Tuesday, March 28, 2006

Segmentation's benefits

While a simplistic view of segmentation could be viewed as “selfish” as stated in Seth Godin's blog entry on segmentation, there’s much more to segmentation than simply efficient targeting schemes. As Seth states, “You do it by creating something worth talking about!” In order to do that, you need to understand what makes customers tick even if they can’t articulate it themselves. If you look at the benefits of market segmentation (paraphrased from a Segmentation presentation given by Mohan Sawhney – a noted Kellogg prof), many of these don’t strike me as selfish. Rather, they provide a framework to understand customers and then reach them while avoiding what Professor Sawhney calls “wastage”. Said another way, it’s avoiding pestering people with marketing that isn’t something they’d be interested in – that doesn’t sound selfish to me.

Customer focus: Customers have different needs and priorities, so you cannot please everybody with the same offering. Segmentation allows firms to be more costumer-focused by responding differently to different customers

Profitability: Not all customers are equally valuable. Segmentation allows firms to focus their resources and marketing programs to identify, attract, develop and retain the most valuable customers.

Competition: Segmentation helps firms to identify customers that are most “vulnerable” to competition and customers that are most “winnable” from competition.

Differentiation: Segmented offerings are more differentiated and therefore less commoditized; the basis for comparison shifts away from price to value.

Productivity: Segmentation reduces “wastage” in marketing communications spending by allowing the right messages to be sent through the right channels to the right customers at the right time.

For the early stage businesses I've worked with and observed, segmentation can be an effective tool to avoid wasting precious resources trying to serve a market that doesn't value their offering.

An Economics lesson for the computer industry

Joel Spolsky lays out a nice economics lesson on micro economics for the hardware and software industry, and the accompanying implications that are sometimes ignored by the likes of Sun to their demise. One of the key concepts he discusses is the criticality of understanding your products "complementers" and what complementer pricing can do to your own product's pricing. Well worth reading this "oldy but goody".

Thursday, March 23, 2006

Demo tips from DEMO

Periodically, you'll have opportunities to demo your product in front of influential customers, partners or investors. David Hornik has some useful tips based on his observations from the well-known DEMO event.

Wednesday, March 22, 2006

A new tactic against Advermin

John Cook reports on an effort to thwart 180Solutions that sounds like a similar approach to what I suggested back in January to "out" what I called "advermin". I don't know about whether 180Solutions tactics are clean today but any organization (whether they are the advertiser or the enabler) that undermines the health of the overall online ad market deserves being shamed IMHO.

technorati tags: , , ,

Combining productivity and staying fit

Two things I'm fanatic about are productivity and working out. I try to squeeze every ounce of productivity out of my work day and I rarely miss a day of working out. If I haven't worked out, chances are I'm on the proverbial death bed with the flu. When I worked in the typical corporate environment, I had a gym membership. One of my little productivity habits was printing out non-urgent emails and articles that I'd read while on a machine where I could read while I worked out. Since my "gym" is now the pic you see on the right, I had to make some adjustments since it's impossible to read while running, snowshoeing, skiing, mt. biking or climbing.

There are two ways I've solved that issue. One thing I do to organize my week is write down "think" items. These are items where I don't need to be at my desk. In fact, being at my desk can be an impediment to clear thinking. Those think items go with me on my mountain adventures along with a voice recorder if/when I have a nugget I don't want to forget. As I've said many times, most great ideas come don't come while you are inside a conference room or office. The other productivity enhancement is listening to podcasts. One of my criteria for the MP3 player I bought was to also have a voice recorder so I can also capture thoughts while I'm out and about. My current podcast subscriptions include Joseph Jaffe's Across the Sound, Adam Curry's The Daily Source Code, iMediaConnection's podcasts, and various podcasts from NPR and Business Week.

Brad Feld has taken this productivity bent to a whole new level with his Tredputer. The thought of jumping on a conference call while I'm on a hike or while I'm on a trainer bike has definitely crossed my mind but I'm generally at too high of a heartrate to be able to do it without irritating the others with panting. For now, I'm happy with my approach to productivity.

Tuesday, March 21, 2006

Penny-wise, pound foolish

One of these days, I'm going to come with my Top 10 list of ways emerging businesses are Penny-wise, Pound-Foolish. While there are plenty of counter-examples such as RightNow's bootstrapping story and the Inc. magazine story of my friend Dave Morgan (founder of Real Media & Tacoda), too often I see organizations tout how great they are at being frugal by sharing symbolic gestures like desks built out of doors (last I checked, I could get a desk at IKEA for roughly the same price as a door) while wasting real money in other areas. The most common mistake is over-hiring sales people too early in the process which is often coupled with over-spending in marketing. Mark Leslie's Sales Learning Curve framework outlines this in great detail using his composite company example -- Nano Optical Customer Adaptive Software (NOCASH). His whitepaper and presentation are posted here from his CEO Briefing that Altus Alliance hosted.

Sucking down more important than sucking up

Tips from Guy Kawasaki remind me of #11 on my list of Uncle Bill's words of wisdom he shared upon his retirement after a successful 46 year career as a "new products" guy.

#11 Never trust a person who is Dr. Jekyll to those above him and Mr./Ms. Hyde to those under him. Click here for the rest of Uncle Bill's list.

The one from Guy's list I believe in the most is...
8. Rack up the karmic points. I believe that there's a karmic scoreboard in the sky. It keeps track of how many points you've earned and how many you've used. Therefore, when you have the opportunity to help others, do so--and do so with glee. You'll build up points, and someday your kindness will be returned to you. However, understand that you need to accrue these points before you need them--you cannot go negative.

Monday, March 20, 2006

Company politics bog down Market Velocity attainment

I was reminded of the negative impact politics can have on gaining market traction (if people are focused internally, they limit their opportunity to learn from and sell to customers, partners, etc.). Why does it seem that company politics are more common in "BigCos" and how do you avoid it whether you are in a BigCo vs. LittleCo? When my partners and I were chatting with Mark Leslie (ex-Veritas CEO), he shared some insights on how he kept politics largely out of Veritas even as it grew dramatically in size. His view is that people trying to control access to information is usually the seedcorn of company politics. He combated that by having extremely open communications (short of violating SEC rules) with his employees. Even when it's bad news, sharing information builds trust in management. With the rise of blogs and the like, we are living in an ever more transparent world (though there are plenty of holdouts :)). Lack of transparency, I'm convinced, will become an impediment to hiring quality people.

Friday, March 17, 2006

What comes around goes around

This Washingon Post article highlights the congressional Republican rebellion against President Bush. There are plenty of other cliches to apply here including "don't burn bridges", "Never trust a person who is Dr. Jekyll to those above him and Mr./Ms. Hyde to those under him", etc. Whether you are a Bush supporter or not, these are lessons you can apply to business. That is, when you are in a position of power, it can be easy to be arrogant or abusive and you can get away with it...for awhile. I've seen it personally and heard of many examples ranging from Apple to Microsoft to Yahoo/AOL (during the dotcom heyday) to most recently Google. Since I never worked on the so-called monopoly businesses at Microsoft (i.e., Windows and Office), I would be appalled when I'd hear some stories of what people in those businesses would say or do. Unfortunately for Microsoft, a lot of that came to light during the DOJ case. Likewise, these things usually trickle out years later when the perceived bully loses some of their power and it's payback time.

I'm a globalist which is one of the reasons I've had concerns about the approach we have in U.S. Foreign Policy/"Diplomacy". I'm 100% sure there are countless under-the-radar examples where U.S. companies are at greater disadvantage than they've ever been to compete in the global market. It's "death by a thousand paper-cuts" that is introducing friction for American companies in an incredibly competitive global market. I'm convinced we will hear about these more in the years to come. I'll end with yet another cliche -- those that don't learn from history are doomed to repeat it.

Wednesday, March 15, 2006

Early bird rewards

Being an early bird has made me unusual in the tech industry. The majority of the people I've worked with are night owls but my productivity level goes in half after 6pm so I just accept my body clock. Normally, my habit of waking up between 4 and 5 am allows me to get caught up on email, perhaps post a blog, etc. but all work and no play isn't something I espouse especially when there's been a foot of new snow overnight. So this morning, by the time most of you were getting to your desk, I'd climbed 3,000+ feet and skied down and was back at my desk (not to mention listened to several NPR, Adam Curry, Joseph Jaffe and iMedia podcasts). It was a classic bluebird day with clear skies and fresh powder/tracks all done by 8:30. Hard not to have a smile on your face.

 

 

Tuesday, March 14, 2006

Book Review: Wisdom of Crowds

I liked this book so much I wrote a book review originally published on iMedia in the Fall of 2005. iMedia is the “Ad Age” of Internet marketing so it was written with a marketer’s point of view. You can get the book here. Though I read and reviewed this about a year and a half ago, the notion of “collective intelligence” has risen in prominence quite a bit since then so thought it was worth sharing again.

If you look beneath the surface of some successful companies, you'll see they employ strategies espoused in James Surowiecki's book. A great example is a company run by my friend Ian Morris -- the CEO of HouseValues. There's much more than meets the eye that drives their success. The full title of the book is "The Wisdom of Crowds: Why the Many Are Smarter than the Few and How Collective Wisdom Shapes Business, Economies, Societies and Nations," by James Surowiecki.

Surowiecki aims to be the next New Yorker contributor to have a mass appeal book, ala Malcolm Gladwell. He clearly wants to position this book as the next "The Tipping Point" -- combining cognitive science and other disciplines into a book addressing business, politics, society and economies. The book’s relevance to marketing may not be as obvious as The Tipping Point, although there are examples from our industry. As Surowiecki states, “Google is built on the wisdom of crowds. The core of the system is the PageRank algorithm -- a calculating method -- that attempts to let all the Web pages on the Internet decide which pages are most relevant to a particular search.” He goes on to say “With most things, the average is mediocrity. With decision making, it's often excellence. The idea of the wisdom of crowds isn't that a group will always give you the right answer but that on average it will consistently come up with a better answer than any individual could provide.”

While the stakes in marketing may not be as high as space shuttle missions or stock markets (two of Surowiecki's other examples), there are lessons in this book that marketers could apply in a variety of ways. Whether you're making business strategy decisions or developing a marketing campaign, many of us have seen the ill effects of "groupthink" versus bringing together diverse groups within an effective framework. Fortunately, the Internet can enable the elements of a "wise crowd."

This book made me think about how collective wisdom could affect decisions such as ad campaign development (creative decisions, media buying, etc.), product development decisions, industry standards (surely there's a way to move things forward more rapidly) and many other decisions made within your company or across teams representing clients, agencies and technology providers. From my own experience working with technology companies targeting the marketing community, I can see many ways to apply principles in this book to product development, sales and marketing.

Corporations and industry bodies have generally been unwilling to improve their decision making by tapping the collective wisdom of their employees and members. Those who can harness the potential for wisdom that exists within crowds of people will have the world as their oyster.

Perhaps the most significant point for readers isn’t the perspective Surowiecki provides to the inward-facing, organizational structure/behavior perspective, but rather the outward-facing: how marketers can better understand their customers -- how they think, why they think that way, and how their ability to communicate with each other (rather than just with customer service and technical support) raises their collective IQ.

It could be said that the wisest crowd out there is the billions-big horde of Internet users, who consistently use the Web in smart ways that neither technologists nor marketers would have dreamt up. The companies and marketers who grasp the implications of this will in turn develop products and services more in tune with their customers’ needs, as well as have the accompanying Web sites and marketing campaigns to harness these insights.

While our society often trusts experts and distrusts the wisdom of the masses, Surowiecki argues that "under the right circumstances, groups are remarkably intelligent, and are often smarter than the smartest people in them." He uses a variety of examples ranging from simple challenges such as a crowd guessing the weight of an ox to incredibly complex: another crowd located a lost submarine where the best approximation was 20 miles wide and thousands of feet deep. It was eventually found 200 yards from where the group estimated it would be. This despite the fact that no one knew why the sub sank, no one had any idea how fast it was traveling or how steeply it fell to the ocean floor. Other compelling examples include how SARS was solved, and a method for predicting election outcomes with great accuracy.

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.

He also cites examples of groups where these elements are missing with sometimes disastrous consequences. Small groups can make very bad decisions because influence is more direct and immediate and small-group judgments tend to be more volatile and extreme. Large groups missing the four elements can also have disastrous results.

One significant example that Surowiecki describes concerns the Space Shuttle Columbia's Mission Management Team (MMT). The team violated nearly every rule of good group decision making. As Surowiecki outlined, “the team's discussions were simultaneously too structured and not structured enough. They were too structured because most of the discussions -- not just about the debris strike, but about everything -- consisted of the MMT leader asking a question and someone else answering it. They were not structured enough because no effort was made to ask other team members to comment on particular questions. This is almost always a mistake, because it means that decisions are made based on a very limited supply of analysis and information.”

One of the consistent findings from decades of small group research is that group deliberations are more successful when they have a clear agenda and when leaders take an active role in making sure everyone gets a chance to speak. In small groups, diversity of opinion is the single best guarantee that the group will reap benefits from face-to-face discussion.

Conversely, in a stock market bubble all the conditions that make groups intelligent -- independence, diversity, private judgment -- disappear. Whether it was the dot-com bust or the run-up of bowling stocks 40 years ago, stock markets have the potential to lose key elements that make them generally effective. As we are on the 75th anniversary of the 1929 stock crash, we need to remain conscious of the limits of the risks when all the elements of a wise crowd are absent.

The following are additional ideas from this useful book that are salient to the four elements of “wise crowds” -- Diversity, Independence, Decentralization and Aggregation:

Diversity of opinion and background

  • When there is a lot of uncertainty, such as in the early days of an industry where the winners and losers haven't been sorted out, it's key to have a system that encourages, and funds, speculative ideas, even though they may have only slim possibilities of success. Even more important is diversity -- not in the sociological sense, but rather in a conceptual and cognitive sense. What makes a system successful is its ability to generate lots of losers, recognize them as such and then kill them off. Sometimes the messiest approach is the wisest.
  • Diversity helps because it adds perspectives that would otherwise be absent and because it takes away, or at least weakens, some of the destructive characteristics of group decision making.
  • We know that the crowds that make the best collective judgments are crowds where there's a wide range of opinions and diverse sources of information, where people's biases can cancel themselves out, rather than reinforcing each other. Individual irrationality can add up to collective rationality.
  • Decision markets are well suited to companies because they circumvent the problems that obstruct the flow of information at too many firms: political infighting, sycophancy, and a confusion of status with knowledge. The anonymity of the markets and the fact that they yield a relatively clear solution, while giving individuals an unmistakable incentive to uncover and act on good information, means their potential value is genuinely hard to overestimate.
  • Studies have found that groups of smart and not-so-smart people almost always do better in decision making than a group just of smart people. The development of knowledge may depend on maintaining an influx of the na├»ve and ignorant, because competitive victory does not reliably go to the properly educated. My take-away: Teams I've worked on always benefit from the fresh perspective of a newcomer.
  • Homogenous groups are great at doing what they do well, but they become progressively less able to investigate alternatives. It also fosters the palpable pressures toward conformity that groups often bring to bear on their members.
  • Diversity contributes not just by adding different perspectives to the group but also by making it easier for individuals to say what they really think.

Independence

  • Paradoxically, the best way for a group to be smart is for each person in it to think and act as independently as possible.
  • Independence doesn’t mean isolation but it does mean relative freedom from the influence of others.
  • Independence is critical for two reasons 1) it keeps mistakes that people make from becoming correlated; 2) independent individuals are more likely to have new information rather than the same old data everyone is familiar with.
  • If you want to improve an organization's or economy's decision making, one of the best things you can do is make sure, as much as possible, that decisions are made simultaneously rather than one after another.

Decentralization

  • What do we mean by “decentralization?” Power does not reside in one central location, and many of the important decisions are made by individuals based on their own local and specific knowledge, rather than by an omniscient or farseeing planner.
  • Decentralization’s greatest strength is that it encourages independence and specialization on the one hand, while still allowing people to coordinate their activities and solve difficult problems on the other.
  • A decentralized system can only produce genuinely intelligent results if there's a means of aggregating the information of everyone in the system.

Aggregation

  • Groups generally need rules to maintain order and coherence, and when those elements are missing or malfunctioning the result is trouble. Groups benefit from talking to and listening to each other, but, paradoxically, too much communication can make the group as a whole less intelligent.

 

Sunday, March 12, 2006

Cold calls replaced by free software??

Jonathan Schwartz (Sun’s President) has a provocative post suggesting that free software will replace cold calls. I can see this working in some categories and am all for reducing cold calls that aren’t the most productive use of time for either the caller or callee. For categories where this won’t work or isn’t sufficient, I’ve suggested some more effective tactics than the traditional methods of acquiring customers.

Saturday, March 11, 2006

What a 6 months! Dalai Lama & Vienna Boys Choir



It's an interesting coincidence that exactly 6 months apart on 2 days associated with sadness (September 11th and March 11th) that I'd attend two uplifting events with the Dalai Lama (on 9/11) and tonight the Vienna Boys Choir. When I shared my Dalai Lama experience, I mentioned how people thought moving to Sun Valley meant less access to cultural events. I've found the opposite to be true. I decided yesterday I wanted to go to this when I saw it on www.sunvalleyonline.com and tickets were still available. This would never have been the case in Seattle or any other big city. So in the last year, I've seen a Nobel Peace Prize winner, one of the foremost violinists in the world and perhaps the most famous choir in the world for a combined total of $20. This area has an extraordinary ability to draw world class talent across the arts and athletics and I feel fortunate to be able to expose my kids to it.

technorati tags: , ,

Friday, March 10, 2006

Web 2.0 naysayers & lessons learned

Tim Oren and Peter Rip have very reasoned commentary on the hype surrounding so-called Web 2.0 companies. That doesn’t mean there aren’t lessons to be learned from some of the go-to-market strategies associated with Web 2.0 companies that can be applied to a variety of software businesses.

technorati tags: , ,


What comes around, goes around (for the good)

New VC blogger Matthew McCall has a great post entitled A Glass of Milk that captures my view of karma. Welcome Matthew! I look forward to reading more.

Wednesday, March 08, 2006

Apple-apore - If Apple were a country

I’ve been tempted on several occasions to buy an Apple product. My wife used to work there and I have a relative who works there so I have some personal connection to the company but I never make the move. It’s not because they don’t have nice products with great industrial design, etc. I finally realized why I don’t make the leap. It’s because the way they treat their customers, employees and the industry reminds me of my experience visiting Singapore. At first, it can be very appealing when you visit Singapore. It’s very clean, well-run, etc. but there’s the level of control that they dictate to their citizens that runs counter to my desire for independence and can be very stifling. Likewise, Apple/Jobs can be very controlling and vindictive. There is the well publicized move to ban any Wiley books (see Wikipedia article for more) since they published an unauthorized biography and then the time they sued a blogger. I also have read accounts of their DRM that has scared me away from iTunes/iPod. I also don’t like how they force iTunes on you when you download the QuickTime viewer. Finally, in an age of transparency, they operate as a closed society with only their emperor (Jobs) allowed to speak. Thus far, I’m willing to deal with some of the headaches associated with the Wild West that comes with the PC world as opposed to living in “Apple-apore”.

technorati tags: ,



Sunday, March 05, 2006

Live to Work or Work to Live

Rich Karlgaard is the Publisher of Forbes magazine. He wrote a book entitled Life 2.0 – How People Across America Are Transforming Their Lives by Finding the Where of Their Happiness. I’ve only read excerpts from the book but it seems to capture the decision that an increasing number of people have made including me. That is, choosing where to live and then figuring out what profession best fits with your talents. As I mentioned in my New Year’s Resolutions for Googlers, I’ve been brutally reminded of the old adage “life is short”. Part of choosing to live a life without regret is going for it whether it comes to fulfilling a dream of living in the mountains or leaving the stability of a big corporate environment.

I met Lance Trebesch recently and I think we both realized we’re kindred spirits. One of my take-aways from our chat was we were in agreement that we Work to Live, not Live to Work. Don’t get me wrong, we’re both passionate about our work but it comes down to what defines you. Is it your family, your friendships, your recreational interests or what you do at work? For me, I’d like to think it’s a combination of those things rather than what I have observed with many – i.e., work defines their identity. I’ve met many people over the last few years who made a similar decision to me where they’ve chosen where they wanted to live first and then figured out how they’d make it work professionally. Most of us are working as much as we did when we lived in the Bay Area/Seattle/New York but we have 1-2 hours per day back in our lives that get spent with our families and recreation since we don’t have gnarly commutes.

Successful companies like RightNow Technologies have turned their location (Bozeman, MT) into a competitive advantage. I find it amusing how many of my tech industry colleagues will state in one breath how technology has collapsed distances yet in the next have skepticism about people such as myself who’ve chosen to work “remote” (whatever that means these days). People have implied or explicitly stated they can’t imagine how you could be serious about your career while working outside one of the traditional tech hubs. Are they luddites or just jealous J?

technorati tags: , , , ,


Friday, March 03, 2006

Podcast-oriented Angel investment

As a result of spending some time in the Podcast world (e.g., my presentation and interview with the leader of a Kleiner Perkins funded company Ron Bloom – Podshow’s CEO who co-founded Podshow with Adam Curry), I’m starting to see some very interesting early stage podcasting oriented companies. We’re barely in the 1st inning of a long ballgame so I’m convinced there are many opportunities out there that complement some of the companies you may have already heard of such as Podshow. If you know someone interested in making seed stage investments in podcasting-oriented companies, let me know. I’m happy to connect you with them (they are in stealth mode so I can’t mention their names yet).

technorati tags: , , , ,