Digital Books and the Next Era of Innovation

Popular science author Steven Johnson wrote an interesting piece in yesterday’s Wall Street Journal about digital books, how they will change what and how much people will read in the future and the impact those changes will have on innovation.

http://online.wsj.com/article/SB123980920727621353.html

As Johnson points out, we currently have unlimited access to terabytes of data and information courtesy of Google and other search engines. However, the nearly infinite repository of knowledge stored in the millions of books printed since the invention of the printing press are, for the most, outside the searchable Internet.

Game Changers - E-Books and Google’s Book Search Service
That’s about to change. The recent success of Amazon’s Kindle e-book reader, and the progress Google is making with their Book Search Service, are providing the tools and content needed to begin the next phase of the great migration of the written word to the digital format. This next phase, however, will be substantially more profound than earlier phases both in terms of the volume and, in many ways, the quality of the content being digitized.

Based on these developments, Johnson makes some excellent points (all of which I agree with) about the future of book reading:

• Book content (like all searchable content) will be indexed, ranked and commented on by readers
• Authors will likely write chapters (and even passages) in a way that are optimized for search engines
• Books will be un-bundled and many will be sold by the chapter (much the same way people consume songs rather than full albums as a result of iTunes and file sharing)
• Book reading will become social – book content will be tagged and annotated. As a result, people will share comments and insights on book passages (a chapter, a page or even a quote) much like they comment and dialogue on a blog post or newspaper article

Digital Books and the Innovation Revolution
But, to me, by far the most powerful outcome of these developments will be the influence over how people will learn and innovate in the future.

If you believe, like I do, that our economy and culture are becoming more idea and innovation driven, then a world where such an enormous amount of knowledge (book based and otherwise) is indexed, annotated and searchable is truly an exciting development.

So much was argued in Daniel Pink’s 2005 book “A Whole New Mind.” His premise: we are moving away from the information age into a conceptual age where ideas and innovation will be among the most valued currencies. This is a result of the abundance and commoditization of many products and services, the ability to outsource work to the lowest common denominator and the growth of automation. In this new conceptual age, according to Pink, creative right brain thinkers, as opposed to linear left brain thinkers, will be the heroes.

I have no doubt that creativity and innovation are going to be more highly valued as the U.S. and global economies evolve and become more competitive. The wide adoption of e-book readers and initiatives like Google’s Book Search Service, I think, will be very important enablers of that trend. Think of them as force multipliers.

Will the Internet Surpass TV Next Year?

So predicts a research report just published by Microsoft. The study projects that time spent on the Internet by consumers will surpass traditional TV by June 2010. The report was based on research conducted in Europe but definitely has application to the US market.

Specifically, the study projects that by next summer Europeans on average will spend 14.2 hours per week on the Internet versus 11.5 hours on TV.

Other predictions include:

• Over the next five years Internet use on PCs will decline from 95% to 50% as other Web enabled devices such as Smartphones and IPTVs become more widely adopted


• Video capable mobile devices will grow from 31% today to 76% by 2013


• "Connected entertainment” and time shifting will become the norm as three-screen (PC, mobile device and IPTV) integration improves allowing people to watch what they want, whenever and wherever they choose


• Social connectivity will become commercialized and will enable more personalized and relevant online advertising and marketing


• Mobile devices will become the primary point of access to the Internet

Some of these predictions are similar to those reported in a major research initiative by the Pew Internet Project that I posted about in February:

http://marketingmemes.blogspot.com/2009/02/what-will-internet-look-like-in-2020.html

Of course, a good dose of skepticism is warranted with any report that predicts the future, especially one sponsored by a private enterprise like Microsoft that has a lot to gain if these predictions come true.

That said, I see little reason to doubt that most, if not all, of these projections won’t come to pass.

Time is Running Out for Newspapers

The next year or two (if it takes that long) will most likely be the beginning of the end for many newspapers if they don’t figure out a way to make money on the Internet.

For instance, last week after 146 years in publication, the Seattle Post-Intelligencer ceased operations as a print newspaper, reduced its staff by over 80% and converted to a slimmed down, online only publication.

And the P-I is not the only one. Last month Denver’s Rocky Mountain News shut down completely. And there are a host of other newspapers on the ropes, including the Chicago Sun Times, the Boston Globe and the San Francisco Chronicle to name a few.

Even the mighty New York Times recently had to sell part of its company and seek a $250 million loan from a private investor to help address its financial problems.

Of course, all of these newspapers are grabbling with the same challenge: how do they monetize their content online as more readers move to the Web and information becomes more of a commodity.

There are many ideas floating around about how newspapers can become viable businesses again. Here are a few:

• Make newspaper sites a channel for social media – for example, many papers are using Twitter headline feeds on their sites that are grouped by the sections of their paper to keep readers up to date and engaged with their content
• Publish APIs for independent software developers – the New York Times and a few other papers have taken the lead in publishing application programming interfaces (APIs) that allow software developers to create social media apps using New York Time’s content – for example, here’s a Gmail gadget built using one of the NYT’s APIs:

• Jump on the electronic newsreader wagon by bundling content with the purchase of a reader device – for example, Newsweek Magazine might try to get new Kindle owners hooked on Newsweek's electronic version by giving them a free yearly subscription
• Become more deeply integrated into the communities they serve – for example, the Austin Chronicle has thrived despite being a free weekly by becoming active participants in the Austin music and art scene. For instance, the paper started the South by Southwest Conference in 1987, which has grown into one of the world’s premier music and film festivals

Whatever the strategy, I hope newspapers figure this out; and soon. In my opinion, the role of newspapers in investigative reporting , local news coverage and editorial journalism is too important to leave to the anything goes ethos of the Internet. Sadly, they have had 15 years to figure this out so the prognosis is not too good.

What Would Nokia Do?

I just picked up Jeff Jarvis’ new book, “What Would Google Do?” In the book Jarvis deconstructs Google to determine how other companies can think the way Google does as a means to replicate their incredible success. His premise being that our economy and society have been so altered by the Internet that the old ways of thinking are not only outmoded but counter-productive. To Jarvis what’s needed is a new way; the Google way.

After reading the first chapter I believe Jarvis may be on to something. However, I think there’s another company that has a story that is just as, if not more, compelling and relevant for businesses that are trying to find their way in the current environment. That company is Nokia. Here’s what I mean.

The New York Times reported today that an astonishing 2.6 million jobs disappeared in the last four months – a rate unseen during the post-war era. This dramatic decline led the Times to speculate that the growing job loss “may reflect a wrenching restructuring of the American economy…and that many companies [appear to be]…abandoning whole areas of business.” A depressing assessment, but probably not too far from reality.

http://www.nytimes.com/2009/03/07/business/economy/07jobs.html?em

This reminded me of a case history I read awhile ago about Nokia and how it evolved over the years in response to changing conditions.

Nokia was not always the mobile communications giant it is today. It actually started out as a wood-pulp mill in 1865 and eventually, through acquisition, became part of the Finnish Rubber Company in the early 20th century.

By the 1980s, Nokia was a conglomerate that manufactured an array of wares including, among other things: paper products, tires, footwear, personal computers, televisions and telecommunications equipment. It wasn’t until 1992 that it decided to divest from most of its lines of business and focus exclusively on mobile communications. This was in response to a steep decline in paper prices caused by the deep 1990–1993 recession.

Today, 17 years later, Nokia is the undisputed mobile phone leader with 40% market share, and was ranked last year by Business Week as the fifth most valuable brand in the world (Google was number 10, but closing fast).

If there’s any silver lining to the current gloom it’s that companies and industries can turn adversity into opportunity. I’m sure it won't be easy, but Nokia is proof that with a little bit of foresight and some good timing it can be done.

“Startups, Not Bailouts”

Author and columnist Thomas Friedman wrote a persuasive op-ed column in today’s New York Times about the folly of using billions of dollars of taxpayer money to bailout G.M. and Chrysler. Meanwhile high-tech startups, our best hope for future growth, are finding it more-and-more difficult to find venture capital in the current environment.

Stated otherwise - why we are throwing good money after bad when we should be doing everything we can to bankroll the risk takers who are trying to bring the new technologies to market that represent our best chance for a prosperous future?

http://www.nytimes.com/2009/02/22/opinion/22friedman.html?_r=1

After reading Friedman’s piece I did some research and learned the following:

• 2008 marked the first yearly decline in venture capital (VC) spending since the post dotcom bubble year of 2003
• What’s worse - VC investments in Q4 2008 dropped precipitously from the prior quarter (26%) as well against the two year trailing average
• What’s even more worse (at least for someone like me who works in an Internet related industry) - Internet-specific VC investments in Q4 also dropped by 26%

U.S. Venture Capital Investments 2001 - 2008

See PriceWaterhouseCoopers “MoneyTree Report:”

https://www.pwcmoneytree.com/MTPublic/ns/moneytree/filesource/exhibits/National_MoneyTree_full_year_Q4_2008_Final.pdf

So basically the story goes something like this:

During the past 30 years G.M. and Chrysler have been steadily losing market share and have lost hundreds of billions of dollars. So what does the government do? It gives them billions of dollars more (the latest installment $25 billion) to prop them up because they are “too big to fail.”

Meanwhile, during the same 30 year period it was high-tech companies (many of them startups) that were among the most powerful driving forces of economic growth. But sadly in this climate of limited resources it’s likely that the next Amgen, Google or Microsoft will have to get in line behind the down and out from Detroit before it will get government funds to invest in new innovations. Seems like folly to me.

Don’t get me wrong, the recent stimulus legislation will do a lot of good for high-tech industries. For example, funds were set aside for rural broadband and the digitization of health care records which is a start. And while the Obama economic team has made some good moves in their first 30 days there is so much more that can and must be done if we’re going to have a vibrant, innovation-led economy in the coming years. In this zero-sum environment giving G.M. and Chrysler $25 billion was not one of them.

What Will the Internet Look Like in 2020?

The nonpartisan Pew Internet and American Life Project recently posed that question to over one thousand members of the digital elite (analysts, policy-makers, academics, technologists and other Internet experts).

Pew asked them if they agreed or disagreed with various scenarios regarding the social, political and economic impact of the Internet ten years hence. The scenarios spanned everything from the effect of the Internet on social tolerance, to the impact social computing will have on individual transparency and responsibility, to the blurring of boundaries between professional and personal lives.

http://www.pewinternet.org/PPF/r/270/report_display.asp

1. More powerful and better designed smartphones will be the primary means of Internet access for a majority of people across the world

The good news: Greater access for all - more people (especially the poor and those in remote locations) will have access to the Web through affordable, readily available mobile devices.

A big unknown: Will governments, regulatory bodies and wireless carriers align behind one universal standard for connectivity? Not likely if the current CDMA versus GMS situation in the U.S. cellphone market is any indication.

2. The ability of digital communications and social networks to rapidly spread information will result in a less socially tolerant global community

What this means: More tribes, more fragmentation, more polarization and more people using the Internet to spread hate, dogmatism and even fanaticism.

On the other hand: Increased access to information can mean more government, corporate and individual transparency and the potential for greater cross-cultural understanding.

Let’s hope this trend appeals to the better side of human nature.

3. Copyright and intellectual property protection will still be elusive

The good: More free online content (is it possible that the Wall Street Journal online will one day abandon its paid subscription model?)

The bad: More regulation and complex IP-control technologies and even more entangled workarounds to circumvent them.

4. As social media grows individual transparency (if not responsibility) will increase and privacy will become an even scarcer commodity

The new creed: “Never trust anyone who doesn’t have embarrassing stuff online.”

But people will still set boundaries: As one respondent commented – “Although society will seem more transparent, most people will guard many…aspects of their lives with great tenacity.”

5. The growth of artificial worlds and augmented reality means that some people will spend just as much time in virtual reality as they do in “real life”

The upside: More realistic virtual environments will be used to drive advancements in education, engineering, medicine and science.

The downside: For some people it will mean increased isolation, alienation and even violence and more sedentary lifestyles.

6. Ubiquitous computing will make it harder for some workers to separate their professional and personal lives

The positive: An always-on culture will have benefits such as time shifting and more employers may finally start measuring results (i.e., completed work) versus activity (i.e., time in the office). And to paraphrase one respondent, it’s not hard to argue that the 9-to-5 workday was an industrial era creation that doesn’t apply in idea driven economies.

The negative: This hyper-connected lifestyle will be bad for familial and social stability, and will increase stress levels and the likelihood that businesses and governments will use technology to intrude into people’s private lives.

For many, especially those in Internet related industries, this is already a reality so as one respondent said: “get over it.”

7. The basic architecture and technology of the Internet will not change but will evolve; a less secure Internet will cause some to create gated communities

Don’t expect a new “clean slate” Internet, it will take too long and cost too much: Improvements will occur gradually as security and performance requirements demand a more advanced platform. Incremental enhancements such as Internet Protocol v6 and the Semantic Web (allowing easier access to online content) will slowly improve performance.

Do expect more “walled gardens” and other restricted areas of the Internet: In response to the increasing frequency and scope of security breaches, large entities and other online communities will create secure environments where members will give up some control and privacy in exchange for added protection and utility.

Bottom line - the Internet will evolve dramatically over the next decade. And for better or worse many of the economic, cultural and social trends that it instigated will become more pronounced and prevalent in our lives. Let's just hope we don't lose control over it against our collective best intentions.