To survive, firms must be alert to changes in people, both employees and customers.
As customers have added flexibility in their technology investments, they need also to provide flexibility for their human investments; the employees with company and domain knowledge in their heads and in their heads only.
One question brought up was an interesting one: How to companies retain employees who have become millionaires early in life? I don't know if there is much a company can do. If that person wants to continue to work in a structured organization, he will stay. If he wants to do what he wants to do, there's no stopping him from leaving. Even if you could retain that employee, what is his or her motivation to continue producing at a high level? They might have a nothing-to-lose attitude. Foruntately, I dont' think many firms really have to deal with this issue.
A big struggle for firms of smaller sizes is that many of the intricate pieces of company or product knowledge may only be in one person's head. What if he is hit by a bus? What if he is hired by the competition? The only real way around that is to have redundant people for every job function. It is very expensive and a cost most small businesses don't want to lay out. Maybe they don't even think that one of their employees might leave.
The work-life balance is very evident in my generation and upcoming generations. I also notice it more in the west than on the east coast which is essentially a rat race. Employees now have so many hobbies and interests that work responsibilities fall to a lower priority. They want time off, don't want to work 10-12 hour days, but want to accumulate wealth. While this is a growing trend, there will always be those workhorses who pull 65-70 hours a week and move up quickly in an organization. But that is getting harder and harder to find. Especially in the face of downsizing and outsourcing. Why would someone put in 65-70 hours a week for a few years in the hopes of a promotion, when the organization in its current form may not even exist in 2-3 years? Loyalty is nearly a thing of the past, both from an employee and from an employer's perspective.
I like the author's comparison of some employees being looked at as a "black box" or an undifferentiated piece of human capital who can be seen as mercenaries. Come in for a specific purpose or project, and then move on and offere services to someone else. Employers seem to be treating employees like commodities. Skill sets are now commodities that they can easily exchange with a new employee out there.
Wednesday, April 30, 2008
Wharton Chapter 17
Managers and execs know organizations need to adapt to changing environmental conditions but as stated by the authors many successful organizations have trouble doing so. Is this a do as I say, not as I do mentality? Everyone knows they need to be able to adapt, but many can't.
Organizations are experimenting with new organizational forms. Many are resulting in flatter organizational charts as opposed to the traditional hierarchical structure.
Many emerging forms of organization are being tried, but there is no clear frontrunner for new type of structure. In fact, it is unlikely that one single form will dominate as the hierarchical form did for so long.
Forms of new structures:
Virtual Organization. Perhaps a traditional hierarchical structure but employees, suppliers, and customers are dispersed about a geographic area. My business is in talks with a newly formed virtual law firm to be their IT provider. However the technology to do this properly is quite expensive, more expensive than they had previously believed. Implementing a server hosted at a 3rd party co-location, IP phone systems, and network connectivity play key roles in this type of structure, and there is a significant cost of entry to get this going.
External Network Form:
I believe part of HP's business practices would qualify them as being an external network form. They handle their core competency but highly leverage outsourcing to handle many of the implementations and warranty claim services for small/medium businesses. They will contract with local IT providers and pay a flat rate to have the service performed on their behalf. Not exactly a textbook example, but in some part they know that end user service isn't in their core competency and outsource the work.
Internal Network Form
The internal network form kind of sounds like a franchise to me. Executives control company culture and handle much of the marketing and advertising that drives the brand as a whole, but you have the independant franchise owners who are in the field and able to make their own decisions as long as it is somewhat aligned with the franchiser's company goals. For example a McDonald's franchise can't just start selling hot dogs because they feel like it. However they can make some of their own promotions and pricing, and lay out the facility the way they see fit and have 100% control over their employees. They are very modular as recognized by the author.
Spin-Out Organizations
There have been quite a few Spin-Out organizations that have grown to be very successful. Micron is spinning out its imaging business named Aptima. This will still be mostly controlled by Micron, but will be a separate business entity. Spin-outs have tremendous potential and little liability to a company. As in Micron's case, they felt there would be more value in two businesses than having all of that technology under one business. Appleton was quoted as saying that Wall Street simply wasn't recognizing the value in the imaging business due to the performance of the DRAM market. Splitting off the imaging allows it to thrive on its own but still under the control of experienced managers and executives. Had a hard time finding any other info on this out there.
Ambidextrous Organization:
A company that creates and fosters an environment for an entity that would be a good candidate for a spin-out, but that will stay within the main entity of the company. Many larger established firms do this by creating consulting companies that will service organizations within the company as well as outside the company.
According to a Harvard Business Review article April 2004. "These organizations separate their new, exploratory units from their traditional, exploitative ones, allowing them to have different processes, structures, and cultures; at the same time, they maintain tight links across units at the senior executive level."
I think an important aspect of that is the idea of an exploratory unit. A large company may have all the necessary resources to help foster a newer entity, but for the most part want to leave it on its own to flourish and be successful or to be unsuccessful and dissolve back into the company. It is a way for a large immobile organization to create a new, nimble and proactive company while utilizing experienced internal executives.
Front-Back organizations:
Seen in some very customer focused organizations, like the medical field as an example from the book. Essentially the org chart is flipped upside down with the customers at the top along with the customer contacts, and then everyone else (supporting cast) behind.
Sense-and-Respond organization:
Apparently an organization that is ready to change strategies or tactics at the first sign of a market change. They have few long term plans and tend to change to stay with thier current customers regardless of where the market goes. I would say that most organizations try to be at at least somewhat a sense-andrespond organization. They want to be nimble and keep thier current customers since new customers are an expensive addition.
Organizations are experimenting with new organizational forms. Many are resulting in flatter organizational charts as opposed to the traditional hierarchical structure.
Many emerging forms of organization are being tried, but there is no clear frontrunner for new type of structure. In fact, it is unlikely that one single form will dominate as the hierarchical form did for so long.
Forms of new structures:
Virtual Organization. Perhaps a traditional hierarchical structure but employees, suppliers, and customers are dispersed about a geographic area. My business is in talks with a newly formed virtual law firm to be their IT provider. However the technology to do this properly is quite expensive, more expensive than they had previously believed. Implementing a server hosted at a 3rd party co-location, IP phone systems, and network connectivity play key roles in this type of structure, and there is a significant cost of entry to get this going.
External Network Form:
I believe part of HP's business practices would qualify them as being an external network form. They handle their core competency but highly leverage outsourcing to handle many of the implementations and warranty claim services for small/medium businesses. They will contract with local IT providers and pay a flat rate to have the service performed on their behalf. Not exactly a textbook example, but in some part they know that end user service isn't in their core competency and outsource the work.
Internal Network Form
The internal network form kind of sounds like a franchise to me. Executives control company culture and handle much of the marketing and advertising that drives the brand as a whole, but you have the independant franchise owners who are in the field and able to make their own decisions as long as it is somewhat aligned with the franchiser's company goals. For example a McDonald's franchise can't just start selling hot dogs because they feel like it. However they can make some of their own promotions and pricing, and lay out the facility the way they see fit and have 100% control over their employees. They are very modular as recognized by the author.
Spin-Out Organizations
There have been quite a few Spin-Out organizations that have grown to be very successful. Micron is spinning out its imaging business named Aptima. This will still be mostly controlled by Micron, but will be a separate business entity. Spin-outs have tremendous potential and little liability to a company. As in Micron's case, they felt there would be more value in two businesses than having all of that technology under one business. Appleton was quoted as saying that Wall Street simply wasn't recognizing the value in the imaging business due to the performance of the DRAM market. Splitting off the imaging allows it to thrive on its own but still under the control of experienced managers and executives. Had a hard time finding any other info on this out there.
Ambidextrous Organization:
A company that creates and fosters an environment for an entity that would be a good candidate for a spin-out, but that will stay within the main entity of the company. Many larger established firms do this by creating consulting companies that will service organizations within the company as well as outside the company.
According to a Harvard Business Review article April 2004. "These organizations separate their new, exploratory units from their traditional, exploitative ones, allowing them to have different processes, structures, and cultures; at the same time, they maintain tight links across units at the senior executive level."
I think an important aspect of that is the idea of an exploratory unit. A large company may have all the necessary resources to help foster a newer entity, but for the most part want to leave it on its own to flourish and be successful or to be unsuccessful and dissolve back into the company. It is a way for a large immobile organization to create a new, nimble and proactive company while utilizing experienced internal executives.
Front-Back organizations:
Seen in some very customer focused organizations, like the medical field as an example from the book. Essentially the org chart is flipped upside down with the customers at the top along with the customer contacts, and then everyone else (supporting cast) behind.
Sense-and-Respond organization:
Apparently an organization that is ready to change strategies or tactics at the first sign of a market change. They have few long term plans and tend to change to stay with thier current customers regardless of where the market goes. I would say that most organizations try to be at at least somewhat a sense-andrespond organization. They want to be nimble and keep thier current customers since new customers are an expensive addition.
Wednesday, April 23, 2008
Wharton Chapter 11
Appropriating the gains from innovation.
I was surprised to see that the author considered patents to be overemphasized when it comes to securing returns from an innovation. The argument that the patent comes from an intellectual property industry "promoting its wares" was kind of odd. In addition, the complaint that patents only tends to focus on the duration of the period of security seemed counterintuitive. That is indeed the purpose of a patent; to allow the innovator time to recoup expenses and appropriate value.
It was interesting that the effectiveness of patents varies greatly from industry to industry, something I had never thought of. The author states that "patents are unambiguously the least central of the major appropriability mechanisms", but do many business know this? Is the the author suggesting that firms should change their strategy away from patents and more toward the other 3 mechanisms for approriability?
One of the 3 other mechanisms besides patents and legal protection is secrecy. I found this section to be in direct contrast to chapter 15's discussion of knowledge networks and how individuals from firms share information that benefits both. Many firms prohibit loose talkign from certain employees with specific company knowledge that provides some kind of competitive advantage. Similar to patents and legal protection, secrecy has more value to some industries and firms than others. A good example is the recipe for Coca-Cola. At this point, even if the recipe was released, what company could market it and chip away at Coca-Cola's market share? I think secrecy is becoming more and more difficult for firms to manage, and secrecy is not where the value is generated. Time to market or lead time can often be more important than having a competitor discover secrets by way of espionage or simply reverse engineering a prototype. Reverse engineering is becoming a bigger and bigger problem out of China recently and patents and secrecy seem to not stand a chance against it:
http://www.thestandard.com/news/2008/02/29/us-canadian-agencies-seize-counterfeit-cisco-gear
Just recently, US and Canadian agencies seized over $78mil worth of counterfeit Cisco Systems networking equipment that were shipping to North America from China. They are becoming very adept at reverse engineering to make identical products that most people wouldn't be able to tell the difference. In this case, had Cisco had a secret process in designing or manufacturing the items, they might be more difficult to reverse engineer. As the author suggest, secrecy concerning processes is becoming more effective than secrecy about production or design.
Complementary assets have made another appearance in this class in Chapter 11. A firms access to distribution, service capability, customer relationships, and supplier relationships is something that can not be easily copied and that is also usually not any secret. Relationships can not be counterfeited.
Lead Time can make or break a firm's introduction of an emerging technology to the market. In the event that patents and secrecy have proved inadequate, lead-time can be the key to competitive advantage, especially if your product creates a standard that drives additional business back to your firm and also creates an environment where switching costs are high. A good example contradicting this example is the HD-DVD vs. Blu-Ray standard war that recently ended. HD-DVD was 1st to market but Blu-Ray had strategic alliances with Sony and the new PS3 game console that stripped 1st mover advantages away from HD-DVD and eventually Blu-Ray prevailed. This standard war was over before there was an extremely high cost of switching for customers (except those that bought HD-DVD players and lots of movies).
I was surprised to see that the author considered patents to be overemphasized when it comes to securing returns from an innovation. The argument that the patent comes from an intellectual property industry "promoting its wares" was kind of odd. In addition, the complaint that patents only tends to focus on the duration of the period of security seemed counterintuitive. That is indeed the purpose of a patent; to allow the innovator time to recoup expenses and appropriate value.
It was interesting that the effectiveness of patents varies greatly from industry to industry, something I had never thought of. The author states that "patents are unambiguously the least central of the major appropriability mechanisms", but do many business know this? Is the the author suggesting that firms should change their strategy away from patents and more toward the other 3 mechanisms for approriability?
One of the 3 other mechanisms besides patents and legal protection is secrecy. I found this section to be in direct contrast to chapter 15's discussion of knowledge networks and how individuals from firms share information that benefits both. Many firms prohibit loose talkign from certain employees with specific company knowledge that provides some kind of competitive advantage. Similar to patents and legal protection, secrecy has more value to some industries and firms than others. A good example is the recipe for Coca-Cola. At this point, even if the recipe was released, what company could market it and chip away at Coca-Cola's market share? I think secrecy is becoming more and more difficult for firms to manage, and secrecy is not where the value is generated. Time to market or lead time can often be more important than having a competitor discover secrets by way of espionage or simply reverse engineering a prototype. Reverse engineering is becoming a bigger and bigger problem out of China recently and patents and secrecy seem to not stand a chance against it:
http://www.thestandard.com/news/2008/02/29/us-canadian-agencies-seize-counterfeit-cisco-gear
Just recently, US and Canadian agencies seized over $78mil worth of counterfeit Cisco Systems networking equipment that were shipping to North America from China. They are becoming very adept at reverse engineering to make identical products that most people wouldn't be able to tell the difference. In this case, had Cisco had a secret process in designing or manufacturing the items, they might be more difficult to reverse engineer. As the author suggest, secrecy concerning processes is becoming more effective than secrecy about production or design.
Complementary assets have made another appearance in this class in Chapter 11. A firms access to distribution, service capability, customer relationships, and supplier relationships is something that can not be easily copied and that is also usually not any secret. Relationships can not be counterfeited.
Lead Time can make or break a firm's introduction of an emerging technology to the market. In the event that patents and secrecy have proved inadequate, lead-time can be the key to competitive advantage, especially if your product creates a standard that drives additional business back to your firm and also creates an environment where switching costs are high. A good example contradicting this example is the HD-DVD vs. Blu-Ray standard war that recently ended. HD-DVD was 1st to market but Blu-Ray had strategic alliances with Sony and the new PS3 game console that stripped 1st mover advantages away from HD-DVD and eventually Blu-Ray prevailed. This standard war was over before there was an extremely high cost of switching for customers (except those that bought HD-DVD players and lots of movies).
Wharton Chapter 15
Managing Dynamic Knowledge Networks
Overall I had some major problems with some of the topics in this chapter. The author seemed to contradict herself, and some of the chapter contradicted concepts in chapter 11. In addition, it seems as if the author at times is using the terms knowledge networks and strategic alliances interchangeably, and other times refers to knowledge networks as something fairly different.
The whole flight simulator example doesn't make sense in terms of knowledge networks. The FFS, a much more expensive and realistic simulator was beating out the featureless FTD system until the early 1980s when the FTD began gaining ground. I fail to see how the author's definition of knowledge networks had anything to do with this. Due to the recession in the early 1980s, the possibility exists that many firms decided to purchase the cheaper alternative for flight simulator training program. From the information given, the argument that some kind of knowledge network played a part in the growth of FTD is very weak and not convincing.
The chapter should have been split into two parts. One referencing deliberate, controllable knowledge networks and another about incidental, uncontrolled knowledge networks.
The deliberate, controllable knowledge networks would include industry organizations that bring together representatives from several firms within an industry to discuss relevant topics and technologies in the industry. The example of the telecommunications industry is a good one. However, it doesn't seem likely that a firm absent from such industry events would lose competitive advantage due to not being a part of those particular information sharing sessions. The information being discussed is available by other mediums such as trade magazines and other technology publications. It is also the job of some individuals at these firms to stay abreast of upcoming and relevant technologies, so to suggest that this information can be only available through knowledge networks is incorrect in my opinion.
The uncontrolled knowledge networks are even more confusing. The author is suggesting that there is a significant knowledge network among engineers at competing firms getting together in social interactions outside of work. While this is likely and something I myself have experienced, it is pretty rare that information being shared is substantial enough to change the direction or competitive advantage of a firm within the industry. Is the author suggesting that engineers and other people in higher positions within competing firms are sharing domain secrets? That is the only type of substantial information that would warrant any attention to these knowledge networks, and yet there is likely little data available to show this type of information sharing is taking place.
I also strongly disagree with the assertion that knowledge networks can affect the fate of firms. There are dozens or hundreds of variables that affect the success of a firm, with knowledge networks being only one of many that individually have little effect on their own. While the author was surprised at how little attention managers gave the concept of knowledge networks, I certainly was not. It is not a tangible concept and frankly after reading the chapter twice, I am not convinced that knowledge networks, at least in terms that the author uses, is really something people in business need to be concerned with or make an effort to pursue. I believe they are a by-product of the interaction between firms via trade shows, industry, events, and news and trade articles.
I think the concept of knowledge networks could be more easily applied to departments within an organization and used in conjunction with knowledge management systems.
Overall I had some major problems with some of the topics in this chapter. The author seemed to contradict herself, and some of the chapter contradicted concepts in chapter 11. In addition, it seems as if the author at times is using the terms knowledge networks and strategic alliances interchangeably, and other times refers to knowledge networks as something fairly different.
The whole flight simulator example doesn't make sense in terms of knowledge networks. The FFS, a much more expensive and realistic simulator was beating out the featureless FTD system until the early 1980s when the FTD began gaining ground. I fail to see how the author's definition of knowledge networks had anything to do with this. Due to the recession in the early 1980s, the possibility exists that many firms decided to purchase the cheaper alternative for flight simulator training program. From the information given, the argument that some kind of knowledge network played a part in the growth of FTD is very weak and not convincing.
The chapter should have been split into two parts. One referencing deliberate, controllable knowledge networks and another about incidental, uncontrolled knowledge networks.
The deliberate, controllable knowledge networks would include industry organizations that bring together representatives from several firms within an industry to discuss relevant topics and technologies in the industry. The example of the telecommunications industry is a good one. However, it doesn't seem likely that a firm absent from such industry events would lose competitive advantage due to not being a part of those particular information sharing sessions. The information being discussed is available by other mediums such as trade magazines and other technology publications. It is also the job of some individuals at these firms to stay abreast of upcoming and relevant technologies, so to suggest that this information can be only available through knowledge networks is incorrect in my opinion.
The uncontrolled knowledge networks are even more confusing. The author is suggesting that there is a significant knowledge network among engineers at competing firms getting together in social interactions outside of work. While this is likely and something I myself have experienced, it is pretty rare that information being shared is substantial enough to change the direction or competitive advantage of a firm within the industry. Is the author suggesting that engineers and other people in higher positions within competing firms are sharing domain secrets? That is the only type of substantial information that would warrant any attention to these knowledge networks, and yet there is likely little data available to show this type of information sharing is taking place.
I also strongly disagree with the assertion that knowledge networks can affect the fate of firms. There are dozens or hundreds of variables that affect the success of a firm, with knowledge networks being only one of many that individually have little effect on their own. While the author was surprised at how little attention managers gave the concept of knowledge networks, I certainly was not. It is not a tangible concept and frankly after reading the chapter twice, I am not convinced that knowledge networks, at least in terms that the author uses, is really something people in business need to be concerned with or make an effort to pursue. I believe they are a by-product of the interaction between firms via trade shows, industry, events, and news and trade articles.
I think the concept of knowledge networks could be more easily applied to departments within an organization and used in conjunction with knowledge management systems.
Tuesday, April 15, 2008
Wharton Chapter 10
In the case of Kinght-Ridder and other news organizations, investing and losing money in one emerging technology will likely put them at a disadvantage when the next, possibly successful emerging technology comes along. Being burned by one technology can make a firm gunshy about the next transforming technology. How can a firm be aggressive but also remain conservative when it comes to technology adoption at significant costs?
One way would be to watch other industries. No one industry exists in a vacuum, and technology adoption in other industries can be a leading indicator as to what might be down the road. For example in the early 2000s, it was obvious that the internet was becoming home to more and more e-commerce. Financial firms could see that news was making its way onto the internet, so the natural progression would be financial news and actual real-time (almost) stock quotes, and then eventually utilizing the real-time information to make trades online.
An alternative to this would be to work to see several different futures and prepare for any or all of them. That would put the firm in a better position to make changes to remain competitive. Referred to in the book as scenario planning.
Another alternative would be to not wait to see where the industry is going, but be proactive and make your own future and be a market leader. I think the video game market in the late 1970s is a good example of that. Until the release of the Atari 2600 in 1977, home video game systems were designed around a single game or type of game, usually pong or a tennis variant. Each console system had the game or games built right into the console. Atari's release of a game system with interchangable games was a breakthrough. Atari broke from the norm and took an overwhelming lead in the home video game market for years until Nintendo stole the show in 1985.
The 10 "basic" steps to constructing scenarios aren't so basic. Here is a sample scenario for a firm looking to enter the personal aircraft market in hopes that light aircraft will soon compete and possible replace cars:
1. Define issues: Congested roads, people tired of long commutes. Recreational flying. Customer group would be upper class people with disposable income until competitors came in and prices began to fall.
2. Stakeholders: Auto manufacturers and dealerships. What will they do to compete better against a completely new threat? Automated road systems? Larger investment in alternative fuels? Government who would now need to regulate additional air traffic for safety concerns. Current role is that of extreme power in regards to the expansion of these types of technologies due mainly to public safety issues.
3. Forces shaping future: Desire for faster, more efficient (timewise) transportation. Access to larger geographic radius in reasonable amount of travel time. Travel freedom. Population increases putting more stress on existing road systems.
4: Trends/Predetermined elements: Trend in smaller, lighter personal aircraft with prices approaching more affordable levels. No longer need to be extremely wealthy to own and maintain aircraft. Prices of real estate within driving distances of attractive job markets. Population becoming more educated and likely able to absorb flight training within safe levels.
5. Key uncertainties: Government regulations, airspace restrictions. Additional load on air traffic controllers. Takeoff/landing/parking facilities to accomodate additional air traffic when on the ground. Fuel prices - aircraft may be more affordable but burning 10-12 gallons per hour will more than offset any savings. General acceptance - Will people feel safe enough flying themselves around? Safety of lower cost aircraft.
6. 2 most important key uncertainties: 1. Government regulation in the face of increased demand on current air travel system. Aircraft designs may be dictated by FAA or other new government oversight department leaving firm's current design unusable with a sizable lost investment. 2. Infrastructure to accomodate personal aircraft in locations convenient to users' home. Where are these planes going to be parked? Serviced? Refuled? Disposed of?
7. Internal consistency: Main future trends are mutually consistent with each other. Trends point to alternative to land based vehicles to take advantage of all unused available airspace. Outcomes for key uncertainties can coexists. Favorable government regulation could play major part in pushing for compatible infrastructure.
Scenario 1: Government regulation of aircraft is favorable to aircraft manufacturers and end users causing several players to enter the market which drives infrastructure change to accomodate additional acceptance by the public and businesses. Our firm manufactures several models and is a viable competitor in the market.
Scenario 2: Government regulation is not favorable and/or drives prices of aircraft up and prices majority of potential customers out of market. As result, infrastructure is not put into place and air travel does little to compete with automobiles. In that case, firm turns market toward higher end aircraft for business and pleasure use only.
8. Assess scenarios: Scenario 1. Stakeholders such as auto manufacturers would certainly be threatened by favorable government regulation. These firms may purchase other aircraft manufacturers to remain competitive in the transportation industry. Scenario 2. Auto manufacturer stakeholders would not be affected if regulation was unfavorable and limited possibility of mainstream acceptance and use.
9. This step would include some type of modeling regarding cause/effect of stakeholders actions, government actions, and other potential competitors who might enter the market.
10. Reassess steps 1-9 to see if anything has changed. Steps 1-9 would likely happen over a greater period of time where somethings may change. For example. government creates a new department to oversee and regulate personal aircrafts. That would drastically change scenario 2. Maybe advancements in alternative energy have shown ways to avoid using oil based energy, thus decreasing operating costs of personal aircraft.
One of the benefits to creating scenarios is to give an honest look at emerging technologies rather than off-the-cuff decisions about the practicality or future of a technology. Scenarios might also expose what the book refers to as weak signals - minor events or trends that may have a significant impact on the industry down the road. Good scenarios should likely result in some action of some kind from within the company due to the uncovering of emerging technologies or potential threats that otherwise would have gone overlooked. One of the greatest benefits to scenarios is that it keeps companies from failing to see emerging technologies or technological changes in their industry down the road. Just having these issues exposed can minimize resistance as well as allow management to prepare strategies based on several potential scenarios.
One way would be to watch other industries. No one industry exists in a vacuum, and technology adoption in other industries can be a leading indicator as to what might be down the road. For example in the early 2000s, it was obvious that the internet was becoming home to more and more e-commerce. Financial firms could see that news was making its way onto the internet, so the natural progression would be financial news and actual real-time (almost) stock quotes, and then eventually utilizing the real-time information to make trades online.
An alternative to this would be to work to see several different futures and prepare for any or all of them. That would put the firm in a better position to make changes to remain competitive. Referred to in the book as scenario planning.
Another alternative would be to not wait to see where the industry is going, but be proactive and make your own future and be a market leader. I think the video game market in the late 1970s is a good example of that. Until the release of the Atari 2600 in 1977, home video game systems were designed around a single game or type of game, usually pong or a tennis variant. Each console system had the game or games built right into the console. Atari's release of a game system with interchangable games was a breakthrough. Atari broke from the norm and took an overwhelming lead in the home video game market for years until Nintendo stole the show in 1985.
The 10 "basic" steps to constructing scenarios aren't so basic. Here is a sample scenario for a firm looking to enter the personal aircraft market in hopes that light aircraft will soon compete and possible replace cars:
1. Define issues: Congested roads, people tired of long commutes. Recreational flying. Customer group would be upper class people with disposable income until competitors came in and prices began to fall.
2. Stakeholders: Auto manufacturers and dealerships. What will they do to compete better against a completely new threat? Automated road systems? Larger investment in alternative fuels? Government who would now need to regulate additional air traffic for safety concerns. Current role is that of extreme power in regards to the expansion of these types of technologies due mainly to public safety issues.
3. Forces shaping future: Desire for faster, more efficient (timewise) transportation. Access to larger geographic radius in reasonable amount of travel time. Travel freedom. Population increases putting more stress on existing road systems.
4: Trends/Predetermined elements: Trend in smaller, lighter personal aircraft with prices approaching more affordable levels. No longer need to be extremely wealthy to own and maintain aircraft. Prices of real estate within driving distances of attractive job markets. Population becoming more educated and likely able to absorb flight training within safe levels.
5. Key uncertainties: Government regulations, airspace restrictions. Additional load on air traffic controllers. Takeoff/landing/parking facilities to accomodate additional air traffic when on the ground. Fuel prices - aircraft may be more affordable but burning 10-12 gallons per hour will more than offset any savings. General acceptance - Will people feel safe enough flying themselves around? Safety of lower cost aircraft.
6. 2 most important key uncertainties: 1. Government regulation in the face of increased demand on current air travel system. Aircraft designs may be dictated by FAA or other new government oversight department leaving firm's current design unusable with a sizable lost investment. 2. Infrastructure to accomodate personal aircraft in locations convenient to users' home. Where are these planes going to be parked? Serviced? Refuled? Disposed of?
7. Internal consistency: Main future trends are mutually consistent with each other. Trends point to alternative to land based vehicles to take advantage of all unused available airspace. Outcomes for key uncertainties can coexists. Favorable government regulation could play major part in pushing for compatible infrastructure.
Scenario 1: Government regulation of aircraft is favorable to aircraft manufacturers and end users causing several players to enter the market which drives infrastructure change to accomodate additional acceptance by the public and businesses. Our firm manufactures several models and is a viable competitor in the market.
Scenario 2: Government regulation is not favorable and/or drives prices of aircraft up and prices majority of potential customers out of market. As result, infrastructure is not put into place and air travel does little to compete with automobiles. In that case, firm turns market toward higher end aircraft for business and pleasure use only.
8. Assess scenarios: Scenario 1. Stakeholders such as auto manufacturers would certainly be threatened by favorable government regulation. These firms may purchase other aircraft manufacturers to remain competitive in the transportation industry. Scenario 2. Auto manufacturer stakeholders would not be affected if regulation was unfavorable and limited possibility of mainstream acceptance and use.
9. This step would include some type of modeling regarding cause/effect of stakeholders actions, government actions, and other potential competitors who might enter the market.
10. Reassess steps 1-9 to see if anything has changed. Steps 1-9 would likely happen over a greater period of time where somethings may change. For example. government creates a new department to oversee and regulate personal aircrafts. That would drastically change scenario 2. Maybe advancements in alternative energy have shown ways to avoid using oil based energy, thus decreasing operating costs of personal aircraft.
One of the benefits to creating scenarios is to give an honest look at emerging technologies rather than off-the-cuff decisions about the practicality or future of a technology. Scenarios might also expose what the book refers to as weak signals - minor events or trends that may have a significant impact on the industry down the road. Good scenarios should likely result in some action of some kind from within the company due to the uncovering of emerging technologies or potential threats that otherwise would have gone overlooked. One of the greatest benefits to scenarios is that it keeps companies from failing to see emerging technologies or technological changes in their industry down the road. Just having these issues exposed can minimize resistance as well as allow management to prepare strategies based on several potential scenarios.
Wednesday, April 9, 2008
Wharton Chapter 8
The chapter begins with a question about how can a company like Mergenthaler last over 100 years, going through wave after wave of technilogical change and goes on to mention that "incumbent firms often have advantages that allow them to persist and lead through periods of technological change. Because of these advantages, even when they do not win the battle to create the first and best technology, they can still go on to win the competitive war..." (Tripsas, 173). These advantages are even more pronounced in the Information Technology industry because once standards are accepted, it is very difficult for a company to come into the market and displace a widely accepted standard even with a better product. Iomega Zip Drive is an example of this. Introduced in 1995 with the purpose of replacing the aging 1.44mb floppy drive with 66x more storage room and faster read/write speeds. On paper, an obvious replacement but just never caught on partially because of existing floppy standards as well as bad timing. Every computer at the time had a specific port on the motherboard for a floppy drive and it was as standard in every PC as a car horn was in an automobile. Anywhere you went with a floppy you could find a computer to read your media. ZIP drives were not all that common, so you had to bring your zip drive, power supply, and disks with you to be sure you could hook them up. Not to mention the CD required to install drivers to use the device. Floppies were so entrenched in the mindset of computer users that the ZIP drives never took off. ZIP drives may have eventually have taken a foothold in the OEM business, except a few years later CD-R technology became the next portable computing storage standard followed by USB flash drives.
*disclaimer* PC World and several other publications now list ZIP drives as one of the top 15 or 20 worst computing products of all time, but at the time of release many thought they would be the next standard and utilized in markets other than computing. A Nov, 1998 article from the Edge: Work-Group computing report says this: "Additional markets that can take significant advantage of a Zip drive are game systems, digital photography, navigation systems -- basically any product that needs high-capacity, high performance, affordable, removable storage," said Mike Lynch, director of beyond-PC applications at Iomega. "The sole focus of the beyond-PC applications group is to move the Zip drive beyond the PC, providing not only new revenue opportunities for Iomega, but significant new brand awareness for Zip drives and disks beyond the customary PC market."
Sony MiniDisc is another example of solid technology that couldn't overcome the de-facto standard of its time, competing with CDs for portable listening devices. It didn't help that Sony refused to license the technology and had trouble getting music studios to sign up, but a major barrier was an already accepted standard that it simply couldn't compete with.
Complementary assets, such as distribution, existing customer and supplier relationships, and service capability are advantages that incumbent firms have over new entrants and can be a barrier to success for companies who may posess better technology or products.
Commercializing emerging technologies is much more than engineering, developing, and producing products and hoping there is a customer base willing to make the purchase. Creating new customer segments is just as important as commercializing the product, if not more important. Many firms hold back from investing in newer technologies because they don't believe that it fits their current market segment. Why are they afraid to create a new market segment? Competitors change also. Many firms are likely to study their current rival companies when it comes to introduction of new products and the market. However, often times the biggest competitor is one they never thought of, and are less prepared to compete because their sights were on the wrong target.
As brought up very briefly in the book, social networks may play a role in all this. In Second Life, an HP executive can sign on and give himself a tour of the Dell island and all it has to offer, including seminars, sales and product information, e-commerce methods, and much more. During business hours, he could even walk up and talk with a Dell customer representative who would have no idea this person was with HP gathering competitor information. Dell is displaying plenty of useful competitive information, as are many other companies. This is just one additional resource that competitors can use to improve their competitive advantage.
Commericializing emerging technologies is the 3rd hurdle in the race of developing emerging technologies. The others are decision to invest in developing emerging technologies and then the challenge of internal organization effectively acquire the capabilities.
*disclaimer* PC World and several other publications now list ZIP drives as one of the top 15 or 20 worst computing products of all time, but at the time of release many thought they would be the next standard and utilized in markets other than computing. A Nov, 1998 article from the Edge: Work-Group computing report says this: "Additional markets that can take significant advantage of a Zip drive are game systems, digital photography, navigation systems -- basically any product that needs high-capacity, high performance, affordable, removable storage," said Mike Lynch, director of beyond-PC applications at Iomega. "The sole focus of the beyond-PC applications group is to move the Zip drive beyond the PC, providing not only new revenue opportunities for Iomega, but significant new brand awareness for Zip drives and disks beyond the customary PC market."
Sony MiniDisc is another example of solid technology that couldn't overcome the de-facto standard of its time, competing with CDs for portable listening devices. It didn't help that Sony refused to license the technology and had trouble getting music studios to sign up, but a major barrier was an already accepted standard that it simply couldn't compete with.
Complementary assets, such as distribution, existing customer and supplier relationships, and service capability are advantages that incumbent firms have over new entrants and can be a barrier to success for companies who may posess better technology or products.
Commercializing emerging technologies is much more than engineering, developing, and producing products and hoping there is a customer base willing to make the purchase. Creating new customer segments is just as important as commercializing the product, if not more important. Many firms hold back from investing in newer technologies because they don't believe that it fits their current market segment. Why are they afraid to create a new market segment? Competitors change also. Many firms are likely to study their current rival companies when it comes to introduction of new products and the market. However, often times the biggest competitor is one they never thought of, and are less prepared to compete because their sights were on the wrong target.
As brought up very briefly in the book, social networks may play a role in all this. In Second Life, an HP executive can sign on and give himself a tour of the Dell island and all it has to offer, including seminars, sales and product information, e-commerce methods, and much more. During business hours, he could even walk up and talk with a Dell customer representative who would have no idea this person was with HP gathering competitor information. Dell is displaying plenty of useful competitive information, as are many other companies. This is just one additional resource that competitors can use to improve their competitive advantage.
Commericializing emerging technologies is the 3rd hurdle in the race of developing emerging technologies. The others are decision to invest in developing emerging technologies and then the challenge of internal organization effectively acquire the capabilities.
Wednesday, April 2, 2008
Wharton Chapter 7
How does a firm decide what features, attributes, or functions to push to the market when there are several options that create a multidimensional envelope? Within the envelope are barriers that force a trade-off between ruggedness and portability for example. Ideally, maximum ruggedness and portability would serve the market best, but the materials available do not allow maximizing both features.
One way to steer clear of a lumpy market would be to serve only a single target segment and specialize in serving that particular niche. Although doing so limits the potential market, and makes a firm vulnerable to other firms who may create products that appeal to your niche market.
Three components of customer response:
Basic - Technologies that are taken for granted but if not present in a product, there is no sale. HD on televisions would be a good example of this, as well as laptops with wireless built in. Features that are expected, but don't guarantee a sale.
Discriminators - Providers of cell phone services is a good example. Many choose their first provider by what free or inexpensive cell phone models are offered. Pricing is very competitive in the industry for plans, so the model of phone can often influence provider.
Energizing Features - A great example of this in my field is the availability of encrypted harddrives on new laptop purchases. Many customers are requesting encrypted harddrives on laptops for any users who handle company finances, employee benefits/health, and intellectual property. With the recent news stories about laptops being stolen that contain confidential user databases, this has become a concern with many IT departments.
Finding markets for new technologies goes back to some other chapters we read in this book where we talked about products being designed for a yet unknown market. This chapter goes a step further and proactively seeks to find both the technology and the market before anything is certain about either. It is also possible to enter into several markets with the same technology, however attributes are different for the various segments. The only reasonable example I can come up with is Alienware high performance laptops. At one point, a very high performance laptop that could compete with desktops was an emerging technology of sorts in the laptop market. Alienware saw a need for it's high performing laptops in several markets, so it started with a base system and customized it based on segment need. High end gaming laptops came with the latest and greatest video cards, memory, and high end screen. Other laptops were for engineers or designers running AUTOcad products, so they were loaded up with high speed large capacity drives and large amounts of RAM to run resource intensive applications. Alienware could target several segments by changing the attributes of its product.
One way to steer clear of a lumpy market would be to serve only a single target segment and specialize in serving that particular niche. Although doing so limits the potential market, and makes a firm vulnerable to other firms who may create products that appeal to your niche market.
Three components of customer response:
Basic - Technologies that are taken for granted but if not present in a product, there is no sale. HD on televisions would be a good example of this, as well as laptops with wireless built in. Features that are expected, but don't guarantee a sale.
Discriminators - Providers of cell phone services is a good example. Many choose their first provider by what free or inexpensive cell phone models are offered. Pricing is very competitive in the industry for plans, so the model of phone can often influence provider.
Energizing Features - A great example of this in my field is the availability of encrypted harddrives on new laptop purchases. Many customers are requesting encrypted harddrives on laptops for any users who handle company finances, employee benefits/health, and intellectual property. With the recent news stories about laptops being stolen that contain confidential user databases, this has become a concern with many IT departments.
Finding markets for new technologies goes back to some other chapters we read in this book where we talked about products being designed for a yet unknown market. This chapter goes a step further and proactively seeks to find both the technology and the market before anything is certain about either. It is also possible to enter into several markets with the same technology, however attributes are different for the various segments. The only reasonable example I can come up with is Alienware high performance laptops. At one point, a very high performance laptop that could compete with desktops was an emerging technology of sorts in the laptop market. Alienware saw a need for it's high performing laptops in several markets, so it started with a base system and customized it based on segment need. High end gaming laptops came with the latest and greatest video cards, memory, and high end screen. Other laptops were for engineers or designers running AUTOcad products, so they were loaded up with high speed large capacity drives and large amounts of RAM to run resource intensive applications. Alienware could target several segments by changing the attributes of its product.
Wednesday, March 19, 2008
Wharton Chap 6.
Trying to market emerging technologies is difficult because you have a product or more likely just an idea, concept, or even prototype, but the uncertainty of future markets is a reality. The potential market is not known, and there is very little, if any marketing data with which to work. Competition is unknown and impossible to plan for. Within an organization there will be several conflicting ideas and projections about when or if the product will succeed and who will be buying it. Product acceptance and timing are complete unknowns. The best a firm can do is try and minimize the uncertainty about a product market and make an educated decision about potential competitors and what direction they are going.
Three approaches:
1. Diffusion and adoption: The rate at which a technology will be adopted by the target market, or any market for that matter.
2. Exploration and learning: Information and research put a firm in the best position to make correct decisions along the development and marketing of an emerging technology and give themselves a better chance at success.
3. Triangulation and insights: This has to do with a firm using any and all types of research and combining them to give them the best information possible to use for marketing and production/design decisions in an emerging market. Since the customer is rarely the one to be asking for specific products, it's up to the corporations to try and figure out what will be accepted. Using information from any sources available should triangulate and give them the proper direction.
The rate of adoption example using digital imaging is a great example of all the items mentioned previously. The big question for early producers of digital imaging was whether or not users would rather drop off film at a brick and mortar store than plug something into their PC? There was no way to properly answer that question difinitively, so those companies had to use all the information available to them and enter the market with the hopes of adoption. Not knowing who the early adopters might be (except they had to be people with PCs) was probably the biggest question mark of them all. PCs were not as popular or affordable as they are now, so looking back that is quite a big risk over an emerging technology today that requires PC interaction.
Most technologies appeal to a certain segment of the technology enthusiasts population. These folks love technology and will buy the latest and greatest products and be lead users for many emerging technologies. Much of the success of the technology depends on some acceptance by this group of users.
Lead users are some of the best sources of information and feedback on emerging technologies. These users are familiar with the technology and the pros and cons and are motivated because they will be the beneficiaries of the final product.
No data or forecast will accurately project an emerging market. As the author says on pg 148, the best a company can do is determine the market is large enough to warrant product development. One example of a technology that I believe failed to do this was satellite phones. This technology never really took off and has been only used by the very wealthy and the military for the most part. Satellite phones were direct competitors to land based cellular phones, and providers of satellite networks such as ICO Global Communications and Iridium failed to determine whether or not the size of the market, after competition with cellular phones, whether or not the market was large enough to warrant massive amounts of investment in designing and launching communication satellites. What hurt these companies the most was the acceleration of acceptance of land based cellular phones in the late 1990s'. As quoted in the Reuters news article dated 8.27.1999, Mark Roberts, a telecommunications analyst at First Union had this to say: "I'm not at all surprised," referring to ICO Global's Chapter 11 filing. "The areas of the world that are not covered by wireless telecommunications are shrinking very rapidly, so the target market for satellites is shrinking."
Satellite phone providers also failed to look at how wireless users would be using the devices, as well as the design of the devices themselves. The handheld devices cost around $3,000 and required much more power so the battery pack was significantly bulkier than cellular phones. With a $3000 pricetag, the target marker was rich executives. Failure to see that rich executives who just dropped $3000 on phone would likely want to use their phones in the office, car, and airplane was also a major oversight. Satellite phones need line of sight to the sky, so use is very limited.
The market for some form of wireless phone was obvious and potentially very large in the early and mid 90s as technology improved. However, had satellite phone providers used triangulation and continuous market exploration (specifically into cell competitors) they likely would have (or should have) seen the imminent failure of a great idea that had poor design, and superior competition.
Sources: http://www.wired.com/techbiz/media/news/1999/08/21478
Three approaches:
1. Diffusion and adoption: The rate at which a technology will be adopted by the target market, or any market for that matter.
2. Exploration and learning: Information and research put a firm in the best position to make correct decisions along the development and marketing of an emerging technology and give themselves a better chance at success.
3. Triangulation and insights: This has to do with a firm using any and all types of research and combining them to give them the best information possible to use for marketing and production/design decisions in an emerging market. Since the customer is rarely the one to be asking for specific products, it's up to the corporations to try and figure out what will be accepted. Using information from any sources available should triangulate and give them the proper direction.
The rate of adoption example using digital imaging is a great example of all the items mentioned previously. The big question for early producers of digital imaging was whether or not users would rather drop off film at a brick and mortar store than plug something into their PC? There was no way to properly answer that question difinitively, so those companies had to use all the information available to them and enter the market with the hopes of adoption. Not knowing who the early adopters might be (except they had to be people with PCs) was probably the biggest question mark of them all. PCs were not as popular or affordable as they are now, so looking back that is quite a big risk over an emerging technology today that requires PC interaction.
Most technologies appeal to a certain segment of the technology enthusiasts population. These folks love technology and will buy the latest and greatest products and be lead users for many emerging technologies. Much of the success of the technology depends on some acceptance by this group of users.
Lead users are some of the best sources of information and feedback on emerging technologies. These users are familiar with the technology and the pros and cons and are motivated because they will be the beneficiaries of the final product.
No data or forecast will accurately project an emerging market. As the author says on pg 148, the best a company can do is determine the market is large enough to warrant product development. One example of a technology that I believe failed to do this was satellite phones. This technology never really took off and has been only used by the very wealthy and the military for the most part. Satellite phones were direct competitors to land based cellular phones, and providers of satellite networks such as ICO Global Communications and Iridium failed to determine whether or not the size of the market, after competition with cellular phones, whether or not the market was large enough to warrant massive amounts of investment in designing and launching communication satellites. What hurt these companies the most was the acceleration of acceptance of land based cellular phones in the late 1990s'. As quoted in the Reuters news article dated 8.27.1999, Mark Roberts, a telecommunications analyst at First Union had this to say: "I'm not at all surprised," referring to ICO Global's Chapter 11 filing. "The areas of the world that are not covered by wireless telecommunications are shrinking very rapidly, so the target market for satellites is shrinking."
Satellite phone providers also failed to look at how wireless users would be using the devices, as well as the design of the devices themselves. The handheld devices cost around $3,000 and required much more power so the battery pack was significantly bulkier than cellular phones. With a $3000 pricetag, the target marker was rich executives. Failure to see that rich executives who just dropped $3000 on phone would likely want to use their phones in the office, car, and airplane was also a major oversight. Satellite phones need line of sight to the sky, so use is very limited.
The market for some form of wireless phone was obvious and potentially very large in the early and mid 90s as technology improved. However, had satellite phone providers used triangulation and continuous market exploration (specifically into cell competitors) they likely would have (or should have) seen the imminent failure of a great idea that had poor design, and superior competition.
Sources: http://www.wired.com/techbiz/media/news/1999/08/21478
Wednesday, March 12, 2008
Wharton Chapter 5 -
This chapter dealt with what role the government can play in existing and emerging technologies. Discussed was the evolution of the Internet and the role that government played along the way until it stepped out of it completely. Government can encourage emerging technologies, such as those with a strong military or national security application. It can also stifle technologies due to moral or potential legal dilemmas.
The government plays a big role in many emerging technologies either by way of directives (military), standard setting (TV standard), regulation (FDA), or subsidies where the government will not necessarily subsidize a technology as a whole, rather specific companies. The Korean government subsidizing DRAM production is one of the many factors that has pushed the worldwide price down and affected Micron and chip industry. These are seen as protectionist and/or interventionist.
Public concern about effect of technologies may spark an outcry for regulatory solutions. Pornography on the Internet is a great example. Families were worried about how easy it was for young children to find adult content and demanded government regulation which was eventually denied.
The most important of the 10 lessons to me was that regulations that have the intent to promote competition or objectives have unintended side effects or even the opposite effect (pg 122). These types of regulations can produce side effects such as increased prices, decreased production, or the slowing down of innovation. Companies lose incentive to be innovative if they aren't free to earn a return on their investments. This can hurt the industry and all consumers of those products.
Even the threat of an emerging technology industry becoming regulated by the government can be enough to stifle progress and innovation. Regulation of an emerging industry can take place before the industry has a chance to develop and mature and mandates could be in effect that require providing technology services to every household, such as is the case with power today. This could create monopoly franchises. The argument then becomes is the good or service essential to all Americans to provide equal opportunities. Many argue that the Internet meets that criteria and as a result could result in market protection for providers. The ability of regulators to properly assess the market and technology can be questionable.
Comparing Microsoft to a power or telecom company that controls the content and conduit was something I had never considered. I always thought the lawsuits against Microsoft for making Internet Explorer part of the operating system were silly, since everyone had the option to download Netscape or Opera at the time. However, understanding the concept of vertical integration now makes those complaints a little more legitimate, but apparently not to the DOJ who didn't prosecute.
I don't believe that Internet providers will ever be regulated due to the relatively low barrier to entry to the market given the wireless technologies available. An absence of wireless technology would likely draw regulations due to high infrastructure costs, but that is not the case. Companies like Clearwire are likely to attract other companies into the market who see a potential for profit. According to money.cnn.com on May 8, 2007,
(http://money.cnn.com/2007/03/08/technology/pluggedin_mehta_clearwire.fortune/index.htm)
Clearwire will be trying to compete head on with the likes of Qwest, Verizon, and cable companies who are trying to get customers to bundle services. More competition without the limitation of expensive physical infrastructure will produce a healthy competitive market.
The government plays a big role in many emerging technologies either by way of directives (military), standard setting (TV standard), regulation (FDA), or subsidies where the government will not necessarily subsidize a technology as a whole, rather specific companies. The Korean government subsidizing DRAM production is one of the many factors that has pushed the worldwide price down and affected Micron and chip industry. These are seen as protectionist and/or interventionist.
Public concern about effect of technologies may spark an outcry for regulatory solutions. Pornography on the Internet is a great example. Families were worried about how easy it was for young children to find adult content and demanded government regulation which was eventually denied.
The most important of the 10 lessons to me was that regulations that have the intent to promote competition or objectives have unintended side effects or even the opposite effect (pg 122). These types of regulations can produce side effects such as increased prices, decreased production, or the slowing down of innovation. Companies lose incentive to be innovative if they aren't free to earn a return on their investments. This can hurt the industry and all consumers of those products.
Even the threat of an emerging technology industry becoming regulated by the government can be enough to stifle progress and innovation. Regulation of an emerging industry can take place before the industry has a chance to develop and mature and mandates could be in effect that require providing technology services to every household, such as is the case with power today. This could create monopoly franchises. The argument then becomes is the good or service essential to all Americans to provide equal opportunities. Many argue that the Internet meets that criteria and as a result could result in market protection for providers. The ability of regulators to properly assess the market and technology can be questionable.
Comparing Microsoft to a power or telecom company that controls the content and conduit was something I had never considered. I always thought the lawsuits against Microsoft for making Internet Explorer part of the operating system were silly, since everyone had the option to download Netscape or Opera at the time. However, understanding the concept of vertical integration now makes those complaints a little more legitimate, but apparently not to the DOJ who didn't prosecute.
I don't believe that Internet providers will ever be regulated due to the relatively low barrier to entry to the market given the wireless technologies available. An absence of wireless technology would likely draw regulations due to high infrastructure costs, but that is not the case. Companies like Clearwire are likely to attract other companies into the market who see a potential for profit. According to money.cnn.com on May 8, 2007,
(http://money.cnn.com/2007/03/08/technology/pluggedin_mehta_clearwire.fortune/index.htm)
Clearwire will be trying to compete head on with the likes of Qwest, Verizon, and cable companies who are trying to get customers to bundle services. More competition without the limitation of expensive physical infrastructure will produce a healthy competitive market.
Wednesday, March 5, 2008
Chapter 4 - Assessing Technologies
The first thing that came to mind when reading this chapter about technology assessment was the Flight of the Kittyhawk paper Clayton Christensen published in the Harvard Business Review. It specifically applies to scope and strategic intent.
HP began development of the Kittyhawk microdrive without targeting a specific marketing segment. "If you don't have a target, you'll miss it every time". That doesn't ring more true than with HP's Kittyhawk.
HP developed the 1.3" microdrive capable of withstanding a 3 foot drop onto a concrete floor, and then began investigating and pursuing potential customers. One of their biggest potential customers was Nintendo who was very interested in the compact size of the drive for their gaming systems, but had no need for the capability of a product that could sustain a 3 foot drop, rather they wanted a cheaper, stripped down version at a lower price. Because the product was engineered to such high standards, the price was too high for potential customers like Nintendo and other companies who were just about to enter the handheld device market.
HP did a great job of assessing that compact harddrives could be a very profitable emerging technology with potential in several horizontal and vertical markets. They also had the resources in place to begin R&D immediately and be the first to market. However, they failed to assess the market for this emerging technology, and subsequently were first to market for a product that really had no market due to overengineering and a high price.
HP began development of the Kittyhawk microdrive without targeting a specific marketing segment. "If you don't have a target, you'll miss it every time". That doesn't ring more true than with HP's Kittyhawk.
HP developed the 1.3" microdrive capable of withstanding a 3 foot drop onto a concrete floor, and then began investigating and pursuing potential customers. One of their biggest potential customers was Nintendo who was very interested in the compact size of the drive for their gaming systems, but had no need for the capability of a product that could sustain a 3 foot drop, rather they wanted a cheaper, stripped down version at a lower price. Because the product was engineered to such high standards, the price was too high for potential customers like Nintendo and other companies who were just about to enter the handheld device market.
HP did a great job of assessing that compact harddrives could be a very profitable emerging technology with potential in several horizontal and vertical markets. They also had the resources in place to begin R&D immediately and be the first to market. However, they failed to assess the market for this emerging technology, and subsequently were first to market for a product that really had no market due to overengineering and a high price.
Wednesday, February 27, 2008
Google Apps in the Enterprise
I found it interesting how Google wants to move its apps from the edge of its business model to the center. Before reading this article, I wouldn't have even though Google apps were on the edge of the business model, more like out in the parking lot and off the radar. I was not surprised to learn that for their enterprise apps, they currently hand the production consumer apps to the business division for use as the Enterprise apps. Problem is, this requires extensive rework. If they continue this model, their SaaS apps will have a hard time taking market share away from established competitors.
Microsoft will not lose the large volume licensing institutions that license thousands of copies of their enterprise software, including large public companies, government, and educational entities. Of course I don't believe Google is truly targeting them because all the shortcomings discussed in the article are too much for large enterprises to overcome, whether the shortcoming is real or just perceived by IT management. They will be more likely to lose low volume, basic computer users who just need word and/or excel and/or outlook. These are the home users and small businesses who are stuck purchasing a $350-$400 software package for each new employee who needs to use Word and/or Excel only.
One feature talked about that I don't believe is a desired feature is that GAPE offers concurrent collaboration on documents and Office doesn't. Working in small, large, educational, and government institutions I've never once had a need for that.
One thing not discussed at all in the article is the potential disruption to current workstation life cycles within companies. By moving the data processing off the desktop, the life cycle of a workstation could be greatly increased, decreasing IT costs for companies. Google could also be disrupting the PC market inadvertently.
Because I am an IT consultant and have access to users at various types of organizations, mostly smaller to medium sized businesses, I decided to call around today and investigate the type of interest these products might have over their current (MS Office) solutions. I was surprised by the fact that only one of the my clients was even aware that Google offered any apps. So right there, Google has an awareness problem in one potential market segment. After describing the product to my clients, there was definately some interest, not surprisingly by the people who pay the bills. They are consistently frustrated with purchasing even the Office Small Business because thay pay for products they don't use, or use extremely rarely. In addition, their company may only utilize 5%-10% of the features of the Office programs, so the idea of paying $50/user for the stripped down applications was intriguing to them. I was instructed by several of my clients to keep them abreast of updates for future consideration. One big selling point was the ability to leave documents on the server to be retrieved anywhere as long as there is an internet connection. For small business with several offices, this could save them thousands on site-to-site VPN and expensive network solutions.
Microsoft will not lose the large volume licensing institutions that license thousands of copies of their enterprise software, including large public companies, government, and educational entities. Of course I don't believe Google is truly targeting them because all the shortcomings discussed in the article are too much for large enterprises to overcome, whether the shortcoming is real or just perceived by IT management. They will be more likely to lose low volume, basic computer users who just need word and/or excel and/or outlook. These are the home users and small businesses who are stuck purchasing a $350-$400 software package for each new employee who needs to use Word and/or Excel only.
One feature talked about that I don't believe is a desired feature is that GAPE offers concurrent collaboration on documents and Office doesn't. Working in small, large, educational, and government institutions I've never once had a need for that.
One thing not discussed at all in the article is the potential disruption to current workstation life cycles within companies. By moving the data processing off the desktop, the life cycle of a workstation could be greatly increased, decreasing IT costs for companies. Google could also be disrupting the PC market inadvertently.
Because I am an IT consultant and have access to users at various types of organizations, mostly smaller to medium sized businesses, I decided to call around today and investigate the type of interest these products might have over their current (MS Office) solutions. I was surprised by the fact that only one of the my clients was even aware that Google offered any apps. So right there, Google has an awareness problem in one potential market segment. After describing the product to my clients, there was definately some interest, not surprisingly by the people who pay the bills. They are consistently frustrated with purchasing even the Office Small Business because thay pay for products they don't use, or use extremely rarely. In addition, their company may only utilize 5%-10% of the features of the Office programs, so the idea of paying $50/user for the stripped down applications was intriguing to them. I was instructed by several of my clients to keep them abreast of updates for future consideration. One big selling point was the ability to leave documents on the server to be retrieved anywhere as long as there is an internet connection. For small business with several offices, this could save them thousands on site-to-site VPN and expensive network solutions.
Wednesday, February 20, 2008
Wharton Chapter 3 - Speciation of Technology
I found this chapter very interesting, especially with the comparisons to biology and genetics which I was extremely interested in high school and early college. Certain technologies evolve very similarly to groups of species that are separated by some type of divider, allowing each group to evolve independantly.
I was also intrigued with their concept of marketing products. They suggested finding markets for existing products, rather than creating products for a specific market. The latter concept which is held by many marketing types, is the classic textbook method of product development. It starts with the marketing department recognizing a need for a specific product, who then goes to Engineering to create the product and then pushes the completed product through the pre-determined channels. Often times, horizontal markets are completely missed, and if discovered, often times only by mistake. For technology companies, if they don't think of horizontal markets for their products, someone else likely will.
I think blogs are a good example of what the authors are talking about. I doubt whoever came up with the idea for blogging ever thought it would be a method for students to submit assignments to professors.
I was also intrigued with their concept of marketing products. They suggested finding markets for existing products, rather than creating products for a specific market. The latter concept which is held by many marketing types, is the classic textbook method of product development. It starts with the marketing department recognizing a need for a specific product, who then goes to Engineering to create the product and then pushes the completed product through the pre-determined channels. Often times, horizontal markets are completely missed, and if discovered, often times only by mistake. For technology companies, if they don't think of horizontal markets for their products, someone else likely will.
I think blogs are a good example of what the authors are talking about. I doubt whoever came up with the idea for blogging ever thought it would be a method for students to submit assignments to professors.
Thursday, February 14, 2008
Wharton chapter 2
Of the 4 pitfalls mentioned in the Wharton book in chapter 2, I'd say the most common pitfall is delayed participation. However, I would argue that it is not always a pitfall, and in many cases the firm to delay participation, for whatever reason ends up being very successful. I think this pitfall needs some additional info to be completely true. The size of the company plays a big part in whether delaying entry is beneficial or disastrous. I would argue that a smaller company would suffer much more than larger company due to delays. Smaller companies are for the most part more agile, but have less resources. They need to take advantage of being small and nimble and jump into emerging technologies early if they plan to at all. They are usually able to make the first moves and get into the market during the early adopter phase which experiences tremendous growth.
A larger firm should be willing to sacrifice early entry and high profit margins to make sure the market is viable before it jumps in. In many cases, the resources available to the larger company allow it to become a market leader after a period of time. Google is a great example of this. Yahoo was the company to beat for years, and Google comes along and gets big enough that it can knock Yahoo off the top spot. In the technology sector more than anywhere, the company that was first to market doesn't tend to lead the market for a long period of time, as long as there are not tremendous barriers to entry as is the case for Microsoft and Cisco for example.
A larger firm should be willing to sacrifice early entry and high profit margins to make sure the market is viable before it jumps in. In many cases, the resources available to the larger company allow it to become a market leader after a period of time. Google is a great example of this. Yahoo was the company to beat for years, and Google comes along and gets big enough that it can knock Yahoo off the top spot. In the technology sector more than anywhere, the company that was first to market doesn't tend to lead the market for a long period of time, as long as there are not tremendous barriers to entry as is the case for Microsoft and Cisco for example.
Wednesday, February 13, 2008
Hype Cycle for Emerging Tech
At first glance and read through, this article looks pretty spot on for almost all the technologies it talks about. One, however I have to disagree with. The timeline for Virtual Environments and Virtual Worlds seems off to me. 5-10 years just seems to long considering where that technology currenty is and how popular and accessible it is. The article talks about what limitations there are for a faster emergence, but I think they are missing some key points. The authors claim that barriers to this technology are the current network grid and also the expense of hardware necessary for the technology to be attractive to a wider audience.
I believe the emergence of more widespread wireless networks such as Clearwire and Meraki this hurdle may be cleared quicker than is expected. Cheaper internet solutions and options will be available to more people and will be deployed quicker than before.
The hardware hurdle is also something that I feel will be irrelevent soon. With the release of the Nintendo Wii, XBox360, and PS3, all platforms that utilize network connection for multiplayer games, this is an untapped market for virtual worlds like second life and other similar options. It is safe to assume that between a home PC and the 3 gaming platforms named above, most households in America and other developed nations have at least one of them, if not more. The improvements of cellular wireless technology also may pave the way for handheld PCs with the capability of participating in these worlds as well.
I would say 2-4 years is a more realistic outlook on the emergence of these technologies.
I believe the emergence of more widespread wireless networks such as Clearwire and Meraki this hurdle may be cleared quicker than is expected. Cheaper internet solutions and options will be available to more people and will be deployed quicker than before.
The hardware hurdle is also something that I feel will be irrelevent soon. With the release of the Nintendo Wii, XBox360, and PS3, all platforms that utilize network connection for multiplayer games, this is an untapped market for virtual worlds like second life and other similar options. It is safe to assume that between a home PC and the 3 gaming platforms named above, most households in America and other developed nations have at least one of them, if not more. The improvements of cellular wireless technology also may pave the way for handheld PCs with the capability of participating in these worlds as well.
I would say 2-4 years is a more realistic outlook on the emergence of these technologies.
Wednesday, February 6, 2008
Thinking about tomorrow
The near future will bring us many small technological advances that will build upon current technologies and infiltrate more and more of our day to day life. They will change dramatically how and when we receive information, how we are presented with tv, movie, and music entertainment, and present challenges to keep personal information private. We will also likely see more products containint integrated technologies in one device, such as phone, digital entertainment, GPS, and tracking and shopping habits allowing for direct marketing.
Out of all the technologies mentioned in the WSJ article, I think the category that is wide open is how we shop. I think the more we use and rely on technology, the more effort companies will put forth trying to market over those mediums. Using data mining and customer behavior, targeted marketing will be greater than was even predicted in this article. We will be inundated with ads on our handhelds, video games, and other portable electronics that will work directly with implemented systems with larger retail and online outlets. There will be a push away from mass media advertising in favor of more directed advertising that should increase the net marketing contribution. Developing these systems and integrating them with the massive amounts of data out there will be the primary hurdle, but will be overcome due to benefits of a properly implemented system.
Out of all the technologies mentioned in the WSJ article, I think the category that is wide open is how we shop. I think the more we use and rely on technology, the more effort companies will put forth trying to market over those mediums. Using data mining and customer behavior, targeted marketing will be greater than was even predicted in this article. We will be inundated with ads on our handhelds, video games, and other portable electronics that will work directly with implemented systems with larger retail and online outlets. There will be a push away from mass media advertising in favor of more directed advertising that should increase the net marketing contribution. Developing these systems and integrating them with the massive amounts of data out there will be the primary hurdle, but will be overcome due to benefits of a properly implemented system.
Managing emerging technologies
I wish the guy I bought the book from on Half.com would have shipped it on time. No Wharton book for me.
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