Shazeeye's Blog Thoughts on User Experience, Technology and Business

31Oct/110

Growth Strategies and Managing Differences in a Global Economy

As more businesses become global companies face challenges in balancing local conditions with economies of scale. The AAA framework by Pankaj Ghemawat is one way to address this challenge. The three A's stand for Adaptation, Aggregation and Arbitrage. Adaptation boosts revenue and market share by maximizing a firm's local presence such as Mc Donald's in India has adapted its menu to suit Indian tastes by providing the McAloo Tikki burger (spicy potato burger). Aggregation standardizes the firm's product or service offerings by grouping together production processes. Apple manufactures its products in China and markets its products in the US.  Arbitrage exploits the differences between regional markets such as call centers in India, factories in China and retail stores in Western Europe.

A firm can choose one of these strategies or a combination. It can also shift strategies at different points in its evolution. IBM started with the adaptation strategy by setting up mini IBMs in target countries and adapting to local needs. In the 1980s it transformed to a regional dependent organization thus shifting to the aggregation strategy. Most recently it shifted to the arbitrage strategy by exploiting wage differentials in India and increasing its headcount in India.

Which globalization option does a firm choose?

In making this decision managers can use the AAA triangle to make a decision. Firms that do a lot of advertising will need to adapt to the local market and lean more towards the adaptation strategy. Those that do a lot of R&D will use the aggregation strategy and firms that are labor intensive will use the arbitrage strategy. Though firms can use a matrix approach and have two strategies in place employing all three has its constraints in terms of limited managerial capacity and a confused culture. It is important to ensure the strategy is a good organizational fit. A firm could also get external support to integrate across borders. IBM has many vendors and joint ventures to help with its R&D and manufacturing. It is also critical to know when not to integrate as this minimizes points of contact and friction. Choosing to use or not use these strategies can help or hinder a  firm's global growth plans.

30Jun/110

Customer Acquisition Lessons in Internet Retailing

David Bell, Professor of Marketing at Wharton, gave an excellent seminar (download David Bell's presentation) last evening on the most important factors in internet retailing. He summarized four of his recent papers in this space and most of his research stems from Wharton's startups specifically diapers.com and Netgrocer.com. His online customer acquisition lessons are summarized below.

1. Social Contagion states that communication and observation affects online demand evolution. Traditional brick and mortar retailers are limited by their small trading areas. It is more likely for you to visit your nearest grocery store whereas the internet is unlimited but this also means that you don't know where your customer is located.  One of the main findings of social contagion (as seen in image on left) is that your new customers will be located near your existing customers. Communication and observation are key in social contagion. This is where word of mouth and visual differentiation are key. For example, Warby Parker, a Wharton startup, makes prescription glasses for $95  compared to the average competitor price of $500. They have visually differentiated themselves from the competition by making their frames a distinct color (blue, orange, turquoise and more) and a classic vintage-inspired shape (thicker frames). As for word of mouth they donate a pair of glasses to someone in need every time you buy a pair.

2. Spatial Structure follows a pattern of proximity and similarity. This finding states that social and demographic proximity and similarity can drive online sales. For example, an interpersonal property or similarity such as ethnicity could drive sales of an online product that started in Chicago and then moved to LA and then Springfield through word of mouth. Internet retailers first grow through physical proximity and later through similarity among distant locations. Thus internet retailers should target sparse locations with geographically diverse demand. For example, target zip codes that are not close to each other and not socially or demographically similar but have a good number of target customers.

3. Preference Isolation brings shoppers online and explains geographic breakdown of online brand demand. The image on the right explains this concept. Consider 2 markets for diapers- Market 1 with 200 people of which 100 have babies (50% penetration) and Market 2 with 2000 people of which 100 have babies (5% penetration). Market 2 is the preference (in this case diapers) minority and the market that an online retailer should target. The primary reason for internet retailers to target Market 2 is that the brick and mortar stores in Market 1 will stock 50% of their shelf space with various diaper brands (pampers, huggies and even niche brands such as 7th generation) so it is easy for people in this market to access these diapers but Market 2 is going to allocate only 5% of their shelf space thus carrying the top selling brand only (say Pampers) so customers are more     likely to look online for  the other brands especially niche brands thus driving online sales.

4. Acquisition Modes vary in efficacy according to location characteristics. Different acquisition methods (magazines, online WOM, offline WOM, online search) get you different customers and are complementary as seen from the image on the right. Word-of-mouth (WOM) acquisitions  benefit from physical proximity among targets (offline WOM—contagion; online WOM—connectivity). Use magazines for sparsely populated markets and WOM for densely populated markets.

Many other factors such as taxes, shipping cost and type of product matter in customer acquisition in internet retailing but have not been studied in this research.

30Apr/110

UC Berkeley Business Plan Competition: Part 2 of 2

You can read about the first four finalists at the UC Berkeley Business Plan Competition here.

5. Picatcha: is a picture-based captcha that uses images of brands instead of text thus getting ad revenue too. Captchas are text messages to distinguish humans from computers to prevent spam and improve security. They are used on blogs, contact forms, e-commerce sites, etc. Picatcha improves usability and security over current captchas. It aims to recapture the 3-18% new users that leave a website due to a frustrating captcha experience and prevent the 60% hacked captchas.

6. Intimal Solutions: cures deeply embedded ulcers on feet and legs that can't be treated by substitute technologies. This minimally invasive method is a relief to substitutes - surgery or tight compression bandages that may not help and the problem could recur. Intimal Solutions tested a group of patients and found that the technology heals 84% ulcers in 25 weeks and the problem does not recur. They have already applied for 3 patents and received insurance codes to bill to.

7. Easy Parking Spot: is an online parking marketplace. It helps small businesses, individuals, schools, churches, etc. monetize their parking spots by posting their parking availability and cost on this website as well as placing physical signs in front of their parking spaces to help with branding. Using a mobile app you can identify a parking spot near your location and reserve it or recharge it with this app without having to go to the parking meter to add quarters.

8. Gram Power: is a pay-as-you-go energy storage system to improve energy accessibility in the $11.6B rural energy market in India and Africa. This prepaid plan is activated by a dongle and can help entrepreneurs and individuals get access to electricity for a minimal cost. This electricity rental plan will be distributed and managed by sales managers.

Competition Winners

Grand Prize ($20,000): Intimal Solutions

People's Choice Award ($5000): Imprint Energy

Best Elevator Pitch ($1000): Inserogen

Semifinal track winners:

IT & Web: Kopo Kopo and Picatcha competed and Kopo Kopo won

Energy & Clean Tech: Imprint Energy and Gram Power competed and Imprint Energy won

Life sciences: Cardio Paint and Intimal Solutions competed and Intimal Solutions won

Products & Services: Axis and Easy Parking Spot competed and Axis won

30Apr/110

UC Berkeley Business Plan Competition: Part 1 of 2

I went to the UC Berkeley annual business plan competition on Friday evening. It was insightful and impressive. Eight finalists were chosen from 35 semi finalists by a panel of eight judges. Eight finalists were given 15 minutes each to present their ideas and the remaining 27 semi finalists who didn't make it to the final round were given 1 minute to give an elevator pitch. Finalists belonged to one of four tracks - IT & Web, Energy & Clean Tech, Life sciences, Products & Services. There were 2 finalists in each track. Three prizes were distributed at the end of the evening: People's Choice Award ($5000), Best Elevator Pitch ($1000) and Grand Prize ($20,000).

To get details on the semi finalists please read through the UC Berkeley Business Plan Brochure 2011 (pages 17-24). Best Elevator Pitch went to Inserogen, a biotech company that uses non-transgenic tobacco plants as protein bio factories thus accelerating vaccine development.

The eight finalists had the following components in their presentation: identifying an unmet need and solving it well, a substantial and growing market size, a strong team, proof of concept, a robust revenue model/financial analysis, an integrative production and distribution strategy and strong positioning through competitive analysis. The eight finalists were:

1. Kopo Kopo: provides financial services to emerging markets via text messages through mobile phones at approximately $200/month ($100-$400 monthly subscription fee). Kopo Kopo has already partnered with 2 financial institutions (profit shown in image on right) in Kenya to provide the poor access to financial services. They offer a SaaS platform to financial institutions to connect mobile money networks to a Management of Information Systems (MIS). They plan to target this 1.1B market by targeting the 30M small and medium sized Sub Saharan businesses in Africa.

2. Imprint Energy: This was my favorite and I voted for it in the People Choice Award category. Imprint Energy makes rechargeable batteries that can be printed and attached to shoes, clothing, etc.  These customizable, paper thin, longer lasting batteries consist of 5 layers and Imprint Energy has partnered with many companies for its development and manufacturing as seen below. The competitive landscape has few players and Imprint Energy batteries last longer, are rechargeable, are easier to manufacture and are more rugged and safer compared to its competitors.

3. Axis: makes a protective vest that protects athletes from spinal and bodily injuries through advanced sports injury prevention technology. It specifically protects the neck and buttocks in addition to the back as those are the most susceptible parts during an injury. It uses a gel technology which hardens on impact and protects the athlete. Axis plans to start with the equestrian market and then expand to other high risk sports.

4. Cardio Paint: provides heart attack diagnosis and improves risk stratification with a peptide-based injectable. 5M patients visit emergency rooms annually for chest pains of which 60% are told to wait and see what happens. Cardio Paint addresses problem by improving risk stratification through an injectible that accumulates radioisotopes (as seen in the rat's tail below) at a blood clot and better diagnose heart attacks at half the cost and one-tenth of the time.

You can read about the remaining 4 finalists here.

31Mar/116

Trends in Web 2.0: Part 1 of 2

I spent March 29-31 at Web 2.0 Expo hosted at the beautiful Moscone Center in San Francisco. I would like to share my learnings on trends in Web 2.0.

1. Six Web Trends: Kevin Kelly of Wired Magazine identified six web trends that are here to stay: screening, interacting, sharing, flowing, accessing (not owning) and generating (not copying).

Screening refers to screens/interfaces that will dominate areas we never thought of before. For example, virtual phone screens that could be viewed on the palm of our hand and spectacles that could double up as information interfaces. Kevin predicts that one day there will be a single screen for everything - phone, computer, entertainment, navigation, etc.

Interacting refers to the use of modes other than voice, haptic and/or text in communicating with technology. Some other modes could be gestural and eyetracking. He predicts interfaces and humans to be two way communication channels and interfaces will use human input to adapt their layouts to better cater to human needs.

Sharing is going to exponentially grow in the future and will not be limited to sharing information on sleep patterns, locations, health records, etc.

Flowing refers to information in real time. Humans will plug into real time information streams as opposed to static files/pages. Tags will dominate over folders and cloud based services will dominate over web/desktop. Accessing is renting and not owning.  For example, Zipcar, Netflix, renting books, etc. This eliminates maintenance and inventory.

Generating is using operatives that can't be copied. For example, Amazon is in the business of findability and insight (reviews/ratings) not products which can be easily copied. Other generatives could be authentication, personalization, embodiment (see people perform), interpretation (learn how to use) and attention.

Basically, these six verbs describe the future of the web and the money will flow wherever the attention flows.

2. Online Games will be bigger in the future but designing them well is the difference between success and failure. The following core concepts from Amy Jo Kim define 'game thinking':

  1. Know who’s playing – design for their social style such as collaborative (Farmville), competitive or exploratory (ModCloth-online shopping)
  2. Build a system that’s easy to learn and hard to master
  3. Build fun/pleasure/satisfaction into your core activity loop
  4. Use Progress Mechanics to “light the way” towards learning and mastery. Gamers can be novices, regulars or enthusiasts and motivation (badges) for novices, challenges for regulars and exclusivity/recognition for enthusiasts are used as progressive mechanisms
  5. Design for Onboarding, Habit-Building, and Elder Game
  6. As players progress, unlock greater challenges, customization and privileges
  7. Give players real power via stats, voting, earned roles, & crowd-sourcing

3. User Experience differentiates your company from another: For example among the online travel sites hipmunk looks at a factor called Agony which is a combination of price, duration and number of stops which truly captures a traveler's experience.

You can continue reading the other trends here.

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