Some of you are number 1 in this diagram, some are number 2, and some are the other farmers depicted there.
This is becoming an important idea for some folks in TEI because I theorize that there is something we think of as market power or distribution in the world of services, and this idea of distribution is important when it comes to getting the market to buy into innovation. Or simply to even buy an innovative service or product.
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The image above is from the 5th edition of Diffusion of Innovations, by Everett Rogers. Here's the basic idea: innovations are first adopted by people who are not deeply connected with and liked by the mainstream market. These Innovators (#1 in the diagram above) are part of the market, but somewhat apart from it due to their more cosmopolite nature. When Opinion Leaders find out about an innovation from the Innovators and adopt it, the Innovation starts to spread more rapidly to the mainstream market because Opinion Leaders are more deeply connected with and liked by the mainstream market. There's a symbiotic relationship between Innovators and Opinion Leaders. The Innovators have the social and physical freedom to discover innovations, but the innovations can't gain wide adoption without the Opinion Leaders, who have forgone this same social and physical freedom in exchange for the deeper connections with their market/community that give them the ability to distribute innovation more deeply into the market. Opinion Leaders have more market power than Innovators. They are "distributors" for innovations.
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If I wanted to introduce a new kind of soft drink to the market, there are three ways I could go about that project:
- Drive around to all the places in my area that sell soft drinks, and have individual conversations with each store owner, and try to convince them to allocate some of their limited shelf space to this new product the market has never heard of and then deal with getting it off their shelves if it doesn't sell, etc, etc.
- Figure out who already distributes soft drinks to the places in my area that sell soft drinks, and convince them to carry my product on a trial basis.
- Set up my own stores and sell just my soft drink there.
This work is on top of all the other work of inventing, refining, and marketing an innovation, which is itself a substantial amount of work. In #1 above, I'm functioning as my own distributor, and in #2 I'm trying to build a symbiotic relationship with a distributor. The distributor already has invested in relationships — physical and social — with the market. Yes, they're a "middleman", but in many cases they're a vital middleman who adds a lot of value. (In #3 I'm acting as my own distributor and retailer. To keep things simple, I won't discuss this model further here.) The Internet lets us cut out middlemen. It's known for that. Tower Records can tell you all about this facet of the Internet. But what the Internet actually does is make it possible to cut out middlemen. What it does not do is:
- Make it super duper easy to cut out middlemen.
- Impart to every Internet user the social ability to connect deeply with and be liked by the market they hope to reach.
- Cause every Internet user to enjoy the work of building "distribution" relationships with the market they hope to reach.
The value that distributors offer is something they have built. It's something they've worked for. It's something they have optimized their business for. In the physical world of soft drinks, distributors obtain cheap warehouse space, manage a fleet of trucks, manage drivers, track inventory, nurture and maintain relationships with operators of low-margin stores, and on and on and on. In the world of digital products or services that can be delivered remotely, some of the value of distribution is nullified. Warehouse space cost goes to zero. Trucks aren't needed, and neither are drivers. Setting up a store becomes something amateurs can do. But there still is that interface with the customer! That never goes away, and a lot of what makes distribution and retailing difficult and valuable in the world of physical products remains a source of value in the digital world. A simple yet useful way to think about this is: distribution = access; access to buyers in the market. This brings us back to the diagram at the top of this email, repeated here for your convenience:
Innovations (whether they be a digital product that you've created or a service you offer) are not a Genesis Device that you drop on a planet surface to do its transformative work without further help from you. Innovations have to be distributed to the mainstream market via a social system. This takes time. Notice the dates on each member of the farming community depicted in the diagram. It's a 2-year delta between the Innovator adopting the new weed spray and the Opinion Leader adopting. And then it takes another 6 years for that innovation to diffuse through the rest of the social system. I'm starting to theorize that in the world of independent consulting, some folks are better at generating innovations than distributing them, and some folks are better at distributing innovations than generating them. Some folks are natural Innovators (#1 in the diagram above) and some folks are natural Opinion Leaders (#2 in the diagram above). It's not that Innovators can't become Opinion Leaders. Rather, it's that it takes real work to become an Opinion Leader, just like it takes real work to build up a distribution business. To intentionally use a slightly more charged term, it requires real emotional labor deployed over time to build up the access that Opinion Leaders have. Opinion Leaders have more market power — access — than Innovators, but I'm not convinced that this means they are automatically able to run more profitable businesses. They can address a larger market because they're liked and trusted by more people. And they might be able to run bigger businesses. But I'm not sure those businesses are automatically more profitable. After all, nurturing and maintaining relationships takes time and energy, the expenditure of which reduce profit. Further, I'm starting to wonder if the standard indie consulting business model — to the extent that there exists a standard model for this kind of business — assumes that the consultant is an Opinion Leader rather than an Innovator. If I'm right about this (and I'm not 100% sure I am) then there are some implications:
- Innovators need to seek profitable relationships with Opinion Leaders, not with the mainstream market directly.
- Or, Innovators need to balance out their natural weakness and learn how to build up the market power that Opinion Leaders would more naturally have.
There are going to be indie consulting businesses where this whole Innovator/Opinion Leader thing isn't a problem, because the consultant is a natural Opinion Leader. They read books or go to conferences where they pick up innovative ideas, and then introduce them to their clients. The relationship asset they've built up allows them to introduce the innovation to the mainstream market. Where I'm trying to figure things out is with my clients who are more like Innovators. TEI attracts amazing folks like these. The traditional indie consulting model is built around monetizing service delivery. But for that to work as designed, the mainstream market needs to be buying your services. This is a sort of "retail" model. What if you don't have the distribution needed to get your expertise into "retail stores"? How, as an Innovator, do you form symbiotic relationships with distributors/Opinion Leaders? Or alternately, how as an Innovator, do you get better at distribution/retailing? TEI is a community of practice, and we're all learning through experience how to do this. The current experiment several members are engaged in looks like partnering with less innovative but more connected businesses that have done the work of building up "distribution" in the market. Very early results are promising, but time will tell. -P