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Archive for June, 2009

Vision is Strategy. Execution is Tactics.

Posted by Bob Warfield on June 27, 2009

Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.  — Sun Tzu from “The Ancient Art of War”

Sarah Lacy is rehashing that old chestnut about whether vision or execution is more important, right down to the usual recasting of what some feel is visionary (Apple’s latest round of products) to merely fantastic execution.  She’ll argue that if anyone else had even the glimmer of the idea before the visionary, that it is execution and not vision.  There is the inevitable look at history with perfect 20/20 hindsight used to so often when writing about this story–Peoplesoft and I2 are not the winners, SAP is (BTW, Sarah, did you realize Oracle bought Peoplesoft, not SAP, and that Oracle is the bigger player?).  Never mind that Peoplesoft was the winner for many years and the factors that changed that originated outside Peoplesoft’s market and therefore had little or nothing to do with vision or execution on their part.

We’ve seen this movie before. 

What always bugs me about this whole argument is that it again falls into the very Western mindset that insists there must be black or white and no gray.  Only one can win, and we will simply choose to see all gray as whichever color we want to be the winner.  In the East, they are wiser about shades of gray.  They don’t insist on categorizing and pigeonholing where it doesn’t make sense.

So it is with Vision and Execution.

Vision is Strategy, and my favorite definition of Strategy is that it is about making winning easier.  Clearly then, all Vision with no ability to execute will not succeed.  A lack of Vision is one reason why we often see Fast Followers succeed.  We mistake the dumb luck of being there first with true Vision.  Hence folks like Lacy want to argue that it is having the idea first that represents the Visionary.  But I don’t see it that way.  Real Visionaries are not One Trick ponies.  Look how late in his career Steve Jobs is still delivering Visionary results.  Fast Follower opportunity can occur because the Visionary isn’t executing well.  But one also sees markets taken over because an Executor has not Vision and their original motivating Vision grows stale until it is no longer competitive.

Execution is Tactics.  Vision told us which hill to take, now we have to get on with the job of fighting the battle.  Give a good Executor a Vision from somewhere, even borrowed, and they will get it done.  But once they’ve taken the hill, they will have no idea what hill to take next.  Situate their hill in the middle of a whole mountain range of opportunity, and it’s the worst thing they can encounter.  They run from hill to hill with no clear plan.  Often they take the hill, but there is always another one.  That sounds like Microsoft or Yahoo to me.  Microsoft actually had some Vision once upon a time, but it seems long gone as they keep trying to steal other company’s hills. 

And so, it isn’t hard to see, that we need both if we expect to be a sustained force.  It also isn’t hard to look back with that 20/20 hindsight and see that a lot of companies have lost one or the other over time, resulting in their steady decline.

Posted in strategy | 4 Comments »

The Role of Marketing is to Turn Strangers Into Friends, Or At Least Acquaintances

Posted by Bob Warfield on June 26, 2009

I’ve asked a variety of SaaS CEO’s such as Concur’s Steve Singh what they see the role of web marketing as, and the answer that usually comes back is the role is to educate the prospect until they’re ready to be sold to.

Educating the prospect is a very acceptible answer, but upon reading Seth Godin’s post about the difference between Strangers and Friends, I think that more can be accomplished.  Godin, as usual, cuts directly to the chase:

Strangers are justifiably suspicious.

Friends give you the benefit of the doubt.

It makes me want to ask, “How is your marketing turning strangers into friends?”  It’s pretty hard to do, isn’t it?  You can’t be too overt about the marketing because friends don’t spam friends.  It’s a courtship.  Friends give and try to avoid the perception of taking.  Social Media are an ideal tool for this courtship because they invoke an important component in cultivating friends, and that would be friends of friends.  We see it a little bit outside the Internet.  At Callidus, we always tried to invite as many prospects as possible to our user conference, and then we left them alone with our happy customers.  It worked wonders.  By becoming friends of our customers, they were that much closer to being ou friends too.

Think about the many opportunities to use the web to turn strangers into friends.   Start by asking how your prospects can have a good time learning to be you friends.  It’s also critical to take good care of your new friends (as well as the old ones you call customers).  Nurture and protect them.  Watch out for their interests and don’t take undue advantage.  View that as an obligation.

I once spent time chatting with a concierge at a Ritz Carlton.  It was late at night, we were having a drink in the bar at the hotel, and I was curious about the job.  It turned out she was the widow of a US Senator and clearly didn’t need the money or the job.  I asked why she did it, and the answer was that she had a real passion for being a hostess.  I was curious about how the Ritz went about selecting the right sort of person for the job.  Her answer was fascinating.  There is a fairly normal interview process, but then there is an extraordinary component.  For a period of a month, the applicant is on call 24×7.  They must answer the phone any time it rings.  At the other end will be a simulated hotel customer who needs something.  Sometimes its a happy thing.  Sometimes they are very disgruntled.  Sometimes they will be incredibly unreasonable.  She confessed that at first she was very uncomfortable with the excercise.  She complained she’d had no training and had no ideas what her scope of authority was.  What could she promise and what should she not promise?  The hotel simply said she should treat the callers as though they were guests in her home.  She found that worked extremely well, got the job, and has enjoyed it ever since.  That’s just one more example of treating customers like friends.

Posted in saas | 2 Comments »

What Was the Real Value of Newspapers in their Heyday? (Distribution not Content!)

Posted by Bob Warfield on June 26, 2009

The newspaper industry has had a disasterous downturn, largely due to the web.  Not surprisingly, many don’t want to take it laying down.  WSJ publisher Les Hinton recently called Google a “digital vampire.”  He suggests that if newspapers had never offered their content free on the web, there would be no problems.  He goes on and on with odd language about the “charitable view” of how this all got started, as though somehow everyone but the newspapers was to blame.  He vows that it isn’t too late to reverse the trend. 

Barry Diller echoes a similar theme when he talks about the days of the free Internet being numbered.  Just like Hinton, Diller says things got slapped up for free out of fear of being left behind not out of any conscious strategy.  And then Google outfoxed everyone and stole the value from this free content.  Woe is us!


Hinton, Diller, & Co. would only be right if the real value of newspapers and the other media was in the content, and that said content was scarce and controlled almost entirely by them.   Do you believe that these Old School media have the monopoly on the content?  Do they even produce the best content you read these days? 

I don’t think so.  There is no monopoly on the content.  For a newspaper, much of it is just regurgitated newswire without significant editorial or journalistic effort or even much value added from good writing.  Sure, the AP is on this same bandwagon about how the Internet stole their gravy train, and is vowing to change that too.  But it’s too late.  Twitter is leading the front lines in terms of serving as the “AP” of the new age.  We saw that recently with all the activity in Iran.  We saw it again with the passing of Michael Jackson. 

Local news seems like an important niche for the papers, but aggregating local news on the Internet is also not a problem, as the AC example shows.  Delivering restaurant reviews is just a Yelp away.  The Internet understands hyper-local content even better than any newspaper, radio station, or TV station could.

If you follow the stock market, you’ve seen multiple articles get published immediately after a company releases results that purport to explain what happened and that make no sense at all.  That’s because what happens is there are bureaus of bright eyed and bushy tailed young writers who crank those stories out en masse as soon as they see the press release.  These are not insightful reports.  The human bots from the third world.  That’s no value added and I stopped looking at them ages ago, preferring to read what the blogosphere or twittersphere has to say about the news.  There at least you have a shot at finding real people with real insights doing the commenting.

Let me give another related example.  I love live music.  If you live in an area where it is readily available, and you like music, you probably love it too.  No second generation recording can compare to good first generation sound.  But I often feel bad for the musicians.  I’ve heard countless renditions of very famous pieces.  My tastes trend towards rock, so I’ve heard lots of people playing Jimmi Hendrix or Eric Clapton, for example.  They sound just as good or better than the recordings.  Yet they are working for tips and clearly can’t make a living from it.  I’m not saying they’re literally as good as Hendrix or Clapton, and they didn’t write the songs (though even that isn’t always true), but you must know what I’m talking about.  There is more talent available than the market is able to pay through traditional distribution and record labels.  So these incredibly talented folks are playing clubs, restaurants, and other low buck venues for tips just for the sheer joy and passion of it all.

Doesn’t that remind you of all the bloggers and other Internet content creators who are every bit as insightful, and just as good a writers as 99.99% of what you read in the newspapers?

What the web has done very very successfully is provided distribution for these people.  First, they are able to produce and deliver their content on the web.  Second, companies like Google deliver traffic to that content.  The Social Web has taken traffic delivery to a whole other level.  And, as that whole extended community riffs back and forth with each other, the conversation gets even better.  There is the potential to participate. 

None of that exists for newspapers.  Once upon a time they uniquely owned distribution.  Because of that, they controlled the purse strings.  Hinton and Diller think they can just reassert control of distribution and the problem goes away.  Just quit making their stuff available for free and the world will desperately pound at their big bronze doors, begging to be let back in.  Will you be there pounding?  I know I won’t.  These guys already tried this approach, and it didn’t work.  How can they have forgotten?  They didn’t give away all their content.  WSJ and NY Times had for years insisted on charging for it.  That only helped people find their way to other sources.

The remaining conventional scarcities that exist are of a limited nature:

–  So far, mobile has not fully caught up.  Yes, I can get a lot from my iPhone, but I’m talking about FM Radio and Satellite (Sirius/XM) Radio.   That continues to be a form of limited distribution until the Internet can seamlessly stream to mobile devices without dropping out.

–  Stardom.  Properties like American Idol are all about Stardom.  Stardom is scarce, and the profusion of content on the Internet makes it even harder to stand out.  This is why the Satellite Radio people pay so much for a Howard Stern.  There are other guys just as funny (watch some of the stuff on YouTube if you doubt it), but he is the star.  In a way, this is a branding issue.  You can only keep so many star names in your head, and when you hear one is doing something, you want to go see.  But it is more than that.  People want stars to worship.  And as American Idol shows, they love having a roll in annointing those stars.  But this is also a short lived scarcity.  The Internet is fully capable of delivering the American Idol experience in spades.  We’ve already seen contests on Twitter to see who can get the most followers that amounts to stardom.  Moreover, the stars want to own the value and cut out the middle man.  And many of them are content that they can do it on their own.

–  The experience.  Some just like the feel of a newspaper in their hands.  I’ve moved on.  I always liked the WSJ’s front page news digest, which is just like what I get on the Internet, so it wasn’t unique.  I suspect the group that loves the newspaper for the experience is an aging demographic, and therefore it won’t last.  Susan Scrupski put me on to an interesting article that suggests half the people that don’t have Internet don’t even want it.  I’d hate to be trying to build a media empire around such people.

The best advice I can give to Hinton and Diller is to invest in talent and stardom.  Lock that up.  Find scarcities.  Avoid commodities.  Add real value.  Because if you don’t, people are just going to ignore you.  I am afraid that you’d better also get used to the idea that your franchises are never going to be as big as they once were.  Those days are over.  Use the time you have left to figure out what the new scarcities of the Internet might be and how to get a stranglehold on them.  As for Google, forget about it.  They own that one.  You can’t touch them.

Posted in business, strategy, Web 2.0 | Leave a Comment »

Ironically, Big On-Prem Enterprise Software is the Most Customer Driven Software There Is

Posted by Bob Warfield on June 25, 2009

Vinnie Merchandani thinks big Enterprise software involves building a lot of features nobody wants.  He riffs about underutilized features and wishes for a market like the iPhone’s AppStore.   He wishes SaaS vendors to use their real time visibility into what their customers are doing to give them that kind of market-driven visibility into what to build.

Vinnie and I are fellow Enterprise Irregulars, and I really enjoy his perspective most of the time, but he has it all wrong on this one.  Backwards in fact.  Sorry Vinnie!

You see, Big On-Premises Enterprise Software is more customer driven than any other kind of software there is.

“Huh, why is that and what are you talking about, Bob?”

As one person described it to me, for these sorts of companies the Customer is God and Sales is the Church.  Sales people are natural arbitrageurs.  Any time a question comes up they are rapidly computing who to say “no” to.  Is it easier to negotiate with the customer about their request, or is it easier to negotiate with the company?  The bigger the deal and the better the salesperson (and the two go hand in hand, don’t they?), the more likely it is they choose to say “yes” to the customer and “no” to the company.

All that feature bloat in those products is as a result of saying “yes” too many times to customers.  “Yes” was easier than educating them about better ways to do things, or on how while it seems like “yes” is a good answer today, tomorrow they will have enough experience with the software to realize “yes” is no longer important.

Many view the essential function of marketing and sales as finding ways to say “yes” as often as possible, no matter what the cost.  But here is the problem.  Many times “yes” is exactly what wrecked the product.  “Yes” led to the kinds of problems Vinnie wants to escape from.

Look at it this way.  Marketers are fond of saying that since everyone consumes marketing, they all think they are good marketers.  The same is true for products.  Every user wants to tell you how to fix it before they have even explained what the problem is that needs fixing.  There is a whole school of product management that holds that the way to build great products is to constantly survey end users, build great big prioritized lists of what they want, and then give it to them.  That’s how Microsoft builds its products, for example.   But just as everyone who watches movies is not Steven Spielberg, most people who think they have a great idea for how to change a product are probably not helping.

When you approach things that way, you have a lot of trees and no sign of a forest.  Microsoft is known for successful products (unfortunately more in that past than present), but not for great products.  How do companies operate that are known for great products?  Well, consider Apple, which is perhaps the diametric opposite of the democratic product design process.  They annoint a very few philosopher kings who have the vision.  They’re spurred on by the philosopher emperor-in-chief Steve Jobs until they get it right.  Insanely Great Products are the end result.  Apple’s brief fling with moving away from that approach with Soda Pop King John Sculley was a total disaster for them.  On a much smaller scale, 37Signals is a similar model.  They actually take features back out of products if they think they were a bad idea.  That’s something that is very hard to get customers to recommend very often, and they take heat for it.  But they stick to their guns and they are generally quite successful.

Operating that way leads to conceptual integrity.  You get a forest instead of just a bunch of trees.

Companies can’t afford to ignore customers, there has to be a balance.  You need people making product decisions who are enlightened enough to connect the two ends together.  They’re going to ensure a forest gets built, but they will let customers position enough of the trees to keep them happy too.  And, where a tree is being positioned that’s in the way of a vital river needed to bring water to the forest, they will object and stop that tree being planted.  Even if it means losing one customer.  Because it ensures a healthy forest that ultimately leads to more customers in the end.

It’s a tricky process.  If you have a company that either ignores customers too much, or gives in too easily, you’ll have a product that suffers for it.  Visionaries have to be good listeners, and they have to go forth among the customers to understand their needs.  They have to be good at selling their point of view too.  If you can convince a customer to buy into the vision, they’ll quit trying so hard to plant trees in the wrong places.  Steve Jobs does all that in spades.  Is it any wonder he has been so successful?

Posted in software development, strategy, user interface | 4 Comments »

Travelling With a Kindle: It’s an Industry Changer

Posted by Bob Warfield on June 24, 2009

My wife and I recently bought each other Amazon’s Kindle e-book readers as gifts for our 25th anniversary.  We now have quite a lot of cockpit time with these beasts and I can say with some confidence that the Kindle is a huge event for the world of books.  It changes everything in very fundamental ways.

Let me start out saying that the two of us are voracious readers.  We basically can’t go to sleep at the end of the day without having buzzed through a few chapters of whatever we’re reading.  Our house is filled with so many books that we have an annual spring cleaning where we give away several large boxes of them every year, and we still never seem to have enough room.  We’re the sorts of people that would wind up at a Borders every week and a half.  Or, the sorts who would pack a couple of knapsacks (his and hers) with books for a trip, and still have to go to Borders at some point on the trip while leaving behind in the hotel room a stack of paperbacks.  We regularly skip the inflight movie unless it’s really good and we haven’t seen it to keep reading our beloved books.  We were delighted when one of our favorite vacation destinations, Kona, Hawaii, got a big Borders for that reason.  Our annual expenditures at the book store are too scary to ever tote up.  Did I mention we love to read?

So imagine the convenience of being able to carry all of those books in a slim little reader that is actually more comfortable to hold than most any paperback and all hardbacks.  It’s incredibly easy on the eyes–I have yet to find a situation where it wasn’t at least as good as an actual ink and paper book, with the exception of its relatively poor graphical rendering.  You’ll want to stick to books that are mostly print.  The user experience is quite simply, wonderful.  Until you actually try reading an entire book, you really can’t imagine how good it can be.  If not for the fact that I hate the thought of buying a second copy of books I’ve already read and may never read again, I would be going through the whole house and just tossing anything I could get on the Kindle that was mostly text.

Amazon says that where a title is available on both Kindle and in their bookstore, about 35% of the sales are going to the Kindle version of the book.  That number is only headed up, as I can’t imagine buying a book I would like to read on the Kindle and can get on the Kindle.  Every Kindle buyer is likely to be a one-way wholesale adopter of buying Kindle books at the expense of paper.

Our kids don’t (yet) have Kindles, and there are publications we don’t like to read on the Kindles (I for one am also a magazine fiend and the mags I read have lots of pictures), so we still go to bookstores.  However, we go a lot less often than we used to (approximately monthly since getting the Kindles), and my wife and I often leave the store with very little purchased.  OTOH, we can be seen feverishly taking notes on what to buy in the Kindle store as we come across physical books that seem interesting.  That has to be galling for any book store owner that is aware that’s happening, but it is going to get a LOT worse.  Amazon just acquired SnapTell, which is an app that lets you take a digital picture of any book, CD, DVD, or video game and it will later tell  you what the item was.  Imagine walking through the local book store, camera snapping away at anything you like, and finding its all on your Kindle by the time you get home.  The book store paid for your browsing experience, but Amazon got all the revenue.  Look for bookstores to become hyper-sensitive about people taking photos inside their four walls.

If you don’t think Kindle is a phenom, consider this.  On our recent trip to New York all sorts of people spotted us with Kindles and wanted to check them out.  They were all quite favorably impressed and wanted one.  This is not unique to us.  Amazon has started a volunteer program where Kindle owners meet folks who want to see a Kindle for coffee.  That’s some brand loyalty for you!

Things to Love About Kindle

–  The overall user experience when reading a book is great.  Screen readability is excellent, and the navigation experience is very good. 

–  The browsing experience in the Kindle store is not bad, but more on that later. 

–  The savings when buying Kindle books are pretty compelling.  It will take a little while to offset the cost of the Kindle itself, but getting hardbound editions hot of the press for $9.99 is cool.  Especially if you follow a gaggle of authors for whom you must always have their latest title and can’t wait for the paperbacks.

–  The device even looks and feels pretty sexy.  Though it isn’t up to Apple’s standards, I would say it beats a lot of PC’s.

–  Battery life is good, and the Kindle charges fast.

–  The wireless connection also seems excellent.  Frankly, it was better than my Apple iPhone 3G, probably because it doesn’t use AT&T.

–  Being liberated from carrying around the weight of books is awesome.  Being able to instantly get more books when you finish what you have read is awesome.

–  There are free books and really really cheap books there.  I picked up the original Sherlock Holmes series for free.  It’s very cool to see these titles out there and you really feel like you got something of value when you can pick one up and enjoy reading it.

–  I love the iPhone Kindle reader.  It isn’t a substitute, it’s a way to keep reading a few more pages during your down time.  For example, I would pop it out during a cab ride, or while waiting for a movie to start.  It’s very readable, and very usable–much more than I would have guessed given the screen size.  The best part is it is linked online to the reader.  Read further on either and the alternate devices still knows what page you are on.

Less Positive Thoughts

The user experience of the Kindle as a reader and its associated shopping experience for buyers are excellent for newcomers.  But we are already getting to a point where the UI’s are less than ideal.  Some examples:

–  How do I manage having a large number of titles on the Kindle?  It’s pretty crude.  Kindle has search, but it could also use some form of foldering.

–  How do I trade my Kindle back and forth with my wife’s and keep track of which things each of us has read?  Foldering would save us there too, but I’m even thinking of some online facilities to coordinate such collaborative family ownership.  After all, it’s very common for bookreaders to share books.  Amazon and the publishers aren’t going to lose much money here.  I’m not suggesting they let the book move to another Kindle, but make it possible for more than one person to read on a Kindle.

–  Related to this task of who has read what, and on how to keep all my titles organized, is the need for better tools for the iPhone app.  I don’t want to download all the books onto the iPhone.  The app knows how far I have read in the Kindle, why doesn’t it also know what I am reading?  If it did, it would simply download the latest thing automatically if it wasn’t already on the iPhone.  And then I’ll want it to clean up when I finish a book.  I don’t want to clog up my iPhone’s memory with books already read.

–  Shopping on the web is better than shopping on the Kindle.  In some ways, I even like the iPhone Kindle reader shopping experience better.  Color matters to me when looking at book covers even though inside may be black and white.  It’s an odd little psychological quirk, but one I’m sure publishers know all about as they design covers to help sell books.

–  Shopping is skewed to helping me find the best sellers of the moment.  Once I get tired of that, I get very little help unless I go to Amazon’s web site on a real computer.  The best sellers don’t change that often, and once I go through the list for the third or fourth time I get tired of seeing titles I don’t want and know I will never want.  I wish it was easy to make them disappear with one click.  Knowing what I made disappear would help Amazon make better recommendations to me as well.  This is one of the aspects I alluded to where things work well for newcomers but start to bog down when you’ve used a Kindle for a while.

= I like the idea of a list of things to think about buying but not buy, but they need to take it further.  First thing is I can’t find a way to add to my list when I am on the Amazon web site.  It only seems to work on the Kindle itself.  Second is I will want ways to categorize that list.  Amazon is great about letting people make lists on their web site, why not let people have multiple lists on the Kindle and carry them over to the web site?  That would also simplify my problem of organizing my titles for my wife to read.  I’d simply have a list called “Kathy”.

–  How do I reconcile Kindle with my paper books?  I want to tell it what I own and have already read and have it know those titles so it can warn me not to buy them again.  If I had that feature I really would get started giving away the paper books.  As it stands, physically possessing them is my record keeping system.

–  How do I subscribe to an author?  I have a list I follow but I always forget a few.  Any book I read I should be able with one click to indicate I want to be told any time they publish a new book.  This is a big opportunity to sell more books Amazon has missed.

The list goes on, but these are improvements, not tragic flaws.  They will come with time.  Go get a Kindle.  You won’t be sorry!

Posted in business | 1 Comment »

Effective Search Trumps Brand: Glimmerings of a Digital Renaissance

Posted by Bob Warfield on June 22, 2009

I’m just back from a week long family vacation in the Big Apple to celebrate our 25th anniversary.  It was a blast, and as always, its great to get out into the world, see new things, meet new people, and think new thoughts.  I’ll have several blog posts to share on these new thoughts, and this is the first.  It begins with a brief observation by my kids. 

We stayed at a wonderful little hotel right on Central Park South called the Helmsley Park Lane.  Lots to see and do within walking distance, and we also availed ourselves of the excellent mass transit the City has to offer.  Along the way, we wanted to maximize our sampling of the great restaurants Manhattan has to offer.  Having made sure to select choices that appealed both to adults and kids (well heck, I enjoyed our quest for best Pizza too, I must admit!), I was surprised when my kids actually started to register pity for the mega-brands.  “How can McDonalds or Burger King survive here with all this great food?” they asked.

I never thought I’d hear that.  Normally we battle to avoid having them drag us into those places.  Now they were actively pitying the mega-brands of all things.  What was up with that? 

It got me thinking about the nature of what a brand is, and kids are a great microcosm from which to think of it.  Brands are largely about two things.  One is the safety and security of knowing you’ve chosen a brand that is a known quantity.  That McDonald’s hamburger or Starbucks coffee will taste just the same no matter which store you wander in to, all over the world even.  The experience is predictable, and if you like it, you know you can seek it out almost without thinking.  The second things brands do is signal to others that you have good taste.  Brands are very much a social thing, in this respect.  We want to know our choice is a popular choice.  It makes it that much sweeter in many cases.  It allows the brands to charge a premium that is out of proportion to the real value of the product, in fact.

But somehow, this process broke down, at least a little bit, in our Manhattan soujourn.

I’ve always been a person who loves to find new things, loves choices, and in general, has been a little less brand conscious, perhaps.  But my kids are all about brand, especially when it comes to food.  Their fear is that they will be taken somewhere that has nothing they want to eat.  If you’re a parent, I’m sure you’re familiar with that concern!  They’re all about the safety, security, and predictability, which is ironic when you consider they’re young and should be trying everything under the sun before getting set in their ways.  Nevertheless, their behaviour is very obvious and easily understood, and it doesn’t just pertain to kids.

So what happened to break that mold?

They developed confidence in my iPhone, and in the research I had done in advance via Google.  Effective Search had trumped brand.  Let me explain how.

First was the research.  I spent a few hours on the Internet with Google and enrolling the whole family in the process of tracking down some great places to go for dinner.  I was respectful of the family’s preferences, and didn’t venture too far out on a culinary limb.  We only planned dinners that way, and relied on spontaneity for breakfast, lunch, and the inevitable snack or coffee when it was time to rest our weary feet.  But that spontaneity was fed by Effective Search as well.  Wherever we found ourselves, I was able to conjure up a list of food choices using Google Maps with search or the Yelp iPhone app.

The beautiful thing about Yelp is the ratings, and the ability to combine that with geo-awareness (i.e. it tapped into the iPhone’s GPS to know what was nearby) was brilliant.  Google needs to either start doing Yelp-like ratings or just buy Yelp.  It immensely adds to the whole search experience to have those ratings.  The other point I will add about the ratings is that they represent, almost subconsciously, that other function of brands, which is to signal what is popular.  

Of course this sort of approach is critical when you’re strangers in a strange land like we were in Manhattan.  And one could argue that dense urban environment begets more usefulness.  The latter, I think, is very true.  In the Pre-digital/Pre-mobile Age, people have to discover your business through either wandering in one day or hearing by word of mouth.  A dense urban environment facilitates both.  There are quite simply more people nearby than in the dispersed suburbia more common of other areas.  In the latter, we go out of our way to recreate a dense environment through the artiface of the shopping mall.

But let’s not think that the value of Effective Search ends outside that dense environment.  As a matter of fact, I’ll argue it’s even more important.  Manhattan is so competitive, and so dense, that it is hard not to find at least a few good restaurants.   As the fighter jocks like to say, it is a “target rich environment.”  Suburbia is not so blessed.  Mediocre establishments do better than they should precisely because there is less competition.  They can be big fish in small ponds.

I figured as soon as we returned to our small surfing community of Santa Cruz, California, the kids would forget all about the iPhone and Yelp.  But they didn’t.  We were sitting at breakfast the next morning (incidentally at a local pattiserie that beat anything we were able to find in Manhattan), and my son suddenly wanted to use Yelp to resolve a long running family dispute over where the best pizza in the area came from.  There’s that brand property of wanting to be seen as having made the popular choice.  As a 15 year old, my son is particularly keen on what’s popular and fashionable, or not.  Imagine his disappointment when his favorite scored lower than the rest of the family’s.  But imagine all of our surprise when we learned that the consistently best rated pizza place in the area was one we had never heard of that was not much further from our house than the other two!

I am convinced there are some essential takeaways for new ventures and small businesses from all of this.  First, your “brand” is going to be determined more by word of mouth (especially as enhanced by Social Media like Yelp) than it is by advertising.  That’s a good thing, since small businesses can’t afford much advertising.  A close corrollary is that Customer Service is going to be more important than ever, precisely because of that word of mouth.  The Internet will democratize the selection of who is good or bad, and it will spread the news like wildfire.  Make sure your news is good by treating all of your customers exceptionally well!

Second, it behooves you to spend some time thinking about how to get an Effective Search Advantage.  SEO is not going to be the answer.  Everyone is doing SEO.  You’re going to have to be more clever than that.  Ideally, you need a strategy of some kind right from your very beginnings.  For restaurants in Manhattan, geo-aware search is the thing that defines the pond’s boundaries and lets you be a big fish in that smallish pond.  It cuts through the spam.  What are other kinds of boundaries that will help you stand out in Effective Searching?

Real Time.  There is a tremendous amount of talk about Real Time on the Internet.  It’s pretty unfocused, but time establishes a boundary just like location.  What sort of business can you create where time becomes critically valuable?  The obvious one is tickets and other perishable inventory.  What do you have right now that won’t be available tomorrow to sell to those who need something right now?

Social Media:  What communities can you join and really stand out in?  Tackling this challenge can convey the dual benefits of creating boundaries to focus search in your direction as well as annointing your offerings as the popular choice by letting others weigh in with their opinions.  Social Boundaries can come in many forms.  They can be as a result of targeting a focused service like Yelp.  I’ll tell you right now I’d give a discount at my restaurant in exchange for a Yelp review no matter whether it was good or bad.  Just encourage the participation and make sure your service or product is good enough that the reviews are good.  I’d go out of my way to make sure I was plugged into every geo-aware tool I could find, in fact.  The beautiful thing is that reviews beget reviews and they’re pretty permanent.  Once you get the ball rolling it picks up speed.  You don’t have to incent reviews for very long to win.

There are bound to be lots of other ways to create boundaries like this.   Boundaries for the purpose of reducing the search space to a small enough dimension that your business can really stand out.  Seth Godin wrote a great piece today about avoiding the big domino and making sure the first small domino falls with the money and resources you have available today.  I think it captures this idea of reducing boundaries perfectly.  You don’t have the resources to start out trying to brand yourself like Coke.   The good news is that in the Digital Renaissance, it probably doesn’t even make sense to try.

Postscript:  NYC Dining Experiences, Good and Bad

Best Pizza:  We tried Totonno’s and one of the Original Ray’s (the one in Little Italy, on Prince St.).  Both were great, but Totonno’s was a revelation.  They were one of a list of pizza restaurants we had uncovered that seemed to be good candidates for the best.  What swayed me to choose Totonno’s was hearing about it in my favorite pizza cookbook “American Pie“, so I didn’t exclusively use the Internet.  Ray’s got picked so we could get a slice one day at lunch, and we knew we wanted to tour Little Italy and Chinatown, so it was convenient that this Ray’s was also one of the most highly rated.

Daniel:  My wife and I had dinner at Daniel because it was one of the top half dozen or so restaurants in Mahattan at the time I searched.  We were not disappointed!

The Good (Mitchel London), The Bad (Beauchon), and The Ugly (Fika):  As family, we love to go for pastry and coffee in the mornings.  I have to say, we had a hard time finding good pastry in Manhattan (I’ll be amazed if I don’t get lots of comments on this!).  Seemed like life would be good with Thomas Keller’s (he of the French Laundry) Beauchon nearby.  But despite the delightful appearance of the pastries, imagine our surprise to discover they were very stale.  Think Starbucks pastry stale (sorry Starbucks, love your coffee, but your pastry is terrible!).  Here is one where Yelp failed us, as Beauchon has a huge number of fabulous reviews.  Perhaps it was just a bad day.  Lucky for us, while pawing through the Beauchon reviews and trying to understand whether it had recently gone bad, I discovered a great little place right around the corner called Fika.  Great pastry and perhaps the best coffee we had in Manhattan (and we had a lot of great coffee!).  Fika was highly rated but much less well know.  It is a Swedish coffee place, and a wonderfully quaint little spot in an out of the way place.  I shouldn’t call it ugly, because it isn’t, but that fit my title.  The real outstanding choice though was Mitchel London.  The bad news is there is no place to sit, but this bakery had some amazing eats.  The kids made us get French Creullers there twice.  No place to sit?  No problem.  Buy a bag of doughnuts and head over to a nearby Starbucks for the coffee.  They don’t mind!

A tale of two Italians:  Nanni’s and Trattoria dell’Arte.  This was another surpise.  A good friend who has lived in NYC suggested Nanni’s.  Awesome little place.  I had been to Trattoria several times in the past on business trips to NYC, and loved its Antipasti–best I’ve had outside Italy.  Trattoria was a bit disappointing this trip though.  The service was indifferent, and while the Antipasti was good as always, the veal marsala and the pizza my kids ordered were good but not world-class. 

We wound up going back to Totonno’s a second night rather than try another new place.  We had a great conversation with our waitress the second time who it turns out was from San Diego and understood our mindset coming to NYC.  We chatted about what was great in NYC (pizza!  Italian) and what was still better in California (sea food, and especially sushi).  We brought up our pastry plight with her and her response was that she saw people in NYC as being more into bagels (so we had Murray’s and loved them) and saving the pastry for late night dessert rather than breakfast.

Posted in business, Marketing, strategy | 5 Comments »

Palm: It’s Very Hard to Snatch Victory from the Jaws of Defeat

Posted by Bob Warfield on June 11, 2009

Sometimes winning seems easy, but it never is.

I read this morning in Larry Dignan’s blog that Ed Colligan at the helm of Palm is moving on, to be replaced by Jon Rubinstein, ex-Apple.  Is Palm creatively snatching defeat from the jaws of victory?  It’s way too early to say, but the article made me think of writing a blog post based on some thoughts about winning.  Palm will simply serve as a convenient example, and I don’t mean to reflect on Colligan, Rubinstein, or even Palm itself.

Let’s start out with a premise that I suspect many people share:  it isn’t that hard for Palm to win, they just need to copy the iPhone.  There, it’s out in the open.  While you may not agree (and I don’t), it’s something that needed to be said. 

After all, there’s all this artificial scarcity in the form of exclusives with companies like AT&T (whom I hate).  If someone had the same phone available to sell all the non-AT&T’s, they’d make a killing, right?

So why hasn’t someone just copied the iPhone?  Why is it taking so long?  The people at Google with Android or even Nokia are smart.  Surely they can do it.  Won’t they just copy the iPhone and maybe throw in some gratuitous goodies to make it their own?

It sounds simple enough, and likely to succeed.  How often have we been presented with such an apparent opportunity?  Why didn’t someone just copy eBay back in the day?  Why didn’t someone just copy Facebook?  Twitter?  Google?

None of them are all that hard to copy.  Wouldn’t that have made a winning strategy?

Perhaps.  Assuming all that was at stake was commoditization (meaning a cheaper clone would sell well) and assuming we understand fully what the thing was we had to copy.  You begin to see some doubt based on how I worded that, don’t you?

I see this going on with the array of online applications trying to steal Microsoft Office’s throne.  Google Apps.  Zoho. There is an array.  I’ve been there myself, back when I was a General in the Office Suite Wars in the 80’s and early 90’s.

Let me be more direct about what’s wrong.

First, people really don’t understand how to do copies well.  They leave things out.  They assume things may not be important to copy.  They think things they don’t like can be improved without damaging the proposition.  Often they assume that the company they’re with is a giant in its own right, and that this will excuse their sins.  Google doesn’t have to build an exact copy of Office to beat Office because Google is a greater company than Microsoft.

Copying is an exacting and selfless act.  You can’t compromise on compatibility at all.  Not even a little bit.  The first time a user encounters even a little incompatibility it introduces doubt which leads to an excuse to delay. 

The second problem is that there is an extremely limited window of vulnerability in which to copy.  Successful copiers generally fall under the business strategy heading of being “fast followers.”  A successful fast follower has to bring not only an effective copy, but reasons to switch.  And, it depends on the “first mover” having left the door open in some way.

Mick Liubinskas wrote a great guest post on ReadWrite about how the First Mover advantage is all about compound interest.  Therein lies the explanation for why Fast Followers have to be, well, fast.  The power of that compound interest moves the bar so fast that if you are too late, you just can’t fast follow no matter how good your product is.  Twitter has reached that escape velocity.  Building a Twitter clone is doable, but who would come?

eBay, in its day, had tons of fast follower hangers on.  There used to be lots of auction sites.  Every self-respecting web property had one or designs on one.  But in a very short time network effects and First Mover compound interest sent all the business to eBay.  The Fast Followers were left high and dry.

The third problem is switching cost.  It’s great to start a completely greenfield market, but it’s even better to be stealing share like crazy from markets others spent a fortune building.  When Fast Following, always consider switching costs for your market and its leader.  Compatibility in the form of a copy is one way to lower the switching costs, but is it enough? 

Now let’s consider the challenge facing Jon Rubinstein in copying the iPhone at Palm (assuming that is his strategy):

First question:  Can he build a good copy?  Of the iPhone itself, probably, though even that is not certain.  Apple is on their third generation.  There is a lot of learning there, not all of which will be obvious to the copier.  At least Rubinstein’s team comes from backgrounds where they have a head start.  They do have to contend with Apple’s pesky patents around various aspects of the user experience.  When it was introduced, Jobs said it involved over 200 patents.  Just understanding what they are well enough to avoid them is no simple feat.

But copying the phone itself is not enough.  Palm must copy the iPhone’s user experience.  That means the ecosystem of supporting applications.  Everything from iTunes to at least the top 10 most popular downloaded apps.  It’s starting to sound a lot harder just to copy, isn’t it?

Second question:  Is Palm too late to fast follow?  This is always a subjective question, but the iPhone is not exactly a spring chicken.  As I mention, it is on its 3rd incarnation.  It is worldwide.  You see them constantly.  It has become the paradigm.  Most importantly against that backdrop, the relative size, product maturity, and momentum of Palm have to be weighed against the equivalents for Apple.  If you’re like me, it isn’t hard to conclude Palm is much to late to succeed just by copying.  There is still that issue of artificial scarcity that may prop them up.  The major carriers that want to sell the iPhone may not be able to (AT&T already owns it in the US), or may not be amenable to Apple’s terms.  That’s the glimmer of hope on Palm being too late.

Last question:  Are switching costs to move from iPhone to Palm low enough?  Another highly subjective question, but this is the key corollary to the artificial scarcity.  Those other carriers hungry for their own iPhone will lose their appetite if they ship one and can’t get any iPhone customers to switch.  You see, they’re also fast followers of AT&T.  It isn’t just Palm caught up in this business of fast following.

So what are the switching costs?  They’re largely made up of cell phone contracts that have to run out, personal affinity with the Apple Brand (not to be underestimated, Ms Laptop Searcher), and investment in ancillaries dependant on the iPhone (iTunes, Apple mp3 players, apps, etc.).  There are probably some others (like having learned all the secrets, e.g. expertise, or having unlocked your iPhone and invested in that, or having figured out how to sync the iPhone with your mail and calendar, yada, yada), but these are not insignificant. 

Replacing an iPhone is not like just getting another cell phone.  It’s a smartphone.  In fact, it is a general purpose computing device of an extremely powerful sort.  It is nearly as hard as trying to switch from PC to Mac.  In fact, it’s harder.  It’s switching Mac people to PC’s.  Does that ever happen?

Basically, I am not optimistic for Palm.  I know folks shorting them as we speak.  Obvious there are others who’ve made huge bets on them.  It would actually be good for consumers if another smartphone makes it and puts some competitive pressure on Apple (and especially on AT&T).  Unfortunately, it’s one thing to copy a phone, another more difficult thing to copy an ecosystem, and a still harder thing to copy a vision/dream/ideal (some call it a crystal ball even), and a way of life.

Posted in strategy | 2 Comments »

First Chance I Get, I’m Dropping AT&T From Our iPhones

Posted by Bob Warfield on June 8, 2009

Just heard from Apple WWDC:  the new iPhone 3.0 will support tethering, but AT&T will not.

Here’s the company spending zillions advertising how great their 3G network is, but they are opting out of supporting tethering on the iPhone. 

This is a cause well worth starting a consumer revolt over.  Send messages to Apple and to AT&T to express your unhappiness if you have an iPhone.  Tweet about it with hashtag #NoTetherNoATT.

First chance I get, I will be opting out of supporting AT&T any further with my iPhone dollars.

Related Articles

Sam Diaz calls AT&T the iPhone’s boat anchor over on ZDNet.  Amen.

Dan Frommer says Steve Jobs missing from WWDC and AT&T too.  AT&T’s absence in terms of supporting key features was worse.  At least we no Steve is still in the background just trying to get healthier.  AT&T has no excuse.

BS Excuse #whatever:  AT&T says no MMS because they have to manually update the accounts Opt-Out option.  Come on, people.  These are computers.  Nothing has to be manual!

Posted in saas | 2 Comments »

Google Apps Profitable; Microsoft = Titanic?

Posted by Bob Warfield on June 5, 2009

Upon reading that Google Apps is a profitable business from Larry Dignan, one of my Enterprise Irregular blogging cohorts quipped that Microsoft was the Titanic and they’re standing in a couple inches of water soon to get much worse.

I responded:

Nah, there’s no water in the Titanic yet.  But the steel plates of the hull are extremely brittle, there is an iceberg coming up off the port bow, and Captain and Crew are at a party in full tux alternately listening to an entertainer named “Bing” and trying to get the attention of a lovely lady at the next table named “Bartz.”

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Intel Goes to the One Place that can Never Be in the Cloud

Posted by Bob Warfield on June 4, 2009

Intel buys Wind River, maker of embedded systems software, for almost 2.5x revenue.  That’s a lot more than the 30% one often sees these days, so we can assume they see it as strategic.

I’ve quipped that embedded systems are the one place that can never be in the Cloud.  An embedded system is a device, like a cell phone, MP3 player, digital camera, or other gadget of the Digerati as well as many industrial gizmos and even cars.  These days everything has a computer at its heart. 

Intel doesn’t see this as strategic because its never going to the Cloud, rather I think there is something else at work here.  

First, the vicious upgrade cycle is largely over due to the multicore crisis.  People don’t buy new computers every 18-24 months like they used to.  There is even some sense there may be a trend to lower-powered devices like netbooks.  But people are still upgrading their phones and the like very quickly, not to mention buying more kinds of devices.  For years I had one digital camera, a little Canon Elph.  Then I got 2:  the little one and a full-featured Nikon.  Then I had a camera in my phone.  Now I just bought a Flip for movies, and the rest of the family is starting to accumulate multiple cameras.

Software for these things is finicky because it has to be small and powerful.  Some kinds of embedded system use things like Linux (the Tivo comes to mind), but I don’t think we’re there yet for handheld devices.  Hence Wind River has a thriving business.

The second issue is I believe Intel is concerned about competition coming up from the bottom.  There is a family of all-in-one chips that are really cool that I’ve been watching evolve.  One of the latest is called the Arduino, and it is Uber Trendy!  Gizmos like this have been out for a while with names like “PIC” and “Stamp”.  What they are is tiny little general purpose embedded devices.  They have everything on the chip including:

– A language like Basic or dialect of C

– I/O capabilities to control real world devices like switches or rheostats.  They can hook to sensors and use them to control other devices including motors, pumps, robots, sound synthesizers, you name it.

It’s a very generic way to build an extremely sophisticated custom device with a “brain” (no more Mr Scarecrow) and in very small quantities.  Arduino can cost circuit $50 in small quantities, which means you can build a little device in small quantities and make money from it in the $100 – 200 range.  There is a thriving robot hobbyist world out there, creating crazy gizmos like the robot penguin:

But beyond such frivolous exercises for geeks, there is no end of other possibilities.  As these devices become increasingly sophisticated, the low end is steadily move up into Intel’s territory.  The defining difference is that they combine hardware and software on the same chip.  For Intel to do that, they need some software to add to their hardware.  It’ll be very cool if the embedded device market heats up into an arms race.  The little guys like Arduino have been doing cool stuff, but it’s relatively under powered.  If we get to a race for power because Intel is involved and investing, who knows what can happen?

Posted in saas | 1 Comment »

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