Is it a good idea to encourage ALL employees to trade in these markets? Should insiders and/or highly uninformed people be allowed to trade? Do they help or hurt the market?
The first thought that comes to mind is not to allow ALL employees to trade in the prediction markets. Common sense tells you that people with insider information have the potential to sway the prediction in a manner reflective of the information that they possess. This comes across as an unfair advantage for these traders in addition to possibly swaying the end result. On the other side of the information gap, there are those uninformed individuals who our instincts tell us that they lack any information of value and thus, should also be excluded from participating. Setting aside these notions, we take a look at the theory of prediction markets. The theory tells us Yes, ALL employees should be allowed to trade. In theory, with a large enough active population, the few people with insider information and those lacking any information, will be absorbed into the masses thus, balancing out any of their efforts to sway the prediction. The model is successful due to a synergy from the masses, where the output is greater than any one individual’s input. The case mentions this by saying that the prediction outcome is more accurate from a large population than it is from one highly inlelligent/informed person.
People with insider information and the highly uninformed people have the potential to help and harm, respectively, the outcome on a small scale. However, as the population of participants increases, the degree of influence from these two groups decreases. Therefore, it is important to use a large enough population to balance out these effects, in order to obtain accurate prediction results. Also, as a side note, it is important to understand that even those with insider information aren’t guaranteed to have an accurate prediction, as nobody is 100% sure of what the actual outcome will be. (They may have a greater probability of an accurate prediction, however.)
Tuesday, April 21, 2009
Thursday, April 16, 2009
Threadless Case
In what other industries or areas would Threadless’ community-driven product development model work well? And not so well?
Threadless’ community-driven product development model would work well in essentially any industry where consumer-generated products are valued. It would also have to be in an industry where simple products are sold. Highly complex products such as electronic devices, computers, etc. would not be candidates. Perhaps, the art industry would be able to utilize this methodology. Artists could use it for paintings, crafts, drawings, pottery, jewelry, etc. In addition, the music industry might also be a candidate. Singers/music artists/etc. could upload their music, have it critiqued, voted on, and sold.
However, this type of model is very limited in its applicability. This model mostly works for products (not services) that are provided by typically one person. People on their own, generally have limited resources and therefore aren’t able to offer many products or designs for products that are complex (i.e. usually this limits people to the arts.)
Threadless’ community-driven product development model would work well in essentially any industry where consumer-generated products are valued. It would also have to be in an industry where simple products are sold. Highly complex products such as electronic devices, computers, etc. would not be candidates. Perhaps, the art industry would be able to utilize this methodology. Artists could use it for paintings, crafts, drawings, pottery, jewelry, etc. In addition, the music industry might also be a candidate. Singers/music artists/etc. could upload their music, have it critiqued, voted on, and sold.
However, this type of model is very limited in its applicability. This model mostly works for products (not services) that are provided by typically one person. People on their own, generally have limited resources and therefore aren’t able to offer many products or designs for products that are complex (i.e. usually this limits people to the arts.)
Tuesday, April 7, 2009
Social Networking Sites and LinkedIn
Online social networks have become ubiquitous in the past few years. What forms of value do users get from these services and who is most likely to sign up on LinkedIn versus other sites?
Forms of value that users receive from social networking sites:
1) Re-establish connections with former co-workers, friends, family, lovers, etc.
2) Form new relationships with individuals. (i.e. meet new people, form new friendships, find dates, etc.)
3) Knowledge of what others are doing in their lives. This is accomplished via status bars, bloggs, posted pictures and videos, messages, etc.
4) Self-expression. Users have multiple forms of media to convey their thoughts, expressions, stories, experiences, etc. for an audience.
5) Networking. Social networks make it possible to find people who have something of value. (ex. someone looking for a job at a software company could find an Oracle employee and get that person to pass his/her resume around within the company.)
6) Advertising and promotion. Individuals and companies can leverage social networks to promote events, products, bands, music, groups, etc.
7) Groups. Through social networks, people are able to find others with similar interests and form/join groups.
8) Social interaction. People are able to communicate and interact with each other in a virtual environment.
9) Social media. Social networks offer a place for social media.
http://en.wikipedia.org/wiki/Social_media
LinkedIn:
People most likely to signup on LinkedIn as opposed to other social networking sites are:
1) Human Resource (HR) recruiters - for companies looking to hire new employees.
2) Independent Recruiters - use it to match jobseekers with open positions at companies.
3) Jobseekers - those seeking new employment by passing their resumes around and meeting recruiters.
4) Career-minded individuals - those persons who actively network with the purpose of managing/enhancing their careers.
5) Entrepreneurs - seeking contacts to find resources necessary for starting up a business. (i.e. seeking venture capitalists)
6) Business Executives - establishing contacts with other business executives for purposes of mergers and acquisitions, lining up their next job, etc.
7) Salespersons - use it to find sale leads (typically business-to-business sales).
8) Venture Capitalists - use it to find entrepreneurs with great ideas and companies to invest in.
9) Consultants - use it to find clients.
LinkedIn has positioned itself as a business-focused networking site that attracts “business-minded” users. This particular niche is what distinguishes LinkedIn from many other social networking sites such as myspace and facebook, which are not segmented and attract the general masses.
Forms of value that users receive from social networking sites:
1) Re-establish connections with former co-workers, friends, family, lovers, etc.
2) Form new relationships with individuals. (i.e. meet new people, form new friendships, find dates, etc.)
3) Knowledge of what others are doing in their lives. This is accomplished via status bars, bloggs, posted pictures and videos, messages, etc.
4) Self-expression. Users have multiple forms of media to convey their thoughts, expressions, stories, experiences, etc. for an audience.
5) Networking. Social networks make it possible to find people who have something of value. (ex. someone looking for a job at a software company could find an Oracle employee and get that person to pass his/her resume around within the company.)
6) Advertising and promotion. Individuals and companies can leverage social networks to promote events, products, bands, music, groups, etc.
7) Groups. Through social networks, people are able to find others with similar interests and form/join groups.
8) Social interaction. People are able to communicate and interact with each other in a virtual environment.
9) Social media. Social networks offer a place for social media.
http://en.wikipedia.org/wiki/Social_media
LinkedIn:
People most likely to signup on LinkedIn as opposed to other social networking sites are:
1) Human Resource (HR) recruiters - for companies looking to hire new employees.
2) Independent Recruiters - use it to match jobseekers with open positions at companies.
3) Jobseekers - those seeking new employment by passing their resumes around and meeting recruiters.
4) Career-minded individuals - those persons who actively network with the purpose of managing/enhancing their careers.
5) Entrepreneurs - seeking contacts to find resources necessary for starting up a business. (i.e. seeking venture capitalists)
6) Business Executives - establishing contacts with other business executives for purposes of mergers and acquisitions, lining up their next job, etc.
7) Salespersons - use it to find sale leads (typically business-to-business sales).
8) Venture Capitalists - use it to find entrepreneurs with great ideas and companies to invest in.
9) Consultants - use it to find clients.
LinkedIn has positioned itself as a business-focused networking site that attracts “business-minded” users. This particular niche is what distinguishes LinkedIn from many other social networking sites such as myspace and facebook, which are not segmented and attract the general masses.
Monday, March 30, 2009
Wikipedia and DrKW Wiki Case
How do Wikipedia’s processes for creating and modifying articles ever lead to high-quality results?
I believe this can best be explained by the following quote from Jimmy Wales, the founder of Wikipedia:
“The wiki model is different because it gives you an incentive when you’re writing. If you write something that annoys other people, it’s just going to be deleted. So if you want your writing to survive, you really have to strive to be cooperative and helpful.”
Wikipedia’s processes allow anybody (except for non-registered and new users) to edit, modify, delete, and restore text within articles. This allows for an open community of users where all users are essentially given the same privileges and thus, have equal rights regarding content. With an open model, people worry about graffiti, deletion, and accuracy of the information. However, these worries are addressed by the underlying fundamental element of Wikipedia: people actually use it because as a whole, they have a need for a free accurate online encyclopedia. The proof is in the pudding: the fact that millions of articles have been written by thousands of users, demonstrates that people use Wikipedia, that it works, and that there is a bone-fide need for it. Therefore, as long as people, as a whole, see value in the service, they will continue to use it and will monitor the accuracy of the content, for it is only useful to them when it contains accurate information (i.e. it is self-serving). Ultimately, it is a self-serving community that has incentives to keep it useful for its users and will therefore contribute, add value, and protect it.
I believe this can best be explained by the following quote from Jimmy Wales, the founder of Wikipedia:
“The wiki model is different because it gives you an incentive when you’re writing. If you write something that annoys other people, it’s just going to be deleted. So if you want your writing to survive, you really have to strive to be cooperative and helpful.”
Wikipedia’s processes allow anybody (except for non-registered and new users) to edit, modify, delete, and restore text within articles. This allows for an open community of users where all users are essentially given the same privileges and thus, have equal rights regarding content. With an open model, people worry about graffiti, deletion, and accuracy of the information. However, these worries are addressed by the underlying fundamental element of Wikipedia: people actually use it because as a whole, they have a need for a free accurate online encyclopedia. The proof is in the pudding: the fact that millions of articles have been written by thousands of users, demonstrates that people use Wikipedia, that it works, and that there is a bone-fide need for it. Therefore, as long as people, as a whole, see value in the service, they will continue to use it and will monitor the accuracy of the content, for it is only useful to them when it contains accurate information (i.e. it is self-serving). Ultimately, it is a self-serving community that has incentives to keep it useful for its users and will therefore contribute, add value, and protect it.
Monday, March 23, 2009
Blogging at DrKW Case
What are the advantages and disadvantages of implementing internal versus external employee blogs in a corporate setting? Are there certain industries where one of these strategies makes more sense?
Some advantages of internal employee blogs are:
- Facilitate communication and collaboration between internal company divisions (ex. Marketing and R&D)
- Companies have control over what information is being entered in the blogs
- Employees can voice suggestions/recommendations without the public becoming privy
- Internal blogs can serve as company community bulletin boards to disseminate important new information/policies.
Some disadvantages of internal employee blogs are:
- Smaller user base
- Company controlled and monitored – employees may not be able to discuss “sensitive” issues
- Not open to customers (i.e. no customer feedback)
- Audience is one-sided (all company representatives…no one will play devil’s advocate with)
Some advantages of external employee blogs:
- Open to the public. This aids in idea generation for new company products/new features/new ways of doing business/etc., can obtain customer feedback, can be used as a marketing platform, can be used to identify new market opportunities, relay product information, method to address the public (i.e. public relations media outlet).
- Larger user base
Some disadvantages of external employee blogs are:
- Lack of corporate control
- Security risks
- Opportunity for corporate information leaks (i.e. secret information)
- Risk of negative publicity
It may be most appropriate to use external employee blogs in customer-focused industries where customer feedback is important such as software development, consumer electronics, and consumer entertainment. Internal employee blogs may be a better fit in industries with companies that operate using highly protected trade secrets (prevent a leak) and operate in highly criticized social/political/areas (avoid negative publicity) such as R&D firms, non-environmentally friendly manufacturing firms, and the fast food industry (unhealthy food).
Some advantages of internal employee blogs are:
- Facilitate communication and collaboration between internal company divisions (ex. Marketing and R&D)
- Companies have control over what information is being entered in the blogs
- Employees can voice suggestions/recommendations without the public becoming privy
- Internal blogs can serve as company community bulletin boards to disseminate important new information/policies.
Some disadvantages of internal employee blogs are:
- Smaller user base
- Company controlled and monitored – employees may not be able to discuss “sensitive” issues
- Not open to customers (i.e. no customer feedback)
- Audience is one-sided (all company representatives…no one will play devil’s advocate with)
Some advantages of external employee blogs:
- Open to the public. This aids in idea generation for new company products/new features/new ways of doing business/etc., can obtain customer feedback, can be used as a marketing platform, can be used to identify new market opportunities, relay product information, method to address the public (i.e. public relations media outlet).
- Larger user base
Some disadvantages of external employee blogs are:
- Lack of corporate control
- Security risks
- Opportunity for corporate information leaks (i.e. secret information)
- Risk of negative publicity
It may be most appropriate to use external employee blogs in customer-focused industries where customer feedback is important such as software development, consumer electronics, and consumer entertainment. Internal employee blogs may be a better fit in industries with companies that operate using highly protected trade secrets (prevent a leak) and operate in highly criticized social/political/areas (avoid negative publicity) such as R&D firms, non-environmentally friendly manufacturing firms, and the fast food industry (unhealthy food).
Wednesday, March 18, 2009
Apple and the digital music market
Has the digital music market irreversibly tipped in Apple’s favor?
One might have been able to make a positive claim to the above question prior to Apple’s removal of DRM. DRM provided the grounds for high switching and high homing costs, since Apple’s proprietary Fairplay DRM software was incompatible with non-Apple players and products. Apple was able to grab an 80% market share in the digital music market. A part of this advantage came from customers getting “locked in” once they purchased DRM-encoded music in AAC format through iTunes. Now that iTunes sells DRM-free music, this has removed this advantage along with the high switching and homing costs. It is expected that Apple’s iTunes will see a decreased market share in a DRM-free environment, as users will be able to obtain music content from other sources. However, it is unlikely that consumers will switch music content providers unless Apple is the only source offering DRM-free music which, would give Apple a clear advantage, since consumers prefer DRM-free music due to its universal usability and freedom from usage restrictions.
Regardless of the DRM situation and its impact on iTunes, Apple has admitted that it earns no real profits from music sales through iTunes and that Apple’s true revenue is generated by hardware sales such as iPod and iPhone sales. Therefore, Apple will continue to be a profitable and successful company as long as it continues to keep its competitive advantage derived from its customer-focused, easy-to-use, and innovative technology...not through music sales.
Apple has been able to keep its dominant share in the portable digital music player market by continually releasing newer, better, versions of its iPods. A replacement mentality among consumers has emerged. Consumers have been replacing their older iPods for newly released versions thus, allowing Apple to defeat stagnant sales within a saturated market. Additionally, Apple’s iPhone has been the next product line extension of its digital music players and includes an integrated mini-computer and cell phone. With over 17 million iPhone sales within 2yrs, the iPhone has seen impressive growth and has placed Apple in the lead for the mobile digital music market.
One might have been able to make a positive claim to the above question prior to Apple’s removal of DRM. DRM provided the grounds for high switching and high homing costs, since Apple’s proprietary Fairplay DRM software was incompatible with non-Apple players and products. Apple was able to grab an 80% market share in the digital music market. A part of this advantage came from customers getting “locked in” once they purchased DRM-encoded music in AAC format through iTunes. Now that iTunes sells DRM-free music, this has removed this advantage along with the high switching and homing costs. It is expected that Apple’s iTunes will see a decreased market share in a DRM-free environment, as users will be able to obtain music content from other sources. However, it is unlikely that consumers will switch music content providers unless Apple is the only source offering DRM-free music which, would give Apple a clear advantage, since consumers prefer DRM-free music due to its universal usability and freedom from usage restrictions.
Regardless of the DRM situation and its impact on iTunes, Apple has admitted that it earns no real profits from music sales through iTunes and that Apple’s true revenue is generated by hardware sales such as iPod and iPhone sales. Therefore, Apple will continue to be a profitable and successful company as long as it continues to keep its competitive advantage derived from its customer-focused, easy-to-use, and innovative technology...not through music sales.
Apple has been able to keep its dominant share in the portable digital music player market by continually releasing newer, better, versions of its iPods. A replacement mentality among consumers has emerged. Consumers have been replacing their older iPods for newly released versions thus, allowing Apple to defeat stagnant sales within a saturated market. Additionally, Apple’s iPhone has been the next product line extension of its digital music players and includes an integrated mini-computer and cell phone. With over 17 million iPhone sales within 2yrs, the iPhone has seen impressive growth and has placed Apple in the lead for the mobile digital music market.
Monday, March 2, 2009
Brightcove Case
What are the strengths and weaknesses of Brightcove’s business model?
Strengths:
Integrated model with four components - four sides are publishers, advertisers, affiliates, and consumers (multi-sided network).
Multiple Potential revenue sources - Advertising, platform operations, content licensing and distribution, etc.
Syndicated Marketplace - gives the potential to make money at the Brightcove site and any other sites with Brightcove-enabled video content. This strategy helps hurdle the networking effects in an attempt to gain a wider acceptance, similar to a licensing strategy.
Market Niche directed towards providing a solution for content providers. By offering content providers a total package for offering online video, Brightcove has positioned itself in a unique way.
Potential first-mover advantage - Brightcove has begun to service a market that is subject to winner-take-all. If it can become fully operational, it may be able to leverage its first-mover advantage to help place it as a top contender for the market and potentially as the winner in the future.
Weaknesses:
Low-barriers to entry - Providing a platform for “internet tv” is easy and fairly inexpensive. This leads to increased competition, which in turn leads to lower profitability.
Competitors - Several strong competitors exist in the marketplace (Google, YouTube, Amazon, Yahoo, www.revver.com, www.roo.com, etc.)
Massive Amount of Resources - The business model requires a large amount of resources (time, money, skilled employees, etc.) in order to build the complete business.
Complex business model - The business model is made up of many moving parts (multi-sided) and needs all parts in order to function (network must be adopted by all parties involved).
Subject to the “Penguin Effect” - have to get all four parties involved, nobody will join without the others. Who will join first?
Difficult to implement - It is difficult to implement portions of the business model in phases; essentially, it must all be done at once (an all-or-none strategy).
Strengths:
Integrated model with four components - four sides are publishers, advertisers, affiliates, and consumers (multi-sided network).
Multiple Potential revenue sources - Advertising, platform operations, content licensing and distribution, etc.
Syndicated Marketplace - gives the potential to make money at the Brightcove site and any other sites with Brightcove-enabled video content. This strategy helps hurdle the networking effects in an attempt to gain a wider acceptance, similar to a licensing strategy.
Market Niche directed towards providing a solution for content providers. By offering content providers a total package for offering online video, Brightcove has positioned itself in a unique way.
Potential first-mover advantage - Brightcove has begun to service a market that is subject to winner-take-all. If it can become fully operational, it may be able to leverage its first-mover advantage to help place it as a top contender for the market and potentially as the winner in the future.
Weaknesses:
Low-barriers to entry - Providing a platform for “internet tv” is easy and fairly inexpensive. This leads to increased competition, which in turn leads to lower profitability.
Competitors - Several strong competitors exist in the marketplace (Google, YouTube, Amazon, Yahoo, www.revver.com, www.roo.com, etc.)
Massive Amount of Resources - The business model requires a large amount of resources (time, money, skilled employees, etc.) in order to build the complete business.
Complex business model - The business model is made up of many moving parts (multi-sided) and needs all parts in order to function (network must be adopted by all parties involved).
Subject to the “Penguin Effect” - have to get all four parties involved, nobody will join without the others. Who will join first?
Difficult to implement - It is difficult to implement portions of the business model in phases; essentially, it must all be done at once (an all-or-none strategy).
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