(Via Noise Between Stations) A very interesting analysis of how value is created and captured in the iPod supply chain. They take a 30GB 5th Generation iPod ($300 price tag when the article was written), and take it apart. Then, they trace the value created by each component and/or assembly. As predicted, Apple gets most of the value ($80), but what is surprinsing is the authors’ estimate that Chinese assemblers get only $4!

Apart from the apparent simplification (the authors considered the iPod as a single gadget, rather than as an iPod+iTunes ecosystem), the message is clear: innovative concepts, executed right create value. Guess which of the two is harder!

In his blog, my brother discussed Cialdini’s research on influencing behaviour through peer pressure. In particular, he focused on an experiment were a household’s energy usage was compared to that of the neighborhood’s.

What is even more interesting is Goldstein’s research:

And in research I conducted with Wesley Schultz and several colleagues, California households that were informed they were using more electricity than their neighbors reduced their consumption, but those informed that they were using less increased their consumption by 8.6% (emphasis mine). (Goldstein in HBR January 2009)

So, peer pressure leads to improvement or mediocracy? In factory settings, operators who receive bonuses according to their performance, find the “sweet spot” of effort/reward and don’t move an inch past it. Even when the performance measures change, people are quick to adapt (we thrive in feedback loops after all). Visualization of performance is important, but maybe it could focus on piecemeal but continuous improvement – like sports and high scores in video games.