Who Space

Originally posted Aug 18

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One major branch of the Globalization movement is off-shoring, whereby companies outsource some aspect of their business process (software testing & development, customer call center, etc.) to another country. For companies based in developed nations, off-shoring can not only bring significant cost savings but also provide a beach head opportunity to build the experience curve and develop assets to enter emerging markets to capture growth. This opportunity however is not created equal for everyone.

In particular, knowledge based firms from non-English speaking G7 nations will lose out. Qualified knowledge based talent pool from off-shoring destination countries often pursue English over other developed nation languages. In effect, English on the global stage has achieved significant supply side externalities, making it harder for other languages to rapidly diffuse across the  white collar segment of the populace of the emerging economies such as BRIC.

All else equal, English speaking services firms will be able to more efficiently  “dis-assemble” its supply chain and configure its scope of the firm compared to non-English speaking firms. This will translate to not only cost side advantages but also to being more aligned with a global market.

Originally posted May 12, 2007

Many have characterized the high technology industry, in particular software, as one of rapid change where one must be ever vigilant and paranoid, constantly scanning the horizon for emerging threats from competitors and partners alike. However, this mental model of the high tech industry is too broad in its analysis. If we focused our attention on those sub segments of the industry that are the most profitable, have the least number of substitutes and enjoy the highest level of consumer lock-in, namely those sectors that are build on standards and/or exhibit network externalities, a different pattern emerges.

Technologies that benefit from being a standard setter or exhibit externalities often enjoy consumer lock-in (demand side externalities) and channel partner lock-in (supply side externalities). Such technologies spawn an ecosystem of product offerings, partner complementary products and consumer preferences. Once such an ecosystem becomes a dominant player, they operate in a relatively low competitive environment and enjoy high margins. These ecosystems are hard to topple and thus industry change along that venue will necessarily be slow and innovation will likely be evolutionary rather than revolutionary (think MS OS or Adobe pdf viewer). Moreover, as these technology eco-systems grow larger in size (i.e. competitive value offering relies on multiple partners or consortia rather than a single firm), the pace of change/innovation will decrease further due to more complexity in coordination, incentives and goal alignment.

The high tech industry is not fast paced. It is characterized by a steady, perhaps rapid, background noise of evolutionary improvements and ecosystem adjustments, interrupted once in a while by a disruptive and loud eco-system crash and replacement. This is necessary for sustained profitability.

Originally posted on Mar 29, 2007

The Innovation Gap in Pharmaceutical Drug Discovery & New Models for R & D Success

In the past decade the pharma industry has experienced an innovation gap crisis characterized by relatively flat growth rate in new drug approval rates and a steady growth of over 2.5X in cost. Big pharma has tried to tackle the innovation gap with a series of strategic solutions: throwing money at internal R&D, horizontal consolidation, and increased in-licensing from the biotech sector, all with limited success. In our whitepaper, we survey the literature to pinpoint the fundamental root causes of the innovation gap and explore some of the emerging business models and solutions on the horizon and assess their opportunities and challenges in addressing the R&D crisis.

read online from “Kellogg on Biotech”

Blast of the past … Here is a short essay I wrote for a writing class a few years ago

In the Name of Democracy

On many occasions we hear institutions and nation-states wage conflict with others in the name of democracy. The primary objective to an institution’s leverage of the “democratic cause” is to garner support from its citizens. However any citizen who takes credence to this “call to arms” indiscriminately does so at the risk of paying great tribute to the vices of irrationality and injustice.

From a political standpoint, democracy is broadly defined as a government structure (along with its implementations) that speaks for and represents the ideas and common will of the citizens it governs. Consider a near future where all nations are “democratic” by our previous definition; under which banner will these “free” nations rally for support if they find themselves locked in severe opposite interests? Can we favor one democracy as been more righteous over another’s?
Unless the citizens of all nations are homogeneous in creed, beliefs, and culture, democracy alone will not be sufficient or even germane for long-term halcyon stability between nation-states.

The primary cause of all conflicts between individuals or nation-states does not rest in the politics that govern them but the diversity and differences themselves. If we are to cast our ballot for favoring a conflict, we must understand the reasons and our interests in its stake; and that it be based on, if not lawful, then at least moral and ethical convictions, and not in the name of democracy.

Mike Hu - Feb ‘04

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