Here is a company that had an interesting value proposition and beat out Blockbuster and reached the top of the mountain. Before the market punished it, the stock was trading at over $300 and was a Wall Street darling. As with any company, we love them when they are the scrappy competitor fighting the market leader and the minute they win, we hate them.

Netflix has many stakeholders. They have over 23 million loyal customers that help them crowdsource content, academics and analysts who like their business model and investors with stake in the company. Their customers love their wide selections, user interface and interactive website. People who follow and appreciate their business model like the fact that they constantly innovate and keep adding new enhancements to their service.

With the recent price changes that were implemented, Netflix has failed to communicate well with the stakeholder groups separately. The customer group had to be prepared for the change in service plans through early and direct communication. In addition, they shouldn’t be asked to deal with two separate companies – Qwikster and Netflix. As far as they are concerned, they should not have to understand the inner workings and the re-organization of the company into separate business units. They should simply logon to one site and the system should recognize their status and provide them with Qwikster or Netflix services. In fact, Netflix could use interactions to cross-sell or up-sell to different segments.

To the business model aficionados, Netflix should explain their supply chain and point out the cost drivers. The simple reality is that content providers are asking for a bigger piece of the action, quite similar to what Facebook had to deal with in the case of Zynga. The only point of leverage that Netflix has is their loyal and growing base of customers. Do they have enough to bargain with content providers? Content providers, on the other hand, could threaten to go directly to customers. The question is who blinks first.

While Reed Hastings wrote a blog and sent an email apologizing, I feel that he did not consider the stakeholders as unique entities. He implemented the same communication strategy for both groups. While it seems that Netflix has been around for a long time, it is still a young company in an emerging market. Various entities in the supply chain are fighting to determine their profit margins while a value migration is taking place. The outcome was expected, the communication plan was bungled. .

At Babson we are studying gamification as a concept and figuring out ways to incorporate into our learning experiences and applying it to improve engagement with our stakeholders. I was recently talking to Gene Begin, Digital Marketing Director at Babson College about what we doing with gamification. Here is the summary:

Babson is using the platform provided by SCVNGR college-wide as a location-based, gaming application to reward our community for engaging with Babson and completing challenges at a variety of our events and campus locations. SCVNGR is being used for Undergraduate School and Graduate School orientation programming during opening weekend and is being used at each event in a slightly different light. At Undergraduate Orientation, the tool is being used throughout the weekend to drive continuous engagement. At Graduate Orientation, the tool was used as a true two-hour scavenger hunt as an activity within their day of activities.

On the educational front, my colleague John Marthinsen and I are also planning to use the gamification concept for one of our signature learning experiences. In particular, we will explore game mechanics, the role of gamification platforms and the economic issues that it raises.

One particular issue that we will highlight from a economic perspective is virtual currencies. Virtual currencies have an especially interesting connection to macroeconomics because their development during the 21st century mirrors that of the United States banking system during the 19th century, when checking accounts (a virtual currency) eclipsed physical currency as the nation’s prime means of payment. Are virtual currencies “money” that should be included in the money supply statistics? Can Facebook, Zynga, and others create “money”? Should they be regulated as banks are regulated? Who should control them? Does the creation of virtual currencies affect a nation’s economy (e.g., inflation rate)? What are the implications for the national tax base and governments (federal, state, and local) that are desperate for revenues? Will the rise of virtual currencies affect the nation’s national income accounting (e.g., GDP) measures and business financial statements?

Concepts like gamification, platforms and virtual currencies can be used in non-game settings. Student teams will be asked to use these techniques and propose solutions for a societal problem. Currently, game mechanics are being proposed to promote safety by rewarding good driving behaviors in certain cities. Similar ideas could be used to promote fiscal responsibility, reduce poverty, curb tax evasion/money laundering, encourage healthy living, improve community engagement, and enhance education.

As part of our signature learning experience, each team will identify and research a business opportunity that utilizes gamification and solves a societal problem.

Wonder what some of the other schools are doing with gamification?

I am just teaching a class called Clouds, Platforms, and Networks. In that class, students pick a company or industry and draw out the ecosystem for that. The data is collected from public sources like websites or from Lexis/Nexis. They use Pajek to render the visuals. Here are a few of them that they created:

Rajesh Potti: Cisco Ecosystem

Based on prior work by Gawer and Cusumano, we define a platform as a product or service that performs at least one essential function within what can be described as a “system of use” or solve an essential technological problem within an industry. In addition, it should be easy to connect to or build upon to expand the system of use as well as to allow new and even unintended end-uses. To this we add the concept of architectural control, the ability to determine the
access rights and privileges of third-party developers who write to the platform.

An interesting question that came up recently was how do you detect the presence of a platform? Many companies claim to have a platform, while in reality they just have a product. What are some simple test to verify their claims? I would suggest three tests.

1) Do they have a vibrant community of developers and users? In the case of platform providers like Amazon and Salesforce.com or Android, they support development communities. These communities help the developers by helping them solve problems or pointing them to relevant resources. These communities also influence the evolution of the
platform and its features. The platform provider listens to the conversations that take place within these communities and respond when appropriate. Most of the work is done by community members who do not work for the platform sponsor.

2) Do they have a well defined API and clear process for governance? Companies like Apple (iOS), Google (Android) and others use software development toolkits (SDK) to clearly publish and document their APIs. In addition, when developers require additional access, they have to follow procedures to request and convince the platform provider to
support their needs. These conversations often take place in an open and transparent manner.

3) Do they have an App Marketplace? Most platforms come with a marketplace to distribute applications that are developed by complementors. App developers can find buyers and transact easily with them in these market places.
These applications have to follow published guidelines in order to be listed in the marketplace.

Are there other tests to detect the presence of platforms?

Recently, we have begun to emphasize the role of a media strategy in the success of our MBA students. It is important to join the conversation in the digital world and help shape and be informed by it. While most students have a presence on Facebook, LinkedIn, Twitter, blogs, communities or even a website, the key question is do they have a strategic approach to their presence.

 Colleagues, collaborators and recruiters are beginning to form opinions about you based on your digital footprint or lack thereof. When students are approaching potential recruiters, investors or even employees, it is important to be part of their digital network - their peripheral vision. I have heard recruiters tell me that when they receive an application, they tend to respond to those they are aware of from their activities on blogs or Twitter feeds.

 There is nothing novel about starting a blog today. However, it is very important to establish your reputation and credibility in a field. Blogs can act as a journal for your thoughts as you start your research in a new area (like Green Tech) and find your point of view in your area of interest.  Twitter could get the process started by either following people with similar interests or tweeting links or ideas that could be of interest to the community.

Participation in communities (giving and taking) is a key role of a Netizen. We will be asking students to identify communities of interest to them. If these communities do not exist on the Internet, we will be encouraging them to do that. For example, I have just created one to discuss personal digital media strategies on LinkedIn.

LinkedIn is also a good way to pull all this together. It acts as a portal to your digital footprint.  In addition, it has the ability to signal using recommendations from colleagues. People have been building their professional network on LinkedIn for years. Now we have the ability to visualize and tap into it for knowledge work.

To assess the strategy, we will be using subjective and objective measures. In the objective side, tools like Hubspot's grader or Klout can be used.

 Using the concept of Signature Learning Experience, we will help students hatch their own personal digital media strategy. This will include self assessment, reflection, deliberations, actions plans and measures. In the coming months you should hear more about this from Babson.

My colleague Venkat and I recently wrote this piece for a class discussion.

The recent announcement by Nokia to use Windows Phone 7 as their preferred operating system has left many people wondering – WHAT WERE THEY THINKING? What does this choice mean for the mobile ecosystems?

As Mobile World Congress gets underway in Barcelona, the time is right to look at ecosystems in the mobile space.  The Nokia-Microsoft announcement brings into sharp focus some of the key challenges of (1) orchestrating and (2) participating in ecosystems.

In the mobile arena, as of now, there are two dominant ecosystems – iOS orchestrated by Apple and Android orchestrated by Google. The others seeking to be orchestrators are RIM with Blackberry, HP with WebOS and Microsoft with Windows  Phone 7. By announcing its link with Microsoft, Nokia abandoned its ambitions to be an orchestrator of the Symbian ecosystem.  In fact, they are now just a participant in an ecosystem by providing products and services. Other examples of such participants include handset manufacturers such as HTC, LG, Samsung, Motorola and SonyEricsson.  Many of these companies are steadily shifting away from either Symbian or Microsoft and embracing Android.  For a long time, Nokia--as one of the largest handset manufacturers--offered its handsets with Symbian software. Now, it has realigned with Microsoft to create a compelling third ecosystem (in the words of Steve Ballmer and Steven Elop).
--
This decision is strategic not just for these two companies but will have far reaching implications for other participants in the ecosystems. In fact, this has the potential to impact  the shape of every mobile ecosystem.
--
By preferentially linking to Nokia and paying billions of dollars for this arrangement, Microsoft is signaling that Nokia as a handset maker is more important than other handset makers such as HTC, LG, Samsung and others who may be examining their portfolio of devices across different mobile operating systems. Nokia, in contrast, has admitted that its vertically-integrated model of HW-SW (with Symbian at its core) has failed and retreated to become a device maker and preferential (but not exclusive) handset manufacturer of Windows Phone.  

Both parties have assumed huge risks by making this decision. The risk for Microsoft is that other hardware manufacturers may not synchronize their product development roadmap with Windows. The risk for Nokia is that its differentiation is limited by the features and functionality of Windows.  Competing in the brutally cost-competitive hardware market requires scale and Nokia faces an uphill battle.  The other option for Nokia is to compete in the high-end market and create innovative products that run on Windows Phone 7. Steven Elop had few attractive options. Google would not have entertained preferential position but Microsoft--given the poor initial showing with Windows phone--did. It even paid handsomely for the cooperation.  Ballmer and Elop are hoping that their combined scale will be adequate to be a third viable ecosystem.

What will happen as a result of this move? Will we see both Nokia and Windows Phone disappear next year? Probably not.  But, the odds are stacked against them becoming a viable  third ecosystem.

Ecosystems are vibrant when it has multiple participants who are neither tightly coupled (exclusive) or loosely coupled (totally uncommitted) but somewhere in the middle, providing the support to create complementary network effects.  Both Nokia and Microsoft--with this decision--have gone closer to the exclusive end. This risky position will only be rewarding if this ecosystem does indeed becomes the credible third alternative to Apple and Google.  This is a tall order with at least two other credible ecosystems orchestrated by HP and Research in Motion (RIM) vying for the same spot.  This move has consequences for Samsung, LG, HTC and SonyEricsson--which has announced its PlayStation Phone on the Android platform at MWC in Barcelona.  Android becomes more attractive to the independent handset makers against vertically integrated ecosystems orchestrated by Apple, HP and RIM.

As competition shifts from products-versus-products to ecosystems-versus-ecosystems, such decisions by key players not only impact the firms making the decisions but also other participants and orchestrators of competing ecosystems.

Do you think that Nokia and Microsoft will be successful in creating a third mobile ecosystem?