i.want.world

Built for Evolution: The Organizational Structure of Platforms

Capability building is now the most important consideration when making decisions as to how any organization should be structured. This is particularly true for platform companies.

Why? The answer has to do with how platform companies create value when compared to product counterparts. Product companies create value primarily by making their products incrementally better. Take the iPod, for instance: it started as a simple mp3 player, and then made incremental improvements to its appearance, its size, its storage capabilities, and its media display functionality. It will most likely continue on this trajectory, making sustaining innovations, or incremental improvements, to its existing product line.

Now contrast this with a platform company like Google. Google relies on incremental innovations to a certain extent — its algorithm is periodically altered in an attempt to improve search results, and Gmail seems to be forever expanding its storage capacity. More important to Google from a competitive standpoint, though, is it's ability to create entirely new capabilities — for instance, Google Video and Google Base. These initiatives required a wide array of new capabilities to be established.

To structure a company for new capabilities as opposed to incremental innovations, the value chain must completely atomized. In other words, there can be no long value chains where each employee is a rung in a ladder, with all the value ultimately flowing to the top. Such hierarchical organizations are essentially immobile by design; they are not capable of creating new capabilities because everyone in the vertical hierarchy is participating in a way that only serves the existing value chain. This is great for incremental innovations, as such a structure essentially institutionalizes the process of adding more value to existing value chains. It is not so effective, though, for creating new value chains.

At this point, Google is the poster child for the platform company, with its bottom-up innovation style and its emphasis on group-oriented decision making and individual creativity. By giving its employees freedom to work on their own projects, it has set the stage for many value chains to be created; in other words, it has put in place an engine for building capabilities. As companies embrace platform business models to a greater extent, this strategy will be taken even further, with organizations being structured in much the way that open source communities are: no real bosses and independent members working in a decentralized environment dictated more by coordination than by hierarchies.

The final article in the series will look at the seismic consequences of this shift in organizations, and how it will ultimately bring about the demise of corporations and nations.

via Kid Mercury's Blog by Kid Mercury on 05/16/07

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the Huffman code

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Godin vs Gladwell on Anderson's Free

Although Chris Anderson may have 'mistakenly' referenced a few Wikipedia paragraphs without any citation, his argument of Free in his new book is still up for heavy debates and viraling across the web. My observation however has led me to a sort of a perplexed state in regard to Bruce Nussbaum of BW's coverage of the tiff between Godin and Gladwell's refute of Anderson's thesis.

Nussbaum says in agreement with Godin:

"I agree. That's always been at the core of capitalism-unique things or services we crave and pay for become over time commodities and cheap (almost free) and are replaced by new stuff, which we are willing to pay lots for."

His previous post however in regard to his anecdotal account of boomers loving their Kindle ended with an overly contrary support of Anderson's exact prediction and argument that "Tech is too cheap to meter..." What I do gather from Anderson's argument is that digital goods in essence will undoubtedly have a hard time at fetching a price.

Excuse me Gladwell, but a pill is not a digital good. It may be intellectual property, but its far from ones and zeros.

Illustration: Rodrigo Corral

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i am the long tail

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the evolution of writing on the internet

This illustration says a lot about the evolution of writing on the web and our decreasing attention span.

A Very Brief History of Micro-Media. Credit: David Armano.

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wordle

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euro startups are still pitching

via TechCrunch by Mike Butcher on 10/27/08

The European startup scene appears to be relatively unfazed by the downturn so far. But then, they are, even now, still getting used to the mere idea of pitching their idea. O’Reilly’s Web 2 Expo Europe event in Berlin last week featured a bunch of startups all trying to get some exposure to a swathe of European VCs at a “Pitchcamp”. But luckily it featured a crop of some of Europe’s most interesting companies to date…

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the future of torrents

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Google: The all-time biggest company based on free

I've always assumed that Google was the best--and biggest--example in history of a business model based on free, but until today I hadn't actually run the numbers. Before I get to those, let's definite what "built on free" means.

Until the advent of the Web, the biggest companies built on free were broadcasters in radio or TV ("free-to-air" services, where a third party--the advertisers--pay for content to be free to consumers). In the rabbit-ears broadcast era, these were pure free plays: virtually all their revenue came from direct advertising payments or syndication revenues from their local affiliates, who were just passing along their own advertising revenues.

This is what's commonly referred to as "the media business model". Sometimes it means that advertisers subsidize 100% of the content costs, other times they subsidize just 70-80% of those costs, as in the case of magazines and newspapers.

Since the advent of cable TV and satellite radio, the media business model has evolved. TV broadcasters are bigger but they're also more diversified, with a mix of revenues from traditional ad-supported free media and paid content, from DVDs to pay-per-view. Only terrestrial radio remains purely free. 

Meanwhile, the pure free-to-consumers media business model has moved to the Web, but mostly in the shape of companies that don't fall neatly into traditional definitions of "media", such as Google or Yahoo.

So to properly see how the Web free companies compare to the broadcast free companies, we'd have to carefully tease out just the free parts of the broadcasters's revenues. Fortunately, we don't have to bother because it's really no contest.

Google, at $17 billion in annual revenues last year, is larger than any broadcaster in history, free and non-free elements combined.  The biggest broadcasters, ABC, CBS and NBC, are all in the $14-$15 billion range. The biggest radio network, Clear Channel, had revenues of $7 billion. Meanwhile, on the Web, Google's closest free competitor is Yahoo, at $7 billion.

So congrat, Google. You are indeed the all-time biggest company built on free. And a good thing, too, given how much time I've been spending at the Googleplex of late.

via The Long Tail by Chris Anderson on 9/8/08

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experimenting and innovating in a new online society

The allowed possibilities of cheap communication tools and Google are ever more becoming an inconceivable paradigm shift to how we express ourselves and conduct businesses – at least for me.

It is horrifying however to imagine that some CEOs of large corporations and head of governments do not posses the slightness notion of this metastasis.   Creativity has gain new meanings. It is an age of talent abundance.  One may experience this with just one video of Youtube, a platform where every minute 10 hours of video are uploaded. Yet it seems the people who make important decisions that affect us all are afraid to experiment.  To quote leading innovation author Scott Berkun of HBS:

Experiments fuel creativity and change. Experimenting means you are intentionally going off the map and pushing beyond the status quo: you are doing something for which the outcome is uncertain, and doing it on purpose. It's that uncertainty that creates the potential for big positive change.

The problem is that most business managers hate experiments. They want guaranteed returns. Predictable profits. Introducing uncertainty works against what they're trying to do. The comedy is that whatever profits they're talking about protecting originated from the founders of the company doing a huge experiment: starting a new company.

Experimenting leads to the risk of not knowing what the outcome will be. It is a learning process that ushers creativity and innovation and which displaces us from the norm. 

I believe creativity has always been part of us.  We now have however a public audience and we can be assured that our work will be made permanent. Despite other’s reluctance to embrace innovation democratization, I remain steadfastly with the belief that the future society will be govern by rules which ourselves have no control over.  Jeff Carvis explains:

…a new society… [with] the rules of that society, built on connections, links, transparency, openness, publicness, listening, trust, wisdom, generosity, efficiency, markets, niches, platforms, networks, speed, and abundance.

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