Strategy in the media

Citation

Henry, C. (2007), "Strategy in the media", Strategy & Leadership, Vol. 35 No. 5. https://doi.org/10.1108/sl.2007.26135eaf.001

Strategy in the media

Strategy in the media

Customers don’t buy products, they hire them

The market segmentation scheme that a company chooses to adopt is a decision of vast consequence. It determines what that company decides to produce, how it will take those products to market, who it believes its competitors to be and how large it believes its market opportunities to be. Yet many managers give little thought to whether their segmentation of the market is leading their marketing efforts in the right direction. Most companies segment along lines defined by the characteristics of their products (category or price) or customers (age, gender, marital status and income level). Some business-to-business companies slice their markets by industry; others by size of business. The problem with such segmentation schemes is that they are static. Customers’ buying behaviors change far more often than their demographics, psychographics or attitudes. Demographic data cannot explain why a man takes a date to a movie on one night but orders in pizza to watch a DVD from Netflix the next.

Product and customer characteristics are poor indicators of customer behavior, because from the customer’s perspective that is not how markets are structured. Customers’ purchase decisions don’t necessarily conform to those of the “average” customer in their demographic; nor do they confine the search for solutions within a product category. Rather, customers just find themselves needing to get things done. When customers find that they need to get a job done, they “hire” products or services to do the job. This means that marketers need to understand the jobs that arise in customers’ lives for which their products might be hired. Most of the “home runs” of marketing history were hit by marketers who saw the world this way. The “strike outs” of marketing history, in contrast, generally have been the result of focusing on developing products with better features and functions or of attempting to decipher what the average customer in a demographic wants.

This article has three purposes: The first is to describe the benefits that executives can reap when they segment their markets by job. The second is to describe the methods that those involved in marketing and new-product development can use to identify the job-based structure of a market. And, finally, the third is to show how the details of business plans become coherent when innovators understand the job to be done.

Clayton M. Christensen, Scott D. Anthony, Gerald Berstell and Denise Nitterhouse, “Finding the right job for your product,” Sloan Management Review, Spring 2007.

Are you customer-centric or company-centric?

Adversarial value-extracting strategies are common across industries. Recognizing these strategies can help you avoid them in your own firm.

Example: Cell phone service carriers offer several dozen pricing options. They then take advantage of customers’ difficulty in predicting their usage by penalizing them for using too much time or not enough time. Fifty percent of US carriers’ income derives from such fees.

Health clubs’ most profitable customers are those who have been enticed to sign up for a long-term membership but who then rarely visit the club. Knowing this, many clubs intentionally sell far more memberships than they have the floor space to accommodate. And through confusing contractual language, they make it difficult for customers to extricate themselves from the deal.

Look for warning signs

To spot signs of harmful practices in your company, ask:

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  Are our most profitable customers those who have the most reason to be dissatisfied with us? If yes, it’s a matter of time before your customers will retaliate.

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  Do we have rules we want customers to break because doing so generates profits? Rules that, if violated by a customer, preserve or enhance value for your firm are actually mechanisms for taking advantage of customers.

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  Do we make it hard for customers to understand or abide by our rules? Certain cell phone carriers, for example, make it cumbersome for customers to monitor their minute use.

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  Do we depend on contracts to prevent customers from defecting? When companies use long-term contracts merely to prevent poorly served but profitable customers from defecting, they’re demonstrating a lack of confidence in their value proposition.

Put customers first

Sometimes all it takes to trigger a mass defection from a company-centric firm is the appearance of a customer-friendly competitor – one that puts customer satisfaction and transparency first.

Example: Virgin Mobile USA offers a pay-as-you-go pricing plan with no hidden fees, no time of-day restrictions, no contracts, and straightforward, reasonable rates. It has nearly five million subscribers and a customer churn rate well below the industry average. Customer satisfaction hovers in the 90th percentile. And more than two-thirds of customers reported recommending Virgin to friends and family.

Gail McGovern and Youngme Moon, “Companies and the customers who hate them,” Harvard Business Review, June 2007

Process innovation as a competitive advantage

We’ve been studying competition in all US industries, not just the high-tech ones, and we’ve observed a remarkable pattern: On average, the whole US economy has become more “Schumpeterian” since the mid-1990s. What’s more, these changes have been greatest in the industries that buy the most software and computer hardware.

Over the past dozen years, in other words, information-technology consumption is associated with the kinds of competitive dynamics we’re accustomed to seeing in the IT-producing industries. And because every industry will become even more IT-intensive over the next decade, we expect competition to become even more Schumpeterian.

Process innovation

What we have observed in industry after industry is the emergence of widespread process innovation and replication that is analogous to the product innovation and replication that takes place in high tech. Just as Google Inc. can take an improved search algorithm and make it immediately available via the Web, or Apple Inc. can quickly distribute an updated version of iTunes, companies in other industries can invent a new way of doing business, embed it in internal software, and deploy it as widely as necessary across locations, divisions and departments to gain an advantage.

CVS Corp. Chief Executive Officer Tom Ryan in 2001 wanted to improve customer satisfaction in the company’s pharmacies, so he directed a cross-functional team to devise a better way of filling drug prescriptions. The team decided to change the order of two steps and shift the initial data-entry step so that it took place at drop-off, when the customer was still present. CVS then embedded the change in the software it uses to guide its prescription-filling process and rolled it out to its then 4,000 pharmacies in less than a year …

The CVS experience is a microcosm of a pervasive trend toward using IT to replicate not only digital goods and services but also business processes. This trend encompasses core activities such as customer service and order management, as well as support activities such as accounting and human resources. Once a company embeds its processes in IT, the processes are executed the same way not only across locations, but also over time. This means, for example, that a company can ensure that no large customer order will be accepted until a specific credit check is performed.

While creating an innovative business process is less visible than developing a new product or investing in factories, our research shows it is actually more important to a company’s success. Intangible process capital is changing the way companies operate and the capabilities they possess. As a result, it also is changing the way they compete.

Andrew McAfee and Erik Brynjolfsson, “Dog eat dog,” Wall Street Journal, 28 April 2007.

Redefining a company’s core around a neglected customer segment

Harman International, a maker of high-end audio equipment, is one company that redefined its core around a neglected customer segment. In 1993 it was focused primarily on the consumer and professional audio markets, with only about 10 percent of revenues coming from a third segment, the original-equipment automotive market. But its growth was stalled and its profits were near zero. Cofounder Sidney Harman, who had left the company to serve as Deputy Secretary of Commerce, returned as CEO in an attempt to redefine the company’s core.

Harman cast a curious eye on the automotive segment. He realized that people were spending more time in their cars, and that many drivers were music lovers accustomed to high-end equipment at home. Hoping to beef up the company’s sales in this sector, he acquired Becker Radio, based in Germany, which supplied audio systems for Mercedes-Benz cars. One day when Harman was visiting their plant, Becker engineers demonstrated how new digital hardware allowed the company to create high-performance audio equipment in a much smaller space than before. That, Harman said later, was the turning point: he invested heavily in digital to create branded high-end systems. The systems proved to have immense appeal both to car buyers and to car manufacturers, who enjoyed healthy margins on the equipment.

Today, based largely on its success in the automotive market, Harman’s market value is forty times greater than it was in 1993.

Chris Zook, Unstoppable: Finding Hidden Assets to Renew the Core and Fuel Profitable Growth (Harvard Business School Press, 2007).

The new science of winning

In 1997, a 30-something man whose résumé included software geek, education reformer, and movie buff rented Apollo 13 from the biggest video-rental chain on the block – Blockbuster – and got hit with $40 in late fees. That dent in his wallet got him thinking: why didn’t video stores work like health clubs, where you paid a flat monthly fee to use the gym as much as you wanted? Because of this experience – and armed with the $750 million he received for selling his software company – Reed Hastings jumped into the frothy sea of the “new economy” and started Netflix, Inc.

Pure folly, right? After all, Blockbuster was already drawing in revenues of more than $3 billion per year from its thousands of stores across America and in many other countries – and it wasn’t the only competitor in this space. Would people really order their movies online, wait for the US Postal Service (increasingly being referred to as “snail mail” by the late 1990s) to deliver them, and then go back to the mailbox to return the films? Surely Netflix would go the route of the many Net-based companies that had a “business model” and a marketing pitch but no customers.

And yet we know that the story turned out differently, and a significant reason for Netflix’s success today is that it is an analytical competitor. The movie delivery company, which has grown from $5 million in revenues in 1999 to about $1 billion in 2006, is a prominent example of a firm that competes on the basis of its mathematical, statistical, and data management prowess. Netflix offers free shipping of DVDs to its roughly 6 million customers and provides a return shipping package, also free. Customers watch their cinematic choices at their leisure; there are no late fees. When the DVDs are returned, customers select their next films.

Besides the logistical expertise that Netflix needs to make this a profitable venture, Netflix employs analytics in two important ways, both driven by customer behavior and buying patterns. The first is a movie-recommendation “engine” called Cinematch that’s based on proprietary, algorithmically driven software. Netflix hired mathematicians with programming experience to write the algorithms and code to define clusters of movies, connect customer movie rankings to the clusters, evaluate thousands of ratings per second, and factor in current Web site behavior – all to ensure a personalized Web page for each visiting customer.

Netflix has also created a $1 million prize for quantitative analysts outside the company who can improve the cinematch algorithm by at least 10 percent. Netflix CEO Reed Hastings notes, “If the Starbucks secret is a smile when you get your latte, ours is that the Web site adapts to the individual’s taste.” Netflix analyzes customers’ choices and customer feedback on the movies they have rented – over 1 billion reviews of movies they liked, loved, hated, and so forth – and recommends movies in a way that optimizes both the customer’s taste and inventory conditions. Netflix will often recommend movies that fit the customer’s preference profile but that aren’t in high demand. In other words, its primary territory is in “the long tail – the outer limits of the normal curve where the most popular products and offerings don’t reside.”

Thomas Davenport and Jeanne G. Harris, Competing with Analytics, Harvard Business School Press, 2007.

Post-merger integration and “Rashomon”

Profit margins at Kinko’s have fallen, revenue has barely grown and employee turnover, which was 42 percent in 2005, was still a daunting 27 percent last year. Paul Orfalea, who was nicknamed Kinko for the full head of curly black hair he sported in 1970 when he founded the company – originally to serve students at the University of California, Santa Barbara – says he will not step inside the stores now.

“It gives me a stomachache to see what’s happened to the place,” Mr. Orfalea, now balding, said.

But what, actually, has happened? It depends on who is talking. Indeed, the tale of Kinko’s metamorphosis from a free-wheeling group of copy centers to a buttoned-down subsidiary of FedEx plays like a corporate version of the classic Japanese movie Rashômon.

To a customer wandering through FedEx Kinko’s stores, it feels pretty much like business as usual. But delve a bit deeper, and this merger could serve as a case study of the problems that crop up when companies with synergistic strategies but wildly disparate cultures try to meld.

No one disputes the facts. Mr Orfalea expanded Kinko’s through partnerships. He sold a large stake to Clayton, Dubilier & Rice, a private equity firm, in 1996.

Then, in 2003, Clayton sold Kinko’s to FedEx, which is turning the stores into one-stop shops for shipping packages, printing and mailing brochures or sending data over computers.

But there, the agreement ends. Some say Clayton, Dubilier massacred Kinko’s, and that FedEx can never repair the damage. Others say Clayton added discipline to the ’60s-style Kinko’s atmosphere, and that FedEx is continuing that process.

“We’ve got three cultures at play here,” said Brian D. Philips, FedEx Kinko’s chief operating officer. But most see cultures at war. “At Kinko’s, there’s a thin veneer of professional folks riding herd on a vast platoon of semitrained people,” said James E. Schrager, clinical professor of entrepreneurship and strategy at the University of Chicago Graduate School of Business. “That’s just not the FedEx way.” A result, said Robert Boyden Lamb, a management professor at the Stern School of Business at New York University, is that “these cultures do not gel, they do not hook together at key points.”

Employees speak of carnage under Clayton, Dubilier – of slashed training, mass firings, store closings and policies that discouraged helping customers in any way but by the book. “They killed our culture,” said Kayt A. Schaefer, a documentation specialist at FedEx Kinko’s.

Clayton saw it as necessary euthanasia, not murder. “It was the People’s Republic of Kinko’s, a place where store managers thumbed their noses at corporate and ran the stores as they saw fit,” said Gary M. Kusin, a retailer who was recruited by Clayton to run Kinko’s in August 2001.

“Paper jam at FedEx Kinko’s,” New York Times, May 5, 2007.

The high cost of short-sighted cost-cutting

Circuit City fired 3,400 of its highest-paid store employees in March, saying it needed to hire cheaper workers to shore up its bottom line. Now, the Richmond electronics retailer says it expects to post a first-quarter loss next month, and analysts are blaming the job cuts.

The company, which on Monday also revised its outlook for the first half of its fiscal year ending Feb. 29, 2008, cited poor sales of large flat-panel and projection televisions. Analysts said Circuit City had cast off some of its most experienced and successful people and was losing business to competitors who have better-trained employees.

“I think even though sales were soft in March, this is clearly why April sales were worse. They were replaced with less knowledgeable associates,” said Tim Allen, an analyst with Jefferies & Co.

In particular, the televisions showing disappointing results are “intensive sales” requiring more informed employees, Allen said. “It’s a big-ticket purchase for somebody. And if they feel like they’re not getting the right advice or are being misled by someone who doesn’t know, it would be definitely frustrating. They will take their business elsewhere.”

“Circuit City’s job cuts backfiring, analysts say,” Washington Post, May 2, 2007.

When numbers hide the truth

Corporate America is obsessed with numbers

Analyst meetings focus on earnings expectations, revenue growth and margins rather than business fundamentals. PowerPoint presentations look naked if they lack charts and graphs to buttress their message. Lofty corporate mission statements are often trumped by pressure to “hit the targets.” Job applicants are advised to stress tangible achievements, and above all, to quantify them. And the ultimate sign of a trend past its sell-by date: a January 2006 Business Week cover story, “Math will rock your world”.

This love affair with figures increasingly looks like an addiction. Numbers serve to analyze, justify, and communicate. But numbers are abstractions. When they begin to assume a reality of their own, independent of the reality they are meant to represent, it is time to take warning, as some are. When McKinsey surveyed over 1000 directors of public companies in 2005, the majority made it clear they wanted to hear less about financial results and more about things not so readily quantified, like strategy, risks, leadership development, organizational issues, and markets …

Metrics presuppose that situations are orderly, predictable, and rational. When that tenet collides with realities that are chaotic, non-linear, and subject to the force of personalities, that faith – the belief in the sanctity of numbers – often trumps seemingly irrefutable facts.

In an ideal world, we’d be able to offer a roadmap for the proper use of metrics – what should be measured and when, what are the best ways to measure, how should they be interpreted? But it isn’t simply space constraints that get in the way of this objective. Whether quantitative measures are beneficial or not depends less on the measurement themselves and more on how they are integrated into decision processes. Quick and dirty calculations can be helpful if users understand their limitations, and very precise models can be dangerous if given undue credence.

Susan Webber, “Management’s Great Obsession “, Strategy World, 21 April 2007, http://www.strategyworld.org/2007/04/21/susan-webber- managements-great-obsession/

Business lessons from the ER

I just finished reading a great book called Better: A Surgeon’s Notes on Performance, by Atul Gawande. The essays in this book are on different themes, from hand washing to battlefield care in Iraq, cystic fibrosis to polio outbreaks. The theme that shines through, however, reminds me of something that I’ve heard Jeff Pfeffer say many times: Great organizations, especially those that do well over the long haul, are masters of the obvious and the mundane.

Gawande shows how nearly 100,000 Americans die each year from diseases that they catch in hospitals: If doctors and nurses would wash their hands more frequently, this number would fall. He shows how relentless attention to this little detail helps distinguish the best hospitals from average ones.

Gawande also shows how small attention to detail can reduce battlefield injuries. These often-exhausted doctors and nurses are serious about keeping great records so that they can learn how to save more lives from patterns in the evidence. Even after hours of grueling surgery, the norm is that battlefield doctors record the nature of the injuries they are seeing. This attention to evidence has big payoffs. One pattern they uncovered was that soldiers and marines were getting a lot of eye injuries. They asked their patients why they weren’t wearing their protective eye coverings. The answer was that the design was bad. They didn’t want to look like dorks! The goggles were redesigned to look like cool sunglasses, and the eye injury rate went down. This is also a great example of why you need to ask users about problems with products. You might learn something.

To return to my colleague and friend Jeff Pfeffer, this pattern is consistent with what we discovered as we were writing Hard Facts, Dangerous Half-Truths, and Total Nonsense. Great leaders and firms often “win” by doing mundane things well. Think of Southwest Airline’s Chairman and Founder’s Herb Kelleher saying “Airplanes don’t make any money when they are sitting on the ground.” Or of George Zimmer, CEO and Founder of The Men’s Wearhouse, building a business model around the notion that most of his customers would rather not actually be in his stores buying suits. Wal-Mart Founder Sam Walton’s motto, “everyday low prices,” may have had some controversial effects, but is a simple idea that shapes many, many actions at the discount giant. It was essential to its becoming the biggest retailer in the world.

Bob Sutton, “Masters of the obvious”, Harvard Business Online, 4 May 2007, http://discussionleader.hbsp.com/sutton/2007/05/mastersoftheobvious1.html

High-tech opportunity in an unlikely industry

Like many ambitious high-tech startup companies, Current Communications Group begins with an idea that is both technically advanced and yet brilliant in its simplicity: Why not offer customers broadband Internet access over wires that every home already has – its electric grid.

And yet, also like most technology companies, that simple idea has to clear a lot of complex hurdles – in this case, an already highly competitive and advanced marketplace for high-speed web connections, an uncertain regulatory environment and, most critically, the conservative, risk-averse nature of the big electric utilities the company must partner with.

But Current – which was represented at the recent Wharton Technology Conference 2007 by vice president J. Brendan Herron Jr., and two key investors – may have found the solution for breaking out of that box, and it could come from an unlikely source: rising concern about man-made global warming.

That’s because in addition to its main feature – BPL (broadband over power line) Internet service – Current’s technology also provides utilities with a service called Smart Grid, which uses a high-tech system of sensors to closely monitor both electric use and occasional outages, thus providing a huge savings in the need for new generating capacity.

As Herron told the audience during a panel discussion titled, “New Tech Startup: The Challenges and Opportunities of Successfully Growing a New Tech Company,” the twin realizations that power plants are the source of some 40 percent of greenhouse gas emissions in the United States, and that growth in electric demand continues to outpace the arrival of new supplies, have forced the big utilities to take notice. “They are faced with a dilemma: ’What do we do as demand grows and supply doesn’t? The alternatives are: We try to build more plants in an uncertain environment, we take brownouts at a huge cost to the economy, or we use a Smart Grid to help facilities better manage the efficiency in the load.’”

The result is that the startup, based in Germantown, Md., has been able to attract some $130 million in venture capital – from backers such as Google, General Electric, Goldman Sachs and a couple of utility companies – and establish a small but growing record of attracting new customers in markets like Ohio and in Texas, where Current has a promising alliance with innovative electric utility TXU (recently bought by private equity firms Kohlberg Kravis Roberts & Company and the Texas Pacific Group, in a deal valued at $45 billion).

“Powered up: how one high-tech startup plans to electrify the marketplace,” Knowledge@Wharton, 11 April 2007, http://knowledge.wharton.upenn.edu/article.cfm?articleid=1706

The potential and limits of peer production

Peer production is still a new phenomenon and will continue to evolve. Nevertheless, its most prominent examples are now mature enough that we can begin to draw from them some practical lessons for executives and entrepreneurs looking to the open source model as a means of strengthening the innovativeness of their organizations.

The bottom line is that peer production has valuable but limited applications. It can be a powerful tool, but it is no panacea. It’s a great way to find and fix problems, to collect and categorize information, or to perform any other time-consuming task that can be sped up by having lots of people with diverse perspectives working in parallel. It can also have the important added benefit of engaging customers in your innovation process, which not only allows their insights to be harnessed but also may increase their loyalty to your company.

But if peer production is a good way to mine the raw material for innovation, it doesn’t seem well suited to shaping that material into a final product. That’s a task that is still best done in the closed quarters of a cathedral, where a relatively small and formally organized group of talented professionals can collaborate closely in perfecting the fit and finish of a product. Involving a crowd in this work won’t speed it up; it will just bring delays and confusion.

The open source model is also unlikely to produce the original ideas that inspire and guide the greatest innovation efforts. That remains the realm of the individual. Raymond was clear on that point when, toward the end of his paper, he examined some of the “necessary preconditions” for the bazaar model of production. “It’s fairly clear,” he wrote, “that one cannot code from the ground up in bazaar style. One can test, debug and improve in bazaar style, but it would be very hard to originate a project in bazaar mode.” In a recent e-mail to me, he was even blunter. “The individual wizard,” he wrote, “is where successful bazaar projects generally start.”

Matt Asay, a software executive with long experience in the open source movement, agrees. “All open source projects – without exception – are started by one or two people and … have a core development group of fewer than 15 developers,” he says. “The most you can hope for [from the broader set of contributors] is bug fixes.” Asay warns that trying to expand the core decision-making group to include more of the “community” can backfire, as the resulting decision-by-committee approach tends to produce “stale, conservative code.” In other words, keep the bazaar out of the cathedral.

So if you’re looking to bolster your company’s creativity, you should by all means look for opportunities to harness the power of the crowd. Just don’t expect the masses to take the place of the lone wizard or the band of mages. The greatest breakthroughs will always begin, to quote Eric Raymond once more, with “one good idea in one person’s head,” and the greatest products will always reach perfection through the concerted efforts of a highly skilled team.

Nicholas G. Carr, “The ignorance of crowds”, Strategy+Business, Summer, 2007.

The most profitable web site in the world?

The site runs on Microsoft software on a half-dozen machines at a hosting facility a few miles away. From his bedroom, though, Mr Frind can keep tabs on everything going on. When I was visiting last week, he showed me the site’s monitoring program: 43,000 people were at PlentyOfFish at that moment, with 500 Web pages a second being sent out.

When you have that kind of traffic, you can make money three ways: via Google’s small text ads, with bigger banner ads and through “affiliate marketing,” where other sites pay you for sending them customers. Mr Frind does all three – and does very well. A few months back, he posted on his blog a picture of a check from Google for nearly $1 million for a two-month period. Google confirmed the check was for real.

Mr Frind says the site brings in between $5 million and $10 million a year; lest even more competitors get onto his success, he declines to be more specific. That puts him ahead of some of the Web’s best: Last year, each Google employee generated an average $1 million in sales.

PlentyOfFish is the success that it is because of several converging Web trends. Servers and server software have become simple and reliable enough that they can run on their own, without a lot of babysitting. What’s more, a remarkably sophisticated economic infrastructure now exists that allows busy Web sites to make lots of money, certainly enough for one person to live very well.

“PlentyOfFish owner has the perfect bait for a huge success”, Wall Street Journal, 23 May 2007.

The death of distance is also killing newspapers

The newspaper business is based on monopoly control over the distribution of news and information in a given region. The Web destroyed those regional monopolies by making it cheap and easy to distribute any information anywhere in the world instantaneously. The car killed the horse and buggy industry. Digital cameras killed the film industry. Technology happens – but technology itself isn’t destroying journalism. It’s simply destroying the business that subsidized journalism.

Scott Karp, “Should Google subsidize journalism?” Publishing 2.0, 29 May 2007, http://publishing2.com/2007/05/29/should-google-subsidize-journalism/

The publishing industry struggles with the information age

When Shana Kelly, a literary agent at the William Morris Agency, submitted Curtis Sittenfeld’s first novel, “Cipher,” to book publishers in 2003, she had high expectations. She contacted nearly two dozen high-ranking editors at major publishers, expecting every one to make offers for her client’s coming-of-age story set at a boarding school …

Random House published Cipher in January 2005, renaming it Prep and backing it with a clever marketing and publicity campaign. But the initial print run was just 13,000 copies – not enough to generate added royalties on the $40,000 advance.

Prep proceeded to confound all expectations by making the New York Times best-seller list a month after publication. The hardcover, with a cover price of $21.95, eventually sold more than 133,000 copies, according to Nielsen BookScan, which captures about 70 percent of sales. The paperback also became a best seller, selling 329,000 copies to date. Foreign rights have been sold for publication in 25 languages, and Paramount has optioned the movie rights.

The book was buoyed by favorable press and word of mouth. But other books receive similar attention and go nowhere, so why was Prep so successful? Conversely, what causes a book that was all the rage at auction time to fall flat at bookstores?

The answer is that no one really knows. “It’s an accidental profession, most of the time,” said William Strachan, editor in chief at Carroll & Graf Publishers. “If you had the key, you’d be very wealthy. Nobody has the key.”

The hunt for the key has been much more extensive in other industries, which have made a point of using new technology to gain a better understanding of their customers. Television stations have created online forums for viewers and may use the information there to make programming decisions. Game developers solicit input from users through virtual communities over the Internet. Airlines and hotels have developed increasingly sophisticated databases of customers.

Publishers, by contrast, put up Web sites where, in some cases, readers can sign up for announcements of new titles. But information rarely flows the other way – from readers back to the editors.

“We need much more of a direct relationship with our readers,” said Susan Rabiner, an agent and a former editorial director. Bloggers have a much more interactive relationship with their readers than publishers do, she said. “Before Amazon, we didn’t even know what people thought of the books,” she said.

“The greatest mystery: making a best seller”, New York Times, 13 May 2007.

Should business software take a page from video games?

Work is not play. But maybe it should be. In fact, Paul Johnston has remade his company on the idea that business software will work better if it feels like a game. Mr. Johnston is not some awkward adolescent, but the polished president and chief executive of Entellium, which makes software for customer relationship management. Businesses spend billions of dollars on such software to try to track their sales staff, their marketers, their customer service – anything that connects them with customers. Unfortunately, most of the software is the business equivalent of calorie counting. No one does it gladly. Worse, the software has a Big Brother aspect to it.

“CRM software is designed to let your manager peek at you,” Mr Johnston says. He notes that even at Entellium, based in Seattle, he has had trouble getting his sales staff to update their data consistently. Reasoning that sales people are wildly competitive, he thought that they would respond to a program that showed where they stood against their goals – or their peers’. Hence, Rave, which Entellium introduced in April.

Rave adapts a variety of gaming techniques. For instance, you can build a dossier of your clients and sales prospects that includes photographs and lists of their likes, dislikes and buying interests, much like the character descriptions in many video games. Prospects are given ratings, not by how new they are – common in CRM programs – but by how likely they are to buy something. All prospects are also tracked on a timeline, another gamelike feature.

Rave isn’t exactly the business version of Madden NFL, at least not yet. But Craig K. Hall, president of Logos Marketing Inc., a graphics company in Albany, said it reminded him of video games he has played, like the Legend of Zelda. Mr Hall, 31, says he likes the way Rave pops up information, including news that will matter to clients. He also said its use of sales stages and checklists, also borrowed from the way games progress through levels, had helped him rethink the way his company operates. “They’ve done a good job of it,” he said.

“Why work is looking more like a video game,” New York Times, 20 May 2007.

Craig HenryStrategy & Leadership’s intrepid media adventurer, collected these sightings of strategic management in the news. A marketing and strategy consultant based in Carlisle, Pennsylvania, he welcomes your contributions and suggestions (Craighenry@aol.com).