MVP in B2B

Minimum Viable Product (MVP) has become an enormously popular way of releasing web applications. The idea is to get a product that works in front of users quickly and cheaply, watch them interact with it and constantly iterate and improve.  In some cases developers will release changes to the product every day, if not multiple times a day. This is also often referred to as an "agile" development environment. This approach is distinct from the old fashioned, "waterfall" approach where changes to the product are planned and implemented less frequently in well planned batches.

In a b2c environment, MVP works extremely well because a developer can release features and iterate based on data/learnings that they capture by watching thousands of users interacting with their code.

In a b2b environment, though, often this isn't so easy.  At the outset, there may only be one or two individuals using the product so good data and learnings may not be as easy to capture.  As a result, it's critical that when b2b organizations use an MVP approach they be super disciplined about setting up formal feedback loops where feedback is filtered quickly and regularly back to their product team. Most clients should support this as they’ll get to see much of what they recommend being built into products rapidly.  But it’s important to get buy-in on participation in the feedback loop from the early adopters.  This may be a new concept for them as most of their current software vendors are more than likely using the ‘waterfall’ approach.

Also, given the pace of change in an agile development process, it's important that the client-facing team is aware of the more significant product changes that are being made.  Often, an agile, MVP driven environment can lead to such fast paced change that b2b salespeople aren’t aware of the significant features or changes being released.  And an awareness of the substance and timing of product changes can be an excellent way to speed up deal movement and client adoption.

User Driven Valuations

I wrote about Facebook's IPO back in May pointing out how unbelievable it was to me that a company that started back in 2003 and really doesn't make anything of substance or have a very compelling revenue model could go public at a $100 billion dollar valuation. I ended the post by saying, "the world has changed".

Well, maybe not. A lot has changed for Facebook since then (see stock price chart above).

Their market cap is now below $40 billion and the consensus seems to be that their stock price is going to continue to fall. That said, their shares are still trading at around 32 times earnings -- so there's still a decent amount of hype around this IPO.

One of the primary reasons for all of the hype is that Facebook is so widely known and widely used. They have hundreds of millions of users; many of them use the product several times a day, every day. And the vast majority of these users know absolutely nothing about investing.  But because they use the product and know the product, they were compelled to buy some shares. As a result, the company was hugely overvalued following its IPO.

Contrast this with Globus Medical, a medical device company that went public on Friday with virtually no hype. It’s unlikely we’ll see this stock nosedive like Facebook. They have a fraction of the customers that Facebook has – they make medical devices used in spinal surgery – so there are far fewer people interested in owning a piece of the company. There’s far less hype.

There have been literally thousands of consumer web services started and funded over the last couple of years. Many of these companies have millions of users and no revenue or compelling revenue model. As a result, I’d expect to see more and more companies go public in the near future with inflated valuations that are propped up by their user base.

The Facebook IPO underscores a good lesson for amateur investors: just because you use a product every day doesn’t mean it should be a part of your portfolio.

I Like Mike (Part 2)

Regular readers know that I'm a big fan of Mike Bloomberg. I wrote about him in an earlier post back in 2008. Chris Dixon interviewed him for TechCrunch’s Founder Stories series last November.  It's an insightful and inspiring interview -- I recommend watching when you have some time.  Here's some of the highlights/insights for me. I’m paraphrasing Mike, of course.

• One of the goals of New York City is to have a park within a ten minute walk of every New Yorker.
• The business goals for New York isn’t to pay companies to come here through subsidies, it’s to create an environment where people want to live.  That means great culture, parks, schools and reduced crime.
• Big companies are like governments in that they setup very reasonable bureaucracies to minimize risk.  But that bureaucracy is what prevents them from innovating.  That’s why we need startups.
• The United States is committing suicide by not giving citizenship to foreign entrepreneurs.
• People talk about making New York more of a hub for college education, much like Boston.  It turns out that there are more undergraduate and graduate students in New York City then there are people in Boston.
• There are 13 public golf courses in New York City and Staten Island's land mass is almost 25% park.

SecondMarket & the Tech Bubble

There was a fantastic column the other day on Reuters written by Felix Simon titled, Facebook’s SecondMarket Puppets. The column points out how investors that put their money in Facebook using SecondMarket while Facebook was private have actually lost money since the company went public. This is interesting – and scary – for companies with upcoming IPOs that are allowing their illiquid shares to be traded on a secondary exchange. In theory, the value of SecondMarket was that you could get in on a hot company pre-IPO and make big bucks if/when they went public. But it seems that this isn’t a guarantee. Simon’s key insight is this: 

…it’s increasingly looking as though shares in private tech-companies are a bit like fine art prices: a place for the rich to spend money and feel great about owning something very few other people can have. The minute they become public and democratic, they lose a lot of their cachet.  And a lot of their value.

The level of hype propping up the valuations of some of the hot private and public internet companies is enough to keep me far away from these securities...and SecondMarket.

Mary Meeker's State of the Internet

Nobody is better than Mary Meeker -- now a partner at Kleiner Perkins -- at summarizing the state of the internet. Last week she presented her Internet Trends 2012 presentation at the All Things Digital Conference. This presentation is fantastic, I recommend flipping through it when you get a chance. The most compelling part to me is her summary of how technology has forced almost all industries -- from photography to healthcare -- to reimagine their products and they way the deliver value. That section begins on page 33 and ends on page 84.

[scribd id=95259089 key=key-mv1qbwlvykk5cacr6a7 mode=scroll]

TripIt

I've been travelling quite a bit over the last couple of months -- I’m on a plane or train or both at least once a week.  One of the most painful parts of travelling is keeping track of my itineraries: carrier, airport location, departure times, arrival times, confirmation numbers, hotel names and locations, etc. When you're moving around a lot, keeping track of all of this can be a complete pain.

TripIt is an iPhone app that solves this problem.  Anytime I book a train, plane, hotel or dinner reservation all of the relevant information is imported neatly into the TripIt app.  When I open the TripIt app it shows me all of my trips in chronological order.  When I click on an individual trip it shows me all of the relevant information for each flight, train, hotel and dinner reservation.  TripIt takes a good chunk of stress out of traveling and I never have to carry print outs or search through my email to find a confirmation number.

There are two ways to get your itineraries into the TripIt app.  You can either forward your itineraries to the TripIt email address or you can set it up so that TripIt automatically scans through your email every 10 minutes looking for itineraries. I've gone with the latter option and it's worked great.  

TripIt makes money by offering premium packages -- TripIt Pro and TripIt for businesses.  You can see the different product features here.  So far I've opted to stick with the free version.  

If you're looking to reduce some of the stress that comes with travelling frequently, TripIt is a no-brainer. 

Soap Operas & The Internet

You may not know that soap operas are called soap operas because they were originally created as a way to sell more soap.  Putting a quality drama on television during the day is a great way to get peoples' attention.  Sprinkle in some ads for soap and you have a pretty nice business model.  This is what's known as the "interruption-based" advertising model.  The viewer shows up to watch a drama and gets interrupted every 10 or 15 minutes with profitable ads.

Many of the top internet companies are beginning to look a lot like soap operas.

Facebook is covered with irrelevant display ads and requires you to install all kinds of apps to work effectively.

Irrelevant advertisements have started to pop up in my Twitter feed.

LinkedIn has gone from a super clean site to a mess.

Spotify and Pandora ads are poorly targeted and happen too frequently.

Don’t get me wrong.  I recognize that these are businesses that need to generate revenue and I have no problem with them doing so.  I guess I’m just a bit disappointed that as internet companies have evolved into real businesses, they’ve defaulted to old fashioned disruptive marketing to make money. Each of the companies above have built great products and innovated significantly.  You can't say the same about their business models. 

The Facebook IPO

Facebook is set to go public today at a $100 billion dollar valuation.  For context, General Electric is worth about $199 billion.

GE was founded by Thomas Edison in 1890, has more than 300,000 employees and is a market leader in appliances, aviation, consumer electronics, electrical distribution, energy, finance, healthcare, lighting, oil & gas, rail, software & services and water treatment.

Facebook was founded in 2003, has about 4,000 employees and is a market leader in, well, display advertisting.  

It's official.  The world has changed. 

A Couple Thoughts On LinkedIn

I’ve been using LinkedIn much more frequently over the last few weeks.  I noticed a couple of interesting things.

1. LinkedIn shows the number of connections you have to your connections, but they cap it at 500.  So if you have 501 connections or 1,500 connections, it will show the same thing -- 500+.  This feature is very consistent with LinkedIn founder Reid Hoffman’s perspective on networking -- I read about this perspective a few weeks ago in his book, The Startup of You.  The last thing Hoffman would want is his users to use their number of connections as a status symbol, leading them to make connections with people they barely know.  Hoffman believes that people should have smaller networks of very strong connections.  Further, much of the value of LinkedIn is the integrity of its connections.  If I see that you know someone I’d like to connect with, it’s important to LinkedIn that you know that person well.  If you don’t, the product becomes far less useful.  Capping connections at 500 was a smart way to preserve product integrity.
2. I’ve Tweeted about this in the past, but one of the most popular features of LinkedIn is the “See Who’s Viewed my Profile” feature.  You can click on it to see who’s looking at your profile.  This feature drives a ton of traffic -- users come back to LinkedIn regularly just to see who’s looking at them.  What’s interesting to me about this feature is that while it  drives a ton of traffic for LinkedIn, it would destroy traffic for Facebook.  If Facebook users knew that other users could see that they were looking at their pictures, users would look at far fewer pictures.  And because most of Facebook’s revenue comes (indirectly) through page views, releasing this feature would be suicide.  It’s an interesting paradox that illustrates a key difference between our personal and professional networks.

8 Years of BlackBerry

I've been a loyal BlackBerry user since 2004.  Since then, I've had six of them (see photo below).  I finally made the decision to switch over to the iPhone 4s this month.  The iPhone is a significantly superior product.  The operating system is much slicker and the apps are phenomenal.

Apple's App Store took the PDA marketplace to a place that RIM never imagined it would go.  As evidence of this, the last BlackBerry I bought didn't even come with the BlackBerry app store installed.  You had to go out to the web and do a tedious installation process to start buying apps.

All of that said, I'm one of the few that believes BlackBerry is here to stay (though it may require an acquisition by a larger player).  The new BlackBerrys are superior devices for corporate users and more and employees are requiring a mobile device for work.  And the lack of a keyboard puts the iPhone at a nearly insurmountable disadvantage as an email device (email is the most used app for corporate users).  

I don't think it's implausible that most corporate users will have a work device (BlackBerry) and a personal device (iPhone or Android); just as most corporate users have a work computer (very often a PC) and a personal computer (very often an Apple). 

Regardless, BlackBerry is up for a big fight.  And it'll be an interesting one to watch. 

Pinterest

A lot has been written about Pinterest, the social photo sharing website, in the last few weeks.  Fastest company ever to get to 10 million monthly uniques.  Very impressive.  What's even more impressive is how they're monetizing these users at a very early stage with a somewhat brilliant idea.  Here's how it works:

• I post a link to a pair of sneakers that I like from say, Sports Authority, to my Pinterest page
• You see the image and click on the link
• Pinterest runs an instant query to determine whether or not Sports Authority has an affiliate program
• If they have one, the link is automatically converted to Sports Authority's affiliate link and you're sent to Sports Authority's site
• You make a purchase from Sports Authority
• Pinterest takes their commission

A very innovative (and frankly gutsy) idea.  Twitter and Facebook are probably kicking themselves for not thinking of it years ago.  

The Razorblade Strategy

Yesterday I wrote about how I'm long on Amazon. One of the reasons is that they’re in the process of aggressively implementing the Razorblade Strategy.  The Razorblade Strategy is when one item is sold at a low price in order to increase sales of a complimentary good.  It was made famous by Gillette -- they sell their razors for next to nothing and the blades at a high premium.  This creates a profitable recurring revenue stream, and recurring revenue is generally better than one-time revenue.  Printer companies also do this very well.  Printers cost almost nothing and Hewlett-Packard, as an example, makes nearly all of its profits on the sale of the toner (again, recurring revenue).  I remember reading that one ounce of HP print toner costs more than one ounce of Dom Perignon...

The price of Amazon's Kindle has nosedived over the last several months -- you can get one for $79.  Rumor is that they’re even losing money on manufacturing the devices.  They're hoping that by lowering the price more people will buy a Kindle and then buy the profitable digital media to put on the device.  This is a perfect example of the Razorblade Strategy at work and exactly why I believe they’ll compete well against Apple in the digital media space.

Typically, the major risk involved with the Razorblade Strategy is when the price of the complimentary good falls.  But with Amazon's scale and dominance in media there's relatively little risk for them there.

Amazon should race as fast as they can to get a Kindle in the hands of every consumer.  Good execution of the Razorblade Strategy, and a price of $79 versus Apple’s cheapest iPad at $499, is a critical and promising step in that direction.