do_matic

Inevitability: A tell for disruptive innovation opportunities

My colleague Joe just pointed me to this nice article describing one of the big aspects / inner workings of the Visa business model.

http://www.nytimes.com/2010/01/05/your-money/credit-and-debit-cards/05visa.html

We do a lot of work in this space and there's lots of room for innovation and designing for users. I was struck by the sentiment in the article that interchange is a God-given right. Hmmm... maybe...

Certainly banks and the associations have real expenses and there is a value they are providing. They should absolutely have a right to capture and compete for that value.

Yet the idea that this situation is inevitable could be a dangerous one to hold onto too dearly within these companies. There are lots of smaller players out there that would gladly halve those fees and take a percentage of the now smaller amount. It's a good message to broadcast to keep competitors at bay and vendors placated...

There are some firms trying to do it, but that are having trouble competing effectively quite yet. The barriers and scale benefits are still difficult for these entrants to overcome. But some big folks, Google among them, are playing with payments.

Where else is there an "inevitable system constraint" in this industry or any industry?

It could point us to other disruption opportunities.

Get generative by thinking small

I thought this Seth Godin post was excellent:http://sethgodin.typepad.com/seths_blog/2009/12/you-dont-have-the-power.html

In particular, this passage was inspiring:

Here's a way to think about it, inspired by Merlin Mann: Imagine that next year your company is going to make 10 million dollars instead of a hundred million dollars in profit. What would you do knowing that your profits were going to be far less than they are today? Because that's exactly what the upstart with nothing to lose is going to do. Ten million in profit is a lot to someone starting with zero and trying to gain share. They don't care that you made a hundred million last year from the old model.

That's why I love Discovery Driven Planning with a number like $10MM as a starting point. Why not? Even for the big guys.

Seth is writing about publishing here. I've written a lot about my fascination with the current situation in publishing. Pricing dictated by history and fixed cost hangovers just doesn't make sense to me.

Rita McGrath: Organize for growth and innovation

Rita McGrath has a great post on the HBR blogs on organizing for growth. This quote stood out:

One of the most important jobs a growth group can do is create an opportunity inventory — both of ideas that are floating around in the organization but don't have critical mass, and of ideas that are currently being resourced but perhaps not managed explicitly. Without an organizational home, these critical jobs tend not to get done, hampering the organization's ability to grow.

Check the full article out here:

http://blogs.harvardbusiness.org/hbr/mcgrath/2009/10/create-a-special-unit-to-drive.html

Is quality a commodity?

(Yes, I'll take that one.)

Tim Manners at Reveries points me to this article in the NY Times by Bill Vlasic. The article describes the brand promiscuity that has evolved in the US automotive market. This image makes the point:

Tim at Reveries highlighted this quote:

“Brand loyalty has shrunk because of widespread improvements in the products,” said James Farley, Ford Motor Company’s head of marketing. “The ‘trust factor’ is more or less the same for most cars.”

So is quality a commodity?

Not hardly. Professor Chuck Holloway taught me to be really careful when I used the word "quality." It means all manner of things: availability, reliability, meeting specifications, just plain working as expected, etc.

With an expansive definition of quality, there are all kinds of opportunities for differentiation and excellence. With universally-better or common components, you have the opportunity to focus on quality all along the value chain and in all aspects of the consumer experience. This is happening in consumer electronics where integration is one of the primary drivers of value and consumers are starting to demand less from their goods, rather than more.

My stomach really turned when considering the notion that the 'trust factor' for cars was somehow equal because most brands warrant and make similar claims of reliability.

Is trust solely the realm of product performance? Absolutely not.

Innovation elasticity (or why things get killed)

(Remember these games?)

At some point during an innovation project you ought to wake up in the middle of the night, eyes wide open, screaming into the void: "We're thinking of doing what?"

Although scary to you and your neighbors, this is a great moment. If you aren't waking up in the middle of the night, you might not be pushing hard enough. The trick is to embrace that fluttering feeling and to understand the situation. If you don't, you risk incrementalizing or even killing some really great ideas.

Usually, the business opportunity or experience is stretching "too far" along one or more six key dimensions of growth:

Users: needs, contexts, behaviors, mindsets, jobs, etc
Offerings: product/service, value proposition, pricing, positioning, channel, etc.
Positioning/GTM: how you go to market
Business Model/Culture: margin model and prioritization scheme
Process & Organization: how you get things done
Scope: the business you're in

Your brand, your management and your investors are the "anchors" that snap you right back to what you know you can do today. Business designers should be working with their teams to design novel approaches and strategies to navigate and maintain the right level of tension, balancing growth, opportunities and risk.

Some companies and organizations are capable of stretching more than others; they have higher innovation elasticity. Similarly, certain organizational and innovation governance strategies, like heavyweight teams, help provide slack in the system.

You shouldn't stretch just for the sake of stretching. Nor is it realistic or strategic to stretch infinitely in any direction. People that suggest as much, while often alluring, usually don't know what it takes to get things done. There ought to be some tension in the system. But understanding how nimble you are along each of these key dimensions can help you systematically foresee and deal with the hurdles over time.

Non sequitur: When you sell your magazine business what are you selling anyway?

KazakhstanNewsNet, Portfolio (ironic right?) and other news sites have been reporting the latest chatter about Time, Inc. selling its magazine business.

It just made me wonder, what would I be buying and how excited could I get about what I had and what I could grow? Not only the assets, but also the potential.

If you took an aggressive growth mentality into these businesses, what would you do? Could you even do that?

Why can't... somebody tell me where to set up shop?

I'm going to start putting some ideas up here.

This one popped up when I was walking by a couple of budding restaurateurs (ok, maybe barmen) readying their establishment on 2nd Avenue at 12th Street...

Why can't we leverage the power of location-based information to help companies understand where I should put a store? Or place an advertisement? Or for communities and governments to help have a dialog about what a neighborhood needs?

By coupling mobile phone location-awareness technology with widely available geographic information, the proprietors of this service would sell an integrated analytical offering to developers, governments, small businesses and advertisers. They'd probably start in the top 15-20 MSAs.

The company would likely start as or end up being a strategic subsidiary of a mobile phone company. Mobile phone subscribers would opt-in to be profiled and tracked in exchange for advanced location-based data services or free mobile phone service. These same subscribers could also receive free local information in exchange for their participation or serve like Neilsen families of old.

Systemically, the service would "crawl streets" periodically (think radar sweeps over a particular block for a given time period). A customer could commission a "crawl" and the company could offer a premium service that showed detailed demographic information as well as historical comparisons.

Developers, small business owners and advertisers would use the system to assess locations and neighborhoods. Both subscription and ad-hoc services would be offered. Customers would be able to discover not only what traffic looked like at given points in time, but also where people came from, where they went next and a lot about who potential users or tenants were as people.

The online reporting interface would utilize Google mashups to get street views, data on other complementary and competitive aspects of the area (e.g., competitive businesses, vehicle traffic or a nice park to eat lunch). Developers and advertisers could run "placement" searches across markets, allowing them to drill down on both geographic and demographic information.

The company would likely do a deal with a partner like Trulia to assess corporate real estate rates. Similarly, it would integrate data from sites like Yelp and Zagat to glean sentiment.

The company would have a public-facing, free component that shared basic traffic information and visualizations. Citizens could provide suggestions or insight into certain locations or ask for certain additions to the neighborhood.

I think some of the location-based services (foursquare, Loopt?), data and analytics companies are likely considering this. Does anybody know? I seem to recall a WSJ or NY Times article about a New York-based company running selective monitoring of subscriber traffic flows to profile and create new types of segments.

[Editors note: Jon pointed me to exactly the company, Sense Networks, and the article I was trying to recall. Amazing Jon. Thanks!]

(No street names=other solutions. Japanese neighborhood map courtesy of Kamoda on Flickr and Creative Commons.)

Countermeasures vs. Solutions

In the August issue of the MIT Sloan Management Review, there is an article by John Shook describing the A3* report - a lynchpin of the famed Toyota approach to improvement. As a structured, fact-driven and ideally visual way of capturing and sharing a situation, the A3 is really attractive. It's more rational than intuitive, but there's room for intuition in the A3 for the enterprising business designer as well. We've got similar tools that we sometimes use at work.

In one of the callouts in the article, I found a really nice observation by the author that made me stop for a second.

In the A3 report, design responses to challenges are typically framed as "countermeasures" rather than "solutions." Whereas "solution" connotes the "end-all, be-all", countermeasures represent a refinement or evolution to combat a challenge. As Shook points out, countermeasures might introduce new challenges to the system. You'd never expect such rude behavior from a solution.

"Countermeasures" is just a much more honest way to frame design responses. Plus, the word appeals to my irrational attachment to The Hunt for Red October.

*As a paper size, I like A3 (tabloid or 11X17) for worksheets and sketching - especially early in a process. You can see the whole problem, especially if your sketching is as "loose" as my ideas usually are. I find my writing and visualizations get smaller and clearer as I work through the divergence and convergence cycle. Too bad. If I was working more sustainably, I'd flip that.

Trial when your lights are off

 

A few weeks ago, I was running by a restaurant that serves vegetarian fare on a somewhat dire stretch of 10th Street in the East Village. They had a table offering free samples. People commuting to work that particular morning could sample what this ten-table place had to offer.

When I first saw the sample sign, I thought "what a nice idea." I'd noticed the restaurant before, but never really been interested in it (probably because I'm usually looking for something a little more indulgent when I'm out in the neighborhood). This move made me reconsider. Here's the conversation I could have imagined playing out among the proprietors:

"Get locals on their way to work to actually try us out. Many of these people often make decisions about what to do for dinner earlier in the day, so why not introduce ourself to them when the streets are a little quieter and they can focus on us?"

It made me think of how to engage potential consumers out of the context of use, but at a time that still represents a reasonable context for consideration.

This isn't a new idea for sure. In a sense, advertising is predicated on it and targeting / placement is meant to get you half-way there. Yet I wonder how else it could be more personally and mindfully pursued? Where else could this be applied?

Business Design: What is it?

(The definition comes from the work. This photo comes from procsilas via Flickr and Creative Commons.)

I've recently found myself talking to audiences, fellow business designers (like Diego and Colin) and clients about what we mean by the phrase Business Design and what we've learned practicing it. Personally, I don't love defining stuff like this. The work should speak for itself.

I think it has.

Over the last four years, I've been really lucky to work alongside dozens of world-class folks at the firm as we've designed our way through hundreds of projects to not only a point of view on what Business Design means, but also a philosophy about what great business design is and how to get there. Looking back at our work and our community of practice, the definition sort of writes itself.

Business Design is an emerging discipline, practiced by people.

Those folks have diverse backgrounds, but they share a depth and passion for business. We're not business experts. We're designers with business expertise.

We’re human-centered, optimistic, entrepreneurial, pragmatic folks that make business possibilities concrete and real.

We’re deep. We geek out about business models, get inspired by business and we have experience and love getting things designed, trialed, done and made.

Business Design is a craft, not a field of knowledge.

At the highest level, we work alongside our collaborators and other design disciplines to do two things:

1. Design business opportunities: creating new options, finding new ways and means for our clients to create value
2. Help designs realize or find their business value: identifying constraints, so we may design around and through them

One big point of confusion that I've spoken and written about before is that I don't mean Design+Business or Business+Design. It's a practical mix of entrepreneurship, commerce and art all a "making" focus.

What are other people saying?

Well, Rotman's trademarked the phrase. I'm not sure if that means I have to start paying them my wages (I love those guys, but I'm not paying them my wages). People are adding on words, such as Social. Sometimes firms and practitioners mean organization design, or maybe analytics inside (tm?). Others seem to mean a systematic approach to identifying innovation opportunities, leveraging the tools of design and through a combination of inductive, deductive and abductive reasoning. That's certainly closer and we end up doing that quite a bit albeit in a way that's human-centered.

I'm excited to keep emerging the discipline, to help others learn the craft and to work with other Business Designers to push the bar on quality to make better, more valuable stuff.

What do you say?

Waste Not: Sustainability as survival and foresight

On Saturday I saw something that was pretty striking. I went to the MOMA to see a variety of things, but I was stopped in my tracks by Song Dong's Project 90 show. The piece of work on display is called Waste Not. Here's a snippet from the MOMA description:

A collaboration first conceived of with the artist's mother, the installation consists of the complete contents of her home, amassed over fifty years during which the Chinese concept of wu jin qi yong, or "waste not," was a prerequisite for survival.

(A view of the show shot from above by sixteen-miles via Flickr. Our iPhone didn't cut it.)

Experiencing the piece, I went on a little journey of revelation. I wondered where and how the artist's mother stored everything. I imagined how she might have imagined using what was kept. I saw how foresight and thriftiness becomes a daily, necessary activity: self-insurance against an uncertain future.

In the end, I realized how little I was doing with what I was consuming and how carefree I felt in my ability to consume more tomorrow. I definitely consume this many bottles in a year, yet I marvel at how this woman kept them or found those that others failed to keep (via sixteen-miles).

 

So back to business design... It made me wonder...

How might we better design products so that they can be there tomorrow for us or for someone else to use them or get value them?

How might we make thriftiness a daily routine? Something to be cherished? Something thrilling?

How might we make one person's trash another person's recyclable? In urban or rural environments?

How might we consume less, yet enjoy more?

Any other ideas?

More on atoms or the bits

The editor of this blog does not necessarily agree with the views and viewpoints of George Parker, but I must admit to a smile or two when I read his rants. Here's one via PSFK on the topic du année.

Kindle books are about 10 to 40 percent cheaper than hard cover counterparts. But paperbacks are often the same price on the Kindle as on the regular site, which gives higher margins for Amazon and the publisher. And if you really want something horrible to look forward to, Amazon has just taken out two patents for “On-demand generated eBook content with advertising.” Meaning that your latest John Grisham yawn will have as many ads in it as the Manhattan Yellow Pages.

Price, value, experience and digital media (or "the atoms or the bits")

I was going to pick up this book. Because VSL told me to. I often do what they tell me to do and they haven't let me down yet.



I was looking forward to the prospect of holding it whilst relaxing in a lawn chair in the backyard this summer (ok, somebody else’s backyard, I live here).

Then I was like... well I wonder if it’s available on the Kindle? Lo and behold, I see down there in the lower left that it sure is. Bonus.

That’s cool, I could get it faster. Immediately even. (Even though my Kindle is at home and turned off, when I next turned it on this book would be there "waiting for me" in all its line item glory sooner than I would ever be ready to read it).

Then I was like... I’d probably want to share this one with my wife Steph or my friend Rene. It would make me look smart and I could nerd out about it with somebody. That couldn’t happen with the Kindle though (and Steph would be like 'get out of here with that nonsense, you nerd'). And this book might have pictures that I want to look at (I don’t think so actually, it seems like a collection of essays.)

Then I was like... what’s the price difference (notice the tardiness of this question)?

$0.21

So the inherent difference in the value of this book is $0.21? Says so right up there. (Apparently a pleasant voice is worth another $8.39, but the robot voice on the Kindle is free.)

Well maybe. Price is what you pay and value is what you get. Amazon sets a price, but we say how valuable it is.

As a Prime customer, I’ve already covered the shipping differences quite nicely for them and order more books than I otherwise would if I was to consider the incremental cost of shipping each time I bought a book (brilliant!). I’ve already bought the Kindle. But... let’s ignore sunk costs for a second (MBA kicks in).

Then I was like... Screw that. I’m offended. I want to buy the paper now because I can share it, hold it and it will get here soon enough for my purposes. That is, sooner than I can read it. If I'm paying to destroy trees, then I want the trees. On the margin, the value of the paper is greater for me (or at least I tell myself). Or at least until and if paper goes away. And paper hasn't yet been wrested from my cold dead hands.

But then again, I can’t stick the book on that “library” of mine for when I travel. Who cares? I’ve got enough book inventory to allow me to shelter in place while revolution and reality shows rage around me. They could give me both. They might someday. They're giving me lots of free books right now with some channel price discrimination. That's both a problem and an opportunity they have: two simultaneous models.

Then it occurred to me... Amazon’s got me. I’m a sucker. I love them, but I’m a sucker. Bezos is an innovation hero, but seemingly my arch nemesis as well. (Okay, okay. I'm my worst enemy.) He's found a price and designed an experience that has me considering paying the same price! I'm trapped, but do I want an alternative?

But at this price, is Amazon really going to change the industry and simultaneously maintain control? Perhaps, but I don't think they are destroying enough value yet!

They need to price this book at 50% the cost of the physical book. But then again, those publishers aren’t that interested in doing that right now either... There’s some breakeven for the production side of the value chain that keeps the creators whole (or even better off), while passing on a savings to me the consumer and winning Amazon share of all these little profit bombs.

If you didn’t have to cover the costs of other aspects of your business (publishing print for example, or shipping toasters), what would you charge? What’s the right price to put food on the table of the authors, editors and the rest of that value chain? What could I cut out? How should I deliver the experience for both consumers and creators?

The pricing out there in this world is really, really dynamic. I'm really in need of knowing more of the details of the margin models though. Anybody know?

So, what did I do? Nothing. Can't decide. Frozen.

Business Design: The curriculum of 2012

[Editor's note: Hi! Lot's of folks end up on this blog because of this post. If you like the post (or even if you don't), take a look around. If you like what you see (or maybe if you don't), consider commenting, sharing, coming back or even subscribing. Okay, this is what I wrote that got people talking...]

In the near future, I believe that you'll be able to get an advanced degree in Business Design. 

Some programs like the d.school (a formative experience for me) and Rotman are playing with this idea, but I don't think these programs really nail it yet.

The educational experience would be applied and pragmatic. Classes would be harder than fluid dynamics (ok maybe not, but close). As a student you would feel as inspired and challenged as you would in the most advanced studio art class. Theory alone wouldn't cut it. If you didn't do something practical by the end of the term in each class, you would fail. We would get things done.

I think I would have achieved a 2.6 average or so coming out of it, but I'd have learned a hell of a lot. Here's an initial list of classes: BDES_Curriculum (full list after the jump)

What would you add? What would the admission requirements and pre-requisites be?

BDES 101 | Creating Options (Do Nothing)
3 credits
In this core class, we’ll tackle one of the key skills of the business designer: generating, framing and valuing strategic options. We’ll learn idea generation techniques, portfolio comparison strategies, game theory and dig deep into weighing options.
Practicum: Act as a Business Unit president in a dynamic simulation. Create and decide amongst many options as the context and competition changes all around you.