hattrick: you, me, and google...

Economic future & Patent law

2011-09-13T14:43:00.000-07:00

America Invents Act is latest bill in the US patent law system, aimed more at defending entrenched economic interests rather than anything else. The bill changes the method for determining the priority of patent applications to a “first to file” system from the long-standing “first to invent” method.

According to the NYTimes, the major two views about this bill are:

“This bill is unequivocally a job killer,” said Valerie S. Gaydos, a Baltimore-based investor in early-stage companies. “It will create a rush to the patent office, with innovators seeking to file anything and everything. The applications will be less complete, less well written and it will create more of a backlog.”

vs.

David S. Kappos, the patent office director and under secretary of commerce for intellectual property, disagreed, saying that the first-to-invent system was flawed because it essentially granted an inventor the right to legally defend his contention that he came up with an idea first. By changing to a first-to-file system, which is used in nearly every other country around the world, priority is clearly established, he said.
Many large corporations — like General Electric, Caterpillar and I.B.M. — supported the bill, which opponents suggested was evidence that the bill favors behemoths at the expense of the little guy. They point out that Mr. Kappos worked at I.B.M. for 27 years before taking the patent office job.

Here are some public views on the matter:

Anon
Boston

The Framers - at the urging of the Paris-based Thomas Jefferson - gave Congress the power "To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries" (Art I Sec. 8). The idea was clearly to encourage individual innovators to commercialize their ideas, reap the rewards of their ingenuity, and teach others their inventions so they might be improved upon. But most of all, the hope was to bring the benefits of invention to the public, to agriculture and to industry. The cotton gin, the McCormack reaper, the telegraph, the electric lightbulb, and countless other inventions benefited both their inventors and the public in this way.

The patent system has degenerated into a big money corporate game. Most utility patents are trivial improvements on existing technologies, and rarely encompass the whole of the value of the product: a smartphone may incorporate hundreds of patented ideas. Patents are often issued on ideas that are already in the public domain, and it is extremely difficult to overturn an issued patent. Despite the high cost of prosecuting a patent, companies like Motorola, Apple and Microsoft file thousands of them each year, almost indiscriminately. The inventors get a modest award for each filing and a second if the patent is granted. And rather than being an incentive to innovation, they are trading cards in litigation.

Worse still, patents get abused by non-practicing patent holders (who often buy them cheaply) for barefaced extortion schemes that create no economic value and only serve to raise the price of technology products to consumers or keep valuable products off the market. The patent portfolio of the failed Nortel Networks had more value in bankruptcy than all the other assets of the company combined, in a cynical bidding war.

Jefferson must be spinning in his grave.

Court of Customs and Patent Appeals Reports (Patent Cases) in a large DC law library.

Lafayette75
Paris

Be careful, folks, anything that tends to bigness also arrives at awfullness in America. It is an ineluctable destination in an America gone crazy over Bigness is Beautiful.

What market bigness does is this: It creates oligopolies where too many customers go chasing too few suppliers. This is already happening to the Interconnect Industry, which is why DSL-interconnect is so much more expensive than elsewhere.

Which means what? My take: It means that our right to interconnect is not universal but based upon companies cherrypicking markets according to the number of cherries the market will produce.

Which means inevitably that some people will have to go without, sooner or later. It is one of the reasons why rural Internet Interconnect is lagging in the US. I live a very tiny village in the boonies of France, and yet my interconnect cost is only $20 a month.

Why? Because the government decided that citizens had the right to be informed (by TV, Telecom, Telephony) and that right should come at the lowest possible cost. Beyond that, whatever content they wanted could be priced at whatever the market will bear.

This notion is lost in America, which takes pride in Large Numbers bounced around the media, reported in the NYT, that makes mouths water.

What a bunch of children. Money can't buy you happiness, but it should be able to buy you a decently priced interconnect ISP.

RAPIER
CITY OF ANGELS

It's really boils down to control and domination. The realm of patent abuse has gone off the charts. Patents are being used by too big corps to dominate and control large marketplaces and LIMIT choices and increase costs to consumers thereby increasing their profits. Frenzied patent activity is occurring in every market; genetically modified food (and seeds), bio-med, etc. It's just another method to noose consumers with technology.

Farmers can't get a pineapple seed without buying a patented one from a giant Japanese firm because they GMOed it so now they own all the pineapple seeds.

Most of these corps don't create anything new. They just suck up other entrepreneurs' and inventors' ideas or products and/or steal them. A smaller entity or an individual has no chance to fight them in court. What are these patent vampires really producing that is truly beneficial to society at large? Drone jobs? Disposable technology to contaminate the planet further? Too rich executives? Contributing to an elite economic class and destroying the middle class? What is their true value to western civilization beyond Wall Street money changing and fostering a trend towards corporate state fascism?

Recently, congress was attempting to 'reform' the patent office filing from who had the idea first to who files first. Mammoth corporations employ mammoth law firms to do all that legwork. Tesla died poverty stricken. JP MORGAN bought or stole his ideas.

_______________

So, the present seems to favor a future characterized by economic monstrosities, also known, gingerly, as too big to fail.

The mind as lens into the future

2010-12-29T09:44:00.001-08:00

Vannevar Bush
Originally uploaded by UltimateLibrarian

Vannevar Bush, dean of engineering at M.I.T., in The Atlantic, July 1945:

Consider a future device for individual use, which is a sort of mechanized private file and library. It needs a name, and, to coin one at random, "memex" will do. A memex is a device in which an individual stores all his books, records, and communications, and which is mechanized so that it may be consulted with exceeding speed and flexibility. It is an enlarged intimate supplement to his memory. It consists of a desk, and while it can presumably be operated from a distance, it is primarily the piece of furniture at which he works. On the top are slanting translucent screens, on which material can be projected for convenient reading. There is a keyboard, and sets of buttons and levers. Otherwise it looks like an ordinary desk.

In one end is the stored material. The matter of bulk is well taken care of by improved microfilm. Only a small part of the interior of the memex is devoted to storage, the rest to mechanism. Yet if the user inserted 5000 pages of material a day it would take him hundreds of years to fill the repository, so he can be profligate and enter material freely.

Lead time to another harvest...

2010-12-10T09:29:00.000-08:00

I've been arguing on different forums that people got addicted to the late '90s returns on hi-tech innovation, without understanding that they were harvesting the fruits whose seeds were planted for ~45 years (read, investments in fundamental science and such). In a recent exchange on LinkedIn, the following link came up.

Right now, we can see that innovation still goes on in the Military and bio-sciences. Indeed, it's due to the big money spent on these.

From Siprnet to Cablegate: An information system gone wrong

2010-12-01T05:01:00.000-08:00

SIPRNet is an acronym that stands for Secret Internet Protocol Router Network. SIPRNet is "a system of interconnected computer networks used by the United States Department of Defense and the U.S. Department of State to transmit classified information (up to and including information classified SECRET) by packet switching over the TCP/IP protocols in a 'completely secure' environment." It came into being in the aftermath of 9/11, as a way to share information easily among the many government employees, with the objective, or hope, that key intelligence no longer gets obscured in information silos or "stovepipes."

SIPRNet is an information system, or a combination of people and technology. The whole Cablegate episode becomes also interesting from the perspective of our confidence in, and expectations from, technology. One should only recall the early rhetoric surrounding internet technology, which probably made its way also to/from the State Department.

Now, we are waiting again for technology to save us from peak-oil.

In all these instances, I ask, where have the investments been? Not in people, it appears...

ideas in motion: covering mirrors

Question

2010-08-16T21:31:00.000-07:00

Without following the finer points bibliophiles make in reaction to e-book readers, how closely and how soon will the book industry resemble the music and film industries?

A hard disk drive back in 1956... with 5 MB of storage

2010-07-14T18:47:00.001-07:00

In September 1956 IBM launched the 305 RAMAC, the first 'SUPER' computer with a hard disk drive (HDD). The HDD weighed over a ton and stored a 'whopping' 5 MB of data. Do you appreciate your 8 GB memory stick a little more now?

deconstructing the iphone

2010-07-06T10:03:00.000-07:00

Globalization is apace, despite increasing awareness to negative externalities, jobs displacement and higher costs. In 2006, it was Sonicare, now is iPhone. Some things never change, they keep mutating at the edges.

Swan Song?

2010-02-05T05:52:00.001-08:00

Microsoft’s Creative Destruction
By DICK BRASS

AS they marvel at Apple’s new iPad tablet computer, the technorati seem to be focusing on where this leaves Amazon’s popular e-book business. But the much more important question is why Microsoft, America’s most famous and prosperous technology company, no longer brings us the future, whether it’s tablet computers like the iPad, e-books like Amazon’s Kindle, smartphones like the BlackBerry and iPhone, search engines like Google, digital music systems like iPod and iTunes or popular Web services like Facebook and Twitter.

Some people take joy in Microsoft’s struggles, as the popular view in recent years paints the company as an unrepentant intentional monopolist. Good riddance if it fails. But those of us who worked there know it differently. At worst, you can say it’s a highly repentant, largely accidental monopolist. It employs thousands of the smartest, most capable engineers in the world. More than any other firm, it made using computers both ubiquitous and affordable. Microsoft’s Windows operating system and Office applications suite still utterly rule their markets.

The company’s chief executive, Steve Ballmer, has continued to deliver huge profits. They totaled well over $100 billion in the past 10 years alone and help sustain the economies of Seattle, Washington State and the nation as a whole. Its founder, Bill Gates, is not only the most generous philanthropist in history, but has also inspired thousands of his employees to give generously themselves. No one in his right mind should wish Microsoft failure.

And yet it is failing, even as it reports record earnings. As the fellow who tried (and largely failed) to make tablet PCs and e-books happen at Microsoft a decade ago, I could say this is because the company placed too much faith in people like me. But the decline is so broad and so striking that it would be presumptuous of me to take responsibility for it.

Microsoft has become a clumsy, uncompetitive innovator. Its products are lampooned, often unfairly but sometimes with good reason. Its image has never recovered from the antitrust prosecution of the 1990s. Its marketing has been inept for years; remember the 2008 ad in which Bill Gates was somehow persuaded to literally wiggle his behind at the camera?

While Apple continues to gain market share in many products, Microsoft has lost share in Web browsers, high-end laptops and smartphones. Despite billions in investment, its Xbox line is still at best an equal contender in the game console business. It first ignored and then stumbled in personal music players until that business was locked up by Apple.

Microsoft’s huge profits — $6.7 billion for the past quarter — come almost entirely from Windows and Office programs first developed decades ago. Like G.M. with its trucks and S.U.V.’s, Microsoft can’t count on these venerable products to sustain it forever. Perhaps worst of all, Microsoft is no longer considered the cool or cutting-edge place to work. There has been a steady exit of its best and brightest.

What happened? Unlike other companies, Microsoft never developed a true system for innovation. Some of my former colleagues argue that it actually developed a system to thwart innovation. Despite having one of the largest and best corporate laboratories in the world, and the luxury of not one but three chief technology officers, the company routinely manages to frustrate the efforts of its visionary thinkers.

For example, early in my tenure, our group of very clever graphics experts invented a way to display text on screen called ClearType. It worked by using the color dots of liquid crystal displays to make type much more readable on the screen. Although we built it to help sell e-books, it gave Microsoft a huge potential advantage for every device with a screen. But it also annoyed other Microsoft groups that felt threatened by our success.

Engineers in the Windows group falsely claimed it made the display go haywire when certain colors were used. The head of Office products said it was fuzzy and gave him headaches. The vice president for pocket devices was blunter: he’d support ClearType and use it, but only if I transferred the program and the programmers to his control. As a result, even though it received much public praise, internal promotion and patents, a decade passed before a fully operational version of ClearType finally made it into Windows.

Another example: When we were building the tablet PC in 2001, the vice president in charge of Office at the time decided he didn’t like the concept. The tablet required a stylus, and he much preferred keyboards to pens and thought our efforts doomed. To guarantee they were, he refused to modify the popular Office applications to work properly with the tablet. So if you wanted to enter a number into a spreadsheet or correct a word in an e-mail message, you had to write it in a special pop-up box, which then transferred the information to Office. Annoying, clumsy and slow.

So once again, even though our tablet had the enthusiastic support of top management and had cost hundreds of millions to develop, it was essentially allowed to be sabotaged. To this day, you still can’t use Office directly on a Tablet PC. And despite the certainty that an Apple tablet was coming this year, the tablet group at Microsoft was eliminated.

Not everything that has gone wrong at Microsoft is due to internecine warfare. Part of the problem is a historic preference to develop (highly profitable) software without undertaking (highly risky) hardware. This made economic sense when the company was founded in 1975, but now makes it far more difficult to create tightly integrated, beautifully designed products like an iPhone or TiVo. And, yes, part of the problem has been an understandable caution in the wake of the antitrust settlement. Timing has also been poor — too soon on Web TV, too late on iPods.

Internal competition is common at great companies. It can be wisely encouraged to force ideas to compete. The problem comes when the competition becomes uncontrolled and destructive. At Microsoft, it has created a dysfunctional corporate culture in which the big established groups are allowed to prey upon emerging teams, belittle their efforts, compete unfairly against them for resources, and over time hector them out of existence. It’s not an accident that almost all the executives in charge of Microsoft’s music, e-books, phone, online, search and tablet efforts over the past decade have left.

As a result, while the company has had a truly amazing past and an enviably prosperous present, unless it regains its creative spark, it’s an open question whether it has much of a future.

Dick Brass was a vice president at Microsoft from 1997 to 2004.

tis hurtin'

2009-12-11T21:42:00.000-08:00

Stayin' alive long enough can show one that the stronger some views were held to more ironic they seem now. Case in point, the Mini-Microsoft Blog and its author who goes by the name of Mini. A few years back, a smart and differently outspoken Microsoft employee--read, anonymous yet very publicized--decided to create a blog whose mission can still be read on the frontispiece:

Let's slim down Microsoft into a lean, mean, efficient customer pleasing profit making machine! Mini-Microsoft, Mini-Microsoft, lean-and-mean!

A recent visit to the MiniMsft blog has revealed the following excerpt, to which I append my comment, left at that site as well:

The looming threat of continuing RIFs and layoffs indicates that Microsoft is just too big for its leadership. It is beyond their capabilities to wrap their minds around everything Microsoft is doing. It has gotten away from them. What needs to go? Hell, I don't know even what all these people do, and you want to decide who stays and goes?

We've lived to see you write this--been waiting for a while ;-)

Now, what would you expect, Goldilocks? Of course nobody knows how many employees MSFT ought to cut! It's always been like this, too much either way. Oh well, soon we'll talk about executive compensation and I may be getting myself in trouble...

Yes Mini, dying from 1,000 paper cuts aint's easy, be careful what you wish for!

Nota Bene: There was a time I used to be a regular visitor of the Mini-Microsoft blog, check it out!

A day in the life of YOU

2009-11-25T16:59:00.000-08:00

"Directed by the French motion graphics studio H5. It features a day in the life of a woman working in the London's Square Mile solely through infographics; this includes labeled close-ups of everyday objects, product lifecycles, schematic diagrams, charts, and is generally illustrated in a simple isometric visual style."

Notice the difference?

2009-11-11T20:31:00.000-08:00

I am talking about the difference between a Japanese executive and an American. Of course, you'd have to judge the latter by the absence of an open position that is critical of their actions and shows so much concern to the extended group of stakeholders a corporation has even when not acknowledged as such. Following is the open position adopted by Akio Toyoda, president of Toyota, and heir of the company's founder. Is it all a show of false public humility, or something more serious? Would it behooved, say, Chuck Prince or Dick Fuld to issue statements like this? Has anyone learned of any corporate titan in the US saying anything that amounted to an apology?

____________________________
Thank you very much for coming today.

I was appointed president of Toyota Motor Corporation at the Board of Directors meeting held on June 23rd, following the Ordinary General Shareholders’ Meeting on the same day. In addition to my comments here today, our executive vice presidents will provide remarks on their areas of business.

The global automobile industry has been facing extreme hardships since the latter half of last year. As for Toyota, we ended the last fiscal year with an operating loss of 461 billion yen. We expect our losses to deepen this fiscal year, and so all of us in the new management team at Toyota feel like we are setting sail during a storm.

Since the birth of Toyota, the company’s philosophy has always been to “contribute to society.” The first article of the Toyoda Precepts, our original statement of purpose as a company in 1935, states that we must contribute to the development and welfare of each country we operate in by working together—regardless of individual position—in faithfully fulfilling our duties. In other words, we must manufacture high-quality vehicles for the benefit of society.

“Contributing to society” at Toyota means two things. First, it means, “to manufacture automobiles that meet the needs of society and enrich people’s lives.” And second, “to take root in the communities we serve by creating jobs, earning profits and paying taxes, thereby enriching the local economies where we operate.”

Unfortunately, we are currently losing money and that negatively affects the amount of revenue we pay the government in Japan and our host countries. Like everyone in the company, I am extremely frustrated about this.

So, we must start again from the very bottom up.

The 70-year history of Toyota has been filled with many challenges. Toyota stood close to the verge of bankruptcy in 1950 and suffered a labor dispute that reduced its workforce by a quarter. As a result, the president and other top executives chose to take responsibility for the situation by resigning. But this experience also marked the starting point of the strong labor-management relations that have supported Toyota to this day.

In the 1970s, air pollution standards and two oil crises again threatened the auto industry, but we prevailed by building cleaner, more fuel-efficient cars. In the 1980s, we faced trade frictions and voluntary export restraints that threatened our business, but we overcame these by expanding production outside Japan.

So, Toyota has overcome many challenges during its seven decades of business. What has made this possible is the way we make our cars under our “customer first” and “genchi genbutsu” principles. Furthermore, all Toyota companies around the world have risen to the challenge each time to engage in technological innovation and increased productivity.

During the last 10 years, Toyota has seen a big increase in international sales and production. Since 2003, the pace of expansion has exceeded half a million vehicles a year. Since Toyota’s mission is to contribute to society through the manufacture of automobiles, I do not think we were wrong to expand our business in an attempt to meet the needs of customers around the world. But we may have stretched more than we should have, and that made us unable to capitalize on Toyota’s traditional strengths.

With this in mind, the way forward is clear.

As a company, we must reaffirm and all share the mission of contributing to society through the manufacture of automobiles. And, we must implement the principles Toyota has held to firmly through times of trouble.

Yes, the going will still be tough for the next few years, but if all Toyota companies around the world come together and reaffirm Toyota’s mission, Toyota WILL bounce back. My immediate goal is to work from this low point in our business upward so we can return to profitability as soon as possible.

To do that, I first want to build an unwavering commitment throughout the company to “strive to make better cars”—in other words, I want Toyota to have a “product-focused management.”

Rather than asking, “How many cars will we sell?” or, “How much money will we make by selling these cars?” we need to ask ourselves, “What kind of cars will make people happy?” as well as, “What pricing will attract them in each region?” Then we must make those cars.

The recently released third-generation Prius is a prime example of this spirit. I am certain this car will satisfy both the needs of society as well as our customers.

The second thing I want us to focus on is making sure our management places priority on meeting the needs of regional markets. In other words, a management style that closely watches consumers and markets, notices changes, and allows those best acquainted with a particular market to make prompt decisions.

The structure of our new executive vice presidents reflects this idea. I have asked each one to take responsibility for specific regions around the world.

Together, we will create clear “Regional Vision” plans by determining what role Toyota should play and what we want to achieve in each region. We will also consider our capacity and the market situation in those regions, in order to identify areas where we want to advance, and areas where we need to take a step back. These decisions will allow us to better prioritize the allocation of our resources.

Through these processes, I would like to make Toyota’s product development and product lineup more region-focused. We will change our policy from achieving “a full lineup everywhere” to “a lineup necessary to meet the needs of each region”. We will also launch new vehicles that anticipate consumer needs and are exciting to drive.

To further explain what I mean, let me give you a brief overview of the direction we will be taking in each region.

Mr. Ichimaru, executive vice president, will oversee the Japanese market.

We launched the new Prius in Japan on May 18th and it has enjoyed wide acclaim with orders now exceeding 200,000 vehicles: a record. The new Prius is equipped with our latest hybrid system, and I believe the response to the vehicle shows our customers’ appreciation for its technology.

Strong sales are also the result of the Japanese government’s stimulus plan: the so-called “eco-car tax deduction” and the “scrap incentive for buying eco-cars.” I believe that wider adoption of eco-friendly vehicles will not only reduce CO2 emissions, but also lead the auto industry to focus more on environmental solutions that will help create a new, stronger economy. I would like to express my appreciation to the Japanese government for forming and implementing this policy in a timely manner, and hope that it will continue its efforts.

When it comes to the Japanese market, we must look at the entire market, including so-called “mini-vehicles” and used cars along with new cars. If we look at it this way, the size of the overall market is about 12 million vehicles. This compares to the traditional view of the new-car market, which excludes mini-vehicles and is expected to be less than 3 million units this year.

With this in mind, there are plenty of ways for us to increase sales as long as we provide attractive products. Furthermore, total vehicle ownership in Japan stands at 75 million vehicles, so business opportunities are abundant.

In order to approach our business from this new angle, we must reexamine our advertising and marketing as well. To that end, I am considering setting up a company that specializes in marketing. This new company will place the utmost priority on our approach to customers, and provide fresh ideas that will in the future be fed back to Toyota so that we can develop even better products.

Next, I would like to touch upon North America, which Mr. Niimi, executive vice president, will oversee.

Sales in the North American-market have dropped off sharply recently, but with vehicle ownership at 250 million units and with the population increasing, I firmly believe this market will recover.

And when it does, it may have a different look than today’s market with its focus on full-sized models. So we will need to be insightful in our approach to the full-sized-vehicle segment, where the market could shrink further.

That said, North America has been a major engine of growth for Toyota to this day, and it will remain an extremely important market for us. Toyota will further strive to establish a more autonomous operation in the region, continue planting roots in the local community, and work as a member of North American society to produce the best vehicles there.

As for the European market, Mr. Sasaki, executive vice president, will oversee this region.

Europe is full of major automakers, each with its own history and roots in national markets. Although Toyota has devoted a lot of resources to its European strategy over the years, to be more successful, we need to do more than just seek increased sales and market share. Instead, we need to develop a distinctive Toyota business model in the region so we are not lost in the crowd. In that regard, what distinguishes Toyota most is our hybrid technology. So, as stricter environmental regulations come into place, we are gradually shifting our focus to the hybrid segment. We are confident that this will create a stronger position for Toyota in Europe.

Europe is also a place where Toyota can learn about “automotive culture.” I have always admired the fact that cars play a major role in the lives of Europeans and that they love the experience of driving. Hopefully, we can find ways to transfer that excitement to other regions around the world.

Next, I would like to address emerging markets, such as China, Asia and South America. Mr. Funo, executive vice president, will oversee these regions.

These markets have amazing growth potential, and I can see that China will someday stand alongside the United States as a giant single market. In order to meet customers’ needs, we will—as always—take straightforward steps. First, we will take time to walk in our customers’ shoes, and then promptly launch competitive products that address their needs. Expanding our reach in these markets will help increase our overall sales volume and profits, so I am determined to establish proactive business plans in these areas.

This will require more than just introducing products that are available from other regions. We must make every effort to produce high-quality products targeted to regional needs and sell them at affordable prices.

We have had success with the Innovative International Multi-purpose Vehicle business model in emerging markets, and I would like to set up another business model for such markets.

These are the main points of my vision for Toyota’s markets around the world.

Now, let me turn to our product development and product line-up. Mr. Uchiyamada, executive vice president, will be responsible for these areas.

As I said earlier, I strongly believe that in order to achieve a low-carbon society, we must further enhance environmental technologies that achieve low fuel consumption. To that end, we will seek to improve the environmental performance of both our hybrid and non-hybrid vehicles.

However, this alone is not enough to ensure our success.

We also need to offer vehicles that bring joy to the driving experience and move people—emotionally. We also need to offer technology that anticipates peoples’ needs.

Together with Mr. Uchiyamada, I will work hard to develop cars that people fall in love with.

At the press conference in January, I talked about my desire to become “a president who is closest to the frontlines, or genba.” I believe that the essence of management lies in the genba, and Toyota employees play a vital role there.

A company’s competitiveness increases when its employees have a chance to develop and improve. There is a phrase we have always had at Toyota that says: “build quality in at each work process.” When each of our employees strives to do that, the result is high-quality cars. So, I believe that the basic principle of management is to think together and develop together with employees so we truly build quality into each stage of our work.

I have been with Toyota for just 25 years, which is short for a person taking up my position. But even during that time, I am thankful for the numerous opportunities to learn and to receive support from many people in many ways.

The reason Toyota has been able to grow is because of the strong support we have received from each and every one of our customers, dealers, suppliers, Toyota Group companies, and our predecessors in the company.

I would like to take this opportunity to express my sincere thanks and appreciation to them as well as our shareholders and stakeholders around the world.

I pledge to implement the steps I talked about today in a levelheaded manner, without being overzealous, while being united with others, and to never forget the gratitude I feel for these people.

June 25, 2009
Akio Toyoda
President, Toyota Motor Corporation

ideas in motion: still enjoying the internet while it's here

2009-08-12T10:19:00.000-07:00

By now, most of us take the internet for granted, not unlike any utility resource. Its popularity is seldom considered together with its vulnerability--technical, behavioral, political, etc. In fact, I would ponder as whether or not the vulnerability of the internet grows with its popularity, especially beyond reaching some adoption threshold.

Here are two directions in which the internet as we know it today may go into:

1. Stuff of any value won't be free of charge;
2. Countries, or groups thereof, will enforce permanent or temporary "safe areas;" communications in and out of such areas will have to be cleared at router level.

In evaluating the above suggestions, just consider the "unipolar world" as a brief between bi- and multi-polarity, and the fact that advertising alone cannot pay for it all. In fact, if one really understood the eventual costs of the "free stuff," one might volunatrily want to pay for it, no strings attached. Just like paying to have your phone number unlisted...

Crisis Rebranding

2009-01-13T21:00:00.001-08:00

It's a Jungle Out There...in the world of venture capital, that is

2008-10-13T06:42:00.000-07:00

Sequoia Capital on startups and the economic downturn

View SlideShare presentation or Upload your own. (tags: depression recession)

Sequoia Capital recently made a presentation to its portfolio companies about how to try to survive an economic downturn. Here's the soundtrack:

Open Letter, for O8

2008-09-23T18:44:00.000-07:00

Small is Beautiful!

Small(er) enterprise is better than (quasi-)monopolies;
Universal healthcare is both good and necessary;
Let wages converge lower;
Put money into the following infrastructures: education, energy efficiency, internet, transportation;
Encourage innovation and exports;
Encourage quality;
Bring smart people in, our universities should be the Ellis Island of the 21^st Century!

_________________
The key to the above is Wall Street: How good of an approximation for market-based capitalism?

Idea For How Wall Street Will Morph

2008-09-23T18:11:00.000-07:00

That Wall Street is transforming quickly goes without saying. How will it morph? Here's an idea from Barron's Michael Santoli:

The upshot is a massive capacity reduction in Wall Street. That won't matter for a while, until the business stabilizes, and returns may never get back to, say, 2006 levels. But before long, the brass at Goldman, Morgan and at a handful of smaller brokerage shops might allow themselves a smile at what the chaos has wrought.

Related to this, the wrenching markets are setting up an endgame for this phase of the hedge-fund boom, which will lead to a painful shakeout (1,000 funds closing?). It turns out -- Guess what? -- that there's not nearly enough "absolute return" to go around to drive incentive fees on a trillion bucks in assets when markets are weak. Everyone has the same software, and the easy trades get crowded an hour after they're discovered.

This will allow the largest elite hedge-fund shops to consolidate and continue morphing into fuller institutions -- true counterweights to the Street.

How to verify such a hypothesis? Look for the professional trajectory of the biggest yesteryear names in investment banking! They either join the Blackstones of the world or go into early retirement. Indeed, can you see these guys working for/under the management of some commercial bank?

Dell: Subprime- vs. Sub[...]-casualty

2008-04-01T08:22:00.000-07:00

Recently we've become familiar with the growing waves of pain on Wall Street. However, few should have expected more pain on at Dell after its founder returned to the company about a year ago. From NYTimes Bits we learn:

Dell on Monday announced that it plans to close a desktop computer manufacturing plant in Austin, Texas. The company said the closure is part of a massive reorganization effort to revive Dell while also cutting $3 billion in costs.

Dell's misfortune (being a one-trick shop) has been amplified by Microsoft's Vista non-event. Indeed, its exclusive reliance on an optimized supply chain and Wintel has consistently made for cheap products and increasing vulnerability to Vista-type of events. When Microsoft failed to give corporations a timely reason for an upgrade, Dell was found poorly prepared to capitalize on the consumer market.

As a side note, it's interesting to see how Michael Dell's second coming wasn't that much of a comeback since Dell had always been a Dell-Rollins show. On the other hand, Mr. Dell himself believed it was a comeback since he spent quite a chunk of his own money to buy shares in the company.

-more on the subject-

MicroYahoo, Cui prodest?

2008-02-08T20:59:00.000-08:00

Google should only try to make it expensive for Microsoft (start a bidding war and leave the curse of the winner befall Microsoft);
Microsoft will finally have made the capital mistake--what will have been Microsoft's most significant loss/win? Mr. Ballmer himself.
Yahoo! will lose the game (beginning with R&D talent);
The financial community will stand to make great fees;
The regulators will make a mistake to let it happen (see the next point);
Per chance a deal goes through and a merger happens, the customers will be worse off for there are going to be fewer choices;
The smaller players in Silicon Valley will lose an exit strategy (i.e. being acquired by Yahoo! or Microsoft);

Then, why is it that some take so much to learn? Let's say it's the competitive advantage of others.

Ideally, Yahoo! will be given more time, but time looks like the ultimate luxury. Something that after the decline of private equity players only a sovereign wealth fund can afford?

Mobile-phone Wish list

2008-01-03T16:38:00.000-08:00

Here's a mobile-phone (unordered) wish list I compiled from answers I got on LinkedIn:

It doesn't drop calls;
Being able to call my phone (from another phone) and redirect all incoming calls to a number I specify;
Better voice recognition software;
VoIP calls and service switching to a my Wi-Fi network when I get to the office or home automatically--without an additional fee;
A "cell phone station" where you plug in the cell phone and all regular phones connected to the station respond to the cell phone;
GPS, for one, paired with Google Earth or Mapquest or whichever makes the highest bid to get in bed with my service provider;
A to-do and task list that syncs with the lists on my computer;
A universal contact storage so it doesn't matter which phone you have, they all sink to it;
A telnet terminal program;
The possibility to remove useless applications from my mobile phone;
Audible indications when a call is genuinely connecting, when the phone decides to quit trying, and when a call drops;
A virtual assistant--a rule-based framework that can be trained to pick up calls and reply in some interactive way, for example to offer re-scheduling a call, making sure that schedules neither overlap with each other nor with important calendar events, or to speak out selected messages based on (for example) which number is calling.

And now, here's the best answer from Kevin Howe-Patterson, with Nortel:

Get me all the way from the airport front door (paying for taxi) to my hotel room without stopping at desks, kiosks, check-in stands or have to waive some type of crazy paper boarding pass, credit card, airline card, .... All-in-one electronic service. Give me that and I'll be happy. Checking out and getting back home the same way would be nice too.

Emotional brand building for enterprise software

2007-10-29T22:10:00.000-07:00

The attentive visitor of via fCh has seen how much fun the Q&A section of LinkedIn can be. A while back I posted the question Emotional brand building for enterprise software?

Here's a little background on the above question: During my formal days in enterprise software I used to say that if advertising sold servers then we should have hired some actress/model to sell them like shampoo. At that time, this was rather my reaction to those folks in marcom who had the budgets and seemed to have spent most (their) resources on some template or color scheme.

Not only when associated with consumer products rather than enterprise IT infrastructures, brands have an emotional component.

Even if short lived, the MS Office paper clip animated character was aimed to assist while driving emotions--alas, negative. In the enterprise space, we have an end-user component of most software, but it is seldom that the users themselves make the buy-decisions. Such decisions, in case they are still made in our time, belong to people who are several levels away from that end-user component.

Now, a few additional angles for the action & thinking types:

Do the IT infrastructure-providers themselves "put" enough emotion into their products? To begin with, think of the penguin associated with open source (OS) projects! I know, one may object that mere emotion is what fuels a great deal of the OS movement.
Can a regular organization support concepts like "movement," or "emotion as fuel"?
Even if the organization were to foster emotionally driven working environments, will that turn into emotionally charged products?

And, for those who cannot make it to LinkedIn Q&A, here's my choice for the best answer:

There is an old saying that goes something like this: "no one was ever fired for selecting IBM."

In a prior line of work, I represented a company with about 5% market share. We competed with a company that held 50% market share.

We often competed head-to-head for business and the decision was always made by a purchasing group.

Whether we were the better choice or not in any given situation, my company ALWAYS had to battle the perception that the other company was the safe choice.

To use a boxing analogy, we always had to win by knockout; if the fight went the distance, the scorecards always favored the reigning champ.

Fear may not be the angle you are looking to exploit, but it is a very powerful emotion.

Looking at the converse, I remember an old Mac commercial about a corporation measuring employee productivity on Macs versus PCs and the character says: "But that is not fair, people LIKE the Mac."

If a provider was able to co-opt the position of achieving high levels of adoption amongst users, I imagine that emotion would be very powerful for an an enterprise solution.

NOTA BENE: The author of the above answer comes from sales. Obviously, the answer turns the initial idea/concept behind my question upside-down, while still being correct--Yes, negative emotion can be the default emotion in the brand tactics/strategy? of IT infrastructure vendors.

The Media They Are A-Changin'

2007-08-01T01:05:00.000-07:00

Despite looking like Rupert Murdoch's takeover of the Wall Street Journal was resisted by some high-mindedness of the Bancrofts' preoccupation with editorial integrity at WSJ, green-light for the deal has come as Murdoch agreed to pay an extra $40M in fees for the Family's i-bankers and attorneys. I'm sure we'll learn more about this inter-family affair so let's think for a while what this may mean for the print media landscape.

Background: The US print media alone are a $15B/year business whose overwhelming reliance on advertising has been under attack from:

the internet as an alternative source for news and commentary;
the internet as support for a better advertising model;
the alienation of their readers.

Despite trying consolidation and other "financially-rational" business tools, there was little, if not worse, that the print media could do about the above three developments. In the newspaper business, the last two standing had been The New York Times, and The Wall Street Journal, until the Bancrofts gave in; Now it's just NYTimes--still resisting Morgan Stanley calls for reorganization and such.

The Murdoch Factor: Rupert Murdoch could be described as the ultimate newspaper man--in addition to being one of the sharpest businessmen in media and media-men in business. Built patiently over decades, by sometimes ignoring the calls from the financial community, his media empire is best positioned to capitalize, on a global scale, on the synergies at the convergence of all media--the internet, satellite, print, etc. Murdoch may well shape the next media business model for he's got the most pieces of this puzzle. In a sense, media will likely become more democratic--easier to access, lower price, wider distribution.

Likely Re-actions: WSJ.com was among the select few internet media properties still charging for access. In case Murdoch decides to make money at the convergence of media and lowers to price, expect FREE online versions of your favorite publications. Foreign Affairs, Atlantic Monthly, NYRB, or Harper's will likely be a cost-free click away from you. Consequently, at least part of the $15Bn will be re-routed via the internet. Online publications will be wide-open to readers-input, through blogs and other MySpace emulating mechanisms. An early taste of the audience-generated opinion and commentary one only has to enter the newly added blog section of NYTimes. The audience generated content at NYTimes tops most contributions of The Times' own staff's through richness of perspectives and intelligence. The online versions of the newspapers will take a life on their own, becoming the loci for extended and virtual town-halls. Unlike their print versions, the content will be rich and continuously re-freshed. You think some about the rest and let us know by way of COMMENTS.

For a view into the failed mechanics of news-media, take a look at Goodbye to Newspapers?

A victory of usability and one clear victorThe cell-phone consumer

2007-07-06T17:47:00.000-07:00

Suffice it to say that iPhone is what you could at most have dreamed about, yet as soon as you see it you may well say: This is it! Any more appreciative talk about iPhone, the product, is akin to belaboring the obvious. Analyzing iPhone, the experience, can yield useful insights. Defining the iPhone experience at the intersection of the iPhone product and AT&T' Edge service is the first step. And here's where the problems start for the iPhone experience.

Indeed, AT&T Edge is so inadequate that one is left wondering why Steve Jobs is betting the (early) commercial success of iPhone on a sub-par communications network. For one, Jobs knew better iPod, the product, had to be complemented by iTunes in order to make a successful iPod experience. And, to top it all, AT&T and iPhone are in a long term exclusive relationship. At this time, for all we know, AT&T is working hard to update its network to 3G and has the lion share of the cell-phone market in the US.

This situation begs the question of the nature of the deal behind such marriage. Financially speaking, at least until AT&T gets to 3G, it could be a zero-sum game: Whatever Apple misses due to exclusivity, AT&T pays back in one way way or the other. And, as if to keep a 1/2 ace in its sleeve, iPhone has Wi-Fi connectivity.

Moreover, to protect its own iPod franchise, the storage capacity of the iPhone is rather limited and no extension slot, for memory or applications, is provided. This is despite Apple's calling the iPhone the best iPod to date.

What are the other players in the market going to do?

Nokia is probably the best positioned to counter Apple's iPhone. If MYLO is any indication, Sony/Ericsson will most likely keep overreacting with some feature-laden product. Samsung still has to overcome technology hurdles to play in the premium segment. Motorola and Palm will take at least a temporary hit until they can turn on real innovations. RIM is probably protected until the market figures out whether or not iPhone is a contender in corporate email.

The discussion for wireless carriers goes in two directions. For US-based carriers, the best hope is to roll-out products mimicking iPhone before AT&T upgrades its network. The non US-based carriers will most likely enter some sort of mating dance contest to win Apple over--the market leaders will be the probable winners.

Regardless the strategies each player will implement, there is already a clear winner, the consumer.

For those readers who are still to get their hands onto an iPhone, I suggest watching the following two clips as a good approximation for the better half of the experience:

Next on MySpace or else

2007-07-06T13:21:00.000-07:00

It so happens that I became more accustomed with MySpace on behalf of a special type of client, a rap musician from West Hollywood. From afar, MySpace is one of the early success stories of Web 2.0, a place where user generated content and communities are thriving.

In theory this a marriage made in heaven: A virtual place to loiter is provided to those whose most resource is time. On the supply side, Mr. Murdoch makes most money, on advertising, while paying for technology. For the aspiring artist, with little DIY technology skills, MySpace seems like the shortest path to the audience. However, the MySpace audience is fickle and very hard to monetize on. In a sense, MySpace replaces the studios in that it provides a launching pad for many artists, yet it is only in theory that the successful artist stands to make some money. MySpace expenditures are mostly about the technology while marketing costs are very low--so it's the only one that can scale.

Consequently, artists may do better if they leverage MySpace-type of websites as mere portals into online properties they actually own and manage. For its part, MySpace can still make the extra steps and offer more to the aspiring artists, not only in terms of revenue sharing, but also in terms of providing support for a sustainable business model for artists. For example, as far as features of such technology support, MySpace can provide analytics, traffic management, payment systems, etc.

For practical details on enhancing either side of the virtual community equation, contact fCh.

An IPO, A New Model

2007-04-26T08:45:00.000-07:00

Last week we saw the IPO of MetroPCS Communications Inc. (PCS). This is a provider of unlimited wireless communication service for a flat rate with no signed contract. Its target demographics consist of budget- and value-conscious customers. Customers pre-pay between $35 and $50 monthly for unlimited levels of service. For $50/month, one gets unlimited talk, instant messaging, and internet access--Sprint-Nextel is running a test whereby one gets unlimited access to all services for $150/month. MetroPCS deploys and operates an all-digital network based on third-generation infrastructure and handsets. This is a new model for the US markets, yet quite common in Europe.

Likely effects of the growth of the MetroPCS model are: the erosion of the traditional wireless operators power and margins, the commoditization of the space, followed (hopefully) by improved quality of signal, and a-la-carte service and product offerings. The handset manufactures able to sell cheap and reliable phones are also likely winners. It is also interesting to learn the extent to which MetroPCS' evolution will mirror that of AOL's.

Was YouTube Worth It?

2007-03-09T20:33:00.000-08:00

NYTimes DealBook has an interesting feature on the merits of the $1.6Bn YouTube deal Google made: Was YouTube Worth It?. Eric Schmidt, Google's CEO, recently said about the deal:“If you can build a sustainable eyeball business, you can always find clever ways to monetize it." Make sure to follow the previous link for some very insightful comments from the NYTimes readers.

Here's my answer:

By paying that much, with its own highly priced stock, for YouTube, Google also made sure neither Yahoo nor MicroSoft would get it.

The challenge is still with Google, and those folks who kept buying GOOG above $450 a share, to turn YouTube into a money making machine.

I tend to agree with Eric Schmidt on this one, it's more important to have the traffic and then you can monetize on it. Among the challenges one can think about the copyright issues (in case they keep coming up the whole YouTube model has to change), and the many alternative sites.

At the end of the day, the winner will be the company(/ies) that can assemble the best video-infrastructure (storage, access, publication, scalability, reliability, etc.) the fastest. The current limits will also have to be relaxed--i.e. size of the video-clip and so on. Then, attach a community, like Flickr and Amazon, and you have a money machine.

For some earlier thoughts on this, check this up: Long Tale

Blogosphere++

2007-02-06T22:42:00.000-08:00

About two years ago, when I started to publish Hattrick, I had an entry about my take on the blogosphere--what makes it work and how from an individual perspective. That piece is available here: Blogs are free enterprise capitalist expressions of communication.

Meanwhile, Mini-Microsoft came along and, with it, the blogosphere took another turn. Corporate communications changed by bringing together constituencies kept separate until then--employees, investors, customers, etc. Here you can access some of my contributions to this turn.

Now, it's time a company set its website as a BLOG. The company, arvetica, in its own words, help[s] companies design and implement innovative projects, and seems to be about business and creativity, just like CREIRE.

I wonder what the next stage of the blogosphere will be.

Microsoft-Novell open-source agreement from a different perspective

2006-11-26T20:47:00.000-08:00

Here's the beginning of a conversation, from a newsgroup populated by entrepreneurs:

(Microsoft + Novell) / Linux = Free BSD

This is an open question for the MORE informed in term of OS / LINUX / FreeBSD. We saw the debacle of SCO law suit about Linux in the last couple of years. Now Microsoft and Novel trump in on Linux again.

Is this the sign that it is time to move to FreeBSD?

Questions for the BSD knowledgeable people:

Will any of these stunts ever impact FreeBSD?

Was FreeBSD conceived form the beguiling on a solid foundation where software giants will not come up with a legal pact and find a way to tell you - "Hey you! -- You've used the free software for the last 5 years - here is the bill, pay it or get sued"

I do not mind supporting open source software for a few hundred bucks, but if we are forced to the multi-thousand dollar licensing with the commercial companies, it adds to the headaches of finding money to get a business off the ground.

I think there nothing to worry about having to pay more for using open source products. In fact, until the whole landscape settles (medium term), some prices may come down. For more info, check out the comments section.

Immelt on things of general (end electric) concern

2006-11-12T19:25:00.000-08:00

21 months ago, I published Immelt on hitting Wall Street quarterly numbers. That posting was about the way Jeffrey Immelt, the GE's CEO, understands the relationship between a CEO and Wall Street. The CEO communicates the company strategy, and then follows-up, every quarter, with the numbers. It sounds simple.

Over the past two years, communications is what Mr. Immelt has done. And I am not talking about his addressing as much Wall Street through some dedicated channels as the public at large (customers and potential investors alike). Indeed, chances are you've seen Immelt's positions on ecomagination or US executives pay.

On the other hand, the year of the large cap stocks, as the investment analysts dubbed 2006, is coming to an end, yet few large caps have done as well as predicted. GE stock price returned to $35, where it started the year, after it reached a low of $32. So, not counting the dividends, GE would have been in business for itself had one considered only its stock price.

From an interview with Mr. Immelt, recently published in Financial Times, we learn more about his perspectives on the world as it relates and surrounds GE. This is the type of statements that we seldom learn from CEOs for it says little about here and now. Moreover, his opinions may well indicate, even if indirectly, what has been going on at GE over the past year or two. Here they are, followed by my comments:

"If you put globalisation to a popular vote in the US, it would lose. It is anissue on which business has to find better ways to present its case."

I don't think it's about presentation alone since the real wages of the US workforce have gone down over the past few years amidst growing corporate profits. Some people hint at the need for better re-distribution or protectionism, I think it's about the need for better education and a more trade/investment-open, and copyright respectful, China.

"If we didn't have access to global markets we would lay people off in Cincinnati and Milwaukee, so [globalisation] is real."

This is presented as markets only, I would also add, especially from the perspective of GE- or Microsoft-like businesses, the need for qualified workforce.

"If the US continues on the current trend towards a service-based economy, it could easily end up with wealth concentrated on the two coasts and bigger discrepancies between rich and poor."

What a refreshing perspective on the state of clothing of the emperor (read: services based economy.)

"People think that running GE is like driving a stagecoach: if horse number three breaks down, take it out and shoot it. This way you develop a management team that would rather be bought than stay to fix things and build businesses for the long term."

If this is how things are in reality at GE, Mr. Immelt is to be commended, regardless of the perceived lack of performance registered by the stock price. If it's only a matter of perception or investors' taste, give it some time and reality will take over. It should also be noted that GE lost one of its top managers to a hedge fund, so even GE management can be bought.

"Private equity funds are the conglomerates of this era. Strategic buyers have not seized the moment in terms of doing deals they could have done to build their companies for the long term. The vast majority of them only add value through financial, rather than operational improvements. If you took any of GE's top managers and told them that you have to bring the [profit] figure from 4 to 7 in three years, and then they could drop the reins, almost any of them could do it."

Considering how the hedge/private funds seek to raise money in the public markets, and the frenzy ensuing the pursuit of better alpha, the time of reckoning is closer than the image in the mirror. GE thus becomes the safe bet.

"There are people who like thematic work, who build their careers two years at a time, but I want to hire people who are curious to see stuff through to the end."

Most any hiring manager would say the same thing. GE, by being so diverse, large and keen on accountability, may offer a unique chance for the individual employee to grow professionally without leaving the company.

"I would not tolerate anybody in the company being satisfied with being number four."

This is just to make sure that not everything has changed since Jack Welch retired--the individual and operational entity measures of success have been kept. One thing Mr. Immelt changed was to dispose of the insurance business that made Jack Welch look so dear with the investors in the late nineties.

As if to match words with personal commitment, in the last 12 months, Mr. Immelt has bought GE stock in the open market for which he paid over $2M. Statements and actions like the ones above should make GE the favorite supplier and employer of most, which in turn will translate in great financial returns. A big question mark remains though. In a June interview with HBR, Mr. Immelt said:

"If we can create a sales and marketing function that is as good as finance at GE, I'll change this company."

Hm, not knowing more details, this reads like the GE wildcard. Statements identical to this abound, and so do failures. A relatively recent casualty of this type of failure is Carly Fiorina, who could have well said, to paraphrase GE's CEO, If we re-create a sales and marketing function for HP-Compaq that is as good as engineering at HP, I'll ...

All in all, GE might not have been, and will not be in short term, one's best bet, yet come some crisis and you wish it were.

A long tale

2006-11-02T20:15:00.000-08:00

Google's paying $1.6Bn worth of GOOG stock for YouTube looks to date as the most appropriate illustration of the excess preceding some crisis. And, since the transaction has been made in stock and not cash, it may well be heralding a stock market crisis. In other words, this event is so not as much about Google, since it paid with its somehow inflated currency, as it is about the public market itself that, thinking Google can do no wrong, rewarded GOOG handsomely after the transaction.

Writing about crises, I am not sure though how much of a crisis this transaction signals for the established media. I would posit that YouTube, in any foreseeable form that builds on the current model, could become a first-class channel to capitalize on the potential of the long tail effect associated with specialized media. In this context, specialized media is an euphemism for personal productions or copyleft material. This blog illustrates well the former category, while the following clip illustrates the latter:

So, while I can see millions of users deriving some sort of benefit by uploading/viewing personal productions, I could also see Google's aggregating enough demand for, let us say, the Celibidache-Michelangeli rendition of the Ravel Piano Concerto to even sell it in its entirety for up to $25.

While I have your attention, I would advance a quippish thought: I expect YouTube to make possible enough Blair Witch Projects in the next 5 years to even justify its price tag. As for the main media, one could only wish the model of three or more channels of the same thing on cable were over, or the newspapers, TV-, and radio-stations, fulfilled indeed their public service charters.

On creativity and large hi-tech companies

2006-10-25T22:05:00.000-07:00

During a recent flight, I happened to sit by a senior member of the management team at a large hi-tech company. Upon learning about the creative dimensions of my activity, which give the beginning of the company's name (CrEIRe), this person asked for my opinion about ways in which mature hi-tech companies could re-ignite the creative urge of their staff.

I observed that large companies tend to be about execution, scale and hierarchy, and not about creativity. Most of a company's creativity is acquired at the time of each individual hire decision; the rest can only be stimulated. I, for one, tend to think creatively when in conversations that push the limits of common thinking/knowledge, or in situations without apparent solutions. I also try to stimulate my creativity by frequenting many a venue of human expression, however related or not to the business at hand. Such venues could take me to anything/anywhere, from a report on the health of the economy to a financial model, from the wisdom of the classics to observations about how my child appropriates the world round her, from an academic text to some museum. And the list could go on. Yet, creativity cannot be summoned, it just happens should the conditions be in place.

To return to creativity in the workplace, I am not even sure most companies, once they become large, can do too much about creativity. They can, and seem to always, buy some startup that comes their way to fill whatever creative gaps in their offerings. They can, yet seldom, improve on the working conditions of their staff. Indeed, in how many a large hi-tech company have you seen working conditions that were conducive to creativity? Does one feel creative in one of those too many cubicles, claustrophobic and grey, air-conditioned and fluorescent-lit into oblivion from the outside world, at companies like Cisco, Dell or CA? Unless, of course, one expects the upper ranks (VPs and above) to shoulder the burden of creativity at such places. From this perspective, Microsoft does a little better, and Novell and Google may well top the list--the latter two bearing the Eric Schmidt imprimatur.

So, I had to tell this person that improving working conditions and creatively employing creative people could help improve the creative output of large hi-techs.

Microsoft buying Yahoo!

2006-06-25T08:01:00.000-07:00

Despite a long history of unsuccessful corporate mergers and acquisitions (M&A), captured by now by the dismal M&A rate of success (~30%), M&A comes in and out of fashion as a favorite growth option. Ever wondered where these [...] ideas about M&A might have come from? Seneca--the Younger--would have answered: cui prodest. We, from Tech Trade Daily, learn about a Merrill Lynch analyst's research report whereby Microsoft is being advised to acquire Yahoo!.

The stated rationale behind such advice is: Google's assumed internet preeminence; Microsoft's failed MSN; Microsoft can afford the cash and debt, and needs, to buy a company the size of Yahoo!; and, in the analyst's own words:

Yahoo! seems a strategic fit based on: 1) Microsoft's search/advertising focus across the PC, mobile devices and video game consoles, 2) natural ad platform and cost synergies and 3) elimination of a top competitor.

I am not sure how the conclusion that Microsoft needs to buy something the size of Yahoo! was reached. Lest we forget, Microsoft still has to make sense out of its two last largest corporate acquisitions, Great Plains and Navision. These two companies were not structured as differently from Microsoft as Yahoo! would be, and came both for at a tenth of the cost of Yahoo!.

As a side note, I could imagine the transformational power of targeted advertising, which at the limit would place a future successful business in between a buyer and a lot of her transactions, but would have a hard time betting the future of a today successful company on that prospect. Indeed, who doesn't recall the late '90s projections behind e-commerce, and Amazon.com in particular, yet we see how hard it's been to change the industry structure.

As a second side note, since the Merril Lynch analyst seems troubled not a bit by reduced competition on the internet, one can tell how much he cares about consumers welfare.

Not for lack of rigour, we are then being told that, in the worst case scenario, failure would cost Microsoft $5/share. Some people simply don't know a typical organization from a hole in the ground, our analyst doesn't seem to know that, from an operational perspective, $1 at Yahoo! may be very different from $1 at most Microsoft. Indeed, while Yahoo! has become a media company, Microsoft, according to its current corporate structure and $12 Billion annual revenue, is so much more about enterprise and consumer software platforms and applications than a(ny) media entity. And, unless all computer applications, consumer and enterprise, are going to be delivered like the little gadgets from Google or Yahoo!, why would one want to make Microsoft a media company? Moreover, some seem to have forgotten AOL-Time Warner proved how difficult it is to join even two media companies. How can one think of grafting a media giant like Yahoo! onto the rest of Microsoft when they have so little in common? So, when pricing the cost of the option of buying Yahoo! only at $5/share, cui prodest?

Without doubt, there is plenty of revenue potential in approaching the internet more like a media business, but so is in the non-media business Microsoft has been so successful at. As I wrote here, Microsoft would do better if separated its consumer and enterprise businesses. Should that happen, one can see less structural obstacles to a joint Microsoft-Yahoo! entity. Otherwise, some in the M&A field must be reminded that corporate entities rarely make for additive operations. The rest of us, when not knowing an answer, would do well to return to classics.

On advertisingThe only/last business model?

2006-06-05T11:22:00.000-07:00

Henry Blodget, the blogger--as if he had it all coming from his name, brings up an interesting thesis by correlating the fates of the advertising and housing markets: As Goes the Housing Market, So Goes Advertising.

Without analyzing the strength of this correlation, why wouldn't one go a step further and ask: If advertising were no longer enough to support Google's growth, could it ever charge for its growing number of services?

I don't have an answer, yet the value is in the question sometimes. What do you think?

June 14 Addendum
People are looking indeed: http://www.internetoutsider.com/2006/06/citigroups_mark.html

June 15 Addendum:

"I think we'll look back at this day as the separation between two eras in software — the first being software in a box, and the second software distributed over the Internet for free and funded by advertising. The new era requires a complete re-examination of Microsoft's business model, which has been one of most profitable the world has ever seen." These were the words of George F. Colony, CEO with Forrester Research, on the occasion of Bill Gates' announcement about gradually leaving Microsoft. I sure hope George got it wrong, even though the history of television would indicate otherwise.

Small is beautiful, again...

2006-05-22T23:00:00.000-07:00

If you come to think about it, most kitchen appliances could be reduced to one big motor and one resistor. That would be the case if we were to follow the same logic as, let us say, Microsoft's Windows Vista or Vioxx--the blockbuster drug. Then, for example, the central shaft of the motor, analogously to the steam engine powering the first industrial plants, would set everything in motion through various-size gears/belts. An analogy like this is valid inasmuch an operating system (OS) consists mostly of a file system and a scheduler, and supports all applications, small or large. As well, the blockbuster drug is designed with the largest population target in mind, despite considerations of the cost-benefits analysis that, in the case of Cox inhibitors, would indicate a much smaller target population.

The results of extending a product to do more for most people could and will eventually be outweighed by the risks of failure. Production costs rise fast and even more so does the risk. For computing system vendors, increased complexity is intended to replace innovation while protecting the incumbents. However, as we saw with Vista's delays, or Intel's first 64-bit architecture, the risk and costs of failure are big and real. Vista's latest delay has dented billions from the market value of Microsoft and several of its partners. Intel's failed attempts at a 64-bit architecture cost the company and HP a lot of money and opportunities seized upon by AMD. On the other hand, the drug companies have perfected a distorted game (consider the strenuous FDA approval process, or the limited human-testing abilities) by spending excessively on marketing and on convincing doctors more people need their drugs. All goes well as long as the side effects are being kept under control and new blockbusters are being introduced. But, as the Cox inhibitors case shows us, nobody can force the course of innovation nor control the side effects on patients beyond reasonably intended targets.

Solutions seldom come from a single direction. In the case of hi-tech companies we have a combination of regulatory measures and the nimble Google. On their part, the blockbuster-drug companies are under pressure from litigators and the nimble biotechs. In either case, be it personalized/mobile computing or tailored drugs, small and agile is beautiful again. After all, today's premium kitchens have a device or an appliance dedicated to one or a reduced number of tasks.

If you find a virtualization fork in the road...

2006-04-21T23:05:00.000-07:00

Almost a year after Apple decided to switch to Intel processors the rationale for such a move still remains a guessing game for most. Then, in January 2006, the hacker community is challenged to build a solution to natively boot Windows XP on the Intel Mac. Two months later, the challenge is met and after one more month, in April 2006, Apple itself launches Boot Camp Public Beta, a technology that lets one install and run the Windows XP operating system on an Intel Mac.

Without speculating about the level of involvement Apple might have had in lining up the events in the above sequence, I think, Apple faces some uncommonly strategic options around the notion of virtualization. In essence, Apple opens its outstanding hardware platform to the equally impressive universe of Windows-supported applications. This way, Apple exchanges some of its nobility for the democracy of Windows applications. Indeed, didn't you also think, when seeing the latest Mac Mini, "For this price I'd get a couple except that I don't know what to do about applications."?

Let's quickly chart some alternatives in terms of players, costs, risks, and benefits:

At these early stages, Microsoft still holds some cards, so Apple is tentative and mindful--both in its PR and the requirement to have "a bona fide installation disc for Microsoft Windows XP, Service Pack 2, Home or Professional." Lest we forget Microsoft's own Virtual Server 2005 R2. On the other hand, AMD and the traditional IBM-compatible PC makers will have to start thinking beyond the parallelopiped.

At this time, keeping the cost of hardware the same, I would expect the performance of running XP on MAC to be lower than that of XP on a PC. However, two mitigating factors will have to be considered: (a) Within certain limits, cool-factors overshadow performance/cost factors; (b) Due to multi-core processors, non-enterprise users have now the chance to enjoy the best out of virtualization, without low performance/cost factors--Intel is placing a momentous bet on its releasing a new multi core architecture that increases the performance, while decreasing power consumption, of its processors in the 2^nd half of 2006.

Among the risks we have: Problems at Intel continue; Microsoft Vista comes on time with an overwhelmingly positive user experience; Users begin to pay more for hardware; Microsoft problems may erode Apple's image.

Among the benefits: Users will do whatever they do in style; Apple and non-Apple ISV's can begin a relationship, even if indirect in the beginning; personal computing starts being interesting.

So, as Yogi Berra put it: " When you come to a fork in the road....Take it "

How much becomes too much?

2006-03-30T13:23:00.000-08:00

When discussing Windows OS strengths and weaknesses, it is rather the norm for people to overlook its salient mega-feature that is source for both sets of attributes. That is Microsoft's deliberate support of as many hardware configurations as possible. It is precisely the same multitude of configurations that makes Windows:

So valuable to partners and customers;
Prone to systemic vulnerability;
Slow to start;
Slow to bring to the market.

A dialogue with a Microsoft insider reminded me of all these and more from my own time as an ecosystem caretaker for large software infrastructures. Read the dialogue for yourselves here.

Non-Event @ MSFT

2006-03-26T19:28:00.000-08:00

Much ado about little seems to be round the latest delay that keeps Microsoft from releasing Vista, its who-in-the-market-is-waiting-for operating system. The novelty this time is about being able to glimpse at the communications (even thought process) several Vista-related constituencies have on the Mini-MSFT blog--see the second part here.

From a customer perspective, I suppose, the impact is minimal. Why should it matter a few-month delay more than an already multi-year one? What is there that people want to capitalize on and only Vista enables them to do so? Enterprise customers will get their hands in the software this year still, yet their upgrade cycle is somehow independent of the release schedule of software providers. And, yes, the home users may get some back-to-school/holiday purchase plans redrawn, but it's not to say they'll have that much of a different alternative, financially speaking for Microsoft at least.

This delay could be more complicated for Microsoft hardware OEM partners, but even those are grown-ups with their own histories of mishaps.

More noticeable effects are likely to occur on a couple of fronts though. One is a short to medium term hit MSFT will take in the financial markets. MSFT stock has been between $22 and $28 for the most part of the last 6 years, so now it has some room to slide from $27. The other is with Microsoft's own employees who seem to be ever more confused as to what the direction of their company is. The rank and file are unhappy about the slow growth, whereas the executives have been in a state of prolonged denial. The problem with the former is their resistance to becoming more like, let us say, IBM employees; the latter seem to have run out of ideas with real impact on the markets and their own employees. Elsewhere on this blog, I even dared make a suggestion for what Microsoft might want to do--in essence a clear separation between applications/infrastructures for home and enterprise customers, respectively.

I consider Vista's delay just one more symptom, alas one of the highest visibility, of the problems companies in general and Microsoft in particular face. This is to say nothing about the novelty Microsoft has been trying to pull off: to have a major redoing of a multi-million line of code piece of software every few years...

Per chance you have not visited Mini-MSFT lately, here are my favorite three comments about the market delay of Vista:

First, calling it an operating system is a misnomer. It is a bloated 'user experience' that has no relationship to an operating system.

Second, XP ('ancient' 'years old') is the first stable general market OS you folks have produced. Yes, NT was a decent product and 2000 was fine and started the transition to the general market but XP is still good enough based on your history. And I have no incentive to rush to Vista.

You produce bloatware. And all indications are that the Vista bloat will follow Moore's law once again.

You aren't producing operating systems you are following a business plan. And you do that very well in a totally selfish and proprietary manner that has had its obvious success.

But, I really wish you'd quit calling yourself something you aren't.

I have used 2 stable OS's in my long life--CP/M on the 88 series and OS/2 w. 386. And I have used a reasonably stable x86 product with XP.

I guess you might call me a MS basher but I am also a realist. I have no incentive to be a masochist and run an alternative OS. But, the cost is all the crap MS makes me use a better processor and more memory than my 'real' applications require.

I run the applications that I want to use and they are on the MS platform. But I can live without the 'enhanced user experience' that you are selling. As a long time (retired) consultant and programmer to industry, I'd have no qualm in telling any former client to wait and wait whether Vista shipped tomorrow or in the next decade.

You are very accurate in one area--you folks are really full of yourselves.

I think this is all a huge laugh. I recall Bill's comments back in DOS days about a bloated, decisionless IBM that he was out to take down. He should have read Pogo rather than computer journals--we have met the enemy and he is us.
KenP

I'm just a simple sysadmin that has to install and maintain Windows but I agree that the direction the OS has taken with Vista/Longhorn is several steps backward. It appears that MS is losing sight of exactly what Windows is used for.

Basically it's just a tool; for business and for entertainment. Adding eye-candy doesn't improve the mix; it makes it more difficult to support and more expensive to re-train.

Yes, MS needs to correct the Windows team problem, but it also needs to reconnect with the users.

If anyone needs to see some good examples of what NOT to do with a good OS, slide over to the V/LH beta newsgroups and read what's being posted. It's quite an eye-opener.
Mark-Allen

And now, the third, which reminds me an entry into the Ideas Lab section of this blog, about Agile software development:

It dawned on me during the commute over the 520 bridge: I'm irritated with all the recent sh*t-flinging at the company, but I don't think Vista inherently sucks. I think it is just too ambitious a project. Just like WTT (WDK for external folks) What a piece of garbage WTT continues to be. I can't even get my daily stress runs to count in the stats pages lol!

Anyway, these big projects look great on paper, but when it comes time to implement, it quickly becomes a crap-fest due to the complexity. As a low level employee, I can't even fathom how you could possibly manage all this properly. Is there a comparable software project out there of this complexity? I doubt there is anything that matches the lines of code...

I think Windows should trim down the release cycle and become more like NASA. Instead of flying men to the moon, just do smaller, manageable projects here and there. A probe one year, a rover the next. Makes the news; gets the budget dollars flowing; keeps people excited.

We can do this with Windows. We did some awesome stuff with XP SP2. OCA hits went down big time. Games started working again. Data execution prevention opt-in improved security. Ok not the most glamourous examples, but I hope you get the idea: we made stuff really work.

Why not have Windows be a real subscription service? In order to download the next new feature, you have to subscribe and activate your copy. Don't want Windows Parental controls? Don't subscribe. Don't want Media player eleventeen? Don't subscribe... Don't want LDDM/avalon/glass? Don't subscribe.
Anonymous

In the third comment, I think the anonymous Microsoft employee is onto something. Except that the process s/he is describing cannot be applied to all product lines at her/his company. And I would contrast the process advocated by this employee with the observation KenP made about what appears to be (driving) the current process: You aren't producing operating systems you are following a business plan. And this is only to show how far the far-between is.

Don't abuse numbers!

2006-03-11T22:45:00.000-08:00

Last summer, on an inbound flight to NYC, I was seated next to an employee of a numbers-driven consultancy. His assignment was with a large grocery chain in the US, for which he had to come up with what else if not a strategy to turbo-charge stagnant revenues. The problem seemed to be that his numbers did not add up beyond the usual suspects, some improvement here, some scale there, or, in other words, more of the same albeit to a greater extent and at a larger scale.

My suggestion at that time was as simple as one word can bear it: organics! My word fell on deaf ears. Then, I tried to counter his skepticism with some off-the-cuff quantitative proxies: organics have higher margins, are the fastest growing segment, and so on. Perhaps, I continued, if the organic goods were to be eventually private-labeled the vendor would stand to make even more of a profit. He followed on with a whole line of argument that I could sum up as "organics are too risky."

Fast forward to a visit at Sam's Club this past week: 5-lb. bags of organic apples selling at the price of regular apples. First and foremost as a consumer, I hope this is just the beginning of a new stage in grocery retail, and vendors will come to understand that what is good for the consumers will be good for them, too. Secondly, I hope there will be enough independent groups to watch over the increasing number of 'organic' claims from vendors. Thirdly, I hope the days of that business, dear to some and known as whole-paycheck to others, are numbered; in the end, an apple is just an apple and should stay an apple, in price that is...

P.S. Sometimes the most numbers can reveal is the need for change.

Origamiun-folding

2006-03-09T21:00:00.000-08:00

I like so much the idea of a device along the lines of the Origami project that I went as far as checking the opportunity of reinvesting in Microsoft and Intel. According to Reuters, Origami is

a paperback-book sized portable computer, which is a hybrid between a laptop PC and a host of mobile devices that the world's biggest software maker hopes will create an entirely new market.

Its characteristics are:

Less than two pounds (0.972 kilograms);
Seven-inch (17.78-centimeter) touch-screen;
Powered by Intel processors;
Runs a modified version of Microsoft's Windows XP Tablet PC edition;
Will run on Windows Vista;
Sell price between $599 and $999.

Its target market is gadget fans lured by an array of features at the intersection of productivity and entertainment (e.g. communications, TV & radio, cameras, music players, etc.). A company official claims that:

We believe that (ultra-mobile PCs) will eventually become as indispensable and ubiquitous as the mobile phone today.

Amidst all the predictions and hype, several questions about the scope and viability of the project, I am certain, will have an answer only as time goes by. Here are some of them, followed by my considerations:

Have Microsoft and Intel learned anything from the success of iPod? iPod set out to solve one problem, of portable music devices, from the perspective of several constituencies. The end user wanted style and portability, the music industry wanted copyright protection, and Apple wanted to get back in the game. Apple did this, most probably, by starting with those needs in mind, and only years later generating variations on a successful theme (camera, phones, solid state memory, size, eco-system of complementary products, photos, TV, etc.).
How much is Origami a bottom-up vs. top-down project? A bottom-up project would be one that starts with some unmet customer needs, selects or builds up the best technologies (operating system, applications, hardware), determines a price, and sells it to no end. A top-down project is one that, let us say, comes as top management's reaction to some competitor's market success. In answering this second question, let's ponder some facts: We are being told that Vista would be the next OS in the Origami project. Admitting the progress (applications performance and power consumption) of the Intel Core Duo processor, will it be diminished by supporting a heavier OS? How close is Intel from delivering a whole set of circuitry to support a mobile device the way Origami intends to unfold?
What has the lack of success in the current Tablet PC line taught Microsoft? Judging by current specs, it is as if Tablet PC was overwhelmed by price and size alone. I don't know about the price, while the size was surely not the reason I did not buy a Tablet PC. My decision was the result of: unimpressive hand-writing driven maneuverability; the cost of a huge OS on the resources; and the sense of haphazard symbiosis between the software and most hardware implementations.

Besides Tablet PC, the next closest Microsoft project that Origami comes to is Media Center. Let's just say that's another story altogether. In any case, I hope Origami will be more than a glorified PDA/etch-a-sketch, and Microsoft/us will get there in less than three iterations.

Follow up to: Is Redmond Adopting Win-Win Strategies?

2006-01-30T21:28:00.000-08:00

Last May on this blog, I called readers' attention to a new Redmond strategy whereby Microsoft was ready to invest IP-capital into start-ups. Time has come for step #2 in the strategy implementation: Co-opting European and Asian governments as proxies for Microsoft strategy. According to Brad Smith, general counsel with the company, "By extending the reach of IP Ventures through government agencies, we believe new businesses will bring more technology to market, faster, and they'll also contribute back to local economies."

Probably, folks at Microsoft have understood that , outside the US, entrepreneurial culture, or lack thereof, ought to be complemented by government action. Not to mention the good deeds the company may be generating at a time when its redress from monopolist behavior is received with skepticism.

Original posting: Is Redmond Adopting Win-Win Strategies?

Can search follow the browser?

2006-01-04T17:50:00.000-08:00

In early December 2005, Bill Gates said to an Indian audience that Microsoft would share some advertising revenue from its search engine with users. This would be a move aimed at Google and its search users. However, to succeed, Microsoft needs to come up with a search infrastructure whose results are deemed by users at least as good as Google's. Indeed, the few cents per search a search engine can share with its users are not enough to make one switch for a less satisfying set of results--unless fraud is involved. Speaking of fraud, any such revenue sharing mechanism should be built impervious to fraud.

So, if Microsoft can deliver:

a search engine whose results are as good as Google's if not better;
a search infrastructure to support searches beyond Google's span;
an economic model enticing for all parties involved in a search;
a mechanism to protect the above business model from abuse;

then Microsoft search will become a true Internet destination.

Moreover, if Google does not become more for its search users before Microsoft delivers on the above points, search may well follow the browser.

Addendum 2/9/06

Should Yahoo thank Microsoft for the hint? Have a look at this excerpt from TheStreet.com:

Yahoo wants to stop losing search market share to Google, and now it's asking users to do something about it.

"Yahoo! is considering launching a program to reward people who make Yahoo! their primary search engine," says a company-sponsored survey first posted on the Web site of CNet.com.

People would receive a monthly reward if they do most of their searching on Yahoo! through a specialized tool bar. Among the rewards being considered for the program are ad-free Yahoo! mail, unlimited email storage, frequent flier miles and discounts on Yahoo!'s personal and music services.

The strength of (low) numbers

2005-12-05T16:07:00.000-08:00

Has it ever occurred to you why people like shopping so much at Costco that they even pay an annual fee to do so? The following comment

It's been estimated that there are 1,000,000 SKU’s (Standard Stocking Units) out there in America. An average supermarket has 40,000 SKU’s. Now for the stunner: An average family gets 80% to 85% of their needs from 150 SKU’s. That means there's a good chance they'll ignore 39,850 items in that store.

posted here, and some additional information I had about Costco explained the magic of paid shopping membership.

Costco mark up is up to 16% => One can hardly find products at the same quality cheaper elsewhere;
Costco carries only a very limited number of items/brands => scale economies and higher negotiating power with suppliers;
Costco has a refund/replacement policy for the life-time of a product => it costs you little if any to try out a new product from Costco.

From #2 & #3 above, one has the feeling Costco is pre-screening well the products competing for a place on its shelves; otherwise it could not have stayed in business for this long.

All in all, there is value in numbers, that is small numbers...

Job markets r-evolutions

2005-12-01T16:48:00.000-08:00

Apparently, not much has happened in the online job-markets since Monster.com became the 800-lb. gorilla. Contenders have either been devoured by Monster.com, or stayed on life support due to the hopes Yahoo! and its likes have for this market. All this would have made for a boring landscape, in which the process of looking for a job on Monster is like asking your current HR person for a job with another company, had it not been for a new concept introduced by companies like LinkedIn or Doostang. These companies leverage the salient feature of job markets, that is networking. Your typical candidate, for once, becomes a multi-faceted entity, represented as such, that reveals a wealth of information before you even make a phone call. The job market is among the first to capitalize on concepts such as markets as conversations or social networks. There is so much more to happen before late.

Markets as conversations or December musings

2005-12-01T10:57:00.000-08:00

Given the confusion generated by its intended $6.9Bn acquisition of Scientific-Atlanta, I wonder if CISCO is on its way to sharing the fate of a former undisputed leader of networking, Novell. Through this purchase, Cisco wants to become the leader in TV, telephone and Internet. At an operational level, CISCO and S-A have been as different as they come (markets, profit margins, support, pricing, etc.). At another level, it is interesting seeing there are still incumbents thinking of revolutions in terms the most successful application(s) of the prior medium. It could be argued that this is more a problem for Yahoo! and AOL than for the infrastructure provider itself, yet I am skeptical about this version of Nirvana consisting of 500 VOD channels. The relevance of the model's viability is clear to those who recall the many billions worth of infrastructure equipment CISCO had to write off after the last boom.

When did problems start showing up at Dell? When Michael Dell left the top position, when Mark Hurd succeeded Carly Fiorina, or when some Central-Texas star lost its shine? It could be all or any of the above and something more. Anyone recalls Dell's exiting the Chinese retail market? Somehow, Lenovo was able to do better in that market, despite all Dell's patented processes and such. And that was only punch #1 in the series. The second came shortly after, when Lenovo acquired IBM's PC business. Optimists still call this progress, however, when considering the success of Lenovo's first ThinkPad, progress is in the eye of the beholder. I would say, this was just the most recent punch...
The point of the whole story may well be that Dell, by deciding to put its money in processes, has been, by and large, about lower prices and little else. When a canny competitor, (e.g. Lenovo) that spends on R&D and somehow beats Dell's processes, shows up what's left to keep Dell in the customer's grace?

***

Will there be a time, in the enterprise software market, when Oracle and Microsoft are the only players? On the one hand, Oracle has to do prove it did not bite off more than it can chew. On the other, success at Oracle will push SAP and Microsoft in the same place. I should add that I cannot see how a third option, represented by online offerings (e.g. SalesForce.com), can resist the giants. Such option is limited by the need of enterprises for back end integration of their applications. By the time SalesForce.com is able to add one more enterprise application to its own offering, the big players will have developed their online versions as well.

****

In theory, the music and print industries are best suited to make the most and fastest out of the potential of markets as conversations. Here would be some of the reasons:

Their contents are either digitizable or in digital form already;
People often base their buying decisions on advice from others;
The current cost structure is extremely inefficient;
The costs of producing (digital) content have been lowered dramatically.

On the flip side, these same industries fear:

The proliferation of pirated (digital) copies;
Changing of their tested, however imperfect, revenue system with something uncertain at best, if not disastrous.

What are the driving forces?

Digital piracy that cuts on the profit margins;
Newcomers such as Amazon, Google;
Decreasing revenues from the traditional channels;
Perceived lack of fairness on the part of consumers who, say, have to pay up to $20 for a CD.

To illustrate the concept of markets as conversations, how many times have you checked product reviews with Amazon or Epinions before making an on/off-line purchase? What do you trust more, an advertisement or several reviews? Moreover, the reviewers are being rated themselves. Is this step, of checking online reviews, going to become part of your purchase making process? If so, why not make content producers out of what are still being perceived as channels by traditional content producers? Alternatively, given the reduced price of production, why wouldn't content makers bring their products to a place like Amazon.com?

To conclude, the challenge in the music and print industries is about finding the next business model. DRM or legal interventions can help the incumbents only dream a little longer. It is essential to stress out that, no matter how one looks at it, consumers must pay for content. However, supporting bloated industries cannot be anybody's goal. Question is: How much to pay? Hint: Follow the evolution of telephony pricing!

What do you think?

To Jim Heskett

2005-11-16T23:57:00.000-08:00

Harvard professor Jim Heskett raises a monthly challenge at HBS Working Knowledge. This month's topic is "Is Less Becoming More?". Here's my take:

Complexity problems with producers are seldom encountered by first movers. Complexity tends to creep in either as result of the producers' need for differentiation, product complexity, or as "me-too's," choice complexity. Indeed, when producers want to differentiate themselves, up to a point, the safest and quickest way to achieve that goal is to add features or increase product complexity. Moreover, striking analytically (as opposed to heuristically) the right level of complexity may not even be doable. Thus, the first impulse of some producers is to err by doing more. When successful, product complexity is being subsidized either by scale economies, as in software, or by the consumers' wants, as in luxury products. Choice complexity is usually brought about by those "me-too" producers that want to capitalize on the first-movers' R&D. Less search-costs, its net effect is to drive down prices, being subsidized by producers. It is remarkable though how Apple manages to achieve product simplicity and choice complexity with its iPod line of products. Product simplicity endears iPod with the consumer, while choice complexity helps Apple segment its customer base. As a side note, products start simple, and then get copied and more complicated until another category starts anew.

Regardless of the type of complexity, product or choice related, the consumer is ultimately overwhelmed. Worse yet, consumers may even experience frustration due to unfulfilling complexity of choice. An example could be found on the shelves with cereal boxes at your health-food store. Cereals come in about two dozen offerings, but chances are that you'll find just one to contain organic cereals without sugar. Maybe the producers' problem is the lack of perceived innovation/differentiation in plain and sugarless cereals.

Additionally, you may want to consider: Minimalist vs. Baroque Categories

Internet futures

2005-10-27T18:23:00.000-07:00

Friends and foes alike are asking for a seat at the Internet-governance table through the formation of an international institution supplanting the US-based ICANN. The US Government responded with a Monroe Doctrine of our times. For more, check out Internet(s) at crossroads, posted on the sister site Ideas in Motion.

An unorthodox mix of voices

2005-10-04T15:31:00.000-07:00

What an interesting phenomenon is shaping up at minimsft, right now! Due to either the exhaustion of more mundane subjects or the logical escalation of the conversation, minimsft has started tackling a subject of major importance for Microsoft: How Fit Is Steve Ballmer as the CEO of Microsoft? Judging by the comments on the subject, the conversation is spreading beyond the usual (SDE) suspects of the blog to embrace what seem to be Microsoft more sophisticated constituencies such as Company management and investors.

It is interesting how, by "ignoring" the conversation, Mr. Ballmer has attracted onto himself the lights of public scrutiny. For most, in the end, it doesn't matter who's raising the questions about the top guy as much as the rise of the right questions themselves.

How this whole episode in corporate communications will end? Your guess is as good as any. However, management at public companies is likely to have one more Sarbanes-Oaxley-type of burden to put up with: the "unorthodox" mix of voices coming from employees, customers, investors...

Addendum Oct 8, 2005

Apparently, there is at least one member of management at Microsoft, Ken Moss - General Manager MSN Web Search, who has read minimsft. Mr. Moss has "strong opinions on many of the points discussed on Mini’s blog and in the comments. But I’ll save those for another discussion." For the time being, Mr. Moss is only addressing a challenge to the anonymous employee behind Mini-Microsoft:

I have no idea who Mini is, but I would like to officially issue a challenge to him to come and do a totally anonymous informational interview with me. If he passes our hiring bar, I am confident that we can provide him with a way to feel inspired by Microsoft and the work we’re doing. We have many awesome features he can come and work on – and he’ll be able to ship them as soon as they’re ready since we update our service constantly.

I, and the rest of the management team, will do our very best to provide cover for any bureaucracy that may stand in his way. Mini will be free to innovate and ship software as fast as he is able to. He will be able to challenge himself to see how good he can be. He will be inspired and have a blast. I can almost guarantee that success won't be easy -- but I can guarantee the opportunity to challenge himself. If he does great work, he will get great rewards.

I find such an idea commendable--to invite an employee to an interview whereby s/he could work in an inspiring environment. Indeed, there are great individuals who get stuck in one organizational context or another, and the only way out/up is outside the organization. Having a second chance in the same place cannot hurt. However, a question still remains: Why would a manager make such an invite only to the person who, supposedly, is behind minimsft? What recommends an anonymous figure to such preferential treatment is an enigma to me... unless this is an attempt at tackling the Mini-Microsoft blog issue?

Hmm... I think the horse is out of the barn and enjoying, albeit in a contorted way, the blogosphere pastures. However, since investors and customers have joined in, minimsft is no longer an internal Microsoft affair. Thus, Microsoft management should kick into gear and treat the whole issue at least at a PR level. Observers of the whole phenomenon would probably welcome Mr. Moss' addressing any of the several MSN-related issues that have come up at Mini-Microsoft.

Addendum Oct. 17, 2005

On where Bill Gates sees himself in ten years:
I’ll be turning 60. I have to say, ten years older than me always seems like that’s when I’ll be old. When I was 40 I thought 50 would be that mark, and, now that I’m very close to that, No, no, no, that’s not being old. My life’s work in terms of creating a company is certainly around Microsoft. Software was what I thought about when I was very young and believed something dramatic could happen, and so the opportunity to be involved in that and shape that industry, that’s really my professional work.

Over the next ten years, my balance between the time I spend on philanthropic things vs. my full-time job will switch in favor of doing philanthropy. It does mean I need to get one of the great young people at Microsoft to get on the hot seat of setting product strategy. I love my job, it’s an amazing job, and I’ll always be able to have some mix of Microsoft and philanthropy.

Addendum: 12/02/2005

Kevin Schofield, General Manager with Microsoft Research, visits MiniMSFT and leaves the following comment:

Regarding Thinkweek documents, they are company confidential documents and should not be discussed outside the company. As employees who want to be trusted by our company, it's our responsibility to be trustworthy in return and not "go rogue" and leak confidential information.

For example, if there is indeed a thinkweek paper about taking MS private (I haven't tried to verify this) it's inappropriate for you to mention it here. Some reporter will read your comments, will start calling Microsoft asking for a copy of it and comments on the record, and will eventually nag enough people that someone will dig it up and leak it to the reporter. Or worse, they'll just make stuff up. This is a huge can of worms that you don't want to open.

Mini, I understand why you feel like you need to stay anonymous to be a public critic of Microsoft, and while I'm not sure I agree I certainly respect the reasoning and emotion behind that decision. You'd lose all respect in my book, however, if you start using the cloak of anonymity to leak confidential information. I think it's great that the company encourages a broad set of employees to read and discuss Thinkweek papers -- I love the philosophy that by default we should trust our employees -- but this is a relatively new trend for Thinkweek and I worry that they will be forced to re-think that policy if the papers keep leaking.

But by all means, I hope you enjoy reading the thinkweek papers. There's a lot of good stuff.
available here

Here's my reply:

Kevin, knowing that a GM with MSFT visits these pages confirms my suspicion that Mini-MSFT cannot be ignored where it counts a great deal (i.e. among the executives of the Company). Not being privy to the discussions you and your peers have about Mini-MSFT, I would certainly expect that, at least when you officially visit this place, some consideration is given to any one of the real issues people bring up. Addressing this forum obliquely does justice neither to your position with the Company nor to your public profile as illustrated by radio.weblogs.com/0133184/

The option of taking technology companies private again has been exercised by several (e.g. Trilogy, Seagate, Corel, etc.). In other words, changing the form of ownership of a company, from public to private, is just one of the several strategic options managers ought to consider. Since a prior comment here addresses so well such (im)possibility for Microsoft, one should be grateful to the public, if anonymous, intelligence, enabled by this blog, for saving some brain-cycles of Microsoft executives.

Addendum 1/19/06:

To the growing chorus enabled by blogger/minimsft, we should hail the latest voices: Microsoft Partners'. To judge the amount of scripting vs. improvisation, the over/under-tones, and any other parameter in these folks' tunes, have a look here: http://minimsft.blogspot.com/2006/01/when-partners-collide.html

And now, the $10k-question: How soon will the top two acknowledge the minimsft- phenomenon?

On sources of technology innovation

2005-09-27T16:38:00.000-07:00

Two recent comments, posted at Mini-Microsoft, have given me some food for thought. Please, read through and ...

Oh by the way, there is the SmartWatch to look out for. You know - BillG's innovation that made the IEEE Spectrum list of the ten dumbest ideas of the year? LOL, that's the kind of innovation Microsoft is famous for!
The sad fact is that our execs are now so very disconnected from the real morale/culture problem. They think that somehow just shipping more product will help. NOOO, that's not it. It's the fact that our execs don't understand what it's like to be an IC, to want to just get something done, get credit for it and get paid well to do it...and NOT be getting micro/process managed to death while you're doing it. That's it, plain and simple.

... answer: Could multi-(b/m)illionaries innovate on behalf, and for the benefit, of your average JOE?

Since the collective intelligence is more apt to tackle such a question, I invite you, the reader, to think about this. Your comments will be appreciated!

From behind the NDA curtain

2005-09-26T11:02:00.000-07:00

Considering the (qualifiable) success of Mini-Microsoft, a supposedly Citrix employee has launched a Mini Citrix blog. Is this part of a trend that's going to make corporate management honest, and overall better? Only time will tell. Meanwhile enjoy what the smart, and identity-less, folks say, despite the NDA curtain.

Is Koogle's successor the key to Google's future?

2005-09-23T18:23:00.000-07:00

I can hardly imagine Google making the kind of money the investor community is anticipating without getting scores of unhappy users. Granted, Google is still far from Yahoo!'s misplaced and annoying advertising, but in the end how can anybody make that kind of money and remain Mr. Nice?

First off, how many people recall Koogle? He used to be Yahoo!'s CEO before Semel. Yahoo! needed a Semel to graduate from the do-only-good on the internet stage and start delivering the type of ROI the Street had been waiting for. Will Google's management and don't-be-evil philosophy change in time? Let's see: Eric Schmidt had given us a taste for how well he could maneuver a corporate entity, at Novell. Wasn't he the one who, among other things, sold SCO-Unix, yet later Novell bought SUSE-Linux? If Schmidt is replaced by a Semel's equivalent, people will talk about Page&Brin as they do now about Filo&Young.

So far, Google's achievements are:

Made most happy internet users;
Built one (of the most?) extraordinary internet infrastructures on commodity equipment;
Perfected an (IBM/CMU?) search/ranking algorithm for web pages to the point advertising subsidizes their turning upside-down business rules for ISVs;
Bought a few start-ups and released their nice technologies for free;
Seduced the Street into getting a $7Bn cash advance;
Created a supposedly phenomenal working environment at a larger scale;
By and large, lived by its don't-be-evil philosophy.

How far and where can Google grow from here?

I think most speculation on this is, to put it mildly, unwarranted. I'll leave it to those who need to trade such things. What we may anticipate is that an advertising-subsidized internet can become as Orwellian as they come. There is no such thing as free lunch, and those who expect it should reckon the difference between HBO and the big 4-5 major TV networks. The only problem is going to be the multiplicative factor of the internet.

Who should be afraid of Google?

IMO, its first casualties are going to be those businesses, targeting consumers, that don't understand simplicity commands a premium. More on this here--see the CHI Triad. Conversely, when companies are thinking too much in terms of closed-platforms, or closed-specs complements for their products and technologies, the inherent complexity is discounted. It is as if Microsoft or Intel started with the idea of a platform in mind, or DRM was contemporary to the first Walkman. So, when "new" at Microsoft is an extension of one of its platforms, and Intel tries to go with its first Itanium, they are not as mindful of the customer as they were when their success was growing. In these cases, the novelty is called Google, and AMD, respectively.

Another category that is living under potential threat would be our very selves--the users of Google technology. Indeed, the potential for Google's misusing personal information is so huge that one may want to pay just to be free.

Personal note

As far as I am concerned, my interaction with Google has been allright. While I have not received any discounts to the things I enjoy via Google, the little experiment I run with the smallest Google ad-box to the right of this posting is behaving. The displayed ads match the contents of this page anywhere from 45% to 85%. Yet, I have seen much worse on more popular pages...

Thank you for your attention and comments!

Comments I posted at Mini-Microsoft

2005-09-23T07:26:00.000-07:00

Here are my comments posted in different places on the Mini-Microsoft Blog. In green-font are (snippets of) others' comments posted there that prompted me to reply.

It is interesting how, across most postings to Mini-Microsoft, most blame is directed at management. And, to a great extent, management is responsible--otherwise how in the sky could they justify their own compensation schemes?

In ancient times, people used to vent their passions during carnivals, when kings and fools exchanged places for a brief. In the long interval between carnival days, it used to be religion. In democracies, we have elections. Religion has been replaced by shows and morale building exercises (i.e. propaganda). When the individual (contributor) doesn't believe anymore in the show managers put on, it's time for a (ritual) reversal... So, managers, take notice!

Yet, where is the personal responsibility that arises from a conscious decision to grow up as individual and either clean up the mess around you or move on?In the end, let's face it, the cake is in only one place!

For the MSFT shareholder who asks why the Company has a finger in the gamming pie, I would venture to answer:

Because of digital convergence;
Because of no-longer growing revenues in those areas that have made him money so far;
Because it's fun for the engineers who work on it;
Because consumers welcome alternatives (to Sony and Nintendo);
Because it's there--as a growing market.

...should I go on?

III

Somebody at Mini-Microsoft quoted "Microsoft Corp. and Time Warner Inc. have been discussing potential online partnerships that would help the two companies better compete against rivals Google Inc. and Yahoo Inc. (Nasdaq:YHOO - news), two people familiar with the talks said Thursday."

MSN has always had a problem: it tried to be(at) AOL no matter what the users who were running to Yahoo! and Google were saying. Now, does anyone think that putting together two less-than-stellar entities will form something great? Hmmm, unless I am a hopeless geek, they should ask Carly--the former first lady at HPQ!

Why is it that folks think Microsoft has lost it's agility? My guess is that most associate the Longhorn/Vista delays with this lost agility. I think this is a cop out. The systemic constipation inside of Microsoft around Longhorn/Vista is the result of the Chief Software Architect's failure to properly design and architect his vision of integrated innovation. Bill is an architect in name only.

The above comment raises some interesting (insider) points. For us, the outside observers, the big question nobody has been willing to ask is: "How much does BillG still deserve the position he appointed himself to?" Follow up question becomes: "When talking about accountability, how high up can one go?"

Be it as it may, we've seen how Scott McNealy and Larry Ellison have stepped aside to make room for new blood...

Few more interesting points, and I would welcome a conversation on the subject, are those related to MSOffice on Linux, getting together with Apple's music format at the expense of WMA, etc. That such points make for heresy at Microsoft goes without saying. I'm not sure though they make a lot of business sense.

Oh well, drop us a line, especially if you are PM in one of these areas. In any case, state your function at the Company!

The owner of, and MSFT participants to, the Mini-Microsoft blog might have done more (for better or worse) to set things in motion at Microsoft than scores of executive wonks. Hence the value of the internet in making the workplace more democratic. Now we should wait and see how well this does to business. I cross my fingers!

From all incentive systems I've known, for large organizations, I had come to respect the most the one employed by McKinsey.

Consultants (at lower levels) rate their next-level-up manager/mentor anonymously, and are being rated by their manager. There is assumed flexibility for a junior consultant from a mentor to another. This inter-rating mechanism keeps most bastards honest, and people do actually get useful feedback for improvement.

For how long has this incentive system been in place at McKinsey? For as long as anybody at the Company remembers!

Now, incentive theory is really a chapter in the science of economics. Have you wondered why when you get in a cab, it starts with a few dollars on the meter as the driver turns the engine on? And, relative to the cost per mile, the starting-fee is not trivial. They make it so a driver gets enough from such starting-fees that he's got an incentive to drive you in the shortest time to destination...

VII

Dear fellow minis,I really love this blog and I am a huge fan of the "Mini" himself. But please quit with the constant field sales bashing,e.g - that shit might get salespeople fired up but for your average introverted dev it does nothing but promote ennui.We both love and fear for the company just like you do. Signed, Longtime EPG account rep (lowest of the low but I have served one of our biggest customers for 7 years and beleive me the software you develop (a) isn't easy to sell and (b) it's a total b***tch to deploy across an enterprise.

Sometimes, it takes an "EPG account rep" to see the gap between the coolest/innovative ideas and happy customers--some people call it "process." Other times, nothing does the trick but a higher stock-price.

Thinking more about the review process at MSFT, it looks like it encourages massive politicking due to its one-sidedness. I would be surprised if, in fact, there have not been executive drives to streamline middle management and increase accountability. But hey, everyone has got a friend, with a lower IQ, whom can be turned into a power base through the one-sided review process.

In other words, a bad process may be as costly as no process...

VIII

Bring back some sense of fairness between execs and rank and file. 320,000 shares for Kevin Turner? Is Kevin really worth 320X+ more than the average good employee? Should a grossly underperforming exex like Burgum not only retian his job but cash a couple $M every Q? I don't think so.

I wonder since when has it become an issue the fairness of executive pay? By and large, little is fair about it, and so is life!

Having incompetent executives is a another matter. The novelty about this latter notion is given by this couple of key elements:

MSFT has smart, and type-A, personalities who came to the Company after/under genetically less endowed managers;
The employee-liberating, and -enabling, capabilities of a blog.

The rest will be a new page in corporate reform, driven by the explicit action of a vocal, and newly empowered, minority.

Imagine if Apple suddenly decided to offer MAC OS 10 on standard Dell platforms, and when you called Dell, they asked which OS you wanted.

...new UI in Office 12 with other 23.984 useless featuress (where each running Office app will eat 70 MB of the memory)...

Reading some recent opinions posted at Mini-Microsoft about how several of MSFT products/features turned into resource hogs, let me put it in a slightly different (non-Google) context:

There has been a yesterday's company whose platform runs most efficiently and effectively out there. Its customers loved it so much that they saw no need to upgrade--no, it's not about some mainframe architecture.

So, what happened? Hardware system vendors (HSV's) decided to stop offering support for the old platform. The old hardware would either crash or not interconnect with the newest hardware. In the end, customers had to jump ship. Who benefited from this? MSFT, Intel, and al other usual suspects in the HSV space. Who lost? The customers and Novell.

Fast forward (I) to the early 2000. IBM, not to be fooled twice, drops a lot of mainframe-, and new-IP, into Linux (e.g. virtualization, driver support). Not to be outdone, the rest of the HSV band (formerly, of MSFT-brothers), with the partial exception of Dell, joins IBM in supporting straight Linux, or one of its corporate flavors (Red Hat, SUSE/Novell). As a measure of this transformation, 5 years ago, who would have thought SUN would complement both Solaris and Sparc with Linux and Intel/AMD, or the fact that Oracle would run on Linux??? And, except for IBM (and possible Oracle) nobody does it despite Microsoft.

Fast forward (II) to the Google's IPO. The public at large gets a taste of Google's context (i.e. simple things in small-sized software).

Fast forward (III) to 2005 corporate customers. Here's the voice of a select few. What is the message? They want to DO MORE WITH LESS!

Fast forward (IV) to 2005 HSVs and ISVs. Oracle and IBM are doing/promoting about grids, and most every HSV is doing blades. How do I translate III & IV? Optimal allocation of IT resources or better ROI's for the IT budgets.

Fast forward (final) to mini-msft blog. Microsoft engineers ponder how it is possible that their Company continues to invest in countless obscure Office-like features. Yeah folks, the genie is out, yet who knows when the turn comes for your management to think of growth alternatives to bloating software.

As end-user I've been able to tolerate MSFT annoyances up until two episodes. (1) When a customer from abroad emails me an audio-clip he made using MSFT tools, I could not play it back until Windows Media Player checked with some DRM-god on the internet. (2) Hearing the complaints of a partner (marketing-strategy type) about his Dell laptop slowing down I suggested, and then wanted to initiate, a reinstallation of the system from the vendor's CD. I was told that, because the XP version on the CD was older than the (patched) one on the laptop, I could not reinstall the system.

Why did I share the above two anecdotes with the readers here? To illustrate how MSFT-neutral customers might have grown unhappy with MSFT to the point they'd switch when alternatives show up. For the (mini-)Microsoft engineers, such consideration should only nuance the(ir) conversation--after all, they've gotten paid their salaries from such tactics. For those in management, it is a whole different thing. It's up to them whether or not to take their customers and (minimsft-)employees seriously, regardless of their particular biases.

Somebody posted a remark about Apple grabbing mindshare with the iPod and OS X. As somebody who is completely outside of Microsoft -- I'm a journalist, but very much not tech -- I can't stress enough how right that is. It is not only the products like the iPod, it is the decisions they have made, like yanking the iPod Mini at the hight of its sales to market the Nano. The collective reaction among the people I know was first something like God, the balls on those guys! followed by God, is that beautiful!. And the "halo effect", though probably overrated, is real. All the Apple people in my department have to do is say something like "If you think that is cool, you should see my Mac."

I think folks in MSFT Entertainment Group have taken notice--As proof, msofties themselves are saying the latest XBox is something they look forward to buying.

"If you think that is cool, you should see my Mac."

Now this is major indeed. Not as much for its effects--when Apple started going down, it still offered a greater experience than MSFT--as for its power of example for companies dealing with consumers. The platform approach at MSFT, which made them so big, sustains a vicious circle in which some products are put on the market without being required to compete on their own merits. We are probably witnessing in fact the price platforms are exacting on a firm by skewing the behavior of marketing and development folks. On their part, customers who sunk so many resources in MSFT technologies have little option but keep "consolidating" the platform. The ideal situation would be when customers like so much a product that they want to try others from the same vendor. Only then should the vendor look for platform synergies. Again, this would be ideal.

Meet my customer's customers!

2005-09-21T12:37:00.000-07:00

For practitioners of the art/science of new (IT-) product development, CIO roundtables are a must attend. Many a time, such a practitioner faces oneself with a product-concept that sprung out of somebody's frustration/imagination, a product-concept that extrapolates somebody's strong feelings into a whole market. Therefore, getting together with a group of CIO's is as close as one can come to experiencing the reality oneself.

I happened to be involved recently in such a CIO roundtable, over a couple of days. Here's the background on the CIO's companies.

Day One:
Manufacturer: a US subsidiary of an Asian manufacturer of electronics;
Designer: A company that only designs stuff;
Agency: A quasi-governmental entity;

Day Two:
A retailer: A rather special one;
Financial: A diversified financial services company;

Here is my approximate transcript:

THEME #1: How to manage growth without adding personnel? Leverage IT to scale the company/IT as multiplier of existing resources!

Manufacturer's View:

Premise: IT gets information to more people faster;

Goal: Automating everything without adding personnel;

How: BPI & BPT initiatives;

Challenges:

For those people in the room things are OK, but for those outside the room it's about loosing control;
The IT leader problem: getting in the right place where business people make strategic decisions (i.e. informal networks where things happen)
--> It's not about IT, but relationships

Conclusion: A lot of the technology problems are about people's (not) wanting to use new systems--culture change, etc.

Context: Everybody in the industry buys the same tools, so business processes differentiate a supplier from the next; the next step is automation

Quote: "The exact process that I use is my only advantage for the next year!" after that, process automation

Outsourcing Views:

Outsourcing without offshoring doesn't save money!;
Outsourcing results in as much as 10% savings, however it ends up not being profitable;

Outsourcing challenge:

If you outsource for knowledge then you had better know how to get that back in house;
Understanding diversity of cultures is critical for good outsourcing (incentive system, trust, etc.);

What to know about outsourcing:

How much does it really cost you to outsource: socialization (i.e. making the same assumptions), coordination, etc.?
Outsourcing Business analysis and design: good;
Outsourcing coding : not good since it brings no value added;

ROI's:

No ROI internally but at corporate level they are lots of them with plenty of intangibles;
Should separate the cost of doing business (email, computer, etc.) from others and don't ask for ROI's over a long period of time;
I can do more with less;
ROI's have been misused and abused to the point they all sound like TV ads;

Words of wisdom: IT vendor, give me the biggest, fastest, and that can be absorbed--many times, several initiatives come into the same area and that's a problem for they cannot be absorbed!

Designer's View:

Premise: IT is good only in the context of what's important for business, what's mission critical, etc.

Industry challenge: When the OEM's slice their prices the suppliers have to figure out a way to do so as well;

Modus operandi:

Before improving a business process, ask if it can be eliminated
--> Is this business process a value adding one or is just a support function?
--> simplification / elimination;
Change the business process to comply with the IT tool--unless prevented by a strong business reason!

Context: A lot of IT activities are commodity (except for Dell's)

Challenge: Business leaders to understand what technology is

Solution to above challenge:

Insistence on formal communication;
Some IT leaders are assigned to talk to the business/design leaders;
Quarterly stirring committee--people at 2nd level of management (directors and senior managers) in charge with accounts payable etc.;
-->bi-directional flow of communication

Outsourcing:

80% customers, 90% suppliers and 60% of sales force are in overseas
--> global environment
--> global support for customers, its own sales, and suppliers
--> outsourcing

Perspective on outsourcing: Outsourcing is not new (e.g. payroll, salesforce) but mission critical apps should stay in-house for control reasons

Outsourcing Challenge: Understanding culture is also important, otherwise contracts are just pieces of paper that need to be enforced in courts

ROI's:

Things need to be articulated in metrics that matter to the leadership (not money always!);
Investment driven by the need and not other considerations;
When a business case is made and a look at the total cost.

Agency:

Challenge: Educating business people about IT and not only the IT people about business;

Outsourcing:

"O"-word is forbidden;
Business wants to keep control (over accounting, back-office, etc.) so outsourcing is not liked;
However, it is CIO's job to consider all options;

Outsourcing challenge: What's gonna happen when things go wrong? If I am responsible I want to be in control.

Outsourcing potential:

Keep same level of service when ownership changes;
Pilots are good (learn a lot of info and risks are low);
Identify non-critical parts of the business and outsource them so you don't keep hiring;
How expensive is to bring things back in house if/when something goes wrong?

ROI's:

Intangibles are no good in an ROI analysis;
--> Don't tell me how much IT saves, but by how much my fixed cost decreases.

THEME #2: What is you biggest set of (IT) challenges?

Retailer:

Challenges:

Automation of the relationship with suppliers without cost to the suppliers (let Wal-Mart drive the RFID)
Compliance // MasterCard and Visa are imposing controls on the users of their cards that cannot be observed by themselves
Getting the telcos to wire the facilities (they sell all the right stuff in words but don't deliver)
Password change rule: "to be different from the last 4" is difficult/costly to be enforced
--> Solution Single Sign On (SSO)

SSO Problem: SSO would be a neat technology if it came at $10/user per annum;

SSO alternative: Leveraging Active Directory because it was too expensive to buy SSO!

Opportunities:

Technology today is so much easier to use that developing in-house applications is more and more doable HOWEVER, the problem is that in-house developed software needs to be documented, but then ERP-X support doesn't have all the answers typed up on paper either so it all comes down to the responsibility of the CIO;
Due to outsourcing pressures, IT people are normal again and one ought to look for in-house integration and development opportunities as well.

Challenge with outside software packages: 16 people are supporting 4 functional blocs of ERP-X, and next year they'll have to grow to be 20 --> too much for a general ledger or payable/receivable system!

Needs and Future Opportunities:

Mobile ways to get merchandise out of the store so that waiting in line will be cut down (it's not about cutting labor as much as keeping the flow)
Restaurant technology in supermarkets

Modus operandi: The only information on the customer is their credit card number held for 30 days by and at an outside highly-encrypted place

fCh Question on the above: How about the whole new etailing category exemplified by Amazon and E-Bay, and their IT-enabled ways of knowing everything about the customer? Not to mention the whole school of thought from the strategy consulting houses that calls for more numbers and data about the customer?

Retailer's CIO Answer: The pendulum is swinging back--it went too far into numbers and everybody is getting hurt. We offer our customers a (shopping) experience not cross-selling/marketing...

Quote: "I'd love to buy software that's reasonably priced; 3% is a good margin in retailing, 10% (as opposed to 50%) might be a good margin for the IT vendor too!"

Financial:

Challenges:

Information security;
Our Company name shall not be in the newspapers;
California and New York ask repositories of personal data to inform each and everyone of their customers in case there is a breach in data security, other states will follow;

Approach towards information security: Info security oversight committee (security, legal, compliance)

More (mundane) challenges: 1000 people in the branches who need to access 5 to 10 applications with different passwords/rules/scripts etc. --> SSO would be a good thing 27% to 32% of helpdesk calls were about password resets (clerks at $8/hour forget passwords from Friday to Monday)

SSO problem: The difficulty is not about logins and passwords, but scripts that launch the legacy financial applications.

Modus operandi: DIY doesn't work for banks! Too many applications coming from different and highly specialized vendors; internally, we develop only interfaces and intranets

Future needs:

Data warehouse (cross-selling opportunities etc.) due to the proliferation of too many SQL databases (a total 57);
Enterprise content management (archival, storage, retrieval, etc.)

Quote: "If you wait long enough in the industry, it's all going to come back: now, with ASP's, it's all about time sharing again!"

More on mini-Microsoft

2005-09-21T08:31:00.000-07:00

I keep reading the comments posted on Mini-Microsoft pages about how lean and mean MSFT used to be, and how annoyed are the developers by the extra layers of "bureaucracy"--program managers (PMs) and testers included.

These are probably the voices of those (younger) developers who got into MSFT at its top form. Yet, why aren't they being told that MSFT used to ship buggy software ("blues screen of death") and made for tons of jokes about bad software development? When you grow big and customers say you need to fix up or else, adding more testers and "bureaucrats" to make sure the customers don't switch is VITAL!

I shipped myself some big software and know full well about the culture clash at the intersection of developers, business, customers, partners, testing, consulting, etc. Guys, beyond a point in size, it's just life! For those advocating a smaller MSFT (hence mini-Microsoft?), I should add that a little fat hasn't killed anybody, and one gets to appreciate that when a new opportunity shows up or the market fluctuates. In a sense, one of the problems Microsoft has is its inability to hire what/how much it needs! And this is not a function of Google as much as a function of how education fails US. Moreover, as of late, we've seen many of downs, yet people complain about having to co-pay $40 for branded medicine. If you spent time with the folks from Wall-Street, who are ready to chew you up at a moment notice, you'd have a better understanding of where Ballmer is coming from on that.

As I said elsewhere, I suggest MSFT reorganize along big enterprise stuff and consumer stuff. Big enterprise software is meant to be boring and process-laden(sorry folks!), consumer software being in the opposite category. Self selection of the employees could put its mark on the overall happiness then. As another recommendation, MSFT could do better if stayed away from just about everything that (can) exists in digital form. Initially, this approach might have been the result of lower projected revenues in mature areas. Now, when so much is becoming digital, it may be hubris. A better way to tap into the future would be to just buy whatever company is doing well in a promising area--problem is, those guys don't always develop on .Net or Visual Studio...

Why wouldn't the top brass at MSFT put everything into two buckets? Maybe because they keep telling everybody Windows is a monolith that cannot be taken apart into modules--yet they are doing just that, at least when it comes about developing the beast. In other words they might have gotten themselves on a "dependency path" that does not allow Microsoft to be different and save management/legal face at the same time. To counter a possible argument like: "fCh, doesn't MSN cut it both ways under your two bucket plan?" I would say that beyond a certain size, MSN consumer cannot be(come) MSN enterprise, unless you want to make everybody unhappy--from developers to customers, your cousin included. A grown up MSN consumer would be more like Yahoo!, whereas MSN enterprise like salesforce.com. Who in the right mind would MERGE (all the way to developer-level) the two of them?

As for Google, let those guys go round the bloc for a few times, prove their worth, and then jump to conclusions. Google is not the answer, any number of start-ups in the Valley might be--at least for those who dream of themselves sleeping on/under tables and developing untested software. I use and respect Google's stuff, yet I am apprehensive like hell about what it may turn into--I'll write more about this soon. For an early taste of what's to come, click here!

Synergies between retailing and search

2005-09-19T16:29:00.000-07:00

Let's say you are a young father-to-be. It's 9pm and your wife has settled, uncomfortably, on to her favourite couch. Clearing her throat, she politely reminds you that you've been a bit distant lately, that you haven't done a hell of a lot to help her around the house. You cringe. She continues: she's eight months pregnant, for God's sake, and when are you going to get around to reading that copy of What to Expect When You're Expecting that she left none-too-subtly in your briefcase six months ago?

Now, you're in your den, avoiding dealing with the sheer terror of becoming a father by checking your e-mail for the tenth time in so many minutes, but a pang of guilt finally reaches your irresponsible heart. So you start searching the web, trying to get smart quickly. You Google "pregnancy baby" and head to the first link, Babycenter.com, where you read up on the eighth month.

You then find a link to an article that lists 10 things you can do to be a better husband. The fourth suggestion reminds you to read the books your wife has purchased, so you head to Amazon and buy another copy of What to Expect When You're Expecting, as you left the one your wife gave you next to the Gideon Bible on your last business trip. "I'll read it, I promise," you tell your wife, and then add, "I'm on Babycenter right now, in fact." Pleasantly startled, your wife springs off the sofa - well, lumbers, perhaps - and peers over your shoulder. In a flash of inspiration, you intuit that there might be something you could watch together on TV that relates to the whole parenting thing. "Let's see if there's anything on TV that might be good," you say.

You click over to your TiVo home page, which lets you manage your television service through a search-based interface. You search for "parent childbirth newborn" or something like that and find that there are five shows in the next week that focus on the course of pregnancy, three of them on the Learning Channel. You tell TiVo to record them all, noting that the first one will be available to download tonight, in half an hour, no less.

In the background of your computer, as you jump from site to site and page to page, several marketing-related actions are occurring. A cookie set by your local cable company notes that you've visited several sites that r marketing potentials - Amazon.com, TiVo.com, and Babycenter.com, all sites that indicate significant intent to purchase products or services. You've also alhat you intend to download five new programmes, and the system takes note of content tags associated with those programmes, cross-referencing them with your recent search history.

The cable cookie shares this information with a marketing application running in the background of your computer, perhaps as part of that Google Desktop Search (GDS) program you downloaded last year. Alerted by the marketing potential that your recent surfing has created, GDS instantly uploads new tags to Google's central advertising marketplace.

Up on Google's ad marketplace, millions of similar potentials are aggregated and presented to hundreds of thousands of advertisers for sale in a modified real-time auction. Most of those advertisers have preset their spending levels, demographic preferences and, most important, intent-based targeting profiles.

In the time it takes for an average Google search to finish - less than a second - several advertisements have already been sold against each of the five programmes you've selected.

Half an hour later, you and your wife turn on your television to catch the Learning Channel show. As it starts, a small box appears on the bottom of the screen, alerting you to several advertisements that have appeared in your feed. You pause the show, hit the ads button, and scan the commercials.

Only they're not just commercials; they're offers as well. The first is from Gerber for a free month's supply of formula. (Pass; you and your wife have agreed that breast-feeding is the way to go.) Next up is a Pampers ad offering a free box of diapers. (Sure, why not? You accept that one, clicking the box that allows the system to send your details to the Pampers marketing machine.)

Then comes the killer ad: "Click here for $50 off a Peg Perego Stroller. Ships in 24 hours!" Huh? you think to yourself. That's the one your wife said was the Mercedes of strollers. Maybe you can afford one after all. "Honey," you begin. "What do you think? Should we go for it?" Her eyes light up (you had said no to this exact request twice - $300 for a fucking stroller?!! were your exact words) and you click to accept the offer. Your wife snuggles into your side, pleased that, for once, her husband actually gets it.

Is such a scenario possible? While the details will inevitably vary, I honestly think it is not only plausible; it is inevitable.

For an advertiser like Peg Perego, such a scenario not only makes television advertising affordable; it turns the medium into a new sales channel. Instead of buying time on the Learning Channel on Mondays at 8pm (a content-attached purchase), Peg Perego will buy direct access to the intentions you have declared through a blend of your search history and your television watching habits. Once it is satisfied that you are a potentially high-value customer, it will then push advertising offers down the cable line to your digital video recorder.

The beauty of this scenario lies in how it changes the economic model of marketing. First of all, Peg Perego has never been a television advertiser because the medium has never lent itself to a high enough return on investment - the company relies mostly on word of mouth and distribution through a network of retail outlets for its sales. But because it can identify exactly who its customers might be, on the basis of intent, it can change its model completely, and view a marketing investment in television to be, well, not a marketing investment at all, but rather - this is worth stating again - a new sales channel. This in turn means that tens of thousands of marketers who otherwise may never have considered television a viable medium will soon see it as such.

That is the magic of intent-based marketing - it shifts marketing dollars from the unknown to the knowable. As Tim Armstrong, vice- president of advertising at Google, puts it, "search turns a cost centre into a profit centre". Think about that for a minute. The entire foundation of marketing - a $100bn industry driving, well, nearly every business on this planet - is shifting, slowly but surely, to a new model, one informed by the simple idea of people looking for things on a search engine. No wonder Jan Pedersen, chief scientist for Search & Marketplace at Yahoo, recently quipped: "We think of shopping as basically an application of search."

Marketing is not the only industry facing massive change in the search economy. There is probably no greater example of a thriving off-line search business than the yellow pages, now worth around $15bn in the US alone. Within one generation, however, the yellow pages will be viewed as a dead industry.

Now, before you tell me that flipping though a printed directory is far more convenient than turning on your computer and punching in some search terms, let me remind you that local search, as it's called in the search industry, is still in its very early stages. There will be about 1.7 billion mobile phone handsets in use by the year 2006, and most of those will have internet access.

When finding a dentist is as easy as punching "dentist" into your phone (or, with new technology already on the market, simply speaking it), the idea that anyone will pull out a 10lb paperweight to execute a search will seem as quaint as hand- cranking a car.

Imagine it's the near future and you're in your local grocery store on a mission to pick up food for a Saturday night dinner party. Because you've got oodles of disposable income to burn, it's a high-end Whole Foods store, the aisles dripping organic righteousness and whole-grain goodness. You know that dinner for eight is going to run to at least $200, not counting the wine, but that's OK compared with the tab at the local bistro. You'll be coming out ahead. But you do want to make sure you're not spending money you don't have to, especially on the wine.

Now, Whole Foods has quite a wine selection, but the store isn't known for its discount prices on anything, and when it comes to wine, you've got a sneaking suspicion that the store is really sticking it to you. But it's a convenience buy, you've always thought, and you're willing to put up with it for the most part.

As you slip your Neiman Ranch tri-tip roast beef into your basket and thank the butcher, you head to the wine aisle. What might go with that grilled tri-tip? A nice Cabernet, no doubt. Whole Foods' wine aisle, a testament to hierarchy and peer pressure, places the most expensive bottles on the top, and the cheap juice on the bottom. No self-respecting Whole Foods shopper wants to be seen bending down to check out a bottle of wine. Then again, those bottles staring out at you from eye level are exactly the kind that you suspect Whole Foods marks up with the glee of a four-star sommelier.

What to do? Not to worry; you've got Google Mobile Shop installed on your phone. You whip out your Treo 950, the one with the infrared bar code reader installed, and you wand it over that $52 bottle of 2001 Clos du Val now lovingly cradled in your arm. In less than a second, a set of options is presented on the phone's screen. It reads:

2001 Clos du Val Merlot, Lot 21 Stags Leap District, Napa Valley Average Retail Price: $38 (click here for more) Click here for a list of prices at nearby stores Click here for stores selling similar items Click here for reviews of 2001 Clos du Val Merlot Click here for more on this vendor [ecological impact, vendor labour policies]

You're pretty sure that Clos du Val isn't employing child labourers, and anyway you're really interested only in price comparisons, and the first screen has confirmed your initial suspicion: Whole Foods is ripping you off.

You click on "list of prices at nearby stores" and see that the liquor store up the street is selling the same bottle for $39. You click on that store's link, and then choose the "reserve this item for same-day pickup" option. With a satisfied smirk, you replace the bottle on its perch on the top shelf, and head over to compare prices and recipe tips for $6 boxes of imported pasta. As you leave, the fellow who runs the store's wine department eyes you warily, then picks up the phone to talk to his manager. "Herb," he says. "Did you get my message about banning cell phones in the store?"

Is this scenario possible? For it to happen, a few nontrivial things need to occur. First, the entire UPC barcode system must be made open and available as a web service - a nontrivial event, to be sure. Those bar codes and the information within them are not yet a public resource, though a small coterie of researchers and entrepreneurs is looking to change that. Second, merchants must be compelled to make their inventory open and available to web services. Third, mobile device makers must install readers in their phones, essentially turning phones into magic gateways between the physical world and the virtual world of web-based information. And fourth, providers like Google must create applications that tie it all together.

While the first few hurdles to the realisation of this scenario have yet to be jumped, it's certainly a no-brainer that Google and Yahoo would love to tie everything together should it become possible to do so. The implications of search breaking out of the PC box and making real-time information available at the point of purchase has been the failed business model of several web 1.0 companies. But with recent developments in local and mobile search, it is far closer to happening now.

What might be the effects of such a system coming to fruition? For one, markets would have to compete far more on service, convenience, ambience and other factors unrelated to price. And vendors of products that have been made in third-world sweatshops or in factories that overpollute; or vendors that support causes some consumers do not wish to support; would be called out in a far more transparent fashion. Refusal to participate in such a system would mean that vendors or merchants had something to hide, and so the system could be a major force for good in the global economy, forcing transparency and accountability into a system that has habitually hidden the process of how products are made, transported, marketed, and sold from the consumer.

Whether or not such a system actually develops, the fact remains that it could, and that alone is a powerful force on the vast ecosystem of local and global commerce. Decision by decision, possibility by possibility, click by click, search is shifting the firmament of our economic world, and what we've see so far - the billions upon billions of dollars running over the servers at Google, Yahoo, and others - is simply the first indications of that shift.

for more, click on comments!

This is an edited extract from "The Search: How Google and Its Rivals Rewrote the Rules of Business and Transformed Our Culture", by John Battelle, to be published by Nicholas Brealey Publishing on September 20.

To buy a copy for £16.99 (+ SH) call 020 7239 0360, or click here!

On MicroSoft

2005-09-16T22:35:00.000-07:00

BusinessWeek features an interesting cover story on its 09/26/2005 issue about Microsoft: "Troubling Exits At Microsoft - Once the dream workplace of tech's highest achievers, it is suffering key defections to Google and elsewhere. What's behind the losses?"

Amid all changes in the marketplace, Microsoft's stagnant stock price and increasing attrition rate make for a troubled picture. The BusinessWeek article seems to suggest that Microsoft was different in the '90s, and only now, with Ballmer at the top and Google/Yahoo becoming better professional destinations, things take a while to come out of Redmond. However, one should recall that after shipping MS-Windows 95, it took Microsoft a long time to come out with MS-Office--a suite that was made up of various pieces, built or acquired.

Obviously, Microsoft is facing a fork on its road. On one hand, enterprise software needs to come out to the market in lockstep. Thus, most efforts to transform the Company into a mature business ought to be in areas dealing with large enterprise software. There are many models one could think of, yet one has to start from one's own premises. On the other hand, in the consumer space, where the innovation pace has been set by Google, Yahoo, and Apple, Microsoft would do well to think of ways to stay nimble and flat! In any case, there are always some who wonder: "When has Microsoft stood for (product) innovation?" pointing to the Company's long string of acquisitions. On the enterprise side, Microsoft should look at ways of getting better than IBM, on the consumer side it's got Google and Yahoo to worry about. Accordingly, there could be at least two different corporate entities, one targeting enterprises, the other consumers. No matter what the answer may ultimately be, trying to cut it into a size that fits all is just a dream, and no other entity has managed to be all things to all markets.

Forbes also has an article in its 09/13/2005 Business Strategy section: "Microsoft's Midlife Crisis"

This article goes into some of the details about daily life at Microsoft. The reader learns about a number of management initiatives launched by Ballmer, such as everything-reviews, or the dismissal of "6.5% of the workforce every year for inadequate performance." While these initiatives could make all the sense in the world, the reader is not given the context, either organizational or historical, in which they occur. This, together with the scattered complaints of its employees, leave the reader bewildered as to what the diagnostic and solution might be for Microsoft (culture) ills.

In fact, for the student of corporate culture, a better place to start thinking about Microsoft's situation would be to look at Mini-Microsoft, a blog where people with all Microsoft-related affiliations vent out about the Company. From there, I quote an anonyous reply that puts the employees' complaints in a better industry perspective:

Hopefully sites like this will add value to the discussions around the problems that MSFT faces and what can be done to address those problems.

But the fact of the matter is if anyone thinks MSFT is in poor shape in terms of innovation, morale, etc... take a look at the rest of the industry, and just the economy in general.

You want to be really depressed, talk to folks who work in the auto industry... or let's look into what ails the airlines... two bankruptcies in one day, and who's accountable? No one knows for sure, but a lot of pilots, flight attendants, mechanics, etc will be paying the price for management mis-steps...

Even in the hi-tech industry, think MSFT is bad? Try working for IBM, HPQ, Sun, SGI, Intel, or if services is your thing, try EDS, Accenture, etc. Talk about endless meetings, lack of passion, regular quarterly headcount reductions to cut costs, missing the innovation that made some of these companies great... MSFT isn't so bad by comparison.

However... just because MSFT isn't as bad off as these stalwart companies, I also can't deny that MSFT isn't as passionate, innovative, and hip a place to work as companies like Google, Yahoo, and other darlings of Wall Street and the media are. But they'll all end up in the same place as MSFT eventually (with the same BW or Forbes articles written about them), and those same passionate, innovative, A-Type personalities will move on to the next big thing.

It's part company growth and part Wall Street. Get big enough, get successful enough, and God forbid, go PUBLIC, and you can flush long-term innovation and employee morale right down the toilet. Bill and Steve are just as beholden to Wall Street these days as Immelt and Palmisano and Hurd... cost cutting, earnings, and stock price trump innovation, employee morale, and benefits every time.

Upset about having to pay $40 for a prescription or no longer having towels for your after-workout wipedown during lunch? Would you trade that for what other competitors and other industries offer? Probably not.

As I mentioned, just because MSFT isn't as BAD as the majority of companies, that doesn't mean it's as GOOD as Google, et al, in terms of passionate workforce, excellent benefits, stock options, innovation, etc. There is significant room for improvement.

But at the end of the day, I'm not certain any publicly traded company in America can sustain the entrepreneurial spirit that got them going in the first place, once investors become the key stakeholders. Just look at what happened to the HP Way... it got laid off and put to pasture... Gerstner made quick work of the IBM family, and the "Think" mantra morphed into making the elephant dance... on the backs of tens of thousands of layoffs.

Microsoft has the talent and people and money to re-invent itself and compete. And most likely, change will need to start at the top with Ballmer. Often times, executive shakeups produce near and mid-term results. But ultimately, MSFT's situation is more a function of the influence Wall Street has on good companies, than anything else.

In other news: This site is fantastic and I just saved a lot of money on car insurance by switching to GEICO. ;>

In the end, here's Goldman Sachs' position about the current situation at Microsoft:

Goldman Sachs maintained an "outperform" rating on Microsoft despite employee morale issues.

The research firm cited recent reports about a decline in morale among Microsoft employees. "Microsoft has never been the most innovative company," Goldman said. The rapid pace of innovation by competitors including Google has been a lingering employee concern, according to Goldman.

Moreover, the maturity of Microsoft's products has been a damper on growth, on the stock and on employee compensation, according to the research firm.

Goldman remains convinced that Microsoft still has "a lot of smart and highly motivated people," and that the product pipeline remains strong.

"The new product flow and innovation is impressive and increases our conviction that there are robust new product cycles upcoming that will be beneficial to the stock and a boost to morale," Goldman said.

So, all will be well when MicroSoft will have played all its cards (i.e. products on the pipeline). Until then, a cautious "outperform"...

From SUN To SUN Again!

2005-09-12T16:41:00.000-07:00

"When people have a monopoly sometimes they don't make the right choices." Intel's blunders have reinvigorated the computer industry in the sense that it "is good for the industry, and it will lead to more innovation."

"In my mind the biggest challenge is to avoid unnecessary complexity and gratuitous engineering. My personal mission is to make things as simple as possible."

For him, investor with $200,000 in Google at an early stage, what matters most is that he is doing just what wants to be doing at age 49. "I've wanted to build things since I was 6 years old. Writing checks and watching companies grow is not my cup of tea, if you know what I mean."

Andreas Bechtolsheim, Sun co-founder

Andreas' observations are very timely. Several of the (IT) industry giants, past and present, would do well to take in his advice!

E-Bay & Skype (Part I & II)

2005-09-08T16:44:00.000-07:00

Even the thought that E-Bay is evaluating the possibility to buy Skype is somehow unsettling.

Given the discernible lack of complementarity between what E-Bay and Skype have been about, one is left wondering what the synergies might be? Or maybe E-Bay, after an extensive international expansion, is simply running out of steam as far as economies of scale are concerned. After acquiring Pay-Pal, one would expect further developments from E-Bay towards economies of scope--since the shopping experience there is far from perfect (e.g. trust or item return issues).

By comparison, one can see a much better rationale behind Amazon.com's A9 efforts. Often times, somebody searches something on the internet with the prospect/possibility of buying something.

... unless E-Bay's rationale is to counter what Yahoo! and Google have recently done in the VoIP area. Indeed, considering that these two are its direct competitors, E-Bay may fell it needs to mirror their actions. However, this would be a wrong move; check out historical precedents!

09/26/05 Addendum:

Following the completion of a project evaluating opportunities for other players in the telephony and data services sector, here are some considerations as they relate to the rationale behind the recent acquisition of Skype by E-Bay:

"We believe that you should not have to pay for making phone-calls in future, just as you don't pay to send email." Niklas Zennström, Skype cofounder and CEO
So far, Skype's cost of acquiring a customer has been $5, compared to $200-$400 for Vonage;
Skype adds about 150,000 users a day to its member base of 54 million in 225 countries and territories. It does so without a dollar spent on equipment, or marketing--zero marginal cost.
"We want to make as little money as possible per user, because we don't have any cost per user, but want a lot of them." Niklas Zennström
VoIP is driving the price and cost of VOICE to zero;
Cost sensitive customers are adopting Skype in droves. In short term, this increases average revenue per user (ARPU) for the providers of traditional telephone services. In the end, they would have to offer telephony services for free, and part of a larger data services package.
"When Yahoo! and Microsoft buy companies, they typically disintegrate them." Niklas Zennström
E-Bay plans to leave Skype alone, as a brand and business.
Skype is one of the top brands on the internet. Its brand alone could be worth over $1Bn of the $2.6 E-Bay has paid for it.
The rest of the purchase price (up to $1.6Bn) could also be justified by the "reduced friction" Skype will enable E-Bay's transactions with. Cross-pollination between the customers of the two entities, and "pay-per-call" (analogous to Google's pay-per-click), are further justifications.

Still not convinced Mrs.Whitman's spent well E-Bay's dollars? Consider this:

On 31st of August 2005, PayPal announced the introduction of micropayments processing fees for digital goods.In other words, micropayments-enabled Skype could well become the number 1 telephone company in the world. There would be some obstacles, yet initial signs are good.

The picture on the minds of the EBay-Skype dealmakers becomes so much clearer now, and sense has been blown into it anew. This deal is a keeper.

Watch for major transformations in the telephony-services market; subscribers will become consumers!

Never think you are too good or right relative to your customer

2005-09-08T16:08:00.000-07:00

You probably ran into this situation too. Let's say there is a book or something you order from Amazon.com and you are being told "Usually ships in 1-2 business days" or "Usually ships in 24 hours." When you actually complete the transaction, unless you paid for expedited shipping, you learn that the item you've just ordered would ship in 14 to 20 business days.

This seems to be another way for Amazon.com to segment its customers and/or boost the adoption of its "Free Two-Day Shipping or $3.99-per-item Overnight Shipping on over a million eligible items sold by Amazon.com" program. Alas, all this comes at the expense of service level.

That Amazon.com is not the most economical is old news to its customers, who paid the premium because of the quality of service. Does Amazon.com think its service level is so high that it only can be lowered? Or could it be that they borrowed from the book of some top-service retailer in Kirkland WA, that charges for membership?

Hmm, I don't think this can work in the long run (factor in those looming state taxes), but then again I'm not the one running their numbers...

Since we are talking about Amazon.com, who likes the bazaar atmosphere on their pages anyway? I can even imagine one line of defense: Amazon.com is doing real-time trials on what sells and it actually sells more by cluttering the space. However, based on my years of history with the Company, I would expect at least the option to customize my Amazon shopping portal if not a default minimal design. Is it just me?

The road(s) ahead...

2005-08-22T12:01:00.000-07:00

In the world of personal computing, the ball has been for too long in the court of the incumbents--folks in Redmond, etc. So it pleases one to see how the personal computing industry is taking notice, and changes as result, of the challengers--Firefox, Google and their likes. Indeed, Internet Explorer has become stale and heavy long time ago--until recently there had been no developers working on it anymore. Longhorn, the ghost of the operating system once meant to be, will finally be released in 2006.

Meanwhile, public imagination has been set ablaze by a series of pointed actions undertaken by the folks at Google: acquisitions, big name hirees, unconventional business approaches towards product and service offerings, or the $4Bn pile of cash it wants to get by selling its near $300/piece stock.

In charting out Google future, I would ponder the answers to the following questions:

What strategy should Google follow?
What one Google product should have its API public?

Google should make it so that access to its services is less dependent on Microsoft's gates(sic!).

Longhorn, at least initially, was supposed to offer a lot of the functionality Google tries to bring to the desktop and more. Should Longhorn come in a position to do that, Google's days on the desktop would be numbered, and considering the low adherence people have to search websites, Google would have a hard time justifying its multiples. Consequently, an elegant way out of the Microsoft conundrum for Google could be Linux. However, one of the major weaknesses Linux has is its lack of a (novice-)user oriented interface.

How about extending the Google search capabilities to Linux so that the user is presented with an extremely simple point of access to all the local-, and internet-resources? In other words, what would it take Google and Linux to become what Longhorn has struggled for such a long time to be?

To ensure the success of such approach, API's (and developer tools) should be provided so that an ecosystem (consisting of software and hardware applications) may develop.

To sum it all up: make search, discover, and consume the new computer paradigm, and get there, before Longhorn, with the help of the developers community!

During all this time, Google should continue to throw good technologies at the end-user so that the costs of switching off away from it grow.

Microsoft would do well to (re-)learn a lesson in creative destruction and mobilize its resources and developer community.

The end-user customer will finally be the judge, albeit a delighted one!

An upcoming IT revolution in healthcare?

2005-06-20T14:00:00.000-07:00

Steve Case, the founder of AOL, is thinking of a comeback. This time is Revolution, a private holding company in which he's put $500M of his own money and the hope to do something that would amount to a revolution in the healthcare industry by buying and building companies that help people take care of themselves. In case one thinks highly of AOL's founder and former chairman acumen, and of the healthcare industry's potential, here's Mr. Case's checklist:

Online reviews and rankings of doctors and hospitals.
Information and breaking news about medical ailments and treatments.
Software and tools that let people manage their medical records online.
Health "concierges" or "coaches" who help patients navigate the medical system.
Walk-in medical clinics where, say, in 15 minutes and for $39, you can discover whether your child has an ear infection.

It may not look like much but nor did AOL about a decade ago. While people were thinking and talking big about the soon-to-come internet revolution, Steve Case thought of end-user access at a lower fixed cost, and a direct marketing campaign that flooded our mailboxes for years on end with the ominous AOL starter kit.

Keep in mind: Cost, Quality, and Timeliness

2005-06-19T20:14:00.000-07:00

Harvard Business School professors Pankaj Ghemawat and Ramon Casadesus-Masanell have recently co-authored an academic paper Dynamic Mixed Duopoly: A Model Motivated by Linux vs. Windows. They explore several answers to the fundamental competitive dynamics question:

Will open source software (OSS) ever displace traditional software from its market leadership position?

In their formal economical model, they structure the problem in terms of a dynamic mixed duopoly in which a profit-maximizing competitor (Microsoft) interacts with a competitor that prices at zero (Linux), with the installed base affecting their relative values over time.

They go on further to ask what conditions are needed for Linux to take over Windows:

Is Linux's superior demand-side learning sufficient to win out?
What is the effect of forced procurement by governments and some large corporations on the long-run equilibrium?
How do cost asymmetries play out?
Can Microsoft use piracy strategically to improve its market position?

Summing up their findings, the authors say:

"We believe that there is still a great deal of confusion and puzzlement on how this competitive battle will develop."

Worth pointing out are their recommendations for Microsoft to strategically to remain competitive against a product that is argued to be of better quality, is updated more frequently, and is free:

Increase its own demand-side learning.

Listen to the demands of the user community to better exploit the benefits of demand-side learning. Microsoft must facilitate communication between the user base and the company to have prompt feedback on the performance of its products.

Make an effort to incorporate improvements in the code (fix bugs and introduce new features) as soon as possible.

Reward those who propose improvements for the code. At the very least, Microsoft could publicly acknowledge those who proposed new features or discovered bugs.

Feed its direct and indirect network effects.

Support as much as possible the independent software vendor community so that the quantity and quality of complements is substantially above that of Linux.

Encourage competition between the different ISVs. The lower the prices of applications, the more appealing the Microsoft system will be.

Price discriminate. Give Windows and applications away to schools and universities so that users build their file libraries on Microsoft, not Linux.

Minimize the number of strategic buyers.

Let governments access the source code and give guarantees that sensitive data is treated confidentially

Price discriminate. Give binary away to organizations and individuals who are not willing to spend money on Windows but who would be willing to use Linux because it is free.

Reduce costs to be able to sustain long periods of time with low prices.

Decrease Linux's demand-side learning.

Because the way to do this involves some questionable (from a legal point of view) actions, we will refrain from suggesting specifics.

Lessen Linux's direct and indirect network effects.

Make it as hard as possible for Windows applications to work on Linux.

Same for MS Office documents.

"Promote" Linux's code forking.

Infuse fear, uncertainty, and doubt into the Linux user community. For this to work, the statements must be perceived as credible. Credibility requires some past FUD announcements to be realized.

Takeaways:

The model is structured in terms of price, quality, and frequency of updates. In Competing Against Time, George Stalk, a consultant with BCG, shows how companies that respond faster to customer needs can expect to be twice as profitable as the industry average, and to grow up to 3x quicker. Stalk arrived at his findings structuring the problem in terms of supply chain, which he described along the following parameters: cost, quality, and timeliness. Not unlike those of Ghemawat and Casadesus-Masanell.

More cash, more chances for VoIP

2005-05-12T10:38:00.000-07:00

The story of VoIP continues with the latest round of funding at Vonage. From PRNewswire we learn:

EDISON, N.J., May 9 /PRNewswire/ -- Vonage, the leading provider of broadband phone service, today announced the closing of a $200 million financing round led by Bain Capital, with strong participation from existing investors including New Enterprise Associates (NEA), 3i, Meritech Capital Partners, Institutional Venture Partners, and existing investors. This latest round of financing brings total investment in the company to $408 million.

Boasting 600,000 subscribers, Vonage is the de-facto placeholder for what VoIP is yet to be: the alternative to fixed-line telephony, local and long-distance, and much more. It is difficult to call into question the viability of the Vonage model, even though no VoIP-enabled killer-app has surfaced into the shopping lists of customers. However, a series of exceptions could be taken with the current positioning statements of most VoIP services, chief amongst being 'low-cost telephony.'

Before Vonage even came into being, price wars among the long distance carriers brought the price per minute of most phone conversation down to pennies. The low prices were due in part to: excess capacity combined with VoIP technologies, opaque cost structures at the big long-distance carriers, and the apparition of a myriad of small players squeezed in between.In essence, the above reasons centered on a cost structure that allowed such low prices for the consumer. On the other hand, the sustainability of such costs has proven to be questionable. Several of the large carriers are no longer in business, and the small ones (the squeezed in between) cannot scale much beyond their initial scope.

When Vonage entered the stage, the prices of phone conversations were already low, for local and long-distance alike. A look at the cost structure at Vonage is indicative. Vonage spends about $400 to get a new customer who, in turn, pays back to Vonage $25/month. Assuming monthly operating costs between $10 and $12 per subscriber, we see that Vonage needs to serve a new subscriber well over 20 months to break even. So unless somebody (read, for example, cable companies) is willing to subsidize for that long the challenger category to the Baby Bells, providing low cost telephony may not be the way to stay in business for the VoIP promoters. For one, the Baby Bells could do a number of things to temper VoIP, and for another, VoIP architectures don't seem to scale well on the provider side.

As a way out for a company like Vonage, one can think of:

An application rich environment that targets the mobile individual (e.g. follow-me abilities, and connecting IM, email, phone, calendar, etc.);
Selling the company to the public or some cable operator.

Adding to the recent infusion of cash a friendly regulatory environment in Washington, makes for a hopeful landscape for Vonage/VoIP despite some regulatory hurdles big states that are hosts of individual Baby Bells may raise along the way--see Texas' lawsuit against Vonage over how it handles emergency calling.

-these are some thoughts from a larger project I have undertaken with my partner, M. Vexler, VP with IPCC-

Is Redmond Adopting Win-Win Strategies?

2005-05-05T20:30:00.000-07:00

Until recently, typical of the companies its size, Microsoft has leveraged its intellectual property (IP) portfolio mostly in the context of IP exchanges. That is, until May 4 2005, when Microsoft unveiled its IP Ventures program meant to link venture capital community, entrepreneurs and emerging businesses with its multibillion-dollar R&D effort.

Microsoft IP Ventures opens up hundreds of internally developed technologies to entrepreneurs and new businesses by licensing and spinning out Microsoft's innovations to facilitate new product and business development.

"Our research labs and efforts across the company have created a large portfolio of innovative technologies that extend the reach of personal computing today, with much of it going into Microsoft® products," said Rick Rashid, senior vice president of Microsoft Research. "At any given time, there are hundreds of projects under way at Microsoft. IP Ventures provides yet another vehicle for extending this reach and delivering innovations to customers in a variety of areas." (http://www.microsoftipventures.com)

So, Microsoft gives something away for sure. Let us consider some of the reasons:

Its R&D (700+ people worldwide) has become too big for Microsoft to capitalize on its IP by itself;
Need for additional direct revenue (it is estimated IBM gets $1B a year from licensing out IP);
In addition to its developer tools, Microsoft's IP could become yet another powerful way to ensure the growth of the ecosystem centered on Microsoft technologies;
Potential for long term returns from the equity small companies trade for the Microsoft IP.

What can go wrong? It is hard to say. Let us only mention that open source, IBM, and SUN, have been giving away IP for some time now. Thus, the impact of the reason #3 above may be diminished. As well, tying one's future to the odds of success of fledgling companies is a risky endeavor that requires specialized assets and resources. Thus, the impact of the reason #4 above is uncertain--especially for the accounting types. Also, given Microsoft behavior, ungentle at times, toward smaller companies that seemed to take away some of its revenue, companies will need re-assurance that everybody in the ecosystem is going to earn something and be able to keep it.

All in all, this cannot be a bad time for the Microsoft centered companies. The customers are likely to get more innovative technologies, the partner-companies are likely to get access to the Microsoft smarts and channels, and Microsoft itself will get the rest.

Reconciling long term vs short term in a company's life

2005-04-13T23:36:00.000-07:00

If it weren't for the difficulty to supplant the cash coming from public markets, one might be inclined to question the financial markets. It is not an isolated instance for the financial markets to be portrayed as mere obstacles confronting the otherwise strategic corporate executive with the imperative of delivering quarterly numbers at the expense of long term profitability in the publicly traded companies.

Ian Davis, the worldwide managing director of McKinsey & Co., is one more voice, among the few of this profile, to take exception with such views. Mr. Davis, in a 4/10/05 article with FT, strongly suggests that, in the well-run and managed company, the health of the company balances very well with long-term performance. Such an approach, the author says, encourages "management teams to understand how to look after the company today in a way that will ensure it remains strong in the future."

We are also reminded that share prices reflect the market expectations of future performance, and "in almost all markets around the world, 70 to 90 per cent of the stock market value can only be explained by the cash flows beyond the next three years."

Mr. Davis identifies the following indicators management teams should consider for the health of their companies:

a robust and credible strategy;
productive, well-maintained assets;
innovative products, services, and processes;
a fine repute with customers, regulators, governments, and other stakeholders;
the ability to attract, retain, and develop high-performing talent.

Following such prescriptive indicators, Mr. Davis goes on to acknowledge that, in a recent survey, the majority of executives indicated they would forego "an investment that offered a decent return on capital if it meant missing the quarterly earnings expectations."

Among the offered suggestions, one is particularly interesting: "Companies must first identify investors who will support their strategy and try to attract them. [...] Management teams should then talk to these investors about the metrics the company has developed to track both performance and health, be they product development, customer satisfaction or retention of talent.

So, in other words, management should take care of both the sort-term and the long-term in companies, and communicate what they are doing.

A lesson from the markets

2005-04-06T11:57:00.000-07:00

A couple of products coming from Sony are worth noticing for their potential to signal novel approaches to markets. One is Sony Cybershot DSCH1, the 5.1MP digital camera, and the other is Sony MZ-DH/RH line of minidiscs.

Both these products indicate some remarkable departures from several of Sony's directions. The lower pricing, about half of what Sony used to charge for its high-end new to market products, could be aimed at better positioning of the camera against Panasonic's Lumix, and the minidisc against Samsung's players and Apple's iPod.

The feature sets have also gotten less impressive than what we've come to expect. Except for the higher optical zoom and stabilization for the camera, and Organic EL Display for the minidiscs, several of the high-end/marketing driven gimmicks are gone. Among the missing features in the new lines are: the magnesium body, hi-def digital amplifier, and long battery-life in minidiscs, and the InfoLithium M battery as well as the Zeiss lens and the ability to use non-Sony memory supports for the camera.

So, besides the price adjustment, what else is there? Sony gave in and its minidiscs support now both MP3 and Atrac3plus direct playback. Moreover, the $6-1Gb Hi MD removable disc can store music-, and data-files of all types, thus enabling the player to become a storage device as well. Considering Sony's attachment to ways of protecting its content copyrights at all costs, this is no small change in a world where consumers want to freely move content among devices. As for its DSCH1 camera, this seems to offer a refreshing price vs. feature-set balance that takes into account both competitors' prices as well as the rise of consumer preferences for other brands, and maybe the diminution of its own following.

Since all these are product-events that must have been in the making at a time when Mr. Stringer, Sony's recently appointed non-Japanese CEO, was still the British executive of Sony's American entertainment operations, it is safe to assume that even the old guard at Sony had heard the message from the markets. However late, market capitalism seems to be alive and well and has finally taught a lesson that Sony's executives could not afford to ignore.

The To Do List at Sony should include the making its 1Gb Hi MD discs widely accessible, by lowering the price and licensing the standard out. In an increasingly commoditized world, the competitive game has not remained about engineering alone as much as great engineering and design followed by ubiquity and standards. In this sense, the expected truce in the next generation DVD media support is another sign that the folks in the big league get it.

Nota Bene: According to 54-year-old Ken Kutaragi, the "Father of the PlayStation," Sony executives had been too restrictive in controlling Sony content in a world where consumers of digital movies and music want hassle-free access.

He was of the opinion that Sony must revive its original innovative spirit. The Company also has been hurt by its insistence on making its content proprietary, Kutaragi said.

Mr. Kutaragi's latest creation, the handheld PlayStation Portable, is selling very well. An estimated 3 million have been sold since it was released in Japan in December and the United States last month. Considering his recent demotion, he has lost his board seat recently, Microsoft or Samsung could do well by making him an offer

The $100 Laptop

2005-04-04T23:00:00.000-07:00

Several years have passed since the fee to narrow the digital divide in the US was added to our tax-laden phone bills. The results for education are mixed at best, though schools and libraries got their share of wiring and equipment. Now, a new initiative " that could revolutionize how we educate the world's children" is coming to the fore. It is known as the $100 Laptop, and it is the brain-child of a diverse and growing group including MIT faculty members at the Media Lab: Nicholas Negroponte (a founder of the Lab), Joe Jacobson (serial entrepreneur and inventor of e-Ink), and Seymour Papert (one of the world's leading theorists on child learning). In addition, there are three initial companies that have committed to this project: Google, AMD, and News Corp.

Professor Negroponte describes the $100 Laptop project in the following terms:

"The $100 Laptop will be a Linux-based, full-color, full-screen laptop, which initially is achieved either by rear projecting the image on a flat screen or by using electronic ink (developed at the MIT Media Lab). In addition, it will be rugged, use innovative power (including wind-up), be WiFi- and cell phone-enabled, and have USB ports galore. Its current specifications are: 500MHz, 1GB, 1 Megapixel. The cost of materials for each laptop is estimated to be approximately $90, which includes the display, as well as the processor and memory, and allows for $10 for contingency or profit."

At this time, the biggest challenge of the project is estimated to be "[M]manufacturing 100 million of anything. This is not just a supply-chain problem, but also a design problem." Governments in target countries will take care of the distribution and marketing aspects of the project.

If history is of any help, anyone recalls Larry Ellison's Next Internet Computer? That was a company whose objective, 5 years ago, was to provide cheap computing (under $500) to the US schools. Linux was around at the time, and so were Java, the internet, browsers, money, applications, etc. Beyond scale, and the burning desire of the governments to do well for their youth, what else could make $100 Laptop a success? Maybe the presence of News Corp among the initial corporate sponsors of the program?

For more info on the $100 Laptop, see: http://laptop.media.mit.edu

Intel's Otellini strikes at the US tax regime

2005-04-01T10:04:00.001-08:00

Recently, Paul Otellini, Intel's to be CEO, has expressed his considerations about building a $3 Bn chip factory abroad due to higher taxes in the US relative to Europe and Asia. Mr. Otellini considers the 35% corporate tax his company would pay to the federal government too high in comparison to:

a) Israel, which offers a 20 percent capital grant, a 10 percent tax rate and a two-year tax deferral;
b) Malaysia offers a 10-year tax deferral;
c) Ireland offers a 12.5 percent tax rate.

When comparing operating costs in the US with the 3 alternatives above, Mr. Otellini stated: "The problem that we have and which the industry has is that it costs us $1 Bn more to operate inside the U.S. than outside of the country." It's not wages and capital; it's almost all attributed to tax benefits - or the lack thereof - in the United States compared to what is offered elsewhere." It is not easy to accurately calculate the TCO's/ROI's associated with each alternative since the raw numbers in the overseas alternatives present cost savings exceeding $1Bn, while having a factory built in the US, in close proximity to the most other Intel operations, would increase the ROI.

However, difficult a calculation this may be, Mr. Otellini may be onto something more than jettisoning the costs of the leader in a battered industry. Indeed, by looking at the Israeli alternative, one can gauge the real willingness of a country to become a premiere hi-tech place since Israel is offering to pay a premium while it experiences its own budget difficulties and quasi-war situation.

An outsourcing tale

2005-03-25T19:44:00.000-08:00

It is becoming increasingly apparent that outsourcing and offshoring are not as great and/or necessary as they might have seemed. In the autumn of 2004, JP Morgan Chase management, after 21 months of running, decided to undo its 7-year/$5 billion outsourcing contract with IBM, stating that it came to realize IT was a strategic function in the organization. Austin Adams, JP Morgan Chase CIO, commented that "We believe managing our own technology infrastructure is best for the long-term growth and success of our company ... to become more efficient."

In fact, Mr. Adams got to be in charge of an enlarged IT infrastructure after the merger of JP Morgan Chase with Bank One. The latter bank had built a repute for consolidating data centers and streamlining computer infrastructures and applications. Mr. Adams reached a point where he could entertain a switch from IBM to self-sufficiency and borrow from BankOne's cost-cutting know-how. The following table briefly shows a comparison among few data points of the corporate IT spending equation:

MEDIAN VALUES, 1999-2003	I.T. spending per employee	Compensation per employee	Return on shareholder equity
Bank of America,Citicorp, Wells Fargo, Wachovia	$12,729	$55,057	15.79%
JP Morgan Chase	$28,297	$110,702	9.45%

Obviously, JP Morgan Chase did not get the most out of its IT-expenditures. One may infer that IBM could not deliver the same efficiency as a well done in house job would. There could be a couple of reasons: 1) IBM used JP Morgan Chase's numbers as baseline and it improved on it marginally at most, and 2) IBM might have as well pocketed the difference, after all this is their business rationale.

For the time being, the problem not if/how companies like IBM could leverage scale and make it worthwhile for all involved. It is rather the moral of the story. If a company wants more than window-dressing for the sake of some quarterly numbers, hard choices ought to be considered. In the beginning/evaluation stage, outsourcing, and especially offshoring, my seem very attractive. Yet companies should not think that deferred costs and/or cheap labor can mask their process and organizational inefficiencies. In other words, improving a company's own business should come first and outsourcing/offshoring only later in the strategic roadmap of a company leadership.

For a more detailed analysis of the steps one should consider when business-process outsourcing is an option, see: Reaping the benefits of business-process outsourcing (Bloch & Spang / McKinsey)

Minimalist vs. Baroque Categories--work in progress

2005-03-12T20:43:00.000-08:00

The distinction between minimalism and baroque should concern technology makers, not only the aesthete. Technologies have been around for too long, we've spent too much money on them--at home or in corporations, yet we've have come to expect so little of it unless ready to fork out premium $.

Makers of technology have always known that their lock on the customer is an elusive goal. Technology companies try several ways to hold on their customers, with various levels of success, as far as market share, and price vs. duration, are concerned. As well, commoditization makes its way through, and in the end most all technologies become "black boxes," functionally distinct units, assigned to specific tasks rather than general purpose, that are simple to operate and mask unwanted complexity; specialization is addressed in small batches only. Resisting commoditization, the point where straight feature-comparisons start driving down the price, is yet another trend companies try to avoid their technologies from following. Balancing the two imperatives, to hold on customers and resist commoditization, is a tough act to follow.

One of the ways companies hope to stay relevant for their customers is to increase switching costs. This is what happens when, for example, software companies don't publish API's so that complementary technologies cannot be developed.

Another way companies try to hold on their customers is to provide increased perceived value relative to the price. Balancing perceived value vs. price has been achieved in a couple of notable ways: a) by subsidizing the user's (access) price with revenue coming from the provider of a service, and b) by leveraging scale economies, relatively complicated technologies are offered at lower prices. Client-server technologies typify the former alternative in which, say, the browser is free but the server costs one an arm and a leg. Low perceived cost relative to the amount of features also occurs when one pays, say, under $x for a technology utilized at a much lower scale than its capacity.

It is the last type of alternative that, when technology companies adopt it, fuels what people in the industry call bloatware or, as used in the title here, baroque categories. Several of Microsoft's products and services such as MSN, Adobe Photoshop, the AOL service, are good examples of this. After a certain point in the process of feature agglutination, it becomes clear that it is not your typical customer's needs that are being addressed by such technologies and services, but the technology companies' need to stay in business--see the resistance to commoditization. A rationale behind bloatware is that you either deal with specialized customers who need rich feature sets (Photoshop,) address the largest segment of the customers who, by definition, are technology illiterates (MSN, AOL,) or simply add a lot of features to keep 'price vs. features' type of challengers away from your market (MS Office.) In fact, in most cases, companies do it to defend their market share and/or because they cannot see it any other way.

Deconstructing technology, from a customer-centered perspective, generates the following elements: infrastructure, presentation, and experience--the CHI Triad [pronounced: kee]. Well designed and implemented infrastructures should take care of aspects such as reliability, scalability, interoperability, security, ubiquity of access, scale economies, platform approach, etc. Presentation is by and large what we also call look and feel. Good presentation, usually, makes it so that one can use the technology right out of the box or very soon after installing it--i.e. ease of use. User experience should consider the quality of all relationships between user and the technology over the duration of these relationships. Network externalities, safety, pay, being able to get the job done, perception of value, effects on environment, social clustering, usefulness, etc. Good customer experience presupposes that the underlying technology resonates with the customer context. Obviously, the farther away one moves from the infrastructure portion of a technology the more are the goals achieved by UI-, marketing-, creative-types. Conversely, engineering becomes stronger as one gets closer to infrastructure.

To return to bloatware, it can occur in each on of the chi triad's elements. Moreover, according to some companies, bloatware is the only way to show their worth. And, lacking alternatives, the frustrated customers march along. This course had seemed without alternatives, at least until Apple and Google launched their products and services. Minimalist approaches to technology, not exclusively in the presentation and experience areas, have brought customers products and service a renewed sense of hope for technology as a means to customer satisfaction. Minimalism should not be restrained to presentation and experience alone since Google and Amazon are powered by a myriad of Linux servers. An example of a successful product where minimalism rules over its user experience and presentation is Picasa, Google's image handling application. For most people, this is all one needs in a world with ever proliferating images of all types and standards: few simple options, plenty of affordances, enough built in interoperability with other complementary applications, ready to be used, and the list can go on. Apparently, Picasa is missing one feature alone: a free standing business case by which its thirtysome-dollar price is explicitly made up elsewhere in the Google's ecosystem. Unless Google decided to stay minimalist all the way!

A word of caution is necessary. Minimalism cannot be imposed as the new orthodoxy but rather as guiding principle, along each direction of the CHI Triad. When business considerations ask for a deviation from minimalism, striking a balance between minimalist and baroque approaches is required as good business practice. On a whole different level, minimalism also requires that a synthesis of users' representations be possible. Such synthesis becomes possible when a good set of the users' shared experiences accumulates.

For those asking : 'When StarOffice offers for free a great deal of MS Office's functionality, why is it that people still don't switch?' I have to confess that I don't have an answer. Maybe it has to do with some bio-evolutionary mechanism that also leads us into driving big trucks from home to the soccer field, only 10 minutes away. Psychologists, please help!

Takeaways: Minimalism vs Baroque Categories, Affordances, CHI Triad, Network Externalities, Scale Economies, Interoperability, Scalability.

Nota Bene: The CHI Triad is a tool developed and used by the author.

The new message is the (collaboration) medium

2005-03-12T12:59:00.000-08:00

For those pondering what the next platform in personal computing is the answer may be in the recent acquisition of Groove Networks by Microsoft.

Facts: Grove, a 200 people company, makes a collaboration software, Virtual Office. The stated intent of the purchase is to augment both the upcoming versions of the OS (Longhorn) and MS-Office suite. Capabilities in Groove's Virtual Office overlap with SharePoint, the already existing collaboration software at Microsoft.

Putting all these pieces together, makes for an interesting hypothesis: The next platform in personal computing (SOHO and corporate) is collaboration. Collaboration is either the conduit or the destination of most our work with the computer.

Scenarios: The OS becomes an abstract file system and scheduler to which we add extensive communications and search capabilities. One would never face again .dll's or MIME type extensions. The OS would only enable one/one's applications to communicate with another('s), and will allow one to find out a piece of information by looking it up by any number of its attributes. The MS-Office Suite becomes this multi-party productivity tool by which work is being done alone or in groups, and always meant to be shared. Versioning control and real time control and access management could be its perceived features at (multi-)user level.

So, in a time when some are still looking to control the OS as platform, the next platform might have already been made into a collaboration play. The new medium, i.e. collaboration, is the message!

Another (insider) perspective on HP

2005-03-04T16:02:00.000-08:00

Addendum to previous postings on HP.

This is a link to the story told by an ex-HP research scientist who left the Company in 2003 due to the wind of change brought about by Ms. Fiorina. It becomes apparent, when reading the story, the modest opinion folks at HP's have about marketing types. However, in the end, it is the task of the CEO to understand where the strengths of a company lie and act accordingly. Yes, Lou Gerstner made research at IBM more profitable, but that did not come at such an expense for the scientists themselves. Moreover, Lou understood what proved to be initially not so obvious strengths and weaknesses in the IBM portfolio--mainframes, and services, respectively. I am only left to wonder, who cashed in the check for the post-merger integration of HP and Compaq...

P.S. Go Carly, word has it, world hunger is next in line for you!

Corporate move(s)

2005-03-02T13:02:00.000-08:00

Michael Sievert, formerly with ATT Wireless, has just been hired at Microsoft as corporate vice president for Windows product management.

This move raises the following question: is this an opportunity hire due to Cingular's buying ATT Wireless or is this an implicit acknowledgment that something may be a Denmark in need of fixes in Longhorn?

Longhorn has been postponed, and trimmed from several important features, several times already. For those who recall the painful and strenuous path of integrating the MS Office Suite of products, this is not news. It took then, as it may be the case now, outside managerial expertise to augment an engineering-centered culture that promoted from within code mavens. Alas, the multiple pieces of the Suite existed as independent entities in all but name.

When the 'platform' business at Microsoft is under attack from several directions, the measure of its relevancy in the shopping-list of the customers is given by the quantity and quality of integration among the Company's disparate pieces of technology. Even when the platform as we anticipate it now, Longhorn, is out, the meaningful business-, and technology-integration of Great Plains and Navision, will still belong to the future. So, there is a lot waiting to happen.

Good luck Mike, and shake it well!

A Key to Bill Gates' Interoperability Message

2005-02-20T20:55:00.000-08:00

I did not know how much of Bill Gates' announcement(s) about software security were directed at Microsoft employees, and how much at the whole ecosystem around Microsoft that gets hurt each time a virus hits.

Then, before we have seen it all in the area of security improvements at Microsoft, Gates releases a public call for interoperability. He makes a case for cooperation, to all industry players, for data-level interoperability--i.e. XML. In passing, he also considers as misplaced those past and present calls for interoperability at application or OS/platform level and finds one more opportunity to blast open source. Anyway, to return to data-level interoperability on XML, what is Gates' intended audience this time?

XML, SOAP, XSLT, WSDL, DTD, UDDI, etc., are usual terms describing the object of activity at organizations such as W3C--large and consensual, industry-sanctioned standard bodies that work to generate common views on just about everything ranging from http to web-services and beyond. Microsoft being member, often founder-, in most these standard bodies one may ponder as why the need for such call.

One could hypothesize for an answer any of the following: the recent anti-trust EU resolution directed at Microsoft, impatient customers, superfluous PR in a time of slow news from Redmond, and even hypocrisy.

Being a little skeptical in accepting such hypotheses wholesale, I thought to myself that Bill Gates should know all too well how busy (read behind public schedules) his colleagues are to play games. Then, all of a sudden, I recalled the B-school stuff called game theory and strategy--microeconomics/industrial organizations. So, I came with a hypothesis of my own:

What if Bill Gates is serious about all things interoperable, and is trying to make all industry players aware (rational) about a Nash Equilibrium the whole industry stands to capitalize on should anyone choose to cooperate on XML standardization? To reach Nash Equilibrium, players need to be rational and there should be a dominant strategy--no need for common knowledge or correct beliefs. I would not expect anything less from Mr. Gates, moreover, such approach is still perfectly compatible with his past behavior.

Once I had an explanation, I wondered about the odds of such call to succeed. From the same playful sources, we know about the Prisoners' Dilemma: players cheat even when knowing the outcome is sub-optimal. In reality, players may fail to be rational or they simply make mistakes. A company may choose to 'cheat' should it find comfort in the (usually short-term) gain associated with such action. Yet, the existence of the dominant strategy should give everybody a clear prescription of what to do. Moreover, according to the Flood-Dresher experiment (the players are rational and there is a rather long history/dependence path,) it is clear that a long-term prospect of the game encourages cooperation. In our case, at least the large companies/entities that do not live on borrowed time should cooperate towards interoperability. The wild card will always be some small guy with a big idea of his own.

Hence, this time, we may conclude that Bill Gates' audience is the industry at large, technology (corporate) customers included. His call has managed to stir up some powerful emotions, and I take this as a sign for the strong interest in the topic. Awareness about the interoperability challenge is the first step towards education, debate, and rational decision making. Yes, Microsoft will benefit handsomely from data-level interoperability, but so will most industry players, and, above all, the customer. The customer benefits for data-level interoperability gives the customer a better chance to make sense out of the heterogeneous nature of the IT environment, in other words to spend less money on integration leading to faster/better ROI. As a practical matter, in most upcoming squabbles around XML standardization, the corporate customer ought to be the ultimate instance of authority. This way, XML may be prevented from the predicament of, let us say, OSI. At least, today's corporate customers are more powerful, aware, and invested in technology, than they were twentysome years ago.

So, at least for the time being, there is hope and Bill Gates has apparently learned something from Ray Noorda (former CEO of Novell), the value of coopetition. This time though, Bill may be trying to get the customer to fight the battle on his side.

Cheap does not supplant Quality

2005-02-20T18:17:00.000-08:00

I drove for 1/2 hour to Wal-Mart to buy a set of windshield wiper-blades only to find that the type I needed was out of stock. Is it a unique experience?

Have you also been bothered by the fan of your Dell laptop blowing hot air on your (right) hand-wrist as you were handling your mouse?

Beyond the fact that both types of customer dissatisfaction come from icons of our economy, is there anything else these companies share? Of course, they are both representatives, each in its own industry, of the transformational nature of technology and ensued operational efficiencies.

Wal-Mart, by operating a just-in-time supply chain, and Dell, by manufacturing-to-order, have managed to be the most efficient organizations in their given industries. The common knowledge goes on to say that the customer gets the benefits (read savings) when dealing with anyone of these two. Yet, driving twice to the same store to get wiper blades more than doubles my cost, and taking all the heat from a poorly placed fan is all I remember when the lower price I paid for the laptop is forgotten.

So, when you have a long supply chain, long in weeks and miles, or when you change suppliers of your parts every now and then, "to keep them honest," it becomes easy to overlook 'subtleties' in your service/product like the ones above.

To the extent these are not isolated occurrences, what can drive such organizations back to consider quality of service/product?

Could there be anything like a customer revolution or are we in a race to the bottom?

Juran saw the problem with quality (too) many decades back... Somehow, had he had mostly Japanese and European students?

Addendum: The minimalist approach throughout!
Ikea makes an interesting case study: Not the greatest service on the floor, several items out of stock unless shopping on the first floor or the warehouse, one's shopping experience is more like a crawl than a flow. Yet, Ikea manages somehow to offer simple lines / functional furniture, an entry level to Scandinavian design (as far as price and quality,) that is still popular with shoppers for the lack of alternatives. In the end, the model behind Ikea's success is keep it minimalist (assembly, features, price, logistics, etc.) The only exception from minimalism seems to be its global scale.

To understand the difficulty through which change comes about, at a macro-level, it's worth recalling how Thomas Kuhn used to say that mere disconfirmation or challenge never dislodges a dominant paradigm; only a better alternative does.

Immelt on hitting Wall Street quarterly numbers

2005-02-14T06:40:00.000-08:00

Jeffrey Immelt, GE's CEO, talks about a whole host of issues during an interview with Charlie Rose. Then, as of nowhere Rose raises one of his questions:

Rose: What do you think about Warren Buffet's opinion about the undue pressure on today's executives to hit quarterly numbers for Wall Street?

Immelt: Why would that be a pressure? I give them that number! I don't see a problem with doing what you said you were going to do. Hitting a number now presupposes that I had good strategy three years ago, and then good execution ever since. On top of that, I've had to know my customer for all this time. I don't see the problem....

This position goes at the heart of the issue of not being able to think strategically as a CEO of a company due to Wall Street. If GE with its 170 business units can do it one must think that yes, it is possible to be strategic and hit quarterly numbers as well. Moreover, it seems that good strategy (and execution) implies foreseeable earnings (and profits).

I invite you, the reader, to comment on Immelt's position from your own industry/perspective. For example, how would things change in a fast moving consumer product company where, say, you don't know your customer by her first name?

Nota Bene: This is not a verbatim reproduction of what was said. It is captured only the idea of the dialogue.

When one doesn't know the future or backgrounder on HP

2005-02-12T22:31:00.000-08:00

In the aftermath of the .com bubble HP found itself looking for a viable alternative to its Unix architectures in the corporate server market. The Unix server market had enjoyed an extraordinary growth during the .com boom. Every company, including your cousin's, was planning to be the next Yahoo or Amazon, hence the (anticipated) demand for scalable and reliable infrastructures was nowhere in sight. Cisco, WorldCom, EMC, Sun, HP are just few of the names that stood to gain big from the never-ending Internet revolution. Yet, when reality was set for a comeback, these same infrastructure providers were among the hardest hit.

Indeed, Cisco wrote off about $2.25B worth of inventory in 2001, WorldCom and several in its category ceased to exist, Sun is still looking for a way out, while HP saw the light of a new day with a blind eye. In fact, Sun and HP had some things in common: great deal of reliance on Unix-based hardware revenue at the expense of software and services revenue. HP though had the advantage of a revenue stream diversified enough between corporate and end-user customers. EMC, another hardware star of the late 90's, has since set itself on the (right) track of complementing its hardware (revenue) with a string of inspired software acquisitions (e.g. Documentum, VMware.)

In the 2001 corporate server market, Intel based architectures were becoming more capable in reality and not only in the perception of the customers looking to shave costs. One could cluster enough Intel (multi-)processor based machines to serve webpages and applications, route email traffic, or even build a decent storage solution. While Sun had all inertial reasons to reject anything less than Solaris on Sparc, HP had already been a player (however minor) in the Intel based server architectures. Hence the logic of HP in acquiring Compaq: to become a credible player in the Intel based server market. The logic went on and stated that Compaq's weakness in the Intel server market, relative to Dell, was going to be addressed by demand consolidation (thus lower prices forced on suppliers), scale economies, and operational efficiency in the combined entity--estimated at, and later achieved, $2.5B.

HP failed on a couple of fronts. The most obvious is its competition with Dell. By choosing the better set of systems and processes from the two companies (HP vs. Compaq) and making it into the merged entity's standard, HP failed to acknowledge the intrinsic advantages in Dell's systems and processes. So instead of outdoing Dell, HP decided to add scale to an underperfoming set of systems and processes. In fact, the extent by which HP could outdo Dell's processes would have been a better metric associated with the acquisition. So, HP's server strategy failed due to a miscalculated objective and/or sloppy execution.

The second and more insidious development HP failed to fully consider was Linux's and the growth of the Lintel market. Around 2001, when Amazon and Google announced their adopting it, Linux was still relegated to the fringes of the corporate data center. So much has changed since that even Oracle and SAP run on Linux today. To its defense, HP could not have anticipated IBM's Linux moves, directed not only at Microsoft but at itself and Sun as well. It is through the IBM gifts that Linux has its place in today's datacenter. These gifts have been both direct, intellectual property, and indirect, corporate credibility. IBM has more than made up for the value of its gifts to Linux and forsaken revenue in its own Unix servers by selling services and/or a myriad of software applications on top of Linux. Arguably, IBM benefits now from an virtuous cycle it was instrumental in creating: Linux + services + Linux-applications + weakened competitors. If HP's Linux-delay could be half understood, Sun has no excuse for letting IBM steal the show. In conclusions, it is neither HP nor Sun that has capitalized on one of the most important trends in the server market: Linux.

One may add HP's loyalties to the company's problems. It could be viewed that staying for too long too close to Microsoft, Intel, and its own Unix, made HP less than prepared to capitalize on developments such as AMD's Opteron, and Linux.

On both accounts, HP failed for it did not know the future. In conclusion, one who doesn't know the future either stares at it and is condemned to reaction or creates it.

Offshoring to Central and Eastern Europe

2005-02-10T11:57:00.000-08:00

The offshoring/outsourcing impetus still seems to feed on steroids, despite the recent withdrawal of JP Morgan-Chase from its $5B/7-year outsourcing contract with IBM. No doubt, the offshoring/outsourced movement will have its ups and downs. Yet, for those companies looking for such options beyond your typical Asian players, Central and East European IT service providers look like a promising destination. The West Europeans have already gotten a taste of the opportunity in areas ranging from games to customer service, and to enterprise software.

For the US based entities looking to offshore IT projects in Central and East Europe a few things are worth considering: The supply is rather small when considered against the demand of large projects, yet it makes up in eagerness and skills. Good engineering education and strong American cultural ties also help. The supply is skilled in Microsoft, Java, and Unix/Linux technologies. Not so great are the web-services skills nor their familiarity with best practices in the enterprise environment. The price may be moderately higher than in several Asian countries. One may very well consider these places as alternative destinations for R&D campuses.

Addendum: Reaping the benefits of business-process outsourcing (Bloch & Spang / McKinsey)

HP: Déjà Vu all over again?

2005-02-10T11:46:00.000-08:00

There used to be a PC manufacturer that didn't know what to make of the Internet; other than buy Digital, and thus get an aura of respectability, and possibly know-how, in the big server area. That company went by the name of Compaq. When the acquisition magic was gone, and not much else could be produced to the satisfaction of shareholders, another company was trying to make sense out of its engineering prowess in the Internet age. This latter company, as we know it today HP, had ambitious plans of its own. We very well recall eSpeak, Chai VM, utility computing, services, etc. On the services front, it was in 2000 that HP tried to buy PwC Consulting for $18B. And that was last we heard from HP on the services front. As for Compaq and HP, they both underwent changes at their top executive levels. Capellas went on to become the CEO of Compaq, and Fiorina became the CEO of Hewlett Packard.

Now, it is worth having a selectively comparative look at two industries: retailing and computing. In retailing, we've witnessed the success of Wal-Mart and Target, at the expense of other players, and most notably K-Mart. Among the contributing factors, let us not forget of operational excellence driven by technology in one instance, and clever branding and positioning in the other, respectively. In computing, we've seen Dell driving the cost of the PC-based architectures (and most everything else it touches) so low that manufacturing commodity-based computers is nigh impossible in any other way but Dell's. What is Dell's way about? Driving efficiencies through operational excellence, commodity based architectures, and an impressive and growing amount of process-related intellectual property. IBM managed very well to elude these problems by complementing its strong engineering with first class services, open source software, integrated architectures and such. In 2002, IBM found it opportunistically convenient to augument its Global Services and acquired the same PwC Consulting for $2.7 billion in cash, with the remainder of the $3.5 billion purchase price composed of stock and convertible notes. On the other hand, the recent proposed sale of its PC business is indicative of IBM's pain through these transformations.

So, in the Fall of 2001, Fiorina and Capellas thought of combining their two companies. They presented the whole deal as 'there is no other way out,' despite skeptical or dissenting voices at HP or in the analyst-community. At least, not much dissent could be heard as coming from Compaq... Scale was the new corporate orthodoxy at HP, and Deustche Bank vouched for it in a tight proxy-battle that went on well into the next year.

Fast forward to early 2005. The printer and imaging unit at HP is still the most profitable--its market price alone could be about 2/3 of the whole company's. HP finds itself ever more cornered by IBM and Dell, which are squeezing its margins at both ends. Maybe it is indeed time for a change--a real one and not some gimmick to alleviate impatient Wall Street types. Going back to the core competencies HP has always been capable of could be one of the directions. Luckily, HP happens to have a board of directors that believes in change. And, if Lenovo passes the legal hurdles in acquiring the PC business from IBM, how far would an Indian suitor be for the PC-business of HP or, as Yogi Berra has it, déjà vu all over again?

The new Shell Global Scenarios

2005-02-09T10:14:00.000-08:00

A preview of the new Shell Global Scenarios 2005 was presented at the January 2005 Annual Meeting and the Young Global Leaders meeting of the World Economic Forum in Davos.

On telecoms

2005-02-08T17:31:00.000-08:00

A lot of attention goes nowadays to telephony and its several forms--baby bells, wireless, VoIP, ma bell, etc. Two of the latest developments will be analyzed here:

1) The announced acquisition of ATT by SBC;
2) WI-FI enabled (wireless) phones.

1. Many a reason has been given for the situation ATT has gotten itself into. As far as I can tell, here there are some of them:

a) McKinsey's advice: In the early 80's McKinsey (under-)estimated the wireless market to reach up to 1 million wireless subscribers by the end of the 90's (70+ actually). In the mid 90's, the same McKinsey was suggesting synergies at the intersection of bandwidth, content, and services. ATT's Armstrong and AOL-Time Warner were pursuing these very opportunities and lost big--yeah, it could be endlessly argued about reasons but it is of no use for those shareholders who lost value in the process.

b) The unintended consequences brought about by the actions/intentions of regulators: On one hand, regulatory constraints prevented ATT from making much of its NCR acquisition--thus, loosing big on the computer revolution. On the other, it was after the 1996 Telecom Act that we've witnessed not only dropping long distance rates but also the demise of the long-distance carriers. It is not by chance that the biggest acquirers of the day are the baby bells, so, to the extent the regulators intended the replacement of one big monopoly by several ones as defined by smaller geography, regulation has been a success.

c) ATT's peculiar culture, as revealed by recent studies/books or through direct interaction with telecom types in the industry--who doesn't have a story to tell about some ATT alumnus whose modus operandi was about (#minutes * fee)?

So, it's been strategy (or lack thereof), regulators, and culture, that brought about the demise of this icon. As a side note, ATT might have done well to hedge McKinsey advice in the 80's by considering instead an approach similar to Shell's scenario planning--just as an example. Another conclusion one may draw from the evolution of the telecoms could be that a monopoly--through its quasi-guaranteed cash-flow--is better for business than market forces alone. Otherwise, how can one explain why it is that local monopolies acquire most anybody else?

2. Soon, one will be able to go to any WI-FI hotspot (e.g. one's own house, Starbucks, etc.) and be able to make a call from a WI-FI enabled cell phone, over the Internet. Clear winners, for now, seem to be the handset makers and the Vonages of the world. Let us not talk about losers for now for the consumer will not always be in winner's seat. VoIP in general may lead us into a near-term future where there will be only low-, and high-quality telephony (corresponding to VoIP and land-line, respectively.) The so called high quality telephony may come at a premium and through further consolidation. Unless the baby-bells manage to bring into one's home a bundle of digital goodies priced for masses. For starters, I still dream of a cafeteria-style menu of TV programming choices. But, where did we start?

Sony vs. iPod

2005-02-01T21:20:00.000-08:00

The whole company versus a product? Not really, yet almost. People fault Sony for its ATRAC (an encoding proprietary format) yet Apple's iPod is not any more open. People praise Apple for its cool factor. Gee, where have these people been when Sony introduced its several mini-disc players and recorders?

Then what is it that gives iPod, a 2001 product, so much of the market share? For one, it is the fact that consumers and Sony got equally tired--alas, the former of the latter. For another one, Sony's R&D seems so altered by the desiring management folks concerned with the 'cannibalization' of content... It's interesting, from the outside it is as if the model customer of the R&D were at odds with the model customer of the content folks: the former is this tech/gadgetry-loving avant-garde urban person willing to recognize financially a great product by paying extra for a Sony product, whereas the latter is the 'nothing can ever compete with "free" for my money.' Tough choice...

So, what is a challenger to do? Keep it simple, open for others to drive value to and from, and pay attention to performance. Simplicity, especially in the case of up and comers, ought to come at a price: don't be stingy guys and spend some $$ with folks at Idealab or similar places that employ good design-engineers! Nobody is asking for B&O yet in a world built from standard components you've got to differentiate your product! The openness in discussion is about standards and extensions. Balance right and generously--the generosity of openness can be sustained only by innovation, so there you have another cost. As far as performance is concerned, this thing you are building ought to stand on its own. Simplicity speaks to one's emotions, openness to one's social needs, and performance to one's brains!

To come back where I started, let's say that while Apple's iPod and Sony's minidisc achieve equally high marks on emotions and brain, Apple is the better of the two on openness. Moreover, when Apple introduced iPod in 2001, Sony's customers had already been waiting a revolutionary installment for about 10 years.

Now, that you've come so far, what am I really talking about? Is it music players, search engines, or simply great and long lasting brands? You be the judge!

Building a Metric for Website Evaluation; Theory and Practice--MIT eCommerce Research Forum

2004-09-10T09:32:00.000-07:00

This work looks at two types of website communication. On the one hand, we have passive communication that originates with the websites' owners. On the other hand, we have reactive communication that originates with the audience (i.e. users surfing the Internet). Without ignoring synergy-effects of both communication types, it is the reactive type of communication that distinguishes Internet communications from all predecessors—radio, TV, and print. With the underlying assumption that passive communications on the Internet are similar to traditional forms of communication (such as TV, print, and radio), in this work we will look for patterns of the reactive component of the Internet communication, as well as come up with a metric. The metric associated with the reactive type of communication in a website has the dual purpose of both evaluating, and better designing of, websites.

This material was presented as Master's Thesis with Georgetown University in Spring 1999.