Month: May 2006

Leadership lessons from China

There are some interesting leadership and management lessons from some of the Chinese manufacturing systems that can be applied at all levels of an organization to make it more innovation-friendly. The contrast between leading and managing may be subtle to some, but it’s hugely important in making a company capable of competing in the fast-paced Internet economy.

Not knowing the path to a particular outcome can be excruciating to someone who knows what they want. Managers find it much easier to make lists of things that add up to the sum of the final goal, and they like to put checkmarks next to all the items in the list as they are completed. This system never scales no matter how talented the manager is because that system is totally dependent on the manager.


Photo: Hocchuan

John Seely Brown and John Hagel examine how a network of motorcycle parts assemblers in China break traditional centralized management tactics to optimize for innovation in a paper called “Innovation blowback: Disruptive management practices from Asia.” In the Chinese city Chongquing a supplier-driven network of parts developers work together under the loose guidance of their customers rather than under the orders of assemply-line management:

“In contrast to more traditional, top-down approaches, the assemblers succeed not by preparing detailed design drawings of components and subsystems for their suppliers but by defining only a product’s key modules in rough design blueprints and specifying broad performance parameters, such as weight and size. The suppliers take collective responsibility for the detailed design of components and subsystems. Since they are free to iomprovise within broad limits, they have rapidly cut their costs and improved the quality of their products.”

As a manager, when you define what is to be done and how it is to be done, then you are setting the exact expectation of what is to be delivered. There is no room for exceeding expectations, only for failing to meet expectations. Your best-case scenario is that you will get what you asked for.

As a leader, on the other hand, when you set parameters for success, you let the contributors in the system share ownership of the outcome. This is participatory production which includes an important incentive for each individual contributor: pride. The outcome becomes a somewhat personal reflection of each contributor’s capabilities as a person.

There’s another interesting paper on the concept of peer production called Coases’ Penguin written by Yochai Benkler in 2002 that talks about the incentives that drive users of online media to contribute content to a web site such as Slashdot or Wikipedia. One of the interesting conclusions is that financial reward can sometimes have a negative effect on participation and collaboration:

“An act of love drastically changes meaning when one person offers the other money at its end, and a dinner party guest who will take out a checkbook at the end of dinner instead of bringing flowers or a bottle of wine at the beginning will likely never be invited again.”

John Battelle similarly points out that Google’s latest attempt to monetize peer production in online media may actually have the effect of degrading the overall quality of their ad network. As they provide ways for user-generated content (UGC) sites to kick earnings from AdSense back to content creators on those sites, they are inviting spam and click fraud at pennies in earnings per user at the expense of quality contributions.

“I’ve never seen UGC sites as the least bit driven by money. They are driven by pride, the desire to be first, reputation, whuffie. But dollars? That often screws it all up.”

Of course, pride won’t replace the need for salaries, but it can certainly make up for the margin pressure these particpatory production systems are putting on themselves. When the production process reduces waste, that savings will get passed on to the buyer before the profits get passed back to the creators. That’s how this Chinese network has stolen marketshare from the big motorcycle manufacturers like Honda and Yamaha.

“The average export price of Chinese models has dropped from $700 in the late 1990’s to under $200 in 2002. The impact on rivals has been brutal: Honda’s share of Vietnam’s motorcycle market, for instance, dropped from nearly 90 percent in 1997 to 30 percent in 2002.”

Of course, everyone in the Internet business would rather be in a position of growth than one of decline regardless of the profit margins. The way to put your company on the growth track and to stay competitive through innovation is likely based on these types of leadership principles rather than micromanaging your staff through every step of an unpredictable journey.

Media needs to reflect attention, not collect attention

The “Edge” economists generated a swirl of activity over the last couple of weeks inspired by an attention economy paper apparently written in 1997 and referenced by Esther Dyson in a WSJ article.


Photo: eva8

In this paper, Michael Goldhaber wrote about the inherent desire for and scarcity of ways to get attention. He talks about how mainstream media created demand for getting attention and that the Internet then created the means for getting attention. It’s an excellent, thought-provoking paper. It’s particularly interesting today since most media insiders have been focusing on ways people give attention.

Here’s one particularly good excerpt:

It is a very nice feeling to have respectful attention from everybody within earshot, no matter how many people that may include. We have a word to describe a very attentive audience, and that word is “enthralled.” A thrall is basically a slave. If, for instance, I should take it in my head to mention panda bears, you who are paying attention are forced to think “panda bears,” a thought you had no inkling would come up when you decided to listen to this talk. Now let me ask, how many of you, on hearing the word “panda” saw a glimpse of a panda in your imagination? Raise your hands, please. Thank you. … A ha.

What just happened? I had your attention and I was able to convert it into a physical action on some of your parts, raising your hands. It comes with the territory. That is part of the power that goes with having attention, a point I will have reason to return to. Right now, it should be evident that having your attention means that I have the power to bend your minds and your bodies to my will, within limits that in turn have to do with how good I am at enthralling you. This can be a remarkable power. When you have superb control over your own body, so that you can perform great athletic feats, it feels great; likewise, it feels good when your mind feels focused and powerful; how much more wonderful then to be able to have the minds and bodies of others at your disposal! On the rather rare occasions when I have felt I was holding an audience “in the palm of my hand, hanging on my every word,” I have very much enjoyed the feeling, and of course others who have felt the same have reported their feelings in the same terms. The elation is independent of what you happen to be talking about, even if it is to decry something you think is horrible.

Several different bloggers have fleshed out intersesting perspectives on this topic including John Hagel, Umair Haque, Esther Dyson, Scott Karp, Nick Carr and Andrew Keen.

One of the important lessons from this discussion is for media companies to think of themselves more like a mirror. If online media brands can successfully help their customers to get attention then they will win.

That doesn’t mean you should resurrect that old message board system you trashed or stopped linking to. It means that you need to stop pushing content out and start introducing your online audience to each other.

After reading things like this I start wondering whether publishers should stop creating content completely. The efficiencies of leveraging an online media brand merely as a way to conduct 1-1, 1-many, and many-many conversations only amongst the audience itself seem intuitively more powerful and future-proof than almost any form of broadcasting we have today.

And it probably also means throwing out terms like “audience” in your corporate lexicon unless you are referring to the “audience” of one of your customers. This model suggests that media brands don’t have anyone listening to them. The sites’ “users” or “visitors” are interacting with each other instead…competing for attention amongst each other.

How many medium to large-sized publishers will be necessary when a few figure out how to enable people to get more attention? I would bet all of the teen magazines are panicking in the big shadow of MySpace’s market share. It suddenly feels like there’s another wave of disintermediation on the horizon, this time aimed squarely at publishers who are slow to shift gears.

I’m turning into a mumbling idiot

I was comparing my feed collection with Micah Laaker the other day, and I realized that the scope of my intake just keeps getting narrower and narrower. Looking at other user’s lists in the Share your OPML system, it seems I’m not alone.

Sometimes I get overwhelmed thinking about how I can possibly dive into big important topics like Israel or oil the way I want to knowing how much time and energy I put into understanding and acting on the extra-small-sized issues that are in my circle of influence.

It makes me think that the phrase “The more you know the more you don’t know,” was perhaps more pertinent when the universe of knowledge was less fluid. Jay Behr recently captured this problem articulately:

“The older we get the more esoteric our knowledge becomes until nobody understands what the hell we’re talking about anymore. I’m going to age into a mumbling idiot.”

Dotcom business ideas over a pint or two

DotCom Challenger
Photo: SimonD

I think everyone has had the experience of brainstorming a “great” dotcom business idea over drinks with friends. There were more than a few good and bad ideas thrown around the offices of The Industry Standard as the editors learned that the companies we were covering didn’t always deserve to make as much money as they did.

I had another one recently that was kind of interesting, though not really new in any way, so I thought I might just post it here and see if anything comes of it. I haven’t come up with a name for it, yet:

ProductX is a toy exchange network for parents of small children. It consists of a directory of toys available for members; a profile for each toy with ratings, comments, and user submitted videos; a queue for each member to track which toys will be shipped next; and a distribution system for receiving, storing and shipping toys. Anyone can become a member by contributing X toy(s) and paying a monthly fee. The toy contribution will be donated to charity. After joining, a member can select any 3 toys available from the directory. Members can only keep 3 toys at any one time and must return a toy to receive the next toy from this or her queue.

There was a variation on this theme that was also interesting that involved essentially ‘platformizing’ a swap system like this. That way you could focus member networks on specific types of products of similar value.

And just to put some perspective on my thinking here, these are some of the other ideas I’ve either heard, contributed to or invented myself (not telling which is which) and about when they were conceived:

  • ThingThunk.com (2005). The ultimate product review directory. Inspired by Wikipedia, ThingThunk allows anyone to add a product, rate a product, comment, submit video, etc. It’s the ultimate shopping assistant where you can get advice from other people who have actually bought and used a particular product.
  • Bioconomist.com (2005). The Industry Standard of the biotech industry. Insider analysis, heavy-hitting journalism, industry metrics, deal tracking and job listings.
  • Makingamockery.com (2002). Jack Ass meets Gong Show online. People submit videos of themselves doing stupid things. Users vote for favorite stunts, but, more importantly, users can request stunts. Successfully performed requests win cash prizes and appear on the accompanying weekly TV show. (I’m now realizing as I type this that it’s more like Jack Ass meets Y! Answers.)
  • PublishingPilot.com (2001). A UK-based CMS and hosting environment for small businesses to crank out web sites without having to know anything about anything. (I got some momentum behind this one including a somewhat high-powered board of directors before my personal bank account ran dry and MovableType appeared on the scene.)
  • LargeLifeStyles.co.uk (2001). Fashion retailer for larger-sized women. (Actually, I pulled this one off using my father-in-law’s resources in textiles in London. We morphed it into a shoe retailer that performed mildly well for a few months until we stopped updating it with new product.)
  • Sugarpimp.com (2000). Sponsored behavior modification. This idea arose out of my desire to keep a floater friend of mine unemployed and travelling so that I could continue to get his emails from strange places around the world. Then it hit me that you could create a market of sorts where you could get sponsors to fund all sorts of things. The obvious twist was that this would clearly turn into some kind of strange fetish/porn market.

And my personal favorite (courtesy of John Masterson)…

  • MyBeltWithHooks (1999). An offline clothing personalization platform. The belt would be very expensive but any third-party developer could create hooks to attach to it. One example of a third-party hook is the real-world search engine, a small child or dog that would attach to your belt and go find things on command.

Reach vs target marketing: how to reduce the waste

There are 2 somewhat opposing forces that advertisers are always trying to reconcile:

  1. broader reach
  2. higher precision

Search marketing solves the former. And niche publishing solves the latter. It seems to me that there are ways everyone could benefit from combining those systems in some way.

What B2B trade publishing discovered is that more valuable customers can actually be found and identified with the right kind of carrot. The methodology is very simple. If the value of the content on offer is higher than the cost of obtaining it, then people will give the publisher marketable data about themselves.

Globalization and Innovation by John Hagel and John Seely BrownIt hit me after giving my email and then downloading John Hagel’s and John Seely Brown’s PDF’s that I should be able to setup something like this through a simple self-serve tool if I wanted the same functionality on my site. There are a couple of longer papers I’ve been considering writing, and I’ve started playing with screencasts that might be particularly valuable to certain people.

If my paper or screencast had specific advertiser appeal, I should be able to triage the lead collection and bidding for temporary access to those people who agreed to be contacted in exchange for the content.

There are some smaller players who focus on certain kinds of lead generation activities. Some focus on webcasts such as Accela and On24, others on PDF’s such as ITBusinessEdge and IT.com.

Online tech publisher TechTarget purchased BitPipe in late 2004 for $40M, a successful whitepaper-based lead gen provider, so they could own the whole service chain from promotion to lead collection. This is very smart as they collect ad revenue all the way along the marketers path.

The next step after that, of course, is to connect directly into the sales channel at the advertiser’s side. That way you could watch the whole chain. You could see which promotions converted to leads and then translated into sales.

KnowledgeStorm shares this vision and has made some progress toward that end. They offer a lead generation system in tech B2B publishing which includes several methods for following up with the leads they pass to marketers. For example, they actually phone the lead and ask whether or not they purchased anything. (It turns out that in many cases the marketer doesn’t even contact the lead.)

There’s a lot of work going into algorhythmic improvements to ad targeting and behavioral approaches to identifying the right customer for a particular advertiser. These are certainly important, but there’s a much larger opportunity, in my opinion, in a distributed lead capture system. As always, the first to market in that kind of ecosystem will be difficult to unseat.

Regardless of who gets there first, that kind of efficiency would potentially create a win-win-win across the board. The marketer could spend less to get more, better customers. The publisher would improve yields on their already limited inventory. And people would get more relevant promotions for the things that interest them…well, we can dream, at least.

“Loosley Coupled” does not mean “Easy to build”

The concept of “Loose Coupling” is great on so many levels. I’ve used it to describe different types of things in ideal worlds, but I’m starting to see that there is a lot of gray area there that can be maddening in real worlds.

Here is Wikipedia’s current definition of it:

“Loose coupling describes a resilient relationship between two or more computer systems that are exchanging data. Each end of the transaction make their requirements explicit and make few assumptions about the other end. Loosely Coupled systems are considered useful when either the source or the destination computer systems are subject to frequent changes.”

I’m working with a small team on a really fun web-based product that weaves lots of stuff together. The core app we’re working on has a very powerful layer of intelligence built into it, but it depends on a stack of data sources and rendering environments that are all partially isolated and not necessarily production-ready.

This means that we can’t really test the product end-to-end. It means there are several layers of troubleshooting that get added to each bug no matter how small. It means we have to fake a service layer here and there to emulate behavior.

I’m realizing now that “loosely coupled” means you have to think a lot harder about each move instead of just cranking out everything from scratch the way you want it to work.

Ultimately, the power of our platform services including things like scalability and user data management will accelerate this product’s ability to reach a more profound state of being than it could without loose couplings. But the cost of glueing all the things together in parallel means that we spend hours in meetings and constantly reshuffle our attack plan.

It feels like running through mid-court of a dodgeball game.

IDG’s private-label CPC ad system

Most publishers are either looking to capitalize on the CPC text link advertisement bidding concept or they already have a plan for implementing something in this space.

IDG found their private-label CPC bidding tool solution with Quigo, a competitor of smaller ad services companies such as IndustryBrains and Kaboodle. The system they created together is called “TechWords“. It’s a contextually-placed text link ad unit that runs across IDG’s portfolio of tech sites (or most of it, anyhow) in which advertisers can bid for placement.

This is exactly the right way to reinforce your brand as a publisher rather than water down your marketing potential through a larger mostly blind ad network. As Joe Wikert put it:

“Why should Google have all the fun? … Kudos to IDG for proving that disintermediation is alive and well! I’m surprised we’re not seeing more and more of this popping up, at least on the sites that are part of a larger network within one parent organization.”

If I sell complex IT equipment such as enterprise database systems, I’m going to have better luck reaching potential customers and converting them to sales by advertising through a brand that talks to people about databases than I will by blasting links out into the wild hoping they stick. And I should be willing to pay more for that opportunity.

…Or at least that’s what IDG is counting on.

Of course, IDG already uses IndustrBrains for basically the same thing which has proven to work pretty well. The problem is that IndustryBrains requires some manpower to build and retain the advertiser base. This has a cost which gets passed back to the publisher. Publishers usually have a sales force in place that would rather take those commissions than share that revenue with a service provider.

What IDG is about to learn, I think, is that you want your sales force spending time developing relationships and coming up with higher value opportunities with the heavy-hitting marketers rather than dialing for dollars with smaller CPC marketers. Though I wouldn’t be surprised if they plan to hire a classifieds sales team to operate this…and then you have the overhead costs of paying, training and managing people. There goes your margin.
Also, this is yet another ad unit on an already densely covered page. You’re not going to increase your revenue cap by meaningful numbers by squeezing a few more text links on the page.

There’s a lot of future potential when you have a closer relationship with your advertisers like this, regardless of the ad platform. I’m hoping they start working on ways to leverage TechWords into something that will support the next generation media models such as mashups and other syndication models. If nothing else, testing out the concept is really important at this stage in the game. I think we’ll see more and more media companies doing this kind of thing soon.

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