Relationship Capital

The Barista Principle -Starbucks and the Rise of Relational Capital is an interesting article on the importance of relationships. Write Ranjay Gulati, Sarah Huffman, and Gary Neilson in Strategy+Business:

Winning companies define and deploy relationships in a consistent, specific, multifaceted manner. Although some companies will dub any concluded business deal a relationship, top-performing companies focus extraordinary, enterprise-wide energy on moving beyond a transactional mind-set as they develop trust-based, mutually beneficial, and long-term associations, specifically with four key constituencies: customers, suppliers, alliance partners, and their own employees. Starbucks, we believe, exemplifies this new model of the relationship-centric organization.

The relationships with these four constituencies are so valuable that they should be considered, collectively, a core asset of a firm. We call this asset “relational capital”, and define it as the value of a firm’s network of relationships with its customers, suppliers, alliance partners, and employees.

Outsourcing

Why Outsourcing Is In is an article by Anne Chung, Tim Jackson, and Tim Laseter in Strategy+Business:

In the past, outsourcing focused on tactical, nonessential activities such as payroll processing or manned security stations. But the focus is shifting. Strategic operations outsourcing encompasses core activities – such as manufacturing or logistics – that could substantially affect a business if not performed well. The best companies pursue it through a critical reevaluation of their positions along industry value chains, aiming to improve financials in mature businesses. When multiple companies in or around an industry come to the same strategic conclusion, a reinforcing cycle of strategic outsourcing can initiate a fundamental restructuring of entire industries.

I will be writing shortly about Outsourcing in my Tech Talk series on “Tech’s 10X Tsunamis”.

Think Regional, Act Local, Forget Global

Write Karl Moore and Alan Rugman in Strategy+Business:

Most business activity by large firms takes place in regional blocks, not in a single global market.

Most MNCs headquartered in North America earn the majority of their sales in their home region of North America, or by selling to members of the Triad, which encompasses North American Free Trade Agreement (NAFTA) and European Union (EU) nations, Japan, and the Asian tigers.

In only a few industries – consumer electronics, for example – is a global strategy superior. In fact, for most manufacturing and virtually all services, a national or regional approach is more sensible than a global one. And for a growing number of MNCs, a regional strategy works best. Sectors such as bulk chemicals, automobiles, and pharmaceuticals have shifted from a national to a regional focus in North America, with companies setting up regional headquarters responsible for NAFTA countries.

Statistics reveal the power of regional markets. For instance, more than 85 percent of automobiles sold in North America are built in North American factories; more than 90 percent of the cars produced in the EU are sold in that region; and more than 93 percent of all cars registered in Japan are manufactured domestically. In specialty chemicals, more than 90 percent of all paint is produced and sold regionally by MNCs in the Triad. The same is true for steel, heavy electrical equipment, and energy. Nearly all activity in New Economy services, which employ about 70 percent of the work force in North America, Western Europe, and Japan, is essentially local or regional.

Romancing the Seas

There is nothing more relaxing than sitting at the edge of the world’s waters, listening to just the sound of the waves and feeling the wind in one’s face. The Seas have that magical effect – a calm, soothing effect in our fast-paced lives. I like to sit along the ocean every once in a while, close my eyes and just hear the waves and feel the wind. Try it sometime.

Technology Marches On

Writes NYT – Technology Climate Is Gloomy, but Its Future Still Seems Bright:

Over the long haul, the technology sector will generate more than its share of business opportunity and economic growth – as it has since the 1960’s, when computers appeared in big companies, universities and government agencies. Sure, excess capacity and price-cutting make the current business environment brutal for the producers. But not for the consumers. The numbers for the technology in use worldwide %u2014 personal computers, cellphones, handhelds, digital cameras, DVD players, MP3 music players and households online – all continue to grow apace.

And the expansion of the technology goes beyond digital devices. Increasingly, computer science has spilled over into other fields. Computing has helped transform everything from the way scientists plumb the mysteries of biology, chemistry and physics to the way Detroit designs cars and Hollywood makes movies.

Dan Bricklin sums it up best: “The people who really have a love for this stuff the technology and what it can do never stop.”

Digital Cockpits – NYT

Writes NYT: “A growing number of companies are now able to use the Internet to monitor many or all of their key performance indicators daily, or even minute-by-minute. This is done through what have come to be called digital dashboards, or digital cockpits.”

Microsoft Software Assurance

Microsoft upgrade plan gets cold, writes News.com:

The majority of Microsoft’s customers won’t be signing up for a controversial licensing plan set to go into effect on Thursday, according to analysts’ estimates.

Signing onto the plan, which would commit business customers to a two- or three-year annually paid contract guaranteeing the right to upgrade, will be the only way to continue buying Microsoft software at deep discounts.

The holdouts have until the end of their business day on Wednesday to sign up for the plan or risk paying full price the next time they buy software from Microsoft. They won’t get a reprieve, either. Microsoft has twice extended the deadline for the new program, but a representative said Monday that there would be no more extensions.

The reason for stiff customer resistance is simple: cost. The plan, called Licensing 6, effectively raises volume-licensing fees from 33 percent to 107 percent, according to market researcher Gartner. Microsoft also eliminated the most popular means of buying upgrades, which allowed companies to pay when they wanted new software, rather than spend money in advance for software upgrades.

Linux and OpenOffice are definitely serious alternatives which should be considered. The problem of cost becomes even more serious for companies in developing economies. The Linux-OO alternative is in fact the only sensible option. My experience with OO suggests that it is now past the “good enough” stage and merits adoption.

TECH TALK: Tech’s 10X Tsunamis: Open Source: Opening Futures

A little over 10 years ago, a Finnish programmer sparked off an unlikely revolution with this post:

Hello everybody out there using minix – I’m doing a (free) operating system (just a hobby, won’t be big and professional like gnu) for 386(486) AT clones. This has been brewing since april, and is starting to get ready. I’d like any feedback on things people like/dislike in minix, as my OS resembles it somewhat (same physical layout of the file-system (due to practical reasons) among other things).

I’ve currently ported bash(1.08) and gcc(1.40), and things seem to work. This implies that I’ll get something practical within a few months, and I’d like to know what features most people would want. Any suggestions are welcome, but I won’t promise I’ll implement them 🙂 Linus (

PS. Yes – it’s free of any minix code, and it has a multi-threaded fs. It is NOT protable (uses 386 task switching etc), and it probably never will support anything other than AT-harddisks, as that’s all I have :-(.”

In September 1991, Linus Torvalds released version 0.01 of Linux.

Cut to July 2002, and Microsofts Fusion 2002 conference for developers and partners. This is what Steve Ballmer, Microsofts CEO, said:

We have prided ourselves on always being the cheapest guy on the block–we were going to be higher volume and lower priced than anybody else out there, whether it was Novell, Lotus or anybody else. One issue we have now, a unique competitor, is Linux. We haven’t figured out how to be lower priced than Linux. For us as a company, we’re going through a whole new world of thinking.

(Not that the re-thinking is impacting Microsofts bottom-line. Later in the same week, Microsoft announced yet another blockbuster quarter, even as other software companies are hurting!)

In the same week, Forbes carried a series entitled The Cult of Linux. An excerpt from one of the articles:

Look at the numbers: The first commercially packaged versions of Linux came to market only in 1994. According to IDC, Linux now accounts for an “amazing” 27% of the market for server operating systems, up from less than half of 1% in 1995. More than half of all Web servers sold today run Linux. Sales of entry-level servers (characterized as costing less than $100,000) running Linux grew in 2001, to 486,000 units worldwide, while sales of Windows NT and Unix servers declined in the same time period.

Industry leaders IBM, Oracle, Intel and others have committed resources–in IBM’s case billions of dollars–to Linux marketing, support and development. Roughly 10% of Dell Computer’s servers are sold with Linux pre-installed, according to the company.

The endorsement of such established companies helped make Linux a credible option for large customers. A mandate to cut IT costs amid the downturn also attracted customers to the free OS.

That Linux penetrated corporate America the way it has is surprising when one considers the competition: Microsoft’s Windows and Sun’s Solaris. Despite its promise and its momentum, Linux will not wipe out Unix, Windows or any other well-established technology. But like others before it–minicomputers, PCs, the Internet–Linux will likely marginalize older technologies because the value proposition is too great to ignore.

Is it disruptive to the status quo? Absolutely.

Tomorrow: Open Source (continued)