INNOBLOG

A recent article in the New York Times put the spotlight on an excellent example of disruptive innovation in estate planning. Although it doesnt use the language of disruption, it does a great job of highlighting both the barriers that lead to non consumption in estate planning and the innovation levers software and online providers have pulled to overcome these barriers and find disruptive success.

The article mentions several disruptive solutions that are emerging in estate planning, including online solutions such as LegalZoom and software packages like Quicken WillMaker Plus or Suze Orman's Will and Trust Kit. Each innovates along the dimensions that really matter to consumers; making estate planning cheaper, quicker, and easier than the process would be if done through an attorney who specializes in estate planning. Of course, these software and web solutions arent able to fit every estate planning need, but they are "good enough where they need to be (producing valid, legally correct documents) and better than an attorney where it counts (price, time, convenience).

Expect their success to continue, and for more legal services to be disrupted as these online and software providers move up market, figuring out how to address increasingly complex legal needs in ways that are more attractive to consumers.

Two weeks ago, the British rock band Radiohead announced that they were releasing their long-anticipated new album in ten days time. Ordinarily, when a band finishes an album, it takes three or four months to get it into stores, but Radiohead accelerated this process by self-releasing their new songs, online. If avoiding the record labels altogether wasnt enough, the band made even more of a splash by asking fans to name their own price for the digital download.

Innosight President Scott Anthony posted his take on Radioheads innovative distribution model over at the Harvard Business School Publishing website. In brief, Scott characterizes the scheme as disruptive, and points out that its impressive and immediate success ought to be instructive to the music industry, which is still reeling from the disruptive onslaught of digital music:

"Interestingly enough, early data suggests that customers are paying comparable prices to what they would pay in stores or online (full disclosure, the author ponied up $10 for the digital download). This is great news for Radiohead who doesnt have to split revenue with distributors and the record label. Early estimates pegged the groups first day take at around $10 million from sales of 1.2 million albums.

Not only will this effort provide a bonanza of data for economists, it is yet another nail in the disruptive coffin of the major music labels.

Historically, record labels provided a very valuable set of services. They scoured the world to identify up-and-coming artists. They helped those artists build fan bases. And they provided different ways for musicians to connect with that fan base.

New mechanisms allow the collective to identify new artists. For example, buzz-worthy bands start attracting friends and friends-of-friends on News Corps MySpace. Last.FM (purchased earlier this year by CBS Interactive for around $300 million) keys users into obscure artists they might like based on their preferences. This democratizing of talent discovery mimics changes in the lending industry, where credit scoring techniques obviated loan officers who used intuition and judgment to make lending decisions. Radiohead is demonstrating the power of a direct model in the music industry.

The genius behind Radioheads move is that they are capitalizing on the revolution in access enabled by digital distribution a revolution that has rapidly dilated the market for non-mainstream music. Back in the go-go 90s, when, in my teenage years I found myself moved by Radioheads particular brand of wry pre-millenial dystopic anomie, the mainstream distribution channels available to me (FM radio, MTV, Rolling Stone, etc) were too narrowly focused on manufactured pop and fashions of the moment to give me what I was looking for, to "get my job done in innovation parlance. I wanted to trace the sonic lineage of the music I liked, to discover cool bandsand all a kid could do in this regard was trawl through record stores, scour British rock magazines, and worst of all talk to burnt out old dudes.

Nowadays, of course, this task is effortlessly and painlessly accomplished through iTunes and Wikipedia and Myspace and Facebook and Pitchfork and last.fm, and every kid on campus is bopping to would-have-been-obscure indie music on their iPod. This massive democratization has made it so much easier for the casual fan to find and access music, and, for a band, all it takes to get downloaded by every kid on campus is buzz and what creates buzz like a clever, counter-intuitive, disruptive new business model?

Previous business model innovators in the rock world include the Rolling Stones, who pioneered the band-as-mega-corporation concept in the 70s and 80s, and David Bowie, who "went public by securitizing his catalogue in 1997. That said, this skeptical listener sure finds it interesting, if not slightly ironic, that Radiohead, avowed crusaders against globalization and the premier flag-waving anti-corporate band of the last decade have gone and bought into this notion of band-as-corporation

I set up my first lemonade stand in well over a decade yesterday. But the recent sunshine weve been getting here in Boston had nothing to do with it. In fact, as I think about it, nice warm weather is probably detrimental to the success of my new lemonade stand, as it might draw people outside, away from their computers. You see mine is a web 2.0 version of a lemonade stand; it exists on my Facebook profile.

But Facebook isnt the only place Lemonade.com helps people participate in e-commerce. In addition to developing an application for Facebook, Lemonade has code for users to put up stands on MySpace, Blogger, and other pieces of web real estate. These stands act as retail kiosks where the stand "builder can choose to display items he or she "recommends. There are roughly two million different items that can be displayed at a kiosk through Lemonades online retail partners including iTunes, WarlMart.com and Hotwire.com. A click on the displayed item takes potential customers to the retail partners site. If a purchase is made there, the retailer gives a 5-15% commission. Lemonade takes 20% of that and passes the rest to the PayPal account of the stand owner. Think of it as a more democratic version of e-commerce (or perhaps just a more "portable version of eBay).

Those commissions arent enormous, but they are more than a Blogger or MySpace user would get now for letting the world know that he or she recommends a book, song or handbag. And I think the chance for commissions is enough to drive and sustain adoption once the cool factor surrounding Facebook widgets dies down.

The idea also has an element of disruption going for it. These stands remove a barrier to consumption. Just as the innovation of online retailing removed buying constraints around location, allowing a buyer to purchase from his home instead of having to go down to the store; lemonade.coms "e-commerce for everyone removes some constraints around virtual location, allowing a buyer to begin the purchase process from many virtual locations like blogs and social network profiles, instead of requiring navigation to an online storefront like Amazon.com or WalMart.com.

So the name fits. Like curbside lemonade stands move the storefront closer to pedestrian and vehicle traffic, virtual lemonade stands move online storefronts closer to web traffic.

And I imagine an up-market march where these simple widgets improve; eventually becoming more complete online storefronts that would allow for a full purchase decision to happen in one little corner of a blog or social network profile, rather than via a link to the online retailers portal. Sure, critics will point out that clicking a link and opening up a new browser tab or window is a much less significant barrier than the one presented by having to drive a few miles to the nearest WalMart (and they do have a point there), but convenience is still convenience. I think these kiosks could present a considerable advantage over "virtual brick-and-mortar online retailing. Why would I go to Amazon. coms home portal or use Googles browser tool to search for "The Innovators Dilemma Clayton Christensen Buy when I can just click on my friends storefront while Im checking out his blog?

That said, even if the idea of a virtual lemonade stand proves successful, Im not sure that Lemonade.com will be. It wouldnt take more than a few weeks for Amazon, WalMart.com, or other online retailers to make similar widgets. And if the idea starts to generate significant cash, I dont see why platforms like Blogger, Facebook or MySpace wouldnt include this sort of functionality in their own code, squeezing Lemonade.com right out of the niche its currently trying to create for itself.

For now, Ill try to make some "lemonade of my own. Feel free to help out below. :-)