Welcome to JeffreyVeffer.com

Business Model Innovation for Growth and Renewal

Posted by Jeffrey on Apr 22, 2010

Mark Johnson, Principle of Innosight Consulting gave a talk at the Rotman School of Management where he led off the talk with a discussion of the Music industry- a common story which leads to a well known conclusion: others started the industry but couldn’t capitalize because they were trapped in their old modes of thinking. Apple really won the war because they understood that customers didn’t just want a cool device (although that helped) but a whole package (including software) that helped make the process of downloading and listening to music easy and painless. Except that Apple didn’t originate this solution: Tony Faddell brought it to them after he had been kicked out of many other companies up and down the 101.

But I digress…. The traps that most established businesses find themselves in is that they can’t grasp the fact that in contrast to their existing business (where their knowledge to assumption ratio is high) in a new business venture it is low and the metrics, processes and norms that surround their existing business don’t apply in the new.

With some examples he illustrated that there are 3 traps that established businesses find themselves when trying to create new businesses. (Note that this doesn’t [shouldn't] apply to start-up businesses (unless you have real problems.)]

Trap 1- failure to allocate resources. Basically this is the “Holy crap! Is this thing as big a disruption to our model as we think? Better not pay too much attention as we don’t want to rock the boat.” Think DEC and the personal computer.

The second trap is in trying to graft new technology onto an old business model. How to develop a digital camera? Make it work the same as a film camera. At least this is what Kodak thought in the early 90s when they released the $30,000 DCS-100 that had the same quality as film. (Except users didn’t want the hefty the price tag!)

The third trap is companies don’t let these new innovative businesses mature and are impatient for growth. In this case because HP was a multi-billion dollar company, they wanted their newly developed HP Kittyhawk 1.3 inch hard drive to be a $100M business within 12 months, because that’s the growth rate established by the rest of the company. They didn’t allow the product a “Test and Learn” that would have made it apparent that the main market that they were targeting with this device was wrong and they needed a different business model to succeed where the device would have the most traction.

At this point, one asks, “What is the problem with these companies? Cant they see that you have to be aware of all these “traps” to succeed?” Where it really becomes a challenge is around culture and operational norms. In the rigidity of rules, norms and metrics established business find they are “trapped” in how they evaluate new opportunities and how they fit into existing business models. They really need to step back and think about how they currently make money and what needs to change if they are to really take advantage of a new opportunity. In a lot of cases, the whole business model has to change.

Think about the Tata Nano. It was created not to compete against other cars but as an alternative to a scooter. They had to change everything about the model (supply chain, distribution, manufacturing) in order to compete on that level.

Or what about MinuteClinic? Its not a competitor to existing medical services but meant to take care of many routine health care issues that can be treated by rules-based procedures.

The biggest problem comes from the inevitable commodification of business models as new entrants come in once and attractive market is carved out. You can ignore it to your peril or do what innovative companies like Hilti have done. They’ve created a new business that realizes that one source of frustration to contracting companies is tools and tool failure. Rather than simply selling tools they now sell a “tool fleet management service” with a monthly fee covering leasing of the entire tool category. They had to completely rethink their model. Rather than selling through distributors, now they sell direct. Before they had to think of low cost manufacturing, now they need IT systems to track inventory and repairs. They had to really think about the stakeholder and the job that needed to be done and how they could serve that stakeholder.

Finally the example of Better Place was raised. With the advent of the true electric car close to fruition, a key problem still exists- the long charging cycle of current batteries. Shai Agassi, the entrepreneur behind the company thought, What if we could reinvent the whole model so that we didn’t actually sell cars, but we sold “miles?” Their target is not other new cars, but used cars- they need to be competitive to someone who might not consider a car at all! Their model is similar to the cell phone where the initial cost of the vehicle is subsidised by an ongoing distance contract.

For me the real takeaway once again was getting to the heart of the job to be done that the customer needs. This leads to a clean sheet thinking about what the appropriate model is to serve that customer and how to integrate that model into a system. The ever-present question is whether this can truly ever happen in an established company with and established model and established ways of thinking. Time will tell if there are ways of breaking out of established patterns, but given the above examples of very competent companies, the jury is out on if this journey is one that has a happy ending.

The City State and the Creator Economy

Posted by Jeffrey on Jan 26, 2009

I just came across a fantastic interview with Stanford Professor and futurist Paul Saffo who talks about how we have moved from the Producer Economy (from about 1900 – 1950) to the Consumer Economy (fueled by Advertising and Marketing ) (from about 1950 till about 3 months ago (!)) and to the Creator economy, which we are entering right now.

According to Saffo the Producer Economy was preoccupied by overcoming the scarcity of making stuff. It ended after the WW2 when firms realized they could make more stuff than people wanted.The next economy was dominated by the introduction of the credit card – and it was less about the workers who produced than the consumers who purchased the goods and services. Power shifted to those who created desire which pushed sales/ marketing (and especially advertising) to the forefront of the purchase process.

Interestingly enough he highlights that in the Producer economy the promise was abundance but actually scarcity was the key motivator in the continuing goal of producing more goods and services.
In the Consumer Economy, the mantra was buy more, then repeat. And we all know now that endgame.

The fundamental difference he outlines in the creator economy is that the fundamental actor is the person who neither just produces nor consumes but does both in the same single act. People can create value without it costing anything and its all about interactivity. Google, YouTube, Wikipedia all exist as part of this new economy.

He continues to detail the rise of the City State (not the Nation State which was prevalent up till now) and how mega regions will start to define how economic decisions are made in the future. As interests fragment keeping nations together with an incredibly diverse population will increasingly difficult. But people will self-select with others in creative geographies to provide the most opportunities for expression.

He maintains that the essential theme for the next economy is uncertainty and he contends that’s not necessarily a bad thing, and we have to get used to it because that’s the way it is. I think he is largely right but additionally we have to somehow realize the flipside of uncertainty is opportunity because we can do so many things we have less constraints on our lives than ever.

The implication is on the financial models that underpin this new economy. In the past, if you had invested in credit card companies at the beginning of the Consumer Economy you would have done well in hindsight. (Well up to about 6 months ago!) What is the model which underpins this new economy? Is it selling advertising against a whole bunch of creators work like Google? Or is it some other non-economic model like reputation or credibility?

Only time will tell but Saffo’s advice? Always look back twice as far as you are looking forwards.

Demo-Wrapup

Posted by Jeffrey on Feb 2, 2008

Well another Demo has come and gone with a whirlwind of information and opportunities. There are a few things which I found at this year’s session. 

It seems like collaboration is no longer a nice to have but a feature that is really becoming standard when it comes to online products. Notably, Cozimo, LiquidPlanner and some others are taking it to a new level as they are allowing simultaneous work across multiple locations which points to the new, geographically dispersed nature of projects these days. And LiquidTalk allows simultaneous translation across differerent groups all within an IM client.

Social media as a concept is also being rolled up into all products; so much so that Demo is going to stop having a separate grouping for these products. How’s that for validation of a concept?

Gadgets and devices are still around (even thought sometimes it feels like all the services are being delivered inside the browser). Livescribe‘s pen

Livescribe’s Pen.

brings your voice (or any audio) to the printed page. Even translation of words into other languages!

And for another audience alltogether (kids 4-8) Leapfrog‘s tag system (available Nationwide in June ’08) gives little ones the ability to interact with books with audio and music with their pen-like reader.

Green has to get bigger at Demo and the buzz around the pavilion was that having only two companies there representing the category was a real letdown. There have got to be more worthy companies out there (besides the great offering from Celsius and GreenPlug.) With the amount of monitors and cpu’s buzzing over the sessions, there is growing awareness of the impact of this sector.

Video is not just for broadcasters anymore and although we’ve know this for a while, there are a bunch of new tools out there (VisibleMeasures, TubeMogul) which help monetize and analyze online video for publishers, be they consumers or national brands.

And of course, the web is a Web 2.0 (sorry couldn’t resist) playground as everything is and can be, mashed up together. One service (Flypaper) even allows searching and viewing of flickr photos right from inside their application. Sprout brings the power of custom flash applications to a wider audience with their cool builder application which allows users to create cool flash apps right from inside their browser. No download needed.

But my concern as always with these new services is how they will sustain themselves over the long term to support their rapid advancement and integration of really fantastic functionality. I have heard that funding for “Ad-supported” services has tapered off over the past 6 months or so, and if that is the case, what other type of subscription, transaction or other models are out there?

For other views on this check out ZDnet and Rafe’s column.

Demo-Tuesday Afternoon Sessions

Posted by Jeffrey on Jan 29, 2008

Simplicity was the kickoff theme as we went through a wide variety of demos this afternoon; all the way from virtual desktops for the enterprise to teaching music over the web.

Chris Shipley noted that: “Simplicity on the other side of complexity. Making really hard stuff simple.”

A real cool demo was Sprout, that allows you to create flash widgets without being a flash programmer.

Simplify, Simplify

He wasn’t much of a technologist, but Henry David Thoreau had the right idea. We make our lives easier, and arguably better, by using products that wrap complexity and capability in simple designs and interfaces. DEMO will continue to beat the drum for practical products that work well, hide complexity, and make our professional and personal lives more enjoyable.

Demonstrations by:

LiquidTalk, Inc.	Podcasting- better connect and engage mobile workers. Enterprise- manages content like recorded conf calls in easy to use interface. Synching technology – supports BBerry. Prod managers can assign different types of content to different employees. Can be used by reps (like Pharma reps etc.)
Zodiac Interactive	Mobile content for the TV web- Mobile on demand. Send coupons to mobile phone. Can see content bricks on TV then can push to phone. Find new content. Not just on TV, but on Blu-Ray consoles etc. and an API as well.
Voyant, Inc.	Do it yourself financial planning.
Review2Buy, Inc.	Review a free mobile price comparison product. Wine comparison with winereview.com reviews.
Acesis, Inc.	Simplifies healthcare records keeping. Built on Flex and Adobe Air. Templated forms for doctors to enter information/ patient records. Can customize without professional services because in effect, it is user-generated content on a CMS.
blist, Inc.	“Worlds Easiest Database” online application that has a more friendly UI for non-programmers. Competitors are DabbleDB , quickbase etc. [name is: WeBLIST]

Content Made Easy

As consumer-generated content become de rigor, we’ll want tools and techniques to create and deliver better looking, more stylish and professional content. Whether it’s presenting materials at work, delivering messages to friends and customers, or distributing content, these products give individuals the ability to communicate like pros.

Demonstrations by:

Flypaper, Inc.	“Tell stories that stick on the web” bridges gap between PowerPoint and custom flash development. Using templates users can create rich flash animations that they can then upload to the web.
GoldMail, Inc.	“Voiceover messaging” – uses rich messaging in custom branded player. Recipients get an email then a link back to the site where they can view the content. Simple easy-to-use creation tool, which you then basically do a slideshow with voice-overs. Not as rich as the previous company in terms of impact, but there is an email tie-in automatically.
Sprout, Inc.	Web-based drag and drop environment for building flash files using Flex. It integrates with other web services such as Yahoo maps, Ribbit etc. Can publish and republish to popular platforms such as Facebook and blogger.. Can change the widget and republish and it updates wherever you have published it.

It’s Easy Being Green

Over decades, the technology industry has had a profound negative impact on the environment. With greater awareness, the industry is also poised to have a profound positive effect as well. We’re watching for products, technologies and services that are responsible to the environment and sustainable in the economy, with an eye toward a future DEMOgreen event.

Demonstrations by:

Green Plug, Inc.	Is there a universal power adaptor?? Will recognize the device and just charge it. They sell a chip for free, software on the product side and they both recognize each other. Shuts off power when device does not need it.
Celsias, Ltd.	First online collaboration site for climate change projects. Easy to put up projects on the site and easy to join whatever projects users want. Revenue Model: (in addition to Google Ads), they want companies to use it for CSR projects for 29.99/month.

On Research: Turning Ideas into InnovationsSponsored by The Kauffman FoundationAcademic research centers are fertile ground for discovery of some of the Next Very Big Things. With the support of the Kauffman Foundation, DEMO is again reaching deep into the academic community to identify innovators working on some very big ideas.Panelists:

Steven M. Barlow , PhD., Professor, SPLH
Programs in Neuroscience, Human Biology, and Bioengineering
Director, Communication Neuroscience Laboratories, University of Kansas

Ronald Indeck , PhD., The Das Family Distinguished Professor of Electrical Engineering, School of Engineering and Applied Science, Washington University, St. Louis

Yannis Papakonstantinou , Professor, Computer Science and Engineering, School of Engineering, University of California, San Diego and Founder, app2you.comThis discussion with the two academics went on a bit too long and I got the sense that audience was tuning out.Virtualization . . .

Virtualization technology is at the center of more secure, more stable, more scalable IT infrastructure. These two products are leading that trend.

Demonstrations by:

Citrix Sytems	Streaming virtual desktops- can roll out virtual desktops remotely with a instant on logon and no real difference than a physical installation. If users open a presentation the application is dynamically automatically provisioned to the virtual environment.
StackSafe	Virtualized pre-production testing. Trying to eliminate downtime in software applications. Cost effective staging and testing platform.

…. In a Virtual World

From virtual IT infrastructure to virtual entertainment . . . why indulge someone else’s second life when you can build a second, or third, life of your own?

Demonstration by:

SceneCaster

First social media content creator to share within the browser in 3D. Sceneweaver creates new opportunities for 3D media on the web. Full in browser 3D experience.

See it again for the first time

You may think you know these products, but we invite you to take a closer look, as each demonstrator unveils a new aspect that brings new dimension and import to these emerging products.

Demonstrations by:

Livescribe, Inc.	Smart pen – part of a mobile communications platform. Just begin writing on the special paper, and as you speak it records audio. You can scrub to the audio you recorded by just touching the area where you started speaking. It even does translation as you write! Books $5 each, 2Gb pen for $199. Neat! (see the video here- http://livescribe.com/smartpen/videos.html)
Seesmic	Can push video to twitter as well as seesmic.com. Their marketing material calls this “the twitter of video.” Not too sure based on their demo (but a whole bunch of smart guys, including Arrington and Clavier have invested so what do I know?)
MOLI, LLC	“Next generation social networking sit” and can allow you to control multiple profiles in one account. Can permission each profile separately to allow access to each profile. Co-brand and whitelabel technology for Enterprises and SMBs. These companies can communicate with their customers. Can also add ecommerce as well (and the Moli doesn’t take a piece of the transactions!) Has reporting on visits, % gender etc. Also has video content. Like what else do they have? It seems like they have a lot of different pieces going on.

Demonstration by:

iVideosongs

Brings innovation to music – “its all about the songs” they teach complete songs accuratelyIts about the people – the instructors present the songs as they were recorded. Original artists present the story behind the songs. Control – customers have complete control (non-DRM) to put it on their TV or mobile device.

Early start at Demo

Posted by Jeffrey on Jan 28, 2008

I got in today after a bumpy ride into Palm Springs due to the remnants of some bad weather they had on the weekend so some coverage of some of the companies presenting here this week.

A few that I will be talking to include a content delivery network startup called BitGravity for a while (and also Squidcast which allows users to share HD video in a P2P environment!) and definitely Ribbit which allows developers to add voice quickly and easily to their applications. It “lets you make and receive multi-protocol calls via Flash-based phones, provides speech-to-text message transcriptions and provides an open message management environment – all built using Ribbit’s open APIs. ” I will have to ask them about their business model… Giga Om’s NewTeeVee has some Day One coverage here.

Demo is trying something a bit different this year; along the lines of CES they are trying assemble some companies around the “Green” concept; but there are only two of them this year. Sounds like they are going to start up a potentially new conference in the future called “DemoGreen” but have to wait and see how that pans out.

My question is around the whole impact of this show. Given that it is in the desert and most of the companies here are using electricity to power their demos, could the show have considered some offsets to somehow mediate their impact on the environment? Aren’t most shows doing something like this now?

Running a startup Like Ghengis Khan -Kevin Hale

Posted by Jeffrey on Apr 25, 2007

Do big things with small teams
Technology Mashups
Word of Mouth Marketing

1. Expose yourself to harsh conditions
o Less hardware, less features, less money
o Practice in stress, practice disagreeing, do things people hate
2. Be a Nomad
o Huns, Bulgars, Magyars, Pirates
o Nomads don’t wander (migrate only 2x per year)
Nomad
Sedentary
Mobile
Settles
Tents
buildings
o Martha Stewart’s smores, the value of hunger (always hungry)
o Hot or Not – made it free to force it to survive
o Bubbleshare (Albert gave most of his money to parents)
3. Efficiency
o Good to great , hedgehog principle (what is your economic engine), Google profit per click (profit per X)
o Strip away and measure – you make what you measure (put up metrics on the board
4. Say no to infantry
o Voltron – why start with the tigers, why not with giant robot?
o Infantry, cavalry, archers, (Roman idea)- Khan said everyone needs to do everything.
o Roman army 20 mi / day; Mongols 60 mi/day (limited by slow infantry)- very small Mongol horses, no heavy armour.
o Mongol bows more advanced (recursive composite)
5. Word of mouth
o Chanted and drummed for hours, could hear it for miles. Then stopped.
o Tried to fight on cloudless days. Initiated combat by flags, then at a unified time they’d scatterà not traditional attack.
o Gmail created word of mouth marketing (WuFoo – making forms fun!)
6. Do not fight the enemy by their rules
o built a wall around the fortress and waited them out
7. Appropriate the best people and skill for your war machine
8. Build bridges
o They’d marry Mongols with heads of state, then had rights of the Mongol state, not slaves
o Maybe don’t be as secretive- share it
9. Inspire fierce loyalty
o Employees, customers – if anything happens to you I’ll take care of your family.
10. Remember the lesson of the many headed snake
o Snake with many heads had trouble in winter finding a hole
o Snake with many tails found hole and was ok
o Stick you core competency- hard to find discipline, but stick to it.

Genghis Khan and the making of the modern world
Founders at Work – Livingston

Particletree.com/web2expo/gk.pdf