Virtuous cycle

Bartlomiej Owczarek weblog

You are currently browsing the Virtuous cycle weblog archives in 'Strategy' category.

Return to 'Virtuous cycle' home page

1bln+ people market

Article in the New York Times by Gary Rivlin. Stories about entrepreneurs who got rich extremely fast, but still keep on building new companies.

Interesting part:

?It?s easier to start the next company than it was in the past,? said Marc Andreessen, who was a co-founder of Netscape Communications in 1994, when he was 22. It is also potentially more lucrative than it was even a dozen years ago, said Mr. Andreessen, who despite a net worth estimated to be in the hundreds of millions of dollars is now at work on his third start-up, a social networking company called Ning.

?For the first time in history, you have a global market of 1 billion-plus people, all connected over an interactive network,? Mr. Andreessen said. ?The opportunities are bigger than ever before.?

Yup. But also see the quote on working 15-18 hours a day. Got to have these hours first, though.




Shock Doctrine

A trailer for new book of Naomi Klein is the best conspiracy piece I’ve seen in a long time. Gets even closer to science fiction style of conspiracy, see Japanese Ghost in the Shell cartoons.

Maybe it’s because conspiracy is promoted to the same target audience and through the same means as entertainment.

Change can be generated in conditions of shock. Isn’t it suggestive? Conspiracy aside, I had enough of change management topic lately to get interested in this point of view.




How many Radioheads it takes to bury recording industry?

For years, record labels have been busy fighting file sharing on the Internet. This activity gave them a good excuse not to bother with changing their obsolete business model. Today, however, Radiohead’s move to release their new album on “pay as much you like” basis may indicate that it will be top bands, not pirates, who will bury the labels.

Label business model is the following: revenues from top bands allows them to invest in promotion of the new ones, in hope that some of them will eventually reach the top, too.

Now, though, top band can itself distribute its music on the Internet at marginal cost. Why share profit with label, then?

Problem with bands is that, in contrast to the customers, they actually own the music, so there is no option to sue them.

Enough top bands head to the doors, record industry model collapses.

Thriving in Pareto world

A quick note on an interesting article of John Hagel, comparing Gaussian and Paretian world views.

Gaussian views seeks for “normal” distribution of things in the world around us, while Pareto focuses on power law distribution, with disproportionate influence of a limited number of events/objects (think: earthquakes, accumulation of wealth, etc.)

Gaussian situation is said to occur when there is little interaction between particular observations. Interactions easily create a positive feedback loop, and some objects obtain advantage which is self-reinforcing.

World is getting more networked and interactions are increasing, and Pareto mindset is becoming more important.

Thus, new tools are required to handle this reality. Some sources of them are hinted – earthquake research, complexity science. It would be interesting to define a toolkit immediately applicable in business, though.

Music wants to be free

Apple did it again. Reached agreement with EMI and will offer its music library unprotected (and higher quality, though more expensive) in May. So in the end I finally might buy something from iTunes, since EMI’s portfolio seems to include also Radiohead.

It’s just funny how Apple is able to leave Microsoft far behind on every turn. First with its closely guarded DRM castle, now, when Microsoft copied its approach (poorly), it comes out of the castle and scores as a digital freedom fighter. Microsoft, following Mini-microsoft description, like a “lumbering idiot”.

Still, already 6 years into digital XXI century, and still the only idea to get more songs of Budapest Klezmer Band seems to go to Budapest and buy some CDs.

Simple vs “it just works”

Read some comments of Torres on simplicity, relating also to Don Norman’s “Simplicity Is Highly Overrated”.

Never too much talking about simplicity.

I’m a fan of simple things. But does simplicity sell? Sometimes I wonder. To give example from consulting playground, I like to make excel models which are straightforward and well commented and pyramidal in structure, so they are easy to follow from the top to the details. Typically excel models are anything but easy to follow and it takes less time to build a new model than to understand one made by someone else. Then again, maybe complex models that you cannot understand seem smarter in the end.

Don Norman:

Why is this? Why do we deliberately build things that confuse the people who use them?

Answer: Because the people want the features. Because simplicity is a myth whose time has past, if it ever existed.

Make it simple and people won?t buy. Given a choice, they will take the item that does more. Features win over simplicity, even when people realize that it is accompanied by more complexity. You do it too, I bet. Haven?t you ever compared two products side by side, comparing the features of each, preferring the one that did more? Why shame on you, you are behaving, well, behaving like a normal person.

Why then:

People buy ipods? I bought ipod. I doesn’t even have a radio. Even my nokia phone has a radio.

People do not buy hybride products? They do buy things that do one thing well.

Why Google rules and not the portals?

Torres:

Simplicity is primarily around the first-run user experience and making sure to optimize the high-volume scenarios. A great example of this is Microsoft Photo Story 3. This tool makes creating videos out of photos a complete no-brainer, even for someone who has never touched a digital camera.

Simplicity is something that everyone wants… but not forever. The simplicity of Photo Story is actually limiting once you want to do something a little more advanced, like running a macro or applying a custom transition. For that you need Windows Movie Maker 2 or Adobe Premiere.

I would argue (and I do quite often) that simplicity in the long run is over-rated for most users, especially for users who actually know what they are doing. (…)

The MSN Search team did loads of research while developing their search service, and what they found is a testament to this. They discovered that search engine loyalty isn’t earned through stellar results for routine queries, but rather through an amazingly unique response to an off the wall query. (…)

Now, “it just works!” is something completely different – and even more important in my opinion. When you plug your digital camera into your Powerbook and your photos are automatically copied into iPhoto, it “just worked”.

It feels strange to me, listen Microsoft people talk about simplicity. And that they did a lot of research into this. Surely they did a lot of research, focus groups and everything on branding. Look at the results. Still, though, for the theory, fine.

Simple on outside, complex in the inside (if you insist), that is, features are there. I’m not Korean and my toster doesn’t need lcd. But I use Google as a calculator and no one I know does it.

No need for vision to get rich

Gazeta Wyborcza published an interview with Tad Witkowicz, one of the richest Polish immigrants (worth estimated USD 250m).

In your life, did you follow the golden rules from the various business gurus?

– Yes and no. Such advice is sometimes a trap. When I was bracing for launching my first company, I was reading a ton of books about business, tutorials, memories of the famous managers. And I was becoming more and more frustrated. Everyone wrote that you need to have a grand, breakthrough vision, which you follow consequently.

While I never had any vision. I thought – damn, from the start I’m probably doomed for failure.

So what did you do, without this vision?

– Some time ago Ray Strata, the founder of a known technology company Analog Devices, told me: “Do not believe in what they write. Later, while writing a book, it is easy to attach impressive vision to the memories and even believe in it. But in the beginning, a normal person doesn’t have any grand visions.”

Learning innovation from Toyota

I would to start with a note on elegance, as an introduction to Toyota’s innovation practices. But the best I read on elegance recently comes from Joel on Software. Joel quotes Alain de Botton book on architecture, explaining elegance on example of two bridges:

The bridge is endowed with a subcategory of beauty we can refer to as elegance, a quality present whenever a work of architecture succeeds in carrying out an act of resistance?holding, spanning, sheltering?with grace and economy as well as strength; when it has the modesty not to draw attention to the difficulties it has surmounted.

Back to Toyota’s document: “An elegant solution is one in which the optimal outcome is achieved with the minimal expenditure of effort and expense.”

What links elegance to innovation? ?Simple is better. Elegant is better still (…) Great innovation requires understanding and appreciating the concept of elegance as it relates to solving important problems.?

Toyota practices for creativity:

1. Let Learning Lead
2. Learn to See
3. Design for Today
4. Think in Pictures
5. Capture the Intangible
6. Leverage the Limits
7. Master the Tension
8. Run the Numbers
9. Make Kaizen Mandatory
10. Keep it Lean

Elaborated in ?Elegant Solutions? by Matthew E. May, link by Guy Kawasaki.

Raison d’etre of firms

There are firms, and there is the market. In firms, people are directed by managerial signals (you do what you are told to do). On the market, people are directed by prices (you do what pays out most).

Now, there is a certain amount of business done inside the firms, and the rest is done outside on the free market – but what determines the border line?

While writing my master thesis I got to know Coase’s theory regarding boundaries of firms. These are determined by the transactional costs, which make market transactions more expensive, and provide incentives to embed them within the firms – till the moment when the organizational cost is higher than transactional one (management has its cost, too).

Ok, I wrote all this to introduce one paragraph of Hagel’s article, which is adding some new perspective to the theory:

At the most fundamental level, the rationale for the firm is shifting. As JSB and I have written, the rationale for the firm articulated by Ronald Coase back in the 1930s ? that firms exist to economize on transaction costs – is diminishing in importance as continued innovation in IT systematically drives down transaction costs. In its place, we are seeing a new rationale for the firm emerge ? firms exist to accelerate talent development. This is increasingly the reason why people choose to affiliate with firms. They believe they can get better faster by working with others within the firm, as well as with others across firms, through the privileged relationships built by the firm. If firms can?t find ways to deliver on this promise, talent will exit and Tom Malone?s e-lance economy will flourish.

Firms allow talent to develop faster, thus gain another advantage over the market.

On a first glance I can’t tell if this couldn’t be retained in the transactional costs framework. Take consultants. It’s true that in the company one can learn more than as a free lance consultant (at least in the beginning). That’s because of the experienced people that you have a chance to work with.

But the team could be assembled on the market basis, by contracting and sub-contracting (we sometimes do that to some extent, when we involve external experts). Usually it’s not… because of transactional costs.

How iPod was made

Team effort.

Wired: Straight Dope on the IPod’s Birth

You bet: a “Polish Nokia” will emerge

Article in Gazeta Wyborcza (Polish):

W Polsce narodzi się gigant high-tech?

A topic dear to my heart: will we at last have a high-tech startup with a brand known worldwide? Say, till 2008.

Dariusz Wiatr, former McKinsey and Andersen Consulting partner, says no.

Tomasz Czechowicz, who runs MCI Management fund, says yes (but means whole region rather than only Poland).

Chinese companies: ain’t broken, don’t repair it?

BenQ is a Chinese company which produces mobile phones, which are later sold under Western brands. It performed in this role quite well, but its ambitions grew and pursuing them led to BenQ’s acquiring Siemens’ mobile division. The result was rather disappointing, as reported by the Register:

BenQ’s mobile phone business – the former Siemens division BenQ took over less than a year ago for ?250m – is facing imminent collapse.

A spokesman for BenQ Mobile GmbH says the company will file for bankruptcy in the next few days as BenQ’s board has decided to discontinue funding the German unit.

Did BenQ make a false step in the right direction, or the direction itself was wrong?

To John Hagel, the final outcome gives more support to the theory that the companies are facing the great unbundling to join one of the three groups:

I have anticipated that all companies over time will unbundle into three much more focused business types ? infrastructure management businesses, product innovation and commercialization businesses and customer relationship businesses.

When I think of it, I would expect a successful Chinese outsourcer to dream about going upstream and having its own R&D and brand and all this stuff, and as a result higher value added, read: fat margins. This seems intuitive and expected by everyone but maybe wrong:

Despite enormous success in pioneering innovative business models and business practices, many entrepreneurial Chinese companies still have a sense of inferiority and want to look like larger Western companies with their own manufacturing, R&D and sales and marketing operations. The irony is that, just as many Western companies are unbundling (in part offshoring and outsourcing to more focused Chinese companies), many Chinese executives are tempted to build more tightly bundled operations that mimic the model many Western companies are abandoning.

I’m interested in the future of Chinese companies. Even though I’m skeptical about unbundling predictions, Hagel’s hypothesis provides a useful tool for exploring the topic.

On false economies, or under-paying

Read in FT at Helsinki airport, “Cut corners and the human spirit” by Harry Eyres, quoting John Ruskin:

It’s unwise to pay too much. But it’s worse to pay too little. When you pay too much, you lose a little money, that is all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing it was bought to do.

And:

There is hardly anything in the world that someone cannot make a little worse and sell a little cheaper, and the people who consider price alone are that person’s lawful prey.

Just some useful material for afterthoughts on the Chinese shopping experiences.

Business strategy of warfare

Thanks to John Battelle I read this Economist article comparing Google to Napoleon, while its badly beaten opponents to Napoleon’s historical adversaries. The suggestion, drawing from Emperor’s story, but not very deeply, is for the small guys to get somehow (diverse views on how) together in order to gain more fighting chance.

Reading Sun Tzu once was so far my only adventure with “business as warfare” thinking, and I cannot recall any inspiration specifically from Napoleon, so I did a Google look-up.

The first to be found was Wikipedia’s article “Marketing warfare strategies”. Ironically, considering Nick Carr’s article on Wikipedia’s alleged drive to centralize web’s information through its strong positioning in Google search results. And quite significantly too, since the article was “good enough” for my brief interest in the topic.

A worthy note that warfare strategies imply zero-sum game, where what is one’s gain is someone else’s expense. This is a dangerous mindset to have, especially if one’s market is driven by innovation. If Google’s competitors, some of whom are already suspected of having serious organizational issues with creating innovation-friendly environment, were to merge and create even bigger, paralyzed, lumbering corporate giant, that would rather be closer to a suicide than a winning strategy maneuver.

Nevertheless, even if out of favor for a moment, I am sure military lessons will continue to inspire ranks of, after all still largely male, business leaders. Other than Napoleon and Sun Tzu, also Clausewitz, Mao Tse Tung and even Robin Hood are mentioned. But coming to the Napoleon himself:

Napoleon made four key innovations. They were 1) increase his army?s marching rate, 2) organize the army into self contained units, 3) live off the country, and 4) attack the opponent?s lines of supply. All four provide lessons for business strategists

I refer you to the article in case you are interested what kind of lessons.

Touchscreen sportello

I just returned from the train station, where I bought a ticket to Warsaw for tomorrow. I had a peculiar experience at the ticket office and I didn?t have a camera with me, not even a crappy phone one, shame on me. The picture is worth thousand words, and video would be even better, but I don?t have neither, so I will go for words.

At the station, the ticket seller was sitting in front of a machine which instantly attracted my attention. Instead of the old ordinary computer that I got used to see there, it was a shiny, actually cream white, new piece of equipment with a monitor and a printer, but interestingly, no keyboard. (read more…)

« Previous PageNext Page »