alteraxion > Digital Entertainment Convergence | Consulting, Venture Capital, Strategic Intelligence.

Harmony: Real Smart

As we suggested in our previous post 'Treo 600 Music Quest' consumers should be able (and want to be able) to repurpose their digital media content on any platform so the recent announcement by RealNetworks of the introduction of its 'Harmony Technology' came as a welcome surprise.

As I discussed two weeks ago:

"While we're on the subject of music, I really thought that I should bring up an idea that I have been thinking about for some time and which Photo Matt recently wrote about that I think is a superb (if perhaps somewhat impractical) idea.  Essentially the suggestion is that if you buy an album on iTunes or another digital music store that you also get a hard copy of the CD shipped to you (or vice-versa, buy it at Tower Records and get the MP3 download version as a bonus for free!). 

Take this one step further and you wonder why this is not being used to promote the faster adoption of eBooks (which as I've stated before I'm beginning to find addictive) by allowing you to purchase a digital copy of a book like 'The American Prophecies' for $1.00 if you purchase the hard-copy for example.

You must consider that the implications of this go well beyond just music and could impact the entire transition from physical to digital entertainment products.  Why for example could we not buy a DVD of say the Star Wars Trilogy and then for a small additional fee (or subscription) get a Palm version to watch on our Treo 600 or a Portable Media Player. 

Projecting into the future where we can watch movies on our television, mobile phone, laptop, desktop, portable media player, portable games device and probably countless others that don't yet exist, will we really buy a movie that can only be played on one device?  Of course not, once it's digital we should be able to easily choose which device we want to play any digital media on without tedious restrictions of file compatibility or other.  This is the same reason that people are unlikely to buy two copies of the same movie but one on DVD and the other on VHS - now really what would be the point of that?!  If consumer and computer electronics companies want to increase the sale of their devices they need to sort out the digital content equation first (and fast).

Yes, I agree with you, what a wondrous mess this whole digital convergence is likely to be... but eventually smart entrepreneurs will come and provide us all with a great solution and we'll be able to finally enjoy our music, movies, games, etc. anytime, anywhere and on any device we want."

However, at present this idea of 'repurposing' content is exactly what content owners absolutely, positively, 100% do not want us to do.  Why?  Because someone somewhere dreamed a beautiful business plan (but deeply flawed in the practical aspects of business) where we would be buying a DVD for our DVD player, a digital copy for our PC, yet another for our Treo 600, and on and on ringing a cash register at every step...  As I've stated before, can anybody genuinely tell me how many people will go for this nonsense?  I guess that common sense is not something currently being imparted in business schools!

One of the most intelligent commentary that I have read on the topic came as Richard Wolpert the Chief Strategy Officer of RealNetworks recently higlighted at the Jupiter Plug.IN conference: "Incompatible media players are becoming a drag on adoption rates and growth curves.  The music industry still has to focus on making sharing music among a variety of devices as easy on the consumer as possible.  No more if you buy this, you can only play it with this device -- that's confusing for people and a concern of music labels.  Current device/store incompatibility will slow adoption."  Thank God, at least someone is thinking straight...

Strauss Zelnick, the CEO of media company ZelnickMedia, also had some extremely insightful comments when he stated that: "the four main trends that are driving true media convergence have begun to accelerate along with the economic recovery: digitization of media, globalization of that media, consolidation of media ownership, and conversely, fragmentation of audiences with the proliferation of new media channels." He goes on to say: "[Digital Convergence] will link billions of people, not just with words, but with music, video and other media. This will usher in possibly the most creative and disruptive time in the last 50 years of the media business."

Judging by all the dis-harmony that Real's 'Harmony' is generating it is obvious that companies are still not focusing on the key stakeholder: the customer.  All the battles to create technology 'lock-in' diminish the focus on delivering superior value propositions and customer experiences by other means - everyone wants to take the easy route...

Related:
Apple Shows Some Mean Color - Dan Gillmor
The Trouble with Tethering - Peter Rojas
The Apple-RealNetworks Disharmony - PaidContent

Effective Visioning

For a vision to truly effect change it must be:

1.   Articulated clearly and succinctly
2.   Capable of stirring emotions
3.   Versioned by many and regularly
4.   Repeated often
5.   Demonstrated by ongoing 'small wins'
6.   Refined with time and changing conditions
7.   Nurtured and encouraged
8.   Provided with nutrients
9.   Given time to germinate
10. Followed by actions

How does Netflix do it?

Early last year my company, alteraxion, explored the possibility of launching an online DVD rental service (such as the one offered by Netflix) in the UK.  We invested a significant amount of time studying the market and developing a business plan for it but in the end decided that proceeding on a standalone basis instead of in partnership with Netflix would be taking a risk that we were not prepared to assume.

Aside from the fact that Netflix had stated its resolution to proceed independently, one of the key issues influencing our decision at the time was the fact that with over 100 competitors Netflix controlled some 95% of this market - it still does. 

We have since continued to give a lot of thought to the question of why and how Netflix has managed to maintain its dominance against other equally well-funded competitors such as Wal-Mart.  In the end, we concluded that there can only be two reasons to help explain Netflix' success: 1) it is the very best at what it does and executes flawlessly or 2) its competitors are executing poorly or simply don't 'get it' thus handing the market to Netflix on a silver plate (for example, by contributing marketing funds which raises the awareness for online DVD rental services in general without first having developed a service of its own that can stand up to Netflix'.)

More recently we completed a short analysis assessing the impact of Netflix' forthcoming UK market entry to share our learnings and raise awareness among local players.  Some of the points raised are excerpted below.  Please note that while we had UK players in mind when writing our report it is evident that many of the issues apply equally to the hundred odd Netflix contenders in the US.  Our conclusion is that we continue to view Netflix' leadership as unassailable with current competiting offerings (in either the US or UK).

You can read the report by following the link below.

Historical & Cultural Entrepreneurial Constraints

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.

Building a Richer Future

When we dream of building a richer future money should be treated as nothing more than the means to get us there.

Treo 600 'Mini-Computer' WILL do Entertainment!

Following our recent post on the entertainment capabilities of the Treo 600, there's a interesting article in the NY Times by John Markoff (free access for the next 5 days only) which discusses the strategic and design changes taking place in the development of a new generation of smartphones with devices such as the  BlackBerry, Sidekick and others by SonyEricsson, HP and Motorola.  He also notes that many will be coming out with built-in WiFi capabilities - Palm are you listening?

More importantly for us he goes on to mention that "Cellular executives say they think that a market previously limited largely to business travelers and technology enthusiasts will broaden as networks add digital audio and video entertainment services to their offerings."  Finally someone is picking up on this!

An SVP at T-Mobile goes on to state that these devices have until now been a niche but that they have high hopes for a range of devices coming out right now.  I would respond that the industry first needs to get its act together before it can reasonably expect to see these devices becoming mass market.  There's a ton of work to be done there and I don't see anything at all anywhere being done about it. 

Time has come for these and other companies to shed their product-centric approach (push the product) and focus on what really matters - us - by taking a customer-centric approach (deliver solutions!).  Until they get this right I can assure you that there's zero chance of these devices ever becoming mass market.

Finally, a PalmOne executive goes on to state that he feels that the company "has a defensible advantage because of the physical design of the Treo 600".  Hello!?!?!?!  Anybody listening!?!?!?!?!  The product is only a small part of the equation!  Can they not see it?

Ultimately here is the warning: Palm cannot afford mistakes because if it does not succeed in its transformation efforts to position the Treo line to a wider audience the company may very well not be around in a couple of years time (even if it has proved the ability to reinvent itself in the past).

You may be interested to visit a 'little experiment' that we've been working on with our Treo 600 bloguide...

About Dreams

Our ability to dream has been and continues to be diminished by the everyday triviality of our discourse.

Confronting Change When Customers Smile

Following the emails that I have received and other feedback to my latest post 'Confronting Change', I would like to share with you some more thoughts on the topic - in this instance about change when customers are smiling.

When raising the issue of change this is what I often come across: "Our customers love our products!  They're all smiles!  Our sales have never been better!  We don't need to change a thing!"

Following this corporate wearesocoolwepissicecubes statement I point out that 99% of customers are extremely well brought up, model citizens who have strong values and go to church on a regular basis.

The response I get is: "Andrew, are you feeling OK?"

Quite OK thank you.  The point that I'm trying to get across is that the majority of customers will have a high propensity for politeness and will feel bad to make you feel bad because they are basically, well, very nice people.  The fact that they may not be actively voicing their opinions says nothing about how they really feel about your products or services (or vice-versa those who do voice their opinions are not necessarily representative of those who don't).

In short: "When a customer smiles it's not always because he/she is happy, they're quite often simply being polite."

However I also remind companies that this politeness stops short of reaching customer's wallets.  They will nevertheless very politely indeed exit for the nearest competitive offering if it offers them better value - and it's not all just about a slightly better, faster or cheaper product/service but about the complete customer experience!

Confronting Change When Everything is Moving Fast

This post continues my earlier discussions on 'Confronting Change'.

The latest volley of conventional wisdom (click here to read how I feel about this particular subject) posits that we now live at a time where technology is enabling us to recruit customers to help us design our products.  The principle is absolutely right but I believe that we are rapidly evolving to a stage where the expectation is that customers will do pretty much all of the design work and this is absolutely not right.  I now frequently come across: "We'll get [it] out to market and if it's not right our customers will tell us how to solve it."  Multiply this across thousands of products and services and the pressure on customers to help companies get it right becomes unbearable. 

This is particularly true in the consumer technology sector (both for products and services) where of late more and more offerings are coming out to market 75% finished instead of a more acceptable 98% - acceptable that is only if there is absolutely no way that it can ship 100% finished.  Of course there are competitive pressures but speed-to-market should not become an excuse for negligent work!!!  Furthermore, considering that we are rapidly coming to a point (if we haven't reached it already) where any 'kid with some pocket change'  (in another context a very good thing) can develop and market a new product or online service, I fear that things are likely to get much worse on this front going forward. 

Finally, I have not come across that many people questionning the long-term damage in consumer confidence that this is causing.  If customers were somewhat apprehensive about trying new technologies before we're closely approaching a point where we're scaring the bejesus out of them!  As an industry example, it may be worthwhile noting that for all the iPods sold out there people using digital music and MP3 players still pales in comparison to those making do with conventional CD's.  We're going to have to work a lot harder at getting the right products and services on the market to appeal to this audience.

Ultimately: "It is not the responsibility of customers to run or tell you how to run your business.  That's what they pay you for when they buy your products and services."

Confronting Change

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...

You can learn more about successful entrepreneurship by reading Fanaticism Is The Secret Weapon at VentureBlog.

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.