Winning the Hardware Software Game Winning the Hardware-Software Game - 2nd Edition

Using Game Theory to Optimize the Pace of New Technology Adoption
  • How do you encourage speedier adoption of your product or service?
  • How do you increase the value your product or service creates for your customers?
  • How do you extract more of the value created by your product or service for yourself?

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technology adoption

  • Playing the Mobile Payments Game v.3: 2015 - Present

    A copy of the full analysis can be downloaded by clicking on the link at the bottom of this blog entry.

     

    The latest version of the Mobile Payment Systems Game started in early 2015, with two significant changes in the structure of the Game.  First, the Mobile Carriers surrendered to Google. And second, Samsung entered into the game with its acquisition of a technology company that provides an alternative to Google Wallet. PayPal also joined the Game, allying itself with the Merchants, though this is a less-significant change than the other two. The structure of the game is presented in Figure 5.

  • Playing the Open Source AI Game, Part 1

    AI Basics

    Definition

    Why Now?

    The Controversy

    The Letter

    Current AI Ecosystem

    Categorization of AI Technologies

    Organization of Companies in the AI Ecosystem

     

     A copy of the full analysis can be downloaded by clicking on the link at the bottom of this blog entry.

     

    OpenAI, the organization recently cofounded by Elon Musk, has been receiving a lot of press lately. The company was introduced as follows:

    OpenAI is a non-profit artificial intelligence research company. Our goal is to advance digital intelligence in the way that is most likely to benefit humanity as a whole, unconstrained by a need to generate financial return.

    Since our research is free from financial obligations, we can better focus on a positive human impact. We believe AI should be an extension of individual human wills and, in the spirit of liberty, as broadly and evenly distributed as possible.

    Two issues in particular have been generating most of the attention surrounding the founding of the new organization:

    • OpenAI will focus its research on discoveries that will have positive benefits for society; and
    • OpenAI will be open source, that is, its discoveries will be freely available to all.

    Recent advancements in AI have enabled researchers to provide valuable new products and services in the marketplace, and the promise of continuing advancements suggest that even more valuable discoveries are on the horizon. As such, what motivations lay behind the decision of Elon Musk and his cofounders to make their new organization open source, rather than establishing it as a for-profit company? They have said that their intent is to provide discoveries that benefit humanity. But are the founders really as altruistic as they, themselves, and the media have made them out to be?

    This analysis is an attempt to better understand the dynamics underlying the AI ecosystem so as to better understand what motivated the founders of OpenAI to designate the organization as open source and whether or not there may be other agendas out there besides pure altruism.

  • Playing the Open Source AI Game, Part 2

    Generating Value from AI Systems

    Essential Components

    Feedback Loops

    Stated Benefits of Open Source Systems

    Focus on Projects that Benefit Humanity

    Mitigate Power of Single Entity

    Benefit From and Improve the Technology

    Attract Elite Researchers

    Why Do I Think OpenAI Was Established As Open Source?

    The More Obvious/Discussed Justifications

    The Less Obvious/Discussed Justification

     

    In Part 1 of this analysis, I provided some background information on AI as a foundation for the discussion. In this part of the analysis I continue on to discuss why I think Elon Musk designated OpenAI as an open source entity.

    A copy of the full analysis can be downloaded by clicking on the link at the bottom of this blog entry. 

     

    Generating Value from AI Systems

    Essential Components

    I’ve mentioned several times throughout the analysis that AI technology involves three essential components: IA algorithms (software), AI platforms (hardware), and big data. In this section I describe the nature and use of these components in more detail.

    I like the way Neil Lawrence describes the AI system in “OpenAI won't benefit humanity without data- sharing.” He uses the analogy of cooking, where AI algorithms are the recipes, the data are the ingredients, and the platform is the stove or oven.

    Anyone who has tried to come up with an original recipe will tell you that it generally needs to be tweaked before you come out with the ideal output. Similarly, researchers design AI algorithms, test and train them by running data through them, then tweak them to improve their performance.

    Generally speaking, the better cooks are those with more experience, and they tend to be the ones who come up with the best recipes. Of course, occasionally unknown or unpracticed chefs come up with excellent recipes, but that’s not the norm. Similarly in AI, the better, more experienced researchers are the ones who will probably generate most of the advancements in AI. However, that does not preclude the possibility that some unknown savants will be able to come up with advanced solutions on their own.

    Also, in cooking, better ingredients produce better dishes. Similarly, in AI, higher quality data lead to better results – as the saying goes, garbage in, garbage out. At the same time, AI algorithms become more accurate (trained) as they run more data. This means that having access to larger volumes of data will generate more accurate algorithms. So when it comes to data, both volume and quality are important.

    Finally, when cooking, the sizes of the ovens constrain the volume of food that can be produced. Similarly, with AI algorithms that need to run through large volumes of data to become properly trained, larger, more efficient hardware systems produce results much more quickly than do smaller systems.

  • Playing the Same-Day Delivery Game Part 1: Bricks-and-Mortar vs. Online Stores and Last Mile

    A copy of the full analysis can be downloaded by clicking on the link at the bottom of this blog entry.

     

    Shopping Experiences: Bricks-and-Mortar vs. Online Stores

    Let’s start with a comparison of shopping experiences in bricks-and-mortar versus online stores.

    There are three major advantages associated with in-store versus online shopping experiences. First, buyers are able to handle the merchandise. This basic sensory experience reduces much of the risk associated with online shopping regarding not knowing exactly what you’re getting. Second, in-store shoppers are able to take immediate delivery of the items they buy – no shipping costs or delays. Finally, to the extent that shoppers need to return items, in-store returns don’t require any of the packaging or shipping costs associated with online returns.

  • Playing the Same-Day Delivery Game Part 2: Configurations of Delivery Networks

    A copy of the full analysis can be downloaded by clicking on the link at the bottom of this blog entry.

     

    In Playing the Same-Day Delivery Game Part 1, I discussed the differences between shopping experiences that take place in-stores vs. online, and I noted that same-day delivery services aim to provide shoppers with much of the convenience of online shopping, without the associated delays. I then discussed the Last Mile problem, which has historically been an impediment to the cost-effective provision of same-day delivery services.

    In this part of my analysis, Part 2, I discuss various configurations of delivery networks.

     

    Essential Components

    The essential components required to operate any type of delivery network include (i) hubs, (ii) vehicles, and (iii) drivers. The minimization of costs associated with operating a delivery network entails several, simultaneous optimization problems involving these essential components.

  • Playing the Same-Day Delivery Game Part 3: Delivery Network Operations and Barriers to Adoption

    A copy of the full analysis can be downloaded by clicking on the link at the bottom of this blog entry.

     

    In Playing the Same-Day Delivery Game Part 1, I discussed the differences between shopping experiences that take place in-stores vs. online, and I noted that same-day delivery services aim to provide shoppers with much of the convenience of online shopping, without the associated delays. I then discussed the Last Mile problem, which has historically been an impediment to the cost-effective provision of same-day delivery services.

    In Playing the Same-Day Delivery Game Part 2, I discussed various configurations of delivery networks, including hub-and-spoke systems, aggregator systems, point-to-point aggregator systems, and point-to-point systems.

    In this part of the analysis, I discuss the different options for delivery network operations and the barriers to adoption of same-day delivery services.

     

    Delivery Network Operations

    Suppliers who wish to provide delivery services to their customers currently have several options: (i) they can provide delivery services in-house; (ii) they can outsource delivery services to a third party; or (iii) they can provide modified delivery services, such as curbside delivery.

  • Playing the Same-Day Delivery Game Part 4: Same-Day Delivery – Why Now?

    A copy of the full analysis can be downloaded by clicking on the link at the bottom of this blog entry.

     

    In Playing the Same-Day Delivery Game Part 1, I discussed the differences between shopping experiences that take place in-stores vs. online, and I noted that same-day delivery services aim to provide shoppers with much of the convenience of online shopping, without the associated delays. I then discussed the Last Mile problem, which has historically been an impediment to the cost-effective provision of same-day delivery services.

    In Playing the Same-Day Delivery Game Part 2, I discussed various configurations of delivery networks, including hub-and-spoke systems, aggregator systems, point-to-point aggregator systems, and point-to-point systems.

    In Playing the Same-Day Delivery Game Part 3, I discussed the different options for delivery network operations — in-house and outsourced, and others — and the barriers to adoption of same-day delivery services, namely, will enough customers and suppliers sign on?

    In this part of the analysis, I discuss why same-day delivery services have just now (over the past several years) appeared in the marketplace.

     

    The last mile problem has existed since the advent of transportation and communications systems. So why have same-day delivery start-ups suddenly been popping up now, over the past few years? In fact, what has changed since the late 1990s when Webvan, Kozmo, and other startups tried, but failed, to do the same thing?

    There are two separate factors contributing to the recent renaissance of same-day delivery services. The first is the improvement in logistics technologies, which have vastly reduced the costs of operating delivery service networks. The second is the implementation of same-day delivery services by Amazon and Google as a means to other ends.

  • Playing the Same-Day Delivery Game Part 5: How Will the Same-Day Delivery Game Evolve?

    A copy of the full analysis can be downloaded by clicking on the link at the bottom of this blog entry.

     

    In Playing the Same-Day Delivery Game Part 1, I discussed the differences between shopping experiences that take place in-stores vs. online, and I noted that same-day delivery services aim to provide shoppers with much of the convenience of online shopping, without the associated delays. I then discussed the Last Mile problem, which has historically been an impediment to the cost-effective provision of same-day delivery services.

    In Playing the Same-Day Delivery Game Part 2, I discussed various configurations of delivery networks, including hub-and-spoke systems, aggregator systems, point-to-point aggregator systems, and point-to-point systems.

    In Playing the Same-Day Delivery Game Part 3, I discussed the different options for delivery network operations — in-house and outsourced, and others — and the barriers to adoption of same-day delivery services, namely, will enough customers and suppliers sign on?

    In Playing the Same-Day Delivery Game Part 4, I discussed why same-day delivery services have reappeared recently, after having been tried and failed in the late 1990s. In particular, I note that over the past decade, there have been tremendous advances in logistics technologies, which have significantly decreased the costs of providing same-day delivery services. I also note that Amazon's and Google's forays into the same-day delivery market are driven by more than just providing delivery services. Specifically, the two companies are seeking to (i) grab a share of the grocery market, (ii) increase their respective shares in the product search market, (iii) generate access to consumer use data, (iv) generate direct access to consumers, and (iv) generate spillover effects to other parts of their technology ecosystems.

    In this part of the analysis, Part 5, I discuss how I think different aspects of the same-day delivery game will evolve.

     

    Will Enough Consumers Sign Up?

    Will enough people participate in same-day delivery services and use them frequently enough to support operations?

  • Playing the Used Technology Game

    Smartphone manufacturers, such as Apple and Samsung, have thrived for the past fifteen years using a specific business model that involves

    (i) Swiftly releasing next generation products that contain significant advancements over previous generations of products, and

    (ii) Selling next generation technologies at a premium.

    However, more recently, sales of used and refurbished older-generation-technology products have cut into sales of latest-generation-technology products. This analysis examines the game between sellers of new products and sellers of used and refurbished products.

     

    Figure 1

    used tech game

  • Playing the Virtual Reality Game

    Key Concepts

    Before we can understand the issues related to 360°, 3D, AR and VR technologies, we have to understand some key concepts.

    Immersion and Presence

    The goal of 360°, 3D, AR and VR technologies is to immerse users in an environment, so that they feel they have been “teleported” to this new locale and are actually present in this new world. Achieving immersion and presence requires that the brain be fooled by the senses into believing it is somewhere that it really is not.

    Here are descriptions of immersion and presence by some other sources:

    Reality Technologies:

    Total immersion means that the sensory experience feels so real, that we forget it is a virtual-artificial environment and begin to interact with it as we would naturally in the real world.



    Virtual reality immersion is the perception of being physically present in a non-physical world. It encompasses the sense of presence, which is the point where the human brain believes that is somewhere it is really not, and is accomplished through purely mental and/or physical means. The state of total immersion exists when enough senses are activated to create the perception of being present in a non-physical world.



    a sense of immersion (i.e. convincing the human brain to accept an artificial environment as real).

    iQ by Intel:

    … presence: “The unmistakable feeling that you’ve been teleported somewhere new.

    VR Lens Lab

    … presence. That is, the ability to take you somewhere other than where you really are, and trick your mind into believing it.

    Jonathan Strickland at How Stuff Works

    In a virtual reality environment, a user experiences immersion, or the feeling of being inside and a part of that world.

  • Social Development Requires More Than Just New Technology

    This post continues the discussion about what society needs in addition to technology to develop. In my previous entry, The Growth and Development Paradox, I established that

    • Technology enables societies to develop.
    • Foundational technologies have existed for thousands of years.
    • Yet, sustainable development didn’t occur until the Industrial Revolution.
    • Technological development is thus not sufficient for societies to develop. There’s something else — in addition to technology —that’s necessary for society to develop.

    Let’s consider the automobile as a case study of what else society needs, in addition to technology alone, to be able to develop.

    Most people would agree that the automobile has been one of the most influential technologies of all time. Since its inception in the late 1800s/early 1900s, the automobile has fundamentally shaped American society: it has provided unparalleled mobility to the masses, engendered suburbia, empowered women to take a more active role in society, created numerous jobs, and shaped our leisure activities (cruising and road trips, drive-in movies and restaurants, etc.).[1] In short, the motor vehicle has turbo-charged social development.

    Currently, about 100,000 patents cover automobiles.[2] That’s a huge amount of innovation! But it wasn’t just automobile technology alone that enabled society to develop based on the automobile. Yes, the automobile offered society the potential to develop. However, to realize that potential, society needed more than just the technology alone: Society needed changes in Community, Markets, and Government to accommodate changes in Technology and unlock the potential that technology provides. Let’s consider the changes in Technology, Community, Markets, and Government required for successful widespread adoption of the automobile in society, thereby enabling mobility of the masses.

    Automobiles replaced railroads, horse-drawn carriages, and bicycles as more comfortable, convenient, and efficient means of traveling short and long distances.[1] However, in addition to automobile technology, widespread adoption of the automobile in the US required the majority of Americans to have: (i) disposable income and access to affordable automobiles; (ii) roadways and infrastructure; (iii) widely available sources of fuel and repair services; (iv) public space for parking; and (v) education and licensing programs to teach people how to drive and how to follow the rules of the road.

    4 systems automobile

  • Switching Costs: The Overlooked Obstacle to Change

    Why do we adopt new technologies?

    Many people will be quick to respond, “Because they help us do things faster, easier, or better.”

    Pretty obvious.

    Well, then, why don’t people adopt new technology?

    Most people would probably say that people don’t adopt new technology either because the technology is too expensive or because people don’t need the features the technology offers.

    But there’s another reason we don’t adopt new technology or make some other change in our lives, even though we’d like to: something is holding us back. There’s an obstacle that’s preventing us from making the change.

    I call this obstacle switching costs. Switching costs are an important, yet often overlooked, obstacle to change. In my book, Winning the Hardware-Software Game, I define switching costs as it relates to adoption of new technology as follows.

  • The Current State of Electric Vehicles Part 1: Electric Vehicle Battery Basics

    A copy of the full analysis can be downloaded by clicking on the link at the bottom of this blog entry.

     

    The following are the essential factors at issue when considering batteries for use in powering electric vehicles:

    Amount of Energy that Can Be Stored

    The batteries of any given size that are able to store the greatest amount of energy in terms of both weight (specific energy) and volume (energy density) of the battery are the most desirable (efficient) to power electric vehicles. Perhaps the largest current disadvantage in terms of the state of battery development for electric vehicles (EVs) is the fact that currently EVs cannot go very far without having to have the battery recharged, creating so-called range anxiety. Lower battery range would be less of a problem if (i) there were more fueling stations around (currently there are very few refueling stations), and/or (ii) it didn’t takes so long to recharge the battery (20 minutes to several hours, depending upon the technology of the charger). Currently, EV manufacturers are working fiercely to increase both the specific energy and/or energy density of batteries for EVs so as to achieve greater vehicle range.

  • The Current State of Electric Vehicles Part 2: The Earliest Electric Vehicles (Hybrids) Used NiMH Batteries

    A copy of the full analysis can be downloaded by clicking on the link at the bottom of this blog entry.

     

    The relationship between specific energy and energy density for various types of batteries are presented in Figure 1, which was taken from Justin Amirault, et. al. “The Electric Vehicle Battery Landscape: Opportunities and Challenges”

    Figure 1

  • The Current State of Electric Vehicles Part 3: Electric Vehicles Now Use Lithium-ion Batteries

    A copy of the full analysis can be downloaded by clicking on the link at the bottom of this blog entry.

     

    From the beginning, the biggest problem facing all-electric vehicles has been their short range, that is, they cannot go very far without having to recharge their batteries. Since lithium-ion (Li-ion) batteries offer the greatest energy capacity and density of all the batteries, and thus the greatest potential for longer range, Tesla chose to use Li-ion batteries to power its first all-electric vehicle, the Tesla Roadster. As Tesla notes:

    Tesla battery packs have the highest energy density in the industry

    ...

    Nickel Metal Hydride (NiMH) batteries are commonly used in hybrid cars. However, a 56 kWh NiMH battery pack would weigh over twice as much as the Roadster battery. Instead, Tesla uses Li-ion battery cells which dramatically decrease the weight of the Roadster pack and improve acceleration, handling, and range.

  • The Current State of Electric Vehicles Part 4: Current Electric Vehicle Offerings

    A copy of the full analysis can be downloaded by clicking on the link at the bottom of this blog entry.

     

    Now let’s take a look at the characteristics of the current offerings of electric vehicles across manufacturers, which are presented (above in Figure 2 and) in Figures 4 and 5.

    Figure 4

    Figure 5

  • The Current State of Electric Vehicles Part 5: The Costs of Manufacturing Li-ion Batteries

    A copy of the full analysis can be downloaded by clicking on the link at the bottom of this blog entry.

     

    This section examines the structure of costs associated with manufacturing Li-ion batteries for use in electric vehicles.

    The battery packs used in electric vehicles consist of numerous individual batteries connected together and packaged into modules, which are then connected together and packaged into battery packs.  David L. Anderson, in “An Evaluation of Current and Future Costs for Lithium-ion Batteries for Use in Electrified Vehicle Powertrains” explains this process in a bit more detail:

    [F]or automotive applications, individual cells are typically connected together in various configurations and packaged with associated control and safety circuitry to form a battery module. Multiple modules are then combined with additional control circuitry, a thermal management system, and power electronics to create the complete battery pack…

  • The Current State of Electric Vehicles Part 6: The Future of Electric Vehicles

    A copy of the full analysis can be downloaded by clicking on the link at the bottom of this blog entry.

     

    In Part 1 we learned that the essential factors at issue when considering batteries for use in powering electric vehicles include (i) the amount of energy that can be stored, (ii) longevity, (iii) cost, and (iv) safety.

    In Part 2we learned that (i) theearliest EVs (hybrids) used NiMH batteries, due to their greater safety, longer life, and lower cost; and (ii) two factors led to the industry-wide adoption of Li-ion batteries as the battery family of choice for electric vehicles: (a) their potential for greater vehicle range, and (b) patent access problems to NiMH battery technology.

    In Part 3 we learned that (i) current EVs use Li-ion batteries because they offer the greatest potential energy capacity and density; (ii) Li-ion batteries include a family of batteries composed of different materials; (iii) the cost of the battery is the largest cost component of electric vehicles; of the battery costs, the most significant contributors are the costs of the raw materials, which vary greatly in price; and (iv) different material constructions of Li-ion batteries generate differences in battery performance, where the ranking of battery potential from least to greatest is (a) LCO (1st gen) and LMO (2nd gen), (b) LFP (3rd gen) and NMC (4th gen), and (c) NCA and LTO.

    In Part 4 we learned that information on current EV offerings provide three indications: (i) many of the current EV offerings are “compliance cars”; (ii) the performance of most EVs is clustered around similar levels of energy capacity and range; and (iii) the battery manufacturing industry is consolidating around a few key suppliers.

    In Part 5 we learned that (i) high quality control standards for the manufacture of batteries for EVs result in low manufacturing yields, on the order of about 60%; (ii) materials account for about 75% of total manufacturing costs of batteries for EVs; and (iii) cost reductions in the manufacture of lithium-ion batteries may be achieved through larger scale production volumes and technological breakthroughs.

    Putting it all together yields the following insights.

  • The Great Stagnation: The Internet Has Not Been a Revolutionary Innovation… Or Has It?

    GDP vs. Social Value

    GDP Is Not an Accurate Measure of Well-Being

    Has the Internet Been Revolutionary for Well-Being?

     

    Tyler Cowen, an economist at George Mason University, recently published an ebook called The Great Stagnation: How America Ate All The Low-Hanging Fruit of Modern History, Got Sick, and Will (Eventually) Feel Better

  • Understanding the Evolution of IoT and What Will Be Important for Success

    The IoT Ecosystem Contains a Vast Array Of Components

    The Potential Value of Iot Will Increase Exponentially Over Time

    Barriers Are Currently Impeding Adoption of Iot

    How the Evolution of Iot Will Proceed

    Why Be an Early Adopter?

    What Will Be Important for Success in Iot?

     

    Introduction 

    Vasyl Mylko of SoftServe notes that the Internet of Things is emerging at the intersection of Semiconductors, Telecommunications, and Big Data, through the evolution of their respective laws (see Figure 1)

    • Moore’s Law observes that semiconductors have been achieving a 60% increase in computer power every year.
    • Nielsen’s Law observes that Internet bandwidth has been achieving a 50% increase in speed every year.
    • Metcalfe’s Lawobserves that telecommunications networks increase in value with the square of the number of nodes
    • Law of Large Numbersobserves that the average obtained from a set of data approaches the true value as the size of the dataset increases.

    Charles McLellan, in “The internet of things and big data: Unlocking the power,” describes more directly how the confluence of trends inspired by these laws is enabling the rise of IoT:

    A huge number of 'things' could join the IoT, whose recent rise to prominence is the result of several trends conspiring to cause a tipping point: low-cost, low-power sensor technology; widespread wireless connectivity; huge amounts of available and affordable (largely cloud- based) storage and compute power; and plenty of internet addresses to go round, courtesy of the IPv6 protocol…

     

    Figure 1

    1 iot intersection