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Posted by julia

Kevin Werbach writes about the likely winners in the converging world of computing and communications: Microsoft, Sony, Nokia (all three mentioned in the WSJ article I just posted), IBM, AT&T and some of the dotcoms. The list excludes the content and IT hardware companies.

His introduction is something every tech entrepreneur should read, memorise and live (emphasis mine):

In a network-centric world of relentless commoditization, there are only two ways to thrive for an extended period: Go small or go big. Small means building a defensible niche product that that doesn't threaten anyone. Apple represents the upper bound for this strategy. It can be a comfortable life, but your upside is limited. The big option is really, really hard. Any competitive advantage and source of profits today could be someone else's free giveaway tomorrow. Just look at how Microsoft decimated Netscape. The only way to win is to develop a core asset that becomes a platform. As I wrote three years ago in the Harvard Business Review, that means providing that platform to others instead of holding it close to the vest.

The battle has begun. Nokia, Microsoft and Sony all want a piece of the action. Each one has its own view of the future. For Nokia, it is cellphones. For Microsoft, it is the PC. For Sony, it is the TV. Will be very interesting to see what we, the consumers, decide. Writes WSJ:

All three companies are trying to capture a broad swath of the home-entertainment market -- and steer the future development of consumer technology in a direction that plays to their own strengths and their rivals' weaknesses.

Nokia hopes consumers will spend a big chunk of their time and money listening to music, playing games and even watching video on mobile phones. Microsoft is geared to turning desktop, laptop and hand-held computers into all-purpose entertainment machines that eliminate the need for other gizmos. Sony is covering all the bases by producing everything from pocket-size music players to giant home-cinema systems, but the Japanese company sees the television as being at the heart of the entertainment market.

A WSJ interview with IBM's Gerd Binnig who won a Nobel Prize for his work on nantech. He is now working on "helping people better tap into the vast quantities of information stored in databases, hard drives and the Internet" by building nano-machines to replicate the human brain. He explains the problem...

The problem is that [there's] simply too much [information] for us. We need some help from machines that predigest this information. This means these machines to a certain extent have to understand this information.

If you work on a certain problem in science and you stumble over something new, you have to read an awful lot of scientific literature to see what has been written about similar or related phenomena. I would say 90% of the literature you wind up looking through isn't of interest to you, but you simply have to read it all, as you do not want to miss something important.

Instead, you could have an intelligent assistant, which could be a machine, that reads all the literature for you and gives you just the information you need, like, "Here in this paper they talk about this and that," and brings up a connection between two different subjects. Then you can read this predigested information and pick up the right papers and look only at them and not all the vast amount of literature.

The present way of processing data is still very useful. We, however, will learn more and more from the brain. I envision for the processor of the future a complex hybrid of conventional sections and brainlike ones. Let's take the example from before of understanding text. You show a computer a word. You can say this word is known in the computer's knowledge base ... but it has many, many meanings.

In the neighborhood of this original word, you found other words, and you also don't know the meaning. You have to link these words in a logical way sometimes, and sometimes only in a very loose, associative way. So they have to influence mutually their meanings. This could be done in a very parallel fashion, where you stimulate all of these words and at the same time they stimulate each other in defining their meaning.

For this you need lots and lots of connections so they influence each other. Then you have not only the words that influence each other. It might be that the previous sentence has to influence it. So you build up a meaning on a higher level, a more abstract meaning that can be digested somewhere else, which also influences then this particular sentence you're analyzing.

Consider the Indian pyramid from the needs of technology. Right at the top are today’s computer users, numbering about 10-15 million. They have computers at home, or at the workplace, or use them from cybercafes across the country. India's present computer base is about 8 million. The last 3 years have seen computer sales stagnate between 1.5 and 2 million.

In the pyramid, the middle tier is the one which wants computers – they understand its value, but cannot afford the Rs 30,000 (USD 600) price point. This segment consists of about 40-50 million households or about 160-200 million people – they are the ones who have access to telecom (either a landline or a cellphone) and cable television. This is India’s aspirational middle class.

This segment needs computing for which they are perhaps willing to pay Rs 500-700 a month, which is about half of today’s EMIs (equated monthly installments) of Rs 1,000-1,500, over a 36-42 month period. They could get access to consumer finance, but probably feel that the cost of the computer is still too high to justify a purchase. These users need English and support for at least one other Indian language.

The bottom of the pyramid in India is the one in its 600,000 villages, numbering about 150-200 million households (600-800 million people). Few among them have seen or heard of a computer. For the most part, they live on less Rs 50 (USD 1) day. This is a segment which could use computers for getting land record details, for grievance redressal, for getting commodity prices, for literacy, and many other reasons. This segment presently has little or no access to computing – cybercafes cannot be found in villages.

This is a segment which can pay a few rupees each time they access a service. But very quickly these rupees start adding up, limiting usage. The question is: how much money can be invested by a household in this segment for access to computing? This answer will determine what is required to make an economically sustainable model. The assumption we will make for now is that they are convinced that like health insurance, paying for computing is necessary because it will guarantee a better future.

Assume on an average each Indian village has about 1,000 people (or about 250 households). The per capita income for Rural India is perhaps no more than Rs 1,000 a month (Rs 12,000 or USD 240 a year). For a family of four, this works out to about Rs 4,000 a month. Let us halve that for the bottom of the pyramid. This gives us a figure of about Rs 2,000 a month. Will this household spend Rs 20 a month (1% of their income) on technology?

Let us for a moment assume they will. (We will come back to why they will do so a little later.) This gives us an income of about Rs 5,000 per month from the 250 households in the village. Over three years, this gives us a total of Rs 180,000 for a village. This is the economic base on which we have to build out TeleInfoCentres connected into a Village InfoGrid and complemented with Intelligent, Real-Time eGovernance to transform Rural India.

Next Week: Transforming Rural India (continued)