Endless Innovation

How Taylor Swift Hit the Target Bullseye

Yo Taylor, I'm really happy for you, I'ma let you finish, because you have one of the bestselling albums of the past five years. Not to get all Kanye about it, but Taylor Swift's new record "Speak Now" just sold 1 million copies in one week -- only the second time that's been done in the past five years. So how did she do it? Not surprisingly, there was an extensive marketing blitz that included all the usual media suspects, a few non-traditional channels (e.g. a free concert at JetBlue's terminal at JFK), a cross-promotional tie-in (i.e. a new fragrance), and strong support from Starbucks and Target.

But there was also a lot of thought about creating the right channel strategy for Taylor Swift's new album. Billboard Magazine has one of the best breakdowns I've seen yet of Taylor Swift's sales numbers:

(1) Target - 350,000 units

(2) Apple iTunes - 220,00 units

(3) Walmart - 190,000 units

(4) Amazon - 40,000 units

(5) Costco - 40,000 units

(6) Best Buy - 35,000 units

(7) Starbucks - 28,000 units

More interestingly, Taylor's fans were willing to pay a premium for the new album -- and that meant that a race-to-the-bottom pricing strategy wasn't effective. The suggested pricing for the album was $18.98 -- nearly twice the $9.99 standard you'd encounter on Apple iTunes. (Currently, Apple iTunes is offering the album for $13.98). Target - which blew out the competition by far with nearly 1/3 of the entire sales - still is holding firm to the $16.99 price point by delivering additional value in the form of 3 original songs, 3 remixed tracks and 30 minutes of exclusive video coverage (as well as that "lady in red" re-interpretation of the album cover). However, the $18.98 price point was hardly a line drawn in the sand -- Amazon quickly undercut the pricing of the entire market, at $3.99 for the digital download of the entire album. On the CD side, Walmart led the race for margin compression with $7.78 pricing.

Heading into Week 2, it will be interesting to see how these retail channels - especially Target -- alter their strategy to maintain the sales momentum for "Speak Now."

[image: Taylor Swift Joins Forces With Target]

Lady Gaga as Innovation Superstar

For the past six months, Lady Gaga has parlayed her amazing success in the music and entertainment world to become the unofficial poster child for creativity and innovation in the business world. Earlier this year, she was tapped as the new creative director of Polaroid. Then, just last month, Fast Company named her the #1 Most Creative Individual in Business - an honor that placed her ahead of luminaries from the likes of Apple, FedEx, TED, Microsoft and Nissan. 

Lady Gaga has even been described - in glowing terms - as the perfect embodiment of the software-as-a-service concept by Read Write Web:

"Lady Gaga, along with her record company, is evolving the album in the form of software as a service. Considering the content of her hit new video, Telephone, it is fitting that she would use software to tackle the hard problem of getting paid by amazing fans.

On her path to global dominance, the site, LadyGaga.com has innovated the next generation of brand management for artists. To do this, she creates a join between Google's YouTube, Apple's iTunes, Twitter, and Facebook. Way beyond having a an Twitter account, LadyGaga is hosting an interface party, and you're invited. She's a performer who is inventing ways to create the value of using multiple platforms to juice the network effects.

[...]

With the help of Twitter, Facebook, Google, and Apple she will connect to more platforms than ever before, with fewer clicks and passwords.We wonder how this evolve further into other platforms. Will LadyGaga's services continue to find new ways to leverage real-time services? We're starting to envision personal mobile and location aware fan applications. Will the forces of cloud computing and commerce force Apple and Google be best-friends-forever in music?"

While it's easy to pick a popular company or personality and proclaim that we're witnessing "Something Unlike We've Ever Seen Before," it's clear that Gaga -- if she manages to play nice with others -- is on to something new. Any other examples of how Lady Gaga is changing the rules of the road for businesses? 

[image via Read Write Web]

The New York Times Re-Thinks The Living Room of the Future

New York Times R&D Group: Moving the news into your living room from Nieman Journalism Lab on Vimeo.

In a push to regain favor with advertisers and Wall Street analysts, The New York Times has been aggressively pushing its unique vision for "The Living Room of the Future." In fact, CEO Janet Robinson has been increasingly putting members of her R&D team front-and-center as she meets with advertisers and ad agency executives. Her goal is to convince them, first, that the New York Times has figured out the whole Internet thing and, secondly, to lock down new advertising deals. This being earnings season and all that, the Wall Street Journal recently took a closer look at what the future holds for the New York Times:

"On a recent morning, Michael Zimbalist, Times Co.'s vice president of research and development operations, acted as guide on a typical tour through the company's lab on the 28th floor of the Times building. The tour is centered on what Mr. Zimbalist calls a "living room of the future," a small room with a brown couch, a large flat-screen TV and four smaller screens on another wall.

The set-up is designed to mimic how a reader will be able to receive Times content sent using various technologies including RSS feeds and Twitter. In a demonstration, a staffer receives a Twitter message from a friend recommending a video from Times food writer Mark Bittman. Mr. Zimbalist touched the recommendation on one screen and dragged it to the flat-screen TV, which plays the video. A recipe associated with the video then appeared on Mr. Zimbalist's iPhone with an ad for a nearby Whole Foods store.

Mr. Zimbalist said the room is a vision set 12 to 18 months into the future for how New York Times content will be distributed and experienced."

Ever since the 1970s, of course, people have been discussing the "living room of the future." (Try Binging "living room of the future" and see how many results pop up!) What's fascinating about the approach by the New York Times is how the vision is being driven by a "content" company rather than a "technology" company. Slowly but surely, the New York Times is transforming itself from a text news company to a true multimedia news company.

For more videos about the New York Times R&D team and the future of news & advertising, check out this excellent five-part video series from the Nieman Journalism Lab at Harvard University.

Innovation and the Future of Media

The July/August "Ideas" issue of The Atlantic (still available on some newsstands) is chock-full of innovation goodness, including one of the best-written articles that I've read in some time about the future of the newsweekly. Michael Hirschorn looks at the experience of The Economist, which actually added advertising pages last year (up 25%), gained subscribers and expanded circulation at a time when similar types of publications were experiencing double-digit declines, and asks a simple question: Why has the Economist been so successful when other weekly news magazines have not?

After ruminating on how the digital age has changed the way people consume news & information, Hirschorn identifies several possible reasons for the success of The Economist:

1. Quality and breadth - "The Economist is truly a remarkable invention - a weekly newspaper, as it calls itself, that canvasses the globe with an assurance that no one else can match. Where else, really, can you actually keep up with Africa?"

2. Ability to distill the news and offer a point of view - "The Economist has reached its current level of influence and importance because it is, in every sense of the word, a true global digest for an age when the amount of undigested, undigestible information online continues to metastasize..."

3. Smart analysis & razor-sharp clarity instead of original reporting - "The Economist virtually never gets scoops, and the information it does provide is available elsewhere... if you care to spend 20 hours Googling."

What's interesting is that The Economist has managed to do all this without knowingly adapting to the realities of Web 2.0. In fact, even Hirschorn admits that The Economist "has never had much digital savvy." The Economist, which almost demands to be seen first and foremost as a print publication rather than a Web publication, appears to stand alone on the Web, un-linked to other sources of news & information: "While other publications whore themselves to Google, The Huffington Post, and the Drudge Report, almost no one links to The Economist. It sits primly apart from the whole orgy of link love elsewhere on the Web."

At the end of the day, The Economist feels like "the only magazine you need to read. You may like the new Time and Newsweek. But you must - or at least, brilliant marketing has convinced you that you must - subscribe to The Economist."

[image: The Atlantic]

Starbucks and the 21st Century Suggestion Box

When in doubt as to how to run your business, open up the floor to the crowd. Companies like Dell and Delta have already experimented with these "online suggestion boxes" and now Starbucks is looking for new ideas from members of the wider Starbucks community. Under pressure from investors to prop up a sagging stock price, Starbucks just launched the site My Starbucks Idea. There's coverage of the new Starbucks site on Wired and Mashable, and a (very brief) mention of it in today's Wall Street Journal.

[image: My Starbucks Idea]

A hard rain falls on financial innovator Bear Stearns

The full and total collapse of Bear Stearns over the weekend and the investment bank's purchase by JP Morgan Chase is another stunning example of the link between reputation and shareholder value. Bear Stearns was one of the most storied names on Wall Street. On Thursday, shares of the company traded at $57. On Friday, shares of the company plunged to $30 in a matter of minutes in a huge cascade effect triggered by a loss of confidence in Bear Stearn's reputation and the company's ability to act as counterparty on financial market dealings.

Over the weekend, amid concerns that a bank run on Bear Stearns could lead to a collapse of the entire worldwide financial system, JP Morgan Chase stepped in and bought shares of Bear Stearns for $2 apiece. That's basically a 93% discount for a company that had worldwide operations, was founded in 1923 and was routinely ranked as one of FORTUNE Magazine's most admired companies! The value of the company's real estate in midtown Manhattan was probably worth the purchase price alone, effectively valuing the company at... zero. Zilch. Nothing.

Imagine waking up to that on a Monday morning.

[image: Bear Stearns via Huffington Post]

Starbucks rips another page from the McDonald's playbook

Starbucks is quietly rolling out a pilot program of $1 coffees and free refills to customers at select stores in Seattle. Despite all indications that Starbucks is slowly morphing into a McDonald's-like fast food chain complete with dollar menus, highway rest stops, and drive-through windows, Starbucks spokespersons vigorously deny the notion, claiming that the pilot "is not indicative of any new business strategy." Instead of innovating its way out of its current predicament, Starbucks seems to be grasping for straws coffee stirring rods. Years from now, the story of the slow erosion of the Starbucks brand is going to be required reading at the nation's leading business schools.

[image: Starbucks Drive-Through in Japan]

Starbucks turns to its founder for a spark of innovation

The return of Howard Schultz to Starbucks in the CEO role -- combined with the deluge of press attention about the looming showdown between McDonald's and Starbucks for the hearts and minds of coffee drinkers around the world -- raises a very interesting question: To what extent can the founder of a company spark a turnaround by returning to the CEO role? It seems like a knee-jerk reaction at many companies to reinstate the founder as CEO in times of need: there's not only Howard Schultz at Starbucks, but Jerry Yang at Yahoo, Michael Dell at Dell, Steve Jobs at Apple, Charles Schwab at Charles Schwab, and Ted Waitt at Gateway. The basic logic, of course, is that the original founder of the company is an "innovative visionary" capable of righting what ails the company and restoring investor confidence in the strategic direction of the company.

With the exception of Jobs at Apple, however, these founders have produced mixed results thus far in their turnaround bids.  Pink notebook PCs at Dell and "Talk to Chuck" ad campaigns at Charles Schwab are nice, but how much do they really add to the bottom line? Anyway, investors were upbeat about Schultz's return, driving Starbucks stock 8% higher on the news. Is this a quick hit or part of a long-term turnaround at the company?

Influx Insights seems to think the burden of proof is with McDonald's, but I think the burden of proof is really on Starbucks. The company's international expansion plans - in places like Russia and China - are not going as well as they should be, and the company is GAP-ifying itself with a Starbucks on seemingly every corner. On the other hand, McDonald's has mastered the game of international expansion (its store in Pushkin Square in Moscow is still legendary), while the company has proven proficient in thinking up innovative new food concepts (Chipotle Mexican Grill - one of the hottest Mexican food chains in the USA - is a McDonald's spin-off) to drive top-line revenue growth.

[image: Howard Schultz of Starbucks]

Nike rips a page from the Malcolm Gladwell playbook

Even if you've never read Malcolm Gladwell's Tipping Point, you probably already know how important "influentials" and "tastemakers" are in the development of a brand that "tips" into the mainstream. In an effort to re-charge growth in the sneaker category, Nike has been reaching out to "influentials" and "tastemakers" in places you wouldn't normally expect. Whereas once the company might have tried to identify the up-and-coming basketball talent in urban neighborhoods, now the company is redoubling its efforts to find street artists, club kids, muralists, industrial designers and skateboard champs to promote the Nike product and give the company some street cred.

However, as the Wall Street Journal reports, those efforts have met with a bit of cynicism from the very people they were supposed to be reaching. (If you look closely, you'll see that the skate deck in the middle combines an image of a tattooed Nike exec, but in the background, there's a white stretch limo, symbolizing the corporate image of Nike.)

Which raises an interesting innovation: Is the goal of the new Nike outreach initiative a way to make some incremental sales to users the company hadn't been reaching before? Or is the goal to re-invent Nike entirely, which might alienate the company's core consumer base? That, my friends, is the crux of Clayton Christensen's Innovator's Dilemma.

[image: Nike skateboards]

A media company that actually "gets" innovation

The most interesting development in the media world over the past month or so hasn't been Rupert Murdoch's foray into 24/7 business news programming. And it certainly hasn't been NBC Universal's $925 million deal for Oxygen Media. Instead, it's the sea change in corporate strategy going on at Discovery Communications, better known as the operator of cable channels such as Discovery Channel and Animal Planet. In August, Discovery acquired the popular site TreeHugger.com for $10 million. On Monday, the company snatched up HowStuffWorks.com for $250 million. Together, the two sites will become the focal point for the company's revamped Internet strategy. (In fact, Ad Age has referred to the bigger and better Discovery Communications as "DiscoveryPedia.")

The bold moves appear to be the work of CEO David Zaslav (a former NBC veteran), who took over Discovery in January. Since taking over, he has replaced much of the company's top management, closed its chain of retail stores and lopped off 20% of the workforce. Any guesses as to what's the next Internet media property he might look to acquire?

[image: Discovery + TreeHugger]