Strategies for a discontinuous future.

Consulting & advisory, research notes, in the press, about bubblegen,
next wednesdays.

Friday, October 03, 2003

VC in Europe, part 649:

These guys, who are like a UK version of Netflix, just got some serious funding. Innovation or imitation?

-- umair // 2:08 PM //


IBM's success has much to do with BPO (outsourcing basic business functions, like HR, if you don't already know) - driven, in large part, by it's acquisition of PWC.

How long can this cash cow last? Until someone actually feels the pain that massive BPO is gonna cause - from the destruction of core competences critical to innovation and building resources for the future.

-- umair // 12:00 PM //


Tech strategy as efficiency and cost-reduction.

This is not a technology strategy. This is a kind of new dogma that's emerging about technology. If this is all you can see in technology, you have got massive blinders on.

The critical link is thinking about technology and innovation. They go hand-in-hand. If you ignore that, you can be sure that any advantage you have is going to erode, when someone discovers a way to do what you're doing differently, and better.

-- umair // 11:51 AM //


Bundling graphics cards with killer games is a decent tactic, especially for duopolists, but it better not be the cornerstone of your strategy.

That's because it will eventually set off a Red Queen race of bundling - essentially, quantity competition.

But the thinking is in the right direction. The only way to really succeed in the replication economy is platform thinking. More on that later.

-- umair // 11:24 AM //


What Philips-Van Heusen is doing with Calvin Klein, which it recently bought.

' "Mr. Klatsky defined overhead this week as...simply the way the business was run � with a perfectionist's zeal.

"They made thousands of samples," Mr. Klatsky said on Tuesday, "and that costs a bloody fortune" '.

Hey look - it's the beancounters!! Sounds bad to me.

But then again, I really think it is time for the Calvin Klein meme to die a horrible death.

-- umair // 11:18 AM //


The Replication Economy:

Valve's Half-Life 2 source code gets leaked.

"...just to be clear, it's ok to talk about the leak and the possible implications, however we'll nuke you and your family if you even make the most slight clever hint of where to download it or even screenshots of it..."

Is there any way out of this for them? Has replication really cost them all the value they created? Can they still appropriate more than little bit of it? Interesting questions.

-- umair // 11:12 AM //


The Post gets nostalgic for the days of dot-com past.

-- umair // 11:08 AM //


Wall Street is now recommending business strategy:

Steve Milunovich sends a letter to Sun telling them they should 'accept being a successful niche company in mission critical computing'.

Umm. Look: this is seriously uncool. Companies need independence from the sordid and stupid short-term obsession with growth and profitability Wall Street has developed.

Investors need better representation in the firms that they invest in, and this is one possible mechanism. But in this case, the interests of the agent (short-term profits and growth) are hugely different from the interest of the principals (sustained competitive advantage).

If you're interested in short-term profits and growth, maybe you should consider why the creation of real economic value is always a dominating strategy.

That said, Sun is in real trouble. Here's a great summary and some history.

-- umair // 11:02 AM //


The Horror Channel.

It's amazing how innovation can just kind of fall out of the sky, even in relatively mature markets which most people have written off.

-- umair // 10:53 AM //


You can buy Alexa's web archive. Can I say how cool I think this is?

-- umair // 10:51 AM //


The disruption in the connectivity market is almost here.

The problem is that wireless networks are natural monopolies. Access and other schemes never work. So, I hope the players in this market don't set off an arms race of litigation and other negative tactics - and instead, stick to their positive strategies of innovation. Otherwise, they are going to destroy the pie for each other - and for us.

If you're interested in this stuff, I recommend you take a look at Randal Picker's course notes.

-- umair // 10:50 AM //


e-Textiles are gonna make clothes do cool things. This article thinks that the lead uses will be high-value, high-cost industrial and military applications.

I think that the lead use is gonna be fashion, because adding function to form will completely redefine the economics of the fashion market - whereas it simply adds more value in the military and industrial marketplaces.

-- umair // 10:43 AM //


EFF releases a very nice paper on 'trusted computing'.

It's still amazing to me that we want the economics of things in the virtual world to be just like the economics of things in the real world - and the lengths most businesses are willing to go to make this happen.

Of course, the real rents will flow to people who discover ways to exploit 'natural' virtual economics - because when they do, incumbents employing protection strategies will get killed.

Oh yeah - the EFF paper makes all the points you would expect: trusted computing is 'owned' by a single platform, so the platform owners can use it as a mechanism to gain unfair market advantage, and users don't have enough control.

-- umair // 10:37 AM //


I just took a blogger survey which asked me:

How easy or difficult is it to find other blogs to read?

It's cool that this is on Google's radar.

-- umair // 10:32 AM //


The price of the human genome and genechips is dropping. When it gets low enough, expect a massive cambrian explosion in biotech.

-- umair // 10:28 AM //

Thursday, October 02, 2003

Zero intelligence:

Speaking of the Santa Fe Institute, Doyne Farmer finds that share prices may be a function of market structures - like limit orders - instead of any kind of rationality on the part of traders.

-- umair // 8:06 PM //


3D fractals. No, I am not normally into fractals. But:

1) These look cool
2) Businesspeople and strategy-makers think way too linearly. This is what your performance landscape really looks like.

Go read Stuart Kauffman if you want more punishment.

-- umair // 7:40 PM //


Will your job move to India? Die, MBAs, die!

Of course, this (completely naive) article overlooks the fact, unless we turn into a nation of blithering morons, there are going to be incredibly cool NEW JOBS that come from incredibly cool innovation.

This article also overlooks the simple fact that, sooner or later, business is going to find out that 'offshoring' has a massive downside - it creates huge organizational blind spots and vulnerabilities, mostly in exactly those areas which will be critical for market advantage in the replication economy.

-- umair // 7:34 PM //


StarROMs sells legal ROMs for use with your fav emulator. We are mostly talking about video games that are 20+ years old. Copyright or copywrong?

My own take is that 20 years is plenty of protection for a video game - certainly enough to build a highly succesful firm around. So I think that most of these games should be public domain now.

On the other hand, when I use their website, I feel like I would pay a few bucks for a game - but only if I was sure that my money was going to the people who created it, not some fatcat who bought the rights, while the artists and programmers starve.

-- umair // 6:09 PM //


Economist article talk about how IT spending has changed in the last few years, from spending on 'hot' technologies, to basically becoming a driver of total cost reduction and efficiency. Not only that, but growth in IT spending has dropped from 16% a year in the 70s, to 6% a year now.

-- umair // 6:05 PM //


Coke introduces interactive billboard in Piccadilly Circus.

Why are marketing and technology on two different planets? Is this only because geeks and trendsters don't usually get along? Why did this take SO LONG to happen?

-- umair // 5:51 PM //


Siliconvalley.com has two articles today about Nokia's Game Deck. The first one mostly points out the confusion and uncertainty that surround it, as well as offers some ok info about it's competitors.

The second one is a more comprehensive review of the N-Gage, the first Nokia device to run the Game Deck platform. To sum up, the N-Gage gets trashed for being difficult to use, opaque and expensive service+pricing plans, no games, and generally too expensive.

Neither articles points out that Nokia is a platform coordinator - so mobile games competitors face a seriously uphill battle.

-- umair // 5:50 PM //


Recombinative innovation: Sony introduces a USB drive with fingerprint reader for security. Why is this a good idea? Because passwords produce transaction costs exponentially.

-- umair // 5:47 PM //


Mobile net use in the UK tripled last year. Amazing what brushing the cobwebs out of your business model will do.

-- umair // 5:44 PM //


Wired talks about laptops replacing music studios.

Apple bought one of the major players in this space, emagic, last year. The other one, Steinberg, was bough by Pinnacle earlier this year. The point is, these are the companies that made the laptop audio revolution possible - and they got seriously rewarded for innovating.

Full disclosure: I am a big laptop audio geek.

-- umair // 5:34 PM //


See, price competition isn't just bad for firms selling the cheap goods - it can be bad for the people behind the economics, too. That's because lowest cost bidding gives people all the wrong incentives.

-- umair // 5:28 PM //


Mercora is a startup that is going to utilize social networks (and maybe collaborative filtering) to distribute DRM-protected music.

The economics of this (if it works) are pretty simple: the extra value you get from having your online buddies turn you on to new stuff is greater than the cost of the hassle that the DRM imposes.

Interesting, to say the least - at least they are creating value. They haven't signed any deals with record labels yet, so don't hold your breath.

The website is SO 1999 - it says 'the revolution begins'!!! Aw, I'm getting all teary-eyed.

-- umair // 5:27 PM //

Wednesday, October 01, 2003

Here's a terrible article. Don't do any of this if you're marketing online. People hate it, because they don't find any value in it.

-- umair // 3:41 PM //


My picks from MIT Sloan's OCW:


Managing Innovation

Intellectual Property

Strategy 1

Tech Strategy





Game Theory


IT and Business Transformation

Taxes and Business Strategy

-- umair // 3:03 PM //


More price competition in the UK mobile market. See, this is what happens to platform industries consumed by the value extraction mindset. Especially when the platform coordinator refuse to provide the incentives necessary for platform coordination - like fair revenue splits to platform contributors, and cool (as opposed to deliberately manipulative) marketing to consumers.

i-Mode's chief strategist, Takeshi Natsuno, once famously referred to his strategy for i-Mode as based on a mental paradigm shift -'from telecom way of thinking to internet way of thinking'. I think what he meant was fundamentally about harnessing innovation to create real economic value for consumers, in order to earn what economists calll Schumpeterian rents - not about trying to manipulate consumers into paying you for something they won't value. Because if you focus on the latter, you end up in arms races of price competition.

-- umair // 2:41 PM //


Coffee Republic ditches sofas to discourage social loafing, tries to turn coffehouses into coffee-as-fast-food.

"...he has decided to turn his welcoming lounges into brisk New York-style sandwich bars where the accent will be on �high customer throughput."

There's nothing like total disconnection with your consumers' needs to give an opponent with an already massive advantage the ability to checkmate you. In this case, it's Starbucks, whose market advantage is based on a well-differentiated strategy aligned with massively protected resources, like brand, standardization & qc, and innovation.

This strategy is also aligned with what consumers want from coffee - a good quality drink, new things on the menu, and a nice welcoming place to sit and chat. Coffee Republic's new strategy, on the other hand, is like radical devolution at work - back to the days of what coffee was like before Starbucks.

-- umair // 2:32 PM //


Levi's posts higher profits, mostly because it's selling cheap jeans in Wal-Mart. The Street loves it.

Do I even have to go into why selling cheap jeans at Wal-Mart is a good way to destroy a century of authenticity and innovation?

Levi's can compete on price - but it will have to change everything about it's business to really sustain such a strategy. Everything - from it's culture, to it's supply chain. The cost of such a strategy will be the heart and soul of Levi's.

But hey- the Street loves it. And we all know that cashing in your brand, business, and innovative capability for short-term profits to make the Street happy is what's important.

-- umair // 2:22 PM //


[email protected] talks about virtual economies.

I get irritated by b-school profs talking about cool things like virtual economies. First, they don't take them seriously. Then, when they get legitimized, they start raving about them. Then finally, they act as if it as their interest legitimized the cool thing in the first place. Then they lose interest again, and the cycle repeats itself.

The article links to this paper, which talks about property rights and legal systems in virtual worlds.

-- umair // 1:11 PM //


NYT article points out how copyright and privacy activists are beginning to take different stances. Are we seeing a succesful divide-and-conquer tactic by the recording industry?

I think that the good guys in this fight (as in most fights) need to a long hard look at the strategies that the bad guys are using, and have been using succesfully for a long time. A lot of them are extremely distasteful - but a lot of them are also very effective.

Here's a link to the whole series of NYT articles from the last few weeks on file-sharing. Most are pretty good.

-- umair // 1:08 PM //


NYTimes article about H1-B drop.

This is treating the symptom, not the cause. Many tech jobs are gone for good, or at least until the US loses it's comparative advantage in higher-value goods. Innovation is - like it always was - the answer. What we need is a lot more great ideas - Googles, if you want - to give people innovative things to work on. Do you think the irrationality of a lot of VCs could have something to do with this? Do you think VCs can stifle innovation as much as they catalyse it?

-- umair // 1:04 PM //


Arrrgh. I normally think BusinessWeek sucks, but they are rocking today. Here's a short article that - leave the typical BW hype aside - is a great sort of grass-roots introduction to why China is such a potent economic force.

When you read this, remember that they are protecting their currency - keeping it cheap - so that when (if) the yuan floats, most people expect it to become more expensive. Note that this a now-classic strategy of emerging economies, so please don't think I am making a moral judgment - I'm trying to point it's strategic value.

-- umair // 12:59 PM //


Rajan was a prof at Chicago, who's now at the IMF, who's just written a great book about financial markets called 'Saving Capitalism from the Capitalists'.

I think every VC and entrepreneur should pick this up, in order to better understand where the Chicago school is coming from, and also to get why creating some kind of economic value (rather than attempting to extract the value someone else has created) is necessary for a succesful venture. Especially VCs in Europe, who don't seem to get this *at all*.

Full disclosure: I have a close family member who works at the IMF.

-- umair // 12:55 PM //


Will tech kill open-outcry exchanges? It's an interesting question, since most people so far have considered electronic exchanges complements to open-outcry exchanges. I think those will be the absolute last things to get replicated. But I'm glad the big exchanges are (finally) facing competition.

-- umair // 12:50 PM //


The Economist talks about the failure of 3G in Europe so far.

This is an incredible link to a diary by a lead user of FOMA, the first Japanese 3G service. One of my favorite reads of the year because of quotes like this:

'...I think i-motion is so far something like "a scrap of a pornographic book found on the street by chance"'

If you don't have to read the whole thing, at least read this entry.

Put these two together and you can see why 3G is an incremental innovation that adds little economic value to consumers - massive marketing or 'stealth' marketing.

-- umair // 12:46 PM //


Strategic moves: the Appeal to Authority, or argumentum ad verecundiam.

States begin to require licenses for VoIP operators.

"...the state has asked VoIP providers Vonage, VoicePulse, SBC Communications, Net2Phone and Packet8 to apply for the same license that landline phone companies need to operate in California".

Welcome back to the telco wars. You can guess who was most likely responsible for this. The telcos have crippled and then co-opted and then priced up every threatening technology to come along for the last 20 years, all the while utilizing really shady tactics with their own subscribers in order to prop up their creaking business models and margins. I am amazed that they get away with it.

Hey look - it's a disruptive technology! No wait - it's just a massive deadweight loss.

How cute. I've just noticed that, at the same time, the telcosare stalling VoIP for no apparent reason. Could it be because they don't want to innovate? Could it be because they want to prop up their business models due to fears of cannibalization? No way!

-- umair // 12:36 PM //


I took some flak from folks about saying that there are cool marketing applications of RFID. Let me take a minute to clarify.

I don't mean that marketers should have the ability to track your every move and transaction without your consent. That clearly won't add any value to you. What I mean is that RFID can be used for bonafide innovation in creating cool things that consumer value: like at the new Prada stores, where RFID on the clothes brings up images of them on the catwalk.

Toys like this create the 'magic effect' for consumers - which is incredibly useful in marketing today. This is because the marketing world has created a kind of cultural arms race for itself, where it constantly appropriates social meanings, and then is forced to discard them. How many of your favorite songs have been ruined by commercials? What is the best response if your competitors pursue such marketing strategies?

Well, one is to imitate. The other is to innovate. Almost everyone to date - even those most people credit with producing cool ads, like Volkwsagen - are imitators. RFID offers a major avenue for innovation.

That said, I also think that there is going to be a fundamental tension for a long time between privacy and business, because IT powers business, and it's good at, well, storing and processing information. I like to think of this along three dimensions: transparency, control, and relevance. In the US, we are kind of in towards the low end in transparency, and the high (or business end) end in control.

But there are unhealthy equilibria on either side of this. For example, in the third world, business doesn't know anything about it's consumers (because it can't afford to develop IT capabilities). So those guys are low in transparency, low in control, and low in relevance.

I think the sweetspot for consumers and businesses - and society in general is high relevance, high transparency, and low (or consumer) control. If you want to know why, read Arthur C Clarke's The Light of Other Days, cos this post is getting waaay too long.

-- umair // 12:26 PM //


Thanks to Tim Oren for introducing me.

His blog kind of inspired me to write this - I really enjoy the kind of analysis he does. I hope to provide you kind of a similar thing, with a little more focus on strategy and economics.

I hope that if, you're taking the time to read this, you find it useful. If you do - or if you don't - feel free to contact me anytime, especially if you're in London.

-- umair // 12:14 PM //

Tuesday, September 30, 2003

Crime in virtual economies of online games. Maybe the ultimate validation that these *really are* markets.

-- umair // 1:08 PM //


Nice interview with Adobe CEO. He talks about Microsoft's XDocs threats to Acrobat. Says they will divvy up the market because they're focused on different sectors. Admits they could do better on usability and functionality. Waffles on Apple and Adobe's most important resource: Acrobat's user base.

I hope this guy doesn't actually mean anything he says in this interview, because Microsoft will use all of the lovely tactics it has used in the past to really exploit the lack of a coherent strategy we are seeing here.

-- umair // 12:49 PM //


Orange and Vodafone contract to BT WiFi. Hey look - it's a winner-take-all market emerging.

My econ profs always used to argue with me that there are ways to divvy up natural monopolies, like access pricing for networks. This stuff never really works in the real world, and we end up with either multiple networks, or winner-take-all markets.

-- umair // 12:43 PM //


Pricing and selection details about MusicMatch. 99c per track, 200k songs available now, target is 500k by year end. Only available in the US. Requires MusicMatch JukeBox as client. Songs can only be played on three devices. Burn limit is five.

This is going to open such a massive arms race in hacking and patching DRM clients that I am going to sit back and watch the fireworks for the next few years.

Value creation...not value extraction...expanding the pie...not putting Chinese Walls made out of concrete, then titanium, then plasma, around each slice...

I have a headache now.

-- umair // 12:41 PM //


Nice article in the Register about the woes of telcos which begs a little deeper thought. Their explanation is the abundance of cheap substitutes.

Taking it one level deeper, we can say that the telcos lost the capability to innovate.

Or even lost the capability to perceive innovation as part of their strategy.

Or, to be even clearer, lost the capability to perceive that actually providing consumers some kind of relative value is necessary to sustain an advantage built on fast-eroding, exogenous isolating mechanisms (regulations, in this case). Because substitutes are definitely right around the corner when those are the dynamics of your market.

-- umair // 12:35 PM //


Nope, the European market *still* doesn't get innovation. It doesn't understand anything about innovation - not the micro or macro-economics, strategic implications, social impacts, or how to finance it.

I'm ranting because the Guardian has published (another) stupid piece on technology. It basically argues that blogs are bad for business because businesses should exploit information asymmetries. It also attaches serious political and social judgments to blogs and bloggers.

Note to Guardian: Businesses based on simple information asymmetries are not sustainable. People mostly hate them. The simplest example is the prototypical shady used car dealer.

Real strategies are built around embedding - not exploiting - what you know in innovations that the market derives value from. Real strategies are not about value extraction, but about value coordination and creation. In increasingly turbulent markets, businesses can't hope to compete on simple information asymmetries - for the simple reason that real strategies enable competitors to provide consumers greater value at the same or lower cost - the essence of any sustainable market advantage.

-- umair // 12:27 PM //


Here is a somewhat cool and somewhat 'studenty' site on social meanings and 'capital' - more correctly for them, capitalism. Basically, the kinds of theory that make advertising as social engineering work.

If you've never read any of this stuff, this is not a bad place to start.

-- umair // 12:12 PM //


The Social Software Bubble:


...the beat goes on. The VC's see the dollar signs and another bubble gets built. I would really, really like to know if anyone has a clue about how these guys are going to monetize their services. A basic analysis of the microeconomics and competitive dynamics of this market reveals that there are *serious* appropriability issues.

-- umair // 12:09 PM //


Wal-Mart and RFID. I didn't catch this, but apparently earlier this summer Wal-Mart announced that it will require it's top 100 suppliers to use RFID by 2005.

That alone will legitimize the RFID market. It's a move that makes sense for Wal-Mart, given their total focus on efficiency and cost-reduction. What's sad is that they'll probably miss the cool applications of RFID - like using it for marketing, innovation, and other things people value nonlinearly.

-- umair // 12:07 PM //


AMD prototypes a Linux PDA. It's pretty clear why this is a good tactic - but I'll outline it anyways.

In platform markets, if you're not one of the platform coordinators, it pays to hedge your bets. The platform coordinators always and everywhere have the capability to appropriate most or all of the value from the platform, because they by definition control the platform via ownership of a critical resource (user base, IP, etc).

AMD is not only not a platform coordinator, but a rival to one of the platform coordinators. So the better it hedges it's bets, the less risk it faces. Not only that, but increases it's credibility and strength to make threats and other kinds of strategic moves - because it has walk-away option on the table.

Finally, this tactic is solid because it not only build on AMD's current resources, but also extends them for the future, letting us glimpse the beginnings of a future AMD value proposition which is both defensible and well differentiated.

-- umair // 12:03 PM //


India's blocked Yahoo Groups. Amazingly stupid for such a tech-savvy country.

Update: Wired says that they only wanted to block one group, but a 'technical glitch' blocked the rest. Political censorship is still stupid, especially for a country that wants to make it's bones as a safe place to build businesses.

-- umair // 11:52 AM //


iRiver announces a new digital music player. No DRM death star strategy here. Just providing a good that users value, at a price they're willing to pay. Simple, but most players in this market (Dell!) don't get that yet.

-- umair // 11:50 AM //


Trillian hooks bakc up to Yahoo Messenger. What a surprise.

Note to Yahoo: isolating mechanisms don't mean locking users out of deriving benefits (in this case, rare direct network externalities). They mean protecting resources from imitation or substitution, and hence, value appropriation by competitors. Add something that users value - which Trillian can't. That shouldn't be too difficult - considering you're Yahoo, and Trillian is, well, Trillian.

-- umair // 11:47 AM //

Monday, September 29, 2003

This is a killer article in the NYT about Netflix Vs Wal-Mart.

They talk about Netflix having a huge first-mover advantage, but Wal-Mart having all the strategic resources and capabilities (supply-chain, brand, processing) necessary to mount a massive attack on the market. However, Netflix' FMA means that it's already got infrastructure resources (technology platform, mail-order distribution), IP, and a loyal user base.

This is going to be an extremely interesting battle to watch. My guess is that Netflix will try to be like Google - to get close to it's consumers, figure out what they really want, and give it to them as painlessly as possible. This will mean that Wal-Mart will have engage in (what a surprise) massive price competition, which may actually *not* count for very much in this market - price elasticity in video rentals is pretty low, in my opinion. Essentially, I think not being hassled has quite a bit of value in this market - and I'm not confident that Wal-Mart will be able to understand this.

I'm also kind of surprised that Amazon hasn't acquired Netflix yet. There is a natural fit between the two firms in terms of competences.

-- umair // 4:29 PM //


Palm to target mobile market with next OS revision.

Palm is *finally* realizing that it has to build resources for the future. So I think this is at least a step in the right direction - the problem is that this market is already pretty much sewn up in terms of standards, and all the value is *already* starting to be appropriated by players providing functionality beyond the OS (like Sun with mobile Java). But at least this move helps ward off strategic decay.

If Palm can turn this into a leapfrogging strategy - and attempt to optimize their OS for the next generation of mobile devices which lie beyond the discontinuity which is soon to hit this market, they have a winner. They also have to make sure that their current resources don't cause inertia which interferes with this effort - a difficult task, considering PalmOS's history.

-- umair // 3:32 PM //


Yet another cool piece from the BBC today, this one on social software. Talk about LinkedIn and Spoke, and how people are actually starting to derive benefits from networking services. Spoke is like a corporate networks data miner; LinkedIn is a personal and professional networking site.

Of course, the biggest strategic resource networks like this have are going to be superconnectors - those rare people who are supernetworked. Without them, networks (and benefits) will collapse. So this looks like a winner-take-all market.

Finally, the revenue model for these services is pretty risky. Will people pay to join these networks? I'm betting that, at the very least, not until the winner has emerged. And even then, I suspect that the superconnectors - those people adding value to the network nonlinearly - might have something to say about it.

-- umair // 3:23 PM //


Google co-founders celebrate the rationalization of the tech sector. They also talk about advertising as a key part of their success.

It amazes me that most firms pretend Google, as a strategic player, does not exist. Time to wake up. Google has succeeded in part because of it's technology, but equally well because of it's strategy. What does that mean?

That means a deep competence in organizational learning - specifically from your consumers, a massive resource in systematic creativity and innovation, a critical resource in ethics (Google is 'not evil'), a resource in intuitive usability, and of course a strong technological resource. Oh, and a commitment to strategic renewal.

This is pretty much the perfect set of resources to develop in a network market. Of course, the corporates will never understand this - because they don't have the organizational capacity to even perceive that Google has a strategy.

-- umair // 3:11 PM //


What happens when you don't innovate, differentiate and let your strategy decay: mm02 is worried about price wars in the mobile market.

This is a classic example of destructive competition - a Red Queen race. For years, the mobile network operators have been concerned not with trying to innovate but with trying to outcompete each other in a tactical arms race of byzantine pricing plans and offering features that the market doesn't value. The outcome of industry dynamics like these is pretty clear - the market will be split between the lowest cost player and the radical innovator.

Why do I say no one is really innovating when everyone is concentrating on building 3G networks? 3G networks are white elephants :massively expensive investments in something that the market sees as an incremental improvement on a relatively price-sensitive durable good most people already own - a mobile handset and subscription. Incremental innovation has to add more value than the cost of the innovation - it is very dubious whether 3G does. It also leaves room for a radical innovator to disrupt this market, as I have argued before.

-- umair // 2:59 PM //


Interesting interview with the co-inventor of the spreadsheet.

He argues that the plasticity of the spreadsheet made it 'hard to knock off'. I don't agree - I think the spreadsheet is incredibly easy to knock off. The plasticity is what makes a spreadsheet so incredibly useful - it can almost be seen as a different kind of interface to universal computing functions on one level. He also talks about how his background in computer science and as an MBA made this innovation a natural extension of his own skills and interests.

-- umair // 12:46 PM //


The Replication Economy and Dell:

I can't believe anyone would call Dell's music service client an 'iPod for the PC'. Anyone saying that has no understanding of consumer needs or competitive dynamics in this industry.

Look, there are two critical problems with Dell's offering.

First, Dells is partnering with MusicMatch for it's foray into the music as service game. I'm pretty surprised that Dell would choose MusicMatch - they don't have the selection consumers value, or more importantly, the organizational understanding of what their consumers value.

Second, let's ask what consumers value. It's exactly the opposite of what Dell will offer. Dell's product will be tied to it's web service - I'm betting that airtight DRM will be embedded. This will mean that their service is not in line with what consumers demand (choice, flexibility, convenience, the ability to have a universal library of music). It will be at worst a client for MusicMatch, not an iPod for the PC, and at best, there will a Chinese Wall between MusicMatch files, and regular old files.

So this kind of service is not going to build strategic resources that will going to back up Dell's attempt at a 'networked hub' strategy - instead, it is going to expose a critical hole in Dell's strategy, and send a lot of people to Apple (and Sony, etc).

-- umair // 12:39 PM //


Babies named after brands. I could write a long post about the social meanings of consumption - but instead I'll just say that I think the power of marketers to control social meanings is almost *really* becoming social engineering.

-- umair // 12:34 PM //


Ultra-high definition TV has 16 times the resolution of HDTV, and apparently is so realistic, it makes people sick.

Of course, this is what 'moving films' did to folks a century ago.

Now if only someone could coordinate a standard-setting process that actually worked, this technology might not take decades to get to the market (like HDTV).

-- umair // 12:20 PM //


Another article about RFID. This one has good summary value if you don't know much about this emerging technology.

Note on RFID - few firms have considered the downstream implication of RFID, pretty much thinking solely about the upstream ones (supply-chain issues). I think RFID has killer potential for all kinds of cool marketing and also as a new sensory input for organizational cognition.

-- umair // 12:15 PM //


Interesting piece about the cult of the NDA. The author argues that NDA's are unncessary because most ideas are not unique, and thus don't need protection. Instead, he claims luck and execution are the keys to succesful venture.

I think luck and execution are obviously important, but without some kind of protection for ideas, a VC market wouldn't exist - there would be a massive coordination failure.

-- umair // 12:15 PM //


If you don't already know, Magnatune is an online record label that may have a business model which actually works - 50% revenue split to the artist, and a 'try before you buy' marketing approach, so you can download individual songs, but pay for albums or licensing.

-- umair // 12:12 PM //

Sunday, September 28, 2003

Read this: Umberto Eco on fascism.

Does this remind of you of what many firms' cultures devolve into?

-- umair // 4:11 PM //



Recent & upcoming sessions:

Supernova 2007 (video)




due diligence
a vc
tj's weblog
venture chronicles
the big picture
bill burnham
babak nivi
n-c thoughts
london gsb

chicago fed
dallas fed
ny fed
world bank
nouriel roubini


uhaque (dot) mba2003 (at) london (dot) edu


atom feed

technorati profile

blog archives