Thursday Jul 30, 2009

Deals and More Deals

Reuters deals pages are still the best and quickest source of news on deals and corporate strategy. 

For example, consider the page that summarizes global deals in terms of total number and value of deals among pairs of countries. (I agree that a complete summary graphic representation would also be good to add to the ones that capture deal totals for each country.)

Monday May 25, 2009

The Mind of the Strategist

Yesterday, I completed my reading of Kenichi Ohmae's The Mind of the Strategist: The Art of Japanese Business.

Originally written in Japanese in 1977 and later translated into English, this is a quintessential book on business strategy.

Reading it makes one wonder whether the many strategy scholars of the 1980s, 1990s and 2000s have produced thoughts that flow directly from principles already laid out by Ohmae.

The book contains many vivid examples from the Japanese business scene.

I'll try to extract some useful quotes and comments in the coming weeks.

Thursday May 07, 2009

Puzzling on the Value of Bundles

Measuring values of a product bundle, particularly when the bundle contains non-equal or potentially complementary lots, has puzzled economists and business strategists alike. I don't claim to have solved the puzzle but I have puzzled on some other aspects of the problem in a short three page briefing I wrote a few weekends ago.  

Sunday Mar 08, 2009

Survival and Growth

I just started reading Arie de Geus' book The Living Company, and found in the first few pages a clear echo of Chester Barnard's The Functions of the Executive. Both emphasize the centrality of survival and growth ("thriving"). Here is Arie de Geus writing about the topic: 

Like all organisms, the living company exists primarily for its own survival and improvement: to fulfill its potential and to become as great as it can be. It does not exist solely to provide customers with goods, or to return investment to shareholders, any more than you, the reader, exist solely for the sake of your job or your career. After all, you, too, are a living entity. You exist to survive and thrive; working at your job is a means to that end...

If the real purpose of a living company is to survive and thrive in the long run, then the priorities of managing such a company are very different from the values set forth in most of the modern academic business literature. Such a purpose also contradicts the views held by many managers and shareholders. To be sure, many management fashions resonate with the idea of a learning company—for example, the concepts of the "learning organization" and "knowledge as a strategic asset." But there are serious doubts that even the most enthusiastic managers and shareholders have fully explored the ramification of these concepts.   

Before writing all this, Arie de Geus, a long-time Shell employee, had led Shell's Group Planning study on the longevity of companies. The study had concluded that companies live longer depending on their (1) sensitivity to the environment, (2) cohesion and identity, (3) tolerance (and as a corollary, decentralization), and (4) conservative financing, which gives rise to an ability to govern one's own growth and evolution effectively.  

Saturday Feb 28, 2009

The Three Forces of the Long Tail and the Classic Market

Chris Anderson's study of The Long Tail identifies three economic forces that the modern computing technologies, the Internet and the Web have helped unleash: (1) Improvements in tools of production of content and goods. (2) Improvements in tools of distribution. (3) Reductions in search costs through improvements in search technologies. (When we speak of "search technologies," we should understand them to mean any method of search, including the physical search, which is the "classic" search technology.)

These three forces join and orchestrate a move, in the consumption curve, from "hits" to "niches".

The argument is that this increases overall economic value. It does, indeed, for some firms and large numbers of consumers that engage in related "modern" search-and-consume activities on the Net. However, the classic market economy does not improve and will suffer, without a fast enough replacement in all niches and certainly in "hits" which provide the batteries for the classic market. Unless we reformulate the classic consumption game in new innovative ways, through innovations in general logistics of moving people and goods, I remain skpetical whether the replacement rate will be sufficient to outpace the overal reduction in consumption due to the diminishing physical search habits.

Relative vs. Absolute Strength

In his classic work first published in the U.S. in 1982, Kenichi Ohmae outlines the general approach of a strategy analyst. He draws a distinction between absolute vs. relative strength and  explains why strategic thinking puts a particular emphasis on relative strength: 

I make the distinction between relative and absolute strength because there is a great difference between the two with respect to the degree of urgency. Internal weaknesses or inefficiencies can usually be tolerated, at least for a time. By contrast, deterioration of a company's position relative to that of its competitors may endanger the very existence of the enterprise. In effect, it will allow the company's profitability to be controlled by its competitors, a situation in which sound management of the enterprise will no longer be possible.

The Mind of the Strategist: The Art of the Japanese Business, Kenichi Ohmae

Thursday Nov 20, 2008

In Need of an Economic Strategy

Michael Porter, the business strategy guru from Harvard, writes about "Why America Needs an Economic Strategy".

His essay deserves a careful read by business and political leaders in the U.S.

Wednesday Oct 29, 2008

An HBR case on Wikipedia

Karim Lakhani has put together a business case study on Wikipedia. It is worth noting that Wikipedia uses MySQL as its database engine. 

Sunday Oct 19, 2008

Market Focused Strategy and the Long Term

Market-focused strategy formulation helps to solve the problems of today as viewed through our understanding of the current markets. Markets, however, tend to change rapidly in modern societies. Just observe what is going on around you, the number of products that have come and gone, and business that have failed and hailed, fashions and habits that have come to fore in the last decade. Under such rapid change, it becomes difficult to maintain stability and constancy needed for long-term strategy. For some companies, a long term strategy might run a course of a 100 years. (It is reputed that some Japanese companies have 100-year, and some longer-term, strategic vision.) To serve long-term strategy, it seems more advisable to view the firm as a bundle of evolving and emerging resources, skills and capabilities, and focus on building long-term strategy based on the synergy and the development of these resources and capabilities. 

Monday Sep 29, 2008

Student Central -- A Sun for Students

If you are a student and want to learn more about Sun, the place to go is Student Central. According to marketing program manager, Colin Cupp,

This is the perfect starting point to find out just what Sun, as a company, has to offer students today.  Covering everything from technology to Eco-responsibility, jobs to social media, this is the first student page that tells the Sun story from a student perspective.  Come by and check it out, but be sure to come back as this page will evolve along with Sun's student offerings!

I took a peek and I agree with him. 

Years ago, when I first joined Sun, I had advocated for audience-based web pages, and now we are seeing that happen more often.

It is truly wonderful!

Sunday Sep 28, 2008

Porgramming Strategy

In his Contemporary Strategy Analysis, 6th edition, Robert M. Grant writes:

We must also recognize the nature of strategic analysis. Unlike many of the analytical techniques in accounting, finance, market research, or production management, strategy analysis does not generate solutions to problems. It does not yield rules, algorithms, or formulae that tell us the optimal strategy to adopt. The strategic questions that companies face (like those that we face in our own careers and lives) are simply too complex to be programmed.

The purpose of strategy analysis is not to provide answers but to help us understand the issues.

Sunday Sep 21, 2008

Future of Business Technology

Check out MIT Technology Review's special reports on "The Future of Business Technology".

You may want to read the story of Postful and Figaro Interactive, and the accompanying contrast between Amazon Web Services and Google App Engines.

Saturday Sep 20, 2008

Strong Positive Feedback and Tippy Markets

In network economies, the number of compatible users (or network end points) determine the value of the network. In such economies, one may experience strong negative or positive feedback. When the number of compatible users goes down, the network will eventually suffer a "vicious" cycle of collapse. On the other hand, when the number of compatible users goes up, the network will enjoy a "virtuous" growth cycle.

In Web 2.0: A Strategy Guide — Business thinking and strategies behind successful Web 2.0 implementations, Amy Shuen writes:

When two or more companies are in a competitive race for market share where there is strong positive feedback due to network effects, only one company emerges as the winner. (Economists call this market tippy because it can tip in favor of one company or the other.) Strong positive feedback can lead to a winner-take-all market dominated by a single firm or technology.

Sunday Aug 31, 2008

Time Delays

In Competing Against Time: How Time-Based Competition is Reshaping Global Markets, George Stalk, Jr. and Thomas M. Hout wrote:

Distortion between actual demand and perceived demand plague most businesses today. To escape them, companies have a choice. They can produce to forecast and try to ignore the reverberation that would cause them to do otherwise, or they can reduce the time delays in the flow of information and product through the system. The traditional solution is to produce to forecast...The new solution is to reduce the consumption of time throughout the system.

Managing time and information in supply chains have improved considerably since Stalk and Hout wrote their 1990 book. Bullwhip effect remains universally and as well-recognized (starting with ideas rooted in Jay W. Forrester's work) as in 1990. It is also known that even in the case of perfect information flow up a supply chain, some amplification of oscillations will continue to propagate upstream of any supply chain, and the only control action that remains (in a world of "perfect" information flow) is still the reduction of time delays, some of which will continue to survive due to the physical conditions of lived time and space. It still takes time to transport goods from point A to point B.

Wednesday Aug 27, 2008

Brand Value vs. Logos

Jim Buckmaster, Craig's list CEO:

We pay zero attention to brand. We never use that word internally. We do zero advertising. We don't have a logo. We've never done a focus group. We don't care about any of that. And now we're told we have the strongest brand ever for a company our size.

What a great example, and still, isn't there a little symbol, a little logo, a little peace sign in the browser URL box?

Thursday Aug 07, 2008

Fast Strategy Introduction

Published by O'Reilly, Amy Shuen's Web 2.0: A Strategy Guide: Business Thinking and Strategics Behind Successful Web 2.0 Implementations gives a fast, well-written introduction to the strategy, economics and business of Web 2.0 companies—all based on cases that should be familiar to the reader. 

Tuesday Aug 05, 2008

The end of the deep freeze

After the two great wars (WWI and WWII) and particularly after the first one, the world went into a deep freeze over international trade. Whole sections of the world were forcefully left out of its active commercial core. Political storms divided natural trade partners and put their commerce into a deep freeze. In the new millennium, those affected have fully woken up to the grander design of the world trade. So, now, we can read the following in Financial Times ("Sino-India trade wave captures banks' attention," August 4, 2008), as a normal course of events:

Sino-Indian trade last year climbed by 56 per cent to $38.7bn, according to Chinese data, and could reach $60bn as early as this year rather than in 2010, as was previously expected.

This is still pittance compared to the major bi-party trade figures in the rest of the world but looking at the growth rate will tell you where we are heading. Will the world commercial core next shift to where it was 800 years ago?

Sunday Jun 08, 2008

Subtle Significance of Job Satisfaction

I quote the following passage from the conclusion to Dennis W. Organ's paper ("The subtle significance of job satisfaction," Clinical Laboratory Management Review, (Jan/Feb 1990) 4, no.1, 94-98):

Management research and theory have taken a long time and a torturous path in catching up with the insights of Chester Barnard. More than half a century ago, Barnard noted the essential condition of the "willingness of persons to contribute efforts to the cooperative system." This quality of willingness "is something different from effectiveness, ability, or value of personal contributions...[it] means self abnegation." Willingness is characterized by "[an] indefinitely large range of variations in its intensity among individuals" and, within individuals, "it cannot be constant in degree." Finally, this "willingness to cooperate, positive or negative, is the expression of net satisfactions and dissatisfactions experienced or anticipated."

Barnard underscored the very nature of organizations as cooperative systems. Rules, structures, policies, job descriptions, sanctions, incentives—they all play necessary roles in collaborative endeavors, but as derivatives of, not substitutes for, the underlying disposition to cooperate. Such a disposition can be sustained only by a sense of organization as a microcosm of a just world. Occasional inequities can be tolerated if there is faith that the system works fairly over the long run, with self-correcting tendencies. When faith leads to a narrowly defined, quid pro quo contractual relationship, the disposition to cooperate ebbs. Surveys show that most of the nation's labor force begins work with a fairly high degree of job satisfaction and that most of the people, most of the time, will describe themselves as "all in all, satisfied." There is a generally prevalent inclination to give the employer the benefit of a doubt—"I'll assume you're treating me fairly until you persuade me otherwise." So the disposition is generally present to render a substantial contribution via OCB [Organizational Citizenship Behavior]. A good-faith effort by managers to provide a "square deal" will do much to ensure the quality of OCB.

Tuesday Apr 08, 2008

Open Source Databases on the Rise

Christopher Lawton of The Wall Street Journal reports on the rise of the open source databases:

The potential benefits in cost and flexibility have not been lost on customers. The market for open-source databases is expected to grow 35% to $270 million this year from $200 million in 2007, according to Gartner Inc. Among the earliest adopters are midsized companies, which don't always need the high-end features of conventional databases, says Carl Olofson, analyst with IDC, a market-research firm.

For example, Sun Microsystems Inc. provides supported offerings of MySQL, PostgreSQL and Java DB (Apache / Derby) to its customers.

If you're interested in discussion and community around open source database technologies for Solaris, see here.

Monday Feb 11, 2008

"Asset Specificity" and Open-Source Software

Despite some excellent coverage of issues related to transaction cost economics of Open Source Software in The Success of Open Source (Harvard University Press, p. 193, "Business Models and Law"), Steven Weber may have misapplied Oliver Williamson's concept of "asset specificity" as an attribute of transactions .

Weber seems to be saying that Open Source Software, by virtue of its openness, will reduce asset specificity for those (including enterprises) who consume or use software, releasing them from lock-in. While the effect might be true, the reasoning diverges from the original meaning of the concept of "asset specificity," as coined by Williamson.

In The Mechanisms of Governance (Oxford University Press, pp. 59-60), Williamson states that his concept of asset specificity refers to "the degree to which an asset can be redeployed to alternative uses and by alternative users without sacrifice of productive value."

To clarify matters further, Williamson notes that there are varieties of asset specificities, e.g. (1) site specificity, (2) physical asset specificity, (3) human asset specificity ("that arises in learning by doing fashion"), (4) dedicated assets, (5) brand-name capital, and (6) temporal specificity. 

Let me elucidate the concept by giving some examples.

If I use some assets, say my Prius, to drive to the local supermarket to buy oranges, I have not used any assets specific to the transaction of buying those oranges. The transaction is a fully market-driven transaction. I could buy the oranges from a large number of groceries that do business near where I live.

Now, assume I'm an orange broker in Florida. I may station my operations site near the largest orange groves or near the largest auction market for oranges. I may buy some forensic equipment specific to orange analysis, and pay for membership dues in the orange auction market, etc. I may spend money to brand my brokerage service, calling it "Honest Oranges." Now, I've invested in assets that have a higher degree of specificity (in site, in physical nature, in brand capital, etc.) in order to carry on with the transactions I conduct as an orange broker in Florida.

Now, let's turn from oranges to software.

When it comes to software, we can have some in-dept discussion of each of the specificity types mentioned by Williamson and see if there are others. For example, the Internet, the digitalization of storage, content and distribution, has almost done away with "site specificity." You can consume software made in city A even if you live 12 time zones away in city B. On the other hand, some software must still be installed in a particular way and on particular hardware, generating a "physical asset specificity" effect.

The most important kind of specificity when it comes to software, however, is "human asset specificity."

When an enterprise uses open-source software, they still have this aspect of specificity to deal with. For open-source software, as for any software, human specificity arises in learning by doing fashion. In fact, human asset specificity governs the software transactions world much more deeply than many other product types.

Unless there is a backing from a supplier that has reduced the need for investments with high degree of "human asset specificity," the user of the open-source software will have to make such investments on its own.

This is exactly the reason why we see great consulting, services and integration businesses thrive around open-source software products.




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