Musicians Are Starting to Embrace Technology...Finally

This week I have been listening to Girl Talk's new album.  Like a growing number of artists, Girl Talk makes his albums available online for free, sometimes allowing downloaders to donate an amount of their choosing to the artist.  This seems like a pretty unsustainable business strategy, but there are a few reasons why I think it works for artists like Girl Talk.

First, the availability of free, online music has led to the decline of CD sales.  As this has happened, musicians have had to increasingly rely on live performances in order to make money.  By allowing downloaders free access to one's music, an artist is simply recognizing that people would be downloading it for free anyway through Torrent and other online services.  Second, many artists like Girl Talk can't legally sell their music commercially.  Because their music consists of mashes and mixes of other artists copyrighted music, sometimes combining acts as disparate as Three-6 Mafia and the Smashing Pumpkins, selling their music would leave them on the less desirable end of countless lawsuits.  Finally, releasing high-quality music for free goes so far in developing listener loyalty that many times fans will go out of their way to pay for concert tickets or give donations out of a sense of gratitude.  This could be seen clearly with Lil' Wayne's release of Tha Carter III.  After several years of releasing countless high-quality mix-tapes free online, Lil' Wayne finally released Tha Carter III, a studio album.  Although anyone who had enjoyed his free releases could have found that album on the internet for free, fans went out in droves and bought the CD.  It seems the reason for this was appreciation for the free work Lil' Wayne had done in the past.

Despite this seemingly strange method of release I think it works for artists like Girl Talk.  His new album can be downloaded here: http://illegal-art.net/allday/

Serendipity and Culture

In vendor selection, I believe that things like corporate culture and attitude are very important.  Doing research about things like culture allows a firm to best take advantage of serendipity.  Serendipity can be incredibly important in business, but leaving success all to fortuitous events is a huge mistake.  The best way to go about things is to put your business in the right place to let luck take its course.

If a company chooses vendors by throwing a dart at a list, then there is a chance that the relationship could be successful.  But if they first go through and screen that list of venders and eliminate half, or two-thirds of the firms that would cause a culture clash, then there is a much greater likelihood that things will end up working out favorably.  At the end of the day, a dart will be determining the relationship, but because the majority of problem candidates will have been eliminated, the decision will end up being judged upon the extent of the relationship's success, and not whether it worked at all.

Outsourcing Core Functions

After our panel discussion for outsourcing, Prof. Schwarz posed the question, "what stops firms from outsourcing core and strategic functions?"  I would contend that it really isn't possible for a company to outsource such things without it altering their core competency itself.  For example, a software development company cannot remain a software development company if they outsource software development.  That kind of outsourcing effectively makes them a different kind of business.


What I wonder is whether the expansion of outsourcing will effectively lead to the introduction of different kinds of businesses.  As economies of scale are being created through networking, I wonder a segment of businesses will develop whose primary focus is the creation of those networks themselves.  This will depend upon whether networking is sufficiently time consuming and expensive to justify outsourcing their networking needs to another firm, and whether a firm can be efficient and effective enough at network creation to use that as its core competency.


In today's world of network-centric working relationships, and the push to outsource as much as possible, it will be interesting to see if businesses end up outsourcing to such an extent that it that they cut out much of the meat of their business. If too many businesses emerge that are essentially just managers of a collection of contracts, they may cost more than the value they create, meaning we could see a swing back in favor of insourcing.

Outsourcing-Insulation from Liability

After the presentations this week, we discussed outsourcing as a tool businesses use to insulate themselves from liability.  The classic example of this is the cab company.  Most cab companies operate simply as dispatchers who maintain contractual relationships with the drivers of the cabs.  Each cab driver is an independent contractor as opposed to an employee of the cab company they work for.  With this arrangement in place, it is each driver (not the cab company he or she works for) that bears responsibility for the accidents that the cab is involved in.  This increases the awareness of the driver, because he will personally have to pay for any damage he causes, and also significantly reduces the costs of cab companies because they aren't required to pay for the negligence of their drivers.

This is the same strategy that BP employed with the Deep Sea Horizon rig.  The general rule of law is that businesses are not responsible for the damages caused by their independent contractors.  The exception to this rule, however, is that businesses ARE responsible for the damages caused by their independent contractors while engaged in "ultrahazardous activities".  Ultrahazardous activities is a legal label that is not easily definable.  Deciding whether an activity is ultrahazardous depends upon the nature of the activity, the appropriateness of the activity for the place it is being engaged in, and finally (and most importantly) whether the exercise of due care can prevent the kind of damage that took place.  The idea behind this is that you don't want companies to be able engage in incredibly dangerous activities without the possibility of having to pay for them just because they hire independent contractors.

The problem for BP is that it would be very easy to convince most people that maintaining a deepwater well is an ultrahazardous activity.  No matter how safely the well was maintained, there is no way to completely forestall the kind of disaster that took place because of the difficulty involved with stopping the flow of oil from a well that far under the ocean's surface.  So in this situation, BP's outsourcing arrangement probably isn't going to help them very much.

So if a company is utilizing outsourcing to insulate themselves from liability, an important thing they have to do is consult their lawyers and figure out whether the activities that are being engaged in are ultrahazardous or not.  A good rule of thumb is that is it probably ultrahazardous if it involves any kind of uncontrollable explosions.  If the activity is ultrahazardous, outsourcing may be a waste of your time.

We Live in Public: When Technology Invades Personal Space

I blogged earlier about the potential for social network advertising to go beyond the scope of normal marketing tactics and turn off potential customers by thoroughly creeping them out.  I just recently watched a movie that explored this idea in detail.  The movie, called "We Live In Public" documented the odd life and social experiments of pseudo.com millionaire Josh Harris.  It explores the effect that social media like FaceBook and Twitter could have if taken to the extreme.

The main social experiment that took place involved the placement of over 100 artists in an ultra-wired, locked basement where everything was recorded, and everyone could monitor everyone else.  Each person had their own "pod" with a TV and a camera, and everyone had the ability to monitor everyone else's pod. There was no privacy, and privacy was eliminated.  The important thing to remember is that everyone involved in the experiment did so voluntarily and with quite a bit of enthusiasm about this bold new project.

After about 2 weeks of the experiment, the project imploded.  Even the most ardent exhibitionists had trouble giving up their privacy completely.  Tensions ran high, violence broke out, and the shooting range that had been included in the basement as a mode of entertainment became an accident waiting to happen.

Eventually the experiment was shut down by the police for zoning and weapons violations.  But the film emphasized the potential dangers of social media to the extent that people make their personal lives privy to the observations of others.  Even if it seems like a fun or exciting idea at the time, once a person gives up their privacy using social media, it isn't something that they can take back.  Their personal life will forever exist in a public forum.

The movie seems to suggest that the internet is an inherently impersonal place--which is why I thought our speaker in the panel discussion who talked about his church was so interesting.  The idea of trying to promote intimate, spiritual connections on a medium that is in many cases impersonal and unforgiving struck me initially as counter-intuitive.  But with them I think it all came down to the way that they used the internet to connect to people.  The church seemed to use the internet to reach out for ways to help people in times of crisis (personal or environmental).  So it seems like the key is using the internet as a tool for accomplishing your goals as opposed to the place that you live your life.

For information about the movie: http://www.imdb.com/title/tt0498329/

Change for the Change Resistant

I found the Spartan case this week incredibly interesting because it dealt with the potential overthrow of traditional and time-tested business structure.  Food wholesalers like Spartan have existed for many years, but the introduction of conglomerate companies like Wal-mart and Meijer are seriously calling their continued longevity into question.  Spartan's Co-op structure may end up proving unnecessary due to the demise of the smaller independent supermarkets that are the company's shareholders.

Co-ops exist to support and benefit their shareholders who are also their customers (in Spartan's case, a number of grocery stores).  What that means, however, is that in order for the company to make decisions, they have to satisfy a board of directors that represent the interests of hundreds of separate businesses.  While those business owners have the best interest of Spartan in mind, their primary concern is their own business and not Spartan.  With all of those shareholders pulling the business in so many different directions, the decision-making process becomes incredibly convoluted and inefficient.  A Co-op can never be as efficient as a single conglomerate company can when it comes to making decisions, because with a unified company, the interests of all of the shareholders are in sync with one another.  Implementing new technology for a single company is easy...the decision just has to be made, but with a Co-op, making a change in technology requires convincing all of the constituent companies to make the change as well.

In order to solve this fundamental structural deficiency, I think that Spartan needs to ensure compliance with the decisions they make.  They could require some kind of contractual assurance that the individual members of the Co-op comply with the decisions made by the company.  They could also refuse to sell to companies that fail to comply with their decisions.  This would solve most of the problems involved in the implementation of decisions for a Co-op company.  There seems to be little that can done to resolve the inefficiencies in the decision making process itself for Co-ops.  Becoming more like a conglomerate defeats the purpose of the Co-op itself which is to support the companies owned by its shareholders, so the company will always operate like a several hundred headed monster.  It will be interesting to see if companies like Spartan will ultimately be able to withstand competition from companies like Wal-mart.

When Low Tech Works

The case study presentation this week about the Zara clothing store was incredibly interesting to me.  The business model of that company blew me away.  By increased production and constant reinvention of fashion trends, Zara managed to stay on top of the latest fashion trends without having to be on top of the latest technology.  To the contrary, Zara managed to use their low tech inventory system to create increased demand for their products.

By constantly rotating their products, Zara created a sense of urgency among the individuals that shopped there.  By keeping their inventory system low tech and minimizing inter-store communication, Zara managed to create sales as opposed to hurt them.  If a shopper found something that she liked, there was no ability, nor time to check if another store had that product in her size.  Despite this, the shopper would be influenced to buy whatever else in the store she found remotely appealing because she knew that it wouldn't be around if she came in later, and she couldn't try to find it somewhere else.

In creating the impression that failing to buy something instantaneously will forever prevent one from doing so, Zara more than makes up for the business that they lose from people that can't find exactly what they want with the business that is created through the constant pressure for impulse purchases.  It is an ingenious idea that is counterintuitive, yet incredibly effective.