Design innovation strategy and imitation

In December I found an interesting article on incremental innovation. At the weekend I read a short article about Roberto Verganti’s and Claudio Dell’Era’s study Strategies of Innovation and Imitation of Product Languages (Journal of Product Innovation Management, No. 6, Nov 2007). They studied design intensive companies and used Italian furniture industry as their focus group.

Verganti and Dell’Era suggest that imitation is very expensive innovation strategy at least in design intensive furniture industry. They found very interesting inverese relationship between innovation strategy and the number of products. Verganti and Dell’Era speak about product signs and languague.

The empirical results illustrate an inverse relationship between innovativeness and heterogeneity of product signs and languages. Contrary to what is expected, innovators have lower heterogeneity of product languages. They tend to be strongly proactive and limit experimentations of new languages in the market.

Imitators, instead—which would be expected to have low variety since they can invest only in languages that have been proven successful in the market—tend on the contrary to have higher product variety. Eventually, by having lower investments in research on trends of sociocultural models, they miss the capability to interpret the complex evolution of products signs and languages in the market. (See full abstract)

One can find an analogy to online media also. Thinking online classified media for instance, it is very easy to imitate direct competitors or other industry benchmarks. If comparing players in the same markets you quite often find more similarities than differences between the products, layout and processes. However, the biggest success stories in last years has still been very focused innovations that took their place in the markets first and left imitators to cope with lower share.

In case of online media we have to either choose launch and see strategy or see and launch strategy the time to market is crucial. There is no time for winning wait and see strategy in our business. Verganti quotes Apple’s Steve Jobs, “Companies that do radical innovation do not listen to users; they eventually value market feedback, but first they propose things to the users.”

See Julia Hanna’s article in HBS Working Knowledge.

Photo above taken 2007 in Finnish furniture store.

Boiling eBay community

John Sviokla’s conversation starter in HBS blogs is an interesting post about eBay’s current challenges. He describes how the company is losing trust of its sellers and buyers as the company is changing from community based online service to a “brick and mortar” e-retailer. Sviokla adds – and he is definitely right – that eBay is not a retailer, “but rather a social organism that created a way to find latent demand and link it up to sources of supply”.

In early February the sellers were organizing a week long no-sell strike in eBay. The reason for that attempt was changes both in the fee structure and the very important feedback process. Now the sellers can’t leave negative or neutral feedback on the buyers. The active eBay sellers made their opinion public in YouTube also.

New York Times’ Saul Hansell have frequently been writing about eBays’ problems. He also pointed out that there is challenges in the product itself, as the search functionality is not even a close to Google or Amazon. Also the strategy of fixed price sites confuse the customers as you can use the main site, eBay Express or shopping.com to search the same products. In December 2007 he collected the core of the problems in to two posts: Angry Sellers and Disappointed Buyers.

EBay’s new CEO John Donahoe has a problem when running his community based business. The moves have to be delicate or otherwise the community starts to fight back. We’ve seen this behaviour in Facebook too. John Sviokla suggests that eBay should stay as an organic social commerce player and extend that business to other markets instead of trying to beat Amazon in the online retail business. One thing eBay and all other community based businesses can’t lose is the trust from its sellers and buyers.

Online video ads and Google AdSense

The value of US online video advertising is expected to rise from USD471 million in 2007 to more than USD7 billion in 2012. The growth estimate is amazing! Video streams are already permanent part of content for traditional newspapers as well as all other kind of sites from sports portals to recruitment services. Still the commercialization of the streams has proven to be quite difficult. Efficient methods and standards have been searched already for a some time.

Google has recently opened a beta version of AdSense for video. It is first targets for US based publishers serving customers in English and have more than 1 million monthly video stream downloads. The search and advertising giant promises that AdSense for video is soon available for other markets too.

Google’s solution is separate video and text overlays instead of a pre-roll or a post-roll ads. Ads shown next to the video will be based on the tags attached to the video. Video ads called as InVideo are paid on a CPM basis and the overlay ads CPC basis. “Google’s heft in online advertising could easily make it the standard”, says TechCrunch.

Picture above from Erottaja Bar, Helsinki, Finland. (Absolutely nothing to do with the post).

Snowboarding Istanbul

I came more than week ago to visit my future hometown Istanbul. Of course I decided to take running shoes and some light sportswear. What I didn’t take with me were my x-country skis. I thought it will be something closer to 10 degrees (C) here. But on the contrary. There were more snow than in Southern Finland, where the winter has been worse in my adult life.

So hard snowfall here is not normal here. Therefore, the schools were closed and as a lot of problems with traffic occurred. However, the people also enjoyed the unexpected blizzard in many ways, like snowboarding in the park.

The two pictures were taken Feb 18th.

Real-Time Economy Initiative

Here is a very interesting presentation about real-time economy by Bo Harald, Head of Executive Advisors, TietoEnator. Note in the video the amazing numbers related to invoicing. Bo opens clearly the benefits of e-invoicing with real value terminology.

The complete presentation with slides can be found here.

Photo above used under CC licence, credits to Judith.

Slowdown for Microsoft’s plans

A more than a week ago I wrote about Microsoft becoming a media giant after acquiring Yahoo. I admit, I forgot one very important issue. In Quentin Tarantino’s great movie Pulp Fiction, The Wolf (Harvey Keitel) used a bit different words, when he meant that it is not over until it is over.

According news today, Yahoo’s board is going to reject Microsoft’s offer. Which means at least three options: 1) Microsoft have to pay more, 2) Google gets interested or 3) Other investors get interested.

For Microsoft this means at least slowdown in its plans. We’ll see is it even a showstopper.

Metro International Unprofitable 2007

Metro International published its 2007 financial figures. The company made losses and the statement of the CEO Per Mikael Jensen tells us that the company have to work a lot in order to reach sustainable profitability.

Metro International has not been immune from the volatility affecting the global newspaper industry, which has been reflected in the latest results of the company. While the loss for the full year 2007 is a disappointment, the board, management and employees of Metro International remain committed to reversing losses in markets that are underperforming and to focus investment in areas of strong potential growth, including online.

One very interesting statement is Metro’s decision to strengthen its online presence. According to today’s statement the first markets are France, Spain and The Netherlands. I guess we will see a some kind of mixture of local news, local advertising, local classifieds and even local directories introduced.

The full financial statement can be read here.

Frozen Grand Central

I found this video first from Laundy’s blog. It is super cool!

Recession or worse

It is not more than a couple weeks ago, when George Soros ended his FT column with very dark mood: “The danger is that the resulting political tensions, including US protectionism, may disrupt the global economy and plunge the world into recession or worse“.

Whether it is economical downturn or recession, the US newspaper industry starts to vote for recession. NY Times announced sharp fall on December ad sales and now the same paper lists additional challenges for the industry:

• The San Diego Union-Tribune eliminates 10 % its work force
• San Francisco Chronicle, The Los Angeles Times, The Boston Globe have lost 30-40 % of their circulation in few years
• The shift of classified advertising from newspapers to online accelerated last year.

The most interesting comment of the NY Times article comes from Brian P. Tierney, publisher of The Philadelphia Inquirer and The Philadelphia Daily News: “The next few years are transitional, and I think some papers aren’t going to make it.”

There are probably several reasons for Mr. Tierney to be pessimistic. The biggest may be the shift of advertising spending from newspapers to online. The big question is, will the newspaper advertising follow the overall economy trend or is this year really a turning point for newspaper industry as NY Times predicts.

Greg Sterling have listed a several interesting questions about the impacts of the recession. Among them he asks “Will newspapers suffer more than other traditional media sectors?” and “Will advertisers fall back on traditional media because of familiarity and more proven history or will the greater flexibility and generally cheaper pricing drive faster adoption (for SMBs and nationals)?“

Reindeer’s comfort break and other inflight reading

KLM’s inflight magazine Holland Herald’s latest number (Feb 2008 ) is titled as The Extreme Issue. The stories introduce readers to kite surfing, BASE jumping, motocross and extreme ironing. Yes, you read it right – extreme ironing! Of course couple featured design articles too to serve the delicate taste of airline travellers.

I was happy to find that a very important piece of information about my country was also shared to all KLM’s passengers worldwide. The Holland Herald kindly explains us what does the word poronkusema mean.

Poronkusema – The distance equal to how far a reindeer can travel without taking a comfort break (KLM inflight magazine Holland Herald, Feb 2008, p. 46-47).

According to reliable web sources, poronkusema is exactly 7.5 kilometres. I guess there is differences between individual animals. However, thanks KLM for sharing this. At least it made me laugh!

Photo: Reindeers enjoying their comfort break near Kiilopää, UKK National Park, Saariselkä, 2007.