Sunday, June 26, 2005

Enterprise Sales Learning Curve and the Smart Energy sector

An article I wrote for the Center for Smart Energy (run by the well regarded industry analyst/pundit Jesse Berst) is post here. There has been a lot of press attention on the rise of venture investment in the "clean technology" sector. Much of these have business ecosystems that are far from the experience/contact base of technology industry veterans. In contrast, there's much to leverage from the technology arena into the emerging "Smart Energy" market. Learn more at the Center for Smart Energy's website.

Open source marketing

As a result of my work for iMedia Communications and my past board role with the Interactive Advertising Bureau (IAB), I came up with an idea to have much more open and useful case studies of marketing campaigns that would not only speak to the "why" of Internet advertising & marketing but also to the "how". I thought I'd coined the term "open source marketing" until I did some digging around. I didn't want to be the "Al Gore" of Internet marketing and imply that I'd invented something that was already around. While it certainly hasn't hit the mainstream media, you know the term is hardly a secret when Robert Scoble and Steve Rubel post about it here and here. There's even been a "ChangeThis" manifesto published with the term. I pitched my vision of what an Open Source Marketing campaign would be to iMedia and they bit hard and have launched a new series.

The first example is a company called SugarShots. The hub for the campaign is interesting. It lays out what the marketers' goals are and then is giving a blow by blow of the strategy behind the campaign. With that introduction, they are now in the process of sharing the ongoing results. In addition, you have thought leaders from the Internet marketing community such as Doug Weaver and Eric Torres adding their perspective and analysis.

It should be interesting to see how this concept catches on.

The following is the republished iMedia article introducing the rationale for an Open Source Marketing campaign that I wrote:

Seth Godin recently wrote a book entitled "All Marketers are Liars" but the subtitle ("The Power of Telling Authentic Stories in a Low-Trust World") captures the real issue of why to pursue an open source marketing plan. Furthermore, in this age of blogging and Sarbanes-Oxley, corporate transparency is de rigeur.

Any corporation that has an offering that doesn't require trickery to sell should embrace the idea of "opening the kimono" on portions of their marketing plan, so long as they have other elements of their strategy that give them competitive advantage (and thus don't want to share with their competition). In addition, marketing departments are expected to be accountable more than ever before -- both to their shareholders and even their customers. With this backdrop, it stands to reason that virtually any marketer would be interested in a case study that shared unprecedented levels of results and background that proved (or disproved) various elements of the marketing mix.

Why not an open source marketing plan?

The notion of open source marketing borrows from how open-source software projects (such as Linux) have developed. With open source software, developers collaborate to make a compelling piece of software. Likewise, an open source marketing plan should develop a compelling marketing campaign that leverages the talents of the marketing community and, increasingly, the product's own customers. For a recent example, see Joseph Jaffe new book, "Life After the 30 Second Spot," where he discusses the strong trend of customer-created marketing.

Plans could be developed in both the commercial and non-profit worlds, bringing together appropriately experienced and passionate marketers and customers. Obviously, the definition of open source marketing will evolve over time, but as the person who coined the phrase -- at least within the iMedia community -- here are my thoughts:

  • The project leader would define the overall goals that the marketing campaign is intended to achieve. In addition, they'd develop a "creative brief" that would outline more details on the organization's target customers and the actions the project leader wants prospective and current customers to take. The leader would also disclose his initial thoughts for various marketing tactics that would be considered a "stake in the sand" to start generating ideas.
  • Once the project leader shares the above information, the marketing community will get engaged by sharing their ideas and building off of other ideas.
  • The project leader/team would then be responsible for coalescing the feedback into an initial plan that gets put into action. This is where the real work begins as learning starts to take place.
  • A communications tool -- such as this newsletter or a blog -- will communicate ongoing campaign results, insights and course corrections. Through this process, the entire marketing community can benefit from the collective input and learnings. Undoubtedly, there will be active debate on how to evolve based on the results.

Wise crowds

The concept of an open-source marketing plan also borrows heavily from the ideas outlined in James Surowiecki's "The Wisdom of Crowds: Why the Many Are Smarter than the Few and How Collective Wisdom Shapes Business, Economies, Societies and Nations." (You can read my iMedia Book Club review of it here.) The author outlines four elements required to have a wise crowd:

  • Diversity of opinion: each person should have private information even if it's just an eccentric interpretation of the known facts.
  • Independence: people's opinions aren't determined by the opinions of those around them.
  • Decentralization: people are able to specialize and draw on local knowledge.
  • Aggregation: some mechanism exists for turning private judgments into a collective decision.

Why it's important to share details -- some background

My thinking about open source marketing goes back to when I was working on behalf of iMedia to look at what was holding back the interactive marketing industry's growth -- recognizing there was a major disparity between media consumption and media spend.

iMedia has a somewhat similar mission to the Interactive Advertising Bureau, where I'd previously been the Chairman of the IAB's Chief Marketing Officer (CMO) council. Here is iMedia's mission statement:

To advance the business of interactive media and marketing by serving as the primary conduit between buyers and sellers. And, to inspire marketers of all types to explore and embrace interactive marketing strategies.

After speaking with dozens of CMOs, agency heads and media publishers, one of the key findings was that decision makers -- while they found studies such as the Cross Media Optimization Studies to be useful in understanding the appropriate weight for online media -- wanted the strategy and detailed results behind the topline results that were shared. Unfortunately, the brands (Ford, Universal, Unilever, McDonald's, et cetera) that participated in these studies weren't interested in sharing details.

Sugarshots steps up

After my experience with XMOS, my question became "which marketer would be willing to share more details?"

Since I spend the vast majority of my time studying and working with emerging businesses, I felt some of these companies might be willing to share in a quid pro quo exchange for some free exposure and opportunity to tap some of the leading minds in the marketing world. One such company has stepped forward -- Sugarshots, the test brand for iMedia's first open source marketing case study.

Sugarshots is a player in the Consumer Packaged Goods Industry selling premium liquid cane sugar specifically formulated to sweeten gourmet coffee, tea -- just about anything -- better than granulated sugar.

People often ask Sugarshots how they came up with this idea -- liquid cane sugar. Like countless other people everyday, the founders were literally having lunch one day and we started complaining about the sugar sitting idle at the bottom of their iced teas. But what choice did they have? Expose their bodies to artificial sweeteners with their saccharines and phenylalanines? All for what? Dissolvability? Fewer calories? There had to be a better way. So they looked for a better way and found nothing. Like many entrepreneurs before them, they decided to build a business to solve that problem.

Sugarshots has taken that entrepreneurial sense of adventure and boldly agreed to be a pioneer in "open source marketing." They have agreed to share some of their key marketing goals as well as their initial thoughts in key areas of their marketing mix. The goal of sharing those goals with the marketing community is to give marketing thought leaders enough information to provide recommendations.

The virtual marketing team will embrace and synthesize the strategy recommendations into an ongoing marketing campaign that we'll continue to report on and evolve the marketing strategies based on what does and doesn't work.

The question now becomes: will the marketing community embrace this collaborative effort?

My hope is that the collaborative spirit that is present at iMedia Summits will extend itself into this realm.

I hope you prove me right, as it will be a fun ride.

Wednesday, June 22, 2005

Underdelivered VC cliche: Roll up our sleeves

Fred Wilson (a NY-based VC) highlights how most VCs talk a good game about rolling up their sleeves to help out their portfolio companies but few deliver. Fred makes a good case why he strives to be an exception. I've observed the exactly same thing. While I think most VCs have the best intentions, they simply don't have (or make) the bandwidth to really roll up their sleeves (between wading through their deal flow, board meetings, etc. they run out of time). This leaves an opportunity open for venture consultants like Altus Alliance. We've consistently found that entrepreneurs are willing to have venture consultants earn sweat equity by rolling up their sleeves whether it's to play an acting executive role such as a VP of Business Development/Sales or CFO. There's often a point where the founders are overwhelmed yet the time isn't right (or the funding isn't there yet) to hire a full complement of staff. In addition, the talent that is willing to work at a company at that stage is usually less experienced than what a strong venture consulting firm can offer.

Tuesday, June 21, 2005

Healthcare Dot-Com Era?

Is Healthcare IT investment activity about to tick up? This Business Week post suggests that is happening. Having spent many years in Healthcare IT, I've always had a lot of trepidation about software companies in this arena (I haven't touched the medical device space arena as I know very little about that segment of the market). Why the trepidation? It's a paradoxical market where cutting edge technology is used on the medical side of things, it's in the twilight zone from an information technology perspective. Various federal mandates like HIPAA have provided some impetus for automation but things still move slowly. I believe there are a few factors that have gated IT adoption in the past.
  • The "cost-plus" billing model bred inefficiency that wasn't penalized for a long time. The other side of that coin was that it didn't attract (for the most part) the best and brightest in the IT world.
  • There are additional factors such as risk aversion due to the stakes being high if mistakes are made. I used to tell my colleagues at Microsoft that while some markets claimed they had mission critical system requirements, healthcare had life critical requirements. The unfortunate thing is that thousands die each year due to avoidable mistakes such as systems to avoid negative drug-drug interactions. Even if there was a flaw from time to time with a computer system, I think it would be the equivalent of a plane crash where it only happens rarely but it causes disproportionate fear.
  • Yet another factor impairing technology adoption is seasoned MDs hold a lot of power at hospitals so a group that is relatively computer-phobic can refuse to use technology. Since they are usually independent from the hospital and the hospital is dependent on them for their business, it puts them in a tough position.

With all of those barriers, one has to look at opportunities very carefully. Ultimately, someone will figure it out. One way it may get rolling is new models for healthcare delivery that don't have legacy issues. An example is some of what Steve Case is working on as reported in the NY Times with this "Revolution" venture (sub req).

Tuesday, June 14, 2005

If you lie down with dogs, you'll come up with fleas

Whether it's hiring employees, deciding whether to work for a jerk to get a "dream job", who you co-invest with, this is always a cliche worth remembering. Fred Wilson expounds on this cliche.

Wednesday, June 08, 2005

Can VCs and Angels get along?

There's been a bit of non-news news about how VCs and angels feel about each other. Brad Feld has another good post sharing his experiences on both sides of the equation while also showing how the "news" has been purposely provocative when there wasn't much news to begin with. He shares some good words of wisdom.

Update: Fred Wilson, another seasoned VC, adds his two bits with comments strongly in favor of the value of angels.

Tuesday, June 07, 2005

Enterprise Sales Learning Curve update

Given the strong feedback we received for more information on the Sales Learning Curve framework Mark Leslie presented at the Altus Alliance CEO briefing, I will provide an update periodically on the latest information regarding the Sales Learning Curve. The following are updates since that event:

  • Mark’s presentation and whitepaper was posted on this page.
  • Mark now refers to his framework as the Enterprise Sales Learning Curve (ESLC) to indicate that it’s the entire enterprise (not just Sales) that goes through the learning curve.
  • Altus has conducted a couple ESLC Assessments with clients and received very positive feedback on how they are helping focus the company’s energies towards what’s going to maximize their sales yield. As an extension of that, Altus has also developed a simulation tool that aids decision-making in how to allocate finite company resources. The tool was built using a modeling technique called System Dynamics (click here for background on Systems Dynamics if you aren’t familiar with that approach). It’s been a great tool to discuss trade-offs in alternative strategies. We developed it in conjunction with Greer Black Company.
  • An article was written in the leading digital media marketing publication about the Sales Learning Curve.
  • Search engines are starting to pick up more articles and insights around the ESLC. Here’s what Google, MSN and Yahoo have.
  • We are working with an institutional investor on incorporating an ESLC Assessment into their due diligence process as they see how it can be a better predictor of success than what they’ve done historically. Conversely, we have a client starting their next fundraising round and they are using the ESLC Assessment as a preparation tool for that process.

After the event, the quote I liked best was from a serial entrepreneur –

“I thought that the talk was nothing short of excellent. Often those things are lame-o and I will tell you that this was top 1%. Thanks again for including us. Do you have the deck? We would love to see it.”

Those types of events are a lot of work but that kind of feedback makes it worth it. We hope to do another event down the road but are focused on putting the ESLC through its paces in the meantime.

Digital Media Costs Rising High

Rishad Tobaccowala, chief innovation officer at Publicis Groupe Media and president of SMG Next always seems to have a bead on where things are headed in digital media (e.g., he was well ahead of the curve on the rise of streaming video ads). He provides a view into the rising costs of digital media on the horizon in this article.

Sunday, June 05, 2005

Is the Venture business permanently a seller's market

Bill Burnham has that thesis that's worth a read...

While deal flow undoubtedly remains an important part of venture capital, changes in the venture industry are making deal flow far less important and rapidly making deal flow-centric business models unsustainable for all but a few venture firms...Net, net the cold reality is that the venture business is now clearly and permanently a seller’s market.

Bill does a nice job of laying out the changes that have taken place in the last 20 years that lead to this thesis. Though we hadn't thought about it in these terms, it validates the approach my firm has taken. As most of our clients are post-angel and pre-institutional from a funding perspective, it's common for us to play a "matchmaker" with VCs and private equity firms. Our value-add, beyond having the contacts, is understanding the expertise of the funders. As has often been said, it's always better to have "smart money" whether it's angels or institutional investors. They not only can provide operational guidance, but they can also help find future funders/acquirers.

Saturday, June 04, 2005

Milestone birthday today

I used my "milestone" birthday (I'll let you guess which one) to run my first race in nearly 20 years. This living in the mountains thing is paying off. Though I'm running about 1/3 of the miles I did 20 years ago, I ran about as fast and managed to come in 4th in the race. It was a hilly course and I realized I haven't been running down hills much of late -- it uses different muscles to say the least! I have to admit it got my competitive juices flowing. Most (all?) of those competitive juices have been directed towards brain (i.e., work) rather than physical activities the last 20 years. I think I'm going have to balance them out.