Why are banks organised in product silos?

Posted by Unknown on 19:23 in , , , ,

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EU Visa Reform

Posted by Unknown on 20:37 in , , ,
For more: http://ec.europa.eu/dgs/home-affairs/e-library/documents/policies/borders-and-visas/visa-policy/docs/proposal_regulation_touring_visa_en.pdf

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Interesting TED Talks

Posted by Unknown on 20:35 in , , , , ,
No one on the planet knows how to build a computer mouse...

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Dan Ariely: Commencement Speech

Posted by Unknown on 23:21

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Brain Tricks - This Is How Your Brain Works

Posted by Unknown on 15:10 in , ,
This short video summarizes some of the most common tricks that our mind plays on us.

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Jeff Bezos on Leading for the Long-Term at Amazon

Posted by Unknown on 15:43 in , , , ,
As Warren Buffett once said: "You can hold a rock concert, and that's OK. You can hold a ballet, and that's OK. Just don't hold a rock concert and advertise it as a ballet."

Jeff Bezos, recently named n.1 living CEO, in this podcast talks with Adi Ignatius (Harvard Business Review) about the long term approach to business that he implements in Amazon. In this post I will share some of his comments. Nowadays it is indeed good to be reminded of the importance of taking a long term approach, rather then worrying about the stock price for the following day.

"If you're long term oriented, customer interests and shareholder interests are aligned. In the short term, that's not always correct."

"I care very much about our share owners, and so I care very much about our long term share price. I do not follow the stock on a daily basis, and I don't think there's any the information in it. Benjamin Graham said, "In the short term, the stock market is a voting machine. In the long term, it's a weighing machine." And we try to build a company that wants to be weighed and not voted upon."

"When things get complicated, we simplify by saying what's best for the customer? And then we take it as an article of faith if we do that, it'll work out the long term. So we can never prove that. In fact, sometimes we've done a price elasticity studies, and the answer is always we should raise prices. And we don't do that because we believe-- and again, we have to take this as an article of faith-- we believe by keeping our prices very, very low, we earn trust with customers over time, and that that actually does maximize free cash flow over the long term."

The full transcript of the interview can be found here: http://blogs.hbr.org/ideacast/2013/01/jeff-bezos-on-leading-for-the.html

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Ernesto Sirolli: Want to help someone? Shut up and listen

Posted by Unknown on 23:00
When most well-intentioned aid workers hear of a problem they think they can fix, they go to work. This, Ernesto Sirolli suggests, is naïve. In this funny and impassioned talk, he proposes that the first step is to listen to the people you're trying to help, and tap into their own entrepreneurial spirit. His advice on what works will help any entrepreneur. Ernesto Sirolli got his start doing aid work in Africa in the 70's -- and quickly realised how ineffective it was.

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Third is better than first

Posted by Unknown on 14:10
Malcolm Gladwell explains why it is better to be third rather than first when bringing innovations to the marketplace.

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Early Stage in Italia 2012

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How Google Uses Coupons To Increase Its Profits

Posted by Unknown on 18:07
In this post I will explain how Google is one of the few companies in the world who can directly profit from giving out free coupons for its advertising program.

Google receives most of his revenue through the sale of advertising. In particular, Google is able to automatically match the needs of advertisers with relevant online content. Ads are placed on the search engine pages, as well as in third party websites through the AdSense Program.

How Google Advertising Program Works 
What is really interesting in my opinion is how the system works, especially on the advertiser's side.

If you want to promote your website/product online, Google AdWords (the program set up by Google for its advertisers) is probably your best choice right now. The system is very efficient because your ads will be placed in areas related to the subject of your interest and you will pay only when people click on your ad. For instance, if I have a blog in which I write about cars I can ask Google to place ads on my blog. The ads that Google will display on my pages are very likely to be about cars. When my visitors click on the ad, Google will split the revenue with me (AdSense Program).

Each time a visitor enters a page in which Google places ads, an auction takes place. Indeed, each advertiser has previously entered his preferences regarding his willingness to pay for certain results. For instance, I could decide to bet a  max of 8 cents for a certain ad to appear in a certain context. Now let's imagine that there are other four advertisers betting 10, 11,10,15 cents for my same results. Usually Google ads show a max of four advertisers at the same time. If I am betting 8 cents and everyone else (4 players) is betting more than me, I will not enter the advertising space for that page. In order to appear in that page, I would have to raise my bet. In other words, Google ads are governed by auctions that run each time a page is opened. (In this explanation I made things a little easier just to give a gist of how the whole system works, but if you sign up to AdWords you can see yourself how sophisticated the system actually is)

Usually, in auctions, the following is true: the higher the demand, the higher the final price. In other words, if more people are betting for the same result, the price is likely to increase (also because Google tells you when you set up your campaign what the price for your bet should be based on current bets). If you want your ad to show up, you need to bet more. 

The Impact Of Coupons
In the last few years I have received several letters from Google with coupons inside. The coupons were always very generous if you consider the price of the average bets. I would receive 50 €, 75 € and 100 € coupons and I would only spend a few cents for each click.

One day I started thinking about this generous coupons and I came up with the following conclusion: Google increases its profits by giving out free coupons. 
Why do I think that? Well, as I was saying before, in an auction, if you increase the number of people who want to bet for the same result, you are very likely to have a higher final price. Since coupons allows people to bet more than they would normally do, overall demand increases, the final price per click increases (even if the people who use the coupon don't win the auction) which ultimately increase Google's revenue per click.

This is basically why Google is one of the few companies in the world who can directly profit from giving out free coupons for its advertising program.

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Secrets of entrepreneurial success revealed by Harvard

Posted by Unknown on 13:50 in , ,
In a recent paper, Performance Persistence in Entrepreneurship, Paul Gompers, Anna Kovner, Josh Lerner and David Scharfstein reveal some of the secrets of entrepreneurial success.
Here are the main findings:
  • Serial entrepreneurs are more likely to be successful in their next startup. A venture-capital-backed successful entrepreneur has a 30% chance of succeeding in his next venture. Entrepreneurs who failed before have a 20% chance, while first-time entrepreneurs have only an 18% chance of succeeding.
  • An entrepreneur who has previously received VC funding and has failed in his venture is more likely to get more funding in the future from the same VC firm, while those who succeed will be less likely to receive new funds from the same VC firm.
  • Market timing ability is an attribute of successful entrepreneurs.
  • Most entrepreneurs get their ideas from former employers. "A substantial fraction of the Inc. 500 got their idea for their new company while working at their prior employer."
  • Serial entrepreneurs are able to get funding faster than first-time entrepreneurs.
  • First-time entrepreneurs receive an higher initial valuation.

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Don’t design jobs for employees you wish you had, design jobs for employees you actually have

Posted by Unknown on 11:53 in ,
  • The ability to deliver great customer service is influenced by how the organization is run, but also by how it is designed. As they easily put it: "Don’t design jobs for employees you wish you had, design jobs for employees you actually have."
  • This is a simple but yet powerful concept because most people come up with complex ways to improve customer service that unfortunately will never be working because they were not designed with the actual organization in mind. They will work only on paper.

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Thesis: Entrepreneurial Orientation and Firm Performance

The primary objective of this thesis is to determine whether firms who have a greater entrepreneurial orientation tend also to be more successful in terms of performance. In particular, I want to answer the following research question: “What is the relationship between the entrepreneurial orientation and the performance of a firm?”. This thesis is the result of a research project conducted on a set of 49 companies in the Consumer Goods sector listed on Borsa Italiana (the Italian Stock Exchange) during the year 2010. Entrepreneurial Orientation and Firm Performance - Giorgio Tomassetti The paper is composed of four parts. In the first chapter I introduce the subject of entrepreneurship. In particular, I describe the main findings and points of view on the topic of corporate entrepreneurship and entrepreneurial orientation. The research background in the first chapter allows the reader to gain a better understanding of the second chapter. Indeed, in the second chapter I describe the tools and the method used in this research project to gather the necessary data. In the third chapter, I explain the analysis I conducted on the information previously collected. Finally, the fourth chapter is about the results of my research. In this part of the paper I conclude that there is a moderate positive correlation between the level of entrepreneurial orientation and a firm’s performance and this result is coherent with previous research in the field of corporate entrepreneurship.

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The Smart Shopper: How Information Is Changing The Way We Buy

Posted by Unknown on 19:56 in , ,
Here are two videos that help us understand the magnitude of the changes happening right now among consumers. Those of us who research a product online before going into a store and those who use their smartphone inside a store to gather more information about a product know what I am talking about.

The Smart Shopper: Constantly Connected

The Mobile Movement: Understanding Smartphone Consumers

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The importance of trial and error in today's complex world

Posted by Unknown on 22:16
As Tim Harford points out in a recent TED Talk presentation, 10 percent of American businesses disappear every year. However the U.S. economy is still the world's greatest economy. How can this be? It turns out that the high failure rate that exists in America is actually a good thing for the economy because it forces American businesses to evolve faster than in other countries through a process of trial and error.

There are two ways to make a decision. One is to study a problem and then find a solution and the other one is to test different solutions in order to understand the problem. Harford believes that the reason why we tend use the first technique more often than the second one is because we are affected by the so called "God complex". In other words, our brain can be easily persuaded to believe that we actually understand the world around us and therefore we can make reasonable choices based on our knowledge. The only problem is that our understanding of the world can only function if we develop some basic assumptions that allow us to reduce the uncertainty that surrounds us and frame the problem more easily. And guess what? Assumptions are not always true.
If you think that it is often hard for teachers to control a class of more than 20 students, now imagine being able to predict what almost 7 billion people around the world will do tomorrow. How likely is it?

Through technology and research, today we have a better understanding of our world, but also of our limitations as human beings living in a complex system. Trial and error is often a great way to find out what works and what doesn't. As Tim Harford points out in his talk, research shows that the use of trial and error as a way to solve problems is actually a common characteristic of successful organizations. However, even if people today realize the importance of trial and error (and it might also seem obvious to talk about it), if we think about the way we actually make most decisions in our life we realize that we rarely use this method.

If you are interested in the subject, I suggest reading Freakonomics: A Rogue Economist Explores the Hidden Side of Everything and The Black Swan: The Impact of the Highly Improbable. These two books will teach you the importance of challenging the conventional wisdom.

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Lockitron: use your phone to open your door

Posted by Unknown on 23:28 in , ,
Lockitron is an interesting gadget that allows you to open the door of your house by using your phone. You can even allow your friends inside with a simple text message!

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Groupon Inc (Case Study)

Posted by Unknown on 06:35 in , ,
Groupon has the capacity to maintain its leadership position in the group-buying industry by creating sustainable competitive advantages, despite the numerous competitive threats.

Groupon Inc, the group shopping website that features a new local deal every day, is the fastest growing company in the history of the Internet (Steiner, 2010) and it is now the leading player in the group-buying industry. Founded in 2008 by Andrew Mason, Groupon grew from $0 to $500 million in sales in only 18 months and it is now in 500 cities (Saporito, The Groupon clipper, 2011). Given the high growth potential, the negative working capital, and the low barriers of entry that characterize this business (Chan, 2010), many similar companies around the world tried to gain a share in this attractive and growing industry. The group-buying industry is expected to grow 138% to $2.66 billion in 2011 (Local Offer Network, 2011).
Groupon’s business model is scalable, which means that it is relatively easy to expand in different markets because the company can still use the same code and resources. Groupon should therefore leverage scalability and expand in new markets at a faster pace than its competitors, because a scalable marketplace is also attractive to new entrants and is likely to increase rivalry among existing players. Once a market is entered, it is crucial for Groupon to grow a competitive subscriber base.

Acquisitions and partnerships are additional competitive tools that Groupon can use to rapidly expand and establish a leadership position in a new market. For instance, Groupon’s purchase of the CityDeal allowed them to dominate the European market (Underwood, 2010). However, the company should not use acquisitions as a primary tool for growth because acquisitions tend to be more expensive than other approaches, and would also encourage new players to enter the industry. In countries in which cultural differences are a major issue, Groupon should seek to build partnerships as it did in China with Tencent and Yunfeng Capital (Saporito, Groupon heads to China, 2011).

The strategies outlined above will allow Groupon to continue to grow, but they cannot be successful unless Groupon develops true competitive advantages. In the period February-March 2011, for instance, revenues dropped 32% in major North American cities. One reason for this drop in revenue is the growing level of competition from companies such as LivingSocial, which during the same period experienced a 59% increase in revenue (Riley, 2011). In order for Groupon to maintain its leadership position in the group-buying industry, the company has to differentiate itself from the competition by focusing on a few key success factors. The success of Groupon is directly related to both the success of the merchants who run offers on the site and the satisfaction of those who buy the deals. According to a recent study 32% of the merchants surveyed were not profitable with the offer run on Groupon, and 40% said that they would not run a similar promotion again (McMahan, 2010).

Groupon should therefore continuously improve the quality of its service for both merchants and final customers. The company can achieve this goal by analyzing previously collected data to create a sophisticated model that can determine the optimal quantity for each deal at a certain price point.

In conclusion, Groupon should focus on expanding its customer base and maintaining its leadership position to reduce the competitive threats that characterize this industry and ensure long-term profitability for the company.

Case Study - Groupon

Photo: Duane_Brown

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Case Study - Fiat/Chrysler

Posted by Unknown on 05:44 in , , ,
Despite their different background, the partnership between Fiat and Chrysler has the potential of being successful if the right mix of products is delivered in the different marketplaces and the resources are managed efficiently.
The pdf file can be found here.
Case Study - Fiat/Chrysler

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Analyzing Policy: Efficiency

Posted by Unknown on 21:48 in , ,
This is a summary of chapter three of  the book Analyzing Policy: Choices, Conflicts, and Practice” by Munger, which is about the efficiency of the market.

The author defines a market as a set of institutions, rules or informal norms, that promote exchange. In order for a market to exist, people have to have diverse preferences and diverse endowments. Also, economies of scale and specialization should be a reality.
The reason why markets have been very successful in organizing complex human activities is because they are usually very efficient. Also, markets allow a reduction of transaction costs and the gains from trade result in improved welfare for all participants.
As Aristotle points out, money doesn’t necessarily mean wealth, but money represent all other commodities and they are efficient because they reduce transaction costs of the exchange.
When talking about markets it is important to consider the concept of opportunity cost, which is the benefits you could have received by taking an alternative action. In the chapter Munger discusses a case study in which students have to choose between selling some tickets they found on the sidewalk, or use them and go to the concert. To answer this question we need to consider not much the real price of the ticket, but the its opportunity cost. Another important concept in this unit is scarcity, which implies a desire for a good or service. Without scarcity there would not be trade.

Munger also identifies the sources of market inefficiency, one of which is the so called “Pingou’s conjecture”; here the inefficiency derives from the overuse or underuse of the resource. The solution would be having the opportunity cost as close as possible to the price of the resource. The other source of market inefficiency is the “Coases’s counter-conjecture”.

According to the author there are four mechanisms for dealing with scarce resources.

  • Price system (markets). Markets are considered very efficient mainly because they offer information through prices and they are able to align the self-interest of the individual with the collective interest of the society by using incentives. Also, they are able to maximise the value of resources.
  • Queing. Queing favor those who have time to spend in line and ultimately wastes these people’s time. It is also not an efficient system.
  • Chance. Everyone is traded the same and this might feel fair to some people, but the allocation of the resources is random and this usually results in inefficiency.
  • Authority. This system favors those who are in power and those who are close to them and this means that corruption and favoritism are very likely.

In terms of information, prices are able to signal scarcity and determine wealth.
Munger also describes in this chapter the advantages of a simple barter economy and he does that with the use of the Edgeworth Box where the indifference curves represent people’s preferences. The equilibrium point is where the indifference curves are tangent to each other, even though all points on the contract curve (the set of potential equilibrium points) are Pareto optima.
After stating the advantages of a barter economy, Munger introduces the function and the advantages of using money as an accepted medium of exchange. First of all, the use of money reduces transaction costs. Indeed money are both a unit of account and a store of value since they do not easily deteriorate.
In the last part of the chapter the author lists the characteristics of a good currency, such as being widely accepted and durable.

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