Apple Enters The Education Market

According to published reports in the FT, Podcast pedagogy divides opinion at US universities, Apple is turning it's attention to education delivery systems.

Rebecca Knight reports that

For Kathryn Bowser, a 19-year-old biology student at Drexel University in Philadelphia, the best time to sit through a lecture on organic chemistry happens to be when she is riding the exercise bike at the gym.

The right product to the right person at the right time. It's the oldest rule about making money in the marketplace.

The core value of higher education is not the lecture series. Rather it's the continuing real world conversation among students, faculty and others in the community and the rich networks that grow in the college experience.

If the lecture can be delivered faster, better, and cheaper using new technology, it's not surprising that an innovative company is figuring out how to do it. And not surprisingly, there will be many Universities that will be frightened at the idea of reliquishing "control" of their "content". As were music companies, and book publishers.

But the relentless logic of the GME redefines value creation and disaggregates value packages that worked well in the last century, but have become less valuable in this one.

A central concept of the GME is that the monetizable value is timeliness and effectiveness. Any entreprise that can save time and increase effectiveness at the appropriate cost will find a sustainable business model. It just may not be the one they presently have.

If educational content can be delivered in less time, and be available when the student (consumer) is most ready to absorb it a business model will probably emerge that will allow that to happen.

Can Wal-Mart Become the Good Guys?

In yesterday's Financial Times there is a report entitled Wal-Mart Picks a Shade of Green

Jonathan Birchell reports,

"What if we used our size and resource to make this country and this earth an even better place for all of us?" asked Mr Scott, as he announced targets for reducing greenhouse gas emissions and cutting waste. He also committed the company to working with its suppliers to promote good environmental practices.

"That speech was the single most groundbreaking speech from the CEO of a major US company on the environment that I have ever heard," says oneleading US environmental activist.

This company has "customer-first" in it's DNA. In the 20th century "low prices everyday" was enough. A single focus and flawless execution wins.

When Wal-Mart starts changing it's tune, and presumably it's operational focus, something big is going on.

Google Innovates At the Bottom With Ad Sales

We will develop and expand this later, but one of the impacts of the GME is the potential that it provides to "innovate at the bottom of the pyramid" (as Clay Christensen terms it).

On of the most innovative things that Google did was to remove the transaction costs from buying advertising. By allow AdWords purchasing online with credit cards, and enabling people to see what kind of ad inventory was for sale and how much it costs in real time (IAI and RTR!), Google opened up the ad market to two new classes of customers:

1. People with small budgets who could not be profitably served through a traditional, salesman-based ad-sales process
2. (more importantly) people without the time or inclination to deal with an ad salesman.

Google allowed ad-buying in real time. No proposals, no call backs, no negotiation.

Does what you sell need the sales overhead you have? How much could you expand your market if you streamlined your sales process?

Values, Market Valuation and The Logic of Business

In today's FT it is reported that Google shares drop more than 16%.

It seems that Google made the grievous error of meeting their predicted profit goals, increasing their revenue 97% in the quarter to $1.29bn. But they did not exceed their projections, and fell from a 109% growth rate in the previous quarter.

They were rewarded by the stock market by a loss of $20 billion in their market cap.

On the face of it it sure seems there is something out of whack with stock market valuations.

Perhaps it's why George Reyes, CFO is quoted in the same article, as saying:

Google has broken with Wall Street tradition since it went public by refusing to issue predicitions of what its quarterly earnings are likely to be, arguing that this sort guidance encourages companies to take a short-term approach to managing their businesses.

In another part of the paper, the Lex Column, does make an important point,

Google’s earnings miss, coupled with last week’s decision to bow to Chinese censorship, have broken its sheen of immortality. Expect more volatility as investors get used to the idea that Google can, in fact, do wrong.

While I take issue with describing a predicted result as an "earnings miss", Lex does highlight that even the most massive enterprises are not immune from the discipline of the GME.

The only sustainable advantage is the relationship with the customer, and with IAI, that is an advantage that is put to the test every day. The "brand", which supplies the context of meaning in which the service/product is delivered, is critical to the value created for the customer. If the customer doesn't like you, the perceived value you give is threatened. And there are lots of competitors eager for a chance to do better.

The other important issue is that Google is not always good, and that Wal-Mart is not only bad. They are both merely business organizations driven by business incentives and trying to make sustainable profits. You can ask for no more or less.

Social Values and Google

John Gapper, in a column in yesterdays FT Google is putting its own freedoms at risk in China points out that

Making money by making the world a better place is nice work if you can get it. Google's founders are so convinced they combine the two that they made "Don't be evil" a founding principle. But what happens when business interests clash with ethics? That is occurring in China not only to Google, but to Microsoft and Yahoo and it ought to make Silicon Valley's finest worried.

Mr. Gapper goes on to talk about the conflicts between the power of Yahoo, Google, and Microsoft and the privacy and political issues that are inevitably emerging. Google seems to be the only search engine that resisted the US government's request for data, but all of them made arrangements with the Chinese government to gain access to the Chinese market.

He concludes,

...In these circumstances, the internet giants ought to tread very carefully. The benefits of an open internet, free from clumsy regulation and inquisitive authorities, have been huge. But they need not last and will be curtailed if the public loses faith in Google and others. China is a vast market but what does it profit an internet company if it gains the whole world and loses its soul?

The implication is that if Google "does lose it's soul" in China, they are at risk of losing their public and threatening some of the value they have created.

In the GME, if even Google is vulnerable to whether customers have faith in them , what might that mean for mere mortal companies?

IAI, RTR and Recruiting/Retention

A lot of thoughts that we've had around IAI and RTR is in the area of competition or customer acquisition/service. But an equally important impact, we believe, will be in recruiting and retention.

As the post-Google generation enters the workforce, they will have less patience for inaccessible information and slow bureaucratic processes than previous generations. Companies that can't meet their expectations internally may find that their highest value employees (and employees focused on RTR are nearly by definition highest value) are frustrated and difficult to retain.

Social Values and Wal-Mart

Wal-Mart has not been known for best practices in sustainable business practices. Born within the context of 20th century business models, they have ruthlessly maximzed their values within the incentives of those models.

It's at least plausible that the DNA of the company coupled with the fact that Wal-Mart focuses on serving customers at the bottom of the pyramid, bodes well - both for the company's continued success in the GME and the growth of widespread recognition of the benefits derived from using appropriate values to inform strategic business decisions.

In this Sunday's Financial Times it is reported that

Wal-Mart has committed itself to taking most of the fish it sells in North America from environmentally sound sources, in its latest initiative to improve its much criticised record on environmental and social issues.

This is a testament to the power of the GME and the incentives for expensive innovation that are implicit when business is focused on the needs of customers at the bottom of the pyramid.

The arguably most powerful company in the world is crtically dependent for its success on their customers' opinion of them. Since the North American market is quickly becoming merely an important niche market in terms of further growth, the issue of sustainable supply chains moves from strictly a "feel good" necessity to a "must have" business necessity.

Of course, the public pressure generated over the last three or four years has been the stick to get their attention. But if Lee Scott, et al, did not see addressing this issue as a critical business problem, they would not undertake the massive, and very troublesome, task of setting standards for a supply chain that includes 60,000 suppliers dispersed all over the globe.

The values required for success in the GME are, in important respects, the same values that can lead to addressing the most serious global problems.

But success is not a sure thing.

The disruptions created by new technologies often lead to economic reorganization that can create dangerous turbulence as civil society and government readjusts to new realites. It's certainly one way to think about the strains associated with the advent of industrialism at the turn of the last century.

The faster that business, civil society and government adjust, the less painful the transition. As the incentives of business success become increasingly aligned with the values needed for global success, the transition might be smoother.

Context is King and the Value of Design

The importance of design is a corollary of the idea of "context is king" .

IAI implies accessible information and technology. In 20th century business models, it's the lack of access, reflected in the high cost of getting it, that was an essential component of the value created by information and technology. RTR was only possible in a well managed large enterprise.

But in the GME, that basis for value creation is being replaced by the ability to execute in real time. In the communications industry, successful execution means traversing the "last mile". As shown by the history of the cable industy, getting the message from the street to the living room was the hard problem. The harder the problem, the greater the value created.

But the hard problem is a constantly moving target.

After billions of invested dollars, the tech for the last mile is now pretty much solved in the developed communites of the world. While that's still a relatively small market in global terms, it's significant. At any rate, the hard problem is shifting again - getting the message from the living room into a person's life.

That's the context for the next actionable hard problem.

iPods showed what happens when you solve the last mile problem. Apple's profits and success come from monetizing the value created by a design solution for a hard and actionable problem.

Creating value in the context of the last mile has always been the job of the great designers. Recognizing and monetizing that value creation is the job of great enterprises.

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.

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.

Relativity

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?

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.

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.

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.