Clouds of common sense

I came across this article today, and it gave me a pleasant surprise.  I’ve had the public/private cloud debate many times over the past year, and to me a private cloud always wins. Basically it boils down to this, if your data is so valuable, why on earth would you put it in a public cloud? Yes, there’s the cost argument, but that’s like being back in 1999 and having a hosting company host your site. It’s a only short term solution because the costs will and do come down.

I’m also glad that CFO’s are wising up to the OpEX shuffle. It struck me as bizarre that no one ever bothered to look at the long term implications.  It’s like everyone was managing to the next quarter, maybe next year. But what about 3,4,5 years out – oh, right, someone else’s problem because you won’t be there anymore.

If you…

 

If you have a profitable business model, then you have a chance to grow.
If you grow, then you have a chance to become really big.
If you become big, then you have a chance to print money.

 

If you have a non-profitable business model then, with other people’s money, you have a chance to grow.
If you grow, then you have a chance to become really big.
If you become big, then you have a chance to hemorrhage money.

 

When you get big the approach matters.

 

 

Windows 8 + SkyDrive = The Beginnings of Microsoft’s AppStore

Yes it’s true, Microsoft has an app store (not to be confused with WP7 Marketplace). Well ok, it’s not official yet – or done- but the framework is starting to falling into place. Microsoft just updated their SkyDrive “cloud storage” offering. The update has made it more web friendly by replacing the Silverlight interface with a HTML5 version. The initial “away for the browser” test of SkyDrive will come from the upcoming Mango release for WP7 which will allow users to upload photos, videos and Office docs to SkyDrive. To me this seems like only the first step.

I believe that Microsoft has bigger plans for SkyDrive than a just narrow phone integration because Microsoft needs a response to Apple’s iCloud and Mac App Store offerings and what better way to respond, than to build a full integration into the next version of Windows. This is also exactly what people are digging up in the early access release of the Windows 8 Milestone Build 3 – hooks to a Windows Store. Since this is only Milestone 3 it is clearly unfinished, however I expect a better picture to emerge as we start seeing Release Candidates. And as we near release of Windows 8 I also expect to see a whole host of integration code to allow developers to easily write code that interacts with variety of Microsoft cloud services. This is key point – Microsoft has to engage the development community otherwise the store will become another ‘also ran’ offering. Microsoft may be late to this party too (as they were with WP7), but I can’t imagine them not responding to a changing competitive landscape and thus, it is only logical that would attempt to leverage their desktop dominance to facilitate growth by extending the platform into the cloud.

How to get it wrong by trying to get it right

Over the last week I have by been amazed by the new paywall being implemented by the NYT. I assure you that is not meant as a compliment. There is just too much of everything in this system:

  1. Price discrimination by device – why?
  2. Create artificial limits.
  3. Change the rules by the day.
  4. Leave everyone utterly confused.

If it succeeds, it’s in spite of and not because of these policies.

One founder with no competitors

One aspect of entrepreneurship that I believe gets less attention than it deserves is successful companies which have a single founder. Many times these companies are not fast rising stars or those which raise large amounts of venture capital. (Note: Venture capital people tend to not like single founder companies.) One such company is Viking Range. It is a single founder company but what makes it more impressive is that Fred Carl Jr. admits there where no existing competitors.  What I love about this story is that it highlights two things:

Attitude –  Fred realizes that no one else in this business and he says,  “this is a business”. Many entrepreneurs would reconsider jumping in, but Fred didn’t.

No overnight success – while it’s true that Viking had a successful launch in 1987, success did not happen overnight. Raising the initial capital was a friends and family affair and it took about 4 years to get the first product out the door.

One of the advantages of being a single founder is that you can follow a passion and make it a success. When there’s two or more founders, passion can get lost in risk control.

Patient Innovators – Do public markets hamper innovation?

Absolutely. The short term focus on quarter to quarter results creates an environment where accepting the inevitable decline of the established business model is difficult. And when the reality can’t be brushed aside anymore, the ability to transition is limited by investor patience. This makes for an artificially quick – and likely poor – transition to the new model. ie. everyone is looking for the blockbuster product rather than focusing on sustainable and scalable growth. However not all public companies suffer equally, Google has had tremendous leeway in developing and growing new innovations because their primary revenue stream is so robust.

With few exceptions, I believe that the the ability to be patient and focused on the long term is a key advantage for a private company. A leg to this stool is the capital structure of the private entity. In other words, a private company building on organic growth, rather than external funding, has even more latitude to experiment. Good examples of patient innovators are companies like W.L. Gore and SAS.

Marching out of time

There is a great message in this recent recent post by Roger Ehrenberg in that it is challenging for an entrepreneur to be part of the minority. Conformity is easy,  it is understandable to others, it is what everyone celebrates (think iPhone). It is much harder to do something that is different because most people are inherently pattern thinkers. In other words “tell me who you are like” is a basic human pattern matching process. Therefore an entrepreneur with a novel vision is at a disadvantage to be heard. Props to Roger for having the guts to invest in “novel” – it takes more effort and time to understand a novel idea.

Innovating with Less

Ryanair, differentiated by cutting services and price. In other words, they gave less to customers who where looking for less which in turn took customers from the undifferentiated coopetition among existing airlines.

Similarly Toyota and other foreign car makers initially attacked the dominate Big Three US car makers buy offering less, ie. smaller, vehicles at a lower price.

Less is a valuable strategy when an industry suffers from coopetition and low rivalry.

Do you have a What If unit?

How many companies have/need a “what if” business unit? Most existing business units focus on operations and thereby execute and optimize an existing business model. But who looks out for the new stuff or the stuff that falls in between silos? Whether or not your company has a formalized structure, the truth is that someone, somewhere is the “what if” person and you can only hope they are good at.

When the day comes to formalize, what I’ll refer to as the Discovery Unit, then existing corporate rules will no longer apply. For example, short term financials are out because the performance horizon for a Discover Unit is long term development. Predictable year over year incremental growth fused with cost reductions is also a thing of the past. A Discovery Unit is not a little edgier version of an existing business unit.  It is a drastic change from the norm and it will cause contention among the ranks, thus for it to be successful it will require the highest level of executive support. If you interested in a great example, take a look at P&G’s Future Works unit, it may be an eye opener.