Startup: The Complete Handbook for Launching a Company for Less

I happened to come across a review of this book while surfing the web and thought it deserved some consideration as a possible replacement to the course textbook for ETR500 entrepreneurship and innovation. The book is called Startup: The Complete Handbook for Launching a Company for Less, and is written by Elizabeth Edwards. Edwards is an entrepreneur herself having started her own company. She has also funded several startups as a venture capital investor, and sits on the advisory boards for several other startups. The book is based on her personal experiences in all these different areas and can be used by technology startups, as well as, people just looking to open a local coffee shop.

How Word-of-Mouth Can Drive Revenue for Your Business

Here's another interesting article I came across that talks about how word-of-mouth can drive revenue for your business. The article talks about how many people now use user generated content such as , reviews, blogs, and other things to find out what products to buy. 51% of people now buy products based on user generated content. The article also lists several things that a company can do to step into the brand talk surrounding their company or product. 

What brands can do to step into brand talk: 

• Be where your target audience is around 
• Listen to the conversation 
• Respond to the conversation 
• Publish and share buyer persona relevant and remarkable content on the web and in social media 
• Ask for opinion about your products and your business 
• Ask for any suggestions for product and services improvement 
• Be authentic, be honest and be helpful 
• Keep the conversation on run

The article goes on to say that in 2017 the Millennial generation will have more buying power than any other generation. There are also some interesting charts towards the end if the article that show the difference between Millenials and Baby Boomers in terms of what they will and wont buy without first checking user generated content. Not surprisingly Baby Boomers are still very reluctant to base decisions off of user generated content while Millennials tend to rely on it more when making decisions.

Why Apple is Beating Google

I found this article while surfing the Internet the other day and thought it was interesting. The author, Henry Blodget, claims that while Google's products are all built around a strong technology foundation, they are geared more towards "geeky technologist". Apple, on the other hand, design its products for "normal humans". Blodget explains that because these nerds are a smaller, weird niche market Google is struggling to gain the mass market appeal that Apple has enjoyed for several years now. Blodget linked these differences to the organizational strategies that are in place at Google and at Apple. "Google has an engineering culture, in which brilliant technologists are the rock stars."  Apple on the other hand, "has a product-design and marketing culture, in which "technology" merely serves to support a product's function and form."  Looking deeper into this Blodget notes that Google was founded by people who posted stellar GPAs at some of the country's top universities, while Apple was founded by a college dropout, Steve Jobs, who attributed his amazing product designs to LSD and calligraphy. According to Blodget, Jobs, a genius in his own right, would never have been hired at Google because their hiring algorithm would have red-flagged his educational background and dismissed him as a legitimate candidate. Unfortunately, Google really needs someone with Steve's type of genius in order to bring their products to the masses, but in order to do so they will need to change their hiring algorithm, as well as, the colleges that they typically recruit from. The charts below show where Google goes for its talent and where Apple goes to hire its employees.

Google

Apple

Market Opportunities

Estimating the size of a particular market depends on four different cuts of market data: demand, addressable market, realistic opportunities vs. competition, and targeted selection of "winnable market opportunities.  In the following post I will discuss the approach that Closing Bell has used thus far in estimating our market size.

Demand:

"In economics, demand is the desire to own anything, the ability to pay for it, and the willingness to pay. The term demand signifies the ability or the willingness to buy a particular commodity at a given point of time (Wikipedia, Demand)."  One of the key benefits to running a bar like Closing Bell is that there is always a demand for alcohol.  In fact, our research has shown that despite the recent recession people are still indulging themselves with alcoholic beverages at a record pace.  Boston in particular represents some of the highest alcohol consumption rates in the entire country, which makes this location for Closing Bell that much more attractive.

Addressable Market:

"Total addressable market (TAM) is a term that is typically used to reference the revenue opportunity available for a product or service. TAMs help to prioritize business opportunities by serving as a quick metric of the underlying potential of a given opportunity (Wikipedia, Total Addressable Market)."  Presently there are approximately 4.5 million people living within the Greater Boston area.  Of these 4.5 million people approximately 3 million are of legal drinking age.  These 3 million people represent the total addressable market for Closing Bell, or the number of people we could expect to see if there were no competition (i.e. other bars, liquors stores, etc.).

Realistic Opportunities vs. Competition:


While there are 3 million people of legal drinking age in the Greater Boston area there are approximately 1 million males age 24 to 34.  Of the 1 million males age 24 to 34 in the Greater Boston area it is difficult to forecast the exact number that will choose to go to Closing Bell rather than one of the other approximately 180 bars in the area.  Our hope is that people will choose our bar because of the unique pricing system we have implemented, as well as, the atmosphere that fully immerses the customer in the Stock Market experience.  Because of this difficulty in forecasting we took a somewhat different approach in estimating our market. We went more with an average customer per day assumption (assuming on Friday and Saturday we would be closer to max capacity (including turnover) so more like 250 customers, where as on Monday / Tuesday, we might have an average of 50 customers.  We then added a factor in, saying in year 1, we will probably only get 25% of max sales, Yr 2 increasing to 35%... and so on.

Targeted Selection of "Winnable" Market Opportunities:

Closing Bell is currently targeting the 1 million males age 24 to 34 in the Greater Boston area.  However, rather than go after this group as a whole we are specifically seeking those people making over $50,000/yr as this group represents the highest percentage of drinkers.

Tiny $35 Raspberry Pi computer causes big stir on launch day

A fully functioning computer for just $35!  Apparently it's as simple as Raspberry Pi.  Eben Upton came up with the idea in 2006 as he watched the number of applicants to Computer Science programs that possessed actual programming experience declining at an alarming rate.  In the 1990s Upton saw many applicants that were experienced hobbyist programers, but by the 2000s kids were applying that had little more programming experience than simple web design.  Upton deduced that the reason for this radical shift was because current computers and gaming consoles were so expensive that parents had forbidden their children from tampering with them.  While this is a completely logical reaction on the part of the parents it was not providing children with an opportunity to learn basic programming.

By 2008 Upton and his team were able to take advantage of processors that were being developed for mobile applications, but at the same time would suit the needs of his simple computer.  Now, nearly three years later the project is at the end of its first run of developement, and project is garnering incredible interest from across multiple markets. "Developing countries are interested in the Raspberry Pi as productivity devices in areas that simply can’t afford the power and hardware needed to run a traditional desktop PC; hospitals and museums have contacted us to find out about using the Raspberry Pi to drive display devices. Parents of severely disabled kids have talked to us about monitoring and accessibility applications; and there seem to be a million and one people out there with hot soldering irons who want to make a robot."

This message comes directly from the company's website, www.raspberrypi.org. "We don’t claim to have all the answers. We don’t think that the Raspberry Pi is a fix to all of the world’s computing issues; we do believe that we can be a catalyst. We want to see cheap, accessible, programmable computers everywhere; we actively encourage other companies to clone what we’re doing. We want to break the paradigm where without spending hundreds of pounds on a PC, families can’t use the internet. We want owning a truly personal computer to be normal for children. We think that 2012 is going to be a very exciting year."

And in fact they were right.  The response to the Raspberry Pi personal computing system was so overwhelming that when it was launched in early March 2012 distributer's websites crashed almost instantly and the product sold out within hours.

Coming across as nothing more than a credit card-sized circuit board, "the powerful, fully-programmable PC can plug into any TV and can power 3D graphics and Blu-ray video playback."

(Click to Enlarge)

In an interview with CNN, Upton informed them that he is currently working on a version of the computer that will retail for only $25 and will being starting production within the next several weeks.  Upton's hope is that this device will spur the creative minds of young people and result in an additional 1,000 engineers in the UK each year.  He views the Raspberry Pi as a potential "industry-changing development."  In Upton's mind, "anyone who expresses a desire to get into designing software should have a platform to do it."

Like any good entrepreneur Upton saw a problem, identified an opportunity, and set out to create a solution that now appears to be on its way to becoming a successful business.

Whole Foods experimenting with Kinect-powered shopping carts

I found this article on one of the technology blogs that I frequently view in order to keep up with the constantly revolving cycle of gadgets that are being developed.  It's always fascinating to see what people will develop.  In this case, Whole Foods, yes that earthy-crunchy food market, has developed a shopping cart that is capable of following the customer around the store, checking items off their list, and even directly billing their account when they're done shopping.  This particular article is thin on details, but the video showing the cart in action is pretty intriguing.

As shown in the video the cart is even capable of advising the customer about the contents of certain products in regards to allergies.  In the demonstration the customer has entered into his list that he is looking for gluten free spagetti.  When the item is scanned by the cart it reacts to the purchase by notifying the customer that this particular brand of spagetti contains gluten.  It then tells the customer where in the store he/she can locate the gluten free version.  A more detailed article about the cart can be found through Popular Science.  The main driver behind this innovation is the Kinect, which was developed by Microsoft as an add-on to their popular gaming console the XBox 360.

Microsoft developed the Kinect in response to Nintendo's Wii gaming console that allowed uses to control their gaming experience by waving their arms while holding a controller.  However, Microsoft took this concept to the next level with the Kinect, which is capable of monitoring the full motion of the user's body.  Since it burst onto the scene in November 2010 the Kinect has spawned many new innovations such as the shopping cart shown above. Engineers have strapped the device to everything from vacuum cleaners to lounge chairs in an effort to provide them with the ability to sense and react to their surroundings.  Popular Science Magazine featured an article about the Kinect in November 2011, which explored everything that people have used the popular device for since its inception one year earlier.  Included as part of the article was the chart pictured below, which illustrates everything that engineers have used the Kinect for.

(Click to enlarge)

In creating a next generation gaming device Microsoft inadvertently created a device that can also be easily hacked, and adapted to slew of other applications.  Could this be the first wave of robot devices that will make our lives easier?  Only time will tell.

Nottingham Spirk Strategic Innovation

I buried the link to this company in one of my previous blog post, but thought it was worth featuring on its own.  The company is called Nottingham Spirk Strategic Innovation, and they are developing game-changing products for many different markets.  The company was founded by John Nottingham and John Spirk after the two met in Industrial Design Department of the Cleveland Institute of Art.  Upon graduation both received lucrative offers from Fortune 500 companies, but chose to go a different direction and start their own company instead.

They currently do work for multiple clients in the medical, consumer, packaging, retail, business-to-business, and services industries.  Clients include Dirt Devil, AXE, and Swiffer.  Innovations include the Spinbrush, twist-and-pour paint container, and the M&M's Personalized Printer which allows consumers to print custom images on M&M's.

One of the more interesting features of Nottingham Spirk is there location. Housed within the First Church of Christ Scientist that was originally built in 1931, Nottingham Spirk renovated the space to create the Nottingham Spirk Innovation Center (pictures below).  The company is located in Cleveland, OH.

I thought it would be interesting to create this post in light of the previous post, which dealt with large corporation's inability to foster entrepreneurial environments.  Nottingham Spirk, on the other hand, thrives on innovation.

Corporate Entrepreneurship: Existing Roadblocks and Proposed Solutions

Corporations face many challenges when trying to encourage entrepreneurship within their organizations. One of the biggest challenges for entrepreneurs acting within large corporations is securing the resources and support needed to get their idea off the ground.  Large corporations tend to be extremely revenue driven, and senior management focuses on those projects that will be best for the company's bottom line.  Often such projects are the "safe" ones that are "at scale".  "The competitive advantage of the established global firms is in the operation of businesses with mature products, with substantial market penetration, credibility and relationships usually spanning multiple geographic regions."

In general the challenges that face corporate entrepreneurship can be broken down into three categories: strategy challenges, incentives and organizational challenges, and decision making challenges.

Strategy challenges can come from a lack of integrated decision making at the highest level.  In large corporations entrepreneurship is viewed as small business that requires a great deal of up-front investment, and has very few customers at the start.  Because of this, entrepreneurship opportunities are designated as low priority items, and therefore do not garner the amount of attention they may deserve.  Some entrepreneurship opportunities could potentially take business away from the established core businesses of the corporation, and thus create a tricky balancing act between supporting the new idea or continuing to forge ahead with the established one that is generating a steady stream of revenue.  Economic downturns also play a significant role in strategy.  When the economy is going well corporations are more likely to support entrepreneurial activities.  However, when the economy takes a turn for the worse, like it did just a few years ago, many corporations will immediately scale back on none-core activities of which, entrepreneurial endeavors are typically the first to get cut.  Thus, entrepreneurial endeavors tend to be very cyclical, following the ups and downs of the economy.  Another problem with corporate strategy is that large corporations have a tendency to view new opportunities in much the same way that they view established core businesses.  If the new idea doesn't fit within the established product line it may be given very little consideration by upper management because it does not conform to what the corporation is currently doing.  The main problem with this thought process is that it can leave corporations open to being blindsided by new entrants, who have game changing ideas, or by shifts in customer preferences.

At the same time, established corporations have a tendency to avoid risky endeavors.  Many view failure as a career-ending event, which leads top management to focus the corporation's activities on surer-bets that have a high probability of success.  Because of this entrepreneurial ventures will get kicked to the curb do to their high risk nature, and unknown ability to succeed.  Another problem regards where to house the new business within the established organizational structure of the corporation.  If the venture is located within an existing business unit it will have to mesh with current management that is in place, and might not be best suited for leading the new venture.  If the new venture forms a separate unit then they will likely be cutting themselves off from resources necessary to get the project off the ground.  Finally, if the new venture constitutes itself outside of the established organization all together there is a high likelihood that the objectives of the new venture will not jive with the ones of the established corporation.

In making decisions regarding new business ventures managers tend to not look far enough ahead when projecting financial outcomes of the new venture.  Often, they will look more at a short term view of the new venture, which typically is not enough time for it to get established.  When testing the waters for new ideas large corporations also have a tendency to use already established methods of market feedback analysis.  Traditional focus groups, or surveys will not uncover those new ideas that have potential to be disruptive or breakthrough in nature.  Large corporations are also known for their bureaucracy.  Bureaucracy and innovation typically do not work hand-in-hand, and the incredible number of steps necessary to make a decision within a highly bureaucratic corporation can stifle creativity and innovation.  Finally, performance measures and compensation in large corporations are tied directly to set targets and metrics, which tend to promote incremental change, but fall short stimulating interest in wholesale change.  Measurement of breakthrough ideas becomes difficult using set metrics and targets.

Having discussed the many problems that entrepreneurship faces within large corporations with established businesses it's now time to turn our attention toward some potential solutions.  Having now worked for two different large corporations I have seen how they operate, and have some suggestions on how they can change to better promote new ideas.  When I began work at my first job, which was for an established global organization, and again at my second job, also for an established large corporation, I entered at a time when both were bringing in a significant amount of new, young talent.  In each case, the new people are brought along to learn the corporation's standards for how things are done.  Such standards are essential to any business, but in my opinion will not lead to innovation.  In my mind corporations need to take better advantage of the new people they bring in who might be able to offer a fresh perspective on how to do things, which could lead to new and innovative opportunities.  I am not discounting the importance of learning and mastering the standards of the organization as they are essential for keeping the core business running smoothly.  I do think, however, that people need to be given more opportunities to be creative and challenge the established way of doing things.  Whether this means setting up some set-time for brainstorming during the workweek, or maybe having a monthly offsite where people can bounce ideas off one another I am not sure.  Steve Jobs had a yearly retreat in which he would select his top 100 employees and whisk them away to brainstorm ideas for the future of Apple.  Jobs also recognized that in order for Apple to remain successful that he would need to maintain design as a core competency.  Because of this, designers at Apple were considered to be the most important people in the organization and reported directly to Jobs.  As was mentioned early when discussing the problems that corporations face when trying to promote entrepreneurship, compensation can play a significant role.  Performance evaluations are based solely on one's ability to do work that meets established metrics, which funnel directly into the corporations core business roadmaps.  Nowhere is an employee evaluated based on their ability to innovate.  My current employer will offer an employee up to $1000 for a patented idea, which does provide some reward.  The only problem is that there is little time to work on such ideas in between completing tasks to support core business work.  At the same time, the risk of losing one's job because of a bad idea needs to be eliminated as it stifles the employee's desire to think outside the box for fear of being fired.

THE BRAULER

Awhile back I was reading through Popular Science magazine and came across an interesting invention.  Popular Science is always good at turning up new devices or gadgets that have the potential to change the way we live, work, and play while at the time also helping us spend our money.  What I found in this edition was something that appealed to the side of me that enjoys beer, but in particular good beer.  Craft brews often come in growlers.  The biggest problem, well maybe problem isn't the right word to use, the biggest issue with growlers is that once you open one it's best to finish it.  They don't store well as the beer tends to lose carbonation and become flat.  My dad's policy has always been, "once you open it you have to drink it", which made for some great times spent between the two of us polishing one off.  Typically this is reserved the holidays like Thanksgiving or Christmas.

Anyway, some further digging around the web led me to The Zythos Project who are responsible for the design of The Brauler.  On their website they label themselves as a "Portland, OR-based brewing, design, and engineering firm. Dedicated to innovating the art, science, and enjoyment of craft beer℠."  What they created was the world's first virtually indestructible stainless steel modular growler system.  For more information on the company including its vision and mission statement check out this link.

http://thezythosproject.tumblr.com/brauler

What surprised me the most about this was that they were established in 2011.  People have been using stainless steel water bottles for years now, so I thought it was interesting that no one decided to make the leap into other potable liquids until 2011.

By going with stainless steel the group offers several advantages over the more traditional glass bottles.  These include weight savings, which makes transportation easier.  Stainless steel will not chip or shatter like glass.

Also, like so many companies nowadays they offer a green advantage.  Stainless steel is 100% recyclable and because it's shatter proof their is no loss in the cycle do to shattered containers.  The metal also allows for faster cooler, which cuts down on energy usage.

They have already begun to think of enhancements for the product such as various caps that be used to suit different purposes from the traditional carabiner attachment to the more applicable CO2 cap tap.

Right now the product is being targeted at breweries and is currently available for order in bulk.  Once they are able to make enough bulk sales I believe they will be expanding to more one-off sales at which point I will definitely consider picking up one or two of them for myself, and will be buying one for my dad as well.

Shark Tank

Have you seen Shark Tank?  If not I definitely recommend it.  It's all about entrepreneurs who have developed great ideas, and are then given a finite amount of time to pitch them to 5 venture capitalists, the sharks.  The classic elevator pitch, but with much higher stakes.  Some of the ideas you can tell at first glance are going nowhere, but others have huge potential.  Many of the great ideas are often so simple that I am left wondering why I never thought of them myself.  And then I remember that's because I am an engineer and when trying to come up with great ideas I often move past the simple and directly into the incredibly complex.

Unfortunately it airs at 8pm on Friday nights, which means you will probably have to set your DVR.  Enjoy!

Google knows too much about you

I happened to run across this article on CNN.com today.  As one of the millions of people who have hit the "dismiss" button when Google tries to bother me about reading their new Privacy Policy I have to say I am somewhat shocked at what Google has on me.  I know this has been in the news ever since Google changed it and I guess I now know why.  I had no idea that Google could save all of my past searches.  Pretty much everything else I do through Google I realize will be saved in some form or another even after I have deleted it, but saving searches is interesting.  Just one of the many things people do on the internet without even thinking about it.

Between Facebook and LinkedIn I already know that I am not invisible on the internet.  People can willingly find out most things about me through either of those sites.  I have my privacy settings jacked-up on Facebook so that really only my friends can see my full profile, but on LinkedIn I know almost anyone can see what I have posted.  One reason I know this is because I get at least one phone call per week from a recruiter who has seen my profile on LinkedIn and wants to see if I would be interested in a particular position they have available.  The best part is that they call me on my desk phone which I don't even have listed on LinkedIn, but they are able to see which company I work for and then look me up in the company directory.

In the internet age it is almost impossible to maintain a low profile on the web.  Luckily for me that my name is common enough where a simple Google search doesn't turn up too much.  Thanks Mom and Dad for not being too unique in coming up with a name!

Check out the article here...

An airplane in your garage?

I found this article on CNN.com the other day and thought it was interesting.  It's about a company named Terrafugia, which was cofounded by a graduate student in the Department of Aeronautics and Astronautics at MIT, Anna Dietrich. The goal of the company is to take advantage of a new rule put in place by the FAA in 2004 that lowers the barriers of entering into the personal aviation business.

Their product, The Transition, is what they like to call a "roadable aircraft."

"As a light-sport aircraft, the Transition must be operated in and out of designated airports by certificated pilots. (Because this aircraft is easy to fly, the appropriate pilot license can be earned in weeks, instead of months or years.)  Unlike any other airplane on the market today, the Transition can fold its wings on command, shift power from the propeller to the rear wheels and drive as a fully street-legal vehicle on any road in the United States. Designed to meet the Federal Motor Vehicle Safety Standards, it is the first light airplane to incorporate automotive-style safety features such as dash-mounted airbags, a passenger safety cage and energy-absorbing crumple zones. For added safety in flight, there is a full vehicle parachute for use in case of emergency."

(Clicking the images above will make them larger)

Maybe we aren't all that far away from living a Jetson's type lifestyle after all.

"Creative Abrasion"

"Creative Abrasion" is brought about by creating an atmosphere where ideas are continuously being challenged and new intersections are constantly being made. The idea of "creative abrasion" would seem to fly in the face of the collaborative team environment that most companies establish to create new and innovative ideas and products, however, the man attributed with first conceiving "creative abrasion" would beg to differ. 

Jerry Hirshberg, founder and president of Nissan Design International (NDI), first came up with the idea when he was poached from the corporate stalwart, General Motors, to established a new venture within Nissan Automotive. Hirshberg discerned that "sometimes the right person for the job is two people." In hiring people to work at NDI he would create "divergent pairs" in which he would bring in two people at the same time and pair them because of their differences. Hirshberg found that the continuous tension between the pairs, as well as, their opposing views on things created an incredibly innovative environment that spawned some of Nissan's greatest vehicles including the Pathfinder, and the Infinity Series of automobiles, which now represents Nissan in the high-end automotive market.

Another example of where "creative abrasion" succeeded is in the design of the first Macintosh computer. In setting out to create the Macintosh Steve Jobs assembled a diverse team of musicians, artist, and others.  Obviously all of them qualified as a proficient software people as well, but it was their other more creative talents that Jobs valued.  Diversity is an enabler of "creative abrasion" because there are so many viewpoints to be drawn from that ideas are bound collide. Jobs also took this team and housed them in a separate building away from the main Apple campus so that they would not be influenced by the hierarchical and bureaucratic systems that were in place there.

From Wikipedia, intrapreneurship is defined as the "practice of a corporate management style that integrates risk-taking and innovation approaches, as well as the reward and motivational techniques, that are more traditionally thought of as being the province of entrepreneurship". An entrepreneur is "one who undertakes innovations, finance and business acumen in an effort to transform innovations into economic goods." In either case, both the intrapreneur and the entrepreneur strive to defy the norm. They both seek to think outside of the box in an effort to come up with an innovative product or new way of doing things that had previously not been thought of.

So then what are the pros and cons of "creative abrasion" in a start-up setting, from both entrepreneurship and intrapreneurship perspectives?

From the perspective of intrapreneurship "creative abrasion" is often necessary in order to develop new and innovative products.  Many companies have established standards that all employees are trained to follow in order to do their work on a daily basis.  Those employees that tend to think outside the box can be viewed as being creatively abrasive because they are challenging the status quo.  After several attempts of knocking on the door some of these employees are able to get their voice heard and it can often lead to key product innovations.  "Creative abrasion" when exemplified by individual employees within a large company can also be viewed as non-conforming, and thus might be looked upon as detracting from the greater good of the company.  

The same can hold true from an entrepreneurship perspective as well.  Entrepreneurs by nature tend to be creative thinkers.  It is also to the benefit of the entrepreneurial group to include people from different backgrounds who can bring fresh ideas and different ways of thinking to the table.  In doing so, the group is able to continuously challenge itself from within, which in most cases will lead to a product that is very well thought out.  Unfortunately, this same tactic could lead to rifts forming within the group that might detract from the group dynamic and ultimately the end product.  In order to create an environment of "creative abrasion" all of the individual pieces need to be very secure in themselves and also be able to positively respond to criticism.

In short "creative abrasion" can be viewed as an enhancer of innovation because it simply means that someone saw something that someone else did and challenged it.  Without this sort of thinking the world would not be what it is today.  Where would be if no one ever asked, "what if"?

Strategy and the Internet

In his piece, "Strategy and the Internet", Michael Porter included a breakdown of how the internet influences industry structure.  In that breakdown he listed five main areas of focus, also known as Porter's 5 Forces; rivalry among existing competitors, threat of substitute products and services, bargaining power of suppliers, barriers to entry, and buyers.  In this post I will discuss how the internet has influenced the power that each of these five forces has within industry.

"Many have argued that the internet renders strategy obsolete.  In reality, the opposite is true.  Because the internet tends to weaken industry profitability without providing proprietary operational advantages, it is more important than ever for companies to distinguish themselves through strategy.  The winners will be those that view the internet as a complement to, not a cannibal of, traditional ways of competing."

Rivalry Among Existing Competitors

When it comes to competition in the marketplace the internet has had a profound impact.  Prior to the existence of the internet, companies only had to compete against their neighbors within a given geographic area.  With the advent of internet technology these same companies are now competing in a global marketplace.  Not only are the local shops forced to compete with online giants such as Amazon.com, but a quick Google Shopping search for any given product can yield several results.  With so many options now out there many retailers are forced to offer increased price discounting in order to draw people to their product.  In this new, internet dominated, global marketplace competitors are sparring with one another mainly over the price of the product.  Those that are able to offer the best price will most likely win out in the hearts and wallets of consumers.

The internet has also greatly enhanced the flow of information to the point where it is often hard for competitors to keep things proprietary or maintain a certain level of secrecy.  A simple Google search allows many companies to glean information about what their competition is working on.

Threat of Substitute Products and Services

As has already been mentioned the internet laid the world flat, and created a global marketplace that is now available to almost anyone.  In this sense the internet has increased the efficiency of industry, but at the same time it has also made it easy for substitutes to enter the market.  While some industries are more prone to substitutes entering the market than others, the internet has none the less made the threat of substitution more tangible than it was prior to its existence.  Take for example the local machine shop.  In the past some people would might have explored using such a shop to have something made.  Now, such local shops are forced to compete against online machine shops such as eMachineShop.com, and internetMachineShop.com that provide customers with the tools necessary to design, create, and manufacture custom widgets.

Bargaining Power of Suppliers

One of the most profound impacts of the internet on the power of suppliers has been its ability to grant them instant access to the end users.  In the past many suppliers had to reach end users through a third party.  Now they can go directly to the end user.  Take a company like Sony for example.  Prior to the internet Sony products could be bought through several third party locations such as Best Buy or Walmart.  With the advent of internet technology Sony has gained the ability to reach the end user directly through the establishment of an online store.

Barriers to Entry

Because of the internet many industries have seen a flood of new entrants.  Anyone with something to sell can now start up a website and directly reach their desired customer.  There is no longer a need to have an effective sales force peddling the product from door-to-door.  Everyday new and interesting products are being developed and marketed on the internet.

Buyers

The internet has effectively put an end to some of the most powerful channels and also greatly improved the bargaining power that competitors now have over traditional channels.  At the same time, it has also created a shift in bargaining power to a model that is now more focused on the end user.  Customers (i.e. buyers or end users) are now flooded with product information, which allows them to make better decisions and also become more well informed.  Personally, I tend to do a great deal of research before making significant purchases such as televisions, cars, or other expensive electronic devices.  Sites such as Consumer Reports, CNET, or Cars.com can help educate buyers about products and provide them with valuable information before making costly decisions.

Why Portland's Public Toilets Succeeded Where Others Failed

The city of Portland, OR has taken the outdoor, public restroom to the next level.  As most people who have used public restrooms of any sort can attest, most have been vandalized in some way or another.  Whether that means graffiti on the walls, smashed mirrors, or various other items being destroyed public restrooms commonly come under attack.  Because of this the city of Portland, OR decided to design a public restroom that was more or less impervious to vandalism by removing most of the modern frills.  The city has patented the design and is currently in the process of selling these restrooms to other municipalities.

Check it out!

A.G. Lafley vs. Steve Jobs

I thought this article was very relevant to some of the discussions that we have been having in class, as well as, reinforcing some of the reading material. It discusses how the CEO of Proctor and Gamble, A.G. Lafley, spent a great deal of time trying to understand the target market while, on the other hand, Steve Jobs, Apple's CEO, was infamous for saying that "it isn't the customer's job to know what they want." 

In the end both men came to the conclusion that in order to be sucessful you need to understand your customer better than they understand themselves. This also allows you to stay ahead of the curve and introduce new and innovative products ahead of when a customer might initially need them.

Like A.G. Lafley Cleveland based Nottingham Spirk Strategic Innovation uses the power of observation to seek out new and innovative ideas.  Nottingham Spirk is housed in a "state-of-the-art facility known as the Nottingham Spirk Innovation Center, where researchers, product designers, engineers and prototype technicians work side by side through every step of the company’s unique, vertically integrated open innovation process, developing products that change the game in their respective markets."  Employees of Nottingham Spirk often wonder the aisles of major chains to see the products that currently exist and then come up with innovative ways of improving those products.

Is there a first-mover advantage?

A first-mover is defined as the first significant occupant of a market segment.  The advantages of being the first person/group to enter a particular market segment are many.

• No competition - by definition you have created a market that did not previously exist and therefore for at least the initial stages have no competition.  Assuming the market that was created thrives it will only take so long before the fast-followers catch on and try to move in.
• Control the technology - if the product or process is innovative enough then the first-mover will gain control of the intellectual property (IP) and can establish patents that will last for 20 years.  This will make it tough for others to quickly gain a competitive advantage.
• Set the rules for the game - The first mover also has the ability to set the rules for the game so that any competition that arises will have to play by those rules.  
• Ability to acquire assets for less money - First-movers can capitalize on low demand for supplies to get them at a cheaper rate.  After the market has been established for awhile and as competition moves in these prices will increase as demand for the same supplies increases.

Unfortunately, there are also some disadvantages to being the first-mover.

• No established market segment - Because the first-mover establishes a completely new market segment they must deal with the risks associated with this.  The financial penalties associated with entering a previously unestablished market can be significant.
• Room for improvement - Unless the first-mover enters the market with a product that meets all of the customer needs right from the start they are leaving themselves open for competition to enter the market with a product that is superior to their's.
• Complacency - The first-mover should be aware to not rest on the success of their accomplishments and must continue to strive to improve their product for fear that competition will arrive and overtake them.

Coca-Cola and eBay are examples of first-movers and they cornered the market in cola beverages and online auctions respectively for a while before competition could enter.  Fortunately, for both the competition was not able to take away from their competitive advantages.

With the iPod Apple was a fast-follower.  Other MP3 players existed at the time when Apple introduced the iPod, but Apple was able to surpass them by making significant improvement to the product.  Having had a Diamond Rio 600 MP3 player that had 32MB of storage I can attest to the significant leap that Apple was able to make with the iPod which allowed users to store 1,000 songs.  I quickly switched to the iPod and haven't looked back since.

In the end I would say that unless the first-mover is able to deliver a product that meets all of the customers' needs and upon which little improvement can be made, then they have left the door open for the fast-follower.  The first-mover takes all of the risk in establishing a previously non-existent market.  The fast-follower can capitalize on this and in the door is open, move in and create a better product and thus nullify any advantage that the first-mover gained.

Why would-be engineers end up as English majors

This article was on CNN.com back in May, but I thought I would bring it up as it directly relates to my previous post regarding engineering jobs being sent over seas.  The article discusses the dropout rates of young people entering the math and science fields in college, and compares them to the dropout rates of other majors such as the liberal arts or business.  According to the data presented in this article dropout rates for students pursuing math and science degrees are much higher.

As someone who graduated with a B.S. in Mechanical Engineering from the University of Massachusetts I can relate to this article, but also found a couple of their arguments to be somewhat flawed.  It seems to blame the lack of quality teaching as a reason for the higher dropout rates.  My Freshman engineering classes had about 120 students in them and by Senior year these same classes were down to about 40 students.  66% of my original classmates had disappeared.  Ironically this is exactly what one of my Freshman engineering professors had predicted.  Before passing back an exam he told the class to "look to your left and then look to you right.  Chances are those people want be there when you graduate in 4 years."  However, I don't blame this high dropout rate on teaching.  I found most of my professors to be readily accesible and approachable.  Instead I look to the myriad of other options that college students have.

Engineering is one of the least appealing majors because of the large amount of time and effort required to complete the degree.  There were many times when I would look out my dorm room window to see other students playing frisbee or whiffle ball in the quad while I was doing statics, thermo, or materials homework.  To become an engineer you have to want it.  There are definitely sacrifices that have to be made, and I don't think enough talented people are willing to make them.  College has become more about the party and the other social aspects than graduating with a degree that will be useful for years to come.

How the U.S. Lost Out on iPhone Work

How the U.S. Lost Out on iPhone Work is an article that was in the New York Times this past Sunday (1/22/12). As most Americans have become acutely aware, the level of manufacturing in this country continues to decline and many American companies, Apple included, now manufacture the bulk of their products overseas. China in particular has become a hotbed location for the assembly of consumer electronics goods. The following is a quote which basically sums up the article.

"Another critical advantage for Apple was that China provided engineers at a scale the United States could not match. Apple’s executives had estimated that about 8,700 industrial engineers were needed to oversee and guide the 200,000 assembly-line workers eventually involved in manufacturing iPhones. The company’s analysts had forecast it would take as long as nine months to find that many qualified engineers in the United States. In China, it took 15 days."

As a young engineer in this country it is always discouraging to read and hear of jobs being sent overseas, but unfortunately engineering is not revered as a glamorous major despite the fact that jobs in math and science are higher paying and more readily available.

Nice Quote from Steve Jobs

“Your work is going to fill a large part of your life, and the only way to be truly satisfied is to do what you believe is great work. And the only way to do great work is to love what you do. If you haven’t found it yet, keep looking. Don’t settle. As with all matters of the heart, you’ll know when you find it. And, like any great relationship, it just gets better and better as the years roll on.” - Steve Jobs