Are You Using a Viral Innovation Strategy? Either You Are; or You R-Naught.

Are You Using a Viral Development Strategy? Either You Are; or You R-Naught.

What a Virus Can Teach Businesses About Innovation Strategy

Virus

In today’s fast-paced economy technology is advancing at an unprecedented level and customers demand ever better user experiences; to remain competitive in such an environment businesses are constantly looking to be more innovative to ahead of the blistering speed of new technology and stay relevant with their customers by delivering high-quality user experiences.

We all know this year has been one of the worst flu seasons on record.  If you have been fortunate enough not to get sick, you likely know someone who did.  But why is this year’s season bringing particularly severe flu symptoms and spreading so rapidly?

The answer: Exposure.

The same exposure that turns an every-day virus into a severe strain is the same exposure that companies should seek in order to develop, diffuse and manage truly innovative products.  We can think about the innovation of high-quality products the same way we think about a virus…but… in this case…a really good virus that people want to catch and businesses want to create and transmit.

We have all heard the term “going viral” which, itself, went viral when referring to “viral marketing” with the emergence of social media.  Viral marketing refers to the near-frictionless ability for content to rapidly spread throughout a population or market.  Viral Marketing describes how content is disseminated or adopted but the question I want to explore is how to create the content capable of going viral in the first place.

Accordingly, I will first review the biology behind how a Killer Virus is created; then I will introduce an emerging strategy I call Viral Development and, using a Killer Virus as an analogy, explore how businesses can use the biological strategy of a virus to create and manage innovative products.

To clarify: By “Killer”, I mean one that makes you really sick and spreads quickly through a population – not necessarily one that literally kills.

So how are Killer Viruses created?  And once created how do they spread so quickly?

How a Killer Virus is Created

Why do some viruses make you sneeze a bit and others make you feel like you’re going to die (or actually kill you)?  And why do some viruses become epidemics—spreading to thousands or millions while others don’t seem to have any effect at all?  They mutate.

First, consider how a Killer Virus is “made” or, more appropriately, mutated?

For a virus to infect you it has to have the perfect formulation of genetic make-up and protein coating that can bind with—and infect—specifically human cells (This is why your dog doesn’t get sick when you have the flu.)  When a virus infects a new host it replicates itself millions of times, each time mutating—taking on genetic elements of its host genes.  More hosts mean more exposure to their genetic information which leads to more mutations of the virus.

Most of the time, these mutations do not have any significant effect on the fundamental characteristics of the virus, but sometimes, all the pieces serendipitously together to make a virus that has adopted the precise combination of genetic characteristics to affect you with symptoms ranging from an itchy throat; to achy joints; to death.

But it is not enough for a virus to mutate into one that is harmful to humans.  It must also mutate to adopt the necessary characteristics to be passed from human to human.  Remember the Bird Flu scare? The Bird Flu virus N1H1 had morphed to pass the infection from birds to humans with devastating consequences including death, but it had not adopted the ability to pass from human to human and hence, did not become a pandemic killing about 300 world-wide.

The R-Naught

When determining to what extent, and at what rate a contagion such as the flu will spread the Center for Disease Control (CDC) uses a formula called the R0 or R-Naught.  In short, the R-Naught of a virus is the average number of people who will be directly infected from one infected person being introduced to a population.

An R-Naught greater than 1 means the disease will spread; an R-Naught of less than 1 means the disease will eventually die out.  The other important consideration is that the higher the positive R-Naught, the more rapidly the virus will mutate and spread.

So the way a virus is able to develop, evolve and rapidly distribute itself to the masses depends on the number of hosts it occupies.  The more hosts a virus occupies the more exposure it has to genetics (which is simply information).  Using that genetic information, the virus mutates (or experiments)—again and again—until it serendipitously finds the perfect genetic formula that enables it to be both harmful and to be passed from human to human.

So the more information a virus is exposed to and the more experiments it can run, the more likely it is it become an epidemic, Killer Virus.

Viral Development

So how does the biology of a virus translate into a Viral Business Model, and how can you apply that model to your business and your innovation strategy?

Where a virus strives to morph into a unique strain that causes harm to its host, a business strives to create a product or service that uniquely satisfies a burning need of their customer.  Just as the virus strives to become a rapidly-spreading pandemic, a business strives to create innovative products that spread through their market segments.

Then there is the diffusion or distribution issue.  The virus wants to achieve an R-Naught greater than 1 so it will continue to morph and change benefiting from exponential increases in exposure, eluding vaccines and quarantines.  The business must also tackle this challenge.  How best to distribute, maintain, and manage a new product on a very large scale while incurring the lowest cost possible?

There is an emerging trend that takes a page directly out of the virus’ strategy of exposure.  That trend is known as Open Data/Open Development, Open Source Development, Biz Dev 2.0 or, as I call it: Viral Development or Viral Dev.

Viral Development and Biz Dev 2.0

The trend of decentralized, disaggregated development is what Flickr co-founder, Caterina Fake calls “Biz Dev 2.0”.  I first heard the term Biz Dev 2.0 after speaking with leading API strategy thought leader, Kin Lane, Author of The Business of APIs and the self-proclaimed “API Evangelist”.  After a successful career working for some of the world’s top tech firms, Lane spent the last two years passionately promoting the explosion of Biz Dev 2.0 enabled by the adoption of Application Program Interfaces through his API Evangelist website, and the API Strategy conference.

Viral Development—describes the innovation strategy of development and management of applications by providing the global community of software developers access to your company’s valuable data to through what’s call Application Program Interfaces—or APIs.  APIs provide a gateway to a company’s valuable data that enable software developers to identify, define, develop, market, maintain and service valuable, innovative applications based on the data the company’s APIs provide.

The key words here are valuable data.  Data (or information) can come in many different forms such as videos (YouTube), photos (Instagram), an engaged audience (Facebook, Twitter), maps (Google), bank account information (Bank of America), payment processing capabilities (PayPal), scheduling – e.g., the ability to make reservations at a restaurant (OpenTable.com), accounting (QuickBooks), news stories from around the country (NPR) or package-tracking information (USPS, FedEx)?  If your company has access to any valuable data, chances are that a hoard of developers would love to get their hands on those data and create truly innovative solutions around them.

What is an API?

So, what is an API?  If you are a typical application end-user staring at a nicely designed webpage or application, you will never see an API.  An API is simply a bit of code embedded in an application’s source code.  Though the functionality an API provides can be significant the API itself is just bits of back-end code like this:

It's just code.

It’s really just code.

If you clicked on the YouTube video earlier of Mr. Law…you used an API; if you checked Facebook on your smartphone…you used an API; if you checked you bank statement today…you used an API.  Other applications like Pulse or Flip Board that consolidate news from multiple sources into a single platform for your viewing pleasure, all generated using those news sources APIs.

In short, APIs are code that act as a gateway to communicate data from one application to another allowing them to “speak” to one another.  It is like the old footage we’ve all seen of the switchboard operators:  The operator gets a call from…say…Mark Zuckerburg saying, “I want to speak with Ben Burgess.” The operator says, “Please Hold” then connects the wire from Mark’s phone to Ben’s phone allowing Mark to ask Ben for his invaluable advice.

We’ve all seen a YouTube video embedded in websites such as Facebook (or this article’s webpage for that matter).  When you click on the video to play it, the Facebook page “calls” YouTube using the YouTube API and says, “YouTube, I need that one video of the 10 cutest cat moments.”  YouTube says, “OK, Let me connect you to that video.” and connects Facebook to the YouTube’s Top 10 Cutest Cats Video.

The data for the cat video you are viewing through this blog are not stored on my servers; they are stored in one of the many massive server farms somewhere in the world or “The Cloud”.  It is the YouTube API that connects the window you see below to the cat video.

An API is a Switch Board

An API connects a client with valuable data

Side note:  If you had an ad in the beginning of the video that was also accessed through an API from which they make tens of billions of dollars per year.

The Philosophy of Viral Development

This emerging trend is primarily a philosophy and a movement in addition to a strategy.  Viral Development is driven by an army of developers, who passionately espouse the philosophy that the greatest innovation will come from the crowd, freely and frequently experimenting, enabled by the democratization of information; that open source, open data and open development are the most effective ways to achieve significant and sustainable innovation.

The Viral Development philosophy is diametrically opposed to the traditional, top-down, centrally-controlled and centrally-managed strategy of development.  It is the age-old question of make or buy:  Vertical integration (where you make/do everything yourself) vs. horizontal integration (where you serve as a hub, consolidating the work of others to create a value greater than the sum of the parts).

Using our analogy, for a Viral Development strategy to achieve a high R-Naught it requires a decentralized structure with individual, self-directing “viruses” spreading rapidly through a population by learning and adapting with no direction from a centrally controlled body.

The Philosophy of Viral Development

This emerging trend is a philosophy or an ideal in addition to a strategy.  Viral Development is driven by an army of developers, who passionately espouse the belief that the greatest innovation will come from the crowd, freely and frequently experimenting; enabled by the democratization of information; that open source, open data and open development are the most effective ways to achieve significant and sustainable innovation.

This Viral Development philosophy is diametrically opposed to the traditional, top-down, centrally-controlled and centrally-managed strategy of development.  It is the age-old question of make or buy:  Vertical integration (where you make/do everything yourself) vs. horizontal integration (where you serve as a hub, consolidating the work of others to create a value greater than the sum of the parts).

Using our analogy, for a Viral Development strategy to achieve a high R-Naught it requires a decentralized structure with individual, self-directing “viruses” spreading rapidly through a population by learning and adapting with no direction from a centrally controlled body.

The R-Naught of Viral Development: Catching the innovation bug

So let’s get back to your innovation strategy’s R-Naught and Viral Development.  I call this strategy Viral Development because, just like the virus, it realizes the value of exposure, allowing companies to rapidly and effectively innovate, benefiting from the same experimentation and dissemination effects that created the severe strains of this flu season.

By engaging the global developer community to create products for your business rather than trying to figure it all out on your own raises your company’s R-Naught.  Remember, in our analogy the “Killer Virus” is equivalent to a great idea that the market will quickly adopt.  So you could use the traditional method of development you will be producing one (or a couple) application(s) at a time; but you will surely not create really great products 100% of the time.  That means your R-Naught is below 1 and—just like the low-R-Naught virus—you will die out.

Alternatively, you could create a platform containing valuable data once (if it is not already there), then create an API that provides access to those data to thousands of developers.  You benefit from their unique insights into their respective niche markets, their creativity, their experience, and, most importantly, their time as they eagerly develop valuable application using your data.  Those applications can then be combined with other API-driven applications, exponentially increasing exposure to your data… Now your R-Naught is through the roof!

By creating an ecosystem around your data, you no longer develop single, one-off applications that may or may not be a hit; instead, you have potentially hundreds or thousands of applications being developed on your behalf, exposing you to markets of thousands; morphing, mutating and evolving applications built around your data until they serendipitously find a Killer, Viral Solution at no development cost to you.

Viral Development: Managing the bug

So far we have focused on viral development and your R-Naught from the standpoint of innovation and application development.  But an equally, if not greater, benefit of Viral Development is the management of applications once they are built:  All the marketing, distribution, maintenance and customer service products require.  Using a Viral Development strategy you put the power of your data and the incentive to create great products in the hands of the masses which increases your R-Naught.

Remember the two mutations that must occur to produce a Killer Virus:  The mutation to produce undesirable symptoms (otherwise who would care if they are infected), and the mutation that enables prolific human-to-human infection allowing the virus to take on a life of its own.

Even if you do successfully identify, define and develop a “killer” (desirable) application people want with a traditional, in-house innovation strategy, you will be working too hard, spending too much money and incurring too much risk to market, manage, maintain and service the customers of that application effectively.

However, with Viral Development the responsibility and the incentives lie with your community of developers to properly manage their respective applications.  So all the costs and headaches of marketing, implementation, constant software updates, angry customer service calls all while trying to stay relevant against the competition all fall on your developer community which has an incentive to continue to maintain their existing applications and, more importantly continue to innovate as long as you keep your data valuable, open and available.

So you may be saying, “This all sounds great, but if I give away all my data, how will I make money?”  Great question, so let’s explore business models to monetize this strategy.

Identifying Your Viral Development Business Model

Although a High-R-Naught, Viral API Strategy sounds good, it may not be for everyone, so remember, an API provides developers access to valuable data, enabling them to develop and market software based on the data the APIs provide.  These developers are not creating great applications for their health, they usually want a return for their time.

So, the two questions you need to answer before jumping into an API strategy are (1.) what is valuable about my data, and (2.) How can I eventually make money off developers using these data?

First:  What is the value that your data provides?  By that I simply mean how can your data make the life of the end user better or what do your data actually do.  For example, the Google Maps API lets people know the location of the nearest gas station; The Facebook “Comments” and “Like” APIs allow users to connect and share with friends without having to leave whatever webpage they are on.  The FedEx and USPS Rate Engine APIs enable eCommerce merchants to bill their customer’s for shipping in real time saving them time and money.

Second:  What is your business model?  How do you make money off thousands or millions of people accessing your data?  There are many models out there but here are a few:

Google, for example, makes money off advertising, much of which is driven by the incredibly rich data they have on customer behavior.  So they want to get as many people feeding them personal data as possible and will gladly make available just about all of their functionality such as Gmail, Maps and Chrome Plug-in APIs as long as you—and your valuable data—are flowing through Google’s pipeline which they then use to make billions in advertising.

As another example, USPS has fully embraced Open Viral Development, providing their APIs to developers for free, enabling them to create applications that make shipping easier for eCommerce customers with USPS.  That way, more eCommerce customers will choose to ship with USPS which will result in more money to USPS from shipping revenue.

Finally, other companies will simply charge people to use their APIs such as Voice Over IP (internet telephones) companies like Skype where you pay per minute or a subscription fee to access their API and telephone services.

There’s Nothin’ New Under the Sun

The reason open, Viral Development works is that it (a) embraces the inherent uncertainty of innovation by encouraging experimentation and (b) decentralizes the cost of management; placing those costs and responsibilities on the Viral Developer Community.  But this isn’t really anything new.

Thomas Edison held 1,093 patents produced by hundreds of the brightest engineers in the world, but this was only a pseudo-R-Naught strategy.  Though Edison embraced experimentation, he was still vertically integrated; employing large teams of the greatest minds in the world to experiment in his labs and incurring high costs—though you could argue that he provided the platform that attracted those people in the first place, similar to Apple today.

The real High-R-Naught innovation strategy was that of Westinghouse—whose AC electricity beat Edison’s DC electricity to become the electricity standard by the 1890s, a result that benefitted not only from the innovations of Edison, but also from those of Nikola Tesla and thousands of other inventors.  Westinghouse provided the power that served as the platform on which inventors could build products people wanted; those products consumed the electricity Westinghouse gladly provided in exchange for a whole lot of money…now that’s a high-R-Naught Viral Development strategy.

Finally, if you have valuable data and a business model that makes money off those data but you still need truly innovative products to get those data into your customer’s hands, you have two options:  Go vertical…or go Viral.

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About

I am the President of The NorthStar Group where we help small businesses start or grow their business through branding, digital media, eCommerce and strategic planning.

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Posted in Business Insights
3 comments on “Are You Using a Viral Innovation Strategy? Either You Are; or You R-Naught.
  1. Great points… I think the key point is having “valuable data” as you stated. The customer will use that and build it out IF YOU HAVE IT. And that is where your organic growth comes from, having your customer do things along side you.

  2. nninoss says:

    Very very nice!…I like it!

  3. […] as we grow the idea of becoming a viral inovation in a physical world become more […]

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