Innovation Prevails When Synergy of Two Elements (Hardware and Software) Becomes Relevant

The notes do not exceed five, but the changes of the five notes can never be fully heard. The colors do not exceed five, but the changes of the five colors can never be completely seen. The flavors do not exceed five, but the changes of the five flavors can never be completely tasted. In warfare the strategic configuration of power (shih) do not exceed the unorthodox and orthodox, but the changes of the unorthodox and orthodox can never be exhausted. The unorthodox and orthodox mutually produce each other, just like an endless cycle. Who can exhaust them?  

                                                                                                                                                                 - The Art of War, 5

                                                                # # #
Following is an abridged version of a Wall Street Journal's 2011's article by Marc Andressen's on the emergence of the impact of software in the information economy

Today, the world's largest bookseller, Amazon, is a software company—its core capability is its amazing software engine for selling virtually everything online, no retail stores necessary. On top of that, while Borders was thrashing in the throes of impending bankruptcy, Amazon rearranged its web site to promote its Kindle digital books over physical books for the first time. Now even the books themselves are software.

Today's largest video service by number of subscribers is a software company: Netflix. How Netflix eviscerated Blockbuster is an old story, but now other traditional entertainment providers are facing the same threat. Comcast, Time Warner and others are responding by transforming themselves into software companies with efforts such as TV Everywhere, which liberates content from the physical cable and connects it to smartphones and tablets.

Today's dominant music companies are software companies, too: Apple's iTunes, Spotify and Pandora. Traditional record labels increasingly exist only to provide those software companies with content. Industry revenue from digital channels totaled $4.6 billion in 2010, growing to 29% of total revenue from 2% in 2004.

Today's fastest growing entertainment companies are videogame makers—again, software—with the industry growing to $60 billion from $30 billion five years ago. And the fastest growing major videogame company is Zynga (maker of games including FarmVille), which delivers its games entirely online. Zynga's first-quarter revenues grew to $235 million this year, more than double revenues from a year earlier. Rovio, maker of Angry Birds, is expected to clear $100 million in revenue this year (the company was nearly bankrupt when it debuted the popular game on the iPhone in late 2009). Meanwhile, traditional videogame powerhouses like Electronic Arts and Nintendo have seen revenues stagnate and fall.

The best new movie production company in many decades, Pixar, was a software company. Disney—Disney!—had to buy Pixar, a software company, to remain relevant in animated movies.

Photography, of course, was eaten by software long ago. It's virtually impossible to buy a mobile phone that doesn't include a software-powered camera, and photos are uploaded automatically to the Internet for permanent archiving and global sharing. Companies like Shutterfly, Snapfish and Flickr have stepped into Kodak's place.  ... 

Today's fastest growing telecom company is Skype, a software company that was just bought by Microsoft for $8.5 billion. CenturyLink, the third largest telecom company in the U.S., with a $20 billion market cap, had 15 million access lines at the end of June 30—declining at an annual rate of about 7%. Excluding the revenue from its Qwest acquisition, CenturyLink's revenue from these legacy services declined by more than 11%. Meanwhile, the two biggest telecom companies, AT&;T and Verizon, have survived by transforming themselves into software companies, partnering with Apple and other smartphone makers.

Software is also eating much of the value chain of industries that are widely viewed as primarily existing in the physical world. In today's cars, software runs the engines, controls safety features, entertains passengers, guides drivers to destinations and connects each car to mobile, satellite and GPS networks. The days when a car aficionado could repair his or her own car are long past, due primarily to the high software content. The trend toward hybrid and electric vehicles will only accelerate the software shift—electric cars are completely computer controlled. And the creation of software-powered driverless cars is already under way at Google and the major car companies.LinkedIn is today's fastest growing recruiting company. For the first time ever, on LinkedIn, employees can maintain their own resumes for recruiters to search in real time—giving LinkedIn the opportunity to eat the lucrative $400 billion recruiting industry.  ... 

...  Oil and gas companies were early innovators in supercomputing and data visualization and analysis, which are crucial to today's oil and gas exploration efforts. Agriculture is increasingly powered by software as well, including satellite analysis of soils linked to per-acre seed selection software algorithms.

The financial services industry has been visibly transformed by software over the last 30 years. Practically every financial transaction, from someone buying a cup of coffee to someone trading a trillion dollars of credit default derivatives, is done in software. And many of the leading innovators in financial services are software companies, such as Square, which allows anyone to accept credit card payments with a mobile phone, and PayPal, which generated more than $1 billion in revenue in the second quarter of this year, up 31% over the previous year.

Health care and education, in my view, are next up for fundamental software-based transformation. My venture capital firm is backing aggressive start-ups in both of these gigantic and critical industries. We believe both of these industries, which historically have been highly resistant to entrepreneurial change, are primed for tipping by great new software-centric entrepreneurs.

Even national defense is increasingly software-based. The modern combat soldier is embedded in a web of software that provides intelligence, communications, logistics and weapons guidance. Software-powered drones launch airstrikes without putting human pilots at risk. Intelligence agencies do large-scale data mining with software to uncover and track potential terrorist plots.

Companies in every industry need to assume that a software revolution is coming. This includes even industries that are software-based today. Great incumbent software companies like Oracle and Microsoft are increasingly threatened with irrelevance by new software offerings like Salesforce.com and Android (especially in a world where Google owns a major handset maker).

In some industries, particularly those with a heavy real-world component such as oil and gas, the software revolution is primarily an opportunity for incumbents. But in many industries, new software ideas will result in the rise of new Silicon Valley-style start-ups that invade existing industries with impunity. Over the next 10 years, the battles between incumbents and software-powered insurgents will be epic. Joseph Schumpeter, the economist who coined the term "creative destruction," would be proud.

"First of all, every new company today is being built in the face of massive economic headwinds, making the challenge far greater than it was in the relatively benign '90s. The good news about building a company during times like this is that the companies that do succeed are going to be extremely strong and resilient. And when the economy finally stabilizes, look out—the best of the new companies will grow even faster.

Secondly, many people in the U.S. and around the world lack the education and skills required to participate in the great new companies coming out of the software revolution. This is a tragedy since every company I work with is absolutely starved for talent. Qualified software engineers, managers, marketers and salespeople in Silicon Valley can rack up dozens of high-paying, high-upside job offers any time they want, while national unemployment and underemployment is sky high. This problem is even worse than it looks because many workers in existing industries will be stranded on the wrong side of software-based disruption and may never be able to work in their fields again. There's no way through this problem other than education, and we have a long way to go.  ... 

Finally, the new companies need to prove their worth. They need to build strong cultures, delight their customers, establish their own competitive advantages and, yes, justify their rising valuations. No one should expect building a new high-growth, software-powered company in an established industry to be easy. It's brutally difficult.

I'm privileged to work with some of the best of the new breed of software companies, and I can tell you they're really good at what they do. If they perform to my and others' expectations, they are going to be highly valuable cornerstone companies in the global economy, eating markets far larger than the technology industry has historically been able to pursue.

Instead of constantly questioning their valuations, let's seek to understand how the new generation of technology companies are doing what they do, what the broader consequences are for businesses and the economy and what we can collectively do to expand the number of innovative new software companies created in the U.S. and around the world.

That's the big opportunity. I know where I'm putting my money. "
--- eof

Click here for the entire essay's on "Why Software is Eating The World."

Side Note 
Software is not the singular cause of the dramatic change in our information economy. One needs to have the right software tools that works with the hardware systems.   ...  Luckily, many of the popular tool kits are quite sophisticated and are able to operate under many different systems. Concurrently, the programming skills of software engineers are 

Connecting the integration of software and hardware to the right marketing niche, is a good example of a force multiplier- a product that is in the right place and in the right time. 

#

Leading the Innovation Wave

United States companies is the bellwether in the innovation game for the various reasons. 

One of their secret components is the emphasis of innovation as one of the alpha objectives.

iPhone, Tesla cars, Amazon's Kindle's e-book device are some of the well-known examples of software and hardware integrating in a positive constructive mode. 

As Software and Hardware Advance Together, the Next Innovation Wave Rises

... The U.S. has a chance to win bigger with the rise of smarter, software-driven machines. Silicon Valley remains a hub for the most sophisticated software and creative uses for processing power. Tesla's cars and GE's jet engines have begun to fit this model. Now the factories that produce them are being computerized. A startup called Sight Machine taps into cameras and sensors on factory floors and uses software to analyze data and spot flaws; it's also been hired to monitor fast-food assembly lines, said CEO Jon Sobel. "When you think about combining the innovation that's available with the physical world, it implies some major changes to how we do things," he said.

Some glitches

America isn't guaranteed victory. Nest recalled smart smoke detectors after a software glitch. Economists including Cowen and Annunziata also point out that this era might not be great for everyone; an automated car factory cranking out self-driving vehicles stands to put plenty of people out of work. Cowen predicts a massive labor shift from taxis and factories toward housekeeping and child care.

Annunziata's take is more optimistic - that smart equipment can help drive the global economy for years to come. "There is no limit to human beings' hunger and desire for new things and services," he says. "This will create wealth."

Click here for the rest of the Bloomberg's article.

As software and hardware advance together, so does innovation.  ...  Software works as long as the right hardware is there.  The brain is worthless without the body and vice-versa

#

...  Thus [none of] the five phases constantly dominates; the four seasons do not have constant positions; the sun shines for longer and shorter periods; and the moon wanes and waxes.                                                                                                                  - The Art of War, 6

While technology is constantly evolving, certain behavioral patterns and economical matters are the attributes that drives the ever-changing marketplace.

Side Note

Some people believed that culture prevails over strategy.  However, it could only go so far without the right organizational attributes.

# # # 

Non-American Software Companies Profiting and Succeeding in the Global Information Economy

Presently, there are many non-american companies who are profiting and succeeding in the information economy.

Following are some of these companies:

• Kaspersky Labs (a Russia-based anti-virus software company);
• AVG (an anti-virus software company that is located in the Netherlands); 
• TrendMicro (an anti-virus software company that is located in Japan);
• Opera Software (a multi-facet web browser company that is located in Norway);  
• Startmail (a e-mail company that is located in Netherlands); and 
• Spotify (A web music company that is located in Sweden and United Kingdom)

Click here on an interesting item where Zendesk, a U.S. cloud software company purchases Zopim, an Asian company for their live chat platform.

No Monopoly on Innovation
The above list of companies do not possess an absolute monopoly in brains and innovation. Creativity originates within the political-social culture of the project terrain and the experience of the implementers.  

While the performers and the producers within each project terrain come and go, the maintaining of the culture of strategic innovation is the principal challenge for most companies. 

The Focus Point
In our ever-evolving global economy, the only color that counts is the color of money or whatever the hot commodity becomes the flavor of the day.

Comments From the Compass Desk
We should always mindfully practice the art of assessing a situation while never underestimate anyone or any group in the information economy. 

The possession of "The Will to Grind and Persist" usually enables someone or some group could succeed, especially in a chaotic and grueling interval. 

In the fast game of product development, doing it now and optimizing later is the way how of these start up companies survive. (The listed companies are not start ups)

While technology is a great democratizer in the information economy, the resources sector (the energy companies, the banks and the basic commodities companies) still rule the grand order of our global information economy.

Compass Trend (4): An Unique Exception to the Automated Restaurant Service

... Click here to "see" the strategic exception to the automated service trend. ... Most of us know that the simple formula of sex and alcohol sells. It works as long as the entrepreneur targets the correct social and economic locations with the right amount of resources. ...

The Sign of the Times: The Automated Trend Continues (2)

Here is another example of the growing automated trend. ... IBM has been developing their version of automated efficiency for the cities. ... There are a few cities who could use this type of solution.

Click here for our past view on this trend.

Ruminations From the Compass Desk

With automation, the human error is near-eliminated. The operating costs and the labor costs are greatly lowered. Efficiency and profit are increased. Soon, every relevant competitor will be functioning at this level.

Big Tangible Picture

There is a limitation to the approach of automation, outsourcing and copycatting that can be achieved in a non-innovative and efficiency-driven information economy. Once the surviving (and thriving) competitors achieved their apex level of efficiency, will they have the economics, the logistics, and the drive to compete against each other effectively? ... What is the possibility of these market players being involved in the excessive game of competitive darwinism? ...

Based on current data, we assessed that the model of "the last three men standing" would be prevailing in various macro marketplaces,

We will focus on the negatives after-effects of the "efficiency-driven" mindset in a future post.

The Next Big Thing: IPTV

Source: http://commons.wikimedia.org

We previously discussed the marketing popularity of iptv.

Clickable ads on the iptv platform is another reason why the user audience for the cable TV is shrinking.

Our book project has a case study that delineates the configuration and the competitiveness portion of the IPTV marketplace.

You can read more about IPTV at iptvdaily.com .

The Sign of the Times: The Robots Trend is Here

In a past post, we spotted the vending machines trend as one of many "hot" trends. What we forgot to tell you is that the real money is in the area of robotics. ... Various Global 1000 companies have already positioned themselves to control this niche. The key for the up and coming entrepreneurs is to search deep into the configuration of their terrain and find the various micro terrains that might provide a strategic benefit to a mass of future clients who have cold, hard cash.

Our Compass Assessment of the Robot Trends(abridgment):

Alpha Moment: The implementation of robotics is here.

Benefits:

• A faster and efficient service that provides low operational costs and a fast delivery cycle while ensuring quality
• The option of charging a nominal fee for those who require the "human touch" service.

Challenges:

• Customers who prefer the "human touch" .

Drawbacks:

• Customers who can't afford the "human touch" services might take their business to somewhere else. The question is whether the number of consumer options for that specific group of clientele are limited to a few companies?
• The possibility of more unemployed people.

Efficiency/Flexibility:

• The trend of robotic customer service will be utilized all over the globe and will be quite efficient on the long run.
• With good artificial intelligence constructs, we expected the robotic technology to be quite solid.

#

What if there's no fix for high unemployment?

By Martin Ford, contributor June 10, 2010: 12:08 PM ET

FORTUNE -- There seems to be little doubt that unemployment is going to remain stubbornly high -- quite possibly for years to come. There's also mounting evidence that a good part of that unemployment is really structural in nature: The skills and capabilities of many experienced workers are simply no longer demanded by the market.

In manufacturing and in many clerical and administrative occupations, computerization and automation have left many formerly middle-class workers with few viable career options. Is it possible that we're creating a future in which jobs are going to be harder and harder to create?

While most economists would probably acknowledge the role that advancing technology has played in the elimination of many middle-skill jobs, few, if any, seem prepared to give any serious thought to where that trend is likely to lead in the future. History shows clearly that the overall capability of information technology accelerates over time -- roughly doubling every two years according to the widely-accepted "Moore's Law." If that trend continues through the next decade -- and there is every reason to expect that it will -- we can anticipate that the computational power available to be focused on automating jobs of all types will increase by a factor of approximately 32. A change of that magnitude isn't something to take lightly. Imagine that your monthly mortgage payment increased by 32 times -- say from $2,000 to $64,000.

As technology continues to accelerate, the number and types of jobs that can be automated is certain to expand dramatically. It's not just factory workers that can be replaced by robots and machines: Rapidly improving software automation and specialized artificial intelligence applications will make knowledge worker and professional occupations requiring college educations and advanced skills increasingly vulnerable.

Consider that this month HP (HPQ, Fortune 500) announced thousands of layoffs while also touting that it's making investments in technology and automation to increase "efficiencies" in the years to come. It is far from the only company to have made such a pronouncement in recent years.

The unemployment pendulum could stop swinging

Yet even economists who think unemployment will be high for five or more years hold onto principled but ill-defended beliefs that unemployment will eventually return to normal levels, just because it always has. But what if this time, something's really different? Technology isn't going to stand still while we wait for the job market to recover. As jobs of all kinds get automated at an increasing pace, it may turn out to be extraordinarily difficult to find our way back to an acceptable unemployment rate.

0:00 /4:02Romer: 'We are adding jobs'

Skeptics will rush to point out that while advancing technology eliminates jobs, it also creates new opportunities and new employment sectors -- so there should be plenty of new jobs to pick up the slack. This process of "creative destruction" is indeed inevitable, but the reality is that innovation often wipes out jobs in more traditional, labor-intensive industries, while creating new ventures that rely heavily on advanced technology and employ only a few people.

Consider Blockbuster (BBI, Fortune 500), which employs a large workforce at thousands of retail stores. Compare it with Netflix (NFLX), with a much smaller number of employees in a just a few highly automated distribution centers where DVDs get sent out and received. That's not all though: The trend is relentless. Netflix customers are already able to stream video directly to their computers or televisions, and there can be little doubt that the Internet is going to be the way movies get delivered in the future. Guess what that means for the workers who are now shipping DVDs through the mail?

Automation is going to hit every industry

As both hardware and software evolve, virtually every employment sector will be increasingly -- and simultaneously -- susceptible to automation. That's a very different story from past technological advances. In the last century, mechanization destroyed millions of jobs in agriculture, and that resulted in a transition to factory-based employment.

More recently, manufacturing automation and globalization were the forces behind our shift to a service-based economy. This time around, we're unlikely to have the luxury of such a sector-by-sector impact on employment: Automation is going to hit hard nearly everywhere.

If structural unemployment increases, there will be very few safe harbors. Today, workers whose skills become obsolete often end up in the jobs of last resort: low-wage service positions at employers like Wal-Mart. The problem is that those jobs won't be there forever -- and certainly not in the numbers required to sustain us.

Wal-Mart (WMT, Fortune 500) for example, is one of the biggest proponents of RFID, an inventory tracking technology which reduces the need for human supply-chain management. (It was also once reported to be considering using robots to perform nightly store inventory, a claim the company has denied.) As automation technology becomes more capable and more cost-effective, its eventual introduction into the retail stores, warehouses and offices that now employ tens of millions of workers is inevitable.

Increasing unemployment and falling consumer confidence would very likely result in stagnant or even falling aggregate demand, raising the risk of a deflationary spiral that might be very difficult to reverse. Social safety nets like unemployment insurance would come under unprecedented pressure, and governments would see dramatically increased demand for services even as tax revenues plummeted. Governments would have little choice except to borrow even more -- making the sovereign debt problems that are already tormenting the developed world just the tip of the iceberg.

The solutions to this mess are politically unthinkable by today's standards. Think about it: Jobs are the primary way that purchasing power gets delivered into the hands of consumers. Consumers without incomes can't drive the economy. If jobs at all levels are destined to evaporate in the face of broad-based automation, radical intervention -- and perhaps even a fundamental rewiring of the way the economy works -- may ultimately be our only alternative.

Mainstream economists are, of course, completely oblivious to such a potential scenario. They remain confident in elaborate mathematical models and assumptions that were put together in the last century -- often on the basis of economic data collected decades ago, when information technology was still in its infancy. What if those assumptions turn out to be just plain wrong?

--Martin Ford is a Silicon Valley entrepreneur and author of The Lights in the Tunnel: Automation, Accelerating Technology and the Economy of the Future.

http://money.cnn.com/2010/06/10/news/economy/unemployment_layoffs_structural.fortune/index.htm

http://www.sfgate.com/cgi-bin/blogs/gettowork/detail?entry_id=54118

http://www.sfgate.com/cgi-bin/blogs/gettowork/detail?entry_id=65580&type=jobs

--

Our research tells us that robotics will play a relevant role in our global settings. We expected more bottom to lower-middle tier retail businesses to utilize robotics-like devices for various types of customer service.

Side note: In the information technology profession, virtualization software, outsourced labor and a improved project process has currently taken away many middle-tier professional positions from the U.S. job market. We believed that most of those jobs are not returning to the United States

To some people, life can be considered as a zero sum game. While someone wins, another person or a group of people loses.. However, every crisis creates another opportunity. The key is to assess the grand tangible picture with the purpose of identifying opportunities. Then, position oneself by basing their planning and preparation to the strategic assessed situation. Finally, implement the tangible gameplan with the competitive intelligence-driven influence.

The Vending Machines Trend

In a previous post, we identified the vending machines trend as one of many "hot" trends.

Current marketing trend reports told us that that the vending machines will be a way of life for the lower-income regions.

The key to maintaining this sales appeal is having interesting products that the majority of the masses would immediately need and want.

Here is an idea for dispensing gold.

Interesting Compass Points

• A store of automated kiosks should cost less than an employee
• It is near perfect for the consumers who expected immediate gratification
• 86 percent of North American consumers were more likely to do business with companies offering some sort of self-service. (NCR Corporation's 2008 report)

The Next Big Thing!

Source: Geekandpoke

Beside our prediction of IPTV, we have seen robotic-driven surgery as another possibility.

A few years ago, I met up with an old market research associate who revealed to me that the next big thing is that the various popular fast food companies are going to the automat route. They have already begun experimenting this idea at various remote locations. This slow-moving trend is quite real. The reasons for this strategic move are the economics and the logistics.

It is only a matter of time, that certain customer service-based companies (mobile phone, municipal utilities, etc.) will follow suit.

In the future, the cost of person to person services will rise. It is the sign of the times.