Thursday, February 26, 2009

Discussion of the Week - Prioritizing Shareholders vs. Stakeholders

Over the weekend, we had our first Financial Mgm't class, with Dr.Sandra Dow. One of the readings for the class was a piece by Michael Jensen (Harvard Business School), entitled Value Maximization, Stakeholder Theory, and the Corporate Objective Function.

[I'm paraphrasing & summarizing here, so my apologies to Dr.Jensen for butchering his theory]

The paper makes the argument that companies need to consistently put the maximization of Shareholder Wealth as their top priority, ahead of goals to enhance Stakeholder "value".

It was an interesting topic for a couple of reasons:
1 - Several other courses have brought up the Balanced Scorecard model as an example of how to manage the business, often showing that Balanced Scorecard provides management with balance across Financial, Customer, Internal Business Processes, and Learning & Growth. This was the first time the Balanced Scorecard was presented as the wrong approach for running the business, and that it led to too many internal conflicts to be able to manage simultaneously.

2 - It was the first class with Dr.Dow, and the first couple hours were spent going over the Pros and Cons of these different prioritizations. Needless to say, it was a healthy discussion as my classmates had very strong opinions (on both sides) about how well each approach worked in their experience, the morality issues, the conflicts of interest with employee/mgm't stock ownership, how much lower-level employees or managers could impact shareholder wealth (ie. stock price), etc.. Dr.Dow has been very generous with her time in extending this discussion with several of us via email since the class, and I expect it will be an on-going discussion throughout the semester, especially given the existing economy (how we got in, and how we might get out).

Overall, it was a good discussion to reflect on how this applies to each of our companies, our existing roles, and if we'd make any changes if we held higher roles within our organizations. I personally used it to contrast some existing thinking I've been having about 20th Century vs. 21st Century thinking that has been inspired by Dr.Umair Haque, and his recent talk at the Daytona Sessions in Sweden.

[UPDATE: An interesting article looking at how Amazon has created an 180* turnaround on their balance sheet (2002-2009) and how it used an unorthodox model of revenue growth vs. profit growth.]

Sometimes I wonder if I'm doing bad vs. good things

Within the Exec MBA class of 2009, I'm sort of the outspoken "Internet Guy". There are others in the class that do work related to technology, but I'm primarily of the one that waves the flag for all the things the Internet could do...especially as it relates to changing business.

"The Internet" is a pretty amazing thing. It's been a lot of fun over the past 15 years to work on Internet-related projects. In terms of the scope of man-made things that have had as much impact on the world, I suppose it's right up there with democracy, the wheel, the assembly line, and the atomic bomb.

But sometimes I wonder if the pace at which the Internet moves and changes is a good thing for mankind. It's a pros and cons list that I think about quite often.

This video is a good reminder that sometimes we need to put the impact of the Internet on our lives in perspective. Yes, the Internet has allowed people to do some amazing things (collect the world's information, visit friends and family without leaving the house, learn things that otherwise we couldn't afford, connect with old friends, help the world's poor), but it's also changed our perspective on time and scope.

It's good to step back from time and time and put some things in perspective....

Wednesday, February 18, 2009

Broadcast TV will be dead soon!!

There seems to two consistent themes this semester (in the classroom or reality):
  1. Manufacturing in the US is dead or dying.
  2. The Internet is completely changing all forms of media, and the old ones will be dead soon.
I've written about the impending death of the paper newspaper, and I think it's time to start collecting facts and stories to write the obituary for broadcast TV.  I'm calling it right now...it'll be dead within 10yrs.  How do I know this?  
The first sign that the old industry is dying is when they realize that the competitive service is taking off and the only thing they can do is starting taking short-term actions to block it's growth.  They can't compete with the new service on price or ability to attract new customers, so they resort to actions that are completely defensive and create no value in the market.  

For anyone that is in the content creation business, this is an inflection point.  The online opportunities are now going to happen fast & furious.  You can stop thinking about distribution via broadcast networks and cable, and start only focusing on Internet and mobile devices. Potentially some great new business opportunities for WFU MBA students with start-up ideas.

Monday, February 16, 2009

Even great brands can't rest on their laurels

You might think that after 350 years (and 100 for HBS) that reputation and years of top rankings would lead an organization to relax and potentially ride the wave of past successes.  Not the case. BusinessWeek does a nice job of showing how Harvard's recruiting office aggressively goes after the best in an effort to retain the ideals that the school was founded on.  

A great lesson for not only my WFU classmates, but the entire WFU administration as we seek to create greater value for students of the newly combined WFU business schools, as well as draw closer to the ideals that WFU was founded upon.  

Why am I not driving an electric or solar car?

Following up on the 21st century concepts discussed previously, and considering how rapidly the technology seems to be evolving, I need to ask myself the question...why?  My commute to work is about 45-50 miles roundtrip, in partially rush hour traffic, and it's probably sunny 300+ days a year here in NC.  I drive to the office or the airport in my car, and the rest of the time with the family in the van.  Maybe it's time for me to investigate this more deeply on a personal, professional and investment level.  

Conflict of Crisis - 21st Century Economics

[More details about these concepts can be found here]

This is about a 70min video from Umair Hague,  called Conflict of Crisis.   I'd highly recommend it to all my classmates.  It goes against the majority of what we learn in MBA programs, because they typically teach based on examples (cases, companies, etc.) that succeeded over the past 5-20yrs.  

Haque's messages are starting to connect with me more and more for a few reasons:
  1. In OpsMgmt, we're reading case after case about how manufacturing jobs and companies are leaving the US because of lower costs.  But while the US grew to economic dominance on the backs of these manufacturing giants, we're not necessarily seeing similar prosperity happening in the 3rd-world countries that are taking over this work.  Why is this not happening?
  2. The GenY population is not embracing large company ideals and culture, they are bringing their principles to companies and asking why they aren't being embraced.  
  3. The "value" created over the last 10yrs is almost completely unsustainable (as we've seen with the last two bubbles; Internet & Credit).
  4. The hyper-connectness of the Internet is allowing very different business models to be created and grow.  
So what does all of this mean?  It means the pace of change could potentially start moving much faster than any principles we're learning in B-School today.  It means businesses could be in sprint mode all the time, with radical market shifts happening every 5 years.  It means you need to keep you mind open to new ideas, and consider looking for ways to focus on the 4 principles Haque mentions.  While the examples he gives are still somewhat limited, they are beginning to show the building blocks of what could be the new 21st century economic principles.  

=========

Here are the four pillars of smart growth - for economies, communities, and corporations:

1. Outcomes, not income. 

2. Connections, not transactions. 

3. People, not product. 

4. Creativity, not productivity. 

Sunday, February 15, 2009

2 Guys and the Internet?? Maybe your next business...

This past week, I watched a video from the new Dean of the WFU Business schools, Steve Reinemund. It covered a number of topics:
  • The current economy and its effects on WFU and the business schools (undergrad and graduate)
  • The merging of the undergrad and graduate programs and the vision to improve the school's offerings and ranking.
  • Steps the school is taking to ensure that near-term graduating students will receive additional assistance in finding employment.
One area that interested me quite a bit were his comments about creating new business school models that leveraged the breadth of education that WFU offered, both from the liberal arts of the undergrad departments and the joint activities of the business schools. The main idea being that we need to do a better job of bringing together excellent ideas and people, regardless of their field of discipline. It makes alot of sense to me, considering that very few companies compete in markets which are only taught in B-Schools (maybe banking or consulting?).

Over the weekend, I went to a number of social events and the topic of the economy came up with several friends. We made the obligatory guesses at how long the downturn will last and how severe it will ultimately be. In most cases, we determined that many of the jobs being lost will probably not come back, at least not for large corporations. They will find that productivity has outpaced the cost of the employees, or that buying habits will be changed for many years to come because of this recession.

These two things got me thinking. Why doesn't the school create a "2 Guys (or Gals) and the Internet" program to drive entrepreneurship? It could start as an extension to Dr.Mandel's Center for Entrepreneurship, or it could be much smaller and focused, like Mark Cuban's Open Source Stimulus program. And don't limit it to just the Business school. Begin to leverage the goal to tie in the entire set of skills and thoughts of Wake Forest. Or be really bold, and start expanding the program to include other schools from the ACC, maybe leveraging those that have skills that aren't world-class at Wake Forest. Lots of smart engineers at Georgia Tech, Virginia Tech and NC State. Amazing things happen when you allow yourself to branch out with small ideas.

So where does the "and the Internet" part come into this thinking? Am I requiring that these new ventures be only focused on Internet technology? No way!! I'm suggesting that since there are so many opportunities these days to leverage the interconnectedness of the Internet to source aspects of a business, that this should be a mandate of the program. These "2 person" operations will need to use all the leverage they can to compete, and that's completely possible with today's Internet. Need business cards - link up with Moo. Need to host your business operations - link with Amazon. Need early market research or advertising buzz - link up with Twitter. These are just basic items, but the ability to pay-as-you-need and grow without all the fixed costs (or people) is there for the right idea and motivation.

Twitter for Sales, Customer Service &/or Market Research?

Following up on the growing usage of Twitter, here's a good example of how customers are going to start using Twitter for things that relate to business and revenue...and not just their social status.

A few questions for companies:
  1. If you have any sort of online presence (sales, product information, customer service, etc.), can you afford not to have a presence on Twitter? It costs nothing more than some time of people to monitor the Twitosphere. Most of this could be automated.
  2. Wouldn't it be great to be able to monitor the preferences and dislikes of your competitors and customers? In real-time?
  3. Wouldn't it be easy to let your customers and potential customers know about projects that you're working on, or recently released products, or a sale or coupons or discounts?
While it's not the exact science that we study in MBA courses, it does provide an excellent, real-time view of the crowdsource opinions and marketplace. I suggest that if you don't have a presence today, that you make it an action item for Monday.

Thursday, February 12, 2009

"Google devalues everything it touches"

One of my classmates, Domingo Isasi, runs Que Pasa Media.  Que Pasa operates for hispanic customers in North Carolina.  Domingo and I have had several conversations about news media and how the Internet is changing its form and economics around the world.  One of the great things about the MBA program is getting first hand experience from classmates.

Charlie Rose recently hosted a discussion of online value for newspapers, which touches on a number of the challenges they are facing, including:
  1. How to get people to pay for content once they can get similar content (or reblogged content) online for free.
  2. The challenge of trying to convey value to customers that probably didn't truly think about value before, since there weren't easy alternative options to get news before the internet (that's simplified, I know).
  3. How all of these news creating sources (newspapers, magazines, blogs, video-blogs, microblogs) will be able to survive with only advertising revenues, especially given how Google is driving down CPMs.
  4. Is it a good thing that Google seems to be one of the few companies making money around news, while the newspapers fail?   Or is this just the next phase of Darwinian evolution and new models will emerge?
  5. What role do local newspapers (or local media outlets) play in the bigger picture?  Are people willing to pay for that local content in order to feel connected with communities? (this is Que Pasa's business).
There are many more aspects of this, and it will be interesting to see how it plays out over the next 3-5 years.  While maybe not as economically impacting as the banking challenges, I think it's equally important to see some controlled survival.  I'm pulling for the local newspapers, both because of my past employment and for the experiences of my children, whom I hope enjoy reading for pleasure and knowledge just as much as I do.  

As an aside, maybe this is a good excuse to teach myself (and my children) Spanish, so we can follow the local news via Que Pasa, and I can help support a classmate!  

Twitter is Mainstream - Will this change the Freemium Model?

A classmate, Jim Schweitzer, posted this update to his Facebook page today "CNN likes twitter now too:http://www.cnn.com/2009/TECH/02/12/twitter.shorty.awards/index.html i don't know if it's cool anymore."

For those that haven't heard about Twitter, it's an online "micro-blogging" service that let's people and companies communicate in short, 140 character messages.   People use it for fun to send status messages to friends ("at work but want to meet up at bar for drinks at 7pm") and various companies are starting to use it as a way to communicate with customers or about their current projects.

Twitter is a free service, with over 1,000,000 users.  To run this service, Twitter obviously has to provide massive amounts of computing services (servers, bandwidth, software programming).  So how does it stay in business if it collects no revenue?  Welcome to the "freemium" business model, where the primary goal is to create as many users of your online service as possible, and then figure out how to eventually get at least a small percentage of them to pay for an enhanced version of the service. Or maybe nobody ever pays for the service, because it's subsidized by online ads. 

I bring this up for a couple of reasons:
  1. People have become such big fans of Twitter that others are running contests to help Twitter come up with a business model.  Most of these models involve Twitter charging users for some aspect of the service.  
  2. With the economy being where it is today, people have less to spend, VCs are funding fewer opportunities, and companies that aren't cash-flow-positive aren't going to survive very long.  This means asking for money will be difficult (from customers or VCs), but it's almost mandatory to survive.  Tough spot to be.
  3. For one of my StratMktg Analysis projects, I'm going to explore the Freemium business model and how companies can evolve into hybrid-Freemium or full-paid serivces.  I suspect it's going to be interesting psychological research, since most customers prefer to see prices go down than up.  
The project isn't due until April, so I have a little bit of time, but I'm really looking forward to seeing what ideas may come out of this challenge.  It's not the same problem I recently mentioned with Facebook, but they have similar challenges.  I hope to explore both aspects.  I'll post the results when the paper is finished. 

[UPDATE:  Looks like Twitter just got a bunch more VC money, and hired their first BizDev person.]

Tuesday, February 10, 2009

The Power of Web Analytics

As everyone knows, a good chunk of MBA programs are teaching students how to collect, analyze and make decisions based on data.  "So sayeth the data!!",  "Show me the numbers".  "Follow the money...connect the dots."  And while companies spend millions on sophisticated systems to track their customers, product inventories, brand awareness, etc., one of the beautiful things about the digital economy is how simple it is to track and analyze data.  And all of this data collection and analysis can be done for extremely low costs (or free).

For example, here are some of the things I'm able to track on this website:
  1. How many people visit the site?  How many times have they visited before (returning vs. newcomers)?  This gives me a sense of whether I'm creating loyalty or interest in the readers.
  2. Which pages are the most popular?  How many times has each page been read?  What type of content is popular.  What types should I try more or less often.
  3. How did people find the site (Search Engine, Twitter, LinkedIn, Facebook)?  Where are the best places to advertise the site.  How are associations with specific words, searches, people made.
  4. Where are people visiting from?  If I was seeing certain geographic trends, I could alter my content to appeal to different demographics.
  5. How long do they stay on the site?  How many pages / articles do they typically read?  This helps me determine how interesting the content is, and how well linkage between pages is working.
  6. How are they accessing the site (domain; type of device; specific browser)?  This could eventually be used to make sure that add-on functionality is compatible with the most popular access methods.
There are several other things that can be tracked, trended and analyzed, but the important point is how simple this has become.  I can quickly understand my advertising, customer interests, customer loyalty and many other factors.  

So far this blog experiment has provided me with many valuable learnings, as well as some benefits that I never expected.  

Update on Financial Management Class

Today we received our syllabus for the Financial Management class.  On the surface, it looks like a fairly standard finance class.  Lots of Cash Flow analysis, Net Present Value, Capital Budgeting, Cost of Debt & Equity, etc...

The one thing that jumped out at me is the grading model for the course.  55% is based on a final exam, and only 20-30% is based on team projects or class interactions.  While this might be fine for a full-time program made up of students with less work experience, but it doesn't seem to be in line with an executive program made up of experienced students that have knowledge to share. This structure seems to facilitate memorization rather than long-term learning.  It almost seems ironic that a finance class wouldn't be focused on "leverage", in this case the students leveraging each other.

If there is one thing that frustrates me about the program is the lack of consistency of how the courses are structured (case model vs. exams vs. lecture).  I've mentioned this before, but it came up a couple times this past weekend in class.  Several people mentioned that they would prefer to see the excellent cases presented across classes, so we can examine them from the different course perspectives (Operations, Marketing, Accounting, etc..).

Monday, February 9, 2009

Podcast Review - Killer Innovations - "How to Sell an Idea"

Just got finished listening to Phil McKinney's latest Killer Innovations podcast.  This week Phil explores some proven tips he uses for selling new ideas.  This is even more important in today's economic environment for a few reasons:
  1. During difficult times, companies tend to get conservative and focus on cost savings and reduction instead of keeping at least one eye on growth opportunities.  
  2. Managers tend to focus on their personal safety within the company as opposed to embracing new ideas that could help their reputation or the group's reputation grow.
  3. As has been proven before, innovative companies frequently take more market share during down periods.
As always, Phil does a great job of breaking down the concepts into simple, digestable segments and spends most of his time on the application of the concepts.  At 25mins, I highly recommend downloading it onto your iPod/iPhone and listening on your commute into work tomorrow.  It may help you sell that great idea that makes you a hero in these difficult times.

Discussion(s) of the Week - Today's Economy and Tomorrow's Economy

Since last fall, the world has been going through various stages of reality checks, depending on your industry or specific company. Whether you were Leiman Bros, or Chrysler, or IBM or Mom & Pop's local diner, the reality of the new economy has hit you in some form or fashion. That reality seemed to be in full effect in class this weekend. Classmates are starting to loose jobs, have plants closed, laying off more people than expected, closing more stores. There was clearly a new level of stress and frustration on their faces this weekend. And as positive as we're all trying to be, I believe it's going to get considerably worse. Worse throughout 2009. Worse continuing into 2010.

I heard a conversation asking the over/under on how many people in class would still be employed at the end of the program. This wasn't a joke.

I heard conversations where people were asking what their management was forecasting for a recovery timeline. None of the people mentioned 2009. At least one mentioned 2011.

There were a few conversations this weekend (some hallway, some classroom) that were very interesting to me (WARNING: If you're looking for sunshine, stop reading now):

1 - For an administration that hit almost entirely home runs during the campaign, there have been a lot of foul balls and missed swings during this first month. But this conversation is not about bashing the new administration, since they walked into a tremendous mess that isn't a short-term fix. The real discussion was about whether or not people believe that these stimulus plans truly address real problems.  For example, if no floor is reached on the price of toxic CDOs, then how are the banks ever going to reach a level where their holding ratios allow them to lend?  Neither TARP nor the proposed Stimulus package seem to address this.  Fred Wilson makes some interesting points today about why this probably shouldn't be a solution the government tries to address my itself.  And how do they expect infrastructure improvements (ie. roads) to create a short-term impact?  Those projects take 5-10yrs, are notoriously over-budget and late.  And where are we going to find all the workers?  In case they haven't noticed, America has become a knowledge worker economy.  

2 - In our OpsMgmt course, we get a daily dose of how America has lost it's way in manufacturing.  One of the questions that is always asked is, "How would you fix this situation?".  In talking to classmate Ric Freeman, we asked ourselves if we had a magic bullet to "fix it", if we'd have the people to drive the fixes.  We've gone at least one generation with American kids not seeing manufacturing (or certain aspects of engineering) as an exciting field of work. They've seen their uncles or fathers lose jobs from that segment, or seen jobs shipped overseas.  So we asked ourselves, what would it take to create that new interest for American students and future generations?  What if the Obama administration decided that there would be one US Automotive company, with the goal to not only create world-class vehicles, but also serve as a beacon for future manufacturing and engineering students?  Would this help?  Would it even be possible considering current wage expectations or forces or competition? This is a difficult problem to comprehend a solution for.  

3 -  During the ITMgm't course, we looked at Merrill Lynch's eTrading platform from 1998 and the challenges they faced with their Financial Consultants (FC) as they moved to electronic trading and the potential changes to fee structures for the FCs.  As we looked at ways to communicate these changes to FCs, and integrate that with the strategy towards online services, someone suggested that maybe the FCs would be willing to take a pay cut to help the overall strength of the firm going forward.  Hmmm...socialism for capitalists?  Interesting.  I bring this up for two reasons:
a - My classmate works in an environment where loyalty to the company is very strong, and this wouldn't be a completely unusual request to workers.  
b - Based on the recent number of layoffs across all industries, I wonder if we're going to have a generation (or multiple generations) of people that have absolutely no trust in their employers and how this will effect managers ability to motivate teamwork in workers.  

Sunday, February 8, 2009

5 Ideas for Facebook to make money - Part V

Idea #1: Yearly fee
Idea #2: Blogging - Reinvented
Idea #3: Facebook Reunions
Idea #4: Facebook TV

Idea #5 - Cell Phone Address Book - How many times have you gotten a new cell phone (new model, new carrier) and been told that you can't transfer your existing contact list to the new phone?  Sound familiar?  Or maybe you sync your contacts with iTunes or Microsoft Outlook, but you occasionally get a new PC (or it crashes, or gets upgraded).  

Considering how valuable that list is, and what a hassle it is to recreate, wouldn't you potentially pay $5-10/year to have it backed up?  None of the carrier seem to offer this service today, even though it would create tremendous customer loyalty and satisfaction.  Facebook should fill this void.  They already own your social network "contact list", which you aren't about to move, so why not add your mobile device contact list as well?  

[UPDATE - After writing this, I was informed by several people that Plaxo provides a somewhat similar service already.  Fair enough.  I still think this is a valuable service to integrate with existing Facebook functionality, but I will work on coming up with a new #5 way for Facebook to make money.]

5 Ideas for Facebook to make money - Part IV

Idea #1: Yearly fee
Idea #2: Blogging - Reinvented
Idea #3: Facebook Reunions

Idea #4: Facebook TV - Based on the popularity of the CNN/Facebook integration during the Obama Inauguration, there are huge opportunities to create social TV environments around live TV (sports, reality TV, American Idol) as well as online video (Hulu, Joost, etc.).




As much as the younger generation would have you believe that the TV is dead and everything will be watched online or via a mobile device, there are still plenty of people that love the experience of their couch and a huge LCD display (in HD). The technology to integrate a TV + Internet experience is quickly evolving, and the time is now for Facebook to take this to a new level. People will be going out less during the down economy, and staying home to watch interactive events. Facebook has the opportunity to truly change on those people interact with their friends during Sporting Events, American Idol, Reality TV, Grey's Anatomy, Lost, etc.

[UPDATE:  Looks like Major League Baseball is already exploring this path with Facebook.]

[UPDATE-2:  Will Twitter-TV beat Facebook-TV to the punch on this?]

5 Ideas for Facebook to make money - Part III

Idea #1 - Yearly fee
Idea #2 - Blogging - Reinvented

Idea #3 - There are ~15,000 high schools in America. Every year, they have at least one class reunion event (10yr) and sometimes multiple events (10yr, 20yr). While there are things like Evite for casual parties, nobody provides a framework to plan high school reunions. Considering the daily reunions on Facebook, it's a perfect extension of a service they informally provide today.

Not only is there an opportunity for Facebook to charge a fee to the reunion planning committee (to find local vendors, host specialized photos, pre-party Facebook events, etc.), but also to take a commission fee from the vendors for being part of the Facebook network.

5 Ideas for Facebook to make money - Part II

Continuing on the "5 Ways" thread...

Idea #1 - Yearly fee

Idea #2 - Host user blogs. Taking a page out of Google's book, the key is to collect as much user data as possible. And this recent phenomenon of "25 Things" shows that people want to write about themselves, and others want to read it. In fact, Facebook may want to look at this trend as an opportunity to redefine blogging, maybe something as simple as Twitter and less intimidating than WordPress or TypePad.

  • Do they allow users to use a service that lets that write about products or services they love?
  • Could that become the beginning of "virtual" Tupperware parties, allowing people with common interests to attend online events to socialize, get informed, and potentially buy products they love....all with friends or potential new friends?
  • Could they come us with new mashable ways to collect the opinions, feedback or thoughts around specific topics?
  • Could people choose to be "ad supported" on their blogs by brands that they love or want affiliation with? Maybe they collect a small fee, or are associated with exclusive offers, or just get an ego boost by being affiliated with a brand.
If Facebook can come up with a way for people to write easier and more comfortably, there is huge potential to use this information to generate multiple revenue opportunities (ads, brands, events, etc..)

5 Ideas for Facebook to make money - Part I

As an avid Facebook user, and following the recent trend to make lists, I thought it would be fun to come up with some ideas to help Facebook make money in 2009. Their user-base is seeing rapid growth again, but they are still struggling to monetize all that user data. For the sake of time, I thought I'd condense this list down to 5 things.

Many of these ideas are based on the growing number of 30-40 somethings that are joining. These folks use it as a distraction from their existing lives, or as a way to keep in touch with old friends, or to remember happier times.

Idea #1 - Charge for usage. $9.99/year. Millions of people pay that much for a month of NetFlix, or a day's worth of Starbucks. There's $1.6B in revenue (at 160M users).

Plenty of people will say that violates the spirit of what allowed Facebook to grow, which was the Freemium business model that gained popularity in 2005-2008, with the rise of many Web 2.0 companies. Fair enough, but how many of those companies are going to survive the latest economy crisis? And by survive, I'm really talking about being a long-term business entity, not selling out to Google, Yahoo, Microsoft or some other large internet company. Let's think in terms of truly building a business, not an exit strategy.

At some point, Facebook needs to be able to ask their users (directly or hypothetically), "if we were gone tomorrow, would you miss the service?" If the answer is "No", then charging a usage fee is dead. If the answer is "Yes", then you have a very viable starting point to explore a fee.

I have some ideas about how they would create the inflection point for making the change from Freemium / Ad-Supported to Fee-Supported, but I'll hold off on those for another post. I think 2009 is going to be an interesting year to see how some of these models survive and also how create they get with revenue models.

[NOTE - As I mentioned before, it's good to put large numbers in perspective.  Facebooks existing user base (160M) is equivalent to 52% of the US population; is equivalent to 73% of US broadband users; is equivalent to 10% of worldwide broadband users.  Needless to say, there is a lot of growth potential for Facebook worldwide.]

Wednesday, February 4, 2009

Plagarism or Open Information?

One of the great things about today's Internet is the free flow of information.  Combined with things like Google search and various mashable technologies, companies are finding new ways to utilize the vast amounts of information that exists freely on the Internet.  

This evening, I had an interesting experience.  While surfing to cnn.com, I was greeted by this cover story.  I appreciated them trying to bring attention to something that seemed to be slipping past people.  I agreed with the concept so much, that I wrote about it the day before.

Maybe it was a complete coincidence.  Maybe we both had the same thought while riding the bike in the gym, and their publishing process took longer than mine did.  Or maybe they got inspired by my viewpoint.  Who knows.  It doesn't matter.  What I need to realize (and remember) is that we're all better off because information is free flowing.  Ideas can get created anywhere, get modified anywhere, and hopefully become something bigger and better somewhere down the road.  

It also means that you better have a plan in place (and wheels in motion) if you ever want to make any money off those ideas.  

The Marketing Chicken or Egg

Just a little reminder to my classmates as they prep for the Value Proposition work in StratMktg this weekend.  Not only does this include one of my favorite video clips, but also a simple way to explain that marketing does not equal advertising.  

Tuesday, February 3, 2009

The magnitude of numbers are becoming irrelevent

One of the knocks on MBA graduates is that they tend to only focus on numbers.  Spreadsheets, statistical models, market segmentations, etc..

But as I read and watch this latest econalypse unfold, I'm starting to wonder if people have become numb to the magnitude of the numbers being thrown around.   For example - up until recently, Bill Gates and Warren Buffett had net worth of approximately $40,000,000,000.  (NOTE - I wrote the full number out to show the magnitude, because it's too easy to forget how big $40B really is.).  This number represents 30-40 years of work from these men, creating businesses that produce products or services to the world on a massive scale.

We used to talk about how Gates or Buffet could take all their money and solve some serious world challenges, exactly how the Gates Foundation is doing today.  $40B was a lot of money.

$40B is also 5% of the funds allocated to TARP.  And many experts are saying that the depth of the banking crisis might be 2-4x the existing known level, so TARP II or TARP III might actually make that $40B be 1% or .1% or .01%.  

Sometimes it's helpful to put numbers in perspective for people, especially when the numbers are HUGE.  At my previous company, we shipped a product that was supposed to help scale the performance of the Internet.  The examples we used to communicate it's performance were things like "download the entire Library of Congress in less than 1 second" or "allow every person in NYC to watch a YouTube video at the same time".  While these examples were still huge in scale, they were much better at communicating the scope than saying 180 TerraBytes per Second.

So my tip to anyone trying to communicate the scope of the numbers being thrown around today is to try and put them into perspective.  I find that if people can relate to the numbers on some level, it helps them find a way to engage in the ramifications of those numbers.   

I'm getting one MBA and 2 PhD's

If all goes well, in just 11 months they will give me a a really expensive piece of paper with fancy writing on it and the WFU logo, which will allow me to add "MBA" to my resume.  And hopefully along the way I will have gained a good bit of knowledge on topics such as these and these, and a few others from May to December.

Two courses that aren't on the course-list but it feels like we're getting PhD level exposure are corporate layoffs and corporate leadership.  I'll start with the later.  

I don't usually write about my company on this blog, but thought it might be appropriate for a couple reasons:
  1. Leadership seems to be in short supply these days, and our Vice-Chairman is truly an outstanding motivation speaker about leadership topics.
  2. Education is so important to our Vice Chairman that he endowed the Business School at his alma mater.
  3. This talk was given as part of a leadership series at the graduate school at NC State, so it's speaking to students.  (NOTE - It's about 65 mins long, but worth a watch)
This talk does a really nice job of highlighting why attitude and motivation are so important, especially during difficult times.  He provides some excellent examples of how the company dealt with the Internet Bubble, as well as how they realized changes in the world and took actions to reposition the company to better compete in the new realities of the world.   Finally, he talks about how he uses frequent goal setting and open discussion to build and maintain culture and focus through good times and bad times.

One the flip side, I'm also getting a PhD in watching how companies, their leaders and their employees deal with layoffs on a massive scale.  This isn't Organization Behavior, this is Laying Off People 101.  I have two Senior Executives on my team who are dealing with layoffs of nearly 20%.  I have one classmate that luckily was on the right side of a 33% cutback, and another that is going through a major merger and restructuring.  And this is just my team.  The stories are fairly consistent from the rest of my classmates and their teams.  

While I don't get any credit for these two additional topics, they are definitely adding to my list of experiences and will hopefully be valuable at some time in the future.  

Monday, February 2, 2009

Killer Question - Could you customize a mass product?

"When things get tough, the common reaction is to scale back and standardize the processes.  The objective is to take costs out of the business.  What would happened if you went the opposite direction?  Rather than standardize, why not customize?"

This is an interesting question for me, since my company mass produces a product that is "customizable" by our customers through software configuration.  This isn't really an aftermarket for our product, since the product isn't immediately useful in it's default state.

But if I had to think about ways that our product could be customized, the list might look something like this:
  1. We could allow customers to upload specific configuration options to their order, and we'd load those before the product was shipped.  This might make it easier for them to deploy the products in remote offices without sending a specialized technician to the site.
  2. While it wouldn't enhance the functionality of the product, we could offer options on the color of the faceplates on the products.  Some companies have corporate colors (ie. Yahoo - purple, UPS - brown, Wake Forest - black/gold) and this might be a desirable look in their data centers.  
  3. if our selling partners identified their primary target markets, we could potentially create collateral (training, co-logo'd whitepapers, etc.) that aligned with those segments.  This would reduce their costs and increase their focus, and we could probably do it with minimal additional costs.
This is an interesting exercise, because while some these ideas could change the overall experience, they also introduce additional conflicts or problems (distribution, etc.).  I need to think about this some more, to see if there aren't more obvious or impactful ways this could be applied to my company.  I may find that this exercise works better for new companies looking to create a niche (or adjacency) to an existing market, rather than trying to change an existing product/service mix.

Sunday, February 1, 2009

How would Google change Detroit?

In this week's BusinessWeek, they ran an article that looked at how Google might approach the challenges of the Big 3 automotive companies in Detroit.  It was based on an excerpt from a new booked called "What Would Google Do?", by Jeff Jarvis.  I have written about this book before, but hadn't had a chance to read any of it prior to this article.  

After looking through the article, I was glad that many of the concepts aligned with some of the ideas I had written about in a previous Decision of the Week.

At first blush, the idea of open collaboration for product design probably sounds completely foreign to most people that work in industries where that information is closely guarded.  But as we're beginning to see with many industries, the pace of change is forcing them to look for more ways to solve problems.  I'd be interested to hear how my classmates think their companies could benefit from open collaboration with their customers, partners or even competitors  to solve their most critical challenges.