Consumerization: The Crowdsourced Version of COTS

RIM, the company that makes the Blackberry smartphone, announced more bad financial results last week. The company is in a downward spiral. How did the leader in smartphones lose its lead to Apple iOS and Android? There are important lessons about consumerization.

RIM marketed the Blackberry through corporate IT departments, mostly by providing security and easy integration with corporate infrastructure like email. If you wanted to use a smartphone at your company, your choice was Blackberry. The Blackberry got some consumer traction, but its high price limited consumer appeal.

Along came competition from the iPhone, Android phones, and even the iPad before RIM seriously upgraded its product line with the PlayBook tablet. RIM's slow response gave iOS and Android plenty of time to gain market share in the consumer space RIM had ignored. Consumers flocked to iOS and Android devices that put in the consumer's pocket PC functionality like surfing the web, playing music and videos, and communicating with integrated voice, email, chat, and SMS. Blackberry's security and ease of integration with corporate infrastructure held little value in consumer space.

Now consider what happened decades ago in the military. The U.S. Government asset acquisition acronym COTS stands for Commercial Off-The-Shelf. COTS became a FAR, or Federal Acquisition Regulation, in the 1980s as the Department of Defense realized that the costs of custom specified parts and products were unsustainable. The classic example was paying $640 for a toilet seat. In order to reduce acquisition costs, the government found ways to deploy COTS parts and products rather than custom.

Today, IT departments are re-learning the lessons of COTS acquisition. Take email. Corporations and governments are outsourcing email because they don't derive significant benefit or differentiation from the extra costs of providing email in-house. Email was once a service that corporations had to provide. Now consumer email systems that have been made available to corporations, like gmail, are cheaper and fuller-featured. IT departments are following COTS economics. Corporations that learn how to deploy high-volume consumer products and services save money.

This is the lesson RIM missed. RIM discounted the possibility that high-volume competitors would drive innovations like application stores that, in turn, provided inexpensive capabilities that corporations wanted, capabilities that were more valuable than RIM's security or ease of integration with corporate infrastructure.

RIM isn't alone. Other companies that sell to IT have to re-think their strategy versus consumer products and services. IT departments themselves have to re-evaluate their complex acquisition processes much the way the DoD did 25 years ago. In the IT ecosystems, Systems Integrators are playing a similar role to Defense Contractors in the military ecosystem. Like a military contractor, an SI may prefer the solution that optimizes its own profits rather than its customers' profits.

The looming phenomenon that will change all this is consumerization, the trend in which employees bring to work the devices they own and prefer to use. An employee who has purchased a device and learned to use it has made a significant financial investment that IT departments will learn to leverage. Consumerization is the crowdsourced version of COTS. It is an acquisition system that relies on employees rather than IT to identify, procure, and deploy new technology.

The end-game for IT is to provide a low-overhead corporate framework for COTS assets and manage only the non-COTS assets that provide significant differentiation. RIM has provided another lesson that COTS is a winning strategy for both manufacturers and corporate customers. Consumerization will accelerate the deployment of new COTS technology into the corporate space.

Online Book Marketing

It's instructive to look at ways that authors are promoting their books online. Let's consider a couple of video promotions

Previously, I posted about a video promo for Backbite, a video trailer that uses a sequence of stills and spooky music to pique the potential buyer's interest.

First up in this post, Erik Qualman explains his book about "Socialnomics" in a youtube video.

Qualman uses two elements in this promo. First, he uses a zippy video that explains the importance of social media economics. Then he switches to man-in-the-street interviews where he explains his book during book promotion events. The first part of this video gives the potential buyer the impetus to learn more about social media, the second the reason to buy this particular book.

The next example comes from William Barry Leslie, the author of Psychotic Pleasures.

Leslie takes a different approach from Qualman. Rather than tell the potential customer the reasons to buy the book, Leslie reads from his book to give the potential customer a sample. There are two important lessons from this video. One is to start reading earlier. Youtube statistics tell us that most viewers watch one minute of video, then move on. Second is to provide links to a bookstore everywhere you promote your book (those links are missing on Leslie's youtube post as of this writing).

You can be the judge of which type of promotion works for your book. Non-fiction books generally have easier promotion hooks than fiction works since non-fiction can leverage an existing well-edited news story or short video piece to explain the book's topic. In any case, consider finding existing video whose owner will allow you to excerpt it for use in your own promotion.

Another approach that writers can use to promote their stories is the story-behind-the-story. It is easy to blog about writing your book. If you're writing, say, a travel adventure, you can blog about all the locations in your book, why you chose them, what a visitor might explore when traveling there. You also can make a video that tells the story behind the story, but that probably will cost a few thousand dollars per minute for a well-conceived and executed video.

Also, don't forget giving away sample sections or chapters in text format (rather than video or audio format). This can be done simply by providing a link to a blog post, as Leslie has done, or to a scribd listing.

Lady Gaga's Online Pricing Lessons

The entertainment industry is making the transition from a scarcity model (a few copies of a work at a high price) to a ubiquity model (copies everywhere for cheap or free).

The music industry is leading the way.

In case you missed the news, Amazon ran a $0.99 special on Lady Gaga's most recent album, Born This Way. Amazon ran the promo as a way to increase users of its new cloud music service. Indeed, the album sold 440,000 copies, and Amazon probably paid about $5 to Lady Gaga for each new cloud music user they signed up.

Many more people were willing to pay full price after the Amazon promotion:

Gaga's massive first-week sales, however, suggest there is still room for album sales--if the artist is popular enough. While offering the album for only 99 cents on Amazon might've boosted her sales, it's clear that consumers were willing to pay more: About 700,000 copies of Born This Way were sold at full price.

What does this say about $0.99 pricing? For one thing, buyers may perceive value in bundling songs inot an album. For another, artists need to consider bundled and unbundled products as tools in their marketing plan.

Consider unit sales of various music formats. Here's a chart that shows sales of CDs, downloaded singles and downloaded albums.

 boost


Clearly, downloaded singles are where the unit volume action is.

Similarly in books, the online market has boosted sales of short stories and novelas, two forms that had lost their way in the paper distribution model. Short stories sold well only when bundled with other writing, either in a magazine or in an anthology. Novelas were hit and miss. But ebook sales are mimicking aspects of online music sales: low-priced short-form has a larger unit market in the online world than in the physical world.

The Lady Gaga experiment suggests that writers can still sell long-form works at a higher price than individual short stories. Short story writers should consider using bundling as a way to increase sales of less popular short stories. Bundling options include collections from individual writers and theme-based collections from multiple writers. Likewise, novel writers should consider serialization, excerpts, and other ways to break up larger works into less expensive units. This will generate higher unit volume sales and attract a larger pool of potential buyers to the entire novel.