Let me start by saying that I know next to nothing about fluid dynamics. However, the little that I do know has helped to provide me with a great many insights of the 'digital customer' and by extension a very good vantage point from which to evaluate the future of digital entertainment convergence.
You see, I have painted a picture in my mind of the millions of digital customers as one massive stream of water rushing downriver while digital entertainment businesses are the dams whose turbines generate revenues as digital customers come gushing through them.
While I use the above analogy to gain a better understanding of some of the dynamics of digital entertainment convergence at the 'macro' level, I similarly apply it at a 'micro' level when evaluating a particular digital business offering and also at the 'nano' level to determine the level of 'fluidity' of a specific functionality for example. Here I will discuss mainly the macro level.
So let's look again at the key elements which form part of this 'digital stream'. We have water (digital customers), the dams (digital businesses) and the turbines (digital systems & processes). Each element has a particular function and objective. Water wants to flow to the 'other side' and it will pass through the dam's turbines to get there (digital customers want to use or purchase a digital offering); the dams want to contain as much water as possible to power their turbines (digital businesses will grow and thrive in proportion to the number of digital customers they are able to attract) and finally the turbines will attempt to use the flow of water as efficiently as possible so as to maximize the energy produced in the process (the more efficient a digital system is the more revenues it will be able to generate, the more profits it will derive and the faster it will thus be able to grow).
Assuming for a moment that two competing parties are targeting identical markets (the location of the dam and its associated water flows) and that their 'construction and engineering' teams have matching capabilities, the key issue will turn to which of these two parties is able to maximise the returns from its activities through the superior design of its systems and processes (the design and efficiency of its turbines).
Unfortunately, I have repeatedly come across situations where people believe that the mere fact of locating and building their digital business within close proximity to a large stream of digital customers will automatically grant them untold riches. There are two issues that they fail to properly take into consideration. Firstly, they are not operating in a void but have many direct and increasingly indirect competitors who will fiercely attempt to divert as much of the digital stream for themselves. Secondly, they spend significantly more time looking at the big picture of the water and the dam than the minute details of the turbine where all the energy will actually be generated.
Again, I am often faced with instances where managers are not immediately concerned (or worse, aware) that while their dam may be generating 400 megawatts their competitor is also generating 400 megawatts but failing to recognise that this competitor is able to achieve the same level of output with a dam that is two thirds the size of theirs through the use of more efficient turbines. Within the context of a dynamic digital environment there is little doubt that the more efficient operator will rapidly eclipse the other.
In conclusion, while many digital businesses are in the right location and have developed a digital offering of one kind or another the ultimate winner will be determined by which player is able to design the most efficient and fluid system to exploit the Digital Stream.
I would like to thank my good friend Stephane K. for the many conversations which have greatly stimulated my thinking on this as well as other issues.
I will never forget the day that I met an old college buddy with whom I had lost touch a few years ago. During our conversation we naturally caught up on each other's professional pursuits and upon learning that I was an Internet strategy consultant he looked at me shocked and said: "But Andrew, you studied architecture! How can you possibly know anything about business?!". It's funny how we always complain about business people's lack of 'creativity' when it is just as apparent that many creative people lack 'business' sense...
I began to think about this episode again today as I made the wonderful discovery of cartoonist Hugh McLeod's blog and his post 'How to Be Creative'. Hugh's blog is aptly named 'gapingvoid' and in it he discusses business issues with a creative flair and creative issues with a business flair (as well as other plain funny issues about everyday life).
I'm interested in all of them but I'm particularly attracted by his ability to convey complex business concepts with his extremely simple 'cartoons drawn on the back of a business card' - which also complements his income as everybody knows that you can't make money by blogging alone...
Thanks Hugh, I will certainly be keeping a regular and watchful eye on your forthcoming cartoons and writings.
I have just returned from a business trip in Paris via Eurostar which should have provided me with the opportunity to catch up on a large stack of unread news and articles. However, one of these by my friend the economist Reuven Brenner and entitled 'Unsettled Civilizations' so engrossed me that I did not get much other reading done...
Like many, I consider Reuven to be one of the foremost thinkers in the area of entrepreneurship and its economic benefits. His knowledge and insights are truly remarkable and I only wish that more companies and nations could learn to apply the many lessons that he teaches us.
Although this article starts off on the matter of how the US can deal with Iraq you will find that its scope goes significantly beyond this and as he states early on "today's conflict  can be viewed as one between 'mobile' and 'immobile' civilizations whose members can be found in every society".
Among others, he asks and answers two important questions: - "Why have so few societies succeeded in developing deep and open capital markets?" - "How did the West stumble on the maze of institutions that laid the foundations for its 'mobile' civilization?"
One of the comments that struck a particular cord from my own experiences living and building a business in Venezuela some years back is how "institutions are needed to give an increasing number of young people hope and a stake in the future [without which instability ensues]".
Although I know that many will feel uncomfortable with the word 'dreaming', I strongly believe that a 'future vision' [dreams about a richer future] are much needed to motivate an individual or a nation into taking the actions required to achieve this vision. The main issue thus becomes how and what vision to state in the first place and this article offers a good starting point.
To say that we are confronting change on an unprecedented scale cannot even begin to describe the disruptions facing us in the coming decade. From the continued growth and pervasiveness of the Internet and the resulting changes in consumer attitudes and expectations towards business and government to the constant introduction of new innovations and technologies across countless industries we are living through one of the most momentous times in the last century.
So how are businesses and governments confronting these changes? To be frank, most (consciously or unconsciously) currently have their heads burried deep in the sand and are oblivious to the threats and opportunities that lie ahead.
It is important to understand that there are two kinds of attitudes that motivate change initiatives by governments and businesses worldwide:
In a rapidly changing environment, there are those that proactively rally their resources in a quest for "opportunities" across new frontiers while others only respond reactively to "threats" while trying to protect their existing dominion.
True leadership (usually closely followed by economic success) can only be found amongst the first group as the other scrambles and struggles to eat from the leftovers.
Many will come to me and say: "Andrew, what are you talking about? Look at all the initiatives that we have in place. We are doing something about it!". I have to respond that yes they are often doing 'something' about it but then question them by asking how 'seriously' their organisation is taking these initiatives. By seriously I mean in the sense that "are you absolutely 100% wanting this something to succeed and will stop at nothing to make it work?".
The response after this is a bit different: "Well our CEO/Chairman doesn't fully support this yet"; "It's not that critical to our business because it's small compared to the rest" - you get the picture... Essentially these organisations are not playing to win they're just playing! How motivating can this be for the managers and employees in these organisations!? What if this was football and your coach told you that he loved the game but you really felt that he didn't care that much if the team won or lost... I wish that I could have such a cavalier attitude when tens or hundreds of millions are invested to fund these initiatives...
I've so far only discussed governments and established businesses but there is a third crucial category - entrepreneurs. Why do I consider that entrepreneurship is so vital to be included separately here? Because an entrepreneur can never start a venture with a business plan premised on threats. He/she will always have to start a business in the pursuit of new opportunities as no investor will be prepared to fund them otherwise.
So what's so important about having entrepreneurs pursuing these opportunities? Well there's one simple prevailing fact about entrepreneurs: in order to succeed they know that they must create something that is somewhat or significantly better than what is currently available because customers will otherwise have absolutely no reason to flock to their products or services. Entrepreneurs are the ones who risk to dream the future, who have the courage to succeed, the ones who must have the motivation and energy to make it work because there isn't a nice 'cushion' to sustain them if things don't work out - they have to make it work. Naturally not all entrepreneurs will approach their business in this spirit and may also fall in the 'play to play' category but the odds are that most will.
In times of rapid change in particular, a country driven by entrepreneurs pursuing opportunities will over time completely outdistance its competitors. For example, we recently presented an analysis demonstrating how a comparatively simple competitive advantage compounded over 10 years could represent the difference between one company achieving $10 billion in revenues while its peer only managed to reach $1 billion over the same period. The biggest surprise actually came from finding out that people found this surprising!
As a businessman, futurist and change agent I often find myself struggling to get this message across and a wise friend suggested with the quote below that this blog may just be the right forum to do this.
"Reflection instead of confrontation, articulation versus confusion, persuasion under candlelight..."
I personally believe that much more agressive means are necessary because time is rapidly running out and I feel that my sense of urgency is not shared among many CEO's and politicians but as I said my friend is much wiser than I am...
How are you or your organisation confronting change? This article seeks to generate debate. Make the most of it. Use your mind, use your voice, use your pen, share your thoughts! Post your comment below and share your own experiences with the many global entrepreneurs (or will-be entrepreneurs) who visit this blog and are at this very moment going through the same travails as you are or you can email me if you prefer. I will write a follow-on piece to disseminate and share your views with others and hopefully together we'll build the pressure to get things moving! Thanks for visiting and a particular thanks to all those of you who have already exchanged your remarkable stories with me and who continue to inspire and motivate these discussions.
As previously discussed, Morgan Stanley's Internet Trends report makes for a fascinating read and its optimism for the future of the Internet is refreshing after years of doom and gloom for the many players in this industry.
One particularly interesting slide (click thumbnail on right) highlights the number of Internet users by region worldwide. To my utter astonishment I discovered that Europe now has more web users than the US - some 230 million vs. 210 million!
The issue, as this Business Week article discusses, is that there are few non-US companies that have managed to exploit a pan-European footprint - let alone a global one.
Whether it is because of lack of resources, a limited vision or a cultural bias, European Internet ventures have often only managed to consolidate leading positions on a local basis - a local market which at the most encompasses 10-20% of all European Internet users and leaves millions of other potential customers and revenues untouched.
I have often had the opportunity to argue about this point with web entrepreneurs who are persuaded that a leading position in their home market will protect them against outside competitors or that in the worst case they'll be bought out by the competition. I consider the first argument to be shortsighted and the second to be wishful thinking as the realistic outcome of either of these is extremely slim.
As a good friend commented, when the easy money was flowing all the investors came rushing in but the moment the going got tough they deserted those companies that needed their support the most. Now many good companies are gone and the time lost cannot be regained - at least not at a reasonable cost.
As an unattributed quote mentions: "In times of rapid change the learners inherit the earth while the learned beautifully apply their skills to a world that no longer exists." Time to wake up and smell the coffee...
Well, anybody who doesn't at this point see that the Internet is not only here to stay but is also the most disruptive technology to have emerged since the printing press would do well to read Morgan Stanley's Meeker report on Internet Trends released May 2004. The major points of the report are outlined below:
Key Underlying Trends
1) We believe the Internet should prove to be the growth distribution channel of the decade
2) Search/find/obtain (SFO) is becoming a global reality and may be the next ‘killer application’ of the Internet
3) Residential broadband (with an estimated 88MM global subscribers as of CQ4:03) has hit critical mass, and pricing continues to decline…
4) The underlying growth rate for global Internet usage remains strong and global markets are ramping
5) Online continues to gain share from offline
6) "Mind share" well above "market share" demonstrates growth opportunity
7) We view Internet momentum/opportunity as compelling compared to other media
8) Consumer appears to be alive and well for key technology-related purchases. Small to medium-sized businesses (SMBs) have benefited
9) Technology platform-driven convenience, low (and transparent) prices/pricing, uniquely strong 24x7 customer service, and extensive selection have been key factors behind growth
10) Online advertising trends could surprise on the upside & online premium services have begun to ramp…
11) Handful of industry leaders gaining share…operating leverage with inherently scalable models is powerful
12) Positive earnings surprises can be, more often than not, followed by more of the same…
The good news is that according to a recent article "Europe Hits the E-Mall" in Business Week "with Internet connections and broadband growing across the continent, Europeans are finally starting to get serious about buying online" and that as Geoff Hutton from Microsoft MSN Europe states "despite the boom and bust of the dot-coms, Internet usage has continued to grow the whole time [in Europe]".
The bad news is that "There's just one let-down in this new Internet love affair. Most of the top online brands are American companies that have parlayed easier access to capital and success in their home market into dominance of the European web."
I can pick up a hint of a condescending tone when BW goes on to state "True, in the heady days of the boom, Europeans dreamed big and launched ambitious local ventures such as e-tailer Boo.com. But those outfits are long since defunct." I know, they have a point, it just hurts when they rub it in... Don't even get me started on the Boo thing... Any half-witted businessman could see that it was nonsense... and Fortune put them on the cover?!
But that's not all. "Now the Americans are picking up the pace" and are "setting off a scramble to lock in their lead." MSN's Sutton adds "We think it will be increasingly difficult for local competitors to develop new services." It gets worse. "Investment bankers are combing the continent for acquisition candidates." Now to top it all off we're getting bought by the dozen on the cheap... well not quite on the cheap as "Yahoo! plunked down $577 million in March to buy Kelkoo"...
The only country that appears to have seriously dented one the behemoths, Amazon, is (OMG!) France where "local champions FNAC.com, CDiscount and Alapage" have put up "fierce competiton". At least somebody is putting up a fight!
The conclusions. "American Web sites remain convinced that they enjoy an unbeatable advantage thanks to their global scale." "For European entrepreneurs, that probably signals the demise of any dreams fo building their own Web giants." Never too late to put up a good fight... even if after squandering fortunes we're going to have to work hard to convince investors that we have the mettle to deliver...
Now aren't all these news a great way to start your day fresh and motivated! Time for European entrepreneurs, CEO's and politicians to get their gear into shape and to start demonstrating that we're not 'euro web wimps'.
In the meantime I'll get on with buying my books at Amazon, auctioning my wares on eBay, getting my news from Yahoo! and my email from Hotmail while searching for yet something else on Google...