Assume you are a plumber, a good plumber. You do a good job and charge a fair price and your customer service is excellent. You do minimal advertising, an advert in the Yellow Pages and some leaflets around the local area.
Work increases gradually until you are turning away work you can’t fit in. You have three options: -
1. Carry on and be contented that you have full employment.
2. Increase your prices to control the demand and improve your income.
3. Employ someone to do the extra work.
Let’s assume that you take option 2 and increase you prices a little. Assuming you are still doing a good job and customer service is excellent there is no reason that most of your customers will not keep coming back. Some of the smaller less profitable jobs may disappear but these could easily be replaced to larger more profitable jobs and provided all else was equal the demand could soon outstrip supply again.
Let’s assume that at some point you employ someone. You could pay them what you used to charge and keep the price increases as your commission. This would probably be over generous as you would have to keep the books, deal with customer issues, pay tax and national insurance etc. However, you now have someone working for you and are able to take on more work. Increase your income and maybe get a bigger discount from suppliers.
Assuming all goes well and demand increases to outstrip supply again. You recruit another plumber, then another and another. At some stage these employees are going to need more management time that prevents you from being a plumber. Your suppliers need managing to get the best deals customer services in not the customers calling your mobile. Now you have two options:-
1. Carry on being a plumber and employ someone to manage the back office for you
2. Employ another field plumber so you can manage the back office
The danger with option 1 is that your back office person sees how to run the business employing plumbers and decides to set up on his own and steals all your customers and some of your employees. Not only are they in competition they have also set your business back as you seek to replace them the employees and the customers.
The danger with option 2 is that you are now doing a job you are not necessarily the best at doing and could easily get swamped by the day to day running of your organisation or fail to make the best of it.
Let’s assume you go for option 2 and as you expand you bring in someone to do the books, then someone to look after the customer service while you continue to look after the “lads”. Eventually you structure the team so there a regional team leaders able to get to jobs and support the lads in the field that come across problems.
By now you have around 50 plumbers in the field the over demand is not a problem anymore and the problem is to keep a steady flow of work in between the winter peak and the summer lull. So now you employ a sales man to try and win some company maintenance contracts. He needs some marketing blurb and a rate card and some introductory offers – entre a marketing person. As your company moves more towards the highly lucrative contacts with enterprises, councils and housing trusts you company is less and less like the jobbing plumber it started.
Winning large contracts becomes the focus and having the right sales people is the key to success in negotiating these large deals. The right sales person demands a high salary and a heft bonus.
What would your company do if best sales person left? Could it survive?
What would your company do if the best plumber left? Recruit a trainee?
What has happened? The company that started off selling plumbing services is now held to ransom by a small elite group of sales people that defend themselves by instilling fear of losing them. The core people that create the wealth, the plumbers, are less important.
The sales people have become the go-between. They bring the plumbing skills and the customer together. They add no value. The customer is buying the plumbing skill.
Bankers don’t create anything, let alone wealth. The simply bring savers and borrowers together. Unlike sales the bankers have the added luxury that the savers and borrowers don’t know each other. This enables the bankers to charge even higher commissions and means that replacing them would be more of a struggle at first.
Tuesday 28 December 2010
Where has the innovation gone?
I’ve just been to a conference about innovation.
One of the snippets of anecdotal information that was given almost as a throwaway line was the 80% of the inventions in the Bell laboratories, during its most prolific 10 years, were born out of conversations in the canteen. I don’t know that this is true but the speaker then went on about how their software enabled people to collaborate over great distances, as if they were in the same room. Clearly he thought that collaboration was very important for innovation. Or was he just trying to sell his software?
However collaboration, whether over great distances or within the confines of a research lab, are formal interactions not the random “chaos” of a canteen. I doubt that the advances in Bell’s laboratories were due to the research team all sitting down to lunch at the same time. It is more likely they there was an element of random interaction. Not with some person off the street but with someone conducting research at a tangent. Someone with the intellectual capability of appreciating the problem, without understanding the detail, and suggesting an alternate approach or, simply talking about their work sparking an idea in a someone else.
The conversations would be struck up by the need to find somewhere to sit and eat. Spotting a familiar face, a well known ex-colleague, or team, even someone only vaguely known. The conversation would start with small talk and eventually the inevitable “So what are you working on” would crop up. This would often lead to a dead end, maybe one person might take the problem away and think about it, or mention it to another colleague. In this way problems could have many minds working on it without the need to consciously organise a conference call, set up a workspace or use “collaboration” software.
In my company we used to have canteens in every building. Everyone went to work (no home or distance working) and you worked together in the same office. The accountants can only measure things and so unable to measure innovation looked at the cost of the canteens and decided that they could be cut. To some extent this made sense. Buildings that had housed 100 to 300 engineers only had 5 as equipment got smaller and more reliable. But some buildings retained 100’s of people. Undeterred the canteens were replaced with coffee/snack bars. No longer did people sit for 30 or 40 minutes on tables that held 8 to 20 at a time. They sit at a 2 or 4 person table and have a meeting over lunch they can’t fit in at any other time of the day. These are not random collisions, no “chaos” and no innovation.
The company I work for has recognised, from time to time, that it now lacks innovation. Many people would point to the red tape and formal process that prevent or at least obstruct innovation. Senior managers would say they welcome and encourage innovation. They have had a few initiatives to try and encourage innovation. All have failed. One initiative, about 5 years ago, tried to map the interactions between people. They compared the relationships of people in successful teams with those in other teams. The successful teams are much more chaotic. Post research showed they failed to record many of their connections and where potentially even more chaotic. One striking thing was they were much more social people (in general) as a group, than others. They would meet outside of work on at least two or three occasions during the year and would have an external hobby or interest that involved meeting and working in groups, from scuba diving to bridge clubs.
This social network made friends, required varying degrees of dependency and confidence that fostered trust as a normal part of their life. The ability to throw in a suggestion without fear of it being ridiculed and with the comfort that it would be considered and that no one would claim it as theirs.
By contrast at work today, many fear for their own job and they want to be important. They want to be Sir Alan Sugar’s next apprentice. They see the world with themselves at the centre. They name drop about who they have met/know as a means of establishing the pecking order. They bully people into doing what they want, by threatening to escalate issues to “senior management”. This so called senior management are even bigger “wannabes”. They are looking for their next promotion their next company. They can’t be bothered with people, details or right and wrong and come down on their people with “just fucking sort it”. So the crisis gets solved until the next, which tends to be ever closer to the last. Not to worry I’ll be gone before I have to really deal with it.
The organisation encouraging innovation. is sadly laughable. I have worked with two innovations one of which had the potential to save Telco £300m a year. The divisional CTO didn’t like the technology so didn’t progress (he left 8 months later). The commercial/product manager wanted the ideas to be fully costed and forecast for the next 5 years. Not unreasonable! But he wanted the technician, that had the idea, to do it (or get it done). This technician was 34 had left school at 17 and worked for Telco all his life. He didn’t have the knowledge to present an MBA thesis with a full business plan and so the idea was dropped. The CTO no longer cares (if he did in the first place) and the product manager has confirmed (because the technician didn’t produce a business plan) that the idea was too difficult and wouldn’t have delivered the benefits. Three years on Telco is almost a billion out of pocket.
Worse than this is that without innovation based on sound understandings the organisation has become ravenous for ideas. This vacuum, allows those with their MBA mumbo jumbo, to present flaky ideas, with promises of huge revenues that will save the company. The bigger the numbers the more these ideas take on a life of their own. Even when people see that it’s all smoke and mirrors the company keeps running forward. Why? Partly that everyone is afraid to bring the bad news, as the messenger may not get shot, but will be castrated. Partly that I can ride this and keep a job until they find out and partly I don’t think about what I’m doing I just do what I’m told (that way I can’t get blamed).
To bring back innovation you need to create an environment and opportunity for chaos. Not safe, shielded and cosseted but a trusted environment. Successful ideas become better, because they are challenged. If your idea is not challenged then no one is passionate about it. If your idea can’t withstand challenges it isn’t that good.
One of the snippets of anecdotal information that was given almost as a throwaway line was the 80% of the inventions in the Bell laboratories, during its most prolific 10 years, were born out of conversations in the canteen. I don’t know that this is true but the speaker then went on about how their software enabled people to collaborate over great distances, as if they were in the same room. Clearly he thought that collaboration was very important for innovation. Or was he just trying to sell his software?
However collaboration, whether over great distances or within the confines of a research lab, are formal interactions not the random “chaos” of a canteen. I doubt that the advances in Bell’s laboratories were due to the research team all sitting down to lunch at the same time. It is more likely they there was an element of random interaction. Not with some person off the street but with someone conducting research at a tangent. Someone with the intellectual capability of appreciating the problem, without understanding the detail, and suggesting an alternate approach or, simply talking about their work sparking an idea in a someone else.
The conversations would be struck up by the need to find somewhere to sit and eat. Spotting a familiar face, a well known ex-colleague, or team, even someone only vaguely known. The conversation would start with small talk and eventually the inevitable “So what are you working on” would crop up. This would often lead to a dead end, maybe one person might take the problem away and think about it, or mention it to another colleague. In this way problems could have many minds working on it without the need to consciously organise a conference call, set up a workspace or use “collaboration” software.
In my company we used to have canteens in every building. Everyone went to work (no home or distance working) and you worked together in the same office. The accountants can only measure things and so unable to measure innovation looked at the cost of the canteens and decided that they could be cut. To some extent this made sense. Buildings that had housed 100 to 300 engineers only had 5 as equipment got smaller and more reliable. But some buildings retained 100’s of people. Undeterred the canteens were replaced with coffee/snack bars. No longer did people sit for 30 or 40 minutes on tables that held 8 to 20 at a time. They sit at a 2 or 4 person table and have a meeting over lunch they can’t fit in at any other time of the day. These are not random collisions, no “chaos” and no innovation.
The company I work for has recognised, from time to time, that it now lacks innovation. Many people would point to the red tape and formal process that prevent or at least obstruct innovation. Senior managers would say they welcome and encourage innovation. They have had a few initiatives to try and encourage innovation. All have failed. One initiative, about 5 years ago, tried to map the interactions between people. They compared the relationships of people in successful teams with those in other teams. The successful teams are much more chaotic. Post research showed they failed to record many of their connections and where potentially even more chaotic. One striking thing was they were much more social people (in general) as a group, than others. They would meet outside of work on at least two or three occasions during the year and would have an external hobby or interest that involved meeting and working in groups, from scuba diving to bridge clubs.
This social network made friends, required varying degrees of dependency and confidence that fostered trust as a normal part of their life. The ability to throw in a suggestion without fear of it being ridiculed and with the comfort that it would be considered and that no one would claim it as theirs.
By contrast at work today, many fear for their own job and they want to be important. They want to be Sir Alan Sugar’s next apprentice. They see the world with themselves at the centre. They name drop about who they have met/know as a means of establishing the pecking order. They bully people into doing what they want, by threatening to escalate issues to “senior management”. This so called senior management are even bigger “wannabes”. They are looking for their next promotion their next company. They can’t be bothered with people, details or right and wrong and come down on their people with “just fucking sort it”. So the crisis gets solved until the next, which tends to be ever closer to the last. Not to worry I’ll be gone before I have to really deal with it.
The organisation encouraging innovation. is sadly laughable. I have worked with two innovations one of which had the potential to save Telco £300m a year. The divisional CTO didn’t like the technology so didn’t progress (he left 8 months later). The commercial/product manager wanted the ideas to be fully costed and forecast for the next 5 years. Not unreasonable! But he wanted the technician, that had the idea, to do it (or get it done). This technician was 34 had left school at 17 and worked for Telco all his life. He didn’t have the knowledge to present an MBA thesis with a full business plan and so the idea was dropped. The CTO no longer cares (if he did in the first place) and the product manager has confirmed (because the technician didn’t produce a business plan) that the idea was too difficult and wouldn’t have delivered the benefits. Three years on Telco is almost a billion out of pocket.
Worse than this is that without innovation based on sound understandings the organisation has become ravenous for ideas. This vacuum, allows those with their MBA mumbo jumbo, to present flaky ideas, with promises of huge revenues that will save the company. The bigger the numbers the more these ideas take on a life of their own. Even when people see that it’s all smoke and mirrors the company keeps running forward. Why? Partly that everyone is afraid to bring the bad news, as the messenger may not get shot, but will be castrated. Partly that I can ride this and keep a job until they find out and partly I don’t think about what I’m doing I just do what I’m told (that way I can’t get blamed).
To bring back innovation you need to create an environment and opportunity for chaos. Not safe, shielded and cosseted but a trusted environment. Successful ideas become better, because they are challenged. If your idea is not challenged then no one is passionate about it. If your idea can’t withstand challenges it isn’t that good.
Monday 27 December 2010
IPTV is dead - long live broadcast
IPTV whether that is VoD, download or live, has moved slowly forward over the past few years. The jungle drums have changed from beating out a multitude of predictions to a constant rhythm of new service launches.
Some initiatives have the seeds of commercial viability, others you know are much shakier. Almost none of these new services are commissioning content. Those that are, are not exactly mainstream and usually rely on a enthusiast and volunteers. Other “unique” or “original” content is UGC. So the vast majority of commercially viable services are reliant on content that has been created for and funded for, by more traditional platform such as cinema DVD/BD and TV broadcast. Therefore they are relying on the, much talked about, “long tail” value of content, or at best trying to extract just a little more value out of content at some stage in its life cycle.
The first thing against IPTV is, Internet/PC is not the place to watch quality content if you want to see it first. It will have been on another platform first. That is where the premium revenues will come from.
The second thing against IPTV is the picture quality is lagging behind other delivery mechanisms. 2Mb/s is arguably just about sufficient for a SD TV picture, 5 Mb/s is DVD quality and a 1080p HD feed that matches Blu-ray quality is 40Mb/s.
So here I am (as a consumer) with my nice large (and expensive) 1080p screen watching HD cable, DTH or DTV channel. For the latest films I have the choice of the cinema or the rental and purchase of a Blu-ray. Why am going to watch IPTV? Even if it doesn’t keep buffering, I am unlikely to get anything close to the same picture quality without downloading to some storage devices in my house. Wait a minute isn't that a DVR? Oh no it yet another box I've got to but and wire in and balance on the stack of Set Top Boxes.
I will sacrifice picture quality for something I may have missed. Better to see it in a poorer quality than not at all. Services such as iPlayer are undoubtedly a new facet to the growing arsenal of my TV entertainment options, alongside DVR’s, and games consuls.
I may also sacrifice picture quality to see something unique, niche or exclusive but this is unlikely to be the way that most people consume most TV content most of the time. Even if broadband bandwidths are larger and all you can eat, there is a large number of things that have to come together to make it work for the consumer.
Virgin and Sky, providing pay TV services with multiple channels, are also providing broadband. Virgin in particular provides some of the highest broadband connection speeds available in the UK at the moment. As bandwidth increases their users could opt to drop the pay TV bouquet for OTT IPTV. As Virgin and Sky provide larger broadband they could be undermining their own business. Are the stupid? No. They know that whatever you get via IPTV that is free will be old (to at least some degree), will be inferior or a niche that they do not service anyway.
The big success of IPTV in the UK is the BBC iPlayer. There also exists the ITV player and 4oD. All three share the same fact that they are free to the consumer. Most (if not all) content consumption to date has been to a computer of some sort. Presumably this tech savvy audience knows how to access all three yet the iPlayer is by far the largest of all the IPTV options in the UK put together (with the exception of YouTube).
If we assume that the content is comparable, then why the disparity in take up? The most obvious difference is the lack of adverts on iPlayer. The second difference is the range of content across the four BBC TV channels and the umpteen BBC Radio channels. This makes the iPlayer a comfortable and resourceful destination for content. Watching iPlayer is like watching a DVR, watching ITV player and 4oD is not, as I can’t skip the ads. I also have only the content of one channel to select from. (ITV and Channel 4 do not offer a variety from their main output).
IPTV is a cleaver technology but just because you can do something doesn’t mean you will. The real challenge is to deliver something the customer wants, something they may not yet know they want, but like so many people that have a DVR will tell you “I wouldn’t do without it now”. The thing to note is that the mass adoption of DVR's hasn't really happened yet. Most people have them as part of their DTH or Cable package. But Freeview/Freesat customers have not taken to them on mass yet. The industry is looking for the next revolution when this one hasn't happened yet.
Some initiatives have the seeds of commercial viability, others you know are much shakier. Almost none of these new services are commissioning content. Those that are, are not exactly mainstream and usually rely on a enthusiast and volunteers. Other “unique” or “original” content is UGC. So the vast majority of commercially viable services are reliant on content that has been created for and funded for, by more traditional platform such as cinema DVD/BD and TV broadcast. Therefore they are relying on the, much talked about, “long tail” value of content, or at best trying to extract just a little more value out of content at some stage in its life cycle.
The first thing against IPTV is, Internet/PC is not the place to watch quality content if you want to see it first. It will have been on another platform first. That is where the premium revenues will come from.
The second thing against IPTV is the picture quality is lagging behind other delivery mechanisms. 2Mb/s is arguably just about sufficient for a SD TV picture, 5 Mb/s is DVD quality and a 1080p HD feed that matches Blu-ray quality is 40Mb/s.
So here I am (as a consumer) with my nice large (and expensive) 1080p screen watching HD cable, DTH or DTV channel. For the latest films I have the choice of the cinema or the rental and purchase of a Blu-ray. Why am going to watch IPTV? Even if it doesn’t keep buffering, I am unlikely to get anything close to the same picture quality without downloading to some storage devices in my house. Wait a minute isn't that a DVR? Oh no it yet another box I've got to but and wire in and balance on the stack of Set Top Boxes.
I will sacrifice picture quality for something I may have missed. Better to see it in a poorer quality than not at all. Services such as iPlayer are undoubtedly a new facet to the growing arsenal of my TV entertainment options, alongside DVR’s, and games consuls.
I may also sacrifice picture quality to see something unique, niche or exclusive but this is unlikely to be the way that most people consume most TV content most of the time. Even if broadband bandwidths are larger and all you can eat, there is a large number of things that have to come together to make it work for the consumer.
Virgin and Sky, providing pay TV services with multiple channels, are also providing broadband. Virgin in particular provides some of the highest broadband connection speeds available in the UK at the moment. As bandwidth increases their users could opt to drop the pay TV bouquet for OTT IPTV. As Virgin and Sky provide larger broadband they could be undermining their own business. Are the stupid? No. They know that whatever you get via IPTV that is free will be old (to at least some degree), will be inferior or a niche that they do not service anyway.
The big success of IPTV in the UK is the BBC iPlayer. There also exists the ITV player and 4oD. All three share the same fact that they are free to the consumer. Most (if not all) content consumption to date has been to a computer of some sort. Presumably this tech savvy audience knows how to access all three yet the iPlayer is by far the largest of all the IPTV options in the UK put together (with the exception of YouTube).
If we assume that the content is comparable, then why the disparity in take up? The most obvious difference is the lack of adverts on iPlayer. The second difference is the range of content across the four BBC TV channels and the umpteen BBC Radio channels. This makes the iPlayer a comfortable and resourceful destination for content. Watching iPlayer is like watching a DVR, watching ITV player and 4oD is not, as I can’t skip the ads. I also have only the content of one channel to select from. (ITV and Channel 4 do not offer a variety from their main output).
IPTV is a cleaver technology but just because you can do something doesn’t mean you will. The real challenge is to deliver something the customer wants, something they may not yet know they want, but like so many people that have a DVR will tell you “I wouldn’t do without it now”. The thing to note is that the mass adoption of DVR's hasn't really happened yet. Most people have them as part of their DTH or Cable package. But Freeview/Freesat customers have not taken to them on mass yet. The industry is looking for the next revolution when this one hasn't happened yet.
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