Thursday, April 29, 2010

Buildings = Lack of Ideas

If an institution begins a prestige building program (new headquarters, new church building) then it’s a warning sign that they’ve run out of ideas.  In the 21st century the game is not to herd more sheep into your pen, it’s to get more connection and influence over the sheep out in the field.  The organizational returns aren’t in more bricks and mortar, they’re in ideas and relationships with customers, partners and contractors ‘out there’.  So if you’re spending all your time with architects and interior decorators you’re missing the biggest plays in today’s market.  By this standard the most idea free places in America are its colleges and universities.  About right, don’t you think?

Buy ideas, short building programs.

Monday, April 26, 2010

Never Sell Technology Short

Autoweek Magazine points out that current cars produce 98.5% less pollution while barreling down the Freeway than their predecessors did sitting still with their engines turned off.

The operating 2010 Mustang is 98.5 percent cleaner than the 1970 with its engine shut off, according to Ed Kulick, an emissions regulatory planner in Ford’s vehicle Environmental Engineering Department.
The ’10 Mustang has demand-based fuel injection with no return lines, hydrocarbon impermeable fluorocarbon gaskets and evaporative emissions canisters that eliminate gasoline vapor seepage, even during refueling. The ’70 Mustang emitted the equivalent of 3.7 grams of hydrocarbon (HC) per mile sitting still, according to Kulick. The ’10 is certified at 0.055 gram of HC per mile when cruising the interstate at 70 mph.
The 1970 ’Stang had Detroit’s first rudimentary apparatus to control exhaust emissions It met federal standards of 4.3 grams of HC, 39.6 grams of carbon monoxide (CO) and 4.1 grams of oxides of nitrogen (NOx) per mile. The 2010 generates no more than 0.055 gram HC, 2.1 grams of CO and 0.070 gram of NOx, for reductions of 98.7 percent, 94.7 percent and 98.3 percent, respectively.

Some will interpret this as a magnificent achievement of regulation, others of unfettered capitalism.  The news will be used to both justify global warming regulation and to reject it.  Regardless, the fact remains that the human mind's capacity to imagine the future is almost unlimited and over ever shortening timescales has the capacity to stun us with its inventiveness.  So as you make decisions, it's important to recognize just how fast the technology event horizon is creeping up on you while you're out on the Openwater.

Monday, April 12, 2010

On specialization

I went with my good friend Morris Shank to a 'with it' church service late Saturday afternoon.  In my lexicon a 'with it' service is one with modern music (lots of rock - we're white, after all) and a strong multi-media message - speaking leavened by video and audio clips in a convincing post-modern montage.  I've been lecturing the pastors at my (large, evangelical) church that they need to update their messaging style and I think I'm frustrating them.  As I talk to the main 'preacher' about limiting messaging to 9 minute segments followed by music (the better to leverage the standard modern American's attention span) and the need to integrate visual, aural and social stimuli to maximize retention and learning, he throws his hands up and says:  "but I'm just a theologian, I'm not a director or script writer".

And therein lies the problem for knowledge based businesses.  Imagine how lousy movies would be if the stars were forced to write, direct and perform in their own films.  For every Woody Allen or Charlie Chaplin, there are hundreds of lesser talents that can only do one thing well.  Yet most industries that sell knowledge services (I would put churches in that category) still rely on a single person:  the partner, the pastor, the guru to develop all of the ideas and content, direct the show and star in it.  This is clearly nuts.

With the proliferation of media and tools, the ability to create visually and aurally rich multi-media experiences that deliver far more impact and value has exploded, but our organizations have lagged.  With the new media environment the idea is a concept that can be taken and replicated in many different ways for different audiences.  And once created, a high impact presentation of a given concept can be repeated literally millions of times.  This has several compelling implications for knowledge based businesses:

First:  You can't afford to reinvent the wheel.  The key to communicating and syndicating your ideas is reusable content that can be leveraged via multiple channels.  In Preacher terms:  quit writing the sermons from scratch, figure out how to replicate the best of what others have done.  Then focus your time adding your unique idea or twist, your 'special sauce' to the mix.  You don't have time to think about everything from first principles, stand on other's shoulder's to get to the goal.

Second:  Repurpose the same concepts and message to multiple audiences.  An idea whose time has come has incredible impact.  The best preachers of the "word of the new" figure out how to get the message across in multiple ways:  the book , the video, the seminars, the speeches, the celebrity appearances, the tracts, the entertaining shorts and so on.  The value of the idea is enormous only if it reaches the audiences that are most likely to benefit from it - so create the idea once and deploy it everywhere.

Third:  The power of the network is key.  It is not very often that brilliant ideas are spread through mass channel marketing.  Usually there is a sophistication and complexity to ideas the make them difficult to sell in 30 second spots.  Ideas, knowledge, and know-how are spread by disciples - people who have first been exposed and then have sought out the vision of the creator of the knowledge.  Wise knowledge based businesses figure out how to create what Seth Godin calls "tribes" of people who share a commitment to the faith or concept or lifestyle represented by the idea creator.

Fourth, and this is key:  Specialize - engage people who create ideas and messages and keep them hard at that.  Find others who are good at communicating the message or choreographing the interplay between message, media and audience.  Like the entertainment industry does, give these directors, producers and technicians the power to craft a unified vision and message.  It is very seldom that the idea creator (aka the 'screen' or 'sermon' writer) really understands how to deliver their idea in a way to change the perspectives of thousands or even millions of people.

So, if you want to sell your ideas, focus on what is unique and borrow the rest, find as many different mechanisms to communicate the idea to the world, emphasizing those things that are leveragable and repeatable.  And look for disciples, people who will share your passion.  Finally LET GO - it would be very unusual if you had all the skills to deliver your knowledge in a high impact way - find brilliant professionals and let them do their jobs.  And if you let them, you might, just might do something that could change the world.

Changing the world:  now that's a goal worth pursuing out on the Openwater.

Sunday, April 11, 2010

Hoeing your row

The enterprise software solution world has simplified' over the past ten years.  This is because the major players, Oracle and to a lesser extent, SAP have bought everything.  The problem with this is that they really haven't imposed much 'order' on the market, they've just imported the chaos.  See my post the Rocket Science of Soup.  It is hard for clients to buy from and implement what they have on offer, indeed it's hard for their sales people to sell it.  It's so damned complicated.  And the complication stings at so many levels:  the solutions have huge and proliferating configuration options, the complexity of integration between solutions is growing apace, and the applications the software can be applied to have risen.  It's all a bit intimidating.

So what's the answer?  Services. Clients have and are increasingly moving away from trying to optimize and understand the proliferating complexity of their enterprise software solutions.  Instead, they are turning towards vendors that deliver a comprehensive solution to a specific business problem: a full training, workflow and web service solution.  They deliver outcomes, not code.  And outcomes are much easier to understand and account for than the infinite optionality of the enterprise software world.  Appregatta is a company founded to bring this service model to market.

So while in the past sofware has been king, in the future, technology enabled services that embed training, workflow and code into an outcome will increasingly win the day.  Mind you this isn't necessarily the same thing as outsourcing or offshoring, it's delivering a completely executed service solution that client employees can deliver. If they're not careful, firms that specialize in software implementation will find their dancecards distressingly barren in this brave new world.

It turns out that finding a service row and hoeing it is an increasingly viable strategy used by the fastest yachts racing out on the Openwater.

10 Reasons why the recovery is real

We don't normally talk about general economic activity on this blog but the recession has been so deep and so long that it's important to highlight any good news that can build investor or consumer confidence.  Mark Perry of the University of Michigan gives ten reasons why the economic recovery is real here.

Saturday, April 10, 2010

The power of institutional integrity

One of the most under-appreciated aspects of successful organizations is institutional integrity.  I define institutional integrity as the extent to which an organization makes and consistently keeps a valuable commitment to its customers or clients.  The more painful the commitment and the longer it's kept, the more institutional integrity.  Walmart is a company with enormous amounts of institutional integrity.  Sam Walton set out in 1962 to create a store that would bring big city prices to small town America.  And Mr. Walton's original commitment to "Every Day Low Prices" indeed, the lowest regularly offered prices anywhere has driven the company's actions and success ever since.

A friend of mine was the top real estate executive at a (soon to be bankrupt) specialty retailer.  He tells of going to the annual retail industry real estate conference.  Like the other retail execs, he took a room at the luxury hotel nearest where the conference was being held.  His two counterparts from the richest retailer in world history doubled up at a discount motel.  It is this commitment to a valid goal:  low prices for things working people need that has been the key to Walmart's success.  And what success they've had.  Click here to see a time series of the company's spread in just the US.  From Flowing Data.

Watching the growth of Walmart – now with 100% more Sam’s Club
Exert every ounce of energy giving customers what THEY want, rather than what YOU want over a long enough period of time and you'll find that the people will reward you with far more success than you could have ever dreamed of.  Just ask Sam Walton, fishing in the afterlife, out on the Openwater.

Thursday, April 8, 2010

The Levy Flight - Interesting addition to the rocket science of soup

Check out this diagram from Seth Godin:
It represents the motion of an animal through space as it forages.  Note how the animal stays in one location for quite a while, eating whatever is there.  As soon as the local supply is exhausted it then sets out in a random direction for quite some distance, stops and then begins foraging again.  Social researchers have demonstrated that this is what consumers do:  they find a brand or restaurant or website that they like, they forage closely at it, returning again and again.  This is why increasing product complexity works for a while - the new flavors or features keep the customer coming back to the same feeding ground.

No matter how interesting and complex you make things, eventually the customer gets all the value that they want or just gets bored with your offer and they set out to find something new.  And complexity at that point makes it harder for them to stop at a new solution or brand - the complexity makes it harder to take advantage of the features that make the product valuable.

This explains why complexity is a rational short term tactic with potentially disastrous long term implications.

Something to think about next time you're fishing for whales out on the Openwater.

Wednesday, April 7, 2010

The rocket science of scale

While needless complexity can often complicate the branded solution's problems (see my post The rocket science of soup), it turns out that the onrush of technology can offer some knowledge based service providers real advantages over their less prestigious 'white label' competitors.  I had the privilege of listening to Al Kent - a Senior Partner at PricewaterhouseCoopers - at lunch today.  He talked about how the "Big 4" accounting firms are increasingly using technology to automate and offshore many of the more tedious activities of the accounting profession.

This is interesting because historically the Big 4,6,8 have been substantially more expensive than their less branded (if not White label then grey label) competitors - this is because the big boys needed far more infrastructure and risk management to serve global companies than the regionals needed to serve simpler mid-market businesses.  This led to a mass exodus towards 'selectivity' or the abandonment of the mid-market by the Big 4.  In Mr. Kent's remarks I noted the glimmer of a shift in competitive dynamics.  By utilizing their global reach, scale and access to technology, the Big 4 appear to be narrowing the price gap between themselves and their smaller competitors, making the decision to go with the Brand Name easier for the upper end of the mid-market.

It will be interesting to see how the 'speed boats' respond to this challenge from the 'ocean liners' out on the Openwater.

The rocket science of soup

One of my consulting colleagues, Dave Holloman has written a fascinating post on his group blog:  The Global Rail.  He uses the wild proliferation of Campbell Soup SKUs to illustrate the dilemma that branded suppliers face.  As innovation slows down and categories are commodified, those players with the power to control what goes on the shelf - retailers in CPG, integrators in tech, are motivated to shift to lower cost commodity or "white label" solutions.  These 'store brands' take shelf space that was previously owned by branded competitors.  The branded competitors respond by adding more and more options to differentiate themselves from the plain vanilla distributor's offer and justify their price premium.  David points out that this rush to complexity has real costs, both in the delivery/supply chain as well as for the buyer who must invest more time and energy in differentiating between all of the competing choices.

And if the competing choices don't really increase customer value, then there is a net loss to the system.

As they say:  read the whole thing.

 Fighting commodification with valueless complexity, another way to sink your rowboat out on the Openwater.

How to have the biggest launch ever

I like Seth Godin's work.  His perspective on how building brands and creating value in the wired world has always been a step ahead of his peers.  He writes a very perceptive post on why Apple's I-Pad launch was perhaps the biggest single truly new product launch in history.  As Instapundit would say:  Read the whole thing.

Where have all the jobs gone?

Carpe Diem has posted graphs of manufacturing employment and agricultural employment as a percent of total employment in the United States (see below) what is striking is how much the two graphs look alike.  The manufacturing employment trend has followed almost exactly the agricultural employment trend, only later and at a somewhat more accelerated pace.

This is the consequence of constant technological change and productivity growth.  For our society to get wealthier each worker must produce more output each year.  And since there is only a finite number of physical 'things' we can eat, wear or even possess (our bulging closets and basements testify to that), inevitably productivity will outstrip demand and employment will fall.

So where have all the workers gone?  There has been a temporary surge of employment in technology or 'knowledge' work but that too is falling at an even faster rate than manufacturing.  Notwithstanding all of the state and government 'high tech' quality jobs programs, tech employment will not soak up the workers.  It is simply too easily automated.  Instead employment is surging two categories:  'personal services' and 'government and government subsidized businesses'.

Personal services is a huge category that includes everything from hair dressing to lawn mowing to resort management and restaurants.  As we get more affluent we are able to pay more for the sorts of things that only the rich could get in the past.  Indeed we pay each other to get these personal services.  Research comparing German married women to their American counterparts found that even though many more American wives worked full time outside of the home, they had more leisure time because they could rely on efficient, inexpensive personal services from each other.  In a real sense we've followed David Ricardo's law of comparative advantage to it's logical end:  those who like to cook, cook, those who like to account for taxes, do the taxes.

It is likely that many of the jobs of the future will remain in this category, only becoming more inventive and sophisticated over time.  Virginia Postrel's "The Substance of Style" is an important book to read in this regard.  A significant part of the entrepenurial effort of the 21st century is likely to go into enabling people to get the services that they want at higher quality, lower price and greater level of sophistication and customization.

More later on the other major growth area - government and government subsidized industries.

Something to think about while waiting for you Mochalatte with a shot of expresso out on the Openwater.

Friday, April 2, 2010

What is social media for?

Predicting future demand for new products, for one thing.  Here's an article that explains how Twitter can be used as a predictor of film attendance.  If it can predict demand for movie tickets than it stands to reason that it can predict demand for products where the supplier must invest real money in real inventory or infrastructure.  This is big people, really big.  The entrepreneurs who can leverage the hive to drive predictive business intelligence are people who will be buying professional sports franchises in five years.