innovation

Netflix, Facebook, Apple and the brand community karma bank

By now I’m sure you’ve seen that, in a tersely-worded blog post, Reed Hastings of Netflix today rolled back the controversial decision to split the company into two separate services: a DVD-by-mail service that would have been named Qwikster and the on-demand streaming service that would have retained the Netflix name.

You may have also seen the announcement that Apple pre-sold 1 million units of its new iPhone 4S on the first day it was available, blowing away previous records. This positive news comes after many people (especially those in the media), expecting a completely new iPhone 5, greeted last week’s iPhone 4S announcement with disappointment.

Meanwhile, over at Facebook, privacy concerns continue to mount as the latest site enhancements caused some to question the addition of cookies that would supposedly allow Facebook to track users’ movements even once they log off the service.

I put these three events together because they showcase how three of the most successful and powerful brands of our time interact with their brand communities as they innovate quickly and aggressively.

What do all three companies share? First, confidence. They can see their destiny, they have a plan in place to control it, and no one—not even their customers—is allowed to slow their innovation engines down. What else do all three share? They all also have passionate communities of people who care deeply about them and watch every move they make closely.

In each case, these two forces—the company’s own self confidence and the pressure and expectations that a deeply engaged and passionate brand community brings—can lead to highly-charged, high-risk announcements, communications, and interactions.

So why is Apple so successful at keeping the relationship with its brand community healthy? Why is Netflix stumbling so badly? And why is Facebook in a dangerous spot?

In my view it comes down to a difference in the way each company approaches the give and take transactions with their brand community, the way they manage their community karma.

Creating a healthy brand community is a lot like managing a bank account. In order to remain in good standing, you must make more deposits in the karma bank than withdrawals. And this is where Apple, Facebook, and Netflix begin to differ.

On one end of the spectrum is Apple. The company showers us with delightful new products and innovations. Apple surprises us. Apple entertains us. But most of all, we’ve come to expect that almost every product Apple makes is going to fundamentally change the way we work and play. By creating great, impactful stuff that really does improve our lives in meaningful ways (I haven’t used a computer that runs Microsoft Windows in more than a decade… but I still remember EXACTLY how it felt), Apple is constantly making deposits in the community karma bank.

And while many folks were upset that Apple didn’t launch an iPhone 5 last week, I’ll point out that it was a stronger karma decision to launch an upgraded version of the iPhone 4 and call it a 4S than to launch an upgraded iPhone 4 and call it an iPhone 5 (as many other companies would have done). When an iPhone 5 is ready, we will know it, I’m sure.

That’s not to say that Apple doesn’t make karma withdrawals too. It does. Apple, you annoy me with your crappy restrictions on what I can do with music I download from you. I dislike your anti-competitive app store practices, and you scare me every time I have to click through a new version of your license agreement.

But when it comes right down to it, you give me more than you take, Apple, so I must admit I still love you.

On the other end of the spectrum we have our friends at Netflix. For years, Netflix was a dutiful investor in the karma bank. The company made their site elegant and easy to use, the social functionality and ratings were helpful, and, when streaming came along, it was like Christmas.

Personally, I loved Netflix. I loved it so much that I even bought a new TV last year on the strength of one feature—I could seamlessly stream Netflix movies directly to it.

But something changed. Over the last six months, I’ve noticed that Netflix has started making more karma withdrawals than deposits.

First, the Netflix site quit getting better. I don’t know about you, but I found it harder and harder to search for new movies. Netflix has always tried to push you toward the backlist titles and older movies, and I get why that made sense with the DVD-by-mail system. But why not make it easy for me to find your newest on-demand titles? I got frustrated and quit using it as much because it seemed like the site was actually losing searching/browsing functionality rather than getting better (was that my imagination?).

Then Netflix hit me with the price increase. Now I don’t mind paying more when I’m getting more, but at the time the price increase was announced it had become clear that Netflix’s agreements with distributors were souring and that they might even lose access to many on-demand films. This on top of my frustrations with the site, created my first negative Netflix experiences.

Still, Netflix had enough positive karma with me, built up over years, that we remained buddies.

Then, on September 19th, Reed Hastings sent me an email (under cover of night, at 3:31 AM, mind you) that started as an apology and quickly turned from mea culpa into double down. If you got the email, you were likely either A) angry or B) wondering if Reed might soon have an opening to hire you to help with his communications strategy.

Not only was Netflix going to keep the price increase, they were going to significantly degrade the customer experience by splitting the business in two and forcing their customers to log in to two completely different sites if they wanted to stay a customer of both the streaming and DVD-by-mail businesses. I understood the business strategy and why it made sense… but the communications strategy and the way the whole thing was positioned was just plain terrible. As someone in the communications business myself, I felt the need to look away.

And that was the moment Netflix made one more karma withdrawal than I could take. In the weeks since I received that email I have 1) bought a Roku box so I can stream on my TV from someone other than Netflix if I want to 2) started using the free streaming I get as a member of Amazon Prime and 3) made the decision to go on a break from Netflix until it gets its karma account back in order.

Apparently, I’m not alone. Since the announcement, the Netflix stock has fallen off a cliff, down from just over $200 to around $110 a share (and it was at $300 a share this summer). The announcement today may not have come soon enough, only time will tell.

Netflix, I still think we might have a future together, but man do you have some work to do.

Which brings us to Facebook. Now Facebook is a very interesting case to look at because of one thing that makes it very different than the other two companies: it doesn’t charge me any real money.

Facebook is a free service, and typically our expectations of a free service are very low. Investments in the karma bank add up quickly when the service is free. For years, Facebook has earned our love by helping us reconnect with long lost friends and relatives, while allowing us to actively keep in touch with more people at once than we ever could with a pen, phone, or email.

The real price of using Facebook—our privacy and personal data—was one that was originally only too high for a fringe group of digital conspiracy theorists. But over the past year, Facebook has become more and more intrusive, less respectful of what little privacy it still allows us, and has at the same time claimed more ownership of our personal data, using it in ways that are less clearly in our own interests.

The double whammy is that at the same time, the service is becoming incrementally less valuable to many people. Now that you are connected to all of these folks that you haven’t seen in 20 years and know what their kids are having for breakfast… then what?

I’ve noticed more and more of my friends on Facebook are going largely silent. It is good to have the network there when you need it and want to reach out to someone. But my perception is that the regular updates are decreasing, the number of times I’m tempted to click the “like” buttons has gone way down as I wonder how Facebook intends to exploit my click, and I’m unlikely to upload any personal photos or videos until I am 100% positive they aren’t going to show up in some banner ad for deodorant.

I wonder if Facebook is nearing a critical juncture. Because the service is free, I think Facebook will likely be able to avoid the rapid depletion of the karma reserve that Netflix has seen over the past few months. But as more people become aware of the true costs of using Facebook—in terms of loss of control of our privacy and personal data—and the incremental value of Facebook begins to level off, could the karma bank for Facebook go negative, even as a free service?

I don’t know. But if I were at Facebook, I’d certainly be starting to worry about it. Especially if I had a competitor like Google (with its own karma stumbles, but an overall better track record of respecting personal data) lurking, waiting for Facebook to make one too many withdrawals.

I’m sure many of you have strong views about these three brands. If you do, and either agree or disagree with my analysis, I’d love to hear your thoughts.

Why is Google putting so many ads on TV?

Almost every time I’ve turned on the television in the past week, I’ve seen an ad for Google Chrome. What started earlier this year as a sprinkling of ads here in the United States has become a torrential downpour.

For me, Google has long been one of the poster children for a new breed of company born in the age of the Internet that doesn’t need to rely on traditional advertising to build its brand.

So, as I’m sure many of you have, I started asking myself, why exactly is Google doing so much television advertising?

It’s no secret that Google has historically not been a fan of traditional advertising. In fact, it wasn’t so long ago (2006) that Google Chairman Eric Schmidt called advertising “the last bastion of unaccountable spending in corporate America.”

And Google is certainly an interesting paradox: a company that historically does little paid advertising itself, yet makes billions of dollars selling advertising to others.

I did a little research and pieced together some history about Google and television ads.

In May, 2009, the first ad for Google Chrome appeared on television in the United States. In the blog post announcing the new spot, Google sounded almost apologetic, saying the ad was originally just developed in Japan as a web video, but it sparked a conversation and received good feedback. So Google decided to run it as a TV ad, in part as a test of the new Google TV Ads program.

The next year you may recall that Google actually bought an ad on the Super Bowl, which they called Parisian Love.

Eric Schmidt announced the spot on the Google blog, justifying it by saying “we liked this video so much, and it’s had such a positive reaction on YouTube, that we decided to share it with a wider audience.” But his Twitter announcement of the ad acknowledged that this was quite a unlikely strategy for Google:

Earlier this year, Google began developing the current set of ads for Google Chrome in partnership with advertising agency BBH.

The work is compelling, as advertising goes (here’s a link to all of the spots on YouTube, if you want to check them out). Perhaps the most thoughtful one highlights the It Gets Better Project, which has resulted in thousands of videos being created for YouTube that are intended to give hope to LGBT youths.

The Dear Sophie spot has been viewed on YouTube over 3 million times, and there are ads featuring Lady Gaga (4 million page views) and Justin Bieber (almost 2 million pages views) as well. The newest pieces highlight The Johnny Cash Project (where artists are collaboratively developing a tribute music video for Cash’s song “Ain’t No Grave”), Frank Restaurant in Austin, TX (mmm…. so delicious… don’t pass up the waffle fries), and Angry Birds.

From a branding perspective, the ads make sense–as stories. By telling these stories, Google and BBH are invoking the transitive property of branding to associate Google Chrome with some incredibly innovative collaborative efforts. The math looks something like this:

Lady Gaga = open, collaborative, innovative.

Google Chrome = open, collaborative, innovative.

Therefore, if you like Lady Gaga, you’ll like Google Chrome.

Certainly getting ten million combined pageviews on YouTube for the campaign is pretty awesome—and free—so why spend the big money to put these ads on television too? Isn’t the beauty of the Google / YouTube model that it can be effective at eliminating the need for traditional advertising?

Perhaps Google is trying to expand its brand awareness with people it can’t reach via YouTube? But why spend the money on Google Chrome, a web browser (and a term Google itself has shown that almost no one understands), rather than the Google brand itself?

My first thought was that perhaps Chrome was losing the browser wars and the television ads were a desperate attempt to keep the Chrome ship afloat.

It turns out that is about as far from true as you can get. Chrome is killing it. According to StatCounter, Chrome is rapidly gaining new users at the expense of Internet Explorer and Firefox both.

In fact, some predict Chrome usage will actually exceed Firefox usage by the end of this year.

A victory for traditional advertising?

Not so fast. Here’s a good post from late this summer highlighting Chrome’s rapid ascent and documenting the reasons for it. From the post:

“Online, Google of course has a huge marketing advantage over basically everyone else since it can recommend its Chrome browser on its web properties such as Google Search, YouTube, etc. Not even Facebook can compare with Google when it comes to sheer web presence, reaching over a billion users.

That said, Google has clearly built a very good and highly popular product. If people didn’t like Chrome, the browser wouldn’t be able to retain users to the extent it seems to be doing.”

So the two reasons for Chrome’s success come down to:

1) the browser is good

2) it can leverage the power of Google’s online advertising engine (yes, the same engine that millions of companies have raided their traditional media advertising budgets to spend more on, causing the rise of Google in the first place).

But I didn’t see Google’s television advertising strategy mentioned here, or in any other article I read, as an explanation for Chrome’s rapid ascent.

Let me sum things up:

I get why Google is making the effort to create stories like these and share them with the world. Storytelling is an extremely powerful tool for building brands the open source way.

And overall, I like the approach Google is taking—many of the stories are really well told, and the focus on open, collaborative projects and artists (not to mention tasty hot dogs) sits well with me.

But I can’t for the life of me figure out why Google spending so much of its shareholders’ money putting these ads on TV.

If you have the answer, I’d love to hear it.

[This post originally appeared on opensource.com]

Are the “Best Companies to Work For” really the best companies to work for?

The other day I noticed that the application deadline to be considered for the Fortune 100 Best Companies to Work For list is this week. My company is too small to be considered for this honor (you must have at least 1000 employees), but I always pay close attention when the rankings come out, and I’m sure many of you do as well. On the 2011 list, the #1 company was SAS, followed by Boston Consulting Group and Wegmans (see all 100 here).

The organization that does the ranking, The Great Place to Work Institute, has been running this competition for years and has a rigorous process for selecting the final list.

Yet when I read the articles written about the top companies or browse the list in Fortune, I always feel like something is missing. I finally put my finger on it:

I believe the evaluation process is benefit-heavy and mission-light.

What do I mean? When I read about the top companies, most of the emphasis seems to be on the salary and benefits offered to employees; which companies pay the most and have the best or most unusual employee perks (life coaches, wine bars, or Botox anyone?).

But the section of the report I want to see is nowhere to be found:

Which companies are doing things that matter?

• Which companies have a noble mission or purpose and are helping make the world a better place?
• Which companies have a bold vision and are leading innovation that is changing the world?
• Which companies are doing such amazing or interesting stuff that they are attracting the world’s top talent?

You see, I’m not someone who would find a company a great place to work because it offers a big paycheck and fantastic benefits. I need my work to be personally fulfilling. I need to feel like I have a chance to make a difference, to do something great.

I don’t think I’m alone.

Previously, I’ve written about something I call cultural fool’s gold, my term for an organizational culture built exclusively on entitlements.

If you want to test whether you work in an entitlement-driven culture, just ask a few people what they like most about working at your company. If they immediately jump to things like free snacks and drinks, the work-from-home policy, or the employee game room, you may have a culture made of fool’s gold, an entitlement-driven culture.

If instead they say things like these:

• I believe in what we are doing.
• I love coming to work every day.
• I leave work each day with a sense of accomplishment.
• I am changing the world.

you probably work in the only type of organization I’d personally ever consider—a mission-driven organization.

So the big question I’d pose to the folks at the Great Place to Work Institute:

Should there be a “best places” list for those of us who not only want to work someplace great, but want to do something great?

Maybe the Institute should consider a new list for those of us who demand more from our workplaces than big salaries, comfortable benefits, and free Botox injections?

Perhaps it could be called Best Places To Do Great Work or Workplaces with Purpose for People With Purpose or something like that?

The world has changed. I think many of the people graduating for our universities today will demand more than just great benefits from their employers. They’ll want to do meaningful work and be a part of a community of others looking for the same.

Personally, I hope to see the way we rate “the best places to work” in the future change to accommodate people like me.

What do you think?

[This post originally appeared on opensource.com]

How do you sell a community-based brand strategy to your executive team?

Who will be the new face of openness at Google?

Last week, Google Senior Vice President of Product Management Jonathan Rosenberg resigned after almost 10 years at the firm. While the comings and goings of tech industry executives aren’t typically that interesting to me, I found this news fascinating for a couple of reasons.

First, Rosenberg says that one of the things he plans to do is write a book with ex-Google CEO (and current Executive Chairman) Eric Schmidt. The subject? According to an article in the Mercury News, they’ll be writing about “the values, rules and creation of Google’s management culture.”

Now that is a book I’d like to read. Google is in many ways an ideal case study of the open source way as applied to management practices, and, while many have written books about Google already (notably this one by Bernard Girard and this brand new one by Steven Levy), I’d love to see Schmidt and Rosenberg’s take (and I hope we can corral one of them for a webcast on opensource.com when the book comes out).

I’m especially interested in their view of how the existing Google culture changed (or didn’t change) during their tenure. Especially since it has been reported that Rosenberg’s top-down management style didn’t mesh well at first with the existing engineering-led culture.

But what I find to be the even more interesting question in the short term is, with Rosenberg leaving, who will be the new face of openness at Google?

Continue reading »

Your open source management approach: Red Team or Blue Team?

When I hear people in the technology industry talk about the benefits of open source software, one of things they mention often is their belief that open source software “gets better faster” than traditional software (David Wheeler has done a nice job collecting many of the proof points around the benefits of open source software here). While the speed of innovation in open source is in part due to the power of Linus’s Law (“Given enough eyes, all bugs are shallow”), I believe it also has a lot to do with the way open source projects are managed.

Many of the characteristics of this open source management style apply well beyond making software, and I’m always looking for examples showcasing this in action. A few weeks ago, I wrote briefly about the story in Malcolm Gladwell’s book Blink about (now retired) US General Paul Van Riper.

Gladwell tells the story of how, in an enormous military war game called the Millennium Challenge in 2002, Van Riper took command of the Red Team, playing the role of a rogue commander who broke away from the government of his Persian Gulf country and threatened US forces (the Blue Team). Rather than following standard military management protocol, Van Riper managed his team according to a philosophy he called “in command and out of control.” From the book:

By that, I mean that the overall guidance and the intent were provided by me and the senior leadership, but the forces in the field wouldn’t depend on intricate orders coming from the top. They were to use their own initiative and be innovative as they went forward.

Continue reading »

Does your organization need a “no policy” policy?

Daniel Pink published an interesting piece over the weekend in The Telegraph about Netflix‘s innovative corporate policy of not having a vacation policy.

Meaning, employees don’t have a set number of days they get off each year, but instead can take vacation whenever they want. From the article:

At Netflix, the vacation policy is audaciously simple and simply audacious. Salaried employees can take as much time off as they’d like, whenever they want to take it. Nobody – not employees themselves, not managers – tracks vacation days. In other words, Netflix’s holiday policy is to have no policy at all.

This may sound like a recipe for disaster to you, but it hasn’t turned out that way for Netflix. In fact, as the rest of article highlights, not having a lot of corporate policies may be a fantastic strategy for engaging 21st century workers.

[Read the rest of this post on opensource.com]

OpenIDEO: a new experiment in open innovation

This week, those smart folks over at IDEO launched a new project they are calling OpenIDEO. If you aren’t familiar with IDEO yet, you should be—they are the poster children for design thinking specifically and 21st century innovation more generally.

IDEO has been responsible for groundbreaking designs of everything from computer mice to toothbrushes to brand experiences, and it is the home of superstar thinkers like Tim Brown (author of the recent book called Change By Design) and Tom Kelley (author of The Art of Innovation and The Ten Faces of Innovation).

What is OpenIDEO? Here’s what the website says:

OpenIDEO is a place where people design better, together for social good. It’s an online platform for creative thinkers: the veteran designer and the new guy who just signed on, the critic and the MBA, the active participant and the curious lurker.

So it is basically an experiment in open innovation, a place where IDEO can be the catalyst of a conversation among really smart folks from different disciplines that might lead to solutions for big, complex social problems.

If you are a skeptic, you might immediately wonder what’s in it for IDEO. One person asked whether IDEO planned to make money with the “crowd’s” ideas, and Tim Brown answered like this:

[Read the rest of this post on opensource.com]

MIX: Gary Hamel’s experiment in reinventing management the open source way

Of all of the people talking or writing about the future of business right now, no one has more street cred than Gary Hamel. I’ve written about him many times before, and his book The Future of Management is one of the most inspiring and meaningful business books of the last 10 years.

Last year at the World Business Forum, when Gary called open source one of the greatest management innovations of the 21st century, there was some serious high-fiving going on amongst us open source business types.

So I’ve been watching closely as Gary and a team of management superstars have launched an open innovation experiment called the Management Innovation Exchange, or MIX. In the video below, Gary explains a little bit about the goals of the MIX.

Here’s how they describe the MIX on the website:

“The Management Innovation eXchange (MIX) is an open innovation project aimed at reinventing management for the 21st century. The premise: while “modern” management is one of humankind’s most important inventions, it is now a mature technology that must be reinvented for a new age.”

From spending some time on the site, it clearly shares a lot of the same foundations as the open source way, even if the MIX folks prefer the term open innovation.

One of the most wonderful bits? The MIX is a meritocracy, where anyone can join, submit management hacks, stories, or barriers, and then collaborate with others to explore the ideas further.

[Read the rest of this post on opensource.com]

The open source way: designed for managing complexity?

This week I finally got a chance to sit down and digest IBM’s latest Global CEO Study, newly published last month and entitled Capitalizing on Complexity. This marks the fourth study IBM has done (they complete them once every two years), and I’ve personally found them to be really useful for getting out of the weeds and looking at the big picture.

This report is based on the results of face-to-face meetings with over 1500 CEOs and other top leaders across 60 countries and 30+ industries. These leaders are asked all sorts of questions about their business challenges and goals, then IBM analyzes the answers and segments the respondents to isolate a group of high-performing organizations they call “standouts.” The standouts are then further analyzed to find out how they are addressing their challenges and goals differently than average organizations.

As a quick summary (but don’t just read my summary, go download the study for free), IBM found a big change this year. In the past three studies, leaders identified their biggest challenge as “coping with change.” This year, they identified a new top challenge: “complexity.”

If you’ve been reading marketing collateral or web copy from your vendors over the past year (someone must read that stuff…) this will come as no surprise to you. How many things have you read that start with something like: “In our increasingly complex world…” or “In the new deeply interconnected business landscape…” If the marketing folks are saying it, it must be true.

But I digress. Here’s IBM’s punch line:

[Read the rest of this post on opensource.com]