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For Executives, Entrepreneurs, and other Digerati who need to know about SaaS and Web 2.0.

Archive for June, 2011

Square: It’s All About the Momentum, Baby!

Posted by Bob Warfield on June 29, 2011

Reading about Square’s latest $100 million in capital raised at a $1 billion valuation, it’s tempting to write another Bubble Story.   While it’s undeniable that it would be hard to do that financing in the wake of the recent Sequoia RIP Good Times era, there’s something more interesting to think about here.

First, let me say the Square folks are doing exactly the right thing to raise as much as they can as soon as they can while the Bubble lasts.  That was essentially my advice to entrepreneurs in my message to Founders that the Bubble Clock is Ticking.  Enough said about Bubbles and Clocks, Square is an interesting deal from another perspective–it’s a “Golden Crumbs” financial scaling on the back of a new paradigm story.  Money guys love that story.  They love to get into it over and over again.

“Golden Crumbs” is a term I got from Bonfire of the Vanities.  It stems from business opportunities that involve taking a very small tax on a very large volume.  It’s a beautiful thing to have a Golden Crumbs opportunity, particularly when it is made all the more plausible by prospects of a paradigm shift.  We’ve watched first the Internet, then Social Networks, and lately Mobile (Square’s paradigm shift) step up as reasons to believe by way of paradigm shift.  The ideal paradigm shift is one the incumbents have a hard time participating in.  Such shifts are called “disruptive”, and they give the Golden Crumb harvesters time to get really big before they have to deal with the last generation’s Golden Crumb Landed Gentry.

Couple the sexy business model that is Golden Crumbs, the Team that made Square happen, the Mobile Paradigm Shift that makes it possible to Believe and it’s got to be hard for investors not to like Square.  After all, the last deal that was lined up this well was PayPal, wasn’t it?  If these guys can really change things with all that capital, the willingness to Believe in them, and the state of the market, they will have earned that valuation.

I can tell you one thing, payment processing is hard for small businesses, and the Internet has changed the landscape in so many ways that help foster small business.  Why not fix the payments problems too?

Posted in business, venture | 1 Comment »

There’s a New Sheriff in Town and His Name is “Content”

Posted by Bob Warfield on June 24, 2011

Just read a great top-level overview of Google’s Panda on SEOMoz.  If you haven’t been following Panda, or you’re not involved with marketing much, it is Google’s latest algorithmic attempt to minimize the ability to game search results.  This article is at a good level for CEO’s, Board Members, Investors, and other Interested Parties to understand the flavor of this huge watershed event for marketing on the web.  I’ve talked to a number of companies that were impacted by Panda.  In most cases, the impact hurt their search traffic because they’d been relying on SEO games to get the job done.  In a few, it has transformed their search traffic for the better.   Those few are companies that had been almost overly focused on content.

Google wants to interfere with the SEO strategy of manipulating search results mechanically by delivering search results that searchers actually like.  Towards that end, Panda lets Google blend in subjective evaluations of search results to tune up their search engine and start to de-emphasize those sites we all come across that aren’t really that enjoyable or even informative despite great search ranking.  This is mainstream when you start to see Dilbert cartoons about it, and it is life threatening for Google when we read that measurable amounts of web traffic have left the general web and gone to sites like Facebook.

Marketers should expect a lot more of this sort of thing over time.  It will be increasingly important to quit worrying about SEO voodoo and start publishing content people are delighted to find.   I have been saying to everyone that will listen:  Marketing is a Product.  It has a User Experience.  Make sure yours is one that delights would-be customers lest they not only tune you out but have an increasingly difficult time even finding your content.  First impressions will matter more and more as feedback loops like Google Panda and Social “Like” buttons that affect search results are not going to give you a second chance if you blow the first one.

If you’re running an established business that focuses most of its efforts on SEO manipulation, start thinking about how to ramp your content quality up quickly.  If you’re an entrepreneur thinking about bootstrapping a business or an investor wondering where to invest, you need to add another couple of tests to your framework for evaluating potential ideas:

–  Is this space crowded and noisy due to an abundance of great content, or is it one where there is a tremendous hunger for scarce content?

–  Does this company already have a track record for producing differentiated content that is driving traffic?

–  Does the company have content creation talent on board and does it understand how to use content effectively?

You want to be a big fish in a small content pond when you’re starting out if you expect to be noticed.  And importantly, it’s hard to farm out the best content until you have a critical mass of folks familiar with your market and products who want to contribute.  Make sure you have the ability to operate with great content until you’ve spanned that gap.

There’s a new sheriff in town, and his name is Content.

Related Posts

Small Businesses Need a Minimum Viable Marketing Strategy

Pitfalls of Free Content and an Inbound Marketing Strategy

Posted in bootstrapping, business, Marketing, strategy, venture | 1 Comment »

Quality is Part of the UX Too

Posted by Bob Warfield on June 21, 2011

Just had a back and forth with @dahowlett on Twitter about Dropbox’s recent breach of security.  For about 4 hours passwords didn’t matter to Dropbox–you could type in whatever you wanted and access anyone’s data.  Dennis went on a pretty good rampage about it, and I have a hard time blaming him.  Yes, accidents happen, this is software, and all software has bugs.  But some kinds of problems are sufficiently scary that there should be automated testing that is pretty bulletproof in preventing these problems from reaching customers.

Consider really terrible obvious painful problems that might afflict a service like Dropbox:

–  It might be impossible to add data to your Dropbox.

–  It might be impossible to retrieve data from your Dropbox.

–  It might be possible for anyone to access your Dropbox (this problem that prompted this post).

–  etc.

It’s not a hugely long list, but these are the obvious catastrophic things a service like that has to make sure can’t possibly get out the door.  Ever.

Isn’t this level of quality just table stakes?

We live in a world where VC’s and Angels want software developed on a shoestring.  They’d prefer it was done and working with customers and traction before they put a dime into the company.  We like to revel in the idea of Continuous Deployment–look, it’s so easy, even our VC can push code out to our customers.  We kid ourselves that programming tools are so much better than they once were that we can do the same things faster, better, and with far fewer engineers.  Never mind that you can look at things like Objective-C and wonder what people who think that are smoking.  The tools are better, but not that much better.  We’ve simply lowered our sights on what we’re building.

We think all the cool kids are on the consumer side, so much so that we want to “consumerize” the business side to make it better.  Quite apart from my belief that consumerization is something else entirely, isn’t all this hubris how we wind up with problems like Dropbox’s?

Let me ask it a different way: are we doing to our once innovative Software Industry exactly what the bean counters did to our once innovative Auto Industry?  We know how that turned out.  The once proud American Automakers eschewed innovation, style, quality and performance for cheap, cheap, cheap.  The bean counters and finance types ruled over the engineers and stylists and we cut costs everywhere we could, introduced planned obsolescence, Ford Pintos blew up when rear ended, yada, yada.  The car became a commodity.  Right up until Japan figured out that Quality is part of the User Experience too.  What now Ford, Chevrolet, and Chrysler?

Once upon a time the Valley stood for cool technology.  I’m not saying a lot of cool technology isn’t still being built, but it sure is a lot harder when the way to fame and fortune seems to involve catapulting cuddly birds at complacent pigs in rickety houses.  Do you remember the horrendous excuses for automobiles Detroit started giving us in the late 70’s?  The Mustang II.  The Chevette.  There are many more.  Even now Detroit hasn’t really recovered.  Are we building the equivalents in the software world as we speak?

I read Mark Sigal’s post, “The iPhone, the Angry Bird, and the Pink Elephant,” and I wonder if we aren’t on the same wavelength.  He bemoans the contrast between huge companies built on great products in previous iterations of the industry and the present.

The PC revolution gave us high profile names like Intuit, Lotus, Microsoft, Apple, Adobe, Symantec, Borland, CheckPoint, McAfee, Oracle, Siebel and Sybase, as well as many others.  Some have lived on and some have died, but you can’t deny they were all great at least at some point.

The Internet revolution added names like Amazon, eBay, Yahoo, Google and PayPal.  And let’s not forget the Enterprise side like Salesforce, VMWare, NetSuite, and others.  Again, some are not so great as they once were, but they each accomplished quite a lot.

Now we have the likes of LinkedIn, Facebook, Groupon, and Zynga.  Are they really in the same category as any of the prior players?  Do they deserve valuations that imply they are somehow even better than the prior giants?  Perhaps, but from my perspective each iteration seems like more and more the greater fool theory and less and less innovation, talent, and quality.

Could any of the more impressive earlier generations even be possible to found today?  Are we so obsessed with quick hits, bubble economics, and trivial software that we wouldn’t even try?

There certainly are some exceptions, and in some cases they have resulted in amazing companies.  Reed Hasting’s Netflix is no flash in the pan consumer web quick hit.  Steve Jobs’ latest efforts in the iPhone and iPad are likewise revolutionary.  But access to capital to do truly big things is pretty limited.  Hastings got Netflix done before the current funding mentality set in and Jobs needs no VC.

Everyone else either gets to be a digital sharecropper slaving to get lucky so their Darwinian seed can be plucked up and pumped full of uber-growth-hormone-capital for instant bubble inflation, or they go the bootstrap route and try to make it without capital.

At some point there will be the equivalent of the Japan Car Industry that reverses this trend to the inane, brings back Quality and Innovation as features of the UX, and knocks the current Tom Foolery right out of the park.  We’re already too far down the ski jump on this bubble cycle, but perhaps out of the ashes will come a resurgence.  Let’s hope so.

Posted in business, strategy, venture | Leave a Comment »

When Will Your Job Be Consumerized?

Posted by Bob Warfield on June 2, 2011

This post is on  behalf of the Enterprise CIO Forum and HP.Consumerizing = Having Fun Doing Work

It’s become all the rage to talk about the Consumerization of IT in the last few years.  There are a lot of definitions of what the term means.  Those who are looking to downplay it somewhat will toss out the idea that it’s copying consumer web technology into business software.  One gets the idea that some are trying to argue consumerization happens when proper business software thinkers become bankrupt of ideas and so are forced to steal from other markets.  Wikipedia says it’s:

A stable neologism that describes the trend for new information technology to emerge first in the consumer market and then spread into business organizations, resulting in the convergence of the IT and consumer electronics industries, and a shift in IT innovation from large businesses to the home.

Okay, that’s a bit much (stable neologism?).  In 2005 Gardner said it would be the most important trend of the next 10 years of IT development and that, “the majority of new technologies enterprises adopt for their information systems between 2007 and 2012 will have roots in consumer applications.”  Better, but this all misses a larger point:

What drives Consumerization?  Why is it happening?

If we could understand that point, assuming it’s more than just business software companies being bankrupt of ideas, we might start to skate where the puck will be instead of where it has been in the consumer markets.

I believe consumerization is a much deeper phenomenon that simply copy consumer markets.  My manifesto and definition of consumerization is:

Consumerization happens when the consumers have choice in any market causing the market to have to leverage the user experience of its consumers to make them more satisfied.

Steve Jobs “consumerized” what was already a consumer market, the music industry, by leveraging a far better user experience in the form of choice, instant gratification, and the ability to manage that choice more easily.  Thus was born the iPod and the digital music industry as we know it today.  He radically improved the user experience for telephones with the iPhone, and before either one came along, the Macintosh improved the user experience for personal computers.  Netflix did it for movies.  Amazon did it for retail and especially books.  These are all consumer areas that were further “consumerized” because the digital everyone always connected world meant consumers had the choice to adopt a better user experience.  And they did so in droves.

What’s happening with IT is the realization that workers are consumers.  They’re consumers because they have choices.  Choice is what begets the opportunity for consumerization in most cases.  If we have to do something because we have no choice, why bother improving the user experience?  But, if there is one thing that has radically changed in Modern Society, it is the prevalence of choice in all things.  People no longer work for the same company their entire careers as they once did.  They do not expect to be doing the same job their entire careers either.  They have choices, and when they have choices, it’s important for those who depend on the outcome of the choices to pay attention.

It used to be good enough to save someone somewhere a little time with a piece of Enterprise Software.  Most of this software boils down to fill in a form and move the contents of all those fields around from database table A to tables B, C, and D.  We may make minor transformations to the information along the way, and we may even review the information at some later date in a report.  It’s a solitary pursuit though, and not much fun.  Not much of a user experience, either as anyone who has ever had the sort of job where you fill in such forms all day every day can tell you.  These applications are data assembly lines where the knowledge workers (to use that quaint old term) are the modern blue collars.  Guess what?  If you give them a choice, they’d like to have a better job.  They’d like to add more value and not just be blue collared cogs on your data assembly line.  They want to use their minds, have some authority they own where they make decisions, and they’d like a chance to collaborate with their coworkers.  They want to understand how their contribution fits into the corporate mission so they can take pride in it.  And while we’re on the topic of taking pride, they’d like others to see their work as something meaningful and valuable.  Hard to do that if you’re just punching data into forms all day.

How can business software do this?

It’s easier than you think.  Let’s take one of the most painful jobs out there–handling Customer Service.  My last company was focused on this problem.  The traditional Enterprise Software solution is part of the CRM space.  It involves what we’ve been talking about–a customer gets in touch and a “Trouble Ticket” is opened up.  The Service Rep fills out the ticket, and pretty soon we’re moving data from Table A to Tables B, C, and D.  Tickets get closed.  We track whether we responded within SLA requirements.  We collect metrics on our call centers.  And we spend a lot of energy trying to minimize the expense of all this to the business by making it efficient and tying Service Rep’s compensation to their metrics.  In the process we incent all kinds of bad behavior and generally piss off our customers beyond belief.  Service Reps have none of the things I mentioned.  They’re not empowered to make decisions of consequence, they’re only there to try to get you off the phone and the ticket closed even if the way to do that is to frustrate you so much you give up.  They are not able to use their minds to any great extent, they stick to a script.  We’ve all talked to many of these people who know less about the product we have a problem with than we do.  They don’t get to create anything of lasting value, collaboration is minimized because it interferes with the metrics, and so on.  These are very hard jobs to take pride in, and I’ve been hearing since I first started in the software industry that Customer Service is not a destination career.  People get out as soon as they can.

To counter that depressing backdrop, we had a very simple idea that today is called Social CRM.  We realized after watching all this machinery in action that a much better User Experience could be made both for the Service Reps and the Customers.  The idea behind Social CRM (today a very promising market with companies like Lithium and Jive, not to mention’s Chatter) is to change all those negatives using the Social Web.  No, it doesn’t mean literally copying Facebook or Twitter, and it doesn’t mean copying them either.  It means engineering a user experience for Customer Service that better serves the Customer Service Reps and their Customers.  Because both have a choice.  In this case, a better User Experience involves helping these parties to collaborate via social software with one another.  When a Service Rep closes a trouble ticket they (may have) helped one customer.  When they have a collaborative discussion in a forum, our data shows they helped an average of 16 customers.  After all, if one customer has a problem, others are likely to have the same problem.  There are genuinely few one offs.  And, if you can make it possible for customers to help themselves to the answer to the question because someone before them had already asked it, they actually prefer it that way in many cases because it’s faster.  If they get to interact with fellow customers along the way, if the Service Reps get to have the fruits of their labors visible to a broader audience, and all the rest that goes with a modern Social CRM application, that’s a better User Experience for everyone.

So I’m back to my original question:  When will your Job be Consumerized?

There is a wealth of opportunity in the Enterprise to start Consumerizing.  After all, we largely finished building the data assembly lines as a result of Y2K and the first dot-com boom.  The work is getting done more efficiently.  Now it’s time to take the next productivity step and help people to actually like getting it done.

This post is on  behalf of the Enterprise CIO Forum and HP.


Posted in business, strategy, user interface, venture, Web 2.0 | 2 Comments »

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