I always wanted a brother (and got one in the deal when I got
married, which has been yet another huge win). But now I have
a not-so-evil twin brother in (nerd) arms, too.
Me on the left, Art Licht on the right.
We are frequently
confused for each other, for obvious reasons:
This picture was taken immediately after someone at the Americas Sales Meeting registration desk said "Art, you already registered."
Our discussion turned into a cataloging of the mechanisms for identifying disruption and leveraging the corresponding change in market size (or market existence -- like that for pre-fab salad), operating costs, distribution costs, or costs of goods sold.
First and best-known entrant in the art of projecting disruption is scenario planning, popularized by Peter Schwartz and now institutionalized through the Global Business Network . Scenario planning combines market and behavior analysis; you start with a big pile of possible disruptions or exogenous events, and boil them down into two ideally orthogonal forces that will shape the business under evaluation. You then look at the four combinations of extreme situations of those forces, and build a narrative describing what the world will look like. Scenarios aren't about right or wrong, or optimizing for one ideal outcome; the future is typically a melange of more than one scenario as the identified contributing factors shape the market with differing degrees of force. What you're planning for isn't a singular future but the disruptions that shape that future.
Schwartz's claim to fame is that his scenarios prepared Royal Dutch Shell for disruptions in the oil market in the mid-70s. What's bad for some parts of the market (consumers) can be good for others (producers). I participated in one full-blown scenario planning exercise around the future of silver halide versus digital photographs. The market driving forces shaping our narrative were picture taking versus storytelling and standalone devices versus networked devices. Consider the mid-90s timeframe and these were fair questions, and our scenarios painted some interesting potential investment areas and disruptions to the market. The narratives we dictated back to management contained some "stay the course" advice; if digital photography never attained the quality of analog film, or if networking remained the domain of low reliability modems and AOL, existing franchises around film processing, rapid print making, and analog image science were safe.
What we missed, however,
was that "storytelling" didn't mean using photographs for a storyboard
or digital scrapbook. One of our scenarios was called "Personal
Spielberg" describing a desktop digital editing and composition application. We
had the ideas right, but the players wrong; it's not the digital photography
players who built iMovie; it was Apple. And the demand for digital
home studio output exploded with YouTube. We didn't know what
a Long Tail was, and therefore we weren't looking for one. On a
more practical and personal scale, though, storytelling circa mid-2008 is
abundantly clear if you join
FaceBook; your photo albums show another face to your life, with or
without captions. Add some book lists, favorite music, share with your friends,
and perhaps the Moody Blues were right about the
Our scenarios were nicely constructed but completely missed
the dominance of social networking as a continually evolving story,
pictures as color commentary.
Scenario planning is much more of a strategy tool than an innovation
tool, because it builds on known and project constraints and asks
"What would you do if?" type questions. It doesn't push the boundaries
of using technology to change the strength or force of those constraints.
More recently, Kim and Mauborgne at the Harvard Business School have
promoted the
Blue Ocean model for innovation. The basic premise is that
"red ocean" markets are those already in existence, with
each player growing as a function of overall market growth and
through taking market share from each other. The blue ocean
strategy focuses on finding new, non-consumptive markets based
on the relative value of product or service features demanded by
consumers in those markets. The disruptions come from
combining the most valued features in non-intuitive ways to
create a new market. Bagged lettuce combines the produce aisle and
the convenience of the prepared foods aisle in the supermarket;
nobody knew it would be a billion dollar business. One of my
favorites (indicated by waistline) is Pret-A-Manger, the
UK based sandwich shop that combines the speed of ordering
lunch in a fast food outlet with the fresh ingredients and healthier
eating choices of a local deli. The name itself is a play on
pret-a-porter, the notion of high-end clothing (or food) ready to
consume without the time intervention of a tailor
or the guy slicing turkey one sandwich at a time.
Blue ocean strategies overlap in two ways with the digital world.
First, open source software is a key entry point to non-consumptive
markets. The best way to get someone who has never used
your software to try it, evaluate it, or take an interest is to remove
all barriers to entry. The analysts (and occasional) customers who
ask me "How will Sun make money by giving things away?" miss
the fact that "giving things away" is a blue ocean strategy that
expands markets, while "making money" is a red ocean tactic
to compete and take share in those newly entered fields of play.
The second dip of the network endpoint in the blue ocean is
the use of blue ocean strategic thinking to define new, small
markets and identify the attributes that drive consumers to
value them. It's Chris Anderson's
Long Tail as seen
by an MBA, not a web site developer. And I have to give
Anderson credit for the most recent, and possibly most
powerful, Long Tail model for describing innovation as the confluence
of more products, better, lower-cost distribution, and a transition
from mass-produced hits to niche-consumed special
interests.
Disclaimer: the closest I've ever been to an MBA was
going to a professional wrestling
event at the old Boston Garden with two friends from
Harvard Business School and a guy who used to call
himself
The Divine Bruce Yam (it involves Elliot Spitzer, so
we'll stop there).
That won't stop me from formulating a theory and
giving examples, though.
If I had to pick one thing that's been at the heart of
Sun's culture of innovation for 25 years, it's been the
insistence that everything be networked, and assuming
that the density of connectedness is monotonically increasing.
If you take our vision of "everyone and everything connected
to the network" (or, I could argue, "a network" where there may
be multiple, sometimes disjoint meshes), then getting in
front of the disruption wagon means looking at the
set of constraints facing your business, and relaxing them
to the point where you'd do things differently. That
spurs innovation in strategy, products, services, and
market mechanisms. Best example I can think of:
When Jeff Bezos realized that ordering a book from
an online catalog was independent from the source of the
catalog, and therefore you could relax the constraint
of equating "catalog" and "retail book store inventory."
As soon as you could order any book in print, amazon.com
had disrupted the scale of online retailing.
So what are the constraints you can relax, spurring the
need to think about markets or products in innovative
ways?
Time. Time can be bent in non-relativistic ways
by focusing on real-time as a customer service or data access
attribute. How long does it take to get to the piece of data
that you need to make a decision, refute a claim, or answer
a customer question? The answer isn't always about writing
neat SQL scripts or having an in-house search engine, because
they are bound by the meta data (or lack thereof) that enables
those result sorting mechanics. One part of the standard time-space
trade-off is to optimize for available space (for example, making
a large data set memory resident to avoid paging); however, space
constraints benefit from Moore's Law while time constraints do not.
Adding tags to data, building
indices based on context, and aggregating data based on user
input and feedback drives the time constraint. "Real time" also
refers to the latency limited world; if you aren't thinking about
solving these problems within the attention span of the average
click-driven user, someone else will.
Space. Not only the classic counterpart to time optimization,
relaxing a space constraint also means "removing assumptions about
the solution space." Example: Amazon's Mechanical Turk, a model
for "crowd sourcing" work across a much larger pool of talent.
Just as amazon.com flattened the book selling space by making the
entire books in print catalog available, any innovation that broadens
the input space (what can be worked on) or the transform space (who
can do the work) is going to drive a space disruption in the market.
Almost all of these space disruptions rely on networking technologies
to match the flattened input and transform spaces with each other,
be it crowd sourcing or the
Hadoop/MapReduce model of moving computation to storage instead
of the conventional reverse approach.
Developers or Contributors. Who are the developers for
your applications? Your own IT department, Facebook developers who
may engage with affiliated user communities, open source developers
whose work products you consume, or commercial software companies'
employees? Or some combination of all of them? The "new" definition of
developer includes content as well as application developer; user
generated content in training, virtual worlds, and support has
become de rigeur. Taking advantage of a larger pool of
developers and contributors is only possible if you relax some
of the classic constraints enforced around rights to use. Recently
I heard Philip Rosedale
(founder of Linden Lab,
creators of Second Life)
talk about building customer premises Second Life worlds;
Linden Labs gives away an edge of the network (and the rights they'd
normally assert to be the ones building that world) knowing that users will want
to populate those new boundary territories with walls, furniture,
props, and other items purchased in the 2L economy. Relaxing the
constraint about intellectual property distribution creates a new market player,
and by extension, adds developers to the 2L network of economies.
Relaxing a constraint often leads to a surfeit of a resource
formerly considered a rate-limiting factor. My introduction to this
surplus economy thinking happened in 1985, in the days when a "network
connection" meant you were on CSnet and could use a soldering iron,
when I was on the staff of the
Massive Memory Machine project. At that time, what was "massive"
is less than you get in a single DIMM today, but challenging
"conventional wisdom" about time-space trade-offs continues to drive
innovation in computing.
Today's coolness: I'm on my way to San Francisco, in Newark airport for a flight delay that is now just about as long as the flight itself (hey, mid-day thunderstorms will do that, no harm, no foul on this one). At this point I'm unclear as to whether I renewed my airport lounge membership, or what affinity card works where. So I tried, was given a polite "no", and then the guy in line next to me says "He can be my guest, he's a fellow hockey guy." All because I'm wearing my favorite "Miracle on Ice" t-shirt, attempting to channel a bit of the spirit of Lake Placid to our athletes in Beijing (wrong season, wrong sports, right idea).
Turns out my line-mate of the random rotation plays (more seriously than I do) in Chicago, is equally delayed here in Newark, and was just being nice. You want the antidote to air (or road) rage? Play more hockey.