Tag Archives: technology

Apple and Quality

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I know I’m not always the biggest Apple fan on here. But there’s one thing I have to admit, they typically come out with a really well put together product. If they don’t, they are fairly quick about providing a free solution – such as the case for the iPhone with the antennae issues. However, this version doesn’t seem to be along the same lines. There’s the issue with iOS maps, which is pretty terrible, but there’s also another problem with the sapphire lens selected for the camera causes a purple tint and light flaring. Their solution is to simply point the camera away from the light and that this is normal behavior.

This type of quality issues in a product like this leaves a lot to be desired for some pretty obvious reasons. For a lot of people the cell phone is their only camera. I almost never take pictures, but when I do, it’s on my cell phone. If the pictures are defective by “design” then this is going to be a huge problem. I’m sure that the Instagram filter won’t look right when you add that to the picture as well.

I think that these two issues are starting to indicate a trend with Apple for the beginning of a decline in the perfectionism that most users associate with Apple products. To some extent it was never there the way people like to think that it was, but there was a lot of perfectionism that went into the designing and material selection for the phones.

You could argue that the tint is similar in defect type to the antennae issue, but I think this is different because the camera is such an integral part of the phone. Apple has been developing cameras for years whereas the antennae issue was related to a new skill set, an external antennae.

The next concern for Apple fans, is that the phone is their core product and they really dropped the quality in some ways. Without proper maps, the quality certainly suffers, users are used to the correct maps at a touch of a button, not seven. Will these issues prevent iPhone fans from buying this phone? No, I don’t think so. I think it might push some people away if they were on the fence about getting the same phone, again. I think the larger risk is in the long term. If Apple continues to produce the same products but continues to have quality issues with some expected features on a phone then Apple will begin to lose customers in droves.

For the iPhone6 Apple needs to come out with a different feeling phone, if they do, any issues like camera or whatever will be masked by the fact that it’s totally new. People will flock to it again. If Apple doesn’t come out with a new feeling and has issues, I think that will give more people pause about the whole company. We’re a year or two away from the iPhone6, so that may be premature. Customers and analysts aren’t friendly to stagnating firms. Apple surely doesn’t want to be in that group.

Business Cash Reserves and Innovation

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I found an article on MarketWatch that discussed the fact that the private sector is, in fact, doing just fine. As the author mentioned, this didn’t go over very well whenever Obama mentioned it a few weeks ago. However, he’s right. Companies as a whole are doing extraordinarily well (see graph below), but normal people aren’t seeing it. I’ve discussed this before in a Future of Employment post.

As you can see from the graph Corporate profits are at an all time high. We also know that investments are still occurring in new equipment. We know from the numbers that companies aren’t hiring. I think that the GOP would argue that this is because of regulation uncertainty, which they are contributing to. From what I’ve seen the Democrats don’t really have any sort of good explanation for the lack of hiring. The author of the MarketWatch article claims that companies aren’t spending money on new employees because they are returning most of it to stock holders through dividends or stock buybacks. The data supports this perspective to some extent. Part of it could be the fact that many companies are automating, outsourcing and offshoring all contribute to some level or another.

I think that it’s a combination of these factors plus one other factor. This was added as something as a throw away at the end of the article, but it really stuck with me. “Corporations may be intensely profitable, but they have no profitable ideas about what to do with the vast sums they earn.” This comment is extremely important, especially when you couple that with the article that the Washington Post just published about the difficulty of PhDs finding jobs. 


These researchers are the core of the future for innovation at companies. If companies aren’t hiring these scientists, despite the fact that many claim there are skill gaps, then they are unlikely to innovate moving forward. My old roommate in the Netherlands, Brian, told me that the Holst Centre where he worked created 3 jobs for every employee at their research center. I’ve seen similar numbers in one of my courses as well. 


In this case the trickle down effect actually works. You hire researchers and they need to have technicians building equipment, which needs to order parts and raw materials to build those components. Which requires additional labor elsewhere. While 3 for 1 may not seem like the greatest ratio, those other workers typically make good money and will end up spending money elsewhere.

Innovation drives the economy. Companies need to look at how they manage risk, especially if they are sitting on huge reserves of cash. Putting more money into research for their field can lead to huge disruptions in technology and could lead to an increase in market share.

I will talk more about these risks in my next blog.

Evolution and Innovation

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Apparently I published this before I meant too. Anyway, today in Techdirt, they published a discussion on copying, innovation and evolution. Basically, a biologist argued that we are evolutionarily predisposed to copy and use group learning to develop new tools. What this means is that instead of going out and developing something out of the blue we first have to see what someone else has done and then we copy whatever they did, then in a parasitic way, make marginal improvements on the original. We’re nothing but freeloading copiers that make things a little better.

Techdirt completely disagreed with this point of view. They argued that simply copying something or a part of something doesn’t mean you’re freeloading. You can add a great deal to something to the point that whatever you copied simply becomes a part of a larger whole.

Anyone should know from my writing that I support Techdirt’s perspective. This comes from several several different arguments. The first is from the evolution of technology. If you ignore some of the human motivation behind the changing technology itself and focus on the selection process, you can see that technology changes through incremental adjustments. These changes are selected by the market or in primitive societies by the end result of an improvement. Spears that last longer, less energy expended on making new spears, spears that can be thrown farther, less danger from the animal being killed, or sharper shovels, less energy spent gathering food – more food. This selection process is a very natural process. Additionally, there would be some specialization of skills even at this point in our history. Some people would have been better at making spears and in a collaborative environment, because there were no patents and sharing was for the best of everyone, many people could experiment with new spear designs. This innovation while based on copying is a very real form of innovation that likely lead to gradual improvement over a great deal of time.

The second argument that supports innovation after copying is the argument of Cesar Hidalgo, which argues that looking at what countries are currently producing you can see a relationship with their innovative ability. By looking to see what technologies they import and export you’re able to see how well they have developed scientifically and in the manufacturing world. For example you can expect to see more advanced products come out of a country if they got into producing fertilizer very early in modern times. This typically leads to a general chemical industry which can lead to pharmaceuticals and semiconductors. Why? Well developing a strong base in chemistry with fertilizers can be expanded into drugs and as a base for semiconductors.

How do new countries move into these fields? Essentially, they have a knowledge transfer from a country that is already doing it. This can be done in two ways, one is the easy way: have a multinational company set up a manufacturing then R&D facility in your country. This allows a direct flow of knowledge on how to manufacture the material, which increases the rate of copying. Would allow the country to be a fast follower but will still require significant time for them to eventually innovate on that technology. Having an R&D facility would increase this rate, because local scientists would have already been trained on how to innovate in that field. They would have already been doing research in that industry and would more easily be able to innovate if a spin-off was created (or if the state nationalized that part of the multinational). The second manner is much slower: repatriating of knowledge workers. This is essentially what has happened in Taiwan and India. Educated Indians or Taiwanese returned from the US and created spin-offs and became professors at the local universities. This isn’t always successful.

Saudi Arabia is trying to develop a third way, which is having some success. They are recruiting experts from around the world to develop their own universities and companies. This is having mixed results and education and industry needs to pay attention to these attempts to see how well it plays out in the long run.


Copying is extremely important in education and is required to develop new industries in a country. Technology evolves through copying previous technology, recombining with new learning from other fields and from experimentation within the current field. Without copying there cannot be innovation. The more people participating in an economy where innovation through copying is rewarded, the greater our culture and the greater or technological evolution will be. Biology needs to take a lesson from Evolutionary economics.

Facebook, IPO and valuing a company

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This week we’ve been hearing about the debacle that was the Facebook IPO.Which has revealed that some of the underwriters for the IPO were doing shady things. Matt Taibbi believes that this indicates that there are essentially two markets. One for the insiders and one for the schumcks, the every day investors.

Why is this important? Well, based on the discussions I’ve read online, there’s a lot of concern of the validity of the whole IPO process, the valuation methods of companies and how investors think of companies. The valuation of Facebook had a great deal of discussion before the final IPO price of $38/share, this was partially driven by two articles that came out. In the first one it was mentioned that GM was pulling it’s account because “Facebook ads don’t work.” The other article of note relates that researchers found that 44% of Facebook users will NEVER click an ad. This research is important because some of the valuation is based on the conversion rates of ad views to ad clicks. On average Facebook was only able to earn around $4.34 per user. The valuation of $100 billion puts the life time earning potential per user at $100 (at 1 billion users). This is pretty low, but at the same time, if only 560 million users ever click ad, that pushes means the people that do click ads need to be earning Facebook roughly $200.

MIT Technology Review discusses how this is an unsustainable growth model for Facebook. Essentially, Facebook will begin to drive down the cost per view for their advertisers to try to increase their total revenue. This falls into the race to the bottom mentality that crushes industries. Advertisers will be able to say to any website, why should we pay you x amount per ad when we only pay Facebook y there is no way that you can get me more views than Facebook. The only way that a site could get more revenue if they can show data for a higher click through and conversion rates than Facebook. That might be tough. The Review article argues that this will eventually kill Facebook and a lot of the ad driven website business models.

The other aspect of the IPO is a difference in the way that business and technology media are reporting on Facebook. Things have shifted from all the non-business related activities to focusing solely on this aspect of Facebook. This will likely shift over time, but I believe that these considerations will be discussed in any article related to Facebook. If Facebook wants to remain a haven for activists it will be difficult if there are potential suits over people being activists. There will be an increase of risk aversion within the “owners” of the company as there will be influence from investors.

Zuckerberg has said that he plans on doing what is best for the long term and try to ignore the demands of investors. He might be able to do that because he still owns 57% of the voting rights for the company. However, it will be difficult for him to avoid the influence of the discourse of media outlets. Even if he gets all his news from his friends on Facebook, there will likely be articles posted that will give him news about the company and things that he probably won’t want to read.

Essentially, discussions will shift from being about the risk of privacy for users to how changes to Facebook will impact investors bottom line. I don’t think this is healthy for businesses, consumers of Facebook or the general public. There are other things companies do that are unrelated to investors that are important for society as a whole. The Facebook coverage really indicates that we don’t look at businesses in a long term sustainable manner. We need to change this if we want to save capitalism.

Continual improvement, Innovation and Modularity

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I’ve been reading Internet Architecture and Innovation which has gotten me to think a great deal about system’s architecture and innovation (shocking I know), but it has also gotten me to think about continual improvement as well. The perspective that Schewick takes for innovation in a system is actually based off of stock options. If you aren’t aware there are two types of options. Each is used in a different circumstance to sell at a certain price or to buy at a certain price. This has been used in some innovation theories for a while it’s called real options, or taking financial options and using them in a similar situation in real life. The differences is that it’s a go/no go choice instead of buy/sell. In terms of innovation it would be a choice between pursuing a new innovation in a system or not. For example. Let’s say you have a watch and you are trying to improve the time on the watch. Using the reals option approach you could figure out how much money you’d have to have for a return on your investment in the innovation, per watch, and figure out how many different types of crystals you would test to improve the timing mechanism. Another example could be a car, where you’re trying to reduce the drag on the car, which could dramatically change the full shape of the car. Whereas with a watch you may only be changing the crystal. 

Essentially, what this means is that you have two different ways of innovating within a system. Change the full system (car) or change a single module of the system (watch). Reducing the drag on a car could require a full system overall, because you’ll be changing the size of the front end, which could impact the maximum size of the engine (or shape of the engine), or could impact the maximum headroom of the vehicle. So, you could have a radically different looking vehicle from model to model. In fact we can see this if we look at the evolution of the car (below). This change is extremely expensive and requires a huge amount of work. It’s not likely that a company would pursue multiple designs beyond the drawing board or initial mockups. It would simply be too expensive to build multiple prototypes that are fully functional.
Evolution of Lamborghini
With watches you could have the exact same watch with several different materials to ensure the watch keeps proper time. In terms of watches there have been several radical innovations, including the wristband and digital. However, if the watch is not digital, the changes in some parts of the watch are extremely easy to test and compare on the market. For instance many pocket watches use rubies to protect the metal pieces in a watch from rubbing against each other. In this case it’s possible to test many different gems to protect the components, it’s also extremely cheap and if something fails completely it would never move into production. However, you could test hundreds of types of gems (sizes or whatever), at a significantly lower cost than testing many different full system designs.
So what’s the difference between the two? In this case we’re changing a full system compared to a module within the full system. Of course changing the gear structure of a watch would require a full redesign, but there are many parts that can be changed independently. In many aspects this can happen with a car, but there are limitations as well.
This modularity allows designers to innovate on separate aspects of the product without decreasing the quality of the overall system. This same idea can be applied in other business settings in terms of rapid and continual improvement processes. Many business processes are systems that integrate many different groups and aspects. Splitting the system into modular components allows continual improvement on many different aspects of the system at the same time. This modularity decreases the cost of improving individual aspects of the system as well as allows for more improvement projects throughout the system. 
Why would the costs be lower? Well, as I mentioned with the watch, it’s cheaper to test different components for the gems, time keeping crystal and face glass than to test a change in drag for a car. The change in drag could require changes to the seat heights, new design for the windshields, possibly an entirely new chassis. In the case of reduced drag, if the design works you may have to redesign all these other components. In the case of the watch finding out that the new glass face doesn’t work wouldn’t impact which crystal works best. This reduces the costs for testing the improved system.