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Friday, December 28, 2007

Facebook will Rule the World

I was looking at blog publishing alternatives yesterday to see what new developments are available, and after a stop at Twitter that led me to Facebook, I had an epiphany. Facebook is going to rule the online world, and here is why:

Before the invention of the automobile, towns were built around town squares or high streets. Town squares were gathering places, often populated by churches. Italy has the piazza, Germany the platz. Clusters of stores and restaurants often were nearby. In the UK, these clusters of retail businesses are called a high street, in the United States they became known as main street. In the United States, main street is dead or dying, replaced by shopping malls, strip malls, and big box stores. The negative consequence of this is the loss of community as these stores have larger catchment areas and lack that neighborhood feel, resulting in further isolation of individuals from each other.

Building upon the increasing isolation of individuals from each other, people are at the same time becoming more mobile meaning that people are more and more likely to have friend networks that span hundreds or thousands of miles. More and more people are 'hanging out with their friends' online and Facebook is one of the places that this happens in spades. 'Online Community Sites', as they are now referred to, like Friendster, Bebo, MySpace have exploded.

The reason I say that Facebook is going to rule the world, is that relationships are more important to us as humans than anything else other than food, shelter, and clothing. In the early days of the Internet, there was very little community and it was characterized as a patchwork of "properties" spread around the globe, and the result was that the "portal" became very popular and people flocked to sites like Yahoo! and MSN, and search engines like Live.com and Google. In fact four of the top five Alexa-ranked sites are the four I just named. But things are about to change. Spots six through ten in the Alexa rankings are currently all occupied by community sites (MySpace, Facebook, Wikipedia, Hi5, and Orkut).

The Internet is becoming a lot more relationship-focused and Facebook is leading this enablement by treating their site more as a platform. It won't be long before people expect to be able to go to Facebook or their favorite community site and check their e-mail, browse their favorite news items and send text messages while still keeping track of what their friends are up to. These type of integrations will represent the next wave of innovations online. Instead of portals adding community as a feature, the innovation will come from a company like Facebook leading with relationships and then seamlessly integrating tasks and information into the community site in a way that allows people to customize these features to their needs.

My interaction with e-mail is already changing thanks to Facebook. I go onto Facebook to see what people are up to and a news item from one of my friends will trigger a contact, not through my Yahoo! account, but through Facebook. Yahoo! Mail can't provide this kind of contextual prompt. Google tries to achieve some level of this in GMail by showing you who is online for chatting integrated together in the mail window, but I don't know what people are up to. Nothing really sparks my curiosity or my likelihood to contact someone. Why is this important?

Money is allocated in the Internet economy based on the number of page views and the level of engagement. If people suddenly start initiating e-mails on Facebook or browsing classifieds or jobs on Facebook or who knows, maybe even news content, then the money moves with them. What happens if people suddenly stop typing in google.com or live.com directly into their browser and instead search off a widget in Facebook instead that drives revenue Facebook's way?

Facebook not only has the potential to move up the rankings tables, but the revenue tables as well. When you look at this way, Facebook was smart to turn down Yahoo!'s $1 Billion.

So what are the portal players and search engines up to?

Microsoft has Spaces on live.com and is invested in Facebook, Google has Orkut, and Yahoo!, well Yahoo! wanted Facebook but didn't get it and 360 is pretty lame. Now I'm no betting man or industry analyst but I would look for Yahoo! to do a deal in the next six months for a community site at an overinflated price. Facebook is about to overtake Yahoo! in the same way that Yahoo! overtook AltaVista. Now you see why I believe Facebook is going to rule the online world.

What do you think?

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Thursday, December 20, 2007

A Laptop Innovation We All Need

Intel and AMD are making processors faster, ATI and nVidia continue to accelerate graphics and video, while faster memory and buses underpin both. Meanwhile, hard disks are spinning a bit faster, but getting bigger at the same time. Maybe I am wrong, but it seems like hard disk access speed continues to be the bottleneck. So can our laptops really get much faster?

The answer is hopefully yes, and here is an idea that hopefully will make them faster and more reliable at the same time. Some of you may have heard of SSD (Solid State Disk), but probably only a handful of you have ever had your hands on a machine with one built-in. For those who don't know what an SSD is, it is a small capacity "disk" made of flash memory chips that retain information without power. By small capacity I mean that most current implementations are 32gb in size (small when compared to 250gb laptop hard drives). An SSD is useful for the following reasons:
  1. Uses less power than a hard disk
  2. Faster access than a hard disk
  3. Can be used together with a hard disk
Because of these advantages, and SSD is an ideal place to store an operating system to speed boot time, improve responsiveness, and extend laptop battery life.

These features and benefits make an SSD very useful, but not necessarily very valuable (the price might be too high for many). Now I haven't seen how people are implementing SSD's in laptops, but I wanted to make my case for the solution that would make such a laptop very valuable to the mass market (thus creating a true innovation). It works like this:
  1. SSD is upgradeable as memory prices per gigabyte drop
  2. Laptop comes with the operating system installed on the SSD
  3. Laptop comes with the operating system installed on the hard disk
  4. Laptop comes with an application that allows you to choose which to boot from on startup
  5. Laptop comes with a one-click application that does the following:
    • Reformat and optimize the SSD
    • Does a fresh install of the operating system onto the SSD
    • Re-installs operating system level components of compliant applications
    • Gives you a list of non-compliant applications and the option to remove them
      (these applications would have to be reinstalled manually to work properly)
Why would this be so much better than what we have now?

Well, one way to fix some of the worst computer problem is to do a low level format of the hard disk and re-install your operating system and applications. This would make it almost painless to do this, and would allow users to keep their computer in peak performance at all times instead of limping along until they have time to do a full backup and restore. I'm limping along waiting for that moment as we speak. This all seems perfectly doable, but I wonder whether laptop manufacturers will deliver dumb SSD's or something more intelligent, to move from useful to valuable, and reap the rewards from the true innovation.

What do you think?

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Wednesday, December 19, 2007

Followup - The Future of Broadcast Television

I finally got my password to the beta program for hulu.com and I must say it is what I thought it would be, a site where you can watch advertising-supported Fox and NBC programming for free. This article is a followup on innovation article #75 of November 11, 2007. ABC.com has been doing this for some time, but this marks the first time that two competing networks have gotten together to share development costs on such a venture. The real question is not whether it will be successful or not, but how successful it might be.

The site sounds a near-certain death knell on iTunes future capacity to offer television content profitably. ABC already has their content for free online, and now NBC and Fox do as well. While some people may want to be able to watch content without commercials, I surely doubt that the size of that market segment are going to be large enough to make it worth the investment in servers and development cost, not to mention marketing and other costs. People that are that adamant about not having commercials, and are willing to pay for that privilege, will surely spring for the DVD instead.

From the networks perspective, surely they get more than a dollar or two in advertising revenue per view, so then it becomes a question of the number of views they get and whether that covers the operational costs. The great thing is that the development costs have already been covered by the broadcast division, so the content is ostensibly free to the online division (with the exception of any royalties they must pay).

This calls into question whether iTunes will really be able to ever succeed in video of any kind, including movies. It is in the networks best interests to host their own content or to host it via a platform that they control. By doing so they not only have the opportunity to increase their revenue, but also to cross-promote - to push people from show to show, or sell DVDs and other merchandise.

Finally, if people consume the content on a platform that they control, the networks have a better opportunity to loyalize consumers and even to elevate their interest to involved fan. If they can elevate their interest from casual viewer to involved fan, they may buy merchandise, but more importantly they are likely to then be worth more in terms of advertising revenue (repeat visits, links out to community sites, etc.).

Hulu.com isn't a revolutionary innovation, but it does bring a few new things to the party when it comes to advertising-supported premium content:
  1. Ability to embed a program in any other site on the web
    • Surprisingly without commercials
    • Also allows you to resize the timebar to create a custom clip
  2. First site to offer movies for free (advertising supported)
  3. At the end of the video clip, it gives you either
    • A link to the show's web site telling you when the show airs
    • A link to Amazon Unbox where you can purchase an episode for $1.99
      • Three formats (computer, TiVo, or portable device)
    • Text saying that people can download or purchase a season (but no link)
Hulu does have the ability to revolutionize the industry in a way that YouTube never will, if they have the vision and the organizational capabilities...

Starting with two major networks' content available gives Hulu the chance to at least try to establish itself as a destination for more than Fox and NBC content, potentially stripping YouTube of its best user-generated and premium content at the same time. Hulu has the chance to establish itself as the platform for introducing all kinds of other advertising-supported premium content:
  1. Television and Movie Back-catalogs
  2. Foreign and independent content (movies, television and shorts)
  3. Public television content
  4. Music videos
  5. Video podcasts
  6. Audio podcasts
  7. Audiobooks
  8. Temporary promotional content (i.e. concert or other live entertainment teasers)
  9. The opportunity to create a new style of infomercial
It will be interesting to see if Hulu seizes the opportunity to create an industry platform instead of just a nice little joint venture. It will also be interesting to see what the effect of Hulu and other premium content sites are on shared networks. I guess we will see.

Do you think Hulu will maintain a closed or open network?

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Followup - Why Seattle Needs Double-Decker Buses

I wanted to followup on innovation article #23 of August 20, 2007 where I campaigned for double-decker buses in Seattle as a way to reduce traffic congestion and improve the speed and the trip of public transit riders.

I was surprised to see a double-decker public bus cruising through downtown Seattle the other day. It was a route 417 on its way to Mukilteo and it effortlessly cruised through a yellow light to get the last spot in the bus zone (one a bendy bus wouldn't have fit in).

I don't know if the regional transit bureau serving areas north of Seattle has more than one double-decker bus in their fleet or whether this is a test bus for a future purchase, but it sure looked better cruising through downtown Seattle than a bendy bus bouncing up and down. There is nothing quite like the view from the upper-deck of a double-decker bus as you cruise through a city. I hope this is the sign of more to come. Bendy buses may be a newer concept, but double-decker buses are a better one.

What do you think?


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Tuesday, December 18, 2007

Followup - Following the Line to Innovation

I was hesitant this weekend when a man at Costco asked if he could scan my Costco card while I was standing in line, thinking that he was going to try and sell me on their executive card. I was pleasantly surprised when he then scanned my items with a portable scanner/computer and gave me a slip of paper to alert the cashier that he had done so.

It is a pretty simple system:
  1. Scanner/Computer reads my Costco account number and creates a record
  2. It then associates the item numbers scanned with that record, and sets a flag in the system that this temporary record exists on my account
  3. Cashier enters my Costco account number and retrieves my account
  4. The flag in the system enables the cashier to transfer the scanned item numbers into a live order
  5. The cashier verifies the number of items
  6. The cashier processes payment
  7. The system deletes the temporary record

I thought "wow!", this is brilliant, this is exactly the type of potential process improvement that I was talking about in innovation blog entry #78 of November 16, 2007 (Following the Line to Innovation).

Costco has a fixed number of registers and the cashiers can only scan items and process payment so fast. If the cashiers only have to process payment and maybe throw a few things in a box, then the throughput of each cashier increases and lines become shorter or non-existent. This appears to be a new process to accommodate the increased volume of shoppers that all retailers experience during the holiday season, but the process could be even better.

Normally when I go to Costco there is a cashier working busily and a box person working less frequently. It seems to me that this scanner/computer task could become the normal job responsibility of the box person. If the jobs were re-distributed then maybe the non-holiday throughput could be increased and possibly free up people for other tasks.

All I know is that I was a happier customer that day. And--as I've said before--by making more efficient use of waiting time, companies can potentially decrease costs and increase revenue at the same time, while also increasing customer satisfaction. What can be better than that?

What do you think?


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Sunday, December 16, 2007

You Cannot Always Invent Your Way to Innovation

I'd like to start today with a quote from a NASA article in Fast Company - "But sometimes the better part of innovation, is not invention but effectiveness."

I've detailed my views before on how invention is not the same thing as innovation, but to build upon them and the quote above - sometimes progress or innovation is achieved by taking value out of a product or service. Southwest Airlines created innovation not by giving passengers more food, more legroom or more options, but fewer. Apple succeeded with the iPod, not by providing more capacity or more features, but by making the features they provided more beneficial than the competition.

People ultimately do not care whether a product or service is better at the tasks it is asked to perform, but whether it more effectively meets their needs. These are not the same thing, and in fact make success far more difficult.

A sponge may clean better than all other sponges at absorbing liquids, but if to do so it has to smell like a wet troll, it is ultimately not going to be the sponge most effective at meeting customers needs (or likely to make repeat visits to their shopping baskets). Success becomes more difficult because customers don't always surface their needs. Chances are your market research wouldn't have surfaced their need for a sponge not to smell like a wet troll. But if succeeding becomes more difficult when success is not purely a technology challenge, then this is a good thing for the truly committed, because difficulty creates opportunity.

So during the product development process, don't ask yourself "How can we make X do Y better than the competition?". Instead focus people's attention on asking "How can we better meet our customers' needs?". If you focus on the second question, the competition becomes almost irrelevant, and you will become better at creating products or services that are more likely to be valuable instead of merely useful, and that is where true innovation lies.

What do you think?


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Thursday, December 13, 2007

Cashing in Online

Why do dead presidents have no value in the online world? In other words, why can I not pay cash online anywhere I want in the same way I can in the physical world?

For years now, when I am not busy serving paying clients, from time to time I bang the drum for my vision of making all online stores like brick and mortar stores where people can 'walk' in and pay cash. Now why is this so important for online retailers?

Online shopping is growing in popularity under current conditions, but it could grow even faster if the final barriers were eliminated. Enabling customers to pay cash online would eliminate barriers to online shopping posed by fears of:

1. Stolen credit card information
2. Identity theft
3. Invasion of privacy

Online merchants are missing out on shoppers who may never join the cashless society (UK statistics provided for illustration purposes) by not allowing shoppers to pay with cash:

1. 40% of the population doesn't have a credit card, yet 80% of online purchases are made with one
2. Not everyone can get a credit card - In 2000, 4 million 12-16 yr olds spent $6 billion

I saw an article in the Seattle Times about Amazon inking a deal with a partner to allow people to shop online and pay without a credit or debit card, and so I started to think "hurray!" - after four years somebody has finally realized the opportunity. I was so disappointed to find out that the 'solution' of serving people who do not want to pay with debit or credit card, was to allow people to pay directly from their bank account (ala PayPal) via a partner called BillMeLater.

As an entrepreneur and professional adviser, you would think I would be excited to hear that my vision still has not been widely implemented. I am excited, but at the same time I know that the true 'solution' is not workable for a new entrant.

What do you think?



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Wednesday, December 12, 2007

Frequent Diner's Club

The coupon is as American as apple pie, and American shoppers love a good bargain. Some people love to clip coupons and some feel that it is beneath them, that somehow using a coupon makes them less of a person. I'm not quite sure I understand that one, but to each his own. Despite American's aversion to haggling, there is no doubt that there are a lot of goods and services in America with variable prices. It is just that in most cases, instead of asking for a deal, you have to know about a deal ahead of time. This usually means knowing where to find the coupon.

Similar to the stories of three people in a row of airline seats having paid vastly different prices for seats next to each other, in the same way, three diners may all be paying different prices for the same entrees. Whether companies want to admit it, the same is true for many other products and services as well.

The internet intensifies this phenomenon of variable pricing and has the potential to spread your coupon beyond those you intended to give it to. The most famous story is the story of the free iced coffee coupon that Starbucks distributed to some of its employees encouraging them to share it with friends and family. The problem is that one or more of those friends and families posted it on their websites and suddenly Starbucks was facing more redemptions than they anticpated. They chose to stop accepting the coupons altogether, touching off a negative PR firestorm.

So, how can restaurants make technology work for them instead of against them? The first thing that all restaurants should be doing is trying to identify their most frequent patrons and engaging them in a meaningful dialogue. In order to have this kind of dialogue the restaurant must be careful about the kind of communications they send, and seek to offer personalized opportunities that occasional diners do not get. Imagine a restaurant that is used to having 70% or more of its reservations for the evening full by 6pm and the rest of its capacity filled by walkups, but one evening it is only running at 30% full by 6pm. An ordinary restaurant would just suffer through a poor night.

A smart restaurant might take advantage of their preferred diner program to text the members that live within ten miles of the restaurant to let them know that if they come in this evening that they can choose a special price on the evenings' special or have the evening's special appetizer or dessert for free. This helps the restaurant fill spare capacity, helps loyal customers feel special (and even more loyal), and will the reduce the amount of food waste.

A restaurant that tracks preferred diner's tastes, might be able to organize special events that speak to the preferences of different customers on slow nights, or possibly allow the restaurant to draw in certain customers on nights that certain specials are offered that might please a certain group of customer's palettes. There is also no denying that pulling in customers on their birthdays (with a free meal or glass of wine) tends to pull other people along with them. Are there other occasions that you can think of an offer that you could provide that might encourage the preferred diner to bring others along with him or her?

Are you using your loyalty program to fill spare capacity?

Are you really using it to reward and encourage loyalty?



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Thursday, December 06, 2007

Oh No you Don't - Get Back to Work!

Some might say it is a step forward, some a step backwards, but coming soon to a Jet Blue airplane near you--access to Yahoo! Mail (e-mail) or Yahoo! Messenger (instant messaging client) for free in the sky via WiFi access points.

You won't be able to access the web willy nilly, but a separate agreement with RIM will allow feeding your Blackberry addiction too. Now what good is their in-flight television system? People won't be able to get away from the office. Check out the full article over at Engadget. Is this a step forward or a step backwards?

What do you think?

The innovation in this example comes not from the fact that Jet Blue is offering in-flight e-mail and instant-messaging, but in the airline and Yahoo! recognizing that even though the bandwidth they have available is not sufficient to support unrestricted web browsing, there is still something interesting that the partners can do. Hats off to Yahoo! for having the wisdom to identify a value add for their existing mail and IM users while also potentially growing their install base. Hats off to RIM for becoming the only handheld device delivering messages in-flight on Jet Blue, adding value for their platform subscribers.

There are a lot more interesting things that airlines could do in-flight, even with about the same amount of bandwidth. I would love to sit with the airlines and show them my vision for the greatest potential in-flight value add. Maybe Jet Blue is ready to listen.


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Tuesday, December 04, 2007

Retained Innovation

As an independent consultant, I try to talk to as many other fellow practitioners as my schedule allows to keep abreast of what others are experiencing and doing. What I have found in the area of billing clients is that there are a myriad of ways of receiving compensation for the work that we do. Everything from traditional hourly/daily/weekly to at-risk payment types like graduated rates, milestone payments, equity stakes, contingencies based on achieved savings, royalties, and even retainers.

Of all the different methods that I've seen, I think that royalties and savings contingencies make the most sense in revenue augmentation and cost reduction scenarios. Companies should be willing to reward those practioners that deliver real revenue increases and cost savings, and practioners should be willing to accept lower compensation if they don't.

But when it comes to looking at innovation projects and innovation process then I think that the retainer model is the best way to go. Innovation is about competitive advantage and in today's competitive environment, companies can't afford to wait around until their favorite practioner is available to fully engage, and at the same time they can't afford to go with whoever is available regardless of quality and fit.

I believe the retainer model works best for innovation projects and innovation process because the guidance is there when you need it. It can be as proactive or reactive as the needs of the client dictate, and it provides the continuity necessary to keep program improvements on track. The retainer model also allows the company to access their practioner a few hours at a time, something that would be unworkable for both sides if a new contract was needed each time.

The retainer model also can be quite useful to companies who would like to have a Chief Innovation Officer (a steward of the innovation process and culture for a company), but can't justify the overhead of a full-time resource.

But regardless of how a company chooses to resource their innovation capability, every company should have an innovation strategy, and that should include continuous re-evaluation and improvement using both inside and outside resources to preserve freshness and to introduce new thinking.

So what is your innovation strategy?


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Saturday, December 01, 2007

What Interchange are they Looking For?

I came across a couple of interesting articles on businessweek.com about relatively new payment solutions that people are looking at. The first article is about a company called National Payment Card that links your bank account to your drivers license or store loyalty card - creating a virtual debit card protected by a PIN. Transactions are processed as e-checks through the Automated Clearing House (ACH) bypassing costly interchange fees charged by Visa, Mastercard, and others for processing debit and credit card payments. In the areas where this is up and running, some consumers find this payment option quite handy (especially when coupled with a discount) and others avoid it out of fears of identify theft.

What do you think? Would you sign up for a solution like this?

The second article is about the GratisCard (which is now known as the RevolutionCard). The RevolutionCard is backed by Steve Case (founder of AOL) and ex-credit card industry players. The RevolutionCard processes payments over the Internet instead of over a dedicated payment network and is a PIN-protected credit card with no embossed account number or cardholder name. RevolutionCard hopes to lure merchants with lower interchange fees, and consumers with improved security and credit features. Other companies have tried to come late to the credit card game (think Discover Card), but without much success, so RevolutionCard faces a steep hill to climb.

Does the RevolutionCard have much of a chance?

The biggest challenge that these two new companies face is customer inertia. People typically pay in the manner they are most comfortable with or that will benefit them the most. Personally, I use a rewards card for everything I can (even small transactions), quite enjoy the free flights and hotel stays, and so would be loathe to use something else unless I thought it would benefit me even more. I carry three or four cards because there are always cases where one or more don't work for whatever reason.

So, while both of these companies probably see themselves as innovative, I see their developments as interesting but not innovative, and something that the credit card companies could copy if they were so inclined. What would be more innovative would be one card to rule them all (a true "smart" card). A card that was smart enough to be used as multiple cards, that allowed me to prioritize which one it should pretend to be first, which one to go to second if there were any communication or card status issues, and had the ability to automatically sense which card would give me the greatest rewards for the transaction of the moment. That would be a true innovation. And hey, if it happened to also be my drivers license, all the better.

What do you think?


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