Thursday, November 25, 2010

Silicon Valley comes to the UK (SVc2UK)

Folks following me on twitter (@tshelton) know that for the past week I have been sporadically commenting on #svc2uk or sometimes #svc2c (Silicon Valley comes to Cambridge). Last week was my third time joining this trip, organized again by the fabulous Sherry Coutu (@scoutu) and Reid Hoffman (@quixotic). 4 days and series of events that puts us in touch with 2200 people in London and Cambridge from government to industry to education... it is truly an amazing experience. As Teamly founder and CEO Scott Allison (@scott_allison) tweeted:
What makes #svc2c special: the accessibility and willingness to help of the experts. Quite unlike other conferences!
I think that is a key to what makes this event so special for both the folks from Silicon Valley and the UK attendees. When you look at the amazing group of people that came over (speakers list) you can understand something about how special this event is -- sitting at a table with the head of engineering for Facebook, the head of engineering for LinkedIn, senior folks from Google, the executive director of Mozilla, CEO of creative commons... and the list goes on.

A few things I learned about my follow SVc2UK attendees:

August Capital venture capitalist David Hornik (@davidhornik) has a degree in criminology from Cambridge University (and is happy he has never had to use it as an investor!)

Nancy Lublin's (@nancylublin) organization has motivated over 1 million kids to become active toward some social good this year.

Creative Commons CEO, investor, and all around amazing guy Joi Ito (@joi) went to the University of Chicago during the exact years I was there (he was in the physics department and I was over in philosophy...) and also didn't graduate! I told him about how I successfully completed my degree 25 years late (class of 2009, yeah!) and he is now going to try as well...

Google's Megan Smith told us that Google is spending $140 million this year alone on socially relevant activities through their non-profit arm

Other funny moments and quotes:

Megan Smith at NESTA's "Big Data" discussion "Get your data online and don't get caught in the PDF ghetto!"

UK Minister Willetts supporting more open immigration policy: "More than half of new tech from Silicon Valley were built by people not born in US"

Reid Hoffman: "Trust relationships between people are key to how business is done"

Also Reid: "'A startup is like throwing yourself off a cliff & build a plane on the way down"

And one last one from Reid: "Work fast to solve the hardest problem first. Because if you can't solve it, you need to pivot"

Other great links:

Mozilla Exec Director (and now Greylock VC John Lilly's Talk at the House of Commons

Mark Littlewood of BLN blogged the panel about what the world will look like "If my company is massively successful..."

NESTA put up videos of a bunch of the speakers...

The Telegraph's Milo Yiannopoulis (@nero) "Cambridge starts taking the internet seriously"

Looking forward to next year!!

Wednesday, November 10, 2010

Five Modalities Model of Community Development

When considering community development as a part of marketing activities, corporations often forget the most basic requirements of inter-dependency and value creation. In 1986, researchers McMillan and Chavis wrote about defining a sense of community that it must have the following elements:
1) membership, 2) influence, 3) integration and fulfillment of needs, and 4) shared emotional connection.
Too often companies simply believe that a "community" is a cluster of people who expressed interest in their products or services, and that this can constitute a sufficient connection to continue to communicate AT these people.

Instead, companies must consider how they can bring value to the people of a community, not just expect value from those people. We have identified five core ways that companies can bring value to people and can develop this sense of membership, influence, integration, and sharing that is crucial in community formation. The first two, the easiest and most common, only allow a company to earn attention, even when they are accomplished in a context of "co-creation." But the other three modalities are much more powerful and can form the basis of a long-lasting relationship for a company with its customers and prospects.

These five approaches can be used both when a company elects to create its own community and when it engages with existing communities. While we have developed the use of these approaches in online environments, they are as valuable to consider when engaging in the physical world.

There are two modalities useful in earning the attention of an audience, we call them "entertain" and "inform" although often (as with all five) they can be used in concert. The better the content, the more valuable it will be to an audience member, and the more likely it will be to result in some sort of response -- whether it is through sharing (passing the company's message to one's social graph) or through co-creation. A "better" content will be one that is in itself more entertaining or more informative, but also one that is more tuned to the needs of the people consuming the content as opposed to the desires of the company to achieve some transaction.
  • INFORM -- In its most basic sense, informing communications are ones that help educate people about something whether it be a product, service, or the problem that such product or service addresses. For example, a company that sells do-it-yourself home repair supplies might simply advertise the low price of lumber available at their store. While this would be a form of "information" it is of transitive value and only relevant to those immediately in need of the particular goods on sale. Instead such a company could construct a website answering questions about how best to do various repair or construction projects. How, for example, to use that lumber to build a treehouse.
  • ENTERTAIN -- Getting people to laugh has been a mainstay of advertising since virtually the first commercial messages were distributed. Whether as humor, spectacle, or narrative the notion that an advertising message can be coupled with some kind of entertaining content is well worn and works in the social space as readily as in other mediums. Finding those opportunities to create an entertaining envelope for your ad message which is also adopted by a community is somewhat more difficult than the onanistic pleasure we get from a good commercial on primetime TV. But a number of simple mechanisms are evolving.

But far more interesting than merely using this new social "channel" to recapitulate the attention models of old marketing, social technologies provide the opportunity to shift the model -- from one in which you as the marketer are seeking an audience, to one in which interested parties find you. This reversal is truly the core of understanding the current marketing revolution and why the old mechanisms will continue to decline in effectiveness while a new science of market engagement is needed.

The new engagement modalities provide a circumstance for a relationship to develop between a company and its customers (or prospects). Broadly speaking there are three possibilities:

  • SUPPORT -- Facilitating the customer's experience of a product or service, typically by hosting an open collaborative space for customers to interact with each other. This can be moderated, mediated, or merely contributed to by the company with the objective in any such participation being to enhance the quality and credibility of the discussions. So for example, providing more accurate information is good, deleting an accurate (though negative) comments is bad...
  • CONNECT -- Helping members of your market connect with one another hopefully toward some purpose that is related to the company's product or service. This can be as simple as hosting content and community on related topics or as sophisticated as providing a matching system that allows participants to identify themselves to others with compatible interests or objectives.
  • COLLABORATE -- Truly the most powerful of the engagement modalities, when you can collaborate with your market, or at least help them to collaborate with one another, you provide the greatest (and most lasting value). As with any of these approaches, it is more powerful when directly related to the company's products or services, but this is also a place where "corporate social responsibility" elements often can appear.
These five approaches to building community should be used in combination, and the "devil is in the details" in getting the right strategy and execution. But this brief outline is at least a useful filter to apply to your organization's social activities and a useful starting point to ask questions about whether your current strategy is right or whether it is time for some new thinking. If the latter, let us know as we'd love to help -- Open-First.

Tuesday, August 24, 2010

The More You Give The More You Get

Last week I had an opportunity to present one of our client projects at the Social Fresh conference in Charlotte, N.C. (Slides below). One particular item that came out of this project (slide 17 if you want to jump ahead) is worth exploring in more detail because I think that it illustrates a general principle of networked systems, what I'll call "The More You Give The More You Get."

For this project we needed to contact a large number of food bloggers and explain this crazy idea we had to publish a cookbook filled with appetizers, entrees, deserts, and snacks that use "brain healthy" foods. The result by the way is beautiful, the ThinkFood Cookbook. In the course of talking to hundreds of food bloggers we contacted some who had an enormous number of regular readers all the way to bloggers who had virtually no readers but we liked their style and recipes.

In communicating with all of these different bloggers we started to see this fascinating corollary which ran contrary to our expectations. We had thought that the bigger the blogger (in terms of readers) the less likely they would be to want to participate in our project. Whereas we thought that small bloggers would jump at the chance to participate in a high profile project which might bring them new readers.

The opposite was true.

The larger the readership, the more likely the response was positive! And even when the answer wasn't a "YES" the response was always positive and supportive. By contrast the most vitriolic "NO" emails that we got were from bloggers with the smallest readerships. Like this one (no need to give the person's name)
"You want us to provide you with free content in exchange for exposure? Do *you* work for free? No thanks."
Well yes, unnamed blogger, I do often work for "free" if by "free" you mean without compensation in the form of sovereign currency immediately exchanged for my labor. But I also recognize that when I work for "free" that the exposure IS a form of compensation. And that through the exposure I am likely to trigger a variety of network effects that will pay dividends in the future.

And so I put this question to you to research -- is it the lack of relative success in blogging that makes these people who don't want to give so unfriendly? Or is it their unwillingness to give (and unfriendliness) that makes them unsuccessful?

My guess is that there is a connection between being willing to freely give in a networked economy, and the success one achieves through that network -- that the more you give, the more you get.

Here are my slides:

Monday, August 02, 2010

Inaugural Techonomy Conference

This coming week we will see the birth of Techonomy a new conference and a new organization dedicated to one of the most important things we do as a species -- the exchange of ideas in search of collaborative engagement that takes those ideas further... what Matt Ridley recently called at TED Global "ideas having sex." Techonomy, like TED, brings together an amazing group of the top thinkers in the world, people like Bill Gates and Dean Kamen who are making substantive contributions to the improvement of our planet and species. But unlike TED, the founders of Techonomy are on a mission. From their website: is what techonomy promotes: a rational, optimistic, forward-looking, technically savvy work ethic that celebrates technological achievement, human ingenuity, and sustainable living.
Technomic thinking -- understanding the relationship between technology and economy -- is key to the way in which our economy will develop in the 21st century. The pace of innovation, driven in this generation by the computer chip, now greatly exceeds the capacity for our linear human experience (and institutions) to comprehend. When we look at the problems we have today and calculate in 19th or 20th century terms the length of time it will take to solve these issues, we miss the profound change that the computation economy brings to our civilization.

As I prepare to travel to the Techonomy conference, I am reading and thinking about the recent Harvard Business Review blog post by Umair Haque, "Three To-Do's (And To-Don'ts) of 21st Century Strategy." In this compelling post, Umair begins his thoughts with a welcome:
Welcome, finally, The 20th century ended a decade ago, but the 21st century never began...
He goes on to explore a set of social dynamics that, he suggests, business needs to re-organize around in order to prosper in the 21st century. He identifies a strong middle class, a sustainable use of natural resources, societies which respect and protect human rights, and a need to reform the way corporations manage themselves as the key principles of the next era. To these I would add Techonomy attendee Andrew McAfee's voice and his separate HBR blog post, "IT's Three Key Organizational Transformations." He writes:
I see companies in all industries using computers to accomplish three broad and deep transformations: they're becoming more scientific, more orchestrated, and more self-organizing.
Techonomic thinking asks us to reflect on the kinds of challenges that Umair poses through the lens of technology and its capacity to transform our organizations and the very possibilities we have for solving humanity-wide problems. Andrew gives us the next few steps for how we prepare our organizations to participate in this new technology driven economy. Techonomy the conference encompasses both of these ideas and brings them together, Matt Ridley's "sex of ideas," and asks its attendees to spend the next several days working together to imagine a better world, to whose creation we can all contribute.

Welcome to today!

Sunday, July 25, 2010

Rethinking Software Patents

When I was at Borland at the beginning of the decade, I was amazed to discover that the company held patents for the "tab" user interface element and even the right mouse click, amongst hundreds of others. Few of these patents ever really helped the company and we had long debates internally about what to do with them, and whether there was really anything that could be done with them. Here we were, a very successful software company, inventing many new technologies, and really getting no credit (and no protection from competitors) from the software patent process. At the time I felt that software patents were probably at best a waste of time.

Well I have just had a very frustrating few months. And my experience is causing me to rethink (or maybe to think through for the first time) my position on the software patent debate.

I am coming to see some value in issuing patents to innovative young companies in order to protect them from the abusive behavior of large companies. An established company, like Borland, was capable of pursuing market opportunity through execution. But small companies are too often frozen out of the market by bigger companies. But they can also be an enormous source of innovation -- if we want to foster this innovation from small companies, shouldn't we find a way to provide them with protection?

One client I am working with right now clearly invented something four years ago that a number of large companies have now studied and learned from. My client applied for patent protection in 2007 and the application is slowly moving through the various government processes and will likely be issued in 2011 or 2012.

But in the technology world 5 years is a lifetime. And in those 5 years a dozen companies have now taken this startup's invention and implemented their own versions.

There is one particularly egregious example of a large tech company that asked the startup for a version of the software for testing back in 2008, spent a good deal of time actually using the product, and now has (a) shipped their own version of the technology and (b) refuses to meet with the company.

So how will my client ever recoup the time and money invested in creating the innovation in the first place? The most likely outcome sadly is to sell the patents to a specialty firm, often derisively called a "patent troll." One might look at such firms as being the worst kind of lawyers - those that create no value and just seek to take value out of other, "legitimate," businesses.

But stop for a moment and think about how the firm that enforces patents is actually doing our system a favor -- they are saying to the big company that abuses its power and steals from small companies that there WILL be a reckoning day and a price to pay for this abuse. While they keep a lot of the money from the patent infringement cases, they are at least one way for a small company to someday make something back for their innovation.

And the patent enforcement practice is byzantine at best, with numerous places for a small company to go wrong and lose their ability to effectively prosecute their case. They need someone who specializes in such knowledge to help them.

I'm afraid our world DOES need patent lawyers -- as long as big companies are willing to treat small ones with such reckless disdain.

Friday, July 09, 2010

Relentless Focus and a Data Driven Culture

Wondering what Google, Facebook, Foursquare, Twitter and Zynga might have in common? Hint: something other than the creation of incredible new businesses that are enormously valuable and growing at an unbelievable pace? I have been asking myself this question and thinking about how the lessons of these five could be applied to every business. A few nights ago I had dinner with an old friend who is now a senior executive with Zynga and I put the question to him. His answer?

"Relentless Focus"

But over the course of dinner he admitted it wasn't that simple. Sure, dedication and hard work and staying on top of the right issues and opportunities was a critical factor, but how did you know what the RIGHT things are to focus on? Couldn't you just as easily fail by having a relentless focus on the wrong stuff?

Zynga is an amazing success, how amazing we can only guess until they file for an IPO though we do know they have grown to 1250 employees already and are continuing to grow fast. But my friend didn't claim that he and the other executives were just so smart that they had simply known the right things to do as they gre the company. And while he admitted that there is an element of luck, when pressed he began to talk about something very interesting, something that probably is the difference for all five of those companies. He said,

"we have one of the best data analytics guys in the world"

Why is this important? Because it represents an enormous sea change in the way business is conducted. There are companies that have truly embraced a data-driven culture, and they are rewriting the way decisions are made, issues are surfaced, and on what we should relentlessly focus on to succeed.

The hierarchical decision making process of the twentieth century promoted the best decision makers into positions of greater decision-making authority so that the smartest and most experienced (although sometimes the best political players) made the important decisions for our companies. But that isn't what happens in data driven businesses.

At a lunch with some friends on the Google campus recently one of them gestured around the Mountain View lunchroom and asked me, "do you think anyone in this room knows what our stock price is?" He went on, "most of them don't, but they do know the data on how many users are actively using their products." And people at Google relentlessly focus on this metric. Looking at "7 day actives" or how many people used your product (or feature) in the past week means that you can, each week, establish experiments and evaluate the impact that making one or another change has on usage. As has been discussed elsewhere (How Google Works infographic), virtually every search you do on Google is either part of an experiment or control group. This iterative product improvement method is well understood in web businesses because data is an inherent part of the customer experience. But the principles can be applied much more broadly.

The first task is to understand what data a given business needs to have to make better decisions. This in itself is an iterative process, with the definition of what data is valuable evolving over time. The second task is to develop the right processes to collect this critical data. Web businesses are swimming in data but often the wrong kinds, so even here there is an important job to be done which we call "incentive design." In short, how do you design your customer interactions in order to obtain the data you need to make decisions? And how do you use new social and mobile interactions to collect data you never had access to in the past.

Exposing this data inside the company is a critical step in the process -- you don't know who will need access to the data to make a decision so in a data-driven culture the company provides a powerful dashboard for all employees to explore and interrogate the data being collected. This is where the name of our company, Open-First comes from -- employees need open access to complete and accurate information in order to make good decisions. So change your culture to be open first, before you do the next step. The next step though is all about the data.

Once you have the data you can start talking about experiments that let you rapidly and inexpensively test your ideas and give you the feedback loop you need to find your focus. Andrew McAfee talks about this in his recent HBR article titled "IT's Three Key Organizational Transformations" in which he says
I see companies in all industries using computers to accomplish three broad and deep transformations: they're becoming more scientific, more orchestrated, and more self-organizing. None of these is complete yet, and I doubt that they ever will be. This is because innovation keeps opening up new opportunities to go further with orchestration, self organization, and science, and companies keep taking advantage of these opportunities.

These three elements are all critical, a scientific approach (we call our methodology PHAME) and devolved decision making (self-organizing which is at the same time coordinated (or orchestrated) results in an organization that is capable at moving at a speed that hierarchical twentieth century business is incapable of duplicating. So companies like Zynga will run circles around traditional businesses.

Your business needs this - a deep understanding of the data that you need to make decisions, the right processes for gathering that data, tools for presenting the data to your employees, and an experimental methodology for learning from the data and decisions.

And oh yeah,

Relentless Focus

Friday, June 04, 2010

Location, Location, Location

Yes the joke has been made before - what has long been said about the real estate industry is now also true of the mobile industry and even of the Internet more broadly as mobile access continues to grow and eventually becomes the primary way we access the Internet. The ability to detect a user's location is changing the way we design and use applications and is already creating enormous new business opportunities. What is truly amazing is that this is only the first of a series of sensors we'll carry with us in our phones -- the "low hanging fruit" of the mobile revolution that the 2010s will bring to our society.

Data courtesy of Open-FirstHere at Open-First we have been studying the emergence of the mobile paradigm and have been applying our knowledge in advising our corporate clients. The graph shown here is an important key to understanding the tremendous shift underway. It shows the first 5 quarters of user growth for the now enormously popular Twitter service, and the more recently launched Foursquare service. Both of these services can be seen as "lightweight social networks" in the sense that they provide one particular way in which people will interact, as opposed to Facebook and others that aggregate a variety of interaction modes.

But Foursquare reached 1 million users in half the time that Twitter did, even after a huge growth spurt for Twitter following the 2007 SXSW conference, largely acknowledged as the point at which the technology world "discovered" Twitter. Why has Foursquare grown so much more quickly?

In our opinion the disparate growth has everything to do with what Geoff Moore called in his famous book of the same name, "Crossing the Chasm." At the risk of losing all of the subtlety of Geoffrey's invaluable book (go buy it and read it if you haven't already) the simple explanation for how a product moves from "visionaries" to "pragmatists" is by providing some easily understood real value in the use of the product. Thus the difference in the growth rate of Twitter and Foursquare in our view was the time it took for each to establish that value.

Foursquare's advantage in this race was location. The shift is at once subtle but fundamental. Twitter is at heart a message bus, merely a facility that enables a wide range of activities. But Foursquare inherently incorporates purpose into its use. One could even say that location is a proxy for purpose -- I am in a particular place because I am doing a specific thing there. Others that come to that place are likely to be doing something similar for similar reasons. I immediately share purpose with others -- a social network of purpose will prove its value much more rapidly than a social network of interest like Twitter.

And even aside from mobile we currently have an explosion of social networks of purpose. The social buying site Groupon for example. But the other important aspect of Foursquare is the way in which it is leveraging a mobile sensor, in this case GPS for establishing location. This is important because we are about to see an explosion in the number and variety of sensors deployed in the built environment and on our bodies, generating vast new quantities of data, often into social pools (see Dr. Andreas Weigend's Social Data Revolution for more on this).

In each case, as a type of sensor is popularized, new applications (and new businesses) will emerge and because they will be tightly coupled with purpose, these applications will leap to "pragmatists" quickly and grow in importance and use quickly. What are these other sensors you ask? How about a device that accurately monitors how many calories you are burning? Or a personal pollutant sensor? Location will be extended to monitor social proximity and we'll also know more and more about an individual's activities while with others based on text, audio, and visual content collected and correlated based on content location tagging.

Our mobile phones have been turned into a global distributed sensor network. These devices will contain an increasing level of sophistication in what they are able to sense and transmit into networked database that will then overlay and correlate data from other sources. In a recent guest post for TechCrunch Robert Scoble imagines how this new world of location based services will change the way we live -- Location 2012.

And really, this is just the beginning.

Saturday, May 22, 2010

My Heroes

If anyone is going to save our species, it will be the brilliant scientist/inventors who are rethinking the possible and making it real. Here are three of the people you have to rank as heroes of our generation if you believe at all in innovation as the key to our survival -- Dean Kamen, Ray Kurzweil, Craig Venter

Don't tell me its impossible -Dean Kamen

If you reach 1 percent and keep doubling your growth every year, you’ll hit 100 percent in just seven years -Ray Kurzweil

A doctor can save maybe a few hundred lives in a lifetime, a researcher can save the whole world. -Craig Venter

Thursday, April 29, 2010

The Computation Economy

From the 18th century and for about 200 years the world was radically transformed by something we now call the industrial revolution during which substantial changes in the methods of production and the organization of human society led to exponential growth in per capita GDP, an accompanying improvement in the standard of living and longevity, and a sustained period of accretive scientific and technological innovation unmatched in any previous period of social and economic growth.

For the past 50 years or so, a variety of writers and educators have spoken of a postindustrial economy, in which economic improvement has been driven by continuing innovation and knowledge. Some have called this the "information age" or the "knowledge economy." The language is derived from an observation that value creation is increasingly driven by the information content of a product rather than by mining, refining, and assembling the raw materials (value drivers in the industrial economy).

The idea of the "knowledge economy" was explored by Peter Drucker in his 1966 book The Effective Executive in which he contrasts the manual worker and the knowledge worker as ones which work with their hands or their heads respectively.

But trying to understand the changes coming in the next hundred years through the prism of information, knowledge, or thought misses the transformation that is at the root of the change. It would be as if one tried to understand the industrial revolution by simply observing that people had raw materials, methods for making them into things, and bodies to do so.

The transformation in the industrial revolution was about the mechanization of labor -- the ability to build a machine that augmented or supplanted labor. Division of labor was a step in the process toward mechanization - a kind of mechanization in itself as it transformed work from skilled craft to unskilled repetition.

The transformation that we are in the early days of experiencing is one in which computers are augmenting or supplanting thought. Computation is eradicating the cost of communication and the cost of coordination in our social, economic, and political systems. The initial "knowledge workers" performed tasks which will be increasingly computerized just as the workers of the industrial revolution found that once production had been efficiently divided into narrow tasks, people could be replaced by machines in those processes.

And just as the industrial revolution changed what we were capable of manufacturing, so to will computation increasingly change what we are capable of thinking. Stephen Wolfram in his 2010 talk at TED gives us some glimpses of what is possible and what is coming.

The Computation Economy is rapidly replacing the Industrial Economy - computation is the true heir to industry, not information or knowledge which are merely the raw materials of the computational engines. When we look back from a vantage point of 50 or 100 years from now on the early steps of these last 50 years, the accelerating per capita GDP, increased quality of life and longevity, and the transformation of our species will be credited to a rapid doubling and redoubling of computational power. Just as in the industrial age it was through the doubling and redoubling of physical power.

Wednesday, April 28, 2010

Information Has NO Value

Information has no intrinsic value. It is what you DO with information that creates value. Perhaps this seems obvious or even useless to point out, but if you read through this post, perhaps you'll agree that it is an important key to understanding the future (and past) of all media businesses.

When you read news about why a company will do well or poorly you might invest more intelligently and make money. You listen to music. A joke makes you laugh. Each of these is a use - make money, listen, laugh... value begins when you are doing something with or because of information, not in the information itself.

Why is this distinction important? Information business models must be evaluated in terms of what the creator (or owner anyway) can gain through uses of information and what the recipients would gain. Not from something about the information itself. And there are some important places in which the benefits for creator and recipient are aligned and some where they are at odds.

A simple example -- malfeasance by a government official is a kind of information that as long as it is secret protects the job of that official. But it is in the public interest to have this information known widely so that whatever abuse is occurring can be stopped. Creators want it private, the rest of us want it to be public.

In media businesses we assume that the interests of creators and recipients are aligned -- but this is often not the case if we dig a little bit deeper.

Value Conflict 1: Restricted vs Broad Distribution
In the news business there are stories that are more valuable for the recipient if fewer people know about them so that acting on the info is limited (info about a company which will make a stock go up or down). And some stories that are more valuable if a large number of people know about them (the description of how a computer virus is passed between computers) so that acting on the info is widespread.

But a news company's business model might not be aligned with the value for recipients. It might be skewed toward broad access (the more subscribers the higher the revenue) even when restricting access would create more value for individual subscribers. Or toward restricting access (fees for reading online articles) even though all recipients would benefit more from broad knowledge of the content.

Value Conflict 2: Immediate vs. Long Term Returns
Time frame is another important component of recognizing value conflicts. Take music for example -- on the one hand a musician would like everyone to hear his songs as this helps build awareness and appreciation for that musician over time. Doing so may lead to more attendance at concerts, use of the song in advertising, and even future sales of related products. But in order to make money from selling copies of recordings (a shorter term benefit from the music) access to the music must be restricted. For recipients easy access is essential in a world in which far more music is available than can be heard.

Value Conflict 3: Constraints Imposed by Media Format
In some cases the delivery medium confuses the value proposition. For a newspaper owner, there is a clear efficiency in bundling information of a variety of mostly unrelated types into one rolled stack of pages in a plastic bag. But for the reader this is a very inefficient model for consuming information. Why wade through section after section when looking just for job listings or sport scores?

Similarly TV with its limited bandwidth and time slots needs an executive decision process to determine which programs go into which limited time slots but this isn't at all convenient for the consumption of content. As consumers we each want to start watching when we are ready and watch the program of our choice at the time of our choosing.

Internet Deconstruction
The wonderful and horrifying thing about the Internet is that it collapses the constructs which have created value conflicts and forces us to entirely reexamine our institutions and business models that create and distribute information. The key to developing new successful models will be to analyze the ways in that value for creators and recipients of information can be aligned.

For example news organizations reporting on politics have to focus on business models which earn money through the largest number of people consuming their content because a democracy functions most efficiently when all people are aware of the issues and positions and can debate and vote on them intelligently.

Musicians could focus on creating great experiences of listening to music, and communities of listeners. Value created for listeners would then result in more loyal fans who attend more concerts and buy more non-music products and increase the likelihood of other commercial uses of the music.

What is certain is that where business models exist today in which value to the recipient is frustrated by the attempt to extract value by the information creator (or owner), the business model will be defeated by a more aligned model.

So to create value in new media business models focus on what we DO with the information.

And remember that the information in itself has no value.

Thursday, April 22, 2010

Earth Day Needs More Thought

Hope you are all feeling great about "earth day." Planning to turn out the lights tonight? Don't burn candles instead as the impact on the environment is MUCH worse. Not planning on driving to work? Make sure that the lost productivity doesn't wipe out the positive impact that the reduced CO2 might have. In fact just about everything we do that "feels good" about conservation really isn't going to help. Let's look at the big picture.

Average per-capita energy consumption on the planet in 2005 was 1,778 kgoe

US consumption was 7,885.9 kgoe.

So yes, US citizens per capita consume way more than the average -- although it is incorrect to say that we consume the most. Folks in the very hot places (like the United Arab Emirates) handily beat us at that game.

But let's talk about conservation -- what if we convinced US citizens on average to consume 20% less energy? We'd save something like 1577.18 kgoe per person per year. But the US is less than 5% of the population of the planet. So how much would the other 6.7 billion people have to increase their energy use to wipe out our conservation?

About 70 kgoe

That is just 20 gallons of gasoline.

So if everyone in the US reduces our energy consumption by 20% for an entire year the rest of the world can fill up their gas tanks once and wipe out all of our conservation.

Of course not everyone in the world has a car (most don't today). But the problem with conservation is that it ignores the real problem -- the rest of the world wants to live like we do. Instead of reducing energy use we need to focus on how we can increase energy use without destroying the planet and the only way is to create cheap clean energy alternatives to oil.

In fact, lets increase average global energy consumption by an order of magnitude - to 20,000 kgoe -- but with cheap clean energy.

Cheap clean energy would mean cheap clean water which would in turn allow for cheap high quality food and improved living conditions.

And lets not forget that clean energy would reduce greenhouse gasses and help us reverse global climate change.

Simple conservation won't help. Focus your energy instead on the investment in innovation that is necessary to create the power sources of the future.

Happy Earth Day

Data from EarthTrends: The Environmental Information Portal

Thursday, April 15, 2010

Tax Day and Why You Should be Paying MORE

Tea parties are for kids. Adults deal with the tough problems. And we have a very tough one in the US - almost $13 trillion total deficit and headed quickly up and away. Try leaving this real time debt clock as the background on your computer screen for awhile to give yourself a sense of the problem. Or just look at these facts:

The Congressional Budget Office projects that total federal revenues will be about $2.2 trillion in 2010

The Congressional Budget Office (CBO) projects that if current laws and policies remained unchanged, the federal budget would show a deficit of $1.35 trillion for fiscal year 2010

We are spending $3.55 trillion on $2.2 trillion of revenue. That is, we only earn 60% of what we spend.

That is not sustainable. Full stop.

And cutting spending won't be easy. You aren't going to take benefits away from baby boomers, not all of them anyway (not all the benefits, not all the boomers). And for the doves out there, military spending going to zero (impractical) would only cut the deficit in half.

So while we should spend less, and there are certainly lots of opportunities to do so, the only practical solution (sorry tea party kids) is to INCREASE REVENUE.

There are two ways to do this and we must do BOTH:

1. The economy (GDP) must grow.

2. Taxes must be a higher percentage of GDP.

Take a look at this chart from the revenue outlook page of the CBO's report:

Federal taxes as an average of GDP from 1970 to 2009 averaged roughly 18%. Taxes in 2009 however were just 15% of GDP a 60 year low. Tell me again what the tea party folks are complaining about? The overall federal tax on the economy as a whole is at a 60 year low! Even when including state and local taxes, the overall burden on consumers and businesses is at historic lows.

How much of a difference does that make? 2010 GDP is projected to be almost $15 trillion. An additional 3% (just to bring us back to the 30-year average) is another $450 billion in revenue. That doesn't solve the hole in the budget but does close it by 1/3.

What do we do to get the rest of the money we need? Or even start paying back the deficit? Or putting money against mounting health and retirement benefits?

First we need to invest in the growth of the economy. Growth from a $15 trillion to an $18 trillion GDP would alone (at the 18% average tax rate) add $540 billion in revenue.

But we also need to anticipate a period of higher taxes while we grow our economy (and control spending). At current spending levels we need to increase taxes by about 2% over historical average levels, to 20% of GDP.

An $18 trillion economy taxed at 20% would generate $3.6 trillion in federal revenue -- just enough to pay for current programs. Cut spending and you can pay off existing debt.

Lets put that in perspective - what are the tax rates for other countries that we might look to as a model (From the Organization for Economic Co-operation and development) Note that the US rate is shown including state and local taxes (so about 28%):

We don't have to become the highest taxed nation on the developed world (or anywhere near) in order to close this deficit problem and begin to take care of our children.

Join me in opposing the tea party and calling our representatives to ask for higher taxes!

Sunday, March 21, 2010

A Tale of Two Cities

Just down the Holland Park Road from London's wealthy Notting Hill neighborhood, the community around Shepherd's Bush Commons is experiencing an interesting urban juxtaposition. Not far from the old, somewhat run down shops on Uxbridge Road and the adjoining park of Shepherd's Bush Commons lies the new London Westfield Mall (in the space labeled "White City" on this Google Map).

The shops along the commons, as can be seen in this Google "streetview" photo, are the run-of-the-mill type you'll find in various modest neighborhoods. A quick walk around the park suggests that the area is primarily dominated by immigrants from the Middle East and you'll often see women in full burkas. A few homeless people and drunks are in the park which is otherwise clean and well used with many children on the play equipment.

As you progress down the road to the recently refurbished tube station (opened in 2008) suddenly a very different image of life in London appears. According to a Wikipedia article on the Shepherd's Bush station the refurbishment was paid for by Westfield. Given the way in which the tube station and the adjoining overground station match the steel and glass architecture of the Westfield London shopping mall it is easy to make the connection.

(A blog by Scott Santoro has additional photos and commentary on the mall) The mall itself is a fascinating vision of what 21st century life in London (and around the world) may increasingly look like. Steel and sheer glass replace the humble beige brick. And in this version of London Prada and Gucci replace the "Super Save." One is tempted to ask who can really afford all of this luxury but on this Sunday afternoon the shops and restaurants were packed full of bag toting shoppers. A small play area for children had far exceeded its capacity as parents entertained small kids while the shopping went on.

The many contrasts in so small a physical space seemed accentuated to me by the way in which the mall is entirely cut off from the original neighborhood. The greenery on the photo above covers a high wall that serves as a solid barricade between middle and lower class apartments and the glitz of the mall. One could arrive by the underground or overground station, walk into the mall, and never realize that another London is just on the other side of this shrubbery.

Which is perhaps the point. People in the new London don't really want to be a part of the old London. This particular architectural contrast shows how there is a wide gap between the two, a gap that has always been a part of society. But a gap that is now defining itself in an architectural language which at once announces and embodies both the future and the past -- a future of clean bright spaces made of shiny materials and the past of ongoing segregation by economic class.

At least in Notting Hill there is a continuity between one neighborhood and the next. In the futurism of Westfield there is a complete break from the existing community. To be fair, the idea of the mall has evolved over time all over the world as a kind of tiny city which ignore the existing landscape in which they are placed, forming their own islands of commerce. But I wonder if one squints just a bit whether the London Westfield isn't just a mall but also a look at how urban planners will be rethinking entire communities (exclusively for the wealthy) in the decades ahead.

If so, we should begin to worry about how this visual and physical segregation of western society will exasperate the many social problems which we already are experiencing, and whether our architects and urban planners ought to think more about how to create connections and continuity between old and new.

Saturday, March 13, 2010

The Strategic Use of Social Data

There is a tidal wave coming, or as my friend and colleague Andreas Weigend likes to say, a "Social Data Revolution." I like the metaphor of the tidal wave because it evokes the image of a force of nature that cannot be stopped whereas "revolution" might fail or be reversed by "counter-revolution." And I don't think the change coming can be stopped or reversed.

In the past few weeks since attending a fabulous workshop in Zurich hosted by the Gottlieb Duttweiler Institute I have been even more attuned to the emerging corporate practices in which social data is informing decision making processes. A few examples:

  • A retailer checking to see if your email address is active on a range of social networks as a way of deciding whether or not to clear your online order

  • A credit card company that has realized that customers who have extensive and long standing LinkedIn profiles are significantly less likely to default on their credit cards

  • An insurance company that is making decisions about which insurance claims to further investigate based on the social graph of the claimant

  • An enterprise IT equipment company that has modified its sales lead scoring algorithm to include a variety of factors from activity in social networks and social media

  • An appliance manufacturing company that has reduced the delay in knowing that they have a product defect issue by two months by monitoring online conversation rather than waiting for data from their field repair organization

The list goes on. Companies of all kinds, in every industry and region, are discovering that there is an enormous pool of information -- call it social data -- that is being created at an every increasing pace from which they can learn more, and make better decisions more quickly.

This trend will only accelerate with advanced mobile technologies. Every individual now has the capability of being a "sensor" in their physical environment, recording and transmitting physical data (location, speed, etc) but also behavioral and emotional data. When people walk into a particular store, say Starbucks, are they happier than before they walked in? How does that one store's data compare to other stores in the area?

For the past ten years we have been building out a network of sensors in roadways that can transmit data about the speed of passing vehicles and allow us to aggregate that data into a visualization (typically a map) to help us decide which roads we should choose to get from point A to point B. This is an example of data-driven decision making with which we have all become familiar.

Now every person is a "sensor" and is using their computer or mobile phone to transmit information into public (and private) databases. Businesses must learn how to build the analytical models and visualization tools to give their employees the equivalent of a map in order to comprehend this information and use it to make better decisions.

The companies that utilize these tools effectively in their industries will have an enormous strategic advantage over their competitors. The time to join the tidal wave or revolution is now.

Saturday, March 06, 2010

The next Facebook

Randall Stross offers some useful insights on Facebook and on the phenomena of the "network effect" in his latest NY Times article, "Getting older without getting old." But he misses the easy one when he writes
Industry watchers constantly scan the horizon for a challenger that could displace Facebook...

The most interesting thing which we should all reflect on in our businesses is the rapid emergence of Facebook from nothing to 50 million users in 2007 to over 400 million in early 2010... and how a bunch of kids have rapidly transformed the business landscape with an idea backed by a little bit of software and the Internet. And how this is happening over and over again in every industry.

The "next facebook" is the wrong question to ask. We should be asking, what is the idea that is going to blow up all of our own preconceived notions of the way our market/industry works and how can the "network effect" be used to create the next amazing transformation? What should you be doing right this minute to change the way your company is connecting with customers, creating value in the marketplace, and changing the way business gets done?

The "next facebook" will almost certainly not be anything like facebook - it will be a new insight into the way in which the Internet removes barriers to our collaborating and co-creating meaning in our world.

Tuesday, January 05, 2010

The next tech boom

OK folks - here it is, the official announcement -- GAME ON! I have been saying for awhile now that the tech industry is in expansion mode again and that 2010 is gooing to be an explosive growth year leading to another long expansion, one that will surpass even the great Internet boom of the late '90s / early 00s (read on for why). Today I have validation.

Perhaps you don't think this validation is legitimate - much to your own sorrow when you miss the boom (or are just late to the party). But I am talking about man on the street validation. Here in San Francisco today I overhead not once, not twice, but three times today different conversations in which people were talking about tech companies in growth mode.

The last of these three was when I was walking to the Montgomery BART (very close to our offices at 2nd and Mission) and overhead two real estate people in their nice real estate suits talking outside a building. The one said to the other "oh yes, I think they will take the space at that price -- I am seeing a lot of action right now from tech companies, they all seem to be growing."

For me this is validation of a trend I was already seeing shape up for 2010 -- the coming year of mobile. And yes, I do think that Mary Meeker called it right in her annual address to the faithful at the Web 2.0 Summit. "Mobile Internet Usage Is and Will Be Bigger than Most Think" which will lead to a dozen NEW companies of enormous size and value over the next decade...

But that isn't the only story. There will be a dozen tech IPOs in the first half of 2010, breathing life into the whole investment supply chain and creating a huge new cohort of want-to-be tech companies. Sure, some will be life sciences and some will be cleantech and energy innovation. But my money is on the mobile Internet.

Apple, Google, Nokia, Samsung, and (go down the list) not to mention Vodafone, AT&T, (another list), and all their suppliers have realized that there is an enormous new business that is being created -- a whole new range of consumer experiences that will be enabled by the combination of (1) mobile; (2) cloud computing; (3) social technologies. Everything we do as citizens, as consumers, as businesses is about to be transformed.

Prepare for take off!