The Social Entrepreneur

As part of my ongoing job search (BTW, are you hiring?), I met Michael Pirron this afternoon. Michael has a distinguished educational and professional background with a focus in Information Technology and has worked around the world in various consulting roles. Last year, Michael created a new company called Impact Makers, which to my knowledge and his, has a very unique business model. I also think it may be disruptive (more on that later).

As Michael explained to me, there are generally two types of social enterprise in the US today:

1. A nonprofit who generates their own revenue stream by operating for-profit businesses to support their service delivery to the community. The problem with this model is that most nonprofits lack the capacity and the experience to run a competitive business venture.
2. A for-profit business that gives a small percentage of their profits to fund nonprofits (i.e. Ethos Water or Newman’s Own brand). The problem with this model is that the shareholders can, at any time, decide to stop the program or sell the company.

Impact Makers has introduced a new model where a partnership is formed between one nonprofit entity (Impact Makers’ Management and IT Consulting Services) focusing on generating income in the for-profit marketplace, and a nonprofit partner who is delivering services to the community. Impact Makers not only donates it’s profits, but also provides consulting services to the partner, allowing it to focus with greater effectiveness and efficiency on its core competency – delivering community services.

Is this model disruptive? I think so for two reasons:

1. In today’s marketplace, companies are increasingly concerned with the other bottom lines – environmental and social responsibility. Major companies frequently use vendors to provide services like IT consulting. A company that chooses to use a vendor like Impact Makers gets top talent at competitive rates, but instead of generating profits for the vendor, they are directly funding a community service provider and that gives a vendor like Impact Makers a competitive advantage.
2. Individuals working outside of non-profit systems do not have many opportunities to make a substantial difference in their community. They might volunteer occasionally or donate money to charities, but unless you are Bill Gates, you probably don’t have the resources to contribute on the scale of funding a program. Under this model, employees receive competitive salaries while their profit generated from their work directly contributes to improving the community.

This second point, the ability for individuals to have a bigger social responsibility impact, struck me as being analogous to what has happened in a number of other other industries where power has shifted to individuals, thereby giving them a voice and disrupting the status quo.

Impact Makers does not have capital lying around with which to build their business. Instead, Michael is relying on networks and contacts to get contracts. Impact Makers currently has one service delivery partner, a local organization called Safe Harbor which provides confidential shelters for abused women and children. Over time, Michael would like to see other professional service industries adopt his model, should it prove successful. There really isn’t a limit to the types of businesses that could adopt this model. I don’t normally use this blog to promote a business, but I was so impressed with Michael’s model that I wanted to share it. I don’t have a huge number of regular readers, but when you consider the reach of the people I do have conversations with, both here and on Twitter, the reach can be pretty big.

What do you think about this idea? If you like it and have a blog, consider telling your readers about it. Do you have clients who need Management or IT services? Tell them about Impact Makers. If you want to learn more about it, contact Michael ((804) 212-5056 or mpirron@impactmakers.org ), and tell him I sent you.

More Thoughts on Sprint

To my regular readers, I’m sorry that the blog has gone a little stale over the past week, but I’ve been a bit preoccupied trying to find a new job. Nevertheless, traffic is way, way up on the Sprint post and I have been having lots of great conversations with people who have commented on it. In lieu of a new topic, which I promise to get to this week, I’ll pass on some of those additional thoughts from my conversations. Perhaps if Sprint were a Sense & Respond organization, they would be joining in the conversation or at least be actively listening. My guess is they’re not.

Of all the comments on the post, no one defended Sprint. To the contrary, all but one had negative things to say about them. The other guy just had negative things to say about female cellphone users. Thought certainly not a statistically valid sample, I would wager that few people really love their wireless provider. It’s the nature of the industry in the US. With limited competition due to the high cost of entry, the wireless providers aren’t compelled to differentiate on customer service and in my experience, Sprint is the poor service leader.

You may have noticed that this story has gone mainstream with coverage by the Associated Press, ABC News and Brandweek . The details, if you haven’t seen them are mind-boggling. David Reich wrote a great summary today on his blog, “my 2 cents”, but here’s the big thing to consider:

Out of Sprint’s 52 Million customers, only 1000 received the letter saying they were calling customer support too much. Do the math. That’s less than .002% of their customers. There is no way that that small percentage was adding any material cost to their operation. (update:  As a friend pointed out, the actual cost of these calls could have been material; however, the methodology for counting is unclear.  For example, the ABC story indicates that a single call with 5 internal transfers might have been counted as 5 calls). Sprint says that, on average, these customers were calling in 40-50 times per month. Perhaps that’s true and given my personal experience with trying to get my own Sprint bill fixed, I can appreciate that.

Nevertheless, Sprint made the decision to go after them in a way that became very controversial, very public, very fast. The cost of this action in terms of bad PR is on par with Circuit City’s recent bungle. where they fired 3400 of their most experienced store employees to cut costs. Several months later they are still trying to explain that one, but it’s too late. In both cases, the damage to public perception has been done, although in Sprint’s case, it was pretty low to begin with and their defensive spin machine is just getting fired up. In my opinion, it was a failure of leadership in both of these companies to make such shortsighted decisions without considering how their customers would view them.

One of my conversations this week was with the Conversation Agent herself, Valeria Maltoni. She pointed me to a post she wrote about the wireless business in the US and speculates that Apple may be just the disrupter needed to shake up the industry. It’s a great post and has some David Letterman Top 10 humor to boot.

Niche Marketing: Narrow, Not Small

An article published today in Advertising Age really resonated with me. It makes the case that the maturing marketplace, combined with the hyper-connected, in-control consumer “has created a seismic shift from one-size-fits-all mass markets to millions of markets of self interest.” That assessment carries huge implications for retailers who are trying to move product that was once a specialty, but is now a commodity. Strategy consultants Booz Allen Hamilton explain it this way:

As every market matures, choice increases. Then competition drives up quality and convenience to the point at which offerings become commoditized. The only businesses that then thrive are those that move beyond “me-too” or incremental offerings to marketing more-relevant and more-differentiated products and services. The only way to accomplish this is to focus on a narrower target.

Technology & The Long Tail

Technology has played a major role in facilitating this shift. Marketers are now able to micro-target specific groups, engage customers with more frequency and intimacy, and customize to consumer specs. Moreover, technology has enabled consumers with the tools to seek out suppliers that offer just the thing they want.

Think about it. If you are a retailer focused on selling lots of stuff to lots of very different people, you are probably fighting a loosing war of diminishing margins, market share and profitability. On the other hand, brands that have figured out how to excel at attracting and keeping loyal a narrowly focused niche will probably continue to do well. And why is that? Once you, the customer, has experienced having your ever-increasing levels of self-interests met by a niche provider, you have a hard time going back. For example, why would I continue to go back to a retailer for accessories that I know from previous experience, they probably will not have (not even on their website).

As even a senior Wal-Mart official recently said, “no customer today will stand to be treated as part of a mass market anymore.”
This is a major disruption and marketers who fail to respond to it quickly will suffer. According to Advertising Age, the value propositions of those who ignore niche marketing…

“…will be less relevant than those of competitors. For those slow to adopt niche marketing, the future also is bleak. Attempts to recoup share will be difficult because competitors will have preemptively established closer customer relationships.’

A number of brands and marketers have embraced niche marketing. Names like Target, Crocs, Red Bull and American Girl. The all have the same objectives as any other marketer, but they have sensed the disruption and have responded by finding a new way of going to market.

Narrow, not Small

The other thing that has changed is what niche marketing really means in today’s environment. It’s still “the targeting of a more narrowly defined customer group seeking a distinctive mix of benefits”, but niche markets are not the “marginal opportunity” that they were once viewed to be. Today, niches are viewed much more positively.

In today’s marketplace, niches are flourishing. Some niche brands are generating hundreds of millions in sales. Sometimes, narrow niches, fueled by mavens and connectors, become the next big, disruptive thing. The big point of the article is that niches should not be equated with small. Instead, think of narrow. Then target very specific groups who will relate to and find differentiation in your offering. At this point, you are no longer a commodity and you can increase your margins by charging a premium. Do this over and over with different products and services, and you can generate volume and growth that makes up for your narrow targets.

Smaller targets, larger focus
Ten years ago, the medium was still the message. Eight years ago, we could still think of the 4P’s — product, pricing, place, promotion — as essentially independent strategies. Five years ago, everyone started to buzz about customer-relationship marketing. About two years ago, we got really excited about digital-marketing tactics and started to apply them without any real strategic purpose. All this has changed.

So what’s really new about the new niche marketing? It’s realizing that while our targets have to narrow, our definition of marketing communications has to broaden. Today, everything communicates what a brand stands for, all the time.

It’s like the old saying: If you are on the wrong train to begin with, every stop along the way is the wrong stop.

The article closes with 10 principle to harness the power of niche marketing:

1. Position your brand as narrowly as is economically possible.
2. Become the specialist that anticipates the needs of your target.
3. Rapidly work with the target niche to co-innovate.
4. Set as your goal such consumer centricity that the target niche will want to co-brand their identity with yours.
5. Live by a higher standard of ethics.
6. Embrace a business model and metrics that grow the most valuable assets of the new niched economy.
7. Reap first-mover advantage by learning how to identify a niche of opportunity.
8. Re-imagine your role as that of entrepreneurial founder of a special interest group.
9. Forget push marketing; excel at pull marketing.
10. Realize your brand is now “media” competing against all other media

What do you think? Does this make sense to you ? Can you think of companies that could immediately benefit from leveraging niche marketing?

(Source: Advertising Age)

A Clean Slate is a Beautiful Thing

I typically don’t write about my professional life, but today is different.  After 23 years as an IT professional for a Circuit City Stores, my position was eliminated.  For the first time in 23 years, I am going to be actively seeking employment.  With today’s revelation, came a dark rainbow of negative emotions: frustration, anger, uncertainty, fear, sadness.   Over the course of the day, I reflected on those feelings, the pros and cons of my former job and the implications of the event.

Where I’ve Been

If you have explored my blog, you may know that my “day job” has been management of IT development.  Not very sexy stuff and frankly, not a very creative outlet for the stuff I am passionate about.  Nevertheless, after 23 years, you can get really comfortable with a 3 mile commute, a good salary, and lots of longtime friends, so I have never seriously looked elsewhere. 

About 2 years ago, I was asked to join an internal innovation team.  This cross-functional team, made up of all sorts of people with other day jobs, was given time and resources to design and test as many new ideas as they could come up with.   Recognized as someone who was never content with the status quo and who frequently pointed out opportunities to improve the customer experience, I was later invited to join a special team who worked with company execs and Gary Hamel’s consulting firm, Strategos, to develop an new strategic framework for the company. 

What I Learned

It was the most invigorating 10 months of my career.  I learned how to synthesize consumer insights, emerging trends, orthodoxies and competencies into a differentiating strategic architecture.  I researched and developed 7 year forecasts for consumer technology, social trends, retail store design, and the American retail workforce..  The team delivered several solid proposals, all of which had differentiating customer experience models, and eventually selected one to move forward with.

It was during these last few years of Innovation and Strategy work that I really discovered my passion and point of view around delivering great customer experiences.  It’s also when I became acutely aware of the shift of power from supplier to customer, and the need for companies to start using social media tools and other emerging channels like virtual worlds to engage their customers and employees in conversations.   These are the things I had become passionate about.  IT Management was my job and one was getting in the way of the other. 

 Who I’ve Met Along the Way

The same social media tools that can enable this amazing conversation with customers and employees has also allowed me to make connections and share insights with like-minded people all over the world.  A few months back, David Armano wrote a “emotion” piece entitled “Shared Experiences”.  In it, he asked if the digital relationships that we are forming through social media can ever be as close those we create through actual interaction.  I think they can.  I watch the banter between digital friends on Twitter.  I learn what people like, what they eat, what makes them laugh, their musical tastes, their kids names; and I share the same about myself.   Those of us who have adopted these vehicles of personal publication tend to share our thoughts much more freely than those who haven’t.

When I Twittered about getting laid off this morning, I was both surprised and delighted by the replies and offers to help from my digital friends.  You know who you are and I really appreciate you reaching out.  Though most of us have never met, I really do consider you my friends.

Clean Slate

Now before this post careens completely out of control (is it too late?), I think I need to get to the point.  I was dealing with all sorts of negative feelings this morning, but why?  Was it because I wasn’t going to be managing financial applications development projects any more?  Or perhaps I was going to miss that next meeting where we go over, in excruciating detail, why one team needs to adjust a testing schedule? 

No. 

These are the uninspiring elements of my former day job that were a necessity because I had not taken the time to look for other opportunities where I could do work that I really cared about.  Now I’m sitting here with a clean slate and it’s a beautiful thing.  I have been given the opportunity to find something new to do; something that I want to do.  The negative feelings from this morning are being offset with optimism, excitement, hope, happiness.

Having to find a new job is a challenge.  Contemplating a career change after so long is daunting, especially when you don’t really have a resume that reflects what you want to do.  My newfound positivity might erode in the coming weeks if the opportunities don’t pan out.  But for now I feel really good.  I love new challenges, I know what I am passionate about, and I know that I have a network of new, like-minded friends, who’s opinions I respect, ready and willing to help.

Surface Computing – This is Cool!!

Microsoft announces “Surface“.  Click the link.  Better seen than described.

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 <Via Scobleizer>

Democratizing the Future

Those lucky enough to attend last week’s IIT Institute of Design’s Strategy Conference got a chance to see some great presentations from some major innovation thought leaders.  I was not one of them, but I have been going throught the materials from the conference which are publicly available.  As a proponent of Open Innovation, I particularly enjoyed reading the presentation given by Josephine Green of Philips Design which introduced the concept of social innovation. 

Realizing that innovation driven solely by technology often failed to meet customer needs, many organizations turned to a consumer (marketing) oriented approach where consumer research and observation is handled by “experts”.  Green believes that this approach is starting to reaching end of life.

Her main point is that we need to go beyond designing around individual consumer needs and start innovating around social needs.  Her reasoning:  We have reached a saturation point for technology and consumer goods.  Continuing to consume the way we currently do is not healthy.

“There is too much ‘stuff’ and a growing realization that filling the future with more and more consumer-driven technology and marketable goods does not necessarily guarantee higher growth, a better quality of life or even life itself, given the state of the planet.”

So what exactly is Social Innovation?  According to Green, it goes beyond looking at individual consumer needs to look at the relationship between people and the products/services they use.  It involves engaging experts, customers and creative communities to envision, build and deliver products and services which better reflect the needs and values of the future consumer.  Green believes that this shift from a Consumer/Market-led approach to a People/Social-led approach is being driven by three factors:

1. Diversity:  our world is becoming increasingly small, with many different cultures, beliefs, opinions and behaviors all living together.  Along with increased clashes, this closeness has led to an understanding of our differences.
2. Creativity: Social Media tools have put the consumer in a position of power and they are increasingly becoming “the supplier of content, taste, emotions and goods.”  They no longer want choice, they want a participatory role in designing the things they consume.
3. Wellbeing:  There is a growing awareness that our ever increasing pace of life and consumption is having a correspondingly negative impact on the environment, the poor, and our own quality of life.  Health and wellness, connectedness, personal growth & control are replacing material things as the way to measure wellbeing.

What will be the implications of this shift for today’s companies?  First and foremost, you must begin establishing a dialogue with your customers.  You will need to facilitate conversations between customers and your designers.  Second, you need to develop a Sense & Respond competency and be able to support fast prototyping.  Third, you must get really comfortable with relinquishing control of some of the development process to your customers.  They are already in control of your destiny in case you hadn’t noticed. 

Jott This Down

Just when Twittering seems to be all the rage, a new player hits the stage. It’s called Jott.com and its one of the coolest innovations I’ve seen in a while. Here is the basic idea:

You call Jott on your mobile phone. You speak the name of the person or group you want to send a message to. You speak for 30 seconds. Those sentences get transcribed and e-mailed. It could be a “note to self”, or a client, or an employee, or your team, or your spouse who never seems to have either of their two cell phones turned on (that’s another story).

Instant speech to text conversion with messaging. Kinda like a 30 second Twitter version of a podcast.

I often judge the coolness of something by using my 13-year old daughter as a barometer. She thinks Twitter is “totally geeky”, but when I showed Jott to her, she was instantly hooked. She immediately started playing with it; not for anything productive mind you, just wanted to see how much abuse it could take (singing, laughing, nonsensical jibberish). She also told her friends about it and they started Jotting each other. The hyper-connected youth have yet another way to communicate.

I have to agree with Drew McLellan who predicts that Jott “is going to be the breakout of 2007”. Drew suggests several ways he is going to use it:

• Dictate notes from meetings and send them to myself for a record. Jott it.
• I’m pulling out of a client’s parking lot and send a note to our Project Manager about opening a new job. Jott him.
• Forget milk? Never again. Jott me.
• Have a breakthrough idea while waiting to board a plane — jott my entire staff before I forget said idea. Jott the team.
• Want to remind my daughter to do XYZ but she’s going to get home before I do. Jott her.
• See someone across the way at Panera and want to remember to call them in a week or so. Jott me.
• Have forgotten to grab a book from the office 3 times. Jott me.
• All the stuff that I try to write down before I forget it. Jott me. Jott me. Jott me.

The other reason this may be big is that it is potentially disruptive to the wireless carriers. Think about it. Text Messaging is hot.  Over 80 Million US subscribers sent over 100 Billion text messages last year (Pew Research). Teenagers have made it a routine way to communicate. Most individual subscriber plans charge $.02 per message sent and received. With Jott, you never have to pay to send a message, so you can send more messages under you current plan, or reduce your monthly costs by switching to a plan that allows fewer messages.

Now if someone will just build a simple interface to allow me to Jott to my Twitter account, I’ll be in lifelogging heaven.

Will iPhone Mess Up Cell Phones Upgrade Cycle?

Olga Kharif at Business Week believes the Apple iPhone will disrupt the cellphone upgrade model.  That model says that users generally replace their phones every 18 months.  They do this for a number of reasons: Phone is broken or has battle scars, new features, new styling.  The biggest reason, of course, is that the industry enables it by giving free or cheap phones when you agree to a new contract.

In a recent article, Olga’s makes this argument:

“The new iPhone from Apple….brag[s] touch screens instead of buttons. That means that if cell phone makers or carriers decide to add new functionalities to these phone when they are already in use, they could, potentially, do that over the air. Want to enable consumers to shoot, edit and post videos to a mobile site in a new way? Just send them an application with virtual buttons that will appear on their touch screens and allow for this application’s use.

If consumers are able to get new applications this way, I think some of them will stick with their phones longer. After all, today’s phones all feature cameras and Web access. Unless handset makers come out with additional hardware making replacing handsets every 18 months a must, I don’t see why consumers will keep on changing their phones as often, especially since the phones’ prices seem to be on the rise. After all, with a simple software upgrade, users will be able to drastically change their phones’ looks and functionalities anyway. So, why splurge on a new phone?”

She goes on to ask her readers if they agree.  The article is short, but the list of comments is long and each side makes good points. 

Here’s my take.  The upgrade cycle today is controlled by the carriers.   Apple wants to change that.  The iPhone may be the hottest CE product of 2007 and millions of people will pay the premium to get it.  Once that happens, and assuming that the experience lives up to the Apple brand (and the hype), people will not be so eager to upgrade just because their contract is up.   Assuming that the 5 year exclusive deal with Cingular doesn’t change, they won’t really be able to switch anyway.  Being touchscreen based does not make the iPhone an infinitely extendable platform (sorry Olga).  There will be ongoing evolution of the technology, just as there has been a steady stream of product improvements to the iPod.  This is what will drive the upgrade cycle for iPhone users.  The cycle may remain at around 18 months, but it will be the product itself that shifts the control of the cycle to Apple.

What do you think????

On Social Media….

Social Media is one of my blog categories, but there are folks out there who don’t know what it means.  In response to a Robert Scoble post on the subject, Stowe Boyd differentiates between the new, disruptive “Social Media” (capitals) in which the former audience is now fully participating in creating the message, and “social media” – the tools (blogs, wikis, etc) that make up the platform for “Social Media”.

His post is so well written, it just makes sense to quote a big chunk of it to you:

“The fundamental distinctions between Social Media and the things that preceded are these:

1. Social Media Is Not A Broadcast Medium: unlike traditional publishing — either online or off — social media are not organized around a one-to-many communications model.
2. Social Media Is Many-To-Many: All social media experiments worthy of the name are conversational, and involve an open-ended discussion between author(s) and other participants, who may range from very active to relatively passive in their involvement. However, the sense of a discussion among a group of interested participants is quite distinct from the broadcast feel of the New York Times, CNN, or a corporate website circa 1995. Likewise, the cross linking that happens in the blogosphere is quite unlike what happens in conventional media.
3. Social Media Is Open: The barriers to becoming a web publisher are amazingly low, and therefore anyone can become a publisher. And if you have something worth listening to, you can attract a large community of likeminded people who will join in the conversation you are having. [Although it is just as interesting in principle to converse with a small group of likeminded people. Social media doesn’t need to scale up to large communities to be viable or productive. The long tail is at work here.]
4. Social Media Is Disruptive: The-people-formerly-known-as-the-audience (thank you, Jay Rosen!) are rapidly migrating away from the old-school mainstream media, away from the centrally controlled and managed model of broadcast media. They are crafting new connections between themselves, out at the edge, and are increasingly ignoring the metered and manipulated messages that centroid organizations — large media companies, multi national organizations, national governments — are pushing at them. We, the edglings, are having a conversation amongst ourselves, now; and if CNN, CEOs, or the presidential candidates want to participate they will have to put down the megaphone and sit down at the cracker barrel to have a chat. Now that millions are gathering their principal intelligence about the world and their place in it from the web, everything is going to change. And for the better.”

……..So, a formula: Social Media = what the edglings use to communicate.

I really like being an Edgling, don’t you?

A “Sense & Respond” Retailer Would Have Bet Early On the Wii

I just bought a Wii.  They are still hard to find, but I happened upon a pallet of them in my local Costco last week (right place, right time).  Although I have been blogging about the Wii Experience for months, I had never experienced it personally.  After the first swing of the virtual tennis racquet, I felt it.  I was really “playing” tennis.  I was not “pressing A to swing”.  With just that brief experience, I completely understand why the Wii has taken off like it has.   ‘It’s the experience, stupid!’,  and it’s quite a success story.

Nintendo has long been the underdog in the video game market.  Sony and Microsoft flew past them in terms of titles and realistic graphics during the last cycle.  Nintendo titles have historically been more “family oriented” (no cop killing or hidden sex scenes), and their stock performance has historically been lackluster.  When the third generation  (3G) console war started heating up last year, the PS3 was supposed to be the big cheese (with the big price tag).   XBox 360 had gotten a head start on the 3G market a year ago and had over 150 titles so they were expected to hold on to the number 2 position. 

Retailers, while covering all the bases, believed that PS3 would be the big winner.  As a result, they all fought for the same scarce pre-christmas inventory.  Fast forward three  months and we are now seeing headlines like: “Nintendo’s Wii Leaves Sony’s PS3 In the Dust and Nintendo Wii Sales Quadruple PlayStation 3 and Analyst: PS3 Readily Available, Wii Still Sold Out?

Faisal Laljee  over at StocksandBlogs.com made this observation:

I visited no less than 6 stores on Monday night – EB Games, GameStop (NYSE: GME – News), Best Buy (NYSE: BBY – News) and Target (NYSE: TGT – News). None of them had the Wii in stock. I spoke to one of the employees at GameStop and he told me that they get Wii shipments from time to time, but the units sell within minutes. Talk about demand.  He did volunteer that they had plenty of PS3’s stacked up in the back.

Were there early indicators that the PS3 would fail so miserably against the Wii?  If you recognized those indicators, could you have profited by changing your retail strategy and focusing more on the Wii?  Did any retailer see opportunity?  Perhaps Gamestop did as they secured an exclusive agreement to have Wii demonstration kiosks in their stores.  Did they “Sense & Respond” or was it accidental?  Here are some early indicators that could have pointed the way:

1. PS3 is too expensive for the average household

Lots of discussion about this from analysts following the E3 debut.  An analyst with ABI Research was quoted as saying “Asking consumers to pay $500 to $600 for a game console, when most have yet to purchase an HDTV, will give many current PlayStation 2 owners reason to consider the competition.”

2. E3 Performance: Poor PS3 showing; Big Nintendo buzz

From IGN.com:

“We went into E3 2006 unconvinced of the Wii name or the machine’s potential and walked away from the Convention Center knowing for certain that Nintendo has another hit on its hands…. The Big N’s new platform may lack the graphic horsepower of competitor PlayStation 3, but its innovative controller stole the show right out from underneath Sony’s collective feet.”

3. Continuous stream of bad news and missed expectations from Sony

Originally slated to debut in May, 2006; pushed to August, and then to November, Sony just could not deliver.  Industry observers were warning as early as February, 2006 that the PS3 could be a flop due to the high cost of the technology-bloated console.  Sony’s strategy was to use the PS3 as a Trojan horse to get Blu-Ray into your family room, but limited availability of key components which were reported as far back as July ’06 caused Sony to scale back the number of units available in North America delayed European availability until 2007.

4. Nintendo’s disruptive shift that focuses on the experience of the gamer

I think this was the biggest indicator that Nintendo would be the clear winner.  Nintendo’s decision to approach the business from the players perspective and make a product that truly engages the player (at half the cost of a PS3) was disruptive. 

Did you see it coming?

How Nintendo Disrupted Sony

It’s been a while since I last discussed the recent videogame console war. It was long my belief that Nintendo’s Wii, with its focus on the player’s experience, would be the real winner. Although there is plenty of time for these two to battle it out, the early results are a clear indication that Nintendo’s approach has disrupted Sony. Michael Urlocker’s OnDisruption blog has a great post that lays out the case and offers six concepts about Disruption that are applicable to any business:

Nintendo’s market disruption is not about better technology;

Disruption is not about incremental improvements;

Disruption is about understanding where the customer experience is not good enough;

Disruption is about making a product more accessible;

Disruption is about changing the basis of competition;

Disruption is about a new business model.

The Download Wars Have Begun

Pulling off quite a coup, Wal-Mart has entered the movie download business with a bang.   In the announcement today, the company announced agreements with all six major movie studios — Walt Disney, Warner Brothers, Paramount, Sony, 20th Century Fox and Universal — to sell digital movies and television shows on its Web site (www.walmart.com/videodownloads), becoming the first traditional retailer to do so.   Wal-Mart, who lost the battle against Netflix on DVD rentals two years ago, sees that the bigger opportunity is in downloads.

The move plunges Wal-Mart into direct competition with established players like Amazon.com, CinemaNow and the 800-pound gorilla, Apple’s iTunes.  Wal-Mart will face a number of challenges.  Apple dominates the digital download space, leaving only a very small share of the market for others to scrap over.  And where Wal-Mart is the king of retailers, they have no real competence in digital distribution.

What they do have is clout and they have leveraged that clout to do what Apple has been unable (or unwilling) to do:  to pull together all the right Hollywood players.  Wal-Mart has also partnered with Hewlett-Packard to create an easy-to-use Web site and develop a broad library of videos.

Movies will run from $12.88 to $19.88 on the day the DVD drops, while older flicks start at $7.50. All movies will have roughly the same price as the actual DVD at Wal-Mart stores, though.  Not sure why download customers would want to fork over almost what you’d pay for the actual DVD, but then again, I’ll do just about anything to avoid going to a Wal-Mart.  The pricing is designed to protect the DVD business which will keep the studios (who have considerable clout themselves) happy.

The service will have TV shows from Comedy Central, CW, FX, Logo, MTV and Nickelodeon.  Major networks are not in the mix as of now. TV shows run a bit cheaper than iTunes, at $1.96 a pop.  Altogether, it will offer “access to 3,000 productions,” with the mix split roughly 50/50 between movies and TV shows.

Just as MP3 downloads have disrupted the CD business (just ask Tower records), digital movie downloads will be disruptive to the DVD business and possibly other CE products such as DVRs.  You can already watch recent episodes of ABC shows for free.  If, in the near future, I can get high-def downloads of shows that I missed, why pay for a hi-def Tivo and the monthly subscription that goes with it?  This disruption could also impact CE retailers who do not move into the digital distribution space.  The war is just starting, but it will be interesting to see how it develops.

<via NY Times>

Circuit City Joins The Virtual World

Circuit City and IBM have teamed up to launch a prototype virtual store in Second Life. The store, which will be open to SL residents on 12/18, is designed to be a virtual extension of Circuit City’s existing multichannel design and will be used as a learning lab.

SecondLife residents can purchase items such as iPods TVs, and Computers in the store for use in SL, but they can can also link to Circuit City’s website to purchase the real world version of the product. There are other extensions of the e-commerce site into virtual space such as forum discussions for particular products, a store locator, and a display that helps you decide what size TV to purchase based on how far back your sofa is.

“Teaming with IBM in the virtual world is as much about sensing and learning from the community as it is about commerce. These immersive environments provide an interactive forum for testing and feedback as we focus on the next generation of customer service”, said Bill McCorey, senior vice president and chief information officer of Circuit City. “Our ultimate goal is to understand the implications of virtual 3-D worlds on multi-channel retailing and to extend the connection we have with our customers to new spaces.”

I think the big thing here is that Circuit City is starting to experiment with 3D web as a commerce channel. I believe this is the future of ecommerce. The combination of an immersive 3D environment with the social networking aspects of an environment like SecondLife will give the customer a rich experience that transcends today’s 2D experience. Granted, we are in the embryonic stages of this transformation and the experience is not “all that”, but at least Circuit City is putting their toe in the water and that’s a step ahead of where most retailers are.

Read more about the launch here and here.

Full Disclosure: I am a Circuit City employee and am part of the SL team.

Another Nail in the DVD Coffin???

A new Video on Demand deal between Comcast and Disney gives Comcast the ability to use some ABC shows for its massive VOD effort as well as broadband. But more importantly, the far-reaching agreement may become the model on which the new media world soon operates.

According to BusinessWeek, Comcast is expected to announce a new TV portal, code-named C-TV, that Disney will help promote through the use of film and TV clips that Comcast would use online. Down the road, the two companies may work more closely together to provide ABC, Disney Channel, and other kinds of programs for the portal as well, according to sources at both companies. But that’s just the start of the relationship…

Disney is expected to help Comcast test the notion of showing movies on demand at the same time the movies are available in DVD stores—effectively shortening the lag time before cable gets access to those films. It’s a development certain to drive major DVD retailers like Wal-Mart (WMT) nuts. “The deal is all about Comcast wedging itself into an online content company and using Disney as a partner to get there,” says UBS analyst Aryeh Bourkoff, who follows both companies.

Both companies have been aggressively trying to improve their image. Disney wants to be seen as more agile and an adopter of new technologies. Comcast needs to update its offerings to remain competitive with Telcos and new media outlets like MySpace. This deal accomplishes both objectives by giving Comcast access to Disney programming for its On Demand service. Disney gets access to more than 24 million Comcast TV subscribers and another 11 million high-speed Internet customers. Disney intends to sell ads for most of its shows. Where will the partnership go from here?  The BusinesWeek article says:

Disney has told Comcast it is willing to participate in a test in two markets, in which it would offer movies on demand three or four months after the movies show up in movie theaters—the same time DVDs are shipped to retailers such as Wal-Mart. Disney has already ruffled feathers among retailers like Wal-Mart and Target (TGT) by offering its movies on Apple’s iTunes site at prices that the large retailers believe are below their wholesale price (see BusinessWeek, 9/11/06, “The Empire Strikes Back”). But this could send folks to Comcast instead of Wal-Mart to buy the DVDs. For Iger, who has said he wants to experiment with narrowing the “windows,” it is a toe in the water.

For Comcast, Disney presents a formidable ally in taking on telcos and others in the battle to deliver movies and TV shows over the Internet. C-TV, the new TV portal due in the coming weeks, is expected to help consumers organize their videos—be they consumer-generated or shows that they have streamed or downloaded from other sites. But down the road, Comcast wants to make episodes of TV shows available online, giving it the ability to offer custom-made channels for shows like Lost or Desperate Housewives. ABC hasn’t agreed to that, but the lines of communication are open since both companies are eager to experiment in the broadband world, according to sources with knowledge of the deal.

Given the extremely tense relationship these two have had in recent years, the new spirit of cooperation is remarkable but also very good for both companies.  In the end it may mean profound changes in how media is bought and consumed and that will be disruptive to retailers who rely on DVD content as a traffic driver.

The Coming Camcorder Conundrum

Is the traditional camcorder going the way of the VCR.  Recent trends indicate that the answer is “yes” and its a big problem for camcorder makers and CE retailers. 

Sales of camcorders have fallen 6.7% to $785 million so far this year, according to researcher NPD.  In a recent article entitled The Coming Camcorder Conundrum, BusinessWeek points out that the traditional camcorder is being replaced by……. wait for it……. the Cellphone.  Consumers are also opting for low-cost, flash-based, disposable recorders.

“Many consumers are looking for less expensive, less complicated machines, and in growing numbers they’re adopting devices on the low end. Pure Digital Technologies specializes in disposable, point-and-shoot, flash-memory-based camcorders. Its latest point-and-shoot model, released in October, holds up to 60 minutes of video and sells for about $129.”

Pure Digital understands what most people are doing with video these days.  They are creating content for distribution on the web and Pure Digital is building disposable camcorders that interface to Google Video and Sony’s Grouper.  A YouTube interface is in the works.  Pure Digital believes that the traditional camcorder market, reaching fewer than 3 million units a year, will expand to more than 20 million devices sold as disposable and point-and-shoot camcorders proliferate.

The phone manufacturers are on the same track.  The quality available on phones and other low cost devices doesn’t compare to today’s high-end camcorders, but they make up for it in ease of use and price, and over time, the quality will get better.