Random Musings:

The Future of Music - Part 4 - The Empires Strike Back

This week's theme is the future of the music industry. A major impetus is David Kusek and Gerd Leonhard's The Future of Music: Manifesto for the Digital Music Revolution.

I've been considering Endates that are alternative visions to the one proposed by Leonhard and Kusek, Music Like Water, which I call The Music Utility. The second installment of this series outlined the 10,000 Mainiac MTV Channels Endstate, an oversimplification of which is that music videos become far more important than simple audio. Yesterday's third installment, The Return of the Artists,  suggested that change in industry structure in which Artists and their agents are the most important players is the future of the industry. Today, naturally, The Empires Strike Back.

The Future of Music - Part 3 - The Return of the Artist

This week's theme is the future of the music industry. A major impetus is David Kusek and Gerd Leonhard's The Future of Music: Manifesto for the Digital Music Revolution.

I've been considering Endstates that are alternative visions to the one proposed by Leonhard and Kusek, Music Like Water, which I call, the Music Utility. The second installment of this series outlined the 10,000 Maniac MTV Channels Endstate, an oversimplification of which is that music videos become far more important than simple audio.

The Music Utility Endstate is mainly about the evolution of the supporting technology infrastructure and business models, principally wireless and audio-enabled devices and subscription based streaming music rather than file downloads. In the Kusek and Leonhard version, Music Like Water, artists have much more power and leverage compared with other actors in the industry, such as the major music labels.

The Music Utility Endstate does not depend, in my view, on this fundamental change in the structure of the music industry. The majors, viewed as dinosaurs by some) could very well morph their service and business models and by doing so, avoid extinction. More on this point tomorrow.

What about artists?

Music Listening Declining Says Barry Ritholtz

Coincidentally with The Future of Music week here, economist and music fan Barry Ritholtz documents on his Big Picture blog a decline in the number of hours per person spent listening to music. Check it out.

The Future of Music - Part 2 - 10,000 Maniac MTV Channels

The theme of this week is the music industry. As noted yesterday, the impetus is David Kusek and Gerd Leonhard's The Future of Music: Manifesto for the Digital Music Revolution.

The central organizing vision of the book is a future for the music industry that they refer to as "Music Like Water." Some of the essential elements of this Endstate are that for a fixed fee, consumers get access to a virtually unlimited music library. One important difference between this future and the present time is that Kusek and Leonhard expect that streaming music will be far more important than music distribution based on files and downloading.

Here I want to begin suggesting some other Endstates for the music industry. Today's Endstate might be called "10,000 Maniac MTV Channels". The hallmark of this Endstate is that music video is far more important than plain old music. A majority of music is experienced through video. Watching is more important than simply listening. And MVideo tastes change rapidly; attention spans are extremely short.

The Future of Music - Part 1

As noted in today's Event of the Day, this week's theme is the future of the music industry. A major impetus is David Kusek and Gerd Leonhard's The Future of Music: Manifesto for the Digital Music Revolution. This book should be required reading for anyone interested in the music business.

Scenario planning entails defining 4-6 disparate visions of the future of an industry, a company, strategic business unit, or global challenge issue, such as global warming. The Future of Music book defines one vision of the future that the authors call "Music Like Water," by which they mean that streaming music is available everywhere, much like water. They envision the evolution of business models, distribution channels, industry structure, and network and computing technologies such that music is available all the time in virtually all places on all devices. In The Music Like Water future, musicians are more empowered than today because the quintessential relationship is between the artist and the fan or consumer, which is to say that music is an experience rather than a physical product or a file to be download. The music experience is king (or queen).

Part of the support they offer for Music Like Water future is a discussion of 10 key truths about the music industry that reinforce the notion of music as experience and the primacy of the artist:

Disney Dispands Corporate Strategy Unit

According to a Reuter's article running Friday on Yahoo, the strategy group is largely gone, its functions to be distributed to the various business units. This restructuring is an acknowledged effort to hold each operating unit more accountable for its own results. One wonders if this small indication that there may not be as much synergy across business units as previously thought.

Walt Disney Co. on Friday said it would largely disband its strategic planning division, and Peter Murphy, its merger and acquisition architect for years, would step down from his current role to become a senior advisor to CEO-elect Robert Iger.

Prediction Markets

Art Hutchinson, a former colleague when we were both at NCRI, writes frequently about prediction markets. Yesterday's article is about expert vs "man-on-the-street" opinion. Worth a read.

When In Doubt, Ask The Net - More on EPIC 2014

Regarding the EPIC 2014 video mentioned earlier today, thanks to those who commented here (AdamH) and the folks who responded on the Online News discussion list at Poynter.org.

The EPIC video mentioned here was done by Robin Sloan and Matt Thompson while they were Fellows at the Poynter Institute. Their current SnarkMarket blog is here.

As the Brits might say (or used to say), "Jolly good show"

Future of Newspapers and Google

If you're interested in the future of newspapers and the Net, go to this link and click on "click here to view." What you'll find is an 8 minute video on the future of news and Google. Well done.

I couldn't find any information regarding the source and history of this video. If anyone knows, please let us know via a comment or by email.

[tip o' the hat to Felix who provided the pointer.]

World Health Organization - Human "Bird Flu" Vaccine

Here is a World Health Organization (WHO) report on the development of a human "bird flu" vaccine published in February:

Availability of H5N1 prototype strains for influenza pandemic vaccine development

February 2005

The WHO Influenza Surveillance Network has characterized H5N1 influenza viruses isolated from humans and animals from several countries affected by the 2004/2005 H5N1 outbreak in Asia. WHO has also made recommendations on the antigenic and genetic characteristics of H5N1 viruses which are suitable for vaccine production.

Avian Influencza - Possibility of Pandemic

The Centers For Disease Control and Prevention (CDC) published an article back in March reviewing the status of avian influenza and the prospects for a human pandemic. Here is a portion of that article:

Recent Avian Influenza Outbreaks in Asia
March 18 , 2005

Background

Outbreaks of highly pathogenic avian influenza A (H5N1) occurred among poultry in 8 countries in Asia (Cambodia, China, Indonesia, Japan, Lao, South Korea, Thailand and Vietnam) during late 2003 and early 2004. At that time, more than 100 million birds either died from the disease or were culled.

From December 30, 2003 to March 17, 2004, 12 confirmed human cases of avian influenza A (H5N1) were reported in Thailand and 23 in Vietnam, resulting in a total of 23 deaths.

By late February, however, the number of new human H5 cases being reported in Thailand and Vietnam slowed and then stopped. Within a month, countries in Asia were reporting that the avian influenza outbreak among poultry had been contained. No conclusive evidence of sustained human-to-human transmission was found.
Recent Developments

Beginning in late June 2004, new lethal outbreaks of H5N1 among poultry were reported by several countries in Asia: Cambodia, China , Indonesia , Malaysia (first-time reports), Thailand and Vietnam. There has not been a resurgence of avian influenza in South Korea and Japan, and the outbreaks are reported to be controlled in those countries. It is unknown to what extent H5N1 outbreaks in the other countries may be ongoing. For more information about outbreaks in poultry, visit the World Organization for Animal Health website.

Retailers Balk At Search Ads Prices

According to a Dow Jones article published on excite.com here, rates may have peaked for buying certain search terms on services such as Google:

It's no secret that the golden age of dirt-cheap search terms has passed and that we're now in the era of steadily rising search term prices. Although for many advertisers paid search still pays off, returns on investment are diminishing and some retailers have cut back on paid search budgets.

"In the early days we were bidding 10 cents, probably a dollar 18 months ago and now $2.50," said Whitney Anderson, chief executive of Mother Nature Inc., a natural products e-tailer.

The company's ROI has dropped for terms it's been bidding on for four to five years, especially following Google Inc.'s (GOOG) IPO, when an influx of new advertisers saturated the market, said Anderson. Even some second-tier search engines have raised minimum bids from 5 cents to 10 cents - enough toaffectexpenses. So the company decided to freeze its paid search budget early this year at somewhere north of $1 million.

"The absolute number is set," said Anderson, "and not growing as fast as the rest of our ad budget."

Even eBay Inc. (EBAY), one of the biggest paid search advertisers, is feeling the effects of price increases. Bill Cobb, president of eBay North America, said at a meeting with financial analysts last month that the company was surprised by key word prices and viewed current pricing as being "a little wild." The auctions company is watching prices closely.

"If the ROI isn't what we're expecting, it doesn't matter what the marketing program is," eBay spokesman Hani Durzy told Online Retail Report. "We'd pull back."

U.S. Oil Gas Companies Reduce Climate Change Risk

According to the Corporate Social Responsibility Newswire Service, CSRWire, U.S. oil and gas companies have taken action to reduce global climate change risk:

After extensive negotiations with shareholders, Anadarko Petroleum, Apache, ChevronTexaco and three other leading U.S. oil and gas companies have taken far-reaching actions in recent months to disclose their potential financial exposure from climate change and develop strategies to improve their strategic positioning as international pressure grows to reduce greenhouse gas emissions and promote renewable energy sources.

The company actions come in the wake of record-high voting support last year for shareholder resolutions seeking more climate risk disclosure from oil and gas companies, which face growing regulatory, competitive and public pressure to reduce their reliance on fossil fuels and other greenhouse gas emitting energy sources. Shareholder resolutions with Apache Corp., Anadarko Petroleum Corp. and Marathon Oil Corp. all received record voting support last year, with support at Apache reaching 37 percent.

Cold Fusion Redux

So the future of energy just might include Cold Fusion, this according to the latest issue of  New Scientist [issue 2491, 19 March 2005, page 30]:

AFTER 16 years, it's back. In fact, cold fusion never really went away. Over a 10-year period from 1989, US navy labs ran more than 200 experiments to investigate whether nuclear reactions generating more energy than they consume - supposedly only possible inside stars - can occur at room temperature. Numerous researchers have since pronounced themselves believers.

Scenario Planning in The Sports Market

BrandRepublic's MediaBulletin has an article that mentions in passing the use of scenario planning in the highly volitile sports market. I believe that scenario planning can help substantially reduce, but never completely eliminate, the likelihood of "out of the blue" events (see below).

In short, when the mud flies, does it stick to the brands?

According to David Abrahams, senior vice-president of Marsh Risk Consulting Practice and an expert in brand risk, there is often a demonstrable link between the way in which a crisis is handled by a company and what happens to that business and its associated brand. 'The way in which any crisis is handled becomes a visible test of management capability,' he says.

'If that crisis arises from a fundamental breach of trust or performance, the compound effect of the bad handling can be devastating.'

The Future of Google

Since at least the early 1990s, the proverbial pendulum swings between some form of central services / thin client computing and distributed / peer-to-peer / grid computing. The pendulum is still swinging. Molly Wood's article on Google's strategic intent suggests server / thin client computing is where the G folks are heading as a way of directly challenging Microsoft for the hearts and minds of computer users. Here's her major point:

Everyone seems to agree that Google's showing signs of building some sort of operating system. One of Microsoft's key Windows architects, Marc Lucovsky, recently defected to Google, and so far, his duties at Google haven't been detailed. Google's also been rapidly expanding onto the desktop--Google Desktop is the company's only other Google-developed product that's not in beta. They've acquired the photo-organizing software Picasa, along with the 3D mapping software Keyhole. There's e-mail client extraordinaire Gmail and Google Deskbar, which lets you search for and display Google results without opening a browser (a first step toward rendering IE, Firefox, Netscape, Opera, and company obsolete?). Meanwhile, a walk through Google Labs shows you personalized search projects, mobile solutions such as Google SMS and Froogle Wireless, and, of course, Google Maps.

Gurus of Entrepreneurship Offer advice to startups

Dan Farber writes:

At the Churchill Club last night, Garage Technology Ventures Managing Director Bill Reichert led a discussion with a panel of notable startup veterans: Kamran Elahian, Steve Kirsch, Dan'l Lewin and Heidi Roizen.

Here are a few highlights of the interview, which is available as both an MP3 download and as podcast that you can have downloaded to your system and/or MP3 player automatically (see ZDNet's podcasts: How to tune in).

I resonate with this comment from Karam Elahian, especially the point about humor:

A startup is not picnic. Any time you go to b-school, you see those beautiful hockey sticks...all of that is nonsense.

Life in a startup is full of ups and downs; if you accept that at the beginning, you manage everything based on that.

Make sure always to bring a lot of people with a fantastic sense of humor.

Bill Gurley's New Blog

Benchmark Capital's Bill Gurley (previously at Hummer and CSFB) has moved his "Above The Growd" newsletter to a blog here. Always an interesing "read." The initial article addresses why the US is falling behind in broadband penetration.

The 5 Deadly Startup Sins

Elsewhere in these pages is an article that refers to Peter Drucker's instantly classic, The Five Deadly Business Sins. Without at all holding myself out to be a Drucker, here are what I believe to be the five deadly sins of a start-up business:

1. Excessive Ego. One classic manifestation is the technologist who demands to be CEO. The company, technology, and products are his--less frequently, her--babies. Teaming is difficult for someone in the Ego Trap.

 

2. Excessive Greed. The CEO and/or Board of Directors insists that the value of the company is $x Millions. Not a million less. By the time the dust settled, the money went away. The company closed its doors.

 

3. Vision Rather Than Market Driven. When committing this sin, the sinner fails to ask potential or actual customers what they really need. The startup assumes because the founders resonate with a particular vision of how the world must be in 18 months or 36 months, the world will resonate as well. And it has to turn out that way because the vision says so.  Everyone will want to use widgetoptitron software. It's the next Big Thing. Not infrequently, the product is significantly over-engineered--too many features. Or under-engineered with not enough of the really valuable features implemented. Both God and the Devil are in the details on this one.

 

4. Technology Rather Than Market Driven. This sin is similar to the Vision problem, except it's technology driven. Our flabergastic overdrive chip will change the way in which all networks operate because it's 10x better than anything available today. Not necessarily. Again, this naive faith in technology leads to what might have been an avoidable failure.

 

5. A Business Ecosystem of 1. Start-ups assume that if they find potential customers and get their supplier costs and quality right, all will be well. Maybe. But in most verticals, its a collection of cooperating companies that succeed by competing successfully against one or more other collections of companies.  Startups need alliances and partnerships much more than large established companies. Startups are vulnerable. Big time.
   

Event Of The Day-3/9/05-US Automaker Share Under 50%

US Automakers Less 50% Share.

In 1990, the "Big 3" US auto makers had 71.6% of the US market. By 2009, share had fallen under 50%.

Still unable to compete in quality, features, and design.

Drucker's 5 Deadly Business Sins

I was cleaning my office and sorting papers when I came across a Xerox of the original WSJ version of Peter Drucker's famous The Five Deadly Business Sins article published in 1993. From time to time it's been on my bulletin board, which it is now, as a reminder of the eternal value of his comments. Here are excerpts:

1. The worship of high profit margins and "premium pricing" always creates a market for the competitor.  And high profit margins do not equal maximum profits.


2. Mispricing a new product by charging "what the market will bear." This, too, will create a risk-free opportunity for the competition. It's the wrong policy even if the product has patent protections.

 

3. Cost-driven Pricing. The only thing that works is price-driven costing. The only sound way to price is to start out with what the market is willing to pay--and thus what the competition will charge--and design to that price specification.

 

4. Slaughtering tomorrow's opportunity on the alter of yesterday. It's what derailed IBM. IBM's catching up almost overnight, when Apple brought out the first PC in the mid-1970s. But then when IBM had gained leadership in the new PC market, it subordinated this new and growing business to the old cash cow, the mainframe computer.

 

5. Feeding problems and starving opportunities. All one can get by "problem-solving" is damage containment. Only opportunities produce results and growth. And opportunities are every bit as difficult and demanding as problems are. First, draw up a list of the opportunities facing the business and make sure that each is adequately staffed (and adequately supported). Only then should you draw up a list of the problems and worry about staffing them.
   

Strategies for the Policy Arena

In addition to organizational settings, the tools for dynamic strategy analysis, decision-making, and implementation discussed here have broad application to critical policy domains. Examples of these key policy domains include global warming, homeland security, infectious diseases such as HIV or the next influenza pandemic, nuclear terrorism, and bioterrorism threats such as smallpox and especially genetically reengineered smallpox.

Each of these policy domains has been largely seen as involving too many actors, too many countries, too many decision-makers, and are so complex as to elude proper analysis. Cynics say that even if one could emerge from a project with the preferred scenario in hand, implementing that plan is so difficult as to undercut the value of the planning.

Maybe so. The proof is, of course, in the eating of the pudding (and not in the pudding itself).

But for complex issue domains, scenario planning provides many of the required tools. {See Bob Horn's work for some complementary Visual Language tools such as "mess maps," argumentation analysis, and other techniques.}

Scenario planning projects are excellent ways of bring policy makers, foundation staff, lobbyists, domain experts, business people, academics, organized interest groups, and other issue constituents together to share knowledge and explore diverse options.

For those seeking to influence policy, these scenario planning projects have the following benefits:

• Understanding policy options and likely consequences of action and of inaction.
• Formulating an action plan that address actors and influencers at all levels
• Identifying key leverage points and policies; where to apply effort.
• Understanding which forces are aligned with and which forces are opposed to each policy direction.
• Identifying currently neutral actors and their likely direction so that they can be mobilized or incented to remain neutral as appropriate to the policy objectives.
• Laying a foundation for multilateral cooperation among nations, NGOs, and other actors.
• Understanding when, where, and how to spend scare financial resources.

Strategy Implementation

A SVP in a large Sillicon Valley company said to me a few years after completion of a scenario-based consulting project, "yours is the only consulting project I've seen that stuck on the wall here," by which he meant, of course, that our work had real and positive consequences for the Company. Why?

Scenario planning and strategy setting is not enough. It's cool, it's fun, everyone feels good at the end. Everyone who is open to doing so learns something. Some of the learning is even important to the Company.

Here are some of the requisites for effective implementation:

• There absolutely positively has to be high level executive sponsorship and commitment. Usually this means the CEO. But this may mean the head of of a functional unit such as IT. Or it may mean the general manager of a business unit.
• The whole management team has to be involved. Don't leave the IT, financial, human resources, and legal people out. They will have to be part of the implementation. The sooner they know what's what the better. And they usually make good contributions to strategy decisions.
• Have a presentation that summarizes the results of the strategy setting project and share that presentation internally as widely as makes good common sense.
• Written narrative documents are expensive to produce and become obsolete quickly. One exception is in IT and similar areas where the result is consensus on the internal IT architecture, including standards, best practices, and currently preferred vendors and products.
• At least monthly, Management Team meetings should have a spot for receiving and assessing War Room feedback on the strategy and key Events.
• Actively look for signs that the strategy is working as planned.
• More importantly, actively seek disconfirming information. Knowledgeable outsiders can be particularly helpful here. Most importantly, don't shoot the messenger.
• In addition to Events, make sure that the strategy has been defined in terms of the key metrics used to run the business. Which numbers are important indicators of success? Order backlog? Call center utilization? Returned merchandise?

War Rooms

When I was at Northeast Consulting (NCRI), we frequently observed that it's OK to be wrong as long as you figure out that your wrong before your competitors do. Dynamic strategy setting using scenario planning is one major tool for assessing current strategy, whether it's product, business unit, or corporate strategy.

Interactive processes leading to strategy decisions are highly effective for setting goals and strategies for attaining them. Interactive processes also go along way toward aligning the company with the chosen strategy. This is because in the best circumstances, the management team responsible for implementation was directly involved in determining the strategy.

An effective corporate or business unit strategy project should, at its conclusion, leave each person knowing what they should be focused on when they come to work the next day.

But what about the day after the day after? The quarter after the quarter after?

The materials produced by participants in scenario planning projects have as much value after the project as at the conclusion of the project. Event sequences and cards on the wall can form the foundation of an effective "war room".

To be effective, a particular person has to be responsible for at least the following:

• Keeping the war room up-to-date. Stuff happens. There should be a convention for indicating which Events have happened and how the actual event corresponded to the hypothetical event. Sooner than expected?
• Communicating Event "stuff" to others in the organization. It won't help the collective knowledge base if only the keeper of Events knows.
• Soliciting input on changes to the desired scenario. Maybe others can suggest new Events that need to be evaluated. Are proposed new events consistent with the chosen scenario? If not, is there a message to the Company?
• Asking managers to assess the extent to which their goals are aligned with the strategy. If not, why not? If so, with what results?
• The War Room can be the basis of a quarterly strategy review. Is the strategy still right? Are course corrections necessary?
• Sometimes many Events happen are not consistent with the strategy. When that happens, alarm bells should go off. Time to do a serious reassessment of the strategy.

Event Of The Day-3/1/05-Crude Oil

Crude oil hits $120 per barrel.
 

What impact would this event have on your business? Your nation? Your political party?

Cumulatively, Events Of the Day show the extreme diversity of business, organizational, political, and policy issues that can be effectively addressed through dynamic strategy development and implementation. Event cards also invite comments. As the Brits might say, have at it.