Strategies for a discontinuous future.

Wednesday, June 16, 2004

The Journal has a nice piece on the death of the cookie. It asks why the cookie is dying, and then answers it's own question:

"...The cookie industry is frantically trying to respond, but results have been mixed. Kraft stretched the Oreo into an oblong, covered it in chocolate and called it Oreo Barz, as if it were a portable snack like an energy bar. The product is struggling. Kraft cooked up a microwavable cookie it thought would be just like homemade, but the company had to pull its Ooey Gooey Warm 'N Chewy Chips Ahoy! cookies from shelves last year after consumers complained about an odd texture and the $2.99 price".

The answer is very simple - mass-produced cookies are even worse for you than home-made cookies, they don't taste as good, and now everyone knows. If I were the cookie companies, I would try something REALLY radical - not Oreo Barz - I would simply become a cookie business again focused on really making cookies for people. As opposed to a cookie corporation, who can only see the technics and the finance of the cookie; who can only think in terms of selling the lowest cost cookie with the best 'mouthfeel' at the highest price possible - which is simply what all of these cookie 'innovations' really are.

-- umair // 11:55 AM //


Viral outsourcing by Halliburton causes problems for the US Govt.

-- umair // 11:50 AM //


European indie labels refuse to sign a deal with Apple to distribute via iTunes. Why?

"...The labels have accused Apple of misusing its position as the dominant online music provider to squeeze unacceptable terms from smaller record labels."

Look, indie labels are no lambs to the slaughter here - they do quite well in Europe. But Apple's approach to negotiating gives the game away - my guess is it simply replicated the terms it gave American indie labels, not understanding the very different dynamics of the European market. And this is very nice evidence that iTunes is the same old music industry with a prettier face.

-- umair // 11:26 AM //


How not to analyse tech strategy, Ultimate Example.

Apart from saying that this article is a great example of simple, first-order thinking, it also highlight nicely the bizarre paradox of business in Europe.

Europeans think business is only about $$$, so it must be evil, stupid, and shallow - but this becomes a self-fulfilling prophecy, where business can never be anything but evil, stupid, and shallow. So because of assumptions like this ('open source is only about lucre'), Europe has big problems with radical innovation, disruption, and the other massively fun aspects of business.

-- umair // 11:19 AM //


Hey, look, it's another example of consumers arbitraging away massively costly property rights cooked up by marketing droids and strategy nerds. Like I've said before: unless there's an incentive to use them, digital property rights will always be arbitraged away.

-- umair // 11:11 AM //


The aestheticization of Wal-Mart. Veery interesting. Wal-Mart is an example b-schools love to use of radical innovation in retail. Of course, it's only corporate types who haven't been able to see Wal-Mart sowing the seeds of it's own destruction - ultraspecializing all of it's competences towards the same vision of the future, and thereby creating a massive competence trap. Now, stakeholders outside the traditional corporate mindset that are effectively Wal-Mart's only rival: the community. But because b-schools and other corporate types couldn't (wouldn't) fathom Wal-Mart massive strategic errors, they couldn't see this coming.

-- umair // 11:00 AM //


Durkheim's Law

This breathless article by BW gets it all wrong - convergence isn't going to 'accelerate' the rate of technological disruption; it's the other way around. Convergence is a nice example of the constantly increasing rate of change of disruption, because there are increasing returns to innovation. This is like a Moore's Law for disruption; except it was formulated by sociologists at the turn of the 20th century.

I think the more interesting bit is that we are at the point where it feels like (technological, market, regulatory) disruption is the new normal. The big question that strategy hasn't answered is this one: what do firms do when disruption is the rule, rather than the exception? Clearly, in this situation, innovation is table stakes - not a game-changer. I think the answer is a return to tactical thinking - to teach managers how to skate around the edge of discontinuity, without falling off.

In fact, I think managers would be better off reading this Guardian op-ed, which discusses the downside to consumers of accelerating disruption - so they can understand how people feel about it. Unless they do this, the strategic outcomes of convergence are already clear:

1) Massive hypercompetition because of competence blur (ie industry walls break down)
2) Hugely increased search space for the dominant design (because the number of goods possible through recombination increases massively)
3) Luck determines winners, who stay lucky for shorter and shorter periods of time. Decreasing competitive advantage period means little payoff to entering convergence market.

Interesting corollaries to look out for:

1) Hypercompetition drives platform costs (ie switching costs) to negative - platforms become interoperable.
2) Replication/distribution economies of scale made possible by convergence disrupt other industries, creating Convergence Wars

-- umair // 10:46 AM //


Scanlation is a nice example of distributed economies of scale - where massively distributed production is cheaper than centralized production.

-- umair // 10:40 AM //

Monday, June 14, 2004

Replication Wars


-- umair // 4:02 PM //


Ultimate console auction. Wow. (Via /.).

-- umair // 3:58 PM //


Aarrrrgh. Here's yet another article about outsourcing - this time, a roundtable of (rather respectable) b-school profs including D'Aveni and Rajan.

Look, by now, we've had a very, VERY nice example of the problems with 'outsourcing': Iraq (and Abu Ghraib). It should be patently obvious that outsourcing, far from being a radical cost reducer, can absolutely demolish an organization's social capital - and thus create (all sorts of) massive hidden costs: via reputational effects, unintended consequences to organization structures, lines of power, erosion of control, etc.

So what these guys are discussing, unfortunately, has little to do with reality.

-- umair // 12:44 PM //


Read Rheingold's address to the 2004 Stanford comms class. Interesting - but, frankly, I think the the 'invisible hand of info-anarchy leading to the best outcome for everyone as the future of everything' rap (by all the usual suspects, not just Rheingold) is starting to sound a little tired. I think it's time - past time - to start thinking about machines much more critically than simply fetishizing them.

Rheingold's two examples are Wikipedia and Ohmynews - the point I'm making is to look at the flaws in these structures. Do machines like Ohmynews create massive thought bubbles? Do machines like Wikipedia have an asymptote beyond which deep knowledge never makes it into the system? Machines don't exist to serve us - but it's easy to think they do.

There's a deep flaw hidden in the info-anarchists Panglossian message. The upside, as Aruthr C Clarke presciently observed in The Light of Other Days, is that a perfectly transparent society is a self-policing society. But the flaw is that a perfectly transparent society, is, economically, the ultimate competition - perfect competition (or close enough to it), for everything, everywhere, all the time. I don't think that's a nice place to live.

This is what orthodox economists aspire to: a society where perfect competition and productivity growth through technological innovation mean perfect consumption. This phenomenal essay about the Past and Future of the Industrial Revolution, by Lucas - which is absolutely crucial reading - explains why.

-- umair // 11:51 AM //


Replication Wars

Real and Starz launch a subscription service for films over the Net:

"...During viewing, movies downloaded from the Starz service will fill the entire screen of a computer monitor - a sharp improvement over the postcard-size pictures initially offered by online news and music video services. A technically adept user could also wire a computer that contains the downloaded movie to a television set for viewing.

But the picture quality is not as high as that of a cable pay-per-view movie, nor is the service as convenient. Digital cable services offer an increasing number of movies on demand, while downloading a movie takes 10 to 30 minutes, depending on connection speeds. Still, Rob Glaser, the chief executive of Real, argues that the wait beats driving to the video store."

Is this going anywhere? Not unless they can seriously compete with cable-on-demand - whose pricing structure is idiotic, but which offers a far superior experience.

And, last but not least, here's someone else who's (finally) figured out that microsubscriptions are economically far superior to microgoods.

"...the per-song services have gross margins of 10 percent to 15 percent, compared with 40 percent to 50 percent margins for subscription services, said Richard Wolpert, Real's chief strategic officer."

-- umair // 11:43 AM //


A little more about invisibility tech.

-- umair // 11:41 AM //


On the one hand, this piece about emotional labour effectively as a hidden cost capital imposes on labour is excellent - but on the other, the examples are focused around the notion that work should be maximally 'efficient'. Bit of a contradication if you ask me.

-- umair // 11:36 AM //


The Great Lakes are dying: invaders, hitching rides on ships from international waters, are altering the native ecosystem of the Great Lakes. Excellent piece.

-- umair // 11:33 AM //




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