Posts Tagged ‘business model’

The i’s have it!

August 20th, 2010

Last night I had a chance to catch up with two companies involved in the Boom Startup group that I mentioned previously. The first was iCount.com (formerly known as Voycit), a website that facilitates conversations with your elected officials. After verifying that you’re a registered voter you can get informed about what is going on in a particular topic, engage with your local representatives by voting on issues that come up.

Their business model is currently based on display ads, providing analytics to politicians, and allowing lobbyists to contact you for calls to action. They will be holding a contest to see who can invite the most people. An iPad will be given to the winner so sign-up as soon as you can.

The second company wasn’t presenting but was there in the audience and I had a chance to chat with them about their progress. iActionable.com is a website that offers an easy API plug-in that is gives you a customizable reputation system. Meaning you can have the power of game mechanics available to reinforce whatever behavior you want.

It can also keep track of users and what sort of things they’ve done. For example, if someone were to leave a comment or review on a site that was using iActionable you would be able to see what other subjects or products this person has made the past providing you with a little better context regarding their credibility.

They’re both ramping up and getting ready for the big investor day coming up in September. I wish them the best of luck to both of them.

Getting what’s coming to you

July 20th, 2010

Today, I spent much of the day sifting through a variety of legal documents that needed to be signed and finalized since there was an equity change with my little start-up. I’m comfortable with contract language having previously composed riveting material you find in policy manuals and handbooks but I can understand why many people wish Google Translate had a Legalese option.

One of the things I read had to do with the vesting schedule. It is called a Membership Unit Purchase Agreement for those that like labels or MUPA for those that live in the world of acronyms. Basically, mine says how many shares of the company I own and when they really become mine. It’s a way to ensure that everyone on your team is committed for a specific time period or until certain milestones are met. Investors like to use them when working with start-up teams. Customary vesting schedules are between 3-4 years for most CEO’s.

We’ve decided to escalate ours because we don’t imagine that we are necessarily the right people to be able to scale with the company and would like to be able to have our full shares when it is time to change leadership. My partner and I would much rather get the company to a point where someone else can take over and run the show while we make money in our sleep. I would argue that should be the goal of most founders.

Steve Blank wrote a recent blog post about the role of a founding CEO is to find a repeatable and scalable process. If they do that they should get all their shares. Then the board can hire someone that can take it to the next level. We’re just planning for that in case our investors don’t have as much foresight as Mr. Blank.

Public Perception

February 23rd, 2010

Scribd Business Model

Today I had an interesting experience in user perception. While following a link to a presentation I was interested, in I arrived at the Scribd site and was greeted with the view shown above. Although the screen capture might not do the blinking neon banner at the bottom justice, I hope that those reading this will share similar sentiments to those I experienced. The content is surrounded by gimmicky advertising that screams desperation to me. If you’ve built a business dependent on advertising muscle enhancers and the chance to win WalMart gift cards then I begin to seriously doubt your future prospects. Maybe I’m being to quick to judge Scribd. After all, I’ve always considered them a reputable company. Its amazing what today’s visit did to my perception. My biggest take away from this experience is the importance of being aware how you’re projecting yourself to your customers. Take a second to view your public presence through your customer’s eyes and make sure there aren’t any metaphorical flashing neon banner ads.

Success going once… going twice…

February 5th, 2010

I had the opportunity to listen to, former CEO of eBay, Meg Whitman. She was promoting her new book (The Power of Many) and currently on the campaign trail in her quest to become the next Governor of California. (BTW her platform she shared is focused on job creation, reducing government spending, and updating the infrastructure for any CA readers)  As she paraphrased the book’s contents she talked about two characteristics that allowed eBay and many other companies to be successful.

Successful companies have

  1. A disruptive technology or a feature that creates value that wasn’t there before
  2. Some emotional need or component that is fulfilled when customers experience a service or product.

This caused me to reflect on Tshirts4Hire.com (check out this previous post for better understanding of what the company is all about. What is the technology or feature that adds previously unrealized value?

 Similar to eBay’s model I think it is the platform the space for businesses, bloggers, organizations, etc. to connect with Social Media Marketers who are willing to rent their wardrobe and share their online influence to drive traffic and customers their way.

What emotional need is met?

This is something I’m still kicking around. Meg talked about how eBay focused just on the collector community initially and that it created a community of people with common interests. This later would translate into the thrill of the hunt or bargain during an auction; the anticipation or “I’m next” feeling.

I don’t think it is the same thing for us.Tshirts4Hire is about providing options to creative and/or hard working individuals; helping them become self sufficient. It also creates a new kind of permission marketing for advertisers.

The t-Marketers (T-shirt-wearing Marketers) are consumers that are often the ones generating their own leads talking to local businesses that they would not mind representing to their online community (spammers don’t have many friends).

It is always easier to promote something you believe in or enjoy and ultimately we all are influenced by someone. We tend to even get and follow medical advice from our friends or acquaintances before we’ll go to a doctor.

This creates a way for companies to capitalize on the loyal fan base, creating self-produced testimonials and mini-commercials that can then be leveraged to sway those who haven’t yet experienced the product or service. If you’re lucky it can go viral (a demonstration of the power of many) and the company finds an audience larger than the Super Bowl or a new set of customers/application. Think of how much traction Subway has gotten out of Jared’s subs only diet.

 I’d be interested to hear what others think. Is this something that creates unrealized value? What if any emotional needs are met?

Adaptive business models

November 3rd, 2009

evTribuneTweetIn previous posts I’ve mentioned my feeling that the rate of disruption is accelerating. Watching traditional media flounder has reinforced this opinion. A combination of last week’s TechCrunch article on newspapers and then a local newspaper shutdown announcement today is driving that point home. Newspapers are an extreme example of the impact that technological shifts can have on previously stable business models. Free and convenient news can now be found online from a variety of sources. In many cases, craigslist will attract a bigger audience than any classified ad might and in most cases won’t cost a penny. This has resulted in a drastic decrease in relevance for newspapers.

Sadly, I think that newspapers have lost too much ground to recover and that this will result in lower quality news from fewer sources as more and more players are forced out. I do think, however, that the newspaper business has given us an excellent example of how important it is not to become too dependent on assumptions of perpetual status quo.

Google recently announced the inclusion of free turn-by-turn navigation with unsurprisingly graphic results for the GPS makers. Are there any shifts that could render your business model dead in the water? Will a new technology reduce your effectiveness? Are unseen competitors able to enter your market at a cost that makes your business unprofitable?

“Micropreneur”

October 9th, 2009

I recently listened to a podcast from fellow Phx enterepreneur Sean Tierney that discussed the Micropreneur Academy. While I can’t comment on the value of paying to subscribe to the academy itself, I found the podcast quite interesting for a variety of reasons. First of all, their definition of a micropreneur as a single individual or small team building a business on a smaller scale than VC funded ventures caught my attention. I appreciated them including a segment of the population who, like myself, are attempting part-time entrepreneurship along side full time employment.

One of the most striking points brought up was the idea that to complete a product you might need to invest an average of around 600 hours between all aspects of product development. If you only have 10 or 15 hours a week to dedicate to your venture, this would mean more than a year of work. With this in mind they advocated delegating or outsourcing as much as possible. I often find myself doing all of the tasks on my list despite the fact that there are others who I could outsource certain aspects which would result in big time savings.

As a software developer, the idea that business should be prioritized first based on market, second on marketing, third on aesthetics, and then finally on features seemed counterintuitive. Comparing these priorities with businesses who are doing well seem to validate this approach.

The group did seem to be very software-centric which I could relate too but others may not. However I think there are huge opportunities out there for micropreneurs in fields other than software. In fact I think that with the diminishing cost of starting a software business and the associated increase in competition, people who are able to start businesses not based solely on software will enjoy greater returns than strictly software based endeavors.

So, what are you doing right now to build your business that you should be outsourcing? Are you adding features without measuring your market, investing in marketing, or refining aesthetics?

B2B or not B2B?

September 16th, 2009

To be or not to be...pilgrim

Mr. John Wayne, not a trained Shakespearean actor, said in one of his movies (McClintock!) that “…everyone works for somebody.” At the time this line was delivered he was playing the part of a rich cattle baron. He was lecturing to one of his hands who didn’t think too much of himself. McClintock (not to be confused with Macbeth) pointed out that even the cattle boss worked for the American people.

So who is your customer? Frequently customers are lumped into groups according to common characteristics from a high-level classification of businesses, governments, and consumers down to very specific demographics like a single mother of 3, ages 31-35, college education, geographically located in such and such state, earns so much, etc.

All this information is used to determine how to get customers to buy more. Whether that is by having a recognizable brand that is more visible, or catering to customer’s demands for faster or more convenient service, or even creating something entirely new that customers are sure to want; all of it is to drive up revenues, which, if they’ve run their business right, will result in a profit. (Although some will operate at a loss if it means there’s a chance at a sustainable profit.) Profit is the life blood of an organization that allows for further success. Even non-profits have to cover their costs somehow.

If people don’t want what you are offering, you won’t be in business very long. It is the secret and power of consumerism, though customers often don’t realize that this power is theirs. The world in which we live is largely shaped by businesses through various experiences or services they produce. Businesses exist because people buy from them. So the reverse is the overlooked truth. If people don’t buy from them they will not exist and if they don’t exist then our culture and society won’t be influenced by them.

This realization has changed over time as more and more products proliferate and fill the marketplace. People rely on reviews and opinions of others to make choices about what is going to best meet their needs. Trust and information has become a hot commodity.

Consider this tidbit from an article in The New York Times last year, “According to Forrester Research, 52 percent of people who shop online say they do their product research on Amazon.” Over half of all sales over the internet (US ecommerce industry is estimated $130B/year) are made after checking Amazon.com Customer Reviews and this is just one website, not to mention all the other consumer review sites that are dedicated to specific categories of products. More than $60B is determined by what customers and others say about a product or service.

Even in the brick and mortar stores, word of mouth is still the most powerful prompt for potential customers to become actual ones. Businesses have known the power of a positive endorsement for awhile and frequently make use of it by the use of a shill. The term comes from when a carnival or traveling salesman would plant individuals within a crowd during a sales presentation in order to influence the mob of people into a positive predisposition.  The shill would often be the first to buy the product or perhaps even demonstrate its wonderful effects to encourage those who were hesitant in making a purchase.

Online sites like Amazon have a team dedicated to detecting and minimizing shills in order to maintain their credibility as a trusted source. That trust is what drives customer loyalty and more importantly repeat business.

Just a few clicks away...

Just a few clicks away...

With that in mind, I’d like to propose the growth of an often overlooked kind of business: a consumer to business approach or C2B. Businesses are dying to get your purchasing history and trends. Most online businesses thrive on this fact. From targeted Google Ads to individual banner advertising on a specific blog (anyone interested in sponsoring us feel free to let us know) to collecting transaction histories (Amazon, American express, etc.). They all have some level of interest in what you want or do so that when you do decide to vote with your money you pick them.

Case in point: Mint.com, a free site that provides personal finance software, was purchased by Intuit, maker of QuickBooks and Quicken, for over 170 million dollars with no plans to change the free component of the site. Why would they spend all that money to get something that won’t make them direct money? One of the reasons is that Mint.com has a plethora of consumer data just waiting to be mined and turned into targeted marketing for the profit making products.

So why not sell your information directly or agree to be a spokesperson for a product or service you already love?  Tout your 400+ Twitter followers as a distribution channel of information and influence or make your Facebook friends your sales force. Perhaps you could simply be a mini-market research firm sending out surveys to your circle of influence about products or services and then sell the data to the highest bidder or just share it with everyone that participated and build your own credibility among “friendly” consumers.

Another approach is to reverse the idea of buying in bulk; band together with others that want to buy the same thing as you for a group discount. Basically, it allows you, the customer, to offer to purchase a product at a price you set and then your friends bid on the same product. If the company gets enough people that it becomes worth it to them then the company allows that group to purchase the item at the lowest bid made.

Maybe soon...

Maybe soon...

Group-buying was something that was explored pre-dot com bubble burst; here’s a nice article of what happened and why they struggled. They weren’t sustainable because of the amount of time it took to get enough people to merit a significant enough discount. And many times you could find it for cheaper as an individual consumer if you took the time or chances with an eBay auction. Though there has been some success in China and here in the states with things like Groupon. Have things changed with the advent of Twitter and Facebook? Is it time for a good idea to hit its stride? How could it work now?

Remember everyone works for someone. Why not have businesses work for you—or at least with you.

Artificial barriers – a doomed business model

August 27th, 2009

A recent article over at TechCrunch details an unholy alliance between Blockbuster and the movie industry. Their idea, aimed squarely at relative newcomers such as Netflix and Redbox, is to limit new release rentals to physical rental stores for the first 30 days. As seen by skimming the (abundant) user commentary, it is easy to see the discontent with such a brazen action completely devoid of any benefit to the consumer. It is hard to imagine any other objective in this strategy than Blockbuster’s attempt at propping up a failing business model by taking away existing customer choice. I’d be curious to hear of any examples where such a business strategy has resulted in an improved outlook for a company. I certainly hope that there is some correlation between value provided to a customer and business prosperity. I firmly believe that the best long term strategy in any business is to provide ever increasing value to your customers and adapting to new business challenges by evolving in directions that continue to benefit your customer base.

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