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March 1, 2013

Unlocking the Value of Innovation and Thought

Posted by Simon Towers (View Profile | View All Posts) at 3:23 AM

Michael Loechle, Vice President, Information Systems, Alstom Thermal Power, describes how Infosys' approach helps Alstom achieve better, more innovative results

The most famous songwriter and celebrity of the 19th century - Stephen Foster - is virtually unknown today. Some old-timers might recall the songs he wrote because they were still very popular in the first part of the 20th century. Tunes like "Camptown Racers," "Beautiful Dreamer," and "Swanee River" defined American popular music for many generations. Yet when he died after collapsing on the street in New York City, Foster was found to have just 38 cents in his pocket. Could you imagine today if the head of a major entertainment label or music publishing company were to die with less than a dollar to his name? We live in an age when the so-called middleman - the person or entity that connects buyers and sellers - is the dominant force in the market. To be more specific, the middleman makes the market in the first place. That's why he tends to dominate it.

Different markets have their own versions of the middleman. The New York Stock Exchange is one of the most enduring examples. (We'll save a discussion of Dark Pools and what they mean for the future of your organization and the financial markets for another post.) But the case of Stephen Foster is what fascinates me here. If he had been able to make a market for his ideas - some of the most enjoyable sings ever written - chances are he wouldn't have met with such a sad ending. Plus, I can't help but think of Foster in light of the Internet. A market for ideas was one of the things that the Internet was supposed to deliver. Anybody off the street whose songs (or healthcare innovations or computer software for that matter) held the promise to transform the world, was on a level playing field when it came to the Internet. Or so it went.

Make no mistake: The Internet certainly enabled organizations to make their own markets. But the market makers tended to be new versions of the old, established players. Instead of getting disk jockeys to play new songs on radio stations (or, later, for MTV to give a marketing push to a music video), music publishers would utilize the Web to get their new products out. When services like iTunes appeared, they were fascinating from the standpoint of delivering on the Internet's egalitarian promise of giving the artist control of his own material. The New York Times recently reported that musicians used to get some 10 cents per download from iTunes. That's a far cry from what they receive now on services like Spotify and Pandora, which deliver micro-pennies per play.

True, the deck is stacked in the large organization's favor. It's nearly impossible for an independent artist to brave the world without a savvy, market-making gallery owner. But even the big entities have their challenges. For example, how does an organization with an arsenal of intellectual talent and property ensure that it receives the right level of compensation for such inventory? First, it must preserve the value of its assets by demonstrating to the market that it can deliver content faster and more efficiently because of what it already has under its own roof. Consider the fact that anyone with a crude Internet cam can produce his own 30-minute news broadcast. But do you really want to watch that segment compared to, say, 30 minutes of India Broadcast News, with its army of experienced reporters and editors?

A prestigious news organization like IBN has the advantage of connecting buyer to seller because it has a longstanding platform and brand name. A start-up must do more than simply have a Web cam and read his version of the news into it. If that person happens to be the most talented newsman of his generation - the Stephen Foster of his world - then chances are he will develop his own following. But, like Foster, it's unlikely that he'll succeed in being compensated fairly for the high-quality product that he delivers to the public. Chances are some other entity is connecting him to the buyers.

That's something for all of those organizations that produce intellectual content to think about: Producing the content is only half the battle. Finding the most efficient delivery model for that organization's intellectual property and ideas is another challenge of an entirely different nature. Without the second half of the equation, value creation makes a would-be innovator nothing less than, as Foster might say, a beautiful dreamer.

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