Mike Walsh

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The Social Side Of Trust

Posted by Mike Walsh ON 2/6/12 11:12 AM

Shoe RepairGetting a little help from your friends was easy enough for Lennon and McCartney, but in an age of Google Circles, Facebook lists and Twitter followers - it is far from clear what friendship actually means. Worse still, marketers are muddying the waters. Brands used to want to brainwash us - now they want to be our friends. But consider this for a moment. What if social marketing was not about getting your customers to like you on Facebook but rather fixing a much bigger problem? Namely, trust.

I grew up in a retail family. My old man used to manage department stores and when I was a kid, one of his favourite 'father and son' activities was to take me around the store and check whether the products that had been advertised in the newspaper that day were actually in stock. Perhaps it was his very Irish way of giving his nine year old a home-made MBA. Anyway - one Saturday morning, I remember him pointing out one of displays and asking me whether I knew why there were so many mirrors on the walls? I shook my head, puzzled. 'When people see themselves' he explained with a wry smile, 'they are less likely to steal things'. 

Like it or not - 'being seen' - is one of the strange, uncredited forces that keeps civil society in balance. There are a lot of things that people would do if they thought no one else would see them doing it. And in rare moments, like the London riots in 2011 - you get a glimpse of just what those things might actually be. But ironically - the very social platforms that have been behind so much revolution and unrest in recent times, also have the potential to improve the way that your customers behave online. And it couldn't come a moment too soon. 

The Web has changed - and in some ways, not for the better. When was the last time you tried to buy or sell something on eBay? What was once a friendly community of amateurs and garage sale enthusiasts now feels to me like an unruly mob of fraudsters, identity thieves and shady offshore merchants. When I recently tried to sell a camera - my advertisement was deleted halfway through an auction. A terse email informed me that my listing was considered potentially fraudelent, and when I re-listed the item and it finally sold - the transaction was voided one final time - because the seller was apparently a fake. Hardly the model of friction-free commerce.

Some argue that new sharing models of commerce will change everything. After all, isn't the popularity of new platforms to share your home, your car, and other posessions indicative of a more responsible online community? Perhaps, but potentially not for long. In my view, like eBay, once digital platforms become mainstream, it is inevitable that the community spirit forged by early adopters becomes tainted by the actions of a few willing to abuse the system.

One solution may be finding better ways to use the social graph to make your customer's networks more transparent. Already, to defeat spammers, many websites require you to login with Facebook before you add your comments to an article. If you connect AirBNB with Facebook, you can see which property owners have common friends with you. Co-working space provider, Loose Cubes, offers a similar feature. Picking an office where friends of yours have worked before helps customers choose between the listings and also provides the owner with a sense of who they are. However, these integrations are only the beginning of what might be possible when you start to combine data with smart consumer pyschology. 

The strategy of making your customer networks transparent is not just limited to the digital world. When Grameen bank makes a micro loan, they hold the borrower responsible not only for their debt, but the repayment actions of those in their lending circle. You can see how this logic can be taken a step further ont he Web. Imagine if AirBNB allowed householders to only rent their places to people within one or two degrees of friendship from their network? And when someone did make a booking, the system showed you the pictures of their common friends so that you knew who you would have to answer to should something go wrong. It would be like catching a glimpse of yourself in a store mirror, just when you were thinking of shoplifting.

True - there is something slightly distateful about this. No one likes to be reminded that we live in public. And rightly or wrongly, many still believe that the Internet is some kind of protected space from the rest of society where different rules might apply. That's a delusion. Consumers may want to be Mark Zuckerberg by day and Julian Assange by night, but you can't have it both ways. Either you are connected and you take responsibility for your actions, or you are anonymous, cut-off and on the run. 

As social media matures, consumers will discover that their networks, recommendations and behaviour will become a passport as valuable, if not more relevant, than their credit rating. And for business, reaching such an agreement with their customers will be equally essential - literally, a new social contract. Without it, increasing levels of fraud, spam, and abuse will cripple the new economy. 

So the next time your marketing manager tells you proudly how many new fans you have on Facebook, ask them to think about the more interesting question. How can you leverage social networks to better shape your customers' behaviour?

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CATEGORY: Retail, Social

The Dual Horizon Problem

Posted by Mike Walsh ON 10/9/11 8:25 PM

Sailboat

I don't like boats. I get sea sick easily and my worst nightmare is being caught out in the middle of the ocean in a storm. When that happens my original plans - however grand - go straight out the porthole. Business leaders face a similar dilemma. You can spend a weekend retreat discussing the far future, but on Monday the only scenario that counts is the immediate future of cash flow, customers and competitors. So how do you reconcile two distinct timelines which require radically different strategies for attainment? I call this paradox the 'Dual Horizon Problem'.
In the Dual Horizon Problem, there are two timelines to consider. The first horizon is what you can see from your present vantage point. It might be the next quarter or the next year - but the important factor is that the measures for survival are based on growth in your current business model. In a crisis, you may realise instinctively that you are heading in the wrong direction - but in fact, you are likely to be so consumed with trying to salvage your position using your traditional strategies, to worry about re-orientating to a new business model.

To see beyond the waves to the next horizon, you need to exercise a little imagination. Try this quick exercise. Start with a clean sheet of paper with two columns. Write a list of your major products and services (what you sell), business models (how you sell) and customer channels (where you sell) on the left. Now take your best guess at what direction consumer behaviour and disruptive technology might take in the next few years, and then push your ideas a bit further. Use this to write a list of items in the right hand column that should neatly oppose your current business. Congratulations! You have just sighted your second horizon.

Without a plan to reach your second horizon, you may survive the present only to fall short of the future. It is like escaping a storm, only to discover that don't have a final destination. Are you heading to an island paradise or the rocks of death? Not something you want to leave to chance! But before you get too excited, keep in mind that focusing on your second horizon alone is just as bad as ignoring the future altogether.

Consider HP. The company recently made headlines when they announced an intention to exit the consumer PC business. HP's management recognised that in the future, margins in the consumer hardware business were shrinking, competition intensifying and product commoditising. They imagined shifting to a second horizon business based on the Cloud - a platform that seemed to offer much more attractive growth prospects. The only catch - as HP's senior leaders discovered when their stock price plummeted - was that shutting down divisions that contribute large chunks of your present day operating revenue without a clearly defined vision for the future, is unlikely to win much support from investors.

Arguably, IBM handled their horizon transition much more effectively in 2004 when they made a similar shift to technology services away from PC hardware. A key difference between the two companies is that when IBM sold their PC business to Lenovo, they retained both a significant shareholding and strong management influence in the old business. They were also clever to structure the deal to increase the market awareness of the IBM brand throughout Asia. Only when Lenovo achieved a profitable market position did IBM gradually reduce their shareholding. In doing so, IBM not only gracefully segued from their first to second horizon business model, they were able to neatly re-organise their cost structures in the process.

Sometimes companies can have the right dual horizon strategy, and yet slip up on their customer communications. A good example is Netflix. Netflix were very astute in building a horizon one entertainment aggregation business using mailed distributed DVDs at a time when broadband speeds and Hollywood licensing arrangements were not sophisticated enough to handle a streaming model. Using their revenue and customer base from horizon one, they then started to ramp up an online model that enhanced their primary proposition - all of which came dramatically undone when the company announced sudden hikes in pricing and a decision to split the two businesses. Netflix lost a devastating chunk of customers and their CEO was forced to publicly apologise.

Navigating a path to the future is not easy. And worse yet, the pace of both technological and consumer change today means that you no longer have the luxury of waiting until the market catches up before you make your move. That's why I believe that as a leader today you have to cultivate 'Dual Horizon' thinking, which although somewhat schizophrenic, will give you the perspective to lead your company through a transformation process without sinking it in the process.

When working with many of my clients at Tomorrow on this problem, I have advised them not to destroy their horizon one business, in their question for new growth. If you turn everything upside down overnight, you run the risk of either becoming overwhelmed by the reality of corporate inertia, or worse, irrevocably destabilising your current profit engine. Better instead to spin out a new unit - empowered to make a clean start, to trial emerging technologies, break business rules and most of all, to think big.

The best way to get things moving is to round up all your trouble-makers, dreamers and hackers and give them the space and protection to try new things. Watch closely. At the right moment you can either bring them back into your business, or fold your business into the new venture. And be assured that you won't be the first to have sailed that route. To paraphrase the late great Steve Jobs - if you have ride out the storm of the present into an uncertain future - its better to be a pirate than join the navy.

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Need some help with leveraging technology in your present business? Find out more about our innovation lab at Tomorrow. I'd be happy to schedule a free advisory session with you to talk about your business goals.

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CATEGORY: Innovation

The Economics of Immortality

Posted by Mike Walsh ON 9/1/11 1:13 AM

Wall

I once asked a well connected friend from the Valley what the stock rich digerati spent their billions on once they exhausted their penchant for Ferraris, Gulfstreams and obscene boats. ‘Secret labs’, he replied cryptically. ‘Now that they are richer than God, most of them are scared of actually meeting him. So many are busy funding scientists and private institutes to keep themselves alive for as long as possible.’ Eccentric, wealthy centenarians are one thing - but to me the real question is what happens when life extension moves from the realms of the super-rich to the masses. In other words, what impact will the economics of immortality have on the rest of us?

Let’s try a thought experiment.

Imagine that life extension technology now exists. It could be in twenty years or a hundred - but for the purpose of discussion, there are two key assumptions that matter. Firstly, it will be expensive. Regardless of the actual production and implementation costs of the treatment, the companies who develop it will need to recoup their significant R&D investments and maximise their opportunity for making money while still protected by their patents. Secondly, longevity is unlikely to be a once off process. Similar to servicing a car, extending life is likely to require a program of regular treatments, physical monitoring, and constant adjustments in lifestyle to achieve maximum effectiveness. Given these two conditions, here are my predictions for the future impact of mass market immortality.

The Rise of Info-Pharma Giants
Living longer is a problem whose solution may well be part medical and part informational. Rather than a generalised elixir, life extension is likely to require highly personalised medicine. In other words, your treatment will vary depending on your genetic background and the way you live. Accordingly, the companies that will dominate in the space are likely to combine the medical rigour and research funding scale of large drug companies, with the information processing and data analytics of software or cloud computing giants. In fact, by the time life extension becomes a reality - the merger of an IBM and a Pfizer, may actually be more plausible than today's shotgun marriage of a Google and Motorola.

Immortality As A Service
One possible way that longevity could be made affordable will be to structure it as subscription service. Your monthly charges may vary depending on your individual condition, conformity to certain lifestyle parameters, and how early you begin preventive treatments. ‘Immortality as a service’ providers will monitor their clients very closely - most likely using technology that evolved from today’s mobile bio-informatics apps. So be warned - unhealthy lifestyle choices or dangerous physical hobbies are likely to be met with severe subscription rate hikes or even a cancellation of service.

P2P Meat Markets
The alternative to a subscription funding model` is someone else paying for your extended lifespan. It is not uncommon for rockstars to securitise their future earnings from their back catalogue and get their money upfront, but what about ordinary people? Financial institutions may baulk at the uncertain risks of securitising an individual, but what about a P2P loan market for medical treatments? Consider this scenario - browsing through a virtual stock market of individuals, weighing up their career prospects and capabilities, their influence networks and personal projects - before deciding who you are willing to back with your funds. However, peer funding will be a double edged sword for those who take it. Imagine having to justify quitting your job or taking a holiday to your own personal board of directors.

Social Stagnation
If you want to picture the potential social impact of extended lifespans, the best place to start is Japan. According to the World Bank, the average life expectancy in Japan is 82.9 as compared to the global mean of 69.2. Due to both longer life spans and a strong cultural deference to family elders, young professionals entering the workforce in Japan often have to wait until well into their middle age before gaining positions of influence or power. In our future scenario of extended lifespans - this may become a common global phenomenon. When the rich and powerful hold onto their toys way beyond a normal lifespan, you will see increasingly aged company boards, the indefinite delay of retirement, and a calcification of inherited wealth. And if the new rejuvenated elderly are smart, they will concoct elaborate changes to the educational system to keep people in training longer and even encourage an extended adolescence in ambitious juniors - all to distract them from the reality of their continued grip on power. Bread and circuses indeed!

Black Immortality Markets & Rogue Rejuvenation States
Whether you are a Hollywood Studio defending your movie library, or a luxury brand protecting your handbags from rampant imitation - piracy is already a global epidemic. But now consider the consequences of companies or countries stealing technology to prolong life. Prohibitive pricing and the divisive politics of life extension would certainly be sufficient incentive. Would some emerging market in 2050 proactively encourage reverse engineering longevity technology to provide their citizens with a competitive edge against other nations? Whether it be cosmetic surgery or pregnancy terminations - patients already travel to arbitrage different regulatory regimes and the relative cost of medical treatments. Will we abandon our countries of birth in the future, in order to live longer in some other one? And in the spirit of the oil wars that defined the twentieth century - what kind of future geo-political conflicts could the battle for immortality inspire?

Of course, you should read all of this with a grain of salt. The true consequences of widespread longevity will be impossible to fathom until we actually have to live through it. But as the post war baby boom, China’s One Child Policy and India birth gender selection all demonstrated - small changes in demographics can have devastating impacts to human society. In the meantime, keep a close eye on the world’s technology billionaires. When one of them runs a decent time in the New York Marathon at the tender age of eighty-five, you know a brave new world is almost upon you.

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CATEGORY: Health

Why Inspiration Trumps Imitation

Posted by Mike Walsh ON 8/23/11 4:11 PM

Sony Store

You can have too much of a good thing, especially if it wasn’t yours to start with. Here’s the perfect example - brands that shamelessly imitate the strategies of their major competitors. I was scouting the Westfield complex in Century City, LA last week and noticed a new Sony concept store a few feet from a classic Apple retail shrine. It was striking how similar both stores appeared, except for one crucial distinction - Sony was devoid of customers.


Years ago I remember watching a fascinating interview with Steve Jobs. He was comparing himself to Microsoft and Bill Gates, explaining that their mission at Apple was to take as much as they could from art, music, history, science and technology - in his words ‘the best things that humans have done’ - and cram it into their products. That’s why, he said while people use Microsoft products, they love the ones that Apple makes. The difference was passion.

Apple’s retail strategy is also no stranger to appropriation. Next time you are in front of one of their stores, stop for a minute and squint your eyes so that the laptops and screens disappear and all you can see are abstract shapes, materials and lighting. Anything look 


familiar? When they designed their stores, Apple took direct inspiration from the world of luxury boutiques with their expensive construction materials, theatrical street presence and sparse merchandising, They ruthlessly imitated, but importantly - it was not from the playbooks of their immediate competition.

That said - there are some limited scenarios when direct imitation works as a disruptive strategy. For example when you take an expensive product, and deliver a comparable substitute at a dramatically lower pricer point. Although their customers might deny it - low priced imitation is the secret behind the success of fashion brands like Zara and H&M. They directly copy high fashion styles from established luxury brands, and rapidly manufacture and curate market appropriate products at prices mass market consumers can afford. Not so dissimilar is the practice of Chinese ‘shanzhai’ or bandit phone manufacturers, who offer clones of high end smartphones at substantial discounts to their originals, and in doing so, open up entirely new consumer niches.

The distinction between inspiration and imitation might be nuanced, but the competitive differentiation can be vast. Steve Jobs was always fond of the infamous Picasso quip - 'good artists copy but great artists steal'. But what does stealing really mean? When you steal something, you don’t just take it - you make it your own. Sage advice for the next time someone asks you to look over your shoulder and mindlessly mimic something your competition does.

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CATEGORY: Retail, Marketing

A World Without Apps

Posted by Mike Walsh ON 8/14/11 9:06 AM

apple

I love apps, I hate apps. Their ingenuity and variety has brought fun and delight into my life, but I also long for a world without them. That is to say, a world without a handful of companies circling their wagons around my content and how I interact with my community. Fortunately something happened this week that should fuel a glimmer of hope for an alternate mobile future.

The real issue is not whether Apple or Android will win the war for your mobile phone, but rather the nature of the game they are forcing us to play. The digital revolution is at a crossroads. The Web was designed to be an open platform for the networked navigation of content, but increasingly it is under challenge by those who would allow it to become a walled garden for social media monopolists or a background pipe for proprietary mobile applications. In that context, Amazon’s lastest challenge to Apple’s control over your smartphone is a welcome development.

I still remember the day I made the heart wrenching decision to move all my physical books into storage and embrace the Kindle. Dust, space, and endless hours on airplanes finally killed the romance of ingesting words on dead trees. Now I read my books on my phone, my iPad and, when in direct sunlight, on a Kindle e-reader. After this week, I also have the choice of reading them directly from the Cloud. At face value, Amazon’s new HTML5 Kindle app might not seem that game changing but think for a minute what it actually represents. One brand platform, no App Store, no software downloads - just your content, on any web enabled screen wherever you are.

HTML5 has been kicking around for a while, but now that platform providers are playing hardball on their approval processes and demanding a greedy bite of third party revenues on content sales - publishers have a growing incentive to bypass them altogether. Amazon will not be long alone in this nascent uprising. Magazine and newspaper owners are growing uneasy at losing their direct billing relationships with their audiences. The Financial Times has already launched its newspaper on the HTML5 platform. More will follow.

There is a deeper thread to this conflict worth noting. At the moment, mobile application development is a nightmare in diversity. Different screen formats, multiple device profiles and divergent operating systems add up to costly duplication of work and complex testing processes. For CIOs in particular, this creates all kinds of headaches when deploying services in the enterprise. But in the future, what if you could virtualise any application and deploy it in a web browser? Music, productivity tools, secure communications, video games, newspapers - all hosted and deployed from the Cloud, irrespective of what device you are using.

Cloud virtualisation is not good news for everyone. It erodes the platform power held by Apple who have used the iTunes ecosystem to defend the high margins of their hardware products. And while in the short term, a shift to the Cloud might help challenger brands like Samsung, Sony, LG and HTC - in the longer term, even they will suffer as hardware and bandwidth commoditises and value shifts to a hyper-competitive era of platform agnostic applications.

Don’t sell your Apple stock just yet, but I do think we will look back and remember 2011 as the year this innovative company and its CEO were at the historical peak of its powers.

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CATEGORY: Culture

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