The anatomy of a strategist

February 19, 2012 § 1 Comment

ImageFirst of all, what IS strategy, anyway?  Ask 10 people and get 10 answers.  But I’ll answer the question this way: strategy involves assessing an organization’s internal and external factors to establish the most desirable future direction, and to determine a course of action and an investment of resources to get there.  Strategy can be “macro”, such as when setting a company vision, or tactical, such as when deciding whether, where and when to open a new manufacturing facility.

Now, after you get some strategy projects under your belt (and I’ve seen more than my fair share, having been in and around the field for over two decades), you start to notice some patterns related to successful strategy projects and the people who run them.  You also begin to realize that the patterns overlap greatly, meaning, great strategists are ones who excel across the lifecycle of a project, and successful projects are ones that leverage the full capability of a top strategy talent.  Being thoughtful about these characteristics can be helpful in many ways … when project planning, when staffing a team, and when recruiting and hiring, for example.  And if you’re an up and coming strategist, the reverse is also true – when deciding to whom you’d like to entrust the next few years of your career.  So what are these characteristics?

  • A good strategist is curious and aware:  sometimes, strategy is about optimizing what already exists.  But often, it’s about recognizing what is possible, both good and bad.  Ninety-nine percent of an organization’s headcount is dedicated to operating the business, so it becomes the responsibility of the strategist to look beyond current trajectories (sales growth, immediate competition, profitability, and so on) to identify new pockets of growth, as well as unforeseen threats.  One approach to this is “scenario planning”, wherein the strategist will extend observable trends into a longer-term timeframe, and then assemble them into 4-5 plausible (even if improbable) combinations that would meaningfully impact the businesses, and that call for a specific, proactive response.
  • A good strategist is comprehensive:  a classic mistake is to fail to consider options that simply don’t come to mind – to not think broadly enough.  So classically trained strategists often ask themselves a question to test the completeness of a set of options, which is, “is it Mutually Exclusive and Collectively Exhaustive?” (or MECE, for short).  What the MECE test does is it forces the strategist to think broadly enough that all primary possibilities are evaluated.  For example, a strategist may investigate both pricing and volume to properly diagnose revenue trends, or may fully consider the tradeoffs of buying vs. licensing vs. building vs. partnering to deliver a new product on schedule.  In any case, the goal is to not let the best option go unnoticed.
  • A good strategist is visionary and bold:  status quo, and even evolutionary moves, should always be among the options considered, but if the strategist doesn’t juxtapose some creative, extraordinary alternatives, then she’s taking the easy road.  I sometimes say that if the “currency” of the Finance department is dollars, and people for HR, then the Strategy function should be trading in big ideas.  How might the organization’s underutilized assets be deployed in new ways?  What new markets make sense to penetrate?  What new product lines could define the business’s direction in the next ten years?  A good strategist will understand the tradeoffs between current and new pathways, and help the executive team maintain a healthy balance between the two.
  • A good strategist is analytical:  I sometimes notice people confusing “strategic thinker” with “analytical thinker”, and they are, in fact, two very different types.  A strategic thinker, in my book, is someone who can synthesize multiple inputs (like competitive intelligence, customer research, and company capabilities) into meaningful implications and recommendations, whereas an analytical one will know how to shape raw data into actionable insights.  One knows what questions to ask, and the other knows how to answer them.  Your most versatile people, of course, will be capable of both.  That said, not everyone is destined to be.  There’s a reason that top strategy consulting firms staff “analyst” and “consultant” roles.  Some successfully migrate from one to the other, and even to the lofty rank of partner, but very few do.
  • A good strategist is, what I call, multivariate:  meaning, she can pick apart a situation from multiple angles and perspectives.  The proposed strategy may make the most economic sense, but do customers give you “permission” to expand into an adjacent growth area?  Operationally, do you know how to deliver and support the new concept?  Will your sales representatives welcome the new offering into their portfolio?  Does Marketing know how to promote it?  In other words, a good strategist will translate the theoretical down to the practical.  A strategy that isn’t implementable, or that hasn’t considered the operational implications, isn’t worth much more than the PowerPoint it was presented on.
  • A good strategist is persuasive:  the more significant the prescribed change (assuming status quo is not the preferred path forward), the more challenging it will be to bring others on board.  This is for good reason – change doesn’t come without risk and uncertainty.  And unless your organization is sitting on top of a “burning platform” as Nokia’s newish CEO Stephen Elop famously said, it’s not easy to make a different path look better than the present one.  An effective strategist, then, can’t declare victory at the Board meeting’s end.  Results are the only reward that count, and those come only after decisive agreements have been made and resources (including dollars, people and executive oversight) have been committed.  To earn that, a strategist must understand and adapt to the factual and emotional starting point of each decision maker, and the dynamics of how the organization makes decisions.  Whether the successful effort is fact-based or an impassioned plea, whether it’s supported by a carefully scripted slide presentation or an open ended conversation, and whether it’s achieved through a carefully sequenced series of one-on-one discussions or a group meeting, all depends on an up-front decision making analysis.
  • A good strategist is energetic (even if sleep deprived):  Strategy is a thinking-oriented discipline, obviously, but that doesn’t mean it’s any less demanding on the body.  In fact, I’ve heard that while the brain accounts for only 2% of a person’s body weight, it demands 20-30% of calories consumed!  So if Strategy demands more of the brain’s capacity, it may also demand more energy.  I can’t back that with science, but my point is that Strategy is demanding, even if only in terms of the time commitment required.  The environment that shapes and impacts strategy is never at rest, and so a good strategist is “always on”.  Consuming information.  Interpreting data.  Communicating insights.  Shaping discussion and decisions that can have a material effect on the direction of an organization.  Fielding questions from senior leaders looking for a balanced perspective on internal and external events.  It’s equal parts thrilling and exhausting, and a good strategist will be prepared to make a real commitment to the proactive and reactive nature of the practice. 

If a good strategist will excel at one or a few of these things, then a great strategist – or strategy team – will master them all.  And so will a successful strategic initiative.  Use this as a checklist the next time you’re filling a strategy position, or hiring a consulting firm, or managing a strategic initiative.

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Google’s acquisition of Motorola Mobility more than just a patent play

August 15, 2011 § Leave a comment

The buzz around the GOOG/MOT deal is all about the 17,000 additional patents that Google will have both to innovate its platform, and maybe more importantly, to defend itself against the onslaught of suits currently making their way across the mobile industry.  I certainly don’t dispute the importance of the patent portfolio.  But I think Google has more up its sleeve, namely:

  • Access to a tightly controlled, standardized development environment.  Google has been criticized for the freedoms it has granted developers in the past, essentially letting them run amuck.  Great for independent developers, and perhaps one of the reasons for Android’s popularity.  Maybe even a necessary ingredient for the Android app universe to catch Apple’s.  But now that they’re close enough to parity, the downside of the approach has become more apparent.  Major upgrades to the Android OS  have to get pushed to multiple environments, not just one.  Innovation is slowed.
  • Android’s openness has also cost the platform in the area of security.  Too hard to tack down the many implementations of its software.  The closed-loop environment with Motorola handsets should allow Google to batten down the hatches, so to speak, and create a model environment for other OEMs.
  • Google offers to handset makers for “free”, with the understanding that broad distribution will ultimately lead to advertising opportunities.  Google may be thinking it’s time to pay the piper, and a tie-up with Motorola will enable it to experiment with tightly integrated advertising solutions over the OS.

No doubt, there are risks to consider.  With Motorola under its wing, Google could alienate other handset makers just enough to drive them closer to rivals, namely Microsoft (despite Google’s promise to run the unit independently, and to maintain its commitment to open development).  Similarly, MOT’s cable set top box business now falls into the hands of a parent with a track record of attempting to challenge the strength of established cable and telco players.  But if they balance their strategy right, and I have no reason to suspect they won’t, they will maintain their good standing, and improve their lot in the mobile arena.  I count this deal as a strategic “win” for Google.

Microsoft’s Rumored Xbox Live Announcement Not Likely to be a Shocker

June 6, 2011 § Leave a comment

UPDATE:  Microsoft’s announcement is in, and the winner is …
A platform enhancement.  Albeit a pretty slick one.  Xbox 360s powered by Bing and a subscription to the Live Marketplace will be able to use voice recognition to help users find access to content from sources such as Hulu Plus, Netflix, and ESPN.  The capability will extend to live programming in regions where Microsoft has the required partnerships, such as Canal+ in France, Sky TV in the UK, and FOXTEL in Australia.  It’s a given that the proliferation of content across platforms and media genres (linear, on-demand, games, etc.) poses a user experience challenge, and Microsoft’s announcement offers a unique solution.  But it’s one of many, as many incumbents and newcomers seek to deliver the “ultimate programming guide”.

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Microsoft is expected to make a major Xbox LIVE – IPTV related announcement today at the E3 gaming conference.   The rumors range from a Mediaroom enhancement (the platform that AT&T’s Uverse service uses to bring IPTV to its customers), to an a la carte service (competing with Netflix and Hulu Plus), to a full-on linear TV subscription service.  A few reasons why I don’t expect Microsoft to announce the latter:

  1. The live TV business is a monster to get into.  Huge fixed costs, and programming is getting even more expensive (not that Microsoft can’t afford it, but why would it?)
  2. The Xbox may be a trojan horse on which to launch a video service, but how many homes have multiple Xboxes connected throughout their home?   If Microsoft were planning to compete with linear TV, it would need distribution (or a hardware extender, perhaps), that it doesn’t have today
  3. Moving from platform to B2C service would put it in contention with AT&T and any future partners it hopes to add.  Counter to Apple’s, Microsoft’s strategy has always been to be the platform.
  4. Live TV is a competitive industry.  In any given market, you have a cable company, perhaps a fiber option, and a couple satellite providers, not to mention over-the-air, and over-the-top alternatives.  Microsoft, or any company wishing to enter the space, would need some pretty thick skin, if they hope to be successful.

So, we’ll see what they come up with, but I don’t think it will be the shocker that some are predicting.

Ecommerce could be Facebook’s next big business … if it addresses a few things

March 9, 2011 § 2 Comments

Much hoopla has been made about Facebook’s ecommerce opportunity.  Just as it has quickly earned a strong position in display advertising, and has grabbed share in virtual goods and payments, the industry pundits now say that online commerce will be its next billion dollar business.  The tools already exist, in fact, for merchants to integrate commerce directly into their Fan Pages, obviating the need for customers to link out to conduct their business.

But I think Facebook, and the merchants who sit atop its platform, are going to have to go beyond a “build it and they will come” approach, if they expect to reap the full potential of this new revenue stream.  I recently conducted an informal poll to gather insight on people’s attitudes and intent when it comes to Facebook commerce.  While there’s all sorts of caveats here, ranging from small sample size to survey bias, I think the findings are directionally useful – absolutely no one had the desire to buy traditional goods or services from within a Facebook page.  The rationale varied, but tended to fall into two themes: distrust and value.

Thanks in part to continuous headlines accusing Facebook of privacy violations (or of making it difficult for users to control their privacy settings), many people, it seems, are hesitant to relinquish any further data to the service.  And purchase decisions can be as revealing and personal, if not more so, than just about any other category.  Others simply don’t appreciate the value of buying through Facebook.  Some even assume that the inventory and buying experience will be a slimmed down version of what’s available on the merchant’s own site.  Facebook’s ecommerce strategy, therefore, should seek to resolve these barriers.  For example:

  • They should strengthen their online privacy policies.  A tall order, perhaps, for a data-oriented business model, but low hanging fruit include simplifying privacy controls, and being more sensitive to how its constituencies will react when it considers new features with questionable protections.  Remember Beacon, and the poor guy whose engagement ring purchase was revealed to his soon to be fiancé prior to the proposal?
  • Merchants would be advised to offer a comparable (if not unique) selection within Facebook.  If strategy or availability dictates otherwise, go deep on the specific categories that are offered there.
  • Product reviews and brand suggestions could be more personalized within Facebook (as compared to outside of it) if users opted-in to a higher level of disclosure.  For instance, Facebook could give buyers the option to share a purchase with their network anonymously or in the aggregate on external pages, and openly within Facebook pages.  So if you were shopping for the Motorola Xoom on Amazon.com, you might see that 15 of your friends “Like” the item or even purchased it, but if you shopped for the same gadget within Facebook, you could see specifically who those friends are, whether they posted any feedback, and so on.  Today, there’s no such distinction.
  • There’s no denying that credit cards are a suboptimal payment method for ecommerce, and even if you keep your card on file with multiple merchants, managing all those logins and passwords is a major pain.  Facebook’s payments platform, originally implemented to take a bite out of the virtual goods market, will be expanded to make real world purchases a whole lot easier.  Think PayPal for Facebook.
  • Facebook will ultimately host thousands (millions?) of commerce pages, likely positioning it as the broadest “store” on the Web.  As an aggregator, it could structure a rewards program with greater benefit than what’s offered by sellers individually.  Tied to its payment platform, points could be redeemed across its participating merchants, both physical and virtual.  It could also choose to award status and privileges to users who make purchases within its pages.  Facebook has done little to date with status awards, but history shows (recall Yahoo! Answers) that they can be extremely motivating.

Ecommerce could be a big deal for Facebook, and in fact, may be necessary to justify its massive valuation.  But to reach its potential, it should address its privacy issues, and seek to offer advantages over merchants’ own sites.

Beyond the politicking, the 30% “Apple Tax” is good for subscription publishers

February 16, 2011 § 4 Comments

In a story picked up by the Wall Street Journal and many other media outlets today, Apple clarified the new ground rules that publishers who wish to offer subscription services through its iTunes interface must abide by.  Starting this summer, publishers who promote subscription services via link-outs from their iPhone or iPad apps will be required to integrate the sign-up within the app itself, using Apple’s new payment platform.  Apple will levy a 30% fee for each sign-up.  Other details include:

  • Companies can continue to sell through their own Sites, but must then offer the same service and pricing within the Apple application
  • Companies can continue to link to their own subscription registration pages from the app, but must then offer the in-app registration option as well
  • Apple won’t automatically forward new customer name and email information to the publisher; the customer must opt-in for this to occur.  Apple claims this is to protect customer privacy
  • Compliance is expected no later than June 30

Predictably, the initial reaction from publishers is that the sky has fallen.  One publisher, representing the sentiment of many, I’m sure, was quoted as saying that the Apple Tax is “economically untenable” with its business model.  Another has said that the customer data opt-in provision gets in the way of its ability to forge a relationship with its users.  But let’s look at this issue from a different perspective.

As Apple is acting as a performance based channel (publishers pay no fees for listing their apps in the iTunes Store), the “tax”, as it’s been called, is no different from an affiliate commission.  Sales affiliates routinely command fees of 30% or more.   I’ve seen as high as 70%.  With benchmarks like these, 30% seems rather fair.  Until now, publishers have been getting a free ride.

Another important factor is customer lifetime value (CLV).  Any company publishing content worth its weight in salt is going to (1) be able to charge a premium relative to its cost to produce, and (2) retain the subscriber beyond the initial subscription period.  Its fully-loaded monthly margin, multiplied by its average subscriber months, is its CLV, which is offset by its initial Customer Acquisition Cost (CAC).  Assuming the Apple charge is one-time only, many publishers will more than recover the fee over the lifetime of the subscriber.  And let’s not forget that had it not been for Apple, the publisher would have incurred a CAC through its other channels.  And the cost to acquire a new sub – we’re talking about for paid services now – is typically non-trivial.  If your service commands a $100 annual subscription price, resulting in a $30 fee to Apple, you’re probably pretty happy.  Many publishers invest $100 or more to acquire a new sub.

I also expect that savvy publishers will identify ways to circumvent the system.  Apple seems to be saying that pricing (and let’s assume special offers as well) inside the app must mirror those available on linked pages outside the app.  But what about pricing and offers on marketing pages that aren’t linked to the app?  If the rules don’t apply there, publishers will be able to craft strategies that make it advantageous for customers to register outside the app, then download the app only for consumption purposes.  If, on the other hand, Apple has already closed this loophole, the fair-payment-for-services-performed and CLV arguments still apply.

Lastly, while this will certainly burden publishers, and especially those whose analog businesses are in heavy decline, as well as those who were 100% digital from the get-go, these new terms don’t amount to Armageddon for most.  Consider that for the time being, digital is a smaller segment than offline for traditional businesses, and within digital, Apple commands only one, albeit important, channel.  The magnitude will obviously vary by publisher.  But consider the example of the Financial Times, which reports that only 10% of its subs come through the iPad.

The bigger issue than the tax, I think, is that Apple has said that publishers will not receive customer names or email addresses unless opted-in by the new subs.  If they don’t, as will often be the case, it will make renewal marketing a bit more challenging (see the CLV argument), but not nearly impossible.  For instance, publishers could promote renewals through their service interfaces directly – as users log-in to access their content, the publishers will know who they are and the status of their billing relationships, even if not by specific name.  I suspect that smart, customer-minded publishers will make it worthwhile for users to opt-in, perhaps by offering something of incremental value, such as additional subscription months, exclusive content, or entry into a prize drawing.

Understandably, publishers need to make a lot of noise up front, and to vocalize their discontent with the new Apple terms.  After all, any charge that didn’t exist before is now going to negatively impact their margins.  But in the end, Apple is entitled to receive a commission for the channel it provides, and the more integrated purchasing experience is good for the consumer.  And a new channel with a relatively low customer acquisition cost is certainly good for the publisher.

For Aol, The Huffington Post is a piece of a larger puzzle

February 7, 2011 § 3 Comments

Aol is making bold bets again.  It announced this morning that it will purchase the Web’s #1 blog, The Huffington Post, for $315M in cash and stock, and make its founder, Arianna Huffington, the editor-in-chief over all its content properties.  The deal comes on the heels of Aol’s acquisition of Michael Arrington’s popular TechCrunch blog, which became part of the Aol family last December.  In adding The Huffington Post’s 25-30M monthly readers to its stable, Aol advances its audience strategy, but is still dependent on a number of elements coming together before it can return to the days of meaningful revenue and profit growth.

The underlying assumption of Aol’s strategy is that the online ad spending market will continue to ramp aggressively because while ~40% of media time is spent online, still only ~15% of U.S. ad spending is on digital media.  This certainly seems to be playing out, as online advertising growth rates continue to hit double-digits, while overall ad spending is lumbering away at 1-4%.

               

Search is the leading format by far, but Google’s 76%+ share precludes all but the strongest of wills and deepest of pockets from participating.  Microsoft’s takeover of Yahoo’s search business was an outlier.  In November 2010, Ask.com announced that it would cease investing in its search business, and Aol outsourced its search business to Google years ago.  Even the famously determined Jason Calacanis, the serial entrepreneur and founder of search upstart, Mahalo, recently determined that he would pivot his business away from search and towards video how-to content. 

Under these circumstances, Aol has prudently chosen to focus its efforts on the display market, and in particular, online brand advertising, which at only 5-6% of the total brand advertising market — which itself is 165% larger than the direct response market – would seem to offer significant upside.

But there are reasons why brand spending lags in online media.  One is fragmentation.  Unlike in paid search, where most ad dollars flow through Google, display and brand advertising can be allocated across a dizzying array of portals and networks, each claiming unique reach and targeting capabilities.  Another barrier is the uneven content quality that serves as the anchor for brand advertising.  Advertisers know that their brands will be affected positively or negatively based on the quality of the content they’re associated with.  The fear of a negative “halo” is why YouTube’s 100% advertising-supported model is just now turning a profit, even though it nearly controls the user-generated video space, with 117M unique monthly visitors, and counting.  A third reason is that brand advertising, long the exclusive domain of broadcast TV and glossy print, have until now depended on the passive characteristics of those media to capture brief moments of consumer interest (and even then, is dependent on great creative to avoid being diluted by the thousands of marketing messages targeting us daily).  But online is a traditionally more active medium that plays right into the sweet spot of direct response advertising in general, and paid search in particular.  Establishing a brand connection with a consumer while she’s on a mission to check her Facebook page or to research where her favorite local band is playing on Saturday night, is immensely more challenging.  So now let’s take a look at Aol’s approach and progress with regards to these issues:

  • Fragmentation – this is where the recent acquisitions come in.  Aol had already reported growing audiences, but with The Huffington Post, its overall reach in the U.S. will be about 117M UVs.  Not a dominant position, but a meaningful number, to be sure.
  • Content Quality –Aol recognizes that its content must be home grown and exclusive if it is to differentiate itself and offer a “safe” platform on which to invest in brand advertising.  Its Patch (hyper-local content) and Seed (editorial platform) projects are an attempt at this, but neither has translated into revenue growth for the company as of yet.  Of course, the story is still being written, and Aol hasn’t been shy about posting some pretty lofty goals – in a recently released strategy doc, dubbed “The AOL Way”, it was revealed that Aol intends to ramp from 31,500 pieces of editorial content per month today, to 40,000 by the end of Q1.  Some have criticized Aol’s approach as “content farming”, a practice that Google said it plans to demote in its rankings in the near future.  Aol’s acquisitions of highly successful, branded blogs may be a safer approach.
  • Engagement – last year, Aol announced Project Devil; an attempt to drive premium ad rates and to make display advertising more engaging through larger formatting, cleaner design, and more interactivity.   It may prove to be a smart move, but by itself, doesn’t do enough to convert an “active” medium into one in which brand messages will be seen or heard.  For that, Aol needs online video into which it can place pre-roll advertising.  Aol’s strategy document indicates that its ambitions here, to embed video in 70% of its owned and operated pages from only 4% at the end of last year, are even greater than that for its content growth.  And it’s off to a good start.  In a letter explaining the HuffPo deal to employees, Tim Armstrong indicated that Aol’s video UVs are up 400% Y/Y for 2010, which wouldn’t be so impressive if he didn’t also mention that they already exceed those of Hulu.

About 3 minutes and 45 seconds into an eight minute interview with AllThingD’s Kara Swisher, Tim Armstrong and Arianna Huffington help justify the deal by citing their shared vision “… to create the future of brand advertising on the Internet …”  To reach that destination, many efforts must go right, including those that extend well beyond this partnership, and especially with regards to its video strategy.  So far, the trends are in its favor.  If they continue this way, Aol could very well pull off one of the great turn arounds in history, and indeed, create the future of online brand advertising.

Amazon on the verge of a rare mistake

January 31, 2011 § 5 Comments

Over the weekend, super-blog Engadget revealed screenshots of an apparently new product offering from Amazon.  Based on the screens, which are no longer accessible from Amazon’s site, the ecommerce juggernaut intends to offer unlimited streaming of TV shows and movies, for FREE, to all Prime subscribers.  Prime subs currently pay $79 annually for unlimited shipping, and Amazon has reported a strong correlation between the launch of this delivery service and an uptick in sales activity.

In and of itself, Prime may be a winner, but I think Amazon is on the brink of making a large mistake if it intends to include online media benefits for no additional charge.  Here’s why:

  • It devalues the online media industry.  For the sake of argument, let’s attribute the full price of the Prime service to the media feature.  At $79, it’s already $16 below Neflix’s comparable, streaming-only service.  If it’s successful, as Amazon surely hopes, Netflix will have no choice but to meet or beat the price, and voila!  There go Netflix’s profits, and Amazon’s differentiator.  Listen for the hissing sound of margin escaping the industry, like air from a balloon, as the two race each other to the bottom.
  • It requires heavy subsidization.  Shipping is a money loser for Amazon.  Even with the Prime subscription fees, Amazon spends more on shipping than it takes in, and the stats are worsening.  According to its financial statements, Amazon took in $1.193B in shipping revenue last year, while incurring $2.579 in cost.  Relative to the prior year, shipping revenue grew only 29%, while cost grew 45%.  Yikes.  It may be a perfectly sound strategy for Amazon to increase its appeal by making shipping more affordable, but with shipping being a cost center, the subsidy for the online media business has to be funded by its core ecommerce operation.
  • It smells of the “causality trap”.  Their research may indicate otherwise, but it’s not intuitive that the way to increase memberships to its premium shipping service is to add online media benefits.  And even if their ploy were successful at growing Prime subs, it’s even less likely that the new members will buy more physical goods from Amazon (which is necessary for the subsidy to work).  I think Amazon my be falling for the causality trap, in which company planners observe a beneficial correlation (in this case, Prime subs order more frequently than non subs), assume a causal relationship, and then extrapolate that if they could only drive more of the causal behavior, that the correlation will surely hold, and they’ll make a whole lot more money.  But this is flawed logic.  Existing Prime subs value the service for its shipping benefits and are therefore more likely to be active buyers.  If new subs are lured in by media benefits, they will care less about the shipping features, relatively speaking, and can be expected to behave differently from the installed base, i.e., buy less often.

So what might explain Amazon’s strategy?  It’s media business is large, contributing over 40% of its overall revenue, but while its Electronics and General Merchandise business is growing at an increasing rate (67% last year vs. 48% the year prior),  Media has started to flatten, producing a comparably modest 16% growth over the last two years.  So Amazon is under some pressure to try something new.  It is also likely anticipating a not-too-distant future as Netflix has, where streaming and downloading online content overtakes the sale of physical media, such as DVDs and Blu-ray disks.  Both are good motivations, but I think their strategy is off base.  If they’re willing to invest in subsidies, as they seem to be, they could boost media service subscriptions with a more relevant and targeted offering to electronics buyers, particularly those buying units compatible with its online media services (e.g., free 12-month trial).  Who wouldn’t give that a try?  An offer like that would produce paying subs as they roll off the promotional period, and would help differentiate their electronics business (not to mention, leverage the huge amount of volume generated by that business already).  Similar reasoning underscored Best Buy’s purchase of CinemaNow, Walmart’s acquisition of Vudu, and Sears’ recently announced partnership with Sonic Solutions.

Amazon, if you’re planning to give online media away for free to your Prime subs, you may want to take a step back and rethink that.  Sorry if I’m disappointing all you Prime customers out there.

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