Friday, December 10, 2010

Is Cisco UMI (you-me) the NBN killer app?


CNN has a video story today showing Cisco's Umi 1080P hi-def videoconferencing application that sits on your TV.

(this CNN link might expire, since there is no permalink on the video)

Cost:$600, plus $25 per month
Uses: HDMI in/out
Needs: 3.5 mbps bandwidth (seems low for hidef, but the NBN will mean everyone can use it, including satellite and wireless...)
Needs: unlimited Gbs (sigh.... I am on 4Gb per month... student...)

This could be a killer app for the NBN, if the price was right. I think this price is too high, but if it got down to Apple TV price ($129) and $10 per month, there could be a stampede....

See also the Cisco website: Umi website
This might also be a good way to demo the speed of the NBN. Cisco has demonstration centres around the US: New York, Boston, Dallas, Chicago. Might be fun to have in the city malls where people can interact between cities eg Melb vs Syd, Bris vs Perth, Adel vs Darwin, Newc vs Geel.... just for fun....



Meet Umi





Video on Youtube... too HD to even fit on a blog....(sigh)...

Thursday, November 18, 2010

NBN Sensitivity Analysis: Cost Benefit Part II



I reworked the figures (spreadsheet) in my costs benefit analysis spreadsheet with new assumptions. Four new scenarios show impact of changing assumptions. From low to high takeup adds $10 billion to NPV. But from low to high GDP impact adds $30 billion to NPV. More than 1% growth in GDP then NBN is a no brainer. Less than 0.5% then NBN is too expensive for the benefit it provides. Takeup has much less impact than GDP effect.

See spreadsheet here. Originally posted on Whirlpool NBN forum. Original Cost Benefit Analysis: July 2010 | April 2009.

Assumptions:
1a.Takeup high: Business 90%, Consumer 70%
1b.Takeup low: Business 65%, Consumer 50%
2a.GDP high: 1% impact (to year 15, pro rata to % built)
2b.GDP low: 0.5% impact

Scenarios:
1.High takeup, High GDP: NPV $10 billion
2.Low takeup, High GDP: NPV $nil
3.High takeup, Low GDP: NPV negative $21 billion
4.Low takeup, Low GDP: NPV negative $32 billion

With low takeup but high GDP impact, the NPV of the NBN is around $zero. Therefore, the NBN is positive, when business takeup exceeds 65%, AND consumer takeup exceeds 50% and GDP impact is 1% (per annum pro rata to year 15 from build start).

With high takeup, and 1% GDP growth (high GDP impact), NPV is positive $10.66 billion.

With low takeup (business 65%, consumer 50%) and 0.5% growth (low GDP impact), NPV is negative $32.5 billion.

If GDP growth only reaches 0.5% per annum (to year 15) from NBN, then NPV is negative $21 billion. This is with high takeup (business 90%, consumer 70%).

Therefore impact on GDP has the greater impact on NPV of NBN. From low to high takeup adds $10 billion to NPV. But from low to high GDP impact adds $30 billion to NPV. Sounds like we need to be arguing about how much impact the NBN will have on GDP. More than 1% growth in GDP then NBN is a no brainer. Less than 0.5% then NBN is too expensive for the benefit it provides. Takeup has much less impact than GDP effect.

Research on broadband impact on GDP.

1. Access Economics in their recent report for IBM, suggest 1.5% increase in GDP "within a few years" (p.37) for Transport, E-Health, Water, Electricity

However this is for FTTN (for $10-20 billion investment). Access Economics, The Economic Benefits of Intelligent Technologies, May 2009. Would be interesting to try to back out the costs. Though I don't think the 1.5% includes the cost of the network (p.ii), but depending on the degree of spare capacity in the economy (??jobs impact of building network??).



2. The World Bank considers there is a expectation of 1.2% increase in GDP for every 10% increase in broadband (Qiang 2009 pdf). This cites an earlier Qiang working paper of 2008. See picture above from Qiang 2009.

Australia in contrast has much high speed broadband. But many Australians do not use broadband. The ABS 8153.0 (June 2010) cites 9.6M internet services (3.2M over 8mbps; 8.2M over 500kbps). Of these 9.6M, 4.2M are DSL, 3.45M are wireless 0.8M dialup. Therefore there are at least 1.3M with dialup or slow broadband (less than 500kbps). These numbers relate to accounts rather than persons, so in our house one connection is used by me and my wife. Other houses may share a single connection with a family of five. Work and home connections might count twice. Still with 9M households and 2M businesses, there is still some scope for probably another 20% penetration of broadband from nothing, let alone those households with no computer. Malcolm Turnbull cited this week only 43% of homes with income $40,000 or less have internet.

Overall we have 9M households and 7.0M household broadband connections. But with only 4.3M DSL connections, there must be at least 2.7M wireless broadband connections, maybe iPhones and other 3G phones. At least 2M households don't have wireline broadband. Possibly as many as 4M households. Thus there is plenty of scope on the World Bank numbers for GDP growth in excess of 1%. However, the Cost benefit model needs a 1% GDP rise (about $7B per year) to run for about 8 years (from the end of the NBN build until the model ends at year 15).

The community needs to have a conversation about whether we think 1% growth in GDP is viable under the NBN. The NBN if spent in one year is about 3.5% of GDP. A 1% return increasing GDP is then around 30% return on investment. In these terms, the return seems quite high. Yet I am optimistic. Your comments are as always appreciated.

Tuesday, November 9, 2010

Value Management for Government



The Victorian Election is due on 27 November, and I just examined the Victoria Innovation policy (DIIRD). The focus is on businesses and innovation capability, roadmapping and foresighting (p.26), and establishing a new peak Innovation Advisory Forum (VIC DIIRD 2009-12 Corporate Plan). Innovation goals are about increasing innovation capability, such as increasing R&D to 29.3% of Australia's R&D (p.27). Focus is on the big job sectors: Auto, Aviation, Biotech, Energy, Financial Services, ICT, International Education, Tourism.

Victoria has admirable Innovation goals: to be Australia's leading economy - innovative, dynamic and sustainable (DIIRD 2010 Annual Report, p.12), and specific goals including:
150,000 new jobs by 2010, $8 billion infrastructure by 2011, and $35 billion exports by 2015. (All good measureable, actionable, simple, achievable goals).

Value Management suggests a greater focus on consumers and consumer value. My suggestion on the ALP Victoria website Get Involved is a voter facing portal for Victoria Government, myVic.



Title: myVictoria (myVic, myGovt) portal for Voters (an Innovation)



Tags: web 2.0, facebook, "social media", community, "building community", volunteering, "car pooling"

Many voters feel cut off from the Government and not listened to. We are separated often from our neighbours (See Softbank 30 year plan 10Mb pdf). Government is organised to suit their processes rather than voters' needs. Let's use the internet to make a better connection between voters and government.

Goal: every Victorian has a myVictoria webpage by 2013.
Estimated cost: $1 per Victorian operating costs, plus $0.50 per Victorian development.
Tagline: ALP: We Listen, We listen to Victoria

What does myVictoria do?
- share voter problems and likes, including strength (agree, strongly agree, disagree, strongly disagree)
- aggregate community concerns (a Victoria page shows all the problems and likes combined with number of voters, and strength rating on issue)
- share the good as well as the bad
- volunteering? Solve local problems. How can I help? Helping others in your local community (limited to 1-2km) by electoral roll
- car pooling. Get cars off our roads by finding nearby commuters who are going the same way.
- energising communities. Connecting Victoria.
- local problems, local solutions. Cutting costs. For instance, local volunteers to pick up rubbish off the street or beach. Local give advice to where problem can be directed in Government.
- reputation system, tracks volunteering, tracks politician performance (happy, not happy) for MPs, Premier, Govt Departments, Issues
- privacy. Only locals can see your (identified) issues, problems. Within 1-2km. Government and everybody can see aggregate issues (de-identified), by councillor, by electorate, by region, across State.
- donate. Benficiaries of volunteer work can donate to myVic website offsetting costs.

STEPS
- Pilot project with 1000 homes, plus 1000 volunteers (groups of ten in community, over 100 communities). Find functions communities want to use. Test and estimate costs.
- Expand to include more communities. Roll out in line with NBN.
- Can expand to include local and national government. Cost sharing across three levels of government reduce costs.
- Can expand to school children (babyVic).

Benefits:
Labor is the party of Innovation. Labor: we listen. Labor: building communities. Like Facebook for Victoria (based on location you live and connecting with local community). Trending issues. Live real time ongoing feedback from voters. Not just at election. Not just a sample. Everyone has a voice. Cutting costs. Getting volunteer work recognised and organised. Intersects with NBN benefits, and focuses on enabling everyone to participate.

Fairly low cost at $1 per voter per year. Offset by across government contribution. Offset by donations from volunteering.

Risks:
World first, so may be privacy, regulatory and transparency issues. Cost a risk, but offset by pilot. Reputation at risk since project government sponsored. Technology risk if system goes offline.

Sunday, October 17, 2010

What's important (and brief) in a (consumer) value model of innovation?


I express my PhD contribution (to the innovation and consumer value literature) as a list of propositions:

Proposition 1. Value drives consumer action. Consumers adopt new technology when they see good value.

Proposition 1a. Loss of value is a stronger drive to action (problem solving) than value.

Proposition 2. Value (when complex) has multiple, conflicting meanings.

Proposition 3. Consumers express value memories as attitude.

Proposition 3a. Attitude occurs at two value levels; by value meaning and overall.

Proposition 4. Closing and simplicity emerged as the most unusual and unexpected value practice and value meaning.

Proposition 5: Value is driven more by emotion than goals.
As Steve Jobs said "Don't let the noise of other's opinions drown out your own inner voice, heart and intuition. They somehow already know what you truly want to become." Stanford Commencement Address 2005.

My what's important thinking crystallises from the more longwinded post from a few days ago.

Thursday, October 14, 2010

If the NBN is the solution, what is the problem?


I suggest three problems the NBN addresses:
1. High per Gb prices, compared to overseas
2. Capped Gb per month, compared to overseas
3. Price per month measured taking incomes and currency into account (ie affordability)


Also, I sent Minister of Broadband a note referring to my poster on the NBN



Senator Stephen Conroy,
Minister for Broadband, Communications and the Digital Economy
re: How to sell the sizzle of the NBN? .... to non technical Australians....

Dear Sir,

I recently produced this poster for the Melb Uni, IBES (Institute for a Broadband enabled Society) on how to portray the benefits of the NBN in a way that, I believe, is more appropriate (and more oriented) to consumers. The focus of NBN discussion on $43 billion and headline speed (100Mbps, 1Gbps) are all well and good for techies and IT professionals, but don't speak to the needs of more ordinary Australians, such as retirees who use broadband mainly for email, working mothers who manage a household budget, and other non-technical people. The NBN also needs to be sold to (well informed) non-technical people, but with language more in keeping with their interests and concerns. The poster provides a sample of three ordinary Australian and how the NBN will be better value for them.

Headline:
NBN: faster, simpler, cheaper broadband.
Get more…. Do more… on the NBN.

Poster Summary
Why do consumers adopt new technology? What holds them back? How much will they pay? Past innovation theory focuses on early and later adopters, the young and high income earners (Rogers 2003). Value theory suggests consumer goals drive consumer choices (Woodruff 1997). Co-construction of value (Vargo and Lusch 2008) is a new perspective suggesting consumer value drives successful innovation (Kim and Mauborgne 2005). Innovation succeeds when it creates consumer and shareholder value. Innovation fails when it fails to create value.

Conclusion
To sell the sizzle of the NBN, we need to talk about how the NBN creates value for consumers. The focus should become how the NBN is cheaper ($ per GB), faster, and ideally simpler in pricing, choice, and usage. We should forget the $43 billion headline price, and 1 Gbps headline speed and talk in terms consumers understand: price per month.

Poster Image at: here(9Mb)

Blogpost on my PhD blog here.


I am researching how consumers understand value in a new technology, looking at 3G mobile phones.

The focus I recommend for the NBN (price per month) is difficult while the NBN is providing a wholesale only service, but focus could be made on the current Tasmanian NBN retail offerings, especially where they are priced lower than current ADSL2+ pricing. I have a blogpost on this comparison too, I call NBN ValueWatch here .

Kind regards
Richard Ferrers
Innovation and Value analyst
University of Qld

Sunday, October 10, 2010

What's important: in a (consumer) value theory of innovation





A Phd needs an academic contribution. The 'so what' was that research all about. Why was that research worth doing?

This post reprioritises the (consumer) value model. The Value Model focuses on the consumer aspect of Innovation: what do consumers value in a new technology?



What's Important with consumer value:

1. Consumers intimately describe value (meanings and practices) in connection with their actions (buying without waiting; waiting). Consumers' problem solving actions protect their existing value, while value reconfiguring (buying, exploring, comparing) seeks to grow new value. Consumers express their emotional response to value far more than any goals they might have, which are almost completely absent in descriptions of their experience.

2. Loss of value is a stronger drive to action (problem solving) than value.

3. Value actions include value practices: individual - exploring; comparing; filtering/closing; social - observing; inquiring; recommending; value consequences - buying; using; waiting.

4. Loss of Value actions (problem solving) include: seeking seller (innovator, telco) assistance; seeking alternatives; closing; doing nothing.

5. Pre purchase Value meanings include: connecting; bargain hunting; novelty; power, beauty, duty. Post purchase Value meanings include: service, reliability, simplicity. Underlying Value meanings include: function, need, emotion and time.

6. Consumers express Value memories as attitude; "brilliant", "fabulous", "amazed", "fantastic"; "happy", "better", "good", "prefer"; "problems", "don't want", "annoy", "dislike"; "total crap", "pissed off", "shits me", "totally unsatisfied". Attitude is positive or negative, strong or weak. Attitudes attach to (value meanings in and overall to) a value object. Simple valuing, where one thing is better than another in all aspects, is rational. Where one thing is compared to another thing; the first better in some ways, the second better in other ways, then valuing is complex.

7. Value meanings (and their creation) interact with and reconstruct Value practices (collecting and sorting value information). The interaction makes value dynamic, constructionist, complex (multi-meanings) and paradoxical (different meanings pull us to different actions).

8. Valuing takes place as a series of value conversations: social, individual and telco (innovator, promoter, contextual), so value is socially constructed and experiential.

9. Valuing continues pre and post purchase, so value is iterative and dynamic. I call this the Value phases.

Limits:
The Value Model is based on interviews of consumers about their 3G mobile phones. I asked consumers:
-how did you come to have your 3G mobile phone? how do you find it now you have got it?
-is there anything you would change? how do you find the telco?
-what does your 3G mobile phone mean to you?
The grounded theory methodology assumes a world in constant motion, where consumers' actions are based on the meanings they make out of their experiences in the world. This type of research is called interpretive, as I interpret the meanings consumers make, and as such is not generalisable in the way statistical research is.

The Value Model is complex but close to and grounded in consumer experience with 3G mobile phones.

Comparing:
The Value Model has been compared to the major innovation literature theories of technology adoption (diffusion of innovation) and major consumer value literature (see below)

Tuesday, October 5, 2010

Updated NBN Pricing: iiNet breaks $1/Gb barrier



Value Watch (Sept 2010)

Headline: iiNet, in new pricing, breaks the $1 per Gb barrier on $60 plan and above... iiNet substantially lowers its NBN pricing with September price release, and until June 2011, provides speed at fastest rate. iiNet leads lowest NBN pricing, below Exetel's $2/Gb pricing towards $0.20 per Gb ($110/mth), and $0.60 per Gb ($60 /
mth).

See Value Watch here.

Thursday, September 30, 2010

The Overview Model: towards a (consumer) value theory of innovation



An overview model, linking the grounded theory concepts into one overview construct. The Chapter 7 draft is available as pdf (9.5Mb; here). Innovation in this thesis is defined as "something new (novelty, a value meaning) which adds value" (consistent with Schumpeter 1934, Drucker 1999, 2007, Porter 1999, Vargo and Lusch 2008). To create value, innovators need to understand what value is to consumers and how value works (the processes and practices of value) for the benefit of consumers. Thus value is addressed always and only from the consumer perspective. All references to value are to consumer value, rather than shareholder value. The top diagram shows the value structure from simple beginnings.

Key aspects of (Consumer) Value:

  • Value structure analysed through several dimensions: as three value conversations (individual, social and telco); three phases (pre purchase, post purchase, and consequences of value); and value interactions (between value meaning, value practices and context).

  • Valuing continues pre and post purchase (iterative, dynamic).

  • Value meanings, Value practices (12 each) interact and reconstruct one another (dynamic, constructionist, complex, paradoxical).

  • Social, Individual and telco practices (socially constructed, experiential).

  • Value stored as attitude (significantly emotional), so valuing largely not based on rational goals (Woodruff 1997) and decisions.

  • Model is not generalisable, since interpretive (grounded theory; derived from consumer experience).

  • Loss of value stronger driver to action than value (problem solving).

  • Model is too complex but close to and grounded in consumer experience with 3G mobile phones. Need several layers to explain model.

  • Model combines and compared to elements of innovation models; Bass (1969) individual, social practices, Bijker (1995) problem solving, Rogers (2003) linear adoption, Christensen (1997) adoption dynamics, Ryan and Gross (1943) knowledge intensive and social. Value Model built to examine, and analyse Kim and Mauborgne's (2005) Value Innovation; which hypothesises adoption when leap in value.

  • Model value meanings tested against consumer value literature; fruit drinks (Zeithaml 1988), auto business to business (Flint, Woodruff and Gardial 2002), value typologies (Richins 1995, Holbrook 1996, Woodruff 1997)


This chapter has presented a value model of innovation, developed from the grounded theory practices in this thesis. The model is complex but offers a dynamic, subjective, contextual, and interpretive view of how consumers (at least in a 3G mobile phone context) understand value in a new technology. In the next chapter, I conclude and consider limitations, recommendations and further work to extend and improve the value model.

Comments welcome...!







Layer 1: Value structure:

Three value conversations (individual, social and telco)

Three value phases (pre purchase, post purchase, consequences of value)



Layer 2: Value Practices:

Pre: Post: Consequences:

Social: Individual: Telco:






Layer 3: Value Meanings:

Pre: Post: Underlying

Monday, September 6, 2010

How to sell the sizzle of the NBN?


Proposed Poster for IBES Symposium 21 Sept,
(Institute for a Broadband Enabled Society, University of Melbourne)

NBN: faster, simpler, cheaper broadband.
Get more…. Do more… on the NBN.



What is the NBN? Liberal Coalition view
Final Poster a4 print (1Mb) | a1 print (9Mb) | Draft (1.2Mb)| Value Model (170k)





Background


Why do consumers adopt new technology? What holds them back? How much will they pay? Past innovation theory focuses on early and later adopters, the young and high income earners (Rogers 2003). Value theory suggests consumer goals drive consumer choices (Woodruff 1997). Co-construction of value (Vargo and Lusch 2008) is a new perspective suggesting consumer value drives successful innovation (Kim and Mauborgne 2005). Innovation succeeds when it creates consumer and shareholder value. Innovation fails when it fails to create value.

Aim


This project aims to understand how consumers understand value in a new technology. Using grounded theory, I am seeking how consumers differ in their needs rather than what they have in common. Understanding value dynamics and building a theory that explains how value shifts over time and why is a focus.

Technology Findings


Approach: 3G mobile broadband is the site for this research as a proxy for understanding the slower moving broadband sector. I interviewed consumers and telecoms analysts to discover how the consumers came to have a 3G mobile phone, what their experience was, and what if anything they would change about their experience. Telecoms analysts were interviewed, since the telcos were reticent to particiate. The analysts described how the 3G telcos were going to make a return from their 3G investment, who they were targetting and how they were going o capture consumers and revenue in the marketplace. 3G telco annual reports and brochures were also sources of telco intentions, to contrast with consumers.

Results: Consumers assess value in new technology, such as 3G mobile broadband, through a number of processes (exploring, comparing, recommending) and by aggregating competing value meanings, such as novelty, beauty, power, simplicity, service, reliability against price. Valuing takes place both before and after purchase, and positive value outcomes are important for ongoing social recommending. Bargain hunting is an important driver of new technology adoption. Consumer love bargains, because bargains are gains in value.

Consumers avoid (filtering) low value messages, and reject uninteresting technology approaches (closing). The NBN must cut through these value construction processes to engage consumers. Social construction value construction processes are important (observing, inquiring, recommending). Therefore, IBES should set up connected demonstration kiosks (in cinemas, libraries and the NGV) to show consumers what NBN performance is like. Video services, and play is a key to consumers getting the message that NBN is good value, but pricing is critical too.

Conclusion


To sell the sizzle of the NBN, we need to talk about how the NBN creates value for consumers. The focus should become how the NBN is cheaper ($ per GB), faster, and ideally simpler in pricing, choice, and usage. We should forget the $43 billion headline price, and 1 Gbps headline speed and talk in terms consumers understand: price per month.
NBN: Do more, Get more…. On the NBN. Faster, cheaper, simpler. Easy…!

Poster contains three Use Cases, with image to follow....

Wednesday, August 11, 2010

Ten things I would do with 1Gbps NBN...


NBN (National Broadband Network) CEO Quigley announces Gb network test successful, today. Given unlimited download (as proposed by the McKinsey NBN implementation advice, what would I use GB NBN for?


* - possible with my internet now

** - not possible now

43 yo Phd student
skype my nephew 2000km away in HD**
lecture my innovation class from rural town**
watch HD Stanford/Harvard webcasts and interact**
talk to the doctor without travel*
watch Aegean sunset in HD**
interview for job 1000km away from home**
Jam with sister in Germany, she on violin, me on trumpet**
watch my nephews school play live**
give English lesson with an Asian English learner*
watch webcast of NBN AIIA lunch talk*
My internet: 4Gb 3G VirginBroadband at 500k inc local/std calls $60/mth


80 yo father
skype my 2000km away son*
talk to doctor online*
watch Andre Rieu concert live*
borrow library books*
record video memoirs and store online**
watch Parliament*
chat to overseas daughter (skype)*
browse family photos online*
train young lawyers*
keep an eye on Arsenal football games live*
My internet: 2Gb ADSL2 $30/mth

What is not possible now is to do these things all at once, or within our download limits.

Monday, August 9, 2010

Comparing VM with the literature


In June 2008, I wrote a results paper for the DRUID conference at Copenhagen Business School. An earlier version of the paper compared Value Management with the innovation and consumer value literature.

Innovation lit compared:

  • Christensen (1997) The innovator's dilemma

  • Bass (1969) A new product growth model for consumer durables, Management Science

  • Ryan and Gross (1943) The diffusion of hybrid seed corn

  • Bijker (1995) Of bicycles, bakelites and bulbs: toward a theory of sociotechnical change

  • Rogers (1962, 2003) Diffusion of innovations


Consumer value lit compared:

  • Holbrook (1996) Customer value ACR

  • Zeithaml (1988) Consumer perceptions of price, quality and value. Journal of Marketing

  • Woodruff (1997) Customer value: the next source of competitive advantage. JAMS

  • Flint, Woodruff and Gardial (2002) Eploring the phenomenon of customers' desired value change. Journal of Marketing

  • Not included here, ut to include in thesis: Richins 1994 Valuing things. JCR



Pdf 24 pages of comparison: http://depositfiles.com/files/rbhxe5tn9
For your reading pleasure, and any comments welcome. This is a draft. See final DRUID paper here.

Sunday, July 11, 2010

Resistance to innovation: a value perspective





The connecting value that holds society together resists the novelty seeking value of explorers. A dynamic tension exists between these two social forces; to change and to remain, which is destabilised by innovation and entrepreneur's effort. A community, society, club, association or family is an aggregation of community shared values. These values are ongoing connections and connecting. Novelty emphasises and values newness, while community (resistance) emphasises shared ongoing practices that constitute the identity of the community.

From the perspective of the Innovator, shared ongoing community practices (tradition) look like resistance. From the perspective of the Community, novelty (change, innovation) looks like distraction from ongoing community constituting practices. Community resists Innovation to the extent the change disrupts community identity. Rogers compatibility factor of speed of adoption captures this idea. Innovation unravels Community by changing constituting practices.

Thus innovation and resistance are two alternate value perspectives, valuing the new, and the known, those practices that constitute the community.

---
Innovation Poster Quote: "Imagination is more important than knowledge". Albert Einstein Quote $24.70 at M100 Plus Posters.

Innovation: for profit or value?


A new results chapter, brings me to further reflect on what innovation is? My review of the innovation literature, and finding recent exponents of the two perspectives encourages me to document the difference I found, and my argument of its impact.

Supranormal profits are the reward for successful innovation (Nelson and Winter 1982*, p.409).

Innovation is the successful commercial exploitation of new ideas… The eventual aim of [innovation] is the delivery of value and the process of commercialisation – that is obtaining returns from innovation investments – is a central element of MTI (management of technological innovation). (Dodgson, Gann and Salter 2008*, p.4).

[Managers] confuse novelty with innovation. The test of an innovation is that it creates value. A novelty only creates amusement. Managements decide to innovate for no other reason than they are bored doing the same thing or making the same product day in and day out. The test of an innovation – as is also the test of quality – is not ‘Do we like it?’ It is: ‘Do customers want it and will they pay for it?’ (Drucker 1999, p.85).


Two perspectives contest what innovation means. Is innovation profit oriented (Dogson et al 2008), or is innovation consumer and value oriented (Drucker 1999)? This chapter examines value from a consumer’s perspective and seeks to understand innovation through understanding consumer value. Management simplifying of innovation theory to a profit focus has reoriented innovation away from value creation. A single word dropped has caused the problem. The strategic management catch cry is “innovate or die” (Dess, Lumpkin and Eisner 2006, p.400) because supranormal profits are the reward of the innovator. By dropping ‘successful’ from the Nelson and Winter quote (see above), the need for value creation disappears. Innovation without a requirement of success, becomes novelty, and results in definitions in Strategic Management such as Innovation involves introducing or changing to something new (Dess et al 2006, p.397). They go on, saying Innovation is essential to sustaining competitive advantage (p.400). Now, anything ‘new’ will lead to sustained competitive advantage, and value has been lost in the wilderness. Such slight simplifying of what innovation is, by removing value creation as a focus, makes innovation easier because consumer’s input is no longer essential. Consumer needs, the focus of value, are no longer relevant, since value creation is no longer required. Yet management is mystified when such innovations fail, blaming the resistance of consumers (rather than their poor understanding of what consumers want or need). This thesis seeks to put value back in the centre of our understanding of what innovation is. Better understanding value, will help management to better understand innovation. Innovation becomes ‘something new that creates value’. <image source>

---

All quotes:

A cynic knows the price of everything and the value of nothing (Oscar Wilde in Green 2009).

Supranormal profits are the reward for successful innovation (Nelson and Winter 1982*, p.409).

Profit is not the explanation, cause or rationale of business behaviour and business decisions, but rather the test of their validity (Drucker in Green 2009).

Innovation is the successful commercial exploitation of new ideas… monopoly power is useful in providing incentives to technological research (Schumpeterian rent). (Dodgson, Gann and Salter 2008*, p.4, 9)

The eventual aim of MTI is the delivery of value and the process of commercialisation – that is obtaining returns from innovation investments – is a central element of MTI (management of technological innovation) (Dodgson et al 2008*, p.4).

Innovation is the search for and exploitation of new opportunities for satisfying human wants and needs… Entrepreneurship create[s] a new market and a new customer… Customers only pay for what is of use to them and gives them value. Nothing else constitutes quality. (Drucker 2007, p13, 20, 206).

[Managers] confuse novelty with innovation. The test of an innovation is that it creates value. A novelty only creates amusement. Managements decide to innovate for no other reason than they are bored doing the same thing or making the same product day in and day out. The test of an innovation – as is also the test of quality – is not ‘Do we like it?’ It is: ‘Do customers want it and will they pay for it?’ (Drucker 1999, p.85).

The starting point [of management] has to be what customers consider value (Drucker 1999, p.29).

References:
Dess, G., Lumpkin, G., & Eisner, A. (2006). Strategic Management: text and cases. Mc-Graw Hill Irwin: New York, NY.

Dodgson, M., Gann, D., & Salter, A. (2008). The Management of Technological Innovation: Strategy and Practice. Oxford: Oxford University Press.

Drucker, P. (1999). Management challenges for the 21st Century. Harper Business: New York, NY.

Drucker, P. (2007). Innovation and Entrepreneurshio: practices and principles. Elsevier: Oxford.

Green, S. (2009). Good Value: reflections on money, morality and an uncertain world. Allen Lane: London

Green, S. (2009). Good value in Banking. Available online at: http://www.hsbc.com/1/PA_1_1_S5/content/assets/newsroom/090908_speech_frankfurt.pdf

Monday, July 5, 2010

My Cost Benefit Analysis on the NBN


The Senate report ( process here, final report here, pdf (327k) here) on the viability of the NBN asked for a cost benefit analysis. Several have been done already, including:

* Ergas and Robson (2009) here, found $13 - 20 billion loss, based on all revenue generated from usage fees (reported here, pdf here)

* Gans (2009), found overall social benefits, using a month consumer payments and surplus analysis here, and pdf here.

* My previous attempt on this blog (Apr 2009), which suggested an operating shortfall of $40 million per month: available here.

I have updated my Cost benefit analysis of the NBN and attach it for your information (here ; updated for broken link, Apr.2013). Given the recent Senate Report calling for a cost benefit analysis, and media talk, I thought I would have a go at putting one together. About three hours work.

I found that to achieve a positive NPV, the NBN needs to add between 0.5 and 1.0% to GDP per annum. Approx $7 billion per annum, proportional to % build complete from network 50% complete. I add NPV for NBN Co, including projected revenue, depreciation, operating costs, but no interest.

This model assumes, funding/interest at 5%, consumer takeup maximum 70%, corporate takeup maximum 90% at year 8, pro rata over the course of the build, with accelerating takeup as the build passes 50% complete.

In the model I assume that the Federal Government pays interest on $43 billion invested at 5%. That Telstra loses 50% of its value over the network build (about $20 billion). That NBN Co earns profits, which pay down the $43 billion NBN investment, and NBN Operating expenses of 20% of depreciation (about $430 milllion after build). Depreciation straight line at 5% per annum.

Future adjustments to model could include: grossing Telstra loss up to future value (adds about $10 billion, and reduces NPV by $7 billion), adding other telco losses, eg Optus, AAPT, shaping GDP gains from high in mid term, and dropping over the longer term.

The spreadsheet allows all these variables to be manipulated and show the impact on NBN and National NPV. I look at cashflows for years 1-15, and discount at 5%, including debt outstanding at that point. If you have any questions about the model or would like to discuss it, please let me know.

Monday, June 21, 2010

NBN Early Pricing analysis - Value WATCH (June 2010)









I have analysed the early NBN pricing between Exetel, iiNet and Primus using my Value Watch methodology.

The McKinsey Report (https://wiki.dbcde.gov.au/dashboard.action) advises pricing for penetration  - see Exetel Tas NBN prices http://www.exetel.com.au/residential-fibre-pricing-tasmania.php starting at $0 plus $2/Gb for basic (25mbps) to $50 plus $0.75/Gb for fast (100mbps). Mckinsey advise wholesale price around $30 for entry level broadband (25mbps; unlimited Gb) plus $5 for unlimited calls. Equates to about $55-60 retail entry level. But three other ISPs are pricing NBN like a premium service: iiNet, Primus $50 for 5Gb; $90 for 15 Gb. I know who I would prefer. I will attach my comparison of the initial NBN prices below.

See graphical comparison here.... http://www.mediafire.com/file/wdyj0qkzmbe/NBNvalueWatchJun2010.pdf...

Comments welcome below. The Value Watch compares Price per month and Price per Gb. Greater value is when both these indicators are minimised. Exetel shows a clear value lead over iiNet and Primus in these early stages.

Update: Exetel revised their prices up from $1.50 / Gb to $2/Gb and monthly access down from $10 to $0. Faster plans had no changes. Will have to update analysis.... Revised graphs with updated Exetel prices here - http://www.mediafire.com/file/htfdqy3m4j2/nbnJune2010b.pdf

Saturday, May 29, 2010

iPad ergonomics poor? How about a lap stand?

A recent youtube video shows a 99 year old getting her first computer, but the ergonomics look bad, because she is bent so far over her lap to use the screen.





Concerned that iPad users might be hurting their back, by using the iPad on their lap, we are prototyping a Lap Stand. We want your feedback. Please treat this prototype as work in progress, and durability has not been proven.




Tuesday, May 11, 2010

When innovation is bad...?!?!


I have been invited to attend the Hanken School of Economics, Helsinki Finland to discuss the downsides of innovation.

A workshop called "Beyond the pro-innovation bias" is being run by Prof Karl-Erik Sveiby, in May 2010. Profs Jan Fagerburg, and Nancy Harding are making keynotes. The format is interesting because of the small group involved, the focus on brainstorming and problem solving, and the output of publishing the results as a book or special issue. UQ however prefers funding when a paper is presented at the gathering.

"The objective of the workshop is to bring together a group of 15-30 innovation researchers to explore alternatives to mainstream innovation research by addressing how unintended and undesirable consequences of innovation could be brought into the research agenda of the innovation research field. We want to go beyond the 'pro-innovation bias'." - Hanken website

My suggestion of a new term to indicate loss of value - 'denovation' (Jan 09) caught Prof Sveiby's interest and led to the invitation.

If innovation is something new, the result can be good or bad. If innovation is something new that adds value (as I argue in my thesis), then what is something new, which decreases value - I call this denovation. The trick is to work out if your action creates or destroys value or both. For instance, a price rise decreases value unless there is compensating change in product features.

Firms raise prices and think there is no effect on customers. I argue customers notice and remember, and include such information in ongoing value assessments. Price rises means customers lose value, and while customer response may not be immediate in action, an immediate response to the shift in value is a shift in attitude; increasing negative or decreasing positive sentiment towards the firm. Hence the need for ongoing measurement of customer attitudes towards firms as a measure of ongoing value provided.

Thursday, April 15, 2010

Revising results - AJETS vs now


As my supervisors ask me to add more data into my results chapter, I look again at the first draft of results from Oct 2007.

I attach the latest draft, and the Oct 2007 draft for your comparison.

The first draft was written, but not submitted to the AJETS - Australian Journal of Emerging Technologies and Society.

Here is the AJETS file Oct 2007. ( attached 459k pdf)

Here is the latest draft Results file April 2010. (attached 1.5M pdf)

Wednesday, April 14, 2010

Institute of Value Management


I have been discussing my thesis with some Value practitioners from the UK. They raise some interesting questions which I will deal with shortly, when I find the time. I have posted them here to consider, and to share.

Richard

Good to find someone being so rigorous. I'm intrigued by your findings and the way that you present them, as far as I've been able to understand them from your blog. The outlines for HBR make good sense and it is time they paid proper attention to customer value as opposed to their usual cursory nod. I hope they take them.

I have few questions and observations which I hope might stimulate a dialogue:

1.I wondered about the impact of experience with similar or competing products - or from product trials - is that embodied in attitude in your model or am I looking in the wrong place?

2.In my non-rigorous work on this I have found it useful to separate strictly social (family and peer group interactions) from network enablement (community, society) as very different motivations seem to apply. Do you make such a distinction?

3.Further I have found that fit with complementary products and services is a strong driver. I tend to refer to systemic values when exploring these issues. Your research does not seem to have thrown up this concern (or am I missing something?)

4.You identify context, or relevance, as an influence but not narrative integrity (by which I mean the story I have about myself - does this product fit with my self-perception? will it help me build the story of me?) Again anecdotally I have found this to be significant and I usually try to explore this dimension with clients. Do you accommodate such a concept?

Finally I have found it useful to categorise items like necessary tasks and complexity as costs (usually in terms such as effort and cognitive load)/. This allows me to place them on the cost side of the value equation along with price, social exposure, status risk etc. I'm not clear how you envisage the benefit / cost trade-off working. Or is this too analytical for your model?

As a further aid to my understanding I wondered how your values compare with the set of universal values identified by Schwartz and summarised in the rather fuzzy image I attach.

Great work! I'd love to read the thesis.

Best wishes
D@IVM

Earlier comment from KS@IVM:

The origins of the IVM lie in the promotion of value analysis/value
engineering as originally developed by L.Miles. VM has however developed
from those origins where the focus was on manufactured products to encompass
all types of "products" and organisations. It is argued that QFD,
benchmarking and lean are all developments from VM approaches. More recently
VM has encompassed soft systems methodology and has considerable affinity
with systems thinking and concepts of the learning organisation. It is not
directly associated with earned value. I assume from your reference that
you are referring to what in the UK we call earned value analysis (EVA)which
looks at the ratio between percentage costs incurred and percentage
activities complete; as opposed to economic value added(also EVA!)as
proposed by Stern. I would argue that the latter involves a narrow
definition of value, while the former is only related to value if planned
activities can be shown to be relevant to achieving organisational
objectives whose achievement at an organisational level underpin value.

There is in Australia an equivalent organisation to the IVM
(www.value-management.com.au), and there is an Australian standard on VM.
The leading VM academic in Australia is Roy Barton(RTBarton@aol.com).

Institute of Value Management

1-3 Birdcage Walk | London | SW1H 9JJ

Tel/Mobile: 07919 470566

Our mission is to enable our members to develop and promote the professional
practice of managing sustainable value to secure and ensure economic and
social wellbeing for organisations and citizens in the UK and
internationally.

Find out more at ivm.org.uk



Further academic discussion of Value Management from this perspective can be found at:

Managing value as a management style for projects
International Journal of Project Management, Volume 25, Issue 2, Pages 107-114
S. Male, J. Kelly, M. Gronqvist, D. Graham

Friday, March 26, 2010

The Economist debates Innovation


The Economist is hosting a debate on the proposition:

that innovation works best when Government does least.

See here - http://www.economist.com/debate/overview/168/Innovation.

Thursday, February 25, 2010

FCC tests broadband barriers in America


CNN reports 'Cost is a major barrier to broadband adoption'.

The FCC conducted a survey (pdf) of 5000 landline and mobile users "in an effort to understand the state of broadband adoption and use, as well as barriers facing those who do not have broadband at home". The report found 67% of American households have broadband, with only 6% have dialup. Interestingly 13% of households earning over $75,000 do not have broadband, suggesting greatest internet problems were: pornography and other inappropriate material, and identity theft.

FCC define broadband as 200k up or down. See more at FCC Broadband home here.

I have found cost or price to be a universal value dimension, but one of twelve. Other universal value dimensions include function, service/reliability and time. Other value dimensions include beauty, emotion, simplicity, newness, duty, power, community and need.

Monday, February 1, 2010

Tipping Point found in Value model: Attitude counts



It's been a big january with the target rewrite. With the tight deadline, I had to dramatically shrink and focus the Ch3 results, with surprising result.

I focussed on two things.
1. The properties of Value.
2. A single value connection between Value and Attitude.
This connection is the simplest two concept model of value. I excluded the other six value concepts (social network, consumer strategy, innovator strategy, value assessment, action and context) and will include this as a complex value model in an Appendix.

I analysed the Value attitude connection through three propositions.
P1: Value is stored as attitude
P2: Value is stored as a single result.
P2a: Value is stored as a multiple result.
P3: Value shifts with new relevant value information. ie Attitude endures
P3a: Attitude degrades over time.

This has meant some reanalysis (of interviews, and other tech consumer comments), and complete (part 3.2) rewrite, which is almost but not quite done. ANother few days.

Significant new results:
1. Attitude exists at two levels: general, and specific (or sub-attitude). The latter linked to value dimensions, and the former not.
2. Attitude is mainly a single result ie general attitude, but some people have a multiple general attitudes - simultaneous opposing general attitude eg 'necessary evil'
3. The connection between sub and general attitude is the key to the 'tipping point'. General attitude tips or flips between positive and negative, while multiple sub-attitudes are possible against multiple value dimensions ie happy with price, unhappy with reliability, happy with service, unhappy with convenience etc etc etc overall either happy or not. Have excluded from thesis scope the link between sub and overall attitude. Think this is a whole thesis on its own.

Prefer not to have to cover attitude literature ie whole new lit review but may have to, subject to your feedback.
Att lit eg cognitive dissonance Festinger 1957, theory of reasoned action (multi attribute ie multiple attitudes) Fishbein and Ajzen 1975, balance theory Heider 1946, congruity theory Osgood, Suci and Tannenbaum 1957. From Lawson, Tidwell et al Consumer Behaviour in Aust/NZ 1996.

4. General attitude would include tacit knowledge, while sub-attitude is explicit knowledge. if space/time would like to link to Polanyi. Perhaps in conclusion.
5. Attitude endures over time. No disconfirming evidence found. Though hard to prove a negative ie Popper.

I am conscious of my supervisor's need for quality, and my wife is cracking the time whip. I am in the middle.

I hope that now I have sufficient results for a significant contribution, while being simple (and tight) enough for the examiners to follow. And it will all fit in 80k words.