Computerized Forecasting and Discrimination

In my MBA class, I learned a quantitative technique called Discriminant Analysis. Discriminant Analysis is useful for making prediction, e.g. whether a person will buy the latest Harry Potter book or consume organic food.

In my assignment, I devised a model which predicted if a student would be a high scorer in examination. Prediction was made based on a number of questions asked, such as:

• How much time a student spends on doing homework?
• How much time he/she spends on sports?
• How much time he/she spends on surfing the Web?
• How many siblings does he/she have?

My classmate devised a model to predict if a person would be a potential terrorist. Here is a concern: If a person is predicted to be a terrorist, will he be subjected to unnecessary spying? Will computerized forecasting lead to discrimination?

In her article Forecasting human behaviour carries big risks, Christine Evans-Pughe writes:

The Surveillance Society report from the Information Commissioner’s Office outlined worries about predictive social sorting on the grounds that could amount to discrimination, create new underclasses and that by totting up of negative indicators from health, school and other records, a predictive model could make its own worst predictions come true. “For instance, if your parents both have criminal records or you have a bad school attendance record because of poor health, even if you are the best-behaved kid in class, you will find that every teacher is likely to treat you with suspicion."

As a conclusion, Evans-Pughe sums up:

Computerized forecasting techniques are certainly useful for stores, but flawed when it comes to complex human issues.

Scrutinizing Blue Ocean Strategy – II

[Part I is here.]

In their book, authors W. Chan Kim and Renée Mauborgne point out the differences between Blue Ocean Strategy and the ‘traditional’ Red Ocean Strategy.

(Click to enlarge.)

The idea and advantages of creating an uncontested market space is long known. It is not exactly a great discovery. Sony's founder Akio Morita once said, “We don’t serve market. We create market.” The difficult part is: can we identify the uncontested market? Or, if we can identify such a market, do we have the know-how, technology or resources to make it happen?

The Blue Ocean Strategy also dictates that a firm aligns its activities in pursuit of both differentiation and low cost. In the literature of management guru Michael Porter, ‘differentiation’ refers to product differentiation, and implies added value in the perspective of end users. Kim and Mauborgne use this term rather loosely. Even difference in production process or price is taken as differentiation.

For example, Kim and Mauborgne write in their book:

[Henry] Ford’s success was underpinned by a profitable business model. By keeping the cars highly standardized and offering limited options and interchangeable parts, Ford’s revolutionary assembly line replaced skilled craftsmen with ordinary unskilled laborers who worked one small task faster and more efficiently, cutting the time to make a Model T from twenty-one days to four days and cutting labor hours by 60 percent. With lower costs, Ford was able to charge a price that was accessible to the mass market.

The success of Henry Ford was due to his efficient assembly line, but that didn’t constitute product differentiation. Furthermore, rather than discussing Ford’s marketing strategy, wouldn’t it be more beneficial to study his assembly line innovation?

Charcoal Factory in Kuala Gula

The vegetation of Kuala Gula in Northern Perak, Malaysia, is dominated by mangrove forest. The wood from mangrove trees is often used to make charcoal.

In my recent trip to Kuala Gula, I made a detour to a charcoal factory. The picture below is taken inside the factory. Pieces of wood are smoked inside the hemispherical structures where they would turn into charcoal.

Related posts:
Sunset at Kuala Gula
Poisonous Fish
Mangrove Forest

Death Penalty

I came across a blog of an American gentleman recently. He was against capital punishment, and had called for petition to spare the life of a convict. I left a comment in his post, and raised one question: If a person has the intention to commit crime, will death penalty makes him/her think twice?

I think psychologists are the best people to answer this question, but I would like to give my humble opinion…

If a person is convicted of serious crime, e.g. homicide, he/she may be executed. An alternate option is life imprisonment. Is death penalty more effective than life imprisonment in preventing crime? My impression is that to some potential criminal, they make little difference. To others, death is scarier.

The most cunning of the criminals would assume that they could erase all evidences and therefore be free. Capital punishment won’t deter them.

In countries where corruption is serious, defendants can bribe the police, judges or witnesses. They too, would not fear death penalty.

Capital punishment is also unlikely to stop people with psychological problem. Virginia Tech killer Cho Seung-Hui was one such person. He shot himself after killing 32 people in the campus.

There are also people who committed unplanned crimes out of momentary insanity, e.g. after drinking or during heated argument. They were unable to think logically, and therefore, unlikely to ponder consequences of their wrongdoings.

Finally, suicide bombers do not fear death.

So, I'm worried that death penalty is not as effective as the lawmakers think. Then there is possibility of wrong verdicts. Should we still support death penalty?

Related post in another blog:
Troy Anthony Davis: the Death Penalty

Management Lite & Ezy 42 – When & Where to Inspect

In manufacturing environment, control of process is needed to make sure a system is producing at the expected quality level. Control is often done by inspection, which can involve measurement, tasting, touching, weighing, or testing of the product. Its goal is to detect a bad process immediately.

Inspections, or audit, can take place at any of the following points:

1. At supplier’s plant while the supplier is producing.
2. At your facility upon receipt of goods from the supplier.
3. Before costly or irreversible processes.
4. During the step-by-step production process.
5. When production is complete.
6. Before delivery from your facility.
7. At the point of customer contact.

In my earlier post, The Toyota Way, we learned that team leaders in the car giant’s plant stopped the assembly when they detected quality problems. Inspection was done during the step-by-step production process, as noted above.

Reference:

Jay Heizer & Barry Render, “Operations Management”, 8^th edition

Scrutinizing Blue Ocean Strategy

Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant written by W. Chan Kim and Renée Mauborgne was one of the best sellers in year 2005. I haven’t read this book, but did come across photocopy of its Appendix A. I am not sure if I could agree with what I read.

In Appendix A, the authors examine auto industry. They write:

In the 1970s, the Japanese created a new blue ocean, challenging the U.S. automobile industry with small, efficient cars.

Back in 1970s, majority of American households already owned cars. The Japanese automakers, therefore, were competing in existing market rather than creating a new blue ocean. Sales of Japanese-branded vehicles rose steadily because of these reasons:

1. The market was expanding because of population increase.
2. The Japanese car makers ate into the market share of the Big Three.
3. More and more American families could afford to purchase second or third cars.

The third reason could readily be explained by older marketing models. Success of Toyota, on the other hand, can be explained by the famed Toyota Production System. The Japanese also moved up the value chain by selling luxury cars, e.g. Lexus by Toyota, Acura by Honda and Infiniti by Nissan.

The book continues…

Fast-forward to 1984. A beleaguered Chrysler, on the edge of bankruptcy, unveiled the minivan, creating a new blue ocean in the auto industry.

…

The success of the minivan ignited the sports utility vehicle (SUV) boom in the 1990s, which expanded the blue ocean Chrysler had unlocked.

Now, according to Kim and Mauborgne, a Blue Ocean Strategy involves BOTH differentiation and low cost. As we know, minivan and SUV are not cheap. The automakers were competing on differentiation but hardly low cost!

It is clear that the automakers mentioned above did not adopt Blue Ocean Strategy as claimed by the authors. They were, nonetheless, successful. My lecturer said, “Blue Ocean Strategy is one of the strategies, but it is not the best strategy.” I probably have to agree with him.

Related post:
The Toyota Way

Blue Ocean Strategy on Wikipedia

What is in a name?

A few months ago, I wanted to buy a backpack for my camera. I compared bags from various manufacturers, and read product reviews on the Internet. After weeks of researching, I finally settled on a backpack from Crumpler. It is called – don’t laugh – The Sinking Barge.

Crumpler’s bags all have silly names. Its other products include:

7 Million Dollar Home

Karachi Outpost

The Hoax

Singaporean Ice Monster

The Moderate/Considerable/Dreadful Embarrassment

The Salary Sacrifice

The Horseman

(Which one do you like most?)

These silly names are memorable and convey the message of youthfulness and rebellion. They may have helped Crumpler capture more sales.

Specialized Holidays

In January 2007, I traveled to Northern Thailand. In the cities of Chiang Mai and Chiang Rai, tour operators organized 1 or 2-day guided tours for tourists. Trips to Golden Triangle and hill tribe villages were popular, but there were also some unusual ones, such as:

• Thai cooking class, which included shopping for grocery in local market.
• Thai massage class.
• Mountain bike tours.
• All terrain vehicle (ATV) tours.
• Be a volunteer in Elephant Nature Park. (below)
  

In the article “Capturing the Niche” (Newsweek, May 14, 2007 issue), author Michelle Jana Chan noted that there was a growing demand for specialized holidays, and tour operators have been repositioning themselves to cover the niche market.

Earthwatch Institute, mentioned in Chan’s article, organizes many programs for holiday-makers who want something more meaningful. The programs, among others, are:

• Cheetah conservation in Namibia’s ranching heartland.
• Lion conservation in Tsavo, Kenya.
• Monitoring the movement and behavior of elephants in Kenya.
• Unearth the origin of human at Olduvai Gorge.
• Bat conservation in Malaysia.
• Tracing the life cycle of butterflies of Mount Fuji.
• Dolphin conservation program in New Zealand.

If I were a tour operator in my country of Malaysia, what trips shall I organize? Perhaps I will wake up the participants at 4.00am and rush them to the rubber plantation.