Friday, August 31, 2007

Commandments for the Crazies

Had a beer with a friend last week. He's considering starting a business (I hope he stops whining and takes the plunge). Between guzzles, he asked: Don't you have a list of things I should consider before making a decision? Gulp. Remember all those talks you used to give to entrepreneurs? Double gulp, and a nod.

I unearthed and dusted off -- is it possible to dust off a computer file? -- a few dusty presentations. Therein I would close my talks with a Kawasaki/Letterman knock-off: 12 Commandments for the Crazies (i.e., things to consider if you're crazy enough to start a business; I would have slimmed the list to a tidy 10, but I didn't have time). Here's the list:

12. Cui bono?
11. Be big, hairy and audacious.
10. Do the other thing.
9. Be lucky.
8. It's the jockey. Not the horse.
7. Big pie. Small slice.
6. Greed > Fear = $.
5. God damn it, be a Wham-It.
4. Increase shareholder wealth. Daily.
3. Just do it.
2. There is no finish line.
1. Never sacrifice your integrity.
If you've read this blog (or seen my presentation), most of the above are familiar. I have authored posts about cui bono, luck, jockeys v. horses, the fundamentals of greed versus fear, being a Wham-It!, and my translation of Nike's "Just do it" mantra to entrepreneurship.

The others:
- Be big, hairy and audacious: With credit to Collins and Porras and their mid-90s tome, Built to Last, I would reference JFK's 1961 challenge: This nation should commit itself to achieving the goal before this decade is out of landing a man on the moon and returning him safely to earth. NASA was born, the nation rallied, the rest is history. Collins and Porras: "A true BHAG is clear and compelling, serves as unifying focal point of effort, and acts as a clear catalyst for team spirit. It has a clear finish line, so the organization can know when it has achieved the goal; people like to shoot for finish lines."

- Do the other thing: Business is not a science; it’s not black and white. Rather, it is an intoxicatingly frustrating and rewarding sea of grey ambiguity (recall our past post about thinking in grey). There are few rules, and it’s human nature to do the reactive, obvious thing; true progress and value are achieved by doing the other thing.

- Big pie, small slice: Successful enterprises are competitively allocentric. Individual egos are shelved for the organization's well-being. Too often, entrepreneurs focus on their slice of the pie (their position in the company's cap table), versus the grand pie: a large slice (majority stake) of a small pie (company with little value) has little value; a small slice (minority position) of a large pie is tasty.

- Increase shareholder wealth. Daily. Companies exist to create wealth. Period. We had a practice at one of my prior companies, a daily "five o'clock stand-up meeting" question: What are we doing to increase shareholder wealth? If we're spending time on stuff that fails to propel value, quit doing it; focus solely on progress and wealth-generating activities.

- There is no finish line: Building a business is a marathon (check that: a perpetual chronicle of 26.2-milers). The minute you're satisfied, you're cooked: cramps set in, apathy trumps ambition, the finish line is a fuzzy mirage, and other racers (your competitors) race past.

- Never sacrifice your integrity: Enough said.

Thursday, August 30, 2007

POTW: Freakonomics on Aptonyms

It was 105-or-so-muggy-degrees in Davis the past two days. Hence, I'm yearning a chortle, chuckle or two. My discovery: A recent Freakonomics post, Beat This Aptonym. Their contestant: Paige Worthy, a researcher with Good magazine. Very cool. Wisdom of the blog crowd suggestions: Layla Moore (prostitute), Dr. Toothman (orthodontist), Lynn Sharp Paine (prof of business ethics), and Dr. Dick Trapper (urologist), among others. Enjoy.

Monday, August 27, 2007

Fence and fund

I've been AWOL for too many days, spending time on my fence and a fund. The former's a 340-foot, permit-grade, fill-the-pool-by-Friday-or-else monster. With help from my friend Nievas -- whoever thinks Hispanics lack work ethic deserves a long dip in a deep trench -- we erected the first 300 feet. The latter's a work-in-progress, more-to-report-soon early-stage investment fund. Great model and partners, and I think it's going to fly (fast).

Fences and funds can suck the blog out of you. In my belated writer's remorse and ching-ching of my Visa, I'm reminded of a tip I garnered from my first stockbroker. It went something like this: Invest in companies you know and from who you buy. Makes sense, but it was too logical/obvious at the time. It's a concept that's so succinct and valuable it's swept aside.

Digging deeper (not the pool or fence posts, but the idea), it's even more sensible. If you invest (your time, your money, your sweat) in something you know, you're a step ahead. You have a good idea about what a customer wants, what they're willing to pay, how the competition stacks up, and what sells (and what doesn't). Here's a simple exercise: Look around your life (tangible and intangible stuff) and think about what you own. Dig deeper ... take a look at your credit card statement to recap what you buy. Lots of food and fluff and staples, and some nice-to-have luxuries.

I drive a Toyota; my wife shuttles a Volvo. We employ Fidelity and Lazard to manage our money, First Horizon for our mortgage. We buy groceries from Trade Joe's, books from Amazon, teledata from AT&T. We bank at Wells, eat take-out three or more nights a week, and engage architects and house cleaners and contractors and gardeners and pool builders and accountants to keep our lives in order and enjoyable. We drink Coors Light, Diet Coke and Gatorade, live and die by our Macs, eat Lara and Luna bars, listen to iPods, and communicate with iPhones.

How and why do we decide? And, more interestingly, what can we learn from our purchasing and consumption habits to start and finance and back new companies, or to invest in established enterprises? Lots. An investment portfolio composed of companies you know and support (i.e., spend money on) is sage. So too is a vocation invested in what you know and enjoy; you commence with a head start, and it's a lot easier to navigate tough times where you believe in what you're doing and selling. Sounds a lot simpler and painless than building a fence.

Tuesday, August 21, 2007

GeekDad

I just discovered an enjoyable, dust-off-the-Legos-and-have-fun post from DFJ Managing Director Steve Jurvetson. His GeekDad take engages one of our favorite subjects, the creativity of children. "Parenthood is an atavistic adventure, especially for geeks who rediscover their child-like wonder and awe… and find that they can relate better to kids than many adults," Jurvetson offers. "The little people really appreciate arrested development in adults. =)"

Jurvetson -- perhaps I'm arrogantly navel gazing -- echoes and amplifies thoughts herein, specifically our Yes, and ... post. Here are a few morsels of his prose:

From what I can see, the best scientists and engineers nurture a child-like mind. They are playful, open minded and unrestrained by the inner voice of reason, collective cynicism, or fear of failure.

Children remind us of how to be creative, and they foster an existential appreciation of the present. Our perception of the passage of time clocks with salient events. The sheer activity level of children and their rapid transformation accelerates the metronome of life.

POTW: Andy Hargadon on the virtues of qualitative research

One of my favorite thinkers (let alone people), UCD wonder prof Andy Hargadon, chimes in with our post of the week, On the virtues of qualitative research. I've had the pleasure of teaching innovation and entrepreneurship with Andy. He is a rare breed in academia: Pragmatic, creative, market-centric and inspiring in his teaching. Andy gets shit done and makes a mark beyond research, publishing and classroom tutelage.

Here's an excerpt from this week's worthy POTW:

... qualitative research usually does not attempt to measure the same variables across a range of situation but rather it looks for for how new variables or new relationships can be found within a single situation--variables and relationships that nobody has yet identified and studied.

As Einstein and so many others have been credited with saying

"Not all that can be measured should be measured and not all that should be measured can be measured"

There is a great deal of value to be had in measuring our world--and a great deal of value in continually questioning the methods and results obtained by our current measures.

Monday, August 20, 2007

Chapters

I am embedded in Michael Chabon’s latest novel, The Yiddish Policemen’s Union. It is an enjoyable, consume-til-your-eyes-shut read, a nice break from business books. Therein a line caught my eye last night: The lady has been in and out of the hospital lately, dying in chapters, with a cliff-hanger at the end of every one. Though morbid, it metaphorically struck a cord: Companies (like people) create stories over time (in chapters) replete with cliff-hangers. A strange and probably fruitless thought to sleep on, which I did.

I awoke to a cup of coffee and visions of companies-as-chapters dancing in my head, recalling a ballad from one of my favorite Buffett tunes, Lone Palm: I knew this girl made of memories and phrases, Who lived her whole life in both chapters and stages, Danced til the dawn, wished all her worries away. Strange. Back to my coffee and PowerBook. First task: Check email. Second: Peruse an executive summary from a less-than-nascent startup. Interesting, incomplete read reaffirming my Sunday night concept.

I’ve analogized how companies are like gardens, how entrepreneurs are like gardeners. In the same vein, companies and entrepreneurs (CEOs) are analogous to books and their authors. Here’s how…

At the outset, entrepreneurs (like authors) have an idea. Their idea is framed and prophesized, typically in the form of a business plan and its junior compadre, the executive summary. Great entrepreneurs, as we’ve opined, are great storytellers. They know little more than the premise (story line), and have enough ammo and gusto to write the first chapter or two of their ambitious tale. Their stories then come to life; they begin acting it out, solidifying embryonic chapters and archetyping future prose. The characters and scenes and around-this-corner results aren’t yet known, but they drive (blindly?) deeper. Characters come and go, stuff happens, past chapters are rewritten and future chapters are re-calculated. Some stories are fictional, some non-fiction, and a few the rite of legend (fairy tales?).

How are startup companies and their work-in-progress stories similar to fairy tales? Here are a few commonalities of fairy tales:

  • Include fantasy, supernatural or make-believe aspects. (As do most early-stage business plans.)
  • Typically incorporate clearly defined good characters and evil characters. (Think: Microsoft is evil; we are supernatural saviors!)
  • Involves magic elements, which may be magical people, animals, or objects. (Entrepreneurs are magicians [or so they trumpet].)
  • May include objects, people, or events in threes. (Whoa … think of the Rule of Three in business, specifically advertising and communication.)
  • Focus the plot on a problem or conflict that needs to be solved. (Sounds like a situation analysis and related business model/value proposition.)
  • Often have happy endings, based on the resolution of the conflict or problem. (IPO or bust!)
Sounds like a good read to me.

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Post-script (14 Feb 08): Speaking of chapters -- though this relates more to the Long Tail -- Monday's WSJ featured an apt story, Publisher Tests Selling by the Chapter. Ironically, the guinea pig is a book I'm reading, Made to Stick. Here are a few morsels from the story:
Taking a cue from the music business, a major publisher today will begin selling the individual chapters of a popular book to gauge reader demand for bite-size portions of digital texts.

Random House Publishing Group's experiment appears to be the first time a major consumer publisher has offered a title on a chapter-by-chapter basis. It will sell the six chapters and epilogue of "Made to Stick: Why Some Ideas Survive and Others Die" for $2.99 each.

Random House will post "Made to Stick," written by Chip Heath and Dan Heath, at www.randomhouse.com/madetostick. Customers will receive a digital link via email enabling them to download the chapter onto their computers. Random House expects that eventually users will be able to download chapters onto other devices, such as BlackBerries.

"We want to get our content out there in new and different ways," says Matt Shatz, vice president of digital at Bertelsmann AG's Random House Inc.

It takes a licking ...

My watched died this morning. Time of death: 8:18. It wore a good life, and I plan to celebrate its three years of companionship tonight. If you had inquired yesterday about its maker, I would have either guessed or turned my left hand 90 degrees watchwise; until this a.m., I didn’t (care to?) know it was a Timex. It took a licking but stopped ticking, and now I’m naked in search of my next $25 companion.

The death of my Timex conjured other taglines and advertising slogans. A good slogan is one that is both memorable and relevant: It etches a perception (or collection of perceptions) in the minds of specific constituents. Good taglines are so memorable – or perhaps annoying – that they’re trite. We remember, hum, jingle, recite and act upon (i.e., purchase) with our eyes closed. It’s advertising and branding at its most effective: Brain-dead, reactive, take action and loyal consumerism.

Two memorable ones from pinned-to-my-wall teenage posters:

  • Is it live, or is it Memorex?
  • There is no finish line. (Nike)
And, a few that are probably too obvious and therefore trite to recite (answers at the end; see if you can ID these):
A. A mind is a terrible thing to waste.
B. We bring good things to life.
C. Mikey likes it.
D. Think different.
E. Sometimes you feel like a nut, sometimes you don't.
F. Don't leave home without it.
G. The milk chocolate melts in your mouth, not in your hand.
H. When it absolutely, positively has to be there overnight.
I. The ultimate driving machine.
J. A diamond is forever.
K. Got Milk?
L. From the Land of Sky-Blue Waters.
M. Good to the last drop.
N. The Breakfast of Champions.
Now, if only I could find a watch of champions, one that lasts forever, the ultimate time-telling piece from the land of sky-blue waters that I will not leave home without. After all, a good watch is a terrible thing to waste. Got ideas?

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Answers: A. United Negro College Fund; B: General Electric; C. Life cereal; D. Apple; E. Almond Joy and Mounds; F. American Express; G. M&Ms; H. FedEx; I. BMW; J. De Beers; K. California Milk Processor Board; L. Hamm’s Beer; M. Maxwell House (allegedly coined by Theodore Roosevelt in 1907; adopted as Maxwell House’s tagline in 1926); and, N. Wheaties.

Thursday, August 16, 2007

Always swimming

If one of your kids swims, you know the drill: Daily lessons and workouts, last-minute scrambling for goggles, towels and sunscreen, hurried caravans to and from practice. The kids love it, but it can be a time-gobbling migraine for parents.

If and when my noggin’s operating at half speed, I’ll remember to grab my laptop, a book, or a periodical. Sunglasses and my Treo too, though it’s tough to partake in conference calls while kids are splashing up a storm. Tuesday night – running late, of course – I grabbed the just-arrived issue of AlwaysOn, The Blogozine On Innovation. (Love the “blogozine” reference, BTW.)

Seeking to kill an hour, I opened the zine. “Greener Pastures for Global Business,” engaged the headline for a double-truck, two-page promo of the GoingGreen conference at UCD. Since I’m attending the conference, I dug deeper: My comrades Nicole, Redwood, Andy and Glen are speaking, along with Bill McDonough and a host of other green visionaries. Cool.

I flipped to page seven, the Tune In, Tune On welcome from Tony Perkins (AO’s founder and editor). I had dinner with Tony a few years ago back in his Red Herring days – decent food, great conversation – and his writing is, as always, crisp, poignant and insightful. Cool II.

Flipping deeper, page 29 featured an opinion from Eric Janszen, What Makes a Bubble?, elaborating his Eight Laws of Asset Bubbles. I do not know Eric, but his piece is meaningful given our recent post, Blowing Bubbles, along with my current read, The Black Swan. Cool III.

Page 34 introduced the AlwaysOn top 100 private companies. I curiously scanned this list seeking a connection. First browse: Nothing. Second glance: Nextrials, my friend Anthony’s company. Cool IV.

A few pages further reveled an interview with Tom Gage, CEO of AC Propulsion, an electric vehicle manufacturer. Since my wife and I are considering ditching a gas-guzzling SUV for an EV or hybrid, I was intrigued. And, even more so when I discovered my friend Redwood conducted the interview. Cool V.

As the splashing intensified and my reading time elapsed, I turned to page 40. Bam. A picture of Redwood anchoring his guest blogger commentary: Cautionary Cleantech Metrics. Like Tony, Ed’s prose is terse and useful, echoing several sitting-on-the-Sudwerk-patio liter-guzzling sessions Redwood and I have enjoyed. Nice work, Wood; Cool VI.

The lifeguard’s whistle blew. Ty dripped over in search of his towel. Great job, Ty!, I exclaimed, hypocritically internalizing that I had not watched a minute of his practice. Wasn’t that cool, dad? Yep.

Wednesday, August 15, 2007

Rough sailing

All organisms die, and most companies do too. It’s perhaps the morbid of morbid realities. When you’re living, death is a surreal perpetual state. When you’re dying, the process is painful, painted with retrospectives and what-ifs. The latter is especially true for on-their-last-rope companies and the teams chartering their evolution.

I’m fortunate to be intimate with and work with a few dozen companies, several of which -- and one in particular -- are navigating risky and rough waters. (As you may recall from a previous post, Greed > Fear = $, risk is derived from the Italian word risco, an expression used by sailors to express the chances of ending up on the rocks.) All companies – at one time or another or more – sail tough seas. It’s part of the game.

With the said company, the signals are sobering: internal mumbling and back-talking, close-the-cube job searching, employees bailing, and myriad confessions venting in. For the first time in my life, I feel like the Pope. Negativity and pessimism happen, but they can fester from a benign to malignant state.

Companies die for one (or more) of many reasons: They run out of cash, their product/service offering does not resonate (deliver enough differential value) in the marketplace, their business models are flawed, they execute poorly. More succinctly – as we discussed in a post last week – it comes down to three things: the team, the product and the market. This company has a solid team delivering a differential and cool product in a great (and growing) market. It doesn’t add up, but business is far from algorithmic. And, like life, business is not fair.

But it’s not too late. The company has wind in its sail (money in the bank), a team with solid sea legs, and a vessel that can outrace its brethren. Here’s hoping they steer away from the rocks and stay afloat.

Cradle to Cradle

I am typically too impatient to sit through a half-hour-or-so webcast. Anxiety trumps patience and I move on to whatever is next. Last night, my modus operandi changed thanks to architect, designer, and author Bill McDonough. His presentation walks through Cradle to Cradle, his book/design philosophy that provides a framework for growing the things we want to grow; here's a link to the replay. It's a meaningful, terse talk that I highly recommend.

A few morsels I enjoyed:

  • Commerce is relatively quick, essentially creatively, highly effective and fundamentally honest because we can't exchange value too long if we don't trust each other.
  • In our lexicon, asphalt is two words assigning blame.
  • Imagine this design assignment: Design something that makes oxygen, sequesters carbon, fixes nitrogen, distills water, accrues solar energy as a fuel, makes complex sugars and food, creates micro climates, changes colors with the seasons, and self replicates. Why don't we knock that down and write on it.
  • Competition: Comes from the Latin com-petare, which means strive together. We're looking at competition as a way of cooperating.
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Post-script (8/16/07): Just learned Bill McDonough is speaking at the upcoming (9/10-12) AlwaysOn GoingGreen conference at UC Davis. Ironically (with thanks to my friend Redwood), I'm slated to participate. Can't wait.

Tuesday, August 14, 2007

Begin the Begin

My now-five-year-old son Ty has an ear and inkling for all that's musical. He digs bands -- especially marching bands -- freezing at first sound, eyes doubling in size in curious amazement. He lionizes the Cal Aggie Marching Band-uh! When your an adolescent, it's uncool to play in a marching band; when you're five, bands are bigger than an Easter Bunny/Santa Claus hybrid.

What does Ty hear and see that we miss? Diego Rodriguez has an interesting take in metacool, relaying the story of a street-side violinist in D.C. While adults shuttled by, children stopped and watched in amazement. Here's an excerpt:

Why the kids? Partly because they know beauty in their hearts and not in their analytic brains. Partly because they're not rushing somewhere like all the adults (even if they're in tow -- young children don't rush anywhere they don't want to go). The kids were listening because that's what kids do. They listen and observe with an intensity that only the most talented and highly-trained professional ethnographers can muster. In the face of such beauty and mastery, how could they not spend these precious moments of life soaking in the music?

This sense of "beginner's mind" or "mind of the child" is a pillar of design thinking. It's the ability to see things afresh. To see deeply and to sense the truth and the beauty. It's not the same thing as ignorance -- far from it. Rather it's a cultivated ability, an ability which, ideally, is matched with deep technical expertise and wisdom.
We touched on the Beginner's Mind in a post last week, and our inaugural post of a few months ago engaged the concept and its application to creative thinking. We can all stand to begin the begin, let alone spend more time enjoying marching bands. Speaking of bands, here's a lyrical slice of R.E.M.'s Begin the Begin:
Life's rich demand creates supply in the hand
Of the powers, the only vote that matters
Silence means security silence means approval
On Zenith, on the TV, tiger run around the tree
Follow the leader, run and turn into butter

Let's begin again, begin the begin

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Post-script (8.21.07): Richard Watson has an interesting Fast Company take on the Beginner's Mind. His view: When it comes to innovation, organizations can be disabled by experience and specialization.

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Post-script (13 Feb 08): John Maeda checks in with a terrific post about why being creative is good. Love it ... here's the post in its entirety:

Much of my days and all hours are now spent on contemplating the value of the arts and design. Of course there is the economical value of art as artifacts that accrue value, or design as enabling enhancements that result in product revenues. But my mind has wandered towards this strange overused word of creative. The idea of someone that has a propensity to create.

While watching my daughter's viola lesson, and as she stood in front of the class, I realized that the moment when the bow touched the strings was not something to be taken for granted. It was the moment when she was to begin the process of expressing herself by creating music. To create is to potentially embarrass oneself in front of others. It is about the courage to be oneself and to be seen as oneself. Putting ink to a page, or pressing one's fingers against clay, or typing a line of computer code, or blowing glass and realizing mistake. Or success. With everyone watching. But most importantly, you.

So it dawned upon me how important it is to be a creative. Because it means you have within you infinite capacity to experiment. You are unafraid to go somewhere new because you are creating a new thought process about your own creativity. You know that if you stop and no longer challenge yourself, you cease to be creative. You become still, silent, and the bow no longer connect with the strings and music is not made. And you do not exist. You show you do not have the courage to exist.

Creativity is courage. The world needs more fearless people that can influence all disciplines to challenge their very existence. Creativity is reflection aimed not at yourself, but at the world around you.

Monday, August 13, 2007

POTW: Chris Anderson on Productivity

This week's post of the week: It's simple but painful, idealistic but not realistic ... click here.

Five

Our youngest son turned five Saturday, thus culminating – not sure if this is correct, but it feels so – his infancy. Our baby is no longer a baby: He’s a boy, a kid, and at his age birthdays are consequential – the leaps between years are meaningful, noticeable, and celebratory.

Turning five is a big deal, a societal introduction to structure, schedules, responsibility and accountability. Four-year-olds get to goof off (lots); five-year-olds have things to do. Kindergarten starts, homework commences, report cards roll in; reading, writing, counting and behaving. Soccer becomes organized (you’re on a team replete with practices, games, uniforms, and orange wedges). Tee-ball too. Naps go away along with pull-ups and diapers.

In celebration of Ty’s penta-bday, here are a few cool fives:

  • Super Bowls: The Niners have won five.
  • Baseball: Hank Aaron, Joe Dimaggio and Brooks Robinson donned #5.
  • Kids: One of my best friends Casey has five.
  • Oceans: There are five in the world.
  • Senses: There are five too.
  • Music: 5, the name of Lenny Kravitz’s fifth studio album. And, of course, The Jackson Five.
  • Olympics: Five inter-locked rings (representing the participatory/inhabited continents).
As I poked around the Internet researching fives, I learned that five sounds like the word "not" (symbol: 唔) in Cantonese. Four-year-olds like to say “no” … hopefully Ty will stick to Spanish, not Cantonese, though I guess he’s apt to take the fifth instead of saying no.

Saturday, August 11, 2007

Grey

Grey is drab. It’s elements, black and white, have character: Black is striking and bold, cavalier and authoritative, cold and mysterious. White is crisp and clean, full of possibilities, saintly and sober. Grey is, well, grey.

However, people who live and think in grey – while dipping into black and white when appropriate – are cool. Grey thinkers are open to possibilities, uninhibited and not normalized by what exists. They think in a yes, and … manner. They are voracious collectors and connectors of dots (experiences), challenging rules, trying new things, and refusing to accept status quo. Their world is kaleidoscopic and clairvoyant, an always curious landscape of combinatorial possibilities. Stuff happens, and shit gets done, because they make it happen. Creative thinkers and artists and musicians and athletes and entrepreneurs and writers and circus conductors think in grey. Kids do too.

Plato, Kant and Freud all recognized that creative processes (thinking in grey?) are actually different from other kinds of processes. Creative processes lead to products that do not seem directly traceable to antecedent conditions or the workings of established laws.

Reminds me of an apt quote from Jung:

The artist's relative lack of adaptation becomes his real advantage, for it enables him to keep aloof from the main streets the better to follow his own yearning and to find that things which the others unwittingly passed by.
Most of the world, though, thinks and exists and adapts in black and white. The world is binary: It’s either this or that and that’s the way it is (and has been). No questions, no trepidation. Authority rules. Hierarchies are accepted. Mediocrity is the norm. Black and white thinkers constrain possibilities, obey rules, and shy from new experiences (or dot-collecting adventures). They are drone-like in their walking and talking; it’s as if they’re programmed by bits and bytes, a normalized genotype of 0s and 1s. Things happen for a reason, not because they made it happen.

It’s impossible to entirely live in a grey world. There are laws, morals and standards that beg adherence. And, there are conclusions, facts and applied-grey-thinking decisions that become black or white. To create grey (thinking that leads to creation), you need to combine black and white (what exists/what’s established). You can then repeat the cycle, imagineering in grey while dipping into black and white when necessary. Sounds like a fruitful use of your grey matter.

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Post-script (21 Jan 08): Of all places, I found a relevant and inspiring muse in an ad (Monterey CVB) in this month's Sunset:
Can the salt water by your muse?
Can it inspire you to
not just simply see different things,
but to see things differently?

Thursday, August 9, 2007

I don't know

Fast Times at Ridgemont High is one of my favorite flicks. Among myriad memorable scenes is an encounter between Mr. Hand and Jeff Spicoli. Baked beyond comprehension, Spicoli is queried by his teacher. Startled, he mutters: I dunno.

Mr. Hand: I don’t know. I like that Mr. Spicoli. So much that I’m going to share it with the rest of my classes – as he etches with phrase on the chalkboard -- with full attribution to you, of course.

Spicoli does not see the humor, but rather takes it as a compliment: Right on.

I don’t know. Right on: I like it too. It rivals Why? and What if? among my favorite sayings.

We’ve all been there, and perhaps you experience this each day: The temptation to BS your way through a question, or the you’ve-gotta-be-real feeling when a droid confidently, but erroneously, answers a question. Which begs the question: Why is it so hard to admit you do not know something?

You may recall a post herein about The Beginner’s Mind … here’s an excerpt:

Children begin to lose that innocent quality after a while, and soon they want to be "the one who knows." We all want to be the one who knows. But if we decide we "know" something, we are not open to other possibilities anymore. And that's a shame. We lose something very vital in our life when it's more important to us to be "one who knows" than it is to be awake to what's happening. We get disappointed because we expect one thing, and it doesn't happen quite like that. Or we think something ought to be like this, and it turns out different. Instead of saying, "Oh, isn't that interesting," we say, "Yuck, not what I thought it would be." Pity. The very nature of beginner's mind is not knowing in a certain way, not being an expert. As Suzuki Roshi said in the prologue to Zen Mind Beginner's Mind, "In the beginner's mind there are many possibilities, in the expert's there are few." As an expert, you've already got it figured out, so you don't need to pay attention to what's happening.
Admitting uncertainty is analogous to asking, Why? It – the curiosity and candor of baring your intellect -- is child-like but healthy. I don’t know is an appetizing conversational entrée, made even more palatable when followed by, What do you think?

I’ll take curious eyebrow raiser over a confident head nodder any day.

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Post-script: Post-posting of the above, I discovered a somewhat relevant and terse take from Tim Sanders: Just admit it, you don't get it. Quick take:
You say "I get it", because you want them to think you are quick, smart or in-the-know. That's about you, not them.

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Post-script (13 Feb 08): Learned a new term tonight, questionating, thanks to this post in Conversation Agent. Excerpt:

Questions stimulate the brain! Questions use verbs and words that activate key areas of the brain that, in turn, increase the volume and variety of questions.

The more questions, the more creativity and innovation. We like to say that questions open the innovation pipeline.

Why is it that the older we get, the fewer questions we ask?

We’ve found that the most popular answers to this question have been: asking a question makes one look stupid; asking a question is a sign of weakness; and people think they know the answer so they don’t feel the need to ask.

What if questions were baked into the business processes? Corinne suggest four steps to developing a QuestionBank: Identify Question Sources, Collect Questions, Organize Questions, and Refine Questions.

Bonds

Barry did it (756) Tuesday night, and he did it again (757) last night. In a cloud of media mumblings and human growth hormone howlings, I’m glad it’s over.

My friend Casey and I took our boys to a Giants game a few weeks ago. Though our belabored orange and black field one of the worst products in professional sports, the seven of us caravanned from Davis. We invested a nice chunk -- tickets, hot dogs, sodas, beers, cotton candy, peanuts, parking, gas, bridge tolls plus our time – to see a crappy product. Why? Number 25.

Barry was sitting on 753, two shy of Aaron’s record. Our boys could care less that Tim Linsecum – all 165 dripping-wet pounds of him – was firing 97 MPH fastballs. They came to see – or, perhaps, they were brainwashed by us to think the reason for going was to see – Barry hit. He went one-for-four, no dongs, and the Giants won. More than 41,000 people paid to see the show.

Juice or not, Bonds’ feat is a jaw-dropping accomplishment. It is the talk of pundits and fans alike in, as Frank Deford opined, the asterisk era of baseball. One sour argument goes like this … the Giants would be better off without Barry (Bonds, not Zito; the latter’s $123mm contract begs asylum time) and his $16mm salary. A few thoughts:

  1. He’s unquestionably the best player on a bad team.
  2. It’s all about the Benjamins: Barry creates interest that generates an enormous profit for the Giants.
You can argue he’s a jerk. That he’s a bad teammate. That he cares more about himself than his employer. All true. But, as an allocation of resources from a business standpoint – the Giants, after all, are a business – he’s worth every penny.

Quick back-of-hotdog-wrapper math:
  1. The Giants have the third worst record in baseball, but they’re sixth in attendance (40,000+ fans/game), trailing the two NY and two SoCal teams, and the Cardinals.
  2. If the Giants were middle-to-upper-road in attendance – given their large market and best-in-baseball park that balance the crappy product – they would draw 35,000 fans.
  3. Hence, if you can deduce that Barry puts an extra 5,000 butts in the seats each game, here’s your ultra-conservative economic justification (sans TV and radio contracts, sponsorships, licensing, road-ticket sales proceeds, etc.):
  • 81 games X 5,000 fans = 405,000 “Bonds effect” fans.
  • Tickets ($20/seat), concessions ($15/fan) and parking/memorabilia ($5/fan) = $40/fan.
  • RBR (Residual Bonds Revenue): $16,200,000
You may not want to work or have a beer with him, but he’s the most entertaining attraction in sports, let alone the best bargain in baseball. He generates relevance and interest for an irrelevant product.

Tuesday, August 7, 2007

The jockey, the horse and the track

If you start a company, you will probably fail. The odds of failure (risk) increase proportionally with your ambitions (potential reward); the lower you set the bar, the less likely you’ll fail.

While failure is binary, success is subjective. To some, it’s creating a business that generates enough cash to make a living – hitting a single. To others, it’s building an organization that gainfully employs a team, does good/makes a contribution, and (since it’s a corporation and the purpose of the corporation is to make money) spits out enough greenbacks to make a good living, while building something with future value – legging out a double. To a small sliver of entrepreneurs, it’s about swinging for the fences.

Enough of the baseball metaphor; let’s analogize companies to horse racing. There are three key elements to winning a race: the jockey (the team), the horse (the product), and the racetrack (the market). You can’t race unless you have a jockey saddled to a horse and running on a track. All are antes.

Marc Andreessen knows a little about starting and investing in companies (not sure if he knows much about horseracing). He logically asserts there is an incredibly wide divergence of caliber and quality for the three core elements of each startup:

At any given startup, the team will range from outstanding to remarkably flawed; the product will range from a masterpiece of engineering to barely functional; and the market will range from booming to comatose.

And so you start to wonder -- what correlates the most to success -- team, product, or market? Or, more bluntly, what causes success? And, for those of us who are students of startup failure -- what's most dangerous: a bad team, a weak product, or a poor market?
Most people – including many professional investors and seasoned entrepreneurs – would bet on the jockey. A great team can imagineer and deliver a solution to a market with compelling needs. Those who wager on the product – after all, without a great product, the team and market are irrelevant! – can make a sage argument. And, what’s the value of a killer product and kick-ass team if the market’s too small or not palatable?

Andreessen cites former Benchmark Capital Partner Andy Rachleff’s Law of Startup Success:
The #1 company-killer is lack of market.
  • When a great team meets a lousy market, market wins.
  • When a lousy team meets a great market, market wins.
  • When a great team meets a great market, something special happens.
You can obviously screw up a great market -- and that has been done, and not infrequently -- but assuming the team is baseline competent and the product is fundamentally acceptable, a great market will tend to equal success and a poor market will tend to equal failure. Market matters most.
And, it’s probably the difference between racing in the Triple Crown or going out to pasture.

Monday, August 6, 2007

Blowing bubbles

Just discovered an interesting Freakonomics post about The Benefits of a Bubble, Even When Burst, complimenting Daniel Gross, author of Pop! Why Bubbles are Great for the Economy. Quick excerpt:

These bubbles are right; these bubbles work. Thanks to the American penchant for creative destruction and the U.S. bankruptcy system, investors — and the economy at large — tend to get over bubbles quickly. … The stuff built during infrastructure bubbles — housing and telegraph wire, fiber-optic cable and railroads — doesn’t get plowed under when its owners go bankrupt. It gets reused — and quickly — by entrepreneurs with new business plans, lower cost bases, and better capital structures. And when new services and businesses are rolled out over the new infrastructure, entrepreneurs can tap into the legions of users who were coaxed into the market during the bubble. This dynamic is precisely what has made Google the “it” company of this decade …
Reminds me a little of last week's 10x commentary and Marc Andreessen's thoughts. Good stuff.

Troublemakers

My seven-year-old runs with a band of comrades, aka the troublemakers (or goofballs or knuckleheads). Tackle football, tree-fort exploration, obstacle course racing, sneak-in-the-garage soda guzzling -- the troublemakers have it made. It’s cool to be care- and commitment-free when you’re seven.

I’m helping some friends start a band, and we invested much of last week testing the tone and tenor of the music we plan to make. We spent a few hours with our friend Roger, a proven band leader who’s known for challenging would-be musicians. Among his sage musings: It’s a helluva lot more glamorous on the outside than herein, and you better be ready to play hard … harder than ever before.

His advice reminded me of the commitment theory, specifically the challenge of doing something grand. The minute you commit – emotionally, financially, professionally – and make your commitment public, it’s psychologically tough sledding to turn back.

And, our friendly band-leader’s counsel made me think more about troublemaking: If you’re going to go to the trouble of trying to create trouble, you better feel good about your soon-to-be fellow troublemakers. John Doerr of KPCB talked about the imperative of pre-troublemaking commitment:

That's the moment of truth (when you decide who you’re going to make music with). That's when you ask: "Are these the people I want to be in trouble with for the next 5, 10, 15 years of my life?" Because as you build a new business, one thing's for sure: You will get into trouble.

Also, measure the members of the group against some hard standards. Are they great at recruiting other talented people? Are they great at selling? In a small company, everybody is selling all the time. Believe me, selling is honorable work -- particularly in a startup, where it's the difference between life and death. And make sure that the group has a sense of humor. You're going to be spending a lot of time living together as a team. Of course, everyone you'll need for a great startup isn't going to be there at that first meeting. Teams always need to grow, to get stronger and better. But be sure to answer the question, "Is this a group I wouldn't mind getting in trouble with?"
Reminds me of a scene from Butch Cassidy and the Sundance Kid. Butch (Paul Newman) and the Kid (Robert Redford) are trapped at the crest of a canyon, the product of their perilous troublemaking. Parked on their horses with two options – raise a white flag or leap – they chose the latter, committing to and executing a free fall to the river below. Probably not the most apt archetype for starting a band, but it’s a wonderfully memorable visual.

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Post-script: An hour or so after publishing the above, just discovered a "bringing the band back together" post about YouTube in the Freakanomics blog.

Sunday, August 5, 2007

Be relevant

Had a beer with a friend the other night. After talking about important stuff – friends, family, life – we shifted gears into biz talk. Specifically, the perils of a small, publicly traded, OTC-BB software company that we both knew.

What’s up with them? Earnings are lagging. Stock price’s flat. Growth has stagnated. The CEO’s fried. A recent acquisition fell apart. The CTO bolted. They’re running out of cash. They’re too small to be public. The board’s unhappy. Analysts don’t care. It was a standard, morbid diagnosis of a limp-along company.

Satisfied with our analysis, we transitioned to sports: Barry and 756, the passing of Bill Walsh, college football, our cognitive and emotional dissonance of admiring Pete Carroll but hating USC. Mid-drink, we returned to the hamstrung company. (In retrospect, it was eerily similar to the brake-pushing, head-turning exercise of witnessing a roadside accident.) Seriously, what’s wrong with them?

Well (with apologies to Beavis and Butthead), they’re like totally irrelevant, one of us opined. Nobody really cares.

Ouch. It sunk in. I thought about the CEO, a good, hard-working friend who’s pulled many a lever to bolster his company’s market cap. He reminds me of the Wizard of Oz, operating behind the curtain, winking (with, of course, no response) in the dark. Our recalculated diagnosis was encapsulated in one word: relevance.

To boost earnings, enrich a company’s stock price, foster growth, enliven leadership, successfully execute transactions, retain key employees, and keep enough oxygen (cash) in the tank, a company needs to be relevant. Relevance leads to differential value that leads to – post execution – market dominance.

What is relevance? To me, it’s getting people to care by generating value and interest and demand and intrigue and inspiration. It’s about creating and stoking a bonfire, one with ever-growing visibility and a desirability to participate. It's encapsulated in one of The Cluetrain Manifesto's theses: Companies that do not belong to a community of discourse will die. It’s hands down the paramount challenge CEOs face.

Relevance matters only in the minds of your constituents; it’s their perception, period, that counts. And, all stakeholders count: Customers, prospects, partners, shareholders, employees, analysts, competitors … your entire ecosystem. It’s doing something – a lot of things – to edge people to the front of their chair, to raise an eyebrow, to engage a phone call, to elicit an, “I’ve gotta do something -- invest, buy, partner, work, lead, support – with this company," action.

Fostering relevance is an (check that: the) ante to success. The rest – the blocking and tackling of business – is easy and boring. If you’re not relevant – if you can’t get key constituencies to care – move on. Treading water in an empty pool is painful for all involved.

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Post-script: Thanks to my alter-ego Dave for the kick in the rear ... vmail this weekend: Dude, enjoying the blog, but you've gotta stop writing about other people's stuff, and write about your stuff. Kick: Get relevant.

Saturday, August 4, 2007

How to be creative (gapingvoid)

The blog ecosystem (blogosphere to those -- not me -- in the know) is a rich universe. There are bloggers, and then there are bloggers. True pros, not babbling hacks; though, come to think of it, babbling is cool, especially in blogland. Hugh MacLeod, creator and proprietor of gapingvoid.com, is a professional.

I've included his back-of-business-card toons on the sidebar, and I just unearthed a provocative post from his site: How to be creative. MacLeod proffers 31 tips -- many of which resonate with thoughts herein -- to "to be more creative, in art, in business, whatever". Enjoy.

The genius

Bill Walsh died this week. Mortality has more gravity when an immortal passes, and Walsh – to me, albeit as an atheist – was a deity. He had an aura and presence that commanded respect. He was an intelligent, thinking-man’s football man: Entrepreneurial and innovative and professorial, the antithesis of wham-bam-slam, huff-puff-gruff, Rockne-esque football coaches. It was cool to be cerebral in professional sports thanks to Bill.

Walsh’s death conjured an epiphany from Peter Drucker: Management is doing things right; leadership is doing the right things. Doing things right: Blocking, tackling and execution. Doing the right things: Respectful, thoughtful, cohesive corralling of individual strengths toward the accomplishment of a goal. Walsh got it, and many benefited.

He was an artist, conjuring another relevant quote (this one from Aristotle): Art is a production of what is performed and imposed on matter. One more (Jung): The artist's relative lack of adaptation becomes his real advantage, for it enables him to keep aloof from the main streets the better to follow his own yearning and to find that things which the others unwittingly passed by.

His passing reminded me of a similarly gifted, but virtually unknown, coach, David O’Meara. Dave coaches tennis. And life. Thanks to my brother, James, I spent an hour with him earlier this year in Sarasota. As James and I kicked up clay banging balls to and fro, Dave patiently observed our rallies. Ten humidity-ridden minutes (and several dozen beyond-the-baseline banged balls on my behalf) in, Dave spoke: What are you thinking about when you hit your forehand? Well, um, I think I’m trying to hit it too hard or I’m afraid to reach for the ball or I’m opening up my wrist, I muttered. I looked at and kicked the clay, expecting him to coach me as coaches do: To provide technical feedback about my forehand’s faults. Instead, he focused on my perception – the thoughts, feelings, and actions – of my play, and how I could translate my perception to improve my experience. It was cool.

Dave authored a book, Play Better, Live Better, chastising the command-and-control style of coaching and introducing a thoughtful (but simple) approach. While I do not dig self-help soliloquies, Dave’s quick read is meaningful and valuable – get it, and I assure you will not be disappointed. He conversationally shares a 10-step process to improving as an athlete, coach, person and parent:

  1. Discover aspirations
  2. Observe what is
  3. Look for patterns
  4. Appreciate what is working
  5. Acknowledge what is not working
  6. Create a new perception
  7. Trust the new perception to generate a new experience
  8. Let the experience do the teaching
  9. Develop an awareness of the power of the new perception
  10. Assimilate the new experience
Dave is a great coach and an even better person. From what I’ve gleamed, Bill Walsh was the same. It’s trite to say, but he will be missed.

Thursday, August 2, 2007

POTW: Glenn Kelman on startups

Now that my temples are graying and teeth and lengthening in blogland, albeit only a few months and 60 or so posts deep, I’m starting to catch on. Several bloggers I enjoy (e.g., Perkins, Kawasaki, Andreessen) share posts or quotes of the week, self-selected morsels for your quick consumption. Not that they need the flattering, but I’m going to imitate … henceforth we’ll have a post of the week (POTW).

Our inaugural take: A How to Change the World (Kawasaki’s blog) post from Glenn Kelman, CEO of Redfin. He strikes a cord with his hard work mantra and creation-as-a-sensation take. Here’s an excerpt:

Last month, Guy called James Hong and Markus Frind heroes for running multi-million dollar websites like Hot or Not and Plenty of Fish in their underwear. Their stats are jaw-dropping: twelve billion page views, 380 hits per second, two hours of work a day.

Lately I've been thinking how hard, not how easy, it is to build a new company. Hard has gone out of fashion. Like college students bragging about how they barely studied, start-ups today take care to project a sense of ease. Wherever I’ve worked, we’ve secretly felt just the opposite. We’re assailed by doubts, mortified by our own shortcomings, surrounded by freaks, testy over silly details. Trying to be like James or Markus has only been counterproductive.

And now, having been through a few startups, I’m not even sure I’d want it to be that easy. Working two hours a day on my own wasn’t my goal when I came to Silicon Valley. Does anybody remember the old video of Steve Jobs launching the Mac? He had tears in his eyes. And even though Jobs is Jobs and I am nobody, I knew how he felt. I'd had the same reaction--absurdly--to portal software and more recently to a Redfin, a fledgling real estate website.

“The megalomaniac pleasure of creation,” the psychoanalyst Edmund Berger wrote, “produces a type of elation which cannot be compared with that experienced by other mortals.” Jobs wasn’t just crying from simple happiness but from all the tinkering, kvetching, nitpicking, wholesale reworking, and spasms of self-loathing that go into a beautiful product. It was all being paid back in a rush.

Like the souls in Dostoevsky who are admitted to heaven because they never thought themselves worthy of it, successful entrepreneurs can’t be convinced that any other startup has their troubles, because they constantly compare the triumphant launch parties and revisionist histories of successful companies to their own daily struggles.

Read further and you’ll unearth a cool top-10 list, including a thoughtful metaphor:
In the early days, start-ups focus on how great it’s going to be when they succeed; but the moment they do, they start talking about how great it was before they did. Whenever I get this way, I remember the Venerable Bede’s complaint that his eighth century contemporaries had lost the fervor of seventh century monks. Even in the darkest of the Dark Ages, people were nostalgic for...the Dark Ages. Start-ups are like medieval monasteries: always convinced that paradise is just ahead or that things only recently got worse. If you can begin to enjoy the process of building a start-up rather than the outcome, you'll be a better leader.

Lies, lies, lies

There are lies, and then there are lies. Fibs and fumbles. Tall tales and exaggerated extrapolations. All entrepreneurs have a little PT Barnum in them, an ability to engage and feed the imagination while – intentionally or not; perhaps naively – stretching the truth. It’s a lovable characteristic.

A few weeks ago I chortled in a post about entrepreneurs. A few years ago I chortled (out loud and through the nose, if memory serves) during a talk by Bill Reichert, managing director with Garage Technology Ventures. His topic: Top Ten Lies of Entrepreneurs (click here to access the pdf). His opening: There are lies, there are damn lies … and then there are business plans.

Drum roll, please …

  1. “Our projections are conservative.”
  2. “Our market is $56 billion.”
  3. “Our contract with [Big Company] is going to be signed next week.”
  4. “If we only sell 40 pct of the company, we’ll still have control.”
  5. “There’s no competition in our space.”
  6. “We’ve assembled a world-class team.”
  7. “Our sales cycle is three to six months.”
  8. “We have the first mover advantage.”
  9. “All we have to do is get 2 pct of the market.”
  10. “I’ll be happy to hand over the reins to a new CEO.”

Puddles, ponds, lakes and oceans

Young companies often remind me of an untied, just-released, rapidly swirling (in which direction, who knows), wall-bouncing helium balloon. Full of energy and potential, primed to soar. Unfortunately, helium balloons run out of fuel and – with a somber/morbid squeak – succumb to gravity. It’s somewhat like chaperoning a team of four-year-olds to the Jelly Belly factory … they bounce and fly in every which way, ultimately crashing in their homeward-bound car seats when their sugar high wanes.

Young companies that persevere boast a little helium – oftentimes held in reserve until the right moment – but are more like inflatable punching bags (I call them Wham-Its), lifesize, well-anchored objects facing in one direction and able to withstand (and bounce back from) a punch with a smile on their face. Wham-Its are patient, focused and resilient.

I enjoyed a candid post from Peter Rip this morning, detailing the derailing (and rerailing) of a young company. It reminded me of previous entries herein about focus and simplicity, along with our inference to sausage making, the messy inner workings of a startup. Here’s a bit of Rip’s rip:

I figure the only authentic thing to do is to talk about this again, even when it is in an ambiguous period of re-birth. This ugly period is a re-tooling of the premise of the business to give it more clarity of purpose. It’s not fun being in the sausage phase.

First, let me admit we went down a mashup rat hole. We have a general technology for snapping together web services. "Because they can" is an insufficient answer to "why do people want to create mashups?" We failed to commit to solve a specific problem for a specific market, preferring instead the broad appeal of generality. This has changed.

No one led us down this rat hole. We led ourselves. When we realized we had to make a radical shift, we had to reignite the fire with limited fuel. We made personnel changes because the fuel demanded it, not to penalize or blame anyone. So we did the right thing. We cut, refocused, questioned everything, and sharpened our edge.

The first thing we did was toss out any pretense of solving everyone’s problem. There is an old proverb that I just invented for this situation -- “The boiling of the ocean begins with a single puddle.” We had to define our puddle. So we did.
Too often young companies agnostically and horizontally approach a market: We’re going to solve all of these problems for all of these customers in all of these markets. It’s a Wham-It-popping prescription; it is hard enough for a young company to solve one problem for one customer in one market, let alone curing the world’s ills. How do you do this? For starters, work directly with – and listen intently to – a specific, referenceable, amenable customer. Focus on getting it out there, even if you do so for free. The true value is not the $$ you receive for the sale, but rather the validation you earn for creating a solution that solves a specific problem in an identifiable puddle. Paying customers will come and the puddle will grow.

Rip continues:
Along the way we re-learned something. Name your user. Ask her what she wants; she will tell you, and often she will surprise you. So we did and they did. One clear consequence is that you will see more emphasis on a configurable application, not a bucket o'widgets that snap together. Leading with "it's so easy to build what you want" is like making a diet fun – it is still a diet, no matter how much more fun it is. You only do it when you must.

So now the Company is heads down executing what we think is a re-jiggering of the basic components. We are packaging to solve a problem - not all problems. Nor are we packaging to provide “examples” of how you can use Teqlo to solve a problem. Nope. We have picked a customer, listened to what they want, and are hacking away to get to market.

We now have an Emily in mind, a clear sense of who our natural distribution partners are, what’s in it for them, and how this little puddle becomes a pond and then a lake. We dream of an ocean, but are navigating the puddle.

Wednesday, August 1, 2007

Two-sided networks

Our discussion earlier this week of the network effect and its derivatives/analogs engaged me to dig a little deeper. What are examples where a ubiquitous (or standard) platform germinates a wellspring of business creation? My first Google search: ubiquitous networks. Not much to chomp on. I returned to Wiki and perused the network effect a little further, therein discovering two-sided networks and platform businesses, highlighted by an HBR paper: Strategies for Two-Sided Markets.

Two-sided networks are everywhere, touching each of us – ambivalently – each day. Examples include newspapers (joining subscribers and advertisers), HMOs (linking patients and health care providers), and operating systems (connecting computer users and application developers). So, if you peruse up the daily fish wrap, visit your doc, or turn on your computer (hopefully a Mac), you’re participating in a two-sided network.

At the core of two-sided networks are platforms, products and services that bring together groups of users. They provide infrastructure and rules that facilitate the two groups’ transactions. Platform businesses include online recruiting (Monster), video games (PlayStation), multiple listing services (real estate brokerage firms), and, of course, Web search (Google). Platforms have power: They can dictate the terms, rules and pricing of their market, while monetizing both sides of the equation. Here’s an interesting take from the HBR paper:

Two-sided networks differ from other offerings in a fundamental way. In the traditional value chain, value moves from left to right: To the left of the company is cost; to the right is revenue. In two-sided networks, cost and revenue are both to the left and the right, because the platform has a distinct group of users on each side.
Two-sided networks are more dynamic and complex than traditional businesses. eBay is a great example. The foundation – getting paid to facilitate commerce between disparate buyers and sellers – is obvious. Dive deeper: PayPal and Skype (which they own and operate), and Craigslist (in which they’ve invested) are tantalizingly powerful platform businesses too.

Back to the network effect and its relation to two-sided networks:
These platforms exhibit two types of network effects, which may be either positive or negative: A same-side effect, in which increasing the number of users on one side of the network makes it either more or less valuable to users on the same side; and a cross-side effect, iin which increasing the number of users on one side of the network makes it either more or less valuable to users on the other side. Cross-side network effects are typically positive, but they can be negative (TV viewers preferring fewer ads). Same-side network effects are often negative (sellers preferring fewer rivals in a B2B exchange), but they may be positive (Microsoft Xbox owners valuing the fact that they can play games with friends).
For the cost of a turkey sandwich ($6.50), you can gobble down the HBR piece … it’s a tasty and healthy meal, regardless of your perch at or around the platform.