Archive for 2006

“An Airbus of the Internet”

Thursday, August 3rd, 2006

Airbus A380 3.jpg

European aerospace giant Airbus has been running into all kinds of problems recently, including the embarrassing delay of its A380 superjumbo jet and a major shakeup of its senior management team. Which makes it all the more surprising that some European business execs - including Christoph Mohn, heir to the Bertelsmann media empire - are calling for Europe to create “an Airbus of the Internet.” Yep, that’s right. The Europeans apparently think a bloated, state-supported company can take on the likes of Google, eBay, Yahoo and Amazon. As Daniel Gross of Slate explains, this idea is “really stupid” for two reasons:

(1) The notion that European governments could will into being a competitor to eBay or Google conflicts with pretty much everything we know about how consumer-driven internet businesses grow;

(2) Airbus is a disaster just now. Literally speaking, an “Airbus of the Internet” would mean a company that loses ground to its U.S. competitor, is plagued by product delays, and has an untenable ownership structure.

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[image: Airbus A380]

BMW seeks to impress the “idea class”

Thursday, August 3rd, 2006

BMW Leipzig.jpg

Yesterday, there was a great article in the Wall Street Journal (link via MoneyWeb) about BMW and its new strategy of relying on innovation and design rather than engineering to sell its cars to U.S. consumers:

“For well over a decade, BMW has focused its marketing almost exclusively on its cars’ German engineering and technical sophistication, and targeted its message to one very specific customer group — upscale auto enthusiasts. In a break with that formula, the company is promoting a corporate culture of independence and innovation. One advertisement in a new campaign that has turned heads in the auto industry highlights the design by architect Zaha Hadid that BMW chose for a striking glass-walled factory in Leipzig, Germany. BMW hopes the approach will broaden its position in market share and appeal to a group the company calls “the idea class” — upscale car-buyers who are swayed more by artistic values than horsepower.”

BMW’s primary strategic imperative, of course, is to fend off competitors like Nissan’s Infiniti unit, Honda’s Acura unit and Toyota’s Lexus brand, all of which now offer “credible performance vehicles for far less money.” The big wake-up call for BMW was an internal study that indicated a whopping 73.7% of U.S. consumers who bought luxury cars in 2004 didn’t even consider BMW. (In a related finding, 73.7% of college frat boys didn’t consider wearing one of those annoying BMW logo “Ultimate Party Machine” t-shirts in 2004.)

What do you think - will appealing to the so-called ‘idea class’ mean that BMW will be able to sell more cars in the U.S.? (Oh - in case you’re wondering, the “idea class” is indeed a direct riff on Richard Florida’s concept of the “creative class”)

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[image: The BMW factory at Leipzig]

When your lifestyle is the brand

Tuesday, August 1st, 2006

Brand Lifestyle.jpg

Over the weekend, there was a fascinating article in the New York Times Magazine about Aaron Bondaroff (”A-Ron”), a lifestyle curator and brand impresario who is building a one-man brand in the hippest neighborhoods of New York City. Unlike anti-establishment types who prefer to distance themselves from the cultural mainstream, A-Ron is as much a businessman as he is a hipster. He’s not afraid to make his “subculture lifestyle” a highly-visible brand that appeals to mainstream audiences. Even while he’s trying to sell his hipster T-shirts and hats at places like Barneys, he’s still courting the “cool kid” demographic in lower Manhattan. He’s not an artist, designer, author, musician or filmmaker - he’s just a “cool guy” who is fawned over by marketers and advertisers hoping to kick it with the cool crowd in Manhattan. Needless to say, A-Ron’s underlying capitalist ethos is challenging the whole notion of what it means to advertise and market a product:

“This might seem strange, since most of us think of branding as a thoroughly mainstream practice: huge companies buying advertising time during the Super Bowl to shout their trademarked names at us is pretty much the opposite of authentic or edgy expression. But branding is more complicated than that. It is really a process of attaching an idea to a product. Decades ago that idea might have been strictly utilitarian: trustworthy, effective, a bargain. Over time, the ideas attached to products have become more elaborate, ambitious and even emotional. This is why, for example, current branding campaigns for beer or fast food often seem to be making some sort of statement about the nature of contemporary manhood. If a product is successfully tied to an idea, branding persuades people — consciously or not — to consume the idea by consuming the product. Even companies like Apple and Nike, while celebrated for the tangible attributes of their products, work hard to associate themselves with abstract notions of nonconformity or achievement. A potent brand becomes a form of identity in shorthand.”

It’s not just A-Ron, though, who is busy at work creating a “counterculture brand”:

“Thousands and thousands of young people who are turned off by the world of shopping malls and Wal-Marts and who can’t bear the thought of a 9-to-5 job are pursuing a path similar to A-Ron’s. Some design furniture and housewares or leverage do-it-yourself-craft skills into businesses or simply convert their consumer taste into blog-enabled trend-spotting careers. Some make toys, paint sneakers or open gallerylike boutiques that specialize in the offerings of product-artists. Many of them clearly see what they are doing as not only noncorporate but also somehow anticorporate: making statements against the materialistic mainstream — but doing it with different forms of materialism. In other words, they see products and brands as viable forms of creative expression.”

Anyway, the article is a fascinating look at the blurring of the mainstream and counterculture, of the slow seeping of the capitalist ethos into even the tiniest consumer niche. It also calls into question, if only indirectly, the whole flourishing of the “D.I.Y” ethos both online and offline. If I’m reading the New York Times Magazine article correctly, then the whole raft of “DIY” and “craft” businesses that are popping up seemingly everywhere are really nothing more than a disguised form of the mainstream businesses they were meant to avoid. After all, there’s not much more mainstream than attempting to sell your wares at huge retail stores and having your cool parties underwritten by the likes of Nike and Sony: “Countercultures are supposed to oppose the mainstream, and nothing is more mainstream than consumerism…”

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[image: New York Times Magazine]

Is Microsoft more innovative than either Google or Apple?

Monday, July 31st, 2006

MSFT-RD-INVESTMENTS.jpgSadagopan’s Weblog on Emerging Technologies offers a comprehensive review of Analysts Day at Microsoft, which featured presentations from Ray Ozzie and Craig Mundie. While Ray Ozzie focused on the major trends that are impacting innovation strategy at Microsoft, Craig Mundie drilled down on the R&D numbers at Microsoft: “Craig Mundie’s presentation tabulates the reported R&D investments amongst the technology majors. Shocking, to say the least, when seen together. He points out that big changes take time and effort and highlights the type of innovation that Microsoft is after – on the disruptive, responsive and sustained spectrum.”

Yet, is this impressive amount of spending on R&D by Microsoft really paying off? As Sadagopan exlains, “one does not necessarily need to spend about five billion in R&D to find that the next big thing does not exist…” Microsoft should keep in mind that growing market competition, not growing R&D spending, is what drives innovation:

“Microsoft spending details is not helping them win the respect of the tech watching community. Innovation on the products/services that most of what the world associates with Microsoft (centered on the desktop) is seen happening in the sustained category – precisely where many see Microsoft to be ineffective/slow moving and seen to be losing ground (MSN search?). Not that it has set the market on fire through disruptive innovation - if anything in the mobile/pervasive/CES space, it is seen that others are defining the agenda. While some cyclical investment surge is understandable – what we are seeing is a trend of progressive increase in spending. Paul Kedrosky points out that Google has added over a $100-billion in market capitalization during the period, while Microsoft has shed around $30-billion in market cap. Similarly, Apple has added around 30-billion in market cap, while IBM has shed around $20-billion.”

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[image: Cumulative R&D investment since 2000]