Category Archives: The thoughtful manager

John Hagel on the user revolution

(Third installment in a series of Notes from FastForward 2008) 

John Hagel: The User Revolution

(John spoke without slides – what a relief)

The user revolution is about power. Good news, bad news: Most of us are users, so that is good. But most of us are employees of companies, and they are being squeezed. Average lifetime as humans going up, average lifetime of firms is going down (average time in Fortune 500 is now 15 years.) Companies have not yet figured out how to thrive in this environment.

A key limiter has always been shelf space – either in a store or as share of attention of a sales person. This is no longer a scarce resource. The scarce resource now is is customer attention. Second part of the story is the increasing power of talent. Talent is in short supply and increasingly important to company performance – and there are more options for talent to leave. Companies will increasingly differentiate themselves on their ability to develop talent.

Movement from push programs to pull platforms – from tightly scripted activities to flexible frameworks for orchestrating resources. How do we create decentralized resource networks that are highly scalable? The “pull platforms” are about connecting people to resources and to each other. Bill Joy: There are always a lot more smart people outside your organization than inside. Example: Lee & Fong, tailored supply chains for apparel designers.  Cisco Connection Online with 40K “partners” around support of products. Facebooks mobilizing application developers.

Push models allowed companies to start and to create effective processes. Manufacturing, education etc. has primarily been in push mode. Push programs treat people as passive consumers, pull platforms treat people as network creators. Search is a critical tool here.

One problem: For any revolution, we need a pragmatic transition path. This requires a new set of performance measures (in addition to traditional measures, not as substitutes):

  • ROA: Return on attention. From participant and organizer perspectives. Key question for participants: What is the productivity of the attention I give to one resource? For organizers: How much resources necessary to gain attention, and what is it worth.
  • ROI: Return on Intention: For participant: How much information about myself and my needs have I provided relative to what I have receive. From organizer: How much effort invested, how much value in return. Need to watch what people are doing and generate insight from that, as opposed to having people fill out lengthy registration forms. How can we shorten the time from information collection to delivery of value? Are we fully utilizing the data that we have – many companies brag about all the data they have about customers, but the tangible value is often negligible.
  • ROS: Return on skills. Given the amount of effort I spend, to what extent can I develop my skills. Can I use my skill on other platforms. For organizers: What kind of contributors can I attract to my pull platform?

As customers become more powerful, they want influence over the design of the platform. Allow that to gain loyalty. Customers are looking for partners that can help them become better faster, collaborate more effectively with others.

Don Tapscott on Wikinomics

(Second installment in a series of Notes from FastForward 2008)

Don Tapscott: Wikinomics – setting the stage

Don started by saying that this is not new: Time’s Person of The Year was you, and that is soooo 2006. Mass collaboration changes everything. Buy my book! Now, seriously… 

Companies are becoming more professional and peer-oriented, less hierarchical, more meritocratic. This is not new either – Paradigm Shift said this in 1991, and Peter Drucker has said it for a long time before that. Why is it taking so long? The drivers have been missing, but are here now: 

Four drivers of change:

1: Technology, particularly 2.0 technologies: Things talking to each other – one friend has his sprinkler system couple to his intrusion system, in case a burglar jumps over the fence. In the new world, you browse the physical world. GPS allows not just positioning, but movement. True multimedia changes what a film is. New web based on XML, the web is becoming a global computational platform. In some ways, search becomes the new operating system, But legacy systems exist and the integration problem will not go away quickly.

2: The net generation: We have this generation that are not afraid of technology because for them, it has always been ubiquitous. We have had boom, bust and echo in demographics, but the echo is larger than the boom – in Asia and South America have tsunami coming along. These kids multitask, don’t use the TV, they are very active with collaborative technology, games and search. Their synaptic connections are actually different, since they have had this during their formative years. They use email technology to send a formal letter of thanks to a friend’s parents.

3: A social revolution: The rise of collaborate communities. XML has overtaken HTML: Flickr beats Kodak, YouTube beats MTV. MySpace has 15,000 bands….. His son created a Facebook group on Wikinomics that exploded and is now placing demands on him….

4: An economic revolution: You are getting new companies: Digital conglomerates. Google is the fourth largest broker of hardware in the United States. Microsoft, Yahoo, Google, amazon.com, ebay – these are not some blips. Coase: Transaction costs is really cost of coordination and contracting. From industrial companies to extended enterprises to business webs, and now we will have mass collaboration. Example: Goldcorp, a mining company ready to be shut down, because the geologists cannot find gold. So they put their geological data on the Internet, hold a competition on the internet, $500,000 prize money, 75 submissions find $3.6b worth of gold. Many of the best submissions came from people who where not geologists.

How do you harness mass collaboration? 7 things:

  1. Peer pioneers: We are smarter than me, a book written by 1500 people. Spikesource: Tests open source software, certifies it, support it. Marketocracy.com investment fund, zopa.com peer lending.
  2. Ideagoras:  Creating an eBay for innovation. P&G looking for a molecule that will take red wine off a shirt, innocentive.com. Crowdsourcing.
  3. Prosumers. Turning your consumers into producers. 99% of Linden Labs product (Second Life) is done by its users. The record industry is the poster child for not understanding this. The final chapter of Wikinomics is a wiki…want to be the context provider for the definitive guide to the next century business.
  4. The new Alexandrians. The sharing of science. The Human Genome has transformed bioscience. Tracking Avian flu through mashups. The alliance for climate protection. Killer app of wikinomics may be saving the planet.
  5. Open platforms. Amazon.com – open platform from innovation. 1/3 of revenues from API.
  6. The global plant floor. 787 is a peer produced airplane, with their suppliers. Suppliers co-design airplanes scratch and deliver compelte subassemblies. The Chinese motorcycle industry is run by small companies that meet in tea houses, collaborate, now has 1/3 of all motorcycle production. Next year: 1500 dollar car from China.
  7. The Wiki workplace: Geek squad (20,000) design products for geek squad. 

“New paradigms cause dislocation, conflict, confusion, uncertainty. New paradigms are nearly always received with coolness, even mockery or hostility. Those with vested interests fight the change. The shift demands such a different view of things that established leaders are often last to be won over, if at all.” (Marilyn Ferguson).

Saint-Exupery: We should welcome the future because it will soon be the past.

We should respect the past because it was once all that was humanly possible.

Clunky does it

Seth Godin gives examples of how winning web sites often are not those that win design awards, unless you define ”bad design” as ”does not work”.

VG Nett logoI am not sure this is a real trend, but here is another example: vg.no.  This Norwegian newspaper has a website that breaks all possible criteria for good design: It is seemingly disorganized (there is not thematic order to the articles), has colorful images and distracting images all over, is very long, and is manually put together. And it is wildly successful: VG is Norway’s largest newspaper*, and vg.no has more readers than the paper paper.

Vg.no is also different in that only 5% of the material at the web site comes from the paper version. The managing editor of vg.no, Torry Pedersen, has so far resisted any integration with the paper version tooth and nail – something the very successful media house Schibsted gives him, not least because his profitability levels have consistently been over 40% and he has taken more than a quarter of all news and entertainment traffic in Norway.

I used to think that search would take over newspapers, but Torry begs to differ: Only 10% of his readers come through search engines – the rest arrive in the front doors, looking at the lively, entertaining and rather chaotic front page as a gateway to something interesting, something newsworthy, a break in a hectic or slow day.

In other words, there are more than one way to skin a cat, or, in this case, to bring newspapers to the web. Torry’s way should be something to ponder for traditional papers such as the New York Times, with their rather austere and self-important designs. The Atlantic has an interesting front page, but the content does not change often enough to make it a frequent stopping place. As for the rest – look out for Google News…

*On a personal note: I never read it myself, since it is decidedly tabloid in nature. The Internet version, though, is subtly different. 

The scientific method

I am currently re-reading Robert Pirsig’s Zen and the art of motorcycle maintenance, and came across this section, which is one of the best explanations of the scientific method I know of (explained in terms of motorcycle maintenance, of course). So, here goes:

Continue reading →

Building a market for digital movie rental

Seth Godin has a brief yet thoughtful take on the digital movie rental market.

Just about the first thing you learn in microeconomics is that over time, given competition, the price of a product will come close to its marginal cost. Understood by economists for hundreds of years, but not yet understood by the movie industry. Over time, their machinations will make as much sense as the British red flag laws (mandating a person walking in front of motorcars with a red flag) at the beginning of the 20th century. Until then, it seems the content industries will make the same mistakes – first the music industry, then movies and TV, then book publishing.

Frustrating, yet seemingly inevitable.

One of the things I used to wonder about was what would happen when the theory of disruptive innovation (see various articles by Clayton Christensen) became known. Would the effect disappear, like a Heisenbergian attempt at measurement, because managers now knew how it worked? After all, if you understand and recognize a pattern of development you can anticipate it and create a new business model. That is, if you are smart enough to read theory and willing to apply it to your industry rather than find excuses.

I think we see the answer in what is happening in the media industries – a truly disruptive innovation will ruin your business even if you know about it, because (as Weick phrases it) companies select and enact their environment. In other words, they choose what they want to see and discard anything that indicates a deviation of their prejudices. The death-spiral of the RIAA is but one example, with its desperate attempts to turn back time and preserve an anachronistic business model.

At least we now know that disruption is real, hard to prevent, and, for companies with no current stake in the business, a great opportunity, exploitable less for the novelty of the innovation than for the blinkers of the incumbents. Fun.

The real car of the future

Tata shows a $2,500 car, the Nano. John Seely Brown once said that the most important effect for Western countries from globalization will be the innovation necessary to compete in markets of many individuals with little money – and how those markeds would spawn products that would then be exported to the West.

This will be a $10,000 car in Norway once you have added the 200% car import tax and transportation. Still, I would love one for driving myself and my lunch packet to work every day…..

Financials tools and innovation

Clayton Christensen and friends have an article out in HBR that I have been waiting for: Innovation Killers: How Financial Tools Destroy Your Capacity to Do New Things (behind paywall, unfortunately).

Consulting as system and profession

Toppin, G. and F. Czerniawska (2006). Business Consulting: A Guide to How it Works and How to Make it Work. London, The Economist.

This is a useful but uneven book. Its main contribution lies in the development of a model called “the Business Consulting Ecosystem”, which describes the various entities in the consulting profession and how they interact. There are also good descriptions of how the industry has evolved over time and good interviews with many consultants and clients. I particularly liked chapter 11, which describes the markets for ideas and how companies try to capitalize on them, though that may be because one of the companies described is Index, which I worked for in the nineties.

On the negative side, the latter part (second half) of the book and the conclusions feel quite a bit like a Powerpoint presentation, with bullet points giving the outline and filler text added in. The book is also slightly dated, since it was published in 2004 and things have moved on a bit, though it does report on the transition to outsourcing and the increasing polarization between advisory consulting and implementation.

So, smart in parts, useful in general, but uneven when it comes to drawing decisive conclusions. Sounds like the consulting business.

The Wealth and Powerty of India

Gurcharan Das. (2002). India Unbound: From Independence to the Global Information Age. New Dehli, Penguin Books.

India Unbound is fascinating – a combination of autobiography and an essay series, where Gurcharan Das reflects on the various stages in his life and how what he learned changed his views on India, its politics and economic development. Das is a commentator and an essayist, and the book is colored by this: It repeat itself and belabors the same point from many angles. For a novice of Indian it is useful, best read with access to a computer so you can look up words and places like "haveli" and "octroi" as you go along. Das’ language is fluent and content-packed, with an elegance reminiscent of Landes’ The Wealth and Poverty of Nations (whom, incidentally, he criticises, rightly, for an overly simplistic explanation of India’s lack of progress).

Highly recommended. This essay borrows much from the book. Check out his columns here.

Some quotes:

On India after independence: There were two competing visions. Mahatma Gandhi had a vision of self-reliant villages, with a reinvigorated agriculture and craft production. He opposed modern urban industry because it dehumanized man. Jawaharlal Nehru had a modern scientific mind, and he was much impressed by the economic gains of the Soviet revolution; but he was also committed to democracy. He had a vision of democratic socialism with the state leading the process of industrialization. He spurned capitalism because it exploited and it created inequalities. Both Gandhi’s and Nehru’s ideas were flawed, however, and we have spent a long time chasing after them. Gandhi distrusted technology but not businessmen. Nehru distrusted businessmen but not technology. Instead of sorting out the contradictions, we mixed the two up. We have to deal with holy cows: smal companies are better than big ones (Gandhi); public enterprises are better than private ones (Nehru); local companies are better than foreign ones (both). They so mesmerized us that the succeeding generation, whose job was to jettison these foolish ideas, failed to do so and did us incalculable harm. (p.11) 

When ordinary human beings err, it is sad, but when leaders do, it haunts us for generations. (p. 51) 

If America is a melting pot, India is a mosaic. (p. 72)

The economists, it seems, turned out to be hopelessly optimistic about the ability of poor countries to transform their economies through investment in import-substituting manufactures and overly pessimistic about their ability to export. (p.75)

The more rules there are, the less people will do on their own, and the more effort they will spend in getting around the rules. […] The ordinary person will generally do the right thing, left to his or her own devices. The important thing is that people believe that only results will win them rewards.

In Hindu society the Brahmin (priest, teacher) is at the top of the four-caste hierarchy, followed by the Kshatriya (variously landholder, warrior, ruler). The Vaishya or bania (businessman) comes third, and the Shudra (laborer, artisan) is last. Below the four are casteless "untouchables" and tribals. The three upper castes constitute roughly 15 percent of India’s population, and have ruled th ecountry for three thousand years. About half of India is laboring or Shudra caste, divided in turn into hundreds of subcastes. [occupational or geographic]. More than 20 percent of the population are the casteless or "untouchables" and tribals for whose uplift Mahatman Gandhi worked all his life. The remaining 15% of India belongs to other religions: 11 percent Muslim; the rest Sikh, Christian, Parsee, etc. (p.140)

Modern India’s tragedy is not that we adopted the wrong economic model in the 1950s, but that we did not reverse direction after 1965. 

Businessmen are fine producers of goods and jobs, but they are cowards and do not speak out. 

Okaysellers

New word alert: Theresa Nielsen Hayden has a great observation on the publishing industry – saying that the important thing is not to search for the elusive bestseller but rather to have many "okaysellers".

Makes sense from an economist’s view, I suppose – with low marginal cost, easy distribution and no expiry date there might be more money in finding new books at low acquisition and marketing cost than in the ad-driven lottery tickets we call best-sellers.

One of Theresa’s commenters points out that the original Wall Street Journal article actually does not say what Theresa says it says, but rather the opposite….at least in the conclusion. Another commenter says that it is what is in the beginning of the article that is important, since nobody reads the article to the end….

As my friend Eirik has pointed out in his discussions (can’t find the link) of the Norwegian publishing industry: What is fascinating is how the whole industry discusses markets and economics without introducing numbers. It should be trivial to get a view of what books are selling over time – Tim O’Reilly can show the way – and then the discussion could start from fact rather than feeling.

Then again, most publishing employees seem to be in it less for the numbers than the words. They like it like that.

Google’s functional expansion

Chris Anderson reports and Anil Dash analyzes Google’s gradual move towards providing more functionality on top of data elements.

This is a very significant move, and starts with the information. First Google lets you find information, in the process becoming the standard interface to the net and the first port for information in general. Then functionality is added to the information – not as advanced as what you can get on the desktop, but good enough for  a start.

The important issue here is that this is a potentially disruptive innovation because it allows people who formerly were not able to change/process/analyze information to do so – but with technology that will be deemed inferior by those that are the best customers of the existing software vendors. As Anil says, the 500 most important customers of Microsoft wants less change and other kinds of functionality than the infinitely larger market of individuals with smaller investment budgets.

Cory Doctorow video on Google video

Google Video has its uses – here is the video from the speech Cory Doctorow gave in Oslo in May 2005. Don’t know who put it there, but it is public domain – and yes, it is yours truly giving the overlong introduction.

The VC version of Tech adoption

Cover of Coburn's The Change FunctionCoburn, P. (2006). The Change Function: Why some technologies take off and others crash and burn. New York, NY, Penguin Portfolio.

Picked this one up on a lark from Amazon. Written by a venture capitalist, it breezily argues that the many technologies fail because the perceived pain of adoption is too high.

I found this one hard to get into – my suspicion is that it is (like Women are from Venus, Men are from Mars) one of those books where the title suffices for understanding the main idea. In this case, the title doesn’t, but Coburn helpfully provides this summary in the introduction: 

ISSUE 1: High-tech failure rates stink
The commercial failure rate of nominally great new technologies is troublingly high. That failure rate is consistent with the hatred and distrust most normal human beings – which I like to call Earthlings – tend to have of high technology. That hatred and distrust is a bummer since our little planet can use all the help technology might provide.

ISSUE 2: Suppliers think they are in charge but in reality users are in charge
The technology industry operates according to an implicit supplier-oriented assumption. That assumption is that if one builds great new disruptive technologies and lets cost reduction kick in, markets will naturally appear. This is known as "build it and they will come."

He then goes on to provide a semi-mathematical formula of the "change function" with, I think, the likelihood of success (or, at least, technology adoption) as the product of "perceived crisis" and "perceived pain of adoption".

OK. The perceived pain of reading the rest of the book from that point on became a little too much for me, especially since a quick glance awakened reminiscences of 140-page PowerPoint presentations and hastily grabbed examples. Plus, my perceived crisis is in too much adoption. So I disengaged.

Refuse to be terrorized

Bruce Schneier, one of the world’s foremost experts on computer security, has a great essay about how we need to get less panicky about possible terrorist threats – in order to twart terrorists.

Common sense, in other words. May the newspapers and politicians of the world hear him, but I suspect that the economics of attention and influence is against him.

Beer and diapers again

Regdeveloper tries to debunk the wonderful story about the co-buying of diapers and beer. And it turns out the story is based on an actual finding, but the reasons for the covariation is left to the imagination of the marketeer.

My take on the situation was always that diapers is a stress purchase. When you run out of diapers, you don’t wait until the next time you go shopping – someone has to get in the car right away, or pick up something on the way home from work. The man of the house gets the job, enters the store and goes straight to the diapers section, then rewards himself with a sixpack since he is out shopping anyway.

The fact that Osco never moved beer close to diapers to increase sales is neither here nor there – they could have. And perhaps they should, at least between 5pm and 7pm on Thursdays.

So I will continue to tell this story, with careful insertion of “it might be a good idea to” rather than the affermative.

Thoughtful Scoble

Robert Scoble has an interesting "exit interview" with his readers as he is leaving Microsoft. Very interesting. One key phrase on blogging in general and how information moves: "All you need to do is tell 15 bloggers something and if it rings true it’ll get repeated around the world. That’s what gets executives fired."

I am just waiting for blogs from, say, inside General Motors or some of the large airline or media companies talking about their struggles to stay afloat. Not to mention the blogging-induced Enron, whoever that will be.

Hans Rosling talk at TED

Hans Rosling at TEDHans Rosling, professor of public health, speaker extraordinaire, software entrepreneur and one of the best illustrators of fact-based research and policy discussions I have ever seen, is now available in English from the TED conference.

See it. This is required viewing for anyone wanting to understand how the world evolves and what we need to do to make it evolve in a direction beneficial for all. Rosling is one of the best speakers I have ever seen, on any subject, and this subject is critically important.

 

Paul Graham on conditions for entrepreneurial success

Paul GrahamPaul Graham, one of the finest essayists to ever publish on the Internet, has two stellar examples of how to take a complex issue and present it in a clear and consistent way:

As usual, Paul does not leave out the difficult parts or avoids pointing out the faults of the current model. Both essays are reworked from a keynote he gave at Xtech.

Excellent stuff. Read it. I will assign it for classes.

(Via Dragos.)

Blogs help Microsoft

Scobleizer quotes some interesting statistics: Microsoft is gaining server market share because of blogs (and wikis). Though some insightful comments modify the numbers a bit, the increase is still large, and shows that Microsoft can make a dent in that market by doing what they did on the desktop: Offer functionality that is "good enough" and relatively easy for the end user to set up. At the very least, it is in indication of blogs becoming a "must have" on any web site.

To respond, the open source community would have to go from pluribus to unum in terms of user experience, configurations and setup. I doubt that is going to happen. Wonder which segments of the market Microsoft is gaining in?

Searching and finding – hard to get into

I am currently reading two books on what can only be described as Web 2.0: John Batelle’s The Search and Peter Morville’s Ambient Findability. I don’t know why (maybe just my own overdosing on reading after starting my sabbatical), but I am finding both hard to get into.

Batelle front coverThe Search is better written – it is a mix of a corporate biography and a discussion of how search capability changes society. The language is tight – though sometimes cute, as in the phrase "the database of intentions" about Google clickstreams and archived query terms – and there is a thread (roughly chronological) through the book that allows most people who have been online for a while to nod and agree on almost any page. John Batelle has an excellent blog and plenty of scars from the dot-com boom and bust (I always liked Industry Standard and wrote a column for the Norwegian version, Business Standard, for a few years, so I am very favorably disposed), and his competence as a writer shows. The book reads like a long Wired report, but better structured, marginally below average in use of buzzwords and John has the right industry connections to pull it off.

Ambient findability front coverAmbient Findability looks at search from the other side of the coin – how do you make yourself findable in a world where search, rather than categorization, is the preferred user interface? For one thing, you have to make your whole web site findable, make it accessible and meaningful from all entry points. Morville fills the book up with drawings and pictures on almost every page, comes off as a widely read person, but I am still looking for a thorough expansion of the central message – or at least some  decent and deep speculation on personal and organizational consequences. It is more a book popularizing information science than a book that wants to tell a story, and it shows.

While both books are well worth the read if you are relatively new to the Internet, I was a little disappointed in the lack of new ideas – they are clever, but once you accept that the marginal cost of processing, storage and communciations bandwidth approaches zero, the conclusions kind of give themselves. Perhaps I am tired – actually, I am – perhaps I am unfairly critical after having treated myself to The Blank Slate, The World is Flat and Collapse, but these books, while both worthwhile, have failed to "wow" me.

Apologies. I will make a more determined re-entry once I wake up.