No Money for Blockbuster

As frequent readers of this blog know, my Benchpress-partner-in-crime Anthony and I like making ridiculous $100 offers for failing companies/divisions. One may inquire, then, given Blockbuster’s pitiful plight (which has been so poor that they’ve even been the subject of an Onion video parody), why we haven’t made our usual $100 offer.

The reason is simple, despite a couple of long discussions about Blockbuster: Anthony and I are simply not confident that we could turn around Blockbuster.

There really are only three ways for their management to proceed:

1. Out-Netflix Netflix. The major benefit of this strategy is that this is the  business model that its management would be most familiar with – selling/renting video content. However, that’s about the only benefit that this strategy has. They are now strategic followers in a game which Netflix created and perfected, rather than leaders. But unlike Microsoft, they lack the resources to outlast or outinvest their competition (in 2008, Blockbuster lost $374 million compared to having only $626 million of equity [all their assets minus all their debts], while Netflix made a profit of $122 million on $347 million of equity) nor do they have a premium offering to combine with their new strategy (e.g. Microsoft can roll innovations in things like Virtualization or Cloud Computing back into Windows or Office). Blockbuster’s one asset over Netflix, their physical presence around the country, is now relatively unimportant given the dominance of broadband internet (and new internet-enabled set top boxes) and the cheapness and speed of mail delivery and their traction thus far in gaining major electronics and set-top box wins has been disappointing. Their most promising press release (a partnership with Microsoft to use Live Mesh) may be the only thing going for them – and this happens to be with the player who’s not the leader in portable media players and who’s Live Mesh product won’t really get full force until late-2009/early-2010. This strategy is not promising.
2. Fundamentally change their business model. This is an idea I pushed at first – suggesting that Netflix switch business models to selling home entertainment gear, something which could help tie with their current product offering and give them much needed partners to counter their current slump and lack of customer mindshare. However, Blockbuster’s lack of resources (as of Oct 2008, only $95 million in liquid cash) and profitability and the high risk and long-term horizon of this strategy make this un-feasible as a game changing play. Simply put, there’s not enough farm to bet on this strategy.
3. Sell themselves. This is probably the most promising strategy in that Blockbuster will only need to turn itself around just enough to convince another buyer to acquire the assets. But, given that Blockbuster is the largest brick & mortar renter of videos and its dim prospects, its unlikely there are any buyers interested in owning a video rental store. Success would require finding a party interested in:
• Buying a loser who’s likely to shed off much more in profits and brand power before being able to turn itself around
• An unwieldy network of physical stores
• Investing large amounts in either outcompeting Netflix, fundamentally changing their business, or some combination of the two

In other words – probably nobody (except people who still think real estate values will always go up).

Sorry, Blockbuster – maybe Dogbert will cough up some dough for you?

(Image Credit) (Image Credit) (Dilbert)

There is no security

Yesterday the partners on my case relayed the terrifying information they had learned when they met with former Chairman of the Joint Chiefs Peter Pace about computer security — which is to say there is none. Warning: this is not uplifting at all:

• An estimated 60% of computers have Russian/Chinese bots (probably both) on them, enabling them to be used in distributed attacks on enemy systems — e.g. when Russia took down all of Estonia’s IT system, the IP of the “attackers” came mostly from Peru and Egypt; when Russia took down much of Georgia’s IT system — the IP of the attackers came mostly from the US! And no, Mac/Linux users and antivirus/malware addicts are probably not safe.
• If you go to China, don’t bring your Blackberry — even if your Blackberry stays off, the Chinese have technology which can read all the information off of it and pump a “call home” virus on it which will infiltrate your corporate/government email system and send all the data back to Beijing (something which happened at the Pentagon apparently)
• It’s a common corporate security practice to prevent any secret transmissions/work from happening in China out of fear that the Chinese government or Chinese corporate spies will intercept it; the head of Bain China told a visiting partner from the US to not even turn on his laptop for the Chinese will just read your hard drive and inject malware
• The technology exists for skilled hackers to destroy a country’s energy infrastructure by modulating electrical pulses through the generators
• The technology exists for you to manipulate the information on Barack Obama’s computer screen, feeding him false information

• We don’t even KNOW what China/Russia are doing to us — all of this is speculation based on what the US has gathered on the limited number of detected incursions and what the US knows its own hackers can do (and hence it conjectures Chinese/Russian hackers can also do it)

More Made in Taiwan

It’s been a while since I visited the topic of Taiwan’s pivotal role in the global technology supply chain. So, it’s long overdue for some not-so-shameless plugging of news involving my favorite island country’s technology industry and the impact they’ve had on the technology space:

• HTC shipped the first mobile phone to run Google’s Android mobile phone operating system
• Taiwanese OEMs/ODMs stormed the PC space with new netbook/nettop form factors which have been the only PC segment to survive the downturn
• Taiwanese ODMs are set to completely change the PC landscape again with new computer designs based on ARM chips (not the traditional x86 processors which Intel/AMD make) like the QBook
• The Taiwanese government is actively being courted by Elpida (Japanese memory manufacturer) and Micron (US memory manufacturer), the two candidates who seek to gain control over Taiwan Memory Corporation, the Taiwanese DRAM manufacturer who will consolidate all of Taiwan’s failing DRAM players
• TSMC, the world’s largest and most profitable and advanced semiconductor foundry, not only pushed 40nm process technology into volume production (note: even Intel is still currently only at 45nm process technology), but is now the first partner Intel has ever entrusted with its processor technology
• Despite the recession destroying the profitability of pretty much the entire semiconductor industry, Taiwanese superstar semiconductor firm Mediatek is expecting sales in Q1 2009 to be 8-13% larger than Q4 2008 (versus the previously anticipated 8-16% decline) and TSMC is projecting that their final Q1 profit margin may be between –2 and 0% (up from the –19 to –15% previously anticipated)
• VIA, one of three companies in the world with the license to produce x86 PC chips, has unveiled its new netbook processor which, unlike Intel’s Atom chips, can actually play 1080p video
• Given the many OEMs/ODMs in Taiwan working on Android devices, Google plans to open an Android development center in Taiwan

Hopefully a small taste of the reason why so many tech analysts watch the Taiwanese industry so carefully.

(Image Credit)

Successful Consulting

… looks like this (courtesy of, duh, Dilbert):

One man’s trash is another man’s “brilliant” executive strategy.

On a more serious note, though, one of the tasks that any strategic executive (or consultant for that matter) needs to be able to do is to take crazy assumptions and to test them to see what would happen if they were true. What if some upstart competitor develops a technology which makes our product outdated? What if the government decides to heavily regulate our industry? What if someone completely out-of-left-field enters our market by buying our largest competitor?

These scenarios may seem far-fetched, and the assumptions they rely on may seem extreme, but that’s exactly why this exercise needs to be done:

1. It helps establish a list of test-able hypotheses to verify which of these scenario’s are plausible (What criteria would a out-of-left-field player need to fulfill to be interested in my market? What would cause the government to start regulating my industry?) and which are not. This then informs the executives which are credible threats (both in terms of likelihood of happening and in terms of damage) to actively manage and monitor and which can be put on the back-burner.
2. It forces executive teams to formulate contingency plans. I can’t imagine that asking “What if all of our subprime mortgage assets become worthless”?” could’ve made things worse for the economy and for the troubled firms. No firm can afford to be caught off guard. Look at the example of Polaroid or Blockbuster – caught completely off guard by the onslaught of the digital camera revolution and Netflix/broadband video respectively. The companies are now has-beens, as they were not only unready for the destruction of their market, they were slow to react and use their strong market positions to their benefit.
3. It gives management a list of trigger points to monitor for and to move quickly on. If our competitor looks like its interested in acquiring supplier X, we need to take action quickly to make that deal a lot more painful to swallow, or make our own move to counter that threat.

Garbage assumptions? Maybe. But not necessarily a business failure!

Lessons from the Consulting Life: chain yourself to your blackberry

Yesterday, I stopped by a coworker’s desk to grab a quick morning breakfast and then to discuss our various workstreams. Given the endless teasing I get about how dependent I am on being connected via 3G wireless card and Blackberry, I thought I’d mix it up by not bringing either my laptop or my blackberry to the meeting.

Big mistake. The next thing I know, I have 6 emails in my inbox marked urgent: two from the head partner on my case, one from my manager, one from the head partner’s executive assistant, and two from the office receptionist. I have a message left on my cell phone from the partner. And I have the receptionist pinging me over the PA system.

It turns out the one time I choose to go “unconnected”, the client’s CEO suddenly needs some data that I have.

Lesson learned: I will chain myself to my Blackberry.

Metaphysical Party Pooper

There are certain questions that people ask which are deep and profound. Like, what is the meaning of life? Why be moral?

But, there are some questions which people seem to think are deep and profound, but which I don’t think are. Like the “if a tree falls in a forest…” question (HT: Kiwi_grrl)

So yes. If a tree falls in a forest and no one is there – it makes a frickin’ sound.

Roche: making PCR look cool

Over on Benchpress I referred to a new ad by Roche for their LightCycler 480 PCR machine. My buddy (in offering poor prices for poor companies) Anthony provided the most fitting testimonial of:

“If RT-PCR was this cool, I’d do it everyday.”

Well done, Roche. Well done:

Resident reform

I was reading a column by Pauline Chen on the New York Times about resident work-hour reform, and I have to say that I’m very stunned and somewhat outraged at a doctor’s claim that resident work-hour reform is a bad idea:

I spoke with Dr. Thomas J. Nasca, the chief executive of the Accreditation Council for Graduate Medical Education, and asked him about resident duty hours, patient safety in teaching hospitals and the implications of further duty hour changes to the doctor-patient relationship.

Q. What have been some of the effects of decreasing duty hours on patient safety?

A. We know there have been a lot of unintended consequences, some of which have not been good for patients. One of these unintended consequences, for example, has been an increased number of handoffs between doctors leaving their shift and new doctors coming on. The handoff period is the most vulnerable period for a patient, not because the people handing off data are not doing their best or because institutions don’t have systems in place. It’s a vulnerable period simply because one cannot predict what will happen when a patient is ill, and the doctors left caring for those patients don’t know them.

Handoffs are when most errors occur, and most of the potential reductions of error based on fatigue have been replaced by an escalation of errors related to handoffs.

Really? And this guy is responsible for making trade-off decisions that affect patient’s lives? Let’s ignore just for a moment that incumbents never want change (after all the people who went through hazing processes oftentimes become the biggest advocates of said hazing processes), but I think most patients would agree with my take:

1. I strongly prefer a resident who is rested and slightly unfamiliar with my case over a resident who is half-asleep and is probably not all that familiar with my case anyways given that he/she is probably dealing with many other patients and was probably half-awake/running-on-adrenaline during those patient visitations as well.
2. Really? Handoff errors are occurring at such a high rate that they are compensating for decrease in fatigue-related errors? I find that really hard to believe. 
3. Even if handoff error rates are close to fatigue error rates, it suggests that we aren’t training doctors correctly at all. After all, while fatigue error is practically impossible to control (if you’re tired, your brain doesn’t think properly — there’s not much you can do about that one), handoff errors are. I fail to see why training doctors to communicate more effectively, to learn to collaborate with other doctors more effectively, and to take better records (Obama is committing $19B to developing better healthcare IT) is something that is unfeasible or undesirable or an unnecessary burden.

Print Media 2.0

Although my good friend Teresa might not want to admit it, print media is dying. After all, why buy an unwieldy stash of paper when blogs and online web versions of newspapers (crazy idea huh?) can do the trick?

Well, Ben Claassen III (always gotta show some support for another Ben) came up with some great ideas for how newspapers might still be relevant (HT: Newsarama):

I particularly like the ability to embed video.