Author: JP

Four Pillars: Opposable Thumbs: Machine Tools and Safety: A Long and Winding Post

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I was at the Club of Amsterdam’s Summit for the Future for a short while last week, and found much of what was discussed very interesting, hearing from a diverse group of speakers. Even Marc Canter could not have said “Same Old Faces”. Bless him, he was there as well, his usual self.  -)

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One theme dominated the summit, that of risk and how we appear to treat it. Take a look at Sir Paul Judge’s presentation on Risk and Enterprise, a version of which is available here. Better still, join the RSA, more properly the Royal Society for encouragement of Arts, Manufactures and Commerce. I did, and have never regretted it.

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Their Adelphi Charter work alone makes joining worthwhile. Here’s the basic blurb:

  • The Adelphi Charter on Creativity, Innovation and Intellectual Property responds to one of the most profound challenges of the 21st century:
  • How to ensure that everyone has access to ideas and knowledge, and that intellectual property laws do not become too restrictive.
  • The Charter sets out new principles for copyrights and patents, and calls on givernments to apply a new public interest test.
  • It promotes a new, fair, user-friendly, and ecfient way of handing out intellectual property rights in the 21st century
  • The Charter has been written by an international group of artists, scientists, lawyers, politicians, economists, academics and business experts.

I digress. What the opening sessions woke up in me was a different perspective on the Michael Power assertion in The Risk Management of Everything One of my key takeaways from Michael Power’s lecture was that in a world of immense post-facto regulation and extreme litigiousness, Small Print Was Taking Over. Second-order risks were influencing people’s decision-making to a point where valuable and vulnerable professional opinion and judgment were being discarded willy-nilly.

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An aside. Maybe this is why blogs need to exist. As a counterbalance to the stultifying fossilised stuff that passes for opinion elsewhere. I’ve seen more opinion in a telephone directory…..

And maybe the bringing in of opinion into Wikipedia is what makes Wikipedia work. The Encyclopaedia Britannia had opinion. Lots of it. From some very talented and opinionated people.

But they published opinion as fact.

And today, in the world Michael Power describes so well, we have to live with a lot of fact as opinion. Because opinion is dangerous in this over-litigious world. If you don’t think the world is over-litigious, then ponder these figures from the latest issue of Fortune magazine:

  • 170% growth in the number of attorneys at the 100 top-grossing US law firms over the past 19 years. The average headcount at these firms jumped from 260 in 1986 to 702 in 2005, and their share of all working lawyers nearly doubled, to 6.4%. In 2005 these giants generated an average profit per partner of $1.1 million. Good for them. I just wish they made less money from garbage collection and gardening. Garbage like bad IPR and bad DRM. Gardening like walled-garden maintenance.

I digress again. One of the assertions made in Amsterdam was the following:

We need to make it easier for people to take personal risks, not harder. And we need to balance this move by ensuring that people are made more accountable for their actions and made to understand and acknowledge the consequences of their actions, to take responsibility as well as risk.

Instead of which, we appear to spend a lot of time and energy in preventing people from taking risks, whether as private citizens or as employees in firms.

And then we compound the problem by mollycoddling people to a point where they are insulated and absolved of personal responsibility, where consequences are neither understood nor acknowledged.
This is a nightmare in a world where blame cultures are the norm and where post-facto regulation is seen as good. Einstein did not wear SOx.

Okay, enough digressing. The point I was trying to make is that all this, the mindset and attitude, this weird world of blame-o-philia mixed with nanny-state-hood and Boys Named Sue, this Risk Management of Everything, all this has pervaded our Four Pillars Machine Tools. And could corrupt our thinking if we are not careful.

We have to learn more about us and how we developed…… I cannot but think that the experimentation with machine tools predated the invention of related safety wear, as we learnt more about the behaviour of the tools. And what to be safe about.

Instead of which, given current thinking, people seem to want to design the safety requirements before they know about the risk appetite and risk premium.

It’s worse than economists pontificating about merit goods and how They Know Best. And we have to prevent it happening. Otherwise bad IPR and bad DRM and bad Identity will be used by Nanny States Who Also Always Know Best. And we land up Channelled, not Connected.
More later.

Four Pillars: Learning from my children about Generation M

I was talking to Isaac, my 14-year old son, about BitTorrent and the Warner deal. And in the conversation, he said something worth thinking about.

As far as he is concerned, he’s happy with his laptop battery life. And anything that takes longer than that is too long for him.

M stands for Many Things. Mobility is one of them. Multitasking is another. Multimedia is a third. I am sure there are more, so I like thinking of them as the Many Things Generation.

We need to think about the constraints Generation M face and live with, however temporary those constraints might be.

160 characters for a text. Though you can send multipart texts, it counts as multiple messages. Not cool. So they tend not to send longer text messages.

SIM card driven contacts book entries. Whatever that might be, seems to vary a bit. Congregates around the 90 mark?

Battery life driven acceptable task completion time maxima. Less than 3 hours to build eternity.

I’m sure there’s a lot more. Any offers?

 

 

Four Pillars: Digital rights and wrongs: “IP leakage”

I was reading the print edition of the latest issue of Fortune, and chanced across this article: Not Exactly Counterfeit. [That feels so good, to be able to link to a new story that I read as a paying subscriber, and then finding I can actually link to it and share it with others for free, without a digital barrier in sight. No sarcasm intended. That’s how it should be, and for this relief much thanks].

The story is all about ” a bug in the outsourced economy”, referring to unauthorised production cycles and “third shifts” that sell cheap excess into otherwise protected markets.

To me, the heart of the story is apparently about a guy named Horace Chang and his dealings with New Balance. We pick up the action in the early 1990s: the italics below represent direct quotes from the article, and the bold straight bits are mine:

New Balance began outsourcing in the early 1980s, using factories in Japan, then South Korea, then Taiwan. In the early 1990s its Taiwanese suppliers began moving their factories to mainland China. One of those contractors was Horace Chang, now 59, a tough, keen businessman. (Chang declined to be interviewed for this article, citing New Balance’s legal proceedings against him.)

At this stage God’s in His Heaven and All’s Well with the (Friedmanian Flat) World.

In 1990, Chang built a factory in Yang Jiang City, in Guangdong province near Hong Kong. At first his factory, which can employ up to 4,000 workers, made New Balance shoes only for export. But in January 1995, at Chang’s request, New Balance licensed him to also distribute its shoes to the Chinese domestic market.

Everything’s copacetic. After all, who wouldn’t want to go after the Chinese domestic market as a by-product of what was an export-only factory? Everybody wins.

Chang’s sales were initially modest, according to Ed Haddad, 57, New Balance’s vice president for intellectual property. But soon he had success with an inexpensive style known as a “classic.” It’s a colorful fashion shoe with “no technology,” Haddad explains – meaning none of the fancy midsole engineering that defines a high-performance shoe.

Now let me understand this. Sales aren’t too good, then suddenly Horace breaks through with a simple inexpensive style. So far so good. Not an IP leak in sight. Implied or otherwise.

In June 1999, Chang stunned New Balance executives at a meeting in Boston by announcing that he was projecting sales of 250,000 pairs that year – quadruple what he’d sold the year before.

“We were amazed,” recalls Haddad. But not pleased. New Balance executives feared that the company’s name was becoming associated in China with a fashion shoe, jeopardizing its reputation as a performance brand. They told Chang to pull back from selling classics.

“He was dumbfounded,” Haddad recalls. “He came here thinking he was doing a great thing – like the cat that brings you the dead mouse – and we slapped him on the hand.”

Now it gets interesting. The guy comes to Boston and says “I’m going to sell your socks off. Because the customer wants the Classic and I intend to give it to him”. A quarter of a million times. NO discounting. And his management rap his knuckles. Silly Boy. Give the customer what he wants? You’ll be wanting to run a charity next.

Chang didn’t pull back. Rather, he ordered materials to produce 450,000 pairs, as the New Balance sourcing department reported to its alarmed management later that year. Soon Chang’s inexpensive shoe was seeping out of China into premium markets like Japan. Licensed New Balance distributors there were furious.

Now we have something to talk about. A local manufacturer and distributor, a legitimate part of the global supply chain, wants to increase sales of a product that he produces legally and distributes effectively. His global management don’t agree, they would like to see the premium market protected. He feels he knows what his customers want, in terms of spec and price.

Houston, we have a problem. But as far as I can make out, not an IP issue. But things aren’t as copacetic any more, with inexpensive grey product seeping across borders into premium markets and all that jazz.

In August 1999, New Balance notified Chang that it was terminating his license to make and distribute classics, effective Dec. 31, 1999.

“What happened then is when everything went crazy,” Haddad recounts. Upon termination, the contract called for Chang to return to New Balance all its confidential technical, production, sales, and marketing information, including molds, specifications, signs, labels, packages, wrappers, and ads. He didn’t.

“He continued to sell,” says Haddad, “and was actively trying to sell product outside the country: in Taiwan, Hong Kong, Italy, Germany.” (It’s unclear whether Chang continued to make classics after 1999 or sold stockpiled inventory. Chang told the Wall Street Journal in late 2002, when it wrote about the situation, that he still considered himself entitled to make New Balance shoes.)

At New Balance’s request, the provincial divisions of China’s Administration of Industry and Commerce (AIC) seized about 100,000 pairs of Chang’s shoes from his stores and factories. During one raid New Balance made an alarming discovery: Chang had launched a competing line of classic-style sneakers under his own brand.

These he called Henkees (a meaningless word in Chinese), and he marked them with a logo on the saddle that purported to be a distortion of “Hi.” At a glance it looked a lot like New Balance’s block N saddle design. Chang had obtained a Chinese trademark on the Hi logo without New Balance’s noticing.

They said tomayto he said tomahto. And their ways parted. And we get the first taste of something to do with IP. He didn’t send back the specs, and may have (not sure here) kept on producing shoes to the classic spec. May have.

His crime? To produce and sell shoes they weren’t planning to sell, to people who weren’t planning to buy what they wanted to sell them in the first place. They wanted to control the product and its price and its placement and its promotion and however many other Ps you want to add. He wanted to sell his customers what they wanted at a price they were happy with.

Very intriguing. Maybe my perspective’s warped. But as far as I can make out, he did not change the design or the price.

Just the quantity. Upwards.

Like most Western companies doing business in Asia, New Balance had inserted arbitration clauses in its contracts so that it wouldn’t have to deal with foreign courts. Disputes were to be heard by an international arbiter applying Massachusetts law.

But while an arbiter could assess damages, he could not provide New Balance what it needed in this crisis: an injunction stopping Chang from selling New Balance classics. To get that, the company had to sue in the Shenzhen Intermediate People’s Court for Guangdong province. In late 2000 it did.

By this time I was not worried about IP leakage any more. I was worried about IP lobotomy.

I really don’t get it.

This is not about IP. It is about using tenuous arguments related to IP to try and lock customers in to products they don’t want at prices they don’t like.

It’s not going to work. IP or no IP. This is not really about New Balance or for that matter Horace Chang.

It’s about the customer.

 

It’s the customer who owns the customer. It’s the customer who selects the product. And the price.

And I think there’s a lesson here for all of us, particularly in positioning mainstream and luxury products in India and China.

The Innovator’s Dilemma appears to have mutated and grown. And we need to prevent this particular strain from getting traction.

Four Pillars and Marketing’s traditional 4 Ps

Have you reached the stage where everything you read feels stale, you get a sense of deja vu, you’ve heard and seen it all before? Quite a few people tell me they have.

I guess I’m lucky that way, I don’t feel that staleness at all. I really enjoy reading “parallel” texts on specific topics, feeling a sense of joy when, as a result, I receive fresh insight into that topic. A different perspective. This happens often when I read the Bible, and occasionally when I read some favourite poem or play.

It seems to happen most when you are actually familiar with something, yet open to unfamiliar concepts and constructs about that familiar thing.

Well, that’s what happened to me when I read the Sviokla post below. And I think it’s part of the richness of the blogosphere, part of how ideas mutate and move.

Thanks to Jonathan Peterson and way.nu for sending these snowballs my way. [Which reminds me. Maybe we need a term for the connections made explicitly and exclusively by blogosphere. Ideas anyone?]

Jonathan referred me to this recent post by John Sviokla (with Antony Paoni) on Marketing Remix.

Information congregates where customers go. And transactions are enabled there as well. Products and services butterfly into contact with customers. Perspectives we may have heard, but said succinctly and differently.

I feel that relationship, intention and co-creation need to be brought in more effectively by John, but that the core arguments are worth a read. See what you think.

What’s the matter with the Information Technology workforce?

That’s the provocative title of a recently published piece I found on First Monday. Some profound thoughts, especially at a time like this, with the future of the internet being debated and new intellectual property wrongs being created.
Example quote:

…..all the licensing and examinations in the world will not protect a profession in which the nature of the work changes when new knowledge enters the field.


I’ve been reading First Monday for some years now, and much of what I’ve read is first rate. Thanks to all at First Monday. One of the first places I saw opensourcing of ideas in practice.