When I was a management consultant we would read briefs written from other teams around the world. The Japanese teams were always raving about both the convenience stores and vending machines in Japan as world leaders in retailing.
Given that your average bodega in North America contains questionable food of uncertain age and most vending machines are variations on Coca Cola, I’ve always been a bit skeptical. However, being here has made me a convert.
Kings of Convenience
Your typical Japanese city is dotted with 7-Elevens (do not confuse it with the North American version), Family Marts and Lawson Stations (in Tokyo you also get the more upscale “Natural” Lawson).
In addition to drinks, snacks, etc., these stores sell a lot of fresh food. The triangles below are seaweed-wrapped rice with a vegetable/meat/fish core. Needless to say, you have to turn over your inventory pretty quickly to stock that:
Same for the fresh croissants, noodles, fried chicken, etc. that can be found in most of these stores.
There are also ingenious heated racks for serving you hot beverages:
I highly recommend the Boss coffee in a can.
However, the kicker for me was that you can buy Muji in Family Mart stores:
New Yorkers and Londoners are crazy for Muji and it routinely sells there for outrageous prices across a very limited line of goods. In a convenience store – a convenience store! – in Tokyo you can buy more of their products than you can in NYC. Those are shirts in the lower left; underwear above them. Stationery in the middle. On the right are snacks (delicious cheese pretzels; yogurt-covered cherries) with noodles and sauces below them.
NYC and LDN: eat your heart out.
Cointastic
Because Japan’s so safe, they have vending machines for everything. There are your traditional drinks (and yes, that is Tommy Lee Jones for Suntory; Lost in Translation was not a joke):
There are also cigarettes:
And my personal favourite, booze:
The fact that a beer/liquor vending machine does not:
a) Get broken into all the time
b) Lead to drunken youths lounging in the streets
tells you something about the national psyche here.
One other cool thing about some of the vending machines here is that you can pay with your cellphone. (Yet another potential line of business overlooked by North American cellphone companies).
The vending machines here are also not limited to chilled drink cans. This one will make you a hot coffee or a milk shake:
Here’s a shot of showing just how many different drinks you get in each of these vending machines. Compare that to your typical 8 flavours (two of which are usually the most popular one) back home:
It has been a fascinating few weeks in the device-side of the mobile internet. A ton of major events have happened. It worth looking at them all to try and figure out the patterns and understand what’s going on.
Item 1: Blackberry unveils preview of OS 6
Blackberry released a video showing what their new OS 6 is going to look like. It’s worth worth watching, because it’s a bet-the-company move.
Why is this a bet the company move? Take a look at there charts from recent Mary Meeker state of the internet reports.
This first one is from 04/09 and shows the share of handset shipments vs. usage for different manufacturers. One way to read this is that if your usage is higher than your shipment share then people love using your phones. And if people love using your phones, you’re probably going to keep growing.
So how does RIM do? Not well. Lots of shipments, but very low relative usage:
Here’s an updated version from the end of 2009. RIM’s slipping on usage – Android has jumped ahead of them – but they’re holding firm on shipments.
The scary thing for RIM right now is that they have to get people to use the mobile web on their phones. That’s why the video above shows Facebook, Twitter and a bunch of other web properties on the new OS 6. If RIM can’t get people to use the web on their phones, no developers are going to build for their platform and then it’s a vicious cycle to the bottom.
Worse, RIM will still look financially good as they’ve got a massive salesforce and are still the leaders in integrating with corporate email systems. They’ve also got great relationships with the carriers so they’ll be able to use price to ship a lot of units. They’ll even throw off a lot of cash in the meantime but it will be like watching GM’s arc from 1960-2010. I’ll keep watching the graph above: if it doesn’t shift, they are doomed.
The battle for smart phones used to be about who was the best at selling high-priced devices to corporations (the only ones who could afford them). RIM won by having a great keyboard and Exchange email integration. But Apple redefined the space and made it a consumer game – which will be won by whoever has the most intersting apps on their platform.
Which brings us to…
Item 2: Some Guy Named Steve’s Thoughts on Flash
This morning Steve Jobs wrote a post where he explained why Apple will not support Flash on the iPlatform. It’s a beautiful piece because it is the intersection of deep technical knowledge and keen insights on business strategy. Even if you know nothing about Flash or technology, you can appreciate the letter.
The implications are striking. Flash is dead as a technology for anything other than lazily creating websites for small businesses. The market seems to understand this:
So what are the implications for software developers?
First, if you’re on Flash, migrate away from it as fast as you can. Similarly, migrate away from any software tool that uses anything other than web standards to enable you to code across platforms (and even then be wary).
Second, focus on making your data clean and creating an API. If you don’t have the resources to develop across multiple platforms (after all, you were using Flash for that), you need to convince someone to do it for you. Give them access to your data and let them go to town.
Adobe got whacked by the Apple stick today as Apple reaffirmed their focus on their platform. But Apple doesn’t just take away, Steve giveth too…
Item 3: The Crazy Pricing of Apple’s iAds
The Business Insider is claiming, courtesy of the WSJ, that Apple is looking to price its iAds at 10X the traditional price of ads. They’re going to charge $0.01/impression and $2.00 per click (!). They keep 40%; the developer of the software program keeps the rest.
Why is Apple charging so much for this? Well first, they’re the only game in town (see Item 2) so they can. More importantly though, 60% x $2.00 = $1.20. That’s a huge amount of money for a developer – particularly given that the average price of an iPhone app is $2.40.
You can bet that many more developers are going to be clamoring to put these ads in their applications. Which means that more people will be trying to develop for the iPhone. Which means that more people will buy and use the iPhone as it has the coolest, best apps. Go take a look at item #1 again and you can see why it’s RIM’s bet-the-company moment.
There’s no way Apple will sustain this pricing over the long haul, but it might be enough to kick RIM or Symbian out of the game. Especially since Palm’s now gone…
Item 4: What the Hell is HP Doing?
The last major event of the past few weeks (at least, at the time of writing this) is HP buying Palm. HP’s got a long history in the mobile space (remember the iPaq or the Jornada?) and now they’re “doubling down on the Web OS [Palm's operating system].”
Many people assume that they’re doing this to re-enter the hot mobile space, etc. but I’ll bet $5 it’s for the following:
1) HP has been at risk of getting ’stuck’ as a computer manufacturer. They make middle-of-the-road devices and the market is fragmenting to the high- and the low-end. By buying the WebOS they can build some cheaper and/or differentiated devices like netbooks, tablets, etc. without having to pay about $40/unit to Microsoft for a copy of Windows. (They already make high-end [and high margin] devices like the Blackbird and VoodooPC)
This is augmented by the fact that software is shifting to the Web: you use your browser, Facebook and Twitter – and you don’t care if the underlying platform is Windows or WebOS.
2) You’re going to see a whole lot of WebOS systems in the government and enterprise. Remember that HP has a massive consulting organization. The Web means that this group increasingly spends its time moving bits around its clients’ organizations; that’s where the money is. Now they can offer linux-based devices on the server side and WebOS-based devices on the client side, meaning that an HP offering just got cheaper than the competition.
Don’t be surprised if 5 years from now you go to your doctor’s office or local fire department and everyone’s using an iPaq Palm device.
3) What you won’t see is a great phone. Palm hasn’t shown themselves good at picking carrier partners (witness the long exclusivity to Spring) and HP doesn’t sell phones, so don’t expect them to do a good job either. Also, Palm’s never going to beat Apple or Android on the software side; they lack the scale and focus to do so.
There are going to be a lot of devices that use the WebOS but the developers are going to be working on commercial apps for industry (think medical records) or HP will be paying the Facebooks, Twitters, etc. of the world to create versions of their apps on the WebOS platform.
As the Chinese say, may you live in interesting times…
It’s always refreshing to see someone take their own advice (aka eating their own dog food).
Last week Facebook announced their Open Graph initiative. It’s their hugely ambitious attempt to take over the web. In a nutshell, the idea is that you Facebook will be used to log you on to all websites and all your preferences (which bands you like/hate, etc.) will reside with them and in return they’ll personalize everything for you (both content of sites and ads).
It’s a great idea as long as you trust Facebook with every private aspect of your life. And you don’t mind if they share it with their development partners. And you trust them to delete your info if you like something you shouldn’t have. And you don’t want to use any competing service that might be improved based on your preferences (you can bet Facebook won’t share your data with them). In short, it’s a closed universe and those work really well right up until they don’t – usually when you try to do something someone in the corporate Politburo didn’t want you to.
So, what to do? Well, a group of interesting folks have started OpenLike, an open source project to come up with a standard for ‘liking’ objects on the web (that’s the mechanism for capturing your preferences).
Are these folks doing it out of the goodness of their hearts? Probably in part, but more likely they’re focused on “commoditizing the complement“.
The notion is simple: you want to drive down the cost of anything that augments your product/service. Joel Spolsky wrote the definitive treatise on this. While the notion is simple, identifying a complement isn’t always obvious and that’s what makes OpenLike so interesting.
If you look at the folks behind the initiative, one of them is Chris Dixon, who wrote the blog post about complements referenced above. He runs Hunch, a site that gives you recommendations and gives you better results as you and others use it.
Hunch’s value lies in their algorithms: the more data they have about you – most notably your preferences about what you like/don’t like – the better their algorithms work. In other words, preference data is the complement to their algorithms, so they’ve got a massive interest in making it as cheap as possible for people to give them their preferences.
Facebook is threatening to make it infinitely expensive (they’ll almost certainly never give Hunch that data), so they’ve got a fire under their butt to consider doing something else. They could try buying the preference info from users, but that’s typically not a good way to run your business (ask Microsoft who is offering cash back on search and losing a fortune).
They’re focused on building a killer product that will offer enough “value” (I put it in quotes as it’s such an elusive term) to users for them to want to give them their preferences. But that’s not enough when you’re going up against the web-wide distribution of an industry leader with over 400 million users.
Hence OpenLike. If they can provide an alternative to Facebook’s platform they provide a way for themselves to thrive. Publishers are happy as their content can get shared to more places on the web. Hunch is happy as they can get more preferences. And open web advocates are happy as the user is back in control of their preferences rather than one private company. Plus it’s always nice to see people like Chris walking their talk.
On another note, this will also be a small win for Google, who will now have a search entry for the exact phrase “commoditizing dog food”:
When the Internet arrived in force in the ’90s, one of the promises was a new era of telecommuting. You could live in the middle of nowhere but be part of the high tech workforce in a major city. However, this hasn’t played out and, in fact, the opposite appears to be happening: cities matter more than ever.
This little chart from a recent Brookings Institute presentation (note: PDF) sums it up more beautifully than anything I could say:
Today an interesting Tweet from @umairh popped up:
opinions on causeworld? there’s something bugging me about it. http://nyti.ms/coFtpR
CauseWorld in a cause celebre (sorry, couldn’t resist) of the web world right now. The premise is hopeful: you use your phone to check in at various locations to earn “karma points” which you can then donate to a charity – and an advertiser pays for the donation.
Sounds like a win, right? In return for you giving up some privacy (you can be 100% sure that your check-in data is getting sold to advertisers), the world becomes a better place.
I’d argue the world actually becomes a worse place.
When you choose to give money directly to a charity you have to make two conscious choices: the cause and how much. Every person has their own complex calculus for arriving at the final decision, but it’s immediately clear to you what you’re doing as it’s your money and your choice.
CauseWorld changes this completely. The first aspect is that you don’t actually know how much you’re giving as they are purposely hiding the value of the “karma points”. For example, if you earn 30 karma points, you can donate clean water to one person in Sudan for one month. 30 karma points means that you have to check in probably about 6 times.
Now you can feel good because you’ve saved someone’s life for one month. And what’s that worth? Well, the brutal answer is, 30 cents. You could have gone to GlobalGiving.org and saved 100 people for $30:
Similarly, maybe you wanted to use 100 karma points to get 1 pound of food for monkeys in the Congo. That’s 20 check-ins. And worth a whopping $1. You could have gone to GlobalGiving and donated $25 to the exact same group to save the same monkeys (Jane Goodall Institute):
Let’s examine what your 30 cents means. You’ve generated six data points that have probably been sold to a company (the sponsor) and will likely be sold to more. You’ve given up a lot of your privacy as you’re now selling every single location you go to (each of your checkins corresponds to a geographic location; I’ll bet CauseWorld can pinpoint your home within six months of using their service). You’ve had to look at multiple ads for sponsors. You’ve also generated a tax break for the company that makes the donation because they are giving the cash instead of you.
What’s really bad, is that I’ll bet you’ll be less likely to donate your own cash to charity this year because instead you think you already gave via CauseWorld. Lets say that last year you gave $100 to a charity. That was a lot to give at once, but it didn’t take long and it felt good. This year, to do the same thing, you’re going to have to check in 2,000 times (each check-in in 5 cents). That’s a heckuva lot of work. I’ll bet that after the first thousand checkins you slow down – if you even make it that far. And this is where the damage occurs: you still think you’re giving to charity, but it’s at a much lower rate than last year.
There’s another issue here, too. When you pick the charity, you’re donating to your agenda. When you do it via CauseWorld, you’re only donating to their charities. There is zero chance that any of their selected charities will go against the agenda of their advertisers.
We’ve seen this before: it’s called the health care system. Your insurance company (CauseWorld) gives you a service that’s paid for by your work (advertisers) and you never see the price it costs for a doctor to fix you (the charities) – and you can only see certain doctors. As a result you use too much health care, the price goes up all the time and you frequently can’t see the doctor you want/have to go out of your way to find a doctor.
CauseWorld is going to do the same thing to charities: you think you’re giving more because you’re spending more time ‘donating’, but really you’re not and you’re also not giving to the charities that really matter to you.
PS
If I was CauseWorld my response to this would be:
a) We make it easier for people to donate during tough economic times. This rings hollow. No one knows if charitable donations are going to be down due to this recession, but America has gone through many recessions before and charitable giving has grown faster than the economy.
b) We open up giving to a new audience that normally would not donate. This is not likely true either. The article in the link above estimates that 70-80% of American households donate money. These are the same people who are going to use CauseWorld (if this was not the case, P&G, Citi, etc. would not be lining up behind CauseWorld). Therefore there just aren’t that many of them who aren’t already donating. And, if you believe my logic above, they’re now probably going to actually donate less.
I was going through my photos today and found this one:
Now, you might be reasonable asking: “Lindsay, why on earth would you want to take a photo of a photo of the Ottawa airport’s board of directors?” Because this is a great example of monopolistic excess.
When you arrive in the Ottawa airport domestic terminal, you’re greeted with this ad. It’s conspicuously placed so that almost everyone has to look at it. Since Ottawa’s the nation’s capital, a lot of politicians and assorted ‘important’ people must pass through the airport, and I’m sure the board thought this was a great way to get some exposure for themselves.
I, however, am neither important nor interested in the details of the board. What I’m more interested in, is what does not appear on the ad. There’s absolutely no way to contact any of these folks. If you’re like me, and it’s 1:30 am in the morning and you’ve been waiting for 45 minutes for your bags because a) there wasn’t a gate ready for your plane [think about that-that means that the tower assumed your regularly scheduled plane wasn't going to arrive. Does that mean they were assuming a crash?] and b) there were two other planes in the same boat and therefore no baggage crews, you might want to reach out to these folks to explain a teachable moment.
However, this ad is, instead, a monument to corporate self-gratification. There’s no way to contact these people and instead they simply gloat over you as you await your bags. No phone number, no email address, no website. Nothing It’s unintentionally the ultimate symbol of monopolistic hubris.
I know there’s not a lot that can be done to stop the monopoly that an airport’s going to have in a (relatively) small town like Ottawa, but some high speed rail would sure go a long way to making life a little more awkward for that board (Ottawa-Montreal and Ottawa-Toronto are the bread and butter of the airport). And that wouldn’t be a bad thing.
Let’s speculate about how it might save journalism (or your industry of choice). It’s going to have to provide a great experience that’s fundamentally different from how it works today (check out this Sports Illustrated mock for one hypothesis). However, I think it’s going to have to make it really easy to pay for this content, too. Ads alone aren’t keeping these folks in business, so a new format alone (which is just more ad inventory) isn’t going to be enough.
So what could this mean? Well, imagine a monthly subscription to all New York Times content – across your tablet, iPhone and the web – with the first 100 articles or so free.
Similarly, right now it’s tough to do subscriptions for an iPhone app. You have to put the app in the store and then the subscription occurs within the app (e.g., it sells for $0.99 in the store but then it’s $9.99/month within the app to use it). I’m hoping that with the tablet, Apple will continue switching the store to allow transparent per month pricing at the time of purchase, with a free trial.
Ideally, two things come out of the tablet:
New ways to convince users to subscribe to content. Ideally, providing a ubiquitous payment system that works across all digital channels
An improvement to subscription pricing in the iTunes store
These sound totally banal, but if this happens it will suddenly be financially viable for a whole new type of software to be developed for the iPhone. Apple can build its mobile lead and really revolutionize a lot more than just journalism.
I either didn’t exist, or was way to young to remember it, but the ‘7os were tough economic times. The reason: inflation. Prices were quickly going up, and when this happens faster than the economy grows, your standard of living drops. Here are some quick charts from the Berkeley Econ dep’t:
It took Paul Volcker raising interest rates to absurdly high levels in the early 1980’s – and thereby bringing the economy to a standstill – to tame inflation. This had a profound effect on society: the Fed send a clear signal that they would not tolerate a rapid increase in the prices of goods and services. If such a rise occurs, then they raise interest rates, even if it risks putting the economy into recession.
This has held true to today and as a result, we haven’t had any serious (excluding gasoline) increases in the prices of goods and services since 1981 or so. As a result, this type of inflation hasn’t caused this recession or any since the early 1980’s-and that’s a great thing.
However, notice that I’m being very specific in my choice of words: I’m defining inflation as the increase in the price of goods and services. Recently we’ve had all sorts of recessions caused by other types of inflation: the Tech Bubble of ‘99/00, the Oil Shock of ‘07/08 and the Housing Bubble. In fact, some folks believe that we’re seeing a bunch of other bubbles right now: Chinese property market, U.S. equities, and on and on and on.
So here’s the hypothesis: since the Fed is so tightly monitoring the prices of goods and services – because that’s how they define inflation – they’ve pushed ‘inflation’ into other markets. If you were to look at other prices and define ‘inflation’ as occurring when they rise too rapidly, you’d think to yourself “holy crap, we’ve got an inflation problem.”
In 2007, Summers started looking at the looming economic crisis. Back in 2003, he had attended a Federal Reserve conference in Jackson Hole, Wyoming, in which economists were celebrating the fact that central bankers seemed to have mastered the use of monetary policy to tame inflation without causing the economy to slip into a recession, as had happened in the past. Summers warned that perhaps the victory over inflation meant only that the next recession would be caused by some new phenomenon.
Further, the Federal Open Market Committee members may not recognize inflation when they see it, as looking at inflation solely through the prices of goods and services, while ignoring asset inflation, can lead to a repeat of the last policy error of holding rates too low for too long.
This is a really tricky problem to solve. Taming inflation is straightforward: you just tell the public that you want inflation to be between 0.5-2% and then raise interest rates any time it looks like it might be higher. The public pretty quickly learns that you mean business and don’t misbehave.
But trying to prevent bubbles is a crazy hard problem. You can’t say something like “asset prices can’t increase more than 10% a year” because nobody is going to agree to that. There are legitimate times when a category of asset prices could increase way faster than that and it would require unprecedented (and unacceptable) government intervention to avoid it.
Instead, the challenge to the Fed has to abstract the problem and understand how to create a set of incentives to get people to behave properly. This is a really hard problem as first, everyone has to agree on what causes the problem (almost impossible as people who are making quick money have an incentive to disagree) and then Congress, etc. have to be convinced to actually implement regulation.
It’s going to be fascinating to see if the Fed and the Obama administration rise to the occasion and try to solve this problem. As the Chinese apocryphally said: “may you live in interesting times.”
There’s a great two-part interview with Marc Andreessen up at the Business Insider (although it’s occasionally painful to watch as their streaming is buggy beyond belief).
Marc talks about Netscape and what he’s learned about creating technology businesses, strategy, etc. Here are a couple of gems:
Jim Clarke spent four years in the wilderness at Silicon Graphics before he had a product that people actually thought was useful. This helped him mentor Marc while Netscape was in its wilderness period
Before starting Netscape, Jim & Marc had a variety of ideas, including an idea for XBox Live-but it was 1993 so it couldn’t work.
When they started Netscape they had two elements that helped them:
The idea worked: Mosaic as a browser was a research success. They just had to rewrite the code and commercialize it
They defined their business model (sell servers and commercial browsers; give non-commercial browsers away for free)
Note that the above basically says “create a great product and then build a company”, not the other way around
Business plans are useless – but the process of planning is very valuable. It forces you to think critically about your business and show that you understand the issues
Every tech company starts off doing something different than one it originally planned to do. Microsoft started writing compilers but made money in OS. Apple started with the Apple II but made its money on the Mac. Silicon Graphics started selling computer chips and ended up making supercomputers.
“There’s not a tension between product and business [in the technology industry] – there’s a staging. You don’t have a business until you have a product – especially a product that lots of people want.” It’s about product/market fit. Make a killer product and then scale up. Marc seriously wants to avoid creating companies that grow to 75 people, go nowhere and everyone just collects a salary.
Marc answered one big question I’ve always wondered: why did AOL buy Netscape? After all, the business tanked immediately after they bought it.
It turns out that AOL never really cared about the business and actually never even bothered to really run the company. They bought the company so that they would be perceived as “the blue chip internet company,” the “GE of the Internet”. It worked – there stock subsequently quadrupled and they were able to buy Time Warner.
Finally, he was asked what three things made him the success that he is. His answers might surprise:
Luck
Timing – which he considers luck
Place – being in Silicon Valley has forced him to be better as he is always surrounded by so many smart people
There’s a fascinating article in the Chicago Tribune about how Netflix delivers their DVDs. I have a nerdy love of companies that are really, really good at what they do (Toyota, Amazon, etc.) so this sort of article always interests me.
Here are some killer numbers for you:
95 percent of titles are rented every 90 days
every day they go through their entire nation-wide inventory of 89 million discs and figure out where each is
less than 1 quarter of 1 percent of discs are mistakenly shipped
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