Value Creation at its best.

Great article at The Next Web about how Apple’s long term strategy will likely dominate the tablet market.

They project a ten year dominance, similar to the experience of the iPod. In the article they provide, what I believe, are 7 compelling reasons for their dominance.

1. They are outselling (not just out shipping) by a factor of 10 to 1.
2. Tablets are not smartphones.  So competitors have to compete with Apple on device profitability alone.  In the tablet market there are no data plan subsidies to back them up.
3. Apple’s 336+ stores provide a high touch environment to learn whether to buy an iPad.  Moms and grandparents will be converted more by that experience than a tethered tablet at a Best Buy or WalMart.
4. Apple has the profit and cash reserves to invest heavily in the latest technology (solid aluminum skins) that make their designs more elegant and user friendly commanding higher prices and better experiences.
5. Apple, based on the above, has altered the relationships with suppliers, obtaining agreements that lock in their margins and lower cost advantage on the new technologies they fund.
6. Apple’s ecosystem.  Mac, iPod, iPhone, iPad.  Once they pull you into the fold it’s hard to leave as the devices work so well together.  This phenomenon is sure to accelerate with the advent of the iCloud in the fall.
7. It works better.  Technically the user experience is smoother with the iPad.  They give reasons why the touch interface works better based on the underlying technologies and iOS software.  Watch for improvements in the next iPad.

It’s a compelling read on value creation at its best and the execution of a business model strategy.  A must read for all executives about how to pull all the pieces together into a cogent sustainable differentiation strategy.

Thank you for visiting ennova.ca

How to shape a publishing future

Here is an idea that builds on the concepts I’ve talked about to shape our future.  Enjoy.

JE: Hi I’m Jim Ellis and I’m the Managing Editor of Business week. I’d like to welcome you to today’s podcast. This podcast is the fourth in a series of six where we showcase the most intriguing innovations from 2014.

I’m pleased to have on today’s show Frank Nedamyer, President of CenterICE.com. For listeners on our show CenterICE is the New Sports fan experience that has swept the National Hockey League over the last three years.
Welcome Frank I’m so glad you could be with us.

FN: I’m happy to be here.

JE: Frank when I called you in February to inform you that our innovation team had selected you and your organization as one of the winners of our “Most Intriguing Innovators Award” I was thinking about CenterICE. Yet just two weeks ago you made an announcement about the NFL. Can you tell us a little more about that?

FN: I’d love to Jim. We’ve just signed an agreement with the NFL to create a similar fan experience for their fans which we’re going to call CenterField. It’s a 10 year contract to work with the teams using our proprietary “Fan at the center” technology. We expect to complete the roll-out in August just prior to the start of the season.

We’re especially excited because the NFL is the premier sport enterprise in the world and will help us migrate this platform to every major sports franchise.

JE: How did this all get started? If I remember correctly you started this back in late 2011 correct?

Disruption

FN: Actually, Jim it was earlier than that. It began in early 2010 when I was working at corporate headquarters and was given the task of developing a customer focused innovation capability. At the time we had a number of different companies one of which was the Jersey Publishing Company with a number of broadsheet newspapers as our core properties.

As happened to all of us in the newsprint business it was a time of great disruption. Craigslist had substantially reduced the most profitable source of revenue – classified ads. Page advertisers were leaving to go to Google ads where they could key word and location target. Readers, especially the younger generation were using alternative source of information like blogs.

All of this disruption in a time of increasing costs.

At the time of course, we were on the web with an on-line offering. It was successful enough as it goes, comparable to others, but we couldn’t seem to crack the nut. Our trajectory was not one of sustainable high profit growth. And then to top it off, the iPad was launched guaranteeing that further disruptions were coming our way. As you can imagine it was not a fun period.

JE: Is that when you first started to innovate?

FN: Not exactly. We had developed a very robust internal innovation process back in 2001. We had been very successful with it in the ensuring years, at least in terms of internal efficiencies. However, it had never really yielded anything of any significance in terms of growing the top line. They were mostly expense based innovations. So we knew something wasn’t right and started in the spring of 2010 to inform ourselves of what capabilities were required to innovate on the top line.

JE: This sounds very interesting what did you learn?

FN: Of my gosh all kinds of things. Fundamentally it’s a mindset change in how you look at your business. But if I was to summarize this change, three things really stood out. First, to create a customer-focused, fast-growing, profitable innovation you need to disrupt. And right there, that word, disrupt, was a challenge. We don’t normally think about innovation as disruptive. But it is.

And by disruption I mean you need to put something into the market that allows a new behavior to emerge in your target population. Here’s an example. When you looked at what we, and every other publisher, were doing on-line, it was copying the paper experience over. Sure users could search, and print, and read some blogs. But basically, everything was very similar. So from a user standpoint there was nothing really new in what they could do.

Read the paper, or read it on-line, it’s all the same – passive interaction with content. That’s why those models never really attracted many users. And without users, advertisers won’t come.

JE: Very insightful. What else?

Business Model as Core Capabilitites

FN: The second big insight we had was how to look at our business. We learned to stop seeing the business as publishing but more from a capabilities standpoint.

Rather than framing all our conversations about innovation and top line growth from a publishing bias, we learned to frame it from a core capability perspective. For us, what we excelled at was gathering and assimilating information and turning it into stories and insights very rapidly. That was our core.

JE: Is that when you came up with the idea for CenterICE?

FN: Almost, there was one more piece left. Our last big learning was about motivations. Identifying a target group of people who have deep seated motivations to explore and express themselves in new ways. Then figure out what we now call the sweet spot.

Choose a target you have familiarity with including their motivations, and using your core capabilities aligned with creative use of technology, create an environment where they can do things they have never done before. Create an experience that they could never do before because your offering did not exist.

It’s like the phone. No-one ever knew they needed to be able to connect with people across town instantly until the phone arrived. Once it showed up people started behaving differently. They called instead of writing.

No-one knew they needed to make videos to share with their friends and family until YouTube arrived. Now 13 hours are uploaded every minute. That‘s the equivalent of 57,000 hours of Hollywood feature length films a week.

It goes all the way back to our heritage. No-one knew they needed fire until our ancestors figured out how to capture it a move it from place to place.

Take any significant innovation, from fire, to the printing press, to electricity, to the iPhone, to CenterICE, and it always follows the same pattern.

JE: So what was the thinking behind CenterICE?

FN: Well, when we looked at the business through this new disruptive lens a couple of targets immediately came to light: Sports fans and Political followers.

Both groups are passionate about their fields. We choose Sports fans because the risk was lower and they have lots of fanatics. Fanatics can’t get enough.

And because a large portion of fans are of younger age they would be open to new experiences. The key motivational factor was fans don’t want to just cheer. They want to coach! Go to any bar and the conversations are about what the coach should have done. So, that’s the experience we created for them.

We started in late 2011 with an on-line site where they could simultaneously watch the game and provide live analysis.

This was supported by our top sports columnists who were live analyzing the game as well. All the participants rated the views provided by both the pro journalists as well as the fans “scribes”. Overtime, the fan journalists who did well, as voted on by the group, achieved status rankings ranging all the way from Newbies up to Pro.

It really took off when we signed an agreement with the Philadelphia Flyers and they invited the “Pro” writers to interview the players. Fans went crazy trying to achieve the Pro status and volume on the site grew.

JE: How were you making money?

FN: Initially it was just advertising. In the beginning it was free for the fans. But, because we had their complete profiles we were able to charge premium rates to advertisers to have access to our site. After the Flyers joined we went into joint ventures on product placement etc.

Now, we’re ruining journalist boot camps on-line for wannabe sport journalists and we charge for that. Finally, to have access to the behind the scenes information we charge premium subscriptions to fans. All our “Pros” get that free. Those working up the ranking system, have to pay. It’s a multi-tiered monetization scheme.

The sports fans love it and the teams love it as we are delivering to them more dedicated fans. That’s why in 2014 we were able to negotiate with the NHL commissioner a league wide offering.

JE: So why did you start with hockey?

Risk Mitigation

FN: It was part of our risk mitigation. Look, the NFL is the 800 pound gorilla in the room. You don’t want to bring an idea to them that’s not been fully worked out. The NHL on the other hand is the weakest of the major franchises. That made them more open to our concept.

JE: Weren’t you worried about the other leagues stealing your idea once you got going.

FN: Once again our risk mitigation strategy kicked in. We created an unassailable patent wall around this offering. I can’t get into the particulars but it was a three year effort. Some leagues tried but soon found out it wasn’t possible to breach it.

JE: What about “Behind the Bench”?

FN: That was in 2013. By then we had 237 fans who had reached pro status. And boy, were they fast and good. With the instant feeds between them and a digital based collaboration site they could jointly analyze a game in real time.

Imagine, two hundred thirty-seven experts all working at the same time collaboratively. We started to recognize that they were seeing things that the coaches behind the bench couldn’t see. So we approached Peter Laviolette, the Flyers coach and ran a little pilot program. Five minutes before the end of the period a representative from the group would debrief someone from the coaching staff.

It was slick. They had video clips and diagrams and the whole lot. Then they would pass it on to the coach to use or not use as he saw fit.

Remember in April after the game when the Flyers made it into the play-offs and Peter mentioned that he owed a lot to the CenterICE team for their analysis between the second and third periods? After that endorsement our fan base jumped 30% in the three teams we had platforms for. As they say in hockey, sometimes the puck bounces your way.

JE: How about building it out. How difficult was that?

FN: We stumbled a bit in the beginning until we realized that you can’t take people who have a fulltime job in traditional publishing and expect them to work on an idea as different as this in their spare time. Not only is it too stressful to balance both, you inevitably put them into a conflict of interest. Do I work on sustaining the publishing business or work on this new business that might hurt the publishing business? That’s a trade-off you can’t ask people to make.

What we did was create semi-permanent innovation teams who reported in to head office and were tasked to take an idea from prototype to pilot very quickly on a (mostly) full-time basis. While the operating groups complained about taking their people away we were able to negotiate our way through this.

What was interesting in this process is how we found ourselves unlearning a lot about risk. Traditionally, we had applied traditional business risk principles to innovation. In particular, eliminate uncertainty. From a practical standpoint what that meant in the past was if the idea was bold, reduce the “boldness” of the idea so it reduces the uncertainty and hence the risk. That’s how you end up with an on-line offering that mirrors the paper version.

What we learned to do successfully was to keep the idea bold and therefore keep the uncertainty high. BUT, use other techniques to reduce the uncertainty.

All in all, customer-focused innovation is very different. And while we bolted the new system on to our tracking and creativity processes that we had in place, we learned that it takes a different mindset and structure to make it work.

JE: So what’s next for you?

FN: As you know we’ve started dialogues with NBA and MLB, and have had representatives from both the IOC and the FIFA World Cup approach us.

JE: Well on behalf of our listeners I’d like to thank you for joining today’s show and being one of the 2015 most innovative companies.

FN: My pleasure Jim. We hope to see you at the game and CenterICE.

I hope you enjoyed the story.

Thank you for visting www.ennova.ca

There has been a lot of  negative press about Apple’s launch of the iPad.  Some commentators have focused on the name choice.  Others have lamented the lack of features: no multitasking, no video, no touch keyboard, to name just a few.

Missing the point

They’re missing the point about creating new market spaces.  Creating a new market space occurs when you enable new behaviors to emerge in a target population.  Specifically, if your offering (the disruptor) allows people to do something they couldn’t do previously, and many people want to do that, then it takes off.  The new behavior disrupts the norm of how people interact with each other and with space and in so doing, creates new value.

The power of new behavior space

For example, the Blackberry brought us push email.  That allowed us to stay connected everywhere.  New behaviors emerged, not all of them desirable mind you (emailing during a meeting).  This new behavior enabled by the Blackberry disrupted other phones and organizers (the Palm).

iPhone utilized the programmable touch screen.  That allowed more intuitive interfaces and a whole slew of new behaviors to emerge.  Face-Book, Twitter, Traffic alerts, conversion calculators, games, games and more games, etc.  Over 100,000 apps have been created in all sorts of areas with a corresponding increase in new mobile behaviors.

What they, and others (the telephone, steam engines to name a few oldies) did was create new behavior space.  As new behavior space grows, so too new market space grows.

(Behavior space = the number of people x the frequency at which they demonstrate a behavior.)

The iPad’s new behavior space

So what new behavior will the iPad allow to emerge?  When you inspect the core functionality of the iPad through the lens of behavior space you see that it was built primarily for two purposes, both of which do not currently have large “mobile” behavior spaces.

1. Playing games
2. Viewing media content (books, movies, magazines, newspapers, etc.)

Let’s just explore the latter.

Yes, the Kindle and Sony Reader already exist.  However, their adoption rates are small.  They haven’t swept the market.  I suggest two reasons for this lack of explosive growth.

1. Their offering is mostly one dimensional.  They only offer reading.  More critically, there is no obvious path for a potential consumer for new behavior growth. Consequently, potential buyers only have one reason to buy.  Do I want to be able to read in a mobile environment?  If yes they buy.  If no they don’t.  They’ve hung their hat (mostly) on one behavior.
2. Their business model does not include the potential for rapid evolution of content experience.  You can buy a book from Amazon, or you can download it.  In either case the book is largely the same.  Where is the capability to change the nature of the book, or magazine to take advantage of the new technology (disruptor)?

Look at how the iPad value-disrupts

1. iPad offers room for growth.  It has both games and media content (including movies) so it is multi-purposed to begin with.  Combine that with iphone apps and the device has more room to grow.  People will buy the iPad because there is more behavior capability there, and there is an expectation that those capabilities will grow even further.  This is especially true given Apple’s reputation.
2. With the app capabilities expect to see all kinds of new media content.
   • Self book-publishers will now publish their books through the iPad.  I worked with a self-publisher (Dr. Alex Osterwalder) on his recent book Business Model Generation.  Now he can publish on the iPad and make the experience far more interactive and rich.
   • Apps will allow successful bloggers to monetize their blogs.
   • The newspaper industry, which is in death throes, will do what the music industry did – migrate their offering to the iPad.  Some have calculated that printing The NYT costs twice as much as sending every subscriber a free Kindle.  With a multipurpose iPad it will make sense for them to build their own apps for their newspaper.
   • Creative magazines and newspapers will use color, 3G connections, GPS locators, video-play and gaming capabilities to develop an incredibly rich multi-media, multi-connected, location-specific experience to the user.  Think about that for a moment from a behavioral perspective.  What will the world be like when you can be at the corner of Main and Water street in your home town and point to a building and be presented with a multi-media array of games, news, background information, promotions, etc. all relevant to the entities you are pointing at?  Or, imagine what a “NYT experience” could be.  Even better, imagine what a small town paper could do (the Saskatoon Phoenix experience).  How exactly does Kindle compete against that?

The secret to market space is in creating new behavior space through a value disruptor.  The iPad, like the iPhone before it, and the iPod before that, is their next value-disruptor.

Watch the publishing industry be value-disrupted

So, no the iPad is not a replacement for the laptop.  No, it doesn’t do multitasking, or have video, nor phone capabilities.  It doesn’t need to.  It’s going after a much larger market.

100′s of thousands of  iPhone app developers combined with a mobile multi-media device creates the potential for a massive increase in behavior space in the publishing industry.  Apple will do to the publishing industry what they did to the music industry.  They will value-disrupt it.

What new behaviors can you imagine emerging?  In gaming?  In publishing?  How will the business models of publishers change?

You can learn more about value-disruption from the following posts.

1. How to differentiate - a story about a small janitorial firm
2. How LinkedIn is disrupting the recruiting industry
3. Pepsi uses crowdsourcing. Commoditizes Superbowl advertising
4. Will Google’s Nexus disrupt the smart phone industry.  Not yet
5. Companies value-disrupting their markets; a dialogue

Thank you for visiting http://ennova.ca

If a disruption is a change to the norm, then Value-Disruption is  a change to the norm that creates value.

I’d like to start a dialogue about this topic.

I’ve been writing recently about value-disruption based on work by Clayton Christensen and Alex Manu.  The key ingredient seems to be: a new resource and associated interfaces (a value-disruptor) allow a new behavior to emerge in a target group that satisfies a human motivation.  This new behavior disrupts relationships (in a positive way) and so creates new value.

Value-Disruption Elements

LinkedIn Question

After having written a number of posts on this topic (here, here, here, and here)  I wanted to see what others thought so I asked professionals in LinkedIn this following question.  “What examples can you give me of companies that are value-disrupting their industry?“

I received some interesting answers back.  (And I’m going to ask you to submit your thoughts at the end, with a twist.)

Well Known Examples

First, well know examples were submitted.

• Circe de Soleil
• Apple with iTunes
• Nintendo Wii
• Google with many of its applications: Search, Google Maps, email,…
• Many social media sites like Facebook, LinkedIn, Twitter

Then a couple of airlines.

• Virgin Air
• Porter Air

While the airline examples offer a better service than others and have carved out a niche, I can’t see how they have a disruptor in play that allows a new behavior to emerge. (ennova)

Tor Grønsund suggested

Swiffer (P&G) disrupts the vacuum cleaner.

Connecting a power-driven machine doesn’t work for small jobs.  So instead you use a swiffer which has reasonable “pick-up” capabilities.  A small but reasonable level of new behavior (ennova)

Asif Khan suggested

Vex Canada

They are building a national WIFI network that’s free.  They will offer free WIFI in restaurants, coffee shops, airports etc.  by having suppliers to these locations pay for installation and running costs in  return for advertising for people using the wifi.

They should certainly disrupt the industry of paid WIFI in Canada and allow 1000′s of people to connect to the web in 1000′s of new hotspots around the country.  Significant new behavior can now emerge. (ennova)

George Hazapis suggested

The publishing industry is undergoing a transformation, re-engineering its value chain.

Vizu

One example would be Vizu, a company behind Ad Catylyst, a digital ad effectiveness measurement system. The company measures how online ads impact viewer perceptions of key brand attributes.

Zeta

Another company is Zeta which provides complete digital solutions to enable publishers to market through email and other digital channels to drive traffic and improve engagement. Companies are transforming the industry by taking costs out of the business, increasing the engagement factor for print, adding value to content, improving web-based CPMs, assisting publishers in increasing the value of content within their eco-systems through the use of short codes, and tagging. There is a burgeoning mobile market and publishing is going online & mobile.

Boy, you can just imagine all the new behaviors will emerge from brand managers now that they have tools that gives them real data.  (ennova)

The hospital business model is undergoing disruptive innovation as the hospitals need to keep everything & everyone well at low cost.  Hospitals should cede market share to disruptive business models, patient by patient, disease by disease starting at the simplest end of the spectrum of disorders that they now serve.  Hospitals need to deconstruct their activities operationally into two different business models: solution shops and value-adding process activities.

Aravind Hospitals

in India which do eye surgery, and

Coxa Hospital

in Finland which focuses on hip and knee replacement surgery.

People travel out of country to get top notch medical care at lower rates and faster than they can in their country. Significant behavior change. (Ennova)

Thanks George for these four strong examples.

First, thanks to all the LinkedIn contributors for your descriptions of value-disruptions.

So, what examples would you provide?  Most importantly what do you believe is the relationship between the degree of behavior change and their business success?

Lastly,  thank-you for visiting http://ennova.ca

Unpacking stories to find the truth that lies underneath is always fun.  Here’s a story about a janitorial firm in Cincinnati Ohio that is both inspiring and, reveals how to escape commoditization by differentiating.

First the story.  The basic facts are these.

• They are a janitorial firm (since 1972) that service office buildings over 100,000 sq. ft.
• Like companies in the industry, their employees were largely immigrants looking for a first job that could lead them somewhere else.  After all, who wakes up thinking of cleaning toilets as a career?
• They like everyone else suffered from massive turnover – 400% a year (Yes, that’s 100% every 90 days.)
• You can imagine the turmoil and the low, low margins this level of turnover would create.
• So they implemented a bold idea.  They provided a Dream manager for their employees (all of them).   The dream manager met monthly with the employees and helped them articulate their dreams, plan for it, and because a financial component was usually involved, helped them save for it.

Think about the boldness of this idea for just a moment.  How crazy is that?  A dream manager?  Who has ever heard of such a thing.  A company that spends money helping you achieve your dreams?

Back to the story.

• The Dream Manager Program worked. It slowly gained momentum as employees started achieving their dreams.
• It really took off when Rita bought a house.  Then everyone saw that they too, could realize their dreams. (A car, a good education for their kids, a proper Christmas, a vacation back home, simple things many of us take for granted.)
• The results were (are) incredible.  In five years, 2,785 significant dreams were realized, turnover fell to 4%, gross revenue tripled, profits rose every quarter.
• Their costs are lower. Their client satisfaction tops everyone else (As you can imagine, their employees are very loyal and willingly work very, very hard). No competitor can match them.  They are differentiated.
• BTW, there are now 11 full time dream managers on staff.

What does this all mean?  Should we all hire dream managers as part of our business model?

No, not necessarily, but it does teach us an valuable lesson about how to differentiate.  It starts with a new phrase - value-disrupt.

A rose disrupts the moment. To differentiate, disrupt behaviour

Greatness has always disrupted the norm.  From fire to electricity; from writing to the iPod; different objects, different models, different ideas all inspire latent behaviours to willingly emerge that create new value.  (That’s they key!!)

Let’s unpack the story and discover the formula for differentiation.  As we go through the story we underline the elements.

1. Jancoa recognized a human motivation that existed in their target group.  In their case – the motivation of their employees to dream, to hope for a better future.  (While this motivation is universal for most of these immigrant employees they had long since stopped dreaming.  After all, life taught them they would never reach their dreams.)
2. To enable that motivation to express itself they created a disruptor – (The combination of a resource and associated interface)  = the dream manager with the monthly meetings.
3. The value-disruptor provoked a latent behaviour to willingly emerge.  Employees articulated their dream, planned for them and with the help of the dream manager, monitored progress a monthly basis until the dream was realized.  They did so without being coerced.  They wanted to do this.  A latent behaviour willingly emerging is the KEY.  It’s a new behaviour that a target group willingly adopts that causes a disruption to occur.
4. It disrupted the relationship between the employees and the company.  Duh Yeah!  I don’t just clean toilets here.  I make my dreams come alive.
5. That value-disrupted their markets.

So there you have it, the formula for differentiation.  I’ll return to this value-disruption concept in future posts.

Tips on disrupting

1. Focus on the new behaviour you wish to emerge.  As a result of changing your offer will they do different than they did before?
2. Test it for willingness.  Why will the target do it willingly?  To answer this question think about how easy it will be and how strong the motivation is.
3. Finally, remember that technology by itself is useless.  What is the work process that surrounds it that makes it useful?  Fire by itself just burns.  When you have a work process to control fire you have something useful that will value-disrupt.

Many thanks to Alex Manu who introduced me to this concept.

Thank-you for visiting www.ennova.ca.

You can buy their book about their experience here.  It’s a great holiday gift.

The recruiting industry has always been lucrative. With 35% of a recruited individual’s annual salary as a typical fee it certainly paid well. Except there’s a new kid in town and he’s good and much cheaper.

To understand the disruption you first need to understand the basics of the recruiting industry. It’s fundamentally an arbitrage play. Recruiters typically have deep relationships in either an industry sector, (e.g. manufacturing) or a functional area (e.g CEOs).

They use these assets to find the right person for the job – their core value proposition. While they perform many valuable activities along the way: Job posting, advertising, screening, interviewing, etc., it’s their ability to FIND the right candidates to put through the process that people are paying for. And that’s based on experience and relationships and networks. The best of the best always had the right connections and networks and that’s what you paid for. Hence the “pay a percentage salary” versus paying for time spent.

But what is LinkedIn but a network of relationships of 40 million professionals around the world? And for a measly $500 per month you can have access to them all. And what’ s even better, the recommendations on each profile are real. They can’t be faked. So, combine access to the information of 40 million professionals, inexpensive geo-targeting ads, with an ability to read and follow-up on recommendations and you have not only replicated the recruiters network, you’ve taken it to a whole new level.

Take this asset and put it in the hands of a former HR professional and magic occurs. The revenue models are changing to a time based fee versus access to the network base fee. And with fees 1/3 to 2/3 less than what traditional recruiters charge serious disruption is going on. Add that to a recessionary economy and now is not a good time for recruiters to say the least.  They are being commoditized.  How will they escape?

So what lessons can we learn?

• Social networking sites are huge repositories of personal and professional information. (no kidding)
• Prior to these social networks, industries had high costs to access specific types of this information and so their revenue models reflected that. (Recruiting and professional experience and recommendations)
• With cheap access to this information on a massive scale, new much cheaper revenue models become available, disrupting the old industries.

So what does the future bring?

Here is another industry that this massive information storage could disrupt. Personal behavioral information and the personal insurance industry.

What other industries do you think could be disrupted based on access to previously expensive information about people?

Thanks for visiting http://ennova.ca