Insight #1 - how to boost innovation in your company... at 0 cost!

Life is full of surprises.

About 10 years ago, my very young wife had the opinion that the employees of Accenture belong to one of two groups: the tech geeks and the boring nerds. Little could she guess that one day she would be married to one of those and that she would actually work there. And be happy with both, at least so I'm lead to believe...

Something equally mysterious happened to me when I realized that last Thursday's top MBA insight came from such an unsuspected subject as Cost Accounting. I mean, what interesting learning could possibly come from any subject  that has the word "accounting" in it? Well get ready, because it is actually quite simply and rather ingenious.

In the last class we were roaming about cost allocation, specifically about how overhead costs (say rent, electricity, corporate jets,...) could be allocated to specific products. One very simple way could be to divide the cost equally among all the products. So if the overhead is, say €1M and the company produces 500K of products then we would allocate 2€ overhead for each product that goes out of the factory.

You can easily reach the conclusion that this division is not really fair because maybe the company, for example General Electric, produces both large scale industrial equipments and toasters and the proportion of overhead used in the production of each is different. When this is the case how should the allocation be carried out?

There are various methods but the innovation focus enterprise will choose to allocate overhead costs based on the man hours required to produce the product. And this simple decision is likely to do more for innovation and efficiency than any clever idea put on powerpoint by some hot shot consultant. To see how, follow the role play described ahead.

"role play"

You have just been promoted to product manager of toasters in General Electric with P&L responsibility. As you review the profitability numbers of toasters you realize that they are much worse than your coffee machine pal Joe, the product manager for large scale industrial equipments. You quickly realize that the reason for that is that each of your 20€ toasters get 10€ of overhead costs the same as Joe's €1M large scale industrial equipment. This is because Joe's highly efficient and automated process uses the same labour hours as your manual intensive toaster production process. Hence, the same overhead allocation.

Naturally, your first reaction is to summon up a long list of very rational arguments about why Joe's big machine should take more overhead than your small toaster and you present them to Jack Welch on the first opportunity.

As Jack tells you "tough luck bro, just eat it!" you realize that the only way you can improve your numbers and collect the hefty bonus at the end of the year is to make your process more automated and efficient. So you go back to your corner office and start working on innovation!

end of "role play"


I leave you with some food for thought: if the European politicians had attended Luis Fernandez-Revuelta Perez's cost accounting course at IE, would budget deficits be as high as they are?

IT@IE is dead! Long live IT@IE!!

Dear readers,

Long time since the last post. I have not forgotten about this blog nor the 7 of you that read me. There is a reason for the absence.

This blog was created for the Information Systems class of my MBA. It was used for the IT assignements plus occasionally for some other stuff that did not mention IT at all.

However, having finished the course I went into a reflection mode about what could I use this space for. Several thoughts crossed my mind but it was only after reading my friend and "illogical" classmate writing about his impressions of out first term that I decided what I wanted to do: 3 daily paragraphs about interesting insights from the MBA experience.

You see, amidst the many boring sessions and the more than expected stream of pointless interventions, there is not one day that goes by without me adding at least one more good insight worth remembering. And after 1 year that will make around 365 new and original take aways.

Therefore, IT@IE is now officially reborn as the repository of thoughts and "ah-as" of a journey in the business school wonderworld instead of the reflections on the virtual wonderworld.

IT@IE is dead. Long live IT@IE!

Tesco's IT competitive advantage

If Tesco was a person it would have a couple of stories to tell it's grandchildren. One of them was about the launch of its Clubcard loyalty program and it would go something like this: "once upon time the highly competitive market of retailing in the UK was lead by Sainsbury; your granddaddy Tesco wanted to change this and decided to launch a loyalty card so that the customers would be so happy to come to Tesco and would come back again and again. This was a big success and after 6 months Tesco increased market share significantly eventually becoming number one in the country.".

This story seems to belong in the fairy tale world but it is, nevertheless, a true story. The unusual success with Tesco's loyalty Clubcard (by the way, loyalty cards already existed in several other industries) is related not to the card itself but to what Tesco did with it. Tesco used the card to collect a lot of relevant information about the customer shopping habits and preferences (ex.: "38% of customers cared about price) and acted on them (ex.: basket of goods on promotion was reduced from 750 to 350 matching customers preferences).

Tesco used the technology developed around the Clubcard as an enabler to improve their product and boost customer satisfaction. Tesco successfully created of unique, not easily replicable, set of processes that, through IT as enabler, was able to create consistent and sustainable value to their customers.

And in the business jargon this is called "competitive advantage".

Beach&Party weekend - orientation and FAQ

BEACH & PARTY WEEKEND IS JUST 2,5 WEEKS AWAY! YEAH!

Find below some info about Lisbon and where we will be hanging out on the 2nd, 3rd and 4th July.

Around Lisbon

FYI - Lisbon is a very small town (800K people) surrounded by some of the best beaches in Europe. We'll be hanging one of the four signed in the map above according to the weather and swell charts. Some brief info  on each:

• Costa da Caparica- this is the closest one to Lisbon, about 10km from the city centre: about 15 km stretch of sand, 1 large beach but several names. Probably where will be.
• Carcavelos - urban beach, really used for surfing only as it is not the prettiest around
• Guincho and Praia Grande - arguably the most beautiful ones in the area, but are colder and therefore require warmer weather. Guincho in particular is very exposed to wind and can be a nightmare for beach goers (and a paradise for kite surfers...) 
• In all of them: water is cold! This is the Atlantic Ocean, beach for real men and tough women, not that sissy Caribbean thing. But well worth it... check teaser pics

Sunset + "beach activities" in Costa da Caparica

  

October mist in Praia Grande

If you are brave enough to challenge "the elements", you can get a wetsuit and a board and have a go at surfing. Let me know if you feel like to know how you're loundry feels in the washing machine and I should be able to get some rental equipment.

a nice little beginners' wave at Costa and a heavy one at Carcavelos

  

the beginner surfer challenges "the element" and gets his reward. It was his 4th or 5th time

    

With regards to the city itself: 

The orientation in Lisbon is dead easy! There is one main artery that goes downhill to the river (Av.Liberdade and pedestrian R. Augusta) that splits the city in two. On the left you have the Alfama and the castle where the original 12th century Lisbon was; on the right the Bairro Alto where 19th and 21st century Lisbon thrive (all the bars are here!). On the east of Lisbon you have the Expo area (new development that removed old industries), nice and pleasant for a Sunday stroll; on the west the Belem area with monuments, cafes and great views to the golden gate bridge (pretty much like the one in San Francisco but without the fog!).

And this is really all you need to know for a weekend. Except for Belem and the Expo, everything is walking distance but be ware: 1) Lisbon is not flat; 2) wear comfortable shoes, specially the ladies as Lisbon sidewalks are a deadly trap for high heels (you'll understand it when you're there).

Left: view from the castle; right and bottom : around Bairro Alto

    

About safety and where to stay

Lisbon is totally safe and you would have to be REALLY unlucky or try very hard to get into trouble. Just a few things to bear in mind:

• beware of pick pockets around touristic areas like the castle, downtown, bairro alto and belem (usual stuff)
• avoid Martim Moniz, Intendente, Anjos. They are all on the "left side of town" on the metro green line. You will never go to Intendente and Anjos but Martim Moniz is really close Rossio (downtown between Av. Liberdade and R. Augusta). Martim Moniz is not dangerous during the day but it is where the illegal immigrants hang out so it is not pleasant.
• Bairro Alto after 3am can get heavy, I wouldn't hang around the tight winding streets at that time. Also, be aware that this is full of bars and there is always some drunk guy looking for trouble. And I don't need to tell you to decline any invitation to go inside some building or into a dark corner to buy drugs, right?

When you are choosing where to stay you have all the safe options (Novotel, NH,...) cheaper than in most other European cities. For a stay in style you can try to get a short term let deal like this (thanks Sebastian for the tip), and it even isn't more expensive. hint: always ask if there is public parking nearby because Bairro Alto and Alfama are a nightmare for cars. I have heard there are zillions of places like this but I actually don't know them cause....aaa, I normally stay at home when I'm in Lisbon...

Ok, this is the basics taken care of. Next post will be about eating & partying so keep checking.

And of course, if you have any questions or need any help you know where to find me!

the erp dilemma

 

A long looong time ago in the beginning of my career I was an ERP consultant. My first steps in the corporate world were crammed with praise for the power and flexibility of ERP systems (mostly SAP in my case). Clients were bombarded with fancy slides explaining how their business could be configured in the endless options available in SAP and, if the option was not there standard, you could develop it.

The key message was: you do not need to change your business, the system is fully adaptable to your reality.

A mere 5 years later the tune had changed substantially. Tales of implementations gone horribly wrong (now it's the right time to go back to the picture in the beginning of the post) coupled with outrageous maintenance bills of highly customized systems paved the way to the opposite philosophy.

The key message became: the ERP is based on best practice so you should adjust your business processes to the system.

What cherries to pick?

Confused? Naturally! But not to worry, there's a new rule brewing that can be used to sort out "The ERP Dilemma": should companies adjust their businesses to the system or the system to their businesses?

If it is a core competency, adjust the system; if it is not, adjust the company.

Beach&Party Weekend in Lisboa

Here's a thought: we've been doing a fair bit of work, exam period is coming up, some of us are getting a tiny weeny bit stressed out.

Work + Exams + Stress = we gotta chill out before the 2nd term begins!

With this in mind, Group A went through one of their trademark brainstorming sessions:

• one standing up and writing everything on the white board, 
• another one doing the same but in some fancy application on the ipad, 
• one making sure that the discussion is emotionally charged by making as many extreme statements as humanly possible complemented by extensive use of loadsa powerful adjectives
• another one snoring through most of it and occasionally intervening with some enthusiastic paraphrasing of someone else's idea, 
• one getting on everybody else's nerves with occasional pseudo witty lecture style "clever" comments and 
• last but not least, another one silent most of the time and only coming out of the shell when the group had walked through the self destructing path far enough that required prompt action to re-balance emotions and avoid irreversible implosion.

The result: BEACH&PARTY Weekend in Lisbon. Find some details below:

When?
2nd July (Friday) - 4th July (Sunday)
We can leave straight after the quants exam on the 2nd.

Where?
aaaa... well, in Lisbon where else?....

What?
Mostly all sort of beach activities (surfing, frescobol, good food, great partying!)

How?
Important disclaimer: this is not an all included perfectly organized trip. If you want to go, get together with 2 or 3 people, rent a car and hit the road!

The big advantage is that you have expert local knowledge available (that would be me, btw...) that you can use kinda like in the spirit of Alice's rent a local friend.

I'll be posting some more details and tips on things such as how to get there (recommend car), where to stay (hotel vs flat), where to go (some of the best beaches of Europe crammed up in a 15km radius around Lx...), where to eat (insider tips only), where to party (I might be able to make guest list arrangements where it's needed).

Stay tuned!...

can "dell hell" be avoided?

Jeff Jarvis was an ordinary guy. And as many other ordinary guys, he decided to get a Dell computer sometime in 2005. He was unlucky: his laptop turned out to be a lemon and he ended up enduring the usual after sales nightmare that you get when you happen to buy pretty much any defective high tech item.

Jeff Jarvis was an ordinary guy but he was also a blogger, one with reasonable exposure. He started blogging about his pains and getting massive response from his readers and the friends of readers (measured in hundreds of comments). Soon he captured the media attention and by the time he wrote an open letter to founder and CEO Michael Dell, "Dell Hell" was already a catchy slogan that eventually made its way to an independent web page. 

A picture is worth a 1,000 words, and the picture below can be revealing:

As you can see, after "all hell broke lose" in the blogosphere Dell shares went from over $40 to a minimum of $20 in 1 year. Mr. Dell finally agreed to meet Jeff Jarvis in October 2007 (over 2 years after the open letter) after various attempts to fix Dell's customer service but most of the damaged was made.

The million dollar questions (or should I say, the $20 per share questions) are: could this be avoided and how so?

The answer to the first one is certainly yes!

The answer to the "how" is more tricky.

1. Engage in the the dialog
It is clear enough that Dell has misread the importance of Jeff Jarvis' lemon laptop and understated the impact that this one incident could have in its public image through the virulent effect of the blog world. So an obvious prescription to Mr. Dell (and any other consumer goods producers for that matter...) is: get on your marketing or IT budget room for a bunch of people to run through the blogs, social networks, online news and, arguably, even relevant chat rooms and forums to check and respond to what is being said about your company and your products. Engaging in the dialog is sometimes your customers want and can make a such a difference and make a world of difference in preventing PR misery.

2. Go back to basics
Even if Dell had been top of the tops in ePR, if their products are bad or, as it appears to be more correct in this case, your after sales is appalling then you are in for trouble.

I suspect that Dell's woes between 2005 and 2007 were not chiefly related to post sales "Jeff Jarvis' Dell Hell" case but rather to continuously missing investors' expectations of which this June 2006 article is an example. And this was probably more related to the decline of Dell's original sales model (sales to end customers via 3rd party stores) in light of the rise of the more cost efficient direct online sales than to its post sales misery.

Having said that, laptops are, nowadays, pretty much a commodity. And the 2 key competitive advantages that you can have in commodity business are 1) lowest cost + large scale and/or 2) superior customer service (if you are lucky to have this option, because coffee makers and cement producers don't).

In 2005 Dell had neither of the two so its market value had only one way to go...

the magic 3: on facebook's top issues and its future

 
3 times this month I was called upon to draw my attention to (relatively) new players of the e-economy: foursquare, google and now facebook.

3 times I have followed the same research pattern: read wikipedia for the company's history, browse their websites and generic news sites for information on their products and sources of revenues, get inspiration from specialized blogs and other e-media sources for clever insights about their business and their future.

3 times I looked at what I got and ended up with the similar conclusions: the future of these companies, and in particular of Facebook, is directly linked with the way they handle and adapt to 3 key issues. Data privacy, anticipate and/or prevent the "online advertising bust" and stay in tune with recent trends affecting their businesses.

Data privacy


I do not have an accurate figure, but if I boldly stated that 80% of the news articles of the last six months on Facebook addressed the issue of data privacy I could probably get away with it (the remaining would be 15% about acquisitions and IPO and 5% demonising founder and CEO Mark Zuckerberg).

I feel most of the excitement is both biased and dated. Biased because for decades banks, insurance companies and governments have stored confidential and sensitive information prone to hacking and misuse. Dated because even if Facebook may concentrate more personal information than your bank (which is debatable) most users simply do not care: generation Y clearly has its own view on what privacy means and social network websites like facebook are designed for them and not for their critics.

Having said this, Facebook's strength depends on their user base and the traffic they generate. To step out of line and loose the confidence of their users is very risky because competition is just one click away.

Online advertising bust


This is controvertial: how do I dare putting the adjective "bust" close to "online advertising", the new Holy Grail of PR, the Mecca of product awareness, the Nirvana of relevance and meritocracy, a market that went from $4,6Bn in 1999 to $22,6Bn in 2009 in the US alone!

Well, because of one simple reason: online advertising is easy to avoid, block, opt out. Don't believe me? Just google it and, with an appropriate plug in you can avoid those annoying and intruding pop ups that come up pretty much every site you browse to.

As an MBA student of IE at had the privilege of attending a class with the country manager of Google Spain in which he stated that advertising blockers are not a major concern because Google sees advertising as a "service" to the users and those who opt out from it would not provide any revenues anyway.

This is a good (and brave!) point but I wonder how many users consciously consider online ads a "valuable service" vs those who would rather block them if they knew how to. As users become more tech savvy it is not unreasonable to think they will be activating advertising blocks most of the time they surf the web, consequently reducing the number of times they are exposed to ads and the number of times they click on them (both major sources of online advertising revenue).

If this hypothesis of the behaviour of web users is correct, online advertising will grow up as more users get connected, will start decreasing when they learn to block advertising until it reaches a stable (lower) equilibrium that corresponds to the users that click on ads only when they choose to be exposed to them.

In fact, I wonder if last years's small dip in online advertisement in the US is a consequence of the financial crisis or an indicator that the US market reached a mature point and has started "the search for the new equilibrium".

- Online advertising revenues: USA -

source: "IAB Internet AdvertisingRevenue Report 2009", published April 2010 and available online here This graph is on page 5.

Stay in tune with trends

Young innovation driven internet companies are used to operate in a very dynamic environment. Facebook is one of these that, like it many of its kind, started off as a cute, unpretentious idea to fulfill a niche (create a facebook of Harvard students), operated for years on venture capital money until it finally found its gold pot in online advertising.

In this process, the key factor of success was adaptability. Facebook's capacity to adapt resulted in the creation of a superior product (usability is considered one of the reasons that made Facebook explode whereas mySpace faded) and of eventually finding its business model that took FB from negative CF in 2009 to $1Bn in revenues in 2010.  

Going forward this characteristic will be very important to meet two serious challenges: the increase in quantity and variety of internet devices and platforms (ex.: tablet computers and TVs, Apple vs Android) and the global trend to "go mobile" (where Foursquare's concept of "social networking meets google latitudes" may be  an embryo of what lies ahead).

So what's next for FB?


I do not dare anticipating what Facebook will look like in two years time. It would be arrogant and possibly stupid to do predictions about a company that operates in a very dynamic environment, where competition is 1 click away (ok, maybe not 1 but not more than a few...) and that does not care about money.

But its future is likely to be shaped by the pulling and shoving of the 3 forces I described. And it will undoubtedly be interesting!

artificial waves in India save the shores!

Check out this cool idea that this company is doing in India: install artificial reefs offshore to protect the coastline from erosion.

As a by product they ended up creating a brand new surf spot, opening up new possibilities to boost the local economy!

Not bad!

quo vadis microsoft?

"A computer on every desk and in every home, running Microsoft software", Microsoft's original mission statement

Microsoft Corporation (MS) born on the 4th April 1975, Aries, has, like men and women of the same age, reached full grown up status. And like human top achievers of the same age is feeling the pressure and anxiety about what to do in the next 20 years in order to secure its place in immortality.


In men and women this is commonly called "the biological clock" and the prescribed solution is: have children! For companies that may not be so simple but MS seems to be trying to do just that.


For 20 years MS has remained faithful to its origins and grew up to become the largest software company in the world; from 1995 it started experimenting with the internet via IE and MSN but remained in the shadow of other rising internet stars. This was also the period in which it started having problems "with the law", namely the anti-trust regulators; in 2001 it entered the game console business and more recently (2009) it decided to launch own brand retail stores.


MS probably guesses that their core software products and approach are dated and it's only a matter of time until open source software (with continuous product development strategy rather than release based strategy as depicted in the figure below) and other innovations such as cloud computing will erase MS's competitive advantage and slowly but relentless erase its software market share.

Having enjoyed only relative success with its new business units, MS stands at yet another crossroad: will it nurture it's more recent offspring knowing that they will likely never be as successful as their "parent"?; will it invest in other brand new business?; or will it try to get back to its core and reinvent itself to maintain (or even improve) its still dominant position in the software business?


MS's current mission statement "At Microsoft, our mission and values are to help people and businesses throughout the world realize their full potential" could apply to almost any business that sells products and/or services to both people and companies. 


It may be a signal of MS's indecisiveness about what it is or the quiet resignation of a mature company that, like a 35 year old pop star, has decided to make its leaving from "very best" albums and remastered versions of old hits.


More to come on this.


note: this post was done exclusively with wikipedia as reference

things can get weird at graduate business schools...

Matthias Seifert is a friendly quants teacher that, through his cheerfulness, just about manages to escape the popularity devastation that often contaminates those who teach what is widely regarded as "the nightmare subject in business schools".

Lately, Matthias has shown in class that, contrary to the prevalent pre-conceived ideas, Germans can also have a pretty refined sense of humour.

However, pretty much like everyone else, Matthias has a weakness: it appears that he is a huge fan of David Hasselhoff (!!!).

This post is for Matthias and all the other Knight Rider & Mitch Buchannan fans around the world...




PS - if you can endure 3 mins of this you will be rewarded with "David's fish bite". Really the créme de la créme of it all...

IT@IE version of a 4square point grade system

In the previous post the author of this blog had the audacity to suggest that new internet golden baby Foursquare for which Yahoo has made an offer of $100M is, business wise, a rip off.

Don't wait for history to prove him wrong. Start doing it now by providing valuable insights and/or data that contradicts his views and WIN POINTS FOR IT!!!

If you win enough points you may become the....aaaa... JEDI of this site (or the HELLO KITTY, if you're a she).

Write about:

1) additional potential customers and/or products / services worth while paying 4square for;

2) how much these customers/products/services are worth in €€€s;
3) any additional stuff that you think might contribute to tear apart this author's argument.

The author of this blog pledges that he will compile all the relevant information, publish it and retract himself should there be enough evidence and/or a compelling case for it.

get macarronated with 4square!!!

   
"In my experience with hundreds of entrepreneurial startups, business-plans rank no higher than 2 - on  a scale from 1 to 10 - as a predictor of a new venture's success"
in How to Write a Great Business Plan by William A. Sahlman. Harvard Business Review July-August 1997


First of all I would like to apologize: I am a graduated economist. And as an economist I am particularly well qualified to grossly miss out all predictions (we call it forecasts...) about the future and then come up with brilliant ex-post explanations about why they were wrong.


This post is about the first part of my skills, applied to the exercise of understanding foursquare business model and predicting its future success.


Foursquare is one of the latest crazes in the virtual wonderworld. On the surface it looks like a basic version of (yet another...) social network site: you sign in, add friends and share with them where you are and what you are up to.


However, Foursquare has a few tricks that make it unique: the first one is that it actually tracks where you physically are when you login to it; the second one is that it comes with a "point system" that can can get you the wonderful honour of  becoming The Mayor of a specific location if you logon to the service in that location more than anybody else. So, for example, my Information System teacher Enrique and virtual wonderworld enthusiast, is The Major of IE because he logs on to his 4square account eeeeeeverytime he arrives at school; last (but not least), the user experience is so well conceived that it feels like a (highly addictive) game.


Simply put: Foursquare is the first crude attempt at getting a legal personal global positioning system whereby you can not only find out where Mr. Joe physically is in a given moment, but also access a database of where he has been to ever since he has decided to join the 4square community.


The current "service" provided by 4square has serious limitations the most important of which being (arguably) that it is really only practical for smartphone users that bother to install the appropriate application to use it. This reduces drastically the number of users that it attracts, but, nevertheless, it has not deterred the likes of Yahoo to present a lavish $100M offer for the startup.


Ok, so we know what it does and we know that Yahoo is willing to pay a fortune for it. But why? What is the business model behind it?


Follow me in answering three critical questions to solve this problem: 1) who will be willing to pay to know where we are and where we've been; 2) why would we publish this highly personal information and 3) how much would the customers be willing to pay for this. 

1) Who wants to pay for personal geo-positioning?


A few examples quickly come to mind:

• governments – this is the obvious one. Even setting aside controversial  big brother type applications such as “Mr. Anderson who has an outstanding parking ticket is just across the street from the Police Station. Agent Smith: go get him!”, personal geo-positioning can certainly be used to improve emergency services and crime investigations. 

• companies – the classical application that we have already seen in science fiction films like Minority Report is to advertise a custom made promotion when the person enters an area close to where the shop is. Additionally, marketing freaks are likely to reach a state of intellectual ecstasy from looking at an accurate report stating something like "on average there are 2,535 young males with income > €50,000 per year that pass through the number 25 of Calle Ortega y Gasset every day whereas only 527 that pass through the number 10 of Calle Serrano". Particularly, if they are responsible to decide the location of the next Rolex shop featuring the new collection specifically targeted for young men...

• individuals - even with mobile phones we are sometimes not clever enough to find a friend which is standing across the street: "where are you?"; "I'm here", "here where?", "in front of the Corte Ingles", "no, I'm in front of Corte Ingles!", "I don't see you. Wave good bye", "I'm waving", "!"#$%&$", "...aaa, in which entrance are you....?".

This last point holds the clue to the 2nd critical question…

2)     Why would I want to disclose my whereabouts to the world?

For as much as companies (and, in particular, marketing&advertising professionals) would like to believe that we would be ecstatic to be bombarded with custom made promotions about the shops in the street that we just walked in, or that web enthusiasts may like to think that the rest of the world may want to share their wherabouts online because "it's neat to be the Mayor", I would consider a fair assumption that most of the people would only do it if they were unambiguously better off in doing so. 

For example, if you were looking for a bank, a taxi, or a doctor in the area. Quid pro quo, I show where I am if you tell me where I can find what I'm looking for.

3)     How much would the customers be willing to pay?

It follows that the success of this business lies in its universality: what good is any of the services described if   only 1,000,000 in the world have signed in, even less businesses and no government authorities? The current limitations of foursquare, both technical and in terms of market penetration, explain why it is currently not making money: after all, Google would not be the giant it is today if it was used by 0,015% of the world population and could only search an even smaller percentage of available pages...


I will not dare putting a €€€ value on the venture, but at this stage I am confident enough to conclude that:

•  4square is (really) a personal global positioning system and database that sells real time information about the location of people and other entities (such as companies and government agencies). 

• The business model requires that the customers provide their information for free in exchange for the privilege of paying a fee to access the information of other customers.

• The key success factor of the business model is the capacity to, eventually, reach everything and everyone (universality).

What are the odds that this will work out? Well, Yahoo thinks they are good enough to give $100M for what is currently nothing more than an embrio of a business.

Unless, of course, my analysis is flawed or incomplete or plain wrong (or all of the previous!...) and there is some other ingenious way of making money out of it. Surely Dennis Crowley, named one of the "Top 35 Innovators Under 35" by MIT's Technology Review magazine (2005), CEO of 4square must have it all figured out!

This thought kept pounding in my head: "what am I missing?", "where did I go wrong?"... after all, as an economist I am used to making predictions (ehm, forecasts) that are grossly wrong but, as a former consultant, I am not trained to admit mistakes... So, being unable to come up with an original idea that could better explain the hype around 4square, I did what any sensible person in trouble would do: google it and hope the light would reveal itself.

I need not go far: the first link I opened had the key to the mystery. It was from a news channel in Brazil that informed that the Rio de Janeiro based fast food chain Spoleto was launching a new promotion that went something like "Use Foursquare and get macarronated" (as in, eat free macarroni).

It hit me! Foursquare's business model is much, much simpler than my previous description: take an existing successful idea (social networks), make a twist on it (call it "mobile social networks"), add charm and media attention ("like breakfast with opinion makers that video posts on youtube"), ride the "wave of the hype" for a while and wait for an industry giant to get "macarronated" with the stuff, in this case, for about $100M (or more....).

You don't believe this version? Check out Dennis' vision and where his previous venture dodgeball ended up...  (just focus on last 4 sentences of paragraph 2)

the financial crisis in a nutshell

This blog was supposed to be mostly about the extraordinary insights that a highly "sharp and sophisticated" person could bring to the world as he explores the virtual wonderworld (or shall I say, underworld?...).

However, I'm making an exception as and will post this little video that follows up from the discussion we had today about the financial crisis in the economics class.

This video has got all we talked about in class regarding the Fanny Mae's and the big investment banks ran by "highly sharp and sophisticated" people. And there is a little bonus: if you ever wondered REALLY why the heck we are bailing the banks out wait for the punchline at the end!

all rights reserved

 "IT@IE copyright statement: the author of this blog hereby auhtorizes every PERSON to copy, publish and/or broadcast all materials posted in this blog wherever and whenever you see fit as long as you tell me about it"

Basically if you can prove that you are a biped with complex communication skills and opposing thumb you get copy and paste anything you like from here. Just keep me posted about it…

Copyright discussions have recently been BIG! Prosperous, long established cash cow industries that have been sucking the marrow out of artists’ work for decades are suddenly becoming the paladins of the protection of their employees’ original creations. They are naturally concerned of protecting the generous rewards they give the artists that are lucky enough to be on their payroll: something between 0% to (maybe) 8% of the proceedings (8% only if you happen to have” Madonna like” bargaining power…).


I suspect their efforts will be short lived. Throughout the history of the industry technical innovation has reshaped business models creating new jobs and firms whilst destroying or severely damaging others. Have a look at this clip and make a short (but highly enlightning) table linking, on one side, the technical innovations and, on the other, who benefited and who lost with it.

http://www.youtube.com/watch?v=ZQW6KTt5dvk

Without underestimating the strength of the powers that currently are, I suspect it will not be possible to prevent the free spread of digital content, be it music, video, text or other. The winners will eventually be those who will better adapt to this new reality.

Which brings me to the beginning of this post and the blog’s copyright statement: there is no way I can control what you do with “my” content so I might as well play the generous and care free soul and let you have it as if your own.

It is interesting to see that there are other people which are doing the same as me lay in two groups: "the nobodys" that have got nothing to lose and have no other way to get the content out there anyhow (that’s me); and "the celebrities" who can afford to get their stuff out for free because they have other sources which will benefit from the widespread distribution of their music (that’s the Radioheads’ and company).

The great resistance to this comes from the guys in the middle. They rely on selling their content for a living and cannot get to grips with giving it out for free. This great example of the “donut principle”, where there is nice sweet cake for the extremes but a big hole of nothing for the mainstream middle, may be one of the reasons why the industry has been so sluggish in finding alternative business models for musicians.

I wonder if the this will lead to a very unequal industry characterized by zillions of "nobodys", very few "celebraties" and a big hole in the middle... any thoughts on that?

how deep is the rabbit hole?

Review checklist: Firefox. Check. Blog. Check. Google reader. Check. Delicious. Check. Twitter. Check. 4 square. Well, it’s optional, so… skip it!

If the above list is full of gibberish you kinda have heard of but do not fully understand what it is or what it is for, welcome to the club!

And congratulations: you qualify as a prospective full-time MBA student at one of the most prestigious and highly ranked universities in the world: the Instituto de Empresa (alias IE).

As part of our first session of the Information Systems’ course we had the immense pleasure of hearing a tall, clumsy looking fella ramble about a myriad of tools at our disposal in the virtual world that can make our existences so much more visible and, hence, much more meaningful.

As I listened to the geekish jargon thrown at us with great enthusiast about all sorts of hardware and software gadgets I thanked God for the jokes, often quite funny, that kept me amused whilst a persistent thought hammered in my head: “what the heck is he on about?, what the heck is he on about? What the heck…”

Then he played this trailer: (you can watch the whole thing but the relevant bit is really from 1:18 to 3:50)


http://www.youtube.com/watch?v=te6qG4yn-Ps

Bang! Lightning stroke and I could finally make (some) sense of it all: he wants us to plug in and check it out first hand! “Don’t just read about it, do it!”. 


Feeling very well about myself for having understood the message of my teacher and active blogger Enrique Dans, I could not help indulging myself in “deeper” and intellectually stimulating thoughts such as “Keanu NEO Reeves is taking the red pill to get UNplugged from the matrix, while we are taking the red pill to get PLUGGED onto it. But we have the same purpose: understand what it is.”

Bottomline, ladies and gentlemen, I present myself: my name is joao and you can now find me in wonderland…

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PS - I am new to this stuff so if anyone knows how to put the youtube video directly on the page I'd appreciate some directions. Additionally... any ideas why the bullet points are showing up as a wimpy flowers??!!!....