Toyota's Product Launch: Marketing 2.0 Style

There's a lot of skepticism about web 2.0. People ask me--where's the money? and where's the evidence? Memories (mostly bad) of the boom-n-bust of web 1.0 (e-commerce) is still fresh for many including me. So, I am always on the look out for hard data that provides evidence of how web 2.0 is working.

Here is a blog that provides some evidence of Toyota's product launch in Greece.

For the launch of their new hatchback model, the Auris, Toyota Hellas wanted a digital campaign that would promote the new car's interior design and the feel drivers get when sitting inside the Auris' modern "cockpit". The campaign needed to actively engage consumers with the brand, to generate leads and "test-drive" requests.

OgilvyOne Athens decided to think "Web 2.0" and find a way to invite consumers to do most of the talking and promoting. So Greek bloggers were invited to test-drive the car for a week if they would post their findings on their respective blogs, which would also be collected into a central blog. At the same time, a banner campaign invited the general public to request a test-drive, which could also win them a 4-star hotel weekend in Greece with of course the Auris at their disposal.

The Auris Blog campaign lasted for 10 weeks. There were 85 requests from Greek Bloggers and the car was given to 15 of them after a careful selection process. 55 different posts were written, most of them including photos and videos. (A digital camera was given as a gift to the bloggers in order to get multimedia content from them). There were 175 comments to the posts.

The Auris Blog had more than 52.000 visits by 41.000 unique visitors and the overall response rate of the banner campaign was at 4.75%. More importantly, 2.000 test-drive requests were submitted from this campaign, accounting for 50% of the total test-drive requests received through all channels (phone, in-store, events or promotions).

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I wonder if there's a site that systematically tracks the results of experiments and initiatives using web 2.0 ideas.

Embedding Videos from WSJ vs. NYTimes (Update!)

Over the last two decades that I have been teaching strategic management (at MIT Sloan School) and IT strategy (MIT and now at Boston University), I have found it valuable to use videos to add some multi-media context to the case discussions. Most videos in the 1980s were CEOs speaking to different classes at Harvard Business School that the publishing arm would distribute to faculty members to use. Some were promotional videos from companies such as FedEx or Intel or Apple to illustrate new technologies or features.
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Fast forward to 2007. I can embed videos in my course blog--either before class or after class--and students can select and watch them when they are multi-tasking (I do not know anyone less than 25 who is not a multi-tasker!). Here is one example of video that I have embedded in my course blog. It can be either a short one (often less than 3 minutes) highlighting a simple point or it can be a long video (such as Tom Friedman's video for the discovery channel on 'The Other Side of Outsourcing.' Either way, I have found that videos complement discussions and enhance learning.

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Wall Street Journal allows its videos to be embedded (much in the spirit of web 2.0). I do not mind watching the advertisements that play just before the video because that pays for the videos to be made available free.
Here is an example that I could have linked to my post before on Microsoft-Ford partnership.


New York Times--on the other hand--still expects that their videos be linked but not embedded. They still seem to operate under the notion that content should be located at their site (reflective of 1.0 thinking!) but not letting their videos to be available on other sites (in the spirit of 2.0). They could still monetize advertisements around their video content(!). So, if I wanted to link David Pogue's discussion/commentary on Apple iPhone, I can only link.

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I think it's just a matter of time before more multi-media content owners make their library of multi-media clips (CEO presentations, speeches, product launches, product promotions, advertisements etc.) available for enhancing education and deriving deeper insights into the functioning of modern corporations.

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Update: Thanks to David Pogue for clarifying that I can do more than link to his videos (which I like incidentally!). Here are his suggestions.

You could embed my video from YouTube, since all of my videos also appear on YouTube.

Or, even better, you could subscribe to them on iTunes--and then enjoy the fully DOWNLOADABLE, much better H.264 video quality.

--David Pogue
New York Times

I will use the YouTube option to embed and then itunes subscription to perhaps show it in class.
Thanks David.
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Update: June 2, 2007.
Other developments to watch as Real Player launches new player.

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The newsrelease from Realnetworks is here.
The key features are:

Consumers can use the innovative, single-click process to quickly download and save videos for later enjoyment.

Consumers can download multiple videos simultaneously with RealPlayer, allowing people to save time and easily multitask. Users can also start downloading in the middle of watching a video, and the entire video will be captured.

Consumers don't need to worry about video format compatibility issues — the new RealPlayer supports videos created in the most popular formats, including Flash, Windows Media, Quicktime, and Real.

Consumers can easily burn videos to CD (or to DVD, using RealPlayer Plus). The Video CD format used by RealPlayer can be played in most DVD players.

Consumers can send links of their favorite videos to their friends with a convenient "Share with a Friend" feature. The link that arrives in their friends' email will direct them to the online source of the video content their friend downloaded.

RealPlayer supports both downloading and recording for popular streaming format (Windows Media, Real, and Quicktime)

RealPlayer will only download/record video that is not protected by DRM (Digital Rights Management) systems.

RealPlayer features an improved look and feel, a streamlined installation process and faster video playback.

RealPlayer will first be released for Windows, and will work with both Microsoft Internet Explorer and Mozilla Firefox. Real plans a version for the Mac to be released later in the year.

Here is a blog entry from RealPlayer product team on their new offering. and here is an interview with Jeff Chasen, VP of RealNetworks.

Microsoft-Ford Sync: Will it evolve to be a telematics platform?

The 2007 Consumer Electronics Show should be seen as a success by Microsoft and Ford. Not only did the two companies join together to launch Sync but the system won the People 's Voice Award.

In a last-minute flurry of votes, Microsoft Sync--a partnership between Ford and Microsoft--pulled ahead of the People's Voice pack. A factory-installed tech panacea, Sync will ship on 12 of Ford's 2008 cars and on the entire 2009 fleet. The flash-based system lets drivers call hands-free (12 phones work with the always-on Bluetooth connection) and control MP3 players via voice commands and buttons mounted on the steering wheel.

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For now, Sync is a joint initiative been Microsoft and Ford Motor Company. Ford hopes that this will be a point of differentiation against GM--which has led with its OnStar initiative. Microsoft sees it as a strategic way to extend the Windows OS beyond personal computer and mobile phones. Needless to say that the consumers will be able to sync their mobile phones that run on Windows Mobile; they will be able to play music from their Zune players. They have also announced that consumers can connect a broad range of Bluetooth-enabled devices and Apple's ipod (market leadership has some advantages!).

If we look beyond Ford-Microsoft initial launch posture, how will the telematics industry evolve in terms of key linkages?

1. Today's automotive market is characterized by a series of proprietary (firm-specific) closed platforms. OnStar--owned by GM-- is mostly available on GM automobiles although in recent past, other automakers have experimented with it (example: Toyota Lexus, Subaru and Audi). So, I do not think non-GM cars have OnStar functionality available now.

2. Before Ford's partnership with Microsoft, it launched a joint (85-15) initiative with Qualcomm labeled Wingcast. It was shut down after a lapse of about fifteen months without much fanfare.

3. Other automakers by now have their own version of telematics services. Lexus has Lexus Link; BMW has iDrive and BMW Assist; Mercedes-Benz has Command APS and so on.

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So, this is a classic case of multiple proprietary protocols--with no interoperability. Much like how we lived when we had independent automatic teller machines from the different retail banks that were not linked to one other. Now And no automaker is able to leverage network effects beyond their own driver base. What are the possible trajectories of evolution? Well... here are some likely scenarios.

One: The status-quo continues for sometime but with each automaker making its system open to accept multiple devices (using standards like Bluetooth and USB connections) and evolving the functionality and scope (just as OnStar has done over the last decade).

Two: One of the current proprietary systems (e.g., OnStar) is embraced by other automakers and evolves to become the automotive industry standard to allow for interoperability because of strong customer pull an demands.

Three: Sync evolves into an automotive platform beyond Ford Motor Company and Microsoft to allow other car manufacturers and software/hardware providers to participate in an open consortium.

Four: A new entrant emerges to create a cooperative consortium to ensure that the automotive industry embraces new technologies and deliver superior services to drivers (car-related, safety and convenience services) and passengers (information and entertainment).
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It is clear to see many advantages of seeing an automobile as a node on the network--not just for safety but also for convenience. OnStar and Sync are two powerful experiments in the shift towards network era in the automotive sector. Who will win in the race to create the platform for telematics is an open question. It is too premature to declare winners and losers given the importance of information technology in the transformation of the automotive sector.

Media in the Network Era: Can BBC 2.0 Deliver on its Vision?

BBC surprised many observers last year (March 2006) when Mark Thompson, BBC Director General delivered a talk titled-- BBC 2.0: Why On Demand Changes Everything. He outlined a bold vision that goes beyond what many media companies had done till then, which was to embrace the web. The following excerpt captures the essence of his vision for BBC.

The second chapter in the web's history requires other changes from the BBC: a much greater focus on content management and supported metadata to allow for sophisticated search and navigation, a shift of gravity from text towards rich audio-visual content across the piece, an engagement with user-generated content, user-recommendation and personalisation which goes beyond anything I've touched upon this evening.

And it requires a different kind of BBC, a BBC that continues to generate content which drives public value, but now content that can last and which can be repurposed over time and across multiple platforms. (my italics)

Not a traditional broadcaster with a rather good website but a deliverer of high quality content over the web and other digital channels with, yes, some rather wonderful traditional TV and radio channels still in our portfolio.

That's a transition that will take place over time but that's where we're headed: towards the BBC 2.0.

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I was wondering how BBC was transitioning to offer value in the 2.0 world and I was pleasantly surprised to find that it had developed a set of fifteen principles for the Web. In the spirit of web 2.0, these principles (officially signed off by BBC management) are in perpetual beta! I think that list is a good starting point for any company that is crafting business strategy using the global web as the business infrastructure. The slides used by Tom Loosemore of BBC during a keynote in March 2007 are located here.

When I look at the following six principles, I see a consistent logic of principles that capture the essence of strategy 2.0.

Treat the entire web as a creative canvas (#5), Make sure all your content can be linked to, forever (#8), The web is a conversation. Join in (#6), Maximise routes to content (#10), Let people paste your content on the walls of their virtual homes (#13) and Link to discussions on the web, don’t host them (#14).

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BBC now has the approval to launch its BBC iplayer "which will make BBC Television programmes available for download, free for UK licence fee payers, at high quality, with no advertising, for up to a week after transmission." But, it is still limited to UK (perhaps due to some constraints of how BBC is funded) and does not use the global web as the creative canvas.. More importantly, it seized on the YouTube phenomenon by launching the BBC channel on Google's YouTube. BBC managers deserve credit for this innovative move.

Still, many of their content are not yet available for users to repurpose and upload to different websites in the spirit of principle #13 (letting users paste BBC content on their virtual homes) or #10 (maximize routes to content).

The media landscape is likely to be the sector leading the web 2.0 revolution and it will be interesting to watch the moves of the different major incumbents throughout the world as they recognize and respond to the opportunities and challenges of crafting winning strategies in the network era. BBC has clearly outlined its vision and commitment to 2.0. I--for one--will be watching to see how quickly BBC delivers on the vision reflecting the fifteen principles.

Royal Navy as a Messenger Service: Stuck in the 1.0 world?

The next-generation kids are different; they are tech-savvy, always-on and growing up on social networks defined by MySpace and Facebook. Indeed, Mark Zuckerberg of Facebook sees it as a 'social operating system' that sits "at the center of its users’ online lives in the same way that Windows dominates their experience on a PC" according to NY Times today. (subscription required)

So, how do you communicate to this group? Traditional means appear limited as this generation is more tuned to messages from within their community. Marketing, advertising and communication methods are under attack and need to be revised and refined.

Royal Navy (UK) is trying an interesting tack to reach potential recruits. See and try it here. It is different but does not embrace the core principles of web 2.0. Will it work as a standalone site or should this functionality be embedded in ways reflecting web 2.0? I--for one--would like them to evolve this idea into the 2.0 realm.

Platform Architect as a Network-centric Strategy

My work in recent years has focused on strategies from a network-centric point of view. Here are some core differences when we shift the frame from a firm-centric view to a network-centric view.

1. Instead of looking at a corporation as a portfolio of products (single business firms) or portfolio of businesses (multi-business firms), look at corporations as a portfolio of capabilities leveraging a portfolio of relationships (within- and across different organizational entities and including customers). Co-creation with complementary corporations and customers emerge as a useful frame to think about strategic choices.

2. Recognize the role of Internet as the new infrastructure to architect business models that deliver superior value to customers (and by extension, the shareholders).

Viewed this way, there is symbiotic relationship between business and IT strategies. Each needs the other; neither alone is sufficient for winning performance.
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So, what new business models emerge when viewed from a network-centric point of view? One that I have been intrigued by for sometime is what I label as platform architect. The term platform has become widely used (and perhaps even abused) in business writings today. But, the logic of architecting a platform reflects the essence of strategic thinking in network-centric terms. Let me outline some essential ideas.

1. The automotive industry may have created the first product platform whereby automakers such as GM or Ford designed ways to share a set of components common to different automobiles. It helped in streamlining production and efficient procurement of components and subsystems from vendors. In the automotive industry, product platforms are also labeled as vehicle architecture that specifies how the various components and subsystems fit together. This is an example of proprietary or closed platform architecture. GM's vehicle architecture differed from Ford's or Chrysler's.


2. The computer industry transformation allows us to go beyond single-company, proprietary closed architecture to a more multi-company, relatively open architecture. A Figure such as the one below is a schematic representation of the shift.




Understanding this shift in the computer industry allowed researchers to introduce key concepts of design rules and modular operators by Carliss Baldwin and Kim Clark. The six modular operators introduced by them in the book is a useful way to understand the shift in the computer industry. These are:

Splitting - Modules can be made independent.
Substituting - Modules can be substituted and interchanged.
Excluding - Existing Modules can be removed to build a usable solution.
Augmenting - New Modules can be added to create new solutions.
Inverting - The hierarchical dependencies between Modules can be rearranged.
Porting - Modules can be applied to different contexts.

This shift also allows us to understand the importance of platform leaders. Annabelle Gawer and Michael Cusumano show how Intel, Microsoft and Cisco (among others) drive innovation in the computer industry through platform leadership. Indeed, a significant part of the Microsoft antitrust case is based on ideas of network effects and 'divided technical leadership'--a term introduced by Professor Tim Bresnahan in an unpublished working paper (available here). The essential point is to recognize that a platform need not be under the control of a single firm but could be designed by the coordinated efforts of multiple different firms, each leading in one or more layers of the stack (as shown in the figure above). Thus, we refer to the dominant architecture of the personal computer as Wintel (Windows-Intel) architecture. Coordination across complementary capabilities through different types of is an essential requirement of crafting strategies in a network-era. Platform architect is one who is capable of coordinating different components into a coherent architecture that creates direct and indirect network effects.

3. So, does the idea of platform architecture have any role beyond the computer industry? To the extent that network effects may be operating, platform architecture will be important. To the extent that business models are being created on a global networked infrastructure, platform architecture will be critical. We are beginning to see attempts by companies to architect platforms in music (e.g., Apple ipod/itunes and Microsoft Zune), photography (Yahoo-Flickr, Google Picasa) and e-retailing (Amazon, eBay), social networking (MySpace, Facebook), media (YouTube) and so on. I have developed some preliminary maps of some of these shifts that I use in my presentation on network-views of strategy. In an intriguing post, JP Rangaswami of BT even suggested that American Idol be viewed as a platform and enumerated a set of criteria that is useful to explore the ideas of platforms beyond the technology sector.
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So, are you really a platform architect?

One--platform architecture is essentially network-centric. it involves coordination of modules (or sub-components) designed and delivered by different independent entities. So, while we may credit Apple for shifting the music industry to the network era, its success equally well depends on the broader ecosystem that it has orchestrated. Microsoft--despite succeeding in architecting the Wintel platform--has been unable to win with Zune thus far. Similarly, GM OnStar is a relatively closed (GM-centric) telematics platform that has not yet been adopted by any non-GM automakers for it to be considered a network-centric strategy while Microsoft is initially partnering with Ford Motor Company to launch a new dashboard OS. When Microsoft extends this experiment to deliver this functionality to non-Ford cars, it becomes a platform architect in the same spirit of Windows and Office platforms.

Behind every successful platform is vibrant ecosystem of complementary capabilities.

Two--platform architects earn revenue in two ways. There is direct payment from the users of the platform (e.g., Windows Vista or Office 2007, Sony PS3 or Xbox) or indirect payment from other parties involved in business transactions (e.g., advertising in the case of Google or transaction fee in the case of Visa or Amazon or eBay). The choice depends on network characteristics and customer propensity to pay for different features under different conditions.

Thinking through the location of cash register is critical to successful platform architect strategy.

Three--the scope of platform architecture straddles multiple different industry boundaries. The single-company proprietary platform like the automotive vehicle architecture is a firm-centric strategy. In contrast, platform architect from a network-centric point of view is cross-industry. Is Google a search engine or an advertising platform? Is Microsoft a software company or something else? Is Amazon an e-tailer or e-commerce platform or something even broader? What makes the platform architect strategy challenging is that it defies traditional industry boundaries.

Myopic demarcation of platform scope is likely to lead to failed strategies.

Four--platforms evolve and morph. Networks by definition are connected and dynamic. The dynamic nature is by virtue of addition of new nodes and new linkages. New entities and new relationships change the scope of platforms. Amazon's success is partly due to its ability to evolve its definition of business scope and adapt to the new functionality and market demand (look at Amazon's launch of DRM-free onlin emusic downloads as an alternative to iTunes in different music formats). Competitive moves also redefine the scope of platforms. When Google acquired YouTube, it put in motion a chain reaction of new connections (e.g., NBC and MySpace joining together). RIM announced that its popular blackberry software will be available on competing phones that run Microsoft mobile OS. In some cases, the implication are more emerget (than designed) as in the case of mash-ups using APIs from different entities (The facebook platform releasing itsAPIs is the latest). For an updated matrix of mashups, see here.

Defending successful platforms calls for proactively recognizing the likely evolutionary shifts and being in a position to capture value.

Healthcare 2.0: What's Google's Role?

When I discuss strategy 2.0 with healthcare professionals, one question invariably comes up. It is sometimes framed as an inquisitive question: "What is Google doing in the healthcare domain?" Other times, healthcare executives wonder: "What could Google do to threaten my business model?"

Both are legitimate question since healthcare is (1) data-intensive: (2) computation-intensive; and (3) the current business models are broken and need to be fixed as the sector embraces the network-era opportunities and recognizes the challenges of architecting newer business models. Just recently, I blogged about the forthcoming health2.0 conference.

Here is a recent blog posted by Adam Bosworth, Vice President Google Health that is worth reading. He outlines three core principles

• Discovery - Consumers should be able to discover the most relevant health information possible
• Action - Consumers should have direct access to personalized services to help them get the best and most convenient possible health support
• Community - Consumers should be able to learn from and educate those in similar health circumstances and from their health practitioners

There is also an extended text of his presentation at the 2007 American Medical Association of Informatics (AMIA) Spring Congress. It is clear that Google wants to play leadership roles in #1 (allowing consumers to discover most relevant health information) and #3 (creating an effective peer-to-peer network along the lines of Orkut and Blogger). We may even see something like Myheathspace (along the lines of MySpace) orchestrated by some trusted healthcare entity in the not so distant future.

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It will be interesting to see what new ideas emerge from the Health2.0 conference scheduled for later this year. It is clearly an industry ripe for transition using the power of information technology.

Analyzing Apple's iPhone Pre-launch Moves

A lot of people--including me--are waiting eagerly for Apple's launch of iphone in June. Ever since Steve Jobs mesmerised the audience at the January 2007 Macworld in San Francisco during his keynote address, there has been non-stop buzz about what this could mean for Apple, AT&T and the global mobile phone industry.
It is true that many expected that Apple will rise its success with ipod by introducing a device that symbolizes the impending convergence of devices, features and functionality. What surprised many observers was that Jobs--usually secretive about new product introductions--actually pre-announced it nearly six months before the actual launch. True, Apple had to get FTC approval and leaking invariably occurs during that bureaucratic process. It could well be that Apple wanted to send out a strong signal that it is still the leader when it comes to defining new design standards for products. We can analyze what Apple has done so far to develop some lessons for winning strategies in business networks.


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It's the next-generation ipod (music, pictures and videos)
It's the next generation mobile web browser and email client
It's the next generation phone (with visual voicemail and easy conference-calling).
It's a software design innovation competing against hardware design innovations (size, weight, shape and look-n-feel).
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It's also an interesting case study on competing in business networks. Apple cannot succeed based on its own core competencies. It needs a vibrant ecosystem. So, what can we learn from Apple's moves so far. Here are some issues worth thinking about.

1. The architecture of business networks. Apple has mostly been a 'closed architecture' (take a look at ipod). It looks like iphone is also mostly closed architecture: there will be no third-party manufacture of hardware or widespread availability of the software on non-Apple devices. Apple's DRM helped it attract content owners; now Apple has embarked on DRM-free music with differing response from the music labels (EMI loves the idea; Warner Music does not). I think Apple's brilliance was making ipod and itunes compatible with Windows and Mac OS. Had Apple restricted ipod to only Mac OS users, it would have remained a niche offering. Building on top of the success of ipod (and itunes), iphone will work on Windows and Mac operating systems.

In other words, Apple has selectively chosen where it will link to others and where it will be closed. It is showing that the game is not about simple open vs. closed architecture but selectively deciding when, where and how to architect the business ecosystem for competitive advantage. I believe that its success will depend on how this architecture is adapted over time.

2. Managing key relationships. Apple's iphone will launch only on the new AT&T (formerly, Cingular) in the USA. The rebranding of AT&T is coinciding with the iphone launch. More than a million consumers have already expressed interest in AT&T-iphone service. Both companies see their partnership as being critical. AT&T needs iphone to succeed to differentiate itself from T-Mobile (both being GSM carriers in the USA). Apple needs the AT&T network to be reliable and flawless because iphone user experience will ultimately depend on the quality of the network. Poor network coverage or dropped calls could seriously hamper iphone's sales. My understanding is that the exclusive USA deal with AT&T is for 5 years! Should Apple have gone with a single network provider for such a long period given the high stakes?

The architecture of a business network depends on a portfolio of relationships: not all relationships in an ecosystem are equally important and some relationships can make-or-break the strategy. iPhone's success will initially depend on how this relationship holds up and matures over time. Over time, Apple's selection of network operators and other partners in the ecosystem will dictate its success.

3. Analyzing likely competitive moves in the network. The buzz is that while iphone has raised the bar, competitors will not be sitting idle. What will Motorola announce? Will this strengthen its relationship with VerizonWireless? What about SonyEricsson that has recently launched impressive lines of Walkman phones and has turned in impressive financial performance? What about Nokia? LG? Samsung? Blackberry? Similarly, network operators such as VerizonWireless and T-Mobile are also likely to look for new devices to neutralize the initial advantage that AT&T may hold.

And what about Microsoft? It is still the leader when it comes to personal computers (desktops and laptops) with Windows Vista doing better than analyst expectations; it is gaining share in mobile phone software, although lagging behind Symbian. Its Zune--on the other hand--is somewhat disappointing. How might Microsoft (with its ability to orchestrate a network of third-party developers) respond to Apple iphone?

Winning in business networks calls for thinking through how other players might respond--not just through individual product launches but through interfirm linkages that could change the architecture of the business network and customer
value propositions.

4. Looking for early indicators of success (and weaknesses). Apple's five-year financial performance has been stellar--thanks largely due to the revival of Mac OS and ipod. The market is captivated by the early buzz.Much of the increase in 2007 is based on iphone expectations.


What key indicators of iPhone business to look for in Steve Jobs' conference calls with Wall Street analysts in the coming quarters? Where are their vulnerabilities?

Positions of network advantage could foretell business success. Tracking a set of key indicators could provide early indications of the likely success of iPhone.

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I have a feeling that history will mark iPhone as a turning point--just as Apple Macintosh defined graphical user interface and Apple iPod defined how we access and consume music. More than the two prior innovations, iPhone is about architecting a business network and orchestrating a portfolio of business relationships in a dynamic ecosystem. If Apple succeeds, it will be a worthy case study for other business leaders in the midst of shifting to compete in a network era.
In the meanwhile... Hello iPhone..
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note: for those wondering if Apple may have any advantages from its patent portfolio supporting iPhone, here is a quick summary that is worth reviewing.

Moore's Law and IBM Power6 Chip: Combining Speed and Green

IBM announced that it has designed the world's fastest microprocessor. It runs at 4.7 gigahertz, twice the speed of its previous Power5 processor. What does it mean to a layperson? May be this referent comparison might help:

The processor bandwidth is 300 gigabytes per second. IBM said the Power6 is so fast that it can download Apple Inc.'s entire iTunes library -- which currently boasts more than 5 million songs, episodes from 350 TV show series and more than 400 movies -- in one minute. (think speed)

Another unique feature is that it uses the same amount of electricity as Power5 processor: the implication is that customers can increase their performance by 100% or reduce power consumption by 50% (think Green).

Healthcare 2.0

Ideas of web 2.0 are clearly not limited to peripheral activities such as social interactions (Facebook, MySpace). The power of networks lie in how they shape and reconfigure activities for enhanced value. My interest is because they shift roles of key players as well as how value will be created and captured.

So, I was pleasantly surprised to see healthcare embracing the 2.0 realm. Here is a good blog on healthcare that I read. There, I found a link to a conference on Health 2.0 with an interesting subtitle--User-generated healthcare taking place on June 15. I am anxious to see blogs on the conference as well as presentations from a cross-section of presenters--such as Yahoo, Google, Microsoft, WebMD, Kaiser Permanente and others. The list of presenters--albeit self-selected for this conference--shows the breadth of actors involved in the healthcare network.

When a simple hello would do just fine

Microsoft's $6 billion Move into Online Advertising

I had blogged earlier today about WPP buying 24/7 Real Media. But, this announcement is a watershed event in the shift to a network-era in advertising. Microsoft today announced that is is buying aQuantive for about $6 billion (representing a premium of about 85% over yesterday's closing price). The $6 billion purchase price is about 2% of Microsoft's market capitalization and is the largest acquisition till date by Microsoft. Steve Ballmer said that:

"Today's announcement represents the next step in the evolution of our ad network from our initial investment in MSN, to the broader Microsoft network including Xbox Live, Windows Live and Office Live, and now to the full capacity of the Internet."

If history is any indication, companies have more often not been successful in adapting their business models through acquisitions. While horizontal corporate combinations for scale-based advantage have been relatively successful (DaimlerChrysler notwithstanding), many firms have struggled to acquire and assimilate new competencies to get into new areas of operations or radically adapt their business models. Recall Time-Warner and AOL? It will be very interesting and illustrative to see how (and if) Microsoft becomes a dominant force in network-era advertising.

Madison Avenue gets Convergence

Google has shown that online advertising is a big growth business. If you still do not believe it, look at Google's stock price--still largely based on growth premium.



To further consolidate its position, Google has agreed to but DoubleClick for $3.1 billion. We know that Yahoo and Microsoft want pieces of that growth potential and are making some moves of their own (including speculated combination of their online activities). And there are many smaller rivals wanting in as well.
How should traditional advertising companies respond? After the initial period of wait-n-watch to see if this shift is real, they go on an acquisition spree to buy new competencies.
1. Publicis Group bough Digitas for $1.3 billion in December 2006.
2. WPP has agreed to acquire 24/7 Real Media for $649 million in cash this week. Sir Martin Sorrell said in so many words during his conference call with investors that "the deal was prompted by Google's acquisition of DoubleClick."

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Did Madison Avenue need additional wake up calls to recognize the shift to the network era? In the 2005 Annual report, he devoted the better part of a page to speculate if Google was a friend or foe?

What other corporate combinations will we see as advertisers (and advertising agencies) recognize that the convergence is here.. and here to stay and evolve and morph in some interesting ways? I believe that we have just gotten started.

Google: Can it orchestrate a business ecosystem?

Nearly a decade back, everyone wanted to distill lessons from Microsoft's strategy and success. In 1998, my friend and former colleague at MIT Sloan School, Michael Cusumano wrote a successful book Microsoft Secrets with an illuminating subtitle--'How the World's Most Powerful Software Company Creates Technology, Shapes Markets and Manages People.'

Now it looks like management lessons are distilled from Google. Instead of books (which tend to get outdated), we now have many websites and blogs that purport to examine Google. And, there are consulting companies and boutique think tanks that specialize in uncovering best practices from successful companies--including Google.

Ricahrd MacManus of ZDNet has blogged based on JupiterResearch report (which costs a hefty $750).

Understanding Google: Exclusive look at a JupiterResearch report by ZDNet's Richard MacManus -- JupiterResearch recently released a Concept Report entitled Understanding Google. Subtitle: Competing and Partnering with the Most Influential Company Online. It costs $750 to purchase this report, so I asked Jupiter’s Michael Gartenberg if I could get it for free and blog about it - as I did almost 1 year ago with their report on [...]

... (the full blog is worth reading).

The following two points are worth highlighting as they relate to strategy from a network perspective.

"Competitors and partners should think of Google as a platform company that creates marketplaces, products, and services that support consumers’ efforts to organize their information. Google’s corporate insularity results in biases toward secrecy and its existing search technology, and weakens Google in supporting industry ecosystems based on its platform." (my emphasis)

"Google builds platforms and marketplaces based on searching this information, and the way it builds them is colored by its intense inward focus. As it moves beyond information organization to information creation and storage (e.g., Blogger, Base, Gmail, Picasa), it’s not clear Google’s profitable scalability will hold up."

Both these points highlight the importance of structuring and managing a vibrant, dynamic business ecosystem involving a portfolio of relationships (often involving companies that may be competing against Google in some spheres of operations). This is more than superb technical infrastructure. Microsoft has mastered the intricacies of orchestrating a portfolio of third-party developers (independent software vendors, ISVs) to make Windows (and Office) succeed. Google may not have developed the routines to analyze and orchestrate the network of relationships till now but I would not declare them 'inward focused and insular' as the report seems to indicate.

If Google was so insular, how has it orchestrated the AdSense network that contributes to 40% of its advertising revenue ($4.16 billion--for the year ended December 2006)? If Google is so insular, how come, we see so many websites (see here for a list) that create mash-ups using Google APIs?

If Google has realized that it is a platform company (as the report seems to indicate), then a critical competency is network orchestration. Here, Microsoft has the upper hand by virtue of over a decade of practice. But, in my view, it is premature to declare that Google is insular and inward focused.

We are in the early stages of the shift to the network era. Companies such as Microsoft, Yahoo, eBay, Amazon and Google are in the midst of architecting complex platforms that serve as the infrastructure for the network era just as telegraph, roadway and railroads created the infrastructure for the industrial era in the 19th century. These platforms are just taking shape and business innovations on these platforms are just beginning.

When Channels buy so-called authoritative information sources

Independent information agencies are essential for effective functioning of markets. A few years back, the financial services industry came under attack when information about investments (buy/sell ratings) were provided by brokers with particular slant. Imagine if Nielsen Media was owned by NBC or CBS (thankfully it is not the case!) or Nielsen/NetRatings were owned by Yahoo or MSN (again thankfully, it is not the case).

Amazon announced on May 14 that it has acquired dpreview.com--the web's most comprehensive site for digital camera information and reviews. The press release highlights the following:

“One of the difficulties of operating dpreview.com independently has been
the balance between producing content and delivering new site features,”
said Phil Askey, founder of dpreview.com. “Now, with the support of Amazon,
I’ll be able to devote more of my time to expanding and improving our
features – such as product reviews and discussion forums while still
delivering the high-quality content that our readers have come to expect.”

Dpreview.com offers in-depth reviews of the latest digital cameras and
accessories, active discussion forums, digital photography and imaging news,
sample images, a dynamic digital camera buyers’ guide, side-by-side
comparisons of the most popular models, and the web’s most comprehensive
database of digital camera features and specifications
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It will be worth watching if the acquisition by Amazon creates any bias in terms of directing visitors (7 million unique visitors over 22 million sessions) to the dpreview.com site to buy digital cameras from Amazon.com at the expense of other sites. Or will dpreview.com continue to maintain its independence and authority? At least, we should be thankful that it is not being acquired by Nikon or Kodak.

Learning from the Rise and Fall of Web 1.0 Companies

As a researcher, I often wonder how many of our assertions and prescriptions are based on intuition and gut feel (not to mention strong opinions!). This is particularly true of the Internet (business models, valuation, growth potential etc.) and strategies for exploiting new technologies--especially web 2.0.

Here is a good list of dotcom (ebusiness) companies (also called as web 1.0 companies). Steve Baldwin has written 'Web Elegies' for many of them. I see this site as a rich source of raw data for research.

Someday, I will see if I can systematically analyze the key drivers of their rise and fall. In the meanwhile, if someone knows good (robust, scientific) analyses of the rise and fall of dotcom entities, please do comment on here. Thanks.

IT Strategy: Balancing Innovation and Implementation

During April 2007, I have had a chance to present my ideas on the changing role and challenges facing CIO at different forums--(1) SAP USer Group Meeting in Maastricht (Holland), (2) Pocket CIO Program at Boston University School of Management (Boston) and (3) dinner meeting with senior CIOs and IT directors for The Leading Edge Forum, London. My essential message is that the most fundamental challenge facing the CIO is the balancing of requirements of innovation with those of implementation. Not all CIOs can excel at both requirements without relying on an organizational approach that allocates distinct responsibilities to the twin requirements. Some CIOs do have the mandate (as well as the skills and competencies) to use IT to shape business strategy while others deal with the mandate of implementation. In some companies, CIOs are seens as the innovation architects while in other settings, CIOs are tasked with infrastructure operations.

This fundamental tension raises a set of management challenges in how IT should be organized and managed in the 21st century. While we do not have a perfect organizing model to manage IT, here is a presentation that outlines some of the key ideas that I shared with the audience in the different talks that I mentioned earlier.


Look forward to comments and suggestions.

Eric Schmidt Discussing Technology Trends

This talk provides the context for business strategy implications for the network era.

User-genrated Music Videos

It is not surprising to see music videos created by fans--who now have access to powerful video technology at affordable price levels.
Here is a short video from WSJ that shows how some of the music bands are taking advantage of user-generated content.

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This is just the latest in a growing list of connections that reflect strategy 2.0: involving customers as part of the co-creation including advertising. There are many examples of consumer-created advertising. Here's one from Dove.

Strategy 2.0: Overview Presentation

This is an overview presentation I used in a workshop at Boston University (BUILDE) to lay out some of the opportunities and challenges of winning in a network era.
The presentation is rather straightforward. Please do feel free to comment as well as give feedback and suggestions. This is work in progress.