SOPHISTICATED FINANCE

How Mobile Affects Social

Interesting post today about Indonesian use of social media. In Indonesia Twitter is much more popular than Facebook. The writer speculates that the large percentage of young users in Indonesia creates an environment of constant turnover in social apps as people try and adopt the newest apps. This may be true but I think there is another explanation.

Until recently Indonesia was one of the biggest markets for Blackberry Messenger. Indonesians learned to use it because it was inexpensive, easy to use and 1:1. The use of Twitter is in many ways the same experience as BB Messenger just for the world.

I think that young users will have their social media experience shaped in part by the first social apps that they use heavily. Apps that mirror this experience will also be popular. That's why Twitter is so popular in Indonesia.

The Indonesia post is at http://soundboy.tumblr.com/post/28302650549/does-social-media-use-in-indonesia-predict-facebooks

Americas Venture Capital Conference Call for Presenting Companies

The 3rd annual Americas Venture Capital Conference, hosted by FIU's Pino Entrepreneurship Center, is now requesting for presenting companies seeking funding to submit selection materials by September 4. Guidelines for prospective presenters are at http://avcc.fiu.edu/presenting_companies.htm.

Information for conference attendees is at http://www.avcc.fiu.edu/. This year's conference will be held in Miami on December 12-13.

A Simple Definition of Business Strategy

Have you ever asked someone to define a common business term such as marketing. The answers are almost always long winded rambling responses. Good thinkers, however, provide simple and elegant definitions.

HBS Professor Cynthia A. Montgomery provides a simple and elegant definition of strategy in a short article in HBS Working Knowledge. She poses four questions that every strategy must answer:

1. What does my organization bring to the world? 
2. Does that difference matter? 
3. Is something about it scarce and difficult to imitate? 
4. Are we doing today what we need to do in order to matter tomorrow?

Professor Montgomery also makes an important point about formulating strategy. The rigorous analytical approaches to strategy pioneered by Michael Porter and other HBS faculty have placed too much emphasis on the process and perhaps inadequate emphasis on answering the four fundamental questions.

Note: Marketing--customer acquisition and customer retention--from another HBS faculty whose name I cannot remember.

 

Business Model Innovation

Silicon Alley Insider has a nice post this morning called "The 7 Principles of Successful Entrepreneurship". What caught my attention was principle 5 "Remember that business model innovation is often as important as tech innovation". They explained this point as follows:

"We’ve never seen any statistics or studies in this regard, but it sure seems that the majority of shareholder value created over the last half century had a lot more to do with companies innovating around their business model than around technology. Think of eBay with online auctions. Store brands and generic drugs. Amazon cutting out the retail middleman. Manufacturers asking suppliers to co-locate. Dell building PCs to order. Social networking typified by sites such as MySpace and Facebook. The way HMOs and PPOs fused insurance and healthcare delivery. Sure, in many cases, technology was involved, but technology was not the strategic driver that created shareholder value. Instead, it was creativity applied to the business model (product/service mix, value proposition, channels, pricing) that made the difference. This kind of thinking needs to be applied not only by entrepreneurs but by corporate new-business professionals as well."

In my classes and workshops on business concept development one of the main themes is the opportunity to improve the value proposition through innovation in pricing, sales and distribution. I think too many entrepreneurs gloss over these decisions and miss the opportunity to build better customer relationships.

The Role of Shareholders

One of the foundations of capitalism is that the for-profit company is owned by shareholders. However, in the most fundamental sense, little has been written about the nature of shareholders. In a new article in HBR Justin Fox and Professor Jay W. Lorsch (HBS) argue that shareholders are more like "renters" than owners. Shareholders have limited rights rather than the full rights of ownership. The authors argument can be summarized as follows:

1. The average holding period for a stock has declined from 7 years in 1950 to 6 months today.
2. In 1950 90 percent of shares were held by households but today as much as 65-70 percent are owned by institutions; portfolio management approaches in many institutions reduce the focus on individual company performance. 
3. The nature of shareholder voting rights favor management and the board of directors rather than shareholders, which dilutes the benefits of ownership for shareholders.

What brought about most of these changes were the intended or unintended consequences of a government lead initiative to lower brokerage commissions on common stock transactions. Lower transaction costs facilitated more trading and made it cheaper to trade in and out of a stock position, thereby creating shorter holding periods (and more price volatility) and the accumulation of stock positions by institutions.

So what is an individual investor to do? Fox and Lorsch's conclusion was very theoretical and not particularly helpful. My conclusions are:

1. Invest in hedge funds who specialize in short term trading strategies
2. Invest in companies where there is a large shareholder (in percentage ownership terms) because these companies tend to generate better returns for all shareholders due to greater control of management self-interest

The entire article "What Good Are Shareholders", which is well worth reading, is here.

 

 

Teaming, Pioneer in Crowd Funding, Enters the U.S.

In March 2011 I spoke in Barcelona at the "Do Good Do Well" conference and met Jil Van Eyle.  Back in 1998 Jil was one of the early developers of what is now commonly called crowd funding. Jil founded Teaming, which he explains as follows:

"Teaming is a simple, but powerful story of how leveraging individuals’ consciousness and creative thinking through teamwork can generate great positive impacts and results for people, business and society."

After its start in Europe, Teaming now has a U.S. website here.

My original post on Teaming, which explains how and why Teaming started, is here. Teaming is a great example of how passion and entrepreneurship can combine for social benefit. 

An Odd Thing about IT

I have noticed with an amazing amount of consistency that when older people run out of things to discuss the conversation turns to software and computing devices. My theory is that because of their age the large majority were self-taught out of necessity in the early days of Windows and other equally horrible software. By talking about computing they find better products and solutions to solve their remaining problems, a technique developed early on out of necessity.

Young users have grown up with much better software and apps that largely work the first time and are less likely to use self-diagnosis as a means to IT
problem correction. Consequently they do not default to computing when more normal subjects are exhausted. Maybe they do not exhaust normal subjects as quickly as older folks. Maybe older folks just find computing more interesting....because they worked so much harder to make IT work.

Definition: "0lder people" 50-70; "old people" 80+

Amazing Statistic-Education

From the Good Cities blog:

"When a team from Wieden + Kennedy confronted its challenge to engage the community in public schoolsfor GOOD Ideas for Cities Portland, a surprising statistic came to the forefront: 85% of people in central Portland have no children of school age. With so few residents with a natural link to education, Portland’s public schools are struggling to develop community support."

Just in case you missed it--85% percent of the City of Portland residents have no children in school! Wonder what it is for other large cities?

Community involvement is a key to successful education projects. I see it all over the world and not just in OLPC projects. Community involvement reduces violence amongst children, fosters a sense of collaboration for problem solving and encourages adult literacy and learning..as well as child learning.

Thoughts on UI

Two of the oldest interfaces are the abacus and the map and both are still widely used. They have survived because of their simplicity and ability to serve a narrowly defined need. However, Rebecca Rosen at The Atlantic thinks maps will go away. By integrating more and more information into a location (weather, restaurants, gas stations, etc.) the notion of "map" breaksdown replaced by a new interface for "geospatial information".

Of course, the really big question in interface is whether the tablet will replace the keyboard. The keyboard was invented about 170 years ago and was unchallenged until the iPad. Where I now think interface will go is toward combined devices--both a physical keyboard and a touch interface. The advantages of each interface combined outweigh the advantages of either interface. Just need somebody to come up with a design. Maybe a 6 inch Samsung note would be big enough to have a decent keyboard on the horizintal axis.

I Missed My Fifth Anniversary

No I did not miss my wedding anniversary. BTW I am way past five years married to the same woman.

Over five years ago in June 2007 Sophisticated Finance was launched. The first post on June 18 is here. A typically short post, with just the barest details. Somethings do not change. Did I stick to the proposed agenda? Maybe, maybe not.

I have written quite alot on strategy, startups and technology. Strategy post are far and away the most popular. In the last two years I have also written quite alot on education and social entrepreneurship. These topics were never anticipated when I started the blog, but social entrepreneurship posts are almost as popular as strategy. 

The best device I have found to increase readership is LinkWithin, which probably adds about 30% of daily page views. A good post on Hacker News (no affiliation) can bring 3,000 readers to the blog. Commenting on other blogs also brings alot of readers. Also, I have discovered that I am a natural SEO expert. The number of SF posts that are in the top ten Google search results is much higher than the readership of the blog would suggest. About 40% of viewers come from Google searches.

What would I do differently:

1. Use more posts that relate to a single theme and string them together in a week of posts
2. Write longer posts where I better show the logic of my thinking
3. Ask for more suggested topics from friends (hint: leave your ideas in the comments)
4. Do the blog in both Spanish and English
5. Discover why there are so few comments (in my opinion) in this blog 

To anyone who started with me five years ago, a special thank you, and to everyone else thanks for reading Sophisticated Finance.

Almost forgot--my favorite post--from October 2007. If you enjoy this post, you might want to review this topic archive from SF.

 

 

 

App Log In Complaint

Recently I have seen a trend in iPhone apps that bugs me. To log into a new app I must use either my facebook or Twitter ID. When I asked the developer of one app why they did this, they said they only wanted people who had a FB or Twitter account to use the app. 

I have been on Twitter since the beginning and I joined FB about a year after it went public, but I delete apps that demand only these logins. I prefer to get to know an app before I link it to other accounts. Does any one else feel the same way? Post a comment.

Married Humor

Over the weekend I went out to dinner with my wife of 37 years. Sitting next to us were four elderly women. The conversations went as follows:

Me: Are those four women widows?

My wife: Yes...I hope I don't end up like that

Me: I am rooting for you.

Life is funnier than art.

Report on Benefits of Hybrid Learning

Hybrid learning usually invovles a combination of classroom and online instruction. A report by Ithaka S+R reveals the results of a recent study on hybrid learning in a university setting. Key findings were:

1. Student learning outcomes were not better in the hybrid environment
2. Students learned the material 25% faster in the hybrid environment than classroom students
3. Productivity gains from fewer teachers and smaller facilities were a significant economic benefit

Finding 1 could be used to conclude that IT approaches to learning are not effective. However, as Clayton Christensen, the HBS Professor, makes clear in his book, "Disrupting Class", we should not expect better outcomes in learning when the technology is used in traditional ways. To get better learning outcomes the technology must be used in new ways that develop new skills.

Finding 2 reaffirms the concept of student centric learning. When students direct the pace (and scope) of their learning they enjoy it more. The trend for faster paced education is a huge issue that has been barely discussed in the education literature. I believe that the technology is going to cause a "compression" in education wherein more and more advnced courses are going to be taught to younger children. Quite possibly in this IT environment students could complete a college degree while still in high school.

I think everyone has realized the economic benefits of IT in learning, particularly in reducing textbook costs. I wonder what some of the large public universities will do with their extra facilities in 10-20 years.

The report was referenced in this article from brainshark.

Perhaps a Different Take on 1:1 Computing

Last week I visited schools in a particular country in Central America. All of the schools had 1:1 computing environments, with the computers donated by a private foundation. Some schools just had laptops and some schools had laptops with Internet connectivity. None of the schools had any textbooks because the government had no budget for textbooks. The computers served as the principal learning device and Wikipedia (loaded on all the laptops) served as the principal source of all student information (not provided orally by the teacher) in the schools without connectivity.

A few observations:

1. The students were very engaged in class even though they had no textbooks
2. Discipline problems and absentiism had dropped dramatically after the laptops were introduced
3. Parents came to the schools for their own computer training, which was scheduled during parent-teacher conferences; parental attendance at such meetings has increased significantly; (the students take the laptops home each night)
4. The number of laptops stolen is de minimis even though the setting is poor because of community involvement in the project

What has become clearer to me is that the lower the resources available for education, the greater the potential benefit of laptops in classrooms for each student. The higher the resources available the more the laptop becomes just a device for connectivity...to the better educational content online. Resource rich environments perceive a risk the further they diverge from traditional classroom methods for teaching in the use of computers. Such environments also have more controls through testing and curriculum.

Emotional Engagement = Product/Market Fit

Successful salespeople understand the principle of emotional engagement. Product features, pricing, delivery schedules do not motivate people to buy a product. People have to have an emotional attachment to a product in order to purchase. This quote from Paoloa Antonelli sums up the idea perfectly:

"The bond between people and things has always been filled with powerful and unspoken sentiments going well beyond functional expectations and including attachment, love, possessiveness, jealousy, pride, curiosity, anger, even friendship and partnership."

As you try to sell a new product to find product/market fit do not focus so much on product features. Rather, listen to the customers reactions to the product and try to determine where the emotional engagement exists and how to foster more engagement with the product.

Paola Antonelli is the Senior Curator of Architecture and Design at the Museum of Modern Art in NYC. I found the quote in an article on Brain Pickings.