The Importance of “Convergence” In Market and Industry Analysis

If You Get Technology “Convergence” Wrong, Nothing Else Matters

I came across this book during my most recent visit to the UBC Vancouver campus.  As good as I think this book is at focusing attention, in workbook style, on the importance of market and industry analysis in new venture due diligence, there is an issue that I think is not adequately addressed by any model or theory: not Porter, not STEEP or SWAT. Convergence is the issue.

We can imagine and even potentially envision a very cool business idea, but if the technology to achieve it is not ready, not sufficiently mature, the idea is Dead on Arrival (DOA).   I do not mean to pick on young entrepreneurs, but I reviewed a business concept last week that was a superb and compelling idea, but the technology necessary to achieve it simply was not there, either in terms of its capability or its price point. I am confident that it will be there in time, but it is not now.  As if to make my point, Apple announced that it was acquiring a company for $20 Million in the exact same technology area: indoor location tracking (no small feat).  At this point it is not clear that the acquired company has any extraordinary intellectual property or expertise, and the article primarily focused on the point that this “location identification” technology was “heating up.”  It looks like it may be a simple “aquihire.”   Global Positioning and geo tagging as in smart mobile phones, radio frequency identification technology (RFID), and inertial guidance are all currently used in various combinations by a host of competitors (too many) to achieve required levels of accuracy, immediacy and cost.  A local industrial RFID company has just closed its doors because it simply could not compete and make money.  The simple problem was that this company’s idea, as compelling as it was, could not achieve the necessary price point, or possibly would not even work.

So we have the problem of “convergence.”  Great idea but the technology simply is not ready….yet.

I have three personal case study examples of the problem of “convergence,” that every potential entrepreneur should study. I have to admit that I was a senior executive at all three of these Silicon Valley companies, one of which actually made it to the NASDAQ exchange.  All of them had the “convergence” problem.. Too early for the available technology.

1. Silicon Graphics.  Silicon Graphics was founded in the late 1980’s by a pre-eminent Stanford professor, Jim Clark, on the idea that 3D visualization of complex problems would become the next big wave in technology. As a minor side business, it also excelled at computer animation, a growing new market of interest to Steve Jobs and others. It is now obvious that Clark was onto something that has now finally become the Next Big Thing, but at that time, the available technology simply made it too difficult and too expensive. Silicon Graphics no longer exists. Silicon Graphics crown jewel was its enabling software code, the SGI Graphics Library. It does still exist in open form.

Read more:http://mayo615.com/2013/03/31/hans-rosling-makes-visual-sense-of-big-data-analytics/

2. iBEAM Broadcasting.  iBEAM was the precursor of YouTube, but too far ahead of its time.  the founder, Mike Bowles, a former MIT professor, envisioned streaming media across the Internet, but this was in 1999.  Intel, Fox Entertainment, Reuters, Bloomberg, Microsoft were all involved, some investing significant sums in the company. We tried mightily to make it happen for Mike, but there were technology convergence problems.  The Internet at that time simply did not have sufficient reliable broadband capability.  In 1999 the vast majority of Internet users still used a dial-up connection.  The company, with help from Microsoft and its other big pockets investors turned to satellite transmission, which is immensely expensive.  I did learn a lot about the satellite business. Great idea, way too early, and the company failed early.

3. P-Cube.  In 2001, I was approached by prominent friends at two downtown Palo Alto venture capital firms to consider joining an Israeli startup in which they had invested. The idea was wildly popular at the time….traffic policy management and so-called Internet traffic shaping.  I enthusiastically joined the new company and became its first U.S. based employee.  The compelling idea was simple, make money by charging for bandwidth. The background idea was to enable deep IP packet payload snooping to prioritize traffic, but also for its political potential. This is the technology that Dick Cheney employed after 9/11 to snoop all Internet traffic.  The only problem was that the technology was simply not yet ready.  The P-Cube Internet traffic switch was a 24 layer printed circuit board (hideously difficult to fabricate), with 5 IBM PowerPC chips, 1 Gig of onboard memory (at the time bleeding edge, but today laptops have more memory), a host of “application specific integrated circuits” (ASIC), and to top it off a proprietary software language to program the box.  In the end, P-Cube burned up $100 Million in venture capital, and I had great fun traveling the World selling it, but the box never worked, largely because the technology simply was not there..  P-Cube’s assets were bought by Cisco Systems and t0day such capability is built into the boxes of Cisco System, Juniper Networks and others.

The key takeaway lesson from this: do not underestimate the importance of technology convergence with a great idea.

Immigrants Will Think Twice About Coming to Silicon Valley

Since I joined the high-tech industry years ago, Silicon Valley has had a fundamental need for highly educated engineers and scientists that could not be filled by American graduates. This reality has been bemoaned by Congressional politicians for decades now, who have essentially done nothing to increase the emphasis on STEM education (science, technology, engineering, and math) for resident Americans, and who instead chose to provide the H1-B Visa enabling Silicon Valley high-tech companies to employ immigrants to fill these crucial positions, and has enabled the high-tech industry to thrive.  In my own group at Intel years ago, one of my closest colleagues was a Canadian math graduate from McGill and a Harvard MBA with an H1-B visa. Today, Silicon Valley is now notable for its multicultural diversity.  The election of Donald Trump has raised very real fears in Silicon Valley. His platform is almost completely devoid of any acknowledgment of the crucial importance of high-tech innovation to U.S. productivity and economic growth, the need for H1-B immigrants and the parallel need for greater investment in STEM education. But then Trump is on record calling computers “a mixed bag” and thinks people should wean themselves off the internet. Trump is also said not to have basic computer skills, beyond the use of his Twitter account. 

Supporters of Trump prior to the election were few and far between. Peter Thiel, a venture capitalist, former founder of PayPal, and a gay man, is perhaps the single most visible Trump supporter in the Valley. Tim Cook, CEO of Apple, did hold a private Silicon Valley fundraiser for Paul Ryan during the election, but otherwise, his support has been publicly tepid at best, as Trump has lashed out vigorously at Apple’s overseas manufacturing. Meg Whitman, CEO of Hewlett-Packard and a host of other Silicon Valley luminaries were outspoken supporters of Hilary Clinton. There are indications of a tenuous thaw from some in Silicon Valley but where will it lead?

What Will Happen to the H1-B Visa and Investment In STEM?

Source: Silicon Valley Reels After Trump’s Election – The New York Times

 STATE OF THE ART THE NEW YORK TIMES, NOV. 9, 2016

Farhad Manjoo

Silicon Valley Reels After Trump’s Election

Silicon Valley’s luminaries woke up Wednesday morning to a darkened new global order, one that the ceaseless optimism of their tech-powered visions seemed suddenly unable to conquer.

Across the technology industry, the reaction to Donald J. Trump’s election to the presidency was beyond grim. There was a sense that the industry had missed something fundamental about the fears and motivations of the people who use its products and that the miscalculation would cost the industry, and the world, greatly.

“The horror, the horror,” said Shervin Pishevar, a venture capitalist at the firm Sherpa Capital who, like just about every leading light in tech, had strongly supported Hillary Clinton’s candidacy. “We didn’t do enough,” he added. “There were too many people in the tech industry who were complacent. They waited and waited and waited to get engaged in this election. And now we have this nightmare.”

Others were more succinct in their devastation. “I’m heartbroken,” said Stewart Butterfield, co-founder of the corporate messaging service Slack.

 For some, buried in the visceral reaction was also a realization that the tech industry’s relationship with government — not to mention the public — looks bound to shift in a fundamental way.

During the Obama years, Silicon Valley came to see itself as the economic and social engine of a new digital century. Smartphones and social networks became as important to world business as oil and the automobile, and Amazon, Apple, Facebook, Google and Microsoft rose to become some of the most prosperous and valuable companies on the planet.

Mr. Obama, who rode many of these digital tools to the presidency, was accommodative of their rise; his administration broadly deferred to the tech industry in a way that bordered on coziness, and many of his former lieutenants have decamped to positions in tech.

Mr. Trump’s win promises to rip apart that relationship. The incoming president had few kind words for tech giants during the interminable campaign that led to his victory. Mr. Trump promised to initiate antitrust actions against Amazon, repeatedly vowed to force Apple to make its products in the United States, and then called for a boycott of the company when it challenged the government’s order to unlock a terrorist’s iPhone. Mr. Trump’s immigration plans are anathema to just about every company in tech.

Amazon, Apple, Facebook, Google and Microsoft offered no immediate comment about Mr. Trump’s win, or how the new administration’s stated policy goals would affect their businesses.

But it seems clear that a shift is in the offing. Leaders of these behemoths have long spoken in ambitious, gauzy sentimentalities about a broadly progressive future. Their goals weren’t simply financial but, they said, philosophical and democratic — they wanted to make money, sure, but they also wanted to make the world a better place, to offer a kind of social justice through code. Theirs was a tomorrow powered by software instead of factories, and offering a kind of radical connectivity that they promised would lead to widespread peace and prosperity.

Last year, Sundar Pichai, Google’s chief executive, published a broad rebuke of Mr. Trump’s plan to ban Muslims from immigrating to the United States. Mark Zuckerberg, Facebook’s co-founder and chief executive, told an audience of developers in April that “instead of building walls, we can help people build bridges.”

 Peter Thiel, former founder of PayPal, and perhaps the most visible and lonely Trump supporter in Silicon Valley

In private, during the campaign, many tech leaders were positive that their vision would prevail over Mr. Trump’s. When asked about whether they were preparing in any way for a Trump victory, bigwigs at many of the industry’s leading tech and financial firms were bemused by the notion. They thought it would never happen.

The deeper worry is that tech is out of step with the national and global mood, and failed to recognize the social and economic anxieties roiling the nation — many of them hastened by the products the industry devises.

Among techies, there is now widespread concern that Facebook and Twitter have hastened the decline of journalism and the irrelevance of facts. Social networks seem also to have contributed to a rise in the kind of trolling, racism and misogyny that characterized so much of Mr. Trump’s campaign.

And then you get to the economic problems. Unlike previous economic miracles, the tech boom has not led to widespread employment. Much of the wealth generated by the five biggest American tech companies flows to young liberals in California and the Pacific Northwest, exactly the sort of “global elites” Mr. Trump railed against in his campaign.

It’s not clear that most Americans see technological progress as the unalloyed good that it is considered in Silicon Valley. Technology has pushed so deeply into people’s lives, changing how they work and go to school and raise their children, that it could well raise more fears than hopes. A new smartphone is nice, but perhaps not if it means that your trucking job will be replaced by a big rig that drives itself.

“We need to figure out how to connect more Americans to the economic engine of technology,” said John Lilly, a partner at the venture capital firm Greylock Partners.

On Wednesday, some in Silicon Valley worried about their disconnection from the mass of voters who chose Mr. Trump.

“In tech, we need scale, so we look at the world through the lens of aggregate metrics like page views, active users and even revenue,” Danielle Morrill, the chief executive of a start-up called Mattermark, wrote in an email. “But that doesn’t mean we understand the people on the other side of the screen as individuals. That’s the danger and the opportunity.”

Still, some people in tech said that despite their heartache over the outcome, they felt renewed inspiration to take bolder action to realize their progressive visions. Some made very big, idealistic proposals — this being, after all, the land of disruption. On Twitter, for instance, Mr. Pishevar said he would fund a campaign to get California to secede from the nation.

Others weren’t as high-flying but were nevertheless resolute.

Aaron Levie, the chief executive of Box, an online document storage company, suggested that the tech industry promote specific policy issues.

“To shift to an economy driven by innovation from tech-enabled businesses, we need to get ahead on the issues we’ve been talking about in Silicon Valley for years, like education, patent reform and immigration reform,” he said. “By and large, minus taxes and some tax repatriation issues, much about Trump’s rhetoric has been antithetical to most of the big businesses that are driving the economy.”

Mark Suster, a venture capitalist at Upfront Ventures, echoed the idea.

“Tech needs to take a deep breath, and then reflect on how this happened,” he said. “And have policy proposals that can realistically address the inequality in our country.”

Partnerships, Collaboration and Co-opetition: More Important Than Ever

A Strategy For Survival in Tough Times

In the simplest terms, the concept here is how a company can potentially increase both revenue and market share by executing a strategy to work with its direct or indirect competitor(s) to the benefit of both, a win-win.  The old Arab saying, “My enemy’s enemy is my friend” also applies. It can also be as simple as joining an ad hoc collaboration among a group of companies or a standards group to create market order and simplicity from an overcrowded and confused market.  Customers invariably respond to products that provide the greatest value and paths to long-term increased value and cost reduction. Collaboration or “Co-opetition” is one of the most effective means to achieve that goal, particularly in an economic environment where “flat is the new up.”

Multibus: An Early Example of Collaboration Building A New Market

Soon after joining Intel, I learned about Intel’s concept of “Open Systems” and its “Multibus” system architecture.  Motorola was Intel’s primary competitor in microprocessors and so-called “single board computers” at that time.  Intel’s now legendary Marketing VP, Bill Davidow had developed a strategy to recruit other companies to support Multibus as an open system standard.  Davidow’s idea was to make Multibus more attractive to system designers by having a stable of compatible products from other companies supporting Multibus. It worked. Since that time the concept has evolved significantly and has played a major role in the development of many new markets. This post discusses some of the evolutionary changes, offers two high-tech case studies and some key requirements for successful collaboration.  It is more important now than ever as a survival strategy in a particularly challenging global economy.

The IBM Personal Computer Sets The Standard For The Future

Perhaps the best known high-tech example of an open system is the IBM Personal Computer, involving IBM, Intel, Microsoft, and thousands of other supporting companies. The result has been the creation of a huge new market, with over 400,000 applications for the PC, significant price competition, and interchangeable components from multiple vendors.  By contrast, Apple opted for a closed, proprietary system, which persists to this day, and continues to be a source of discontent from Apple customers: higher prices, as well as accessories and interfaces only available from Apple, etc. In sheer market share, the PC dominated at 85% of the total market, while Apple was forced to concentrate on niche markets like education and graphic design. I am not going to discuss the PC as it has been analyzed extensively over the years, though it does provide an excellent case study on the dynamics and market power of open systems versus closed proprietary systems.

 Important Current Co-opetition Successes: DSL And Android

I will discuss two other cases, one less well known and the other better known and more recent.  In the first case, I was personally involved so my experience enables me to speak in-depth on the topic.  Shortly after leaving Ascend Communications, I was called by a friend at Compaq/HP in Houston and asked to fly down to Houston for a private discussion with the VP of the Presario Division and his team.  The VP wanted to incorporate a high-speed digital subscriber line (DSL) connection in the Presario out of the box.  The idea was that a consumer would connect the PC to a standard RJ11 telephone wall jack, and be instantly connected to the Internet.  However, I had to explain that the challenges to this were enormous. First and foremost the telephone companies themselves could not agree on the standard for how DSL worked. Equally problematic, the DSL market was fragmented with dozens of competitors offering different proprietary solutions.

We decided to proceed regardless, recognizing that if HP/Compaq were to succeed with their ingenious idea, it would require a fundamental change in the current DSL market and the telcos.  This could only be attempted if Compaq joined forces with Intel and Microsoft, and even then the outcome would be uncertain.  I contacted Ali Sarabi in Intel’s Architecture Labs, who admitted that Intel had been thinking of the same idea, and talking with Microsoft as well. So within two weeks all three companies met at Microsoft in Bellevue and the idea gained steam. Soon after we held three days of secret meetings in Atlanta with DSL companies, without explaining our purpose, and came away completely dejected. Bringing the competitors together was hopeless. They all pointed in a different direction. It then dawned on us that if we could get the telecom companies to agree on a single DSL standard, they could unite and as “the customers,” and therefore dictate to the DSL competitors what they would buy. Nothing works better than the opportunity to make money.

Another round of secret meetings in Seattle with the telecoms, and follow-up meetings around the country led to a breakthrough: the formation of a global consortium of over 100 telecom companies and DSL companies that culminated in the International Telecommunications Union in Geneva Switzerland creating a single global DSL standard, which eventually made the original Compaq Presario vision a reality.

Special Interest Group Legal Framework Paves The Way

One of the keys to this success was a simple legal framework for the companies to collaborate, known now as a “Special Interest Group,” avoiding any hint of unfair competition and ensuring that the technical aspects of the standard would be in the public domain. The SIG legal document has since been used in a number of other developments, notably Bluetooth and USB.  Other standards bodies, like the IEEE and IETF, are also structured similarly, enabling the creation of crucial collaborative projects like WiFi. These efforts are now a key aspect of many high-tech markets. Many companies devote entire teams to managing their participation in these standards bodies and ad hoc industry collaboration activities. Even on a small scale, some agreed framework, a Memorandum of Understanding or a simple one-pager may be required to achieve the necessary trust to move forward.

Android Repeats The IBM PC Phenomenon

The second case of successful global industry-wide collaboration is the Google Android smartphone operating system versus Apple IOS.  Once again, Android is an open architecture while Apple IOS is a closed proprietary system. Android has been adopted by a wide range of smartphone manufacturers, most notably Samsung, HTC, and Huawei. Despite the well-publicised popularity of Apple’s iPhone, the fact remains that Android, as an open architecture dominates the global smartphone market at 82% market share in 2015, as reported by International Data Corporation (IDC), and Apple again stuck in the 15% range.

Global Smartphone Market Share 2015 (IDC)

Two Failures To Collaborate: Videoconferencing And The Internet of Things

The video conferencing market has been around for nearly thirty years. Originally, there were big bulky proprietary systems. Cisco Systems later became a major player with its own impressive HD technology. In all, there were nearly a dozen major competitors addressing an “enterprise market” for business use only. The equipment was very expensive. Then along came Skype, WebEx, Apple Facetime and others. The problem is that, after thirty years, none of these competitors applications can talk with any other application. Clearly, this is a problem. So “middleware” startups have sprung up, offering a simple translation of otherwise incompatible video transmission protocols. Bluejeans technology is one excellent example. I have used it personally in my UBC classes to link a guest lecture on Skype to UBC’s corporate video conferencing system because there is no other way to do it. Is this the best solution or cost-effective. Absolutely not. Why, after thirty years, has the video conferencing industry failed to standardize?

In another case, the emerging new market buzzword is “The Internet of Things.” This means that everything in your home can and will be connected to the Internet. Sounds simple enough, right?  Not exactly.  Today the IoT market remains a complex, confusing Tower of Babble, with multiple competing communications protocols. Some products support WiFi, but there is no one single agreed way to communicate. A recent ZDNet post explains that home automation currently requires that devices need to be able to connect with “multiple local- and wide-area connectivity options (ZigBee, Wi-Fi, Bluetooth, GSM/GPRS, RFID/NFC, GPS, Ethernet). Along with the ability to connect many different kinds of sensors, this allows devices to be configured for a range of vertical markets.” Huh?  This is the problem in a nutshell. You do not need to be a data communication engineer to get the point.   I have written here on this blog about this embarrassing failure to collaborate.

Summary

While the open architecture of the PC happened more or less organically, as so many companies were keen to get in on the action, the DSL problem was a hairball of enormous global complexity that had to be solved.  I am honored to have been part of that effort. Google’s decision to launch Android as an open architecture was more like Multibus, and the conscious strategic decision of Eric Schmidt and Larry Page to enter the market as an open system from the outset. Other examples in other industries abound and are documented in the now legendary book, Co-opetition.

The result in all three successful cases has been a dramatic market success. The key takeaway point is that in all three cases the open architecture created opportunity and expanded the market.  Industry collaborations like this are as relevant for smaller markets with only two or three competitors as for large complex markets.  Collaboration can be the key to company survival or failure.

10 Best Industries To Target For Internships and Entry Level Positions

 Let’s be frank. Finding a decent job commensurate with your new UBC degree in Management has become extremely difficult. I have blogged previously here on the discounted value of a degree, as explained by UC Berkeley economist and former U.S. Secretary of Labor, Robert Reich.  For those living in the Okanagan or hoping to stay here to enjoy the sunshine, I urge you to relocate to a region with better employment prospects. BC Business recently published a ranking of BC cities for employment prospects.  Kelowna ranked 17th, despite being the second largest region in B.C..   Calgary is no better option for jobs these days.

READ MORE: Okanagan Economy And Jobs Market Likely To Worsen

The following list of potential employers is admittedly U.S. focused but it does give you some idea of kind of things you should look for in Canada.  Calgary is no longer a good option due to the oil price slump, expected by Goldman Sachs to last at least five years. Avoid the Energy Industry completely unless it is renewable energy, a growth industry. So not much opportunity in fossil fuels industry for the foreseeable future. Two of the ten below are immediately off this list for that reason alone: Chevron and Schlumberger.  In Canada, some UBC FOM graduates have found internships and entry-level positions in financial services companies like Edward Jones. High tech companies like Cisco Systems, Intel, and many others offer internships, but the competition is fierce. If you haven’t already done some serious advance work, you are probably out of the running. Don’t write off smaller companies if they are in an interesting industry.  If you can afford it, social entrepreneurship may pay dividends to your career.  Bottom line: if you want a good internship opportunity you are going to need to cast your net much further than you may have thought. work all possible network connections, and don’t be shy about asking for “informational interviews” with companies you are targeting. Looking in British Columbia only will be limiting though there are a few good companies, so it may be necessary to look across Canada. Follow the strengths of your aptitude, and people you know who can help you. Ask any FOM alumni who has managed to find a good entry-level position and they will tell you that it was a long, hard process. As my tag line says, “The harder I work, the luckier I get.”

REBLOGGED from CNNMoney:

Challenging projects. The real-world impact of one’s work. Access to company leaders. Free food.

These are some of the hallmarks of a great internship, according to reviews on the jobs site Glassdoor, which recently published its annual list of the highest-rated companies for interns.

Four of the firms in the top 10 are big tech companies; two are in the oil and gas sector, and there’s one each in media, finance, health and business consulting.

The interns who offered anonymous reviews of the companies where they worked also reported their pay. Average amounts for each company ranged from $1,722 to $7,214 a month.

CNNMoney contacted the 10 companies: three confirmed the pay numbers were in the ballpark, four wouldn’t confirm but said they pay competitively, and three didn’t respond. The survey didn’t distinguish between undergrad and grad student interns. Companies may pay graduate students more, so the average pay reported may be higher than what undergrad interns could earn in some cases.

Each company on the list is actively hiring for interns. And geographically, Glassdoor data show that New York currently has the most open internships (2,500), followed by San Francisco (1,500) and Los Angeles (1,400).

• Company
• Avg. monthly pay interns reported
• What interns say

• Facebook
  $6,779 (software engineer intern) $6,058 (intern)
  Great culture, challenging tasks, access to anyone in company
• Chevron
  $6,001
  Professionalism, they invest in you, lots of opportunities
• Google
  $6,788 (software engineer intern) $7,214 (intern)
  Able to make an impact, supportive managers and co-workers, lots of training
• Quicken Loans
  $1,850
  Learned a lot about mortgage industry, room for personal growth, free lunch
• eBay
  $5,893 (software engineer intern)
  Felt appreciated, got to work with top execs, “Bagel Wednesdays”
• Yahoo
  $5,178
  Everyone’s energetic and dedicated; Marissa Mayer a great leader
• Epic Systems
  $5,003 (software developer intern)
  Well-defined projects, flexibility, fun events for interns every few days
• Schlumberger
  $5,607
  Lots of learning opportunities, real projects, everyone helpful
• NBCUniversal
  $1,722
  Great program, professional development sessions beyond your specific job
• Boston Consulting
  Group
  $5,566
  Surrounded by talent; friendly management; career development made a priority

Moore’s Law at 50: At Least A Decade More To Go And Why That’s Important

Gordon Moore, now 86, is still spry and still given to the dry sense of humor for which he has always been known.  In an Intel interview this year he said that he had Googled “Moore’s Law” and “Murphy’s Law,” and Moore’s beat Murphy’s by two to one,” demonstrating how ubiquitous is the usage of Dr. Moore’s observation. This week we are commemorating the 50th anniversary of the April 19, 1965 issue of Electronics magazine, in which Dr. Moore first described his vision of doubling the number of transistors on a chip every year or so.

It may seem geeky to be interested in the details of 14 nanometer (billionth of a meter) integrated circuit design rules, 7 nanometer FinFET (transistor) widths, or 5 nanometer line wire widths, but the fact of matter is that these arcane topics are driving the future of technology applications, telecommunications, business and economic productivity.  As just one example, this week’s top telecommunications business news is the proposed merger of Nokia and Alcatel-Lucent, with the vision to deploy a 5 G (fifth generation) LTE (long term evolution) mobile telephony network. Building out such a high speed voice and data network is almost entirely dependent on the power of the microprocessors in the system and ultimately Moore’s Law.  Nokia apparently believes that it can deploy this technology sooner rather than later and essentially leap frog the competition.  My UBC Management students will recall that in my first university teaching experience in Industry Analysis, I chose to expose them to the semiconductor industry for this exact reason.  Semiconductors are in virtually every electrical device we use on a daily basis.

However, as we cross this milestone we are able to see that we are near the limits of the physics of Moore’s Law.  International Business Strategies, a Los Gatos based consulting firm, estimates that only a decade ago, it cost only $16 million to design and test a new very large scale integated circuit (VLSI), but that today the design and testing cost has skyrocketed to $132 million.  Keep in mind that the cost of design, fabrication and testing of bleeding edge IC’s has been reduced dramatically over the decades by automation, also driven by Moore’s Law. So we are seeing a horizon line.  That said, entirely new technologies are already in the laboratories and may, in a way,  extend Moore’s Law, and the dramatic improvements in cost and productivity that come with it, but through entirely new and different means.

 

 

Now This Is Funny: Top Ten Reasons You’re Not Ready for Today’s Online World

This is not the Letterman Show.  But it is very funny..  Scott McNealy, former CEO of Sun Microsystem‘s keynote address at an enterprise computing conference held in Pacific Grove a month or so ago. Scott is not particularly well known for his humor and perhaps better known informally for his appreciation of ice hockey.  Someone must have helped him with this Top Ten list list of “reasons you ( or your Chief Information Officer) is not ready for today’s new online world.”

Top Ten List of Reasons You Are Not Ready For Today’s Online World.

10. “GolfShot” is the #1 cloud app on your mobile phone. This is McNealy’s poke at himself, a long time golf nut. 

9.  Your StarTac blurts out that “you’ve got mail.”  

8. You think Gmail is a typo

7. Myspace is your social media site

6. COBOL programming is a requisite for all your new hires.

5  Your grade school child is your tech support at home

4. You believe Computer Associates the leading an open source software provider

3. When someone mentions “Google glasses,” you type “glasses” into the search bar.

2. You are planning to implement OS2 on the desktop.

1. Big Data is a rapper.

Multidimensional Mobile Market War: Silicon Rust Belt

Winners and Losers: Tech’s Hot or Not List

Read more in the Wall Street Journal: http://online.wsj.com/article/SB10001424127887323809304578431211400776432.html?KEYWORDS=Tech%27s+Rust+belt

In this, my third post on the dramatic and fascinating developments, shifts, and impacts of the Multidimensional Mobile Market War, the precipitous decline of the leading personal computer industry competitors, has become even more pronounced than anyone suspected.  Last week, IDC and Gartner were in more or less violent agreement that the bottom had very suddenly dropped out of the PC market.

In my previous post I speculated that Michael Dell‘s attempt to take Dell Computer private was in major trouble. Carl Icahn and the Blackstone Group had already thrown a monkey wrench in Dell’s effort to buy back personal control of Dell. Then came the SEC disclosure statement that showed that Dell’s situation was more dire than previously known. This week the Blackstone Group announced that they no longer had an interest in Dell and were pulling out.  The final chapter of this may be that Dell Computer will run out of cash and simply be forced to shutter its doors.  Please keep in mind that Microsoft is a key strategic investor in Michael Dell’s privatization plan.

Then we turn to Microsoft itself and its problems. Microsoft has been grappling with major strategic problems as it attempts to transition away from personal computers into smart mobile.  Windows 8 has been a disappointment.  I gave my wife a Windows 8 laptop, and she immediately complained that the “Start” button was gone, and nothing was intuitive.  Microsoft has just announced that Windows 8.1 will include the return of the “Start” button. You can’t make up stuff this dumb. Nokia is struggling to re-establish a survivable market share in mobile using Windows 8 as its OS… IDC has been forecasting that Microsoft is unlikely to establish more than a 8% mobile OS market share by 2015. This is catastrophic for Microsoft.  Facebook‘s decision to implement an HTC Android device is yet another nail in Microsoft’s attempts to reinvent itself.

Some articles and blogs have argued that Intel is also at a “strategic inflection point,” as Andy Grove would have said, with its legendary reputation grounded in the PC business, as with Microsoft. While this is true, Intel’s short term results belie the  historically volatile and cyclical nature of the semiconductor market. What is clear, is that Intel saw the future some time ago, and that it has a coherent long term strategy. Intel has been diligently plowing its profits back into research and new market development programs. Most important in these new markets is the Atom low power chip for mobile, and perceptivity computing. The Intel Hillsboro facility we used to call “Jones Farm,” the Intel Labs, is famous for leading the industry efforts on the Universal Serial Bus (USB), Universal Asynchronus Digital Subscriber Line (UADSL), PCI bus, Bluetooth, and now a host of new market efforts, including energy harvesting technology.

I speculated last week that Lenovo must be rethinking the wisdom of it’s decision to buy IBM‘s PC business.  This appears not to be the case.  It has been reported this week that IBM is now in talks to sell its server business to Lenovo.  This revelation is also important in understanding IBM’s strategy. IBM appears to be completely disconnecting from its legendary past in computing hardware, and exclusively embracing “The Cloud”  and software as a service (SAAS).

Then we must consider the case of Hewlett Packard.  Over the last two years, HP has engaged in a schizophrenic death dance with the PC business, that has damaged the credibility of the HP brand, something many of us could never have imagined.  HP’s bizarre decisions to purchase the Palm OS for over $2 Billion, and British software company Autonomy, for over $11 Billion, which some have described as the greatest business blunder in history, surpassing Time Warner‘s blunder in purchasing AOL, leave observers shell shocked. But even more bizarre in my humble opinion (IMHO) is HP’s repeated blunders and reversals in the PC and tablet businesses.  HP has been in and out of the PC and tablet businesses so often that the HP brand credibility has been completely trashed.  With IBM now apparently getting completely out of hardware and concentrating entirely on The Cloud and SAAS, via IBM Global Services, it forces HP to yet again rethink its PC business, if it is to compete successfully with IBM.

Finally we must consider the situation of Oracle, a perennial big player in enterprise software and services. It’s CEO and America’s Cup sailor, Larry Ellison, recently acquired Sun Microsystems, its traditional hardware partner.  The logic of Ellison’s decision to acquire Sun escapes me.   Based on the fringe SPARC proprietary semiconductor architecture, Sun was never able to achieve the cost/volume advantages of Intel. Oracle should have focused on becoming hardware independent, as IBM seems to doing.  Instead, Oracle’s financial performance is under pressure, and they are lumbered with Sun hardware.

The spectre of a Silicon Valley Rust Belt seems to be one likely outcome of the Multidimensional Mobile Market War.  Who will be a victim and who will be a survivor is not yet clear.  If only from a historical point of view, I would put my bet on IBM and Intel, who both have decades long reputations for reinventing themselves. I would also be looking at the strategic directions both IBM and Intel are taking, as potentially good indicators of the future.

Microsoft’s New End Game Strategy: Pray

PC Sales in Freefall: Wall Street Journal

Quarterly PC Shipments Drop 14% as Windows 8 Fails to Stem Advance of iPads and Android Devices

Mega Mobile Market Share War Moving At Breathtaking Speed to the End Game

In a further episode of my earlier posts on the Mega Mobile Market Share War, it would seem that International Data Corporation (IDC) and Gartner, the two leading high tech industry analysis firms, are haggling over whether the precipitous drop in quarterly PC sales is 11. 2% or 14%.  It also adds evidence to the accelerating rate of change in the corporate life cycle. Corporate life cycle events that took a decade are now occurring in a few short years.

Any way you look at it, it is a catastrophe for everyone in the PC business, and a further piece of the puzzle in determining who will win and lose in mobile. Shares of Lenovo, HP, Microsoft, and even Apple are all down as the market reacts to the news.  This is doubly bad news for Microsoft, whose strategy seems to have been to introduce Windows 8 to bolster lagging PC demand, while building for the future with tablets and smartphones.  It appears that the bottom has fallen out for Microsoft in more ways than one.  First, we have the dismal forecasts for Windows mobile, also from IDC. Microsoft had been forecast to have perhaps 8% of the smart mobile OS market by 2015, fighting with Blackberry for the leftovers not taken by Apple IOS or Android. Microsoft’s mobile device partner, Nokia, is not looking too healthy in the mobile device war.   If I were a Finn from Nokia, I would be camping out in Mountain View, not Redmond. Last week’s announcement that Facebook would adopt a modified version of the Android OS from Google, would seem to further dim Microsoft’s chances of finding a survivable market share in mobile, much less Blackberry.

No one has mentioned Dell Computer, currently in the midst of a protracted investor battle over privatization, pitting Michael Dell against Carl Icahn and the Blackstone Group. The market news today has undoubtedly impacted this situation in a major negative way. Michael Dell waited too long, and don’t forget that Microsoft is also a player in the original Dell plan to go private.. This is nothing less than a corporate train wreck.  I could envision Dell now perhaps closing its doors, and Icahn, waiting like a predator to buy the deceased’s assets for a song.

Frankly, for those of us who were forced to contend with Microsoft’s unbelievable arrogance and hubris in the late 1990’s, we view the likely difficult times ahead for Microsoft with some irony. The way it is playing out, it is extremely unlikely that Microsoft or Blackberry will survive in their current forms. Meg Whitman will now probably announce the third or fourth reversal in PC strategy at HP and exit the business once and for all, to save HP.

IBM was incredibly smart to sell out to Lenovo when it did, and Lenovo must now be asking itself if buying the PC business from IBM was such a good idea, and rethink where it is headed.

Has Intel Corporation moved rapidly enough into mobile low power devices, and new markets like “perceptivity computing” which they showcased at CES this year?

It does seem increasingly likely that Google Android is in an unassailable position to win the Mega Mobile Market Share War. Apple and IOS will be number two. I would also offer that Apple’s situation has been influenced by a number of other ancillary factors. The death of Steve Jobs and Tim Cook assuming the reins of the company is one key factor, still not completely clear in its effect.  Rumors began to float today that Cook would announce the first true mobile wallet app at the upcoming Apple Developer’s Conference.  I just don’t see mobile payments as being the Apple “killer app” that some in the high tech blogosphere are calling it. Apple does not have a monopoly on mobile payment systems, and most believe that “point of sale”  (POS) equipment will take nearly a decade to roll out. Another way of making my point is to ask why Apple left a “near field communication” (NFC) chip out of the iPhone 5 if Apple considered NFC and mobile payment to be the next big thing?  That is the other factor: Apple arrogance and monopoly mentality that has been part of the Apple culture since the early days. It is Apple’s Achilles heel.

So my final word on all of this is that I have great respect for Eric Schmidt, Larry Page and Sergei Brin at Google. But even if Google and Android win the MMM Share War, as we all know, competitive advantage is a fleeting thing. Google need only watch Microsoft’s current conundrum to be reminded of that fact.

The Importance of “Convergence” In Market and Industry Analysis

If You Get Technology “Convergence” Wrong, Nothing Else Matters

I came across this book during my most recent visit to the UBC Vancouver campus.  As good as I think this book is at focusing attention, in workbook style, on the importance of market and industry analysis in new venture due diligence, there is an issue that I think is not adequately addressed by any model or theory: not Porter, not STEEP or SWAT. Convergence is the issue.

We can imagine and even potentially envision a very cool business idea, but if the technology to achieve it is not ready, not sufficiently mature, the idea is Dead on Arrival (DOA).   I do not mean to pick on young entrepreneurs, but I reviewed a business concept last week that was a superb and compelling idea, but the technology necessary to achieve it simply was not there, either in terms of its capability or its price point. I am confident that it will be there in time, but it is not now.  As if to make my point, Apple announced that it was acquiring a company for $20 Million in the exact same technology area: indoor location tracking (no small feat).  At this point it is not clear that the acquired company has any extraordinary intellectual property or expertise, and the article primarily focused on the point that this “location identification” technology was “heating up.”  It looks like it may be a simple “aquihire.”   Global Positioning and geo tagging as in smart mobile phones, radio frequency identification technology (RFID), and inertial guidance are all currently used in various combinations by a host of competitors (too many) to achieve required levels of accuracy, immediacy and cost.  A local industrial RFID company has just closed its doors because it simply could not compete and make money.  The simple problem was that this company’s idea, as compelling as it was, could not achieve the necessary price point, or possibly would not even work.

So we have the problem of “convergence.”  Great idea but the technology simply is not ready….yet.

I have three personal case study examples of the problem of “convergence,” that every potential entrepreneur should study. I have to admit that I was a senior executive at all three of these Silicon Valley companies, one of which actually made it to the NASDAQ exchange.  All of them had the “convergence” problem.. Too early for the available technology.

1. Silicon Graphics.  Silicon Graphics was founded in the late 1980’s by a pre-eminent Stanford professor, Jim Clark, on the idea that 3D visualization of complex problems would become the next big wave in technology. As a minor side business, it also excelled at computer animation, a growing new market of interest to Steve Jobs and others. It is now obvious that Clark was onto something that has now finally become the Next Big Thing, but at that time, the available technology simply made it too difficult and too expensive. Silicon Graphics no longer exists. Silicon Graphics crown jewel was its enabling software code, the SGI Graphics Library. It does still exist in open form.

Read more:http://mayo615.com/2013/03/31/hans-rosling-makes-visual-sense-of-big-data-analytics/

2. iBEAM Broadcasting.  iBEAM was the precursor of YouTube, but too far ahead of its time.  the founder, Mike Bowles, a former MIT professor, envisioned streaming media across the Internet, but this was in 1999.  Intel, Fox Entertainment, Reuters, Bloomberg, Microsoft were all involved, some investing significant sums in the company. We tried mightily to make it happen for Mike, but there were technology convergence problems.  The Internet at that time simply did not have sufficient reliable broadband capability.  In 1999 the vast majority of Internet users still used a dial-up connection.  The company, with help from Microsoft and its other big pockets investors turned to satellite transmission, which is immensely expensive.  I did learn a lot about the satellite business. Great idea, way too early, and the company failed early.

3. P-Cube.  In 2001, I was approached by prominent friends at two downtown Palo Alto venture capital firms to consider joining an Israeli startup in which they had invested. The idea was wildly popular at the time….traffic policy management and so-called Internet traffic shaping.  I enthusiastically joined the new company and became its first U.S. based employee.  The compelling idea was simple, make money by charging for bandwidth. The background idea was to enable deep IP packet payload snooping to prioritize traffic, but also for its political potential. This is the technology that Dick Cheney employed after 9/11 to snoop all Internet traffic.  The only problem was that the technology was simply not yet ready.  The P-Cube Internet traffic switch was a 24 layer printed circuit board (hideously difficult to fabricate), with 5 IBM PowerPC chips, 1 Gig of onboard memory (at the time bleeding edge, but today laptops have more memory), a host of “application specific integrated circuits” (ASIC), and to top it off a proprietary software language to program the box.  In the end, P-Cube burned up $100 Million in venture capital, and I had great fun traveling the World selling it, but the box never worked, largely because the technology simply was not there..  P-Cube’s assets were bought by Cisco Systems and t0day such capability is built into the boxes of Cisco System, Juniper Networks and others.

The key takeaway lesson from this: do not underestimate the importance of technology convergence with a great idea.

Big Data: Big Deal Or Not?

I have been having a spirited marathon debate with a couple of my friends.  Is this alleged new “Big Data thingy” so transformational that it will change our every day lives, or is it just an evolutionary advance that may improve productivity but not much else?  The same arguments may apply to the concept of “The Cloud,” and “Smart Mobile.”  The three, taken together, are coalescing into the major information technology forces that will drive innovation and productivity into the foreseeable future.

PollDaddy: What Is Your Opinion?  Big Data: Big Deal Or Not? Or Comment Below

We are hearing regularly in the media about so-called “Big Data.”  What exactly is Big Data? A number of differing definitions have been offered from a wide range of media sources. ZDNet‘s definition is one of the best I have seen so far.  In essence, big data is about liberating data that is large in volume, broad in variety and high in velocity from multiple sources in order to create efficiencies, develop new products and be more competitive. Forrester puts it succinctly in saying that big data encompasses “techniques and technologies that make capturing value from data at an extreme scale economical”  Prior to the emergence of commercial Big Data, the concept only existed where cost was no object: in the black world of the National Security Administration, and required the largest purpose-built supercomputers in existence.

A zettabyte (symbol ZB, derived from the SI prefix zetta-) is a quantity of information or information storage capacity equal to 10²¹ bytes or 1,000 exabytes (or one sextillion (one long scale trilliard) bytes).^{[1][2][3][4][5]…..I Billion terabytes….Today, you can walk into your local computer store and buy a couple of terabyes for a $100.  Only $500 Million for a zettabyte.  In real terms that is dirt cheap, and getting cheaper daily.   Now that we have that cleared up, we can move to the next level.}

With regard to the obvious issue of personal privacy, the European Union and other organizations have made efforts to protect privacy, with very mixed results.  Other governments, notably China, are aggressively implementing opposite policies to strictly limit privacy.  Highly sophisticated telecommunications equipment has been available for years that enables deep analysis of all of your voice and Internet traffic. We learned this when Dick Cheney secretly set up such equipment to track and record all voice and data traffic in the United States.  The equipment trapped and analyzed all of it in real time. You didn’t notice a thing.  The thing about your personal data is that they already have it. Most of it comes from public sources you authorized.   I not advocating this, I am only the messenger. The founder and former CEO of Sun Microsystems, Scott McNealy famously said, “You have no privacy. Get over it.”  We must not ignore the serious issue of privacy, but the problem is already here and deep data mining is thriving.  Privacy needs a revolution of its own.

The core question then becomes whether Big Data, and for that matter, the Cloud, and Smart Mobile, represent revolutionary and transformational changes in technological capability and also consequentially, human culture, politics: how we conduct ourselves in the World.  Or is it just so many more boring zeros and ones zooming by at the speed of light, stored in chips, and processed by quantum microprocessors?  No big deal, just IT management as normal.  Frankly, this is a significant philosophical question.  For this discussion, we will focus only on Big Data.   Discussion of the Cloud and Smart Mobile will follow later.  My most recent post on Smart Mobile gives a hint of my thoughts:  Mobile Market Share: A War of Titans Worth Following, http://mayo615.com/2013/01/21/mobile-os-market-share-strategy-war-of-the-titans-worth-following/

In fairness, I cut my teeth on Marshall McLuhan‘s ideas while in university in the 1960’s.  In an amazing irony, I soon fell into Intel Corporation at the birth of the microprocessor revolution, and later, I was also present to personally participate in the emergence of the personal computer. My memory of McLuhan kept popping up everywhere.   As my career progressed, I seemed to jump onto each new wave: networking at Sun Microsystems,  then the Internet infrastructure build out explosion with Ascend Communications, and finally a host of new companies, based on Internet-based capabilities.  Through all of it, I could only conclude that somehow McLuhan, like some kind of modern Nostradamus, had foreseen it all.   Most importantly, my own life was transformed by it all, and I saw with my own eyes the massive transformation occurring all around me.

So I have no doubt that Big Data is transforming our lives, and will continue to transform our lives, in ways we cannot yet fully grasp, as I could not grasp McLuhan when I first heard him, or the significance of the Internet as I sat right in the middle of it.

I have previously described Big Data as analogous to the evolution of Chaos Theory.  For centuries, full understanding of the complexity of nature’s designs were thought to be the realm of God, and beyond human comprehension and explanation.  Then in the 1960’s in places like Santa Cruz, California and Germany, the elegant simplicity of a solution to chaos began to emerge.  The massive scale of Big Data is a very similar nut to crack. We are now seeing an elite group of data scientists and mathematicians begin to solve Big Data in a way similar to how chaos was resolved.  Google, Microsoft Bing, Baidu, Yahoo and Amazon are driving the development of these mathematical skill sets.

Last year I showed my UBC Faculty of Management students a YouTube video on Data Mining. In the video, the two Hungarian mathematicians leading a data mining company, described how they had solved hideously complex problems that were previously beyond any computational solution. The key to their success was their ability to extract very precise useful information from extraordinarily large stores of information.  The metaphor here is more like finding a particular grain of sand on a very large beach.  A parallel key factor has been the incessant march of Moore’s Law.  Even 10 years ago, successful data mining on this scale could not have been accomplished. The computational cycles and high speed mass storage were not available or were too expensive.   Today those microprocessor cycles are available.  The costs will continue to plummet, making further advances inevitable. Failure to consider Moore’s Law and available computational cycles has also been the cause of many failed ideas over the years. But the threshold has arrived.

Today, developments like Google Spanner, the largest known database architecture in the World, have joined with the computational solutions.

Unveiled this fall after years of hints and rumors, it’s the first worldwide database worthy of the name — a database designed to seamlessly operate across hundreds of data centers and millions of machines and trillions of rows of information.

Spanner is a creation so large, some have trouble wrapping their heads around it. But the end result is easily explained: With Spanner, Google can offer a web service to a worldwide audience, but still ensure that something happening on the service in one part of the world doesn’t contradict what’s happening in another.

Google’s decision to reveal Spanner has many dimensions.  First, it provides a peek into the black World of the U.S.  National Security Agency and the U.S. Defense Intelligence Agency.  Previously, the existence of such large and sophisticated global databases were only imagined. We now know they exist and are a crucial component of Big Data.

Read more in my post, Google Spanner, the single largest database in the world

http://mayo615.com/2012/11/26/inside-google-spanner-the-single-largest-database-in-the-world/

For me, the most compelling example of how this all works, has been the extremely sophisticated Big Data mining used by the Obama campaign to achieve re-election. As early as March 2012, the Wall Street Journal began reporting about “Dashboard,”  the Obama campaign app that was mining Big Data to find undecided voters in key states.  But not only undecided voters.  Dashboard can key in, find and persuade “Off the Grid” voters.  Off the Grid is the term used to describe those people, such as students and other young people, with constantly changing locations and only a mobile phone.  These voters have historically been virtually impossible to reach.  This short PBS Newshour video below speaks volumes about the extraordinary impact and value of Big Data, not seen before.

Watch How Much Do Digital Campaigns Know About You? on PBS. See more from PBS NewsHour.

The campaign’s hiring of Rayid Ghani, as “chief data scientist,” and an army of data analysts, set the stage for what was to come.  On election night, Mitt Romney and Paul Ryan were absolutely convinced that they had won the election, but were shocked to find otherwise. Working through their disbelief, both candidates later remarked about the enormous voter turnout for Democrats in key locations and the “technology advantage” of the Obama campaign.

So from my years of observation of the march of technology and its impact on my own life, I am convinced that we are entering another transformational period as profound as the emergence of the Internet itself.

I have been repeatedly drawn back to Steve Job’s 2005 Stanford University commencement address, in which he closes with references to Stuart Brand and The Whole Earth Catalog. Stuart Brand is an extraordinary futurist.  One of Ken Kesey’s original Merry Prankster’s chronicled in Tom Wolfe’s book non-fiction novel, The Electric Kool-Aid Acid Test, Brand had been inspired by the legendary first photograph of the entire Earth taken by Apollo 8 astronaut Frank Borman.  Brand is also the founder of The Well,  the very early Sausalito-based Internet Service Provider, who is now considered one of the most important thinkers on human culture, technology and its impacts.  Word of Job’s commencement address spread virally around the Valley...”Did you hear what Job’s said at Stanford today?”    Steve was basically saying that he too understood what McLuhan had said, and that Stuart Brand also understood the transformational importance of the Global Village, by publishing The Whole Earth Catalog.