Max Mednik

Sorry, ya'll, been super busy, but wanted to chug through some backlog of posts to get to fresher content. Below are my penultimate notes on brand management.

Age of consumer capitalism

• Focus on customer first, not shareholder value
  
• Managerial capitalism
  
• Customer-driven capitalism
• Maximize customer value subject to minimum shareholder value

Grow: Evaluate progress and people against the ideal

• Brand contribution to market value has risen heavily
  
• Quarterly brand index
  
• KPIs in terms of ideal
  
• Toyota: dedication to people
  
• Link ideal to employees' daily work plans
  
• Design performance reviews by focusing on how and ideal
  
• Reward time spent with end customers
  

MillwardBrown Brand Database Speaker

• Apple #1 brand in world by brand value of BrandZ Top 100
  
• China Mobile only Chinese one in top 10
  
• Measuring the effectiveness of super bowl advertising
  
• Sales effects
  
• Equity effects
  
• Turned out that super bowl ads had good ROI
  
• 1.       Iconic brand
  
• 2.       Top league of advertisers
  
• 3.       In mind of consumers, this has big impact
  
• Using measurement to create business case
  
• Great brand examples: Apple, Starbucks, Method, LVMH, Chandon

It was long overdue, but I finally finished reading The Innovator's Dilemma by Clayton Christensen, an HBS professor. So many people kept citing this work around me, and I now understand why. The book is a bit slow and dry in its writing style, but the key points are incredibly deep, thought-provoking, and not as often discussed in start-up pop culture.

My biggest takeaway is that when companies are doing the "right" things, like being good managers, following business school teachings, executing, listening to customers, etc., these practices that help them scale successfully are exactly the WRONG things to be doing when confronted with disruptive innovation. That's the core of the dilemma. As a start-up gets traction and grows into a big company, it makes it much less likely that it will be able to keep doing disruptive innovation. This is a really interesting concept, and one that's bittersweet.

My notes are below. You can also download a great book guide that was included in the book at the bottom of this post (sorry for the quality, I took the photos on my phone).

I really enjoyed the book, even though it took me a while to get through it (this was a physical copy I was reading for 10-20 pages at a time).

Part 1: Why great companies can fail

Ch. 1: How can great firms fail

• Disruptive innovations technically straightforward 
  
• Studied disk drive industry
  
• Known tech in unique architecture
  
• Advanced tech development for sustaining innovation
  
• Customers of incumbents demand sustaining innovation
  
• Firms that led disruptive innov always entrants who developed for new mkt and not for current customers
  

Ch. 2: Value networks and the impetus to innovate

• Different value networks (industries, target users) have different needs and cost structures, assigning value to different components of products
  
• Incumbents listen to lead customers and don't pursue disruptive innovation because isn't appropriate for value network
  
• Entrants seek fit via trial and error with some value network that wants their disruptive product
  
• Then later entrants grow and expand into territory of incumbent and by then it's too late for incumbent to respond
  
• Customers mislead in advice around disruptive innovation
  
• Technology s-curve framework: tech supplants old tech when second derivative negative (past inflection point)
  
• S-curve only for sustaining innovation (disruptive along new curve)
  
• Initially disruptive tech is worse in most product attributes than majority value network care about; only better in an attribute that small value network cares about which is uncertain and must be discovered
  
• Over time, if trajectories of what 2 techs deliver to different value networks over time cross, then disruptive tech can overshadow and meet needs of both value networks, threatening incumbent firms
  
• Flash disk drives vs DRAM

Ch. 3: Disruptive innovation in mechanical earthmoving industry

• When disruptive innovation comes out, majority of market doesn't want it
  
• Search for market that could use it and appreciates its value
  
• Then as product improves along axes the majority care about, can expand into there
  
• Hydraulic excavator vs. cable system

Ch. 4: What goes up can't go down

• Moving upmarket to higher price points easier for customers than moving downmarket into lower price, smaller market opportunities (as is required for disruptive innovation)
  
• Managers also prefer higher margin, proven market projects
  

Part 2: Managing disruptive innovation

• Good (not bad) management to blame for missing disruptive innovations
  

Ch. 5: Give responsibility for disruptive technologies to organizations whose customers need them

• Customers allocate an org's resources, not mgmt (resource dependence theory)
  
• Result is need to create an independent org and embed it among emerging customers that do need disruptive tech
  
• Same org can't keep supporting mainstream customer and pursuing disruptive innov

Ch. 6: Match the size of the organization to the size of the market

• Leadership in sustaining technologies not essential (can be follower company)
  
• But is essential in disruptive
  
• Big companies searching for big markets to sustain growth rates; disruptive tech for small markets not interesting
  
• Acquire a small company and launch products through it 

Ch. 7: Discovering new and emerging markets

• Market apps for disruptive tech unknowable
  
• Discovery and learning, not execution
  
• Market research and listening to customers impossible
  
• Expert forecasts always wrong
  
• Failed ideas versus failed businesses: most successful ventures abandon original biz strategies after learning 
  
• Managers often can't deviate from plan
  
• Plans to learn vs plans to execute
  
• Discovery-driven planning
  
• Smaller batches
  
• Agnostic marketing: no one (us or customer) knows size of market until you try
  
• Get out of the building and test (same stuff as custdev and lean startup teachings!)

Ch. 8: How to appraise your organization's capabilities and disabilities

• Only companies that succeeded in disruptive tech are those who create independent orgs whose size matches size of opportunity
  
• Organizational capabilities determine where it can succeed
  
• 3 factors: resources, processes, values
  
• An org's processes and values also define what it can't do
  
• Values are decision rules
  
• For companies to maintain growth rate as they grow, have to ignore small markets (Wall Street cares about earnings growth percentages)
  
• Bittersweet reward of success: lose the capability to enter small markets
  
• Problem with mergers and acquisitions
  
• If acquiring for resources, integrate acquiree
  
• If acquiring processes or values, let acquiree stand alone
  
• Acquiring to create capabilities is good
  
• Resources can change easily but processes and values much more rigid and limit developing new capabilities internally
  
• Create spin-out venture with new processes when big org values and growth rules prevent it from doing disruptive work
  

Ch. 9: Performance provided, market demand, and product life cycle

• Performance oversupply satiates customer demand and customers no longer willing to pay price premium so start considering other aspects; basis of competition changes, allowing new entrants
  
• Product becomes commodity with only price competition once exceeds all market demands/needs and no more features/differentiation is needed
  
• Performance oversupply drives transition from one phase to next of product life cycle
  
• Based on product and vendor availability over time, customers choose products first based on functionality, then reliability, then convenience, then price
  
• Performance oversupply causes phase transitions between these
  
• Chasm model is user-centric but shows same transitions
  
• Aspects of disruptive tech that make it unsuitable for mainstream mkt make it perfect for emerging mkt
  
• Disruptive tech usually simpler, cheaper, more reliable, and convenient
  
• Sustaining tech assumes existing market needs valid and has a technological problem of improving product to meet them
  
• Disruptive tech seeks to find market that fits and has a marketing problem of finding the market that will accept the tech
  
• Strategies: move up market towards higher end customers along life cycle, stay with customers as they move along life cycle, market to change customer demand for new product functionality
  

Ch. 10: Managing disruptive tech change case study

• Electric vehicle example
  
• Is tech disruptive?
  
• Look at market behavior, not interviews. Plot market performance demanded over time. If exceeds new tech capacity, then might be disruptive
  
• Look at performance improvement of new tech over time. If growing faster than market performance demanded, then can be disruptive on day (will intersect market need curve)
  
• Where is the market for the new tech?
  
• Ignore mainstream
  
• Find a market that values the disadvantages of the disruptive tech compared to mainstream
  
• No one can learn from market research where the right market is for an emerging market
  
• Only way to learn is through expeditions of trial and error, prototyping, selling real products to real ppl paying real money
  
• Business plan must be one for learning, not executing strategy
  
• Product: simple, reliable, convenient. Designed for quick and cheap iteration. Low price point. 
  
• Product plan cannot rely on achieving breakthrough tech innovations. Disruptive tech usually combines existing stuff in new way. 
  
• Distro strategy: usually new value network and channel needed because existing has clear formula that doesn't fit
  
• Create independent org or spin-off so not competing against current needs and resources
  
• Bigger org's best for sustainable innovation
  

Ch. 11: The dilemmas of innovation summary

• 1: Pace of market need doesn't always match tech progress
  
• Cannot just be guided by current customers
  
• Use tech trajectory maps
  
• 2: mgrs are honed for profitability, and it will be very difficult to keep allocating resources to disruptive tech
  
• 3: disruptive tech is a mktg challenge, not a tech challenge
  
• Find a mkt that values characteristics of disruptive tech in current form
  
• 4: org's capabilities much more specialized than we believe because tuned to one value network
  
• Not fit for disruptive tech
  
• 5: disruptive tech very risky so need to focus on quick learning and tolerating failure
  
• 6: must use diff strategy in leading disruptive than sustaining innov
  
• 7: biggest companies make their own barrier to entering and investing in disruptive tech at the most important times that entrepreneurs can take advantage of

I'm on the plane to Hong Kong and about to spend a week learning about doing business in China through a UCLA Anderson trip. I'm very excited because this is my first trip to Asia, and I'm interested in learning about how entrepreneurship and small business works over there.

I've heard the architecture and culture are very different from the United States, though Hong Kong I expect won't be as drastic of a departure. Even so, I hope to get a flavor for some of the more traditional culture, architecture, food, and music while I'm there. I'm looking forward to meeting with real businesses, getting to know the business students at Chinese University Hong Kong, and trying to some real dim sum. I've also heard the light show at the harbor is beautiful, and I'm a big fan of light shows.

Also, as someone with a finance background, I'm excited to see one of the four "Asian Tigers" and one of the world's financial centers in action. I've heard that relationships and personal contacts are much more critical in Asian business, and I'm looking forward to learning more about that. Do people "network"? How do you meet new people? Do people give each other intros? How prevalent is bribery?

Overall, I'm very excited and will report what I learn soon.

Below are great articles I've run across in my preparations and research.

WSJ: After Earning Cash in China, The Trick Is Getting It Out

WSJ: DreamWorks in China

Really interesting article about modern HK-Mainland relations: MSNBC: Birth rights battle: China vs. Hong Kong

Understanding China and censorship: MakeUseOf: How To See If Any Website Is Blocked In China

An Overview On Doing Business In China: Intro, Full

Foreign Entrepreneurs in China: A JV Survival Guide: Article 1, Article 2

BBC: Hong Kong entrepreneur finds opportunity in city’s darkest moment

TechCrunch: From Zynga To Flipboard: Why All Eyes Are On China For The Next Mobile Boom

WSJ: China Premier Wen Jiabao Backs Financial Market Reform

9 Trends in Chinese Entrepreneurship

In search of best dim sum in Hong Kong

Day 2 of the trip was really informative, as we got to tackle a lot of the difficult issues facing the city in safety (crime) and economic development. We also discussed some of the large improvements in education through charter schools and the big journey still ahead to get NOLA education where it needs to be. We also got to start the day by visiting another really successful tech company and learning straight from the CEO, which was awesome. (I also got to try alligator soup, which I was not particularly fond of.)

Before I dive into my notes on each event, I wanted to say that I've been really impressed with the amazing group of people I've met. Everyone is cool, interesting, positive, and super talented. The group is very diverse, including people with roots in Louisiana and some there for the first time, like me. Among the awesome people I've met are a full time traveler and author, film producer,  fashion designer, interior designer, 2 doctors, video engineer, sustainable product designer, and several tech entrepreneurs. It's awesome to see a mix of people interested in digital media, arts, biosciences, and sustainability, and everyone's really dedicated to finding ways to help NOLA out.

My notes on the day's events are below.

TurboSquid

• Matt Wisdom
  
• Started in 1999
  
• 80 people now, 15 engineers
• Most in NOLA but some in China
  
• 3D model marketplace
• Seeded and begged suppliers to put in models
  
• Recruiting through personal referrals
  
• Not many language issues with international marketplace and offshore staff. 300 million non-native English speakers in world (more non-native than native)
  
• Only 5% of traffic from AdWords
  
• Most is organic search traffic
• Use Yammer internally
• Partnered with AutoCAD to help promote TurboSquid
  
• Most customers use 3D Studio Max and Blender
  
• Some issues with cross formats
  
• Working on VoteIt app also
• Fun: ordered a MakerBot for the office

Today was jammmm packed. I got an amazing sense for the vibrant tech culture and amazing recovery of New Orleans across its arts, digital media, and biosciences sectors. What a day!

We started the day at a beautiful museum, which went from 9 to 40,000 pieces in 100 years. We ate breakfast at a HUUUGE
30 seat board room table, and the museum was filled with "Art in Bloom" exhibits combining art and flowers (not so great for my allergies).

Having cameras around us the whole day was a bit strange (I felt like it was reality TV), but for the good of the documentary and spreading the word, we are all good sports.

Below are some of my photos and notes on the day.


Random/general thoughts/impressions/learnings

• Lots of people drive from state to state all the time (not like LA)
  
• It's my first time here, and I'm getting a nice sense of what the south feels like (and enjoying it).
  
• Everyone talking about culture and magic
• Huge tech growth
  
• "Silicon Prairie" name of tech in Midwest (Iowa)
  
• Fleur de lis everywhere jewelry and streets
• Lots of y'all
• Trees with beads hanging on them
  
• Old streetcars
• Gas-burning house lamps

Panel at New Orleans Museum of Art

• 3 C's and L
  
• Cost: $13/sf rents
  
• Cash: huge state incentives
  
• Payroll
• R&D
• Digital media: 35% rebate
  
• Angel investor tax credit: 35% back over 5 years up to $5m
• Culture
• Leadership
• Great political leadership team
• NOLA is doing deficit spending in time when rest of country pulling back so want to be at top when economy turns around
• Added more tech jobs than any other region in absolute numbers
  
• Leading country by 30% of startups per capita since Katrina
  
• Brain gain champion: more people with college degree coming than any other region
  
• Challenge: image and brand
  
• Perception gap
  
• Workforce challenge
  
• Turnkey office space challenge
  
• 4 main issues
  
• Crime
• Corruption
• Flood
• Education
• Latter 3 been doing well
• Education: huge reform
• Corruption: not as bad as NY now
• Flood improvements put in
• But still major problem with crime
• Computer science is a challenge
• Working with local colleges and got government grants to put in tech
• Digital media doesn't employ a lot of low skilled workers but bio does
  

Whenever I'm about to do something new, I try to minimize expectations. That allows me to keep an open mind and be pleasantly surprised.

I am thrilled to be going to New Orleans on Wednesday as part of the NOLABound program, and I know it will be a trip of a lifetime. Even so, I'm trying not to get carried away with "expectations" and simply remain open to new experiences and ways of thinking.

One of my professors recently taught that Happiness = Reality - Expectations, so hopefully my method will bring some happiness too.

But if I said that I hadn't been thinking about my trip for weeks now, I'd be a liar. Anyone who's spent some time around me must have heard me saying "Nawlins," "crawfish," "alligator," and "gumbo" an inappropriate number of times. I'm really curious to hear the accent (if any) for myself and maybe pick up a phrase or two of local slang. I want to know which New Orleans stereotypes are true and which are overhyped. It's true that as a francophile I'm looking forward to checking out the French Quarter, the French food, and the French music. Bien oui! And it's true that as a newbie jazz fan, I'm looking forward to some real musical education and hearing what music the locals are into.

I'm also really looking forward to seeing how I can personally help the New Orleans entrepreneurial scene grow and thrive, using perhaps some lessons I've picked up from my time in Silicon Valley and Silicon Beach to help Silicon Bayou (still not sure how I feel about all those names). I know what trends have been hot in California, and I'm curious to see what the scene and people are like in New Orleans.

Specifically, I'm curious about what the lean start-up trend has meant for New Orleans start-ups and how the general entrepreneurial process compares. I'm curious about what industries/spaces/problems are hot, which start-up resources are plentiful, and which are missing. I'm also very interested in how New Orleans views the (tech) world, and if it suffers a little of the same Silicon Valley envy that Los Angeles unfortunately suffers from (constantly comparing itself to its northern cousin). I think each city should emphasize its strengths and unique taste of entrepreneurship, and I hope to discover what that is in New Orleans (and what Los Angeles stands learn from New Orleans!).

Most of all, I'm looking forward to bonding with my NOLABound tripmates and exchanging ideas and experiences. We're all so different and come from such diverse walks of life, and yet I can already tell from our conversations over the past week (on Twitter) that we all share something common to entrepreneurs: a positive attitude and a desire to learn, explore, and help others. I can't wait for Wednesday!