Category: Management

News.com believes that Apple’s iPod reflects a new found realism and openness:

The company has long held the philosophy that its software and hardware should be tied almost exclusively to the Macintosh computer for both quality and profit. But it is developing and marketing the iPod with uncharacteristic openness to work with Microsoft’s Windows software and other technologies.

Like archrival Microsoft and other technology leaders, Apple has identified the digitization of home entertainment as a primary engine for growth–and, in its particular case, as an opportunity to reclaim the glory of its early years. However, while it envisions the Mac at the center of a network that encompasses music, videos, photography and other media, Apple is entering foreign territory in expanding its product lines with the iPod and other devices.

[Apple] finds itself at a critical crossroads: It must decide whether to follow the historically proprietary approach of the Macintosh computer or the more flexible business strategy of its successful digital music player.

Apple may have a unique chance to avoid a similar fate, if it can figure out how to turn the allegiance of the iPod generation into abiding affection for a broader range of products. Many consumers increasingly associate the company’s brand more with the digital music player than with the 20-year-old Macintosh brand.

Business Week has a cover story on Apple:

Just as the Mac revolutionized the computer industry, Apple is once again in the business of changing the world. This time, it’s the world of music. Its diminutive iPod, which can store 10,000 songs in a device smaller than a deck of cards, is the most radical change in how people listen to music since Sony Corp. introduced the Walkman in 1979. Then there’s Apple’s online music store, iTunes. It was established only after Jobs became the first person to persuade all the major record labels to make their music available — legally — on one Web site. Since late April, 30 million songs have been downloaded from Apple’s store, and the trend may one day spell the end of the compact disk.

For years, Jobs’s perfectionist approach to product development has been experienced only by Mac users. But now, massive changes are roiling the worlds of entertainment, computing, and communications, giving him a broader stage. Increasingly, content — that magical lifeblood of movie studios, record labels, and publishers — is being transformed into digital form. At the same time, the Internet and wireless networks are evolving to deliver those bits almost anywhere, at speeds never before possible. Couple all that with disk drives, semiconductors, and high-resolution displays that are growing ever smaller and more powerful, and technology is liberating entertainment from its past. How we watch movies, look at photos, listen to music, even read a book promises to change profoundly in the next decade.

No one may have a better chance to make order out of this chaos — and then profit from it — than Jobs. He bridges the marketplace: He has a hand in the worlds of computing, music, and movies to see how they’re evolving. He has the track record with consumers: His string of hits includes the original Mac, the candy-colored iMac, and the iPod. He has the pieces: Apple not only has a combination of software and hardware skills unique in the PC business, it also has strong product design and one of the world’s best-known brands. And he has the silver tongue: When the record companies had dug in their heels against the Net in Napster-induced terror, it was Jobs who persuaded all the major labels to put their music on iTunes.

Risk is inherent in every aspect of life and business. Writes The Economist:

It is not strictly true to say that life has become more risky; instead, some risks have become smaller, others have shifted to different people, and new ones have sprung up to take their place. This survey will review some of these shifts in the burden of risk and explore an extraordinary phenomenon: that when people confront risk, whether they are running governments, businesses or their own affairs, they tend to mismanage it.

Risk is different from uncertainty, which is unquantifiable. It is more of an educated gamble based on the odds. Taking such educated punts has become easier, thanks mostly to two factors.

The first is information technology, which has made it easier for people to study many past risks in the hope of learning from them…The second factor that has made it easier to quantify risks is the growing use of markets.

For all the progress in using such tools, perhaps the biggest obstacle to dealing effectively with risk remains human beings’ perceptions and misperceptions of it. People tend to get risk wrong in a variety of ways, often consistently. A growing awareness of this has been revolutionising economics. It has also been changing the way corporations, governments and citizens deal with the risks they face. This survey will argue that the largest gains will arise from coming to terms with this softer side of risk.

Suhit Anantula, who has an excellent blog on Rural India, points to an article by John Kay on Obliquity. Writes Kay:

Strange as it may seem, overcoming geographic obstacles, winning decisive battles or meeting global business targets are the type of goals often best achieved when pursued indirectly. This is the idea of Obliquity. Oblique approaches are most effective in difficult terrain, or where outcomes depend on interactions with other people.

If you want to go in one direction, the best route may involve going in the other. Paradoxical as it sounds, goals are more likely to be achieved when pursued indirectly. So the most profitable companies are not the most profit-oriented, and the happiest people are not those who make happiness their main aim. The name of this idea? Obliquity.

Obliquity is characteristic of systems that are complex, imperfectly understood, and change their nature as we engage with themSuccess through obliquity is a product of natural selection in an uncertain, but competitive, environment. It is almost certainly true that, on average, profit-oriented companies are more profitable than less profit-oriented companies. It is very likely that on average people who are interested in money are richer than people who are not. But at the same time that the most profitable companies are not the most profit-oriented, the richest people are not those most interested in money. Outstanding success is the product of obliquity.

The distinction between intent and outcome is central to obliquity. Wealth, family relationships, employment all contribute to happiness but these activities are not best conducted with happiness as their goal. The pursuit of happiness is a strange phrase in the US constitution because happiness is not best achieved when pursued. A satisfying life depends above all on building good personal relationships with other people – but we entirely miss the point if we seek to develop these relationships with our personal happiness as a primary goal.

This is one of the most thoughtful articles I have read in recent times. It echoes a lot of what I feel I didnt have a name to describe it. Now I do.

[via Yuvaraj] Charlie Munger on the Psychology of Human Misjudgment from a speech at Harvard University in June 1995. Read and imbibe.

Business Standard (Manjari Raman, a Boston-based management writer) discusses the issues facing Infosys with Clay Christensen of HBS and co-founder, chairman and chief mentor Narayan Murthy:

The good news is: Infosys is a disrupter. Says Christensen: Infosyss business model is disruptive relative to the IT services industry in North America and Europe.

What made Infosyss Global Delivery Model (GDM) disruptive was its framework for distributed project management, the ability to deploy multi-location, multi-time-zone teams to execute projects efficiently and at low cost.

Like all disrupters, Infosys moved up the value ladder by deploying the model better, faster, more efficiently and in more areas.

The company evolved from writing small bits of code offshore at its Bangalore office to IT consulting to business process outsourcing. Now the company is gearing up for the next level, a new initiative called Thousand Board-Room Consultants.

Says Murthy: We have to transform our people so that from reactive problem solvers, they become proactive problem definers. We want our people to go to a CEO and say: I have looked at your organisation. Things seem to be all right today, but you will run into this problem two years from now. Infosys can provide you a solution today.”

Moving up the ladder has not only improved Infosyss margins but it has also helped the company integrate more with its customers needs.

Its exactly the right strategy for Infosys to follow. It does have to move up the ladder, says Christensen.

However, while the move to create Infosys was a disruptive innovation, all the improvements in Infosyss ability to execute faster, better and more complicated IT solutions are sustaining innovations. As it moves up the ladder and becomes more and more integrated, Infosys needs to create something that has a proprietary interdependent architecture inside its product offering.

for Infosys to become a global giant it will need to overcome at least three hurdles posed by its innovation strategy: Sustenance from sustaining innovations, limited to the low-end, and the trap of too little, too late.

Separately, News.com has an interview with Infosys CEO Nandan Nilekani on outsourcing.

Fortune (David Kirkpatrick) writes:

As the Internet’s influence grows, we’re seeing its intrinsic egalitarianism and tendency to empower the small start to change many aspects of modern life. Customers today have more options and less loyalty. They will migrate to businesses that see them as participants in a process rather than as just consumers.

This new style of business, birthed by the Internet, is ignored at any company’s peril. In an excellent new book, The Future of Competition: Co-Creating Unique Value with Customers, authors C.K. Prahalad and Venkat Ramaswamy describe the consumer’s new role: “from isolated to connected, from unaware to informed, from passive to active.”

In the bottom-up economy, presuming you know what the customer wants is the ultimate error. Prahalad and Ramaswamy instead call for “co-creation of value”: The successful products and services from now on will be those developed jointlycompany and customer working hand in hand.

Adds John Robb: “Management gurus have arrived with a business oriented version of the Clue-Train (and they are going to make a mint on this).”

Ross Mayfield writes: “Its not just that the Internet created the opportunity for the bottom-up phenomenon to emerge. We are compelled by the necessity of our times to work together, be open to change and to continually tinker with simple solutions that work. Because of the degree of connection we are beginning to acheive, these changes may be more persistent and the emergent impact may be greater than we realize.”

The first reaction of most people to Apple’s decision to price its mini-iPod at USD 249 came as a suprise. For USD 50 more, one can get the regular iPod with 15 GB storage instead of the 4 GB in the mini. So, has Apple gone crazy? An assessment by WSJ (Tim Hanrahan and Jason Fry) points that it is as simple as market segmentation:

For every buyer of an MP3 player who cares about capacity, there’s another one who cares about size. Or style. Or both. While a wonderful device, the original iPod is still a substantial presence on one’s arm or waistband, particularly if you’re running with it. Not everybody was wowed by the original iPod’s choice of colors, which made Mr. Jobs Henry Ford in reverse. (“You can have any color you like, as long as it’s white.”) And for plenty of music fans there’s no real difference between 1,000 CDs and 3,750 — they’re both “enough.” As one Slashdotter who saw the light wrote, some people “can’t justify $299 just for space, but might justify $249 for style.”

By the way, if you haven’t thought of this a few paragraphs back: It’s smaller, light enough to jog with, and comes in pink. Anybody see a target audience there? We thought so — and we were relieved to see a few female Slashdotters stand up and demand to be counted. We also see a valuable lesson that a lot of MP3 geeks missed, ourselves included: Different strokes for different folks — particularly when their money’s equally green.

So, far all who think that maybe Steve Jobs had lost his mind, think again. After all, as others fight out in the 88-99 cents a tune market, Apple’s got the digital music player that everyone wants – they sold 2 million last year. And that is where the profits are.

[via Yuvaraj Galada] Here. Read/watch Bill Gurley and Jeff Bezos on IT and the Internet, respectively. Both draw upon history in a rich story-telling format.

Gurley: “(1) Evolution is a model or decent metaphor to think about business, and companies evolve with their tools. (2) technologies are business weapons, but there are no guarantees. (3) You can’t choose not to play without risking extinction-heading out onto the field with a wooden racquet is a really bad idea.”

Bezos: “I personally believe that with respect to the Internet we are at about the 1908 Hurley Washing Machine stage…We haven’t invented the equivalent of the off switch, we haven’t invented the electric outlet, people are still having to choose between phone calls and using their web browser…As the fundamental technology advances, as disk drives become even cheaper, as bandwidth becomes even cheaper, as CPUs become even cheaper, as the raw ingredients in our business continue to get cheaper and cheaper we will layer on top of that innovation to figure out how to take the now much cheaper raw ingredients and do something special that actually serves customers…What I see is that the rate of innovation on the Internet in general to my eye appears to be accelerating rather than decelerating. I don’t know how long that will continue. I think it’s very early, and we’re basically in 1908.”

Slashdot has an interesting discussion related to Lester Thurow’s new book “Fortune Favors the Bold: What We Must Do to Build a New and Lasting Global Prosperity”. Writes Slashdot: “There is a chapter which discusses the beginning of new industries. During this time, several business models are introduced and only a few will survive. Looking at the PC industry, Commodore was the industry leader in the 1980’s, but ultimately failed and went bankrupt in 1994. Successful business models such as Dell were not introduced until years after the industry began. I now ask the Slashdot community: which internet business models they believe are going to succeed? Which companies will rise to the top? Will they be infrastructure related companies such as Cisco and even FedEx, or will they be true dot.com’s such as eBay or Amazon?”

At its heart, the Internet (like IT) is about reducing transaction costs. So, those business models which leverage on this will succeed. The question to ask is: how can we do business differently assuming the presence of the Internet?

Tim Bray has begun a series to identify which technologies win and lose, and why. “: Which new technologies will make it, and which will fail? The TPSM is an attempt to approach this question systematically, by figuring out what the key success factors are for new technologies. The premise is that you use the past to predict the future.”

Winners: SQL/RDBMS, Unix/C, Open Source, PC Client, WWW, Java, XML

Losers: OODBMS, 4GL, AI, VRML, Interactive TV, Ada, SGML

The Nine Factors: Management support, Investor support, Standardization process, Technical elegance, Apparent ROI, 80/20 point, Compelling idea , Happy programmers, Good implementations.

Should be a terrific series.