RonAmok!

The adventures of an analog engineer and digital storyteller who studies emerging networks and their impact on the great game of business.
Apr 8, 2010

Last Monday I wrote a post called Real Time Communications, describing how mass communications tools in the hands of average people are having a profound affect on our lives. At the end of the article, I posed a question about business implications of such access.

The difficulty with this question is manifested in the sheer magnitude of the problem. How does a company monitor mass communications channels, save the data, analyze it, and act upon what it finds? That’s when I ran into a simple and very understandable example.

For the past few months, I’ve observed how one company uses the real-time information of a competitor to set pricing. The company is Amazon.com, the competitor is Barnes and Noble, and the product is my book Read This First: The Executive’s Guide to New Media–From Blogs to Social Networks. The chart below demonstrates what I mean.

My book was released in November 2009. Since Amazon was the first bookstore to carry it, and thus had no competition, it chose the retail price of $17.95. That price held for a few weeks until it dropped suddenly to a seemingly arbitrary $12.21. It didn’t take me too long to figure out what had happened. Read This First had just debuted on Barnes and Noble’s site at that price.

Three months after the book was released, Barnes and Noble decided to increase its price to $15.34, triggering a corresponding and almost instantaneous increase on the Amazon side. But this time, instead of matching the price increase as it had earlier, Amazon only increased it by 10%, to $13.46.

Finally, about a week later, Amazon returned its price to $12.21 while Barnes and Noble has held its at $15.34 — where both prices remain today.

To me, this chart represents a simple example of how future businesses will use real time mass communication. Computer programs will watch for specific information, events, triggers, social graphs, etc… They’ll run that information through algorithms, perform pre-programmed actions, and closely monitor the results of those actions. Over time, the algorithms will be adjusted to optimize the results.

Perhaps companies will be able to better predict mass demand for a product. Perhaps they’ll be able to automate the purchase and sale of goods and services at an optimal price. Perhaps they’ll be able to predict large earthquakes, based on disparate and seemingly inconsequential data that on a whole paints an accurate picture.

I can’t predict what they’ll do with the information, but I can predict one thing with certainty: Technology is not the limiting factor…our imaginations are.

Photo Credit: Tolomea

Filed under: Measurement

Comments

Ron,

You’re post is the tip of the iceberg and we could probably spend several hours and destroy a couple of nice cabs on this subject. I finished a masters program in information services last year and one of the classes I participated in was ‘Data and Knowledge Management’ – a decidedly dry title to actually quite an interesting pursuit.

Data, information, knowledge – one begets the next. We have tons of data – terabytes, petabytes, and many companies (Google is one, I’m sure) are well into exabyte territory.

As your post illustrates however, without separating the ‘wheat from the chaf’, the data is useless – it just takes up a lot of (usually expensive) space. We need to know how to use (what to look for in) the data and thus create information and, after percolating the information, hopefully gain knowledge that is of some use. Of course, with that knowledge gain, we tend to open new cans of worms which create more data and thus the recursive behavior starts another cycle.

Your example of price chasing is one that is not only enabled by corporate crunching mainframes but by the consumer as well. (As you mentioned in your book – Orson was almost right except that the many will be watching the few – not the other way around!). With smartphone in hand, consumers can snap a pic of the UPC barcode on a product, do an on-the-spot price comparison and if they find a better deal online, order it and probably have it delivered to their house before they finish shopping and picking the kids up from school!

I certainly agree though, it is the unknown possibilities that are most exciting. What will happen say, when product pricing becomes so close as to not be a differentiator? How will companies differentiate themselves? What will they chose as a model? Could it be the human factor? I was on a web site the other day perusing some products when a window popped up asking if they could be of assistance with anything. I IM’d for a bit with them and they were quite helpful. Not exactly like being in a brick and mortar, but still a nice blend of tech and flesh – made me feel like they actually cared I was there.

Thanks Ron for your intriguing posts and your book. New Media and specifically RSS feeds have certainly changed how, where, and when I find relevant data and information and, once in a while, I even gain a little knowledge! ?

– Ryan

Ryan
April 8, 2010

Thanks for the great comment, Ryan! Really meaty stuff to chew on.

Over the next few years, someone is going to figure out how to separate the wheat from the chafe. That's when two things will happen:

1) They'll become very wealthy.
2) I'm going to say, “Man, why didn't I think of that? It was so obvious!”

R~

ronploof
April 8, 2010

Thanks Ron and Ryan,

I believe the human factor is and always will be the key differentiator for successful businesses. Somebody will figure out how to decipher the endless bytes of data in the world, and yes they will make a boat load of money. However, once that problem is solved, all companies (that can afford it) will no longer have the same issues they have today, nor will they be able to justify higher prices without giving more value.

In my experience value is in the eye of the beholder. If a company spent the extra time to develop processes and systems that proved their added value versus their competitors, they would stand out from the pack and have a better chance of long term success.

@B2BMaven

B2BMaven
April 13, 2010

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