Stanford CSP, BUS 152 - Session 5, Quiz 1

Background: A major shift in business and technology strategy (aka pivot) seems to be inevitable during the life time of both startups and large companies. The change requires the team to make critical decisions under conditions of uncertainty.



Please listen to the podcast above and answer the following Questions:

1. Why LoudCloud was too early to the market? What were the key decisions for LoudCloud/Opsware in executing a pivot?

2. Did Lytro develop a new technology? Please describe briefly its pivot in terms of the 4Q diagram covered during our Session 4 (Feb 13, 2017). Using the same terms, describe the team's original mistake.

3. (Optional). Imagine that you are the CEO of Twitter. Your user base and revenues are not growing fast enough to compete with Facebook and Snapchat. You have $1B and 2 years to execute a pivot. Describe your key decisions and reasoning behind them.

tags: bus152, quiz, 4q diagram,

Invention of the Day: Klystron.

Klystron was one of the first inventions that put Stanford University on the world's map of high technology.

 

On the picture above: The 40-cm. klystron used for the U.S. Army blind landing system before World War II, Stanford University, 1939. In foreground, kneeling, Russell Varian adjusts the tube. Observing, left to right, are Sig Varian, David W. Webster, head of the Physics department, William W. Hansen, and John R. Woodyard, who was responsible for building the model shown. (Sperry Gyroscope Co. Photo)

In the second half of the 1930s, motivated by the growing danger presented by German air force, Russel Varian invented a device that could generate microwaves necessary to detect a plane flying above the clouds.

At the time, Russell knew nothing about the research on pulsed radar then being carried on in secrecy by the military. He began to visualize a system that amounted to an outline of what was later known as Doppler radar. Such a system would need a practical source of short waves. He knew that the generation of short waves by conventional means was limited by the difficulty of building suitable resonant circuits attached to conventional tubes and that at the shorter wavelengths the efficiency of the resonant circuits was very low. He concluded that if practical requirements for generating microwave power were to be met, a new type of resonator would be needed. (IEEE wiki)

According to the 1937 technology licensing agreement  with Stanford, the university got half of the financial returns derived from the original klystron work.

In 1948, two years after the end of the WWII, Varian Associates - one of the first successful Silicon Valley's high-tech firms - was formed. In addition to radar applications, microwave technology was used in TV broadcasts systems,  radio, and long-distance telephone communications.

Remarkably, invention of the klystron was due to what we would call today business model, rather than technological research

In his article, "The $100 Idea," in the February 1976 issue of Spectrum, published by the Institute of Electrical and Electronic Engineers, Dr. Edward L. Ginzton described the genesis of the klystron invention as "practically a text book demonstration of the validity of 'management of technology.' It demonstrates the wisdom of being 'coupled to the market place' and of identifying societal or market needs rather than merely advancing technology for its own sake."

tags: invention, innovation, patent, detection, packaged payload, history, 4q diagram

Quote of the Day: The Luck of Silicon Valley.

Gordon Moore:

I never fail to credit the element of luck.

My personal success stems in part from the fact that Fairchild’s timing and direction were extremely fortuitous. Semiconductor science and technology were evolving rapidly. Fairchild invented the planar technology that provided the basis for the integrated circuit. Intel made a lucky choice of a new version of the MOS technology using a silicon layer for the gate of the transistors.

The luck of this valley stems from the fact that it began with a fairly clean slate in a wide-open technology space.

Moore's insight about luck gives us an important attribute of a possible successful innovation: wide-open technology space. We should also realize that when Moore talks about technology he means the business of technology, not just the technical side of a specific implementation.
Similarly, when Steve Jobs introduced PC and, later, iPod he targeted a wide open business-technology spaces.

This aspect of luck can be captured by using my 4Q diagram approach (one of the topics of today's class at Stanford).

tags: 4q diagram, strategy, quote, innovation, business, model

(ES) Creating business with 10X change.

Gordon Moore, of the Moore's Law fame, writes about his experience of creating a breakthrough technologies at Intel,

...at the time the first microprocessors were shipped, the total annual market for computers in the world was something like 10,000 units. The microprocessor would have been a commercial disaster if all we did was to replace those 10,000 units with cheaper processors.

I remember going to a conference and speaking before a group that was more involved in applications than devices and explaining to them that we had to ask big questions, like, ‘ How are we going to develop markets that can use 100,000 of these a month?’ (While one hundred thousand a month doesn’t seem like many now when compared to the tens of millions shipped currently, it sure did then.) Ted’s insight and the Fairchild experience with ICs helped us understand that this product had countless uses, but we also understood our efforts alone would build volume markets.

 To summarize, the goal was to create a market that could absorb 10 times more units shipped in a ten times shorter period of time. It's likely that Andy Grove's notion of a 10X change comes from the same early days at Intel.

Source: SIEPR Discussion Paper No. 00-45. Gordon Moore, Kevin Davis. Learning the Silicon Valley Way. Stanford University, 2001.

tags: 10X, 4q diagram, business, breakthrough

Same technology, different S-curves, different results.

Using solar power in areas where there's no power grid, e.g. in Asia and Africa, looks a lot more promising and cost-effective than introducing the same solar power technology in mature energy systems in the US or Europe.

(MIT Tech Review, June 8, 2012). Diesel is a major source of power in south Asia and Africa, where many areas lack access to the grid and frequent blackouts prompt those who can afford it to install backup generators. These markets could help a solar industry that’s struggling with low profit margins due to an oversupply of panels. In turn, the lower prices for solar power could speed up deployment in poor countries by providing a more economical alternative to diesel-powered pumps and generators, and a much faster path to electrification than waiting for grid infrastructure.

One of the first economical applications for solar is replacing diesel-powered irrigation pumps, Gopalan says. These pumps don’t have to run at night, so batteries aren’t needed, keeping costs down. “The total available market in India alone is 15 to 20 gigawatts, and irrigation pumping is a massive application in all of Asia and Africa,” he says. For perspective, the current total installed capacity for solar power is 65 gigawatts, according to the management consulting firm McKinsey.

In Asia and Africa, introduction of the technology does not depend on infrastructure investment. Furthermore, as recent power outages in the US show, the bottleneck in the energy system is not power generation, but power distribution.  Also, Germany's introduction of "green" energy involves massive investment into new distribution lines. As a result, adoption of the same technology in different areas produces dramatically different economic outcomes.

This difference is obvious to me on the personal level as well. Every day I walk my dog by our local high school. Two years ago it used a government subsidy and a local bond to install solar panels to cover its parking lot. Paradoxically, during the summer months when the largest amount of solar power is generated, the school is not in session. Therefore, the power cannot be used locally and has to be distributed through the grid - with losses - to remote users. In other words, there's a fundamental mismatch between the power generation and the power use patterns.

In contrast, the MIT article cited above talks about a solar panel installation in Asia that feeds irrigation pumps. Because the pumps have to work the hardest when there's a lot of sunshine, solar-based power generation and power consumption by the pumps are almost perfectly synchronized. Therefore, there's no need to store or distribute the power - with inevitable losses - to other users.

As we can see, economic efficiency of the same technology is quite different in these two cases. Here in California, we face a trade-off: the "greener" the energy, the more expensive it is. Opposite to that, in Asia the trade-off is broken: the "greener" the energy, the cheaper it is. Clearly, the technology's upside is much greater there.

tags: s-curve, synthesis, growth, distribution, infrastructure, niche construction, 4q diagram, market

Winner-takes-all market in tablets (so far)

CNet reports on web traffic data originating from tablets. Because Apple is such a dominant force, the chart they refer to looks like this:

Note that Apple's iPad is not in the picture at all. When you add the iPad the chart looks like this:

Data Source: Chitika.

tags: market, domination, tool, synthesis, 4q diagram, business, model

LunchTalk: (@Berkeley) Demystifying the Chinese Economy.

Speaker: Justin Yifu Lin, Senior Economist and Senior Vice President, World Bank.

Building on a distinguished career as one of China’s leading economists, Mr. Lin is undertaking an ambitious research program that examines the industrialization of rapidly developing countries and sheds new light on the causes of lagging growth in poor regions.

link

tags: lunchtalk, economy, 4q diagram, mousetrap

Smartphones reincarnated.

Mass production of smartphone components creates opportunities for new embedded applications based on smartphone software and hardware. For example, Romo the robot.

Feb 4, 2012. CNet -- They wanted to build a robot that, like any software-based product, could be tweaked and changed over time. Their robot needed to evolve.
The problem was cost. Nguyen, who is 25, came up with the idea of tying it all to a smartphone in order to take advantage of the powerful processor already built into the phone. This way, the most expensive part of building a robot from scratch would, in effect, be taken care of by Apple or other smartphone makers

Now we know that in the future old phones will be reincarnated as robots or some other type of computing interface for various appliances.
The PC revolution created huge opportunities for embedded computing: from dental office equipment to PC-based supermarket checkout stands to blade servers that run on Intel processors. In a similar fashion, the smartphone revolution will power new connected appliances.

tags: computing, mobile, innovation, s-curve, 4q diagram

Russian Revolution: Facebook vs Google+

Google+ is doomed. All prep work for the next week's mass protest in Moscow, Russia is done through Facebook.

tags: facebook, social, networking, google, 4q diagram, mousetrap

Zynga Timeline

VBeat has a timeline of Zynga, from April 19, 2007 when Mark Pincus started PresidioMedia, till present. I pulled out a piece around the key social media platform acquisition on June 5, 2009.

July 31, 2009 — Surpassing Yahoo Games, Zynga becomes biggest online game operator in the U.S. with 44 million monthly unique users. Pincus says that Zynga will generate more than $100 million in revenues in 2009. Zynga has 330 employees and 110 open jobs.
June 30, 2009 — Zynga hires Brian Reynolds as chief game designer. He sets up Zynga East as a new game studio in Baltimore, Md.
June 22, 2009 — FarmVille launches. It will grow to become the biggest social game of its time.
June 13, 2009 — The company bans a number of players for hacking the system to get more poker chips.
June 12, 2009 — Mark Pincus says Zynga is not planning an IPO. The company has more than 250 employees. Top rivals include Playfish, Playdom and SGN.
June 5, 2009 — Zynga acquires social network and game maker MyMiniLife. The company’s game engine becomes the infrastructure for FarmVille.
March 24, 2009 — At the first annual GamesBeat conference, Mark Pincus declares that social gaming isn’t a fad.

Around that time, Zynga had become a game platform on top of Facebook application platform. 

tags:  social, games, networking, platform, 4q diagram, infrastructure, evolution

Disruption: everything everywhere all the time.

Disruption has become a meaningless buzzword applied to any new technology to make it sound more solid than the good old "cool."

(November 13, 2011. NYT. Disruptions: The 3-D Printing Free-for-All.) - A recent research paper published by the Institute for the Future in Palo Alto, Calif., titled “The Future of Open Fabrication,” says 3-D printing will be “manufacturing’s Big Bang.” as jobs in manufacturing, many overseas, and jobs shipping products around the globe are replaced by companies setting up 3-D fabrication labs in stores to print objects rather than ship them.

 Let's do a quick reality check. What is the problem the technology is going to solve? Assuming the technology works, is there a large-scale need for making more physical things?

I don't think so. The overwhelming trend is toward creating and consuming virtual rather than physical stuff. Electronic books are killing paper books. Electronic toys are killing physical toys. For example, here's what today's kids want for Christmas:

One generation from now, when the presumed 3D revolution is supposed to take over the world, these kids will be into manipulating 3D virtual objects, rather than printing and throwing them out after they turn out ugly.

Further, there's a lot of research that show people prefer experiences to objects in( see for example, Carter & Gilovich, 2010. The Relative Relativity of Material and Experiential Purchases. DOI: 10.1037/a0017145)

Unlike material possessions, which are typically made to fill a specific, concrete purpose, experiences are often purchased for a variety of different reasons, both abstract and concrete.

 

Transportation cost savings will also be negligent because you'll have to transport raw materials for making the stuff in your home/garage/office. Most likely, 3D printers are going to make a difference in rapid prototyping of new devices or making lawn furniture on demand. Is it going to be a disruption? Maybe for the current prototyping methodologies, but far from a revolution in consumer goods.

Steve Jobs: a 10X change for an infinite market.

It's hard to write about Steve Jobs' approach to innovation just one day after his death. Let him speak for himself. In this video, he introduces first iPod. Remember, this is years before Apple became a household name in consumer electronic devices. At the time of the speech, the company is a minor player in the IT industry dominated by PC. But Steve Jobs sees an infinite opportunity and he brings an order of magnitude change to take advantage of it:

Just to emphasize several points:

1. A major technology transition under way. [from CD to MP3]
2. A market with an infinite potential. [Everybody loves music]
3. No winning solution. [No competition in a potentially infinite market]
4. At least one order of magnitude improvement over current solutions. [ a) thousands of songs instead of hundreds; b) fast transfer of the whole library].
5. Cool design.

It's a tough set of criteria to satisfy. Out of today's devices only Amazon's Kindle/Fire fits it.

tags: 10x, apple, information, entertainment, market, 4q diagram,

Amazon: making long-term innovation bets.

Jeff Bezos, the Amazon CEO, talks about his company's approach to invention and innovation:

we started working on Kindle almost seven years ago….  There you just have to place a bet. If you place enough of those bets, and if you place them early enough, none of them are ever betting the company. By the time you are betting the company, it means you haven’t invented for too long.

If you invent frequently and are willing to fail, then you never get to that point where you really need to bet the whole company.

We are stubborn on vision. We are flexible on details…. We don’t give up on things easily. Our third-party seller business is an example of that. It took us three tries to get the third-party seller business to work.

Most of our customers shop with us from desktop or laptop computers, but people have a different posture with tablets,” he said. They “lean back on their sofa. People leaning back on their sofa, buying things from Amazon, is another tailwind for our business, so I’m very excited about that.

via venturbeat.com

Tablet is going to be a huge boost to e-commerce and many other ways of content creation/consumption. The sooner the Internet sheds shackles of the browser,  the better.

tags: 4q diagram, bus75, course, bet, innovation, strategy 

VCs pull out of clean tech

More bad news for "green":

Now many venture-capital firms are going back to their roots. Dozens recently stopped making initial investments in clean technology companies, according to Dow Jones Venture Source. Many that continue to invest in clean technology are shifting to areas such as energy efficiency, which includes low-capital projects such as software for monitoring and reducing energy consumption, according to an analysis by the Cleantech Group. The money that still goes to the solar industry is now directed to companies with small capital requirements. Globally, nearly seven-eighths of clean-energy funding—including financing for wind farms—goes to established technologies, says David Victor, director of the Laboratory on International Law and Regulation at the University of California, San Diego. "We're on the cusp of a severe challenge for energy innovation," he says.

One just can't build a new business model and a new technology relying on government subsidies. The scale of commercial introduction is the key difference between governments' involvement in early Internet development in the 1970-80s and the 2000-10 attempts to deploy green energy across the US and Europe. That is, the Internet was developed on the scale of an extended R&D proeject and did not compete with any mature large-scale existing commercial offering. In contrast, green energy had to compete with very mature, highly efficient commercial technologies. Internet was a new Betting Ground while green energy was positioned as a Better Mousetrap, prone to a failure even with huge subsidies (see the 4-Q diagram below).

tags: energy, business, trade-off, efficiency, synthesis, 4q diagram

The beginning of the real green revolution.

Electric cars and less expensive batteries begin playing the role of dynamic storage that can respond to variations in supply of local solar or intermittent wind energy. It's far from a breakthrough, but it's a good first step.

The system uses the Leaf charging station to draw from the car's lithium ion batteries and feed current into a home's electricity distribution panel. The 24 kilowatt-hours of energy storage in the Leaf is enough to power an average Japanese home, which uses about half the energy of an average U.S. household, for about two days.

If a person pays a higher price for electricity during peak times, it's possible that charging a battery at night and drawing on it during peak times could save consumers money. That's the vision of many battery companies which envision home energy storage as a way to store energy from the grid or solar panels.

The problem with Nissan's proposed setup is that after the car battery is drained, e.g. during a blackout, it becomes useless for transportation too. Not good. They need a source of cheap and/or intermittent energy that would be wasted if not stored in the battery.

In system terms, they have to solve a synthesis problem, not just graft Leaf onto an existent grid. Maybe they should make a deal with Google to build distributed local storage infrastructure.


tags: innovation, synthesis, storage, s-curve, source, control, energy, 4q diagram, environment, trade-off, breakthrough, example

Facebook Credits, the reserve currency of the future.

Facebook and Zynga are taking great strides in making social commerce a reality:

Because Facebook appears to favor Zynga more than other game developer, including through an unusual growth-target agreement, those two companies seem to be just about joined at the hip.

A year ago, Zynga’s chief executive Mark Pincus told employees that Zynga planned to expand beyond Facebook and start its own Zynga Live web site as a portal for its own social games. That never happened because Facebook cut the deal on Facebook Credits with Zynga.

Zynga already has enormous advantages over other developers on Facebook, with more than 264 million monthly active users on the social network, more than the top 15 other game companies combined.

If this partnership is a long-term cooperation game like the one Intel and Microsoft played in 1980-2000, Google will have a hard time catching up with this freight train. Facebook Credits represents a new transactions technology, which has a chance to become a platform for new commercial applications beyond games, e.g. video conferencing, content sales, etc. You can see Netflix's cooperation with Facebook as an example of a possible Zynga-like play in a different entertainment domain.

Can you finance a Facebook revolution with Facebook Credits? ;)

A couple of diagrams to illustrate the transition from social networking to social commerce.

tags: games, facebook, commerce, virtual, deontic, payload, platform, 4q diagram, social, control point, business model

From Stanford Entrepreneur Corner:

In this 12 min snippet of the talk LinkedIn Co-Founder Reid Hoffman discusses rules of thumb to help individuals looking to create new products and companies:
1) Look for an opportunity brought about by major trends ("moving to the wild west vs moving to next town).
2) Aim to make a really big change in the world because it takes as much blood, sweat, and tears to create something big, as to create something small,
3) Build a network around your company, i.e. create and engage a creative crowd;
4) Plan for good and bad luck: proactively discover opportunities along the way and kill unneeded activities to save limited resources;
5) Maintain flexible persistence: listen to your customers and ignore them at the same time (a solution to the innovator's dilemma)
6) Remember these rules are just rules of thumb by which you navigate.



Other parts of the talk are also worth watching, esp. where he talks about scalability in parts 5, 7, 8.

tags: innovation, startup, 4q diagram, 10x, business, model, dilemma, scale

The ugly truth about technology

Henry Chesbrough, the author of Open Innovation, writes:

Technology by itself has no single objective value. The economic value of a technology remains latent until it is commercialized in some way via a business model. The same technology commercialized in two different ways will yield two different returns. 

doi:10.1016/j.lrp.2009.07.010

One of the key differences between corporate and entrepreneurial innovation is availability of a running business model, i.e. an implemented way to convert a technological innovation into money. Within an established corporation, a number of business models are readily available, therefore inventors/innovators can and will focus on technology development. In short, within a corporation technologists and business managers think in their respective dimensions.
On the other hand, in a startup, a business model often is being built along with the technology. Therefore, an entrepreneur, either an engineer or a business[wo]man, has to think in at least two dimensions: technology and business.

Today's education in engineering schools follows the corporate innovation model, which was dominant 50 years ago. Only in few places, like Stanford and UC Berkeley, entrepreneurship is taught to engineers directly, or, more often, absorbed by students from "the air" in the Silicon Valley.

quote, system, business, model, innovation, education, 4q diagram,

New times, new crimes

Certain criminal practices are also subject to technology disruptions.

In a 2001 story, the New York Times reported that there were 23,068 reported pickpocketing incidents in the city in 1990, amounting to nearly $10 million in losses. Five years later, the number of reported incidents had fallen by half, and by the turn of the millennium, there were less than 5,000. Today, the NYPD doesn't even maintain individual numbers on pickpocketing. "It's hardly a problem anymore," says a department spokesperson.

Check forgers and horse thieves are gone too.

tags: technology, evolution, d, disruption, 4q diagram

Channeling free money

Another sign that virtual goods are becoming as important as real goods and services:

Visa has agreed to buy virtual goods company PlaySpan for $190 million in a big move into the market for digital goods.

PlaySpan enables game companies and video publishers to make money through the buying and selling of virtual goods. It’s a key part of the food chain in the free-to-play business model.

Also related, according to NYT, Apple wants to channel all in-application sales through its AppStore:

Apple is now saying the app makers must allow those purchases to happen within the app, not in a separate browser window, with Apple getting its standard 30 percent cut of the transaction. At the moment this applies only to e-book purchases.

tags: money, virtual, games, social, market, communications, 4q diagram, control