INNOBLOG

• When Open Innovation Becomes A Gimmick: Lessons From Campbell Soup Company, by Stefan Lindegaard | Leadership+Innovation blog

  Lindegaard identifies what appear to be problems with Campbell's new open innovation initiative, including a lack of focus.

• Unraveling Complexity: The (Heretofore) Missing Link for Achieving Collaborative Innovation, by Chris Jones | Driving Innovation in a Digital World blog

  Musings on the role of social media in collaboration for innovation: "I now believe that innovation in complex ecosystems will depend on an improved collaboration process – a new middle ground for problem solving – that balances large-scale central organizational approach with grass-roots contributions by individuals."

• Social Technology Growth Marches on in 2009, by Josh Bernoff | Groundswell blog

  Forrester's newest report on the adoption of social media finds that "in 2009, more than four out of five online Americans are active in either creating, participating in, or reading some form of social content at least once a month. " Interesting as a view of technology adoption and also for insight into the changing "jobs" of those embracing social media.

• Happiness: A Buyer's Guide, by Drake Bennett | The Boston Globe

  New research into behavioral economics has proved that money doesn't buy happiness. However, the same research has shown that some things we spend money on -- such as providing great experiences like restaurant meals and vacations -- provide more happiness than spending money on material possessions. So should companies be innovating more around providing experiences for customers as opposed to goods?

• The Disruption of Scientific Publishing, by Bruce Sterling | Wired's Beyond The Beyond blog

  Description of a new "flourishing ecosystem of startups that are experimenting with new ways of communicating research, some radically different to conventional journals" and the "gradual rise of science blogs as a serious medium for research."

• The New Media Crisis of 1949, by Terry Teachout | WSJ.com

  A look back at 1949, at the start of the television era, in which TV disrupted other forms of media and entertainment. Author notes that CBS and NBC, which had been big radio players, also came out on top in TV by the 1950s: "The old media of today have a similar chance to prosper tomorrow if they can survive the heavy financial losses that they're incurring while they develop workable new-media business models."

• Start-Ups Are Poised For Latest Space Race, by Andy Pasztor | WSJ.com

  With its budget eroding and virtually certain not to keep pace with stated space exploration goals, NASA is increasingly turning to outsource portions of its programs that have never before been outsourced. Smaller firms and "scrappy entrepreneurs" are expected to win contracts.

• How to Build a Culture of Innovation, by Jessie Scanlon | BusinessWeek

  Description of the top-down innovation culture at Tata, including the Tata Group Innovation Forum (TGIF), a 12-member panel of senior Tata Group executives and some CEOs of the independently run companies.

   

• Hey, AP: Here Are 7 Money Making Ideas for You, by Erik Sherman | BNET Technology Blog

  Is the Associated Press doomed in an Internet age? Some have suggested this, and their increasingly protectionist stance seems to indicate they think so too. Business blogger Erik Sherman disagrees, offering seven ways AP can make money on the Internet.

• Stressed Brains Rely on Habit, by Jeff Akst | The Scientist

  "Rats that had been stressed repeatedly and unpredictably for three weeks were more likely than unstressed animals to continue performing habitual behaviors, even when it no longer made sense to do so." These findings have implications for innovation, since innovation requires an ability to break free of pre-existing patterns.

• Too Much Networking? by Alan Boyle | Cosmic Log Blog on msnbc.com

  "An overabundance of connections over which information can travel too cheaply can reduce diversity, foster groupthink, and keep radical ideas from taking hold" says the journal Science, citing that as a reason why most open-source software shows only incremental improvements from version to version. The article stops short of blaming the Internet and social networking for groupthink, probably because the Internet also fosters the kinds of weak ties that lead to breakthrough thinking.

• Vendor Sparks Art Concepts by Sarah Junek | The Southlake Journal

  A hand-restored cigarette machine rescued from the scrap metal pile after legislation banished them in 1997 now vends cigarette-pack-size art in a Keller, Texas, art gallery for an accessible price of $5.

• Retailers Cut Back on Variety, Once the Spice of Marketing by Ilan Brat, Ellen Byron and Ann Zimmerman | WSJ.com

  Will this affect the increased pace of incremental innovation in consumer packaged goods? "In the next year or so, these and a few of the other largest retailers are expected to slice the assortment of products in their stores by at least 15%, industry executives and analysts say. This is a challenge for manufacturers, who have grown accustomed to churning out incremental variations on popular products to maintain shelf space and keep their brands fresh in consumers' minds."

• IBM Aims for a Battery Breakthrough by Steve Hamm | BusinessWeek

  Article points out the GE, among others, is also making a play in batteries. "Industry leaders have called for just this kind of concerted effort amid concern that the U.S. will miss out on one of the most important technology shifts in history—the switch from gasoline to electricity as the primary power source for light vehicles. The worry is that the U.S. will trade its current dependency on the Middle East for oil with a new dependency on Asia for vehicle batteries. 'We lost control of battery technology in the 1970s,' laments Andy Grove, former chairman of chip giant Intel. 'Battery technology will define the future, and if we don't act quickly it will go to China and Japan.' "

• The 99-Cent iPhone App That Kills Print Journalism by Ray Richmond | The Wrap

  I have it. And it's good enough that it's hard to imagine how a publication could sell online access if it was also available via this iPhone app. Media disruption continues.

• MediaBugs Rethinks Corrections by Taking a Page from Programmers by Zachary M. Seward | Nieman Journalism Lab

  In a move borrowed from open source programming, startup MediaBugs purports to offer an improved, centralized method for media corrections. "Improved" partly because many media sites have no well-defined path for users to point out corrections, nor prominent place to publish corrections for readers to see.

• What Will Journalism LookLike in the Future? 14 Scenarios from IDEO
  The design firm shares some prototyles for collectively sourced, hyperlocal forms of journalism.

• Unboxed: Who Says Innovation Belongs to the Small? by Steve Lohr - NYTimes.com
  Lohr cites The Innovator's Dilemma in saying that much future innovation won't be by small-scale disruptors but systems-level innovations in energy and healthcare by big companies that have the skills and scale to tackle such projects.

• ESPN to open "ESPN Innovation Lab" at Disney's Wide World of Sports to test new broadcast technologies, by Joseph Garcia - OrlandoSentinel.com
  "The facility will allow the cable-sports giant to test new applications such as virtual graphics during events staged at Disney's sports venues. Think concepts such as the "EA Virtual Playbook" that ESPN has used as part of its pro football and basketball coverage or the strike-zone graphics used during baseball games. Because the Wide World of Sports venues are in year-round use, ESPN believes they will make an ideal spot to test and tweak new broadcasting concepts during actual in-game conditions.

• Q&A with search expert Danny Sullivan on Microsoft Bing, by Nick Eaton - Seattlepi.com
  Audio and an edited transcript of an interview in which Sullivan discusses to disruptive potential of Bing and the ways in which Microsoft might make money from it.

• Learning, and Profiting, from Online Friendships , by Stephen Baker - BusinessWeek

  Exploration of the innovation taking place as companies work to figure out how to make money from the wealth of data they're beginning to have about our online friendships.

• A Real ROI from Twitter? The Start of Social Medical Networks, by Tom Steinert-Threlkeld - Between the Lines blog, ZDNet.com

  Tweeting to your doctor about the status of your health could revolutionize the treatment of chronic diseases.

• Gin, Television, and Social Surplus, by Clay Shirky - Here Comes Everybody

  Participation in social networks represents the shift of "cognitive surplus" from billions of hours of TV watching to a more participatory culture.

• Getting Money from Readers Who Won't Pay for Online News, by Steve Outing - Editor & Publisher

  It's too late for newspaper publishers who are not already charging for content to start doing it, says Outing as he puts forth a business-model concept of multiple revenue streams and describes what some of those might be.

• TRIZ-enabled Mergers and Acquisitions, by Jim Belfiore - InnovationTools.com

  TRIZ, a well-established method used for product and process design evolution, has elements that can be successfully used as an early-stage M&A planning and research tool to help predict and identify potential evolutions of products, technologies and markets.

From FASTForward blog: 

Yesterday the FASTforward Blog hosted a great discussion between Vivian Schiller, the CEO and president of NPR, and Scott Anthony, the president of Innosight and author of the forthcoming book: The Silver Lining: An Innovation Playbook for Uncertain Times. Moderated by Renee Hopkins Callahan and sponsored by Microsoft, the discussion touched on topics ranging from:

• the challenges of today’s news business, NPR’s particular “business” and its need to “be its own disruptor”
• the “misalignment” of business models with real value in some of today’s media companies
• the role of technology in enhancing the user experience
• the importance of good editors and harnessing the collective intelligence of informed human beings
• framing disruption as not just a threat, but also as an opportunity
• the viability of charging for content and other forms of monetizing content
• the need to experiment *and* be willing to fail often
• the importance of innovation even, sometimes, in the absence of a clear business model

You can listen to the recording of the event here.

Innosight president Scott Anthony and NPR president and CEO VIvian Schiller will discuss Innovating through the Storm: Insights on the Disruption in the Media Industry in a free webinar from 11 to 12 EST this Thursday, May 14. I will be moderating the event, during which Scott and Vivian discuss the challenges faced by media companies and the possibilities for how they can navigate through truly disruptive times.

Scott is, of course, president of Innosight and author of the forthcoming book The Silver Lining: An Innovation Playbook for Uncertain Times. Vivian was previously the senior vice president and general manager of NYTimes.com and was recently tapped to head NPR.

Among the topics Vivian and Scott will address:

• The dynamics of the media industry and the reality of the disruption it faces
• The expectations of empowered consumers about how they derive, and increasingly drive, value from their interactions and experience with media
• How technology is helping media companies engage their customers and connect them to the content and community they care about
• Where the media is headed, citing interesting experiments and innovative models that are emerging

Go here to register.

This webinar is part of the FASTforward Insight Series, sponsored by Fast Forward and Microsoft.

The proliferation of "good enough" alternatives has been a main driver of the current disruption of the media business. Good-enough is, of course, quite relative — citizen journalists offer a product that's good enough on some dimensions, but for some audiences often is vastly superior to professional journalism on dimensions such as immediacy and depth of local knowledge.

"Do-it-yourself" media got another shot in the arm last week when HP announced its MagCloud service, which would allow anyone to create a glossy magazine: "Charging 20 cents a page, paid only when a customer orders a copy, H.P. dreams of turning MagCloud into vanity publishing's equivalent of YouTube. The company, a leading maker of computers and printers, envisions people using their PCs to develop quick magazines commemorating their daughter's volleyball season or chronicling the intricacies of the Arizona cactus business."

John Boddie, formerly of Innosight Ventures, sent me an email commenting on this development:

"Print on demand has been around for a while and there may have been other companies that have tried to offer many of these features. One of the difficult things about disruption is watching the churning mass of contenders for a given disruptive play and figuring out which will finally arrive at the right combination of jobs-to-be-done and respect the right set of restrictions so that consumers on the other end can finally adopt. In this case, the choice of PDF for submission (rather than mucking around with a custom magazine generator) is key. Almost everyone now has some means of converting most document formats to PowerPoint. Almost everyone now has some means of converting most document formats to PDF. Eventually they might want to allow uploads from other content creation/distribution engines such as Slideshare and Blogger, but this is a great start."

The New York Times story also offers a couple of other clues as to the innovative potential of this idea, one in the very lead: "For anyone who has dreamed of creating his own glossy color magazine dedicated to a hobby like photography or travel, the high cost and hassle of printing has loomed as a big barrier." People who are intent on communicating around an interest about which they are passionate offers an attractive niche market to get the service off the ground and growing. Once that happens, there could be the up-market move that would potentially displace some existing print magazines.

Also, at the end of the story, HP offers a clue that they're going about this right: "For H.P., MagCloud is also a way to provide customized service at low risk. And if the niche does not thrive, the company will simply move on. “We are trying to experiment with these new types of business models,” said Andrew Bolwell, head of the MagCloud effort. This kind of emergent-strategy approach of setting up a business unit to experiment with a new model is what we would recommend any existing company like HP. In order to grow, they will have to find new markets. Setting up this kind of low-risk test is exactly the way to go about it.

• Innovate Like Chris Rock - Conversation Starter - HarvardBusiness.org

  Emergent strategy illustrated in Chris Rock's approach to comedy.
  

• Free Newspaper Venture Depends on Local Blogs - NYTimes.com

  More business model innovation in media.
  

• Cisco Plans Big Push Into Server Market - NYTimes.com

  Cisco plans to release a server equipped with virtualization software, a product that "threatens to shake up the technology industry and put the company on a collision course with traditional partners like Hewlett-Packard and I.B.M. ... [this] is a bold but risky move by Cisco into an unfamiliar, intensely competitive market that typically produces far lower profits than Cisco makes from network gear. ... Cisco’s push into the server market...could cause an all-out war among the tech titans for one another’s customers.
  

• Asleep at the Wheel of Creative Destruction - Umair Haque - HarvardBusiness.org

  Wall Street's moral hazard has a mirror image.. The perverse irony of the collapse of industrial-era capitalism isn't just that Wall St ended up being massively risk seeking, taking bets it never should have. It's also that venture capitalists ended up being risk averse - never making the bets they should have. ... Venture investors have been free to take hidden action that maximizes their own near-term returns - underinvesting in radical innovation.
  

• The New Reality: Constant Disruption - The Big Shift - HarvardBusiness.org

  John Hagel, John Seely Brown, and Lang Davison argue that "equilibrium is a thing of the past" because "Today's core technologies--computing, storage, and bandwidth--are not stabilizing. They continue to evolve at an exponential rate. And because the underlying technologies don't stabilize, the social and business practices that coalesce into our new digital infrastructure aren't stabilizing either. Businesses and, more broadly, social, educational, and economic institutions, are left racing to catch up with the steadily improving performance of the foundational technologies."

I came across a delightful YouTube clip from the early 1980s about newspapers doing experiments with “newspapers by computer.” It is a must-see for anyone who enjoys comparing our world today with the future foreseen or predicted by experts of yesteryear. 

What I found most interesting was a remark at the end that compared the relative costs of online news with print editions:

“It takes over two hours to receive the entire text of the newspaper over the phone. And with an hourly use charge of five dollars, the new telepaper won’t be much competition for the twenty-cent street edition.”

Online news was over 50 times as expensive then.  How times have changed…

In the January 14 issue of Strategy & Innovation, we offer up our annual Year in Preview story (free reg. reqd.) by Scott D. Anthony. This year we've added a new feature to this feature — we asked Innosight partners to write short industry specific predictions of the industries in which they have expertise.

Some overall themes:

• The darkening economic climate is good news for innovation — after all, abundance is at the root of many corporate struggles with innovation.
• It has never been easier to develop and scale an idea. Innovators can draw on high-quality, low-cost tools to develop, test, and begin to commercialize ideas without tens of millions of dollars of investment.
• Innovation has never been more important. Success in what we are calling the Great Disruption requires mastering perpetual transformation.
• Companies that are partially disrupted (such as print media) and those that are innovation novices will have a tougher go of it, as the current economic climate isn't favorable for their challenges.
• On-the-brink disruptive attackers and companies that have progressed in their efforts to make innovation systematic will be more likely to find their efforts paying off.
• Companies that demonstrate an ability to love the low end will find that strategy effective if they are able to master business model innovation and gain a deep understanding of how the low-end consumer measures value and develop unique offerings tailored to key value drivers.

Those industries for which uncertainty in the markets and uncertainty regarding potential governmental policy and regulations changes will struggle this year until the economy settles down and the policies of the new U.S. presidential administration begin to take shape. Finance and healthcare are two such industries.

Here are some of our partners' industry-specific predictions:

• Media: A strong likelihood of continued bankruptcies among media companies.
• Defense: A push toward decentralization and away from aircraft- and ship-specific platforms.
• Manufacturing: A shift toward innovation and away from strict reliance upon Six Sigma and cost-cutting.
• Automotive: No automakers will fold, but we will see consolidation of vehicle models in the saturated marketplace as a better linkage develops between customer requirements and available models.
• Retail: Growth among retailers targeting the low-end as well as those that can add high-level services that high-end consumers will pay for.
• Consumer products: CPG companies that do well will be those that strive to push the boundaries of their innovations, looking beyond just new products to new categories, new business models, and new channels.
• Finance: Reduced scope and size among financial global financial services firms, and an opportunity for low-cost tools and data providers.
• Healthcare: Widespread implementation of Electronic Medical Records, as proposed in the forthcoming economic stimulus package, could radically shift the balance of power between physicians, healthcare provider organizations, and insurers. 

Online microblogging and social networking service Twitter started in March 2006 but didn’t really hit its stride until the past few months ago. September 2008’s 5.57 million visitors represented a fivefold increase within a month’s time. This usage curve has dovetailed with my own Twitter experience. I signed up for Twitter as @ReneeCallahan in the spring of 2007, when a number of my blogging friends were signing up. I couldn’t figure out what to do with it until this past October, when I joined a group of people “tweeting” snippets from the Business Innovation Factory’s BIF-4 conference.

Since then I’ve stepped into the Twitter conversation stream several times each day and have come to value the camaraderie and knowledge-sharing I find there. It's truly amazing how much information can be put into a 140-character post.

I’ve begun to wonder whether Twitter has in it the seeds of disruption. First thing I'd need to know is, if Twitter is in fact disruptive, what is it disrupting? Social media consultant Laura Fitton of Pistachio Consulting (@Pistachio) helped me gather information on this by putting up a quick survey using Google Docs and publicizing it to her 12,500 twitter followers. Here's what 128 respondents felt Twitter disrupted when they were allowed to choose all applicable answers:

When the respondents were forced to choose only one answer from the list, the results looked like this:

Open-end answers to the question included: Craigslist, real conversation, sleep, PR, media gatekeepers, eating, and writing my dissertation. There was also a fair amount of comment in the open-end answers as to whether Twitter is truly disruptive.

In order for Twitter to disrupt, it would need to display the characteristics of disruptive innovation: it would need to be a good-enough, low-cost solution to a job that anough people were trying to get done that it would create a new market at the low end of an established market.

What do you think? Is Twitter potentially disruptive? If so, what might it be disrupting?

Imagine that you’re a television executive and are deciding whether or not to renew a show. The show in question has generated a lot of buzz and it seems like everyone in the demographic it targets is talking about it. Why then do the ratings look so bad?

Maybe because the definition of success is the same, but the way people watch television has drastically changed.

We often tell our clients that game-changing plays must be accompanied by similar innovations in the metrics that evaluate success or failure. It should be no surprise then that in an age where we can DVR our television shows and watch them later, stream them over the Internet in a coffee shop, or view them on iPods, the Nielsen rating is starting to show its age.

The show bringing this issue to the media forefront?   Gossip Girl.

Whatever your opinion of the CW’s teen-drama Gossip Girl, there’s no avoiding the fact that this show is a pop-culture success as the show has propelled its actors and actresses into the limelight. How is it then that the show has such poor Nielsen ratings? The answer: 'alternate" television viewing, including millions of downloads on iTunes.

A big risk to evaluating programs, on television or otherwise, is to evaluate them with the wrong metrics and cancel them as a result. Fortunately (for fans of the show), the CW isn’t wedded to Nielsen ratings. As networks like the CW catch on that traditional ratings don’t tell the whole story, there is the potential to both change the way these shows are judged and to find a better way to capitalize on these alternate forms of television consumption.

In the words of one Gossip Girl character, “Who watches TV on a TV anymore anyway?”

Innovation is tough in the best of times. What do you do when times are tough and your industry's very survival is in question?

A newspaper executive asked me that question during a discussion this past Monday. While just about every organization is feeling some economic pinch these days, few have it as tough as newspaper companies. Print circulation continues to slide. Advertisers are fleeing to the Internet, where newspapers continue to lose ground to Google, Yahoo!, and countless others.

Newspaper companies are experimenting with new approaches to disseminating content, but those ventures aren't getting big enough quickly enough to offset declines in the core business.

To their credit, most newspaper executives with whom I've spoken recognize that they have to keep pushing. They know they have little hope of maintaining their relevance if they don't innovate. Yet, the pressure to staunch the bleeding in the core business makes it incredibly difficult to do things differently, to commit to innovating.

It's a tough challenge, and it highlights for other businesses that maybe aren't in the dire situation that newspapers are just how important it is to start innovation efforts when times are good, when you have the time and resources to allow your efforts to reach escape velocity. Had the newspaper industry really pushed the innovation agenda in the mid 1990s, we would be having a very different conversation today.

Read the rest on Scott's Harvard Management blog.

At some point during the past few years, Adobe’s Flash technology became one of the most often used formats to encode streaming video on the Internet. From its start as a niche animation tool in the mid-1990s to one of the top streaming video formats today, Flash has followed a decidedly disruptive path, taking market share away from all traditional streaming video format heavyweights.

In the late 1990s, as Internet connections became capable of carrying streaming video content, a format battle arose. RealVideo, a purpose-built platform designed to handle the challenges of Internet streaming, quickly captured dominant share. Windows Media, despite the inclusion of its player within all Windows-based PCs, lagged far behind, slowed initially by poor video quality and streaming capabilities. Finally, despite offering the highest video quality, Apple’s Quicktime format lagged Windows Media’s share, suffering from a lack of promotion, the need to download and install a player application, and niche ownership of Macintosh computers.

A few years prior to the format wars of 2000, San Francisco’s Macromedia acquired a vector-based animation package, FutureSplash, and rebranded it as its Flash product. Flash was easy for novice and experienced developers alike to use, and its applications and animations could also be easily compressed to a small, Internet-friendly file size. As Flash applications and animations began to pop up throughout an increasingly interactive Web, Microsoft agreed to bundle the Flash plug-in within Internet Explorer 5. By 2000, it was being distributed within all AOL, Netscape, and Microsoft web browsers. In 2002, it shipped within all releases of Windows XP for an installed base within 92 percent of all Internet-connected PCs.

Initially, Flash was a format perfect for interactive applications and animations, but could not be used for the encoding of video. Over time, however, as the Flash platform evolved, it became capable of supporting increasing content frame rates. Soon, the line began to blur between animation and video. In 2002, after the release of new capabilities within Macromedia Flash MX and Flash Player 6, Flash’s broad installed base compelled developers to begin to use Flash as a format for encoding video. While its video quality lagged that of incumbent formats, Flash was “good enough” for some web video content, particularly in light of the fact that the majority of users could consume such video without needing to download and install a separate player application — a big plus.

Over the last six years, and more recently under Adobe’s ownership, Flash adoption has grown dramatically. Today, television channels including CBS, NBC, CNN, and ESPN, along with user-generated content sites such as YouTube, MySpace, Google Video, and Yahoo Video, all encode their videos using Flash. CBS.com, for example, is also just one example of many sites streaming Flash video 720p HD. According to a report published in April 2008, Flash-powered online video websites are now responsible for substantially more than 91 percent of online video traffic. While RealNetworks' RealVideo, Microsoft Windows Media, and Apple Quicktime remain players in the world of online video, Flash has clearly taken the lead.

Since its acquisition and re-launch by Macromedia in 1996, Flash has followed a classic disruptive trajectory through the world of streaming video. Its initial foothold, the world of web-based animation, provided a perfect niche for Flash to incubate. Bundled within all major web browsers, Flash then hitched a ride on a dynamite distribution mechanism, finding a home within 98.45 percent of all Internet-enabled PCs as of June 2008. Improvements to Flash technology, combined with its installed base, next enabled it to move up-market, tackling increasingly complex content until the line between animation and video was gone, along with the lead that had been enjoyed by the streaming video format incumbents.

The iPhone 3G hogged its share of the spotlight over the weekend. The “twice the speed, half the price” phone sold upwards 1 million units over the weekend. But while most of the spotlight was focused on the new phone itself (and the difficulties experienced during the launch), I believe time will show the iPhone App Store — a iTunes-integrated online store that allows consumers to easily install a seemingly endless variety of games, utilities and other applications — was the Apple release most deserving of the weekend spotlight.

The new features (3G antenna, standard headphone jack, etc.) are improvements, don’t get me wrong. But they are the sort of sustaining improvements that customers expect, and they don’t exactly break new ground. I doubt whether these features alone can propel the iPhone to the level of success that Apple’s other “i” product has achieved. (If they could, you’d see a lot more buzz about the LG Dare and the Samsung Instinct).

It is the App Store that adds features in a disruptive way that other phones can’t match. With it, the Apple finally gives consumers a way to conveniently add third-party programs to their phones. (I’ve used both Palm OS and Windows mobile devices and can testify that until now this has been neither a quick nor a convenient process). In the same way that the iTunes music store made the iPod much more than another digital music player by allowing the consumer to easily buy, organize, sync and play music, the App Store makes the iPhone more than another smartphone. It turns it into a computer in your pocket, ready to be customized with the applications that you want.

How significant will the effect of the App Store be? Well, if the history of the iPod before and after iTunes is any guide, the effect will be enormous.

Prior to the release of iTunes in April, 2004, no more than 1 million iPods has been sold during any quarter. After it was released for Windows in October of 2004 (it was a Mac only release for the first few months), at least 4 million iPods (and as many as 22 million!) have been sold every quarter.

Of course, there are differences. Consumers already had well-established habits relating to buying and listening to music that the iPod + iTunes could build on. Similar habits relating to the use of third-party applications on mobile devices may not be as prevalent. And this time, the competition isn’t as far behind. Google is hard at work pushing its own mobile platform, Android, with headset makers and application developers (and might even be developing a Google phone). Also, incumbents like Nokia, which acquired Symbian recently, aren’t sitting still either. Both may be able to offer consumers devices that are as flexible and application ready as the iPhone in the near term.

In the face of these challenges, it will be interesting to see whether Apple will be able to repeat the success of the iPod. It is doing plenty right. But will it be enough?

Perform an Amazon search for INSEAD professor Philip M. Parker and you’ll see that he’s authored over 85,000 books. No, that isn’t a typo. The actual number, in fact, might even be higher (this New York Times story put him over 200,000). He hasn’t written each and every one in the traditional way, of course; to do so would take a person sixty years of writing nine books a day. Instead, he’s developed a system of computer algorithms that use publicly available information to author his works.

As this video demonstrates, many of his works are economic or market analyses and forecasts, but he also uses the technology to write about obscure medical topics – both genres that he’s able to succeed in because they are underserved by traditional authors.

Take the first Philip M. Parker work that comes up on an Amazon search: "The 2007-2012 Outlook for Lemon-Flavored Bottled Water in Japan". I can’t imagine that more than a few dozen people and/or firms on the planet are interested in this work (at most). No author or market research firm is going to write this book with such a low potential for sales and even if they did, the time and effort involved would make it expensive.

Mr. Parker, however, creates his books, on average, in half an hour and at a cost of about twelve cents (excluding printing). He can sell a single copy for $495 and make a handsome profit. If he doesn’t get any orders, he loses almost nothing. Multiply this opportunity by 80 to 200,000 books and it isn’t hard to see how he can be successful. It’s a great example of a technology facilitating a successful low-cost business model.

My last post argued that disruption in online video was likely to come from someone outside the industry. Yet, consummate industry insiders NBC Universal and Fox seem to be on the right track with their online video offering Hulu. How could that be? The companies have structured in a way that has helped them "forget enough of the core television model to position their new venture for success.

Fox (like FX a part of the News Corp family) and NBC (who also owns the Bravo, USA, and Telemundo networks) formed the joint venture last year. The strategic aim? Help ensure that the companies avoid the fate suffered by their cousins in the music industry, who let Apple capture the lions share of the value in the digitization of music.

When NBC and Fox formed their venture, most industry watchers were appropriately skeptical. Incumbents struggle enough on their own to formulate winning disruptive businesses; asking two incumbents to work together to create a disruptive business seemed like a recipe for disaster. Even the ventures name earned ridicule.

Yet, after a few twists and turns, Hulu appears to be on a path that might yet promise success

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Read the rest at Innovation Insights

If you blinked, you missed NBC Universals hotly hyped new show "Quarterlife. After airing a single episode on NBC, the media titan decided to move the program to its Bravo cable network. NBCand the creators of "Quarterlifefell into a classic trap of trying to "cram disruption into an existing model.

No one has yet figured out how to create a sustainable video success on the Web. It is clear, though, that viewing habits are different on the Web. Users, especially those lacking high-speed Internet connections, will tolerate lower production quality. Comedy works well. Anything longer than six or seven minutes seems to sputter.

"Quarterlifes creators Marshall Herskovitz and Edward Zwick sought to bring television production qualities to the Internet. The two certainly have an impressive resume. They created landmarks television series "thirtysomething and "My So-Called Life.

The duo followed the television playbook: hire a set of attractive actors and actresses (including one with online credibility: Bitsie Tulloch of lonelygirl15 fame), use polished scripts, and create professional-grade content. They did embrace at least some of the more distinct aspects of Internet videos, with short episodes and a heavy dose of interactive content.

The show did reasonably well on MySpace, with some episodes drawing several hundred thousand viewers.

By and large, though, the shows creators fell into a classic trap....

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More over at HBSP's Innovation Insights

How the movie rental business disrupted traditional cinema is a well-known story. Over the years, studios have adapted to the trend by earning revenues from video rentals and later DVD sales of major productions, while never fully embracing direct-to-DVD films.

Recently, Warner Brothers created a new unit called Warner Premiere to fully embrace home video and create quality original movies for direct release on DVD. Warner Premiere is making headlines this summer with "Get Smart and its direct-to-DVD sequel to be released just ten days apart. With such a short release window, "Get Smart advertising can promote both the main attraction and its sequel simultaneously. With this strategy, Warner can innovate its business model by generating greater payoffs from one-time use resources like production assets and marketing budgets.

The core consumer Job to be Done is to be entertained. By now, the home viewing public is conditioned to wait for a films DVD release or seek illegal alternatives like street vendors and P2P networks. This summer, how many parents would love to treat their kids to the Shrek 3 DVD after watching it in cinemas? Unfortunately, studios are not capable of creating such an offering and disrupting themselves, as they are hampered by constraining contracts with industry players accustomed to the traditional business model. Mark Cuban is notable for accomplishing "simultaneous release, where a movie is released in theaters, on demand and on DVD concurrently. Warners new unit is a step in the right direction in giving viewers more options for entertainment and we look forward to others like Warner Bros. and Mark Cuban challenging Hollywoods business model.

See "Studios Have New Respect For Direct-to-DVD Films. WSJ. April 20, 2007.
"Warner Bros. Gambles on Direct-to-Video Sequels that Come Out Days After Their Theatrical Originals. Wired.com. May 7, 2007.

Only 25% of all new products that established companies introduce in their markets succeed. The seventy-five percent that fail often do so after multi-million dollar investments and very visible branding and public relations efforts.

So how can companies innovate without wasting resources and risking the company brand? To address this dilemma, Innosight recommends that companies run small, cheap experiments to test assumptions early in what we call an emergent strategy. We recommend that companies "invest a little to learn a lot. A recent Wall Street Journal article provides a great example of this with the experiments that search engine companies run to test their new products.

In the last year, Yahoo has introduced AlltheWeb.com, Google has launched searchmash.com and Microsofts Windows Live unit recently brought MsDewey.com live. These sites were all launched under a separate brand from their parent to test new features and gather consumer feedback.

The site MsDewey.com is a search engine where users pose their query to prerecoreded video clips of a sassy actress.



It is definitely a novel way to search and we can assume that Microsoft has launched this site without the Microsoft brand to answer some of the following questions

- Should we do this?
- Do consumers want this?
- How can we strategically beat competitors?

We like what these companies are doing because these types of experiments

- Can be executed quickly
- Can be executed with relatively minimal investment
- Provide high return on learning investment by providing knowledge around key assumptions
- Present minimal "blowback risk to established brands

The key thing to remember is new products have a high failure rate and one way to minimize the risks involved in launching new products is to run small experiments.

See:"In Search ofBetter Ways to Search: Google, Microsoft, Ask.Com Quietly Use Spinoff Sites To Test New Features, Solicit Feedback,; Pulling Up Videos. The Wall Street Journal. January 17, 2007; Page DI

Warner Music has taken a step away from the pack of other music companies to ink a deal with the video sharing web site YouTube. This comes just one week after the CEO of Universal Music Group called out YouTube claiming that they violate copyright regulations by hosting content on their site that is uploaded without the proper approval of its owners.

Here's an overview of the how the partnership will work...

"YouTube will allow users to legitimately incorporate Warner content into their own video creations, while ensuring that Warner continues to receive a proportion of the advertising revenue generated."

...and here a few things that we like about Warner Music's approach

• Innovating the business model - Warner will receive non-traditional revenue from ads placed next to Warner's content or user-generated content that features Warner music or videos. This differs substantially from how music companies traditionally make money by producing and selling albums
  
  
• Understanding Jobs - YouTube has proven that there is an important Job to be done of "give me a place to create and/or post cool video content". It has also shown that there is an audience for this user-generated content. YouTube was reported to have more than 100 million videos viewed on a daily basis
  
  
• Experimentation - Warner Music does not appear to view this deal as the "silver bullet" solution but as an experiment where they can invest a little, earn a little and learn a lot
  

Few industries have felt the disruptive impact of the last decades biggest innovation, the Internet, more than the media. Newspaper circulation has dropped; billions of advertising dollars have swung from broadcast and print outlets to the web; and music and movie companies have seen their intellectual property high-jacked via peer-to-peer technology.

From 2000 to 2002 alone, sales for the worldwide recording industry shrank close to 20 percent, from $39 billion to $32 billion, according to the Recording Industry Association of America.

Whats more, lately online competitors have even begun to muscle their way into the print world. Last fall, for example, Google announced it had begun reselling ad space in ink-and-paper journals. In January, it purchased dMarc Broadcasting, a radio advertising firm; company executives also publicly discussed a possible move into TV ads.

The news is not as odd as it may seem. Google realizes that the more ways it can reuse and resell content"whether in cyberspace, in print magazines, or over the airwaves"the more money it can make. And thats a lesson that could benefit all traditional media companies.

To succeed in this new environment, traditional media players need to imitate the strategies of their biggest new threat: free-content providers employing a variety of reuse and re-run tactics. Today, free blogs give content more reincarnations than Houdini. They compress initial release and re-run cycles"sometimes to an instant"and they link their content to others, creating powerful, self-reinforcing networks.

Cornerstone blogging technology Really Simple Syndication (RSS) allows bloggers to transmit content around the Internet to be repackaged into email or personalized Internet homepages. Rather than being tied to a conventional re-release schedule, RSS allows near instantaneous repurposing. By offering as-good-as-new content, bloggers grab wider audiences without making additional investments. In this Strategy & Innovation article, which you can read by subscribing here, three partners of the consulting firm Bain & Company, offer valuable lessons for incumbents and describe how some big media companies have started to co-opt the logic of bloggers.

Wal-Mart?s recently announced foray into social networking, ?The Hub,? or ?School Your Way,? seems so incredibly clumsy, forced, and blunt that its success is nearly unimaginable. The site exists in order to sell the uber-retailer?s cool clothes to cool kids. Wal-Mart-loving fashion conscious teens can create profiles that express some personal information, show off hot pics flashing smart ?Mart threads, and even submit video clips that may be made into actual Wal-Mart commercials. The idea is to build brand loyalty and defray the baseless conception that Wal-Mart?s clothes are bland and dasshile promoting select advertisers? products and, perhaps, mining some cool data from kids? profiles. Sounds too good to be true, right? Get this, there?s a catch: all content posted by users to the site will be scrubbed by censors to insure that it meets Wal-Mart?s standards of decency. This seems like a classic example of a large, powerful, and well-funded company attempting to cram into a disruptive space. Often, such efforts are frustrated by the need for different resources, processes, or values in an emerging market. Wal-Mart famously promotes conservative lifestyles, censors media sold in its stores, and forbids alcohol at corporate events -- governing values that seem antithetical to the freewheeling ?hey dude check out these clips of me drinking? world of teenage social networking. Can Wal-Mart?s values (and blatant attempts at self-promotion) fly on the Internet? In order to understand what social networking is all about ? and, consequently, how success can be achieved ? it is essential to understand users? ?Jobs to be Done.? Common wisdom is that teens flock to MySpace and its ilk to express, establish, and play with their identities in a relatively undefined space free of adult influence or meddling. The success of Wal-Mart?s venture rests on this question: how essential is that ?free of adult influence or meddling? bit to the ultimate social networking Job? To many American parents, familiar, ubiquitous and socially conservative Wal-Mart is a whole lot more wholesome and acceptable than MySpace, so, to their kids, The Hub may be to social networking what Christian Rock is to MTV ? an attainable, safe, and ?good enough? alternative. Can ease of access outweigh restrictions on expression on the Internet? In China, certainly, the young are willing to put up with censorship in exchange for access; perhaps getting online is ?good enough,? and freedom of expression is overshot. Assuming Wal-Mart can work out the heavy-handed kinks in its initial design and limit the intrusiveness of its attempts to monetize the site (big assumptions), The Hub figures to be a good barometer for the red state/blue state dynamic among the young and the development of Internet culture in America. Get a load of the fashions at schoolyourway.walmart.com

VS.


Back when I was young, AOL was all the rage. Everyone wanted to get online, get an email address, and most importantly, instant message their friends. IM became a massive success among young people because it made teenage communication easier and, consequently, less awkward. Compared to the telephone, IM required less effort to stay in touch with buddies (and certainly less guts to flirt with potential love interests). It created a new form of communication that then expanded into limited text-only user profiles and away messages. A witty one-liner about how much homework you had or a pithy quote in your profile signaled serious schoolyard status.

The strange power of these features became apparent to me when I got to college, where I used IM to stay in touch with my now-dispersed high school friends and my roommate used it to obsessively check his friends and acquaintances away messages and profiles. Frequently online, often insecure, and always looking to procrastinate, college kids spent a lot of time fine tuning their digital images and keeping track of everyone elses.

If only AOL had paid attention to what their consumers were actually consuming.

The misuse of a product is often a good sign of an unfulfilled need and, therefore, a disruptive opportunity. When MySpace, Friendster, and Facebook stepped in with good-enough functionality that allowed users more control over their profiles, more features to customize, and more ways to interact with their social networks, young people fled AOL en masse. In the 33 months since its launch, MySpace has amassed 77 million users and generates 19 billion page views per month.

Now, years too late, AOL is finally getting into the social networking game with the impending launch of AIM Pages, a service that allows users of AIM to create profile web pages where they can post pictures, blog, and communicate with a network of friends. Meanwhile, MySpace has just announced its official entry into IM. Existing features like in-site messages, comments and bulletin boards have already begun to replace conventional email accounts and instant messaging services for many MySpacers; the deployment of a formal IM interface is likely to draw more and more of its massive base further inside its web-within-the-web.

Unsurprisingly, MySpace has a clear advantage in this virtual turf war: not only is MySpace perceived to be cooler than so-five-years-ago AOL, it is far easier for a consumer to migrate from one IM service to another (thanks, especially, to IM integrators like Trillian) than it is to migrate an entire byzantine network of friends, photos, and blog posts to a new social networking site. Perhaps AIM pages will help AOL stop the bleeding, but IM will advance MySpace's efforts to tap into its massive and entrenched user base to grow page views, continuing its disruptive march.

In January we wrote about an online product that we felt had the makings of a disruptive product. The product is Spot Runner ? an online site and engine that enables businesses to customize stock video ads and run them on cable TV for a cost as low as $500.

Fast Company profiled the company in their April issue. The article reminded us of some of the reasons why we like Spot Runner's solution

1) It competes against nonconsumption: the local dog groomer was previously restricted from advertising on TV because it was too expensive, complicated and time consuming and is delighted to have the ability to do so now

2) It is "good enough": the canned stock video does not match the quality standards of a consumer packaged goods company but it is "good enough" for small businesses including IT repair shops and flower shops

3) It targets a customer, market, and technology that competitors in this case traditional ad agencies are happy to ignore: This is best represented in a quote in the Fast Company article from a VP of Media Planning saying "I'm a million times smarter than that that - computer! You can't replace gut instinct. That comes from experience."

People sweeping the idea of Spot Runner under the rug may do well to look at the dollars Google has made with their... their... computers!

Spot Runner, a new firm in the press lately, caught our attention as a disruption to traditional advertising agencies. They have a do-it-yourself model that enables local advertisers who otherwise couldn't afford to advertise on TV to do so. The idea is quite simple -

"advertisers can choose from a comprehensive library of professionally produced ads that can be viewed, purchased and personalized in a simple process online...with its proprietary media planning engine, Spot Runner also creates customized media plans by using some basic information entered by the advertiser, such as their industry and budget. The entire process, which can traditionally take months and hundreds of thousands of dollars, now takes just days and a fraction of the cost."

The company says its basic solution can cost as little as $500. While traditional advertisers would not find this solution anywhere near meeting their creative and media planning standards it is definitely "good enough" for local businesses like doggie day cares, hair salons and flower shops who otherwise couldn't advertise on TV because it has tradtionally been too complicated and too expensive.

A recent article in Business Week was titled Managing Google's Idea Factory. The article listed specific steps that Google is taking to encourage innovations, which are crucial for Google to be able to compete with giants like Microsoft and Yahoo! as well as newcomers like Technorati.

What do we like about their approach?

Rigor and discipline It is nice that Google mentions that not only creativity is key to their success, but so are the rigor and discipline behind their approach. The company has eight brainstorming sessions each year with 100 engineers. Six concepts are pitched and discussed for ten minutes each. The stated goal is to build on the initial idea with at least one complementary idea per minute.

Lead from the top Google recognizes that it is not enough to allow anyone at the firm to post thoughts for new technologies and businesses to mailing lists. They have instituted supporting processes that are led by management. Marissa Mayer, the Director of Web Products at Google, has open office hours much like a college professor where employees can talk through ideas. Google's personalized home page came out of this process. Also, all engineers have one day a week to develop their own pet projects, no matter how far from the company?s central mission. Google News came out of this process.

Act like a venture capitalist Google is willing to look for great ideas not only inside the company but outside as well. In 2004, the company bought Keyhole, which allowed them to develop Google Maps with sophisticated satellite imagery and maps

A key question is whether Google can sustain and continue to nurture this "innovation culture" as they grow. We'd love to hear your thoughts.

Want to learn about hog-cooking? A Boston Globe article describes how In June you can pay a mere $1.99 to download a 45 minute video about how to "find, select, prepare and serve a whole hog." The download will be available on a service called DaveTV, which intends to offer thousands of niche programs such as the hog-cooking video. In fact, that video will be one of more than 1,000 barbecue-related programs offered by the service. Of course, the downside is the video will only be available on the Web, so you have to watch it on your computer, not your television.

Telephone companies are all trying to figure out how to respond to the incursion of the cable companies into their core telephony business using Voice over Internet Protocol. The natural response is to spend huge amounts of money trying to go directly after cable operator's core business. The more disruptive play is to follow the DaveTV approach, offering a differntiated, dare I say, disruptive, offering. Ultimately, this differentiated approach has a greater chance of creating positive growth for the phone companies. Mimicking the cable operators will lead to a zero-sum game where the "winner" will be left with a rotten business.

A great interview over on Investor's Business Daily with Michael Miron, a digital media consultant and former CEO of ContentGuard (registration required). Miron is discussing the general fear that media companies have about the disruptive threats facing their industry. The threats are quite obvious. The democratizing power of the Internet allows anyone to create their own content; the digitization of media facilitates the seemingly profit-free sharing of previously hard-to-access content. What Miron points out is that disruptive change almost always creates net growth. He reflects on his experience at IBM:

"I was at IBM in 1981 the day the personal computer was announced. We had raging debates about mainframes vs. PCs. It turns out that PCs weren't a substitute for mainframes. It was a massive, radical expansion of the market for computing power. Today, it's 10,000 times bigger than anyone would have credibly said in 1981."