FutureTech Business

It Takes Two To Tango!

A classic mistake for start-ups is to ask one name to fly solo. It’s usually the product name. Since entrepreneurs have to be obsessed with their product to start a business, that’s probably to be expected. But then how can you be sure you’re talking about the company when it has the same name as the product? Which brand promise do you want to imply or express?

Apple Computer owes its name to a small apple farm where Steve Jobs spent time each year with friends in the mid-70s. And it was the name of both the product and the company until the Lisa, Mac and other new products came along. That’s the typical pattern for start-ups. It was also a long time ago in terms of today’s marketplace.

Today you need all the brand power you can get to claim and hold a place in customer minds, and you need this the minute you start marketing.

Products can be treated as brands - given proprietary names and a brand platform as the backbone of marketing communications efforts. Or they can be given descriptive names and associated with a brand. But they’re missing out if they are denied the halo effect of a corporate brand.

The corporate brand is the face of a business strategy – what the company wants to be known for. In time, it becomes the organizing principle that simplifies the complexity of multiple products and the umbrella that facilitates new product acceptance.

The cost need be no greater for two than for one if you do it right – and you’ll build a far stronger foundation for ongoing sales and profits with both.

The Best of Times

by Eleanor Haas

What’s great?  The opportunity.  What’s not so great?  The uncertainty.  But then, that’s what makes it great!  So concluded five wise, wise VCs and one very wise entrepreneur at today’s Digital Breakfast: Venture Capital Forecast 2010.

What does today’s environment feel like? 

·         In terms of technology disruption, 1987.  In terms of the economy, it’s uncharted territory.

·          Q2 of 03.  A flattish movement up.  A great time for financial technology.

·          Late 02/early 03 in terms of the opportunity, with the full contraction of VC yet to come.  Dramatic changes in the cost to launch an Internet business and how you build the company.  The use of real-time media and social media to build traffic is much less expensive than search.

 1994-1995 in terms of the opportunity and the low cost of entry.

Some highlights:

VCs

·          VCs have started intersecting with angels and finding they can get further with a company for less money and then take a smaller exit.  They are also co-investing with other VC funds.  Some VCs are doing investments as small as $100K and $250K. This enables them to do smaller exits, which in turn has implications for the funding model.  If new investors come in for later rounds, they pay a higher price and cannot make money with the smaller exits.  As a result, their interest is no longer aligned with that of the entrepreneur and early investors.  So, it’s best for the investor group to remain constant.

·          The VC dilemma:  the line between the seed round and A round Is blurred because of the speed with which things can be done.  Some VCs have moved their fund size down in order to make efficient use of capital..

Trends of the Moment

·          Entrepreneurs are building low-cost web-enabled businesses as vertical layers on top of Facebook.   The network effect of Facebook makes it essential that Facebook or a Facebook widget be a component.  Business-to-business sites all have Facebook Connect today.  You can build businesses like GolfTripGenius for a few thousand dollars.

·          Entrepreneurs have the opportunity to build good technology-enabled businesses – inexpensive to launch and profitable for the entrepreneur – but they may not necessarily be investable.

·          LAMP-plus infrastructure for hardware with Facebook has brought web site start-up costs dramatically down.

·          What’s important at this moment is “clever” technology as opposed to “proprietary” technology – technology that’s not necessarily costly and represents something done in an interesting way with a value proposition.  The package that creates value consists of traction plus the technology plus the skills of the entrepreneur.

·           Marketing is as important as technology – the ability to get customers. 

·          The value of patents is lower because they’re too hard to value and take too long to become effective.

  Mobile is a channel, not an investable vertical.  It will be part of everything, not just apps that are location-based.

The Digital Breakfast was organized by Gotham Media Ventures. The moderator was Gene DeRose, House Party.  The VCs were Charlie Federman Crossbar Capital; Howard Morgan, First Round Capital; Lawrence Lenihan Jr., FirstMark Capital; David Pakman, Venrock and Daniel Schults, DFJ Gotham Ventures.

High-End Computing for General Purposes Becomes an Eco-Friendly Possibility

By Eleanor Haas

How quickly both information technology and social values are advancing! Bringing supercomputing capabilities down to a general-purpose level where they can serve consumers, not just advanced scientists – as a new IBM product does - is a giant leap forward in our ability to access, analyze and manage massive amounts of information efficiently and cost-effectively. But that alone is no longer sufficient. Today our society requires that this be done in ways that minimize climate change effects. Greentech is not just a fad. It’s here to stay.

The new IBM iDataPlex line of server products does both. It seems to me to represent an historic break-through: It enables cloud computing that supports Web 2.0 applications as well as the high performance computing (HPC) requirements of life science researchers, engineers, petroleum exploration, financial services, and government and academic research. But perhaps the most important attribute of the new hardware design is that it requires 40 percent less electrical power to run than alternatives with comparable computing power and can eliminate air conditioning when outfitted with a water-cooled wall.

As Web sites evolve, they add features that impose new demands on the infrastructure and challenge performance standards critical to the user experience. Web 2.0 applications empower users to do a great deal more than just retrieve information. Now users can activate interactive features inherent in Web 1.0 at a higher level and exercise new degrees of control over data, even add value to applications as they use them. These new capabilities drive enterprises to scale capacity in a secure, reliable and cost-effective way in order to deliver a satisfactory user experience. Cloud computing is one of the most important new concepts that is emerging to make this possible.

Cloud computing is computing done at a remote location, which is to say, out in the clouds. It is computing on a massive scale in terms of both computing power and the range of computing tasks.

Supercomputers were mainframes invented to enable advanced scientists to handle enormously complex calculations. Then Google and others started locating the data storage and processing power of supercomputers on vast banks of computer servers in remote data centers – Google called these distant servers “the cloud” - instead of on mainframe computers or a network of multiple processors on the Google campus. And Amazon and others started providing cloud computing services - remote computing services, also called web services - delivered over the Internet. And so cloud computing was born.

Cloud computing is hugely important but still nascent. A recent report by Forrester Research said in its executive summary that: "Cloud computing is a new IT outsourcing model that doesn't yet meet the criteria of enterprise IT and isn't supported by most of the key corporate vendors.  It's wildly popular with startups, exactly fits the way small businesses like to buy things, and has the potential to completely upend IT as we know it.”

Cloud computing represents a fundamental shift in how we handle information, according to BusinessWeek, because it enables companies to write their own programs to run on a cloud provider’s servers. Irving Wladawsky-Berger, Chairman Emeritus, IBM Academy of Technology and Visiting Professor of Engineering Systems, MIT, sees two major factors that make cloud computing qualitatively different from all IT concepts to date: One is massive scalability. The other is the much higher quality of experience it can provide for users. “As with the Web in the mid-‘90s, every enterprise will have to develop its own cloud-like capabilities, or work closely with partners that do.” he writes on his blog.

But cloud computing can be no more than a vision until something is done about the data centers on which it relies. In general, today’s data centers can be described as massive, sprawling and pushing the limits of power and space available to them. Many have grown through mergers and acquisitions, with different departments having their own servers and a proliferation of small and mid-size servers. As a result, they are inefficient, expensive to operate and have high energy requirements. Worse, they cannot be scaled effectively.

The new IBM iDataPlex system represents a solution, a basis for the data center of the future. It reduces the cost per server by approximately 20 percent to 25 per cent by using off-the-shelf components and open source software, fits 138 percent more servers in the same floor space and, best of all, as we said, requires 40 percent less power to run. It is intended both for enterprise cloud computing initiatives and clouds designed to host Web 2.0 applications.

Not a lot of iDataPlex systems will be sold. The target universe contains only 1,000 prospects, each valued at upwards of $20 million, and each system will be custom-built. But it’s already clear that cloud computing builds on itself, as large companies become suppliers for smaller ones. And IBM has the pieces in place to help customers acquire new data centers conveniently. IBM Global Financing will offer them lending and leasing opportunities, IBM Global Asset Recovery Services can manage the disposal of equipment in accordance with environmental regulations, and IBM will team with third party technology companies to drive a product ecosystem around iDataPlex..

That’s smart of IBM because iDataPlex has the markings of a hot product. According to Forrester, “Cloud computing . . . has all the earmarks of a disruptive innovation: It is enterprise technology packaged to best fit the needs of small businesses and start-ups – not the enterprise.” An eco-friendly cloud computing system.  What a thought!

What do you think about all this?  Where do you see it going?

Some Resources:

http://www-03.ibm.com/press/us/en/pressrelease/23991.wss

http://www-03.ibm.com/systems/x/hardware/idataplex/index.html

                                                                                                                                                  

PDF documents
	Pund-IT Research Report: IBM System x iDataPlex – Enabling Web 2.0 with Internet-Scale Solutions (133 KB)
	Cabot Partners White Paper: IBM System x iDataPlex: The Newest Economical Workhorse in the Computing Cloud for Next Generation HPC Data Centers (1 MB)

Whither Wikis?

By Eleanor Haas

Wikis, those indispensable reference resources - Web sites where anyone can add or update content - are still “cutting edge social media” after nearly 13 years, “with best practices an evolving target,” says John Blossom, president, Shore Communications, who organized and moderated a panel on the subject at a recent SIIA Brown Bag Lunch.

Wikipedia has proven user-generated content can be very high quality and can be accepted as authoritative and reliable when done right.  As proof of this, social media sites increasingly come out at top of a Google search. What's next?  Video and photos are bound to play a greater role as equipment quality continues to go up and prices to come down.

What the wiki delivers that’s different from a search engine is “a well-packaged story,” said Michael Sha, co-founder and co-CEO of Wikinvest, a new wiki, still in beta. That speaks clearly to their market appeal. Their diversity is an equally clear indicator. The key to their quality control, the primary topic, varies:

• Wikipedia, the granddaddy of them all, was founded in 1995. It achieves quality, said Mark Pelligrini, senior editor/contributor, by enabling quality to evolve in real time through policies requiring verifiable information, a neutral point of view, accuracy on a par with the encyclopedia Britannica and peer review. All the filtering is manual.
• Newsvine, a new kind of news site, does it with an algorithm that causes content to fall away to an archive after 24 hours unless it gets enough votes, said Chris Thomas, top contributor. “Filters catch advertisers and astroturfers – corporations and other vested interests who try to create the appearance of a grassroots net movement,” he continued.            

Content is provided by both professional journalists as well as everyone else to create a comprehensive ecosystem of both subject areas and contributors that mirrors the real world. New user content lives in the “greenhouse,” a purgatory with no live links for search engines to follow. After users prove themselves, their content gains full access.       

• Wikinvest, an investment information site, has “a broad population of people who are knowledgeable about certain areas” of finance – people “passionate on the topic who desire to interact,” Mr. Sha stated. “Filtering tools bring out the best,” he added.  The tools identify the most valuable contributors, those requiring the least review. This wiki can be a great platform for asset managers, positioning them as authorities on investment strategies.

The site consists of objective summaries of companies and of investment areas, or industries, subjective bull or bear commentary on each, and descriptions of the contributors creating the content – already more than 100,000 of them.

Transparency is Wikinvest’s secret of quality control. Every edit can be tracked.

• WikiAnswers, a Q&A community acquired by Answers.com last year, consists of questions and answers, each entered by the same or different contributors, each open to edits by anyone, reported Bruce Smith, Chief Strategic Officer. Over100 supervisors – all with day jobs – control quality in their specific subject areas.

What motivates contributors? Fun – pure enjoyment - is the No. 1 reason, according to a recent MIT study, with which panelists agreed. Contributors are enthusiastic about their subjects and enjoy sharing their knowledge and interacting with like-minded individuals. In addition, they can improve themselves and advance their careers by building a reputation and even driving clients. Newsvine adds one further dimension: it shares advertising revenue with contributors whose content attracts the ads.

But how does free content generate revenue?

• Wikipedia solicits individual and corporate contributions.  It also sells feeds to subscribers, big search engines and cell phone providers. Some people license the database and post a mirror site with advertising. On-site advertising is not feasible because the community reacts “very negatively.”
• Wikinvest will test syndication. If it moves to charging for premium services, these charges would never involve content access. Advertising is a distinct possibility for the future.
• WikiAnswers will monetize with AdSense and with ads when answers can add user value by being on an iPod but, like Wikinvest, will not charge for Web access to content.
• Newsvine carries ads and pays 90 percent of ad revenue to contributors.

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Advertising is dead! Long live advertising!

By Eleanor Haas

As everybody knows, paid media advertising is declining in effectiveness. Why? Because audiences have too many options. They have more and more media to choose among. They are deluged with messages – to the point of information overload. They have found ways to skip TV ads.  And they are captivated by new kinds of media, such as You Tube and Facebook.

Three technology-enabled alternatives to the status quo were discussed this morning by a panel sponsored by the law firm Frankfurt Kurnit Klein & Selz. The focus was on who owns creative content and how these ideas are paid for. What the new accepted practices will be will have to evolve over time. But clearly, advertising is undergoing a metamorphosis.

The challenge is what it has always been: how to come up with a compelling creative concept that will make the cash register ring for a product. Technology has added a new twist. Aren’t ads simply a form of content? Can’t they be interactive games or songs? How does user-generated content figure in this as opposed to ads created by professionals?

But once ads become content, the creative brains behind them take on an importance greater than that of a hired hand, something comparable to that of a star screen writer or songwriter. That’s when you get into serious questions of intellectual property ownership and compensation.

One new direction comes from OpenAd.net, which calls itself “the world's first online marketplace for buying and selling advertising, marketing and design ideas.” OpenAd wants to democratize the ad businesses by enabling students, professional free-lancers and ad agencies to compete side by side. In addition, it wants to give creatives a chance to benefit financially from really great ideas that work.

Creatives all over the world who have registered with OpenAd create ads in response to briefs from ad agencies or advertisers. Buyers who have enrolled as OpenAd members get access to diverse creative approaches and can license these ideas as they use them. Creatives are compensated proportionate to the value the buyer perceives in their ideas - as expressed in frequency of use - as opposed to the traditional one-time fee based on time and materials.

Grey Worldwide has been pioneering another new direction for at least five years: creating ad content as branded entertainment. It’s also helping brands get ownership of songs they use as well as using songs as key branding tools. The agency becomes the brand’s A&R consultant, proposing artists and songs as well as their interaction with the brand. In one ad, for example, Rihanna plugs both her own album and Cover Girl products in a format reminiscent of MTV. In another the Black Eyed Peas chant hip hop lyrics owned by Dr. Pepper to promote sales of Dr. Pepper soft drinks.

GO Film, a production company, collaborated with McCann Erickson to produce two music videos by Christopher Guest that pitch Intel processors through original songs that incorporate technical terms specified by Intel. The videos, which were posted on various techie and non-techie Web sites, are designed to deliver pure entertainment value as a basis for an enhanced brand image. One video tells a story about a soft-rock singer – representing Intel software – and a hard-rock singer – representing Intel hardware – and the pleasure they bring their audience of office workers.

Advertising is still a message controlled by a sponsor who is identified and who pays for distribution. But the nature of the message is taking on radical new dimensions, dimensions that at times seem to erase the line between entertainment and advertising.  The times they are a'changing!

 

 

Technology for Tomorrow’s Winners

By Eleanor Haas

Change or die. The mandate to update IT infrastructures comes from today’s intense competitive challenges. A recently posted IBM white paper – Into the Future: The Technology Fast Track for Financial Markets (http://www-03.ibm.com/industries/financialservices/doc/content/bin/fss_fm_ins_into_the_future.pdf) - focuses on financial markets, as increasing numbers of equities trade orders are executed using algorithms and the data volume explosions stresses out front-office systems. But virtually all business sectors are experiencing both unprecedented competitive pressures and an exponential explosion in the volume of data being generated. And this calls for the analytic capabilities high performance computing (HPC) provides. 

The good news is that HPC is no longer affordable only by the US Government and well-financed research organizations. It has become an option for small-to-mid-sized businesses with modest budgets in the tens of thousands of dollars – wherever computational problems require significant processing power in order to have rapid access to very large amounts of data that must be processed quickly.

Hedge funds could not survive without HPC, and, when you think of it, they may have huge assets under management but are not large organizations. Biotech companies too are small and equally dependent on HPC.

Intel and AMD have brought processor costs down, and major hardware vendors, such as IBM and HP, now offer products specifically designed for smaller organizations. Applications developers too have designed products for smaller environments. To complete the picture, a great many tools now exist to enable systems that can be easily operated and maintained by companies that are not expert in IT and computing.

Companies still need to determine the best technology solution for their particular situation and then to structure a fine-tuned infrastructure of components. But now HPC is there for the taking, and taking it could have a lot to do with who makes it into the ranks of the next generation of winners.

GE Adopts Extreme Partnering

By Eleanor Haas

GE appears to be once again proving a new standard - this time having to do with partnering.  Technology innovators often try to use partnering as a key growth strategy.  They use it  to achieve  R&D, marketing/distribution and/or financing goals.   Sadly, too many blunder in without fully appreciating the complex art and science of structuring and operating strategic relationships.  The result is that the majority fail.  One estimate is that 70 percent overall fail; other, that 50 percent fail within three years.

Worst of all, they fail for preventable reasons: Mismatched companies, unmanaged expectations, lack of competency in developing the relationship and/or lack of competency in managing the processes and relationships needed for implementation.

GE is showing another side of the coin:  partnering can work successfully when you do it right.  We found it stunning to discover the extent to which industry leader GE has turned around from a “do it my way” approach to partner on an unprecedented scale. “It’s better to partner with the No. 3 company that wants to be No. 1 than to buy a tiny company or go it alone,” says CEO Jeff Immelt.

What’s more, GE is using joint ventures as a first choice to test new markets, not as a last resort Even VC firms are part of this strategy. Teams of GE researchers are today working with VC firms to discover technologies the company may want, so GE is investing in start-ups as a result. Is this the same company that has asserted for years that its management approach, and only its management approach, was the way to go?

We think partnering represents the future for any and all growth companies. To succeed requires a detailed planning process, relentless patience in seeking out the right partners and the right deals and, finally, tenacious commitment to operating the relationship as professionally as if it were an entity in its own right – because that’s what it is.