Many forms of technology requires standards to work. As a result, it is in the best interest of all parties in the technology ecosystem to participate in standards bodies to ensure interoperability.
The two main problem with getting standards working can be summed up, as all good things in technology can be, in the form of webcomics. 🙂
Problem #1, from XKCD: people/companies/organizations keep creating more standards.
The cartoon takes the more benevolent look at how standards proliferate; the more cynical view is that individuals/corporations recognize that control or influence over an industry standard can give them significant power in the technology ecosystem. I think both the benevolent and the cynical view are always at play – but the result is the continual creation of “bigger and badder” standards which are meant to replace but oftentimes fail to completely supplant existing ones. Case in point, as someone who has spent a fair amount of time looking at technologies to enable greater intelligence/network connectivity in new types of devices (think TVs, smart meters, appliances, thermostats, etc.), I’m still puzzled as to why we have so many wireless communication standards and protocols for achieving it (Bluetooth, Zigbee, ZWave, WiFi, DASH7, 6LowPAN, etc)
Problem #2: standards aren’t purely technical undertakings – they’re heavily motivated by the preferences of the bodies and companies which participate in formulating them, and like the US’s “wonderful” legislative process, involves mashing together a large number of preferences, some of which might not necessarily be easily compatible with one another. This can turn quite political and generate standards/working papers which are too difficult to support well (i.e. like DLNA). Or, as Dilbert sums it up, these meetings are full of people who are instructed to do this:
Our one hope is that the industry has enough people/companires who are more vested in the future of the technology industry than taking unnecessarily cheap shots at one another… It’s a wonder we have functioning standards at all, isn’t it?
One of the dangers of a consultant looking at tech is that he can get lost in jargon. A few weeks ago, I did a little research on some of the most cutting-edge software startups in the cloud computing space (the idea that you can use a computer feature/service without actually knowing anything about what sort of technology infrastructure was used to provide you with that feature/service – i.e., Gmail and Yahoo Mail on the consumer side, services like Amazon Web Services and Microsoft Azure on the business side). As a result, I’ve looked at the product offerings from guys like Nimbula, Cloudera, Clustrix, Appistry, Elastra, and MaxiScale, to name a few. And, while I know enough about cloud computing to understand, at a high level, what these companies do, the use of unclear terminology sometimes makes it very difficult to pierce the “fog of marketing” and really get a good understanding of the various product strengths and weaknesses.
Think about it. How many large companies do you know of where there isn’t a massive layer of mysterious “vice presidents” (or some other equally meaningless-sounding title of doubtful seniority)?
This isn’t to say that all these positions are filled with useless people, or that distinctions like “senior vice president” and “executive vice president” and “associate director” aren’t important, but this proliferation of senior-sounding titles is indicative of companies facing a “mid-life crisis”, where the promise of massive growth and exciting future job prospects are no longer certain enough in order for a company to retain all of its talent.
As a result, companies are forced to create these new levels of management to keep their good people, either because there are not enough positions of seniority for these people to be promoted into or because they are being drawn by other companies/competitors who have already made the jump into “vice president land”.
This practice, in and of itself, is not in and of itself a bad thing. After all, why shouldn’t a successful company make a minor concession like this to retain talent? But, the problems emerge when:
These new positions add new layers of bureaucracy that muddy up what used to be a very clear decision-making process and make the company less agile
These new positions create “organizational bloat” — where costly and inefficient “manager” positions are created which don’t actually manage anyone or which manage departments/groups of little value
These new positions allow senior managers to play politics with promotions and/or lower promotion hurdles, lowering the talent/efficiency of the company overall
While there is no easy way to tackle all of these issues (and, in my mind, the fact that companies feel they have to create these new “vice president” positions feels like a cheap cop-out to me), it is something for all general managers/consultants to be aware of as many companies suffer from the dilemma of keeping a company lean and efficient and yet retaining the talent/size that they need to grow.
In my Introduction to Tech Strategy post, I mentioned that one of the most important aspects of the technology industry is the importance of ecosystem linkages. There are several ways to think about ecosystem linkages. The main linkages I mentioned in my previous post was influence over technology standards. But, there is another very important ecosystem effect for technology companies to think about: encouraging demand.
For Microsoft to be successful, for instance, they must make sure that consumers and businesses are buying new and more powerful computers. For Google to be successful, they must make sure that people are actively using the internet to find information. For Cisco to be successful, they must make sure that people are actively downloading and sharing information over networks.
Is it any wonder, then, that Microsoft develops business software (e.g. Microsoft Office) and games? Or that Google has pushed hard to encourage more widespread internet use by developing an easy-to-use web browser and two internet-centric operating systems (Android and ChromeOS)? Or that Cisco entered the set top box business (to encourage more network traffic) by acquiring Scientific Atlanta and is pushing for companies to adopt web conferencing systems (which consume a lot of networking capacity) like WebEx?
These examples hopefully illustrate that for leading tech companies, it is not sufficient just to develop a good product. It is also important that you move to make sure that customers will continue to demand your product, and a lot more of it.
This is something that Dogbert understands intuitively as this comic strip points out:
To be a leading executive recruiter, its not sufficient just to find great executives – you have to make sure there is demand for new executives. No wonder Dogbert is such a successful CEO. He grasps business strategy like no other.
After I fleshed out all the more interesting adjacencies as ideas (e.g. dessert food, franchising, coffee machines, online banking services, renewable energy credits, etc), my ideas turned to capability moves, and the most promising one that I came up with was supply chain services. I can’t think of many firms/stores that have the same distribution network that Starbucks has (~11,000 stores in the US). After all, in San Francisco, I know of corners where I can see 3 separate Starbucks stores – and I’m sure this happens in other big cities as well!
For Starbucks to function effectively, I would hazard a guess that they must have an efficient way to distribute supplies (e.g. coffee beans, baked goods, materials, machines, etc) to each of the ~11,000 locations in the US on a regular basis. I would also guess that such a system, if designed effectively, would probably see reasonable returns to scale, as I would expect a nationwide distribution network that had to distribute more products would be more efficient than one with less product (as you wouldn’t be sending trucks out on partial routes or with only some of their capacity filled).
Starbucks may have a unique capability that others (e.g. other stores, restaurants, etc) might be willing to pay for
Starbucks would benefit from developing that capability. If Starbucks does have such a distribution network, expanding the amount of materials it needs to distribute could, in theory, reduce the cost of distribution. This would help enhance its own ability to distribute supplies/goods to other firms as well as reduce the cost of distributing coffee/materials/baked goods to its own stores.
But this is a far cry from a sure thing. My colleague and I discussed just a few of the possible shortcomings of the strategy:
Starbucks may not actually operate its own distribution network so it wouldn’t be in a good position to sell this service
Starbuck’s distribution network may be well-suited for distributing coffee beans, but may not be well-suited for many other things (e.g. biological specimens, fresh produce, large equipment, etc)
As I’ve mentioned before, a good businessperson makes contingency plans. But to make those plans, its necessary to have some insight into what the future will bring – which explains why agencies like Gartner, IDC, and Forrester make millions of dollars selling market research reports to companies who are seeking either:
insight into the future
a “market-tested” forecast that people are willing to trust
It also explains why many of the clients of my firm are very interested in contingency plans around the current economic downturn. As a result, my firm (and I’m sure many other consulting firms) is investing in producing a coherent point-of-view on the causes, duration, severity, and impact of the current recession, as well as quick perspectives on how companies in different industries may want to change their game to respond.
The trick behind forecasting, though, is to balance accuracy with believability and reasonable action-items… something that Dilbert’s company economist doesn’t seem to do very well at:
As frequent readers of this blog know, my Benchpress-partner-in-crime Anthony and I like making $100 offers for failing companies/divisions. One may inquire, then, given Blockbuster’s plight, why we haven’t made our usual $100 offer.
The reason is simple, despite a couple of long discussions about Blockbuster: Anthony and I are simply not confident that we could turn around Blockbuster.
There really are only three ways for their management to proceed:
Out-Netflix Netflix. The major benefit of this strategy is that this is the business model that its management would be most familiar with – selling/renting video content. However, that’s about the only benefit that this strategy has. They are now strategic followers in a game which Netflix created and perfected, rather than leaders. But unlike Microsoft, they lack the resources to outlast or outinvest their competition (in 2008, Blockbuster lost $374 million compared to having only $626 million of equity [all their assets minus all their debts], while Netflix made a profit of $122 million on $347 million of equity) nor do they have a premium offering to combine with their new strategy (e.g. Microsoft can roll innovations in things like Virtualization or Cloud Computing back into Windows or Office). Blockbuster’s one asset over Netflix, their physical presence around the country, is now relatively unimportant given the prevalence of broadband internet (and new internet-enabled set top boxes) and the cheapness and speed of mail delivery and their traction thus far in gaining major electronics and set-top box wins has been disappointing. Their most promising press release (a partnership with Microsoft to use Live Mesh) may be the only thing going for them – and this happens to be with the player who’s not the leader in portable media players and who’s Live Mesh product won’t really get full force until late-2009/early-2010. This strategy is not promising.
Fundamentally change their business model. This is an idea I pushed at first – suggesting that Blockbuster switch business models to selling home entertainment gear, something which could help tie with their current product offering and give them much needed partners to counter their current slump and lack of customer mindshare. However, Blockbuster’s lack of resources (as of Oct 2008, only $95 million in liquid cash) and profitability and the high risk and long-term horizon of this strategy make this un-feasible as a game changing play. Simply put, there’s not enough farm to bet on this strategy.
Sell themselves. This is probably the most promising strategy in that Blockbuster will only need to turn itself around just enough to convince another buyer to acquire the assets. But, given that Blockbuster is the largest brick & mortar renter of videos and its dim prospects, its unlikely there are any buyers interested in owning a video rental store. Success would require finding a party interested in:
Buying an industry stalwart who’s likely to shed off much more in losses and brand value before being able to turn itself around
An unwieldy network of physical stores
Investing large amounts in either outcompeting Netflix, fundamentally changing their business, or some combination of the two
Sorry, Blockbuster – maybe Dogbert will cough up some dough for you?
One of the tasks that any executive (or consultant for that matter) needs to be able to do is to take crazy assumptions and to test them to see what would happen if they were true. What if some upstart competitor develops a technology which makes our product outdated? What if the government decides to heavily regulate our industry? What if someone completely out-of-left-field enters our market by buying our largest competitor?
These scenarios may seem far-fetched, and the assumptions they rely on may seem extreme, but that’s exactly why this exercise needs to be done:
It helps establish a list of test-able hypotheses to verify which of these scenario’s are plausible (What criteria would an out-of-left-field player need to fulfill to be interested in my market? What would cause the government to start regulating my industry?) and which are not. This then informs the executives which are credible threats (both in terms of likelihood of happening and in terms of damage) to actively manage and monitor and which can be put on the back-burner.
It forces executive teams to formulate contingency plans. No firm can afford to be caught off guard. Look at the example of Polaroid or Blockbuster – caught completely off guard by the onslaught of the digital camera revolution and Netflix/broadband video respectively. The companies are now has-beens, as they were not only unready for the destruction of their market, they were slow to react and loss the opportunities to use their strong market positions to their benefit.
It gives management a list of trigger points to monitor for and to move quickly on. If our competitor looks like its interested in acquiring supplier X, we need to take action quickly to make that deal a lot more painful to swallow, or make our own move to counter that threat.
My good friend, college roommate, and Bench Press partner-in-crime Eric never lets me down. Despite 3 years of rooming with me, basically letting me live in his room to use his old broken Mac to write my thesis and do my problem sets because my laptop broke down, he still found it in his heart to make it a tradition every year to gift me Dilbert: 2009 Day-to-Day Calendar come Christmas time. So, while I can’t say it was a surprise, I was very happy to come home and find this waiting for me:
There’s no better way of coping with work stress than to remind yourself that, hey, at least my life isn’t like Dilbert’s… Oh. On second thought…
If you’ve ever wondered just how the decision-making process which caused countless (supposedly) intelligent financial analysts to buy into securitized subprime mortgages and then cause the global economy to tank, a recent Dilbert might just have the answer:
I think “it’s called math” and “I feel all savvy” pretty much wrap it up.
The logic behind securitization is basically just as Dogbert explained (buy up a lot of bad mortgages/cows and expect at least some of them to make it). The cartoon does leave out one (very dangerous) assumption which, if true, almost makes the whole scheme make sense (but just almost): mainly that the price of cows/homes is always increasing – so much so that even if one sick cow dies, you can still make a fair amount selling the carcass. That this entire scheme depended on being able to sell dead cows (foreclosed homes/re-financed mortgages) for more than they were originally worth is still mindboggling to me.
I’ve been asked that question many times — and the only answer I have is that we do whatever is needed to help solve management’s problems. But that’s always felt like a cop-out to me — because realistically speaking, what we’re doing usually ends up in some sort of Powerpoint slide.
This isn’t to be completely dismissive of the job — far from it. A great source of value that consultants add is to help dig through the information that a client already has (or knows exists) and then to repackage it in a way which is actionable to its management.
Of course, you can take a different view (hat tip: Dilbert — who else?)
One of the most atrocious examples of consulting-speak that I see on a day-to-day basis is asking for the “10,000-ft view” — a euphemism for “give me the general idea, but leave out those annoying details that I don’t care much about.” If you don’t care about the details, just say so — don’t give me some contrived “oh I’m thinking at a level far above you ground-cannon-fodder” term to avoid saying what you actually mean.
Of course, instead of suffering in silence, what I should do is really give them that “high altitude view” that they so crave (a la Dilbert):