US consumers need third broadband option

What do BPL, municipal WiFi and WiMax have in common? Besides being three more acronyms inscrutable to most of the population, they also represent US consumers' best hope to get more bang for their broadband dollar.

The US is woefully behind much of the rest of the world in broadband price-performance. (According to the OECD, New Zealand, for one, is worse.) The following table demonstrates the vast disparity in megabits/second delivered per dollar in different countries.

Country	Price Per Mbit (USD)	Source
Japan	$0.37	OECD, September 2005
Korea	$0.42	OECD, September 2005
Sweden	$0.87	OECD, September 2005
France US – cable US – fiber	$1.75 $7.15 $3.33	OECD, September 2005 Comcast web site, Jan 2007 Verizon web site, Jan 2007

Clearly, we in the US have a long way to go. And, let's face it, two broadband providers are not a competitive market--but an oligopoly. Now, with three vibrant competitors, maybe we have something. Four would be even better.

So, electric utilities, municipalities, advanced wireless spectrum license holders--let's get busy! Tens of millions are waiting.

innovation, broadband, internet, pricing

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P&G market research becoming insidious

It's not enough that Procter & Gamble is studying hotel chambermaids' work habits to learn how to sell more industrial-strength Spic 'n' Span--now, in order to market their heartburn medicine Prilosec OTC, they've cornered the game of Bunco.

A dice game played regularly by 21 million American women, according to the Wall Street Journal, bunco is an excuse to socialize, often a weekly affair complete with rich food, drinks... and heartburn.

The Journal, which broke the story (or was tipped off to it by P&G PR) credits an enterprising product manager, Clarissa Niese, with discovering the vital link between Prilosec and Bunco. She found a P&G employee whose wife played regularly, and got invited to a game. Said Ms. Niese: "I could immediately see the relevancy to heartburn."

Now Prilosec is the exclusive sponsor of the Bunco World Tour.

This is getting downright creepy. Is there no activity or pastime which cannot be tied to some consumer product? Not if P&G has anything to do with it. It's enough to give you a stomach ache.

marketing, market research, health care, Wall Street Journal

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The Pigou Club - count me in

Economist Greg Mankiw, former member of Pres. Bush's Council of Economic Advisors and now a professor at Harvard, has been patiently advocating for a simple increase in the gas tax as the best, most efficient means of increasing the US' energy self-sufficiency. (His consistently interesting blog is required reading if you're at all curious about economics.) He's dubbed the people who've signed onto this approach the Pigou Club, for reasons explained here.

My main objection to a tax rise has been that a pork-addicted Congress and an administration lacking in financial discipline would squander these newfound billions.

But alternatives (such as the Rube Goldbergian Bush administration proposal recently announced), full of side effects and unintended consequences as they will be, would be worse, in my view.

So, while gas prices are relatively low, let's start phasing in a new gas tax, to perhaps $1.00 or $1.50 a gallon, and commit the revenue raised toward deficit reduction.

My two cents.

(Picture from bubbels via stock.xchng)

environment, economics, taxation, government

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Orange or blue? The power of brands

Today I had to go to the store to buy a new toilet seat and a portable electric heater. I brought along Charlie, my almost-4-year-old.

As we neared the store, Charlie started saying, "Orange or blue. Orange or blue. Orange or blue." (Like a good marketer, Charlie knows the value of repetition.)

I told him, "We are going to Home Depot." (For non-US readers, the two predominant DIY stores in the US are Home Depot, the orange store, and Lowe's, which is blue.)

"Orange or blue?"

"Home Depot is the orange one."

"I like the blue one better."

And there, in a nutshell, is the power of great brands. Charlie knew that we were going to Home Depot or Lowe's. He can't read more than a few words, hasn't ever bought anything at these stores himself, and probably hasn't even seen a commercial for them. Yet he knows that Lowe's is the blue store and Home Depot is the orange store. More than that, the color is his shorthand for the entire store and the experience of shopping there.

When I asked him why he liked the blue store better, he said, "I don't know." But something about the decor, or the lighting, or the shopping carts, or the signage made a difference to him, and made him place the Lowe's brand at the top.

Brands are elemental.

retail, brands, marketing

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Friday comix - Procter & Gamble researchers analyze housekeeping at the Millennium Hotel

"You know, new Spic 'n' Span 3-in-1 can cut 27.5 seconds
off the time you spend scrubbing that floor."

From today's Wall Street Journal:

"For my staff, every minute counts," says Terri Muran, the [Cincinnati Millennium] hotel's director of housekeeping. That's why when Procter & Gamble Co. researchers approached her last year with an offer to analyze the way her staff worked, she agreed.

marketing, market research, management, B2B, Wall Street Journal, cartoons, Friday Comix

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Want answers to a tough problem? Offer a prize

In today's Wall Street Journal, columnist David Wessel highlights the role prizes have played, and continue to play, in fostering innovation.

From the Longitude Prize memorialized in Dava Sobel's book to the Ansari X Prize, awarded in 2004 to SpaceShipOne for reaching space first as a private venture, R&D contests continue to provide a valuable supplement to corporate, government and university research.

Here's the most interesting point in the article. According to a study by Harvard professor Karim Lakhani of solutions contributed to scientific research bazaar InnoCentive, "outsiders," that is, people whose expertise was remote from the problem domain, were more likely to solve a problem than domain experts.

Apparently their distance and beginner's mindset (should we say foolishness?) aided their ability to solve the problem, while experts struggled to set aside their existing knowledge to find a truly new answer.

innovation, research, problem solving, foolishness, Wall Street Journal

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Lighting companies have a negative incentive to sell compact fluorescents

Wal-Mart recently announced a marketing push to encourage consumers to install energy-saving compact fluorescent bulbs ("CFs") to replace old-fashioned incandescents. Wal-Mart's sales target for 2007 is 100 million bulbs, compared to 40 million sold in the twelve months through August 2006. And we're gonna need the help, because the profit incentive for the lighting companies is to keep CFs a niche product and continue to sell large volumes of incandescents.

Why? Despite their overwhelming environmental benefits (CFs use 75% less electricity), each compact fluorescent sold costs the lighting company $0.29 of profit compared to selling incandescents. CFs have a higher sale price, but last eight times as long as an incandescent. Wal-Mart reaching its goal of 100 million CFs sold could cost General Electric, the largest lighting manufacturer, $10.5 million in lost profit--and that doesn't anticipate the further cost reductions in CF's that Wal-Mart will ask for. Please download my analysis and make your own assessment. You're welcome to point out errors, suggest changes or replace assumptions with data.

So, we'll have to see if the lighting manufacturers are a willing participant in this experiment--or a reluctant one--and if that has any bearing on Wal-Mart reaching its goal.

(Picture from ievaG via stock.xchng)

environment, marketing, lighting, innovation

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Improve your presentations!

One of my New Year's resolutions is to stop giving lousy presentations. While I've never gotten terrible feedback on a presentation I've done, I know I've gotten lazy and fallen into the habit of throwing up a few powerpoint slides with text too small and talking over them, just like 99% of all presenters.

I don't like watching those presentations, and I feel worse giving them.

Thankfully, I stumbled onto a blog that is loaded with advice, tools, reviews and dialogue about presentations. It's called Presentation Zen--and, if you haven't read it yet, you should.

The author, Garr Reynolds, offers suggestions for how to use fewer words and more pictures, how to deal with handouts, using graphs, etc. He reviews Steve Jobs' Macworld presentation (thumbs up), and Cingular's Stan Sigman's (thumbs down). At no extra charge, he provides peeks into Japanese culture, like this. (He currently works in Japan.)

Presentation Zen is already quite widely-read, so I may be late to the party. So be it. I resolve to put its lessons to use in all the presentations I give from this day forward.

(Picture: an effective powerpoint slide from Garr Reynolds' website.)

presenting, narrative, business, blogs, business blogs

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Dave Stein and I talk about segmentation

Dave Stein of ES Research recently interviewed yours truly on sales channel segmentation. You can find the resulting post here.

I met Dave almost ten years ago when he conducted a sales and marketing training program for Alltel, where I worked at the time. I was impressed by his matter-of-fact approach and ability to distill the issues around sales and marketing so they didn't seem so difficult to solve.

ES Research provides information and research on sales methodologies and training programs--kind of a Gartner for sales education. They offer by subscription white papers, process methodologies, etc., for companies looking to improve their sales effectiveness. Check them out if you're looking to adopt a new methodology or want to investigate alternatives to your current one.

channels, alliances, sales, marketing

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The sneaky price increase - should you use it for business services?

Harvard Business School's Working Knowledge site has just republished a fascinating piece from 2004 in which HBS marketing professor John Gourville tells us something we should already know, but don't:

Consumer products companies "raise prices" on us constantly by reducing the quantity of product they sell for a certain price. (Examples: coffee, breakfast cereal, ice cream.)

Prof. Gourville maintains that these companies have found that reducing quantity while retaining the price point works better than keeping quantity constant and increasing price.

Companies selling technology services to businesses face similar issues--underlying costs (typically labor and benefits) rise, yet customers don't want to pay more. It's even more of a challenge, since tech buyers have come to expect prices to decline for the products and services they buy.

One way to implement the sneaky price increase in business is to reduce the service level of an offering (say, the maintenance response times or the hours tech support is available) and keeping the same price. Yet these items are frequently contracted and not able to be altered freely. Also, the people pushing back on price (procurement or finance) are typically different from the people using the service (IT or operations).

As opposed to the sneaky price increase, many services companies would be better off using a tool that they already have at their disposal--the regular, small, price increase. Many contracts allow the supplier to change price at certain periods of time (often yearly), yet many companies don't use this tool. As a result, prices don't change for years--and then, when a price increase is unavoidable, it's surprising and painful to the customer.

So, negotiate the ability to raise price into your services contracts. And then, use that ability regularly, in small doses. Your customer relationships will be better for it, as well as your bottom line.

(Picture: the former 1-lb. tin of Maxwell House coffee from homegrocer.com)

pricing, services, marketing, contracts

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Business bloggers, stop relying on Godin and Kawasaki for your material

A Friday-afternoon rantTM

Is anyone else getting tired of the many business blogs that lard themselves with reductive copies of Seth Godin and Guy Kawasaki posts?

The posts look something like this:

I was reading Seth's blog today and he said [fill in the blank]. He is SO right! Way to go Seth!

or

Guy Kawasaki's recent post on [fill in the blank], really hit home with me. He points out [main idea of original blog post]. I agree with Guy 100%!

Usually there's a picture to fill out the space, and "Digg It" and "del.icio.us" icons.

Why do people do this? The charitable explanation is that writing several blog posts a week is difficult, and recycling high-quality material helps to fill in the inspirational dry stretches.

A more cynical view is: if I can write a post that has lots of links to highly popular blogs like Seth's and Guy's, then those foolish search engines will list my blog when people are actually looking for information on Seth or Guy. And perhaps someone will click on the link, upping my traffic statistics.

blogs, business blogs, marketing

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Why do people love fashon but hate to admit it?

The Wall Street Journal yesterday published an article by Alessandra Galloni featuring a fascinating interview with Miuccia Prada, head of the fashion company bearing her name. Ms. Prada has done a lot of thinking about women's love-hate relationship with fashion. (There may be fewer men so afflicted, but it's not an insignificant number. Just go to any bar in New York City and see.)

Ms. Prada can articulate why people are drawn to fashion better than anyone I can think of. Here are a couple of her best quotes from the article:

"Fashion enthralls everyone, from the taxi driver to the mega-intellectual.... Some say it's about seduction, but I think that's limiting," said Ms. Prada, wearing a springy flared skirt and sandals. "What you wear is how you present yourself to the world, especially today, when human contacts are so quick. Fashion is instant language."

"Buying a $5,000 handbag just because it's a status symbol is a sign of weakness," Ms. Prada said. "Daring to wear something different takes effort. And being elegant isn't easy. You have to study it, like cuisine, music and art."

The Journal has posted the entire interview transcript.

marketing, innovation, design, business, fashion

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More more storytelling

Self-promotion alert! Stop reading now if you don't want to be sold to.

Okay, now that I have your attention, the two storytelling posts I did in December (here and here) were among the most read of the year.

I also was intrigued by the application of storytelling to business. Via those posts, I connected with Shawn Callahan of Anecdote, a narrative-focused consultancy in Australia. Shawn and his team have taken the narrative approach and created a very pragmatic use for it within business.

In a nutshell, Shawn teaches managers and executives to find the stories in their organizations, make sense out of them, and make changes as a result of what they learned. Anecdote's methods build upon techniques and models originally developed for use at IBM.

Stories, as opposed to metrics or surveys, are the only way you can really learn how complex changes are affecting your employees, so you can make adjustments and improve the outcomes. Complex changes include mergers or acquisitions, reorganizations, deployment of new enterprise technology, process reengineering, outsourcing/offshoring, etc.

Think of the failure rate of those types of projects--wouldn't you want an effective tool to improve your chances of success?

I've been working with Shawn to arrange Anecdote's first workshops in the USA. We will be holding one-day workshops in Seattle on Monday, March 26 and in Boston on Thursday, March 29. The workshops are a great opportunity to get your hands dirty and learn how to extract the key stories from your organization.

If I've whet your appetite at all, please read here for a more detailed overview of the workshop and instructions on how to sign up. And please by all means pass this note along to anyone who might find value in this type of learning.

End of advertisement. Thanks for listening.

innovation, narrative, business, management, change management

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Courage in business doesn't take b**ls

In the current Harvard Business Review, Kathleen Reardon of the University of Southern California made me think twice about courage.

Conventional wisdom would say that courage is an intrinsic personal capability, allowing one to disregard great risk in order to do the right thing. And in matters of life and death, it is often so. But business is different from a rescue mission or a valiant battle.

In fact, says Reardon, business courage isn't in your gut, but in your brain. She states:

In business, courageous action is really a special kind of calculated risk taking. People who become good leaders have a greater than average willingness to make bold moves, but they strengthen their chances of success--and avoid career suicide--through careful deliberation and preparation.... Most great business leaders teach themselves to make high-risk decisions. They learn to do this well over a period of time, often decades.

I think it's useful to make this distinction between personal courage and business courage. First, it allows for the proper separation of, say, the soldier who led her troops through a dangerous mission and the CEO who sold an underperforming division even though people didn't want him to.

Second, it allows us to focus on those things we can do to learn and apply business courage--in Reardon's thinking, setting goals, weighing risks/benefits, timing, managing the power structure and having contingency plans.

courage, decisionmaking, leadership, management, business, Harvard Business Review

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Personal networks - useful anywhere

I am an advocate of robust and well-maintained personal networks. Too often, though, the business press has viewed networks as the property of salespeople. Even "Never Eat Alone," the best single guide to building networks, primarily focuses on their benefits for deal-making.

I'm here to tell you that a good personal network is a strong asset whether you're a corporate executive, an engineer or a human-resources professional.

And if you don't believe me, listen to the Harvard Business Review. In the January issue, two different articles discuss the benefit of networks. In "How Leaders Create And Use Networks" (link to abstract), Profs. Herminia Ibarra and Mark Hunter of INSEAD assert that "strategic networking" is an essential component of leadership. Strategic networking is a longer-view, integrated network of friends/colleagues/mentors/proteges, as opposed to more tactical workgroup-oriented operational networks and casual personal networks. Hunter and Ibarra say,

As they step up to the leadership transition, some managers accept their growing dependence on others and seek to transform it into mutual influence. Others dismiss such work as "political" and, as a result, undermine their ability to advance their goals.

Another article, "Firing Back" (link to abstract) by Jeffrey Sonnenfeld of Yale and Andrew Ward of the University of Georgia, discusses the value of strong networks for fired executives. Paradoxically, more distant connections were more useful in positioning the executive for her next job than closer connections. Say Sonnenfeld and Ward,

Through the power of acquaintance networks, you can reach almost anyone within a few steps. Thus, distant acquaintances that don't appear to have any connection to you may prove key to your recovery when you are trying to get back on your feet.

So keep that address book up to date and, better yet, stay in touch. It'll do more for your career than kissing butt, and it's more fun besides.

(Picture from nruboc via stock.xchng)

relationships, networking, strategy, psychology, entrepreneurship, business, alliances

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Innovation means doing more with less

Exhibit A: The NFL's New England Patriots. No other sports franchise has created so much success out of scarcity. Yesterday, against the San Diego Chargers, who had the league's best record and nine all-star honorees (vs. one for the Pats--an injustice, but not one to discuss here), the Patriots beat them with creativity, persistence and some luck. But luck, nonetheless, which resulted from their own innovative preparation.

The play of the game was receiver Troy Brown stripping the football from San Diego's Marlon McCree, who had just intercepted a poorly-thrown Tom Brady pass with six minutes to go in the game. The Patriots recovered, and were able to score eleven points in the next four minutes, erasing an 8-point deficit and winning the game.

With the ball in McCree's hands, the game is over. When Brown stripped it away, he gave the Patriots an opportunity, which, like any innovative organization, they capitalized on.

Several seasons ago, with the Pats' defensive secondary having lost several key members to injury, coach Bill Belichick began to have Brown practice, then play, as a defensive back. (Playing both offense and defense is almost never done past high school. ) His two-way play helped the Patriots win their third Super Bowl.

And on Sunday, after Marlon McCree picked off the pass, Brown channeled that inner cornerback, reacted to the ball, and pulled it, and the game, away from the Chargers.

(Picture: the Patriots belt buckle from buckleshop.com)

innovation, sports, football, New England Patriots, resourcefulness, business

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A peek inside executive severance agreements

The outrage over Bob Nardelli's and Hank McKinnell's multi-hundred million dollar severance agreements still hangs like a cloud over US business. But lost in the outrage is exactly how these severance agreements came to be, and why they look the way they look.

The most misleading impression these articles give is that the board of directors decided to reward the outgoing CEO for his years of service, and thus packed his briefcase with stock options, deferred compensation and cash as a way of saying thanks. (Here's one of the only articles I saw that explained the issue clearly.)

Nonsense. They'd prefer in these situations to pay nothing, even to claw back some of the existing millions they'd paid out.

But the severance agreement is signed when the CEO is hired, not when she's fired. In many cases, when the CEO is lured from another company (say, GE), the employment contract--which covers severance--includes "make-goods" for compensation the CEO is leaving behind (like unvested options, pensions, etc.).

When the CEO is fired, the company needs to pay up on these make-goods or other partially-earned awards. It's in the contract--not optional.

And remember, when the employment contract is negotiated, the prospective CEO has a lot of leverage. She'll hire an attorney and a consultant to make sure she's taken care of in case she's terminated for any reason. And it's true that the CEOs have been far better than their boards at negotiating for their own benefit, should the worst happen.

Therefore, the seeds for the negative PR avalanche around severance packages were sown years before, when the CEOs were initially hired.

executive compensation, employment contracts, leadership, governance, ethics, management, business

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Cingular an "unpopular distribution partner"...NOT

In his wide-ranging attack on Steve Jobs in today's WSJ Op-Ed article ("iGenius" - $$), Michael Malone hits Cingular with an unwarranted stray shot.

Malone claims that, among Jobs' many mistakes on the iPhone is the selection of Cingular as an "unpopular distribution partner." Which struck me as odd. Unpopular by what measure, and compared to whom? Cingular has the largest subscriber base, a churn rate that is approaching the industry's best (Verizon), and continues to grow at the expense, primarily, of Sprint.

In my opinion, Cingular is stealing a march on Verizon (who I suppose would be Malone's version of a "popular distribution partner"--unless he means Sprint or T-Mobile) in the smartphone market. In addition to the iPhone exclusive, they offer the Samsung Blackjack and the Blackberry Pearl (UPDATE: I forgot the very cool Sony Ericsson Walkman phones), and Verizon doesn't.

Also, Cingular is GSM, meaning the iPhone can be more easily adapted for sale around the world (where GSM is predominant). That's proving to be an advantage to Cingular too.

wireless, mobile, iPhone, Cingular, Verizon, Wall Street Journal, business

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MVNO blog coverage breaks out of its tiny niche

MVNO, one of my favorite topics (much to the consternation of my wife, who asserts persuasively that I haven't been able to explain clearly what the hell it means), is the subject of an excellent post today in Interpublic Group's Future of Media blog.

Except for press-release driven articles in newspaper business sections, coverage of this industry has been limited to the gadget blogs or industry publications. Does this portend MVNO edging toward being a mainstream, long-term viable business? Sprint, for one, hopes so.

wireless, mobile, marketing, MVNO, business

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More on the underdo strategy

Nowhere is the underdo strategy more active than in computer software. Thanks to Microsoft setting a high bar for pricing (and growing higher--see these new prices for Windows Vista and Office!), or deficient functionality, or both, they've left lots of space for companies to develop products that offer good or better value at a much lower (or zero) price point. Here's a short list:

• Firefox web browser
• Basecamp
  
• Linux
  
• MySQL
  
• OpenOffice
• Gmail
  

Do you think Google sees this white space as an opportunity? You bet. They bought Writely and put together Google Docs & Spreadsheets as a way to grow into a market that has been Microsoft's alone. Yet now Microsoft is trapped in the position of the high-price competitor, offering loads of features that no one uses.

In an example of how things have changed, I use exactly two pieces of Microsoft software: Windows XP and Media Player (and that only when I have to).

And I'm not a cutting-edge tech guy, either.

innovation, product development, marketing, software, business

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Postscript

The prior post was "fermenting" in my mind for a few days before I put it on paper. Yesterday, after reading the article on Basecamp in PDMA Visions for the umpteenth time, I realized something.

I have been using Basecamp for the past month, for a project I'm working on. (My excuse: my colleague set up the project in the software and sent me a link and user id. He casually referred to "Basecamp" in an email or two, which is what triggered my eventual recollection.)

Now that's a simple, straightforward product. You can use it without being aware of doing so!

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If you want to create a great new product, do less

Counter-intuitive, right? Sure was to me. We marketers are brainwashed to believe that "better" means more features. But creating value by doing less is the new horizon in product innovation. Just ask Clayton Christensen of Harvard Business School, or Mark Hart, who wrote about the phenomenon in the latest PDMA Visions magazine.

Christensen (the most quoted man in innovation today?) discusses the concept in the December Harvard Business Review, focusing on social services (link - $$). One example cited is MinuteClinic, which started in Minneapolis providing walk-in health services at CVS drugstores (CVS subsequently acquired MinuteClinic).

MinuteClinic treats a finite set of common maladies with nurse practitioners, not doctors, with reasonable cost and a high-level of convenience. Is MinuteClinic service "better" than treatment from the Mayo Clinic? No, but it's good enough, much cheaper and more convenient. That's the "underdo" strategy in a nutshell.

Mark Hart's example is 37signals, a company that evolved an internal need for simple, Internet-based collaborative project management into Basecamp, a product now used by more than 500,000 users and awarded "Best of the Web" by Business Week--even though it does much less than Microsoft Project. Which of course is the point.

(Picture: a Rube Goldberg device from Wilf Ratzburg via stock.xchng)

innovation, product development, marketing, Harvard Business Review, PDMA, business

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Startups, ditch your business plan!

The business plan is an entrepreneur's lifeline. It has near-mythic qualities--the ability to distill an entire business into one short (or long) document, the ability to attract investors, the ability, even, to predict the future. (Want to know what a startup's EBITDA will be in 2010? Check Exhibit K.)

In addition to all these things, according to today's Wall Street Journal, it may also be a waste of time. Referring to several studies of startup performance, reporter Kelly Spors cites a study from Inc. magazine showing that nearly two-thirds of fastest-growing startups had rudimentary business plans or no plan at all.

Why is that? One explanation cited is that startups have to be nimble, and if you are too wedded to a business plan, you may stick with a failing concept too long. Or that spending lots of time writing the perfect business plan can cause you to miss the business opportunity.

You must understand the financial model for your business--how will you charge customers? What are your expenses, fixed and variable, and how will your prices cover your costs? What working capital will you need? But, as stated in the Journal article, "it's not always crucial to have the 60-page plan."

If you're considering ditching the business plan, remember one thing. If you're going to ask any institutions for money (VCs, banks, etc.), you're gonna have to have one. But keep it small and simple--and be prepared to change it.

(Picture from broker via stock.xchng)

entrepreneurship, business plan, startups, business, Wall Street Journal

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Software distribution partnerships--got to know what you want

When you set out to form software distribution partnerships, you know one thing at least: you are looking for someone to sell your stuff. Beyond that, though, many companies wade into this phase of partnering with few other things decided.

And that's a problem.

Are you looking for the partner to fulfill any other roles besides sales? Like, say:

• Installation
• Systems integration & project management
• Ongoing account management
• Providing complementary software
• First-level maintenance
• Second-level maintenance

It's important to have a point of view on this, because it will help you narrow down the types of companies who will be good partners (and perhaps more importantly, the types who won't).

Let me describe two partnerships at the extremes of the distributor spectrum:

Partnership 1: the software provider wants the distributor to sell the product, but the software provider will do all the installation work, any integration/customization required, ongoing maintenance.

Partnership 2: the software provider wants to sell a standard platform, and wants the distributor to install, customize, integrate and provide most maintenance (the software provider only provides core product customization and level 3 support for bug fixes to its platform).

These two partnerships will have very different commercial models, legal agreements, training, exclusivity provisions, etc. The type of partners you look for will be very different as well. Partner 1 can sell and doesn't need any other capabilities (e.g., manufacturer's rep). Partner 2 better also have lots of professional services, strong processes, industry domain expertise, a reliable brand name, etc. Partner 1 will need a share of the license revenue, but most of the overall revenue will be yours. Partner 2 will command a much larger share of each customer's spend, but will let you distribute much more widely.

So think about what you want before you start signing up partners. It'll save lots of money and headaches. And you'll sell more stuff, too.

B2B, software, alliances, sales, business, marketing

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Friday comix - McDonald's thrives despite controversy

marketing, management, McDonald's, Wall Street Journal, cartoons, business, Friday Comix

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The Seven-Man Clock

My wife got me one of these for my 40th birthday, a few years back. It is without doubt the best conversation piece I've ever had in my office. It's a small replica of a large kinetic sculpture which is in Seattle's Pacific Science Center. There are seven small brass people working at various places on the clock--turning cranks, riding escalators then falling down, etc. It makes a fairly loud whirring noise that thankfully fades into the background as you get used to it.

It seems at first that the workers are moving the machine. But, as you stare at the clock, it becomes increasingly clear that, in fact, the machine is moving the workers.

Which reminds me a lot of when I worked for very large companies.

(photo: the seven-man clock from Kinetico Studios and Gordon Bradt)

design, psychology, organizational behavior, management, business

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Examples of different partnerships

Continuing from the last post, here is an example of each type of partnership:


Technology partnership:
Pfizer licenses the right to market Scripps Research Institute's drug discoveries.


Joint venture:
Sony and Ericsson combine their mobile phone operations into a jointly-owned company.


Joint marketing agreement:
Sun Microsystems and Quark collaborate to promote and sell Quark's publishing software running on Sun platforms. (Here's an example contract from Sun.)


Referral relationship:
IDT, and Net2Phone, two telephone providers selling different services (long distance and voice-over-IP), refer leads to each other. (Note: partnerships often grow into deeper relationships--the companies subsequently merged.)

(Photo: the Walkman 810 phone from Sony Ericsson)

innovation, alliances, sales, business, marketing

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What's a "strategic alliance" or a "partnership" anyway?

When people in business say they want to be your partner, they usually mean this:

I want you to sell my stuff.

In fact, one of the most dispiriting situations in a product manager's career is getting your first great "partner" lead and discovering the inevitable: while you thought they wanted to sell your stuff, in fact they want you to sell their stuff.

There are other partnerships--technology partnerships, where one company uses another's technology as part of its product (in open innovation vernacular, this is often called in-licensing or out-licensing, depending on whether you're using or supplying the technology); joint ventures, where two or more companies share ownership of a third company which develops, manufacturers and/or markets a product; joint marketing relationships, where companies co-invest in marketing but sell side-by-side to customers; and referral relationships, where companies whose products don't overlap refer prospects to each other, sometimes for a fee or other consideration.

But most of the time, we're talking about somebody selling somebody else's stuff. In the next several posts, I'll talk about how to develop and structure that kind of partnership.

(Picture from stock.xchng)

innovation, alliances, sales, business, marketing

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