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Strategies for a discontinuous future.












Saturday, November 19, 2005
 


Edge Competences: Plasticity

I don't have much time to blog today, but if you'd like some weekend reading, I strongly suggest you read this killer post my Michael P (again...nice one).

Now, I disagree with his take on what Joel Spolsky is saying almost absolutely - Joel's analysis is off. In fact, variable pricing is a great thing for media consumers (and producers; i discuss why here).

Michael's post is like a wrapup of recent developments in the growing plasticity of media - which is one of the edge competences that players should be developing, but instead, are getting disrupted by.

-- umair // 9:59 PM //


 


Yawn

Not to be harsh, but this is a quite pointless debate on Google Print. Read my research note for real insight.

-- umair // 8:13 PM //


 


Reflections on Equity Research

An interesting blog on Equity Research.

-- Mahashunyam // 7:09 PM //


 


R.I.P. - Peter Drucker

Trusting the teacher in the grey-flannel suit

B-schools around the world are mourning the loss of this intellectual giant. [email protected]'s tribute is here.

-- Mahashunyam // 8:04 AM //


Friday, November 18, 2005
 


Edge Competences and the Post-Network Economy

The fundamental economic shift taking place in the 21st century is the shift from cheap information to cheap coordination.

In the second half of the 20th century, thing got digitized, and then networked - the cost of information itself dropped discontinuously. This made the dominant strategy hyperspecialization - to leverage this cheap info by building core competences, which are essentially, scale economies in specialization.

Now, new technologies are making coordination discontinuously cheap - it's now increasingly possible to do things with that information, without the need to build the huge coordination mechanisms firms employ; like bosses, managers, meetings, roles, and performance assessments.

At it's heart, this is why Web 2.0 is important - it's about going beyond cheap information; about dropping the costs of coordination. This is the shift to a post-network economy; where what we do with the stuff on the network is more valuable than just being part of the network.

This is why, increasingly, competences at the edge are more valuable than at the core - they let you learn how to leverage cheap coordination, to generate new sources of value; rather than leveraging cheap information, to which returns are dropping.

MIT's $100 laptop is a nice example of another driver of this stuff - it will help drop the cost of information, and the cost of coordination (assuming it can plug into the 2.0sphere). Which is why incumbents across industries should be actively thinking about edge competences, as their core competences continue to get devalued.

-- umair // 3:36 AM //


 


Prices Make Markets

iTunes prices are going to get shaken up, it seems - with "multiple points" for different tracks.

This is a very good thing.

Why? It begins to make the music industry, well, obey the basic laws of economics.

As I argued a long time ago in a galaxy far away, one of the music industry's big problems is that prices transmit no information. This creates further incentives for consumers to buy insurance against the information asymmetry at the heart of the industry - file-sharing.

That is, the price mechanism itself has been a distortion in the music industry (which is amazing if you think about it). So prices will finally begin to reflect demand. Of course, the danger is that this will be used a strategic tool by the industry, just like radio playlists, which got gamed by payola. Let's hope not; they'd be shooting themselves in the foot (with a Plasma Autorifle.

-- umair // 3:00 AM //


 


Bubbles

Michael P has a great post about bubbles in both the short and long run. Highly recommended.

-- umair // 2:41 AM //


 


Media 2.0 @ 1996

Phil tracked down this killer article which talk about Media 2.0 in 96. Highly, highly recommended - it is an excellent (and illuminating, even today) read.

-- umair // 2:25 AM //


 


Politics of the Day

Is it just me, or is the right in America now something beyond radical - hyperradical; something like an absurd caricature of Big Brother meets Bozo the Clown?

Check this out:

"...Keep a sharp eye on fresh developments in both Canada and Cuba, two countries with rogue, corrupt and repressive regimes that don't know when to cut their losses and leave town."

Canada and Cuba? Last time I checked, my repub buddies in the States didn't think Canada was a "corrupt and repressive regime". Maybe a little too permissive, and with better looking women. But "repressive"?

I understand that people on the right pride themselves on faith, not "reality", but isn't this just a wee bit much for any sane human whose brains have not been reduced to the consistency of ketchup by countless hours of guys like James Dobson to believe? Oh, wait...

-- umair // 12:57 AM //


Thursday, November 17, 2005
 


Google + Riya

Yeah, I have heard the rumour too, a day or two back, I was pretty surprised (to say the least). I could understand <$5m for a nice tech, but it's the price that surprises me. If the rumour is accurate, $50m ish is an enormous sum for a play with zero beyond technology.

I think that tells us something quite interesting; the big guns are looking for cool ideas, but not finding anything that meets their criteria. When they do, they've got every reason to spend lots of $$$ - sitting on that much cash is not a great idea for long periods of time, especially when your expectations are being amplified by the market.

That, in itself, is a nice bit of evidence to back up the fact that they're increasingly behind the curve - I think there are plenty of cool plays around. Not a bubble, but certainly inflation...

You may also wanna check Peter Rip's blog - he backed and has posted a bit about Riya.

-- umair // 10:25 PM //


 


Bangalore Pot Hole - Repositry of pot holes in bangalore.

A clue from media 2.0 to media 1.0....

From an excellent post on India-Uncut.

-- Mahashunyam // 5:39 PM //


 


Research Note �
Edge Competences and Media 2.0: Newspapers Mini Case Study


There�s been a lot of attention focused recently on the plight of newspapers, in the face of falling circulation, and an exploded universe of competitors, both new entrants like startups, and lateral entrants like Google. But asking what decision-maker should do should do is to ask the wrong initial question.

Newspapers are canaries in the coal mine. The economic shift that is disrupting the structure of the media industry is deep and pervasive; within the next five years, it will touch all consumer-facing industries. What's happening to newspapers should serve as a warning signal to players across markets that the deep economics of consumer-facing businesses are undergoing radical change: change as fundamental as that which marked the shift from the industrial to the knowledge economy. To understand this change, let's define the problem the news market is facing.

The publishers, like the rest of the media industry, are facing a radical shift in industry economics; a structural disruption. Barriers to entry have been vaporized, as have switching costs. At the same time, the market power newspapers could exert over content creators and advertisers is eroding.

The fundamental reason is discontinuous drops in coordination costs, driving a micromedia explosion. Micromedia is driving ambient media consumption, bringing down iron curtains of distribution which kept media audiences segmented and advertising targeted. At the same time, the micromedia explosion has exploded the supply of content, forcing newspapers to compete for attention with entirely new kinds of media � blogs, podcasts, vlogs, machinima, and communities, to name just a few.

This is difficult industry in which to maintain profitability. But there is a relatively simple solution: to reshape industry economics, by leveraging new kinds of resources and competences.

What news execs need to do, then, is to not just adapt to a new set of industry economics, but to actively reshape them. How can they begin doing so?

Not by searching for new business models. The age-old models of advertising and subscriptions can � and are � generating strong revenues in the Media 2.0 industry. This point is intuitive; we only need to consider AdSense to understand why.

Newspaper publishers, fundamentally, must build and/or acquire new resources which can provide new sources of value creation. At the same time, they need to begin developing edge competences, to drive this value creation from those resources.

Doing so is straightforward � even paradoxically intuitive. News executives must invest in the new media value chain. When the value of old resources is exhausted, smart players shift investment to resources that can generate new value. Those that fail to do so will, as their competences and resources are devalued, see near-total margin erosion and defection.
What are the segments of this new value chain? As we've outlined, microplatforms allow prosumers to create personal media. Smart aggregators syndicate and distribute it. Reconstructors build individualized �casts of media for communities of connected consumers.

At the same time, to maximize value creation from these resources, news execs must focus on developing edge competences. Consider the core competences of traditional newspaper publishers � finding, writing, and checking stories, publishing, and selling ads.

Both of these core competences are getting � and will continue to get � increasingly devalued as value shifts away from core competences � information-based specialization � and to edge competences � coordination-based specialization.

That is, the costs of building such core competences, by acquiring information that drives learning and specialization gains, have largely been atomized; and so, the returns that flow from them must necessarily decline. For example, consider how frictionless the information necessary to specialize in publishing content and selling ads has become.

Instead, the newspaper industry should focus on building edge competences � leveraging coordination to drive new sources of specialization gains � in the same deep sets of organizational learning: finding, writing, and checking stories, and selling ads. How? Fundamentally, by making the resources involved in these activities liquid and plastic � leveraging cheap coordination to drive new sources of value creation from new resources in the emerging Media 2.0 value chain.

Consider a newspaper industry player who had invested along the new media value chain � in a microplatform, and a reconstructor; and who had also developed strong edge competences in making ads, publishing, and finding, writing, and checking stories plastic.

Such a player would be actively reshaping industry economics. By controlling microcontent, they would be exerting strong market power over buyers and suppliers. By being able to leverage new kinds of distribution � individualized �casts of microchunked content � they would be able to massively raise switching costs, as well as entry barriers. The net effect of such a player would be to capture much of the value that is shifting away from the core of the value chain, and towards the edge.

This is not a revolutionary proposition. It is simply recognizing the changing nature of media itself; recognizing that as discontinuously new technologies and changes in consumer preferences reshape industry economics, so execs must invest in new resources and develop new kinds of competences.

At the same time, what�s happening to the newspaper industry is the writing on the wall; a sign of things to come. The tectonic structural shifts that it is going through are going to affect all consumer-facing markets in the next five years.

This is because those structural shifts are driven by a fundamental change in the deep economics of those industries: that coordination has become discontinuously cheap. Cheap coordination is what drove the micromedia explosion to reshape the economics of the media industry; but it is not confined to markets like newspapers, radio, and television.

In fact, it is a structural shift in the way we produce and consume goods � one with implications for players across consumer-facing industries. Edge competences dominate the economics of cheap coordination, by letting players leverage it � instead of getting hypercommoditized and disrupted by it.

You can find more info about Bubblegen�s Media 2.0 & Micromedia practice here, more info about Bubblegen�s Edge Competences practice here, or find contact details here.

-- umair // 4:10 AM //


 


More Base

Michael has a very interesting take on Base, which puts things in a very different perspective to mine - highly recommended.

-- umair // 4:08 AM //


 


Link of the Day

Essential reading - no comment, just read if you're bored with the usual.

-- umair // 4:00 AM //


Wednesday, November 16, 2005
 


This Post is Also Not About G**gle

Not to go echo chamber style on you, but Fred has a point when he says Google is (increasingly) lame.

Consider things this way: there is a huge opportunity to leverage peer production to do disruptive things...and the best Goog can do throw the doors open to what's essentially just a gigantic, minimally structured database, pretty transparently designed to build inventory for the same old b-model?

That is lame. Really lame.

-- umair // 10:11 PM //


 


This Post Is Not About G**gle

Google Base is live.

I think this is very interesting. It gives us the first hints of Google's coming strategy decay.

There's only one question that matters, strategically: is Base the AOL-style walled garden of the 00s?

That is, are returns to info owned by Google going to be lower than decentralized info?

I think, probably, yes. That depends on my assumptions; which are that communities and markets like Last.fm and TIOTI are the future of efficient attention allocation - and that Google can't play that game.

What that means is that Google keeps indexing the world's information, albeit at increasingly costly factor prices; while superior returns begin flowing to reconstructors and smart aggregators. This scenario devalues centralized mechanisms/walled gardens, like Base - because they're not part of the attention ecosystem; they're part of GoogleWorld (we really do need a name for all the info Google owns).

In the short run, it will certainly be a nice incremental revenue stream (even if it's new name is likely gonna be Google Pr0n).

But I think what it does do is begin to point to a growing vital point competitors can strike, if they'd stop being so inept - I mean, Shoposphere has its intent in the right place, but the model is economically and strategically backwards; I'd tell you why, but I've discussed how to help Yahoo more than enough for free (and I'm sure most of you can figure out the basic flaw in the model).

Then there's Amazon, eBay, VCs, and media - all attention economy players, who seem totally intent on missing the tectonic shifts right under their feet, which are eroding all their returns.

Another, marginally related point - it also points to the uncooling of Google. I mean, Base? Can you get more Orwellian, lame, sinister, connected to all the wrong stuff?

EG: Al Qaeda means "the Base".

The only name I can think of in recent memory that's more corporate is "XBox".

Man, I am so falling off the GYM bandwagon!!

-- umair // 7:18 AM //


 


Bush is Jesus Mugabe, Special Macropocalypse Edition

So, remember last week, when it was curiously noted that oil industry execs weren't being sworn in for their statements? Presumably, so they could avoid perjury charges?

Well, now we know why!

"...A White House document shows that executives from big oil companies met with Vice President Cheney's energy task force in 2001 -- something long suspected by environmentalists but denied as recently as last week by industry officials testifying before Congress."

Let me skip the rhetorical questions (How is it possible for these drooling idiots to be such transparent tinpot dictators? Is this not just a little too much like a Satanic episode of Yes Minister meets Nascar?) and get straight to the point.

Like, what else could it possibly take to clue you in that Dubya, Dick, and Condi want to help their agenda and their buddies at your expense?

You've seen: a vicious terrorist attack (horrible), a war on the wrong country (amazing), the devastation of an American city (unbelievable), systemic corruption at the top (disgusting), the total mismanagement of the country's money, rendering the US a future pauper (almost inconceivable) and now, almost every day, more and more evidence of the kind of cronyism this country hasn't seen since 1929 (stupendous; congratulations should surely be in order).

Oh, wait, I figured it out.

The rest of us may want to note that cronyism like this kills economies dead.

-- umair // 5:23 AM //


Tuesday, November 15, 2005
 


How Not To <3 Media 2.0

Let me tie up some lines of thinking about recent developments.

What are Media 1.0 players saying to 2.0, viz the recent moves to distribute TV programmes over the www? Basically: incremental revenue streams for old business models, meet new distribution channel.

Now, I share Michael's enthusiasm, to an extent. It's a nice first step. But...

I think it's also a killer example of strategy decay; a fatally flawed approach which digs 1.0 players deeper into their competence traps.

The point is that the shift to Media 2.0 - media in an EoIP world - fundamentally inverts mass media economics. It disrupts the structure of the media industry.

Why? Because attention becomes scarce at the margin. Attention used to be like water for the media industry - cheap, plentiful, and available pretty much ubiquitously. Now, it's like oil - expensive, scarce, and subject to more and more severe shocks.

Put another way, barriers to entry have fallen; the market power incumbents could once exert is eroding; and the universe of possible substitutes, which was once nicely walled off by iron curtains of distribution, just exploded. The Berlin Wall just fell, because you can (and do) consume all your media at once.

What that means is that the www is emphatically not just another distribution channel. It requires new ways of thinking, new strategies, and new business models. Ones which are focused on allocating scarce attention - not redistributing old episodes of Welcome Back Kotter (for God's sake).

All of which brings me back to TIOTI. Why is TIOTI cool? Well, because it threatens to be the first video reconstructor. It's a lot like Last.fm, which is one of the few real audio reconstructors - it can allocate your attention eficiently by giving you individualized 'casts.

This is where 1.0 players should be focusing. This is where smart venture money should be flowing. It is a huge (huge) gap in the market, which is only narrowly met by guys like (the excellent) Memeorandum.

Think about Revver for a sec. Now, I think Revver is cool. But do you think the market size is bigger for a simple microplatform like Revver, or for a reconstructor like TIOTI? Which one can exert more market power over suppliers? Which one makes media plastic and liquid? Which one controls and can extract rents from increasingly scarce attention resources?

Pretty clearly, I think the answer is for reconstructors. Now, interestingly, the real money is in vertically integrated models - a Revver plus a TIOTI, if you like. But that requires thinking about media and technology - not just either/or.

Now if I could get reruns of Manimal or Automan, then I'd be telling you how this was teh disrutipon.

-- umair // 7:42 AM //


 


The Great Disruptive Web 2.0 Search

So much for that. I haven't found any (that I can tell you about, anyways).

Honestly, the closest so far is TIOTI (scroll down). And that's not saying much, considering all they've got is four screenshots and a cool name!!!

-- umair // 7:29 AM //


 


G**gle Print is Not a Library

OK. I don't wanna jump off the GYM meme, but I keep seeing this anti-argument: "but...G**gle Print is just a library".

Guys, there is a simple reason Google Print is nothing at all like a library - it's an enterprise, a company, a firm. Its only purpose is to make $$$ (sad, I know).

That means that it has every incentive to behave very differently than a library - to think strategically about how to maximize it's returns.

-- umair // 7:17 AM //


 


Next Big Things - Stop the Tagging Edition

Just when you're convinced that the next 5 trillion plays you see are gonna be exactly the same thing (help me stop the tagging, won't you?), along comes something so retardedly cool, it's sure to be more than a little disruptive.

I think TIOTI is awesome, in ways that YouTube (etc) can never be (read: the social, efficient attention allocation, blah, BLAH, you know the score).

Why is it that all the cool stuff happens when I'm not in London?

Interestingly, TIOTI does something else the Valley's not - it's targeting a place in the media value chain. Imagine that.

I know, these days, in the Valley being a "media company" is something that's met with more than a little disdain. But guys, just like software, more often than not, it takes an ecosystem to help make new ventures successful. And like it or not, most new 2.0 plays are very squarely media plays - just like Google and Yahoo are.

-- umair // 6:56 AM //


Monday, November 14, 2005
 


Out of Commission

Dodgy curry = mild food poisoning = me out of commission.

Had a ton of emails to send this weekend, haven't been able to - sorry if you're someone I was supposed to reply to. Hopefully, by tomorrow (or, yell at me in comments below).

-- umair // 9:10 AM //


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