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Showing posts with label _toc. Show all posts
Where did your Big Idea come from?
I arrived at the Kellogg School at Northwestern in 2009 with the intention of starting a business while I was there. This quickly became my sole and dominant focus. By the time of my summer internship in 2010, I had focused on one idea in particular - creating an online platform on which university professors could be hired as consultants. I had noticed that professors were already hired as consultants on an ad-hoc basis, so I felt an online marketplace for this activity held particular merit. I was wrong.
I determined that science and technology would be the most tangible place to start for the online professor marketplace. Thus, over the summer of 2010, I interviewed various Northwestern alumni who had become directors of R&D labs. As I spoke to the R&D directors, one by one they all responded in a luke-warm fashion. As an entrepreneur, you believe your idea to be incredible. You believe you have found a golden opportunity. It is this belief that drives you forward when others do not. Yet, even with this bias clouding my lenses, I could see that the responses of the R&D directors were at best luke-warm.
Why did they not jump with excitement at what I proposed? It transpired that most of these R&D directors would only hire a professor once a year, and sometimes less frequently. A company might hire a professor to obtain an impartial perspective for clinical trials, for example. In their everyday work, if they came across a technical problem, there were others in the company, and in the industry generally, that they already more readily turned to.
Ultimately, one of the R&D directors I spoke to suggested a different idea. He had previously had an internal team scout for technologies developed at universities, with a view to leveraging any applicable findings for their own work. As a consequence of various company reorganizations, this team had disappeared, yet the need still existed.
After my frustration in pitching my own idea to numerous people, I decided it would be easier to build something that a potential customers were already asking for. I decided to build a service for scouting university technologies, largely to the specification that the initial R&D director was interested. Years later, we have a business based on this initial need.
When I recollect this story, sometimes people accuse me of "cheating" - that I was building something that someone in particular already wanted. Once I had built this for one person, it was just a case of finding more of those types of people. To them, I always ask, "What is the alternative? Build something for a lot of people and hope one of them wants is?"
As much as we, as entrepreneurs, think we have to have a great idea, and that we know best - we usually do not. In the end, your "big idea" can only come from one place: the customer. I thought an online platform for professors to find consulting arrangements was a great idea. In the end, the idea that has gained traction came from a customer.
Forget Customer Pain. Find Arbitrages.
The basic advice that entrepreneurs are given when starting a business is, “solve a customer pain.” It's simple advice intended to help you filter ideas – to help you determine the best idea to pursue. Yet, it remains a simple filter. A better way of thinking about customer pain that can help you identify more profitable ideas is to instead identify arbitrage opportunities.
Often there is a cost for a customer to relieve their pain with a solution. Yet, with arbitrage opportunities, while there may be a standard cost that most customers pay for their solution, there are alternative solutions which have a cost that is significantly lower. These alternative solutions are inaccessible to the mainstream market of customers. Thus, if you were able to find a way to get mainstream customers access to these alternative solutions, you could add your own fee for providing these alternative solutions, and still provide customers with incredible value.
Many of today's Internet businesses already take advantage of such arbitrage opportunities. As the Internet became widespread, it became possible for these Internet businesses to offer what was once a niche alternative solution to a much wider audience. Examples of such arbitrages include Dell.
The original premise of Dell Computers was to wipe out the distribution costs of PCs – removing warehouses, retailers and other parties in the chain between the person building the PC (the manufacturer) and the customer. Through the Internet, Dell could offer cheaper PCs than those sold at high street shops, for similar or superior specifications, while still keeping a nice margin for themselves.
It had always been the case that a person could buy all the components of a PC and build it themselves for a cheaper total cost. In fact, the founder – Michael Dell – would build such PCs from his bedroom and sell them. Yet, for the mainstream customer, this “build it yourself” solution was not a viable alternative solution. The Internet enabled Michael Dell to offer this alternative solution to the masses. In doing so, Dell realized an arbitrage opportunity.
At PreScouter, we believe that universities are a significant untapped resource. Corporations have many ways in which they develop new inventions, from utilizing internal R&D to working with suppliers. However, universities are an alternative solution for sourcing inventions that many corporations struggle to realize full value from.
In the US alone, almost $50Bn is spent on research at universities, yet very little of these innovations are commercialized out into the real world. Yet some those that have been commercialized have had significant impact, and range from the Google search algorithm out of Stanford, to Lyrica, a drug out of Northwestern that contributes $2.5Bn to Pfizer's annual revenues. What could it mean for corporations, and society at large, if more Googles and Lyricas were to reach the real world? Our mission is to find out.
Often there is a cost for a customer to relieve their pain with a solution. Yet, with arbitrage opportunities, while there may be a standard cost that most customers pay for their solution, there are alternative solutions which have a cost that is significantly lower. These alternative solutions are inaccessible to the mainstream market of customers. Thus, if you were able to find a way to get mainstream customers access to these alternative solutions, you could add your own fee for providing these alternative solutions, and still provide customers with incredible value.
Many of today's Internet businesses already take advantage of such arbitrage opportunities. As the Internet became widespread, it became possible for these Internet businesses to offer what was once a niche alternative solution to a much wider audience. Examples of such arbitrages include Dell.
The original premise of Dell Computers was to wipe out the distribution costs of PCs – removing warehouses, retailers and other parties in the chain between the person building the PC (the manufacturer) and the customer. Through the Internet, Dell could offer cheaper PCs than those sold at high street shops, for similar or superior specifications, while still keeping a nice margin for themselves.
It had always been the case that a person could buy all the components of a PC and build it themselves for a cheaper total cost. In fact, the founder – Michael Dell – would build such PCs from his bedroom and sell them. Yet, for the mainstream customer, this “build it yourself” solution was not a viable alternative solution. The Internet enabled Michael Dell to offer this alternative solution to the masses. In doing so, Dell realized an arbitrage opportunity.
At PreScouter, we believe that universities are a significant untapped resource. Corporations have many ways in which they develop new inventions, from utilizing internal R&D to working with suppliers. However, universities are an alternative solution for sourcing inventions that many corporations struggle to realize full value from.
In the US alone, almost $50Bn is spent on research at universities, yet very little of these innovations are commercialized out into the real world. Yet some those that have been commercialized have had significant impact, and range from the Google search algorithm out of Stanford, to Lyrica, a drug out of Northwestern that contributes $2.5Bn to Pfizer's annual revenues. What could it mean for corporations, and society at large, if more Googles and Lyricas were to reach the real world? Our mission is to find out.
US Immigration Options for Entrepreneurs
I often run into international students who are looking to start a company when they graduate from school in the US -- just as I did. They ask me about the options foreign entrepreneurs have with respect to getting a visa to stay in the US. This video is a great introduction and discussion on those options.
Start With Why
If you're building a company, it's long term survival and prosperity often comes down to one thing: the reason for its being.
Kill Hollywood
YCombinator's Paul Graham has a great reaction to
SOPA/PIPA. Here are some highlights:
The main reason we want to fund such startups [that will compete with movies and TV] is not to protect the world from more SOPAs, but because SOPA brought it to our attention that Hollywood is dying. They must be dying if they're resorting to such tactics. If movies and TV were growing rapidly, that growth would take up all their attention. When a striker is fouled in the penalty area, he doesn't stop as long as he still has control of the ball; it's only when he's beaten that he turns to appeal to the ref. SOPA shows Hollywood is beaten. And yet the audiences to be captured from movies and TV are still huge. There is a lot of potential energy to be liberated there.How do you kill the movie and TV industries? Or more precisely (since at this level, technological progress is probably predetermined) what is going to kill them? Mostly not what they like to believe is killing them, filesharing. What's going to kill movies and TV is what's already killing them: better ways to entertain people. So the best way to approach this problem is to ask yourself: what are people going to do for fun in 20 years instead of what they do now?There will be several answers, ranging from new ways to produce and distribute shows, through new media (e.g. games) that look a lot like shows but are more interactive, to things (e.g. social sites and apps) that have little in common with movies and TV except competing with them for finite audience attention. Some of the best ideas may initially look like they're serving the movie and TV industries. Microsoft seemed like a technology supplier to IBM before eating their lunch, and Google did the same thing to Yahoo.
Blackout
The Internet is killing the entertainment industry. It is becoming increasing difficult to protect copyrighted materials from being posted online. In the past these materials would have earned the entertainment industry money, but now they are becoming free. The business model that the entertainment industry has come to rely on is increasingly becoming unworkable in an Internet era.
Their reaction? To lobby the government to introduce bills (SOPA/PIPA) that provide unprecedented powers of censorship to the entertainment industry.
While Google...
... and Wikipedia...
... have taken some action against these bills, Seth Godin probably says it best:
Their reaction? To lobby the government to introduce bills (SOPA/PIPA) that provide unprecedented powers of censorship to the entertainment industry.
While Google...
... and Wikipedia...
... have taken some action against these bills, Seth Godin probably says it best:
It's painful, expensive, time-consuming, stressful and ultimately pointless to work overtime to preserve your dying business model....Breaking systems that benefit your customers is dumb. Taking money from lobbyists to break those systems is dumber still.
Building a next generation, cost-efficient enterprise
One of the benefits of building a company from scratch, and doing it in a bootstrapped way, is that you are really forced to do even the simplest of things in new, innovative and cheaper ways than a Fortune 500 company might. In this way, even if you were to do nothing but create a company that replicates an existing business, for example, a realtor (real estate) chain such as Foxtons, you could create the business in such a way that it has significant cost advantages. With these cost advantages, your business might even be able out-compete the more traditional type of firm.
Perhaps the most stark example of emerging cost advantages that new firms have is through the gradual elimination of IT infrastructure costs. In many companies, IT infrastructure is a significant investment that covers desktop application software, computer hardware and IT support staff that manage these. If you are building a company from scratch, you can build an enterprise that has little of few of these types of costs. How? With Google Apps.
Current and upcoming features in Google Apps include
Clearly a Google Apps centric solution is not as feature rich as tradition solutions... but how many organizations need those rich features? And is it worth the additional cost?
Beyond the cost of IT infrastructure, there are other areas where cost advantages are possible.
Perhaps the most stark example of emerging cost advantages that new firms have is through the gradual elimination of IT infrastructure costs. In many companies, IT infrastructure is a significant investment that covers desktop application software, computer hardware and IT support staff that manage these. If you are building a company from scratch, you can build an enterprise that has little of few of these types of costs. How? With Google Apps.
Current and upcoming features in Google Apps include
- Web based docs, spreadsheets and other office software - all of which is free, comparative to Microsoft Office.
- Management of your web site and domain.
- GDrive, Dropbox-like software that will integrate your offline storage with Google docs online, and thus also provide back-ups.
- Chromebook laptops that are integrated with Google Apps. They can be leased at approximately $300/year - and so can be cheaper than dedicated, purchased hardware.
- Google Apps, and their partners', support staff, who provide assistance in using these services.
Clearly a Google Apps centric solution is not as feature rich as tradition solutions... but how many organizations need those rich features? And is it worth the additional cost?
Beyond the cost of IT infrastructure, there are other areas where cost advantages are possible.
- The use of offshore, remote workers that can be employed for simple tasks using oDesk and other contractor platforms. Do you really need to hire administrative staff at full US staff costs, or can a remote worker (at a fraction of the cost) suffice?
- In some cases Western workers are required, because of the nature of the work involved. In those cases, can you employing segments of the population that are normally not considered by other firms, and hence can be cheaper? These include, for example, the retired and stay-at-home mums.
- Maintaining all documents and literature in electronic form, and hence eliminating filing cabinets of paper, and reducing the amount of office space required. Just think about how much paper that your legal department has, for example.
- Allowing staff to work from home, so the office is just a place used for meetings and work that requires collaborative effort. This again reduces the amount of office space, and overhead costs, required to run a business.
- Use of Skype and Google Voice to reduce or eliminate telephone costs. Use of Join.me, instant messenger and email to enhance collaboration.
What customers are coming to expect
An interesting excerpt from IDEO's Patterns:
Despite its reputation as a suffocating bureaucracy, China is a place where virtually anything is possible and everything is available. Want a custom-made suit for less than US$50? Knock-off Italian furniture? Unlocked iPhones? China has it all — if you know the right person on the right street corner. This no-holds-barred approach, or abundance service, has become legendary at places like Shanghai hot-pot restaurant Hai Di Lao (海底捞火锅店).
“THIS IS THE BEST FRICKING HOT POT RESTAURANT ON THE FACE OF THE PLANET!!!” wrote one reviewer. “It rivals the Ritz Carlton. Free drinks if you want them. They will bring new eyeglass-wiping cloths to wipe the steam from your glasses and offer to do it for you. …there is a children’s playroom, and there are small tables with Chinese Checkers and Chinese Chess, and they have a team of women who will give you a professional manicure. THIS PLACE IS AWESOME.”
Note that this breathless review raves about the utterly satisfying dining experience, not the meal. The restaurant’s reputation is for service—and, increasingly, that’s what customers are coming to expect.
London's Silicon Valley
In the two years I've been away from London, the city has developed a flourishing digital hub - "Tech City". A map has been created to highlight the growth of startups in the hub.
More from the BBC:
More from the BBC:
The UK Prime Minister has unveiled an interactive map of East London's technology cluster, revealing more than 600 firms in the area.
The Tech City map highlights the expansion of Old Street's "silicon roundabout". By comparison there were around 200 tech firms based there last year.
The government said it was acting to support the area's success.
Seth Godin on analyzing web businesses
Seth Godin has a great post on analyzing web businesses. Here are the six things he suggests you assess in any such business:
- What's the revenue per visit? (RPM). For every thousand visitors, how much money does the site make (in ads or sales)?
- What's the cost of getting a visit? Does the site use PR or online ads or affiliate deals to get traffic? If so, what's the yield?
- Is there a viral co-efficient? Existing visitors can lead to new visitors as a result of word of mouth or the network effect. How many new visitors does each existing user bring in? (Hint: it's less than 1. If it were more than 1, then every person on the planet would be a user soon.) This number rarely stays steady. For example, at the beginning, Twitter's co-efficient was tiny. Then it scaled to be one of the largest ever (Oprah!) and now has started to come back down to Earth.
- What's the cost of a visitor? Does the site need to add customer service or servers or other expenses as it scales?
- Are there members/users? There's a big difference between drive-by visits and registered users. Do these members pay a fee, show up more often, have something to lose by switching?
- What's the permission base and how is it changing? The only asset that can be reliably built and measured online is still permission. Attention is scarce, and permission is the privilege to deliver anticipated, personal and relevant messages to people who want to get them. Permission is easy to measure and hard to grow.
Just three questions
I once interned at a VC firm. At this firm, potential startup investments flowed through rapidly, and it could sometimes be difficult evaluate every single opportunity. Faced with such a task, the associate tasked with looking at these opportunities assessed them using just one, simple rule of thumb: if you had to ask just three questions of the opportunity, what would they be?
It's a simple rule of thumb, but one that applies to opportunities beyond just looking at companies: if you could ask a customer just three things, what would they be? If you had to build just three product features, what would they be?
Which three questions will help you prioritize and get clarity on what you're working on?
It's a simple rule of thumb, but one that applies to opportunities beyond just looking at companies: if you could ask a customer just three things, what would they be? If you had to build just three product features, what would they be?
Which three questions will help you prioritize and get clarity on what you're working on?
Kenyan farmer lauds internet as saviour of potato crop
We sometimes forget that the Internet has yet to penetrate many parts of the world. This amazing story of a farmer in rural Kenya shows us the impact the Internet can have on those parts of the world.
Kenyan farmer Zack Matere pulls his mobile out of his pocket holds it up and takes a couple of photos."It seems they have come back and are digging here again."He is referring to a group of people who have encroached on a water catchment area and are endangering the whole community's water supply."When they came before, I took photos of what they were doing, posted them on my Facebook page and was able to get assistance.""I got in touch with Forest Action Network and they came back to me quickly saying they would help me protect the catchment area."This is just one of the ways in which he uses the internet.More at the BBC.
How do you get 50,000 followers on Tumblr?
Clarisa relayed me this interesting tib-bit from a classmate at Medill who has a Tumblr blog with over 50,000 followers. How did that happen?
As for my blog, the only "press" I got that I know of is from Tumblr itself. It all started around the time I hit the Chicago newsroom, because I started posting my science writing. I was highlighted on one of their Tumblr Tuesday posts last March. I can't remember exactly how they found me, but one of their tag curators (for Science) started following me, and then one of the biggest Tumblr bloggers (SoupSoup) started following me and reblogged a few things of mine -- in fact, maybe they found me through him? Not sure.... Anyway, the big jump really happened this June.
I know a few of the Tumblr staff through my blog, and I met one of them when she came out to Chicago for a meetup. I got an email some time last Spring from her asking me to fill out a tiny little bio for something they were planning. I never heard a thing more until they launched the Spotlight, where I'm featured in the Writers category. This is where the bulk of the followers came from, because not only is it an easy place to find people to follow, it's also the first thing that comes up when you get the new Tumblr app (which launched for the iPhone in June). So that's the long story of it. Sorry if you didn't want all the details.
Amazon's Silk disrupts the microprocessor race
Amazon claims its Kindle, running the new Silk browser, will be able to provide performance and user experience comparable to that which you are accustomed to from an iPad or laptop, but on hardware that is far cheaper and inferior. If they are able to deliver on this promise, Amazon will be ushering the end of the microprocessor race between Intel, AMD and others. However, I suspect they are not quite there yet.
For years, we - the consumer - have had to upgrade our processors on a periodic basis, as software vendors have increased the processing capabilities of the hardware they've required. For example, each new version of Windows has gotten bulkier and graphically more intensive. Yet, this is not what most consumers want. By moving much of the processing to the cloud, consumers no longer need to play this game. Amazon will take care of the computation for us by pre-processing the necessary computation so it is done on their EC2 clouds, rather than on your device.
Yet to fully realize the dream of moving all the computation to the cloud - Amazon needs to do something radical. Amazon needs to create its own communication protocol between the Silk browser on the Kindle and Amazon EC2 servers where the processing is done. This is the best way to pre-process the web content so it is easier to render on inferior devices. Since the standard HTML protocol is verbose, using a proprietary protocol will also reduce the bandwidth required to transmit the data. I suspect Amazon has not yet quite realized this.
Time sensitivity
What are the lasting ways in which business school changes you, beyond the knowledge that you glean? For me, business school made me far more aware of time than I had been previously in my life.
At business school, there were always far many more activities than was time to do them. Having to pick and choose, and seeing the outcomes from these choices, really made me conscious of the value of time and how the investment of time we make shifts the directions of our lives.
In my particular case, I choose to spend time on starting a company while I was at school, rather than recruiting for a job. Both are significant undertakings. Just starting a company is itself hard to do. It is even harder to do while recruiting.
At business school, there were always far many more activities than was time to do them. Having to pick and choose, and seeing the outcomes from these choices, really made me conscious of the value of time and how the investment of time we make shifts the directions of our lives.
In my particular case, I choose to spend time on starting a company while I was at school, rather than recruiting for a job. Both are significant undertakings. Just starting a company is itself hard to do. It is even harder to do while recruiting.
Don't think Big. Think Big and Fast.
Google is 13 years old today. It is today valued at $175Bn. Groupon's third anniversary will be in November. It is expected to IPO at a $24Bn valuation. There was once a time when it was inconceivable that you could build such big companies so quickly. How those times have changed...
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