Friday, December 15, 2006

being like everybody else makes you nobody

Art Forum magazine December issue Best of 2006 cover

Want to be a nobody? It's easy. All the big internet companies are doing it. How? By imitating each other. Adopting a "me too" attitude. A "conform to the competition" strategy. Being like everybody else makes you nobody.

That's good news for start-ups, entrepreneurs, and small companies. The big guys are going crazy, stupid, idiotic...rapidly dumbed down to eventual oblivion.

John Hagel III, co-author of the classic Net Gain book, is scolding Yahoo, Google, Amazon, and other internet giants for imitating the old business models that are now dead: the silly conglomerate mentality.

We HATE conglomerate asshats. We love niche companies. We actively seek the unique, eccentric, unusual, individualistic products and companies. The internet enables us to search the global commerce realm to find exact, customized, non-generic products.

Does Xerox makes cars and candy? Does Coca-Cola make guitars and shoes? Does IBM make cigarettes and chicken restaurants? Of course not. Starbucks can make ice cream, because coffee flavored ice cream is a good idea. But you'll never see Kentucky Fried Chicken ice cream, or Sony brand bread.

Brand extension is, generally, nothing but confusion, lack of focus, marketing suicide. Convergence is a curse.

But the internet giants are either greedy, arrogant, or plain stupid.

"Internet Strategy" by John Hagel III is a masterful analysis of the growing trend to try to "be all things to all people". It's so good, please bear with me in quoting a huge chunk of his blog post.

Faster movement is dangerous if you have no sense of direction.

It just means you do more things more quickly, spreading that peanut butter even more thinly. To paraphrase an old quote by Casey Stengel: “if you don’t know where you are going, you will never get there.”

And let’s not just single out Yahoo. I have a growing sense that all the major Internet players – Google, MSN, Amazon, Ebay and AOL – have lost their sense of direction and differentiation.

Rather than carving out and rapidly enhancing areas of distinctive advantage, these major players appear to be leaping like lemmings into the red ocean. Here are some of the red flags that give me cause for concern:

* Rather than helping people to connect more effectively with resources across the Web, they all seem increasingly focused on aggregating their own resources.

* They are becoming more and more obsessed with advertising revenue and risk losing focus on what is required to add more value to users. Advertising revenue is a dangerous narcotic – it shifts you more and more into a vendor mindset rather than a user mindset.

* They are investing large sums of money on infrastructure, further diverting time and attention away from development of new services for users (infrastructure services like Amazon’s EC2 and S3 are a very different business).

* They seem to be looking more and more at each other and trying to replicate each other’s services rather than focusing on the user and trying to be truly innovative in terms of new services.

Now, this growing homogenization of the leadership ranks might be understandable if the Internet were a maturing business arena.

Given the rapid and sustained pace of innovation in the underlying technology, the rapid growth of usage, the continuing shift of spending to the Internet and the proliferation of new businesses created on the Internet, I find it hard to characterize this space as “maturing” – my sense is that it is still in its infancy.

Some observers have even begun to hail the emergence of “Internet conglomerates” as the wave of the future. Looking from the outside in, one can make explicit the assumptions that seem to be driving the investments, business initiatives and strategies of these leaders.

These assumptions seem to converge on this view of the future: leading companies will be vertically integrated and horizontally integrated, offering a broad range of their own resources to users who will “settle” into their spaces. Certainly, the strategies of these companies seem to assume that Internet conglomerates are the wave of the future. Is this really the way the Internet will evolve as a business platform?

As I have written in Harvard Business Review, I believe that a quite different future will unfold, marked by a distinctive process of unbundling and re-bundling of firms. This perspective suggests that all the Internet leaders confront the same difficult choices that more traditional companies also face.

Over time, will these companies choose to be customer relationship businesses, product innovation and commercialization businesses or infrastructure management businesses? None of the Internet leaders appear prepared to confront these choices yet.

Of course, there’s another interpretation of the initiatives pursued by the Internet leaders.

They may be explicitly avoiding any view of the future and instead spreading their bets across many initiatives in the hope that some of these bets will pay off while others will prove to be dead-ends. Nick Carr refers to this as the spaghetti strategy – “throw a lot of stuff against the wall and see what sticks.”

As uncertainty increases, this has become the preferred “strategy” of many companies, not just in the Internet sphere.

While strategy used to be viewed as the discipline of making choices, this approach proudly rejects the need to make any choices. It is a particularly seductive approach for large companies with lots of resources.

And yet this approach stands in sharp contrast to the strategies that enabled the Internet leaders to carve out their leadership positions in the first place.

Unlike the thousands of other start-ups that embraced hustle as strategy and speed without direction, the founders of these companies started with a very clear, even though high-level, long-term destination in mind.

It helped them to make difficult choices in the near-term and to launch waves of initiatives that cumulatively built very large and successful businesses. It has stood them very well in the first decade of their business.

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