Saturday, January 28, 2006

The importance of design

Chris Yeh has a good post on design as the compelling differentiator, which brings home the incredible transformation of the technology labor market in the GME:

A friend of mine is building a Web 2.0-type Web site. In the old days, this would have taken an entire team to build and operate. He's doing it on his own. In his spare time.

He designed the service, created a spec, and put it out to bid on Rentacoder...48 hours later, he's received a ton of bids, including some as low as $20. And that is not a misprint.

Of course, the $20 bidders are students in low-wage countries, but several reputable firms bid only slightly more, like $120.

Friday, January 27, 2006

Don't do anything new, just do it better

There is no shortage of new ideas in the GME. Most ideas have already been had. But there is a shortage of good execution. Just because an idea has been out there doesn't mean its been executed properly.

Google is not new. Google is AltaVista done right.

Starbucks was not new. Starbucks was McDonald's done right for the leisured professional class.

People love to have new ideas. People inside small companies have new ideas all the time. But as Michael Porter said, "Strategy is knowing what not to do.

Why Wal-Mart?

Some of our friends have asked us why we chose Wal-Mart as a namesake of the GME. We chose it because Wal-Mart has an amazing IT infrastructure and uses real-time sales data to manage logistics, pricing, and ordering from suppliers. In this sense, Wal-Mart has been focused on IAI and RTR since before Google was born. (We need to verify this, but we believe we once heard that when Amazon was scaling up its logistics and warehouses, it hired a bunch of techies from Wal-Mart).

Of course, Wal-Mart has a lot of baggage -- it is a "category killer" that has negative overall effects on local economies, it pays low wages and minimal benefits, and it is hell on its suppliers.

But lest you think that Wal-Mart is a dominating monster, remember:
  • Wal-Mart operates on ultra-thin margins
  • Wal-Mart controls less than 10% of retail shopping
  • Wal-Mart has essentially zero brand loyalty from its customers. If they can get a better deal, they will go elsewhere.


Consider how long the following activities took in 1994:
  • Finding and ordering a book that was not on the shelf at your local bookstore
  • Buying an airline ticket
  • Getting you bank account balance
  • Writing and sending a letter to a friend
  • Finding and combing through a company's 10-K
  • Ordering from a catalog

You can now do all of those from your desk, without talking to anyone.

Are your customers still dealing with you essentially the way the did in 1994?

How much longer will that last?

All the rest is commentary

This is not directly related to the GME, but it is one consequence of it. I'm constantly amazed by how B2B sales people and service providers routinely create situations that they would not stand for as consumers.

It's been said better by people far holier than us, but in the hypercompetitive GME business environment, the golden rule really applies.

And as ye would that men should do to you, do ye also to them likewise." Luke 6:31

"What is hateful to you, do not to your fellow man. This is the law: all the rest is commentary." Talmud, Shabbat 31a.

Ever give a presentation that you wouldn't want to sit through? Ever been unable to answer a customer question that you would have expected to have answered if you were the customer? Ever ask a customer to jump through hoops you wouldn't jump through?

Thursday, January 26, 2006

Information barriers and bad service

In the pre-GME days, companies benefitted from their customers' lack of access to alternative providers. Access was determined not only by physical space but by lack of knowledge of who alternative providers might be and how to contact them. But the web has greatly lowered that barrier. As a result, it is much easier for disgruntled customers to find alternative providers.

Try asking a college student how to buy a book, get something designed or printed, buy a car, or choose a bank.

Real Time Reaction in Real Life

What does Real Time Reaction mean outside of data-mining and logistics (the areas in which Wal-Mart does very well)?

It means behaving like an entrepreneur all the time.

It means not having a "big company" mentality that things are "someone else's responsibility."

Here's a recent example of real-time reaction. A friend of mine is a practice manager in a small consulting firm. His colleague, manager of one of the other practices, is desperately understaffed (and, consequently, personally overworked). My friend came across a job applicant that wasn't right for his practice, but was a possible fit for his colleague's. His colleague agreed that the candidate was strong, but instead of calling the candidate directly to see in a five minute call if there was a potential fit, he referred the candidate to the HR person. The HR person, not having a sense of urgency about it, let it sit for a few days, and the colleague is no closer to being fully staffed.

Decide what's important, and do it in real time.

Context is King

Yesterday I had a conversation with Caleb Clauset, Senior Systems Engineer at Typefi Systems.

He brought up a concept that points to a possible value of the GME idea in thinking about real world business and social problems. Among many other things, Caleb's background includes training as an artist and communication designer.

I don't think that's an accident.

His notion, with which I strongly agree, is that in web 1.0 the mantra was the "content was king". But in web 2.0 the more appropriate mantra is that "context is king".

Because of IAI, information is fast becoming a commodity. The inclusion of massive armies of content creators and the opening of searchable databases presents a clear and present threat to any business or public model based on the protection of content creation as it's core value.

Also because of IAI, the context in which that information is presented to human beings becomes the new source of value creation. And in the GME, only true value creation can be sustainably monetized.

Business, health, education and government have been limited by old technologies as they worked to harness the power of context to augment meaning. Business leaders are masters of using the available tech. Starbucks is my present favorite for understanding the importance of "context". Google, of course, is the present master on the web, with Amazon close behind. WalMart, Costco, Staples, Apple, Trader Joe's and the corner coffee shop on my block, all get it and are doing very well.

The words they use are usually "brand", or "focusing on the customer experience" or "keeping the customer happy" any of a number of other 20th century words that all are trying to encapsulate the same phenomenon.

Now GME has created an environment in which new sets of accessible communication technologies appear every day. It has also made the successful use of those tools more than a "nice to have". Now it's become a matter of growth and perhaps even survival.

Professionally trained and talented communication designers, no matter what their medium of choice, have a long, well defined practice of putting "context" at the center of their solutions. If the problem is communicating, the best design solution has always been the artifact that communicates most elegantly and efficiently. The best book designers, advertising designers, and others have always found the ways to leverage the power of the viewer's context to maximize the effectiveness of the artifact they produce.

There is a lot more to say about applying this notion to problems in education, health, government and business, but that will keep for another day.

At this point, I only want to suggest the GME might be a useful construct to visualize the big picture economic context. It's another way to describe the phenomenon that has been called globalization, The problem with "globalization" is that it has been so laden with pro and con, that it's losing it's usefulness as an analytic concept. Perhaps GME will lead to more productive results.

So... GME is a shorthand for the big picture economic context. But contrary to what some might believe, the economic context, while very important, is not the really important part of the story. The last mile of communication happens in the real world, not the world of capital flows, balance of payments and ROI.

In the real world, people live in the contexts of their communities, their jobs, their families and – most importantly in the developed areas of the world – the context of their personal time.

To add another level of complexity, human beings move through time and space within overlapping groups - most often groups of 10, 30 or 150. It's those groups that are true carriers of culture.

The literature of communication research indicates that meaning is created from artifacts by the human interaction in these groups.

In the real world of human communities, ignoring the implications of GME leads to bad policy decisions in the public sector. In the world of business - either small, regional, national or global, ignoring the implications of GME leads to wasted marketing dollars and the inability to imagine the new sustainable business models. Denial of the new realities also makes it almost impossible to innovate and to leverage the value of emerging innovations.

Monday, January 23, 2006

The "Social Contract"

In yesterday's post there is a reference to the the social contract for newspapers. Just wanted to add one more thought. The social contract for newspapers is not that "newspapers derive revenue from community advertising".

That's the business model.

The social contract has something to do with delivering information so that citizens can make informed decisions in their everyday lives and entertain them with useful and interesting facts, not spin, that enrich their daily experience. Maybe part of the problem for newspapers is that they've been blinded by an outmoded business model, that focuses on the advertiser instead of the customer. Traditional business models work for a long time, and then they don't.

Following a 20th century business model in the GME is probably not sustainable. Global business now finds itself in the same situation as small business. They have to have to make money by honestly serving their customers.

In a world of IAI, they will win only by being better, faster, cheaper than the competition. Whether that competition comes from small business or the internet.

Welcome to the real world.

Sunday, January 22, 2006

No room for Indirect Value in the GME

New York Magazine has a profile of Craigslist that is obsessed with how it is stealing classified ad revenue that "belongs" to newspapers. Newspaper people are kind of hysterical about it:
"There has been a social contract for hundreds of years -- news-gathering organizations derive revenue from community advertising. Well, Craigslist is changing that equation. That symbiotic relationship is over. Who's going to step forward to support news-gathering?"

Social contracts are for the government, not for businesses. Any business whose revenue is not tied directly to the value given, especially those whose position is based on control of information distribution (TV Networks, Newspapers) should take a long hard look at their business models. In the GME, there is no room for indirect value.