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Gift Business: Innovation In Gift Giving (Part 2)

Earlier, in Gift Business: How Do People Buy Gifts? (Part 1), we covered the individual steps of the gift giving process.  Here, in Part 2, we will take a look at innovations that improve, replace or eliminate these steps.

We have already talked about the gift receipt innovation in our previous post.  The logical follow up is the gift card.  Aiming to make the entire process even more efficient, the gift card eliminates the SPECIFIC GIFT substep entirely for the gift giver, and makes the DELIVERY step easier, by reducing the size of the gift significantly, sometimes entirely, in the case of electronic gift cards.  

Because of its convenience, a number of new business models emerged around the gift card idea.  We are not merely talking about existing online and offline retailers, like Amazon or Starbucks selling their gift cards, but rather about new businesses that make concepts previously deemed impossible or impractical come to life.

CashstarOutsourced gift card services is one such concept.  For retailers that do not want to implement a gift card service by themselves, either because they are not tech-savvy enough or simply do not want to make the necessary investment, companies like CashStar provide a practical solution. CashStar’s digital gifting platform lets B2C and B2B retailers integrate a complete e-gift card service to their offering.  Customers can create personalized e-gift cards with their own text, photos and videos, then send them to recipients via the retailer’s website, mobile site or even Facebook.

Speaking of Facebook, the company is the main enabler of another concept made possible by the gift card innovation: social gifting.   In Facebook: Show Me The Money, we talked about Facebook’s role as an Integrated Social Utility:

“Facebook is … a social utility.  Just like other utilities, it is meant to work with other businesses, not compete with them.  That means it can be the provider of all kinds of social data to whoever is willing to pay for it.  Facebook has the ability to be the irreplaceable partner of every internet based business out there, integrated into their systems, providing them with data about their customers they otherwise would not be able to get.”

Wrapp MobileEven though Facebook has acquired social gifting start up Karma last year, and turned it into Facebook Gifts, the company allows its users to send paid-for, discounted or free gift cards to their friends via applications from dedicated gifting companies such as WrappDropGifts, or Boomerang.  CNET editor Paul Sloan explains in his article The Social Gifting Boom:

“It works like this: You sign up for Wrapp, either on the Web site or via the mobile app, by connecting directly to your Facebook account information. Wrapp notifies you of each friend who’s having a birthday, say, or who’s gotten engaged. Then, because of the targeting options it gives its retail partners, Wrapp will match its offers with information about the person you want to send a gift card. The choices you’ll see for a woman 18 to 25 are different than those for a man in his 40s.

While many of the cards are free, there is also an option to add more money. So you can chose to give a free $6 H&M gift card to a friend for Christmas, or you can make it for more, as any real friend would. Once you pick the offer, you write a message, press the Give button and you’re done. Your friend gets a notice on her Timeline, and it shows up in the news feeds of mutual friends (although there are options to send it directly through e-mail or SMS). If you receive a gift, Wrapp requires you to download the app to redeem it.”

Sloan believes that the beauty of the model is not how it works for the user, but the way companies like Wrapp have convinced their retail partners to give away free gift cards. Companies treat these cards almost like coupons, and gladly give away cards of a certain value because they know full well that recipients will either add more money to the card or that when they come to the store to redeem the card, they will end up spending more than just what is on the card.

treaterThere are others, as always, who look for the niche within the niche.  Treater is a gifting platform for sending casual, spur-of-the-moment, consumable, low price gifts.  It does work under the same principles as its larger rivals, but unlike them, it focuses on everyday treats, low cost items and local businesses instead of  formal occasions, big ticket items and national brands.  The idea is that next time a Facebook friends posts a status update on what a bad day they are having, you can send them a cup of mocha to make them feel better or when a friend announces a promotion at work, you can give your congratulations by treating them to a burger for lunch.

Even though gift cards provide recipients with the flexibility of making their own decision at the SPECIFIC GIFT step, there is always the possibility that the recipient may not exactly be happy with the LOCATION, or even the GENERAL IDEA.  In such a situation, the recipient could be stuck with an unwanted gift card.

This is where gift card exchange services come in. Exchange services such as Cardpool or Plastic Jungle allow gift card owners to either sell their gift cards, or trade them for another gift card of their choosing, at a discount.  The process is fairly simple. Once the gift card owner enters the gift card information (merchant, amount, card number) on the exchange’s website, the exchange will make the gift card owner an offer, if they want to sell the card, or display trade options, if they want to trade the card. Most gift cards can be sold or traded online, without the need to visit a store.

The ultimate solution to the unwanted gift issue, however, comes from Amazon.  Even though it has not been implemented yet, Amazon received a patent for a System and Method For Converting Gifts on November 2010.  The background of the patent application explains the motivation behind the innovation:

“…it sometimes occurs that gifts purchased on-line do not meet the needs or tastes of the gift recipient. For example, the recipient may already have the item and may not need another one of that same item. Alternatively, the item may not be the right size, the right type, the right style, and so on. In such situations, the recipient may wish to convert the gift to something else, for example, by exchanging the gift for another item or by obtaining a redemption coupon, gift card, or other gift certificate to be redeemed later.
… However, the process of converting the gift to something else once it has already been opened may be perceived by the recipient as being inconvenient. This may particularly be the case in the context of a gift purchased on-line, where the gift would likely need to be repackaged for shipping back to the merchant. Accordingly, the recipient may not ultimately convert the gift to something else, even though the gift does not meet the needs or tastes of the recipient.”

Amazon Patent Gift ConverterThe patent’s basic idea is a system by which a recipient’s gifts will be converted into things they actually want, through personalized lists and filters. Similar to email filters for products, potential recipients set up a personalized series of rules, and if any gifts sent through the online merchant trigger these rules, the recipients are sent either an item from their Amazon Wish List, or a gift certificate instead of the unwanted gift.

While innovative, the system drew sharp criticism from not only traditional minded gift givers, but also from etiquette experts.  The system was accused of being “dishonest” and while returning gifts that will not be used is deemed acceptable, returning gifts before even receiving them is considered to take the focus away from the appreciation of being given a gift.

wantful catalogThe balance between pragmatism and the spirit of gift giving we like is that of Wantful.  The company enables gift givers to choose gifts and create a small catalog of gifts. The recipient is sent a beautifully designed and personalized hard copy catalog that allows them to choose a gift, which is later sent to them in the mail. It is almost like a nice compromise on all fronts: the gift giver gets the convenience of not having to go to the store and the post office, while the recipient not only gets a nice, “hands on” catalog, but also has a degree of freedom in choosing a gift they want, without the hassle of  having to return an unwanted one.

Yet another innovative concept is group gifting.  Uniting the resources of many gift givers into a gift card enables the recipient to receive a more expensive gift they actually want,  instead of many small valued and mostly unwanted ones.  Group gifts not only make it possible for the gift givers to co-buy a gift of larger value, but also let the recipients choose or sometimes even predetermine their SPECIFIC GIFT.

A number of models have emerged around the group gifting concept.  eBay’s Group Gifts is one of them.  Once the gift fund is set up via an eBay and a PayPal account, gift givers can be notified via email or Facebook, and contribute to the fund with their credit cards.  No one gets charged until everyone chips in, and once it is fully funded, the gift fund will be sent to the designated PayPal account, and the recipient can checkout the same way as they would normally purchase any item on eBay.  It is a simple system that combines existing infrastructures of eBay and PayPal into an innovative service.

DreamBank‘s model is slightly different than the average gift fund.  Rather than focusing on items as gifts, the platform lets a recipient set up a fund for their dreams and enable gift givers to fund the recipient’s dream, which can be anything from a Caribbean cruise to an anniversary party, from a certificate program at the local university to ballroom dancing classes. The service is built as a community, so the recipient and the gift givers can interact over time with each other by sharing progress, resources or even encouragements. Gift givers can also set up a DreamBank account for unsuspecting recipients and surprise them after the dream has been funded.

SocialGift provides outsourced group gifting services for existing online retailers. Similar to what CashStar is doing for gift cards, SocialGift provides retailers with a plug-in for their product pages.  Customers can create a group gift directly from the retailer’s online store via an event page.  Through the event page, gift givers can determine how many people will contribute, track the progress of funds raised, invite more people to contribute or socialize with other gift givers.  The gift is shipped immediately, once the funds have been raised. If the gift is underfunded by a predetermined date, a gift card for the amount raised by the group is sent to the recipient.

While all the innovative concepts mentioned in this post so far have touched upon, utilized or modified most of the steps of the gift giving process, one step alone is outside the scope of most businesses: WRAPPING. This is where Delightfully comes in for digital gifts.

DelightfullyRecognizing the need to capture and enhance the emotional aspect of gift giving, Delightfully presents itself as “wrapping paper re-imagined”. Through Delightfully, gift givers can select an unwrapping experience for their gift, from 3-D mazes to a puzzle, from photo albums to a virtual tour. Gift givers can add their own personal messages and photos to the preexisting tools of the “wrapping paper.” Facebook users even have all of their photos on Facebook available for the platform. Co-founder Jason Shin explains:

Gift-giving is intended to be about a relationship between two people — not a vendor and a recipient.  When we talk about digital gift-wrapping, what we mean is showing some effort, the same way you do when you do a great job wrapping a physical gift.”

We have only talked about but a small subset of innovations and new businesses in the gift space.  Undoubtedly, some of them will prevail, while others will not. John D. Rockefeller once said that “the power to make money is a gift from God.”  Which of the businesses and innovations we have covered have received that gift, and which of them will convert that gift into their own gift cards? Time will tell.


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Gift Business: How Do People Buy Gifts? (Part 1)

Gift giving is a universal phenomenon.  From the Holiday Season to Mother’s Day, from Valentine’s Day to Graduation Day, from birthdays to weddings (not to forget anniversaries) literally hundreds of millions of gifts exchange hands every year, making both givers and receivers happy.  While many people give gifts the “traditional” way, others utilize new technologies and services.

We are going to cover the Gift Business topic in two parts.  In this post, Part 1 of the series, the individual steps that occur during a gift giving experience will be discussed.  In Part 2, we will take a look at how new technologies and services can improve, replace or eliminate these steps.

Many GiftsWe are all familiar with the “traditional” gift giving process, even if we do not always consciously think of it as a process or recognize the individual steps.  There exist many academic studies with conceptual frameworks attempting to describe the gift giving process, such as this example from the clothing industry:

“The framework consists of four stages: prepurchase, purchase, presentation, and postpresentation. Components of the prepurchase stage are object; interactions among occasion, recipient, and gift object; giver and recipient; cost of gifts; and information search. The purchase stage includes choice of retail outlets for gifts, distance traveled to locate gifts, and methods of payment. The presentation stage focuses on perceptions of the giver and the recipient when the gift is revealed. The postpresentation stage includes ways in which gifts affect interpersonal relationships; consumption of gifts is another component of this final stage.”

In this post and the next one, however, we are going to follow our own framework.  The gift giving process starts with a NOTIFICATION.  The NOTIFICATION can be external, such as receiving a wedding invitation or a birthday reminder email, although it can be internal as well, where you remember your child’s birthday, or just feel like rewarding your team at work.  This is the stage where “whether to get a gift or not” decision is made.

If a NOTIFICATION results in a go-ahead, it is generally followed by the SELECTION step, with its three substeps: GENERAL IDEALOCATION and SPECIFIC GIFT, although not necessarily in that order.

The GENERAL IDEA is just what it sounds like: you do not know exactly, but you have a “general idea about the nature of the gift” for the recipient.  This idea can be dictated by tradition (flowers on Valentine’s Day) or can be a result of your own free will (“I will get my friend a book, because I know she likes to read.”)  The GENERAL IDEA helps narrow down the options for LOCATION or “where to get the gift.”

Sometimes, however, it works the other way around.  The gift giver may decide on the LOCATION first, and then move on to the GENERAL IDEA (if the LOCATION offers many different options, such as a department store) or skip the GENERAL IDEA step altogether and let LOCATION dictate the nature of the gift.  Reasons for deciding on LOCATION first can range from convenience (“I can buy the gift on my lunch break at the department store across the street.”) to timing (“I thought her birthday was tomorrow!”) to financial considerations (“I already have a coupon/store credit for this store.”)

Usually, people tend to decide on GENERAL IDEA before LOCATION, if they have a strong motivation to get a “good” gift for the recipient to enjoy, and vice versa if they care less about how much the recipient will enjoy the gift, than the fact that they are giving a gift, as is the case with obligatory gifts (such as Secret Santa at the office.)

Next comes the SPECIFIC GIFT step, where the gift giver decides on the purchase.  Depending on the nature of the gift giver’s relationship with the recipient, and how well they know each other, it is possible to skip the two previous steps and get the SPECIFIC GIFT directly.  (“I know that my fiancee really wants these earrings.”)  The availability of gift options also dictate whether the gift giver is ready to move on to the next step, or go back and change the LOCATION (“They do not have that sweater in her size here, I will look elsewhere.”) or even the GENERAL IDEA. (“I originally wanted to get my nephew a katana, but they are so expensive, so I decided to get a book on Japanese swords instead.”)

The steps we covered so far involve many research, analysis and decision activities on the gift giver’s part, which we will not discuss in detail.  There are tools, many of them online, that help gift givers research various dimensions of gift options, analyze their viability and price/value ratios, as well as make relative and absolute comparisons to decide which gift will ultimately yield the optimal outcome for both the giver and the recipient.  While it would be interesting to take the process map one level deeper, and look at these processes and tools in the flow, for the purposes of this discussion, we are going to stick to the high level steps.

The next step is PAYMENT.  After the gift giver decides on the method (cash, debit card, credit card, installations, coupon, existing store credit) they must also make a very cruical decision which affects the rest of the process: whether to get a gift receipt or not.  While the more traditional minded gift givers frown upon the idea of their gift getting returned and exchanged for something else, the more pragmatic minded gift givers always give the recipient the option to exchange the gift, which has become a standard service at retailers.

WRAPPING, what makes a gift really look and feel like a gift, comes next.  While gift wrapping is a standard service at many retailers, some traditional minded gift givers insist on wrapping their gifts themselves, with decorative wrapping paper and accessories appropriate for the occasion, which indeed does add a personal touch to the gift giving process.  Many people argue that an important part of the joy of giving and receiving gifts is the surprise element, achieved by the WRAPPING, and the excitement that comes from unwrapping.  Although getting a gift wrapped at the store is more convenient, it can take away some of the surprise if the wrapping paper has the retailer’s logo all over it and hints at the GENERAL IDEA. (“I wonder what that rectangular gift wrapped in paper with Barnes & Noble logo all over is?”)

Traditionally, DELIVERY is the last step of the gift giving process.  A gift giver generally prefers to give the gift to the recipient in person when possible, usually in order to witness the happiness of the recipient firsthand.  When a personal DELIVERY is not practical, usually due to factors such as distance, availability or size, a commercial delivery by either the store or a commercial delivery service is arranged.

Gifting ProcessAlthough it does not affect the steps of the process by itself, the gift receipt innovation, mentioned at the PAYMENT step, has altered the flow of the process.  Rather than ending the process at DELIVERY, a gift receipt has the potential to set the process back to the SPECIFIC GIFT step, by giving the gift recipient the choice between keeping the original gift and exchanging it for something else.

As mentioned earlier, traditional minded gift givers dislike the gift receipt, because it not only makes the entire original SELECTION step irrelevant, thus overriding the original intent of the gift giver, but also reveals the actual monetary value of the gift, which is considered to be impolite.  In contrast, progressive minded gift givers defend the gift receipt, claiming that it gives the recipient an opportunity to exchange an unwanted gift for a better one, increasing the recipient’s utility, and after all, is not the gift giver’s ultimate goal just that?

So far, we have examined the individual steps of the gift giving process.  In Part 2, we will take a look at various innovations that redefine the process, its flow, as well as one or more of the steps.

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From Data To Wisdom On The Internet

The DIKW Hierarchy is a model that explains the relationships and the distinctions between Data, Information, Knowledge and Wisdom.  Although these concepts are commonly used for one another in our daily life, in scientific and business thinking, they have very different meanings.

The first time I became aware of these distinctions was while taking the Systems Methodology course by Prof. Iraj Zandi at the University of Pennsylvania, a course that significantly altered the way I view the world.  I remember Prof. Zandi talking about these four different but interrelated concepts, explaining them in a model proposed in 1988 by another Penn professor, Prof. Russell Ackoff, one of the pioneers of systems thinking.

Ackoff, in his article titled From Data to Wisdom, proposed that the contents of learning in an organization, regardless of size, can be represented as follows:

Data: symbols

Information: data that are processed to be useful; provides answers to “who”, “what”, “where”, and “when” questions

Knowledge: application of data and information; answers “how” questions

Understanding: appreciation of “why”

Wisdom: evaluated understanding

Several years later, in 1997, Gene Bellinger elaborated on Ackoff’s model and came up with his version:

Personally I contend that the sequence is a bit less involved than described by Ackoff. The following diagram represents the transitions from data, to information, to knowledge, and finally to wisdom, and it is understanding that supports the transition from each stage to the next. Understanding is not a separate level of its own.

Here is an example of mine that may help explain the sequence:

Data: It rained today between 2:30 PM and 3:18 PM.  A rainbow was visible in the sky from 3:18 PM to 3:30 PM. The sun was also shining after 3:18 PM, once the rain clouds had passed.

Information: There is a connection between the rain and the rainbow.  Other combinations of a rainbow appearing after a rain shower have been observed many times previously.  There were times when it rained with no rainbow following, but a rainbow was ALWAYS preceded by a rain shower. And the sun was ALWAYS shining in all of these circumstances. Whenever the clouds had not parted, a rainbow was not visible.  A rainbow can only be seen after it rains and if the sun is shining.

Knowledge: The rainbow consists of different colored lights.  The only light source when it happens is the sun.  Somehow the light of the sun must be transformed into different colors.  When there is no rain there is no rainbow and when there is heavy rain there is also no rainbow.  There must be a specific concentration of raindrops in the air to form the rainbow.  The raindrops in the air must somehow be transforming the sunlight into different colors.

Wisdom: We see rainbows because of the geometry of raindrops. When the sun shines from behind us into the rain, incident rays of light enter the drop and are refracted inwards. They are reflected from the back surface of the raindrop, and refracted again as they exit the raindrop and return to our eyes. Refraction is responsible for splitting the sunlight into its component colors.  The rainbow will alter as you move and will differ from others’ perceptions. Because the light from any single drop is dispersed, only one ray of a particular color reaches your eye. The violet band that you see leaves the corresponding raindrops at about a 40.6° angle, and the red band that you see leaves its corresponding raindrops at 42.4°, so the red light is from raindrops higher in the sky relative to your eye. (Explanation by WebExhibits)

What made me think of all this was an article by Nichole Kelly, President of SME Digital, titled How Data Hype Is Destroying Your Social Media ROI.  Kelly warns marketers about various infographics to be found all over the Internet, and urges them to double check the accuracy of the information represented within.

“In the early years of social media marketing (just 6-8 years ago, really) several major media outlets chastised bloggers claiming they didn’t cite sources and do enough research to make sure the information was accurate. The social media crowd stood up and said that our audiences would control bad information by calling it out, complaining in comments, or simply not sharing the information with others. In essence, our audience would be the filter for bad information.

Well somewhere along the way we have fallen down on the job. We aren’t being critical enough about all this data that is getting thrown at us. I see too many just believing the data because it came from a “reputable source,” — a company or an individual we have come to trust. We need to use a more critical eye before we jump on the band wagon of support. More importantly, we must be more curious when using this information to justify adjusting our marketing tactics.”

Kelly is talking about social media ROI in particular, but her points are valid in general.  There is an wide range of data and information available on the Internet, some quite accurate and reliable, while others … not so much.

Before the Internet, when we needed to get data and information on a subject, we used “traditional” information sources such as books, magazines, and published reports.  I remember spending tens of hours at Wharton‘s Lippincott Library in 1992, conducting research for a management paper.  The Internet as we know it now did not exist back then, and I had to spend all that time hunting down relevant articles by checking out paper copies of old business magazines, waiting in line to run Lexis/Nexis queries and sitting at the library, reading industry reports which could not be checked out.  The upside was that I was very comfortable with the quality of all the data and information I was getting.  They were being published by professionals and were most likely double and triple checked by editors.

Nowadays, things are a lot different. No one has to evaluate or approve Internet content before it is made available to the public. Anybody with a computer and an Internet connection can put anything they want onto the Internet.  One would think that this ability would create a sense of skepticism in Internet users, but no, most people are eating it up!

Accepting data without checking its authenticity and sources is bad enough, but it gets even worse:  People are outsourcing their thinking, not even bothering to analyze the data to “understand the relations”, as Bellinger suggested, to get to information.  People accept other people’s analysis at face value, with absolutely no regard to quality or accuracy.  I tried to touch upon this in Distimo’s “Most Popular Social Networking Apps” Study and How NOT to Display Data, which is but one example.  Not to sound too alarmist, but it looks like there is a mass epidemic of “cerebral laziness” out there!

It turns out that Robert Harris of Southern California College, saw this problem way back in 1997.  In his work Evaluating Internet Research Sources, he revealed his CARS Checklist for Information Quality:

“Source evaluation–the determination of information quality–is something of an art. That is, there is no single perfect indicator of reliability, truthfulness, or value. Instead, you must make an inference from a collection of clues or indicators, based on the use you plan to make of your source. If, for example, what you need is a reasoned argument, then a source with a clear, well-argued position can stand on its own, without the need for a prestigious author to support it. On the other hand, if you need a judgment to support (or rebut) some position, then that judgment will be strengthened if it comes from a respected source. If you want reliable facts, then using facts from a source that meets certain criteria of quality will help assure the probability that those facts are indeed reliable.”

The CARS framework consists of qualitative checklists on Credibility, Accuracy, Reasonableness and Support. While originally focused on internet sources, I think that it applies just as well to print resources, sets an example of critical thinking and provides insight into creation, presentation and application of data and information.  It is a recommended reading of mine for anyone who uses the Internet as a source of data and information.  Here is a summary:

Credibility:  trustworthy source, author’s credentials, evidence of quality control, known or respected authority, organizational support.

Goal: an authoritative source, a source that supplies some good evidence that allows you to trust it.

Accuracy: up to date, factual, detailed, exact, comprehensive, audience and purpose reflect intentions of completeness and accuracy.

Goal: a source that is correct today (not yesterday), a source that gives the whole truth.

Reasonableness: fair, balanced, objective, reasoned, no conflict of interest, absence of fallacies or slanted tone.

Goal: a source that engages the subject thoughtfully and reasonably, concerned with the truth.

Support: listed sources, contact information, available corroboration, claims supported, documentation supplied.

Goal: a source that provides convincing evidence for the claims made, a source you can triangulate (find at least two other sources that support it).

I will leave you with something I saw on Facebook this week.  While amusing, it is also very sound advice, one that should especially be taken to heart by those of us who always want to get good data and run a good analysis and hopefully reach a level of wisdom that will help us make good decisions, be it in a business setting, or life in general.  Remember: Not everyone out there is an Honest Abe!


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Cashless Society: Be There or Be Square?

Square caught my attention this summer, when I came across a VentureBeat article called Square credit card readers now being sold at Walgreens, FedEx Office, and Staples.  A credit card reader sold at office supply retailers?

Basically, Square is a payment system where a small, square-shaped reader plugs into your Android, iPhone or iPad’s earphone jack, and allows you to process credit cards, as if you had a POS machine.  The reader is free, after a rebate.  You can choose fixed or flexible pricing, either a flat rate of USD 275 per month, or a variable rate of 2,75% of the charged amount per swipe. Payments taken during business hours usually become available in your bank account the next business day.

Pretty neat, especially when compared to all the hoops a business must jump through to get a POS machine in Turkey.

Generally speaking, a business that wants to obtain a POS machine and the ability to accept credit cards in Turkey, must first fill out an application with a bank and open an account there.  Then come the negotiations, which are not really negotiations but terms dictated by the bank about all the payments the firm has to make to the bank.  Types and amounts of payments vary by bank, common ones are POS machine charge, POS machine setup fee, bank commission rate for the charged amounts (as high as 4%), service fee, loyalty program fee, account processing fee, to name a few.  There are also some penalty fees, if the monthly amount charged through the POS machine is below the quota assigned by the bank.

If there is an agreement, the applicant then must provide the bank with all kinds of documents such as list of authorized signatures, a certificate of good standing with the Chamber of Commerce, copies of the national ID cards of all the partners , a copy of the tax registration certificate,  a certified copy of the article of incorporation and myriad others.  After doing all this, if the applicant is deemed worthy, it is time to sign a bulky agreement with the bank.  My favorite part is where most banks tell you that they cannot give you a copy of the signed agreement, so you have no idea what you just agreed to, and in case you need to look it up in the future, well, tough luck.

Naturally, after comparing the Square to all that hassle just explained above, I thought that it was a pretty good, possibly a disruptive innovation, especially for small businesses and individuals.  It turns out, I was not the only one.  Over the summer, Square signed a deal with Starbucks where customers at participating U.S. Starbucks outlets would be able to pay for products using the Pay with Square app.  Then at the end of August, Square announced a new partnership with AT&T, making Square readers available at 1,000+ AT&T retail stores all over the U.S.

So, Square is doing well in the U.S., but I am more interested in how, if at all, it would work in Turkey.  What does this innovative payment system mean for developing countries like Turkey? Could it become mass market, or would it merely be just another cool gadget, only used by few? Ignacio Mas of CGAP, an independent policy and research center dedicated to advancing financial access for the world’s poor, housed at the World Bank, talks about it in Are Lower-End Shops Ripe for Electronic Payments?.

“In developing countries, … most people do not have a preference for electronic payments, and the installed base of cards and smart devices is still low. The former is by far the bigger obstacle. The majority of people in developing countries who have an electronic account do don’t have much value stored in them, and many more don’t even have an account. It’s hard to create a preference for paying in a currency you don’t have. In this situation, only merchants that tend to serve the richer banked elites will see a reason for accepting electronic payments (and, more significantly, the merchant discounts that come with that). Accordingly, we’ll observe the usual slow progression down-market.”

CGAP’s analysis rings true.  In developing countries like Turkey, cash will continue to be king for a long, long time. Visions of a cashless society come up more and more often in business circles these days.  The cashless society idea, where everyone uses a credit card, debit card, NFC or a gadget like Square instead of cash, sounds cool and may work in a country like Sweden, but around here it is nothing but a pipe dream, at least for the near future.

Sure, credit card usage has grown at an impressive rate in Turkey over the past few years. But a significant number of credit card owners are “revolvers“, people who use the credit card to buy things they otherwise would not be able to afford, as a substitute for a loan, if you will, instead of “transactors“, who simply use the credit card as a convenient payment tool. If you include transactors using the “installments” method of payments, a phenomenon unique to Turkey, number of revolvers becomes even more significant.  So, the large number of credit card users does not necessarily mean that people prefer credit cards and are willing to abandon cash.  It just means that they enjoy spending money they do not actually have, even if the cost of doing so is high.

With its huge underground economy, uneducated customer base, low level of trust in financial institutions and a widespread habit of tax evasion, I do not foresee electronic payments winning over cash in Turkey anytime soon.  Anybody who tells you different is trying to sell you something.


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Change Is Never Easy

Earlier, in The “Odd New Thing”: Social Media, we touched upon how executives treat social media as the something they do not really understand but feel the need to be part of.  And in Social Media Teams we discussed changes brought to the organization structure and the inner workings of a corporation by social media.

What is true for social media in particular is also true for new technologies and digital in general:  New, innovative ways of doing business force companies to undergo drastic changes in organizational structure, uses of technology, measures of success and resource allocation.  More than merely the way of doing business, the business mentality itself is becoming more customer-centric, more adaptive and less tolerant to mistakes.

Based on my observations of executives in Turkey, especially those of traditional companies, most react to these changes in one of the two extremes: apathy or obsession.  Some consider these changes to be something to be managed in a vacuum, to be handled by others, either someone within the organization or by an external consultant.  They do not really want to be involved, and as long as there are no problems, and it does not crowd their space, it is all good.

Others get really excited about all this transformation and want to become a part of it.  They spend a lot of unnecessary time and energy at the expense of other areas, driving their teams and colleagues crazy. Even though they do not understand the underlying strategy or the methods all that well, they want to “do it” anyway, albeit in a manic manner.

Martin Gill, an eBusiness and Channel Strategy Analyst at Forrester Research, talks about similar difficulties faced by eBusiness managers in Shooting Arrows At Eagles:

“Some visionary companies Burberry, Marks and Spencer are lucky enough to have CEOs who grasp the power of digital. These companies are embedding digital into every aspect of their operations and are collapsing the walls between “eBusiness” and the traditional store or branch chains.

But most organizations aren’t so well positioned. Many eBusiness leaders have a vision for agile commerce that isn’t shared or even understood by their senior management and are now finding that their primary mission is to drive transformational change across their companies from within their area of accountability — selling the vision upwards, sideways, and downwards and positioning themselves as cross-functional leaders.

This takes vision, great communication skills, and the courage of their convictions much like our pacifist revolutionaries. Change driven not from the top, but from small seeds.”


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Smartphones: Post-Verdict Apple-Google Relations

This past month, Asymco released a study of the smartphone market that included the following graph on market shares of smartphone platforms, 2007-2012:

Interesting,  no?  Meanwhile, a recent Fortune article asks the question: “Are Apple and Google really ready for patent detente?

The answer, which I believe has a ring of realism to it, is also included in the article:

“Smartphones are the fastest growing segment of the trillion dollar mobile phone industry, thanks in large part to innovations introduced five years ago by the iPhone. … Having achieved dominance in a market that generates hundreds of billions of dollars a year, [Google] is not about to cave over a $1.05 billion verdict against [its] clients. Nor is [Apple] likely to back off [its] insistence that competitors “invent their own IP” on the strength of one verdict and a handful of patents. Apple has tens of thousands of patents and dozens of lawsuits pending against manufacturers of Android devices.”

I have a feeling Apple is not going to kiss and make up anytime soon, especially after a big win like the Samsung verdict. To get a feel for what Android has cost Apple in terms of smartphone market share, all you have to do is look at Asymco’s graph.



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Revolutionary! Nowadays, almost every new innovation is labeled as revolutionary.  Is that really so?

The automobile was a revolution. The cupholder was not.
The telephone was a revolution. Call waiting was not.
The internet was a revolution. The iPad and Twitter are not.

Steven Strauss, an Advanced Leadership Fellow at Harvard University, explains what it takes for an innovation to be called revolutionary and talks about what he calls the new megatrend of Diminishing Marginal Innovation in We’re Stuck In An Era Of ‘Marginal’ Revolutions Like Twitter And Amazon.

“An innovation is revolutionary if it so changes society, that going back to the pre-innovation technology would be catastrophic. By this standard, many of our most recent innovations are incremental, not revolutionary.”


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