Film Industry, Digitalization and Creative Empowerment: "Side by Side"

Executive Summary: In the context of the excellent documentary, "Side By Side", here is a quick snapshot of digitalization's impact on the film industry along the dimensions of film making process, creativity, innovation, innovation collaboration, end product quality-trade offs between digital and film, the human factor, and history and trends. Is it digital vs. film, or digital and film? Or is this debate a distraction? From the desk of No-Industry-Is-An-Island-Unto-Itself.

Overview

Digitalization has impacted our lives in many ways, specifically, how we-
- Connect with people,
- Search for, find, and utilize information and entertainment, and,
- Get things done.

Over the years, there has been quite a bit of news about digitalization's impact on the publishing industry (you could blame the NYT's media desk for a lot of it). I have talked about a "fly on the wall" documentary, "Page One: Inside The New York Times", which describes the impact, here.

On the other hand, there has been relatively less news about digitalization's impact on the film industry beyond the usual reviews about special effects laden movies.

How has the film industry been dealing with the digitalization of the world around them?

Some Initial Questions

Waiting in a standby line for the sold out film, "Side by Side", at the Tribeca Film Festival, I roped in fellow film enthusiasts, waiting in line, into an interesting discussion about digital technology's impact on the film industry. Some of the questions raised were:
- Do you lose out on quality (cinematic experience) with digital films?
- Is 3D really better?
- Would actors be replaced by machines?
- Digitalization impacts jobs and people's lives- is it really a good idea if it does that?
- Wouldn't human experience be lesser in movies driven by machines?

Thoughts Before the Screening- Baseline Ideas

My initial reaction to a lot of these challenges was:
- Human beings have been telling stories for ages- this is just another tool to help us tell stories.
- Any narration would always have to rely on creativity in the story, and on how well the story is told.
- Film was a technological advancement in telling stories. Digitalization is just another step in this story telling evolution.
- Human beings would always want "real world" contact with another person (there are anecdotes about conversational skills of teenagers that seem to prove otherwise).

I am of the view that this digital vs. film debate is a distraction. The conversation should be able the story *you* want to tell, and the story *you* want to hear.

"Side by Side"

The documentary, "Side by Side", premiered at the Tribeca Film Festival, provides a bird's eye view of how digitalization has affected the film industry. It was surprisingly well equipped to handle a lot of the questions raised.

Here are a few of the areas it covered:

Film-making Process and Creative Empowerment:

An anecdote by a woman filmmaker summed up the empowering outcome of digitalization. A woman filmmaker (an actor on Girls, on HBO) admits that she would not have been able to make a movie if it were not for digital technology. She was daunted by movie making process as a complex film "undertaking".

As the documentary slices through the various facets of film making you can see this creative empowerment theme through the various film making steps below:
1. Movie development and production:
- shooting and production
- acting and actors
- film direction,
- cinematography and camerwork,
- film editing, and,
- post production
2. Film planning and budgeting decision making
3. Film distribution,
4. Film screening, and finally,
5. Film archiving.

Digitalization has forced changes in the degree of creative control and influence asserted by each step of the creative process. While independent movies had embraced digital technology early on, fully aware of the detrimental impact on cinematic quality at that time, big budget movies appear to have  begun to embrace digital technology as a tool for budget control.

Movie making creativity:

The documentary covers while getting industry greats and pioneers, from George Lucas to Scorsese, to spill their guts about the creative impact of their choice between using film and digital media for their film releases.

While some directors have relished
- the flexibility and freedom of instant feedback,
- the removal of the 10 minute shot, and,
- the cost constraints of using expensive film for footage,
some others have decried the loss of cinematic experience in moving to digital.

One filmmaker was concerned that the quality of films has dropped drastically since anyone can now make a movie thanks to digital technology. Quote: "there is no taste maker". Christopher Nolan believes (and correctly so, for now) that digital does not match film in quality.

Scorsese points out that for effective storytelling, you must return to the wells of human creativity. David Lynch summed the pro digitalization view on storytelling and cinematic experience aptly, by drawing a parallel with the publishing industry, through the analogy that "everybody and his brother has paper and a pen..."

Innovation, and  Innovation collaboration:

A striking example of innovation was the team behind RED cameras talking about how they rigged a camera mechanism overnight to enable the rowing sequence for "The Social Network" to be shot. While George Lucas had collaborated with Sony on "Star Wars: Episode 2" to move digital camera technology along, this is a different order of innovation collaboration.

As with changes in creative control and influence exerted by each step of film making, the potential for innovation is leading to a need for greater collaboration and participation across each area associated with movie making.

End Product Quality- Trade offs between digital and film:

The documentary pulls no punches on the technical details of how film captures images and how digital technology has advanced over the years. Digital technology, in many ways, is still short of the cinematic experience that film can provide.

While digital technology is catching up, it has a lead in:
1. Night sequences of the type shot in the movie "Collateral",
2. Movies of the type "Star Wars",
3. The active sequences of the type shot at the beginning of Danny Boyle's "Slumdog Millionaire", and,
4. The rowing sequences in the movie "The Social Network".

The Human Factor:

The movie making team is changing on the dimensions skills, creativity expectations, collaboration, creative control and turnaround time.

"Side by Side" clearly lays out the human impact of this massive change. George Lucas had to call a summit at his home to deal with the backlash from his decision to shoot Star Wars: Episode 2. Some members of the industry accused him of shooting on film and claiming he was shooting in digital, because "digital could never be that good".

It has been a tumultuous period for the film industry, with old skills being replaced by new, especially in functions like editing, and post production.

History and Trends:

The film covers the gamut of the movie making ecosystem, from George Lucas' and James Cameron's big budget movie technology toys to a student at NYU's film school, shooting a film on a Canon 7D. Her take was that while the Canon 7D is not a movie camera, it allows her to focus on the story and turn in her project within the time and budget constraints.

Conclusion:

The film industry has had its fair share of upheavals, like the publishing industry.
It will continue to embrace the advantages of digital technology.
Story telling skills will always be in demand.

Finally, this all hinges on the movie goer enjoying the experience. That has been a different story altogether, as you can see in this article here:
http://www.nytimes.com/2012/05/20/magazine/how-to-enjoy-going-to-the-movies-again.html?_r=1&smid=tw-nytimes&seid=auto

My view? This documentary put me firmly on the side of the view that this debate is a distraction. It should be able the story you want to tell, and the the story you want to watch. Use the tools you believe will help you deliver and enjoy the experience your way.

What do you think?

Creativity, Market Domination and Innovation

Executive Summary: Filter thoughts on creativity, competition, and market domination, through the lens of experience and business history. Play devil's advocate to the obvious- Is all creativity about finding monopolistic market positions? How about sustaining advantages through competition? From the desk of Silver-Bullets-Are-Often-Traps.

Overview
David Brooks wrote an interesting article on creativity, and the importance of creative minds seeking monopoly like market domination, for society:
http://www.nytimes.com/2012/04/24/opinion/brooks-the-creative-monopoly.html?_r=1&ref=davidbrooks&pagewanted=print

The article has some great lines, like "we sometimes confuse what is hard with what is valuable." I also found this article to be a good springboard to sift through some common thoughts and touchstones about creativity, competition, monopoly, and market domination.

An example from the non profit world, ModelAlliance.org, and its founder, Sara Ziff, may well be textbook cases for David Brooks' article. To get us started, let's break the article down into two contexts: Creativity in Industry and Business, and Individual Creativity.

A. Creativity in Industry and Business:
Let's pick key thoughts in the article around this context and find supporting cases for them.

Quote 1: "We often shouldn’t seek to be really good competitors. We should seek to be really good monopolists."
If you are familiar with the different flavors of innovation, David Brooks appears to be saying that breakthrough, disruptive innovation trumps incremental innovation.
Let's take Pharma industry as an example- the policy support for orphan drugs dovetails with this view.
In the technology industry, Facebook could be touted as an example of this strategy.

Quote 2: "It’s often more valuable to create a new market and totally dominate it."
Besides Facebook, Apple products like the iPod, iPhone and the iPad come to mind.

Quote 3: "The competitive spirit capitalism engenders can sometimes inhibit the creativity it requires."
Clayton Christiansen's examples from the hypercompetitive hard disk industry seem to support this. Business is littered with examples, where an organization's momentum often prevents it from acting differently, when required, to maintain leadership through market change. IBM had to face a major crisis to undergo change.

Quote 4:  "Value to society is often bigger (with dominant market positions)".
Facebook is being valued at over $100 Billion. That is a useful yardstick for impact on society.

Following this train of thought leads to these questions:
1. First Mover Advantage:
Are we only talking about the first mover advantage here?
There are very few business contexts where a first mover maintains a competition free market position indefinitely, or for a long time.

2. Sustaining the first mover advantage:
Once the market has been created, would you need skill in competition to find dominating differentiation, and to maintain profit margins?
Would you call that incremental innovation?
Or would you call that moving the market/ shifting the goal posts every time competition makes a move?
The current Apple iPhone 4S, and iPhone 5 rumors, are examples of this tactic.

3. Supporting Environment:
What kind of industry, business, public policy and cultural environment would support this consistently?
Would society be able to substantially increase the number of disruptively innovative people, and also allow a significant percentage of them to demonstrate achievements at a significant scale in society (these are two separate things)?

4. Impact on Society:
Given that several world economies have lost out on manufacturing exports, where sustained, incremental innovation is important, would it be fair to call breakthrough innovation a silver bullet?
Would a "portfolio" strategy toward innovation be more effective, whether active or passive (creating the right conditions for all type of innovation to prosper)?


B. Individual Creativity:
An individual's decision paths are complex, and heavily driven by the environment he/ she operates in. However let's simplify this section with some "devil's advocate" questions:

Quote 1: "Instead of being fastest around the tracks everybody knows, creative people move adaptively through wildernesses nobody knows."
This is a great description of one type of creativity. This type of person would be in the same category as Beethoven and Picasso. If even Steve Jobs could be said to have x number of great products in him, would you say this type of creativity is common?
What social, economic and cultural context would you need to harness this creativity?

Quote 2: "Competition has trumped value-creation."
In an effort to create value, wouldn't you need skill at competing for resources to achieve your monopolistic position?

Summary
Creativity and innovation come in many flavors. Diverse social, economic, cultural, and market structures may be required to support them all. Can we tweak these structures to support one type of creativity and innovation, with the intention of benefiting society more? Would it work, i.e. would it truly benefit society?


What do you think?

Netflix and Organizational Capabilities

Executive Summary: While I previously shared a thought exercise (link) on the kind of capabilities Netflix can demonstrate against its competition, this post is about the hard work that goes into creating an organization where teams work in concert, and in diverse ways, to develop these competitive capabilities. From the Desk-of-George-Lucas-Theory-When-In-Doubt-Make-Star-Wars-Prequels.

Why am I talking about Netflix?

Three reasons.

1. Innovation:
Netflix has been called an innovator that leverages its investments into innovation effectively towards business capabilities.

2. Market Capabilities:
Recently, there was news about Netflix looking at original programming, that kicked off this thought exercise on innovation and tactics below:
http://randomjunkyramblings.blogspot.com/2011/03/innovation-and-tactics-series-netflix.html

3. Distinct Context:
Unlike the iPhone, Netflix has entered existing markets and upended them without much "confetti about cool". It's almost like a B2B company in a B2C market.

What does Netflix mean for Other Organizations?

Netflix continued to invest in streaming capability for many years, before launching the product. This demonstrates a long term thinking about its business and its markets.

How does an organization connect
a. investing in long term capabilities, and,
b. thinking about markets,
In hindsight, all of this is as easy as pie. Lets look at the challenges.

Challenges with Making the Organizational Connections:

Let's take two cases within two functions in an organization.

1. Finance:
Say you are a business finance manager, and a business manager comes over to you about a prototype he would like to acquire and integrate into the company's product and marketing portfolio. How do you not only help him acquire the prototype, but also give him the leeway to invest time and resources toward patiently integrating an early stage startup product into a reliable portfolio asset at the company?

2. Marketing:
As a marketing manager, say, you realize you need an organization wide communication and analytics sharing capability to meet the product and competitive environment in the medium term. What kind of marketing programs, and in what prioritized order, do you push, to deliver phased, sustained capabilities to your organization over the medium term?

Suddenly, this doesn't look all that easy, does it?

For managers battling to get things done within their silos on a daily basis, these are not easy questions to answer. Thinking about this gives you the scale of the effort that an organization needs to put into developing capabilities that impact its markets.

What do you think?

Innovation and Tactics Series: Netflix Bids for Original Programming.

Executive Summary: Netflix has been lauded for its ability to manage innovation, especially for its ability to translate innovation into real impact on its business. This post helps us think through some of the market possibilities it can target. From the Desk of "Is it a bird? Is it a plane? Its a... Jedi mind trick!"

The News, The Question

Netflix seems to be making interesting moves in content production:
1. http://www.theatlantic.com/business/archive/2011/03/netflix-plays-the-long-game/72611/
2. http://blogs.forbes.com/chunkamui/2011/03/17/how-netflix-innovates-and-wins/

The news reminded me of a curveball I recently threw to some very bright folks:
Will Netflix get into running movie theaters (or atleast renting them out temporarily)?

What Does The Question Mean?

The folks found the question interesting enough to pause to think it through. This is not because they did not have a (what may seem like an obvious) ready answer, but because it should, and apparently did, make you think about Netflix's context and how it is disrupting the context around it.
To rephrase:
1. Can Neflix groupon its at-home viewers into a high quality, custom generated "in theater" experience?
2. Can Netflix be vertically integrated in a niche market, while still serving what is currently its core market?

All in all, how do these ideas impact its profitability and its margins? At worst, can a capability to pursue the option posed in the question be a useful negotiation tool?

To dig a little bit deeper:
- What about Netflix's current position and capabilities (e.g. continued investment in innovation) provides it a competitive advantage?
- As Netflix get to know more of its customers better, how can it leverage it's information better?

Structure Around the Question

Here are a couple of paths to making sense of this question on Netflix:
- Content Development and Production -> Content Channels and Distribution -> Content Consumption
Or the reverse:
- Content Consumers and Markets -> Content Channels and Distribution -> Content Development and Production

Deep Dive Into The Market and The Consumer

Lets walk through the first way of looking through this process:
A. Who is Neflix's core consumer? What market is Netflix targeting?

1. Viewers of TV and movie dvd like content "experience" at home with access to a mailbox and to an internet ready device?
2. Viewers of video content "experience" at home with access to an internet ready device?
3. Viewers of an entertainment "experience" anywhere with access to an internet ready device?
4. Viewers of an entertainment "experience" with access to an internet ready device or with access to a specific location?

Now, you can define a spectrum of "experience" as well, from a streaming video "experience" on a small device while on the move, to a fixed location video "experience" of the IMAX or the "IFC Theater"/ "Indie Movies" sort. As for margins, isn't the IMAX share price hear its LTM high?

Now that you have some lightbulbs flashing in your mind, need I say more?


What do you think?
 

Innovation and Tactics Series: Groupon Wants My Married Friend to Speed Date.

Executive Summary: A light hearted look at the marketing tactics arising out of Groupon. No, I don't mean Groupon...zi. From the Mark Twain Desk of Funny Bones at the Jeffersonian.

Groupon wants my married friend to speed date! Really! Well, technically speaking, my married friend received a groupon for speed dating. I am sure you can see the humor in that. :-)

The smart folks would jump to thinking of this as a marketing, even statistical, error. However, this could well be the Jedi mind trick of the year so far- after the cool VW darth vader superbowl ad.

How? Here are some ideas...
1. Don't your married friends keep setting you up with dates? Duh, right? You would think their persistence factor would beat any email spam marketing tool known to man, or woman.

2. Do you know what the divorce rate in the country is? This could well be a long term, relationship building strategy for a future target audience. Disclaimer: A bright, married friend suggested this when I put this up on Facebook, so don't shoot the messenger.

3. Its an error- my friend would be one of the few, or many, random, in error recipients of the sophisticated, targeted statistical model used for the promotion.

I am pretty sure you have some ideas of your own. What do you think?

Cloud Computing and Innovation in Sourcing Strategies?

Executive Summay: A speculative look at innovation in sourcing strategies driven by Cloud Computing, based on pricing complexity and on third party players and standards helping develop seamless integration across vendors.

Would the adoption of cloud computing across industries lead to innovation in sourcing strategies? Would it lead to innovation in how the sourcing strategies are implemented?

Tried and tested single, dual or multiple vendor approaches exist, along with bidding mechanisms. If we are to speculate on potential for innovation, below are some possibilities. These are driven by the increasing complexity seen in the pricing of sourcing contracts- the elements of which sometimes resemble derivatives transactions.

1. Does the future hold structured arrangments where cloud computing locations (think: risk management/ disaster recovery/ pricing & capacity management) are transparently bundled into dynamic pricing of services? E.g. Dynamic energy trades/ demand management in the enery sector?

2. Does the future hold structured arrangements where multiple vendors could transparently bundle their services in a dynamic pricing model? E.g. Advertisers bidding on Google search response positions.

As you can see, this speculation rests not only on pricing going "derivative", but also on the emergence of a "glue" that holds all this complexity together and packages it for translation into everyday use.

Getting an answer to this can be broken down into the following steps:
1. Current state of the art in, and future trends in the industry:
- Are the players specializing? How?
- Which tiers of the computing infrastructure are being moved to the cloud and how?
- How are different sectors engaging with cloud computing and its vendors? E.g. Data privacy concerns in healthcare and financial services. We have covered some thoughts that impact this here:
http://randomjunkyramblings.blogspot.com/2009/08/privacy-and-social-media.html

The current state analysis process may be similar to the one we previewed for the consumer electronics industry here:
http://randomjunkyramblings.blogspot.com/2010/01/consumer-electronics-show-ces-2010-ce.html

2. Alliances:
- Is there a potential for alliances between players in the sector? Or would any partnership within the sector be a step toward mergers and acquistions?
- Is there a potential for vertical alliances? E.g. Cloud computing providers and Google Analytics?

3. Development of Third Party Standards for Cloud Computing:
- These would range from metrics to methodologies across quality of services, monitoring and executive reporting.


What do you think?


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Aiding Economic Recovery in a Recession- The "I" of the Tiger

Aiding Economic Recovery in a Recession, a.k.a. The "I" of the Tiger, from the desk of Bengal-Tiger-Crackling-With-Ideas.

Executive Summary: There are various ideas and approaches being thrown about to help economic recovery out of this recession. Below is a recently published WSJ article by M. Zuckerman****. He suggests budgetary control, but also spending in "regeneration" programs focused on technology and infrastructure. We look at these through the lens of the GDP. We will expand on this and finally tie this in with Innovation and Animal Spirits.

The Background- Aiding Recovery
There are two broad streams of thought when it comes to aiding recovery. One focuses on cutting all cost and bailout toward balancing a budget, with "let it (a company) fail" as the mantra. The other focuses on providing large doses of temporary stimulus that would be followed by an extended period of belt tightening.

Below is a recently published WSJ article by M. Zuckerman**** that seems to belong to the second stream of thought. He suggests budgetary control, but also spending in "regeneration" programs focused on technology (tied in some way to innovation) and infrastructure.
The Article:
http://online.wsj.com/article/SB10001424052748703837004575013592466508822.html?mod=loomia&loomia_si=t0:a16:g2:r2:c0.133655:b29954458

Proposed Solution: The GDP Lens
Looking at it in terms of the GDP, where GDP = C + I + G + (X - M), the article can be summarized as:
 Big C (Consumption) goes down, G (government investment) goes up to assist in increasing I (private investment), and eventually "I" will limp back to normal, finally leading to a ratcheting down of G. Note that I am not talking about X - M right now.

I will admit that investing in infrastructure and technology via government regeneration sounds great. That's supposed to be the "soft", "behind the scenes" aspect of government spending led recovery in this equation. We can also look as some background on debt and economies below:
http://randomjunkyramblings.blogspot.com/2009/12/debt-and-economies.html


Proposed Solution: South Korean Precedent?
Now, South Korea seems to have pulled off something similar to become an OECD economy. South Korea racheted up debt to support imports of technology and machinery, which led to an increase in exports, and kickstarted private investment. The Chaebols, in this case, were instrumental in this maneuver.

* However, can this maneuver by South Korea be called a precedent?
* Was it, and is it now, easy to pull off?
* Could you call the Chaebols in South Korea a strong government-industry partnership?
* Is a very tight government- private industry partnership feasible in the US?
* Does the tight partnership help in managing and spurring innovation? If yes, is the spurring of innovation, and eventual reovery, quicker or slower than in other approaches?
* Can an increase in G truly substitute, or directly lead to, for an increase in "I"?
* Does an increase in G, at best, keeps the social fabric together, and provide a base on which "I" can rebuild? If yes, is there a minimum and a maximum turnaround time for "I", coming out of economic shock?

Perspectives on how economic recovery would assets itself globally are linked below:
http://randomjunkyramblings.blogspot.com/2010/01/economic-recovery-patterns-and-globally.html
Now, lets focus on the "I" of the Tiger.

The "I" of the Tiger- Funding the Recovery
How do we bring "I" back into business? The government could directly hand money to individuals and businesses, or it could hand it to banks and cajole the banks to make the right lending decisions. As we know, too much liquidity brought us to the real estate bubble. So, lenders/ investors/ government/ banks- whatsinaname? - must exercise "good judgement" in their practices.

* Do we have enough "good judgement" to go around for the massive influx of funds bottlenecked in the financial system/ sitting with the government?
* How do we prevent another bubble?
* On the flip side, how do we ensure that the distribution system works, makes money and hence leads to economic activity?

I am reminded of a conversation at a solar energy panel in 2008, where some folks were of the opinion that funds for solar energy projects were available, but they were tied up with the government (DoE?). The government had a poor track record of investing and ideas floating around including getting investment bankers to the party.

Since we are thinking about the what and the how of aiding economic activity, lets talk about innovation.


Technology and Innovation
Now, I have previously talked about innovation- an example is the link below.
http://randomjunkyramblings.blogspot.com/2010/01/innovations-impact-on-economy.html

However, lets get into some detail.
* Do good, fundable ideas arrive in some sort of random manner, or can we increase them by just waving money (and tweaking some more factors, if you like. E.g. increasing unemployment, etc.)?
* The VC industry is currently undergoing some sort of contraction as well.
* Research states that MITIE's (an arm of the Japanese government) investments in the electronics industry did not have a significant impact on it.


Animal Spirits
This is where "Animal Spirits" comes into play. You could call it the natural ability of a people to take risk, to innovate and/ or to build. Naive optimism, if you like. Some previous thought on Animal Spirits can be found here:
http://randomjunkyramblings.blogspot.com/2009/07/art-of-stimulus-and-economics.html

Are people taking risks to build something they believe in? I recently stumbled across a little cocoa shop in the city- the team had taken up an empty store for their venture while the real estate company looked to fill the space. Very enterprising, and they had a good product too! I really hope that company does well. More about it here:
http://randomjunkyramblings.blogspot.com/2010/01/entrepreneurs-corner-organicoa-and.html


Conclusion
The cocoa shop example tells me that the US is still a great place to turn good ideas into great engines for growth. I am keeping my fingers crossed for all the good, bright folks out there who have found/ are about to find a great idea.


What do you think?


Some more thoughts on aiding economic recovery can be found here:

http://randomjunkyramblings.blogspot.com/2009/07/economic-crisis-and-art-of-stimulus-to.html


--
*****Note: The article was posted on a macroeconomics forum by Prof. Rosensweig to kick of a debate on approaches to recovery. The ideas here were posted in a condensed form at the form on January 24, 2010.

Innovation's Impact on the Economy

Executive Summary: We have perspectives on measuring innovation's impact on a company and even on a sector. How do you measure innovation's impact on the economy? Would this information help government/ economic decision-making in any way?

The Background
There is some interesting an exciting work around innovation and organizations- The name Clayton Christensen immediately comes to mind. There also is some insight on innovation an industries- specifically clusters.

At CES, 330 companies joined 2500 existing companies in debuting 20,000 products. Now, given all the hype generated around the iPad and around CES 2010 in these tough times, how would you attempt to measure innovation's impact on the economy?

The Avalanche of Questions
* Does innovation make a significant dent on the economy (especially if the economy is driven by the Big C- Consumption)?
* Does innovation become more, or less, important during tough times for the economy?
* Does innovation help in economic recovery?
* What kind of innovation is best for economic recovery and well being?
* How do we categorize innovation- diruptive, incremental and something-in-between?

One Method to the Madness
Lets indulge in some rogue behavior and dive in approaches. We can then step back and evaluate value and ease of obtaining data elements of each approach. One approach would be to add up all the revenues of "innovative" products et voila! Given a consumption economy, does it really matter?

* You might argue that the revenue from some complex technique- say the legal mechanism that allows sovereign funds to invest in key infrastructure assets- may not easily be classifiable as an "innovative product" or service. Fine. Make an executive decision- in or out, or even halfway in.
* You might also argue that some of these products may have been manufactured elsewhere- well, then that shows up as trade or investments doesn't it?
* Why are we only looking at revenue? What about the rest of the financial statements of the firm in relation to the product?

Another Method to the Madness
Now, do you believe that the way out of a current economic quagmire is to focus on production of goods and services, and start saving?


How about trying to build an optimization function/ index that tries to minimize Big C (consumption) in the GDP?
 
The Model
Could we start by categorizing innovation with this objective in mind? Yes, it is a different way of thinking, and I am pushing the envelop a little, but I am sure we can come up with some sort of back-of-the-envelope index? It, tongue firmly in cheek, need not even be as rigorous as zero carbon footprint.
 
The Data
What do we really need for a rigorous approach here? Firm financial statments broken down by products? As easy as ABC (pun intended with Activity Based Costing)? Also, mapping these components to their net effect on the elements of the GDP?
 
What do you think?
 
Here's a crazy thought:
Would this sort of granular data help the government make more effective decisions in the interest of the economy?
 
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Innovation and Effective Healthcare for The Masses: An Oxymoron?

I tread carefully when it comes to discussions on optimizing healthcare solutions for the masses because Stephen Hawking's image crops up in my mind with this question: What if we designed a wonderful system that made it really difficult for Stephen Hawking to seek assistance at any point in his life? Replace Stephen Hawking with any person important to you, or who you believe is important to society, and you know what I mean.

Teams designing an effective healthcare system for the masses have challenges on sustaining innovation that are slightly different from those faced by mass market consumer products companies.

For a mass market beverage company, the challenge in supporting innovation may exemplified by the case of the Quaker Oats Company product portfolio acquisition. However, for regulators designing an effective healthcare system, the real challenge in societal optimization of healthcare lies in supporting innovation "pathways" through:
1> supporting basic research, and,
2> providing markets, processes and infrastructure for very expensive drugs to hit the market, and,
3> providing patients means to seek solutions outside the "mass" healthcare system.

For patients that have to pay out of pocket, then the government must make this process seamless, painless, and provide structures that help individuals extract some "economic rent" from (no apparent or direct attached economic benefit to) society. Depending on the context, you could call easy access to private, non profit foundations, to help fund your recovery, a form of economic rent.

In fact, the government may leverage experience with organ transplants for designing these "innovation pathways": http://www.organtransplants.org/understanding/unos/

The three points listed above are examples of the way certain "types" of innovation may stop getting support once creating and sustaining a mass market healthcare system becomes a prime focus of the society. I realize I am effectively proposing an indirect subsidy for innovation. I am in favor of this sort of indirect subsidy, because my hypothesis is that this may have a multiplier effect on drug research. My perspective is that this indirect subsidy would be similar to the investment in national highways in the last century.

What do you think?


--

NYC Internet Week: Business Impact of Innovation

As part of a NYC Internet Week gathering, I got involved in a discussion on business impact of innovation in technology with two representatives from Pond5.com, Dana and Tom.

We discussed the poster child for technological innovation- the XEROX PARC center at Palo Alto. It was filled with the brightest minds who came up with amazing innovations in computing that are taken for granted today. Dana mentioned that the facility is a shadow if it's former self and is reflective of Xerox's current state of affairs.

The center had the first PC like workstation ready in the early 70s (the mouse was at hand in the 60s) and the Graphical User Interface available in the late 70s, but these brilliant ideas lay around within the walls of the facility. However, they captured the imagination of Steve Jobs, who successfully pushed them out to the market and created a successful company out to them.

The question is, was Steve Jobs alone responsible for the business impact of such innovation? Was Bill Gates the primary force? Would you also consider advancement in manufacturing technology, as well as the Palo Alto cluster of innovation bringing skilled individuals together as important factors in the business impact of innovation?

Another thought to consider- isn't Xerox also continuing to innovate in some way? Are there levels of innovation? Based on my brush with managing innovation at a beverage company, can a gated process truly manage innovation?

The impending release of newer versions of the iPhone, and the apparent dependence of Apple stock value on Steve Jobs' presence in the company, are interesting cases that make you probe the nature and sustainability of innovation.

What do you think?

Panel: Venture Capital: “If it ain’t broke…” Does the VC Model Need Fixing?

The discussion focused on the parameters within which the VC industry currently operates

A return to fundamentals
The discussion kicked off with a return to fundamentals:
1> Most venture capital firms are not setup to make small investments
2> Venture capital firms are more like asset managers
3> Deal making is not easy: A deal like that of EqualLogic was hard work for all parties involved
4> The venture capital business is fundamentally not about fundamental research for revolutionary technologies, but about applying technology
5> Depending on the industry, the average holding period can be up to 9 years
6> As the market for the pre-IPO company matures, it should grow larger, providing the opportunity for late stage venture capital firms.
7> Exit strategies are critical to the model. Is there a vibrant IPO market? Are there private company sales opportunities?

Investing during the economic downturn
The panelist opinion was that the quality of business plans and management teams gets better as the economy goes down. The panelists emphasized that they are being extremely selective; they are not into throwing 50 bets at the solar power industry.

A panelist pointed out that the CEOs of their portfolio firms were upset by the Sequoia deck. The economic downturn, though, has led them to revisit their breakeven analysis.

Economic cycles and the industry- a perspective
A panelist had an interesting perspective on the economic downturn- the VC firm sells a company to Microsoft in the good times -> Microsoft cuts products and jobs in the bad times -> the resources are back in the VC fold working on the next product.

Venture Capital Fund Management
Funds are structured as financial managers who can find good business managers, as opposed to operational managers making funding decisions.

In January 2009, Kleiner Perkins, raised a so-called “annex fund,” or reserve fund it can tap to support companies it has already backed to help ensure they get through the downturn.
http://venturebeat.com/2009/01/14/kleiner-perkins-forced-to-reach-out-to-new-investors-unheard-of/

Outside of the one off hits, a panelist pointed out that returns in the 4x range would be rare in exits. Valuations were down 50%, B and C round valuations were down 20% and 30 % respectively. Another panelist stated that the venture capital industry was saved from a sever flight of capital by the buyout collapse.

Some the questions that arise:
1. Do lower valuations imply a longer time to complete transactions, and require a better understanding of the potential investment’s core business?
2. Would there be a shakeout in the industry that favors more late stage firms that have strong networks with large, potentially private companies? Would the shakeout lead to a reduction of the number of multistage firms?
3. Would late stage venture capital firms resort to private investment in public equity (small cap companies)? Even at the risk of serious strategy drift?
4. Given the odds of hitting the ball out of the ballpark (and I am not even talking about the odds of innovation), how should a venture capital firm get more selective?
5. Given the context of the Kleiner Perkins Annex fund, would a fund consider trading extensively in a secondary private market only when it is considering liquidating? Would partial portfolio/ strip sales be a serious option? Would some sort of a CDO like market structure be useful in the venture capital industry?
6. How are funds helping the LPs? Is it just via managing the drawdowns?
7. Are more LPs checking on estimates on deal flow and deal sizes to assess the impact of the economic downturn?
8. Are investment charters of old portfolios being modified to provide more flexibility to the venture capital firms?
9. How frequently are LPs assessing their asset allocations strategies and communicating with funds to execute revisions?

What do you think?


The Usual Disclaimer: This is purely a knowledge sharing resource and I have been careful to protect panelist/ speaker interests. Ethically, context is everything, and I will gladly retract anything that affects the parties mentioned. Call this my mini OpenCourseWare, if you will, where Open signifies life experiences.

Conference Panel: Healthcare in India

Before stepping into the panel, I had a pretty linear approach to the Indian healthcare business:
1> Regulatory frameworks -> IP, constraints.
2> Industry-> market structures, services, and maturity of symbiotic players.
3> Consumers and Markets-> segmentation.
4> Companies-> Revenues-> Products and Services; Costs -> Manufacturing, Distribution, Licensing.
5> Distribution models.

Listening to the panelists from Pfizer, a healthcare company (Apollo Hospitals), a generic drugs company (Dr. Reddys) and Carlyle, I began to focus on 2 takeaways:
1> Healthcare Framework and Policy Innovation: The parallel here is the effort in the Indian Financial Services sector to develop frameworks given the results in the US financials "market". Another parallel is the U.S. music and film industry.
2> Business Model Innovation: Focused on access to healthcare services and drugs. Access equates not just to distribution, but also to price points. The parallel here is the U.S. (global?) music industry.

Healthcare Policy Framework Innovation
1> The "Access" Case for Policy Frameworks:
Amit Patel from Dr. Reddy's made an interesting point that bringing down price points in drugs, patented or otherwise, may bring about increases in revenues, due to increases in volumes of users. He carefully avoided talking about elasticity, but he was effectively driving at segmentation and managing the segments.

How is this thought process relevant in the Indian Healthcare context? Unlike in the U.S.- given the context of healthcare insurance in the US- the price of a drug effectively forms an access barrier to those who need it. Healthcare in India invariably involves a large out of pocket expense component.

These access issues roll up into a need for policy frameworks that develop multiple markets and multiple market entities that collaborate to serve unmet demand.

2> The IP Case for Healthcare Frameworks:
Again, the panelist from Dr.Reddy's pointed out that a patent regime is an outcome of a particular economic environment and necessity. The U.S. music industry is coming to grips with markets evolution driven by technology. Do the U.S. music and film industries need to rethink how they look at IP and its enforcement? Would they have to take another look in the future?

3> Policy Roadmaps:
How about applying an idea, similar to product roadmaps for agile development, that I suggested here:
http://randomjunkyramblings.blogspot.com/2008/03/conference-panel-infrastructure-in.html

Business Model Innovation
On distribution, the value chain, and operations, I find parallels between the music industry and the healthcare industry. Supply needs to innovate to stoke Demand.

More about this as I add to this blog.

Conference Panel: Selling to the Indian Consumer

Amazing insights from consumer electronics and retail consulting. A consumer electronics company was focusing on the top 30 cities, despite indicates that the rural market had as much disposable income as the urban market. This raised a couple of questions from me during the panel.

What kind of innovations in distribution do we see in India in the next 5 years?

What do you think?

Can the Consumer Electronics companies contribute to more active usage of the cellphone screen? This query had an interesting response and an unexpected fact component- India uses only about a third of the spectrum that the US currently uses.

Does the Indian cellphone consumer need an industry association comprising of consumer electronics companies, software companies, infrastructure companies and investors to encourage more active usage of the cellphone screen?

What do you think?

The Usual Disclaimer: This is purely a knowledge sharing resource. Ethically, context is everything, and I will gladly retract anything that affects the parties mentioned. Call this my mini OpenCourseWare, if you will, where Open signifies life experiences.

Conference Panel: Infrastructure in India

Commenting on the delays in getting infrastructure projects off the ground toward creating a project pipeline, G.V.Sanjay Reddy, Vice Chairman, GVK Industries Ltd., pointed out that it is more important to get decisions made in getting infrastructure projects off the ground as opposed to developing detailed policy frameworks. That's the 30,000 foot eyeview of the problems in execution.

This, coming from an India company, seems to make sense. The India company has expertise in managing vested interests throughout the project lifecycle and a greater appetite for management risks.

Could there also be a realization that once Indian firms develop core capabilities and differentiate, a network of firms/ contractors/ sub-contractors model would become feasible?

Another thought that I would have like to pose to the policymakers is the consideration they give to developing policy roadmaps.

What do you think?

The Usual Disclaimer: This is purely a knowledge sharing resource. Ethically, context is everything, and I will gladly retract anything that affects the parties mentioned. Call this my mini OpenCourseWare, if you will, where Open signifies life experiences.

Conference Panel: Media & Entertainment in India

TATA Sky setup a nationwide support structure in India, flat. It is growing at a pace that is set to drive the company to leadership in satellite TV subscriber base.

How does a company manage operational decisionmaking, organization structure, core competencies, vendor relationships, training, and breakeven in such a context?

What do you think?

Given that India has over 250 MM cellphone screens, versus upto 50 MM in PC screens, how do service providers support the growth of applications and products for the cellphone screens? Does a Microsoft-Facebook dealmaking approach work in an Indian context?

What do you think?

1> India seems to have a lack of startup oriented risk-taking despite a large pool of enterpreneurs.
2> The Indian market does not have mature "competitive" technology clusters and mature financial players that support various stages of a company's lifecycle in a cluster.
3> Leaders from Microsoft India, pointed to a lack of expertise in business models.

This lack of business model innovation may be impeding a ramping up of local application/ product based activity. Would a Microsoft-Facebook type deal-making model- as a means for service providers to support cellphone market development- work in India?

What do you think?

The Usual Disclaimer: This is purely a knowledge sharing resource. Ethically, context is everything, and I will gladly retract anything that affects the parties mentioned. Call this my mini OpenCourseWare, if you will, where Open signifies life experiences.