Business models: a question of honour?

There's a story in Purple Cow that caught my eye about two restaurants. The first, Brock's Restaurant in Stamford, Connecticut, has a sign up above their salad bar: "Sorry - No Sharing". There is an explanation that this rule is necessary so that the restaurant can continue to provide good value. In other words "please help us protect our profit margins".

Compare this to the wine policy at a restaurant called Frontiere. The owner puts an open bottle of wine on every table. At the end of the meal you tell the waiter how many glasses you have drunk. An honour system.

The brilliance of this idea is that two glasses of wine pay for the whole bottle at wholesale price.

Isn't the salad bar just like the media business? In this case the sign might read "Don't share music" or "Don't photocopy books". The underlying message is the same: "please help us protect our profit margins".

What if we were more like Frontiere? What if there was an honour system?

In journal publishing that is exactly what does happen. Journal articles have no DRM. Fair use allows for copying and sharing of articles. Publishers trust librarians to honour fair use. Librarian respect that trust. Articles are shared widely and everyone benefits.

Freeware has a similar business model. Download for free but make a contribution if you use it and like it. You might find it surprising but many people do.

So what might an honour system for books look like?

Suppose we make books available online by chapter. The student pays for one chapter but has access to all. If they download more we ask them to tell us and pay.

Just as in the wine example, pricing will be key. I'm certain that the low price for a single chapter will attract a larger number of customers. I doubt it would be enough to protect the margins. The success of the model will likely depend on how many customers pay for a second or third chapter. The other thing to remember is that the printed book will of course still sell although likely in smaller numbers. And they would be other derivative versions, such as the complete eBook, or the eBook as part of a collection or library, and for a textbook an online course.

I'm sure this sounds like a crazy idea to you. Maybe it wouldn't work. But maybe it just might. In any event, I would love to see someone experiment with new business models like this for books. I think everyone would benefit.

Do you love reading or do you love books?

Author Ann Kirschner set out to answer this question by reading the Charles Dickens classic “Little Dorrit” four ways: as a paperback, as an audio book, on her Kindle and on her iPhone. She spoke about her experience on NPR's On The Media last week. You can listen to the interview below or read the transcript here.




Ann's conclusion was that she loves reading and that each of the formats she chose offered something different and was useful in different ways. She loved the familiar paperback, the nostalgic feel of it in her hands. She used the audiobook in the New York subway. The Kindle was good but she didn't like the screen going black between pages.

Then she used the iPhone:

"....the iPhone, which seems, on the face of it, to offer the least enjoyable experience because the screen is so small. And yet.... the iPhone was the revelation to me. The screen is brighter, crisper. You can change pages instantaneously. But the most important thing is that the iPhone is always with you, or at least always with me."

There are two things that I learn from this. The first is the same point that Stephen Fry made recently "books are no more threatened by ebooks, than stairs were by elevators". If you love reading then celebrate that we have so many great ways to read now.

The second is Ann's experience with the iPhone. The fact that it is always with her compensated for an inferior user experience. Easy of use and instant availability trumped quality.

I'm afraid that many publishers are still convinced that their customers love books, after all they are still buying them right? I think that many customers are discovering, just as Ann did, that their joy of reading is stronger than their love of books. I call this the ebook event horizon.

Publishers should be falling over themselves to provide their books in every possible emerging format. They need to worry less about the things that are important for books (like quality) and care more about ease of use and instant availability on any device. What's to fear? After all, we still use stairs don't we?

Book Review: Purple Cow by Seth Godin

Something remarkable is worth talking about. Worth noticing. Exceptional. New. Interesting. This is a remarkable book for all those reasons. It is written with marketeers in mind but I think the insights are relevant to anyone involved in innovative product development. The book is a passionate plea to us all to think differently about our markets. And to think about marketing from the moment we begin to design a product or service. In fact marketing is design

The underlying theme of Seth's book is that the old ways of marketing are dead. He does a great job of explaining why. For example: "The sad truth is that whatever you make, most people cannot buy your product. Either they don't have the money, or they don't have the time, or they don't want it. The world has changed, there are far more choices and less and less time to sort them out."

Seth continues: "No-one is going to eagerly adapt to your product. The vast majority of customers are happy. Sold on what they have got. Not looking for a replacement, and anyway they don't like adapting to anything new."

These are humbling insights. It is all too easy to become caught up in your own success story when you are building products. You need the positive momentum to keep you going, to keep you excited. So it is a shock to discover that at the launch that the world isn't waiting eagerly for the stuff you have worked so hard on.

So what can you do?

Be remarkable. Create something that is worth noticing and that people talk about. Ideas that spread are more likely to succeed than those that don't. It is not about gimmicks. Not about creating remarkable blurb. Not about making a product attractive after it has been designed. It is about designing the product to be remarkable from the start. Products that are worth talking about will get talked about.

The book is stuffed full of examples of remarkable products and services to help you understand what Seth means by this. My favourites are: the Dutch Boy paint cans that are designed with easy opening lids and carrying handles to make the painting process easier. Tracey the publicist who chose to focus on the narrowest possible niche (plastic surgeons) and to become the world's best publicist in that niche. The Four Seasons in Manhattan that knows that personal attention can make people feel special.

This is not a perfect book. As always Seth can be by turns insightful and annoying. He has a self-confessed tendency to hyperbole and some of the case studies are a bit flaky. Overall though this is a great book and I thoroughly recommend it.

Oh yes and the title of the book? Well it's simple. If you were driving along in the countryside and you saw a cow that was purple instead of the usual brown or black and white ones, that would be remarkable wouldn't it? You'd probably tell someone about it when you arrived home: "hey you'll never guess what I saw - a purple cow!" That's what customers say about remarkable products.


#Twitternovels version of this review: Don't be boring. Playing safe is risky. You must be remarkable - you must be a Purple Cow

Purple Cow by Seth Godin

A serendipity button

I always dreamed of what I called a Serendipity Button - a kind of sliding scale you could apply to (say) search results. A low serendipity setting would show you the results you were expecting, but a high serendipity setting would reveal apparently unrelated, but curiously intriguing, results that you were not expecting.

Wouldn't that be cool?

How close to the wind are your ideas?

I learnt how to sail with a wonderful instructor named Bert van Elderen. Over the years since then, I have realized that one of the things he taught me has relevance beyond sailing. Let me explain why.

As you probably know it is not possible to sail directly into the wind. You can however sail at an angle to the wind that allows you to make ground upwind. This is why yachts often sail in a zig-zag pattern. To make the most ground upwind you need to sail at the smallest angle possible to the direction the wind is coming from. This is called sailing close to the wind or close-hauled. You have to be careful not to sail too close to the wind, otherwise the sails start flapping and you lose speed. The trick is to learn how to sail as close to the wind as possible.

One day I was with Bert in a dinghy learning just that. Every few minutes he would ask me if I could "luff up", in other words sail closer to the wind. Sometimes I discovered that I could and sometimes I discovered that I was already sailing as close to the wind as possible. After a while I was pretty confident that I knew what I was doing, and yet Bert continued to ask the same question, again and again.

Finally, slightly annoyed, I asked him "why do you keep on asking that?, am I not doing it right?"

"Simple", he said, "It is a question with no wrong answer! If you are sailing as close to the wind as possible then the answer is no and you keep to your course; if the answer is yes, then you have fallen off the wind and you need to luff up a bit". What he was of course teaching me is that the conditions change all the time and that I should ask this question of myself all the time to make sure that I am sailing as close to the wind as possible.

I think this simple question applies to many things in life. For instance, it is the basis for retrospective reviews. "Could I have done that better?" is a question with no wrong answer. Either the answer is no, you did the best you possibly could, or the answer is yes, here's what I can do better next time. Either way you learn something. It is the key question to ask if you are interested in systemic change.

Jeff Honious reminded me last week that it applies to innovation as well. You should always be asking yourself the question "is this idea remarkable enough" or "can I improve on this idea?". These again are questions with no wrong answers. If the answer is "yes" then great we continue with the idea as planned. If the answer is "no" or "maybe not", then we need to do some work on the idea to make it better. Just like the wind, conditions around the idea change all the time. Asking these questions every day will help keep your ideas close to the wind.

Coping with complexity - Lessons from Albatross

I wrote a couple of weeks ago about the difference between complex and complicated problems. The more you work on a complex problem, the more details you uncover and the more complex it becomes. You can solve complicated problems but you have to learn to cope with complex ones. How?

I think we can learn something from the Albatross.

The Albatross is a remarkable bird. It flies over the oceans without touching land. It feeds on fish that it finds as it flies around. But fish are not especially plentiful in the open ocean and moreover they are not evenly distributed, they gather together in shoals. So how does the Albatross know where to find shoals of fish to feed on?

To answer this question, scientists attached transmitters to some Albatross and tracked their flight. A huge amount of data was collected. The scientists were unable to explain the data in terms of normal distributions. It seemed highly complex. The Albatross either made short flights before stopping (the assumptions is that they stop to rest or to feed) or they made long flights. When they made long flights, they either branched off suddenly or they stopped after a certain distance and then took off in a different direction. What was going on?

They asked Gene Stanley, a brilliant physicist, to help. He took the data and looked for patterns. It turns out that the flight path of the Albatross is an example of a random walk known as a Lévy flight. It is statistically the most efficient way to forage for food that is sparsely and randomly distributed.

This is how it works. The Albatross looks around for signs of fish. If it sees evidence of fish then it flies to that spot, finds the fish and feeds. If it cannot see any signs of fish then it flies in a randomly chosen direction. As it flies it looks around for fish. If it sees any then it flies towards them and feeds. If it does not see any fish then it flies only for a limited distance before stopping and changing direction.

I think we can learn a lot from the Albatross. I think that remarkable ideas are sparsely and randomly distributed in oceans of obvious ideas. The trick is to keep moving in different directions until your find something that works. If the Albatross sat still and waited for the fish to come along, more often than not they would die waiting. When foraging for answers a random walk is the best strategy.

What publishers could learn from Build-a-Bear Workshop

My kids loved the Build-a-Bear Workshops when we lived in the USA. There was a special Workshop at Citizens Bank Park, home of the Philadephia Phillies baseball team. The team mascot is the Phillie Phanatic and you can build a one for yourself. There is always a huge queue outside the shop on game night.

This is how it works. You pick up a half-stuffed Bear (or Phillie Phanatic) and then choose which clothes, shoes, and other accessories you want. You can pick a voicebox to embed in the stuffed toy. You take it all to the assistant who inserts a "heart" and adds more stuffing, sews it up and dresses it. A Bear is born. It is a simple concept but a huge hit with kids. It turns the buying of a teddy bear into an event to remember.

The remarkable part of Build-a-Bear Workshops is not the customization. It is the half-stuffed bear that you start with. These are all exactly the same! And yet every child leaves their store believing that the bear they created is unique to them (it most likely is since the variations are almost endless). What Build-a-Bear Workshops have done is to figure out how to build a customization business that is profitable AND that delights the customers, in this case kids.

Isn't this what publishers have been searching for? A way to build a customizable experience that delights individual customers but doesn't kill any hope of profit. What if publishing could be more like Build-a-Bear?

Take textbooks and teachers. What would be the "half-stuffed" text that teachers could use to add features and content to build their own text? What is it about a great textbook that makes it great? Perhaps the didactic flow, perhaps the content, or the way of engaging the student. Whatever it is, what if we could distill that into the half-stuffed text and let the teacher build the rest?

This model is of course well established in some areas with services such as netvibes using RSS feeds. There are also sites that offer course materials. As far as I know there is no-one that offers an easy-to-use build-a-textbook service for teachers.

Are humans more predictable than the stock market?

Banks remind us that the past performance of their investment funds is no indicator of future results. The stock market, they say, is unpredictable, it can go up as well as down. Fair enough. No-one could seriously think that human beings are more predictable than the stock market?

And yet there is a school of thought that your past performance is the best indicator for your future results. Interviewers often rely on this insight to assess your suitability for a new position. They even have research to "prove" it.

I think this is total rubbish.

Don't get me wrong. I love to hear about people's past experiences, where they have been and what they have done. I just don't think it is much of an indicator of what they can or will do in the future. Nor should it be. I would rather hire someone for what they are going to do with my team than for what they have done in the past with someone else. I would choose potential over experience every time.

So how do you assess potential?

I look for passion. I look for that spark inside someone that is going to drive them to do things even when most people around them are telling them it's not worth doing.

Here's a couple of examples. Some years ago, I helped my father start a bookshop business. When he hired staff he asked questions about how many books people had at home, what book they were reading now and what did they think about it. He wanted to know if they were book people. Were they somebody he would like to have help him in a shop if he was the customer? Were they as passionate about books as we were?

When I was a student, I applied for a Saturday job at the LD Mountain Centre in Newscastle-upon-Tyne, an outdoor sports store. The only questions the shop manager asked me were "do you climb?", "can you come out climbing with us next Sunday", and "when can you start?". He was looking for someone passionate about mountains.

Rachel Mooney, Head of Organisational Culture at Google Europe, told me that one of the best answers she had ever heard while recruiting for Google was "I hope that what I am going to do with Google hasn't been invented yet". Passionate about creating something remarkable.

Why you should put the customer in control of their own experience

“People don’t believe what you tell them. They rarely believe what you show them. They often believe what their friends tell them. They always believe what they tell themselves". A great insight from Seth Godin in his recent book Tribes.

I think the same applies to the way a customer experiences a product, service or website. Think about user manuals and help texts. Few people read these anymore, they just dive in and figure it out. You can try to tell them how best to use the product, or perhaps show them, but they don't really listen. They just say: "I'm sure I'll work it out, thanks".

If you are in control of your experience, then you choose the way you do things. You are telling yourself a story that convinces you that this is the best way to do things. And these stories stick.

So how much control do you give your customers and users with your product? Or your website? What stories do they tell themselves as they use it? And what stories do they tell their friends and colleagues?

Little details matter

People tend to think about the big things but overlook the little details. As a result, I think that little details can often reveal hidden, subconscious truths. Here's some examples, and a story that illustrates how powerful little details can be.

Many companies say that their customers are the most important thing to them, that customer focus is their number one priority. If this is true, then why do so many companies display only their products in their lobbies? What if they displayed the names and pictures and videos of their customers instead of their products?

And what about visitor badges? If visitors are welcome, why do we give them crappy badges with VISITOR on them? What if there were temporary badges printed on the fly with the names of the guests instead? Or even better, name badges that were ready upon their arrival. Wouldn't that make a guest feel welcome?

We all know that first impressions are important. Why is it then that many companies outsource their front desk to a security company? What if for one morning, a senior executive sat on the front desk and welcomed the staff? Wouldn't that be cool? What if the front desk staff had responsibility and a small budget for keeping the lobby fresh, fun and interesting?

Many executives say that their staff come first and that they value their people. If this is true, why is it that so many Board Meeting agendas have finance as the first agenda item and HR as the last? What if HR was the first agenda item instead?

I remember a regular monthly conference call that I used to attend some years ago. Every month the most senior executive on the call would say "this call is the most important call that I do every month". If this was true why was he was 5-10 minutes late dialing in every time? What if he was always the first to dial in instead?

Many websites say that they welcome feedback. If that is true then why do I have to register before I can submit comments? What if I could leave anonymous feedback but have the anonymous feedback visible only to registered users?



And now the story:

I had the great pleasure of visiting the Nature Publishing Group (NPG) offices in New York a couple of weeks ago. As you may know, they have recently taken control of Scientific American. NPG is busy making space in their offices for them. The desks and cubicles have been set up and are waiting to be fitted out with equipment. Over the last few weeks Scientific American staff have been visiting their new space in small groups to see what it is like. Before the very first group arrived, NPG made sure that there were nameplates above each new desk. Imagine how good it feels to visit a new office space that isn't even quite ready yet, and to see your name above what will be your desk. You can also see who will sit next to you. Wouldn't that make you feel very welcome? It is a little detail. I bet it makes a big difference.


Finally, a warning to anyone who thinks they can "fake" the little details. Humans have built-in authenticity sensors that detects inconsistent behaviour and recognizes token gestures. It is this same sensor that tells us when a CEO blog is ghost written for example. Little details are surprising and unexpected to the receiver and yet seem completely natural to the person that thinks them up. For the Nature example I am sure the thought process was "these new people must be feeling apprehensive about moving, how can I make them feel welcome? Well, one thing I could do is to put their names over their new desks before they arrive..."

Why good enough is no longer good enough

I am re-reading Seth Godin's book, Purple Cow. The book is a plea for being remarkable and for having remarkable ideas. Seth's argument is that in a crowded market, only those companies that stand out will survive. It is no longer enough to copy someone else's remarkable idea. Playing safe is too risky.

One of the many insights for me in this terrific book is that the opposite of remarkable is "very good" or "good enough". Not "bad" or "mediocre" as you might expect.

I think most companies are pretty good at weeding out the bad and the mediocre ideas during development. Concept testing and prototyping help us do this at low cost. I wonder how many companies are as good at sorting out the good enough from the remarkable?

Here is a scenario you might recognize. You talk to customers and get some remarkable insights. You turn these into remarkable concepts and remarkable prototypes. The customer feedback is great, you realize you are testing things that no-one else has ever done before. Wow! Then comes the business case review and the CFO says: "great idea, I love it, but could you do it for less maybe?....I mean does it have to be so fantastic - good enough is good enough right?". This sounds very reasonable doesn't it? The kind of thing CFO's say all the time. Has it happened to you?

I suspect this is how remarkable ideas are dumbed down into good enough ideas, and why many of these ideas disappoint upon launch into the crowded marketplace of today. There are plenty of products competing for our customers' attention, why should they even look at something that is unremarkable?

Good enough is WORSE than bad or mediocre. We can recognize the bad or mediocre and we have learnt to kill it early. The problem is that good enough fools us into thinking we are on the right track. Good enough keeps us investing in something that will never excite our customers. Ever.

The secret I think is to keep the remarkable ideas alive during the development process. You have to understand what it is that is remarkable about the idea you are developing or the concept you are testing. When challenged to do it more cheaply, as inevitably you will be, you have to work out how to keep that remarkable part alive. If that is not possible, it is better to stop than to proceed.

Here's two examples of what I mean:

Some years ago a couple of guys working at Mars thought it might be cool if you could print personalized messages on M&M's. Printing on tiny saucer-shaped, hard gum-covered chocolates without melting the chocolate or crushing the M&M and producing readable text proved to be technically very tricky. The easy thing to do, the good enough solution, would have been to personalize the packaging instead i.e. deliver M&M's in bags with your personalized message on the outside. Other companies do this. It's not that difficult. But no - the team at Mars stuck to their remarkable idea. It took them five years to figure out how to print on M&M's and how to do it in a cost-effective way. The result is My M&M's and an entirely new business unit: MarsDirect Inc. Today you can upload your own message and even photo's for printing onto M&M's. It is a huge success with around 2000 orders a day and many very happy customers. When you look at one of their printed M&M's you cannot fail to be impressed and ask yourself "how on earth do they do that?". It is remarkable. You can read more about it here.

ScienceDirect is another example. The original idea of providing desktop access to scientific, technical and medical articles was remarkable in 1993 when we first started experimenting with what would become Elsevier's web delivery system for scholarly information, ScienceDirect. This might seem strange to you now in today's world but remember that the world wide web didn't exist until Tim Berners-Lee proposed it in 1989 and only a handful of websites were live in 1993. Just as in the M&M example, the key problem to solve was the production. How could we take whatever format authors chose to send their articles to us in and turn it into something we could display online? And how to do it in a cost-effective way? Our computer-aided production process was the innovation that made this remarkable idea possible. There were many "good enough" moments in the 5 years it took to develop but the team stayed true to that original, remarkable idea of desktop access to articles.

As Seth Godin writes: "transform your business by being remarkable". Good enough is no longer good enough.

What is the difference between a platform and a product?

We would argue this question for hours when I was a product manager. We came up with plenty of definitions to clarify the difference, although I'm not sure we were ever very clear about it ourselves at the time. And yet I think this simple question lies a the heart of good product management. So here is what I think today.

One line of argument is as follows: People buy products. Platforms are structures that allow multiple products to be built within the same technical framework. Companies invest in platforms in the hope that future products can be developed faster and cheaper, than if they built them stand-alone. I would argue that as the cost of development comes down there is much less to gain here as there once was.

Today it is much more important to think of a platform as a business framework. By this I mean a framework that allows multiple business models to be built and supported. For instance, Amazon is an online retail framework. Facebook is a social media framework. Apple iTunes is an online micropayment framework.

It is the business framework that leads the product strategy. Amazon started by selling books. Over time they have expanded to selling all sorts of other things. Apple iTunes started by selling tracks and now uses the same framework to sell videos. TV programmes and software applications for iPhones.

In a technical framework, you leverage the underlying technology to build new products. In a business framework, you leverage the knowledge about the customers to build new business models. Amazon built a retail platform that gathered huge amounts of data on how people buy things online. They used this knowledge to extend the platform to sell more and different things.

How is this relevant to publishing? Suppose I am (say) a textbook publisher. I can imagine developing all sorts of products to repackage my textbooks in online formats. I might develop a great technical platform to do this efficiently. Eventually all my textbooks are online. Great. What do I do then? The business framework is unchanged, I am still selling textbooks, albeit now online.

Let's take a different approach. As a educational publisher we help students to learn. It seems logical then to think that the more we know about how students learn, the better we will be able to help them learn. Suppose then I design a platform that gathers data on how students learn over time. I might start with (say) a study guide that helps them identify what the best learning strategies might be. I would figure out a way to track how useful the learning strategies are for individual students. Over time I would build up a large data set of the best ways to help students learn. With this knowledge I can design new products for students.

That's why I believe we should be thinking of platforms before we think of products