26 October 2005

The Failure of the ROKR in a UCaPP World

Wired has a great article that describes the structural failure that leads to the market failure of Motorola’s ROKR music-player-mobile-phone device. By structural, I’m referring to the incongruities and seemingly unresolvable conflicts among the interests of Motorola (supplier of the handset), Apple (supplier of the music licensing via iTunes), music labels (supplier of the licensed music), and the mobile carriers (supplier of the bandwidth).
When Jobs and Ed Zander, CEO of Motorola, announced 15 months ago that the two companies were going to partner on a new phone, people imagined a hybrid of two of the coolest products in existence: Apple's iPod and Moto's RAZR. For months the new gizmo glimmered mirage-like on gadget sites - ever promised, never delivered. When it finally did show up, it bore the unmistakable hump of a committee camel. Not sleek like an iPod, not slim like a RAZR - and when you saw the fine print, you discovered that you can't use it to buy music over the airwaves, that it's painfully slow at loading songs from iTunes on your computer, and that it comes pre-hobbled with a 100-song limit. No matter how much of its 512 megabytes of flash memory you have left, you can't load any more tracks onto the thing. The consensus: disappointing.
Not to mention the small detail that, going through iTunes, the customer bypasses the mobile network carriers’ “tollbooth” – the same carriers that distribute 99.5% of all handsets and mobile devices.

Until now, the “closed vs. open” debate centred on hardware, protocols, software applications, and what many problematically refer to as content. Keeping one’s design or specific implementation or specific content locked away, protected by so-called intellectual property rights, gave a company a competitive advantage, assuming, of course, that the proprietary gizmo, gadget or gewgaw was something that was sufficiently unique and compelling to the company’s would-be customers – for example, the design of the Apple iPod, or the noise of the latest Ashley Simpson karaoke fodder. On the other hand, making these aspects relatively available enables everyone to innovate, remix, extend and generally be creative, often leading to greater market opportunities in the long run – for example, the band that increases its fan base (and hence, concert and merchandising revenues), or creating an environment in which it is less expensive to create support chips for Intel microprocessors than any other. (If I was a shameless self-promoter, I would say that it’s about understanding what business you’re REALLY in.)

(If you are reading on the main page of the blog, click here to read the rest of the argument’s development.)

If we extend our thinking about closed vs. open standards, in the context of the Wired article’s description of What Went So Badly Wrong with the Motorola iTunes-(questionably)-enabled ROKR, we see that the closed vs. open debate describes the minds of those involved in the controversy. The closed minds camp are of the Michael Porter school of marketing thought that (among other things) supports protecting your competitive advantage at all costs, and focusing on your target demographics with laser-like precision. Steve Jobs, for instance, set up the announcements of the iPod nano and the Motorola ROKR to coincide at the same event.
If music phones are the biggest threat Apple has faced since Windows, September's dual product introduction showed two quite different responses to that challenge. The nano is the innovative response - an iPod so small, so powerful, so cool you might not care about a music phone. The ROKR is the cynical response: Here, you can have your music phone, but what you'll get is so uninspiring you'll wonder why you ever wanted one.
The music labels themselves hold true to the fantasy that if you completely restrict people’s ability to obtain music other than through them, the sky’s the limit on price:
Mobile downloads in the UK cost the equivalent of $2.75 per track, nearly twice as much as a computer download on Britain's iTunes store. Both music and wireless execs look at the extraordinary sums mobile subscribers have been paying for ring tones and figure people will happily shell out a similar amount for full tracks: Why shouldn't the whole song be worth as much as a snippet? … "The price associated with iTunes' launch was really about establishing some traction with consumers where there had been complete failure to show that people would pay any price," says Michael Nash, a digital strategy executive at Warner Music. "Where you don't have that artificial price depression, people are willing to pay more to get what they want, when they want."
Or so goes the theory. And the carriers demand their cut as well: “to buy new music, you have to access the iTunes store through your computer, bypassing the carrier's network and billing service.

Contrast this with an open mindset, one that seeks to expand the market by expanding innovation, even (especially) if it is not immediately apparent how a new market meshes with the old business plan. Imagine, for instance, a Nokia mobile device, the “N91, a 3G Symbian handset that will go on sale this winter. As a music phone, the N91 is everything the ROKR is not. It can hold a thousand songs or more. It has a rugged 4-gigabyte hard drive as well as Wi-Fi and a high-speed USB connection. "If you want to do file-sharing, this is also possible," Vanjoki says. "Because this is not a mobile phone, it is a computer." ” Imagine municipal WiMax on top of it, and closed, obsolete business models of the entire dysfunctional consortium from which the iTunes-ROKR is stillborn are completely bypassed.

Our world has changed dominant organizing principles from those based on the Industrial Age to new UCaPP* structures that are in the process of emerging. In a UCaPP business environment, it is the connections and relations that count. The hallmarks of creativity and innovation that some (but relatively few) are only beginning to recognize include collaborative creation that eliminate the interfaces – the stark demarcations – among those thought to be competitors, a feat that is achievable if business leaders and theorists alike expand their “scorecards of goodness” (currently imbalanced in favour of one predominant business measure) that will allow for innovations that Just Make Sense to everyone, except the defunct scorecard.

With our first real experiences with this new environment begin to sink in, it is easily seen how the IA mentality has simply been overlaid on the new environment – not surprising, since the first use of any new medium is to emulate the old medium. As our understanding of the new environment matures, many are beginning to understand that even the ‘net-enabled business environment behaves as a space of simultaneous relationships and connections among disparate companies and individuals: producers who where once consumers, consumers who were once producers, and companies across a wide variety of different industries who suddenly consider themselves bitter competitors within an amorphous market. In this, we can observe that the environment’s effects are characteristically organic, emergent and collaborative, as opposed to mechanistic, deterministic, and competitive. The sooner any given business or industry recognizes, and responds, to this new imperative, the sooner they – and we – will begin to reap the benefits.
*UCaPP is my shorthand for Ubiquitously Connected and Pervasively Proximate
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