The other day I was musing about how Apple's recently released FaceTime software will do to Apple's impressive product line. The potential is huge. There's no mystery as to what Apple is up to strategically.
Right now, FaceTime is a closed system: Both parties need an iPhone 4 and WiFi to use it. Apple is encouraging both parties to get iPhone 4s, iPad, iTouch and now Macs that so they can use it. If the pitch works and people like the service, FaceTime will be yet another major asset in Apple's desire to build a closed system that benefits from strong network effects and a huge barrier to entry.
Closed systems with network effects are hard to build because consumers and competitors prefer the convenience of open platforms. When you can successfully build closed systems, however, they make awesome businesses. The more people who use Apple products, the more valuable the product gets, and the harder it is for competitors to break in and offer another viable choice. Thus, as the network effects really kick in, Apple will easily gains more market share by selling more hardware.
FaceTime not only adds to the many features that makes Apple's current product offering the strongest in its history. But it also has the potential to increase the stickiness of the platform exponentially. The jury is still out on whether Apple's new FaceTime iPhone video chat will be the next big thing or just another cool feature that no one use. Only time will tell.
What if I say that next big career opportunities lies in the field of Predictive Analytics. (Part of data mining) Sound strange! isn't it.
Some facts that I think will help to shape my argument.
This decade have witnessed a huge investment by corporates in building dataware houses to collect different types of enterprise data, most importantly customer data. These corporates are now sitting on huge pile of data without knowing what to do with this. Companies are now coming to realization that they can use this data to understand the needs of its customer and tailor their product offering based on users needs. In lack of thorough understanding of customer needs, most companies target the customer segment that is big enough to keep their manufacturing plants running at full capacity. However with advancement in technology and manufacturing capabilities it is possible to customize the products to the unique needs of individual customer without substantially increasing the cost. Nike with its NIKEiD is already giving an option to customers to customize their shoes. Similarly computers companies such as Dell, HP are giving an option to their online customers to customize the computers based on individual requirements. This micro-segmentation require knowledge about the customer requirement that can be mined from the data stored in enterprise databases. This is where predictive modeling tools using statistics comes into picture. These tools will help companies to identify the new market trends from the data. Based on these trends companies can change or develop new products to capture the unmet market demand, thus maintaining the competitive advantage over its rivals.
Predictive analytics is an emerging field. People who have advanced mathematics and statistics degrees will be at forefront of this revolution. Even better, mathematicians and statistician with domain knowledge in industry such as retailing, banking etc will sell like hot cakes in next decade.
Over the last few years, using a combination of technology investments and process re-engineering, companies have substantially raised the productivity of transactional processes. Companies today are sitting on vast and unexplored surplus of intellectual capital of its workforce. This surplus can be tapped and exploited from the use of innovative participatory tools such as Web 2.0. Corporate leaders who are eager to find new ways to constantly innovate the business model in dynamic environment might find the use of such technologies quite useful. Web 2.0 promises further gains, although the capabilities differ from those of past technologies.
Issues surrounding business implementation of web 2.0
Top down organizational culture – Most of the companies in today’s world follow the top down approach in implementing a business process. Upper management sometimes believes the technologies will be adopted without management intervention. This approach might not work in the organizations where decisions making responsibilities fall with the top management. Participatory technologies such as Web 2.0 are founded upon bottom-up involvement from frontline workers.
Perceive value from web 2.0 - Earlier IT campaigns, focusing on identifying and prioritizing the applications that would generate the greatest business value, was relatively easy. These applications focused primarily on improving the effectiveness and efficiency of known business processes within functional divisions (for example, supply-chain management software to improve coordination across the network). By contrast, the value generated from web 2.0 tools cannot be perceived immediately, thus placing a bottleneck in its successful implementation.
Disconnection from regular work – Most of the time in an organization, Web 2.0 often considered separate from mainstream work. Thus, using Web 2.0 and participating in online work communities often becomes just another task on an already busy list of tasks. Participatory technologies have the highest chance of success when incorporated into a user's daily workflow.
Performance incentives - Traditional management incentives such as variable allowance, promotion etc aren't particularly useful in encouraging participation from the workers. In traditional technological platforms, the failure of employees to use particular application may affect its performance appraisal. The same evaluation criteria if imposed with participatory technologies often results in low quality outputs from employees. One of the more active approaches to unlock participation of good quality is to recognize the user desire to recognition. This can be done by bolstering the reputation of participants in relevant communities, rewarding enthusiasm, or acknowledging the quality and usefulness of contributions.
Identify the right participants – Another important issue to increase the quality of participation is identifying the right persons. Targeting users who can create a critical mass for participation as well as add value is key to success. Without the right base, efforts are often ineffective. To select users who will help drive a self-sustaining effort, the companies can target technology-savvy and respected opinion leaders within the organization.
The successful implementation of web 2.0 tools in the organization depends how successfully companies can overcome above issues and develop strategies that enhances user participation. Encouraging participation calls for new approaches that break with the methods used in the past by companies.
There is lot of argument about enormous power that Google has in organizing and displaying the information on its website. It enjoys tremendous power to make and break online businesses. Through its proprietary algorithm that determines which web pages show up in top spot in its search result, Google can drive lot of traffic to other websites. On other side a slight change in its secret recipe will send entire website into oblivion.
Google considerable power also stirs resentment and doubt over the way it is exploiting its monopolistic power. It has massive control over so many companies that rely on internet for driving sales. Moreover, thinkers have started to worry that Google will directly compete with some of it businesses that it helped to become part of mainstream economy during internet boom such as online shopping sites. Google move into specialized services such as travel are stirring wider concern from online travel websites such as Expedia, Priceline. These services are a part of new approach that company adopted in 2007 known as Universal Search. Online retailers are concerned that Google will favor some of its services over their businesses thus driving away traffic from their websites. So much are the concern that thinkers have coined the term "search neutral" on similar lines as "net neutrality" that is applicable to telecommunication and cable companies. The frustration of the businesses arises mostly due to the fact they have not completely mastered the technique to nail the search technology that drive their sales. In this respect Google search technology is not completely transparent to its users.
I think of the above issues more from different prospective. Google (or other competitors) will loose its relevance in this competitive world if they have to reveal the nitty gritty of their search algorithms. The competitors in this situation will quickly replicate Google technology, reducing the competitive advantage that made its technology command leading position in search. Abuse would be another problem that comes if the search engines disclose their algorithms or if they have to use standardized algorithms. Spammer would use that knowledge to game the system.
As always companies have plenty of arguments to defend its activities and business models. Google argues that its search results are the product of objectives rules for filtering web pages. The further argument is that the main aim of Google search using its own services is that it is quick and provides a more relevant answer to users questions. I can buy the argument as long as I am getting the most relevant results of my search queries and there are no other more relevant results on internet. But this argument is flawed because how can one be sure that there are more relevant results on internet if they keep seeing the results from Google own services.
Furthermore, in my opinion constant changes in search technology are required as long those changes are transparent and don’t cause the complete shift in traffic pattern. The web is more complex than it was ten years ago. New media types such as social networks, tweets, audio streams, and pictures have added to the complexity of the search. In this changed scenario it is important to experiment with the new technology and changes in the search algorithm are warranted to make the search relevant with current times. Another strong argument is that it is these small changes that make Google search different from Bing or Yahoo search. Without these innovations, search will become the commodity creating a disincentive for companies to find new and innovative ways to seek out the best answers on an increasingly complex web.
In summary, businesses need to adjust their expectation of what they expect from Google. Static search technology is not in the interest of business because of dynamic nature web. Moreover, businesses cannot expect Google to open its core technologies for public scrutiny because those technologies are an essence of its survival. Google on the other hand has to walk a fine line in deciding on what services they can offer so that they do not directly compete with businesses that provided the advertising revenues in the past. Moreover, they should actively engage online businesses in teaching how the Google technology works and how to optimize their websites with the new changes. This is essential if Google wants to grow its platform. It remains to be seen if two sides can maintain harmonious relationship.
People everywhere are getting together via the Internet in unprecedented ways. Millions create content, inform each other about global issues, and build new communications channels in a connected, always-on society. The rise of user-generated journalism is generally attributed to blogs. Users and readers want to be heard. They want to influence what they are reading. Unfortunately this revolution in user generated content means that not all information on the Internet is suitable for all of its users. While many companies maintain high standards of decency and refuse to allow any indecent material on their computer network, not all companies have the capabilities to do so. Internet malcontents have turned too many of the “group sites” into cyber‐graffiti walls, filled with offensive comments. Malcontent on the websites threaten to spoil the members’ experience on the websites.
Publishers and blog owners are looking for ways to effectively monitor the content on their websites. Effective monitoring not only maintains the editorial standard of the publishing house but also positively engages users on the website. As the market for user-generated content set to rocket over the next few years, the important question for publishers and advertisers remains: how best to monetize the rapid growth and demand in user generated content whilst ensuring a brand-safe environment?
The importance of this market, in comparison to the traditional advertising market is clear. As budgets tighten due to global financial uncertainties, brand marketers are looking to maximize the ROI potential of social media ahead of other digital media channels. Rich media such as user-generated content that is uploaded and viewed from social media communities is going to be a major global trend for brands to adopt and commercialize, and for advertisers to take advantage of in terms of reaching new audiences. Indeed, for any user generated content to be of significant value to the advertising community it is absolutely critical that the environment is moderated and therefore, brand safe. Moving forward, the owners/publishers of social media and social networking sites should be compelled to take responsibility for the content that is displayed on their sites, especially if effective monetization is a business aim.
Major enterprise publishers will look to harness this potentially, highly lucrative revenue opportunity. Every major brand will create and manage its own digital community where every consumer will be able to share their voice. However, the potential of this demand will only be realized if advertisers can be assured that their brand is safe within the user generated content market.
What makes Apple tick? How is it that it came back from the dead to surpass both Google and Microsoft in market cap? French consulting firm faberNovel takes a stab at explaining Apple’s success.
Reserve currency is a currency that is hold by other countries and financial institution without the worry that it will loose its value over time. Nations or financial institutions hold reserve currency for different reasons. Holding assets in different currencies serve as a diversification strategy for institution who don't want to be over-invested in one particular asset class. The reserve currency also reduces the transaction cost for corporation who do the trade in anchor currencies such as Dollars, Euros or Pound Sterling.
Over last several decades some exporting nations such as China have been amassing dollar reserves to prevent the appreciation of their currency. Currency appreciation is not liked by export-oriented economies because it affects the competitiveness of their exports in the world market. The accumulated dollars are pumped back into the US capital markets through sovereign wealth funds that reinvest the dollars in dollar denominated assets such as US stocks, US treasuries or even US companies.
One of the premises of reserve currency is that it should not loose its value over time. If I am an investor the first thing I should worry about is that my investments should not loose value over time. One dollar I invest today should buy the same amount (or even greater) of goods and services five or ten years from now. This implies that to attract investors to finance its increasing current account deficit, US should keep the dollar strong.
Strong dollar has its merits and demerits. On the positive side strong dollar reduces the commodity prices in the world market as most commodities are priced in dollars. On the negative side strong dollar makes US a consumer nation by increasing imports. Alternatively, it priced out US exports from world market by making them expensive as compared to other nations with weak currencies. The world sell its excess produce in US market and buys US consumer debt with hard earned dollars. After all who needs to get convinced that US assets are the safest bet in town till now. In pursuit to find good returns with minimum risks, financial institution started to bet in US consumers loans. These financial institution further fuels the credit boom by providing cheap credit to US consumers. Why consumers needs to worry if money is available at very low interest rates. This has created a credit cycle where people has started to consume more than they need to consume from cheap money.
This cycle continued, as long world believed that US consumers have the ability to pay back the money they have borrowed. After the credit crisis, rest of the world came to the realization that US consumers are broke and they have borrowed more than their ability to pay back. The easy way for US to fix its over indebtedness and make its way to prosperity is to weaken its currency. However, if the rest of the world perceives that the US is trying to gain competitive advantage via a deliberately weakening dollar, others may try to race US to the bottom by selling US debt, launching a potentially devastating sequence of events.
Does this imply that investor will loose faith in dollar and refuse to hold dollar assets?
US dollar won’t loose its reserve status in near future. There are few contenders to replace the dollar reserve status. After the dollar, the contenders for the title of the world’s dominant reserve currency are rather limited and obvious. The euro, representing an economic entity roughly the size, complexity, and productivity of the US economy can pose a serious threat to dollar. However the euro suffers from several deficiencies: It’s defined by highly fragmented capital markets that can’t offer the size and liquidity of the $600-billion-a-day US bond market. There is no central fiscal authority, the banking system is outdated, labor and resource mobility is limited, and reallocation is frightfully slow. Further, Europe suffers from the same dire fiscal outlook as the United States but with lower growth prospects, deeply embedded and well-protected national interests, crippling demographics, and without the advantage of substantial immigration to support population growth.
In Asia, which is the current roaring growth engine of the global economy, both the Japanese yen and the Chinese yuan are seen as posing a competitive challenge to the dollar. Japan is still the world’s second-largest economy. It possesses enormous wealth, a well-educated population, and has best-in-class corporations, notably in the export sector. But like the United States and Europe, Japan’s fiscal condition is precarious, with the country’s debt-to-GDP ratio now hovering at 200 percent and with massive deficits. The country also suffers from deflationary pressures that hamper consumption and capital expansion. Japan is also suffering from demographic trajectory that will increasingly weigh on growth.
China, the consensus choice as the new economic superpower, continues to make history with its rapid economic growth, highly open economy, breakneck pace of surging prosperity, and increasingly global firms. But China faces many challenges, too. It still has a closed capital account, a questionable banking system, an undeveloped legal system, rudimentary capital markets, and a less independent central bank. Without question, China suffers from an incredibly inefficient allocation of capital, which is unlikely to improve anytime soon.
In sum, while the dollar’s long-standing status as the preeminent reserve currency has caused more harm than good to US. World is seeing dollar as a risky bet and slowly diversifying it assets into other currencies from Asia and Europe. However, in short term we can assume that dollar is tallest midget in the room.
Silicon Valley is a magnet to which numerous talented engineers, scientists and entrepreneurs from overseas flock to in search of fame and to participate in a technological revolution. The unprecedented success of the Valley is a testimony to the contributions by people from diverse cultural and racial backgrounds, made possible by the favorable political, economic and intellectual climate prevailing. There are several crucial factors that makes Silicon Valley a great success.
Firstly, it has the largest concentration of great computer professionals and the best supporting services in the world, and easy access to world-class research institutions, like Stanford University, University of California Berkeley, which continually nurtures would-be geniuses, which the industry needs in order to move forward.
Secondly, it actively encourages and even supports risk-taking. Failure holds no terror and there is no stigma attached to a failed effort. On the contrary, they will try even harder next time round. Such never-say-die approach is the main ingredient for the ultimate success in entrepreneurship and technological breakthrough.
A third decisive factor is the vital role of venture capitalists that willingly support promising start-ups with urgently needed initial capital to get them started. Some would even give failed entrepreneurs a second chance if convinced that a fresh concept might lead to eventual success. This is essential because without initial capital start-ups would never get up from the ground.
Another reason why so many successful innovations originate from Silicon Valley is the fact that strong data and IP protection laws protect new ideas. This creates an environment where entrepreneurs feels comfortable in developing new ideas, without worrying about that somebody might steal their secrets.
Of equal importance, many bright young people and middle level professionals are keen to work for a new venture at substantially reduced remuneration, as it offers more scope for entrepreneurship and job satisfaction than the established companies. There is also a pride of achievement if their efforts contribute to its success.
Intellectual challenges aside, it is a common practice for start-ups to offer generous share options to employees in order to attract the right talent. This is a powerful incentive to motivate the staff to do their utmost and to share in the company’s prosperity if it reaches its goal. Many regard this as the foundation of a successful enterprise.
