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Colin Johnson’s blog


Archive for the ‘Business’ Category

Info-stream or Interface

Tuesday, March 13th, 2012

Online organisations usually have the choice between two ways of making their information available. One is what we will call info-stream, where the information is made available in the form of a stream of machine-readable information that people can view and process in different forms. Twitter is a good example of this: whilst it does provide a fallback option of viewing it through the Twitter website, many users use a different way of interfacing with it such as an app on a computer or phone, or an alternative web interface. By contrast, some other organisation choose to provide the information through a specific graphical interface. An example here is Facebook, who clearly expect all users to interface with the content through the Facebook web-site (or Facebook-provided mobile app). People wanting a different view of the content can get alternative interfaces (e.g. Social Fixer or Facebook Purity, but these appear to work by a screenscraping-style approach that is not designed for in the way Facebook designs its information provision.

What is the business argument (in the broadest sense) for making one or the other of these choices? Clearly one argument for the interface approach is concerned with advertising. One problem with providing an info-stream is that this makes it very easy to filter out advertising. Organisations that have adopted an info-stream approach tend to have a very tight integration between their advertising and their content. For example, advertising in Twitter is in the form of promoted Tweets or Trends, which are Tweets or Trends in their own right; by contrast, the content delivered by Facebook has advertising, but not as part of the main News Feed content.

A more complex example is provided by the choices made by travel, insurance, banking and energy companies. In the early days of the web, much was made of the idea that online commerce would be a purer form of commerce because aggregators would be able to draw a direct comparison between different providers. Clearly, this vision has been realised&#8212up to a point. A number of firms, for example insurance firms Direct Line and Aviva and some of the discount airlines have largely avoided being on comparison sites. What is the business case for this? Possibly, to avoid the commission fees charged by the sites; possibly, to create a more direct channel of direct negotiation with the customer, akin to the old print-advertising strategy of not listing prices but saying “call us for our best price”. Again, this is an info-stream versus interface decision: the “not on comparison sites” are pursuing an interface strategy, where they want to control the interface between the information and customer in their own way; by contrast, the firms that are supplying information to comparison sites are providing information in an info-stream fashion.

"not on comparison websites"

This is clearly not something that was anticipated in the early discussions about e-commerce. It was assumed that organisations would be falling over themselves to provide information for aggregation and comparison. Clearly, though, it is possible for firms to adopt a strategy of opting out of such comparisons. This does not bode well for the development of the semantic web, which (rather naively) assumes that any organisation online will want to readily provide information in a computer-readable fashion. Instead, the choice for a firm is more complex: to provide an info-stream and work on an objective (as far as the measures used) comparison as a strategy, or to provide an interface and rely on more traditional advertising and marketing strategies that leverage the lack of ability to compare directly.

Are there other organisational/business arguments about the info-stream/interface choice?

Obsolescence

Thursday, March 8th, 2012

Over the last few years lots of money has been spent building automated ticket barriers at stations. However, I wonder if this is all going to be rather wasted, as train companies are gradually moving towards e-ticketing, and the barriers are designed to take a very specific form factor of printed ticket. At the moment, e-tickets have to be checked by a human operator, which kind of defeats the point. I wonder if this is why the new barriers at King’s Cross have some kind of barcode scanner thingy on them?

Out of the Valley of Death

Monday, February 13th, 2012

The “Valley of Death” is the rather overwrought term used in technology transfer for the difficulty of getting technology developed in a university research environment into commercial use. This is a big concern for governments—for example, the UK government Science and Technology Committee recently held a consultation on this very issue.

Thinking about how the university world operates compared to other areas, I wonder if one problem is the ready availability of people at the university end to do medium scale pieces of work. The university research workforce breaks down into largely two categories of people: the lecturing/professorial staff, who have lots of expertise but also lots of calls on their time, and the PhD students and postdocs, who have specific expertise and whose time is largely taken up by the project that they are working on. It is easy enough for a commercial organisation to get a little piece of consultancy, e.g. running a few ideas past a professor for a day or two; similarly, a firm that is happy to make a larger commitment, e.g. to sponsor a postdoc, PhD student or KTP associate for two or three years fits into the system readily.

The difficulty is the middle ground. What about a project that requires specific expertise in a particular area, but which also requires a substantial commitment of time, say three to six months. In many other industries—say, product design—a designer would be available from the pool of designers employed permanently by a consultancy to work on projects. One initially attractive proposition, therefore, would be for a university to retain a number of such “consultants” to work on projects as needed. However, this fails; the expertise required in a research-driven project is rather specific, and it would be impossible for such a consultant to have the breadth of knowledge required to work immediately on projects.

I wonder if a very low-ceremony secondment scheme for postdocs and PhD students would work here. I am sure it is possible for, e.g., a research council project to be extended by three months to allow a postdoc to work for three months as such a consultant; but, I would be put off investigating this, as I would be concerned that the amount of admin overhead in extending the project etc. would be large. What we need is a simple way to do this; a one-page web form where a PI can request a small number of months extension to a project so that a postdoc or student currently employed in a cognate area could take some time off their project and be paid by the firm to do a medium-term project of a few months. This would provide both the flexibility and the expertise, and would mean that universities could respond more rapidly to such requests. If sufficiently well remunerated by firms, I can see this being appealing to the secondees, with the opportunity to work on something relevant and probably earn a little more money for a while than they normally would do.

“You switch if you want to…”

Sunday, February 12th, 2012

The government and the press occasionally get in conniptions about why people aren’t switching energy providers (or similar service providers) more readily. The government has gone to all the trouble of creating a rich marketplace of competitive providers, with the intention that people will exploit this liquid market by readily moving from provider to provider and therefore putting pressure on the providers to provide efficient, cheap services.

But the people have spoken with their feet—the bastards—by standing still and refusing to change fluidly. Why? Part of the problem is that the stalls set out by all of the providers are obscure and uncomparable. The last time I talked to an energy supplier we had a conversation along the lines of “your last three months gas and electricity usage amounted to about 35 pounds a month; therefore we’ll set your direct debit at 73 pounds a month”. When I asked for an explanation of what “therefore” meant in that sentence, there was, of course, no explanation. It was take-it-or-leave-it; and, the same would no doubt be true for all other providers. Comparison sites help somewhat here.

Another part of the problem is that people have bought into the efficient market hypothesis and therefore don’t see the point in switching. This is meta-capitalism: the effect of awareness of market mechanisms on the market itself (a slapdash version of the “Lucas critique”). People commonly say “it might be cheaper now, but I’m sure it will all even out in the next few weeks”, which is reinforced by headlines like “final energy provider falls into line and puts up prices”. This is where service markets vary from the markets concerned with the purchase of individual items; in a one off transaction, a customer can immediately benefit from the cheapness of a widget there-and-then; with a service, conditions might change rapidly.

There seems to be a further effect here. All providers feel the need to present themselves to the customer in largely the same way: a complex, incomprehensible presentation together with an assertion that they are therefore obviously the best and that if you tie-in now for the next 24 months you will get an even better deal. It seems that there is some conservation law of complexity emerging here whereby the complexity of presentation to the customer remains the same across providers, regardless of the number of providers in the system.

It is odd why there isn’t a provider that tries to distinguish itself by radical simplicity—the “Gordon Ramsay” strategy of “throw away the complex twelve-page menu and write half-a-dozen dishes on the blackboard”. I don’t think that there is anything conspiratorial going on here, it is just that such an approach is too big a risk to try, and the costs for new entrants with a radically new strategy is too high. It is interesting that in another industry—gym subscriptions—which previously had a similar complexity of presentation to the energy firms, has recently been shaken up by the emergence of upfront, fixed price, no tie-in providers. But, it is easier to build a few gyms (or just one) and experiment with a new model.

I wonder if there is an opportunity for a supplier to run a “diffusion line” under a different name, with a radically different level of complexity of presentation? This would bring a new “provider” into the market backed by the requisite infrastructure but without the risk of the original provider exposing its whole customer base to the experimental strategy.

Advertising Opportunities (2)

Wednesday, February 8th, 2012

Almost all hotels seem to supply generic no-name toiletries, sometimes branded with some ad hoc private label, sometimes branded with the name of the hotel. This seems to miss a tremendous marketing opportunity for manufacturers of shampoo, shower gel etc. I’m surprised that such manufacturers aren’t falling over themselves to give free samples of their products to hotels, as this is one of the rare occasions where people use products that aren’t “the usual”. I wonder why this doesn’t happen.

House Size

Tuesday, December 27th, 2011

On the kind of property programs that were popular a few years ago and that my mother was addicted to watching, a clichéd suggestion was that “you could just knock this wall down”. However, when compared with housing in many other countries with similar economies and lifestyles, the typical English house has lots of small rooms.

Why does this contradiction continue to hold? We might assume that if there is sufficient demand for larger rooms, then eventually the market would respond and start providing houses with a smaller number of, larger, rooms. However, I suspect that the answer is in how houses are marketed. By contrast with, AFAICT, every other country in Europe, no headline indication is given of the overall floor area of the house. Therefore, number of rooms is used as a proxy for overall size of house, which motivates builders to build houses with a large number of small rooms.

December Rituals (1)

Friday, December 23rd, 2011

Taking last year’s plastic-wrapped phone book off the shelf, unwrapping it, putting it in the recycling, replacing it with this year’s phone book, still in its wrapper.

No Sale!

Thursday, December 8th, 2011

Bizarre message from East Coast trains website:

You have now made the maximum allowed number of purchases today (4)

I wonder what the origins of this are? Trying to clamp down on secondary markets? Avoiding fraud in some way?

Rates of Exchange

Friday, November 18th, 2011

Current talk about the Euro makes me wonder about what will happen to the notion of a country belonging to a currency system in the next century or two. At present, we see a change in the currency system as being a huge shift—something that might happen at some point as part of a long-term political realignment, as with the introduction of the Euro, but which we wouldn’t imagine happening again in our lifetimes.

I wonder if, in the longer run, we will see a much more flexible approach to this. If currency becomes much less dependent on physical notes and coins, it becomes much easier for a government to swap out into a different currency system. Perhaps this might be something that is done regularly as part of economic planning: a number of worldwide currency systems could exist, with various criteria for entry, and countries enter and leave these systems according to their economic status and planning, and have the option of returning to a local currency for a while if none of these international systems work for them at that point.

Is this plausible? I don’t know enough economics to know whether this is at all a meaningful proposition.

Entrepreneurship and the Fetishisation of Failure

Tuesday, November 15th, 2011

The amount of successful experience required before a practitioner can regard themselves as basically accomplished varies vastly from field to field. A professor needs to have published a few dozen papers, an actor taken on a few dozen roles, before they are regarded as established. Sure, there is the occasional exception—the brilliant theorem proven in a PhD thesis, the definitive performance given by a 20-year old—but, for most people, there is room enough for a few apprentice-works followed by a track record of decent achievement.

Other areas require fewer individual projects before the practitioner is regarded as basically successful. A novelist who has published a couple of books is regarded as part of the mainstream, a parent who has brought up a couple of children isn’t regarded as an amateur. This is largely due to the scale of these achievements—doing them a couple of times takes a lot of time, and the number of people who have a track-record of 50 novels or 20 children is rare and regarded as somewhat freakish.

One area where this reaches its apogee is in entrepreneurship. I recently went to a—very good—talk on entrepreneurship by someone whose track record was two failed businesses and a current business that was struggling to get off the ground. Are there any other areas where such a track record would be considered enough for people to come and hear you speak?

There is almost a fetishisation of failure in the entrepreneurship culture. Talks on the subject often include something along the lines of “anyone who hasn’t had a couple of failed businesses isn’t a proper entrepreneur”. There is substance to this—statistics are regularly trotted out that some large percent of businesses fail within some small number of months—so, the point isn’t an irrelevant one. Yet, I worry about the consequences.

In areas where failure is small in impact, being upbeat about early failure is unproblematic. When I was learning to juggle, I was told that “a drop is a sign of progress”, with the implication that I should be pushing harder to do more complex moves and not always stay conservatively within my current capabilities. Similarly, I try to reassure PhD students that a rejected paper is fine. I am sure that the same is true in many other areas: there are many stories of novelists or scriptwriters figuratively, or perhaps literally, wallpapering their houses with rejection slips.

However, in these areas the consequences of failure are minor. A novelist can submit their book to another publisher, an actor can attend another audition. Note that this doesn’t always correlate to the scale of the work created: a novel, once written, can readily be touted round a dozen publishers. But in entrepreneurship the cost of failure can be large.

This is where there might be a class bias in entrepreneurship education. Perhaps the talk of failure isn’t offputting to the potential entrepreneur from a financially secure background—the worse that can happen is a slightly embarassing cap-in-hand return to family for support. Whilst, for the financially insecure, the risk of “having a go” at a business is potentially threatening to that person’s financial and personal stability for many years afterwards.

What could entrepreneurship education do about this? This is a difficult question. We would not want to downplay the potential risk of failure, as it is real and there is little in the way of definitive guidance as to how to prevent it. Perhaps more advice could be given as to how to isolate the business risks from personal risks; after all, a business failure need not lead to lead to personal financial ruin if the business is set up in the correct way. What other ideas might there be to encourage a wider range of people into starting innovative and exciting businesses?

Self-reinforcing Criticism

Tuesday, October 25th, 2011

There is an interesting rhetorical move that I notice increasingly, which we might refer to as self-reinforcing criticism. An example of this is given in one of Edward De Bono’s books: a caricature of a Freudian analyst argues that some negative trait that someone has is due to their repressing some aspect of their personality. The person being criticized has very little in the way of response. Either they agree, or they disagree. If they disagree then that can itself be used as evidence of even deeper repression!

A common use of this is in planning processes in organisations. A complex proposal will be presented, which is roundly criticized for a number of reasons. However, rather than taking on the criticisms, the person presenting the argument counters with the argument that the critics are just “afraid of change”.

We need a term to “call out” this kind of specious argument. I have experimented by called out the emotional aspects of it: “why are you in a position to know how I am feeling?”. But this isn’t ideal. We need a term of art to describe this, and then to create a pejorative sense to that term. Perhaps a term for this already exists in rhetoric somewhere?

Relatedly, there is a phenomenon where a complex proposal will be presented and, if it is attacked, the proposer will say “well, what do you suggest instead?”. This is difficult to respond to, as the proposer is in the position where they have had days, weeks or months to prepare their proposal, whereas the off-footed opponent has a matter of seconds or minutes. I wonder if we should be working harder to make multi-alternative proposals to be both normal (so that proposals with only one alternative are seen as weak) and acceptable (so that presenting proposals with multiple alternatives are not seen as being weak and indecisive).

Some Reward for Loyalty…

Monday, September 5th, 2011

It struck me a while ago that loyalty to TV shows is actively unrewarded. Shows that have a loyal following can be shoved hither-and-thither around the schedule, postponed for three weeks because of the bloody snooker, and so on—trufans will always follow. By contrast, shows that have a more casual following get punished for such manoeuvres by reduced audience.

Are there any other examples of this phenomenon?

Failure Insurance

Wednesday, August 31st, 2011

Given that higher education is increasingly costly in the UK, is there a business opportunity for students to take out insurance against the risk that they will fail the course? If so, how would the insurer ensure that the failure was due to an inability to achieve the aims of the course, rather than just fecklessness?

Net Neutrality and Entrepreneurship

Wednesday, August 31st, 2011

It seems odd that net neutrality is associated with the liberal left, with the canonical right-wing argument being that neutrality is a kind of enforced anti-market equality . However, a perfectly decent argument could be made from a pro-capitalist standpoint that net neutrality is a desirable aim.

At the core of one such argument is the idea of an easy-entry space in which entrepreneurialism can occur. It is clear that different markets have different entry requirements—starting up a business online is trivial, starting a shop or market stall fairly low entry, whilst starting a broadcast TV station is complex and expensive. We can imagine what a different country we would live in if, to open a shop, you had to agree with a national chain of shopping malls to open a shop in every location simultaneously, and no individual shops were available.

Other costs of doing business also benefit from a comparable neutrality—for example, the neutral transport and logistics infrastructure means that you can readily shift small amounts of goods around the country via postal and courier firms, not have to have a complex logistics contract in place before you can start a small business.

The creation of easy-entry spaces is a core activity of pro-business governments throughout the world, who are prepared to throw large amounts of money at smoothing out this entry point, through the creation of enterprise zones, regional development agencies, business hubs, science parks and so on.

The neutral net is, in many ways, an ideal enterprise zone; and, what’s more, it is entirely self-sustaining. It seems astonishing that pro-business governments would be prepared to throw this away, when they are getting for free what in other domains they throw vast amounts of public sector money at, often without much success.

Perhaps the key difference here isn’t right- vs. left-, its big vs. small or new vs. old. In many ways, the non-neutral net, like broadcast TV, is a big/old favouring medium; so is the “big socialism” of e.g. Soviet Russia. Both of these have a high entry cost for new activity; in broadcast TV, the “block size” of entity you ned to create is large; in a big socialist system the complexity of the planning system plays a similar role. In a smaller/new-focused organisation, neutrality aids innovation, whether in a more capitalist-focused system (e.g. a market stall) or in a social-oriented system (think about a student union where the preconditions for setting up a student society are that you have 20 students interested).

The diagram that has been kicking around for years comparing the non-neutral net to a subscription TV channel is a very succinct summary of the issues here.

And yet, perhaps this matters less now that in did a few years ago. Increasingly, it is the large websites—facebook, Amazon, YouTube—that are the infrastructure of the net, not individual company sites. This is evidenced by the increasing trend of companies to include www.facebook.com/example as the link in advertising, rather than www.example.com; similarly, a service like about.me, which presents a brief bio, photo and list of social networking sites as a replacement for the traditional “home page”. So, perhaps neutrality matters less to the entrepreneur—as long as potential customers can access these base, neutral platforms, that’s okay, and they will surely be including in the “basic package” for most internet services. But, it seems terribly risky to predicate the success of your business on the ongoing commitment of these firms to continue to provide a neutral platform.

If I were Queen for the Day (1)

Thursday, June 9th, 2011

When I succeed Lord Sugar on The Apprentice, the tasks are going to begin at 9:30 in the evening, none of this “be at Covent Garden by 6am” malarkey.

The Unbelievable Effectiveness of Public Services (1)

Thursday, October 21st, 2010

Imagine first-class mail being pitched as a new idea on Dragon’s Den.

You pick up letters locally for delivery across the country; sensible, something a lot of customers need. And you deliver them the next day; a good, if potentially expensive, service. How does collection get arranged: do you book a slot online for it to be collected, or take it to a central location in your local city or market town? No, you just put it in a box, and we will make one of these available in every settlement of significant size in the country. Okay…but what about the staff needed to collect and charge for the letters? How do you pay for them to be near to the boxes? Or perhaps people need to pay online and then they print-out an e-ticket that they attach to the letter? No, what, you just sell stamps in small shops around the country. Good idea, but getting but-in from lots of small businesses could be challenging.

Sounds like a good idea, well thought through. What is your price point? Ten pounds per letter? Five pounds? Two pounds; but what about the infrastructure costs? What…41p…? That’s ludicrous. I’m out.

That Luxury Feeling…

Monday, October 18th, 2010

Here is an interesting difference between B2C and B2B marketing. In the B2C arena, it is common to label products with “upmarket” labels, even if they are fairly cheap, to give the impression that you are getting a lot for your money. This fails if transferred over to B2B marketing, because the purchase usually has to be approved by someone who doesn’t get to see the full context.

Two examples. I was recently booking a hotel room (in a place clearly marketing itself in its strapline as a “business hotel”), and the lowest-grade choice was described as a Premier room. The second example is a supplier of education robotics products: a fairly basic kit, containing just about enough stuff to get a project working, is called the “deluxe” set (hey, the ’70s are calling and want their marketing strategy back). In both of these cases they are setting themselves up for a fall; I have to go through the embarrassment of putting in a purchase order or expenses claim, and potentially get a snarky note back from the Dean asking if I could manage with a basic room or whatever.

Advertising Opportunities (1)

Monday, October 11th, 2010

I am surprised that there is almost no advertising in airport luggage collection areas. It would seem to be one area where there are millions of people standing around, doing almost nothing, for multiple minutes at once.

Hic Sunt Dracones (3)

Thursday, September 23rd, 2010

“Turnover is vanity; profits are sanity.” Good business advice from Duncan Bannatyne on a recent episode of Dragon’s Den.

It Could Be You

Tuesday, September 21st, 2010

Lotteries are often described as “a tax on people who are innumerate”. The idea is that any rationalist would not play a lottery, because the return on investment is shoddy—negative, indeeed, stunningly so. Back to the post office savings account then.

But hang on there! Is this really why people play lotteries? Often the driving force is the remote chance of a truly life-transforming event, which is not adequately measured by the ROI.

The interesting observation is that this argument also works for events with negative consequences. Indeed, we are accustomed to this kind of reasoning about negative events. For example, people will readily argue that, whilst they know that the chances of a plane crash are minuscule, nonetheless they aren’t going anywhere a damn plane—because the consequences of being in a plane crash, however remote, are horrifying. Again, a life-transforming event, but one with bad rather than good consequences. The behaviour seems to be controlled by the same mechanism—I wonder if a carefully controlled experiment would show that the underlying structure of thought is basically the same?