Andrew Hargadon

Thinking about networks

 

A great post by my brother, Steve Hargadon, describes the challenges facing anyone trying to create, or re-create, a new business: Long-handled Spoons. The story, excerpted here, goes as follows:

A Rabbi asks to see Heaven and Hell. His wish is granted and he's taken to a room where everyone is seated at a long dinner table with delicious food in front of them.  However, everyone there is starving and emaciated.  This is because, the Rabbi discovers, while each has a long spoon strapped to his or her wrist, the spoon is so long they cannot pick up the food and actually put it in their mouths. They are utterly frustrated and bitterly unhappy. The Rabbi is told that this is Hell. 

He is then taken to another room with everyone seated at an identical long table with delicious food, and each individual also has a long spoon strapped to his or her wrist.  These people, however, are well-fed, for they have learned that their spoons are perfectly designed to allow them to feed each other, which they are doing quite naturally.  They are joyous, happy, and contented.  The Rabbi is told that this is Heaven.

Steve uses it to discuss web 2.0 and the difficulties that the traditional business mindset has in wrapping itself around true collaboration. In a more obtuse way, I posted earlier about my fear that Apple saw the need to connect our digital networks, but is falling short of enabling a truly open experience because of their insistence on being the hub of a network that will, ultimately, have no hub.  Our posts seem to be two views of the same problem (what would you expect from two brothers?). 

The lack of collaboration is not new but the internet has made the problem all the more obvious and acute.  While some people hold on to their proprietary offerings, collaborators are growing like weeds around them.  This is all obvious, but what I find fascinating, and what the lesson of the long spoon is getting at, brings us down from the level of technological trends, web2.0 evangelism, and social networks and into the challenge of changing the way people think and act.

How do people conceive of new ventures that are networked at their core?  Meaning new businesses that are originally designed for, and evolve around, collaboration as the primary way in which value is created and delivered.  Forget the long-tail--this is the challenge of the long spoon.

As importantly, how do people living in organizations designed to profit from proprietary products and services allow aspects of their business to experiment with and evolve into more open and collaborative business models?  Can large organizations change the way they treat suppliers, competitors, and potential partners fast enough to evolve with emerging markets?  I've know companies that can't get an NDA through legal in under 6 weeks--how are they going to explore and experiment with partnering in these conditions?

Apple and the great confusion

As we approach the beginning of the new year--measured by Apple fanatics with the January MacWorld--it's worth reflecting on Apple's recent past and rapidly-approaching future because it offers a glimpse into deep changes underway.


For the past decade, Apple has served as our visionary guide to the future of personal computing coal.  Apple's vision took shape in 2001, when Steve Jobs introduced the concept of Apple as the digital hub of our computing experience.  It was a good insight then, made brilliant by the actual products and services Apple created to seamlessly connect us with our new digital cameras, DVDs, and music.  We were at the dawn of a new digital world, and Apple made sense of (and money off) it better than anyone else.

Now, 10,000 photos and 3,500 songs later, we're at a similarly significant inflection point. This MacWorld, Apple shows they either get the next new world or they don't. 

It all began, as Tim Bajarin wrote in Personal Computer World (Home on the digital range),

At Macworld in early 2001, Apple chief executive, Steve Jobs, used his keynote address to introduce what has become a most important concept in the world of personal computers. He unveiled a diverse set of multimedia applications such as Itunes, Imovie, Idvd and Iphoto and told thousands of the Apple faithful that the Mac would become the digital server of their homes - their creative nerve centre.

People with digital tools such as cameras, MP3 players, digital movie cameras and PDAs would use the new software to manage their digital photos, music, movies and data. Later that year, Apple even launched its Ipod MP3 player and later tied it to the Itunes online music store. This made Apple a leader in innovative use of 'digital lifestyle' technology.

I remember where I was that day--do you?  No matter, because everyone felt the impact of Apple's vision and products.  The iPod was released later that year and Macintosh computer sales grew along with its success.  The digital world changed completely and the Mac (and, begrudgingly, the PC) did indeed become our hub.  But some very deep but subtle shifts have taken place since then.

The Great Confusion

While Macintosh (more accurately OS X) has served faithfully as our digital hub over the past decade, we as digital consumers have changed.  We're the hub now.  Our digital and analog lives have continued to confuse--a term Neal Stephenson reminds wonderfully in his Baroque Cycle trilogy means also the process of mingling two previously distinct alloys.  It may be confusing for those experiencing the mingling in the moment but, ultimately, it results in a single and coherent reality.

In other words, I'm no longer outside the digital world, occasionally choosing to look in on it.  That distinction is gone. Confused.

My experience of news is confused: I read the morning papers scanning for the items I have not already seen online; when I find interesting articles, I go online to send them to someone (or myself); maybe I blog about them; and I learn as much by what others send me.

Music?  Confused again.  iTunes carries my own music collection, but Pandora's gentle introduction of artists I like but had never heard of before has become as much a part of my Sunday morning ritual as bagels and the New York Times.  And Shazam (thank you, iPhone) allows me to engage with the music streaming around me wherever I go.

Even traditional computing activities--if you're willing to concede that email and word-processing are now old school--are confused.  I get email on my desktop at the office and at home, on my iPhone and Blackberry, and in an emergency, on any other internet device I need thanks to googlemail and (more clumsily) mobileme. If anything, I miss old days when email was a different world. 

The experience of word processing--what others once called writing--is equally confused. I abandoned MS Word for its complexity and insularity, moving to googledocs for its simplicity, availability (whether home, office, or hotel) and, increasingly, collaborative capabilities. This last distinction speaks volumes on the difference between digital and connected. MS Office documents requires constant vigilance to keep versions and edits distinct and separate. But writing is no longer solitary.  Drafts move between authors instantaneously, and between iterations via twitters, blog posts, and essays before becoming published pieces (if at all).

So many other digital and analog experiences have confused as well. Photos moved from digital archives to online and shared instantly with distant cousins. Family calendars are online and updated at the dinner table. Not to mention casual conversation, which email, texting, and social networking has confused completely with real contact--just look at any corporate meeting. You get the point. 

And that means my experience of the digital world no longer comes through a single screen--whether a desktop, laptop, or phone.  It comes through more screens than I can count and, in the next few years, than I could imagine. It's nothing new to say we're immersed now in the digital world.

Doors in a meadow

What's new is that there is a titanic struggle underway for control of the hub of that digital world. We've come so far since Apple declared themselves the hub that the idea of them as the hub--and us as a spoke connecting, through the PC, to all things digital--no longer fits.

Eight years ago Apple showed us how computer companies could embrace and enrich our digital experiences. We listened. We bought digital cameras, iPods, laptops, smart phones, Chumbies, Sonos, eeePCs, and everything else under the sun.  And, in the process of engaging with them, we evolved.

Anyone who wants to control my access to the digital world today is building a door in the middle of a meadow and telling me I need to use it. Apple's iPhone has brought me some wonderful apps (including Pandora, Sonos, and Shazam) but it has yet to allow me access to google calendar or googledocs--despite Apple's insistence that insular iCal and .mac are enough. That's not a trade-off I'm willing to make.  It's too easy to see the rest of the meadow, to see where I want to go, and to want to use the shortest path to get there.

For years before Apple anointed themselves hub in 2001, we saw the digital revolution coming.  The same is true today with the great confusion.  It's anyone's guess how Apple, or Google, or anyone else will make money when we want access to everything through everything. But that future's already here, and companies that don't recognize it are going to keep building doors we'd rather not use.

So Apple now sits with us, on the verge of the next major transition.  Are they going to announce a radical change in strategy?  I hope so, since we did well by them the last time. But that may be asking too much of a company where lightning has already struck twice.  Stay tuned.

   

Gotta love anomic social networks

BusinessWeek has just added another article to the pile of observations on the increasing popularity of social network sites: "Social Networks: Execs use them too". Anyone who knows me knows I like social networks. The current trends in social network technologies, however, are disturbing.

Namely, networking technologies are seeking to automate the acquisition and use of one's broad-ranging social relationships in the same ways that organizations have automated the acquisition and use of the local relationships needed to get one's work done.

There is an irony that, by providing the product--a new network tie--these technologies are bypassing the need to personally build and use your own existing social network.

In other words, instead of calling your friends to see who might know someone who knows someone who can give you an trusted opinion of someone else, you log into LinkedIn, avoid all those messy and time-consuming phone calls and immediately jump to the right "connection." And, by doing so, you let wither all of the actual relationships you built that were based on actual, mindful, and interactive contact with others.

Here's an analogy: between commuting, email, and television, we spend a lot of time sitting. Then we collectively head to the gym for an hour of intense standing, climbing, riding or whatever. For most of us, organizational life has taken away much of our need to actually stand or walk around (unless we're scrambling to get a PO signed late on a Friday).

In the same way, organizational life has taken away much of our need to "network"--to actually meet new people, engage with them, form productive and reciprocal relationships, and maintain those relationships over time and distance. Instead, most people drop into pre-established organizational networks ("this person will tell you what to do; that person will do what you tell them"). We then bemoan the static nature of our social networks and go to "networking events" where for an hour, like on a stairmaster, we push ourselves to hand out business cards and make untenable lunch plans.

Our fascination with networking technologies reflects two increasingly apparent problems with organizational life. First, the loss of our own abilities to build and mantain meaningful and mutually productive relationships with others. And second, like the unrealistic body images that drive too many middle-aged men and women to the gym every night (you too can have abs of steel and two kids under 5), executives have unrealistic network images that suggest you too can have the contact list of a Hollywood producer.

In an ironic twist--our increasing emphasis on social networks may come from the decreasing nutritional content of our own social networks. To me, the whole thing smacks of anomie and, thanks to Wikipedia, I can wax learned on the subject without truly understanding what I'm saying:

The nineteenth century French pioneer sociologist Durkheim borrowed the word [anomie] from the french philosopher Jean-Marie Guyau and used it in his book Suicide (1897), outlining the causes of suicide to describe a condition or malaise in individuals, characterized by an absence or diminution of standards or values (referred to as normlessness), and an associated feeling of alienation and purposelessness. He believed that anomie is common when the surrounding society has undergone significant changes in its economic fortunes, whether for good or for worse and, more generally, when there is a significant discrepancy between the ideological theories and values commonly professed and what was actually achievable in everyday life.

Anomie essentially represents the lack of meaningful social relationships that connect individuals to their surrounding community. The term was picked up by Robert K. Merton:

Robert King Merton also adopted the idea of anomie to develop Strain Theory, defining it as the discrepancy between common social goals and the legitimate means to attain those goals. In other words, an individual suffering from anomie would strive to attain the common goals of a specific society yet would not be able to reach these goals legitimately because of the structural limitations in society. As a result the individual would exhibit deviant behavior.

Through the miracle of modern technology, we can embrace social networking software that simultaneously increases our connections and decreases their meaning and value. We are perfecting the anomic social network.

Life in the Long Tail

Not to belabor the point, but WSJ had an interesting story about life in the "long tail" (Famous, Online) in describing several small bands and their use of the Internet to generate and tap a following without the traditional scaffolding provided by the established record labels. In my last post on this, I mentioned the risk to established producers of low-cost and lower-expectation competitors:

For established companies, selling one thing is bad business. For the guy producing an album in his bedroom, selling one thing is good business. And soon, according to the Long Tail, big companies will be competing with millions of these smaller producers, who would each be quite happy with an extremely infinitesimal piece of the pie.

Elizabeth Holmes writes about several such "amateur bands" as the duo, The Scene Aesthetic, who had "2.3 million visitors and more than 124,000 'friends'" on MySpace. Here are some interesting numbers describing their career...

• Using an amateur booking agent to book a national tour


• Promoting their tour on MySpace


• Booking every night in July and August (at pizza parlors and teen centers)


• Gettting up to 200 people a night


• Making about $600/gig (plus t-shirt sales)


• Sleeping on fan floors when they can't afford hotel rooms

Granted, this is not living large, but then again, there's an authenticity to it that reminds me of the Beatles' early days in Liverpool and Hamburg. Not that The Scene Aesthetic is the next Beatles, but that such a life can be pretty good when your cash needs and aspirations are aligned.

Is this the Future?

Will big companies, like big record labels, increasingly face competition from many small firms who have low capital requirements and less aspirations for corporate expansion? Yes. But will it cause a problem? Only for those companies who refuse to acquire or in other ways partner with these smaller firms. Though even these companies will find partnering less profitable than it once was--as they're buying proven commodities.

That's because what the long tail provides is a fertile space for small bands, brands, and business to establish a niche and grow to the point of proving they found an unaddressed need. No corporate fat-cat will be able to pretend their house brands are better simply because they control the only access to the market.

The Scene Aesthetic is not alone--there are thousands of such bands living online, hosting their own pages, posting their own songs promoting their own gigs for little or no cost. And this long tail has its own long tail: PureVolume, a song-posting site, says of the 300,000 bands posting songs, only 2% have more than 5,000 plays.

The long tail is a work-around for the relatively inefficient filter that is BigCo's ability to spot and acquire hot new businesses. Eventually, good bands will rise to the surface, unaided by talent scouts and undeniably desired by fans, the same way local bands like the Beatles and the Stones and so many others emerged in the late 1950s playing local clubs (before producers started replicating the formula).

AS this model increasingly applies to other markets, we may be facing a potentially great Cambrian experiment in business evolution.

McDonalds with a purpose.

Govindappa Venkataswamy, an opthalmologist, passed away July 7th. He's not an American icon, but could (and should) be for his entrepreneurial ways. The WSJ just began a weekly column honoring the passing of prominent business figures, and Dr. V's passing is an especially nice way to inaugurate the column.

Dr. V Started the Aravind Eye Care System with an 11-bed clinic in 1976, and has since grew it into a five-hospital system. The Aravind system provides affordable surgery for the masses--quite literally--and now impoverished cataract patients can have their eyesight restored for about $40--and if that's too much, for free. It also proved that there was a way to make money at the bottom of the pyramid; the free are paid out of the profits of paying patients.

What makes the Aravind system interesting to innovation is the origin of its success:

He was inspired, Aravind says, by the assembly-line model of McDonald's founder Roy Kroc -- learned during a visit to Hamburger University in Oak Brook, Ill. ... "Can't we do what McDonald's and Burger King have done in the United States?"

Sound familiar? In 1910, when Ford's engineers came back from studying the assembly lines of the Chicago meatpacking plants (first publicized in Upton Sinclair's 1906 book, The Jungle), one of his chief engineers said "If they can kill pigs that way, we can build cars that way." From food to cars to food to the operating rooms of Tamil Nadu:

The assembly-line approach is most evident in the operating room, where each surgeon works two tables, one for the patient having surgery, the other for a patient being prepped. In the OR, doctors use state-of-the-art equipment such as operating microscopes that can swivel between tables. Surgeons typically work 12-hour days, and the fastest can perform up to 100 surgeries in a day. The average is 2,000 surgeries annually per surgeon -- nearly 10 times the Indian national average. Despite the crowding and speed, complication rates are vanishingly low, the system says.

What if the best ideas of modern economies were, with care, put to better use? As Dr V said, " Intelligence and capability are not enough. There must be the joy of doing something beautiful."

A grain of salt for the long tail...

Guy Kawasaki offers a good counterbalance to the hype surrounding (or soon to surround) Chris Anderson's new book, The Long Tail. The idea of the Long Tail is that, in a single market, the combined size of many niche products can be as big as from a single (or relatively few) mass-market products. Anderson's original idea stemmed from comparing the sales of pop hits and artists to niche songs and singers on iTunes and Amazon. Of course, this was also how General Motors ate Henry Ford's lunch in the 1920s, by introducing multiple makes and models against the mass market-driven Model T.

The threat: Big companies are caught between a rock and a hard place. On the mass market side, Walmart and others are squeezing their margins to nothing. On the other end, smaller companies are increasingly stealing away niche chunks of their more profitable, lower volume products.

The promise: Companies that master the long tail will see their revenues and share grow where those that can't will watch theirs wither.

The grain of salt: The long tail may hold vast riches in many markets but, as Guy points out, before a company can exploit the long tail, they (and their market) must meet a serious set of requirements...read his post for these.

However, I think there is one area where the Long Tail still may hold promise for big companies: The back catalog. The hundreds, if not thousands, of SKUs that companies have maintained if only to avoid the trouble of formally killing them off. These are the countless products dating back decades which someone, somewhere still needs or wants.

It may be difficult for a company to find, contract for, or develop new products to build themselves a brand-spanking new long tail. But the ideas behind the long tail may still enable companies to find new value in their back catalogs in the same way that eBay has enabled so many of us to find new value in our attics and garages.

The trick will be finding those customers you had neglected before--the mom & pop shops, the weekend users, the 40-year old virgins, who still want whatever you first sold them 20 years ago.

Finally, and unrelated to the rest of the post, Guy utters a classic line:

"Everyone knows that the innovator’s dilemma is to find a tipping point in order to cross the chasm."

Sums up management thinking in the 1990s.

The return of the Long Tail

Two very nice posts take up the story of Budweiser's "Long Tail Libations" (a perfect name, to say the least, for generating buzz these days). Chris Anderson's post picked up on another post from the Brookstone Beer Bulletin (which in traditional blogosphere fashion is picking up on an earlier Chris Anderson post).

Anheuser-Busch has launched a new wine & spirits subsidiary, aptly naming it "Long Tail Libations" because its charter is to develop and launch many new and relatively unique (read small) brands that would not see the light of day in a company otherwise focused on a handful of national brands.

The cool idea in this string of posts is that the long tail of local beer was there before the mass market began dominating with a brands backed by major advertising. Sound familiar? The major beer brands were born in the 1950s--or reborn from previously local brands--and grew to prominence on the back of newly national advertising, distribution networks, and refrigeration.

In essence, we are now entering the long tail's second coming. Thanks to even more sophisticated national distribution, we can live in California and drink Boston's favorite micro-brewed beers. There is a story here that goes beyond the "Long Tail," and involves how "what the long tail is doing to consumers" is doing to markets and the nature of products and services. That one's for another post.

In any case, Bud's problems are the same problems as most major brands--how can you build an organization capable of exploring the long tail, which is either where the next major brands are going to be, where all the sales growth is going to come from, where the earnings growth is going to come from, or all three?

The downside of open innovation

There's been a lot of writing lately about the valuable role that a firm's customers (and others) can play in generating innovations. Chevrolet tried this recently, and found out what happens when you ignore a large part of your (potential) customers and then, finally, give them a voice in your innovation process. Autoblog just posted a very interesting set of videos created by "users" for GM:

As part of a creative new ad campaign for the new Tahoe, General Motors has teamed up with Donald Trump's 'The Apprentice' franchise to create a website that allows prospectives to make their own commercials online. The website allows readers to select backgrounds, video shots, and input text in an attempt to win prizes ranging from a Jackson Hole Getaway to a trip to the Major League Baseball All-Star Game.

Some of the videos created can be seen here...for as long as GM doesn't notice them. At which point, we'll see where they turn up on the web. one two three

The iPod Ecosystem

The NYT (The iPod Ecosystem) has an interesting description of the "ecosystem" surrounding the iPod:

An entire ecosystem has emerged around the music player, introduced by Apple in October 2001. Other manufacturers had produced MP3 players earlier. But the simple design of the iPod, plus Apple's iTunes store, quickly helped Apple to dominate the market. And that simple design — some might even call it bland — encouraged people to personalize the machine.

Then numbers are quite impressive:

Apple sold 32 million iPods, or one every second. But for every $3 spent on an iPod, at least $1 is spent on an accessory, estimates Steve Baker, an analyst for the NPD Group, a research firm. That works out to three or four additional purchases per iPod.

Call me an academic, but here's why I prefer the language of networks to ecosystems. Ecosystems infer evolutionary (and relatively unintelligent) design while networks are, in most cases, intelligently, or at least intentionally, designed. Jobs and Co. have done a remarkable job designing the iPod network. Granted, Apple should be able to by now, having failed to build effective networks around so many of their previous products--from the original Macintosh to the Newton to the failed clones market. Nevertheless, they have succeeded brilliantly here--by focusing first on the consumer experience but then, second, on the entire set of related products and services that bring value to that experience:

That obviously makes accessory makers happy. It thrills retailers, whose profit margin on the accessories is much higher than on an iPod. And it delights Apple because the racks of add-ons made just for the iPod — 2,000 different items at last count — send a strong statement to consumers that the Apple player is far cooler than a Creative or Toshiba player, for which there are few accessories.

So far, Apple has managed to limit their greed this time and, in the process, get a smaller slice of what grew to a large pie. However, it's not too late for them to revert back to their old ways.

Some creations, like Mickey Mouse for Disney or Barbie dolls for Mattel, created an enormous market for accessories, but most of those items, like the Mickey Mouse watch or the Barbie Dream House, were licensed or made by the same company that created the original product. In contrast, Apple has encouraged a free-for-all, and its own share of the accessories market remains small...That will change. Apple is aware of the power of this market and is getting more active. Indeed, at the recent Macworld conference, Apple demonstrated that it wanted more of this lucrative field. It made a splash with an attachment, the $50 Radio Remote, that plays FM radio through the iPod.

I can't help but marvel how, in building this network, Apple could share the growth while never losing sight of the strategic high ground--those aspects of the entire network that would provide profitability and defensibility. That takes intelligent design. Let's hope Apple can stay that way.

One more small step...

Google has taken one more small step forward, and gave us a glimpse into a giant leap for Internet-kind. video.google.com is a site for users to upload short videos which Google converts to flash and offers up for everyone. One of my favorites took a stunt we used to play back in the design loft with old soda bottles, corks, and bike pumps and turned it into almost a blood sport: water bottle jet pack. Also check out the clips from amateur rappers from across the world (e.g., Curry and Rice Girl)--which shows as well as Friedman could that the world is indeed flat. All the world's a stage--or maybe more like a infinite-ring circus.
Consider the value of building your own stage and letting your community (users, friends, what have you) provide the content...