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As material and immaterial worlds melt, new business opportunities arise.

M IIK K A

L E INON E N


MIIKKA

LEINONEN

As material and immaterial worlds melt, new business opportunities arise.


Version

1.0 Š 2014 Miikka Leinonen. All rights reserved. ISBN 978-952-93-1726-4 Published by Miikka Leinonen Translation and editing: Rebecca Watson Second editor: Cheryl Riggins Photo credits: Page 8 and back cover: Tuomas Kolehmainen. Small icons on page 11, 16, 17, 48 and 72 by Kapreski / Shutterstock. Page 80 Albrecht Dßrer, Rijksmuseum For further information please go to www.miikkaleinonen.com


Go on. I dare you.


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This book is for those who understand the power of visual thinking.

Thanks! Thanks to all the people who have supported this project. Every discussion, every presentation, and every question has helped me carve this idea into a book. And thanks to all those who supported and pushed me forward when I doubted myself. Here are some of those people: Kati Jussila, Jussi Tapio, Hannu Lindell, Isa Merikallio, Torfinn Slåen, Anu Leinonen, Jaakko Pesonen, Sirpa Alhava, Janne Saarikko, Antti Huttunen, Perttu Tolvanen, Tuomas Kolehmainen, Henrik Småros, Aleksi Bardy, Aija Bärlund, Riitta Lumme-Tuomala, Hannu Ripatti, Jari Tuovinen, Sami Kangasharju, Peter Barkman, Zeev Shaposhnik, Paulo Rodrigues, Kalle Hallivuori, Nguyen Thanh Long, Juha Nurro, Harald Neidhardt, Tuomas Airisto, Martti Mikkola, Saku Tuominen, Lotta Vaija, Päivi Holmqvist, Timo Kiviluoma, Wael Soliman, Annamari Typpö, Greg Satell, Sari Veikkolainen, Hannaliisa Johnson, Petri Vilén, Jussi Markula, Martin Pronk, Ladystorm, Jarmo Hovinen, Juuso Henriksson, Heikki Peltola, Susanna Paloheimo, Manuel Grassler, Yuri van Geest + you. M i i k k a L e i n o n e n | melt

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Contents B Y

M I I K K A

L E I N O N E N

THEORY PART

A BIT MORE PRACTICAL STUFF

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Why I had to write this book + GLOSSARY

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EXAMPLE Products and people are melting. This shift is particularly evident in smartphones.

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WORLD DIVIDED IN TWO

MELTING THE WORLD

The material and immaterial worlds are very different. Companies rule the material world, but now they need to open up to the immaterial world.

Technology has melted the immaterial and material worlds, creating a completely new universe with its own laws and fundaments. Mastering this “Melt� is crucial for the success of any business.


What is this book about?

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Melt must be part of your strategic thinking. Learning to Melt means letting go of your old habits and beliefs.

CASES Amazon Kindle Kalmar Port Automation Clash of Clans Rijksmuseum Scoopshot

MELT STRATEGY

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As technology melts the material with immaterial, new possibilities open up. Some companies reap great fortunes, while others face huge problems.

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MELT TOOLBOX When you master the Melt, you will create innovations and agile strategies that outsmart the competition. This section offers practical tools and tips.

This book offers visual tools to help people prepare for the new and unimagined adventures ahead.

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Why I had to write this book

I

love companies. They are incredible driving forces that bring together all types of people. They set challenging goals and spur the invention of novel ways to achieve them. At best, companies are as fast as lightning and bursting with innovation. With their unabashed optimism, fresh ideas, and often a seed of revolution, startups are particularly close to my heart – all will be different tomorrow! Growing up in a family of entrepreneurs and during a career spanning two decades, I’ve come across all sorts of companies – big and small, hyperlocal and global. Companies can be powerhouses for nailing the toughest challenges. Key revolutions of our times will arise through companies – through the tools they create and new potential they offer. I’ll even go as far as to say that companies can actually

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accelerate mankind’s evolution. Companies are packed with an admirable primal force as they compete for survival and living space. But companies are not perfect. Far from it. Many sectors are stuck in a paradigm of the 18th century age of industrialization, allowing its dogmas to rule business life and work itself. Despite the world around us becoming immaterial, companies continue to measure success using material metrics. As much as I love companies, the business world continues to be clearly founded on the old-fashioned. A growing share of humankind is heading towards the immaterial world, while companies are in danger of being imprisoned by the material world. For mankind to make the most of companies, businesses need to adapt to the surrounding world. Otherwise, they just may become obsolete, which is something I don’t wish. My mission in writing this book is pretty


straightforward. As individuals, we need to help companies develop, so they in turn can build our future. This book is designed to support companies, chart the potential offered by the melt between the immaterial and material worlds, and provide keys for increasing revenue. I’ve chosen to speak in familiar business terms. And growing profits seem to provide the best incentive for change for businesses today. My book is aimed at providing companies with a shared language and tools for dealing with these complex new worlds. Companies that outgrow the dogmas of the material world and embrace all that the immaterial world has to offer are capable of ever-greater innovation and humane action. And yes, unprecedented financial rewards.

We need to help companies build our future.


Who writes books anymore?

D

espite sometimes being seen as a dated medium, books do a fine job at crystalizing thoughts. For me, they are a tool for thinking and at times a tough teacher, forcing the author to make countless choices. The front and back covers symbolize the beginning and end of a thought, while the plot inside needs to be intelligible, convincing, and identifiable. For readers, amid the seeming infinity of the present digital era, a book with a clear beginning and end comes as something of a promise – everything crammed into a neat and handy package. I’m not an economist, psychologist or philosopher, yet I wanted to write a book specifically about the current shift taking place in the business world. Putting scientific aims aside, the idea is to create new thought models and shared visual discourse tools for people with diverse perspectives. I hope my “office science” helps companies see the future coming at them. I don’t seek to provide an exhaustive

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explanation of the world. I want the core idea of this book to be grasped even by just flipping through the pages. I hope you find this book immediately useful, but I also hope it kindles deeper reflection. My background in graphic design is reflected in the way I formulate my thoughts. Powerful visual narration can create communication methods for a company, with terminology made up of commonly shared forms. Despite the rather complex topic, I’ve aimed to use terms that are simple enough for ideas to be passed on, illustrated on a whiteboard, sketched on a napkin, or articulated in a presentation. My thoughts are by no means conclusive, but I hope they prove useful and you can use them to carve a path of your own. What’s in it for me? The best rewards are the new insights I’ve gained during the writing process, and all the new people to share thoughts with. I’d love to hear what’s on your mind, so get in touch!


OFFICE

Nothing in this book is proven science. Just one man’s delirious babbling.

SCIENCE

Don’t take anything written in this book as a proven fact.

Glossary This is not a scientific publication, but a tool for understanding changes in the world, as well as for creating new strategies and innovation. I’ll be taking some shortcuts, leaving aside deeper philosophical and religious argumentations and aims for scientific exactness. Understanding the material and immaterial worlds is paramount for innovation and strategy work, and crystalizing one’s views on the topic is useful all around. The terminology should mean different things to different people. Team members trying to understand each other’s world views creates enriched collaboration as a byproduct. IMMATERIAL: This book refers to the immaterial world as a reality, which is created by human beings through, for instance, thoughts and emotions. If you prefer things to be a little more complicated, think about intangible aspects, such as, luck, memories, destiny, self-image, admiration, talent, and morale. MATERIAL: Material is described as something that can be touched or sensed, such as objects and actions. MELT: A world created at the melting point of the material and immaterial worlds, where elements have both immaterial and material characteristics. IMMATERIAL PULL: Every material element that comes in contact with a learning organism becomes more immaterial.

My bibliographic references are rather unscientific, verging on nonexistent. Just google the damn thing. M i i k k a L e i n o n e n | melt 11


Our world is changing. We all know this. But the magnitude of change will be bigger than anyone can fathom. Our way of life and doing business is taking an unprecedented evolutionary leap. The intensified collision of knowledge and competence, global competition, and changing human needs have created an opportunity to reassess the relationship between business and work, companies and individuals. We are lucky. Only a few generations have had the privilege to witness a leap of this magnitude. Companies born tomorrow will see a competitive edge very differently from those dying today. But even old companies can learn new tricks. They need to pluck up the courage to find business advantages in new, sometimes scary places.

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K

nowledge has been liberated from the shackles of the physical world, and people and thoughts are brought together on a global scale. This has significantly sparked our capacity for learning and ideation. Our lives are bombarded with more stimuli than ever before. The world seems chaotic, with so much in turmoil at once. The way we see the economy, power, and business life is changing dramatically. The same goes for our views about work, collaboration, and the individual. Instead of explaining it all in detail, this book aims to unravel the underlying thread of this metamorphosis. My aim is to support companies that enter this new world by providing a visual form and language for the shift. I want to offer tools and models for creating new business thinking. The transition from a material to an immaterial world is a giant evolutionary leap that involves learning and unlearning. From a business perspective, learning about the immaterial world is probably easier than unlearning the material world. Even if we

are unwilling to admit it, the foundation for our business thinking is highly material, even mechanical, based on an ideal of efficiency. To put it bluntly, we continue to idealize the steam-powered conveyor belt invented by Ford. As companies climb up the ladder of the immaterial world, its genuine, underlying principles begin to transpire. And traditional rules for doing business no longer apply. Where the material world is limited, the immaterial world is unbounded. Those who only understand the rules of the limited world are unable to succeed in a world of abundance. Companies are transforming from material collectors to accelerators of immaterial riches. They are already beginning to notice that the key task of the immaterial is to create new immaterial elements, not to support the material world. The 20th century was governed by those who powered the material world – energy companies. The emergence of technology companies in the early 2000s proved that the future is for those who make use of technology that merges the liberation of information, power of emotion, and diversity. From now on, the world will be ruled by amplifiers of the immaterial world.

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EXAMPLE

Smartphones Control of fire, agriculture, the wheel, printing machine, steam machine, vaccinations… A smartphone may not exactly compare to these inventions, but it does represent a key innovation that defines our life as we know it.

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he innovation of our time can’t be reduced to a single device or even a combination of many. It’s a fusion of different devices, services, human functions, thoughts, skills, and emotions. Supported by technology, human action and thinking melt into a new organism that’s far greater than the sum of its parts. Smartphones are just a small part of the transformation, but serve as a fine illustration of the material world melting with the immaterial. Emotions and competence gain

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totally new visual forms, and human behavior is saved as data and refined into knowledge and competence. Different devices and services support the melting process like never before. Of course, those making the most out of their smartphones already experience this transformation in their everyday lives. Yet, all this has been possible for only a few years, and we’re still at the initial stages of development. The following pages describe how we can use our phones to fuse our thoughts and actions in new ways, and the perks that result.


Just had an exceptionally good run! And the weather was just perfect!

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Information creates knowledge, competences, and emotions.

Immaterial world

The immaterial world is made up of what we can’t perceive with our senses, such as, emotions, experiences, memories, scenarios, ideas, social networks, beliefs, self-image, admiration, skills.

Material world

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The phone and apps provide information.

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The material world is made up of objects and action. The immaterial and material worlds are interconnected and interdependent.

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You buy a smartphone and use its features and applications.

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The phone affects your behavior.

AUTONOMOUS ENRICHMENT Technology enriches your life without your active input.

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Information creates knowledge, competences, and emotions.

Information multiplies knowledge, competences, and emotions.

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You allow the phone to tap into your competences and emotions.

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Your behavior creates information.

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People share competences, experiences, and emotions.

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PERSONAL ENRICHMENT

The phone affects your behavior.

Technology enables you to create new possibilities.

People share information.

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Other people’s emotions and competences affect your behavior.

SOCIAL ENRICHMENT

People influence each other’s thinking and actions through technology. M i i k k a L e i n o n e n | melt 17


Personal electronic devices create loops, melting the immaterial into the material

IMMATERIAL ELEMENTS

Flow

TOWARDS THE MATERIAL WORLD

ELEMENTS BECOME

Free

Emotions, competences, knowledge

Objects and actions

FROM THE MATERIAL WORLD

Devices support human thinking and action even when people don’t actively produce information. 18 melt | M i i k k a L e i n o n e n

ELEMENTS

Amplify THE IMMATERIAL WORLD

ELEMENTS

Shape THE MATERIAL WORLD

People generate information, which is then enriched back by their device.

People produce information for each other, which influences their thinking and behavior.


TO SUM UP Your electronic devices make your emotions, knowledge, and competences more tangible. Your actions become data, which transforms into immaterial elements. Technology has become ingrained into our daily lives through its ability to merge our worlds. Devices connect us to existing information, other devices, and people – melting together the immaterial and material worlds, and creating a new space in between that has elements from both worlds. Devices have become part of the way we function, serving as our communication channels, guides, memories, referees, coaches, and connections to the competences and emotions of others. It may be impossible to predict exactly what

the future holds for devices and technology, but certain development trends are already evident. Technology is becoming part of us and we are becoming part of technology. This symbiotic relationship with technology will also affect our relationships with other people. We are all active or passive producers of information, and our perception of humanity changes, as cognitive technology liberates and forces us to reassess what exactly makes us unique and significant.

PRODUCING DATA PASSIVE ACTIVE USING DATA ACTIVE

PASSIVE

Development is spurred by everyday electronic devices, which turn more and more of us into engaged data users. The immediate benefits of mobile devices increase the utilization and active production of data. The more frequently and diversely a device is used, the more data it collects and produces. And the more people share generated information socially, the more important the devices become. M i i k k a L e i n o n e n | melt 19


IMMATE REALLY HARD TO SO STOP TRYING! 20 melt | M i i k k a L e i n o n e n


ERIAL IS REALLY O GRASP. ! A WORLD DIVIDED IN TWO This chapter explains how the world can be divided into material and immaterial.

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Imagine the world as a box that contains everything we do, sense, know, and imagine. The box can be divided in two.

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et’s say that the bottom part of the box illustrates our material world with its concrete elements, such as, actions and objects. It is our clearcut, physical world. Because our views of the material world are sufficiently coherent, we hold it to be generally true. With its constrained nature, the material world can easily be divided up, categorized, and measured. For companies, the material world is the more familiar and straightforward part of the box. The top part of the box illustrates our immaterial world – elements that aren’t concrete or palpable, such as, ideas, emotions, knowledge, beliefs, and competence. Theoretically speaking, the immaterial world is infinite, which makes it difficult to fathom or measure. Our views of the constantly evolving 22 melt | M i i k k a L e i n o n e n

immaterial world are seldom the same. Not a single element in the immaterial world remains the same – they constantly change, merge, split, pause, then suddenly restart. They influence one another and the time in which they exist. DIFFERENT WORLDS

The two sides of the box are very different, yet inseparable. Science and religion offer various perspectives to the relationship between the material and immaterial worlds. But in my effort to create simple business development models and tools, I’ve opted for a simplified, western, human-centric view, which sees the material world as real, as the human body is seen as real. The immaterial world is understood to be nonexistent, built on material elements, like thoughts and feelings. The material world is relatively easy to define, but what about the immaterial world?


Immaterial Material

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Strictly defining and classifying the immaterial world would be both impossible and pointless, as it represents different things to each individual and company. The material and immaterial worlds are so far apart that depicting them as equivalent counterparts would not do justice to either. Let me give you a theoretical illustration of the differences: I could (if I had the inclination and financial means) buy all the pants in the world and pile them up into a gigantic heap. With sufficient funds I could even acquire the world’s entire production of pants. But I would never be able to buy all the ideas relating to pants, which are theoretically endless. The material world is limited and ruled by the laws of scarcity, while the immaterial world is boundless and abundant. This is why the top part of a box is open. The immaterial world is as vast as our imaginations allow. HEADING TOWARDS THE IMMATERIAL

In line with Maslow’s hierarchy of needs, as basic human needs, such as, food and safety are met, the role of the immaterial world begins to expand. We want to feel a sense of belonging and love, understand things for ourselves, and find new meaning and purpose to our existence. Improved welfare 24 melt | M i i k k a L e i n o n e n

liberates people to channel their energy into the immaterial world. If this is the case for individuals, it must also apply to companies. But there are further reasons why businesses should focus their attention on the immaterial world. Towards the end of the last millennium, companies were finding it difficult to set themselves apart amid tightening global competition. They were confined inside the box of the material world. So, they began to reach out towards the immaterial world. A number of sectors have slowly begun to move away from material production, reaching ever higher into the immaterial world. Some are moving from producers to service providers, or concentrating on managing the customer interface, branding, product development, and innovation, leaving their subcontractor chain to deal with competition in the material world. At the same time, competence, innovation skills, job satisfaction, and an understanding of the social needs and moods of customers have become important focal areas of business strategies, bringing a major competitive edge. Machinery also drives companies towards the immaterial world. As automation has taken over a vast share of material work, the material has become characterized by standardized quality and lack of individuality. Advanced production methods, tough competition, and an ideal of uniformity resulting from


Emotions Competences Knowledge

Objects Actions

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technology have created an increasingly homogenous material world. Objects have become their own replicas. The immaterial world gives companies the chance to reclaim the individuality of products and services, as they are customized by the customer’s immaterial elements. Products are servitized and become attached to the customer, gaining stronger identity and individuality. IMMATERIAL AS A LEARNING CURVE FOR COMPANIES

Previously, companies needed to find success in the material world with limited elements at their disposal. Those producing the highest volumes most efficiently – in the shortest amount of time and with the least available resources – made it. The cornerstones of business in the material world boil down to three key words: collect, repeat, protect. Companies are accustomed to the rules of the material world. In future, survival will be determined according to how well they understand the different sets of rules of the material and immaterial worlds and navigate smoothly in both. The growth of companies towards the immaterial world has had its problems. Deeply rooted in the material world, they have approached the immaterial world with former teachings still fresh in their minds. The needs of the material world have served as a starting 26 melt | M i i k k a L e i n o n e n

point, with immaterial elements seen purely as material production tools. The most valued immaterial elements have included those that release maximum benefit from the material world or can be fully self-owned. A pursuit of ownership, restriction, and measurement has been targeted at immaterial elements, illustrated by such terms as Intellectual Capital, Innovation Capital, Human Capital, Brand Value and Intellectual Property Rights. This is, of course, understandable, as companies planted in the material world are faced with the discomfort and near impossibility of dealing with the uncontrollable nature of the immaterial world. But the two separate worlds are so far apart that their operating models are not compatible. Totally different rules are at play. Another example: I can’t stop you from thinking what you want. If I ask you to stop thinking about the world’s highest pile of pants, I will probably fail. Your mind is set on what you want despite me trying to deter you, or perhaps because of it. Companies are investing an increasing amount of effort into understanding the principles of the immaterial world. Companies are beginning to see the immaterial world for what it’s worth, rather than simply as an additional resource of the material world. In many cases, immaterial


ABUNDANCE Immaterial can’t be owned, boxed, or protected.

SCARCITY Material can be controlled, repeated, and measured.

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value already outshines material value. A professional considering a new position may be more motivated by the intellectual challenge and experienced colleagues than a higher pay package. BLUE OCEAN

The immaterial world offers unforeseen opportunities. It’s ever-changing, unfettered, and moldable. Emotions, motivation, charisma, desires, competences, talent, curiosity, luck, and beliefs, to name just a few, fluctuate, waver, and are difficult to possess, all washing up against each other, eddying and shaping new elements. Companies must learn to use all of the available immaterial elements according to their features in order to create an endless array

of new immaterial elements. For example: Which emotions spark other emotions? Which emotions encourage people to apply their skills? What moods are fostered by higher skills? What sorts of encounters give rise to new ideas? A focus on the immaterial world doesn’t mean the material world has suddenly become obsolete for companies – products and services continue to be strongly attached to the material world. The greatest potential awaits those who embrace the immaterial world and invent new ways to combine the best elements from both worlds. Profit is created in the material world, value in the immaterial world.

KEYS TO THE IMMATERIAL WORLD

To thrive in the immaterial world, the following immaterial premises must be accepted:

Trust

Amplify

Flow

Trust is the most important element in the immaterial world. Trust that the immaterial world is endless. Trust others. Trust yourself. Intuition is the best and fastest immaterial metric – learn to use it.

Create immaterial value. Use material and immaterial elements to create anew and activate existing immaterial elements. Give before you expect to receive.

Activate immaterial elements and allow them to flow on, make them tangible, share, use your intuition to spot the elements with the most profound effect on both worlds, and amplify them again.

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3RD Business models of the

MILLENNIUM

2ND Business models of the

MILLENNIUM

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MELTING THE WORLD

TH OUTSIDE T THE WH IS M This chapter explains the melt of the material and immaterial worlds, and what it means for business.

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FORGET THINKING THE BOX. HOLE BOX MELTING! M i i k k a L e i n o n e n | melt 31


Technology has caused the material and immaterial worlds to increasingly overlap. I decided to call this new world Melt.

T

he two human worlds have always been interdependent and partially overlapped. It’s not easy to pinpoint the exact moment when a thought turns into action, or emotion influences financial value. Accelerated by networked technology, material and immaterial are now merging in a deeper sense than ever before. This melt won’t result in new IT platforms

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or business models. We are witnessing the birth of an entire new world. THE BIRTH OF MELT

The melting of the two worlds has been evident in our daily lives for quite some time. News, entertainment, and information have begun to lose their one-sided, material form. At the same time, emotions and thinking gain increasingly visible and concrete forms of existence through, for example, the social media.

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This is how Melt has grown.

Information

Services

As a combination of fierce competition and technological advances, the material world is pushing into the immaterial world... 32 melt | M i i k k a L e i n o n e n


Technology has resulted in a number of material elements losing their physical form, while immaterial elements have become more visible. Elements have features from both worlds, which vary according to the viewpoint. New material elements lose their physical form, merging with each other and with immaterial elements in completely new ways. Take social encounters for example. Social relationships are increasingly established on data networks. People meet, work, and share views regardless of their physical location. Some spend so much time in cloud services that their geographical location becomes a secondary aspect in determining their existence. Concrete objects also stretch towards the

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immaterial world. Lighting in homes can generate information that is converted over a data network into intelligence for other equipment and users. Together with other devices, a lamp can create information on used and remaining service life, time of use, efficiency, and how use can be developed. It can anticipate the user’s behavior by learning from other devices. It can also help other devices develop their functionality. A physical object turns into a service, information, competence, and learning, shared with other devices and people. Immaterial elements can be combined in countless new ways, creating a constant influx of competitive advantage the material world alone would never be able to create. The more

4 Emotions

Thinking

...At the same time, immaterial elements are becoming more tangible. M i i k k a L e i n o n e n | melt 33


a service is ingrained into the immaterial world, the more links it has to material elements and the more immaterial value it can generate. As a company’s services become more immaterial, immaterial elements like preferences become inseparable parts of the service. This way, the service is constantly adapting and personalizing. Technology makes it possible to combine material and immaterial elements as never before. Several new structures and business areas are just around the corner, with the melting of the material and immaterial worlds at their very heart. Take 3D printing for example;

printable plans and models can be endlessly combined and shaped in intangible form, and traded in both intangible and tangible forms. HOW TO DEFINE MELT?

Understanding Melt as a world of its own can be difficult. You could perhaps think of it as data networks, or servitization supported by technology. The world of the Internet provides some easy examples. Google liberated information from the confines of space and indexed it. Social media services, like Facebook, VK, Twitter, and Renren, allow people to share their emotions and skills in a very visible way. Also, information generated and exchanged

CHARACTERISTICS OF MELT Ambivalence:

Melt has three specific features:

In Melt, elements lose their distinctive material or immaterial characteristics, but have features of both. Data generated from an industrial process can be seen as the output of a material process or as immaterial competence.

Ever-changing: Different elements can continuously interconnect in different ways.

Melt Time: Melt has a different concept of time than the material and immaterial worlds. Melt’s concept of time is new and somewhat unknown, creating unforeseen potential for companies. (cf. page 86) According to David Gelernter, Professor of Computer Science at Yale University, the Internet is shifting from a space-based to a time-based structure. Each Internet event is part of a shared, constantly flowing dynamic stream. These streams can be combined to restructure the past. They can also be used to construct future scenarios. 34 melt | M i i k k a L e i n o n e n


Immaterial

Material

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by machines, which is then generated into new competence, is part of the brief history of Melt. From a technological point of view, Melt has many names – digitalization, Internet of things, home automation, and industrial Internet. Melt can also be seen as a transformation of culture and business: sharing economy, social media, servitization, etc. One way to grasp Melt is by comparing it to music, which requires a merge of the immaterial and material worlds. Talent, disciplined practice, and a fine-tuned instrument create more than the sum of their parts. Music is neither material or immaterial, yet in essence it’s both. As the words of cartoon bird Mordecai from Cartoon Network’s Regular Show go: ”You can’t touch music, but music can touch you.”

Melt is expanding rapidly. How will this affect people, businesses, and the economy?

T

he growth of Melt has a dramatic effect on the confined world. As more and more elements are linked to the Melt, the material world begins to shrink. Companies that build their competitive edge on the material world 36 melt | M i i k k a L e i n o n e n

operate in a disappearing environment. For example, automation and lifecycle thinking have turned property development from the production of material elements to a service business. Property owners need to be able to combine data with competence in order to forecast and develop functional buildings and optimize future measures. Companies that are unable to merge data from diverse material sources with top lifecycle competence will be out of the picture. AMPLIFYING THE IMMATERIAL

Melt reduces the clear-cut material world, while it has an opposite effect on the immaterial world, which is endless and thus enriched and strengthened. Melt creates immaterial elements to be shared, which spurs encounters and cross-pollination. This is demonstrated as an overriding emotionalization in our everyday lives. We have never been as keen to share emotions, often linking these also to material elements. And so understanding the emotions of customers and employees has become a key element for many businesses. More frequent encounters between competence and talent also influence our lives. New services are launched at a faster pace, different business areas become intertwined, and disruptive business models have permeated each sector exponentially.


Melt on the rise

The growth of Melt has an almost opposite effect on the two different worlds. The limited material world shrinks, while the immaterial world is enriched.

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Rise of the machines. Machines create their own immaterial worlds and force people to redefine themselves.

T

echnology helps us combine different worlds. But there’s more. Machines have created their own immaterial world for quite some time. The first industrial revolution saw machines working alongside people, surpassing mechanical labor. Today, in the context of the second industrial revolution, machines have taken over information. MACHINES ARE SUPERIOR

Machines produce and process a great deal of information that we humans are unable to handle. For example, gathering and analyzing meteorological data as it’s done today would be impossible without supercomputers. Machines learn, refine data, and generate conclusions in ways that are beyond human skills. Data transmission among machines impacts aviation safety to such a degree that human involvement in planning flight routes or managing disruptions is sometimes considered a risk. Machines generate an increasing amount 38 melt | M i i k k a L e i n o n e n

of information for themselves, turning into cognitive organisms that can learn and share what they’ve learned. Gradually, each object becomes intelligent and develops its own identity. In other words, machines create their own immaterial world. The capability of machines to learn from each other accelerates the expansion of Melt. The material world is shrinking, as a growing number of objects gain immaterial features. At the same time, machines create their own immaterial world that they understand better than humans do. WHAT MAKES ME ’ME’?

Our entire human self-image and value is transforming. As machines have begun to take over cognitive tasks, the role of humans is rapidly being redefined. Information and learning are no longer our most valuable qualities, as computers are much more capable of doing the job. So we have to search further to find our unique qualities. Machines prompt us to ask: What makes us humans truly unique? Is human value immaterial or material? These two questions can be approached in two ways; either we allow machines to determine our roles according to what’s left over, or we take hold of the opportunity and start exploring the immaterial world.


Machine-made world

Machines create their own immaterial world, which humans can’t comprehend.

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Melt accelerates the shift towards the immaterial world. I call this the immaterial pull.

C

ombining different worlds comes quite naturally to us human beings. Here’s an example: I pick a stone from the ground and weigh it in my hand. I learn a great deal about the stone just by feeling and looking. I add my existing knowledge to the equation. I think up new ways for using the stone. Suddenly, the stone is no longer just a material object, but attached with a whole range of immaterial qualities. A simple physical object begins its journey towards the immaterial world. IMMATERIAL PULL EXPLAINED

Every material element that comes in contact with a learning organism grows more immaterial. I call this the immaterial pull. We have a growing array of immaterial elements at our disposal, which we can conveniently merge with material elements. This way elements stretch increasingly towards the immaterial world. Technology speeds up the immaterial pull also in other ways. Material elements may be totally replaced with immaterial elements that 40 melt | M i i k k a L e i n o n e n

have similar qualities, but are scalable and bring more immaterial value. Probably the best-known example of the revolutionary impact of the immaterial pull is the transformation of music from saleable physical products to digital form. According to some listeners, music became immaterial, that is, inconsumable and limitless, and they were no longer prepared to pay the same price as they did for a physical product. The music industry was unprepared for the changes affecting products. Having built their empires on material models, record companies were unable to react fast enough. This resulted in a share of music becoming unattainable and almost immaterial for a while. WORKING WITH THE IMMATERIAL PULL

The immaterial world offers new possibilities for competitive advantage for each business sector. To utilize these new possibilities, companies need to rise along with the immaterial pull without losing their grip on the material world. The balancing act with the accelerating immaterial pull is now one of the key strategic decisions businesses face. (More on page 68.) As the roles of the immaterial world and Melt rise, companies need to continuously reassess their chosen strategies. The immaterial pull is characterized by sudden changes, which may provide companies with surprising opportunities for creating added value.


Immaterial pull

Definition: Every material element that comes in contact with a learning organism becomes more immaterial.

There are number of reasons why elements are drawn towards the immaterial world. Abundance, scalability, not being bound to a specific location, and loss of clear ownership create immaterial value for elements, strengthening the immaterial pull.

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Material Value

Definition: The value of an element for other material elements.

An element that becomes more material has increasing value for other material elements.

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Immaterial Value

Definition: The value of an element for other immaterial elements.

An element that becomes more immaterial has increasing value for other immaterial elements.

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Melt emphasizes the significance of immaterial value and disrupts the creation of economic value.

I

n business, every element has three significant, clearly distinct values: material, immaterial, and economic. As an element approaches the immaterial world, its immaterial value grows and material value diminishes. Both values are important for business, but can be difficult to measure. They are often replaced by economic value, which is an accurate enough measuring stick for the combination of material and immaterial value. PROBLEMATIC METRICS

As the material world shrinks and the immaterial burgeons, using financial indicators, mainly money, becomes problematic. Money was born as the currency of exchange and indicator of the material world. It cannot function in the immaterial world. Money can’t measure overall immaterial or material value; it only measures what’s evident in the material domain, such as, a product or service with an impact on the material world. Love, for example, is a highly valued immaterial element with a vast impact on 44 melt | M i i k k a L e i n o n e n

immaterial elements. If love has a material object, it also has material value. But only when love leads to action, that is, becomes transferred to the material world, does it also gain economic value. Inside Melt, determining financial value is difficult. Elements have financial value only if they are perceived as material. As elements can be both material and immaterial in Melt, determining economic value becomes blurred. Whether an element is seen as material or immaterial in Melt depends on each person’s viewpoint. This gives companies a chance to formulate new revenue generation models that reap from the ever-changing meeting point between the immaterial and material worlds. Designing an immaterial service to be more concrete, for example, may give it a more material appearance, which results in more people willing to pay for it. Designing a web service as an app, for instance, may make it more monetizable. IMMATERIAL ADVANTAGE

As immaterial pull draws everything towards the immaterial world, immaterial value outshines material value as a competitive factor. Companies will be competing over who produces the most immaterial value without losing their connection to financial value. This trend draws increasingly from the ambivalence of Melt. We are continuously bombarded with innovation and disruptive strategies that redefine profit-generating value combinations.


Economic Value

Definition: The maximum amount of money someone is willing and able to pay for goods or services.

In Melt, economic value diminishes the closer you get to the immaterial world.

Economic value is a fusion of immaterial and material values. But it can only be created in a world viewed as material.

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RECAP

3 reasons why companies are migrating towards the immaterial world Companies have always made use of the immaterial world. But now business is shifting towards the immaterial world more coherently and at a faster pace than ever before.

Tools Technology

Push Competition As technology shrinks the material world, it offers fewer ways for companies to outshine their rivals amid global competition. Although the value and success of companies is measured using material metrics, their competitive edge derives from the immaterial world. 46 melt | M i i k k a L e i n o n e n

Networked, cognitive computing enables the creation of new services, products, communication channels, and revenue generation. Companies no longer necessarily need to manufacture material products. Companies are able to mix different factors in new ways, including data, personal experiences, competence, and social networks. Technology also makes material elements more immaterial and former immaterial elements more concrete.


Pull Immaterial value After basic needs have been met, people find motivational factors in the immaterial world. Companies are investing in innovation, talent, corporate culture, image, engagement, admiration, recommendation, and crowdsourcing. Immaterial value has overtaken material value as a competetive factor.

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May contain traces of airy anti-corporate hippie sh*t.

WHO NEEDS COMPANIES?

T

The idea of a company was born during a time when material needs ruled the world. Companies are ‘organisms’ designed by people to advance the material world. In fact, companies are so good at this task that it’s hampering their ability to understand and adopt the immaterial world. The needs and motives of companies themselves are material. Companies have a strongly rooted fear of death that drives them forward and fuels mutual competition in the material world. With the staggering advancement of the material world, the last couple of centuries can be referred to as a golden era for companies. But as the world is becoming immaterial, the material character of companies is becoming a burden. Companies have always been able to produce immaterial value, although in most cases simply as a byproduct of material gain. While some companies have understood 48 melt | M i i k k a L e i n o n e n

BOUND TO THE MATERIAL WORLD In order for companies to make a profit, they need to exist in the material world. COMPANY

CUSTOMER

A

B

2 1

A company uses immaterial elements (A) to create material products (1), which are designed to respond to immaterial needs of customers (B). Another way for a company to address these needs is through lighter, less material elements, such as, services (2). At the same time, it needs to keep holding on to the material world in order to generate revenue.


and made use of immaterial value, a vast proportion remain glued to the models of the material world. We need to radically alter our perception of the types of companies we need, their tasks, and how their operations should be steered. Also, the disparity between the motives of society and enterprises is becoming a burden for companies. The single-minded desire of companies to produce material value is creating a wider wedge between companies and society. According to Harvard University Professor Michael E. Porter, companies are increasingly perceived as creating profit at the expense of the community. And companies need to focus on creating shared value. MONEY, MONEY, MONEY

Money is the main metric for companies. Like companies, money has developed under the dominion of the material world and is suited for measuring material value due to its (theoretically) limited character. Although money can be used to measure the influence of immaterial value on the material world, it is unsuitable for measuring purely immaterial elements. Like everything else, money itself is becoming immaterial. Monetary value hasn’t been directly linked to the material world for quite some time. Through a range of complex systems, money is tied to its own value and

immaterial elements, such as, trust. A great deal of confusion, inequality, and unmanageability is caused to individuals, companies, and states by the immaterialization of the world; the needs of companies and individuals to be located in different worlds; and the main value indicators, money and trust, distancing themselves from the material world. Companies need to make sure that, in future, using money as a measure of value doesn’t impeed success. The following three challenging points are intended to help companies use money as an appropriate measuring stick: A) Make sure using money as a measure of value doesn’t prevent products or services from moving towards the immaterial world. B) Make sure using money as a measure of value doesn’t hinder the creation of immaterial value. C) Only measure the value of immaterial elements according to other immaterial elements.

As the significance of the immaterial world continues to grow, companies need to be redefined. We also need a metric that’s more suited for both worlds than money. The new metric should be both material and immaterial, limited and limitless. In an immaterialized form maybe money could work. Another option could be time. Perhaps more on that in the next book… M i i k k a L e i n o n e n | melt 49


F ST F PHIL

MELT STRATEGY This chapter explains how companies can make use of the different worlds in their strategies.

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DON’T FIX YOUR TRATEGY FIX YOUR LOSOPHY. M i i k k a L e i n o n e n | melt 51


IF YOU CAN SAY YES TO THE FOLLOWING QUESTIONS, YOUR BUSINESS WILL FLOURISH.

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Do you appreciate the immaterial world? Understanding the immaterial world and its role is a lifeline for companies. But, as immaterial elements have characteristics that are highly incompatible with familiar business models, this is also a challenge. Are you embracing the endless possibilities of the immaterial world, or are you stuck in the old material paradigm?

Do you accept that the immaterial world... A …is immeasurable? Defining a company’s brand value, for example, merely involves forecasting the effect of everchanging immaterial elements on the material world.

B …can’t be measured in monetary terms? Not a single emotion or idea has monetary value without links to the material world.

C

D

…can perhaps be attached to corporate processes or culture, but can’t be completely controlled or owned?

…is ever-changing? And that’s exactly why it has the most value for companies. It is the source of anything new.

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Are you an amplifier? Technological evolution kick-started a new era of unprecedented immaterial amplification. Companies need to learn to operate in the immaterial world, which is daunting, erratic, and unpredictable. It stirs respect and fear in company directors unfamiliar with its forces. Do you have what it takes to amplify the immaterial world?

Do you have what it takes to be an amplifier? A Are you aware of the immaterial elements people around you need?

B Do you accept that an immaterial element has the highest value for another immaterial element?

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C Do you have what it takes to open up your company to immaterial amplification and throw yourself into the uncontrollable whirlwind?

D A collision of random elements brings serendipity. Is your company ready to pick the surprising fruit of immaterial amplification?


Are you open to new ecosystem roles? In Melt, also the melting processes melt together, empowering one another. Also, the relationships and roles of companies are under constant change. Are you ready to accept the value of simultaneous melting for your own process? And are you able to quickly adapt to new ecosystem roles?

Are you an enabler of melting? A Can you take your service so close to the immaterial world that your customers feel ownership has been transferred to them?

B Can your services be integrated into some other ecosystem? Or could your services function as a host ecosystem for other services or products?

C Can you accept that the melting processes of other companies may be more valuable to you than your own?

D Ecosystems undergo constant change. Are you ready for potential new roles?

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Corporate strategies merge four different roles.

T

he deeper melting of the different worlds opens up new strategic opportunities for companies. The first thing to do is to identify your company’s current roles in the different worlds. The next stop is to chart and configure new roles to best support your goals. The four distinct roles are: MAKER

Companies create revenue according to the rules of the material world, so they need to be present in the world of scarcity. This can be in the form of a concrete product or service with clear enough links to the material world. Typically, the ’maker’ role is repetitive, simple, clear, and measurable. SHAPER

Companies aim to shape the material world and its business models and competitive fields. Companies with a strong ’shaper’ role have a unique take on the opportunities offered by the material world. This type of company aims to develop the material world into something others don’t yet perceive. 56 melt | M i i k k a L e i n o n e n

ENABLER

A company can enable the melting of different elements by, for example, facilitating encounters between the ideas of experts and data streams derived from the material world. Links with different ecosystems are a major success factor for the ’enabler’ role. Adaptable ecosystem roles allow combining diverse melting processes in order to strengthen the impact on the immaterial and material worlds. AMPLIFIER

A company generates new immaterial elements and accelerates existing ones. The ’amplifier’ role makes elements like talent, needs, and emotions flow to become tangible and shareable, and reuses them to amplify other elements. This type of company is able to create a strong connection with the immaterial world. DIFFERENT COMBINATIONS

The roles are not cut out to create profitable business alone. A strategy must always be a combination of the different roles. One company benefits from a productcentred strategy with added value deriving from the immaterial world, while another company emphasizes the immaterial world. For a company built on a strong brand, accelerating immaterial elements is vital, while physical products serve merely as material expressions.


AMPLIFIER: To truly reach immaterial potential, a company must become an immaterial amplifier sharing and enriching immaterial elements with others.

AMPLIFIER

ENABLER: Nourishing the continuous melting of immaterial and material elements.

ENABLER

SHAPER MAKER

SHAPER: Changing the rules of the material game.

MAKER: Repetitive action or replicable product. Simple, straightforward, measurable.

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A company that enables melting will shape and amplify the world around it with ease.

T

he rise of the immaterial world and the possibilities of technology to merge elements are transporting the focus of corporate strategies towards the immaterial world. At the same time, the diverse roles of a company are bound together more

strongly. This is why understanding ’melt’ is important. MANY ROLES ARE CHALLENGED

As the material world shrinks, the ’maker’ role becomes extremely challenging. The advancement of networked technology has given rise to a growing stream of services that address material needs with lighter, less tangible options, thus reshaping the material world at an accelerated speed. Also, the ’shaper’ role is shifting. Shaping the material world requires combining elements with increased speed and versatility,

SHAPER MAKER

The material world is capital-intensive and slow to react. A ‘maker’ aims to replicate things as closely as possible.

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The ‘shaper’ role is closely tied with Melt and the ‘enabler’ role.


which is why the ’shaper’ role becomes integrated into Melt more deeply. So, to be a ’shaper’, you must be an enabler of melting. Making use of Melt is vital also for an ’amplifier’. Accelerating the immaterial world can succeed when a company is able to make immaterial elements flow towards tangibility and shareability, facilitating their melting with other elements and re-amplification. ECOSYSTEMS ARE KEY

In addition to elements melting with each other, different melting processeses merge together in the Melt. Understanding and

utilizing the parallel existence and the merging of ecosystems requires continuous reassessment and construction of flexible, adaptable ‘enabler’ roles. Companies are moving away from a process and product-centric approach to building customer, social object, and community centric ecosystems. Companies are turning products into services. Services are integrated into the immaterial world and additional services. Companies and the services and products they offer become part of the customer’s own ecosystem.

AMPLIFIER

ENABLER

The ‘enabler’ role allows a company to combine elements and influence both the material and immaterial worlds.

Amplification is created when immaterial elements are made to flow to become tangible and melted with other elements.

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EXAM-

Two distinct innovation methods – one aiming for predetermined results, the other for serendipity. Materially aligned innovation Immaterial elements that companies end up choosing are usually determined by material goals. A company may specialize in a certain field and have accumulated relevant competence, which is divided into several silos to manage activities. This model has developed to address the need for in-depth

understanding and management of the material world. A company aiming for innovation in the depths of the material world will seek to outline immaterial elements according to the premises of the material world in order to create anticipated results.

Immaterially aligned innovation As the immaterial world becomes shared through Melt, companies gain access to a wider wealth of knowledge, competence, and talent than ever before. At the same time, their products become more immaterial, servicebased, and interlinked, which means more adaptable and cost-efficient. This allows the company to move on a wider horizontal range in the material sphere.

The wider the area from which a company draws immaterial elements and the more widely the material world is accessed, the more likely a company is to invent something genuinely new. We can even go as far as saying that serendipity is only possible as an outcome of innovation, which has been outlined according to the premises of the immaterial world.

Although these two innovation methods can be linked to the same company, usually structures adopted for the needs of deep material innovation prevent companies from moving horizontally. 60 melt | M i i k k a L e i n o n e n


2

Competence, talent… 3

Product under development

1

A company focused on the material world aims to define the end result as accurately as possible.

2

The company seeks immaterial elements it thinks will lead to the desired result.

3

Development work of the material world is usually expensive. The company aims to use resources efficiently to achieve the desired outcome. Operating models of this type are typical, for example, in the pharmaceutical industry.

1

Since more intangible services can be developed faster and more cost-efficiently, it’s financially possible for companies to have vaguer goals.

2

Companies can make use of immaterial elements in a broader way. They can activate and allow different elements to converge.

3

Diagonal serendipity lines are created when companies don’t strive to outline elements according to the material world, but instead approve elements that are far enough apart on a horizontal plane.

4

If the immaterial world determines the paradigms of a company’s innovation process, the impact on the material world is difficult to anticipate. This is a typical operating model for young mobile companies.

1

Area of serendipity

Area of serendipity 3

2 1

1

4

1

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WHAT IS YOUR GROWTH DIRECTION?

Escaping the material

Growing upward from products to services.

Becoming an amplifier

The worlds impact each other, which can be illustrated by two loops.

T

he material and immaterial worlds interact constantly, forming two reciprocal loops. These loops are very different. The loop in the world of scarcity continuously reduces and modifies existing elements, while the loop in the world of abundance enriches and creates something new.

MATERIAL LOOP Melt reconstructs the material world. Material elements can become intangible, which has an effect on the limited material world. This loop is breaking many norms in different companies and creating surprising business advantages. Examples include product servitization and the rise of the sharing economy. MELT DRAWS UP ELEMENTS

Learning how to reach for emotions and creativity.

Finding material value

Learning to generate more solid material revenue streams. 62 melt | M i i k k a L e i n o n e n

According to the definition of immaterial pull, every material element that comes in contact with a learning organism grows more immaterial. Elements become increasingly immaterial, which affects every single aspect in the world of scarcity. As Melt grows, the immaterial world becomes available to more and more companies, and in turn companies come up with new ways of making elements intangible. MELT SHAPES THE MATERIAL WORLD

In many industries, even a minor increase in immaterial value may have huge repercussions on the sphere of material competition. For example, transforming a product into a service and engaging users in production may significantly cut down production costs. Due to the limited nature of the material world, anything new will shape or even eliminate existing elements.


Freeing material elements and shaping the material world.

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COMMON SPACE Technology merges people’s immaterial worlds.

IMMATERIAL LOOP “Create more value than you capture”, exhorts tech and media visionary Tim O’Reilly. To make use of the immaterial world, companies need to stop harvesting and start amplifying it instead. LEARN TO AMPLIFY AND FLOW

An individual’s worlds.

Technology makes immaterial elements tangible to others.

As more and more immaterial elements are shared, ownership disappears.

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To create an immaterial loop, companies need to come up with immaterial elements that amplify each other and find out how to remove obstacles between the elements. A company can strive to make immaterial elements more tangible, so they melt with other elements. This process, in turn, amplifies the immaterial world. Amplifying the immaterial world requires companies to understand the sphere of immaterial needs and opportunities as well as to let go of tight control and see immaterial elements merely as stepping-stones for material gain. Social media services, like Facebook, Twitter, VK and Pinterest, serve as good examples of immaterial amplification. The joint amplification by vast masses of users has resulted in immense immaterial value. Due to huge user volumes, only a small slice of the services need to be linked to the material world in order to gain profits. GIVE AND YOU SHALL RECEIVE

Immaterial amplification doesn’t happen without trust and reciprocity. People can’t be expected to give without receiving something in return. Immaterial amplification is the result of three immaterial principles: trust, amplify, flow. A ratio of 3:1 can be applied to immaterial amplification. Launching one immaterial element in motion requires stimulation from three other elements. Activating the expertise of a professional, for example, requires combining it with other competence, emotions, and potential. For a company, this could mean providing a noble vision, challenging task, and an enriching work community.


Companies need to spur encounters between different immaterial elements. One immaterial element is activated, as it becomes the focus of three others. A totally nonscientific “fact�

Amplifying the immaterial world over an immaterial loop.

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Before loops can be utilized as tools for innovation and strategy, they need to be divided up. Loops that connect the worlds are made up of different segments with different roles. These help us to better understand and model the effects of different actions.

Free

Shape

MAKES MATERIAL ELEMENTS INTANGIBLE.

SHAPES THE MATERIAL WORLD.

This part of the material loop makes physical elements more intangible. For example, information can be extracted from an object. Elements become scalable and can be conveniently combined with other elements, creating new innovation potential.

Melting has always had an effect on the material world. The digitalization of a company’s products soon influences the requirements and success factors of the entire sector. Melt enables the creation of services that can completely eradicate material products.

EXAMPLE: Digitalization has changed many service businesses.

EXAMPLE: Industrial internet melts various data sources and shapes processes.

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Flow

Amplify

MAKES IMMATERIAL ELEMENTS MORE TANGIBLE.

AMPLIFIES THE IMMATERIAL WORLD.

Immaterial elements flow towards the material world. Immaterial elements always pick the path of least resistance. Flow means turning elements into something that can be accessed and shared by others. Emotions can turn into action.

An immaterial loop amplifies immaterial elements, thrusting them into motion. Some immaterial elements are important amplifiers of the immaterial world. Boldness creates boldness, love creates love.

EXAMPLE: Opinions become recommendations, influencing the opinions and actions of others.

EXAMPLE: A service or a brand may ignite strong emotions in users.

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Dealing with the immaterial pull. How to prevent your business from growing too distant from the material world.

RECAP FROM PAGE 40:

IMMATERIAL PULL Every material element that comes in contact with a learning organism becomes more immaterial.

T

he immaterial pull constantly drives each product and service towards the immaterial world. While competing for the creation of immaterial value, a company’s services may become distanced from the material world and financial value. In other words, a service produces immaterial value, while the company’s profit-making capabilities diminish. Companies can impact this trend in three ways, making use of the main features of each of the three worlds. 1. SHAPE IT.

A company’s offering needs to be in a unique physical form, such as, a product or something perceived as physical or having an impact on the physical world. Companies can reconnect with the material world by renewing the form or reassessing material impacts. 2. AMPLIFY IT. RECAP FROM PAGE 44:

ECONOMIC VALUE Economic value is a combination of immaterial and material value in a world perceived as material.

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A company is able to renew and brand its services by constantly linking them with new immaterial elements. This boosts the immaterial value of services and makes it harder to compare value creation with products in the material world. 3. REDEFINE YOUR ECOSYSTEM ROLES: HOST & EPIPHYTE.

Companies are able to influence the material value of services by altering their relationship with other services. A service can be made part of other services. In this way, the services undergo constant change as other elements transform. A service can also serve as a host for other external services, which it accepts as components of its own. The company can then function in a more immaterial role and as an agent for external material elements. (Example: Amazon Kindle on page 84.)


AMPLIFY IT.

Include new immaterial elements in your service to ensure constant renewal and creation of added immaterial value. Example: link skills and emotions of customers to a product or service to create more customer value.

HOST & EPIPHYTE.

Example: expand a product or service to work as a platform for others, or make your product a key element of other services.

Transforming the relationship towards other melting processes.

SHAPE IT.

Connect to the material world in renewable ways through a physical product. Example: package a service in a way that users think of it as a physical object.

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Melt is an ecosystem that offers companies two strategic choices.

C

ECONOMIC VALUE Economic value is a combination of immaterial and material value.

ompanies need to find the best way to melt elements. As Melt is a combination of two worlds, it can make use of two sets of principles. In addition, Melt has its own features that create new potential.

Who owns the melting process? The first choice is whether the melting process should be more material or immaterial. Materiality means steering the melting process with the rules of scarcity – through control and ownership. Or should the melting process be as immaterial as possible – liberal and determined by others? These decisions have a huge impact. OPEN

As Melt is a mix of the immaterial and material worlds, its elements may still have economic value. This value diminishes the higher up one climbs in the immaterial world.

The more immaterial or open the melting process, the easier it is for others to mold and own. This type of service takes amplification and flow to the max. For example, users may create all of the content, resulting in a service that resembles the users and regenerates itself rapidly. CONTROLLED

The more closed and controlled a service is, the more it is affected by the principles of the world of scarcity. This type of service resembles a concrete product, which is easier to own and monetize. FIGHT OVER OPENNESS

As elements can change forms in Melt, their ability to generate economic value is also prone to change.

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As openness is a surer bet for amplification, many sectors see it as a key business advantage. Companies compete over who takes the melting process closer to the immaterial world while still making a profit.


Losing control in a controlled way

The larger the share of ownership handed over to others (for example, to customers), the more open and immaterial, scalable and adaptable it becomes.

Open

WHO OWNS IT? Controlled The tighter the ownership, the more material, controllable, measurable, and monetizable it becomes. A service can be divided into two parts. An example would be freemium strategies, which involve integrating the segment that’s of most value to service users as closely to the immaterial world as possible, making it free of charge. Financial revenue is sought from the more material elements of the service.

Example

1

Too much control may have a destructive effect on immaterial amplification. Yet without control a company could lose ownership and potential for financial profit.

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How do different melting processes relate to each other? Melt involves millions and millions of simultaneous melting processes. These, too, melt into each other. How can a company make use of different melting processes? EPIPHYTE

A company can disperse its own melting processes into the processes of others. In this way a service undergoes constant change as part of a whole, while its other parts transform. A service could, for example, function as a premium element of a freemium strategy of some other service. Two different melting roles:

HOST Definition: In biology, a host is an organism that harbors a parasite, or a mutual or commensal symbiont, typically providing nourishment and shelter. (Wikipedia)

HOST

A company’s service can host some other external service, taking it on as its own component. This type of platform thinking is illustrated by LinkedIn, which allows people to exchange their expertise and employers to find the right talent. EPIPHYTE AND HOST

A company can go for both options at the same time. It could serve as a host by receiving customer data into its own system. The company could then make use of the refined data in the customer’s systems, becoming an epiphyte. STAND-ALONE

EPIPHYTE Definition: An epiphyte is a plant that grows upon another plant (such as a tree) nonparasitically. (Wikipedia)

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A third option is to keep one’s distance from other melting processes, which offers a sense of control. But the weakness of a stand-alone strategy is its slowness. Host and Epiphyte roles involve the speedy emergence of new, surprising ideas and properties from diverse melting processes as more and more companies with diverse goals engage in development efforts. As a result, the stand-alone strategy is becoming obsolete.


A company needs to be able to construct a melting process that is functional in both the world it controls and in worlds created by others.

HOW IS IT LINKED?

Host You are more in control of form and structure.

Stand-alone Full control and ownership. Many product-like qualities.

Example

2

Becoming a host and an epiphyte

Epiphyte You can move and find suitable partnerships more easily.

Apple and Google have chosen to tread very different paths. Apple’s lock-in strategy aims to retain the customer in a closed world of a single producer, while Google’s operating models involve varying Host and Epiphyte roles that create an extremely free and fast-paced ecosystem.


EXAM-

Wikipedia Open Host

Open Stand-alone

Controlled Host

Controlled Stand-alone

Open Epiphyte Controlled Epiphyte

Wikipedia is a colossal online encyclopedia offering content created by individuals. With its strong role based on openness and lack of financial goals, Wikipedia has no need to strive for an epiphyte or host role.

Twitter This online networking service offers an open platform for individuals and organizations to exchange thoughts. Third-party services can use Twitter fairly liberally, and the login feature can be used to access a number of other services. Due to its open character, Twitter has faced challenges in monetizing its success in the material world.

Open Host

Open Stand-alone

Controlled Host

Controlled Stand-alone

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Open Host

Open Stand-alone

Controlled Host

Controlled Stand-alone

Open Epiphyte Controlled Epiphyte

Open Epiphyte Controlled Epiphyte

Red Bull Red Bull energy drink has shifted its marketing efforts from conventional sponsorship to its own sports events and media production. The brand has ditched platforms provided by others in favor of its own, moving from an epiphyte to a host role.


6 Melt roles Melting processes have six distinct ecosystem roles, whether in the context of an online service or a company’s internal competence development. Companies are able to choose a number of different roles that can sometimes be conflicting.

Corporate culture has a vital impact on the types of roles a company can adopt. Traditional companies often find it harder to embrace an open epiphyte role, preferring to approach Melt from the angle of a Controlled Stand-Alone role.

Open Host

Open Stand-alone

Open Epiphyte

e.g. Facebook provides the platform and users produce the content.

e.g. Wikipedia

e.g. Twitter account works as a sign-in key to other sites.

Controlled Host e.g. Apple App Store.

Open

Available to anyone. Often perceived as shared.

Controlled Stand-alone

Controlled Epiphyte

e.g. banking service or legislation.

e.g. API offering data for third-party systems.

Host

Stand-alone

Epiphyte

Host for others.

Independent.

Operates inside another.

Controlled

Controlled and administered by a single instance.

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EXAMPLE

1

Open Epiphyte on Open Host The game is available free of charge within other ecosystems, such as, mobile app stores.

EXAMPLE:

The game serves as an Epiphyte on other platforms, providing excellent reach.

2

Open Host In-game features that the player aims to control. EXAMPLE:

The game serves as a Host for diverse features that are freely available to the player, increasing game time.

3

Mostly Open epiphyte. Nearly all features, options, and extras are free of charge. EXAMPLE:

Only some of the features carry a fee. Pricing needs to be in line with the game’s inbuilt logic.

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How does freemium work? The idea of the freemium strategy is to offer the core service for free and create revenue potential through extra features. The strategy mainly works for services with negligible production costs and maximum scalability. The freemium strategy takes advantage of the different areas of Melt, and has a multilayered structure with the premium price uncovered only after several free layers.

EXAMPLE: IN-APP-PURCHASHES IN MOBILE GAMES Many mobile games aim to create revenue through in-app purchasing. Downloading the game is easy and free, with most players never actually paying for the game, while a fairly small share will go on to make in-app purchases for additional features. The strategy attains a large user base that includes enough paying customers. Epiphyte and Host roles alternate in the freemium model, achieving maximal scalability, user ownership, and smoothly linking additional chargeable features. This is where they make profit.


Paper beats rock The soaring role of the immaterial world influences the types of ecosystems that are able to succeed. Open services gain more out of the immaterial world, as they typically create more immaterial value than controlled services. Being a host or an epiphyte usually

Open Host

Controlled Host

Open beats controlled

The more open an ecosystem is, the more immaterial value it has.

offers increased development potential and adaptability compared to a stand-alone strategy. Of course, an ability to create immaterial value, development potential, and adaptability doesn’t ensure financial success.

Open Stand-alone

Controlled Stand-alone

Open Epiphyte

Controlled Epiphyte

Host and epiphyte beat standalone

Adaptability, development potential and service M i i k k a L e i n o n e n | melt 77


SOME COMPAN ARE DOIN IT RIGHT CASES

Strategies that work draw from both the material and immaterial worlds as well as from their melting point. This chapter illustrates different combinations of the worlds. 78 melt | M i i k k a L e i n o n e n


Scoopshot

Rijksmuseum

Clash of Clans

Kalmar Port Automation

Amazon Kindle

NIES ING T. M i i k k a L e i n o n e n | melt 79


THE BIG QUESTION HOW TO USE IMMATERIAL AMPLIFICATION TO YOUR BENEFIT? The Internet and social media in particular have spurred engagement like never before. Almost anyone can now make use of the diverse immaterial worlds of different people. Successful crowdsourcing requires an understanding of people’s needs as well as readiness to accept and make use of diverse, unexpected, even unwanted outcomes. Why did the Rijksmuseum in Amsterdam decide to allow people to download, copy and modify its online collections, and what good has come of it?

CASE

Rijksstudio How Holland’s Rijksmuseum caught the attention of millions through its sharing philosophy.

R

Albrecht Dürer, Rhinoceros 80 melt | M i i k k a L e i n o n e n

ijksmuseum, the Dutch national museum dedicated to arts and history in Amsterdam, launched its online service Rijksstudio in 2013 to mark the completion of a decade-long renovation. The service allows free browsing of the museum’s online collections and curating of virtual collections. Over 100,000 individual collections were created during the first year alone. The underlying thinking at the Rijksmuseum is that art belongs to the public. Through Rijksstudio, people can order products based on a specific work of art, or download high resolution images of their favourite piece that can then be modified. This is further encouraged through awards and competitions.


THE ”AURA” OF ART GROWS

3

2

People merge their own competences and emotions to works of art by recreating personal collections and new works of art.

Possibilities for self-expression and collections curated by others inspire experimentation.

RIJKSSTUDIO

1 Most of the museum’s collections have been photographed and made available via Rijksstudio.

4 Rijksstudio strengthens peoples relationships with works of art, which in turn motivates people to go and see the originals.

Rijksstudio provides unique, almost limitless opportunities to explore, modify and play with works of art.

A work of art is a combination of material and immaterial elements – physical characteristics and the views of the creator and examiner. The immaterial value of art (usually) far exceeds its material value. Digital distribution of works of art results in a

continuous stream of new versions and development, which in turn enhances immaterial value. Digital copies do not reduce the value of the original piece of art with its unique physical form. In fact, the opposite is true: the aura of the original is strengthened. M i i k k a L e i n o n e n | melt 81


THE BIG QUESTION HOW TO TURN A PRODUCT INTO A SERVICE? An industrial manufacturer that wants to become a service company could rent instead of sell equipment, or merge maintenance and parts services with product sales. Digitization brings new growth paths for manufacturers as they shift towards

service provision. For many sectors, this shift has happened at such a fast pace that it is best described as a revolution rather than an evolution. How has Kalmar made use of digitization in transforming the port industry?

CASE

Kalmar Port Automation

How Kalmar grew from an equipment builder to a data-driven service provider.

K

almar offers a wide range of cargo handling solutions and services to ports, terminals, distribution centers and the heavy industry. The company is the industry forerunner in terminal automation and energy-efficient container handling, with one in four container movements around the globe handled by a Kalmar solution. Automation helps port operators increase capacity and optimize operations to increase efficiency, lower costs and improve safety. In the next few decades, digitization will have a big an impact on logistics as the invention of containers did in its time. Through data production and utilization, Kalmar has managed to shift from a manufacturer of container handling equipment to a producer of holistic, automated terminal services. 82


BUILDING PORT AUTOMATION

2

Building automated ports has required Kalmar to continue developing increasingly intelligent equipment and acquiring new competence. With sophisticated terminal equipment, insight, data and advanced Terminal Operating Systems (TOS), Kalmar is able to construct fully automated ports that facilitate continuous development of equipment. In the controlled environment of ports, every incremental improvement adds up to massive savings, 3 simultaneously opening up opportunities for gamechanging innovations in safety.

3

INSIGHT AND COMPETENCE

2

With detailed information on port operations, Kalmar and its clients gain new insight and create innovations, setting new demands on internal competence. Fresh talent and skills are vital for matching the challenge.

4

DATA ECOSYSTEM 1

4

PRODUCING DATA Kalmar continuously develops equipment to generate increasingly versatile data. The more data is generated on port operations, the more opportunities arise for its utilization.

1

4

In 2011, Kalmar acquired Navis, a company developing Terminal Operating Systems. Navis TOS became a crucial part of Kalmar’s service portfolio. To utilize all equipment, resources and port facilities to maximum capacity, TOS needs to seamlessly make use of a number of data flows and be compatible with a variety of other ecosystems.

M i i k k a L e i n o n e n | melt 83


THE BIG QUESTION HOW TO RETAIN FINANCIAL VALUE WHEN FACING IMMATERIAL PULL? When an element loses its material form, it faces significant immaterial pull. The material value of the element decreases, while its immaterial value grows. This happens when a physical object is reproduced in digital form. Digitization increases a product’s

CASE

Amazon Kindle

How the physical book was not replaced by a digital book but by an ecosystem.

A

s information began to take the form of bits, publishers, suppliers and manufacturers got busy developing digital books. Supported by a backdrop of the world’s biggest online bookstore, the Amazon Kindle e-book reader won out over other ideas of the time. Amazon has managed to hold on to its top position in delivering e-books despite new devices, sales points and ecosystems emerging on the market. Amazon Kindle has grown from an e-book into a vast ecosystem, which aims to create its own, continuously evolving service range. 84

immaterial value, while reducing its material value. At the same time, financial value may drop close to zero (e.g. delivering traditional mail vs. email). How did Amazon manage to prevent the price of digital publications from hitting rock bottom?


1

KEEPING IT PHYSICAL Amazon did not stop at just digitizing the contents of books, as this alone would have made it difficult to create a profitable business. Instead, Amazon Kindle was launched as a physical device, designed to be hand-held similar

2

to a traditional book. The image of a book changed without material quality getting lost at the same time. As a result, people were still willing to pay the price of a physical product for an intangible service.

ECOSYSTEM ROLES CREATE NEW VALUE Amazon refused to be imprisoned by its own e-reading device. Access was allowed on several digital platforms, so readers could opt for the device of their choice. This dramatically altered Kindle’s ecosystem role; it was no longer

just a physical device, but also an epiphyte compatible with other devices. Changes like this have enriched the Kindle with features that a printed book does not have.

AMPLIFICATION MAKES THE BOOK EVER-CHANGING The Kindle e-book of the future will be a combination of the original publication and readers’ views. Amazon has patented a method for including additional creative works to the original, such as, illustrations, alternative plot twists, maps and graphics. Ultimately, readers will be able to modify books as they wish, or experience combined creations by

others. Amazon aims to continuously to create added value through its e-book reader in an attempt to beat traditional books and competitors. The success of the Kindle e-book depends on how well it is enriched by Amazon with immaterial value, while keeping the e-reader closely linked to the material world of printed books.

3

M i i k k a L e i n o n e n | melt 85


THE BIG QUESTION HOW TO GET PEOPLE TO PAY FOR SOMETHING INTANGIBLE? CASE

Clash of Clans How Supercell turned a simple mobile strategy game into a financial success.

C

lash of Clans is a social real-time online strategy game designed for mobile touchscreen devices. The game was created by Supercell, which also produced hit games Hay Day and Boom Beach.. The game involves building a

village, gathering resources, attacking other villages and teaming up with fellow players to form clans. The revenue generation model is based on the successful free-to-play strategy that is widely used in mobile games; actual playing is free, but in-app purchases can be made during the game.

The financial profitability of Clash of Clans is established on a three-layer ecosystem. A

SCALE LAYER: Get as many players as possible.

Clash of Clans is a free epiphyte in Apple and Google ecosystems.

B

HOME LAYER: Inviting players to create their own worlds inside the game.

Players can build villages and clans as they wish.

C

TOOL LAYER: Offering alternative ways to advance in the game.

Players can advance their villages through gems, which can be both collected and purchased during the game.

The free-to-play model typically involves only a few percent of players actually spending money on the game, while most play for free. 86 melt | M i i k k a L e i n o n e n


BENDING TIME IS THE KEY Clash of Clans makes use of the temporal concept of three different worlds, making it feel as if events take place in a material time sequence. This way players accept and trade with the financial value of time.

3

The players’ immaterial needs exist in nonlinear time.

2 The game actually takes place in ”Melt time”. This appears to be linear, but can be altered.

1 The game is portrayed as if happening in ”real time”.

In principle, building in the Clash of Clans game takes place in a defined, fixed amount of real time. Constructing the defense structure for a village may take several days. Advancement takes longer as the game progresses, but players have the chance to ‘bend time’ by buying gems as in-app purchases. Players improve their skills as the game advances.

They can learn by watching reruns of attacks or chatting with other clan members. Players may feel advancing their villages is important in order for their villages to correspond with the players’ skills, to receive admiration from others, or out of simple curiosity to see what the future holds.

M i i k k a L e i n o n e n | melt 87


THE BIG QUESTION HOW TO USE IMMATERIAL MOTIVATIONS FOR MATERIAL ACTIONS? What motivates people? We are steered by both material and immaterial motives. We want to be inspired, belong, learn, and be admired. But which immaterial

motivator in each situation is strong enough to result in material action? And how do immaterial motivations change as collaboration continues? How did Scoopshot nail this?

CASE

Scoopshot How do you get people to take photos for $5?

S

coopshot is a simple and brilliant service that connects media and brands with eager amateur photographers. Anybody can create a photo task via the Scoopshot website and scout a certain type of image across the globe, such as, �I need photos of beautiful sunsets.� By downloading the Scoopshot app, users receive photo assignments or start taking photos. They may price them as they wish ($5 on average). Simple and fun! Scoopshot is actively used by media houses, brands and organizations alike in order to get hold of genuine, individual, often surprising images in just minutes. The Scoopshot app has now been downloaded in over 170 countries by more than 570,000 photographers, and counting. Scoopshot has managed to build trust among its users. It has succeeded in inspiring people to get creative and share their creations with others. The service has uncovered immaterial motivations that lead to action. 88 melt | M i i k k a L e i n o n e n


Researchers Wael Soliman and Virpi Tunnainen from Aalto University have written a case study on Scoopshot, Understanding Continued Use of Crowdsourcing Systems: An Interpretive Study, Journal of Theoretical and Applied Electronic Commerce Research.

Soliman and Tunnainen applied the self-determination theory to map motives.

Here is a simplified (and nonscientific) takeaway from their brilliant work: When crowdsourcing, companies need to learn to motivate people in the right way during the different stages of the lifecycle of collaboration.

Origin INTRINSIC

Enjoyment

Altruism

Doing an activity for its inherent satisfaction.

1

2

EXTRINSIC

Nonmonetary rewards

Recognition

Doing something in order to attain a separate outcome.

OUTWARD

Aim

During the initial phase, people are attracted by curiocity and the possibility of making money.

Monetary rewards

INWARD

Action intended to serve others.

Action intended to serve oneself.

The initial phase is motivated by very different factors than during continued use. Enjoyment, ecognition, ards Altruism, R w re y ar Non-monet

Curiosity, Mon etar y

Relevance

After using the service for some time, people become interested in helping others and motivated by challenging photography assignments, advancing their photography skills, and receiving feedback for images.

Curiosity

1 INITIAL PHASE

rewards

2 CONTINUED USE

Time M i i k k a L e i n o n e n | melt 89


Melt Tools are ready to use or can be custo mized to your needs .

90 melt | M i i k k a L e i n o n e n

To


oolbox New tools and toys for finding innovative and surprising angles for your business.

M i i k k a L e i n o n e n | melt 91


THEORETICAL MODEL 92 melt | M i i k k a L e i n o n e n


...becomes a practical tool. M i i k k a L e i n o n e n | melt 93


Melt Too lbox consists of 7 parts .

Each part offers new angles for strategy and innovation.

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ely t a r a p e s m e h You can usecotmbinations . o r in

M i i k k a L e i n o n e n | melt 95


Each part plays an . i mpo rtant ro le Flow

How to make immaterial elements more tangible?

Immaterial world What immaterial elements can you use?

Amplify How to amplify the immaterial world?

Melt

How to melt elements?

Shape

Free

How to make material elements intangible?

How to shape the material world?

Material world What material surrounds you?

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you w o h s s p o o L the w ay . The worlds are interconnected through loops. Follow the loops, and you may find some surprising insight.

Sometimes the desired outcome is known from the start. In that case, you need to go against the tide to discover how the outcome can be achieved.

M i i k k a L e i n o n e n | melt 97


On the left, Melt abso rbs elements . Elements transform as they get closer to Melt.

Immaterial elements become tangible.

Elements are freed up from their material form and become more intangible.

98 melt | M i i k k a L e i n o n e n


On the Melt f right, other eeds w o rl ds . Changes in Melt always affect the material and immaterial worlds in one way or another.

Melt amplifies the immaterial world.

Melt shapes the material world.

The impacts of Melt on the different worlds are deeply linked. If, for example, a service has a vital effect on the material world, it’s also likely to radically impact the immaterial world. M i i k k a L e i n o n e n | melt 99


You can make use of Melt Tools in many situations. I guess that's what you're actually doing right now.

Supporting the sharing of thoughts, competence and emotions has become an important part of what companies are about.

Products transform into a service. And services become productized.

Servitization and productizing services

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Teamwork and crowdsourcing


Many industries are undergoing such an upheaval that continuously reassessing all the contributing factors is vital.

To change the material world, different types of competences and talents need to be combined.

Innovating and product development

Building ecosystems

Continuous strategy work

No single company can survive alone. Changes in the ecosystem offer a new competitive edge.

M i i k k a L e i n o n e n | melt 101


People have always loved to draw. A drawing is like a campfire, attracting people to circle around for a chat. As a communication method, drawing eliminates language barriers. And it doesn’t require special talent – anyone can draw a box, circle, or arrow! It’s often also a more straightforward way to communicate a design to others. So grab that pencil!

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1

It is the common language we all know. There are many ways to draw material and immaterial worlds. Feel free to make your own version. Or...

1

Draw it like this: Immaterial 3

4

If you know how to draw this...

Melt 2

Material

And then you just have to �melt� them.

Add some finesse.

...You probably can also draw this. M i i k k a L e i n o n e n | melt 103


2

ting? el m ur yo of ce ie p er nt ce e What is th What can affect both material and immaterial worlds?

MARKETING STRATEGY

CORPORATE CULTURE

BRAND

MOBILE APP

INTRANET

PARTNER STRATEGY YOUR _______

BUSINESS STRATEGY

SERVICE

To keep things simple, the following pages use services as an example.

SOCIAL MEDIA CAMPAIGN

EXTRANET

CONTENT STRATEGY

POLITICAL CAMPAIGN

SERVITIZATION PROJECT 104 melt | M i i k k a L e i n o n e n

INDUSTRIAL INTERNET

IT PROJECT

SOCIAL OBJECTS

CUSTOMER LOYALTY PROGRAM

YOUR SERVICE CENTER

CROWDSOURCING PROJECT


3 Immaterial elements

Actions that affect elements.

YOUR SERVICE

You need to visually separate elements and actions.

And a way to highlight change:

Material elements

CREATES NEW

INCREASES

ELIMINATES

DECREASES

M i i k k a L e i n o n e n | melt 105


4 Try different s starting point. and di rections Get the elements flowing and mixing in surprising ways!

If your strategy is CUSTOMER-DRIVEN, BRAND-CENTRIC, OR INNOVATIONCENTRIC...

If your strategy is

SERVICE-CENTRIC OR CUSTOMER-CENTRIC...

If your strategy is

PRODUCT-CENTRIC OR PROCESS-CENTRIC…

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ANALYSIS

Immaterial world What immaterial elements can you use?

You should start here!

ANALYSIS

Melt You should start here!

ANALYSIS

Material world What material surrounds you?

You should start here!

M i i k k a L e i n o n e n | melt 107


The material world is becoming intangible. And that changes everything. When you free up elements from their material boundaries, you can create new services, disruptive strategies, and tactics. To create revenue, you must shape the material world. The bigger the change, the better the chances of making money.

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ACTIONS

ACTIONS

Free

Shape

How to make material elements intangible?

How to shape the material world?

ANALYSIS

Material world What material surrounds you?

M i i k k a L e i n o n e n | melt 109


Map your material world to understand what you can free up.

M

aterial elements can be set free from their materiality or pushed closer to the immaterial world. To understand what elements you

can free up from the material world, you first need to understand what components your material world includes.

WHY NOT TRY ONE OF THESE METHODS:

A

Make a list of everything that’s material: First you only notice the main things. But as you begin to focus on certain areas, elements that could be made more immaterial begin to surface. This stage involves creating a platform for surprising insights taking place at other stages of the loop, and being too critical or trying to find the right answers is useless.

B

Split things into atoms: Breaking structures into their base components helps uncover hidden elements. Choose one factor in the material world and split it into components. Divide these new elements into further components. The map created in the process will provide some interesting elements for the following stages.

THERE ARE DIFFERENT OPTIONS FOR MODELING: Usually, a company views its operating environment in some accustomed way. But it’s beneficial to experiment with new types of categories. Viewing the opportunities of the material world within the premises of habitual thought patterns can prove limiting. Here are some models to try out:

OBJECTS

ACTIONS

PLACES

PRODUCT DEPENDENCIES

YOUR PRODUCT

PROCESS AND RESOURCES

RECURRING ACTIVITY

RANDOM ACTIVITY

INACTIVITY

PRESALES

POINT OF SALE

AFTERSALES

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ANALYSIS

Map your material world. Just start somewhere. It doesn’t have to be all-embracing.

You may use whatever ideation technique you feel comfortable with. A group of people, pens, sticky notes, and mutual trust is a good starting point.

WHAT IS IT USED WITH?

YOUR KEY PRODUCT?

WHERE CAN IT BE BOUGHT? (Channels)

SUPPORTING PRODUCTS AND SERVICES?

MAIN USE OF THE PRODUCT?

WHO MAKES IT? (Resources and partnerships)

COMPETING PRODUCTS AND SERVICES?

PROBLEM IT SOLVES?

HOW IS IT MADE? (Process)

REVENUE STREAMS

COST STRUCTURE

M i i k k a L e i n o n e n | melt 111


Making material elements intangible creates new opportunities.

1

ANALYSIS

WHAT CAN YOU FREE UP? And what does it turn into?

2

ACTIONS

HOW CAN YOU FREE THEM? What actions or features are needed?

You can approach the question from three different angles:

A

What intangible can you extract from a material element? E.g. What type of data does the product, product use, or accessory generate? What type of data could be generated?

B

C

What intangible can you bundle it with to make it more immaterial?

With what intangible can you replace a material element?

E.g. What service could the product be linked to?

E.g. Could a service address the same need as a product?

Figure out what actions or features would make elements intangible. QUESTIONS TO ASK YOURSELF:

How can a purchase be digitized?

What service addresses the same needs as a physical product?

How does a product need to be changed to generate data?

How to make customers create part of a product or sell it to others?

How can a customer pay for using rather than owning a product?

How could a single product adapt to everyone’s individual needs?

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YOUR SERVICE And what does it turn into?

ACTIONS

How can you free them? ANALYSIS

What can you free up?

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Melt always affects the material world. But how?

1

ANALYSIS

HOW DOES IT AFFECT THE MATERIAL WORLD?

2

ACTIONS

WHAT MAKES THIS HAPPEN?

Assess the impact of the service CREATES NEW on the different areas of the material world. You can divide the results according to how creative and radical they are. Gentle Remember that in a limited INCREASES world, creating something new always eliminates something old, while increasing another element reduces something else.

Creativity ELIMINATES

Aggressive DECREASES

Fine-tuning

Make a list of all the service features that influence change. Consider whether changing certain features would create a stronger impact. QUESTIONS TO ASK:

Could the service completely replace a material product?

Which service features would reduce the product’s manufacturing or sales costs?

What type of service would affect the product’s manufacturing method?

What additional features could the service add to the product?

Which features have the biggest impact on the position of a competitor’s product?

What service features support the co-use of different products?

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YOUR SERVICE

ACTIONS

The material world is based on scarcity and measurability. Metrics can be specified for verifying changes. WHAT IS IT USED WITH?

SUPPORTING PRODUCTS AND SERVICES?

COMPETING PRODUCTS AND SERVICES?

REVENUE STREAMS

What makes this happen? ANALYSIS

Effects on the material world? PROBLEM IT SOLVES?

WHERE CAN IT BE BOUGHT? (Channels)

WHO MAKES IT? (Resources and partnerships)

HOW IS IT MADE? (Process)

COST STRUCTURE

M i i k k a L e i n o n e n | melt 115


The cycle of immaterial elements has accelerated. This creates a constant supply of new opportunities. You will never be able to fully control immaterial elements. But you can try to make them flow in the chosen direction. The future belongs to those who know how to amplify the immaterial world – that’s where value is created.

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ANALYSIS

Immaterial world What immaterial elements can you use?

ACTIONS

Flow

How to make immaterial elements tangible?

ACTIONS

Amplify How to boost and enrich the immaterial world?

M i i k k a L e i n o n e n | melt 117


Learn to use this ever-expanding resource.

T

he immaterial world is something different to each person. It’s an endless, constantly changing source of riches that can be neither owned nor restricted. Understanding it coherently is unimportant – gaining insight into new opportunities is what matters. Key questions for making use of the immaterial world include how broadly it’s understood, how it can be accelerated, and how immaterial elements can be steered towards shareability. It’s not the resources you own, but what resources you can access.

HAVES NEEDS CUSTOMER SEGMENTS

SEGMENT-DEFINED

MAKE A LIST OF THE FOLLOWING:

A

E.g. What emotions does your company or its services and products evoke? Who are your biggest fans, and what type of competence do they have?

B

IF

CONDITION-DEFINED

Immaterial elements you would like to have at your disposal?

E.g. Who has the competences you need? What competences would make your service better? Who knows something you don’t?

C

THEN

Immaterial elements that you can use? Elements that are just waiting for an outlet.

What immaterial do people need? Do you have it?

C COMPETENCE A

SUBJECT-DEFINED

DIFFERENT MODELS: Companies have many methods readily at their disposal for defining the immaterial world. Some companies can outline emotional bonds and impressions held by people in a highly organized way. Competence and motivations are also often charted. It’s models like these that may help. On the other hand, these models can also prove binding and self-evident. 118 melt | M i i k k a L e i n o n e n

B

D

INTRINSIC

EXTRINSIC OUTWARD

INWARD

MOTIVE-DEFINED


Intelligence

Love

Admiration

eComp e c n e t

Sense of value

Insight

Loyalty

Enjoyment

Sense of belonging Imagination

Fame

nition

Recog

Curiosity

Creativity of Sense nity u m m co

KEY CUSTOMERS NON CUSTOMERS

HAVES

Fam e

POTENTIALS

NEEDS

NEEDS

HAVES

ANALYSIS

What is in your immaterial world? Make a list of all of the immaterial elements that you have available. Then list all the immaterial elements that you would like to have. Some immaterial elements may at first seem ridiculous or negative, but prove useful at a later stage. M i i k k a L e i n o n e n | melt 119


Make immaterial tangible, accessible, and shareable.

1

ANALYSIS

WHAT CAN YOU MAKE TANGIBLE? And what will it become?

2

ACTIONS

WHAT MAKES THEM FLOW? What actions or features are needed?

Flow means turning elements less immaterial, preferably into something that can be accessed and shared by others. Flow doesn’t mean capturing or owning immaterial elements. You just make them tangible. You need to be able to create channels that make immaterial elements tangible along the way. Thinking along the following lines can help:

A

Which immaterial elements would you like to make more concrete?

B

Where are immaterial elements flowing to at the moment? Can this flow be channeled?

C

If an immaterial element were concrete, what would it be?

As immaterial elements always choose a path of least resistance, you must be able to build the simplest channels possible that allow elements to flow in the right direction. SOME EXAMPLE QUESTIONS:

Do you intentionally or unintentionally prevent the natural flow of immaterial elements?

Is the natural flow already visible? What immaterial issues can be deciphered from people’s behavior?

How do you access or guide existing immaterial flows?

What if your flow attracts unexpected immaterial elements? Are you agile enough to utilize them?

What features are needed to create new flows?

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ANALYSIS

What can you make tangible? ACTIONS

What makes them flow?

If you have trouble finding ways to make immaterial elements flow, try amplifying first.

YOUR SERVICE And what will they become?

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Activate! Connect! Boost! Stir!

1

ANALYSIS

WHAT ELEMENTS WILL YOU AMPLIFY?

2

ACTIONS

WHAT MAKES THIS HAPPEN?

All companies naturally accelerate the immaterial world, but there’s always room for improvement.

TARGETED AMPLIFICATION

Amplification can be approached from two directions.

E.g. A brand creates emotions.

A

Map out how you already amplify the immaterial world?

B

Think about what you’d like the immaterial world to generate?

You can amplify individual elements.

LINKED AMPLIFICATION

You can amplify certain elements to gain access to others. E.g. Create passion to be able to make talent flow.

There’s a huge range of available methods for amplifying the immaterial world. HERE ARE SOME SAMPLE QUESTIONS:

Map out ways your service already amplifies the immaterial world. Could you strengthen those features? Do you know what immaterial elements people need? How could they get hold of them? What would generate strong emotions, like fear or love? What other elements would those amplify?

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What elements could you flow to become amplifiers? Can you test how different amplifiers work? Does someone else have elements that you could use to amplify the immaterial? What social sharing mechanisms could you use?


ANALYSIS

What will you amplify?

ACTIONS

You might need to run more than one loop of amplification and flow to reach something unique.

What makes this happen?

YOUR SERVICE

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INTRINSIC Doing an activity for its inherent satisfaction

Sense of responsibility towards community and altruistic motives.

Curiosity and enjoyment-related motives.

Reputation and fame-related motives.

Reward-related (financial or other) motives.

OUTWARD

INWARD

Action is intended to serve others.

Action is intended to serve oneself.

Origin EXTRINSIC Doing something to attain some separate outcome.

Aim

To utilize the immaterial, you must understand what drives us.

T

To reap from the immaterial world, amplification and flow must work together. But which of the two should be the focus in different situations? Understanding people’s motives helps locate the right triggers.

1

ANALYSIS

What makes us tick? Write down all the motives that you think have an impact on your service. Is the motivation’s origin extrinsic or intrinsic, and is it aimed inwards or outwards?

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Tools can be borrowed from the field of psychology for charting the needs and motives of people. By applying the self-determination theory, for example, we can divide immaterial motivation factors into groups and pinpoint actions that trigger them.

2

ACTIONS

Plan actions. What types of actions harness motives and related immaterial elements or actions so you can put these into use?


ANALYSIS

Map out immaterial motivators

ent Excitem

Sense of responsibility towards community and altruistic motives.

Curiosity and enjoyment-related motives.

Reputation and fame-related motives.

Loya

lty

See example on page 88.

Reward-related (financial or other) motives.

OUTWARD

Pleasure

INWARD

Focus on enabling flow.

Emphasize the correlation between flow and amplification.

Will you help us?

If you do X, you get Y.

Focus on amplification.

C'mon! This is something new!

ACTIONS

Plan actions that amplify and help the flow. M i i k k a L e i n o n e n | melt 125


Melting different elements together has an impact on the immaterial and material worlds. How do you melt elements in a space that’s not material or immaterial, but both at the same time?

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ANALYSIS ACTIONS

Melt

How to melt elements?

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The Melt process is always the sum of its parts.

I

n Melt, highly diverse elements encounter each other through two loops. If favorable conditions are created, the melt takes place almost by

itself.

While each melting process is different, the preconditions for their success can be divided into three groups. A unique take on ways to impact different worlds is the most important sub-group. Companies that see immaterial and material potential that others fail to

notice are able to transform the worlds. Companies also need the ability to implement the change. Different elements must be guided to encounter each other, and the outcome of these encounters requires a channel for influencing the material and immaterial worlds. Finding an ecosystem role is the third important factor. All of the melting is interconnected. Melting processes that support one’s own melt need to be discovered.

TEST YOUR MELTING PROCESS WITH THIS CHECKLIST:

1

YOU HAVE A UNIQUE PERSPECTIVE ON... immaterial or material elements that can be used.

how you can affect the immaterial or material world.

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2

YOU HAVE THE ABILITY TO...

3

YOUR ECOSYSTEM ROLES...

free material elements. make immaterial elements flow. amplify the immaterial world. shape the material world.

support and enrich your melting process.


UNIQUE ANALYSIS Features that make immaterial elements

Flow

Creative, unforeseen insight on the possibilities of the immaterial and material worlds.

features that

Amplify

the immaterial world

ANALYSIS

What are the key features of your service?

Features that

Free

the material elements.

features that

ENRICHING ECOSYSTEM ROLES

Linking with other melting processes.

Shape the material world.

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Without a supporting ecosystem, melting becomes virtually impossible

F

our key questions for defining the ecosystem role:

Open

1

Do you want to open up the service to customers, so they feel they own it? In this role, the service is easier to adapt to people’s needs and has stronger links to their own immaterial world.

ACTIONS

Controlled

Open or controlled?

An open role is optimal for creating immaterial value. It brings reach and scale. It’s relevant for services that aim for large user or customer bases.

The Split Tail

Usually, all services are combinations of the right mix of both roles. 130 melt | M i i k k a L e i n o n e n

Co nt ro l-

Theoretically, it’s easier to create financial results with this type of service, as provision can be controlled.

Intangible scalability

2

Do you want the service to remain controlled, so it resembles a material product?

Economical value/unit

The difference between an open and controlled melting process can be huge. An open process approaches the immaterial world by offering scalability. A controlled process offers better economical value per unit.


ACTIONS

Host, epiphyte, or stand-alone?

Y

our service can function completely separately from others. This role is becoming increasingly rare. Deepening connections with other melting processes is vital in future ecosystems.

Host

Stand-alone

Epiphyte

3

Do you want your service to be a part of other services? As an epiphyte, your service reaches a large user base, but has an operating environment that’s difficult to control.

4

Do you want to make others part of your service?

As a host, your service can develop rapidly as all of the epiphytes it contains develop. A deep connection is created between services both in a host and epiphyte role, sometimes the actions of others having a surprisingly fast effect on the service. Companies are able to choose a number of different ecosystem roles simultaneously and adjust them continuously.

Epiphyte Birds

A company can function merely as an epiphyte in the ecosystems of others. Rovio’s Angry Birds mobile game makes excellent use of an epiphyte role, with the bird figures featured on the products of hundreds of different companies - from candy to skateboards, and sneakers to bedside lamps. Yet, at the same time, Rovio is strengthening its own host role by introducing other partners to the services it offers. M i i k k a L e i n o n e n | melt 131


ACTIONS

Test different roles. Open Host

Open Stand-alone

Open Epiphyte

Controlled Host

Controlled Stand-alone

Controlled Epiphyte

Opportunities

Threats

EXAMPLE Every role in the ecosystem offers opportunities and poses threats. Map them out. A service that functions as an

open host is more scalable than controlled services, and may end up with a dominating role in the ecosystem.

However, the content and direction of development can be harder to steer than those of a controlled system.

CHANGE OVER TIME Roles in the ecosystem can be boosted or completely changed. Plan different growth paths.

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A

B PHASE 1


ANALYSIS

Which roles are possible for your company?

A

company has several roles in many different ecosystems, and it’s easy to get too carried away when modifying the roles. Keep things simple.

How about a freemium strategy?

Offering the key service features for free enables a service to quickly reach a large user base. An adequate audience can be reached by proceeding through several open layers. This, in turn, churns enough users for marginal premium features.

Role 1

It’s also good to think about the type of Melt role your corporate culture allows. A closed, process-centered corporate culture doesn’t really facilitate open epiphyte roles. In the battle between corporate culture and an ecosystem role, corporate culture always wins.

Open Host

Controlled Host

An ecosystem role can’t necessarily be defined by oneself, as it is determined externally.

Controlled Host

A

B

Open Stand-alone Controlled Stand-alone

Open Epiphyte Controlled Epiphyte

Role 2

Melt is constant moving. The most important thing is to continuously question the dominating role and search for new opportunities.

C

EPIPHYTE FOR SCALE Find (or build) an open host ecosystem that offers you the largest user base.

Open Stand-alone

Open Epiphyte

Controlled Stand-alone

Controlled Epiphyte

HOST FOR LONG TAIL Your service must act as an open host for many epiphytes: other services, add-ons, and user-creations. This creates breadth and a rapid development.

Role 3 EPIPHYTE YOURSELF Most epiphytes need to be free, although some can include paid features. Paid part

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Melt is a diverse and dynamic tool kit that opens up a whole range of possibilities. Your task is to cut through the noise, and choose and crystalize factors with the biggest impact on your business.

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You can develop service components that help you

AMPLIFY&SHAPE

Features that enable the flow of immaterial elements

Features that amplify the immaterial world

YOUR SERVICE Features that free up material elements

136

Features that shape the material world


EVALUATE YOUR SERVICE 6 questions for assessing service strengths and weaknesses Is the service based on a unique view of material and immaterial possibilities? 1 2

3

How well does the service utilize the immaterial world?

How well does the service amplify the immaterial world?

4

5

How well does the service utilize the material world?

How well does the service shape the material world?

6 How well do ecosystem roles support the service and set it apart from competitors?

137


FIND YOUR ECOSYSTEM ROLES Melt tools help you explore different ways to build ecosystem roles.

EXAMPLE

ECOSYSTEM ROLE:

ECOSYSTEM ROLE:

Controlled Host

Mostly open

This ecosystem role is vital for creating trust in...

This role enables excellent scalability...

You can create an ecosystem strategy to develop your ecosystem roles over time. PHASE 1

138

PHASE 2

PHASE 3


MATERIAL RESULTS You’ll be able to assess the effects of your service on the material world.

PRODUCT DEPENDENCIES

YOUR PRODUCT

PROCESS AND RESOURCES

WHAT IS IT USED WITH?

YOUR KEY PRODUCT?

WHERE CAN IT BE BOUGHT?

SUPPORTING PRODUCTS AND SERVICES?

MAIN USE OF THE PRODUCT?

WHO MAKES IT?

COMPETING PRODUCTS AND SERVICES?

PROBLEM IT SOLVES?

HOW IS IT MADE?

REVENUE STREAMS

COST STRUCTURE

EXAMPLE

Creativity CREATES NEW

ELIMINATES

INCREASES

DECREASES

Aggressive

Gentle

MATERIAL CHANGE

Fine-tuning

139


Melt Tools can be used to

FEED OTHER STRATEGIC TOOLS

140


141


CASE

Taxi! Taxi!

How do you build the fastest growing taxi company in history without owning a single car? How is a simple mobile app able to break the status quo of a traditional industry? What is the secret to Uber’s dizzying success?

A

NO CARS, JUST SERVICE

1

2

Uber isn’t actually a taxi firm, but more like an intermediary between customers and drivers. With a small material base, the company is able to scale itself conveniently.

B

MULTIPLE ECOSYSTEM ROLES MOBILE APP

3

3 Uber’s app is free and simple to learn.

SERVICE

4 The app has been kept as streamlined as possible.

SERVICE

4

5 1

2 TAXI PASSENGER

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Uber is integrated into the payment systems of PayPal and credit card companies. The customer pays directly through Uber’s system without having to worry about payment during the journey.

PAYMENT

5


SOLUTION

Uber’s idea is to turn taxi travel into a super-easy and pleasant experience for both passengers and drivers. The solution simplifies ordering, traveling and paying for the ride. In addition to the convenient service, Uber has managed to build trust between taxi drivers and customers. These features have resulted in Uber taking over a large share of the customer interface in several different cities.

C

EXTRA FEATURES 6 LOYALTY

8

SERVICE

6

8

Uber has extra features, such as, splitting the bill among several people, anticipating cost, and a music playlist for the journey. All of these features widen the gap with regular taxi services.

9 7

7

D

10

BUILDING TRUST

TRUST

9

10

SERVICE

At the end of the trip, both the passenger and driver rate each other. In addition to the offered ease, another important factor comes into play: trust.

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CASE

Convincing security Name Withheld had a problem: the company’s ICT security systems were outstanding in combating infrequent but potentially dangerous cyber attacks. All it needed to do was to communicate this to the management of corporate clients. However, top-level management lacked sufficient knowledge to discuss the new technology. How did Name Withheld solve this problem?

A

DATA AS A SERVICE 1 INTERNAL INSIGHT

2

3

First they gathered all their data and knowledge of cyber threats. The data was then refined into a service.

2 4 3

1 DATA

The motives of experts working for the customer were tapped into to pique their interest: talent, challenge, fame.

B

HANDING OVER OWNERSHIP INTRINSIC

4 EXTRINSIC

4 OUTWARD

C

INWARD

5

5 An analysis program was created which could utilize the corporate client’s data and be integrated into the company’s own systems.

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SOLUTION

Although it was impossible to reach top managers with the right messages, experts working for the corporate client could be convinced of potential security gaps. The next step was to construct a mechanism for communicating the right message to management.

D

INTERNAL PROCESS OF CUSTOMERS 6 CUSTOMER EXPERTISE

7

8

8

CUSTOMER’S EXPERTS

Experts working for the corporate client wanted to learn, develop, and add their own data to the service.

6

SERVICE

7

E

9

10

Through their own data, experts developed deep insight into future threats. They were able to convince the company’s management to invest in new systems.

CREATION OF PURCHASING POWER

CUSTOMER’S MANAGEMENT

9

10

SERVICE

DATA

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EXAMPLES CASE

Some simplified examples of the use of melt tools INDUSTRIAL INTERNET

Which areas could provide you with data?

What could you create from that data?

How can you collect the data?

What type of competence is needed to make use of the data?

How do you make that love tangible?

How is it accessible to others?

How does that affect the view others have of you?

How can you amplify and flow to meet those motives?

How can you create a culture that allows flow and amplification?

What elements does this create for you to use?

What changes are needed to attain them?

What impact would a change in ecosystem roles create?

How can you make use of your current image?

What elements can you free up?

What type of service do these create?

How exactly do you free them up?

How do they affect the material and immaterial?

What roles ease amplification?

What roles open up flows?

RECOMMENDATIONS

Who loves you?

IDEATION CULTURE

Define immaterial motives. BRANDING

What are your brand goals?

SERVITIZATION

Chart your material world.

ECOSYSTEM STRATEGY

Define your ecosystem roles.

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How to utilize the competence?

What type of ecosystem role supports your service?

What type of impact does it have?

How can you amplify that effect even more?

How do those feelings shape your business?

Does that generate revenue?

How to flow those elements to be shareable?

How to further open up the ecosystem?

How does it shape the material world?

Have changes affected the image?

How does the image affect the material world?

Does the image affect the product’s market position?

Test different ecosystem roles.

How do the changes affect the competition scenario?

What are the key shaping features?

What roles affect freeing and shaping?

How immaterial can you go and still retain economical value?

What roles work best for melting elements?

How can the impact be strengthened?

How can the impact be strengthened?

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Summary B Y

M I I K K A

L E I N O N E N

World divided in two

Totally different worlds

Worlds are melting

The world can be divided into material and immaterial parts, both of which play an important role for business. Because of its constrained nature, the material world can be easily divided up, categorized, and measured. For companies, the material world is the more familiar and straightforward part of the box. Competition is tightening in the limited material world as business becomes more global.

The top part of the box is open. This illustrates the immaterial world. It is infinite, which makes it difficult to fathom or measure. Our views of the constantly evolving immaterial world are seldom alike. Not a single element in the immaterial world remains the same – they constantly change, merge, split, pause, then suddenly restart. The role of the immaterial world grows, as our material needs are replaced with more immaterial ones. We’d rather be happy than be given a new car.

Technology melts the immaterial and material worlds together, creating a reality of its own that has elements with features of both worlds. Knowledge and services, for example, are detaching from their material ties. On the other hand, people increasingly divide up the immaterial world. Competence and emotions gain shareable forms increasingly via social media, for example. This new world called Melt opens up totally new potential for companies.

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Melt Strategy

Ecosystem at the heart

Melt Toolbox

Melt is on the rise, affecting both the material and immaterial worlds more deeply. This can be illustrated with two very different loops. The loop in the world of scarcity continuously reduces and modifies existing elements, while the loop in the world of abundance enriches and creates something new. The loops split into stages, all with a unique strategic role.

Melt is a sizzling melting pot of highly diverse processes that link together. Companies need to find the right ecosystem roles that allow them to make use of the simultaneous melting processes of individuals and other companies. Roles need to be changed boldly as the ecosystem changes. Ecosystem thinking is the most important factor for a company’s success.

Loops that connect the worlds can be divided into sections. The strategic role of each section can be examined separately. The Melt Toolbox helps to visualize and communicate, even in the case of the most complicated processes. The Melt Toolbox makes you see the world as constantly changing, with steerable streams that can be merged together in completely new ways. Ultimately, this creates a better understanding of the immaterial world and allows you to make use of its entire potential.

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As odd as it may sound, technology is making the world more organic again. Let’s enjoy the ride!

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As a result of technological advancement, our material and immaterial worlds are melting together. This has huge repercussions for every company. Miikka Leinonen combines his extensive background in graphic design with his passion for business and strategy to create a truly unique theory and visual tools for managers to understand and capitalize on this change.

Melt  

As material and immaterial worlds melt, new business opportunities arise. Your visual guide to the future. Get the iBooks version: https...

Melt  

As material and immaterial worlds melt, new business opportunities arise. Your visual guide to the future. Get the iBooks version: https...

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