Why Is Foursquare Unbundling?

Foursquare recently announced that they're splitting in two. They're moving the location sharing feature to a new app called Swarm. I've been a fairly loyal Foursquare user for quite some time. And when I think back to why I use it and why I've stayed loyal, I'd say it's a few things (in order):

1. Their search and discovery is really good. It's incredibly useful when I'm in an area I don't know well and random searches like "free wi-fi" or "cappuccino" are really effective. And their GPS is extremely accurate.
2. Foursquare records a history of where I've been. If I'm trying to remember a restaurant that I really enjoyed it's great to be able to look back at my history when I can't remember its name.
3. The gaming component is fun. Their UI/UX is absolutely phenomenal. I have to admit it's pretty satisfying when you check-in.

The one thing I don't use Foursquare for is location sharing. I don't have a large network on Foursquare and I'm uninterested in sharing my location with large groups of people. That said, there are lots and lots of people that love to share their location with the world. But that market was quickly swooped up by Facebook a while back when they released the exact same feature.  So for me there isn't much value to Swarm.

I recognize I'm a sample size of one, but all of this makes me wonder if Foursquare unbundled because they wanted to create two really valuable, standalone apps. Or if the move was more of a spin-off or divestiture of a less valuable and less promising feature (location sharing). I'm not sure. But it will be interesting to see what comes of Foursquare and Swarm as mobile search, discovery and location sharing evolves.

SaaS & Minimizing Buyer Risk

Andreessen Horowitz had a podcast recently on software company valuations. All of their podcasts are excellent by the way and definitely worth listening to when you have some time. This one discussed the fact that, traditionally, big enterprise software deals were sold as "perpetual" licenses. This meant that the enterprise would pay big money upfront for software that could be used forever. This was a nice thing for the seller from an accounting point of view. You'd get big bucks on day one that you could use to pay your engineering team and sales force. Your financials would look really good in that period. The software as a service model (SaaS) is much different. With SaaS, the license is sold as a subscription and revenues and costs are spread out over the life of the agreement. At first glance, the SaaS model doesn't make a seller's financials look so good. When the deal is closed the seller has to pay their engineering team and sales force upfront. All that cash is out the door but the revenue is collected and realized over several years. This is why Castlight Health was called the most overpriced IPO of the century when they went public a couple months ago at a valuation of $1.4 billion on only $13 million in revenue (an outrageous 100x revenue multiple). I don't have a strong opinion on the company or their valuation but what many people in the media missed is the fact that most of that multiple was being driven by the company's "deferred revenue" -- or deals that have been closed but not yet realized from a revenue recognition perspective. Deferred revenue is a critical measure of a SaaS company's health.

I say all of this to make a related point. One of the challenges in selling enterprise software is the buyer's concern about risk -- e.g. a buyer might say "what if we make a big investment in your product and we find that it doesn't work for us, do you provide a guarantee?" When you're selling SaaS (as opposed to a perpetual license) it's important to explain to your buyer that you are totally aligned on risk. The entire SaaS model is built around getting renewals. During the initial contract period, the cost of selling the software likely exceeds the revenue collected so it's critical for the seller to get the buyer to renew. The good news for the seller is that over time the costs are amortized and when the client renews the relationship becomes quite profitable. So the entire model is setup to drive customer renewals -- in many cases, most of the risk is actually on the seller. It's worth explaining some of this simple accounting to a buyer when they push back on risk.

Unlike a perpetual license, the buyer and seller's interests are completely aligned: the buyer needs great software and the seller needs a renewal.

4 Things That Big Healthcare IT Companies Must Do To Stay Competitive

The healthcare IT space is possibly the most exciting and dynamic industry in the United States right now. Healthcare is going through a total transformation driven by massive regulatory change, the “consumerization” of healthcare and the important shift from a system that manages sickness to a system that manages health. Underlying all of this change is the software that runs large healthcare organizations -- specifically, the big EMR systems. Given all of the rapid change in healthcare, the EMR industry -- and the dominant players that lead it -- are ripe for disruption. It's not unlikely that there'll be some big names dropping out of the race over the next several years.

With that in mind, here are 4 things I think the large EMR players should do to remain competitive amidst all of this change.

1. Move to the cloud. Healthcare IT is all about big data. And the large EMR companies host loads of it. In the traditional database space, Oracle and SAP waited much too long to move their data to the cloud. And it seems that some of the big EMR companies appear to be waiting too long as well (though, it's possible they could be making this transformation behind the scenes). Regardless, the fact is that health information is going to have to live on the cloud in the long-term. There is no way around this. Patients are going to demand interoperability of data between their primary care doctor and their gastroenterologist and their dermatologist and their dentist. And there is no way that all of those providers are going to be running the same EMR – the space is way too fragmented. I'd argue that not moving to the cloud is a bigger risk for EMR companies now than it was to the large database companies ten years ago. Patient advocates and regulators are simply not going to allow a big EMR vendor to keep their data in house. Larry Ellison said it took 7 years of development to get Oracle on the cloud. EMRs vendors can't continue to put this off.

2. Open up platform APIs (I mean, really open up platform APIs). I've used the BlackBerry versus Apple's iOS example in the past when discussing this topic. Apple opened up its app store early (effectively employing hundreds of thousands of app developers) and as a result made the iPhone 1,000 times more valuable. Meanwhile, BlackBerry dragged their feet and eventually ended up near bankruptcy. There are a number of reasons why the analogy isn't perfect (EMRs aren't consumer products, there are HIPAA restrictions around exposing personal health information, etc.) but EMRs should take a close look at what caused BlackBerry's demise. Part of the reason they dragged their feet on opening up was that their corporate customers were hesitant to allow their employees to download apps. They let their own customers slow down their development. Now some will tell you that the EMRs have created APIs and are adding services on top of their products all the time. This is not true. Even the most open EMRs are tightly policing the products that plug-in to their platform. The first EMR that takes a true "app store" approach will have a massive advantage. There are a ton of well-funded developers building amazing things that these EMRs can tap into if they open up.

3. Focus on usability. I'm not a doctor and I don't work in a doctor's office. But I've seen enough of these systems and I've heard enough complaints from users of them to know that the usability of most EMRs is not up to par with high quality B2B software tools. This is the classic case of B2B software being bad because it can. These companies have high talent sales teams that only need to sell a handful of executives and the rest of the health system is forced to use it and deal with the usability problems. With the emergence of B2E2B (business to employee to business) sales strategies a lot of this is changing. Staff members expect B2B software to work the same way their consumer tools work (Facebook, Gmail, Amazon, etc.).  Granted, due to high switching costs, the big EMRs can get away with poor usability for a while -- it'll be a long time before EMR software is sold the way Yammer is sold but when big contracts come due in a few years, usability will be a massive competitive advantage.

4. Get out of the B2C business. Many big EMRs are rapidly creating direct to consumer products, mostly in the form of a patient portal. This is being driven by 1.) the belief that consumers will continue to be more and more engaged in their care and 2.) the government is requiring it as part of meaningful use; though it’s mostly being driven by the latter, which is a recipe for really weak consumer products. Take a look at the app store ratings of many of the big health IT apps – consumer expectations of what makes a good app are much too high for an enterprise-focused vendor to meet at this point.  To compete in the consumer space you have to be totally focused on the consumer. It has to be an obsession. Take a look at a company like Oscar Health that has built their entire business around consumer experience. This isn’t a criticism of the EMRs, they do lots and lots of things really well. The point is that they should focus on those things and double down on them. Moving to the consumer space is too hard and too competitive and too much of a distraction.  The better approach is to buy or partner with an organization that is built around the consumer.

The Contrast Principle

Another tidbit from To Sell Is Human by Daniel Pink (the book I wrote about the other day) is the notion of the 'Contrast Principle'. Pink tells the story of when two ad executives were walking through Central Park and came upon a blind man begging for money holding a sign that read, "I'm blind."

They found that the man had only collected a few coins.

One of the ad executives decided to help. He asked the man if he could make a small change to his sign.  The man complied and the exec added four simple words to the sign.

Immediately, the execs noticed that people began to give the blind man more and more money. This continued throughout the day and the blind man had his most profitable day ever.

The four words that the exec added to the sign? "It's spring time and...".

"It's spring time and I'm blind."

By contrasting the experience of the person walking by with the experience of the blind man asking for change, the sign was able to give people better perspective on the blind man's situation.

Who knows if this story is true. But the point is a great one. Providing buyers with a contrast is critical. For innovation sales to work, there has to be a significant contrast between what exists now and what will exist in the future. The buyer must fully understand the current state.

Humans notice the difference between things, we don't notice absolutes.

Oscar Health's Competitive Advantage

A few weeks ago the Wall Street Journal did a short piece on Oscar Health, the New York health insurance startup that is out to revolutionize the industry. If you haven't heard of them, Oscar's goal is to take all of the complexity out of health insurance by providing clarity and top-notch user experience. The article points out that when a new customer receives their health insurance card from Oscar it comes in a box that looks like you're getting an iPhone (see below). The box is even shaped such that it fits perfectly into an Instagram frame so customers can share it easily online. A quick look at their site and you can see that they're really different from the big guys. They're all about the consumer.

But one thing you'll find is that they really aren't that much cheaper than traditional health insurance. Their play doesn't seem to be price. Their play is simplicity, clarity, beauty and ease of use. I love that. They're going to try to compete in a wildly competitive industry by doing nothing other than making their product easier to use and easier to understand. A seemingly minor competitive advantage -- but potentially a massively impactful one.

This product is perfectly aligned with what consumers expect (and are getting in most other aspects of their lives). We expect easy and simple and beautiful in all of the products we use and most healthcare products are not giving it to us.

Oscar is tapping into that consumer (patient) demand and will be a fun company to watch.

4 Ways to Improve Email

Many have written before that email is ripe for disruption. Something has got to give and I think we'll see lots of innovation over the next few years. In the meantime, here are four features I would love to get added to Outlook and Gmail that would make my life a little bit easier: 1. Character count. I'd love a character countdown (from, say, 200) to appear in the top corner of a new email. It would be a critical reminder to keep emails short. I'd even love a feature that would not allow the email to be sent if it exceed a particular character count. 'Pithiness', as required by the 140 character limit, is the best feature of Twitter. There's no reason it shouldn't apply to email as well.

2. Like button. I stole this idea from a comment that Donna White made a while back. One of the best features of Facebook is the 'like' button. It's an incredibly easy way to let people know you appreciate something they've posted without engaging in a back and forth. It's a super-efficient, low effort way to keep in touch with lots of people. Instagram and Twitter do this as well. I'd love the same feature to be added to email. Instead of having to respond with a one or two word response, the reader could just 'like' the email and that could be tracked and not require a new email to be generated. This would probably reduce the volume of email by 20%.

3. Reply tracking. I'd love to be able to click on a folder that show all of the emails I've sent that haven't been responded to for easy follow-up and tracking. I know there are plug-ins like Toutapp and Yesware but they're painful to install -- this is so basic it should be native to email programs.

4. External/internal reporting & filters. One of the pitfalls for people that are externally facing is ensuring that you're focusing the right amount of energy towards customers as opposed to internal work. A simple widget that tracks the percent of email flow that is internal versus external over time would be super useful. In addition, it would be great to have the ability to easily switch between internal and external inboxes and sent items folders.

The Argument For Net Neutrality

The other day I was writing about how I find it odd that most of the prominent venture capital firms seem to only invest in computer and software engineering companies and seem to avoid things like energy, telecom, transportation and infrastructure. The reason, of course, is that computer and software engineering is really the only big opportunity left that hasn't been significantly regulated. Well, as most of you know, that's about to change. ISPs are preparing to charge web services to use their pipes. This would do great damage to the "permissionless innovation" we've seen in the internet. The big companies that can pay the fees will flourish and the small innovators will be shut off. This would be a horrible thing for the industry, and, in many ways, the world.

But, some would argue, if Netflix is using a ton of bandwidth to make huge profits, the ISPs should have the right to charge them. If the ISP market was a completely free market, that would make a lot of sense. But it's not. Most consumers only have a couple of options for which internet provider they use. If those ISPs want to enjoy "duopoly" status, they're going to have to follow some rules.

With that in mind, I came across a comment from Phil Sugar the other day on Fred Wilson's blog that makes the net neutrality argument perfectly.

To me here is the question. I as a citizen through my elected officials have given the cable company, the phone company, the electric company, the water company, the gas company, the garbage company the right to serve me in a non competitive monopoly or duopoly.

I agreed to this arrangement because it is not cost effective to have twenty people digging up my streets, putting in wiring, plumbing, etc.

However, I demand for this right that I am served as a utility.

I do not want to pay more for electricity because I am running super secret trading algorithms on my computer versus having my daughter leave the light on.

I do not want to pay more for my water because I am crafting the best microbrew in the world versus my wife filling the claw foot tub.

I refuse to pay more per bit because a cable or telco company views it as more profitable for the company that is serving me.

Now if you want to cap my total bandwidth, limit my speed, etc, that is a discussion that we can have at the utility level. I don't necessarily think every plan has to be "unlimited" because I don't necessarily want to subsidize my bandwidth hogging neighbor.

Spot on.

Sales 3.0 & 'Problem Finding'

I've been reading To Sell Is Human by Daniel Pink, a great book that argues quite persuasively that we are all salespeople; that the most important thing that each of us does every day -- regardless of whether or not we're in sales -- is to sell. Selling your family, your friends, your colleagues, your customers, your boss. And he argues that most of the jobs of the future (mostly focused around education and healthcare) are going to be all about "moving people", e.g. selling people. Pink also puts a fine point on what I wrote about the other day where I compared Sales 1.0 and Sales 3.0. He notes that today's sales environment is more about “problem finding” than “problem solving”. He uses the example of someone purchasing a vacuum cleaner.

A guy might say, "I need a new vacuum cleaner". So the problem, is: he needs a new vacuum cleaner. It used to be that to solve this problem he would drive down to a a store and talk to a vacuum cleaner salesperson who would explain the options, features and pricing. This salesperson no longer exists -- or if they do, they're not that valuable anymore. Information on vacuum cleaners is easy to find on the internet. You can educate yourself on everything you need to know about buying a vacuum cleaner while sitting on your couch. The information is now a commodity. So the “problem solver" type of seller is going away. We don't need salespeople to solve the "I need a new vacuum cleaner" problem anymore.

But suppose that this guy’s problem isn’t that he needs a new vacuum cleaner. What if the screens in his house are letting too much dust into the house? Or what if his carpets are of poor quality and are attracting too much dust and replacing them would solve his problem?

This is what sales 3.0 does. It gives buyers insights (that's where the value is). But not insights on how to solve the problem, but what their problem actually is. Remember, information on the solution, in most cases, is now a relative commodity.

I love the vacuum cleaner analogy.

Sales 3.0 is about helping buyers understand their true problem.

Related to this, this is why RFPs (request for proposals) are now so backwards. Large enterprises don't need to execute an RFP to figure out what feature set will solve their problem at the lowest cost, they need advisers (sellers) to help them figure out what their problem is.

As more and more salespeople adopt the sales 3.0 approach, I think we’ll start to see the perception of salespeople begin to improve. If sellers are sincerely trying to provide buyers with insights on their business and helping them think through their problem, buyers won't avoid salespeople, they'll seek them out.

Is Innovation Accelerating Or Decelerating ?

I came across a great debate the other day between Peter Thiel and Marc Andreessen on the question of innovation and whether it is accelerating or decelerating. I found Thiel's perspective on this super interesting as he talked about the massive lack of innovation we've seen since the 1970s with regard to transportation and energy and infrastructure. I also enjoyed the debate around which metrics are best to use when measuring innovation acceleration -- things like GDP per capita, number of engineers and researchers, cultural attitudes toward technology, speed of cars and planes, patents filed, etc. Finally, I've always wondered why it seems that most of the notable venture investors out there always seem to be so heavily focused on computer and software engineering as opposed to more structural opportunities like energy, transportation, construction, finance, education or healthcare. The simple reason is that computer and software engineering is the one area that government regulation has (for the most part) not yet slowed down. This is why you're seeing the venture community so interested in things like virtual reality, drones and Bitcoin -- these are opportunities outside of software engineering that haven't yet been regulated. Little regulation means good opportunity for growth.

I enjoyed the debate so much I posted the video below. It's about 57 minutes long.

[youtube http://www.youtube.com/watch?v=VtZbWnIALeE&w=560&h=315]

Sales 3.0

I've written about this topic here in the past but lately I've been thinking a lot about modern methods of selling and figured it was time to update my thoughts. Over the years, I have witnessed three phases of sales:

Sales 1.0: Pitching and objection handling. This is the old fashioned approach of 'sell, sell, sell' and 'always be closing'. This is where a salesperson talks about themselves and their company and their product's features and makes bold claims and defends their pitch by responding to objections. It's selling with brute force. There are lots of salespeople still using this approach.

Sales 2.0: Consultative or solution selling. This is where a sales person focuses most of their time learning about a prospect's business, asking questions, understanding the prospect's challenges and problems and 'what keeps them up at night'. The trick, of course, is that the answers to these scripted questions result in the prospect believing that they need the seller's product to solve their problem. This is almost the exact opposite of Sales 1.0. The thinking is that the sale is not about the seller, it's about the prospect and the prospect's business. I've found that most people still believe this is the right way to sell.

Sales 3.0: Disruptive selling. With the emergence of the Challenger Sale, this approach is becoming more and more popular. With disruptive selling, a seller is basically saying this:

I don't know much about your business, but I know a lot about the specific area that my product focuses on. And the way that you are currently addressing the problem that my product solves is completely inadequate. I'm not here to sell you something and I'm not here to ask a bunch of questions about your business. I'm here to challenge you on a very specific part of your business and to get you to think about it differently and change the context with which you think about it. I'm here to educate you and inspire you and move you. Again, I don't know your business all that well but I do know this area much better than you do. I think about it all the time and I talk to your peers about it all the time. So I'm going to give you our perspective on it. If at any point you don't think what I'm saying is interesting or don't think that a partnership makes sense, please tell me and we'll shake hands and I'll leave. And if at any point I don't think a partnership makes sense I'll do the same. This is not a sale, it's a discussion about an issue that is relevant to you and an opportunity to determine whether a partnership might make sense.

The seller likely wouldn't say this so bluntly, but you get the idea.

Sales 3.0 is most frequently used in selling innovation, but from what I hear it's becoming more popular across all industries. The world is incredibly complex. It's simply not possible for an executive to understand and manage all aspects of their business perfectly. And that's ok. And that's why they need specialists (salespeople) that are super competent experts in their domain to challenge them aggressively on different aspects of their business. Increasingly, for salespeople, knowing the product (Sales 1.0) and knowing the customer (Sales 2.0) are commodities. That should be a given.

Salespeople should know everything about their domain: products, customers, competitors, trends, the history, the future. Everything. And then use that extreme expertise to challenge a prospect on that aspect of their business. With Sales 3.0, salespeople shouldn't sell or ask a bunch of scripted questions. They should be interesting. They should give insights. They should have a point of view. They should influence. They should challenge. They should find authentic synergies.

And if authentic synergies aren't there, they should leave.