Dr. Emmett Brown
Big time Zappos customer here – VIP member. It’s interesting to me that the retention rate fell once they implemented the new “circles” staffing model. Perhaps hospitality-minded people, focused on making customers feel satisfied, need the structure of a formal working environment with a manager, etc. to be productive. I’m curious to know if once they implemented this, did effectiveness at solving challenges decrease because people had to now work together in a less structured way more than before? Working well in teams and being successful in team-based problem solving are a different set of skills from the soft ones required to be good at customer service. In a way, people that work customer service at a place like Zappos (where time on the call isn’t important) likely involve a lot of personality into what they do – personality they likely feel is a critical part of they ability to do their job so effectively. When you tamper with that, it’s likely some employees will feel marginalized. Good article!
This was a great article. “In the future, Wikipedia’s most difficult challenge will be maintaining the community of contributors and editors” – spot on. What’s crazy to me is the fact that they bring in 50-75M in donations per year and spend close to 2/3 of that just to run Wikipedia – seems not to efficient. Also, they’ve done little to increase grants over the past year years despite a rather massively growing surplus for a non-profit. Given the fact they need people to continue contributing and editing, and these people need to be above some metric of pedigree as writer/editors for the content to stay relevant, they need to start putting some of that $75M+ cash coffer to work promoting writing and etc. (e.g. youth scholarships for creative writing, etc.)
Awesome article. Big Fallout fan myself. I think your point on “more of the same” is a good one. They simply don’t get the product iterations that players like Valve get because of their timeline – it’s too stretched. One different approach might be to continue the open world element but release episodes – sort of like the Walking Dead Game Series did. This would give people a chance to contribute in a way maybe in the development of the story line – again, like they do with the Walking Dead Game. It also gives them the benefit of being able to iterate more often to increase the velocity of new features and etc. Basically, release a core game with x number of hours of game play, then have downloadable content (DLC) that adds new to the game. It might be too risky to try though on their two franchises now, so maybe they acquire a new franchise to try it out on.
Good points. The reusable element is pretty massive – if done right, it can cut the cost of a launch down an order of magnitude.
The Blue Origin landing, despite the media hype, puts virtually no pressure on SpaceX. What SpaceX is doing is about 100x more complicated. Let me explain:
Blue Origin’s rocket launches basically straight upwards and then stops, falling back down to earth. The analogy is throwing a tennis ball straight up, it decelerates then falls back down to you on the ground close (relatively speaking) from where you first threw it. So once the rocket starts to fall back down, its really just a matter of doing a controlled burn to slow the spacecraft down and put it down softly – it isn’t moving fast along the ground left to right, just free-falling. The technology to do this is actually relatively straight forward.
SpaceX’s rocket launches off the pad and pitches over near horizontally. It does this so it can accelerate to 17,000MPH+ to circularize (i.e. get into a stable orbit). You can’t orbit unless you build up enough horizontal velocity to combat gravity. After a few minutes, as it usually passes over Africa, the rocket is going some large fraction of this 17k MPH speed when the bottom part (first stage) separates and the rest of the rocket turns on and the payload continues its journey to space (on the upper stage). The first stage is now traveling at a ridiculous ground speed and free falling back toward the earth’s surface slowly. This is the amazing part. SpaceX reignites that stage, stabilizes it from a tumble over the east pacific, then burns the engine to slow itself down so it can descent down to earth where it will land on a moving barge in the ocean.
Very different engineering challenges. One involves lobbing up a mass then applying the brakes gradually over time as you fall. The other does the same thing but involves you first slowing down a bullet.
Meant to say in the beginning of my original post that this article was excellent – sorry DG.
I think the IQT model with tweaks could be very powerful. There are other models in play too that I think could be Frankensteined with IQT to actually do some incredible justice to tax payers. But I do also think that the nature of the “suitor” requires solutions that probably only weakly benefit from IQT investments (which are slow compared their timetables typically).
I can’t speak to the employee alignment at IQT, but they face the same challenges every government organization does: is the mission compelling enough to persuade top talent to give up higher pay? My prior organization struggled with the same issue – only it’s getting exponentially harder and harder for that organization. People arguably still resonate with the mission, but they like the mission at other places too, and more and more it seems (e.g. SpaceX, Google[x], etc.)
Awesome article. Many will argue with me by using companies like Apple as an example, but I think R&D-heavy companies that go public are doing a disservice to themselves more often than none. The pressure of being a public company I think over time forces executives to allocate less and less resources towards R&D. Most high tech companies spend less than 5% of revenue on R&D – pharma is I think on average 15%. How much of the tech and innovation that went into the iPhone do you think Apple directly paid for? If you back track all the patents and sources of the IP, I bet it’s less than 1/3. And if those other companies or labs that developed the non-Apple IP that went into the iPhone (more than likely non-public companies) don’t continue to spend on R&D, the pipeline dries up. No new innovations means no new fancy products to sell that maintain the competitive edge for Apple. This will happen to Apple eventually, unless they invest heavily now in R&D (they got the cash to do it too). I think the decision that Amar Bose made to not take his company public was a good one. And I think his action of donating a large chunk of the company to MIT was a clear indicator of his vision for Bose to become something like a Bell Labs. Sadly with his recent passing I’m not certain what the future holds for Bose or if the current President, Bob Maresca, has the same spirit as Amar did. We’ll see!
While In-Q-Tel is interesting and certainly “cool”, the value it provides to target companies comes at a high price to growth.
At the end of the day, In-Q-Tel’s reason for existing is to provide the CIA (and other unnamed U.S. intelligence agencies) with tech so they can ensure all of us are safe. Awesome sauce. But put yourself in the shoes of the company. You’re developing, more than likely, some IT product (although IQT has been doing more and more non-IT investments over the last 30 months or so) and have some early customers – small potatoes but potatoes nonetheless. Your excited about an investment from IQT and having a potential massive future customer with a large checkbook (again, the CIA and other unnamed U.S. intelligence agencies). You’re excited too about the help they’ll give on driving product iterations and maturation. Sounds like a dream come true. So you take the investment. Over time, the customer gives you more and more input – you make strategic trade-offs on how the product evolves so you keep IQT happy and the “suitor” (the CIA and other unnamed U.S. intelligence agencies). Your other investors also are pressuring you to focus on the “suitor” because of the massive payday potential. And the “suitor” often times for IQT companies is by the way hardly ever the CIA (think other intel agencies that have a real need for “IT” stuff) – these people have specific needs.
Fast forward two years. You’ve alienated your original customers-base for a single customer who more than likely is either no longer interested or becoming impatient. As context, most tech projects within the “suitor”‘s purview typically have a couple month expiration date and near infinite budgets – got to keep people safe and money is of minimal importance. Your revenue is drying up from those original customers you lost while you’ve been chasing the government carrot. At best, you got to go raise more money just to keep chasing the “suitor” – who is going to invest in a company with a single customer? Worst case, IQT walks (along with the “suitor” more often than not) and you’re left worse off than when you started.
As a former manager of a government R&D investment initiative, the companies I made investments in and worked with made this same mistake over and over again. They got an awesome idea or product – heck, they might already have some cheddar coming in. But they get overly excited about the investment I’m making in them and convince themselves to focus 99% of their effort on scoring my organizations business. While these are poor business decisions on their part, they’re equally poor precedents set implicitly by said programs like mine and organizations like IQT. Fundamentally, I think government investment in R&D is critical. But I think early investments, pre-revenue, is where the role is best served. Funding to take the idea into and out of a prototype phase, then let traditional funders take over. Otherwise you start skewing the innovation, product development, and go-to-market efforts towards a single customer with a high hurdle to acquisition.
IQT is cool. Simple put. They’re trying to keep us safe. And Norm Augustine, their founder, had only the best intentions in mind when we create IQT. But my thesis is that, on average, IQT will do more to set these companies into a cannibalization process rather than help them grow.
SpaceX has done an amazing job harnessing the energy of younger engineers – the type of energy that NASA has capitalized on for close to half a century. The difference, which this article accentuates, is that SpaceX is orders of magnitude more nimble and willing to push limits to achieve goals. There is a reasonable likelihood that their competitor, ULA, is bankrupt within the next 5-7 years. Yeah, they’re significantly more reliable than SpaceX – for now, but that changes as SpaceX builds up more data points with successful launches. That reliability comes at a massive cost that customers are likely to not continue paying more. And they can’t compete on cost with SpaceX – but they could, over time, after emerging from a bankruptcy.
SpaceX has a serious set of goals in front of it. And I don’t mean the “go to Mars” stuff – I mean just filling the orders for what people have already bought. My biggest concern for SpaceX is scale – lean, mean, and scrappy only works for so long. At some point, they will have to make tweaks – invest in more facilities, pay employees more, migrate off of skeleton crews and add more staff, etc. I fundamentally believe they can do that and still be as competitive as they currently are. My fear is that if they don’t make these changes in the next couple years, someone(s) will either get hurt or killed. And unlike NASA, who has killed 19 astronauts to date, my fear is that it will be some innocent, ambitious young engineer out on a test rig or on an assemble line trying too hard to push the limit to reach these ambitious goals.
Time will tell. Good article!