Monetizing Internal Capabilities: Find New Growth by Looking at What You’re Good at, Not Just What You’re Known For

25 Feb

“Add new features. Sell more. Increase marketing spend. BE MORE INNOVATIVE.” These are just a few of the myriad ingredients in the pantry of company executives charged with the daunting task of cooking up revenue and profit growth on a consistent basis. In a world where competition is increasingly attacking from all angles – crowdfunded Kickstarter campaigns, agile startups and international firms, in addition to your traditional competitors – identifying new growth opportunities is not as easy as many shareholders would prefer it to be.

A handful of firms such as Apple, P&G and Amazon will grab headlines and spurn management professors into churning out book after book on how to be innovative and create disruptive products and services that “wow” consumers. Sure, these companies are great and serve as models of excellence when it comes to innovation, but we’ve been increasingly intrigued by companies that have found new growth opportunities not through innovating the products and services they’re known for, but instead by commercializing what they’re good at – their internal capabilities.

From R&D and supply chain logistics, to organization-wide functions like IT and HR, we have found examples of companies that have created new services through marketing their internal capabilities to external customers. Capabilities are the business processes, supporting systems and technologies that make your business to run. Capabilities enable the products and services conceived and developed by your organization to hit the shelves in the market. Historically, these capabilities have been nurtured so that firms may gain a leg up on the competition, but increasingly we are finding examples of organizations that are turning proprietary capabilities into new businesses in an effort to diversify revenue streams, add value to their customers, and expand their customer base by entering new industries.

Let’s examine a few case studies of firms that have created entirely new service offerings by marketing their proprietary capabilities.

Disney

Creativity, teamwork and innovation have long been the hallmarks of the culture at Disney, a company that has built a reputation of delivering entertaining, family-friendly customer experiences over the past eight decades. The culture at Disney became especially relevant to the business community after appearing in the celebrated book In Search of Excellence, which profiled the world’s most successful companies and identified the themes that led to their success. Disney’s success, the book argued, was driven by the firm’s culture. “How do they do it?” executives around the country soon asked. Disney answered.

The Disney Institute formed in 1986 as a vehicle for individuals, teams and entire organizations to learn the customer-centric methods that have made Disney so successful. Part management consulting firm and part executive education program, the Disney Institute has been retained by school systems, hospitals, foreign governments, Fortune 500 companies and small-scale entrepreneurs to teach leadership, customer experience, brand loyalty and training.

Fees from the Institute’s services range from under $1,000 per person for a one-day workshop to hundreds of thousands of dollars for extended consulting engagements. Net revenues from the service are negligible to Disney’s bottom line – the company had $42.3 billion in revenue in 2012 – but it has no doubt exposed Disney to a host of potential future business partners and given it perspective on a range of new industries.

Bellin Health

In 2002, Green Bay-based integrated healthcare delivery system Bellin Health confronted a startling fact: healthcare costs for its own employees were projected to increase 30% to $13 million, in just one year. This unsustainable trajectory of rising overhead led Bellin to develop strategies to improve the health of its employees, rather than just treating health concerns. The organization looked at the various factors influencing the health of its workforce, and ultimately designed a system that saved Bellin $15 million over the following nine years.

Local organizations took notice of Bellin’s success and approached it in order to learn how to rein in their own rising healthcare costs; Bellin’s Business Health Solutions business was born. Bellin was able to parlay its internal cost savings initiative into a service that has allowed organizations such as the Northeast Wisconsin Technical College and the Foth Companies to save $500,000 and $250,000, respectively, in their organizations’ healthcare costs. Read the rest of this entry»

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Custom Experience Design: Lessons from Startups

28 Nov

From traditional management consultancies to boutique design firms, everyone seems to acknowledge the role customer experience plays as a point of differentiation in today’s increasingly competitive landscape. For the most part, thought leaders agree that customer experience management requires leadership alignment in order to foster a consumer-centric organization, as well as tools and processes to continuously measure and refine the customer experience. However, the key element that seems to be missing in today’s literature around this topic is how to actually design the customer experience.

So, how does one actually go about designing a compelling customer experience that builds a loyal fan base, provides a layer of differentiation and drives revenue growth? Ask a startup founder.

Identifying pain points in the customer journey

Interview just about any successful startup founder or CEO, and more often than not you will hear some variation on the following sentiment: “I was frustrated with the current offerings, and realized there had to be a better way.”

Trunk Club CEO Brian Spaly articulates his startup’s reaction to the shopping experience for men’s clothing: “The big challenge for most guys today is the overwhelming amount of choice on the internet and the unattractive environment of the retail store. We solve that problem by sending an edited, personalized assortment.”

For Dwolla founder Ben Mine, the customer experience of dealing with merchant interchange fees needed revamping: “I got really obsessed with interchange fees and how not to pay them.  Every time a merchant gets paid with a credit card they have to give up a percentage.  In my case, I was losing $55,000 a year to credit card companies.  I felt like they were stealing from me — I was getting paid and somebody was taking money out of my pocket. So I thought, how do I get paid through a website without paying credit card fees?”

In these cases – as well as myriad others in the startup world – a pain point in a customer experience led to a flash of insight, around which a business was designed to circumvent the pain point.

Defining the target customer segment

When identifying opportunities for improvement in a customer experience, regardless of the industry, you cannot forget about one crucial variable: the customer. One only has to look at the headlines for retailer JC Penney to see what happens when you ignore your core customer when designing the “ideal experience”.

After retail star Ron Johnson was brought onboard as CEO, he tried to revamp the storied brand of the struggling retailer and reinvent the customer experience. The problem, however, is that Johnson designed the new “ideal experience” for a higher-end, upper-middle class customer rather than for the value-seeking customers that had been loyal JC Penney shoppers for years. Johnson’s attempt to apply his magic from Target and Apple – retail experiences he previously designed – to  JC Penney illustrate the extent to which you must design the customer experience around your most important customer segments, or risk alienating those that delivered your success in the first place!

Again, startups provide a valuable learning experience in this regard. Men’s retailers Bonobos and Trunk Club offer experiences for fashion-conscious, time-starved men, while Daimler’s car2go is designed for on-the-go urban dwellers. These companies have thrived because their services solve the problems of a specific customer, instead of trying to be everything to everyone.

Redesigning Your Customer Experience

Who are your customers, and what does their customer experience look like today? As the startups previously discussed illustrate, customer experience design is not interchangeable with customer service improvement; instead, analyzing the customer experience can lead to insights that drive completely new services and businesses. If you want to drive loyalty and create a differentiated experience, borrow a page from the startups’ playbook and turn a pain point into a point of differentiation.

Sweating the details: odor eliminating disposable laundry bags

30 Sep

Like millions of busy, health-conscious professionals around the world, I strive to hit the gym before work as often as possible. My gym is conveniently located on the same block as my office, so after a grueling workout, I hit the shower and head into the office to start my day. Just as my workouts leave my lungs and muscles exhausted, so too are my gym clothes, which are transformed into sweat-soaked relics of a solid gym session.

Image

Conveniently, my gym provides disposable plastic bags to store my sweaty gear until I’m able to dump it in the laundry – 12 hours later when I get home from work. The bags protect my coworkers from the foul odors that are no doubt emanating from my stinky gear, but at the same time the bags create an environment that fosters the buildup of bacteria and “funk” that somehow overpowers even the most intense laundry detergents and washing cycles. What ends up happening is that the life of my gym clothes is cut short. As I’ve repeated the experience of dumping my dirty workout clothes into the laundry countless times over the past several years, I’ve realized that there is a real opportunity to design a solution to improve the disposable gym bag.

The bags that my gym and countless others around the world provide to their patrons are pretty much identical to produce bags that you’ll find in a supermarket. This solution is cost-effective and convenient, but doesn’t address the issues of odor and moisture that are by-products of the fitness session. What I imagine is a bag with an odor-fighting and moisture-wicking liner that extends the life of gym clothes by pre-treating them before they are laundered. Just as a box of baking soda in the fridge eliminates odors and  a slice of bread in a jar of brown sugar absorbs moisture and prevents clumping, so too could a treated laundry bag provide the same benefits for dirty clothes.

The market for such a solution is huge – according to the International Health, Racquet & Sportsclub Association, there are almost 30,000 health clubs with 51.4 million members in the U.S. alone. These 30,000 facilities all produce millions of pounds of sweaty and stinking workout gear that, for the most part, fester in a pile of dirty clothes until the gym-goer feels compelled to run a load of laundry. A “better bag” would be an easy sell to many of these health clubs, which attract members partly on the basis of amenities offered.

In addition to the B2B sales of this product to health clubs around the world, there is a compelling B2C market. The success of Glad’s innovative scented garbage bags, leveraging the Febreeze brand, shows a consumer interest in “premium plastic bags”; I imagine that a treated disposable laundry bag would be an attractive offering for travelers, students and a range of other consumers interested in temporarily storing odorous possessions until they can be washed or disposed of.

Once developed and launched, the brand would be a natural acquisition target for bag manufacturers such as Hefty and Glad.

Listen Local: A Pandora for Live Music

27 Jul

I’ve always been a huge fan of music, but never a big concert-goer. Personally, I prefer listening to music to watching it, but when I do make the occasional trip out to support my friend’s band or am convinced to buy tickets to a show, I always end up having a good time. I would love to be able to check out more local bands, but where do you even begin?

In DC and every other major metropolitan area in the country – and around the world, really – there are numerous music venues hosting dozens of bands of various quality and success every week. At some point, as I’m sure psychology professor Barry Schwarz would agree, the seemingly unlimited options for live music entertainment become overwhelming to the point where making decisions becomes an anxiety-inducing endeavor since you’re always left wondering, “Did I make the best possible choice given all other existing options? This band is good, but what’s the opportunity cost of staying here versus trying to catch the 9:30 show at the venue down the street?” This might explain why you won’t see too many economists crowd-surfing at music clubs, but it doesn’t address the issue of choosing which band to check out the coming weekend.

Sure, there are myriad “music discovery services” such as TagWorld and Last.fm, not to mention the recommendations from friends’ Spotify and YouTube posts to Facebook, but these services are largely still designed for mainstream, studio-produced music. What about the local music scene? Gruvr helps users locate local concerts, and countless other websites profile and spotlight local musicians, but all of these options are largely aggregators of music. As in other digital media, I think it’s time to evolve from aggregation to recommendation.

What if there was a Pandora for live music?

Just as Amazon can leverage my purchasing and browsing behavior to make (often spot-on) recommendations, Pandora “learns” from users’ listening behavior and plays music that the user is likely to enjoy due to similar traits such as melody, harmony, form, composition and lyrics.

Pandora’s algorithm uses almost 400 attributes to classify each song in its library, and codifying each song required about 20-30 minutes of human analysis per four-minute song. Clearly, this level of granular analysis cannot be feasibly applied to a Pandora-like service for live music, but I think a combination of self-identification and crowdsourced voting would be sufficient to build a product that users, musicians and venues could all greatly benefit from.

A typical band interview always has a question along the lines of “So how do you define your sound?” Bands, tasked with the challenge of defining and labeling their art, usually respond with a reference to other bands that serve as reference points for the interviewee and readers. The Local/Live Pandora I’m imagining would allow bands (or their promoters and fans) to self-identify with genres, artists or songs catalogued in Pandora’s Music Genome Project. Users can weigh in regarding the degree of accuracy of bands’ self-identification, voting whether the sound is similar and making recommendations for a better match. Over time, enough data would be entered to produce a fairly accurate analysis.

Because the point of the service is to introduce users to bands to see live, the service would leverage smartphones’ geo-location features and the algorithm would only introduce users to bands that are playing within a certain radium and within a certain timeframe. You could also imagine being able to configure personal settings, so if you were visiting Chicago in a few months, you could get a sense of the local music scene and stumble upon a new band to check out.

Obviously the production quality would not be as high as it is on Pandora or similar services, but the point isn’t to use the service as a music player; instead, it’s a tool to identify bands to see live. This implies unique revenue streams that could be harnessed. For example, imagine you sign into your account and the service pushes you a band that you might be inclined to like, since the band or song has been identified as being similar to many other bands and songs that you have already liked (perhaps pulling data from users’ iTunes, Pandora and Spotify accounts). A notice would pop up, notifying you of an upcoming show. You could then click to purchase tickets, and the service would take a cut of the ticket sale; in effect, the service becomes outsourced marketing for local venues, who would be willing to trade a share of ticket sales for increased attendance (and therefore increased bar sales).

Is it just me or is this music to anyone else’s ears?

Don’t Let Shareholders Hold Innovation Hostage

31 May

The markets and regulatory agencies governing publicly traded companies should borrow a page from the NFL’s playbook and purposefully manage the division between the real and expectations market, argues Roger Martin in his latest book Fixing the Game. In the (slowly) retreating shadows of the recent financial crisis, Martin rails against modern day American capitalism, arguing that CEOs need to address consumer needs instead of focusing on maximizing shareholder value.

Through the lens of agency theory, Martin discusses the pitfalls of tying managers’ incentives to the expectations market (stock market) instead of the real market (operations, cash flow, products and services, real customers). His running analogy compares the idea of shareholder value maximization to the way in which the NFL is proactively managed in order to ensure that the fans’ experience is maximized; for example, players and coaches are forbidden from gambling on football, which could influence their on-field performance, and salary caps ensure a more equitable distribution of capital, theoretically leveling the playing field for all teams. The analogy falls apart at times, but the general point rings true: companies should not be held hostage by their shareholders.

Martin’s criticisms of capitalism’s emphasis on the expectations market at times blur the lines between policy and management recommendations and a moral diatribe. He essentially argues that hedge funds have no societal value, where as venture capital and private equity firms play a prominent role in facilitating the creation of jobs and game-changing innovations.

Nevertheless, I agree with his central tenet that if businesses successfully address the needs of customers, shareholders will subsequently benefit; however, if the focus is exclusively on the shareholder, customers don’t benefit. Even former champion of shareholder maximization, Jack Welch, admitted that an expectations market-centric view of management is flawed: “On the face of it, shareholder value is the dumbest idea in the world,” he said in a 2009 Financial Times interview.

Focusing on the demands of external shareholders instead of meeting consumer needs stifles innovation and threatens long-term gains at the expense of short-term gains. Shareholders are not interested in well-designed products, services and customer experiences; instead, they analyze businesses through quantifiable financial metrics such as cash flow and profit margins.

Especially in today’s context of explosive startups and a wave of tech-driven IPOs, we must be cognizant of the fact that entrepreneurs are driven to build game-changing products and services above all else. The Mark Zuckerbergs of the world don’t need the fund manager of California’s pension system telling them how to run their business, after all.

Martin believes the shift of focus from shareholders to customers is inevitable, because, ironically, this way of thinking makes more money (as Steve Jobs proved at notoriously investor-averse Apple). Fixing the Game is a refreshing read, at least for all of its sports references, and hits upon themes that will no doubt take center stage in this year’s presidential election. Martin has my vote.

 

 

“To Done” Smartphone App

16 May

"To Do" list 2.0, but with room for improvement...
Everyday, we wake up with a list in our heads of things we need to do that day. There are groceries to buy, errands to run, work tasks to complete, and happy hour beers to drink – some things on our “to do” list are more of a chore than others, but they are all things that need to get done one way or another.

Some of us write reminder notes on our hands, scribble grocery lists on sheets of paper or use our smartphones to remind ourselves of what we need to do. Oftentimes any or all of these methods are sufficient to remind ourselves what we need to do , but just because we remember to do a task doesn’t mean it’s not a pain in the ass to do so. We’ve successfully leveraged technology to make our work more efficient (I agree, this is highly debatable), so why not use it to make our “to do” list easier, cheaper, and more fun?

The “To Done” smartphone app I envision does just that, and has a unique business model with multiple revenue streams to boot. Yes, there are literally dozens of “to do” apps and productivity-boosting apps out on the market, but none of them fully leverage the inherent capabilities of our wallet sized computers. What these apps lack, and what I’m jonesing for, is the ability for the items on my “to do” list to proactively reach out to me at the most opportune times and remind me that I need to buy X, do Y, or go to Z. Phone alarms and calendar-synced alerts are a step in the right direction, but what good is it for me to have my phone remind me at 2pm that I need to buy toothpaste when I’m in the middle of an afternoon of meetings? Not only will I forget by the time I’m actually out the door, but I’ll also be annoyed by the inefficacy of the system and abandon it.

What I propose is to leverage the geo-location services of smartphones and a database of product SKUs and conditional commands to build a better and more proactive “to do” list: the To Done app (because it makes your tasks so easy to check off that you might as well consider them done! Thanks but no thanks Mr. Draper, I have this one covered).

Take my list of tasks for example. What if I could choose from a host of SKUs for my favorite toothpaste brand, my laundry detergent of choice, or anything else I need to buy? To Done would partner with retailers like CVS, Target and Harris Teeter, among others, to create a vast database of all the SKUs carried by those retailers. I could then choose a specific product, and anytime I walked by a CVS, for example, my phone would ping me: “There are 6 items on your To Done list at the CVS 150 yards away at 888 Smith Street.” At that point, you could pop into the store to pick up your items, or even better, you could purchase the items on your phone and scoop them up. The latter would require a closer partnership with the retailer’s POS system, but this is clearly where the mobile payments industry is heading anyways, so perhaps a third party developer could be brought on board to add this functionality.

Retailers such as nation-wide pharmacy chains and grocery stores would be great partners for the development of this app, because it would give them incredibly valuable insights into the purchasing habits of local consumers. Over time, they could identify trends such as “Washingtonians love Crest more than Colgate, and they buy a ton of Cheerios in January but not so much in August,” trends that could allow them to make strategic decisions about their inventory management systems. Access to consumers within a close distance of their stores is very valuable to retailers, who would be willing to share a percent of sales – or perhaps pay to join a platform to access these consumers  – made through the To Done app. Additionally, retailers could provide targeted discounts or leverage their customer loyalty systems incentive app users to buy shaving cream at this CVS, rather than that Duane Reed across the street: “Hi there, it looks like we have 6 of your To Do items in stock; why don’t you buy them now and we’ll give you 15% off!?” Sounds good to me.

In addition to facilitating the purchase of products on your “to do” list, To Done could help you with other tasks based on your location and/or pre-defined parameters. For example, let’s say you need to water your house plant. Why not have that be a recurring To Done item and have the app ping you every other Tuesday when it detects that you are at your house? The applications of this type of proactive, location-based offering are endless, and with the right algorithms, the To Done app could get smarter over time by drawing insights around patterns in your purchase and task history, making recommendations where it sees fit.

Developing the app itself is not a significant investment itself, but landing the high-level retail partnerships that truly make the app a valuable tool would require a talented business developer. Additionally, partnerships with players such as Foursquare, Google and others would ensure the app is a truly innovative offering, and not an “also ran.”

What do you think – anything you’d love to see checked off your To Done list??

In Defense of the Dividend Tax

14 Mar

A few weeks late to this conversation, I admit, but I finally had a chance to catch up with my long overdue writing “assignments” and have had a burning desire to write this piece.

“Seldom has there been a clearer example of a policy that is supposed to soak the rich but will drench almost all American families.”

Recently, the Wall Street Journal published an article railing against Obama’s 2013 budget, which included a proposal to triple the tax rate on corporate dividends. Not surprisingly, the author’s position was that this was an atrocity, an attack on the middle class and further “proof” that the Obama administration’s economic policy is stifling growth. The author essentially argues that the double taxation of corporate profits are an unnecessary burden on flag-waving Americans, the tax increase disproportionately affects older Americans reliant upon steady income streams produced by dividend-paying stocks, stocks are less valuable because they are now discounted, and that the correlation between dividend tax rates and corporate dividend payments implies that companies won’t pay out dividends now because of the change in tax policy.

I find this argument to be flawed on many accounts, mainly on the grounds that it assumes that dividends are essentially an unalienable right of investors that their payment is an assumed “business-as-usual” responsibility of corporations. Additionally, the argument completely ignores the bigger picture of the tax hike’s intended affect on the economy as a tool to indirectly encourage corporations to direct their funds towards investments other than to their shareholders’ bank accounts.

First of all, corporations have no obligation to pay dividends, and they will not be adversely affected by this tax hike. Dividend-paying organizations have been able to grow their revenues, go public, and pay dividends in the first place because they introduced products and services that met a market need; their success is due to the customer, not to the shareholder. Take Apple for example – the tech giant is sitting on  nearly $100 BILLION in cash and only now are analysts so sure of the fact that it “is likely to declare…a dividend before the year is out.” Apple didn’t become a $500B company by placating investor demands – and really it, or any other company with  any significant value proposition – so investors should be lucky to have dividends at all in the first place!

Additionally, the author tries to paint a picture of a sad, old wrinkly fart that is more or less going to be financially ruined because of this tax hike: “IRS data show that retirees and near-retirees who depend on dividend income would be hit especially hard. Almost three of four dividend payments go to those over the age of 55, and more than half go to those older than 65, according to IRS data.” This is partly true. The 55+ demographic obviously comprises a disproportionate amount of the stockholders in the U.S. because these are consumers at the acme of their income-earning years, but let’s be real: anyone who “depends” on dividend income doesn’t really depend on dividend income. If you are in a place financially to where 25% or less of your investment portfolio (surely you’re diversified to the extent that dividend-paying stocks account for  less than a quarter of your investments, right?!) is your main source of income, then I have to imagine that you’re not going to be that adversely affected by this tax increase; particularly if the companies in which you’re invested stop paying dividends and instead use that excess cash to buy back stock, or invest in their operations – which could in turn further increase the value of your portfolio!

The author completely misses the point – tax policy can drive economic growth. Regardless of the tax rate, the significant majority of shareholders of dividend-paying stocks are not going to take that windfall and immediately recirculate those funds back into the economy; however, if companies are de-incentivized to pay dividends, they have a stronger impetus to invest in initiatives that create value for their customers, themselves, their shareholders…in essence, the economy as a whole.

Increasing the dividend tax might force a niche demographic to rethink the allocation of its investment portfolio, but more importantly, this proposed change in tax policy has the potential to directly impact the economy. That’s a good thing, right?

 

“Retail Experience” Innovations at LivingSocial

15 Feb

On Monday, LivingSocial announced the grand opening of a “first-of-its-kind live events venue” in downtown Washington D.C., where the rapidly growing daily deals business will offer customers unique experiences to its customers, and a testing ground for its merchant partners.  The “retail experience” space is an innovative move for the company, who is looking to expand its image beyond that of a “coupon company.”

   (image courtesy of Washington Post)

The company’s new venture is notable for many reasons, and I am particularly anxious to see how it pans out, as I’ve long been bullish on the daily deals business model and do not think it is sustainable in its own right.

Even though the company has expanded its user base to more than 60 million members, and offers deals in 647 markets worldwide, LivingSocial and its closest competitor Groupon have yet to turn significant, sustainable profits; figures from Amazon’s 10-K report imply that DC-based LivingSocial suffered a net loss of $558 million in 2011, on revenues of $245 million (Amazon has a 31% stake in the company). Those 60+ million consumers are proving to be very expensive to acquire as repeat customers.

Is a retail experience venue like that of LivingSocial a one-off innovative initiative, or a game-changing model?

Most of the criticisms charged against daily deals businesses have been around the lack of long-term gains conferred to their merchant partners. Mom and pop shops often find it challenging to keep up with the demand created by a one-off deal, and they receive only a fraction of the proceeds from those deals (usually 25% or less of the face value of the goods and services the coupon offers). Additionally, cost-conscious consumers have little reason to be loyal to one daily discounter over another; as long as they can get half-off pedicures and sushi rolls, it doesn’t matter what company sells them the voucher.

What is interesting about the retail experience, however, is that it allows merchant vendors to more proactively manage their expenses and the customer experience. Rather than providing consumers access to a brand at a discount, the retail experience space gives brands access to consumers (albeit still at a discount, for the most part).  This subtle distinction, where vendors have more control over the customer experience, means that local companies are better positioned to lock patrons in as loyal customers. Who do you think will revisit a restaurant more often – a consumer who buys a 50% discounted meal, or one who pays to experience a new tasting menu with a restaurant’s chef?

LivingSocial’s press announcement for the retail experience space at 918 F Street didn’t explicitly state whether the new venture would be repeated throughout the hundreds of other markets where the company is present, but one can imagine that if the model proves successful, they will roll it out company-wide – that is, if LivingSocial’s competitors don’t copy it first.

White Space Opportunities around Digital Textbooks

20 Jan

“Get NOOK Free!” reads the banner ad on the New York Times’ website. Barnes & Noble, creator of the NOOK e-reader, has partnered with the New York Times to give away its NOOK Simple Touch with a 1-year online subscription to the NYT. Why would Barnes & Noble give away a product that is already heavily discounted at $99? Simple: e-readers are not profitable products, they’re valuable service platforms.

As we’ve recently reported in Fast Company, incorporating services into traditionally product-centric “design, manufacture, market” models–or replacing the product entirely with services–allows companies to create value for their customers as well as their shareholders. In the instance of media, we’re seeing that by replacing physical products (books, CDs, DVDs) with digital equivalents, companies that create service platforms accessible via consumer electronics are able to capture revenues previously owned by retailers and publishers.

The closing of Borders and the declining sales at Barnes & Noble stores indicate that the digitzation of media isn’t a trend, but instead a shift towards a new model in which traditionally tech-centric firms (Apple) have entered the media business, and retailers (B&N) have entered the tech business.

Apple’s announcement on Wednesday that it would take on the $10 billion textbook market by turning its iTunes U app into a platform for digital textbooks further signals the attractiveness of the white space opportunities available around digital service platforms. In addition to low price points ($14.99 for textbooks), Apple plans to launch a self-publishing tool called iAuthor. E-textbooks are a palatable proposition for consumers – not only are they less expensive, but they’re also more portable, interactive and easily integrated with other products and software – and to those who sell them.

Digital textbooks are attractive to Apple, and its competitors who plan to enter the market, because of the revenue streams and unique business models that can be created around them. One can easily imagine that the $14.99 textbook sold on iTunes U could be supplemented with additional question banks, content updates, study guides and videos – high-margin add-ons that would no doubt add millions to Apple’s coffers. It will be interesting to see how these companies develop innovative partnerships with both schools and content providers, and how the role of the physical product used to access digital content will evolve.

Do you think we’ll see Apple pull a NOOK-like move, and give away iPads to university students in the near future? It does seem far-fetched, but there is no doubt that as price points for the increasingly commoditized products fall, the market will turn to the pasture where the new cash cow grazes: digital service platforms.

Startup Spotlight: ShopSavvy and iftt

28 Dec

Greetings readers, and welcome to a new monthly blog series where I will discuss all things ‘startup’ – from venture capital resources to analyses of innovative companies that I think are truly disrupting their industries, or creating entirely new ones.

I wanted to start by introducing two companies that I recently discovered, both of which leverage technology to simplify consumers’ lives and literally “put the internet to work for you”: ShopSavvy and ifttt.

ShopSavvy

ShopSavvy, a free smartphone application introduced in September 2008 by Dallas-based idea factory Big in Japan, allows users to do comparative shopping on the go. The application, which is available on Android, Windows Mobile and Apple’s iOS systems, uses smartphones’ cameras, the internet, and geolocation services to identify products and inform shoppers where they can find those products online or locally. The app can read traditional barcodes as well as QR codes, and has a slew of features that allow users to add photos and prices, post reviews, share products via various channels, stream deals aggregated from the web and other ShopSavvy users, and check the availability of products at local retailers.

After using the application for a few weeks, I have been amazed by its potential to change the way consumers shop and its broader impact on B2C product-centric business models.  Especially during such times of economic uncertainty, consumers are increasingly arming themselves with information to make smarter purchasing decisions, and ShopSavvy provides a clearly defined benefit in the form of immediate savings. For merchants, however, the application is more of a direct affront to profit margins, as they must become more aware of and responsive to competitors’ pricing schemes – a challenge that is especially daunting to smaller, less flexible retailers who cannot purchase on the scale of larger, big-box competitors. Continue Reading»

If This, Then That (iftt.com)

It seems that every week we are inundated with a new app, social network, or some other innovation served up through digital channels, but after awhile, managing all of these elements becomes almost a second job. Surely there’s a way to consolidate our tech lives, and make our online worlds more proactive, right? Enter ifttt.com. ifttt (pronounced like ‘sift’, minus the ‘s’) “puts the internet to work for you” by triggering actions when users define and implement conditional “recipes” across various channels. In November, ifttt announced a partnership with Buffer, a social media scheduling application that will expand the scope of potential recipes that users can create.

For example, you can create a recipe in which you receive a text message anytime that the forecast calls for rain, or one where favorite tweets are automatically saved to your Evernote account.  Currently, the most popular ifttt recipe is one in which every time you are tagged in a Facebook photo, the image is automatically saved in a Dropbox folder.

I have long been intrigued by the broader shift from content and product aggregation, to more proactive recommendation-based models, and If This, Then That certainly takes a leap in that direction. After a 9-month beta test that began in December 2010 and included over 100,000 tasks that triggered more than 25 million “actions”, ifttt is now open to all users.