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The Internet does not make much sense… On pricing digital goods and other illogicalities

Vincent van Wylick — Tue, 10 Aug 2010 09:14:49 +0000

“From my cold, dead hands…” It’s something that came to mind as I was thinking about writing this post. The part that doesn’t make sense about the Internet, today and perhaps since ever, is that American concept of “Freedom,” of independence and lack of governance.

In my post on piracy, my point was not complete. YES, historically, there has been a trend in every industry towards eliminating inefficiencies and yes, in some ways making things digital is just another step down that line, but NO, as @ksilvennoinen pointed out in the comments, digital goods do have a value greater than zero, the question is how to find a way to recuperate that value from customers.

To me value equals investment, but that is not the way pricing works. Unfortunately, I managed to misplace my pricing bible some months ago and can’t seem to recall most of the rules of pricing, but there is a strong psychological component to it. And the psychological part is what I am confused about. To get another book in here, it’s just like “Positioning: the battle for the mind,” if online goods are ‘positioned’ against a never-ending slew of free content, how do you position yourself to be priced at a value greater than zero?

On the one hand, it’s not so hard. You position yourself in such a way that a comparison does not make sense. Let’s take digital books, an area I actually don’t consider as threatened as publishers and media-outlets would like you to believe. The reason is that as soon as you download a digital book and view it on a PC, it immediately becomes an inferior product. Unlike a TV-show or movie, which I can frankly watch on a post-stamp (no matter what David Lynch says), reading and eyes work best together on either paper or e-paper (haven’t tried reading on the iPad, though I really like doing it on the iPhone). Of course the real threat to e-books in a PC environment is websites, but that’s a story for another day.

To get back to it, e-books work best in a dedicated reading environment, which immediately creates opportunities for platforms and putting walls around those. Platforms ensure that there is a network effect of content, walls ensure that there is no inter-leakage between the quality-controlled inside and the dark-waters-of-piracy outside. And that mechanism allows digital goods to be priced to recuperate investment and more. But…

Where it gets confusing again is how very open the Internet is. This openness allows you to create an app in a day, it also allows you to jailbreak an iPhone (now with US-gov. support), and it allows for me to get a movie that Chinese kid 107-xg46-*** released 5 minutes ago on the torrentZ. Amazon was built on this openness, as was OS X, as was pretty much anything that was stolen out of the Xerox labs 35 years ago. While there is a trend of eliminating barriers in general, it is even more prevalent on the Internet.

So, what I am asking myself here is the following questions:

Is this 1969 again, where hippies roamed free, sex was consequence-less, and there is an Aids-epidemic on the horizon, which will make us go back to the 50s in terms of promiscuity?
Are platforms doomed? I’m just talking platforms, not walls around them. Twitter is an example of an open platform.
Are the walls around platforms doomed? So: iTunes & iOS-devices, Amazon & Kindles, Facebook & human relationships, every online retailer in the world…
Is pricing digital goods a logical thing when taking into consideration how it is positioned against other digital goods?
Should digital goods be free and prices be set for things that cannot be spread digitally: iOS devices, Kindles, Disk-media, other consumption-devices…
And many more questions…

Getting back to value equals investment in my third paragraph. In any chain that leads from idea to the user, there are value points, which come from some kind of investment. In the embroidery example, a strong value point appears to be the creator. Without that person, there would be no creation. And, of course, there are plenty of examples on that. In the case of iPhone, strong value points are both the conceptualisation (R&D expenditure) and the production costs. In the case of Amazon, the website (presentation, distribution, etc.) is a strong value point. The end-product can still be digital, as it is in the case of the embroiderer’s designs, the iPhone apps, and the Kinde-ebooks, but the investment in certain parts of the chain is very much real.

And the value to consumers, which the crux of the matter, is equally real. If I compare 2010 to 1995, we live in the era of digital convenience. From e-banking, to restaurant-reviews, to TV-shows, to software, we undeniably live in a better world, but one where, ironically, we are less willing to spend as much on it. But there is another side to this as well. Let’s say, everything that exists is walled off. You’d have to pay to get access to every blog-post, to every youtube-video, to everything else that is already being charged for. I would sincerely start to question whether it was all worth it.

The Internet continues to be confusing to me, part shopping bonanza, part free-for-all utopia. Writing this has brought a little clarity, but if you have stuff to add that clears it up even more, please feel free to share it in a comment.

Can we accept piracy as a necessary evil already? [Cranky Rant]

Vincent van Wylick — Wed, 04 Aug 2010 10:39:59 +0000

I have a general philosophy on the evolution of the B2C and B2B relationship, one that is inspired by history. Let’s look at some examples. Money first took the form of barter, then gold, then coins, then paper, and now bits and bytes. Transport: on foot (great shoe-sales), animals (great stable-sales), cars (great garage sales), planes (great duty free sales), and finally tele-conferencing (great device sales). Books: handwritten, handprinted, printing-press, mass-media, internet, iPad / Kindle. At every turn, something was replaced, an industry was destroyed, yet it was for the purpose of evolution. Don’t get me started on evolution itself, as that is all about destructive replacement.

The point about all of these is not about destructive replacement. It’s about improving a product in the eyes of the consumer. And what enabled this improvement? Common standards, collaboration, user-feedback, guts, ruthlessness, innovation, progress, etc. Why producers don’t like to cooperate with that? Because every technology requires an investment to make it work.

Think of the poor embroiderer, which is what inspired this post (bound to get a lot of flack). It’s a funny industry. I wasn’t aware that needlework designs are being sold over the internet and thus at the risk of piracy. I suppose I always thought an embroiderer embroids, then sells their product and ships it to consumers. Instead, they seem to go to the simplest side-product of their work, the one that becomes a foundation for potential mass-production, the “design-chart,” which is then being “shipped,” via download, to customers. Interesting! It kinds of makes sense from a distribution standpoint. Customers are not willing to pay for the shipment of needlework, instead they prefer producing locally, which really is a great idea. The only problem here is the way it is distributed.

In a B2C relationship over the internet, I think, it always comes down to eliminating as many barriers as possible. When you buy from an online shop, you really want the product in your house as quickly as possible. If I could reach my arm into the screen in front of me and pull out the product that I just ordered, that would be just perfect. It’s worse when the product is digital, because the customer knows that it’s just bits & bytes really not worth anything tangible (I’m just talking about the 1s & 0s here) and it could be in the customer’s home in a millisecond. Instead, business erect as many barriers as they possibly can, whether it’s a big ‘copyrighted’ sign across a picture, an overly complex signup/payme page, or the somewhat convoluted iTunes-model, where it really is easier to pay than to pirate.

But in the light of evolution, these barriers are bound to be broken! The same reason why gold is no longer a form of payment, because it’s really heavy and annoying to handle, the world of commerce has a way of evolving towards something easier and easier and easier, until finally I pay by waving a magic wand (eh RFID chip) across a panel.

Let’s get back to embroidery. The problem is two-fold. 1. fragmentation, because any solution that I am about to propose will not get blanket acceptance. 2. the silly notion that selling designs, which seems like the most valuable thing an embroiderer has to offer (actual IP), is something that should be done in a direct B2C relationship. In the light of consumers constantly wanting to break barriers, this offering of valuable IP seems like an industry-defeating purpose.

So what are possible solutions?

consolidation & protection. Basically the iTunes model, where everything is placed behind a secure window that can preferably only be accessed via a specific device (my personal belief is that anything bits & bytes will eventually be free as that is not where the real value lies).
selling designs via local shops. If the problem is distribution, why not partner with local shops that keep your designs behind bars and just print out the end-product for consumers.
selling designs via the machines that produce needlework. No idea what they are called, but they have a strong incentive to keep their machines being used and have a direct line to consumers.

I’m sure any of the above is a solution with problems, but my point is the following:

Piracy will continue to exist and will become worse if you make it easy for people to pirate.
Consumer products evolve in a fashion that keeps pushing out inefficiencies and piracy is one of the quickest ways online to remove these inefficiencies.
The only way to prevent privacy is to not distribute anything that can be distributed via bits & bytes.

Case in point: the idiot that just walked into an Apple store and jailbroke every damn iPhone 4 on display.

Last point: I am not advocating piracy. I run a company myself, I have a business degree, and I believe in getting paid for your work. But I do believe silly strategies deserve to get punished. And there are plenty, plenty, plenty of them that I have mentioned on this blog over the years.

Thoughts on Intellectual Property and dealing with everything else that is out there

Vincent van Wylick — Fri, 30 Jul 2010 10:05:59 +0000

We’ve talked to a number of investor these last months and I can classify their questions into three categories:

Intellectual Property Protection (IPP)
Revenues
and Operations

Revenues is a straightforward concept and reflects market potential, market share, and business-model. Operations can also mean business-model as that clearly affects your operations, it also concerns the team, and it very much concerns *the last mile*—a very detailed understanding of how your product comes of the “factory line” and goes into a customers hands (every step and every screw has to be planned out). And IPP, well IPP is something special.

Intellectual Property Protection refers to legal and other ways that you protect the innovation and knowledge that is built within your company and its people. It is not as straightforward as simply taking out a patent, copyright, or trademark, though those are usually the first avenues that investors will pursue when talking to you about IP. IPP can just as much come from keeping information tacit—inside the heads of your team—, developing systems that spread an innovation across many parts—e.g. the way technology companies prevent copying from factories they outsource production to, by only giving them parts to produce, but not the whole—, another systematic answer could be deep vertical integration, which ensures a higher quality of products and services than can be replicated by vertically smaller competitors (a strategy pursued by Apple and Starbucks), and last but not least: speed—in some industries it pays to just scale very quickly, rather than build a protective base around IP (a contrast between e.g. web and medicine).

But let’s get real for a second. You’re an inventor, you developed something new. The most obvious path to pursue is a patent. The first issue is cost, because taking out a patent is not cheap. Basically, by filing a patent in your country, you can protect yourself for a while because there is a period, 1-2 years, I believe, where you are filing it and it can serve as a type of legal instrument to prevent other companies from filing a similar patent. But in the end, you have to shell out maybe €5000 per country to protect your invention internationally—and those costs do not cover the legal cost or protecting a patent once it’s being breached. Let’s get real x 2: you’re a startup and while your technology may be innovative, it may not be what the market needs (which can relate to actual taste, but also to cost, to regulatory issues, etc.) and that means that your patent, if you decide to take it out, may not be worth squat. Let’s get real x 3: your invention may not be unique, at least not in its current form, and pursuing a patent in that case is not even feasible.

So practically speaking, what do you do? Just to be clear, I don’t have the final answer to this, though it is something I am constantly thinking about as a potential risk in our, a technology startup. So my interpretation and approach are entirely my own, but I am writing this to start a discussion more than to give the final answer.

The answer to me is all about strategy. IP protection has to make sense in the context of a longer term business strategy, long term meaning to me longer than 2 years and preferably longer than 5 (if you have an actual patent and it has market value as well, you have over a decade of protection). And IP, just like a business, is something that can be split up to cover different areas related to supply, to the manufacturing, to the end-product, to the service, etc. So the more broad and comprehensive your way of protecting your intellectual value is, the less it can actually be replicated by your competitors.

All IP concerns aside, it is sometimes of benefit to not protect the whole value chain. This is true in our business, which I will write about some other time, where we can split up our technology into core-components that are integrated into new solutions which act as a platform for more solutions. Locking off that whole chain is perhaps of some benefit, but in some ways we would like to have people innovate in their respective areas and for us to focus on developing better products out of that. My point is that IP protection should be seen as something that can be shifted to those areas most critical to your business and that new development in your industry is not necessarily something to be scared of. In the end, we are in the product business and if we can produce superior solutions for customers that outweighs comprehensive IP solutions.

So the conclusion is, even if you are developing a product that is not entirely novel, there are places in the value chain where you can still develop an IP solution. And if you are developing novel solution, it has advantages on both the supply and the market side, to not make your IP too restrictive and thus diminish your product potential.

The role of Sunk Costs in Strategic Decision Making—a European’s perspective

Vincent van Wylick — Wed, 28 Jul 2010 11:28:59 +0000

In his MBA-series (that I don’t read enough, but I may not be the target audience), Fred Wilson writes about the role of sunk costs in making future decisions. As an entrepreneur, I am constantly concerned with the cost of decisions, so I was kind of happy to find out (though I do vaguely remember learning this before) that sunk costs—the costs previously incurred in an enterprise (of any kind, incl. love)—should not be an explicit factor in making (financial) decisions about the future. I remember a distinct case not too long ago, where I did include sunk costs as part of my decision-making, so here’s a few thoughts on it.

Sunk costs are part of reality. Every decision you make comes at the cost of not doing another one (opportunity cost) and as soon as you make a choice and invest in it, that money / energy is sunk / gone. The thing that counts then is to evaluate both the context under which the decision was made and the outcome of that decision. While it makes sense to not include sunk costs in a financial decision-making formula, a negative outcome does require taking pause before making new investments. Perhaps this is a European attitude to things, or a risk-averse one, but much of our thinking about forecasts is based on looking at past performance.

What matters most then is the context, and this, in a startup environment, is rather a complex affair. I’m going to draw some analogies with rocket building in the early 1900s, producing art (at any point in time), and staring at goats here. Art is, I believe, a calling that is very difficult to quantify. It is very strong amongst people that seem to be bad at everything else—just based on my own experience. In this case, you have no past performance to base future performance on. And art being a fluid craft where aberrations of the status quo seem to produce some interesting results (but also at terrible odds), it is nearly impossible to predict the future of such an enterprise. Rocket building in the early history of rocket building suffered from similar dangers, in that no one had done it before and it required cracking a great number of eggs before reaching the moon.

All of these are sunk costs that may or may not lead to greatness, and what I take issue with is to then ignore sunk costs in making future decisions. At what point is it justified to ignore sunk costs and at what point isn’t it? If the “staring at goats” division in the army spent half a century, eh, staring at goats, you could argue that it’s an investment in the future, but you could also argue that it’s a foolish enterprise—just for fun, I tried staring at the back of the heads of a few people standing in front of me in a supermarket, I did make a few scratch an (imaginary) itch themselves upon my specific mental request, but I can’t say that this “sunk cost” was a reason to invest some more energy into it.

When we made a financial plan for our startup, we didn’t give much thought to making the wrong decision, though that is a very important factor to consider at this stage. It is nearly impossible not to make a wrong decision when you’re building a rocket to go to a place no one’s gone before. What we did do were two things: 1. we researched as much as we could of the environment we were heading into and the tools & reality we had to work with. 2. Every, and I mean *every* decision that had to be made that involved a financial or time investment was scrutinised as much as possible beforehand. But… both research and execution can be flawed in that not all information may be clear—especially regulatory stuff can be a maze to travel through, as can understanding a science or technology—and execution depends on both good information and good people to execute. And the fact is, I believe with any startup, that we have incurred certain costs that can be considered sunk and gone. When we make the plan for the next stage, we will have to ignore those investments, as painful as they have been.

I’m a great believer in the lean startup. This comes from my father, whose whole life philosophy is based on a Ghandhiesque lifestyle that involves discipline, routines, and a leanness when it comes to living and working. I can’t say that this is exactly the way I want to live my life, but I do believe that the opposite, coming from an abundant lifestyle and trying to make good decisions, is more than often a formula for failure. Entrepreneurs and their startups should to a certain degree remain hungry so that the decisions they make are made with the desire to improve life. If you see the amount of hurdles that are presented to startups everywhere, you know that this attitude of keeping startups hungry is shared by many people.

A part of this leanness in decision-making is what I discussed before: scrutiny, scrutiny, scrutiny, among many a step of the way. But I have to frankly admit that this scrutiny can lead to a near bureaucratic way of doing business, which, to me, seems quite incompatible with creating great innovations that require some significant dreams. Dreams are your mind processing information in funny and interesting ways, and if there was an accountant sitting in the back of your head telling you to not dream this and that because it costs too much, it wouldn’t be much of a dream.

That brings me back to the role of sunk costs in decision making. One must be allowed to make mistakes when engaging on an enterprise. It’s quicker to learn from a mistake than to try to constantly prevent it. I’ve also been thinking quite a bit on the role of subsidies in early stage startups and the chance they present to make these mistakes. That, however, should be the topic for a future post.

My conclusion thus is that while entrepreneurship is a serious business, there can be little great ideas without some (in many cases considerable) room for experimentation. How you quantify this, I think, remains subjective. It can’t be Google’s 80-20 rule, where 20% of an employee’s time is spent on his own ideas. When you start, it should more likely be 50-50, with 50% being aimed at making good decisions and the other 50% at pursuing the dream that make those decisions have meaning.

The last retail store on earth—a fantasy story

Vincent van Wylick — Mon, 26 Jul 2010 15:41:46 +0000

The door slid open slowly, all that was visible from inside the store was a wide beam of light that slowly expanded into the shape of a door. The automatic triggers kicked in and the other security-panels in front of the windows slide open also, illuminating the last retail store left in the world 2020.

He entered. The last ever retail-clerk left on earth. A wide smile on his face, from years of practice, a swing in his step from his regular work-outs. All part of the routine.

The camera-system, also the lighting system of the place, followed his every step—one tiny camera in every tiny light-bulb, giving combined resolutions beyond that of any screens in use today and filming whatever was in the store with more dimensions than the holographic output to date would require. As he reached the music-rack, the one closest to the door, the one most geared towards impulse buying, he passed the security threshold and the system was forced to react—was he an intruder or an insider? Always a fun game to play with this flaky system… He passed the test and personalised systems started turning on all around him.

It started with the music-rack, a 50 metre (150 feet) long pathway surrounded by holograms of artists’ heads performing—sometimes in group-form, if it was a band—and tiny beams triggering the sub-dermal speakers behind his ears to play a song, just right for his mood and of course just out in the charts that week. He sometimes felt he was his best customer, because he rarely left that isle without purchasing at least one song. Another credit down from his, well , limitless credits that he could spend on these things. One thing caught his eye, the Beatles hologram was slightly off-colour, the yellows not quite as yellow as they should be. He knew banging the holographic projector would only make it worse, so he made a mental note to call the mechanic, who could probably calibrate it from his home office.

Next up, the movie isle. He loved how movies had evolved over the years to become a hybrid of a blockbuster movie with great effects, a great story-line that was essentially limitless and could be changed by the viewer as he or she consumed the movie. The movie isle was a mini-experience of such a thing, also targeting his past taste, his current mood, as well as plenty of other variables of course. The result was that as he moved onto the platform, he saw Disney-bunnies playing in the grass around him, and walked along a couple of prehistoric hunters in their furry outfits with, in the distance, their attractive female mates waving at them and cheering as they got closer. He could smell the food as he drew closer, another marketing gimmick, and he was happy that after this came the food isle.

At this point, it should be said the last retail store in the world (also the name of the store) was in fact a great big mall. The difference to other stores that came before? It was run by a single man and everything else was automated or remote-controlled. A consumer would enter and would first be entertained through music and movies, and could then choose to fulfil his primal needs: food, hygiene, etc. The second-smallest section in this store that had everything was the electronics section. People basically had electronics implanted into their bodies or they ran everything off a terminal. There was no hardware differentiation, everything had already been invented, and every software could run on the hardware that people owned from the day they became an adult or when their parents gave them permission. The smallest section of this store was the payment area, in that there was none. Why pay when every credit you need is stored on your person and you can just swipe the product you want and get it?

The clerk had said his goodbyes to the women in his personal film and started down the food isle. Again, a moving platform, on which he could sit this time, with choices flicking across the tables next to him, sushi-style, until he identified his favourite, grabbed it, and munched it down. The platform, measuring his progress and seeing that there were no impatient customers trying to get by, basically came to a standstill, allowing him to eat and enjoy.

This was a typical start of the day and arguably he had the best job in the world. The rest of the time would be spent on support, on dealing with customers that “didn’t get it,” take care of the technical issues that arose even in his technology heaven, and, even, doing some sales, though that was highly unlikely with the kind of data computers already had on consumers, making every product suggestion the perfect one.

The clerk didn’t care where his customers came from or where they went, but he suspected that they lived very much like he did, in an overcrowded apartment block with a big postal area designed specifically to receive all the UPS shipments people ordered online or in his store (mail and those inferior small postal boxes were out-innovated years ago).

The first customer came in and he smiled in anticipation of having to do absolutely nothing, while the customer spent at least 20% of his disposable income that month. Typically, people only came in once a month, if ever, just to get that personal, immersive touch that systems at home and elsewhere would never be able to replicate.

Welcome to the last retail store on earth.

This story was inspired by a recent Macworld article on comic stores vs. iTunes, my blogging on food and retail, and thinking about the future of the physical retail store. Pictures courtesy of the movies “Clerks” and “Thomas in Love.”

Prefer to have me blog in fantasy format? Let me know and I’ll continue to do so!

Status, Signals, and the Startup

Vincent van Wylick — Wed, 23 Jun 2010 21:26:08 +0000

Starting a business, just like anything else, really is defined through personal contexts. For instance, I’m a first-time entrepreneur and my partner is a 4-5-6th (hard to keep count) entrepreneur—for him, he views starting a business very differently than me. There are other differences as well, such as age, type of education, culture, marital status, all of which affect how one views the starting of a company. I aim to not pronounce these differences, rather this is a blog post about the generalities of sending out positive signals and raising the status of a startup.

Here’s a list of signals a startup might want to send out (I will discuss these further below):

The quality of your idea/prototype/product (the whole range of what your startup is centred around)
The quality of the team
The quality of your associations
Your legal status as a company
Your financial situation
The satisfaction-quotient of your customers
The speed of growth, which is really a component of ‘quality’
Your location & office

I kind of threw a few in there, as you can perhaps tell, because for instance some signals can be bundled together into tangible vs. intangible signals, as well as technology, people, financial, legal, etc. You can of course also split op signals into external—to the outside world—and internal—to your co-workers or board.

Why does any of this matter? On a basic level, because we all care about showing signs of being good at something (and starting a business is a highly personal thing in which individuals determine the direction such a venture takes), and more practically, because startups are about bringing ideas to the world that do not exist yet.

Signals are about increasing your worth in the eyes of someone else. To go back to the list, the first one, product, should be obvious: either create a kick-ass product or find a kick-ass customer that really needs your product (the latter is more realistic).

No. 2, the team, is trickier, though still crucial. It’s about getting the right mix of people in a company; people that have different educational backgrounds, possibly different genders, different ages, different networks, etc. It’s tricky because any relationship risks becoming a liability if people don’t match (that’s a big IF). And because getting quality people doesn’t always come easy, either because you can’t afford them or because the type of quality you need cannot be measured on paper or elsewhere.

Three, associations are pretty straightforward. If I have a board-member that has a good reputation, that opens doors. If I have partners in a market that is my target market, that kicks ass. If I can stamp logos of companies on my product that already have a name, that’s great marketing. It’s not rocket-science and the only thing that is required is to make these kinds of connections happen, usually through the quality of your pitch, your product, and your team-members, each of which comes with their own network.

Four, legal status, is not so straightforward. For many companies, having LTD written next to their name is a sign that they reached a certain stage. But in of itself it means nothing, only if it actually makes sense from an accounting point of view. So this is actually something that I don’t think should be up to the entrepreneur, but to an accountant and tax-lawyer. Having LTD or equivalent next to your name is still sweet of course (though not if it costs you 1000s of dollars/euros to set up and you haven’t written your business-plan yet…). Another legal status symbol is having a patent or a trademark. Both are valuable only in certain situations and require a serious strategic analysis beforehand, not least because it is so expensive to maintain (between 6000 – 100,000s for a patent & that doesn’t include the legal cost of going to court over a dispute), but because if you haven’t done your homework, you could be spending money on protection that isn’t worth a damn. Legal signals always require the help of experts, which is why lawyers will, for better or worse, always be around.

Five, the finances, has consequences on so many things that it’s impossible to summarise it well. What kind of company do you have if you can’t pay your employees, if the effort you put into it isn’t generating any cash-flow, etc.? The answer is simply a bad one. Other positive signals here are having a high profile investor on board or, preferred by most companies, a high paying customer or 100.

Six, your customer, should really be number one. Again, what kind of company do you have if you don’t have happy customers? It’s not impossible that this is the case at the start, but there should always be room for making customers happy—interesting story about how Zappos decided to sell to Amazon because its stakeholders thought Zappos was investing too much time/money in increasing customer satisfaction. There will always be conflicts in regards to customer satisfaction vs. financial satisfaction. Another often underestimated problem is that one happy customer doesn’t translate to another. This is the topic of a little book called ‘Crossing the Chasm,’ which is about going from early adopters to the mainstream, different types of customers with very different values and expectations!

Seven, speed, is one that I don’t like, but became aware of through my studies of entrepreneurship. It’s crazy how much media-attention fast growing companies get, as well as how much government-attention. If you can grow to 20+ employees in 2-3 years, it wouldn’t surprise me if politician X gives you a call to thank you for the good you’re doing the economy. If you grow to 1000, the queen/president will probably shake your hand. On the other hand, there are plenty of situations, the internet boom & bust comes to mind, where speed is actually a detriment and it would’ve been better for the entrepreneur(s) to take better care of the foundations of the company (you know, building a profitable business), rather than focussing on the status of having a ginormous team. A debatable point, I know…

Finally, location, well who doesn’t want an office looking out at Manhattan or, in my case, some tropical beach somewhere (I don’t really need the office…)? Who doesn’t want to be able to invite clients and show them your shiny office, with plants, fountains, and beautiful people everywhere? As I hopefully made clear, sending out signals is fine and good, but it should always be weighed against what you give up and if you actually need it. Kind of the same thinking that should be employed when deciding whether to get a new Apple product or Aston Martin—will those shiny objects really make you more desirable to the opposite sex? Well, maybe a little

That was a little braindump. Hope you enjoyed it.

Liberating Leadership, intrinsic equality and world-class businesses

ceciiil — Sat, 05 Jun 2010 13:25:23 +0000

Many thanks to @flapinta for pointing this one to me (french link). What a revelation !

Isaac Getz is is a professor of Idea, Involvement, and Innovation Management at ESCP Europe. He has been Visiting Professor at Cornell University, Stanford University and at the University of Massachusetts. He graduated in Computer Science, then obtained a M.Sc. in Management Science, a Doctorate in Psychology and a post-doctoral degree (HDR) in Management.

I usually don’t spend too much time providing information on the business thinkers I quote, but considering the content, I just wanted to make sure Isaac Getz is not mistaken with some kind of hippie smoking ganja on a beach in Goa.

With Liberating Leadership : How the initiative-Freeing Radical Organization Form Has Been Successfully Adopted (pdf) Isaac Getz received the accolade of French Management Union of engineers (SYNTEC) with the Academic Prize of Management (french link again).

This 26 pages essay provides us with further evidence that methods of management that arose in the 50s (Chris Argyris and Douglas McGregor), have been successfully applied by dozens of world class companies and market leaders in their area (Toyota, Southwest Airlines, USAA, Avis, WLGore, QuadGraphics, FAVI in France etc …) to foster employees engagement. The amazing thing is how they align with the management principles that are consubstantial to Enterprise 2.0.

In a time where leadership has never been so critical for businesses, some lessons to remember from this essay :

The key to F-Form organisations

Chris Argyris and Douglas McGregor researches converge in the 50s to the conclusion that traditional organization forms (organisation silos, command and control type of management) lead to failure.

In the 90s many companies such as Southwest Airlines or Toyota illustrated successfully Argyris and McGregor preferred organisation type : what Getz calls the F-form. In F-form organisations, employees have complete freedom and responsibility to take actions that they (not their bosses) decide is best.

Getz decided to study these companies to answer this obvious question : how come this type of organisation, yielding impressive economic results, have not been more generally adopted throughout the business world ?

What he found out : there is a common factor in all the companies where F-form of organisation prevail : liberating leadership. Enterprise without this type of leadership just can’t adopt this type of organisation.

All studied leaders understand the defining function of the organizational form they were building, to allow complete freedom and responsibility of employee’s action.

Nourishing people three universal needs

McGregor redefined the How to motivate people ? conundrum into a “How to build an environment where people self motivate themselves“.

Edward L. Deci and Richard Ryan studied organisations and proposed a self-determination (wikipedia) and work motivation (pdf) theory. This identifies a framework of non controlling environmental factors required for self-motivation : relatedness, competence and autonomy.

Beyond these environmental factors, they identified three universal needs that, once fulfilled, lead to self motivation :

need of being treated intrinsically equal,
need of growth
need of self-direction.

Creating an environment for intrinsic equality

Robert Townsend (CEO of Avis) published the Up the organisation best seller in 1967. Motto : once you’re in charge, remove everything you didn’t like as a subordinate and implement what you missed.

Robert was an admirer of Management Theory Y by Douglas McGregor. Alike other liberating leaders, he proceeds in what could seem to be an empirical fashion, adopting work practices that help treating people intrinsically equals and removing the ones that does not.

Principle thoroughly adopted for instance by Cristobal Conde, CEO of SunGard :

How do people get recognized? How do you establish a meritocracy in a highly dispersed environment? The answer is to allow employees to develop a name for themselves that is irrespective of their organizational ranking or where they sit in the org chart

It’s all about listening

This is a very strong and common trait of liberating leaders : stop controlling and start listening. There are some telling examples in Isaac Getz essay but the most impressive I know of probably is Paul Chambers CEO of Cisco (though not in the essay) :

I had to move from a command-and-control leader to a collaborative one.” Collaborative leadership means “letting go” by involving others in decision making, listening to ideas.

The are good reasons behind the listening key. Jeff Westphal CEO of Vertex provides the Wisdom of Crowds one in Getz’s essay. But the main one is that when people genuinely are listened to, they feel intrinsically equal.

Creating an environment for people to grow and self direct

With all the studied companies and organisations, Getz’s team has witnessed a strong focus on making sure the company encourage self-direction. Among other examples, the essay explains how USAA (insurance company) does not measure the performance of the call center on the number of calls handled per hours but on the number of customer problems solved during the first call.

What really is interesting here is that the company provides the guidance (take care of the customers by fixing its problem in one call) rather than the control (count the number of calls addressed by employee). This did not prevent USAA to top Business Week 2007 and 2008 (2nd in 2009) customer service ranking US wide.

Fostering culture-keepers

Another common principle with liberating leaders : they are the culture keepers. There is a strong will to foster this. We live the culture (Terri Kelly CEO of WLGore – link to her video).

And there is a will just as strong to make sure nothing can damage it. Getz gives the example of FAVI, an amazing french company building brass gear forks auto parts. This company has experienced a 3 decade long double digit free cash flow and solid margins, moving from 0 to 50% of market share in an industry where its European competitors are, at best, at a loss, and in most cases has disappeared.

In the 25 years of the company, Jean François Zolbrist (great french blog post by @pmeance including a video of JFZ explaining FAVI principles) didn’t dismiss people whose job became useless. But he did promptly fire 3 people for malfeasance as they were not treating people intrinsically equals.

This brings us back to how Brad Bird protects innovation in Pixar by getting rid of passive-agressive people.

Main values

All the leaders of the studies company share the same values :

Freedom and responsibility values. As Bil Gore said : “Freedom is is the great motivating power of individual human beings”.
Creativity : A survey from IBM’s Institute for Business Value shows that CEOs value one leadership competency above all other : creativity. One of the observed main feature of their creativity, is the ability to rephrase problems to find solutions more easily.
Wisdom : The ability to contextualise and the reluctance to fundamentally attribute errors to individuals

Be nice

Last remarkable trait of Liberating leaders, they make sure their F-Form organisation are considerate not only with their employees but also with their suppliers, customers and partners.

This brings us back (again !) to E. Goldratt definition of any company goals : be profitable, take care of the customers and take care of the employees.

By doing so, the F-Form companies develop trustful long term relationships.

A remarkable essay which sheds a great light on the “mysteries” of many successful and exemplary companies. It perfectly complements Gary Hamel best seller The Future of Management.

Now the questions : have you witnessed such type of leadership ? Have you experienced it ? How to implement such type of leadership in an organisation ? (My hint : it starts with E and finishes with 2.0). Let us know.

E’ship diary part 7: Gut Instinct vs. Calculation, or On Managing Uncertainty

Vincent van Wylick — Wed, 07 Apr 2010 20:24:06 +0000

Let me start by saying that it’s hard to write about what we’re doing, particularly from a non-marketing angle. Tech IT Easy is a .Org and it doesn’t feel right to use it as a commercial medium (apart from the sponsorship banner, which I value very much and which will at some point host my company’s logo as well).

Marketing aside, it’s hard to write about something that continues to evolve. What is a permanent truth is that you get presented with a lot of information, challenging problems, and Choices (with a capital C) all the time, and I wouldn’t exchange this period for anything (except for a bit more sleep).

The Uncertainties
Today’s post will be about managing uncertainty, which is really at the core of my job description. I wrote about technology, market, people, and other risk before, which is a way to abstract what is happening.

What really is happening is that you have multiple people in a company, each has their own job, not each does it in the same (predictable/independent/insert apt term here) way. These people have to build or build upon often multiple technologies that may or may not exist yet. All of that needs to happen before the project runs out of money. You need to involve external parties who have to like what you’re doing, enough for them to give us stuff for free, invest in our stuff, and/or buy our stuff. Risks from all angles but oddly enough it feels fine.

Lilypads allround
In a draft I wrote a few days ago and don’t want to bore you with, I compared it to the following:

Entrepreneurship is different. You may love doing a certain activity more than others, but doing so may very well come at the price of success. If I were to try to describe the feeling, I would say it feels like jumping from one lilypad to the next and keeping them all floating in the same general direction. I can spend more time on one lilypad because it houses a nice frog I like or because the sun’s shining on it just right. But eventually, the pressure would push the leaf into the water and I would drown. Or something to that (slightly nightmarish) effect.

This isn’t that bad, of course, or rather if you think it’s bad, believe me: you’ll get used to it! I wasn’t prepared for this, but I knew it would be hard and now it’s just an everyday thing.

The best way to deal with all these lilypads is to learn to be efficient and to spread the love around equally.

Gut instinct vs. calculated risks
During the early days of my master in entrepreneurship which was supposed to teach me all this stuff, we tried to analyse “the entrepreneur” from the psychological, sociological, and economical perspective. The most frustrating part about it was the psychological side because every academic paper and article seemed to compare the entrepreneur to a superman. It probably didn’t help much that plenty of those articles were written during the .Com days where we all worshipped entrepreneurs many of which later turned out to sell very good smelling air.

One thing that struck me, however, was the concept of “calculated risk.” Entrepreneurship isn’t a risky venture, it is an exercise in calculated risk. I didn’t get what that meant until very recently.

As mentioned, our company is composed of several people, all of whom are different and work differently. I have people that need structure, people that hate structure, and people that seem to jump from one lilypad from the next, with me, the “boss,” chasing after them. In one way I hate it, in another way I really want people to find the best way FOR THEM to work, though of course respecting the general reality of our situation.

I am taking a risk there, but the crucial part is that I do so in a calculated manner. And that is more literal than you think. For example:

We have a very clear vision of where we want to be in several months time, but there are alternative paths to get there. One would be to build upon existing technology, which would involve a slight adaptation but at a very high financial cost. The advantage is that we have a ready to go product, the disadvantage is that we have to calculate the higher cost down to our customers. That’s ok, if it wasn’t for path no. 2.

No. 2 would require building something from the ground up that would interface with an existing technology, except that it allows us to create something much more impressive (and innovative!), as well as build a series of cheaper prototypes until we reach the mature prototype phase. Cost of production would be the same in the end, except that we can produce 10 versions of our product for the same price. The advantage is a superior product for the consumer, the disadvantage from a developmental stance is that instead of a minor adaption such as in path 1, we spend more time on this part, time we could allocate to other areas.

These are pretty much once-a-week decisions that I have to make, and a large part can already be decided by instinct. It is better to build 10 cheap prototypes than 1 expensive prototype. But how much better it is can also be calculated out in time and material cost in a simple excel sheet.

How I choose to interpret “calculated risk” is that it is actually calculated. Risk is simply uncertainty and uncertainty means that there are alternative paths to a destination and we don’t 100% know which is the right one.

You can apply this to plenty of other things, such as how to design products for different business models and how to design companies for different investors. It is amazing what clarity it brings to quickly crunch the numbers when a new idea is introduced that appears to derail the whole project. After calculating the cost of that choice (the “risk”) it may in fact bring the project to a whole new level!

I still consider myself a visual thinker where ideas are concerned, but I am becoming more and more convinced of the power of “the numbers” in turning ideas into commercial innovations. There is a risk to spending too much time in them, of course. Who hasn’t heard of forecastoritis, also known as the hockey-stick financial forecast. Life doesn’t work that way and while any forecast over a longer period of time ends up looking like starting with a large minus that turns into a larger plus, the best forecasts actually reduce the minuses to a minimum. I see a large R&D budget as the equivalent of a welfare state that just sponsors those types of people that don’t really ever want to make money: the scientists. They just want to build things and love an endless R&D budget. What they don’t realise is that when a company actually makes money, part of that money will be used for R&D anyway, which actually becomes an endless development budget! But only after you have a viable cash cow that makes it happen and only if development continues to generate continuous revenue opportunities. Ok, that last paragraph was a bit of a rant…

All my entrepreneurship diary posts can be followed under the tag ‘Vincent’s eDiary.’ I don’t write about what we do as a company on purpose, but you can always ask in the comments or via the email address on the right. Pictures are courtesy of the great M.C. Escher and nature.

How Enterprise 2.0 nurtures employees engagement

ceciiil — Sun, 04 Apr 2010 20:44:59 +0000

Towers Perrin has published the results of a Global Workforce Survey they made about employees engagement. The survey has involved about 90,000 people over 18 countries. The objective was to rate the level of engagement of the people in their work.

People are split into 4 groups depending on their level of engagement :

Engaged: Those giving full discretionary effort, with high scores on all three dimensions.

Enrolled: The partly engaged, with higher scores on the rational and motivational dimensions, but less connected emotionally.

Disenchanted: The partly disengaged, with lower scores on all three components of engagement, especially the emotional connection.

Disengaged: Those who have disconnected rationally, emotionally and motivationally.

What Towers Perrin found out does not give much credit to management : only a fifth (21%) of the workforce is engaged, twice as much (41%) feels enrolled, a third (30%) feels disenchanted and almost a tenth (8%) feels disengaged.

Costs of lost engagement

This excellent study also shows the cost of lack of engagement. On a three-year study, companies with high employees engagement show a positive evolution of operating margin (+3.74%) while companies with low employee engagement show a 2% reduction of their operating margin.

In addition, it shows that this engagement strongly affects the belief people have regarding the impact they can have on the company innovation, productivity, costs, growth and customer satisfaction.

Three conclusions from this report :

The global workforce is not engaged — at least not to the extent that employers need their employees to be in order to drive results.
Engaged employees are not born, but made
Employees worldwide want to give more, but they also want to see a clear and measurable return for their effort.

Now : let’s see how and where Enterprise 2.0 can help in nurturing engagement …

How to close the engagement gap ?

Tower Perrins provide three axis along which management can make a difference in creating a more engaged workforce.

1 – Engaged Leadership

2 – Shape the work environment.

3 – Puts employees under the microscope

In addition, the report provides the Top 10 engagement factors for employees. Based on real life Enterprise 2.0 stories, we’ll see how these collaborative platforms answer all these employees requirements along the 3 axis identified above.

1. Senior management sincerely interested in employee well-being.

Enterprise 2.0 platform helps leaders to communicate with the workforce. With blogs, leader can engage in a conversation with employee. And conversational communication is key for leadership.

Paul Otelinni from Intel or, more recently, Ben Verwaayen of Alcatel Lucent are examples of leaders who has fostered Enterprise 2.0 platforms to exchange directly with their employees (blog for Otelinni, Ask Ben for Verwaayen) and show leadership engagement (management axis #1).

2. Ability to improve skills and capabilities

Coming from an open source background, I can guarantee that there is no better place in the world than inter connected network between people with similar area of knowledge to learn, locate experts and support and develop new skills.

I am still surprised this does not happen behind the firewall apart from those companies that have implemented Enterprise 2.0. One has to be very persuasive to convince me this is not necessary for knowledge workers productivity.

These collaborative platforms are genuine tools to shape the work environment (management axis #2).

3. Organization’s reputation for social responsibility

By providing a mean for customers, communities and citizens to openly discuss with brands and corporations, Enterprise 2.0 Social Tools allows for more transparent and visible policy regarding the social responsibility.

The Nestle Vs Greenpeace story in social media shows how harmful it is in the 21st century for company to neglect their social responsibility.

4. Employees’ input into decision-making

Gary Hamel essay Future Of Management describes how Enterprise 2.0 Prediction Markets have made wonder in Best Buy, thanks to a manager fascinated by the theory of James Surowiecki book Wisdom of Crowds.

It has been quite a tough one for the bunch of internal experts/analysts from the company. But at the end of the day, people felt more engaged as their input was taken into account and the company made more profits.

5. Quick resolution of customer concerns

Again, in Future of Management Gary Hamel explains how adding organisational layers between the workers and the final customers made knowledge workers losing sense and responsibility about their contribution.

By reducing the feedback loop and offering the space of conversation between employees and customers, Enterprise 2.0 provides the framework for quick resolution of customer’s concerns while helping knowledge workers to make more sense out of their contribution.

6. Setting of high personal standards

In his book, The 22 Non-Negotiable Laws of Wellness, author Greg Anderson wrote, “When we change our perception we gain control. The stress becomes a challenge, not a threat. When we commit to action, to actually doing something rather than feeling trapped by events, the stress in our life becomes manageable.” (Setting High Personal Standards – ezine articles)

In the excellent series about Implementing Enterprise 2.0 at Booz Allen, Bill Ives reports that thanks to professional profiles in the implemented solution :

There is also a greater sense of individual responsibility as people are better empowered to manage their identity in the firm and their career development. The Hello tools provide both greater control and increased transparency. So the firm is now more global, and at the same time, more of a collection of empowered individuals rather than a collection of partially siloed teams

7. Excellent career advancement opportunities

Again, with the People Profile feature in Hello platform Booz Allen, Bill Ives notes that

A person is more likely to get staffed on a project that reflects the interests and experience noted in their profile. They are also more likely to find the right contacts and intellectual capital to allow them to succeed in their areas of interest contributing to their preference to stay with the firm.

This goes back to my definition of enterprise 2.0 : the empowerment of knowledge workers. Providing professional profiles to employees allow them to have a greater control on their career.

Last but not least, these professional profiles and open contributions to conversation provide the company with an opportunity to put the employees under the microscope (management axis #3).

8. Challenging work assignments that broaden skills

Enterprise 2.0 offers more comprehensive understanding of the company and the business as a whole via conversations. Besides it also provides networking possibility with weak-links people the employees wouldn’t hve been in contact with otherwise.

And these weak-links are instrumental in getting new opportunities : studies show most career opportunities occurs via weak links.

9. Good relationships with supervisors

As Susan Scrupski puts it, trust is the currency of anything social.

Enterprise 2.0 open and easy platforms are a bedrock for transparency and trust, hence a better relationships with supervisors.

10. Organization encourages innovative thinking

Professors from Harvard Business School, Insead and Brigham Young University have completed a six-year study of more than 3,000 executives and 500 innovative entrepreneurs, that included interviews with high-profile entrepreneurs. They have identified five keys that drive innovation : Associating, Questioning, Observing, Experimenting, Networking.

Enterprise 2.0 collaborative platforms are the obvious management toolkit for knowledge workers to

Associate with people from different background,
Observe internal processes and user experiences, `
social Network,
Question experts and whoever involved in the project,
Experiment and get an instant feedback from all expert on the domain on the business value of their proposal.

Refer to my Enterprise 2.0 presentation (How Collaborative platforms fosters knowledge, productivity and innovation) for a more detailed description on this subject.

Actions

Now that you know how make your employees happier, more engaged, more productive and more innovative, you just need to refer to the 10 keys of successful projects to see how to implement Enterprise 2.0 in your company and increase your operating profit by 6%.

IDEA GENERATION: what is your workflow?

Vincent van Wylick — Tue, 16 Mar 2010 19:56:11 +0000

I asked yesterday for a more graphical and intuitive way to plan out costs for products and projects. The reason lies in an essay I co-authored several years ago with Jeremy Fein, co-founder of this blog. I forget the exact title of the thing, but its premise was that good entrepreneurial teams are composed of both brains & brawn (Asterix and Obelix, in other words). It has since become my philosophy towards entrepreneurship and building teams.

Good ideas also reside in intersections between different modes of thinking. I don’t know who made up the idea of the ‘execution multiplier for ideas‘ (Derek Sivers posted it on his blog once), but an idea is worth little without someone carrying it out. Similarly, in Neil Fiore’s book “The Now Habit” (the ONLY self-help book I would ever recommend to people) he writes about the source of good ideas, which often come when you least expect it: on your breaks, your holidays, anywhere which is not work-related.

While productivity is a great thing and crucial to executing ideas, idea-generation itself is actually not very compatible with the productive mind. But it’s not impossible to combine the two either.

Let’s look at a sample workflow from problem to idea generation to product (product meaning the outcome of idea generation, which has to lead somewhere):

1. You have a problem (duh… no really, don’t come up with an idea if it doesn’t solve a problem!)
2. You discuss it with people to try to figure out it’s parameters —what is the true gist of the problem?

This is a good time to get stuck. Where do you go from here? Do you go the left-brained route — the super-rational approach that would e.g. benefit from some number crunching in Excel? Or do you take a right-brained approach — the artistic approach of drawing out the problem further on a white board or an outliner?

It of course depends on the complexity of the problem, but it isn’t time yet to go super-rational all of a sudden. It breaks you out of creative solution mode and gets you into execution mode, which is really brain-dead “getting things done” mode. Before you get things done, you have to define “things” much further.

The next step in my process would be:
3. draw out several solutions, preferably in a group, and discuss them and the logic behind it. Is it an elegant solution to the problem? Does it solve it or does it complicate it? What scenarios are there and what are its parameters?

As soon as you come to scenarios, we come into process mode. And this is where a more left-brained approach of calculating resource-allocation (people, time, money) absolutely makes sense. In my last post, I was hoping that someone would have a good way of making this more compatible with step 3, I am still waiting for someone to come up with a good solution, however.

4. calculate it out. What are the costs associated with each solution, what are the benefits of each solution?

Costs vs. benefits could also be called expenses vs. income on a financial projection for a startup. Solid resource allocation is ultimately the lifeblood of a company, however in an early stage it is also the language to use when looking for funding for your company.

I don’t want to be too rigid about this; I’ve struggled with the process of “problem -> idea generation -> execution -> product” in the past and think that it’s an area that benefits from several approaches and also leads to more-than-several pseudo-suggestions on how to approach this.

Rather, I thought to expand a little on yesterday’s post and clarify why I really do want a more visual Excel (for lack of a better term). If you want to combine right- and left-brained perspectives, a white board alone won’t do it and Excel alone won’t do it. I want software that does both.

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CeBit 2010: On 3D technology and its commercial potential

Vincent van Wylick — Mon, 08 Mar 2010 11:21:54 +0000

This year, I had the chance to visit CeBit 2010 for the very first time. It was an anticlimactic experience. Being raised with reports of CESs and Macworlds, you can’t help but hope to stumble on the next big thing, but what I was confronted with what had the air of a dusty town ripped out of a Western movie after all the gold diggers left for fairer grounds. In this case, the gold drought is the recession, and the aftermath (to me) appeared as a number of very empty spaces and the remainder seemingly under-budgeted, not “2010 innovative” but 2007 innovative, and with a big sticker on their back saying: “I’m under-confident, please buy something!”

To me, the most interesting technologies were 3D and a massage chair that took me under for 20 min. The biggest news story, however, was USB 3.0, a sad state of affairs if 2010 is marked by a tiny, soon to be in every computer, plug (no matter how fast that damn thing is).

Ignoring the massage chair, which I can’t recommend enough, 3D was the hot topic, inspired by, of course, Avatar. Everybody, from Nokia to Nvidia, appeared to have something related to 3D. They mostly had excuses for it—Nokia was pimping its high bandwidth infrastructure for 3D content aimed at TV & telephone providers; Nvida was pimping its 3D shutter technology for consumer PCs; Frauenhofer Institut was pimping its glasses-less 3D technology; and more and more and more—but my end-conclusion, also after trying to explore the potential for a revolution that was Avatar, was that 3D is an excellent gimmick that will draw a crowd to your stand or cinema, but will leave you disappointed 2/3 times.

Ironically, Nokia had the most impressive display of 3D, showing it off on a 15,000 euro JVC flatscreen. When asked for details, however, all they could tell me was the price of the TV and that their bandwidth technology was not for sale to the “likes of me.” Very arrogant, those Nokia folk and it wasn’t just the 3D guy either… Nvidia’s shutter glasses also worked well and I see a real potential for 3D gaming. Frauenhofer’s glasses-less 3D-TV… pah! The problem with 3D is that it’s so easy to do it badly and 3D without glasses is far from ready. 3D with glasses is far from ready!

I don’t get the obsession with not wearing glasses either. First of all, they’re roomy, which means that you can wear them over existing glasses, they won’t make the claustrophobic more claustrophobic, and they’re disposable. Putting on glasses in the living room is kind of like turning off the light when watching TV.

Last, but not least, I liked lcReflex, which developed an interesting, if not very portable contraption, that makes applications on a computer screen three-dimensional. It involves something they call a Stereomonitor, two screens joined together at a 90 degree angle (one front-facing, one on top facing down) and a semi-transparent mirror in the middle. Put on glasses and you can manipulate an image of brain in 3 dimensions, which should be very interesting for, eh, brain-scientists and playing 3D Tetris.

What’s fairly clear is that we are very close to having 3D in our living rooms, whether it’s for playing games or for watching (selected) TV-shows and movies. But 3D has the same problem that HD-DVDs and -TVs have, which is that it’s insanely niche. You can’t play everything on it and you need some pretty expensive equipment to play it. That combination doesn’t justify much of an investment in it.

The best chances for success belong to companies like Nvidia, which produce consumer-priced solutions for consuming content. Add to this that it is (relatively speaking) fairly easy to convert digital content from 2D to 3D. I very much see the next stage of gaming to becoming 3D.

I’m much more bearish on video-media. Great that cinemas have found a new revenue stream to subsidise their troubled existence. Great that 7 out of 10 filmmakers are considering to make their next film in 3D. I don’t think cinemas have to worry about living rooms competing with them on that level anytime soon. While the need for a big screen to enjoy 3D is a myth well-worth breaking (and it soon will be in gaming), it is still a powerful way to experience a movie and something you can sell at €/$ 15 a pop. Home-entertainment still has the expensive technology problem and the fact that BluRay DVDs simply aren’t selling to anyone except Playstation 3 owners.

As mentioned, 3D’s gimmick power is strong, but that will wear off after having 3D technology in your living room and hardly any media to consume on it. It’s much better off in cinemas where the growing few pay a few bucks more to see space debris floating above their heads, or on consoles where the price of a 3D add-on is hardly more than buying a Guitar Hero guitar.

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E’ship diary part 5: project management and vision development in the face of ambiguity, technology and market risks

Vincent van Wylick — Wed, 03 Mar 2010 11:00:37 +0000

Having reached a personal milestone, part 5 of my entrepreneurship diaries, I should mention that it’s very pleasurable and useful for me to write on these topics, and I hope it’s the same for you. In this post, I want to briefly address the issue of uncertainty in early stage technology companies and how that affects management.

As I mentioned before, I was asked to join this company as CEO after consulting them on the commercial applications of this exciting new technology. Joining a year later, we had a good understanding of the strengths and weaknesses of the current organisation. During the consulting stage, I wrote a business plan with a fairly clear time line (to me and our sponsor), but it wasn’t being executed upon as required. One of my the deliverables I set myself was therefore to get development back on track, which not only respects the resource boundaries (financial, human, technological) we face, as well as sends out the signal that we are a serious business.

One thing I keep hearing over and over from entrepreneurs is that you have to be comfortable with ambiguity. And that is absolutely true. We continue to iterate on ideas based on changes in technology, customer and partner feedback, and our own ideas, something that would drive any sane man crazy, but we have to keep it under control. The best way that I find to do that is continuing to develop the vision of where we are going (the strongest motivator I can imagine) and maintain a loose type of project management that gets us to that goal.

I call this project management, as it deals with schedules, milestones, and resource allocation over a period of time. Uncertainty is an important factor to consider in this. In a large company, chances are you’re dealing with a predictable environment, in an early stage startup this is not the case. Getting a tighter schedule in place continues to be a challenge we are working on, however I find that being alert, flexible, and adaptive all the time contrasts with the more stable art of project management. Please correct me if I’m wrong, in which case present a solution also! Of course, there have to be thresholds in place, which to me is very much defined by risk assessment.

Regarding risks, let me start by saying that not all risks can be addressed, which is why being comfortable with ambiguity is so important. And second, there are many different types of risk, technology, financial, market, etc., but one usually outlines the thresholds that you have to respect. In my case, I see this clearly as market risk, as nothing matters if your customers aren’t buying… however, this really is not something to take for granted.

In medicine for instance, which is traditionally patent-based and largely dependant on a complex regulatory process, you have a 15 year window, of which you can spend up to 12 years developing your super-innovative cure. Clearly the technology risks outweigh the market ones (note: this ignores the rise of generic, cheap, knock-off drugs). In the web-industry, on the other hand, it’s perfect for rapid prototyping, it’s hard to protect innovations and easy for competitors to clone them, and it makes much more sense to push out your products asap. That means that there can be plenty of competition and the risk lies in grabbing sufficient market share to make a (sustainable) profit.

In our case, we are not as “high-tech” as medicine and not as “high-market” as web-development, in the sense that we face both market and technology risks. However, I see market risks as more important and try to align both market & technology approaches together. As an example, one of the things we did several months ago, was demo our technology to the general public and to selected partners. After the experience, we interviewed them thoroughly on their experience, as well as their initial expectations. We want to make sure that people don’t expect something different than what we deliver and that our product meets and exceeds their expectations. That gives us a clear view of where we want the product to go.

On a technology level, that presents us with certain thresholds in terms of “the experience” and price-points. And whenever we face a technology change, whatever solution is being developed, it has to fit within that end-picture the customer expects. That also overcomes the problem of black-box development, which is not uncommon in technology development.

So, that’s more or less how we continue to develop the vision for our company and the project management that supports it. We started with a lucid dream of producing great technology. We demoed initial versions and tried to align our vision to the needs of our users. And we end up (hopefully) building what our customers want and pay for. I would love to do this in a web-environment, as that really makes prototyping so much cheaper and quicker, but we do the best we can with our not so intangible technology.

Why I look down on coding (and why I’m completely wrong about it)

Vincent van Wylick — Thu, 25 Feb 2010 20:24:41 +0000

I live in a funny world. My company, which is composed of several disciplines in the manufacturing, industrial design, and, yes, programming space, is one factor. I sometimes see people screw together contraptions in our workshop, and I see coders banging away at their PCs and Macs, and I wonder what the hell I am thinking calling programming low or high tech. There are different degrees to everything and just like metal and a few screws can lead to an amazing creation, so lines of code produces the amazing virtual reality I interact with most of my days.

This will be a short post. I think that the Internet has proven to be a two sided coin. It brought us freedom of information, but bits are also information, which makes it hard to gain value from them. Looking at it through a business lens (a flaw of mine) I can’t help but wonder if programming is a worthwhile direction to take, if you want to make money at least.

The other side is what I wrote about in paragraph one. Code produces wonderful things and I am grateful everyday for the fruits of that labour. So I sincerely hope that my world, the business world, will continue to allow for “the code” to reign free, and for those that produce code and its products, to reap the rewards and continue to do what they love.

So I apologise for whatever I wrote previously, namely that software is not high-tech, i.e. innovative, because it simply does not apply to all code (just to the 100s of 1000s of me-too apps and websites out there, which ruin it for the good ones).

This post was inspired by Fred Wilson’s post “Code As Craft” and by one of our interns producing “beautiful code.”

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E’Ship Diary Part 4: what to pay attention to when starting a business

Vincent van Wylick — Thu, 25 Feb 2010 13:31:55 +0000

This is just a short list of challenges that I faced with my current business. Feel free to suggest other things in the comments.

your relationship with the company & people you’re starting with: coming out of a position that involved reading a lot, a lot of contracts, I’m kind of particular about how to phrase them. I like the idea of contracts if they very clearly state the boundaries of your position and the relationship you have with others. It should also clearly state the deliverables that have to be met, though that can also be included in a separate “action plan.” A good contract should leave no room for misinterpretation, which is why it took about 3 weeks and 8 draft-revisions to get it just how both me and the company wanted it. Of course, a 1 person business doesn’t have to do this, nor someone that doesn’t get paid, though both in “hobby (that become) startups” situations and multi-team startups, it’s good to have a thing on paper that states a number of things including responsibilities & shares, as well as, if possible, time-frames for carrying out the job. You don’t need a lawyer for this, it’s best to start with a simple list of what you want to achieve and work from that. Very important is to mention what national law this contract falls under (e.g. Dutch law or French law), full names & addresses, etc.
your intellectual property: I’m kind of running up against something like this now, which is why I think it’s worth mentioning. IP has different values in different industries of course, but in my industry, a high-tech non-software one, it plays an important role. Not only is it important to dedicate certain resources at protecting your IP, you also have to watch out that others don’t lay claim on it, just because you spoke to them once or twice (or worked there at some point. The Mattel vs. Bratz case is an interesting one to follow for that.). IP protection also plays a part when talking to outside parties like investors. Last but not least, it does protect you against copycats, though, as mentioned, the value of patents or similar varies from industry to industry.
your own finances: They say that you should have enough saved up to not have to work for 1 year. I’ll just say that I made sure that I do have a comfort zone, though not so much that I won’t stay hungry (lesson 101 in entrepreneurship and raising (rich) kids: instill a hunger for success).
the company finances: at my last company, my job was to handle certain business affairs for companies that have their legal address with us. Company finances are a complex affair, and plenty of swindlers out there try to get out of taxes here and there. Not that I don’t sympathise, but be careful of not signing something that makes you responsible for someone else’s problem. Something similar occurred last year, where someone signed something that nearly (!) made him responsible for ca. 1 million euros in unpaid taxes. Let’s just say that the lesson was to have complete transparency from the start and not sign if it doesn’t exist. Preferably this should be specified in the contract (point 1) also. The other side of the coin is that the company has to become a financial vehicle for the people working there. That means that managing its finances (income and expenses) is vital to making sure that there’s also enough money to pay all the costs.
staying organised: Kind of obvious, a chaotic entrepreneur doesn’t make for a good entrepreneur. As I have about 12 different jobs, I have to make sure that I don’t forget what needs to be done, to prioritise the important things at the right time, and to delegate those tasks that I have no time for or someone else is better suited for.
staying healthy: I’ve seen three people pass away that I’ve had a professional relationship with. One was of an advanced age, one had a deadly disease, and the third passed away at a very young age of medical complications. Two of these were entrepreneurs, and both let themselves get carried away by stress. Stress means: less sleep, eating crap-food (my new term for fast-food), and not taking the time to exercise. It is not where I want to end up, I want to do a good job (it is just a job) and live long enough to reap the rewards (preferably, I’d like to live forever, but that’s a future startup).
staying connected to people: as a first time CEO, I have a lot of questions and the best way to have them answered is to ask them to people that are smarter than me. Luckily, there are many, many smart people out there, and people love talking about that which they know.

That’s it for now and all I could fit into 30 min. of writing. All my entrepreneurship diary posts can be followed under the tag ‘Vincent’s eDiary.’ I don’t write about what we do as a company on purpose, but you can always ask in the comments or via the email address on the right.

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E’ship diary part 3: Why I don’t like the term ‘entrepreneurship’

Vincent van Wylick — Fri, 19 Feb 2010 12:00:56 +0000

Both ‘startup’ and ‘entrepreneur’ are terms that immediately evoke an often false reaction from an audience and I would personally prefer not to describe my work using those words. In the following post, I write about three associations in regards to entrepreneurship, one positive, one negative, both somewhat false, and one what I see entrepreneurship as really: just a job. As usual, these diary posts, which I try to write in a short amount of time, are produced with minimal editing. I hope it makes sense. All my entrepreneurial diary posts can be followed under the tag ‘Vincent’s eDiary.’ I don’t write about what we do as a company on purpose, but you can always ask in the comments or via the email address on the right.

The popular associations
The word entrepreneur has two popular and a third upcoming association. One association is negative, that of a risk-taker and in some ways a loser—this would be more in a European context where job-security is highly valued. The other is positive, that of a potential Bill Gates or Steve Jobs, i.e. the smart entrepreneur who sees a big opportunity and has the drive, intelligence, and access to other resources to make it very big.

Of these two, the latter is what we are all aiming for, but realistically that applies to less than 1% of entrepreneurs today (using the very broad definition of someone that starts anything from 1-man webdesign company to an ambitious cure for cancer). The first association is also a misunderstanding of entrepreneurship, as entrepreneurs are not blind risk-takers, or at least they shouldn’t be. I would say and hope that it applies to a minority of entrepreneurs also.

The third association: a career-choice
The third association is that of an upcoming trend: entrepreneurship as simply a job. You’ll find plenty of job-adverts with “entrepreneurial attitude a plus” or similar in the job-description, a term I hate just as much as the often mis-used “business development,” standing for just B2B sales.

Added to the job-description part comes that there are plenty of entrepreneurial courses and full academic programmes available to the public, one of which I enjoyed, though I know from personal experience that that doesn’t make a person an entrepreneur.

A third factor contributing to the ‘entrepreneurship is a job’ association is easier access to the marketplace. I’ve had some online discussions with Cecil Dijoux on this blog about today’s technology culture in the context of enterprise software development, and there is as much a democratisation of software-/web-ware development, as there is of other increasingly “low-tech” industries. (As a side note: My definition of low-tech is a technology something has very low barriers to developing it.).

I think that the abundance of resources (not just) in regards to programming, to very well developed (internet) distribution methods for getting products, tangible or intangible, out to customers, as well as more-and-more programmes for funding/assisting startups, means that entrepreneurs have access to a better developed funnel where it comes to their profession of gathering resources and marketing their products.

That doesn’t make it easy, and actually brings other challenges like being one tree in a very large forest, but it does mean that it can be seen as a type of job.

Now, what is there not to like about the word ‘entrepreneurship’?
Maybe it’s a personal thing, but I feel very uncomfortable telling people I meet that I’m an entrepreneur. One, I do see it like a job, a job that I have to do well, and nothing special really. The term ‘entrepreneurship’ makes it sound fancy, which it is not. Two, I’m a European and I do feel the same association that many Europeans have to the word, which is that it’s “less than a real job.” Rationally, I don’t think that’s true, but emotionally I have found myself feeling the following initial reaction more than once when someone comes up to me and describes himself as an entrepreneur:

“Get a job, you hippie!”

Add to this that a startup is not a company until it makes money, and an entrepreneur is not an entrepreneur until he makes money doing what he does.

So I think the term ‘entrepreneurship’ is glorified, perhaps invented to make entrepreneurs feel like they’re doing something special, same as the term ‘Artist’ or ‘Inventor.’ Art isn’t art unless the audience considers it so, and people have invented plenty of mousetraps that are now collecting dust in a garage somewhere.

Suggest something new please
I’d like a new term for what I do and maybe you can suggest one. It should perhaps be related to a startup, which immediately summarises what is happening: A company that is starting up and isn’t there where it wants and needs to be yet.

The problem is that an entrepreneur is not always in the same class as a startup. He can be 50 years old and have a long and successful career behind him. Would you call him a “starter,” a term often used for people fresh out of college applying for a job at Consultant X or Multinational Y? Generally, entrepreneurs are responsible for the activities that happen in a startup in order to make it a success. Their chances of success increase if they have prior experience, resources, and networks to build upon, that make it easier to access the three pillars of “starting up,” as I’ve summarised in the picture above.

In regards to the above, I personally like to describe my work as “I’m running a small company and we’re developing a new product X,” but that is also a bit of a mouthful.

The other side of the coin is that entrepreneurs are in (desperate) need of marketing, where glorification does play a part. I read somewhere that entrepreneurship can be described as the process of developing something irregardless of resources currently in possession. That suggests a pitch is necessary, and perhaps already being termed an entrepreneur helps getting a foot in the door. I doubt it and it would personally bother me if that’s all it took, but I’m smart enough to realise that we “entrepreneurs” need to do whatever it takes to acquire resources, as long as it fits our code of ethics of course.

So, entrepreneurship, yes or no? I don’t like the term, but I may be stuck with it. If I come up with something more apt, I’ll let you know. And same for you please!

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An e’diary part 2: what are the responsibilities of an entrepreneur

Vincent van Wylick — Tue, 16 Feb 2010 22:06:23 +0000

This post is part of a series, a diary of starting a business if you will. It follows part 1, the decision of becoming an entrepreneur.

One thing I found out is that it’s hard to put your responsibilities down on paper… there are so many!!! There is of course a basic job-description, which more or less sounds like that of a project manager/pull-the-rabbit-out-of-the-hat magician: “make it happen that we go from this thing on paper to the product in the hands of customers.” “Make it happen” is a super-loaded phrase, which can mean countless things.

There is a continuous struggle between micro-management and keeping the overview. Micro, because it is your responsibility that every (little) thing is carried out by your employees (if you have them). Overview, because You the entrepreneur are The Organisation. There is a third struggle that shouldn’t exist really, that between your professional life and your personal life. I’ve come to the conclusion that the only way to do this thing well is to focus on it exclusively. Friends, family, love, …blogging… it’s a nice luxury to have, but it comes second place.

The responsibility of an entrepreneur are thus: have a goal and make sure that everything is executed to get to that goal.

In a technology company, there are matters of technology and business (really, in what business except for strategy consulting isn’t there a mix of “technology,” which can mean anything from cooking to software development, and the commercial side of things, which is meant to pay for everything?). What I found was that as someone with a business background, who sort-of-kind-of has an idea about product development, and has a better grasp of business development, I still can’t let go of the reigns of product development entirely.

Product development ties in directly with business development. People are unwilling to pay for something that doesn’t exist and similarly our budget is supposed to last us until we have something worth paying for or investing in. Therefore, as an entrepreneur I have to make sure that product development stays on track. The absolute best way to do this is to have a capable product development manager in charge. The truth of it is that startups by their nature are resource-poor, which includes tripple-A product development managers (probably employed at multinational X or Y somewhere), and there is a lot of learning/training on the job. Learning/training means that the (hopefully) existing product development manager (in our case yes) still has to be managed, through schedules and regular meetings. In any case, product development is in its conceptual stage a very brainstorm-friendly activity, which means the more the merrier. But ultimately, a startup must get beyond this stage, respecting the entire resource-poor situation that a startup usually faces.

So, responsibilities of an entrepreneur as far as the technological product development is concerned: If you have a product development manager, you have to make sure that he works under the realities of the business. If you don’t, which I imagine many 1-person software startups operate under (as well as those lucky strategy consultants), well then you have to do the job of product development as well, keeping a close eye on the business realities.

OK, the business part of things. My role is fairly well-defined here as I come from a business background and approach startups from a business perspective. Assume that role 101 is having a firm grasp on everything that goes on, which can be phrased as “where are resources (people, time, money) being expended at and is it wise to do so.” This entails having a good budget plan and sticking to that.

Role 102 is to build the business, which I call business development, but that often gets confused with sales as that that is what it says in job adverts. Business development is the building of the business, which includes sales, but also includes building the company and all that entails.

So, we are trying to get from point A to point P, how do we go about it? If product development is about turning an idea into a product, business development is building a business plan into a business. Business plans are total BS unless they contain validated information. Some key-chapters in business plans are the market overview, the market approach, the time-line, and the financial need to meet all these objectives. Business plans can serve as a. cannon fodder, b. a plan of approach, c. one of several signals to attract investment. For c. no investor will take a look at your business unless you have a plan of approach (b.). On that plan, there should be a time-line, which you are following (predictability!) and there should be a goal: the market you are targeting and your approach.

The market section of the business plan presents a big problem for technology entrepreneurs. Because (non!) customers often don’t know what they want. I can ask a target group “what kind of air do you like to breathe?” and it wouldn’t surprise me if a significant number of responses would say: “I like to breathe air that smells like perfume.” OK, that’s a terrible question, but what I mean is that people sometimes make up answers that have nothing to do with reality (that said, both the perfume business and the fast-food industry have made lots of money from essentially selling air that smells good. Scent is also plays a very important part in memory, but I digress…)

What I’m a big fan of is validated market data, which is data gathered from actual customer experience with your product or part of it. That brings forth another problem of a bias towards early (and over-excited) adopters, something which the book “crossing the chasm” deals with, but is really not something that I think is realistic to address at an early stage, except that validated market data can also come from experts in the markets you are targeting.

The implication is also that product development is again completely tied in with business development which leads us down the path of rapid prototyping, another practice that works great in software / on the web, not as easily (though not impossible) with hardware. In any case, the experts in this area most well-known today are:

- Steve Blank, who wrote “The Four Steps to Epiphany” and is currently hosting the excellent Stanford’s Entrepreneurial Thought Leaders seminars (btw. Steve Blank also writes a great blog on customer-focussed development, which I’ve only just started reading.
- Eric Ries, who authors the blog Startup Lessons Learned and has some great articles on responsible (=lean) development.
- And Donald Reinertsen, who wrote an incredibly dense book called “Principles of Product Development Flow,” a book which is clearly an authority in the field, but which I cannot recommend to any sensible entrepreneur with a 60hr/week schedule. Those principles, by the by, number in the 100+.

As well as of course Toyota and plenty of other experts out there, I’m sure, many of which are referenced by the people mentioned.

I think that it can safely be said that task 3 or a sub-task of business development is working towards the customer, the lifeblood of a business.

There are other tasks of course, which have to do with human resources, legal work, accounting, etc. Some of which can be outsourced, some of which can be done half-heartedly (oh no, I didn’t say that), some of which are really-really important, etc.

All these tasks, however, require a certain authority. The entrepreneur’s responsibility is to either be an authority on a task level or to be sure to work with authorities, either in the company or in an (informal) consulting fashion, so that they are carried out responsibly.

Task 4 can thus be entitled: be an authority on the tasks that need to be carried out or have access to one.

So, a whole can of worms starting a company can be and it is vital that it does not interfere with the single most important thing that you must do as a human being: be healthy! Health is part sleep, part exercise, part food, part love. There is no yin without yang and vice versa. Thus forget everything I said about personal life being no. 2. The best is if it reinforces what you do in your work. Health leads to happiness and happiness leads to optimism: a key-quality in entrepreneurship if there ever was one.

So the responsibilities of an entrepreneur summarised:

100: keep your eye on both sides of the court: the goal & the resources needed to get to that goal
101: align Product development with Business development
102: always validate your market data by staying close to your customers
103: be an authority on the tasks that need carrying out or have access to one
104: stay healthy and happy.

This was written in a single session with minimal editing. I hope it kind of makes sense. Part 3 of my e’diary will be on the topic of: can you prepare for entrepreneurship? As I have a master in entrepreneurship, I thought it might make for an interesting perspective. All my entrepreneurial diary posts can be followed under the tag ‘Vincent’s eDiary.’ By choice, I’m being mysterious about my company. If you have questions, feel free to comment or write to me via the email address on the right.

Picture courtesy of Be The Dream.

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An e’Diary part 1 – on the decision of becoming an entrepreneur

Vincent van Wylick — Fri, 12 Feb 2010 07:58:17 +0000

Who wants to be an entrepreneur?

It seems strange to keep a diary as an entrepreneur, which is thought to be a career that is all-consuming. But I made the resolution to not get lost in my work, leaving enough space for inspiration and reflection, next to all the getting things done.

Inspiration, aka new ideas or thinking out of the box, primarily comes from taking time to have new experiences and meeting new people. It’s too easy to get stuck in a rut when spending 9 to 5 in an office. Reflection comes some time after getting things done and so my words today will be mostly about stuff that happened some time ago, during 2009 in fact.

You’ll often find pre-/post-/non-entrepreneurs arguing about whether e’ship is something you’re born with. I think it’s arrogant to argue either way. E’ship is the pursuit of opportunity weighed against the opportunity cost of pursuing something else. Entrepreneurs are not formed in pre-school, running a lemonade stand, it just makes sense at a particular time and environment. And in this case… it made sense to me.

Flashback December 31st 2008. I received a call from an inventor that had read about a previous experience of mine in a technology business and asked me to help him with the business plan for a new venture exploiting a similar technology. As it was something that appealed to me I said yes. The project turned out ok, we secured seed funding to develop the technology, and I moved to Luxembourg for a job in finance, while staying on as a silent advisor in the tech startup.

Flashforward 9 months. The startup was finally ready to demo the technology which had so far only existed in our heads. It’s an important qualifier, not only for our business partners and investor, but also for the team and myself. While we had discussed something similar before, it was at this point that I was asked and considered to run this company.

To go back to “what makes an entrepreneur,” you’ll often read about entrepreneurs being a. all-invested in a venture (as opposed to investors, who diversify their risks across multiple investments) and b. Entrepreneurs having to make (relatively) calculated risk decisions. And that is what I did, I made an, as much as possible, rational decision whether I wanted to commit fulltime to being an entrepreneur in this venture. So that was my decision process, which required serious thought, consultation with friends and family, and more.

End of part 1. In part 2, what are the responsibilities of an entrepreneur. You can read all my e’diaries from now on under the tag Vincent’s ediary. If you have questions, obviously I’m pretty mysterious about our business, post a comment or mail me via the address on the right.

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FarmVille is a role playing game

Kari Silvennoinen — Fri, 05 Feb 2010 07:52:34 +0000

As I argued in the comments in Vincent’s post about FarmVille, FarmVille is a role playing game (RPG). And pretty bad one at that. Like most RPGs, you don’t actually need any skills or develop any skill playing it yourself as your success is solely dependent on the amount of time you sink into it. You can get pretty good at FreeCell, but no matter how much time you spend in FarmVille, you won’t get “better” in it. But what most RPGs have at least is a story – even if most these days have left the ending pretty open. Contrast this to FarmVille which isn’t trying to tell you any story. In this sense it resembles a simulation, but that genre is usually characterized by depth and strategy which are nowhere to be seen in FarmVille, unlike, say, in SimFarm from 1993.

Free range animal farming at FarmVille

It is way too easy to categorise FarmVille as a “casual” game, but “casual” doesn’t need to mean games where you can’t lose, games which have zero learning curve and games that don’t offer challenge. A good example of “casual” game that always ends in the player “losing” and (hence?) offers a lot of challenge is Bejeweled. If I remember correctly, Bejeweled was the previous title holder to the biggest casual game ever.

The only challenges are achievements – and now collections. But there’s little, if any, social value in achieving them – unless you count boasting about them on your Facebook wall. And, unfortunately, the game doesn’t have level 13 Pig Warlocks.

There’s some irony that the main reason people play FarmVille, boredom, is also a main reason why people quit it. This boredom kicks in at about level 20 or so, where you start to realize that you have pretty much seen everything the game has to offer. The only thing left is the grind.

There are, of course, shortcuts to simple grinding. You can use farm machinery to do your activities faster, but they consume fuel (that, until recently, you could only refill by real money). Also, spending money allows you to get many benefits before non-paying players. And this is a problem, because many people don’t consider this “fair”. Offering players to pay to save time, however, is pretty crucial from business logic. The trap here is that the players who don’t feel comfortable paying start to feel that the only way to progress in the game is to spend real money.

FarmVille follows the RPG formula that the higher you have leveled, the more effort (= experience points) you need to reach next level. Granted, you have access to new things that might increase your “productivity”, but the mean time between levels is increasing. However, and this is the problem, the reward of leveling up remains pretty much the same. At some point, the perceieved benefit/effort ratio falls short. The trick is that at this point, the player has invested so much into the game that they might be more willing to pay real money to make advancing easier… if the rewards of leveling up are worth it.

The business logic of FarmVille dictates that the more you play, the better player you are for Zynga. It’s the curious logic of taxing your good customers, the discrimination for the information age. This is most evident if you look at how the experience points you get from crops depends on their harvest time. The shorter the harvest time (and so, how many times the player “needs” to play FarmVille), the more experience the player can gain in given time. As you can see, the relationship between these two variables follows an exponential distribution with pretty high correlation.

Harvest time is strongly correlated with experience points you can get in FarmVille

There's not much correlation between profits and harvest time, though.

As an interesting side note, the correlation between Harvest time and profit isn’t nearly as high and there’s a lot of variation. This neatly illustrates how the main metric in the game (from game designer’s perspective) is not profit, but experience points which are tightly tied to player retention. This also means that while there’s a wide variety of different kind of crops, there’s only a handful that makes any sense to use as the rest are strongly dominated. Oh, and the trees and the animals don’t make any sense given how scarce the land is and how much more profitable the crops are. The only reason to have either is for achieving ribbons – or self-expression (which you might have already guessed was pretty low on my priority list).

The other thing in FarmVille is that your game progress is also aided somewhat by the amount of friends you have. Whether these friends help you or not, is not necessasry, as only retaining a certain friend amount gives you benefits. The most important of these is access to larger farms. The social aspects of FarmVille can be divided into self-expression (how one designs one’s farm) and a coordination game of sharing gifts and other “loot”. The game design trick of “free gifts” is pretty clear after the player realizes that he or she needs a bigger farm to accommodate all the gifts. Contrast this “social gaming” to the title-holder of “most anti-social game ever”, World of Warcraft, in which (as far as I’ve understood) it is possible to “complete” the game alone, but playing with others is a key element to enjoy the game. In WoW the higher level players can help out lower level players, but in FarmVille the higher level players can gift some items to lower level players that lower player level players can’t gift. So, for some time the reciprocity logic didn’t really work in gifting, but this was recently fixed by introduction of “Mystery gifts” that are pretty much the only thing that makes sense for lower level players to send to higher level players.

So, what you are left in a more competitive sense of “social gaming” is the amount of ribbons you have collected, the level you have achieved and how pimped out your farm is. The element of achievements that you can accomplish as a group is zero.

I’m not entirely sure that Facebook is the most fertily grounds for games, as the dominating functionality seems to be “the social” and exploiting one’s userbase. Game mechanics and social dynamics come second. This is why I believe that to experience “true” social gaming, one needs to invest some real money to buy a game. The “free” gaming model seems to denigrate too quickly into nickel-and-diming, see for example what happened with EA’s Battlefield Heroes – where again some of the players didn’t see the real money elements as “fair” after certain point.

The problem with FarmVille, in short, is that the business logic dictates the game design too much. The revenue incentives of Zynga make the game experience worse for the players, who are looking for more than killing time.

My computing context and what I think about the iPad

Vincent van Wylick — Sat, 30 Jan 2010 09:31:53 +0000

OK, time to write a few words about the iPad. In true spirit of fanboyishness I started (and finished) writing this post in bed on my iPod Touch. Let me start by saying that with reservations I want the iPad. Reservations include that like you, I haven’t actually used the device, and that it doesn’t include a front facing camera which is a real shame. Flash… Pah! I really don’t care. Anyone who experienced the professional look, feel and support you get even from a €0.79 game on the Touch or iPhone isn’t going back to freeware flash (read my Farmville review as an example).

I’m not trying to provoke you by being so dismissive of flash, even though I feel a lot of people really really hate how the iPad turned out. I am only writing out of my own current and past context and reserving final judgement until it’s in my hands.

My context is several. I was born into an age when there weren’t any personal computers. As a matter of fact, Apple had only just been conceived when I was born. I grew up without computers, until I got a toy Amiga at 13, and a very buggy 1st PC at 15. It ran DOS mostly and crashed a lot in Windows 3.1. I mention this because people in my generation suffer from a curse. We were forced to learn a zillion crappy commands as teens, which made our parents and family members consider us computer geniusses and not a week goes by when I don’t get at least 1 question about a bug in a computer. Last week, I spent maybe 5 hours trying to get a Wifi card to communicate with an Internet radio, I will have to set up skype VOIP at my parents’ house this year and who knows what else.

My no. 2 reason for getting an iPad? To give it to my parents and save me future headaches (knock on wood).

My no. 1 reason is different. Last December, my MacBook was lost on a train. I’m using an older MacBook from work at the moment and digging this iPod Touch a lot. In many ways I do more on the Touch now. It has its flaws of course, and no it has nothing to do with “openness” or flash. The screen is too small and there are times (less than you would think) where I need a physical keyboard.

So picture my context. I travel a fair amount, I think the MacBook is not always neccessary but the Touch/iPhone is not always enough. The Touch meets my casual gaming needs (serious games, that’s what consoles are built for), it kind of meets my wordprocessing needs (still typing on the Touch …). So why on earth, for that price, wouldn’t I want an iPad?

Truth be told, I was considering getting a sleek MacBook Pro to replace my lost MacBook. But for years, I’ve secretely lusted after a shiny iMac as well, never being able to justify having both a laptop and a desktop. The iPad is not a standalone PC. It needs to be synced with one (every week or so). But it also gives me a chance not not restrict computing to a small 13-15″ screen and buy a “real” computer so that makes sense to me.

In my UNIQUE context, the iPad makes sense. In my less unique context regarding my parents, it makes sense. 2010 is hopefully a year of less computing headaches and more of just getting things done.

the end
Vincent

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Thoughts on Farmville, an addictive but flawed Facebook game

Vincent van Wylick — Tue, 12 Jan 2010 07:20:54 +0000

I quit Farmville yesterday, after 3.5 weeks of pushing it up to level 20. In the first week, I wanted to write a review of how awesome it was and how it changed the social dynamic of Facebook. Now after a few weeks of wintery downtime, my gaming habit is back in the closet where it belongs, and my opinion is somewhat different.

What attracted me to Farmville in the first place? Well, in true Web3.0 spirit, it was someone raving about it on Twitter (Fidji Simo, I believe). It made me check it out and when I found out that some of my friends were on it, it made me give it a chance. I also remember SimFarm being one of the first games I played on my first PC and there was the nostalgia factor.

Farmville = FunVille?
The fun part of Farmville was to me truly the social dynamic. You build experience by doing different activities, such as growing fruit and vegetables, herding animals, and also helping out your friends. You can also give gifts to friends who in turn gift you back. All of that leads to two ways of measuring progress: experience points, which leads to new levels and abilities, and achievements, which you get after doing certain activities enough. While helping friends fuels my socialist—we are all equal, blablabla—self, the latter fuels my competitive—I am better, haha—self. As such, Farmville gives me complex feelings of satisfaction that can’t be found in every activity or game.

Now, while I admit that the latter statement is a little weird, but hopefully sufficient to explain why I liked the game, let me get to the parts that made me quit Farmville. They are, simply put: money, Adobe’s Flash, and boredom.

Farmville = CashVille
Farmville was admittedly the biggest blockbuster on the Facebook platform in 2009 and I have no doubt it will do well in 2010 also. The reason it is what it is, is because of its way of making money. Yes, if you want the easy way to winning, which is measured by how beautiful your farm is, you have to pay! There are three ways to pay for stuff in Farmville: achievements, such as having many neighbours or growing many tomatoes, which gets you free stuff; fake money, which buys you stuff; and Farmville money, which you get by either levelling up or by buying it for real dollars.

You can do pretty much everything you want without spending Farmville cash. Except for two things: expanding your farm, which would lead to having more real-estate and thus more “fun.” And, buying fuel. You can buy vehicles that make farming an easier chore, but using those vehicles requires fuel, which is expensive to buy and slow to recharge. The fact that I couldn’t sustainably earn income and spend it (without spending real cash) was a real downer in terms of gameplay.

Farmville = FlashVille
Flash made headlines these last few years mostly because of three things. It got bought by Adobe, its Air-platform and the sheer ubiquity of Flash as a development platform on sites such as Facebook. And, its lack of support on the iPhone / iPod Touch OS. And the latter is the case because Flash really sucks! It’s bloated, it’s not as good as pretty much any other interfacing technology (for lack of a better term), and it reminds us all of badly designed Myspace sites.

For me, the lack of iPhone OS support was a real factor as I got a Touch this Christmas, which became my nr. 1 Facebook interface, minus the reason* why I mainly visited Facebook these last few weeks (*: yes, yes, I really did mean it when I wished my friends a Merry Xmas and Happy New Year, but that just wasn’t getting me the experience points to get me ahead on Farmville…).

The second factor was that Flash is simply a bad technology. 1. it was incredibly slow and I had to reload the page several times, also losing my progress. 2. the Farmville interface is split up into blocks, on which you can farm, build, plant trees, or herd animals. Doing stuff on these chunks required actual movement of my avatar/farmer, who wasn’t moving to swiftly because of “Flashville’s bloatyness,” and I also couldn’t drag actions across the screen, which I would have been able to do even in the 16 years older SimFarm! Flash sucks and was the no. 2 reason for quitting Farmville.

I think Farmville would make the perfect iPhone App, but I really think Flash needs a major overhaul and/or be killed of.

Farmville = FrustrationVille
I already mentioned how repetitive the actual playing part became, going from one block to the next to plant or harvest. Every level felt slower and more frustrating, which was mostly due to Flash, but also perhaps due to Farmville making it harder to get to the next level. In the end, I kind of started wondering why I was playing this game and if I was even playing and not just doing manual labour. The only real reward seemed to be Farmcash, which you could either earn by levelling up (1 Farmcash per level, while buying more farmland costs like 20-30 farm-dollars, seems frustrating) or by paying real money (and that would just be sad). I could also spam my friends to join Farmville and become my neighbours, but come on!

I did get some satisfaction out of reading the several strategy guides that exist for Farmville and there really is no shortage of community support. But in the end it seems like Farmville emulates actual farming too closely, by making it tedious manual labour to grow stuff on your farm (mostly due to Flash sucking!) and it also makes it feel like serfdom, by having to buy Farmcash from your “masters,” in order to have a great-looking farm.

Well, that’s all I have to say on Farmville. It was a fun experience during the holidays and I don’t regret trying it. But while I think social gaming has a strong future, I really don’t like business models that rely on making its users’ lives more frustrating. I know World of Warcraft has a similar model and is the most successful multiplayer game ever made, but that doesn’t mean that it makes it the best game ever made. I can name a dozen single player and half a dozen multiplayer games that aren’t as successful financially, but just work well in terms of gameplay. And games like Farmville have a long way to go before they get there.

End review.
Vincent

Why Entrepreneurship is ultimately Not a Management Science

Vincent van Wylick — Fri, 08 Jan 2010 12:49:31 +0000

I’m reposting this comment I wrote in response to Eric Ries’s stimulating blog post on Harvard Business Review online, with the title “Is Entrepreneurship a Management Science?” Feel free to share your thoughts on it there as I think it’s worth thinking about whether Entrepreneurship can eventually learned or whether it is an art-form. My thoughts on that are below.

Having both studied a Master of Science in Entrepreneurship and working in my 3rd startup (trying to apply the lean techniques that Lessons Learned made me aware of), I can say that my ideal is that entrepreneurship is a science. In reality, it’s a collection of Sciences as well as the act of Imagination AND Guts AND Agility, none of which are particularly scientific.

It’s a collection of sciences because no entrepreneur or team of entrepreneurs is undertaking just one activity, he, she, or they are doing many in parallel, some of which are business related and some of which are technological. Both have scientific foundations behind them.

Why the Business of Entrepreneurship is scientific is simple to explain. Businesses, starting or existing, can’t operate in a vacuum (for long). We have to obey financial restrictions, sell the idea to our investors, who themselves employ scientific means to measure whether the return on their investment justified, communicate to the market in effective ways, study the market, and project manage all the activities and people in the company. For most of these “wheels” already exist, so there isn’t always a need to reinvent them.

BUT, there is no replacement or science for guts, imagination, and agility in starting a business. You have to ignore many rules, you have to play dirty, and you have to be quick & flexible if you want to succeed. Maybe a management scientist can eventually plug those dirty variables in a formula somewhere. But I doubt it can be applied to any two startups successfully.

Vincent

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Please welcome Anand Kishore Raju, a new blogger on Tech IT Easy !!!

Vincent van Wylick — Sun, 03 Jan 2010 13:20:14 +0000

Dear everyone,

I am extremely happy to start off this new year by introducing a fresh face on Tech IT Easy, Anand Kishore Raju, who will be blogging with us in 2010. His main areas of focus as a blogger will be greening the internet, carbon footprints, energy and power figures of the internet and web2.0.

Anand is currently working as a Research Engineer at Telecom ParisTech (ENST). His area of research focuses on the Energy aspects of the Internet, what the scientific community calls “Green Networking”. His efforts are directed towards making Computer Network Science aware that processing, moving and storing bits has a cost in terms of energy and in terms of the Carbon Emission Footprint.

In the past, Anand had also worked at Collaborative Systems Group (ColSys) at Bilkent University, Turkey, where he developed a taxonomy for user properties, influence factors for feedback quality in web 2.0, existing and novel models for deviation types and their detection. He also holds a degree in Computer Science and Engineering and aspires to join HEC in near future.

Anand joins a smart team of collaborators, some of which also work in green computing and many of which share an interest in this important topic for sure. As such, please join us in welcoming Anand to the team and I hope you enjoy reading his words on Tech IT Easy!

Happy New Year,

The Tech IT Easy team

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37 Signals : Digital Natives Leadership in action

ceciiil — Mon, 14 Dec 2009 14:48:46 +0000

The question I’m always asked when I run out of my friends/colleagues/dog patience with the issue of Digital Natives integration within the enterprise is : how to convince the proponents of this culture to adhere to a common professional project, to an organization with rules and commitments ?

The answer is straight-forward : leadership. A leadership for a post-ideologic generation. A leadership whose core resides in simple and clear principles, to put in practise, rather than plastic values nobody believes in.

Enterprise 2.0 represents a gradual immersion of the XXth century organisations into the web culture. Digital Natives Companies are born from this culture : there is no change required to adopt these principles as they are the core foundations the companies were built on.

In order to illustrate this assertion (and as promised), an overview of 37Signals, a GenY company achieving incredible results, from both financial and reputation perspectives.

Anti-nonsense manifesto

37Signals initially is a Web Agency created in Chicago by Jason Fried at the end of the XXth Century. We are not talking here about just another web agency. They already display strong opinions and principles with their original manifesto : Ergonomics, Design, Simplicity, productivity, no-nonsense.

This is a small structure where employees are split all across the USA. To solve subsequent problems, 37Signals chose to develop a in-house project management application.

They recruit David Heinemeier Hansson who decide not to use any of the standard technologies (Java, PHP etc …) for the development. Invoked reason : these technologies are far too complex and not productive enough. Being a fan of the agility and flexibility offered by an obscure scripting language (Ruby), he develops his own web development framework : Ruby On Rails.

At the end of a quick build, 37signals proposes Basecamp service in SaaS mode and reaches the million user milestone in November 2006.

Start-up with an opinion

RoR framework is well received by the open source software development community, which leans heavily on the Java side of things back then.

Well respected figures such as Martin Fowler or Bruce Tate praise the great simplicity and the strong principles of the framework (convention over configuration etc …).

Getting Real

From Basecamp development experience and success, Jason Fried writes an essay : Getting Real.

This book enjoys a tremendous success for his strong anti-corporate stances and the radical principles it preaches : no functional specifications, no planning, no meeting. Also : do less features than the competitor but spend more time to design them properly; do not anticipate on problems you don’t already have (think scalability) and embrace constraints which can prove to be innovation opportunities.

As a kind of alternative business bible, this e-book contributes significantly to their reputation and the growing incoming traffic on their blog SignalVsNoise. This online business reputation allows Fried et Hansson to give conferences and raise them to well respected figures in the industry.

The next small thing

All start-ups dream of getting bigger and bigger in order to become global companies ?

37Signals insist they want to remain a small shop : there are only twelve of them today. This small size allows them to remain extremely agile and to progress with small changes while implementing small decisions. This especially allows them to focus on their core activity et to get rid of any other issue.

Key points are productivity and trust : I have no idea how many hours my employees work — I just know they get the work done (J. Fried).

Productivity, Trust but also simplicity, the ultimate sophistication according to Leonardo Di Vinci : “Simple requires deep thought, discipline, and patience – things that many companies lack” (Matt Linderman a 37Signals employee)

Business Model Conundrum

In A Secret to making money online a presentation he gave in Startup Stanford conference in 2008, Hansson goes against standard start-up policies and introduce the thoughts that brought them to their business :

The classic conundrum : You have a

great application and then
?????? (something magical happens and then)
You make profits.

We have been doing research, experiment etc … we found out that the best option for us was to 2 – put a price on the application to make profit. It’s too simple to be true but believe me it works.

Financial Independence

Each time you see a successful company, tell yourself it’s because someone in the company took a brave decision – P. Drucker

Once again on the opposite side of the other start-up financial approach, 37Signals made the brave choice to bill their customer on a monthly basis. This service is as easy to subscribe as it is to cancel. The objective is to ensure the company is financially sound and independent.

So far, they only have accepted one investor : Jeff Bezos. Bezos, who knows a couple of things about online business, guarantees not to interfere with their business strategy.

A cool, though very meaningful anecdote : when they launched their Basecamp service, they didn’t know how they would bill their customer at the end of the month. They implement their billing solution within that 30 days. This is hardcore just-in-time.

Working hard is overrated

All start-ups have the overtime culture ? DHH openly takes on à Jason Calcanis when the latter recommends in his start-up management principles to only recruit workaholics.

Their position : to design, develop and launch software services is a creative craft and it’s just not possible to be creative more than 4 or 5 hours per day. In order to preserve their creativity, 37Signals decide to switch to the 4 days week. Working hard is overrated indeed to quote the great Caterina Fake, flickr founder.

No meeting

For the Fried’s mob, evil in the organisation has a name : interruptions. And the embodiment of Evil is Meetings. Meetings should be exception not the rule (Fried). According to Fried, in order to be creative, one has to be in the zone, a sort of state of mind which requires deep focus : all these interruptions prevent people from reaching the zone. And from being creative.

In order for people to collaborate smoothly without interrupting each other, 37Signals create the Campfire service, a Business Group Chat.

Ban the four letter words

Leadership also is a sound and harnessed communication. 37Signals has banished a set of four-letter-words from the company vocabulary. These simple and common words which often prove to have bad consequences : must, need, just, can’t, easy, only, fast.

Reality is a terrible collaborator

According to Fried, planning is useless. These are just vague guesses who have no purpose other than reassuring control addicted managers.

What the point in losing time trying to predict the future when Reality is a terrible collaborator. Where will we be in 10 years ? In the business (Fried).

Do the right thing

Management is doing the things right, while Leadership is doing the right thing. (P. Drucker)

Offering simple enterprise SaaS solutions to SMBs who praise their services, and focussing on simple principles they literally apply on a day-to-day basis, Fried and Hansson give a great leadership lesson to the online business.

Some people sometimes misinterpret this intransigence and confuse it with arrogance. As a result, they have quite a few detractors. But these, in turn, contribute to grow their fan base who admire more the company as they loudly voice their strong opinions.

They enter the HallOfFame-2.0 with Basecamp being mentioned in the mythic Meet Charlie presentation slideware, probably the best introduction to Entrerprise 2.0 ever designed.

Wrongfooted Enterprise

37Signals has shown with much panache that Digital Natives know how to run their business while completely integrating constraints and characteristics of the XXIst century connected world. With this amazing result : 12 people (working 4 day/week) in a company delivering services to million of customers. Most importantly, they achieve so doing the exact opposite of what last century companies recommend.

Peter Drucker, again, in Management Challenges of the XXIst Century :

The most important, and indeed the truly unique, contribution of management in the 20th century was the fifty-fold increase in the productivity of the manual worker in manufacturing. The most important contribution management needs to make in the 21st century is similarly to increase the productivity of knowledge worker.

This objective has been patently achieved at 37Signals.

Thinking about it, that’s probably one of the main blocker of Enterprise 2.0 adoption. For the first time since Taylorism age, Corporate world is facing a successful alternative business model that seasoned business leaders have trouble to apprehend.

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The Poor Man’s Business Model—How Out-of-the-Box thinking can generate tremendous value for customers

Vincent van Wylick — Tue, 01 Dec 2009 13:17:21 +0000

I’m always fascinated by business models, i.e. at how entrepreneurs and companies put together services in order to make money from them. I’d call it the source code of business if I hadn’t seen the other source code in Luxembourg —legal and accounting—but arguably that’s more like binary code, i.e. 99% unintelligible.

Sarah Lacy writes about SMSONE, a ultra-local news provider in India similar to Outside.IN, a Union Square Ventures funded US-only company that provides news updates via the web. SMSONE does it, as the name suggests, via SMS. And it spreads through a franchising model, working with local entrepreneurs that pay a franchise fee and also collect a share of the advertising revenue from locally focussed businesses. It is able to do this because of something that apparently doesn’t exist in the US (but does in Europe): receiving an SMS in India doesn’t cost the recipient anything.

When reading about this, I was immediately reminded of a similar business model employed by a Dutch entrepreneur in Russia, Ms. Annemarie van Gaal, founder of Independent Media, a company that distributed Russian versions of magazines like Cosmopolitan, Marie Claire en Good Housekeeping (source). When she spoke at the Star entrepreneurial seminar in Rotterdam a year ago, she told us about how she differentiated herself from the competition (paraphrased as I haven’t got my notes with me):

The trouble with getting your magazines distributed in Russia was that you had to pay quite a lot of money (some would call it bribes) to companies that would then take care of it… badly. Instead van Gaal decided to do it differently. She would hire street kids to distribute her magazines, similar to the gold days of newspapers: the newspaper boy.

If you read Sarah Lacy’s account on Techcrunch, you’ll see that SMSONE does it similarly, hiring local kids, often without much education, to take care of distribution. Doing it via official channels is likely a nightmare over there, and centralising distribution kind of defeats the purpose of micro-news.

It’s a different way of thinking, which many of us westerners don’t have. I mean, would you entrust your products to a beggar on the street or to a street musician? Not only is it probably against the law (except if the government does it), we pride ourselves on our super-organised infrastructure, where anything from temp-workers to interns are there to provide companies with a flexible workforce, and anything from printing presses to mobile internet exists to produce and distribute your stuff.

Of course, I wouldn’t just leave you with these two examples. In the beginning of 2008, Boston Consulting Group published a study of “local dynamos”— domestically focussed companies, which use creative business models to capture value from emerging markets that are filled with challenges, like lacking infrastructure and low-income consumers. The map below shows how widespread these companies are.

Some very interesting examples are mentioned, like:

Shanda, a Chinese gaming-company, that, in order to combat software-piracy, focusses on providing interactive services through gaming, services that are impossible to pirate. And to overcome a lack of a financial infrastructure to pay for online services, they work with pre-paid cards.
Indian CavinKare, which sells cheap sachets of shampoo through small local retailers, while using educational marketing to teach customers how to use their products.
Goodbaby, which targets the many 1-child families in China, who are both willing to spend more on their child than multi-child families would, but are also in need of education.
Amul, an Indian food-and-beverage-marketing-organisation, which collects and pays for milk locally, while tracking all operations via satellite and uses ERP solutions to make analysis based on the data and gauge whether future supply needs to be increased or decreased.
Wimm-Bill-Dann Foods (Russia), which works extensively with local partners, and has devised leasing schemes for expensive machinery to boost their production and is able to serve 280 million consumers nation-wide.

The BCG, of course, takes the stance of its customers, Western companies, and the study is mainly aimed at how multinational companies (MNCs) can replicate 6 of these dynamo’s advantages, in order to compete with them. They are:

Customising to local needs – which involves first understanding these needs, and then meeting them.
Devising innovative business models that overcome local challenges – a logical follow-up to the last point, how to make money from the info you gained.
Leveraging the latest technologies – meaning that these emerging economies are less burdened with traditional infrastructure and quicker on the uptake of more affordable, newer, and easier-to-spread technology, e.g. mobiles.
Beneﬁting from low-cost labor and overcoming shortages of skilled labor – there’s two ways to look at this; a local workforce will be better equipped to interact on a local level, a highly-trained workforce will be better equipped to run a business. Tough call.
Scaling up fast – Russia, India, China, Brazil, etc. are all giants with the promise of huge rewards when you capture them. Many of these dynamos grow quickly through both through acquisitions and building up their network of suppliers and distributors.
Sustaining long-term hypergrowth without imploding – this kind of follows on to the last point

Some of the Western companies mentioned, which have managed to compete on a local level, include:

General Motors, which has adapted its luxury-liners to meet the demands of its Chinese customers, who are usually sitting in the back;
LG, in China, which has learned that the audio-quality of its televisions is more valued by its customers, who often reside in noisy environments;
Carrefour, which has started to work with local municipal governments in China, as these don’t meddle in their operations like local dept. stores would, and are able to provide access to prime locations;
Perfetti Van Melle, in India, a candle/chewing-gum manufacturer, which has found local means to advertise, interacts frequently with local partners, and has adapted its products to local tastes;
and Yum! Brands, which owns Pizza Hut and KFC, and has adapted its menus to meet local Chinese tastes, started a new food-chain aimed specifically at the market, and uses its international expertise to integrate IT, lean supply chains, and a higher level of food standards into their offering.

It shows the value of out of the box thinking in terms of reaching people, and I believe that traditional “Western” thinking should long ago have been thrown out the door anyway, particularly in light of the troubles that media-, automotive, and financial industries are going through. We are in the flux of disruptive innovation and only those quickest to grasp new technologies and ways of thinking are able to survive another day.

No shortage of lessons on that from entrepreneurs in emerging economies…

Vincent out

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Changing markets – OS opportunities in retrospect

Vincent van Wylick — Mon, 23 Nov 2009 15:51:47 +0000

Whether or not to design a new OS is probably the wrong question to ask at this point. Gruber says that hardware makers should strongly consider going the Apple route and design their OS and hardware combined. I think that the iPhone vs. any other mobile OS battle, and any other standards-battle really, proves that it’s not so much about the OS as it is a about critical mass of apps. At the same time, had the App-less iPhone v1 (lame pun intended) been a badly design hardware+OS, then no one would’ve bought it. But that was threshold 1, which the iPhone got out of and we are in threshold 2 now: features, i.e. Apps.

PC OSs are in the same boat. As much as I like Mac OS X, if it didn’t run the apps that I needed to be productive or unproductive (you know, media & games…), then the chances of me getting a Mac are zero. Any new OS maker is in the same boat, having to think about both their OS and the apps that run on it. A hardware maker designing an OS would have to think about all three dimensions (+ all the other stuff: consumers, partners, etc.).

I think I was fairly down on Android as an OS and fairly up on Chrome OS (COS), long before it either came out. I’m still sort of down on Android and very much up on COS. The reason is for once not hardware or software, it’s the changing world of telecommunication.

I haven’t been silent about my feelings about mobile operators. They’re not good, mostly for people in Europe that travel internationally a lot. And just when some positive movement is happening in terms of mobile and sms roaming charges, we now get Internet roaming, where operators still find plenty of opportunities to gouge consumers. It’s not unusual to pay several Euros/dollars/pounds per MB for instance, which is o.u.t.r.a.g.e.o.u.s.

As such, when I saw the ASUS EEE and all the other Netbook models being offered with subscriptions, I was skeptical. But what I didn’t think much about, because I wasn’t a user at the time, was the opportunities that ubiquitous internet (within roaming reality) offered: by buying a subscription with a laptop you are in fact instantly online, which makes any argument against a NetOS moot. It completely opens up the road for a NetOS maker, like Google, but also like Nokia, RIM, Palm, Apple, Microsoft, etc. to build an OS that entirely operates on a connected backbone. This is the opportunity that I see Chrome OS exploiting and why I think it, as well as the iPhone netbook/tablet if it comes out, will be massively successful.

I still don’t like the idea of hardware enslaving itself to telecom-operators. But I think we really can start thinking about a cable-less world a few years from now, with all the implications (no more offices, augmented shopping, etc.) that it can bring.

Yay mobile net. Yay Net OS.

/ Vincent

(Picture: city in clouds, courtesy of www.crestock.com)

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Tech IT Easy » Economics

The Internet does not make much sense… On pricing digital goods and other illogicalities

Can we accept piracy as a necessary evil already? [Cranky Rant]

Thoughts on Intellectual Property and dealing with *everything else that is out there*

The role of Sunk Costs in Strategic Decision Making—a European’s perspective

The last retail store on earth—a fantasy story

Status, Signals, and the Startup

Liberating Leadership, intrinsic equality and world-class businesses

E’ship diary part 7: Gut Instinct vs. Calculation, or On Managing Uncertainty

How Enterprise 2.0 nurtures employees engagement

IDEA GENERATION: what is your workflow?

CeBit 2010: On 3D technology and its commercial potential

E’ship diary part 5: project management and vision development in the face of ambiguity, technology and market risks

Why I look down on coding (and why I’m completely wrong about it)

E’Ship Diary Part 4: what to pay attention to when starting a business

E’ship diary part 3: Why I don’t like the term ‘entrepreneurship’

An e’diary part 2: what are the responsibilities of an entrepreneur

An e’Diary part 1 – on the decision of becoming an entrepreneur

FarmVille is a role playing game

My computing context and what I think about the iPad

Thoughts on Farmville, an addictive but flawed Facebook game

Why Entrepreneurship is ultimately Not a Management Science

Please welcome Anand Kishore Raju, a new blogger on Tech IT Easy !!!

37 Signals : Digital Natives Leadership in action

The Poor Man’s Business Model—How Out-of-the-Box thinking can generate tremendous value for customers

Changing markets – OS opportunities in retrospect

Thoughts on Intellectual Property and dealing with everything else that is out there