Quantum computing would change your life

Kenneth Chang reported in “IBM researchers inch toward quantum computer” in the NYTimes that they are going to throw their research and development might behind a radical new method of computing. This is quite a big deal. Researchers are quite excited about recent advances that bring the promise of quantum computing closer to reality.

As an IBM researcher said in the article, it always seemed that quantum computing was 50 years off; however, given recent advances, it seems like it is more like 15 years away now.

What’s the big deal, you ask?

Every computing problem that we thought was hard, would now be solvable. Hard? What is meant by hard? Well, these are problems that, if you put today’s fastest supercomputer to working on it, and it had started working right after the Big Bang, then it would still not be done working on the problem...13.7 billion years later! And these quantum computers promise that these types of calculations could produce the answers in days or even seconds.

So we’re talking a significant speed-up here.

An explanation of the power of the theoretical structure, the qubit, that makes it all possible is described in an article by Damon Poeter, “IBM says it’s ‘on the cusp’ of building a quantum computer” in PC Magazine:

“The special properties of qubits will allow quantum computers to work on millions of computations at once, while desktop PCs can typically handle minimal simultaneous computations,” the IBM researchers said. “For example, a single 250-qubit state contains more bits of information than there are atoms in the universe.”

You should not get the idea that these computers are simple to build. For one thing, the computing infrastructure has to be cooled to within a small fraction of a degree above absolute zero (-273C). And, for another, these qubits are fairly unstable — the big advance that has occurred in the last decade has allowed a qubit to increase its life from a few billionths of a second to all the way up to one-ten thousandth of a second. Finally, the chip used to run the experiments that IBM is reporting on contains 3 qubits.

Your mind should be sufficiently blown by now. Wwe’re talking about a complete change in the computing landscape concerning what is thought of as hard. The kind of problems we’re talking about are these:

• Electronic commerce would have to be handled differently. Currently, the security of transactions is based on the fact that numbers thousands of digits long are really hard to factor. (And by “really hard” you know I’m talking about lots of computing power over a very long time.) Well, a quantum computer would render calculations like that in the blink of an eye. So long, bank balance.

• Another really hard problem is known as the Traveling Salesman Problem. (As an aside, this is the problem that got me hooked on mathematics and computers back in the early 1970s when I was reading — I hate to admit this — our Encyclopedia Brittanica. It absolutely blew my mind that something could be this hard to compute. And it still does. I did my first summer paper when I was getting my PhD on the TSP. Anyway...) The basic setup of this problem is that your task is, given a set of cities, come up with an ordered list of those cities that would allow the salesman to visit all of those cities in the shortest distance possible. Currently, it takes a lot of computing power to figure out the shortest distance. Computing techniques can be used on sets of 80-100,000 cities. (Note, they don’t have to be cities; they can be addresses or whatever.) Here is a drawing representing a solution to a trip over 85,900 cities! Again, this would be handled easily by quantum computing instead of requiring dozens of scientists and years and years of computing power.

This is just the tip of a vast iceberg of the implications of usable quantum computing. While it is nothing that you should get excited for right now, you should keep your eyes open for future developments. Because if it ever is deployed, you can know right now that your life will change.

If you’re interested, more information can be found in the IBM Quantum Computing Press Kit.

IT opportunities for companies and your career

In today’s Wall Street Journal in the article “Cut Those Costs! (But Not Tech!),” author Ben Worthen writes that the trend among CFO officers (who haven’t had the best reputation among us information technology types) are increasing their approval of IT projects even while they are reducing spending in other areas. In fact, a recent survey of CFOs say that spending on IT projects is expected to go up by 10% over the next year, a significant change from the behavior of just three years ago.

CFOs have come to believe that technology can deliver competitive advantages over their competition:

“The amount of data that businesses collect — or should collect — is growing exponentially. CFOs believe they can get an edge on competitors by investing in new systems that collect, analyze and share all those numbers, everything from traffic patterns on websites to point-of-sale data in stores.”

Not only that they see that lots of new technologies provide ways for employees to be productive while they're away from the office. While this is changing how work has been handled and how employees have been managed, CFOs have come to see that the investments in IT have positive returns.

This is not the only such pro-IT article that has come out recently. In “The hot tech gig of 2022: Data scientist,” in CNNMoney, author Jessi Hempel points out that some applied mathematicians are going to be needed in the marketing and strategy departments in order to make sense of all the data that is going to be coming at businesses:

“Today there are some 400 million devices connected to the Internet, mostly phones and computers. By 2020 some 50 billion devices, from cars to appliances, will be talking to one another. And companies will need teams of data scientists...to sort through everything from internal inventory metrics to customer tweets.”

This is where I feel that I was simply born 30 years too early. Certainly, if I had a solid foundation in mathematics and was trying to figure out what to do in business, it would certainly not be obvious any more that finance would be the way to go. Marketing merits serious consideration. Data mining requires some serious statistical insights and it also puts the data scientist at the center of the strategic and tactical decisions that CxOs have to make every day. It is not a back-office, specialist job far from the front lines of business.

It is on the front lines. And it provides a great way for someone with analytical skills to get exposure to top level executives early in his or her career.

What do you think about these opportunities?

Do companies need a clothes horse?

My dog, Deker, who definitely needs his tiger

On Friday, Fast Company blogger Kaihan Krippendorff wrote “The Strategy Of Being Needed”. In this article he builds on a quote from Balthasar Gracian, a Spanish-born Jesuit priest from the 17th century:

“The wise man would rather see men needing him than thanking him...He that has satisfied his thirst turns his back on the well, and the orange once sucked falls from the golden platter into the waste-basket.”

Both Gracian and Krippendorff believe that it isn’t good enough that customers really like your product. If that’s the case, then they can still walk away from it and never use it again. These authors posit that they want customers to have a continued need for you or your product, a thirst that cannot be satisfied.

This sounds like moving along the “degree of product change” axis in our innovation matrix. That’s fine. But what I was really interested to hear about was the example he used — Clothes Horse. This is a service for online clothing retailers. Bonobos is their first major customer. The problem being solved is that one person can need clothes of different sizes from different manufacturers. What Clothes Horse provides is an algorithm that converts a customer’s measurements and other information into the appropriate size for a specific clothes manufacturer. At Bonobos, a customer (male, in this case) would enter his information and the algorithm (provided seamlessly by Clothes Horse) tells the customer what size he should order.

While this provides some benefit to Bonobos (it does not have to come up with the algorithm) and some benefit to Bonobos’ customer, the real customer benefit would only come to the customer if multiple stores use the same Clothes Horse algorithm and shared customer information across companies so that the customer would not have to enter information multiple times.

It is also the case that the online clothing business also benefits as more companies adopt the Clothes Horse tool. Assuming their algorithm works (a big assumption since I have not seen any independent confirmation of this), this tool should increase customers’ confidence that the clothes they buy online will end up fitting (and not have to be returned). This decreases the total cost of buying online, thereby increasing the market share for online purchases compared to all retail clothing purchases.

All is not rosy, however. While both customers and the entire online clothing industry benefits, individual retailers — especially large, incumbent retailers who customers are familiar with — don’t benefit from adopting this algorithm. The net effect of wide adoption of it would be to make it easier for customers to switch from well-known, and possibly more expensive, brands to less-well-known or less expensive brands. I would recommend that any large, well-known brand (especially one with a fairly large chain of stores) actively resist the adoption of this algorithm until it is so wide-spread by competitors that there is a chance that it would be at a competitive disadvantage.

What do you think? Of the customer benefit? And of my call for action?

Linpossible is Nothing: Adidas is also cashing in on Linsanity

It is hard to ignore the buzz surrounding the phenomenal rise of Jeremy Lin; his impressive performance for the Knicks has fueled so much media attention that hardly anyone hasn’t heard of him. Lin is an Asian American playing a sport dominated mostly by African Americans. He was also undrafted coming out of Harvard University, and was leter let go by two NBA teams: the Houston Rockets and the Golden State Warriors. Kobe Bryant had no idea he existed. These factors are what make his underdog tale so inspiration, and has ignited Linsanity not only in the United States, but overseas in Asia as well.

The Jeremy Lin effect

Besides the emergence of some “lintertaining” puns and giving sports journalists something new to write about, Lin’s continual success on the courts has resulted in monetary success for others off the courts in addition:

• From being the 28th most-selling event at Ticket Liquidator, Knicks tickets jumped to number one in the two week period since Linsanity started. Average prices of Knicks tickets rose from $130.53 on February 3rd to $211 on February 19th (that is a whopping 62% increase).
• The stock of Knicks parent Madison Square Garden (MSG) has risen a cool 13% since the beginning of February. Furthermore, according to MSG, viewership for Knicks games on its network has also increased 70%, which they expect to drive up their advertising revenue.
• Demand for Lin apparel has been off the hook according to sporting apparel company Modell’s Sporting Goods, and they are scrambling to keep up. Lin’s jersey is also the number one sell for the NBA’s online store since his February 4th breakout game.

Adidas

Lin’s identity as a Taiwanese-American and his great accomplishments have those in Taiwan and China rooting for him, as people find him relatable and inspirational. The WSJ article I came upon today talks about Adidas’s plan to profit from the high demand for Jeremy Lin apparel in Asia, as Lin’s increasing fan base want to openly show its support. In the next couple of weeks, the German sporting apparel company plans to roll out Lin’s jersey to its 6700 stores in China. Adidas anticipates on profiting greatly on Lin’s superstar status, given its licensing agreement with the NBA in China. However, the company’s plan to maximize their earnings through Lin’s fame is complicated by the basketball star’s current contract with Nike, as well as the competition from Chinese sporting apparel companies also mass producing Lin apparel.

In the short term, selling Lin jerseys in its Chinese stores translates into a quick and easy profit for Adidas. The article does not draw conclusions about whether Adidas’s long term strategy includes Lin or not. However, if Adidas were to sign Lin after his contract with Nike ends, it would no doubt be an incredible key resource for the company. If Lin continues to perform as well as he currently is, his star power will sure pass that of Yao Ming’s in China. And utilizing Lin’s stature and success story would be a great marketing strategy for the company, as they battle it out for market share with Nike in China. Both companies have recognized the increasing purchasing power of brand conscious Chinese consumers. Whether Lin chooses to stay with Nike or sign with Adidas plays a big role in determining each company’s success in China.

Like many other Asian Americans, I am rooting for Lin’s continual success and will be following his story closely. Being that he is already being compared to Michael Jordan and Kobe Bryant, I think that Jeremy Lin’s career is very promising to say the least. How do you guys feel about Lin’s recent rise, and what business implications of his success do you see for the Knicks and sporting apparel companies like Nike and Adidas?

The Trademark Bullies

In the modern age of corporations and copyright laws, it seems that just about everything has been legally claimed to some degree. With language and art, these claims often take the form of copyrights: companies who have established a successful symbol or brand name often go to great lengths to keep them distinct - form a company or product with too similar a name, or borrow too much from their famous logos, and chances are you’ll have some charges filed against you. Yet at times it seems to get ridiculous, with corporations attacking anything that resembles their trademarks or refers to them — it is in these situations, that trademark battles can be crippling to innovation and communication.

The Wall Street Journal article, New Tool In Trademark Fights, shows how these trademark disputes can often be one-sided and illogical. For Phil Michaelson, a cease-and-desist letter was received due to his usage of the commonplace word “keep” for his website KeepRecipes.com - AdKeeper Inc. claimed that the ability to save recipes to KeepRecipe’s online cookbook by clicking on a “K” for “Keep” was a blatant trademark infringement. In another case, Bo Muller-Moore, a grassroots t-shirt designer in Vermont, was sent a cease-and-desist letter by Chick-fil-A for his t-shirt slogan “Eat More Kale”, claiming that it was too simliar to their slogan “Eat Mor Chickin”. Yet Bo Muller-Moore’s t-shirts stand for a very different cause and represent a genuine support for healthy, locally-grown foods - more of a grassroots movement as opposed to a ploy to start a kale-oriented fast food chain and leech off Chick-fil-A’s success.

Both Phil Michaelson and Bo Muller-Moore have turned to the Internet for solutions. Michaelson posted the cease-and-desist letter on a website, where it was noticed by a group of entrepreneurs and passed along to their lawyer, who offered to represent Michaelson free of charge. Muller-Moore meanwhile, has created a Facebook and online petition that is drawing the support of thousands, which now even includes the governor of Vermont. By adding a donate button to his website, he has been able to raise funds for legal support if the case ends up in court.

These techniques of “shaming” a company online in order to make them back down have been gaining in popularity with the growth of social media and online services. The goal is simple - to prevent the overreaction of large corporations from crippling smaller companies that may not be able to afford legal battles. In certain cases it has proven to be extremely effective, like the two mentioned above, as it puts a lot of pressure and attention on the corporation, and lets them know that there will be consequences for carrying out a lawsuit. As Wendy Seltzer states, “Trademarks are meant to protect your image, so it doesn’t really help to look like you’re coming down hard on the little guy”.

I’m definitely a proponent of this new development. As the article states, the success of online shaming is mainly reserved in cases when it is quite clear that the company is overreacting in order to protect their trademark. AdKeeper was quite clearly overstepping its boundaries, and Chick-fil-A has completely misconstrued the purpose and significance of Bo Muller-Moore’s t-shirt designs. In cases such as these, a public voice is most effective - if corporations become too entitled to their rights, going so far as to claim basic ideas of design and language, then their coveted ideas and symbols will instead be branded with negativity.

Google: Changing How You See the World

Google is set to revolutionize the way people get information on the go. Google plans to release their Heads-Up Display Glasses to the public by the end of the year. The descriptions of what these glasses can do look like they came right out of a spy movie. There will be a screen overlay that will bring up a digital layer over what you see through the glasses, informing you of your surroundings and acting somewhat like a smart phone that sees exactly what you do.

The glasses will have wireless internet, run on the Android operating system, have motion sensors, GPS, and a camera. Amazingly enough, sources say that the glasses will be priced at a somewhat reasonable price between $250 and $600, right around where high-tech smart phones are currently priced.

These glasses could literally change the way one sees the world. One will be able to see all the businesses in the vicinity, their ratings, the deals they have, and probably a plethora of other things. Additionally, with the Android operating system, one could do just as much as they could on their iPhone or other smartphone. Controlled by nods and buttons on the frames of the glasses, this gadget could just be the next big thing.

Obviously, not only is there a possibility for revenue from the glasses themselves and the 3G or other data plans that go along with them, the possible revenue from ads and other sources are huge. Going to Prahalad and Krishnan's ideas on IT allowing businesses to make changes, Google's glasses may be the next step in completely personalizing the mobile device experience for users.

Looking at the N=1;R=G model, Google's glasses will definitely provide an individual experience for everyone one of its users. Literally seeing exactly what the user is seeing, Google will be able to tailor the experience to whoever is wearing the glasses, wherever they are (as long as there's 3G). If an individual frequents Steakhouses, then walking down the street, the glasses may alert him to the top rated, award winning steakhouse that he is about to pass by. Additionally, the ads that a user may see could be personalized through microtargeting to an extreme. Looking at the user's past locations, areas, and if linked to a Google account, even their internet browsing history, the glasses would be able to highlight areas that the user would more likely be interested in. Having such specifically tailored results would be difficult, but if any company has the information to accomplish this, Google would be the one.

As competitors such as Apple are also venturing into the area of wearable computing, Google needs to make efforts to not only be the first to the market, but also produce a quality product that will change the way people live. They need to have a product in a way that will make people wonder how they ever lived without it. Just as smart phones have aided the boom in social media and on the move communication, wearable computing that works well may be the next thing to take the market.

These glasses are not the most stylish and may burden the people who wear it, but the sacrifices that we make to have information at our fingertips is just one that people are willing to make. Compared to my old, small Motorola Razr V3s, my iPhone is pretty big, heavy, and not the prettiest gadget to have in my pocket at all times but I have come to accept that it has become such a vital part of my life and that even a day without it seems impossible at this point. Will this be what happens with Google's glasses? Maybe one day everyone will be walking around, sending messages, finding people, and exploring the world with these on.

Start-ups, uFlavor, and the State of the Beverage Industry

At the end of last week, Fortune ran a story about the current state of the beverage industry and how start-up companies are succeeding and failing. The column began by focusing on uFlavor, an Indianapolis-based start-up that allows consumers to take 42 different flavors and make their own soft drink. Varying amounts of carbonation, sweetness, and caffeine in each flavor enables users to find a drink that fits them. The idea is extremely new and is the perfect example of a store focusing on each customer's experience independently. Currently, customers can create drinks at the company's website. The simple and user friendly site provides customers the ability to log-in and post the ingredients to their desired drink, as well as see others concoctions and create a forum for how to make the best drink. With the first customized drink hopefully shipped out by the end of the month, uFlavor already hopes to have self-serve vending machines available at retail stores and restaurants in eighteen months. With the ambitious goals and an innovative new product, the question remains, will the concept succeed?

The rest of the essay details how tough breaking into industry is for new companies and ideas. Coke and Pepsi have 42% and 29% of the market share respectively and essentially acts as a duopoly. Other players with a much smaller influence in the industry include Dr. Pepper-Snapple and the still independent Jones Soda. For start-ups, the environment is extremely competitive. Industry trends show the best way to succeed is to own a patent and get acquired by Coke or Pepsi, or at the very least sell a minority stake to one of them for access to their massive distribution centers. Examples of this are endless. The popular Vitamin Water is now a part of Coke's product line, and O.N.E. Coconut Water, the trendy new beverage on the market has just been partially acquired by Pepsi.

One of the best examples of this process is Honest Tea. Started in 1998, the brand was extremely successful compared to other beverage start-ups. Although 15,000 retailers carried the product after ten years, the company's bottom-line was hurting. When Coke offered access to their distribution centers and world-wide supply chain for a minority share in the company, the owners could not pass up the opportunity. In the three years after the deal, Honest Tea is approximately five times larger and currently being sold in 75,000 retailers. Coke ended buying the company in 2011. This quintessential example of a beverage start-up exemplifies the largest problem for companies trying to break through the duopoly and become a player in the industry. Many entrepreneurs, who are often more interested and involved in the science of what makes a good drink, do not consider distribution a major factor when they start marketing their invention. Often manufacturing out of their own homes, start-ups that desire to control their own value chain lack the resources to get their products into stores and out in front of customers.

While it is difficult to enter the beverage market and stay independent, companies have not quit trying. The most successful way to do this appears to be maintaining an N=1 model ( focusing on one customer and experience at a time). Jones Soda, a perfect example of the model, creates an online buzz for their product by allowing customers to order Jones' iconic bottles online with personalized pictures and taglines. This allows them to keep up demand and meet customers' needs by skipping retail centers all together. 8% of the companies' revenue comes from special orders and personalized bottles; online sales are expected to top $100 million by the year 2016. The strategy allowed the company to stay in front of customers, creating an experience that kept customers coming back while Jones' management worked on strengthening relationships with retail centers.

Back to uFlavor, will it be able to break through the ceiling and create success independently? will it sell-out to the big players? or will it just crash-and-burn by itself? Using Everett Rogers' success factors of compatibility, complexity, trialability, and observability, it is seems like a long shot. US consumers are by now used to customization and having personalized products, however Coke and Pepsi have been staples for so long it may take users a while to get used to new tastes. For complexity and ease, expecting a customer to be able to mix 42 different flavors into a great-tasting drink seems like a lot to ask for when all I want is a Diet Coke. Low trialability is implied by the pain of ordering a soft drink online and the unlikeliness of stumbling across a vending machine. And low trialability often means low observability. Those obstacles and problems, coupled with an extremely tough industry, potential manufacturing and distribution problems, and enormous up-front costs lead me to believe uFlavor's shot at success is slim. But I wish them the best.

Dell Earnings and Forecast Fall Short of Wall St. Views

Today Dell released a forecast of fiscal first quarter revenues (with sales down by 7%) that was far below initial estimates and continues to stoke fears that the PC industry hasn’t quite escaped its ongoing slump. CIO Brian T. Gladden acknowledged that any strength gained by Dell’s corporate business unit was offset by considerable losses in its public business sector. He further pinpointed 3 key reasons as to lower earnings:

1. Weakness in consumer spending in the US
2. Discounting of inventory leftover from their previous generation of phones
3. Impact of a Thailand flood on its product mix (specifically certain disk drives)

Because of the loss in these disk drives (which is predicted to continue on this year) Dell couldn’t create customizable, higher margin products and instead had to settle for lower-end systems.

The issue that Dell and other competitors face in the PC market is the eroding market share that smartphones and tablets such as the Ipad take from them. However Dell still sees hope in its enterprise market (which grew 5%) as companies continue to upgrade aging hardware.

In the end, Dell is in a transition phase as they try to scope out what markets they want to enter in to given that the PC market is no longer the best place to be. Their current overall goal is to “improve profit margins by getting out of low-margin businesses and focusing on being a one-stop shop for business customers.”

Microchips Advancing Medicine

A microchip capable of internally delivering prescription drugs to patients just passed its first human test with great results. This particular chip has been in the works for over 10 years and was developed by MIT researchers Robert Langer and Michael Cima, of MicroCHIPS, Inc.

The chip works relatively seamlessly. Before being implanted in the patient, prescription drugs are inserted into its reservoirs, which are sealed closed with platinum and titanium. After being implanted underneath the skin of the patient, it releases the drugs when a current is applied to the seal. The microchips can be programmed, which means drug delivery can be automated so that dispersal is at regular intervals.

For those with diseases that require daily injections, these microchips offer substantial value. Having an automated drug regimen will allow these people to stop worrying about taking their medication multiple times per day, as well as alleviate any anxiety related to administering drugs with a needle. In addition, these chips can be equipped with biosensors, which allow physicians to evaluate the drug’s effectiveness and reprogram the chip to adjust to changing circumstances. The only setback is that this work can only be done in close proximity to the chip. In other words, patients would have to see their doctor each time they need their device reprogrammed.

How often does the chip need to be replaced? The successful study [mentioned above] was for the duration of a month, although MicroCHIPS, Inc. claims device viability for 12 months or more. The procedure takes only 30 minutes and the patient does not have to stay for an extended period of time afterward.

The study was only done on osteoporosis patients, but plans are in the works for other chronic illnesses. MicroCHIPS, Inc. is designing new iterations of its current successful test chip, to include up to 400 doses per device, which translates to daily dosing for one year or more. They hope to have the chip ready and approved for launch in 2014.

As discussed in class, there are many factors to consider when evaluating the likeliness of a product being successful:

Relative Advantage

How does this product compare to existing competitors? At this time, competition does not exist for this specific product. Probably because of the high research costs involved, which are partially funded by MIT.

Compatibility

Is this product consistent with existing values and experiences? The existing method of treatment for those with chronic illnesses requires 1-3 injections with a needle per day. While receiving a microchip under the skin may not be consistent with this current experience, it seems far more appealing.

Complexity:

How difficult is the product to understand and use? Well, patients don’t necessarily need to know how the product works; their doctors do. The only thing the patients need to know is how often to return to their doctor for a replacement chip.

Trialability:

How feasible is it to experiment with the product? 100% feasible and absolutely necessary in order for the microchips to be approved for use.

Observability:

How observable is the quality of the use experience to other people? In this case, not very observable - other than the testimonials from the test subjects who reported that they would continue using the microchips after the one-month trial period.

I would argue that this product falls into the “Smash Hits” product category, because it requires a low degree of behavioral change and has a very high degree of product change. Patients who inject themselves with medication on a daily basis are already seeing a doctor regularly, so visiting the doctor once a year to receive a new microchip should be no ordeal. In addition, these patients won’t have to spend time injecting themselves 1-3 times per day. The degree of product change is enormous, because it goes from a simple needle injection to a complex electrical device that took over 10 years to develop.

That being said, I think this product could face some significant obstacles to success. Seeing as how this product required millions of dollars of research and each chip contains expensive materials such as platinum and titanium, it’s fair to reason that each microchip will come at a significant price. In addition to its price, some individuals may have reservations about having an electrical device injected into their body. They might prefer to stick with their current practice and avoid the risk of something going wrong with the new chips. Regardless, I’m confident that this is the future of medicine and will change more than just the way prescription drugs are administered to patients.

Sources

• “Your next prescription might be for a microchip”, Forbes
• Mchips.com
• “Note on Sensing Opportunity”, Robert J. Dolan

The Value of the CEO

Imagine you are the Chief Executive Officer of a company. As the title implies, you are the one making the decisions and calling the shots. Or are you? Maybe you are just the face of the company, while a team that you handpicked to serve under you completes all the tasks necessary to keep the business upright. Apparently, there are people in the business world who take both sides.

On the one hand, Boris Groysberg writes for the Harvard Business Review that “It’s Harder than Ever to Be a Senior Executive”. He lists five reasons why a leadership position within a company is not only hard to maintain, but also getting increasingly difficult to obtain. Groysberg argues that a well-qualified candidate should own exemplary soft and hard skills; that one should be as good communicating with people as analyzing data and making decisions, especially because industries are becoming global. Furthermore, he claims that executive level positions are becoming “increasingly interdependent”. Jack-of-all-trades, not specialists, are the people that rise to the top of organizations. Finally, Groysberg states that an executive must always continue to learn, due to the constant fluctuation of rules, information, procedures and relationships that compose the modern business world. In sum, no CEO, no matter how powerful the company, can just reminisce about the past while his/her subordinates search to innovate.

On the other hand, Doug Poretz, author of the first comment on Groysberg’s post and a self-claimed reporter to a CEO for over 40 years, argues that the job of CEO requires only establishing a vision, sticking to that vision, and then structuring the rest of the executive team to execute it. After those three objectives are completed, Poretz says, the CEO can ‘Get the hell out of the way’.

So which is it? How “in charge” is a CEO. Based on what we have studied in class, I could not disagree more with Poretz. While studying McDonalds and Dell, we noticed that only certain individuals, Jim Skinner and Michael Dell respectively, were able to propel their companies forward and make them profitable. When others, like Kevin Rollins for Dell, were given the reins for a few years, even though they stuck to the original plan, still failed. Skinner and Dell have demonstrated that they contain the necessary qualities to be successful executives, and it truly shows in their absences.

I also agree with Groysberg’s argument that an executive position is becoming harder to perform. Technology is truly shrinking the world, and people from different continents are doing business with each other on a regular basis. Communicating with others from foreign backgrounds, whether it is through learning a new language or even finding something in common through hand motions, is just as vital for a CEO as reading through a statement of cash flows, though it is necessary to know how to do both.

Perhaps an answer to this question will be created when evaluating Apple’s performance in the coming years. After the passing of longtime CEO Steve Jobs, it will be interesting to see how well the company continues to innovate with its production, and whether or not it can maintain the sizable competitive advantage it has for so long.

A Different Form of Car Rental

There is a new form of car rental services that is still going through a trial period in a few big cities, including San Francisco.  People are now lending their personal cars to strangers in order to make some more money.  It is not just random people looking to make some money, there are companies behind the idea and have created websites to make it easier for people to do this.  There are different prices depending on the type of car that is being rented and according to the article, the owner of a midsize sedan can make approximately $3,000 a year by renting their car out 10 hours a week.  The only problem is, as of right now, only California and Oregon have allowed this type of car rental.  The other states have not due to legal issues.

The CVP for companies like Relay Rides (including Getaround and JustShareIt) is providing people who would like the use of a car without having to pay to have their own at a relatively low price per hour while also allowing car owners to make money instead of letting their car sit in a parking space while they are not using it.  It even allows for less cars to be on the road because instead of using a rental car that a company went out and bought so that it could make money, you would be using someone's personal car which that person would have regardless.

In my opinion, this type of company can fill a niche that Zipcar has ben looking to fill, but at a much lower cost to the company.  These car sharing companies simply match people who would like to rent a car with people who are willing to let strangers drive their car around for a few hours while they are not using it, so these companies do not have to buy cars for people to rent.  This type of car sharing reminds me of Swaptree in a way because all the website is doing is matching people in a way that is beneficial to all parties involved.  One company, known as Relay Rides, even has  hardware in the cars that could be rented and all a renter has to do is swipe a card over this device, the doors open and the keys are left near the ignition.  This is exactly the same type of deal that Zipcar uses for their cars.

I believe that if a company like Relay Rides becomes very popular and grows to a national level that Zipcar would be in a lot of trouble.  With competitive prices and the same target market, these companies would compete for an already small market.  Relay Rides in my opinion would hold a stronger position in the market because there is no up front cost, just the cost per hour and the cost of gas.  Relay Rides is even looking into a partnership with OnStar, that way it can cut the cost of installing the hardware into the cars.

It will be interesting to see if in the future other states begin to allow this type of car sharing and if it will take and spread over time.

JCPenney Stops the Screaming

This new commercial addresses the frustration that people have from coupons and sales. JCPenney has so many random sales and coupons that consumers often get lost and confused: “Should I wait until the Presidents’ Day sale, or would the new every other early bird Saturday going to save me more money? Or wait! Perhaps I can use the extra 15% off coupon I get from completing that online customer survey.” Consumers often find themselves missing a great sale, or getting a coupon that expires within the next week after they just bought something. Now under new management, Forbes article describes how JCPenney rethinks value and aims their strategy at simplicity.

JCP passes $40, first time since '08

JCPenney’s performance has not been so hot in the past few years, but with its new ex-Apple CEO Ron Johnson and new president Michael Francis, former CMO of Target, it looks like it's heading in a positive direction. Wall street approved of the new strategy boosting its stock price up 15% back to levels it hasn't reached since late 2008.

Forbes is predicting that the department store will be the most interesting retailer of 2012. Changes that revolve around its new simplicity strategy include (1) everyday low prices, (2) themed monthly sales, (3) and clearance items. Clearer price points using whole numbers and a once-a-month super-sized catalog rather than a bunch of weekly mail deals also come along with some of the changes. The model of the store itself is also changing. JCPenney is adding over a hundred small unique shops within its store with specialty brand boutiques including Martha Stewart’s shop that will launch next year. In addition, they will be adding a “Town Square” that offers complementary services as well as promotions such as free hotdogs and ice cream. These major transformations will simplify the value conversations with its customers.

In addition to changing their stores, JCPenney has put forth a new campaign that will give it a fresh modern image. Earlier this month, they signed Ellen DeGeneres as their spokesperson. Standing up to for equality, the “Gay Day” flash mob with all employees wearing pink on the event a few weeks raised awareness and helped encourage more sales.

JCP's New Strategy

Will this new strategy work? I think this new campaign is definitely a positive move, and if JCPenney does nothing it will continue to lose sales to other retailers. Taking their traditional complex approach with coupons and hundreds of random sales a year and redefining themselves towards a simpler model is a great way to build the JCPenney brand. It’s very expensive for the retailer to constantly run those sales and promotions, and its quite evident that JCPenney has tired out their customers who are unable to buy at their convenience. This move will be positive for both the consumers who can now get the low price anytime without missing their kid’s soccer game on a busy weekend, and JCPenney itself “will trim promotions to 12 a year from 590” which many customers seem to ignore anyways. Walking into a JCPenney store this weekend, I see the department store redefining itself in a new niche. Instead of competing with the its old standard retailers like Macy’s and Kohl’s, I now see JCPenney as a differentiated sort of upscale version of TJMaxx or Marshalls. I can still purchase that quality average product, without feeling like I’m in a Burlington Coat Factory store. Overall, I think Ron Johnson is gonna do big positive things that will help turn JCP around. What do you guys think of his strategy?

Microsoft Needs to Stops Taking a Bite out of Apple's Store Model

Two years ago, Microsoft launched the Microsoft store. They are now expanding into New York, Canada, and other places as stated in an article in Forbes. However, what happens when a consumer walks into a Microsoft Store? What feel does he get? As Dave Thier states: “Picture and Apple store. Now picture a poorly designed apple store.” This is how a Microsoft store is described by him. As a customer walks in, there are long tables with products that people can try out. Employees are scattered with lanyards. Finally, there is an “Answer Counter” at the back for customer service. It is therefore a cookie cutter store of the Apple store. Is this good for Microsoft?

I believe that the fact that Microsoft has store very similar to Apple, shows that they are admitting that they are second to the Apple store experience. After all, the best form of flattery is imitation. I believe that this is a mistake. Microsoft cannot worry about how the apple store is laid out and ran. Rather, they need to focus on who they are, what they represent, and what they sell. Yes, the Apple store is always a unique experience but it fits with what they are about a represent at Apple—a young hipster generation. On the other hand, that is not what Microsoft is about. Microsoft has primarily been about serving the business. This is who they are and what they serve. Therefore, the storefront should stop pretending to be someone else. It will only confuse their customer base. In developing a store, they should have ignored completely the Apple model and focused solely on how they can present a store to serve their client based. They cannot the fact that Apple has an edge. I believe that with that move, they are subjugating themselves to a number two position when it comes to the store front (Even though they are number two).

To change, I believe that they need to make it seem that the store is on the professional level of who they are serving. There would be many ways to this from ridding themselves of the Apple store layout to making it more like a business office to requiring their employees to dress business casual. In doing so, they will focus on what they do best: serving the business world.

Apple unveils 'Mountain Lion' software to Mac

A recent Wall Street Journal article, by Jessica E. Vascellaro, discusses how Apple Inc. is planning to make its Mac more like its iPhone and why; when Apple begins selling their new Mac OS X software titled, "Mountain Lion", later this year.

What is the big deal? The article mentions that the new software has many features that are normally seen on the iPhone.  In doing so, it appears Apple is pushing to be the first to hit on the notion that mobile devices, laptops and desktops will soon be coming together. As a result, the company wants to provide a similar experience across their various line of products. This act could have an impact across the industry as categories of devices converge.  Additionally, Apple simply wants a greater market share for their Macs which had a 5.4% market share of global PC shipments in the fourth quarter of 2011. Compared to some of Apple's other products such as the iPad and iPhone it is not great but they have shown gains recently. Apple looks to be using the success of the these other products to generate greater success with their Mac products.

Similarly, other companies are following suit with Microsoft Corp. planning a similar concept for their windows operating system that has an interface that is like its mobile-phone devices. 

In the new software, Apple will bring many of the same apps from the iPhone to Mac and has even changed some of the Mac apps to those of the iPhone such as iCal becoming Calendar. Also, Apple is incorporating other products such as iCloud into the software. A new feature on the Mac software called, AirPlay Mirroring will allow users to see what is on their iPad or iPhone and a television screen connected to an Apple TV device. This is pretty interesting as this may change how people begin to watch television.

In my opinion, this is nothing new for Apple, as we discussed in our last class session how the vision of Steve Jobs  was integral, and still is, to Apple Inc. This new product furthers this, as Apple begins to reduce differences among its products. I believe this move makes sense by easing the use of Apple products for users and it makes the Mac more functional for those that are used to the iPhone. Apple looks be really keying in on the success of the iPhone in order to improve the success of the Mac. Likewise, this product update is another way to make money as people always want to be up to date with software. The future of these products appear to be becoming more standardized as these tech products become similar in many ways across various devices. As I am not an expert I don't know if this is groundbreaking but it seems as if it will definitely have an impact.

What is your opinion? Do you think this is a good idea by Apple to somewhat 'standardize' their products and should others do likewise?

Dublin after London

Imagine you are in a mall standing in front of two stores: one Apple, one Google. Which one do you decide to enter? Or better yet you ask, since when does Google have a store!!!!!? Well according to a recent filing, Google plans on opening up their first stand-alone retail store at its headquarters in Dublin. After using a trial retail location inside London’s Curry and PC World stores, they decided to go on their own and enter the retail market. So now imagine once more you are in front of the two stores with the knowledge that a Google store exists. Can you answer the first question now? Probably not because you still have no idea what the Google store even sells! And neither do they! or at least, they haven’t publicly stated such knowledge.

So let’s recap here before continuing on. Google, the world’s most popular search engine service which also offers other online services such as Mail, Calendar, Google+, etc in addition to Android and other operating software, is opening up a physical retail location to sell concrete items. Puzzled? As am I. I am aware they have an online store that sells clothing and other Google labeled novelties but what else is there? What is worth opening a store for and for what purpose?

Perhaps they are looking to compete against Apple and use their resources, along with their $12 billion buyout of Motorola Mobility Holdings, to become the biggest company in the world. Or maybe they got bored of the doing the same thing and want to venture into new fronts. Which ever reason it is, I do not feel it is the right move. They are a software company with a search engine that dominates the market share, online services that create convenience and operating software for phones that compete heavily in the smartphone arena. Above all, they are damn good at all of these things, software related, and should stick to them. I do not think entering the retail market and manufacturing consumer electronics should be their next step. Sure, they have brilliant people working for them and their stock is doing beyond incredible but why risk it all. Now, it is only one store and considering how much money they have, it is not financially straining to test this out. Maybe it will work, maybe it won’t. Only time will tell for this software giant.

But wait! there is a lingering question at hand. Which one do you enter? More importantly, should Google even get to the point where consumers need to make such a decision?

Facebook Is Saving MySpace. Wait, What?!

As written by Jeff Bervovici of Forbes and Emma Barnett of the UK's Telegraph, MySpace has added 1 million users in the past two months. Chris Vanderhook, MySpace's COO, recently attributed the recent spike in MySpace's membership to its "integration with Facebook and Twitter." At first glance, that completely blew my mind. Ever since I got a Facebook back in high school, I've always thought of MySpace as Facebook's most direct competitor. And even though MySpace hasn't really competed with Facebook in the past five years, it was still a little strange to see them working together.

Apparently, MySpace is no longer just a social networking site. It's been rebranded as a "socially-driven music discovery engine," and thus, is no longer competing with Facebook. So, for about 15 seconds I understood what Facebook was trying to accomplish by helping out MySpace. They're just diversifying their customer appeal by adding a music site.

Then I remembered that Facebook has been promoting Spotify, another socially-driven music discovery engine. So I am once again perplexed by Facebook's actions. I understand endorsing ONE social music app or site. It expands Facebook's CVP by allowing its music-loving users to listen to music conveniently while on Facebook. I don't, however, understand why it would endorse TWO competing music sources.

I suppose they could be endorsing both Spotify and MySpace and allowing the users to decide which one they like better. After some trial period, I assume they would drop, disallow, or otherwise disown whichever music app was least popular. That makes some sort of logical sense, but I still think it would make more sense to just pick one from the get-go and promote that app even more. What do you all think?

It's Halftime America

Clint Eastwood- It's Halftime America

According to the Wall Street Journal, Controversy has arisen on the Chrysler Clint Eastwood commercial due to Superbowl viewers beliefs that the commercial had hidden political Pro-Obama intentions. Chrysler stated, "We have no doubt that this ad had no political agenda of any kind but rather [was] a statement of fact and hope for the future for all of us and America," the company's National Dealer Council said following an emergency meeting. They also stated that the main purpose of this commercial was to deliver emotion as a rally cry to get American's together so we can go back to be a collective power that was once so prominent. Yes one would think due to the Obama administration bailing out the company, many believe they owed the administration but using that same logic they also bailed out GM, a strong competitor of Chrysler. So I believe Chrysler had no reason to add a political message in their commercial. Chrysler's idea was to sell cars, not to start a political uproar. If this country wants to be the manufacturing superpower it once was, I believe the people of this nation need to come together and help the auto industry flourish instead of pointing fingers at these companies for so called political agendas. Its HALFTIME America, so let's come together in a non-partisan manner.

Has Pepsi's CEO lost sight of Pepsi's true purpose?

A recent article by Geoff Colvin in Fortune Magazine entitled “Pepsi’s CEO faces her biggest challenge” claims that Pepsi’s CEO, Indra Nooyi, will face her biggest challenge yet this year as she tries to revamp Pepsi’s business strategy in order to save its falling stock and falling profits.

One of the major problems for Pepsi, as Colvin points out, is that Pepsi’s stock has been falling since Nooyi became CEO, whereas, in that same time period, Coca-Cola’s stock has increased by 40%. However, Colvin states that this is not a fair comparison because Pepsi’s stock was almost overvalued when Nooyi became CEO and Coca-Cola’s stock had been doing poorly.

A NASDAQ Stock Comparison Chart of The Coca-Cola Company and Pepsico from the time Nooyi became CEO

An even bigger problem that Pepsi faces is that in its primary product category, drinks, its products are being displaced in the world’s major market, North America. Although Pepsi had held the number 2 spot for years, after Coke, now Diet Coke holds the number 2 spot. This fact is very bad news for Pepsi since the carbonated drink industry, as Colvin explains, is very profitable due to its low capital requirements and high profit margins. When examining Pepsi’s situation, I can’t help but see the similarities to Toyota, as we discussed last week in class. To illustrate, both companies are losing market share in their primary markets and falling behind the competition.

To counteract some of these problems, Nooyi had tried to change Pepsi’s business strategy by changing its CVP. Nooyi did this by trying to emphasize the nutritious value in its products like Quaker oatmeal, and trying to emphasize the ‘fun-for-you’ or amusement value in its products like Mountain Dew and Fritos.

Recently, Nooyi announced some changes that she would be making to Pepsi’s business strategy. These changes include spending more on advertising and marketing, cutting costs and getting rid of ambitious profit goals.

Although she claims that this plan is going to take two years to be successful, Colvin believes that the next few months are make-or-break for her, and that if investors and the board do not see results within the next year, that will mean dire consequences for Nooyi.

Despite her attempts to fix Pepsi’s business strategy, she does admit that she has made mistakes. She was quoted saying, “I wish we had stepped up our overall brand support, especially in North American beverages, earlier.” This hesitation also relates to the Toyota case because similarly, Toyota hesitated when deciding to enter emerging markets which proved to be a major mistake for Toyota. Clearly, Nooyi’s situation proves that every strategic business move is crucial and that one mistake or hesitation could seriously injure a corporation.

As I read this article, I was constantly reminded of Montgomery’s article, “Putting Leadership Back into Strategy.” Nooyi’s situation is living proof of some of the claims that Montgomery makes about the importance of real business strategy that goes beyond a company’s financials and focuses on a company’s purpose. Perhaps, by Nooyi changing Pepsi’s CVP and focusing on other products, she has lost sight of Pepsi’s true purpose and as Montgomery says, “nothing is more important for complex corporate entities than a clear sense of purpose.” However, maybe if Nooyi takes Montgomery’s advice and finds Pepsi’s true purpose and creates value, then Pepsi will be able to reclaim some market share and find its way back to the top.

What is your opinion? Do you think that Nooyi should follow Montgomery’s guidelines or do you think that there is another way to fix Pepsi’s failed business strategy? If you were Nooyi, what would you do to revamp Pepsi’s business strategy?

An Outsider's Look Inside Microsoft's Anatomy

I recently read a collection of articles on Wired about Microsoft’s recent activities and strategies that got me to think about how each of its departments are linked to each other, both internally and externally. Here are some of them:

• http://www.wired.com/wiredenterprise/2011/10/microsoft-and-hadoop/
• http://www.wired.com/gadgetlab/2011/06/microsoft-kinect-hackers/
• http://www.wired.com/gadgetlab/2012/02/how-windows-apps-will-run-on-arm-tablets/

There are many more on the site worth reading, if you can dig them out.

Before I dive into Microsoft, let's take a look at what Apple has done over the last five years. They have seamlessly integrated all of their platforms into one cohesive unit, and their sales numbers reflect this. As more people bought iPods, they started buying Macbooks, then came the iPhone, iPad, and TV, all of which gel very well together. That is, you play along with Apple's rules. However, once you try to go beyond Apple's scope, it becomes extremely difficult. Hence my frustration with Apple, and my infatuation with Microsoft.

Enter Microsoft who, unlike Apple, allows the user to explore well beyond the confines of many of its platforms. Allow me to explain. When Microsoft first launched Kinect, there was a massive, almost cult-like, dissecting of the capabilities of its hardware and software. At first, Microsoft was against this, and began arming itself for litigation. However, after seeing what the community has come up with, they have embraced the idea of what is now known as the "Kinect Effect," and have even put together a software development kit (SDK) for amateur and professional software developers to create home-brew and third-party add-ons for the technology. For more on this and its many uses outside of the living room, see the following links:

• http://www.xbox.com/en-US/Kinect/Kinect-Effect
• http://www.kinecthacks.com/

(kinecthacks is what started it all)

Like Microsoft, Apple had a similar experience with its iOS, most notably the idea of jail-breaking iPods, iPhones, and the like. While there were some issues regarding the enabling of software piracy, the pros were very much obvious: the community had developed tons of great new features that greatly expanded the capabilities of an otherwise very inhibited device.

This is known as open-sourcing, and has earned itself a major role in the software community that cannot and should not be ignored. It is important to understand that this is very different from developing an app for the iPhone, which restricts the developer to only Apple-approved methods (such is my experience with their SDK).

Now back to Microsoft's business strategy. In order to catch up with Apple, it needs to fight back for ubiquity in the market, which it has done very well in the consumer entertainment sector. Since its release, XBox has evolved from a gaming console to a household multimedia hub, having secured valuable partnerships with Verizon, Comcast, Netflix, and more. Later this year, Microsoft will launch Windows 8, which is already available as a pre-beta for testing and development purposes. I have used this early version of Windows 8 and, I have to say, it is unlike anything I have used before and, far more importantly, critics and experts in the field agree. The Metro UI, which was first seen on Windows Phone 7 and now also on XBox, is coming to Windows 8 PC, alongside the traditional taskbar, Start Menu, and icon layout. This will also be featured on the upcoming Win8 Tablets as well, also due to launch this fall. It gets better: Microsoft has engineered each of its platforms such that they may be so easily integrated to create one, streamlined Windows experience between the phone, the tablet, the living room, and the PC.

Why is this important? Well, for starters, it is this same product strategy that not only saved Apple from the brink of failure (thank you, iPod), but brought it to where it is today. Then you have to consider where Microsoft has always been the software of choice: the corporate world. This includes everything from its Office Suite to Windows Server, which is also getting the Windows 8 overhaul treatment. The key difference is that Microsoft is far more receptive to open-source development than Apple is, as I mentioned earlier. Considering the explosive nature of the software industry as of late, open-sourcing represents more forward thinking than any other aspect of the industry. The reason for this is that it allows the consumer at large to direct the innovative trend of the industry and, consequently, affects the products that companies such as Microsoft put out. The next two years will be very interesting for Microsoft and, on a grander scale, the tech sector as a whole.

From an investment standpoint, if you have yet to add Microsoft to you portfolio, it’s not too late. On another note, I would love to hear what you all think about this theory, considering that it’s a pretty bold claim to take a stand against Apple.

Is Paper Next in Line?

In the mid 20th century metals were predominantly used to produce computer casings, before Steve Jobs revolutionized the process in 1977 by launching the Apple II in a distinctive beige plastic casing. Could paper (fortified with polymers) be used next as a substitute? Michael Coren certainly thinks so, and in his brief article on Fast Company he expands on the rationale behind his beliefs.

Before delving into the analysis and offering my opinion, it is important to make one key distinction: the consumer in this case wouldn’t be the general population, it would be computer manufacturers. Although this may seem like an obvious point, it is an important clarification to make to allow focused debate. To introduce some of the pros and cons of switching, I am going to refer to the Gourville’s matrix.

Degree of product change: (High)

The degree ofproduct change is quite high since it is much more environmentally friendly. This difference in the paper and plastic casing will gain more significance if states keep pushing for the ban of electronic wastes in landfills like they have been doing recently. If the trend persists, then this new casing would be a suitable and sustainable alternative.

Degree of behavioral change (High)

The fact that it will be expensive for companies to modify their manufacturing processes to adapt to different raw materials will be a barrier to quick and wide-scale acceptance of this product. This is what makes it a long haul product (a product that has an advantage, yet requires significant structural changes for it to be adopted).

This point links to the low compatibility on the consumers' (manufacturers') part. They will have to change their processes to adapt; however, since changes like these have been made in the past (albeit a long time ago) companies should be willing to make similar changes now to adapt to consumers who are more cognizant to a products' impact on the environment and new laws. Some factors that work in the benefit of this innovation is that trialability is quite high because they can make prototypes, the product is not very complex, and the benefits of it are observable.

Will we see computers made with paper infused casing in the next couple of years? Not very likely. Will we see them five to seven years down the line? I believe we will, assuming that changes in laws and consumer tastes follow trends that they have been in the last few years. What do you all think? What factors will affect the acceptance of this change? Do you think the first computer with this casing will soar to the heights of the Apple II, or will it be touted as a bigger failure than DigiScents?

Nike's new marketing mojo

Fortune Magazine noted Nike’s innovative marketing in Scott Cendrowski’s article Nike’s new marketing mojo. The world’s largest sports company has fared well in recent years, bringing a 120% stock return in the last five years, compared to the S&P 500 index’s 2.5%, even while dealing with a series of unpopular celebrity endorsers. This success has been enabled by a shift from traditional (TV and print) to nontraditional advertising. In fact, even as its advertising expenses soared to a record $2.4 billion last year, Nike’s traditional advertising expenses fell 40% in just three years. Of the 100 top US advertisers, it spends the largest portion of budget on nontraditional ads.

The shift toward nontraditional advertising has brought it closer to its target customers. Teens have shifted away from the TV and now spend more time in online communities. That is precisely where Nike has placed itself. It has contracts with several marketing agencies specializing in web and social media, and these ventures have paid off with marketing successes like the viral spread of its 2010 football commercialvia Facebook. Further, it has expanded its reach—it can get a message out to 200 million people on any day, not just on the day of the Super Bowl.

Nike has utilized partnerships as well as outside contractors to develop and sustain its marketing success. Nike+ is a venture with Apple that links shoes and iPods to record and give feedback on people’s workout.

While these marketing efforts have brought it to the online hangouts and personal devices of its users, they have also given it a key resource: consumer data. It knows facts about its customers’ workouts, profiles, and habits. It knows what customers want, when, and why.

Its strategy has also enhanced brand loyalty by making Nike a part of social networks and a part of the modern exerciser’s workout recording routine. Further, it is reestablishing its brand by spending money on helping customers perform athletically, not on ads featuring celebrities. It provides tips on proper exercise and habits, which ties customers to Nike more than do passive TV or print ads. It is active marketing that reinforces the company’s purpose and stems from the customer value proposition.

Nike’s marketing strategy may be a success, but some of the electronic devices associated with it may be questionable. Take FuelBand, a $149 wristband that measures a person’s exertion throughout the day. The black rubber band with “Fuel” glowing in bright letters across the display may be a good accessory for teens, but it is doubtful that there is a sufficient market of teens who would spend $149 to track their bodies during non-exercise. The product is marketed as a way to stick to health goals by getting constant data on habits. This seems more like a good tool for adults, but most adults would not wear the band with a business outfit. Further, the complexity of the product may be high. The band must synchronize with the user’s iPhone, something prohibited for many teens during much of the day at school, and it must be linked to the user’s social media accounts to deliver the full experience. All these setup difficulties may not be justified by the additional knowledge about non-exercise periods. The concept may also be hard to understand—most have always been taught that exercise is what counts, not the periods in between, which are the focus of this product. Plus, being a product that is so customized to a person, trialability is a major flaw, though observability may be better. Compatibility is slightly more complex. On one hand, people need to remember to wear the band at all times, not just during a workout, which may be a difficult habit change. But conversely, the device connects to a user’s existing devices and social networks. Nonetheless, this product does not seem to have smash hit prospects.

Nike+ is another product that may be doomed to fail. Complexity may similarly be high since it must be synchronized to an Apple product. Further, it is doubtful that there would be much demand for a device that controls the music one listens to as one works out. While passive recording of various exercise metrics may be a good way to give feedback to the user, an active interference during the process may be overly intrusive. This interference may not add enough value to entice a customer to replace a regular heart rate monitor, or simply the smart sensor on most workout machines, with Nike+.

Nonetheless, Nike is smart to delve into electronics and marketing through social media, since such efforts firmly place it into its customers’ increasingly online experience. But it is also smart to partner with companies that can execute its devices strategy better. The alliance with Apple was a brilliant move—not only does the presence of Apple products in nearly every customers’ pocket make adaptation of Nike+ and FuelBand easier, but the move also associates Nike with hip and modern electronics. Customers need not make as many new purchases since they already have part of the package. And, the earlier infiltration of Nike into social networks helps move customers to make the new purchases—they have much of the hardware, they already connect with Nike via Facebook, and now they are only a few small products away from integrating the experiences to revamp their workout. The plan is brilliant.

What do you think about Nike+ and FuelBand? And do you think that Nike's move to nontraditional advertising is well planned?

Redbox taking on Netflix

Coinstar Inc, Redbox's parent company, and Verizon Communications Inc are ready to set up a video-streaming service later this year to challenge Netflix after signing up a joint venture. Redbox began in 2002 as an idea sponsored by McDonald with kiosks selling grocery products and DVD rentals. Today, Redbox is the biggest DVD rental service in the US with the market share of 37%. Redbox has expanded its DVD rental service to 28,000 locations including the bigger chains like Wal-Mart, Walgreens and Safeway. Redbox's business model targets customers visiting supermarkets, grocery, convenience and drug stores. Its CVP is to provide a convenient (Redbox kiosks is present in every state) and easy (rent and return anywhere policy) buying experience by charging an affordable price ranging from low-medium. Redbox revenue increased 35% last year to $1.6 billion. If the revenue growth is so strong, then why is Redbox horizontally integrating into the video-streaming service?

This is because of the following reasons:

• DVD rental business is a dying business model. This does not mean that in the coming years customers will stop renting from Redbox's kiosks. This means that given the surge in number of internet users, more customers will shift from renting the DVD physically to streaming it online. Redbox in order to sustain its brand name and business cannot only rely on DVD rentals and therefore has made the right choice of entering the video-streaming market. Netflix also started on the same path, first renting and selling DVD's and then moving beyond the DVD market to video-streaming.
• It is also important to understand the timing of this deal. A few months ago Netflix tried to change the fee structure by separating its DVD rental and video-streaming service. Subscribers were upset about the price and some of them also cancelled their accounts. Most of the customers have continued with Netflix because there are no other companies that provide both DVD rentals and a video-streaming service. Given the negative image that Netflix has created for itself in the market, Redbox has appropriately grabbed this opportunity by signing a joint venture with Verizon to create its own video-streaming service that will be introduced later this year.

There are two questions that Netflix needs to answer and to which Redbox needs a reply.

• Is Netflix replaceable? This means can Redbox replace Netflix when Netflix is not in the market?
• Is it easy to replicate Netflix? This means while Netflix is in the market, is it easy for Redbox to replicate Netflix’s business model?

Netflix is replaceable for the following reasons:

• Redbox over the years have accumulated 36 million email addresses which will help them promote their video-streaming service.
• When Netflix is not present in the market, the licensing dealers like the big studios (Times Warner) will shift to Redbox in order to sell their licenses.
• If Netflix shuts down now, then Redbox is the only company among its competitors like Wal-Mart’s Vudu and Amazon streaming service to provide both DVD rentals and video-streaming.

Though these three points indicate that Netflix can be replaced when shut down, there is a challenge that Redbox faces. According to Charlie Wolf, an analyst at Needham & Co., comment in a Wall Street Journal article that Verizon and Coinstar could not gain traction in licensing content. He said that "Unless Verizon and Coinstar are prepared to spend an amount that's in the ballpark with Netflix and/or possibly Amazon; the service is unlikely to capture a material number of households."

Netflix cannot be replicated by Redbox for the following reasons:

• Given that Netflix is in the video-streaming market, it will be a tough job for Verizon to negotiate licensing deals with the big studios who would have already sold their licenses to Netflix.
• On the contrary, Redbox's inventory is limited to what is in the kiosks, compared to Netflix's library of 100,000 discs.
• Redbox and Verizon aim to charge lower prices to consumers in order to attract them to the service. However, given the rising cost of streaming rights, it will be tough for the joint venture to sustain profits which will ultimately force them increase the price of their product.

Also, Netflix is making it hard for its competitors to replicate its business model by expanding with content that has not been introduced anywhere else. For example, Netflix's first original TV series, an eight-episode drama called "Lilyhammer," debuted Monday.

These are my viewpoints on whether Redbox can replace or replicate Netflix. What are yours?