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A leading innovation and marketing blog from Braden Kelley of Business Strategy Innovation

Tuesday, December 23, 2008

The War for Talent Escalating

Here is an interesting video on how China has started advertising on Silicon Valley billboards to attract tech talent from Silicon Valley back to China.

America used to be the top magnet for tech talent in the world, but now risks losing that mantle as other countries develop. Will American companies be able to find a way to stop the brain drain back to immigrants' home countries?

Check it out:



What do you think?

@innovate

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Thursday, December 18, 2008

Clearwire/Sprint Followup

Clearwire Sprint 3G 4G ArticleI came across an article today about Sprint offering a 3G/4G USB Modem for $149 with a $79.99 per month contract. This USB modem will automatically switch between Sprint's 3G network and Clearwire's 4G WiMax network when it is available (which is currently only in parts of Baltimore).

It is a great step forward for Sprint/Clearwire that will make the service more attractive, but will people really pay an extra $20 a month for such a big external device?

If they really want Clearwire to be a runaway success, they need to find a way to embed this kind of technology into the phone and allow tethering of the phone to any computer (especially laptops). If they did that and threw in 1000 minutes and unlimited texts and unlimited data for $60 per month. I'm in.

What do you think?

@innovate

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Get on the Bus to Flexibility

Article on Innovation FlexibilitySnow in Seattle today. It will be interesting to see how many of my current clients make it to their office today. I for one am taking the bus and despite it being a bendy bus, it looks like it will manage to make it downtown. It had to go out and around a jack-knifed bus to make it up and over the bridge out of my neighborhood, but it made it.

Forecasters were sure we would get snow Tuesday night, but we didn't, nor did we get snow yesterday despite their predictions all day that we would. Snow didn't come to Seattle until last night. Most schools even announced closures based on these forecasts rather than waking up early to see if it had actually snowed. Forecasters blamed it on a "donut effect" meaning that the mountains to the west and east of Seattle took all the snow.

This Seattle snow fiasco is a good lesson in risk management. Is there really such a thing as 100% probability? While it is important to have a risk management strategy to protect yourself against events of low probability and high impact and every other combination, the key aspect of any such strategy is flexibility.

What if Costco or Nordstrom's had decided to close all of their stores based purely on the weather forecast? What would the unnecessary financial losses have been?

Flexibility is key. Flexibility in everything you do, from human resources to manufacturing to risk management. Without flexibility any strategy, policy, or process is doomed to have some snowless "snow" days.

Look at GM. Underinvestment in flexibility when times were good has left GM on life support and begging for money from the federal goverment because they only are capable of producing cars people don't want at a cost structure they can't sustain.

So when you are building any business or policy or process, look at whether or not you are designing it with the necessary flexibility.

After all nobody wants to get snowed under.

What do you think?

@innovate

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Tuesday, December 16, 2008

My Hopes and Fears of the Black Swan

Black Swan ArticleLast week I came across an interview with Nassim Taleb, author of "The Black Swan." Mr. Taleb went on to talk briefly about the main thesis of the book - that every so often events come along that change our vocabulary and our way of thinking about the world around us. The example given, related to the title of the book, was that people in England used to sometimes say "I'm as likely to see that happen as to see a black swan." That of course was before the discovery of Australia, and before the discovery of - black swans. The point being that people always seek to explain the world around them using the past as a guide, but "black swans" always come along that don't fit people's previous understanding of the world.

The author then went on to talk about how he saw the financial crisis coming, and how beginning in about 2006 he started advising everyone close to him to move everything into cash. Living in Silicon Valley back in 2001, I saw the stock market and housing and consumer debt bubbles all forming, but I wrongly assumed that when the stock market bubble burst that the housing and consumer credit bubbles would also pop. We now know of course that they didn't and instead actually got bigger thanks to the acceleration of mortgage securitization and risky lending. This time however, the real estate bubble's explosion has of course popped the stock market and consumer debt bubbles.

Now of course, every economist and stock picker out there is seeking to explain the current situation using the past as a guide and the government is seeking to avoid the "mistakes" of the past. You have people calling a bottom in real estate, you have people calling a bottom in the stock market, and you have a few people saying the stock market will go down another 20-30%.

The truth is, this is a black swan.

Nobody has ever seen a residential real estate bubble, a stock bubble, and a consumer credit bubble all pop at the same time. One bubble not included in the list, but about to be added is the popping of the commercial real estate bubble. Because all of these bubbles have never all popped at the same time with the financial markets seizing up for good measure, nobody can really tell you what is going to happen next. I won't endeavor to either. But I will share with you my top five hopes and fears.

Hopes:
  1. Things will bottom and the huge amount of money sitting on the sidelines in treasuries and money market funds will move back out into stocks and bonds and help to avoid some of the layoffs that would otherwise occur

  2. The actions of the fed will be sufficient to keep the capital markets functioning

  3. The stimulus package of Barack Obama and Congress will not result in a pork explosion and will help to set a floor to the downturn

  4. The government will actually make money on its rescue efforts and the dollar won't collapse under the weight of all this new debt (meaning China and others won't dump dollars)

  5. Private industry working with the Obama administration and state/local governments can help to spur the country into a leadership role in the next wave of global innovation

Fears:
  1. Consumer spending will hold up better than expected in this holiday season and everyone will get all excited and the market will rally, only to realize that it was one last big debt-fueled hurrah and personal bankruptcies will surge in the first quarter (January-March)

  2. Housing foreclosures which dropped in November will also remain relatively tame in December as people seek to be home for the holidays, only to see home foreclosures spike in the first quarter (January-March)

  3. As retailers accelerate store closures in the first quarter and commercial real estate companies come under pressure, it will spark another round of trouble in the financial services sector and the credit markets may seize up again

  4. Companies that have a heart and chose not to lay people off right before the holidays, will finally succumb and turn loose an avalanche of layoffs in the first quarter, making credit card and mortgage default problems even worse

  5. The pent up aggression that we have seen erupt in places like Greece may erupt here if things get substantially worse


What are your hopes and fears?

@innovate

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Thursday, December 04, 2008

Will Clearwire survive until its market appears?

Clearwire article
Clearwire recently completed the acquisition of Sprint's WiMax assets. Sprint's assets merge together with Clearwire's original WiMax assets to create the nation's largest WiMax operator.

I hate to beat up a local business, but Clearwire/Sprint represents a perfect case study of the perils of:

1) Letting ego drive strategy instead of market fundamentals
2) Launching into the marketplace too soon

Clearwire originally launched in smaller American cities where fixed-line consumer broadband was not widely available (making wireless broadband an attractive option). But, not content to fully exploit this niche, Clearwire instead began building out and promoting wireless broadband networks in first-tier cities like Seattle with a product that provided inferior speeds, service, and value. Instead of maximizing their niche strategy and waiting for technology and execution that provided a compelling value proposition for first-tier markets, they chose to launch with a sub-optimal offering and significantly increase their cash burn. I would argue that Clearwire made a mistake going after tier one cities when they did (destroying valuable brand equity they'll need later).

Meanwhile, Sprint was facing its own challenges in the wireless market (where they were now #3) and hoped WiMax would somehow propel them back into the top spot. Millions of dollars later Sprint decided the WiMax effort was a distraction and a money pit and agreed to merge their newly created Xohm unit into Clearwire in order to shore up their balance sheet and restore focus to their core business.

Collectively, Clearwire and Xohm have burned through a ton of cash and expect to lose an ever increasing amount now that they are starting to build out their network. A network they are starting to build out 1-2 years too soon. Why do I think that?

First, WiMax-capable mobile phones are a rarity and it will be another year before smart phones really start exploding in the United States. Plus, there are only a few laptops currently that come with WiFi/WiMax chips built-in. Given current economic conditions, in one to two years a huge majority (probably 70-80%) of people will still have laptops, desktops, and mobile devices without the capability of connecting to Clearwire's network. That means very few urbanites are going to subscribe to the network they are building.

So what should they do?

Delay building the network. Delay the start by 1-2 years. Lobby Congress to help make it an infrastructure project (Why not? - everyone else has their hand out). Roll out the network in line with technology adoption, not in advance of it.

Begin building the network when combination WiFi/WiMax capabilities begin to be built into the cheapest laptops, desktops and smart phones. If Clearwire starts building the network in network in 1-2 years instead of now, they'll be able to install faster or longer range hardware (probably for less), and there will be exponentially more people who will see the value of switching and potentially ditching both their fixed broadband and mobile carriers.

Personally I would love nothing better than to pay $40-60 a month and get both mobile phone service and broadband (for home and to go). If Clearwire can deliver that, I'll be first in line.

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