Tag Archives: Innovation

All posts that talk about innovation theory and technological innovations

Lack of Net Neutrality will be a competitive liability in the future for the US

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Net Neutrality could be dead in the US and I think that this creates problems for companies that do business in other parts of the world. Or rather, it creates incentives for companies based in the US to focus on non-US markets for conducting business. There are several reasons for this. Let’s take this from a Netflix perspective, assuming they were able to get the same catalog they currently have in the US and took it into Europe (this has been difficult for US companies while it’s been easier for EU companies to come into the US – see Pandora and Spotify as references). Let’s assume that can happen and they have they opportunity to continue to work in one region or the other.

The EU has recently enacted end-to-end Net Neutrality as the law of the land. So, Netflix traffic cannot be slowed down because of the volume. It cannot be slowed down because it is Netflix traffic, all traffic if it needs to be groomed happens at the same time (likely random or everything gets slowed down). Netflix cannot be charged by the ISP to ensure specific speed to guarantee quality of product, if Netflix wants to control this, it’s up to them (they could manage this through increased buffering before the video starts, for example). The average internet speed is significantly higher than in the US, so the quality will be higher and the need for buffering lower, because the speed can account for dropped packets much more effectively. This means if they charge 8 Euros a month, they are able to keep more of that.These conditions would also apply in Argentina.

In the US, Netflix traffic is now subject to the whims of the ISP. the ISP can slow down traffic based on the time of the day, based on the source of the traffic (using deep packet inspection). They can and have charged Netflix for equal access as, for example, Comcast Xfinity’s streaming service. The US has some of the lowest average internet speeds in the industrialized world. Netflix charges $8/month they have to pay Comcast to ensure that their service meets their end users requirements.

As a company that makes money based on the fact that they are able to deliver high quality content (where the price of said content is continually rising), I would prefer to operate in the EU rather than the US. I will have significantly less issues with the ISPs because they can’t discriminate my traffic and I won’t have to pay to make sure that they do not discriminate my traffic. This means that my quality will increase and my cost per user will not increase as it will in the US. I would begin focusing on providing local language content as well as the best content I can provide from the highest quality sources in the world.

As we start moving towards higher speed requirements in our applications, this will become a larger problem. I know of people online that have issue streaming up to Twitch and Mixify as well as streaming the content to their computer. This is a problem now. We will be moving into significantly higher quality video and games (PS4 streaming a game to your console, that will require a lot of bandwidth and low latency $$$$$). Furthermore, if we start having more tele-medicine we’ll need higher quality video feeds to ensure best results.

These are all examples of applications we know of that will suffer from a lack of net neutrality. As we get people that develop applications for gigabit connections, we’ll start to see net neutrality as paramount. These companies will not be able to afford the required costs for the internet speeds required for effective applications.

This means that the EU and other net neutral countries may become the source of innovation for these applications or companies that create them in the US will need to move to markets like the EU for a user base that can fully exploit their application.

We’ll effectively be playing on an Xbox 360, when high quality PCs are out there. We’ll be at a serious disadvantage.

FCC, Net Neutrality, and the Internet as a platform

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The proposed FCC rules for Net Neutrality are pretty terrible. The Verge has a pretty good write up on them, here. Is this a good or bad thing? Personally, I think this is terrible for the future of innovation as I’ve written about before in a few spots, most recently here. I also think it depends on what you think about the role of the ISP. If you think that the role of the ISP is to provide a conduit to the internet and simply pass data to you, then Net Neutrality is for you. If you believe that the ISP should actively play a role in the content you seek, then Net Neutrality is not for you. If you think that the ISP has a role in shaping the way data flows, has the right to extract as much money out of the internet ecosystem, then you probably don’t think that Net Neutrality is the right thing either.

I believe that this comes from a fundamentally different world view on how the economy should function. There are a lot of people out there that truly believe that organizations have the right to maximize profitability. I don’t really think that’s true. I think that organizations have a role to play and those that exploit platforms like the internet are drains on the economy and limit our ability to innovate.

Many of the developers of the initial internet protocols strongly believe in net neutrality. Ranging from the guys that used to run Xerox PARC to Tim Breners-Lee, there’s a lot of different push back against non-neutral positions.

I think from an evolutionary economics standpoint, technology platforms of the past have been wildly successful because they’ve been able to continually lowered in prices which increases accessibility. This drives further adoption of that technology as a platform encouraging more companies to compete to make that technology platform. Some historic platforms are roads (shocking), steel, silicon chips/processors, and now the internet.

Roads have been pretty much government sponsored and open for just about anyone to use. In Portland, the Blue Line MAX line has driven $7 Billion in new development, the largest for a new commuter line anywhere. Computer chips are near and dear to my heart as I’ve worked at a few companies that make them. I think that we can all see in our daily lives how these chips have dramatically changed the world. That the company that makes chips (Intel) is worth a lot less than a company that leverages those chips (Microsoft). The combination of these two companies has essentially driven a great deal of the modernization we’ve experienced in the last 20 years in the US.

In the last 10 years the internet has driven the worlds most valuable companies. It has more quickly shifted how companies engage with their customers and powerful retail based stores have fallen on extremely hard times (Sears/KMart,etc…). My job is only made possible because of the internet I work with people in different states every day.

The fact that it will soon be government policy to enable a company to seek as much money from every user of their platform is only going to hurt the entire ecosystem. If my service stays the same but my price continually increases, that means I can’t afford to buy services that I want online, so I’ll switch to other options or drop the options all together. This will kill competition and negatively impact consumer choice. Furthermore, if I’m paying for Netflix and Comcast and Netflix is forced to pay for access to Comcast customers, then Comcast is charging everyone. I’d expect massive quality upgrades on a continual basis or something in return for all this extra cash flow. Instead it will likely go to investors in the form of higher profits.

Innovation, Kickstarter, Etsy, and First World Problems

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Innovation happens at it’s best when companies have wide ranging experiences and sources for ideas. It’s been shown that leaders with a broad network of unique individuals across an organization have better ideas that can influence the direction and innovation of a company. It’s also been shown in other studies that a group doing research will have better results if the members have a diverse background. This is true in since in general as well. Much of the breakthroughs we see happen at the interfaces of scientific disciplines. Which is one of the reasons why it takes so long for paradigms to change in scientific communities – the old guard doesn’t want to adopt to the new truth. Scientists that move into that field from one of those boarder disciplines will be more likely to adopt that new idea than the old guard. A great example of that is physicists and biologists moving into Economics. They are bringing new ideas to economics that aren’t supported by the current theories but are slowly making head way (HFT use these theories more than classical economists).

Platforms like Kickstarter, Etsy, and Git Hub, make it a lot easier for unique ideas to reach a broad audience and enable collaboration. Github is all about collaboration between different coders, while Kickstarter and Etsy aren’t about collaboration but about sharing of ideas though design. 

Kickstarter and Etsy literally are market places of ideas. These places allow people to scratch the itch of sticking it to a corporation that might make a similar product and helping out the little guy at the same time. I personally like both places because I’ve found some really interesting presents for my wife that will likely be unique to the area I live. Essentially, Etsy is so low of volume that in a given city there might be one other person with that same item.

Many of the products fall into the “me too” category where they are fixing a minor problem that isn’t really a big deal. They are addressing first world problems. These are similar to the mobile app masturbation fest that we call Silicon Valley or San Francisco today. Some of these ideas are really novel or could lead to some cool concepts if given the support that they need. However, the ones that aren’t really useful won’t actually survive. They just don’t get the backing that they need – if they are a Kickstarter project or won’t have enough people buy stuff if they are an Etsy company. 

The other interesting thing about both is that once you reach a certain size you’re done. In Kickstarter’s case that’s reaching your financial goal to complete your project while in Etsy’s case if you sell too much you have to move on to a different platform. 

For the most part, these platforms are all about selling products or concepts that could be manufactured in different ways, but we want the hand made feel to it (or unique designs). I don’t think there’s anything wrong with that. Especially since there can be Kickstarters for documentaries and activities in third world countries.

That’s where the market place for innovation comes through. Aside from shipping concerns I don’t really care where the product is being designed or made. I’m purchasing them for the uniqueness rather than where it’s made. Some people might focus on that, I don’t however.

I will definitely use these platforms in the future. In fact, I essentially bought a watch on Kickstarter today because the goal was already made. I have no idea when I’ll get it, so when it comes it’ll be a surprise. Kind of like the wallet that I bought. I’m not super happy with it, but I’m helping someone’s dream come true. And that is really what I’m buying when I use Kickstarter.

Powerful Microsoft investor wants MS to focus on Enterprise

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According to the Washington Post an influential investor is pushing for a new direction at Microsoft. His goal is to get Microsoft to ditch the consumer market and focus solely on enterprise. He wants the X-Box gone (likely sold to someone), Surface gone (either sold or killed), and their other non-enterprise solutions eliminated as well. I think that from a Financial person’s perspective these are something of an obvious option. X-box isn’t killing it in the market, they are expensive and take a while to recoup the cost of development and all that. The Surface hasn’t had great sales – although it’s hard to separate weak sales of the Surface from the abomination of Windows 8 that sold with the bulk of them initially (I’d bet they’d be solid devices with Android on them).

I think it’s important to remember why Microsoft is Microsoft. It’s not entirely because of Enterprise. It’s because Operating systems are difficult to learn and people don’t want to learn more than one if they can avoid it. Only recently have the bulk of people been fluently on two different operating system – Windows/Mac/(few on linux) & iOS/Android/Windows Mobile/Blackberry. The most common interaction would have to be Windows & iOS and/or Android and Mac & iOS.

The reason for strong enterprise Windows sales is because of the massive consumer base that Microsoft has managed to hold on to despite it’s best efforts. If most people had to learn multiple different operating systems between home and work it would increase their stress levels at work. The skills they learned at home wouldn’t transfer well. I think this is also the reason why enterprise is conservative in upgrading their Windows OS – essentially skipping every other one. XP/Seven because those are the products that seem to build a strong enough user base on the consumer side. Most techies don’t like Win 8, so that hurts sales to Mom and Dad or their friends. They’ll tell them to avoid a product or get them to go back to Win 7 over 8 if possible.

The battle for the next OS is going to be fought on tablets and phones, before it’s fought on laptops and desktops. I know there are some tech experts out there calling for the death of the tablet, however, I think it’s far more likely that there will be a convergence between laptops and tablets. Where a tablet can meet our core needs of our laptop.

The more powerful of the two Surface products (Pro) was just that type of product. It was able to do a lot of WINDOWS laptop stuff, but in the form factor of the tablet. Should have sold well, except it cost a ton for a tablet or under powered laptop. I think that this really is the consumer space people will work from. We really don’t need more space unless we’re gaming and then people will build a desk top or buy a console.

Consoles – the X-box isn’t just a console, it’s supposed to be a full multimedia PC replacing the need of a desktop. You pair the Surface Pro with an X-Box and you’ve got everything you need for your house. This is what Microsoft is envisioning. Everyone is still using Office on their Surface, Skyping on both X-Box and Surface, and everything is based on the familiar (sort of) Windows OS. Keeping it front and center.

Let’s say MS ditches the console and Surface. They’d have to license out Windows to run on tablets and wouldn’t have the ability to help shape those conversations. They are competing with 2 Rabid fan bases in mobile OSes, one that many companies are able to use for free (with some licensing fees to MS), Google is pushing to replace MS in netbooks and likely other environments – Chromebook and ChromeBox. All of these could threaten their dominance as the work station in enterprise. For the bulk of the work I do, I could probably do it on a tablet as long as I have a compatible office suite.

Furthermore, MS isn’t the only option in many of the enterprise spaces. They aren’t the only OS, Office Suite, or Enterprise service company (Dell, IBM, Accenture, SAP, etc…) it’s not a guarantee this process would work. Furthermore, people are already talking about an Android server for some activities. These are all threats to MS core business OS and Office Suits. Leaving the consumer space only opens them up to more threats as people will want to stay in a similar environment.

This is another example of the Innovator’s Dilemma and MS should look to use Lean to help solve their cash and process challenges. Both the Surface and X-Box are good products. They just need to figure out how to find the right market for the Surface.

Lenovo bought Motorola now what?

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Well, it’s complete, Lenovo has completed it’s assimilation of IBM’s x86 market and now has moved onto the mobile market in the US through buying Motorola Mobility. This move makes a lot of sense for both Lenovo and Google (as well as IBM). From the Innovator’s Dilemma perspective, we have a company that is focused on building produts at a good price with all sorts of efficiencies buying a much lower on the priority source of revenue from Google and IBM.

What else does this mean? Well, it’s likely that Lenovo will begin to experiment with unique products to take advantage of their full technology stack. They are one of the few companies that have successful lines of business in Laptop, Servers, and now Smartphones. They obviously will be quickly filling any gap they have in the tablet space – which they already have offerings. Now, they can take mature technologies from Motorola Mobility and implement them in their broader product portfolio. In the sale, Google kept most of the patents, but they are sharing the patents with Lenovo. This is a big deal for Lenovo as they can freely use those technologies with no cost which means they can experiment with those technologies in unique products.

For Google, it’s a good move because they don’t need to manage a legacy manufacturing and design firm that they never really integrated. This is especially true since they were partnering with other companies to develop their Nexus line up. It simply made no sense to hold on to a company like Motorola when you weren’t planning on truly using it. Plus, Google makes most of it’s money from ads still and from their ecosystem. They do better if there’s strong competition in their operating system ecosystem. In fact having Lenovo as a partner now will likely help them more than owning Motorola ever did.

Lenovo will be able to put more money into their smart phones and will likely offer unique products that mix their laptop capabilities and servers with the smart phones. What could we see? Well perhaps a fully docking phone/tablet that truly replaces a laptop and maybe even a desktop. With the small server capabilities they may even figure out how to mix those capabilities by selling a smart phone that can connect to a “personal server” that allows you to access more power and storage while on the go.

I’m excited to see stronger cometition for Samsung and Apple in Lenovo and look forward to interesting products from the company to compete and push the market in a new direction.