W1 Insight

“It’s really hard to design products by focus groups. A lot of times, people don’t know what they want until you show it to them.” Steve Jobs, Co-Founder and Chief Executive, Apple

The Mashed-up business is created by joining together products and services from different firms to create a new offering that is only possible by the unique combination of resources and capabilities that you have assembled. We’ve been outsourcing many of our functions to achieve lower costs and better services levels for many years, we’ve even started outsourcing our innovation, even crowdsourcing, to speed up development of new products and services. Now it’s time to take the next step – to assemble components of other people’s offerings and business models to build something brand new to offer your clients – fast.

Transformation
Right now, the digital media industry is being transformed through convergence, more to the point, the news, information, entertainment and advertising industries are being transformed through digital convergence. Online- newspapers look more like TV channels (eg: The Times) and TV news programmes are looking more like newspapers (eg: BBC News). In just five years YouTube has become the most watched media channel in the world and newspapers could have largely disappeared, as physical copies, in the UK by 2019′. In the future we will increasingly want to pay for content, not paper and ink and transportation.

Facebook founder, Mark Zuckerberg, announced at the November 2010 Web 2.0 conference in San Francisco, that within the next five years he expects his company to make “billions and billions of dollars turning the TV, news, film and music industry upside down”.  If all that wasn’t enough reason to think that media world is in downward spiral of deconstruction, the Google backed O3B satellite network aims to provide mobile phone and internet access later this year to the other 3 billion people, the ones in the world who have no access today.

LinkedIn, with 100 million users executes its IPO this year with Groupon, Facebook and Twitter all positioning themselves to go public in the not too distant future. Facebook, with 600 million members is likely to see its 1 billionth member by the end of 2011. This sort of growth and change, alongside O3B means that by the end of 2011 we will be looking at a completely reconfigured digital media infrastructure. The players will have rearranged their ownership and 3 billion more customers will be online, mostly through mobile devices.

Curation
What was about control of content in the past, is today all about access. By the time all this is in place broadcast and broadband will completely overlap, and mobile broadband at that – access for all – but who will help navigate all this content?

The editorial role in TV and Newspapers isn’t going away any time soon, it’s just changing hands, from the traditional channel providers, such as The Times and the BBC, to social networks such as Facebook and Twitter. Even that’s not accurate, because it’s in the hands of the people on Facebook, YouTube, Google and Twitter. It’s their members who have become the new curators of content, and we’re following them. In the meantime, advertising is moving onto these online platforms but not fast enough.

Mashed up
In Denmark, the mobile internet service provider (ISP) TDC has bundled free streamed music with their monthly service charge. As a consequence, their churn rate has fallen by 50%. What cost them $20 million to set up has already earned them $50 million. In the USA, Netfix teamed with LG to provide streamed film content to consumer’s homes. These sorts of devices are coming out thick and fast, including technologies such as the Xtreamer that links the big family TV screen with the online world and with the contents of every PC in the house. There’s no distinction between the PC, mobile and the TV any more. Whatever is the most appropriate screen to use, will be used. To make a point, the much delayed BT ‘Youview’ is TV, catchup, film and app (application) platform provided from a telco. Considering Netfix and LG got together back in 2008, it’s taken BT quite a while to get this service off the ground, or anyone else for that matter!

So today it’s all about access and convergence. The digital economy of the future and how we make money from it, is going to be about convenience. When your mum knows how to get access to any digital content, on any media and view it on any screen, anywhere and at any time, then there will be a massive acceleration in the take up of digital cross-over products and services. Today, it’s about innovative configurations of channel and access, with devices and content, offered, frequently for free, or almost free, with an upside premium revenue stream.

The money for the media industry is coming from connecting the crowd with the content in the ‘cloud’ and building innovative partnerships of content, devices and channels – social channels – for distribution. The models we will enjoy are – I pay – you pay – they pay. I pay for access, you pay and I get it for free or advertisers pay to fund my access. So, the TV, Film, news, entertainment and music industries are all caught up in needing to define a new meaning of value, looking to monetise their content. The default for this social decade is ‘sharing’ and when we aren’t prepared to share then we will be punished. The music industry lost 71% of its music sales revenues in the last decade because it refused to share its content online – it couldn’t see a different business model to sell its content.

The ‘Like’ button
So what are the imperatives. The first and most important is attention. To be ignored is the death knell for your offering and for your clients. In the dot.com boom, firms sought to advertise themselves to fame with what seemed at the time, inexhaustible advertising budgets. It turned out that they were exhaustible and when the money dried up many start-ups folded. Today the life blood of successful offerings is through Social Networks recommendations – the ‘Like’ button. Finding ways to help your clients be ‘Liked’ is one of the most important contributions you can make. We all get this, so to stand out we need to offer new, innovative, mashed-up capabilities that are differentiated in our crowded market and help you to maintain your fee levels.

Who Values you
When it’s a matter of attention it will be the highly connected individuals in the social networks who will be the king makers of tomorrow. How will you find them – follow Klout, Peerindex and other social network analytic sites that are scoring individuals connectedness, authority and reach. At the same time can you imagine a client engaging any services firm in the media industry in the future that doesn’t have a high Peerindex or Klout score, both for the company and also for those that work in that organisation.

The recent Wiggins Digital Entertainment Survey indicated that 75% of UK Facebook users visit their sites every day and 55% of them ignore any messaging from brands. Unless there’s something in it for the individual, a brand’s messages will increasingly fall on deaf ears. What we are doing is following our friends on Facebook and those we admire on Twitter.

Co-opetition
Firms can combine and collaborate with sometime competitors to produce compelling propositions to clients on an ad hoc or loose arrangement – ‘co-opetition’. This ability to select from the best on a project basis has been at the cornerstone of many industries for the benefit of their clients for many years. Consider the construction industry. They compete aggressively with one another every day for contracts with slim margins. At the same time they combine in an endless confusion of collaborative projects to win some of the largest contracts, and when they win they establish the project on-site within days and are up and running without fuss or rancour. This is the future for the media services industry – a complex networking of capabilities endlessly being reconfigured to meet client’s needs. You can wait for the clients to demand this or take steps to be in control and provide it yourself – your choice.

What you know and who you know
The future is all about what you own, your intellectual property and your network, it’s what you know and who you know that gives you your differentiation, your ability to charge for services at the level that you want and your sustainability in your market. What’s hard is innovating to achieve this position. Who do you involve? How much time will it take? What will it cost? How do you innovate?

Many firms embark on innovation by assembling people in a room, running a process for a while and hoping something new emerges. This is often facilitated by competent agencies who’s process will deliver you some new ideas at the very least. Can this approach deliver step-change, industry busting, new category creating breakthrough innovation – yes it can but it’s not very likely, and frequently doesn’t deliver very much of real and lasting value.

The mashed-up business model is about combining elements from many sources to create something new. The newness may be marginal or extreme but it offers the potential for break-through innovation, personalisation and differentiation that your own internal efforts could fail to achieve in a millennium of effort and thinking. The same function in companies in different industries has been developed under different conditions, often using different principals and processes. Now imagine taking the best processes, methods, ideas and technologies from the industries that best developed them and combining them with your know how, resources and service offerings. The company, project team, product or service that results could be an order-of-magnitude better than you or your traditional competitor could deliver.

Crowd in the Cloud
So to benefit from this approach you need access to people who might be prepared to collaborate for mutual advantage – enter the crowd in the cloud. Crowdsourcing is the act of outsourcing tasks, traditionally performed by an employee or contractor, to an undefined, large group of people or community (a “crowd”), through an open call. Jeff Howe, one of the first authors to employ the term, established that the concept of crowdsourcing depends essentially on the fact that because it is an open call to an undefined group of people, it gathers those who are most fit to perform tasks, solve complex problems and contribute with the most relevant and fresh ideas.

Using crowdsourcing techniques we can rapidly involve a disparate set of companies and individuals in an open process that can generate break-through ideas and innovation. I imagine at this point I’ve lost a few people’s interest. What about copyright and patent, confidentially and commercial arrangements you say? New forms of open-source contract are available to allow mutual protection of copyright and intellectual property such as the Creative Commons Licence. I am suggesting that involving non-traditional participants to collaborate in identifying break-through ideas is the minimum we will need to do to move ahead in our markets.

Innovate or die
In almost every sector across most geographies we are seeing innovation high on the agenda of companies. This is a direct consequence, in the developed economies, of highly saturated and slow growing markets. The only way to grow is to take market share from the next guy. Either you’re innovating or you’re going to be hit by someone else’s innovation, sometime soon.

If you’re putting your faith in increased customer satisfaction, even advocacy, hoping for their loyalty to sustain your business, you need to know that even companies with increasingly happy customers get hit by the loyalty/satisfaction paradox – where customers, who may be delighted with your performance – still move away to try new things from your competitors. In a survey over half of companies recognised that this had happened to them at some time. if you’re relying on your customers to tell you where your future is then consider the horse rider who when asked what he needed, answered, a faster horse, instead what he got was a car.

To bring this tale up-to-date consider the Apple ipod. When it came out there were plenty of MP3 players around, there was nothing particularly special about the Apple ipod, yes it had white wire which was sort of cool and a nice dial but it did the same as all the others – or did it?. The innovation of course was huge – they organised legal access to music at a price the customers were prepared to pay. But the technology was pretty much the same. If you were an MP3 player provider you just lost your market. What’s interesting is that Apple took the same approach for their iphone and for their tablet, the ipad. it’s taken years for the competition to catch-on and it’s catching on through a third party – the Android operating system.

This story tell us three things.

1. There is huge value in getting the innovation right.
2. The answer is often simply combining what others couldn’t see. in this case organising content with cool technology.
3. Sometimes the differentiation created can be highly sustainable. In this case Apple took that one combination strategy through their ipod, iphone and ipad, from music, to video and applications – apps, and made a fortune.

What can you do
So what can you do about this? Time and resources are short. The pressure to deliver is on, yet you need to find a way to avoid the commoditisation of your services in the digital economy and resultant fall in your charge-out rate. There are two things that are available to you immediately:

1. Start, or accelerate the rate at which you are gathering organisations and individuals who want to connect with you. The people in your network are the ones who are most likely to respond to an opportunity to collaborate with you around new propositions and business models. When Procter and Gamble were in trouble in their innovation they started to get-out-more and engage with outside organisations and individuals. They ended up building a network of 3 million people who were open to the idea of collaborating around innovation with them. Many were from industries a long way from their own.

2. Consider an open-source project, access the crown-in-the-cloud, to identify how you could combine skills and capabilities from outside your own firm and your own industry to offer something brand-new and compelling to your clients.

Who are the right people
When you consider how to move any of this ahead – think about this – you may not be the person with the most discontinuous thinking head on in your firm. Find out who they are, network those guys together and give them permission to take on a break-through project as I’ve been discussing. It’s unlikely you’ll want them to do this full-time, but give them some encouragement to seek out new partners to blend your capabilities with, particularly those from outside your industry, to create a new mashed-up offering.

Who’s following you?

Who are you working with to create a new combined service offerings?

In what new ways are you helping your clients taking advantage of the turbulent, converging and rapidly expanding digital landscape?

How are you helping your clients to monetise their offerings in this changing world?