12 Apr 2008
0 CommentsEarly Adopters versus Business Models: Shooting Yourself in the Foot?
In an attempt to de-mystify seeming abstract business theory, from time to time, we will discuss “real world” examples of business models in action.
Both theory and practice underscore the importance of keeping early adopters engaged with a new product or service, a key enabler for creating a hit in the mainstream market. Of course, such trend setters love to play and revel in all things new. More importantly, they are also disproportionately connectors and influence makers, who can make or break eventual success in any marketplace. The new science of social networks merely provides proof of our intuitive sense that these people are the number one key to success in new markets.
To provide some historical context, a lack of serious engagement with application developers (a very specialized form of early adopter), penalized early Apple Macintosh market share, a failing which took nearly 20 years to put right! Thus, do people running both startups and major corporations, having learned this lesson, live and breathe attention to early adopter crowd?
Hardly. Below are two glaring examples, sadly (or perhaps tellingly), both involve the same major Canadian wireless carrier. Both involve a very simple lapse in appreciating of long term impact of short term decisions. Can you provide additional examples?
Electronic Bill Presentment and Payment: In the late 1990’s, Electronic Bill Presentment and Payment (EBPP), in which consumer bills that had been printed and mailed via the postal service, are instead processed automatically as a web service, was an exciting emerging market. I can remember the palpable frustration of Ray Simonson when I told him of my early adopter experiences EBPP. Ray, currently CEO of Software Innovation (Coreworx) and my partner at Verdexus , was co-founder and CEO of Bluegill Technologies (now Checkfree Software), which was the run away success and market leader in EBPP.
What was my involvement in this? Around 1998, I jumped at the option of “on-line” billing for my Rogers Wireless service (using a different platform than Bluegill by the way). As a committed early adopter, of course I signed up. Imagine my dismay when, at tax time, I found that the system had stored only the previous 6 months of bills! Because I no longer received paper bills in the mail, and this being early April, I had to scramble to find 9 of the preceding 12 months of billings to complete my return. And, this one year requirement doesn’t even take into account the tax authority’s rule of 7 years of record retention.
Did this early service meet my basic needs? No, it fell short, and spectacularly so. But, even worse, until very recently that negative early experience put a “chill” on my migration away from any form of paper bills, although I did pay online through my bank. Once burned, twice shy.
Wireless Data Pricing: Many people have commented on the issue of high data rates, and even higher charges for data roaming on wireless networks. The problem is endemic in the US and even more spectacularly in Canada, and is arguably a product of a flawed regulatory framework and inadequate competition.
The roots of this problem have been discussed many times, including in this blog and by Alec Saunders. For example, Toronto entrepreneur and futurist, Thomas Purves, in his analytical (if not constructively inflammatory) posting “Canada Worse than 3rd World Countries When it Comes to Mobile Data Access” shows just how egregious data rates really are(see graph). My personal initiation into this problem occurred in 2006 when my normally $300/month Rogers bill came in about $1000 higher than I expected! The cause – the overage was split pretty equally between going over the meagre 25 MB of data (for which I already pay $60/month) and data roaming outside Canada. At the time, both were billed at a charge rate of $0.05/K or an unbelievable $50/MB! And, at least on my Blackberry or Nokia N80 there is absolutely no mechanism to monitor or meter consumption. Therefore, unlike voice with its call timers, there is no effective way to predict and high charges simply show up as unwelcome surprises on the next monthly bill.
Of course, who is going to argue with a company (again Rogers Wireless) exploiting its natural monopoly profits? This problem is more than my personal griping, or that of any individual business. The strategic significance is that if Canada (and to a less extent the US) continues to keep these barriers to adoption of wireless data applications, the innovation and economic benefits will migrate elsewhere. It’s very hard for Canadian mobile startups to compete globally with such a flawed home market. And, for Rogers, my strong belief is that any short term gain will be far outweighed by the loss of signficant data revenues as they become the driver of future wireless business models.
Two very sad stories indeed. I’d love to hear your take on this early adopter issue. Do you have stories of your own? Do you have a different take? Feel free to comment.
From that springboard, he became interested in the way fads and other changes propagate through society, especially illustrated by recent books like Malcolm Gladwell’s 
Now, let’s drill a bit deeper to understand why this is so important. Malcolm Gladwell is a (very persuasive) popularizer of complicated and transformational ideas. By contrast, Duncan Watts, associate professor of Sociology at Columbia University and author of the 2003 book 
It seems that several people missed the “Comments” link where Grover posted his materials for the Venture 2.0 Playbook. Therefore, I’m reposting his comments with the link here below. Also, although we’ve had some great dialogue offline about this extremely important topic, I’d like to see some here.
28 Apr 2008
0 CommentsIs There More to Early Adopters than the Next Big Thing?
In saying:
it’s not entirely clear that Groucho Marx was referring the much-vaunted early adopter of a previous post. Therein, I illuminated how important early adopters are and the hazards of miscuing when serving them in newly minted markets. Because of this, I thought I’d share a few personal experiences of what motivates me to adopt early. Of course, I’m a technophile, yet I’m hardly indiscriminate in my acquisition of new technologies.
How do I decide where to focus my energies? Let’s start by looking at a few of the new technologies I didn’t adopt and why not, and discern some lessons from that.
Compact Disc
As an audiophile in the 1970’s, I spent lots of time researching and purchasing hi-fi audio systems with a primarily primarily British lineage, including: high end turntable (Linn Sondek or Rega), cartridge (Supex), pre-pre-amp, pre-amp (Meridian, Naim or Tangent), amplifier, speakers (Harbeth), etc. I read the quirky “Hi Fi Answers”, patronized audiophile shrines like Ring Audio and CC Audio and even had equipment (from Tangent) for which total production volume was about 100.
The 1982 introduction of the Compact Disc (CD) was a major market disruption. Unfortunately, although the CD overcame the clicks and pops inherent in the analogue vinyl LP , the format had a disappointingly low sample rate limited by the state of technology at the time. As a good friend and audiophile engineer, who worked on the Synclavier synthesizer, said: “you can’t simulate a sine wave with a square wave”. Well, doubly so at too low a sample rate. Forced to create a standard that was at best a compromise, high end audio has suffered ever since. And, we won’t even mention that audiophile travesty known as MP3‘s.
I can remember being at the Spring CES in 1984 and hearing a CD demoed against a Linn Sondekand Meridian bi-amped system. After the blindfolds were removed, it was clear that i had been the LP which produced bright and vibrant sounds, while the CD sounded comparatively lifeless. As a result, I probably delayed my conversion from LPs to CDs for about 5 years, if only because the CD was good enough for the average audio listener. It’s interesting that the lowly vinyl LP continues in the turntable art and mashup set today, while I continue to remain unexcited by the sound quality of the CD, a standard launched more than 26 years ago. Of course, 99% of the market, apart from the long tail like me, think the CD was a vast improvement over the compact cassette and a low end turntable.
Personal Digital Asistant
Way back in 1996 when some of my early adopter buddies hoisted their trendy stylus to enter text in a new language called Graffiti, the Palm Pilot was all the rage. Nonetheless I stuck stubbornly to my paper and leather Economist personal diary. My paper-based calendar and address book was simply good enough for me on a pragmatic level and it was also portable, fitting nicely into my jacket pocket.
What I seemed to know intuitively, way back then, was that the technology disuprtion that would change my thinking was the addition of the (mobile) internet connectivity into the mix. So, for me, the late 1999 birth of the original Blackberry 950 was a quite different story than the first PDAs. Essentially a two-way pager, which primitively fused email connectivity with the calendar and address book of the PDA, the early Blackberry was much less sleek than the device I now carry (pictured on the right).
By solving a new problem, doing email and keeping almost all my information at my fingertips, it became an indispensable arrow in the quiver of a nascent mobile nomad.
The Next Wave
Building on the lessons of the Blackberry, for me, the next wave of applications will clearly be in the web-enabled, mobile applications category. As an inadvertent mobile nomad, the value in being an early adopter may well be more apparent to me, and allow me to put up with more glitches than the next person. Of course, at least in North America, the entire mobile data infrastructure is still one big “beta test” when scrutinized for coverage, reliability and cost factors.
The big gap I see for the coming few years will be to both transition existing applications off my desktop and/or notebook computer and also to build new applications that benefit from the fusion of internet and mobile standards with things like GPS, Bluetooth, camera, secure payments, etc. Ironically, as we see convergence of more and more features in a single mobile device, we will also witness a new specialization as well. For example, a high-end GPS navigation device or a Mobile Internet Device (MID) may well have roles that the basic smartphone will never fulfill.
Recently, I’ve been testing a very simple MID computer called the Asus EeePC. With 7″ screen, full (but small keyboard), 8 GB solid state flash disc, 2 GB RAM and the ability to add 32GB of SDHC or USB disc, and running Ubuntu it does almost everything a legacy Windows notebook does. However, this is small, light, solid state so it can be used in more places and more flexibly. Not without some rough edges, the device shows promise and at least will help me evaluate a more mobile web-enabled application set of the future.
Lessons
Here are some lessons I’ve learned that have applicability both to those who like to live on the “bleeding edge” and to companies trying to serve the early adopter market:
Being a technology pioneer is both fun and time confusing. With appropriate focus, it does have its rewards. Please feel free to share your early adopter war stories and, to comment on the trends identified here.