Whichever way you measure national productivity, it’s growing at a snail’s pace both in absolute terms and compared to past growth rates. (See Sidebar.) And that’s not a good thing as increases in productivity improve our standard of living. SIDEBAR: Measures of Productivity Labor productivity, the measure most often cited, captures the amount of goods and services produced (output) with the number of hours worked to produce those goods and services. Multi-factor productivity compares output to the amount of combined inputs (labor, capital, energy, materials, and purchased services) used to produce that output. Economists argue this measure better captures the impact of technology advances. Not all experts agree productivity is an issue. Bloomberg blogger and investment expert Barry Ritholtz argues that productivity is higher than we think because our current measures fail to capture innovations in the digital world that have changed how…
Has the drive for efficiency through cost cutting gone too far?
The drive for efficiency has gone too far in my estimation. “But efficiency is always good,” you might protest. True, productivity gains increase incremental profits all else equal. But “all else equal” rarely holds true in practice. Therefore, like all good things pushed too far, gains from incremental efficiency initiatives may not be worth the price paid to secure them. Why is the Efficiency Goddess who brought us big box miracles like Staples, online retailing and record corporate cash balances failing us? Efficiency initiatives usually pay attention only to readily measurable costs, ignoring unintended consequences and opportunity costs. Why do CIOs limit support to only PC-computers? Why do CFOs reduce support staff, forcing administrative work onto revenue-generating managers? Such is the thinking of modern corporate managers: They are brilliant at measuring costs and lousy at measuring professional productivity. Shortsighted trade-offs are magnified as…
Smarter marketing requires more than personalized messages
I feel overwhelmed by the volume of digital messages coming at me from all corners of my life. And I am not alone. My 2013 prediction is that value is about to rapidly migrate once again in technology markets. Over the holidays I met a young woman in her 30s — a former boutique owner who now works at a leading retailer — who told me that she stopped using Facebook when she realized the postings kept growing in number and falling in sincerity. Also, she’s “unsubscribed” from retailers she buys from, finding that their recommendations based on past purchases more often insult rather than reflect her taste. She is tuning out to digital messaging much as I ignore the ads in newspapers to make my newspaper reading more efficient. Perhaps my message overload problem was not age-related, I thought leaving our conversation….
Curators: A growing business model opportunity
If you are feeling overwhelmed by the volume of information, options and messages bombarding your daily life, you are not alone. Enter the curator – a role that I believe will become even more dominant in the decades ahead, creating opportunities for individuals and companies alike. The term curator has traditionally been associated with the experts working at museums who bring together the right collection of pieces to convey new insights into a subject, be it an art movement or geological period. Normally, seeing a part versus the whole of something reduces our understanding. Who would envision an elephant from a tusk? The genius of museum curators rests in their ability to select, from an entire body of work, the right subset to deepen the audience’s understanding of both the part and the whole. There are many other types of curators all around…
Will Netflix’ business model crash as entertainment streams converge?
Netflix’s stock price is falling, fast. My take is that the decline has much more to do with the long-term viability of its business model than the stated cause – recent defections in subscribers owing to a change in its pricing formula and a (since averted) break-up of the company into two parts. Here’s a business model lens on Netflix’s issues. Boundaries are melting in the entertainment world as content that used to be available in only one way becomes accessible in multiple ways. We can see TV shows on the Internet, read physical books on-line, use videogame boxes to watch movies-on-demand and buy hardware solutions that transfer data streams acquired on our computers to our TV screens. Hollywood’s new UltraViolet System will give consumers free Internet or cable access to any purchased DVD. What’s the implication for Netflix of convergence to one…
Are eroding barriers to entry hurting your business models?
Just 7 years ago, Motorola introduced the first thin cell phone to rave reviews and industry dominance. Yet, in a flash, it faced a flood of lower cost Asian knock-offs then lost its position to smart phones only to be bought by Google. Motorola’s engineering skills, supply chain excellence, and brand name strength were of little use in a massive industry upheaval enabled by new information technology. Google, meanwhile, moves from a once-distant competitor to posing a huge threat to Apple, RIM and Microsoft Windows. Google built mobile operating system leadership by acquiring and freely distributing Android. With its acquisition of Motorola, Google will likely become a device leader. No wonder Samsung’s reducing its reliance on Google’s Android system. In the Motorola story is the story of how the information age is making it harder and harder to win at business in the…
Innovation Makes Google a Leader
Innovation is to this century what quality and efficiency were to the second half of the last century – the dominant focus organizations adopted to improve business results. From a macroeconomic perspective, the shift is welcomed. We need new-to-market industries and jobs to replace those lost to the decades-long, relentless, job-destroying drive for reducing waste and increasing efficiency. But a commitment to innovation and successful innovation can be miles apart. How can leaders best bridge the divide? Marissa Mayer, senior leader of Google’s search business and one of the company’s longest tenured employees, shared her company’s innovation formula at the University of Wisconsin Madison’s E-Business Consortium’s 2010 Business Best Practices & Emerging Technologies Conference. Founded in 1998, the UWEBC brings together leading Wisconsin companies to focus on thought leadership, business best practices and emerging technologies related to E-commerce. Each year, the UWEBC provides…
Saving Newspapers Before Google Rescues The Day
Media provides a great case study of creative destruction, to coin Joseph Schumpeter’s term for capitalism’s ability to destroy while creating anew. Yet even massive creative destruction will not reverse the basic economic principal that customers buy based on highest perceived value, where value is perceived benefits less the perceived costs to acquire those benefits. Newspapers, for example, were highly profitable when they held the unique advantage of cost-effectively and frequently reaching customers with an advertiser’s message. Editors focused first and foremost on readers, with the publisher paying most attention to advertisers. The symbiotic relationship worked … … until Cable TV and the Internet fragmented markets and provided alternative and less costly routes for commercial advertisers and classified ad purchasers to reach their target markets and paying readers to find news. The monopoly position of the newspaper as a frequent advertising vehicle was…