The Pebble and the Avalanche

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Current Revolutions in Business and Technology

by Dr. Moshe Yudkowsky,

author of The Pebble and The Avalanche: How Taking Things Apart Creates Revolutions


Mon, 2008-Sep-08, 08:39

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What End Users Really Want: Featuring Mabel and the White Mice

Here is my talk "What End Users Really Want: Featuring Mabel and the White Mice," which I gave at the August 2008 SpeechTek conference. The talk focuses on innovative services in speech technology, but aside from some jargon the overall point of the talk should be fairly clear.

The video consists of the conference audio track synchrnoized to the slides (download, PDF). If you find the correct icon (the screen icon, to the left of the progress bar) you can view this presentation in full-screen mode.

Fri, 2008-Sep-05, 07:34

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Video: If Information Wants to Be Free, Where Is It Hiding?

The keynote address I gave at Cluecon — "If Information Wants to Be Free, Where Is It Hiding?" — now available online as a video presentation. Here are the slides in PDF format.

The abstract of the talk:

Interesting web applications demonstrate that information really does want to be free. Developers mix and match data from various sources to create new, fascinating, and useful web sites. By comparison, telephony applications incorporate limited information and -- in a mobile world -- almost nothing in the way of location-sensitive information. What information will be free in twenty years? How will telephony applications incorporate this information? How do we get there from here? How can we make money during the journey?

I've also updated both parts (Part I, Part II) of the CCXML Workshop. If there are any remaining problems with the video, please contact me.

And with any luck, I should have another interesting (but much shorter!) talk available online later today.

Fri, 2007-Jan-05, 08:46

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Huge Opportunity in Cell Phone Services?

The major cell phone companies — Verizon, AT&T, and perhaps others — continue their relentless march to intrude your phone service by introducing advertising on mobile phones. AT&T thinks it will make billions in the advertising industry, which I will have to see to believe. It's the kind of imposition that can only be achieved by an oligarchy — any real competition would instantly squash advertising on cell phones. No wonder the cell phone companies continue to fight against city-wide wireless Internet services, which might provide some competition.

But if they really go through with it, I suspect we'll see golden opportunities. First, more people will find a way to switch to mobile devices that use voice over the wireless Internet instead of cellular service; but more importantly, business people will be willing to pay a premium for service that does not have advertising. I have to wonder where that service will come from and who will provide it.

Thu, 2006-Nov-09, 08:42

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Expect Slow Sales of Next-Generation DVDs and Tough Year for Electronics Retailers

As the confusion continues in the long and pointless battle between Blu-Ray and HD-DVD (which I've written about before) over which standard will dominate next-generation DVD sales, the people who actually manufacture the players that go into consumers' living rooms will soon be able to easily support both standards.

As a result, smart purchasers — the ones who usually buy the latest and greatest and lead the pack — will likely sit on their hands and wait for the new players, which will not be available until 2007 at the earliest. Your local electronics retailer won't sell many of the available next-generation players, which is a bit tough on them. And since Microsoft Vista won't be ready until 2007, computer sales will also be slow until 2007, which will make things even more difficult for the retailers.

Both these incidents are sides of the same coin. Blu-ray and HD-DVD couldn't' find common ground, share authority, and settle on a single specification. The result is slow sales. Microsoft's Vista is tied so closely to the purchase of computers — Macintosh and Linux remain distant competitors in the consumer space — that any glitch at Microsoft severely affects sales. Lack of disaggregation has very real commercial consequences.

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Tue, 2006-Oct-17, 08:39

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How to Replace Wal-Mart and Target

Christensen explains in The Innovator's Dilemma that as companies grow, they abandon opportunities that aren't large enough to relative to their size. A million-dollar opportunity that would make or break a small business becomes too small to occupy a top executive's attention.

Wal-Mart and Target started out by catering to shoppers who want inexpensive goods, but now that the companies have grown and the market is saturated, revenue growth must come from elsewhere. Dozens of news stories discuss how Target and Wal-Mart now pursue a more fashionable — and profitable — upscale market far from their original roots: the companies introduced lines of fashionable clothing for women, with Target succeeding and Wal-Mart struggling.

The very success of Wal-Mart and Target will drive them out of their original business segment. The companies successfully disaggregated and then conquered a particular market, the value-oriented shopper; now the value-oriented shopper can no longer sustain the companies' revenue targets. Wal-Mart and Target have started to move on, and unless they can somehow maintain their hold on the value-oriented shopper — a task that's possible in the short term but probably impossible in the long term for such large corporations — a new ecological niche will soon appear.

Who will replace Wal-Mart? Who will replace Target? I suspect that it will be a Hispanic-owned corporation that expands from its niche of serving value-oriented shoppers in immigrant communities and reaches a wider urban market. In Chicago, I've notice the emergence of several larger Hispanic-oriented, value-shopper malls; I would not be surprised if one of them displaces Wal-Mart and Target from their current niches a decade from now.

Mon, 2006-Jul-17, 06:11

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Labitat Answers the Question: Billions for Search, But How Many Cents for Optimization?

Labitat announced a new product today that solves a dilemma faced by small and medium enterprises. Companies now spend billions of dollars at Google, Yahoo, and other search-engine companies to purchase advertising; the question becomes is that money being spent wisely? Certainly it's easy enough to purchase advertising via Google — fill out a one-page form and you can spend as much as your budget allows. But is your marketing campaign effective? Are you wasting money on inappropriate search terms? Are the "clicks" legitimate or fraudulent? Businesses spend bilions for "clicks" and it's crucial to put some cents (and sense) to make certain the billions are wisely spent.

Some advertising firms have a "chief digital officer" who monitors their web strategy. Large companies with in-house marketing teams can devote staff positions to search-engine marketing. And the complexity of search-engine marketing demands expertise, as noted in this recent Wall Street Journal article:

But because consumer search patterns change and competing businesses can jump in and out of the search ad market at any minute, advertisers say they have to stay on top of it to get the most for their money. Changes to the search companies' ad systems make it even more dynamic. Google and others sometimes add new variables or weight existing ones differently when determining which ads are displayed most prominently or what the advertiser pays per click. They also regularly roll out new features, such as letting advertisers restrict display of their ads to specific times of the day or only to people in specific geographic locations.
Many small and medium firms can afford to spend a few hundred dollars per month on search-engine marketing, but can't afford the time and don't have the expertise to determine if their marketing efforts are wisely spent.

Until now, that is. Labitat, the same folks who brought us the excellent Marketing Shift blog on search-engine marketing, now offers "PPC Audit" (i.e., pay-per-click audit). For a reasonable fee — "less than most SEM [search engine marketing] companies charge for a setup fee" — Labitat will audit a marketing campaign and provide expert advice.

The evolution of search-engine marketing continues. In very short order, the business has disaggregated into many different specialties, with more to come — for example, I haven't yet come across search-engine wholesalers who purchase "clicks" at bulk disount and re-market them, the same way telecommunications companies purchase long-distance minutes in bulk and re-market them, but I predict it will happen some day soon if it hasn't happened already. For the forseeable future, services from Labitat and similar companies will become more and more important as the search-engine marketing business continues to grow and evolve.

Tue, 2006-Jul-11, 08:54

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Kayak: A Brilliant New Travel Site

Yesterday evening I was all set to write a blistering diatribe against Orbitz, Travelocity, United Airlines, and American Airlines for their clumsy, inept, and frustrating online reservation systems. I found each of these sites almost impossible to use when I wanted to explore variations to my itinerary, and instead of enjoying making reservations via the web I began to miss the good old days of travel agents.

This morning, I found a travel site that's so superior that it puts those others to shame. Kayak, a relative newcomer to the field, has a brilliantly-executed search tool interface. Their interface disaggregates each part of your trip into a separate, visible controls. Do you want to see a different range of departure times? Change the slide control. Do you want to explore different airports? Check or uncheck the list of airlines. Kayak uses dynamic web technology (AJAX, as far as I can tell) that provides instant answers, instead of the slow and annoying updates used by the other sites.

Kayak faces some tough challenges because, after all, the ideas in their user interface can likely be copied. Kayak's information comes from other web sites, and therefore it's also vulnerable to how willingly those sites share information. Kayak's revenues, on the other hand, depend on advertising and commissions from click-through sales, which is a very solid business model. But there's little question that Kayak's brilliant interface sets the standard for travel sites, a solid win in the area of innovation.

Fri, 2006-Jul-07, 13:31

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Wal-Mart and Financial Services

Wal-Mart's forays into banking services make its competitors nervous, as might be expected, but allow me to predict that it should make Wal-Mart shareholders nervous as well.

When I was at Bell Laboratories, AT&T went into the credit-card business with its "Universal Card," and I simply could not understand the logic of a stolid telecommunications company entering that business. A friend explained it to me; I can't recall his exact words, but they were along the lines of: "Money is a great business to be in. Customers can't call and complain that it doesn't work, and they have to give the money back to you after they're done using it."

Of course AT&T eventually discovered the rule that all other credit-card companies apparently already knew: a huge influx of new customers is profitable for the first two years, and then a slew of those customers default or even declare bankruptcy. Eventually AT&T left the credit-card business.

Most retail business maintain the disaggregation between hawking & and services and handling the financial details. Every once in a while a large retailer thinks it's discovered the magic formula that will let it aggregate all the pieces of the puzzle into its own hands. Remember when Sears purchased Dean Witter? So here's a long-range prediction: Wal-Mart would be better off with a disaggregated, component-based approach to financial services. Wal-Mart doesn't manufacture the paper clips it sells in its stores, and Wal-Mart should not make mortgage loans either — and if it does, Wal-Mart shareholders will eventually regret it.

Mon, 2006-Jun-26, 09:04

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Buffett/Gates: Charitably, A Disaster

As noted in dozens of news stories, Warren Buffett recently pledged to donate $37,000,000,000 to the Gates Foundation charity. I can't see how this can spell anything but disaster.

Bill Gates will devote more time and attention to the Gates Foundation now that he's stepped back from Microsoft, and I believe the gift from Buffett shows that Gates hasn't lost his devotion to gargantuanism and the will to dominate. The Gates Foundation will be by far the largest charity in the world, able to sway governments and utterly crush smaller, rival charities. With Gates at the helm of the Gates Foundation, I anticipate that the ferment and creativity that marked the world of charity and philanthropy — the creativity and competition of disaggregation — will be replaced by the stultifying uniformity and poor results of Gate's Microsoft products.

Tue, 2006-Jun-20, 08:13

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"No" to Movies on Cellphones

I've never understood why some telecommunicaions companies believe that people will watch television and listen to music on their cell phones. The cell phone has a small screen and limited memory; the sound isn't very good; whats the point? Recent news indicates that cellphone companies that bet on the multimedia market are in trouble:

But many of the new carriers are struggling as they fight over a relatively thin slice of the market. While the number of U.S. cellphone users has doubled over the past six years to 215 million, only around 1% of them regularly use cellphones to watch videos, for example. Cellphones also are facing competition from iPods, Blackberries and other multimedia devices.

I can't claim to be prescient, however: I never thought cellphones with cameras would ever get off the ground.

Each of these multimedia items — cameras, videos, and music — are disaggregated from their original storage mediums (paper, phonograph records, videotape) and are now available as distinct components that can be built into anything. The ability to watch video can be built into your cellphone, but it doesn't mean it should be built into your cellphone. While there's a market for combined devices, I still think distinct devices for communications and for multimedia will remain the norm until cellular technology disappears in favor of internet telephony and everything moves to pocket computers.