In today’s mail I received a tantalizing offer from Bell Canada Long Distance. It promised the ability to “Call the world without limits” by delivering “Unlimited World Long Distance Plan $29.95/mo.” With calls to over 50 countries plus Canada and USA included, on the face of it, that’s a pretty attractive offer.
But, I’ve learned that, when dealing with the telecoms industry whether landline or wireless, it pays to read the fine print. And, sure enough, in very small type at that bottom it says “excludes calls to mobile phones and wireless devices.” Sadly, when I call overseas, where mobile penetration is generally at or even above 100 mobiles for 100 population, over 95% of my calls are to mobile phones. So, far from being unlimited, this plan is really a bit of a “bait and switch” which might well increase my calling costs. In the monthly billing cycle, the arrival of the first bill post sign up would almost certainly make any customer’s blood boil. At a macro level, I’m really curious as to what such deceptive marketing campaigns say about customer relations and basic trust in the 21st century?
Also this week, Canadian Minister of Industry, Jim Prentice, dialled up his earlier suggestion to mobile operators Bell and Telus to reconsider their ill-conceived plan to charge customers for incoming SMS text messages, including SPAM. Minister Prentice, after meeting Bell CEO George Cope, publicly raised the spectre of increased wireless regulation in Canada as a way to increase pressure for the pair to see common sense. Clearly, for companies that act in the public interest, using the police-like powers of regulation to curb those who stray from this idea must strike a delicate balance. Again, is this a trust issue? Are Bell and Telus exhibiting corporate greed or simply strategic incompetence?
Speaking of trust, a week ago a good friend lent me a fascinating book called 24 Days, by Rebecca Smith and John R. Emshwiller, Harper Collins, 2003. The co-authors, two Wall Street Journal Reporters, lay out a factual and totally rivetting chronicle of how the once “great” company called Enron went from being on top of the world into a death spiral in little more than three weeks. To quote the authors, “so much of Enron’s energies were devoted … to exploiting accounting rules to make profits out of thin air. So much brainpower went into temporary gains rather than into building projects with lasting value. By any means, was the Enron way. … Service to its customers and clients, didn’t enter into it.” Having once run a public company where we took our fiduciary and regulatory duties to our shareholders and the public markets seriously, the sheer magnitude of the greedy cleverness of the malfeasance at Enron boggles the mind. Again, why have the fundamental ethical standards of human trust in the corporate world sunk so low? While it is easy to build a house of cards, without long term trust, I firmly believe it is impossible to build any entity (corporate or otherwise) with lasting, long term value.
Can We Trust Their Claims of Open?
Trust issues aren’t confined to the US and Canada. In Germany, T-Mobile has been advertising their new iPhone mobile data plans as “open internet access with unlimited data” (“Freier Internetzugang mit unbegrenzter Datenflatrate”) For the details, see a fascinating post from TMCnet. Indeed, customers were finding to their dismay that this open internet access specifically disallowed such basic mobile web services as VoIP, IM, and VPN. Furthermore, the supposedly unlimited data plan was actually capped. This is almost unbelievable, especially in Germany which, being in the European Union, generally benefits from far superior mobile regulation than we enjoy in US and Canada. In a David versus Goliath situation, sipgate, a small VoIP application provider for Apple iPhone, stood up for consumers and has won a preliminary court injunction against mighty T-Mobile. In this instance, there can be no doubt that t-Mobile is just plain wrong. Once again, we wonder how clearly deceptive advertising affects trust between T-Mobile and its customers?
For once, the lessons for companies are simple, yet so often overlooked. In this age of call centres, web self service and mobile nomadism, opportunities for developing personal relationships between companies and customers are on decline. As people feel increasingly distant from the companies that provide them goods and services, the importance of trust in business dealings goes up. I would argue that because trust is built over the long term, it needs to become a vital part of every company’s brand equity. Although economists have yet to devise specific measurements, it is clear that a lack of trust can kill a multi-billion dollar brand very quickly and in such a way as to make recovery extremely difficult and costly, if not impossible.
New York Times on Sunday contained an article which immediately caught my attention, as it appears to provide the missing piece pulling together all of my recent postings outlining an “Entrepreneurial Toolkit”, so far consisting of these five core skill sets:
The article, “If You’re Open to Growth, You Tend to Grow”, New York Times, 6 July, 2008, in extolling an individual’s openness to change and personal growth, really provides a common thread, weaving together the above skills.
To quote Carol Dweck of Stanford University,
“People who believe in the power of talent tend not to fulfill their potential because they’re so concerned with looking smart and not making mistakes. But people who believe that talent can be developed are the ones who really push, stretch, confront their own mistakes and learn from them.”
The notion that nurture trumps talent, is an interesting one. It underscores why defining some great attributes for an entrepreneur in my Entrepreneurial Toolkit is such a good idea. For the right people, if they strive for personal growth, each and every one of these attributes is in reach.
I’ve always held an innate belief that hiring is about way more than the credentials from the best schools and relevant job experience. By finding people who value “stretching themselves”, companies are adding those who can navigate today’s complex and every-changing environment to their team mix.
It’s also a very positive and empowering message.
Good mentoring and management, like good parenting, works.
Yesterday’s climbdown by Rogers on 3G iPhone (in fact, quicly extended to all smart phones) data pricing was nothing short of spectacular. Since the weekend, I’ve watched as many of my colleagues in the Blogosphere have pushed a campaign of long term customer lobbying over the goal line. Clearly, in addition to influential bloggers, Apple is the industry titan that has been able to unclog an uncompetitive wireless market in Canada unlike any other company (or government) so far.
The story has been well covered, with a good selection of the chronology, below:
However, apart from the obvious power that an internet-engaged base of consumers now has over even the largest companies and apart from a major victory for grassroots campaigning, there is an even bigger lesson to be learned from this.
In a blog post back in April “Early Adopters versus Business Models: Shooting Yourself in the Foot?”, I stressed that companies who fail to engage early adopters and keep them happy risk both sabotaging an emerging market, but also creating long term ill will that is almost impossible to reverse. My personal hypothesis is that that the ratio of the cost to reverse grassroots consumer dissatisfaction (bad will) to delivering a message when the company brand is seen as consumer friendly (good will), may well be as high as 1000 to 1.
While we must await the long term customer fallout from this major misstep and climbdown by Rogers, I suspect that Rogers has suffered a significant long term liability on its balance sheet.
Again, it is clear the companies ignore early adopters at their peril.
Whether you run a startup (pre-revenue and running on fumes), a larger, later stage company (with actual revenues and earnings) or even a public technology company, the topic of cash should never be far from your consciousness. And, it goes without saying that keeping tabs on cash is generally even more germane in social enterprises.
For many early stage entrepreneurs, skilled in technology, marketing and strategy, the notion of vigilance around cash burn might seem mundane, something to be avoided or delegated. There is no question that companies endowed with more cash on their balance sheets can act more strategically. Conversely, It is the rare company indeed that isn’t significantly cash constrained at some part of its life cycle. As a result, you need to be on top of cash burn and not let cash crises catch you off guard.
Of course your need, or even better should virtualize, solid financial and accounting management skills. Notwithstanding this, as CEO, cash needs to figure as a constant item in your personal mental checklist. In the New Venture 2.0 Playbook, discussed in much more detail in an earlier blog post here,Grover Righter has aptly dubbed the level of importance of cash as “The CEO’s Mistress” (pictured at right).
No, not like this!
Yet, many entrepreneurial CEOs can’t answer simple, but fundamental, questions, such as:
what is your monthly burn?
what is the life of existing (and committed) cash in the business?
Which expenses could be cut, should I wish to extend this cash life by lessening burn?
What was that cheque really for?
While the Venture 2.0 Playbook outlines a complete methodology to build certain entrepeneurial technology startups, from beginning to exit for much less money, the key point of today’s post is that every entrepreneurial CEO must internalize the whole issue of cash burn. Remember, it’s not enough to sleep peacefully at night, comfortable in the notion that your CFO is handling all of that cash stuff.
And, ironically, this need doesn’t disappear even in a larger firm. When I ran a public company, portfolio manager expectation was that the CEO knew the business model, budget and forecast to a reasonable level of detail for up to 2 years into the future and also with longer term strategic thinking. Because public CEOs (and CFOs) are expected to give “street guidance” of future quarters, it feels like trying to drive a car where the steering column is very long — in this case say 18 months long. Keeping all of this in your head can be challenging. And, furthermore as you discussing product, market and strategic questions, all may well have financial implications. In other words, even minor adjustments in one area of the business can significantly alter the “18 month steering” problem of future financial guidance.
To summarize, for the entrepreneur without formal financial training, seriously consider upgrading your financial skills (by formal training, finding a good mentor or via your own research). And, even more important, take them to heart – particularly in the area of cash management.
Successful entrepreneurs must push themselves to develop a set of, often seemingly contradictory, business and life skills. We’ve already talked about fearless passion and not drinking your own bathwater.
Today, we’ll expand on a skill that is becoming ever more important in these times of rapid technological, social and business evolution — the need to embrace change. In my own life, it has been a personal hallmark, so much so that without major new challenges and course corrections, my life satisfaction drops precipitously. Therefore, seeing Guy Kawasaki’s recent interview with Ariane de Bonvoisin called Change is Good reminded me to add change into my personal Entrepeurial Toolkit as skill #3.
For me personally, it is wonderfully affirming that, what I used to consider a pathological need for change, is in fact highly adaptive for the future world. Ariane’s book defines ideal entrepreneurs as “chance optimists”, who believe change is mostly good. Furthermore, those who have a strong believe in the positive power of change can flex their “change muscle” to overcome adverse emotions, or “change demons.” I think you get the picture, but it is certainly well worth reading, if only to re-affirm how important change has become to building lasting value.
The notion that change is cool has long been a hallmark of the culture of Silicon Valley, and most technology startups. Entrepreneurial founders are naturally aggressively impatient, pursuing change with an ADHD-like intensity. In fact, one influential business school commentator, who will remain nameless, suggested that the management style favoured in the Silicon Valley, which is so tuned to rapid growth and a challenging environment, would totally fall apart in the more repetitive world of “traditional” business. The truth is that the technology startups of the 1980’s and 1990’s were almost certainly belwethers heralding the morphing of our economy into one that is largely knowledge-based. I’m really not so sure that a business built on repetition and “continuous improvement” (which, sadly, is often more like “death by a thousand cuts”) has much of a future. But, what is unquestionably true is that the change-intensive technology startup culture is miles apart from traditional businesses whose historical rate of change was measured in decades, not weeks or months.
In a world full of change, do maturity and learned experience continue to have value? Absolutely. Serial entrepreneurs learn to “replay a tape” of past successes, and even more importantly, to avoid pitfalls that have bedevilled them in the past. However, replaying the tape is much more complicated as the pace of change accelerates. A good analogy is that you are replaying the tape as the format transitions through 8-Track, to Cassette, CD and now to MP3s in Flash memory, while the music genre morphed from Disco to Punk to Rap. Notwithstanding this, there are still enduring universal truths about making great music that transcend format or genre. The same is true for entrepreneurs building great businesses.
I mention this because I still have people ask me to talk about experiences in developing “go to market” strategies from 10 or even 15 years ago. While there are some valuable object lessons there, the approaches today (as we’ve discussed in other blog posts) are totally different. That being said, I feel that those earlier experiences have helped me to navigate this current change-infused world. Alas, my early world of physically shrinkwrapped software, sold through mail order distributors like Programmer’s Paradise and advertised in physical magazine ads, that built MKS in the 1980’s is largely history. The 1990’s saw most software sold via ecommerce on the web. Millenial startups leverage vast social networking platforms (Facebook, Twitter, etc.) and mobile distribution models. Like the tape analogy, each iteration of the market is pushing the envelope and, yet, each borrows heavily from existing playbooks as well.
Furthermore, even technology startups can get into a rut of repetition. As an entrepreneur, it is critical to have a network of intelligence that helps you navigate your ever changing business landscape.
If you want to learn from first hand from Ariane de Bonvoisin on the subject of “Taking Charge of Change”, or even ask your own questions, sign up for her 21 August, 2008 Calliflower call by clicking here.
In summary, embrace change by being both a “change optimist” yourself and encouraging it in your team. My strong belief is that it will enhance your ultimate success as an entrepreneur, and also increase your personal satisfaction during your personal journey to success, however you define it.
I finally found some time to record thoughts on a great conference – last Thursday’s Tech Leadership Conference (TLC) by Communitech.
CEO ROUNDTABLE:
Verdexus once again gathered a few tech CEOs from Waterloo and Toronto, the night before at Charbries, to have an informal and open-ended discussion of key issues in financing, growing, valuing and finding exits for technology startups.
As in past years, we assembled an accomplished group who have built primarily software-based businesses during the last decade and are now executing newer models, whether SaaS or the more esoteric Venture 2.0 Playbook necessary for “so-called” Web 2.0 and Mobile businesses. In an earlier blog, I covered a past TLC speaker and Verdexus advisor Grover RIghter’s Venture 2.0 Playbook.
Numerous war stories about increased complexities of dealing with founders, VCs, groups of angel investors, not to mention simply making enterprise sales highlighted common success factors of perseverence to overcome obstacles, failure and experimentation before ultimate success and just plain good luck around timing. The drying up of VC money and other funding challenges remain a constant theme.
Experience in building great businesses over the last ten years has a lot to teach us today. However, the 2008 market also demands significantly different startup building techniques. To explore that, we spent time dissecting the Web 2.0 phenomenon. Some key questions we analyzed were:
Q: in building companies for less (e.g. under $10 million, or even $5 million, from start to exit), is this building a complete company? Or, is an exit to a much larger acquirer the only way such nimbly funded companies can be grown to full scale? A: yes and no, we had some quite different opinions on this, so perhaps the jury is still out.
Q: likewise, are these companies inherently built around smaller applications, that aren’t as technologically deep as earlier startups, or is there a genuine breakthrough in company cost structures? A: yes there are real breakthroughs in outsourcing, virtualization, hardware and network costs, virtualizing management, etc. Furthermore, while some Venture 2.0 companies are big plays, many are ultimately just a piece of the whole product and will ultimately find their true “home” only when acquired.
Q: in an age of “free”, what are the long term monetization strategies that will build companies of real value? A: see discussion around TLC and Chris Anderson, below.
In addition, we spoke about:
the right time and stage to start going outside for money, and hence the tradeoffs between purely organic growth and the accelerated growth rates external finance allows.
how to get and maintain, and perhaps legally incent, alignment between investors and management.
the difficulties a “closed” mobile environment, particularly in Canada and the US, presents to startups and whether purely web-based applications (a laiPhone) represent the optimal rollout strategy. The emergence of 3G will only enhance this strategy (3G is expected to be 20% of handsets by 2010, but that number would be skewed to non-North American markets).
TECH LEADERSHIP KEYNOTES:
For anyone attending the May 1st Tech Leadership Conference, you can see that our roundtable discussions were right on point for what the US-based, most west coast and Web 2.0 focused speakers were telling the audience. In fact, it was striking how common the issues between the two back-to-back events turned out to be.
First of all, Chris Anderson, editor of Wired, author the The Long Tail and most notably a past contributor to my favourite magazine, The Economist, spoke about the increasingly dominant role of FREE in product pricing strategies. Speaking from the perspective of an economist, Anderson illuminated why, increasingly, products and services, particularly those in the online digital realm, are moving to free or low cost pricing. He boldly predicted that “free is going to be the price of some version of any product”. First of all, the cost of production and distribution of these virtual products is primarily based on such inputs as computer processing power, network bandwidth, digital data storage, All of these are approaching zero or very low cost. Anderson underscored this by showing that the cost of serving video for 1 hour over the internet was about 1/4 cent per hour (and would be 1/8 cent per hour next year).
This is important because basic economics teaches us that “in a competitive industry price will equal marginal cost.” At the very least, this means that competitive online markets will almost always involve competing with a free offering. Anderson presented a fabulous dissection of why this is true and the implications for business, and especially tech startups in fields like web, social media, mobile and digital media.
He spent less time on the monetization strategies startups should use to compete in these free-dominated markets. Although he presented the “freemium“ business model wherein 99% use a basic and free offering, while revenues come from the 1% who are most engaged and hence see the greatest value. However, as I’m engaged in real world exploration of these web 2.0 monetization strategies even as I write this, there is so much more to this critical topic. The previously mentioned Grover Righter Venture 2.0 playbook delves deep, exploring a hierarchy of monetization models, including mashups, text ads, video ads, carriage, points, subscription, vending, etc.
Having already seen venture investor and advisor Chris Sacca doing a similar presentation at the Deloitte Predictions conference in January 2008, I will spend less time on his lunch time keynote. Sacca is an especially smart and engaging speaker and probably the best I’ve seen in sharing the Silicon Valley culture, expousing lessons learned during his recent work as head of special initiatives for Google.
The statistic that still resonates with me from his January talk was that Google is the largest purchaser of Filet Mignons in California. Having struggled over the years to import the Silicon Valley culture of focus and fun to Waterloo, I continue to wonder whether a direct import is possible given our differences of culture, climate and politics here in Canada. But, we this is definitely worth exploring and I’d really be interested in a Google employee’s analysis of the office and amenities in Waterloo compared to Mountain View.
On a deeper note, Sacca’s described his almost evangelical mission to lobby the FCC and help shape the subsequent 700 MHz spectrum to ensure it would be an open wireless platform. I’ve spoken a number of times about how broken our mobile environment is and that we need an improved regulatory framework and increased competition to get out of our current “dark ages”. In engaging the FCC, Chris has helped move the regulatory piece forward and with its Android open handset initiative, there is a good chance that Google will increase competitive intensity as well.
Lastly, Sacca weighed in on the topic of building new companies more efficiently and at the same time, took a swipe at VCs, in saying “traditional VC funds haven’t fathomed how cheap it is now to build a software company”. He continued that he “wouldn’t know how to be a VC, when you can start a company without maxing out a credit card”. Overstatement perhaps, but it does drive home the point we’ve been exploring for some time.
The interplay of the two Chris’s (Anderson and Sacca) with later keynote Jeff Taylor (Eons, ex-Monster) and Rick Segal (venture parter at JLA Ventures) mashed up into a panel with maestro Mark Evans(PlanetEye, ex-National Post) moderating. Iain Klugman of Communitech is to be congratulated for putting this together. Never before have I seen so much mental horsepower and raw in the trenches experience on one stage. The panel, for which I believe Communitech plans to have a video stream available shortly, was a true highlight.
Again, major kudos to Communitech for pulling this remarkable event together. It is a real step forward for the Waterloo startup scene. To illustrate, less than three years ago, at October 2005 Entrepreneur Week, when Tony Perkins (AlwaysOn, founder RedHerring) spoke about many of the same Web 2.0 issues, the lack of readiness of the audience to receive this message was most apparent. The recent TLC dramatically shows that we’ve come a long way in those last few years in transitioning to the next generation of tech in Waterloo Region.
“believe me, you have to get up early if you want to get out of bed”
it’s not entirely clear that Groucho Marx was referring the much-vaunted early adopterof 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.
“The Ultimate Audiophile’s Turntable” British Audiophile Bible in the 1970’s and 1980’s
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.
Blackberry Pearl – Convergence of Network and Information First Mass Market PDA 1996
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 Pilotwas 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
Apple iPhone – Next Generation Browsing Experience Asus eee – MID Computer
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:
most early adopters are quite selective in the technologies they will invest time in as pioneering users. Most either explicitly or intuitively identify gaps in their personal or business application environment.
in fact, perhaps each adapts a particular form of the “Ten X Rule” – ie. a new technology has to be at least 10 times better than what exists in the marketplace, simply to justify the switching costs. Some people may remember the Digital Audio Tape which, among other failings, didn’t need the 10X Rule compared to existing technologies.
early adopters in one product category may well be early majority or mainstream users of other technologies.
Next generation products, while better in many aspects, may well be a step backward in other ways.
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.
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.
His topic, for which he developed a computer model written in multi-agent, graphical modelling and simulation language called NetLogo, was to study the propagation of ideas such as fads or partisan political persuasion using some of the latest social graph theories. Last summer, at the acclaimed Shad Valley program at University of Calgary, he became interested in the topic of emergence. For those who are not familiar with this fascinating field, emergence can be defined as as “… the way complex systems and patterns arise out of a multiplicity of relatively simple interactions.”
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 The Tipping Point. (An interesting footnote is that Gladwell, now based in New York City, grew up right around the corner in the small community of Elmira). Gladwell, a journalist by trade with a similar modus operandi to Don Tapscott, has done much to popularize a whole new area of science.
Devin’s project aimed to show how fads, political influence, religions and even diseases spread through society. Au courant terms such as tipping, connectors and mavens all arise from this new science which shows how a few key people can take a simple, and seemingly inconsequential idea or trend and turn it into a mass movement. As story-telling narrative it’s intoxicating, as a science it may well be one of the most exciting subject areas of this new century. And, beyond being a very proud father, I was struck by how much the area Devin chose to study sits right in the epicentre of our investment thesis at Verdexus.
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 Six Degrees, is one of the academic pioneers who managed to fuse existing work in graph theory, psychology, sociology and physics into a new science of connectedness.
This new Science of Networks (covering social, biological and technological networks) is truly a post-millennial creation. In an age when we’ve moved beyond mere specialization, whole new research disciplines are synthesized from a set of discrete subject areas. Such fusion of formerly disparate knowlecdge areas is a key example of the Knowledge Integration referred to in Thomas Friedman’s The World is Flat.
I can’t do justice to this field here, but to give a flavour, some key recent breakthroughs are:
Duncan Watts shows that the connectedness of most social networks isn’t a Nomal Distribution as might be intuitively supposed, but instead is a Scale-Free Network exhibiting a Power-Law Distribution. The significance of this is that a few key Connectors can make (or break) the ability of the network to take over. Watts points to the Matthew Effect in which “well-connected nodes are more likely to attract new links, while poorly connected nodes are disproportionately likely to remain poor.”
Furthermore, Watts describes Affiliation Networks, or “networks of overlapping cliques”. They are the new social networking version of clubs, but in scientific terms are Bipartite Networks, which are really fused version of networks of Actors and Groups.
lastly, the concept of Social Currency has really re-defined the notion of brand in this new science.
As I mentioned, I’m just skimming the surface, but the net takeaway that really excites me, is how new some of this fundamental science is. Although the origins of the field may go back 50 or 100 years, many key findings are still a mere 6 or 8 years old. Furthermore, my sense is that this field is just beginning.
To put this into context, I started working with one of the first peer-to-peer, social networked contact systems with Ottawa-based GoodContacts (now acquired by Reunion) back in 2001 and a full 18 months before Plaxo was launched. When later social networks like LinkedIn came along, I remember asking why we hadn’t taken that approach. But, the truth was, that much of the enabling science hadn’t yet been formalized.
With that in mind, in this day of Facebook, Social Branding, Twitter, and the new social conferencing from iotum, I suspect that we are just in an early generation (Beta test?) of the Social Networking Revolution. Therefore, for human interactions with friends, sales, politics, and entertainment, stay tuned for Social 2.0 and beyond. Remember, social networking is not just a fad of college students and teenagers, but a fundamentally different way to optimizing human and social interactions.
2 Aug 2008
0 CommentsBrands, Trust and The Fine Print
In today’s mail I received a tantalizing offer from Bell Canada Long Distance. It promised the ability to “Call the world without limits” by delivering “Unlimited World Long Distance Plan $29.95/mo.” With calls to over 50 countries plus Canada and USA included, on the face of it, that’s a pretty attractive offer.
But, I’ve learned that, when dealing with the telecoms industry whether landline or wireless, it pays to read the fine print. And, sure enough, in very small type at that bottom it says “excludes calls to mobile phones and wireless devices.” Sadly, when I call overseas, where mobile penetration is generally at or even above 100 mobiles for 100 population, over 95% of my calls are to mobile phones. So, far from being unlimited, this plan is really a bit of a “bait and switch” which might well increase my calling costs. In the monthly billing cycle, the arrival of the first bill post sign up would almost certainly make any customer’s blood boil. At a macro level, I’m really curious as to what such deceptive marketing campaigns say about customer relations and basic trust in the 21st century?
Also this week, Canadian Minister of Industry, Jim Prentice, dialled up his earlier suggestion to mobile operators Bell and Telus to reconsider their ill-conceived plan to charge customers for incoming SMS text messages, including SPAM. Minister Prentice, after meeting Bell CEO George Cope, publicly raised the spectre of increased wireless regulation in Canada as a way to increase pressure for the pair to see common sense. Clearly, for companies that act in the public interest, using the police-like powers of regulation to curb those who stray from this idea must strike a delicate balance. Again, is this a trust issue? Are Bell and Telus exhibiting corporate greed or simply strategic incompetence?
Speaking of trust, a week ago a good friend lent me a fascinating book called 24 Days, by Rebecca Smith and John R. Emshwiller, Harper Collins, 2003. The co-authors, two Wall Street Journal Reporters, lay out a factual and totally rivetting chronicle of how the once “great” company called Enron went from being on top of the world into a death spiral in little more than three weeks. To quote the authors, “so much of Enron’s energies were devoted … to exploiting accounting rules to make profits out of thin air. So much brainpower went into temporary gains rather than into building projects with lasting value. By any means, was the Enron way. … Service to its customers and clients, didn’t enter into it.” Having once run a public company where we took our fiduciary and regulatory duties to our shareholders and the public markets seriously, the sheer magnitude of the greedy cleverness of the malfeasance at Enron boggles the mind. Again, why have the fundamental ethical standards of human trust in the corporate world sunk so low? While it is easy to build a house of cards, without long term trust, I firmly believe it is impossible to build any entity (corporate or otherwise) with lasting, long term value.
Can We Trust Their Claims of Open?
Trust issues aren’t confined to the US and Canada. In Germany, T-Mobile has been advertising their new iPhone mobile data plans as “open internet access with unlimited data” (“Freier Internetzugang mit unbegrenzter Datenflatrate”) For the details, see a fascinating post from TMCnet. Indeed, customers were finding to their dismay that this open internet access specifically disallowed such basic mobile web services as VoIP, IM, and VPN. Furthermore, the supposedly unlimited data plan was actually capped. This is almost unbelievable, especially in Germany which, being in the European Union, generally benefits from far superior mobile regulation than we enjoy in US and Canada. In a David versus Goliath situation, sipgate, a small VoIP application provider for Apple iPhone, stood up for consumers and has won a preliminary court injunction against mighty T-Mobile. In this instance, there can be no doubt that t-Mobile is just plain wrong. Once again, we wonder how clearly deceptive advertising affects trust between T-Mobile and its customers?
For once, the lessons for companies are simple, yet so often overlooked. In this age of call centres, web self service and mobile nomadism, opportunities for developing personal relationships between companies and customers are on decline. As people feel increasingly distant from the companies that provide them goods and services, the importance of trust in business dealings goes up. I would argue that because trust is built over the long term, it needs to become a vital part of every company’s brand equity. Although economists have yet to devise specific measurements, it is clear that a lack of trust can kill a multi-billion dollar brand very quickly and in such a way as to make recovery extremely difficult and costly, if not impossible.