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August 30, 2005
Different forms of innovation
Dev Patnaik has a great metaphor for needs-driven innovation in his Business Week piece Needs Solutions = Innovation:
In the words of one designer at Ford Motor (F), "I keep begging the marketing guys: Don't tell me you want a bridge. Show me the canyon you want to cross."He also has a good example of the different forms of innovation:
Let's say you're looking for ways to improve store efficiency, and you observe that the clerk is having trouble getting boxes from a high shelf. You conclude that the clerk needs a ladder. A ladder certainly works, but what if you frame it this way, asking, What does the clerk need to get boxes from a high shelf? A ladder is but one of several possible solutions. Lowering the shelves and rearranging the boxes is another. You may find many more. Reaching a box is a need. Getting a ladder is a solution.My commentary: a ladder is a technological solution; lowering the shelves and rearranging the boxes is an organizational solution.
We don't always need technological solutions.
Nor do we necessarily need to solve the immediate problem. One should first ask why we need to cross the canyon. If it is simply to gather firewood, then another solution might be needed. If it is on the road to El Dorado, then let's think about bridges.
I would also warn against two narrow a view of needs-driven innovation. I've long agreed with Prahalad & Hamel that innovation came from "infusing products irresistible functionality or, better yet, creating products that customers need but have not yet even imagined." But sometimes it takes the creation of something totally new before people can envision how it can be applied to meet yet unimagined needs. Innovation, as Patnaik points out, is a robust interplay of new ideas (technological and non-technological) and needs.
Companies who undertstand this succeed. And countries who gear their policies to that reality prosper. Those who emphasis one part of the equation over another don't.
This is why we need to insure we have a balanced innovation policy in the US if we are to succeed in the I-Cubed Economy.
Posted by Ken Jarboe at 11:52 AM | Comments (0) | TrackBack
August 29, 2005
Sad state of statistics
A story in this morning's Washington Post ("Measuring the Economy May Not Be as Simple as 1, 2, 3") gives us a heads-up on the latest statistical controversy:
The Census Bureau tomorrow will release the latest statistics on poverty in the United States, the income level of an average household and the number of Americans still lacking health insurance.
Don't believe the numbers.
A growing chorus of experts and politicians is raising questions about the data that frame Americans' understanding of their nation's well-being. From poverty levels to health insurance, inflation to personal savings, widely accepted statistics are overstating some problems and understating others, miscounting people, and sending policymakers down blind alleys.
One example of a blind alley:
When Congress returns in September, the House Ways and Means Committee will try to put together legislation to raise personal savings through tax credits and other incentives. But according to David Malpass, chief global economist at Bear Stearns & Co., the United States is accumulating savings hand over fist. The country's pool of liquid savings grew by $1.5 trillion last year, he said, and U.S. households remain the world's largest creditor, with $37 trillion in financial assets.
The problem, Malpass said, is that the official savings rate measure does not consider economic gains from patents, innovation, capital gains or land appreciation.
In part, this problem (especially capital gains and land appreciation) can be solved by the movement in accounting to switch from historical costs to fair market value. While this will add realism to the numbers (since current worth is usually very different from cost), it will also add volatility since cost is a fixed number but current value fluctuates - as anyone who has watched the day-by-day and minute-by-minute gyrations of their 401(k) knows.
Accounting for intangibles (patents, innovation) has others difficulties, as outlined in our white paper Reporting Intangibles: A Hard Look at Improving Business Information in the US (see earlier posting for a summary). Given the problems with valuing some of the "softer" intangibles, such as leadership and an innovative culture, I doubt that we will ever be able to include all intangibles in the economic statistics. However, a certain portion of "intangible goods" such as patents can be assigned a value and therefore deserve to included.
It will not, however, be easy. Current valuations of patents are not necessarily very good (witness the controversy over suspected inflation of the value of patent donations). And patents are one of the most concrete types of intangibles.
Thus, bringing our economic statistics into the I-Cubed Economy will be daunting task - but do-able. In the meantime, that the Post's advice: don't believe the numbers. Or, better yet, take them with a grain of salt.
FYI - for Paul Krugman's take on the irrelevancy of many economic statistics to current economic reality, see Summer of Our Discontent - New York Times.
Posted by Ken Jarboe at 08:36 AM | Comments (0) | TrackBack
August 19, 2005
Hollywood's jurisdictional advantage - and "sticky jobs"
According to the Los Angeles Times, "Movies, Shmovies -- TV's Taking Over L.A.", Hollywood is experiencing the
biggest boom ever in Los Angeles television production, one that is rapidly turning Tinseltown into a TV town. While Hollywood's nomadic film business has gravitated toward cheaper U.S. and foreign locales, television production has become the bedrock of the Los Angeles entertainment economy.The reason why?
With its production infrastructure and proximity to talent, Los Angeles is the location of choice. Stars working on a regular series prefer to stay close to home, and producers want to be near writers who may be needed for quick rewrites.
In other words, the TV production process is just enough different from the movie production process to create a continued jurisdictional advantage for Hollywood. It is that one difference - the on-going production process - that makes L.A. a more desirable location.
This is a perfect example of where a geographically-connected network is required in the production process - as opposed to a geographically-indifferent process.
Likewise, this slight difference in the production process creates a set of geographically "sticky" jobs: actors want to work close to where they live, production personnel need to be near where the actors are living, writers need to be nearby, etc.
We need to understand more about how these small differences in the prodcution process create "sticky" jobs.
Interestingly, California state political leaders seem to be responding to the decline in movie production rather than the rise in TV production. According to the New York Times:
California Considers Tax Breaks for Filming - New York Times
For the first time since a handful of immigrant New Yorkers moved west to Hollywood seeking cheap land for their movie studios, so many motion pictures are being made outside California that state leaders are poised to enact subsidies to keep productions from leaving.
The state's dominance in entertainment production has been eroding for years, as filmmakers and television producers gobbled up generous tax incentives in Louisiana, New Mexico, Illinois and other states, and pursued tax breaks, cheaper labor and favorable exchange rates as far away as Canada, Eastern Europe and Asia.
Of course, the movie studios are all in favor of subsidies. And they are used to getting them from other states. As the NY Times story goes on to relate:
Canada provides a 16 percent refundable tax credit on labor costs, with no cap; the provinces of Ontario and British Columbia add 18 percent more, while Manitoba offers a whopping 45 percent credit for labor costs, according to the California Film Commission.Why does this all sound familiar? States try to lure production to their locality with tax breaks. As jurisdictional advantage shifts (in part due to the actions of others to build up their own jurisdictional advantage and localized assets; in part due to the changing nature of the production process), localities try to retain the industry through direct subsidies -- rather than either shift to the new area of advantage or re-build the local assets that gave them the advantage in the first place.
In the United States, 14 states have passed or expanded incentives for production this year alone.
But Louisiana remains the leader in enticements to the film and television industry. The state offers a tax credit of 15 percent of a production's total costs, even it is only partly shot in Louisiana, and an additional 20 percent of a film's in-state payroll. A revised credit, which takes effect in January, will apply only to spending in Louisiana but will rise to 25 percent of spending, plus 10 percent of payroll.
Smokestack chasing comes to the creative industries!
As Maryann Feldman pointed out in her paper and presentation to Athena Alliance's policy forum, Constructing Jurisdictional Advantage, the use of local tax incentives to smokestack chase is ultimately a losing game. It becomes a race to the bottom, since everyone can give a tax break. No lasting jurisdictional advantage is created.
There are other, more productive ways to follow a low-cost strategy, Feldman has argued. These would include actions that permanently lower the cost of going business in a location - rather than temporary subsidies to a particular business.
Better yet is what she calls a strategy of "deliberately constructing jurisdictional advantage by building on existing, not easily replicated resources and complementing private sector activities."
I have long maintained that since the resources needed for success in the I-Cubed Economy include a talented workforce and a knowledge-sharing, innovation infrastructure, localities would do much better to invest in these activities. Subsidies (tax breaks or direct subsidies) may under limited circumstances (and I stress, "limited") be beneficial in helping foster an agglomeration of localized knowledge assets (often mistakenly referred to as a "cluster"). Those circumstance are when a particular asset is missing or underdeveloped. But these types of subsidies are best seen as strategic investments - and must be undertaken with forethought and planning.
Otherwise, subsidies simply contribute to a footloose environment. AS Feldman remarks, "these types of operations are frequently the first to be closed when the cost structure changes."
Given the boom in TV production in LA, maybe the politicians can resist the temptation to take the easy step of providing tax breaks. I wholehearted understand their concern and support their goals of preserving middle-class jobs. I simply think the means they are using to reach that goal will ultimately be unproductive.
Posted by Ken Jarboe at 09:38 AM | Comments (0) | TrackBack
August 17, 2005
Reinventing locational advantage - the case of Cornwall
One key to economic success of a location is its ability to re-invent its competitive advantage. New York City, Boston and Silicon Valley are all used as example of places that have consistently re-invented themselves to adapt to changing economics. Now add Cornwall, England to that list, according to the New York Times These Days Surf's Up on Cornwall's Northern Coast:
Cornwall, which was once celebrated for its more elderly pursuits - Cornish teas, watercolor galleries, coastal walks and seaside gardens - is now considered one of the hip places to visit in England, no matter what your age. With numerous beaches for all levels of surfing, an outpost of the modern Tate Gallery in St. Ives, and the environmentally avant-garde Eden Project in St. Austell, Cornwall is increasingly becoming a popular family destination, particularly for those families with painfully trendy teenagers.
Posted by Ken Jarboe at 04:48 PM | Comments (0) | TrackBack
Uneducated
A scary statement:
Only about half of this year's high school graduates have the reading skills they need to succeed in college, and even fewer are prepared for college-level science and math courses, according to a yearly report from ACT, which produces one of the nation's leading college admissions tests.(from Many Going to College Aren't Ready, Report Finds - New York Times)
The report, based on scores of the 2005 high school graduates who took the exam, some 1.2 million students in all, also found that fewer than one in four met the college-readiness benchmarks in all four subjects tested: reading comprehension, English, math and science.
How can the United States prosper in the I-Cubed Economy when half the college-bound high-school graduates don't have the reading skills necessary for college? In addition, not all high school graduates take the ACT in preparation for college. But almost all high school graduates will need some form of training and education beyond high school. If the college-bound student are doing poorly, these non-college tracked students must really be in trouble.
And so are we.
Posted by Ken Jarboe at 10:22 AM | Comments (0) | TrackBack
Customers message to Detroit
News flash for Detroit: make better cars.
WSJ.com - Car Owners Value Quality Over Cost, Survey Suggests:
A survey to be released today of U.S. vehicle owners indicates that while this summer's "employee-pricing" deals may give auto makers short-term sales gains, improving quality is more important in the long run.
The survey referred to is the University of Michigan's American Customer Satisfaction Index - run by Professor Claes Fornell. His take on what Detroit needs to do:
Customer satisfaction with U.S. automobile nameplates has improved, but nevertheless falls further behind competition from Japan and Korea. Rebates, low cost financing, and employee discounts to the public have led to higher sales and ACSI scores for U.S. automakers, but they have also taken a toll on profits. In contrast, the rising satisfaction with foreign cars is due to improvements in quality and customization. Price promotions usually have a positive effect on customer satisfaction, but it is generally not large or sustainable. Some US nameplates have also increased advertising touting their superior customer satisfaction. It is difficult to see how Chevrolet (with an ACSI score near the bottom of the industry), for example, can benefit from such advertising: People know how satisfied/dissatisfied they are. It is unlikely that any amount of advertising will change their attitude. A better strategy would probably have been to move dollars from advertising to product improvement instead. It is still not clear that Detroit is taking customer satisfaction, or the lack thereof, seriously enough.
As the Wall Street Journal story points out "U.S. auto makers spent an average of $4,239 a vehicle on incentives in July, compared with $2,372 for European brands and $1,619 for Asian brands, according to Autodata Corp."
Deja vu, anyone? Didn't we go through this before? Detroit spends money on marketing; competitors spend money on product improvement. Detroit has even brought back Lee Iacocca as its corporate spokesperson ("You forget the most important part - the deal").
Why is it when we are supposedly moving into the I-Cubed economy, we keep re-fighting the battles of the 70s and 80s? Our public policy is stuck in that time period (see Going beyond math and science). And now it seems that the corporate strategy of a key US industry is stuck as well.
As Santayana said "Those who cannot remember the past are condemned to repeat it."
Posted by Ken Jarboe at 08:25 AM | Comments (0) | TrackBack
August 16, 2005
Striving for simplicity
Apropos yesterday's posting on the need for simple designs (USA Today doesn't get it) comes this wonderful piece from Gerry McGovern, "Simplicity is hard work". Gerry is one of the clearest thinkers around on website design and content. He also publishes a weekly newsletter "New Thinking" which I strongly recommend (click here to subscribe). The following is the article in full:
Simplicity is hard work
Simplicity is in the eye of the beholder. What is simple to the creator is rarely so simple to the customer.
I recently bought a Philips CD burner. Its software was difficult to install. What I wanted to do was copy music I had bought from Apple iTunes. When I finally managed to complete the installation, it wouldn't let me do that. Thus, I wasted about 30 minutes installing and uninstalling the software.
I decided to try iTunes support. There were simple instructions about how to copy songs onto a CD. I followed them. I was able to simply copy songs using the Apple software and the Philips CD burner.
Philips currently has a marketing campaign called "sense and simplicity". I checked it up on its website. The first sentence reads, "The digital revolution is supposed to have made our lives easier, but studies have shown that's not the case." How true.
In the middle of the page that this text comes from is a large animation that is constantly in motion, making it very difficult to read the text. It is ironic that text which is championing simplicity should be cluttered by a totally unnecessary and highly distracting animation. Whoever designed this page certainly doesn't understand simplicity very well.
Apple understands simplicity. Its products live simplicity. Practically every Apple product I have ever owned has been a pleasure to use. iTunes and iPod are simple, elegant and intuitive.
I keep noticing advertising campaigns now by organizations that are telling us how simple their products and services are. I don't believe them because my experience is that while many talk simplicity, very few practice it.
I'm sure that within Philips there is a genuine belief that it is important to make their products as simple as possible to use. However, there is a big difference between marketing your products as simple to use and making them genuinely simple.
Simplicity is hard. It's expensive to do well. "Our experience is that for every mouse click we take out of the user experience, 20 things have to happen in our software behind the scenes," states Brad Treat, Chief Executive of SightSpeed.
You are the worst judge of whether your website or product is simple. You know your website. You designed it. Remember, a potential customer who has never been at your website before will spend less than one minute figuring out your homepage.
We outsource what we don't think is a core activity. Support is obviously not seen as a core activity by most organizations, since it is outsourced so much. Well, people ring up support because there is complexity in their lives (something doesn't work). They are hoping that someone will bring back simplicity (a vain hope in my experience).
I was once told by a manager of a software company that customers were complaining that they couldn't find anything on the support section of the website. The response of the technical writers was that the customers weren't searching hard enough.
To achieve simplicity an organization needs to be genuinely customer-focused. Extra investment will be required, as well as a special commitment from designers and management. Is it worth it? Certainly, organizations such as Apple and Google are showing that simplicity can become a genuine competitive advantage.
Gerry McGovern
Gerry McGovern provides website content management solutions
Posted by Ken Jarboe at 09:50 AM | Comments (0) | TrackBack
Making policy based on urban legends
Great story in Sunday's Los Angeles Times on how policy often gets made "Legal Urban Legends Hold Sway":
Merv Grazinski set his Winnebago on cruise control, slid away from the wheel and went back to fix a cup of coffee. You can guess what happened next: The rudderless, driverless Winnebago crashed. razinski blamed the manufacturer for not warning against such a maneuver in the owner's manual. He sued and won $1.75 million. His jackpot would seem to erase any doubt that the legal system has lost its mind. Indeed, the Grazinski case has been cited often as evidence of the need to limit lawsuits and jury awards.
There's just one problem: The story is a complete fabrication.
The article goes on to talk about how these urban legends are passed off as truth in policy debates.
What I really liked was th description of how the McDonald's hot coffee suit was morphed from a serious lawsuit to "the poster child for frivolous claims."
Here is what happened:
According to popular accounts of the lawsuit, [Stella] Liebeck coaxed nearly $3 million from an Albuquerque jury in 1994 after being scalded by McDonald's coffee she spilled on herself while riding in a car. These are the story's best-known elements, but filling in the missing facts puts the case in a different light.
Trial testimony showed that at 180 to 190 degrees, McDonald's coffee was much hotter than that served by other restaurants or by people in their homes. The fast-food chain had received at least 700 complaints about hot coffee in the previous decade and had paid more than half a million dollars in settlements, according to trial testimony cited by the Wall Street Journal.
Liebeck's injuries were hardly minor. She suffered third-degree burns on her thighs and groin area, was hospitalized for a week and had to undergo painful skin grafts. Before filing a lawsuit, she wrote McDonald's requesting that it lower the temperature of its coffee and cover her uninsured medical bills and incidental costs of about $20,000. McDonald's offered $800.
Later, as the case neared trial, a mediator recommended that McDonald's pay a settlement of $225,000. The company refused.
Jurors ultimately awarded Liebeck $160,000 in compensatory damages and about $2.7 million in punitive damages. "The facts were so overwhelmingly against the company," one of the jurors told the Journal. "Their callous disregard was very upsetting," another said.
Soon after the verdict, the trial judge slashed the punitive damages by more than 80% to $480,000. Then the case settled for an undisclosed amount.
Posted by Ken Jarboe at 08:52 AM | Comments (0) | TrackBack
August 15, 2005
USA Today doesn't get it
USA Today apparently doesn't understand the difference between "dumbing down" and good design. Check out the title of their story:"Hotels dumb down alarm clocks for weary guests". The story itself is a great example of good versus bad design:
How difficult can setting an alarm clock be? That's a question of much interest in the hotel industry. Responding to guests confused by the numerous unexplained buttons on their alarm clocks, hotel companies are introducing simpler models designed to be more user-friendly.
It's a move that guests like David Cornett, a St. Louis-based human resources executive, could come to embrace. "Some of the clocks are ridiculously complicated, especially when you are at the end of a 16-hour day and don't even check in until 10 p.m.," he says.
. . .
Business travelers, fretting about early morning meetings or flights, have come to view hotel alarm clocks as a key travel tool and a source of anxiety. Often devoid of intuitive designs, LCD-display clocks have flummoxed guests for years with their "hold-button-while-pressing-another" features.
Too many of our tech devices are overloaded with complex features that only get in the way of their ultimate purpose. This swiss-army-knife approach to engineering (aka "everything but the kitchen sink approach) fails to even understand the elegance and simplicity of the design of the Swiss Army knife.
And USA Today's headline writers fail to understand that good design is not "dumbing down."
(Now if I were catty and going after Wonkette's audience, I would say something like "that is because many view USA Today as the dumbed down version of a newspaper." But it is the dog days of summer and I will resist the temptation.)
Posted by Ken Jarboe at 11:25 AM | Comments (0) | TrackBack
Praying for the auto industry - and innovation
Seems that a least one person in Michigan thinks the auto industry needs help in the innovation area -
"In a State Devoted to Autos, a Prayer to Take a New Road - New York Times":
Lanny L. Johnson recently came up with a prescription for Michigan and its auto industry. Prayer. On billboards.
Mr. Johnson, a 71-year-old retired orthopedic surgeon, bought two months of advertising space on four billboards in the state and put up this message: "Dear Gracious Heavenly Father, Forgive us our sin of being dependent upon the Automobile Industry and not on You. Please restore invention, productivity and prosperity. In Jesus Name, A Michigan Citizen."
As I've said in a couple of recent postings (Detroit discovers flexible manufacturing and Detroit's true innovation), I think the answer to the automakers prayers is to build desirable products.
Now, having said that, we need to also recognize the so-called "legacy" cost that bedevils the auto industry. Chief among these is health care, something that plagues most of manufacturing and even other industries. A decade ago, there was a moment in time when major health care reform was possible -- in part because American companies were getting eaten alive by health care costs. That moment passed because of miscues by the new Clinton Administration and raw political posturing by the Republicans (who were looking for a way to break -- successfully as it turned out -- the new Democratic lock on Washington).
The issue then disappeared from the policy debate. The GOP Contract with American even dismisses it:
We don't need a government-run health care system with costly new entitlement programs. Instead, we need to facilitate efforts to keep families intact.
Unfortunately, the problem did not disappear. It was simply masked over during the 1990's boom.
Now, with slower growth, rising health care costs are once again coming back to haunt us. Maybe the moment to confront the problem will arise again. But likely not soon enough to save the US auto industry.
Posted by Ken Jarboe at 09:14 AM | Comments (0) | TrackBack
August 12, 2005
US science losing the edge - WSJ
You have heard it before: the US is becoming a less science-friendly place. Now the science columnist from the Wall Street Journal, Sharon Begley, has taken up the call, based on the Korean dog cloning in
U.S. Science Research Is in Danger of Losing Place on Cutting Edge:
The fact that Seoul has become Cloning and Stem Cell Central has ratcheted up a concern that has been growing for years: Is the U.S. losing its decades-long pre-eminence in science? And if so, does it matter?
The numbers suggest that the answer to the first question is yes.
The counter argument is that we can utilize science where ever it is produced:
That more smart people around the world are making more discoveries "portends well for the future of all humankind," Alan Leshner, CEO of the American Association for the Advancement of Science, argued in an editorial in Science.
"Do we have to trump the entire world?" he asked me rhetorically. "Probably not. That more papers are coming from outside the U.S. doesn't upset me nearly as much as the fact that cutting-edge scientists are leaving because they can't do research here" as a result of strict limits on human embryonic stem-cell studies.
Leshner is absolutely right. The problem is not that others are doing important work. The problem comes from our inability to capitalize on that research because we don't have the necessary skills still available in this country.
As Begley points out in her article:
Allowing a minority opinion to stifle research is only one symptom of politics undermining science. Some appointees to federal scientific advisory panels have been chosen for their ideology rather than their expertise; staffers with no research credentials alter the scientific (not only the policy) content of reports on climate change. Politicians' attacks on the science of evolution continue, even though "intelligent design" may make a fascinating lesson for a philosophy class, but is not biology.
Begley lays out the ultimate nightmare scenario:
An interesting battle will come when a lab in Singapore or Seoul or Britain uses embryonic stem cells to develop a therapy for diabetes or Parkinson's or heart disease. Its use in the U.S. would require approval by the Food and Drug Administration. Will opponents of stem-cell research demand that the FDA reject it and deprive patients of their only hope?
And they will we use our trade laws and other threats to bully other countries into adopting our standards on stem-cell based therapies?
It boggles the mind!
Posted by Ken Jarboe at 01:01 PM | Comments (0) | TrackBack
June trade in intangibles
The trade deficit increased in June as imports rose to record levels and exports remaining unchanged, the BEA reported this morning. The balance of trade in intangibles was basically unchanged with a surplus of $7.2 billion. Imports of intangibles continued to increase faster than exports; exports by .6% and imports by 1.1%. During the first half of 2005, the surplus has declined in every month except March, after generally increasing during 2004. The June 2005 surplus is $250 million below the balance in Dec 2004.
The deficit in Advanced Technology Products declined slightly in June to $3.7 billion (from a deficit of $3.9 billion in May) as exports rose much greater that the increase in imports. The last monthly surplus in this category was in June 2002 and the last sustained series of monthly surpluses were in the first half of 2001.
Note: we define trade in intangibles as the sum of "royalties and license fees" and "other private services". The BEA/Census Bureau definitions of those categories are as follows:
Royalties and License Fees - Transactions with foreign residents involving intangible assets and proprietary rights, such as the use of patents, techniques, processes, formulas, designs, know-how, trademarks, copyrights, franchises, and manufacturing rights. The term "royalties" generally refers to payments for the utilization of copyrights or trademarks, and the term "license fees" generally refers to payments for the use of patents or industrial processes.
Other Private Services - Transactions with affiliated foreigners, for which no identification by type is available, and of transactions with unaffiliated foreigners. (The term "affiliated" refers to a direct investment relationship, which exists when a U.S. person has ownership or control, directly or indirectly, of 10 percent or more of a foreign business enterprise's voting securities or the equivalent, or when a foreign person has a similar interest in a U.S. enterprise.) Transactions with unaffiliated foreigners consist of education services; financial services (includes commissions and other transactions fees associated with the purchase and sale of securities and noninterest income of banks, and excludes investment income); insurance services; telecommunications services (includes transmission services and value-added services); and business, professional, and technical services. Included in the last group are advertising services; computer and data processing services; database and other information services; research, development, and testing services; management, consulting, and public relations services; legal services; construction, engineering, architectural, and mining services; industrial engineering services; installation, maintenance, and repair of equipment; and other services, including medical services and film and tape rentals.
Posted by Ken Jarboe at 09:03 AM | Comments (0) | TrackBack
Patent Wars - Apple vs Microsoft
One of the reasons for patent reform is to ensure that patents create incentives for invention, rather than being used strategically against competitors. An example of the latter might be the recently announced case where Apple Fails in Patenting IPod Technology:
Apple Computer Inc., whose iPods are the top-selling music player in the United States, lost an attempt to patent some of the device's technology because rival Microsoft Corp. had already filed a similar application.
Microsoft beat Apple to the patent application by five months, U.S. Patent and Trademark Office documents show. Apple's request, filed by chief executive Steve Jobs and other officials in October 2002, was rejected by patent officials last month.
Apple plans to appeal the decision to ensure it won't be forced to pay royalties to Microsoft on every iPod sale.
Understandable, Apple is upset:
"Apple invented and publicly released the iPod interface before the Microsoft patent application cited by the examiner was filed," Apple spokeswoman Natalie Kerris said yesterday in a statement. The company has received other patents related to the iPod and has other patents pending on the device, she said.
The story goes on to state:
Microsoft employee John C. Platt applied for the patent on behalf of his company in May 2002.
. . .
Microsoft's application was rejected in December 2004, patent office records show. Platt amended the application in April 2005, and on June 27 the office indicated that Microsoft's pending patent would be approved.
The stakes in this game are huge:
The iPod already faces competition from Microsoft-powered music players. Microsoft said this week it is working with electronics makers to design new devices for release in the end-of-year shopping season.
I don't know all of the details of the case. But, I can bet that it will spark renewed debate on a number of patent reform issues, such as first-to-invent vs first-to-file, the practice of filing amended applications after rejection, and the access of the patent examiner to outside, publicly available information.
Last I heard, the patent reform bill was stalled in the House Judiciary Committee. Maybe this will change things.
Or maybe not.
Posted by Ken Jarboe at 08:37 AM | Comments (0) | TrackBack
August 11, 2005
Non-brands
As Business Week explains in The Serious Cachet of "Secret Brands", sometimes the best brand is a non-brand:
In a world where brands rule, nobody drinks sweetened caramel water. They drink Coke or Pepsi. And while some still drink no-name water, many prefer Evian or Poland Springs. Brands are so embedded in our daily habits that it's hard to imagine a world without them. But a couple of store chains -- Muji of Japan and American Apparel in the U.S. -- are striving to establish just such a world by offering the "unbrand" with their logo-free products, and they're achieving tremendous success. How to account for it?
Logo-free obviously appeals to set of consumers who are sick of being bombarded with brand names and seek to be unshackled from them. "There's a core group of people that can't stand the idea of having to walk around as a corporate billboard with a logo stuck on the chest," says Steve Manning, managing director of Igor, brand naming agency in San Francisco.
But in the case of Muji and American Apparel, more than that is going on. Both retailers have carved out a niche by offering a certain style, whether minimalist in the Muji's case or classic fashion revival in American Apparel's, that has captured the imagination of millions.
While "brands" are intangible, they are not ephemeral. Behind the successful brand is something that appeals to the consumer. In the case of McDonalds, it is consistency and value. In the case of Coke and Pepsi, it is a certain taste (which is why Coke drinkers hate Pepsi and visa-versa). In the case of Montblanc pens, it is a statement of wealth and sophistication. In the case of Muji and American apparel, it is their recognizable style.
If you have a recognizable style, a logo may be redundant; the style is your logo.
And if the style ceases to appeal, no "branding" or catchy logo will necessarily save the day.
Thus, it is important to keep in mind that the I-Cubed Economy is built not on the outward trappings of the logo or brand, but on the deep-rooted appeal to consumer desires. And after all, isn't that what economic activity is all about - meeting human wants and needs?
Posted by Ken Jarboe at 03:30 PM | Comments (0) | TrackBack
Boredom on the job
Here is Brad DeLong's take on Wonkette's take on a story in yesterday's Washington Post about boring jobs -
Boredom: An Interdisciplinary Approach:
Wonkette reports that the Treasury Department was underutilized (to say that it was out-of-the-loop would be to falsely imply that there was a loop) during the first Bush administration.
What Wonkette was referring to was how the Post story Boredom Numbs the Work World starts:
When Bruce Bartlett was the deputy assistant secretary for economic policy at the U.S. Treasury under George H.W. Bush, boredom occasionally drove him from his cushy Washington office to seek relief at the movie theater. One afternoon, he ran into a friend who was a senior official in another department.
"It was kind of awkward," he said.
. . .
Bartlett's problem was that he was deputy assistant secretary for economic policy when the president "just didn't care about economic policy, only foreign policy. . . . Because the White House didn't want to do anything, there wasn't anything we could do," he said.
That problem -- a lack of autonomy and a job that has very specific instructions -- hits workers from the highest to lowest echelons of the working world. Many spend their days surfing the Internet, writing e-mails or taking care of personal business.
Of course, Brad describes how that was all different when he had Bartlett's job under the Clinton Administration.
[In the interest of full disclosure, I must admit that I once went to a movie in the middle of the day when I was a Senate staffer. But, I was with a senior US trade official and we were researching the movie Rising Sun about US-Japan economic relations.]
Political digs aside (I leave this to Wonkette and Brad), the Post story makes an excellent point: the title and level of a job doesn't mean it isn't boring. Being "promoted" up to a nothing job is a long standing way of getting rid of someone without firing them.
More important than the title of a job is the degree to which a person can use their own initiative - a key feature in the I-Cubed Economy. Just as every job can be boring, most jobs can be challenging if set up that way. This is why I normally recoil at the notion of a separate creative or innovative or "thinking" class. It is more in how the job is structured than just in the nature of the task. Granted there are boring jobs - paint-drying watcher, for example. But most jobs are boring based on how they are set up, not necessarily because of the task.
If we structure jobs to be interesting, we will get better productivity. That is the information economy path.
If we structure them in a ridge fashion with no autonomy and very specific instructions, then they will be boring with static productivity (since productivity increase only occurs in that situation when someone outside changes the instructions). That is the industrial age path. It no longer leads to economic prosperity in this new economy.
So, that is my new policy prescription: eliminate boring jobs and boost productivity!
Posted by Ken Jarboe at 12:56 PM | Comments (0) | TrackBack
Outsourcing Everyday Life
From the outsourcing file:
ABC News: Editor Outsources Everyday Life to India
After reading up on the trend of large companies outsourcing jobs overseas, AJ Jacobs, Esquire magazine's Editor-at Large, began wondering how much of his own life he could send overseas. He discovered he could outsource almost everything, from ordering his food to fighting with his wife, and wrote about his experience in this month's issue of Esquire.
I guess I will add Esquire to next week's beach reading. (FYI - the story is in the September 1, 2005 issue).
Posted by Ken Jarboe at 08:33 AM | Comments (0) | TrackBack
August 10, 2005
What is going on in Kansas?
First, steps toward elevating creationism to the level of science (see Kansas Board Advances a Draft Critical of Evolution - New York Times).
Now, this from the
Wichita Eagle - Reading, math standards unattainable, officials say:
The [Kansas] State Board of Education should repeal standards that require all students to achieve reading and math proficiency by 2014, Attorney General Phill Kline said Tuesday.
Not doing so could cost the state an untold amount of money, Kline and the Senate vice president warned.
. . .
Senate Vice President John Vratil, R-Leawood, appearing with Kline, called the standards "unrealistic and unattainable," saying that many of the factors leading to underachievement are beyond schools' control.
"We are setting ourselves up for failure by virtue of the 100-percent-proficiency standard," he said.
He told the board it was not an attempt to "dumb down" the standards to save the state money, as some critics have suggested.
He, of course, then went on to complain about the costs to the state budget.
Yes, Senator Vratil, you are setting yourselves up for failure. Failure to provide an adequate education for your children. Failure to equip them to compete in the new economy. Failure as a local economy stuck in the 19th Century.
I have lots of problems with the standards -- mostly that they are inflexible to meet the needs of the I-Cubed Economy. And they may need to be changed. But to say that these minimum standards are unattainable is simply to give up on our children for political reasons.
Kline said the standards must be changed to preserve legislative and state board control over education policy and spending.
Welcome to the state of ignorance - where politicians are more concerned with preserving control than preparing their children for the 21st Century.
Posted by Ken Jarboe at 09:35 AM | Comments (0) | TrackBack
August 09, 2005
Robert Rubin takes on the digital divide
Many of you may know that an early interest of Athena Alliance was the bridging the digital divide - with a conference New IT-New Equity-New Economy and a report Inclusion in the Information Age: Reframing the Debate. For that reason, the following item in the Wall Street Journal caught my eye: Project to Build Broadband For Low-Income Homes
A five-year project spearheaded by former Treasury Secretary Robert Rubin plans to invest $1 billion to build rental homes with high-speed Internet access for roughly 100,000 people with low incomes.
. . .
The project, called Access@Home, will be funded by grants, low-interest loans and equity investments from the National Equity Fund, a unit based in Chicago of Local Support Initiatives.
Most important, however, is this part of the equation:
The technology and training will be provided by One Economy Corp., a nonprofit company based in Washington, D.C., that focuses on extending the benefits of technology to people on the lower economic rungs.
A major point that came out of our conference is that simply throwing technology at the problem doesn't work (see our "Points of Consideration"). It is not simply a question of technological deployment, but using the technology to improve people's economic prospects and daily lives.
One Economy Corp. is a great organization which understand this. Their Beehive websites help end economic isolation, build assets, and raise standards of living by providing dynamic content for low-income people. This makes the technology relevant to improving people's lives - rather than just another entertainment and advertising mechanism.
Posted by Ken Jarboe at 04:22 PM | Comments (0) | TrackBack
August 08, 2005
Wal-Mart discovers design
From Sunday's Washington Post - "Pinch Me -- Is That a Wal-Mart?":
Since its founding in 1962, Sam Walton's brainchild has built its business on the traditional-minded lower-income shopper. This is a customer, judging by Wal-Mart's merchandise, who wants the basics -- a sturdy nightgown, a reliable bathing suit, a six-pack of children's underwear. (Wal-Mart sells one of every two pairs in the United States.)
The discount giant has stuck by that consumer, earning billions in the process. But now it is rethinking things -- placing ads in that fashion bible Vogue; having its TV commercials portray a lifestyle, not just a smiley face rolling back prices; even considering hiring a big-name designer. For it has not escaped the attention of Bentonville, Ark., that the rest of the retail world has discovered a different, more lucrative shopper -- one who craves style for style's sake.
. . .
For 43 years, Wal-Mart has been obsessed with individual bargains -- the $24 DVD player, the $12.90 twill jacket -- at times regardless of how they fit in with the rest of the merchandise in the store, or even whether they are in style.
But that singular focus on bestsellers has left the chain without the kind of storewide design aesthetic that has turned rival Target into Tar -zhay, crammed, at every turn of the shopping cart, with bold, contemporary patterns and designs that evoke a lifestyle. And it has left Wal-Mart vulnerable at a time when customers at all levels, even Wal-Mart's basic customers, want fashion.
"We are an item house," concedes Wal-Mart's vice president of product development, Claire Watts, a veteran of Limited Stores, Lands' End and May Department Stores. "But customer expectations require more than great items."
Wal-Mart is trying to move in the direction of Target by establishing a "Trend Office" in New York (Manhattan, no less) to keep up with fashion. But the marriage between "low prices every day" and "cool" may be problematic:
The Trend Office itself is classic Wal-Mart, with penny-pinching touches like fake hardwood floors. The cubicles, tables and chairs are standard-issue from Bentonville. But, in a nod toward the office's fashion ambitions, workers asked to use wall paint a shade brighter than the grayish Wal-Mart white, and to splurge on a set of stools from Design Within Reach. Quotes from Sam Walton cover the walls.
Thus, it is unclear whether a corporate culture built on the mass-production, mass consumption industrial age paradigm of lowest possible prices can make the shift to the information age paradigm of individual fashion statements. Target has so far managed to maintain the balance. It will be fascinating to see if Wal-Mart can.
Posted by Ken Jarboe at 08:30 AM | Comments (0) | TrackBack
August 06, 2005
Symbols, mascots and intellectual property
You may have heard of the latest flair up of the controversy over the use of offensive sports mascots. In this case, the NCAA will prohibit college athletic teams that use Native American images deemed "hostile or abusive" from hosting postseason events or displaying the symbols during championship competition (see NCAA Takes Hard Line On Mascots). The ban extends to the Florida State Seminoles - which has an interesting twist:
The issue remains particularly controversial regarding Florida State, because the Seminole Tribe of Florida has expressed support for Florida State's use of its nickname and related symbols.
"That the NCAA would now label our close bond with the Seminole Tribe of Florida as culturally 'hostile and abusive' is both outrageous and insulting," [Florida State President T.K.] Wetherell said. " . . . It is unconscionable that the Seminole Tribe of Florida has been ignored.
"The rules as we understand them would have us cover the Seminole name and symbol as if we were embarrassed, and any committee that would think that is a proper and respectful treatment of Native Americans should be ashamed."
As NCAA officials point out, however, not all tribes support Florida State's use of its nickname and mascot, the horseback riding Chief Osceola. In fact, the Seminole Tribe of Oklahoma has expressed opposition to the school's use of symbols.
The controversy points out that there is a lot of gray in our intellectual property. One would think that the use of the word "Seminole" would be the intellectual property of the Seminole tribe. After all, it is no different than requiring Parma ham from Parma or Tiger Woods to control the use of his name or Microsoft to control the use of the word "Microsoft". Imagine if a college team tried to call itself the "Microsofts" or the "Excells".
Maybe what NCAA should do is require those schools that use specific tribe names to obtain the permission of the tribe for the use of their intellectual property. That way the Seminoles could license the name to Florida State (which might help the different parts of the tribe - Florida and Oklahoma - work out their differences). And the Chippewas (Central Michigan University) and the Utes (University of Utah) and the Choctaws (Mississippi College) and the Sioux (University of North Dakota) and the Illinois Nation - Illini (University of Illinois) could decide for themselves whether or not they wish to be associated with the team.
Of course, Native American names are so common in our geography that it might be hard to enforce this rule in every case. For example, what would the State of Delaware owe the Delaware tribe - or the Miami or the Dakota or . . . ?
But if the name and symbols of the tribe is associated with a specific commercial activity (and don't tell me that college football isn't a commercial activity), then the tribe should have some recompense for the use of their intellectual property. If it is good enough for Disney, it is good enough for the Chippewa.
Posted by Ken Jarboe at 10:31 AM | Comments (2) | TrackBack
August 05, 2005
Going beyond math and science
From the "Working" column of today's Washington Post - "The "Bizword Is Science"
The nation's business leaders want you to hit the books -- particularly the math and science books.
Worried about the prospects for the American economy if you don't, groups including the Business Roundtable, the U.S. Chamber of Commerce, the National Association of Manufacturers and TechNet have banded together to put pressure on policymakers and the public to improve math and science education.
Among the coalition's priorities: more support for teachers, incentives for students to become scientists and engineers, more research funding and faster security clearances for foreign scholars. It wants to double the number of bachelor's degrees awarded in science, technology, engineering and math by 2015.
But what's wrong with the nation's future business leaders just studying, well, business?
Nothing, but it's only half the equation, said Asher Epstein, managing director of the Dingman Center for Entrepreneurship at the University of Maryland. Business is all about understanding how value is created and how to capitalize on it, he said, but that initial spark still has to come from the scientists and the engineers.
"MBA students need to team up with the technologists," he said.
Amen to that. But even entrepreneurship courses aren't enough. Where are the designer, the creative input, the marketing, etc. etc. etc.
Everything that the business coalitions want to do on the science and technology agenda is urgently needed. But these steps won't be nearly enough to survive in the I-Cubed Economy.
In understand the business leaders’ frustration. Over the past few years, there has been a systematically trying to dismantle all the bi-partisan technology policy that we put together in the 80's and grew in the 90's. Congress has, to its credit, resisted many of these attempts. But, to have to be defending the NSF budget and the Manufacturing Extension Partnership (MEP) at this stage is utterly ridiculous. Rather than addressing the new challenges, we are busy trying to keep the programs that got us to where we are.
What worries me is that because we are so busy defending existing, we can't see how things have changed. We are caught in a post-Sputnik mind set where we think we just need to throw more engineers and technology at the problem. Trouble is, the Chinese and Indian can throw a lot more engineers at the market place than we can - and at a quarter of the cost. We are the proverbial generals fighting the last war.
And then we have well meaning folks like Tom Freidman claiming the world is flat. The world is not flat -- in the sense of the playing field being level (more on this later). The playing field is tilting more and more against us. And throwing money at NSF, etc. is not going to reverse that tilt. Rather than worry about the condition of the playing field, we need to re-invent the game. Yet in Washington, we sit around arguing with the surveyor as to whether his plumb line is straight.
We need to rethink the agenda. More emphasis needs to be on the design/creativity/intangible assets part of the equation as a way to re-invent the game. Industry already knows that. Washington needs to learn it.
Posted by Ken Jarboe at 11:49 AM | Comments (0) | TrackBack
August 03, 2005
Detroit's true innovation
Silly me -- while I was concentrating on the technology (see last posting on "Detroit discovers flexible manufacturing"), I missed the real innovation in Detroit's latest marketing ploy. From
WSJ.com - Business World: Why Detroit Can't Stop Haggling:
Shopkeepers in ancient Babylon used splashy discount promotions to clear excess inventory. For reinventing this wheel, General Motors is now being hailed as a marketing genius for a new millennium. What gives?
You can't fault the numbers produced by its "employee discounts for everyone" promotion, begun in June and now extended into August. June sales were up 47% compared to a year ago; the goal of cleaning up a million-vehicle backlog was evidently met. Dealers are now complaining about a shortage of merchandise.
Yet, and peculiarly, the average selling price of a car was almost identical to the price before the promotion. The "Law of One Price" prevails in the car market after all -- i.e., the market price for a car is the market price for a car, however you gussy it up. GM's "employee discount" merely substituted for various rebates and other "incentives" that GM had previously used to rationalize the gap between the sticker price and the selling price.
But, lo, a mystery presents itself: What accounted for the big increase in volume if not a big drop in prices?
Answer: GM's inspired gimmick may not have meant better deals on new cars, but it did mean a radically altered buying process. All but eliminated was haggling, which surveys show is reviled by most consumers.
So what happens when the novelty of the marketing gimmick wears off? Then we are back to the point I made earlier about going beyond costs. Even the Business World columnist, Holman Jenkins, makes the same point (after railing on the auto companies' labor costs).
Yet notice that dozens of models -- from the Chevy Corvette to the Ford Mustang to the humble Dodge Neon SRT -- were carefully exempted from the employee discount offer. These cars command a market price that reflects the sticker price, and covers the cost of building them. Why? Because they are desirable cars, which is Detroit's only salvation if it can't create more flexibility in its labor overhead.
Build desirable cars? What a novel idea. A lot better that the industrial era strategy of "flexibility in its labor overhead" (read: cut worker costs and benefits).
Maybe Detroit is doomed to enter the I-Cubed Economy after all.
Posted by Ken Jarboe at 11:56 AM | Comments (0) | TrackBack
Detroit discovers flexible manufacturing
From yesterday's Wall Street Journal, "Amid Price War, Chrysler To Revamp Manufacturing":
DaimlerChrysler AG's Chrysler Group plans a major revamp of its manufacturing process that it hopes will shave billions of dollars off the cost of developing and producing cars over many years.
The move reflects how U.S. auto makers have begun to rethink basic assumptions about manufacturing cars and trucks as they seek a way out of the intense price war, and surge in overseas competition, that has sapped their North American profits since 2001.
Chrysler's new manufacturing process, which will be rolled out this fall at a plant in Belvidere, Ill., that is among the company's biggest money-losers, is intended to allow the flexibility to build three or more completely different models of cars in a single plant. Typically, U.S. auto makers produce one or two types of vehicles per plant. The idea behind the retooling is to improve the odds of a plant operating at close to maximum capacity - a big key to profitability in a capital-intensive industry like autos.
. . .
Increasing factory flexibility by retooling one plant to build three different cars isn't a new idea. Japanese car makers, led by Toyota Motor Corp. and Honda Motor Co., have nearly a decade of experience with the process, known as flexible manufacturing.
But with costs rising, Chrysler, GM and Ford face acute pressure to rethink the decades-old calculus of their North American vehicle-making businesses.
"This environment requires people to do things differently," said Frank Ewasyshyn, executive vice president of manufacturing at Chrysler, in an interview. "You have to find ways that you never thought of before to reduce your cost and pass it on to the customer."
. . .
Ron Harbour, president of Harbour Consulting, which puts out a closely watched scorecard of auto-manufacturing productivity, said Chrysler's new initiative "gives them the chance to catch up to Toyota and Honda," but notes that the Japanese are not standing still. "Five years ago, I thought [the Big Three] would have caught up by now, but the Japanese have continued to move forward and [the Big Three] haven't moved fast enough," he said.
. . .
Industry manufacturing experts point out that Detroit's auto makers have announced ambitious initiatives in the past to revolutionize vehicle development and manufacturing, only to see them fizzle. In the 1990s, for instance, GM set out to create a common set of underpinnings that could be used to make midsize cars by its auto brands in Europe, the U.S. and elsewhere. But its divisions ended up modifying the underpinnings so much that the cars that use them -- such as the Saab 93 and the Chevrolet Malibu -- shared relatively few parts and couldn't be made on the same production line.
Toyota has been working to improve its own flexible-manufacturing systems. At some plants in Japan, Toyota and Honda produce as many as six different models per assembly line.
I don't know whether to laugh or cry. These ideas of flexible manufacturing and a common underpinnings (not the same thing - although the reporter seems to think so) go back well before the 1990's (remember the "world car"?). Every few years, we seem to get a new wave of assertions by US auto makers (including the Americanized German company DaimlerChrysler) that they are on the verge of a manufacturing revolution. In the mean time, the Japanese companies continue along with their process of continual improvement. And they pay attention to other things besides costs -- like quality and design.
Judging from this story, the US auto industry seems stuck in the days of Henry Ford when the key to success was "plant operating at close to maximum capacity" (to quote from the story as the reason for the change). They had a good run with innovative new products -- minivans, SUVs. But now those creative juices seem to have dried up and they can't adjust to the new circumstances.
No wonder Detroit has to practically give their vehicles away in order to maintain sales.
Posted by Ken Jarboe at 10:02 AM | Comments (0) | TrackBack
Information in the information society
In the information age, most people very quickly realize that not all information is equal. Some ideas are half-baked and some assertions are just that, assertions and not facts. One of the most important elements of the making the information economy work is the ability to judge the validity of information.
In this light, President Bush has made what is seemingly a reasonable request: schools should teach all sides of the evolution controversy. I say "seemingly" because this request is not as straight-forward as it appears. The request is not for a free flow of information, but to elevate the credibility of one side of the controversy - creationism, aka "intelligent design". This is a well known rhetorical trick of trying to compare apples with oranges by saying they are both round (see my earlier posting, Science or not science).
Evolution is a scientific theory subject to the scientific method of empirical verification and falsification. Creationism is a dogmatic religious assertion - no amount of facts can prove or disprove it.
Teach creationism if you must; but teach it in religion classes where you also teach all the major world religions.
I wish all those who are so keen on proving that theories like global warming are nothing more than "junk science" would turn their attention to the attempt to junk-ify science by equating creationism with science.
Unfortunately, that is what the President has just done - endorsed the ultimate of junk science. And by doing so, he has undermined one of the key pillars of our information age.
Posted by Ken Jarboe at 08:34 AM | Comments (0) | TrackBack
August 02, 2005
The aspirational economy
Lee Gomes of the Wall Street Journal relates this interesting lesson in the importance of design in "For Certain Consumers Of High Tech, Function Isn't Always Enough"
With the home-improvement season in high gear in the neighborhood, I decided to replace a few of the windows in my house and called on a nearby dealer who makes simple custom ones in his own shop.
His windows were clearly well-made and would last for decades -- the two points that were the beginning and end of his sales pitch. While entirely comfortable discussing his old-fashioned craftsmanship, the window maker seemed bewildered and a little impatient with the finicky style-oriented questions I started asking. Are there different sorts of trim detailing available? How many kinds of knobs do you offer? What sort of options for frosted glass are there?
It was as if I was talking about a different product completely, which in a way I was. He was selling windows; I was buying a design statement. He was offering something entirely functional and pragmatic; I was looking for something aspirational.
This functional vs. aspirational dichotomy is an instructive, possibly even amusing, way of divying up the technology industry -- along with many others.
Amusing -- possibly; instructive -- definitely. Never underestimate the role of the aspirational - or, maybe a better word is "inspirational." In the mass production era, the common belief was that engineering reigned and functionality ruled. But was never really the case. Aspirational/inspirational was always sitting next to functionality. Case in point: art deco and the "modern" design of functional things like railroad locomotives (the 20th Century Limited).
I'm somewhat surprised that Mr. Gomes' window maker didn't understand this. Every craftsman I have ever dealt with is a master of the inspirational as well as the functional. And anyone who as even glanced at one of the innumerable home decorating magazines knows that windows are a fashion statement.
The aspirational/inspirational has also long been part of the technology culture, as he points out:
Apple Computer, of course, is often mentioned as the ultimate aspirational technology company. It isn't simply that the iPod or the PowerBook is "well-designed"; it is that Apple realizes the extent to which the people buying its products are making a statement about their good taste.
Even if a Dell Windows machine does all the same things -- and is less expensive and faster to boot -- it still doesn't matter, as a walking tour through any tony design studio will tell you.
But I would argue that this over simplifies the case. Designers chose the Apple long ago because it was functionally better for graphics. And the Dell machines are not ascetically unattractive. (In the interest of full disclosure - I am writing this on a Dell Windows machine).
Rather than divide products on the aspirational versus functional line, I think the winners will be those who appeal to both (as the headline of the Gomes article implies). We can't forsake functional for merely decorative; but nor need we settle for boring. In many ways, the I-Cubed Economy is the aspirational economy as well.
Posted by Ken Jarboe at 08:57 AM | Comments (0) | TrackBack
August 01, 2005
American Job Creation Act - not
Last year, Congress passed the American Jobs Creation Act which gave companies a tax break if they repatriated their overseas profits. Well, according to Business Week, "Profits Head Homeward, But Where Are The Jobs?", the bill is not necessarily living up to its billing:
U.S.-based companies are on track to repatriate upwards of $520 billion by the end of December, estimates Henry "Chip" Dickson, chief U.S. equity strategist at Lehman Brothers Inc.
. . .
But if there's little doubt the money is pouring in, figuring out exactly where it's going is another matter. Though the bill was promoted as a job-creation measure, regulations set by the U.S. Treasury leave companies wide leeway in how they use their repatriated profits. Hiring, capital investment, research and development, marketing, acquisitions, pension funding, and debt repayment all qualify -- and companies do not have to disclose specifics of their spending plans. They also have three years to allocate the cash. Moreover, if a company plows its foreign profits into research and development, for instance, it could take money previously earmarked for research and use it elsewhere. "You can't trace the money," points out Mickey D. Levy, chief economist at Bank of America Corp.
Still, some companies are starting to show how they're putting their newfound treasure to use. In June, Pfizer paid $1.9 billion for Vicuron Pharmaceuticals Inc. (MICU ), a King of Prussia (Pa.) biotech firm. Pfizer also has initiated a $5 billion stock buyback -- though the company says that isn't a direct result of the profits it's shipping home, since share repurchases aren't allowed under the Treasury regs. But a spokesman for the New York-based drugmaker acknowledges: "It's hard to say where money is going to and coming from."
One thing is clear, however: The money piling in from abroad as the result of the Jobs Creation Act has done little to actually spur hiring. In fact, six of the 10 companies repatriating the biggest totals are axing workers in the U.S. They include HP, which announced July 19 that it would cut its head count by 14,500 in the U.S. and abroad, and Pfizer, which has said it will shutter 20 factories with undisclosed U.S. job losses to lower costs by $4 billion by 2008.
Oddly, the repatriation is also cutting into profits. The reason: Even that measly 5.25% rate means companies must pay higher taxes than they had budgeted when the earnings were tucked away outside the U.S. Pfizer has taken a $1.7 billion charge to cover taxes on its foreign profits in the first half, while Merck & Co. (MRK) has said it would have to take a one-time charge of $1 billion if it goes ahead with plans to bring home $15 billion.
Use of the tax code to achieve specific policy has always been tricky -- but that doesn't stop policy makers from trying. There are notable successes, such as the mortgage interest deduction that has spurred homeownership (and contributed to the real estate bubble, according to some). But there are also numerous programs that exist through shear momentum. The US tax code is the biggest example of our industrial policy. Yes, we have an industrial policy even though the use of that word is forbidden in polite company. It is hidden away in the closest of the tax code where only lobbyists accountants and tax attorneys can play with it.
It is unclear whether many of these industrial policies have anything to do with either helping or hindering the I-Cubed Economy. I would hope that the President's tax reform commission is looking at the relevance of these hidden policies - but I am not optimistic. Maybe the case of the American Job Not-Creation Act might spur greater scrutiny.
Posted by Ken Jarboe at 10:25 AM | Comments (0) | TrackBack