CloudAve Software in Business. The Business of Software. Thu, 20 Nov 2014 13:33:11 +0000 en-US hourly 1 Copyright © CloudAve 2014 (CloudAve) (CloudAve) CloudAve 144 144 Software in Business. The Business of Software. CloudAve CloudAve no no The Silent Benefits of PR Thu, 20 Nov 2014 13:30:16 +0000 I’ve been having this PR discussion with three separate portfolio companies at once so I thought I’d just publish my thoughts more broadly. I have written many times about PR so if you want a deep dive on the “how” of PR you may enjoy reading some of these posts. PR is an insanely valuable […]

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I’ve been having this PR discussion with three separate portfolio companies at once so I thought I’d just publish my thoughts more broadly.

I have written many times about PR so if you want a deep dive on the “how” of PR you may enjoy reading some of these posts.

Silent Benefits of PR

PR is an insanely valuable activity in early-stage companies. Very few investors understand this and even fewer startups. When you’re an early-stage business every dollar matters and because many startup teams these days are very product & technology centric they often miscalculate the importance of PR. I believe PR is often not tangibly measurable and for quant-oriented people this is hard to accept.

The benefits of PR are exactly that: Immeasurable. They are silent. They don’t show up in a calculation that says I spent $7,000 and I got X-thousands inches of press. It doesn’t work that way.

Why PR?

1. Recruiting – One of the hardest tasks of any startups is recruiting world-class talent. It is possible, of course, to recruit great people as an underground startup but it is 10x easier when qualified candidates whom you may not even know read about your company and are excited by your vision. I work with a startup who has an insanely talented & connected team but still struggled to add staff. After their recent PR they reported back to my that candidate inflow has gone up dramatically. As I said, PR has silent benefits that you barely recognize until your newly acquired team is firing on all cylinders and many people sort of forget the reason they attracted such great staff was from great press coverage / world-of-mouth.

2. Business Development - Biz Dev is hard. You’re a startup and every major company you meet is trying to size you up as to whether it’s worth their time striking a deal with you. Then they read about you in the American Airlines magazine or Wired or Recode and they think to themselves, “we should really reach out to that company.” You get the call. You’re happy. Business is going well. There is no attribution on that inbound phone call. By the time they’ve called they may not even remember themselves where they first heard of you. PR pays dividends in Biz Dev.

3. Fund Raising – No self respecting VC would admit (even to themselves) that they are influenced by what they read about you in the press. But human psychology can’t be ignore – we are all influenced by what we read. Sometimes you read it directly and think, “I should really reach out to that company” and sometimes it comes in the form of world-of-mouth like somebody I work with mentioning a company they read about. But as I like to tell entrepreneurs, great PR could add $10 million to your valuation or increase your chances of closing a round 2x and either case is a reason to make sure you have good press. It’s much hard to get funded as a company nobody has heard of.

4. Staff Morale – Often overlooked is staff morale. I once asked somebody at Accenture (where I worked early in my career) why they advertised so much at airports. The reply was, “So many of our employees fly every week to projects and by seeing us advertised every time they fly they feel more proud working for our organization.” Well, at least until Tiger Woods decided to send a few too many racy text messages :) But the reality is that employees love seeing their company get positive press. They get feedback from their peer group, boyfriend and parents. Classmates call. People give them attaboys. Press matters. You can’t measure the retention benefits but I promise it exists. Just like negative press hurts.

5. Enterprise Sales – The very first thing a potential customer does when you email or call to set up a meeting is Google you. When they want to propose spending money with you their boss Google’s you. So does the enemy who is fighting for the customer to choose another vendor. Give your champions ammunition.

6. Future PR – This is something often overlooked. When you eventually want your home run coverage in the Wall Street Journal or are trying to convince Good Morning America to have you on their show – the first thing the journalist or executive producer will do is Google you. If they find great pieces on you from your past PR they are more likely to want to talk. Of course you need a new angle to get a journalist interested because they don’t simply want to write what everybody else has covered. But neither do they want to be out on a limb as the first person predicting you will change the world. Press loves company as much as they love exclusivity. Ironic, of course. But true. I promise.

7. Customer Acquisition - I left customer acquisition for last intentionally. Why? Because every single company I talked to thinks this is the reason to do PR and often it is the least important reason. The narrative goes like this, “We appeared on TechCrunch” or “We were featured in the App Store” but we didn’t get nearly the downloads we expected. Many people downloaded our app / visited our website / etc. but didn’t convert to sales. So this was a wasted effort. We’re going to dial down our PR for a while.”

See points 1-6. Rinse. Repeat.

When I was the CEO of my first startup our company won the B2B PR company of the year in the UK. Not for startups – for any business. In the write up of our success I was quoted as saying, “If I had $1 dollar left to spend on marketing I would put it to PR.”

If anybody tells you differently be suspect. Most people don’t understand the silent benefits.

What have your experiences been? What stories can you tell about the silent benefits to your company?


(Cross-posted @ Both Sides of the Table)

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The Silent Killer – The Company Your Community Never Created Wed, 19 Nov 2014 14:30:30 +0000 I was at a dinner recently in Chicago and the table discussion was about building great companies outside of Silicon Valley. Of course this can be done and of course I am a big proponent of the rise of startup centers across the country as the Internet has moved from the “infrastructure phase” to the “application […]

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silent killer

I was at a dinner recently in Chicago and the table discussion was about building great companies outside of Silicon Valley. Of course this can be done and of course I am a big proponent of the rise of startup centers across the country as the Internet has moved from the “infrastructure phase” to the “application phase” dominated by the three C’s: content, communications and commerce. But the dinner discussion included too much denial for my liking.

I think startup communities being simple cheerleaders doesn’t help anyone. Those of us outside Silicon Valley need to make an effort to effect change not just wish for it.

At the dinner some of those arguing that Chicago has everything it needs now that it has built: GroupOn, Braintree, GrubHub and others and that it has “come along way” and “will never get the full respect it deserves just because it’s not Silicon Valley.” But I think this misses the point. I’m a very big fan of Chicago. I started my career at Andersen Consulting (now Accenture) so I went to Chicago many times a year for nearly 9 years. I then got my MBA at University of Chicago so I secretly pull for local entrepreneurs as long as they don’t make me visit in the Winter any more.

But no community can become complacent with the wins that it has. It’s not the great companies you build, it’s the silent killer of those that should have been build locally and weren’t. It’s the thousands of jobs that weren’t created but you don’t even know it.

Think about Facebook had it stayed in Boston. Could it have become the behemoth that it is today? Who knows. But I’ll bet the Boston community would take 50% of the success of Facebook built locally. And the truth is that successful startups beget more successful local startups, wealthy VPs who go on to build their next startups, etc. Even Mark has acknowledged moving wasn’t the be all, end all in this famous interview

“If I were starting now, I would have stayed in Boston. [Silicon Valley] is a little short-term focused and that bothers me.”

Boston is still a great tech hub. But wouldn’t it want to be great PLUS have Facebook?

We have similar stories in LA and most people don’t know it. For example, Lookout is a mobile security company that was founded by three talented graduates of USC. They started their company in LA but a couple of years after raising capital from Khosla Ventures in the Bay Area they ended up relocating there. A few years later they announced $150 million in a funding round at $1 billion+ valuation and are ramping up jobs to secure their market-leading position. You could say the team would have gone North anyways. Perhaps – who knows? But I know with local funding and local support that’s certainly less likely.

And consider Snapchat – one of our hometown favorites as they’re based in LA (Venice Beach). Luckily for our community the founders decided they wanted to build their company in LA regardless of not having local funding from LA. That’s our great gain as Snapchat has also raised a lot of money at a monster valuation ($10 billion reported) and has been scooping up talented Stanford engineers and relocating them to LA. Locally we call it “the Snapchat effect.” The VPs of SnapChat will be LA’s great founders 5 years from now.

Silicon Valley is littered with startups where the founders were originally in LA. Klout was an LA company – sold for $200 million to Lithium. As was FarmVille (sold to Zynga) and many, many others.

Local capital matters. Local mentors matter.

That was my original idea behind Launchpad LA. I figured if we couldn’t fund every company locally we should at least embrace them as a community and show that we’re willing to mentor them whether they raise their money in town or not.

So what can a community do?

I often point out the story of when we raised our fourth fund a few years ago. I went to see several LP funds in Boston. At least twice I had conversations that went like this, “Yes. It’s true. Your fund performance has been great. But there’s also several great funds in Boston and while our first priority is to returns we have an equal responsibility to local funds and local jobs.”

LA public pension funds and endowments have historically been the opposite. I think government and community members need to understand that capital formation is an incredibly important part of economic revival. People often say, “Great entrepreneurs will build a community and the capital will follow.” I don’t see much evidence of that. I think it’s a combination of the two. It’s clear capital with no talent ends up having to travel to do deals. But talent with no capital is another word for migration.

And then there is public policy. Historically the City of LA has been hostile to startups. I’m reminded of LegalZoom who was founded in LA but moved it’s headquarters to Glendale and much of its operations to Austin, Texas. While LA was trying to impose archaic taxes on the firm and seemed to care less about its existence since it was a “startup” – the first lady of Texas welcomed them to Austin by picking up the CEO at the airport on his first visit there.  It’s no wonder hundreds of jobs migrated. Luckily since then we elected Mayor Eric Garcetti who understands the importance of startups and of technology and venture capital on job creation.

But we still need more funds. No – I’m not worried about the competition. We’ll win our fair share of deals. But when you remember the Snapchat effect you see that I gain even from the deals we didn’t get to do. I’m guessing the future leaders of Lookout will build companies in the Bay Area.

Communities can make a difference. I wrote about the awesome efforts of Cincinnati to stimulate its startup community and the role of Paddy Cosgrave in Dublin, Ireland as well the entire Irish business community, the IDA, etc. who woo businesses to put their headquarters there. I also covered the impact of Brad Feld in Boulder or Fred Wilson in NYC as observed from my keynote on a trip to Seattle, which I felt could have a huge boom if its elder statements embraced startups a bit more.

Don’t get me wrong. Chicago has made strides. The Pritzker Family has been very active and the opening of 1871 as an entrepreneurial hub is a great example. But my conversations with countless Chicago entrepreneurs suggests it has similar issues to all non-Silicon Valley centers: not enough venture capital, too few tech angel investors, not enough talent for product management or engineering, not enough local tech powerhouses to drive local biz dev / keiretsu. I think this is true of LA, NY and many other tech communities so I’m not singling out Chicago.

My point is this … cheerleading isn’t enough. We need to help create local venture capital funds who may be national in investment strategy (as we are) but who will do more than their fair share of fundings locally (for us that’s 50%). Fund formation + local mentors + local talent = a shot at creating successes that drive the future job growth of our great cities.

Photo Credit from 500px

(Cross-posted @ Both Sides of the Table)

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IT spend is growing, but CIOs ‘just don’t get it’ Fri, 14 Nov 2014 16:30:05 +0000 New research demonstrates profound challenges facing IT and Chief Information Officers. CIOs who are "IT survivors" will build strategic relationships with stakeholders and other constituencies.

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The role of IT and CIO continue to evolve as broad economic and cultural changes shift business expectations of technology in the enterprise. As a result, this is a tumultuous time for IT and many of the old rules defining CIO engagement no longer apply.

Technology disassociated from direct business consequence, decision-making, and action is not a viable strategy for today’s CIO. Modern IT must help departments across the organization make better and faster decisions. Although infrastructure and security remain fundamentally important considerations, business improvement is the core mission of IT.

A new study from the Society for Information Management (SIM) documents the changing role of IT and the CIO. The report is among the most detailed and transparent I have seen, representing a huge cut above the shallow, self-serving documents so often peddled in the name of research.

To complete this study, called the 2015 SIM IT Trends Comprehensive report, SIM received 1,002 responses, including answers from 839 senior IT leaders representing 717 unique organizations. Of these, 451 identified themselves as CIO, by title or role. The report includes an appendix describing the research methodology in detail.

The press announcement includes this brief summary:

  1. IT spending is on the rise, with companies on average spending more than 5 percent of revenues on IT (up from about 3 percent from just a few years ago). To illustrate, that means that IT budgets of the largest companies in the Fortune 500 can be as large as 75 percent of all of the companies on the list.
  2. Largely as a result of that investment, IT is becoming more strategic and more complex. While at the same time CEOs are complaining that CIOs “just don’t get it.” IT is keeping the lights on, but CEOs aren’t getting the strategic foresight and innovation they are looking for from IT leaders.
  3. Companies are investing in big data in big ways to make better business decisions.
  4. Cyber security threats are driving more IT spending to help combat those threats.

Top IT management concerns

Respondents choose up to three issues from a list of 40, to determine the most important points of concern. This table lists the top ten:

SIM IT Trends - IT Concerns

The report explains that historical data supports the assertion that IT priorities are becoming increasingly focused on business issues:

there has been a shift in priorities and focus among organizations and their IT leadership away from tactical and operational IT issues like efficiency, service delivery, and cost reduction to more strategic and organizational priorities like business agility, innovation, the velocity of change in the organization, IT time to market, and the value of IT to the business. It seems that IT is becoming more strategic and business-focused and presumably the organization is becoming more digitized.

Largest IT Investments and Most Important Technologies

In general, there is good correspondence between level of investment and technologies that IT believes are most important to the organization. The following table compares respondents’ most important investments to their largest investments:

SIM IT Trends - IT investment

The report comments on differences in the two columns:

As for the differences in the rankings between the two lists, Data Center Infrastructure, a capital intensive item for an organization, ranks only sixth on the most important technology list (with 13.1% selecting it), but second on the largest IT investment list (selected by 19.1%). Legacy Applications, selected by 5.6% of organizations and ranking as the 15th largest investment, was selected by 7.9% to rank 10th as a most important technology. Big Data is 10th on the top 10 list of largest investments (selected by 8.8% of organizations), but only ranks 12th on the most important list (selected by 7% of responding organizations’ senior-most IT leaders).

IT spend as a percent of revenue

Percentage of revenue is a useful tool for organizations to benchmark their level of IT investment against similar companies. The respondents in this survey include a broad range of industries and company sizes. For this question, 493 unique organizations responded with their investment as a percentage of revenue. As showing in the graph, these companies averaged 5.145 percent in 2014:

SIM IT Trends - IT investment as percent of revenue

The report comments on the investment level reported by the survey:

average IT spending as a percentage of revenue for the past three years has been significantly above the 10-year (2005-2014) average of 4.08%. This may represent a “new normal”; however, it may also to some extent be indicative of “catch up” IT investments making up for the lean “Great Recession” years of 2008 to 2010, when both revenue and IT investment contracted in most organizations (see Figure 13, Figure 15, and Figure 16). This increase is also being affected by new investments in cloud and shared services, digital marketing and analytics, and health care informatics, as well as the increasing digitization of organizations in general.

IT alignment and credibility

The changing role of IT raises profound strategic questions for the CIO and his or her relationships with other parts of the organization. Questions around level of investment in IT, CIO priorities, and customer satisfaction with IT revolve around the relationship between IT and other departments. SIM recognizes this and therefore added several questions on IT strategy and innovation to the current year’s research:

SIM IT Trends - IT strategy and innovation

Concluding thoughts

The SIM research is solid, and CIOs should feel confident using the results to benchmark their performance against other companies.

The report includes data on a variety of topics, but perhaps the most important relate to IT’s capacity to formulate business strategy and participate in high-level decision-making. The following table lists CIOs’ top performance metrics:

SIM IT Trends - CIO performance metrics

These metrics show that CIOs understand the importance of demonstrating value to the business. However, a body of other research indicates that many business leaders do not think IT provides sufficient value. I will write about this in more depth later, but in one study from Deloitte, for example, only 49% of CIOs said their own IT organization is a strong partner to the business. It is a striking admission for CIOs to acknowledge lack of effectiveness in this key area.

I asked the lead researcher, Professor Leon Kappelman of the University of North Texas, for his advice to CIOs. Kappelman offers four keys to being a “CIO survivor,” as he calls it:

  1. Learn the business; be the business; become the business
  2. Develop a flexible, agile infrastructure to ensure that IT can keep pace with business changes
  3. Build a strong team with a strong bench
  4. Create value-creating partnerships with other senior executives and business leaders; Do the same with customers and suppliers of the business, and with your IT vendors

The message to CIOs is clear: there is categorically no substitute for developing strategy-level relationships with senior business decision-makers and other constituencies. These relationships form the backbone for advancing IT and providing higher value to business partners.

(Cross-posted @ ZDNet | Beyond IT Failure Blog)

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Part 4 of “Predictable Revenue Guide to Tripling Your Sales” with Aaron Ross+SaaStr is Out Now Fri, 14 Nov 2014 16:25:29 +0000 It’s getting there. The fourth and final part of the 1.0 version of the “Predictable Revenue Guide to Tripling Your Sales”, the SaaStr + Aaron Ross + SaaStr sequel to the original Predictable Revenue, is out now. You can download it here. The next step is a final revision of what we have on the way to […]

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Screen Shot 2014-11-13 at 1.44.18 PMIt’s getting there.

The fourth and final part of the 1.0 version of the “Predictable Revenue Guide to Tripling Your Sales”, the SaaStr + Aaron Ross + SaaStr sequel to the original Predictable Revenue, is out now.

You can download it here.

The next step is a final revision of what we have on the way to print publication sometime in 1H’15.

Any comments or thoughts, please post below or send in.  We’ll take as much of the feedback we can and put it into the final draft and print.

(Cross-posted @ saastr)

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SaaS Inside Sales Benchmarks Survey | Take It! Fri, 14 Nov 2014 16:25:06 +0000 Tweet Me! As many of you may know, Trish Bertuzzi and the folks over at the Bridge Group publish a lot of great stuff on Inside Sales strategy and operations, including inside sales compensation benchmarks, lead development rep best practices, outbound selling strategies, and on an on. Their upcoming 2015 Inside Sales Metrics and Compensation […]

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As many of you may know, Trish Bertuzzi and the folks over at the Bridge Group publish a lot of great stuff on Inside Sales strategy and operations, including inside sales compensation benchmarks, lead development rep best practices, outbound selling strategies, and on an on.

Their upcoming 2015 Inside Sales Metrics and Compensation report will feature expanded coverage and focus of SaaS inside sales benchmarks in an extra effort to service the SaaS community. But the numbers are only as good as the data, so I’m reaching out to all my SaaS sales colleagues to TAKE THE SURVEY!! It only takes 6 to 8 minutes to complete. As motivation, SURVEY PARTICIPANTS WILL RECEIVE A PRE-RELEASED COPY. If you don’t do it, your competitors will ;) .

saas inside sales benchmarks

For reference as to how great the fruits of your labor will be, here is a link to the 2012 Inside Sales Compensation and Metrics report. And, if you haven’t come across the other inside sales resources the Bridge Group has published, I highly recommend you check in out.

(Cross-posted @ Chaotic Flow by Joel York)

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Digital : Disruption To Edge Tue, 11 Nov 2014 13:05:00 +0000 The sweeping opportunities arising out of digital centered structural changes in enterprises are really enriching and can create deep business impact in the short and, medium and long-term. The participants in the digital world enjoy high degree of empowerment with a mouse click or with access from any digital front-end device. In the multichannel world, […]

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The sweeping opportunities arising out of digital centered structural changes in enterprises are really enriching and can create deep business impact in the short and, medium and long-term. The participants in the digital world enjoy high degree of empowerment with a mouse click or with access from any digital front-end device. In the multichannel world, with different ways of participants coming together, a wide range of combination of association get formed across the offline and the online world. Many of the associations will be experimental in nature to start with and over-time the collaboration aspects will become more and more important and will help create value for the enterprise/ecosystem. Seen at a different level, it can be seen that digitalization is substantially changing the ethos of interaction in our social and business lives.

On an ongoing basis, one can see that digital disruption is shifting the sands of the profit landscape as well. Studies show that enterprises that have embraced digitalization report better returns and industries affected by digitalization, by being unprepared have had to sacrifice sales and margins. Clearly, value is migrating and enterprise leaders aren’t always sure if they’re experiencing short-term cyclical change or long-term structural change. There is consensus across the board in may enterprises that legacy assets are losing value and there is a widespread need to invest to capitalize on new, digital-related opportunities. More subtly, companies are developing new digital value in their supply chains and processes. Due to the wide reach and deep impact digital can enjoy, many enterprises are forced to rethink the very nature of their core business.

It’s now well known that traditional barriers of entry don’t hold water with players muscling in with digital at their core of business. Boundaries get distorted, categorization and niche gets torn apart, enabling a new wave of entrepreneurs and getting innovation aficionados into the mix. Digital technologies and their extensions can power a phenomenal range of technologies centered innovations – these could be far reaching in their impacts and can have a powerful cascading effect across the ecosystem. The traditional players face enormous pressure to defend and grow their turf and this collective continuum of changes and their impact – bot for winning, defending and sometimes losing can be termed as “Digital Disruption” . The intensity and the range of time to experience this disruption may change across sectors and geographies. As with any major change, in some sectors, the impact may be large and may be felt at once or over time and in some sectors,the impact may be felt only over time. Some sectors/ lines of business may actually get created because of the digital forces in action.

Enterprises – big and small impacted by the digital wave of disruption have really no choice but to find effective ways to respond to defend or take advantage to grow. With the digital onslaught being so powerful – think CAT5 storm is passing through your region – the impact will be deeply felt. The enterprise response can happen at various levels and typical response would be centered around:

- Reimagining corporate strategies and business models

- Customer centricity

- Revenue stream reassessment

- Cost structure revisions

The winners here take the long view and approach any change top down – with deep commitment and care. The wide ranging impact should factor in the changes needed internally and a clear appreciation of the way traditional business landscape is getting changed – the very nature of demand generation, consumption, competition, communication, customer expectations – all have profoundly changed. The balance of power in the commerce equation between the producer and the consumer is now firmly loaded in favor of the consumer . The wide adoption of connectivity and the resultant wave of information and the ability for the consumers of the information to take part and share their views to the potential next set of customers in real time gave made the consumers the unanointed kings and queens in the equation.

First the issues around strategy – its important to realize that one size fit all wont work for all, this wont work for players even within the same industry – as value chains undergo huge change. The opportunities and threats could significantly change for different business inside enterprises. In recognition of this, the approach to embrace the digital wave has got to be so specific that business need to define the right strategy not just at the enterprise level, but preferably at the business unit level. The core model of operation needs to be reassessed for enterprises trying to embrace digital – in this universe, the power of information and data are so formidable, that many times business integration revolves around different ways of rejigging the information flow and set stage for opportunities to create more value across the chain.

The question at a high level that needs answer for every business is how to positively embrace digital disruption. While, this is a very detailed exercise calling for a rigorous evaluation of possibilities to be engaged in a highly disciplined way – assessing possibilities, opportunities for changing the game and for further upsides in traditional business outcomes, it can be safely said that the key tenet of digital disruption is about the range and amplitude of change that business could experience soon. This also involves assessing the myriad possibilities that can be reaped when powerful digital opportunities get pursued across various business streams. Digital at its heart can allow business by helping them through innovative means to target new customer segments, power new business models and in some cases help create entirely new lines of service for the enterprise. Digital technologies can help enterprises to explore adjacent markets more easily – either on their own or as part of a larger ecosystem. Repeat this for exploring adjacencies in customer segments, geographies, product segments etc. Scaling up and scaling wide can become distinct possibilities for business, when they embrace and get digital.

Already digital promotional/ad spend is becoming a dominant category in an enterprise customer/prospect reach out efforts. These mechanisms help enterprises target newer segments leveraging the ecosystem – search engines and low cost online advertising etc. The data that gets collected will embolden business to more specifically target their customer-base, opening possibilities of cross sell, upsell and rich returns. For example, location information discerned through maps or email usage or spreading content through multiple channels, value added data procured from mobile service providers – all these help in better targeting the enterprise customers. The customer segmentation models gain more maturity by learning from enterprises more focussed on enhanced targeting mechanisms.

Some strategies that help enterprises reach new customers include adequate leverage of the 4P’s of marketing and beyond. For example, social is becoming a significant frontier in targeting – in allowing business to interact directly with customers and prospects and being able to reach out to them at very low cost to the enterprise. With adequate leverage of social enterprises gain much better targeting insights, leading to more better granular segmentation.The highest level of maturity in an enterprise digital journey is the ability of the enterprise to leverage the pervasive digital connections that exist in their ecosystem connecting systems, people, location and things. All the technologies – ranging from smartphones to remote sensors, need to be appropriately leveraged for pursuing strategy refresh, customer centricity, creating new business models. realigning the cost structure and setting up new new streams of revenue. Such measures would collectively propel the enterprise to acquire a digital edge, which it needs to continually review and hone for success.

(Cross-posted @ Sadagopan's weblog on Emerging Technologies,Thoughts, Ideas,Trends and The Flat World)

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The Audacious Plan to Make Electricity as Easy as WiFi Tue, 11 Nov 2014 13:01:44 +0000 When I first met Meredith Perry she was 24. That was three months ago this week. Today I’m handing her the largest A-round check I’ve ever written as a VC as we lead her $10 million A-Round at uBeam. As I’ve written about recently, at Upfront Ventures we started talking a couple of years ago about […]

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When I first met Meredith Perry she was 24. That was three months ago this week. Today I’m handing her the largest A-round check I’ve ever written as a VC as we lead her $10 million A-Round at uBeam.

As I’ve written about recently, at Upfront Ventures we started talking a couple of years ago about wanting to fund stuff with more meaning. I think this is a combination of being realists as venture capitalists that outsized returns in our funds must come from taking on bigger, more impactful projects that can move markets. It is also a function of the stage of much of our careers where we aren’t interested in playing small ball with incrementalism on how to squeeze out an extra 5% of margin by optimizing the Internet slightly better.


The reality is that as VCs we have limited allocations of where we can spend our time so we want to attach ourselves to projects in which we, too, can be passionate. It’s true the some VCs have started writing so many checks that they resemble stock pickers but the majority of us still have less than 10 board seats at any time and tend to go pretty deep so the result is that we care deeply about where we commit our time.

Meredith came to see me along with the CTO Marc Berte.  They had been introduced by my friend Brian Garrett, a partner at Crosscut Ventures and the ambition outlined in their deck seemed almost unbelievable, “to make wireless charging of phones (and other devices) as easy as WiFi” that I had to see it for myself. They demoed the electricity transfer with a physical device that looked like something that would never be allowed on an airplane. But it seemed to work.

I spent one hour with them. I had back-to-backs all week and that’s what it’s like when you squeeze in a last-minute meeting. But I walked out and asked our entire team to go in after I left. I said simply, “That’s the most ambitious project I’ve seen since I became a VC.”

The approach was clever and novel. Take electricity as an input and through a process called ultrasonic transduction to convert it to a soundwave that can be beamed from a transmitter to a sleeve on your mobile phone that would use and ultrasound receiver to convert it back to electricity and charge your phone. Many of their innovations that allowed this to work when nobody else had solved wireless transfer at a distance (several meters) included:

  • A transmitter compact enough to be practical to hang in restaurants, coffee shops, your car, your home, etc.
  • A receiver thin enough to be a sleeve on a phone and small enough in surface area requiring the right materials (they can transmit & receive with devices thinner than 5 millimeters),
  • Precision tracking software so they can focus the sound beam to concentrate the sound wave exactly to your receiver and avoid inefficiencies of diffusion
  • Methods for identifying the size, shape & motion of devices while they are moving
  • Etc.

The goal is straightforward. uBeam intends to charge your mobile phones at amazing speeds while you are simply using your phone or setting it down anywhere. Over time, working with manufacturers, uBeam has a method that will allow the battery life to last 10x longer than today’s batteries before they degrade. They can allow manufacturers to use thinner batteries and thus further miniaturize phones.

And the truth is that Team uBeam doesn’t want to stop at phones. With the explosion of “wearables’ wouldn’t it be nice if you didn’t have to charge your watch, fitness tracker or noise-canceling headphones? What about if elderly people never had to ask a relative or healthcare worker to change the batteries on their hearing aids? The practical uses for uBeam technology is limitless.

This kicked off a frantic process of discovery for me personally

  • Did the physics actually work? Check
  • Was it safe? Well … for starters it is just an inaudible soundwave being transferred – as in the kind also used for women during pregnancy. It also happens to be how your car likely tells the distance to objects when you park or if you have a side assist whether you can change lanes safely. Check
  • Was there consumer demand? No brainer. If electricity could be transferred like WiFi but as safe as a soundwave we use on pregnant women’s bellies and at a price-point that was attractive this is a multi-billion market. Check.
  • Could we produce this at cost? At scale? Here is where having Marc Berte and a team out of MIT who have designed systems like this for years gave one confidence we could do something others couldn’t copy and at price points that could make us market leaders over night.
  • Did anybody hold patents that would prevent us from using this technology? I seldom hire patent attorneys during due diligence but this was too important. We hired OSHA regulatory lawyers. We hired IP specialists to review prior art. We grilled their IP attorneys. The more we dug the more confident we became (and so did every advisor we used).

And then the most important factor for me – who were these people? Were they ambitious? Did they have the right skills? Would they build a world class team.

Meredith Perry came up with the idea for uBeam while still in college at University of Pennsylvania and like many great inventors won her school’s business plan competition.  It turns out that while she had the right idea the materials needed some reworking to come in at the cost structure required to build a business at scale. Marc Berte started helping her to perfect the materials and approach and the two together had a huge break-through that led Marc to decide to join Meredith in her journey. He became so passionate about the idea that he decided to go full time and began recruiting some of MIT friends to the project.

With Meredith I did every on-reference-sheet call I could make and many off-reference-list calls. I followed my playbook on reference calls making sure to ask both positively worded as well as skeptical questions. “Ambitious,” “Driven,” “Crazy Smart” and “Secretive” were the adjectives most used.

She had raised seed funds from a who’s who list of investors including Andreessen Horowitz, Founders Fund, Marissa Mayer, Marc Cuban, Troy Carter and so on. Many people had small, very early bets on the company but the question was whether I was going to take the first big bet. One of her seed investors is Jonathan Triest of Ludlow Ventures who I really enjoy speaking to and trust his input. He was doubling down on his investment and also gave me a great lay of the land on handicapping how all of the other seed investors saw the company.

I also got the insights of her biggest champion from within Andreessen Horowitz, Margit Wennmachers, who talked me through when she first met Meredith, how she’s grown, the maturity of Meredith to interact with Silicon Valley’s good & great and be nonplussed about it. She connected me with Andreessen’s due diligence team who were surprisingly open with all the technical analysis they had done. It was impressive. And then I spoke with Marc directly who also gave me refreshing views on the company and his word that he would personally stay involved from A16Z and a desire to invest more than their prorata in any round.

But the most important character building itself was just seeing the talent of the people who were lining up to work with Meredith. Accomplished executives well her senior were very comfortable joining Meredith on this journey and trusting her leadership to raise capital, do business development deals, build a team and ultimately a great company.

And finally it comes down to the good old instinct test. Through many meetings discussing strategy, approach, recruiting, financing, etc. I became impressed with Meredith’s maturity, willingness to learn and lack of fear in taking on the enormous challenge of leading a company as ambitious as uBeam. I am inspired by her ambitions and plans.

I can’t wait to see what Team uBeam produces.

Note: Company headquarters is in Los Angeles with major R&D also happening in Northern Virginia.


(Cross-posted @ Both Sides of the Table)

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CUL8R Active Directory Mon, 10 Nov 2014 09:43:33 +0000 The 1200 baud modem was sweet in its day, but now we have broadband. The fax machine and beeper transformed businesses, but now we have smart phones, messaging apps, and near field technology. And while Active Directory is still used by 95 percent of the Fortune 500 today, with the rise of the cloud, it […]

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old modemThe 1200 baud modem was sweet in its day, but now we have broadband. The fax machine and beeper transformed businesses, but now we have smart phones, messaging apps, and near field technology. And while Active Directory is still used by 95 percent of the Fortune 500 today, with the rise of the cloud, it will soon be time to move Active Directory from the core to a legacy support system, to the trash bin.

According to a compilation by BetterCloud, Piper Jaffray predicts that in five years, one third of workloads will run in public clouds. Gartner has found that Google’s productivity suite is taking market share from Microsoft, predicting that by 2022, of 1.2 billion office suite business users, 695 million will rely on the cloud. My own conversations with today’s hottest start-ups all sound the same – these businesses are not managing files, email, and applications behind firewalls. It’s cheaper and faster to use apps like Egnyte, Dropbox, Huddle, BambooHR, and Marketo. In this new world, Active Directory functions poorly as an identity management solution.

For example, a recent client, a company with 15,000 employees in more than 2,000 locations, tried to roll out Office 365, but the administrators were completely overwhelmed by the complexity of using Active Directory Federated Services (ADFS) and had to seek an alternative solution designed with cloud identity management in mind. The complexity of extending Active Directory to the cloud slows IT deployments to a crawl. Born at a time (the 1990s!) when IT dictated every aspect of technology, this identity management solution hasn’t kept pace with the new technologies organizations need to implement. For example, implementing single sign-on (SSO), a foundational component to identity management, typically requires a custom integration project that can take months to finish, even without including essential features such as multi-factor authentication and rapid de-provisioning. And every time you add a new application into the mix, you have another integration project.

The move to the cloud should accelerate time to value and offload complexity, but mixing the cloud with Active Directory and ADFS is doubling your investment in the past, while waiting longer for the future.

Active Directory makes life more difficult for IT. The growing number and diversity of enterprise user communities and cloud applications puts pressure on IT to untangle a mountain of different security policies and authentication procedures. Managing all this in Active Directory, especially in today’s decentralized organizations, is incredibly time-consuming, leading to higher identity management costs and an overextended, discouraged IT department. Just getting a short-term contractor access to the right apps with the right entitlements can take hours or days, wasting precious time and money.

The move to the cloud should enable organizations to do more with less, but with Active Directory in the mix, it’s only IT that does more while business users do less.

Finally, relying on Active Directory in the age of easy-to-deploy cloud apps increases security risks by encouraging the rise of “shadow IT.” Users know how easy it is to sign up for cloud apps and begin using them, and facing their own pressure to perform, they have no patience with an IT department hampered by out-of-date tools, so they simply bypass IT. In fact, in our 2013 State of Cloud Application Access Survey, 71 percent of respondents admitted to using unsanctioned apps like Dropbox and Google Apps to get work done, while 44 percent said employees still manage passwords on sticky notes and spreadsheets.

The move to the cloud should never compromise network or data security. In fact, it can improve it dramatically, since cloud vendors endure security audits that would make many IT organizations crumble. But resting these efforts atop Active Directory has many hidden costs, with only an illusion of security.

Active Directory gained popularity for a good reason, but it should now take an honored place in the Hall of Fame. While enterprises with a large Active Directory install base will require time to wean themselves from the solution, those companies that resist changing their identity management strategy because of inertia, product loyalty, or in-house expertise will find themselves less productive, less secure, less agile, and ultimately less competitive.

(David Meyer is VP of Product at OneLogin, a Real-Time Identity Management & Single Sign-On provider.)

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Top 4: “Nobody Reads Blogs… Except Everybody Read Blogs” Mon, 10 Nov 2014 05:20:12 +0000 I know I know, the marketers say it’s all about the single articles now. Nobody reads blogs. Nobody subscribes to blogs. Ya know, except of course for that small percentage of people that do. …marketing, it’ll make you insane if you’re not careful. But seriously, here’s a few blogs that are actually worth reading. They’re […]

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I know I know, the marketers say it’s all about the single articles now. Nobody reads blogs. Nobody subscribes to blogs. Ya know, except of course for that small percentage of people that do.

…marketing, it’ll make you insane if you’re not careful.


But seriously, here’s a few blogs that are actually worth reading. They’re worth subscribing to and surprisingly, they’re blogs that businesses organize and write. Yes, I have and might be writing for some of them in the future. But I’m honestly basing this list on a few specific criteria:

  • The blog has to include some technical content that is important to getting kick started with their product and getting kick started with other tooling around their space.
  • The blog has to include articles that have industry information that is relevant to conferences, meetups, and other community related activities.

Here’s my list of reads lately:

Codeship Blog – This company provides continuous integration and deployment services. Everything is super easy to get started with. The team is active in the tech communities. They regularly blog about getting Java, Node.js, Rails, Ruby or other stacks up and running, deploying cleanly and deployed to their final destinations.

Orchestrate Blog – The crew at Orchestrate (which I have written for a while back) have a steady stream of awesome flowing from their brains. The blog is chock full of ideas, implementations of various apps, and they are involved via the blog and in person with community events, conferences and the like. It’s a solid blog to be subscribed to.

AWS Blog – I’ve never written for the AWS blog, but I follow it as it is a steady stream of updates about the product and services but also includes other information regularly. They don’t always branch out beyond their space, but they’re so huge and cover so much space, the topics end up being pretty diverse anyway.

New Relic Blog – I write for New Relic on a regular basis. They’ve got a great selection of posts that go up from meetup recaps and notifications, to conference recaps, commentary and follow along of events and of course the technical content for everything from .NET to Java to Nodejs to Ruby on Rails. You name it, they likely have tips, tidbits and tricks every now and then.

There are a few others that I might tack onto this list in the future. But for now, that’s my top 4.

(Cross-posted @ Composite Code)

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Why You Don’t Want to Give Financial Information to All of Your Investors Mon, 10 Nov 2014 05:10:29 +0000 We all know that funding markets have changed for startups. The trends are well understood: more angels, more seed funds, more crowdsourcing and so forth. We all can intuit the benefits to founders of these trends so there’s little reason to elaborate. What is less understood are the consequences of these changes. I have blogged about […]

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We all know that funding markets have changed for startups. The trends are well understood: more angels, more seed funds, more crowdsourcing and so forth. We all can intuit the benefits to founders of these trends so there’s little reason to elaborate. What is less understood are the consequences of these changes.

I have blogged about some of the downside consequences of the changes and the private information I have says the consequences are much worse than is reported in the press since few people publicly talk about

1. How founders get screwed on convertible notes
2. How party rounds can burn you if it takes time to find your groove

There’s another issue I can add to your list of things to be aware of – information rights. Generally speaking in venture capital financings the legal documents will specify that only “major investors” (a threshold set in the agreement – which can be $500,000 investor or more). There is a reason for this. In a funding round with 1 or 2 VCs and 15-20 angels or 4-6 seed funds if you gave every investor you financial information and performance metrics your proprietary information would increase in its probability of leaking out.

But shouldn’t an investor who has given you $50,000 of his or her hard earned money be entitled to know how you’re doing? Yes. And no.

I am generally a fan for providing management updates periodically for all investors but in doing so you must assume that what you send out will get read by others and thus hold back on your most sensitive information. I’m not saying that VC behavior is always impeccably honorable but the truth is that there are so few VCs and the reputational costs of bad behavior are now so high that becoming known as somebody who leaks confidential information can have immediate negative consequences. So I recommend a high-level “state of the company” email a couple of times a year but a message that you assume might get shown to others. I’d keep your financial performance to your board members who are anyways directed by law to represent the interests of all shareholders. This is no different than a public company where of course most investors are not given detailed financial and performance information and when they are it is quarterly and after the fact.

There are now so many new early stage investors and many of these are new it’s not so obvious whom you can trust.

Let me give you a real world example from this week.

We led an investment round in a company a while ago in which we wrote a seven-figure check and have taken a board seat. We are doing what we do – writing larger checks and playing an active role at the company. Another investor – not one we’ve worked with before and not likely one we’ll work with again – wrote a $25,000. Simple enough – we like allowing small investors into rounds because they often bring additional relationships to a company that can be helpful.

This investor decided to use the fact that they got into a company that appears to be doing well to their benefit to almost fraudulently persuade limited partner investors to give them money. Here’s what they did: They blasted the market with emails describing how they “co-lead” this deal with us (they did not) and how they are planning to lead the next round with a $10 million+ check (which apparently they don’t have). They asked LPs to rush to get into their next side-car fund to have access to this great deal plus the LPs also get the “benefit” of investing in their next fund.

If you don’t mind investing in dishonest people perhaps there is still room for you in their round?

I couldn’t believe my eyes since the entire thing was such a fabrication and felt like it was bordering on securities fraud. In the email (I have seen a copy) was all of the companies performance data, revenue data, financing plans and company PPT decks, which is surely a violation of the confidentiality clauses of our legal agreements. They have listed forward revenue figures that are highly questionable and bring the issue of SEC oversight to my mind.

Let me be clear about this. I have publicly said many times that there is a positive to crowd funding. But I have always warned of the consequences of not very well regulated situations in wish investors (and even entrepreneurs) produce information bordering on financial malfeasance.

Is this investor on AngelList? You betcha. Does he blog about venture capital and try to advise entrepreneurs? Yes. Speaks on CNBC. Attends 500startup events. Has written a book on venture capital. I’ve never heard of him until now. But it would be super easy for him to represent himself to LPs and to entrepreneurs as an upstanding individual.

I was just super fortunate that since it listed our name in the email solicitation that an investor reached out to me to ask us about it. I was furious and although I have no intent of talking about this investor publicly you can be sure we won’t be working with them, recommending them or endorsing them with LPs. You can be sure that if the SEC decided to investigate we would obliged to point out the fraudulent misrepresentations that were made and I would consider it a public service to do so.

But here’s the thing. We could have easily never found out about this. We called the CEO immediately to find out whether he had any knowledge – he did not. He informed the investor that this was a violation of confidentiality clauses and we now have our company counsel reviewing the situation.

My point is this: As the number of funds that enter the market has dramatically increased the norms and behaviors of our industries will be put to tests. I know the temptation is to trust every investor – large & small – who gave you money when you were an early-stage startup. The reality is that you cannot. Major investor clauses exist for a reason. Protect your financial information wisely.

The wolves operate. And not only on Wall Street.


(Cross-posted @ Both Sides of the Table)

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The Case for Optimism and Risk at Startups Fri, 07 Nov 2014 18:45:33 +0000 Last week a company we enthusiastically backed, uBeam, led by a very special entrepreneur, 25-year-old Meredith Perry, announced a $10 million round of financing.  The press around the raise & company was fantastic and the promise of their technology – wireless charging that works as easily as WiFi – would positively affect many of our lives. […]

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Last week a company we enthusiastically backed, uBeam, led by a very special entrepreneur, 25-year-old Meredith Perry, announced a $10 million round of financing.  The press around the raise & company was fantastic and the promise of their technology – wireless charging that works as easily as WiFi – would positively affect many of our lives. What person hasn’t crouched at an airport to get 18% extra on one’s battery before boarding an airplane?

Glass Half Full

But then one person – who happens to be a physicist – wrote a back-of-the-envelop calculation of uBeam and said it’s not physically possible. His math was correct and I can hardly blame him for taking a guess at what uBeam does but every assumption that he used was wildly inaccurate. uBeam’s tech does work and I have safely seen it demo’d in the real life many times. Most of those that have been privileged enough to get a look at what they are actually doing have moved from skeptics to believers.

One is reminded of the famous quote often attributed Mark Twain

“A lie travels around the globe while the truth is putting on its shoes.” **

There is a battle between entrepreneurs who try to change the world and solve a meaningful problem and those who write take-down pieces with no apparent personal benefit other than attention. Here I make the case that entrepreneurs must stay focused on the prize, not the doubters. I make the case that optimism for new breakthroughs should be higher in the minds of those of us that watch from the sidelines rather than schadenfreude.


There are those amongst us the are willing to abandon the comforts of a job with a salary and perhaps the prestige of being able to tell family members, loved ones and friends that “I work for Google, Goldman Sachs, Apple, FedEx, Verizon or Coca Cola” and instead put out selves out there to potentially look stupid one day.


Working at a big company is honorable and I don’t believe the narrative that all of this tech disruption is to kill off big companies. Having a steady income and providing for a family is one of life’s highest commitments and honors. But for the group of people who are always talking about doing it but never do,. this sole act of being willing to jump ship separates “wantrepreneurs” from entrepreneurs.

Entrepreneurs accept that failure is a possibility but are highly motivated by not letting it happen to them. It can be one of the strongest motivators. Even bigger is the desire to stick one’s middle finger up at all of the people who doubted you all along. Who sat on the sidelines from the comfort of their keyboards risking nothing and criticizing everything.

Entrepreneurs are driven to pursue their passions no matter the personal costs, societal pressure, family head-scratching or financial consequences. They are driven more by the journey than they are about the destination.

I was fortunate enough recently to be invited to a private sitting with the president of South Korea, Park Geun-hye, along with 18 other entrepreneurs. She is trying to build a “creative economy” in South Korea and wanted to learn from some Americans what made us so innovative and what they could learn from us.  I thought I was pretty sell suited to answer that question because having grown up in Northern California but lived and worked in the UK, France, Germany, Italy, Spain & Japan over 11 years I had seen quite a few societies and work environments.

I told her that I believed America’s best asset – driven initially from software innovation mindset in the San Francisco Bay Area and media innovation driven from Los Angeles – was our willingness to accept failure. If a society shuns people for TRYING you discourage people from creating truly breakthrough innovation out of fear of failure. The beauty of Silicon Valley and the ethos it has driven in all of us is acceptance of failure and a profound respect for those who at least try.


When I think about the people in our generation I most respect: Elon Musk, Larry Page, Richard Branson – they are optimists to a fault. They have a can-do attitude that is infectious. Who else would publicly try to launch people into space so that one day we might be able to fly people from New York to Tokyo in 90 minutes.

And in the tragic events of Virgin Galactic’s crash this week Richard Branson didn’t say, “yeah, it’s too risky, we were wrong” he said “Space is hard – but worth it. We will persevere and move forward together,” to which the CEO added  “The future rests in many ways on hard days like this, but we believe we owe it to the team to understand this and to move forward. And that is what we’ll do.”

When Elon Musk set out to build SpaceX he wasn’t greeted with enthusiasm from the space community not used to having a private enterprise challenge the government funded space exploration of NASA. Now they are partners. Who in the auto industry believed Tesla, a totally electric car, was a good idea? The collective wisdom of the establishment to this huge innovation? Bubkis. Who else but an extreme optimist and entrepreneur could have imagined and then publicly spoken about “The Hyperloop” – a system of transport that envisages transporting people from LA to San Francisco in 35 minutes. Of course the naysayers are out again. I’d love even 0.5% of Elon’s ideas to come to fruition and let him fail on the rest.

No true innovation is ever accepted by the establishment precisely because it pushes the boundaries of what people think is possible

It was really gratifying to read Larry Page’s interview in the FT this past week. As you may know Google recently restructured so that Larry could spend more time on big innovations – on “moonshots.” In the article is cites:

Page estimates that only about 50 investors are chasing the real breakthrough technologies that have the potential to make a material difference to the lives of most people on earth. If there is something holding these big ideas back, it is not a shortage of money or even the barrier of insurmountable technical hurdles.

When breakthroughs of the type he has in mind are pursued, it is “not really being driven by any fundamental technical advance. It’s just being driven by people working on it and being ambitious” 


People. Working on it. And being ambitious. And not enough capital embracing these moonshots.

Who amongst us originally thought “driverless cars” was a great idea? It is now seriously being talked about as a way to reduce the number of cars on the road, to reduce traffic & congestion, to cut back pollution and so forth.


Backbencher is a term from British Parliament to represent those that are neither in government positions where they have to enact policy nor in the opposition front bench positions of having to suggest counter policy. They get to sit in the back benches and holler at those in government about what fuck-wits the leaders are and how their do-nothing policies are ruinous to the people. Of course backbencher has also become a slang term for “someone who exaggerates their actual power, influence, or importance, usually for nefarious purposes.”

Backbenchers never DO anything. They get to sit in the back of the room, snicker, criticize and yet enjoy the benefits of our efforts. They aren’t just free riders. They are negative-as-hell free riders with no personal ideas for how to make things better.

Backbenchers love to criticize. It reminds me of Glum from Gulliver’s Travels (if you don’t know him do yourself a favor and watch this best of 60 second video), “It will never work.” “We’re doomed.” “We’ll never make it.” Anyway, an American my age will remember Glum vividly from childhood as the one who did nothing but always warned how everything was going to fail.

I wasn’t shocked this week after we announced we funded uBeam, a company that seeks to transfer electricity wirelessly to have some public Glum’s question its viability. In fact, the headline of one read, “How Putting $10m into uBeam illustrates everything that is wrong with tech investing today.”

Juxtapose this: Larry Page telling us we need more ambitious projects and one person with a blog writing a very negative take-down piece on a company that is truly innovative and trying to change an industry and free us from having to crouch in airport corners to get 18% more juice on our phones before catching out flights. Or trying to save old people from having to constantly change the batteries on their hearing aides.

To what point? What to gain from the cynicism?

In his post this blogger imagines the math of how uBeam works and says, “I’m no physicist – oh, wait, I am” to establish authority. Except that each of his calculations and assumptions about how uBeam works is totally wrong. That’s ok. He’s entitled to his speculation.

Here’s what you need to know for now:

  • It does work. I have witnessed it working. So anybody telling you the physics is impossible is simply wrong.
  • I did not lose my hearing. I was not fried. I was not scared. I was not scarred. It is safe.
  • We hired outside experts. We kept our skepticism and like many who initially doubted we were convinced.
  • We checked patents. We checked regulatory rules. We checked efficiency calculations. We checked safety. We checked charge times.
  • Will it work at scale? Are we right in all of our assumptions and diligence? Time will tell.

But “what is wrong with tech investing today?” Give me a flipping break. If anything I’d like to fund 5 more teams and projects this ambitious. And if one of them succeeds it would have been worth doing. But my chips are in on uBeam and I’m not afraid to put my reputation on the line the same way entrepreneurs must each day.

Some people have publicly or privately asked me to define exactly what uBeam IS doing and why this backbencher is wrong. We will do that. Of course. When we ship product. And then feel free to judge the teams accomplishments or failures. I, of course, am betting on the former and am not 1% swayed by the doubters. If you have no doubters trust me you aren’t pushing the boundaries far enough.

But would you expect Apple to reveal its product details before launching? Would you expect Tesla to pre-announce what battery innovations they are working on? Of course not. And that’s why uBeam is rightly focused on perfecting their product, innovating, hiring and building for the future not on responding to every criticism from those without details of what we’re actually doing.

Should Elon Musk have responded early to the cynicism of Nasa or the Auto Industry or just delivered his products? Has any truly novel innovation ever been greeted with universal approbation before its ultimate success?

Heads down, entrepreneurs. Carry on, optimists.



“A feeling of enjoyment that comes from seeing or hearing about the troubles of other people.”

Schadenfreude is not an emotion I possess. What surprised me most about the post launch snipes at uBeam is not the doubting Thomas. 99% of the articles about the company were positive. The overwhelming public reaction was “hell, yeah, I’d love to be able to ditch the wires” yet some entrepreneurs and investors felt the need to quote this one blogger through authority of saying “See! Physicists say this isn’t possible!” One investor said on Twitter that the bloggers punchline of “I’m no physicist – oh, wait, I am” was “awesome.” I then reminded this investor that his firm was an investor in uBeam.

Do you REALLY know what uBeam’s plans are? Are you really so sure it can’t work? Do you really believe one blogger who uses wild assumptions over a company that has committed itself to innovation in this field? Are you willing to give them the benefit of the doubt? Leadership over backbenchers?

What makes America great, as I told the president of South Korea, is our willingness to accept failure. To root for failure is not what our industry does. It’s not what we’re made of. I know many people with physics backgrounds question how uBeam will work. But I can tell you from my experience in due diligence that many who have actually seen the company’s plans have changed their minds and now believe.

Time will tell. And I can’t wait to engage with all of you when we ship product. And I hope the skeptics will join in from a perspective of “how can we help?” vs. “how can we tear you down.”

I’m betting on success. Obviously. If I’m wrong? I stand by my decision 100% and will both look for equally ambitious future projects as well as be first in line to ask Meredith and Marc what they want to do next.

But to Larry’s broader point, “breakthroughs … are being driven by people working on it and being ambitious.”

Meredith Perry is 25. She has withstood 2+ years of backbenchers questioning what she’s working on. My experiences with her have been amazing. She never lost enthusiasm for her pursuit. She never lost confidence in the team’s ability to innovate and execute. She never got distracted from her core mission. She has never given up despite setbacks. The determination, grit & pluck are inspirational. I wish I had 20% of her confidence, focus and leadership skills at 25. The world needs more Meredith Perry’s, not fewer. Could you withstand the public scrutiny every day of being a young tech founder and show up every morning filled with enthusiasm?

Marc Berte, the CTO, and a masters from MIT, is exceptionally gifted. Of course we threw at him every skepticism of the market that we had heard or thought. What about loss of efficiency? What about battery charge times? What about safety concerns? What about competing patents. Of course we brought in outside experts. At each stage Marc and the team gave us confidence they really did have a novel approach and that it would work safely and efficiently.

Let’s embrace those trying to push the boundaries while acknowledging that many of them in the end will fall short. And then let’s dust off and get them working again on their next innovation. We’re an industry filled with naive optimists, with can-do attitudes and a desire to change the world no matter how many back benchers want to ridicule us for trying.  Don’t join that chorus – even when companies do fail. Schadenfreude is such a terrible sentiment.

And for entrepreneurs waking up everyday to backbenchers public and private?


Note: Today’s beautiful image courtesy of Alissa Evangelista who can be found on Twitter or 500px.

** – While this quote is often attributed to Mark Twain, the great irony is that it appears that Mark Twain wasn’t the person who coined the phrase

(Cross-posted @ Both Sides of the Table)

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Rate your company’s innovation culture Fri, 07 Nov 2014 18:30:00 +0000 Culture. “Culture” is one of those terms. Hard to define, but you know it when you see it, right? I mean, we all understand what we’re talking about here, don’t we? I’d bet if you and I polled 10 people on the street, we’d get 10 different interpretations for culture. In the course of my work, […]

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“Culture” is one of those terms. Hard to define, but you know it when you see it, right? I mean, we all understand what we’re talking about here, don’t we?

I’d bet if you and I polled 10 people on the street, we’d get 10 different interpretations for culture.

In the course of my work, I often find myself working with companies that previously tried a generic open suggestion box approach to innovation. Create an ideas portal, let people post ideas spontaneously and see if anything interesting comes up. The outcome of this approach is remarkably consistent: no one bothers to do anything with the ideas. The result is a disillusioned workforce, where a culture of skepticism has settled in. A good part of my work is establishing a plan for re-energizing employees.

What defines culture? Behaviors. I posted as much to Twitter:

As you can see from the retweets and favorites, that sentiment resonated with a number of people. As a follow-up to that, I want to provide more specific ways to identify the behaviors that determine success or failure in innovation.

Below are the four major categories of behaviors that affect collaborative innovation. Following a discussion of each area, there’s a link to download the 25 behaviors that drive innovation success. If you’re interested in analyzing your organization’s collaborative innovation culture, it also includes asurvey for rating your organization on each of the 25 behaviors.

1. Leadership

Leaders have a dramatic ripple effect on innovation throughout an organization.

Any discussion about organizational culture must start with executives. The plans they make, the actions they take, the clarity of their approaches…these are cues to employees about what matters. This applies to all levels of executives: c-suite, senior and mid-level.

For organizations that value collaboration and understand the tremendous asset they have in their own workforce, the actions by executives throughout the organization are key to motivating employees. Without leadership’s positive behaviors, innovation becomes the province of only the well-connected and individual superheroes.

Key leadership areas that affect collaborative innovation success:

  • Clarity of purpose
  • Commitment to initiatives
  • Openness to diverse opinions

In the 25 behaviors that impact innovation success, 7 fall under the Leadership category.

2. Awareness

The process of gaining share of mind.

Meetings. Phone calls. Powerpoints. Client visits. Project work. Deadlines. The daily pace of work demands attention and focus. It’s into this environment that collaborative innovation enters. There is definitely capacity among employees to participate. I know this, because I get to see it all the time. But there’s an issue of share of mind.

An acid test of awareness is this. If someone were to ask a randomly selected employee in your organization what they know about your innovation program, what would they say?

  • Do they know it exists?
  • How it works?
  • What results it’s delivered?

In the 25 behaviors that impact innovation success, 4 fall under the Awareness category.

3. Employee Engagement

Engagement makes employees’ creativity and insights available to the innovation program.

When I kick off a consulting engagement with clients, I will note this about innovation programs: They are people-driven efforts. Which I admit sounds rather shopworn, in an overused “social business, empowered employees” sense. But I use the observation to draw a contrast to other software-supported initiatives. Like accounts receivable processing. A/R is about standard rules, and maximizing processing efficiency.

With collaborative innovation, the key inputs are the ideas, the perspectives, knowledge and judgment of employees. The willingness to provide these precious assets to a company depends on how confident people feel that:

  • It’s accepted to participate
  • Their contributions will be taken seriously
  • Their participation will be a positive experience, whatever the outcome

In the 25 behaviors that impact innovation success, 5 fall under the Employee Engagement category.

4. Innovation Governance

Innovation governance is the process of turning ideas into action.

As I mentioned at the start, a classic failure in corporate innovation programs is the unattended idea portal. The site where employees post ideas…and nothing else happens. An idea graveyard, where ideas die a quiet, solitary death. Quite sad, as it’s a killer to the credibility and utility of the innovation program.

Successful companies, those that generate results year after year, do things differently. They approach innovation as a broader process that spans innovation needs to ideation to assessment to selection to development. I’ve heard that sort of rigor described as ham-handed red-tape that strangles innovation. Not at all. The actual threat is the absence of any plan for moving ideas into innovations that can be iterated and experimented, and scaled when they’re ready. Governance ensures that innovation isn’t a random draw from the deck, but something that is planned and sought.

With a solid plan for innovation governance, organizations:

  • Understand how they will address ideas generated by employees
  • Ensure innovation doesn’t fall through the gaps
  • Create bases for analyzing performance and identifying fixes where needed

In the 25 behaviors that impact innovation success, 9 fall under the Innovation Governance category.

Rate your own organization’s innovation culture

In its 2014 report on the Most Innovative Companies, Boston Consulting Group found the following (pdf):

Successful innovators, both strong and breakthrough, work hard to make sure that the value of innovation is reflected in their corporate cultures and that they are organized to move new ideas forward. Innovation is recognized and rewarded at these companies.

Worth repeating: The value of innovation is reflected in their corporate cultures.

The four categories of collaborative innovation culture described above represent 25 different behaviors that drive success or failure. Recognizing that just stating these categories is insufficient for assessing your organization’s culture, we’ve created a diagnostic survey. The survey is yours to use for your own purposes. What you get with it:

  • The 25 behaviors that define collaborative innovation culture.
  • With each behavior, there is a rating scale from -2 to +2. Specific examples of negative and positive behaviors will guide you in rating your organization.
  • At the end of the diagnostic survey, a table lets you map your organization’s score to an overall assessment: Exceptional, Satisfactory, Average, Underperforming, Ineffective.
  • Based on that assessment, actions are recommended to enhance your organization’s capabilities in collaborative innovation.

To get your diagnostic survey, just click the big blue button below.

Download the free culture assessment tool


(Cross-posted @ The HYPE Innovation Blog)

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Disruptive Enterprise Platform Sales: Why Buy Anything, Buy Mine, Buy Now – Part III Fri, 24 Oct 2014 08:49:00 +0000 This is the third and the last post in the three-post series on challenges associated with sales of disruptive platforms such as Big Data and how you can effectively work with your prospects and others to mitigate them. If you missed the previous posts the first post was about “why buy anything” and the second […]

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This is the third and the last post in the three-post series on challenges associated with sales of disruptive platforms such as Big Data and how you can effectively work with your prospects and others to mitigate them. If you missed the previous posts the first post was about “why buy anything” and the second post was about “why buy mine.” This post is about “why buy now.”

Platform sales is often times perceived as a solution looking for a problem a.k.a hammer looking for a nail. In most cases your prospects don’t have a real urgency to buy your platform making it difficult for you to make them commit on an opportunity. There are a few things that you could do to deal with this situation:

Specific business case

It’s typical for vendors to create a business case positioning their solutions to their prospects. These business cases include details such as solution summary, pricing, ROI etc. If you’re a platform vendor not only you have to create this basic business case but you will also have to go beyond that. It’s relatively hard to quantify ROI of a platform since it doesn’t solve a specific problem but it could solve many problems. It is extremely difficult to quantify the impact of lost opportunities. If your prospect doesn’t buy anything do they lose money on lost opportunities? Traditional NPV kind of analysis goes for a toss for such situations.

As a vendor not only you will have to articulate the problems (scenarios/use cases) that you identified leading up to this step but you might also have to include more scenarios that were not specifically discussed during the evaluation phase. Getting a validation from the business on expected return on their investment while fulfilling their vision is crucial since your numbers will most likely get challenged when your prospect creates its own business case to secure necessary investment to buy your platform.

Leveraging the excitement

What seemed like a problem when you worked with a variety of people inside your prospect’s organization may not seem like a problem in a few weeks or months. It’s very important in platform sales cycle not to lose momentum. Find a champion of your pilot keep socializing the potential of your platform inside your prospect’s organization as much as you can while you work on commercials of your opportunity. People should be talking about your disruptive platform and wanting to work with you. Cease that moment to close it.

Knowing who will sign the check

Platform sales are convoluted. People who helped you so far may not necessarily help you with the last step—not that they don’t want to but they may not be the buyers who will sign the check. It’s not uncommon in enterprise software sales to have influencers who are not the final buyers but the buyers do have somewhat defined procurement process for standard solutions. When it comes to buying a platform many buyers don’t quite understand why they should be spending money on disruptive platform that may or may not necessarily solve a specific problem.

To complicate this further, for disruptive technology, it typically tends to get cheaper as it becomes more mature. This gives your prospect one more reason to wait and not buy your platform now. As I mentioned in the previous post your focus should never be on pricing (unless of course you are the best and cheapest vendor by a wide margin) but on immediate returns, no lost opportunities, and helping your prospect gain competitive differentiation in their industry.

Despite of working with your prospect for a while helping them define problems and piloting your platform to prove out the value proposition, you might get asked again to do things all over again. There are two ways to mitigate this situation: a) involve buyers early on in the sales process and not at the very end so that they are part of the journey b) work aggressively with your influencers to establish appropriate communication channels with the buyers so that it’s the influencer’s voice they hear and not yours.

Happy selling!

Photo Courtesy: Wierts Sebastien

(Cross-posted @ cloud computing)

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US federal CIO? ‘Someone from Google or Facebook will be eaten alive’ Wed, 22 Oct 2014 04:25:05 +0000 The selection of US Chief Information Officer must be an innovative Washington IT insider. Anyone else is doomed to fail.

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white-house-274x300Following the departure of Steven VanRoekel, the Obama administration is evaluating candidates to fill the role of US federal CIO.

Aside from the symbolism as national IT leader, the federal CIO oversees an information technology budget of almost $80 billion. Given the growing importance of technology to national competitiveness, innovation, and efficiency the position has particular significance and meaning.

The Obama administration faces a fundamental choice right now on whom to choose: Bring in a Washington IT insider or choose someone from West Coast – San Francisco or Seattle.

The advantage of a Silicon Valley star is the possibility of fresh ideas and best practices. In addition, he or she may be willing withstand pressure from the “IT cartels,” as former US CIO Vivek Kundra described incumbent technology vendors and service providers that wield excessive influence over procurement. However, since only two years remain in Obama’s term, an outsider federal CIO will find it almost impossible to make a meaningful impact.

Therefore, Washington should choose a federal IT insider to fill the US CIO role, for these reasons:

  1. Federal IT faces significant complexity in areas related to procurement, communication, and collaboration across agencies and departments. These issues are not specific to technology and can only be overcome with political experience and leveraging existing relationships.

  2. During the next two years, the federal CIO must shape policy and drive consensus despite budgets that are already fixed. Only an insider has the detailed process knowledge, and established organizational relationships, needed to hit the ground running.

  3. Pockets of innovation excellence do exist in the federal government. The White House should recognize, encourage, and reward accomplished leaders already working inside government.

The administration should recruit its next federal CIO from the ranks of federal IT. I say this as someone whose work on CIO innovation, IT failures, and enterprise software has beenreferenced in the press about 1,000 times and in more than 40 books.

To elaborate further on the need to appoint a federal IT insider, I asked three respected and well-known technologists for their views.

Dr. John Halamka is one of the most prominent healthcare CIOs in the world. His accomplishments include CIO of Harvard Medical School, CIO of Beth Israel Deaconess Medical Center (a major teaching hospital system), professor at Harvard Medical School, and leadership of several health technology standards bodies. In addition, he has worked closely with government groups and served as a policy advisor on healthcare technology to both the Bush and Obama administrations. Halamka was also a guest on CxO-Talk.

Halamka offers the following advice to make the federal CIO position successful:

I always support the federal government but bold new ideas get lost in the complexity of procurement, contract management, and getting stakeholders to agree. Navigating the US government is difficult and complicated, and an outsider from Google or Facebook is likely to be eaten alive. Only an insider can navigate the process while offering new ideas and approaches.

Richard Spires is former CIO for the Department of Homeland Security and a rumored potential candidate. A consummate insider, he now runs an early-stage technology firm, Resilient Network Systems. Spires comments on the federal CIO role:

With only two years left in the administration, it is difficult for someone to step in and gain momentum, let alone drive meaningful change.

To help make progress, they should bring in someone with significant IT leadership experience in federal government. That person will understand the issues and complexities – how things are done – to be productive in a couple of months. Someone from the outside, without that background, will require a year to get up to speed.

The US CIO should be driving significant change in federal IT. Right now, we spend too much on operations and maintenance, which squeezes out innovation. The new CIO should work with the Agencies and Congress to refocus the appropriations process to drive IT infrastructure consolidation and more aggressive movement to cloud computing. Further consolidation should be driven in the back office, to include financial and human resources systems. While such consolidation cannot be completed in two years, the next Federal CIO can make demonstrable progress if there is senior White House and OMB support.

Craig Newmark is best-known for founding craigslist, the popular San Francisco-based website that still bears his name, even though he has not been a spokesperson for the site in years. Since 2009, Newmark has advised federal agencies on technology innovation, including the VA Center for Innovation, US Digital Service (18F), HHS, SBA, CFPB, and others.

Given Newmark’s position as a prominent outsider strongly connected to federal IT, I asked for his thoughts on the US CIO:

In Washington, technology is easy compared to working with agencies, regulations, legal requirements, and procurement processes. We need someone who can get around in D.C., working with multiple constituencies, and who knows when to get out of the way.

Considering these constraints, Newmark offers for his pick for the next federal CIO:

I’ve worked with David Bray, who is CIO of the Federal Communications Commission — seen him get stuff done and inspire my fellow nerds online.

[Dr. David Bray, CIO at the FCC, is also a rumored candidate for federal CIO. He was a CxO-Talk guest and appeared a second time with another rumored candidate, Dr. Alissa Johnson, who is Deputy CIO for the Executive Office of the President.]

The bottom line. The White House should select the smartest, most innovative senior leader working inside federal IT today – there is no better option.

(Cross-posted @ ZDNet | Beyond IT Failure Blog)

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What’s in a name in open source? Thu, 16 Oct 2014 13:47:00 +0000 What does community mean to you?
Community is an overloaded word, it can mean anything. Community can mean just people who use your product. Or maybe it's those who build your product, or maybe it's the business partners who are using it. Or maybe it's...

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What does community mean to you?

Community is an overloaded word, it can mean anything. Community can mean just people who use your product. Or maybe it’s those who build your product, or maybe it’s the business partners who are using it. Or maybe it’s those who are blogging about it.

This article is part of my talk, Open-Source Business Models. You can see the full transcript and the video of my talk on

Decide what kind of community you like, because there are different ones. Again MySQL had a total of maybe 100 contributors over its lifespan of code, and we hired many of them into the company. That part of the community was relatively small. The community of users was enormous and still is. And the community of those who build an add-on to MySQL was enormous. You have different ways of doing them.

Then finally, and this is perhaps the most remarkable insight I’ve made about open source licensing models and governance, it’s very much about branding. This has to do with the fact that an open source license stipulates nothing about the name. If they do that, it means the name isn’t free, it is protected by copyright.

So, if you use Android and you take it and fork it and you refuse to sign the Open Handset Alliance, you’re not allowed to call it Android, you must call it something else. You could use the code because the code is open source, but you are not allowed to call it Android.

That’s why Amazon took the Android code used it in their Kindle Fire, I think, but they can’t call it Android because they didn’t sign the Alliance that would have forced them to use Google Services. If you take Red Hat’s code and distribute it, you can do that, but you’re not allowed to distribute anything that shows the brand or the logo. The name Red Hat Enterprise Linux and all the marks that go with it, the visual, the JPEGs and PNGs, and the pictures, they are all proprietary.

I’m not sure the open source gurus who invented the licensing models and governance 20 years ago thought about this, that actually branding becomes the control point of how it works.

Similarly, the Apache Foundation had set a smart rule. They say whatever is in the Foundation has a name and those names must not be used commercially. If you use Hadoop, you can say this is built on Hadoop, but your commercial product cannot be called Hadoop. It has to be called Cloudera or Hortonworks or MapR or something. Branding actually becomes the way you control the behavior of the ecosystem.

We had that in the MySQL where we are holder of the brand, both the commercial and the non-commercial, and we were thinking, “Should we split them up?” Because we’re looking at Red Hat saying, okay Red Hat, they took the Red Hat name from the community and turned it commercial only. And the non-commercial name is Linux or Fedora. We asked ourselves at MySQL should we also split up the branding and have one name for the open source thing and one name for our commercial offering. And we never believed it was the right thing to do, but we spent a lot of time thinking about it.

We had our challenges either way. The fact that we had them together gave us certain challenges, and also certain benefits. So branding is more important than I realized when I was in the middle of it.

Further reading

So with that let me stop here, I’m ready for questions and discussion with you. You’ll find my Twitter handle there and my email address, if you would like to get in touch with me after this. Thanks for listening actively and intently, and now I’m ready for your questions.

Q: When you have a commercial product, what do you do if someone contributes a similar product that is open source?

A: A good question, when you have commercial add-ons, what do you do if someone contributes an open source product that does the same? We have decided to just welcome it; we did it at MySQL, and we are doing it at Eucalyptus. I’ll give a Eucalytpus example.

When you run Eucalyptus on Linux and KBM, you need nothing else and you can run massive clouds on that product. If you need to run it on VMware hypervisor, you need our commercial plug-in. Now, we think if you’re paying VMware all those millions you might as well pay us a few thousand bucks as well so we think it’s fair. And we also say, “Or then you write that plug-in yourself. If you think you can do it, then go ahead.” Because the platform is open and the API is open so anybody can do it.

That means that if somebody would contribute a competing component we would welcome it. Because we believe that, for those who do go through the work it will have benefit for them. For most customers they’ll say, “Yeah I know there are open source alternatives. I would like to have the one which comes from Eucalyptus Inc., which is tested and proven.” So we welcome those happenings.

That’s what I tell customers, I say, “We have these commercial add-ons but you can develop your own.” We saw it at MySQL where we developed a management tool that you paid for to manage large MySQL installations and many others developed their own commercial ones and non-commercial ones. And they existed in the ecosystem.

Of course, I had sales people who came to me and said, “Marten, we must crush this competitor to our commercial product!” I said “No, we don’t have to crush them, this is part of open source. There’s always an ecosystem of small players out there. They serve to demonstrate the openness and the lack of lock-in.” And the majority of customers will always come to the main vendor and say, “Okay, I understand I can get it cheaper or for free somewhere, but I want to deal with you guys.” You have to have that conviction, but you can easily get tangled into sort of distrustful relationships if you don’t go all in with this.

Q: What are the advantages or disadvantages of having a singular product with multiple brands?

A: The question was what are the benefits and disadvantages of having one brand for both sides. If you go to a branding expert who knows nothing about open source and you say, “Should I have two brands or one?” They would say, “One, of course!”

People have a limited attention span, they can’t remember two brands. Don’t make it complicated for them. We had huge benefit of this with MySQL because anybody who said “MySeQuaL” or “MySQL”, it came to us always, it was always ours. So we saw that benefit. But we had the problems when let’s say somebody built something on MySQL or forked it, and wanted to call it MySQL or wanted to call it the MySQL Administrator. We had to go to them and say, “We know you love us, and we know you did it with good intentions, but the naming convention ‘MySQL something’ is ours. You can call it ‘Administrator for MySQL’ that’s fine, but it’s only us who can call it ‘MySQL Administrator’.”

Sometimes when we did that we got very negative reactions because they say, “What is this, I’m helping you and you are ungrateful.” You have to deal with them softly and firmly at the same time.

I forgot to say that if you go into open source business models you are asking for a lot of trouble anyhow, so you might as well get used to it but you’re also asking for the most powerful disruptive force in the world. It’s well worth it in my mind.

Q: How much code was contributed to MySQL?

A: The question was how much was contributed to MySQL or MySeQuaL. It’s amazing how little it was. When I joined in 2001, 90% or 95% of the code was written by one single man. And over the next eight years when I was in charge of that place, like I said I think we had a hundred contributors. In terms of percentages or meaningfulness, it wasn’t meaningful.

I’ve told the world, I myself am of the firm belief that when people say open source they easily think about contributions. “Oh that’s what open source is about. Everybody is contributing and everybody is happy.” That’s not true! Open source is not necessarily about contributing code. There are many other things that you do in the community: you use the code, you test the code, you write add-ons. The act of contributing has both benefits and drawbacks.

We all know, I think we all know, that some of the best designs of the world are made by small teams. Steve Jobs said, “Small teams of A-players will run circles around large teams of B and C players.” And it’s so true.

If you’re building a monolithic product like MySQL with huge demands on concurrency and synchronicity and stuff, you should keep the team small to make a fantastic engine. Then everybody else is building around it. I happen to believe in that model. But we have other projects like the Apache Web Server where when you go and say, “Who was the chief designer of the Apache Web Server?”

They all point at each other. You know you can talk to the founders and they don’t have a view of who the main designer was. They say, “Well we did it together.” You have examples of projects that are very successful where there isn’t strict design governance, but I happen to believe that the most artful things must have a core philosophy and maintaining a core philosophy is very difficult if you don’t have a chief designer like Linux has Linus Torvalds, like MySQL had and has, and like others have that.

That’s why to me, if I could choose for an open source project, I don’t need code contributors. I need people who do something with the code. That’s more valuable. In my mind.

Q: How do you determine what to keep closed source?

A: Right, so drawing the line between what’s paid for and what’s not paid for is really difficult, and whatever you do you will regret it. And if you do nothing you will regret it even more. So welcome to the club.

I think we developed a good principle at MySQL which we are now using at Eucalyptus. We said, “We believe in open source. We will do open source as much as we can.” We also believe like with food, food without salt, may not taste that good. Maybe it’s healthy to not have salt, but add just a little bit of salt and it’s amazing. Similarly we think that with an open source product you can add commercial plug-ins that add something to them without being the major part.

We always said that the main open source product must be fully ready for mission-critical heavy use. You mustn’t take away something that’s vitally important because then you are questioning and second guessing yourself and your ambitions. You have said that open source is fantastic, so you should show it.

But then you go beyond that and say those who use it, some of them want convenience, some of them want assurance, some of them want ease-of-use, some of them are in a commercial setting and you find those borderline cases where they are actually looking for a reason to pay. We had many customers who came to us and said, “We would love to pay, give me something I can tell my boss that I’m buying and I will buy.” It wasn’t a difficult value proposition at the end of the day, you just had to have a clear distinction.

If you listen to Mike Olsen, he was interviewed somewhere recently, he said exactly the same thing, maybe even stronger. Mike Olsen has an even longer experience from open source than I do.

It’s a constant debate and you can move things from proprietary to open, you can’t really move from open to proprietary. That’s like shooting yourself in the foot.
But you can move the other way, and you can build new things over time that are useful but that are not essentially needed for the production workload.

Q: What advice do you have for a cloud-based service built to run on open source software?

A: Okay, yeah we have an example. Amazon, AWS RDS is MySQL as a service. Do they pay anything to the owner of MySQL, to Oracle? No. Is it bad? Maybe somebody thinks it’s bad, but the ones who created the product, meaning us when it comes to MySQL, we decided to make it open source and we have to stand our choice and our selection.
I don’t think you have to worry. You’re just making use of the license the way it was supposed to be made and if the originator doesn’t want you to do it, he or she should have picked a different license. I don’t see any moral question there. You use it under the contract that has been given to you.

Of course if you do build, if I were now to build, if I start a company to sell MySQL as a service, I would absolutely go to Oracle and say, “I’m going to do this, I would like to have a commercial arrangement with you so I get quick bug fixes, I get your help.” I would actually establish a business relationship because I think it makes sense.
I don’t think there’s an obligation moral or otherwise to do so because those of us who have produced open source code we exercised freedom zero, the freedom to set the license. The license then dictates what can be done and what can’t.

Q: What defensibility and strategic concerns are there for a cloud-based service run on open source software?

A: Yeah defensibility is difficult if you are not at the core of the development because we all now know that there’s a lot of software in the world, and owning the software is just one part of your business. You have to show that you can develop it and that you can keep it competitive.

I sort of think, yes you can drill into all the questions and you get these weird, sort of difficult questions. But at the end of the day it’s very simple. If you do a great job and you innovate you will have a business and if you don’t, you won’t.

It’s easier if you own everything, if you have control of everything and you own the brand name, you have much more control. That’s why MySQL became such a valuable property. MySQL was acquired for a billion dollars. Postgres has never been acquired by anybody. Technically Postgres is as good as a product as MySQL. Some people think it’s better and that’s fine.

MySQL became a business worth a billion dollars because there was a concentration of brand and skill, and innovation, and marketing and sales, and leadership and technology, and everything in one place. It does add up, but there are components. You can go either way. There are companies who are building businesses on MySQL without owning the code.

Q: How do you price support contracts for free software?

A: Right, how do you price support contracts for free software. I’ll start by saying I don’t believe support is a scalable business, so I don’t know how to price just support.
At MySQL and at Eucalyptus we price subscriptions. An annual fee that gives you everything you need: the features, the support, the legal indemnification, the priority with consultants, and so on. And we price it, we don’t know, somewhere, and then we look at the market and see how it reacts and we go up and down.

I’ll give you a wonderful example though. Our general counsel at MySQL, who would think that a lawyer would come up with it, but he’s amazing. He came up with the best marketing idea. He said, “We should sell something called MySQL Unlimited.” And everybody said, “What is that, we can’t do that!” Because the idea was to sell an unlimited license for a fixed price, as many servers as you had. We priced it at $40,000. We went out to the world and said, “If you pay us $40,000 per year you get an unlimited subscription to MySQL. You can have one server or a million servers and we will take care of you.” And $40,000 is the price of Oracle Enterprise Edition on one CPU.

That whole marketing trick was so powerful in the industry, that was the best thing we ever did with pricing. Then in reality we started building tiers into it, and said, “Okay, the 40,000 is for companies up to 400 employees and then it is 400,000.” And we built a great business around it, nobody was disappointed, it was still a huge saving. Our fear that it would cannibalize our support ability didn’t happen because in reality companies don’t grow their installations that fast. If somebody really has a huge number of MySQL servers, you want them as your customer anyhow because they’re a great reference.

We had a lot of pricing power because we had a business model and we could play around and test the pricing in the market. We did and it worked well. But you must have that courage to do some testing and experiments and apologize when you price it incorrectly, and come back and price it in a new way.



(Cross-posted @

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When Should Technical Founders Become CEO? Wed, 15 Oct 2014 14:59:58 +0000 Much has been written about when it is time to hire a “professional CEO” to run a startup company and of course that has long been a norm in Silicon Valley when founders find that their inexperience may be a limiting factor in company growth (know as the Peter Principle). Much less has been said […]

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ceo bitchMuch has been written about when it is time to hire a “professional CEO” to run a startup company and of course that has long been a norm in Silicon Valley when founders find that their inexperience may be a limiting factor in company growth (know as the Peter Principle).

Much less has been said about when the technical CEO is the best person to run the company.

Yet if you look at some very successful market changes in the last few years it does point to technical prowess in the number 1 seat. Case in point is the return of Larry Page to the role as CEO of Google. I don’t think that Google would have become the success story we all know without the leadership of Eric Schmidt through the years he led the company.

So why did Larry need to return?

It seemed that Google was being out innovated by another Silicon Valley technical leader, Mark Zuckerberg. Somehow in a world of rapid change Mark had been able to right his ship much faster than the highly bureaucratic organizations that places like Google, Yahoo! and Microsoft had become. Bringing back Larry seemed an effort to streamline, to innovate, to compete.

Of course Larry returning wasn’t the only Silicon Valley comeback. Steve Jobs is perhaps to most famous comeback in our industries history and while Jobs wasn’t quite the “techie comeback” relative to his replacement, John Sculley, who was a marketer from Pepsi, he certainly was a technical visionary.

In more recent times we have seen people like Matt Mullenweg – the founder of WordPress – step back into the company’s CEO role after 8 years.

In a way it seems the model has been bring in professional management to help a company through a growth spurt while technical founders focus on becoming an industry leader in terms of innovation and then when the less experienced technical founder is ready they step back in the role. In many ways that might be one way to interpret even Facebook where Sheryl stepped in as COO but by all accounts ran much of Facebook for a few years (other than product). It now seems that Mark is more firmly in control.

All of this is top of mind for me personally because I’m just now dealing with a technical founder – Nick Halstead – retaking the CEO mantle as we announced today at DataSift.

Our big news is announced in this DataSift CEO – Time for Growth post – it’s worth checking out.

I first met Nick Halstead in 2009 when he was running a company called Tweetmeme (the predecessor to DataSift) who had invented the Retweet button and actually helped Twitter develop its early API. He explained to me much of the Twitter infrastructure and why Twitter data would become super valuable. He focused not only on the Tweet text but also the meta data describing the Tweet (who sent the Tweet, from which location, on which device type, at what time of day, etc.).

Even more importantly he the probabilistic inferences you could draw from the data (who is the Twitterer following and who is following him or her?, was the sentiment of the Tweet positive or negative? what was the frequency of Retweets, @ mentions and so forth). Equally important he pointed out that since Twitter is a place you send links to your followers – crawling the link URL to read the text that was in the ultimate article being shared would tell you 10x more than the Tweet itself).

Nick was always and remains a huge visionary in where public, realtime data was heading. He’s one of those rare people that after every meeting you have with him you feel like you have much more insight into the future of the technology industry than before your conversation began.

We kept meeting at conferences over the next 18 months and he kept showing me what he was working on. When he had his prototype solution for DataSift and had secured re-syndication rights (the rights to resell Twitter data – which only 3 companies ever had) I knew I wanted to work with him.

Nick was based in Reading, UK (near London) which was a slight but not insurmountable problem. I didn’t mind heading out the England a few times a year – after all I lived there for a decade and even became a dual citizen. But I firmly believed the company needed to have a large presence in the US given our major data partners were all here and the biggest companies looking to buy our products were also based here.

I like technical founders so this wasn’t an issue. But when I asked Nick if he would move to the US he told me he preferred not to. Although he seemed to be in the US incessantly – his home and his family were rooted in England. When Roger Ehrenberg & I agreed to fund Nick’s first institutional VC round we agreed it knowing that he was staying in the UK, that he was building out product & engineering in the UK and that he was the CEO of the company.

But during the funding process we certainly asked whether Nick was open to hiring a US-based CEO so that Nick could focus on engineering prowess and leadership and not having to build out a sales, marketing & support organization in the US. Luckily for us Nick was extremely mature and believed it would be in the best interest of the company. So Nick drove strategy & tech from the UK and remained an active board member and CTO of the company.

That enabled us to bring Rob Bailey on board as the CEO and it was the best decision we could have made at the time. Under Rob’s leadership we built out an amazing organization of seasoned enterprise software veterans in the US market. He travelled tirelessly to clients, data partners and to the UK to make sure the global organization was synchronized.

Under Rob’s tenure DataSift grew to 10’s of millions in recurring revenue, signed up more than 1,000 enterprise customers, raised > $60 million in venture capital, hired more than 100 employees and has become one of the fastest growing SaaS companies in the industry. We simply wouldn’t be here today staring at this opportunity in front of us without Rob’s leadership.

Rob has written this incredibly thoughtful post on the topic if you’d like to hear it directly from a CEO’s perspective.

I learned much in watching Rob execute and enjoyed my experience in working with him tremendously. I think it’s fair to say that Rob managed me as a board member more than I managed him. Simply put – I’m 100% sure I’ll continue working with Rob Bailey – as long as he can put up with me again :)

So why on Earth would Nick be returning to the CEO mantle and Rob becoming a board member?

Our industry has hit such a fast pace where technical leadership can bring massive growth and fortunes to companies while missteps can mean a company’s quick demise. Here I quote John Sculley on letting Steve Jobs go

“I did not have the breadth of experience at that time to really appreciate just how different leadership is when you are shaping an industry, as Bill Gates did or Steve Jobs did, versus when you’re a competitor in an industry, in a public company, where you don’t make mistakes because if you lose, you’re out.”

Shaping an industry.

That is the opportunity in front of us. For years we’ve been a close partner of Twitter and despite Twitter having acquired our largest competitor GNIP we still maintain a very close relationship and partnership. And of course we have dozens of other data sources making us a much broader platform than Twitter data.

But we have to acknowledge that the industry has changed. 18 months ago Nick embarked on what I started calling our “Manhattan Project,” which defined the next major leap for the company from organizing public, social, big data to organizing all corporate enterprise data whether internal or external.

And because Nick is Nick he wasn’t content with just helping enterprise organize internal data & integrate it with public big data – he also decided it was best if he could build a machine-learning engine that would learn to recognize, interpret and integrate data-types without the need for data analysts and scientists to create and maintain schemas, tables and mappings.

He called this initiative VEDO and launched it quietly to some of our bigger customers.

So the next chapter of DataSift is underway. You’ll see more news from the company over the coming months. With Topsy purchase by Apple and GNIP by Twitter we remain the only independent public provider of realtime data streams. With Nick as the CTO we have created an enterprise-grade data management platform that we believe could be transformational in how large companies process, store, retrieve and make sense out of large volumes of big data.

And with this new phase – and with the fruits of Rob’s efforts that led to our 120-person organization – Nick is ready to step back into the driver’s seat and lead us to the next level. I’m excited to see what Nick can product. I remain as childishly giddy at Nick’s vision as I did in our conference hangout we had in 2009.

And of course I’m grateful to my good friend Rob Bailey who stepped into the role of CEO at a crucial time. He performed his role phenomenally well and now that he will become part-time (as a board member) I look forward to finding more ways to work with him in newer capacities.

Onward & upward DataSift.

(Cross-posted @ Both Sides of the Table)

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The Digital Wave & Business Leverage Tue, 14 Oct 2014 13:25:00 +0000 It is now common knowledge that digital is changing the fortunes of many business – impacting both positively and negatively, depending on their level of preparedness to embrace digitalization. In every industry, competing business leveraging digital technologies, platforms and relationship to win over rivals, get more customers and their business and loyalty, and thereby rewriting […]

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It is now common knowledge that digital is changing the fortunes of many business – impacting both positively and negatively, depending on their level of preparedness to embrace digitalization. In every industry, competing business leveraging digital technologies, platforms and relationship to win over rivals, get more customers and their business and loyalty, and thereby rewriting the rules of competing in business, is perhaps the order of the day.

Reimagining the possibilities for business by becoming a digital enterprise is a key expectation for survival in the future for many businesses around the world. That calls for going beyond creating revenue by mere digital substitution. A digital strategy that focuses on specific business outcomes leveraging various forms of digital technologies can create an edge for the enterprise and in many cases, a sustainable edge comes in where the inane physical resources mutate with the vibrant digital information to create new value. Winners in doing this get there by thinking big and small together transforming processes, creating/validating/rebooting business models and enabling new waves of customer experience. The reality is that any company large or small, old or new can leverage digital technology and principles to create a winning edge for its business and perhaps, its industry. Your customers, your competitors, and your suppliers are all digital now. You can’t address this change with a bolt-on strategy that adds an app here or a site there. You need a comprehensive strategy that embraces both digital markets and digital operations.

Firms like Amazon and Netflix, were born digital — they find embracing these digital principles far easier. Most others strive to have significant digital business and imbibe /embrace digital DNA as their core mantra. For some of them, who were not tuned in, a near extinction threat could be shaking them up. The good news is that, with the body of expertise and collected wisdom available, survival and being competitive is possible like Kodak and Burberry with varying motivations and expectations were able to reorient and restructure their commercial business and have created formidable digital business. The old and well established business of last century or the ones started in the century before are totally capable of successful digital transformation.

Being self-aware is the key to reinventing oneself – this universal principle holds good for enterprises as well. At whatever level of maturity an organization is, digital journey for enterprises would call for substantial degree of change with respect to organizational DNA – this would permeate the culture, organizational structure, operations and governance. As I wrote here, “digital transformation, for a company board or a transformation council could look like a large scale revamp, but in reality, it is a series of coordinated number of changes – on multiple dimensions – across various attributes covering some planned, known unknowns, unknown unknowns – the coming together of this creates a deep impact and effects change, leading into a converged advantage. One can say that the commonality across different true transformation initiatives would rest on ability to think differently about set ways of functioning and willingness and ability to revisit all known models and think and act on them to change to deliver different results”.

There are multiple ways to measure an enterprise maturity and determine the strong and weak points (the most common way to measure is to plot a two- by-two with internal capability vs delivered excellence or capability vs maturity etc). Digital Babies” Digital Natives”, “Digital Phoenixes”, “Digital Masters” etc. are some of the terms used to denote categories, depending on whom you choose to listen to. From Slow moving to Wannabe leaders to Visionaries to Path breaking leaders, the different players can be classified through an assessment. My preferred assessment, as a next step is to chart radar diagrams covering the entire customer lifecycle journey measuring the efficiencies of various attributes along the way and using the outcome to rate against overall expectations. With such classification at hand, depending on the industry trends, a rapid path – either as a protective measure or as a winning measure need to be laid out. The important thing to notice here is no enterprise needs to be left behind in this digital journey lest they suffer extinction over time.

The successful undertakers of the digital journey need to look beyond bolt-on initiatives and look at transformation possibilities holistically, covering digital experience, digital operations and process outcomes. The nature of digital business is such that there are a lot of players/processes that need to be aligned – and some of them could be internal and some could be external involving partners, customers etc. So, the overall ecosystem would matter to get the best experience and outcome to customers. Think travel business or something like how ozon, the leading ecommerce player in Russia achieved success.

The need for holistic view cannot be under emphasized. With the proliferation of digital touch points and increased range of services that customers are beginning to expect, it is unwise to look at each of these as discrete or sequential projects – as such an approach would lead to increased cost and take a long time to deliver overall best results for the enterprise. In an age where time-to-market is a key determinant of success, such approaches are not in tune delivering for the needs of the day for enterprises.

When we digitalize enterprises, we set the seed for destruction of the old practices and policies and instead embed new age practices and leading edge policies. The customer expectations, service levels, support mechanisms etc. substantially change in the digital age and as such, those types of changes cannot be avoided. How do we conceptualize and validate such changes? The answer lays in being able to think for digital solutions wearing the shoes of the customer. Should services be delivered separately or in combinations – should we restrict the combined services to what can be natively delivered by the enterprise or combine them with external services. These types of questions need to be objectively assessed and answers though through – the answers will in turn shape the contours of digital transformation covering both strategy and operations.

One of the defining characteristics of cutting edge digital solutions is the ability to seamlessly weave associated services available with a bevy of partners made into a seemingly single stranded service for the customers – imagine airline ticketing service or financial services like Intuit(Mint) or Amazon marketplace. This is both an opportunity and a challenge – opportunity is to provide service under one virtual roof, challenge lies in integrating a variety of services real time. The customer expectations would not care for challenges though – so long as some other enterprise is able to provide similar integrated services, the baseline of expectations get already set in. The key to note here is that by offering such services leveraging relevant partners/services, an enterprise protects itself from the competitive effects of digital disruptors.

Such an ecosystem of partners sharing data and services protects the players within, overall from competitive onslaught. In every industry, digital thinking for business forces non-linear thinking and the can provide disproportionate returns to the enterprise. As the Ozon case illustrates, the partners can be sometimes competitors but such arrangements done through smart working relationship frameworks can provide great agility and scalability to business and can provide endearing value to customers.For some, such outcome may not be magical – remember, it’s a journey and the game keeps improving. It’s truly transformative for some, but in ways that will feel right and sometimes may not even look so special, given that these may become second nature. Many times, we don’t realize that the future that we envisaged in the past, when it arrives look so reachable and understandable – every enterprise embarking on a digital journey, can feel that along the way, if digitalization is pursued in a vigorous way with discipline inside their respective enterprise.

(Cross-posted @ Sadagopan's weblog on Emerging Technologies,Thoughts, Ideas,Trends and The Flat World)

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Keys to turn your open source project into a business Tue, 14 Oct 2014 13:11:00 +0000 Broadly speaking, there are two types of open source software. The free software, which has a reciprocity requirement in it. Open source software which doesn't.

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Broadly speaking, there are two types of open source software. The free software, which has a reciprocity requirement in it. Open source software which doesn’t.

We can have debates about the merits of those two groups for the whole evening. I think both of them are needed and it depends on the usage and the purpose of your project.

This article is part of my talk, Open-Source Business Models. You can see the full transcript and the video of my talk on

When we come to making money on open source software, at MySQL we had about 15 million users of our product and 15 thousand paying customers. That was like the needle in a haystack. In a haystack of a thousand users we would find one paying customer, and we made it work. We had a business that produced cash and paid for our expenses, but that’s at the extreme end of open source software.

We always debated on how to balance the act between who should pay and who shouldn’t? We boiled it down to a principle which is here on the slide saying: “There are always people who will spend any amount of time to save money, and there are other people who will spend money in order to save time.” Typically in your life, or in the life of a company, you go from one to the other.

“Why does Facebook run on MySQL?” I asked Mark Zuckerberg a long time ago. And he looked at me and said, “Marten, I grew up on MySQL.”

So when he was 15 or 14 or something, he started using it, so of course he would build Facebook on the LAMP Stack. They were a big non-paying user for the longest time, and one day they came to us and said, “Our business is growing so fast, we have so much to do. Why do we have all these people here maintaining our MySQL databases? Could we buy a support contract and the services from you to keep the site going?”

Then they became one of our biggest customers. They shifted from the mindset of saying, “I’ll do anything with my bare hands to save money,” to “I have other more important things to do, so I’ll pay money to get it done.” This is a philosophical principle, it’s not a business model, it’s not a licensing term. But it guided us and it has guided many open source companies in figuring out how do you figure out how to make money and who you think should be paying for your stuff.

Because if you can’t live with the fact that 999 out of 1000 of your users are not paying you anything, you will never succeed. You must love those who are not paying you anything as much as you love your customers.

We said that! We said, “We love you, we really love you, but until you pay us money, love is all you get.” Meaning if you need support or anything else, then you pay us. And you must also know that no matter how much customers love you because they said, “I love your product it’s fantastic!” They don’t love you as a vendor. They have no mercy with you. If they can get away by not paying, they will. They can be the nicest people, the most fantastic company. There’s nobody who will pay voluntarily.

We had one customer at MySQL who paid us voluntarily. Craigslist. So Craig Newmark sent us $10,000 saying, “I don’t find anything to buy in your offerings, but I love you guys and I would like to support you, so here’s $10,000.” And that was the reminder to us that we had no good business model. We had to figure it out and we had to build that which we called hard differentiation that said, “If you don’t pay you get this, if you pay you get this. You can take it to your boss, because it’s your boss who is the problem.”

When you sell, it’s never a problem of selling to the person you’re selling to; it’s that person who has to go up to the budget boss and say, “Boss, I just paid $50,000 for something I could have gotten free of charge.” You can’t do that. You must say, “I just paid $50,000 for something we uniquely get as a paying customer.” You must build that differentiation.

You must be comfortable being on both sides of the fence. If you don’t like your free users, you won’t have a business. Then you shouldn’t be open source. You should be a closed source vendor. So, do it only if you are really committed to being open.

I was checking through some old documents, and I found an article written by somebody a few years ago that had a list of 17 open source business models. That again is a description of the trauma of open source. We struggled for so long to figure out how to make money and in some cases we couldn’t. And there are companies who didn’t and who went out of business. I’ve again tried to simplify it for you, and I believe that there are two broad models for building an open source business.

Two broad open source business models

The one is the foundation-originated model where you have some non-profit organization or place that spits out code all the time. And then you have a set of vendors around them who take the code, turn it into a product, and sell it to their customers. Linux is the best example: we have, we have The Linux Foundation producing the main Linux Kernel, and then we have distros turning it into products and selling them. But they all say we sell Linux. There’s Red Hat Linux, there’s SUSE Linux, there’s Ubuntu Linux, and so on. That’s one business model.

The other business model is the singular one where the open source project and the open source company is practically the same thing. I would say that MySQL was the prime example of this. We had the Swedish company MySQL AB that had the whole project in its hands, and it maintained both and And there are many others, MongoDB is such a thing. Eucalyptus is following that. I have a lot of names there on the list, but it’s a one-to-one relationship. Of course, others can fork it and they do.

Take MySQL, there are forks of MySQL sold by others. I’m not saying that it’s strictly a singular, I’m saying it’s basically a singular model. I’ve now learnt only later that when you do make that choice you’re sort of forced to a certain business model. In the foundation-originated one, and here Hadoop would be an example. There are many Hadoop vendors but they draw the Hadoop code originally from the Apache project. In the foundation-based model, many differentiate from each other through the binaries.

Take Red Hat. Can you get access to the binaries of Red Hat Enterprise Linux? No, you can’t. But it’s open source, why can’t you? Well because they have perfected their model in a way that their best binaries are given out only to paying customers and if you want something from Red Hat that doesn’t cost you anything, it’s called Fedora and it’s different binaries.

When you have that common platform called Linux, the way they differentiate is through different binaries and the fact that they are tested, certified, trustworthy, they’re maintained, they have security fixes, and so on. When you’re a singular vendor, you can’t do that. At MySQL if we had said, and we tried but it failed, that the best binaries are for our paying customers and our community gets slightly worse binaries, we wouldn’t have had a community. Because nobody else was providing it. So, at MySQL we had to give our best binaries, the best executable to everybody.

If you give that to everybody how do you make money? That’s where I think the only viable model is to have commercial add-ons that you give only to paying customers. Some of you are saying, “But Marten, we can sell support can’t we?” Absolutely you can, but that’s not a scalable business model. I’m assuming you’re building scalable businesses. It’s great if you build nice businesses that don’t scale, there’s nothing wrong it. But I’m talking about scalable business models and therefore, I believe you must build a commercial differentiation. You see that Cloudera has that, Eucalyptus has that, MySQL has it. If you go to Acquia, because you’re a Drupal user, Acquia in their commercial offering has stuff that you don’t get if you are not a paying customer, features and characteristics of the product. You must have some sort of hard differentiation that comes on top of it.

The open source product is fully-fledged, ready-to-go, mission critical, capable, stable mature, tested, all of that. It’s an amazing platform. But it lacks something that appeals to enterprises, something that appeals to those who are ready to pay money in order to save time. I think this is how it’s happening now in terms of business models.

As always, there are always exceptions.

Take the Mozilla Foundation, how did they make money? Selling ads. Well they gets tens of millions per year, maybe a hundred million per year from Google for having the Google toolbar in the browser. Then Mozilla isn’t technically a for-profit organization, so you could say, “Is it a business model or is it just a funding model?” We could go deep into those questions.

I’m saying, broadly speaking, generally speaking, if you are building an open source business you choose between the foundation based where many companies draw from the same upstream place or the singular where it’s one company with one product.

Like NGINX is a new one, for the last 15 years, we’ve all used Apache as the web server and now slowly but surely, and maybe not even so slowly, we’re seeing the market share of NGINX growing in the world of web servers. Because NGINX is more performant than plain Vanilla Apache. The company NGINX is now building a business around it.

So you have those two models, and you have to have hard differentiation that you can sell. I have gone through all these tests and experiments with MySQL and I’ve taken all the flack that you can get for doing it. Wherever I go, there’s always somebody who thinks that it’s bad what we are doing. Because we are building a business, we have to add a closed source component. We’re doing something like that.

I believe that’s the only way to build an open source business. And you must have the courage to stand in front of the crowd who’s demanding that you give away everything for free.

Because customers have no mercy with you, they don’t mind if you don’t make money. They have demands and you must have the courage to say, “I do all of this for you, but this I need to make money on.” I think you have to have that sort of a mindset.

You can also say that commonly, if you are building a product and nobody is against you, if you have no detractors, well then you are not really being popular. A measurement of popularity is that you have different groups and some of them criticize you wildly. That’s a sign of success in a way. But as an open source vendor you have to have very thick skin for all that input you have.

Once you say you are an open source company they will assume that you are ready to share everything, your thinking, your plans, your finances, your product, your code, everything; and they will have a sense of entitlement to what you are doing. It’s sort of true, and you have to live with it.

At MySQL, we had so many people who came to us and said, “We made you successful.” Like, “Okay, but we’ve been working hard here for ten years and we did all the code, coded everything, and tested everything, and fixed all the bugs, and you just helped us here and there.” No. They believe and sort of know that they made us successful and it was true. MySQL couldn’t have been successful without those passionate users all over the place.

Like once when we were in Rio de Janeiro with the MySQL founder. He had a MySQL T-shirt on him and we were down in Ipanema Beach. And you would think that young men on Ipanema Beach would be focused on something other than middle-aged men. But, once they saw this MySQL T-shirt and realized who it was, they were just all flocking around him. They forgot all the fun stuff and all the girlfriends they had there because it was so amazing to meet the founder of MySQL. It sort of shows this weird relationship that they completely buy into it and are passionate about it, and then they say, “It’s partly mine, I have an entitlement to it.” You must live with it.

Winner takes all

I wrote something about the foundation-originated business model. I wrote, “Winner takes all.” Then I thought I had to write it on the other side as well. And this is a little bit disturbing, but I sort of grew up in the open source business when there was a number of Linux distros. Turbolinux, we had Mandrake, we had the one in France, we had SUSE, we had Red Hat, and so on. Today, 90% of all money that’s made in Linux is made by Red Hat, so you can say it’s a winner take all.

Then you say, “Okay, but now we have Android. Everybody is building something on Android.” Well guess what, 95% of all profits in the Android world are going to Samsung. Samsung is the one that makes real money on Android, and Google on their ads, but actually using Android.

I’m not sure it’s completely true, but there’s a trend of winner takes all in that space that can be a little bit challenging for those who know that by definition there are many vendors there. Long term it seems that only one can really win.

Then I was thinking about the other side, the singular ones. There it’s also winner take all, because either you win or you don’t. If you are MongoDB then, if the open source product is successful the company will also be successful at the same time. So you could say it’s a winner takes all. But what then when there are different vendors in sort of the same category? There I don’t think we have an answer yet. We have a traditional example of JasperSoft and Pentaho—both in practically the same space, both are open source, both are doing well, neither is killing the other. So there you see a healthy ecosystem.

Or you could take the new NoSQL Databases, sure MongoDB might be the biggest one, but you have CouchBase, you have Cassandra, you have Neo4j. They are smaller and larger and they have different styles, but in the new world of databases there is a healthy ecosystem of different players that seem to be doing well. I’m hoping that would happen because that gives more hope to all the entrepreneurs in that space.

Keys to turn your open source project into a business

If you are starting an open source project and if you decide to turn it into a business, here’s some key things to think about:

First, why are you producing open source code? Some share it to make it technically even more viable. Facebook when they shared Cassandra, they thought, “Hey, if others start using it, it will evolve and we will benefit from it.” Netflix open sourced Chaos Monkey and Asgard, Edda and all their cloud management tools for the same reason. So there’s a lot of good stuff coming out from users there. I don’t need to make money, I just want to insure the longevity of this product. B) is build a business on it, like MySQL. MySQL always wanted to build a business. Always. The purpose was always to build a business. And there are many others, MongoDB and so on. They are building a business. And then there is C) grow and install base for some benefit or monetization opportunity.

When Google came out with Android they were not planning to make money on Android. They were planning to make money on those who make money on Android. Meaning when you sign the Open Handset Alliance and you start using Android in your phones, you bind yourself to using Google services, Search and so on, and that’s business for Google.

You can build an open source product that indirectly serves you. This is important to know if you are in that space because you can have asymmetric competition from somebody. You can have competition from somebody who doesn’t have to make money on what they are doing because they are open-sourcing it. So you need to know why you are doing it.

Then you need to decide on what the governance is. How do you govern the roadmap? Meaning you have a great open source product, who decides what happens with it, what features get put in and what features won’t? Who decides on what contributions you’ll take and what you won’t take?

There are many models here and the great thing with open source is that it has figured out ways to handle it, but it’s a choice you have to make.

In a company like MySQL or in Eucalyptus, it’s easy. We have a hierarchal organization, at the end of the chain is a CEO and he can make decisions. You can get very fast road map development and you can be customer-focused, you can do a lot of that. Others take a different approach. Take Cloud Stack, which was a company like Eucalyptus, now they donated the code to the Apache Foundation. Which means governance of the roadmap is now in the Foundation’s hands.

When Citrix, from where it came, want to implement a new feature, they go to the foundation and they have a steering committee that votes about it. They’ve given up control of their roadmap, counting that the support they get is more valuable than the control they lose.

It’s for you to decide what you want. And some of you are passionate founders, and you will never give up control of anything. Linus Torvalds is like that, he’s not building a business but boy 20, how many years is it?—22 years after he started the project, he’s still the guy who makes the ultimate decisions on what goes in and what doesn’t. He really is passionate about his project.

(Cross-posted @

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Why Has LA Suddenly Gotten So Much Attention from VCs and Entrepreneurs? Tue, 14 Oct 2014 13:00:16 +0000 “There’s something going on in LA.” It’s the most common refrain I hear from investors and even entrepreneurs these days. I hear it right after people have decided to come by for a few days to “check out what all the fuss is about.” I hear it when I visit LPs (the people who invest in […]

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“There’s something going on in LA.”

It’s the most common refrain I hear from investors and even entrepreneurs these days. I hear it right after people have decided to come by for a few days to “check out what all the fuss is about.” I hear it when I visit LPs (the people who invest in VCs) all across the country, “Yeah, I haven’t been out there for a few years but I keep hearing that something is going on there.”

Or if you ask the venerable Greg Bettinelli, he’s #LongLA

So what is actually going on in LA? Is it true that the ecosystem has changed? Has it begun to mature or is it just better marketed than in was say 5 years ago? This is the task I set out to answer with the master of analysis at Upfront Ventures Glenn Poppe who deserves the bulk of the credit for our work.

LA By The Numbers

When you begin to peel back the onion some surprising data presents itself. Let me start with the obvious baseline that most people probably know instinctively: Los Angeles is the 3rd largest technology startup ecosystem in the US. Given our city is the 2nd largest metropolitan area in the country this is hardly surprising.


LA 3rd largest ecosystem in the US

But to answer the actual question “Is there something going on in LA?” in 2014 the data seems pretty conclusive because LA has now become the fastest growing tech startup region by numbers of companies being started and those of us here have noticed this pace accelerating. I know that many VCs instinctively knew this even without the chart below because I’ve noticed the frequency of high-profile VCs (Bill Gurley, John Doerr, Roelof Botha, Marc Andreessen) recently backing companies in LA, spending time throwing dinners & events and even some very experienced VCs (David Lee, Chris Sacca, Erik Rennala) have relocated to Los Angeles.

LA Fastest Growing Tech Market

In fact, data released just yesterday (10/16/2014) in this report by the LA Economic Development Council and released by the LA Mayor’s office showed that LA now has more people employed in high-tech jobs (368,500) than any other metro region in the US, accounting for 9% of all of LA’s jobs and 17% of total wages (that obviously highlighting some other issues that need to be addressed). They estimate that high-tech work contributes $108.3 billion dollars of regional GDP. What is perhaps different from other regions is that we have large indigenous aerospace industry and a big high-tech import/export trade as opposed to a lot of software companies. But even this is changing. More on both trends later.

Given how efficient markets are when a large market like LA starts to blossom it attracts capital pretty quickly. In the last full year where we have data LA attracted $1.5 billion in venture capital to LA’s technology startups and 2014 will shatter that figure.

Over the past 4 years LA’s tech fundings have growing at a 30% compounded annual growth rate (CAGR) which is > 4 times the US average VC CAGR (7%). In the last month alone (ie not captures in the $1.5 billion 2013 figure) have been massive financings at Honest Company ($70mm), JustFab ($85mm), ZipRecruiter ($63mm) and lord only knows how much SnapChat has actually accumulated.

Prominent LA Financings


What Has Given Birth to This New Movement in LA? 

Many people don’t realize that the majority of the monetization of the Internet originated in Los Angeles but was perfected in Silicon Valley. When my friend and the father of LA’s tech startup community Bill Gross first demonstrated his company (renamed Overture) on stage at a TED conference he was actually booed (True story. You can hear many other amazing stories in this 1:1 interview). What was Bill Gross’s heretical idea as portrayed to the tech elite? He presented a system where your search results would be ranked based on companies bidding for placement and where merchants would be charged on a “cost per click” basis (CPC).

Booed. So much so that if you read Ken Auletta’s wonderful book “Googled” you’ll see that Larry and Sergey had for years stated they would never do paid search results. The monetization engine of the Internet that powers the most profitable business perhaps in history was invented and perfected in Los Angeles and is what you now know as Google Ad Words. The patents Overture held became known in small circles as Google’s ’361 problem as outlined here. Yahoo! acquired Overture for $1.63 billion (Upfront Ventures was an early Overture backer).

Yes, Google won. Of course that’s not disputable. My point is that historically the ecosystem in LA has bred innovations in monetization and technologies but to date hasn’t reached the kind of scale of our major NorCal brethren.

And it wasn’t just Google Ad Words that originated in Los Angeles. Google’s Ad Sense did, too. Ad Words as you likely know are the paid results you see when you do a Google search. Google Ad Sense are the results you sometimes see on non-search pages that show you ads that are seemingly relevant to the words on the page. This method was perfected by Gil Elbaz and his team at Applied Semantics in LA and in what some have called “the most important acquisition ever made by Google” they acquired the company for $102 million before Google had even IPO’d.

What do Bill Gross and Gil Elbaz have in common that portends well for the future of LA Tech?

Both graduates of one of the most premier science institutions in the United States: Caltech. Both are massively funding other LA tech companies through what Fred Wilson once defined as “recycled capital.” Both had super talented senior executives that are now running (and funding) tech startups in their own right, like Gil’s brother Eytan Elbaz or the countless graduates of Overture. Both Bill Gross & Gil Elbaz are building their next companies in LA.

I think there is also no denying the role that Richard Rosenblatt has played in building the LA tech ecosystem and spawning great entrepreneurs who followed in his footsteps. He built & sold iMall in Internet 1.0 for $565 million to Excite. He led and sold MySpace to Fox for $650 million. He built & IPOd Demand Media. And while none has yet had the lasting power of the much bigger NorCal successes I imagine his next moves will continue to be closely watched by those in the know and the countless younger LA entrepreneurs who count Rosenblatt as a mentor may leave an even more lasting impact.

LA 1.0 Begets LA 2.0

But the “monetization heart of the Internet” doesn’t stop at Overture, Applied Semantics and MySpace. Over the past decade we’ve had high-profile exits at many companies that pioneered monetization techniques now used across the web including Commission Junction, Value Click, ShopZilla, Price Grabber, LowerMyBills and a newer breed including Invoca, Burstly, Shift, Rubicon Project, Gravity, Convertro, Retention Science and so forth. Many of the early winners sold for north of a half a billion dollars.

Success begets success. The seeds planted by those who came in the 90′s have begun to blossom 15 years later literally into seed capital, blossoming new entrepreneurs and an ecosystem of experienced operators that powered LA 1.0 and are guiding LA 2.0.

But Is This Really That Surprising? Isn’t the Overall Market Just Booming Now? 

Aren’t some of the recent successes in Los Angeles just emblematic of the overall long tech boom we’ve seen nationally and has led to growth in funding in NY, Boston, Seattle and San Francisco? To some extent – of course they are.

But this time there really is something happening in LA. It is different. More substantive. Lasting. Structural. This time we won’t stop at a mere half a billion but we seem destined to create the kind of tent-pole successes that have brought lasting change to markets like Seattle.

LA Big Structural Results

Of course most of you know SnapChat, Tinder & Whisper and many people immediately associate the success of Los Angeles under the SoLoMo banner (Social, Local, Mobile) and you wouldn’t be wrong. But many people forget that we have 2 relatively recent IPOs that are substantive companies: TrueCar (Upfront backed) & Cornerstone OnDemand. We don’t seem to get credit as a community for SpaceX or recognition as one of the fastest growing communities for commerce: Honest Company & JustFab. You probably know that Disney recently paid nearly $1 billion to acquire Maker Studios (Upfront backed) and that is really just the 1st inning for online video companies hatching out of LA.

If you throw in Oculus into the mix along with TrueCar, Rubicon, Burstly, Beats and others LA Tech has seen more than $8 billion in exits in 2014 alone. As Adam Sandler would say, “not too shabby.”

LA’s 2.0 – this time it really is different.

From Infrastructure to Applications – The Three C’s

In order to contextualize the opportunity that exists for the Internet outside of Silicon Valley these days you can take inspiration from the history of technology evolution across many markets throughout history. In her well-regarded (but boringly named) book “Technological Revolutions and  Financial Capital: The Dynamics of Bubbles and Golden Ages” Carlota Perez outlines the history of many of our great leaps forward in innovation.

Each followed a predictable path of building out infrastructure followed by a bubble then a crash followed by a more rapid deployment of the technology throughout industry and society. No less than Fred Wilson has credited Carlota’s work with having a major influence on his investment strategy at USV.

Application Layer with Other Industries

At Upfront Ventures we have long argued that the same trend was underway with the Internet but when you’re in the midst of the “infrastructure phase” it can at times be harder to perceive that a separation is happening. I grew up a computer programmer, a builder of computer networks and fascinated with infrastructure so in many ways I felt like I existed at the inception of many of these great technologies.

In order to have the great companies we now know today: Uber, DropBox, Airbnb, SnapChat, Twitter, Facebook and so forth we first needed the “Internet rails” beneath us. We needed routers, switches, databases, caching software, load balancers, application servers, browsers, compression algortyhms, streaming technology, low-cost storage, management consoles, programming libraries and on and on. We saw booms & bubbles in both telecom infrastructure and Internet infrastructure and now, of course, those two things are largely the same.

Once the railways are built most countries (except for some odd reason the US) start to build better versions of their infrastructure so you get high-speed railway in Japan, Germany, China, France and now even connecting France & The UK. So I’m not arguing that the infrastructure building phase of the Internet is over – to the contrary. We see big data storage solutions and processing platforms. We see improvements in wireless transmission and in real-time programming languages.


With the foundation laid the application layer has had its moment. It’s no surprise to see billion dollar companies like Honest Company & JustFab in LA. We are the largest textile and apparel center in the country and now we have a way to reach billions of people in this globally connected Internet. Deflationary Economics now favors us.

Is it any surprise to see Zulily in Seattle, Wayfair in Boston, ExactTarget in Indianapolis, TrueCar in Los Angeles, GroupOn in Chicago or BuzzFeed in NYC? I think it’s the era of the application.

And our belief is that consumer applications — almost all of the things consumers DO on the Internet — that ride on this Internet infrastructure layer fall into just three buckets we call “the three c’s”: content, commerce and communications. These are industries ripe to succeed in LA & NYC. These are industries that start to open up new commercial zones like Cincinnati (home to P&G & Kroger) and Chicago.

LA The Three Cs

Content: It should be intuitive to most that LA is well-suited to take on the world of content meets tech as we’ve seen with Maker Studios, Fullscreen, AwesomenessTV and Big Frame. With all of those companies gobbled up the market is now focused on the next generation startups like TasteMade, MiTu Network, StyleHaul and so forth. We believe there is no denying that the future virtual reality (VR) world will be stimulated in LA where you have the great 3d special effects companies, content creators and movie studios.

Commerce: What is less known is just how important LA is as a commerce hub. Around $400 billion of imports & exports pass through the LA ports each year, which set the national high-water mark in 2012. 36% of all apparel jobs in the US are in Los Angeles. And LA is the largest retail & trade employment metropolitan zone in the country.  It’s not accident we have so many great startups targeting commerce including Tradesy, DailyLook, NastyGal, Honest Co & JustFab just to name a few.

Communications: Of course comms companies are springing up globally including WhatsApp, Line, KakaoTalk, WeChat and the dominant platforms of Facebook & Twitter. But there’s no denying that we have more than our fair share of great startups in this space that have emerged recently including SnapChat, Tinder, Whisper and TextPlus (which while much smaller still has millions of monthly active users – Upfront is an investor).

And of course we have great public companies that have spanned content & communications like J2 Global whose market cap as of this writing is a cool $2.5 billion.

Stuff you may not know about LA?

There are so many misconceptions about Los Angeles and these stereotypes of course have been reinforced by tech journalist outside of LA covering our market and trying to draw simple conclusions.

So it’s probably worth pointing out that LA is a town built upon entrepreneurship even if not always underpinned by technology. We literally are a land in which people left their stable East Coast homes in search of opportunity and a chance to start fresh. LA in fact has more entrepreneurs as a percentage of its population than anywhere else in the country.

LA Largest Entrepreneurship

Intuitively most people know that LA isn’t just the entrepreneurial capital of the US but it is also the creative capital. LA is the largest metropolitan area in the US for people employed in art, design and media and the local creative economy of LA generates more than $140 billion in economic output – more than the GDP of many countries. In fact, 1 in 7 or nearly 15% of Angelinos are employed in a creative field.

But what about tech talent?

Yeah, we got that, too.  It may surprise you to learn that LA graduates more engineers than anywhere else in the country. We also have more grad student enrollments each year in computer sciences than anywhere else in the country. So we produce them en masse and we produce them with deep knowledge.

LA Largest Graduates in Engineering

Where do all of these engineers end up? Of course many have been employed for years in the video & music industries and a larger amount have even been pulled into aerospace and defense over the past 30 years. As a result we have a large number of locally employed engineers with video experience that will fuel the next boom of the Internet (Americans watch 5.3 hours of television per day – a number that is not declining and much of this video is now moving online) but equally important is that we are now a rich source of hardware expertise and innovation that is increasingly becoming important as the hardware markets boom.

But our best Internet software engineers have historically been exported on a net basis to the Bay Area. I’m sensing that trend reversing as companies like SnapChat have been able to import large volumes of Stanford grads lured to creating a next gen Internet powerhouse in Venice, California (which by the way, doesn’t suck :) GQ magazine just dubbed it “the coolest block in America.”). Nicole LaPort recently highlighted this trend for Fast Company, the so-called “SnapChat Effect” in a recent post on the topic of LA attracting great Silicon Valley talent.

You may also be surprised to know that not only does LA graduate more engineers than anywhere else in America but we also have more top 25 engineering programs than anywhere else in America with nationally acclaimed programs at Caltech, UCSD (my alma mater), USC, UCLA and Harvey Mudd.

LA Most Top 25 Engineering Schools

What Do We See From the Road Ahead?

The infrastructure phase of the Internet is over. It will still garner much investment as it improves in terms of quality, speed and reach but the application layer will rise in it’s dominance. The three C’s: Content, Communications and Commerce will ride on the tracks that have been laid for us and LA has shown itself to be a prominent player in this application phase.

We have the engineers who are graduating from top engineering schools and believe me if they have the opportunity to remain in this dynamic, affordable and pleasant city many would choose to. We now have 2nd and 3rd time entrepreneurs fueled by recycled capital and mentors who have built startups to successful outcomes and have seen scale.

We have our emerging tentpole companies like SnapChat, Oculus, TrueCar and large investments and teams from Google, Facebook & Microsoft.

LA Great VC Community

I also surveyed the list of local VCs and while we are slim on total available local capital I also realized just how many new funds were created over the past decade and how much more modern the skills are of this generation of local VCs are than those of the past.

With the founders, the funds, the application layer of the Internet, the attractiveness of Los Angeles in terms of cost-of-living and climate I think it’s fair to say that our moment in the sun has just begun.

LA There Really is Something Going On


And here is your moment of zen … the full deck with many additional slides. Use any you want. Tell a friend. Forward the data. Silence the doubters.


(Cross-posted @ Both Sides of the Table)

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Digital Transformation & Digital Advantage Mon, 13 Oct 2014 16:40:00 +0000 On my flight to Boston, I came across this article titled: We Need Better Managers, Not More Technocrats from Harvard Business Review. This set me thinking for not many articles have touched the issues of digital transformation at its core, in so far what I have seen and so mentally egged me to draw this […]

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micro management dilbert

On my flight to Boston, I came across this article titled: We Need Better Managers, Not More Technocrats from Harvard Business Review. This set me thinking for not many articles have touched the issues of digital transformation at its core, in so far what I have seen and so mentally egged me to draw this note. The part of the article that set me thinking started with the perspective: “digital technology is not the true story. Digital transformation is “and adds, “ Leaders need to engage their people in a process of redefining how they work and what their companies do. Digital transformation is therefore the key managerial imperative for today’s business leaders”. This implies that enterprises need more proactive technical and business leaders, willing to shake the tree and get deeper to challenge the established norms of doing business in their respective business. Transformation possibilities come out of beating the status quo and propelling powerful forces forward.

The article adds that those companies that get the greatest benefit are those that:

- Make smart investments in digital technology to innovate their customer engagements, and the business processes and business models that support them

- Build strong leadership capabilities to envision and drive transformation within their companies and their cultures.

To my mind, to gain advantage many things need to happen at the enterprise level to deliver sustainable results. It’s not just managers alone who matter, there are a whole host of issues that enterprises will need to focus on, besides leadership commitment.Let’s now focus on what this digital transformation is all about and the range of issues and opportunities that come into interplay.

What’s Digital Transformation?

Every transformation efforts brings along with it substantial degree of risk. Digital proponents leverage the fact that the business strategies that embrace. New process models and couple powerful new technologies are transforming the way we do business and the vibrant nature of the marketplace. It’s clear that yesteryears paradigm of economic and business models are too inadequate to secure future years success. New paradigms need to be created, starting with the vision to innovate and enormous energy and skills to stay the course and realize quantifiable benefits. The core ability needed to enable digital transformation rests around customer centricity and a focus on making their businesses different through technology but not per se on the technologies. No technology should be deployed without a fully thought through vision of how it advances business goals, addresses customer needs, or both. Beyond that, technology should be so tightly inter twined with strategy that the two drive and reinforce each other.

Seen at one level, transformation is a proactive process that begins with a large and bold vision centered around making customer linked processed and operations to be made global class and the drive in support of this to effect appropriate changes in the environment. At the highest level, this is the common denominator that enterprises strive to achieve – call out the objective, introduce the variables (exogenic factor) and focus on transforming this into new order of creativity and innovation. To me, digital transformation, for a company board or a transformation council could look like a large scale revamp, but in reality, it is a series of coordinated number of changes – on multiple dimensions – across various attributes covering some planned, known unknowns, unknown unknowns – the coming together of this creates a deep impact and effects change, leading into a converged advantage. One can say that the commonality across different true transformation initiatives would rest on ability to think differently about set ways of functioning and willingness and ability to revisit all known models and think and act on them to change to deliver different results.

Digital Transformation is not a silver bullet, as seasoned business executives would confirm – there is no permanent state of advantage in an enterprise’s digital transformation journey. The true meaning of this journey is that the exogenic factors enables new avenues of powerful possibilities of change and too often this in turn opens the floodgates of passion, creativity and innovation. In a typical digital transformation journey, such release of convergent forces produce massive doses of change on the enterprises model of delivering value, the underpinning culture leading to authentic and visible transformative ways of doing business.

To repeat the often repeated cliché, “Progress can’t be achieved by doing the same things we’ve always done and expecting different results”. It’s plain talk : Unless new, progressive models are employed, true transformation can’t occur. Yet in the real world, its only to be seen that lag metrics centered thinking hold executives to protect the past. An Amazon’s way of thinking and action on growth, investments and customer advocacy efforts would substantially vary with most other business today. But that level of challenging set ways of thinking and busting assumptions are needed to effect true digital transformation efforts that can bring in sustainable success. From incubation to creating a large digital platform at enterprise level calls for ability to both think big and small, deep and wide, create capabilities at scale and target narrow skills in some cases. A clear plan, well thought through investment, and a rigorously focused implementations involving cross functional units are key to rope in success.

Creating an operational blueprint centered around digital ops would become a key requirement to carry forward the journey, an area mostly underfocussed on early on in the digital transformation journey – a big mistake.. A digital operation framework ties in executives to work together across functions to demonstrate early success that enterprise can build on. The to-be state of operation should appropriately balance opportunity upsides, core execution strengths and leverage differentiated business models. As the scale and maturity of adoption of digital transformation inside enterprises increase over time, it will be critical to replace guesstimates with more directly captured metrics leading to set the stage for repeatable, measurable and scalable outcomes.

Why are digital ops so important? Because early success and quantifiable returns feed more momentum and so is important to think through early enough in the enterprise digital journey. A well-executed strategy of putting in place a robust digital transformation framework would enable enterprises to

1) Optimize ROI at an earlier stage in the funding lifecycle of each initiative, and collectively across the enterprise; self-funding models are also being demanded by enterprises;

2) Bring in linkages and transparency between strategies, funding model, execution model including digital ops

3) Relentless prioritization for improved performance, value, and sustainable growth.

True transformation entails transforming from outdated methods to new, more productive ways of conducting business to produce new ideas, profound change, dynamic innovation, and sustainable opportunities and all these are directed at enhancing customer experience provides lasting value.

Digital transformation is not a linear process where a step follows another in a predictable way. Parallel initiatives, competing attention needs will be the order of the day inside many enterprises. The advantage is going to be accrued by those enterprises, who envision, plan and execute well leveraging on the rapid advances in the marketplace and behold, we have not seen much here compared to what’s going to come with sensory and analytics technologies providing a whole lot of new perspectives about how much the digital transformation boundaries can be pushed. As I noted earlier, there is a need for enterprises to completely re-visualize the possibilities by becoming a digital enterprise. That calls for going beyond creating revenue by mere digital substitution. A digital strategy that focuses on specific business outcomes leveraging various forms of digital technologies can create an edge for the enterprise. It must be noted that a sustainable edge comes in where the inane physical resources mutate with the vibrant digital information to create new value. Winners in doing this get there by thinking big and small together transforming processes, creating/validating/rebooting business models and enabling new waves of customer experience. Any company large or small, old or new can use this digital technology to create a winning edge for its business and perhaps, its industry.


(Cross-posted @ Sadagopan's weblog on Emerging Technologies,Thoughts, Ideas,Trends and The Flat World)

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