I’m starting up a new blog (Zune’dOut) based upon one of my branding/product ideas, but it most definitely won’t be a branding blog. I will continue to post on mgmtnow, and hope this will get me posting more often on both.

Focus

I’m super passionate about music in general, and specifically the Zune product Microsoft offers. Unfortunately I think Microsoft has really missed the boat on their marketing strategy for this product, and this is why they’re hovering at 3% market-share.

The Zune’s key differentiator is that it allows you to download unlimited music (so long as it’s on the pass) and keep it until you cancel, in addition you also get 10 songs a month rolled into the deal all for $15 a month. Think of this product as Netflix where they let you keep 1 movie a month.

The Problem

People were used to renting movies; no one is used to renting music. Netflix spent millions and millions on marketing to create an effective brand and get people used to the idea of subscription based renting and mail delivery.

Unfortunately, Microsoft has focused their marketing resources on trying to create a Zune is sexy image, when Apple the purveyors of everything sleek and revolutionary in design are the market leaders.  I don’t have the figures but given the subject matter of the tv ads I have seen I can’t imagine the subscription marketing efforts amount to anything more than 25% of advertising budget.

My Solution

One of the biggest challenges in a subscription system is keeping customers engaged. Netflix spent millions to create a profiling recommendation system, including a contest that led to a $1 million payout to a programmer to improve the algorithm.

I think Microsoft should be crowd sourcing their “algorithm”, now I’m not saying they have to get a bunch of programmers to improve the marketplace (not that it wouldn’t help). No I’m talking about encouragement, ecosystem building, and creating more features around music sharing “djing” outside of their current social efforts.

Since I see this as a great way to drive their subscriptions, I decided it would be a good project to undertake and see if I could get any traction behind.

Possible Revenue Streams

The standard AdSense model of revenue generation is obviously one way to go. Another interesting revenue stream may be Zune’s affiliate system, whereby they pay you a set fee for every Zune

*Disclosure* I worked at Microsoft, but have zero insider knowledge on the features announced today for Windows Phone 7. I don’t know how they work, I’ve never seen them demoed or in any PPT. If you’re looking for a leak, look elsewhere. My commentary on any features is purely speculative and done as a consumer of said product, and where I see each product going. The only insight from my time at Microsoft is tied back to the challenges of working cross orgs.

My thoughts on Microsoft Culture and WP7

From my time at Microsoft I saw huge challenges in taking on projects that crossed over multiple stakeholder groups. This was actually an area in which I really excelled in, but always questioned how well the company did on this.

Well today I woke up to a surprise, a very pleasant surprise….. Windows Mobile Phone 7. I worked in an org. pretty close to MCB (Mobile Communications Business), we had a lot of the same ideas of leveraging Microsoft properties for a winning experience for our customers. Unfortunately, there were a ton of agency issues, getting people on the same page was always a challenge, and integrating conflicting business models was messy at best.

Whether or not Windows Phone 7 hits the ground later this year as an “amazing product”, or even a “commercially viable product”, it is a huge win for Microsoft. It’s the first product I’ve seen break down all the walls that Microsoft has built with their businesses and deliver the extent of the value of integrated services to the consumer, and that’s huge.

Some of the features I saw and what they mean:

Xbox –

Currently:Doesn’t have a mobile market at this juncture, didn’t even have solid Zune integration.

What we’re likely getting:A fully integrated experience with Xbox, Zune, PC, and Phone. Plus online gaming, and services on a mobile device, which is something no one else has…. not Apple…. not Sony …. nor Nintendo.

Zune-

Currently:A model focused around the player, when it’s the service that really makes it standout vs. Apple. An anemic mobile purchasing system hampered by lack of connectivity outside of WiFi.

What we’re likely getting: The best music subscription service available to the phone. Better integration with contacts, and social networking for this product.

Bing-

Currently: Actually probably the best current service of any I’ll list from the WP7 features. Lots of cool features but its very under-utilized.

What we’re likely getting: The best chance for Microsoft to make headway into search. Google owns the desktop and will continue to own that. The mobile search market will eclipse that market though and drive higher revenues as location based search offers way more value to customers and businesses.

Office & Exchange services –

Currently: Not well designed for the phone (except for Exchange). Looks like a child’s finger painting next to the sexy (I can’t believe I just called Office sexy, I may need a girlfriend) Office ribbon interface.

What we’re likely getting:WP7 took the best UI available (from Zune) hopefully they take the best UI in productivity from Office as well. It will also be interesting to see the integration with the online services like SharePoint, and Project.

Why This is Great for Consumers

I’m not an Apple supporter but a fully integrated all up approach of software, services, and hardware is the best way to deliver a consistent pleasant experience to your customers. When you look at Microsoft as a whole they have all the pieces to deliver the experiences that Apple does, but sometimes the organizational structure gets in the way.

Seeing a product cross over these boundaries taking the best of what each group offers is huge, and quite honestly wasn’t what I was expecting. So for today there’s nothing but optimism for the Windows Phone, maybe the rebranding was necessary because this doesn’t look like your same tired Windows Mobile 6x device.

If you want more information on the Windows Phone check Gizmodo, an awesome publication for tech-gossip and research.

 “The term “Black Friday” originated in Philadelphia in reference to the heavy traffic on that day (see Origin of the name “Black Friday” below). More recently, merchants and the media have used it instead to refer to the beginning of the period in which retailers go from being in the red (i.e., posting a loss on the books) to being in the black (i.e., turning a profit).”

What else can Black Friday teach us outside of retail dynamics and health of the general marketplace? Can the deals that can be had on specific goods show us a trend in the marketplace?

Deals That Point to Irrelevance

One of the deals pointed out as a screaming deal were the $59.99 GPS unit from TomTom that Walmart had advertised. While these were quite a hot seller, and terrific deal for customers what did this deal really signify about the long term attractiveness of this category?

Seeing a TomTom GPS at such a low cost was a surprise this is a move I’d have expected from an also ran competitor not one of the two market leaders. This move follows news of Google’s map and turn by turn being added to the Android mobile phone platform, as well as aggressive movement from Apple into this field via the iPhone.

We’re likely seeing the slow extinction of the handheld GPS due to convergence with other products specifically phones.

Deals That Point to Maturity

LCD televisions so cheap they make and Xbox360 seem expensive? Yes, we saw those on Black Friday $248 for a 32in LCD or $450 for a 40in display. These all point towards the movement into the mainstream that is the flat panel monitor. I can remember two years ago when $1000 for a 42in DLP TV was a screaming deal. Now the future of DLP seems grim since its most attractive competitive advantage was price.

In addition we’ve also seen a $78 Blu Ray player. This along with the price point for the tvs is showing that high definition has arrived for your average consumer. 

We’re likely going to see the complete transition away from CRTs and DLP tvs, alongside Blu Ray grabbing a increasingly larger share of the DVD business.

Deals That Point to Future Categories

While we could more accurately point to last Black Friday as the rise of the Netbook this holiday season we’re seeing increasing inroads in this category. With the Netbook hitting $200 a price point I’d expect from a higher end appliance not a low end computer, this category is really starting to drive share in the PC space. 

The question OEMs increasingly have to ask themselves though is how do I trade a $600-1000 purchase for a $200 one and still make money? Is this something that can be accomplished by scale? Maybe sell it as “your second pc”? Or do you partner with service providers as some are doing to provide a “connected anywhere” experience that can be monetized.

It will be interesting to see, but I see Netbooks as a driver for lower cost wireless data services, and increasingly will change how we think about mobile computing.

Conclusion

We’ll see how these predictions end up but it’s almost as fun to look at what these sales could mean as it is to see what great deals exist. It is important to note the examples and what they can mean to positioning for your product in the retail space and holiday shopping.

I’m currently in the process of building a business model around a patent I filed a few years ago so this is top of mind. Creating value usually boils down into one of three categories either its the product, a service, or the distribution of a product. If you’re not a manufacturer or creator of the product you’re going to be focused on the service aspects or distribution as your key value add.

Business Models Focused on Distribution
Often this is an overlooked opportunity to differentiate especially by manufacturers as they tend to want to focus on product or services. This could result in failing to see a different channel for the product, or an inability to create product offerings that hit different segments. Especially with software this can be a critical error due to the monetization possibilities licensing unlocks.

Value of Distribution
By no means is this an exhaustive list but just a couple ways you can add value through distribution:

Speed of Delivery: Examples like McDonalds show us the advantage of creating a distribution mechanism that enables fast delivery of a specific good being used as the key differentiator in a business.

Consistency: Being able to deliver a repetitive high quality experience every time like Starbucks. Many would argue there is a better cup of coffee available to you every day, but Starbucks can guarantee the experience due to rigorous training and standardization.

Price Points: Walmart and Costco focus on reducing price by putting price pressures on suppliers. Their  sheer size and willingness to just not carry a product if the cost isn’t favorable enable them to compete on price in ways other businesses can’t.

Licensing: Being able to take one product and deliver it in many different channels hitting new price points and customers. Anti-virus software is a good example of this with the ability to push the same product (sometimes with a couple additional features turned on) via box product, volume licensing, or subscriptions.

Location: This could be anything from shelf space in a supermarket, to having a presence in the mall, or presence on a web property. This is all about opportunity andtraffic. 

Audience Targeting: Enterprise Rent-A-Car is a great example of how location as a pillar of your business model can make your business stand out. While other car rental companies focused on travelers Enterprise focused on people who had disruptions in their everyday commute option due to repairs or auto-accidents.

Conclusion
The phrase “a product so good it sells itself” is a fallacy. A strong business considers its distribution channel at least as seriously as it did its product creation if not more so. A mistake in these areas can make you easily irrelevant even if your product is great.

The other day in the comments there was an inquiry into why I’d stopped posting sections of the Creating Value eBook. My core audience of the site is divided between entrepreneurs and business professionals, and the eBook leans very heavily onto the entrepreneur side.

I had decided it would be best to stop  inserting the sections and just get the Creating Value eBook out instead. My goal was to have a more polished product with better formatting some pictures, and flare. Unfortunately, that’s been delayed.

Given the ask though the straight forward solution was just to post the raw eBook here so that the knowledge could at least be shared.

Goal: My hope was with this eBook I could create an easy straight forward set of questions a entrepreneur could ask to begin to understand what their product is and how they should go about selling it. This might be a bit rudimentary for those with extensive Product Management experience but  I think there can still be some value there.

Enjoy

MGMTNow Value Prop eBook