CNN and other broadcasters are rapidly recognizing the power of YouTube and such user-generated video websites. CNET reports today that CNN Exchange will launch later this week to allow consumers to create and post their own videos (which is exactly what YouTube does.)
And not to be outdone, AOL/Time Warner is looking into the same trends as part of its overhaul of AOL.
VCs and tech entrepreneurs often focus on improving an idea that someone else has, rather than changing the game. The market is getting crowded with me-too video services already, says TechDirt.
Some questions arise:
Are these new services just copies or minor improvements to what YouTube has already created?
Can a mainstream broadcaster support and promote a business that might cannibalize its current business?
Are mainstream broadcasters just trying to cram the new thing (user-created short videos) into a business model that can't support the new thing?
Is the current business model past its prime?
** Other Views **
BBC video report on how user-generated content and video cell-phones have changed news reporting. A BBC executive says the July 7th London bombings were a catalyst for a new approach to
journalism. On that day, the BBC received more than 20,000
emails and SMS messages, thousands of which contained images
and videos.
PaidContent.comseems doubtful of AOL's success: "AOL has been a beat or two behind, leaving it vulnerable to
suggestions of copy-catting or “me, too,” even when its plans already
were in the works.
VC BloggerPaul Kedrosky points to a Charlie Rose interview with AOL founder Steve Case, who says he regrets the blockbuster 2001 merger with Time Warner. This is worth considering as media companies look at user-created content as their salvation.
ZDNet'sBlogBetween The Lines has a good update on business issues at YouTube, including copyright problems, competition from Google, IPOs and profitability, based on a panel discussion with CEO Chad Hurley at the AlwaysOn Summit, a tech conference last week in Stanford.
BeetTV has a video interview with YouTube's Hurley following the conference, including his thoughts on Microsoft's Warhol project.
The old drive-in movie theater business peaked in 1959 and died a slow death through the 1970s. Today few people under 40 have ever attended a drive-in.
Yet an interesting trend is underway: The growth of so-called guerilla drive-ins. Armed with a few pieces of electronics and a sense of community fun, hobbyists are creating their own drive-in movie experience.
The technology required at a total cost of about $4,000:
DVD player;
AC inverter in car;
FM transmitter;
PC projector.
An informal movement, called MobMov (for mobile movies) is helping people figure out the technology and logistics of holding these events around the world, from Berkeley, CA (the first MobMov venue... Who would have guessed?) to Hyderabad, India.
Notable venues are in Hollywood, including one location at the Hollywood Forever Cemetary, with a weekly schedule and DJs as a warm-up act. The Guerilla Drive-In at Santa Cruz, CA presents a mix of Hollywood classics and indie films at two-week intervals in a public park as part of an effort to reclaim public space.
The regular movie audience has been so decimated over the past 56 years
that the habitual weekly adult moviegoer will soon qualify as an
endangered species. In 1948, 90 million Americans—65 percent of the
population—went to a movie house in an average week; in 2004, 30
million Americans—roughly 10 percent of the population—went to see a
movie in an average week.
Entrepreneur Mark Cuban, a pioneer of internet radio and HDTV, and owner of a movie chain is vexed by the issue, which he calls the holy grail of the movie business:
How do you get people out of the house to see your movie without spending a fortune? How can you convince 5 million
people to give up their weekend and go to a theater to see a specific movie without spending 60mm dollars?
Cuban knows his movie business well and has not been caught in the classic traps of denial or of keeping a narrow view of the business.
Hollywood has a high-cost business model for making and promoting movies. Average budget last year was $96M, up 76% from $55M in 2000;
The business depends on hits to bail out the losers;
Consumers have other alternatives to entertainment, including TV since 1940 and home-theaters in the past decade;
New online entertainment alternatives such as the web, YouTube, video games, etc. are drawing consumers away from the big screen at a more rapid rate than early TV did.
I can't say that I have immediate complete answers. But five questions pop up based on the disruptive innovation framework:
What is the job that people are 'hiring' movies for when they go to the cinema?
What are the barriers to the consumption of movies?
Are there ways to eliminate or reduce some of these barriers?
Are parts of the market overshot?
Is there a simpler, lower-cost approach that appeals to a neglected or underserved market segment?
The first two questions appear straightforward and I will take a quick crack at them. The last three questions get at the heart of the issue and I will attempt to address them over time. It would be a disservice to rattle of quick answers on those issues.
The job people hire the movies for: The reason people go to the movies varies: Unattached teens want a better place than the mall to hang out. People on dates want an easy-access, neutral venue that gives two strangers something to talk about. Parents with kids want to have a simple night out to relive their dating experiences. Although these are all different, the common theme is by and large people are looking for 90 minutes of affordable, diverting escape.
Barriers to consumption: In my view, time is the biggest barrier. People work longer. They surf more. They have increased responsibilities and other diversions all of which eat into potential movie time. Part of this may be associated with just getting out to the theater more than the actual length of the movie. With ticket prices rising and concessions upsizing, money is also a barrier for many people.
** Other Views **
BloggerAdam Kalsey says theaters should improve service
to win back customers, with better food, assigned seating etc.: He
adds: "The problem Mark Cuban is trying to solve is mass-marketing
films isn’t efficient. In order to replace mass-marketing of films,
studios need to replicate
the successes while eliminating the problems. They need to build word
of mouth, build mass awareness, and create interest among their target
market. Approach the mass market through some non-traditional
advertising."
FirstShowing.net has an interesting approach to recreate the excitement of a Hollywood opening night, every night, something most theaters don't do: "Blame lies on the movie theatres themselves. They’re not advancing
themselves in the way they should be by redeveloping their business
models and reworking their business strategies."
Tesla Motors is attracting attention with its new $100,000-sports car. Reason: 0-60 in 4 seconds on an electric vehicle. That kind of performance outclasses Corvettes, Vipers, BMWs and Porsches.
And the Tesla Roadster looks great, which you would expect from a Lotus design. The car is being prepared for sale in mid-2007 and is getting rave previews from auto journalists and tech people including Wired because of its unique technology, adopted from laptop batteries.
(AutoblogGreen's editor, Sebastian Blanco, shot video at the unveiling of the Tesla Roadster in Santa Monica, CA.)
The company is funded by a crowd of Silicon Valley celebrities including execs from Google, Paypal and Ebay. As a the MIT Technology Review said:
Silicon Valley thinks it can do what Detroit could not -- create a thriving business selling electric cars.
The electric car business has been a substantial failure to date. For example, GM sank $2B into its EV1 car and lost money on every one sold, according to a former engineer. And at risk of inviting some conspiracy theorists into the discussion, we can observe that very few electric cars are in use today (around 1,000 in California), compared to, say the Toyota Prius hybrid, which doubled sales to about 100,000 units in 2005, dwarfing all other hybrids and electric vehicles. Even then, hybrids account for 1.2% of total car sales.
So is the Tesla a disruptive innovation? Or put another way, is this company likely to create a new growth market where others have failed? Can it eventually move into the mainstream successfully?
Tesla Motors was founded by smart, successful business people and they have created a tremendous car. But, the success of their enterprise seems to depend on three factors:
Initial success at the very high-end of the market;
Sales volume sufficient to support an expensive business model;
A breakthrough in battery technology performance and lower costs for future lower-cost mainstream models;
This is the approach that worked for years in Silicon Valley: Follow the early adopters and count on Moore's law of improving technology to enter the mainstream. But they are starting at the very high end of the market with an electric car that beats conventional cars in terms of sports car performance.
...He's already preparing a sedan, codenamed White Star, which
could hit streets as early as 2008. Of course, the sedan won't be as
lightweight or aerodynamic as the Roadster, so its range is likely to
drop significantly. Eberhard's response: maybe with today's tech. But
battery power is improving steadily, and several companies say they may
soon double battery life. By the time the sedan comes out, he says,
batteries will be ready to deliver: "We're going to ride that
technology curve all the way home."
To draw a parallel, it is something like a Cray supercomputer intitiative. But seemingly with the goal of eventually getting into the PC business when component prices fall, chips improve sufficiently, or when the market is ready for a Cray-style PC.
You will note that no supercomputer maker managed to move downstream into the larger market. Among mainframe makers, only IBM did (using a skunkworks team in Boca Raton, far away from HQ) and it exited the PC business last year after never making money. Not a single minicomputer maker managed the transition to the PC business.
This is not a perfect analogy because Tesla is a startup (not an established player like GM) but I wonder if there is some merit. In Tesla's case, the company can rely on a lower-cost business model than conventional auto makers by outsourcing manufacturing and relying mainly on standard technology. Clearly Tesla's focus is on sexy design and battery technology (1,000 lb of Lithion Ion batteries and a liquid cooling circuit.)
Typically disruptive innovations have some of these characteristics, which often cause mainstream competitors to underestimate the newcomers:
Inferior product in terms of attributes valued by the mainstream market. (Think about how DEC and its minicomputer customers underestimated the role of the PC, an underpowered toy back in 1981;)
Superior attributes valued initially by a fringe market which is neglected by mainstream suppliers. (Early adopters the Sony transistor radio in 1956 were rock-and-roll teenagers who valued mobility and privacy above sound quality, reliability and power consumption;)
In established markets, disruptors typically expand a market by enabling non-consumers to buy in. They are thrilled with the new product, despite its shortcomings. Disruptors do so by making products simpler, more convenient, less costly, or by reducing the expertise required to consume. (Think of Apple's iPod and iTunes, which were the first easy way to convert and pack all your music;)
Successful disruptive innovations initially seek the toehold market, establish profitability in that niche quickly and maintain a low-cost business model as they grow the niche slowly. This is the exact opposite of most dot-com style business plans which aim high and are based on a high cost structure. Patient for growth/impatient for profit, as Harvard Prof. Clayton Christensen writes.
One could argue that millionaire sports-car buyers represents a fringe market, but I am not sure it is a neglected market. To me, this looks like a tough road ahead for breaking into the mainstream.
Is there a disruptive approach possible for electric cars?
A few months ago, we wrote about an electric car company with a disruptive approach, Feel Good Cars, a startup pursuing a neglected niche market of seniors in gated communities. With limited speed and range, the ZENN can be seen as inferior to conventional cars. But it is a nice low-cost upgrade from electric golf carts that some seniors are using. Its low-cost business model allows it to be profitable from the start.
There is a risk in that over the longer term Feel Good is counting on a battery breakthrough from EEStor, a secretive Kleiner Perkins startup. Feel Good has an exclusive on EEStor technology for small cars.
Update: Since we last wrote about the ZENN, Feel Good has recruited a few auto
industry execs, has unveiled its ZENN car for shipments to start
shortly and won a gold medal from the Michelin challenge for urban
vehicles.
** Other Points of View **
Clayton Christensen looks at high-end disruption with a warning: "Be careful not to apply the label high-end disruption too quickly," he says, because it may be that the innovator is competing on a different set of performance attributes. For example, although Whole Foods Market appears to be a "high-end" disruptor, it is actually offering greater convenience and greater variety than other healthy-food suppliers.
The Disruption Group lists the results from disruption, including new revenue streams and sustainable, high return on equity. The website also has a CEO Guide to the Benefits of Disruption (pdf)
Tesla Motors'blog by CEO Martin Eberhard talks about the company's three-year history and design decisions along the way, such as working with Lotus.
Anti-marketer Paul Paetz has an alternate take on disruption from the high-end of the market, saying I have underestimated Tesla Motors: "What isn't important for disruption is whether the initial price point
is high or low, but that the revenue required to support a startup is
far less than what Detroit needs. This is where your point that they
need a high volume to support an expensive business model is flawed."
Zack at the OpenForce software blog gives the Tesla a thumbs-up rating for Silicon Valley entrepreneurs and VCs: "I expect these will be more common than Toyota Prius's on Sand Hill
road in 2007. The Tesla Roadster is undeniably cool and I hope it will
influence car makers world wide. This could be the shape of things to
come."
Red HerringInterview with Tesla CEO Martin Eberhard including his views on why the electric car has failed so far: "...For
the most part, it requires the buyer of such a car to change his or her
nature. You’re buying a car that is not as good as an equivalent gas
car at all—slower, uglier, with not as much range—and they’re trying to
compete essentially on price, where they can’t win. None of those cars
were built for people who really like to drive."
Green Car Congress has a posting and online discussion on Feel Good's ZENN car, including detractors as well as supporters.
Tech strategist Pip Coburn and the crew who run the Yi-Tan community call, a weekly thought-group on technology and change, will be hosting a conference call on July 24th to discuss YouTube as a disruptive innovation. Here is the preview:
Game-changing technologies look like toys when they emerge.
What does YouTube portend for IP rights? Is it smarter to let people riff and mix?
Why hasn't anyone caught up with YouTube?
Please join us for our Weekly Call by contacting Fazia Amin or Jerry Michalski, or simply catch up at your convenience by downloading the audio files from the Archive or podcasts. For now, recordings will be available three days after the call, so check here on Thursday mornings.
CBS is miffed...""It's uncool for people to take our video without permission," says Betsy Morgan, Senior Vice President and General Manager of CBSNews.com.
BusinessWeek looks at some newspapers that are joining together to build on the net rather than fighting the trend. A coalition of Yahoo, Hearst,MediaNews Group have apparently been in discussions since Oct. to leverage online classified ads such as Yahoo's HotJobs.com site.
"Help-wanted is the
quick cash," says one executive involved in the discussions, "but news
search is the long-term future." At least one newspaper executive
involved in the discussions says he nurses hopes that Web surfers
eventually will pay small fees -- micropayments, in Web parlance -- for
some newspaper content.
It is true that newspapers need to explore new services online. Newspapers won't survive by simply replicating online what they do in print. That's a classic mistake for incuments confronted by a potentially disruptive innovation.
Newspapers need to explore what are the real problems consumers have and how can newspapers help solve them. And media companies may learn from online efforts working with Yahoo.
Trouble is that coalition members won't share the same priorities for the project. And newspapers may put the breaks on some efforts out of fear of cannibalization of current ad revenues.
Media-watcher Jeff Jarvis says there is an important subtext in struggling media companies these days. He asks who's in charge at newspapers that struggle to define their future: The traditional print bosses or the new online content bosses?
The specific case under discussion is Dow Jones, publisher of the daily Wall Street Journal, Barrons, the online service Marketwatch and the traditional Dow Jones news wire, among other properties reaching 14M customers worldwide. But the issue of how traditional media companies stay relevant in an online-Googlized-24/7 -instantaneous-information-world is being considered by every media player, from network TV to the New York Times.
Dow Jones has struggled for years and has seen its profit erode by 65% in the past two years. Now, like many newspaper publishers, it is setting up a task force to figure out its future in light of competition from web services and new media companies etc. The task force has several members from each of the divisions and is mapping out something they call "Project Journal 3.0: Newspaper for the Digital Age."
Jarvis's concern is that at DJ, the online guys are losing control of the future:
"The ballsy news company will not only give precedence to the internet
but also to the people who know the internet. I’m afraid I’m not seeing
that happen..."
Jeff seems to be allergic to task forces and I think anyone who has been involved in once would be sympathetic to that view. In an earlier posting, he writes:
"If the journalists truly want to be involved in the reinvention,
perhaps their starting point should not be trying to preserve the past
but instead ideas for the future... These strategic
task forces can’t afford to be about resisting change. They have to be
about making change happen, and quickly."
Develop a strategy that incorporates all DJ markets, all DJ brands, all the media in which we operate;
Optimize products and services so each medium is used to its full advantage;
Serve the customers of each product as efficiently and effectively as possible;
Deliver differentiated and unique content how, where and when consumers want it;
Minimize efforts on lower-value content;
Reduce duplicated efforts;
Eliminate unnecessary effort.
And this all makes total sense. And this will likely fail. Regardless of whether online or print people are in charge.
I don't mean to be pessimistic or critical of Dow Jones specifically.
But this looks like a recipe for failure for any incumbent and dominant supplier, which DJ is. The problems faced by Dow Jones are similar to those faced by any successful company that is about to be blown out of the water by a disruptive innovation, in this case, primarily web-based information services.
Think of mainfame computer makers vs mini-computers... minicomputer maker DEC vs PCs... Kodak vs digital cameras... Palm vs BlackBerry... Microsoft vs Linux.
In each case, the established and dominant suppliers typically failed to recognize that bigger, more profitable markets could be created based on new disruptive innovations. To be successful, the market disruptor catered to a new set of customers, thought initially to be low-end or marginal and therefore ignored by the incumbent. The disruptors also had a different business model, often with a different distribution channel, that seemed to make no sense to the incumbents and to the incumbent's customers.
Each incumbent doomed itself by over-allocating resources dedicated to preserving the past instead of harnessing the new disruptive innovation. Often, they waited until the new market proved itself. But by then, they were too late.
A committee structure designed to boost efficiency and effectiveness of the current operations is focussed on the wrong thing. Its like moving the deck chairs on the Titanic. Or worse, arguing about who is in charge of the deck chairs.
The iceberg was in charge of the Titanic. The customers are in charge of the news business. And the customers by and large have spoken: Newspapers are less relevant today than ever. The most important group that newspapers should pay attention to are not their customers. It is the non-customers.
"Newspaper readers are heading into the cemetery, while newspaper non-readers are just getting out of college."
Further, to develop a strategy that encompasses all DJ brands, all
DJ services and all DJ media, might prove to be blinded by what the company already
knows and does.
Sure, the Wall Street Journal runs a great online site, with more than 700,000 paid subscribers. One of few online newspapers to make money. Also probably the best newspaper in the country.
But it is very difficult for a committee of various stakeholders in the status quo to come up with clean, unbiased views on where the best new growth is available. They will be caught in the classic dilemma created by disruptive innovation, stuck catering to current customers, preserving their cost structure and business model, seeing their volume whittled away as new competitors steal the low-margin or unattractive customers. As summarized in the CEO Refresher:
"Well-run companies find it difficult to allocate resources for products
that fly in the face of mainstream demands. In order to get essential resources
for disruptive technology, savvy managers align the unorthodox product
with the 'fringe' customers who can put it to immediate use."
Any new market-disruptive services or products will likely look too small or too unprofessional or just too weird to the eyes of the DJ task force, which will likely assess things using market size studies, focus groups and surveys, ROI analysis etc., the traditional tools of successful companies. These tools seldom greenlight disruptive innovations.
After all, markets that don't exist can't be analyzed. What would a market study say the demand was for Google before Google existed?
Instead of establishing a complex multifaceted task force with many
objectives, DJ needs to reflect only on a few simple questions, cribbed
from Peter Drucker and Clayton Christensen:
What parts of the customer experience are good enough or
commoditized? (defocus here)
What parts are not good enough? (focus
on improving this)
What are the jobs to be done that consumers are already doing themselves?
What businesses and processes should be sloughed off altogether?
A small team of creative people, armed with only a small budget, complete independence, and a mandate to create a profitable business quickly, can address these issues faster and better than any task force.
Remember, it took only two guys to create YouTube, a video download service that has some videos more popular than top network TV shows.
**Alternative Views **
Rupert Murdoch, who knows a bit about the media, is optimistic but says newspapers and journalists condescend to their readers: "What is required is a complete transformation
of the way we think about our product. Unfortunately,
however, I believe too many of us editors and reporters are
out of touch with our readers. Too often, the question we
ask is “Do we have the story? rather than “Does anyone want
the story?”
Robin Sloan produced a captivating, but haunting view of the future of newspapers, called EPIC 2014, an 8-minute flash movie that sees the demise of the New York Times, and the ascent of a Googlized world of trash news.
Michael Bloomberg, now mayor of New York City, created a networked media conglomerate that emerged from nowhere in the 1980s to beat the dominant incumbents, Dow Jones and Reuters, in the financial newswire market. Bloomberg's autobiography explores his business methods and how he disrupted the competition, summarized here.
I found some interesting online resources that explore Pip Coburn's new book, The Change Function. I think this is an important book because it challenges many traditional approaches to tech development.
Chapter One excerpt is a available below and at Coburn Ventures.
It's a good read in Coburn's breezy self-dialog style of asking simple but profound questions. Coburn observes that the traditional approaches of creating and marketing new technologies honed in the past 40 years were incomplete because they ignored users' concerns and fuelled hatred and mistrust for technology.
For another angle, there is a good podcast with Coburn created by bookseller 800-CEO-Read in which he challenges the traditional engineering approach of milking Moore's Law to deliver new technologies at lower prices. Instead, technology suppliers need to consider the user's total perceived pain of adoption vs the user's crisis, he says.
Here is an online presentation (with many links) on some of Coburn's thinking, from www.changethis.com, a group of optimists dedicated to calm online dialog.
I found a couple of online excerpts from Andy Kessler's new book, The End of Medicine.
This book offers an outsider's view of frontline doctors and how new technologies can disrupt medicine as we know it. You'll get a quick take on Andy's take on medicine, and how it hasn't changed much in terms of frontline diagnostics in many years, from these excerpts.
Cupertino could as easily be on the outskirts of any major city as it could be in Silicon Valley. Apple Computer is around here, but it’s mostly forgettable three or four story office buildings surrounded by gas stations and retail strip malls. It was like a tour of virtue and vice. For every Fitness Center, Jamba Juice and Holistic Center that I passed there was a Taco Bell, Carl’s Jr. and cigar store.
I pulled up next to a Mercedes S55 AMG - maybe it’s the doctor’s – and sat in the parking lot of a few minutes. My heart was pounding, and the butterflies in my stomach were migrating up to my throat. I was having trouble swallowing, let alone breathing. It wasn’t too late to bail.
"OK, nothing in that one, let’s keep going.” Dr. Solon Finkelstein was cranking through these at a pretty good clip. About a minute each.
The light box seemed like something out of the 1970’s. Films were clipped in two rows to some white flexible plastic. Dr. Finkelstein would hit a button and a motor would whir and the films would move to the left, wound onto some spool buried in the machine and a new set of films would roll into view.
“I’ve been doing these since 1967, you know. Not much has changed. Oh, the film is better, but the rest of this…” he waved his hands in front of the contraption.
Andy Kessler is a former tech guy, former Wall Street analyst, former hedge fund manager. He has written three books on the investment world, chock full of hilarious and revealing stories, insightful analysis and wisecracks.
In pursuit of the next big investment score, he wrote The End of Medicine: How Silicon Valley (and Naked Mice) Will Reboot Your Doctor, published this week. It has Kessler's trademark bawdy stories and acid observations, but it is an outsider's examination and diagnosis of an industry that looks poised for change. We traded emails with Andy to learn a bit more.
Q: Andy, what got you interested in looking at the medical business and what got you to thinking that it is ripe for disruption?
I've spent over 20 years tracking the technology business for Wall Street, as an analyst and then as an investor.
The only thing I really learned was to find the silicon. Once you find a market that is attacked by silicon, you only have to wait for big markets to come into being from nothing. Silicon gets cheaper every year by 30%, it halves in price every two years. If you find something that works today, but is too expensive, then wait a bit and the fireworks start.
I was bored looking at traditional markets, computing, telecom, wireless, even music and video. I drifted around for a while, sniffing at other interesting things when I learned that a friend was diagnosed with cancer, by accident, as he had banged his head skiing and an X-Ray and CT scan showed a tumor on top of his neck. A brother-in-law had a heart attack. I wondered if silicon could be found in medicine to be able to detect disease much earlier. I was astounded by what I found.
Ripe for disruption is an understatement. $2 trillion a year is spent on healthcare in the U.S. and it is quickly on its way to $3 trillion. Doctors drive medicine and are a large component of costs which rise by double digits each year. If silicon can make its way into diagnosis, perhaps costs could stop rising and at the same time provide better care.
Q: Are doctors to become the bank tellers of their industry, to be replaced by better, smarter, automated processes or online procedures that customers would prefer to deal with?
Think about what happened to telephone operators. Switches came along and performed their function better and cheaper. Eventually, switching happened so quickly, telephone calls could become cheap and ubiquitous. A machine embedded the intelligence of the operator.
Same for bank tellers. A slightly more complicated task, ATMs embed the intelligence of the teller into silicon and software and lower the cost of transactions.
Same for auto mechanics. They fix the problem, but silicon diagnoses what is wrong with autos today, embedding the intelligence of the mechanic into the system. At $60-75 per hour charged by service stations for labor, the payback for an automated diagnosis system is quick.
The same thing happened to stock traders…So why not doctors. I went for a physical and my doctor took my blood pressure, looked into my ears and the took out a rubber hammer and
banged my knee. $440 for nothing. Was I going to have a heart-attack? He couldn't tell me. Could I have a tumor the size of a golf ball on top of my neck? No way to tell looking in my ears. He was flying blind.
But new technology exists to do powerful diagnosis, and embed the intelligence of front line doctors into silicon and software. 256 slice CT scans that turn into high resolution 3D images that can be flown through looking for atherosclerosis to avoid heart attacks. Biomarkers and molecular imaging, all silicon based, will be able to detect unique proteins from cancer cells five years early. This will change what is spent on chronic care by huge amounts.
The trick is to get down the learning curve and make these tests cheap and routine.
Q: Ok let's cut out doctors. I am all for that. But they do a lot of thinking, don't they? Just like equity analysts. Can we really automate doctors? While we are at it, can we automate stock picking and eliminate analysts? Apart from in commodities, analysts don't scale well either.
First, not all doctors. Just the front-line doctors.
My friend had a tumor the size of a cocktail olive found on the top of his neck, by accident. If he hadn't banged his head skiing, he would probably be dead right now.
The idea is to look inside each of us. Front line doctors, internists, family doctors, can't do that. They can only guess.
Nature is the screen for heart disease and cancer. When you have a heart-attack, the system declares that you have arteriosclerosis. Couldn't you have told me ahead of time and avoid the midnight ambulance ride?
Cancer is worse. You piss red or your shoulder hurts or you’re throwing up dinner and after exhaustive tests, they find a tumor and declare you have six months to live and even chemo and wonder drugs are a long shot.
Using technology, we can scan for all sorts of proteins in our blood and do a much better job of finding cancer early. Five years early. Doctors can't do that. There are no symptoms. They would never know. But cheap technology can know. Smaller, cheaper, faster, better. In this case it is cheaper and better than doctors.
The security analyst comparison may not work, but the trader comparison does. You can trade in milliseconds huge blocks of stock anonymously, while using a trader requires phone calls and paper trails and confirms and moving the market, etc.
Specialists on the NYSE and doctors may be in the same boat: Progress bypasses them.
Q: Maybe this question is too simple, but from a customer's point of view, what is the broken part of the medical business and what might be the easiest way to fix it? Ie Convert the macro observations into a business idea.
Doctors are human and don't scale. Get them out of the equation and you have a business that can get smaller, cheaper, faster, just like everything else silicon valley touches.
Consumers can do their own tests, and then only see specialists when they need them. (No pun on the NYSE, but same concept!)
Q: Cancer is a big killer today, yet doctors and patients will tell you that despite all the advances in chemotherapy, it is still a crapshoot. Did you come across any technologies that might change that?
Mostly, I spent time looking at early detection, the ability to find cancer early enough so that treatment is simple and effective, directed radiation, surgical removal, heating, freezing, melting via directed ultrasound, etc. Detected early, cancer tumors are microscopic, a million cells vs. later stage tumors the size of a cocktail olive or golf ball with a billion cells. These microscopic tumors can be treated without affecting much surrounding cells, almost impossible with later stage larger tumors, hence chemo. So the earlier, the better.
Having said that, I did see imaging techniques involving probes tagged with radiation, that find these early microscopic tumors and then light them up for PET scans. There is research going on in increasing the radiation dose tagged to these probes, meaning that they not only find cancer tumors, but directly apply radiation to them. Interesting, but very early.
Q: Ok let's invest in some medical companies or startups. What are your picks for either companies or technologies to consider?
There really isn't a business model for early detection, not yet. There is more of a negative for expensive pharmaceuticals and treatment centers, the day that heart disease, stroke and cancer begin to subside in numbers.
However, sometime in the next several years, as the silicon and software and algorithms developed for early detection begin to get cheap enough, these business models will emerge, and you will see venture capitalists step up to fund interesting companies and IPOs of the hot new early detection players. 3-D imaging, computer aided detection, biomarkers, molecular imaging probes, nanotech scan devices for antibody chips, these are all areas that we will see companies emerge.
**Other Information**
The Disruption Group lists the results from disruption, including new revenue streams and sustainable, high return on equity. The website also has a CEO Guide to the Benefits of Disruption (pdf)
Edwin Lefèvre: Reminiscences of a Stock Operator A great investment classic from 1923. The tale of the tape adds helpful insight and caution to any investor. Well written -- a rarity for this type of book. (***)
Benjamin Graham and Jason Zweig: The Intelligent Investor A wise counsel at the ready. Graham's book stands the test of time and will make better investors of careful readers. Zweig does a fantastic job flushing out Graham's 1973 book for modern-day readers. The lessons are the same, but it is great to get the additional reminders from the dot-com era and the subsequent bear market. (*****)
Scott D. Anthony and others: Innovator's Guide to Growth: Putting Disruptive Innovation to Work The latest from the team at Innosight. A how-to-guide for making disruptive innovation work. Several practical management tools and guides to help organizations do the tough work ahead. Curiously, one of the contributors is the head of strategy and business development for Motorola's handset business. If there ever was an organization that showed the need to disrupt and the failings of adapting successfully to disruptive innovation (hello iPhone), sadly to say, Motorola is it. (****)
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