On Being an Early Adopter in Silicon Valley

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Rochelle

When I lived in Chicago, I used to find myself getting annoyed at coverage of new innovations happening in Silicon Valley — it all seemed so far away and out of reach.  But now that I live in Silicon Valley, I’m enjoying being at the center of new trends.

So when I read about a company that is revolutionizing blood testing, and realized that their first and only testing center is about 20 minutes from my house, in downtown Palo Alto, I had to check it out.

I learned about the company, Theranos, in the pages of one of my favorite magazines, Wired. This magazine, headquartered in San Francisco, features the most exciting up-and-coming technology from the hottest startups.  Theranos certainly qualifies as one of these, with its goal to revolutionize the business of blood testing.  The 30 year founder came up with the idea for doing blood testing using 1000th of the amount of blood required by normal tests, with results produced in just a few hours. She dropped out of Stanford and used her tuition money to fund her company.

Blood testing was on my mind when I saw this article, because every spring is when I have my annual physical my doctor likes to do a lot of blood tests. And I mean a lot.  She’s a devotee of another trend that is currently popular in the Bay Area, called Functional Medicine, which emphasizes gathering a lot of data. I like this approach very much in theory, but having a half dozen vials of blood drawn for all the tests is not so great in practice.  So the Theranos micro-sample approach was extremely appealing — all they need one drop of blood to run a battery of tests.

Thus I found myself at the Theranos Wellness Center in the Palo Alto Walgreens, the first of what will soon be a nationwide network.  It turned out that the large number of tests ordered by my doctor exceeded what could be done using the pinprick micro-sample, so I had to have an ordinary venipuncture.  That was disappointing, but they only had to take two mini tubes, so it was certainly an improvement over my usual blood test experience.  Other than that, it was not too much different than going to the usual testing center, other than I was the only patient there, presumably because not many people have discovered it yet. But with small blood volume requirements, test results available in a few hours, and clearly posted prices (a rarity in U.S. medicine) I expect that more and more people will be trying Theranos soon.

 

Regulators vs Innovators

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Rochelle Kopp

A key feature of innovations is that they disrupt existing markets – the more innovative the idea, the more disruption that they will cause.  However, those who are disrupted don’t necessarily appreciate being disrupted.  Furthermore, industries that are being disrupted also may have regulations that enforce the status quo and are not necessarily friendly to new entrants who want to do things differently.

In four recent high-profile cases, regulators have cracked down on innovative new entrants.  All these cases provide interesting insights into the issues surrounding how new technologies and business models can feel like positives to consumers while at the same time garnering the wrath of the government and traditional competitors.

A popular new service in the U.S. recently has been services such as Lyft and Uber, part of the so-called “sharing economy.”  Through an app, drivers offer to take people places they need to go, in their own personal car. This works well at matching riders with transportation.  However, it’s in direct competition with taxicabs, and the cab companies and regulators are not happy about it. In Seattle, the City Council just decided to limit how many cars such services can have on the road at any given time, and further regulation elsewhere may be in the offing.

Another popular “sharing economy” startup that is drawing heat from regulators is Airbnb, which enables people to rent out a room or part of their homes, in competition with hotels.  In New York, Airbnb is currently in a dispute with the New York attorney general, which claims that many people are using the service illegally and that it’s costing the state money.

The decreasing cost of genomic testing is behind the startup 23andme, which gives consumers who submit a DNA sample information about their genetic tendencies, including disease risks, at the reasonable price of $99.  Last fall the FDA shut down the company’s service, concerned that patients would misunderstand the genetic information provided.

Finally, many people are interested in learning to code computer software, and several startups have sprung up offering “boot camps” that help people to learn that skill.  They were surprised in January when a little-known California regulatory agency sent them cease-and-desist letters, requiring them that they be in compliance or face large fines and imminent closure.

Regulations exist partially to protect consumers and partially to protect the interests of established players by blocking out newcomers.  The new wave of disruptive business models will test how flexibly government can respond to the new services made possible by advances in technology and creativity while respecting the desires of consumers. It will also force entrepreneurs to pay more attention to the “powers that be.”

Disruption is the name of the game in technology

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Rochelle Kopp

I recently read a fascinating article.  The author happened to buy a bunch of old newspaers, dating from 1991.  In them was an advertisement from Radio Shack, a leading American retailer of electronic gadgets.   Looking at the items in the ad, the author realized that nearly all of them had been rendered obsolete by the smartphone.  Answering machine? Replaced by the voicemail on the smartphone.  Cassette recorder?  Replaced by an app. Calculator?  Also replaced by an app.  CD player?  The smartphone is now home for all music.  Camcorder?  The smartphone makes videos.   All in all, one would have spent $3052.82 in 1991 (equivalent to about $5100 today) to buy all the stuff shown in that ad, that can now be done with one’s phone.  There were only two items in the ad that couldn’t be replaced by the phone: a radar detector, and a speaker.

That ad is a great example of how technological changes can disrupt industries.  For the companies that made the answering machines, calculators and recorders in the ad, the entire landscape of their industry changed overnight.  Surely, they aren’t able to sell nearly as many of their products as they did previously.

Another excellent example of the kind of disruption that today’s rapid technological changes are leading to is also related to the smartphone.  For many years, the stand-alone GPS was a very popular product in the United States, sold by specialist companies such as TomTom, Garvin, and Magellan.  However, with the advent of smartphones, that product category was almost instantly devastated.  Why buy a separate machine for $100 or more, when there is a free navigation app pre-loaded on your smartphone?

This GPS example is significant, because it illustrates how disruptive innovation today may not come from the same industry, and can appear out of nowhere to immediately wipe out mature products.  The result is that new markets can be created or destroyed  overnight.

For many years in Silicon Valley and other technological centers in the U.S., companies fretted over The Innovator’s Dilemma, the title of a book that explained how disruptors start by offering cheap alternatives to the products sold by existing players. Today, a popular book is called Big Bang Disruption, and it argues that innovations today are likely to cause markets to be upended, as in the case of the GPS. This ever more disruptive change is certainly going to lead to more headaches for companies.  Sitting on ones’ laurels is definitely no longer an option.

The Google Bus Under Attack

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Rochelle Kopp

Many of the tech firms in the San Francisco Bay Area are located in an area called the Peninsula, on a narrow strip of land that stretches from San Francisco itself to just above San Jose, and includes cities such as Redwood City (home of Oracle), Menlo Park (home of Facebook), and Mountain View (home of Google and Linkedin).  While the downtown areas of the cities on the Peninsula are charming, they tend to be rather suburban in feel, and lack the grit and energy of San Francisco or the cities across the Bay such as Berkeley and Oakland.  So, many workers at technology firms in Silicon Valley, especially younger ones, choose to live in those urban areas and commute to their jobs even though the commute can take an hour or more each way in rush hour.  In an attempt to cater to this highly desirable workforce, and to make them more productive during commuting time, many high tech firms on the Peninsula have taken to running daily bus service that ferries employees to and from their homes.  The large buses are comfortable and are equipped with wifi, so that they are like rolling offices.  They are also a conspicuous presence, once that has become the unlikely target of protests, including vandalization of one of Google’s buses on December 20th.

It’s not that the buses are hurting anyone or making noise.  Rather, it’s what they represent.  Writing in the New Yorker, journalist George Packer called the tech company buses “a vivid emblem of the tech boom’s stratifying effect in the Bay Area.” An article published in San Francisco Magazine this fall called them  “metaphor for whatever we feel about the tech industry in our midst: annoyance, resentment, paranoia, even something like hate.”

The fact is that in the Bay Area, there are the techies (employees at technology companies) who earn very high salaries, and everyone else. And because housing stock is limited due to historical and political reasons as well as the lack of available land due to the odd geography of the Bay Area (with a big Bay in forming a giant empty space right in the middle), the recent influx of these highly paid employees of the tech industry has been driving up rents and forcing many middle and lower class residents out of their homes.  Hence the resentment of those lucky people on the bus.

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Japan Intercultural Consulting www.japanintercultural.com

Forced Ranking

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Rochelle

When I was back in business school, I recall one of my Japanese friends telling me about a friend of hers who was studying at Harvard Business School being suicidal. Horrified, I asked her what she thought the problem was. It was then I learned that Harvard has a system where the bottom 10% of the people in each class automatically are given a failing grade. “This is especially hard for foreign students, who are at a disadvantage due to not being native speakers of English,” my friend told me. “My friend fears that she is in danger of being kicked out of school due to her low grades, and it’s driving her to despair.” I never heard more about this person, and I hope that everything turned out alright for her. But this was one of my first exposures to a forced ranking rating system. My immediate reaction was that it seemed rather harsh. My feeling was, at a school like HBS that is so careful about who it admits, and is charging them so much money to study there, such a system seemed really quite excessive. And at the same time, likely it would significantly impact the entire atmosphere of the school in a negative way.
I had heard that people at Harvard were very competitive in a cutthroat way, and this kind of system would surely exacerbate that.

Later, I learned that such systems are not unusual at corporations in the United States. GE in particular is famous for firing the bottom 10% of its managers every year, regardless of absolute performance.

Evidently, Microsoft was also using a similar system, which it called “stacked ranking.” Each business unit’s management team had to rate employees’ performance, and rank a certain percentage of them as either top performers, average or poorly performing. A manager who has a group comprised of all excellent employees would still have to rank some of them as poorly performing. It is said that this gave rise to a “cannibalistic culture.” In an attempt to create a more collaborative atmosphere in the company, Microsoft recently announced that it was changing its evaluation system to get rid of ratings and eliminate the forced curve.

Yet, right on the heels of this announcement, it has come out that Yahoo has recently adopted such a system, and has recently used it as the basis to fire about 600 people. Yahoo’s CEO Marissa Mayer already has the reputation of bucking the trends and being rather harsh in her approach to HR based on Yahoo’s elimination of its telecommuting option. Yahoo’s embrace of stacked ranking seems like another reason to label her an HR contrarian.

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Japan Intercultural Consulting http://www.japanintercultural.com

 

 

 

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Crowdfunding makes projects possible in a new way

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Rochelle

One of my friends is an actor. Earlier in his career, he primarily appeared in plays and the occasional TV commercial.  However recently he is very busy starring in movies. How did this happen?  Was he finally discovered by Hollywood? No, the answer is that he discovered one of the latest trends in U.S. business, crowdfunding.  Using a crowdfunding website, he has been able to raise money from friends and family to shoot movies.  He started with a short one — length of only 2 minutes — and now is working on longer ones.  Seeing how much he is enjoying himself, I have to think that this new way to fund projects is a good thing.

Kickstarter and Indiegogo are the two most prominent crowdfunding sites.  The way that they work is that someone with an idea for a project posts it on the site, and asks for donations.  Generally a variety of donation levels is offered.  A basic donation may get you one of the things being created by the product — for example, my actor friend gives donors DVDs of the movie.  Higher donations can get you special thanks or special privileges.

Some projects that are launched using crowdfunding are creative ones, like the movies that my actor friend is creating. Many however are commercial.  I’ve been hearing of many examples of how video game fans are contributing money to fund the production of games on particular themes of interest to them.  In some cases, and inventor will use crowdfunding as a way of obtaining funds to begin production of their product.  In such cases, the people who contribute to the funding get a promise to receive one of the products.  This means that crowdfunding in a sense is a way of proving that there is a market for the product, and making the first sales.

Crowdfunding can also be good for publicity. Because many people scan the crowdfunding sites looking for interesting things, just posting a project there can be a great (and free) way to get good publicity. For example, last year I saw a newspaper article that mentioned a Kickstarter project to fund the production of a foldable kayak. An avid kayaker without space to store a kayak, I immediately went to the site and made a contribution.  I am now receiving email updates about the production status, and expect to receive my kayak this fall.

Crowdfunding has its pitfalls, and cautionary tales about of Kickstarter projects that went awry, saddling the creators with obligations that they cannot fulfil. If one misestimates the cost of production or how much money is really needed, it can be easy to get stuck.  But overall crowdfunding is a way to raise funds for projects that is more efficient and exciting than the alternatives that previously existed.

 

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Japan Intercultural Consulting http://www.japanintercultural.com

Twitter criticized for all-male board

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Rochelle

In the beginning of October, Twitter announced its long-awaited IPO to much fanfare. The company is looking to raise $1 billion, and it’s expected that many millionaires will be created.

However, a shadow has fallen on Twitter amidst all the excitement. The publication earlier this year of Facebook COO Sheryl Sandberg’s bestseller Lean In has brought renewed attention to the lack of female representation at senior levels of leadership in American business. This has brought scrutiny upon many firms, especially in the tech sector where the number of women tends to be even fewer. Taking this tack, Vivek Wadhwa, a voluble former entrepreneur turned academic, in an interview with the New York Times criticized Twitter for having an all-male board, calling it “male chauvinist thinking.”

Twitter’s COO Dick Costolo went on Twitter to fight back. There, he called Wadhwa “the Carrot Top of academic sources”, a reference to a stand-up comedian who makes exaggerated statements.  It happens that I have in the past heard similar criticism of Wadhwa from my academic friends, so I found it quite interesting to hear the CEO of Twitter say essentially the same thing. However, this dismissive statement from Costolo proved to be very unwise, as it ignited a firestorm of indignation and intensified the scrutiny of Twitter’s lack of gender balance on its board.

The most recent and prominent person to criticize Twitter is Nicholas Kristof, a popular columnist for the New York Times who often writes about issues of gender equality. He called the fact that Twitter’s board contains seven white men “stale, old thinking”, and quoted research that shows that companies with more women on their boards outperform those with fewer women in terms of return on equity and invested capital. He also pointed to research showing that diverse teams are the best at problem solving.

As a consultant who often advises companies on matters of diversity, I’m glad that people are becoming more aware of the importance of including women at the highest levels in organizations, and highly value the research Kristof pointed to. At the same time, to be quite honest the criticism of Twitter is making me rather uncomfortable. In my mind, the essence of diversity is to not judge people based on factors that they cannot control such as their race, age, or gender. But that’s what is happening when people focus on the race and gender of Twitter’s board members.  Having never met them, I can’t say whether they were chosen due to “stale, old thinking” or based on their skills and contributions.

Doubtless Twitter will appoint a female board member at some point, if only to appease its critics. But I personally wouldn’t want to be that woman, because everyone would think that I had been chosen solely on the basis of my gender. I’d like to see the day that we can all get past putting people in demographic categories, and instead focus on them as talented individuals.

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Japan Intercultural Consulting http://www.japanintercultural.com