Ged Carroll

Category: innovation | 革新 | 독창성 | 改変

Innovation, alongside disruption are two of the most overused words in business at the moment. Like obscenity, many people have their own idea of what innovation is.

Judy Estrin wrote one of the best books about the subject and describes it in terms of hard and soft innovation.

  • Hard innovation is companies like Intel or Qualcomm at the cutting edge of computer science, materials science and physics
  • Soft innovation would be companies like Facebook or Yahoo!. Companies that might create new software but didn’t really add to the corpus of innovation

Silicon Valley has moved from hard to soft innovation as it moved away from actually making things. Santa Clara country no longer deserves its Silicon Valley appellation any more than it deserved the previous ‘garden of delights’ as the apricot orchards turned into factories, office campus buildings and suburbs. It’s probably no coincidence that that expertise has moved east to Taiwan due to globalisation.

It can also be more process orientated shaking up an industry. Years ago I worked at an agency at the time of writing is now called WE Worldwide. At the time the client base was predominantly in business technology, consumer technology and pharmaceutical clients.

The company was looking to build a dedicated presence in consumer marketing. One of the business executives brings along a new business opportunity. The company made fancy crisps (chips in the American parlance). They did so using a virtual model. Having private label manufacturers make to the snacks to their recipe and specification. This went down badly with one of the agency’s founders saying ‘I don’t see what’s innovative about that’. She’d worked exclusively in the IT space and thought any software widget was an innovation. She couldn’t appreciate how this start-ups approach challenged the likes of P&G or Kraft Foods.

  • Shenzhen ecosystem

    It is hard to believe that the Shenzhen ecosystem was built over just a few decades. Just over 30 years ago China moved from a period of cultural isolation to gradually opening up to the commercial world beyond its borders. The place to naturally start this was in Guangdong province close to the then British colony of Hong Kong. A small fishing village grew to become the workshop of the world. The growth of Shenzhen was driven by investment from multi-nationals and overseas Chinese. One of the earliest industrial areas was called Overseas Chinese Town or OCT. OCT has changed from manufacturing to retail and offices for the creative industries in the former factory buildings.

    Hong Kong had built up capability and expertise in light manufacturing and clothing from the 1950s through the 1970s. It is still important for supply chain intermediaries. This was the ‘golden age’ of Hong Kong. This is how many of the Hong Kong oligarchs made their first fortunes; which they then invested overseas, in China and into the Hong Kong real estate market.

    Globalisation had started after the second world war. But the opening up of China threw it into overdrive. Hong Kong industrials moved manufacturing plants for clothing, shoes, toys, plastic goods and electrical appliances to China.

    They were joined by Taiwanese electronics manufacturers and then multinationals from Europe, America and Japan. Hong Kong clothing manufacturers provided China supply chain expertise to western retailers like Walmart.

    The Shenzhen ecosystem was built on manual production. The deft fingers of Chinese women workers allowed a lot more precision than Japanese pick-and-place machines. Which meant a lot more flexibility in manufacturing using the Shenzhen factories. You wouldn’t have an iPhone if you used pick-and-place robots on the production line.

    Electronics manufacturing

    At first, these companies were used to fatten the wallets of customers who took on the marketing and distribution of electronics in the West. The dirty secret about many PC and laptop designs was they were standard underneath. Then this cost saving was passed on to the customer as people like Dell went for close to lowest price operator based on a direct mail / online direct ordering and cut out the channel.

    Finally that wasn’t enough, and most of the laptop and PC resellers make no money. Instead the main people to profit from these sales were Microsoft which licensed it’s Windows operating system and Intel which provided the majority of compatible micro-processors capable of running Windows-compatiable applications. In the PC industry there is usually just two or three profitable manufacturers and one of them is Apple. Historically it was Dell, then Hewlett-Packard and now it is likely to have be Lenovo.

    Shrinking PC-esque computing power into the palm of one’s hand was inevitable with the rise of flash storage and Moore’s Law facilitating power-efficient processors. The challenge is battery technology, packaging and industrial design.  Apple pushed the envelope with suppliers. Hon Hai and other manufacturers installed hundreds of CNC machines to fabricate thousands of metal phone chassis. These radical changes in manufacturing capability were opened up to lower tier manufacturers raising the standard of fit and finish immeasurably over a few years.

    Now Xiaomi and Lenovo product handsets that have better build quality than many Samsung and HTC handsets. The performance is good enough (again thanks to Moore’s Law) and the handsets run the same applications. Sony, HTC and Samsung handsets look as marooned as Sony’s Vaio PC range in the Windows eco-system.

    Shenzhen’s ecosystem has been a great leveller of manufacturing and industrial design capabilities with Apple at the leading edge of what’s possible from an industrial design and materials technology.

    More information
    Shenzhen Government Online – this loads slow like they are phoning the pages in from 2002, but is informative
    The smartphone value system – An earlier piece I wrote about the challenges of the Android eco-system

  • FES watch + more things

    Who’s Behind the E-paper FES Watch? – Digits – WSJ – interesting the way Sony has become an internal VC operation. It makes sense since they need disruptive innovation and they still have smart people. they also need to allow their engineering talent to keep having an outlet for their creativity. The FES watch is a classic quirky Sony product that is very clever. The disappointing bit was hearing them working with an external product design agency on the FES watch. Especially given the internal industrial design capability to deliver iconic designs and a wider design language across product ranges. More design related content here.

    Tightening too frightening for UK | HSBC – interest rate increase and lower than expected economic growth

    Oh No They Didn’t: European Parliament Calls For Break Up Of Google | SearchEngineLand – inevitable but not sure it will make an impact, Google must have expected this?

    Maglev elevators are coming that can go up, down, and sideways | Quartz – I love this

    Flickr is about to sell off your Creative Commons photos | Dazed – Tech entrepreneur Stewart Butterfield left the company in 2008, but says that Yahoo-ordained plan is “a little shortsighted”. He added: “It’s hard to imagine the revenue from selling the prints will cover the cost of lost goodwill”. It’s the equivalent of looking for pennies that may have fallen down a crack in the sofa. Flickr photos are already used in the online and offline media. They have also been used to train image recognition algorithms, both of which are allowed by the licensing. The prints seems like a cheap, low value move.

    Supermarket own-brands generate more than half of UK grocery sales | BrandRepublic – bad news for CPG brands. And bad news for brands in general, particularly when one thinks about how Amazon is building its private label lines across several sectors

  • Silicon Valley corporate raiders

    The origins of Silicon Valley are new, even by American standards. Over the space of one life time the area below San Francisco around the Santa Clara valley went from apricot farms and orchards to urban development based around hardware (the silicon in silicon valley) and then on to campus design sites preferred by software companies.

    At the time of the PC revolution was kicking in, Silicon Valley rose to prominence in the public consciousness. This gave use the consumer side of consumer technology we live with today like iPhones and the MacBook Pro this post is written on.

    Over the space of this time, it wasn’t only the landscape that changed but the way we work and how entrepreneurship was rewarded. There were decades of unparalleled economic growth driven by companies firstly in hardware, then software and finally in networking and communications – the internet.
    Reagan_et_Thatcher
    During the early 1980s, America had Ronald Reagan as president. The manufacturing industry that had driven post-war prosperity in the country was suffering from global competition and businesses were under attack. This was the golden age of the corporate raider who destroyed businesses in the name of shareholder value. For example corporate raider Carl Icahn was considered responsible for the bankruptcy of Trans-World Airlines (TWA).

    By comparison Silicon Valley was in a spate of explosive growth. Computers and software were changing the way business operated. Spreadsheet software enabled the kind of models required for corporate raids on main street. Apple, Adobe and Aldus came up with the different components required for desktop publishing revolutionising design in the process.
    The fall of the Berlin Wall - November 1989
    The cold war ended and the Berlin Wall came down, corporate raiding ran out of steam as corporate lawyers began to construct effective barriers on behalf of besieged companies. Silicon Valley started a move away from ‘hard’ innovation to the soft innovation of gadgets, software and services. But that was fine, there where other places in the world who wanted to make the hardware components because of the jobs and wealth it created. The modern internet started to be built on Sun and Silicon Graphics servers connected with Cisco routers. The web was designed on the same Apple Macs that designed brochures.  Technology companies became media companies, retailers and super-fast courier companies. Wired magazine talked about the ‘new economy’.

    The industry was also riding on a one-time offer. Older computers that now ran the modern world had a ‘millennium’ or Y2K bug, which was a bonanza for business IT companies. A dot com bust dampened enthusiasm, cleared out some of the more egregious business models.  Out of the fire sales of Aeron chairs and Cisco Catalyst series routers paired with cheaper broadband came web 2.0 – where the web became a platform rather than just a catalogue.

    For many of the previous businesses in Silicon Valley growth slowed. Most business software looked like a solution looking for a problem. High-performance hardware could be cheaply replaced with more commodity priced boxes. Eventually for many people’s needs, hardware became a service that could be rented according to need. Business models were disrupted, sales dried up, licences weren’t renewed and advertising sales dried up.

    Enterprise software companies were hoovered up by private equity firms eager to leverage their steady cashflows to service debt from further transactions.

    Businesses like IBM and Nokia look like the TWA or Goodyear Tire and Rubber Company in the 1980s. The story of Yahoo! over the past six years looks like one corporate raider greenmail scam after another. Jerry Yang who has recently started to see his reputation rehabilitated was turned out of the company he founded by shareholders influenced by Microsoft and Carl Icahn. The subsequent replacement Carol Bartz supervised over a spectacular destruction in value at the company. Current CEO Marissa Mayer, like her peers at Apple and IBM faces constant corporate raideresque behaviour to leverage up and return money to shareholders as part of a share buyback.

    Microsoft who seemed to have used corporate raiders against its foes like Yahoo! now has activist shareholders on its board and is being forced to rejig its own business.

    Just what is going on?

    I think it it down to a confluence of different factors:

    • Technology has had a spectacular growth spurt in Silicon Valley but the growth has spread beyond the valley. Huawei is arguably one of the most important companies in telecommunications and internet infrastructure now. Just over two decades ago it was a small business selling secondhand company switchboards to the new businesses springing up in Shenzhen. Zhengfei Ren moved from selling equipment he sourced in Hong Kong to manufacturing it himself. Now the company makes everything from core network switches and submarine cables to smartphones, tablets and wearables. Shenzhen is full of companies like Huawei – some more successful than others. The most powerful names in silicon are also Asian companies TSMC and Samsung Electronics play a key role in the manufacture of non-PC style computers: phones, tablets and even televisions. It is often easier to name products that aren’t becoming ‘smart’ in some way
    • There isn’t the same willingness in the US to fund start-ups looking at smart innovation, instead the focus is on areas like social applications. Technology industry veteran Judy Estrin identified this as a key problem in her 2008 book Closing the Innovation Gap: Reigniting the Spark of Creativity in a Global Economy. There are serious technology challenges available that need to be addressed: the break down of Moore’s Law in semiconductor manufacture, commercially viable nuclear power and quantum computing to name but three
    • The technology has been demystified and is yet another industry. There isn’t that much difference between LVMH and Apple or Caterpillar and Oracle. Software as a service moved the buying decision on a number of products from the IT manager to the marketing manager or department head. Cheaper smartphones saw the rise of bring your own device (BYOD) policies. I sat in an old warehouse turned conference centre last week when Will.i.am announced off the stage that ‘Designing hardware isn’t hard, filling Wembley stadium, that’s hard’. Eco-systems from OEMs to Kickstarter have democratised and demystified technology businesses. And with this familiarity has come at least some contempt

    More information
    Closing the Innovation Gap: Reigniting the Spark of Creativity in a Global Economy
    Finding Alibaba: How Jerry Yang Made The Most Lucrative Bet In Silicon Valley History | Forbes
    Yahoo Stock Crashes As Alibaba IPOs – Business Insider
    Marissa Mayer’s day of reckoning at Yahoo is rapidly approaching | Quartz
    BlockBuster: Lyme Regis Sues Icahn, Accuses Sabotage – Barrons.com
    Carl Icahn 2.0: an icon of ’80s greed is back to shake up Silicon Valley | The Verge – 2 words: TWA, Yahoo!

  • Walmart + other things

    Walmart online to offline retailing

    A really interesting video with Walmart that looks at the interface between online and offline retailing. Particularly interesting take on mobile payment form factors. Amazon presents an existential threat to the Walmart business. Walmart isn’t going down without a fight. It has innovated in the past on using technologies like data mining. More recently Walmart has been making strategic purchases across the online retail realm. 

    More retail related content here

    Water resistance

    The reality of watch water resistance is that it is usually measured in a pressurised laboratory rig. Five years ago Casio took their Frogman model from the G-Shock range and did the test in open water off the coast of Japan. It shows the reality of the watch being exposed to a depth of 200M. The two most disappointing aspects of this video are:

    • It hasn’t got as much viewer love as it deserves
    • They failed to come across any diakaiju during the dive and we don’t know what Japan’s beloved son Godzilla (ゴジラ Gojira) thinks of the G-Shock range

    Name generator

    Citizenfour the Edward Snowden documentary launched this week, which prompted a lot of NSA product name silliness including too much time spent on the NSA Product Name Generator

    Mascots

    The people at Rocket News have come up with a new take on the Japanese mascot meme with Hard Ku**mon. More here. Japan seems to have mascots for everything as a way to engage consumer attention. The mascots can build up to be big business in their own right and gain international attention. 

    NASA apps

    Finally I have been working my way through NASA’s collection of iPad and iPhone applications, more here. NASA has an amazing range of content. I would also recommend checking out their flickr accounts for high quality imagery.

  • Yahoo stock + more things

    Yahoo Stock Crashes As Alibaba IPOs – Business Insider – Yahoo stock represents an ideal target to do an LBO and asset strip to pay down the debt. The challenge for shareholders of Yahoo stock is how to minimise

    Ashley Madison Steps Up Search For Asian PR Support | Holmes Report – they are banned in South Korea and Singapore. Thailand would likely be added to the list if Ashley Madison launched there

    Logistics: The flow of things | The Economist – explains why e-railers are building their own logistics networks (paywall)

    Dude, where are my socks? | the Anthill – great story about a small TaoBao reseller

    Bits Blog: Net Neutrality Comments to F.C.C. Overwhelmingly One-Sided, Study Says | New York Times – paywall

    Apple – Privacy – interesting that Apple didn’t do this sooner

    Peter Thiel Says Computers Haven’t Made Our Lives Significantly Better | MIT Technology Review – Peter Thiel often comes across as a bit of a dick but is right on the money with regards the lack of hard innovation and excess of soft innovation

    Single Chinese company owns 60% of world market for tantalum | WantChinaTimes – which is really important for electronics manufacture

    Move over Hong Kong, here comes…Chengdu? | SCMP – huge economic growth in Chengdu which is viewed as an important city due to its proximity to the western edges of China which are the current high growth areas

    Smartphone stress in Coolpad cuts, China Mobile ‘naked’ strategy | SCMP – bottom end of market suffering with Coolpad laying off 1,000 employees

    Why news extortion is so hard to uncover | China Media Project – not just a Chinese problem, look at the uncomfortable aspects of media power with NewsCorp / News Int’l

    Clamshells Gets Smart | CSS Insight – could we see a return of clamshell devices?

    Facebook Is Hiding Important Information – Business Insider – nothing new pointing out yet again that mobile app adverts count for a significant amount of their revenue sales