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Local Chinese Solar Subsidies and Loss Aversion

Posted on October 19, 2012 by Josh Lutton

Yesterday I read a Raymond James analyst report (by Pavel Molchanov and Alex Morris) mentioning a Financial Times report that a senior Chinese government official said the country’s solar industry was like a “patient on life support,” that it would have to go through a painful series of cutbacks that would need to take place through “powerful market competition and cruel elimination,” and that support from the central government would not be forthcoming.

That’s tough love, especially considering many feel Chinese solar subsidies (through loose credit terms) are what drove the industry to its current 2X oversupply situation.  (To be fair, it didn’t help that many Western countries cut installation subsidies at the same time capacity was exploding.)

Unfortunately, as Raymond James and the FT also reported, it is local Chinese governments that have been giving manufacturers support lately.  The cities of Xinyu and Wuxi have given LDK and Suntech $80 million and $32 million, respectively.  This looks like a classic case of loss aversion, which as I explained in another post makes humans prone to make unfortunate gambles when facing difficult choices.

[Read more…]

When a Presentation is not a Presentation

Posted on August 4, 2012 by Josh Lutton

When I was first asked to start giving business presentations almost twenty years ago, I looked at several books for suggestions. I also recalled some of the training I’d received in a high school speech class. One common theme in the advice was that the written materials for effective presentations should have as few words as possible.

I found this to be profoundly confusing, as it didn’t fit my own experience with convincingly presenting data or with the successful presentations I had already seen.

I think the disconnect was caused by the different ways we use the word “presentation.” In some cases, we mean something like a speech. A speech is a monolog and the audience is typically large.  Perhaps the topic is qualitative or conceptual. For the CEO of a Fortune 500 company giving a keynote speech at a conference to 2000 delegates, this is good advice and the conventional wisdom is, indeed, wise.

In other cases, however, when we say presentation we mean something like “discussion document.” In these situations the point is often to discuss the material to explore different angles on the topic so that all of those with a stake in the topic can get comfortable with the conclusion or voice concerns. The audience is generally less than 20 people.  Frequently, an organization is trying to make some sort of decision, so having data is important. Finally, these types of documents are often reviewed without the original presenter or author present. Therefore, it’s important that the documents stand on their own.

The fact that we typically use the same software—Microsoft PowerPoint—to make slides for both types of presentations has probably helped obfuscate the significant differences between the slides needed for each.

At Woodlawn Associates we most often work with presentations of the second type. Here are three rules we use to make them as effective as possible:

[Read more…]

Developing Strategic Creativity

Posted on July 15, 2012 by Josh Lutton

Note: On July 30, 2012, Jonah Lehrer, one of the authors I mention in the post below, admitted to fabricating quotes in his book Imagine.  I’ve elected to leave up this post because the majority of ideas in it come from other authors or researchers or my own experience.

Many of the most famous concepts in strategy help us evaluate or explain ideas but do not help us come up with ideas for our businesses in the first place.  Two books I’m familiar with, William Duggan’s Strategic Intuition: The Creative Spark in Human Achievement and Jonah Lehrer’s Imagine: How Creativity Works, help fill this gap in the strategy literature.  They discuss how new ideas happen, which is essential to Woodlawn’s work in growth strategy.

Strategic Creativity

Our brains are mysterious but increasingly well understood by researchers.  To create new ideas, our brains spontaneously and selectively recombine various previous elements into a new whole. Duggan calls this “flashes of insight,” while Lehrer calls it “conceptual blending.”  I call it “strategic creativity.”

This type of work is the province of the right side of the brain, which is better able to see hidden connections and remote associations than the left hemisphere.  For the brain to do this work, however, it must be in relaxed state.  I can remember “a ha!” moments I had while on a leisurely jog, on an airplane, and while dreaming.  It’s sort of like involuntary muscles.  They work, but they aren’t under your conscious control.

[Read more…]

Moneyball for Managers: Proprietary Insight

Posted on June 25, 2012 by Josh Lutton

Yesterday I took my family to the Chicago White Sox game against the Milwaukee Brewers.  On the way home, we learned the White Sox had just made a trade to acquire Kevin Youkilis from the Boston Red Sox.  This piqued my interest because I remembered Youkilis is prominently featured in Moneyball: The Art of Winning an Unfair Game, Michael Lewis’ page-turner from 2003 about how Billy Bean, general manager of Major League Baseball’s Oakland Athletics, used empirical data to overcome the overwhelming financial advantage of large-market teams such as the New York Yankees. (Brad Pitt starred as Bean in the 2011 movie by the same name.)

In Moneyball, Lewis describes how Bean built a winning team on a baseball’s second-smallest budget by relying on data rather than baseball’s conventional wisdom.  On the drive home I started thinking about whether there are any lessons business leaders could take from the book.  In looking through the book again last night I found three:

[Read more…]

What Should Operators Do About the Apple Television?

Posted on June 18, 2012 by Josh Lutton

As cable, satellite, and telco TV operators consider the impact of a potential Apple television, they should not be sanguine about the potential of such a device to dramatically change which operators gain and lose customers.

As we discussed previously, we think if Apple releases a TV it will do so in partnership with one or more traditional video operators, much like it released the iPhone in partnership with selected mobile operators.  Peter Misek at Jefferies believes prototype versions are already in the labs at AT&T and Verizon in the U.S. and Deutsche Telekom and France Telecom in Europe.  He also thinks Time Warner Cable may be working with Apple.

Impact of iPhone on Wireless Operators

The U.S. wireless market may be an instructive analog for what could happen in pay TV.  As the head of smartphone software portfolio strategy for Motorola’s handset division in 2008 and 2009, I got to see firsthand how Apple changed that market.

[Read more…]

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