Ryan Boze's Blog

Is it a good idea to encourage ALL employees to trade in these markets?  Should insiders and/or highly uninformed people be allowed to trade?  Do they help or hurt the market?

I have no real justification for my opinion, but my gut instinct tells me that encouraging ‘all’ employees to take part in the market through rewards other than those that are inherent to the market might skew or otherwise change the outcome of the markets.  That is not to say that more traders or users of the prediction markets yield better results, because I think that this is true.  But I feel that mis-aligning the incentives of why or how a person participates changes the underlying reason for participation.  I think that it is best to ex pres or convince people of the usefulness of the markets and through this encourage participation.  I feel this way because I believe that free-market economy is more than just a civil system, it is a representation of human psychology.  Not all people chose to participate in stock markets to invest.  They may chose other avenues to reach similar goals.  Without further discussing a detailed topic, I will simply state that there are still two very differing opinions, with a lot of empirical evidence on both sides, on whether markets are efficient or not.

Fundamentally, I like the idea of well-informed or “inside” traders having a role in the market, because if market efficiency is true, then they provide a unique set of information about the market that they participate in.  It is hard to truly say, but I will instictivly say I believe they would ultimately help the market.

In what other industries or areas would Threadless’ community-driven product development model work well?  And not so well?

I had not heard of the company prior to this research, and to be quite honest I can sometimes be a little cynical toward these types of companies, but I was truly impressed not just by the performance of the company, but the dedication and talent from the people throughout the organization.  I think that they have done a great job with developing a passion into a business and creating a very strong culture that understands and loves their product.  Additionally, they have a very clear understanding of what has helped them realize success.

There are a couple of companies that currently exist that have either copied or use the same type of community driven system.  A lot of these companies are not structured exactly like Threadless, but other sites like Etsy.com, an arts and crafts or handmade goods, site that provides a community for people to buy and sell their work.  It seems that anything art driven; paintings, glass work, metalwork, music, video production, etc would be good targets from community driven commerce companies.  One thing that came to mind as I researched Threadless is that a large number of software development companies (or just people) use this idea to develop products by being open source.  People who use the products can use it, review it, critique it, rewrite it, virtually do anything to make the product better.  I think it would be difficult to use the crowdsourcing idea in service driven industries.

On-line social networks have become ubiquitous in the past few years. What forms of value do users get from these services and who is most likely to sign up on LinkedIn versus other sites?

In rapid succession, we have seen a number of social networking sites fight for user base and domination based on the fundamental power of the networking capabilities of the Internet.  Once companies and people realized just how powerful social networking really was, there was and is fierce competition to either come up with the platform that will be used by everyone, or segment out various platforms to meet the specific needs of users.  A common phrase I heard several years ago was, “well, I am not joining MySpace because you constantly get solicited with junk you don’t want” and subsequently, “I am going to join Facebook because it is more professional”.

I think this leads to an interesting point, in that, even though social network companies might want to have the winner-take-all, meet-all-needs platform, people actually like to segment themselves.  Another common phrase that has existed long before social networks or even the Internet is “I like to separate my professional and family life”.  To me, the overall market is large enough to have a variety of social platforms, but only separated by the services or needs they fulfill.  I think it is rather obvious that LinkedIn attracts users interested in a professional platform.  In my mind, this is a very large, virtual business networking community that models non-virtual networking models such as Business Networking International (BNI).  It will attract job seekers, recruiters, professionals looking to network, people looking for professional services, etc.

How do Wikipedia’s processes for creating and modifying articles ever lead to high-quality results?

The basic premise of Wiki’s, being that they allow a large number of people to collaborate on a topic, subject, issue, etc. sets the groundwork for why Wiki’s prove to be so efficient and relatively “correct”.  In my opinion, most people are rational, or otherwise logical and inherently act accordingly.  To make a small example out of this, I put myself in the shoes of “most people” out there and will honestly claim that if I do not know the facts about a subject matter (lets say the battle of Fredricksburg during the Civil War), I would not post or manipulate the Wiki on this subject matter.  On the other hand, since I have 7 years of experience in Broadcast TV operations, I might post on how to hook up a TV monitor.  My broader point is that normal people that are interested in Wikipedia, likely use it for its intended use and treat it the same as doing research in a library or submitting a document for a professional journal, magazine article, or other official publication.  I believe that this accounts for the majority of information that is posted.  The remaining percentage of false, misleading or malicious information that is posted is filtered even further by the structure, processes, and tools provided by Wikipedia.  First off, all information is saved, so there is a record of anything that has been posted.  Second, I think that it is well enough known that Wikipeida should not be considered a “primary” or ultimate source of information (even though I believe it is correct more often times than not), and this leads to people using the information as a reference with an understanding to check citations and sources for posted information.  Lastly, I think that as more people use the service, there is more exposure to the information and that leads to a majority of “rational” and “logical” people using the service to self-police posts to correct for accuracy.

What are the advantages and disadvantages of implementing internal versus external employee blogs in a corporate setting?  Are there certain industries where one of these strategies makes more sense?

It seems that in the modern business environment, firms need to make continual efforts to eliminate “under the table” dealings, shady accounting and financial practices, biased hiring and promotion practices, etc.  I feel that Rangaswami makes and excellent argument at the end of the case regarding external blogs offering transparency, accountability, and efficiency.  On top of that, he brings to light a strange phenomenon that occurs when contemplating the difference of the new digital and traditional environments by asking; “what is the difference in posting a negative viewing external blog and going out to a dinner and talking badly about the firm?”  I think both of these arguments describe the clear advantages of external vs. internal blogs with a firm.  I do think that difficulties arise in having some sort of discretion or editorial process that external blogs must filter through so that obvious or unintended posts do not bring harm to the company.  On the other hand, internal blogs will be much easier to control and monitor.  It seems to me that internal blogs will help communication within a large firm, but the internal barriers will almost naturally limit or confine the true thoughts or concerns of employees.  Either way, I firmly believe that any step toward increasing communication and collaboration will help most, if not all firms in the long run.  Look at where we have come with the e-mail.

I am not sure if I can name specific firms or even industries, though I am sure a longer more in depth analysis might develop a scale, to determine which firms might benefit more from blogging.  In my mind though, I think that two characteristics stick out.  First, I think larger firms because as firms grow in size there seems to be a diminishing effect of communication and collaboration.  Secondly, I think that firms that offer a greater number of products or engage in a greater amount of R&D will have larger benefits as the blogging environment will increase the flow of ideas, problems, etc.

P.S. I hope Denny Hamilin can take a second black/white checkered this weekend at Martinsville!!!! Boogity Boogity Boogity, lets go racin!!

Has the digital music market tipped in Apple’s favor forever?

In my opinion, the best decision Apple made was to offer an easy to use, digital download space for full track downloading.  This was a good move because Apple was able to reach consumers in a way that they were used to while offering slight adjustments to buying options.  Consumers now had the option to download or purchase selected tracks instead of having to purchase a whole album.  Additionally, the tracks (or a whole album purchase) were within the consumer price threshold.  On the other hand, I think that Apple was able to become dominant because people preferred iTunes since they “owned” the music after purchasing it.  In most cases, people could still make copies of songs and in turn, led to some degree of pirating.  Since people were used to digital services such as Napster, they chose to go the Apple route because a.) the iPod was sleek, convenient and easy to use b.) gathering music is easy and relatively cheap and c.) people could still utilize piracy.

I think that Apple can enjoy a certain amount of dominance for a while; maybe even five to ten years in the future.  I think in the long run though, as most all markets, more firms will figure out how to compete with Apple and leverage their weaknesses against them and ultimately reduce margins.  Over the past four to five years, Hendrick Motorsports has enjoyed a large margin of success over the other race teams, primarily for their ability to adapt to the changing model of the stock car to the COT.  This gave them such an advantage because teams stopped thinking about how to make their own cars faster/better and started to figure out what Hendrick was doing to be better.  Once the other mobile carriers and digital music players learn to leverage their own resources to offer a better product more competitively and stop trying to copy Apple’s model, they will be able to carve out some of Apple’s market share.  I think that the market might begin to swing once we see consumers change thier minds and buying patterns of digital music as mentioned by Rob Reid from RealNetworks.

What are the strengths and weaknesses of the Brightcove business model?

I was not aware of Brightcove (BC) as a company until reading the HBS case.  Toward the beginning of the case, I questioned whether BC had a viable opportunity to being successful if it was trying to compete as an on-line video distribution source.  Part of me wondered if BC was the company behind Hulu (later finding out hat it wasn’t).  My point is that one of the core weaknesses of their business model was their inability to capture the consumer/viewer audience.  Early on, it was their intention to be the content provider for all formats of video (TV) distribution by collaborating with content producers and networks via broadband distribution.  As far as I can tell, and after doing a little extra info searching, they were not able to achieve this goal by lagging behind the YouTube, Hulu waves while facing tense competition from traditional distribution networks such as local TV affiliates, cable operators/broadband providers, and satellite carriers.

On the other hand, I think they narrowed their strategic focus by providing a content production driven platform that helps producers integrate and expand their internet presence.  I think that this strategy was realized by the early decision of launching the platform that was tailored to media providers and production houses.  I think they will find that this will be a better platform for them as it still retains most of the revenue streams (advertising, service charges, etc) that the original model expected, but will face less intense competition.  They are also taking advantage of the “long tail” theory by providing high level production and distribution services to smaller or more focused niche content producers.  This strategy will help establish their position as a higher quality service to those producers that want to capture a particular audience.  In turn, BC will be able to provide advertisers with a special, niche marketing opportunity.  BC can help companies pair up specific products with specific audience groups rather than expensive mass marketing or branding initiatives like FedEx sponsoring the Gibbs #11 race machine driven by Denny Hamlin.

1. Is search a winner-take-all business?

Even though it might seem that Google is a winner-take-all business because of its extreme popularity, I think that there are a couple fundamental aspects to its business model and industry that make it vulnerable to increased, viable competition.  First of all, we see that the upfront, ongoing, and exit costs are very low from a user point of view.  Second, we know that barriers to entry for competition are low for existing technology firms.  There are many players that range from big boys like Yahoo! and Ask.com to many regional competitors that offer customized portal services that piggy back on connection services such as Comcast or Cox communications.  Even if users aren’t committed to these special services, they have the availability to switch at any time.  Less fundamentally, I personally feel that it is more human nature to start to become weary or opinionated of large firms or organizations that have become the most popular or “leader” of an industry.  This leads to the company being susceptible to fall.  This phenomenon is particularly apparent among race fans.  A rookie driver that is on the rise and beating some of the traditional drivers brings a sense of refreshment in a sport that has limited competitors.  But one wrong move, a wreck or a temper tantrum, by that rookie can lead to fans going right back to pulling for the veterans (old guys).