I have to say that I was impressed with my own turn of a quick metaphor for pay walls for on-line newspapers. Imagine how happy I was when Jeff Jarvis, the author of the fantastic book on innovation What Would Google Do? re-tweeted what I had to say.
Jeff’s original tweet:
And his re-tweet of my oh-so-witty response:
In my recent post-hiatus brain dump I had a lot to say about challenging assumptions. One of the assumptions that I said needed to be evaluated was the article of faith in the auto industry that if they can survive to 2011 or 2012 the uptick in standards of living in the auto industry will pull them back to prosperity. That’s not a given, and an interesting project for a new model for urban and suburban automobiles is being evaluated at MIT and recently featured in Forbes.
Sharing cars would cut the world’s outlays for vehicles, as well as for parking lots. Racks everywhere would solve the “last mile” problem of having to hoof it to and from public transit stops. More people using buses and trains would take cars off the road. Zipcar, a shared rental service in 13 cities, says each of its vehicles replaces 15 others.
The basic concept is that small, light “stackable” electronic cars would be distributed throughout cities (and probably dense inner suburbs) at stands. These cars would serve a similar purpose to ZipCars today for short-term, short-range car rentals. These cars would serve as the “last mile” extending the convenience of mass-transit.
Environmental concerns are obviously a strong driver for this as a preferred alternative to outright car ownership. I also expect that the current global recession is actually going to delay the march towards the global middle class of China and India, the very trend upon which prosperity in the automotive industry is dependent.
A trend I am seeing more often among my friends in their 20s and 30s is the recognition of what a pain and expense car ownership is. Many of my friends living in the city and closer-in suburbs who don’t have long commutes are deciding that public transportation, ZipCars and Hertz are good enough to deliver cost-effective transportation options. When you consider the cost of car payments, maintenance, parking and insurance this trend is rationality taking hold for those who only need a car for occasional, short-term use.
Much of this is contingent upon density and the availability of public transportation. Going car-less really is not an option for exurban dwellers such as myself or those living in more sprawl-prone cities like Los Angeles or Phoenix. For those in dense cities like Washington, DC (and Arlington, VA or Silver Spring, MD), New York City or Chicago this is a valid option for a large proportion of the global middle class. Take that model global and you can see how residents of London, Shanghai or Mumbai might find this a cost-effective alternative model to car ownership with most of the benefits and none of the pain.
So how could I be wrong about this? Henry Ford held to the Model T because he didn’t realize the potential of the car as a vehicle (pun intended) for personal expression and identity. High end automobiles might continue to be that tangible evidence that “I have arrived.” Among the upper middle class around the world the premium auto will continue to fill that role and the wealthy will drive their Bentley’s and their Rolls. So it could be among the middle class that ownership of their Toyota Camry or Tata Nano will also be used as a signal that “I’ve arrived… sorta.”
To those of us who have focused our professional careers on driving foresight and enabling innovation in business it’s no surprise to see research that confirms the connection between corporate culture and innovation. I’ve often made the case that corporate culture is one of the most important (if not indeed THE most important) factor in how an organization functions.
Some may argue that in these tough economic times the higher levels of Maslow’s Hierarchy are less relevant than simple employment and survival. Certainly most managers align their behavior and incentives towards basic survival. Innovative companies, even those that undertake layoffs and scale back investment, will likely maintain the aspects of their corporate culture that drive innovation to be prepared to take advantage of the market upswing when it does come.
Process innovations that save money in the near term are likely to be very welcome during this downturn. Companies that can foster both kinds of innovation will be more likely to survive the downturn and take advantage of the upswing.
Corporate Culture Is Most Important Factor In Driving Innovation.
It’s a shame that my nose has been so completely placed on the grindstone the last few weeks. Some very cool, game changing developments have taken place in the wireless industry that I’ve wanted to blog about for some time.
Item the First: Amazon Kindle complete with Sprint EV-DO
The week of Thanksgiving Amazon entered the tumultuous space of e-book readers with the Kindle. A lot has been written about the status of e-books in general and the utility of the Kindle in specific. Some have caught on to what I think is one of the most revolutionary elements of the service: bundled Sprint high-speed EV-DO wireless data service.
The real revolution here is the wireless service bundled with another device and service and sold as an element completely independent from traditional mobile telephone or data services. Kindle points us to a day when standard devices will have on-board mobile data connectivity as a bundled service element. You won’t need to migrate your phone carrier from AT&T to T-Mobile in order to take advantage of the discrete connectivity provided by some new gadget or doo-dad. This is an example of the new business model.
Item the Second: Verizon Wireless says they will open their network to any device
In a completely unexpected move, Verizon Wireless announced that they will open up access to their wireless network to any device that is approved through a technical review process to ensure the integrity of the network. Once again the whole tech world asked “WTF?” all at once, but this time with a great sense of optimism. While a number of details need to be hammered out, this move does represent a truly game-changing development. Obviously the wireless industry is going to be turned upside-down. Other industries and business models are going to be revolutionized as wireless connectivity becomes ubiquitous (two industries that jump immediately to mind are consumer electronics and automotive).
Two major details that need to be hammered out are what the vetting process will look like and what pricing models will be made available. If the barriers to technical certification are set too high or take too long innovation will be greatly slowed. I fully expect other carriers to announce plans to open their own networks as well, and getting the best and most demanded gadgets on your network is going to be a dimension of competition among the wireless carriers.
The second issue to be addressed is pricing. Already AT&T have tried to make the case that their network is already open because any device that uses a SIM can be connected to their network. While there is an element of truth to this (one reason I’ve always preferred GSM to CDMA is the flexibility offered by a SIM card), the SIM card model is still based on pricing built around the concept of the mobile phone service.
The real revolution in the pricing of open wireless wide-area connectivity is going to be a move away from the traditional mobile phone pricing models. This is important because the truly game-changing element of open networks is creating opportunities for machine-to-machine connectivity. One the wireless network of the future a large percentage of the traffic will be computers talking to one another. Pricing models will need to be developed, either directly or indirectly, that support a mix of constant and variable connectivity requirements for a wide array of devices. The per-bit charges must be sufficiently low for device manufacturers and value-added services to be priced at levels that will deliver value for end customers.
We are on the verge of a very exciting time in the wireless space. Other carriers are going to follow VzW’s lead, and if Google wins any piece of the airwaves in the upcoming 700 MHz spectrum auction we can expect them to be a very aggressive and innovative competitor in this space. Within a couple of years we will come to take ubiquitous connectivity of certain devices for granted. Some product/service combinations we can easily foresee:
* Constant diagnostic data from cars and other durable goods
* Improved energy efficiency of home heating and cooling
* Real-time remote home security
* Internet audio and video in your car or through mobile devices
* Location-based services, such as luggage that is never lost
These are just some of the concepts off the top of my head. I have no doubt that I am only scratching the surface and not even tapping into the deep veins of opportunities that some very imaginative people will develop.
Upon reading this post Ive come to conclude this is something of a stream-of-consciousness post.
Halfway through I am loving this long weekend. With no big plans for the holiday weekend Ive been able to rest, get some exercise and catch up on some of the chores around the house and reading Ive wanted to get done for some time. After several busy weekends in a row this is an excellent respite.
One of the books Im making my way through this weekend is Seeing Whats Next by Clayton Christensen. The first couple chapters are a decent summary of what constitutes a disruptive market entrant and some of the strategies they employ. What Mr. Christensen seems to do best is to lay out an explicit framework for some of the strategies executives understand by might not be able to articulate. These are actually the kind of business books I like best, because they facilitate building a framework for strategic market analysis that underpins conclusions and recommendations. In other words, they make my life easier.
Mr. Christensen breaks down the three basic categories of customer targets for a disruptive market entrant as follows:
Non-consumers: those who do not use a product either due to its cost or requirements for technical expertise. These customers likely have a need or application for a product or service, but no means to employ those products. One example is the telephone itself, which displaced the telegraph (an example Mr. Christensen employs) partly because it did not require knowledge of Morse code. A second example would be the personal computer, which ended up displacing the mainframe market by making computing accessible to a wider range of hobbyists and non-Computer Science professionals both on the basis of lower cost and reducing the need for specific expertise.
Over-shot consumers: those consumers whose needs are far exceeded by the functionality of the products on the market. These are the customers that can often be heard saying, I only want it to do X. These customers are easily targeted by low-cost market entrants that provide products that only do X and leave Y and Z by the side of the road. These overshot customers are pleased to buy a simpler product at a lower cost, and market incumbents tend to respond to new market entrants targeting this segment by focusing on their higher-end, high margin customers and generally ceding this space. One example of this is the low-cost airlines that were once ignored by the mainline carriers but now command respect from an industry in turmoil. This is an interesting dynamic however, because many customers insist on the Swiss Army Knife solution even if they dont need all of the bells and whistles. Examples of the latter phenomenon include customers who eschew low-cost word processor and spreadsheet software in favor of continuing to use Microsoft Word and Excel, even when the low-cost softwares files are perfectly compatible with widely used software. In other words, in some domains customers continue to insist upon a higher functionality tool regardless of whether or not they leverage the higher functionality regardless of the higher cost.
Under-shot consumers: those consumers whose requirements are not met by the current product set. There are specific features and functions these customers desire, and they can often be observed saying If only id did X. These are the consumers that are generally willing to pay a premium for incremental functional improvements to a product. A disruptive market entrant has the potential to target these customers by offering a product that does X. However, since these consumers are generally the high-margin customers of the incumbent, it is much harder to introduce a disruptive strategy at the high end. Incumbents do not cede this ground.
Reading this book, I cannot help but think of the market for computer operating systems. Several of the responses Mr. Christensen attributes to incumbents threatened by new market entrants bear a strong resemblance to what Microsoft executives have to say about Linux. The potential disruption in the operating system environment occurs along each of the dimensions Mr. Christensen outlines. Non-consumers in the third world are targeted with very low-cost PCs running Linux. Overshot customers in the server market run Linux because it does not have all the bells and whistles (and performance overhead) of the Microsoft OS for servers. Undershot customers can leverage the open nature of Linux to add to the capability set of the OS. While Linux threatens the Microsoft product set on each dimension, the appeal to non-consumers and over-shot consumers is particularly interesting as Microsoft continue their feature creep in future versions of their software.
In a somewhat related consideration, I took a look at a post from a few months back from Robert Cringely. In this post, Cringely covers have a $70 box could challenge the telecommunications industry. This post details how a Linksys router/wireless access point running Linux can be employed in a mesh network. Mr. Cringely outlines how an enterprising broadband or voice over IP provider could employ a franchise strategy to extend wireless broadband in a particular area. This is a very interesting example of potential disruption to the traditional telecommunications indsutry. Perhaps incumbent telecom providers have well-recognized this, and this is why they have been fighting municipal Wi-Fi efforts so strongly. This recent piece from Forbes talks a bit about efforts to deploy wireless mesh Wi-Fi in rural America. The mind boggles at the opportunity to mesh small towns and neighborhoods with pervasive wireless broadband and voice over IP. Maybe I need to figure out something for my hometown of Harmon, Illinois. With technology such as this small-town America could begin to close the digital divide that exists between rural America and large cities.
Forbes is running an article on companies seeking customer input in the product design process. The article is a bit too top-down, focus-group oriented in the customer feedback it examines, but it got me thinking. One key element of corporate PR and competitive intelligence needs to be scouring forums, chat rooms, blogs and the like for similar customer feedback. I’m not questioning the value of the exercises described in the Forbes piece. Consumer-oriented companies would do well to take advantage of the unsolicited, undirected feedback that can come from those media which they do not control directly. The free flow of customer insight represents an extremely valuable feedback mechanism. The ability to separate the wheat from the chaff and turn those insights into actionable developments would be a real competitive advantage.
