Competing by Brain

Fast Company has an interview with Thomas Daveport, who “has helped midwife some of the biggest trends to have shaped business over the past 25 years–among them, reengineering and knowledge management. Now he’s asking: Where do ideas come from? And how do they get traction? Here’s his eight-point plan for winning with ideas.” Excerpts:

Great ideas have three key elements. All big ideas share at least one of three business objectives: improved efficiency, greater effectiveness, or innovations in products or processes. In a way, it’s an exhaustive set of possibilities. You do things right, you do the right thing, or you do something new. Reengineering could have done all three–the mark of a truly big idea–but people used it solely for gaining efficiencies, which limited its power and value.

There are no truly new ideas out there. Every big idea owes a considerable debt to related ideas that came before it. Reengineering’s key components already existed–they had just never been pulled together into one package. Of course, idea practitioners should avoid pointing out that the next big thing amounts to a reshuffling of other ideas. One of the tensions that idea sellers have to manage very carefully is, on the one hand, the need to get people’s attention. The innovation has to be new and exciting. But they also have to talk about the idea in a responsible way so people understand how difficult it really is.

The story sells the idea. The most important way in which ideas and experiences get communicated from sellers to buyers is through narratives. Stories give proof that your idea is going to work. Confidence-building evidence isn’t statistical, it’s narrative in form.

Intel envisions TiVo-like Wireless PCs

News.com writes:

Intel wants desktop PCs to double up as network hubs and video recorders, a move that could make life tough for the companies that produce those standalone products.

Intel will begin midyear by adding wireless networking technology Wi-Fi to an upcoming pair of desktop chipsets. When manufacturers choose a specific version of one of the two new chipsets, they will be able to add the foundation for a built-in Wi-Fi access point nearly for free.

At the same time, the company is developing the Entertainment PC (EPC), a desktop design based on Microsoft’s Windows XP Media Center Edition operating system, which manufacturers can use to create more entertainment-oriented PCs that come with features such as digital video recorders.

Intel sees the addition of those features to its PCs as a vital push to make playback of multimedia content and home networking essential elements in consumer desktops. It predicts that a number of future products, including televisions and stereo equipment will be able to access wireless networks.

The chipmaker said these desktops will provide a relatively easy-to-use access point that allows notebooks and other wireless devices to share a broadband Internet connection and files. Thus, a consumer or a small business that purchases a PC with the built-in Wi-Fi access point will not need any other gear to create a basic Wi-Fi network.

While the concept is attractive, it will take time for these features to migrate to mainstream PCs. The features will mostly be used in higher-end systems in the $1,000-plus range. Lately, the average selling price for a desktop purchased at retail has hovered around $700, according to market researcher NPD Techworld.

Chinese Portals

NYTimes writes that the bubble may burst soon:

Founded in the late 1990’s, the three Internet companies embraced e-commerce, online advertising and other revenue models but failed to turn a profit until 2002, when they began to provide Internet content, for a fee, to users of China’s nearly 200 million cellphones. On their phones, cellular subscribers can receive sports news, jokes or advice on their sex lives – and can even search for dates – all thanks to the portals. Each variety of service typically costs $3 a month, and each download costs an additional 3 cents, on average.

In Chinese cities, it is common to find people staring at cellphones on street corners. According to China Mobile Communications and China Unicom, the two state-owned telecommunications companies that monopolize the wireless market, 220 billion text and image messages were received by cellphones in 2003, roughly 10 percent of them originating from Internet portals. The telecommunications companies add fees to users’ bills for the Internet-generated content and keep roughly 15 percent of that money. The rest goes to the portals.

There are some differences in the portals’ approach. On the Internet, NetEase.com draws a large teenage audience with its abundant advice about dating. Sina.com attracts older visitors with frequent news updates, and Sohu.com appears to occupy a niche somewhere between.

But each is vulnerable to the state monopoly over the wireless phone industry, many analysts said. If China Mobile or China Unicom demands a larger share of wireless revenue, the portals’ profit could slide.

All three Internet companies say that they are trying to diversify their revenue sources. NetEase.com has already tapped into the market for online games, selling prepaid game cards, which permit access to its service. In the third quarter of 2003, it received 38 percent of its revenue from games.

Based on their price-to-earnings ratios, which are commonly used as a measure of value, the three portal stocks are richly priced. Last week, the ratios of the companies were 60 for SINA, 43 for Sohu.com and 48 for NetEase.com. By contrast, Yahoo’s P/E ratio was even higher, at 120 and eBay’s was 88. The average ratio in the Standard & Poor’s 500-stock index was less than 24.

Mexico moves up Value Chain

As China takes up the manufacturing jobs, WSJ writes how Mexico is fighting back:

Factories in Mexico long were winners in the flow of labor around the world, as many U.S. companies relocated there to take advantage of lower wage costs. Now rivals in China can match the quality and productivity of Mexican factories, but at far-lower cost.

So Mr. Sanchez and other managers are moving their factories up the manufacturing food chain, retooling to make more advanced products. Now they are competing against factories in developed economies such as the U.S. that earlier thought they were safe from foreign competition. Mr. Sanchez attracted many of his new orders from another Jabil facility in Boise, Idaho — prompting Jabil to close the plant in September 2002 and lay off its 500 employees. The factory was only two years old.

“China makes you sharp or it kills you,” says Eslie Sykes, manager of a Flextronics Inc. plant a few miles away from Jabil’s facility in this city best known for its fiery tequila and Mariachi musicians. After a lull in activity for the past two years, Mr. Sykes’s one-million-square-foot plant is now poaching higher-end work from Ireland and France. One of his factory’s newer products, a data storage system for a U.S. based electronics company, uses 91 customized screws.

What’s happening in Mexico illustrates how globalization is a double threat to blue-collar workers in wealthy countries such as the U.S as low-skill factory jobs migrate directly to China and countries such as Mexico accelerate their competitiveness for their own survival. By playing the role of upstart global entrepreneur, China isn’t just drawing in jobs but forcing factories throughout the rest of the world to become more efficient. “It’s Economics 101 in action,” says Claudio Bertoluz, head of Mexico’s electronics manufacturing association.

TECH TALK: As India Develops: Education

India has not paid enough attention to educating its people. For India to develop, this needs to be redressed rapidly. Going through life without being able to read and write severely limits what a person can do. Writes Atanu Dey:

Poverty can be considered to be the result of two gaps: one, the ideas gap, and the other, the objects gap. Poor people have less material goods at their disposal as compared to rich people. Hence the objects gap. The ideas gap arises from the inability of poor people to most effectively and efficiently use the limited material resources they have. For any level of objects gap, an ideas gap amplifies the problem. Knowledge goods, efficiently produced and distributed by ICT (information and communications technologies), can bridge the ideas gap.

Education is a way out of the poverty trap. Education plays a paramount role in the process of economic development. Besides being instrumental in development, it is also an end in itself because it helps people lead better lives.

ICT reduce the cost of creating, distributing, and delivering information. Since information is the bedrock upon which education ultimately rests, ICT is uniquely positioned to revolutionize education. ICT is unique appropriate for providing primary and secondary education, increasing literacy and delivering vocational education.

Primary education is a public good. Therefore, the level of primary education provided by the market can be expected to be lower than the socially optimal level. Therefore it is up to the government to step in and either provide primary education itself or subsidize its provision by the private sector.

The higher income groups living in urban areas have the willingness and the ability to pay for primary education. The low income groups in urban areas and most income groups in rural areas do not have the ability to pay for education (primary or otherwise), although their willingness to acquire education is unquestionable. They are not just income constrained, they are credit-constrained as well.

One way of solving the problem would be for the government to provide credit to the poor so that they could pay for primary education. However, given the small size of the budget allocated for primary education and the immense size of the relevant population, it is a challenge that cannot be addressed without resort to technology induced increase in productivity in the education sector.

There are now schools and colleges in India, but in many of them, little teaching takes place. This is where a change is required. Adds Atanu: Just to provide primary education, India requires seven million teachers if one were to have a 1:50 teacher to student ratio. Not only is that number formidable, the problem is compounded by the fact that these teachers are mainly required in the rural areas where the current number of qualified teachers is extremely low.

So, what is the solution?

Tomorrow: Education (continued)

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