Learning from Kodak’s strategic errors

BusinessWeek ran an interesting story on business model innovation this week called “Mistakes Made On The Road To Innovation“. The article focuses on Kodak which reinvented itself yet can’t get ahead in the new markets.

Among other things, the article talks about how the speed at which new models take over markets is getting harder to manage:

“At its peak, Kodak was an icon of American technology innovation. Now it’s fighting to recover from a tech revolution that is strangling its core business. Kodak was late to recognize the problem, slow to react, and then went down the wrong innovation path.

Over time, all innovation gets commoditized. In this regard, business models are not different than products and services. So business model innovation must be a perpetual quest for renewal.

Look at how Dell, (DELL ) long the PC industry’s heavyweight champ, has suddenly become wobbly in the knees. It revolutionized the PC business by assembling computers to order for customers while eliminating the middleman. Now competitors have caught up with Dell’s efficiencies and are even undercutting its prices.”

What struck me in particular is the notion that business models must iterate the way new technologies iterate. Creativity should not be isolated as a product development or an engineering problem. Creativity must be part of a company’s approach to winning in the market.

If you think about this in terms of online media, it seems rather obvious. The banner innovation enabled the page view model to take off. Content targeting enabled the search market to explode. The success of those business models put parameters around the types of engineering problems to solve and opened lots of product creativity.

But business models beget business models and new revenue streams will continue to replace old ones. It can be frightening when the model you invested in becomes a commodity down the line and the company then has to decide how to redistribute its resources if it wants to grow again.

In the Kodak example, they didn’t catch on to the commoditization of digital cameras fast enough and now sit in a market of margin wars, fighting for positioning on increasingly crowded shelves that provide weaker and weaker yields. Without a deeper relationship with the photographer, Kodak is almost meaningless and the technologies they sell are totally replaceable.

The article adds that Apple’s music business is instructive. In iPod-land the connection between the hardware, software, media and revenue are all intertwined. And the more time and money a consumer invests in any one of those pieces, the harder it is for that person to end their relationship with Apple and all the related services in that market.

Kodak’s focused approach on doing one thing well is actually failing them as more innovative business models squeeze them out of markets.

Similarly, page view inventory is losing its value in the online media market. Ad inventory on the home page at mymediaproperty.com used to command a nice premium because it was unique and captured a targetable demographic. Most advertisers are smart enough to recognize the value of independent media brands to lend credibility to their marketing messages and willingly spend lots of money to support those brands. But, at the same time, most online media brands are struggling to communicate their customers’ marketing messages in meaningful ways.

Many advertisers are instead creating their own online brands rather than waiting for media companies to figure out that page views are an aging marketing platform.

I don’t have the answer to the diminishing returns on page views, but I think I know what the market could look like eventually…

Take the AllCrazyStyle mashup example. This site can tell me where to see music performances in my area that I might like by combining my listening behavior at last.fm and my saved locations at upcoming.org.

Where is the link to purchase tickets to each performance? Where is the link to buy the most recent album for each artist? AllCrazyStyle should be able to pull ad content from an ad network that knows what I’m most likely to click on, just like they can pull my listening behavior and location data.

They should be able to display ad content in whatever way makes the most sense in the user experience. I want those links to be there so that I don’t have to go hunting for them, and I want them intergated into the experience.

And like Apple, the more time and attention I invest into either last.fm or upcoming.org, the harder it is for me to end my relationship with any of them and all of the ancillary businesses associated with them.

Regardless of whether or not this concept works or makes any sense, the idea that innovation is a technical problem is short-sighted. Bad business models (or no model at all) perpetuate incomplete approaches to innovation and weak ideas.

When you’re battling in a commoditized market, you need to step back and steer the ship in another direction. Otherwise, you’re going to get sucked deeper and deeper into protecting assets with weaker values against heavier and heavier competition.

Like Kodak, you’ll fall behind all the innovators taking advantage of all the time you spend in meetings trying to figure out how to be more innovative.

How to offer simple RSS badges for your users

The key breakthrough that made it possible for YouTube to ride on MySpace’s heavy traffic coattails into its current state as a mass media service is the concept of widgets, often called badges in related contexts. Although offering widgets or badges may seem like a far off idea for most web site owners to internalize yet, there are a few tools that can make this a snap to offer your users if you’re ready for it.

(I’ll assume here that you already know what widgets and badges are. If you don’t, I’ve been tagging articles addressing the topic of widgets that may be helpful.)

In the case of YouTube, they allowed users to post the YouTube video player to any web page with a simple copy and paste operation. Since most web site owners are dealing mostly with text, the equvilent would likely be a feed of RSS content that people could display on a web page. It would clearly be best to allow your users to display a feed of the things they are contributing to your web site, but if you don’t have user-contributed data to give back to your users it’s still worth trying to offer this functionality using your own content to see what happens.

Here’s a really cool tool I recently found that made it possible for me to offer badges to users on the FlipBait web site. It’s an open source service called Feed2JS, and it appears to be developed by Alan Levine. It requires another open source service called MagpieRSS to operate, but MagpieRSS takes maybe 10 minutes at most to download and install.

After you download and install these scripts you can point to a feed you want to display nicely and get the code back that you can include on any web site to show that feed.

In other words, you now have a badge platform to offer your uses.

I tried this out on the FlipBait web site, and it worked out of the gate. In fact, you can now see on my blog sidebar here the posts I’ve submitted to FlipBait. Each user on the site has access to his badge via his profile page. Now everyone can take their contributions with them wherever their “Internet startup news” identity gets expressed.

It couldn’t have been much easier to setup either. I’m hoping, actually, that the Pligg team incorporates something like this into the source code.

There are also some nice formatting capabilites in Feed2JS that would make people happy, I’m sure. But that adds some complexity I’ll address at a later date. The important thing is to push out a feature like this, watch for uptake, and then evolve it.

I’d be interested to know if other people have tried any other similar solutions or used tools from some of the recent startups in this space and what their experiences have been. Please comment or blog about it if you’ve found another way to accomplish this without having to write the code yourself.

A human-powered relevance engine for Internet startup news

Here’s a fun experiment in crowdsourcing. I’ve been getting overwhelmed by all the startup news coming out of the many sources tracking the interesting ideas and new companies hunting for Internet gold. Many of these companies are really smart. Many are just, well, gold diggers.

And with so many ways to track new and interesting companies, I’ve lost the ability to identify the difference between companies that are actually attacking a problem that matters and companies that are combining buzzwords in hopes of getting funding or getting acquired or both.

There must be a way to harness the collective insight of people who are close to these companies or the ideas they embody to shed light on what’s what. Maybe there’s a way to do that using Pligg.

While shaking my head in a moment of disappointment and a little bit of jealousy at all the new dotcom millionaires/billionaires, the word “flipbait” crossed my mind. I looked to see if the domain was available, and sure enough it was. So, I grabbed the domain, installed Pligg and there it is.

It should be obvious, but the idea is to let people post news of new Internet startups and let the community decide if something is important or not. If I’m not the only one thinking about this, then I can imagine it becoming a really useful resource for gaining insight into the barage of headlines filling up my feed reader each day.

And if it doesn’t work, I’ll share whatever insight I can glean into why the concept fails. There will hopefully at least be some lessons in this experiment for publishers looking to leverage crowdsourcing in their media mix.

The excellent buzz in the MySpace office

Last night I visited my brother Mitch who works at MySpace in the London office in soho. I was quickly reminded how removed I am from pop culture as people rattled off band names and industry gossip that was completely meaningless to me.

The youthful energy and excitement swirling through the office felt very much like most of my time at The Industry Standard. I recall the sense that we were doing something that mattered and the occasional vertigo you get when a company grows that fast. It’s a strange mix of confidence and fear that motivates you to push harder and harder.

The joke running through the office yesterday was the Kelly Likes Shoes video which blasted out of one cube and then another and then another followed by guffaws and imitations. Erik Gibb forwarded that link to me weeks ago, so for just a moment I felt like I had just a sliver of an edge of dot com cool over them.

But moments later I was informed that Britney divorced Kevin followed by the news that the Democrats took Congress and that Rumsfeld was booted…all news to me at that moment…and I realized that the advanced form of pop culture ADD built into their DNA moved too fast for me, and my self-perceived coolness evaporated as quickly as it arrived.

Decision-making through stories rather than data

John Hagel’s post the other day included a great little nugget:

“If executives need lots of data before they feel comfortable making a decision, chances are they will not act until it is way too late. Don’t get me wrong, data are extremely valuable. It’s just that, if we insist on too much data, we will often miss significant changes on the horizon. This isn’t just about analysis paralysis; it’s much more insidious…

Data not only draw us into the past, they also draw us into the core because the core is so well documented and analyzed relative to various edges where data are at best fragmentary and often contradictory. To avoid being blind-sided, we need to pay equal attention to stories and train ourselves to detect patterns in the stories, even if the data supporting the stories remains fragmentary. Stories are generally our first indicators that something really interesting is about to happen; something that data will only reveal to us in full force much, much later.”

As any researcher knows, the data will tell you just about whatever story you want to hear. More important than messages in the data is what’s happening right now that is not yet measurable. That in combination with stories we learn over time gives us insight into the possible answers to the questions that we might not even understand how to ask.

Here are a few questions Internet business historians might ask today:

  • The banner ad made web pages profit centers and disrupted offline advertising markets. Are web services disrupting the web page model, and, if so, who made the transition to web page advertising successfully? Who failed? Why?
  • The media business rewards companies that out-niche the niche. How should a company react when it knows it’s being challenged by a smaller, more nimble, more focused media property?
  • The operational efficiencies enabled by the Internet created several manufacturing and distribution giants. Are there quiet giants or even not so quiet giants on the horizon that have both found and are leveraging new kinds of efficiencies?
  • There are insightful leaders in any market who consistently make smart decisions. Given a particular market condition, who has proven to be successsful and what can we learn from their recent decisions?

Also implicit in Hagel’s statements is the idea of intuition. Trust in your own intuition is a key leadership skill that a lot of people are missing. Never mistake fearlessness for intuitive confidence. Fearlessness can go a long way fast…including off the cliff.