innovation playground Idris Mootee

Random Thoughts On Industrial Design, Busness Model Design And Design For Change

I was chatting with some members of our design research team just yesterday next to the cooler the other day, we were talking about how iPhone is such a bad phone and a great media player, and the Backberry is such a great email gadget but terrible browser. The conclusion was phones were not designed to handle the “social” functions and they are just add-ons. What does a true “social” gadget looks like? I will ask our design team to come up with some crazy ideas and sure clients love to see them

As more and more people use Twiiter or Facebook as their core communications. What are the best gadgets designed for that? The gadget lets them tweet, reply, retweet, send direct messages, and connect with followers. Here comes the TwitterPeek which sells for $99 or $199 (with plan) which included a service plan. It can only support one account at a time. Users can also view TwitPics by clicking the "view content" option from the TwitterPeek menu. If users choose to pay $99 at the time of purchase, they will get the TwitterPeek device and six months of Peek service. After that, they need to pay $7.95 per month for network access. If customers plunk down $199, they'll get the device and service for the life of the product. In either case, TwitterPeek allows for unlimited tweeting.

It is always an important industrial design discipline that they teach in school, do we design something for a singular or more important function or something that does everything. The preference is design something with a purpose in mind. Is the TwitterPeek really necessary in the marketplace. Or we need a Facebook Device? The deep satisfaction of design is when you find an elegant solution to a problem that has, until now, had a hindering effect on our p quality of life or experience or the environment. And the function should be super obvious - developing a straightforward solution to a meaningful problem. But it is not that simple. Industrial design is understood as a part of engineering design, or as running parallel to engineering design and increasingly interface design.

However, when industrial design activity is engaged in the more aesthetic or style concerns of a product it can be understood as running parallel with marketing and brand activity. And when industrial design is engage running parallel with business strategy activity, that becomes a very different game. There is not a right or wrong or simple answer here, there is a lot of room for ambiguity and misunderstanding and many designers are confused about design themselves.

Many designers love to talk Business Model design, not sure how many are qualify to discuss this subject. My experience is even among the MBAs that I hired, anyone with less than 10 years of solid experience don’t understand the real implications of these Business Models discussion. My response to them is "How exactly do you change a business model without understanding the industrial and distribution economics plus the individual players' competitive dynamics. There are always game theory in play in these moves.

One interesting thought is traditional industrial designers came into being as mass production raised output and wanted to match those to market demand, this is still true but not entirely the case. If industrial design comes within a marketing function and marketers buy the creative services of industrial design consultant on an occasional basis for a special project, this quite is different if industrial design is a part of the manufacturing function. And if industrial design comes within a strategy firm and executives buy the innovative services of a firm that has strategy + design capabilities (like Idea Couture), then it is part of corporate strategy undertaking. That’s design thinking in action, not design talking. Am I confusing you?

When Wal-Mart Enters The Funeral Industry, The Business Is About To Change. Will Amazon.com Follow? What's The Latest Innovation In The Funeral Busines?

Some survey stated that the average person's greatest fear is having to give a speech in public. That’s not for me but I am sure for many. I remember one guy told he when he was put on stage in front of 800 people, the dead silence was like death. Giving a speech in public ranked even higher than death which was third on the list. So, you're telling me that at a funeral, most people would rather be the guy in the coffin than have to stand up and give a eulogy.

The first baby boomers are entering their mid-60s, and the death rate in the U.S. is expected to rise from 8.1 people per thousand in 2006 to 9.3 in 2020 (according to the National Center for Health Statistics). Yet the traditional funeral industry is hardly healthy: The Federated Funeral Directors of America, an accounting firm for independently owned funeral homes, found that in the past 20 years, its clients' profit margins have been cut nearly in half. Some 44% of funeral home directors, up from 28% in 2006, blame the increasing popularity of cremations and alternative burials for sinking profits. Some funeral homes have responded by more innovation such as themed funerals, from backyard barbecues to mini concerts.

The 11 billion industry is forced to innovate when Wal-mart enters the business. Wal-mart has started selling coffins online at prices that undercut many funeral homes. People can choose from 14 different ones, from the $895 "Dad Remembered" steel model, to the exclusive "Sienna Bronze" one for $2,899. Why did Wal-mart decide to enter the coffin market? Well, in fact this is a response to Costco’s move to sell coffin online (not in bulk thank God) with delivery within 24 hours. I guess people don’t want to wait for this category. I think it is a good idea. Funeral homes industry is overcharging and often people don’t know what these things should cost. With Wal-mart you need only to pay $1,000 versus 3 or 4 times more through a funeral home.

The funeral homes industry has reason to be concerned. I am sure their argument is these funeral homes can provide full service (like gas station) and ability to provide comfort and empathy, but it comes at a price. If it works for Wal-mart, the next one to join would be Target. They would invite Stella McCartney or Phillipe Starke to design caskets that costs just a little more, but with a lot more style. Amazon.com will follow with online customization that you can pick your favorite patterns or engraved your family crest on it. And for those creative types who are big thing art lovers, forget the traditional wooden box, you want something very special. A company called Crazy Coffins can pretty much order any design you want. There isn't a lot they can’t make. The bespoke coffins are made by two carpenters and costs between $3,00 to $10,000 (£2,000 and £6,000).

And when you decide to spend more on a coffin, may be you should consider an upgrade to Louis Vuitton or Karl Lagerfeld. And for those die hard rock fans , they used to sell a KISS goodbye with the "Kiss Kasket". It is decorated with the logo and pictures of the band members; plus: it is waterproof. The Kiss Kasket went on sale in 2001 until 2006 and now it's no longer available from Kiss' website. I’d like to see a Beatles one.

Your Next Electric BMW May Not Come With Any Sound. Need To Pay For Separately Dowloadable "Autotone".

Many years ago people did not realize the power of the ringtone. Not only they can make money selling them but it is a powerful political tool. I think the Philippines was the first country in the world to use text messaging to topple a former president, they may soon be the first country to overturn a government with a ringtone. Imagine the power of the voice on poll tape and ringtone. What about the Obama ringtone?

The BBC World Service Trust understands the power of the ringtone to achieve development goals. When they were tasked with the tough task to make condoms more acceptable, and free from negative judgment, they came up with a wacky idea to get people talking about condoms -- a condom-themed ringtone. World Service Trust Condom Ringtone was the solution. They hope that this will stimulate conversation, which is desirable as - according to research - those who talk about sex and condoms are more likely to have safer behaviors

Or do you know about the mosquito ringtone for teenager that allows teenagers to receive text messages and phone calls in class without the teachers hearing them. In case you didn’t know, it’s a tone outside the audible range of hearing for most people over the age of 30. You probably don’t know this, the history of the mosquito ring tone dates back to 2005 when a British inventor by the name of Howard Stapleton came up with an ingenious idea to drive away teens through ultra high frequency sounds much like how a dog whistle would affect dogs. It was an idea to make the storefront very uncomfortable for the loitering teens while leaving the money spending adult customers unaffected.

So what’s next for ringtone? Here another innovation for the auto makers to make money. How about “autotones” for your car? If you live in New York City or Toronto you will often encounter bike messengers speeding pass you just a few inches away. The problem is you don’t know they are coming because there aren’t making any sound. When electric cars eventually get popular, the same problem will arise. Because they are so quiet, it can be dangerous if you are crossing the street and couldn’t hear them. Those hyrids need to figure out how to make the cars nosier.

Many have started working with sound engineers to design sound effects to simulate engine noises. The Fisker Karma, an $87,900 plug-in hybrid expected to be in the market soon, will emit a sound -- pumped out of power sub-woofers in the bumpers -- that the company founder, Henrik Fisker, describes as "a cross between a starship and a Formula One car. I believe at one point they will get creative and designing unique noises to differentiate their brands. There will be Mercedes, Porsche and BMW noises.

Buying an electric car in 2012 you will need to pick from the price list what “Vroomtone” or “autotone” package that you may want to include (for a price). Or you can buy a subscription package that you can have unlimited download of all “autotone” for your car for a year. Pick something for the locking of the cars, or another for engine noises or when the charge is ready etc. May be the automakers end up making more money from these “autotone” that the car itself.

Have a great weekend and off to Boston.

Social Enterprises Will Become The Next Big Global Brands. But Not All Socal Enterprises Are The Same.

Let me make a prediction, 10 of the top 100 most popular brands in 5 years time will be Social Enterprise Brands. What are they? They are a new form of organizations. We see more and more development of a mixed economy of companies coming together to further progress on social, economic & environmental well being. Expect to plenty of innovation where Social Technologies meet Social Enterprises.

What exactly is a social enterprise? A social enterprise is a BUSINESS with primarily social objectives whose profits are reinvested for that purpose in the business or the community, rather than being driven by the need to maximize profit for shareholders. But it doesn’t mean that they are not maximizing their effort to create competitive advantages to create economical value in additional to social value. There are many ways to do this but they should not just means non-profits business:

1. Create economic value in the form of profits and use 100% of that to benefit larger purposes. Often include community-based services such as community banking etc.
2. Create economic value by emphasizing double or triple bottom line and use that as a core element of the business model such as value based goods/services esp. fair trade etc. A business that, beyond the profit motive, has a social mission built into their business model or strategy.
3. Create economic value in the form transforming current business model to include social components in a meaningful way.
4. Create value in terms of jobs and some revenue to sustain operations by specifically targeting groups with challenges and to provide training and job opportunities (this employment model is closer to non-profit).

I don’t think Social Enterprises should compete based on lower cost (salaries or subsidized rent etc.). They cannot just rely on a lower cost structure and compete with for-profit businesses with a lower quality product/services, but instead they need to focus on creating innovative business model that allows them to compete just as any regular businesses.

They should not just exist to provide jobs, that’s a pure non-profit’s role, they should be creating value by developing human capital and skilled labor just as regular businesses. The model of many employment-based social enterprise is not 100% Social Enterprises. They provide employment opportunities and job training to its target populations or "clients," that are people with high barriers to employment such as disabled, homeless, at-risk youth, and ex-offenders.

Generally this model is predicated on the appropriateness of jobs it creates for its clients, regarding skills development, and consistency with clients' capabilities and limitations, as well as its commercial viability. This model is usually embedded: the social program is the business, its mission centers on creating employment opportunities for clients. I hope to see the more innovative Social Enterprises that can take this further by innovating more and be able to produce a decent return on capital deployed. It needs to move away from a traditional non-profit model to becoming a doubled-bottom line Social Ventures.

There should be a commitment to both investors and the capacity of individuals and communities to help themselves. Social Enterprises should empower communities and build social capital; you CANNOT take financial capital out of the equation. Not sure if you think this makes any sense to you.

Scott Griffith (CEO, Zipcar) was asked the question by Qn (A Yale School of Management publication) on as the CEO of a social enterprise, how does he make the call when his social goals and profit motive conflict? This is his response:

“Just by the nature of our business model, the social benefits are accruing as we grow. Most of our members don't own cars. As a result of that, every car we put on, we know through surveys, takes about 20 personal cars away, because people choose not to buy a car or they sell a car. “

“That 20-for-1 ratio also benefits household discretionary income. Through surveys we know that between $6,000 and $7,000 a year of transportation spending comes back into the household after they've spent on Zipcar. A clear social and economic benefit to the community that accrues as that happens. “

“As a lot of the economists will tell you, any time you start to pay for something per unit as opposed to a fixed cost, you get much smarter about how you spend your money. So as you transition car transportation from a fixed cost, being car ownership, to a variable or a unit cost, like Zipcar, people get a lot smarter about grouping their trips. And they just make the trade-off: Should I walk? Should I take public transit? Should I use the Zipcar? Their vehicle miles traveled get cut in half. The big purchasing driver, in our case, is economics. That's the steak, and the sizzle is the social good that comes with it, and the sense that they're doing something good for the environment and for the community as a result of their behavior shift toward Zipcar.”

Managing The Unkowable, Unforecastable And Unplannable - This Is Not What They Teach In Business Schools.

I don’t think anyone will disagree with me when I say that the future is unknowable and no one can accurately predict the future with any level of confidence. I remember when we were working to support the global launch of Lisa and had no idea whether it would take off or not. It was a long shot marketing that to corporate IT folks to convince them to switch to Apple then, many are still not convinced today.  Does it mean we should just give up managing the future? What about the future of Kindle? Their sales was pegged at US$1.2 billion and will become the iPod of ebooks, how likely will that happen?

For any innovative products or services, there are so many unknowns and any forecast seems to be impractical exercise. Strategic planning is often used to describe operational planning, real strategic planning is about planning for the future. Thinking about some planning exercise can effective forecast future sales of innovation new products without seeing what the competitive landscape will look like? To do strategic planning, let’s first admit that there is no way what the long-term future looks like and any vision that you have may not relevant at all.

So how do you manage the unknowable and unforecastable? But at the same time need to make many long-term decisions? This is the big paradox of organizations and management. We need to organize in a way to co-ordinate many parts of the organization to function and to create some stability in the day-to-day running of different units. The art is to co-exist between existing structure and processes with the flexibly (and sometimes instability) to adapt to changes. Some believe senior executives or the board should set the direction of the company and control all strategic directions and resource allocation. In fact, the better approach is to set the overall directions and then create favorable conditions and flexible architectures to support learning and innovation for middle management.

A friend of mine (a senior exec with a bank) uses the analogy that no matter how smart a person is or even the person doesn’t sleep, he or she can never out-think or out-innovate tens of thousand middle managers if each only spend 5 minutes a day thinking about new ideas to improve performance or new ways to serve customers better. How true?

It is far more important to expose senior and middle manages to new mental models, unarticulated customer needs and future industry scenarios that together forms new maps and develop perspectives, this way you can power up their collective imagination and stimulate creative dialogues.

I’ve seen so many flaws in so called “strategic plans” and many fail to demonstrate (let alone guarantee) the millions of dollars in new revenue of savings it promises. It is easy to wave the word "quality", “growth” or “innovation” casually like a magic wand to justify investments, without bothering to define what the possible futures are. I will write more on this the next few weeks on how to avoid the mistakes of “strategic planning”. All strategic planning being rooted in the assumptions that the past dictates the future, that’s merely a limit of the planner and not the plan.

Anyone who are familiar with strategy framework like the Balanced Scorecard/Strategy Map methodology from Kaplan and Norton knows the importance of Leading Indicators: Metrics that are forward focused rather than simply telling past performance. Leading Indicators sometimes disguised as "Weak Signals" and that's why it is more difficult to interpret.

I believe strategic innovation and strategic planning are two very different (not mutually exclusive) approaches that people mixed it up. Strategic innovation is a process to discover new value through new ideas while strategic planning process plan base on what happened and what to respond. Without something happen, planners cannot plan further. In most case, strategic planner assumes business as usual. It is hard to find business as usual today. And often they under estimate the magnitude of change and disruptions. Their job is not to read and interpret “weak signals”. That’s why innovation, strategy and operations and three different functions and require very different skill sets.

“Looking back, it is clearer to me now that these plans — for all their seemingly tight, logical connections between mission, belief, goals, actions, responsibilities, and evaluation — were like beautiful but badly leaking boats.”                           — Mike Schmoker

Innovation, Strategy And Leadership? It Means Leading With Purpose And Imagination.

Innovation, strategy and leadership are so closely interrelated and to succeed you need all those three. Innovation is the ability to different options in the future and develop a set of perspectives to guide them into the future. Strategy is the ability to connect customer needs and wants to the corporation’s core capability. Leadership is the ability to instill a sense of purpose for the organization and to mobilized those to work towards the goal.

What is the difference between leadership and management? Leadership is setting a new direction, creating a purpose and/or vision for everyone in an organization to follow. Management develops, controls or directs human and capital resources according to the policies, principles or values that have already been established.

What about “accountability”?, is that part of leadership or management? Well the answer is both. Warren Bennis once defined vision as "a target that beckons." Or we referred to it as “a shared destiny” or "a preferred future." It is that powerful and compelling dream about where we want to go that mobilizes people to help us get there.

Every organization needs a clearly articulated vision and purpose and it is the responsibility of leadership to provide it. Deborah Ancona, Professor of Management, MIT Sloan, outlines a framework for leadership under uncertainty that includes the following components:

First it’s “Sensemaking” which is a term coined by Karl Weick. It is about making sense of everything happening. In the very process of mapping the new terrain, you are creating it. Building on the work of Sutcliffe and Weick here are some tips for Sensemaking:

• Seek many types and sources of data;
• Involve others in your sensemaking;
• Do not simply apply your existing frameworks and overlay them on the situation;
• Move beyond stereotypes; Learn from small experiments; and Use images, metaphors, or stories to try to capture and communicate critical elements of your map.

The second one is “developing relationships within and across the organization”. Leadership is not an individual sport, and in our networked age the ability to connect and build trusting relationships is a key competency. While leaders try to create trust, optimism, and harmony, they often get anger, cynicism, and conflict instead. The core capability of relating centers on the leader’s ability to engage in inquiry, advocacy, and connecting. Inquiry and advocacy are terms coined in the pioneering work of Chris Argyris and Don Schon , as well Peter Senge. In order to enable effective interpersonal relationships, both practices are necessary.

Inquiry means the ability to listen and understand what others are thinking and feeling. It also involves trying to understand how the other person has moved from data to interpretation to assessment, rather than simply reacting to the assessment itself. It requires the leader to suspend judgment and to listen without imposing his/her personal point of view. And yet leadership requires having opinions and taking a stand.

The second area of relating is advocacy. This involves taking a stand and trying to influence others of its merits while also being open to alternative views. It means taking responsibility for your own biases and leaps to judgment while being able to say, “I was wrong, I jumped to conclusions based on insufficient data and overreacted.” Yet often in business there is a great deal more advocacy than inquiry. Sometimes we are so busy trying to push our own ideas that we do not really listen to what others are saying. The third area of relating is connecting. It is the ability to build collaborative relationships with others and to create coalitions for change. Tips for effective connecting are:

• Understand the perspective of others within the organization and withhold judgment while listening to them;
• Encourage others to voice their opinions; Be clear about your stand and how you reached it;
• Think about how others might react to your idea

The third one is “create a compelling vision of the future”. While sensemaking creates a map of what is, visioning is a map of what could be. Visions are important because they provide the motivation for people to give up their current views and ways of working in order to change. Perhaps most importantly, visioning provides people with a sense of meaning about their work. It answers the question “why am I doing this?” Thus good leaders are able to frame visions in a way that emphasizes their importance along some key value dimensions. Tips for effective visioning are:

• Develop a vision about something that excites you or that you think is important;
• Frame the vision with an ideological goal; Use stories, metaphors and analogies to paint a vivid picture of what the vision will accomplish;
• Practice creating a vision in many arenas; Enable co-workers by pointing out that they have the skills and capabilities needed to realize the vision;
• and Embody the key values and ideas contained in the vision— “walk the talk.”

Adobe Systems Is Paying $1.8 Billion To Acquire Omniture. So What's The Strategic Logic Behind The Idea?

When I heard the Adobe and Omniture deal on the Twitterverse, I started scratching my head. What is it I don’t know? Does Omniture has something that Adode really want and have to pay $1.8 billion for it? Whilst Omniture has suites of different products but there aren’t any that fits with what Adobe does. Does Adobe want to extend into developing a next generation full marketing suite using rich media applications that can benefit from Omniture’s analytic capabilities? Is this the "game changer" move that Adobe’s CEO Shantanu Narayen talked about?

Adobe is one of the companies that I believe is best position to challenge Microsoft. My best guess is Adobe is trying to measure the impact of rich media in a way that it cannot be properly measured today, called it the science behind the art. I can see that developing advance dashboarding technology to allow marketers with a means of tracking the impact of cross-channel rich media campaigns on brand perception, purchase intent, customer acquisition, retention etc. This can help CMOs to synthesize disparate data into intelligence that is actionable and can be used to make sense of different creative execution..

The acquisition price of $1.8 billion represents a 45% premium to Omniture's average closing price for the last 30 days (higher than the average premium 25-30%). Omniture has about 1,200 employees and took in just under $300m last year. The two companies said the deal is expected to close during Adobe's fourth quarter and is subject to government approvals. Omniture will become a new unit within Adobe, with Omniture CEO Josh James continuing to lead the business as an Adobe senior vice president. Adobe said the deal should add to earnings in fiscal 2010.

This type of pricey acquisitions often raised questions around value creation. Historically, many mergers and acquisitions fail to meet their objectives, which are typically to accelerate growth, cut costs, increase market share or take advantage of other synergies or create dominance in an industry. AOL Time Warner charged up to $60 billion to its net worth for impaired goodwill from past deals underscores the burdensome legacy that many companies confront long after completing their acquisitions. And for eBay, Skype doesn’t worth anything close to $3 billion. EBay has written off roughly half the value of its investment in Skype in the first two years and is now finally getting rid of it.

So why do so many M&As fail to meet expectations? Or are those strategic assumptions realistic in the first place? And what can organizations do to improve the chances of a successful deal? Deals can fail without a “strategic-architectural” and “people/capabilities” related logic. Both need to make sense. Some quick stats here to give you some perspectives, McKinsey reviewed nearly 1,000 global mergers and acquisitions from 97 to 06 and compared share prices two days before and two days after each deal was announced. The analysis shows that value created in deals between 03 and 06 averaged 6% of the transaction values, whereas those between 97 and 00 average less than 2% and though an alarmingly high 58% of all acquiring companies are still overpaying for acquisitions - this is better than the 70% that were doing so in 2000. It is all about the acquisition premiums. A good strategic deal can still be a bad deal when premium is up and value creation potential is down.

Broadcast Media Is Reaching An Indsutry Breakpoint, And Hulu Is Fast Becoming A Key Part Of The New Industry Architecture.

Here are pictures of the Idea Couture team running several days of long sessions at the MIT.  Jeff, Partick, Adam and Cheesan were happy with the progress to date and I am so looking forward to see the first milestone. It is just a great project and a great client/partner.  Everyone is excited.

While we are on MIT, I came across some early research from MIT Media Lab on "Emotionally Reactive Television" , it is a very interesting concept. The idea was from the time TV was created, watching TV is considered as a static activity. TV audiences have very limited choices to interact with TV, such as turning on/off, increasing/decreasing volume, and traversing among different channels. The working thesis is that TV program should have social responses to people, such as affording and accepting audience’s emotional feeling with the growth of technologies. This paper presents HiTV, an Emotionally-Reactive TV system using a digitally augmented soft ball as affect-input interfaces that can amplify TV program’s video/audio signals. HiTV transforms the original video and audio into effects that intrigue and fulfill people’s emotional expectation. This is a super cool idea.

Some people think media should all be free. Just imagine a world where every form of media as we know is accessible for free. Is this the future? We’re reaching an industry breakpoint in the world of media, fight between pirates, broadcasters, entertainment labels, demanding consumers heats up, the stakes will get higher, and higher.

The convergence of PC and TV will accelerate. I’ve participated in debates and forums around the three screen convergence scenario in the telec industry. That means one provider who can deliver a converged/integrated video/entertainment experience to the TV, PC, and mobile device. This is the telcos’ dream. The idea is, you're watching something on your TV and you have to leave, you can continue to watch it on the go or so you pause it. Is this something we all wanted?

Analyst Laura Martin (Soleil Securities) crafted a worst case scenario for broadcast media. Martin believes Hulu will wipe out the network television business as we know it. In a recent report, she estimates that the online video hub will cost TV networks $920 per viewer in advertising if their audiences are cannibalized by Hulu. She believes the bulk of viewing on Hulu is indeed taking eyeballs from TV. It definitely makes some sense but there are still many wild cards.

Earlier In May she warned that the entire $300 billion market valuation of the television industry is threatened by the shift of programming from TV to the Web. Spearheading the overthrow of TV-as-we-know-it is Hulu, the premium video site backed by NBC Universal, News Corp. and Walt Disney that offers content from the 120 partners. Martin is very confident that Hulu will succeed in the long term. With more than 38 million monthly viewers who watched 457 million streamed videos, it is 6th-most-visited video site, ahead of competitors like AOL, CBS Interactive and the Turner Network, according to comScore.

Hulu is seeding the value migration for its TV network creators as more content that becomes available on Hulu, the more likely it is that consumers will cut the cable cord altogether. Together with that trend is the less attractive economics of online video to advertisers, which offers higher CPMs but fewer ads. The industry estimates that Hulu runs four ads each hour at a $50 CPM compared to 32 ads during each hour of programming on TV at a $35 CPM. ($1,120-$200 = $920). Hulu did not disclosed actual ad sales or ad rates.

The TV everywhere idea is not new. Except it is getting real. I am not sure if it is so simple. There is a lot of uncertainty about the speed of deployment of new technologies and services, and of their adoption driven innovative user experience design. Hence the implications for spectrum demand and management of all these changes are far from clear; and convergence raises the fundamental question of whether current service definitions will make any sense by the end of next year.

Is The Freeconomics Real? We're Seeing It Everywhere.

Just three minutes walking down Baker Street in London I saw signs of free offer eveywhere (see pictures). Is free the future? Or just a reflection of the current economy? It has been 4-5 years since Chris Anderson, the author of The Long Tail, first brought up the idea of the free economy. Technology is offering consumers better deals and enabling innovative business models that are reshaping economic theory. In this economy, free is definitely attractive to many consumers.

Here are the big questions:  How is free changing consumer expectations and behavior? 
How is free changing the economics of businesses? How can free be part of viable business model? 
When the price drops to zero, what else do customers value? How do you beat the free? Where is free headed in the next 5 years?

“Google is not a media company - most of its business is software and services - but it has used the media business model of advertising to ensure that it never shows up on your credit card," according to Anderson. "The psychology of free is incredibly powerful. Traditional marketing says this is awesome, you are going to love it but you can't try it until you pay. Free says this is what it is, I think you are going to like it, but try it out. When it comes time to pay, you are already price insensitive, you are a committed customer, you are engaged."

Anderson suggested free is the future as the increasing availability of open source software and the rise of cloud computing had made the barriers to entry for digital companies very low. But it doesn’t mean you have a viable business. If Anderson practices what he preaches, he should give away his new book for free. But who’s paying for it?

What happens to the economics of goods when scarcity is removed? How is the case difference for digital goods versus physical goods? In both cases, free encourages consumption and expand market share, if your competitor do it and they will take up larger share of the market. This can easily be modeled from a game-theoretic perspective. If you and your competitor both choose the same strategy, you are both on equal footing, consumers win. 

Nash equilibrium does benefit the consumers, who enjoy more free products or services. But is this sustainable? Free is just another form of competition and forces companies to find creative ways to have them subsidized. Just like radio and broadcast TV. Social technologies allow companies to reorganize itself around getting people to work or co-create for “non-monetary rewards and distribution can cost nothing? The book keeper will not work for free? And office supplies are sponsored by Staples?? Someone still need to pay for keeping the lights on. High performance servers are provided free? OK advertisers can subsidize them, we're back to the ad model.

Free is a competitive marketing strategy, but not a business strategy.

Russian Expert Warns America Will 'Disintegrate' in 2010. Cash In Your T-Bills Quick Before It's Too Late!

Just when what you’re watching on CNN everyday is not bad enough, switch over to the Russian channel and you will hear a Russian professor predicting the coming of the end of US.  There is a feature with the WSJ on how the Russian Prof Igor Panarin forecasts that 'America 'Disintegrates' in 2010.  Not sure he had forecast the fall of Russian communism. He is now saying by 2010, US will going into cicil war. Yes a year from today. So  check your bonds and T-bills expiry dates and make sure you cash them quick. This guy is now being interview twice everyday.

He is predicting that an economic (automakers and banks) and moral (hip-hop music and Hollywood) collapse will trigger a civil war and the eventual breakup of the US. Prof. Panarin, a 50 year old former KGB analyst (we can trust him), is also the dean of the Russian Foreign Ministry's academy for future diplomats.  His view is music to many Russian politicians as that’s an opportunity for Russian to return to the stage.

According to Panarin, "There's a 55-45% chance right now that disintegration will occur," he says. "One could rejoice in that process," he adds. "But if we're talking reasonably, it's not the best scenario -- for Russia." Though Russia would become more powerful on the global stage, he says, its economy would suffer because it currently depends heavily on the dollar and on trade with the U.S. He also suggested the US will break into six pieces -- with Alaska reverting to Russian control (pls take Sarah Palin with you)!

He based this forecast on classified data supplied to him by FAPSI analysts, he says. He predicts that economic, financial and demographic trends will provoke a political and social crisis in the US. When the going gets tough, he says, wealthier states will withhold funds from the federal government and effectively secede from the union. Social unrest up to and including a civil war will follow and the US. will then split along ethnic lines, and foreign (??) powers will move in.

Here’s the funny part, California will form the nucleus of what he calls "The Californian Republic," and will be part of China or under Chinese influence (He did not mention whether Lenovo will move its head office to Sunnyville and Yao Ming will replace Schwarzenegger as the governor). Texas will be the heart of "The Texas Republic" (run by George Bush? The Texan Imperial Republic) and a cluster of states that will go to Mexico or fall under Mexican influence (they will have to switch over to Pesos) Washington, D.C.

What about NY? New York will be part of an "Atlantic America" (AA, they already have a national airline) that may join the European Union (is it that bad?). Canada will grab a group of Northern states (Royal Mounties will march across the border and replace all Starbucks with with Tim Hortons overnight) he calls "The Central North American Republic (CNAP)." Hawaii, he suggests, will be a protectorate of Japan (finally) or China (wrong, they prefer Taiwan), and Alaska will be subsumed into Russia (Palin as the puppet governor and she is learning Russian now).

Not sure what he has been drinking or smoking. Let me tell what I think. This current administration is no question the worst in the history of America and ran by a bunch of idiots, we don’t need to say more. Many of the current crisis are in the making before this administration to be fair.  This administration destroyed America’s image and trust in the world stage and cost many lives both in the US military and Irag's civilians.

Americans don’t like war, only this administration. It is not what America set out to be. Sending troops overseas, building military bases in foreign countries, and making alliances is foreign interventionism is not right nor wise.. The Founding Fathers recommended a noninterventionist foreign policy, and for good reason. George Washington warned against "permanent alliances with any portion of the foreign world." He also said: "The great rule of conduct for us in regard to foreign nations is, in extending our commercial relations to have with them as little political connection as possible."

Thomas Jefferson stated: "I am for free commerce with all nations, political connection with none, and little or no diplomatic establishment. And I am not for linking ourselves by new treaties with the quarrels of Europe, entering that field of slaughter to preserve their balance, or joining in the confederacy of Kings to war against the principles of liberty."

John Quincy Adams would certainly not have approved of current US foreign policy since he said that "America . . . goes not abroad seeking monsters to destroy." Were they transported to the twenty-first century, would Washington, Jefferson, and Adams even recognize the American republic today as the same country in which they served as president? Did we study American history?

Despite that, the country is not going to disintegrate, there will be more unity under Obama and Americans will come together to rebuild the economy, the society and international relations. The evidence of American decline is weak. Its share of the global economy last year was about 21%, compared with about 23% in 1990, 22% in 1980 and 24% in 1960. Although the US is suffering through a financial crisis, so is every other important economy. If the past is any guide, the adaptable US economy will be the first to come out of recession and may find its position in the global economy enhanced.

Meanwhile, US technological innovation (and military power) is virtually unmatched … America's image is certainly damaged, as measured by polls, but the practical effects of this are far from clear. Is the US's image today worse than it was in the '60s and early '70s, with the Vietnam War; the Watts riots; the My Lai massacre; the assassinations of John F. Kennedy, Martin Luther King and Bobby Kennedy; and Watergate? Does anyone recall that millions of anti-American protesters took to the streets in Europe in those years?  If you were living in Berkerly CA you will remember what it was like then.

The US will remain the single most powerful and innovative entity in the world but iit cannot dominate, much less dictate. They need to work with the new global powers China and India and they can be more trusting partners than Russia. I don’t think China wants California anyway nor Canada wants Michigan (the automakers are too big a liability for the Canadians). This guy has been drinking too much.
 

Obama Is One Of The Hippiest Brand Of The Decade. The World Needs More Brands Like This One.

I was watching Jack Cafferty today on CNN talking about the questions why Obama gets so much more coverage than McCain. When Obama announced his trip, 200 journalists have asked to join him although the campaign can only be able to accommodate 40. Meanwhile, McCain has taken 3 foreign trips the last 4 months, and not a single network anchor has gone on any of them.

A post from Tina on Cafferty’s blog. “Jack, God bless John McCain, he is a war hero. But let’s face it, every time he gives a speech I fall asleep. On the other hand, I actually surf channels looking for any coverage of Barack Obama; I can’t seem to get enough of him. He makes me feel like there is hope for this country… I imagine that the news media senses the same thing and wants to be there to record it all.” That pretty much describes the difference between the two brands.

No question Obama is probably one of the hippest American brand in this decade, ranking together with Google and Facebook. This election is a competition between brands, or endorsed brands. These candidates are all cross-endorsed by parties and other politicians and entertainers. The future of American depends how the elected brand manifest itself. This branding decision affects everyone in the world and people from all walks of life, particularly the resulting US policy has huge implications outside America since the world war two. This is unarguably the most important brand decisions in this decade.

Is the media biased? Yes. But why? Because the Obama brand has stories for us, it has dreams to share and words that give us hope.  Wondering how everything can go so wrong in American and how to get out this mess. Given the beating of the image of America during the last five years, getting back to "trustable and hopeful" is a long uphill climb, bit not am impossible one.

As for the McCain brand, it is as boring as a Warmart store but offer less value than the retailers do. His straight-talking, grand-pa-can-do-it do persona are not helping and translate into "arrogance" by many and that’s exactly the kind of brand attributes America doesn’t want for his brand. Some see this as Bush extension brand. So what would you pick?

 

Developing An Effective Channel Strategy In the World Of Channel Proliferations

Dell is seriously thinking about expanding their stores and giving up their strategic competitive advantage of direct e-commerce only distribution. There were so many debates on how the role of intermediaries has changed due to the Internet and social networks. Today many companies still have not resolved these issues while spending millions on world class solutions such as ATG.  I came across this note which was a speech I gave to a b-school marketing club some two years ago. I was talking about channel strategy and I thought I should share with you here:

Any company out there with a product/service to sell, how to make that product available to their targeted customers can be as crucial a strategic issue as developing the product and the brand itself, while distribution strategy seems to be a very traditional concern, companies has come under intense scrutiny due to a number of major developments including the Internet and Warehouse Clubs. The expanding market power of retailers has forced many to rethink their channel approaches.

First, let’s talk about the expanding role of the Internet, expanding social connectivity that will result in the coming of “social commerce”. In consumer and business procurement activity has created unprecedented opportunities for easy and vast access to customers and the experience has moved beyond transaction to experiential, the other thing is the economics of materials delivery has been revolutionized by super efficient logistical networks deployed by third-party logistics powerhouses. As a result, many manufacturers are reconsidering whether they should rely on intermediaries or should what extend they should rely on them.  Today’s topic of my speech is to give some insight into this issue.

Firms in a variety of industries have recently established avenues for selling direct (e.g., Nike, Banana Republic, Target, Mattel, Kodak, IBM, Sony, Levis, etc.), and still many others are still seriously evaluating such strategies. In general, this decision entails a determination of the number of levels in the distribution network, the number of outlets within each level, and other variables, such as pricing, inventory levels, and service levels, customer expectations and shopping behavior etc. Today I want to talk about the strategy and the management activities.

The basic motivations for this include: (1) resellers carry only limited assortments of a manufacturer’s products, (2) direct control of distribution and pricing can lead to higher profit margins, (3) resellers can use their power to extract various concessions from the manufacturers, (4) manufacturers can provide a broader product selection in a better ambiance with higher service in direct outlets, (5) more flexibility in experimenting with product attributes such as personalization, (6) closer contact with customers with direct feedback mechanism, and (7) protection from crises faced by resellers 

Getting rid of intermediaries can also improve supply chain efficiency, by allowing upstream parties better visibility into market demand. While these arguments have long supported the use of direct sales and company-owned concept stores, they are just as relevant when the markets are created via the Internet. Indeed, the explosion in possibility of e-commerce and the coming of “social commerce” is what has drawn many manufacturers into the realm of direct sales.  It is not only about moving products, but engaging with customers. Elimination of intermediaries is not without disadvantage, though.

The role of intermediaries is to efficiently create and satisfy demand, through activities that include customer education, providing market coverage, providing breadth of assortment, processing orders, customer support, etc. We refer to these collectively as “sales effort.” If a manufacturer cannot otherwise provide these functions efficiently, elimination of intermediaries may cause an erosion of profits, market share, or both. Many instances this establishes the manufacturer as a direct competitor to its reseller partner, potentially leading to tension referred to as “channel conflict.” We hear this all the time and there seems to be a lot of confusion of what is required to deal with this issue. There's a well-publicized story involved letters in May of 1999 by Home Depot to more than 1,000 of its suppliers, stating “Dear Vendor, It is important for you to be aware of Home Depot’s current position on its’ [sic] vendors competing with the company via e-commerce direct to consumer distribution. We think it is short-sighted for vendors to ignore the added value that our retail stores contribute to the sales of their products....We recognize that a vendor has the right to sell through whatever distribution channels it desires. However, we too have the right to be selective in regard to the vendors we select and we trust that you can understand that a company may be hesitant to do business with its competitors” In general, channel conflict can undermine attempts to develop cooperative relations in the intermediated channel, which may lower the profits of ALL parties. The desire to use both channel types may compel a manufacturer to redefine its relationship with the intermediary, with careful attention to the division of labor and any associated financial terms. For instance, in 1998, the former Compaq unveiled an aggressive effort to sell personal computers directly to end customers, bypassing the dealers who helped make it one of the world’s largest sellers of PCs. To appease its dealers and distributors, Compaq’s plan included maintaining separate brands for small business and corporate markets and paying dealers an estimated 5-6% commission for referring small business customers. On the other hand, while IBM may take orders for PCs over the Web, it redirects the sales to its distributors and allows some of them to add further value by performing a variety of assembly steps. Although they later on dropped these practices and decided even to close down retail outlets and go fully e-channel.

Most of the times adding a new distribution channel often create channel conflict, whether the new channel is owned by the manufacturer or involves other intermediaries. The use of the term focuses specifically on resellers’ concerns about the installation of a manufacturer-direct channel since this represents a growing trend in industry. There is no end in sight for this trend. So how do you formulate a channel strategy? You start from an assessment of channel power and levels of cooperation. Manufacturers must evaluate the following factors when determining the right level of cooperation or when assessing their channel power:

1/ Brand Equity: A strong brand (Apple) drives customers to a manufacturer's site while a weak brand (Acer) points customers to a retailer;
2/Margins: Higher margins (Nike or Adidas) let a manufacturer more easily absorb direct e-commerce costs not already part of its core expertise;
3/ Level of Customer Involvement: The larger and less frequent a purchase, the more effort and consideration a customer exerts during the buying process, and where the brand community exists; 4/ Retailer Value-Added: The more a retailer contributes to the customer experience, the higher the value-add (e.g., large product assortment, service wrapper);
5/ Internet Value-Added: The more the Internet enhances the shopping experience, the higher the value-add of selling directly (e.g. relevant content and customization);
6/ Competitive Intensity: The level of competition within both the retail and manufacturing segments will also be a factor in channel strategy since it is a key determinant of market power (e.g., the more retailers there are then the stronger the manufacturer's position);

A number of factors, including e-commerce and the transformation of logistical economics driven by the growth of the third-party logistics industry, have led many companies to consider engaging in direct e-com sales. This may put such companies in competition with their existing reseller partners. The potential channel conflict has huge implications for distribution strategy. Here I have proposed a concept model that captures key attributes of the relationship between a manufacturer / brand owner and a reseller who act independently, including various sources of inefficiency. These include double marginalization within the re-seller channel, and the failure of each channel to fully perceive the positive externality that its sales efforts can have on the other channel. The latter is directly related to the issue of channel conflict.  I believe that the addition of a direct e-channel alongside a reseller channel is not necessarily detrimental to the reseller. In fact, the manufacturer will reduce the wholesale price to retain some of the reseller’s selling effort, and in some cases, this can make both parties better off.

Using an industrial economic point-of-view, there actually can be a net system-wide efficiency gain to share because the whole-sale price reduction can counteract double marginalization. With such a multi-channel arrangement, diverting product flow to the direct channel can create efficiency gains if this serves demand at lower overall supply chain cost. Hence, the reseller’s concern may, in reality, be groundless; There are also ways to meet customer service expectations and can dramatically enhance the overall shopping experience and even extend that to the resellers.

There are simply many ways to create win-win situation. Yes channel conflicts can be avoided even in the age of channel proliferations. The answer is a harmonized and flexible channel strategy. On this note I want to say thank you and I will spend the next 20 minutes taking questions.

Tiffany - Extending The Brand Magic To New Categories?

We did a little shopping this weekend my wife and I stumbled upon a few good finds including a pair of Burberry snow boots and a pair of elegantly designed Tiffany sunglasses (with Swarovski crystals on the sides). This may be a category that they are planning to enter into.  I don't recall they have a large sunglasses collection. Companies such as Tiffany that cater to the affluent always face the same dilemma: how to balance growth with exclusivity. If you expand too far down the luxury ladder, you cheapen the brand and lose cachet. If you stay exclusive, your market base will always be limited. The question is not whether you should or not, it is how. Companies like Tiffany need to deliver growth but not at the expense of the brand.

There is so much talking about recession and one would think that luxury goods will be the first to be negatively impacted. Tiffany just gave an upbeat forecast for 08 despite everyone worries about the consumer sentiments. Tiffany CEO Michael Kowalski expects a 10% rise in total sales and mid-single-digit profit gain, pretty good taken into account the macro conditions. Tiffany touted growth will primarily be from China and Japan business will continue to falter. This is unarguably one of the best managed brands in the world and the blue box is almost magical to consumers. I am a fan of Tiffany. This little blue box company has grown in to a $2.2 billion 150+ stores company.  Even with a slowdown in front of us, I think they will still do fine. We can always expect a shakeout in the industry from the this slowdown and it will widen the gap between strong and weak brands. The key is to renew their focus on what they're really good at and innovate within or next to those categories. Many luxury brands have entered into categories where they have no expertise because they fell into the trap of "lifestyle" brands.

Up-market consumers are highly discerning and sophisticated. They are always willing to pay a reasonable price premium for, brands that are specialists in certain categories. Tiffany in jewelries, Hermes in handbags, Louis vuitton in leather goods and luggage, Christian Louboutin in women's shoes, and Berluti in men's shoes are brands that up-market consumers rate highest as category leaders. Part of the strategic exercise is to cnduct a rigorous assessment of your brand's category portfolio and get rid of the non-strategic extensions. This is when the brand makes a difference. The challenge for Tiffany is to find growth that doesn’t require new real estate investments but retaining the brand’s exclusivity and prestige image. That's why they did this deal with Swiss watch giants Swatch. I think the idea is to design and produce an extensive collection of watches under the Tiffany brand. and to be distributed beyond Tiffany's boutiques.  They do carry a small watch collection and mostly are on the high end. Is this a smart move (if so what is the strategy behind it) or a deprecate attempt to create new revenue stream at the expense of diluting the Tiffany brand? I think this is a smart strategy and will be a key part of Tiffany’s growth strategy.

The Tiffany brand will help Swatch market to women as well as more upscale market. The watch industry is still a man’s world. Women’s watch market makes up 35%-40% of the luxury watch market. There’s no reason why it cannot be at 55-65%. There is tremendous market potential to turn that into fashion watches like handbags. Tiffany hopes this deal will make them a strong competitor to Cartier and Bulgari , two jewelers that have successfully moved into the luxury watch business. Louis Vuitton and Hermes are also key players too. Hermes watches are good value for brand, design and price. Tiffany will launch in the second half of 08, with the first full collection to follow in 09.

I think the company will continue to move slightly (I really mean slightly) down market  and will continue to look at other high margin categories for extension and leverage their brand. What’s next? Sunglasses and leather goods? How about a Tiffany cell phone? I think it is a matter of time. Expect them to boost lower-priced goods like key rings, pens, stationary and porcelain should also lift profits because margins are attractive for those items. They need to learn from the mistake they made in Japan and not opening too many stores back home. The key is to explore the digital channel and also focus on the, business-to-business and catalog purchases (currently only 9% of total revenue). There are so much untapped opportunities that Tiffany can explore in the online space. This is also an area of vulnerability when we think how Generation Y goes shopping for engagement rings? Are they still going to pay a premium for the blue box from Tiffany, or are we going to Blue Nile? But for now, we all love the blue box.

Up-market consumers are highly discerning and sophisticated. They are always willing to pay a reasonable price premium for, brands that are specialists in certain categories. Tiffany in jewelries, Hermes in handbags, Louis vuitton in leather goods and luggage, Christian Louboutin in women's shoes, and Berluti in men's shoes are brands that up-market consumers rate highest as category leaders. Part of the strategic exercise is to cnduct a rigorous assessment of your brand's category portfolio and get rid of the non-strategic extensions. This is when the brand makes a difference. The challenge for Tiffany is to find growth that doesn’t require new real estate investments but retaining the brand’s exclusivity and prestige image. That's why they did this deal with Swiss watch giants Swatch. I think the idea is to design and produce an extensive collection of watches under the Tiffany brand. and to be distributed beyond Tiffany's boutiques.  They do carry a small watch collection and mostly are on the high end. Is this a smart move (if so what is the strategy behind it) or a deprecate attempt to create new revenue stream at the expense of diluting the Tiffany brand? I think this is a smart strategy and will be a key part of Tiffany’s growth strategy.

Who Would Microsoft Send To Run Yahoo!

I was talking to my investment banker buddies about the Microsoft deal. If Microhoo proceeds as planned, what would happen to Yahoo?  Would they want to keep the company seperate or bring it closer? What platform will be used across the two? I have no doubt that Redmond will send in the generals as soon as the deal is closed and Jerry may or may not have a non-executive role.  I think there’s a 80% chance that he will leave in less than 6 months. They don’t see him as a corporate person and there’s big culture differences. So who would Ballmer send in?

They probably won’t bring in someone from outside, in my opinion is the three top candidates would be Kevin Johnson, president of platforms and services; Brian McAndrews, SVP, advertiser and publisher solutions group and Steve Berkowitz, SVP, online services group. Not in any particular order. I think Merkowitz stands a hslightly igher chance.  I am hearing stories that some of them are actively lobbying for the job.

Berkowitz seems like a strong candidate. He is currently responsible for the marketing, sales and business development of Microsoft's online services, including MSN.com and Windows Live. Prior to Microsoft, Berkowitz was chief executive of Ask.com and has been credited for its turnaround.

A few weeks back there's stories that McAndrews circulated a note to shareholders, touting his success in integrating aQuantive into Microsoft and outlining plans for search, video and mobile adv at Microsoft. He is selling his vision of how integration should happen between the two companies. McAndrews currently reports directly to Kevin Johnson.

i guess we will see more lobbying in weeks ahead.  Hey I want to run Yahoo too.

Where's The White Knight That's Going To Save Yahoo!

It is sad to see that Yahoo is not even putting up a fight. There was no competing bid so no reason for Microsoft’s offer to put more money on the table. Usually we can expect another 10-20% premium.  So far we have seen any signs of a white knight. I thinkYahoo will try to get the offer closer to $40. Not sure they will be succesfull. At the end of the day, the price may end up at $36-$37 I think.

While they can go to Google and partner (outsource) with them on search advertising and boost cash flow. A move like this will trigger the regulatory people to question and delay this deal. Such a search-advertising agreement would likely encounter serious objections from an anti-competition perspective. For 07, Google had a 71% share of U.S. search-adv revenue, and Yahoo was second with 8.9%, according to eMarketer. For U.S. online adv overall, Google garnered 28% of revenue, and Yahoo was second with a 15.4% share in 07; Time Warner's AOL had 6.6%, and Microsoft's MSN had 6.5%. In December, Google handled 56.3% of U.S. search queries, while Yahoo handled 17.7% and Microsoft handled 13.8% according to the Nielsen Online. If Yahoo's board makes the wrong move, it may be getting a flurry of shareholder lawsuits for a breach of fiduciary duty. So tread carefully.

 

It is not a secret but less talk about that Yahoo’s display inventory is estimated between 12X to 15X of Google’s. They bought some interesting companies buying RightMedia, MyBlogLog, Flickr etc. over the years but unfortunately hey just don’t how to monetize them. Or Yahoo could increase its cash flow by an estimated 10-25, swallow their pride and let Google runs its search advertising business. And that kind of a deal could give them a good reason to keep Microsoft out.  Outsourcing search to Google is not bad move (aol) from a strategy perspective, but it is a huge blow to Yahoo’s pride, They might as well do that and acknowledge that all those money and time invested into Yahoo’s Panama project to revamp their search advertising platform simply failed. I think Yahoo’s fate cannot be changed. Here’s email Jerry sent to his folks at Yahoo on the Microsoft offer (source:  documents filed to the SEC on Monday, Feb. 4)

-CONFIDENTIAL-

fellow yahoos:

since we talked to you this morning, there's been a lot of media coverage and industry chatter about microsoft's unsolicited proposal to acquire yahoo!. we know you've been hearing and reading a lot about this. that's why we wanted to reach out to all of you at the end of the day to emphasize a few things that we hope will give you some more context about this proposal, the process that our board is taking, and what you can expect in the days ahead.

first, we want to emphasize that absolutely no decisions have been made — and, despite what some people have tried to suggest, there's certainly no integration process underway. this proposal is just that — a proposal. and it was only made in the last 24 hours. you can be sure the board is going to review it thoughtfully and carefully, and do what's right for our great company. microsoft's proposal is one of many options that we're evaluating in order to maximize value for our shareholders and employees over the long-term. that's why we will respond to microsoft after our board has completed a careful review of all of our strategic alternatives.

second, we can't let any of the noise we're hearing around this situation distract us from our core mission. it's critical that we continue to focus on running our business, executing our strategy and delivering value to all of our users, advertisers and publishers.

finally, we realize that this may have been a tough day for many of you, especially those on the front lines of our business. we know you have many questions, and we're committed to making sure you're as informed as possible as this process moves forward. in the interim, we both want to thank you for your continued energy, focus and determination. we'll continue to share information with you as we have it and can do so.

jerry and roy bostock (our new non-executive chairman)