Most companies become conservative in an economic depression. They focus on cost cutting and cancel projects that don't show immediate returns. Stove-piped organization structures, with separate fiefdoms for sales, marketing, products design and operations, make it hard to react to changing market conditions.
Lean and mean companies have already organized themselves around their core business processes and outsourced parts of these processes to create flexibility. If demand increases they expand rapidly without large capital infusions; if demand decreases they reduce volume without staff reductions. Outsourcers have the economies of scale and support multiple clients in different markets, thereby spreading the risk. But outsourcing is more or less of the same; it is not a tool for innovation. Outsourcing typically covers the operational aspects of commodity processes. Despite the claims of outsourcers that they add substantial value to these processes, the realityis that they show little agility, let alone innovation.
In a recession new cards are dealt and new players join the game. Microsoft and Oracle were born in the difficult early eighties. Google and Amazon rose from the ashes of the dot com meltdown. For open organizations the recession can be the opportunity for creative reconstruction. New products and business models are considered. One of the concepts that is winning in popularity is “crowdsourcing”. In its simplest form a problem is decomposed into self-contained components and individuals, teams and companies around the globe are invited to provide solutions using web tools.
Apple, Toyota, P&G and Vodafone, all four on BusinnessWeek's list of 25 most innovative companies, make use of open innovation and crowdsourcing. The iPhone's success is partly due to the large library of iPhone Apps: applications that anyone, after validation, can sell on Apple's iTunes store. Currently the most successful application, Stickwars, was developed in a month by a single person. Users rates these applications online and their assessment determines its fate. Stickwars has 1,100 reviews. This week the billionth app was downloaded. With on average 27 applications on each iPhone, Apple has created true stickiness for their device. Vodafone launched a website www.betavine.net that invites software developers around the globe to bid on the best solutions for widgets (mini-applications) that Vodafone requires to keep their phone platform competitive. They provide participants with the development tools and guidelines. Winners are awarded with prize money (which can be substantial) and in return they get to keep the rights to the solution. Close ties, open knowledge sharing and strong collaboration with their subcontractors allowed Toyota to bring better cars at a lower cost to the market than their American competitors. P&G leverages extensive innovation networks and apply their Connect & Develop methodology to the effect that over 50% of their innovation is now obtained from outside the company boundaries, reducing speed and cost to bring new products to the market. InnoCentive, spun out of Eli Lilly, mediated solutions to its network of 170,000+ participants for over 400 problems posted by various companies. It has developed a reward system, team-based collaboration platform and governance structure to speed problem solving along. Interestingly they found that diversity increases the probability of finding solutions.
Web 2.0 technologies allow these companies to do faster and cheaper R&D, product design and software development, but also to strengthen their relationships with key customers. Engaging the most important stakeholders in the evolution of existing products or the design of future products strengthens the bond and creates word of mouth marketing opportunities on social networks like Facebook.
Outsourcers should seriously consider to become crowdsourcers. This is the time to turn companies inside out and build stronger connections with the world outside the company walls: leverage the collective problem solving capabilities of open networks, make customers part of the extended organization and switch to open source software. Open, innovative organizations will be the winners in the post-recession world.
NY Times May 31, 2009
ReplyDeleteDigital Domain
Shooting to Software Stardom on the iPhone
By RANDALL STROSS
MITCHELL WAITE could think of only one reason that Apple’s legal department would leave a voice message last February asking him to call back: he was about to be sued. Mr. Waite has a tiny software company bearing his name — it has no full-time employees — whose principal product is a field guide to birds called iBird Explorer, which runs on the iPhone and the iPod Touch.
He called back and discovered that his life was about to change no less than if the lottery authority had told him he’d won the big prize: Apple had decided to feature iBird in a television commercial.
IBird was one of three applications that appeared in the spot, and while it got only about seven seconds, that was all it needed to become the No. 1 “reference” app in the iPhone App Store, a software star among the 35,000-plus applications now crowding the store’s shelf. The iBird Explorer is offered in different versions, priced from $4.99 to $29.99.
“I look at it like Apple paid me $10 million to show my application on every single major network, every major television show — no, I can’t even put a figure on it,” Mr. Waite said.
It’s a delightful story, not only because it does not involve a lawsuit, but also because it does not involve promotion fees. Apple does not accept money from companies whose products are placed in its commercials or in the other prime real estate, the “Featured” section of the App Store.
This has earned Apple applause from software developers and backers. “Apple doesn’t want the money. It’s a level playing field,” said Matt Murphy, a venture capitalist at Kleiner Perkins Caufield & Byers. If Apple likes the app, he added, “it doesn’t matter if you’re a one-person or a 10,000-person company; they’ll put it in ‘New’ or ‘What’s Hot.’ ”
A developer easily gains entrance to that level playing field, by paying a nominal $99-a-year fee for the iPhone Developer Program. A completed app must secure Apple’s approval before it is put on sale in the App Store. It’s often a slow process and has drawn the ire of many developers. But the worst that Apple has been accused of is maddening opacity, not discrimination.
Apple takes a 30 percent cut of App Store sales, a paltry slice compared with that exacted by other online stores in the past. Those that distributed software for the Palm Pilot, for example, took 50 to 70 percent of sales as their cut, according to Jeff Scott, founder of 148Apps.com, a Web site offering in-depth reviews of iPhone apps.
Apple also makes buying and downloading a snap; the app is dispatched wirelessly from the store to the iPhone and is ready to run in a few seconds.
The App Store’s very appeal, bringing in so many developers, has intensified a perennially vexing problem: How can a new software title come to the attention of prospective customers?
“For 99 bucks a year, Apple gives you the ability to sell software to millions,” Mr. Scott said. “They solved the distribution problem, but they did not solve the marketing problem for developers.”
Mr. Scott’s site, 148Apps.com, offers a partial solution, but it reviews only hundreds of apps, not tens of thousands.
See http://www.nytimes.com/2009/05/31/business/31digi.html?_r=1&em for the complete article
Hi Jeroen,
ReplyDeleteI didn't know that you were interested in this kind of marketing techniques. Interesting articles and point of views. Of course we know the success of Apple and the applications for the iPhone. You can ask yourself who made the iPod successful, Apple or us, the people, users programmers a.s.o. Apple took care of the right positioning and distribution and we did the rest. But it is most of the time playing in the digital field.
Check out www.vespafans.nl and you see the first start up of a brandplatform created for and by enthusiasts of a brand. With a lot of possibilities for crowdsourcing, WOM and 'new' marketing techniques. Reaction of the brand: "we love it and gives us new opportunities". let me know what you think about it.
Remas