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Thursday, February 23, 2006

4 Lessons from the Symphony

The other night I went to listen to some music with a friend. I was billed as an interesting fusion of Bach and Latin music called The Passion According to Mark. After the show, I found myself at the post-performance reception drinking very strong Mango Martini's and wolfing down crackers after every sip to keep for getting sloshed. While making cocktail chit-chat, about what I did and where I was from with other party goers in varying stages of boredom and inebriation, I struck up a conversation with a consultant from BCG . This was an affable fellow, for a consultant, no steely stares or close talking and the moment I mentioned I had worked around the music his energy level amped way up.

"You know what the media industry really needs?" he asked, clearly about to tell me whether I knew or not. "It needs to sell me a license and not a damn CD or file."

"Hmmm, Thats really interesting." I offered helpfully. "What about rights?" It was an obvious prompt to see how far he'd thought about this but he didnt notice.

He barreled on, "There would have to be some sort of deal with BMI or what ever the agency is called. But the core idea is that I buy rights to the media I'm interested in. I could then use it anywhere and everywhere I want." he steps a bit closer to me as he starts to really get into it. I guess, as he spoke, he forgot he was being charming and the consultant came out, close talking and all.

"Imagine it." he continues, "I buy the rights and I use it in my car, at the job, on my friends home stereo. Where ever I want. The price of music would be effected, sure, but the utility function would increase by a factor of...blah, blah, blah" I have to admit that either the Mango martini or the close talking started to really kick in and my brain shut down. I dont remember the rest of what was said, except that it involved demand curves, exponential growth and the unleashing of constrained markets and it was all somehow really important.

So what did I learn from my evening at the Symphony?
First: European concert music, while an ossified and stagnant art form, is exceedingly palatable when combined with a bit of life and modernity in the form of African drumming, tango dances and Salsa music. Also the symphony at Emory attracts an audience that would make Ralph Reed and George Dubbya seem right at home in both its tenor and complexion (or lack there of).

Second: Consultant are a little creepy but can really needle through the issues and come up with interesting ideas in the process.I know they're overpaid, "complexify" everything, re-purpose past solutions across clients, hyper-hyphenate and are predictably MBA'ish. But come on you gotta love the 100 page decks or the 30 years of blood, sweat and tears condensed into a two by two matrix.

Third: When a consultant in Atlanta with no history in the music biz arrives at the same idea Mark Hardie (the crazy haired Forrester Analyst) was pushing in 2000 you know the time is overdue for media middlemen to catch a clue. As average people dis-associate the physical product from the experience of the content, the obvious question is how do I replicate the experience (not the product). Media models are going to have to evolve to reflect the selling of experiences. Or as Gilmore and Pine might put it, media companies have to join the experience economy .

Fourth: Mango martinis are dangerous.

Monday, February 20, 2006

New Thinking for New Markets #1

New Thinking for New Markets

There is a reason that MBA's and the large companies that tend to employ them, in general, suck at being entrepreneurial. It's no secret that in exchange for 2 years of your life and $100 thousand dollars, a top business school will train you to think in a way that large companies around the world find tremendously valuable. You will be able to do a SWOT analysis , calculate NPV , quantify risk, run Monte Carlo simulations and generate more decks, of dizzying complexity, then the average employee. However, the average MBA will get no classes on making a decision in the face of uncertainty, no cases on thinking like a successful entrepreneur, no training in innovative problem solving. This deficit in MBA programs, reinforced at most big companies, arises not because innovation requires some "special sauce" or because entrepreneurship involves a genetic predisposition coupled with Powerball level luck. These limits are the result of a mode of thinking called "causal thinking" or "causal reasoning" and it is this manner of thinking that can most limit innovation and reduce entrepreneurial action .

If you work in a large company, causal thinking should be very familiar to you. It is a process that starts with the definition of a goal (generally static and imposed from above) and an assumed set of means or capabilities (narrowly constrained to core competencies in most organizations). The causal thinker selects the best option from among a given set of "means" to achieve the desired goal. In other words the casual thinker connects a series of dots between a set of given means and some
pre-determined optimal end. In the causal model the future has to be predicted (using research or other analytics) in order for a controllable set of options to arise, from which they can cherry picking the most favorable path.

"Creating a firm in a market that does not yet exist involves understanding how to make decisions in the absence of
pre-existant goals." -S. Sarasvathy

There is of course an alternate approach to thinking and problem solving and it's called
Effectuation . While the word may be somewhat unfamiliar, the process is wholly intuitive. The effectual thinker starts with a set of means (who I am, who I know and what I know) and uses them to create a series of potential outcomes, which are expanded and refined through interaction with stakeholders. To put it simply, the effectual mode of thinking starts with locally or internally generated resources, and uses them to fashion what the eventual outcome will be. In the effectual model there is no attempt to predict the future, since the market doesnt yet exist.

To further highlight the difference between these modes of thought, it might be best to think about how one goes about preparing dinner. Using the causal process one would first decide on exactly what the evenings meal should be, vegetable lasagna for instance. Then one would assemble all the required ingredients to create the dish and finally they would prepare it. You could think of this as the Great Chefs approach to cooking.

Of course most people use a much more effectual process in choosing the evening meal. They may start with a taste for pasta, arrive home look through the cabinets and refrigerator, take stock of whats present and depending on what they find, they may create vegetable lasagna, Cesar salad, tacos or they could phone a friend and ask them to bring over pizza. Think of this as the the
Iron Chef approach to cooking

While both models have strengths and weaknesses, effectuation is a clearly superior method of decision making and problem solving when attempting to build innovative products or entrepreneurial firms. Particularly when faced with "Knightian" uncertainty. Media companies are being forced by changes in technology to enter new markets with new products, considered the "suicide quadrant" by many. Continuing to use casual thinking to approach these new markets wont help media companies solve problems faster, make better decisions, produce more innovative products or form high value relationships.

Ben Franklin once quipped that “the definition of insanity is doing the same thing over and over and expecting different results.” This is an apt quote for what happens within many media companies. New markets require new thinking not new acronyms.