Blog #1 : The Proliferation of Large Tech Companies Across Developing Nations

This week’s readings were particularly interesting to me for a number of reasons. The first
has to do with me being born and raised in Ghana and the second has to do with me
existing within the technology industry. As stated across many of the articles, technology
is advancing rapidly and is spurring a lot of changes in various industries. Additionally,
globalization and its ability to connect the world like never before is playing a huge role
in the creation of new economic opportunities for many but also carries with it some
inherent risks.

As someone who exists within the tech industry, the emphasis on the India, China,
Africa, Southeast Asia(ICASA) developing markets is quite relevant and more so apparent
these days. The Global Forces Inspiring A New Narrative Of Progress, made striking
points about urbanization and its spread within the aforementioned regions and the
impact this is likely to have regarding economic growth around the world [1].
Unsurprisingly, this will constitute a shift of the economic loci from existing already
developed countries to currently developing countries, towns, and provinces. 

Various companies within the technology industry already have a significant influence in
developing countries, though they may not have a physical presence in these countries.
More and more, though, these technology companies are making strides to be the first to
set up shop in ICASA regions in order to establish a foothold in these new untapped
markets. Many of the most renown tech companies of today like Google, Facebook,
Amazon, and Microsoft, now have multiple offices in India, China and the other
ICASA regions. These companies have tended to show preference towards expansion
to Southeast Asia, India and China over Africa over the last few years perhaps as a
function of the current state of the development of these regions. Like was mentioned
in the article by Greenberg, Hirt and Smit, though Africa “has the most unfilled
potential...It also faces the greatest challenges [regarding] mobilizing it’s domestic
resources, increasing sustainable urbanization, [etc]. [1]”

Nonetheless, we see companies with enough resources slowly but surely also expanding
to Africa. For example, Google announced the establishment of an Artificial Intelligence
Lab [2] in Ghana not too long ago but has been operating on the continent for a few years
in other countries like Kenya and Nigeria. Similarly, Microsoft has also set up shop in
South Africa and has plans to invest in different initiatives all across Africa. [3] 

The proliferation of these companies and their presence in the African continent is not
surprising. Truly, their presence could be mutually beneficial to the countries in which
they settle in, as well as the companies in question. They can play a role in helping to
empower numerous individuals and local businesses if their influence within these
countries is kept in check. Otherwise, there is an inherent risk that they may end up
inflicting more harm than good by dominating the markets with their products/services
and stifling local competition since they are already so massive. 

[1] https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/the-global-forces-inspiring-a-new-narrative-of-progress

[2] https://www.blog.google/around-the-globe/google-africa/google-ai-ghana/

[3] https://www.microsoft.com/africa/4afrika/4AfrikaInitiative.aspx

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Blog #1: Technology as a Force, Not Factor: How Porter's Five Forces Can Apply Today

The fourth industrial revolution as outlined by McKinsey & Company (Dobbs et al 2015), brings a whole slew of considerations to industry giants as the benefits of digital transformation, innovation, and combinatorial technological expertise become less of a desire and more of a necessity to survive. In many ways the framework of Porter’s Five Competitive Forces that Shape Strategy have been weakened in its relevance to today’s market forces and must be reworked to understand the confluence of these forces as an interdependent woven fabric that places greater weight on technological innovation more than ever before. Yet, there exist counterweights for these market forces that can be used to slowed down or inhibit disruption, for better and for worse.

Porter’s exploration of market forces deems technology and innovation as a factor and not a force. In many respects, Porter’s assertion is correct as technology alone does not sell; it requires strategy and a need for mobilization of other resources—capital, labor, skill, and networks—to be able to create profit and capture dominance. However, the shortcoming here is that within recent years and much after the publishing of his book, Porter was unable to predict the exponential growth of technological innovation and use that underrides the very foundations of present markets.To put this in perspective:

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Within 12 years alone, from 2000 to 2012, we have seen global online traffic increase 500-fold. That is why five of the ten largest US companies by market cap are horizontal platforms, who cut across value chains due to our shift to an online world and an age of connectivity. When companies take advantage of this, they can disrupt even the most traditional and restrictive markets. Take for example, Noble Iron, started by Stanford Business School alum Nabil Kassem, took advantage of the platform capability and the any-to-any business model, and disrupted the construction industry by renting and selling heavy construction equipment. As the “Netflix of Construction Equipment,” Kassem impressively built a $20 million business in the midst of a 2008 recession. His strategy was enabled by the advent of new technology, the shift of consumers to online platforms, and the ability to bypass distribution channels. We should not underestimate how capable new entrants are of bypassing distribution channels as we know that “technology allows businesses such as WhatsApp to start and gain scale with stunning speed while using little capital” (Dobbs et al 2015).

Evidently technology is a force and the only way to take full advantage of its force is through “combinatorial effect”—combining various technological tools to aid in your strategy to disrupt markets. Yet, there are “factors”, according to Porter, which I believe can inhibit these disruption. Government policy will catch up with any-to-any models to limit disruption, as was the case with TLC and Uber (TheVerge). Additionally, the platform players like Google, Facebook, and Amazon will continue to dominate due to their ability to put large resources toward R&D. And ultimately, as technological innovation effects on productivity plateau and our population ages, more importance will be placed on retaining, capturing, and keeping talent as way to stay on top of technological disruptions. The race to digitize has never been more important, and companies will face the decision to digitize or flop.

"Culture eats strategy for breakfast"

I sat at my seat in a Hamburg Hall classroom last Friday morning not to attend a class, but to check out a series of lectures on "IT Culture Transformation."  I wasn't quite sure what to expect until I heard these words leave Francois Gossieaux's mouth during his presentation of Human 1.0.  I would spend the rest of my Friday and Saturday hearing how culture was truly the key to good strategy for a myriad of reasons.  This was not only an eye-opener about this particular industry, but also a shocking revelation as to how good some people (including yours truly) have it in this world.

Throughout the course of the weekend, we looked at various CEO and CIO strategies that failed.  They wanted to trim the fat and get more lean.  They sought industry dominance at the cost of human capital if it meant more dollars to the bottom line.  Instead of focusing on the people, they focused on their shareholders and profit/loss statements.  Granted, some companies can churn through staff and still be successful, but the ones that are the most successful and the ones you really want to work for (e.g. Google, Apple) are the ones that create a culture that people want to be around.  As Francois got deeper into his lecture, he showed how human nature always preferred to be homogeneous.  We didn't want people with different ideas and ideals, but ones whom were most like us.  We relate to them more easily, but somehow it also makes us more insular.

He gave an example of one of his tests for students and companies alike.  He would get a small group of them to form a circle, and another group on the outside to form a ring around them.  He would hand the inner group a piece of paper or a ball, and ask them to pass it around to the next person until it got all the way around.  The outer ring was not permitted to help or say anything to the inner ring.  Francois would set a time limit of say 15 seconds, and each time through, he would stress that the next iteration had to be one second faster.  The inner group would keep getting closer and closer together and at some point, fail.  The outer group would have other means of problem solving, such as everyone stacking their hands and having the item pass through each of their hands vertically instead of passing horizontally, but this thinking outside of the box was not available to the myopic inner ring.

When we create a culture that has its own inner ring and doesn't foster creativity, innovation, and new ideas, we falter as individuals and groups alike.  The key is for strategy to come from the top-down, and the culture must come from there as well.  Thankfully, we saw examples of good strategy and culture from our CIO Panel, which featured the likes of Anuj Dhanda (PNC Bank), Liam Durbin (Block Communications/Pittsburgh Post-Gazette), and Traci Vaughan (US Steel), and also from Chief Communications Officer Bob Evans (Oracle).  They obviously were in industries that were not quite alike, but found good ways of getting their employees to be part of the team and manage to keep their positive values globally.  Even if certain countries differed in culture, there were still core values of things like trust, honesty, and openness that were stressed by all three CIO's.  And as much as one can put together some lame marketing scheme style culture, the end product will show its true colors.

One other brief takeaway I'd like to add was by another CMU professor, Denise Rousseau.  Her lecture on Evidence Based Management had one thing that was echoed by all of my colleagues as a fantastic takeaway.  She showed how culture was like an Onion.  At the core, you had fundamental values.  Those were the hardest to change.  Each layer outside, such as the values, beliefs, and artifacts were the parts that could be changed with some effort.  But without changing those things, it's all just empty talk.  She emphasized how important it was to instill good core values and have a small set of tenets that everyone should abide by.  Again, it's important that the company also uses this truly instead of just using it as fancy marketing garbage.  If you stress safety, then you should strive to get your accident levels down to 0 (which Traci said they managed to do at US Steel).  If you emphasize honesty, you have to reprimand or terminate someone who is dishonest.  Well, you get the picture.

One of the big things my employer stresses is Professional Development.  They offer limitless opportunities for you to get educated on topics ranging from Customer Service to Project Management, and even how to use software like Visio and Dreamweaver.  What they've come to realize is that when you invest in your employees, the returns are substantial.  Sure, there are people who will take advantage of the opportunities and move on to other organizations.  But the standard they set of really caring about their employees and wanting to see them advance up the ladder is highly encouraging to our staff.  We're given the opportunity to take courses that we're interested in even if they are not related to the job we currently possess.  This shows my employer's dedication to advancing the careers of their employees.  Considering how many people are still here after more than 20 years is a testament to the good example of how my company retains employees and rewards us for wanting to learn to do more.

Culture is all about setting a good precedent for your company.  And in the readings this week, we saw how IHG was able to turn around their poor efforts into a profitable one.  In discussion, we saw how Southwest made their culture into a fun one with accountability to encourage their employees to perform at a high level.  So while strategy is important, it's the cogs and wheels that turn it (i.e. the people) that can define it as a success or a failure.  And without a good culture that starts from the top-down, success is rather unlikely.

Sources

1. Gossieaux, Francois.  Human 1.0

2. Rousseau, Denise.  Evidence-Based Management.

In a Struggling Music Industry, Taylor Swift May Have Cracked the "Successful Album Release" Code

The last decade has been awash with reports about the imminent demise of the music industry.  And while the industry has certainly dealt with major disruptions from a variety of sources (most notably new technology and shifting consumer habits), at the end of 2012 the major record labels remain (mostly) intact.

Album sales have declined steadily over the last decade. So a successful album release strategy for a major artist is still largely unknown.  But with that in mind, the innovative strategy behind the October release of Taylor Swift's new album, Red, may have finally cracked the code, selling 1.2 million copies in its first week.

Swift first leveraged her existing marketing partnerships to make sure promotion was at a peak leading up to the actual release. She also limited the availability of the record in its initial release to those outlets that would give her the most money for each album sold: i-Tunes, Walgreens, Wal-Mart, and Target.  Some of those were partnerships she made specifically for the release of Red, for instance Walgreens is open 24 hours which meant that true fans could pick up the album at 12:01am the morning it was released.  Creating new opportunities where I can't imagine anyone saw one previously, she also partnered with Papa Johns, offering a Taylor Swift pizza deal that came in a special box with a copy of the new album-- at the full price of $14.

The distribution strategy is also significant in the outlets that she chose not to allow the album to be released through.  Generally speaking, these were the streaming music services such as Spotify.  By withholding the album from these outlets, it forced fans who wanted to hear the album to go out and purchase it. The thinking behind this strategy is simply that streaming music is an advertisement for the artist, and Taylor Swift is already so huge and has so many loyal fans that there was very little value added by those services. 

This strategy is also based around an assumption that fans needed to hear the album first and early. While the album has been incredibly successful in the weeks after its initial release, this release strategy (of which, the distribution strategy was just a part) prioritized first week sales, and did so very effectively.

Questions: Can the release and distribution strategies used by Taylor Swift for the release of Red be used by other artists in the music industry, or was this a unique case?  What lessons can be extracted and applied to other industries?  Have you heard Taylor Swift's new album and if so, what did you think of it?  (It received a 77/100 rating on MetaCritic)  Finally, is this release strategy applicable outside of her unique demographic?

Links:
The Guardian - "Music is thriving, but the business is dying. Who can make it pay again?"
TechDirt - "Where Record Labels Ran Into Trouble: Monoculture"
ThinkProgress - "The Record Industry Is In Even More Serious Trouble Than We Thought"
Planet Money - "Album Sales Hit Record Lows. Again."
Billboard - "How Taylor Swift's 'Red' Is Getting A Boost From Branding Mega-Deals"
Planet Money - "The Secret Genius of Taylor Swift"
Taylor Swift - Official Site