[conspire] Corrolary to one of Moen's Laws?

[Christian Einfeldt]

On Monday 14 March 2005 19:07, Ross Bernheim wrote:
> On Mar 14, 2005, at 12:34 PM, Don Marti wrote:
> > The problem is that the more dumb customers you
> > have, the more money you can make by _cutting_
> > investment in the product.  The less discriminating
> > your customers are, on average, the more rational it
> > is for you to rip them off.  If you think quarter to
> > quarter, you might even say it's your duty to your
> > shareholders to ship the crummiest product you can
> > to get maximum short-term profit.  Letting FUD trim
> > off the dumb customers for you limits your options,
> > product-quality-wise.
>
> It may maximize short term profit which should
> theoretically be either be distributed to the stockholders
> or result in higher stock prices. The effects longer term
> are not in the best interests of the stockholders. usually
> the ones who benefit are the top management who take
> large salaries and bonuses for the short term performance
> at the expense of the company and stockholders in the longer
> term.

Almost every market in almost every industry consists of customers 
who have divergent needs.  Harvard Biz Prof Clayton Christensen 
thinks that RCA was beaten into almost nothing by Sony's ability to 
leverage transistor radios into less demanding market tiers.  

When Sony first commercialized transistors, they (transistors) were 
too weak to be of use in then-market leader RCA's most profitable 
radios and TVs.  RCA spend tons of money on trying to make 
transistors work, because they could see the future for 
transistors, but they couldn't monetize transistors because their 
best customers were consumers of the radios and TVs which couldn't 
use transistors.  Plus, RCA's distributors, owners of appliance 
stores, wouldn't give quality shelf space to inexpensive, low 
margin appliances with transistors. 

Sony, by contrast, put the transistors into low power hand-held 
transistor radios for teenagers who didn't need the power provided 
at that time by vacuum tubes.  Sony sold its transistor radios 
through department stores such as Macy's which had higher inventory 
turnover rates than the appliance stores, and hence could live on 
the lower margins than those needed by the appliance stores.  

According to Christensen, both the appliance stores and RCA never 
recovered from the rise of transistors.  So, to address Rick's law 
of bicycles, I agree that an uneducated customer base can result in 
lower quality products.  I also agree that helping to educate 
newbies will tend to improve the quality of products, which is why 
I am so grateful to Rick Moen helping me with a command line 
problem that I was having at Tony Godshall's build-in this weekend.  
It is important for newbies to try to come up to speed somewhat, 
because otherwise we will be stuck with crap like Windows.  

On the other hand, fortunately for all of us, as science improves, 
modular solutions improve.  For all of its faults, Linspire has 
made a notebook which is better than Windows notebooks, simply 
because of the GNU/Linux operating system.  Now, even a newbie like 
me can use a Linux notebook and desktop for most of my simple end 
user needs: webbing, email, writing letters and briefs.  Sony 
eventually passed RCA in terms of its ability to make good stuff, 
and we will continue to see Linux pass Windows in a wide variety of 
areas.  In response, Microsoft will continue to flee up market to 
its so-called "integrated innovation" solutions for business, and 
to audio and video, where it will become trapped once science has 
solved the hard problems and the modular solutions there are good 
enough.

I highly recommend that folks on this list read Clayton 
Christensen's book that he co-wrote with Michael Raynor, called 
"The Innovator's Solution."  That book does a great job of 
summarizing the concepts of The Innovator's Dilemma, and then 
taking those concepts to the next step.  

I talk a lot about Christensen and Raynor, because I think that they 
help us understand who the best customers of FLOSS products and 
services are: the customers who don't need "integrated innovation" 
or Microsoft's proprietary audio or video solutions.  In fact, I 
think that we will see those newbies will be the ones who will help 
us erode the business model underlying Microsoft's monopoly and 
lock down.  Here is Linux Today article that I wrote  for 
MadPenguin.org which talks about how this will happen in the media.  
I hope I'm right!  

http://madpenguin.org/cms/html/64/3497.html

>
>
> Ross
>
>
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