The 9x Effect

2604 2019-05-15 21:45

New products fail at the stunning rate of between 40% and 90%. Why? The 9x Effect: You have to be 9x better than the existing alternatives to win their market.

  • companies often overweight the new product’s benefits by a factor of 3.
    • dissatisfied with the status quo and convinced the innovation works.
    • IKEA effect: labor alone can be sufficient to induce greater liking for the fruits of one’s labor.
    • view the innovation as the benchmark.
  • consumers often overweight the old product’s benefits by a factor of 3.
    • satisfied with the status quo and have change aversion.
    • don’t know the product and are skeptical about the new product’s performance.

Warning Signs of Economic Recession

How did Resilient Company Prepare?

Back in 2008, companies turning out to have higher total shareholder return(TSR) did these things:

  • By the time of reaching the lowest point of the recession, they had increased EBITDA(Earnings Before Interest, Taxes, Depreciation, and Amortization) by 10%.
    • By reducing operating costs earlier in the recession, and more deeply.
  • Introduce more flexibility into the investment-planing
    • Reduce > $1 per $1 of total capital on their balance sheet
  • Prepare far more cash than peers for acquiring assets once on the upswing of the economy.
  • Maintain high-value customers’ loyalty.
    • Forgo revenues from price changes, while peers are reducing the price.

However, slashing costs may hurt the brand and the company moral.

Finally, getting ahead of peers create a huge advantage.

What is architecture?

Architecture is the shape of the software system. Thinking it as a big picture of physical buildings.

  • paradigms are bricks.
  • design principles are rooms.
  • components are buildings.

Together they serve a specific purpose like a hospital is for curing patents and a school is for educating students.

Why do we need architecture?

Behavior vs. Structure

Every software system provides two different values to the stakeholders: behavior and structure. Software developers are responsible for ensuring that both those values remain high.

Software architects are, by virtue of their job description, more focused on the structure of the system than on its features and functions.

Ultimate Goal - saving human resources costs per feature

Architecture serves the full lifecycle of the software system to make it easy to understand, develop, test, deploy, and operate. The goal is to minimize the human resources costs per business use-case.

The O’Reilly book Software Architecture Patterns by Mark Richards is a simple but effective introduction to these five fundamental architectures.

1. Layered Architecture

The layered architecture is the most common in adoption, well-known among developers, and hence the de facto standard for applications. If you do not know what architecture to use, use it.

Examples

  • TCP / IP Model: Application layer > transport layer > internet layer > network access layer
  • Facebook TAO: web layer > cache layer (follower + leader) > database layer

Pros and Cons

  • Pros
    • ease of use
    • separation of responsibility
    • testability
  • Cons
    • monolithic
      • hard to adjust, extend or update. You have to make changes to all the layers.

2. Event-Driven Architecture

A state change will emit an event to the system. All the components communicate with each other through events.

A simple project can combine the mediator, event queue, and channel. Then we get a simplified architecture:

Examples

  • QT: Signals and Slots
  • Payment Infrastructure: Bank gateways usually have very high latencies, so they adopt async technologies in their architecture design.

3. Micro-kernel Architecture (aka Plug-in Architecture)

The software’s responsibilities are divided into one “core” and multiple “plugins”. The core contains the bare minimum functionality. Plugins are independent of each other and implement shared interfaces to achieve different goals.

Examples

  • Visual Studio Code, Eclipse
  • MINIX operating system

4. Microservices Architecture

A massive system is decoupled to multiple micro-services, each of which is a separately deployed unit, and they communicate with each other via RPCs.

uber architecture

Examples

5. Space-based Architecture

This pattern gets its name from “tuple space”, which means “distributed shared memory". There is no database or synchronous database access, and thus no database bottleneck. All the processing units share the replicated application data in memory. These processing units can be started up and shut down elastically.

Examples: See Wikipedia

  • Mostly adopted among Java users: e.g., JavaSpaces

Facebook is a very profitable company. Its operating margins = 42%

operating margin = operating income / net sales
operating income = gross income − (operating expenses + depreciation and amortization)

When it is transiting into a privacy-centric super app, there are three challenges.

  1. Technical. How to bridge apps like WhatsApp and Instagram when turning them into a uniform platform?
  2. Economic.
    • China has no dominant app stores so that WeChat grows to the platform of choice. However, in the US, there are Apple and Google.
    • WeChat is no cash cow. It’s hard to micro-target ads against privacy-preserved users.
  3. Privacy and competition.
    • No country wants one firm to monopolize the Internet.
    • Social network + private messaging = Windows OS + IE
  1. Millions of users love the brands and leaders of those unicorns. Those tech stars have everything - except a path to high profits.

  2. In the past 25 years, Three things changed.

    1. Growing fast became more accessible thanks to cloud computing, smartphones, and social media.
    2. Low interest rates left investors chasing returns.
    3. Superstar firms (e.g. Google, Facebook, Alibaba, and Tencent), proved that wealth is made by
      • huge markets, high profits, and natural monopolies
      • limited physical assets and light regulation
  3. Because the unicorns’ markets are contested, margins have not consistently improved, despite fast-rising sales.

  4. The blitzscale philosophy of buying customers at any price is peaking. After the unicorns, a new and more convincing species of startup will have to be engineered.

Alas! Andrew Grove says - Success breeds complacency. Complacency breeds failure. Only the paranoid (who embrace change) survive.

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