ideasarehere

April 28, 2011

New Problems for Old Economies

Filed under: business,creativity,internet,marketing — Erik Dobberkau @ 00:04

In the last post I mentioned that our scarcest resource today is time, and ended on the question why so few people successfully solve the problem of helping us find what we want.

The problem companies with an industrial background now are facing is this is not a repetitive process, something you can manufacture cheaply and sell for a lot. It’s a process which requires you to care about one single topic more than everyone else so you become the go-to person (or company), and you have to accept that you probably can’t repeat this in another area, because you have to sift ever more, so your own time gets ever more scarce as well. But you only have to have a following in one area of demand to have enough leverage to monetize on it.

So here is the wrap-up of the whole axiom:

  • New users take the standard when they joined a (technical) movement for granted.
  • Continuous technical improvement combined with a continuous intake of new users creates an erosion cycle of the perceived quality of service.
  • With more content available, unobtrusive, personalized recommendations play a larger role than new content.
  • These recommendations can only be effictively mirrored in highly complex algorithms or better be done by a real person, someone who cares about the topic.
  • This care or curatorship creates credibility, credibility leads to a following, a following creates leverage, and ultimately leverage creates revenue.

    • April 25, 2011

    New Rules

    Filed under: business,creativity,internet,marketing,media — Erik Dobberkau @ 16:24

    More than ten years into it, formerly major players still haven’t figured out how the Web works and what they can do, especially because they’re asking the wrong questions. The question is not “How can I re-establish the old system, when I had the power, in this new medium and keep it at the same level for a long time to come to make as much money as possible with processes that have been working for me in the last 50 years?” Asking for something like this seems pretty silly, but it’s exactly what big companies do. Why? It’s the people who work there. They want to do the job they’ve been doing ever since, but we don’t need these jobs to be done anymore, at least not in the same fashion.

    What every player, regardless of size or age, needs to admit at first is that not only yesterday, but also today is a sunk cost, because you can’t change it, not at a significant level. So the question becomes “How do the achievements of today (i.e., the latest technical innovation) shift user expectations for tomorrow, and how can I use what I got to satisfy or exceed them?” Example: YouTube today is not what it was 6 years ago. Today’s standards make it very unlikely someone will watch a shaky mobile phone video with your cat chasing the woolen ball over and over and tell all her friends. What we want is high definition video, professionally shot and, even more important, a good story worth our time. We’ve moved beyond the point of boredom and doing stuff only for excitement, because there’s no more scarcity of entertainment for its own sake.

    No, the new scarcity is one that major movie studios could fill if they only decided to abandon their old-fashioned monetization chain. They need to figure out how to get HD video in 3D to my home, so easy, comfortable and cheap that torrent downloads or physical pirate copies are not attractive any more to everybody worldwide. What’s as important: They can help me discover more movies, just like Amazon does. But they could use a different algorithm, and only when I’m logged in. I don’t want a useless recommendation e-mail invade my inbox each day just to make me come back and spend more money.

    Just like the music industry wouldn’t have had to invent iTunes, but Spotify. We have always needed and still need someone to help us discover more of the stuff we already like and buy, and only then do we need someone to actually give it to us, not the other way round.
    The Internet has not ridded us of all scarcities, it just shifted them a lot. The ultimate scarcity is now time, because there is too much to choose from, and people and companies are adding ever more stuff. Today we need someone to help us find the stuff we want. And there’s a reason why there are not many people around trying to solve this problem successfully.

    April 23, 2011

    Digital Natives – Digital Naives

    Filed under: business,creativity,internet,marketing,media — Erik Dobberkau @ 22:47

    Whatever circumstances you’re born into you assume as being normal, because “that’s the way things are”. When all you know is war, fighting and being on the run determines your image of life and reality. Most of us, who have never personally experienced war or other life threatening crises, assume a life of safety and comfort as being normal, and whatever “soft” revolution that we experience, like having Internet connection in every household, having a mobile phone and so forth, are conceived as normal by the next generation. Just because stuff like this exists.

    And usually “normal” stuff , no matter if it’s war or a computer, is not questioned by the new generation of participants or users. Today’s kids just use Google, YouTube and Facebook like it’s always been around and a somewhat integral part of life, but they don’t really know how it works (technically) or what its purpose is (advertising, not searching). In that sense, the new generation should not be called Digital Natives but Digital Naives.

    What’s a little funny about this whole thing is that it’s the first of the four stages of competence, but one can only advance through all four when he knows that he’s incompetent int he first place. And often this doesn’t happen because of the unawareness of incompetence, because the perceived ability to use a device, service or whatever makes one forget they don’t actually know how it’s done. This paradox is known in the professional world as the starting point of the Dunning-Kruger Effect, and when we take this as a given, big opportunities we haven’t seen before become pretty obvious.

    (Yes, it’s a cliffhanger.)

    April 3, 2011

    To Do What, Exactly? (Part II)

    Filed under: business,creativity,internet,marketing,music — Erik Dobberkau @ 09:44

    There was some feedback on one of my last posts that made me feel to explain my point a bit more in-depth.

    A legitimate argument was “Touting the process has at least one value for fans: gossip. Even if they’re the nerds everybody else is laughing about. After all, celebrity mags are no more than a collection of illustrated tweets.” And this is true. The point is, what’s the next step in the process of generating revenue? Gossip in and of itself is not monetizable. The problem of a marketer has always been, is and will always be: How do you convert attention into action? Shouting “Hey!” to make people turn their heads is easy, but then what? It’s action that generates revenue. People who buy stuff. If gossip just happens inside a silo it’s no big help, it may even be counterproductive. Trade, be it with physical goods or imphysical ideas, is based on imbalance, on one person having something the other wants to have. When everybody has the same level and quality of information, there’s no (re-)action. Evolution and progress (and also regress) happen at the fringes, not in the center, and a silo is a rectangular shaped fraction of the center with no fringes at all.

    The entire point is in terms of marketing, gossip is only a means, not an end. Celebrities know this, thus they’re attending parties to have photos taken, getting them into a dozen magazines every week which in return raises their value as a product. They’re (in most cases) aware they’re the product they want and need to sell themselves.

    This is different with most bands I know personally. Musicians tend to think that their product is whatever kind of merchandise which speaks for itself. But it doesn’t. Facts never ever speaks for themselves. As Seth Godin says in “All Marketers Are Liars Tell Stories”, it’s a huge difference whether you say “right-wing fundamentalist” or “person with deeply held beliefs”. As I wrote in the original post, it’s way easier for bands to tout the process of making a record (because it’s hardly comparable) than advertising the final product (which is easily comparable), but it’s the result that earns them money partially refinances their investments. If there’s no story about this product that may spread, the product itself won’t spread too. What happens is that within the silo of the before and after fans, they reach 100% market saturation. But outside the silo nothing changes. This is a critical point often ignored. It’s not enough to say “here’s the album we’ve been talking about a month ago…yes…the last update…remember? You liked our status back then…what we’ve been doing in the meantime?…Y’know….er…stuff..” or “Here’s the shirt. Questions? Look at the photo. Front. Back. See? Read the description. Comes in all sizes from S to XXL. Fine. Now, please, click the “BUY” button. Thank you.” This is a heap of crap in mammoth dimension. Why would anyone need to buy this? It’s a piece of black cloth with white paint on it. It’s not a desirable, somewhat fashionable item making the buyer feel better or leveraging their social status. No, it’s a commodity, and commodities are cheap in every aspect.

    There is, as with all disasters, one upside. Limitation creates predictability, and predictability minimizes risk. What’s more, limitation creates urgency as well. So when bands know there are 200 fans, they can ask each of them to invest a tenner for new music, giving the band one week of studio time. Delivery by download. Or when each fan invests 20 bucks, they can get a souvenir, which could be a signed Digipak with awesome design (emphasis on “awesome design”, which means created by an artist, not “someone who knows Photoshop”). When making shirts, they can only have 100 printed in the first batch and sell them for 5 bucks more than the second (of course you want every fan to have a shirt, but some want it more than others, and they are willing to pay extra for the temporal luxury of exclusiveness). If that sounds to commercial, it might be better to not start swimming in this pond at all.

    In the end, the question comes down to whether it’s a serious shot at making it your profession or just doing it as a hobby. The former requires a tough posture, especially towards yourself, and the latter brings up the question if you want the hobby to be self-sustainable or a bottomless pit.

    March 27, 2011

    Touting the Process

    Filed under: business,internet,marketing,media,music — Erik Dobberkau @ 21:28

    …is in most cases a lot easier than touting the result. It’s what musicians use social networks for these days, but I can’t make sense of it. Who is it about? Whenever a musician posts or tweets they’re going to the studio, it’s just another version of “Hey, I’m feeling great today.” Good for them. Not good enough for me, because there’s no value for me as a fan and potential buyer. Their well-being doesn’t lead to any interaction. And when the attention span is exactly as long as the time it takes to read a post or tweet, the question that need to be asked is: Is it worth your fan’s time? Not the time it takes to read your news, but the time it takes to start a conversation about it. Related questions are: How can I facilitate engagement? How do I connect? How can I make it sneezable? It’s easier than you think. (Exceptions apply.)

    And the issue has yet another dimension to it. A process is hardly measurable (but that’s our fault, because it’s easier for us to measure outcomes), making it a good means to hide behind. No one’s gonna judge you for this, everyone is waiting for the result. And now, as always, it comes down to whether you’ve raised the bar too high for yourself to exceed expectations. And sometimes, the creators feel that they’ve bitten off more than they could chew, which makes going out there and touting the result a little harder. That’s why musicians are still sending review copies of their records to music magazines. Of course, these mags also serve a top-down connecting function within the tribe, but the top-down evaluation component is a lot more important, because a good review is yet another shield to hide behind: “It’s good because some authority said it’s good.” The problem with this thinking is the authority’s voice today is just one in a million, and it’s heard less every day.

    March 3, 2011

    A Business, A Hobby, and A Table

    Filed under: business,marketing — Erik Dobberkau @ 08:07

    There are a lot of approaches how to distinguish what you do as a business or a hobby. Yet most of them are interior aspects, like motivation, seriousness, persistence and so forth. I want to throw in another soft factor, but one that’s coming from the outside.

    In both a business and a hobby you interact with people, but what makes the difference is what sides of the table you’re on. What I was thinking the other day is that a business is defined as “doing something for somebody (i.e., quid pro quo, results must be achieved)”, whereas a hobby is “doing something with somebody (i.e., for the fun of it, results optional)”. And when you look closely at business relationships, it’s never really the case you’re partners who are on the same side of the table. We always say that in order to close the sale, convince voters or get a new coaching client, but once this point has been passed, they’re (quite rightfully) claiming that we live up to the promise we’ve made, right?

    Which is exactly why politicians’ popularity instantly seems to fall after they’ve been elected — voters start claiming right away.
    It’s why your customer or client seems to be unhappy right after signing the deal — she wants you to deliver.
    And in all cases, not only do you have to meet, but to exceed their expectations. (Which is hard enough in “real” business, but close to impossible in politics.)

    But in a hobby it’s different. You’re there for the fun of it, no expectations set. It’s also why groups like AA feel “good”, there’s no exchange of expectations and claims, only mutual interest (or desires, or problems). A hobby and a business can happen in the same location, a health club for example. With the owner of the gym you have a business relationship, with your training partner you’re sharing a hobby (but not your trainer since she’s your business partner’s employee, thus it’s quid-pro-quo too).

    So the two questions to ask to know if you’re in a business or hobby situation are:

    • What are we here for — to achieve results or for the fun of doing something?
    • Does the imbalance of abilities/prerequisites lead to an exchange of claims?

    Once you have figured this out, it resets your own expectations and you can act accordingly.

    March 2, 2011

    Where to Look

    Filed under: business,marketing,music — Erik Dobberkau @ 08:05

    The other week German IT association BITKOM published 2010’s legal music download numbers, proudly speaking of a record result. The interesting part was their interpretation of the age structure of customers, accompanied by a lot of hoopla and (inappropriate) [self-]praise. Since I don’t have the proper numbers, I just made up my own to illustrate my point.

    spreadsheet - music downloads

    Fig. 1

    In Fig. 1 you can see the numbers of downloads for each age group in the years 2000, 2005 and 2010. At first glance, everything’s looking good, aye? Reading left to right, some of the groups are growing, some stagnating, only the youngsters seem to be shrinking in 2010. Or are they?

    Fig. 2

    Fig. 2 helps visualize what I was talking about in the above paragraph. It may look like your product is growingly attractive for the older groups. It also appears that you have massive growth in the late 30s group and with a little less scale in the early 40s group. The younger groups seem to be stagnating after the initial growth in the first 5 years. And all of these conclusions are wrong. Fig. 3 may give you a hint why.

    Fig. 3

    Still no idea? Maybe Fig. 4 makes it clearer.

    spreadsheet music downloads with illustrative arrows

    Fig. 4

    All this age group-based thinking easily leads into a trap of silo thinking that doesn’t match reality. Your customers are getting older, so the ones that bought something ten years ago are ten years older today. The risk is of course that your company would say “we only cater to the young audience” which means a lot of more work, because turning a stranger into a customer requires a lot more work and is thus more costly than keeping your customer. So how to interpret this example?

    • Your popularity with the very young audience is falling, yet growth relatively solid.
    • Today’s middle age groups (30-44), who were your young audience ten years back, are your best customers, spending ever more money on you. Large potential.
    • Current older audience is not that attractive. ROI not safe.
    • Conclusions: Do what it takes to keep your core buyers. Don’t overthrow what you’ve built up just to attract a younger audience, but they’re the ones you must find a way getting them excited about you and become your customers, and do this continously. Then, over time, you’re likely to have a solid customer structure distributed over all age groups.

    What you might discover when you look at charts this way is your business works differently than you expect. For instance, you could save a ton of money when you realize there is a customer lifecycle and embrace it. Which, on the other hand, requires you to see your customers as your most important asset, not only as average consumers who buy your stuff. The record industry would be better off if they realized that they’re selling commodities, not fashion. Their artists are fashion, but the products shipped are all the same. So why waste advertising space like they used to (and still do)? But that’s a different topic, and it’s already been written about a lot.

    February 23, 2011

    Why You Want a Prize (Really)

    Filed under: business,creativity,marketing,media — Erik Dobberkau @ 07:50

    Why is it that even after 30, 50 or 80 years we still admire feature films that have won an OSCAR? Is it because they’re really good (by whatever measures) or because they’ve won a prize, or maybe in between? When we look at all the other films from any given year, we’re not feeling the same way, are we? You’ll always find some flaw in them, and sometimes, you’ll even find the whole thing shabby, having poor image quality, bad sound design, a cheap score, what-have-you.

    But in the day the film was new, it was different. And that’s what we forget when looking at whatever product, but especially ones that are more or less art — not only are they influenced by fashion trends of their genre, but of course also of production standards at their time. Today your $99 mobile phone shoots video with better image quality than a camera that cost $50,000 twenty years back. Today your $300 PC can (technically) help you create a more lavish sound design than a full-fledged studio in the mid-90s.

    This applies for other areas as well. Only eight years back, you cold earn a lot of respect with web programmers when you developed your own CMS. Not today, because it’s an unnecessary effort — there’s more than a dozen free systems out there, why start from scratch?

    How about your work? Are the things you’ve done and achieved worth acknowledging by today’s standards? Has the bar that used to protect your field of expertise lowered in a way that pretty much anyone can compete with you? And has the bar that marks outstanding results raised so high you hardly come close? And which is worse?

    When more or less everything becomes ubiquitous, when everything is always available in one form or another, when scarcity is not a problem to deal with anymore, you’re way better off when you have managed to earn a prize with what you done, no matter when, it won’t really lose any of its shine. Even better when this one prize has a tradition and still exists today. It helps you stand out, makes you a winner, not only of the award, but overall, and for a long time to come.

    February 15, 2011

    It Doesn’t Matter Where You’re From

    Filed under: business,marketing,music — Erik Dobberkau @ 23:21

    It only matters where we can find you, which is a very different thing.

    Today I noticed a flyer for a concert, and each of the band logos had a caption telling me where the band was from. Guess what, I don’t care. Instead, what I care about is where I can listen to their music to decide whether I want to see their show or not.

    When you have only one chance, say something that helps people proceed, don’t make them stop.

    February 4, 2011

    Something For Nothing

    Filed under: business,marketing,media — Erik Dobberkau @ 00:48

    Picture this: A financially strong company builds a mall including all the infrastructure making it a super-hip (yet slightly expensive) place everybody loves. And no surprise everybody who used to have a shop with slowly declining revenue downtown craves the bonanza. And they understand they don’t get mining rights for free. We understand when we sell something on someone else’s premises they expect a share of one kind or another.

    It’s also the way advertising works. Whoever wants to place an ad somewhere has to pay the owner of the channel because, well, he’s the owner. It’s ironic that people who used to own the channel, i.e. print publishers, don’t understand that when putting their channel inside another channel, i.e. the iPad, the owner of the latter won’t give it to them just like that.

    Sometimes you eat the pear, and sometimes, well, it eats you. (huh?)

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