The Restless Mind

Summary: Bundling helps you sell something good alongside something not as good. Unbundling helps you distinguish between the two.

The smartest decision Ringo Starr ever made was joining the Beatles. On his own, Ringo wasn’t much. As the drummer for the Fab Four he was, well, fab.

The smartest decision John Lennon and Paul McCartney made wasn’t forming the Beatles. It was allowing Ringo to join the Beatles. Stars need players on the team to distribute the wear-and-tear of interaction and create the right form factor. Adding Ringo was an insulation factor for the duo. It enabled them to be stars and focus on the core asset that people were paying for.

The bundle
That’s the power of the bundle. The bundle enables the less-than-stars to be sold alongside the stars, insulates the stars from the cost of interaction, and adds the appropriate form factor to make the bundle attractive for consumption.

Bundles explain just about everything in the marketplace. Albums bundle two great songs with eight so-so songs. Neighborhoods bundle three great streets with ten mid-list streets. Cars bundle a beautiful shape with a crappy engine. Cable companies bundle good internet services with not-so-good VoIP services. And so on.

Bundling is a fact of life. Most things in life are average. Few things in life are exceptional. Bundling the latter with the former means you can sell more things that people might otherwise not buy. To sell value, bundling is the way to go.

But to create value, you unbundle.

Unbundling is the mechanism to find the real value within a system.

The unbundle
Shawn Fanning unbundled the music industry with Napster and discovered that fidelity mattered less than distribution efficiency. The MP3 is a crappy music format, but it’s frictionless distribution quality revealed gaping holes in the music industry.

Larry Page and Sergey Brin unbundled paid links from organic linking. Pagerank revealed the true value of the citation and radically changed the efficiency of search.

Stewart Butterfield and Caterina Fake unbundled the meaning of photography. Flickr revealed that photo storage and printing were inconsequential next to public photo sharing.

Unbundling provides you with important insights:
-it highlights the real star of the system
-it spotlights the flaws in the system
-it reveals how the system evolved

What do you do once you’ve cracked the code?

You bundle. You extract the star feature/idea/offer, insulate it with a new cast of complimentary features/ideas/offers, and craft the right form factor.

Un/bundle
If “public photo sharing” was the flickr insight, then their interestingness algorithm is the #2 feature of the flickr bundle. It supports the key notion and makes it better by removing friction from the system. (Interestingness is the citation and tracking system that surfaces the most intriguing photos in any tag category. ) Interestingness is to flickr what Paul McCartney was to John Lennon: a vital counterbalance that made the star asset accessible and scaleable.

Google bundled Pagerank with Adsense and Adwords. Search is the star—but Adsense and Adwords are the brokers. They ensure the system’s sustainability, synchronize the connections, and keep everyone talking about Google. They insulate the star by distributing the cost of interaction (ie. they generate the revenue so R&D can continue exploring search innovations).

Shawn Fanning didn’t get to bundle MP3s with a new system, of course. He was sued out of existence. The job of bundling MP3s with several supporting “features” went to Steve Jobs. Today, iPod, iTunes, and the store are a massively successful bundle around the MP3.

Strategy vs phenomena
The trick with un/bundling a system is that sometimes it’s a natural phenomenon and sometimes it’s a strategic initiative. In other words, sometimes you can do something about it and sometimes you can’t.

In flickr’s case, the founders knew sharing would distinguish the service. They also knew the need for interestingness. They may not have expressed it as such (who would?), but they were making strategic decisions about bundles.

Google knew they were unbundling search with Pagerank. But they didn’t grasp how to bundle their new asset until years later.

Fanning didn’t understand his role or the importance of Napster. He was part of a phenomena that only later was bundled into the right form factor by Apple.

No worries, though. If you miss an opportunity to bundle, you might have the chance to unbundle. They’re a bit yin and yang, a little recursive and repeating.

Right now, the grid is creating perpetual opportunities to un/bundle new products, services, and industries. Friendfeed is unbundling Facebooks’ News Feed. ETSY is unbundling Wal-Mart. Ponoko is unbundling traditional manufacturing. Etcetera and so forth.

What are you dismantling?

A lighthearted post wherein the spectacle of a cheerleading competition is backdrop to the theme of nurturing innovation. Managers, take note: you are the parents in the story.

If you’ve ever fought for a unconventional idea and been defeated by the righteousness of the “safe and secure,” you can find solidarity with the girls of the St. Mark’s cheerleading squad who placed third at this weekend’s Ultimate Holiday Cheer competition in Stittsville, Ontario.

That they were trumped by two other teams is not injustice, given all the teens in the competition were enterprising and deserving of some reward, but it was a subtle and rather sad commentary on what we teach our youth about risk, creativity, and the pursuit of innovation.

For those not among the six hundred or so squeezed into Sacred Heart’s High School on Saturday, let me provide this quick background: cheerleading competitions pit teams of roughly 20 girls against one another and ask them to develop a three-minute routine that consists of much body flipping, hip-hop, and eyeliner. Apparently by scorecard, the judges dole out points for technical and creative application in much the same way they do at the Olympics (whether there was collusion between the French judge and Russian performers I can’t be sure: there were far too many pubescent boys ogling the competitors and blocking my view).

The point about the Olympics, though, is what left me shaking my head as the St. Mark’s team was ranked third. While they had made technical errors—and clearly enough to push the other two teams to second and first place—their routine was by far more imaginative, daring, and—as I assume cheerleading is supposed to be—entertaining.

This seemed as lost on the cheerleading judges as those at the Olympics, whose awarding has become so technical in order to remove the prejudice of taste that they have eroded creative enterprise by rewarding enterprise alone. Any casual observer can tell you that gymnasts now favor a series of safe maneuvers to create a strong composite score rather than attempting risky expressions that are prone to misfire. Watch any floor routine and you’ll notice just that: routine. No magnificence from movement but rather, magnificence of mechanics.

Of course, if you remove the prejudice of judges and rely on the marketplace, you’ll find creative expression wins hands down. That’s why people crave iPods, howl at Chris Rock, and, in something closer to cheerleading, flock by the millions to catch Cirque du Soleil. We seek inspiration and cherish those who deliver it.

So why complain if these kids will find this out for themselves? Why bother to mention that the process of innovation and the output of creative thought will help them succeed if it’s all around us? Well, because they’re kids, that’s why. Because they go to school to learn about what they’ll need to survive in the world. And when the tyranny of a few judges gets them down, they need to be reminded that even if they didn’t win, their creative instincts where bang on.

To the grown ups in that gymnasium (or any other gymnasium), I ask these questions: when should we reward our kids? When they win? Or when they inspire us? Sometimes they do not come hand-in-hand and we must choose.

As for me, I salute the girls of St. Mark. While I think you need to wear more clothes (a point my son will most certainly disagree with), you needn’t feel less proud.

Summary: Umair Haque believes edge principles can restore economic equilibrium. He forgot the human factor.

If you study or build platforms you’ll eventually run into strategist Umair Haque. His BubbleGeneration blog is chock full of dense posts about edge principles, strategy decay, and the coming macropocolypse.

I’m a big fan of Haque and I’m intrigued by his almost biblical view on the “macropocolypse.” His thinking goes a little like this: companies have strayed from their original mission of co-creating value between them AND customers; instead, they now transfer value AWAY from customers TO shareholders. Aggregating value without positive redistribution is, in his mind, disingenuous, non-sustaining, and evil.

Haque certainly has no difficulty finding evidence of strategic rot in the current financial crisis. CEOs pocketed millions as their banks tricked everyone into a pyramid scheme that now the Fed, using our money, has to bail out. It’s a great example of Capitalism gone wrong.

I differ, though, in thinking that edge principles can fix things. In Haque’s view, co-creation and p2p value exchange have the ability to restore balance to our unidirectional system. He cites companies like Google and ETSY as platforms that provide equilibrium among the actors and grow stronger by doing good rather than evil. ETSY, for instance, provides the framework to return us to cottage-scale industry and ensure the buyer/seller value system is 50/50. Google, who delivers value by enabling the p2p voting system we lovingly call Pagerank, grows in perfect step with the user base. The more we use it, the more value it returns TO us, rather than AWAY from us.

These edge mechanics are self-sustaining, essentially, because both parties get what they want. When partners in a relationship both get what they want, there’s no room for deterioration.

Unless you introduce fear.

Here’s where I think Haque misses the issue. Every human-made system disproportionately aggregates value—because of fear.

Fearing invaders and barbarians, farmers relinquished control to Feudal lords. In return for protection the lords amassed the farmers labor and resources. Worshipers surrendered their souls to God lest they burn eternally, enabling the Church to amass enormous wealth and real estate. In return for law and order, citizens gave up personal power to governments who in turn accumulated taxes and legal jurisdiction. And as a “you’re welcome” for helping us keep up with the Joneses (ie. social disinheritance), corporations have aggregated pretty much everything on the planet.

Men trade their assets for the perception of protection. As a result, their assets are aggregated. Aggregation, if you study physics, creates mass, which in turn creates gravity. Gravity is power. It exerts a level of control over its subject that is immutable.

These rules don’t change in the post-grid era. While it’s true that ETSY provides a measure of equilibrium between buyer and seller, it does so in return for control of the platform and the data. That ain’t trivial. Controlling the data means ETSY can monetize the long tail, an aggregation effect that does little for individual sellers or buyers but certainly does something for Jim Bryers. Controlling the platform is everything. If they push you off—you don’t exist. No access to the global, frictionless, one-click market they’re building.

The same for Google. Pagerank gets better the more we use it, but Google owns my data. And aggregating my data has done more for them than me. Thanks to Adsense and Adwords Google is one of the world’s most powerful corporations. What do I get for my Pagerank contribution? I can quickly find videos of the A-Team.

The same is true for every platform on the horizon from 23andMe to flickr to Facebook. Our fear of being diseased, disconnected, or disenfranchised leads us to trade our assets for the perception of protection. We continue to plug into the network because our unhappiness does not outweigh our fear of being unplugged. (Isn’t that what the Watchowski’s were trying to warn us about?)

That’s where edge principles fall apart. Once someone can aggregate and control the platform (social, economic, or political), flow stops being bi-directional and co-creation becomes a shell game. The platform owner amasses close to absolute power. And, as many a good writers have reminded us, absolute power corrupts absolutely.

The future of Capitalism may be in doubt, but the networked future has the certainty of the past—a few control the many using whatever nomenclature suits the few and soothes the many.

…

PS. I promise my next post will not include fear as a central point. (Hey, I didn’t create the human condition. I’m just observing it

Summary: time determines the success of systems more than any other factor. This can be maddening for strategists and designers slaving away at product, service, hardware, and software ecosystems.

Systems are seductive ideas. Like stories, they have the ability to immerse us in tangible and lingering experiences. Unbox an iPod, connect it to your Powerbook, and buy No Country for Old Men from the iTunes store and you’ll know what I mean. Well-designed systems, like well-designed products, are sensuous creatures.

Well-designed systems, though, are hard work. And well-designed systems are not, in fact, designed. They are the product of evolution.

Why systems matter
Product strategist Adam Richardson blogged “the system is the product,” observing that in our multichannel, multi-device world the ecosystem of products, services, hardware, and software must be regarded as a unit and designed as a whole.

For those who manage it, the strategic rewards of systems are nontrivial: sustainable growth, durable profits, unassailable marketshare—even network effects. Witness:
-Apple’s iUniverse, powered by an elegant, extensible Unix platform
-Nintendo’s “play” architecture and the resulting hardware and software
-IKEA’s modular furniture ecosystem

Unfortunately, designing systems is tough. As Richardson notes,
-systems are abstract and difficult to see
-systems are boring
-systems cross-over organizational boundaries

Even if companies jump these hurdles, waves of technology keep capsizing the boat. Some of the unseated:
-Palm by Motorola, both by Apple
-MTV for MySpace
-Blockbuster by Netflix
-Ford, rooked by Toyota
-Kodak, beat by just about everyone

And, if you jump the hurdles and manage the disruption, you still won’t necessarily win. That’s because the most significant factor in system success is time.

Time decides who wins and loses in two significant ways:
-it reveals the system “purpose;” consequently,
-it limits who participates

Time reveals the system
Systems, like narratives, take time to reveal themselves to their authors. Changes in technology, consumer preferences, and markets take years to play out. It’s not clear from day one where the system will go or how it will adapt.

Steve Jobs had no idea that his purchase of SoundJam in 2000 would be the cornerstone of his current empire. He re-skinned it as iTunes simply to respond to the Napster effect and the rise of the MP3. But once he had it in place, it became the nexus for the iPod, the store, hardware synchronization, and now, eight years later, software delivery for the iPhone. Time told Steve what iTunes was, not consultants or engineers.

Hiroshi Yamauchi did not predict the death of the coin-op in the mid-80s would be the birth of the NES, let alone the Wii. But NES gave Shigeru Miyamoto the canvas to re-interpret Donkey Kong into Mario. And Mario’s appeal with younger children (and their parents) was a central theme in Nintendo’s departure from the “fidelity wars” with Sony and Microsoft and the introduction of the playful DS and Wii. Time, not market studies or ethnography, showed Nintendo the way forward.

Ingvar Kamprad did not foresee a $15b furniture juggernaut when he started selling seeds, watches, and pens to farmers in 1943. IKEA didn’t sell furniture until five years later, and it took twelve years before they began designing their own. Flat-packaging, a concept that ultimately transformed furniture design, manufacturing, distribution, and retailing happened by accident when designer Gillis Lundgren couldn’t fit a newly-designed table into the back of a car. Time—a lot of time—showed Kamprad the advantages of systems.

Time reveals all. Just ask authors. Each one starts with “something”—a plot, an event, a character. But only as the they write—as they spend time turning over weak ideas, false starts, and bad pacing—does the true story reveal itself. Many authors describe this phenomena as something that happens to them rather than by them. If they’re patient, the system reveals itself.

Time limits the participants
Most companies don’t have the patience (or the time) for the system to reveal itself. Public companies are focused on three month cycles. Their CEO’s have three-year tenures. Their middle-management has 50% churn. At the other end, startups have no resources. Two-thirds have the wrong-market strategy. Ninety-percent of them fail in three years.

Systems are so rarely produced because they take time and time is one resource companies don’t have. Most die long before the system is revealed.

This is the market equivalent of natural selection.

This is not to say that companies can’t produce good products, services, hardware, or software. But these aren’t systems. They’re the biological equivalent of single cell organisms. They might do fine, for a time, on their own. But as market conditions require them to merge or companies tinker with their DNA to accelerate growth, these cells don’t grow. They mutate. They create mass that biologists call tumors (and in some cases, Vista.) They grow uncontrollably (Palm, circa 1997) until they don’t. Then they die (Palm, circa 2003).

Time is the issue. Without time to correctly translate their DNA, cells rapidly lose their ability to communicate and become mute. Without the ability to speak, so to speak, they can’t reveal anything to their creators. Their system remains unidentified.

To counteract this, an industry of “innovators” have stepped up to insulate (and incubate) the process. Ethnographers look for “unmet needs.” Boardrooms are riddled with pathway analyses to demonstrate inflection points. Prototypes are built and iterated. The goal: jumpstart the process and out-innovate the innovators. But, like asking a friend for feedback on an unfinished manuscript, the interactions simply create more opinions. (“I think the character would do this.”) Occasionally, as IDEO did with Palm, a new product emerges from “design thinking.” It toddles along for a bit until someone like Jobs—waiting a long, long time in the shadows—crushes it.

The test of time
That’s the final test of time. The stamina, luck, and insanity of those dogged enough to fight it out AND wait it out.

Jobs has been at this for over 30 years. Miyamoto for over 25 years. Kamprad has been doing it since World War II. These are grizzled men. If we were in Troy, they’d be the warriors who behead six men at a time while dodging a rainfall of arrows—and laughing.

If “system success” was a book, it would be the Odyssey. Most of the crew fell for the siren’s song and were crushed by the sea. It took Odysseus ten years to fight the war and another ten just to get home.

BusinessWeek recently ran a post about Michael Lopp, a senior engineering manager at Apple who spoke at SXSW and sprinkled a few insider tidbits about their design process.

Basically, Lopp said:
-we do a few more mocks than other design departments
-we meet regularly to blue sky; we also have definition meetings
-we involve management, sometimes embracing what they say, sometimes blocking

Sound special to you? Not me. But then, I don’t think Apple actually does anything special to make their products. For instance:
-they hire from the same pool of engineers as everyone else
-they equip them with tools and processes much like everyone else
-they outsource to roughly the same companies as everyone else

What makes Apple special isn’t design. Or process. Or talent. It’s fear. Fear of the man who is a riddle, wrapped in a mystery, inside an enigma. (And sheathed in titanium.)

An engineer slaving away on the iPhone SDK isn’t concerned about the industry, his peers, or his boss. His relentless pursuit of “system elegance” is simply an animal’s instinct to avoid pain, manifested largely during the senior management review. A bad interaction with Jobs will haunt you your entire career, either because you’ll get fired or tarnished; a mark on your forehead for others to behold.

The iconic temper and aggression that surrounds Steve Jobs is Apple’s greatest asset. It is more powerful than the company’s history or its brand. (It should be factored in their P&L and their market cap.) Steve Jobs’ temperament molds the exquisite form factor we adore in iPods, Macs, and the iPhone—nothing else.

Lovers of French cinema will recognize a paradox at work. While pain is something we fear, we’re also attracted to it. Apple staff may fear humiliation from Jobs, but they’re bullish about rising above it—of not being humiliated (which is tantamount to praise at Apple). That bravado can stimulate neurons to do wonderful things.

Unconvinced? Take a peek at Apple under Sculley and Amelio. They had the same brand, staff, process, and suppliers. What they lacked was the Shakespearian tempest to drag greatness out of the mundane. They lacked character—in the broadest, most literary sense. After all, Jobs isn’t a person anymore. He’s an invention, a legend from the valley that has become a shorthand for what it takes to be great and make great things.

This fable is Apple’s greatest innovation and the reason no company can match it. What, precisely, provides demigod status to Sir Howard Stringer? Or Michael Dell? Or Ki Tae Lee? Would you cross the world to work for them? Ignore your family to impress them? Have a nervous breakdown because of them? Not likely.

As the press and bloggers continue to disambiguate what enables companies to innovate, they invariably point to Apple and their “process” as a rubric, however shrouded it may be. But there’s no there there. There’s no answer to the riddle.

The simple facts are that the vast majority of big companies can’t innovate simply because they’re big (if you want innovation, create a startup) and no other CEO is Steve Jobs. Not even Steve Jobs.

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Update: Wired news chief and longtime Apple biographer Leander Kahney posted a new article, How Apple Got Everything Right By Doing Everything Wrong.

At most companies, the red-faced, tyrannical boss is an outdated archetype, a caricature from the life of Dagwood. Not at Apple. Whereas the rest of the tech industry may motivate employees with carrots, Jobs is known as an inveterate stick man. Even the most favored employee could find themselves on the receiving end of a tirade. Insiders have a term for it: the “hero-shithead roller coaster.” Says Edward Eigerman, a former Apple engineer, “More than anywhere else I’ve worked before or since, there’s a lot of concern about being fired.”

But Jobs’ employees remain devoted. That’s because his autocracy is balanced by his famous charisma — he can make the task of designing a power supply feel like a mission from God. Andy Hertzfeld, lead designer of the original Macintosh OS, says Jobs imbued him and his coworkers with “messianic zeal.” And because Jobs’ approval is so hard to win, Apple staffers labor tirelessly to please him. “He has the ability to pull the best out of people,” says Ratzlaff, who worked closely with Jobs on OS X for 18 months. “I learned a tremendous amount from him.”

A NYTimes article on how technology is shifting the parent-child relationship led punk-anthropologist Danah Boyd to post about “privacy in interstitial spaces,” noting that while teens use new devices and services in ways their parents may not yet comprehend, it simply reflects an age-old desire for privacy and control. Look under the surface and nothing’s changed, so to speak.

While the post was relatively straight forward, a back-and-forth about the nature of privacy between Danah and a commenter caught my attention, particularly when Robert Scoble was quoted from MIX08 as having said, “There is no privacy, and the younger generation doesn’t expect any.” Scoble has a 14-year old in the house so, apparently, he’s come by this observation first-hand.

I disagree. Privacy isn’t dead. It’s layered. When people point to Facebook, MySpace, texting, etc as evidence that teens have somehow evolved past quaint notions of privacy and live 24/7 on the grid, they somehow ignore that all of us—teens included—have used various versions of ourselves to navigate the public/private continuum. The flickr streams, SuperWall posts, and YouTube video comments are editorialized versions of how we want various communities to see us. They provide the appearance of truth while simultaneously suppressing it. (Which sounds much like how grown-ups have fashioned media, politics, and religion.) What teens share on their Walls or in school bathrooms will forever be a gummy mix of truth, fiction, and gossip. In that context, their privacy is both situational and contextual.

So, to Danah’s post and the Times piece, while privacy appears to be shifting, it’s simply the landscape that moved, not the actors. The desire to control what we say—and when, why, how, and to whom—is timeless and immutable.

Acknowledging that is easy. The hard part is the impact on the everyday interactions between kids and parents. Ubiquitous, networked, and mobile tools have reduced the friction of hiding things (which suits the kids) but not yet increased the efficiency of finding them (which annoys the parents). The simplest solution to this is trust between the actors. But in the absence of that (or the shadowy in-between), parents tend to either over-patrol or dismiss the issue as generational. Neither are particularly good choices.

The middle ground is complex. Or at least “layered.” It includes basic rules on the tools and usage (no, nine-year olds don’t need cellphones), mastering the systems firsthand (why haven’t you learned texting?), cohabitation (put the computer in the kitchen), and learning to decipher, over time, new patterns that distinguish what SHOULD or CAN stay private vs interactions that might be damaging, dangerous, or illegal.

Now excuse, me. I’ve got to review my wiretap transcripts.

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Update: Clay Shirk (video): “If we don’t carve out some space for documented personal action that’s “OK,” then we will have robbed young people of something they won’t even know they’re missing because they never leave the net of surveillance.”

Update: Tired of reading? Want to hear an ethnographer call a cellphone a “social prosthetic?” Listen to Norah Young interview researcher Andre Caron on his seven-year study of how technology frames relationships between kids and parents. It’s a brisk, smart interview that’s worth downloading if you don’t want to stream the Odeo file.

Update: a global youth survey finds almost half of all kids maintain a different identity online.