2011: This New York Times article argues that growth in digital music sales is stalling while sales are still at a level that doesn’t compensate for lost CD revenues, and wonders about the music industry’s “salvation” hopes. Unlike other digital media that are perhaps less prone to piracy, digital music just hasn’t found the right business model yet. Note that this doesn’t dismiss the book at all, it just shows that, in reverse of Mark Twain’s famous line, “the news of the music industry’s rescue have been greatly exaggerated…” Is it strictly a “speed of adoption” problem or does it point to a deeper problem – the long tail not being as long as imagined (or not as long as some industries need it to be) – and if so, what other insights could this yield for the “rest” of the media sector and for e-commerce?

Also check out the original (2004) article at Wired and the Long Tail blog (discontinued in 2009, but still interesting).

The good: The idea that groups of people can be better suited than individuals to take on some tasks has been around for a while, and we’ve discussed crowdsourcing on Buysiders.com rather extensively. The idea that you should foster diversity in the team building effort isn’t new either. That said, this very interesting article looks at “Group I.Q.” and tries to determine the collective intelligence of teams and when/ why it varies. It’s still preliminary research and it raises almost as many questions as it addresses, but it’s a great field to explore.

The bad: The behavior number 3 in this article (via Farnam Street blog) is another entry in the large collection of highlights of the dumb things we can do when we’re in groups. In this case, dumb shopping behavior. The 5 tricks come from Robin Lewis’ (of The Robin Report newsletter) new book, “The New Rules of Retail”.

The other posts at Buysiders.com regarding crowdsourcing/ groupthink:

Where do good ideas come from? – Sept. 30th, 2010

The end of management – Sept. 9th, 2010

Multidisciplinary approach and communication – Feb. 17th, 2010

Follow the red balloon – Dec. 6th, 2009

Crowdsourcing revisited – Nov. 18th, 2009

Netflix’s smart crouwdsourcing initiative – Sept. 22nd, 2009

As we say in the “Why we write” section at Buysiders.com, “Risk is much more about knowing very well who you’re dealing with than it is about greek letters.” We also say: “With this site we aim to show potential investors and investees a “live” window into most of what we look at and how we think.” We hope the site will start relationships with the right people, in an efficient manner.”

Quick highlights from the executive summary:

- E-commerce grew 30% to R$ 10.6 Bi and average ticket of R$ 335 (up just 2.1%);

- 17.6mm people purchased something online in 2009, up 33%;

- Within that group, 77% did at least one purchase in the last 3 months of the survey;

- Quality logistics is the key for keeping delivery dates, which is a determining factor in customer satisfaction. (Easier said than done!)

One excerpt we feel is important to highlight:

” ‘We’re trying to do good. And we’re trying to make money. The more money we make, the more good we can do.’ – By this, he (John Mackey) had in mind not the traditional philanthropic argument that more money earned equals more to give away but, rather, that a good company–that is, his company–which sells good things and treats its employees, shareholders, customers, and suppliers well, can spread goodness simply by thriving. “

This “special bonus” is from Mr. Mackey’s editorial on health care in the Wall Street Journal (link below). It’s how he starts the piece and it’s a sentence by Margaret Thatcher, the UK’s former prime minister: “The problem with socialism is that eventually you run out of other people’s money.”

LINKS:

The Whole Foods alternative to ObamaCare – WSJ, Aug. 11th 2009 – The controversial op-ed on the Wall Street Journal about healthcare in the US. By stating that health care is no more of an intrinsic right than are food or shelter, Mr. Mackey made a lot of his “target customers” mad. This mix of personal and professional has led even Warren Buffett to shy away from personal views on issues with potential for backlash. One would think that Whole Foods has credit due to its long history of treating employees and suppliers well – as long as this last group complies with standards that ultimately raise the bar.

Did he jump or was he pushed? – John Mackey steps down as Chairman of Whole Foods – The Tree Hugger.com, Dec. 31st 2009

John Mackey doesn’t believe in climate change – The Huffington Post, Jan. 3rd 2010 – Almost funny in the way it chronicles Mr. Mackey’s fall-outs with Whole Foods’ “target customer” over his personal opinions. This particular blogger has had enough because of his environmental views.

But that’s not all that matters: is crowdsourcing then a substitute for companies’ R&D demands? Does it always work? How open do you really want to be? Some people are looking at it and saying “hold your horses”. That’s always a good advice in our book.

As for Netflix, they’re happy enough to have a Netflix Prize 2 on the works. Very smart: it keeps the ball rolling and takes advantage of the community they built. The press coverage doesn’t hurt, either.

But there’s more. We’d argue that the benefits of the Netflix Prize in terms of research in statistics/ data mining/ etc. in large data sets may be felt for years. It’s interesting to consider this in terms of efficiency gains for many different types of companies. It’s something companies all around the world should be paying attention to.

Here’s a video interview with Reed Hastings, Netflix’s CEO, at the time of the award.

Links:

Crowdsourcing page on Wikipedia

Jeff Howe’s classic article on Wired, his book and his blog

The teaser for Netflix Prize 2

Winning the Netflix Prize – NY Times, October 2008 (huge article with a video that apparently can’t be embedded here).