I must concede ignorance about the fact that I have never heard of Dick Brass who was VP at Microsoft for close to seven years starting from 1997. However, he is a person that I will follow more closely now for he has given a very interesting view on why Microsoft has struggled in innovation in an industry in which it was the major player for a long time. This opinion article in the NYT shows that Microsoft has faced little competition in its main business area as evidenced by the dominance of the Windows operating system and the Microsoft Office suite. As a former engineer with the firm, Dick suggests that Microsoft had such a strong lead in this area that it could afford to apply the brakes to innovation beyond these two areas.
While I am alive to the fact that this is a former employee of Microsoft, the relative seniority of his formal position at the firm leads me to think that his analysis is instructive. He concedes readily that the firm has maintained large profits and enviable reserves but that it ignored the possibility of employing its employees to develop other hardware and software products. Most painfully, he mentions that Microsoft never developed a true system for innovation and that internal corporate rivalries led to the stifling of devices that could have changed the landscape in its favor. One of the victims of this internal fights for dominance is that a new technology named ClearType with clear commercial applications was not fully developed due to internal fears of its potential for success.
I find this assertion interesting because while there was no guarantee that the new technology would be profitable, it suggests that the internal work dynamics at Microsoft were far from perfect. At the same time, one must offer credit to the reluctance to develop hardware products when the corporation's orientation was to develop a winning suite of software for PC use. Dick is certainly right when one considers that the antitrust problems that this corporation had probably affected its focus on product development much more than is realized. In all, the entire story is far from comprehensive for such a large firm but it shows how a great corporation refused to take the chance to develop new products while it had an unassailable position. One decade later, one cannot maintain that it is the predominant technology firm.
Friday, February 05, 2010
Thursday, February 04, 2010
Walmart As Business Case Study
I have come to the conclusion that even the best business writers often miss the essence of the most successful enterprises that they write well about. And my suspicion is that many businesses have maintained their success because of factors that are not immediately palpable. For instance, my view about Walmart is that it is may be correct to identify it as a retailer but that is not the essence of its business. To my mind, Walmart Corporation is really a large logistics and flow management firm and I keep alert to any articles that specifically mention the word logistics or any of its variants whenever the subject is Walmart or the retail business.
Reading this article in the NYT, one finds the characterization of the firm as a leading retailer but the story is largely about management decisions about the focus on its markets. It would not be a stretch of the imagination to state that its focus on a variety of factors are with the view towards providing its customers with a product at the least cost possible. And the corporation has chosen to chase the goal of cost reduction from the logistical end by ensuring that its merchandising is well considered and store location caters to local markets.
This orientation shows that Walmart merely uses its real strength derived from understanding logistics of supply and uses that in the retail business. For that reason, the real value to its shareholders is not by itself in the stores but the thinking that matches the choice of centres with a mechanism to supply goods and ensure that consumers take them off the shelves. That's a model that would apply for many more businesses irrespective of the nature of goods r services that they supply. And while I have not written any case studies for use by business schools, I would be glad to see whether schools are able to see what the essence of a firm lies.
Reading this article in the NYT, one finds the characterization of the firm as a leading retailer but the story is largely about management decisions about the focus on its markets. It would not be a stretch of the imagination to state that its focus on a variety of factors are with the view towards providing its customers with a product at the least cost possible. And the corporation has chosen to chase the goal of cost reduction from the logistical end by ensuring that its merchandising is well considered and store location caters to local markets.
This orientation shows that Walmart merely uses its real strength derived from understanding logistics of supply and uses that in the retail business. For that reason, the real value to its shareholders is not by itself in the stores but the thinking that matches the choice of centres with a mechanism to supply goods and ensure that consumers take them off the shelves. That's a model that would apply for many more businesses irrespective of the nature of goods r services that they supply. And while I have not written any case studies for use by business schools, I would be glad to see whether schools are able to see what the essence of a firm lies.
Wednesday, January 27, 2010
Futurology Meets Professional Sports
Of all the things that I find interesting, it is the one about forecasting trends and trying to imagine the future that is most fascinating to me even if I find that most of its has dubious value. This is because there are many instances of imagined effects of technology and their applications but the development of technology tends to take unprecedented and unimaginable turns with every generation. However, this reading on the forecasts by futurologists has led me to make a connection to this article about a professional sportsman's painful experience.
On the one hand, the UK government's Department for Business, Innovation and Skills spent some public money and asked futurologists to imagine what will emerge from cutting edge technology. The report says that the report was meant to determine the shape of jobs to come and would be laughable if not for the serious implications that it suggests for trade in replaceable limbs. I do not think that any government should spend any sum to come up with the fact that there will definitely be fewer butchers on a per-capita basis in the next generation.
Tracing developments in nano-technology and the advancements in understanding of anatomy, the forecasts suggest that scientists are developing technology that will allow for the replacement of limbs in their entirety. Despite my hesitation in betting against science, I am doubtful that the supply of these limbs would be available in quantities and costs that would make them available for a majority immediately.
The two separate stories are connected by the fact that Rafael Nadal, no doubt a top tennis player retired from a match on account of unbearable pain on his knees. Media reports suggests that his trouble throughout last year with his knees is the result of his style of play which makes him particularly vulnerable to joint damage. Casual prognosis suggests that his high-tempo style means that his knees will get weaker and that his professional career may be substantially shortened. It is clear that an athlete of this level, and one who would hardly lose to Andy Murray on a trouble-free day would be on the demand side for replaceable limbs. So I see clearly that the demand perhaps exists but I am sure that it will remain a niche area for at least another generation. That is unless the science has gone much further ahead than I am aware of and the economics of it means that limbs will be cheaper than I imagine. Rafael Nadal may just have to avoid hard courts for the time being.
On the one hand, the UK government's Department for Business, Innovation and Skills spent some public money and asked futurologists to imagine what will emerge from cutting edge technology. The report says that the report was meant to determine the shape of jobs to come and would be laughable if not for the serious implications that it suggests for trade in replaceable limbs. I do not think that any government should spend any sum to come up with the fact that there will definitely be fewer butchers on a per-capita basis in the next generation.
Tracing developments in nano-technology and the advancements in understanding of anatomy, the forecasts suggest that scientists are developing technology that will allow for the replacement of limbs in their entirety. Despite my hesitation in betting against science, I am doubtful that the supply of these limbs would be available in quantities and costs that would make them available for a majority immediately.
The two separate stories are connected by the fact that Rafael Nadal, no doubt a top tennis player retired from a match on account of unbearable pain on his knees. Media reports suggests that his trouble throughout last year with his knees is the result of his style of play which makes him particularly vulnerable to joint damage. Casual prognosis suggests that his high-tempo style means that his knees will get weaker and that his professional career may be substantially shortened. It is clear that an athlete of this level, and one who would hardly lose to Andy Murray on a trouble-free day would be on the demand side for replaceable limbs. So I see clearly that the demand perhaps exists but I am sure that it will remain a niche area for at least another generation. That is unless the science has gone much further ahead than I am aware of and the economics of it means that limbs will be cheaper than I imagine. Rafael Nadal may just have to avoid hard courts for the time being.
Tuesday, January 26, 2010
Differentiating Democratic and Republican Populists
"Ever since I started covering politics, the Democratic ruling class has been driven by one fantasy: that voters will get so furious at people with M.B.A.’s that they will hand power to people with Ph.D.’s. The Republican ruling class has been driven by the fantasy that voters will get so furious at people with Ph.D.’s that they will hand power to people with M.B.A.’s." David Brooks
Monday, January 25, 2010
When Design Undermines Function
I took time during the Christmas holidays to read Simplexity by Jeffrey Kluger upon the recommendation of a good friend. The book holds a series of different articles arguing that simplicity and complexity are not as straightforward as is conventionally held. Reading this article by Alice Rawsthorne in the NYT has reminded me about one of the chapters that posited an explanation for the increasing complexity in electronic gadgets.
As that story illustrates, the increased tendency to design digital functionality in many ordinary gadgets has made them almost incapable of common use. I would ask that what does it benefit a person to purchase and install a faucet so sophisticated that it requires an Internet search to turn off? It appears that designers are opting for sophisticated gadgets as a primary factor and thereby delegating to second choice the question of function. Other gadgets that are getting unnecessarily complicated are the common household entertainment gadgets which have a plethora of inbuilt functions that are rarely used.
As the book suggests, the greater driver of the digitization euphoria comes from the fact that most of the software designers are designing for themselves. They forget that a majority of people want good looking things but do not wish to have to refer to a 300-page manual to install and watch their Plasma screen. There's no doubt that programmers are smart people but there's no reason to show off with my Plasma TV or mobile phone.
As that story illustrates, the increased tendency to design digital functionality in many ordinary gadgets has made them almost incapable of common use. I would ask that what does it benefit a person to purchase and install a faucet so sophisticated that it requires an Internet search to turn off? It appears that designers are opting for sophisticated gadgets as a primary factor and thereby delegating to second choice the question of function. Other gadgets that are getting unnecessarily complicated are the common household entertainment gadgets which have a plethora of inbuilt functions that are rarely used.
As the book suggests, the greater driver of the digitization euphoria comes from the fact that most of the software designers are designing for themselves. They forget that a majority of people want good looking things but do not wish to have to refer to a 300-page manual to install and watch their Plasma screen. There's no doubt that programmers are smart people but there's no reason to show off with my Plasma TV or mobile phone.
Wednesday, January 20, 2010
Bank Tax is Sensible Policy
In my thinking about regulatory policy, I have maintained that unless the purpose for regulation is consistent with the chosen instrument, then it may help not to regulate at all. With this fairly abstract factor in mind, I have wondered whether the recent intention to levy a special tax on the largest banking institutions in the US is sound policy or not. As is bound to happen increasingly, response to this initiative has been rather predictable. The bankers are arguing that imposition of a special tax would impair banking operations unnecessarily while a majority of the supporters of the special tax retort that the all-round economic pain should be shared with the banks since they have regained profitability. On the basis of what is argued in most opinion pieces, one cannot find insight except to see the ideological orientation and the prejudices rehashed.
While I avoid quoting blog pieces, I found Gregory Mankiw's explanation here for support of the piece as extremely well considered and justifiable. David Stockman, writing in the NYT also dissects the issue with a very clear idea of the dynamics of the credit markets and the failures in monetary policy that have not been fixed thus far. I am therefore persuaded by the concise arguments by both gentlemen.
Like Mankiw, I am uncomfortable with the populism that accompanies the arguments for this policy but it is clear that not all instances of financial creativity in Wall Street are useful for the economy. Instead, these are merely stunts that result in movement of money in circles but do not result in better allocation of capital. So prof. Mankiw argues correctly that it is a principle of economics that taxation of a good reduces the overall amount that is produced hence the levy will in probability cut off some of that activity. This tax also serves to restrain some banking activity that would cause further instability especially because the signalling has confirmed that very large banks will not be allowed to fail. And so having accepted the bail out, then bankers should take the full dose that goes with assurance of public support in the future. So the populist rhetoric aside and considering the subsidy that redistributed income from tax payers towards the industry, it is clear that this modest levy of 0.15% on the debts is modest even if it affects the more cautious firms that were not highly leveraged too.
While I avoid quoting blog pieces, I found Gregory Mankiw's explanation here for support of the piece as extremely well considered and justifiable. David Stockman, writing in the NYT also dissects the issue with a very clear idea of the dynamics of the credit markets and the failures in monetary policy that have not been fixed thus far. I am therefore persuaded by the concise arguments by both gentlemen.
Like Mankiw, I am uncomfortable with the populism that accompanies the arguments for this policy but it is clear that not all instances of financial creativity in Wall Street are useful for the economy. Instead, these are merely stunts that result in movement of money in circles but do not result in better allocation of capital. So prof. Mankiw argues correctly that it is a principle of economics that taxation of a good reduces the overall amount that is produced hence the levy will in probability cut off some of that activity. This tax also serves to restrain some banking activity that would cause further instability especially because the signalling has confirmed that very large banks will not be allowed to fail. And so having accepted the bail out, then bankers should take the full dose that goes with assurance of public support in the future. So the populist rhetoric aside and considering the subsidy that redistributed income from tax payers towards the industry, it is clear that this modest levy of 0.15% on the debts is modest even if it affects the more cautious firms that were not highly leveraged too.
Tuesday, January 19, 2010
Avatar is A Lesson in Economics
I have recently developed an interest in designing predictive models for important economic and business uses and intend to take a course on statistics and its applications once again. With this background and having watched the movie Avatar, I find articles such as this by Sarah Ball interesting and also of some concern. Since I read about the details of this movie, I have had a strong hunch that it would be quite successful though I could not guess what the box office figures would be. In spite of that inability, I am concerned that Sarah Ball proceeds to compare the two movies in terms of the nominal figures. To her credit, the article clearly states that the figures under comparison have not been adjusted for inflation but then goes ahead to ask whether an extra US$ 800 million of ticket sales is possible.
It is incontrovertible that every journalist must present pieces in a way that meets editorial policy and that is most easily understood by their readers. My view is that given the tendency for many professionals to substitute conventional wisdom for sound economic reasoning, the success of a movie like Avatar would present an ideal opportunity to teach readers about the time value of money. In essence, the opportunity is here to introduce the idea about inflation into the discussion without harming the comparison of the two blockbusters that many movie goers enjoyed. I have argued before that comparing a billion dollars across ten years without adjustment for inflation tells one nothing.
It is incontrovertible that every journalist must present pieces in a way that meets editorial policy and that is most easily understood by their readers. My view is that given the tendency for many professionals to substitute conventional wisdom for sound economic reasoning, the success of a movie like Avatar would present an ideal opportunity to teach readers about the time value of money. In essence, the opportunity is here to introduce the idea about inflation into the discussion without harming the comparison of the two blockbusters that many movie goers enjoyed. I have argued before that comparing a billion dollars across ten years without adjustment for inflation tells one nothing.
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