Paul McKey - Synergistic Design

Redbean 20070330 - I recently attended the South by South-West (SXSW) Interactive, Music and Film festival in Austin Texas. Seeing first hand what both small and large players in these three industries, which generate so much activity on the Web, are doing only confirmed for me that we are in the midst of the third phase of the Web revolution.

The first Web revolution was all about the technology. Plumbing and wires, switches and electronics, access, language, protocols, trust systems and so on. Many people don’t realise it but before you can order your book from America or your wine from Australia someone had to lay a cable 12,000km across the Pacific ocean. This is an ongoing exercise with a new $300M Sydney-Honolulu cable announced only this week.

The second Web revolution was all about business. Tim-Berniers Lee proposed his World Wide Web in 1989 yet it took several years for momentum to build. And because the first phase of networks had been so successful all the requirements were in place for a rapid uptake and dissemination of Web technologies and content.

But the Web through the nineties was mainly an amateur, disorganised and eclectic mix of academia, small business and social activists. Business got involved by selling shovels to the gold diggers and an enormous inflow of investment dollars gave the Web ‘credibility’. Unfortunately this rush of ignorant cashed-up investors also lead to the rise of the dot com era. The crash that had to happen did however sort out the wheat from the chaff.

So this brings us to the third revolution. In my model of Synergistic Design I contend that any of the three primary system perspectives, of business, purpose or technology, can instigate change. Then the other two must respond. In this case technology instigated the first change in global information systems. The purpose of this system responded and became the phenomena we know as the Web. But business leapt ahead and tried to make money out of an unripe fruit. The Web of the nineties was crude and of variable quality. Web1.0 was the necessary prototype for Web2.0, the suite of protocols, technologies and functionality which will drive this next phase of the Web. Business will respond again with a better understanding of how to make money out of this phenomena. But this is now just evolution, not revolution.

In parallel to the development of networks and business models in the past ten years has also been the revolution in the tools and skills to produce digital content. As the price of production tools, storage, and communication networks reduces and the availability of skills, distribution channels and demand increases, the real revolution of user-generated content has begun. Publishers of software, games, news, films, books and music have built systems to protect their commercial interests and to date have been successful in defending their oligopolies. Partly because they also held the means for quality production. But those days are gone. Now anyone can attain the skills and technology to produce broadcast quality content in any medium. This equates to a revolution in the Purpose of the Web.

The last bastion of the publishers is really distribution, physical and legal. But with the advent of media convergence, ubiquitous communication systems, interactive Web2.0 and Web3.0 technologies, the physical constraints of distribution will fast disappear. So that brings us to ownership or legal protection. Once again a street level solution, in the form of a Creative Commons license, has been found by the Web community to circumvent blockages. Even Digital Rights Management (DRM) which many considered a sinister means for controlling distribution can now be used for good as well as evil.

What this all adds up to is an unprecedented revolution of development, sharing and consumption of user-generated content. MySpace and YouTube are just tips of the iceberg.

What’s driving this? In a recent paper I described this iceberg as having three layers - Integration, Interaction and Independence. Integration and Interaction summarise the evolution of the Web. Independence however is the deeply human need and desire which is driving this current revolution. This independence, from institutions, places, systems, and even our physical identities will be an ongoing driver of new technologies, functionality and business opportunities. Some analysts are saying this next phase of online growth will last for 10-15 years. I think they are being conservative.

Perhaps the best way to describe this apparent conundrum of independence through increasing convergence is to remember that human nature doesn’t actually change that much. For many the Web is just a new means of expressing what Shakespeare observed several hundred years ago, that “all the world is a stage”. And for an independent producer, of anything digital, the increasingly large and accessible audiences could provide the opportunity for an unprecedented creative and commercial freedom.

For more see:

Creative Commons
Steve Jobs on Music DRM
Dr. Elliot McGucken on DRM

Redbean - Back in “the valley” after a several year break it has been good tapping into the sort of hard intellectual thinking that Americans do so well. They think hard about things like politics, education and many other issues. (Sure, they could probably think harder about global warming.) But they think particularly hard about business, its benefits, its impact and downside and the many subtleties of how it works. Almost anyone in the Bay area around San Francisco can be engaged in a knowledgeable conversation about the latest business topics, trends and opportunities.

So it was great to attend a think tank on global learning with many feisty educators, economists, designers and technologists up in the Santa Cruz mountains (more on this later). Just as interesting has been my catching up with Apple colleagues for an injection of technology trends and futures. Yet it wasn’t their technology that impressed me. It was their business models.

Apple is on a roll. It has what every company, small or large, should desire in its revenue stream, diversity. In the iPod it has a winning product, doing sales of 40M per annum, while in iTunes it has a winning service with 2006 sales of 1,200M songs. That’s over five million songs a day at US99 cents each.

In addition the two winners are joined at the hip by an array of well designed and powerful computers and the most elegant and efficient operating system available, MacOSX.

Sure I have been a Macintosh user for twenty years and even an employee for several years. But my biases apart you can’t deny that what Apple has done is build a phenomenal business strategy that allows a “digital lifestyle” consumer a one-stop-shopping experience. This holistic view of the market place is almost unique in the digital world and possibly only matched by the product-services co-dependence of the automotive and fuel industries or newspapers and classifieds (which Google Ads modernised).

Now Apple has been around for a long time and this dominance has not occurred overnight. And I am sure Steve Jobs has read Geoffrey Moore’s classic “Crossing the Chasm” where just such a strategy was described in 1993.

Holistic product-service matchings are one of my primary design principles for a Smart Business. They are often hard to develop and hard to protect once established, since look-alikes will try to enter your market, but when done well they have a synergistic effect where sales in one area should increase usage in other areas. Most importantly they complete the offering to the consumer which increases yield and drives repeat business through rich relationships.

You can develop and offer synergies yourself (coffee and cakes/cafes), or use partnering and/or co-existence models (think airline, rental car). Look for complements that are either required or desired by the customer.

To not consider the complementary product-service pairings that your customers need is to put your standalone product or service at risk since if the gap is left unfulfilled a competitor will fill it or the customer will simply go elsewhere.

So whether you currently provide either product, services or both you should, like Apple, be thinking hard about all the possible connections and complementary offerings your customers and clients need and then working out both how to offer them and make some money at the same time. That is by thinking about your client’s success you will help deliver your own.