Archive for January, 2010
I Have No Idea How the iPad Will Do!
Posted by Tim in business models, innovation strategy, networks, time on 31 January 2010
With all the feverish discussion and prognostication about Apple’s preview of the iPad, I want to be the first person online to make this prediction:
I have absolutely no idea how the iPad will perform.
I’ll go one step further – neither does anyone else. The benefit of making predictions right now is that if you happen to end up being right, you can link back to your post in a few years. If you’re wrong, well, who reads blog posts that are a few years old?
One line of argument that I find really interesting, though, is being taken by people who are arguing that the iPad will revolutionise… something. The argument is by analogy – and what a lot of people are saying in response to critics of the iPad is that people hated the iPod and the iPhone when they were released as well. In particular, the initial response to the iPod introduction was pretty universally tepid.
Garry Tan from Posterous has collected a few of these, and this one pretty well sums them up:
I still can’t believe this! All this hype for something so ridiculous! Who cares about an MP3 player? I want something new! I want them to think differently! Why oh why would they do this?! It’s so wrong! It’s so stupid!
Haha! It wasn’t Apple that was stupid – they were stupid! Right?
Well, maybe. It’s easy now to look at the iPod’s 70%+ market share and wonder how anyone could have missed that it was a game-changing innovation. I’ll tell you how. The fact of the matter is that all the people that were skeptical about the iPod as a product innovation when it was introduced were actually completely correct. There wasn’t much there. Take a look at the iPod sales figures from wikipedia:
The first iPod was introduced at the end of 2001, and you can see that sales figures for the first three years were not good at all. By the middle of 2004, the iPod’s market share had been sitting in the 20-30% range for a while. By the end of 2005, that had shot up to over 70%. What happened?
iTunes happened.
Because the iPod and iTunes are so closely interconnected now, it is easy to forget that iTunes didn’t exist for the first years of the iPod. At the time, the iPod was just another mp3 player. The innovation with the iPod was not in the product – it was the innovation in the product’s value network. It was a similar story with the iPhone. And that is why nearly everyone that is yapping about iPad right now is completely missing the point. Because we don’t know what it’s value network is going to look like yet, and this is what will actually determine whether the iPad will take off quickly like the iPhone did, or slowly like the iPod.
Even when you make great products like Apple, your innovations never stand alone. They work within the context of their economic network. The better you understand this, and the more innovative you are in constructing your value networks, the more successful you’re likely to be.
So the next time someone talks to about all the great new features something has, ignore them. Instead, think about the business model and the value network that will support the great new thing.
Destroyed by excellence
Posted by John in innovation on 29 January 2010
There was a bit of interest in the blog piece that I did on responding to change so I thought I would follow this up with a quick discussion of a really good model for understanding inertia and how resistance to innovation develops.

One of my favorite research studies on excellence and inertia is by Prof. Dorothy Leonard-Barton, who is one of those rare business academics able to do rigorous research and also translate it into useful information for business leaders. Usually we get the situation where the research is unintelligible or the information for business leaders is based upon bad research. As Tim has said in a previous post, there is a real need for business academics to do a better job with filtering business ideas by testing them with good research.
In a research study published in the Strategic Management Journal in 1992, Prof. Leonard-Barton did twenty case studies of new product development within five firms that she later translated into the bestselling book, Wellsprings of Knowledge. Through interviews and observation, she developed a model of core capabilities that shows four interlocking dimensions.
Firms that are really good at doing something (logistics at Wal Mart, for example) will have a combination of employee knowledge and skill (obvious); physical technical systems such as machinery, databases and software; managerial systems such as education, awards and incentives (less obvious); and values and norms such as rituals, status and beliefs, which acts as a powerful knowledge filtering system (often overlooked). Successful innovations in areas where these dimensions are overlapping will reinforce the connections and make further innovations in that particular competency more likely.
The really interesting finding from Leonard-Barton’s work is that the model for inertia is exactly the same as the model for core competencies. A dominance of a particular skill set tends to marginalize people without skills in that area, resulting in one type of legitimate thinking in the business. People become promoted and rewarded for their skills in the dominant technical systems and the cultural effects of status and beliefs effectively screen information from the outside world that might challenge the status quo. This is exactly what I saw in the case study that I did with the Tioxide company and I wonder if I went into News Limited or Fairfax Ltd, would I observe the same factors?
It’s a powerful model because it shows how businesses are most at risk when they are most successful. By using Leonard-Barton’s framework, managers should be able to detect the early warning signs of overconfidence and lock-in to a dominant technology or business model.
So, success sows the seeds of failure but where’s the supporting evidence? Eric Beinhocker quotes a US study which showed that in a sample of 6772 firms from 1974-1997 only 5% of them achieved sustained outperformance for a period of more than 10 years and only 32 of these firms (0.5%) were able to outperform their peers over a twenty year period. The challenge to keep innovating and changing is immense, and most firms won’t succeed. So much for “Built to Last” or “Good to Great”. The cold, hard data tells us a story more like “Condemned to Being Average” but I won’t even try to sell a book with that title.
Finally, here is a positive thought. Failure and disruption presents the best chance to build new core competencies. When we fail, we should really see it as an opportunity to build the next phase for growth.
Perhaps the great evolutionary economist Bob Dylan summed up this paradox best by saying, “There’s no success like failure, and failure’s no success at all”. I wonder if His Bobness has read Beinhocker?
Low Tech Networks
Everything is different now that we’re all knowledge workers, right? The digital world has changed everything… hive mind… singularity… chaos! change! panic! PANIC!
Maybe. Maybe not.
Yesterday I talked about the risks and rewards of low-tech innovation – if we re-think the most basic parts of our value networks, the parts that we take for granted, we can find great opportunities. Then today I read this in Shop Class as Soulcraft by Matthew B. Crawford discussing motorcycle repair (emphasis mine):
You also develop a library of sounds and smells and feels. For example, the backfire of a too-lean fuel mixture is subtly different from an ignition backfire. If the motorcycle is thirty years old, from an obscure maker that went out of business twenty years ago, its proclivities are known mostly through lore. It would probably be impossible to do such work in isolation, without access to a collective historical memory; you have to be embedded in a community of mechanic-antiquarians.

In all this talk of digital transformations, it is easy to forget that we are talking about systems and processes that have been around for a long time. A lot of the digital things that seem new to us now are simply new in digital form, not in general.
Crawford’s example shows how no matter how low- or high-tech our profession, we still depend on our network for storing, filtering and finding information – the extended brain works in all fields. And it is this network that creates value, that generates ideas, that innovates.
All of our economic and intellectual activity takes place within networks. The ones in which we’re embedded play a substantial role in what we are able to accomplish as individuals. It doesn’t matter if we’re twittering, developing a scientific theory in the 19th century, fixing motorcycles, writing a PhD, figuring out a new way to our job, or just thinking about something. Our networks help us create ideas, and they help us spread those ideas. They even help us craft those ideas. The better we know our networks, the more effective our ideas will be. That’s how we deal with the challenges of the digital age – through our networks.
(photo from flickr/zen under a Creative Commons license)
Low Tech Innovation
Posted by Tim in book riffs, business models, innovation strategy on 28 January 2010
At start of my innovation courses, students often think that if their organisation isn’t inventing iPads, then they clearly aren’t (and can’t be) innovative. I end up spending a lot of time trying to help them see the many opportunities available for innovation, even within industries that appear to be pretty tightly constrained. In many cases, innovating in these industries ends up being far more important than coming up with flashy new gadgets. If you’re one of the first people to get one of the new iPads, and it fails miserably, will your life be materially worse than it is right now? Probably not.
Andrew Hargadon recounts an interesting story of failed low-tech innovation: construction companies in Florida introduced a new form of drywall, which has subsequently been found to be defective. The problem may affect as many as 100,000 homes, and the cost of replacing the drywall in all of them may run as high as $10 billion. Who pays is a bit of question too.
The point that Hargadon makes is that innovation in a very low-tech field like construction materials can actually have much higher stakes attached to it than innovation in gadgets. That is one of the reasons that these industries are very un-innovative – the cost of getting things wrong is pretty high.
Jeffrey Phillips, author of one of the best innovation blogs around, points out another reason that conservative industries don’t innovate – they often are heavily regulated. According to Phillips:
Too often, the regulations become a “ceiling” for new products and services. Rather than dream up new products and services that customers need, then try to revise the regulations to fit those products, firms use the regulations as a hard and fast rule, never to be breached or violated. They are in a box of their own making and own choosing, and careful never to question the box. Again, disrupters are going to seek ways to make that box obsolete, and the interesting thing about most regulated firms is that they employ lobbyists, whose job it is to influence or change regulations. A truly innovative firm would identify products and services that met customer needs, then lobby for the changes necessary to implement those products, and force the rest of the industry to follow.
Highly regulated industries are also often low-tech as well. The disenctives to innovation in these industries are substantial: the cost of getting things wrong is often enormously high; the stakes are much higher; regulations may make it difficult to bring in new ideas. So why try to innovate at all in these industries?
Phillips’ post starts to get at the reason – the risks are high, but the potential payoffs are also huge. Here’s an example:

There’s an excellent book on the history of shipping containers – it’s called The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger by Marc Levinson. The impact of containers has been gigantic. When they were introduced, they reduced shipping costs by over 60%. They quickly reduced the amount of labour needed to load and unload ships by over 95%! The first shipping containers were made in the 1920s, but Malcom McLean and his company McLean Industries did what Phillips suggests – he identified the customer need, and then fought regulations until containers went into widespread use in the mid 1950s.
A shipping container is about as low as low-tech gets. The container is one of the primary drivers of the huge increase in international trade from the end of World War II to now – it’s impact has been greater than that of all the high tech gear that gets shipped around, greater than that of the WTO, greater than that of all of the international trade treaties that have been signed.
What does this tell us? A couple of things:
- It’s another great example of the difference between invention and innovation. The box itself was invented 30 years before “containerised shipping” actually got the idea to spread. It’s not enough to have the ideas, or even to show that they work – you have to get your ideas to spread.
- Following directly from that, the big innovation isn’t in the low-tech shipping container, the innovation is in the business model built around the low-tech shipping container. The new business model includes the integration between the container, ships, trucks and eventually rail – a completely different value network. Revenue generation is different too – the cost-cutting through labour saving was unbelievable. All aspects of the shipping business model changed as containers became widespread.
- As in the drywall example, changing the most basic part of the system had a substantial knock-on effect. When McLean started with containers, there was little innovation in the industry. It was highly regulated, and very comfortable – so people weren’t trying many new things. Almost all of the innovative focus was on the high-tech end – making faster ships, increasing the capacity of trucks, and so on. However, all of these innovations only introduced marginal time savings – the bottleneck was still on the docks. The simple container is the innovation that got around that problem.
So here’s a question for you: what low-tech innovation opportunities are available to you? Particularly if you are in an industry with constraints, low-tech is probably the way to go. The challenge for the day is this – find the most basic part of your business model, and start thinking about innovations around that. This will often get you rethinking your entire business model. That’s what makes the stakes high, but it’s also what makes the potential payoffs high as well.
(Photo from flickr/photohome_uk under a Creative Commons license)
Filtering With Your Network
Posted by Tim in complex systems, filter, innovation strategy, networks on 27 January 2010
In yesterday’s post on Personal Aggregate, Filter & Connect Strategies, I didn’t have room for one key point: one of the key filters to use is your network. When he was in Brisbane last month, George Siemans gave a talk with an example that illustrated this perfectly.
For the past couple of years, he has run a course on Connectivism with Stephen Downes. Here is the definition of connectivism from Downes:
At its heart, connectivism is the thesis that knowledge is distributed across a network of connections, and therefore that learning consists of the ability to construct and traverse those networks.
As I understand it, one of the points of the course is to present students with so much data that they can’t possibly process or understand all of it as individuals. This forces them to create networks to build data-gathering and sense-making networks in order to succeed. There are more details about networks, connectivism and the course in this excellent presentation from Downes (the presentation also discusses Downes’ framework for building knowledge within complex networks, which consists of Aggregate – Remix – Repurpose – Feed Forward).
So as individuals, our network is part of our filtering system. This also points out how the three processes – aggregating, filtering and connecting – interact with each other. In the example of my twitter feed, I discussed this as part of my aggregation strategy. But at the same time, I’m actually counting on people within my network to filter. They’re not sending every little thing that they run across into their twitter streams – they are selecting.
This same process happens as part of the aggregate, filter and connect process for organisations. We can use our networks as aggregating/filtering tools. This is what is happening in customer-led innovation, crowd-sourcing and open innovation. We use our network to increase the flow of ideas into our organisation (aggregate), and we also count on our network to decide which things they run across might be important (filter).
And just as for individuals, these processes don’t work well for firms either unless they are good at all three steps. If you only aggregate, you get overwhelmed with ideas. You need some form of selection process. Both forms of connecting are important too. You must be able to connect ideas in novel ways – this is one of the central skills in innovation. If you’re not generating and executing your own innovative ideas, you run into several problems. Open innovation won’t work, because you’re not bringing anything of value to the table – so why would anyone want to partner with you? Customer-led innovation and crowdsourcing won’t work either, because the skills need to tell which ideas are worth pursuing – your filtering is worse if you’re bad at connecting ideas.
Outbound connecting is also critical – this is how we get ideas to spread. In the case of firms, getting ideas to spread is a critical part of innovatgion diffusion. This is also a network function. Using our networks to help with filtering is essential – both for individuals and for firms.
This is one of the reasons that we are doing research on networks. Knowledge creation within firms is also a network function. John and I recently made a video to use to explain network analysis and our main research project to people that are participating in our studies. Because many of them are in remote locations, we can’t visit everyone. And we figured that showing them a video might help them feel more of a connection with us than simply sending them a document with the same information. Take a look at this, and keep in mind the value of your network in executing aggregate, filter and connect strategies:
UQBS Innovation Networks in Project-Based Firms Information Video from Tim Kastelle on Vimeo.
Personal Aggregate, Filter & Connect Strategies
A while back my PhD student Sam and I were talking, and he asked me about my RSS feed. His question was something along the lines of ‘what blogs would I have to read if I wanted to be able to make the connections that you do on your blog?’ As we talked, I realised that it didn’t matter if I gave anyone else my exact RSS feed, they wouldn’t be able to replicate my blog – and the reason for this is aggregate, filter and connect.
When I first thought about aggregate, filter and connect as a framework, it was in an attempt to explain why Amazon’s business model worked better than that of other online bookstores. The first time I talked about it in public, it was to explain how open education might work. I’ve been working on making it in to a general model of how we create something unique when we’re primarily dealing with information.
As such, it can be used to explain business models, like Amazon’s, or blogs, like mine. The more I’ve talked about the model, the more other people are picking it up, which is great. Some of these recent discusssions have gotten me thinking about how aggregate, filter and connect works at a personal level. This was really Sam’s question. I’ve talked about how Charles Darwin basically used an aggregate, filter and connect strategy, Phil Long talks about it as part of personal knowledge management, Harold Jarche has discussed it as both a general model for business and for personal knowledge management (an idea that Jack Vinson picked up, and connected to the concept of enhanced serendipity from Ross Dawson), and Glenn Wiebe used the framework to discuss both Joseph Priestly’s inventions and teaching. So we’re starting to get a bit of discussion Today I’d like to illustrate the concept by discussing how I use it.
Aggregate, filter and connect is a non-linear process, with lots of feedback loops. However, it is unavoidable to talk about it in steps. While I do that, keep in mind that it is all going on at once. Here is how I use the framework to execute ideas in my main area of interest – innovation and networks:
Aggregate: I do a lot of data scanning. The RSS feed that Sam and I were discussing includes 182 blogs. I also follow 306 people on twitter, most of whom usually tweet about things relating to my areas of interest. In addition to that, I finish a book about once every 3 days, and I’ve been doing that for a looooooong time. I also talk to a lot of people, despite being an introvert (see Sacha Chua’s great presentation The Shy Connector to see how that works) – last year had over 80 meetings with people that are practicing innovation management, plus contact with my students, who are nearly all out in the workforce as well. Then there’s the stuff I’ve learned in all the jobs I’ve had. Collectively, this adds up to a fair bit of data.
Filter: This is my weakest area – I don’t outsource nearly enough complexity. I need to get better at taking notes on things I read, in searchable media, so that I don’t do all the filtering in my head. At the moment, I don’t even filter my twitter stream. Ken Gillgren argues that we should be taking in as much data as we can possibly handle, to improve our ability to see patterns and make novel connections. So I’ll say that’s what I’m doing. In addition to my head, I’m also using Evernote, my own tweets, diigo, and my blog as filtering tools. And I’ve used fairly primitive methods like writing reading notes, though that generally hasn’t worked too well for me – I actually find blogging more effective.
Connect: Harold Jarche has been doing some fantastic thinking about this topic recently, and he made this diagram to illustrate the process:
I think this is a nice diagram, which pulls together a lot of the recent discussion on the topic. The one thing that I would like to add to it is this idea: connection works in two related but distinct ways. The first is that we connect ideas to each other. This is the innovative act – as Schumpter said, “(Economic) development in our sense is then defined by the carrying out of new combinations”. This is where I put a lot of effort when I’m coming up with blog posts, with research papers, and even with ideas for consulting jobs. Making novel connections is a skill that I work hard to build.
The second way that connection works is that we connect ideas to people. This is the outbound side of Connection. I use several strategies. When I re-tweet something, I try to make a comment that links the tweet to a broader concept (sometimes a challenge with 140 characters!). I write about the idea connections that I make in my blog – as people read it, they start connecting with the ideas. I give as many public talks as I can – from last September until now I have given more than twice as many public talks as I had in the previous three years combined. In Canberra last week I had a talk with Geoff Garrett, who said “Innovations travel on two legs.” There’s something to be said for that idea – and I have a lot of discussions about my ideas face-to-face – it’s one of the most effective methods of outbound connection.
So that’s a brief summary of how I have been trying to use the Aggregate, Filter and Connect framework over the past few months. In using it, I have learned a few things that might be useful for others too:
- It really helps to think about the three tools explicitly. As I said, I’ve always been reasonably good at making novel connections. But my ability to get my ideas to spread has increased dramatically once I started thinking in this way. Particularly with regard to outbound connections. My use of twitter, and the increase in my public speaking were both ideas that I initiated to increase my connections.
- When people feel overwhelmed by information, it usually means that they aren’t filtering effectively. Like I said, this is my weakest area. But there are some really smart people working on this. In addition to the posts I’ve linked to, check out the rest of Harold Jarche’s blog for some ideas. Venessa Miemis and Ken Gillgren have done some really good thinking in this area too. This is one of the areas in which most of us probably need to improve.
- The other area that we probably need to address is this: we need to get better at connecting ideas. This is where we create value – by making novel connections. And it’s not enough to just make the connections in our head – we have to frame them in a way that others can act upon. That means creating tangible content – a blog, tweets that connect ideas, podcasting, something. My primary recommendation here is to practice making novel connections, and then express them in a way that enables your idea to spread. One good way to do this is to expand the range of areas from which you collect information, and as you read and hear things from outside your area, consciously think about how they connect back to things that you know well. This is the strength of weak ties between ideas.
- Finally, your personal knowledge management scheme isn’t complete until you are doing all three things well. Aggregating is great, but only an initial step. If you don’t filter well, you won’t be able to make sense of the information that you collect. At the same time, even if you aggregate and filter well, you only create real value when you make novel connections between ideas. Information is the fundamental building block of idea connections. Once you make these novel idea connections, you then need outbound people connections to get your ideas to spread. The three skills reinforce each other.
So there’s the answer to Sam – you can replicate my blog by copying my incoming information streams, using the same filtering tools that I do, and then making the same connections between ideas that I do. In other words, you can’t. Aggregate, Filter and Connect is one method you can use to generate unique intellectual value.
NOTE: I’d like to thank everyone I mention in this post, and many others as well for contributing ideas that I’ve been able to use as building blocks in this argument – It’s great that we’ve been able to Connect! George Siemens and Jon Husband have also written things on these topics that have influenced my thinking.
Another NOTE: Venessa has pointed out in the comments that Howard Rheingold has written one of the definitive articles on filtering: Crap Detection 101.
Third NOTE: Follow-up post: Filtering With Your Network
Final NOTE: Here is a practical example of how the process works.
What Would Google Do? by Jeff Jarvis
Posted by Tim in aggregate, book riffs, connect, filter, innovation strategy on 25 January 2010
The question of how to best adapt to the changes brought about by the internet is of key importance to all organisations that are in information-based industries. According to Jeff Jarvis in What Would Google Do?, the answer is fairly simple: do what Google would. Here is a video in which he outlines the argument in the book (this is from the same session of BRITE ’09 as Umair Haque’s talk that I discussed yesterday):
Jeff Jarvis at BRITE ’09 conference from Center Global Brand Leadership on Vimeo.
Jarvis, author of the blog buzzmachine.com, takes an interesting approach in this book. He infers a number of rules for acting more like Google, but he does this without having direct contact with the firm. Because he’s a very entertaining writer, this first half of the book is worth reading. However, in some ways it rehashes ground covered well by Chris Brogan and Julien Smith in Trust Agents (reviewed here), or David Weinberger in Small Pieces, Loosely Joined (reviewed here). The main ideas are that to succeed, you should join network and be a platform (both facilitated by the internet’s linking structure), give control to your customers instead of trying to retain it yourself, and build a business model based on serving niches. There are actually ten rules in the book, but those are the ones that I found most useful. Jarvis reduces these rules down to five in his tips for creating a Googlier you.
For me, it is the second half of the book that recommends it. In this section Jarvis tries to build new business models based on his Google rules in nine different industry categories, including media, retail, manufacturing and public institutions. Each section has two to three examples, and this part of the book is just fantastic. The thing that I like about it is that Jarvis really puts his ideas to the test here – tackling a number of industries that would not obviously lend themselves to following Google rules like car manufacturing, power generation, and restaurants. It is a fascinating intellectual exercise, and I think that a lot of his ideas would be worth trying out. I recommend the book based on this section.
Behavioural Innovation
Posted by Tim in innovation strategy, time on 24 January 2010
I’ve been reading a lot of things from Umair Haque recently, and there he has some ideas that are definitely worth exploring. This is a talk that he gave last year which outlines several of his major themes. It is 20 minutes long, and well worth the time:
Umair Haque at BRITE ’09 conference from Center Global Brand Leadership on Vimeo.
Haque emphasises the importance of creating thick value. Thick value comes from innovations that have authenticity (they create genuine value for people), and that are also sustainable. Here is an example of thin value – in 2007, Comcast increased revenues by 12%, net income by 175%, and their stock price increased by 50%. While all this was happening, customer satisfaction – already among the lowest in an industry not noted for customer service in the first place – fell by 7%. These kinds of numbers are not sustainable.
To create thick value, he says that we need to focus on Behavioural Innovation, which he places at the top of a ladder going from technological innovation through process, product & service, business model and institutional innovation.
What he means by behavioural innovation is reconceiving the costs and benefits that we are responding to when we innovate and interact with our customers and partners. This creates a framework we can use to move beyond only responding to profit opportunities, or to game-theoretic competition. In some ways this approach is similar to triple-bottom-line methods – it involves taking into account the long-term needs of our partners, taking care of the resources that go into creating our products and services, and demonstrating genuine leadership. The result of this is building value that lasts. In the Comcast example, it means starting by using the customer satisfaction numbers as the target that you are managing, not the stock price. At least for starters…
So what does this mean in practical terms? There are some clues in some of Haque’s earlier work. He has several substantial resources available for free from his website bubblegeneration.com. His 2004 piece, The New Economics of Media is a 107 slide powerpoint presentation, which is essentially a free e-book. Like the talk, it is well worth reading, and thinking about. It is one of the sharpest analyses of the economics underlying some of the recent issues that have occurred across the music, news and publishing industries. In this he argues that the blockbuster model of creating content creates thin value, because there is very little financial motivation to improve quality.
Instead, he recommends creating micromedia. This is content that is tailored to the specific needs of smaller groups of people. This takes advantage of the fact that media are actually consumed in a networked manner – our media consumption is complementary. I don’t just read and think about things in a vacuum. I write about the things that are interesting, and link to them here in the blog, I tweet about them, I cite them in articles – I basically spend a lot of time trying to help ideas to spread. I also use these ideas to help build my own ideas, so that they’ll spread too.
As everyone follows similar paths, we influence each other. This creates snowball effects, and increasing returns. If we follow this model, the motivation for increasing quality is actually very high – because the better we are at connecting up the ideas that we run across, the better our own ideas will be, and the more likely they’ll be to spread.
I’m obviously oversimplifying a very sophisticated argument for the sake of brevity. But I think that there are a couple of critical points here as we extend this approach beyond media. One is that when we are innovating (creating new connections), we need to take time into account. Is our innovation sustainable? The second point is that we need to adopt business models that create genuine, lasting value for our economic partners. This requires us to change the way we think about costs and benefits. It requires behavioural innovation.
Changing the Game for News
Posted by Tim in aggregate, business models, connect, evolving economic entities, filter, innovation strategy on 23 January 2010
A lot of people have been talking recently about a Harris Poll that shows that 77% of people in the US say that they won’t pay for online news. Specifically, this is the question they were asked:
How much, if anything, would you be willing to pay per month to read a daily newspaper’s online content?
And 77% chose the answer “Nothing.” These poll results are absolutely useless – primarily because the question ignores innovation. Here are some things that these results do not say:
- They do not say that information wants to be free.
- They do not say that daily newspaper content has zero value, or value approaching zero.
- They do not say that newspaper readers (or people interested in news in general) are a bunch of freeloaders.
The only thing this polls tells us is that whoever set up the poll is incompetent, and probably shouldn’t be listened to on any further matters of importance. This is fundamentally the wrong question to ask.
If you had asked people in 1980 “How much, if anything, would you be willing to pay per month to watch a television channel’s online content?”, the answer would be “Nothing.” And yet, cable television did reasonably well.
If you had asked people in 1987 “How much, if anything, would you be willing to pay per month to have another phone in addition to the one that you already have? And also, it will have a different number.”, the answer would be “Nothing.” And yet, mobile phones did reasonably well.
Of course people say they’ll pay nothing for news online! What idiot would say that they would? They get it for free already, from a number of good sources. We’ve never really paid for news. Cable TV and mobile phones worked because they offered something fundamentally different from what people already had. Cable didn’t take off until people heard about 24 hour sports on ESPN, and 24 hour news on CNN, and 24 hour music on MTV. Prior to this, you had sports on the weekend, and news at 6 pm and 11 pm, and music, well, never. Cable changed the value proposition.
Mobile phones changed the value proposition too – they allowed you to use the phone anywhere. And eventually, they allowed you to send short text messages. Even still, for me at least, this had negative value until smart phones came along and gave me a portable computer with gps.
And the big problem is that you can’t ask customers what they would want with these things in advance, because we don’t know. You can just experiment. With phones, the telcos always thought that the market was for businesspeople. Initially it was. Once they introduced texting, all of sudden there was a huge market for teens, which drove further innovation.
News has to experiment now, and they need to specifically think about how they create value with Aggregating, Filtering and Connecting. I’ve talked before about many different possible approaches to this. We can develop new funding models, like Jeff Jarvis has. We can develop new value creation models, like Dan Gillmore advocates. We can consciously develop an aggregate, filter and connect model, like politico.com’s or Dan Conover’s.
The main point is that this situation requires business model innovation. To figure out how to do that successfully, we have to ask new questions. We need a news version of cable television. Or a news version of mobile phones. The entire model has to look different. Polls that ask if you’d pay for current content online are not just worthless, they’re harmful, because they prevent us from asking the questions that can lead us to genuine innovation.
Yet Another Example of Why Inventions and Innovations are Different
Posted by John in innovation, time on 23 January 2010
One of my secret pleasures is Ken Burns documentaries. Ever since I saw his breakthrough work on the American Civil War about 20 years ago I have been mesmerized by his careful and beautiful use of images, narrative, music and cinematography (another innovation). It doesn’t really matter what the topic is… the Lewis and Clark expedition, Jazz or even something I don’t even care about that much like Baseball, if I get to watch 10 minutes of the first episode then I am hooked for the rest of the series.
The ABC are currently screening a Ken Burns documentary titled “National Parks: America’s Best Idea”. Once again, its a stunningly beautiful film that makes me consider upgrading to high definition TV. While the title says that national parks are an idea (invention), it becomes very clear through the stories of different parks that they are better described as innovations.
In most cases they begin as an idea in the head of an inspired individual but as we’ve said many times on this blog, ideas are not the problem. In almost every case the process of creating a national park involves building a coalition of supporters and users to redefine the value of wilderness. In some instances, such as Yosemite, the originator of the idea never lived to see the park’s creation. Even the awesome Grand Canyon national park was a struggle to overcome the plans by an Arizona senator to turn it into a hydro electric scheme.
Innovation is hard and ideas can be just the beginning of a long journey.






