What's Hot in a Flat World

I gave a talk by this title to a terrific audience in Atlanta yesterday.  Sharp, relevant questions, laughed when they should have and didn't laugh when they shouldn't have.  Not that a bunch of slides speak for themselves, but happy to send you the pdf of the slides if you ping me.  Also, @jacquichew was very diligent (and kind) in tweeting regularly during the talk, so catch her on Twitter (sorry, still learning how to link to Twitter in a post like this) if you're curious.

Audience is King

It's been growing on me slowly, but in the last couple of months I've a "duh" (or maybe a "doh") moment: it's not content that's king online, it's audience.

Property after property succeeds -- either as a business or an exit -- because it draws and keeps an audience.

Content is one way to do that, but there are others.  Facebook doesn't draw an audience because it's social, but because it does something very compelling with the social medium that draws and keeps an audience.  MySpace drew an audience, but didn't stay compelling and didn't keep them.

Fads can draw an audience.  I think of Twitter more as a "flash-fad" generator than a social medium.  Something outrageous -- Charlie Sheen, Osama's death, whatever -- draws a crowd of bystanders who goggle at it and magnify the effect.  Flash fads.

What would make Twitter enduring if if they have a reliable repeatable way to generate flash fad after flash fad.  It seems that's what they're on to, and, if they succeed, they will do well.

Whatever builds an enduring audience is king.  Your thoughts?

Thoughts on Journalism 2.0

By commenting on a blog posting on Internet Evolution about one of our companies, statSheet, I ended up having a great conversation with Joe Grimm the author, who ended up inviting me to an online chat about Valhalla and Journalism 2.0.  I had never done a chat before, but it's essentially marathon top-speed IM-ing with a live audience whose comments are moderated but real-time.

Terrific group.  Mainly journalists trying to figure out how to make sense of the new world.  The remark I made that was most enthusiastically received by the group was that the transformation of the journalism industry produced "opportunities to make lots of money".  Good luck, I know the journalists of the world will migrate to the new world of Journalism 2.0 and make out well.

Here's a widget with the whole chat:

 

Convergence of the Network, Divergence of the Client

Valhalla’s Art Marks had an insight about one way the Internet transforms existing businesses: it weakens the value of special-purpose networks.

Consider what is happening with pay TV today.  Today some $56B flows into the cable providers, satellite providers, and other “MVPD” organizations who essentially control special-purpose networks for distribution of video entertainment content.  The “entertainment-weighted” equivalent flowing into Internet Service Providers for so-called “over-the-top” video is something like $5B.

It doesn’t take a genius, reflecting on the history of music distribution, software distribution, and news distribution, to conclude that most of the $56B will flow over to the Internet providers over the next four or five years, and the Internet will eat the lunch of yet another special-purpose network.  What VPNs did to VANs, what VoIP does to TDMA, an Internet video stack will do to pay TV.

At the same time that networks are converging, the devices attached to the Internet are diverging.  Yesterday we had PCs, then laptops, then netbooks.  Now we have smartphones and tablets.  Tomorrow we will have so-called net-tops (desktop appliances with Internet access and cloud-oriented computing), connected TVs and set-tops.  And the day after that, perhaps the full-blown “Internet of Things”.

It makes sense, and to paraphrase what, for example, David Isenberg said in 1997: “dumb network, smart edges”.

Product and Service cultures

Moving from Silicon Valley to DC in 2001, I found I was leaving the land of Product Imagination and entering the land… of what I’ve come to call Service Imagination.  The two couldn’t be more different.

 

Product Imagination is all about what goes into the product and what’s left out.  The product is a crystallized packaged of functionality which customers can take or leave.  It’s what you get.  Product imagination tunes the package to be most beguiling to the biggest bunch of customers, but there are always features (and therefore customers) who are left out.

 

Service Imagination is just the opposite.  Customer by customer, the organization delivers exactly what that customer wants, and then does the same for the next customer, and the next.  Service Imagination is about faithfully recording and reproducing requirements, and building them on a reliable timetable.

 

An organization built around Service Imagination can’t scale, of course.  There’s only so many customers you can faithfully support per engineering (or product requirements) body in the shop.  More customers require more bodies.  Product organizations don’t  have this problem.  The same development group can serve a customer base of almost any size (of course, some things have to scale, like product support and distribution, but R&D does not).

 

The two kinds of cultures (and hence the two kinds of businesses) hardly ever co-exist or cross over.  A product company is very hard to turn into a services company, and vice versa.  And what usually happens when they try is one of two possible hybrids.

 

Hybrid #1 is a “services organization with a toolkit”.  In this kind of organization, the repetitive element of various customer jobs is built into a kind of ur-product (often called a “toolkit” or “framework” or “template”) which is customized for each client.  The professional services organization which customizes the toolkit then becomes the locus of swelling body count, with the toolkit group emerging as some kind of product organization embryo.  Very rarely, this product organization spins out into a successful product company, but most often languishes on in symbiosis with the PS group.

 

Hybrid #2 is a “product organization bogged down with per-customer versions”.  In this hybrid, the company is supposedly producing a product but in fact modifies it for each customer (or for the biggest customers).  The symptom here is a development group that can’t implement new features because they are too busy with the per-customer modifications.  The company doesn’t turn into a full-fledge services company, usually, but languishes as a product company progressively falling behind.

 

Are there examples you see of the two cultures mixing, merging, or migrating?

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Whatever happened to RDF?

A friend and I were talking the other day, and we realized 1) that we both thought RDF was a nifty idea for organizing graph-oriented stuff and 2) that we had no idea what had become of it.

I looked around a bit and it seemed as if little was happening in the RDF community.  The links all seemed to peter out in the mid-‘00s, and I wondered where, if anything, the innovation was happening in this area.

Please comment if you can point me to cutting-edge companies and research ideas wrt RDF and its stack.

Inquiring minds would love to know.

Venture Capital as a Manufacturing Business

Half in jest and half to spur my thinking about our business, I’ve found it convenient to think of venture capital as a manufacturing business.

Most people in and around the venture business think of venture capital as a services business.  Our “customers” are our backers – Limited Partners – whose money we invest (hopefully) profitably.  Nothing wrong with that point of view, except it doesn’t lead you to think outside of the box.  And it’s wrong.

Our backers are, more accurately, our shareholders or our investors.  A limited partnership doesn’t work exactly like a joint stock company, but close enough, and certainly closer than thinking of them as customers.

OK, you might say, if you’re in the manufacturing business, what do you manufacture?   Very simply, we take raw materials – ideas, entrepreneurial talent, intellectual property, and so forth – and turn them into companies that can be sold profitably to a buyer, an exit.  We manufacture exits.

Our customer, then, is the buyer for our exits.  And they come in two forms.  In the B2B form of the venture business, our customers are major M&A acquirers.  Cisco is a VC customer.  IBM is a customer.  Google is a customer.

In the other form of sale, the B2C form, we “sell” the company to the public.  This is a “channel” sale because we use channel partners – otherwise known as investment banks – to distribute our “product” to the consumers.

How does this affect your thinking?  Very few VCs pay much attention these customers or channel partners, and the few who do reap outsized returns.