What the social capital means and how actually it can benefit?

The importance of social capital for both establish companies and startup firms.

Social capital is the accumulation of active connections among people in a network. On the other hand, some people think that social capital is whom do you have in your network of contacts. But another group of people think that social capital is resources that are part f and bass of the relationships. Meanwhile, the dichotomy have two opinions too: set of resources that are based on the relations or set of relations that create resources.

In recent years, the meaning of social capital is a bit changed to social capital represents an ideal means how to put all of your resources together in a effective way.

The forms of relationships can vary from informal to formal. The more formal the relationships is the more strong the relationships is. Strategy alliance is the strongest element among them and it stands between two or more firms that are to cooperate with one another. If they work by only themselves, it would be hard to achieve a goal.

Ways the social capital benefit to your companies: way of exploiting a business opportunity; there is mutual advantage to be gained; true partners can form a new team.

Form of cooperation: it is from market transaction to merger acquisition. Outsourcing(e.g. IT, telegram service) and licensing(e.g. software, music industry, insurances, lawyers, taxi drivers) are market transaction. The space between this stages usually include: production, R&D and so on.

What do we achieve with alliance:

• Access to knowledge or competence like share know-how, R&D complementary technology. Where it could be? Real example: telecommunication company.
• Access to new markets and internationalization like market knowledge, local party required. It can be benefit but sometime there are drawbacks for them. When the first product of APPLE was produced, users can only sign a contract and use AT&T operate, do you think it is right or wrong? Apple was totally new product at that time. They lacked knowledge at that time and if you use iPhone is U.S., at least your security of telecommunication can be guaranteed.
• Efficiency like scale, specialized partner;
• Clients do not want product is but tailored solutions like satisfy a need, not  a demand; e.g. mobile in Africa. They do not have enough money to invest and research so they work with google and some other companies in order to come up with a solution.
• Risk sharing like pool resources and portfolios.

The opportunity to combine knowledge in unexpected combinations to create new product concepts is an important motive for alliances as well. The failure rate is 50%.

Download PDF

Who is Elon Musk?

Elon Musk is born in 1971 and died in 2017. He wants to save the whole world. During his life, he is the founder of SpaceX and his markable contributions are March exploring and Tesla industry. He believes Open AI and neural-ink. Climate change becomes a big issue in our planet’s future and Elon Musk wants to save our world with his effort by exploring other plants.

Fraud Group

Is Elon Mush a Innovator or Fraud?

Why he is a fraud:

1. His company Tesla is losing money all the time, 8000$ per minute.
2. He sold his products even he can not support and validate them.
3. SolarCity is hanging on a cliff. The quantity of MW/acre decreased every year. The expected MW is much higher that the actual MW.

One thing he was good at is exploiting the market. And where ie the money come from?? U.S. governments along gave him a lot. He stole the money from government.

Questions for True Group:

1. How many rockets can come back and be reused actually?
2. If I have a lot of money but I did a lot of unsuccessful projects, am I a inventor?
3. You say Tesla actually makes a lot of profit but can you provide evidences what you said?   N
4. Who made the decisions when you receive investment from government? Are you going to share with government?
5. Tesla has a low productivity compared with other car companies. It can be regarded as invention?    N
6. Do you know how many Tesla quarterly deliveries were promised before?
7. Companies work for stockholders since they need to make money. Tesla can not sell their products at the beginning, how can sell more in the future?

Questions for Fraud Group:

1. In your presentation you said Tesla did not profit at all but do you know the Tesla repaid all his debt?
2. Elon Musk knows a lot of pollution, environment and actually he is trying to do his best. You just denied his financial situation, but can you deny his achievements?
3. You gave us a lot of figures in your presentation but how you can prove they are true?
4. After two years of product issued, government stoped the “tax-break” policy of Tesla. Why did government do that?
5. How you can disapprove his ideas and how you can say all his ideas are fraud?
6. How about project: PayPal? Elan Musk supported this project even it is not a idea generated by him.
7. Why electric cars are not the solution in future?     N

Download PDF

I-Heater Group (Weak AI):

1. After you develop a product, you must set this product. Probability of adding to a product is really hard, why I should prefer you rather than them? Why I choose something others can do easier, where is your substantial point in sharing market? Y
2. What is your original advantage of your group? How you convince one to put money into your project for 7 years? What is the novel of your project? Y
3. (it is a question to other group, but this group still answer it same with question 4 in strong AI) Y
4. How about privacy? Y

[Related questions: 4.1 Who is the data controller? 4.2 How you deal with the content of users information according to regulations and policy? 4.3 What if users ask you to move their information in your application?]

5. Liability problem. As a user, if the tool forecast I will have a high possibility to have a heart attack recently two days, what should I do and what your project will do? Y
6. Is the model relative to family situation? Y
7. Data collecting problem. Why do you think they will give you their data? Y
8. How you are going to spend your money? Y
9. In your system, you mentioned that you train data to predict but what if I add some wrong information? Y

Strong AI Group:

1. I do not think your project is clear since AI is complicated, why you strongly recommend AI as a teacher? Why it is called strong AI? Y
2. How should strong AI react? How should it could be better than real teacher? Y
3. How you system launch strong AI? How do you plan to achieve EMPATHY with your machine? Pending
4. Why do you really need strong AI in your project? How you can develop Strong AI within 5 years? Why you tell me something related to weak AI (achievement problem)? Y
5. Is your website a software or hardware? Y
6. How can you make this totally new technology in low price, comparing with tutor? You have to put your product into market at the end and if your product is expensive, your idea will be useless. Y

Today’s topic is more hand-on learning, so we start to know some specific words.

Reasoning on sustainable growth

Start with question: do you think is there any direct and indirect relation between country welfare and companies’ growth? In another word, do you think does the culture, environment, welfare of country influence companies’ growth?

Opinions from students: It depends, like tax is very relevant issue with companies’ growth. Country use tax to develop education, medicine system and so on.

Fortune global 500 is a list of 500 biggest companies in the world in terms of income. Recently, the tendency of Apple is growing rapidly while Microsoft stay stabled and Nokia dropped sharply from 277 to more than 400. There are so other cases, like Spotify, Uber.

The financing cycle for ventures is from seed, start-up, first stage, consolidation and maturity. The seed, it is called FFF focused on idea or project fine tuning, which means you develop product with your own time and resources which can not be sold and made money, that is why in the first stage it declines. Then, we go to second part: business angles who are interested in your product and ideas. If the program is attractive, we start venture capital where the cash and resources flow increases rapidly. When company is successful enough and a lot of people are willing to buy our product, we can go to stock exchanges where we make money and add value in stock market. Another part of this graph is risk. It is deceasing from seed to maturity. Some elements are not found in ordinary companies like shops since it is more suitable for creative and huge companies.

Investment type in seed stage is structural costs and intangible assets. The investment extent is restrained and usually the financial dimension is below 0.25 million. In start-up phase, it focus one prototype, device or product launch. The investment type is working capital and a combination of tangible and intangible assets which is quite substantial.

Debt Capital, Risk Capital and Venture Capital

Debt capital is typical what bank give us o it is a temporary form of funding. It foresees a specific debt remuneration plus the capital reimbursement.

Risk Capital is a totally different type of funding. It is a stable form of funding provided through a company governance agreement. It does not foreseen contractual remuneration but only dividends and capital provider has the right to participate.

Private Equity

Private equity means investing a company and becoming the core of that company. It includes Angel Investors, Corporate Investors and Venture Capital. Eg. Uber is a corporate investor with google.

Business angle

Usually they are physical persons or specialized companies who privately intervene in a start-up Capital. They can support start-ups to growth using management expertise, market knowledge and technology.

Venture Capital

Usually they are financial entities but also physical persons. (rare since it asks for a huge amount of money) Based on investment amount, they receive a certain equity on total shares. They put money in highly risk companies but aim at earring big profits at disinvestment time. Venture capital originated in medieval age from Islamic culture where the partnership between investor and entrepreneur was preferred to loans.

How VC criteria select ideas? Questions involves with market opportunity, value proposition, management team and financials.

Download PDF

It depends on which kind of customers you want to attract, who you want? Usually when we launch a new technology, at the beginning you will have a small customers base who interested in that area.

Evolution vs Revolution

Performance will be improved with increasing customer switching costs or vice-versa. 

Evolution strategy offer to consumers an easy migration path. We are two Rishes to manager which are technical and legal. In technical area, we need to develop a technology that is at the same time compatible with, and yet superior to, existing products.

Revolution strategy offers a product so much better than what we are using right now. It is inherently risky.

Open vs Control

The underlying idea of openness is to forsake control over the technology to get the bandwagon rolling. Control means companies are strong enough to unilaterally control product standards and interfaces have lot of power.

Standards open the opportunities to compatibility. Open standards is developed by multiple actors. Closed standards is what company try to control all of market.

When the costs of switching from one technology to another are substantial, users face lock-in. There are different types of Lock-In, connecting with different switching costs.

Decisions I&E Basics

Discussion part: Decisions and rationality models: Why we consider them and how does this related to I&E? Make some examples of  decisions and analysis how did you make them. How do we make decisions in certainty? How do we make decisions in risk? How do we make decisions in uncertainty?

Olympic decision making – certainty: everything is known and necessary. deliberation is instantaneous and quell for all actors. The reflections is we only have a choice.

Olympic decision making – risk: probabilities are known. Optimal strategies are instantaneously deliberated upon. The options are not equal. There is no global optimum. It goes with given preferences, goals, actions and consequences with probability.

Uncertainty: from consequences which might prompt us to redefine we can get aspiration levels.

Retrospective decision making – ambiguity: act first and justify later.

Download PDF

What do you know about science in action connects with black box?

Science someway can be effected by ambiguity since they shape our way to think.

The first principle of ambiguity is the fate of facts and machines is in later users’ hands; their qualities are thus a consequence, not a case, of a collective action. 

Discussion part: if you target a specific system, what the differences between Android system and IOS system to develop an application. Some answers from students: 1/ you need a license in IOS while Android is not. 2/ if you download from IOS users need to pay more compare with Android.

Relates to our first principle: what the connection between our discussion topic with the first principle? It is a consequent or a cost.

For most applications, devices, softwares we made, the quality we assigned to them is a consequence not a cost. The quality and values of products will change while we update them. Thus, the costumers of products user will change too. 

The first rule of method: we study science in action and not read made science or technology.

Scientific literature

How do citations work? Why is an article cited often? Why is an article never cited?

The frequency of an article cited also relates the consequence.  Even as a researcher, there are different cost to access to library, database.

Thus we can go to the second principle and second rule of method.

Second principle: Scientists and engineers speak in the name of new allies that they have shaped and enrolled; representatives among other representatives, they add these unexpected resources to tip the balance of force in their favour.

Second rule of the method: To determine the objectivity or subjectivity of a claim, the deficiency or perfection of a mechanism, we do not look for their intrinsic qualities but all the transformations they undergo later in the hands of others.

How does this relate to I&E? Why do we choose Uber?

Black swans

The black swans means a large scale, unexpected events. The name came from swans are always white what happens if you observe a black swan? What would you do?

Options: Maybe somebody color it, or maybe more unexpected things will happen it is only a beginning, or it is only a shadow. A black swan is not a swan, we are observing an outlier, our definition is wrong…..

Mediocristan vs Extremistan

Mediocristan means normally distributed, good for natural parameters, high predictability, uncertainty- bases like all swans are white.

Extremists means peaked distributions, good for artificial phenomena, low predictability, ambiguity-based like black swans can exist.

They are two different modules regrading to definitions. trump is a very good example of black swan.

The fallacy of induction: According to our observation, we can draw hasty but hasty inductive generalization might lead to false conclusion.  

How does this relate to I&E? if we can forecast the risk and crisis during process, we can win from real market. Foreseeing is a part of abilities to management and strategies.

Network Effect

In 1876, Bell made the first telephone call. There ware only 2 telephones at that time but two years later, 10000 telephones in service. What happened to the value of the telephonic network between 1976 and 1978? How much was the utility for a user to join the network in 1976 and in 1878?

There is a Metcalfs’ law: the value of a telecommunication network is proportional to the square of the number of connected users.

Given N users of network, the numver of possible connections that can be made is n(n-1)=O(n^2). 

This is what we called network effect, the value that a consumer extracts from a product depend on the number of people using that product as well.

Network effect give rise to positive feedback.

Network Effect Types: direct and indirect.

Direct means an increase in usages leads to a direct increase in value  for other users. Indirect means increasing in usage of the product spawns the  production of increasingly valuable complementary goods, and this results in an increase in the value of the original product.

Bandwagon effect means people base their choices not in a rational way.

Positive feedback makes the strong get stronger and weak get weaker.  Network effects become significant after a certain critical mass of users. The problem is how to attract users prior to reaching critical mass? Like marketing.

Download PDF

Battle 4 – the winner is Horses since they were closer to the points. And Last week’s test all passed and no impact on evolution.

The final score will be marked in three aspects. The first one is battle and group paper(10+1points), second one is blended assignments(5 points we do not know right now), third area is personal essay(15+2 points).

Emulation criteria (personal project)

• Correctness
• Completeness
• Exposition
• Argumentation

The deadline for joint essay and the deadline for personal essay are about 15 January.

Score of battle will depend on joint-paper and the perfect paper will get 10 while those winner groups will get a plus one point.

Review content of last class.

Definition of certainty (day and night); risk (flipping a coin); uncertainty (the truth is out there and need us to find. Supermarket and only for the first time); weak ambiguity (maybe there); strong ambiguity

What we are going to do today? We are “sampling” different filed of ambiguity

Battles. Why we need battles? We are moving from convergent class mode to divergent innovation class and we need to achieve diagram changes. In traditional class, we are taking key questions and solve them during class. But what divergent class? How can I teach concepts of machine learning in a innovative way?

We change convergent case studies which are unequivocally, factuality and convict avoidance to divergent case enactment which are equivocal ambiguity, counterfactuals and controlled conflict.

The goal of battle is to make questions not to draw conclusions. We are going to explore. Why do we do battles and how does this related to I&E?

Sense-making. What is sense making (weick)? It is tends to occur when the current state of the world, or when there is no obvious way to engage the world. Basically, see what has happened in the past and guess what will happen in the next according to assumptions. Sense-making is about what to do next. It is not about the truth and the story. “The pursuit of accuracy to get it right.” How does this relate to I&E?

Introductions to the framework: First principle, first rule of method, black boxes. 

Why do we make boxes? Develop applications more conveniently. Give same examples of black boxes. Supermarkets, medicines, simple cars…

Battle 5 for 14th of November.

60 persons voted for ideology, about 25 for realpolitik. 

Why did we do this?

Download PDF

The change of paradigm in product development: from closed innovation to open innovation in product development.

Some cases from previous classes:

The case of Nokia – how it started?

The case of Phones/landlines vs mobile phones

The case of CEO

The case of shared economy

Discuss: How would products will be developed, what do you see from product development, what drives them, it is a push or pull, it is a closed innovation or open innovation?

Mobiles phones focus more users and customers than landlines.

Q: What is shared economy? What is the driver for them? A: The users.

The problems from customers are the drivers in user centric design which is the main difference with traditional development.

Product development in the industrial age 

Consolidated snd structured process

• Concept development
• Process development
• Testing and tooling
• Manufacturing and launch

STEP 1: Concept development

1. Market analysis and marketing brief
2. Technology selection
3. Functional prototyping based on: performances; preliminary design, tech feasibility
4. Styling prototype through focus groups.

Concept development begins with market analysis. We will be more likely to take functional prototypes from ships, cars while to take styling prototypes from fashions, fast moving foods for focus groups.

Discuses question: Assume that you are a member of a flight company, can you use open innovation to design a more comfortable seat or a engine or not and if you can, what you can do?

Open innovation means a new approach to develop product. It is a B2B structure and a B2C structure too. The boundary can be company and other institutions.

STEP 2: Concept Approval

1. Approval of the R&D plan
2. Approving schedule
3. Approving HR
4. Approving Sales, volumes, prices, prices, fixed costs, variable costs, investment.

STEP 3: Detailed product design, supplier selection

1. Drawings
2. Testing and quality specifications
3. Supplier selection
4. Final prototyping goal:
5. To prepare the deliverables that are needed to manufacture and sell the product.

STEP 4: Testing and tooling

1. Functional and endurance testing
2. Beta testing
3. Mold manufacturing
4. Process optimization
5. Field test

Final goal: guarantee the product/service is reliably performing through life according to specifications.

STEP 5: Manufacturing and launch

1. Marketing: launch communication campaign and refine pricing policy
2. Manufacturing: activate supply chain and plant
3. Sales: recruit salesforce; train salesforce; activate distribution network; manage sell-out

Final goal: Make your product or service available to your customer.

The Shift to the Customer

User centered approach in product development through several methods:

Validated learning: validation board

Design thinking and systems design

Lean startup; MVP and Prototyping.

A topic: design thinking. Design Thinking focuses on viability, feasibility and desirability along the innovation process. The optimal solution to a problem is at the heart of the three. The design thinking steps are understand the need of customer, observe and point out, define point-of-view, ideate, prototype and finally test.

Product management framework: evolves product from an initial idea through iteration.

Begins with concept and through identify the market go to validation. By sing technology and business validation through questions go to step three design and development. Based on user experience and customers needs, we go to market planing. This framework is simplified and specially for technology.

Work time: group 1 watch the video of “expliseat pitch”, group 2 is “improving airline passenger experience”, group 3 is “Prototyping” and for group 4 is “certification”.

Group1: give us a free format textual description or use cases.

Group2: Tell us what are Business drives for that case, what is the market type, customer requirements, values proposals for end-users/service/operators/developer/system integrators. And what are revenue drivers, key competitors here?

Group3: Are there any technology enablers and availability, what are the solution architecture and IPR solution?

Group4: What is schedule and timelines, resource requirements why would you support this project(..or not)?

Download PDF

Overview

Some philosophical questions

• What is “out” there?  What is world surround us? How we can perceive it? Can you understand the word of “epistemology”? ( it means how we process knowledge)
• And is it really “out”? What the truth of “out”?
• How do we come to know it ?
• What’s is our relationship with that?
• What is the relation with innovation?

Game time = Give a word, a meaning, an example and a deeper understanding.

• By giving 37 numbers and two colors at the beginning to the players

Certainty situation

1. Probabilities are always 1 or 0;
2. The knowledge that we have is the ”true” knowledge ;
3. Data are given;

Risk situation

1. Probabilities are lower that 1, but given and known
2. The knowledge that we have is true with a given probability
3. Knowledge is a collection of data with given probabilities.

• The distribution of number and colors is unknown at the beginning to the players
• When the ball stop the croupier shows the tile for the future rounds

Uncertainty 

1. Probabilities are not know
2. They vary according to our capacity to acquire and process them
3. Data are out there
4. Information are the data selected, which are given a meaning( and a probability)
5. Knowledge is a selected set of information about a subject

NOTE: There is no cheating since the play is set in the beginning.

Same condition as uncertainty but every time the croupier shows the ball, then the roulette is reinitialized with a new distribution of numbers and colors.

There is no winner in this game. But this game is played in everyday. How we can do to not loss so much? One possibility of win is doubling it. Give a assumption, and propose the strategy.

Ambiguity 1 – weak

1. Data are meaningless external stimuli
2. Information is the meaning given to data by the knower
3. An interpretative frame is used to make sense of the information
4. Knowledge is the conceptual Fram through which data are interpreted and given meaning.

In this situation the meaning of data changes according to the mental frame we chose to adopt and some data can have different interpretation and generate conflicting information. Everything is relative to the perspective of the observer. There is no right and wrong.

Same condition as ambiguity 1 but player can spend resources to change tiles and made odds in their tabour and nobody know who will try to do, but each player has this potential.( it is a cheating in this game.hahaha)

Ambiguity 2 – strong

1. The world is not specified, but we can manipulate it
2. Different worlds are possible
3. Our actions and words manipulate, influence and create a world
4. The challenge is to create a world that machine controls

In this situation many worlds possible but also in many want to create different worlds and challenge is to convince others to comply with our vision: the more enrolled the more the world become “true”. The world we create will constraint others, but also us..

Examples in this five characters. (CERTAINTY, RISK, UNCERTAINTY, AMBIGUITY WEAK AND AMBIGUITY STRONG )

Can we find examples?

And what about innovation and entrepreneurship?

In certain and risky environments?

• Innovation: about predicting probabilities for new optimal solution, according to risk factor
• Entrepreneur: a person that inquire reality and takes a risk to develop it

In uncertain environment

• Innovation: Is about acquiring information through routes to produce a satisfactory solution at the minimum cost
• Entrepreneur: A person that set up an organization as an efficient and effective information processing entity

In ambiguous environment 

• Innovation: Inventing plausible realities and convince others through means
• Entrepreneur: A person that thinks about a plausible realty and sells it as true creating a world.

!!!TASK: Teachers will give us a paper and some materials, and a week after we will discuss it. They are mandatory readings.

Download PDF

Opportunity Generation

AdQuantic is a scientific tools to boost your Google AdWords revenues.

From theoretical physics to startups:

Find problems: 1. Commercial side; 2. Edwards bidding system; 3. Many keywords; 4. Rol per keyword to evaluate;

An innovative solution: Experts in quantum physics and statistical physics and cross-domain expertise.

Finding a CTO: Academic career and motivative. The first year is to do researches and if the result is available, continuing to do researches otherwise projects will be closed.

Finding a CEO: The work of a CEO is concentrating on market and product positioning.

Two different visions: Developing a powerful technology company and add values to scientific background; break even as soon as possible in order to do this have to give clients whatever they want.

Forming a team: Technical and R&D parts. And after hiring several person they realized that it is important at CV and interpersonal relationships.

Exit strategy: The mixture actions of almost break even and cutting edge product makes this company attractive and they received 500K euros raised from BAs.

Causation and effectuation

Introduction to causation and effectuation:

What is the role of effectuation and causation in entrepreneurship?

• Causation processes take a particular effect as given and focus on selecting means to create that effect.
• Effectuation processes take a set of means as given and focus on selecting between possible effects that can be created with that set of means.

Steps

1. Identified opportunity;
2. Conduct competitive analysis and conduct market research;
3. Develop business plan;
4. Acquire resource stakeholders appropriate for implementing the plan;
5. Adapt to changing environment.

Summary the differences between causation and effectuation:

Download PDF