SOPHISTICATED FINANCE

Answers: So Many Competitors

Much has been made recently of FaceBooks new feature where members can ask a question and get other members to answer it. Equally well publicized is Quora, a high powered question-answer site, with talented and accomplished Silicon Valley types (VCs, angels, tech execs) providing answers to questions. Now Harvard Business Review is entering the fray with the Answer Exchange. In the HBR version the Editors of HBR will provide answers to questions.

What is sad is that LinkedIn had a big headstart in this space but their walled community approach has so far prevented them from dominating this attractive market segment (here).

The U.S. Political Problem in Two Sentences

From the blog New York Business Law:

"Our political system is hampered by political forces that have more at stake in getting elected rather than providing concrete solutions to our problems.  Americans need to think more about what is best for America rather than what is best for them on an individual level."

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Futurists to Follow

ReadWriteWeb had a story today on Mozilla Labs work to develop a new web phone. Mozilla Labs is the part of the Firefox developer where they do projects to shape the future of the web. What caught my attention is that the phone will project a keyboard and a screen. No physical screen or keyboard. See the image below from RWW.

In case you are wondering where you heard this idea before of the projected screen, it was in a post I did July 12, 2007. How's that for a prediction @edtremols.

My new book, Billion Dollar Company: An Entrepreneur's guide to business models for high growth companies, is available on Amazon. See the fourth strategy Porter should have added, determine if the market opportunity is large enough to interest venture capital and learn the 5-step process to really develop a business model. Book website.

Is Google Dying?

Much has been written recently about the purported strategic problems at Google:

1. Facebook is eating Google's lunch and a threat to replace Google as the leading search site
2. Google does not generate content; it only compiles it
3. Google has no real strategy in social media

The underlying premise in all these arguments is that content generation drives the web and that this user generated content has value.

When I look at my own experience I reach the following conclusions:

1. The content from my blog is the only content I generate that may have any real value...to anybody. Twitter and Facebook are just distribution systems for the content
2. 85% of the time I spend on the web is in consuming content--reading blogs, news and article links on Twitter (from a small group of people)
3. Most of the content on Facebook and Twitter is drivel low value or blatantly self-promoting (which also applies to my recent flurry of book promotion tweets)
4. I do not need validation from "friends" on product purchases, restaurants or articles to read; I doubt many of my friends have a deep enough understanding of my needs to opine accurately
5. I am increasingly using chat on Facebook, Skype and Google; this suggests to me that people find the quality of content on Twitter and Facebook lacking and want a more focused communication; 80% of my chats are people (usually students) seeking advice

I think that social media is in its very early stages and that user generated content such as Twitter and Facebook is an early stage phenomena that may not last, except as a distribution channel. I think most people consume content rather than generate it. The success of the iPad is perhaps the proof of this point. The iPad is designed to consume content and not to produce it. The functionality is really too restricted to constantly generate high quality content. According to ReadWriteWeb,

"Kevin Thau, Twitter's VP for business and corporate development, announced during a presentation at Nokia World 2010 ... that everyone's favorite micro-blogging network is not actually a social network. No, says Thau: Twitter is for news. Twitter is for content. Twitter is for information."

I think Thau agrees with me and sees Twitter as a distribution network.

I think that where the web will evolve is toward a model where all your content will be generated from a single web-based app and you will merely choose what distribution channels you want to use (public, private, group, company, etc.), similar to the Google Reader feature "share". As soon as you can choose easily where content is distributed, Facebook and Twitter become much less valuable.

In such an environment I forsee aggregating and curating content will be the more valuable app. Google is clearly the leader today in aggregating content and much of their development in Gmail, Buzz, Rapportive features, etc. points toward improving their ability to aggregate and curate content. As long as most of us focus on using content, Google's focus on aggregating content is a good strategy.

One Month After Book Publication

I have been promoting my book, Billion Dollar Company, for about a month now. I have received a lot of emails from people about the book and the ideas presented. Three themes in the emails point out ideas that I probably should have emphasized more strongly in the book.

1. The emphasis on the different techniques to understand the customer need (Zaltman, Nintendo, abundance/scarcity) prompted existing business owners to go back and re-examine their business. I probably should have made the point more strongly that understanding customer need is an ongpoing process.
2. Defining the key assumptions in the business model is a very effective technique for building concensus in the management team on the expectations for the business performance.
3. Thinking systematically about pricing and distribution strategy in the business model is a mini innovation engine that has given people new alternatives for how to differentiate their businesses.

Thanks to everybody who has written me, tweeted about the book or shared posts on Facebook. I would like to ask for some more reviews on Amazon but those will come.

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Lesson Learned

Whenever one blogs one should always be concerned that your experiences are affecting your interpretation of the facts. With that warning in place I will now relate a story.

Recently we were discussing whether a particular staff was required or should be terminated. I advocated for termination because the job no longer needed to be filled and there was no suitable alternative available for the individual. Everyone pushed back on this decision and finally the reason came out. Everyone else was concerned about the person's family and the ability of the executive to find a new job. As soon as I said that first we make the decision on the position and then we deal with separation humanely everybody agreed to the termination.

Of course terminations have to be dealt with humanely. That obvious point did not need to be stated in my opinion. Everyone else needed to hear that. I am really not such a tough guy. I just need to learn to state the obvious.

Why nobody assumed that I would be humane is a subject that I need to ponder. Probably another lesson there.

Why Can't I Time Share a Dog?

In class on Monday I am going to do a new exercise where I ask the students to imagine that it is 1908 and the model T has just been introduced. The question is how many new businesses can you think of related to the model T. The point of the exercise is to get them to think about new business ideas related to pricing, sales and distribution. After that exercise I am going to put up the Google logo and ask the same question. For the later question I expect total silence. Google is probably the equivalent of the model T as an economic engine but I doubt my students have thought about it sufficiently well to consider all the possibilities.

Now to answer the question posed in the post title. The obvious answer is "why not". In other words why are dogs full-time possessions. They are not children where you have a moral and legal responsibility for full-time care, love, etc. We cannot time share dogs because pre-ordained constraints have prevented us from thinking about dogs as something where we have interval ownership just like condos in Jamaica. If you relax the constraint that ownership of dogs is full-time, you eventually arrive at time share dogs. Pre-ordained constraints, otherwise known as assumptions, are the biggest hindrance to discovering new business ideas. The other big constraint is pricing models. Everyone appears to be genetically programmed to "sell for cash" at time of sale. The time share dogs are really an example of changing the pricing model.

(Note: you handle the vet bills for the dogs through dog health insurance, which is another great example of a new business idea where all you had to do was relax one constraint--humans.)

For more information on dog time share, read this article from the Wall Street Journal.

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My new book, Billion Dollar Company: An Entrepreneur's guide to business models for high growth companies, is available on Amazon. See the fourth strategy Porter should have added, determine if the market opportunity is large enough to interest venture capital and learn the 5-step process to really develop a business model. Book website.

Speaking at HBS and Sloan in September

September is shaping up as a busy month with some interesting events planned:

1. On September 20 I am lecturing at HBS (Harvard Business School) on OLPC and social entrepreneurship
2. On September 21 I am lecturing at the MIT Sloan School on international finance topics
3. On September 22 I will be giving a workshop at the Pino Entrepreneurship Center at FIU on Business Plans for Growth Companies, which will be a short version of the themes in my new book.

My new book, Billion Dollar Company: An Entrepreneur's guide to business models for high growth companies, is available on Amazon. See the fourth strategy Porter should have added, determine if the market opportunity is large enough to interest venture capital and learn the 5-step process to really develop a business model. Book website.

Image via Wikipedia

Image via Wikipedia

New Business Idea 2010-III

This long weekend provided a lot of time for reading and more thinking on entrepreneurship. One interesting example of entrepreneurship revolves around the history of the automobile. As we know the car industry started with this famous quip from Henry Ford.

"If I had listened to the customers I would have produced faster horses."

Overcoming the doubters and a bankruptcy Henry persevered and produced the Model T. Along the way he changed the traditional distribution strategy and created franchised auto dealers. (Note: for business model enthusiasts this is why we include distribution as part of a business model, as described in my book Billion Dollar Company.)

What is interesting to me is the new business opportunities that came from the automobile. First came taxis (very, very short car rentals) and then came rental car companies (longer term rentals). Essentially both of these new businesses just applied the time share pricing model to an existing business (1 of 15 pricing models in my book). This ends the book advertising portion of this post :) and brings us hopefully to the substance.

One of the methods I like to find new business concepts is the abundance-scarcity paradigm (first discussed here). This model says look for what is abundant and then look for the related scarcity. As we all know, information is now abundant and the scarcity is finding what we need or organizing the information in a useful way. This recognition of the scarcity has lead to a zillion IT startups, but where I think the auto story can help us is in looking for different pricing models for information. For example:

1. Why can I buy just one article from Harvard Business Review (HBR) but not more magazines
2. Why can I not buy access to a database for just one search instead of having to pay an annual subscription
3. Why can I not get a cheaper rate on a data subscription if I only have access between 2-4 am EST

If you have other new business ideas related to pricing models for information, show them in the comments.

Image credit: probertencyclopaedia.com

My new book, Billion Dollar Company: An Entrepreneur's guide to business models for high growth companies, is available on Amazon. See the fourth strategy Porter should have added, determine if the market opportunity is large enough to interest venture capital and learn the 5-step process to really develop a business model. Book website.

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Clever Use of Social Media for Private Beta

blekko is a much publicized new search engine, but it is still in private beta. To get an invitation one has to promote the company on FB or Twitter. See below.

My new book, Billion Dollar Company: An Entrepreneur's guide to business models for high growth companies, is available on Amazon. See the fourth strategy Porter should have added, determine if the market opportunity is large enough to interest venture capital and learn the 5-step process to really develop a business model. Book website.

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