Video for two very cool projects out of the New Media Medicine group at the MIT Media Lab. And some excellent acting by my friend Nicole Prowell.
Wednesday, April 29, 2009
Wednesday, April 22, 2009
Tuesday, April 14, 2009
G.A. Paleologo’s explained in well in his paper paper. He illustrates the phenomena with a simple example. Imagine a customer whose demand oscillates between 5 and 10 service units per day, with an average of 7.5. If the customer were to build their own computing system, they would need 10 service units per day to meet the peak demand. The average utilization of the system is 7.5/10, or 75%. If there are 8 customers running the same system with the same demand profile, a utility can aggregate them. The total demand would be smoothed, and the capacity required would be 66, to serve an average demand of 60. The average utilization is 60/66, or 91%, a 16% gain. (Paleologo, 2004)
In modeling businesses that do have variations, there will be a gamut of profiles. Obviously, a relatively established business will differ from a new business (for example, a venture-backed startup). In stochastic modeling, the potential large variation in demand that goes hand-in-hand with some of the dynamics of the Internet must be taken into account. Established businesses, as well as overall aggregate demand, will have some cyclical profile to the demand curves.
Customer Demand Variation
Joe Weinman suggests a few other customer profiles on his ComplexModels.com website that can help smooth out demand. Joe is one of the best thinkers on this topic and I recommend you read his work. If nothing out, check out the 10 Laws of Cloudonomics article at GigaOM.
Event Demand: Computer power providers with extra capacity can single out event demand. Examples are a concert, a one-time promotion or perhaps an annual event. These users should have a relatively high willingness to pay, since it makes little sense to deploy a large scale hardware solution for a single event.
Constant Demand Profiles: A substantial portion of the demand for computing services will have constant demand profiles without the peaks and valleys of typical business users. These users include bioinformatics processing and other scientific simulations that will run around the clock. Sellers of utility computing services would do well to segment these customers out and offer them lower prices. First off, since their demand is easily forecast and stable, the value proposition of being able to smooth out demand peaks does not apply to these customers.
Flexible Demand: One other offshoot is that enterprises that can design their systems so that their demand for computer power is flexible should get better pricing as the economics work out. I think CTO should be thinking about how to do this. For instance, batch jobs that are not time sensitive can be run for cheaper at 3 AM than if they are processed constantly through the day. If you are running millions of transactions, this could save your company a lot of money. Just another idea to create value.
Co-location is important for software projects: Communication is essential for integration. Lotus made a mistake putting its Iris group, essential to its strategy 25 miles away in Westford. That slowed integration speed and created two separate corporate cultures that didn’t communicate well.
“Empowerment is a zero sum game”: If you empower someone, you’re likely taking power away from someone else. So think about who you want to have control.
Innovation-focused spinouts must be structured properly: Many companies these days are using spinouts to innovate. The thought process is that creating these small entrepreneurial shops permits quicker innovation. However, with Iris, Lotus did not get the incentive and cultural structure right to meet their goals. The organization needed innovation, but it needed to be integrated with their existing products. Setting up a separate company in a separate location did not fit that goal.
Being evil can be a business model: Several of the industry veterans who were in the class pointed out how effective Computer Associates was in acquiring software companies whose clients were locked in. CA would then cut costs and treat these clients terribly to improve margins, but since the clients were locked in.
John Landry Biography
Monday, April 13, 2009
Joe Weinman's 10 laws of the economics of cloud computing. Joe is really one of the best thinkers that I have found on this topic.
For more reading, check out my post from awhile back on the cost structure of running a cloud.
I attended and enjoyed this talk on how to create innovative talks by Sung Park from Umagination Labs. Check it out if you have a few minutes.
Umagination Labs: Innovation Techniques presentation from nextlab on Vimeo.
Tuesday, April 7, 2009
- Use a non-approval strategy if the offer is not even a consideration: No negotiations or contact with the other party. There is one issue with this strategy - it may open you up to a lawsuit if shareholders feel you are not representing their best interests and ignoring an offer that offers substantial value.
- Prepare to communicate to your shareholders how you will create more value: If it goes to the shareholders, you must be able to persuade them that you can increase the share price more if they vote for you to retain control
- Provide clear guidance to your negotiating team: Executing on a strategy like non-approval requires clear instructions from the top down on what exactly to say and do.
- Work to increase stock price: Focus on operations, merge business units if necessary - this makes it harder for shareholders not to support you, and more expensive for the potential acqurier to buy you.
- Poison pills aren't easy: They require shareholder approval and this is not easy.
- Take advantage of your corporate structure and classification: State Street was and still is a Massachusetts Commonwealth bank, meaning state banking commission must approve any acquisition. This means that the hostile acquisition must have material benefit to the residents of these state to be approved. State Street was and still is one of the biggest and best employers in Massachusetts, with an 85% university educated workforce. The state wouldn't let go of these jobs without a big fight. A great lawyer can be of great value in understanding these types of issues.
- Prepare in advance for crisis: Take classes that prepare you for stressful situations, perform "war game" type simulations
- Get communications right: Carter and the State Street board had a small, expert communication firms manage all statements to make sure they were tuned perfectly.
- Set clear objectives for your organization: Everyone in the organization should know what they are working towards and why it is important for the organization to remain independent.
- Manage your board tightly: Carter received a tip that BNY was going to call their weakest board member and try to win him over and get him to speak up at the next board movement. Carter knew who the weak board member was and moved at the next meeting to quash any board dissent.
- Consensus management whenever possible with your top 25 managers: The challenge as a CEO is to know when to put your foot down and make a decision.
- Protect yourself from the beginning: With the NYSE, share ownership over a certain percent can only vote a half share (20% ownership can only have 10% of the voting rights)
- Set up a way of controlling rumors: State Street had a rumor control number that employees could call to find out whether they were something was real. This allowed management to deal with any heresay quickly.
- Your motivation as a CEO cannot just be money: Protecting your company and people should be one of your values. The MCI folks sold out to Bernie Ebbers when their stock was around $20 for a $38 offer. When you're a Fortune 500 CEO, it shouldn't be about the money.
- Life balance: It should be a three legged stool with a balance between work, family and a strong outside interest. The fourth leg can be religion for those who are into that. This is essential to be able to deal with the stress.
A veteran of mergers such as Chase Manhattan’s 1984 acquisition of Lincoln First Bank and a key player in State Street’s evolution into a global leader in the financial services industry, Carter has witnessed the challenges first-hand when a company grows more than six-fold under your watch.
As NYSE chairman, he is transforming the Exchange from a company with “85 percent market share in a product sold one way” to a company with an expanded product base and widened global reach. With characteristic understatement, he adds, “We are in a global industry.”
Monday, April 6, 2009
Friday, April 3, 2009
Thursday, April 2, 2009
Marina Hatsopolous, the founder and former CEO of Z Corporation, came to speak to our CEO Perspectives class today. Here are some of the lessons I gleaned from her.
- With pricing, what's big to you is not big to Fortune 500 companies. Don't focus on a $20,000 difference in the cost of a capital investment, but rather the way you add value.
- Additionally, don't apologize for being new. Again, focus on the value that your product generates for a customer.
- New products that change the process of how companies and people work require a lot of education. Sales cycles for these products will be longer than you expect, and the cost of building an educational work force is high.
- Cost of development for complex products will tend to be higher than you expect.
- The cost of development and manufacturing quoted to you by the scientist will tend to be lower by at least an order of magnitude. Marina was quoted $1,000 by the scientist for cost of materials, it costs closer to $15,000 to create the product.
- Understand how your technology is REALLY different. Z Corp discovered that it was really the chemistry of their powders that was really a differentiating factor.
- Key question: Can you exploit the window of opportunity within the life of your patent?
- Demo parts work better when you can use your clients products. Use custom marketing tactics whenever possible with new and innovative products.
Marina Hatsopolous Bio
Ms. Hatsopoulos was the Founding CEO of Z Corporation (www.zcorp.com) from 1994 through its successful sale in 2005. Z Corporation is a market leader in 3D Printing, a technology used to produce physical prototypes from design data at very low cost and high speed. At the time of sale Z Corporation had revenues of $30 million and a strong history of profitability. With 125 employees, Z Corporation was the technology leader and had reached a strong #2 in market share within its industry.
She is currently serving her fourth year on the Advisory Board of the Nantucket [technology] Conference and is also on the Board of Trustees of the Buckingham Browne & Nichols School in Cambridge, MA.
She was a Director of Contex Holding, the $100 million leading manufacturer of large-format scanners and software, from 2005-2007. Prior to that, as Chair of the Committee on Finance and Investment of the American Society of Mechanical Engineers (ASME), she oversaw the budgets and investments of this 120,000-member organization.
Ms. Hatsopoulos graduated with a B.A. in Pure Mathematics and a B.A. in Music from Brown University in 1987 (Phi Beta Kappa, Magna Cum Laude, Mathematics Prize, and Faculty Fellowship). She received her M.S. in Mechanical Engineering from MIT in 1993 (Sigma Xi).
Wednesday, April 1, 2009
Jim Foster, the Chairman, CEO and President of Charles River Laboratories came to our Managing Adversity class and talked to us about how his company dealt with a crisis at his company having to do with a contimination of one of their best selling products. I'm especially excited about this class - it's taught by two former CEOs, Howard Anderson and Peter Kurzina, and it fits into my training (I'm a Certified Business Continuity Planner).