Shortly after I started as my work a researcher at the National Institutes of Health, I joined the Biomedical Computing Interest Group, and co-founded the BCIG Book Club. I really enjoyed reading many of the books that my colleagues suggested, but one of the few that I did not recognize as worth reading was “The Fifth Discipline“.
Time heals, and occasionally it even teaches, so today I was interested to read about “The Beer Game“. It is worth following the link and reading the full story, but I want you to know that it is not really about beer.
The case is about the importance of communication in business and team work. Common sense, I guess, but common sense is surprisingly rare. And I can see now why The Fifth Discipline included this case, albeit in a section that I did not read far enough to get to, as it fits with the book’s message on communication.
Better late than never.
Here is a nice article from the Harvard Business Review, “Breakthrough Thinking from Inside the Box” (see Printer-friendly version). The premise is that thinking inside the box means no innovation, but that asking colleagues to think outside the box presents overwhelming freedom and most people give up during such brainstorming sessions. Instead, asking them to inside a new box provides them with useful constraints but also creative possibilities. Here are 21 Great Questions for Developing New Products:
â€œDe-averageâ€ buyers and users
- Which customers use or purchase our product in the most unusual way?
- Do any customers need vastly more or less sales and service attention than most?
- For which customers are the support costs (order entry, tracking, customer-specific design) either unusually high or unusually low?
- Could we still meet the needs of a significant subset of customers if we stripped 25% of the hard or soft costs out of our product?
- Who spends at least 50% of what our product costs to adapt it to their specific needs?
Explore unexpected successes
- Who uses our product in ways we never expected or intended?
- Who uses our product in surprisingly large quantities?
Look beyond the boundaries of our business
- Who else is dealing with the same generic problem as we are but for an entirely different reason? How have they addressed it?
- What major breakthroughs in efficiency or effectiveness have we made in our business that could be applied in another industry?
- What information about customers and product use is created as a by-product of our business that could be the key to radically improving the economics of another business?
Examine binding constraints
- What is the biggest hassle of purchasing or using our product?
- What are some examples of ad hoc modifications that customers have made to our product?
- For which current customers is our product least suited?
- For what particular usage occasions is our product least suited?
- Which customers does the industry prefer not to serve, and why?
- Which customers could be major users, if only we could remove one specific barrier weâ€™ve never previously considered?
- How would we do things differently if we had perfect information about our buyers, usage, distribution channels, and so on?
- How would our product change if it were tailored for every customer?
Revisit the premises underlying our processes and products
- Which technologies embedded in our product have changed the most since the product was last redesigned?
- Which technologies underlying our production processes have changed the most since we last rebuilt our manufacturing and distribution systems?
- Which customersâ€™ needs are shifting most rapidly? What will they be in five years?
I find the sums here extraordinary – according to “Good Capitalism, Bad Capitalism“, from 2000 to 2004, the University of California earned $575 million from licensing their patents:
The total for all USA and Canadian research institutions was $6,348 million.
No wonder governments around the world are racing to create their own version of the Bayh-Dole Act, which gives universities the right to commercialize their inventions even though the original research funding came from the government. Their own universities cannot compete against US ones without this extra revenue source. And the revenue provides scientists with incentives to bring their research to market.
I keep on finding out interesting things about the history of Alexandria. For example, it was the “first city ever to have numbered addresses“:
Its banks oiled the commerce of East and West alike, its freight terminals churned with the trade of the world. Its celebrated library boasted seven hundred thousand scrolls and had been built in pursuit of a sublime: that every book ever written might be gathered in one place. There were even slot machines and automatic doors.
Now I read this quote, from President Abraham Lincoln in an 1860 presidential speech:
The advantageous use of Steam-power is, unquestionably, a modern discovery. And yet, as much as two thousand years ago the power of steam was not only observed, but an ingenious toy was actually made and put in motion by it, at Alexandria in Egypt. What appears strange is, that neither the inventor of the toy, nor any one else, for so long a time afterwards, should perceive that steam would move useful machinery as well as a toy.
I first found the quote in the “Good Capitalism, Bad Capitalism” book.
How to interpret this? 15, maybe even 10 years ago, my chest would have swelled with pride over the achievements of early Arabs, partly because back then I did not know that the Alexandria described was a Greek creation. During my childhood I read a book that described how so many of the scientific discoveries of the West during the Renaissance were actually rediscoveries of what Arab scientists had already written about. It wasn’t all exaggeration.
But now, I just get annoyed. There is no point in inventing or discovering something if you do not use it.
Looking back on the last ten years, the work I have most enjoyed doing is helping people stop keeping secrets. In another couple of decades I want to look back and think that I have done this work well. Because it is, I am guessing, what I will be spending much of my time doing during these coming years.
I do not like secrets because they cost so much. I do not mean the cost of training UK government staff how to maintain the confidentiality of their citizens’ records rather than sending 25 million of them in the post unprotected. Rather, I mean the cost of keeping this training manual secret from most staff members:
A manual which laid down strict rules on how Revenue & Customs should safeguard the information was not widely distributed because it was thought to contain too much sensitive information to be handed out to 90,000 civil servants. Instead, only a few senior civil servants had access.
The next time you keep a secret from your team, your friends, your family, ask yourself: is it really worth it?
So, should you quit your job at a big company to start your own small company? The business press is full of examples of entrepreneurs that have done fabulously well from this, and Paul Graham had written several essays that explain starting a company as the opportunity to work incredibly hard for a few years to earn what you would earned over a whole career in a big company. Personally though, I suspected something different was at play. I read about it in the “Good capitalism, bad capitalism” which mentions:
[...] several reasons why radical innovations seem to emanate from entrepreneurs rather than large firms[...] For one thing, successful radical innovation, if undertaken by the entrepreneur, promises what might be call “mega-prizes” – hundreds of millions, if not billions, of dollars of wealth. Nothing comparably awaits the radical innovator in a large firm, who might get a special recognition award and a onetime bonus.
Beyond this, paradoxically, studies have found (for the United States at least) that the typical entrepreneur earns less monetary compensation than her employee counterpart. Why then do so many entrepreneurs willingly engage in what is inherently risky activity? Because the additional psychic rewards – being one’s own boss, pride in self-accomplishment, and so forth – make the entrepreneurial endeavor worthwhile even if the entrepreneur does not gain the mega-prize. This, in turn, explains why entrepreneurs have a comparative advantage relative to large companies in attempting to discover and commercialize breakthrough innovations. Because a not insignificant portion of the entrepreneur’s “income” from her activity is psychic, the entrepreneur is the low-cost provider of radical innovation. Often, therefore, it is more economical for the large firm to wait for entrepreneurs to develop the radical innovations and then buy them out.
Italics were in the original text. Folks, you have got to want to be an entrepreneur, not to be rich, to start your own company.
Earlier this year my father was invited to the Festival of Thinkers in the UAE. The idea is to invite great thinkers from around the world, including 16 Noble prize winners, and have them give lectures to local UAE students. The nice twist is that the audience includes all the accomplished thinkers sharing tables with the local students. Eventually, the organizers hope, the local students would learn that the thinkers are just ordinary people, and that high accomplishment is within the grasp of the students if they work hard.
I am not sure how well this work in practice, but I hope to attend next year. In the meantime, my father was given a copy of the book “Good Capitalism, Bad Capitalism, and the Economics of Growth and Prosperity”. This is a fascinating book.
It talks about four kinds of capitalism, rather than the single homogenous blob of “Capitalism” that is discussed in the press:
- Oligarchic capitalism, which is predominant in much of the developing world, especially the Arab world (sigh), is where the state backs a few very wealthy individuals and their families. The welfare of these families means the welfare of the ruling family, and neither group cares if it is at the expense of the general population’s welfare, which it usually does.
- State-guided capitalism, which is predominant in countries like China and Singapore, is where the state determines the sectors to invest in.
- Big-firm capitalism, which is predominant in Europe and Japan, is where the state backs large companies. The welfare of these national champions is a proxy for the welfare of the national economy and holding onto jobs.
- Entrepreneurial capitalism, which predominates in the USA since the 1970s, after a couple of decades of Big-firm capitalism, is where the start-ups drive the economy.
The book’s authors believe that entrepreneurial capitalism is the way to go. They are quite persuasive with this point of view. Oligarchic capitalism is just plain bad (deeper sigh) but state-guided capitalism may not be the fastest way to grow even for fast-growing China. And neither that nor big-firm capitalism can allow growth when an economy is close to the edges of human knowledge. In other words, the authors explain, the stagnation of most European economies apart from those of the UK and Ireland is because they ran out of American innovations to copy. The authors’ argument is much more nuanced and sophisticated than my last sentence is, but that is the main idea.
The reason that entrepreneurial capitalism is that economic growth can only happen from innovative entrepreneurship. This is different from what the authors call replicative entrepreneurship, which is copying and locally applying someone else’s idea.
The authors outline four policies to encourage innovative entrepreneurship:
- Easy to start and grow a business: this includes cheap business registration costs, bankruptcy protection, and access to finance.
- Rewards for productive Entrepreneurial Activity: this includes the rule of law, avoiding onerous taxation, proper regulation (or deregulation), commercializing university inventions, and rewarding imitation (the use of an old idea in a new way or a new setting)
- Disincentives for unproductive activity
- Keeping the winners on their toes: this includes antitrust, and welcoming trade and investment.
Over the next few weeks I will be researching what it would take for me to start my own company in Bahrain. I have a couple of good ideas for start-ups, so the answer is important to me. But I find the USA fascinatingly good at keeping the winners on their toes.
For example, when I arrived in the USA the country 2-3 years was behind Japan in cell phone services, and 1-2 years behind Western European countries. But earlier this year Apple released the world’s most advanced cell phone, leapfrogging over Nokia, Motorola and Palm even though it had never before made any cellphones. And then Google announces its entry into the auctions to be a wireless provider, even though it has never been one in the past. The FCC responded by accepting Google’s proposals that the winner of the auction should make their network open to any device maker, something I have never seen a European or Japanese regulator do in response to requests from new entrants. The saga continues with Verizon’s response, announcing that its whole network would be open from next year.
Within one year the USA has overtaken Europe and Japan to become the second most exciting and innovative wireless market in the world. I still believe India gets top place, but that is because it is such a new market. But at the cutting edge, players in the US market have completely changed the rules and winners of the game, without the need for government intervention.
I can only dream of this happening in the Arab world.
I am on holiday in Bahrain for a few weeks and the place is buzzing. From landing in the airport the adverts are different: more, more expensive, and for a real local economy rather than just imported goods. The trip home showed more of the same, and then of course the most important thing to me: the internet connection at home. What a difference 16 months make.
The house was newly built in a new neighbourhood so the previous telecoms monopoly has still not provided DSL broadband to the house. Last year my parents’ only connection was a 3G Vodafone PCMCIA card. The download speed was around 256 kb, the limit was 2 GB per month (I kid you not) and the monthly cost was 40 BHD ($100).
This year the 3G Vodafone SIM card connects to the PC through USB, the download speed is much higher (the software claims 3.6 Gbps, an exaggeration), the limit is 4 GB, and the monthly cost is just 15 BD ($37.50). Oh and the Kuwaiti multinational MTC Vodafone is rebranded as Zain and have moved their head office to Bahrain.
Before I sleep, allow me to introduce, and recommend, the 3G Phoebus Portable Cellular Wi-Fi Router:
I put the new SIM card into the old PCMCIA card, which in turn goes inside the Phoebus. It takes a little fiddling, but we now have the Vodafone 3G signal always on and broadcast through WiFi to most rooms in the house. So now all the family can be connected and browsing at the same time and we’re all sharing download speeds of around 70 kbps quite comfortably.
I think I’ll be blogging a lot during this trip.