Professions can also gauge in guild like behaviors, and basically by having
certification requirements, by controlling movement of people, through
maybe degree requirements. Even advertising practices, so for
example law firms, they are not allowed to advertise prices for services, and
that is, and doing that, you can actually get thrown out of the profession.
And so these guild-like behaviors act to protect due to sort of reinforce what's
happening inside the guild. And so as you can imagine, this does not
really lend itself to innovation. That is, it does not push innovation to
happen because what the guild wants to do is keep things the way they are.
And by keeping things the way they are they're able to maintain that power.
Of course there are going to be innovations, but the innovations are
going to come in much more slowly. We think about how innovation happens in
the profession. Well, think about it this way.
you, you start out by learning and so, learning the art, other than to call it.
So for example, I have a sister who's a doctor, and she had to learn the art of
doctoring. And so, she went through her
undergraduate, then she did went through medical school.
she's, she graduated from medical school and she started doing residency, then she
started doing fellowships. And so it takes a long time to get from
the learning part to the mastery part. Once you master it, you're able to do
practice. And so for her, that was a long process
to go from learning through mastery, through practice.
You know, maybe like a 20, 30 year period for doctors.
And then other professions it can take equally as long.
So when you ask people in the profession to update, that is to say okay, we're
going to change how health care works. We're going to change how doctoring
works. Well, that's a really hard thing if
someone's trained to do this thing for 30 years in the way that they have.
And also, keep in mind, that along the way they'd been told the deal is, if you
work really hard now, yeah, I know you'll be poor, I know you'll work really hard,
you'll have terrible hours, but when you've, when you're finally able to
practice, you'll be compensated for that and you'll be well compensated for that.
And so, I did my part. I learned, learned, learned and, and
mastered and then, and now finally I practiced.
And now, you want to change everything? Like I don't want everything to be
changed. And so, this can be also part of what we
see, the kind of constraint that we see from education, the kind of constraints
that we see from law, the kind of constraints that we see from health care.
in these kind of professions where there's a really long preparation period,
before someone is allowed to practice. And the idea of the cost of update seems
very very high to them and they're going to oppose it.
On the other hand if we think of innovation as a, like It's called a
professional software engineering, right? Where I learn something, by the time I
learn something in in in learn master and practice in software engineering I can go
really quickly. It's only our 14 year old kids now who
are able to, to very quickly go through this cycle here where they're able to
learn something, apply it and then master it and then learn a new thing, apply it
and master it. And the cycles are so short here that
even in the, in these kinds of professions we might think that learning
is part of the profession. You have to be able to learn quickly in
order to stay alive, to be able to be a member of this profession.
And so, those would be the kinds of differences that we would see between the
kinds of professions and constraints that they pose as suppliers in an industry.
Ad so again, supplier constraints, the goals for suppliers who really want to
increase the value of their expertise. If they have an expertise and they want
to increase the value of it. We all do.
We all have something of value and we want to increase the value of that.
They're going to do it by controlling labor resources.
That is who's able to be in that field. How they're able to get into that field.
What they have to do in order to be in, remain a member of the field.
They're going to control knowledge flows. Often we have jargons and technical ways
of, of having Really a sort, we'll call secret
information about how it is we do certain things.
and also we're going to embed our value into proprietary system.
Let me say that in a different way, to say that if I know I have something of
high value, I don't want to give that directly to my the organization that is
that I'm supplying to. I don't want to give them the value in a
way that they can sort of desegregate it and take it apart and use it to their own
devices. If I give them the whole package, in a
way that they can't take it apart, then actually I've maintained some value.
So my interest in innovation, in innovating is innovating for myself, in
the proprietary system not innovating for my, the organization to which I'm
supplying, my value. So how do we overcome these supplier
constraints? What can we do as a way of getting over,
or, or at least mitigating the kind of, of dynamics that cause suppliers to want
to be not super open to our innovations? One thing we can do is not to outsource
our core. Often we have to make a decision, know,
in the, in the, development of an innovation.
Do we make a part of it or do we buy a part of it?
Well one thing to think about is what is the, how core is that piece to the value
of what I produce. And so in terms of the digital camera I
have to sort of think about what's the most valuable part of that and let me not
supply that, let me not outsource that thing.
Let me make the things that are most important to me where I create a value.
Let me outsource the things where they are not core value that I can actually
set up contracts where I can get suppliers to bid against each other.
for something. Also, we need to know the threat of our
innovation. When we propose innovations, it's
going to threaten our suppliers. And so what does it do to them?
Does it make them feel like not professionals anymore, does it drive down
their costs, does it drive up their costs, does it drive down their their
profit? And if we know that, we're much more
likely to be able to mitigate the threat. We might be able to understand how
they're likely to behave. With this innovation in mind.
You want to share the "Returns Innovation"?
So when you innovate and you're able to get some advantage from your suppliers,
can you share that? Can you share that with them?
They're much more likely to go along with you to help you innovate if they
understand that[UNKNOWN] some return to that.
So if the process is more efficient so you need fewer[UNKNOWN] or their services
maybe you can give them a higher price or maybe show them a way that they can
actually get more customers doing the same kind of thing.
And then also one of the cas-, costs of capital, understanding the cost of
capital, you know, what strings are attached when you take money from a bank?
Right, so a bank could be a supplier to you, supplies money to you.
What strings are attached are there certain loan covenants for example that
require you to have a certain amount of money in the bank and if you have to have
that money in the bank you can't be innovating with it.
And so those are the kinds of costs that might come with the capital that you take
in. Same with human capital.
Well, that's a discussion of a supplier constraints.
Now I want to move to the market and we're going to talk about the kinds of
constraints we face by being in the market.
