The Narrative Lessons of MoviePass

Some stories just can’t end well.

At one point on the Brilliant podcast, we touched on the story of MoviePass, the app-based subscription service that, at least originally, let moviegoers see one movie a day at the theater for one low monthly fee. To say the service has been experiencing growing pains, of late, would be a generous characterization. If you didn’t listen to the podcast, spoiler alert, I don’t believe they’re going to pull out of their very public tailspin. And it’s not because of their numerous, recent, also very public, customer service missteps.

When you start evaluating the MoviePass through the lens of Narrative-Based Innovation, it becomes clear that had MoviePass taken the time to develop a detailed narrative—walking through the consumer buying process and exploring the purchase setting as well as the emotions and motivations of the process—the story just doesn't hold water.

The customer as protagonist

In our full process, we would create detailed narratives, naming our protagonist(s), examining their environments, broader day-to-day experiences, nuanced decision-making processes, et al. But for the purposes of this post, I’ll simply outline the basic and obvious inputs and outputs that would go into the story. In the case of MoviePass, it really should suffice.

Whether we choose a casual moviegoer or a diehard theater patron as our protagonist, once we examine consumer habits, it becomes difficult to draft a narrative where MoviePass makes much sense for most consumers.MoviePass has undergone a number of pricing/service incarnations since its founding in 2011, each apparently losing money.

However, the most notoriety came in August of 2017, when MoviePass introduced a plan priced at $9.99 a month, where users could see up to one movie a day. Which, if you don’t stop to examine the real-world use cases, seems like quite a deal. But as we begin to write out the narrative of average users, the economics seem less appealing.

Americans attend, on average, a little over five movies a year at the theater. Unless you assume our protagonist’s consumption rate would double, it’s difficult to craft a successful customer journey narrative that doesn’t require massive leaps in logic. Even at double the average rate, MoviePass is still ultimately a money-losing proposition for most consumers. Not surprisingly, it also proved a money-losing proposition for MoviePass. Why? Allow me to speculate a bit.

In general, I believe markets are rational. Meaning that casual moviegoers did the math on the $9.99 plan and realized it would cost more than simply buying tickets whenever they wanted to see a movie. So, who signed up? Heavy users who are, also good at math, and, in fact, getting more than they pay for in comparison to simply purchasing movie tickets ad hoc, movie by movie, theater by theater.

The downside for MoviePass was that they were paying the theater full price for every ticket, which was as high as $15 in major metro areas, regardless of what the user paid.So, the only purchase stories that made sense to consumers seemed not to offer any possibility of a happy ending for MoviePass. The truth of which we will see laid out below.

Sidebar:

Source: https://www.marketingcharts.com/wp-content/uploads/2014/01/Harris-Americans-Movie-Going-Trends-Jan2014.png

MoviePass — a script that should have never made it out of development

Over the course of the company’s history, it’s fair to say, MoviePass could never get its story straight. It struggled to sign up 20,000 members at its original $30-per-month movie-a-day offering. But the membership quickly ballooned to over a million after MoviePass lowered the fee to just $9.99 per month in December of 2017.

The story MoviePass was spinning amongst the press was that while they were losing money on every ticket, they would eventually make up in selling user data.But again, that story requires a massive leap in logic. By comparison, at the end of 2017, Facebook was generating roughly $6 per quarter on every user. That would imply that if MoviePass were ever to become cash flow positive, its members would need to be at 8 times as valuable to advertisers as Facebook users.

Projected Facebook revenue per user per year = ~$6.18 (per quarter) x 4= $24.56

Hypothetical MoviePass cost per user = $8.90 (average US ticket price, 2017) x 3 (movies per month) x 12 (months) = $320

MoviePass revenue per user @ $9.99 (per month) x 12 = $119.88

---

Net income per user                                                   -$ 200.12

Which, should explain why MoviePass is burning through nearly $73 million a month.

Pay no attention to the man behind the curtain

In an August 15th, 2018 letter to MoviePass members, Mitch Lowe, CEO, tried to quiet members’ fears or anger at the company, saying:“The truth is, disruption and innovation require staying flexible and having an open mind.“

The response that popped into my mind was, yes, keep an open mind, but not so open that your brains fall out. The company portrays itself as the hero in an epic, when it is, from the outside, looking more like a tragedy. 

Narrative-Based Innovation, Part 4: Three Compelling Uses for Narrative Based Innovation

The more unfamiliar the destination, the more a strong narrative adds value.

In the previous post in this series, we talked about the value of narrative storytelling in the innovation process. In this post, we’ll cover what types of projects benefit most from this approach and why.

Evaluating when and why this approach makes sense is actually fairly simple. The greater the unknowns, the greater the value of a story. A design thinking exercise around refining an existing product category will benefit from storytelling, to be sure, but not as much as design thinking around creating an entirely new category altogether.

The narrative is the first prototype.

A great innovation narrative immerses the reader into its world and allows for the detailed exposition of the desired interactions, features and benefits using no more technology than the written word. In this, the last installment of our four-part series on Narrative Based Innovation, we cover the three most compelling uses and explain how we use storytelling to accelerate and mitigate risks within the innovation process.

One: Innovating new products and services

Innovating new products and services is the classic innovation application. And storytelling, in some sense, has always been a part of this process, usually establishing context or framing need. But in Narrative Based Innovation, storytelling takes on a more substantive role.In Narrative Based Innovation, the story is far more detailed, documenting a journey through the user experience, documenting the functional and emotional requirements of an innovation long before any design or technology resources need be applied.  For example, with additional depth and clarity a detailed narrative brings to a concept, an engineer can better envision the full experience and purpose of a new product or service as they focus and prioritize efforts. Management can more quickly and clearly articulate across departments or to the board, not only what the new product or service is, but how it will be experienced by customers. And sales teams can familiarize themselves with real-world use cases before they actually occur.

Two: Expanding into new markets

The main view of Microsoft: BOB

So, you’re considering promoting innovative new uses for your product or service. After you’ve performed all necessary quantitative evaluations of a potential market expansion (e.g.: market size, price elasticity, cost of customer acquisition, just to name a few), incorporating those details into detailed customer journey narratives, complete with exploration of intent, desire, and need can give you a better sense whether those numbers are a conservative estimate or wishful thinking. Can you draft an obviously believable story? Or, does the exposition of the user journey require dubious leaps of logic?

For example, in 1995 Microsoft was looking to expand the audience for personal computers by creating a more friendly, limited-option interface called, “BOB.” On the surface, it makes sense. There was a large segment of the population who were casually interested in computers, but were intimidated, confused or uninspired by the existing Windows desktop interface. But had Microsoft taken the time to develop a detailed narrative, walking through the consumer buying process and exploring the purchase setting as well as the emotions and motivations of the process, I have to believe they would have not launched.

For context, in 1995, presenting the animated BOB interface actually required more computing and graphics horsepower than presenting the standard Windows interface. Further, BOB was sold shrink-wrapped in a box at a cost of $99. In effect, the company was betting that a casual user, heretofore unable to mentally justify the purchase price of a low-end standard computer would actually pay a premium for a more powerful machine, plus the additional price of the BOB software for an end result that offered a more limited computing experience. The leaps of logic necessary to make that journey believable are, at best, heroic.

Three: Exploring viability of entirely new behaviors

Unlike the previous use case that involves innovating new uses for existing resources, this is about exploring the viability or feasibility of new behaviors altogether. Let’s take, for example, the recent explorations in the ride-sharing space where ordinary folks, through a mobile app, offer their personal vehicle up for rental to, or rent from, total strangers.

Using Narrative Based Innovation as the innovation framework, long before prototyping an app interface or building out a business proforma, you would craft a series of detailed narratives that explore the motivations, risks, opportunities and threats involved. The act of detailing the behaviors can continue to refine and accelerate the modeling and iterating of the user experience, as well as help accelerate the building of a consensus vision for the future among stakeholders.

It’s always about perspective

If we have learned anything from science fiction and fantasy writers through the ages, it is that when we create a compelling enough vision, technology finds a way. And Narrative Based Innovation is about taking time to explore, iterate, test and refine that vision as much as possible, at the most human-centered experiential level, so when the final narrative presents a truly compelling vision, the path from concept to offering appears straight and obvious.

Narrative-Based Innovation, Part 3: Elements of a compelling innovation story

All great stories follow a similar arc

H. Porter Abbott, a professor emeritus in the English department at the University of California, Santa Barbara, calls the preference for linear storytelling “a fundamental operating procedure of the mind.” (1) At around three years old, our brains begin to compartmentalize sensory information from the world around us into the components of an ongoing narrative, with each of us at the center. He says, “We view our lives as a series of actions, causes, and effects that together form an ongoing story.”In his seminal work, “The Hero with a Thousand Faces”, Joseph Campbell lays out the basic structure most (if not all) great stories follow.

The hero’s journey, as Campbell calls it, follows a predictable story arc that (I’ll summarize) presents our humble protagonist as an ordinary citizen, reveals a great secret, introduces them to a mentor that calls our hero to fulfill a destiny, then follows that hero on the journey of discovery, challenge and conquest, and ultimately home to a world, and the hero, now forever changed.

In the third in this series of posts, we’ll cover some of the ways we use Campbell’s framework as the jumping off point for the narrative innovation process.The framework of Joseph Campbell’s Hero’s Journey helps to create a more compelling narrative foundation for ideating and innovating new products and services.

Innovation stories place the user as hero

In any innovation story, the most important element is your customer or user—a.k.a. the hero. Where did they come from, who are they, and why are they the way they are? What human needs and desires are as yet unmet in their world. Or, better yet, in what aspects does their ordinary world cry out for an extraordinary experience?

To truly empathize with our hero, we rely on myriad quantitative and qualitative research methodologies: focus groups, ethnographic research, interviews, reading everything and anything about their sources of joy and misery, studying their aspirations across other categories, and how they talk about those challenges.

Ultimately, you want to create a fully dimensional character sketch with as much physical detail and emotional motivation as possible. The more your innovators feel they know and understand the hero, the more likely they solution you create will have personal and emotional value to the user in the end.

Imagine your business or brand as the mentor

In Campbell’s framework, the hero always encounters and befriends a mentor, e.g.: Gandalf, Obi Wan, Dumbledore, Willy Wonka, etc. This mentor has the responsibility of not only revealing the true nature of the world to the hero, but also helping the hero to understand how, with the mentor’s guidance, they can accomplish something extraordinary. A great innovation story positions the brand as a force in service to the user. It’s not unlike Clayton Christensen’s “Jobs to be done” perspective on branding.

Define the quest

It’s easy, and all too common, for companies to define their customers’ challenges in terms of the products they sell to them. But a great innovation story defines the challenge in human terms. Improving self-esteem. Heightening satisfaction. Reducing anxiety. Empowering growth. Improving social or emotional interpersonal connections.

An emotional foundation to the definition of the challenge allows for greater creativity and freedom of exploration in the ideation stage. In the end, it should also lead to innovations with greater emotional resonance for the hero.

Build the world revealed to them

Crafting a world detailed enough to inform the innovation process, you’ll need to understand what new products and services are on the horizon, and how analogous products have changed your target segment in the past.

We often leverage the collective intelligence of futurists, trend experts, industry experts, internal and external strategists and key internal stakeholders from within our clients’ organizations to begin to build a working model of the world, “at launch.” How far out that world is, chronologically speaking, depends on the time horizon of the strategic vision as well as the traditional development cycle of the business.

In crafting the model of that world, project how key factors (economic, cultural, generational, social, technological etc.) that influence our hero’s journey in relation to the problem you are trying to solve, may change. Document what new opportunities will result from the progression of those trends. Then, incorporate the most relevant aspects of those features into your innovation story.

Explain the magic your next product or service will create

In every hero’s journey, the mentor reveals some hidden and powerful magic to the hero. In your story, detail the ways in which the hero’s life will be enhanced by meaningful encounters with your business or brand. The point here is to define the emotional requirements of the solution in terms of benefits, not features, and their relevance to the hero’s journey.

You don’t need to spell out the specific tools, products or services, that comes later. Obi Wan helped Luke trust The Force. Willy Wonka helped Charlie rise above the seven deadly sins. Dumbledore helped Harry understand the value in self-sacrifice. It’s these big-picture issues, once understood, that make evaluations of the value various ideas generated much less subjective.

Write your innovation story

Once you have all of the elements defined, it’s time to develop the actual narrative—the story of the hero, facing challenges in the world you created. We’ve seen that the more realized and dimensional you can make that world, the more numerous, compelling and innovative the resulting ideas will be. And that, makes all the difference in the world. 

1. https://www.theatlantic.com/health/archive/2016/01/linear-storytelling-psychology/431529/ 

Narrative-Based Innovation, Part 2: Why storytelling matters

Sometimes, words are worth a thousand wireframes

Before we ideate. Before we prototype. We write stories. These stories are detailed narratives that walk through the user journey, step by step, annotated with context, motivation and expectation. Why take the time with this step? Because it helps us to more efficiently and effectively create truly unique and delightful user experiences.

In this, the second in a series of posts about narrative-based innovation, I’ll cover why I believe stories should serve as the foundation for exploring new concepts and ideas at every step.

Story is the best way to generate, evaluate and communicate complex experiences

Stories are the basis for how we learn. Previous generations have always passed down important information to the next generation through stories. You can apply these same storytelling principles to create a deeper understanding and empathy with customers, to solve their problems, and help organizations rally around that vision.

Stories convey vision without a limiting design

During the initial ideation and brainstorming phase of development, a well-crafted story can convey all required or desired points of interaction without unduly limiting a designer's imagination.

Stories document emotional expectations

If a technical spec conveys how an experience should be physically coded and deployed and a functional spec conveys the interactions that code should facilitate, a story can be thought of as the emotional requirements documentation. What points in the user journey should elicit joy or delight? What points require thoughtful decision-making? Which offer relief?

Stories can present future innovations unconstrained by current limitations

The process of storytelling gives us the freedom to envision a radically disruptive user experience that may seem to be beyond currently available tools or resources. I believe that if you can create a compelling vision, technology eventually finds a way.

Storytelling forces prioritization

A story is a roadmap for the visual hierarchy to come in the final experience design. Those interface items or experiences that are critical to forwarding the narrative should, in theory, be featured more prominently in the final UX design. Those elements that are unnecessary to the story should be minimized or considered for removal entirely.

Storytelling exposes the holes

The simple act of clearly describing a user’s journey through an online experience forces the author to resolve abstractions in the requirements.

If you can’t explain it to a 6-year-old…

Simply put, the act of creating and communicating a story that anyone understands and follow forces clarification of thought. In the design process, a compelling story inspires exploration of new ideas, untethered by perceived organizational or technical constraints.

Ultimately, if the story you craft cannot engage, inspire and motivate your customers and employees, the end product probably won’t either. 

Narrative-Based Innovation, Part 1: What is narrative-based innovation?

A narrative-driven approach to design thinking

Stories are the fundamental way we learn and connect emotionally, as people. The narrative-based innovation process applies detailed storytelling to traditional design-thinking in order to create a deeper understanding and empathy with customers, create and communicate a more compelling vision of how to solve their challenges, and deliver more engaging user experiences.

In this first in a series of posts about this approach, I’ll cover how and why to take an already powerful concept—design thinking—and integrate it more deeply with storytelling.

The specific steps in the process are fairly standard

But the process and deliverables are designed to quite literally tell a more compelling story

 Empathize

Embracing our customers as heroes

This immersive, curiosity-fueled step allows us to understand and document the first chapter in the story. We introduce our heroes with detailed, dimensional personas.Brought to life with stories that reveal who they are, we unveil what rational and emotional motivations affect their behaviors. We weigh the resources and constraints that affect their decisions. And we pore over the joys, frustrations and hardships they experience as they travel on their daily journeys through the world. 

Define

Expressing our heroes’ needs

We define the challenge we will solve for our heroes, not by listing technical or functional requirements, per se, but by declaring as our goal the emotional requirements—the way we wish our heroes to feel about themselves and their world after engaging with our solution.

In this narrative framework, that means presenting that challenge in our heroes’ voices. That could be a call for help, an emotional need, a want or need of a desired outcome, or all of the above.

 Ideate

Imagining a new world

To generate the greatest number of viable solutions to the challenges our heroes face today and into the future, we leverage the collective intelligence of futurists, trend experts, industry experts, internal and external strategists, and key stakeholders to brainstorm solutions at scale.Through a guided process, we move from the unhindered expression of hundreds of concepts to the prioritization and deep development of the most viable solutions in a very short time.

The best solutions are demonstrated and tested through, and documented within, idealized stories of our heroes’ encounters and engagements with our solutions, and the resulting outcomes. 

Prototype

Forging the solution

We prototype and iterate, early and often. This is trial by fire. We bring the best ideas to life through low-, medium-, and high-fidelity prototypes and test them in the hands of people.  It is the only way to truly craft and refine real-world solutions that evoke emotional connections and outcomes equal to those documented in our idealized narratives. 

Test

Measuring success

Finally, we bring innovations and prototypes to life, launching the story throughout the organization and experiences to our real-world heroes—customers. Every concept, every experience, active and measurable.Whether we’re launching an internal vision communications piece, a live market beta test, or a communications campaign, we know the story is successful when stakeholders and customers become not simply participants, but evangelists.

It’s never a technology problem

Real innovation doesn’t incrementally improve an existing behavior, it presents new opportunities entirely. If we can first envision and map out a more satisfying emotional experience, ultimately technology finds a way. And our narrative-driven approach to design thinking ensures that emotion is addressed and prioritized at every step.

Looking For a Path to Growth? Change Your Perspective.

Whether simply beginning to map out long-term product or technology roadmaps, examining areas of exploration or innovation, analyzing channel strategy or simply wanting more from existing customers, every company would be well served by asking

What are my customers really buying?

The first big mistake most companies make is believing their customers are buying a thing—a specific product or service. Meaning, your basic widget manufacturer thinks they are satisfying a consumer's desire to own a widget. That frame of mind works well enough in most cases. You can survey the market fairly efficiently and determine the total current market for widgets. You can do a bit of google searching and know how many other widget manufacturers are out there. And finally, you can do a bit of math and quickly determine getting more or less of your reasonably fair share of the market. The problem with that perspective is that it tends to limit the range of growth ideas to those defined by their widgetness. Better widgets. Bigger widgets. Cheaper widgets.

Harvard Business School Clayton Christensen views consumer transactions from a different perspective. In his book, Competing Against Luck, Christensen posits products are not purchased, but rather “hired” by the customer to do a specific job. And if a company can unravel the relationship, it gives them more and better avenues along which to innovate—creating better candidates for the available job.

One example he cites in his classes at HBS is that of a milkshake company that hired Christensen and his team to help boost sales. Through a series of post-purchase interviews with customers at the milkshake purveyor’s retail outlets, Christensen was able to determine that for most buyers, the job the milkshake was hired for wasn't sustenance or even pleasure, per se, but rather a distraction during a long commute home. That the physical challenge of pulling a thick shake through a straw was the perfect distraction to help make the long drive more tolerable.

The company used that insight to create a new line of shakes, both thicker to last longer, and more entertaining through the addition of fruit chunks and other bits to deliver additional joy and keep drivers more “shake engaged.” Changing perspective and understanding what their customers were really buying—entertainment and distraction—opened new avenues for product innovation and growth.

Does my business really have to work this way?

The second big mistake many make is assuming the way you’re currently doing business is the right way and that the logical path to follow leads to doing more of it. As soon as you resign yourself to a specific channel strategy, technology platform, distribution model, et al, you close yourself off to potential opportunities and open opportunities for new market entrants.

Case in point: Casper mattresses. Prior to Casper, the mattress retail experience adhered to a few fairly strict experience guidelines. First, the buyer had to be able to try out the mattress in a retail showroom before purchase—usually under the watchful eye of sales associate. A mattress was too large a purchase to make blindly. Adding to that risk was guideline number two—retailers would do just about anything not to have to take returns on mattresses. And three, selling mattresses direct, online, wouldn’t be financially viable, due to the shipping costs.

In 2014, Casper turned literally every aspect of the purchasing process upside down. The mattresses ship to a customer’s doorstep in a highly compressed in a box of only 19 x 19 x 41 inches—keeping shipping reasonable. Customers are free to sleep on the mattress in their own home for 100 nights. If they return it, Casper picks it up and donates the mattress to a local charity. Truly a disruptive entrant. An article from Fortune nicely encapsulates the dangers of the incumbent being too wedded to their model:

At first, big mattress companies dismissed the “bed-in-a-box” trend as a niche phenomenon, hardly worth acknowledging; but that was before the startups grabbed 9% of U.S. market share. In August 2016, Sealy launched Cocoon by Sealy, a bed-in-a-box brand boasting minimalist fonts, an uncluttered scrolling webpage, and a price point half that of Casper’s. “It’s been a delayed reaction, but now they all have bed-in-a-box products,” says Seth Basham, senior vice president of equity research at Wedbush Securities. As for Casper, Basham adds: “They’ve already got a foothold. Now it’s a matter of how big they’ll grow.”

In what way are you failing customers?

Sometimes the toughest act for a company, or an entire industry, is to take a honest look in the mirror and document the flaws, warts and all. That means really taking the time to understand the end-to-end customer experience and cataloguing every point of friction, pain or frustration. Then looking at those points and asking, “If these flaws, no matter how insignificant they may seem, were critical enough to put me out of business tomorrow, how would I, and to what effort would I put forth, to solve it?” History has shown US market entrants who address issues that companies imagined were trivial can radically alter the competitive landscape. Sometimes that thing can be as small as an emoji.

Starting in 2010, Domino’s Pizza started looking in the mirror and being honest about what it saw, or rather, tasted. It admitted that its pizza was, shall we say, “less than tasty.” So, their first action was to admit it. To themselves and to the world, through their advertising. The second, was obviously to reformulate. Setting aside whether you subjectively agree that the outcome of that reformulation was an improvement, objectively the market began to take notice.

Continuing the examination, Domino’s started to look at every aspect of the ordering experience, leading ultimately to what I would say is the most frictionless ordering experience in their industry, the emoji order. Once you are in their system, your mobile number registered, the only thing between you and a fresh hot delivered pizza is one texted pizza emoji.

Was ordering a pizza via phone, the web, or a mobile app really a “fail”? Easy enough, right? Maybe. But given the number of pizzas ordered by those under the influence of any number of chemical substances every year, something as simple as an emoji just might substantially increase their chances of a completing that order successfully. And it’s a pretty entertaining experience for everyone else, too.

And addressing those seemingly minor, “fails,” has had a major positive impact on their stock price.

Ultimately, try to think like a customer… from another planet.

It’s never easy to see past our experiences or biases. But when a company can be deliberate about the process of self-examination and inquiry, and take on the perspective of an objective observer, opportunities reveal themselves.

How to Compete Against "Good Enough"

Consumers increasingly expect good, fast and cheap. As new technologies lower barriers to entry to many industries, the price/value equation skews dramatically toward the lowest margin position, and often consumers feel like they can find a satisfactory mix of good, fast and cheap. Or, at least, “good enough”. And, when this happens, all too often the incumbent players in the market either don't see the threat looming or they dismiss it as inadequate, until it’s too late. Let’s see what lessons we can learn when examining the rise of YouTube over the past decade and a few competitive responses from within the television industry.

“Good enough” never looks threatening, at first

Imagine you were a television producer in 2006 and someone showed you this:You couldn’t be blamed for dismissing this new user-generated video phenomenon as no threat to your business model. But as the technology quickly and continually improved, and high-definition cameras were built into nearly every mobile computing device, production quality formerly reserved for local broadcast television stations was suddenly dropped firmly the hands of virtually anyone who had the desire and time to create video content. Game on.

“Good enough” emerges at unappealing scale

When this field of new creators was unleashed on us all, they didn’t even come close to commanding the kind of viewing audiences of even the worst performing show on the worst performing cable TV channel. But most of them, fueled by creative passion, would have posted videos for no audience at all. And, as passion is at times contagious, some of those audiences became large enough to generate ad views and commensurate real life-enhancing, if not sustaining, income. The opportunity attracted more and more creators who were serving more and more niche markets with more and more content. This eventually resulted in a critical mass of tagged, related and suggested content that was capable of keeping a viewer discovering and engaged for hours at a time. And more critically for our aforementioned television executive, these creators began to influence the default viewing behaviors of the new generation who were growing up online.

“Good enough” chips away at traditional markets

As Gen Z grew up watching online video—most of it firmly entrenched in the “good enough” level of production—the connection to traditional television waned. In fact, more than 50% of GenZ can’t live without YouTube. And, according to a poll published in 2016, 30% plan on cutting out cable television services altogether.

Three smart responses to “good enough”

The democratization of technology obviously isn’t limited to video creation or consumption. This type of threat can affect any industry. But the following three strategic responses by incumbents within the video industry can serve well as templates for just about any industry.

1. “Mind the gap”

   Facing the flood of ubiquitous, shareable, “good enough” video content, industry behemoths HBO and Netflix have doubled down on quality and exclusivity. Further, HBO broadened its distribution, first, via the HBO GO app tied to its traditional cable subscriptions and eventually to HBO NOW, an app-based subscription that requires no accompanying cable TV subscription.Netflix, followed a parallel path to HBO, pivoting from a content distributor to a content creator with exclusive series like the Emmy Award winning House of Cards, Orange is the New Black, anda number of Marvel-Universe-based superhero shows, just to name a few.

   The main takeaway here is that when barriers to entry become low enough, any market will inevitably become flooded with competitors at the low end. A clever tagline or ad campaign in most cases won’t help you protect your margins. A more viable position is to, in effect, re-raise the barrier to entry. In the case of HBO and Netflix, that was the level of production value/expense, but the idea applies to any business.There is no shortage of online retailers competing on price and selection.

   So, Amazon raised the barrier by investing in logistics and distribution. There is no shortage of providers of homeowners insurance, so Lemonade invested in machine learning and AI to deliver an unprecedentedly easy purchasing experience. When the market gets “cheap”, invest in creating a differentiating, difficult-to-copy advantage.

2. “Do as the Romans do”

   When early YouTube users started uploading snippets of their favorite TV shows, movies and music, the initial (predictable) response from copyright holders was to try and shut it down through DCMA notices, etc. Over time, some of the more progressive copyright holders realized may of these posts could be used to promote more traditional outlets of their intellectual property, as well as working with YouTube to help monetize those uploads through advertising revenue.

   In this strategy, the smart move was to look for ways to use the momentum of a seemingly overwhelming force to profitable advantage. If the threat looks like an infinite game of whack-a-mole, you’re better off dropping the sledgehammer and putting some corporate swag on the mole and using it to hawk your wares.

3. “Keep your enemies closer”

   In the end, numbers are numbers, and large audiences command real advertiser dollars, which in turn attracts the most deep-pocketed of incumbents. In 2013, DreamWorks Animation paid $33 million for YouTube channel AwesomenessTV. Warner Bros. placed an $18 million bet on YouTube video game channel Machinima. Even Disney eventually placed $950 million down on Maker Studios, best known at the time as the company behind "Epic Rap Battles of History" and (the now highly controversial) PewDiePie.

   While this strategy can be, and has been, successful, waiting for an emerging market to mature and then purchasing an emerging competitor, already standing at the end of well-worn path to success, can reduce market uncertainty, but you should be aware that confidence inevitably comes at a premium price.

Incumbent, disrupt thyself

Ultimately, the smartest strategy in the face of emerging technologies is to always ask one question, “How could a new market entrant use this to disrupt my business?” Then, do that. If you don’t, eventually someone else will.

Apple just killed the Macintosh.

It’s day one of the future… again.

As I write this, Apple just finished day one of their 2017 Worldwide Developer Conference (WWDC). And day one always means the Keynote. In its simplest interpretation, the Keynote is is a vehicle for showing the latest, greatest and soon-to-come hardware and software from Apple. But as most tech industry pundits will tell you, it’s also where Apple telegraphs its opinions on the direction of personal technology markets. While this most recent Keynote seemed unremarkable on the surface, it signaled some massive shifts in opinion as to where Apple sees markets heading. Here’s my interpretation of what I think they were saying.

Apple is ready to kill the MacOS

iPad-multi-tasking

This won’t happen this year, or the next. But it is happening. Watch the demonstration of iOS 11 on the iPad Pro. Despite Apple’s claims for the past two years that the iPad pro was a laptop replacement, yesterday’s demonstration was the first hint that their vision may actually be viable. To that end, two major hurdles were overcome. The first was drastically improved windowing/multitasking. The second was a user-manageable file system.Previously, if you wanted to add a photo stored on your device to the body of an email, you would need to traverse a complicated export and transfer data function that took no less than four or five taps and a number of screen transitions and modal dialogue boxes. With iOS 11, you should be able to drag between visible windows just as you can currently on any desktop OS.

Multitasking on the iPad finally looks useful.

The Files app, basically an “appified” version of the Finder from MacOS, lets users see, move, duplicate and delete their files manually. Previously, this required connection to a desktop or laptop computer running iTunes. Further, files were generally sandboxed within each application. If you created a sound file with one application, you couldn’t easily open that data within a complementary application on the device without, again, performing a convoluted export-and-open maneuver that would result in duplicated data.

Theoretically, as apps are updated, users would be able to open files created with any app directly from Files and start working. The larger question is what happens then to the Save behaviors in iOS? The lack of direct file management enabled the “no-menu-bar-never-hit-save” UX design inherent in the iPad now. We will have to see if this paradigm is still viable. I am guessing not.

Video Block

Double-click here to add a video by URL or embed code. Learn more

File management no longer requires a computer.

Combine those two important additions with the less important but highly visual addition of a MacOS style application dock and it clearly highlights a trend of slowly introducing desktop OS functionality into the iOS line. There were a number of other “killer” features added to iOS, but those two updates mark a significant shift in how Apple is positioning the future of the platform.

The new Macintosh updates

The truth is, the Macintosh line represents about 10% of Apple’s annual revenues...and that share is shrinking. To say that, strategically speaking, Apple has paid less and less attention to the Mac lineup is being kind. And yesterday’s updates, despite giving Tim Cook a bit of cover for his next analyst call, did little to dramatically improve that perception.The MacBook Pro updates are nice, however they displayed nothing truly innovative or revolutionary. The new machines introduced last year’s processors, with the same 16GB RAM limit, no significant improvement in battery life, and slightly bumped under-spec’d graphics processors.

Despite Apple’s claims of massive speed increases, the truth is those percentages really only applied to the lower models in the tier. The laptops still cannot be used for VR consumption, let alone development, and will remain brutally slow to render any complicated video compositing. The external graphics card breakout box is a nice albeit kludgy solution to that issue, but that means it’s only fully useful when tethered. Hardly a true portable workstation.

The new iMacs were also nicely bumped in terms of power, but still lack any real compelling innovation story. As for the new iMac Pro, it seems built to placate Wall Street analysts who have been questioning Apple’s lack of vision at the high end. There’s no question the power is impressive. But the issues with the current Mac Pro (which has not been updated since 2013) centered around its lack of incremental upgradability, i.e. lack of removable graphics card, remain. It’s hard to blame Apple though for lack of focus on this segment.

The $5,000 starting price means that the machine represents a sliver of the user base. It’s yet to be seen how the ‘real’ Mac Pro update expected for 2018 will improve this issue. Personally, I’d rather pay $4,000 for a RAM and GPU loaded screen-less desktop and attach it to an 8k monitor. That, to me, would qualify as a professional setup. But even if Apple creates the most powerful professional desktop workstation possible, the Macintosh will still be on death watch.

The trigger has been pulled

The only real question is, how long will the market outrun the bullet? Steve Jobs once said that general purpose computers would become the pickup trucks of the industry. They’re specialized tools for doing proverbial heavy lifting—not the inevitable and necessary center of every home as we were sold in the 90’s era vision of computing. And that’s true. In the long run, in a world increasingly made up of cloud services, real-time streaming content and AR-fueled world-as-interface, the entire category of desktop and laptop computers is an anachronism.

There is little question that, for now, the more locked-down, service fueled iOS is better suited as a platform to drive revenue in an always-connected, real time fee-for-services environment.What should be even more interesting is whether Apple can maintain their current level of dominance as we enter the next wave of our connected future—where hardware and devices as we know them becomes superfluous. But further speculation on that topic will have to wait for another day.

If you’re looking for intelligent ways to enhance your marketing strategy, integrate new technologies, or improve your customer experience,

contact us

. Or, click around our site to see all of the other ways we help we help our clients outsmart, outmessage and outmarket larger competitors, to steal their most profitable customers.

Riding the Wave of AI

The wave of automation and AI disruption is coming. Is your business ready to ride?

We see new advances in digital automation and artificial intelligence (AI) nearly every day. Much like industrial robot technology reduced the number of available manufacturing jobs in the U.S. in the 1980s, the combination digital automation and AI is poised to disrupt virtually every industry at some point in the coming decade. The question is how can you position your company to be the disruptor, not the disrupted? 

Ask how a competitor using advanced AI could beat you at your own game.

Diagram your complete path to purchase on a white board. Evaluate every part of your business for any moment along that path where automation or AI facilitated decision-making could reduce process time, costs and user frustrations. Also look for any part of your path to purchase where customers drop off or fail to convert, and try to re-imagine those points with AI or automation assist. Take time to explore emerging technologies that could directly or indirectly affect your market, long term.Now, look at your market and ask, regardless of organizational, technical or monetary constraints. What would the ideal experience for the majority of your customer look like? What do your customers value/like/dislike about everyone’s current offerings?Finally, get your smartest people—from operations, sales, marketing, admin et al—and design your worst competitive nightmare. What special expertise would they offer? What advantages would they have over your business? How would they price? What capital expenditures would they need to build their infrastructure, I.T. or facilities? 

Figure out what it would take for them to get off the ground.

Once you decide how your new competitor would operate differently to steal your business, try to document what it might take to get a company like this going. What resources would be needed? What infrastructure would be required? What would the employee mix look like? How quickly would they be able to steal your business? How could they offer a parity or better product or service than you do now, cheaper than you can? 

Create a script outlining what they would say to sell against you.

Be brutally honest. Talk about where your business is vulnerable. Ask what potential benefits of this new competitive offering that your customers would respond to that you aren’t able to match. 

Surprise, you just outlined a business plan.

In those three (obviously multifaceted) steps, you’ve outlined the product/service design. You’ve begun to outline a viable financial model. And you’ve laid the foundation for marketing and sales messaging. 

Remember: if you can imagine this, so too can a real competitor.

With every new technology, it’s only disruption when you’re the incumbent. For everyone else, it’s simply opportunity.