The News at Phipps

It has been some time since I posted, I apologise.

I recently attended a talk given by Eric Ries, author of a philosophy (and book) borrowed from the Japanese lean manufacturing process. He has applied this philosophy to start-ups. In short it expounds not wasting your and other people’s time, effort and money through releasing a Minimum Viable Product (MVP) then through small changes to the product (iterations) creating a feedback loop. This allows you to build, learn and improve the product, rapidly reacting to your customers wants then repeating to a glorious fade.

If after this process your product isn’t hitting the spot you can then re-align its focus (through pivoting) honing the positive aspects and cutting the negative ones. Lots of new words and concepts. But fundamentally it is common sense in a world where it is so easy to release a product and interact with your customers to gain constructive feedback.

So through eschewing traditional management paradigms favoured by big organisations Mr Ries is proposing an epistemological break toward the Lean Start-up philosophy. Yet there is lots of scepticism towards his ideas.

One member of the audience asked a very loaded question relating to his use of ‘all the right buzzwords.

“Why should we listen to a failure like you Eric, I mean you’re using all the right buzzwords, but what have you been involved in that is actually successful?’

I have to admit having not heard or seen Mr Ries speak before I was sceptical of someone expounding a magic bullet for start-ups. His appropriation of mysterious philosophies from the a land far to the East. It all seemed a bit cliche.

Yet his ideas are so obvious it seems astonishing to me that they haven’t been expounded before. In some senses this is what makes him something of a visionary, everyone can have these ideas yet to verbalise them and clearly communicate the concepts to Joe Average is a different matter entirely. You have to use buzzwords to do so, you have to fail to be able to learn from those failures.

Ignore his buzzwords and ideas at your peril, imagination is a dangerous thing and working too long and too hard on any idea that has not been validated by your market in the vain hope that you can acheive a Zuckerberg-esque success overnight is the worse of the two cliches. Give me philosophies from the East over that anyday.

This Spanish saying roughly translates to clear bills= lasting friendships.

I think it’s a pretty good one, and for some people (cough, me, cough) keeping a tab on what I owe/am owed by my friends is a difficult task.

Why all this, well, I had an interesting idea the other day. Namely that people (me) often owe their friends money and that it would be good if there was a product/service that allowed you to instantly pay them back without access to cash.

I thought about how this might work and then I began to think about mobile payments and sending your friends money directly via phone at the touch of a button. Squaring debts/splitting bills instantly rather than the labourious process of sending one another your bank details and waiting days in the vain hope someone will remember that the beer/burger/flight/holiday/electricity,council, gas bill you paid on their behalf.

What a good idea I thought, peer to peer mobile payments. I got increasingly excited as I thought about how existing social networks could be brought into play and how, perhaps, it could become a really useful everyday thing.

Then I Googled it, and (of course) someone else is already doing it, though in the US www.venmo.com is their name and further inspection revealed they’ve received around $1.2 million in funding. 

I still maintain it is a good idea, but for me some of the most exciting start-ups of the past years have used a percentage model whereby they skim a couple of percent off the millions/billions of dollars of transactions their users make through the service (e.g. Viagogo).

I struggle to see how Venmo will acheive this, but if they do manage to generate a userbase large enough that they can then take percentages off the establishments/institutions that their users are paying (e.g. 2-3% of the bill at a restaurant). And if research into consumer behaviour (mobile phone= new wallet) is to be believed. Then maybe it could be a viable alternative payment model to existing ones.

However for me the excitment lies in the social aspect, I really can picture groups of friends freely transfering money between one another for meals, cinema tickets etc. Of course I have no idea how one could make money from these transactions (one couldn’t charge as it would put of users), but I still think it’s a really cool idea…is that enough…who knows?

I thought i’d just write a quick overview of what I see as some interesting areas within the mobile space, something that a large number of intelligent people are getting very excited about.

For me a large part of the debate centres around the competing technologies, Near Field Communications versus QR Codes being the main one. However other factors to consider involve the penetration rates of smart phones and the rate at which consumers will switch to them. Not only that but the rate at which consumers will adapt their behaviour to their new handsets and the functionality that goes with them. 

Sadly I don’t think I have anything wildly contrarian or interesting to say on the matter, clearly mobile represents a new cycle in technology following the pc and laptop that went before. However I think more interesting is outlining which areas of mobile and what mobile products are set to affect our behaviour and interactions with the world over the coming years.

Clearly one of the most exciting areas is the conjunction of mobile technology with a number of trends already making themselves known. Any company or service that can successfully yoke a social service with the intimate nature of mobile technology stands to be very successful indeed. For me, reccomendation engines combining mobile elements (e.g. location based services) stand to be successful by very dint of their increased relevance. For example one area that is likely to be increasingly exciting over the coming years in mobile couponing. Predicted by Juniper Research to become a $6bn dollar industry by 2014 it is through the use of location based services, with smart phone apps, email links and so on that will increase the redemption rates of mobile coupons far ahead of the traditional 1% that paper coupons (of which 367bn are distributed annually) currently enjoy.

Of course much of this success depends on the introduction of smartphones to successfully deliver the coupons by…or does it? Currently the vast majority of mobile phone users (with the exception of Japan) are most effectively reached by that most unglamourous of means; SMS, which while it varies by region is still the best means of reaching the largest number of consumers with offers.

I could continue to talk about this, but there are other equally interesting products and services out there and couponing is but one of a myriad of services which are likely to be revolutionised by mobile. Think of the revenue that both Facebook and Google are courting through their offerings (offers and places). 

Other interesting areas i’ll write about in due course.

TTFN

I recently read an article which started like this:

Consumers get the bulk of it with free services like social networks. Will industry dynamics shift as providers and advertisers try to get a bigger share?

It then said the business model could change in one of three ways:

1. Service costs rise.

2. Advertising grows.

3. Monetization by other means.

It then says:

“As more business and individual activities move online, early movers should be well positioned to capture higher advertising revenues and perhaps, over time, higher service fees.”

I don’t like the tone of this article, in the main because I am a consumer and I like consuming things for free. However the clear underlying tone of the article suggests that before long we will all be paying for services that we currently enjoy for free.

In response I would suggest that one of two things will happen were things like social networks to start charging:

1. Online activity will migrate back offline because people do not want to pay.

2. We will lie back and take it.

3. Innovative alternatives will arise which don’t charge us (e.g. Diaspora vs. Facebook) and we will all continue to use them for free. Hooray!

The article does suggest:

“For consumers, the benefits of Web surpluses will continue. Engagement with consumers is the key to value creation in multisided markets, so they should expect continuing service innovations and tolerable advertising levels that keep the prices for Web use and access low.”

Yet I would go further than the eminent thinkers over at Mckinsey Quarterly who are likely to be on the side of those organisations whose “web surpluses” are being exploited by freeloading consumers. What if the consumers whose presence forms the very basis of an organisation like Facebook’s decided that they should benefit from the value that it derives from their activities.

What if I decided that I should gain some percentage of the advertising revenue that Facebook derives from me using it rather than simply worrying about whether I will be charged for it when I could simply migrate to a free version.

As suggested by a far more clever man than I the current system could be termed web feudalism, in which a tiny elite of organisations gain huge financial resources from a mass of people.

Let’s hope it turns into something more of a web democracy in which we as consumers have more, not less, input into the internet of tomorrow and more control over who benefits from our activities. Rather than having organisations benefit from our use through ad revenues and then charge us for the privilege. Here’s the article in full:

https://www.mckinseyquarterly.com/Media_Entertainment/Publishing/The_Webs_100_billion_euro_surplus_2724

For more on the idea of web feudalism watch/read this:

http://techcrunch.com/2010/11/16/keen-on-marc-davis-why-social-is-changing-everything-tctv/

I recently spoke with Threadless co-founder Jake Nickell about his site threadless.com and it occurred to me that there wasn’t a European equivalent (or so it seemed at the time). While he was quick to point out that a large portion of their orders are international it did get me thinking about a European Threadless, or some sort of crowd-sourced product website.

But as with all these things, someone had gotten there first. Firstly I think this site is fantastic, as do the people at Seedcamp (whose 2010 competition they one):

www.garmz.com

Then I thought, hold on. Crowd-sourcing doesn’t have to be limited to clothing, it could be anything. With the advent of 3D printing, the sky is the limit. But someone had gotten there first:

http://www.ponoko.com/

Worth pointing out with these sites that you really do seem to be beholden to the quality of your designers.

Finally i’d done it, furniture. What better medium through which you can link a plethora of different products and designers. More expensive than clothing, with, one would hope, higher margins. Perfect…except someone had gotten there first:

www.made.com

I think all of these are fantastic ideas (not least because I had them), and really highlight that if you can find the correct medium/product then crowd-sourcing as a business model is a great way to disrupt an existing industry where (especially in the case of the way young fashion designers are treated) the balance of power is skewed toward a few powerful people/brands and away from the rich creative talents of the crowd.

The tricky part is working out exactly what to crowd-source though!

Word of mouth is often cited as the most elusive, yet the most effective form of marketing. The ability to provoke excited discussion around a product or service and build a dialogue with potential customers are key ingredients in success for both web-based and offline business.

Yet the ability to harness the tastes and interests of consumers is, I would argue, still being realised. Yes Groupon has experienced unbelievably rapid growth, undeniably this is due to it’s ability to introduce consumers to local, smaller businesses that they would only otherwise have heard of through…you guessed it, word of mouth. Yes Twitter gives a person the ability to listen to and interact with people who’s tastes and interests they are aligned with. Flipchart aggregates news-sources from friends…the list goes on.

However I can’t help but think that this social revolution is far from over. Facebook has morphed from a provider of information on friend’s activities to a portal through which we can not only keep track of Martin’s recent trip to his farm but we can listen to the music he shared with us on the way, we can vist his virtual farm where he has far more virtual sheep than in the real world. Undeniably social games are the area where this interactive experience has gone furthest. Yet I would argue for the ‘social’ phenomenon  to truly reflect our offline, social interactions there has to be complete online interaction between whole groups of friends. 

Martin needs not just to publish the music he is listening to via Soundcloud or Spotify, but his friends need to be involved on these sites. Of course this will happen, and as I look at my Facebook friends more and more are taking up these more social elements of a phenomenom you could coin Web 3.0 or even Facebook 2.0, for me however this isn’t the interesting thing. The interesting thing is that there are so many other elements of offline word of mouth/social that haven’t migrated online yet to the “social” internet that is developing. Think of all the myriad discussions that you have with your friends (online equivalents in brackets) and they aren’t just limited to what you’re up to (Facebook/Twitter), what you’re listening to (Spotify/Soundcloud), Where you’ve been locally (Groupon/Foursquare), what articles you’ve been reading (Flipchart). For the online “social” phenomenom to truly reflect the offline social interaction and word of mouth that goes with it there are so many more tastes and experiences to be shared online. We just need the platforms to share them…watch this space.

I recently watched two very interesting videos prior to heading off to an interview for a growth equity fund where my interviewer repeatedly told me he (and this is verbatim) wanted someone who would “run through walls.”

Yet given the job involved talking to a range of entrepreneurs about their businesses and weighing up their respective merits, being rejected and having doors slammed in your face. I still fail to see how the metaphor was particularly apt. Even if overtures are rejected you still get to talk to entrepreneurs and successful people who are trying to make changes to the way we live and interact. Maybe i’m missing something but anyway who wants to run through walls? Especially given my preparation for the interview involved watching the aptly named John Doerr’s thoughts on social:

http://techcrunch.com/2010/10/21/john-doerr-sfund/

These were then built on by Marc Davis:

http://techcrunch.com/2010/11/16/keen-on-marc-davis-why-social-is-changing-everything-tctv/

All very interesting, particularly the idea of people becoming first class commodities on the web, yet having no say in the value that they generate for huge companies that exploit their data. A form of digital feudalism, yet even though interacting over the web and being forced to work for 12 hours in a field seem very different. As we see the migration of more and more of our lives online and personal web-homes are developed for our online lives (e.g. posterous and flavours.me) surely we will feel more ownership over this property and the revenue it generates. Perhaps we might even go as far as demanding a share in that revenue. 

Currently I can’t think of anyone doing this (twitter arbitrage perhaps?) and as Marc Davis states it is a big company challenge. But I fail to see how or why the feudal overlords of their online feifdoms would want to overhaul this system when they gain so much. Either way an interesting space to watch.