SOPHISTICATED FINANCE

New Business Ideas 2011--I

It's not too early in the new year to present the first thoughts on new business ideas. I suspect I will have a few more after I visit the CES show in Las Vegas, but the point of this post is to remind the reader that new businesses come from areas beyond consumer electronics, social media and IT.

A story from NPR this morning brought my attention back to several themes I follow. The UN World Food Price Index reached a record high in December 2010, as shown below.

I do not think it is a coicidence that the last record high was June 2008, just before the start of the economic crisis. Food demand is substantially affected by economic factors. Therefore, not only commodity prices but also food prices will be increasing as the large emerging countries (Brazil, China, India, Russia etc.) and parts of Latin America and Africa experience constantly higher levels of per capita income in the next 10-20 years.

Therefore, I think there are very large new business opportunities, such as:

• Agricultural technology that improves crop yields, reduces water consumption in farming and lowers distribution costs
• Food processing technology that lowers production costs, reduces the risk of bacteria and other disease agents and reduces the consumption of electricity

I would point out that this increased food consumption is also going to significantly accelerate the worldwide problem of water shortage and water management (World Water Council). Opportunities related to water purification, desalinization and waste water management, to name a few, may be even more attractive than in agriculture.

My new book, Billion Dollar Company: An Entrepreneur's guide to business models for high growth companies is available on Amazon. The book website is here, with book reviews, two videos, an extensive bio and much more.

Related articles

• Sophisticated Finance: New Business Ideas 2009-2010
• India food inflation accelerates to highest level in year (financialpost.com)
• Commodity Price Crisis Driving Green Economic Revolution (triplepundit.com)

Validation--Prediction 3

This the last in my series of predictions. The first two posts are:

• It's the Volume of Information-Prediction 1
• The Future of Education-Prediction 2

In the first post I made a statement on the volume of information:

"Not only are we creating more information but the exchange of this information is accelerating"

Part of the reason that information exchange is accelerating is that the technology now permits it to become "viral" (nothing new here). However, not all networks behave in a viral way similar to an epidemic. Networks are built on nodes and how the nodes interact with the network may be better explained by game theory. An interesting article in Nobel Intent explains how nodes work.

"a network with a lot of connections between people increases exposure and then adoption, as do links stretching between dissimilar groups. When the trend in question spreads to a node with a lot of connections (like a celebrity), its popularity explodes. While this is fitting for some cases, in others it's an oversimplification—a person's exposure to a trend doesn't always guarantee they will adopt it and pass it on.

"It is not only the intrinsic value of a new technology (or other types of innovation) that makes it attractive. It is also the number of friends who have adopted it," Amin Saberi, one of the authors, told Ars. In instances where there is incentive to make the same decision as people around you, the authors of the paper argue, the spread of innovations may instead follow rules of game theory, which differ in big ways from the rules of viral or epidemic trends."

The notion of an incentive in decisionmaking brings us to the question of validation. Everyone is focused now on just creating the social networks. When all this information starts bombarding us there will be more than a need for just information capture through a Facebook or organizing the information through a Rockmelt browser. I think one of the very big opportunities for new business will be in validating data and information.

An example may clarify. Some people check the traffic each morning before they leave for work. Maybe they listen to the radio, check Google street view or Twitter or use another source. However, every source of information is independent and not integrated with another source and every source is at a different point in time. It is quite a challenge to integrate all the data sources, adjust for time differences and come to a valid conclusion.

An additional complexity is that not all of the sources of information are equally credible. The chart below shows the credibility of different sources of information. (Source: Edelman Digital)

Note that trust in our friends is declining, which suggests to me that as we increase the interactions with our friends through social media we are finding them less credible. Note also that college professors have the highest credibility...so you should believe what I say here :)

Now to the business opportunities in validation:

1. I think there is a big opportunity to integrate different sources of data to improve the overall quality of the information. This story about IBM and NATO illustrates the work being done on integrating data
2. I think there is an opportunity to provide greater credibility to search results by providing richer detail on who has viewed a page result. A link on global warming that was viewed by 400 scientists would probably be a more attractive source than a link viewed by 400 government officials, according to the Edelman index above. To have any comments made by the scientists on the page would be richer yet (think of the Zemanta "related articles" feature)
3. While the federal and state governments are very advanced in providing historical information, they are quite weak in providing real time information from their various sources in all the formats (audio, image, video, etc.), such as police, firemen, environmental officials, etc. Tapping into these confirming sources of information and then integrating it (1 above) with public information, without being arrested, is another interesting business opportunity

Of the three predictions, validating information is the most interesting to me and I plan to come back to it in future posts.

 

 

 

Sophisticated Finance: Right NYT: Wrong on Kindle

In the New York Times today Nick Bilton acknowledged that he was wrong in predicting the demise of the Kindle. The Kindle is now the best selling product in the history of Amazon, having surpassed a Harry Potter book (according to Mr. Bilton).

I would humbly point out that I correctly predicted the continuing success of the Kindle in this post from July 20, 2010. The accuracy of my prediction was based on the view that:

"Computing is moving to specialized devices, such as the Garmin GPS, the iPod and the Kindle"

I continue to believe that this view is correct and that many more new business opportunities exist in the field of specialized computing devices that better match the customer need. Logitech's new Harmony, which provides one touch remote control of a reportedly 225,000 devices might be another example. I doubt a smart phone app can control 225,000 devices and the phone still download a video.

In fairness to Mr. Bilton, he makes many predictions and I only opine on the future occasionally (10-20 posts per year). Anybody can get one prediction right :)

 

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Related articles

• Amazon Says Kindle Best Selling Product Ever (informationweek.com)
• Amazon: iPad owners buying Kindle, too (intomobile.com)

It's the Volume of Information-Prediction 1

I have been really bored by the "predictions for 2011" posts this year. I do not need to hear anymore about cloud computing, collaboration or social media for the enterprise. Those ideas were interesting in 2008 but not today. At the risk of also being boring, I have three posts planned which include a bit of prediction. The themes are somewhat related and are listed below:

1. The overpowering volume of information
2. Education
3. Validation

This post covers the deluge of information.

First let's set the stage. Steve Jobs in a Wired interview said:

"The world's getting worse. It has gotten worse for the last 15 years or so. Definitely. For two reasons. On a global scale, the population is increasing dramatically and all our structures, from ecological to economic to political, just cannot deal with it."

Nothing new here, but the world is going through one of its periods of exponential growth with China and perhaps India emerging as developed countries. This emergence is stressing everything--the environment, financial markets, political structures, etc. This growth, supported by the new IT technologies, is creating information at unheard of rates. However, as Paul Kedrosky correctly points out in Infectious Greed, we have passed through the "age of too much information" and are now in the "age of viral information" and here in lies the problem. Not only are we creating more information but the exchange of this information is accelerating. 

Nassem Taleb, author of the Black Swan, brings these thoughts to the correct conclusion:

"Connectivity and operational leverage are making cultural and economic events cascade faster and deeper. Anything fragile today will be broken by them." 

The volume and pace of information exchange has surpassed the current systems of governments and other authorities to monitor and react. The financial crisis in 2008 was not caused by just bad financial engineering but also by the fact that market participants had better information systems than the regulators and reacted much more quickly.

Two examples show recognition of my point.

1. The central bank of a distressed European country is now in the process of rebuilding all of its information systems. 
2. The UN has announced a major new initiative to capture worldwide information in real time on natural disasters and make it available to affected governments.

The fearless predictions:

1. Governments will have a tremendous need for better real time information and monitoring systems with a focus on integrating data from a wider range of disbursed sources
2. Once these systems are in place, decision making will need to be decentralized in order to speed up response times
3. Decentralized decision making will require a new form of government with the bureaucracies replaced by stand alone agencies (e.g. TVA) or private sector enterprises with responsibility to respond to disasters (whether they be natural, terrorist or financial)

Chances that any of this will happen--zero! Re-thinking government in the age of viral information is too complex an issue for today's politicians and government dignitaries to grasp. That is why I think it is such a big opportunity for the private sector.

My new book, Billion Dollar Company: An entrepreneur's guide to business models for high growth companies, is available on Amazon. Learn the fourth strategy Michael Porter should have included, how to determine if a market opportunity is large enough to interest venture capitalists and how product differentiation is more than just a feature set. Book website.

 

 

 

New Business Idea--Dogs on Facebook

I have not posted a new business idea in awhile. This one was inspired by a Tweet. It's not my usual $100 million dollar company idea, but it could provide a nice living to someone one with creativity and humor. I suggested it to my daughter but she never developed it.

Facebook is filled with lots of people and all those company pages (which are really boring), but there are very few dogs that have Facebook pages. Let's do the analysis of this idea:

• Problem: Facebook is getting boring
• Innovation: Humorous character on Facebook
• Barrier to entry: the wit and creativity of the posts
• Size of Market: dog lovers on FB or people on FB that need more humor in their lives
• Sales strategy: duh-Facebook or FB ads
• Capital investment required: about two small boxes of dog bones and working capital for merchandise inventory
• Competition: all the other FB pages that are funny (13 as of 11/9/10)
• Revenue: sales of merchandise featuring the dog, e.g. t-shirts that say "I friended ________ on Facebook

For those of you who feel the need for some market research I provide the following:

Ms. Tripp (@michelletripp) is a brand strategist. The respondent at the far right is the noted social media commentator Mr. Ben Parr (@benparr). With such thought leaders engaged in the idea of dogs on FB we have clearly documented the market potential of the idea. The first mover advantage is still there but you may need to move quickly....and don't forget to walk the dog.

Additional posts on dogs and business are here and here.

My new book, Billion Dollar Company: An entrepreneur's guide to business models for high growth companies, is available on Amazon. Learn the fourth strategy Michael Porter should have included, how to determine if a market opportunity is large enough to interest venture capitalists and how product differentiation is more than just a feature set. Book website.

 

 

 

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.

Image credit

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.

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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Why the Kindle Will Survive

I have said many times here that computing is moving to specialized devices, such as the Garmin GPS, the iPod and the Kindle. The iPad may be another example, serving the "Internet for Dummies" market or more politely people that want to use their computers basically for Internet, music, watching video and chat. The iPad offers a book reader but the further development of this feature (application) will not likely drive the sale of iPads. Therefore, I do not see the iPad book reader evolving much and therein lies the future opportunity for the Kindle and other book readers.

Books have evolved little since the time of the invention of the printing press by Gutenberg. Much as computing has spurred innovation in education, e-books have many opportunities for enhanced features. An example of this opportunity is demonstrated by the Kno, which is an e-book reader targeting the text book market. I expect that the Kindle will continue to add new features based on its wireless connectivity to provide additional reference sources beyond a dictionary and links to Wikipedia. Recently the Kindle added a new sharing feature and I hope that soon I can save excerpts of books to Evernote. When the Kindle starts to propose other articles, books or lectures on the subject of a paragraph based on semantic search, we will be closer to where I see e-book readers going.

The following statistics from Amazon show the robustness of the e-book market, which bodes well for the further evolution of the feature set in the Kindle and other book readers.

You will notice in the data above that my new book, Billion Dollar Company, has not yet sold 500,000 copies as an e-book. The simple reason must be that it is not yet available on the Kindle. If you click through to the Amazon link, read the book review and please click on the button to ask the publisher for a Kindle version. A complete website for the book will be available next week and will be announced here.

Some Great Examples of Business Model Thinking

According to Lijit Search (lower left column), I have discussed "business model" 32 times on SF out of 449 total posts. My interest in business models comes in part from the original way I have of creating a business model. Based in part on some ideas from Sequoia Capital, I believe that a business model has three key parts:

1. The revenue or growth driver (only five possibilities)
2. The pricing model (fifteen choices)
3. The sales and distribution strategy

In teaching and presenting my thinking on business models one of the challenges is finding ways to memorably illustrate each of the three required parts of the business model. This week has been very unusual in that I found two terrific examples.

The first example I got from Jeff Stamp, a friend and leading authority on entrepreneurship. Jeff's example makes clear how the pricing model can differentiate the business concept. Most people think of pricing as merely "sell the product for an immediate cash payment". Jeff's example is a great illustration of another alternative--interval pricing. Time shares are the classic example of interval pricing but what if we applied it to animal shelters--Jeff's idea. Many people visit animal shelters looking for a pet but for some reason never make a pet choice. Most animal shelters typically give up at that point, but what they should offer is for the person to pay for an animal's upkeep for just two weeks (so we do not have to put it to sleep in two days). Effectively, the customer pays for the dog just like a timeshare apartment in Hawaii. Who could turn down helping an animal for just two weeks.... and who says you cannot charge more than cost to support a few more dogs, cats or mountain lions.

The second great example comes from @johnfleming who re-tweeted a post from Chris Brogan. Chris talks about using Foursquare to re-direct a shipment by the U.S. Post Office (after they buy Foursquare). Chris has a great example of how to use distribution strategy to differentiate a business concept. Think of buying a product you need desperately on a business trip (a computer power cord) and having it shipped to your next hotel. If you then change your itinerary you would never get to the original hotel. If you logged in and told USPS to redirect the power cord to the new hotel using Foursquare you would have the power cord. The ability to online redirect a shipment easily is a market changing use of distribution strategy (and a terrific way for Foursquare to think about their business development strategy).

The greatest value in my way of thinking about business model is that it gives you a step by step way to think about the growth driver, the pricing model and the sales and distribution strategy of a new business concept. In other words, my approach does not let you assume and forces you to carefully think about the choices in each of the three parts of the model. Maybe you will come up with original ideas like Jeff and Chris.

My thinking on business model has evolved a lot since this first post in October 2007, but it still reflects the basic ideas which I have now developed into a book. If you would like to read a chapter from my book on business models, send me an email.

New Business Idea--Transcribe Videos

Most experts say that there are about five ways that we learn--orally, visually, reading, etc. I learn best by reading. I am not a visual learner. Graphs are a mystery to me (I would prefer to see the equation) and watching someone do something rarely gives me any insight. "Hands on doing" works reasonably well for me for simple tasks but oral learning is iffy. I would have been a poor student in ancient Greece.

My inability to learn from the visual is increasingly affecting my blog reading. Many blogs now frequently make use of videos for interviews and product demos. Unless the speaker on the video is a world renown thinker, e.g. Michael Porter, I cannot abide videos. Also, for the amount of information, I think reading is faster than watching a video. Therefore, I would like to present a new business idea.

Would someone please create a Firefox add-on or a YouTube app that would transcribe the audio portion of the video into a readable document and capture the key image(s) that go with the text and insert them in the appropriate place in the text. Much as Sony professional cameras generate meta tags, maybe we need a technology that can create tags in a video for the key images or exhibits (charts, graphs, etc.) so that they could be more easily identified and inserted into the text. i would think that some mathematical algorithms based on the time an image is on screen would work reasonably well.

I know there will be amazing new technologies to "search" inside videos but would someone please remember that not everybody likes videos and therein may lie a good new business opportunity.

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Intellectual Thought in Business

In the teaching and practice of business we devote a lot of time to tools, processes and management information. Regrettably we devote insufficient time and attention to the break through ideas that shape an industry or perhaps the world. Examples of profound thoughts that shape an industry are:

• Bill Gates--put a computer in every home
• Nicholas Negroponte--build a $100 laptop to educate the children of the world
• Eric Schmidt--we need 1 gigabyte broadband connections to the home

One could argue that each of these examples involves an exceptional business thinker with a large organization behind them (respectively Microsoft, MIT and Google). I would point out that when each of these statements were originally made, the respective organizations were quite small. (As a telecom carrier Google is quite small.) Negroponte and Schmidt do not even care who executed their idea and Gates surely realized Windows would not have a 100% market share.

What is common in all three examples are men who think profoundly about a problem, do not assume constraints and limitations and look for solutions that have significant social value. Many of us have the ability to think at this level, but we lack the discipline to think about problems on this scale (perhaps because of training). This is the scale that produces world changing ideas (and  great organizations).

Many have said that in the 21st century developing intellectual property will be the "business of business". For this to be more than mere economic growth, we need more business people thinking about issues of significant scale. It may not be easy but we need to do it.

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Google Buzz

As everyone except two people in Montana know, Google Buzz premiered this week. It has of course received widespread coverage in the blogosphere because:

1. It's Google
2. It's embedded in Gmail, one of the most popular email offerings
3. It moves Google closer to a content aggregator, as opposed to a content provider

Buzz is not a great product but it is decent product. It does not replace TweetDeck or Google Reader and most of my Facebook friends have not found Buzz yet. Never the less it clearly moves Google into content aggregation, a subject which I have discussed here before. Who ever figures out content aggregation will have a terrific business assuming there is a way to monetize it (hopefully not through advertising banners or silly ads like FB). Google has not advanced the cause of content aggregation much with Buzz, but Gmail was not terrific at launch either. Gmail is pretty nifty now and I expect Buzz to improve a lot in the next 1-2 years.

What I would like to see in a content aggregator is all of the following features:

1. the ability to sort content by type, e.g. tweets, FB friend posts, posts from blogs I follow, etc
2. the ability to sort/filter a type of content, say tweets, by type (tweets, re-tweets, re-re-tweets) or by publisher
3. the ability to separate blog posts from comments on the blog
4. the ability to separate my content in a separate place apart from the general population of tweets, blog posts etc. that I get
5. the ability to sort content by person/publisher regardless of type

Many of these features exist in a limited form for one type of content but I want more flexibility for how I sort all the different sources of information. Maybe NewsGator could buy TweetDeck and combine the products in one application and add more filters to TweetDeck. Then I might have the content aggregator I need. I might even pay for the convenience.

Another Benefit of Twitter

Last week I put up a silly weather tweet.

"Need wood workers to build ark in Miami. Torrential rains but low winds."

My fiend @Neilkod responded as follows.

@rhhfla no kidding. My 5:30 AM bike ride was rained out. didn't see that coming. how about an iphone app that cancels the alarm if raining?

With the current state of location-based services (LBS), the iPhone technology and NOAA weather feeds, the idea of managing alarms based on weather conditions is not far fetched. In fact the whole idea of managing alarms based on a variety of external data sources is quite intriguing. Maybe a conference call alarm could be triggered only when the host is on line or the buy dinner alarm would only trigger when the spouse leaves the office.

I think the informality of Twitter spawns creativity.

Social Media Affects Information Presentation

Yesterday I met with a lady who is the director of marketing for a bank. She was interested in my views on how to use social media to get the bank's message out to clients and prospects. One can not live on finance alone :)

I basically made the following argument.

1. The world has created more information in the last 10 years than in the entire history before that time
2. Consequently people are challenged to aggregate and filter this huge flow of information to be useful
3. Therefore, customers will participate in only a limited number of information sources and the challenge for marketers is to identify the flows used by prospects and customers
4. Younger prospects are probably using different information sources from older customers (e,g,Twitter vs blogs) so marketing probably has to use multiple channels in social media simultaneously

Nothing too earth shattering so far.

Then I said that because we are all becoming information managers, customers will come to expect the ability to manipulate the information received in the format most useful to them. In other words, no longer will customers be satisfied with a single format, static presentation of information such as a monthly credit card statement. Customers will want the ability to sort and re-format the information in the way most useful to them. The companies that are first to provide this flexibility may gain a temporary competitive advantage.

Perhaps the more important point is that habits and behaviors related to real time, multi-channel social media will have an affect on how we want to deal with traditional information (such as monthly credit card statements).

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Webinar Slides: How to Develop a Business Concept

This week I did another webinar for the Pino Entrepreneurship Center at FIU. The topic was "How to Develop the Business Concept". This is the link to download the slides. Download WEBINAR-NOV-09-BUS CONCEPT-2.

If you would like the webinar content in .wmv format send me an email.

Open Forum Pulse--Twitter Really Goes Corporate

About a year ago I wrote a story here and here about the future of Twitter as a large corporation method of communicating with customers and prospects. Today by email I received an invitation from American Express to join Open Forum Pulse. AMEX describes Open Forum Pulse as follows:

"Every day, more and more business owners are sharing their insights on Twitter. To help them find each other—and potential customers—we're introducing OPEN Forum PulseSM, a unique online experience that brings together the Twitter feeds of some of the most-followed business owners and industry leaders. We understand that connections can drive growth, even in this economy, so we've created Pulse as an innovative way to help you make those connections."

Basically AMEX is organizing tweets from small business owners into a branded forum. If you are interested in small business owner views on business and life, you no longer have to create a search on Seesmic or a group on TweetDeck to aggregate tweets. Just visit the link for Open Forum Pulse.

Not a bad implementation of social media by AMEX and it expands the reach of AMEX's Open Forum website. I wish they had created an RSS feed for Pulse because going to a website to get constantly updated information is a bit clunky in this day and age. (Email invitations are also kind of clunky.) I am sure they will change that when they read this post, which will be in a tweet about one minute after I post it.

Now if AMEX had just hired me a year ago as their social media advisor, they could have saved a year in implementing Twitter. I expect their call right after Microsoft and Google call for help with their strategies.

As an aside, I think there is a business opportunity to establish companies that provide "social media relations". Basically this would be a PR type firm that specializes in developing the daily social media content for larger corporations. I have yet to meet a PR firm that really understands social media or is set up to provide daily content on Twitter, FB, blogs, etc. There is a secret to how to make this business successful, but I am keeping that to myself. Client inquiries are welcome.

Miami, FL

Entrepreneurial Opportunity

Israel Kirzner

A tweet this morning caught my attention--"Do entrepreneurial opportunities (business ideas) exist before discovery or are they created by the entrepreneur?" I will resist the urge to do another epistemology post and instead will discuss how to find entrepreneurial opportunities. Much of my thinking on the subject comes from Israel Kirzner, who criticized traditional micro-economic theory because it failed to take into account entrepreneurs and their asymetry of information. (I discussed Kirzner previously in a post on New Business Ideas.) To find entrepreneurial opportunities, requires a four step process:

1. Passion  You need to be passionate about a subject to maintain the determination to understand something in-depth
2. Information Collection  With a field of interest identified, one then must learn as much as possible about the field...but information collection is not an end
3. Analysis   Information needs to be systematically analyzed to arrive at knowledge, such as through my four (now five) step process to develop a new business concept.
4. Asymetry  In the course of the analysis one should discover a market anomaly, an opprtunity for arbitrage, an asymetry of information--the unique insight about the customer or the industry that forms the basis of the entrepreneurial opportunity

"To do the impossible you need to see the invisible" Marcel Prevost

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Miami, FL

Business Opportunities in Cloud Computing

Chip Hazard, a partner at Flybridge Capital in Boston (VC firm), has a new blog which focuses on IT. His first post is about opportunities in cloud computing, a topic which I have discussed as recently as yesterday (and here and here.) Hazard identifies four major types of new business opportunities from cloud computing:

1. Enable enterprise data centers to be more cloud like (enterprise IT will operate using a cloud computing model)
2. Bridge the cloud and enterprise boundary (enterprise computing will use cloud computing to handle peak loads)
3. Provide tools to better manage cloud environments (self-explanatory)
4. Develop SaaS applications for vertical markets (Hazard believes that horizontal SAAS (CRM, ERP, etc.) is closed but industry specific applications are wide open

Hazard's last point is perhaps the most important for entrepreneurs--create companies enabled by the cloud.

"One of the aspects of cloud computing that excites us the most is that it is a huge enabler of innovation.  Cloud computing makes it so easy to develop and deploy applications that it levels the playing field for start-ups versus large, well capitalized, competitors.  As an entrepreneur, I can now buy access to world-class data center infrastructure for dollars an hour that would have previously cost me millions to purchase and deploy.  As a result, savvy start-up executives can look to create companies that would have previously been too capital intensive to contemplate."

Think about the perfect business model from a financial/economic perspective. It would have three characteristics:

1. Low initial capital requirement
2. Low fixed costs
3. Marginal cost to scale the business

Cloud computing allows the entrepreneur to meet all three requirements. As additional technology is added to cloud computing (e.g. Oracle, Calais, etc.) it will only get easier and more attractive to start new businesses.

I found Chip Hazard's blog through a tweet by @bussgang, his partner at Flybridge who writes a terrific blog.

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Miami, FL

Open Calais on Oracle

Much coverage is given to semantic search but few of the examples cited have much merit so far. One technology that is increasingly getting more attention is Thompson-Reuters' Calais, which I first wrote about in February 2008.

"The Calais Web service enables publishers, bloggers and sites of all kinds to automatically metatag the people, places, facts and events in their content to increase its search relevance and accessibility on the Web. It also lets content consumers, such as search engines, news portals, bookmarking services and RSS readers, submit content for automatic semantic metatagging that is performed in well under a second." (Thompson-Reuters)

Last week Oracle announced that it was integrating Calais into its database products to provide "semantic document indexing". As Oracle looks to build more functionality at the database product level, it's interesting to me that they chose Calais. Now combine this with Oracle available on Amazon Web Services and you have some powerful technology to start exploiting for new businesses.

If you are not following Calais, I think you should.

I found this story on Semanticweb.com

Entrepreneurship Class II--Identifying Customer Need

I believe that the hardest part of the new business development process is to identify and understand the customer need (and then to determine if it is a large market opportunity). I teach my students a number of techniques or processes to use to find the customer need. One of my favorite techniques is Gerald Zeitman's seven metaphors, which I discussed in this post from June 2008. Another technique I like is what I call the Nintendo Approach, which I discussed in this post. This weekend I came across another technique--Abundance Scarcity (link).

If you are looking for a new business idea, first look at what is abundant. Automobiles are everywhere in the U.S. so let's use automobiles. Now let's look for the scarcity. Auto sales people have the lowest integrity rating of any profession in the U.S. according to several polls. People hate the process of negotiating to buy a car. The scarcity is an enjoyable, honest process to buy a car. Voila! Auto Nation! Auto Nation provides high quality used cars at a fixed price (no negotiating) and is the market leader in their industry. The customer experience at Auto Nation is much more than just "no negotiating" but the entire process reinforces an enjoyable, honest car purchase. Google might be another example. An abundance of information but a scarcity of what you wanted...until Google. This logic is still valid as evidenced by all the companies focusing on content aggregation.

Some people start entrepreneurship courses by focusing on creativity. Dr. Jeff Stamp is a good example. He has a new venture called Bold Thinking which combines his extensive experience in creativity with the value creation process in a new business concept. (More on Bold Thinking in a future post.) I prefer to start the course with techniques or processes, which I call "originality". Originality might be defined as taking existing things and putting them together differently (think Auto Nation). Few of us are going to discover penicillin or the theory of relativity, which would clearly be examples of creativity. Many of us have the ability to take things we understand and re-organize them into new concepts, particularly if one tries the techniques discussed above.

Whether you focus on creativity or originality, Marcel Prevost's quote is still true.

"You have to see the invisible to do the impossible"

If you do not understand Prevost, read about Israel Kirzner's "asymetry of information", the special skill that separates entrepreneurs from the rest of us.