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Notes from Stanford US-Asia lecture with Prahalad and Barker

by eleanor on 1 Jun 2005 @ 10:40 am in Events & Happenings | Strategy-Marketing   ++

Here are my Treo-tized notes from yesterday’s lecture in the US-Asia Tech Mgmt. Series at Stanford, which closed out the Spring series. Note that the presentations will be available online here - keep checking.

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Jonathan Barker spoke and focused on China:

• Huge demographic and economic changes: Private property growing, primarily as lease holding from government
  Changing middleclass consumption patterns will have tremendous impact. Adoption of credit and cashless payment systems is coming: there were 200 million bank cards in 2000, in 2004 there are 468 million.
• Chinese consumption is predicted to increase 18% annually for the next X years (versus a static 2% in the US)
• Consumer electronics consumption (not just manufacturing) was $49.6 billion in 2004 (#2 behind the US right now). IDC predicts that will double to $100 billion by 2008. Covers all areas – mobiles, tvs, audio devices.
• Need infrastructure for autos: (missed how many they have now) but in 2020 China’s expected to have 140 million cars on the road – huge impact for cities (urban planning, congestion, pollution), the countryside (highways, gas stations, etc etc) and the nation in general.
• Factors even extend into the non-glamorous: take milk consumption – he showed a chart where per capita consumption went from about 2 (liters?) to 40-50 (liters?) per year. (non-sequitur thought of mine: I had read that many Asians have difficulty tolerating lactose. Is that true? If so would milk consumption be a habit, a sort of acquired taste that would signal affluence?).
• Then he discussed a most interesting bit: China has a metric called the Gini coefficient, which is a ratio of inequality ranging from 0-1, indicating roughly the gulf between the richest and poorest (very interesting – something I recall neither from Political Economy or recent discussions of class in America like in the recent series from The NY Times). China’s is now .46, disturbing when it was just .33 in 1980 (for comparison’s sake it’s .41 now in US).

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Then we had C.K . Prahalad speak on India.

Central thesis: His work is now focused on the 10 countries in the developing world (see one of his slides for the full list, but it’s the usual guys). These countries represent $16 trillion in market potential. To get there we need to adopt the point of view of bottom of pyramid, abandon our own preconceptions and ways of doing business.

The question is what do with the 80% of humanity that’s stayed under the radar of the big global and local companies. hey’re simply unserved and that creates lots of opportunities for tremendous innovation and profit.

He wanted to give specific examples of why and how things work, because it’s very different. Everything about serving this market challenges conventional thinking and assumptions. The price-performance ratio needs to be completely rethought while maintaining world class quality. You need to plan for saleability, selling profitably at $1, not $100. Right now, the NGOs don’t pay attention to scale, everything is done on a regional/national project basis. Industry must step in and build this out.

So back to the question of how to convert 5 billion poor people to consumers. He uses a pyramid to show his 3 themes: global restructuring, conventional strategies and tactics, and the bottom of pyramid (this is probably made much more clear in his book).

This matters because in age of saturated markets, where we are chasing the same 1 billion people with endless product variations, the other 5 billion needs everything, making for essentially limitless opportunity. And it’s not a question of being “backwards”, it’s not about adopting best practices, it’s about finding next practices to leapfrog from being behind to adopting next generation tools. As just one example, India (or some region in India) held a fully electronic poll for their elections in 2004; of course the necessary equipment was transported by elephant, but their elections were successfully held using technology we can’t even get right (or trust, but that’s another story in famously corrupt India). Prof. Prahalad maintains it’s just a project management challenge, and encourages the Stanford Engineering students to bite in and take it up.

The theme of “Next practice, not best practice” would come up again and again in his presentation, that emerging markets are huge, demographics (youth) & growth rates appealing, especially versus the aging and stagnating demographics of the US and Europe.

So back to the question at hand, how to marry low cost, good quality, profitability, and sustainability (I might have missed one) at same time, fuse them into each product. He went through a couple examples (but had many more, I’m sure they’re all this fascinating).

• Hospitality in India. Indians love to travel – visiting relatives, religious pilgrimages, whatever – each day 10-20 million Indians use the national railway system. Where do they sleep? Sometimes even on the street (Gershenfeld’s Fab talked about the huge increase in prices of Bangalore hotels because of the influx of foreigners in to spend time at the tech haven – prices like $250+ a night). Prof. Prahalad wanted to do it for 10% of that kind of cost. So what do you do? You figure out what it will look like. They had a team of 6 people (students? At UMichigan or somewhere else? Is probably in the book.) They limited the scope, to redefine the market as being not luxury, not budget. They created a new market, but plotting the four most critical elements on the sides of a cube: space, modernity, price-performance, saleability. These were the self-imposed constraints (I think of them more as imperatives) that could not be relaxed. He didn’t say, but it has to be the case that everything else was up for grabs.

  So the example here is IndiOne, a venture backed by Tata Industries that’s the result of these efforts.

  

  They offer rooms for $20 US and it looks like a modern hostel meets a less expensive European chain hotel. The rooms are appealing, simple and modern. They have showers, LCD tvs, cable, and broadband connectivity. Hotel lobbies have stripped down restaurants. How did they do it? They rethought everything: new training practices, maintenance plans, human resources (hiring, staffing – they do this with far fewer people), and intelligent application of IT at the backend. Delivering more features, at a lower price. And they specifically thought about scale: they chose iconographic elements so they would be portable (and recognizable) globally. This is what 6 people did in 18 months. Ten more are due to be built next year. Their goal was to destroy the status quo price-performance curve, delivering a new kind of value unseen before. Watch out Marriott.

• The second project he described was to increase adult literacy. They chose to focus not on the educational basics of the “3Rs” (reading, writing, arithmetic) but on the 1R of reading. Goal was to quickly get people to read, so they went with immersion type video, not alphabets and piecemeal word construction. [I can say that while using that Rosetta Stone sw to learn Japanese, the immersion was very effective, especially for the kanji; though I did memorize the kana]. Prof. Prahalad said that half of all Indian women are illiterate. Interestingly, from the video he showed, learning to read via computer was greeted with an enthusiasm that was missing from Gershenfeld’s discussion of tech adoption in India in Fab. It might be the difference between just plunking down hardware and in establishing a program and software to do something immediately useful for the population? This venture was put together by TCS, Tata Consultancy Services as a non-profit, non-commercial project. He said something about the software being open source.

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So that concluded the presentation part, the presentations will be online @ asia.stanford.edu/events/Spring05/ee402t/
Then followed some Q&A from the audience. I just captured snippets of the responses of the professors.

• ….Because our standard of living is so high, we miss out on serving everybody. We need to get back to the old ethos of Ford Motor Company, where the goal was to build products that everyone could afford. There needs to be a new industrial revolution.
• Discussing wage inequalities around the world: Information asymmetries lie at root of wage disparities; they will be brought in line once the information is available to all.
• Closing question - highlights of the best opportunities for the budding young entrepreneurs in the room:
  • Barker: In China, there are still lots of dirt roads, very basic opportunities are everywhere. To be successful, you need to learn to finesse the opportunity, to adapt to the local conditions and to not overlook huge potential even though many opportunities are not sexy by Western standards.
  • Prahalad: Invest time in languages and intercultural awareness. Focus on becoming part of global citizenry. In exchange for the opportunity to participate everywhere/anywhere in the world you have the obligation to do something productive, which will improve the world. Develop a personal mission, a desire to leave personal legacy.

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Prahalad at Stanford: “Changing Lifestyles in Asian Countries: Opportunities for Entrepreneurs”

by eleanor on 26 May 2005 @ 10:46 am in Events & Happenings | Strategy-Marketing   ++

So much of our work here is about geekery targeted to “people like us”. Unashamedly alpha geek though I am, I’d be a fool to ignore the huge emerging markets of the “rest of the world”. I do though, often enough.

Fortunately around here you can get a dose of fresh opportunity. The equation global development -> rising standards of living -> profit works even for those uninterested in changing world.

Stanford’s US-ASIA Technology Management Center (home of lots of interesting free seminars) is having in esteemed strategist and professor CK Prahalad (U of Michigan & required bskool reading) and Jonathan Barker, Managing Principal, Longbridge Capital (behold, the zero info website!) in to talk about what we should be thinking about.

I primarily associate Prof Prahalad with things like “Resource Based View” and moving-pawns-around-the-board type Strategy, but his new book, The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits (not read) addresses these issues.

We should heed the call of the wider world.

Next Tuesday, 31 May from 4:15-5:30pm at Skilling Engineering Auditorium at Stanford.

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Weaselese

by eleanor on 18 Apr 2005 @ 5:24 pm in Strategy-Marketing   ++

Yesterday’s Dilbert tear off calendar is just too good and must be shared.

PHB talking “…and the most critical part of your objective is… mumble mumble mumble”.

Dilbert goes to get an interpreter, someone who speaks (giggle) Mumble.

More mumbling between them and Allen reports “I’m a bit rusty with the Pointy-Haired Dialect but I think he wants you to line dance in a gazebo”.

People keep asking how my job search is going…… This captures it precisely: I’m trying to figure out how not to end up Dilbert, Allen, or PHB.

Yeah, it breaks my pretty page structure, but it’s worth it. I especially like the way the PHB leans into it in his second volley of mumbling. Too true.

Update - I’ve now decided that enough is enough and the page breakage is annoying. If you can’t read it, click on it to see a bigger view.

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Adobe+Macromedia: common cause in graphics & mobile, but where’s the blog platform

by eleanor on @ 12:01 pm in Strategy-Marketing | Mobility   ++

Adobe buys Macromedia. My response is “weren’t they the same company really anyway?”. Tomato tomato.

More substantively, this signals the quantitative impact of personal publishing platforms making the web accessible for a whole range of users (who might have previously turned to Dreamweaver or GoLive). The web has changed and these two giants must cope.

For Adobe, it’s also a natural step after Creative Studio, the megabundle they launched 18 months back. Back then, I expected them to experiment in the other direction — to go after the infrequent user market with on demand, not give a price break to their best customers. These are the tools of the trade for creatives, a cost of doing business; if Adobe was not able to maintain the perceived value of their tools among those guys, compared to, say, the Apple upgrade treadmill, what was next?

Today’s union makes plain the saturated, commoditized content creation marketplace. In pricing theory, bundling is a response to saturation. A user’s willingness to pay for each package on its own merits decreases as the functionality becomes more mainstreamed (despite the best attempts of vendors to feature pad); so you use the bundle to push more product, getting a little bit more from users who wouldn’t otherwise cough up. Adobe’s extracted as much growth as possible out of this bundle, and now has turned to snap up Macromedia, where it’ll bundlize and kill off products by the playbook. All business as usual.

We all publish and consume, but we’re doing it on these blogging platforms. Hard-coded, hard-copy marcom is marginalized. And what Adobe doesn’t have is a blogging platform to address this increasingly important element of content. Even worse, content management functionality is already evident in tools like WordPress. I’d look for blogging to be the next natural step here - either as an organic, as yet unannounced thing or that this behemoth will be the eventual acquirer of SixApart.

Mike pointed out the mobile angle, which I had forgotten. Ah yes, that whole rich internet application and rich client space that Tokyo used to be so interested in. Even though we’ve neatly averted a public adoption battle between SVG and Flash (I bet we’ll see Flash endure — it’s got Laszlo extending its appeal, and holds a bridgehead between the desktop and mobile worlds), there’s a new rub: the adoption of AJAX for some of the more powerful (and attention grabbing) apps like Google maps. Taking a step back, this provides an interesting contrast between organic and strategic: we see two corp sponsored initiatives merge because they are owned and directed (and thus can be merged and killed off), while the AJAX methodology just continues to gain steam.

This is all very interesting, but I still wonder how real this is for the mobile space, at least in the US. It certainly remains far out. At last Wednesday’s 106miles, Mike and Russ slalomed questions from both Tantek Çelik (Technorati) and Dave McClure (SimplyHired) seeking to understand what the now of cell phone dev is. The answer for right now and the next 12 mos (given Russ’s “complete handset turnover every 18 mos” postulation and a camera phone penetration ramp up starting Nov 2004) is SMS is the lowest common denominator capability. But now we’re 1/3 of the way into a turnover cycle with camera phones, which give users the impetus to try out data functions, as well as have the larger screensize and resolution to enable meaningful gui interaction. If I were running a company with a mobile app, there’s no way I’d aim for the now in development; I’d aim for 6-12 mos out. Would someone want to receive job notifications via SMS from SimplyHired? Sure. Would I? No, unless their filtering system only sent me spectacular items; I’d rather browse via email.

More to the heart of the matter of rich clients on mobile - with cost, speed, screensize and network reliability still at issue, the last thing I’m concerned about is the immersiveness of the application. I’m sure we’ll get there, and bet that Adobe/Macromedia will play a part, I’d just be watching to see what happens in their core markets while they wait for the device market to catch up. And keeping an eye out for that blogging platform too.

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BMA Prod Mgmt/Mktng Breakfast Roundtable on PMM in an Always-On World

by eleanor on 15 Apr 2005 @ 12:49 pm in Events & Happenings | Strategy-Marketing   ++

Heh - I really should have done this earlier, but it’s been “get my elderly dad’s finances and taxes in order” week.

This month’s roundtable is — just that — a real roundtable. We’re going to come together to discuss the good-bad-ugly of product work in this age of constant connectivity. We’ll talk about marketing, customer support, requirements gathering, and pr - all issues that swirl together when you’re a company that’s fielding products today.

We’ll talk about blogs - not in a how to blog for your company sense, but in a how to mine all this chatter to capture what’s going on in your segment and in the minds of your customers. We’ll discuss a bit about how to tap into what’s being said via tools, but I’d like the emphasis to be on integrating the power of the blogosphere into how we do our work as product folks.

We’ll look past simply tracking what’s said about your company’s products to discuss how we can participate to shape the market and dig into the conversations themselves to gain product and marketing ideas. In many areas, we’re seeing collaborative product development, as users are proposing important enhancements directly or - more subtly - posting their thoughts on what they want to see from some enterprising provider. This is the true value of the blogosphere for product development - a low cost way to run betas, test out ideas, solicit/discover feedback, reach out to early adopters, and — lastly — create buzz.

Tumble out of bed and come wake up with us. The coffee is on the table, and the decaf is strangely tastier than the regular.

• Date: Tuesday 19 April
• Time: 7:30-9 AM
• Place: Scott’s in Palo Alto
• RSVP: Not necessary, but email me if you’d like eleanor AT ellementK . com.
• Cost: Free for members of BMA, all others $10 + the cost of your breakfast.

Update - Well, hitting “publish” was touch premature, but no major changes, just added a link to Scott’s directions. Time to be done with this anyway!

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Making services more useful 2 - an idea for LinkedIn

by eleanor on 13 Apr 2005 @ 3:09 pm in Geek | Strategy-Marketing   ++

Ah, now here is the idea that got me started on this thread………

A chick on a chick mailing list I’m on is posting on her interviewing experiences. Great stories. They’d make a great shared blog, some sort of healthier twist on fuckedcompany from back in the day. In writing her a note, I thought - this would be a natural for LinkedIn.

If you look at their services today - you see they capture the now and past of people, and are expanding into their future with job postings. Why not capture their travels as they manage their careers and move to new positions by capturing their feedback of what it’s like to evaluate a company via interviews?

Now there are issues with this - the dangers of rants on interviews gone wrong and the natural reluctance of some to lay themselves bare. But there’s interesting data here, which can help show the character and personality of the poster, the company and its people. Now it could be looked at as a potential public relations nightmare for the companies, or it could be looked as a powerful tool to get at the impressions they leave with potential employees. It will give them insight into how the great ones get away, what they do that’s unique and impressive, and what they need to change.

This is valuable intel that would make the LinkedIn pool of data more valuable for new members, and that would strengthen the links between hiring companies, their postings, and the community. It’s also fabulous information that I (with my research and strategy bent) find extraordinarily juicy.

Now, this may be a bit out there, as far as LinkedIn’s business goes, but if it’s fertile ground for a blog, it’s gonna happen. This is a chance for LinkedIn to tie this into their portfolio of career management services. Right now, LinkedIn let’s you get that info about who is there and who was there, not about those who were almost there.

It’s a fact that the costs of poor employee fit are very high. LinkedIn, as I understand it, is mostly about making connections and outing skeletons. Augmenting that by making it easier to share information about company culture, which most people — fish in water style - don’t notice, will help yield successful hires. Everyone knows it’s not always about the smartest, or most experienced, or best connected - it’s about the person who’s best for a particular corner of your company.

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WorldCom’s Ebbers conviction matters

by eleanor on 15 Mar 2005 @ 7:20 pm in Strategy-Marketing   ++

I get back online after the roundtable this morning and see that Bernie Ebbers has gone down on all charges, which I didn’t expect. We’ve gotten clear guidance: The jury (and by implication, shareholders large and small) hold the top guy responsible for running the ship. In a way, it’s a return to nautical mores, where the captain is responsible for all that took place during his watch. This code was so strong that it was the ship’s captain who was disciplined for a mutiny by the crew, a concept that I found murky until I examined it from a management perspective.

It is of course the responsibility of the leader (once they accept the responsibility) to keep things together. A mutiny is a failure of leadership. Between them, Sullivan and Ebbers did well here: they kept the crew together, as testimony of Troy Normand and Betty Vinson, reluctant accounting fraud particpants, showed. At the same time, it’s interesting to think that Ebbers was brought to trial not for where the ship ultimately headed, but as a question his level of direct involvement. That says something about our culture of corporate governanace, how we have evolved. As an investor (not as a leader or member of the board), it’s an obvious truth that the chief executive is to blame for failures of the corporation, and we see it in the periodic sackings. And that seems right and appropriate - “bring in the new team”.

However, looking at it from the point of view of the fallible humans at the helm (executives) or their advisors (board), you recognize that it’s the effort of the team that moves the business along. Ebbers’ defense that Sullivan masterminded the fraud is, at face value, plausible. Individuals can play that great of a role in times of change or crisis, and determined ones can methodically amass enough power to be able to control the course of the firm over the longer term. The case remains that Ebbers, as the boss, had the job to know what was going on, whatever its complexity.

Does it make me want to run a public company? No. Be on the board? Not with WorldCom’s board sweating that $12M (what in the hell was I thinking?) $55.25 M decision. And what it is doing to public companies themselves? As I left NEC, they were bringing in new accountant helpers to rigorously go over every small detail. But that scrutiny doesn’t mean that the business itself would behave with more fiduciary responsibility. It just means you know where they spent the money. It doesn’t invite bets on new innovations or even new business lines, just cost containment and papertrails. As a shareholder, I want to know not that expense reports are completely documented or chargebacks properly allocated, but rather that companies are paying attention to the important value-creating activities.

But that’s a daily grind of a different sort, and hard to quantify. How do you balance responsibility with the reckless necessary to get a jump on new markets?

As a part of my ongoing project (as yet unposted, slacker) to put online my strategy repository, I share this delightful peek into how crazed and misguided the pursuit of growth can be. In a vintage 1997 piece from the estimable Fortune, no greater authority than Gary Hamel, strategy guru and professor, wrote an article entitled “Killer Strategies that Make Shareholders Rich” (June 23, 1997 pp. 70-88) in which he praises the novel strategies of a scrappy energy trading firm, Enron (in a way reminiscent of other journalists discussing Google). The whole piece is piquant; all the more that it was handed out in a circa-1998 b-school strategy class. Hamel captures Kenneth Lay as remarking:

“I think the one lesson probably all CEOs need to learn — at least I certainly needed to learn — is, you have to be very reluctant to tell somebody they shouldn’t do something. Quite often someone will come up with an idea, and I have to keep myself from saying, ‘We just don’t want to go in that direction.’ By doing that, I’ve learned that a lot of the things that initially looked to me to be unrealistic, undoable, or maybe even unwise, turned out to be brilliant after a lot of work. And I think if you start shutting down some of those ideas early, well, then, of course, your employees won’t come to you at all.”

Now there’s fostering the creative impetus, and letting people lead, but as is obvious now, the people at Enron weren’t doing the right things — or rather the things they were doing ended up being precisely as Ken first assessed. Unwise.

So how do you incent positive change? That’s what we talked about this morning - incenting the salesforce to sell the right stuff. Because it was tangential to our topic, I agreed that it was “easy” to do, when the accurate statement is that it is “obvious”. What’s not easy is structuring the comp plan to account for the relentless comp-maximizing instincts of your salesforce. So you have to think, and rethink as you turn over whatever incentives you offer for positive change. You have to think like a rep, or a trader, or whatever agent we’re talking about so that you can understand what they are going to see as the easy/low risk routes to success in the game you’ve structured. Because what you’re doing is creating an environment that will foster the activities desired.

I’ve been mulling leadership over the last few days as we flock to gain direction on this chick conference thing. As we decide the important questions of culture, values, mores, and behavior that will drive the agenda, I’m struck by how unruly things are in the vacuum, how complex the issues are and how divisive the issues of entitlement are. We’re trying to figure out what kind of environment will be productive, looking forward to the future as we look at the now and choose our constituents. We’ll figure it out and the airing of comments helps, but today I’m left with the awareness that it’s not the idea that’s important and online chatter, but the execution. That the leaders must create a suitable environment and act to prevent things from going astray. All these voices on the web will inform, validate, criticize and moot the idea of a chick conference, but the thing that matters is the decisions must be made.

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BMA Product Mktng/Mgmt Roundtable - Chuck Henderson on Launch

by eleanor on @ 2:22 pm in Events & Happenings | Strategy-Marketing   ++

This morning we had our monthly BMA Product Marketing/Mgmt roundtable, with Chuck Henderson of Breakthrough Product Marketing discussing “The Product Doesn’t Matter in New Product Introductions”.

I invited Chuck to speak based on insightful comments he made in response to a launch query on another weblist. The advice he shared some months ago (which he revealed as originating with Cathy Kitcho’s High Tech Product Launch) was that launch must do two things:

1. Create demand for your product or service (create pull)
2. Set up the company to be able to fulfill the demand (make money)

True, beautiful, succinct, and something - as I reflected - I realized that startups and new product teams often deprioritize in a world of limited funds and time. Too often the operational side of the house is neglected, as a sort of self-fulfilling prophecy where companies fail to plan for success. As an example I ran across yesterday gives a nice snapshot of the problem. It comes from Joel Spolsky at FogDog software, now selling a project management book to support FogBugz, one of his software products, who wrote two weeks ago an account of how difficult it is to fulfill physical product vs. downloadable code. In a world where we just can’t do everything we want when we can see it in our strategic path, how do we account for the unexpected opportunities that emerge as we build our businesses out. Joel optimized for code, but now needs to kludge in shipping. How many examples can you think of where back-end processes are made deliberately unnecessary in the early stages of the business - workarounds adopted so this overhead can be eliminated - only to become critical later when you’re selling a more fully-developed product?

Another discussion surrounded the sales side of the house, where we thought through just why the internal aspect of launch (the sales rep training, the lining up of manufacturing, fulfillment, billing, customer service, etc.) are so often deprioritized. It’s incredibly ironic because, as the wiser sales guys in attendance reminded us, it’s far easier, cheaper and margin-pumping to sell to your current sales base. For that, you need to keep them happy. Customer happiness, once they’ve been sold by the flashy sales stuff, is determined primarily by the “boring” post-sales activities of fulfillment, service and support. I can think of a dozen startups that totally deemphasize their support functions. It’s just not seen as mission critical, as product development obviously is - because it is, well, both obvious and interesting. Support is the stealthy make-or-break function in customer retention, but it’s hard-to-quantify and unobvious ROI make it difficult for otherwise responsible folks to spend their limited dollars and time here. Another factor which occurs to me now is that building strong support infrastructure results in a lot of confusing, conflicting, and contradictory customer data. What startup, bravely going about executing their business plan, can afford to be distracted by this feedback? You know there’s value there, but it’s gotta be like comments on A-list bloggers: how can you tell what’s good and real?? Personally, I’m not sure what the answer is - I have a bias against it as well, one I need sessions like this to talk me out of.

Again, we drew in the thinking of Steve Blank from Haas/e.Piphany, who covers some great stuff in his Four Steps to the Epiphany. You should own and read this book. It’s samizdat-style, but getting a fancier cover (our copy has a map of the Tokyo subway which is amusing for its own reasons). $24.95 will unlock the secrets of the startup universe.

Chuck’s notes from the session are here (FYI - he’s going through a rebranding and Innovation Acceleration will be the new name as of 1-Apr-2005) .

This roundtable (which I ususally post about as FYI) occurs on the 3rd Tuesday of each month at Scott’s in Palo Alto from 7:30-9am. It’s always a great group of people, where experienced folks share their knowledge and we noodle through ideas to help improve the practice of the ambiguous world of product mtkng/mgmt.

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Resources from Steve Blank’s talk to NorCal BMA on Wed

by eleanor on 28 Jan 2005 @ 1:09 pm in Events & Happenings | Strategy-Marketing   ++

Steve Blank could almost be said to be my hero. It’s too bad I already did my MBA and that I’m no longer itching for an Econ PhD, because I’d otherwise go over to Haas to sit at his proverbial feet.

It sounds hyperbolic, but this guy has done more to address the mind-numbingly repetitive and crushingly destructive “common wisdom” around how startups start up than anyone else I can think of. He’s got a book, which he calls a pamphlet (my world won’t encompass pamphlets at 200 pgs), which you should own. It’s called Four Steps to the ePiphany - a “private joke” no doubt riffing on Steve’s experience co-founding enterprise sw company ePiphany. Get it at CafePress while you’re up there getting your Creative Communist stuff, or whatever geek wear you’re after. Get it and read it.

Here’s a story for you to illustrate how much sense this stuff makes:   I once gave a photocopy of the first two or so chapters to a salesguy. Now, that’s usually pretty foolish since, having been responsible for thousands of pages of content for sales guys, I know they hardly ever read stuff (not a slam, most of what marketing gives them is not immediately useful - a criteria I respect). Well, in this case, I came upon this salesguy reading this book — with — get this — a highlighter. I almost fell over. Note that this sales guy is now doing very well with happy startups.

So here are Steve’s materials from the NorCal BMA main event luncheon held on Wed: the presentation that he gave (not all of which he had time to go through, so I’m especially happy to have this), and an electronic copy of his booklist, which replaces the printout that I actually thought of scanning in.

Thanks to Steve for coming out!

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Changing face of influence marketing

by eleanor on 10 Dec 2004 @ 5:59 pm in Strategy-Marketing   ++

This piece from The New York Times Magazine last weekend on changing techniques in marketing is worth reading because it very much blends with the more commercial ways blogs and bloggers are being exploited as sources of trusted referrals. Whether it’s Joi Ito commenting on a custom headset the vendor made for him (which he got to try at no cost - and I would guess, with no smear on his character - that probably ended up keeping), or Eric Rice who now has a section called Paid to Blog on his blog, influential bloggers are increasingly seen as highly effective marketing media.

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Use strategy to help protect IP

by eleanor on 1 Dec 2004 @ 2:56 pm in Strategy-Marketing   ++

Guest columnists Bharat Anand and Alexander Galetovic write in The Wall Street journal yesterday that it’s important to remember that protecting IP is not all and only about legal mechanisms and recourses. He argues that:

A number of resourceful companies, however, have figured out how to use their competitive strengths to accomplish what patent and copyright laws cannot. These market-based strategies may begin by preventing a would-be competitor from misappropriating a company’s core assets. They may integrate their products with ones that are less vulnerable. Or, ultimately, they may discover, salvation lies in moving into the very businesses that put those assets in danger.

The strategies he presents are:

• Act pre-emptively: “Some companies combat infringement by acting before competitors can catch their breath.”
• Create bundles that include secure products: “While Microsoft’s stand-alone applications like Excel or Word can be easily copied, its operating systems, on which these programs run, cannot, allowing the company to do business even in the Chinese market, where, it is estimated, 92% of all software installed last year was counterfeit.” And this Forbes piece, Kill Bill, from back in June talks about how IBM is following this strategy to trounce Microsoft.
• Transform the game: “When the threat to their core assets is overwhelming, companies must take more extreme action — sometimes expanding into related businesses….Alternatively, these companies could have acquired outright the businesses that were facilitating the erosion of their core assets — or been acquired by them.”

This article is adapted from an piece that appears in December’s Harvard Business Review.

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US Economic forecasts, bets on productivity

by eleanor on 13 Nov 2004 @ 11:00 am in Strategy-Marketing   ++

Comerica Financial has an Economic Outlook: 2004-2005, And Beyond (2006-08) from this fall that describes a different picture of the US economy over the next few years than I have seen forecast elsewhere. One of Comerica’s key assumptions is that:

“The forecast horizon (2004-2008) features a “guns and butter” public sector overlay on a private sector struggling to remain globally competitive. This promotes a strong pace of technology advancement and capital investment by business to substitute “state-of- the-art” equipment for labor to gain productivity and profits.”

This assumption directly implies a strong return to investment by enterprises in technology — one that I’ve not seen, though it does depend on their assessment of “Mainstream media obsession with negative reporting on the U.S. economy”.

The important element of Comerica’s forecast is a contrarian expectation that 2004 will be a year of strong growth when compared to 2005 and 2006. The report states that “Beyond 2005, U.S. economy hits major economic and financial air pockets”, owing to the inflationary policies of the Fed (aimed at fanning the fragile recovery now) and the shadow of the large entitlement liabilities.

Adding a different perspective, The Wall Street Journal has a piece (archivedhere) about how tech is allowing companies to do more with less. The piece opens in a discussion of companies taking a much closer look at how they can leverage what they have already.

At Hannaford Bros., a unit of Belgium’s Delhaize Group that operates 140 supermarkets in the Northeast, Chief Information Officer Bill Homa says he still has excess capacity on his telecom lines and equipment that he bought or leased between 2000 and 2002….As a result (of all this), Mr. Homa says Hannaford’s total tech spending has been relatively flat over the past few years because he’s been able to get more for less. “In the next five years, I’m not looking for any tech,” says Mr. Homa. “I haven’t run out of ideas with the technology I have now.”

Companies are clearly skeptical about the value of the latest technology. Janet Memmelaar, vice president of sales and administration at Metal Cutting Corp., Cedar Grove, N.J., has not installed the last two upgrades of the manufacturing software the metal-fabricating company uses. She says what the company is using is working fine and the new versions would require her to buy new hardware. “We’re not even paying the maintenance on the old software anymore,” saving the company $15,000 a year, she says.

A quote from Joe Tucci, CEO of EMC, captures another observation I’ve heard often lately — he “recently told investors that companies no longer pay upfront for big installations. ‘They want to pay as they go or pay as they grow,’ said Mr. Tucci. ‘This phenomenon is now hitting software hard.’”

In my daily work, I see more and more evidence that the enterprise market for IT is going to be a difficult place to make money, until perhaps the ‘next big thing’ comes along. Still, some analysts are bullish - Forrester Research makes some predictions (via Tom Sullivan’s InfoWorld blog) about enterprise IT spending , saying that 46% of US enterprises surveyed said they’d spend more on IT in 2005.

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2003 - Year of Successful M&A

by eleanor on 10 Nov 2004 @ 9:23 am in Venture & Startup | Strategy-Marketing   ++

The Wall Street Journal reports today that 2003’s M&A deals were largely winners in Dealmakers Got It Right In ‘03, Study Finds.

Measuring the success of M&A deals is a notoriously difficult art, viewed with caution by the bankers who do such transactions and even the academics who track them. Indeed, a closer look at some of the numbers shows a complex picture. Median returns for all-cash deals was in positive territory, while all-stock deals registered negative returns. And when benchmarked against their respective industry indexes — not just the S&P 500 — the merging companies generally fare less well.

But J.P. Morgan’s overall findings suggest that the M&A world has taken to heart the failures of the previous five years. The failures were sometimes extravagant: companies vastly overpaying for assets that left them crushed under too much debt. Other times, the failings were more subtle: Companies glossed over due-diligence and rushed into a transaction for fear of losing the target to a competitor.

Today, caution rules the boardroom, say the bankers and lawyers who put deals together. Directors are demanding months of due diligence, and even then only about one in 10 would-be combinations reach fruition. As a result, says Paul Parker, head of U.S. mergers and acquisitions at Lehman Brothers, “a lot of the transactions are being de-risked. There is so much focus on the due diligence and integration ahead of an announcement.”

The focus on this article was on mega mergers, but it holds as a snapshot of a more cautious time, when M&A moves are made after more careful scrutiny. Less hangover from bad M&A deals means deal-flow may accelerate, which could benefit some startups and midtier players, as well as acquirers dealhunting. Definitely a healthy sign!

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A Broader View of Currency

by eleanor on 28 Oct 2004 @ 7:31 pm in Enterprise IT | Strategy-Marketing | Mobility   ++

Douglas Rushkoff has a speculative piece, TheFeature :: Open Source Currency, on what the emergence of alternative electronic currencies could mean for the world at large. It’s brief and worth a reread, especially in light of the troubles experienced (and caused) by PayPal’s network outages of last week.

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That enterprise software licensing problem…..

by eleanor on @ 5:51 pm in Emergent | Enterprise IT | Strategy-Marketing   ++

At Symposium and increasingly in commentary and news, it’s apparent that the time-honored models of selling perpetual software licenses are breaking down. Customers are increasingly drawn to service providers and ASPs who sell ’software as a service’ — they sell access but not the intellectual property of the code.

To get a sense of the current mood, see eWeek’s report on discussions at the SoftSummit conference held last week in Santa Clara.

Also worth reading is this IDC report discussing the issue in a more academic way, focusing on the upcoming financial headaches for ISVs as their revenue streams are strained by disappearing upfront license payments.

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The Tipping Point and Media Saturation

by eleanor on 24 Oct 2004 @ 11:05 pm in Strategy-Marketing   ++

Over the weekend I finally read Malcolm Gladwell’s 2002 book, The Tipping Point. It’s well-written and logical, with references to a great variety of research in pyschology and social sciences. This book is mentioned very often among startups and innovators as being an underlying transmission mechanism for getting new ideas into products which are then bought by real customers. I recommend reading it, even though the concepts were very familiar, showing that they have permeated into shared consciousness and mindset of the Valley. See some of the reviews on Amazon for an idea of the key ideas of the book (especially Gough’s).
The ideas seem very sounds and true to the experience of technology transfer. They certainly relate well to Geoffrey Moore’s Crossing the Chasm.

However, there was one part of the book that seemed out of synch with another small tidbit of data I encountered. I’m not a social scientist and not terribly interested in how people’s minds work, but this seemed dichotomous. In discussing the human mind and his concept of stickiness, Gladwell wrote that “According to a study done by one advertising research firm whenever there are at least four different 15-second commercial in a two-and-a-half-minute commercial time-out the effectivenss of any one 15-second ad sinks to almost zero.” That would support the longer, lengthier model of advertising, as we see now with info-mercial style ads.

But when do these observations take on the force of absolute rules? A piece I recall reading in The Wall Street Journal came to mind after I read the above passage. ClearChannel, the dominant player in advertising on radio and billboards, recently proposed changing its radio advertising policies and prices to encourage shorter ads rather than the conventional 60-second slots.

An excerpt of Clear Channel’s Ad-Trim Plans Irk Some Clientsappears below. The full content is available for free to subscribers until 3-Nov-2004.

That’s why in July, the company announced a “less is more” initiative, saying it would trim available ad time to leave no more than 15 minutes of ads per hour and no more than six ads in a row. The move was supposed to create a less-commercial environment and attract more listeners for the nation’s largest radio station owner, with 1,200 stations around the country. At the same time, the radio chain was hoping to get advertisers hooked on 30-second spots and increase revenue, by charging more for two 30-second spots than for one 60-second ad.

Perhaps unsurprisingly, some advertisers are balking, dubbing the plan “Giving you less, charging you more.” In the radio industry, a 30-second spot typically costs about 80% of the price of a 60-second pitch: Advertisers usually figure they might as well spend the extra cash and get a full minute. And advertisers, it turns out, don’t like having to cram their message into half the time they’re used to.

Clear Channel is trying to smooth out the situation as it approaches a self-imposed Jan. 1 deadline for implementing its new strategy. First, it is shaving a bit off the price of 30-second ads, to 75% of the cost of a full minute. And today, it plans to announce the creation of an in-house creative unit to help advertisers come up with snappier ads.

Clear Channel is presenting the plan to media buyers as a way to get more “frequency” for their advertising buck — five 30-second spots for the price of four 60-second spots. And with fewer ads in a row, Clear Channel says listeners will be able to recall the ads more readily.

What does this mean? Nothing of itself, except to say that even the best written book that presents clear and distilled theories about how the human mind works doesn’t have all the answers.

What I take away from this is that it’s important to keep the tipping point model in mind, but not to have it be the only factor guiding your advertising, marketing and product development activities.

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Considering Ecosystems as part of strategy

by eleanor on 22 Oct 2004 @ 5:19 am in Strategy-Marketing   ++

Marco Ianitsi, professor at Harvard’s Business School, is familiar to me from his books and articles in business and strategy press.

He’s contibuted a brief article to eWeek on what’s become one of my watchwords here: Ecosystems. For an overview of his theories, check out the article,
Ecosystems Key to Success.

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Immersive, mobile, interactive… marketing?

by eleanor on 20 Oct 2004 @ 10:15 am in Emergent | Strategy-Marketing | Mobility | Life-Culture-Play   ++

Looking at the increasing intersection betweeen online entertainment, interactivity and mobility, this article from Wired about the fringe game I Love Bees gives some detail on a blend of marketing and gaming that might be the future of gameplay.

I Love Bees’ lead designers said they were hired by Microsoft to make the game as part of the overall marketing push for Halo 2. But they, too, argue that I Love Bees stands entirely on its own.

“We’re building a very different part of that world,” said Puppetmaster 2. “In some cases, we’re trying to recreate Casablanca with six main characters living their lives in the shadow of the events that are bearing down on them.”

It sounds to me like the future of Gibson’s arties and movies like eXistenZ is now.

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Clayton Christensen on Open Source

by eleanor on @ 7:13 am in Emergent | Strategy-Marketing | Open Source   ++

Clayton Christensen teaches at Harvard’s Business school and is author of two highly influential books, The Innovator’s Dilemma (TID) — a classic from 1997, and The Innovator’s Solution (TIS) — released last year. TID is an excellent, valuable read for comapnies of all sizes, but is of primary usefulness to large companies seeking to profitably commercialize innovation. TIS is newer (ed. note - I haven’t read this yet), but focuses more on how small companies can use innovation to grow.

Prof. Christensen’s influence is beginning to seep into the more popular business communities. He spoke at the Open Source Business Conference 2004 in March, and an archive of the presentationis available for listening at IT Conversations.

Also ZDNet reports that Prof. Christensen is giving Microsoft strategy advice on coping with the threats posed by the innovation-run-wild that is the momentum around Linux and Open Source.

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Collaboration as Collusion Brings New Solution to Prisoner’s Dilemma

by eleanor on 15 Oct 2004 @ 4:37 pm in Strategy-Marketing   ++

Wired News gives a good writeup of the most recent competion between programs to solve the famed ‘Prisoner’s Dilemma’.

The strategy behind the winning programs was just that - a strategy adopted by about 60 competiting programs who were programmed to recognize each other and cooperate accordingly. Transferring this particular problem set to human interactions, it’s clear that we can see parallels in the fundamental challenge of recognizng and collaborating with a like mind. The applicability of this experiment for the corporate culture, business ecosystems, and interactions over the net is even more readily apparent when the researchers discuss where they want to take their line of research next:

Jennings is also interested in testing the strategy on an evolutionary variant of the game in which each player plays only its neighbors on a grid. If your neighbors do better than you do, you adopt their strategy.

“Our initial results tell us that ours is an evolutionarily stable strategy — if we start off with a reasonable number of our colluders in the system, in the end everyone will be a colluder like ours,” he said.

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