The China Bubble

Chineseflag Quickly:  Conventional wisdom glosses over China's limitations and problems.

Roger Cohen's starry-eyed China tribute in the New York Times is emblematic of the runaway euphoria surrounding that emerging economy. Threat to America…threat to Asia…ready to overtake Europe in the next 10 years…exploding – the gold rush place to be...450 million cell phones…becoming highly creative and innovative…the new model…the future.

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Not an IT/BT recession

Img_0773 I was at a Forrester event on Wednesday with 50 $1B+ CIOs and Enterprise Architects. When I asked the group whether they thought we were in a recession, three fifth's said "yes." Then I asked whether they thought their tech budgets would be cut this year-- one fourth said "yes." And one smart ass CIO said, "Hey my budget always gets cut -- nothing will be different about this year."

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Advertising's Limits

Quickly:  Advertising's limitations will put a lid on the "free" economy.

Chris Anderson's article in the latest issue of Wired claims that Web economics will drive almost all content to be "free," funded by advertising, cross-subsidies, etc. While this is an obvious conclusion given Google's run, advertising has its limits:

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IT saves GM?

Gm_2 Here's the lightning account of what's happened at General Motors over the last ten years. The company lead all automakers in cost. Even though its IT was outsourced, it ignominiously sported the most expensive IT costs per car. Enter Ralph Szygenda as CIO with the charter to fix the mess. Ralph (along with then CEO Roger Smith) realized that they had to change an out-of-control decentralized culture in which every brand did things their own way. So Ralph didn't focus on tech -- he centered on standardizing process -- designing, engineering, manufacturing, and selling vehicles the same way, all over the world.  The results have been amazing: costs down, quality up, speed increased. With a single process language the company can now design a car in China and build it in Detroit. It has gone from total decentralization to global in the space of a decade -- an amazing achievement for an organization of its size.

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Social Sigma

Under Six Sigma, companies gradually improve process to enhance the quality of their products. With Social Sigma they use feedback from social networks to improve products.

Two great examples.

1) Credit Mutuel, the second largest retail bank in France, has been drafting its customers into product improvement through a program called, Si j'etais banquier -- "If I was a banker." The bank has recorded more than 50,000 suggestions, e.g., "If I was the banker, I'd explain the fees in clear terms." and recently let customers vote on the top 30.

2) GM's Fast Lane blog carries some amazingly straight-up conversations about GM's cars and trucks. Bob Lutz, the company's chief designer, uses the blog to hear firsthand from customers about design, quality, and product problems.

Product design and R&D will become much more of a continuous conversation -- not a black box, "Here it is!" process. Products will be revised under much tighter schedules, with obvious product errors corrected in new versions.

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Ode to 18-1

The only way I could pull myself out of post Super Bowl depression was through lyric therapy. Here is my inferior attempt at Keatsian tribute.

Ode To 18-1

As the snow settles over,
A wet-eyed New England.
And the Patriots fade,
Like a dying failed friend.

Let us all remember,
An extraordinary season.
Beyond logic, and history,
Beyond NFL reason.

Of the many fall Sundays,
When their game made us sing.
The perfection, great play,
As Tom's passes took wing.

Of all the adjustments,
And all the game plans.
And a ball-hawking defense,
In great red-zone stands.

They beat Big Ben,
Came back against Peyton.
Beat Rivers twice,
And escaped the feared Ravens.

The records they fell,
Without ever a loss.
Stolen away,
By Brady and Moss.

And all the O line,
Kept the offense on bright.
A wall of teamwork,
From Mankins to Light.

As the record it grew,
And the snow replaced rain.
Don Shula and friends,
Didn't drink their champagne.

The media brayed,
"We'll wait and see."
But Bill he steered clear,
Like his father's Navy.

Stop and think for a second,
Of all of the fun.
And how cool that it is,
To be 18-1.

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Why Yahoo+Microsoft will help Google

Three reasons:

1) Google gets the best and the brightest from Yahoo. Why? Compensation. Microsoft, in a titanic mistake, eliminated stock options as an employee incentive early in the decade, replacing them with  much less lucrative and leveraged restricted stock. If you're a hot programmer at Yahoo, you'll get options at Google -- not at Microsoft. Aside from compensation, Google's culture, speed, lack of bureaucracy, location, lack of legacy will be big attractors of talent.

2) The confusion factor. Microsoft has never acquired or absorbed anything as large as Yahoo -- unlike Cisco it has no culture or processes around large-scale integration. Microsoft's tight programming ethic will be naturally suspicious of Yahoo and its culture of media and advertising. When the inevitable integration plans are drafted, MSN and the search gurus at Microsoft will defend turf. In a market defined by a quick pace, Microsoft will take years to get this integration right.

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Davos 2008 Part Five: Social Sigma

I was involved in a session on social computing -- Facebook, MySpace, etc. I always bring Forrester data to Davos -- in an attempt to cut through the slugs of opinion/speculation emanating from all concerned. For U.S. people on-line, here's what percentage go to each of the following sites at least once a month: 31% YouTube, 29% MySpace, 22% Wikipedia, 8% Facebook, 3% Friendster, 3% LinkedIn, 1% Second Life. In every major country in Europe, MySpace is in the top three most popular social sites -- Facebook is only in the top three in the U.K. The social computing elite who populated my session beat me up about the data -- they all think Facebook is much bigger than the data suggests. My theory is that Facebook is the white collar place to be, and MySpace is too blue collar for the elite...

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Davos 2008 Part Four: India

All of the Indian outsourcers were there. Infosys' lavish parties from year's past have upped the ante -- now all of the top Indian players are out in force. They have five worries: 1) the "tax holiday" that the Indian government bestowed on Indian IT companies will not be renewed in 2009, 2) the price of the rupee is too high, 3) the price of the dollar is too low, 4) U.S. recession, and 5) somehow, someway to get leverage. The ten year math on Tata/TCS, Wipro, Infosys and their smaller brethren doesn't work. There aren't enough smart, employable people to satisfy their current growth rates, and the planned growth of IBM, Accenture, and the captive players. They should go into the software business...

Davos 2008 Part Three: Asia

Asia was a hot topic. The consensus was that the Asian economy is not decoupled from the U.S. economy. A U.S. recession will take Asia with it -- at least for the next five years. There is $9 trillion of consumer spending in the U.S. per year, and only $1.6 trillion in "Chindia" -- China and India. If the U.S. consumer stops spending, Chindia can't make up the difference. Big debates about whether China can pass the EU or U.S. in GDP over the next 25 years without political reform. A lot of the hard-bitten economists and business people say that China will "muddle through." Pei Minxin of the Carnegie Foundation said that without political change, the Chinese people cannot see the future. He called China's expansion "authoritarian growth" or "high-speed, low-quality growth." In his opinion, political change is inevitable. But the Chinese government watched the clumsy Soviet Union to Russia transition and doesn't want to make the same mistakes.

The wane in U.S. power and influence was a subtext of the proceedings. If the U.S. economy was truly de-coupled from the rest of the world, you get the impression that no one at Davos would be talking about America --they'd be focused on the fast growing India, China, Korea, et al economies.