Category Archives: free information

The ROI of now vs. later

Today we defended Seth Godin in BusinessWeek over the debate, if you missed it, of whether he should post public conversations about brands without their permission. Some said Seth was brandjacking. We say, get over it, let him play with public data. The issue is really much broader — of how controlling any idea is an outdated mindset, and how letting go of control of your brand, methodology, or secrets is required if you want to scale within the new networked world.

Call it the ROI of now vs. later. In the 20th century companies profited in the moment by controlling their concepts — because, after all, if you owned Coke’s secret formula, you made a killing adding sugar to water. Control made you money, and because communications to the public were also easily controlled, there was little incentive to worry about the ripples outside your boardroom walls.

But in the 21st century the new networked world creates huge opportunities outside your office or factory. A common marketing dream is to “go viral,” but as we know from watching Skittles or Subservient Chickens, viral requires letting customers play with your concepts. What happens if you release your ideas into the wild and let strangers abuse them? Why, you might spark conversations among millions of people, all of whom could become customers. You give up making money today for a broader impact tomorrow. The economics of open systems require a huge leap of faith, and many companies may never get there (we can’t imagine Coca-Cola giving up its secret formula anytime soon). But if you think about the millions most companies spend on advertising, it is silly not to add a free component to the mix that could have 100 times the impact — or, at least not to evaluate the financial upside carefully.

Idea manipulators as the fifth force

The reason ideas must be free is the competitive landscape has tilted toward a new entrant — the public, holding video Nanos and editing software, hungry to play. In his Five Forces model, management guru Michael Porter suggested that companies face five gravitational pulls as they try to make a profit: competitors in their space, suppliers and buyers who are upstream or downstream, substitutes that customers might flee to, and potential entrants. Companies in the past locked up information because they feared competitors might steal it, match them, and thus kill their business. They wanted tight control over costs from suppliers and margins from customers. In Porter’s theology, “potential entrants” would be the OxiClean guys popping up out of nowhere to give P&G a run for its money. But what if in the new networked world, consumers repurposing ideas are the potential entrants? What if their tide is unstoppable, a fifth force with exponentially more impact that the old supplier-competitor-customer loop? Is ignoring it an option?

Or, to use another metaphor, like children trying not to eat a marshmallow today, perhaps trying not to control you message tightly will give you more rewards tomorrow.

Oscar winners, U2 album leaked? On web you can find what you’re looking for.

Last August a Dutch fan of U2 walked by Bono’s holiday villa on the French Riviera and heard the singer’s voice booming out of a sound system. So the fan recorded the tunes — tracks from U2’s first album in four years — on his cell phone and posted them online. Problem was, the album wasn’t to be released until this spring; Bono was simply enjoying a private blasting of his new record. U2 managed to get the four songs taken down from YouTube, but then last week perfect digital copies of No Line On the Horizon appeared again on the internet two weeks before hitting online music stores.

So we weren’t surprised when someone began passing around this memo showing the Academy Award winners before tonight’s broadcast. Who knows if this is a hoax — and that’s part of the point. The new publishing and file-sharing tools are blending reality, opinion, paid sponsorships, untruths and even lies, seeding a thorny mess for content publishers such as awards auditors or rock bands. Chris Anderson has argued for three new “free” business models (best illustrated by David Armano) where producers learn to give more away for free on the front end, to maintain some semblance of control and revenue in the back. In other words, you can’t stop the flow of digitized content to the free.

Hey. If Mickey Rourke wins, all bets are off.

The brilliance and big problem of Google Health

Google Health launched yesterday to give patients a simple way to maintain a personal health record. It will probably fail, despite Google’s billions and drugstore partners, because physicians have no market incentive to share information.

To understand the problem, let’s first put a human face on it. The photo above is our mom, a cancer patient being admitted to Dartmouth-Hitchcock, one of the best hospitals in the United States. The procedure was about her 25th at this hospital, yet she was asked to fill out a form listing past surgeries and current prescriptions.

Mom is sharp, but she takes about 30 pills a day and her body has more scars than an Iwo Jima vet. If her surgical success depends on her personal memory, well, that’s not a great idea.

Now we won’t go off on the stupidity of this; Dartmouth is a fine hospital and is simply doing what physician groups do around the United States — using isolated information systems that don’t talk to anyone outside the walls. The problem is physicians have reason not to share.

You see, hospitals are just like the United States Postal Service. USPS makes a lot of money from some customers (businesses who ship packages) and loses a boatload of cash on others (Aunt Ginnie who needs letters delivered in rural Oklahoma). Physician groups have the same customer value issue. They make a huge profit from some patients (knee replacement, bariatrics) and lose money on other patients (inner city emergency care). Hospitals have to provide both levels of service, so it is vital that they attract lots of high-profit patients to offset the losses elsewhere.

Sharing information via a personal health record would disrupt that model. What happens to a surgeon who “owns” your personal records if suddenly those records are easily transported to any other expert in the country? Think how much the competing surgeon groups would love to have a quick, complete history of your health.

And this, dear patient, is why unified health records do not exist in the United States.

There is hope. Other industries, finance in particular, have built unified views of customers because they realize sharing information outweighs the costs. Your credit score is a perfect example of every lender and transaction being recorded instantly and shared, to help banks offset the risk of giving loans to deadbeats. But this system only works because the market benefit — avoiding risk — outweighs the market cost — giving away competitive information.

Pharmacies are the first to start building unified records; MedCo and RxAmerica have partnered with Google, because the unified view of a patient could make ordering pills a lot safer. But hospitals and physician groups still have little incentive to join. The only hope is that some hospital somewhere will realize giving patients control over their information may be a competitive advantage — a new way to help that sets them apart.

For now, Google Health invites consumers to upload and manage their own information. Good luck remembering that tonsillectomy, and downloading the file to your surgical team next time you’re bleeding in the emergency room. We love Google’s initiative and hope it succeeds. But the reality is for many years more, your docs will ask you to fill out a form.

Google CEO Eric Schmidt gives a brilliant view of the problem here:

Free Kiwee undercuts designers and a whole lot more

You can almost hear Hallmark wincing. Kiwee, a social expression site in which users can customize and forward free content such as greeting cards and widgets to friends, has surpassed 1 million users in six short months. The users have downloaded content 500 million times … or, if you consider that all those greetings used to generate $2 each in cards, envelopes and postage, that’s a billion dollars moved from content sales to free media.

Kiwee is a case study in how advertising-supported “free” content is disrupting entire markets — in this case, greeting card makers, graphic designers, stock photo companies, and the United States Postal Service.

Apple and Labor Board try to gag the efficiency of free speech

Information wants to be free, but not if the National Labor Relations Board or Apple can stop it. This week two news items surfaced showing how scared big organizations are about free content.

First up, the U.S. labor board told employers that it’s OK to prohibit workers from sending union-related emails on the company email system, since the email is corporate property. Next up, Apple–our beloved, uber-consumer-centric Apple–shut down a web site called Think Secret run by Harvard student Nick Ciarelli. Think Secret was in the business of investigative journalism, scooping Apple’s upcoming product releases, and Apple didn’t like this. We wonder if Ciarelli got a sweet payoff, er, settlement in exchange for walking away.

Whatever one’s politics, these types of actions should give us pause–not because either is morally wrong, but because both prohibitions are inefficient.

It’s a good thing if news flies that Apple has a hot product coming, because that news helps the entire technology industry advance more rapidly. It’s a good thing if employees can speak openly about work issues, since eventually it helps problems surface and be resolved more quickly, to remove friction and boost future profits. We’re not talking about stealing, lying, or misappropriating intellectual property. We’re talking about the speed of communication.

Let’s examine the corporate email issue more closely. What if, instead of a union message, you email your colleagues a proposal to sell more of Widget A and make the company $10 million in new profits? Ah, but unbeknownst to you, Widget B is a competing product and the Board is focused on that. Your proposal has undercut the other corporate initiative. Perhaps you’ve just abused company property. But at a higher level, your new idea, if adopted, could change your business for the better.

You see the point–prohibitions block innovation. Freedom of communication has moved beyond a human right into a larger role as the engine of capitalism. Consider what drives a healthy stock market: A buoyant technology sector, perhaps, led by Google, and Google sells the free transfer of information. If you really think about Google’s model, it is stealing the first three lines of content from every web site in the world. Do you mind? Put the brakes on that information flow, and search engines, and the entire internet, and then the S&P 500 and Nasdaq will all take a tumble.

Unfortunately, what is good for the economy as a whole–free data–is not always good for individual companies. Industry has a right to protect its creations, to be sure, which is why we don’t agree with today’s college youths that stealing music or video online is OK. But when industry tries to stop individuals from sharing news or opinion, it steps too far. No matter. In the end information will be free, and businesses who can’t learn to profit from that dynamic will sink back into the tar pits, where all dinosaurs belong.