in an iPod world

Kindle survival: Myth or real?

There have been a series of news about Kindle. First, last week, Kindle announced that the sales of e-books exceeded that of hard copy books. Second, yesterday, Amazon announced that Stieg Larsson, the late Swedish author who wrote the trilogy of "The Girl with Dragon Tattoo," "The Girl Who Played with Fire," and "The Girl Who Kicked the Hornet's Nest," became the first author to sell more than one million e-books through Kindle. Third, Newsweek had a column, entitled "Why the iPad hasn't killed Kindle."

According to the article, Amazon has managed to sell about 3 million Kindle so far since its introduction in November 2007. On the other hand, Apple sold 3.3 million iPad in 3 months. Hmm. This looks like a pretty ugly game for Amazon. Sure. Amazon is surging the sales of ebooks. But, remember, iPad has Kindle app. In fact, buying an iPad did not stopped me from buying ebooks from Amazon. I've bought only two books on iBooks. But, I've bought over 10 books from Amazon and carry more than 30 books through Kindle app on my iPad. Before we conclude that Kindle as a hardware device is surviving, we need to look at the data on how many ebooks were sent to Kindle and how many to iPad. My guess is that a lot of those ebooks were sent to those 3.3 million iPads as much as they were sent to 3 million Kindles.

The real story behind this is decoupling of what used to be known as book into hardware, network, software and contents. Both Apple and Amazon seem to benefit from this decoupling.

Thoughts on Samsung's Galaxy S and Innovation

In response to iPhone phenomenal success in its South Korean home market, Samsung introduced Galaxy S, an Android-based smart phone. I have not seen it. So, I cannot comment on how good or bad it is. But, based on many reviews that came out, one thing is clear. It is not going to be an iPhone killer.

(picture borrowed from Engadget)

If you want to kill an innovative product like iPhone that has redefined what a mobile phone is, you need something very different from iPhone, not something that is somewhat different and possibly a bit better in some areas. We often talk about differences in degree vs. differences in kind. What Samsung needs is a mobile phone that is different from iPhone, not in degree, but in kind.

But the dilemma that Samsung has is that Samsung is extremely good at producing something that is different in degree, but not very good at creating something that is different in kind. Over more than a decade, Samsung competed with Sony -- trying to make what Sony makes a bit better, a bit cheaper, with some additional features. Samsung has developed its capability of being a very aggressive, fast, and competent second mover. It is able to copy its competitor's products and make them better, packing them with more features. Its products can be better, cheaper, smaller, thinner, bigger, larger ... or whatever it can possibly do with them ... than its competition.

When Samsung finally caught up Sony in 2004 in revenue and profit, it finally had a chance to define itself without invoking the image of someone else. Samsung's operating profit of $3.4 billion in 2009 was twice as big as the combined operating profits of nine biggest Japanese electronic manufacturers during the same period. Yet, between 2004 - 2010, Samsung looked hesitant, timid and reluctant in making its own bold statement through its products. I don't have data to suggest what was Samsung's internal innovation strategy during that time. However, what is becoming increasingly clear is that Samsung needs yet to develop its own capability for innovation in kind. Samsung's challenge is that the capability for innovation in kind is quite different from the capability for innovation in degree.

So, what does it have to do with Galaxy S? Well, it seemed to me that once Samsung passed Sony, it seemed not sure what to do, as it never developed the necessary capability to excel in that position. However, once Apple showed up in its radar, Samsung seems to be running with its full throttle open. Samsung finds itself in a familiar place -- chasing an innovative rival that creates innovation in kind. This allows Samsung does what it does best -- innovation in degree. Apple is now new Sony to Samsung.

iPad: is it good or bad?

I have had an iPad since it first came out. I use it a lot. I read books, papers, and news papers. I watch movies on it (particular now I am here in Japan by myself). I plan to use it for my teaching tool as well. I take it whenever I travel -- now I don't have to carry a pile of papers with me.

However, I am surprised to see still so many negative reviews -- people often say it is too closed and does not provide enough features. (One of the most recent ones is by a friend of mine, Joel West). And, I can understand why they say that. That is, when you look at it as a computer.

But, I don't see it as a computer. I see it as a replacement of books, newspapers, magazines, and many other things. When you see it as a computer, it is a terribly closed system. You cannot program on it. You cannot add new hardware. Apple dictates you how to use a computer. And, that is not right. After, a modern computer is supposed to be open, allowing you to do whatever you want to do. An iPad is completely closed, yet very successful -- which puzzles those who believe in the principles of open computing architecture.

However, if you see it as a newspaper, a book, and a magazine, it is amazingly open and flexible. It allows you do a lot of different things: it communicates, memorizes, calculates, etc, etc. You can add new functionalities and it is incredibly flexible: simply add new apps.

I don't think Steve Jobs introduced iPad as a Tablet PC. He introduced it as a smart appliance to replace many of these familiar everyday things. And, iPad makes them incredibly flexible and open. As an illustration, just see what iPad is doing to Kindle. Rumor has it that Amazon is hiring mobile app programmers to make Kindle more open and flexible. Instead of making computer industry more closed, iPad is making other industries more open. What users are experiencing is not computing experience, but everyday experiences with hidden digital capabilities. This is what I argued in a paper recently published in MISQ. No wonder, iPad does not have a keyboard, mouse and any extension board. Any appearance that links it to a computer has been deliberately eliminated from it.

We will see which interpretation of iPad will survive. My bet is that people who are inclined to hack their own computers are likely to see it as a computer. However, a whole bunch of non-hacking folks (those who do not set their VCR clock or struggle to program their TiVo machines) will not see it as a computer. Instead, they will see it as a welcome sign of mundane stuffs becoming more open and intelligent. It is a "non-computer" computer that Apple introduced. As long as you see it as a computer, you are missing the point.

When a phone is no longer a phone

New York Times has a story that in the US the data traffic exceeded the voice traffic for mobile phone usages for the first time. The article reports that:

The number of text messages sent per user increased by nearly 50 percent nationwide last year, according to the CTIA, the wireless industry association. And for the first time in the United States, the amount of data in text, e-mail messages, streaming video, music and other services on mobile devices in 2009 surpassed the amount of voice data in cellphone calls, industry executives and analysts say.

This shows a unique pattern of digital innovation where evolution of a technology over time leads to the changes in the basic meaning of the technology. In other words, a phone is no longer just a phone. In fact, on many smart phones, phone has become one of many apps and in some cases, users may have more than one "phone" apps on their device. Right now in Japan, I never use the built-in phone app on my iPhone; instead, I use Skype exclusively when I call back home and Korea.
In 2004, DoCoMo surveyed its most active users under the age 30 to study their usages pattern. They found that 100% of them use their mobile phone for e-mail. But, only 2/3 of them ever used their mobile phone as phone. Back in 2004, this was a stunning finding to DoCoMo. 1/3 of their most active users never use their phone as a phone. As DoCoMo saw itself as a mobile "phone" operator, it was a wake-up call. They started looking for a way to redefine mobile phone something other than a phone and came up with the idea of "lifestyle infrastructure".

As digital technology evolves, the key issue that companies need to wrestle with is "idea" that defines the evolving meaning of the product and mobilize its resources in order to support the new meaning. As a part of lifestyle infrastructure strategy, DoCoMo became a mobile bank, offering a full suit of retail banking services. As we can see here, an unintended consequence of digital innovation is the deconstruction of the meaning of product. The idea of product as a fixed and stable concept is becoming less and less useful.

Unbounded Innovation - ET column

I was asked to write a weekly column for Electronic Times, a daily newspaper specialized on information technology and IT industry. The title of the column is "Unbounded Innovation" and I will be focusing on various issues related to digital innovation and its consequences. This week, using the evolution of e-book as an example, I discussed three different stages of digital innovation. The first stage is a material digitalization where firms introduce new products by integrating digital components into a product that was previously non-digital. In the second stage, firms begin to develop new business models by developing an architecture of information that are derivatives from the use of digitalized products. In the third stage, firms create novel products and services by creating new combinations of existing digitalized products and digital data stream.

Organization Design with Toys

Yesterday, my class discussed Sony case. The case covers how the traditional organization structure that Sony had with product silos led to its failure to respond to digital challenges. Instead of discussing the case, I ask the students to build 3D representations of Sony to explore the problems deeper. Then, we discussed how Frank Gehry uses his projects as a way of organiz-ing, drawing on "From Organization Design to Organization Design-ing". Based on the ideas from the discussion, they modified their models to develop concrete suggestions for Sony. Here's a brief summary of their works.

Group 1: From Walls to Spaghetti

This group was trying to depict the "walls" separating different product groups and redundant knowledge resources (represented in different colors of Play Doe). They discussed the possibility of "back-channel" rogue communication attempts among engineers which are often thwarted by the management (you can see a small black tube through a wall in the back). The senior management sits on the top of the wall, not really connected to the day-to-day reality of each product groups.

Their revised model resembles Spaghetti organization. But, in fact, it is more like a matrix structure with a couple of twists. Each chunk of Play Does in different colors represents a community of knowledge. Each circle represents a convergent projects. Different color lines represent design visions that pull certain members out of their own home base (communities of knowledge) to join these projects. They felt that the firm still needs some type of central unit that coordinates these de-centralized efforts, which is represented with the Play Doe can in the middle. They identified that a key challenge here is preventing the central coordination unit becomes the innovation Nazi, enforcing the central vision. Yet, at the same time, separate project teams need some type of resemblance in order to maintain the sense of identity as a firm. Also, they kept the bended construction paper after removing the wall -- noting that the scars from old structure will likely remain.

Group 2: From Vertically Integrated Silos to Core Integrative Platform

This group represented each product group within a small circle. The tall structure in the middle of each circle represents a vertically integrated product structure that is managed within the narrow band. What is not shown here (because I took the picture before they finalize it) is that the location of senior management. The group built a high tower in the middle of these circles to place all the senior management. Again, similar to Group 1, that was meant to represent the isolation of central management from the grounded realities of each product group.

Their revised model shows a series of convergent product built on a shared platform (represented by a large flat panel). The three circles in the middle represents three core integrative capabilities that they identified (they did not specify those capabilities). These elements represent the core of the organizational structure - that remains stable. The periphery structures with different products are dynamic teams are brought together for specific innovation opportunities. These ideas are crowdsourced within the firm. The strength of their models was that they tried to represent both product and organization structures simultaneously, trying to explore relationships between the two.

Group 3: From a Maze to Whirlwind of Innovation

This group represented the old structure with a maze. This was meant to represent a micro-level experience of an individual engineer who had a break-through idea. He or she might want to have a conversation with another engineer from different product group, but finding the right person feels like an impossible task. Each product group again has redundant resources. Senior management is gathered in an isolated location (HQ).

The modified vision again was represented from a ground-level view from an individual engineer's perspective. Here, each Play Doe can represents a community of expertise. The firm has established an integrative design process by which individual ideas can be swirled into a whirlwind of innovation that is propelled by a design vision. The product (represented as a lump of Play Doe of mixed colors) shows a complex mixture of different knowledge resources (both in and outside of the firm). Unlike the other two groups, they focused on a micro structure of the new organization design.

Evolution of Digital Camera and Unbounded Innovation

With Kalle Lyytinen, Veeresh Thummandi, and Aaron Weiss, I wrote a paper that analyzes the unbounded nature of digital innovation, drawing on the history of digital camera. It was a fun paper to write and I am glad that it was accepted for a presentation at the Academy of Management this summer.

AOM2010 Digital Camera.pdf

materials for Innovation by Design

I ran a 2-Day workshop, "Innovation by Design", at Case Western Reserve University. Many participants requested presentations materials that I used for the workshop. So, here they are. At the bottom, I also added Amazon link for some books that I thought would be useful for the participants.

the impact of iPad

What was the impact of iPad?

Right. I used the past tense. Anticipating Apple's move, Amazon opened its Kindle platform on Jan 20. Also, two days before Steve Jobs introduced iPad, New York Times announced that it is creating a new segment for "reader applications".

On Monday, The Times also announced that its media group division had created a new segment for “reader applications,” and named Yasmin Namini, the senior vice president for marketing and circulation, to head it. Executives said the timing was coincidental, prompted not by the Apple device specifically, but by the growing importance to The Times of electronic reading devices in general.

via www.nytimes.com

It seems to me that Apple is about to do what it did to mobile operators and handset manufacturers with iPhone to media publishing companies and e-book manufacturers with iPad. iPhone opened what used to be tightly vertically integrated mobile service market that was dominated by mobile operators on one hand and handset manufacturers on the other hand. It forces the separation of the "service" and the "device" in mobile industry, creating spaces for hundreds of thousands of applications. The arrival and success of iPhone prepared the way for Android which is even more open than iPhone. Before iPhone, mobile operators and handset manufacturers wanted to vertically control user experiences of mobile services, albeit from the opposite directions. Now, with iPhone and Android, the contents and services are liberated from the tyranny of limited hardware and the control of operators who used to control what users can and cannot do with their mobile phones.

Before iPad, Amazon and publishing companies (including news media) were trying to do the same thing. They have been engaged in a battle over the control of vertically integrated publishing market. What Amazon wanted to do with its Kindle was simply replacing one physical device (paper) with another (Kindle) with digital capability. Yet, its approach to the consumer experience is remarkably similar with that of old publishers in the sense that it wanted to integrate device, network, service and contents, all under its tight control. It is like changing one evil with another from a user's perspective. What iPad will do is to challenge this vertical thinking by introducing a horizontal thinking with loosely coupled layers of devices, networks, services and contents. iPad is in no way a perfect hardware. It does not have camera. It does not have GPS. It only supports AT&T network. And, it does not do multitasking. It is like a big iPod Touch. But, with all its hardware limitations, Apple's iPad is forcing others to move from vertical thinking to horizontal thinking. After all, iPhone was not and is not the best hardware either. iPhone however executes the horizontal approach beautifully, fundamentally challenging the strategies of both mobile operators and handset manufacturers whose strategies are based on vertical thinking. Apple is yet again approaching to the publication and media industry with the same horizontal approach.

The horizontal thinking does not respect industry boundaries, which is vertically formed around physical device which controls network (delivery mechanism), services (function) and contents. Instead, it see things through loosely coupled layers that cuts across different vertical stacks of what used to be different industries. At the end, perhaps, it will be Google who will introduce an Android-version of tablet device that will completely decouple these layers across several different industries.

twitting from physical artifacts

You are reading an article from Wired or NYT. You like what you read and want to twitt. Alas, you are reading a paper version, not on-line. So, what do you do? You can either give up the idea of twitting or you can go on to your computer to find a digital copy of the article and twitt.

How about if publishers include little 2D bar code at the end of each article that act like "share" tag at the end of digital copy of the same articles? Readers can use the camera on their mobile phone to scan the 2D bar code -- depending on the mobile client the reader uses, it will allow you to share it via Twitter, Facebook, or many other social networking tools.

The same idea can be applied for other physical artifacts: books, restaurants, CDs, DVDs, movie & concert tickets, museums, mural arts, etc. Most of these physical artifacts have digital representation somewhere on the net. 2D bar code can simply provide URL for those digital representations so that it can be included in twitt (or whatever form of media the use may choose).