Friday, August 31. 2012
I was on holiday at the time so I'm a bit late onto it, but this piece in The Economist chimes a lot with my experience:
Firstly, "market research" for new technology startups is nothing like what usually works for more tradtional start up businesses:
Anyone who has tried a hand at starting a high-tech business—seeking to turn a clever research idea into something customers will pay good money for—quickly learns that everything taught in business school is next to useless. The mistake is to think of start-ups as just smaller versions of established businesses. They are nothing of the sort.
Our experience is its far more about modelling scenarios, what-ifs, probabilities etc and laying down "marker stones" to know where you are, so you can tell which scenarios are probably playing out. For this reason I was very interested that Silicon Valley Entrepreneur Steve Blank has come to similar conclusions, but with a lot more data and experience, and has set up his own accelerator - i-Corps - to do this (I know, I know re Accelerators* - but read on, there is some interesting stuff here):
What distinguishes an I-Corps start-up from a typical university spin-out is the way it forces researchers to stop fixating on the technology they have developed. New ventures, they are taught, are all about finding customers, what distribution channels to adopt, how to price the product, who to partner with, and more. From day one, the mantra is “get out of the lab”. Participating academics have to make countless cold calls to potential customers—something few research scientists and engineers have ever done in their professional lives and most initially find awkward.
Stopping Technology Fixation is IMO one of the absolutely critical issues for Technology startups, the problem is its virtually impossible for techies who are in love with their technology to do - so the second bit, on treating the startup dispassionately as a live project, seems like a very clever way of forcing that dissociation. Anyone who has studied innovation and startups will know that which technology/company/method succeeds is highly unpredictable in the initial stages, and all sorts of factors come into play - exactly because all sorts of factors are untested.
But I was also impressed with the following, because in my experience turning around tech companies, these are usually the most critical issues - making sales and making profits:
There are other methodologies than those suggested here of course, but in my experience the "80/20" impact is the act of focussing on the business model (how you will make money) and the customer model (who will buy). Its damned hard to do, especially for the techies who are struggling with making the new wotsits work, but absolutely critical. You don't have to have the "right" business model initially (just look at Google) but you have to know what a "wrong" one looks like, and what the envelope of success looks like.
Also, they emphasise that there will be significant twists and turns in the business (or "pivots", as the fashion is to call it these days), its a given not a failure
The I-Corps curriculum emphasises that failures which force participants to pivot and change their assumptions are an integral part of the learning process. That can mean rethinking the market, changing the price, even altering the product itself. During the eight-week programme, I-Corps teams repaint their business-model canvases literally dozens of times. The average team confronts 100 or more potential customers while honing its business plan and tweaking its product.
Re: pivoting, I increasingly think of a startup as a bit like a new genetic algorithm, so it has to go through a number of self winnowing cycles before it can navigate the ecosystem its launched into. Another analogy may be a new species that has emerged blinking onto the landscape and has to adapt to its niche.
Its too early to say whether this particular program will work, after all execution is 9/10 ths of the lore, but I think the proposed areas of focus are in the right direction. The one thing this piece does not say, of course, is that for any startup taking money from an accellerator, incubator, seed investors etc - Cave Contract! Get a lawyer to look it over.
*Yes, in the Bubbletime we are also sceptical of any New New Accelerator story, but this piece has some interesting points.
Thursday, August 23. 2012
WSJ notes that many companies are still using the Freemium model, but its not necessarily successful:
If only they'd read us in 2008, when we explained why FreeConomics overall would fail. (I can tell you that presenting ^that^ paper in 2008 at the O'Reilly Berlin conference was "interesting" as Free! was at the time the latest prayer to a cash-strapped bootstrapping startups' needs. In 2012, maybe not so much controversy as to what does and doesn't work - as the article notes:.
Start-ups are attracted to the freemium model because it is "deceptively simple"—lure users with free services until they're hooked, then charge for extras, said Vineet Kumar, a professor at Harvard Business School, who is currently working on a study of the model.
Its that low takeup rate (in 2008 people were casting about numbers like 10% takeup, we thought 5% would be damned lucky) and lack of business customer interest that caps the Freemium strategy in any given niche, and if its a popular niche there is always the next entrant with a bit more VC funding runway left who will still be free when you are trying to charge. And as we predicted, the most likely way Freemium would actually work was via offset funding (Ads, Virtual Goods, Buy-through goods) - ie other revenue streams than the product itself. Successful Apps (which have the best Freemium profile - low setup cost, low marginal distribution cost, minimal support cost) just about all use offset funding of one stripe or another.
Anyway, here is a summary of the knowledge today:
In defence of Ad based Freeconomic advocates however, we were wrong (so far, anyway) when we foresaw that the biggest risk was in using Ad funding to fund the Freemium business - we pointed out in 2008, if you ain't paying for the free lunch, then you are the free lunch (or as it was better put later, users are not the customer). Needing to feed the Ad Monster forces the company into ever more risky data mining activities, and playing ever more loose with customer privacy. We thought that more companies would have had this aspect blow up in their faces by now, but we have been proved naive about how little reward people require in exchange for putting large amounts of their personal data online.
Tuesday, August 21. 2012
I saw this advertised today on the Twitter, and went along to the page linked (here), abuzz with hope - so what did I learn?
Tongue in cheek I know, and to be fair, there are some snippets of useful stuff there - but I don't think the above summary is far wide of the mark!
Monday, August 20. 2012
Today the CEO of Yammer argues thus (after having sold to Microsoft for $1.2bn, oddly enough). In essence he argues that its hard to:
(1) Find an idea that the Big Guys haven't thought of
As you'd expect, some prominent SV VCs take issues with this, Marc Andreesen arguing that there is an infinite amount of creative talent out there and the big companies are ponderous and often not well run (this being the same Andreessen you recall who watched his own Netscape get crushed by a fairly inept Microsoft's Explorerer in the mid-nineties, of course....but then he made good on Skype. Maybe one forgets....)
We have wondered aloud about the End Of Silicon Valley in in the past, but have always noted its ability to resurrect itself. But today, as well as the above, three other different articles, on 3 different aspects of this issue, seem to be painting an emerging picture:
1. Firstly, the Old School VC's aren't making any money anymore - Business Insider
Last year, in an attempt to cash in on the late-stage "private IPO" investing frenzy, Kleiner startled the Valley by launching a $1 billion late-stage "Digital Growth Fund." Many saw this fund as Kleiner's attempt to play catch-up and associate the firm's name with hot companies it had missed. Some also saw the fund as a sign that Kleiner had lost not just its edge but its valuation discipline and predicted that the firm might get clobbered on some of its late-stage investments.
Twitter is unlikely to make up the numbers. Many of the older VC firms took big hits in the DotCom bust (I recall seeing a McKinsey report that said no investment after 1997 made money). KP has been widely felt to be off the pace for a few years, and this was seen by many observers as a last ditch attempt to get back in the game.
2. Secondly, even the New Boys are backing out of their new investments- WSJ
Some of the early backers of Groupon Inc, including Silicon Valley veteran Marc Andreessen, are heading for the exits, joining investors who have lost faith in companies that had been expected to drive a new Internet boom.
At least they got in earlier, but its not a viable model long term when the IPO money knows its going into an almost pump 'n dump scheme, so no surprises then that.....
3. Thirdly, the huge Californian Public Service pension fund (CalPERS), a stalwart VC funder over the decades, is considering pulling out of funding VCs - PE Hub.
Granted they only put about 6% of their c $240bn fund into VC, but that is a very big number for the VC community
Of course, if CalPers had just shorted the stocks of the companies their VC investments were funding, like the banks did, they would have made out like bandits - WSJ again:
Profits made by banks underwriting Facebook Inc.'s initial public offering as the stock fell were distributed this past week from a pool of about $100 million, say people with knowledge of the deal.
Thats on top of the c $175m they were paid to do the IPO. Easy when you know how.....but not good news for the whole VC ecosystem. Private profits, public (offering) debts....
Wednesday, August 15. 2012
Both the FT and the Grauniad have opined, dewy eyed, on the stupendous lessons for future successful management from the Olympics. The Grauniad's effort is entitles "Olympics: the key to our success can rebuild Britain's economy" and has its core thesis is that success is a mix of infrastructure investment and private elan, that of course the Grauniad's oppoenents (the Conservatives) don't understand this:
Now the Grauniad is fairly left of UK centre, but the FT is ver "small c" (and probably large) conservative to a T (or "C") but it too thinks amazing lessons can be learned (I'm not allowed to cut and paste what they say, as the T&C's are "Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email firstname.lastname@example.org to buy additional rights").
Anyway, they too waxed lyrical on the Legacy, and the benefits of running with large numbers of (lowly paid) volunteers, and that Vancouver got improved transportation, more affordable housing, and top notch athletic facilities. But, we got Zil lanes, people thrown out of their flats by landlords, and the unedifying spectacle of 2 football clubs scrapping over what bargain basement price the "top notch athletic facilities" would be flogged off for afterwards.
Now don't get me wrong - the London Olympics were a superb example of a very complex project, delivered to a very high quality, brought in on time. And the Team GB athletes performed superbly, and the Volunteer Army were superb, and won everyone's hearts. But it was certainly not on budget (even with all those near-free Volunteers) - that went up from c £4bn to c £12bn - so you'd kind of expect the delivery quality would be Rolls Royce class! And, what we also got was gold medal quality finessing of commercial greed, and there are some very searching questions that need to be asked about the ticketing, the pricing, the giveaways to commercial sponsors, the pursuit of perfectly innocent people on trademark etc infringement, and changes made to British laws to make this happen. However, they probably won't ever happen because the Olympics comes around once every 2 generations or so, so all lessons will be forgotten - and Britain had a very good Games, so it will likely all be brushed under the carpet in the carefully cultivated ensuing euphoria.
So, for the truly ambitious manager of Machiavellian mind on the make, we leave this post to posterity to ensure that the real Olympic lessons of success are not lost - and without further ado, here they are:
THE 10 REAL MANAGEMENT LESSONS FROM THE OLYMPIC GAMES
Here endeth the Lesson. See you in Rio
(Update: Matt Schofield points out Lesson 11: Win way more golds than expected. Success has a thousand fathers....)
Tuesday, August 14. 2012
Groupon Share Price down 27% today (courtesy Google Finance)
Yes, we told you it would crash, in June 2011.
I twt'd this on Friday:
There is nothing wrong intrinsically with an online coupon business, there was something seriously wrong with one at that starting valuation.
But the reason we are not writing this blog from our own Caribbean island is that its a lot harder to predict exactly When.
Yahoo (blue) and New York Times (yellow) stock prices vs NASDAQ (brown) from 16 July (Courtesy Google Finance)
When Marissa Mayer announced she was joining Yahoo on July 16th, Twitter was largely positive in its praise of her, but Yahoo's stock went down slightly - see graph above (on an announcement of flat results, on a day when the NASDAQ also went down slightly, so the Marissa Effect was at best neutral, maybe slightly negative)
Today, when Mark Thompson announced he was leaving the BBC to joing the New York Times Twitter was more sceptical ("UK Publicly Funded TV/Radio Broadcaster to be responsible for US Commercial Newspaper revenue" was typical) but the stock market price went up a bit.
In recent months Twitter has been hailed as a predictor of a company's future success, even it's stock price:
In the case of YHOO (Twitter +ve, Stock market slight fall) and NYT (Twitter sceptical, stock market slight rise) Twitter and the market are at odds. Be interesting to see where things are in a year or so's time. As the old adage goes, you can't buck the market......
Monday, August 13. 2012
BBC on Webinos (Webinos is open source Web Operating System technology designed to run on PCs and Android-operated mobile handsets - see Webinos.org)
More than 5,400 developers have downloaded a new open-source operating system designed to enable digital devices to communicate with each other. They are now looking at ways in which Webinos could be used to connect a range of devices such as mobile phones, car stereos, heart monitors and TVs. Webinos is a 15m euro ($18.4m; £11.8m) project supported by more than 30 organisations, including the EU.
Just as the Internet needed open standards to develop to its fullest potential, the Internet of Things (IOT) does too. Right now all the major players are attempting to build walled garden solutions that won't interoperate. Its the same old same old. The other same old lesson is that it always limits innovatio (and quite often an openly available system breaks the walls0
I don't know if this will be the Mosaic of the IOT, but let us hope something will.....
Friday, August 10. 2012
Creating a Trusted Information Currency on the Web (via Joyoftech)
A few days ago I wrote about "Greshams Law of Information" where, given equal transaction values (ie Google links) then bad information drives out good. This is demonstrable on Google these days as it gets (i) gamed and (ii) all sorts of paid for or belief based sites garner far more links than the boring truth with their superior resources (and now, maybe (iii) allowing interested parties to pay for link manipulation).
I defined 2 types of "crap info" on the web:
Now, in economic theory, "Thiers law" enters the cycle later on into any new ecosystem, correcting this imbalance for crap currency as one currency becomes the "go to" trusted currency:
For money, the argument is that, in the absence of legal tender laws, Gresham's Law works in reverse. If given the choice of what money to accept, people will transact with money they believe to be of highest long-term value. If required to accept all money, good and bad, they will tend to keep the money of greater perceived value in their possession, and pass on the bad money to someone else. In short, in the absence of legal tender laws, the seller will not accept anything but money of certain value (good money)
In that previous discussion I could see how Thiers law for Information will work for avoiding Ad-crap (my Case 1 above), mainly via social nmediation (recommendation sites for example) but I didn't work out how the Truth would Out against Belief Based Dis-information (My Case 2). Except for a small bunch of people who would pay a premium for the facts, I could not see a viable dynamic that woulld reverse Gresham's Law as the wall of self-interested money and time promoting crap is far, far greater than that promoting truth.
I did, however, forget about looking more carefuly at Wikipedia as a possible solution, but meeting Jimmy Wales last week got me thinking about it. In essence, the only resource as freely available and as dedicated to Truth that can counter the vested interests of crap-spreaders is a very large voluntary effort of crowd-sourcing, that creates a "trusted currency" of truth - of which at the moment, Wikipedia is the best example (Though I did like the advice to Marrissa Meyer given in joyoftech - see comic strip at top).
Which makes it all the more imporatnt to ensure it stays that way, as the vested interests are way ahead of me and have have already sussed that it is the Trusted Currency of the web, and know their best bet is to subvert it
Thursday, August 9. 2012
An interesting argument that scientific innovation is probably linear, and certainly not exponential - Cogntive Social Web:
The resources that we devote to science have been exploding throughout history. The world population of scientists has been doubling roughly every 50 years from 1500 to 1900 , and has kept an exponential rate throughout the 20th century also, by what seems to be a factor of 10 every 50 years  (it is however unclear whether that growth is still being sustained now , and even if still exponential the rate has evidently gotten slower). Likewise the number of papers and patents has followed exponential growth during the past century, unsurprisingly since average paper count per scientist is unlikely to change significantly.
The author also found (as we did when we looked at it) that it waxes - and wanes
And yet despite all this, if you look at the actual understanding of the world that we have achieved, if you look at real impact rather mere volume, the general impression you get is that scientific progress has really been linear. We didn’t “get” physics 50 times better in 1990 compared to 1940. The 1940-1990 progress of physics might even have been slightly less significant than the 1890-1940 one, actually. is
The question is why is this happening. .... view is its all about the peanut butter, the increasing friction in any system as it grows:
A widely-noticed empirical fact about science is that within a given field, making an impact is getting exponentially more difficult over time. Just look: the big discoveries in quantum physics had all been reaped by 1930. Most of what could be said in Newtonian physics had been said by Newton himself. Information Theory researchers will never surpass in impact the single 1948 paper that founded their field, no matter how long and fruitful their career. The list could go on.
In essence, the argument is that the first people into a new field grab all the low hanging fruit, ie the good old Pareto Principle is at work. So, as exponentially more people come in it gets exponentially harder to find, leading to a near-linear advance going forward.
So what about the rate of increase of New Fields? The author talks about these as "Paradigm Shifts" that open up the new field:
What interested me is that he built mathematical models of both the rate of new innovations in a field (as you'd expect, it yielded a power law of decreasing rate of returns), and of paradignm shifts. The Paradigm Shift was what really interested me (see graph at top) as it described exacly what my research showed, ie we advance by pushes forward, then pauses. I usually describe it as layers of S curves (S curves are the running totals of power law curves), so the linear model is interesting.
Anyway, for all the ambitious New Scientists and Innovators among you....
Caveat - as the author writes, "this is not a paper and I don’t have time for this. Take my model for what it’s worth: as something you’ve read on a random blog. If you’ve got a comment, or want to prove me wrong, be sure to post here or send me an email at email@example.com!"
But often a model like this is worth a million words.
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