what’s dying? It’s Not The News; It’s The Paper!
I attended the inaugural Ignite NYC today at M1-5 in the Chinatown area. A crowd of about 350 people turned out and the din was quite formidable at times. But it was a fantastic lineup of speakers and I learned a number of things from the talks.
The last talk in the program was The Future of News by Nick Bilton, who works for the New York Times technology R&D group. Conventional wisdom holds that as more and more advertising moves online, newspapers are a dying business. The carnage happening in the publishing industry seems to bear out this notion. After a brief overview of the history of news, Nick challenged the audience to think beyond this truism. He said that it’s not the news that is dying, it’s just the paper–the medium for its delivery–that is dying.
Newspapers have fallen into a malaise about their financial health and spend reams of one of their most expensive resources, newsprint, writing about exactly this. The problem is: readers really don’t care to read about this and want instead to learn about substantive news that’s going to affect their lives and their communities. Several Internet services–Digg, Google News, NowPublic and outside.in to name a few–have taken a stab at redefining how relevant news is selected and delivered to people. I am hardly one in favor of throwing this important, professionally mandated, socio-political watchdog function entirely to the wisdom of the crowds, but these services are proofs of the concept that news reporting needs to closely examine and adopt some of the value that these services provide.
Some news organizations, such as News Corp are exploring this space aggressively. Others, like the New York Times, are merely coming to terms with the economics of digital media consumption, such as by opening up the paywall that used to surround most of its content. News organizations need to snap out of their malaise, reprogram their corporate DNA, stop attributing their ill-health solely to the shift in advertising and figure out the precise value they are providing to their customers. News isn’t going away anytime soon, and customers will pay for high-quality content that provides them with true value.
Benkler on transactional frameworks
As some of you may know, I am reading Yochai Benkler’s The Wealth of Networks. Within the context of my thinking around innovation and Atomized Enterprises, I will quote particularly illuminating excerpts from the book as I work through it. I highly recommend you buy the book (or just read it from the full-text online edition). Today’s quote:
(p. 107-112, all emphasis mine)
The first thing to recognize is that markets, firms and social relations are three distinct transactional frameworks…
The point is not, of course, to reduce all social relations and human decency to a transaction-costs theory. Too many such straight planks have already been cut from the crooked timber of humanity to make that exercise useful or enlightening. The point is that most of economics internally has been ignoring the social transactional framework as an alternative whose relative efficiency can be accounted for and considered in much the same way as the relative cost advantages of simple markets when compared to the hierarchical organizations that typify much of our economic activity–firms…
This does not mean that social systems are cost free–far from it. They require tremendous investment, acculturation and maintenance. This is true in this case every bit as much as it is true for markets or states. Once functional, however, social exchanges require less information crispness at the margin…
The difference between markets and hierarchical organizations, on the one hand, and peer-production processes based on social relations, on the other, is particularly acute in the context of human creative labor–one of the central scarce resources that these systems must allocate in the networked information economy… pricing of individual effort can be quite crude. More importantly, as aspects of performance that are harder to fully specify in advance or monitor–like creativity over time given the occurrence of new opportunities to be creative, or implicit know-how–become a more significant aspect of what is valuable about an individual’s contribution, market mechanisms become more and more costly to maintain efficiently, and, as a practical matter, simply lose a lot of information.
The above is an important and refreshing call to bring in the transactional framework based on social relations into the realm of economic analysis in a knowledge-based economy. What I like best about the excerpt above is its balance: neither does it denounce present day capitalism and economic analysis as obsolete in the face of new models of value creation, nor does it define these phenomena of the edge economy as born of a ‘hacker’ mentality driven to subvert all that free-market capitalism has cultivated and cherished. Traditional economic models have fallen short in accounting for social relational transactions in a wide variety of situations (if value creation at the edge these days isn’t a compelling enough example, consider how GDPs of developing countries are often underestimated because they never incorporate nonmarket services–such as socially transacted childcare–which nonetheless generate utility). By giving the social relational transactional framework an even-handed analytical treatment, Benkler does contemporary economic thinking all a great service.
Bangalore Bomb Blasts Heard Around The World
Being from Bombay, which has seen its share of serial bomb blasts, I was quite taken aback this morning to read about serial bomb blasts in Bangalore, which has managed to escape them so far. My deepest condolences go to those killed and injured by this act of terrorism. As GigaOM puts it, these blasts may have occurred far away but their echoes will be felt in the global innovation ecosystem, including in Silicon Valley–this is the reality of our globally connected world with Atomized Enterprises. No doubt this will be another unfortunate factor to be accounted for in business continuity discussions.
The silver lining though is that even with nine bomb blasts, only 2 were killed and 20 were injured (the seven bombs that ripped through Bombay in July 2006 killed 209 and injured 714). I have full faith in the resilience of the Bangaloreans and am confident they’ll bounce right back.
The Elevator Pitch Fetish
Hank Williams has a great post over at Why Does Everything Suck about why VCs might want to reconsider the conventional wisdom that the best fundable ideas are expressed as an elevator pitch. In addition to the great points Hank makes in his post, there are a few reasons the traditional elevator pitch is at least a little outmoded.
- Incrementalism. Every VC wants to have at least one or two ideas in a portfolio of investments that will ‘hit it out of the park’ and return 10x or more of invested capital upon exit. The problem is a lot of the low-hanging fruit in this case–the sort of idea that can be expressed in a crisp elevator pitch–has already been picked. A lot of today’s Internet startups are either me-too companies or build upon other ideas (Yelp = ‘user-generated Zagat’, or Qik = ‘YouTube marries cellphones’). In these cases, crisp 30-second descriptions may not always capture the essence of the idea like it did with prior successes (PayPal = ’send and get money over email’). It is often necessary to sit down and understand beyond an elevator pitch how exactly the idea builds upon others.
- Or, non-incrementalism. In the case of non-Internet startups–specifically in areas like biotech, cleantech and pharma/medical tech–the problems being solved are significant enough, and fraught enough with policy complications, that they often won’t fit in an elevator pitch.
- Ubiquity of communication. Time was when access to VCs was really limited and the elevator pitch was pretty much the only way to get them interested. To be sure, it’s not that VCs have not gotten any more time, but several of them (especially the smartest ones) blog and serendipitous relationships and investment opportunities may surface from these media. This sort of sustained relationship building may often prove more prudent than chance encounters.
- The emerging cult of ’show not tell’. Things have changed a lot in the world of Internet startups. It’s a lot more prudent to get a prototype out that users or potential investors can just take for a test run. A crisp elevator pitch is essential when that’s all you have to lure an investor with, but when you have a functioning service and a user community, it’s hard to argue with success.
All this is not to say entrepreneurs shouldn’t bother with an elevator pitch. The discipline you need to come up with a compelling elevator pitch is essential in distilling an idea down to its barest essence. Another reason is plain pragmatism. It took some time before a non-technical entrepreneur I am informally advising was able to distill his idea down to a manageable set of features. Working against an elevator pitch improves the likelihood that you’ll get something out there (not doing this is perhaps the biggest reason startups fail).
- Elevator pitches are certainly not outmoded for the next big areas in which smart money is investing these days. For Internet and mobile startups, elevator pitches are not outmoded at all for emerging markets, which will have vastly different characteristics than the North American techno-cultural situation. But Hank is spot in advising VCs to open their minds a little and re-examine their fetish of the elevator pitch.
What can disrupt Google?
Google, in addition to making well-regarded products, is hailed as the company that could stand to dominate the technology landscape for a while to come. The company has accumulated a remarkable base of talent (even if some of the bloom has come off that rose) and has built up a formidable infrastructure, both of which enable it to play neatly to an emerging always-online lifestyle. Even as the company goes from strength to strength in its domination of online properties, the golden question everyone loves to ponder is how Google, the golden child of an Internet Age that doesn’t seem to going away anytime soon, might itself get disrupted.
Unlike technology changes like commodity hardware and the Internet, which disrupted IBM and Microsoft respectively, the biggest potential disruptor to Google is in fact Google itself. Google puts a high premium on its ability to maintain the atmosphere of a small, innovative startup, where innovative ideas are heard and translated within a reasonable timeframe into products. Engineers at Google are encouraged to exercise their creativity and passion without much intervention from a traditional corporate hierarchy. The flip side of this heavily peer approval-driven approach is that engineers must build extensive personal networks of influence to increase the chances that their product or feature sees the light of day. As the company continues on a trajectory of hypergrowth though, the laws of organizational physics will pose a challenge to this goal by making this web of relationships progressively harder to keep up. And Google certainly wouldn’t want its own cultural best practices to lead inadvertently to its demise. Until now, most companies that experience this transformation deal with it by creating processes that impose order on chaos, which inadvertently saps the serendipity and hallway conversations that were the life-blood of the company in the first place.
Back when Microsoft was viewed as the innovative young kid on the block, the organizational behavior literature produced several surveys of how Microsoft’s corporate culture enabled its success. MIT Sloan professor Michael Cusumano’s How Microsoft Makes Large Teams Work Like Small Teams is but one example. Now that the legal and technological abilities to form atomized enterprises are emerging, one way for Google to deal with its looming disruption is to look at how to make large enterprises work like small enterprises.
Software development organizations have long realized the value of small, driven teams, but that wisdom doesn’t necessarily translate over to the organizational side of most enterprises, who continue to stick with well-understood models of resource allocation for Traditional Enterprises. Of all the major technology-driven companies in business today, it is Google that can come up with a way of creating a functioning network of independent internal entities that collaborate effectively to advance stakeholder interests. These entities (which, as a practical matter, could be structured as JVs), would not just be maintaining a startup atmosphere–they would in fact be startups! The idea of ‘intrapreneurship’ isn’t new or foreign to Google, but pushing the envelope on that concept and changing the rules of the game are what holds the keys to keeping Google’s innovation engine firing on all cylinders.
two Benkler quotes
I have just begun reading The Wealth of Networks by Yochai Benkler. I’ve read less than fifty pages of the mammoth 515-page tome (set in 10pt Garamond, no less!) and have already been thoroughly impressed. Benkler’s ideas are important to my own ruminations here about Atomized Enterprises. As I work through the book, I will post brief excerpts here that I think are interesting. This post contains two quotes from the Introduction:
p. 17-18:
Different technologies make different kinds of human action and interaction easier or harder to perform. All other things being equal, things that are easier to do are more likely to be done and things that are harder to do are less likely to be done. All other things are never equal. That is why technological determinism in the strict sense–if you have technology “t” you should expect social structure or relation “s” to emerge–is false…Neither deterministic nor wholly malleable, technology sets some parameters of individual and social action. It can make some actions, relationships, organizations and institutions easier to pursue, and others harder…The same technologies of networked computers can be adopted in very different patterns. There is no guarantee that networked information technology will lead to the improvements in innovation, freedom and justice that I suggest are possible…The way we develop will, in significant measure, depend on choices we make in the next decade or so.
I like the above quote [emphasis mine] because it indicates that Benkler’s analysis goes beyond the naïve technoutopianism that we as geeks are somewhat prone to.
p. 8-9:
As collaboration among far-flung individuals becomes more common, the idea of doing things that requires cooperation with others becomes much more attainable, and the range of projects individuals can choose as their own therefore qualitatively increases. The very fluidity and low commitment required of any cooperative relationship increases the range and diversity of cooperative relations people can enter, and therefore of collaborative projects they can conceive of as open to them.
The above quote is a terse statement of the loosely coupled nature of Atomic Enterprises. With apologies to Mark Twain, this passage seems to say in essence, ‘don’t let your job interfere with your career’, something with which I am in strong agreement.
There will be many more quotes from Benkler here, so watch this space. If you prefer, you can peruse the full text of the book online. TCall me old fashioned, but I’m reading from a hardcover edition — this seems like a book I want to own physically.
twitter’s ‘consummization’ bad for app developers?
GigaOM leads with rumors that microblogging service Twitter might acquire search engine Summize next week.
The blogerati love Twitter and really want to help it justify its own existence. Figuring out a business model for Twitter has become the blogosphere’s equivalent of the search for a cure to cancer. Central to the problem of a viable business model is really defining what Twitter is. Twitter has been defined variously as a personal publishing platform, a message bus and a utility. Each of these definitions lead to different possibilities for business models. Add in Twitter’s fledgling API (Twitter as a development platform?) and its abundant downtime and scaling problems (Twitter as a ransom-extractor?) and we have a whole load of ideas on how Twitter can make money.
Given that most of Twitter’s usage comes from its API, it is no understatement to say that building and maintaining a developer brand is important to the company. With respect to this goal, Twitter’s rumored acquisition of Summize is a step in the wrong direction. To be sure, Twitter will definitely gain from the dependable search features of Summize. But in general, Twitter has long defined itself as a neutral message bus that doesn’t examine the messages it carries. Implicit in this assurance is that it won’t get in the way of developers looking to build on its platform.
Not all companies making platforms need be in the position of competing with their platform developers. Whether or not a company is in such a position can be determined from what it says is the unique value its service provides. For example. the Facebook application platform is a way of leveraging Facebook’s unique data asset, a vast social graph populated by rich profile data. Twitter’s biggest data asset is knowing how conversation flows among its members, which can be a powerful determinant of user sentiment on a given topic at any time. A glance at the applications at Summize Labs shows that these are exactly the kind of value-adds atop the basic Twitter message bus that Twitter had absolved itself of earlier.
If this acquisition goes through, Twitter may gain a new core product and possibly a business model. It still amounts to Twitter backpedaling from its earlier statements and raises the possibility that Twitter itself will get into building applications that cannibalize its unique data asset. Sending such messages to developers building on its platform might lead them to look to other social media platforms, and that definitely can’t be good for Twitter.
Update: The Twitter blog now confirms that Twitter has indeed acquired Summize.
the enterprisization of consumer IT
Much digital ink has been expended on the trend of consumerization of enterprise IT–the trend of consumer-facing technology being used in enterprises because of there being high-quality applications. Less has been written about a closely related trend: the enterprisization of consumer IT. Contrived as its name may seem, I think the trend of consumer-facing technologies acquiring characteristics traditionally ascribed to enterprise software is very real. First let’s explore a few ways in which consumer technology is getting enterprisized:
- Scale. Even the world’s biggest employer, Wal-Mart, has only 2.1m employees, whereas the U.S., which doesn’t even have the biggest broadband user base in the world, boasts over 40m broadband Internet users. The global spread of broadband has given rise to a class of applications that must deal with scaling problems hitherto unseen by any enterprise-class software. Accordingly, any consumer-facing technology that has managed to attract and adapt to a sizeable user base will find little trouble applying the lessons of Web-scale computing to the needs of most enterprises.
- Availability and reliability. Not all in the most recent generation of Internet applications may have viable business models, but the resulting changes in user behavior are significant. Be it teenagers using Facebook as Outlook to Indians spending $2bn on online airfare purchases, the Internet is increasingly used as a transactional substrate rather than just a means of transactional support. The increasingly transactional behavior of Internet users on Web services and social networks is giving so-called consumer technology a bunch of enterprise-appropriate features using commodity hardware and software redundancy.
- Interoperability and standards-based distributed computing. A consumer Web site may not be designed from the start with a predetermined list of point integrations with other consumer Web sites. The prevalence of platform-neutral Internet standards enables opportunistic instances of integration to emerge serendipitously. Broadly applicable standards for data, architecture and identity enable the creation of pipelined systems that can dwarf much traditional enterprise software in terms of complexity, utility and elegance. These very principles can be applied within enterprises to create modular, interoperable systems that can be reconfigured flexibly rather than complex monoliths designed from the start against a fixed specification.
In the long run, the consumerization of enterprise IT will just be part of a larger renovation of enterprise IT and will one day disappear into the ether as a trend. The enterprisization of consumer IT, however, has major implications for business models and investment. Time was when the quality of supporting technology and availability of resources to create it was a significant gating factor that determined the choice of business model and market to pursue. Now, however, conditions are in place for a venture to realistically choose between pursuing the enterprise market and the consumer market. It is not that the distinction is becoming false or irrelevant, because the resource allocation methods required for either market are (still) too widely divergent for a venture to pull off pursuing both. But for a software venture, realizing that it is finally beginning to have a realistic choice between pursuing the enterprise market and the consumer market is immensely empowering.
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