March 28, 2007

Rising Land Prices in Japan

By Adam Carstens

Yet more evidence of the "business renaissance" in Japan, as if you needed any more convincing by now...but this article in the WSJ shows that land prices have started to rise in Tokyo once again. According to available data, 92 skyscrapers are under construction in Tokyo - 2nd only to New York City.

What's driving the rise? The article had this to say: "Japan is shifting from a manufacturing economy to a service economy. Some companies are moving manufacturing facilities overseas to take advantage of lower wages in places such as China and India, or to get closer to their customers -- Japanese car makers have opened factories throughout the U.S. But those same companies still keep their marketing and finance functions in Japan. That means less demand for big plots of land outside major cities, where factories are usually located, and more demand for offices in city centers that are close to advertising agencies, accountancies and investment banks."

The article mentions the new Tokyo Midtown development, which I walked by today on my way to an appointment in Roppongi. It looks like a solid competitor to Roppongi Hills, the other new recently-opened mega development in the area. Roppongi is fast becoming a force unto itself to rival the big districts of Ginza and Shinjuku, at least as far as business and shopping are concerned. The streets of Roppongi today seemed to ooze money and services. The bubble economy isn't back, not by a long shot, but supply is following demand with the addition of new retail and office space.

Posted at 04:17 AM in Japan | Permalink | Comments (0) | TrackBack (0)

March 27, 2007

When China Becomes One of the Leading Consumption Expenditure Countries

By Wang Hai

A recent survey by Credit Suisse predicted that China will overtake Japan, Germany, Britain and Italy to become the world’s second largest consumer goods market just behind US by the year 2015. Credit Suisse is not the first one to conclude that China will become one of the biggest consumption expenditure countries in a decade. In 2006, McKinsey already published a report with the name “From 'Made in China' to 'Sold in China' : The Rise of the Chinese Urban Consumer.” It said that China will eventually catch up with Japan in 2025 to have annual expenditure of 10.4 trillion.

The middle class in China is definitely rising, and it is estimated that China will have a middle class made up by 270 million people. It’s a big market, no question about it. But in the past 10 years, the economy was growing amazingly at over 10% per year, but in terms of consumption expenditures, the China market remained asleep. Even though many multinational companies set up their production base in China, many of them were a little bit disappointed at the fact that China, despite having a population 20 times bigger than Italy, spends only $543 per capita per year (as opposed to $11,511 for Italy).

But both McKinsey and Credit Suisse believe that this is changing soon. The major drive will be from the middle class in urban areas. Even rural China will grow, according to Xinhua News Agency which says “the per capita consumption of rural residents in central China's Henan Province grew 16.2 percent in 2006 compared with the previous year, while the consumption of urban residents registered an increase of 9.4 percent…[this is] the first time the growth rate of rural consumption has surpassed that of urban areas in the past decade in Henan.”

So what are the opportunities? As Credit Suisse stated in the report, the consumption of houses and cars will likely continue to grow in the next 5 to 10 years in China. But the service industry will become the area where the consumption rapidly increases in the future. Businesses like entertainment and travel will continue to flourish.

The market is changing fast in China, and those companies interested in China will have to keep the pace up with what Chinese consumers really want in different period of time, otherwise, their products will only stack up in the warehouse.

I think that now, as many companies switch their investment into other Asian countries such as Vietnam, Thailand and India, because of frustrations with the China market, they may leave many untapped opportunities in smaller cities and towns in China. The smart businesses may have to spend more money than anticipated to make it work, but there is opportunity there.

Posted at 01:50 AM in China | Permalink | Comments (0) | TrackBack (0)

March 26, 2007

China Mobile on the Rise

By Wang Hai

China Mobile, the biggest wireless carrier in the world, recently posted a 23% of increase in net profit thanks to growth in subscribers and value-added service revenues.

Wireless communication technology was not widely used until the late 1990s in China, but within the last 10 years, China Mobile has grown into the world’s biggest wireless carrier in terms of subscribers. China Mobile first built up its success in big cities such as Beijing, Shanghai and Shenzhen, then followed with all the provincial capitals. When it had accumulated enough customers and operating revenue, China Mobile lowered its price to penetrate into smaller cities and towns, where 90% of China’s population lives. Nowadays, after the penetration in major cities has almost reached 100%, China Mobile has begun to offer even lower prices for rural areas in order to keep their growth rates.

Though the performance of the company is good, its revenue per subscriber is still very low when compared with world giants such as Cingular, T-Mobile or Vodafone as we can see from the data from Wireless Intelligence in Q3, 2006.

Operator Subscribers (millions) Average Rev. per User ($)

China Mobile 300 11.19

China Unicom 143 6.8

Cingular 60 49.76

Verizon 59 50.59

Sprint 54 52.25

Mr. Wang Jianzhou, President of China Mobile, recently announced that China Mobile would expand internationally and acquired Paktel, a carrier in Pakistan. He also said “we want to make the cell phone into a new medium.” Given that China Mobile only has 20% of the average revenue per user when compared with those American counterparts, China Mobile has great potential to add value to its services.

However, if 3G licenses are finalized later this year, China Mobile will face off against China Unicom and China Telecom. But China Mobile should be able to stave off competition, since it now music downloading services from agreements with Vodafone, MTV Network. It has also other partners such as Phoenix TV, NBA, Sony, Universal, WB, and Google’s search engine.

Posted at 01:28 AM | Permalink | Comments (1) | TrackBack (0)

March 22, 2007

The Attention Economy and Media

By Adam Carstens

We know that people give different types of attention to different media sources. But exactly what kinds of attention do people give to those sources? We set out to finding the answers when we recently interviewed a group of European managers about their attention habits. The results revealed interesting patterns in attention resources.

We asked a group of about 50 managers in Europe to give us their attention perspectives on the following: e-mail, features on their corporate website, online communities, blogs, television, online news/sports/rss feeds, and newspapers, magazines or books. We did this by using our unique attention tool, which we call an AttentionMap.

The average results are displayed here. As you can see, several trends reveal themselves. But first, let’s talk about how we’re measuring attention. The AttentionMap measures attention on four attributes:

• the overall size of attention – the area of the “bubble”

• captive vs voluntary attention – the X axis position

• front of mind vs back of mind attention – the Y axis position

• aversive vs attractive attention – the color of the “bubble”

Now, to the results and what they mean:

• E-mail received the most captive, front of mind and aversive attention. It’s also one of the largest overall attention getters. That should be no surprise, given how important e-mail is to everyday life for these managers. They find themselves constantly tethered to e-mail, unable to get away. And granted, many of them aren’t too happy about it – but they are nevertheless motivated to respond to it.

• Blogs and online communities seem to be more “back of mind” for these managers, with the color rating neutral or only slightly attractive. These sources don’t attract much attention, but when they do, its fairly innocuous. These relatively new forms of communication have gained a foothold, but don’t seem to be “front of mind” just quite yet.

• Television is a largely voluntary activity – and also quite an attractive one. Television is still, for many, the preferred way to relax, given that it attracts attractive attention. It’s divided between front and back of mind, which tells us it straddles the two types of attention quite nicely.

• Printed matter and online news are relatively close to each other in their attention profiles, which tells us they complement each other quite nicely. Printed matter is slightly more front of mind, but not by much. For most people, news is news, and the specific form it takes doesn’t seem to matter that much.

What was even more interesting, however, were the differences in attention profiles for those we termed “externally-focused” (more focused on issues outside the organization) versus those “internally-focused” (more focused on issues inside the organization). The averages for those were as follows:

What do these graphs tell us?

• As you can see, externally focused people have a much more aversive (darker colors) and captive relationship (more to the left) with information. E-mail is extremely aversive, front of mind and captive – the externally minded people are literally chained to their email client. Only online news and television rate as somewhat attractive information sources. Overall, it looks like information is more front of mind for these externally-minded managers.

• Internally-focused people have more of an attractive and voluntary relationship with information sources, as more oranges color this map. E-mail is still aversive, but not as much so. In generally, more information sources are on a voluntary, “need to know” basis (instead of “must know”).

So what does this mean for you?

• Depending on who you’re trying to reach, knowing more about their attention profile and what captures their attention most and best is important.

• Different groups of people respond to different media sources in different ways – the key is knowing about those different ways, and how they drive behavior.

• Our work here is just the beginning. Stay tuned. We’re looking for more opportunities to survey people’s attention – if you’re interested in participating, let me know at acarstens [at sign] attnco [dot] com.

Posted at 12:01 AM in Attention | Permalink | Comments (1) | TrackBack (0)

March 21, 2007

Playstation Home vs. Second Life, et al

By Adam Carstens

Though the PS3 has been lagging in the next-generation console wars thus far, the announcement of Playstation Home should give its prospects a boost over time. I believe it will take offerings like Second Life and render them pale by comparison. Though it is early and we don’t know yet what Playstation Home will look like, the advantages are myriad:

• Playstation Home won’t have any monthly subscription fee, whereas Second Life has premium accounts that cost $9.95 a month. No wonder only 60,000 people or thereabouts have signed up for Second Life premium, despite nearly 5 million having tried it at one time or another.

• Playstation Home will be available in High Definition, on a television screen – and people are snapping up flat panel displays like mad. Contrast that with being hunched over your computer for hours, trying to experience this “world” on a 13 inch screen.

• Playstation Home will have private areas where you can invite your friends and only your friends, as opposed to Second Life, whose areas are 100% public. Second Life strikes me as the ultimate “tragedy of the commons” – people may own the land, but there’s nothing to stop “griefers” from coming in and ruining your experience.

I’m all in favor of these next-gen consoles becoming the nerve center for internet browsing (as with the Wii), movie watching (as with downloadable movies on Xbox 360) and now, MMORPG-style activities (as with Playstation Home). The battle for the living room is joined!

Posted at 12:06 AM in Games | Permalink | Comments (0) | TrackBack (0)

March 20, 2007

The Livedoor Verdict

By Adam Carstens

Disappointing news recently has come in the form of the verdict on the ex-CEO of Livedoor, Takafumi Horie, who received 30 months in prison for securities fraud. As this AP article suggests, the article is a setback to furthering Japan’s nascent entrepreneurial culture, which we believe is in full bloom. The article says that “venture-capital spending…is on the uptrend amid a resurgent economy. The amount of capital invested in emerging Japanese companies surged 46 percent to 234.5 billion yen last year, according to the Tokyo-based Venture Enterprise Center.”

Horie-san may have had to take a bullet for poor conduct (selectively enforced), but something tells me not to count him out. He will emerge stronger than ever after this time in prison. And Japan’s entrepreneurs will persevere, knowing his example is a cautionary one. Hopefully they will not be afraid to test boundaries and continue their mission to invent new, prosperous companies that will take Japan’s economy to the next level.

Posted at 06:58 AM in Japan | Permalink | Comments (1) | TrackBack (0)

March 19, 2007

From 5-Year Plan to 5-Year Program

By Wang Hai

The 5th meeting of the 10th National People’s Congress began March 5th, 2007 with Prime Minister Wen Jiabao’s opening speech about the work of the government in the past year. As Stephen S. Roach’s article of “The Heavy Lifting of Chinese Rebalancing” noted, the Chinese government needs to keep its economy on track, boosting domestic consumption and accelerating reforms in financial sectors as well as the social security system. I think the article provides real insight into the problems China’s economy is facing, and I believe such articles are also welcome in China now. Sometimes, a foreigner’s view could reflect a better and well-round picture of what our problems are.

Wen’s report acknowledged four major problems: conflicts in the economic structure remain unsolved, the energy-intensive growth in economy still prevails, the social welfare system reforms still move slowly, and some government officials’ continued inability and corruption. As for the potential risk of overheat in the economy, China already began a few “administrative macro-controls,” such as tighter controls on loans, and attempts to deflate bubbles in the real estate market and stock market.

As for increasing domestic consumption demand, the obstacles are not easy to deal with. As Stephen pointed out, one year ago, the 11th Five-Year Program enacted by the National People’s Congress already addressed two important issues - the need for a national safety net and the imperatives of tempering rising income inequalities. But the Chinese government already admitted that the reform in medical insurance failed and from 2001 to 2005, Chinese consumption dropped from 61.1% to 53.9% of the economy, while the Gini Coefficient (a measure of income inequality) reached 0.447, while is well-above the warning level of 0.4. That means the 14 trillion RMB of savings in the country belongs to comparatively small amount of people. In this environment, how can people consume with worries about losing their job or not being able to afford their kid’s education or medical treatment?

As a Chinese person, I would say since the central Chinese government acknowledges all the problems and is making various efforts to solving them, so we still have reasons to be optimistic. An interesting change in wording might not draw much attention, but as a Chinese person, I think it’s significant to certain extent: the Five-Year Plan is now called the Five-Year Program. In Chinese, “plan” means a more rigid and preconditioned effort, while a program means more scientific design and can be modified as time goes by. When the government for the first time in the past 50 years, changed the name of “Five-Year Plan” to “Five-Year Program,” it showed it has the courage to face change and place more emphasis on practice, rather than just central authority’s blind decision. These are the types of changes that will ultimately mean a better future for the average Chinese person, not just a lucky few.

Posted at 06:44 AM in China | Permalink | Comments (0) | TrackBack (0)

March 09, 2007

WSJ Overview on Tokyo Trends

By Adam Carstens

Excellent tour of the current Tokyo scene in this WSJ article – it hits all the high points and provides a good summary of what’s been going on these last few years.

The two key passages are this group of quotes:

“As its economy grows again, quirky creativity has become one of its biggest growth industries…International pop-culture juggernauts are looking to Japan for inspiration…"Tokyo is like Disneyland" for trends”

And this reasoning – which makes total sense:

“As monolithic corporations cut jobs and lost their luster, more workers entered fashion, animation and music businesses. The number of employees in these so-called creative industries grew 16%, to 1.4 million, between 1996 and 2001, even as employees of all industries shrunk by 4.3%, according to the Marubeni Research Institute in Tokyo. Japan's consumers began seeking eccentric products that flattered their growing sense of individuality.”

This trend is just getting started, in my opinion. The next economic cycle will see Japan as a micro-lab for many trend experiments. If you want to know where world culture begins, a trip to Tokyo is a must on the itinerary.

Posted at 01:40 AM in Japan | Permalink | Comments (0) | TrackBack (0)

March 08, 2007

National Likability: Japan Leads

By Adam Carstens

Interesting article here in the Sydney Morning Herald discussing the likability factor among nations. The highest negative ratings were given to the US, Israel, Iran and North Korea. The defenders of those nations would say they are only defending the principles they believe are correct. While that may be true - and indeed, each nation's leaders surely believe their cause is just - these attitudes may have long term potential effects. Look at those leading the "mainly positive" views - Japan wins (well, ties with Canada) on that score. It would appear Japan has not suffered much from being a nominal ally of the United States these past few years the way other nations have.

Japan's ultimate benefit in this area may be from being diplomatic with all parties. Even though Japan holds no love for North Korea, it has pursued its case with them deftly, with minimal pushback. For Japan's sake, I hope this leads to further success down the road - and for other countries' sake, I hope it leads to a re-evaluation of their national strategy.

Posted at 02:15 AM in Japan | Permalink | Comments (0) | TrackBack (0)

March 07, 2007

Shameless Plug Alert: Japan's Business Renaissance to be released in...wow! Japan!

By Adam Carstens

I have the honor of announcing that our book, "Japan's Business Renaissance," is going to be released in Japan on April 8, 2007. Our kanji-reading friends can purchase the book here on Amazon. The Japanese recovery continues to amaze, and this book was one of those predicting as such awhile ago. And now Japan can read all about what we think is driving that recovery, and in its native language to boot!

FYI, the new title is "Samurai Jinzai-ron," which roughly translates as "Samurai Human Resources" (if what my Japanese speaking friends tell me is correct). Hey, what human resources department couldn't use a little samurai attitude?

Posted at 02:39 AM in Japan | Permalink | Comments (0) | TrackBack (0)

February 28, 2007

Apple: Biting off more than they can chew?

By Jonathan Lipsitz

It’s the classic problem. A smaller company succeeds by being faster to market and more nimble than the 800 pound gorilla in their industry. Think Google vs. Microsoft as the most recent and notable example. Is Apple becoming like Microsoft, and should they start to worry about some startup giving them a run for their money?

Last year, Microsoft had to delay its launch of Vista, missing the valuable holiday sales period. Now, Apple has announced a delay in the launch of Apple TV. And this product was just announced at CES. What could have cropped up between then and now? It will be interesting to see if similar problems beset the iPhone, and if the product will live up to expectations. Apple might want to start looking over their shoulder.

Posted at 04:29 AM in Web/Tech | Permalink | Comments (0) | TrackBack (0)

February 27, 2007

Is Panama Fixing Yahoo Yet?

By Adam Carstens

Interesting broadside against Yahoo printed here. The basic case against CEO Terry Semel is laid out. Besides all the missed opportunities to buy stuff cheap (MySpace, Google, YouTube), these points stood out to me (quoting from the text):

• Yahoo! had a 28.9% share in February 2003, compared to 29.5% for Google. However, Yahoo!’s share had dropped to 19.5% as of December 2006, and Google’s had increased to 65.4% (according to Bank of America Equity Research).

Wow.

• The total ad market has increased from $1.4B in 2002 to $15B annually today (and growing at 50% per annum) .

Double wow.

Online advertising is still a fraction of the total advertising universe, but clearly whoever can monetize ads the best will win the prize. But then there’s this:

• “A ComScore Networks sampling has shown that following the second phase of Yahoo's rollout of its Panama ad-ranking technology, its click-through rate increased 9% in the week ending February 18 over the baseline week of February 4.”

If that continues, then Panama should reap benefits for Yahoo into this year. We’ll know soon enough.

Posted at 01:33 AM in Attention | Permalink | Comments (0) | TrackBack (0)

February 26, 2007

Where Is the Web’s Martin Scorsese?

By Adam Carstens

Everyone likes to beat up on the movies for not doing as good a job anymore of capturing our attention. And with a four-hour plus Oscar telecast, those critics may have a point. Despite a record number of offerings, the actual number of tickets sold to movies inside the US in 2006 was lower than any year since 1997. And that’s despite a record number of films released in one year! (Yes, cash receipts are up, but that’s because of inflation.)

In this piece, Robert Young references Neal Gabler writing in the LA Times, who says that, in order to succeed, Hollywood must “follow the audience into the development of this new market [social media, et al] by re-focusing core assets that have the capability to deepen the level, and heighten the production value, of self-expression.”

That’s going to take quite a different skill set – one forged by the likes of online community builders such as Kevin Rose instead of the likes of last night’s best director winner, Martin Scorsese, who was primarily influenced by all the New Wave films of the early 1970s.

It’s not to say Scorsese hasn’t done great work during his career, but the world is waiting for the Martin Scorsese of the online world, a person who can take what we think we know and expect about the Internet and transform it into something transcendent. The current malaise in film’s popularity is potentially just another lull before the explosion – the way Scorsese’s “Taxi Driver” made audiences take notice of the art form’s potential yet again.

Posted at 01:09 AM in Attention | Permalink | Comments (0) | TrackBack (0)

February 23, 2007

Using more than just language to communicate across cultures

By Wang Hai

As China has become one of the world’s economic hotspots, Western people are increasingly coming to work there. But even though they may learn the language, there are still many cultural differences in communicating with Chinese. The WSJ’s article about an American’s experience in Hongkong office tells us a lot about the very different perspectives or meanings between Chinese and Western office culture:

• Privacy: While salary, marriage and one’s weight are usually considered to be permissible to discuss among colleagues in China, they are classified as “private” among Americans.

• Greetings: To say “You gained weight” means to say you look healthy in China – not that you need to go to gym more often or skip dinner. Also, Americans like to talk about their family to show friendliness, while in China, talking about family members only happens among very close friends.

• Indirectness: in China, openly opposing a supervisor’s idea rarely happens. People tend to be more indirect in saying “No” to others. When they say “Probably” to some suggestions, usually, that means they don’t agree. It would almost be “mission impossible” for your employees to tell you what mistakes you made.

Of course, to communicate with Chinese won’t be as troublesome as you might think. In fact, as globalization increases and more Chinese interact with those from other cultures, you might also learn the best trick: to negotiate or exchange ideas during a meal. What Napoleon told his diplomats is universal in today’s business world: remember, if you treat someone, you must prepare excellent food, as dining together makes business smooth.

Posted at 01:25 AM in Attention, China | Permalink | Comments (0) | TrackBack (0)

February 22, 2007

SMS: the Favorite Communication Tool for China

By Wang Hai

Short message service (SMS) messages didn’t really catch the attention of Americans until American Idol started using it as a voting tool for contestants. In the third quarter of 2006, more than 10 billion text messages crossed Cingular's network, rising almost 15 percent from the preceding quarter. There are many reasons for the relative unpopularity of SMS in U.S. for many years – the free voicemail service provided by most cell phone carriers could be one major reason. But since those in China often prefer a more indirect way of communication, SMS has been popular for many years. American carriers are learning from their counterparts in China about running the SMS business.

For example, try to guess the amount of SMS messages sent during the recent Spring Festival in China (which lasts around 10 days)? 14 billion! According to statistics provided by the National Information Industry Bureau, in 2006, the total amount of SMS was 429.6 billion, around 1.2 billion per day on average. Thanks to the wide permeation of cell phones (460 million users, about 35.3% of the total population); the two major carriers (China Mobile and China Unicom) have daily revenue generated by SMS of more than 100 million RMB (about $13 million).

Unlike the U.S., where both sender and receiver need to pay for the message, in China, only the sender pays about 10 cents per message. In China, to send a short message not only makes some invitation and conversation more indirect and inexplicit, which is embedded in the roots of Chinese culture, but also saves money for more economical people. SMS is especially popular among young couples, as those sweet love words are really hard to say over the phone, when it’s written, it becomes much more natural and acceptable for both sides.

But the biggest national event to use SMS in China is similar to that in the U.S. Super Girl, a copycat of American Idol, also uses SMS to cast and collect votes starting from 2004. No wonder some Chinese might say: who would be our Chairman if we could voted for this position by SMS...

Posted at 01:23 AM in China, Out There, Social Networks, Web/Tech | Permalink | Comments (0) | TrackBack (0)

February 20, 2007

Customer Service and Positive Feedback: Virtuous Cycle

By Adam Carstens

This blog entry recently made it to the top of social news services Digg and Reddit on the same day. The blog entry received thousands of “Diggs” (for those who don’t know, it’s basically votes for a story’s popularity).

The blog entry concerned an exceptionally positive tale of customer service relating to a Nintendo Wii. Not that Nintendo needs any additional love right now, since the Wii is still sold out for the foreseeable future. But this story, and the positive attention it received around the web, should be a lesson for any business who thinks that “streamlining” customer service to save money will not ultimately come back to hurt them.

With any luck, other companies will be revamping their organizations to create these same kinds of stories, which clearly have an audience and a demand. People love reading about other people’s positive experiences with corporations, not just the negative ones.

Posted at 09:28 PM in Attention | Permalink | Comments (0) | TrackBack (0)

Apple vs. traditional wireless carriers

By Adam Carstens

I loved this story in the Wall Street Journal because it shows just how big of an impact Apple’s entry into the wireless handset market is going to have on the industry. To wit:

Apple feels the customer is ill-served by current offerings. Given the enormous interest and attention being paid to their announcement and product, they are right to feel that way. Furthermore, it is Apple’s contention that the current industry functions as mere gatekeepers and innovate on their schedule, not the customer’s. From the story, “while meeting with Cingular and other wireless operators he often reminded them of his view, dismissing them as commodities and telling them that they would never understand the Web and entertainment industry the way Apple did, a person familiar with the talks says.” Time will tell if he’s right, but so far, the passion seems to be there.

Competitors do not share his view, and remain convinced that their offerings and distribution networks are just fine. From the story, “Verizon balked at the notion of cutting out its big retail partners, like Circuit City, who would not be allowed to sell the phone. And the company's chief marketing officer, John Stratton, was firm that Verizon wouldn't give up its ability to sell content like music and videos through its proprietary V Cast service, people familiar with the discussions say.” Never mind that V Cast was predicted to be a threat to the iPod back in early 2006. Yet the iPod sold 21 million units in the 4th quarter of 2006, smashing through previous records, and have sold 88 million over the life cycle of the product. How many people subscribe to V Cast? The company won’t say – there are 20 million V Cast capable phones, of which “a significant number of whom pay $15 a month to access V Cast” according to Verizon. When a company won’t give you solid numbers, that means they’re embarrassed. In one quarter, Apple sold as many units as there are total potential V Cast subscribers.

The surest sign Apple is on the right track? Copycats. From the story, “Meanwhile, competitors already are responding. Samsung and LG both have announced phones in recent weeks with designs that look similar to the iPhone.” The fact that competitors are already bringing out copycat designs means Apple is onto something big here. Something tells me the other carriers that let Apple get away are going to be looking back and thinking about what might have been for some time to come.

Posted at 02:58 AM in Attention, Web/Tech | Permalink | Comments (0) | TrackBack (0)

February 16, 2007

Yahoo copies Digg - so what?

By Adam Carstens

Isn't imitation the sincerest form of flattery? Well, maybe, but it sure does get people upset. Diggers are p.o.'ed that Yahoo has apparently "copied" their "social voting" model. I put "copy" in quotes, because the Digg model is showing up everywhere these days. It's certainly attention getting, and it works to a certain degree.

But why would Diggers be mad - it's not like loyal users of Digg are suddenly going to be fooled into going to Yahoo just because Yahoo now uses the Digg-model. The real value in Digg is the community, the shared experience and the thrill of "digging." (I guess, I don't use the site much) Yahoo can't copy that, it can only try to build the same type of feeling. If it can, good for Yahoo. But we'll have to see.

Digg users shouldn't take Yahoo's copying of their model as an insult - they should take it as validation that the model works and works well. Don't sweat it, Diggers, you're going to be just fine.

Posted at 01:16 AM | Permalink | Comments (0) | TrackBack (0)

February 15, 2007

Japan GDP rises yet again

By Adam Carstens

A new report is out showing Japan’s GDP is rising yet again – this time, to 4.8% annualized growth for the 4th quarter of 2006, thanks in part to robust consumption and private investment. When you consider growth per capita, it’s even more impressive. The United States added about 3 million people to its borders, but grew at only about 2.9% in 2006. Japan grew at 2.2% in 2006, but the population stayed the same, at about 127 million. Japan’s economy grew for the 4th consecutive year, and shows no signs of slowing. The Nikkei average is up 120% from its 2003 lows.

The one criticism of this recovery is that Japanese consumers haven’t done enough to spur growth. In my view, that’s wrongheaded. Japan has a trade surplus in part because it makes products the world wants to buy (the value of the yen notwithstanding, though the yen was cheaper in 1998, let’s remember). If Japanese consumers want to hold onto their incomes instead of spend them, that’s just fine as well. As long as Japanese companies continue to provide value to the rest of the world, Japan should be just fine.

Posted at 01:11 AM in Japan | Permalink | Comments (0) | TrackBack (0)

February 14, 2007

Do I Still Want My MTV?

By Adam Carstens

Can it really be true? Is MTV’s power to attract attention finally waning? It sure seems like it after the announcement that the cultural phenomenon is going to cut 250 staff.

MTV has been in kind of a slump since Tom Freston left Viacom in late 2006. MTV failed to buy MySpace, and the rest was history. Now, the channel is shedding production staff while they bulk up on a “digital strategy” to try to recapture some of their target audience’s attention.

Can they manage the transition? That depends on how they approach things. In the past, MTV’s website has been criticized for its lack of functionality among other aspects. If MTV tries to go the “gatekeeper” route – putting up barriers to try to trap people inside their clutches, it will fail. Instead, MTV should embrace a strategy of connecting its viewers with the broader world at large, and each other - the way the "Out There" generation wants them to. This is the ethos which has brought success to YouTube and other such sites. We’ll see how MTV manages it.

Posted at 12:04 AM in Attention, Out There, Social Networks, Television, Web/Tech | Permalink | Comments (0) | TrackBack (0)

February 13, 2007

Book: Japanamerica

By Adam Carstens

I just heard about the book “Japanamerica: How Japanese Pop Culture Has Invaded The U.S.” by Roland Kelts. I believe the subjects he discusses are precisely the sort of evidence leading to what we call Japan’s Business Renaissance. Japan’s successful export of things like anime and other culture are an example of the creativity that is exploding out of the country and all over the world. The notion of “Cool Japan” is a major value added asset that Japan is only now just beginning to capitalize on. So check out Kelts’ book, and check out ours too!

Posted at 01:11 AM | Permalink | Comments (0) | TrackBack (0)

February 12, 2007

Strategy for a “thin client” world

By Adam Carstens

Blog Maverick author Mark Cuban muses on potential future developments in the computing/media world. His theory is that as personal computing evolves, we may see more of a jump to “thin client” style systems, where your data/trends/metrics are accessible from anywhere instead of locked onto one PC.

Think about how most younger people use computers nowadays. Web applications are showing the most growth in use, because of the innovation, variety, price and ease of use involved. (MySpace never gave anyone a “blue screen of death”). Do you need Windows to run MySpace? No, you don’t.

So the key going forward will be these three questions:

• What applications are REALLY necessary to run my business/life?

• What types of interactions do I want to have with my applications?

• Who do I TRUST to deliver what I need, when I need it?

Answering the first question, personally speaking, I use email, a word processor, a spreadsheet, some graphics software, some presentation software, a web browser, a VOIP provider and an IM client in my work. I do use Microsoft’s products for some of these things, but given that I don’t work in a large enterprise, it’s not absolutely necessary – in fact, I’ll bet I could switch off Microsoft’s platform and my clients/co-workers wouldn’t even notice. My case may be slightly unusual, but going forward it won’t be, as developments improve in providing all of these above systems from anywhere instead of only on my PC.

Answering the second question, I do like the “quiet intensity” I get from interfacing with my laptop while I work. I can focus on the task at hand, shut out the world at large and really concentrate. But at play, while reading the news or playing a game, such “quiet intensity” is isolating from the rest of the world, which sort of bugs me. It would be great to interact with many of these same applications I use for leisure in ways that are more socially connective. That explains the attractiveness of online social networks in part, but ultimately, using MySpace is still just sitting, staring at a screen and typing on a keyboard. True innovation in interaction is when we can use a computer to do fun things – not just sit and type.

This where Cuban’s insights are right on – he identifies “game consoles” as the type of machine most likely to fill this gap. Anyone who’s seen the Wii at work knows its enormous potential to fulfill this need. With a Wii, we can read the news in a browser and check the weather around the world. Soon, I predict, we’ll be able to check in on friends – what they’re doing, are they awake, asleep – via these consoles. It’s certainly a lot more fun to do that on a 42 inch LCD screen than it is on a small laptop.

As for the third question, who do I trust? Well, this is where it gets tough for Microsoft. For nearly 20 years, they’ve been abusing many people’s trust with Blue Screens of Death and indecipherable task manager lists (ever try to check that list to see what’s REALLY running on your PC? For most people, it’s impossible to know, let alone to try to diagnose the problem.) So their reservoir of goodwill, I think, is just about dried up. This where Google and others have the advantage – thus far, at least, Google hasn’t done anything to warrant mistrust (though that could always change). Google promises fast search, it delivers fast search. Google promises a clean, easy e-mail interface, it delivers. Google’s not going to make everyone happy, but it is going to make a lot of people happier than they were using bloated software that isn’t really worth the purchase price anymore.

Can a company like Microsoft still succeed in this world? Of course. Their bread and butter is with business, and businesses are slow to change. But in the “Microsoft is the new IBM” line of thinking, IBM eventually had to transition into a pure service organization when they could no longer justify the high price of their machines and technology knowhow. They had to become adept at solving problems, not selling. Microsoft will have to do the same. May the most adept problem solver win!

Posted at 04:43 AM in Web/Tech | Permalink | Comments (0) | TrackBack (0)

February 09, 2007

WIPO Data: Japan Tops in Patent Productivity

By Adam Carstens

For those who doubt the power of Japan, think again! Fresh data from WIPO, the World Intellectual Property Organization, shows that depending on how you look at it, Japan is either #1 or #2 in patent productivity. This data is taken from a report, available here, called "WIPO Patent Report - Statistics on Worldwide Patent Activities."

Japan is number one in total filings, in resident filings and in resident filings per capita. It’s number two, behind Korea, in resident filings per GDP and in resident filings per R&D expenditure. The USA is number 2 overall in total filings and resident filings, number 3 in resident filings per capita, number 5 in resident filings per GDP and number 12 in resident filings per R&D expenditure.

What does this tell us? Well, even though their economy may be just coming out of the doldrums after a 15 year hiatus, Japan is still innovating like crazy. In fact, the combined efforts of Japan and Korea mean NE Asia is pretty much the patent filing capital of the world, blowing away the rest of the planet by wide margins. If patent filings have any effect on future economic welfare, both Japan and Korea will be reaping the rewards of their efforts for decades to come.

Posted at 03:00 AM in Economics, Japan, Science, Web/Tech | Permalink | Comments (0) | TrackBack (0)

February 08, 2007

Toyota rises to #2 – Let the Whining Begin

By Adam Carstens

In the January sales numbers, Toyota became the number two entrant in US market share, a position it doesn’t intend to let go of anytime soon. Unfortunately, this rise in Toyota’s performance, dictated by the relative crappiness of Detroit with the fuel-efficiency of Toyota’s offerings, is spurring another whine-fest by domestic automakers, complaining about cheap imports and currency manipulation yet again.

In the WSJ, we read Ford CEO Alan Mulally saying “the yen-dollar relationship is ‘an issue the government needs to continually assess.’ He added, ‘We would encourage the U.S. to continually review the trade policies and make sure that we don't have currency manipulation.’”

Fair enough, Alan. I suppose you’re only playing your role. But the yen is actually CHEAPER than it was back in the late 1990s, when Detroit’s offerings had the US over the moon. In 1998, the yen routinely traded at 140 to the dollar.

What’s changed since the late 1990s? Mainly, the end of cheap gasoline. In 1998, the average price of gas in California was $1.16 in nominal terms, $1.40 in inflation-adjusted terms – in 2006, it’s $2.80. When the price needed to operate a vehicle doubles in 8 years, it’s going to affect what types of vehicles people buy.

Alan, Toyota is cleaning your clock, and they don’t need a cheap yen to do it. Make cars people will want to buy, that run well and sip gas, and the world will beat a path to your door.

Posted at 01:27 AM in Japan | Permalink | Comments (0) | TrackBack (0)

February 07, 2007

The Big 4 in Tech: Revenue vs. Headcount

By Adam Carstens

Now that the “big 4” consumer tech companies (Google, Microsoft, Yahoo and Apple) have reported their revenue for 2006, I thought it would be interesting to see each company’s revenue per employee. As you can see, Google is the most efficient in terms of revenue and headcount. Microsoft brings up the rear. Now, I know each of these four companies has a very different strategy, but they do have a common theme – each is competing with the other to deliver information, productivity, experiences and entertainment. It’s the mark of Google’s productivity that they’ve been able to capture so much revenue with so few employees. Apple’s revenue has doubled in the last two years, no doubt doing wonders for their productivity – they have finally started making products the mass market wants, not for just a narrow niche.

Yahoo and Microsoft have some explaining to do. If they can’t deliver the same amount of revenue with the amount of people they have as Google and Apple, then those people need to be working on new higher revenue-capturing strategies, or they need to be let go.

Posted at 02:26 AM in Web/Tech | Permalink | Comments (0) | TrackBack (0)

February 06, 2007

Dell and Lenovo: Stuck in a Rut

By Wang Hai

It’s financial results reporting season, and once again, Lenovo, the PC giant from China, suffered a flat revenue growth and a 4% drop in North American PC sales. On Jan. 26th, Lenovo’s head of North America resigned. As for the competition, Dell’s eponymous founder came back to run the corporation after Dell lost its world No. 1 ranking in PC sales to HP.

Both companies have a strong performance in their respective domestic markets – in China, Lenovo has more than 35% market share, while Dell has more than 20% in the U.S. Both companies sell mainly to big corporate buyers. But each seems stuck - even though Dell’s growth in China hit double digits in recent years, it’s still far behind Lenovo. And even after purchasing IBM’s PC section, Lenovo’s performance in the U.S. market remains disappointing, with only 2.5% market share.

Unfortunately, what has happened to many an American company when they try to expand into China seems to be happening to Lenovo in the U.S. market. Even though Lenovo kept IBM’s management level people to run the business in North America, it doesn’t seem effective thus far. Lenovo’s performance in North America will be a test for other big Chinese corporations in their mission to “go global.” Dell’s main task now is to break out of its already-successful domestic model and regain the No.1 position back, while Lenovo needs to learn from Dell as to how to better manage distribution and logistical efforts.

Posted at 09:52 AM in China, Web/Tech | Permalink | Comments (0) | TrackBack (0)

February 05, 2007

Entrepreneurial Japan

By Adam Carstens

Others are linking to it as well, so I might as well pitch in - this is a great list of ideas from Harvard Business Review. Obviously, given that our book Japan's Business Renaissance will be published in Japan in March, I'm particularly partial to the entry from Globis CEO Yoshito Hori which discusses how entrepreneuarial Japan is becoming. In particular, this quote jumped out at me:

"Japan has a highly developed telecommunications infrastructure, including a robust broadband network. Its average Internet user fees are far lower than those in other developed countries—just six cents per 100 Kbps, compared with 24 cents in South Korea, $1.77 in the United States, $1.89 in China, and $2.77 in Germany. Japan also enjoys the world’s highest penetration rate for the mobile Internet, with 90 million mobile phone users, many of whom have 3G handsets."

Since information is really the commodity of this era, the price of accessing that information is a key metric, much like the price of wheat is a key metric for agricultural-based economies. Japan is clearly leading the way in this regard. Given the amount of capital that could be put to work from Japanese sources, Japanese entrepreneurship is one of the biggest potential stories for the next few years. The only potential bottleneck I see is the language-barrier, but honestly, Japan is becoming more English-capable by the day! Good things portend all around for Japan, and I'm happy to see it happen.

Posted at 06:16 AM in Japan | Permalink | Comments (0) | TrackBack (0)

February 02, 2007

Special Friday Bonus: Adam on Camera

By Adam Carstens

I know all the readers of this blog want to know what I sound like in a dark, crowded Tokyo restaurant trying vainly to explain about one of our clients and our theory about the six types of attention. Well, have at it. Thanks to Fumi-san for the interview and the link.

Posted at 05:12 AM in Attention, Japan, Out There, Web/Tech | Permalink | Comments (0) | TrackBack (0)

February 01, 2007

Google and Yahoo: Four Years of Earnings

By Adam Carstens

Earnings came out for Google this week, so I thought it might be useful to go back and look at 4 years of Google and Yahoo earnings to see where each company has been, and where they're going. A trip through the wayback machine shows us that in 2003, they were about in the same position - around $1.5 billion in revenue (no slouch, that), with Yahoo about twice as profitable. From 2003-2005, they were in a race, with Google slowly taking over on the revenue side, but still not quite as profitable as Yahoo.

Then, in 2006, the wheels came off for Yahoo and Google continued its run. Google just announced it has crossed $10 billion in revenue for the year, while Yahoo remains stuck at about $6.5 billion (still, no slouch, but come on, it fell behind). On profitability, Yahoo collapsed, with Google taking the prize away at over $3 billion in profits - about 4x Yahoo's profit for the year.

I'm on record as predicting Yahoo will outperform Google this year, because I have trouble believing that talented group of people won't turn it around. Yet, Yahoo is now in the news again for ticking off a very loyal group of users - the original Flickr userset, one of its acquisitions - by forcing them to change usernames AND limiting the amount of contacts they can have on the site.

Even though this may have made sense from a COST perspective, it makes NO sense from a "keeping the hardcore user" perspective. Without the hardcore user, Flickr (and therefore Yahoo) are even more dead in the water. Its the hardcore user that sustains the site's success in the early days and provides word of mouth potential. Even though that hardcore may only represent 5% of total users, if you keep them happy, you stay out of trouble.

Yahoo isn't in trouble now because a loyal group of users is overtaxing their site. It's in trouble because it can't convert all the time people spend at its sites into dollars. Google has such success because it largely stays out of its users way and doesn't try to force nit-picky rules changes on its most loyal fans. Is it too late to recant my prediction? So far, Yahoo's 2007 isn't looking so rosy.

Posted at 02:25 AM in Out There, Web/Tech | Permalink | Comments (0) | TrackBack (0)

January 31, 2007

Is Second Life the next PointCast?

By Adam Carstens

If you worked in the 1990s, you remember PointCast - a “great” screensaver that everyone in my office was loading onto their computers in the mid-late 1990s, so that we could get refreshed news, sports scores, and other info “pushed” to our computers desktops. But for all that utility, PointCast had a fatal drawback – it eventually made our computers unusable. It was slow, klugy and was a bandwidth sucker (and those were narrow pipes in those days).

In an article on Valleywag, Clay Shirky points out that Pointcast did get one thing right - “Pointcast's management claimed that email, the Web, and Pointcast all were about delivering content, and that the future looked bright for content delivery platforms. And indeed it did, except for Pointcast.” True enough, we are now an information-swathed world, but the experience and quality of receiving that information matters more than the information itself. Thus, PointCast went the way of the evening newspaper.

I admit I haven’t “played” Second Life, but on the surface, I don’t see any real reason why it should attract my valuable spare time and bit traffic. I prefer to read (both online and offline) and be entertained. There’s no “there” there in Second Life that I can see. Now, I don’t do World of Warcraft either, but I can easily see the appeal – there’s quests, there’s missions, there’s levels, there’s things to do! You can track your progress against others in a competitive environment. No wonder games are so popular. But Second Life sounds like one giant MLM scam – and I’ve never been a big fan of those types of activities (but I can see how some could be, especially those who “get in on the ground floor.”) And so far, the democracy of demand agrees: “While 42,400 people pay for premium Second Life accounts, that number pales in comparison to the more than 7.5 million people who pay for subscriptions to Blizzard Entertainment's World of Warcraft.”

There’s no question our future entertainment options will take advantage of an ever increasing amount of bandwidth available, and lead to new forms of entertainment. But the forms that succeed are going to be those that capture the most attention, and the most types (and best mixes) of attention. So far, WoW has captured the most and best attention among millions by getting people to do stuff they want to do but can’t do anywhere else. Video game consoles have done the same, selling tens of millions of units. Second Life has a long way to go.

Posted at 06:31 AM in Games | Permalink | Comments (0) | TrackBack (0)

January 30, 2007

Japan’s Business Renaissance: Tokyo becoming HQ for “independent sneaker scene”

By Adam Carstens

For those who doubt Japan’s Business Renaissance, take a look at this article in Metropolis, a local Toyko magazine, discussing how the “independent sneaker scene” now reigns supreme in Tokyo. Shops and labels like Madfoot!, Visvim and of course the legendary A Bathing Ape have brought people all around the world to explore Tokyo’s hidden alleys and corridors.

The fact that Japan – formerly that of the un-creative and robot-like efficient salaryman – can become a world leader in something so luxurious as casual footwear is yet another sign the country is going through a serious change in attitudes. Imagine New Yorkers looking to Tokyo for signs of fashion-forwardness – well, it’s happening! The ability to set fashion trends and make the world look to you for signs of where fashion is headed can only be a positive for Japan’s economy.

Despite the repeated predictions of Japan’s demise, examples like this make us more bullish about the prospect for Japan’s continued growth and prosperity.

Posted at 01:38 AM in Japan | Permalink | Comments (0) | TrackBack (0)

January 29, 2007

MySpace Comes to China

By Wang Hai

China now has around 137 million internet users, second only to the U.S. So it’s no wonder numerous IT companies and VCs are trying hard to come into this seemingly-promising market, including giants like Yahoo!, Google and Microsoft. Murdoch’s News Corporation is also tapping the media market in China, with its shares in Phoenix and Star TV. And now it’s making a big move: MySpace is coming to China.

But how? Mr. Luo Chuan, the former CEO of Microsoft China, has the answer: his new company will run MySpace’s business in China with help from IDG. IDG will not only provide capital, but also help with brand management, backstage technology and operational experience. The Chinese version of MySpace will be launched in a couple of months.

But will this new company buy a local existing online community site, copy the American business model, or develop a completely new platform to meet the needs of picky Chinese internet users? It’s a tough question for Mr. Luo. IDG VC does have a great relationship with the Chinese government, which could be helpful for the website to get the needed licenses. But many other entries into China have shown that it can be hard just to copy the US model – yet if you develop a completely new platform, it takes time to build up a large base of users.

Examples of this graveyard include Yahoo!’s stumbling China arm, eBay’s early departure, Amazon’s falling behind Dangdang.com despite purchasing local brand Joyo.com. And even though MSN has been in China for 3 years, it’s still left far behind the local QQ.com.

MySpace is a little bit different, however. The local team will do their best without too much interference from News Corp., as News Corp. has less than 50% in the share of the new company. And IDG VC can help them to deal with the government relations, which is a lesson from Google’s operation in China. It seems like a reasonable path.

But the risks are also numerous, including:

1. MySpace is a community based website, where content is extremely important. The Chinese government has pretty tight control over that.

2. MySpace in the U.S. makes profit by internet ads, music downloading and some other online services. But in China, internet advertising is in an early stage, and demand is comparatively lower. Also, music downloading can be unprofitable due to the heavy use of pirated MP3s.

3. A new website will face the challenges from local giants like Baidu, Sina, Mop, Sohu, and Netease, as all of them are now developing similar community functions, and most importantly, all of them already have a very stable users group. You can imagine how tough it would be to win market share from them.

At present, I am not optimistic at all for MySpace’s business in China, though it’s too early to make any conclusions. Let’s come back in a year and see how they’ve done.

Posted at 07:00 AM in China, Web/Tech | Permalink | Comments (0) | TrackBack (0)

January 25, 2007

Turning Minutes Into Dollars

By Adam Carstens

Interesting post from Compete, which tracks where people spend time online for December 2006. A few things spring to mind:

• The top 10 domains capture a third of our time online.

• If anyone still doubts Rupert Murdoch got a bargain when he bought MySpace, they shouldn't anymore - MySpace raked in 28 BILLION minutes in December alone. They don't break out revenue/profit numbers for MySpace, but surely its already made back its purchase price and then some.

• Yahoo is clearly not doing enough yet to profit off of the amount of minutes it gathers. If you extrapolate out, they probably got about 60 billion minutes in the 4th calendar quarter. Yet they only made $269 million in the 4th quarter off $1.7 billion in revenue. That's only about 27 cents per hour in profit, or $1.70 per hour in revenue. Whereas Google only got 1/4 the web minutes, but likely made several times the profit and revenue (we'll know soon enough).

• So, really, its not about the number of minutes but HOW YOU TURNS THOSE MINUTES INTO DOLLARS.

Posted at 09:56 PM in Web/Tech | Permalink | Comments (0) | TrackBack (0)

Yahoo Not Yet Thinking About Customer Attention

By Adam Carstens

Yahoo! reported earnings recently, and while the results were OK, revenue growth continues to slow. From the article: "Revenue growth continued to decline at the company. Revenue rose 13% in the fourth quarter; that compares with 19% growth in the third quarter and 26% in the second quarter from their year-earlier periods." Meanwhile, companies like Google have reported huge growth rates.

Though I believe Yahoo! is taking steps to turn things around, here was a key paragraph in the coverage: "The company had blamed competition for advertisers' dollars as a negative factor when it reported third-quarter results. The explosive growth of new players in areas such as online video and social networking has drawn the attention of advertisers, giving established sites such as Yahoo! a run for their money."

Right...WHY isn't Yahoo! capable of competing for these ad dollars? Why don't people want to stay longer at Yahoo's family of sites? Obviously better capture of ad dollars will help Yahoo! turn itself around. But first Yahoo! needs to spend some time thinking about what can best grab its customers' attentions first.

Web customers don't seem to be looking for that all-in-one integrated solution with respect to web offerings. They want to try many different brands with many different philosophies, it seems. Things Yahoo! buys (such as Flickr and Delicious) should link to each other and be usable across one Yahoo account if the user wants it, but they should retain the personalities that brought people there in the first place.

Lets hope for Yahoo's sake that it spend more time thinking about customer attention in 2007, with hopes for a better result for Yahoo's shareholders.

Posted at 01:09 AM in Web/Tech | Permalink | Comments (0) | TrackBack (0)

January 24, 2007

Web 2.0 in China Catches Eyeballs

By Wang Hai

The newest issue of Businessweek discussed the Web 2.0 applications and business potential in China. It seems that Web 2.0 has finally caught some attention in China.

While Web 2.0 technology wasn’t widely used until 2005, some of the Chinese Web2.0 applications was introduced as early as in 2002, such as blogchina.com, which came into operation in August, 2002. Three years later, Bokee.com (formerly the blogchina.com) received the most VC at more than $10 million. Sina.com and Sohu.com introduced their own blog service in the same year – according to statistics in July, 2006, 23.7% of web surfers in China used blog services, which translates into 27 million users. However, estimations about wiki-based applications are not as optimistic as those for blogs or podcasts. Due to the sensitivity of the content, the Chinese government banned wikipedia.org for sensitive political issues, among other reasons.

There’s a fundamental contradiction when it comes to Web 2.0 in China, however. When content providers receive more attention from the general public, their traffic goes up, but so does their trouble. Since media is so heavily regulated in China, blogs are an excellent outlet for people’s curiosity, since blogs discuss content that usually can’t be seen on TV or in a newspaper. Yet the blog provider must keep the peace with the authorities while keeping readers interested - a never-ending dance on the razor’s edge.

Chinese IT companies currently seem more excited by new technology rather than any potential business application of Web 2.0. I believe in the long run, the true profit model lies in the cooperation with traditional media, as technology can only be a means to an end. But definitely, the potential is there for higher growth - according to the national internet development report in 2006, about 3 out of 4 Internet users in China didn’t even know what Web 2.0 meant!

Posted at 06:23 AM in China, Web/Tech | Permalink | Comments (0) | TrackBack (0)

January 23, 2007

Chinese Internet Addiction

By Jonathan Lipsitz

A new report estimates that 2 million out of the 18.3 million teenage internet users in China are addicted to the Internet. Much of this Internet activity takes place in cafes after school. Authorities believe a 68% increase in juvenile crime is partially because of “a lack of diversions at schools, forcing addicts into often illegal Internet cafes and exposing them to crime and violence.”

Blaming social ills on the internet and other media is nothing new in any country. Unfortunately, China is tackling this problem through new regulations cracking down on time spent in internet cafes instead of trying to create more positive after school programs for kids. At this rate, all of the online scams of the future will come from China and not Nigeria.

Posted at 06:04 AM in China | Permalink | Comments (0) | TrackBack (0)

January 22, 2007

TheyTube

By Jonathan Lipsitz

So, You are the Time Magazine Man of the Year. Let’s not all celebrate our ascendance as the entertainment moguls quite yet. There is a lot of buzz out there around social networking sites and user generated content.* Fortunately, here is one article that tries to deflate our egos just a bit and put it all in perspective.

“To wit, one of the most buzzed about online videos, of two Chinese kids lip-synching to ‘I Want It That Way’ by the Backstreet Boys, has been viewed about 1.3 million times on YouTube since the video was added to the site in November, 2005. Meanwhile, a show like CBS’s ‘Smith,’ which was the first cancellation of the fall TV season, is branded as failures even though it generated nearly 10 million viewers a week.”

Of course, how we view (literally and figuratively) entertainment content has undergone a large transformation. But, the big studios and Madison Avenue ad agencies are not going away. They will most likely subsume these new channels. Much of what we think is user generated content will be traditional advertising in a new format. They will get stronger and we, well, we’ll remain on the fringes.

So, let’s create content in the same way experts tell us to buy art. If you like it, invest the money and time to do it. But NEVER expect to make any money off of it.

* This somewhat pessimistic view does not apply to a website soon to be launched by contributors to this blog.

Posted at 06:01 AM in Web/Tech | Permalink | Comments (0) | TrackBack (0)

January 19, 2007

Japan: No Men at Lunch?

By Adam Carstens

Here's an interesting interview with the author of "Kickboxing Geishas," a new book about the changing role of women in Japanese society. While I've never seen the phenomenon the book title suggests, I am actually in Japan at the moment, and I want to take issue with one of her answers in this interview.

"It's rare for salarymen to have a lunch hour or to go out for a big expense-account lunch. They usually take about 15 minutes to slurp noodles at the train station, or they eat quickly at their desks. At lunchtime, restaurants are all full of nicely dressed Japanese women -- no men."

Uh...I've eaten lunch out pretty much every day I've been here. I see TONS of men out on the street and in restaurants while doing so. This statement is patently false.

However, the rest of the interview does touch on some of the issues we cover in "Japan's Business Renaissance," such as the rising entrepreneurship in Japan. Japan is a vibrant, dynamic, innovating country - a lot more than people usually give it credit for. While it is nice to see the "other" side of Japan (besides the cartoony versions - both literal and figurative - that receive most attention in the West) get some airtime, this author needs to do a little more fact checking, especially in terms of who goes out for lunch.

Posted at 02:36 AM in Japan | Permalink | Comments (0) | TrackBack (0)

January 18, 2007

Toyota Joins NASCAR – “Predatory Behavior”?

By Adam Carstens

America is a car culture, no doubt about it – the low population density, large open spaces and low tax fuel make it almost inevitably so. So it is definitely interesting news that a foreign car company is going to join that most American of sports – driving cars repeatedly in a circle, otherwise known as NASCAR.

But this New York Times article covering the entry strikes me as a bit odd. It claims that “competitors are accusing [Toyota] of raiding teams for talent and raising the costs of operation by offering drastically higher salaries.” And yet it only produces one quote about said activity, from Ford’s Dan Davis, the overall logic of which leaves much to be desired. He says about Toyota’s hiring practices: “When anything new comes in with a lot of resources, then those entities are going to try to acquire the best people, the best equipment, the best that they can get. That’s a bit predatory to me. And if you pay people more money than they were getting and you entice them other ways, in a way that’s more than normal, then it’s a bit predatory.”

Question: If someone were to offer Mr. Davis three times his current salary to do the same job, would he reject it out of hand as “predatory”? I bet most people would take that deal in a heartbeat, regardless of what Mr. Davis thinks. Does this spending by Toyota constitute some breach of contract or rule on the part of NASCAR? Apparently not, as the story says “so far, NASCAR officials say they see this as business as usual in a sport in which teams openly raid competitors. Earlier this month, for instance, Roush Racing hired the crew chief Larry Carter away from Michael Waltrip Racing.”

Toyota will ultimately prove themselves on the track, so a lot of this is just talking smack, a venerable part of sports culture. So given that Toyota is now the #3 vehicle seller in the United States and hot on the heels of Ford for the #2 spot, my advice to Ford is essentially this: don’t hate the player, hate the game.

Posted at 02:28 AM in Japan, Sports | Permalink | Comments (0) | TrackBack (0)

January 17, 2007

Achievement Points in XBOX 360 Console Games: Why Are Players are Crazy for Them?

By Wang Hai

There was nothing really impressive this year’s at CES for games, though Bill Gates demonstrated how fascinating the idea of “Live Everywhere” could be as players will use Windows Vista to play the same games online with players on XBOX Live. In so doing, he mentioned the biggest online community ever in the history of console game industry – more than 4 million subscribers are part of XBOX Live! They chat online, buy various content online and play online. But what captures most of their attention are the hidden “Achievement Points” found in all XBOX 360 games.

Achievement Points are awarded for the completion of game-specific challenges, such as beating a level or amassing a specified number of wins against other players in Xbox Live matches. The majority of Xbox 360 games offer up to 1,000 points spread over a variable number of Achievements. Each Xbox Live Arcade game contains 12 achievements that total 200 points.

What makes people so crazy for these Achievement Points? Paul Hyman discussed it in his article in the Hollywood Reporter. It’s different from any other rewarding point accumulation system. You can never cash them for anything, and it’s only shown on your Gametag, along with your most recent games. Rather than any real-world reward, it’s the sense of achievement and pride in the virtual community that drives people to unlock those points in the games. What’s more, it allows people to exchange ideas and opinions on the games they like with other community members easily.

Achievement Points are not a new idea, but they were wisely implemented by Microsoft. In quite a lot of MMORPGs, people show their status by their score or the equipment their virtual characters have. The most popular instant messaging platform in China, Tencent’s QQ, implemented a similar system in late 2005, as the longer you use QQ, the more icons will be added to your tag, such as a moon, a star or a sun, each with a different status. You can also access different features for your avatar, and thousands of people leave their computer on to run QQ just to have those icons.

To avoid overuse of the Achievement Points system, the points can’t be exchanged for anything. So the so-called “farming” activities in other MMORPGs (where in-game gold can be exchanged for real-world currency) are very rare on XBOX Live! That doesn’t mean the system is without controversy. Last November, when user “StripClubDj” reached the 100,000 mark, many people criticized him for the time he used short cuts to rapidly increase his AP. It just showed how some people practically revolve their lives around collecting AP, just for the sheer fun in continually seeing the "Achievement Unlocked" message on their screen. Kudos to Microsoft for helping to grab a lot of gamers’ attention with their Achievement Points system.

Posted at 06:34 AM in Games | Permalink | Comments (0) | TrackBack (0)

January 16, 2007

iPhone No Big Deal In Japan

By Adam Carstens

Despite all the hype about the iPhone, over here in Japan, the iPhone is still way behind the times. The LA Times story says how the Japanese have been doing for years what the iPhone promises and more six months from now - and on a 3G network, no less.

Why has there been such a lag? I can think of a few reasons - namely, reluctance from major carriers to build a true national 3G network, different network standards, onerous contracts and the insistence on charging an arm and a leg for everything from ringtones to games to SMS. No wonder the cell phone industry has such low consumer satisfaction.

Hopefully, Apple can force the other carriers in the US to improve their network and services - just as cable improved its act when satellite became a threat, and the way the phone companies started begging for business when VOIP became a threat. But for more than $500 just to buy an iPhone, it's going to take awhile. Nevertheless, a sea change is what the industry needed and Apple was as good a candidate as any break the logjam. In the meantime, we're all just going to have to drool over the Japanese phone network just a little bit longer.

Posted at 05:45 AM in Web/Tech | Permalink | Comments (0) | TrackBack (0)

January 12, 2007

The Renewal Cycle Tool

By Adam Carstens

Over the years, we've done a lot of research into something called the "Renewal Cycle" and its impact on business. We've shown that:

• There is a cycle with four unique parts that individuals, organizations and countries all navigate through.

• There are significant differences among countries in terms of where their populations are in the cycle.

• The cycle has significant implications for any business.

Now we'd like to invite you to experience the Renewal Cycle for yourself - by answering our quick questionnaire. By taking the Renewal Cycle, you can see what quadrant you're in, as well as explore the deeper implications of the cycle for you and your organization.

Please go to this link to find out where you fit in the Renewal Cycle: http://www.attnco.com/renewalcycle/Survey/index.php

Posted at 02:35 AM in Renewal Cycle | Permalink | Comments (0) | TrackBack (0)

January 11, 2007

Out There: New Pew Survey

Following up on our discussion of "Out There" attitudes, this new study from the Pew Research Center echoes what we've found. To wit, 51% of those 18-25 said their generation's most important goal was to "be famous" (as opposed to 29% of those 26 and older). ("To get rich" also was cited far more often as an important goal) There were also the usual increased numbers of young people who used new technology in greater and more varied ways.

Its good to see what we found showing up in other studies, but one other detail struck me. "Generation Next" as the Pew Survey called the 18-25 year olds are far less enamored of politicians than older folks, and feel far more connected to people they actually know. Their increased use of technology has brought them closer to those in their immediate circle, not isolated them. It's just more confirmation that the "Out There" folks are going to have a severe effect on organizations as they start to move through the ranks. We're just at the beginning of what those effects will turn out to be.

Posted at 04:59 AM in Out There | Permalink | Comments (0) | TrackBack (0)

January 10, 2007

iPhone Captures Everyone’s Attention

By Adam Carstens

I’m over in Japan, and when I woke up Wednesday morning, my blog reader was going crazy with news about the iPhone announcement from Apple (no longer Apple Computer). Even though I probably won’t buy one in this generation (I’m satisfied with both my current phone and iPod, and don’t use either one enough to justify merging them, but that’s not to say I won’t eventually want/need one).

However, it’s clear this announcement captured the attention of quite a few people. Steve Jobs and Apple have a huge effect on markets whenever they enter them, and that effect seems only to amplify with time. Every time I walked by an Apple retail store this past holiday season, it was packed.

Removing the “computer” from their name as well is a very smart and attention getting move. Apple realizes that they’re not in the business of selling “computers” any more than Google is just a search engine. What these companies are about are about allowing people to live their lives in a continuous stream of information delivered in alluring ways. With Apple, you always feel like you’re in control of your media (even if you might not really be).

Though the iPhone won’t be out for a few months, it has already changed how people will view how we relate to information via portable devices. Congrats to Apple for such an attention getting announcement.

Posted at 03:47 AM in Web/Tech | Permalink | Comments (0) | TrackBack (0)

January 08, 2007

Some Thoughts on the International CES 2007

By Wang Hai

For the latest innovations in gadgets, games and technology, you can’t miss the annual International Consumer Electronics Show in Las Vegas, especially this year - the 40th anniversary of the show. This year, the show will continue to focus on digital, mobile and wireless media, and maybe more. I have some thoughts about this year’s show:

1. In 2006, the battle between the next-generation high definition media format was not that intensive as many people had expected, due to the high cost and limited supply. The PS3 with Blu-ray didn’t perform as well as many people and manufacturers expected, but maybe CES will feature some of what’s to come. And of course, consumers will expect lower prices before adopting in large numbers, but potential demand is there - 35 million American families have already bought HDTV!

2. The battle for the “little black box” inside the home continues – that which will control all home-based media – will it be a media center PC or a next-gen game console? But for many, this fight is too hard and too costly to win. Nintendo is smartly avoiding this fight with their successful debut of the Wii. But Microsoft, Sony and other players are still trying to figure out the way to eventually reach this market. Nowadays, game consoles can do much more than just playing games: for instance, with an Xbox 360, you can do all the things PCs are doing nowadays: downloading and video conferencing. With the PS3, you can even install the Linux Yellow Dog system, and then surf the Internet, play videos and music, operate some Office-like software and so on. The price for a media center computer (equipped with Windows Vista, for example), is usually more than $1,000 dollars, while even the 60GB PS3 is only $600 bucks. Expect home media solutions to get even cheaper over time.

3. Tivo is entering its 10th CES appearance to fight against other competitors in the product category it created. But great changes already took place in the past decade. Slingbox enables people to take their television everywhere, and Steve Jobs is finally introducing his iTV, which claims “you can take content to your computer or iPod, and now... TV.” I believe Tivo CEO Tom Rogers has more to showcase besides offering an HD-content-recordable new Tivo for $799 .

4. Old players are coming back. IBM will appear at CES for the first time in the past 10 years, and after purchasing Scientific-Atlanta and merging with Linksys, we have more reasons to believe that Cisco can begin to offer more great consumer electronics starting this year.

Posted at 07:44 PM in Web/Tech | Permalink | Comments (0) | TrackBack (0)

January 05, 2007

Way Out There: Stickam

By Adam Carstens

Have you heard of Stickam? I had briefly but never really given it much thought - until I read this New York Times article, which made me curious to see what it was all about. Having browsed around for a few minutes, I can say the potential - both good and bad - of this website is enormous. This is closer than we've ever come before to a true "YouTube" - people broadcasting life feeds of their entire lives in real time via the web. There's no filtering, no monitoring, no controls. According to the article, Stickam "mostly attracts young people comfortable with the idea of a continuous self-produced reality TV show starring themselves. [!] [The site] has 260,000 registered users — 50,000 of them say their age is 14 to 17 — and is adding 2,000 to 3,000 each day."

The potential of Stickam makes MySpace look like Sesame Street. And the New York Times article was filled with the usual quotes from folks who are not exactly thrilled with the idea. “Letting people do whatever they want is one way for these sites to differentiate themselves,” said Josh Bernoff, a Forrester Research analyst. “It is the race to the bottom.” Actually, what it mostly seemed to be were bored teenagers talking to each other about the most banal of topics - not exactly the most compelling content, but interesting to the right target audience, I suppose - at least more than watching Seinfeld for the umpteenth time.

But Stickam is definitely fulfilling a demand - people, especially teenagers, it seems - want to share more of their lives than ever before - instantly, and around the world. Whether they should do this is a question that no one can answer. But technology has provided a path forward many times to things that people want to do regardless of what others think.

Stickam probably should make a lot of parents nervous (it would make me nervous). But other than ripping the wires out of the walls, I'm not sure there's a lot parents can do about it. Let's hope that the community that uses Stickam can monitor itself without too many bad incidents. Whatever it becomes, it's definitely Way Out There.

Posted at 10:24 PM in Out There | Permalink | Comments (0) | TrackBack (0)

January 04, 2007

The Search for New Metrics

By Adam Carstens

John Battelle said something interesting in his predictions:

Speaking of the content business, it will face a major test as two forces converge to undermine the pageview model: Ajax, on the one hand, and ad blockers on the other. Both will be addressed with alarm and alacrity by industry efforts. By the end of the year, new metrics will emerge to help publishers and marketers understand audience engagement.

Richard MacManus, who was kind enough to link to our Out There post, had this to say:

Also due to ongoing issues with (CPC/PPC) online advertising, there's a real need for a better, more robust online ad model - perhaps something more than CPA. So watch out for developments in 2007 along those lines.

I couldn't agree more. Over time, people are starting to realize just how poor traditional methods of delivering internet advertising are. The problem has even caught Jason Calacanis's eye, so it must be important.

So what do I think is the most important metric to track regarding online behavior? Well, in a word....ATTENTION. The hows and whys of attention will be revealed in due time. But suffice to say, those who can correctly translate attention into action will be justly rewarded.

Posted at 06:20 PM in Attention | Permalink | Comments (0) | TrackBack (0)

January 02, 2007

Can Japan Hold On to Its Recovery?

By Adam Carstens

Excellent series of articles over at Wharton's online site about Japan's future, titled "Can Japan Hold On to Its Recovery?" Particularly of enjoyment for me was the section "Anime: Japan's Gross National Cool." The real point is not that Anime style films are going to propel Japan's recovery. It's that Japan's continued creativity and differentiation from its culture will be a major source of competitive advantage for some years to come. This, ultimately, is why I think Japan will succeed despite a stable demographic base.

Posted at 10:37 PM in Japan | Permalink | Comments (0) | TrackBack (0)

December 29, 2006

2007 Predictions (3)

By Adam Carstens

It’s been a great year – I got married, went to Asia twice and had a great time in my new city of Los Angeles. Can’t wait for 2007, when I expect to spend even more time living in Asia. Anyway, here are my predictions for 2007:

Web/Tech:

• The Nintendo Wii will pass the Xbox 360 to become the biggest selling console of the “next generation” systems on a global basis.

• I don’t think AOL will be sold by Time Warner in 2007. Time Warner is going to continue to try and make AOL into a stable profit center.

• 2007 will be where VOIP finally goes “mainstream.” Skype’s traffic grew by 80% in 2006 to almost 14 billion minutes. I predict it will double again to 28 billion minutes. Other VOIP traffic tripled to 42 billion minutes. It will double to 84 billion minutes.

• Others have made this prediction already, but I’ll echo it: YHOO outperforms GOOG in calendar year 2007.

Economy/Stocks

• The Nikkei did OK this year, rising about 8%, after touching some year-low-levels in June. I believe the Nikkei average will outperform, on a real, currency-adjusted basis, the S&P 500 in 2007.

• The median price of existing homes in the U.S., currently listed at $218,000 according to the National Association of Realtors, will be lower in real terms at this time of year in 2007.

• The dollar will fall against the euro, yen and RMB.

• Michigan will continue to lose population, as it did this past year, as U.S. car manufacturers continue to lose ground and market share.

• The economy overall will record at least one quarter of growth below 2%.

• The Federal Reserve’s Open Market Committee will cut rates sometime during 2007.

Potpourri

• Letters From Iwo Jima for best picture.

• Chargers over Saints in the Super Bowl

• Daisuke Matsuzaka wins the AL Cy Young

That’s all from me – see you in 2007!

Posted at 07:48 AM in Predictions | Permalink | Comments (0) | TrackBack (0)

December 28, 2006

2007 Predictions (2)

By Wang Hai

China:

• Yoshi Kusaki predicted last year that Chinese RMB would be revalued at 1USD=7.5RMB by the end of 2006, and I believe this goal will be eventually achieved by the end of 2007, as Chinese government is pretty cautious in the appreciation of RMB to prevent turmoil among the working class. And by the end of 2008, it will hit 7:1 when versus USD.

• The annual GDP growth of China was predicted by many to exceed 10% in 2007, but I hope it can be controlled at around 9%, as the government is implementing many measures to control the overheat of the economy.

• 2006 was a wonderful year for Chinese stock market, as the confidence in the market was gradually built up among Chinese investors. And the Shanghai Stock Exchange Index eventually recovered to over 2100. It took over 5 years for the recovery, but I believe it will drop at the middle of 2007, then eventually hit 2200 or even 2300 by the end of year.

• The banking system in China will have significant pressure in 2007 as more foreign banks enter Chinese market, and the local banks can no longer make profit based on the difference of the interest for deposit and loan in face of the competition of international banking corporations.

• A 3G mobile network in China will start commercial operations in 2007. The 3G standard has been discussed and tested for many years in China. I think it will eventually begin commercial operations in 2007, as the 2008 Olympics is coming.

• In 2006, China became the third largest automobile market of the world, and in 2007, China will surpass Japan to be the second largest of the world. (Beijing now has over 2.8 million automobiles)

More outlook about Asia are well covered in the following two documents:

http://www.deloitte.com/dtt/cda/doc/content/dtt_GlobEcon07_091506.pdf

http://www.wachovia.com/ws/econ/view/0,,3481,00.pdf

Posted at 11:57 AM in Predictions | Permalink | Comments (0) | TrackBack (0)

December 26, 2006

2007 Predictions (1)

By Jonathan Lipsitz

Business

• The console video game market will falter greatly, with players losing interest in new titles. Online, casual gaming will continue to see significant growth but advertising revenues will not meet expectations.

• Housing prices will continue to slump (down 4% nationwide average) driven by panicky owners and increased investment in the stock market.

• There will be a significant correction in the prices companies are paying to buy web 2.0 startups. Digg will be the first major one to show this. Not quite March 2000 all over again, but it won’t be pretty. The one bright spot in this whole area will be [our new web 2.0 offering to be launched soon].

• Online delivery of TV and movies (studio generated content) will explode in '07. Blockbuster will deliver movies on demand over the internet and accelerate closing of retail stores.

• The dollar will slide further in the 1st half of the year. More than 2 dollars to the Pound. The dollar will strengthen in the 2nd half of ’07.

• Oil ends the year at $53.

Society and Politics

• Reality TV shows will start to diminish in popularity. It’s about time!

• There will be a major artificial intelligence breakthrough reported that will lead to renewed discussion of the threat of machines taking over the world.

• Bird Flu will hit the shores of the US but turn out to be a bust, with a few infections but no serious outbreaks.

• Violence in Iraq will be greatly reduced by the start of the summer, and Iraqi troops will control 60% of the country by the end of ’07.

• One major member of the EU will partially back out of the organization, maintaining free movement of goods and labor, but opting out of existing political and currency union.

• Gordon Brown will NOT become the head of Labour in ’07, due to a personal scandal.

• The new Rocky movie wins several Oscars. Who would have thought it.

Posted at 10:07 AM in Predictions | Permalink | Comments (0) | TrackBack (0)

December 21, 2006

2006 Predictions Revisited

By Adam Carstens

As a purely navel gazing exercise (hey, I have that right), I'd like to go back and look at some of my predictions for 2006. I think I did pretty well, if I do say so myself. What follows are my predictions in bold and then commentary about what happened in regular type.

Japan:

* Nikkei to 18,000 (at least). So close on this one, though I guess there's still time...the Nikkei 225 rose to the mid-17,000s and then fell again, and is now around 17,000. Though it did go up...

* Yen makes a modest recovery against the USD. Yen rose to 110 by May, then fell back again...to end up basically flat for the year. Still, if you sold yen in May, you made money. I give myself half credit on this one.

* Shinzo Abe beats Taro Aso as the next PM. Right on the money on this one.

* Toyota gains in U.S. and global market share. Ditto.

* Sony finally pulls it together and bounces back thanks to the blockbuster PS3, which will dwarf the new Xbox (close but no cigar, MSFT). Still too early to tell on this, though it looks like the Wii will dwarf both. However, I have faith in the PS3 to eventually outsell the Xbox 360.

* Also, I will visit at least once, possibly twice! It happened!

US:

* Dems gain seats in both houses - but I'm not willing to predict a Dem takeover of either house (yet). It happened, with a passion.

* Dems also gain in some big governorships, including CA and NY. D'oh! Half right.

* There will be a net loss of construction jobs. As of now, this is correct - construction jobs have fallen by 2,000 from January to November, and given the softness in the housing market, I wouldn't expect much strength the rest of the year.

* The economy will be OK, but don't expect anything gangbusters outside of tech. The economy did continue to grow, but I would say nothing really exciting outside of tech and maybe energy. So call this half right.

* Stock market will go up slightly, given that the Fed will finally cease raising sometime in '06. Stock market did go up (we can quibble with slightly) and the Fed did stop raising.

* Gold goes to at least $600. Yes, it did.

* The 10-year bond goes to 5% yield. Yes, it did.

Tech:

* Tom on MySpace will get to 100,000,000 friends. He did!

* A multi-player online game will get to 10,000,000 subscribing players worldwide. This didn't happen as far as I know - WoW is stuck at around 7 million, and have begun advertising on TV to get the mass market more interested.

* The newspaper industry will experience a slight resurgence in revenue thanks to some innovation in adding blogs to their rosters, but the overall print circulation numbers will continue their slide. I would say circulation has definitely gone down, but web numbers are up - and newspapers are adding more blogs by the day.

* Official company blogs will also lead to at least one major move upward and downward in a stock price. Hmmm...not sure if this happened or not. Need more research.

* Google goes to $500. It did, though it has since fallen back.

Misc:

* Brazil does NOT repeat as World Cup Champion. Called this.

* Colts over Seahawks in the Super Bowl. Half-right - it was Steelers over Seahawks. Half right!

Not a bad record of prognostication, if I do say so myself...now, onward to 2007!

Posted at 10:57 AM in Attention | Permalink | Comments (2) | TrackBack (0)

December 20, 2006

Big Screen Bloodbath

By Adam Carstens

According to an article in the Wall Street Journal, Best Buy has slowly strangled the competition when it comes to electronics sales. Best Buy has had an amazing five year run in terms of grabbing market share and an improving stock price. Of the four retailers mentioned (Best Buy, Circuit City, Dell and Wal-Mart), only Best Buy's stock is positive over the last five years. But that same article indicates the bloom may be coming off the rose a bit as “holiday promotions left [Best Buy’s] results below Wall Street expectations.” Third quarter profits only rose 9% - while OK, the stock is now taking a breather. (At least it’s not Circuit City, which reported a loss and received a lump of coal in its stocking).

Best Buy is making the best of a bad situation – consumers ' attentions have been captivated by these products, but they clearly expect prices on big flat screen TVs to continue to plunge, and will only grab them if they perceive the deals to be irresistible. While that may drive traffic to the stores, its hell on margins. Best Buy doesn’t have a lot of room to begin with, with only a 2.3% operating margin. If Best Buy is forced to slash prices to keep consumers crazed for big-ticket items, then their already-thin margins will disappear.

The big flat-screen television became a commodity faster than anyone anticipated. Until consumer electronics stores can find the next high-margin luxury item, and as long as housing continues its slow leak (people need somewhere to put the televisions, after all), then don’t expect any improvement for these retailers.

Posted at 12:18 PM in Attention, Television, Web/Tech | Permalink | Comments (0) | TrackBack (0)

December 19, 2006

Wii Weather: Just the Beginning

By Adam Carstens

For the lucky few who managed to buy a Wii, the Wii Weather Channel debuted today. In my opinion, this is merely the beginning of increased attention to the Wii for those who have one in the home. Think about it - you now have three options for finding the weather.

1. Television - wait for a local weather update from your local news, or go to a specialized provider like the Weather Channel - but you likely still have to wait for them to mention the weather for the area you're interested in. You're dependent on someone else's decision to give you the information you want.

2. Internet - go to your preferred weather site and investigate the weather information you want. The Internet is getting better at providing this - there's tons of weather data around and available if you know where to look. But the interface is relatively tame - a keyboard/mouse interface that's been around for quite a few years now.

3. Wii Weather Channel - check out the video at the link provided above. To me, that looks like a fun, intuitive and engaging way to find out a basic piece of information - the weather in your area, any area, around the world. Nintendo has to be considering eventual upgrades, such as satellite and radar information, precipitation data and other such data. One could even imagine a "screen saver" type setting where weather data is constantly streamed onto your television providing an ambient background image filled with color and light that would transform your television into a piece of art.

The sky is the limit for this form of information as far as I'm concerned. While the Internet will remain an important method for digging deep into the weeds of information, not everyone wants or needs to dig deep all the time. The Nintendo Wii Weather interface is a really smart and exciting example of the potential of this new form. I can't wait to buy one.

Posted at 10:42 AM in Games, Television, Web/Tech | Permalink | Comments (0) | TrackBack (0)

December 18, 2006

Children on Celebrity: "Best Thing In the World"

Jason Calacanis was kind enough to write about our "Out There" research recently. However, he did say he thought the "valuing fame as an asset" characteristics of those "Out There" would fade over time. He said "the fame part I think is a temporary thing. Folks who are open and transparent today are getting famous for their candor but in another couple of years this candor will be the norm."

While what he said may eventually be true, that wasn't really what we were saying. Our work shows that those "Out There" tend to elevate fame above other rewards, such as money. That is, if you can reward a person with fame inside/outside an organization, you may not need to pay them as much in bonus money (though a little won't hurt). Think about it - would you rather have an extra $20,000 in bonus money and have all of the credit for your work go to someone else, or would you rather have an extra $10,000 and be publicly recognized and praised by your organization for your work?

These new attitudes are reflected in this survey which shows "children under 10 think being a celebrity is the 'very best thing in the world'." Those attitudes are further evidence of Out There attitudes taking hold, especially among the younger set. Companies would do well to remember this as they manage their "Out There" people.

Posted at 10:32 AM in Out There | Permalink | Comments (0) | TrackBack (0)

December 15, 2006

Home Depot’s Expansion to China Retail Market

By Wang Hai

After months of negotiation, Home Depot is finally entering the China retail market with the acquisition of a local leading retail chain: Home Way of the Home World Group, based in Tianjin. The details of the acquisition are secret, but there are still rumors in China saying the transaction totaled over $100 million.

As one of the world’s three leading retailers (the others being Wal-Mart and French supermarket Carrefour), Home Depot had been planning to expand to China for a long time. It established supply centers in Beijing, Shanghai and other cities as early as in 2002. Home Depot purchased $8 billion worth of products in China in 2005, ranking No. 2 behind Walmart. And in 2004, Home Depot was said to competing with B&Q from UK for the acquisition of a large home improvement retailer, the Oriental Home. Eventually the deal fell through for both, and B&Q set up its branch stores in China by itself. With over 50 stores all over China now, B&Q is the No.1 in home improvement retail business in China.

But Home Depot may have the last laugh. To buy a local chain store is usually a better solution for retail giants to succeed in the China market, as they buy immediate presence, avoid cultural gaps and make a smooth entry into the market. Home Way already has a close relationship with the local government, and Home Way can also get fresh capital to deal with the financial pressure in business operation.

Interestingly, the Home Way had some history with Home Depot as early as 1995. Home Way sent its executives for training at Home Depot in the US, and Jim Inglis, the Independent Director of the Board since 2002, had already worked for Home Depot for 13 years prior to joining Home Way. I believe this was a major reason for the success of the negotiation.

Of course, the potential for the home improvement market is big in China. The market is still very fragmented, as the majority of the players are small-sized business, and chain stores sales only account for 10-20% of the total sales, even in major cities such as Shanghai and Beijing. But according to estimates, sales from the chain stores will grow to 50-80% of the total home improvement market in the coming 3-5 years.

But the deal is not without risks. Prices in chain stores are comparatively higher, and most domestic and international chain stores, including B&Q, don’t have very good performance in the market so far. Clearly, there is still a long way to go to persuade Chinese consumers to buy materials for home improvement in chain stores, instead of just going to small shops.

Posted at 12:49 PM in China | Permalink | Comments (0) | TrackBack (0)

December 14, 2006

Out There Reaction

By Adam Carstens

Thanks to everyone who weighed in on our Out There report!

• Richard MacManus

• Jason Calacanis

• Robert Scoble

• Ted Leonsis

I particularly liked Jason's add ons to the report: "If your putting yourself out there you have to be flexible and open, and just by the fact that you are open you're gonna find innovative ideas. I will add the follow to the list. "Out there" people are:

• #7 Passionate

• #8 Lovers of intelligent debate

• #9 Don't take themselves to seriously"

I think those are great additions to these emerging behaviors. As we continue to study these trends, we will be looking for those behaviors!

Posted at 03:07 PM in Out There | Permalink | Comments (0) | TrackBack (0)

December 13, 2006

Microsoft: Losing Customer Attention the Hard Way

By Adam Carstens

Fascinating interview with the head of Microsoft’s Internet business, Steve Berkowitz, in the New York Times, last Saturday. The article is ostensibly about how Microsoft plans to best its rivals at providing online services in a profitable manner, but really, the article is full of lines and quotes that detail just how the company has given many advantage to its competitors. Let’s count the ways…

1. Infatuation with software geekery rather than creating services that users actually want. Not only that, they failed at even the basics – building a search engine that provides faster, more relevant results.

Microsoft lost its way, Mr. Berkowitz says, because it became too enamored with software wizardry, like its new three-dimensional map service, and failed to make a search engine people liked to use. “A lot of decisions were driven by technology; they were not driven by the consumer,” he said. “It isn’t always the best technology that wins. It is the best experience."

Four years ago, Microsoft embarked on what it called Project Underdog, building its own search engine from scratch. So far, all this work has not impressed either consumers or search experts. Even people who said they preferred to use Microsoft’s search engine actually found what they were looking for faster when they used Google.

2. Poor branding – the “Windows Live” name is poorly executed, and even Berkowitz doesn’t like it.

What seems logical at Microsoft seems like a marketing gaffe to most of the advertising and search industry. “I don’t know if Live is the right name,” he said, saying he had not decided what to do about it.

3. Concentration on advertising talent over software talent – the opposite of Google. This does not contradict with #1 – most of the time, Google manages to create brilliant software that people actually want to use. When advertising types are in charge, the product experience suffers.

[Berkowitz] promoted Joanne K. Bradford, Microsoft’s head of advertising sales, to oversee and revive the MSN portal. [Niall] Kennedy says [Microsoft’s] culture is inhospitable for talented engineers. “Microsoft is no longer the primary place for technical talent,”

4. And this its no surprise – people are staying away from Microsoft’s sites more, even as they spend more time on the web in general.

The average MSN and Windows Live user in the United States spends less time on Microsoft’s sites now compared with a year ago.

However, Berkowitz does hit upon the key challenge for Microsoft at the end of the interview.

“You don’t win in the first 90 percent; it just gets you in the game,” [Berkowitz] said. “What matters to people is emotional attachment. And I think that’s the last 10 percent.”

Whether or not Microsoft can create that emotional bond remains to be seen. But a good first step would be to correct errors #1-4 listed above.

Posted at 03:01 PM in Attention, Web/Tech | Permalink | Comments (0) | TrackBack (1)

December 12, 2006

Out There: The IM Gap

By Adam Carstens

Interesting poll from AP and AOL showing that even among those who use electronic communication, there’s a gap emerging in terms of preference for IM versus email. According to the poll, “almost three-fourths of adults who do use instant messages still communicate with e-mail more often. Almost three-fourths of teens send instant messages more than e-mail.”

This is going to have a real serious impact on organization as managers who may have grown up in the age of email encounter workers who prefer the immediacy and informality of instant messaging. The best, smartest and most agile organizations will allow for IM communication as a way to bring employees together and trade ideas across departments and functions.

When it arrived more than a decade ago, email was widely regarded as a “revolutionary” way to communicate. Now, it’s in danger of being left behind as the communication mode of the stodgy and the stubborn. Who has time to wait for an email response when those who used the IM window got their project done faster and quicker thanks to a constant stream of communication?

Organizations that are the most comfortable with the informality of IM will have the best chance of success in the future. Those who refuse or resist embracing this mode of communication will seem as backward as anyone currently without an email address.

Posted at 08:29 AM in Out There | Permalink | Comments (0) | TrackBack (0)

December 11, 2006

Case Studies on the Attention Economy

By Adam Carstens

Just to let folks know, we've published some case studies on our AttentionMap tool that show how we've helped organizations get a better handle on their attention. The case studies are helpful in knowing just how our AttentionMap tool can help you figure out where attention is and where it may be going in the future.

As we said in our book The Attention Economy, attention is the bridge between awareness and action. These case studies show how we built that bridge with the help of our tool.

Posted at 07:30 AM in Attention | Permalink | Comments (0) | TrackBack (0)

December 08, 2006

Out There: Jobberwiki

By Adam Carstens

A new example of “Out There” behavior is the site Jobberwiki. Jobberwiki intends to be the go to source of information about “real jobs” inside organizations. We’ve shown that those who are “Out There” are more comfortable dishing about their companies. But Jobberwiki is the first offering we know of that creates a dedicated, permanent archive of what its like to work inside an organization – told by the people who work there.

It’s fairly clear it has never been more difficult to be a manager. Make one mistake, have one bad day – and on it goes to Jobberwiki, letting the whole world know your organization is a horrible place to work. Talented applicants steer clear, you can’t hire the quality people you need, you can’t get things done, your sales fall, you go bankrupt, you end up living in a van down by the river.

Let’s hope organizations and managers don’t experience such fates – at least those who don’t deserve it. It will be interesting to see if Jobberwiki takes off, and if so, what the lasting effects will be. In times past, reporting on the inside scoop at work was liable to get you fired. Now, it’s almost accepted, even expected on the part of those entering the workforce. Managers will need to step a bit more lightly from here on out.

Posted at 02:15 PM in Out There | Permalink | Comments (1) | TrackBack (0)

December 07, 2006

Announcing “Out There”

By Adam Carstens

Recently, our firm completed some research with respect to attitudes on the part of those who participate in online communities. You can read the results at this link.

Our main findings:

People who are “Out There” are more likely to:

• Value fame as an “asset”

• Willing to share certain types of sensitive information on the web

• Believe it is appropriate to criticize their organizations on the web

• Believe that “organizations need to be more transparent to succeed”

• Believe “there’s no harm in openly discussing the work I do inside my organization with others”

While many would see this as a problem for companies, we see it as the potential savior of companies. These “Out There” folks are the people who are going to help your company succeed. They pressure the organization to be better from the inside, and help keep it honest if it veers off course.

In summary, your “Out There” people are the ones who are:

• Fast followers

• More flexible

• Open communicators

• Aspire to greatness

• Looking for new, innovative ideas

• In short – your future leaders

We believe the “Out There” demographic is going to be key for companies as both customers and employees in the future. Please contact us at info@attnco.com for more information about our work on “Out There.”

Posted at 03:48 PM in Web/Tech | Permalink | Comments (0) | TrackBack (2)

Baidu Going to Japan?

By Wang Hai

Search service provider Baidu recently announced an expansion plan to enter the Japanese market. It will begin offering Japanese-language search services in 2007. Will this succeed or fail?

In recent years, more and more Chinese leading corporations are looking opportunities in international competition, such as Huawei and Lenovo. Baidu will use its position as the current national search market share leader in China (Baidu accounts for 51% of the total search market value there) to press its advantage in Asia. While Google dominates in most parts of the world in search business, in China, its share is less than one third of Baidu’s.

Baidu’s expansion into Japan may be risky. After all, the consumer base, consumption habits and social and cultural background in Japan are very different from that of the Chinese. But the company has some advantages – namely, Japanese is similar to Chinese, as it uses characters instead of letters.

Another advantage of Baidu’s is that they understand the “Chinese way” of doing things better than Google or Yahoo. For instance, on the censorship of keyword searching, Baidu claims to be much more efficient than Google at complying with Chinese government regulations. Indeed, when you search for Chinese words like “pornal” in Baidu, you can’t get any result, whereas google.com provides millions of results. When Chinese government officers input “pornal” in Chinese and get no result from Baidu, they end up providing more support for Baidu in the end.

Google is just too naïve to believe that if they add the filtering function according to the requirement of Chinese government, it will be easier for them to compete in China’s market. In fact, Baidu might do only one tenth of the effort of Google China in filtering, but they make people believe they’ve done ten times more. That’s a good lesson for all foreign corporations who wish to dig for gold in the online market in China.

Posted at 03:36 PM in China, Japan, Web/Tech | Permalink | Comments (0) | TrackBack (0)

November 30, 2006

Tivo in Trouble

By Adam Carstens

I’m a proud Tivo customer, and have been since 2002, when I first convinced a roommate to invest in the smart little box. However, as a business, Tivo has had problems over the years deciding just what it wants to be – while the competition has caught up in many ways. Tivo has never had a profitable year, its subscriber growth rate is slowing, and its revenue per subscriber number is stagnant.

But Tivo has an incredible chance to focus the attention of its customers. It provides the main gateway for how millions of people view the main entertainment device in the home – which is still the television, no matter how much the PC has been gaining in recent years.

A recent move of Tivo’s has been to offer what they call “program placement advertising”, where advertisements will be placed at the end of a recorded program. Myself, I am usually ready to delete a show almost as soon as the closing credits run, so I’m not sure how effective this will be in keeping my attention.

However, if this service is just advertising, then I can’t really see the value in it for Tivo’s customers. This type of content, if it is to keep viewer attention, has to engage them in ways beyond traditional television viewing – much like Tivo itself does.

To stick around, viewers are going to need “augmented” information around the television experience – what others thought about a particular episode, for example, other types of polls, contests, statistics, data – served up through their box (and ONLY their box). Tivo needs to have the experience of interacting with their box become MORE than just watching television. Otherwise, there are just too many other things competing for people’s attention nowadays.

Posted at 05:13 PM in Television | Permalink | Comments (0) | TrackBack (0)

November 27, 2006

Focus Group of One

By Adam Carstens

For what its worth, on the old IM chat this weekend, had the following conversation with my brother, who lives in an upper middle class suburb in the Pacific Northwest, and whom I consider to be fairly good intel on the consumer buying habits of teens (he did tell me about MySpace first after all):

Me: anyone got a wii or ps3 yet?

18 Year Old Brother: all my friends got wii's

Me: REALLY

18 Year Old Brother: ya

18 Year Old Brother: i dunno any one that got a ps3

Me: do they say its fun?

18 Year Old Brother: yeah they love it

Make of that what you will. It certainly got my attention.

Posted at 03:32 PM in Games | Permalink | Comments (0) | TrackBack (0)

November 20, 2006

Attention-Getting Peanut Butter

By Adam Carstens

Unquestionably the story of the weekend (besides the Cowboys thumping of the Colts) was the infamous “peanut butter memo” where Yahoo exec Brad Garlinghouse took his own company to task for lacking “a focused, cohesive vision for our company [and] decisiveness.” Yahoo’s revenue growth has slowed markedly, now stuck at about $1.5 billion per quarter. Jeff Matthews called Yahoo “the world’s biggest parking lot” for its habit of having a lot of people come to its site, yet no one comes inside to spend money. Matthews continued: “the front page of Yahoo! reminds me of one of those cars—generally an old Volvo—going 40 miles an hour in the middle lane during rush hour that has so many bumper stickers covering every square inch of available space that you can’t actually read any of the individual bumper stickers except the green and blue one that says “Visualize World Peace.” Garlinghouse agrees, saying that Yahoo has too many business units that compete with each other and that even though it has been aggressive on the acquisition front, those acquisitions have not resulted in additional revenue for the site.

Yahoo has probably overinvested on the content side of the ledger, thinking that content and content alone will draw users to a website. That’s not true. It has to be a rock-solid combination of three things: the content itself, the organization of that content and the overall experience that content gives the viewer. If content is poorly organized, hidden, or has lots of hoops and barriers to jump through to get to it – forget it. Viewers will go somewhere else. And even though people may look at the Yahoo home page on occasion, they don’t stay long and they don’t do what advertisers want most – view and click on links to make purchases.

Can Yahoo turn it around? Of course. But to do so, they need to elevate the organization and experience of content above all else – in order to better serve the audience. Bring the audience in and the advertisers will follow – as will the revenue.

Posted at 10:07 AM in Web/Tech | Permalink | Comments (0) | TrackBack (0)

November 17, 2006

Launch of the PS3 & Wii - Finally!

By Adam Carstens

The PS3 launch is certainly grabbing attention… [I certainly don’t recall stories of tramplings and shootings related to the Xbox 360 launch – maybe that’s a good thing]. But what about the economics? An item from Paul Kedrosky shows “Sony is losing an astounding $306.85 to $241.35” per console. So clearly, this won’t help Sony’s bottom line right away. But it will establish a beachhead inside the living room of millions of households, with a device that will definitely rival – if not surpass – the cable set-top box in the war for attention. That has a value we can’t quite calculate yet. But consider this – say Sony manages to capture about 25% of the spare attention of its users, draining it away from other media sources. In the constant zero-sum war for attention, that is quite an achievement – and an opportunity

The only real question is will the hype continue after the launch dies down. After all, $600 is a lot of money…and unless the price comes down fairly soon, you might see a stall in demand. The question in my mind is not if the Wii from Nintendo will overtake the other two consoles in total sales, but when. We’ll know a lot more a few months from now.

Posted at 01:54 PM in Games | Permalink | Comments (0) | TrackBack (0)

November 16, 2006

Interactive Media Executive Shuffle

By Adam Carstens

Lots of change happening over at AOL these days … as well as at Fox Interactive Media. By all accounts, the trend seems to be, according to Om Malik, “old media companies are putting old media guys in charge of their new media empires.” Will this work?

Like any good MBA, my answer is “it depends.” We’ve done some research into the attitudes of the younger generation, and their attitudes wouldn’t seem to gibe well with a “let’s schedule a network and sell ads around it” type of mentality. Success in this new era is going to depend on the quality of the entire experience with a website – not just the content on it. Websites will have to cater to a range of human impulses and desires – all at once – to keep people’s attention. YouTube and MySpace managed to do it by capturing people’s desire to easily share content that was as much a part of their identity as their DNA. You don’t just “watch” these sites, you experience them.

So, to the “old media” guys now running the internet properties of AOL and FIM, good luck. But don’t forget – it’s not just a network anymore.

Posted at 07:00 PM in Social Networks, Web/Tech | Permalink | Comments (0) | TrackBack (0)

November 14, 2006

Seriosity

Good post here about a company we've been working with, Seriosity (Check out the company's website here to learn more!). The concept is quite fascinating - creating a game out of work! The great thing about the concept is the simplicity and the potential for new methods of collaboration. We wish them well as they refine their product.

Posted at 05:49 AM in Games | Permalink | Comments (0) | TrackBack (0)

November 13, 2006

Will MySpace Capture Japan’s Attention?

By Adam Carstens

Rupert Murdoch continues to leverage his investment in MySpace by broadening into new territories. The latest? Japan. Murdoch teamed up with mobile phone provider Softbank to offer the popular social network in the land of the rising sun. "MySpace is seen as having a high potential in Japan," said Atsuo Takahashi, an analyst at Mizuho Securities. "If Softbank can offer MySpace exclusively, it could be an effective differentiation strategy," he added.

But are American MySpace users and potential Japanese MySpace users after the same thing? Said one blog about the popular Japanese social network Mixi, “The whole Mixi mode is obfuscation: fake pictures, fake registered names, misleading and ridiculous nicknames, cat pictures. What I liked about Friendster is that I could search for old middle-school summer camp friends and find them in less than a minute. With Mixi, I am constantly having to navigate contextual clues to figure out who's who in my own peer group.”

MySpace doesn’t appear to plan on making too many changes to the basic concept of its service inside Japan. So it will be quite interesting to see if Japanese users opt for the wide-open “anyone can find you” atmosphere of MySpace over the relatively cloistered world of Mixi. My guess? MySpace will gain favor with a devoted minority of people looking to make friends around the world via MySpace. But most Japanese will stick with Mixi.

Posted at 05:45 AM in Japan, Social Networks | Permalink | Comments (0) | TrackBack (2)

November 09, 2006

Using Herd Mentality To Capture Shoppers’ Attention

By Jonathan Lipsitz

Marketers have tried seemingly everything to get the attention of consumers. The latest effort is based on “swarm intelligence”, how all social animals from bees to humans behave in a crowd.

The Economist reports that retailers are testing smart carts which tell a shopper how many other people picked up a product they are walking past. This drives the desire to be part of the crowd by selecting the same product

This swarm intelligence is commonly used to drive attention on the internet, with sites listing off the most popular items and what else people who bought a given product are buying. But now, with RFID technology the brick and mortar retailers are catching up. And, if they can tie that in with knowing the specific individual walking past an item, the Amazon experience can be recreated in the local grocery store. The main advantage of this model for retailers is that it can direct a shopper’s attention to a product without the use of coupons and other discounts, thus preserving profit margin.

This technology is still in early testing. While technologically feasible, it is still to be seen if consumers will find this to intrusive. But with the convergence of the online and offline shopping experience, consumers attention will be pulled in many new directions by exploiting some of our most basic instincts.

Posted at 03:01 PM | Permalink | Comments (1) | TrackBack (0)

November 07, 2006

Home Inn: the First Chinese Hotel Listed in NASDAQ

By Wang Hai

More and more travel related businesses captured attention from American investors recently. I previously discussed Ctrip, the biggest online travel service provider in China, which had a terrific start in the US stock market. Now Home Inn (NASDAQ: HMIN), which recently had an IPO on NASDAQ, also shows the strong potential of Chinese business travel due to the rise of middle class.

Home Inn is a low-end national-wide hotel-chain. As mentioned by WSJ, “Home Inns' 82 hotels cater to budget-conscious travelers, a growing segment of the hospitality sector as more small-business owners and residents travel within China… four-year-old Home Inns has 57 hotel properties under development.”

Several years ago, NASDAQ was crazy for any IPO from China, but with more and more Chinese companies listed on NASDAQ, investors soon realized that the concept of “China” no longer works, while the universal concept of “profitable” prevails. TMT (Technology, Media and Telecommunication) won’t be the only areas that investors are interested in China, as the consumer-oriented business is gradually gaining favor. No matter how fast or slow the Chinese economy grows, Home Inn is likely to provide a stable profit for its investors.

Home Inn put $7.9 million in ADRs into the market at the initial price of $13.80. The stock ended the day at $22.50, a rise of 63%, a capital gain of $109 million, exceeding the goal of $80 million.

Home Inn’s major competitor in China, Jingjiang International, another hotel chain, is also working on the IPO in HongKong stock market later this year. So stocks of this nature are just getting started to capture the market’s attention.

Posted at 05:50 AM in China | Permalink | Comments (0) | TrackBack (0)

November 06, 2006

The world's largest IPO: ICBC’s Debut in Hong Kong and Shanghai

By Wang Hai

A huge financial event occurred in China recently, one which has the potential to change the balance of power in the global financial system. The most popular bank in China, Industrial and Commercial Bank of China (ICBC), finally made a world’s largest IPO on Oct. 28th, 2006 in Hong Kong and Shanghai, which raised 19.1 billion dollars of capital. And it is also the first simultaneous Hong Kong and Shanghai listing.

The biggest four banks in China are ICBC, Bank of China, Construction Bank of China and Agricultural Bank of China. The Bank of China and Construction Bank of China already had their IPOs last year. But ICBC is definitely the strongest bank in China, with total assets of more than 4 trillion RMB ($500 billion), covering 98% of China and accounting for 50% of the annual financial activities in China. After this IPO, ICBC is already the biggest listed bank in Asia, and No. 5 worldwide, following Citibank, Bank of America, HSBC and JP Morgan.

All was not always rosy for the Chinese financial markets. The Chinese stock market plummeted since 2001, with the Shanghai Stock Exchange Index dropping from 2100 to 1100. Such a stunning drop of nearly 50% had made millions of medium and small size investors lose a great amount of money. But the situation has slowly improved after more regulations and methods were introduced into the stock market, and the confidence of investors is gradually coming back. Within a year, the Shanghai Stock Exchange Index recovered to 1700 before ICBC’s IPO.

This IPO has at least three major impact on the capital market of China:

1. It will stabilize and maintain the rising trend in China’s stock market. As ICBC’s business performance is really excellent, and its market cap is so huge, it will join and lead the other blue chips to build up more confidence among investors, quelling the volatility in the market.

2. It will show the Chinese government’s determination to reform their financial system. Among the dozens of problems in the Chinese financial system, the biggest problem is bad loans due to the interference of government over banking activities. In 2003, China already used foreign currency reserves to solve the major banks’ bad loan problems. China’s capital market is opening to the world now as per its agreement with the WTO. For example, Citibank is close to buying China's Guangdong Development Bank.

3. The high demand for ICBC’s shares show that the world still holds positive attitude toward China’s economy, and is looking forward to a bright future. Though some problems still exist, people still have confidence that China will overcome those eventually.

Posted at 05:09 AM in Banking, China, Economics, Finance | Permalink | Comments (0) | TrackBack (0)

November 03, 2006

Nintendo’s Wii Has Shareholders’ Attention

By Adam Carstens

I will admit I was giving Sony the benefit of the doubt with regard to its Playstation 3 console, due out later this year (maybe). I thought it would instantly become the market leader and blow both Nintendo and Xbox 360 out of the water. And it may yet still. But Nintendo’s lower-priced, mass-market positioned Wii console seems likelier than ever to capture more of what’s really fun about video games – profits.

Consider this from the Wall Street Journal: “Nintendo earned $841 million on sales of $4.35 billion last fiscal year. It expects its new system -- dubbed the Wii to sound like "we" or "whee!" -- and its games to be profitable within a year. By contrast…Sony's games earned $75 million on revenue of $8.19 billion in the fiscal year ended in March 2006. Microsoft has not yet earned a penny from its Xbox business, analysts say.”

Think about that. Nintendo earns about a 20% return from its games, while Sony barely ekes out 1% - and Microsoft seems to be billions in the hole, if you go back and count the P/L on the original Xbox. With that money, couldn’t Microsoft have bought YouTube and Myspace combined? Then where would they be vis-à-vis their race with Google? As this stock chart shows, over the last year, Nintendo has opened up a wide lead over the other two companies – shareholders have clearly been paying attention.

Clearly Microsoft and Sony are trying to invade customers’ living rooms via their game consoles. And they will probably succeed to some degree. But in trying to be all things – a game console, an HD-DVD player, a media server, a DVR – they may not succeed well at any of them. There’s a risk consumers might not want all those functions from one box – at least, not yet. By focusing on one thing and doing it exceedingly well, Nintendo’s Wii will earn a place in the living room, not sneak in the back door. And it will make money doing so – which should keep shareholders’ attention well into the future.

Posted at 08:23 AM in Games | Permalink | Comments (0) | TrackBack (0)

November 02, 2006

Abe Wants A New Kind of Attention for Japan

By Adam Carstens

Japan’s new prime minister, Shinzo Abe, gave a remarkable interview with the Wall Street Journal recently. This interview just confirms what we’ve noticed in Japan over the past few years – the country is ready to move on to a new cycle in its relationship with the world. From the end of World War II, Japan kept the world at an arm’s length even as it slowly built its position from a relatively poor country to the world’s 2nd largest economy with many unique global brands.

“It's been over 60 years since the war, and 60 years marks one generation,” said Mr. Abe, who at 52 is Japan's youngest leader since the war and the first to have been born after the war. “I'd like to start working on creating a new nation, looking at the next 60 to 100 years.”

In our survey work, we’ve already noticed a higher level of desire for entrepreneurship in Japan than in the United States, even though such entrepreneurialism might not have become evident yet. But Abe sees what we see, and wants to reform Japanese society to take advantage of it. in our survey work. To wit, Abe “thinks Japanese entrepreneurs should be encouraged to pick themselves up and learn from their mistakes as they can in the U.S. In Japan, failure tends to be seen as shameful and marks a businessman as someone not to be trusted again with venture capital. Mr. Abe also wants more Japanese to be able to take a mid-career break to go to graduate school.”

Such support from the highest levels of government indicates there is an attitude already there, and Abe is getting on the bandwagon. Instead of it being considered poor form to join a startup company, as it used to be, we’re seeing lots of Japanese startup activity. In our opinion, some of these new companies will join alongside Sony and Toyota as the new Japanese global brands par excellence.

It will certainly be interesting to see where Japan’s attentions lie, and whether it is able to put Abe’s words into action.

Posted at 01:03 PM in Japan | Permalink | Comments (0) | TrackBack (0)

November 01, 2006

Chinese Brands: Gaining Attention in a Global Market

by Wang Hai

While global players swarm to the Chinese market, China’s top domestic brands are also seeking attention getting paths to global markets. Lenovo’s purchase of IBM’s PC or CNOOC’s proposal to purchase Unocal shows one path for Chinese brands to go global: bidding for already established international players. But the top Chinese IT company, Huawei, is going another path: they are making 3G mobiles for Vodafone for the next 5 years, for the high-end model Vodafone 701.

According to Business Week, it’s no surprise that China is making phones for foreign companies. The surprise is that it’s a high-end model, featuring an MP3 player and 1.3-megapixel camera, which can also handle video telephony. This level of quality has never been manufactured before by Chinese companies. But even though it is a top brand in China, Huawei is going to manufacture the phones without Huawei’s name on it – it’s learning to let go of its brand position and be the name behind the phone. This was how Huawei beat Nokia, Sony-Ericsson and Motorola to become Vodafone’s vendor of choice.

But if a corporation is just doing OEM, how can it make its brand known to the global market? At present, quite a lot of Chinese companies finish orders according to their partner’s requirement. That is to say, they know how to make the product but they don’t know why it should be made this way. As a result, thus far, they’ve put little effort into knowing global trends and the international consumer market.

But Huawei is different: overseas revenue has already reached $2 billion, accounting for 40% of the total sales revenue of the corporation. More important, most of Huawei’s products are branded with Huawei. Their slogan in the international market is “the only difference is the price” to show their determination of providing excellent quality products with very competitive price.

No matter if it’s the Lenovo path or the Huawei path, the key for Chinese firms will be to go global, not by only having product presence in the international market, but also by having a global vision, a global level of management and R&D, and a global marketing strategy.

Note: according to McKinsey and the British Financial Times, the top ten Chinese brand with international fame ranks as follows in 2005:

1. Haier

2. Lenovo

3. China Mobile

4. Tsingdao Beer

5. Ping’an Insurance

6. Bank of China

7. China International Air Co.

8. Huawei

9 (tie). Sina.com and Sohu.com

Posted at 10:49 PM in China | Permalink | Comments (0) | TrackBack (1)

October 06, 2006

Tourism Has A Bright Future In China

By Wang Hai

As early as 2003, the World Travel & Tourism Council (WTTC) announced an optimistic estimation of China’s travel business. The president of the WTTC, Jean-Claude Baumgarten said that China would become the nation with the largest tourism business in world history. He estimated that by the year 2013, Chinese tourism would contribute $100 billion annually to China’s GDP. And recently, the stock of the No. 1 tourism website in China, Ctrip.com, also caught eyeballs from investors.

Tourism in China is made up by 3 sections: foreign visitors to China, international trips and domestic trips. The first category is certainly growing quickly enough. In 2004, revenue generated by foreign visitors reached 25.7 billion dollars, a 48% year-over-year growth and ranked No. 7 in the world, while the number of domestic trips reached 1.1 billion and generated 60 billion dollars of revenue. What’s more, due to the strong growth in the economy, China has become the most popular Asian country among international travelers. The figure in 2004 was 28.8 million, and it is expected to reach 50 million by the year of 2010.

Ctrip.com has had success in the latter two categories among Chinese, and is an early leader in the market. Ctrip succeeded because it put more emphasis in building up an online community with creditability. People share their experience there, upload their pictures and discuss trip plans. Today when people try to visit some place in China, they will look up on Ctrip first, to see visitors reviews about the place of interests, hotel, food and recommendations of schedule. And later on, by cooperation with travel agencies, airlines and hotels, Ctrip integrates those functions into its web service and attract more people.

At present, the tourism development in China is facing two major problems: one is that high-level human resource in tourism is still in great need; the other is the development is not balanced and sometimes causing damage to the environment as so many beautiful places become full of tourists, especially during the major holiday seasons.

Starting from 2006, international capital will be allowed to go into the China tourism market as China is now a member of WTO. Great challenges and opportunities are waiting for all players.

Posted at 04:42 PM in China | Permalink | Comments (0) | TrackBack (0)

October 04, 2006

Trust Crisis in China

By Wang Hai

It might be unimaginable for Americans that a crisis of trust is haunting fast-developing China on the other side of the Pacific, yet the whole Chinese nation has been struggling with this issue for many years.

According to the LA Times, crises of trust happen in almost every corner of the Chinese society. This crisis has become a social problem for China, as weird things happened in the society: lawyers don’t trust their clients, consumers don’t buy produce in the market because of worries about poison, and even wives don’t trust their husbands (of course, much of that happens in the U.S. here as well).

Most Chinese believe the “trust crisis” is more serious than ever these days. Corruption of government officers and counterfeits in the marketplace are common in most developing countries in Asia, but in China, it’s more than that. When you have to worry about your friend’s betrayal or the dishonesty of your spouse, how can you trust your partners in business and how can you be willing to take necessary risks under these conditions?

What’s more, people no longer think that such cheating in business is a shame, but rather think it to be common practice in business world. The marginal cost of business activities rises significantly higher than before in this case, and China could lose its international competence gradually if such conditions continue.

Let’s look at some history. After the foundation of the People’s Republic of China, people trusted the government more than ever before, because after almost a hundred years of suffering, the Chinese were more united than ever. But due to Chairman Mao’s political needs, the Cultural Revolution broke down mutual trust among people. After that, the once apotheosized image of the Communist Party collapsed. The market economy concept was then introduced, and without much regulation, short-term business activities made a lot of Chinese become rich, but at the price of trust as countless scandals and counterfeits flooded the market.

Posted at 04:40 PM in China | Permalink | Comments (0) | TrackBack (0)

October 02, 2006

A Significant Change In the Battle For Keeping Customers

By Jonathan Lipsitz

“The format war around next generation DVDs may be over before it has begun, thanks to a breakthrough from a British media technology company”, was recently reported by CNN. On the surface this seems like a fairly boring story about a technology advance. However, this marks the continued demise of one of companies’ favorite ways to lock in customers – technical differentiation.

The classic example cited in business cases at MBA programs around the world is VHS vs. Betamax. Sure there was a difference in quality of the image worth considering, but the real goal of the companies backing different standards was to lock the customer into their standard, thus guaranteeing future cash flow from consumables (video tapes) that only worked on their machines.

The high definition DVD standard was shaping up to be a similar battle. But, technology has ended the battle before it even started. And this is not the only example. Macs can now run software built for Windows. Honda is developing engines that will run gasoline and/or bio fuels.

The main implication of this is that customers will have more choice to switch back and forth between competing technologies and products. Companies that have relied on this method to retain customers, including customers that upgrade because of planned obsolescence, will need to find new, more innovative ways to keep them.

Beyond providing quality products and service, the way companies will increasingly try to attract and retain customers will be based on process integration. This is a common practice in the business to business markets, but has seen far more limited use in the consumer space. The best example in the consumer space would be banks providing automatic bill presentment and payment, managing accounts, and aggregating information and financial instruments. For a consumer to switch banks involves making a lot of changes and a lot of hassle.

Product companies will increasingly do this, and use the internet to integrate into a person’s life processes. In the DVD example, the producer of the DVD player could offer download services with a credit card on file from when the player was purchased, online storage/backup of media, manage licenses so media can easily be played by multiple machines and users across the network, etc. These are examples of value add services that companies have always touted, but this also mean if a consumer switches to a competitor they have to set this all up again – a hassle many will want to avoid.

Companies must recognize this impending shift, and invent new ways to attract and keep customers. And as consumers, we should more broadly investigate our options to change in order to get the best value and quality for our money, while understanding what the total cost of change (money and time) really is.

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September 29, 2006

Japan's Film Renaissance

By Adam Carstens

Japan's four television networks seem to be taking charge of a film production renaissance in Japan, as the American blockbuster - though still important - is receding in popularity and making room for a more home grown brand of movie. Says the LA Times, "in the last four years, the Japanese share of the domestic industry has begun to claw back a portion of Hollywood's market share. Domestic films bottomed out at just 27% of the Japanese market in 2002. Since then, that share has risen every year, reaching 41% of the country's $1.68-billion box office in 2005."

Why the change? Producer Chihiro Kameyama says "They want their made-in-Japan movies to have characters they can relate to, not some knock-off American superhero." He continues, "People don't die in our movies…We're going for a mass audience, and you can't have a lot of bloodshed and people dying. You'd think in a disaster movie people would ask: 'How can nobody die?' But they don't. It makes me think that people don't want to see so much violence after all."

That's definitely different from American movies, which are supposedly filled with simplistic plots and blood'n'guts to appeal across cultures and not be language dependent. Yet the formula doesn't seem to be working in Japan any longer. Films by Hayao Miyazaki, for example, routinely become #1 in Japan, yet struggle in the U.S. So say a few cheers for the preservation of local culture, as even in an ultra-globalized world, Japanese audiences and American audiences diverge in their tastes.

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September 27, 2006

Wal-Mart’s First China Credit Card: Is China’s Credit Card Market Ready to Take Off?

By Wang Hai

According to the WSJ, Wal-Mart will soon launch its first credit card in China, in conjunction with China Communication Bank. Card holders can purchase discounted items with this card in Wal-Mart stores in China. The card will initially be launched in six Wal-Mart stores in Shanghai, Nanjing and Fuzhou, and "soon spread over the country," said a bank official.

“China's credit-card market is growing very fast and is beyond infancy stage now,” said MasterCard International economist Yuwa Hedrick-Wong. Indeed, I remember that before 2004, credit card use among Chinese was very scarce. Only those traveling internationally had credit cards, mainly issued by Bank of China. And 4-5 years ago, most people still believed the Chinese would be reluctant to use credit cards, given the strong tradition of saving among Chinese. According to McKinsey, credit card markets didn’t really start until 2004, yet now the number of card holders has grown from 2 million in 2003 into 12 million today. But McKinsey also predicted that credit card companies in China won’t make a profit before 2008, eventually rising to $1.6 billion in 2013. After all, most Chinese card holders still pay their bill within the free loan period, which means they won’t generate much profit for card issuers.

So who are those holders? 90% of them has more than $4,000 of annual income, and 35% of them live in four major cities: Shanghai, Beijing, Guangzhou and Shenzhen. The potential of the market is huge, as China now has over 76 million people with annual income of over $5,000 USD, yet only about 1 out of 200 have a credit card.

What is the barrier for foreign banks to get into this business in China? As with most things China-related, one’s network really matters. To compete with Chinese banks, foreign banks need to build up their network, but the costs are prohibitive. Big banks such as HSBC or Citibank chose instead to cooperate with Chinese banks to issue cards under both names and share the risk and profit. Foreign banks also have a great reputation for service and experience, which can be an additional edge for them to play in China’s credit card market. McKinsey consultant Wang Yi concluded: “In the past two years, Chinese banks focused on grabbing market share, while they paid little attention to keep their customers.”

At present, the procedure for consumers to get some a credit card is still complicated and the criteria to qualify is not easy. Yet people are motivated to get cards for their convenience. So cards like Wal-Mart’s, which bring immediate benefits to consumers, will definitely be welcomed.

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September 25, 2006

Japan: Coke is not "it" anymore

By Yoshi Kusaki

According to the article in The Wall Street Journal Asia, Coke is experiencing a steep downturn in volume (6 percent) in the Japanese market. Yet Japan is Coke's most important market, as it generates approximately 20 percent of the company's annual profit.

Coke main product "Coca-Cola" was "it" for a while in Japan, but a combination of a greater variety of products, more health-conscious young consumers, competition among major beverage companies, and an aging society caused people to reduce their consumption of Coca-Cola. Now, Coke's sales in Japanese market are largely driven by its Georgia coffee brand.

However, a surprising sales decline in Japan began after Coke launched a new marketing campaign and packaging for its main profit engine, canned Georgia coffee, last fall. Coke initially wanted to attract younger people to the Georgia brand because its core consumers were aging. However, the campaign even turned off some loyal fans confused by more-colorful graphics and new flavors.

Changing horses midstream, Coke launched a new ad campaign in May featuring young and middle-aged salary-men enjoying Georgia coffee at work, and refocused on core flavors, including its Mocha Kilimanjaro and Emerald Mountain Blend. But sales volume for the Georgia coffee brands have still remained soft.

An improved advertising campaign alone may not turn around sluggish sales of Georgia coffee brand right away, but in marketing, more often than not, it more important how well you communicate with your audience than what you actually say. For Coke's sake, I hope Georgia brands will be able to communicate better with their audience.

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September 22, 2006

Gamers Demand Alternate Identities

By Adam Carstens

Interesting article from Reuters about the identity-shifting nature of online gaming - which has real implications for our society going forward. As one player said, "If you come out in 'World of Warcraft' it doesn't matter. Who cares? You can be gay, straight, transgender. What matters is whether you can swing a sword. It's pure MMO capitalism."

Though people's real world tendencies don't disappear just because they establish an online identity, nevertheless there are certain advantages conferred on those who don't create an avatar that looks exactly like them. For example, some gamers realize benefits by being female in games, as "Female avatars are often the center of attention and showered with gifts such as swords or armor by other characters."

As the connection between one's real life self and one's online self becomes more abstract and yet robust at the same time, we'll no doubt see more of these types of behaviors emerging online - especially as the technology improves. What's important is that people are apparently demanding such outlets to express themselves in ways they can't in real life - and the game maker who can most effectively deliver such experiences will capture most of the market going forward.

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September 20, 2006

Social networking makes wealth

By Yoshi Kusaki

The number of users of social networking services (SNS, such as "MySpace" in the U.S.) has been rapidly increasing in recent years. Millions of members enjoy chatting, posting to blogs, and creating message boards to communicate with people who have similar interests.

Backed by this booming phenomenon, Mixi Inc., the largest SNS company in Japan, was listed in the Tokyo Stock Exchange's Mothers market early this month. A total of 7,100 shares were sold in the initial public offering, raising 109.3 billion yen for Mixi, and making a dollar billionaire out of their 30 year old founder and president. The news clearly reminds me of our previous entry about News Corporation's purchase of MySpace for $580 million. Indeed, Social Networking Service creates wealth.

But is the future of Mixi all bright? For its competitive success, Mixi needs to maintain market position as a social-networking leader and keep driving members' social life. Also, when we look at Mixi's main source of revenue, the company earns 90% of total income from selling advertising space. To maintain financial success, Mixi will have to develop some unique advertising methods to get members to click more often. So, if I answer my question, I would say, yes, if Mixi can successfully renew itself.

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September 18, 2006

The Copycat Reality Show Boom and Sustainable Development in China

By Wang Hai

Reality shows in China started in 2000, but they didn’t catch many eyeballs until 2005, when the show “Super Girl” capture the heart of China. Super Girl became a national phenomenon for several months, provoking debate over the Internet, on newspapers and in broadcast media. It was a breakthrough which showed that if the quality of the TV show is good enough, it will find its audience, despite the decades long monopoly of the CCTV network in China.

Super Girl is really nothing more than a copycat of American Idol. Viewers are able to participate in the judging process by sending text messages with their mobile phones to vote for their favorite contestants. Some say it is the largest "democratic" voting exercise in China, as when it comes to the finals, tens of millions of people participate.

In 2005, Super Girl yielded direct income of 760 million RMB, and it is estimated that it has contributed more than 2 billion RMB to the whole economy. It is definitely a successful show, but within a very short period of time, almost all types of reality shows in the U.S. have found their counterparts in China – Survivor, the Apprentice, the Amazing Race, Extreme Makeover, and even some fairly new shows, such as ABC’s Dancing with Stars, already have Chinese versions. (Let us remember, though, that many of these shows are copied directly from European TV) Even the arrogant CCTV network launched another version of American Idol called Dream China. There are some more locally based cultural shows developed by local stations, such as “The Global Chinese Kung Fu Star TV Competition” by Shenzhen TV station, or reported by WSJ, the “China Olympic Coxswain Competition” by CCTV.

But as the market is now flooded with copycats, and huge amounts of resources are used to produce similar shows, fighting for the same eyeballs, viewers are more likely to show fatigue. Similar ideas and rough production will eventually lose ground to foreign reality shows which have more original content and better production. When the entertainment market becomes more open, and when more Chinese can view live broadcasts of American versions of Survivor or the Amazing Race, the competitive edge of those copycats could be diminished quickly.

The Chinese government claims to seek a sustainable developing mode in all industries, but the dilemma is there: as a developing country, the fastest way to grow is to copycat those successful examples in developed countries. But copycats will seldom result in original ideas that have more staying power, which is, in a certain sense, the most critical issue in finding sustainable economic development.

I already saw this happen in the carbonated soft drink market over the past 10 years. Coke and Pepsi now dominate in China, even though my former company Wahaha remains the only domestic major player in that field. There are now literally hundreds of such copycats companies in every industry, but they cannot survive unless they do more to prepare themselves against the foreign concepts which they try to copy. Maybe it’s inevitable, but I hope more people can be aware of this and put more resource in R&D rather than copying stuff from around the world.

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September 15, 2006

WOW: Online Game Market in China

By Wang Hai

As recently as 2004, the global online game market revenue was estimated to be more than $1.1 billion by the year 2008, accounting for 10% of the global video game market (CNET News.com). But that estimate is already outdated. The newest estimation is that China's online game market alone will top $1.2 billion in revenue just next year, according to Networkworld.com, citing analysis from iResearch..

With such a big emerging market, who can take the lead? Today, World of Warcraft (WOW) by Blizzard has 50% of the total subscription based MMORPG market as we can tell from this chart.

The online game market flourished in China much earlier than before WOW came into play. Before the introduction of WOW, Korean online RPG games were dominant in the market, starting around 1999. They accounted for over 90% of this segment of the online game market. Before this, the main forms of online games were just those PC games support multiplayer mode, such as first-person shooters (Quake or Counter Strike) and real-time strategies (C&C or Starcraft). But the real profitable online game era started from the introduction of MMORPGs. When Shengda Entertainment (NASDAQ: SNDA) introduced a second-class Korean MMORPG, MIR2, and generated an annual revenue of over 50 million dollars, it shocked the whole IT world in China. More and more such games were introduced into China one by one, and Chinese IT companies also began to develop such games.

At present, there are three major corporations of MMORPG in China: Shengda Entertainment (with 31% marketshare), Netease (NASDAQ: NTES) (31%) and Nine Cities (NASDAQ: NCTY) (15%). Korean MMORPG’s dominance in the market is already diminishing, as it dropped from 90% to 49% in 2005. As online players mature, they are also more picky about the quality of the games they play. Most Korean MMORPGs are Diablo-like in style, while games like WOW, with both excellent playing features and story, together with featured community functions, has easily distinguished itself from other games.

As piracy problems persist in China, the online game market could continue to be the only piece of the video game industry that could make a profit in China in near future due to its subscription-based nature. Console game markets, which Microsoft, Sony and Nintendo are fighting over would have little hope of success in China.

Here are some more figures about China’s online game market:

- 68% of internet users play online games.

- The average age of the players is 24, and more than 50% of the players are 19-25 years old.

- 81.22% of the players are male

- 54.65% of the players are with bachelor or higher degrees.

- The average monthly expenditure for online game playing for a player is 188 RMB (24 dollars)

- 15.88% of the players are students

- The average monthly salary for the 79.3% of the players with job is 2144 RMB (280 dollars)

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September 13, 2006

More About The Renewal Cycle

By Adam Carstens

Take a look at the new www.RenewalCycle.com, which has new information about some of the research we've been doing about what we call the "Renewal Cycle." We wrote a book about it last year called Japan's Business Renaissance that detailed how the cycle was causing Japan to experience newfound growth.

What does the cycle say about the US? Unfortunately, a plurality in the US (46%) placed themselves squarely (no pun intended) in the portion of the Renewal Cycle least open to massive changes. Whereas countries like China and Japan are more towards the right side of the cycle, meaning they're more open to larger changes. Anyway, see the data for yourself. We'll be putting more specific data about the individual countries soon, so keep checking!

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September 11, 2006

Japan: Will "LOHAS" be real?

By Yoshi Kusaki

Recently, the term "LOHAS" (acronym for Lifestyles of Health and Sustainability) is attracting attention in Japan, according to an article in Mainichi Shimbun. A recent study shows that 29 percent of Japanese are into LOHAS, and its primary consumers are in their 20s to 50s.

These people are often interested in organic food, natural medicine and spirituality. And this point is encouraging many companies to target the emerging LOHAS market. In fact, you will see a series of Japanese groups introducing LOHAS fashion, music, travel, and products, such as organic foods, recycled paper, hybrid cars, solar heating, herbal tea and aroma therapeutic oils.

But is the growth and popularity of the term LOHAS authentic? Are Japanese consumers showered with flashy information and advertising gimmicks only to benefit the brand equity the term carries? I have seen lots of instances that consumer fads burst onto the scene and fade just as quickly. In most cases, people are overexposed to the term without understanding its real meaning, real knowledge of the term, or its connotation.

The article defines that the new way of living, LOHAS, generally appeals to people who are interested in health, the environment, social justice, personal development and sustainable living. And to pursue this lifestyle, people need to be relatively well off. Will LOHAS be for real in Japan? Nobody knows but only time will tell.

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September 08, 2006

If Tom Freston Had Bought MySpace…

By Adam Carstens

That's essentially the lesson from the Viacom change in leadership from this week. Viacom chair Sumner Redstone was quoted widely saying that he didn't want any future opportunities to slip through his company's fingers. The biggest one recently was MySpace - the purchase of which has already paid for itself through selling search rights to Google.

Click on the MTV website - go ahead, I'll wait. You have to suffer through about twenty seconds of flash before finally getting to a slow loading, poorly designed, overburdened site. Someone probably thought this was a good idea - but in an age of ever exploding entertainment choices, people aren't going to wait patiently for your corporate-ego driven website to finish loading before enjoying your content. MTV used to be the only game in town - clearly, now, they're not.

Maybe Freston didn't deserve to get fired, maybe he did. I don't know. But if Freston had been able to pull the trigger on purchasing MySpace last year instead of getting outbid by News Corp., odds are he would still be CEO of Viacom and everyone would be praising his vision. But instead, not.

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September 06, 2006

The NFL is going to China

By Wang Hai

The NFL is going to China to play some preseason games in Beijing in 2007. Sports Business Radio’s Brian Berger was right when he said: “Every sport and every Fortune 500 company on the planet wants to make inroads in China”, but he might be quite wrong in his assertion that “an NFL game in China (which simulcasts some NFL games on CCTV), would sell out in minutes.”

With Yao Ming’s presence in the NBA, basketball has become the most successful sport business in China. You can find NBA products in all the big cities throughout the country. But despite 20 years of exposure in China, the NFL has not yet captured Chinese sports fans attention the way the NBA has.

In 1986, the Super Bowl was broadcast through CCTV in China, and in 2002 the Super Bowl again came to CCTV with live broadcasting, with Chad Lewis as the commentator (he can speak perfect Chinese). But the ratings were very low, and the NFL’s influence in China was even lower than rugby from the UK.

But the NFL remains undaunted. Starting from this season, CCTV will broadcast Sunday Night Football live in a partnership with NBC, which shows the NFL’s confidence and determination to fight for its share in the Chinese market. As the most successful and popular league in the US, the NFL doesn’t want to be left far behind the NBA’s progress in China. The NFL has its official website in China: nflchina.com, and the Oakland Raiders’ official website is the first one with a Chinese version. Their T-shirt with the Chinese characters meaning “invincible” has become popular merchandise in California.

Will NFL finally open the door to success in Chinese market? I think the answer is yes, but not in the near future. American football is scarcely played by the public in China - only some military schools and universities have football teams (the first team was formed in 1990 at China Agriculture University). There are only NINE registered American football teams across China. As for its influence among young people, LeBron, Wade and Bryant are all well known by students, but very few Chinese know Reggie Bush. When talking about the impression of American football, the most common answer is “it’s a rude and brutal sport; we Chinese are not suitable.” I have to say that this is a failure in communication by NFL China. Speed and dexterity are also very important in the NFL, but few Chinese know this.

Besides the environment and cultural barriers, expensive equipment and field construction, complex rules, numerous pauses throughout the game and many other things prevent Chinese people from really loving the NFL.

The NFL will have to slowly cultivate its audience, much like soccer has in the US, and they are doing so, mainly through supporting Flag Football competitions in universities and high schools. Maybe when there is some big Chinese star in American football, the NFL will become popular overnight in China. But the NFL still has a long way to go.

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September 01, 2006

MySpace Friend Trends

By Adam Carstens

Because I’m a bit of a geek, I like to keep track of data trends I find interesting (I know I’m not alone). Here’s a graph I started keeping around 6 months ago of Tom from MySpace’s “friends” – isn’t that an awfully linear pattern? I mean, what are the odds that over a 6 month period, the number of friends would rise by just about the same amount (around 250,000 per day)?

To contrast that, here’s Alexa’s 6 month “reach” data for MySpace over the same period. Looks pretty flat, doesn’t it? We all know the limitations of Alexa’s data. But still, I’d be curious to know how to reconcile those two graphs. Any ideas? Send us an email.

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August 30, 2006

Why Did MySpace Beat MTV?

By Adam Carstens

This article in the WSJ poses one of the most interesting questions of the “Web 2.0” era – why did a cheeky upstart like MySpace become THE place for teens to hang out, as opposed to traditional teen brands like MTV?

The answer isn’t simple. After all, MTV had millions of dollars in marketing muscle plus access to talent that MySpace couldn’t match. So in theory, it should have been the big kid on the block, taking market share from any puny startup. Yet, all that theory falls away if you actually try to go to MTV’s “Overdrive” site to use it. What do you find? Lots of technology that is not obvious to the user and difficult to use on a slow connection – and it requires you to go through complex sign in features. And even then, you might still have to download some new software to get it to work right.

Contrast that with MySpace. Yes, it’s ugly. Yes, it requires a lot of clicking around on different pages. But it couldn’t be simpler or easier to look around. You don’t even have to sign up to look at people’s profiles. And when you do sign up, you just enter basic info and you’re off and running. Nothing to download, you view it in a browser.

This line about Viacom CEO Tom Freston is key: “[Freston] says his company saw a big opportunity as more people signed up for high-speed broadband Internet service. He saw an advantage in Viacom's position as a media giant that could offer advertisers packages on TV, the Web and cellphones.” Here’s where he made his mistake – instead of thinking first about users, Freston thought about his advertisers and “branding partners” – other big companies who could provide the clunky tech to make it work. His assumption was that kids are sheep – they’ll go anywhere they’re told.

Well, that may be true to some extent, but the question is, who is doing the telling? These days, it’s other kids. And other kids are going to go where its easy and fun to spend time online. That isn’t a place built with advertisers in mind first and foremost.

How can MTV and Viacom fix the problem they’ve got? Simple - think about the kids first. The advertisers will follow.

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August 28, 2006

Google Vs. Baidu in China: Localization Lessons

By Wang Hai

In a globalized era, localization for multi-national corporations is still very important. But it seems not all international giants who want to dig for gold in Chinese market really understand this. While Google is enjoying world-wide popularity, it is still tottering in China. According to Businessweek, Google ranked No. 3 in search engine market in China in the first quarter of 2006, accounting for only 13%, and Yahoo China was second, accounting for 21%. Who is first? It’s Baidu.com, called “China’s Google” ever since its birth in 2000, with 44% market share.

It’s hard to imagine that Google could be so far behind the competition in China. Just like Coke, Google had been invincible in all the other countries besides its native soil, USA. How did Google come to such an embarrassing position in China, facing great pressure from a much smaller company?

Of course, there are many reasons behind this, but I want to talk about just one aspect: localization. Localization is a very comprehensive concept in the field of business operation – all aspects related to your product should be localized. Specifically, for a search engine in China, not only should its interface be Chinese; the product design, marketing, sales and all other services related to the product should reflect local culture.

Before Baidu came into being, Google had over 50% market share in China (though at that time, Google had no localization at all, just supporting search in Chinese). But many Chinese users now use Baidu as their first choice in search. Why? The answer is simple: they feel more comfortable when using Baidu. First of all, in search of information in Chinese, Baidu provides better understanding of the keywords and consequently, the results are more relevant and make more sense.

Secondly, even for new features such as directions, a feature provided almost the same time last year both by Google and Baidu, Google China is just copying its model in the U.S., providing only driving directions. Baidu seems to understand Chinese users better, providing not only driving directions but also bus routes from one place to another. After all, the majority of Chinese internet users don’t have a car yet, and Baidu appears to have considered this more than its rival.

Localization is not only expressed in the product design. Compared with Google, Baidu’s management level has a better understanding of Chinese policy and government regulations. At first, Google didn’t comply with the Communist government’s decrees about information filtering and blocking because it contradicted Google’s idea of information being “universally accessible.” Then in 2002, for a period of time, Chinese government completely blocked google.com from Chinese users, while Baidu grabbed quite a lot of users from Google.

Eventually Google China gave in. But even so, from May to June 2006, google.cn again had connection problems for most users in China due to its conflict with the “Golden Shield” (also called “Great Fire Wall”), a censoring system over internet information owned by the Chinese government. This degraded user experience for Chinese users, who continued to flock to Baidu.

Keep in mind, I am not supporting the Chinese government in pursuing such near-sighted activities. But as a business unit operating in China, Google has to obey local laws. Google eventually conceded in exchange for equipment installation on Chinese soil, by blocking websites to which the Chinese Government objected.

Google is trying to catch up with Baidu, but even CEO Eric Schmidt admitted this June that Google can’t surpass Baidu’s business in China in the near term, while the CEO of Sohu.com, Charles Chang, believed that Google would eventually fail just like Yahoo or Ebay in China.

Personally, I am a big Google fan and still believe Google can gain more market share with better localization of its service. After all, the competition of a search engine is based more on technology and product service. Obviously, Google’s strength is not only in its financial resources but in its technology and idea to provide useful service to all users. But its lessons in localization in China are instructive for those who are interested in playing in the vital Chinese market, regardless of their size, brand and financial strength.

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August 25, 2006

Rotating Out of Real Estate

By Adam Carstens

Well, it finally seems to be happening. If you read enough of the stories on this site, you'll easily become convinced that anyone looking to get out of their investment property should have done so last year - or be prepared to wait a very long time.

So, that begs a question - what's next? We had a five year run in technology, and then we had about another five year run in real estate. Capital wasn't destroyed in those two runs - though there were many losers. Capital was merely shifted around, and I daresay plenty of it still exists - especially for savvy people who got out early in either or both cases. My gut tells me they won't be content to just sit on their laurels and take quiet dividends on what they have. They will want to look for something new.

But what will that be? Is the nascent "Web 2.0" a bubble? Maybe, but it has a lot of room to run yet - we haven't seen anyone get mega-rich out of it yet, and there are still plenty of web-centric ideas waiting to be given a hearing by the marketplace. But given that costs are so low this time around, no one's going to be blowing $20 million a month in capital costs - people will be smarter. Getting a good website going will basically become the equivalent of writing and producing a good TV show - many will try to "make it" and a few will get "picked up" by enough fans to warrant staying around. But the best part is, there are no network executives around to decide what gets on the air and what doesn't!

Health care also seems fairly likely to do well - after all, the leading edge Baby Boom turns 60 en masse this year and will be needing a lot more help to survive over the next few decades than the previous few. There's money to be made in helping people stay alive, for certain - especially those with the money to pay, as much of the Baby Boom does.

As for real estate? Well, what can be said? It had a good run, and everyone still needs a place to live, but odds are they don't need two or three. There's a LOT of inventory out there. But I think it's going to be awhile before people are camping out overnight to get that condo…

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August 23, 2006

Wal-Mart: Winning formula is not universal

By Yoshi Kusaki

I found an article about Wal-Mart's mixed record outside the States.

In Korea, the company announced in May that it is selling 16 stores in South Korea to the country's top discount chain Shinsegae because of its unprofitable operation. In Germany, the company, which is having hard time in capturing market share, is now selling its underperforming stores to the leading retail chain Metro. In Japan, the market has been challenging for the company - however, there are some clear signs of progress. The company has been trying to reduce costs and has been busy opening new stores while closing unprofitable stores.

Grown from a single store, Wal-Mart has successfully become the world's biggest retailer as well as the largest private company. With the three biggest sources of cost advantage, such as low corporate overheads, efficient supply chain and low labor costs, Wal-Mart has revolutionized the way people in the United States shop. Even though Wal-Mart abandoned the South Korea and Germany markets, it remains "on track" in its strategy to improve profitability in Japan. The article clearly tells me once again that one single formula for success does not always work well in foreign markets.

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August 21, 2006

Sony’s Mylo – A Better Move Than The PS3?

By Adam Carstens

I’m really starting to question Sony’s Playstation 3 strategy – I think it will only appeal to the hard core gamer, while Nintendo’s Wii will come in and steal a lot of mass market customers. But Sony’s new mobile device – the Mylo – could be intriguing. Here’s why:

Potential for phone (via Skype) and IM capability

Wifi capable

Music capable

SUPER long battery life

NO subscription fees!

As wifi networks get more ubiquitous, and voice over IP get better in quality (its bound to happen), this device may replace the cell phone. With cell phone bills running into the high double digits per month, they’re becoming a real pain point for a lot of people. The Mylo’s starting price of $350 is a bit high, meaning this is primarily for early adopters. But future versions should feature improvements on connectivity, bandwidth and battery life – and ensnare the mass market eventually. The “convergence” between phones, MP3 players and data-connective devices keeps getting better!

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August 18, 2006

The New York Times, MySpace and Everything

By Adam Carstens

Michael Wolff has an article in the newest Vanity Fair which details the long fall of the New York Times. Though the piece is ostensibly about CEO Pinch Sulzberger and the Bush family, I found quite a few good factoids in there about the business of newspapers and news gathering. What follows are some quotes in the article in italics, plus my commentary afterwards.

The relentless reductiveness of the new medium—the Times's long version becomes fodder for everybody else's short version. Or that the Internet requires, according to one hollow-eyed reporter, "everyone to do more and more for no more money."

Yes, but to quote Hyman Roth, “this is the business we’ve chosen.” Everyone is chasing market share & audience these days – from the New York Times to the newest MySpace member. It’s a war for attention, time and money (a/t/m) – and people have limited amounts of all three. Why does the New York Times – or any institution for that matter – deserve my a/t/m more than anyone else?

The Internet, once thought of as the ideal vehicle for reaching a targeted audience, is turning into a high-volume business, super-mass-media, dependent on cheap advertising. Success demands vast numbers: tens of millions or hundreds of millions of habituated users.

Yes and no – as in all things, it depends on how you define “success.” For a publicly traded company, “success” means maximizing shareholder value, and thus, for the NYT, yes, they need those numbers. But in the war for audience a/t/m, people and small groups can survive and be profitable with an audience of just a few thousand. They may not want or need the big audience, but they’ll be thrilled if it happens. If media companies are smart, they’ll hire the folks who bring a built-in and yes, targeted, audience with them.

The Times, in newsprint form, with its daily 1.1 million circulation, and Sunday 1.7 million, makes between $1.5 and $1.7 billion a year (the company does not break out the exact figure). Times.com, with its 40 million unique online users a month, likely makes less than $200 million a year. Cruelly, an online user is worth much less—because his or her value can be so easily measured—than a traditional reader.

These numbers really stuck with me – finally, hard data! If you divide each income number by the number of readers, you end up with about $1,300-$1,400 per reader for the print version of the times, versus $5 per “unique online user” for the online version. Wow! I don’t recall if I’ve ever heard of a case of a bigger disconnect in terms of a product substitute. Personally, I only buy the print edition of the Times if I’m going on a plane, and that’s only if I haven’t already read it the night before (my usual habit), and I bet there’s plenty of people in my camp. But honestly – so what? Newspapers aren’t the first product in history to suffer competition from a cheaper or more convenient competitor and they won’t be the last (though the cruelty of the newspapers themselves undercutting their own profitability so severely is a nice twist). Figuring out this challenge is what they pay people the big bucks to do (or what people pay consultants like me to do – but you won’t catch me revealing how to do so on this blog – why would I undercut my own revenue source as effectively as the Times?)

At best, it might become a specialized Internet player, having to drastically cut its current, $300 million news budget. What it might providentially become, however, is About.com, a low-end, high-volume information producer, warehousing vast amounts of advertiser-targeted data, harnessing the amateurs and hobbyists and fetishists willing to produce for a pittance any amount of schlock to feed the page-view numbers—and already supplying 30 million of the Times's 40 million unique users.

Maybe, but not for certain. Nothing is written in stone – it’s a choice of strategy, of desire and of execution. The use of “schlock” is a nice touch – as though the NYT is going to transform into a burlesque sideshow. Look, budgets come from somewhere – they come from anticipated revenues (except maybe on Capitol Hill). The Times will transform into something its readers (whoever they may be) want and whatever its budget will support (tied to revenues). I’m not particularly afraid of whatever that will be, but I do know that if it is useful to me, it will deserve some of my a/t/m. It’s all fluid. What deserves my a/t/m is different than it was 5 or 10 years ago, and what deserves my a/t/m will be different 5 or 10 years from now. This much I know.

For a dwindling number of us—over-50 Manhattanites, over-50 Jews, over-50 liberal-minded people, over-50 journalists—[the end of the New York Times] is a "God is dead" sort of statement. It's too big. Too existential.

Here’s where you lost me. Are you saying that if the New York Times changes into something different than it was when you were young, that’s some sort of existential crisis? Jeez M. Crow, that’s a lotta hoohah. The New York Times is not – repeat, NOT – indispensable. It’s a great product that has encountered a lot of competition of late. That competition is confusing, irritating and peripatetic, but it is not unbeatable. Just as we got over Van Halen without David Lee Roth, and yet were able to somehow go on living, we will get over life with whatever the New York Times decides to be in response to this new competitive threat.

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August 16, 2006

MySpace Makes All Its Money Back And Then Some

By Adam Carstens

Two things of note have happened to social network powerhouse MySpace recently. One, it passed 100 million users – a landmark feat. Two, owner Fox Interactive Media (a division of News Corp) inked a deal to have Google handle all of MySpace’s search traffic for the foreseeable future. FIM paid about $600 million for the site – and Google promised to pay at least $900 million. Sure, there’s some tweaks for discounting and inflation and whatnot – but still, FIM is getting all its money back and then some – and the burden is now on Google to sell inventory to advertisers.

MySpace also registered 157% year over year growth in unique visitors, propelling it to #6 over all. I expressed a note of scepticism about its potential continued growth back when FIM made the purchase, as did the Wall Street Journal’s Lee Gomes. Well, Lee, we both doubted Mr. Murdoch’s skills. That’s why he makes the big bucks.

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August 14, 2006

China: Happy marriage? Or regretful marriage?

By Yoshi Kusaki

According to this article in Mainichi Shimbun, nearly 25% of 1,073 newly married brides in 10 cities around China (married in the last three years) say that they wish they had picked a different husband if they could have their time again, based on their answers to a recent survey conducted by a Chinese dating website.

Although the dating company did not release the survey result in detail, the remarkable thing about the survey result is that the figures for husbands who regret marriage are almost identical to those for wives. But what is making them feel their marriages are a failure?

Regardless of whether they have an arranged marriage or a love-based marriage, some may feel the after-marriage life is tough. Not just because marriage is two people living together forever but more because living and getting along with relatives on both sides of the family is hard, especially in a traditional Chinese culture which values and emphasizes close family links. Also, others may not want to maintain the outdated system "The man is responsible for the external and the woman the internal," but want to adopt the Western model of family roles, such as sharing the responsibilities of chores and child care.

The study result tells me that people are now becoming freer to express their true feelings in China, even though their thoughts may upset their partner. Needless to say, we never know if those 24% of couples regretting their marriage will get a divorce or not. But amid unprecedented economic growth, it seems to me that rising marital friction is one more signal of increased openness in Chinese society.

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August 11, 2006

Japan Welcoming Immigration?

By Adam Carstens

I was shocked when I read this from Morgan Stanley about Japan’s probable incoming Prime Minister Shinzo Abe’s attitudes towards immigration in Japan. A sea change seems to have taken place – shocking for those who think of Japan as an insular country.

In his new book Utsukushii Kuni e (“Towards a Beautiful Country”), Abe writes on page 158: “We should aim for a country that is seen by people around the world as a place where they want to come to work, want to invest, in short a country that gives everyone a chance. To those who resonate with Japan’s national character and ideals, to those who wish to educate their children here, or to those who want to be Japanese, we should open our doors wide. Moreover, we should do this because it will contribute to the dynamism of Japan.”

Notice he isn’t calling for open borders style immigration, like many in the US are, but rather a filtered style of immigration – you must conform with Japan’s character, you should want to “be Japanese.” However, this is quite a change from previous sentiments. In particular, Abe seems to want to forge new ties with India, perhaps as a bulwark against China or even the U.S. Japanese companies can certainly be of aid in helping construct India’s massive infrastructure needs.

There’s no question Japan has entered a new era – the only question is where this change of attitude takes the country. For those who wrote Japan off, think again!

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August 09, 2006

Vlog (Video + Blog) - prevailing trends

By Yoshi Kusaki

People are familiar with personal publishing tools such as blogs or podcasts. Recently, more people seem to communicate with their audience using video, which is known as vlog or video podcasting, says an article on the SpokesmanReview.com. Technological evolutions such as improvements in broadband, software and hardware have made us become more comfortable with upload and downloading or watching video on the Internet.

Vlogmap provides a geographical distribution of vlogs currently available worldwide. Although there are only a small number of vlogs worldwide, the rise of vlogs seems very powerful. Unlike text-only conventional blogs, vlog provides huge opportunities for vloggers to communicate with their audience more effectively.

Then what is necessary for vlogs to grow up? First off, we need a video camera to create the video clip, and technology that made us easy to edit it. The biggest difference between blog and vlog seems to be the amount of work you may have to put into it. Secondly, vlog hosting services, where vloggers and audience can interact more with, should be popped up. Video search functions should also be necessary. If all those advanced technologies/features become commonplace, people will do something innovative through vlogging. Eventually, vlogging may replace TV!

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August 07, 2006

Teens Are Bored!

By Adam Carstens

I think this story will get a lot of attention - despite an unprecedented amount of entertainment options at their fingertips - the Internet, cable channels, Tivo, cell phones, iPods, DVDs, video games, etc. etc. - teens are still bored! "I feel bored like all the time, 'cause there is like nothing to do," said Shannon Carlson, 13, of Warren, Ohio. She's not alone - a "large majority" of 12-to-24 year olds are bored with their options some or most of the time.

Oh Shannon Carlson, 13, of Warren, Ohio - we feel your pain, but not only yours. How must this sentiment make those who spent billions of dollars delivering this massive number of entertainment options to her doorstep feel? Pretty crappy, I bet. If they had known all of their efforts would be in vain, they wouldn't have bothered.

Seriously though, this says something - it's not just the technology, it's how it makes people feel. You could say (perhaps rightly) that no matter what 12-to-24 year olds are given - SUVs, trips to the South Pole - they're still 12-to-24 year olds and don't know what they want or what will make them happy. Or you could say that despite all the money spent on delivering entertainment options to the masses, there's still something missing - a human element that brings people together to share things. MySpace was lacking in technical prowess, but it let people leave funny messages for each other that will eventually prevent them from getting hired for all but the hottest and noisiest jobs.

So media moguls and web 2.0 mavens - listen to Shannon Carlson, 13, of Warren, Ohio - she's not entertained yet. And therein lies opportunity.

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August 04, 2006

E3 downsizing - E2? E1?

By Adam Carstens

Bad pun in the headline, but still: E3 announces it’s moving away from the glitz, the booth babes and the noise and concentrating on what’s really important - the games. It’s almost as though the video game industry is so confident that it doesn’t need to put on a show and invite the world to gawk at it anymore. I went to one E3 - that was, frankly, enough. Video games are in a bit of a retrenchment lately, waiting for two new next-generation consoles to appear. But it’s a good sign for the industry that they don’t need to spend time, money and attention on a loud sideshow anymore. Let the games speak for themselves.

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August 02, 2006

U.S. Men Increasingly Idle; Why?

U.S. Men Increasingly Idle; Why?

By Adam Carstens

The New York Times featured a story about men in their prime – defined as ages 30-54 – who are increasingly choosing not to work rather than take a job that either doesn’t fit with their perceived career path or would require a demotion in pay or status. The graphic below shows data by state for 2004 for such age brackets. Note the high levels in the industrial Midwest, the rural South as well as the West Coast.

What is going on here? Well, a few things. One, the percentage of people in the labor force over 55 has slowly risen over the past 10 years from 12% to 17% - and is still growing. Those who have gotten to the age of 55 and managed to remain in the workforce are hanging on to their jobs with all they have – in order to better finance their retirement, most likely. As the Baby Boom continues to age, expect this percentage to continue to rise.

Also, the next great “economic boom” has yet to hit us – unless you’re in housing, and even that is beginning to fade in many parts of the country. So the opportunities available over the last few years have not looked very palatable or sexy compared with previous booms.

Above all, the story told by the two main subjects of the article – one whose family survives on one income and disability, the other who continually extracts value from his house – did not bode well for the productive future of the economy. With all that excess labor lying around, it appears many men may be on the outside of the labor force looking in for quite some time. Could the U.S. be that far removed from the stories of the Japanese bust of the 1990s, where men would leave the house, wander around all day and then come home, never telling their spouses they were laid off?

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July 31, 2006

Listen to Pandora and see what comes out

By Yoshi Kusaki

People love to learn about new music, but their busy lifestyles do not give enough time to hit the clubs. Some people do not have patience to download music, rip CDs, create playlists for an iPod. According to this article on CNET News.com, Pandora, an Internet radio service, has acquired 2.5 million registered listeners in seven months since starting its service.

But what can Pandora provide for you? Pandora lets you build your own stations based on similarities among songs and artists. So you can start by inputting the name of a song or a favorite artist, and Pandora will help you discover more music you will like from its database that contains hundreds of descriptors or elements so called "DNA of music," such as melody, harmony, rhythm, kind of accompaniment, lyrics, and subject matter. And the player is free, but it shows ads unless you buy a subscription. What a great way to learn about new songs and artists!

Broadband adoption has become widespread, making streaming radio more viable. I believe Pandora stands a fair chance of success if it successfully establishes a solid revenue model. Pandora tells me that the more those kinds of technologies come online, the likelihood is that old technologies, such as a conventional radio (and even satellite radio, which has shown trouble maintaining subscriber growth), will eventually be abandoned unless they renew their strategies.

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July 28, 2006

Krispy Kreme coming to Japan

By Yoshi Kusaki

According to this article, Krispy Kreme is pushing into Japan. A Korean company, Lotte, and Japanese business turnaround specialist, Revamp, have set up Krispy Kreme Japan and plan to plans to open the first Krispy Kreme Doughnuts chain stores in Japan this coming fall. For Krispy Kreme, recovering from accounting problems, looking abroad to reach new markets is a good bet for its business turnaround.

When we look at donut chain stores, by serving donuts and a small variety of dim sum, Mr. Donuts successfully dominates the market. On the other hand, Dunkin Donuts used to be in the Japanese market before, but it failed. Thinking about Dunkin's case, it had more to do with the managerial problems by the local franchisor than the characteristics of the products. Also, there is always some worry that health conscious Japanese consumers will fail to take such Western-style food products. Will Krispy Kreme achieve success in the Japanese market?

Krispy Kreme is famous for fresh doughnuts made in the store. Krispy Kreme may find it hard to operate donuts plant in small sized outlets in Tokyo. Also, it may have to modify the recipe for the Japanese stores, since average Japanese person could feel Krispy Kreme is too sweet. How Krispy Kreme can get good word-of-mouth reputation among Japanese, like it successfully did in the U.S., will be worthy of attention. One thing apparent to me is that the average Japanese, who love to talk in shorthand, will discuss Krispy Kreme with a cute abbreviation "Kuri Kuri (Kurispii Kuriimu)."

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July 26, 2006

Five Cheers for Google Reader!

By Adam Carstens

Just want to take the time to recommend Google Reader. It hasn't really caught on as an aggregator if overall webstats are to be believed, but I tried it out and it works marvelously. I can browse the more than 50 regular blogs I read in less time than ever. It takes some commitment to get it set up the way you want it, but it pays off handsomely. I tried using "Bloglines" for awhile but eventually got annoyed by its interface. For my money, Google's created another winning product. I don't really care if it's not the #1 blog aggregator out there - I'm using it and not going back to anything else (as with all web widgets, that opinion subject to change without warning, given that the product is completely free).

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July 24, 2006

Microsoft vs Google - Earnings War

By Adam Carstens

Whose idea was it to release Microsoft and Google's earnings on the same day? Because it sure does give a great impression behind the two companies' trajectories, though that might not be what either of them wants.

At Microsoft, income is falling, even as revenue is still bolstered by Windows and Office. At Google, revenue and income are rising, even though most of the revenue comes from one mighty source - online ads. Yet Microsoft's quarterly income is 4 times higher than Google's, but last year, Microsoft's quarterly income was 10 times higher than Google's. You can see the trend clearly.

Google also scored a win as Microsoft declared its intent to spend billions of dollars buying back stock. Google is free of such obligations, and can instead focus efforts to try and replicate its success in search - still rising in market share.

Both are making investments in other businesses, hoping to find nearly as good a cash cow as what brought each company to the fore in the first place. Neither has found it yet, but they're trying gamely, like that proverbial author who desperately tries to replicate the success of the first breakout novel with a follow up hit.

Yet, as of July 20th, both companies' stock were down for the year, indicating some bloom is off the rose in Wall Street's eyes. As Bill Gates rides off into the sunset to fight global disease, and Sergey and Eric think about what size beds belong on their private jumbo jet, they don't really need much more performance from either of their companies, do they?

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July 21, 2006

Planes Are Near Full, Getting Fuller

By Adam Carstens

Forgive me if this is a little whiny, but I just endured a trip for both personal and professional reasons that had me flying long distances on 3 days out of 5 in a row (I'm sure many have experienced far worse). Every single plane was full to the gills, with more people left waiting in the lurch on standby. Particularly entertaining was the family of 9 in Chicago trying to get to Los Angeles, and arguing animatedly about whether to accept 5 seats on standby now and pray the rest of the family could join them somehow, someway.

So it was with no surprise that I read this in the Wall Street Journal: "Industry load factors, or the percentage of seats filled, rose to 77.7% in the first four months of the year from 75.2% a year earlier. This summer, planes have been even fuller. American filled 85.4% of its seats systemwide in June, even as it shrank capacity by 3.1%."

Even with oil (and therefore, jet fuel) nearing record price levels, airplane fares, revenues and profits are soaring - a long way from the bad old days of excess capacity and overhang from 2002. The full planes might be an indicator that the economy is finally ready to overheat (after all, 4.3% inflation reported this week is still darn high). But people really do seem to regard quick, convenient, dependable air travel as an inalienable right - so perhaps even when the economy slows down, people will still keep traveling by air. Guess I might have to get used to fuller flights from now on.

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July 19, 2006

Dell Tries Blogging By Adam

Dell Tries Blogging

By Adam Carstens

Many in the blogosphere are commenting on Dell’s entry into the blogosphere. Take a look at this two year stock chart, and you’ll see why Dell felt the need to do so:

Many people have already sworn off Dell forever, thanks to lousy customer service, so it’s doubtful the blog can bring them back. Indeed, so far, their blog seems heavy handed and authoritarian – though it is only the first few days of operation, so perhaps we need to wait and see where it goes.

But look through competitor HP’s blog roster and you can see more and many different kinds of blogs, all authored by real people. Dell’s blog features some video vignettes from people talking about Dell’s machines – but who are they? What are their passions? Why do they love working for Dell? Why should I trust their opinion above and beyond the fact that they work there?

I’ve always been skeptical of blogger Robert Scoble’s real effect on the public’s perception of Microsoft – that organization was too big and too fragmented for one man to make much of a difference, and it didn’t help that when he was at the company, they were faltering on a number of fronts (delaying Vista, Office, etc.) But Dell is in a streetfight war with other box makers for market share – and they have a relatively simple job to do – convince the customer that they won’t regret working with Dell on any level. Does their blog do that so far? Sadly, it does not.

I once interviewed for a position at Dell and didn’t get it, so some may accuse me of sour grapes. The position was to work on their website. At the interview, the people said they really relied on numbers and metrics to tell them whether their website was doing well or not, and were looking for people who thought along those lines. I’m glad I didn’t get the job, actually, given what the company’s been through these past few years. But it was interesting to read this paragraph on Dell’s new blog:

“The unfortunate truth is that we ended up concreting the cow path. We measured everything. We began designing and orienting the site around those measurements. Over the last couple of years, we watched as our site became larger, more complex, harder to use, and downright fatiguing. We ended up making easy very hard.”

Indeed you did, Dell. I’ll give you one cheer for beginning down this road to make things easy again. But I’ll hold the other cheers until you actually make a personal connection via your website and your blogging efforts

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July 17, 2006

Japan's Savers Beginning to Consume Again

By Adam Carstens

The New York Times looks to Japan's nascent recovery once again, finding that people are slowly dipping their toes into the waters of consumerism. One mental barrier - they've only known a decade of zero interest rates and deflation, especially in real estate and salaries. Said one 29 year old, "Older people have experienced things like rising salaries and interest rates. But I never have. Somewhere in the back of my mind, I still doubt it will happen."

Yet that 29 year old apparently stepped up to buy a newly constructed four bedroom condominium for 40 million yen in Chiba, one of Tokyo's inner suburbs. Since Tokyo's metro area will continue to grow, even as Japan's population declines, this is a good sign that people may be more willing to spend more money in the future.

Japan's youth face an interesting challenge ahead as they must pull the economy along despite being fewer in number than generations' past. Since Japan steadfastly refuses to allow more immigration, they must increase their consumption levels and/or their productivity levels to keep the economy growing.

Our research shows that Japan is indeed ready to be more risky and entrepreneurial, choosing increasingly to spend now rather than save for a rainy day. It's an excellent sign that the 29 year old featured in the article seems to be exemplifying this new attitude in a real and tangible way.

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July 12, 2006

“The 9”: Yahoo Pursues Old Style Programming Strategy

By Adam Carstens

Yahoo has launched a new “vlog” (video blog) called “The 9”. This decidedly retrograde strategy – put a pretty face on video and get her to talk about stuff the audience is interested in – is Yahoo’s attempt to gather more page views and more time spent on its portal. And you know what? It just might work.

Take a look at this chart on below – it’s a graph of the amount of reach of the “big 3” of the Internet at the moment – Google, Yahoo and MSN. Notice anything besides Google’s slow creep up over the last few years to join those two at the top? To me, this chart looks like a classic battle for mindshare that has taken place in nearly every major industry since immemorial.

Something about human nature tells us that people only have room in their head for three major brands in any particular category. With cars, it was always Chrysler, Ford and GM – and now Chrysler looks to be passed by Toyota, so soon we’ll think of “the big 3” as Toyota, Ford and GM. In television networks, it was so for many years – CBS, NBC and upstart ABC, before being challenged by cable television and now Internet.

Yahoo’s move into “vlogging” – (sorry, but I can’t call it that, I’ll just call it what it is – it’s a television show, though the formatting is decidedly different - random access viewing at the viewer’s discretion) is a shot across the bow of the other two. OK, MSN, Google – we’re going to put a video of a pretty face on our portal and she’s going to tell you what’s cool on the web. Can you compete with that?

In this age, many to predict the death of common culture, and to some extent that’s true – we won’t all be watching I Love Lucy or M*A*S*H at exactly the same time. But enough us might decide to tune into “The 9” (or something like it) often enough so that content like this becomes the new “water cooler” conversation piece. And whoever delivers on a promise to the viewer to entertain them early and often will laugh all the way to the bank.

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July 09, 2006

What To Make Of Google

By Adam Carstens

The survivability of Google's strategy has come into question recently, as the stock price has basically rested on its laurels through the first half of 2006, following a stellar 2005. However, it's important to remember just how far the company has come. Revenue for 2002? 439 million dollars. Revenue for 2005? 6.1 billion dollars. By my count, that's a success no matter what else has or hasn't happened.

However, as some point out, Google has only reached #1 in market share in its main moneymaker, search. In everything else, they're #3 or worse. However, Microsoft managed to leverage most of its profits from a single idea - Windows/Office - and managed to make quite a few people wealthy from just that one idea. True, their stock price hasn't gone anywhere in 7 years, but the company has continued to grow revenue.

So, does it matter if Google never comes up with a single killer idea other than their excellent search capability? The answer is.maybe. If you bought Google stock at $400 a share, maybe you're more concerned. But the fact that Google has so many "failures" doesn't really impact their search capabilities, just as Microsoft's "failures" haven't stopped people from buying a new copy of Windows or Office every few years.

If Google's market share in search started to plummet, then there'd be true cause for worry. But the world's demand for information is only going to grow, and Google's past performance - and brand equity - have been a large part of that story. People trust the company and haven't been betrayed yet. So do they need to be #1 in everything? No. But if they get a couple of big things right as they have so far, their performance should continue to sustain the company for awhile.

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July 07, 2006

Can Tie-Ups Save Ford and GM?

By Adam Carstens

Once again, the monthly car sales numbers don’t look good for denizens of Detroit, but look very good for Toyota and Honda. As the graph shows, year to date versus last year, the two hot Japanese carmakers added another 2.5% of market share, while the Detroit Zombie Three lost a combined 3.2%. Toyota already sells more vehicles monthly than DCX, and are clearly on their way to displacing them as the #3 overall carmaker.

So, the question is, can anything save Detroit? It’s been through crises before, but has always managed to bounce back – most recently with SUVs that boosted profits and sales. But with gas over $3 a gallon in many parts of the country, and looking to stay there perhaps permanently, the SUV golden goose is looking increasingly cooked. So tie-ups with more successful car firms appear to be the way to salvation. Detroit cries, save us, Ghosn-sama!

Yet Nissan investors appear skeptical – and don’t want to be dragged down by a GM albatross. "We can't rule out the possibility that Nissan may be dragged down" by GM, says Hitoshi Yamamoto, president of Commerz International Capital Management (Japan) in the Wall Street Journal. The Journal goes on to say, “critics of the alliance idea say Nissan's management should remain focused on fixing its lineup of models and rebuilding sales, rather than taking on the problems of a big and troubled U.S. auto maker.”

Look at the chart one more time – notice the only Japanese automaker listed not to add market share? Yup, it’s Nissan, stuck at just above 6%. One might say now is not the time for Nissan to be taking on additional challenges when Ghosn seems to have enough on his hands at the moment.

No, the only course of action for the Big 3 should be to make cars that people want to buy. Sounds amazingly simple, doesn’t it?

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July 05, 2006

NBC buying Tribe – Money Flows to Social Networks

By Adam Carstens

Well, the purchase of MySpace (now 90,000,000 strong) by News Corp last year has set other media companies into action. NBC has announced they’re buying Tribe.net, a very small social network based out of San Francisco.

Some predicted the purchase of MySpace by News Corp would result in its demise – the ruining of its “indie aesthetic,” whatever that means. As the below graph shows, that’s hardly been the case. MySpace has continued to grow, and is on track to be at 135,000,000 members by the end of the year.

As the graph also shows, other social networking sites have had trouble growing at similar paces. Friendster and Facebook have issued modest challenges, and Orkut seems to be growing steadily, but none of them have experienced the lightning growth of MySpace.

Tribe’s blue line towards the bottom has a long way to go to catch up to either one of them. Is Tribe just another Snap.com, the (failed) attempt by NBC back in the 1990s to create a portal? Or can it challenge MySpace’s dominance? As of now, MySpace has built about a 90,000,000 member lead, and adds about 250,000 more people per day. Tribe had better get going if it wants to play in the big leagues.

But the larger point is, social networks are now seen as increasingly legitimate purchases by traditional media companies. Those who laughed at News Corp last year sure aren’t laughing anymore.

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June 30, 2006

True Performance In Venture Capital

By Adam Carstens

I've been reading a few interesting posts on Paul Kedrosky's blog recently about the troubles facing the Venture Capital industry. This post seems to point to a general case of too much money chasing too few ideas. According to the graph, the amount of pre-IPO venture capital raised per deal was a paltry $125,000 in 1999. That has grown to $1.27 million per deal in 2005 - a ten-fold increase. That is a lot of capital looking for a profitable home, which means it's harder to get a good return on investment in the marketplace. As the blog entry concludes, the venture business has grown into "a search for M&A exits…[which is] a mediocre asset class, at best."

So what can the venture capital industry do to save itself? Some of that venture money could instead try and do some additional research around ideas already in the hopper to make sure they're really all they're cracked up to be in terms of meeting potential and future customer demand. How do we know that end users actually want or need these services? How do we know that we've thought of all potential applications for this service? How do we know what market segments are going to be interested in this service? How do we know the time is right for the introduction of this service?

If venture capital haven't asked these questions of the ideas they're funding, they should - but not in a direct way. No one knew they needed an iPod before they suddenly became a nearly indispensable item for millions. No one knew they wanted to join a social network before Friendster and later, more successfully, MySpace and Facebook, came along. But people did know it would be cool to access to their entire music collection, digitally, via one simple device and interface. And people knew they wanted to keep in touch with old friends via more than just email and without learning how to program HTML.

The venture capital firm that can put together the pieces of the puzzle in heretofore untapped ways - by asking the right questions beforehand - can give you a key advantage that all the money in the world won't help you gain.

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June 28, 2006

Is Leo Hindery Right?

By Adam Carstens

Recently, cable company honcho Leo Hindery gave a speech where he said the “imbalance” between companies he called “portals” (AOL, eBay, Google, MSN, Yahoo!) on one hand and “distributors” (Cable, Telcos, Satellite, Wi-Fi etc.) and “content providers” (networks, media companies) on the other hand would soon be corrected in the marketplace.

Since this speech has been the subject of derision from techhead circles, I thought I’d do a little “personal media consumption” history of my own to see if he might be right. While everyone’s media consumption history is different, I don’t think I’m all that unusual in how my media tastes have shifted over time.

First, here’s a chart of the estimated average hours per week I spent on any given media by year, in 5 year increments. The tan boxes indicate the category “winner” or tied winner for that year. I also include a 2010 estimate just as a guess for where my life might be then.

Notice any pattern? Growing up, I used to watch a TON of television. It was all that was available, and I vacuumed it up like fresh hotcakes coming off the griddle. My friends were pretty similar in that pattern, which peaked in college. But as my post-college years have accumulated, I just have less and less time for television – and in fact, the darn thing is only on a couple hours a night these days – and it’s usually to watch a sporting event or a Tivo’ed show.

TV still captures a plurality of my media time, but the Internet is gaining fast in terms of where I choose to spend my time (just ask my significant other if I spend too much time online!) But even my Internet use pattern is changing. I’m paying as much attention now to “big media” Internet (usually several different newspapers and news sites, which was pretty much all I consumed in 2000 when I was online) as I am to “personal” media – media that’s delivered to me by just regular old people without a TV contract or a movie deal.

I don’t see this pattern changing anytime soon – in fact, in a few years, I’m predicting MOST of my time will be spent consuming media of that variety. Sure, they’ll still be room for the occasional television show, video game or feature movie, but honestly? I’ve seen most of what they have to offer before in terms of plot, characters and storylines.

Now, if the “content providers” are smart, they’ll snap up emerging talents in the personal media department and bring them into the fold of their corporate empires. But I wonder just how many personal media providers are going to think this is such a good deal. The big media companies will need the personal media providers more than the other way around, if my chart is anything like what will be happening across the country. And there are millions of kids younger than me who have grown up with much different media distributions that will be, if anything, more geared towards the consumption of the personal.

“Distributors” and “content providers” will have a lot of work to do to recapture the increasing power of the “personal media” segment. And since barriers to entry and distribution costs are dropping every second, it’s going to take some awfully compelling content and delivery mechanisms to get people back into their fold. Maybe they can pull it off, but color me skeptical.

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June 26, 2006

Mobile Content - Who Will Capture The Market?

By Adam Carstens

A Wall Street Journal article discusses how "a wave of cellphone start-ups that were counting on TV, music and other premium services to attract users is floundering."

Even though a billion in venture capital was raised to try to attract customers to mobile content, everyone - from big names to small - have found the going a lot tougher than they thought. Mobile ESPN and Amp'd Mobile are the two most discussed examples in the article.

So what's the solution? Well, think about what has attracted consumers attention and money. Clearly, iPods are a success, as are social networking sites like MySpace and Facebook. What unites these successes? iPods are the physical embodiment of a person's media collection - music, photos and now videos - they represent what that person values most about their personalities as expressed through media. Places like MySpace offer the same benefit - they let people tell the world who their "top 8" friends are (subject to change at any time), what their likes and dislikes are, and their favorite photos, movies, songs and celebrities.

Best of all is the price point of both - beyond the physical cost of the iPod, you pay nothing after that - no subscriptions, no service charges, nothing. And as the success of the iTunes Music Store has shown, you pay 99 cents per song - a one-time transaction - no contracts. MySpace and other places like it are free and yet reward you with the payback of interacting with your social network anytime, anywhere.

I don't see any of that in the mobile device content networks that have started so far. Even the iTunes enabled cell phones haven't sold that well, as no one wants to be in a position of choosing to use precious battery life to either make a call or listen to music. Helio, MySpace's mobile network partner, is making a valiant attempt but looks too expensive to compete in the mobile market thus far ($85 for 1000 anytime minutes!!!).

What will work for mobile content providers is to allow people to reflect some of their personality in cell phones beyond the mere ring tone (which are already quite successful). The mobile media company that allows people to express themselves in a customizable, updatable and inexpensive way will capture the market in spades. Who wants to step up to the plate?

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June 23, 2006

China - Almost Ready for True Innovation

By Adam Carstens

The Washington Post describes an interesting phenomenon taking place in China - government leaders encouraging people to innovate, rather than remain automatons: "Instead of millions of Chinese youths assembling somebody else's inventions, the party leadership has concluded, the time is right for China to come up with its own ideas and sell them to everyone else."

Will it work? While we see a lot of innovation potential in China, we have noticed that it may be a bit early for true innovative spirit to take hold - that is, coming up with new products or ideas out of whole cloth. The innovation must be grounded in something more concrete first - according to our view, it will be grounded in the desire to build a better, stronger more capable China. While this will be a change from the previous "China as factory floor" model they've pursued - quite successfully! - over the last two decades, it will take time to flower into a fully transformative movement.

We have no doubt in China's long term ability to innovate successfully. But true paradigm-changing innovation is still a ways off. Those raised during the tumultuous but prosperous 1980s and 1990s are just starting to reach their apex as guardians of the new China. When they take over the reins, look out.

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June 21, 2006

Power Is the Best Aphrodisiac

By Adam Carstens

As much as the headline may be snarky, it's still true. In an age when personal power usage is multiplying thanks to the growing amount of data, devices and technology gadgets we use on a daily basis, power has become much more important. No wonder energy prices and their companies stock prices are through the roof.

As such, tech firms seek to be right near the source. By an accident of geography, my home region is going to see a lot of action thanks to the cheap hydroelectric power served up by all of the mega dams on the Columbia River. This Wall Street Journal article discusses some of the cheap prices big tech firms are getting, and how their power needs will only increase.

It just goes to show you the best laid plans of technology giants like Google, Yahoo and Microsoft can be waylaid by want of an available electrical outlet. One cannot help but wonder what happens when the desire for cheap electricity (and therefore, cheap data) bumps up against resistance to building new power plants?

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June 19, 2006

Germany: World Cup will provide the kick to get the economy back

By Yoshi Kusaki

Except in the more international cities of NY and LA, where there is a high immigrant population, most of the American public show relatively little interest in the World Cup, one of the biggest global sporting events. But rest of the world, including me, is clearly catching World Cup fever.

I found an article in Business Week online about the economic effect of the World Cup on host Germany. The country can expect immediate and measurable effects from the World Cup, including the generation of more than $12 billion in spending and 50,000 new jobs. Also, a European economist at JP Morgan predicts the event will add 0.5% to Germany's GDP.

The main effect of the World Cup may be on the timing and pattern of consumer spending and not on long-term performance. So, the boost from the World Cup may be short-lived. However, many businesses in Germany, where unemployment is above 12% and economic growth stalled completely in the last quarter of 2005, are banking on this sporting event to provide a spark for their continued business recovery. The German team should make it to at least the quarterfinals, so if the team progresses to the semi-finals or beyond, the economic effect will almost certainly become stronger.

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June 16, 2006

YouTube: Popularity has tremendous momentum

By Yoshi Kusaki

Video websites are becoming dramatically popular these days. YouTube, which now serves 50 million videos to viewers daily with 50,000 new ones added every day, is one of the most popular video sites, according to this article from The Wall Street Journal.

Of millions of available videos in YouTube, you can watch popular TV series, a great variety of music videos, or a funny lip synching clip of Backstreet Boys by two Chinese guys, for free. Such a popular video site was founded only in 2005. However, everybody knows that online videos are not new. For example, adult movies were the first to take advantage of the high-speed Internet connections. So what explains YouTube's wide popularity?

The way I see it, YouTube opened up a non-charge channel for both individual video makers and millions of TV viewers. Basically, users can post video clips on YouTube without permission from the owner. Users as well as guests can easily search videos whatever they want to view, enjoy those videos by just hitting the website without downloading video player software, and they can even link those videos to their website or blog.

Some companies in the media industry are debating whether to attempt a crackdown or not, even though doing so would be going against the flow of what people clearly want on the Internet. Others, such as Warner Music Group and Universal Music, are trying to explore possibilities with YouTube and others, including sharing revenue from ads displayed when their songs are playing. We never know which future direction YouTube will take, but one thing is clear to me - YouTube greatly helps us to find something exactly what we look for.

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June 14, 2006

Google's Public Spreadsheet

By Adam Carstens

Google has long denied that it is trying to compete with Microsoft in its core businesses of operating system and office. But the release of Google Spreadsheet is making people think twice. The Big Picture blog waxed about how this new development was a strategic threat to Microsoft on multiple levels. Others have said it won't fly, since the notion of storing your sensitive financial data on a public server in spreadsheet form will be anathema to small business.

Yet that presumes that everyone feels the same about putting their personal information online. Aren't millions of people putting personal photographs, public confessions and other such "deepest darkest" secrets online? Given the immense traffic video distribution sites like YouTube are experiencing, people are sharing more of their lives than ever. Why would they live in fear of sharing spreadsheet information? After all, public email accounts like Hotmail and Gmail haven't led to massive fraud.

There may be a massive attitude shift underway in people's attitudes towards sharing all sorts of information with others. Joi Ito has already touched on some of this with his theory of the "Sharing Economy". Where it goes from here, no one quite knows. But Google is betting on people wanting to share information of all kinds - including information that used to be created on highly profitable office suite software.

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June 12, 2006

Japan in the World Cup: Too Humble?

By Adam Carstens

By the time you see this, the World Cup will have started in earnest. I saw this article talking about the characteristics of the Japanese World Cup team. Here's the knock on the Japanese team: "Japan produces excellent midfielders, whose cooperation and ball distribution are vital.but great goal scorers tend to wait for others to get them the ball and then shoot ruthlessly and often."

Will Japan's Business Renaissance extend to a style of soccer (er, football) play that is flashier, more dynamic and able to go toe-to-toe with the world's great powers? Time will tell. But a lot of people counted Japan out in the recent World Baseball Classic, too.only to have the Japanese team win it all!

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June 09, 2006

Tribune: Synergy is Dead?

By Adam Carstens

Recently, a friend and I have been going back and forth over the fate of Tribune. The stock is way down, revenue is flat, and the wisdom of "synergy" to boost the bottom line has long been out of favor in the media world, at least if the unraveling of mega conglomerates like AOL/Time Warner. Now, rumors are flying about a potential spinning off of some of Tribune's assets in order to "unlock value." Said one analyst, "We believe the possibility of a spinoff of the broadcast assets would be highly accretive." That's Wall Street talk for adding value.

Is it just that print and television are stagnant media categories, or is it more? What has Tribune done to make people who watch its television stations or buy its newspapers feel like they have control over what they are consuming? This seems to be the new standard in media these days - people are gravitating towards places where they control - to the microsecond - how much they will participate in any given media. The fact that Tribune's assets are geared largely towards passive consumption of media seems like the worst of strategic blunders.

Tribune is running out of time to transform itself, as are a number of other media companies. Synergy was the savoir of many a media mogul back in the 1990s, as they rode that wave for all they could. Now, synergy is dead and only giving more control to the media consumer can save them. Until Tribune takes action to make this a reality, its performance will lag.

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June 07, 2006

China: Soulmate hunting on the Internet

By Yoshi Kusaki

According to this article inPeople's Daily Online, the online dating market is growing rapidly inChina with an annual growth rate of 60%. The market, which is at $11.2million for 2005, is expected to reach $81 million by 2008. Withchanges to the social environment, young people, especially born underChina's one-child per family policy, are increasingly moving from theirhome towns to large cities, where they have a limited social networkingto find friends. As a result, they're turning to the Internet to findromance.

Despite the growing appetite for online dating website, Internet datingcompanies in China are struggling with how to establish a revenue model- just like we mentioned in a previous entry about Social networkingservices providers in China. It seems to me that it is challenging formany Internet business to catch their dreams in a cash-based economysuch as China. The credit card market is still undeveloped, and lots ofpeople have mental blocks about using a credit card. Also, it will takemore time for Internet dating companies in China to build trust amongpotential customers who are used to the traditional way of dating -through introductions by family, friends, etc.

Is China going to have big, profitable, and decent dating websites,approaching something like Match.com or eHarmony sometime soon? For people in China, hunting soulmates will be easier, yet for datingcompanies, catching their dreams will not be without complications.

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June 05, 2006

Renewal: Yoshinoya

By Yoshi Kusaki

Mad cow disease scare and Japanese government's suspension of U.S. beef imports have delivered a devastating blow to Japan's beef industry. Yoshinoya, one of the major operators of beef bowls, a popular form of fast food featuring sauteed meat on a bowl of rice, which relied heavily on beef from the U.S., has been suffering from a downturn in business since 2003. While other competitors switched to beef from Australia or China, Yoshinoya decided to switch to new pork dishes because of its desire to use only U.S. beef.

Last week, Yoshinoya, Japan's leading operator of beef bowl restaurant reported solid earnings for the fiscal year through March. Against a loss of 1.1 billion yen last year, Yoshinoya reported a profit of 2.1 billion yen. The turnaround was due to cost cutting by closing unprofitable stores, reducing operating hours and staff, and efforts to boost popularity of new dishes provided in place of their popular beef bowl. It took more than two years for Yoshinoya to revive its business since beef bowls were taken off the menu, since improving profitability at existing store was less and less a possibility.

After a difficult set of circumstances, Yoshinoya is beginning to see the light. Japan is expected to decide next month to resume imports of U.S. beef. It is still unclear whether Yoshinoya will attract the same number of customers as before due to increased competition with rivals, which are expanding their chains. However, Yoshinoya is eagerly waiting for the day to put beef bowls back on its menu with a great expectation of doubling its profits to roughly 5.3 billion yen for this fiscal year.

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June 02, 2006

Taking a different approach from rivals

By Yoshi Kusaki

Nintendo is planning to launch a new video game console "Wii (a.k.a. Nintendo Revolution)" later this year, and hopes to sell 6 million machines by March 2007, which is the same number of sales target of Sony's Play Station 3.

Thanks to foreign exchange gains and an increase in sales of Game Boy Advance, Nintendo recently reported that its profit jumped 12.5% for the fiscal year through March 2006. However, fierce competition in the video game market against Microsoft's Xbox360 and Sony's PlayStation 2 has made Nintendo's profit forecast grim for the year ahead, according to this article. Is it really going to be the dry season for Nintendo this year?

It seems like Nintendo is taking a different approach from its competitors Microsoft and Sony. By offering more intuitive brain teasing games and easy-to-play virtual pets games to people who have not been associated with gaming, Nintendo is trying to bring a new set of customers into gaming. Nintendo's challenge - expanding the gaming population beyond core a certain core audience to women and older people - seems to me the way to broaden the games into a true mass medium (for more, please refer to our previous entry on 5/15/2006).

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May 31, 2006

Tom Wolfe and the "fiction absolute"

By Adam Carstens

I couldn't let this fascinating read go by without mentioning it. Tom Wolfe's 2006 Jefferson Lecture was truly a great piece of oratory. Particularly great was his theory that "virtually all people live by what I think of as a 'fiction-absolute.' Each individual adopts a set of values which, if truly absolute in the world -- so ordained by some almighty force -- would make not that individual but his group . . . the best of all possible groups, the best of all inner circles."

Wolfe is talking about politics, but I think this has tremendous application for business as well. Those jerks in marketing don't get ME - I'm in SALES. We're the ones who bring in the revenue. Or, those jerks in sales don't get me - I'm in MARKETING. We're the ones who create the message they go into the field, all they do is blather. And so on in every division of the company.

Businesses would do well to take stock of the various "fiction-absolutes" they have operating within their organizations. Of course, creating a company wide "fiction-absolute" is quite useful when faced with imminent competition - it gives people something to unite and follow. But such times of true crisis are rare, and most of the time people will drift back to whatever "fiction-absolute" gives them the most comfort. Usually, it's something based on their talents or strong likes. "If only everyone could see the value of what I'd know, I'd get some respect around here."

Read Wolfe's speech - then see how much of what he says about "fiction-absolutes" can be applied to your organization. Then, see what you can do about it. Oh, and don't forget to read the Hitler story - priceless.

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May 26, 2006

Renewal: Japanese Banking

By Adam Carstens

It's a good time to be a Japanese banker. According to these articles in the Wall Street Journal and the Yomiuri Shimbun, the six major Japanese bank groups have reached their highest levels of profitability in 17 years. Collectively, they've posted net profits of three TRILLION - yes, with a T - yen for the previous fiscal year. MUFJ and Sumitomo alone account for two-thirds of that total, each raking in about a trillion yen each. Something tells me the shops at Ginza are going to be busy this year.

What's caused the turnaround? "Expanding and developing new bases through acquisitions and tie-ups with foreign partners, and adopting Western-style corporate governance to attract more foreign investors," say the articles. What's more, they're not done - they're pushing overseas as Japanese companies extend their reach across the world. "The renewed push for overseas business comes largely from increased demand from Japanese corporations abroad for loans and settlement services -- especially in other Asian countries." The banks themselves have serious expansion plans in China and India - two of the hottest countries around for investment.

What's different about now versus 1989? Simply put, the lessons of the crash have been absorbed by a management class that got burned when they got too far out over their skis last time around. You don't hear about highly symbolic purchases of movie studios and corporate real estate this time. Instead, careful management and risk analysis is the order of the day.

With profitability numbers like these, Japanese banking capital is poised to command more of the global financial scene than ever before. Competitor banks need to stay sharp - Japanese banks have the wind at their backs, and they won't cede ground without a fight.

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May 24, 2006

A room for milk and movies

By Yoshi Kusaki

According to the article in International Herald Tribune, Starbucks signed an agreement with WilliamMorrisAgency to find movie and book projects to market. The article was reported in the beginning of this month, but I would like to post this entry as it is an interesting example of business expansion.

Starbucks is going to sell movie DVDs, soundtracks, and books at its 5,500 company operated U.S. and Canadian stores. The company has already experienced great success in the music field, selling 3.5 million CDs, including Grammy award winning albums by Bob Dylan. So, the company is looking at movies and books to promote in the hope of duplicating their previous successes.

Are Starbucks stores going to become a small version of Barnes and Noble book stores? According to the article, to avoid overwhelming customers, Starbucks says no more than 20 CD and DVD titles will be displayed at any time in the stores. What the company is trying to do is that it is going to capitalize on its brand image. Its goal is to link its brand image with certain kinds of movies and books, and deliver those products as part of the Starbucks experience. This Starbucks news tells me that, whether or not the company has a truly appealing brand image, efforts like these are a major key factor in their successful expansion.

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May 22, 2006

Renewal: Microsoft - The Towels Are Back!

By Adam Carstens

Everyone's favorite internal anonymous blog devoted to covering Microsoft's personnel troubles, Mini-Microsoft, documented the company's recent "town hall" where the big announcement was - wait for it - the resumption of the company's "free towels" service for employees. Rejoice! Free towels!

Just kidding - actually, the bigger news was the removal of the company's "stacked ranking" rating system - supposedly a bigger morale sapper than the loss of free towels. But will it be enough to turn the company's fortunes around? Bigger changes are afoot, Mini says, including some potential firings in the bloated Windows unit. And the resumption of free towels may make some employees more willing to stay late nights once more without excessive grumbling.

However, there didn't seem to be any mention in the town hall of how they will answer the torrid pace of innovation going on at the competition or in the marketplace. But first things first - quiet the employee grumbling and get them focused on the task at hand. That means giving out a free towel to two, I suppose. But employees who ask for towels better be prepared to come up with concepts and products that the market wants in return - otherwise, all the free towels in the world won't help you.

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May 19, 2006

Renewal: Hewlett Packard

By Adam Carstens

Hewlett Packard reported a fantastic quarter recently, largely thanks to a complete strategic shift on the part of new CEO Mark Hurd. Net income rose 51% thanks to strategic staff reorganizations with emphasis on profits, not sales volume. According to this WSJ roundup, Hurd achieved results by targeting "printers in addition to PCs.[as well as] mobile devices, high-end printing and data centers."

Going beyond the PC made sense in a world where PCs have become the ultimate commodity. Dell failed to absorb that lesson, apparently, as its profitability and stock price have fallen over the past year. Looking at a ten year history, Dell is still way ahead of Hewlett Packard in stock performance, but HP has definitely turned the table - in an industry where such renewals are difficult to come by.

HP's renewal is a testament to the company's and Hurd's efforts to rebuild morale and performance in the wake of CEO Carly Fiorina's less than stellar record. The company should continue its effort to find the most profitable technology sectors and leverage HP's brand name into those sectors, rather than relying on a PC price war strategy.

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May 15, 2006

Head of Nintendo Zigs While Others Zag

By Adam Carstens

Nintendo CEO Satoru Iwata has an op-ed in the Los Angeles Times discussing the game industry’s transition to the next generation of consoles. He writes, “We are an industry that has spent many years "improving" our product along a single performance vector — in our case, graphical realism. But we are reaching a point of diminishing returns. Like Hollywood, which in the past has focused too heavily on special effects, we need to find other ways to improve.”

Most of the chatter coming out of E3 this week is that the new consoles from Microsoft and Sony amount to more of the same in terms of gameplay. While that works for a certain core audience – the 18-35 male – it won’t broaden games into a true mass medium. The same way Friendster appealed to the urban hipster, MySpace changed the social networking game with true mass customization for individuals.

Thinking about it in practical terms, many gamers are now finding themselves married with kids. What types of games are they going to want to enjoy with their families? The same old shoot-em-up or drive-around types of games? Or games with fun, interesting and innovating methods of game play that truly bring people together – not just young males?

We’ll know in a few months who has the answer.

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May 12, 2006

Renewal: Japanese Capital Coming Home?

By Adam Carstens

A recent “Investor’s Insight” letter discusses the incredible amount of Japanese capital that has found its way overseas of late – even more than the fabled days of the 1980s when the Rockefeller Center and Columbia Pictures purchases were made.

According to the letter, “1.8 trillion [dollars] worth of Japanese capital appear[ed] abroad in a little less than ten years. To put this into perspective, this amount is roughly equal to 15% of US GDP or 3% of the total value of US assets today.” The letter discusses the incredible effect – on Japan, as well as other economies – this might have if Japan starts raising interest rates, or if the yen starts to rise.

Well, regarding that last one, it’s already happening. The yen has noticeably dropped over the past few weeks from 118 to 111 or so. The market is voting to dump dollars and gather yen, at least in the short term. While this will mean Japanese prices may start to re-inflate, that’s a good thing from their perspective after years of fighting deflation. An attractive currency, a modest amount of inflation and an economy with lots of repatriating capital – sounds like a recipe for continued renaissance to me!

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May 10, 2006

China: Sharp rise in the number of bloggers

By Yoshi Kusaki

In our previous entry, we mentioned how blogging is booming in China, the second largest internet market after the U.S. According to this article on the news website China Knowledge, the number of China bloggers is expected to reach 60 million by the end of 2006. Right now, it is said that there are 120 million internet users in China. The expected number of bloggers by the end of this year will account for about 50% of those netizens. Also, according to a research report conducted by Tsinghua University, the number will hit 100 million by the end of 2007, the article says.

Clearly, the growth of blog use in China will lead to greater freedom of expression as one of major communication tools with someone out there. And for the companies that provide blog services, establishing a profitable business model centering on blog and blog users is an urgent task, since none of blog service providers in China are making a profit at this point.

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May 08, 2006

Japan’s Population Fall: Is it a problem?

By Adam Carstens

Interesting musing from economics writer Dean Baker, who had a post a few days back about Japan’s falling population. He referenced a Washington Post article describing the fall in Japan’s population as a “problem”.

Baker says “less crowding and less pollution is not a problem in any economics I know. Maybe the Post will explain its reasoning in some future article, but for now, this front page story simply doesn’t make sense.”

I guess it’s all a matter of perspective. Here in the US, growth is considered the norm. If you’re not growing, you’re “stagnant,” or worse, “dying.” We add about 3 million people every year, and import more immigrants (legally and otherwise) than all the other nations of the world combined. The US is the quintessential “growth” story. And as any cross-country flight or long drive will tell you, we still have plenty of room to expand. (Don’t believe me? Try driving through the Great Plains sometime.)

So, when a nation’s population starts falling, we don’t know what to make of it. But really, the story of the 21st century will be how nations transition from high population growth to no or negative population growth. Some will have difficulty, its true. But Japan looks fine. Tokyo is still one of the world’s most vibrant and cosmopolitan metropolises, pulsing at 30 million strong, and yet much of the rest of the country is quite peaceful and bucolic. True, like any rural area, access to services is going to be limited. But that doesn’t make it a “problem.” It’s just the way life is. People who live in Mohave, California shouldn’t expect the same level and access of health care and consumer options as Los Angeles.

At any rate, Japan shouldn’t fear this new era of its development. Japan has long been master of increasing productivity, often through advances in robotics and automation. These advances have helped the world as a whole. If a declining Japanese population means we get more cool robots and labor saving devices, then count me in as a fan.

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May 05, 2006

Renewal: Japan’s M&A Renaissance

By Adam Carstens

Japan is becoming an M&A powerhouse – breaking with its tradition of building companies from scratch and favoring building corporate strength by letting capital flow to where it is needed. Overall, this is resulting in a much more dynamic and re-energized Japan.

According to an article in the WSJ, for the 1st quarter of 2006, “[M&A] deals valued at $22.5 billion were completed in Japan, up from $14.2 billion in the same period a year earlier, according to Thomson Financial, a data tracker. For all of 2005, deals totaling $167.6 billion were announced, up 55% from $108.5 billion in 2004.”

It should only get easier to complete deals in Japan, thanks to “changes to Japan's corporate law [which have] eliminated the need for shareholder approval of many types of deals.” Given Japan’s capabilities, we expect them to be an alluring place for capital for many years to come.

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May 03, 2006

Renewal: Mitsubishi Motors

By Yoshi Kusaki

This article in Reuters reports that Mitsubishi Motors Corp. climbed back into the black in fiscal year 2005 for the first time in three years with a group operating profit of 6.78 billion yen.

In its home territory of Japan, Mitsubishi acknowledged in 2000 that it had been systematically hiding auto defects from authorities for more than two decades, resulting in a dramatic loss of credibility in the market. The company has struggled for several years to restore its image and boost sales. Thanks to the recent popularity of its new Outlander SUV (released in October 2005) and the new i minicar (launched in January 2006), sales of Mitsubishi vehicles in Japan are up 13.2% from the previous year. Also, by reducing their sales promotion spending and material costs, and cutting back on general administrative expenses, they've engineered a rise in Mitsubishi's volume/model profitability.

However, when we look at markets outside Japan, Mitsubishi's recovery still seems weak. In the U.S., where Mitsubishi used to make all of its money, the company is still suffering from the results of a sales promotion to customers with lower credit scores, which caused a higher than normal default rate. Also, in Australia, Mitsubishi has failed to meet initial targets of new locally built V6-only Galant model because the launch was at the same time as a rise of fuel prices.

For Mitsubishi to have a true recovery, it will not only need to bring local operations in closer contact with headquarters in Japan to make quicker responses to the changes of market conditions, but also introduce a truly global vehicle with widespread appeal, like Camry or Corolla of Toyota, to North America and other parts of the world.

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May 01, 2006

Renewal: Microsoft’s Earnings Disappoint

By Adam Carstens

Microsoft released disappointing earnings last week, causing the stock once again to drop to levels last seen in 1998. That’s eight years of ups and (mostly) downs, eight years of promises that Microsoft could once again reclaim its position as the world’s dominant software company.

Unfortunately, this latest news seems to be really hurting employee morale. Commenters are out in force over at Mini-Msft, a popular anonymous blog devoted to trying to make Microsoft into a “leaner, meaner” organization.

One commenter said the following:

“The only way [Microsoft’s stock] can go up is if Microsoft develops a new business that earns Windows/Office like revenues (possible) AND profit (highly unlikely). The entire valuation of the company is based on those two cash cows. To the extent new businesses start becoming a larger and larger part of MS’s overall revenue (which they are), the valuation of the company will continue to fall because each incremental $ of revenue is less valuable than the previous to the bottom line.”

He/she’s absolutely correct – Windows and Office make up the largest part of the company’s revenue and profit – while everything else barely ekes out a profit or worse, runs at a loss. Even the vaunted Xbox division still loses money, even after many years in the marketplace, and unfortunately margins on most home electronics are getting smaller, not larger.

Worse, the company is estimated to be spending $2.4 billion over the next little while on new R&D efforts to try and compete Google or Yahoo. Here’s the problem with that – Google and Yahoo weren’t built with money. Sure, they became big in part of because of development – but the core at the heart of their existence wasn’t found in billions of research. It was found in a small but important shift in how people retrieve and share information – same as Windows and Office.

Does Microsoft have another Windows or Office in them? As the commenter says, maybe. But should you invest in them now, based on only a promise and a big checkbook? Probably not.

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April 28, 2006

Renewal: Abe On His Way

By Adam Carstens

Morgan Stanley's Global Economic Forum recently discussed the prospects for Japan's upcoming LDP leadership election, which will generate a new prime minister after Koizumi steps down this coming fall. Abe received 59% of support in a recent poll, indicating the voters like and trust him to continue Koizumi's successful and popular policies.

Also worth noting is this: "Until 1989, about 70% of Japanese people viewed China favorably. Now the figure is about 30%. Also, some Japanese worry whether the US will continue to be a reliable ally. Why, these Japanese ask themselves, would the US risk its own cities from nuclear attack from long-range North Korean missiles in order to defend Japan?"

Besides continuing to manage Japan's recovery, the next Japanese prime minister will have to be as or more assertive in expressing Japan's will regarding the twin issues of China and North Korea. As the article says, Abe leans towards Realpolitik when dealing with China - probably the most sensible path in a continually shifting power dynamic. His leadership should be just what Japan needs to continue down the road of renewal.

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April 26, 2006

RadioShack needs Renewal

By Yoshi Kusaki

According to Reuters' article, RadioShack, the third-largest U.S. electronics chain, reported an 85% decline in first-quarter profit because of disappointing sales of cellular phones and a write-down of their assets and inventory. The result follows a 62% drop in fourth-quarter earnings. As the company's recent stock price shows, RadioShack has been struggling through a business slump with no signs of recovery.

While other competitors, such as Best Buy or Circuit City, post increases in profits helped by strong sales of flat-panel television sets, notebook computers and portable music devices, RadioShack's business has been unsteady, thanks largely to a switch in its wireless phone service providers. S&P lowered its rating on RadioShact debt to one level above junk status. Claire Babrowski, president and acting CEO says improving RadioShack's wireless sales is the company's top priority. What does RadioShack need to do right now in order to turnaround its business?

RadioShack has already closed 40 stores this year, and it has announced plans to close 480 underperforming stores. However, I think closing 480 stores out of all 7,000 stores is not enough in order to get back to the level of profitability that the company should expect (there are 48 RadioShack stores within 20 miles of where I live!!). Although the company may expect further cost for closing stores, it is necessary to prevent the damage from future profit losses. On the other hand, the company can improve and reinforce its website, and provide well-stocked online shop with merchandise as well as electrical parts.

In terms of the company's crucial wireless business, RadioShack needs to build solid image of new business line to consumers. They need to make a clean break with dated items, and replace them with things such as HD radio, MP3 music players, and unique but sophisticated look wireless devices that use the Bluetooth standard, in clean and neo-futuristic stores.

It is ironically amazing to me that RadioShack has stuck with the same retail name. Many businesses have changed names and sacrificed name recognition in order to keep up with the times. The company should understand that most of us consumers no longer buy radio parts at a shack. RadioShack has been taking great care for customers. They listen to our needs, answer our questions, and give best advice for our needs then any other retailers. The company should not lose customers anymore. We are waiting for their renewal.

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April 24, 2006

Renewal: New York Eats All the Rage in Japan

By Adam Carstens

In a reversal of the Japanese buying Rockefeller Center, New York eateries are invading Tokyo. According to the Wall Street Journal, Manhattan eateries like Dean and Deluca, Il Mulino and Doughnut Plant all have established large presences in Tokyo over the last few years.

"Cafés and hotels in Tokyo boast of serving "authentic" bagels from Manhattan's H&H Bagels, from sesame to blueberry to sun-dried tomato. Dean & DeLuca has opened five deluxe grocery store-cafés in Tokyo in the past three years, and the Grand Central Oyster Bar is planning its second Japanese outlet next year. Il Mulino, the old-school Italian restaurant in New York's Greenwich Village, has operated a Tokyo restaurant since 2003. Doughnut Plant, the Lower East Side shop that sells big, fluffy, hand-cut, doughnuts with glazes like lime and pistachio, has opened nine stores in Tokyo in the past two years."

As we mentioned before, with the opening of Famima!! and Beard Papa in the United States, Japanese food purveyors were clearly aggressively expanding their presence overseas. But that doesn't mean Japan can't also try new foods. Tokyo is rapidly internationalizing its cuisine options, with all international cuisines more readily available than ever before. So why not also doughnuts and bagels?

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April 21, 2006

Renewal: The Future of China

By Adam Carstens

Excellent, thought-provoking piece from Nicholas Eberstadt in the new issue of Policy Review. He discusses the long term trends for population growth in countries such as Russia, India and China. Eberstadt is a bit concerned about trends just starting to make themselves felt in those country.

With China, the percentage of old people in the rural areas threatens to surpass that of Japan within twenty years. "As of 2025, nine of China's 31 provinces and major municipalities are projected to have higher median ages than contemporary Japan."

Furthermore is the question of childless elderly - Eberstadt estimates 30% of China's elderly will have no living son available to take care of them - as is the tradition in China. Either traditions will have to change, or the state will have to step in and provide support. Making it worse is the fact that China's elderly will be poorer, less well educated and more unhealthy than the developing world's elderly.

These obstacles are not enough to doom China's growth, but they do indicate China will be bumping up against some hard limits over the next twenty years as demographic trends exert themselves.

China will need to innovate dramatically in both social and economic terms if it is going to manage this demographic challenge successfully. In later entries, I will discuss the article's predictions for Russia and India, as well as some thoughts on some other countries' prospects.

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April 19, 2006

Don't Fear The Robot

By Yoshi Kusaki

METI, the Japan Ministry of Economy, Trade and Industry, compiled a draft of their Technology Strategy Map 2006, according to this article in Yomiuri Shimbun. The draft envisions a high technology society in 2025. I would like to cite some exciting future innovations from the article.

* Robots will be used to rescue people in marine accidents

* Electricity will be produced from hydrogen and oxygen, and long-lasting fuel cell batteries will be used for PCs and cell phones

* Refrigerators will be able to display recipes for foods as well as vegetables and fish with IC tags encoded with information such as the eat-by freshness date

* A system will computerize body sizes so people can easily purchase clothes that fit their body

* Goggles with the capability of informing users of eyestrain

* Special gloves that make hands able to bend hard materials

* Real time biological information sensor that analyzes human blood simply by applying the sensor to an arm

* The use of genetic information for cancer prevention will increase, and surgical operations will be increasingly precise to minimize tissue that must be excised

It seems like technological advances in the next 20 years will be amazing. Needless to say, the importance of applying science to industry is growing more and more. And behind the glorious progress of science and technology, competition in developing high-tech products will really keep heating up internationally.

Domestically, it seems to me that developing and expanding the use of robots would be vital in maintaining Japan's labor force in order to compete with countries with low labor costs. This will also help make up for the impending labor shortage in an aging society. MITI estimates that the market size for robots in Japan is expected to expand to 1.8 trillion yen by 2010 and 6.2 trillion yen by 2025 from the current 500 billion yen. When Japan establishes a system under which people and robots can work together and produce products more efficiently, Japan's main export item may become robots.

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April 17, 2006

Renewal: Cheap LCD Televisions for All!

By Adam Carstens

Anyone who's salivated over an LCD flatscreen set will enjoy this article, as yet another evidence of the renewed vigor of Japan's tech giants. Sony is partnering with Korean rival Samsung to produce LCD glass panels bigger, better, cheaper and faster. The new plant, to be built in South Korea, will produce 90,000 glass plates a month - almost twice the existing capacity of any current plant.

This marks a continuation of a joint venture between the two companies that continues to pay dividends for both. From the article, "the venture helped Sony recover from a trailing position in production of flat-panel TV sets. Samsung, which had mostly built LCDs for cellphones and computers, learned from Sony's TV expertise to improve LCDs for larger TV sets." Sounds like a win-win, especially for savvy Sony, which has seen some stumbles recently, but seems to have righted the ship in most areas.

Perhaps the "killer bundle" of 2007 will be a new Playstation 3 and a 50 inch Sony HD LCD flatscreen television. I'm taking the trip to Akihabara just for that!

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April 14, 2006

Renewal: Canon's transition to digital

By Yoshi Kusaki

According to an article reported by Associated Press, more than 75% of all cameras sold today in the world are digital. Digital images will account for 90% of all professionally taken photos by 2010. Digital cameras are clearly not a cutting-edge novelty product any more. At electrics stores, we can easily find various models of high-definition digital cameras or cell phones with built-in cameras at reasonable prices. For many electronics and camera manufacturers, the digital camera business has been a cash cow for a decade. The digital revolution has changed the competitive landscape among camera manufacturers. By capitalizing their digital muscle, new entrants such as Sony, Panasonic and Samsung have become leading brands.

When we look at traditional camera makers, we can see that they are trying to renew themselves desperately. Konica Minolta announced in January that they will abandon the photo business (both in digital and film) and will sell some of its camera technology to Sony. Fuji Photo Film plans to cut 5,000 jobs and announced in February that it would change directions to diversify into pharmaceuticals. Kodak, Nikon, and Olympus will farm out manufacturing of digital cameras to high-tech companies with more expertise.

Among the traditional camera manufacturers, Canon has made the most successful transition from film to digital technology, recording six straight years of earnings growth. The company now enjoys 17% of digital camera market share in the world. Canon's heavy investment in digital technology, including in-house chip making and marketing programs to help consumers remember its well established brand name, have helped its renewal process. While a new wave of technology in the photography has given the newcomers the upper hand, old school Canon has survived and prospered.

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April 12, 2006

Renewal: Mmmmm…Donuts

By Adam Carstens

Interesting article in Saturday's Wall Street Journal about Dunkin' Donuts attempts to renew itself in the face of competition from Starbucks. Living in Los Angeles, it's easy to forget about Dunkin' Donuts - there aren't any here - but the late night "Dunkin' Run" for coffee and donuts was a staple for us in college.

What's particularly great about the article is the description of the two "tribes" represented by Starbucks and Dunkin's customers. Dunkin' customers:

" Feel calling a sandwich a "panini" is too fancy (Dunkin' renamed it a "stuffed melt")

" Groused that crowds of laptop users in Starbucks made it difficult to find a seat (guilty!)

" Couldn't understand why anyone would pay as much as $4 for a cup of coffee (no kidding!)

" Didn't like Starbucks' "tall," "grande" and "venti" lingo (ooh la la)

" Felt lingering in a Starbucks felt like "celebrating Christmas with people you don't know." (hilarious!)

It wasn't income that separated the two tribes either - it was the mental space each occupied. "The Starbucks tribe, they seek out things to make them feel more important…[whereas] members of the Dunkin' Donuts tribe 'don't need to be any more important than they are.'" That's certainly one way of putting it.

Dunkin' plans to revamp its stores and is running a new campaign called "'America Runs on Dunkin',' showing office and construction workers relying on the chain to get them through their day." I'd be willing to give them a try - though I must say, for doughnuts, nothing can touch the fine flavors at the best donut shop in the world - Voodoo Doughnut.

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April 10, 2006

How old is your brain?

By Yoshi Kusaki

With the catchphrase 'train your brain", Nintendo's mind-challenging game has become a smash hit among middle-and elderly-aged people in Japan since last May. In the game, players repeatedly complete simple math problems, memory tests, and other brain-teasing quizzes. After playing the game, the game assesses player's brain age based on the player's response speed. The game has sold 3.34 million copies since its launch in May 2005. Japanese adults who are trying to enhance their mental agility, including those who never even liked computer games, have got hooked on the game.

According to the article in The Japan Times, Nintendo will release a U.S. version of the brain game on April 17 under the name 'Brain Age: Train Your Brain in Minutes a Day". The game is also scheduled to be sold in Europe in June in several European languages. Versions outside Japan also feature Sudoku numerical puzzles. But does the game really work to improve memory or mental skills? The game was inspired by the work of a Japanese prominent neuroscientist whose study has shown that performing reading and mathematic exercises help stimulate the brain.

Needless to say, as we grow older, our bodies change and it becomes important to exercise regularly to maintain health and physical fitness. Our brain is no different. Isn't it great that video game helps and acts as a treadmill for the mind?

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April 05, 2006

Renewal - Korean Player Bats Cleanup for Yomiuri Giants

By Adam Carstens

Baseball's here! Hooray! And on both sides of the Pacific, no less. For those looking for an interesting story, look to Japan where Korean slugger Seung Yeop Lee is tearing it up for the Yomiuri Giants. The Giants haven't done so well lately, but have mended their ways so far this season by signing Lee to bat cleanup for them. According to this story, Lee is "the first foreign player in 19 years to bat in the cleanup spot on Opening Day for Yomiuri--the last was Warren Cromartie 19 years ago." Lee hit 56 home runs in 2003, and helped Chiba Lotte win it all last year. He has 8 runs in his first 3 games, and the Giants are off like a rocket in their pursuit of a league title.

The symbolism of a foreign (Korean, no less) player batting in arguably the most important position on the most famous team in Japanese baseball is quite something. It may just be a small thing on the surface, but if it gets results for the Giants, then who can argue?

Allow me to go out on a limb here - someday, you'll see the Japanese league champion and the Korean league champion (along with any other Asian nation willing to take part) battling it for an "Asia Series" title. What a cool event that would be. Someday even those in Major League Baseball will deign to make their championship part of a true "World Series."

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April 03, 2006

Japan – Future Population Trends

By Adam Carstens

Ok, forgive me, I have Japan on the brain. A lot of people assume that Japan is down and out because their population is going into decline. Well, that’s true and yet, it isn’t. If you break it down by prefecture, the story is a lot more interesting (to me, anyway). Take a look at the following map:

Now, there’s a lot of red on this map – particularly in the rural north and south. That’s where most of Japan’s population loss will occur over the next twenty years or so. Fair enough – but are those areas of Japan really so important to the future of the country as consumers and producers, as innovators and entrepreneurs? My answer is no.

Take a look at the two major metro regions of Osaka and Tokyo. There, you’ll find a phenomenon familiar to anyone who knows what usually happens in major cities – they spread out. In fact, even though Tokyo is projected to lose a couple million people, it’s more than offset by growth in suburban prefectures like Saitama and Chiba. And the percentage of people in Japan that live in the four prefectures that make up Tokyo’s metro area (Toyko, Kanagawa, Saitama and Chiba) will be the same in 2025 as it is now (about 27%). If you throw in Ibaraki, projected to grow by another 300,000 people, it gets a little bigger.

Japan still has to be a bit concerned about its loss of population, but this map shows some parts of Japan will continue to grow. Even though the countryside will become increasingly sparse, Japan’s major cities should be just fine.

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March 30, 2006

Visit to Japan - Eastside renewal?

By Adam Carstens

I'm now back from my trip to the land of the rising sun, and I thought I'd share a few more thoughts on its revival. I was staying in a suburb on the East side of suburban Tokyo, called Shin-Matsudo. Shin-Matsudo has a lot of apartment blocks, and like most of the East side, is generally overlooked compared to the "hipper" areas of Western Tokyo, like Shibuya and Meguro. The reason? Not a lot of train lines were built in the east, and thus transportation options are relatively limited.

However, recently there has been some signs of life on the East side. The recently opened "Tsukuba Express" was a bright, shiny new transportation option from near Shin-Matsudo. Though it costs a little more, it's a nice 20 minute ride from Shin-Matsudo to the tech heavy district of Akihabara. The train had huge new windows, reached speeds of up to 120 km/h, and was packed on more than one occasion. We heard it was losing money, but my bet is not for long. What was even more of an indicator of Japan's new economic might was that the train was full of real estate advertisements for newly minted suburbs, now made more convenient to Tokyo by the new train line.

Furthermore, the East side figures to become even hotter. Some early evidence? The new "Tokyo tower" planned in Sumida, which will be the tallest in the world. Sounds like par for the course for Japan's Business Renaissance.

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March 29, 2006

Japan: Consumers will not hold the line on spending anymore

By Yoshi Kusaki

After more than a decade of economic downturn and stagnation, growth now looks sustainable for the world's second largest economy. This article reports that percentage of consumers in Tokyo metropolitan area who perceive that the economy is in good shape is 24.1%, the highest since 1993. Also, 42.1% of consumers expect Japan's economic climate will improve in the coming months. Needless to say, this is further evidence of Japan's business renaissance.

Looking deeper into the research in the article, buying a nicer car is the most popular luxury item among male consumers, while television sets are the hottest buy among female consumers. A revival in consumer spending will clearly lead to further GDP growth. Seems like we will continue to see more positive economic signs not only consumer spending, but also capital investment and exports throughout the year.

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March 28, 2006

Review of Japan's Business Renaissance

By Adam Carstens

Just FYI - Pacific Dreams has posted a review of Japan's Business Renaissance here

They say: "This is a fascinating exploration of not only Japan's business culture but, in turn, the business culture of the United States, as well. The authors give countless examples and stories to help solidify their points. There use of statistical evidence and even charts and graphs also help the reader digest the rich content. Japan's Business Renaissance is easy to read, even for non-business executives, yet so full of information and proof that the reader never needs to doubt the claims the authors make…Just released, Japan's Business Renaissance is very timely and up-to-date, but with information which will certainly be valuable for years to come."

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March 25, 2006

Renewal: Sharp Electronics

By Adam Carstens

Excellent story in the New York Times discussing the revival of Sharp Electronics, which revived itself thanks to a heavy, and risky, bet on LCD technology. The article also quotes our very own John Beck, who discusses the trend for Japanese companies to break out of the pack more often these days.

"It's a new era for Japanese business," said John C. Beck, president of the business consulting company North Star Leadership and co-author of "Japan's Business Renaissance." "Japan has become much more entrepreneurial and innovative. Companies are taking new risks, going into new areas, making new products."

Well said, John! The article also mentions that "changes are rewriting the rules of Japan's business culture, where for decades after World War II companies marched in lock step to advance the nation's economy." Gee, where have we heard that before?

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March 23, 2006

Renewal: Consumer Spending on the Rise in Japan, Says WSJ; iPods everywhere

By Adam Carstens

It seems everyone on the trains here in Tokyo now has an iPod. And no wonder – according to this article in the Wall Street Journal, Apple sold 14 million of them in the last quarter of 2005 alone. That’s about 1 iPod for every 9 Japanese! Wow. In other tech news, my computer was spotted on the streets of Akihabara selling for about half what I paid for it 9 months prior. Sheesh. Note to self – next time, buy electronics here.

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March 22, 2006

China: From the standpoint of working women

By Yoshi Kusaki

In China, March 8 is Women's day. Every March 8, many areas of society pay special attention to women, with employers giving time off and gifts. Speaking of women in China, there is an interesting article [http://www.interfax.cn/showfeature.asp?aid=10653&slug=health] in Interfax China website. The article reports the release of first survey on the life quality of women in China. Specifically, the survey was conducted in eight major cities in China to see womens' working conditions, psychology and health, marriage and families, living environment, and sense of happiness.

Here is a summary of the survey results about women in China:

* 95% of career women are satisfied with their current job.

* Only 65% of career women feel happiness with their marriage.

* 62% of career women who have children worry a lot about their offspring.

* 79% of women are concerned about maintaining a nutritious diet.

* Only 54% of women are satisfied with their current living conditions and environment.

* 96% of women think they can realize their ambitions in their current job, but 92% of women feel pressure in their workplace.

* The pressure makes 24% of women to feel depressed. Especially, those age 31 to 40 years old feel the greatest pressure.

Source: http://www.interfax.cn/showfeature.asp?aid=10653&slug=health

Indeed, working, marriage, having children, and maintaining a body that fits low-rise jeans can be stressful for women in China. In recent years, China had made rapid progress in economic development as well as in developing democratic processes. From this survey, we can see that, like those in many other countries, Chinese women are struggling to achieve a happy life and career success during the current wave of economic evolution.

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March 21, 2006

Japan Wins World Baseball Classic!

By Adam Carstens

One of the real joys of being in Japan these last couple of weeks has been watching a nation actually excited about the World Baseball Classic. Unlike my home country, the United States, which seems more wrapped up in college basketball’s “March Madness,” the WBC has been a daily drama for Japanese television, with endless replays and dissecting of wins and losses.

So it was quite thrilling to see Japan squeak into the semifinals to face down arch-rival Korea and then dispatch Cuba 10-6 for the championship. At the risk of stretching, Japan’s victory could be seen as yet another sign of renewal at work.

Japan’s team and players had been known in the past for cool detachment, precise play and scientific regimen. Even Japanese reporters perpetuated this stereotype – said one article: “[Japanese] players become so regimented, so preprogrammed, they aren't as inventive as other players. ‘I think the Cuban players probably are more creative than Japanese players,’ [Japanese sportswriter Keizo] Konishi says.”

Yet the final proved that was anything but the case. The Japanese team ran the basepaths with wild abandon, at the risk of creating several needless outs. They also committed three errors in the game – quite unusual, and I suspect, a serious case of nerves.

After the victory, the “stoic” Japanese were insane and euphoric in the clubhouse champagne celebration. The normally stoic Ichiro Suzuki, Japan’s star right fielder, said he could never imagine being so happy. When asked what his next dream was, he said he couldn’t think about that right now because he was drunk. There was also this from that same article: “When asked what aspect of American baseball he would like to export back to Japan, [Ichiro] specifically mentioned passion.”

Could it be the formerly “regimented” Japanese have finally discovered how to play the game of baseball in a passionate, almost Latin American, way? What does this say about the future of Japan – will Japan’s emotional victory lead to less “regimented” ways of doing business and allowance of “foreign” concepts such as “passion”? Stay tuned.

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March 20, 2006

Renewal: Break into the mobile market

By Yoshi Kusaki

One of the biggest news stories in Japan last week was an agreement for Vodafone to sell its Japan unit, which has been struggling in the market, to Softbank, the Internet services company in Japan, for 1.75 trillion Yen ($15.5 billion). Softbank is going to realize its dream to become a communications powerhouse with a strong foothold in Japan's $78 billion mobile market, where telecom giant NTT DoCoMo and its rival KDDI have been fiercely competing.

The acquisition is the biggest buyout by a Japanese company in history - therefore, the amount may put an additional financial burden on Softbank since most of the money will be raised through a leveraged buyout. However, Softbank's acquisition of Vodafone is being viewed positively. In fact, Moody's has announced that it may raise Softbank's rating on this buyout, since Moody's says that the acquisition will create a competitive integrated telecom operator that provides operational benefits to Softbank's overall telecom business.

Softbank is expected to offer Yahoo Japan's services to mobile customers, such as news broadcasting, online auctions and chat service. Also, the company is going to bundle these services together with other telecommunication services, such as VOIP, it already has.

Ultimately, Masayoshi Son, CEO of Softbank, one of the richest man in Japan, sees his company's goal as a total digital information services provider that can connect IP to telecommunication devices as well as other home information appliances. Clearly, this acquisition and his company goal align well with Japan's national future vision, establishing the "Ubiquitous Society," an environment where human and machines can truly be in harmony.

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March 17, 2006

Renewal: China switching gears

By Adam Carstens

Various reports I read show China is shifting the focus of its economy from a “fixed asset” focus to more of a value-added focus. This could have significant repercussions for the world economy as a whole, as well as the major economies and multi-nationals who hope to gain from this change.

Realizing the folly of continuing to build endless production capacity along the coasts and destroy its environment in the process, China has realized that it needs to treat the environment as an asset. It also realized that building factory after factory lowers profitability and pricing power. These revelations signal the end of the current phase of China as the world’s factory floor. What it signals the start of is anyone’s guess.

Though it’s welcome news to see China start to apply some reasonable standards to investment, it’s one thing to “invest in research and development” and another thing entirely to actually translate creative thought into value added products and services. To do that, you need a tradition of relatively independent thought and a willingness to go where the research wants to take you. China is new at this to say the least. While I have no doubt there is tremendous entrepreneurial spirit waiting to burst forth in China, these things take time to take hold. In the meantime, China will have a limited window with which to work – it will have a quarter of a billion people over age 65 in a mere 25 years. Whether or not it will be able to balance these competing demands is anyone’s guess.

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March 16, 2006

Renewal: Observations on the Ground in Japan

By Adam Carstens

I have come to the land which yielded such interesting material for our book, Japan, to see exactly what a “business renaissance” looks like. I can report that on the surface, all looks well.

Over the previous weekend, I was on the Sea of Japan side of Honshu visiting my in-laws. The town of Kashiwazaki, they report, has neither risen nor fallen in population in many decades. This reminded me of the fact that during Japan’s famed Tokugawa era, the population also neither rose nor fell. And though such a circumstance would be derided in other corners for being “stagnant,” it doesn’t seem to have hurt Kashiwazaki any. People there still have plenty of resources to spare, and they live a comfortable life, far removed from the crush of Tokyo. My in-laws certainly seem none the worse for wear.

What is striking is to read about my country of birth in my temporary absence, and all the economic pitfalls therein. It seems about a quarter of the populace is doing just fine, but the other three quarters are falling behind, as partially evidenced in “Living standards not keeping pace with productivity”.

Being here in Japan, it really is hard to imagine their society leaving an arbitrary 75% of their population to fester in an economic swamp. And I don’t think it’s just the relative homogeneity. Whether it was in the down 1990s or the relatively flush recent times, it seems like the country never fully lost its spark or love of future possibilities.

My continued sense is that Japan has the know-how and the existing assets to compete for an expanding share of the world’s economic giant, even as its population starts to shrink and a waking giant to its West begins to exert itself more forcefully on the world stage. While touring the Tokyo National Museum, I saw how even though the fortunes of China, Korea and Japan rose and fell over the millennia, all three have managed to maintain distinct identities into the 21st century. Their individual successes compliment each other even today. I see no reason why that shouldn’t continue.

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March 14, 2006

Unanswered Questions From "Naked Conversations"

By Adam Carstens

This article from Bloomberg discusses Robert Scoble and Shel Israel's new book "Naked Conversations." A couple passages from the piece stand out to me, and I'll respond to each of them one at a time:

* "As for return on investment, Scobel and Israel say the return on blogs can't be found on a spreadsheet, any more than a press release or a speech by the chief executive officer can be. ``But most companies understand the value,'' they write."

This isn't going to be good enough. Blogging could be a diminishing return - above a certain point, more time spent blogging or reading blogs could detract from real work getting done or productivity. There are only so many hours in the day and only so many opinions to be gathered before making decisions. What is that sweet spot? Organizations need to know.

* What the authors don't convey, in their enthusiasm for blogs, is any real sense of whether letting employees slip in and out of the blogosphere does any concrete good for a company. They point to this example or that and say blogs must be working.

Blogs can certainly help a company unlock knowledge that might have been obscured. But what does unlocking that knowledge do, exactly? Does it give people more power over their decision making? Or does it confuse and muddy the issue until people are so confused they can't think straight?

These are the as-yet-unanswered questions from their book. In order to arrive at a fair calculation of value for blogging and business, more work needs to be done.

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March 13, 2006

What ails Yahoo?

By Adam Carstens

So the big news on Yahoo recently was that it is backing away from TV-style content and shifting focus to "user generated" content. Some wryly observed that this was something that was known in 1996.

Yahoo has been a darling, but its stock and earnings projections are off as growth numbers start to slow. So what really ails the company? Perhaps we should ask my 17 year old brother, who goes by the screen name "ou est mon boeuf" (don't ask). He is, full disclosure, a MySpace addict. He will also enter college in a couple years and probably know the pleasures of Facebook. I was asking him what, if anything, would make him stop using MySpace - he didn't know. Specifically, he had this to say about Yahoo:

[20:25] ou est mon boeuf: its like whats the point of using yahoo messenger

[20:25] ou est mon boeuf: cuz no one has it

I'm sure he uses Google for search, and I'm certain he uses Microsoft's OS and some of their office features. He also uses AIM. I'm fairly certain he's typical of most of his friends - tech geeks they are not. They define the mass market.

So the challenge for Yahoo (or really, any company) is to make themselves relevant to his and his friends' lives. Some people certainly use Yahoo - there's no question of that. But how to make those who have settled into a pattern of "non-use" join? Why will people who can get various needs met without Yahoo ever need to use it again?

My advice to Yahoo (or really, any company) is to find out what would make a user leave the relative comfort of MySpace. My brother didn't know. Do you?

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March 10, 2006

Renewal: MBAs Becoming More Popular in Japan

By Adam Carstens

The renewal of Japan (www.renewalcycle.com) continues. According to the Wall Street Journal , MBAs are becoming more accepted in Japan's business culture. Companies are hiring and promoting MBAs more than ever before, resulting in "an explosion of books teaching basic management skills and a boom in business schools, which have expanded to 45 from eight in 1990, according to Japanese business-school operator Globis Corp."

Japan's embrace of Western management theories is quite an interesting move for a corporate culture that previously embraced "implicit" learning and on-the-job training above all else. It means that a new wave of managers - many of whom were trained in Western MBA style programs - have seen the results of their training turn into real success in the corporate suite.

Whether or not MBAs will actually improve Japanese corporate performance in the long run remains unclear. But now instead of only one tool in their arsenal, Japan's managers have multiple options at their disposal. Competitors beware.

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March 08, 2006

Renewal: Vietnam & Intel

By Adam Carstens

The Wall Street Journal announced recently that Intel might build a plant in Vietnam. To me, this is an amazing next step for the formerly war-ravaged country and shows just how far they've risen up the value chain in a brief period of time. It's also an excellent signal that the country has a lot of long term untapped potential.

When I last visited Vietnam in 1999, it was definitely bustling but nowhere near the level it apparently is today. I was part of the efforts to help sign a trade agreement between U.S. and Vietnam, which finally came into effect in 2001. Despite worries that we would be "rewarding" a communist government, it is gratifying to see foreign investment taking hold, especially in places it was assumed would suffer once China came on the scene.

Vietnam is also on the receiving end of loans from Japan to build things like power plants and other necessary infrastructure - showing that the Japanese remain active in helping to shape the Asian economic sphere. They know where their future customers are - in the developing economies of Asia. Vietnam is projected to grow to 120 million people by 2050 - to become bigger than both Russia and Japan. With an ample coastline, relatively little ethnic unrest and other advantages, Vietnam's economy may just catch up to Thailand's over time.

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March 07, 2006

Ikea's Success Factors in China

by Wang Hai

Recently, an article in the Wall Street Journal discussed how Ikea has achieved modest success in China.

The article mentions that Ikea has embarked on a "low price strategy." This can be a reasonable strategy for Ikea in China. But let us remember that low price is relative, since in most of Ikea's Chinese customer's eyes, Ikea's furniture is not cheap at all. For instance, an Ektop armchair, at a price of 112 dollars (1000 RMB) is not cheap for Chinese standards.

So actually what I hear about Chinese customers' comments on Ikea's furniture is mainly that "Ikea's furniture is not cheap, but it's fashion, neat, reliable and comfortable. So it's worthy." People are buying Ikea furniture not only because of its cheap price, but because of the brand. Of course, at such a price, Chinese consumers would say it's a "reasonable" price: the price can match its quality and fame.

So, together with lowering the price, ensuring quality and brand image is just as important. I believe Ikea's presence in Chinese market will also bring these ideas to the local players in the market, who were originally only concerned about economies of scale and a price-war strategy. I remember in 1998, when Ikea first entered Chinese market, its price was lower than the international level, though, still people tended to classify it as closer to premium, if not luxury, according to the income level of that time. Though Ikea's customer levels were initially small, its brand message was gradually infused into people's minds. When Ian Duffy took over Ikea China, it was finally time for them to expand their market share significantly, as the brand name foundation was already laid.

The successful elements for Ikea's "low"-price strategy in China now consist of:

1) demand for the product should be huge (new homes & more income)

2) the quality and brand image of the product is superior

3) the cost of products can be significantly reduced by localization of production and distribution

Though there are many foreign brands' in China, we will find these brands can't achieve Ikea's market share of 43% - largely achieved thanks to their original premium position strategy.

Lastly, for the market size of a certain product in China, to say you have a 1.3 billion population as your market is wrong: currently, the demand and affordability for foreign brands in China are still from major cities, and most of them located in Changjiang Delta and Zhujiang Delta, of course, plus Beijing. The gap of the income in cities and in rural area is still very big. The competition in big cities is not very different from those in the U.S., while the only international brand thus far able to successfully reach both urban and rural area in China is Coke.

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March 06, 2006

Play A Game, Start A Business

By Adam Carstens

[Cross posted on Game Train]

There's a new game out there that lets players experience "the excitement, fears, and joy of starting their own business complete with a wide array of possible outcomes depending on the choices made throughout the game." The game is called "Business Experience Series: The Path To Starting A Company." Yes, it's only a text adventure, and yes, its only in Japanese but still, it's pretty cool.

Not only does this game show the power of learning, it also shows what is happening in Japan as detailed in our book (www.renewalcycle.com): Japan is becoming more entrepreneurial. Can anyone imagine an "entrepreneur" game getting published in 1980s Japan?

Why business schools haven't picked up on this is beyond me...maybe some enterprising one will, someday. (Hint hint) However, I can actually remember playing a "simulation" at Thunderbird when I first got there, but frankly, it was horrible. We had no idea what we were supposed to be doing, there was no chance to get feedback in the middle of the experience, inputs seemed to have no relationship to outputs. Perhaps that was the point - but it wasn't a positive learning experience at all. It was more frustrating than anything else. No context was given.

This seems to be one of the first attempts to bring the lessons of business into a game style format. Hopefully, it will not be the last.

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March 03, 2006

Renewal: Americans work more, accomplish less

By Adam Carstens

Interesting article from Reuters on Yahoo discussing how Americans seem to work harder than others yet get less done. Highlights include:

" The average time spent on a computer at work was almost 16 hours a week last year, compared with 9.5 hours a decade ago.

" Workers typically get 46 e-mails a day, nearly half of which are unsolicited.

" Sixty percent of workers say they always or frequently feel rushed, but those who feel extremely or very productive dropped to 51 percent from 83 percent in 1994.

" In 1994, 82 percent said they accomplished at least half their daily planned work but that number fell to 50 percent last year.

" In 1994, 40 percent of workers called themselves very or extremely successful, but that number fell to just 28 percent.

So what does this tell us? Technology investment is definitely making it easier to accomplish business in non-face-to-face environments, but clearly its not having the desired effect. But I don't think its just technology - something else is going on.

Expectations have risen in the workplace to become ever more productive and meet specific efficiency guidelines. But humans are not machines. They will stress out and become less productive if they don't feel comfortable. And worse, their ability to innovate and think critically will become severely hampered if they are subject to too much pressure.

In the desire to push people further and further, Americans have joined organizations full of arcane rules and bureaucracy, denigrated on shows like "The Office." America still has some entrepreneurship left in her, but it's being obscured. Companies need to find out how to unlock the secrets of innovation instead of trying to squelch people with meaningless rules, unnecessary emails and stressing their employees to the point of exhaustion.

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March 02, 2006

Japanese Growth Exceeds All Expectations

By Adam Carstens

Japan shouldn't be growing, right? Its population is old and about to start declining. China is on the move just to its west. The U.S. is more innovative and entrepreneurial. Well, don't look now, but Japan just posted quarterly annualized growth about FIVE TIMES the preliminary estimate for U.S. growth in the same quarter. Better yet, take a look at the sub categories of growth:

" Personal consumption grew 3.2% - driven by better sentiment, rising wages and more jobs

" Residential investment grew 7.6% - driven by tons of new housing and a sense that the property bubble in Japan has finally run its course

" Fixed capital investment grew 7.2% - driven by machinery orders, and pent up cap-ex demand. Japanese manufacturing firms are running at or near full tilt.

Japan has clearly shaken off the doldrums - and 2006 should be a stellar year. I boldly predict Japan will outgrow the U.S. for the full year in 2006.

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March 01, 2006

China: Blogs have become a new tool to communicate

By Yoshi Kusaki

According to an interesting article on interfax China, Weblogs have increasingly become popular among Chinese white collar workers. To summarize the article;

* White collar workers in China's four largest cities - Beijing, Shanghai, Guangzhou and Shenzhen - 52% responded they already had a blog, while another 28% said they plan to begin a blog in the near future.

* Writing complaints and criticism has become a major content theme for white-collar bloggers

* 28% of white collar bloggers always make aggressive and critical comments on their weblogs.

* 60% of white collar bloggers criticize their boss on their blogs.

* Although 67% of white-collars bloggers write about their private lives, only 27% make their blogs completely public.

* 41% said they chose MSN Spaces to host their weblogs, citing the option to limit access to users on the bloggers MSN contact list as a main reason for choosing Microsoft's free blogging site.

In China, blogs have become the fourth online channel for people to communicate with each other, following email, bulletin board systems (BBS) and instant messaging tools. They find blogs a place to relieve their emotions and express personal opinions in public - something they're discouraged from doing openly in real life.

Currently China has about 120 million Internet users, which is second only to the United States of 198 million. Given that the U.S. Internet market is nearly saturated, China's 1.3 billion population is a potential growth opportunity for America's leading providers of Internet hardware, software, and services. On the other hand, as recent news about blog shutdowns under central government pressure shows, foreign internet companies are facing a critical choice between giving in to Beijing's media censorship or risking the loss of Net users.

The growth of blog use in China will clearly lead to greater freedom of expression. And this trend should encourage the world's most populous nation to begin a gradual transition to democracy.

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February 28, 2006

Renewal: China's Place in the Value Chain

By Adam Carstens

Every nation, when it transitions from developing to developed status, has to claw its way up the value chain. Some are better at it than others - Japan is a notable example of a country that pulled itself up from nothing and became the world's second biggest economy. All signals are that Korea is about to do the same - rising in both influence and power in region.

Where China will eventually fit in this ranking is anyone's guess. Though the country is certainly rising in influence, it seems foreign firms are leveraging most of the gains from China. According to this article, American firms made $3 billion in China last year. Japanese firms been making out like crazy in China as well.

But what about Chinese firms? According to some reports, there's simply too much capacity in Chinese plants and too much labor to go around to make much money. For China to move around the renewal cycle, it's going to have to start innovating. And given that the "demographic window" for China - a rising percentage of people within the country of able-bodied working age - is going to close in about 25 years, it doesn't have much time to get its act together. Unless China can move up the value chain and do so quickly, it may be facing a lower growth rate than previously assumed.

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February 27, 2006

Renewal: GM

By Yoshi Kusaki

Fiscal year 2005 was a financial disaster for GM. The world's No. 1 auto maker is reeling from a full year net loss of $8.55 billion, their first loss since 1992. Now the company is targeting $4 billion in broad cost-cutting to restructure, and hopes to restore profitability with its new models in the full size SUV and pickup sectors as well as a number of new models for its Saturn brand.

Mark LaNeve, GM's vice president of vehicle sales, service and marketing, declined to disclose GM's marketing budget. However, he acknowledged, "We're trying to get costs down throughout the company. I would say one of the last places that we cut is marketing expenses, but we're trying to push down costs in the entire company."

An article in Automotive News reported that GM will concentrate their 2006 advertising investments on key product launches while certain brands such as Buick and Pontiac will receive less marketing support. Also, the article says the company is going to cut its 2006 national marketing budget by more than $200 million. GM spends about $2.5 billion a year in total advertising, leading media spending among automakers. Not a single day passes by without seeing TV commercials by GM. But how will GM stretch its ad dollars to drive new sales?

One possible direction GM may take is using non-traditional advertising - such as internet, banner advertising, configurable unified search interface (CUSI), or internet-based magazines, instead of spending on traditional media (print magazines or TV). Whether GM will successfully renew its business is still unclear, but at least the company will get away from relying only on costly discount and rebate campaigns. These are clearly not working, and GM finally realizes it - albeit a bit too late.

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February 23, 2006

Renewal: Japanese Repatriating Their Yen

By Adam Carstens

According to Bloomberg, "a report showed Japanese investors were net sellers of foreign bonds in January for the first month since March." In other words, Japanese are starting to bring their money home for domestic investment and consumption - which should further raise prospects for that economy's performance. Yet another signal as to the renewal cycle's continued evolution.

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February 21, 2006

Renewal: Zillow.com

By Adam Carstens

Zillow.com and other offerings like it are tearing up the Internet with their fresh approach to the real estate industry. For those who haven't seen it, Zillow.com is a pretty comprehensive site that has just about everything you'd want to know about just about any piece of real estate information out there - maps, charts, sales, projected value, etc.

What services like Zillow do is unify information that was previously disparate and allow equal access for everyone in graphically pleasing, simple layouts. A simple model, right? So why wasn't this done before? Simple - that is an awful lot of data - and there were plenty of people who didn't have an interest in seeing it aggregated (entrenched interests like real estate brokers). But finally, people with patience, stamina, programming fortitude and some design sense took on the challenge.

We'll see if they actually make any money - in fact, they don't charge you money on Zillow or make you sign up for anything - it's an advertising revenue model. And I haven't clicked on any ads yet despite looking up the home addresses of nearly everyone I know. But if there was a way for Zillow (or something like it) to become the one-stop shop for those looking to buy or sell a home - well, then, the sky's the limit. So here's to some much needed renewal thinking in an industry that could clearly use it.

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February 17, 2006

Morgan Stanley's Stephen Roach on Japan's Business Renaissance

By Adam Carstens

In his Feb 10 column, Morgan Stanley's Stephen Roach discusses how a growing Japan will affect other economies. Most interesting was his data on the relative share of Japanese imports from other countries. Says Mr. Roach:

"As recently as 1999, the US had the largest share of Japanese imports -- implying that America would benefit the most from accelerating Japanese growth. That is no longer the case. The US share of total Japanese imports has fallen from close to 25% in 1999 to only about 13% today. The reason -- a stunning surge of Chinese imports. Japan's purchases of goods from Greater China (the PRC plus Hong Kong) have risen from just 5% of its total imports in the early 1990s to about 22% today. The share of Japanese imports coming from Europe has also drifted down in recent years to about 11%, but it has been on a much gentler downward trajectory than the rapidly plunging US portion."

So the Japan-China relationship gets even tighter, while the U.S. and Europe are left out in the cold. With the U.S. announcing its largest trade deficit ever recently ($725 billion, or 6% of GDP), one wonders how the U.S. can ever regain a competitive advantage when it comes to exports. Japan is going to have its "business renaissance" without question, but unless the U.S. can regain the initiative, the American side of the Pacific doesn't look like it will have much to offer the Japanese - save as a place to take tourist vacations.

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February 16, 2006

GameTrain: Younger Generation Wants Something Different

By Adam Carstens

New post over at the GameTrain blog about generational differences in the workplace. Check it out!

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February 15, 2006

Japan's Business Renaissance Getting Noticed

By Adam Carstens

Two articles have appeared recently in the press highlighting our new book, Japan's Business Renaissance. Unfortunately, both appear to be behind subscriber paywalls. They are "Japan's Sun Poised to Rise Again" by Greg Earl in the Australian Financial Review and "Japan Deserves Closer Look," by Anthony Rowley of the Singapore Business Times.

However, it appears we're not alone in the Japan-o-phile book department. Russell Napier has written a book predicting the Japanese stock market will rise many fold over the coming decade, with an ultimate Topix of 6,000 (currently around 1,600). Yowza! Napier says that Japanese (and other) households will rush to own equity after bailing out for so long after the 1989 crash. We just hope we have the temerity to bail out in time. And apparently academic Steven Vogel is coming to the book party with one of his own titled: "Japan Remodelled: How Government and Industry are Reforming Japanese Capitalism." Nice to know we're not the only ones…

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February 13, 2006

Renewal: Music media

By Yoshi Kusaki

According to a news article in the New York Times, sales of music albums in the U.S. fell 7% last year, to 618.9 million units. On the other hand, sales of download tracks are increasing rapidly, but not enough to compensate for the decline. Also, global music retail revenue fell about 2% in 2005. So what's really happening?

According to the survey conducted by AP and Rolling Stone magazine, several factors are at work. Four in five music listeners consider downloading music without getting authorization "stealing." So piracy can be a factor, but it is not the only factor.

Three in four music listeners say that CDs are too expensive, and 58% say that music in general is getting worse. I totally agree with those factors. Many artists, as abundant as stars, put out new songs every day. There seems to be no newer patterns of melodies, and we can hardly find the 'newness' from music. I would rather download one or two of those favorite songs into PC or MP3 player instead of buying a CD album that costs $20.

In the epoch of gramophone records or music CDs, music companies did not have to worry about listeners complaints about pricing. Break-even calculation for each CD album used to be a lot easier. But that time is over-and so begins another renewal cycle. Listeners are now getting more power. And clearly this is a business woe for music companies. We are only willing to pay for what is worth paying to listen. We pick up only our favorite songs from the Internet without spending too much by buying CDs that have lots of unwanted songs.

Some say that music in general is getting worse, but advanced technology gives new ways to enjoy music to each of us. For example, just like DJs do, iPod creatively shuffles the order of songs from the track lists, bringing a 'newness feeling' to us. Music CDs will not disappear from the market anytime soon, but eventually it will disappear unless CDs can create higher added values to attract listeners, as opposed to downloading music from the internet.

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February 10, 2006

Renewal: Time Warner

By Adam Carstens

Recent evidence showed there is yet another potential entry into the "smaller is better" category of corporate governance that seems to be gaining in popularity. Carl Icahn issued a report showing how much value could be gained from splitting Time Warner into smaller units. Icahn wants AOL and TW's publishing and cable units spun into different pieces.

This news shows how little value has been wrung from AOL and TW joining forces five years ago. Consumers have been annoyingly persistent in a lack of caring what media conglomerate their content comes from - if they find the barriers to one company's content too onerous, they'll move on, or simply create their own content.

The recent tragedy of Sony (and even more recent renewal) showed what can happen when a company tries to shoehorn all of its divisions into a unified content strategy. Time Warner's divisions should be allowed to follow their bliss. AOL should focus on providing its subscribers with the best possible experience - regardless of content. Publishing and cable should try to attract as many readers and viewers as possible - without forcing them to sign up for AOL.

In an age where content ebbs and flows so easily across devices, platforms and users' brains, a "smaller is better" strategy has the most chances for success. Corporate megaliths seem unable to come up with ideas that work across different types of media - the logic of spending massive amounts of overhead trying to synchronize various arms of a media empire seems doomed to failure.

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February 08, 2006

Renewal: Sumo

By Yoshi Kusaki

In Japan, the annual number of Sumo wrestling fans who go to tournaments has been dropping since 1994. On the other hand, K1 (kickboxing combat sport) fighting has attracted many fans. J League (the top professional soccer league in Japan) soccer games are also popular, as Japan's success in the World Cup in 2002 and hopeful success in Germany this year have driven audiences to the sport. When I watched live coverage of Sumo Tournament, I was pretty shocked at the number of empty seats visible in the background on the TV screen. Clearly, Sumo has some problems attracting fans.

According to a news article in Mainichi Shimbun, The Japan Sumo Association has come up with some ideas to revive the sport. Box seats, which used to be for four people, are now available for pairs and discount tickets are also available. Also, the food menu at Tokyo's Sumo Tournament Hall has been revamped. But these measures have yet to attract more fans. The researcher at the PIA-run institute said that The Sumo Association should come up with new, innovative ideas such as holding an arm-wrestling event between Sumo wrestlers and fans and other things involving the Internet. But honestly, I am not sure about if this idea will really help pack in spectators.

When we look at what is happening on the Sumo ring, we see larger numbers of Sumo wrestlers from overseas every year. Currently there are 60 foreign Sumo wresters from 12 nations, such as Mongolia, Brazil, China, South Korea, Russia, Tonga, Georgia, the Czech Republic, Bulgaria, Kazakhstan, Estonia, and Hungary. Approximately one in 12 Chonmage topknots is from abroad as of November 2005. More important, foreign born Sumo wrestlers now make up 28 of the upper professional ranks. Indeed, Sumo, like Japan itself, is becoming globalized.

But does this trend mean there are too many foreigners in the world of Sumo? No, it's just that there aren't any really strong Japanese wrestlers at the moment. Many young Japanese seem reluctant to enter the rigid world of Sumo. As a Japan's "national sport", Sumo needs to be more exciting and cool. Some people feel unhappy about the globalization of Sumo - however, it is inevitable.

Globalization may make Sumo more competitive and raise the bar. But one clear thing is that when young Japanese Sumo wrestlers who can defeat foreign-born wrestlers appear on the Sumo ring, spectators will surely come back to pack the house, and that is the time when we can say the world of Sumo has gone through the renewal process.

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February 06, 2006

Renewal: The Video Game Industry

By Adam Carstens

Times are tough for the once-invincible video game industry. It's not that interest in video games has dropped - oh no. It's just that the video game industry is finding the transition to the new generation of games more difficult than they thought - at least in profitability terms.

The big three companies reporting recently all showed profit shortfalls. THQ was down to 72 cents a share from $1.05 a share. Take-Two had 53 cents a share, compared to 95 cents a share. And big dog EA posted 83 cents a share, down from $1.18 a share a year earlier.

The industry as a whole seems to be taking a pause, as "total software sales should be flat to down in 2006, with current-generation software sales down 35% to 45% and total hardware sales down 10% to 15%"

Games, the Internet and television are now increasingly battling for that precious commodity - leisure time. But instead of simply playing a static game on a disc, the industry seems to be transitioning to a "live" service model. This seems to be what customers want as well - according to a Stanford University study, while "MMOGs [massive multiplayer online games] make up just 7% of the $28 billion game market, they may be the most addictive niche…the median [MMOG] player was immersed for 20 hours a week, vs. seven to eight hours for gamers at consoles."

Why is the Internet winning over people's hard earned free time - an average of 13.3 hours per week, according to the latest data? It's because of the community experience of the form. Gamers want the same thing - they're tired of the same old stories - the endless grind of playing essentially the same game a thousand times with only slightly updated features. They are eagerly anticipating the next generation of technology which will allow them, finally, to play on an uber-connected network of like minded individuals.

Traditional media companies as well as game companies cannot ignore this rising part of the entire entertainment industry. Whoever creates the best "community experience" for viewers and players will have the upper hand for years to come.

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February 03, 2006

Renewal: Sharp

By Yoshi Kusaki

Japanese electronics makers have struggled over the last several years as their profits were eroded by plunging prices as well as intensified competition with emerging rivals like Samsung Electronics Co. of South Korea. For example, Toshiba said profit in the area of flash memory chips surged by more than 13 times during the latest quarter. Also, Sony is still trying to recover from falling behind in selling flat panel TVs.

But some Japanese companies appear to be making a convincing comeback. Sharp Corp said on Wednesday that its liquid crystal display TV business is growing rapidly, particularly its big-screen models, which resulted in a 26 percent profit increase for the quarter through December. Also, its mobile phone sales rose. Hiroshi Saji, CEO of Sharp said "We could not fill 20-30% of the order of big liquid screen TVs." Sharp kept its forecast for another record year of profits for the full fiscal year ending in March.

What is the driving force for Sharp to get a big lift from the unexpectedly strong global consumer demand for flat-panel TVs? The key to Sharp's success seems to be in its knowledge management system, which is called "Kinkyu Project (Urgency Project)". Under the direct supervision by managements, Sharp develops its flagship products, such as TVs, PDAs, or camcorders using liquid crystal technologies, within this Urgency Project team. The project carried out by Urgency Project Team is prioritized over any other projects that each product division has.

By creating a limited time only secondary division, focusing its corporate resources, and utilizing its core competence in the area where the company can maximize its strength, Sharp quickly develops products in a strategic way. After urgency team disbanded, each team member goes back to conventional division and feed backs knowledge to other division members, thus sharing and utilizing the knowledge. Through this system, Sharp hones competitive power by this knowledge management system.

We see that this Sharp's implementation is a good example of the "renewal cycle" in action. The renewal cycle does not have to come with painful organizational reform dramas - it can also be generated by a system when a company polishes its core competences.

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February 02, 2006

Renewal: Disney & Pixar

By Adam Carstens

Those who know me may know I’m a big Japanese animation fan. Recently, Turner Classic Movies showed some of the classics of legendary Japanese animator Hayao Miyazaki (if you haven’t seen My Neighbor Totoro or Castle In the Sky yet, you’re really missing out). Introducing the films each time was the head of Pixar animation, John Lasseter. It was clear that Lasseter’s love – his passion – for Miyazaki’s work drove him to create some of the most loved animated stories of recent memory through Pixar’s studio.

Lasseter is now head of Disney Animation thanks to the mega-deal announced recently merging Disney and Pixar. Also, Steve Jobs is their new largest shareholder. Something tells me Disney is about to experience a major bit of “renewal” in and of itself.

This is to say nothing bad about Michael Eisner. The man took Disney from a relatively small film and theme park operation to a worldwide entertainment giant. But it was clear that Eisner’s day was ending, as his leadership kept falling short with the paying public and with Disney’s shareholders.

If anyone can give Disney a little push, it’s Pixar and their unique way of doing things. Take this quote from a recent New York Times story about Pixar’s internal culture:

"The problem with the Hollywood model is that it's generally the day you wrap production that you realize you've finally figured out how to work together. We've made the leap from an idea-centered business to a people-centered business. Instead of developing ideas, we develop people. Instead of investing in ideas, we invest in people. We're trying to create a culture of learning, filled with lifelong learners. It's no trick for talented people to be interesting, but it's a gift to be interested. We want an organization filled with interested people."

The person speaking is Randy Nelson, dean of Pixar University, the in-house training center. This way of thinking is definitely going to be new to Disney regulars. It may not be the most immediately cost effective way to run a company, but it’s definitely going to create some value in the long run. Lasseter, make us another Totoro!

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January 31, 2006

Renewal: Yahoo!

By Adam Carstens

Sometimes it takes an outsider to show you what you really have. Excellent story from the New York Times on the turnaround of Yahoo! by its leader, Terry Semel.

When Jerry Yang, the founder of Yahoo!, left the company he built in 2001, the net economy was taking a real beating. Yahoo’s stock was falling by 90% from the bubble highs, and no one wanted to be a tech exec anymore – it seemed all the fun had gone out of being in Silicon Valley.

What new CEO Terry Semel realized was that Yahoo! still had the potential to be a hot property – people weren’t just going to stop using the internet just because some stock valuations had fallen to earth. But the problem was, the company’s focus was too scattered, and the people who had built it from nothing had trouble seeing what it was about Yahoo! that was really special.

Semel took charge by reducing 44 business units to 4 – letting the organization know what was really important. After that, it was trial and error – finding ways to let people express themselves online through groups and IM, forgetting becoming just a “search engine” and becoming a tool people can use throughout their daily lives. Over time, “there were unexpected contrasts between the old and the new that were not immediately apparent to him — just as they seem to keep confounding many of his old-media colleagues.”

Yahoo! has now become the #1 site on the web, and generates about a terabyte of data a day from its users. And better yet, it’s profitability has rebounded under Semel – “Having lost $98 million on revenue of $717 million in the year when Mr. Semel joined it, Yahoo earned $1.2 billion last year on sales of $5.3 billion.”

Narrowing down your priorities, creating innovation by combining the old and the new, and giving users a reason to come to the site – that’s a relatively simple renewal success story. Kudos to Mr. Semel for achieving it.

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January 30, 2006

Recent Media Mentions

By Adam Carstens

Here's a link to a news story about NSLG president John Beck speaking about the "Gamer Generation" at Bowling Green State University. Enjoy!

Also, NSLG Consultant Adam Carstens was on Phoenix radio station KJZZ for a few minutes talking about online communities and the social effects of the Internet. Start listening to the file at the 14 minute mark for Adam's interview. Enjoy!

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January 27, 2006

Renewal: Canada

By Adam Carstens

Canada voted for renewal on Monday night, but in a very Canadian way. It kinda sorta threw out its old government (while still giving that party, the Liberals, a third of the seats) and kinda sorta brought in a new one (while only giving that party, the Conservative, a bare plurality). It also gave a smattering of seats to minor parties, as well as an independent candidate described as a “shock jock radio host from Quebec City.” (Democracy in action!)

What does this mean for Canada? This modest rightward turn doesn’t mean Canada will ditch its national health care or welfare state anytime soon. But it is interesting to note that the victorious party’s headquarters were in Calgary, that boom town of the Prairie that is receiving many of the benefits from the new Canadian oil sands exploration. This is a necessary maturation of the country’s politics away from the entrenchment of the East Coast.

The 12 year rule of the Liberals probably had a lot to do with it as well, as voters do eventually get tired of one party rule after awhile. With any luck, Canada will try out some new modest social experiments that probably deserve a fair hearing.

This election also highlighted growing divisions among the left. While “left” parties received 52% of the vote in total, it was split among 3 main parties – Liberals, NDP and Greens. Indeed, the Greens achieved their best popular vote percentage, while the NDP had their best showing since 1988 in the popular vote. However, in 1988, the NDP and Liberals also combined for a majority of the popular vote, while losing to the Conservatives. What happened the next time? The NDP vote collapsed, as the Liberals rocketed to a 1993 landslide. Of course, this was after 9 years of Conservative rule, so there was likely a lot of tension built up in the political system.

The next election will probably not be too far away, given the minority government situation, so the current government won’t have much time to prove itself to voters. We’ll see if Canadians are really ready to take bolder steps to change the way things have been done in the past.

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January 26, 2006

Renewal: Ford

By Adam Carstens

Ford’s latest attempt at renewal is definitely making news. Layoffs of 34,000 have been announced, as well as the closing of numerous plants. What was most interesting were details from the following article in the January 23, 2006 Wall Street Journal: “‘Way Forward’ Requires Culture Shift at Ford”.

The article tells of the legacy of the legendary “Whiz Kids” of Ford’s management in the 1950s and 1960s: “Ford management culture remains very much the top down, militaristic institution created in the 1950s.” To combat this, the head of the restructuring effort has banned PowerPoint presentations and asked all employees “to wear a blue rubber wristband that says "Red, White and Bold" to signify a new Ford.”

Um, OK. With all due respect, it seems wristbands and PowerPoint presentations are not the main problem. In fact, forcing everyone to wear the same rubber wristband hardly seems to me to be the way to generate new ideas. Does wearing a wristband make you less hierarchical? More creative? Perhaps – it would be interesting to do a control experiment with different wristbands and colors and see how it affected performance within the company.

Anyway, Ford’s latest attempt at renewal are quite interesting, but so far, they haven’t really focused on what’s wrong with the company – the products themselves, and the company’s operating capacity. Ford simply has too many factories to match the relative demand for its products. So, despite CEO Bill Ford’s statements to the contrary when he first took the helm, shutting down overcapacity is the only solution for Ford unless its products start to take off. Ford seems to be admitting this five years too late.

As for the products, to inspire her people to create cars Americans actually want, marketing manager Mary Lou Quesnell apparently “showed her team a video of Americana images like a Bruce Springsteen album cover, cotton fields, open roads in the heartland and the 1980 U.S. Olympic hockey team set to "Little Pink Houses," by John Cougar Mellencamp.”

Note to Mary Lou Quesnell – this America that you speak of, represented by these images. This is an America circa 1984. This America no longer exists. America is now increasingly a multi-cultural tableau that couldn’t tell you jack squat about the “Miracle on Ice” or who John Cougar Mellencamp is. America now lives increasingly on the Coasts and the Sun Belt – not amongst cotton fields. Small town America is dying – big, international, and dynamic America is thriving. America now eats salsa, not ketchup. Get that through your head. And while you’re at it, take off your wristband.

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January 25, 2006

Renewal: Nike

By Adam Carstens

Nike made news recently when CEO Bill Perez, who took over for legendary founder Phil Knight, resigned. In cases like these where a new CEO takes over for a longtime leader, and in this case a legendary founder, it’s always interesting to look back at why the company felt it needed new leadership in the first place.

I went back to a November 19, 2004 Wall Street Journal story telling of the new CEO. The story is full of what Nike thought it was getting by bringing in new blood, as well as Perez’s own expectations of what his job would entail. Let’s go through them one by one.

Nike was avoiding internal strife by bringing in an outsider. “Mr. Knight said the choice of an outsider will preserve the leadership balance at the company rather than upset it by elevating one of the company's executives.”

Nike wanted someone with an international perspective. “The 57-year-old Mr. Perez, who also speaks Spanish, has vast international experience that will help Nike and its subsidiaries expand further into markets abroad, Mr. Knight said. "It's unusual to find somebody of Bill's quality who has worked in 110 nations with multiple brands," he said.”

Nike said it wanted a leader – not just a manager. “‘It took some time’ before Mr. Knight realized that Nike could attract a higher caliber of candidate by elevating its search to a CEO from a COO one.”

But despite Nike seemingly getting what it wanted in Perez, it’s clear there were warning signs from the start. Perez believed his mission was no different from any other CEO – improve the bottom line, move units and return value to shareholders. As to the units being moved, “Mr. Perez acknowledges he is new to the sneaker business, but he believes his experience marketing consumer products will transfer to his new job. "It's not that different marketing 'Ed's shaving gel' than it is marketing Nike products," he said.”

Well, not from Nike’s perspective. According to a more recent article written on January 24, 2006, Perez’s self-appointed mission was to analyze the data, cut down on expenses and see what retailers and customers wanted. “Mr. Perez said that Mr. Knight was comfortable having people "spend 95% of their time in meetings" but that he himself is "not a meeting man. I'm a data guy. I want to see the facts." He said he wanted executives out talking to retailers, and also wanted to push quickly for a clampdown on operating expenses, which "caught some people off guard."

Nike clearly thinks of itself as special – a beacon shining unto others within the sports apparel industry. Others may compete, Nike will always see themselves as above the rest. So looking back, Perez’s mission seems a bit doomed – even though Nike thought it wanted all those things listed above, in the end, it clearly didn’t.

Nike will now have an insider run the company – one of the people passed over when Perez was brought on board. The insider is fully groomed in the way of Nike’s unique culture and thus should have none of the problems Perez experienced. What is interesting is why Nike felt it needed to bring in an outsider before ultimately going with an insider. It seems to be a case of an organization not quite willing to deal with the consequences of its founder getting ready to take less of a role with the company that he loves. Without that full transition to a new generation of leadership at the company, Nike’s ability to broaden its focus and renew itself for new markets remains in question.

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January 24, 2006

Livedoor and "Horiemon" vs Japan's Old Guard

By Adam Carstens

The rest of the world got a rather crude introduction to the trials and tribulations of Takafumi Horie, Internet entrepreneur. "Horiemon," as he is known to his devotees, has set Japan aflame with his brash mergers and acquisitions and shaking of Japan's corporate old-boy network. Horie was largely unknown outside of Japan until his company Livedoor's offices were invaded by Japanese police under suspicion of securities fraud. The resulting action plunged the Nikkei average by 900 points, though the markets have since rebounded.

Horie represents everything about the once-again confident Japan - unwilling to wait his turn, upsetting the apple cart of hierarchy, destroying old networks in order to build new ones. This inquiry will only be a small setback for Horie, as he has both time and the eventual adoption of reform on his side. Most of Japanese society appreciates the role Horie plays, if not him specifically. Though many prefer the more conservative approach of his contemporary Hiroshi Mikitani, CEO of online retailer Rakuten. It is worth noting that both Horie and Mikitani attempted to buy baseball teams in Japan - only Mikitani succeeded, by not being quite as brash as Horie. But still, both play a necessary part in the continuing renewal of Japan.

The old guard of Japan are slowly giving way to upstarts like Horie, whether they like it or not. It will intriguing to watch his future unfold. Something tells me Japan's old guard has not seen the last of "Horiemon."

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January 20, 2006

Renewal: Sony versus Microsoft

By Adam Carstens

We’re introducing a new feature to this blog. We’re going to focus on the specific concept of “renewal” as outlined by our book, Japan’s Business Renaissance and by our model within, colloquially known as the “Renewal Cycle.”

I want to focus on the two main players in the video game wars of late – Microsoft and Sony. Let’s look at the Japanese electronics giant first. Sony’s had a rough patch. Revenue has been flat for five years. They haven’t had a bona fide hit since the Playstation 2 (but man, what a hit – 100 million consoles worldwide!). Their efforts had become moribund thanks to infighting between the content producers and the gadget designers failing to agree what restrictions should be on what content and where, culminating in the disastrous “rootkit” scandal that ticked off music lovers everywhere.

Sony has a new CEO this year, Sir Howard Stringer. After a lackluster quarter announced last October, the stock has since gone mad. It went up nearly 40% in the short span of 3 months, leaving competitors in the dust. Clearly, something is happening at Sony. Either people really believe in Stringer’s management skills to get the place in shape, or he’s riding an extended grace period.

Compare this experience to Microsoft. Though revenue continues to grow, it seems to be slowing down. Vista, the much anticipated new operating system, still hasn’t come out, nearly five years after XP. The company doesn’t seem to know how to handle itself – growing too big and cumbersome to affect change. The CEO is reduced to throwing chairs and talking trash about the competition in the press.

Microsoft recently released its Xbox 360 gaming system, which was plagued by supply shortages in the US and poor sales in Japan. The early numbers are in – Microsoft has sold about a million machines worldwide. While that’s pretty good, it doesn’t seem to match the 1.4 million number sold for the first six weeks of Xbox sales in 2001 – and the game market has grown significantly since then.

Sony meanwhile has released little to no information about their new machine, the Playstation 3. No release date, only a few titles released, and no price information. Compare that to the sturm and drang of Xbox 360’s release. Lots of advertising, lots of telling us it’s going to change the world, launch parties in the desert, etc. All flash, not much in the way of increased sales (at least compared to last time).

Microsoft seems to be getting louder in its insistence that it will continue to be relevant and change the world with its products and services. Sony has gone quiet in the new period of Sir Howard Stringer’s tenure. But something tells me Sony will have the loudest laugh – when it lets its products and services speak for themselves. While this is not exclusively Stringer’s doing, I think a change at the helm was ultimately what Sony needed to find its focus again. Microsoft could certainly do with a bit more internal soul searching these days – maybe with some fresh leadership at the top.

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January 19, 2006

Canadian Election – Who’s Excited?

By Adam Carstens

Well, the answer is, of course, me. Who couldn’t be enthused by projections of minority governments, five major parties, the different terminology of “ridings” instead of “districts” and best of all, common sense and raised dipthongs before voiceless consonants?

Anyway, to the election itself. For the second straight election, Canada appears headed towards a situation of no discernible majority. Thankfully, the U.S. founding fathers spared my country this fate by designing a system where majorities are encouraged. If current projections persist, Conservatives will gain a couple dozen seats, minor parties will gain a few, and the 12-year ruling Liberals will find themselves in second place for the first time in a long while.

The big question in my mind is what happens in Quebec. The “Bloc Quebecois” is poised to gain big and hold a majority inside its province. The party has a publicly stated goal to try another sovereignty vote similar to what was attempted in 1995.

Quebec is fading in importance demographically to the future of Canada – since 2001, the province has only gained 200,000 people, and is falling further behind the fast growing provinces of Ontario, Alberta and British Columbia. Quebec also has one of the lowest birthrates in the nation as well. Though Montreal does has a nice arts scene, Quebec is losing its influence in the Canadian economy ever so slightly, now representing only 21% of Canadian GDP. Meanwhile, Alberta and British Columbia represent nearly 25%, and are growing much faster in both population and economic terms.

Canada would certainly drop in the GDP and population table rankings if Quebec managed to escape, but would things really be so bad? It would actually give Canada a fundamentally more rightward tilt, dispensing with many of the advocates for a greater social services. For Canadians who would demand Canada catch up to the rest of the world in innovation and business freedom, losing Quebec might be the best way to go. For those who want to preserve their social services, Montreal awaits!

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January 18, 2006

MySpace – What Backlash?

By Adam Carstens

Given that I’ve seemingly gotten a lot of attention via the web for mentioning MySpace, I’ll do it again. The New York Times reported that MySpace suffered a backlash for supposedly censoring YouTube, a popular online video provider. The kerfuffle died down, but during the episode there were many threats of MySpace users to take their eyeballs and web hits elsewhere. Well, I just checked My Space founder Tom’s friend count – over 48,000,000 friends and rising faster every day. I stand by my prediction he’ll get to 100,000,000 by year end. What a party that could be…

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January 17, 2006

Games in education – teachers say yes!

By Adam Carstens

Cool article from Britain showing 59% of UK educators said “they would consider using games for educational purposes.” Either the UK is just lucky to have such enlightened teachers, or they’ve seen what moralizing bores some of us here in the US have become about games and violence, especially when the violent crime rate continues to drop.

Note that link shows the US violent crime rate per 100,000 people is about where it was in 1976 – right about the time that Pong first appeared in American homes. Anyway, UK teachers – come over here and impart some of your wisdom to the American education system! Please!

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January 13, 2006

Holiday Sales Recap

By Adam Carstens

Barry Ritholtz of The Big Picture has a good wrap-up of the holiday shopping blitz in the

U.S., which averaged 3.2% in same store sales increases. Going a bit deeper into detail, however, we see particular stores did really well. Wet Seal, Abercrombie and “action retailer” Zumiez all did very well, posting above 20% gains. (My teenage brother tells me Zumiez is where all the “posers” go to buy skate and snowboarding equipment, but hey, posers have money too!)

What didn’t go over? Sharper Image, whose stores still look like they’re out of 1987, was down 15%. Gap was down 9%, but has promised a “makeover” of their store design to encourage a more “homier” feel (we’ll see). Sears was down 12%, which is just awful. And proving that teen retailing is as fickle as they come, Hot Topic was down 6%, after being the darling of Wall Street in 2003. Goth clothing not as profitable as it used to be, I guess.

Consumer electronics kept places like Circuit City and Best Buy doing well, especially the flat panel TV category. It seems this is the new must own device of this decade, and who am I to argue. Our data showed the Gamer Generation™ is willing to spend more on consumer electronics, and as they age and gain earning power, they show they are doing exactly that.

Bottom line – Stay away from Sears, and fully expect one of the three big gainers mentioned in the first paragraph in the doghouse next year around this time. Teens love what they love, until they don’t.

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January 12, 2006

“GM Regrets Discounting”

By Adam Carstens

The headline was quite something on this article – “GM Official Regrets Employee Discounting.” Well, no duh. One of the most lasting things I remember from my education was basically, when you’re out of ideas, you cut prices. GM admitted as such when they got into this game of pricing Russian roulette over the summer. GM lost market share anyway, slipping to 26% of all cars sold in the U.S.

In the article, GM’s management spews more of the obvious. “Our comeback has to be fueled by great products,” GM’s top North American sales and marketing executive, Mark LaNeve said. “There has been no comeback in our industry that hasn't been fueled by great products.” Aha. How much are they paying him again?

It’s fashionable to jump on GM’s continued obtuseness, but really. If they’re going to make it so easy, we have no choice but to point it out. At the very least, we should give thanks that GM has finally stopped shooting itself in the foot. All those unemployed or soon-to-be unemployed GMers may have a different perspective.

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January 11, 2006

Low temp, and GDP boosts

By Yoshi Kusaki

Temperatures this winter are unusually low in Japan. Many areas of Japan are experiencing their coldest winter since 1946. The record snowfall in many parts of the country has killed 53 people in this winter. According to an article in Crisscross, this extraordinary cold weather has made consumers purchase seasonable goods like heating appliances and winter clothes. Heating oil and power use has also increased, resulting in a boost to domestic total spending on goods and services by 656.7 billion yen ($5.7 billion), adding 0.13% to the GDP in fiscal 2005.

Although the weather has an overall negative effect on economy as it prevents consumers from going out shopping, the larger income trend is improving thanks to Japan’s Business Renaissance, so the impact of the cold snap should work positively for the country’s economy overall.

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January 10, 2006

End of the Housing Boom, Cont’d.

By Adam Carstens

Two new numbers released on Friday, January 6, showed continuing patterns in the housing boom’s deceleration, if not outright end. The first was a labor report showing construction payrolls fell for the first time in 22 months and only the second time in 34 months. Consistent with earlier statements by us, construction should cease to be a helpful tailwind for the economy and should turn into a slight but persistent headwind.

The second number was the Federal Reserve’s weekly charting of outstanding revolving home equity loans. As you can see from the chart below, for much of 2005, Americans were net taking out billions more in home equity, and promptly spending it on everything from remodeling to new cars. But suddenly, in July, this rising pattern, which had been happening for years, stopped cold. The outstanding loan levels haven’t risen since the summer – quite unusual. Though this is certainly good news that Americans aren’t going deeper into home equity loan debt, it does mean the good times are pretty much over for those counting on home equity loans to prop up consumer spending, as they have these last few years.

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January 09, 2006

Japan: Is disparity increasing?

By Yoshi Kusaki

Most Japanese considered themselves part of the middle class during the postwar period of economic growth. However, more Japanese seem to be concerned their living standards will fall further behind in the future. According to a survey conducted by Mainichi Shimbun, a total of 71% of respondents think a gap in income between rich and poor will expand, while 18% believe it will remain unchanged. Only 6% think the gap will decrease.

The survey result seems to be driven by the number of young people who hop from one unskilled part-time job to the next, with little chance of building a career. This population has increased dramatically in the past decade. The Cabinet Office’s White Paper on National Lifestyle, published in 2003, says those young people number 4.17 million in 2001, up from 1.83 million in 1990.

Also, drastic changes in the labor market after the bursting of the bubble economy, such as the introduction of merit-based salary system and the ending of the lifetime employment system, have increased the sense of widening disparity of earning differentials among workers.

So what will happen in the future? More people, especially those with low incomes, will have difficulty in planning for their future life, making it harder to have children. Japan may ultimately become a society where children’s future will be largely determined by their family situation, such as the income of their parents. Even though this goes contrary to what Japan has been to this point, I would oppose adopting policies that punish success just to save those who cannot keep up with the pace of socioeconomic changes

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January 06, 2006

Yield Curve Inverts – What Now?

By Adam Carstens

Lost in the holiday hangover haze of last week was news that the yield curve finally inverted – or 2 year government bonds rated a higher yield than 10 year bonds. While some claim this indicator is no longer as powerful at predicting a recession as before, it still bears some watching. Normally, in an economic expansion, money flows away from longer term bonds (thereby lowering price and raising yield) and towards shorter term bonds (thereby raising price and lowering yield). When the yield curve inverts, something unusual is happening. We’ll see how long this condition lasts, and how serious the effects will be.

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January 05, 2006

Mentally-remote neighbors

By Yoshi Kusaki

According to this news article in Yomiuri Shimbun, a survey conducted by the Cabinet Office finds only about one-third of Japanese respondents feel friendly toward China. The favorable response toward China fell 5.2% from the survey fielded in 2004, making the lowest level since 1978. The article says the Japanese may have been affected by large-scale anti-Japanese demonstrations across China or by other disputes between the two nations.

Another survey conducted in November both in Japan and the U.S. by Yomiuri Shimbun-Gallup says 23% of American respondents think the U.S.-China relationship was in bad shape, which was 7% more than the survey last year, and 51% could not say either way. This survey also showed negative attitudes among people in the two countries toward China - 72% of Japanese and 53% of American respondents said they do not trust China.

The negative sentiment toward China is a potential threat to Chinese companies which plan to penetrate the Japanese or U.S. market. People may boycott Chinese brand goods, just as there was some minor American backlash against Japanese goods in the 1970s and 1980s. Is there anything a company can do to achieve success in the market when facing this type of sentiment? By creating a truly appealing brand image, companies can please consumers in the new market and sell based on quality or price, as opposed to nationalism. As long term trends indicate in the U.S., Japanese goods and brands are now nearly ubiquitous, thanks in large part on their products' quality alone - not where they come from.

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January 04, 2006

State Population Trends

By Adam Carstens

The Census Bureau recently released new data on state population trends for the middle of 2005. This was all pre-Katrina, so the effect of that hurricane on the gulf coast’s population won’t be known until later in 2006 sometime, but for now, it’s a relatively good guide as to who’s moving where. Some trends I noticed:

* California’s rate of increase is slowing. California is still growing and remains king of state population at over 36 million. However, between 2000 to 2001, it added more than half a million people, while this past year it only added 290,000. The hot housing market has pushed more people out of the state, but until recently they had been more than replaced by new immigrants. California could finally be hitting its natural limits in terms of carrying capacity – and all signs point to people continuing to cash out and move to cheaper climes. Speaking of which…

* Florida, Texas still on fire. Not literally – but their population growth shows no signs of slowing. Florida added 404,000, Texas added 388,000 this past year alone. For this reason, they are projected to pick up a total of at least 5 and possibly 6 new congressional seats when 2010 rolls around (a scant 4 years away!). Watch out for San Antonio, which is quickly becoming a megalopolis in its own right next to in-state compatriots Dallas and Houston.

* The shrinking Northeast. Three states and D.C. lost population this past year, reversing patterns of small gains in past years. New York lost 26,000 people, Massachusetts lost 8,600 and Rhode Island lost 3,700. Their populations are getting older and grayer, and not being replenished by as many immigrants as before. Granted, the big cities are still thriving, but increasingly the rural areas of the Northeast are becoming lonelier. New York should lose 2 seats in 2010, and Massachusetts should lose 1 – but if they don’t turn it around soon, it could easily be more. This is Massachusetts’ second consecutive year of population decline.

* Other gainers and losers. Through simple linear extrapolation, we project Ohio to lose two seats and Illinois, Pennsylvania, Michigan, Missouri, Minnesota, Iowa and Louisiana to lose a seat each – though in Louisiana’s case, it could easily be worse. California gains one, as does Arizona – though Arizona could easily leap up and grab a second one if it continues its torrid pace of growth. Nevada and Utah each gain one as they slowly climb the population ladder. Oregon just misses out gaining one, but could grab one if just a few more people decide to brave the rain between now and the next census. If not, Oregon’s pretty much a sure thing to get one in 2020. Politically ambitious Beaver State residents, take note!

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January 03, 2006

East Asia and U.S. to share DVD coding?

By Adam Carstens

Some positive news for anyone who’s ever tried to wrestle with region coding issues between East Asia and the U.S. According to Game-Hawg, when the PS3 comes out, it will have the same encoding for both East Asia and the U.S. - meaning the best Japanese games and movies will finally be available for consumption “over here” without worrying about copyright issues. If true, this is a potential killer move for Sony – there are tons of frustrated anime and Japanophiles who must go through no end of acrobatics just to enjoy the culture they love so much.

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January 02, 2006

2005 - Year in Review

by Adam Carstens

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December 23, 2005

Predictions for 2006 (3)

By Adam Carstens

Japan:

" Nikkei to 18,000 (at least).

" Yen makes a modest recovery against the USD.

" Shinzo Abe beats Taro Aso as the next PM.

" Toyota gains in U.S. and global market share.

" Sony finally pulls it together and bounces back thanks to the blockbuster PS3, which will dwarf the new Xbox (close but no cigar, MSFT).

" Also, I will visit at least once, possibly twice!

US:

" Dems gain seats in both houses - but I'm not willing to predict a Dem takeover of either house (yet).

" Dems also gain in some big governorships, including CA and NY.

" There will be a net loss of construction jobs.

" The economy will be OK, but don't expect anything gangbusters outside of tech.

" Stock market will go up slightly, given that the Fed will finally cease raising sometime in '06.

" Gold goes to at least $600.

" The 10-year bond goes to 5% yield.

Tech:

" Tom on MySpace will get to 100,000,000 friends.

" A multi-player online game will get to 10,000,000 subscribing players worldwide.

" The newspaper industry will experience a slight resurgence in revenue thanks to some innovation in adding blogs to their rosters, but the overall print circulation numbers will continue their slide.

" Official company blogs will also lead to at least one major move upward and downward in a stock price.

" Google goes to $500.

Misc:

" Brazil does NOT repeat as World Cup Champion.

" Colts over Seahawks in the Super Bowl.

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December 22, 2005

Predictions for 2006 (2)

By Yoshi Kusaki

Economy/Business

*Chinese Yuan will be revalued (1 USD=7.5 Yuan), leading to the appreciation of Chinese Yuan, depreciation of Japanese Yen, and appreciation of USD.

*GDP growth in 2006 ・Japan (2.0%+), US (3.5%), and World (4.2%)

*Population of Japan starts to decrease

*Toyota will surpass GM as the world痴 No.1 maker/seller of automobile

*Money will continue to flow into the Japanese market. Nikkei avg. willtop out atJPY 20,000

Japanese Politics

*Next prime minister of Japan will be Mr. Shinzo Abe

*Revision of the Japan Imperial House Law to allow a woman to ascend to the Imperial Throne will be passed

*Rise in the Japanese consumption tax rate to more than 10% after September

Sports

*2006 Soccer World Cup ・1st: Italy, 2nd: Brazil, 3rd: Germany, U.S.A.: Top 8, Japan: Top 16

Other

*Obesity rate in the U.S. will hit a new high to 68% or more

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December 21, 2005

Predictions for 2006 (1)

By John Beck

Japan:

* Tokyo's real estate prices increase by 8%

* A movie from a Japanese studio becomes one of the top 10 films in the US in 2006

US:

* Bush's popularity ratings drop below 30%

* Most US military is withdrawn from Iraq by December 2006

* Economy stalls -- less than 1% growth in 2006

Tech:

* Playstation 3 emerges as biggest single product launch ever.

* Microsoft goes on an acquisition spree, buying up large number of smaller mobile technology firms

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December 20, 2005

Lowered Expectations for China?

By Adam Carstens

Recently, I received an email newsletter telling me of some very interesting data in China. Sadly, I can't link to it, but I will say who the author is: Simon Hunt Strategic Services. Anyone interested in doing business in China should do well to listen to Mr. Hunt's advice.

Mr. Hunt's points were several-fold, but all added up to lowered expectations for China than boosters have previously thought. Several points stood out:

1) China's manufacturing sector is horribly unprofitable. "[China's] National Bureau of Statistics survey of 200,000 companies in the manufacturing sector showed a combined loss of US$15.1bn in the first seven months of this year, a 55% increase on 2004." Too much manufacturing supply, not enough demand - and this is even as several Chinese manufacturers move production to lower cost countries such as Vietnam.

2) What's worse, the stuff China is making is piling up in inventory. "Stocks of finished goods are also at high levels - for aircons and other consumer appliances, autos etc." The consumer of record, the United States, simply cannot absorb all this stuff - someone else has to buy it or Chinese manufacturing will go further down the tubes.

3) For those who think China will be able to absorb an ever-increasing supply of goods thanks to their burgeoning population, think again. "China's labour force will actually peak in 2008 at 770M and fall to 690M by 2025…In the age group 20-39, the population peaked in 2000 at 458k and is declining every year. By 2010, he estimates that this segment of the population will have fallen by 4%."

What does it all mean? China's demographic window - the brief period of time a nation hits the sweet spot in terms of the percentage of able bodied workers against the relatively unproductive old and very young - appears to be closing faster than we all thought. In toto, this means China's "real GDP should rise by 7% in 2006, 6.5% in 2007, 5.9% in 2009 with growth slowing to an average of 2.5% by 2024. For the whole period 1994-2024, [expect] an average growth of 4.8%, not the 7-9% forecast by so many analysts."

Now, 4.8% real growth is pretty good - certainly better than the U.S. can expect to achieve. But we fear many investors have been placing blind faith in China going forward, when in fact the real opportunities may lie elsewhere. It remains to be seen whether China can bridge the gap into a high value added services sector like other advanced economies. We shall see.

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December 19, 2005

Japan: Waiting for PS3?

By Yoshi Kusaki

In our blog on the 1st of December, we mentioned that the Xbox 360 has sold out quickly in the States. However, when we look at what is happening in Japan, Xbox 360 seemed to get off to a slower start, even slower than original Xbox console. According to this article on Mainichi Shimbun, more than half the games are still available in stores. Microsoft sold 62,135 machines in Japan over the second weekend of December, which was approximately 40% of the 159,000 machines shipped to stores.

On the 10th of December, the release day in Japan, 250 gamers lined up early at The Shubuya Tsutaya Shopping Center to buy an Xbox 360. The Shibuya Tsutaya Xbox 360 launch event, hosted by a famous DJ from the Nippon Broadcasting radio station, was a great success, and all the Xbox 360 consoles at Shibuya Tsutaya shop were sold out. So what is happening in the second largest video game market in the world? Were Xbox 360 sold exceptionally well only in the Shibuya Tsutaya shop?

As we mentioned in the previous blog entry, gamers plan to wait until both consoles are out on the market and see the full range of games available before making a purchase decision. Although Sony Computer Entertainment Inc. will not come out with PS3 until next spring or later, many Japanese gamers are clearly waiting to see what Sony's upcoming PlayStation 3 looks like. Enterbrain, a game publication company, forecasts some gamers will buy Xbox 360 as more titles, that gamers look forward to playing, come to the market. Microsoft knows the Japanese market is important because the country largely defines the direction of next generation entertainment devices. We cannot help keeping our eyes on what Microsoft will do next in the market in order to get an eager welcome among Japanese.

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December 16, 2005

The Best Taco Bell in the World

By Adam Carstens

Absolutely fantastic article in the Los Angeles Daily News about the best performing Taco Bell in the franchise - conveniently located in Canoga Park. All thanks to the efforts of one manager who developed a plan of attack for transforming his store. His plan was "amazingly simple: talk to at least two customers in the dining room, ask how their meal was and bus their empty trays."

The manager, Mehrdad Khorramian, "armed himself with sheets of smiling stickers, which he doled out to his staff and patrons alike. He learned the names of his patrons and made sure to greet them when they sat down for their gorditas. He worked the room like a four-star chef, inquiring how diners liked their meals, asking how he could make the place better for them." While it doesn't seem possible for a "fast food" franchise to have inspired this sort of loyalty and performance, all franchises would do well to emulate this model - partly by training their people to respect their customer and their product from the very beginning, in the very way Mr. Khorramain has done.

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December 15, 2005

A new ad delivery medium

By Yoshi Kusaki

According to this article in gameindustry.biz, Activision Inc. and Nielsen Entertainment this week released their latest study, which suggested that video game ads, when used properly, can increase awareness of a brand as well as positive attitudes toward it. The study was conducted to among 1350 active male gamers ages 13 to 44 living in the United States. During the study, each participant was assigned to play video games for a minimum of 20 minutes, answered survey questions about awareness, interest and recall of brands integrated into the games.

There used to be the assumption that ads in the games detract from the game play and frustrate gamers, however, a majority of study participants answered that ads enhance the game experience if the ad is relevant to the game. Indeed, in-game advertising can make the game more realistic, which clearly increases gamers’ enjoyment. The study also found that much higher percentage of gamers changed their opinion of the product positively from negatively after the game play. Clearly, video games are a powerful ad delivery medium. Also, advertising revenue will help game producers defray costs for game development.

U.S. ad spending in console and PC games for this year should approach $75 million, but will grow rapidly through the end of the decade, when the research firm sees it reaching $800 million to $1 billion, according to Yahoo! News. Given that the video game market is now as big as Hollywood box office sales, it would not be surprising to see the size of the advertising market grow that big.

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December 14, 2005

GM: Stop Whining, Start Thinking

By Adam Carstens

Jeff Matthews makes an excellent point on his blog recently, discussing a recent op-ed in the Wall Street Journal by GM CEO Rick Wagoner. Wagoner blames a host of problems besides the actual quality and value of the products, recalling the days of the late 1980s when American CEOs talked about Japanese products in downright fearful terms.

Matthews says "I always find it profoundly depressing to open the door of a Ford Taurus or Chevrolet Whatever and feel-just opening the door and getting behind the wheel-the poor quality of a Big Three automobile, compared to a comparable Toyota." To solve this problem, "[Wagoner] ought to be given a Toyota to drive around for a month. Then I believe he would stop wasting time writing self-justifying op-ed pieces and more time trying to fix what's broken at GM: the cars."

I must say I agree - on a recent trip home, I was given a Chevrolet Cobalt to drive. It was similar in size to the Honda Civic I currently own, so I find them to be roughly comparable. However, everything from opening the door to shifting the gears to turning the steering wheel felt horrible, labored and clunky compared to the Civic.

The American people surely agree:

2005 Year to date U.S. sales of the Cobalt: 195,839

2005 Year to date U.S. sales of the Civic: 281,444

Advantage: Civic, by 85,605 cars.

And this doesn't even take into account Toyota, which is frankly kicking everyone's butt this year. Yet more evidence perhaps of Japan's Business Renaissance!

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December 13, 2005

What is the winning formula in business?

By Yoshi Kusaki

On the 8th of December, Deloitte & Touche Tohmatsu released “The Deloitte Technology Fast 500 Asia Pacific”, a ranking of the fastest growing companies in Technology, Media, and Telecommunications in the Asia Pacific region. The ranking is based on the rates of annual revenue growth during the past three years.

This year, Power Digital Card in Taiwan (31,980%), Kong Zhong Corp. in China (23,849%), and Astralink Technology in Singapore (5,706%) took top spots, ranking 1, 2, and 3. The average revenue growth among 500 companies was 518%, and over 40% of the companies on the list belong to either semiconductor, electronics device, or software industry.

Also, the website reveals the result of survey on business issues and trends conducted to CEOs of those 500 companies. Factors that contributed to the company’s growth were outstanding employees (48% of CEOs agreed), strong leadership and right strategy, and outstanding or unique products. Over 90% of CEOs are strongly confident about maintaining growth rate.

So what are these CEOs’ agendas? Maintaining/achieving revenue targets (35%) and developing future leaders and task delegation (30%) are the top priorities that CEOs need to stay successful. Clearly, quality of employees is the single most important success factor – and as demographics change, we think we have an idea on the best way to nurture human resources.

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December 12, 2005

Ichiro's Baseball Renaissance

By Adam Carstens

As a Seattle Mariner fan, I believe Ichiro is one of the more exciting stars to fill the Seattle baseball galaxy in a long time. Yet despite Ichiro's multiple Gold Gloves and superb batting, it has been reported that Ichiro has been upset with his team's last place performance over the last couple of years - and not without good reason.

Particular to Ichiro is his attitude about playing Game #162 of a season that is probably just as well forgotten. Said Ichiro: "I had always felt that the value of a player really depends on his spirit in the last game of the season, just as the player would approach the first game of the season. On that last day I couldn't find anybody warming up on the field, and nobody said anything about it."

There is wisdom in Ichiro's statement as it applies to Japan's performance versus the U.S. There have been cheerleading sentiments talking about U.S. equity markets as they climb back to・he exact same levels they were at one year ago. (Closing price on the Dow Jones Industrial Average on December 26, 2004 - 10,827.12. Closing price on the Dow Jones Industrial Average on December 6, 2005 - 10,835.01.) Yet cheerleading stocks for going nowhere is equivalent to going through the motions on the last day of the season.

Ichiro is a craftsman of the game because he practices hard and plays hard every game - even #162. Despite being reviled in the past for their poor economic performance, Japan has been practicing hard the entire time by reinvesting in their economy and clearing away their bad loans. In the meantime, the U.S. has built up an incredible amount of consumer and mortgage debt. Does a country where 150% of GDP is tied up in household assets sound like it is investing in technology and education for the future? Or is everyone buying fragile piles of bricks, concrete and wood that warp, leak and require endless attention?

Japan learned its painful lesson in 1989 about the follies of real estate. It seems to have turned the tide. But until the U.S. is forced to go through a painful adjustment of its own, it will likely play the game as though its fate is already determined.

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December 09, 2005

New York Times: "A New Game at the Office

"By Adam Carstens

Excellent article in the New York Times discussing younger people's preferences for compensation and job security. "Compensation should be based on merit and his market value" was what one person surveyed said - as opposed to slow steady raises and job security for life. We said the same thing more than one year ago in our book "Got Game."

Thankfully, the main company profiled in the article, IBM, was lauded for how much money it spends on training for future skills. But other companies, in slavish deference to cost-cutting, have slashed training budgets. These companies will be dead in the water before long, unless they not only train, but train according to the new generation's preferences. Ahem.

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December 08, 2005

"Got Game" mentioned on "Iconoclasts"

by Adam Carstens

A friend mentions that our book "Got Game" was mentioned on a Sundance Channel TV show called "Iconoclasts". In an episode featuring Imagine Entertainment's Brian Grazer and Viacom chief Sumner Redstone, both agreed that, thanks to "Got Game," they had newfound respect for video games and their power to educate as well as entertain. Huzzah to Grazer and Redstone, and huzzah to my friend E.M. for letting me know about it!

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December 07, 2005

Reaching to the ad-zappers!

ByYoshi Kusaki

As most of us already know, with its innovative functionalities and ease of use, TiVo revolutionized the way many of us watch TV, and what we choose to watch. According to this article in Yahoo! News, TiVo is going to launch a TV ad search service in early 2006.

The advertising service will let TiVo subscribers search for a product by category or keyword, and TiVo will deliver relevant, targeted advertising to subscribers. Tom Rogers, President and CEO of TiVo says, "TiVo is once again introducing to the TV landscape a new and innovative advertising solution that is intended to deliver an even better viewing experience for subscribers." Indeed, TiVo is trying to capture the best of the Internet advertising model through the medium of television.

But will ad-zapping TV viewers once made by TiVo come back to TV seeking commercials? The article says it is still unknown how many of 4.1 million TiVo subscribers will use this advertising search capacity. If TiVo can clearly proves the new service will be financially beneficial to advertisers, advertisers will seize on TiVo's idea as one of the best ways to reach high-potential customers.

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December 06, 2005

More Optimism on Japan!

By Adam Carstens

It's like a broken record around here, but we love

Japan and we won't rest until everyone else does too. To wit, some more journalistic evidence thereof:

"It's Time For a Turnaround" by Henry Blodget (don't let the dot-com reputation fool you). His main point? "Corporate balance sheets are in better shape than at any time since the 1970s, bubble-era overcapacity has finally been absorbed, and operating profits are 40 percent higher than at the bubble's peak." Despite the high public sector debt and the glacial pace of reform in the government, Blodget still says its worth a shot.

Next is "A Contrarian View of Japanese Stocks: Now Is a Good Time to Buy Them" by Jonathan Clements in the Nov. 30 WSJ. Even though we're (pleasantly) shocked to see buying Japanese stocks is still considered "contrarian," it was funny to read this quote in the article: "Everybody wants to buy something that isn't too high," says Nelson Lam, an investment adviser in Lake Oswego, Ore. "But when you bring up Japan, nobody wants it, because it's been down so long."

Well, someone must want it, because the Nikkei (as of this writing) just blew through 15,000 and frankly seems unstoppable. For all the hoopla about the Dow Jones reaching multi year highs, it's been stuck at 10,000 for as long as we can remember. Those waiting for the Dow to cross through another measly thousand-point barrier should have jumped on the Japan train long ago. According to Mr. Clements, there's still time.

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December 05, 2005

Construction Jobs Keep Rising As A Percentage of All Jobs

By Adam Carstens

November's payroll figures came out, and while there was much rejoicing over the overall number (a gain of 215,000), what was even more interesting was that construction jobs continue to rise as a percentage of all jobs. I first pointed to this trend back in June, and it has continued since then ever higher.

With the exception of three months in the summer of 1973, just before the Arab Oil Embargo threw the country into a brutal recession, construction jobs now take up 5.5% of all non-farm payrolls. The last time the level was that high, it was 1960, and back then the percentage had been falling for years as the post-war house construction boom faded.

Since January of 2001, private sector non-farm payrolls have increased by 857,000. Construction jobs have risen by 542,000 since that date. That means, on a net basis, nearly two out of three net private sector jobs created since January of 2001 have been in the relatively low wage field of construction. Despite the easiest monetary policy in decades, despite massive tax cuts designed to stimulate the economy, despite record trade deficits and foreign investment - most of the job creation is in the housing sector.

My guess is, just about anyone who can afford a house (and plenty of people who can't afford one) has one (and in many cases, more than one). With the exception of the

Gulf Coast, which needs some attention due to Katrina, soon, a lot of people who've been spending time building houses will have to find something else to do.

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December 02, 2005

Singapore: Olympic Games for Gamers

By Yoshi Kusaki

According to this article in Yahoo! News, on the 20th of November, The 5th World Cyber Games, widely regarded as the Olympics of computer gaming, ended at Singapore's Suntec Convention and Exhibition Center. From 3 year old boys to a 39 year old military intelligence officer, more than 700 gamers from 67 countries competed over four days for a prize pool of $435,000. The e-sporting athletes competed over eight of the most popular video games including "FIFA Soccer 2005" and "Warhammer 40,000: Dawn of War".

At the event, 16 players from the United States team won with the most medals (two golds and one silver), and won the most - $80,000. Coming in second was South Korea and third was Brazil. Next year's games will be held in Monza, Italy, and up to 800 gamers are expected. You may see great "e-sports" players in future from your country.

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December 01, 2005

Xbox 360 Launches – Whither PS3?

By Adam Carstens

Well, by all accounts, the Xbox 360 has sold out meaning that, supply and demand being what they are, eBay has now started to see a boom in reselling the new video game console for as much as four times the list price. Internet rumors abounded that Microsoft was short-stocking the console in the early days on purpose, but the reselling on eBay means Microsoft is missing out on potential revenue that may never be recovered. Yet, since Microsoft is losing money on every Xbox it sells, perhaps that’s a good thing.

Now comes the waiting game – when will the Playstation 3 launch? How much will it cost? What games will be available? From what I read, Sony’s strategy is two fold – get as many exclusive games as possible for the PS3, forcing people to either hold off on buying an Xbox (or for the truly committed, buy both), and turn the PS3 into a Blu-Ray platform (Sony’s new standard for high definition DVDs). If Sony can pull that off, it will have achieved a rare victory for the company in recent years (after getting its butt kicked by Apple in the MP3 player category and by the music industry for the recent DRM software on its CDs).

This gamer plans to wait until both consoles are out on the market and see the full range of games available before making a purchase decision. Given that my iPod’s price dropped by about a third about three months after I bought it, I can say for sure that sometimes with new technology, waiting just a bit is the smartest strategy.

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November 30, 2005

Japanese Reforms – Not Yet Finished

By Adam Carstens

A good summary from the Los Angeles Times here about the reforms started in Japan and what’s left to be done. Postal reform is a project just getting started – even though Koizumi pushed the bill through the diet, the process won’t be complete for another 12 years.

But in the meantime, things are still looking up. The Nikkei has resumed its push towards 15,000, and even though the article mentions problems such as the high government debt levels and an over-concentration of benefits in the urbanized areas, there is no question the situation has improved over where it was five or ten years before. Hey, a Renaissance wasn’t built in a day!

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November 29, 2005

Vietnam – Next Target For Japanese FDI?

By Adam Carstens

We’ve talked a lot about how Japan is undergoing a “business renaissance”. Yet much of the reason why Japan is having such a good run is not only its willingness to embrace entrepreneurialism like never before, but also its willingness to invest in its fast growing Asian neighbors. This Newsweek article tells how Japanese investors are starting to like Vietnam more than China – costs are roughly the same, and there isn’t as much potential for political backlash. In fact, China’s fast growing cities may in fact be pricing themselves out of the market, given how much comparatively cheap labor resides on that side of the Pacific.

Many people forget Vietnam is an economic and demographic powerhouse. Vietnam has tons of coastline, making it an easy location for ocean shippers to operate from. It’s population of 83 million ranks 15th in the world, and its economy is growing at a nearly 8% clip. Though it remains nominally communist, it is rapidly changing and should achieve some sort of democratic reform as the population becomes more affluent. That means a more stable future for investors willing to jump in early now.

In the U.S., Vietnam still evokes images of campus protests and hazy 1960s television images of war and chaos. Even though the U.S. signed a bilateral trade agreement in 2001, Japan has a clear headstart on establishing good relations with the country, and should be up to $10 billion in two-way trade by 2007. And if these trends continue, Japanese brands and companies should have a significant advantage for the loyalty of Vietnamese consumers for a long time to come.

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November 28, 2005

Fresno Brain Drain

By Adam Carstens

A recent article in the Los Angeles Times pointed out the problems many American communities are having keeping their smartest citizens from migrating to other places.

Take the city and county of Fresno for example – as the article does. While Fresno County has seen quite a population gain in the last four years, increasing to well over 866,000 people and putting it 10th statewide, the county is by far the poorest of its populous cohorts. Its 2002 median household income of only $34,579 puts it well into the bottom third of California counties. So why would a bright enterprising young person stay in Fresno when the bright lights and high incomes of a Bay Area, Los Angeles or San Diego beckon?

Fresno County’s future looks to be increasingly agrarian in nature. With plenty of arable land on all sides, the area is perfect for nothing but growing crops. Unfortunately, agrarian economies are not all that value added, which doesn’t bode well for the future of Fresno’s income. Short of an earthquake turning Fresno and other Central Valley cities into beachfront property, don’t expect these patterns to reverse themselves anytime soon.

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November 23, 2005

China: In search of new opportunities in online game

By Yoshi Kusaki

One game company official said, “It’s like suicide to sell games in China.” According to a game information website, Gameiroiro, 92% of Japanese games purchased by Chinese game users are pirated. By the time a game is put on sale for 170 yuan (approx. $21), a pirate version is already on the market, for around 10 yuan ($1.20). Clearly, for game producers in Chinese market, confronting bootlegs and finding a way to make their business profitable are the greatest challenges.

With the advent of online games, game producers seem to be going in a better direction. This article in Asahi Shimbun tells that Japanese game producers are eager to move into China with online games. By keeping a tight grip on key data in games and generating revenue in the form of connection fees, game developers are trying to confront pirate publishing issue. Since 2002, Square Enix Co., known for its Final Fantasy series, has offered the online game “Cross Gate” in China, and with its total of 16 million users, it has now become one of the top ten popular online games.

After initial reluctance, Japanese game developers are following the lead of their U.S., South Korean and Chinese rivals. Given the situation that illegal copying of software from CDs and DVDs has been so widespread in China, it seems clear that game developers will continue to put more emphasis on launching games with an online version.

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November 22, 2005

Senior entrepreneurs are coming up!

By Yoshi Kusaki

Have you ever heard of the term “Year 2007 problem”? The term refers to the phenomenon of the first of the Japanese baby boomer generation (6.83 million people) born between 1947 and 1949 reaching retirement age. This means a large number of Japanese salary men will disappear from workplace with dizzying speed. And as a catalytic event, the problem is expected to mushroom throughout the country.

In our blog entry on July 14th, we touched on the aging workforce in Japan. Recently, there has been an increase in both the percentage of those employed as well as those seeking a job among men and women above age 60. There was an interesting article in Yahoo! Asia news last Friday telling about baby boomers’ strong work ethic, even after retirement. A study conducted by The Nomura Research Institute found that 80% out of 500 Japanese baby boomer respondents age 55 to 59 are willing to work after reaching age 60, and 15% out of those 80% think they would like to start new business.

The study result tells us that quite a few Japanese baby boomers would like to continue to work as long as they remain healthy, even after their mandatory retirement age and even they qualify for pension benefits. At this point, new business establishment is going strong at 90,000 per year. However, if we think 15% (or even half of 15%) of baby boomers end up taking real entrepreneurial action, it will signal another age of entrepreneurism , causing another catalytic event in Japanese business scene. On second though, the “Year 2007 problem” may not be such a bad problem at all.

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November 21, 2005

Housing Market Trouble

By Adam Carstens

The signs are everywhere. An article in the Washington Post. Another in the Arizona Republic. Another in the San Francisco Chronicle and the Sacramento Bee and the Los Angeles Times. And the granddaddy of them all – the Wall Street Journal. What everyone has feared seems to be finally coming to pass. The housing market is cooling.

Let me add my own anecdotal evidence to the mix. I recently heard a story about a house failing to sell in Seattle’s Queen Anne Neighborhood. This is one of Seattle’s best neighborhoods – sweeping views of majestic Elliott Bay and Magnolia Bluff across the way. For years, the property owner was besieged with offers to sell – yet didn’t budge. But recently, the owner decided to test the market – and put the house on sale at a price that was perhaps a tad inflated but still reasonable given where housing prices have headed over the years. Yet not one offer was made. The price was reduced. And reduced again – by more than 10% of the original price. Still, no offers were forthcoming. The house was, wisely, pulled off the market.

This story won’t show up in the housing statistics because no transaction took place. But clearly, the market is saying something – we are seeing volume drop as buyers and sellers can’t reach common ground any more. The median price may be holding steady, but there are clearly houses going unsold all over the country.

Home investors who can afford to wait likely will, but those forced to sell because of circumstance will find themselves accepting a lower price than anticipated. And buyers who don’t need to buy should tell themselves to wait, until the sellers get truly desperate.

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November 18, 2005

A Free Multi-player Game?

By Adam Carstens

John Smedley, president of Sony Online Entertainment, talks about the potential for a free multi-player online game in this interview with GameDaily.biz. The implications for this sort of model are enormous.

The game would be funded through advertisements and/or revenue gained from in-game player transactions - which means the gaming world is already starting to take a cue from the world of its older, tired cousin television. With the rise of the next generation video game consoles upon us, it is easy to imagine players sitting down for a night in front of their high definition televisions to play a multi-player adventure instead of a dated episode of "The Simpsons" - especially if there's no cost (beyond that of the game console itself).

Besides the enormous effect this will have on the entertainment industry and leisure time, expect the craft of games to incorporate more lessons of television - story craft, plot lines and familiar, branded characters that engage and entertain just as well as their televised counterparts used to.

Smedley's interview indicates the multi-player game industry is poised for a big breakout as new business models and revenue opportunities emerge. As far as I can see, there's no reason why innovative gameplay styles can't yet create a splash in how people interact with each other.

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November 17, 2005

Search for eternal youth

By Yoshi Kusaki

According to this article in Japan Today, Japan’s largest cosmetic company Shiseido Co. announced that it will enter the medical skin cosmetics market and launch 16 new medical skin care products under a new brand name “Navision”. Shiseido expects sales of Navision at 1 billion yen in the next three years, and its new brand will compete with products of L’Oreal or Noevir. The overall cosmetic market in Japan has flattened out at 1.4 trillion yen -- however, the cosmetic dermatology market, where Navision will focus, is fast-growing. The market has doubled to 23 billion yen in the past five years.

Rapid market growth of medical skin cosmetics market not only tells us that more people are concerned about beauty but also want to keep their youthful appearance well into their later life. So called “anti-aging” products that target signs of aging such as wrinkles, facial sagging and full complexion have continued to expand, reaching 263.2 billion yen, according to research by Fuji-keizai Co. in Japan. For companies that focus on health enhancement and cosmetic products, affluent baby boomers reaching retirement age are perceived as a promising target.

Some say that the quest for beauty and eternal youth has been a recurring theme in both history and mythology. Shiseido’s move to capture this fast growing market is an excellent strategic decision, and should give its competitors a run for their money. Yet another sign of a Japanese company renewing itself for the future!

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November 16, 2005

Goodbye California - Hello...?

By Adam Carstens

A recent article in the New York Times claimed people were moving out of California in droves because of high housing prices. Well, that's sort of true - my analysis of Census data shows that some people are moving out of California, but a lot more people are moving in. In fact, California has gained 1.89 million people since the last Census. However, what's more interesting to look at is the different demographic patterns revealed in the Census data. It turns out different groups are moving to lots of different areas.

I broke down the Census data into several key categories - Non-Hispanic whites, African Americans, Asians and those of Hispanic origin (which can be of any race). The top 5 counties each of these groups are moving to are a wide variety of places.

Non-Hispanic whites - Top 5 County Population Gain 2000-2004

1. Maricopa County, AZ (133,014)

2. Riverside County, CA (85,788)

3. Clark County, NV (79,909)

4. Collin County, TX (61,210)

5. Will County, IL (58,312)

African Americans - Top 5 County Population Gain 2000-2004

1. Broward County, FL (65,769)

2. Gwinnett County, GA (43,791)

3. Prince George's County, MD (42,010)

4. Clayton County, GA (36,414)

5. Mecklenburg County, NC (29,012)

Asians - Top 5 County Population Gain 2000-2004

1. Los Angeles County, CA (102,077)

2. Orange County, CA (62,397)

3. Santa Clara County, CA (53,978)

4. Alameda County, CA (39,132)

5. Queens County, NY (36,897)

Hispanic Origin - Top 5 County Population Gain 2000-2004

1. Los Angeles County, CA (356,192)

2. Maricopa County, AZ (215,784)

3. Harris County, TX (205,162)

4. Riverside County, CA (174,994)

5. San Bernardino County, CA (158,533)

Only 3 counties appear on these lists more than once - and there's plenty of California represented. Yet Non-Hispanic whites are mainly moving to suburban counties in the Desert Southwest, Dallas and Chicago. African-Americans are choosing counties in the South. Asians are sticking to both urban and suburban counties in California but also establishing quite a presence in Queens. And people of Hispanic origin are increasing their presence everywhere, but California in particular.

High housing prices may be driving people out of urban centers, but some of the biggest overall population losers are places like Detroit, Cleveland and Philadelphia - cities who have been largely left behind in the economic recovery and the housing price boom.

Bottom line - plenty of people are moving plenty of different places. The Midwest may have cheaper houses, but so far places like California seems to be doing just fine in terms of attracting new residents.

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November 15, 2005

Japan: Fat purse in cold winter

By Yoshi Kusaki

Here is more good news showing that the world’s second largest economy is recovering after more than a decade of stagnation. The Japanese government said Friday that Japan’s economy expanded at an annual pace of 1.7% in the July-September quarter -- the fourth straight quarter of growth. The government also forecasted GDP growth of 1.6 percent for the fiscal year through March, 2006, thanks to healthy consumer spending and booming trade, according to an article in Mainichi Shimbun.

Given the time of year, most Japanese workers worry about their upcoming winter bonus. According to this article in Asahi Shimbun on last Tuesday, the average winter bonus paid by companies this year rose 2.7 % from a year earlier to 442,000 yen. In the manufacturing industry, the average bonus is 516,000 yen, which is attributable to recent stronger corporate earnings due to the success in corporate renewal, including the completion of corporate restructuring and improvement of balance sheets. Most companies have solved the problems such as excessive debt, overcapacity, and labor redundancy. The total amount of the winter bonus paid will be 16.5 trillion yen – which should cause some ripple effects in strong personal consumption, which will push the economic recovery further. What will they buy with their big winter bonus? :-)

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November 14, 2005

IM, Games and Girls - The State of the Wired Teen

By Adam Carstens

The Pew Internet and American Life Project's new study on teenagers and the Internet contains quite a few fascinating tidbits on how Internet use is evolving in the U.S., especially among younger people. Three trends jumped out at me in particular:

1. The preference for IM over email. Teens seem to find email too slow and outmoded to bother with, while their love for IM is unabated. Expect instant messaging to replace email as the dominant form of communication as these wired teens enter the workforce.

2. The power of games. Eight in ten wired teens game, and show no signs of slowing down as they move into adulthood. This medium will stay with them throughout their lives as well - perhaps becoming the new way to casually make one's professional acquaintance instead of other outmoded business rituals (like golf, ick).

3. From the report: "Older girls are power communicators and information seekers." Girls age 15-17 power into information use, which is the key metric for this day and age. This comfort at home in the world of information is a very good sign for the future - however, it appears boys have some catching up to do.

The whole report is worth a look here.

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November 11, 2005

Video Game Demand called "Soft" - Is it the games?

By Adam Carstens

Electronic Arts reported earnings recently, and unfortunately, had a bad quarter. Revenue was down, profits were down, and the company's future game lineup leaves a lot to be desired in the "wow" department - most games are tired retreads of old titles, mainly built around sports franchises.

What can EA do to regain its magic? Well, the new Xbox and Playstation consoles coming out should help. But overall, the game maker finds itself with a relatively staid lineup in 2006. Even the much ballyhooed "Godfather" game won't be enough. What EA and other publishers need to do is move beyond the well traveled territory of traditional movie titles as their source material. There are plenty of great stories and creative minds out there waiting to create a powerful new game - the key is the willingness to let them do it.

Hollywood studios are reporting a down year and apathetic consumers because the quality of movies has visibly suffered. Hopefully, the game industry can avoid this same fate.

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November 10, 2005

Internet startups 2005 - Venture Capital Need Not Apply

By Adam Carstens

Silicon Valley is once again replete with startup activity. But venture capitalists are finding they're not as welcome at the party this time, according this WSJ story from October 31.

Why the change in sentiment? Costs are down - the article mentions one startup got going with less than $200K. One entrepreneur said "There is magic in independence." What a change in sentiment from the 1990s, when whoever could land the largest venture deal before the concept was even proven was considered the smartest play.

These young upstarts have seen what venture capital brings - a slavish demand to profitability and shareholder value, return on investment and so forth. The ethos in Internet entrepreneurship this time around seems to be about the soul of the invention - tinkering with it until its right, not rushing a product to market before its ready.

This era of startups, with its emphasis on building tools to actually solve problems and engage users instead of just making money for venture capitalists, should yield better results than the previous go-around.

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November 09, 2005

Japanese Cabinet Reshuffle Means Reform Will Continue

By Adam Carstens

In yet another sign of future reform in Japan, Prime Minister Koizumi announced a new cabinet recently, clearly putting= reformers in line to succeed him when he steps down next year. This commitment to continuing the mantle of reform shows Japan is serious in getting ready to meet the challenges of the next few years.

Chief among them is 51 year old Shinzo Abe, who is apparently favored to take the top spot next year. Relatively young and a member of Japan's postwar baby boom, Abe is known as a hawk and critic of China. This need not lead to trouble down the line, however - it will merely assure Japan has a strong position at the table in negotiating whatever needs parsing between the two countries. As China continues its upward rise, it is better for Japan to negotiate from strength rather than weakness. China will need to go through a "renewal cycle" of its own soon enough, so a strong Japan is the best thing for the region.

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November 08, 2005

The State of "Serious Games"

by Adam Carstens

I noticed the Washington Post gave some attention to the "Serious Games Summit" which has descended on DC yet again. I was there last year but other plans have prevented me from attending this year. But let me say where I think the industry is going and where it still has a lot of work to do.

We've spent the last two years talking to a lot of companies and organizations about the potential of games in their organizations. Over the past two years, a lot of the conversations have changed from laughter to skepticism to genuine interest. A lot of the attention, in the industry and in the article, focuses on the "easy targets" - first responders and simple economic simulations which are great but ultimately, I think, leave a lot on the table.

There are many skills in the business world which are applied to games but just need a little more work before they're really ready. We're working on trying to solve a lot of those issues, because businesses will not buy this software just because it's the "next big thing." Many have been burned by too many software packages and "does it all" promises to do it again any time soon. No, we're going to need some real provable ROI data before this thing goes forward. Flashy presentations and promises just won't work. That's why we've focused more on the assessment side of things - the only language business really understands.

I wish the attendees of the Serious Games Summit well - they're on track to discover a lot of interesting things about the potential of this industry. But businesses are still waiting, understandably, for someone to really crack the code of the "serious game."

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November 07, 2005

Rise of Korean companies

By Yoshi Kusaki

The Wall Street Journal reports that Hyundai Motor Co., S. Korea’s top auto maker by sales, posted a higher than expected 27 % increase in third-quarter net profit because of brisk earnings at its overseas and consumer-financing units. In the past several years, Korean companies, such as Hyundai Motor Co. and Samsung Electronics Co., have become conspicuous in global business. What are the driving forces of their breakthrough?

Let’s take a look at Samsung Electronics as an example. Factors in their success include a speedy top-down decision making style by CEO of Samsung Group Kun-Hee Lee, the bruising element of in-house competition, and an eminent corporate governance structure. Samsung Electronics is often compared with Toyota in that both companies have a healthy main business along with ample floating assets. However, there is a big difference between them -- their relationship with affiliated companies. Toyota aims to work together for mutual harmony with suppliers. On the other hand, Samsung Electronics (as well as most other Korean big manufacturing companies) tends to have a more definitive subordinate-superior relationship with them, which is rooted in traditional Korean culture.

A more defined subordinate-superior relationship would work well in making quick decisions and getting things done. However, this may risk stifling innovative thinking or cause frustrations among subordinates. I believe this may be why supporting industries to these manufacturing giants do not grow in Korea, and why strikes among workers continue one after another. In the mid to long-term, companies who see themselves as superior will have to move toward coexistence and cooperation with their subordinates -- otherwise, those subordinates may well trip up their superiors in the marketplace.

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November 04, 2005

A Season of TV in One Weekend?

By Adam Carstens

As if we needed any more evidence that consumers are hungry to change their media consumption habits, along comes this little nugget from the New York Times that shows people are watching entire seasons of television shows in one sitting - usually over a weekend - thanks to television series DVDs.

Media companies gave people a choice - you can ingest a story one hour at a time, once a week, over the course of nine months and have to endure commercial interruptions, scheduling conflicts. Or you can wait a few extra months, pay a nominal amount and watch the entire story over the course of a few days, with the consumption pattern and pace entirely up to you - and all commercial free.

The article says television show DVD revenues were $2.3 billion in 2004. That's an entirely new market that didn't exist just two years ago - and shows consumers are responding healthily when given new options to consume content on their terms. Media companies would do well to give users more control over when, where, and how they consume their content - or give them ways to create their own.

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November 03, 2005

Microsoft Earnings - Warning Signs?

By Adam Carstens

Microsoft recently reported earnings for the last quarter - and even though revenue grew 6% and net profit grew a healthy 24%, there were still a few warning signs on the horizon.

Warning sign #1: In the area where it directly competes with Google, Microsoft's revenue growth was only about 1%, while Google's has doubled. True, Microsoft has lots of other more profitable businesses to keep it afloat - Windows, servers and Office - but these businesses are growing more slowly and are tied to factors outside Microsoft's control, like global PC growth. In new and innovative areas, Google is clearly cleaning up. Despite all its investment in search technology, Microsoft still remains far behind in gaining revenue from users once they get on the web.

Warning sign #2: Microsoft's "Home and Entertainment Division" revenue growth slowed, and is still losing money. That won't change when the Xbox 360 comes out in less than one month, as the company will lose money on every machine it sells (it's hoping to make a profit on game royalties later). Clearly Microsoft has bet a lot of money on gaming potential, but investors should ask themselves whether the whole exercise has been worth it. Microsoft has yet to prove to shareholders that it knows what gamers want and can make money doing so. And until Microsoft does that, shareholders have a right to be skeptical.

Warning sign #3: Microsoft announced it would spent $19 billion over the next year buying back its own stock. Think about that. Microsoft, which contains one of the greatest collective talent pools in human history, cannot think of anything better to do with $19 billion than spend money in the open market buying its own equity. That $19 billion could be used to make acquisitions that add value or spur research in some of the world's most interesting and dynamic fields.

Microsoft may promise that it has a lot of good ideas coming down the pike, but as it enters its fourth decade, it is still highly dependent on products which have been around for years and are growing much more slowly than before. During its heyday, Microsoft always said they weren't an invulnerable monopoly - someone could come along at any time with better ideas. Well, given Microsoft's behavior, it appears they seem content with letting people do just that.

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November 02, 2005

Japan: We gotta recruit more!!

By Yoshi Kusaki

Here is another proof of Japan's Business Renaissance. According to an article in Nihon Keizai Shimbun on last Thursday, major Japanese companies substantially expand college grad recruitment up 13% for next spring.

According to the article, as Japanese economy continues to go through recovery phase, hiring of college students continues to grow, especially among banks, information technology firms and other non-manufacturers particularly enthusiastic about increasing entry-level positions. Clearly, increase of new recruits among non-manufacturing industries shows us Japanese pickup is spreading to wider economy. Indeed, like the bubble years, jobs will be created faster than they can be filled.

For companies, it will be crucial to attract good students. Also, companies need to develop training programs, which should be new and innovative, with long-range perspective, to create human resources with expert knowledge or skills, and to try to retain those talented people, otherwise, the company will eventually lose them. In the blog entry of July 20th, we mentioned characteristics of gamer generation. Our research shows people in gamer generation are good at managing risks, open to learning from other cultures, and unafraid of trial and error, however, if they are unhappy with their job, they will never be afraid of switch their path to the direction they feel comfortable.

One potential way to make in-company training program more innovative is to utilize games. Learning new things through simulated experience will promote understanding of new things more effectively than learning at classroom lecture style training. To take a simple example, how many of us effectively learned basic money flow from Monopoly? Including basic financing and corporate valuation knowledge on the game, and making players learn corporate acquisition, hostile buyout, or shark repellent seem worthy trying for the companies that want to innovate corporate training. We have a few ideas. Please feel free to contact us at blog@nslg.net.

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November 01, 2005

College gender gap widens

By Adam Carstens

This story appeared awhile ago, but I think it's worth mentioning still - the college education gap in the United States keeps widening. Since level of education correlates with voting activity, it should be no surprise that women are voting more than men these days, by about four percentage points. In the 2004 election, six out of ten women voted, yet only 5.6 out of 10 men did the same.

I personally don't care if women have a bigger voice in choosing our future leaders and running our institutions and organizations - more power to them. But as a society, perhaps the U.S. needs to ask, why are men increasingly dropping out of engaged life - both in terms of seeking higher education and in doing their civic duty? Is this a short term cyclical trend or evidence of something larger at work?

Higher participation in both arenas would be welcome by both genders, of course, but perhaps it will soon be time to ask how the current institutions of politics and education just seem to have less attractiveness for men these days, and what (if anything) needs to be changed to make them more palatable. With regard to education, we certainly have a few ideas!

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October 31, 2005

Blogging and business

By Adam Carstens

Blogging has come a long way in a short amount of time. Clearly, it's had an effect on politics - now, it seems to be making a small splash in the world of business. But no one has yet figured out a good "model" for business blogging. Some encourage employees to talk openly about their work, some encourage executives to get out there and sell the company from the top. We're not yet sure which is the best solution, but we're beginning to turn our research efforts toward this end.

One thing we do know is the blogging does not correlate to market perceptions - at least not yet. Google achieved great notoriety for firing Mark Jen when he starting writing openly about what the company was doing - yet it doesn't appear to have hurt their bottom line at all (or their top line!). Their blog is ridiculed for being boring and without comments - and yet somehow they persevere.

Yet two of the most lauded corporate officer blogs, Sun's COO Jonathan Schwartz and GM's Bob Lutz don't appear to have helped either company really connect in a meaningful with customers - at least if bottom line financial results are to be believed. Robert Scoble isn't in the executive suite, but he is Microsoft's biggest fan, never ceasing of telling us how many cool products are on the way from the software giant. Yet, the company's market performance is flat for going on five years or more.

Now, this analysis is a bit simple - clearly there's more variables at work than just whether or not a company "embraces" blogging. But my point here is that it's more than just a blog that helps you succeed in business - you have to put that blog to work in unique ways to connect with people. What are those ways? Watch this space to find out.

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October 28, 2005

Attack of the Gaming Grannies!

By Adam Carstens

This humorous Yahoo! News story points to an interesting trend - gaming is taking hold among the over 50 set. According to research data within the article, one out of five gamers are over 50, about a doubling in the last five years.

Far from being a youth fad, gaming is increasingly becoming a lifelong pursuit. Could that mean people are gaining something from it something more than pure entertainment? Among the benefits described in the article are keeping one's mind alert, relieving arthritis, and giving older people a connection with the younger generation.

Could nursing homes be eventually equipped with gaming consoles and wireless internet to encourage younger people to visit their older infirmed relatives more often? If visiting grandma wasn't so much of a chore than an excuse to try out the latest version of Halo, then so much the better for family togetherness.

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October 27, 2005

"Womenomics" in Japan?

By Adam Carstens

Another reason for Japan's Business Renaissance could be the rise of women in the country's spending equation. Bloomberg has a piece of commentary called "Womenomics Good for Japan and Investors" where the following is posited:

* Women are still a disproportionately small amount of spending in the Japanese economy

* Women's share of spending will continue to increase in Japan

This points to increasing opportunity in Japan for particular sectors, such as "daycare, nursing care, real estate, financial services, online and mail-order retailing, beauty, prepared foods, apparel and accessories, furniture, entertainment and placement agencies." Per capita income would rise nearly 6% in Japan if Japanese female labor participation rates were to match those in Western countries.

Another feature of Japan's newest cycle is a willingness to allow women all the equality long denied them by a very traditional culture. The U.S. experienced positive economic effects as women rose from an labor force participation rate of 31% in 1950 to 58% in 2000.

Empowering women in Japan will likely go a long way towards righting the economic ship in Japan - as well as perhaps even increasing the long depressed Japanese birthrate.

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October 26, 2005

Dreamy cars and gals

By Yoshi Kusaki

In 1954, when owning a car was literally just a dream for most Japanese, who could predict remarkable technological advances of today's automakers? On Saturday, the 39th Tokyo Motor Show, which marks the 50th year since its inception, opened with total of nearly 600 cars going on display. The official website well mirrors the half-century history of Japanese automobile industry as well as immeasurable improvements of Japanese living standards.

At the show, automakers present various concepts for exterior design and body frames, and of course, lots of beautiful campaign girls. This time, the show also spotlights environmental advantages of fuel-cell technology vehicles as well as other new technology, such as electronic drive-by-wire controls.

In this fierce competitive environment, other than quality and safety technologies, applying new eco-friendly technologies or information technology, distinct designs and unique materials have become great help in raising brand awareness and in emphasizing brand differentiation. Although it will be years down the road until those new technologies will be fully launched, it seems clear that bringing some of the advanced technology in other fields to automobiles is important for automakers. Company that works unflinchingly on its renewal cycle and advance innovations can only win the race.

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October 25, 2005

Information Helps in Disaster Relief

By Mike Liskin

The current U.S. citizenry is often called apathetic and cynical. Yet I suggest that we are witnessing a surge of ad-hoc opportunities for those in our nation—and the world—who have always wanted to get involved in direct social or political action but lacked the knowledge, the time or the proximity to do much good.

Take, for example, the East Asian Tsunami. The coordination of recovery attempts for the tsunami produced a catalytic event in that it brought forth ad-hoc efforts to repair telecommunications, help displaced people, and rebuild a stronger disaster preparedness network through the use of the newer communication technologies: blogs, wikis, and more sophisticated web sites. This has not only redefined how we deliver aid to those in need, but it has fundamentally altered the speed-of-reaction time that is expected of information organization and retrieval in times of crisis. James Robertson writes:

…As the beginnings of a massive relief effort were co-ordinated and aid began flowing into affected regions, [Peter Griffin] realised that the response lacked a vital element - information.

With Paola di Maio, Dina Mehta and a small group of internet contributors, many from tsunami-affected areas, [Peter] Griffin established SEA-EAT, the South East Asia Earthquake and Tsunami weblog…

With more than two million visits since it was established this month, it has fast become the online clearinghouse for information and contact details.

This phenomenon was largely repeated during the aftermath of Hurricane Katrina—but this time there were too many sites. Wikipedians came to the rescue with a clearinghouse page to serve as a meta-page that collected information from all the other web pages. But you cannot just use hyperlinks and call it a day. Somebody would have to enter the data in order to make it searchable. This called for massive collaboration.

People from the U.S. and around the world changed the notion of what it means to help in times of disaster. Those that would not have had the time or resources to help out in the traditional manner were able to pitch in from the comfort of their own home. They collaborated on a master disaster database for hurricane survivors, aggregating from other sources to provide a centralized website to help families locate their loved ones and provide important news and information. Just a few hours of data entry can go a long way to help a survivor locate their family. By leveraging the networking power of the Internet, the organization emerged to replace an unprepared and malignantly incompetent FEMA.

The master database collaboration was conducted through the open, free Internet encyclopedia—Wikipedia–a collaborative tour-de-force in it’s own right. After this aggregation page on Wikipedia provided an initial departure point for those in need, Yahoo.com and other portal sites stepped in to provide other meta-resource pages that include links to such information-rich sources as CraigsList New Orleans.

In many ways the distributed meta-data entry project was an ad-hoc collaborative effort in response to a government communication preparedness failure. Citizen stepped in to help fellow citizen, in a manner and with a tone not far from that of the open-source software movement itself. To borrow slang from Malcolm Gladwell, I proclaim that the use of new information and communication technologies in epic disasters has finally tipped.

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October 24, 2005

China: The Boom Spreads Beyond the Coast

By Adam Carstens

The inland Chinese city Nanchang is finally joining in the prosperity the coast has long enjoyed. Nanchang's per capita income has passed $1,000 a year and, though still behind Beijing and Shanghai, is catching up. FDI is approaching $700 million and consumer spending is approaching $3 billion annually. Other inland areas, such as Wuhan and Changsha, are also experiencing similar growth miracles.

Think of the Chinese inland as the American Sun Belt - late to the development party, perhaps, but still plenty of room for growth in the future. The coastal cities of China are increasingly crowded and have limited growth potential compared to their inland cousins.

Consider this scene from a Wall Street Journal article describing a scene from Nanchang's Wal-Mart:

"More than 90% [of customers] turn up on foot, with the rest coming by bicycle or bus. The store's success rests on American-style service, complete with greeters at the door. Unlike in the U.S., they carry bullhorns. Customers can use the shopping carts free, a courtesy they say has since been taken up by supermarkets elsewhere in the city. These days, its aisles are thronged with crowds scanning shelves filled with jars of spicy melon seeds and salted raisins. Giant grouper flap in saltwater tanks, while banks of rotisseries churn out up to 10,000 glazed chickens a week."

China's evolution is happening quickly, and it certainly appears like the country is solidly in Square III of the Renewal Cycle. Companies who can take advantage of China's growth during this stage had better be thinking in terms of their own renewal cycles, and how and what they'll need to change to make sure they don't miss out.

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October 21, 2005

AOL's Dance Card Full Again

By Adam Carstens

After years of shrinking membership and a stock price stuck in the same place it was since before the merger with Time Warner, AOL is finally loved in the Internet world. Why the sudden rush to chase after AOL's once scorned assets?

According to this article in the Washington Post, AOL still drives tons of search traffic and is an instant message platform powerhouse. In the world of Web 2.0, that is pure gold in the eyes of potential partners and buyers.

The rise of AOL again is a sign the web is starting to be viewed as a "human" medium, not one driven exclusively by technological progress. AOL may not be how people get to the Internet anymore, but it is still a large part of what they do while they're on the internet. For all the tricky software and programming prowess poured into the web over the last decade, the two features AOL is being pursued for are some of the oldest on the web - search and IM - which let people find what they want and connect with those they care about. That's it.

What other formerly scorned (or newly created) tech companies will be loved again for their ability to do the simple things right? We shall see.

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October 20, 2005

Clickers: The Key to Educational Success?

By Adam Carstens

The LA Times reported on a relatively old technology infiltrating the classroom - the remote control. While the remote has been around for decades (try remember watching television without one), it is now finding renewed life as a classroom teaching tool. The "clicker" is used to give pop quizzes, take attendance or anything else that requires student interaction beyond speaking in class.

Some teachers seem to like the technology. "The key for me is the immediate feedback," said one. "If you just lecture and ask if they understand, they'll nod their heads - even if they're lost. This way, if I ask them a question, I know right away if I need to slow down or keep going."

It seems the belief of requiring students to be passive lumps while learning is starting to crack. While an over reliance on technology is certainly not productive for education, clickers sound like an interesting and relatively cheap way to spur and track student interaction. It's one more step towards total interactive learning, but it's a step in the right direction.

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October 19, 2005

Will hybrids remain a niche technology?

By Yoshi Kusaki

In an article fromYahoo news, Dieter Zetsche, who heads the DaimlerChrysler group’s Mercedes brand, said soaring gas prices will not kill the SUV market, and fuel-efficient hybrids are an overrated niche technology. From DaimlerChrysler’s viewpoint, his statement may seem plausible, since SUVs and pickup trucks are the company’s most profitabile segments. However, most car makers are trying instead to catch up to Toyota or Honda, the hybrid technology pioneers.

So who’s right? So far, hybrids look like they will grow, but still remain a relatively small share of car sales for some time to come. Hybrids only accounted for 0.5% of the U.S. market in 2004, yet are expected to increase to 3.5% by 2012, while diesels are expected to grow from 3% market share in 2004 to 7.5%, according to research conducted by J.D. Power-LMC Automotive Forecasting Services. Growth in hybrid models will be mostly in SUVs and midsize cars, while growth in the diesel models will be in the pickup trucks as well as the luxury cars and some SUVs.

Consumers in the U.S. are learning about hybrid technology, but are already familiar with diesel technology. Clearly, at this point, the price premium of hybrid models is the main bottleneck to hybrids’ market growth. If manufacturers can succeed in not only educating consumers on hybrid technology (including more raising of environmental awareness), but also reducing the premium of hybrid models enough to attract customers, the hybrid will become more than just a niche technology.

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October 18, 2005

"85 Broads" Can't Be Wrong

By Adam Carstens

Janet Hanson, founder of 85 Broads, a network of more than 8,000 women professionals, had this to say recently about "Got Game" in the Wall Street Journal's Career Journal site:

"It's a fascinating book about the gap between the Baby Boom Generation and Generation X and Y, as well as the profound impact that this generation is already having on the future of business. It helped me better understand and appreciate the incredible 20-something people I work with, as well as the amazing young women in our global network who will be the entrepreneurs and leaders that change the world over the next decade."

Thanks, Janet!

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October 16, 2005

Establishing a business model that brings profits to us all

By Yoshi Kusaki

According to the article on Fuji Sankei Business i, online advertising spending in the States this year will be between $10 billion and $12 billion, crossing the $10 billion mark for the first time. Last year, American filmgoers spent $9.5 billion going to the movies. We can see that the market size of online advertisement is larger than that of the movie industry.

A recent survey by IAB and Price Waterhouse Coopers says online advertising continues to gain ground over TV, newspaper and other traditional media. To get more attentions from the viewers, advertisers are eager to employ state-of-the-art advertisement containing high-quality video. However, many of us are weary of the tremendous amount of web ads since many of them are mostly irrelevant to us. With search-related ads, Google is better at reaching targeted customers than the likes of other media. Surprisingly enough, Google generates nearly all its revenue ($3.2 billion last year) from the small ads it shows on the side of search results and other web contents.

Last month, with a new application software, Google proposed that it will offer free high-speed wireless internet access in the bay area. Most people who live down in San Francisco apparently questioned why they should continue to subscribe fee-based internet access from cable companies or phone companies. We, calculating person, are willing to accept advertisement for the appropriate cost if we can enjoy high speed internet for free. Google's proposal will threat not only other internet access providers in the bay area but also internet portal sites such as MSN or Yahoo. Google also seems like it is trying to expand its business model, offering services for free and keeping up with the cost of services with advertising revenue, to other areas such as cell phone, video game, or digital music. I cannot keep my eyes off the future possibilities of Google.

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October 14, 2005

Tuesday Trifecta!

By Adam Carstens

For those keeping track, Japan scored a trifecta of positive stories in the Tuesday edition of the Wall Street Journal. Further evidence of Japan's Business Renaissance if you ask me!

1. Japan's Economy Gains Steam From Manufacturing Heartland

2. Vote Advances Koizumi Agenda

3. Japan's Machinery Orders Rebounded in August

The sum total of all these stories is this - Nagoya, once thought to be a backward part of Japan (and looked down upon by snobby Tokyo elites), is leading much of Japan's recovery, thanks to companies like Toyota. Koizumi, fresh from his overwhelming victory at the polls, looks like he will finally get his way on postal privatization, leading to the creation of the world's largest private financial institution. And the industrial sector shows no signs of slowing down, leading to a Nikkei average that looks to be headed to 14,000 and higher. Japan's latest recovery looks to be firing on all cylinders!

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October 13, 2005

Toyota expands, GM shrinks

By Yoshi Kusaki

Last week, there was big news in the automobile industry. Toyota will buy 8.7% of Fuji Heavy Industries, the makers of Subaru, from GM. Under the agreement, GM will sell 68 million shares to Toyota for 35.4 billion yen, making Toyota the top shareholder of Fuji. Toyota and Fuji will start studying possible joint projects in development and production areas. Also, Fuji may let Toyota use a plant in Indiana, since Toyota’s plants in the States are running at nearly full capacity due to their increasing sales.

It seems this move will be good for all three companies. Clearly, Fuji will be able to reduce its R&D as well as manufacturing costs by working with Toyota, since Fuji has been struggling with high cost structures and declining car sales. On the other hand, GM will be able to pull out of an alliance where it no longer receives any benefit.

What about Toyota? They may able to expect a synergistic effect from partnership, since Fuji’s product lineups and those of Toyota do not overlap. Although Toyota denied this, some say Toyota’s move was really a bailout for GM, since GM is suffering from declining sales of its large SUVs and trucks due to high fuel prices. Whether the argument is true or not, Toyota will let Fuji take on Toyota’s style, just as it did successfully with Hino and Daihatsu. The move will also allow Toyota to maintain its business growth momentum.

In 1998, when Japanese economy was in the depths of a depression, Moody’s Investors Service revised Toyota’s rating downward because it maintained its lifelong employment system. Yet Toyota constantly created and improved its business practice, and has emerged stronger than ever. How will Moody’s evaluate Toyota’s move? It might be presumptuous to say Toyota symbolizes the strength of Japanese economy, but at least we can say westernizing everything cannot be the right answer in the business world. It seems only a matter of time before Toyota surpasses GM.

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October 12, 2005

Japanese Retailers Moving In to USA

By Adam Carstens

Japanese retailer Uniqlo is moving into New Jersey, as noted by this New York Times article. Uniqlo just happens to be one of the companies we profile in our new book Japan's Business Renaissance. - they're an example of a great company which revitalized the moribund Japanese retail sector. Good for them for expanding their horizons to the biggest consumer market in the world.

Along with Famima, Japanese companies seem all too eager to make attempts on this side of the Pacific. They must feel there are opportunities over here that American retailers, despite their best efforts, are not exploiting.

Still not convinced? Alright, how about the expansion of Japanese pastry maker Beard Papa, who has opened several stores in NYC and appears to be expanding into Boston, New Jersey and Los Angeles. Blogger Gothamist drooled over Beard Papa last year. I first encountered Beard Papa on a trip to Tokyo earlier this year. I didn't try because of the long lines, but perhaps their domestic presence will encourage me to make another trip. See you at Beard Papa - I'll be the guy wearing a Uniqlo shirt!

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October 11, 2005

Recent article about Japan’s recovery

By Yoshi Kusaki

Here is a new article from The Economist magazine showing us Japan’s economic recovery. Here is the author’s view: in the long term (next 15 years or so), we can promise an optimistic outlook on Japanese economy. At least for the next 5 to 10 years, Japan will keep on growing at a fast pace, and we will see the increase in wages as well as the improvement in productivity. Japan will be as powerful as it used to be before the bubble economy burst.

The article may be too optimistic, or not -- but let's look at what we know. Indeed, the amount of capital investment in manufacturing industries has increased by 12.8% from last year, and it is expected to grow at a healthy pace for a while, according to the survey of the Bank of Japan's quarterly survey of business sentiment.

Also, recent news about a rapid cleanup of defaulted loans by most Japanese banks as well as level-off of labor glut would tell us not only the labor market will be vitalized but also tell us they will give positive effects on consumer spending pattern. But what are the driving forces of this Japan’s recent recovery? The answer is in our upcoming book, Japan’s Business Renaissance. Please check it out.

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October 10, 2005

Moving Beyond the "Content Fetish"

By Adam Carstens

Excellent article in the journal "Innovate" by "Serious Games" pioneer James Paul Gee talking about faults in current learning methods and what needs to be done to improve them. Specifically, Gee refers to what he calls a "content fetish." To wit:

"The content fetish is the view that all academic disciplines, from physics to sociology to history, are composed of sets of facts or bodies of information, and that learning works through teaching and testing such facts and information."

Yet as Gee later points out, "something very interesting happens when one treats knowledge first and foremost as activity and experience, not as facts and information-the facts come to life. A large body of facts that resist out-of-context memorization and rote learning becomes easier to assimilate if learners are immersed in activities and experiences that use these facts for plans, goals, and purposes within a coherent knowledge domain."

We couldn't agree more. In our admittedly simple game example, "Samurai Challenge", one could either play our game, or look at the boring table of data we've provided to show our survey results about business attitudes from Japan and the United States. Frankly, we prefer the game method as a way to really see (and remember) the differences between the two countries.

Corporate trainers, as well as any educational professional, would be well advised to consider Gee's thoughts when trying to train their employees or students. Overloading them with facts and information, without the proper context, will only lead to frustration.

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October 07, 2005

An Amazing Third Quarter

By Adam Carstens

Need more proof Japan is on an upswing? You've got some nerve, there, buddy. Stock market performance can sometimes be a weak indicator, but it's clearly indicating something. Check out the graph on above.

One hot quarter may not be enough to convince the skeptics, but investors in Japan are feeling more confident now than they've been in a long time. Wages are rising faster than prices in Japan - the opposite of what is happening in the United States. Plunging consumer confidence in the United States will not serve a mainly consumer-driven economy. Bottom line? We think Japan has more room to run. Stay tuned. And, of course, buy our book.

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October 06, 2005

The World’s Largest Bank: Back in Japan

By Yoshi Kusaki

Big news of a merger came recently from Tokyo. According an article in the Mainichi Shimbun, Mitsubishi Tokyo Financial Group Inc. and UFJ Holdings Inc. merged last Saturday, creating Mitsubishi UFJ Financial Group Inc., aiming to become one of the top five global financial groups by the end of FY 2009. The new Tokyo-based Mitsubishi UFJ has total assets of around 190 trillion yen (US$1,678 billion), topping U.S.-based Citigroup Inc.'s US$1,550 billion. We see this as a catalytic event, since the merger is often said to be a marriage of two different corporate cultures, and will change the universe so sharply that it cannot go back to the old way no matter what.

The debut of the world's biggest bank will instantly become a threat to its competitors, such as Mizuho Financial Group Inc. and Sumitomo Mitsui Financial Group Inc. However, we see this as good. Firstly, the merger will capitalize on each company’s strengths (Mitsubishi was strong in corporate banking, while retail banking was a stronghold of UFJ). Secondly, as the article says, the merger was seen by both Mitsubishi and UFJ as a "final push" to accelerate the disposal of bad loans. Faster integration will boost their capital base.

Interestingly enough, we may see another catalytic event in the financial service industry in the near future. Prime Minister Junichiro Koizumi plans to privatize the nation's postal system, which has 330 trillion yen (US$2,920 billion) in savings and insurance deposits and 24,700 offices nationwide. If Koizumi's plan is approved by parliament, another giant financial institution would be launched in 2007, and could bring another catalytic event to the financial industry.

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October 05, 2005

Television & Internet - a Winning Combination

By Adam Carstens

Reuters recently reported that the amount of television watching in the average American household increased to eight hours and eleven minutes per day. That's increased by more than an hour since 1991 according to the report.

But wait - wasn't the Internet supposed to make television obsolete? Well, yes and no. Television is certainly far less dynamic than the Internet has the potential to be, and we think the Internet will eventually overtake television for sheer entertainment value. The proliferation of hundreds of stations also divides the audience into ever smaller segments, ensuring no one media source will ever dominate. More specifically, increased television watching is actually the confluence of several factors.

1) The Aging of America - as Baby Boomers edge closer to retirement, they will have more time to watch television. Television is one of the cheapest entertainments out there, and it's a medium Baby Boomers have known their whole lives. Yes, some Boomers will have grand retirements full of travel and adventure. And some Boomers are taking to the Internet quite well. But most still spend the majority of their time in front of the television set - it's the information delivery system they know best.

2) Dual Use - Children are using both the Internet and television simultaneously - as a way to stay connected to their friends while watching their favorite shows, or as background noise while they browse, play games, and so on. The fact that more children than ever have a television and a wired computer inside their room is a testament to the power of these dual media working well in concert.

3) Wireless - The computer has increasingly moved out of the home office and into the living room, as households install wireless computer networks that allow for Internet connections anywhere at any time. This will lead to a lot more living rooms where the TV is on, yet more and more people are also engaged in their computer screens at the same time (I confess this has happened to me on more than one occasion).

Television still has a significant role to play in our media diet, but programmers (and advertisers) will need to take into account these new realities. There will be no panacea to how to reach viewers going forward, but a savvy combination of Internet and television exposure will let one's message be heard.

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October 04, 2005

Japan: Big firms get momentum rolling again

Source: http://biz.thestar.com.my/news/story.asp?file=/2005/9/24/business/12137380&sec=business

By Yoshi Kusaki

According to an article in the Malaysian newspaper The Star, Japan has the most companies making it onto Forbes inaugural list of Asia’s big 50 big companies – thirteen of which were Japanese. Needless to say, some companies on the list successfully achieved corporate renewal within their organization [link: www.renewalcycle.com ] after many twists and turns. (See attached list)

It’s no surprise Japan’s big companies are leading the way – the Japanese government recently said business confidence at large companies rose for the second straight quarter, reflecting the economic recovery and the completion of inventory adjustments in the information technology sector.

Yesterday, The Bank of Japan’s quarterly survey of business sentiment, commonly known as the “Tankan" was released. Overall, we can see improvements in the main “Diffusion Index”. Especially, DI turned positive among big and mid-sized manufacturing firms, and they forecast an increase in the ordinary income in 2005 by 3.5% more than last year. There are some concerns such as higher price of crude oil or potential negative effects of US’s economic slowdown triggered by Hurricane Katrina. However, along with increase of Nikkei Stock Average, we can expect Japan will experience prolonged economic growth. Better Tankan figures will lift the business mind of corporate leaders, and clearly show us Japan is achieving its Business Renaissance.

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October 03, 2005

Different Cultures, Different Learning Styles

By Adam Carstens

Excellent article in CLOMedia discussing the challenges of training the workforce in the future. The key section in my opinion, was this:

“About one out of four of people in this country were either born somewhere else or their parents were born somewhere else, which is relevant to the learning/business landscape because of the inherent language and cultural constrictions…Everything they bring with them—their customs, their work habits, what they value or don’t value in the workplace, the flexibility or lack of it in hours of work, what they may be used to in terms of amenities, insurance, retirement, recreation—all of those things vary by ethnic group. And we have such a variety of ethnic groups in this country that employers that are going to minimize their retention and turnover losses are going to be paying attention to this.”

The United States population shows no sign of slowing down – we continue to grow by about two to three million people per year, much of that from immigration. There is no question the U.S. workforce will be far more diverse five, ten and twenty years from now. So how should these diverse elements be trained? Well, we have an idea: GAMES!

Video games are perhaps the one medium which are common around the globe. The same games are now played from Moscow to Mumbai, from Boston to Beijing. The upcoming video game consoles are, apart from movies, perhaps the most powerful and attention-getting consumer products and entertainment devices to be launched on a global scale. The exact same Playstation 3 with many of the same games will sell in every country in the globe.

So, if you’re looking for commonality across an increasingly diverse workforce, give games a try!

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September 30, 2005

Sun Belt Marches Onward

By Adam Carstens

I love Census data - as anyone who knows me can attest. So it was with great pleasure that I saw the new estimates for largest metropolitan areas came out recently. America is still moving to the Sun Belt, in greater numbers than ever before. And the Rust Belt continues its inexorable decline.

From 2000 to 2003, fourteen of the top twenty metropolitan areas with the largest growth (adding over 100,000 residents) were in the Sun Belt. Four in California, three in Florida, four in Texas and one each in Arizona, Nevada and Georgia. What metro areas had the greatest loss of people? Pittsburgh (minus 18,000, ouch!), Buffalo, Cleveland, Youngstown, Scranton - the list reads like the chorus of a Bruce Springsteen song lamenting factory closings.

Americans are still voting with their feet, and their feet say south and west - even as house prices continue to climb in these areas. What's more, people in these metro areas are having more children, thus increasing the population and ensuring more people will be putting down "roots" in these states in the future.

Can anything stop the Sun Belt's growth? Higher gas prices and a shift in a warmer climate (not to mention stronger hurricanes) might reduce some of the appeal of living in these cities. But to quote a friend of a friend of mine living in one of these new megalopolises, "Global warming is why God invented air conditioning." Millions of people currently live in places that, before modern technology, were considered uninhabitable swamps, flatlands and deserts. Never underestimate Americans' collective desire to overcome a foreboding climate for the sake of a cheaper mortgage.

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September 29, 2005

Rich Man, Poor Man

By Yoshi Kusaki

China’s rapidly widening income gap has reached dangerous levels. The article says the most affluent one-fifth of China’s population earn 50% of total income, with the bottom one-fifth taking home only 4.7%. Also the income gap between urban and rural is getting bigger, as urban incomes (avg. $1,000/year) are growing nearly as fast as rural incomes (avg. $300/year).

Are there any solutions to stop this gap from widening further? The income gap in China has grown quickly since 2003, despite a series of government measures to raise the income of the people in rural area as well as the stratum of impoverished people in urban area. Experts advocate comprehensive tax reform in order to correct the differences between haves and have-nots. However, the government has not found a solution to the problem yet.

If nothing is done, what kind of impact will this problem have on society? The article says the situation might deteriorate to the most dangerous scenario in 2010 if no effective measures are taken within the next five years. Specifically, social unrest, such as violent protests and riots, will become more common among people. In order to correct the income disparity and to make consumption a leading force in the economy, it is clear that systemic government reforms are urgent for China today.

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September 28, 2005

A New Model For Newspapers?

By Adam Carstens

This story contained bad news for those in the newspaper industry trying to steer their industry out of trouble. As the American consumer becomes increasingly exhausted and Americans spend less time reading newspapers (but curiously, spend more time with other types of media), the industry faces a real quandary.

The story featured this key passage: "Newspapers have experienced an increase in online advertising, [Merrill Lynch analyst Lauren Rich] Fine said, 'But it's not a dollar-for-dollar exchange. That dollar in print became 35 cents online.'" That's a two-thirds destruction of your profit potential thanks to changing reader habits. Assuming online consumption of news continues (and there's no reason to expect it shouldn't), newspapers need to respond to this new reality - but how?

Some newspapers are responding to the challenge by letting their most productive assets - their reporters - branch out and give more and varied perspectives on the news they cover. By leveraging these assets into additional content, readers get a more flavorful take on the news than before. The newspaper that can best reach past "traditional" news delivery methods and get readers to spend more time on their sites will help defray the shock of that revenue loss.

Appetites for news won't disappear, but they are changing. The evening newspaper is now a thing of the past - the morning newspaper could be next. But a dynamic, constantly evolving newspaper is still on the horizon, waiting to be claimed by an innovative publisher.

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September 27, 2005

7-11: The bid should be higher!

By Yoshi Kusaki

In our upcoming book, Japan’s Business Renaissance, we emphasize the company needs to take something out-of-the-ordinary to force its corporate renewal. We call this the “catalytic event”. In practice, the catalytic event is usually traumatic, or at least highly threatening. A takeover is one catalytic event for the organization, for it changes the company so sharply that the company cannot go back to the old way no matter what.

According to this article, a special committee of the board of convenience store operator 7-Eleven Inc. on Thursday recommended that shareholders reject a $1 billion tender offer from Japan's Seven & I Holdings Co. Ltd. Seven-Eleven Japan, a convenience store unit of Seven & I Holdings Co., owned by Japanese retailer Ito-Yokado, is Japan's largest convenience store operator with more than 10,000 locations nationwide. In 1991, Seven-Eleven Japan and Ito-Yokado became shareholders in U.S. 7-Eleven, formerly Southland Corp., to help to revive the U.S. chain store, which once went bankrupt in 1990.

Seven-Eleven Japan thinks that in order to compete better in the market, 7-Eleven must boost investment in its merchandising, store renovation, distribution and logistics systems, and information systems. This tender offer would bring 7-Eleven more customer satisfaction. However, 7-Eleven said this share offer was "not in the best interests of the shareholders of 7-Eleven". 7-Eleven is not ready for its own catalytic event, and wans to be paid a lot more before starting down that road. Time will tell if Seven-Eleven Japan is willing to respond.

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September 26, 2005

Announcements and Web Activity

By Adam Carstens

We've got a few announcements to make.

First, North Star Leadership Group President John Beck will be giving two upcoming speeches on the importance of games and learning. He'll be speaking at Harvard's Burning Questions conference in Chantilly, France, on October 5-7, 2005. And then he'll be speaking at the Library of Congress in Washington, DC on October 13, 2005. So if you're in either area, drop on by and see what he has to say.

Second, we've got some new web activity to announce -- our new website for our new book, Japan's Business Renaissance, is now online at www.renewalcycle.com. And we've also launched our new site devoted to games and learning at www.gametrain.net. Please check 'em out!

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September 23, 2005

America: Allies Fading, Enemies Rising

By Adam Carstens

The Harris Poll released some data recently on American attitudes towards other countries. Of the 22 countries Americans were consistently asked about since 2001 (before the terrorist attacks of 9/11), there has been an aggregate increase of perceiving other countries as “unfriendly,” and an aggregate decrease of perceiving other countries as “allies.” In 2001, Americans ranked these 22 countries on average as being a close ally 28% of the time – now, that number has fallen to 24%. And of the same 22 countries, an average of 24% of Americans now see them as “not friendly,” compared to 18% in 2001.

So, what does this mean? Obviously, our security priorities changed radically in 2001, driven by a renewed focus on combating terrorism. Yet regardless of our leaders’ intentions in cultivating alliances, Americans have spoken loud and clear – in the aggregate, they are more suspicious of the world than they were four years ago. The consequences of this have yet to play themselves out, but there are clear ramifications for global business in these attitudes. American consumers may not be so welcoming of foreign brands or companies in the future – and likewise, foreign companies may decide to chase other markets where they will not be perceived as hostile.

America has long relied on its primacy as the world’s largest consumer market as proof the world’s companies would come calling. Yet the world’s largest mobile phone company, Vodafone, has no visible presence in the U.S. market. Companies looking to do business in the United States will have to consider the very real risks these evolving attitudes may have on their bottom line.

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September 22, 2005

Founder of Japanese retail giant died, and a new legacy is expected to be started

By Yoshi Kusaki

On Monday, Isao Nakauchi, who founded the supermarket chain Daiei and revolutionized Japan's retail industry, died at 83. Founded by Nakauchi in 1957, Daiei Inc. grew to become the biggest Japanese retailer during the 1970s. But as competitors imitated Daiei’s strategies, Daiei fell into financial trouble and has struggled under the burden of huge debts amassed during years of over-expansion in the 1980s. Earlier this year, it was taken over by a government-backed rehabilitation organization.

We see Nakauchi’s death as a “catalytic event “ for Daiei, since this will clearly and sharply change the organization’s direction, as well as culture. Daiei cannot go back to the old way no matter what. However, rehabilitating Daiei will be rough. The company will have to cut the number of nonmanagerial employees by more than 1,000, or 10 percent of all employees, in November. The company has suffered 17 straight months of year-on-year declines in sales through July. The company also withdrew from Hokkaido and Tohoku in the north of Japan, under a restructuring plan.

Although Daiei is struggling to recover, the company is embracing some change. In March, Daiei recruited a new Chief Executive, Fumiko Hayashi, who is known for her experience in the automobile sales industry. She was chosen by the Wall Street Journal as one of the world's 50 noteworthy female corporate managers in 2004. And in June, Daiei also named Yasuyuki Higuchi, former President of Hewlett-Packard Japan Ltd., as its new president. With a drastic restructuring plan and two new powerful leaders recruited from outside the company, it's hoped that Daiei will successfully revitalize itself and create a new retail legacy.

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September 21, 2005

Revolving Home Equity Flattening

By Adam Carstens

Interesting data from the Federal Reserve shows the amount of revolving home equity in the economy has stayed level at about $430 billion since July. Compare that to the red hot growth this category of loan enjoyed through the first part of this decade – at the beginning of 2000, revolving home equity totaled just over $100 billion. Less than two years later, that number doubled, and just over two years after that, it doubled again.

This massive infusion of home equity, along with stimulus from the Federal Reserve and a combination of tax cuts and liberal spending from the U.S. government, has helped keep the economy afloat since the recession. Yet the growth in this category has slowed to near zero as of late. Does this, along with a gradual tightening of interest rates, augur a future slowdown?

This $430 billion might have been fun to withdraw, but like all loans, it must eventually be paid back. This page shows near all time highs for consumer debt ratios, showing the consumer is under an increasingly heavy strain. Any way you slice it, from now on, the American consumer will have to devote more income to paying down debt, and less to other types of spending. That doesn’t bode well for a continued healthy expansion.

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September 20, 2005

Department of Self-Promotion, Late September Edition

By Adam Carstens

Now is a perfect time to mention another media hit for North Star Leadership Group – an article in Delta’s in-flight magazine about our take on the “Gamer Generation.” Check it out!

Posted at 09:00 AM | | |

September 19, 2005

Japan Real Estate: Is it the "REIT" time for investment?

By Yoshi Kusaki

According to the news, foreign investors' acquisitions of real estate in Japan since the collapse of Japan’s overheated stock and real estate markets are estimated at between three and four trillion yen. By the end of fiscal year 2004, accumulated real estate securitization deals in Japan reached some 20 trillion yen. Will the real estate market become more active as Japan’s business renaissance?

Although some property values are skyrocketing in central Tokyo, we don't feel this is a real estate bubble -- solid fundamentals are driving this growth. Backed up by ample funds, REITs (real-estate investment trusts) are rapidly expanding in Japan, revitalizing the real estate market, along with the supply-demand structure of the office tenant market. In Tokyo especially, the vacancy rate is leveling off since 2003, proving the market has solid demand for office tenants. But it's not just Tokyo. Thanks to the economic recovery and growth of the real estate securitization market, the overall real-estate market, especially in major cities like Osaka and Nagoya, is showing signs of bottoming out recently.

Thanks to lower interest rates, the real estate market will continue to show the improvement in the short term, since this market is a lagging indicator of the economy. But the growth will not be uniform. Because any investment targets from REITs will send land prices through the roof only in certain areas. If more of Japan is to participate in the rise of the real estate market, REITs will need to increase their investment choices and instruments.

Posted at 01:00 PM | | |

September 16, 2005

Business School Offers Full Scholarship - For Playing Games!

By Adam Carstens

The Simon School at the University of Rochester will offer a full scholarship to the winner of its Marketplace Business Simulation over the course of the next few weeks. For a mere $25 entrance fee, players will make a series of business decisions that attempt to simulate decisions made in the real world. The winners will be those who make the most money for their fictional companies.

This is a fantastic preview of what is possible in the world of games and business. Games could be set up to find out who the high performers are inside a company or among potential hires. Subjecting people to a battery of business tests such as these is no different, functionally, than an interview. Employees could be placed in "stress test" situations to see how they handle quick decision making - and more.

Hopefully, other organizations will start to replicate and improve upon what the University of Rochester has started. Given how the Gamer Generation is getting more experienced by the minute, there's no time like the present.

Posted at 09:00 AM | | |

September 15, 2005

A Catalyst to Understanding

By John Beck

A recent USAToday/CNN/Gallup poll that shows that 50% of White Americans thought of the looters in New Orleans as "mostly criminals," only 16% of black survey respondents felt the same way. In fact, 77% of blacks surveyed say that the looters were "mostly desperate people." What a gulf in attitudes and understanding we have in the US!

It is not that we as Americans are unkind. Corporations will raise $1 billion for Katrina relief, according to Stephen Jordan of the US Chamber of Commerce Center for Corporate Citizenship. Relief organizations have already collected $739 million according to the Chronicle of Philanthropy. And let's not forget that Congress has already approved $62 billion in aid. We give money easily - but we apparently have real troubles understanding.

The catalytic events that have been most important in social change in US history are those that made people understand. Uncle Tom's Cabin needs to be capitalized and italicized as a title. Rosa Parks became a symbol of rights because she could have been anyone's mother or grandmother -- an entirely unthreatening figure who just wanted to be treated just like others around her. And in the wake of Katrina, we can only hope that the lasting image will be the sea of mostly black and universally poor faces that stood waiting for a way out of the flooded city.

This survey tells us that while some sympathized with the circumstances driving the looters to act as they did, others did not. We can't begin to bridge the attitude gulfs in America until we understand these gaps at a fundamental, emotional level. An increase of understanding (combined with an opening of wallets) is the only catalyst that will make this country whole and united.

Posted at 09:00 PM | | |

September 14, 2005

Mickey Mouse Coming to Hong Kong

By Yoshi Kusaki

Disney finally opened its newest theme park, Hong Kong Disneyland, in Hong Kong, China, on Monday. The openings came six years after Hong Kong's government and Disney agreed to jointly develop the $3.5 billion project. With attractions such as Space Mountain or the classic Cinderella Carousel, and two resort hotels, the park, located just 30 minutes away by subway from central Hong Kong, looks much like the first Disneyland in California. All guests are welcomed by Disneyland staff, including cleaners and guards, with a warm smile and friendly "Hello!", "Nei hou!" or "Ni Hao!" But what are the real chances of success of Hong Kong Disneyland?

According to the article, one-third of survey respondents living in mainland China said they would either consider going or would go to Disneyland. Also, a majority of people in Hong Kong support the park, according to another local survey. Learning from the Euro Disneyland lesson (which lost $900 million in its first year mostly due to a failure to adopt European culture), Disney started the park small to make it a commercially viable operation, projecting 5.6 million visitors per year). Also, Disney featured Chinese garden pavilions throughout the park to better fit the local culture.

Clearly, the opening of Hong Kong Disneyland brings some changes in the form of entertainment available to people in Hong Kong and China. The park should become one of the hottest places to visit in Asia this year, but in order to match the tremendous success of Tokyo Disneyland, Hong Kong's version will have to somehow bring customers back again and again - not just rely on new visitors. Even as it opens in one of the world's fastest maturing markets, Disney must still play one of the hardest games in the world - the renewal game.

Posted at 09:00 AM | | |

September 13, 2005

New Signals From Japan

By Adam Carstens

Fantastic news for the future of Japan's economic recovery. First, the Japanese electorate sent a resounding message via the ballot box over the weekend - rewarding Prime Minister Koizumi's gamble of claiming a mandate for postal reform. Koizumi's party won nearly 300 seats out of 480, and together with coalition partners, can likely pass bills with an easy two-thirds majority. This practically guarantees postal reform will pass when it is brought up again, which will gradually free more than $3 trillion dollars for private investment.

Second, Japan's economy spiked up yet again in the second quarter, with an annual growth rate of 3.3%. This growth rate rivals that of the U.S., and should surpass the U.S. soon. No wonder Japan's benchmark Nikkei average is now the highest its been since early 2001, and appears poised to go higher.

In short, Japan's "business renaissance" appears well on its way to becoming reality.

Posted at 12:00 PM | | |

September 12, 2005

Murduch Snaps Up Another Property

By Adam Carstens

Last week, Rupert Murdoch's News Corp. snapped up another gaming property - IGN networks - for $650 million. The purchase gives News Corp. a ready made audience of hard core gamers to pimp other News Corp. products - perhaps subscriptions to the New York Post or the latest episode of Family Guy.

Murdoch clearly sees the long term potential of capturing the eyeballs of gamers and is trying to format his business strategy around this concept. Together with his recent purchase of MySpace, Murdoch is trying to build an Internet presence that gets as many people as possible to log on to a News Corp. site as many times as possible during a typical day.

But will the company really achieve synergy between these various sites? It may, but only if they do so in a way that does not over-corporatize or drown users in advertising. The switching costs of leaving a MySpace or an IGN are close to zero - and as Friendster found out, failure to innovate or treating users poorly will result in users leaving in droves. With all of these Internet purchases, Murdoch must take pains to respect his audience's wishes and not bog down into a Time Warner-AOL like morass.

Posted at 02:00 PM | | |

September 09, 2005

Rakuten Bulks Up

By Yoshi