The downside of open innovation

There’s been a lot of writing lately about the valuable role that a firm’s customers (and others) can play in generating innovations. Chevrolet tried this recently, and found out what happens when you ignore a large part of your (potential) customers and then, finally, give them a voice in your innovation process. Autoblog just posted a very interesting set of videos created by “users” for GM:

As part of a creative new ad campaign for the new Tahoe, General Motors has teamed up with Donald Trump’s ‘The Apprentice’ franchise to create a website that allows prospectives to make their own commercials online. The website allows readers to select backgrounds, video shots, and input text in an attempt to win prizes ranging from a Jackson Hole Getaway to a trip to the Major League Baseball All-Star Game.

Some of the videos created can be seen here…for as long as GM doesn’t notice them. At which point, we’ll see where they turn up on the web. one two three

The iPod Ecosystem

The NYT (The iPod Ecosystem) has an interesting description of the “ecosystem” surrounding the iPod:

An entire ecosystem has emerged around the music player, introduced by Apple in October 2001. Other manufacturers had produced MP3 players earlier. But the simple design of the iPod, plus Apple’s iTunes store, quickly helped Apple to dominate the market. And that simple design — some might even call it bland — encouraged people to personalize the machine.

Then numbers are quite impressive:

Apple sold 32 million iPods, or one every second. But for every $3 spent on an iPod, at least $1 is spent on an accessory, estimates Steve Baker, an analyst for the NPD Group, a research firm. That works out to three or four additional purchases per iPod.

Call me an academic, but here’s why I prefer the language of networks to ecosystems. Ecosystems infer evolutionary (and relatively unintelligent) design while networks are, in most cases, intelligently, or at least intentionally, designed. Jobs and Co. have done a remarkable job designing the iPod network. Granted, Apple should be able to by now, having failed to build effective networks around so many of their previous products–from the original Macintosh to the Newton to the failed clones market. Nevertheless, they have succeeded brilliantly here–by focusing first on the consumer experience but then, second, on the entire set of related products and services that bring value to that experience:

That obviously makes accessory makers happy. It thrills retailers, whose profit margin on the accessories is much higher than on an iPod. And it delights Apple because the racks of add-ons made just for the iPod — 2,000 different items at last count — send a strong statement to consumers that the Apple player is far cooler than a Creative or Toshiba player, for which there are few accessories.

So far, Apple has managed to limit their greed this time and, in the process, get a smaller slice of what grew to a large pie. However, it’s not too late for them to revert back to their old ways.

Some creations, like Mickey Mouse for Disney or Barbie dolls for Mattel, created an enormous market for accessories, but most of those items, like the Mickey Mouse watch or the Barbie Dream House, were licensed or made by the same company that created the original product. In contrast, Apple has encouraged a free-for-all, and its own share of the accessories market remains small…That will change. Apple is aware of the power of this market and is getting more active. Indeed, at the recent Macworld conference, Apple demonstrated that it wanted more of this lucrative field. It made a splash with an attachment, the $50 Radio Remote, that plays FM radio through the iPod.

I can’t help but marvel how, in building this network, Apple could share the growth while never losing sight of the strategic high ground–those aspects of the entire network that would provide profitability and defensibility. That takes intelligent design. Let’s hope Apple can stay that way.

One more small step…

Google has taken one more small step forward, and gave us a glimpse into a giant leap for Internet-kind. is a site for users to upload short videos which Google converts to flash and offers up for everyone. One of my favorites took a stunt we used to play back in the design loft with old soda bottles, corks, and bike pumps and turned it into almost a blood sport: water bottle jet pack. Also check out the clips from amateur rappers from across the world (e.g., Curry and Rice Girl)–which shows as well as Friedman could that the world is indeed flat. All the world’s a stage–or maybe more like a infinite-ring circus.
Consider the value of building your own stage and letting your community (users, friends, what have you) provide the content…

TiVo in the news again…

Not that I’m obsessed with TiVo, but they’re in the news again with another sound byte hinting they are trying to move from a product to a portal. In today’s WSJ, as elsewhere, they announced:

TiVo Inc. is partnering with several big ad firms to offer its users a system that lets them search for commercials centered around a specific topic. Expected to launch next spring, the feature comes as Madison Avenue is contemplating a number of ways to reach consumers who use technology to avoid traditional advertising.

But are they networking just for networking’s sake? In their defense, this shows an understanding of what Madison Avenue wants to see in a TiVo network, but how much value does this bring to others in their network? Consider first and foremost the viewer…when you are making a purchase decision, would you expect a commercial to provide good reference material? Especially when so many TiVo owners have the web at their disposal as well.

A better partnership might have been with, that great (and once-free) website that showcases the world’s best commercials. I’d TiVo that.

A network for TiVo?

TiVo’s announcement today, in case anyone missed the headlines (e.g., Yahoo), lays out a nice role for TiVo: enabling you to view your recorded programs on an iPod or Sony Playstation Portable. This is a big leap forward, if they can pull it off, and they’re hinting it should be ready the first quarter of 2006. As with any network innovation, there should be value in this move for more than just TiVo, and at first glance there would be. I’ve been holding off on a Sony PSP because of its relatively closed content network (it only takes Sony UMDs or Memory sticks), but a seamless connection to TiVo would break open that network. Emphasis on seamless, which may not be the case. The WSJ reports that it may take up to 2 hrs to transfer a recorded show from TiVo to your PC and then to an iPod (converting it in the meantime between formats…):

Getting TiVo to work with an iPod isn’t as simple as downloading music and videos to Apple’s device from iTunes. First, a user’s TiVo records a show onto the machine’s hard drive. Then, the program is transferred over a home network to a PC, where it is translated into a video format compatible with the iPod. Next, the video must be transferred to the iPod from the PC. The whole process of getting an hour-long show onto an iPod could take more than two hours from the time a TiVo device finishes recording it.

Worse, it sounds like users will have to buy TiVo software for the PC to accept and convert the programming.

We’ll learn a few good lessons here about network innovations–especially the difference between imagining a networked world and actually pulling it off. Making TiVo connect with the iPod and Sony PSP is more than just kluging together technical possibilities and then making announcements from the Corporate PR office. The real test is whether the engineers and marketing folks can work together (and across firms) to build a seamlessness experience for everyone involved.

But TiVo better hurry, because the other news today is AT&T’s (ne SBC) commitment to a digital future and the delivery of TV, phone, net, etc… to homes. AT&T is talking about 1000 channels in your home in 18 months. This is TiVo’s real chance to hit it big, as AT&T/SBC may find them a better partner than the Cable/Satellite providers (and their DVR knock-offs) that AT&T sees as direct competitors. A 100o channels plus the ‘net is going to need a good SW interface and connection to the rest of our digital lives. Meanwhile, Cisco’s acquisition of set-top box manufacturer Scientific-Atlanta, Inc. could put Cisco’s networking strengths inside any number of DVRs, only highlighting TiVo’s isolation.

Hope for TiVo?

I have written elsewhere (Leading with Vision: The Design of New Ventures) about the challenges for TiVo in today’s networked world. This morning TiVo and Yahoo announced what I sincerely hope to be a new strategic direction for the company:

TiVo Inc. and Yahoo Inc. said on Monday launched a collaborative service that allows TiVo users to program their digital video recorders remotely using Yahoo’s television information Web sites. Shares of TiVo rose 13 percent on the Inet trading system, as the deal appeared to help the company find new ways to compete with cable and satellite companied that offer their own video recording services. In the coming months, TiVo and Yahoo will also offer Yahoo services like photos, traffic, and weather available as part of the TiVo service

There may be hope yet for us TiVo fanatics, as the company struggles to move from being a box to being an enabling node in a larger network that its competitors, the Cable and Satellite providers, cannot or will not create.

In a world where anyone could design and source a digital video recorder (e.g., the HargaDVR) within a few months, TiVo has little advantage to offer as a stand-alone box. If you say superior user-interface, it’s the same as saying Charmin will hold its own in Walmart because of its superior user interface. That’s a nice thought, but when it’s sitting on the shelf next to a Walmart private label tissue selling for 25-50% less and you can’t (or won’t) experience the difference before buying, user interface is a hard sell.

Instead, TiVo’s biggest advantage lies in connecting the user to worlds beyond what the Cable and Satellite providers bring–making TiVo a valuable addition rather than interloper to the existing field surrounding the production and consumption of television content. If TiVo brings Yahoo into the television field, it brings a set of product features and user experiences that the CableCos could not. For example, Yahoo brings a TiVo-enabled network the ability to record programs from the ‘net whenever and wherever they think of it (TiVo2 could already do that, but not without visiting the TiVo site). With all of Yahoo’s content, that could be enormous. Yahoo already provides programming schedules. They could also provide long-tail recommendations for TiVo users that include more information about what and why, and integrate digital content along the way. And any ads Yahoo sells to the networks could carry its own “record this show,” getting rid of the need for viewers to actually remember to watch something. That’s just the beginning, or course, but a great leap forward for them.

In classes and executive ed, I have used the TiVo case extensively as an exercise to get people to see the enormous opportunities that come from viewing products as portals into networks rather than as ends in and of themselves, where the advantages come from what new networks you bring. I’m always amazed at the new markets that people think to bring in–from linking Leapfrog educational toys with network content (Blues Clues, Dora the explorer, etc…) to voting someone off the island to downloading old Leave it to Beaver episodes to inserting local and targeted advertising in programs (a la GoogleAds).

About 3 years ago, I had a conversation with the President of Fox, though calling it a conversation gives me too much credit. I told him I believed TiVo would change the television industry and he called me a thief for stealing his programming. The Networks responded in classic fashion to a new technology: threat-rigidity. Unable to see TiVo as both a threat and an opportunity, they chose threat and responded accordingly. The opportunity to grab and hold viewers with interactive features, to move them back and forth between the web and the screen, was too obscured by their own visions of what they provided for them to see. They too had their product and couldn’t see how their own future depended on expanding the networks of those surrounding them. In their defense, TiVo failed to convince them because they too saw themselves too much as a box meant to replace–not augment–the existing networks.