First rule of first principle thinking, do not use first principle thinking when a mental model is available

Category: Technology Strategy

F2C is the C2B in

  F2C is one conference which I have mentioned earlier couple of times that I would absolutely love to attend. If not anything just to hear my favourite telco strategist Martin argue against network neutrality for the stupid network.

Talk on “Open standards and open source”

Attended a talk yesterday on open source and open standards by Dr. Bob Sutor who is the VP of standards and open source at IBM. He is evangelizing open source and open standards in a pretty big way. Open source is one of those often discussed and debated topics all the time and hence I was not very enthused to pay good attention to this talk. But interestingly the talk was very refreshing. Bob presented what could be a very techically and drab topic in a easy to understand way for a non technical audience.

Some of the salient points of the talk were

  • Open standard: A standard is a blueprint. How things are built and talk to each other,which should by no means be closed. Open for standard means development, maintaineance, accession and implementation and modification is done in transparent way.
  • Open source: It is code which is built in a colloborative way by a community. It could be **free** and may or may not implement open standard.
  • Open source and open standards leads to tremendous amount of value creation.
  • Consumer are becoming smarter and smarter, they don’t trust software companies for ex when companies say “we will take care of your security” or “you need these new features”
  • For governments it is highly important that they follow open standards, data/information generated by an individual is something that belongs to him but the data created by governments is a public good.
  • There are various different Business Models that can be used to build open source companies
  • Support
  • Maintaineance
  • Services
  • Patronage
  • Open source should not be done just for the heck of it, many players in the industry have observed that open source creates tremendous amount of value but a firms decision to go do open source should be aligned to its business and strategic objectives.
  • Open source will not happen in just one single day, it will take a long time for a majority of things to become open.

The talk had a lot of strategic insights embedded in it but explained in a lucid way 🙂

  • Open standards should be followed because they add value through economies of scale to all the players in the value chain.
  • It’s been proven beyond doubt that open source leads to tremendous amount of value creation. Software companies who gets this and play their cards leveraging it will stand benefit in the very long run. Few smart folks in IBM have realized this and thus IBM has invested heavily in open source.  Thus open source is not just about geekery but its about economic value creation. 
  •  No one(especially the corporates) should be given the right to impose exclusivity to government created information. If a vendor uses properietary format it is essentially imposing an exclusivity those making the good non-public.
  • Value creation is undoubted in open source but how is a lion’s share of this value getting capture for the person who coordinated this value creation is an not well solved equation as of now. Couple of methods mentioned above (viz business models) are not very compelling so many are figuring out viable business models in open source. [ One easy & successful but extremely myopic option that comes to mind immediately is for one to build a Gluecode and sell it to IBM 🙂 ]

Replication Wars – Naukri vs Bixee

Sooner or later they had to surface in India and here they are: Naukri vs Bixee (Hat tip:- Amit). Replication wars a big business in itself in the valley arising out of ill defined property rights.  It does not benefit either of the companies except the lawyers involved whose coffers get filled obscenly.

Amit points this among a few other examples as the total inadequacy of Indian legal framework to handle this. I subscribe to his view on all others except this one particular example. This is a classic example of copyright inadequacy for the online world(yahoo, indeed, hotjobs they all scrape).
The immediate question to be considered in this case is that given the current scenario was a lawsuit the best approach for naukri.I think not !!!  As one reader of the article pointed at the end “naukri has really shot themselves in the foot. They have no idea how this aggregation business works”. I must say that earlier I was quite impressed to read one of Sanjeev Bikchandani’s(CEO) very old article ( I guess it was dated way back somewhere 2000 – 2001,  not able to dish the link) where he talked about how leveraged indirect network effects and FMA. I was like man getting it way back in 2000 is really cool when only few people had got the hang of it at that time.
But this recent move of naukri is plain dumb, the economics of this business is changing in a big way, can’t naukri take a cue from US to know the economics are changing (LinkedIn jobs, SimplyHired,etc etc).  Naukri should be innovating rather than wasting the money(KPCB funds ?? could be put to better use)  building iron gates to protect themselves which is going to be a totally futile exercise. If it were me I would have expanded the pie and would have closed a deal with bixee where I get a revenue share for what bixee shows the data that are originating from my database and would have given access of my data to bixee. One important thing to remember is that one very important thing that bixee does not have but naukri does is a big brand value which it has built over a long period of time and could have used this to negotiate with bixee. This way there is larger value creation and sizable share of it gets captured by naukri.

I was roaming in the corridors of ISB a few days ago trying to search a particular room when I asked someone to direct me there, he was’nt sure of it so I moved on and I could here someone call the person Sanjeev Bikchandani and a few seconds later it hit me that this is the person behind Maybe I should have filled him with my opinion on naukri’s strategy on this one 😀 or probably I should do it the next time. I doubt he is going to give to an ear to this kind of view at all 😀

OrangeHues notes on BarcampDelhi

Manu is a Usability expert based out of NCR and he runs an beautifully designed blog called OrangeHues. I thoroughly enjoy his posts, he has that strategic way of analyzing technology which I have never come across any India based technology bloggers in my years of blog reading 🙂 [Ofcourse leave aside Atanu Dey because he does not write about technology specificly and moreover he is an economist].

I try to use the strategic (based on underlying economics) approach to technology which I find is the best way to look at technology but he beats me thoroughly in it 🙂

Manu attended barcamp at Delhi and has posted wonderful notes. Do read his posts in which writes to think in right direction about the technology/talk involved

Ideas do matter

I have met many VC’s, listened to many more them in conferences, read even more of VC blogs, one theme that I have seen recurr without fail is the talk of “Ideas do not matter, execution does”.  While I don’t deny that execution matters, it matters a hell a lot but Ideas do matter as well, I find that those that undermine ideas may not have a complete understanding of the economics of an idea :). Atanu dey has a brilliant post in which he discusses the economics of ideas. He explains the economics to drive a different point altogether but nonetheless the argumen are the same everywhere.
Here is also what umair thinks about idea vs execution.

Invention is a flower, innovation is a weed

John Hagel and Seely Brown have an excellent article in Businessweek on the difference between invention and innovation. The article though written for a general reader is more accessible to people with managerial background. But nonetheless the arguments made in the article are quite excellent.The difference between the two is very favourite subject of mine, though me being a technically inclined I am very clearly focussed on the latter. Put simply invention is discovery of new things,creation of new knowledge. Innovation on the other is about economic value creation (exchange value)
The article reminded me of the famous quote made by Bob Metcalfe. “Invention is a flower, innovation is a weed”

Use value vs Exchange Value

   I was interested in economics but I never gave much attention to it while I was studying. I got interested in exploring it only after college mostly after reading from Rajesh Jain’s posts about economics. Infact I even bought a copy of “Developmental economics” by Debraj  that he suggested as a must read. My suggestion would be not to pick it if one is trying to get basics of the subject , a better book would be get freakonomics or use this open source  economics book.  

   But after having studying economics I no doubt realized that understanding economics is a must for a technologist. And infact a technologist should understand the economics a lot more than an MBA to whom economics is about supply & demand equations/curves. 
 A technologist has to go a step more basic than supply & demand curves. This revolves around the economic concept of Value. It is a very vague concept and in fact there are very many economist working on trying to come up with a good definition for it.
  In its broadest sense ‘value’ is what human being beings need or desire in an object or a service. To put in another way it is “usefulness” of that object/service.

   Two important categories of value is what are known as use-value & exchange-value.

Use value refers to the direct usefulness of an object or service.It can also be called as the functional value and is inextricably tied to the physical property/object. A use-value can be both subjective or objective.

  Now there is an indirect usefulness, i.e the capacity of one object or service to be exchanged for another which is called its exchange value.

  Any object/service can have a use value but no exchange value but the reverse cannot be true. Anything has to a have a use value for it to have an exchange value. It is only objective.

  Exchange value is also called as the economic value.(Neo Classical theory) And the measure we use for it in our modern day society is what we call as money. 

  The point that I would like to  conclude from here is that it is a job of a researcher to create use-value. And it is a technologist who creates exchange value.   I will also like to put it in another way , creation of use-value( knowledge in this case)  is invention and creation of exchange-value(or economic value) is innovation.  

Rajesh Jain

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