The strength of (low) numbers

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.
  1. Costco mark up is up to 16% => One can hardly find products at the same quality cheaper elsewhere;
  2. Costco carries only a very limited number of items/brands => scale economies and higher negotiating power with suppliers;
  3. 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

Apparently, not much has happened in the online job-markets since became the 800-lb. gorilla. Contenders have either been devoured by, 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
December musings


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., can resist the giants. Such option is limited by the need of enterprises for back end integration of their applications. By the time 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

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?