Market focussed or Internal Resource & Capabilities focussed?

How should you design your organizational strategy? Should it be market focussed fulfilling the market need so that whenever market trend changes, your organization needs to keep the pace to stay ahead in the game. Strategy Management Gurus (Robert Grant is one of my favourite strategy management writer) says that in the fast paced innovative world, it is utterly impossible to chase the ever changing market therefore organization should focus on internal Resources & Capabilities mode of organization strategy design.

For instance Google’s (there are many such organization, Google is just an example) Resources & Capabilities allows it to designs products and services which is based purely on what it can offer create rather than getting driven by market. Be it their PageRank technology or AdSense or other services, all has been possible due to skills and capabilities. Therefore it is not necessary that an organization should always focus on market to drive the strategy. However market definitely provides lot of input to validate whether an organization’s capabilities are in sync with what market can absorb/adapt or is it very futuristic that capabilities won’t work at present market trends. That’s why we see innovations failing because those are ahead of their time.

So somewhere there is a fine thread balancing the Market approach and an organization’s resources & capabilities. When this balance gets distorted, we see young and innovative companies displacing the traditional company (Old and mature) in every decades of industrialization. Example: Microsoft giving tough competition to IBM or recent success of Google or may be partial disturbance in Yahoo’s organization strategy model.

Should an organization continue to add resource & capabilities but what is the milestone to do so?

What are the criteria to add such resource & capabilities?

Can an organization survive without remaining market focussed?

So what is the secret of managing strategy in an ever changing market place?

This is a short and thought provoking analysis; I will continue my thoughts on this aspect. Do share your thoughts.

Orkut Vs. MySpace

Roger has an excellent post on Orkut Vs MySpace, I missed commenting on his prior article on same subject. Find more about his analysis in following posts.

http://prof.rogerkondrat.com/2006/11/02/answering-questions-asked-about-my-earlier-orkut-post/

http://prof.rogerkondrat.com/2006/11/01/orkut-the-undiscovered-country-or-is-it/

I think Orkut has an excellent strategy to not to become a hype substance and fad soon. Orkut has taken the traditional “get mature and capture market share route” thereby slowly and steadily making its way by allowing users to build strong community. For instance, I have got 10 request in a week to join in my college groups and other social groups in Orkut but None in MySpace. Why so? Why are my contacts all in Orkut, not in MySpace!! 🙂 I don’t know but my friend/social list includes contacts from US,India and UK and hey Canada too prominently.

But apart from the fact that Orkut is a big story in India having million of users and already killing some service provider ..did they kill Fropper, India’s dating and social networking site 😉 ?
Now coming back to MySpace Vs Orkut. MySpace is hero in USA but USA is fast moving market and it is tradition there to topple established player. May be Facebook is on the way or some other Social network. Whereas Orkut is Hero in Developing Countries like India and Brazil having massive user base. And the tradition in such developing countries : Once you are a Hero, you get praise for the life time 🙂 . And strategically if you can stay in market place longer without fading, you can travel either way East to West or vice-versa. Will MySpace user-base remain loyal in USA ? I don’t think so 100%.

Therefore forget all Alexa ranking, other statistics …simple formula for me is “the longer you have user with you, you remain/will be the leader”.

Every Intellectual property at Google’s doorstep?

To me sounds like Google is ready to buy any intellectual property they find useful for their stack. Now they bought JotSpot. I had thought that with Writely, it will be enough for Google to build their own Intellctual property around it and build a classic application. However it looks like every valuable Intellecutal propery is knocking Google’s door. What might be the reason?

I think Google is at the juncture where Microsoft was when it was building up stacks to launch Office suite buying from every possible solution provider to build Word, Excel or other Office products. Rather than spending huge R&D upfront to build such subsystems, they are getting pieces to stich them for the final product.

While writing this, I find readwriteweb aricle on Elephants and Evolution very interesting because it conveys that Google can’t do everything …therefore hold onto your intellectual property and go solo 🙂 Can you?

Google Co-op will seal fate of few Vertical Search engines

Google Co-op will seal fate of few Vertical Search engines
Have you heard about Google Co-op? You can build your own vertical search engine on top of Google using Google Co-Op !!!!!
Though this is released in May but now it has gone in full public mode and anybody can access this co-op partner program from Google.

Now think for a second what will happen to those vertical search engines having invested millions in building their own solutions!!! I think some of them are doomed unless they have value added service in addition to the vertical search. Let’s take example of Vertical Job sites (avoiding naming some of them ;), some of them are plain vanilla ones without any value addition. Now with Google Co-op anybody (with little higher technical knowledge) can launch a vertical job search engine in few days time. And on top they can put the investment completely to value addition services making mockery of the independent vertical search engines (non-Google ones)!!!

Remember: There is always room for innovations and in my example I am taking cases of those which are dummy vertical search engines)

For me now the real Vertical Search Engine war has begun. Also I think with this, Google is combining social search with vertical flavour and allowing community to mushroom around it.

Google has played the check step and launching the community soldier to play checkmate step. 🙂

Why Asian Startup companies can’t create revolution to topple established players?

Startup in USA and many other western countries are known for their persuasive breakthroughs bringing radical changes to customer’s need and preference and thereby causing massive impact to the established players. Recent example being Skype(causing trouble to established telcos), Jobster (causing trouble to Monster), MySpace (displaced Friendster), many other such examples.

However if you analyse Asian market, once a player gets established, it is fairly difficult for a Startup company to topple them. Why so?

I don’t know the exact answer, but yes I have few suggestions that may be some of the following factors are the reason behind such phenomena. Note – These factors are generalized but there are exceptions

1. Asian market has more loyal customers attached to an old service provider and they don’t try new service provider ?
2. Fear of failure, therefore Startup companies are very reluctant to try something different ?
3. Because Asian culture and mindset in general is “survival” type ?
4. Lack of funding or investment support to make that BIG decision ?
5. More Asians are follower type than leader type?

There can be more…

McKinsey interview with Narayana Murthy

The Quarterly: But the boom in offshoring has also inspired US-based services companies such as Accenture to open up operations in India—essentially to compete with you on your own terms in your own backyard. What will this mean for Infosys?

Narayana Murthy: I think we’re well positioned against the big multinational IT services companies, such as Accenture, IBM Global Services, and EDS. Their customers now have a greater awareness that Indian companies can offer very high-quality application-development and IT-consulting services at much lower cost.

But their coming here doesn’t change the basic economic difference between their businesses and ours. Typically, in the application-development work we would do for an average client, about 70 percent of the effort is done in India or another cost-competitive country. Our general and administrative expenses are centered primarily in India and are about 7.5 percent of revenues today. By contrast, the US companies that are our competitors, despite a strong presence in a country like India, by and large have the majority of their workforce in the United States or in the local market. It is not easy to let go of that workforce. So the economics differ.

Also, it’s not easy for the multinationals to create a workforce equal to ours in a country like India. The multinationals have to compete here for the talent and then train the people. There are many processes that have to be built up over a period of time to do that effectively. And of course, just having talented employees trained to deliver services is not enough.

It’s not just a question of renting a building and hiring a few people and then saying to customers, “The shop is open.

Web 2.0 : Industry Life Cycle

Web2.0 is the latest driving force for new innovation in the web, every day we see many new social media, products, solutions claiming to be web 2.0!! What is web2.0, who are the true web 2.0, can web 2.0 sustain longer “Industry life cycle”, what are the lessons thet we can learn and apply to build a successful web 2.0 product solution. This article explores the above questions in the following section.

Web 2.0 : As Wikipedia defines : Web2.0 is the second generation of internet based services that let people collaborate and share information online in a new way – such as social networking sites, wikis, communication tools and folksonomies.

Some of the web2.0 principles :

  • Web as platform, reach out to the entire web not just the center.
  • Harnessing collective intelligence, turning the web into a kind of global brain.
  • Data is the next Intel inside.
  • End of Software release cycle, i.e. Operations must become a core competency and Users must be treated as co-developers, in a reflection of open source development practices.
  • Lightweight programming models to build loosely coupled systems and allow syndication.
  • Software above the level of a single device i.e. not limited to any specific platform, technology and devices.
  • Rich user experience i.e. enabling user to use web as a medium to collaborate, classify and editing,etc.

Core Competencies of Web 2.0 Companies:

  • Services, not packaged software, with cost-effective scalability.
  • Control over unique, hard-to-recreate data sources that get richer as more people use them.
  • Trusting users as co-developers.
  • Harnessing collective intelligence.
  • Leveraging the long tail through customer self-service.
  • Software above the level of a single device.
  • Lightweight user interfaces, development models, AND business models.

Some of web 2.0 companies:
Google, Flickr, Wikipedia, Yahoo, YouTube …many others

Let’s apply the “Industry Life Cycle” stages to web2.0.

Many of Web2.0 innovations are definitely at the introduction stage.

Technology solutions like small scale CMS or Blogging application like TypePad, WordPress, Drupal, XOOPS and many others are enabling web 2.0 developments. However innovation is at its peak with various tools and technologies being introduced to take web 2.0 to its nth dimension. For instance rich internet application technology like OpenLaszlo,Flex, Google GWT, Ajax, social media are propelling web2.0.

Industry Life Cycle Introduction Stage:
During web1.0, market penetration was difficult because web1.0 companies relied too much on adding functionalities without involving the end user’s preference and participation in evolving a solution. It was built on more hype than substance.User experience was not taken into consideration.Process innovation was rarely part of solution.
With web2.0, the barrier to market entry is lowest!! If we see the success of YouTube or Flickr, they were not backed my multi-million VC fund or mega advertisement to reach to the end user. They followed the classic “allow user to participate and be co-developers of the solution and end user of the service”.
Also developing web2.0 based solution is not expensive because of availability of open source, community support software and evolving solution rather than one mammoth final solution. Web2.0 solution is designed based on principle like any user(IT savvy or not) must able to understand, participate and experience web. This makes web2.0 adaptive yet persuasive.
So are we seeing that the traditional industry life cycle “Introduction stage” principle failing here!!! I think so or the least “Introduction stage” stage has partially merged into Growth stage for basic web2.0 solutions . However if the solution has innovative process, patented ideas, I think the product will have an introduction stage.

If your idea/product has a definitive introduction stage due to innovation/patented ideas, process innovation, key differentiator, you will successfully lay out an entry barrier and continue to introduce persuasive breakthroughs in market place. Google is the leading example.

Let’s explore web2.0 in growth stage, we will take example of YouTube for this.
Growth Stage :
Accelerating market penetration
Standardized product technology
Mass market

YouTube was founded in February, 2005 by Chad Hurley, Steve Chen, and Jawed Karim, who were all early employees of PayPal.
On July 16, 2006, YouTube announced that 100 million clips are watched on YouTube every day, YouTube is currently one of the fastest-growing websites on the World Wide Web, and is ranked as the 15th most popular website on Alexa, far outpacing even MySpace’s growth.
An article in the New York Post suggested on July 23, 2006 that YouTube may be worth anywhere from $600 million to $1 billion. (References : Wikipedia)

The above snippet on YouTube proves that it has quickly transitioned to Growth stage! The question is whether YouTube’s business model has been designed(or getting designed) to penetrate market not only in Europe or USA but also extend to other parts of the world. The threat to YouTube is while it’s expanding, there are copy-cat solutions from competitors!! However as web2.0 philosophy says : Harnessing collective intelligence, turning the web into a kind of global brain, if YouTube continues to innovate and expand the community to other continents, I think it will have advantage over copy-cat solutions and will lead the market growth.
But wait! Don’t you think web2.0 also allows other copy-cat solution to create solution and penetrate market at the same speed as YouTube! It does, as we saw introduction stage has become almost negligible due to least cost to develop (due to open source software) and less entry barrier.
So welcome to world of doom unless your web2.0 solution have substantial business model to innovate, generate and continue be the market leader.

Don’t copy cat solution unless you have a business model. What is important for web2.0 is continuation of market penetration and quick expansion of solution to other parts of the world. Because unless your solution has that “innovative” angle, you will see many copy-cat solutions in record time.

Maturity stage and Decline stage, I can think Friendster http://www.friendster.com/ which was replaced by the arrival of MySpace.(Friendster still making ways back)
Factors like knowledgeable customers, quest for technological improvements and lack of community participation nature made Friendster decline. Does this answer to the critical question we often see in Web 2.0 communities…how long before some bubble burst?
I think we are seeing high innovation and introduction of products in web, however not all of them have business plans or uniqueness which can’t be duplicated, therefore only those will remain successful who keep introducing leading advantages through technology, process, product differentiation and driving the future.

This is an attempt to apply traditional industry life cycle to web2.0 and analyse the pattern for introducing robust web2.0 solutions in market place and also continue to lead the market.
Any thoughts, kindly share.

References :
Contemporary Strategy Analysis by Robert M Gran
Strategic Alliances – HBR
O’Reilly
Wikipedia
http://www.danah.org/papers/FriendsterMySpaceEssay.html