mung
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Why is the Osborne effect wrong?

Sun Mar 20, 2016 11:06 pm

I saw a thread/poll about how many rpi forum users have and it made me consider why the Osborne effect is wrong.

I could give a long list of reasons I think the afore mentioned effect does not apply to the rpi, but I will just give a few minimal and most important reasons.

1)Computers are now thought of as necessary, disposable(almost), rapidly advancing commodity items, and in the rpi case are so cheap why wait if the saving is so small the wait time value is a far greater loss of opportunity cost.
2)The target market(I wont go further into this unless no one sees, it seems obvious)

It would be interesting to see the sales stats but I guess the rpi models have a fairly long tail?

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Re: Why is the Osborne effect wrong?

Sun Mar 20, 2016 11:56 pm

If you had known the Pi3B was being launched on 29 Feb., would you have bought a Pi2B on 28 Feb.? If a lot of people react that way, who eats the cost of having large numbers of Pi2Bs in their inventory? Can they sell them for enough to recover costs, or will they only be able to--modestly--mitigate the losses? Bear in mind that holding inventory has costs, too.

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Jim JKla
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Re: Why is the Osborne effect wrong?

Mon Mar 21, 2016 1:04 am

It is not wrong if in the run up to a new relese you turn to a JIT (Just In Time) model for production and you start running down stocks of the old production model.

The numbers left will obviously sit but if they are modest they will be in demand to replace items broken in distribution to users who were going to get the old model or by collectors who want examplars of every model.

There is a critical timing element to when you announce the new model i.e. don't announce well ahead of time and make sure your demand cycle is in a high demand low availability point when you do anounce.

For example this would be a perfect time to anounce a new RPi Zero as NONE of the distributors have any stock. Zilch like nothing embarassing shortage. ;)
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Re: Why is the Osborne effect wrong?

Mon Mar 21, 2016 1:20 am

Jim JKla wrote:It is not wrong if in the run up to a new relese you turn to a JIT (Just In Time) model for production and you start running down stocks of the old production model.

The numbers left will obviously sit but if they are modest they will be in demand to replace items broken in distribution to users who were going to get the old model or by collectors who want examplars of every model.

There is a critical timing element to when you announce the new model i.e. don't announce well ahead of time and make sure your demand cycle is in a high demand low availability point when you do anounce.

For example this would be a perfect time to anounce a new RPi Zero as NONE of the distributors have any stock. Zilch like nothing embarassing shortage. ;)
It's a pretty good time to announce a new version of the A+, as well. Things like memory bump, default clock bump, or releasing the Pi3A (but I don't think that is close enough right now).

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Re: Why is the Osborne effect wrong?

Mon Mar 21, 2016 1:38 am

I thought the RPi3-based Pi A model was all but official, since Eben Upton's talked about how they were going to eventually release it.

Or maybe I misremember.

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Re: Why is the Osborne effect wrong?

Mon Mar 21, 2016 1:55 am

binaryhermit wrote:I thought the RPi3-based Pi A model was all but official, since Eben Upton's talked about how they were going to eventually release it.

Or maybe I misremember.
That's what Eben said, some time this year. Remember that last year, about this time, he said they planned to release a Pi2A in the "4th quarter." Didn't happen. There was also supposed to be a CM2 last year. That didn't happen either. The problem was that the sales of the Pi2B stayed so high, there weren't parts or capacity to make Pi2A or CM2 boards. (And, if it comes to that, the original Model A--the one that "failed"--was delayed a long time for the same reasons.) So....right now they're making Pi3Bs as fast as possible to handle demand. it is "expected" that demand will slack off in a few weeks. But will that happen?

I have this uncomfortable feeling that Sony needs to seriously consider adding manufacturing capacity for Pis because no one really knows what the full demand actually is....and it seems to keep growing to exceed manufacturing capacity.

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Re: Why is the Osborne effect wrong?

Mon Mar 21, 2016 2:59 am

W. H. Heydt wrote: Sony needs to seriously consider adding manufacturing capacity for Pis because no one really knows what the full demand actually is....and it seems to keep growing to exceed manufacturing capacity.
There seems to be a lot of demand and not just for the pi, SBCs in general are becoming quite popular. Assuming you've got a board to sell that is competitive in capabilities and price.

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Re: Why is the Osborne effect wrong?

Mon Mar 21, 2016 4:34 am

stderr wrote:
W. H. Heydt wrote: Sony needs to seriously consider adding manufacturing capacity for Pis because no one really knows what the full demand actually is....and it seems to keep growing to exceed manufacturing capacity.
There seems to be a lot of demand and not just for the pi, SBCs in general are becoming quite popular. Assuming you've got a board to sell that is competitive in capabilities and price.
Other than the Pi, I think most are being made in China and possibly a few in Korea. (Hardkernel is, I believe, a Korean company...do they do their manufacturing "at home" or do they farm it out to the Chinese as well?)

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Re: Why is the Osborne effect wrong?

Mon Mar 21, 2016 6:51 am

Judging from what the back of my Odroid C1 says, they do at least some of the manufacturing in Korea (see attached photo).
And, from what I understand, the Osborne effect didn't actually kill Osborne Computers. Though I can understand not pre-announcing products.

Anyway, https://en.wikipedia.org/wiki/Osborne_e ... borne_Myth
Attachments
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Re: Why is the Osborne effect wrong?

Mon Mar 21, 2016 7:02 am

binaryhermit wrote:Judging from what the back of my Odroid C1 says, they do at least some of the manufacturing in Korea (see attached photo).
I thought that might be the case.
And, from what I understand, the Osborne effect didn't actually kill Osborne Computers. Though I can understand not pre-announcing products.

Anyway, https://en.wikipedia.org/wiki/Osborne_e ... borne_Myth
Well... while it wasn't what killed Osbourne, it did contribute. The article does go on to describe the effect hitting other companies. So, really, now that it is known that the Pi3A is planned "soon", what is the remaining market for the A+? How much are companies going to risk on inventory they may have trouble getting rid of?.

Personally, I've been expecting a modest upgrade to the A+ for most of the past year. It may not happen, but having a fairly low power board *with* the camera connector fits very nicely between the Zero and the B+, but it really ought to have 512MB RAM.

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Re: Why is the Osborne effect wrong?

Mon Mar 21, 2016 8:45 am

There also the other effect, I call it the Elop effect. That killed Nokia. Another case of an announcement that kills either a product or even an entire company.

And never forget Gerald Ratner.
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Re: Why is the Osborne effect wrong?

Mon Mar 21, 2016 10:53 am

jamesh wrote:There also the other effect, I call it the Elop effect. That killed Nokia. Another case of an announcement that kills either a product or even an entire company.
Don't we know it :(
He also contributed to at least one other company having issues by that announcement by cancelling projects.
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Re: Why is the Osborne effect wrong?

Mon Mar 21, 2016 12:04 pm

mung,

The "Osborne Effect" is neither right nor wrong. It's just a theory. Not even that really as there is probably no way to prove it one way or the other. We can't run another "Osborne" in a different parallel universe where they decide not to pre-announce their new product.

Save to say that some people believe the Osborne Effect is real. For example around here once could buy a Pi 2 at half price during the run up to the Pi 3 launch. They obviously wanted to get the their stock shifted in case they got stuck with it.

No doubt the downfall of Osborne was due to more than the so called "Osborne Effect".

What are your actually suggesting with your post? That the Pi Foundation should pre-announce new products? If so how long in advance, a week, a month, a year?

Why do you want the Pi Foundation to pre-announce? Is it because you would have held off buy a Pi or two until you could get a Pi 3, if only you had known?

If it were your business and your money on the line would you be so confident in ignoring any possible Osborne Effect?

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Re: Why is the Osborne effect wrong?

Mon Mar 21, 2016 12:42 pm

mung wrote:in the rpi case are so cheap why wait if the saving is so small the wait time value is a far greater loss of opportunity cost.
I would agree with that. The Osborne was a $1,800 computer and that was a lot of money to spend at the time; $7,000 at today's prices. It made for a compelling reason to wait for the newer and better model which had been announced. For a $35 product; not so much.

Few would want to spend $14,000 and end up with two Osborne's, an old and new, where $70 and ending up with an old and new Pi isn't that bad, and I suspect most wouldn't even see that as a bad thing.

Selling an old Osborne at $7,000 would be a hard ask. Selling an old Pi is far easier. Even land-filling and losing $35 wouldn't be the end of the world.

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Re: Why is the Osborne effect wrong?

Mon Mar 21, 2016 1:08 pm

jamesh wrote:And never forget Gerald Ratner.
Ratner was ultimately crucified by the media in a campaign of demonisation and determination to take him down, whipping-up hatred to achieve that. Ratner made a statement which was seized upon and the press set about ruining him and his business in pursuit of their own agendas.

His customers knew exactly what they were buying and never had a problem with it being 'crap piled high and sold cheap'. They understood that, knew it, accepted it, wanted it, were happy with that. They got exactly what they wanted at the price they wanted to pay. Ratner understood his market and served it well. Just like Pound stores today.

It was a tragedy that a successful business, serving its customers how they wanted to be served, should have been taken down in such a way. Ratner's customers were the ones who really lost out as a result.

So, no, never forget Gerald Ratner. Nor the power of the press.

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Re: Why is the Osborne effect wrong?

Mon Mar 21, 2016 2:28 pm

I too was around for Osbourne and all the other "IBM PC compatible" companies that fell by the wayside.

I do not believe in this "Osbourne effect" simply because it was not, IMHO, the overriding reason for the company's failure.

The fact is the RPi2 and RPi3 are not the same machine, they are closer than the RPI1 and RPI2 but again they are sufficently different given what people buy RPis for that both are still selling, this from watching stock levels in resellers.

I think the main problem is that this organisation think they are only selling to one type of customer and that just is not true.

I would say that if you do not understand your market then it is all to easy to loose it and that any investment in secrecy is a bad idea when your market is based upon faith.

Lots of people I talk to are worried that the RPi is changing away from what they invested in and given that there are so many alternatives they are increasingly looking elsewhere.

I personally would say that the organisation's exclusion of their customers was a bad idea, especially once it became clear that it was ineffective.

Trust and faith in the organisation were, I would say, major selling points and the cost of excluding their customers has yet to be reckoned

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Re: Why is the Osborne effect wrong?

Mon Mar 21, 2016 3:02 pm

LeMoog wrote:I would say that if you do not understand your market then it is all to easy to loose it and that any investment in secrecy is a bad idea when your market is based upon faith.
Is the market based upon faith or is it built upon having a good product at a cheap price ?

I am not convinced secrecy before launch is entirely a bad idea, though I don't see citing the Osborne effect as the necessary reason for such secrecy as credible.

Because of the low cost of the Pi the surprise arrival of a new model Pi is to me no more annoying than finding the packet of biscuits bought yesterday are now half price or two for the price of one. I'll be annoyed with the bad luck of my timing but I know that I haven't really suffered through that.

I would say a greater risk to Pi sales is the "Version 0.1" effect, where people come not to trust the first release of a new product. I know people who have put off buying Pi 3B's until there is better understanding of the heat issues some are having.

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Re: Why is the Osborne effect wrong?

Mon Mar 21, 2016 3:16 pm

The moral of the story is: don't announce the successor to your sole source of income while you're still paying off the development costs. This isn't happening with the Raspberry Pi Foundation.

The reverse of the Osborne effect was seen in the 1960s to early 1970s, when IBM effectively owned the market. The script would go something like this:

Small Company: We announce new technology!
Customers: OooOooh! But we only buy IBM … Hey Big Blue, when will you have new technology?
IBM: WE WILL HAVE NEW TECHNOLOGY IN SIX MONTHS
Customers: We'll wait, then.
[three months pass]
Small Company: Halp! We're running out of money!
IBM: OH MY! HOW CAN WE HELP?
[three further months pass, in which IBM buys Small Company]
IBM: WE ANNOUNCE NEW TECHNOLOGY!
Customers: OooOooh! Shut up and take our money!

Sometimes, it just makes sense to delay announcements and releases. It blew my mind when I first heard that Ultimate delayed release of the ground-breaking 3D isometric game Knight Lore until the simpler game Sabre Wulf had been a commercial success. That way, they ended up with two blockbuster releases. Pretty smart.
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Re: Why is the Osborne effect wrong?

Mon Mar 21, 2016 3:35 pm

The one I am chasing is the RPi Zero a pre-anouncement of a pending forcast of stock would be nice.

A new model is not an issue when there are no bare board old models to get.

The only stock the suppliers will be stuck with are the ones they are trying to bundle with over priced un-needed extras. ;)
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Re: Why is the Osborne effect wrong?

Mon Mar 21, 2016 3:45 pm

Jim JKla wrote:The one I am chasing is the RPi Zero a pre-anouncement of a pending forcast of stock would be nice.

A new model is not an issue when there are no bare board old models to get.

The only stock the suppliers will be stuck with are the ones they are trying to bundle with over priced un-needed extras. ;)
As above, it takes awhile for the SoC order to get through the fab. Zero's are unexpectedly successful, and required a big ramp of 2835's, and, when you are about to launch a completely new model like the Pi3, there is limited capacity, both in the fab, and on the Pi production line.

Once initial demand for Pi3 goes down, and the SoC's make it through manufacture, the Zero's will start to appear more often.
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Re: Why is the Osborne effect wrong?

Mon Mar 21, 2016 4:20 pm

I get that.

All I am after is a gustimate based on knowledge.

As it happens the only group with propper knowledge is the Foundation. :(
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Re: Why is the Osborne effect wrong?

Mon Mar 21, 2016 5:59 pm

jamesh wrote:
Jim JKla wrote:The one I am chasing is the RPi Zero a pre-anouncement of a pending forcast of stock would be nice.

A new model is not an issue when there are no bare board old models to get.

The only stock the suppliers will be stuck with are the ones they are trying to bundle with over priced un-needed extras. ;)
As above, it takes awhile for the SoC order to get through the fab. Zero's are unexpectedly successful, and required a big ramp of 2835's, and, when you are about to launch a completely new model like the Pi3, there is limited capacity, both in the fab, and on the Pi production line.

Once initial demand for Pi3 goes down, and the SoC's make it through manufacture, the Zero's will start to appear more often.
While I hear that, and understand it, and largely agree with it, the history of Pi sales argues that that the best laid plans "gang aft algey". There will be factory capacity to make make more Pi Zeros (over and above how ever many are now competing with Pi A+ boards for the 2835 SoCs) once the demand for Pi3B boards subsides. But will it? The CM3 is probably also waiting for enough 2837 SoCs as well as production capacity. Beyond that, the Pi3A will need--you guessed it--2837 SoCs and production capacity. So there are two bottlenecks. Making enough SoCs, while time consuming (i.e. lead time issue), probably isn't a long term problem. Plant capacity at Pencoed may be for at least all of this year.

Still...hope on, hope ever.

Edit to add... With sole exception of the Model A (and 100K sales of an SBC is nothing to sneeze at), *all* Pis sell at unexpectedly high rates. (The Pi Zero suffers from the extra impediment that it isn't being ordered by a billion pound company.)

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Re: Why is the Osborne effect wrong?

Mon Mar 21, 2016 6:12 pm

LeMoog,
...the main problem is that this organisation think they are only selling to one type of customer...
Well, yeah. The Pi Foundation has an educational mission. The Pi Foundation is a charity. They have by definition "one type of customer".
Trust and faith in the organisation were [are], I would say, major selling points..
Exactly. Nailed it one. I trust the Pi Foundation. I trust Eben and Liz, and Sony, and everyone else involved to do a good job for a long time to come.

Thanks everybody, by the way.

Aside: If it were me developing a new board and the production line tuning to build it, I would not announce anything until I knew it was ready to roll. So many things can go wrong.

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Re: Why is the Osborne effect wrong?

Mon Mar 21, 2016 6:24 pm

My assessment is that the foundation only sees one market, that of the electronic hobbyist and education for the same. There are other uses for the RPi and many have purchased them for reasons other than the market envisioned by the foundation.

That the organisation has made efforts to block development in other areas is evident from the android section of this forum, this attempt to limit the use of a product after sale can have major consequences. Especially if your market is not predicable because you do not understand it.

Irrespective of what the foundation wants, people have purchased the RPi for reasons other than those envisioned by the seller.

Those misunderstood sales have funded the continued growth and existence of the foundation, this is a good thing but on the other hand without understanding your market you cannot predict how it will react and that is why the Zero is more popular than expected and why the RPi3 is not a direct replacement for the RPi2 and why running a flawed stealth mode on the RPi3 release was such a bad idea.

If, as seems clear, the foundation doesn't want people buying a RPi for any reason than those they approve then they should continue as they are and they will discover before too long that the only market they have is the one they want.

A limited market that will quickly become saturated and eventually move onto more open minded systems that have the cash, the foundation didn't want, to continue the development of their platforms.

The fact is there is SOC competition and like the post above about the little company and IBM, the only reason IBM won out was because of faith in IBM and no reason to trust an unknown. When the "unknown" is the only one offering what is wanted they do not stay unknown for long, they instead become the standard and quickly move away from their beginnings to make their old competitors obsolete.

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Re: Why is the Osborne effect wrong?

Mon Mar 21, 2016 6:35 pm

LeMoog wrote:If, as seems clear, the foundation doesn't want people buying a RPi for any reason than those they approve then they should continue as they are and they will discover before too long that the only market they have is the one they want.
I don't know how you can come to the conclusion that the Foundation only want people buying Pi's for things they approve of. And, even if they do end up only serving the educational market they created themselves to serve, I don't see that as much of a problem.

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