September employment data

Once again, the BLS data on employment released this morning shows a stagnate labor market. The unemployment rate remained unchanged while total employment dropped by 95,000. The report contains some good news (private sector employment) and some bad news (government employment):

Government employment declined (-159,000), reflecting both a drop in the number of temporary jobs for Census 2010 and job losses in local government. Private-sector payroll employment continued to trend up modestly (+64,000).

Once again, however, as the chart below shows, both the number of involuntary underemployed (part-time for economic reasons) and the number of workers involuntarily underemployed because of slack work increased in September. The increase in slack work is especially of concern as it indicates a slight slowdown in production.

First mover advantage?

First mover advantage is part of the standard lore of the I-Cubed Economy. It means that the first company into a market generally wins. The idea is that the first mover benefits from technological lock-in. But that only works if the first mover sets the product standards and there is high cost to the consumer of switching to a different competitor.
What is the alternative? Many have argued that beginning a “fast follower” is a better strategy. Steve Blank outlines this strategy in a recent article — You’re Better Off Being A Fast Follower Than An Originator. According to Blank, first movers (those who are first to sell a product) have a 47% failure rate. Fast followers (those who enter early but not first) have an 8% failure rate.
In part, this should not be surprising. Not every product is a success. In fact, most of them fail. So the first movers are those that clear out the duds. Fast followers have an easier strategic choice since they are coming into a proven but nascent market.
This does not mean, however, the there is no first mover advantage. A first mover who throws a lot of products at the market is bound to have success — even if their batting average is low on anyone product. And a first mover who does succeed in establishing lock-in with high switching costs will likely succeed (for example in the pharmaceutical industry).
For me, the bottom line is not first mover versus fast follower. The real question is finding the strategy that is right for the product and right for the market.

Universities and Intellectual Property

The National Research Council (the research arm of the National Academies) has just released its new report on Managing University Intellectual Property in the Public Interest. The product of two groups — the Board on Science, Technology, and Economic Policy (STEP) and the Committee on Science, Technology, and Law (CSTL) — this report looks specifically at the university technology transfer system put in place as a result of the Bayh-Dole Act of 1980.
The university tech transfer system has been under criticism from two fronts. One side believes the system of centralized university tech-transfer offices puts a barrier between inventors and the market. They would like to see university faculty have the freedom to pick their own path rather than use the universities’ tech transfer system. The other side see a misguided the focus by the tech transfer system on maximizing licensing revenues – to the determent of other knowledge creation activities.
The report finds the basic system has been effective, but in need of improvements. Among those improvements should be a clearly articulate set of goals by the university as to the role of tech-transfer as part of the core educational and knowledge creation purpose of universities. As the report states, “Patenting and licensing practices should not be predicated on the goal of raising significant revenue for the institution.”
With respect to the other critique, the report states: “A persuasive case has not been made for converting to an inventor ownership or ‘free agency’ system in which inventors are able to dispose their inventions without university administration approval.”
The report contains a number of specific recommendations to improve the existing system. This includes better oversight by the federal government of its own technology transfer system and how that interacts with university-based research.
I doubt that the report will end all the debate on university tech-transfer. At least it will give the debate a better framework. The transfer and flow of knowledge is a key element of the I-Cubed Economy. Universities play an important role in that flow. So getting the university “knowledge-transfer” system right is important. The “tech-transfer” system need to be seen in that larger context. Patents and licenses, as the report notes, is just one part of overall university activities:

The transition of knowledge into practice takes place through a variety of mechanisms, including but not limited to:
1. movement of highly skilled students (with technical and business skills) from training to private and public employment;
2. publication of research results in the open academic literature that is read by scientists, engineers, and researchers in all sectors;
3. personal interaction between creators and users of new knowledge (e.g., through professional meetings, conferences, seminars, industrial liaison programs, and other venues);
4. firm-sponsored (contract) research projects involving firm-institution agreements;
5. multi-firm arrangements such as university-industry cooperative research centers;
6. personal individual faculty and student consulting arrangements with individual private firms;
7. entrepreneurial activity of faculty and students occurring outside of the university without involving university-owned IP; and
8. licensing of IP to established firms or to new start-up companies.

Pursuing all of these mechanism is important. Universities need to create an environment to allow that. Sometimes that balancing can be difficult. But nothing the universities do should inhibit that primary role of knowledge creation and dissemination. That is their most important function in the I-Cubed Economy.

Retailers localize

One of the hallmarks of the industrial age was standardization of mass production/mass consumption. In the retail sector, this meant consolidation of stores into giant chains. Starting with the Sears stores and catalogs, shoppers anywhere in the nation had access to the same goods. Buying was centralized with the same fashions showing up in Boise as in Baltimore. With better inventory control systems, some variation was allowed — such as stocking more snow shovels in Buffalo and more sunscreen in Phoenix.
But the hallmark of the I-Cubed Economy is more customization. Some big retailers are attempting to move in that direction. As a story in Sunday’s New York Times relates — Macy’s Goes Local in Matching Goods to Customers

After decades of acquiring, consolidating and centralizing, the department store chain is rediscovering — and financially exploiting — its multiple local roots, advancing a trend that is quickly being adopted by other retailers like Saks Fifth Avenue and Best Buy.
. . .
Macy’s tested its new local approach in a handful of stores in 2008, introducing it in all 810 stores last year. In essence, Macy’s requires sales clerks and store managers to examine the local population almost like anthropologists — studying, for example, what churchgoing black women here in Atlanta shop for compared with the shopping habits of Microsoft wives, as employees call one segment of shoppers in the store in Bellevue, Wash.
At the same time, the retailer doubled its staff overseeing store assortments and decreased the stores that staff members dealt with. It required the people responsible for merchandise assortment to visit stores daily, added log books at each register where sales clerks entered suggestions from shoppers, and introduced a review process so the staff visiting stores could make recommendations to buyers.
There are items that would fit in an olden-days department store. The old Marshall Field’s store in Chicago sells Frango chocolates, boxed as they were in the past. In the Northwest, at Bon Marché, Frangos come wrapped in cellophane and are packaged in an octagonal box, the traditional presentation in Seattle. In Minnesota this year, stores began carrying krumkake irons, a Scandinavian baking tool.

An interesting trend — but not a return to the pre-mass consumption days. Don’t expect the Wal-Mart to turn back into the mom-and-pop . Do expect to see retailers cater more to their local demographic — as “just-for-me” meets “just-in-time” retailing.