Category Archives: business

I’m published by Harvard Business! “Are you the bottleneck in your organization?”

Hi all!  It took a while but (a small sliver) of my Fulbright research on entrepreneurial decision will see the light of day courtesy of Harvard Business Online.  Here’s a snipCelebration baby!pet:

“You may be the reason your company isn’t growing. You are micromanaging — and it’s stifling the organization you are trying to build.  Our research tells us that the very management style that enables a founder to get a company off the ground — a zealous focus on tactical execution — often derails growth down the line. Lost in the heat of battle, many entrepreneurs fail to adapt their management style to the evolving needs of their growing organizations…”

Check out the article over at HBR to see what the 100+ seasoned venture capitalists and serial entrepreneurs we interviewed said about how to balance growth and control.  Or check it out because you want to know what the heck I was doing in Italy for nearly a year!  Either way, let me know what you think and thanks for clicking!

Be well!

Brett

PS.  If anyone is interested in seeing the rest of my research, I would be happy to send it to them!

Build your products like you make your dinner: Mouth-watering, Easy to Consume, and Tasty

Nick from shearinglayers made a great comment on Monday’s post, so I thought I would expand upon his comparison of how we process food to how we interact with products.  Below is a simple, and by no means comprehensive,  framework that may can shed some light on why certain products are more easily digested than others.

Consumers choose products like they choose a meal. They ask themselves three main questions:

1) How does it look? (Mouth-watering = Clear and appealing value proposition)

-In both food and products, presentation counts. However delicious a food may be, most people will never try it looks unfamiliar and they can’t conceive it’s taste beforehand. Similarly, if your product’s value proposition cannot be communicated without a trial, many people will never give it a chance.

2) How easy is it to eat? (Easy to consume = Simple to use)

-Blue fin crabs may be delicious but you’ll never catch me picking them myself- it’s just too much of a hassle. Similarly, many products can create the desired effect, but require too much discipline to use.

3) How does it taste/how good is it for you? (Tasty = Valued)

-This is obvious for food and products. If people don’t like what they deliver, they won’t use them.

So how would certain certain foods/products stack up?  Let’s see.

FOODS

Lobster- 1: like a sea insect, 2: a pain in the ass, 3: delicious

Wedding cake– 1: beautiful, 2: easy, 3: never as good as it looks

Strawberries– 1: delicious, 2: couldn’t be simpler, 3: god’s candy

PRODUCTS

Twitter– 1: confusing, 2: easy as sms, 3: depends how you use it

Most GTD software– 1: sounds like a good idea, 2: need to change work flow, 3: at the end of the day, disciple, not GTD software, determines what gets done

Pandora– 1: “Internet radio,” I get that, 2: turn it on and don’t look back, 3: the only thing that makes sitting in front of a computer for 14 hours a day bearable

This analysis predicts that online radio is may be more “adoptable” than microblogging.   Thoughts?

Nick from shearingglayers.com made a great comment on Monday’s post. Below I expand upon his analogy of how we process food to how we interact with products.

Choosing a product is like choosing a meal. Three main questions come to mind:

  1. How does it look? (Clear and appealing value proposition)

-In both food and products, presentation counts. However delicious a food may be, most people will never try it looks unfamiliar and they can’t conceive it’s taste beforehand. Similarly, if your product’s value proposition cannot be communicated without a trial, many people will never give it a chance.

  1. How easy is it to eat? (Ease of integration/Simplicity of use)

-Foods like Blue Fin crabs may be delicious but you’ll never catch me picking them myself- it’s just too much of a hassle. Similarly, many products can create the desired effect, but require too much discipline to ever be used.

  1. How does it taste/how good is it for you? (Value delivered)

-This is obvious for food and products. If people don’t like what they deliver, they won’t use them.

How do certain foods/products stack up?

Foods

Lobster- 1: like a sea insect, 2: a pain in the ass, 3: delicious

Wedding cake- 1: beautiful, 2: easy, 3: never as good as it looks

Strawberries- 1: delicious, 2: couldn’t be simpler, 3: god’s candy

Products

Twitter- 1: confusing, 2: easy as sms, 3: depends how you use it

Most GTD software- 1: sounds like a good idea, 2: need to change work flow, 3: at the end of the day, disciple, not GTD software, determines what gets done

Pandora- 1: Radio on the internet, I get that, 2: turn it on and don’t look back, 3: the only thing that makes sitting in front of a computer for 14 hours a day bearable

Anyone else have any product analogies they’d like to add to the mix?

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Simplicity: The Value of a Clear and Concise Value Proposition

Crossing the Chasm
Image by cambodia4kidsorg via Flickr

Fred Wilson has a great blog post entitled “What drives consumer adoption of new technologies?”  The post is interesting- Fred’s one line articulation of  the special sauce of ten of the most popular consumer products in recent years- but as Fred says himself, the comments are golden.  One great comment by Alexander van Eslas on “first use” sparked by attention in particular. My response is below.

Many of the comments on Fred’s post talk about “simplicity” as a necesssary characteristic for consumer adoption.  I agree, but it is important for entrepreneurs to remember that products must not only be “simple to use,” but also to “simple to understand the value of.”

The point here is the need for a clear value proposition. People are willing to invest a lot of effort into adopting a product something if the perceived value of using that product is high. Chemotherapy is a horrendous experience and doesn’t always work, but given the alternative (death) it’s a no brainer. Alternatively, if the product’s perceived value is low, the users will be considerably less forgiving. I refuse to register, verify an email, and create a profile when all i want to do is play a game of solitaire on the train for five minutes. **The relationship between perceived value and users’ willingness t overlook product shortcomings reminds me of the relationship between price elasticity and wealth.

Clearly and concisely articulating the value proposition is a real problem for many great technology platform companies*, twitter included. It’s not as if people haven’t heard of these platforms! Everyone COULD benefit from joining Facebook or using Twitter but not everyone realizes it.  The most common thing I hear from non-twitter users “why the hell would i do that?” Conversely, the main reason that people try out services such as twitter despite having no idea what they do, is that “everyone else is using it (therefore it must have value).”  The challenge for the entrepreneur is to evince their service’s value before people give up (Retention- See Dave Maclure’s Startup Metrics for Pirates).

This is where Alexander’s concept of “first use” comes up. Alex asks

“Is a user willing to put in the effort to learn about this new technology and incorporate it in his current habits?”

I bet Marketers try a lot harder to “get” Twitter than Accountants because even if they don’t initially understand it, they know it is supposedly of value to people of their ilk.  They are supposed to be using it.  Twitter is getting better at delivering value upfront by suggesting friends and auto-populating new accounts with popular tweeters but it still needs work.

Ultimately, the correlation between the value perceived and one’s willingness to overcome friction to adopt is more about people than products. This is classic Geoff Moore/technology adoption curve. Technologists find the perceive value in technology for technology’s sake. They could care less if a product  is “simple” or “easy to use” or about sharing or whatever as long as the technology it is built on is new or interesting. Early adopters find technology interesting, but only because of technology’s ability to create disruptive change. Early adopters are willing to put up with a lot of frictionand overlook a lot of foibles if they perceive that adoption will deliver huge benefits. The majority just want to keep pace. Skeptics actually perceive negative value to adoption and thus will hold out until non-adoption becomes so painful that it is easier just to capitulate! Different people see different value in different things.

In conclusion, I’ll reiterate: Products must not only be “simple to use,” but also to “simple to understand the value of.”  A clear and concise value proposition should make the list of drivers of consumer adoption.

*People are insensitive to large relative prices increases for goods that are cheap relative to their wealth, but they are very sensitive to small relative price increases on goods that are large purchases relative to their wealth. In English, I am virtually indifferent between a $1 pack of gum and a $1.10 pack of gum (10% price increase), but raising the price of a house from $100K to $110K (also 10% increase) is game changing. To complete the analogy, the amount of friction users are willing to overlook is proportional to the value they perceive. Thus I believe that a user’s initial perceptions are all the more important if the value proposition is marginal or unclear.

**Drop.io is another example of a “great” technology product (simple, sexy, social, useful etc) that risks missing consumer adoption because people don’t fully appreciate all of the things it is capable of. Getdropbox is a less versatile product that may ultimately gain more traction because it is more intuitive.

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Online Community Building: Make affiliations more valuable by making people earn them

LOUISVILLE, KY - MAY 26:  Boy Scouts salute th...
Image by Getty Images via Daylife

What happens if you make people do something to earn their affiliation to an online community?  Clearly there is a trade off of quantity for quality but I wonder if you make up in engagement what you lose in volume. Does anyone have good examples of  where this has been done?

Most online (and offline) groups and affiliations only distinguish people by how much they give, and make no effort at accounting for what people actually do. Unfortunately, all the flag waving and fund raising in the world is useless without the people that actually implement the good works.

Take Causes.org* for example. While Causes.org is provides better accountability than most online affiliations because it measures what users donate and how many other people they recruit, they have no means of recognizing people that actually implement the good works.

It always annoys me when I go to a benefit at, say, the New York Philharmonic, and there is a gigantic list of people that have donated money, but no mention of the people that have donated their time, connections, or reputation to make things happen. Similarly, it has always annoyed me that you can just plaster your Facebook or linked-in profile with hundreds of badges of organizations and associations that you have never once lifted a finger for. Sure spreading the word has value, but I think that associations and badges would become more meaningful if one actually had to do something to acquire them.

Look at the Boy Scouts. Do we give away “fire starter” badges to kids just because they want to fill the empty space on their belt? What about black belts in karate? There is a big difference between a dojo where people earn their stripes and one where people pay for them.

Especially now that most work is digitally distributable, there is no reason that one couldn’t harness the social web to actually get actual work done. I might not have $10 at the moment, but I’d be happy to donate 10 minutes of data entry for a FB badge of a cause I believe in.

I am interested in the community building effect of making people earn their affiliation. Does anyone have good examples of  where this has been done?

*Causes.org is a non-profit Facebook application that enables users to identify and support the “cause” (charity) of their choice. Causes users can do three main things: 1) “join” a cause (place a specific charity’s badge on their profile), 2) “donate” to a cause (directly send money to the specified charity through the app), or 3) “raise” for a cause (recruit their friend’s to join and donate). Causes’ 15mm active monthly users make it the 4th most popular Facebook application and thus an incredible hit.

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Free Business Ideas: Time-based Barter Economy Targeted at Entrepreneurs (Timebanking Revamp)

Clock in Kings Cross railway station
Image via Wikipedia

The other day I stumbled across a social experiment called “time banking,” at timebanks.org. Basically, Time Banking is a community improvement movement that revolves around the principle that every person’s time is worth the same (Yes,  quasi-socialist).  Each community creates a “Time Bank” where community members can make “deposits” by lending their time to others and “withdraws”  by calling upon other community members for help.  It facilitates a barter economy with currency denominated in hourly increments of service to your fellow man.

“For every hour you spend doing something for someone in your community, you earn one Time Dollar. Then you have a Time Dollar to spend on having someone do something for you.”

An example.  A lawyer helps a little old lady clean her yard  for an hour.  He ears a credit.  Then he can turn around and get an hour of guitar lessons from another guy around the corner.  The guitar player could then ask for cooking lessons, perhaps but not necessarily from the little old  lady.

During boom times, when everyone has more business than they can handle (ie. plenty of money but no time), this idea seems silly.  But in the midst of steep recession, when everyone has no money but plenty of free time, the concept might be once again applicable.  A year ago, it might have seemed crazy for a lawyer to swap services hour for hour with a plumber whose market rate is 1/5 his own.   But if the lawyer has nothing else to be doing and no way of generating business at his billable rate, is it so crazy for him to save the $50 needed to fix his sink by spending an hour helping his plumber resolve a legal dispute?

I think the concept of bartering services is particularly applicable to startups, a group that is always short on cash.  In fact, a good bootstrapping entrepreneur will  always barter services, whenever it is pragmatic, to preserve cash.   This happens all the time, albeit informally.

Time Banking started almost 30 years ago and has spread to “22 countries in six continents” according to the official website.  A  quick google search for “time bank your zip code” will almost certainly produce a small community website.  Unfortunately, the success of Time Banking appears to have been limited by the onerous setup costs.  If your community doesn’t  have an existing infrastructure, you are urged to set one up by buying a “Time Banking Start-up Kit for just $49! With the kit, you get a six month membership, access to the coordinator forum, and a 4.5 minute DVD from the founder of time banking!!!”

WTF?!? 

$49 to join a social network and get a DVD of some old dude talking about something he did three decades ago?

It sounds like a con scheme but no, this is actually a rather sizable nonprofit organization operating on a pre-internet infrastructure.

Check it out for yourselves.  Is there anyone out there that would be interested in writing a Facebook application to bring this concept into the 20th century*?  Seems like you could add a lot of value to startups that have complementary skills.

*Yes, they have a page, but I see no reason why the whole infrastructure shouldn’t  be put up on the web.

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The mobile/real time internet will eliminate the distinction between “online” and “offline”

London Bridge (Tower Bridge) : Reflection on t...
Image by Anirudh Koul via Flickr

I’ve been trying to massage this into something coherent for a week now.  I give up, here it is.

The mobile* and real time internet will eliminate the distinction between “offline” and “online”  by enabling consumers (and businesses to leverage data collected online to optimize offline experiences, and vice versa.

Use yelp or city search to pick a restaurant.  Use an online price comparison search to choose a store.  Since it’s inception, the internet has enabled consumers to leverage online silos of information and rec engines to plan their offline behavior.

“Plan” is the key word here.  People had to 1) use the internet to evaluate a course of action then 2) perform the action.  Planning and doing activities were separated by the distance between your event and your computer. “Online” meant “sitting behind your computer in your office or home.”  “Offline” meant everywhere else.  No longer.

Those days are coming to an end.  The internet is becoming ubiquitous, and the way we make decisons “in the field” is going to change.  Information access will be 24/7, location agnostic and that is going to lead to some interesting changes.

For example.  Right now, Yelp doesn’t know what restaurants you frequent unless you write reviews.  Likewise, if you buy a book at the Strand (a local NYC book store), it is not factored into your Amazon book suggestions.  Even if you spend every day at the courts, Zappos doesn’t tell you about the new basket shoes they have in stock if you buy at footlocker.  The same goes for what magazines you read, the store you wander into, and the places you hang out.  Until now, your online service vendors have been ignorant (and unoptimized) for your offline behavior.

Imagine if your Google reader knew what books you thumbed through in barnes and noble.  Or if the Economist.com knew which articles you read in the magazine.  Imagine how much more targeted Yelp’s recs would be if they knew that you frequent falafel stands not Le Cirque.  As the mobile internet makes passive “offline” data capture becomes less costly and more ubiquitous, data collected about previously “offline” behaviors will be factored into your online experience/rec engines.

Once your loccation becomes a commodity piece of data, Zappos will not need a physical presence to acquire customers at the running track.  They can ask you about your new shoes when you log an hour at the basketball court.   Within minutes of arriving in the SoHo Ralph Lauren, Gilt Groupe tell you all about it’s new batch of deals. Thus, the mobile internet will enable companies that primarily transact online to acquire customers “offline” or in the field.

I’ve got a torrent of thoughts about this subject but I’m going to cut myself off.   More to come.  Please let me know if this made sense and where clarification is needed.

*As an amazing article on the mobile industry review says “there is no mobile internet: there is only the internet.”  I completely agree.  I am referring to ubiquitous access to the information on the internet.

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Offline to Online Conversion Fail

Star Trek
Image via Wikipedia

Ever since online advertisers realized that they weren’t getting credit for offline purchases inspired by their online ads ads , there has been much talk about online leads and offline conversion.  Fred Wilson talks about it here.  What I would like to talk about today is the opposite and increasingly more relevant problem: The challenge for online companies to acquire customers offline.

For example, the other day in the theater, a pre-film ad for Star Trek told me to go to http://www.ofcourseidontremember.com. I almost laughed out loud thinking how poor their conversion must be.

Another example.  I was sitting in Union Sq when a rock cello quartet began to play right there on the steps.  They were awesome.  When they finished, they passed out business cards stamped with their next live performance.  I gladly accepted one of their cards.

Two weeks later.  Have I downloaded or even listened to their music yet?  of course not.  Do I know where the card is?  No.  Even if i could find it, I would have to transcribe the information to the section of my notepad where I keep bands I want to research.   Even if my notepad were electronic (ie I own an iphone or blackberry), there is a serious loss of conversion from the content leads written down in the “to research” section of  my notepad to the content that I actually look up and consume.

Think about it.  What about cool stuff you see on TV that you want to research later?  Posters you see on the street?  Cool restaurants that you pass by?  Do you always remember to check that stuff out?  I don’t, but i wish i did.  It doesn’t matter what form the content is in- music, articles, videos- offline content capture is clumsy because the place where you keep your ideas is centralized but the places where you consume content are distributed.

What happens when you find content in the real world or learn about cool online content via an offline conversation with your friends ?  Generally you email yourself an idea or the conversation often ends with “email it to me” or “check out my twitter.”  Sometimes you remember enough specifics to be able to search for whatever you were talking about, but other times you don’t.  If your friend doesn’t remember, then you have to remember email and they have to email you back.  Messanging services like google and twitter often become the bottleneck or purgatory for content waiting to be consumed. The problem is that then your email becomes a “to do” list and we know that isn’t the best idea.

What do you guys think?  Does anyone else think this is a problem?  Does anyone have a good system for keeping track and ensuring consumption of content leads they discover offline (following up on or checking out books, restaurants, music etc)?  I’d love to get some outside perspective on this.

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Network before you need to

Shaking with the right hand while delivering a...
Image via Wikipedia

In addition to a place where people go shortly after losing their jobs, Starbucks is networking central these days. The 11am Tuesday latte, previously dominated by soccer mommies and retired folk, has become prime networking territory for would-be entrepreneurs and employees.  Almost every conversation I inadvertently eavesdrop upon is an elevator pitch or an informational interview.

As I’ve argued earlier, putting yourself out there where you can bump into new opportunities is definitely a recipe for success.  It didn’t take people long to realize that the best way to find a new job is to get out there and meet new people.  It’s been inspiring to see people respond to adversity by meeting strangers for coffee, mining their alumni databases for contacts, or attending professional networking events such as the NY-Tech Meetup or Meet at the Apartment (both are very cool events which I attend whenever I can).   Jobs availability may be at an all time low but my unscientific survey tells me that labour market efficiency is on the rise.

Unfortunately, I have a sneaking suspicion that most people will stop networking as soon as they procure employment. Focused intently on their new jobs, staying connected will take a back seat to immediate tasks.

This is a mistake.  In fact, at today’s Meet at the Apartment event, Allison Hemming, co-founder of The Hired Guns, brought up the point that people should always be networking, whether they are employed or not. Being well networked can not only help you do better in your current position, but it can help you find a new job faster if you happen to get laid off.

Savvy companies increase their marketing spend during hard economic times to gain share.  Marketing during recessions is not only cheap (less competition) but more effective because everyone else is cutting their budgets (less noise).  Similarly, savvy individuals continually connect to relevant people whether or not they have an immediate need to ensure that their voices will be heard above the crowd when it counts. Successful people make meeting new and relevant people part of their routine.

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How we benefit from I-Bankers and Hedgefunds (Capital Markets Explained)

New York Stock Exchange, December 2007
Image via Wikipedia

Over lunch, my buddy Andy and I got into a conversation about whether or not I-bankers and traders actually  “create”  value.  The common sentiment is that these actors are nothing more than leeches and speculators that piggyback on value created by others.  While  know less about capital markets than my hard finance friends,  I do understand why “agents of liquidity” such as I-bankers and traders increase value not only for themselves but for society as a whole.   That said, I can also understand why people who live and work outside of the system have such a hard time understanding why this is.   So here is a simplistic explanation:

It’s easy to understand how anyone that creates something or provides a service creates value.  Construction workers build houses, teachers make our kids smarter, artists make the music we love and the guy at Starbucks prepares your coffee so you can do whatever the heck you contribute to the world.  Entrepreneurs and employees create value through the creation and provision of goods and services.

Value creation gets a little more abstract as you move away from the consumer facing end of the value chain but initially it’s still pretty straight forward.   Accountants, IT professionals, and bankers provide the support services that enable businesses and institutions to provide us our coffee, education, and art.  Drilling down on the services provided by financiers, venture capitalists provide value by financing big risky ideas that might otherwise have never gotten off of the ground.  Similarly, private equity firms add value later in the business lifecycle by buying and fixing up underperforming businesses.

Here’s where is gets a little tricky.  Stay with me to see how it affects you.

Investment bankers enable businesses to obtain capital ($$$) via Initial Public Offerings (IPOs) of their stock to public markets.  Public markets are public because anyone is allowed to buy on sell on them- you, your grandmother, or S.A.C capital management (one of the worlds largest and most infamous hedgefunds).  Public markets enable investors to share in the profits of the companies that provide us goods and services.

Markets only work though if there are plenty of buyers and sellers- this is where short term investors (traders and some hedgefunds) and long term investors (Warren Buffet, pension funds, and some other hedgefunds) come in.  By buying and selling stocks, they create what is called market liquidity.

Liquidity…refers to an asset‘s ability to be easily converted through an act of buying or selling without causing a significant movement in the price and with minimum loss of value, according to Wikipedia.

The more buyers and sellers in a market, the more liquid the market is.  Without buyers and sellers, there is no liquidity, and thus, no market.  Imagine a vendor selling fruit in an empty market.  How much would the fruit be worth?  Nothing.  The same applies to for stock markets.  Even if a company has millions of dollars of profits and thousands of employees,  if there is no one at the market to buy their stock, the company has no way of unlocking the value it has created.  Assets are only worth something if you can find someone to buy them.

In conclusion, if I bankers didn’t exist to help companies tap into capital markets such as the New York Stock Exchange (NYSE) by issuing stock, and traders weren’t buying and selling those stocks (albeit in pursuit of personal profits), then companies would have to get funding from other, more expensive sources.  That would mean more expensive coffee (Starbucks: SBUX on the NASDAQ), burgers (McDonald’s: MCD on the NYSE), and cars (Ford: F on the NYSE ) for everyone.  Investment bankers and traders aren’t providing services directly to us the end user, but we directly benefit from their services.

One reason companies from all over the world base themselves in America is because we have the world’s best (most liquid) capital markets.  There are plenty of other stock markets in the world to chose from but companies come here.  Active investment banking and trading communities keep it this way, enabling the rest of us to benefit from the goods and services these companies provide.

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