EE8061 INNOVATION AND TECHNOLOGY

MANAGEMENT CLASS DISCUSSION

1. What Is Risk? Describe Risk Management Planning and
Best Practices. How one can identify risk?
Risk is the possibility of loss or injury.
A Function of the {likelihood, and impact}
An event if it occurs will have a negative impact on one or more
of: scope, time, cost, quality, or resources.
Utility or risk tolerance rises at a decreasing rate for a person
who is risk-averse.
Those who are risk-seeking have a higher tolerance for risk
and their satisfaction increases when more payoff is at stake.
The risk-neutral approach achieves a balance between risk
and potential payoff.
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 RISK MANAGEMENT PLANNING PROCESSES
Every project regardless of size, complexity, location, or organization
contains some measure of risk.
The Project Managements objective: is not the removal of all risk, this
simply cant be done, but to identify and manage risks to the benefit of
the project.
Risk Management Planning: Deciding how to approach and plan the
risk management activities for the project.
Risk Identification: Determining which risks are likely to affect a
project and documenting their characteristics.
Qualitative Risk Analysis: Characterizing and analyzing risks and
prioritizing their effects on project objectives.
Quantitative Risk Analysis: Measuring the probability and
consequences of risks.
Risk Response Planning: Taking steps to enhance opportunities and
reduce threats to meeting project objectives.
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 KEY BEST PRACTICES
Manage projects by managing their risks.
Create and maintain a census of risks for each project.
Track the causal risks, not just the ultimate undesirable
outcomes.
Assess each risk for probability and likely cost.
Predict for each risk the earliest symptom that might indicate
materialization.
Appoint a risk officer (a person who is not expected to maintain
a Can-Do attitude), to look at the risk of bad information not
getting communicated.
Establish easy (perhaps anonymous) channels for bad news to
be communicated up the hierarchy.
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 RISK IDENTIFICATION
The first step is to identify as many risks as possible for the
upcoming project with the knowledge that you can never see
them all.
Risk identification is not a one time process; but should be a
continuous process of team members and stakeholders looking
for new issues that may affect the success of the project.
RISK IDENTIFICATION TECHNIQUES
Brainstorming.
Interviews.
SWOT Analysis.

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 2. YouTube is a video sharing website on which
users can upload and share videos. Three former
PayPal employees created YouTube in February
2005. In November 2006, YouTube, was bought by
Google for $1.65 billion, and is now operated as a
subsidiary of Google. In order for YouTube to
remain successful, it must find and manage its
risk factors and sources of uncertainties. Discuss
key risk areas (Market Uncertainty customer,
market sales and growth, channels, competitors)
for YouTube in the immediate future. Also explain
why other similar services (Google Video,
Microsoft SoapBox) have not been so successful.

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 YouTube is a video sharing website on which users can upload and share
videos.
Three former PayPal employees created YouTube in February 2005.
Hurley and Chen developed the idea for YouTube during the early months of
2005, after they had experienced difficulty sharing videos that had been shot
at a dinner party at Chen's apartment in San Francisco.
Karim did not attend the party and denied that it had occurred, and that is
how YouTube was founded.

Chad Hurley, Steve Chen, and Jawed Karim

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 In November 2006, YouTube, was bought by Google for $1.65 billion, and is
now operated as a subsidiary of Google.
Theres no doubt that YouTube is the biggest player in online video industry
and it outperformed its competitors and has become a winner in video sharing.
YOU TUBE FACTS
Over 1 billion unique users visit YouTube each month.
Over 6 billion hours of video are watched each month on YouTube.
100 hours of video are uploaded to YouTube every minute.
80% of YouTube traffic comes from outside the US.
YouTube is localized in 88 countries and across 76 languages.
Millions of subscriptions happen each day.
Most subscribed You Tube channel is Music Channel with 82 Million
subscriptions.
Country where most You Tube videos are watched is:
Saudi Arabia with 90 million views per day.
Most viewed You Tube video ever is:
Gangnam Style with over 2 billion views.

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 MOBILE AND DEVICES
Traffic from mobile devices tripled in 2011.
More than 50% of global YouTube views come from mobile devices.
3 hours of video is uploaded per minute to YouTube from mobile devices.
In 2014, there were 8 billions mobile devices (7.1 billion world
population).
1.4 billion smartphones compared to 2 billions PCs.
1.8 million smartphones are sold every day. Thats five times more than the
number of babies born each day!
YouTube is available on 350 million devices.
Facebook is available on 370 million devices and 3 billion daily Facebook
likes.
76 million Twitter users and 380 millions daily Tweets.

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 SOCIAL
500 years of YouTube video are watched every day on Facebook.
700 YouTube videos are shared on Twitter each minute.
100 million people take a social action on YouTube (likes, shares,
comments, etc.) every week.
YouTube doesn't let developers to make enough money, as it makes
45% cut of their ad revenue.
YouTube has 1 billion monthly viewers, while Facebook reported 1.3
billion monthly visitors.
Therefore Facebook would be the biggest company to take on
YouTube when it comes to audience size.
Instead of sharing YouTube videos, brands are now uploading more
videos to Facebook directly.
Facebook video posts have completely overtaken YouTube video
posts.
Marketers are now turning to Facebook video first and the trend
seems to be picking up speed.
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 VIDEOS BY BRANDS, MEDIA COMPANIES, CELEBRITIES, AND
ENTERTAINMENT COMPANIES,

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 Is Twitter a Threat To YouTube
NO: Because Twitter doesn't host its own videos, and YouTube doesn't allow
people to tweet.
But recently, Twitter began stealing short-form video content from YouTube in
the form of Vine, with its 6-second blasts. (Instagram is another threat to
YouTube, with its 15-second grabs).
If you want to show people a very short video, then YouTube is no longer the
easiest or most obvious place to put it.
Experts believe that Twitter will begin its own videos, of all lengths, simply
because following a person on Twitter creates a "channel" for new video.
The other advantage Twitter has over YouTube is an "identity layer." Twitter
users are logged in. Twitter and its advertisers know who you are, and how to
target you with relevant ads.
RUNNING COAST
The bandwidth costs in 2007 was (1 Million/day) for delivering (and storing) the
amount of video.
YouTubes operational costs are rising and the costs for 2009 were estimated
about $ 470 M.
Although YouTube doesnt comment on the cost most expert believe that its
running coast is higher than Apples iTunes, which was 1Billion in year 2011.
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 MONETIZATION
It is widely believed that YouTube never made any profit till
2009.
So the big question: Is there any money in services like
YouTube?
Yes, Hulu, a smaller and newer competitor of YouTube made
a revenue of $90 M in 2010 and 1 billion in 2014 with 6 million
subscribers.
YouTube proves that theres a big market for user-generated
content but Hulu shows that advertisers want to spend money
for professional content.
Though YouTube was a cultural phenomenon when Google
Inc. bought it in 2006, it was bleeding money losing nearly
half a billion dollars yearly till 2009.
Although YouTube didnt disclose any numbers, it was
estimated that in 2012 the revenue increased dramatically.
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 MONETIZATION
In 2013, YouTube generated 3.5 billions(was expected to be 5.6B),
and according to Wall Street Journal in 2014, its revenue was 4
billions.
It also has been reported that its expenses have grown and
YouTube is roughly breaking even.
By comparison, Facebook generated more than $12 billion in
revenue, and nearly $3 billion in profit, from its 1.3 billion users in
2014.
Many YouTube users treat the site as a video repository to be
accessed from links or embedded video players posted elsewhere,
rather than visiting YouTube.com daily.
Facebook and Twitter which routinely send traffic to YouTube, are
building their own video offerings.
Theres a lot of junk on YouTube, says Pivotal Research analyst
Brian Weiser. If they want meaningful TV budgets, they need to
invest in TV content.
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 YouTube New Model
YouTubes struggles to turn a profit are not new.
In 2012, YouTube Original Channels Initiative with $100 million
was launched that created 100 new channels on the site.
On May 13, 2013, YouTube launched its paid subscription model
Most subscriptions costing around 99 cents per month.
The average price was around $3 a month,
Some channel were as high as $8 per month.
At end, most of the channels failed to attract enough viewers.
It has been reported that by end of 2015 YouTube generated $9B
and is wroth now $100B.
Even if the above figures are true, it paid out around $5bn to
content creators/rights-holders.
Thus it is still not clear whether YouTube is making money or
not?
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 Market Uncertainty customer, market sales and growth,
channels, competitors.
YouTube has generated a significant amount of content and
viewers.
YouTube invested early on to make it easy for other web sites to
embed their video into other web sites. It also exhibits networking
effects with the cross-posting of similar / like minded content.
There are a number of other video services out there (i.e. Google
Video, Apple iTunes Store, Microsoft SoapBox) who focused more
on selling or renting video vs. providing an outlet for others to
freely share videos and capturing revenues via purely advertising.
Mobile video might also allow for new competitors to enter the
market space and steal market share and take share from
YouTube.
Organization and Management Uncertainties Capabilities,
Financial Strength, Talent, Learning Skills, Strategies.
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 Product and Processes Uncertainties Cost, Technology, Materials,
Suppliers, Design.
The largest challenge with YouTube is monetizing its viewers. The
bandwidth costs for delivering (and storing) the amount of video pushed
is significant. YouTube has done a strong job with the technical aspect
of making it easy to embed YouTube content in other web sites. The
use of Flash also makes for a near universal video delivery
mechanism.
Regulation and Legal Uncertainties Government regulation,
Federal and state laws and local ordinances, Standards and industry
rules (Megaupload, Piratebay ?).
There is a significant risk with copyright content and the distribution of
video. YouTube does host a number of copyrighted video clips. Most of
the studios and television networks have not gone after YouTube to
date (potentially due to the short length and lower video quality served).
Financial Uncertainty Cost and availability of capital, Expected
return on investment.
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 It will be interesting to see if YouTube is able to make a
business model out of purely generating revenue from
advertising.
Since a large amount of the video clips on YouTube are
copyrighted, there is a legitimate concern copyright owners can
either demand a large portion of the advertising revenues or
their content be removed.
YouTube with its library of millions of video clips and simple
embedding tools, it is easier than ever to display video on your
site or blog, including videos that might be infringing.
According to the laws Any time you incorporate a copyrighted
work into a site without the rights holder's consent, youre
potentially liable. t doesnt matter where its hosted.
YouTube, as one might expect, offers no protections against
such unwitting infringement.

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 3. First revenue is an important milestone for any start-up business.
Describe the average time for the first revenue for software
companies vs. biotech companies. As an investor in these two
types of businesses, how would this impact your view of these
businesses? How could this time risk be managed?
The primary differentiator to recognize is the difference in
development cycles for software vs. bio-tech.
Software beta cycles have significantly compressed since the dot com
days with 6-9 month testing and then first releases quite popular.
From the perspective of an investor, software allows customer
validation and revenues in a relatively short period of time.
Software management is also more defined and can be tracked to
identify and manage delivery risks.
There are software companies that are more focused on the research
(vs. development), however investors can quickly get new software
companies focused on development.
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 Bio-Tech on the other hand is a very research driven field.
The timelines are also compounded by the regulatory hurdles/gates
that must be passed.
The gates do provide an investor some visibility into mitigating risk
along the way.
However the approval process can be significant in adding time to
market (3-5 years), especially when patient trials are required.
Bio-Tech can be funded through regulatory approval phases,
minimizing capital outlay somewhat.
Thus generally speaking software companies produce faster first
revenue, while biotech take longer time.
However, the final decision will vary and will depend on the
circumstances, long term plans, goals, strategy etc.
Although first revenue is an important indicator, the final decision is not
purely dependent on this single issue (besides for any new venture,
this factor is only one of many factors to be taken into consideration).
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 4. Network economies are an important element for new
ventures. Describe how social networking sites such as
MySpace or friendster.com have leveraged network effects
to expand.
Social networking began primarily in the recruitment/business
world for networking, and quickly expanded into other customer
segments.
Early recruiting social networking sites created a web of
connected colleagues which allowed the leveraging of business
social networks for primarily employment purposes.
Both MySpace and friendster.com focus on primarily youth
segments.
Both provide users the tools to create personalized web sites to
blog about ones life and to link to other interesting sites and
friends.
As more of your friends join the social network, you benefit from
sharing links, web site updates and connectivity options.
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 5. Traditionally First Movers have had some advantage
over Follower Decision. How does the importance of this
decision change in a market with network effects and
increasing returns?
Product Pioneer = First firm to develop a working model or
sample in a new product category
Market Pioneer = First firm to sell in a new product category
The first product to enter the market
Pioneering new markets is expensive and risky, but potentially
very rewarding because market pioneers enjoy advantages
based on early market entry.
Pioneers are more likely to:
Have high market share
Survive longer
Be market leaders in their product category
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 Forces Against the Pioneer Advantage
FREE-RIDER EFFECT: Competitors introduces the same
technology with lower costs.
TECHNOLOGICAL DISCONTINUITIES: Late entrant uses
superior technology to produce a better product before the
pioneer.
SHIFTS IN CONSUMERS TASTES: The late entrants adopt
new positioning before pioneers.
IDENTIFICATION OF IDEAL POINTS: Best product may
become apparent only after the first product is widely
introduced.
Does there truly exist the first mover advantage?
It depends.
Pioneering new markets is expensive and risky, but also
potentially very rewarding.
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 If pioneers have advantages in
Supplies
Costs
Information
Product quality
Distribution,
Firms may benefit from early entry.
If late entrants can leapfrog pioneers with:
Superior technology
Better product quality
Better customer service
Better brand image
Firms could be better off entering late.
The logic of success is not to be first to enter the market, but to strive
for market leadership by scanning opportunities, building on strengths,
and committing resources to customers effectively.
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 First Mover vs. Follower decision is more critical in these types of
markets.
The traditional thinking in a market with network effects and
increasing returns, is more important and valuable to establish
oneself as the First Mover.
Since the value one offers in these types of markets is a function of
how large your customer network is, gaining more subscribers at the
early stages of the market can significantly influence the resulting
winners of the marketplace.
Many technology standard battles exhibit this kind of behavior,
especially when the standards are incompatible.
Some examples would be the telephone, fax machine, BetaMax vs.
VHS, BlueRay vs. HD-DVD, social networking sites, etc.

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