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If you’re looking into the shelf of everyones’ living room, you will probably see in the DVD “Titanic” and the book “Harry Potter”. The popularity of these products is mirrored in the Long tail. The most famous products, which generate the highest demand, represent the hill in the curve (graph). Lower valued products are not that high demanded what is mirrored in the tail of the curve. Earlier we assumed that bestseller generate the highest revenue but the online market changes this view.

Through the internet you are also able to see niche products – a small comparison: Some of the biggest book stores sell around 200.000 books, whereas Amazon sells 5 million books. Why is this so? Since place does not limit the amount of offerings anymore, millions of products can be sold in the market. This rapid change causes that popularity of products to earn revenue, is not relevant anymore. In the online market is does not matter if either a bestseller is sold or a niche product – the revenue stays the same. The demand for these niche products causes the long tail. Which you have learned so far in class.

Creating things is nowadays easier through the digital development – be it recording your own music, your clip or writing a book. Content is rapidly growing. Between 2004 and 2005 the publication of music albums increased by 36%  and in MySpace 300.000 tracks got downloaded.

Further, the motivation to create these contents changed. Capital investment goods are not only everywhere available but also really cheap. Out of that reason content, which is not aimed to earn profit, is produced. If the equipment to produce a movie would be high, economic factors automatically influence the content. Whereas, if productions cost nothing, movies can be created just for fun or to try something out. No costs have to be covered – so the reason to create the content is actually about the content.

Also, the role of the amateur changes: He is not just consuming but also producing. So also our consumption changes through the digitalization since we can contribute to the selection by ourselves.

If we are looking for a book and can’t find it in one store, you have to go to the next one. Also here the digital change helps: Aggregators as Amazon or eBay do not only offer serval products but also make searching for specific products really simple. The more products will be found and bought, the longer the Long tail gets. As you know, Hyprid aggregators as Amazon and Alibris sell physical products online. Small sales volume can still get problematic here: If only one exemplar per year is sold, still storage costs will arise. But already here Amazon is working on the solution by providing Point-On-Demand books, which are only printed, if they are demanded.

By providing more and more of these niche products, recommender systems help finding suitable things to satisfy our demand. Without these systems the online market would have too much too offer, which would lead to excess demand (Goldilock principle).

 

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Maybe you all heart of Elisabeth Homes, who invented the wearable patch, which could test patients blood per the course of the day using microneedles. In 2004, she wanted to publish her idea and founded Theranos. Suddenly she realized that microneedles would not be able to draw on enough blood and the idea started to break. Nevertheless: Theranos claimed its technology was revolutionary and that its tests required only about 1/100 to 1/1,000 of the amount of blood that would ordinarily be needed and cost far less than existing tests.

Quickly Elisabeth built up a reputation and she was the new star in Silicon Valley. Investors took note of her and started investing in Theranos. The hype snowballed until the company was valued at 9$ billion in 2004. But how did that happen? Are making outlandish claims about the company enough to attract investors?

In 2015, articles in the Wall Street Journal were published, which revealed the story and secrets of the company. Blood tests which were claimed to be performed by  the new machine at Theranos were actually performed by traditional blood test machines, which were bought from other companies. Finally, the FDA pulled the plug on the company and charged Elisabeth with massive fraud. She was fined 500,000$ and lost the Theranos. Further, the company ended up losing more than 600 $ million.

This horrific story was a very important lesson for the Silicon Valley, since it showed to all investors how much can be reached with simply advertising and being self-confident. Investors who will seek to revolutionalize and disrupt the industry have to be honest with their technology.

Resources: 

Bad Blood: Secrets and Lies in a Silicon Valley Startup

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To explain how the life formula developed, Max Tegmark divides life into three stages of maturity: 
The first stage is life 1.0, which is the simple biological life. Within its life, it is not able to improve the performance or develop further. Meaning the learning process is occurring through the next generation; through selective evolution. 
The second stage is life 2.0, which represents the cultural life. Yes, you have speculated correctly - we also belong to this stage. Throughout our life, we're able to learn new skills, new languages or new knowledge. 
The last stage is life 3.0, which represents the technological life. It is able to produce a software as well as a hardware by itself and does not depend on the everlasting evolution anymore. As we have learned in Information Strategy, machine learning and artificial intelligence belongs to life 3.0. 

While learning that AI and ML are catching up with humans skills like learning, calculating and remembering, it's not uncommon that the question "Which skills make ushuman?" pops up. If you might think that it's our creativity or intuition, you're wrong since by beating Lee Sedol with the KI system AlphaGo in March 2016, the system was able to show exactly these skills. 

What happens if a machine will be developed, which is able to change their hardware as well as software by itself? Changing the competencies throughout months, days or even minutes? Researchers are already thinking about such scenarios and concluded that it will be highly important to program the machine in such a way, that its goal goes towards human's wellbeing. But this alone does not serve as a guarantee.  

The worst scenario of researchers, showed that they will take over the world and humans will be seen as a threat and therefore be destroyed. 
In week one the article about artificial intelligence from Brynjolsson states that humans morality and humans mental state are the only things what machines won't be able to "imitate". However, I am the opinion that human's awareness is the only aspect in us, which can't be imitated. What do you think?

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In the 6th lecture, Mrs. Li asked us, if having a lot of data is advantages? At that point in time, I asked myself if we are even aware where data is collected.

If you’re seeing a discounted product on a website and spontaneously decides to buy it, you’re probably thinking that you did a free decision. With a high probability, this view is really naive. We all know that data will be saved if we enter them when doing a transaction online but data is also tracked, which we do not even enter actively. Also, people who are not regularly visiting the internet are not safe from big data. Cameras follow every step we’re doing and the best spy is always with us: our smartphone. They track when we’re going to bed, when we’re waking up, they read our messages, listen to our calls. What will probably surprise you is, that a new flashlight app even tracks the movement of people and passes them on to advertising companies.

I do not have to tell you, that a lot of companies collect data. What is happening with those? Collecting data from different areas and connecting them in a smart way, allows them to speculate peoples personality, characters as well as their emotional state. Facebook is able to predict with a 60% likelihood when a person will have an affair or a relationship by just viewing at your habit of connecting with other people. Facebook does not even have to read your messages to be able to predict this. In regards to this, companies even analyze with the help of your contacts, your daily phone calls how your relationships do in regards to certain personalities.

In the book “They know you. They own you. They control you” from Markus Morgenroth, he explained his experiences when working at the data company Cataphora. The company is specialized in locating illegal workers in companies. To be able to do so, they collect emails as well as contact data and compare those with all other workers from the company. In this way, suspicious patterns can be found helping to spot illegal price agreements.
Moreover, the company Acxiom already collected data from 44 million people from their purchases, their internet searches and their usage of cards. All these are used to predict buying behavior and is used efficiently.

Also, people get divided into “bad” and “good” when it comes creditworthiness in near future. Companies rank peoples’ creditworthiness with the help of age, gender and place of residence. Consequently, a young professional can be restricted to a credit just by living in a more urban area.

All these mentioned aspects are probably not new for you but isn’t it scary to know that you’re watched all the time? Health insurance and advertisers, government agencies and employers, hackers and criminals – all are interested in data. With modern equipment and the Internet, they are more easily able to collect personal data. It is important to recognize the extent of this monitoring.

With this article I don’t want to scare you, rather making you aware of the dangers of data and coming back to the question from the beginning: The more data, the better? Not always! Since we are the future of tomorrow it is up to use how save the future will be.

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Is there a positive relationship between technology and economic growth? It is generally acknowledged that there is a definite positive relationship between technological change and economic growth. However, the relationship is certainly not linear. How does this work?

Think about a world without innovation and technological change. Do you think there would still economic growth exist? In the short term probably yes, through copying and expanding existing activities. However, in the long-term, bottlenecks would arise and resources would become scare and expensive. Further, demand would decline and economic growth would eventually almost cease.

So Innovation allows for qualitative change in economic activities and enables to surpass bottlenecks to achieve income levels previously impossible.

Now let’s take a closer look on the relationship between technology and society: Technological innovation also transforms social norms and institutions. In general, it allows for new and differently organized economic activities.

So does innovation and technological processes create unemployment? Leontief’s basic argument was ““As long as total output goes up and all parts of the population share more or less evenly in its rise, all is well; but, as soon as output fails to rise, or when some groups fail to share in its rise, social and political tensions necessarily increase” (Leontief, 1983). This means that distribution depends on specific technological aspects, especially how much demand for labor is created. If we look on Figure 1 as well as Figure 2,  we can see that employment participation rates show recent decline and also inequality has certainly worsened globally. Further, income share has certainly declines globally as well.

Figure 1

Figure 2

Concluding, the relationship between technological change, unemployment and economic growth is not fixed and it depends crucially on the the characteristics of both technology and socio-economic context. Those who combine technological knowledge with deep understanding of the contex will gain the ability to understand impact the future.

 

References:

Leontief, W. (1983). Technological Advance, Economic Growth, and the Distribution of Income. Population and Development Review, 9(3), p.403.

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Already two years ago, BMW allowed people to have an insight into their idea of future vehicles. Now, they presented their highly automated, fully connected and emission-free car on Thursday the 13^th of September in Beijing. “This vision car is a singular vehicle, which you have never seen from BMW before,” said Klaus Froehlich, member of the board of management of BMW AG. But what makes the future car so special?

The BMW iNEXT adopts BMW’s fifth generation eDrive system and enables to drive more than 600 kilometers with one charge (Chinadaily.com.cn, 2018). Further, the lightweight body of this model makes it possible to accelerate from 0 to 100 kilometers per hours in less than four seconds.

BMW laid their focus on designing the car as a mobile living space. The E-SUV has space for up to four people and allows the driver to choose between the “Boost” mode or the “Ease” mode. With the “Boost” mode, people can drive by themselves and with the “Ease” mode, the car will drive by itself. According to the selected mode, the design changes inside. In the autonomous mode, the steering wheel, as well as the gas pedal, disappear. The display shows no driver relevant info anymore, rather shows suggestions for places and events where to go to.

BMW does not use additional displays but rather makes use of invisible integrated intelligent technologies – the corresponding functions are fulfilled via projections. Additionally, a personal assistant can control not only functions in the vehicle but also smart home devices.

The future car of BMW is not just a car but rather a symbol of the new digital era in mobility for all car manufacturers but especially for the BMW Group. By 2021, BMW plans to launch their iNEXT serial production and by 2025 they plan to offer 25 electrified models, from which 12 will be fully electric (electrive.com, 2018).

This new era can be viewed as a positive change, since electric vehicles are better for the environment, our health and the economy. Or do we have to look at this digital trend critically?

 

References:

• Chinadaily.com.cn. (2018). BMW presents its vision and innovation of future mobility – Chinadaily.com.cn. [online] Available at: http://www.chinadaily.com.cn/cndy/2018-09/17/content_36925480.htm [Accessed 17 Sep. 2018].
• com. (2018). BMW presents the Vision iNEXT – production to begin in 2021 – electrive.com. [online] Available at: https://www.electrive.com/2018/09/16/bmw-presents-the-vision-inext-production-to-begin-in-2021/ [Accessed 17 Sep. 2018].

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The digital disruption of business models and the automation of work place a dramatic change on leaders. The upcoming way is uncertain and their new task is to find the answer.

Netflix had to fight against several disruptions year after year and without their CEO Reed Hastings they wouldn’t be able to do so. Let’s take a short look at Netflix history: 1997 the company was known as a video rental shop. The first crisis occurred when costs of sending the videos exceeded the costs of downloading. Hastings encouraged his employees to change Netflix’s business model. The company changed successfully from a video rental shop into an online downloading platform. The next disruption followed shortly: downloading vs. streaming. Also, this time Netflix managed to change from the leading downloading platform into the leading streaming platform. When costs for movies and series started to rise, Netflix started to produce their own series such as ‘House of Cards’ and ‘Orange Is The New Black’.

Three turnarounds in only 20 years and all successfully mastered by means of an appropriate management culture. How does the CEO Reed Hastings do so?

Netflix’s employees do not work from the office and since 2004 the company does not count holidays. One might think that people will not take any holidays in order not to attract negative attention but Hastings takes countermeasures: he posts pictures from his vacation to motivate his employees to act as he does and to return to work with innovative and new ideas. The CEO believes that his employees are responsible for managing their own time. Further, money is not spent on HR policies and everyone acts in the best interest of Netflix.

Leaders are not in the foreground anymore, they take a seat back. They do not give instructions but ask questions, supervise their teams and give valuable input when appropriate. They do not enact any rules but concentrate on shaping their own culture. They distribute impulses in all directions and not from top to bottom. They are not self-complacent but constantly question themselves and their business model.

The principles of leadership must change radically in the next few years to be able to keep up with digital disruptions. Teams must get more important and leaders have to stop leading and start enabling. Power and control have to be exchanged through flexibility and freedom. So far, there might only be a few companies that changed the leadership style as Hastings did.

What are your experiences?

Sources:
Keese, C. (2017): How we can manage the digital transformation

Click to access gartner-symposium-south-africa-digital-disruption-ebook-2018.pdf

https://www.ft.com/content/801774be-43e9-11e8-803a-295c97e6fd0b