Continuous Learning

Below are the web clippings of the day. Enjoy.

• Costco: The ‘anti-Wal-Mart’ - MSN Money
  
  We all love Costco

• Why Toyota Is Afraid Of Being Number One
  
  Covert operation - how to quietly become number one at the same time without anyone noticing it happening. Toyota is pushing the state of art on disruption against American’s own favorite companies.

• Customer Satisfaction Elite
  
  These are the top companies with best customer services. I couldn’t help but notice that 3 out of 25 companies are from the Pacific Northwest Actually 4 if you count UPS which was founded in Seattle long long time ago.

• Don Dodge on The Next Big Thing: Why Microsoft will not fall into the Innovators Dilemma
  
  Will Microsoft be trapped in Innovator’s Dilemma and unable to respond to Google? Don Dodge argues otherwise and believe that Microsoft’s client/server/service vision will be difficult for Google to counter.

• Linux — Not quite ready for the desktop
  
  Why Linux is still difficult for the majority of average users.

Below are the web clippings of the day. Enjoy.

• The Future of Personal Computing ? - Blog Maverick
  
  Mark Cuban believes that game console + networking computing will take away powers enjoyed by Microsoft, Apple, etc on PC.

• Don Dodge on The Next Big Thing: Mark Cuban on the future of computing - game consoles and thin clients
  
  Can we do everything on game console? While it is correct that game console appears to be where the demand for processing power is still insatiable, it might not yet be the center for everything else, yet.

• Is Teacher Underpaid?
  
  Is teacher underpaid? Do higher pay lead to better schools? “The fact is that teachers are better paid than most other professionals. What matters is the way that we pay public school teachers, not the amount.”

• Note to Steve Jobs: unions are only half of school?s problems � Scobleizer - Tech Geek Blogger
  
  More on reactions to Steve Job’s comments on teachers - thought is to offer higher pay to teachers + hiring bad ones. The comment thread has some very good dialogues.

• AP Wire | 02/16/2007 | Apple CEO lambasts teacher unions
  
  Steve Jobs claims that school will not be improved until the system can change. Unionizing protects bad teachers and removes incentives to improve.

• Don Dodge on The Next Big Thing: Steve Jobs says teachers unions protect bad teachers - can’t reward the good ones
  
  Teachers actually make more than many other professionals - the problem with school is not the lack of money but rather lack of incentive and competition.

• Voodoo Chile: 4 Management Lessons from Rock Guitar Wars
  
  You can find disruptions even in fields such as electric guitar industry. A very interesting perspective on how a company changes the rule of competition in electric guitar to challenge the incumbents.

Steve Job threw a grenade to RIAA yesterday and it exploded in the blogosphere!

The third alternative is to abolish DRMs entirely. Imagine a world where every online store sells DRM-free music encoded in open licensable formats. In such a world, any player can play music purchased from any store, and any store can sell music which is playable on all players. This is clearly the best alternative for consumers, and Apple would embrace it in a heartbeat. If the big four music companies would license Apple their music without the requirement that it be protected with a DRM, we would switch to selling only DRM-free music on our iTunes store. Every iPod ever made will play this DRM-free music.

As a technologist, I agree with others that DRM does not work today, and that getting rid of the DRM constraint is probably the best solution. However, I can see why some think Job is a hypocrite. After all, Apple is not exactly a weakling being pushed over by the 800-pound RIAA, and Job’s argument that licensing DRM technology is difficult does not hold water from technical/business perspective.

Of course, given Apple do not own these songs they would have to license by RIAA terms. Job’s judo move is quite mastery indeed. It would be more interesting to see whether he answers the same way with regards to digital movies, given his interests in Disney/Pixar.

Can RIAA pick their heads up from the sand to face reality of internet? As an outsider I can’t tell their motives, but perhaps they are smarter than what we outsiders give them credit for. After all, they probably know if they let go of control, internet will evaporate their business models quickly - this might be why they rather call their customers thieves than taking advantage of the model.

Let time be the judge

Today’s web clipping has a shipping theme to it.

Shipping Isn’t Enough

Instead of measuring by shipping code, true success only comes from having users.  And that means developers should do things outside of "coding".

A smart software developer knows that there’s no point in writing code if it’s code that nobody will see, code that nobody will use, code that nobody will ultimately benefit from. Why build a permanently vacant house?

…

Things like documentation, interaction design, cultivating user community, all the way up to the product vision itself. If you get that stuff wrong, it won’t matter what kind of code you’ve written.

Great point, and one often missed in many corporate environment where no one is empowered to do anything, as pointed out by Mike…

We are not talking about Software as a Service here, but rather selling services to produce or customize software products. For tax purposes, government lumps anything that they have not categorized as services. It means just about anything can be called services, so we will not exhaust the possibilities. Instead, we will focus on the following - Add-ons, Consulting/Customization, and Custom Development.

Advantage

Compared to software product models, the enticing part of software service businesses is the lower barrier to entry and potentially steady revenue. You can start a service business as long as you have marketable skills and can find customers.

Disadvantage

There is almost no scale of economy in services models. Unlike software products, where you can build once and sell a million licenses, in software services, you pretty much get paid by the number of hours worked. There are some exceptions, of course, and we will discuss them below.

This is of course THE business model for the past decade. If you were are not on the internet, then you were not viable as a business

The best thing about internet is that there are no rules, and you can do anything you want. In fact, many internet companies are not software companies or even technology companies. Many do not even differentiate through technology and yet still makes money. Many do not even sell you anything and offer free service. Yet they flourish.

Formula

The general formula is to generate traffic. The more traffic you have, the more likely you will make money. Most follow the approach to give something for free first to generate the traffic. A good mantra is to “give first and you shall receive“.

A few different ways to generate traffics are

• Portal - offering wide variety of content
• Search engine - offer targeted content
• Content-led - specialized site offering specialized content to increase stickiness
• Community - let customers interact with each other to create a sense of online community via forums, newsgroups, or other type of social software
• Viral - leverage customers and use them to market your services; often build-into the software itself (such as hotmail)

This is the third article in the Software Business Model series.

While software by nature fits the mass volume model, some software are only needed by few individuals or companies. In such case we must sell the software at a high price point in order to recoup the cost. And this is why we have the business model of Enterprise Software.

The main difference between enterprise and shrinkwrap software is that enterprise software by definition is low volume and high price point. After all, there are just not that many corporations around. Furthermore, corporation generally protect themselves through myriads of procurement procedures, which drives up the cost of selling for vendors, and that add to the final price points.

One thing to note is that few enterprise software are used as is, because they just are not that useful by themselves and require customizations. We will talk about the customization aspect at a different article.

IMHO, there are two specializations under the Enterprise Software Business Model - Platform Software, and Business Process Software. While one can equate SAAS as an Enterprise Software Model, we will discuss it under the Internet Software Model in the next article.

Platform Software

While one might argue platform software are shrinkwrap software, I differentiate them not because the nature of the software but rather than business model of the software. For example, Microsoft Windows is sold both as shrinkwrap and as Platform software.

The Simplicity vs. Complexity debate rages on, because the topic strikes a nerve for many usability and design experts with the following question:

Does simplicity sell?

This question, having coming from a leading practitioner, Don Norman, hits a bit too close to home for comfort. Design experts have been preaching the value of simplicity, user friendliness, and elegance for ages. If it does not sell as well as simply adding features, are experts still adding value?

Reading through some of the responses it is clear that most people believe the simplicity definition offered by Don or Joel Spolsky either as incorrect or incomplete. Few people equate Simplicity as lack of features. Instead, many choose to elevate the meaning of simplicity to “making complex look simple”, or “better user experience”. Below are some of the points that I’ve picked up:

• Striving for simplicity is less important than adding features - Don
• Simplicity in the sense of lacking features is useless - Don, Joel Spolsky
• Simplicity means better user experience - Joshua Kauffman, Mark Hurst, Scott Berkun
• Simplicity is HARD and COMPLEX to achieve - Nick Bradbury, Luke Wroblewski, Michael Zuschlag
• Many offers tutorial on how to balance complexity with simplicity, John Maeda, Nick, Luke, and others

So - who is right?

This is the second article in the Software Business Model series.

I will use the following template to discuss each of the business model that I am aware of. I do NOT have experiences with ALL of the models, so let me know if you found some information missing.

• Name of the model
• Overview & Synopsis
• Formula - how this model makes money
• Segment - under which general market segment can you sell the software
• Channel - how do you market and sell your software
• Advantages & Disadvantages
• Hidden Cost: Costs that startup founders might not be aware of
• Special Case: Any specializations of the model

Per Joel Spolsky, there are three pricing structures for software:

The models described in this article all fall into the second category.v

Shrinkwrap

This is the most familiar software business model since the early PC days. Since the advent of internet there are proliferations of many other models, but the traditional Shrinkwrap model is still going strong.

Apple iPhone is taking the business world by storm!

The long time speculation has finally come true. Everyone knows that it is only a matter of time before Apple enters into the cell phones business, given Apple’s recent resurgence as the premier consumer technology company, and that cell phone is just about THE most important consumer technology today.

There is no question that the iPhone looks beautiful and it probably rocks (I don’t have one so don’t know for sure), but is it the right product for Apple from a business perspective?

I believe this iPhone miss the mark, because it does not address the competitive threat posed by cell phones.

It might be beautiful designed and very functional, but this iPhone will not raise the barrier to entry in the music player business. Instead, it leaves A LOT of crumbs on the table for phone makers at the alleged price point of $599.

People probably will love the phone. It might be the best music and video phone in the world today, but it is also a high-end phone, and it will not cannibalize the low-end market. It seems that iPhone is designed to avoid self cannibalizing the iPod market.

But that means cell phone makers is free to enter the music player market from the low-end to compete with low-end iPod’s.