Friday, 31 May 2013

internet business model Part 3.4; of rules, methods, character, systems and economic models

[This is a re-post (originally posted on 12 Jan 2013) with minor edits, deleted the original post by mistake.]

Now, let’s switch to something more practical from the previous ‘principles’ posts.

Until internet search, carrying out searches were onerous, looking through directories, reference books, hobbyist magazines, making trips to the library, calling around.  Until social media, it was practically impossible to keep in close touch with several degrees of family ties.  Until the introduction of online payment, it was troublesome to sort through your pile of bills and pay at various locations.  The functional task of looking for things is now simpler.  From function, simplicity has now moved on to a bigger platform.  Before the web, the internet was used mostly by the professionals.  Now grandmothers use the computer.  Online services have since become even easier to use.  This merely continued the trend towards simplification.

The origin of the internet may have something to do with this.  Any network engineer will tell that tcp/ip, the software system that runs the internet, was the simplest of designs during the time it was invented.  Subsequent software designed for this early internet has kept with the simplicity philosophy as with the web.  It is now the culture of the internet to keep things simple.  And simplicity is still in the growth stage!  The first generation of the web online services is easy to use but the second generation online companies have accelerated it.

One of them, Square, is redefining the online credit card payment system through simplicity.  And was the blank page design popular before Google search?  Compare hotel booking sites with Airbrb today.  The uncluttered clean look in this case tends toward extreme simplicity.  It is about user experience.  Even if the homepage has additional content, you have to scroll down the almost stark page to get to it, as though telling you, get on with booking the room.  The aim is minimal distraction.  Compare this to internet 1.0 model of trying to fill the web page to the brim, probably because the business model then was to maximise eyeballs or it followed the obvious model for content then, the newspapers.  In case you are asking, this is relevant because if your organisation is using the internet to conduct business, your website is the proxy.  And rather than simply a presence as it was before (internet 1.0), it is now the business face.  And for others, it is the business.  Of course the empty look cannot apply to all online sites.  It will be a strange newspaper if it did!  The point for sites like AirBrb is to minimise, focus, be exacting, straight to selling a room, minimise distractions.  Interestingly, digg, a new generation news site has similarities closer to the clean look compared to the traditional newspaper sites. 

The minimising approach works. More are adopting the zen look.  Have a look at the new generation online firms; Gilt Groupe, dropbox, digg, twitter.  They reek of simplicity, speed, ease of use, seamless service, all collectively elements of user experience which really means giving the best possible service to users.  Everything about user experience must be super simple; to use, to look at, fast, convenient.  Anything not directly related are removed, minimised or moved elsewhere.  They are all inertia.  The ‘here it is, take it or leave it’ approach are passé.  Even if it is a free service, these new sites give a lot of respect to the consumer. 

With User Experience, words like rapid (to get in and out), directness, intuition and effortless sums up the process.  Ultimately, it is about providing an all-embracing feel.  It is attention to details with all things related to providing delightful online experience.  The total feel drives the design.  It aims at being effortless to use.  If it is a search, let him focus, do not let the site distract him.  Make it as fast as possible.  A top Google executive in search said he agonises over cutting 0.01 second off search results and has the budget to continuously do this.  It is about details.  One of my regular news site has an internal ad on its piece of real estate promoting a sub-site on food.  It has been there for some time.  If the site knows that I do go to the food sub-section, maybe once in three months, it could release that space for other ads.  I already know about its food sub-site and ventures there.  Convenience for users is everything.  There is more genuine deference to the consumer.  With traditional businesses, you know it is mostly marketing when they say the customer is the king.  Here they mean it and acts on it as though the business will collapse if they don’t.  But of course this is business after all.  Their business philosophy is simply that if they get it exceedingly right for the customer, profits will come.  Whatever, the consumer hasn’t had it this good for a long time, in term of vendor attention.

While this concept of minimising and user experience is moving into mainstream, in Asia, we haven’t felt it yet.  Most sites are clogged up as though it is still the way to go.    Perhaps the two methods to attain better user experience may help.

The first is something I call 2-clicks.  The obvious interpretation is of taking a maximum of two clicks of the mouse to get to the content you want.  Well, it is partly about minimising the number of clicks.  But what it really means is a site so streamlined, so easy to navigate, so quick and convenient, a consumer will find it a joy to use because it is an exacting experience.  It is not about trying your best, it is about Steve Job’s way of going above that to the extreme.  It is also about making the product experience intuitive, seamless and to lessen the number of clicks.  Good is not good enough!  But come to think of it, if 2-clicks is literally implemented, it is no bad thing!

The second is user-sensitive content.  This means that the site track how a consumer use it and reacts pro-actively to it.  More on this in the next post...

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©Chen Thet Ngian, (2012, 2013).  Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Chen Thet Ngian and with appropriate and specific direction to the original content.

Thursday, 30 May 2013

internet business model Part 3.3; of rules, methods, character, systems and economic models

Co-creation is another powerful method that if applied correctly can reduce costs and develop better products with less internal resources.  Is this new?  Using surveys for opinions is a form of co-creation for new product development for a traditional company but not in the context of how new online companies do so.  Co-creation makes the product, not as a secondary feedback mechanism to an already finished one. 

While similar to crowdsourcing, organisations use co-creation in a different manner.  As crowdsourcing is more generic, co-creating is more deliberate and thus a smaller crowd takes part.  Linden Lab’s Second Life is about co-creation where the co-creator (user) creates value for himself but rubs off on Second Life, a site.  Away from the online world, others such as a shoe designer, John Fluevog allows customers to submit designs.  The best ones get put into production, thus co-creating a new shoe.  And it has gone to Hollywood.  The movie ’Snakes on a Plane’ actually engaged its audience from scripting to marketing.  It could also be applied to something as simple as a comic strip.  Applied correctly, it is a powerful business tool.  It engages your customers and potential customers to co-create an experience they want.  Thus it can be employed by a restaurant to engage their patrons in coming up with creative dishes or a magazine for a section that is created by its readers.

Taken on a larger context, co-creation generates mutual value from an organisation view.  It involves co-creative engagement among stakeholders of its eco-system of partners, clients, consumers, regulators and employees.  These opportunities add value and extend the life cycle of the product.  It makes an impact with fewer resources. It scales in ways that centrally designed systems cannot as it benefits from constructive feedback.  It innovates swiftly, making it harder for competitors to react.

Co-creation is sometimes executed via a method called an Open Platform model, itself in time could become an economic production model on its own.  This as the term implies is a mode of an organisation to openly allow outside access to its content.  It in fact deliberately taps into the crowds of consumer, partners and customers.  The Guardian newspaper in Britain, Google, Yahoo uses this unusual business means.  Introduced recently, the municipality of London uses it in a hope to catalyse social-economic development.  They even make significant efforts in an endeavour that traditional businesses would be scratching their head figuring why.  They organise their data, building engagement platform for outsiders, making tools available to access the data and provide training.  It is indeed strange considering that content has value.  If he has any hair left, the answer lie in the insight to the open culture of the internet that translates to a business model.  If you think about it, the internet is a case study in itself.  The reason why it is what it is today is derived from it being an open platform, its greatest strength. In this brave new world, the Open Platform model is a new way to improve client relationship, innovate, create new products and lower costs.  It improves organisation productivity but ultimately it is to be more competitive.

The Guardian.allows access to their articles and applications, many developed by others and all integrated within the Guardian network.  They even allow applications based on Guardian content to be available on other online platforms.  They are adapting.  Amazon recognised this new model early and uses it to better its business.  It is now a global leader for cloud computing.  The model that works in the old world, of closely guarding its property, is changing as power shifts to the consumers.   

In execution, the organisation needs to identify the area for external collaboration.  It may be a product, a software module, a transaction engine, a data set, a service.  Not everything should be open though and to make this model work, there should be some trial and error and letting it evolve trying out various schemes until a viable business model emerge.  Success lies in ‘closing up’ the right parameters.  The aim is a progressive platform without destroying the characteristics of the product for example.  Bear in mind that participation will only remain viable for as long as all the stakeholders are appropriately compensated for their contributions, be it monetary or other means.  Don’t expect perpetual gratis.  The ultimate objective is about building a loyal base of contributors that make your ecosystem stronger than your competitor by continuously creating new value for the users.  If well managed, over the long term the organisation evolves with trends, comprehending customers’ requirements in situ, that is, it provides a degree of future proofing and in a natural manner being always on top of industry dynamics.  The Open Platform thus used becomes a powerful business system.

If you were to ask me to single out only one ‘rule’, I would, after two decades studying internet business models, say the open platform model.

Now, let’s switch to something more practical in the next blog.

LinkedIn – dr tommi chen (goggle + profile not completed)

©Chen Thet Ngian, (2012, 2013).  Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Chen Thet Ngian and with appropriate and specific direction to the original content.

Wednesday, 29 May 2013

internet business model Part 3.2; of rules, methods, character, systems and economic models

[This is a re-post (originally posted on 2 Jan 2013) with minor edits, deleted the original post by mistake.]

But who owns these cooperative efforts and the data?  The organisation do not, it is the crowd.  Platforms like Yahoo only borrow it.  It is a ginger relationship.  If respect is not given, the crowds will depart.  The sites must consciously not violate the community norms.  Internet culture plays a part.  They must of course also watch their competitors.  Data must remain fresh to have value, like seafood, so if the consumer moves away, it becomes untenable.  Trusts must be maintained.  Friendster and Myspace, the earlier social media giants suffered this.  If attempt is made to control too much of it, it risk turning away the crowd that makes the value.  The open culture must be respected.

A few examples of applying crowdsourcing to traditional businesses:

The beauty of crowdsourcing is that it reduces risk significantly.  Take My Major Company (MMC), an online record label that uses crowdfunding to finance its acts (it’s already profitable).  MMC posts demos and videos of 10 artists on its website and users are invited to invest anywhere from £10 to £1,000 in the ones they most enjoy or think are most likely to score a hit,  Once an act reaches £100,000, the financing is locked in and the money is used to pay for recording and possibly a tour.  Net revenue is split among the investors, the artist and MMC.

“Amazon even offered $5 off to customers who scanned a bar code in a store – so Amazon could offer a lower price on the same item” (Time, 9 Jan 2012).  If a retailer wants to find out a competitor pricing, isn’t this a great way of doing so?  Instead of paying a team to go physically to stores, you now crowdsource your customers who are even paid (vouchers) to spend further in your store!

Most local travel agencies are not taking advantage of crowdsourcing or other tools to improve the saleability of the hotels rooms, restaurants, packages or to cater to local culture vulture tourists.  User experience on their websites is basic and they could really improve their marketability by developing a more conducive buying experience.  YouTube, the second most searched site on the internet, is a service not fully or properly utilised for marketing.  What is better than actually seeing a video of the surrounds for a more authentic experience when researching for a holiday destination?  Or read and view what fellow travellers have experienced.  They would trust this more, rather than slick marketing messages.  YouTube is mostly crowdsourced so nudge nudge can be used to encouraged locals to contribute.  The principle of nudge nudge is aligned to the internet operating model.  I use YouTube to browse through a location to get a feel of the local culture, whether the streets look safe, the street markets and places where the locals go.  The promotional videos I have viewed are conventional, mostly glossy shots of the popular sites.  It feels controlled.  The YouTube generation may connect better with an open, less formal, down-to-earth facsimile of locales to add realism.  Travel-based websites could also do with local contacts, crowdsourced citizens obviously, who could act as informal online friends to provide local information as another example.

In time, crowdsourcing will become a common tool.

Let’s now use the print media as further example.  While hyped on its death, it is way overblown and it will be here to stay.  As they say, content is king!  Content will always be there but its acquisition, assimilation and presentation will be in a different form.  Readership may even increase if one is to consider not just the newsprint version or its online facsimile.  Many youngsters may not read newspaper these days but they do read forwarded news in Facebook or twitter for example.  New forms as long as the revenue model is synchronised to the foundation is what the stakeholders care about.  Crowdsourcing can be used.  So is co-creation.  The media company could facilitate it by building tools to make it easy to do this.  Twitter unquestionably brings in the freshest news over wider coverage by the crowd but a mechanism needs to be in place to authenticate it (more crowdsourcing and social media can do this).  There are other ways to tap fresh news.  Writers can be crowdsourced directly and indirectly as is content.  We know there is a lot of news worthy content out there, albeit mostly raw, so it is up to us to plug into it and figure out their use.  Short videos, best exemplified by YouTube can be used more.  Crowds are already phone capturing a lot of live video because they are like ants, all over the place.  No doubt most are useless but enough are news worthy.  Someday the media industry may figure out how to capture this first hand like YouTube has done.  Certainly instead of merely incorporating blogs or social media, all content could be integrated seamlessly into an overall experience.  Take into account how directness, immediacy, peering and crowdsourcing can do attitude and be mindful of the transition.

One last example uses gaming as a means to tap crowdsourcing for Science.  DARPA (Defense Advanced Research Projects Agency) runs a public computer game called Foldit in which competitors try to fold proteins, one of the most difficult biochemistry impediments to curing disease.  Misfolded proteins lead to diseases such as mad cow and Alzheimer’s.  Since Foldit launched in May 2008, more than 236,000 gamers have registered, their contributions helping to decipher the structure of an enzyme responsible for causing AIDS in rhesus monkeys – the first example of a major breakthrough in crowdsourced science.  “Innovation” DARPA notes, “benefits when the number and diversity of people participating goes up.

Besides businesses, political parties can use crowdsourcing.  So far, they have used websites, blogs and twitter and while there is feedback, they are mostly a means for outward communication.  Crowdsourcing is inward and engaging.

Co-creation a variation of crowdsourcing, discussed in the next post, is another powerful tool.

LinkedIn – dr tommi che

©Chen Thet Ngian, (2012, 2013).  Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Chen Thet Ngian and with appropriate and specific direction to the original content.