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All posts by Dan Gordon

Disrupting the Disruptors

I’m not going to go into a long tutorial on Clay Christensen’s theory of disruptive technologies and disruptive innovations.  Wikipedia has a decent introduction which, above all, avoids the sin of calling jsut any new technology “disruptive”.

A true Christensenian disruptive technology is a technology inferior to the incumbent but “good enough” to suffice some corner of the market.  Gradually, the disruptive technologies bores from below and eventually the disruptee has to cede the whole market to the innovation.  Southwest Air disrupting the Uniteds and TWAs and Pan Ams of the world is a great example.

One big theme of discussions about disruptive technology is, in effect, “why the h**l did the market leader ‘allow’ themselves to be disrupted”?  Market leaders have it all: resources, customer traction, buzz.  Are they doomed to be disrupted?  Are there any that have fended off disruptive threats?  Is there a theory of “disrupting the disruptors”?

I don’t know if they are all disruptive, but one pattern of successful new product lines in established companies is what we might call the Stealthy Skunkworks.  An internal unit is set up to incubate the innovation, but

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More on Software Factories

In response to my blog on Software Factories a young commentator wrote me:

 

I think the thesis is spot on, with the caveat that another axis of value–besides cheaply and quickly produced–is quality.  Programming without errors is very hard.  Most domains are actually pretty tolerant of errors.  But I think there’s an opening for ‘premium quality’ software.  Galois Inc., by all accounts, is an example of this.

I would also like to see some examples.  The idea of software factories isn’t one that needs anything other than market forces to get off the ground.  So I think the burden is on [Dan Gordon] to prove: a) why such factories don’t exist yet, given the claimed advantages, and b) why doesn’t he go into that business and rake it in?

Final point: It seems like the people who write the dsl’s would have to know quite a bit about the domain they’re writing their dsl for, which would sort of obviate the benefits of breaking up the labor like that.  Language design is notoriously hard, especially when you won’t actually be using the language you write.

Final final point:  Lisp’s

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Software Factories

It’s been a while, I don’t know if “software factories” is still the name of the meme, but the idea is simple.

There are two ways to profitably make software: low wages or high productivity.  The reason the software business is flying from our sweet shores is that ROW has mastered the low-wage variant.  I quit developing software in 1997 because I realized that ROW software engineers who thought a tenth of my salary was good money were actually writing world-quality software.  Obviously that trend has continued.

Which leaves “high productivity” as our only option if we want to innovate and survive.  What is high-productivity software?

Ever since I’ve been in the business people have been convinced that productivity in software inheres in leaving the details to the computer.  High-level languages were invented so people didn’t have to write assembler.  4G languages were invented so people didn’t have to write high-level languages.  Declarative languages were invented so people didn’t have to go into means, only into ends (handy in political life, too, I would think).

The idea behind software factories, or domain-specific languages, is that there’s no such thing as

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Think Fast, Eat Fast

Back in the day I took part in a huge exercise in corporate futility when Intuit (makers of Quicken and QuickBooks), which had grown to perhaps seven or eight hundred employees, took two days off to go to the San Jose Convention Center, split into small groups, and try to come up with a bottom-up Mission Statement.

Now, there may be nothing more sterile than a group-generated mission statement.  The group process filters out anything but the most common-denominator, banal business chestnuts: “we are our people”; “we add value by serving our customers”; “we strive for excellence in everything”.  In the case of Intuit, we had had a corporate culture thanks to Scott Cook and others of the founding team that stressed “doing right by the customer”, making the software easier to use than a pencil, and so forth.  This was all lost in the torrent of groupthink and, when the final document emerged some months later, it was, IMHO, useless.

It had a section on Operating Values, which was probably the least useless section in the book.  One of them sticks with me today: “Think Fast Move Fast”.  It

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Do Track Me… But With a Little Bit of Style!

I read an article in the Washington Post today by Michael Rosenwald which took up a theme I blogged about earlier: at least half the problem with online advertisers is that when they track you they do such a crummy job of actually sending relevant ads and offers your way.

Imagine if you knew as much about me as “they” do: what sites I visit, what I do when I go there, what I buy online.  Don’t you think you could come up with some decent ideas about what to pitch to me?

Rosenwald tried to completely open up his preferences by going directly to ad network sites and checking and unchecking preferences: flowers, but not cars, gadgets but not cars.  Please, Lord, anything but cars!

His results?

There were, however, signs of relevancy. In my day-to-day surfing, I noticed a striking increase in the number of gadget and computer ads. I noticed flower ads. I noticed about a 20 percent decline in car ads. Did I also still see ads for beauty products? Yes. Did I also see ads for Goldman Sachs? Yes. Did those ads annoy me?

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Experimental Results on Privacy Regulation and Online Advertising

Great article in May 2011 CACM about actual experimental results on the effects of privacy regulation on online advertising effectiveness.

The authors did a non-trivial before-and-after analysis of online advertising take rates in Europe in the wake of the EU Privacy and Electronics Communications Directive (usually known as “the E-Privacy Directive”) and came to this conclusion:

We found that in Europe, after privacy protection was enacted, the difference in stated purchase intent between those who were exposed to ads and those who were not dropped by approximately 65%.  There was no such change for countries outside Europe.  In other words, online advertising becamse much less effective in Europe relative to elsewhere after the regulation was enacted.

Obviously there’s more to policy than guaranteeing ad effectiveness, but this is a stunning result and certainly adds fuel to the fire of the thoughtless-privacy-regulation-will-kill-the-goose-that-laid-the-golden-egg camp.

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New Forms of Private-Company Liquidity: Regulate or Orchestrate?

An oft-noted reason for lackluster venture returns is the lack of liquidity for private companies backed by venture capital.  For all kinds of reasons — regulatory, structural, madness-of-crowds — the IPO market for venture-backed startups has been essentially shut down for years.  Which means:

  • Valuations for companies that do exit are depressed becuase M&A buyers know there is not alternative
  • Companies need more capital to get to liquidity, which focuses investors on “certified” mega-hits rather than a broader range of innovation
  • Backers of venture capital firms shift their assets to less innovative but more lucrative asset classes, including (depressed) public stocks.

In the last two or three years a new form of liquidity for private companies has emerged, principally in the form of online marketplaces for private companies.  These companies — such as SharesPost and SecondMarket — are handling increasing volumes of transactions and, as importantly, providing another form of liquidity for private companies and their investors.  See the Q&A in Quora for some opinions about the scope and efficacy of these new media.

There are some ticklish regulatory issues with these exchanges, having to do with the gray

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Why use a top-down approach when a bottom-up one will do?

When I worked at the PricewaterhouseCoopers Global Technology Centre during the height of the Internet Bubble, we were regularly visited by what we called the “Invest in <Mumble>” delegations.  These were investment authority groups from cities, states, regions, provinces, and even the occasional Principality.  Their mission: to find out what orders to issue to get a Silicon Valley in their catchment area.

I recall one group who came from an EMEA city and were wondering how to approach the problem of siting a huge multimedia facility that they were planning.  They had a list with what my then-young kids would have called a “bazillion” criteria.  It was a super-sized list, a real top-down approach.

We asked them if there were existing multimedia firms in or around the city.  They said “yes”.  We asked them if they knew which pub or pubs were the watering holes for the troops from the existing firms.  They said “yes.”

Why didn’t they site the new multimedia center near those pubs, we asked?  Amazement.  Deep respect for the geniuses from the Tech Centre.  But what had we done except port the old story about the

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Hospital Billing: Out of the Middle Ages

No one who reads this blog needs to be reminded that the healthcare business cries out for innovation.  Hopefully the chaotic and strident forces pulling at the industry now will — in the magic Adam Smithian manner — somehow produce net positive forward change.  But not all the change is technological.

I recently went through elective surgery and was blown away by the — I can’t think of any other word for it — Medieval-ness — of the billing process.  I got one bill from the hospital for essentially my stay, one bill for each department in the hospital that had done a procedure, one bill from each of the professionals (above a certain level) who had done the procedures.  Each bill came with no indication that it was a part of the one procedure, the one hospitalization.  They came at different times.  And they dribbled in over the course of maybe 12 weeks (unless there are some I haven’t seen yet; of course there’s no “summary” or notion of an overall master account).

What other industry on Earth works this way?  Try to imagine buying a car like this:

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Virtual Currencies and the Laws of Economics

Read an article in the Communications of the ACM about “Social Games, Virtual Goods”.  I think unfortunately you have to pay to read that article unless you’re an ACM member, but the good news is it doesn’t say anything earthshattering except that online virtual currencies are not that different from “brick and mortar” ones.

I remember my first serious contact with virtual currencies.  My son was addicted to Worlds of Warcraft (WOW) years ago, a shoot-em-up game where your shooting is every so much more effective if you buy special weapons, charms, and poweres.  How do you buy them?  “Gold” is the virtual currency of WOW, and you earn gold by killing monsters.  In other words, you have to spend time in the WOW virtual world, and time costs you (non-virtual) money.

All straightforward: it’s like paying to go to a movie, except that the movie is immersive and you want to stay in it, for more and more $$.

Then I found out from my son — there was also an article in the New York Times about it around that time — that there were companies in

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