Ebooks: Getting Beyond Disruption

This is exactly what the publishers need to be thinking about – how to create long-term value using eBooks.

When you are courting a new customer, you have several roadblocks to overcome. They must believe in your product, perceive the value, and have real pain (desire) to purchase. In most cases, a new customer isn’t an expert in your product/service, whereas you are. So, when they first enter into a discussion with you, having a bundled price eases the decision making capability of the customer, since they don’t have to invest ‘extra’ time deciphering every little line item and it’s price.

The Pros and Cons of Bundled Pricing

How Behavioral Economics Can Help Cure the Health Care Crisis

From Ballmer, who has a very hard job these days.

The New Efficiency

I tried to read the whole thing, but I couldn’t make it through. Lots of corp-speak and little substance.

This should come as no surprise to anyone. The companies backing the broadband are constantly using packaging and pricing tricks to keep consumers. It’s the old nasty business mentality. For many people, broadband has become so essential that you’ll put up with lots of discomfort in order to keep your service.

From a micro- economic point of view, there’s no incentive for the company to make that added investment. Think about it. The company has subscription revenue from it’s existing customer base, but (for whatever reason) the throughput is lower than expected. For the broadband company to fix the throughput, they’ll need to invest in infrastructure, which is billions of dollars. However, there won’t be any new revenue, since the current throughput levels are below the advertised rate. So, that means upgrading the infrastructure will be an outgoing cost, without any return.

And what happens to stock prices when companies don’t match revenue with costs?

By the way, this problem has been solved. Korea has one of the highest broadband penetration and throughput rates in the world. How did they do it? They let the government subsidize it.

“Economists Need to Study Bubbles”

Apparently this is happening in Second Life also.

Second Life Sued For Allowing Sale Of Impostor Virtual Goods

Wall Street’s Math Wizards Forgot a Few Variables

A side effect of this economic downturn is the re-tooling of financial models. Expect a huge onslaught of behaviorial economics grants, theories, and lectures in 2010. I say bring it on.

Of course, the biggest complaint is going to be about privacy. But that’s a daily discussion on anything web-related these days.

The government is subsidizing the transition to the tune of $19 billion. That should be quite enougn incentive for firm to dive into the market and make the transition happen.

My biggest worry revolves about the end cap of the subsidy. If the subsidy is renewed and kept ongoing, there will be almost no innovation or radical improvement to the software used by the doctors. The subsidy could even lead companies to manipulate the customers and focus on lock-in by raising switching costs to a competitor. Let’s hope the subsidy is just that – a short term way to incentive the market and speed up adoption.

However, there’s really not much incentive. Let’s say you take a lot of money and you spend it on R&D. You do a bunch of market research, talk to some existing customers, and start developing some prototypes. Then, after a few years, the idea fails.

The ROI on your investment? Zero. Zip. Zilch.

Or, let’s consider another path. You take a lot of money and you spend it on R&D. You do a bunch of market research, talk to some existing customers, and start developing some prototypes. Then, after a few years, you become a huge success.

Then what? People start copying your idea.

The ROI on your investment? Small at first and then smaller. Why does it get smaller? Because people start copying your idea and cutting into your market share and profits.

Heads I win, tails you lose.

One solution to the situation is not to innovate. I’m going to ignore that because it’s the wrong answer.

Another solution is enforcement of intellectual property. By either using copyright, patents, or trademarks, you can protect a part or all of your invention for a period of time. Then, ideally, you could recoup some money for the length of the legal document. This only works for large companies with deep pockets. Small companies don’t have the money to enforce the patent issue.

Eli Whitney, the inventor and patent holder of the cotton gin, was eventually forced out of business due to filing lawsuits against knock-offs and competitors. This is a perfect example of how a revolutionary invention forced the inventor out of business. Doesn’t seem right, does it?

Why innovate then? Because it should be your goal to change the world. Don’t settle for mediocre. It’s rewarding to participate in something bigger than yourself. When you reach retirement age, you want to look back and say that you’ve contributed to changing the world.

Of course, there are economic and strategic reasons to innovate. I’ll talk about those next.

But I can tell you this, it’s not as exciting as changing the world.