Archive for the ‘Innovation’ Category

What Investors Want to Know

Everyone seems to have a different idea about how to introduce a business to investors.  Scientists want to deliver full detail about the science as well as their products   Most others just want to describe their products in some detail.  But what is it investors want?

We asked three investors at a recent meeting about life sciences companies, and they made clear that they’re evaluating investment value – not the product, not the business, the investment potential.  Here’s what they said:

Investor No. 1:

I want to know five things about a new company:

  1. What is the novel invention?  What’s different?
  2. What is the need for this?
  3. What is the rationale why your technology will work for this purpose?
  4. What is the regulatory pathway?
  5. What’s the ask amount and what is the next value inflection point?

Note:  The same investor also asked for the net income/loss figure instead of EBITDA.  “You have no history, no track record, to justify EBITDA” was the explanation.  To this I would add that EBITDA is a measure of profits and hardly appropriate when there are none.

Investor No. 2:

Five minutes is better than twenty minutes.  Two minutes is ideal.  You can raise money in an elevator!  Think of this as being like a resume, which you write to get a meeting.  A one-page executive summary is the most investors will read.  Staff members do the rest.  Get them excited about investing in your company.

Hit things home without talking to doctors – “if you invest, you’ll make a lot of money” – that’s what I want to know.

Get the investor’s interest right away and then keep their interest. You’re talking to guys that have seen hundreds of business plans.

The growth rate needs to increase for the first three years.

How much will they need altogether?  I’m not looking to get my money back right away, and I don’t want them to be always raising money.  I want to triple my money in six to nine months and then another triple in six months.  I want to get in and out at the right price.

Two things matter to me:  the potential to grow big – so I can make 10X to 100X – and management.

I’m in the business to make a killing.

Investor No. 3

  1.  A big market
  2. What’s the basis for their competing –   their differentiation and competitive advantage?
  3. The financials – what’s the inflection point?  How effectively are they controlling expenses?  How can they avoid a down round?
  4. What’s the exit plan?  Who will the strategics be?  Why?  How long will it take?  What will it cost to get there?  What are the comparables?

The Next New New Thing

In 1999 Michael Lewis told the story of “the new new thing” in terms of a single individual, Jim Clark, a “new-capitalist adventurer” in the words of the NY Times reviewer.  It was an exciting story but as we approach 2015, it seems dated, even quaint – dated because the new new things were individual companies – Silicon Graphics, Netscape, myCFO and Healtheon.

Today new new things are explosions of companies that seem to come in waves – waves such as cloud computing, Big Data and now what Shivon Zilis, of Bloomberg Beta, calls machine intelligence.  One wave often drives another, or at least enables it.  Machine Intelligence, perhaps the newest new thing, depends on massive data sets, so Big Data had to come first.

Shivon has done us all a service by scouring the startup world for artificial intelligence, machine learning and data-related technologies and created a landscape that puts them all in context.  Her diagram of the Machine Intelligence Landscape – she’s using “machine intelligence” as a unifying term for machine learning and AI – has five categories, each with multiple subcategories that suggest some of the areas where they will transform the way we work and multiple companies already implementing them (www.shivonzilis.com/machineintelligence):

  • Core Technologies

o   Artificial Intelligence – Deep Learning – Machine Learning – NLP Platforms – Predictive APIs – Image Recognition – Speech Recognition

  • Rethinking Enterprise

o   Sales – Security/Authentication – Fraud Detection – HR/Recruiting – Marketing _ Personal Assistant – Intelligence Tools

  • Rethinking Industries

o   AdTech – Agriculture – Education – Finance – Legal – Manufacturing – Medical – Oil and Gas – Media/Content – Consumer Finance – Philanthropies – Automotive – Diagnostics – Retail

  • Rethinking Humans/HCI (human-computer interaction)

o   Augmented Reality, Gestural Computing, Robotics, Emotional Recognition

  • Supporting Technologies

o   Hardware – Data Prep – Data Collection

Shivon recommends we focus on her core technology category for innovations at the heart of machine intelligence and suggests using the landscape to package some of the technologies into a new new industry application for those of us looking to build a company.  So spot the market opportunities, and you have an amazing map for innovation!  Even Harry Potter didn’t have one of these!

Making Sense of Change

We all live in perpetual information overload and a swirl of new technologies.  Continuous learning is no longer an option.  Learn or be  lost.  Keeping track of it all, fitting pieces together, is a challenge that seems to become increasingly impenetrable.  Now Brian Solis of Altimeter has given us a structure to help us sort through the emerging digital universe.  Thank you, Brian!

Cloud-based social, mobile and real-time technologies are the hub of the Brian Solis Wheel of Disruption.

In the first circle around the three core themes are the following seven emergent technologies and sectors:

  • Big Data
  • Apps
  • Ephemeral (content that disappears in a short time)
  • Geo-location
  • Messaging
  • Gamification
  • 2d Screen

The second circle contains seven more:

  • Wearables
  • Makers
  • Beacons
  • Internet of Things
  • Sharing
  • Virtual AI – AR (Artificial Intelligence & Augmented Reality)
  • Payments

Alongside the wheel are six themes implemented by these technologies::

  • Platforms
  • Alternative Currencies
  • Mass Personalization
  • Crowd Funding/Lending (and I would add, Sourcing)
  • Anonymous/Private web
  • Instant Gratification

Here’s Brian’s marvelous infographic: http://www.briansolis.com/2014/12/digital-transformation-year-review/

My head already feels clearer!  I hope yours will as well!

Innovation within the Enterprise:  GE

 

I heard Steve Liguori tell an amazing story about industrial innovation at GE the other day.  He was speaking at a Work-Bench event about disruptive innovation – something we’ve all heard a lot about.  And he had a new take on the subject in the context of rethinking how to run a big company.  How?  “Learn to beg,” advised Steve.  “Try disrupting your culture.”

The first step is a full-time person – a passionate advocate with consummate skills in marketing, persuasion – calling on key decision-makers, finding the ones with a big problem for GE customers and an open mind about how to solve it. That’s the begging part.

Steve at the time was Executive Director of Global Innovation and New Models at GE.  The problem he found was a seriously overweight jet engine part – the engine bracket – and as there are many of them, their weight has serious implications for fuel use.

Steve must have mastered the art of persuasion during the years when he headed marketing at blue-chip consumer goods companies.  I marvel at the heights to which he’s taken this to have done what he did.  He got GE management to agree to go outside the company to crowd source redesign of the jet engine bracket!

Collaborating with GrabCAD, a Cambridge startup, GE sent a challenge with heavy duty specs for blueprints to GrabCAD’s global community of more than a million engineers.  From this, GE received nearly 700 ideas, picked and tested the top ten thoroughly, and announced the winner – a design that cut the weight by 84 percent – from 4.48 lbs. to 0.72 lbs.  Who did it?    An engineering student in Jakarta with zero aerospace experience!

Imagine trusting GE’s brand for industrial innovation to engineers outside the company!  Imagine finding a solution beyond GE’s ability from a student in Indonesia.  It’s audacious!  It’s brave!  And I suspect crowd sourcing will be increasingly important in the future!

Media Heads Up for 2015: 12 Takeaways

Media visionaries looked to the future at the Gotham Media’s Digital Breakfast at Frankfurt Kurnit Klein & Selz and made some predictions about social, mobile, TV and more for 2015 and beyond. Here are some highlights:

1. Ever-faster change – new things rise higher faster and fall faster.

2. Sensors all around that are passively aware of you. All cell phones have omnipresent computing.

3. Mobile payments. Apple’s entry will determine whether they make a difference. Most are safer than plastic, says John Abell, Senior editor, LinkedIn.

4. Continued migration of devices to mobile – even Facebook and video on mobile. Increasing importance of the second screen, though it’s still primitive. Monitors are losing to individual devices. “When the first screen gets boring, people go to the 2d screen,” reports Paul Berry, RebelMouse Founder and CEO

5. The steady growth of Facebook and mobile pose a challenge of how many pages per person can be sustained on your site.

6. Niche social networks will be big – a space for passionate sharing. (ED: Vertical networks were lumped into discussion of the category.) Niche networks will be combined with the 2d screen in the future – but with more than Twitter’s limited characters, predicts Berry.

7. People talking in a real voice as opposed to the institutional voice of mainstream media so that you hear individuals.

8. Infinite choice in content. “The quality level has been raised,” said Lockhart Steele, Editorial Director of Vox Media. “Now you have to do great stuff to get attention because there’s so much choice. . . The biggest challenge to media is the conversion to mobile. A lot of journalists are still writing in newspaper style.”

9. “Content is still king. It’s entirely defined by great talent,” according to Eric Wattenberg, Co- Head of Alternative Television at CAA.

10.“Traditional ads aren’t working. Only bots click. Millennials don’t even see the ads,” says Berry. At Vox, an in-house creative agency helps advertisers create native advertising. “The agency relationship is broken,” adds Steele. Every company has the opportunity and responsibility to be a media company, continues Berry. You need a product to be worth someone’s obsessing about it. Then put your money behind them. How do you measure social media effectiveness? Do viewers click? Share?

11 “But then we still don’t know how to measure TV,” Abell reminds us. “Yet, I don’t see how anything can supplant anything as unifying as TV.”

12.“The challenge for TV is how to get and keep an audience and grow it. It may be a combination of traditional TV with live elements in other forms of entertainment so that every week you’ll have to tune in and it’ll be fun and exciting to see what happens,” speculates Wattenberg.

Provenance: Gotham Media’s Digital Breakfast at Frankfurt Kurnit Klein & Selz 12.9.14. Alan Sacks, moderator – Counsel, Frankfurt Kurnit Klein I& Selz PC Panelists: John Abell, Sr. Editor, LinkedIn Paul Berry, Founder and CEO, RebelMouse; Lockhart Steele, editorial Director, Vox Media, and Eric Wattenberg, Co-Head of Alternative television, CAA

The Future is Internet Access. not Devices

Frugal innovation that’s just good enough to enable free mobile Internet access in order to supports a focus on education for billions of low-income people. That’s both the personal and business mission of Suneet Singh Tuli, CEO, Datawind. The outcome? The first $40 tablet computer – the Aakash – launched first by the president of India, then by the UN Secretary General and today in use by thousands of students in India.

Suneet’s business goal is to create a low-price product that impacts people’s lives and, yes, make money from it. “I am not a charity,” he declaims. The Datawind business model is to forgo most of the company’s hardware margins and to focus instead on recurring revenue from content and apps in order to go after and, in time, own the price-sensitive consumer.

He believes everyone should focus on education. Education corrects everything, he says. No, the low-cost computer is not intended to replace teachers but to supplement what they can do. His sons get answers to all the questions they have after school from YouTube! And Forbes International recently recognized Suneet in its annual impact 15 list of education innovators.

Lesson No. 1 for US entrepreneurs: “just good enough” should be part of innovation. It’s not disruptive technology that wins; it’s the one the gorilla ignores – as we learned from Clayton Christiansen. Large companies, such as Apple and Samsung, could own the low-cost tablet market but it would dilute their brands to say nothing of their margins. Their business model is based on creating and producing high-quality, highly profitable hardware. Suneet’s, on the other hand, is to use hardware as a customer acquisition tool.

Lesson No. 2: the future is Internet access, not devices, in Suneet’s view – with money coming not from devices but from content, apps and advertising. In fact, Suneet’s next goal, in addition to bringing the cost of the Aakash down to $25, is to spark a global ecosystem of socially positive apps that empower women.

Whither Online Content?

Sponsored content may not be new, but its role as a replacement for traditional advertising certainly is. So is the new acceptance of the collapse of the long-standing wall that separated content and advertising. What makes this new situation acceptable is transparency about the sponsor and assurance that the editorial content was created independently of the sponsor.

These were among the takeaways of a lively discussion among content and advertising experts about Content and Commerce organized by Gotham Media Strategies and Frankfurt Kurnit at yesterdays digital breakfast. Rick Kurnit, of Frankfurt Kurnit, moderated; Glenn Hall, of TheBlazecom; Eason Jordan, of NowThisNews; Scott Kurnit, of KEEP Holdings; Rob Rasmussen, of Story Worldwide and Rebecca Sanhueza, of Time, inc. were panelists.

However “native ads,” i.e., branded content, is not acceptable when it tries to trick people into believing it’s not advertising. And everyone agrees that advertising sucks when it’s annoying and intrusive. But even overt paid content, i.e., ads, can be great. Three campaigns were cited that have won universal acclaim; Nike’s advertising, which delivers inspirational content that empowers consumers; Dove’s, which establishes a relationship with consumers about beauty and how you see yourself and is more like direct marketing, and AT&T’s It’s Not Complicated series, which uses kids’ imaginations to turn boring brand attributes into pure fun.

Interestingly, online e-commerce businesses like KEEP, are bypassing advertising altogether and simply delivering thousands of products for consumers to buy and share.

So then comes the question can any brand create content? The answer is a flat No. Not all brands have the legitimacy to create content. They need to have both a point of view that carries throughout all the brand’s actions and audience respect for that point of view.

The big question about unbranded content, i.e., pure news, or journalism, is the business model. Originally, this relied on the monopoly of news media, which enabled content scarcity and exclusivity. Gone! Today, we have content abundance and ubiquity. One requirement has never changed: relevance to viewer/user interests and needs. So traditional media, like Time Inc.’s magazines, aim to serve both consumers and advertisers by delivering targeted niche audiences to advertisers and targeted content to those audience segments.

What TheBlaze is attempting carries this one step further, developing special content products appropriate to specific advertiser messages and also relevant to TheBlaze audience.

What’s the future business model for journalism? No one knows. But probably a hybrid of subscription fees and advertising with quite probably some commerce as well!

Extreme Customer Development

Staying ahead of the curve. That’s the challenge in the Innovation Economy, where knowledge, technology, entrepreneurship and innovation are at the center of the model, driving growth. It’s also the only possible basis for sustainable differentiation in a time of accelerated change – and commoditization. Without it, you’re just another me-too company. With it, you have a chance – if you play the rest of the cards right – to win big.

For start-ups, the No. 1 secret for this, according to Promod Haque, Senior Managing Partner, Norwest Venture Partners, is bringing product marketing and product development together from Day 1. It’s not that difficult to build anything, he said in an interview at a recent TiE event. The right engineer can do it. But does anyone care? Is the market large enough?

Even beyond this, the company needs a top sales person who can give the new business access to, say, 50 customers in three months in an effort to validate the product from the customer perspective –or pivot if, in the end, that’s what you learn is needed from customers.

The No. 2 Haque secret is to network your way to people who understand your industry, get to know them, not just meet them, build relationships, seek real feedback and take it seriously. Many people learn from their own mistakes but the smart ones learn from mistakes others make as well!

So, how does a penniless start-up compensate a strategic marketing person – and that’s what we’re talking about here, not marketing communications? Haque’s suggestion is to find the right consultant, put them on an advisory board and compensate them with options that vest at intervals.

If you’re familiar with Steve Blank’s customer development process, endorsed by Eric Ries as part of his lean start-up approach, you’ll notice striking parallels. Steve’s “4 epiphanies” of customer discovery, customer validation, customer creation and company building fit right in. But here’s the thing. The Haque approach is extreme customer development because it combines marketing and product development at the outset. Not something many engineers will be comfortable with – and some will fail as a result – but probably essential in today’s environment if you want to stay ahead of the curve.

Are There Too Many Startups?

That was a question put to Albert Wenger, Managing Partner at Union Square Ventures (USV), after his remarks last week at the BMW I Born Electric event.  Might this be a fad – like doing a band in the 70s? No, no and no, says Wenger.  We’re at the beginning of a transformation as big as the one from agriculture to industrial, he explained.  We need a lot of experimentation.  Even failures have social benefits in terms of the experience gained in taking risks, making decisions, etc.  This can benefit both large and small companies.

And today’s startups have a higher potential for life expectancy.  A lot of historical investing was binary, win-lose.  Now a small team with low capital expenditures can keep on going even if the business is not really hitting.

A significant outcome of seeing startups from the long-term perspective of sweeping transformation is USV’s “thesis-driven investing” – putting more emphasis on the principles of large-scale change than on traditional investing criteria, like market size, competitive situation, etc. No. 1 among these principles is the insight that networks will replace old hierarchies, with the unbundling of traditional services – single purpose services replacing all-in-one traditional newspapers, for example.  Classified ads went to Craig’s List.  Commentary went to blogs.  Breaking news went to Twitter.  People can find the other pieces just one click away, with no need for a single source.  All the companies in USVs investment portfolio exemplify this – among them, Lending Club, Pollenware and Edmodo, two in finance, one in education.  But no sector will escape.  Healthcare and government are just down the line..

In transportation, Wenger sees cars doing three things:  delivering transportation on demand, self-expression and fun and alone time.  Transportation, in turn, can mean delivering my body from point to point or solving an information problem.  Startups like Buzz Car and GetAround are examples of early peer networks that make it unnecessary to control your own car or where it goes.  Online shopping and delivery services can replace the need to get information by going to the grocery store.

Of course, as one audience member commented, industries under siege go to the government for help.  The hotel industry is opposing Airnb’s travel guides to staying in people’s apartments with regulations against renting out spare rooms.  The Taxi & Limousine Commission got a cease-and-desist against Uber, NYC’s on-demand car service. So then we have the inaugural peer network summit in San Francisco.  The battle is engaged:  yesterday vs. tomorrow!

First cousin to the notion of too many startups is the meme that social media are all frivolous.  But social is also becoming the enabling glue for how ideas are shared and funded. Hierarchical research journals and funding processes (NIH) are beginning to lose ground to innovations like Mendeley, a peer-network blog for sharing scientific research, and Kickstarter and others, which are extending their scope to research.  A huge flowering of research can be expected as a result.

Even Bigger than the Internet

The cloud is changing everything.  The change is even bigger than the change we saw from the Internet.  It will change how every business operates.  That’s what a cloud computing expert told me – Roger Krakoff, founder and managing partner of Cloud Computing Partners, a venture capital firm that invests exclusively in cloud computing.  I didn’t get it.  How could this be?  Then I had a second conversation with Roger.

An HBR Analytic Services white paper gave me the core of a cloud computing definition I like:  “enables access through the Internet to a shared pool of computing resources (hardware, software, etc.) that can be tapped on demand and configured and scaled up or down as needed.”  But it stops there.  Thanks to Roger I could now add “by any computing device.”  That was the missing link.  It’s the mobile implications that make cloud computing transformational – not merely evolutionary.   Aha!

But then came an e-mail exchange and Roger’s P.S. “better to think of cloud computing as dial-tone or electric power.  It is there when you need it.  Pay by the unit and it just works.”  Bingo!  The cloud is the new utility – like electrical power or water or the Internet!  One source of its power to transform businesses is what happens when it handles business transactions.  And this is already happening in a really big way. 

On May 17th, IBM released the following stats about its enterprise SmartCloud services customers:   one million enterprise application users working on the IBM Cloud.  More than $100 billion in commerce transactions a year in the cloud.  4.5 million daily client transactions conducted through the IBM Cloud.  And that’s just one major vendor of cloud services! 

What’s more it’s just the beginning.  TopCoder, the world’s largest open innovation community, with 400,000 developers is moving to the IBM SmartCloud Enterprise.  From this we can expect an exponential increase in innovation, as these developers support the organizations for which they work with the entire innovation process – from ideation, software engineering and analytics to implementation, testing and support.

At YouTube (http://www.youtube.com/ibmcloud) I found the moving story of how the cloud has transformed the Bari fishing industry – and made life better for the fishermen and their families with a new business model.  Until recently, the fishermen caught too many fish.  They exceeded market demand, Thanks to cloud computing, they can now communicate how many fish they are catching in real time and a virtual market can sell the fish before the boats dock.  Now they catch only as many fish as the market consumes, their income is up 25 percent and the time to market is down 70 percent.  Wow!  That’s innovation that matters!