In a speech today at Fresno State University, John McCain proposed a $300 million government prize for the development of an alternative car battery. He called for a more efficient and affordable battery than those currently powering our hybrid vehicles, saying the reward would be “a small price to pay for helping to break the back of our oil dependency.”
So are cash prizes and crowdsourcing actually effective means of inspiring innovative solutions to intractable problems? What's the real return on a cash reward? And if the prize were big enough, could you buy yourself a new technology as major as the Internet? Fast Company staff writer Anya Kamenetz tackled these and other questions in the May issue. Read her story, "The Power of the Prize," here.
Cold Stone Creamery may have the highest unit volume in the ice cream category, but its aggressive expansion plan has hit the skids over the past two years. In May, the Scottsdale-based chain, known for its marble-slab mixtures and crooning employees, was acquired by Kahala Corp, a quick-service-restaurant franchisor that holds Blimpie and Samurai Sam's. Taking a page from Starbucks, which has proved that cranking out new stores can be antithetical to brand building, Kahala-Cold Stone is shifting strategy and testing more-inventive approaches to growing their business.
"When a chain goes through explosive growth like Cold Stone did, you have to take a breath at a certain point and say, OK, we've got all the best spots out there," says Chris Prasifka, Kahala's newly appointed president. "We don't want to oversaturate and jeopardize our unit volume." Instead, Cold Stone plans to focus its efforts on growing same-store sales and making each franchise more profitable by diversifying the product offerings. This doesn't just mean adding new ice cream flavors, although Cold Stone will introduce a full batter line (Cinnamon Bun, Carrot Cake, etc.) this summer. It also means trying to hit different parts of the day through co-branding.
Ice cream is a difficult category. It's a fragmented market with many regional players, not to mention that "over the past 5 or 6 years, the introduction of frozen coffee drinks like Starbucks' are even more competition," Prasifka says. Because frozen desserts are bound to warm weather (many chains, including Dairy Queen, shut down during the winter months) and limited times of day (Cold Stone has two peak traffic times: after school and after dinner), ice cream franchises have had to get creative with co-branding. For example, Baskin-Robbins, which found a successful formula in sharing space with Dunkin' Donuts, is now making room for Togo's Great Sandwiches too. To expand its own lunch options, Cold Stone is doing experimental co-branding with SoupMan stores, the shops that inspired Seinfeld's Soup Nazi ("No Soup for you!"). SoupMan is not a Kahala-owned brand, and although it's testing well in some New England stores, Cold Stone is not convinced it's the perfect lunchtime fit. To hedge their bets, they are developing their own Cold Stone café with soups and sandwiches, which will go into testing in the next few months.
Obviously Cold Stone is not the first quick-service food chain to expand its base product offerings to improve sales volume at different times of day. Subway, number one in the sandwich category, added personal pizzas to the menu at 13,000 stores last year; McDonald's is installing espresso machines for upscale coffee drinks; and Dunkin' Donuts has just announced an "all-day, oven-toasted menu" with flatbread sandwiches. The challenge: While adding new products is a way to increase sales volume, you don't want to dilute the brand or alienate your core customers by, say, making them wait in line five minutes to order their Big Macs while you steam milk for a chai latte. Cold Stone recognizes this challenge. "There is definitely a concern to make sure it's a right fit. You won't see us put a Samurai Sam's in a Cold Stone. We're very protective of each brand," asserts Prasifka.
Another strategy for boosting sales earlier in the day is to add healthier options. Consider that a Cake Batter cone in the largest size, called "Gotta Have It," has almost 1,000 calories, and that's without any mix-ins; add brownie bits and rainbow sprinkles and you're well over half your daily recommended calorie intake. (In a nation with a childhood obesity problem, introducing an entire line of ice cream flavors that are essentially liquid baked goods is a move that could draw more criticism.) To balance out the glut, beginning in May, all 1,384 Cold Stone stores will offer low-cal NRgize smoothies, currently sold in health clubs. And jumping on the Pinkberry bandwagon, Cold Stone has created its own barely disguised imitation, a line of frozen yogurts called—wait for it—Tartberry, which is testing well in their crunchy California stores. Cold Stone gives Pinkberry its due credit, acknowledging that the popular chain has "done a great job of introducing the consumers in America to a tarter style of frozen yogurt."
Although fro-yo spilling over with fresh fruit may be a healthy alternative to ice cream, it's a stretch to call it breakfast. Enter another Kahala-owned mix-your-own-food franchise, Cereality, which is being piloted in the flagship Cold Stone in Phoenix. For between $3 and $4, Cereality allows you to mix two scoops of name-brand cereal (think sugary treats like Cocoa Puffs and Lucky Charms) with toppings ranging from dried apricots to malt balls to pop rocks. You can also order coffee drinks and hot cereal combos, such as oatmeal with caramel sauce. Prasifka explains, "Before our stores open at 10 or 11, there's someone in there getting them ready. And we've got this great brand that really seems to fit well. The whole concept is very similar—you go in and personalize your cereal." Not surprisingly, stand-alone Cereality shops are a big hit near college campuses. It's not uncommon to find students in their pajamas eating cereal out of the large Chinese-food-style cartons and taking advantage of the free WiFi. Within the next four months, Kahala is planning to integrate Cereality into 50 Cold Stone franchises, but it is still unclear how the operations will be folded into the ice cream shops and whether the concept will appeal to people of legal drinking age.
Cold Stone is experimenting with other ways to build the business, including merchandising, corporate catering, boosting cake sales, and international expansion (they will open 120 stores in 12 different countries in 2008). One thing Cold Stone doesn't plan to do is adjust their prices. The cost of commodities like milk and sugar is going up, but the increased purchasing power that comes with merging with a food-service giant like Kahala means Cold Stone can keep its price point stable. But is a $7 dollar ice cream cone really an affordable option for families during a recession? Cold Stone seems to think so: "Are people going down from a Gotta Have It size to a Love It? Maybe. But it's an affordable indulgence."
According to indie rocker Jill Sobule, there's only one thing record labels are still good for and that’s financing albums. Everyone is preoccupied over which music-distribution model will win out, but the fallout of the Internet's attack on record companies is that it's increasingly difficult for bands to get their music produced in the first place. DIY rough cuts made with GarageBand or Pro Tools might help a band amass a fan base on MySpace, but the goal is still to graduate to a professionally mixed studio album. So now that the labels are, as Rob Zombie put it, "dinosaurs waiting to die," who will fund new projects?
One possible answer that seems to be gaining traction: the fans. New online music companies are jumping on the "crowdsourcing" bandwagon by allowing fans to discover and finance new music themselves. These companies are confident that we, as consumers, are willing to spend $10 to commission an album from an up-and-coming artist we believe in, especially if it will score us preview copies, private shows, and other exclusive access. After all, music fans, more than anyone, want to feel we're intimately connected to our favorite artists.
One of the more established of these sites is four-year-old ArtistShare.com, which represents some household names, including Rick Moranis (he’s not just film’s most famous shrunken dad—he’s a country singer too!), Trey Anastasio of Phish, and Maria Schneider, who won the label its fourth Grammy in February. ArtistShare allows fans to invest anywhere from $9.95 a share to a whopping $18,000—enough for an Executive Producer credit on the album. In exchange, the investor gets an exclusive window into the artist’s creative process through video diaries and early recording samples. A major reason Grammy award-winning artists like Schneider are choosing to stay with ArtistShare instead of graduating to a “real” label: the 85-percent cut the company gives its musicians dwarfs traditional royalties.
A newer, hipper site that has gotten media buzz lately is SellaBand.com, whose tagline is "You are the record company." They've been busy proving they're as legit as any major label: they got a former Sony BMG exec to sign on as managing director, Heineken's onboard as a corporate sponsor, and they recently struck a distro deal with Amazon. Any artist can upload songs to Sellaband.com, where so-called "Believers" buy shares for $10 apiece. Once a band reaches the $50K mark, it gets studio time with a big-name producer. The company, artist, and investors then split album revenues three ways. SellaBand’s motives have as much to do with aesthetics as profit. Pim Betist, who left a high-paying job in the oil industry to become Creative Director of SellaBand, sincerely wants to fix a broken industry by opening doors for obscure bands. “The music industry is about to die because they have been too focused on overmarketed superstars instead of quality music,” Betist says.
Even seasoned musicians are defecting from record labels and choosing to go the fan-funded route. Some of these artists, especially those indie rockers who don’t fit the Avril/Britney mold, are tired of the creative restrictions imposed by labels. Jill Sobule, who scored MTV hits with "I Kissed a Girl" and "Supermodel" in the 90s, was tired of being passed from label to dying label, so she opted out. Instead, she is choosing to raise the $75,000 needed for her new album through the donation website JillsNextRecord.com. For $10, you’ll get a free digital download when the album is finished; a $200 donation will get you free admission to all her 2008 shows; and for a $1,000 donation, she'll write you a personal theme song.
Of course, this public microfinancing model has its shortcomings. For one, splitting revenue with thousands of fans the way SellaBand does is an SEC nightmare. And while believers like Betist are touting democratization—fans can seek out quality music directly, instead of relying on labels to dictate what's listen-worthy—many listeners prefer a curated experience. In fact, if you visit SellaBand, you’ll notice there are a handful of bands that are extremely popular, while the rest have relatively few pledges. One theory: Because you can see how many pledges each band has accrued, you’re more likely to listen to (and therefore sponsor) the band with the illusion of popularity. In other words, few people are casting votes based on their unbiased opinion of the music’s merit.
In 2006, Columbia University network theorist Duncan Watts did a study on the effects of social influence on musical tastes. He posted 48 songs on a Web site and recruited subjects to vote for the songs they liked. The participants were sorted into eight groups—some voted blindly based on their personal preferences, while others could see how their fellow group members were voting. The results: All the songs were rated fairly equitably in the merit group, while in the social group, a handful of songs surged to the top. What’s most interesting is that between the different “social-influence” groups, there was almost no overlap among the top and bottom songs, suggesting that any inherent quality the songs had was irrelevant. Instead, the tracks that rose to the top were the tracks that happened, arbitrarily, to get the first votes.
It's hard to say whether a model that blends microfinancing and social networking will prove financially viable. When I met with Betist in February, only 14 previously unknown bands had hit the critical $50K mark. And ArtistShare, which is the most established contender in the category, earned just half a million dollars last year. But calling on fans to sub for record labels is a promising option in an industry that desperately needs fresh ideas.
Last night the 2008 Dyson Product Design Awards were handed out in New York City. (Yes, that’s Dyson as in Sir James Dyson, TV’s most pretentious vacuum peddler.)
These prizes are awarded annually for inventions that demonstrate exceptional ingenuity and function. This year’s finalists hailed from 14 countries, and their inventions ranged from the simple (a showerhead you wear like a glove, thereby requiring less water pressure) to the borderline insane (a solar-powered underwater capsule that lets you deep-sea dive without coming into contact with any yucky sea water—no more ear infections!)
First prize went to a safety device for cyclists called the Reactiv jacket, designed by Michael Chen of London. The jacket has a built-in accelerometer that regulates the color of the LED lights sewn into the back—green means the rider is accelerating, red signals braking. If the rider lifts an arm to indicate a right turn, amber-colored lights in the right sleeve begin flashing.
It’s easy to see why this product won top honors. Chen took a real problem—the dangers of urban biking—and devised a relatively simple and effective solution. But for the recipient of a prize bearing the name of Sir Dyson, who made dustbusters chic, I’m not sure I’d call the design of the jacket elegant. As you can see in the photo below, there was nothing understated about the lightsaber glow of the back panel and the wide reflector strips on the sleeves. And while I realize that drawing attention to yourself is the entire point, the safety benefits are negated if you get beat up every time you wear the jacket. But hey, biking is good for the Earth—and we kind of like the Earth.
Nonetheless, my favorite invention at the reception had nothing to do with sustainability or gadgetry. A student from a French design institute created a line of clothing with strategic pleats, folds, and interlacing parts that make it possible for people with a limited range of motion (the elderly, the disabled) to dress themselves. The clothes could actually improve the lives of ordinary people and, as an added bonus, they won’t make you look like an extra on Battlestar Galactica.
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In a Q&A last year with Fast Company’s Chuck Salter, Dyson admitted that he made over 5,000 prototypes of his bagless vacuum before he found a successful model. While that sounds like a lot of work, some of the products on display could have used another iteration or two.
Grossest product: A “wired” toilet that analyzes your waste and transmits information about your health and nutrition directly to your physician. Not surprising that this was the Japanese finalist—it saves you the shame of having to discuss taboo subjects with your doctor. Then again, I can’t remember the last time my doctor asked me about my—yuck, nevermind.
Coolest-looking device of dubious usefulness: A CPU shaped like a tree with the motherboard contained in the trunk. I think this was designed so that an individual part (branch) could be swapped out easily when it malfunctions, instead of replacing the whole computer, but the press release also said something about reminding users through design that their energy consumption affects the earth. A stretch?
Most obnoxious contraption: The Ergoskin, a posture-correcting vest that alerts you when you’re not standing up straight, since most of us only see our mothers on special occasions.
