Showing posts with label Market Equilibrium. Show all posts
Showing posts with label Market Equilibrium. Show all posts

April 29, 2012

Strategy, Blue and Red and Successful All Over

Recently, I was reading about something called “Blue Ocean Strategy.”

The notion is that in pursuing differentiation, an organization’s aim is “not to out-perform the competition in the exiting industry [and to fight it out turning the oceans blood red), but [rather] to create a new market space or a blue ocean, thereby making the competition irrelevant.”

While I like the ocean’s metaphor and agree with the need for organizations to innovate and create new products and services (“blue oceans”), I think that competition (“red oceans”) is not something that is inescapable, in any way.

In profitable industries or market spaces, competition will enter until supply and demand equilibrium are met, so that consumers are getting more or less, the optimal supply at the requisite demand. The result is that organizations will and must constantly fight for survival in a dynamic marketplace.

Moreover, as we know, any organization that rests on its past successes, is doomed to the trash heaps of history as John Champers, the CEO of Cisco stated: It’s “easy to say we’re the best…we don’t need to change, but that’s exactly how you disappear.”

In essence, while we may wish to avoid a duke-it-out, red ocean strategy, every successful innovative, differentiation-driven, blue ocean strategy will result in a subsequent red ocean strategy as competitors smell blood and hone in for the kill and their piece of flesh and cut of market share, revenue, and profit hide.

To me, it is na├»ve to think that blue ocean and red ocean strategies are distinct, because every blue ocean eventually turns blood red with competition, unless you are dealing with a monopoly or unfair competitive environment that favors one organization over any others.

The key to success and organizational longevity is for innovations to never cease.  When innovation dries up, it is the moment when the organization begins their drowning decent into the ocean’s abyss.

So as with the lifecycle of all organizations, blue ocean strategies will eventually result in red oceans strategies.  Once this occurs, either the organization will leverage their next blue ocean strategy or bleed red until their body drains itself out and dies off—leaving the superior organization’s blue ocean strategy to carry the day.

Together, blue oceans and red oceans—drive the next great innovation and healthy competition in our dynamic, flourishing market.

(Source Photo: here with attribution to freezingmariner)

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February 19, 2011

Technology and The Workforce Seismic Shift

The Wall Street Journal this week (17 February 2011) had a scary and thought-provoking editorial called “Is Your Job an Endangered Species.”

The thesis is that “Technology is eating jobs—and not just obvious ones like toll takers and phone operators. Lawyers and doctors are at risk as well.”

The notion is that while technology creates opportunities for some, it is a major threat to many others.

The opinion piece says to “forget blue-collar and white-collar-workers.” Rather, think in terms of workers who are either “creators” or “servers”.

Creators—these are the innovators: programmers, researchers, and engineers. They are “the ones driving productivity—writing code, designing chips, creating drugs, and running search engines.”

Servers—these are jobs to service the creators: “building homes, providing food, offering legal advice,” etc. These jobs are ripe “to be replaced by machines, by computers, and by how business operates.”

These two categories of labor are similarly portrayed in the movie I. Robot with a vision of society by 2035 that has engineers (“creators”) from U.S. Robotics building robots and then masses of robots walking around side by side with people and performing everyday tasks from the delivering packages to caring for the sick (“servers”).

With manufacturing jobs continuing to move overseas to the “lowest price bidder” and service-based jobs at risk as we continue to make advances in robotics and artificial intelligence, there are a number of important questions that will challenge us:

1) Are the Creator jobs (augmented by the left-over service jobs that don’t go to robots or AI) enough to keep our population fully or even near fully employed?

2) Can almost everyone (no matter what their intellectual capability and curiosity) be expected to perform in the functional job category of creators?

3) Can we transition the preponderance of our society to be engineers and programmers and scientists and inventors—especially given our challenges in science, technology, engineering and math (STEM), and is this even desirable?

According to the WSJ editorial, there are a few givens:

- Momentous change in the job market is upon us: “Like it or not we are at the beginning of a decades-long trend” in changing employment prospects.

- Jobs are going to be destroyed: “There is no quick fix for job creation when so much technology-driven job destruction is taking place.”

- New jobs will be created: “History shows that labor-saving machines haven’t decreased overall employment even when they have made certain jobs obsolete.”

One of the major problems with the rapid pace of the technology boom we are experiencing is that job market has not had time to adjust—and the “legacy” labor supply is out of equilibrium with the emerging market demands.

Therefore, until new jobs and the associated education and training catch up to meet the demands of a changing society, we are going to suffer severe job dislocation and unemployment that will be enormously painful for many years yet to come.

In terms of what the gamut of new jobs will end up being in our society, surely it will involve areas of critical need such as energy independence, ongoing medical breakthroughs, necessary security advances, high-speed transportation, and so much more.

In all cases though, we can expect that those workers that bring innovation and modern technical skills “to the table” will have the distinct advantage over those that cling to jobs past their technological prime.

Digital natives will have the advantage here; digital immigrants need to adjust to the seismic shift to the employment landscape that is still only just beginning.


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September 20, 2009

Is Free Worth the Price?

In the computer world, free is often the architecture and economic model of choice or is it?

We have various operating systems like Linux, Chrome, Android and more now costing nothing. Information is free on the Internet. Online news at no cost to the reader is causing shock waves in the print news world. There are thousands of free downloads available online for applications, games, music, and more.

What type of business model is free—where is the revenue generation and profit margin?

Yes, we know you can use giveaways to cross sell other things which is what Google does so well making a boat load of money (billions) from its free search engine by selling ads. Others are trying to copy this model but less successfully.

Also, sometimes, companies give product away (or undercharge) in order to undermine their competitive challengers, steal market share, and perhaps even put their rivals out of business.

For example, some have accused Google of providing Google Apps suite for free as a competitive challenge to Microsoft dominant and highly profitable Office Suite in order to shake one of Microsoft’s key product lines and get them off-balance to deflect the other market fighting going on in Search between Google and Microsoft’s new Bing “decision engine.”

So companies have reasons for providing something for free and usually it is not pure altruism, per se.

But from the consumers perspective, free is not always really free and is not worth the trouble.

Fast Company has an interesting article (October 2009) called “The High Cost of Free.”

“The strategy of giving everything away often creates as many hassles as it solves.”

Linux is a free operating system, yet “netbooks running Windows outsell their Linux counterparts by a margin of nine to one.”

“Why? Because free costs too much weighted down with hassles that you’ll happily pay a little to do without.”

For example, when you need technical support, what are the chances you’ll get the answers and help you need on a no-cost product?

That why “customers willingly pay for nominally free products, because they understand that only when money changes hands does the seller become reliably responsive to the buyer.”

And honestly, think about how often--even when you do pay--that trying to get good customer service is more an anomaly than the rule. So what can you really reasonably expect for nothing?

“Some companies have been at the vanguard of making a paying business of “free.” IBM, HP and other tech giants generate significant revenue selling consulting services and support for Linux and other free software to business.”

Also, when you decide to go with free products, you may not be getting everything you bargained for either in the base product or in terms of all the “bells and whistles” compared with what a paid-for-product offers. It’s reminiscent of the popular adages that “you get what you pay for” and “there’s no such thing as a free lunch.”

Sure, occasionally there is a great deal out there—like when we find a treasure at a garage or estate sale or even something that someone else discarded perhaps because they don’t recognize it’s true value—and we need to be on the lookout for those rare finds. But I think we’d all be hard pressed to say that this is the rule rather than the exception. If it were the rule, it would probably throw a huge wrench in the notion of market equilibrium.

And just like everyone savors a bargain, people are of course seriously enticed by the notion of anything that is free. But do you think a healthy dose of skepticism is appropriate at something that is free? Again, another old saying comes to mine, “if it’s too good to be true, it probably is.”

Remember, whoever is providing the “free” product or service, still needs to pay their mortgage and feed their family too, so you may want to ask yourself, how you or someone else is paying the price of “free,” and see if it is really worth it before proceeding.

From the organization’s perspective, we need to look beyond the immediate price tag (free or otherwise discounted) and determine the medium- to long-term costs that include operations and maintenance, upgrades, service support, interoperability with other products and platforms, and even long-term market competition for the products we buy.

So let’s keep our eyes open for a great deal or paradigm shift, but let’s also make sure we are protecting the vital concerns of our users for functionality, reliability, interoperability, and support.


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