Archive for May, 2020

What does profit-free mean to me?

May 30, 2020

I’m into discontinuous innovation. Back when we did that, we created a category and economic wealth. We had to create a technology, a product, and a market. It was not a fast process. We had to create that economic wealth consisting of new industries, new value chains, and new careers. This economic wealth is what got us a premium on our IPO. But, that was the old days.

I’m into the technology adoption lifecycle (TALC). Discontinuous innovation starts in one place and might cause a Foster disruption. Continuous innovation starts later on the other side of the mean of the aggregate normal that is the TALC. The TALC is the story of the birth, life, and death of a category.

And, I am from the old days when the whole point of a product was to advance the adoption of the technology, a technology that bent or broke a constraint. You sold that product. Your business was focused on that. You didn’t deal with alternative monetizations. You didn’t pretend to be publisher that denied being a publisher, so you had no responsibilities to no one, but yourself. You didn’t sell eyeballs. You made a profit. You got VC money to expand your market, rather than code. And, you bootstrapped. Your valuation did not come from your ability to pitch. And, if you were a serial entrepreneur, you actually built a company and sold product. You knew how to do more than pitch.

Continuous innovation is about improving a technology, not replacing it. It is about the old theory where discontinuous innovation is about completely replacing the old theory with a new one that springs from a completely different basis. Continuous innovation is what VCs invest in. When the VC requires an existing market, that boils down to investing in only continuous innovation. You make some money with that, but you don’t create any economic wealth and that point is apparently lost on everyone. Continuous innovation will not earn you a premium on your IPO.

Now, business schools teach whatever is interesting. But, they mostly teach how to sell a commodity and how to extend the life of the company by extending the life of the category. Design thinking gets that done. Book cooking gets that done. And, a Christianson downmarket move gets it done. But disruption beyond the downmarket move gets us in trouble.

A category once born is filled with competitors. Someone is number one. Someone is number two. When there is room in a category, the freed up market allocation is distributed to the companies already in that market. And, a new entrant might take that allocation. At first the allocations are made by the market. You win those positions by serving the market. Later, when the underlying technology becomes a commodity, market share can be bought. You are in the late mainstreet or later phases of the TALC, your margin is tight before you can buy market share. This is where we do something that we call “compete. Before this you get, at best, 74 percent of the unallocated market. The market leader gets a lot and everyone else get way less. This is the world where b-schools teach you to manage.

What have we been doing since the dot bust? The VCs have insisted on existing markets, b-school territory and quick returns. Microsoft couldn’t happen today. We don’t do that anymore. Instead, we do design thinking, and Christianson disruptions. With this type of disruption, you have no technological basis, and we pretend that business models do not have s-curves. We pretend that management alone without invention is innovation, and that management is not about bending or breaking constraints. Bogus! And, we pretend that we don’t need a profit as long as we drive all the competitors out of the market. Alas, that takes a long time. Uber will win only when no other taxi company exists. Right not, Uber uses predatory pricing to kill their competitors. Amazon leverages their no-sales-tax sale to close BAMs before they enter the same markets with their own BAMs. The business world seems to believe that as long as … antitrust law will not be enforced. That is a minefield. Anyway that seems to be the hope for all these did nothing unicorns, that they can be the monopolist. Not good, either for them or the consuming public. I know that I can’t get a cab. And, I know that I could reserve a cab long ago in my Austin days, long before Uber.

Economists warned up about globalism. They told us someone would profit, but they didn’t know who. They knew that some places would profit, but again, they didn’t know where. And, they warned us not to zero-sum the profits from globalism. The latter is exactly what we have done. We are not investing in new economic wealth/discontinuous innovation. And, we are politically engaging in kleptocracy, the means by which a country becomes a third-world country. We are being put into grave danger by refusing to innovate discontinuously. We are in grave danger of our innovation-free means of innovating. Profit free is hazardous to our future.

A once sales VP used to say, get back to work.

Anyway, enjoy!

Changes

May 30, 2020

I am no longer on Twitter. You have not seen any Strategy as Tires tweets in quite a while. And, you have not seen any Product Strategist blog post promotion tweets.

I have been publishing my Strategy as Tires content in a blog of the same name. Read those tweets at https://strategyastires.wordpress.com/. A blog doesn’t enforce wordcount, so they are short blog entries. Some of them are tweet length. And, I have not done more than one a day. I will edit this stuff and shorten them and burst them out into multiple tweet length entries. It is coming. The content will again, be the familiar Strategy as Tires content.

I am also putting my pror tweets to the extent that I can find them in my tweet archive in the blog as well. That has just started. Those blog entries look very different from my recent “tweets.” They will all look like these blog entries in about a year. There is way too much to do.

I miss my twitter community. Please visit and follow my Strategy as Tires blog.

Thanks.

Cannibalization

May 13, 2020

I’ve blogged on this topic recently. See On Cannibalization. In that post, I drew a sketch of what the technology adoption lifecycle(TALC) would look like because of the cannibalization of the early mainstreet (EM) phase. I put user-led growth (ULG), a new normal, in the aggregate normal that represents the TALC.

I drew the early mainstreet phase as being flat. That is in the distant future. The work and the money is moving to the cloud. But, it is ding this slowly. And, the situation is bifurcated. The enterprise functionality that has moved and is moving to the cloud are vertical applications. The horizontal applications are more resistant. These horizontal applications are a great target for the user-led growth companies.

I’ve drawn a new diagram of the emerging cannibalized TALC.

The red line represents the aggregate shape of the TALC. The black arrow shows the early mainstreet vertical application migrating from the early mainstreet (EM) phase to the vertical layer of the cloud phase (CV). The grey lines represent the former TALC. The user-led growth is shown as the horizontal layer of the cloud phase (CH).

The device phase is shown unaltered by the forces acting on the cloud. I’ll ignore the G5 impacts in this diagram. But, more functionality will be available to the “laggard”-based phase that I’ve been calling the device phase.

Notice that the early mainstreet phase does not disappear as that is dependent on the success of the user-led growth phase. The early phases of the TALC was predicted on the near-monopoly results obtained by the bowling ally and its aggregation in the tornado. Cannibalization threatens this. But nobody is doing discontinuous innovation these days. And, early mainstreet is being approached after success on late mainstreet. The only problem here is that the reverse pathway does not get you to that near monopoly. The innovation is on the reverse pathway is continuous, so the result is a successful cash play without creating any economic wealth. The normal pathway for discontinuous innovation got us to the success of that near monopoly, which got us premiums on our IPOs. No premium is the fault of VCs not investing in discontinuous innovation, rather than a failure of the financial markets to understand.

The increased number of nomials forces some changes to the organizational structure of the company that does discontinuous innovation on an ongoing basis. Each phase is different. They are not generic. A product can be birthed as either continuous or discontinuous. A category is birthed only discontinuously. A category is a collection of vendors, not a single vendor, hence the economic wealth creation and the premium on such IPOs.

The layering of the cloud is new. The functionality already show us that at the jobs to be done level, the work in those two layers is significantly different. So the divisional organization that runs the cloud will have two organizations reporting to it instead of one. The horizontal layer organization will own the user-led growth companies. More than the technology will be different in that layer.

Notice also that the cloud horizontal/user-led growth is skewed and kurtotic in the figure. Eventually it will achieve normality. Until then, put the money on the short tail side of the distribution.

Enjoy.









Circles

May 10, 2020

This morning, I found myself reviewing some math before moving forward into some new-to-me math. A sheet of paper and a pen took me to a few surprises in familiar territory. It all began with having read “Question becomes a conjecture.” Just attribute that to some unknown source, not me. It was on a passing page. I was not online. And, Google didn’t find it. Besides, we are off in a ditch now.

Back in the late ’80s, NASA held a hypertext conference. Researchers from the Microelectronics and Computer Technology Corporation (MCC) in Austin presented some work on formal requirements. CS majors were proving programs. But, nothing beyond it works could be said. It did what we coded, yes. But, did we code the correct thing? Who knew? Formal requirements were supposed to resolve that problem. Connecting code to it’s requirements was the point.

This approach begins by asking a question and encoding the answer in If…then… statements. Thus, eliciting requirements became a generative process. Asking more questions gets you a tree. A tree becomes a triangle. So my triangle model began. The triangle model became a place to embed the waterfall. Yes, the hated waterfall, a classifier of decisions. At the end of all the decisions was the base of the triangle, a user interface. Later, the use case layer was added.

So logic is a triangle, and question is a conecture.

It may take a century or more to answer that question. And, that answer might involve new theory that will make us a ton of economic wealth. Hell, cash these days is made from nothing. Cash is the joker, not the king.

Somewhere along the way, I added Goldratt’s theory of constraints to the mix. The peak of the triangle became the origin. A generative system built outward from the origin until it is blocked by one or more constraints. The constraints form an envelope. What you have is a multidimensional mess. For me, the point of product has always been to bend or break one or more constraints. Alas, this is continuous innovation. Better, quicker, cheaper, … , more profitable for the seller, …

Discontinuous innovation builds a new triangle from new theory, but it gets adopted by approaching the existing use cases even if it has its own use cases. It gets close. It approximates. It approaches. It reaches out. It converges, but only at the use case. It jumps a dielectric there.

The next notion on the list is having read a property that just was, chirality. Chirality is a property of asymmetry. Chirality was said to be Boolean. Either it was the case, or it was not. Now, boil that down to existence (∃). Chirality exists. Chirality, has become parameterized, quantified, leaving that Boolean behind. Existence is a surface. Parameterization moves us out on some normal from the surface of existence to another surface, or other surfaces.

Back to constraints for a moment. When you break a constraint and discover new constraints, you have gained some surface, some area, some volume in which to extend your use. You have more, or inversely less, which generates some income for the facilitator/vendor/us.

After making that list, I got back to the hunt for diagonals.

A circle has one diagonal. When you use that diagonal as the base of a triangle, the angle of the intersection of the two lines drawn from the ends of the diagonal to a point on the circle will be perpendicular. If we are talking data, a circle implies no correlation, as does the perpendicular intersections. The center of the circle or origin implies, statistically, the mean.

A circle also means that the data is no longer skewed or kurtotic. The sample represented by the circle has achieved normality, or has normalized the data to prematurely assume normality. When normality has not yet been achieved, the sample space is hyperbolic, but once normaly has been achieved that sample space may be spherical. At a minimum, the sample space is Euclidean. It becomes spherical as normality is achieved and sigma increases beyond one.

A triangle has an incircle (inside the triangle) and a circumcenter (outside the triangle), so that triangle has two diagonals: one for the incircle, and another for the circumcenter. Triangles have many centers and circles. An incircle is tangent to the sides of its triangle. That incircle has a gap between it and the triangle’s vertices.

The incircle can represent a Poisson game, a game of an unknown number of players. Poisson games is one way of thinking about the bowling ally, a functional construct in the technology adoption lifecycle (TALC). In the bowling ally, the company bringing a discontinuous innovation to market begins to create that market by selling the technology in a client engagement with a B2B early adopter, another TALC phase. The B2B early adopter is the first player in the vertical market’s Poisson game. The B2B early adopter is the entry point into the vertical. Vertical markets are specific to vertical industries. These markets are not entered in the manner as one enters the mass market.

The vendor does six of these client engagements sequentially with the intent of winning market leadership in all six vertical markets. That market leadership is earned, rather than being bought.

Bring it back to geometry, each early adopter has their own Poison game, and their own triangle. Each triangle has its own tails. The distribution has numerous tails. The distribution is asymmetrical. The asymmetry is reflected in the cyclide that surrounds the hump of the distribution. As normality is achieved, that cycide will become a torus. The eccentricities become uniform because the tails become uniform.

As it is, not yet having achieved normality, the diameter of the triangle’s incenter is the short tail of the distribution represented by the circle. The triangle has two more tails, long tails. The short tail will not get shorter. The long tails will contract as the distribution achieves normality. Money put on the short tail will persist, while money put on the long tail will be lost.

Using a circle to to represent the distribution is a simplification. It should be an ellipse. That ellipse will show a correlation between two dimensions captured by the sample data. There would be many such ellipses.

Back to the diameters, the square has two diameters. A square can be encircled. That implies that a square has no correlation.

The large circle would represent the population mean of the adressible market. The smaller circle would be the represent the sample. The population distribution may have achieved normality. That implies nothing of the sample distribution. Once the sample population achieves normality, the population distribution will have already achieved normality. Do not assume normality. That assumption will cost you money.

The reality is that a rectangle will represent non-normal, kurtotic distributions.

Keep in mind that a circle only has one diameter. A square has two. A rectangle has two.

These distributions will be skewed. Rectangles have two diagonals. These rectangles are still abstractions. They represent ellipses. Those ellipses would result from regressions involving two different dimensions meeting at some angle other than right angles. I do not have a tool that can draw them. If I could draw them, the rectangles would be tilted as would the ellipse.

Using circles instead of rectangles causes us to exclude much of the population generated by the long diameter and its larger circle. We need to use an ellipse here.

In the last few weeks, I came across a theorem about quadrilaterals. A quadrilateral being a geometric object having four sides. It turns out that it is an object that organizes two triangles, aka two code bases, that face each other in the market. It goes further when animated as it shows the results of the competitive face off of the two code bases. I have yet to extend this to more competitors.

So A and B are the two competing code bases. A is coding more due to the revenue spit between them. A cannot exceed 74 percent of total market share. B holds the number two position in the market. B cannot capture more than 19 percent of the remaining market. The figure was drawn without these considerations. The gray area hints at A’s concessions to antitrust law for expanding outward, and for incurring into B’s market share.

Each numbered line is a release as per the triangle model. B lags A. The red lines illustrate how the market boundaries move when A wins in an incursion into B’s market. The incursions are a darker color than the release that delivered them. The white areas indicate yet to be delivered code, aka areas that will be filled by future releases or other allocations.

Anyway, such fun. Putting this in the context of a normal distribution is next.

This diagram starts with a quadrilateral where A defines a triangle facing B, and B defines a triangle facing A. This gives us four radi. Two of them are the same, so we end up with 3 circles. We will get to the grey circle later.

Each of the lines defining the quadrilateral are policy lines. A defines two of those lines, and B defines the other two lines. It takes an effort to enforce these lines. They are constraints. We are not just serving the normals implied by the circles. There are three light blue areas. They are labeled in a darker blue by the numbers 1, 2 and 3. The populations in those three areas require some code of their own. There are two light green areas. They are labeled in a darker green by the numbers 1 and 2. Those populations require their own code. Divide and conquer translates into divide and complicate.

The vertical purple line is the line dividing the market between companies A and B. A, an outlier, is far away, however, A impacts the division of the market space. A’s constraints are not ignored by B.

B is focused on the dark blue population. B extends its policy lines to see around the population it is focused on. Extending these lines gives rise to the light grey (1, 2, and 3) and dark grey areas (1 and 2). It also moves A to A’. A is no longer far away. A’ maybe a mirage. Get some data.

Extending the lines moves the radi lines and the circles.

The important thing here is that the quadrilateral gives rise to the need to enforce policy, in other words there is a need to say no. Your competitor’s policy lines effect you and yours. Code does not reach adjacent populations. Or, maybe it does when it should not. And, lastly, code is a measure of distance. How much code will we need to serve this population? Which translates into how much money do we need to reach that population?

Anyway, draw your own pictures. Do your own math. Enjoy!