World’s Top Brands

Business Week writes about BW’s study with Interbrand. A quote from David Martin, U.S. president of Interbrand: “When a brand earns our trust, we not only repeat our purchases, but we also tell all of our friends about it.

The top 10 brands: Coca-Cola, Microsoft, IBM, GE, Intel, Nokia, Disney, McDonalds, Marlboro, Mercedes.

How many of these brands do you use in your daily life? My answer: Microsoft (on a few PCs in our office), Intel (Inside), Nokia (some cellphones), McDonalds (dinner, once in a while).

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.

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.

eBay Book Review

David Gelernter reviews “The Perfect Store”,a book on eBay, and gives his opinion on the company and online auctions:

EBay has no inventory, doesn’t actually sell anything itself, but collects a commission on every sale. Obviously, this company is important. Some 75,000 Americans now run businesses entirely on eBay’s sites. EBay strides through the world economy like a movie star, surrounded by its horde of dependent businesses, its buyers, sellers, critics and rapturous fans.

But the story leaves you pondering. The Web supposedly began a new information age, but eBay brings nothing of its own to the table; it simply connects people. It uses cyberspace not as a library but as a giant switchboard. And this era of the Great Switchboard in the Sky has barely begun. When I said in a 1991 book that global electronic auctions were inevitable (one prophetic claim plus 75 cents will get you today’s newspaper), I meant four related activities: buyers bidding to get goods or services from a seller; sellers bidding to supply goods or services to a buyer. So far, eBay concentrates only on buyers bidding for goods, but the rest will follow. And it won’t stop there. People will consult the great cyberswitchboard to get a job or a mate or a life. (It’s already happening.)

EBay makes money by brokering deals. But what happens when buyers and sellers cut out the middleman and deal direct? At eBay you search for the item you want. But you can also search the Web as a whole. In the long run, we won’t need two separate levels of search. Eventually we will use the fabric of cyberspace itself, not eBay, as our switchboard.

Earlier post on Adam Cohen’s review of the book.

Nvidia’s Challenges – Business Week

Dodging a Hail of Bullets:

Chief Executive Jen-Hsun Huang is trying to beat back the challenges. As sales slow in the company’s core desktop-PC market, he’s pushing into new markets, including graphics chips for high-end notebooks and such low-end products as set-top boxes. On July 16, Nvidia released a new set of chips aimed at low-end PCs and set-top boxes. And Huang is striving to make sure Nvidia’s next-generation chip, code-named NV30, hits the market later this year, right on time.

Still, Nvidia’s problems look like they’re going to get worse before they get better. The company is having a tough time penetrating the new markets it has targeted. In low-end graphics chips, for example, Intel is pricing so aggressively that it is expected to grab 40% of the market by mid-2003, up from 17% now. Worse, ATI introduced its new Radeon graphics chip on July 17, and industry analysts say it’s a step ahead of Nvidia’s current top-line GeForce4 chip in speed and graphics quality.

Successful Teams

Writes HBS Working Knowledge:

In “Leading Teams: Setting the Stage for Great Performances”, J. Richard Hackman lays out five conditions necessary for successful teamwork: The team must be a real team, rather than a team in name only; it has compelling direction for its work; it has an enabling structure that facilitates teamwork; it operates within a supportive organizational context; and it has expert teamwork coaching.

Says Hackman about team composition in an interview:

Composing teams that are too large and too homogeneous in membership. My rule of thumb is that no work team should have membership in the double digits (and my preferred size is six), since our research has shown that the number of performance problems a team encounters increases exponentially as team size increases. Homogeneity of membership is a frequent problem because each of us works most easily and comfortably with people like ourselves. I would no doubt get along very well in a group whose other members also are middle-aged white male pipe-smoking professors. We might very much enjoy our time together. But our creativity would be higher if our group had a diverse mix of memberspeople who have real substantive differences in their views about how the work should be structured and executed. It is task-related conflict, not interpersonal harmony, that spurs team excellence.

Bezos Interview – Business Week

An excerpt from the interview, in response to a question on what drives Amazon going forward:

When you have computing power doubling every 18 months, and you have the costs of long-haul bandwidth halving every 12 months, and disk-space costs halving every 12 months, you get to layer a lot of innovation on top of that. Things that would have been prohibitively expensive to do [a few years ago] become possible.

And as CPUs get cheaper and cheaper, people will start to have multiple computers in their homes. That will drive our business, too. If you were to install a computer in your kitchen, your Amazon account purchases would probably double. That’s what happened in my house. I strongly recommend this to you [the trademark laugh].

It [still doesn’t] make sense for you to look up a phone number on your computer, as opposed to dialing 411 or using the phone book — we’re not there yet in terms of convenience. [But] that’s not going to happen with any intervention on our part. Those are things that happen from the free market.

As we think of computing in the Indian (and emerging market) context, we too need to take advantage of all the developments. One difference: lag technology. This means, we use technology (hardware) which is a few years old. This eliminates the RD cost and gives us 3-year technology at a tenth of today’s “new technology” prices.

The key to make this model work is to put the smarts in software which uses the latest ideas and standards to make up for the older hardware. Taken together, they provide the base to build out a new tech mass-market infrastructure for the rest of the world.

Platform Leadership – Gawer

Some interesting comments by Annabelle Gawer in Infoworld’s Forum on Platform Leadership. Gawer is the co-author of the book “Platform Leadership”, which I’ve been reading.

– Platform leaders are firms that lead and drive innovation in their industry, by stimulating complementary innovations performed by other firms.

– The most important thing is that the corporate executive leaders would be aware of just how interdependent many industries are — and that the market is full of innovative firms that can add value to your product. The trick is to be able to tap into the innovative capabilities of a while industry, without having to internalize all innovative effort.

– Platform leaders understand strategy at two levels: the level of their own firm, and the more encompassing level of industry — and they constantly need to formulate and implement and evaluate their strategies at these 2 levels.

– Broadening the focus, and tap into external innovation requires innovation internally, and being able to drive innovation across the industry as well — so the vision and understanding of where the industry is going is not enough — one has to have the internal capabilities to innovate internally as well.

Gawer’s Thesis on Platform Leadership (PDF, 364 pages)

My context: we have to build Emergic into a platform. I wrote about this recently in Platform Permavantage.

Nvidia and Integrated Chipsets’s story gives a good insight into what Nvidia is doing. Its a company to track as it takes on Intel in the chips business. Writes

Integrated chipsets that combine chipset and no-nonsense graphics processor functions appeared on the PC market about five years ago and have quickly become the preferred option for PC makers to handle both jobs in low-end PCs. About half of all PCs now ship with integrated chipsets, with the rest using traditional standalone graphics cards.

Integrated chipsets are tricky financial propositions for graphics chip makers. Profit margins are wafer-thin compared with those associated with the market for flashier standalone graphics processors, where a small but significant audience of gamers and other enthusiasts is willing to pay stiff premiums for the latest technology. Development costs involved in mastering chipset design are also high for anyone entering the business.

The advantage of having both chipset and standalone graphics products is that the chipsets allow a graphics chipmaker to squeeze more life out of investments in graphics technology, McCarron said. Nowadays, flashier, standalone graphics chips become obsolete quickly. But the integrated products tend to have legs.

An earlier article (Nov 1, 2001) provides additional context:

The graphics business has changed drastically in the past couple of years, with low-end PCs integrating graphics directly into the chipset to save costs, abandoning the need for separate graphics chips or boards.

“The market has really moved toward integrated” graphics, said Mike Feibus, principal at Mercury Research. “Everyday users don’t need a high-end graphics card.”

nForce takes risks in that it aims to create a market niche where none existed before, a middle-of-the-road between high-end chipsets with no graphics and low-price chipsets with integrated graphics.

What I find interesting is Nvidia’s strategies as it takes on an entrenched market leader. We will need to do the same soon in software.

Product Vision: Design-the-Box

A commentary on product design by Jim Highsmith (via Joel on Software):

One practice that I’ve found effective in getting teams to think about a product vision is the Design-the-Box exercise (developed originally by colleague Bill Shakelford). This exercise is great to open up a session to initiate a project. In this exercise the entire team, including users, breaks up into groups of four to six (this works best with cross-functional participation). The team makes the assumption that the product will be sold in a shrink-wrapped box, and their task is to design the product box front and back. This involves coming up with a product name, a graphic, three to four key bullet points on the front to “sell” the product, a detailed feature description on the back, and operating requirements.

It’s an exercise we need to do with Emergic.