Government of National Unity. What a Concept.

I realize it is a slippery slope to talk about politics in a predominantly business-oriented blog. Therefore, even though I currently have some very strong opinions on the upcoming presidential race, I have stayed away from writing about politics...until now. An article in this past Sunday's Washington Post caught my eye. The article talks about a bipartisan meeting, which will be held on January 7 at the University of Oklahoma, that will "challenge the major-party contenders to spell out their plans for forming a 'government of national unity' to end the gridlock in Washington."

Much of the article talks about the potential backing of New York Mayor Michael Bloomberg as an independent candidate for the presidency if none of the current major candidates don't make a pledge to "'go beyond tokenism' in building an administration that seeks national consensus."

I don't know enough about Bloomberg to currently have an opinion on him being our next President but I do support the underlying objectives of this session. I strongly believe Washington D.C. is in a state of gridlock because of its deeply partisan nature and nothing will get done until each party is willing to begin working with the other again. David Boren, a former Democratic senator from Oklahoma and currently the president of the University of Oklahoma, says in the article...

Electing a president based solely on the platform or promises of one party is not adequate for this time. Until you end the polarization and have bipartisanship, nothing else matters, because one party simply will block the other from acting.

I am basing my support for the next President primarily on this issue. As a nation, we are in a mess. Domestically, we have big problems that need to be addressed but nothing significant is getting done because we are deeply divided, particularly in Washington D.C. Internationally, we have lost a great deal of credibility with other countries. For our next President, I believe we need a leader who can reach across the aisle and heal our divided nation, as well as regain our nation's credibility in the global arena.

I will be watching closely to see what comes out of the January 7 session.

Have Marketing Launches Changed?

I am currently consulting to a company that is getting ready to launch their company/service. As a result, I have been thinking a lot lately about the different launches I have participated in over the years and I am going to use this post to wonder out loud, "how much time should be spent on getting the messages just right for a launch?"

My first experiences with marketing launches in the technology world was when I worked at Sybase in the late 1980s/early 1990s (yikes!). At Sybase, we used to spend an incredible amount of time preparing for our launches. In particular, we used to spend unbelievable numbers of hours getting our messaging just right. In those days, it made sense to get your messaging right since we didn't have the tools we have available today to change our messages easily. For example, when it came to developing a sales presentation, we didn't have PowerPoint so we used to send out sets of 35mm slides to our sales reps (I will pause a bit to let some of you younger people wonder how silly that sounds). If we made a change to our sales presentation, we would have to send new 35mm slides to each rep. Since you didn't want to do this a lot, you made sure you didn't change your messaging a lot.

Over the years, however, even when things like the Web and PowerPoint have made it easier to change messages, it still seems to be the mindset within enterprise companies to spend a lot of effort getting the messaging just right when preparing for a launch. A couple recent experiences of mine make me wonder if such an effort is worth it.

Over the last year or so, I have been involved with a couple launches that were very successful (a new release at JotSpot and the first public preview of Twine by Radar Networks). Based on these launches, here is my current thinking:

• The messenger is more important than the message. Sure, time was spent on developing the messages for these launches but it was within reason. More importantly, in my mind, both of these launches had great messengers -- Joe Kraus at JotSpot, and Nova Spivack at Radar Networks -- who were able to effectively communicate the right messages.
• A launch is the beginning of a continuous conversation, not a proclamation that needs to be "set in stone" for a period of time. Sure, you don't want to confuse the marketplace and change your messaging often. At the same time, however, it is now very easy (thanks to the Web, pdf, and PowerPoint) to evolve your messages as you learn more from the marketplace.

What do you think? Does this make sense? Or, are things different when you are marketing enterprise software to organizations, versus "Web 2.0 for business" software to individuals and small groups? (I recently wrote another post related to this segmentation.) Let me know your thoughts.

Google's Knol Initiative and Knowledge Networking

Lots of discussion today about Google's Knol initiative...

Earlier this week, we started inviting a selected group of people to try a new, free tool that we are calling "knol", which stands for a unit of knowledge. Our goal is to encourage people who know a particular subject to write an authoritative article about it. The tool is still in development and this is just the first phase of testing. For now, using it is by invitation only. But we wanted to share with everyone the basic premises and goals behind this project.

The key idea behind the knol project is to highlight authors. Books have authors' names right on the cover, news articles have bylines, scientific articles always have authors -- but somehow the web evolved without a strong standard to keep authors names highlighted. We believe that knowing who wrote what will significantly help users make better use of web content. At the heart, a knol is just a web page; we use the word "knol" as the name of the project and as an instance of an article interchangeably. It is well-organized, nicely presented, and has a distinct look and feel, but it is still just a web page. Google will provide easy-to-use tools for writing, editing, and so on, and it will provide free hosting of the content. Writers only need to write; we'll do the rest.

Much of the discussion in the blogosphere is about the impact Knol will have on other knowledge-oriented services like Wikipedia and Squidoo. Larry Dignan at ZDNet offers a different slant on Knol...

Google Knol is initially being portrayed as a Wikipedia killer and perhaps a threat to Yahoo Answers, but there is a key difference that worth noting. Wikipedia is a community effort. Google Knol will highlight authors. If John Doe is an expert on something he can share that knowledge through Google Knol.

That author distinction makes me wonder if Google Knol could really become more of a knowledge management application. Knowledge management software has been around forever in the enterprise, but never quite caught on en masse. The biggest reason: Employees like to hoard knowledge and don’t want to share much because they become less valuable.

For companies, however, collecting institutional knowledge is critical. If you’re a utility that has one third or more of your workforce retiring in the next two years, you better figure out how to store key information. Most of this information isn’t textbook material–it’s little day to day workarounds that make the business more efficient.

That’s why Google Knol could be interesting. Of course, not all of the content will be worthy, but Google’s approach–if it works–may be worth adopting in the enterprise somehow via an API and a filter that aggregates employee expertise.

I agree with Larry. I have been writing a lot about a concept I call, "knowledge networking". It's kind of like social networking but it's less about "who knows who" and more about "who knows what". We have enough services available, in both the consumer and business worlds, that help us with the "who knows who" problem. We don't have much available when it comes to "who knows what". Google's Knol initiative could be a good step in that direction.

Marketing and Sales in a Freemium World

I am currently consulting to a couple different start-ups (Pathworks Software and Radar Networks) and they are both planning to enter the market with a freemium type of business model. A term coined by Fred Wilson, Wikipedia defines "freemium business model" as:

The freemium business model works by offering basic services for free, while charging a premium for advanced or special features. The word freemium is a portmanteau created by combining the two aspects of the business model: free + premium. The business model has gained popularity with Web 2.0 companies

In the business world (versus the consumer world), LinkedIn is a great example of a freemium service. Users can use many of LinkedIn's features for free but if you want to take advantage of premium features, like posting a job opening, you need to pay a subscription fee.

From my perspective, the freemium model is very similar to the open source model and is an effective method for start-ups to build their user base; however, the model also forces marketing and sales organizations -- especially those who are used to enterprise selling -- to rethink how they run their functions. In particular...

• The freemium model moves the "sales funnel" into the service being offered.
• The marketing function can now be measured in a quantiative manner.
• The sales function becomes transaction oriented, rather than relationship oriented.

Let me expand on each of these points.

The "Sales Funnel" Moves Into the Service

With any sales funnel, there are multiple steps a prospect takes before becoming a paying customer. Historically, marketing was responsible for part of the funnel (generating qualified leads) and sales was responsible for part of it (closing the deal).

With a freemium offering, the service itself plays a role in the sales funnel. As users use the free version, the service must move them through the sales funnel and entice them to pay for premium features. For this to be effective, the service must include "features" that highlight the premium features.

For example, if you providing an online document management service, one of the premium features might be extra storage. If that is the case, the amount of storage a "free" user is using should always be highlighted and as the user approaches their maximum "free" allotment, visual cues should be provided that encourages the user to sign up and pay for additional storage.

The Marketing Function Can Be Measured Quantiatively

Anybody who has been in the marketing function at a technology company has heard all of the lines -- "how do you justify that marketing budget?", "you are just overhead". It goes on and on. To some extent, it is difficult to argue against some of the underlying messages. In the past, it has been very difficult to quantitatively measure the effectiveness of marketing. Sure, there are some elements that can be easily measured (direct marketing being a good example) but it is difficult to do so for many of the functions within marketing (PR is a good example).

In a freemium model, the entire sales funnel, and therefore the marketing function, can be quantifiably measured. The number of people who visit the website, the number of website visitors who signup for the free service, the number of free users who become paid users. These are all metrics that marketing can greatly effect, and should be held accountable for.

In fact, when taking this metrics-based approach to measuring marketing, I would encourage marketing executives to take a fresh look at how they organize their department. I propose there should be one person (or group) held accountable for each of the metrics.

The Sales Function Becomes Transaction Oriented

The tone of this post thus far could lead a person into thinking that the sales function is no longer needed with the freemium model. That is not the case. The purchase decision making for any service used by a group of users is still an organizational one and it still requires some prodding. I believe, however, that the freemium model dictates a difference in how the sales function should be managed.

Unlike the direct sales model where reps are selling six-figure deals into enterprises by using a relationship-based selling approach, the freemium model encourages much more of an inside sales, transaction-oriented approach. Typically in a freemium model, the size of the early, seeding transactions tend to be small and cannot justify the expenses associated with direct sales. Over time, as a company grows and starts selling larger deals, direct sales can be layered into the sales function.

Summary

The use of the freemium business model is an exciting development in the technology market. It requires a different mindset across an entire company but particularly in the marketing and sales functions. Those organizations who can adopt the new mindset effectively will be ahead of those who remain stuck in the old mindset.

Should Enterprise Software Be Sexy?

Over the weekend, Robert Scoble set off a firestorm in the blogosphere with his post, "Why enterprise software isn't sexy". To be honest, I didn't quite get his argument. But many of the responses to his post do touch on what I consider is an important issue these days.

Nick Carr of Rough Type does a good job of hitting the issue on the head. He starts with ZDNet blogger Michael Krigsman's reply to Scoble...

As an enterprise software blogger ... I feel qualified to comment on the issue: Scoble’s question is irrelevant and meaningless. Robert Scoble misses this point: unlike consumer software, where sex appeal is critical to attracting a commercially-viable audience, enterprise software has a different set of goals. Enterprise software is all about helping organizations conduct their basic business in a better, more cost-effective manner. In software jargon, it’s intended to “enable core business processes” with a high degree of reliability, security, scalability, and so on ...

When I’m at home using Twitter, a great example of cool consumer software, I want to be delighted, thrilled, entertained, and engaged. When I transfer money through my bank, which is certainly a non-sexy enterprise system, I demand the system work every time without fail. There’s a big difference between enterprise and consumer systems, a lesson I suspect Robert Scoble is about to learn.

Carr then comes back with...

I'm sorry, but I think Krigsman is the one who doesn't understand enterprise software - or at least doesn't understand what it could become. The distinction he draws between business and consumer applications is specious. Are we really to believe that making software engaging is somehow incompatible with making it reliable and secure? That's just baloney.

And...

By perpetuating a false dichotomy between the friendliness of consumer apps and the seriousness of business apps, all that Krigsman is doing is giving enterprise vendors cover for continuing to produce software that's difficult and unpleasant to use. Give Scoble credit. He's asking the right question, in his own strange way.

Nick has been receiving a lot of grief on his post, especially from people who follow the enterprise software space, like the Enterprise Irregulars crew. I was in the enterprise software space for a long time and I'm with Nick. I not only feel that there aren't any good reasons why enterprise software can't look as good as consumer software but I also feel that in the near future, enterprise vendors will have to deliver a consumer-like experience in order to be accepted by young users who grow up using consumer Web services.

Also, as I stated in a recent post, more and more business software start-ups are taking a bottoms-up approach to entering a market by enamoring users before penetrating the enterprise. When taking this approach, they have to remember that they are initially marketing to individuals, not organizations, and a compelling user experience is an important criteria for an individual when they decide to use a new service.

What Is The "Purpose"?

I have spent a lot of time working for start-ups in the business software space. In that space, when you are defining a new product, it doesn't take long before the discussion comes around to, "what is the value proposition of the product?". When selling to businesses, the concept of a value proposition makes sense and it is usually related to some sort of financial benefit -- increase revenues, decrease costs, etc.

Now days, start-up companies in the business software space are attempting to penetrate the market using a bottoms-up approach. Rather than selling "high" within an organization using a direct sales force, start-ups are trying to initially market to individuals. The theory goes if you can get a bunch of individuals excited about an offering, then they can act as your evangelists within an organization as you upsell to a broader set of users. The open source business model is all about this. Suppliers of business-oriented RSS readers, like NewsGator, are also taking this approach.

The important notion with this approach is that you are initially marketing to individuals, not organizations. As a result, I would argue that the "value proposition" mentality is not as relevant. When I, as an individual, decide to use a new product or Web-based service, I am not thinking about "value proposition". I am thinking more along the lines of the "purpose" the new product/service is providing me.

If I step back and think of all of the Web-based services I use regularly, each one has a defined "purpose" in my mind. I use LinkedIn when I want to see if somebody in my personal network knows somebody I am interested in talking to. I use MyBlogLog to check on my blog activity. I use Pandora to listen to music online.

I have been putting this mentality into practice recently as I consult with start-ups, especially to those who are initially marketing to individuals. I strongly encourage them to develop a succinct sentence that defines a clear "purpose" they will provide a user. Having such a "purpose" makes the requirements definition process much easier; without such a "purpose", the requirements definition process can easily lack the focus it needs to be successful.

Where Are the Big Ideas?

Rafe Needleman of Webware posted a rant today entitled, "Where are the big ideas?" In his post, Rafe wonders out loud why there aren't many start-ups tackling big ideas and, therefore, requiring big amounts of cash.

Right now, a small team with no money can start a real online business. If the founders are very lucky, they generate revenue and begin to grow. If they are exceptionally fortunate, they get sold to Google for $1.65 billion. But most of the start-ups we cover on Webware.com will languish for a while in obscurity and eventually die. The problems they are solving are not big enough.

This is one of the reasons that venture capitalists are having a hard time. Many are are sitting on funds of hundreds of millions of dollars, looking for places to put large chunks of that money. But you can't put more than a few hundred thousand into a typical Web start-up without drowning it in funds it can't use. Over-funding a company can kill it, just as surely as starving it of resources.

This is a problem, because if a business can be funded by credit card debt, a competitor can come in and start the same business, and undercut whatever profit margin the first business is relying on to keep the Ramen cupboard stocked. Big businesses have defensive walls around them, and often these walls are built with stacks of money.

These are the businesses that I really like--big plays that take big money and major industry expertise to start. If they work, they change the landscape.

The reason there aren't that many big ideas these days is because it doesn't make sense to raise a lot of money when the probability is greater that a "successful" start-up will be purchased by a large company within a few years, rather than going public over a number of years.

Just take a look at the facts...if you look at the acquisitions made by Google and Yahoo! over the last few years, the acquisition price for the majority of the deals was under $100M or "undisclosed" (which means that it wasn't a large number since they only have to disclose details on deals that have a material impact on their financials).

If chances are a start-up will be purchased before they are worth more than $100M, it makes sense not to raise a lot of money. The more money you raise, the higher the exit price becomes for all investors to be happy and it reduces the options a company has over time.

I'm not saying this is a good thing. As I have argued a few times (here and here and here), I believe there is a fundamental disconnect between the currently liquidity climate for start-ups and the funding environment. Until this disconnect goes away, I think we will continue to see a lack of start-ups with big ideas.

Is Tech Blogging Happening Too Fast?

Anne Zelenka has an interesting post at GigaOM. Entitled, "Tech Blogging: The Web Mind at Warp Speed", the post raises the question about whether tech blogging is happening too fast these days. Anne cites a couple people who feel that it is...

Marketing consultant and blogger Brian Oberkirch suggests that tech blogging happens too fast, without enough thought, and that a decrease in ad spending could have a helpful effect:

A minor correction in the ad market might be the best thing to happen to blogging. Maybe writers would turn away from becoming page mills and boring the crap out of us, and instead, will turn back to value, passion, thinking things through, making connections previously unseen.

Forrester blogger Josh Bernoff recently voiced a similar criticism:

When it comes to blogging, faster is often perceived to be better. GigaOm and TechCrunch are all over the trends, covering the same announcements, often within minutes of each other.

Anne, however, feels differently...

I’m not convinced, however, that better ideas emerge by holding back on them, deeply thinking them, and polishing them until they’re just right. With the global Internet mind, offering more tentative and provisional ideas and doing it faster may be a better strategy than sitting in an isolation chamber, devoid of feedback.

And...

If all tech blogs did was rewrite press releases, they would add little to the evolving understanding of technology. What they do instead is consistently introduce timely information and quick analysis into an ongoing conversation. While it’s not a perfect approach, it can contribute to an incremental growth in understanding — especially when that new information is mixed and mashed up by other writers working at different paces and with knowledge of other spheres.

I've been thinking about this lately. Every day, I spend a good portion of time sifting through the RSS feeds of the popular tech blogs I subscribe to. I am finding that for the majority of them, I view them as "news providers", rather than as "news analysts". I see their value as delivering news to me on a timely basis. I go through their feeds quickly, scanning the headline, rather than looking for their analysis. For this category of blogs, I am thinking of unsubscribing to some of them since they are playing redundant roles in my mind.

These days, I place much greater value on blogs that deliver lengthier, insightful posts. Read/WriteWeb, in particular, is a favorite of mine right now. I read their posts more carefully because I appreciate the analysis they provide.

So, from my perspective, I do think tech blogging is happening way too fast.

I Like the Smell of Roses

The sub-title for my blog is, "Things That Rise 'Above the Noise' in My Mind". Based on most of my entries to date, you could easily conclude that I think about nothing but business/work. Fortunately, that is not really the case, as evidenced by a few recent entries on parenting (here and here) and education.

One of the other things I spend a lot of time thinking about is sports, and in particular, USC (that is, the University of Southern California; not the University of South Carolina) sports. Although the football season didn't quite turn out the way we had originally hoped (when analysts were saying that this team could be one of the best college football teams of all time), the season ended on a good note this past weekend with USC, once again, winning the Pac-10 championship and a trip to the Rose Bowl.

When it comes to football, expectations are very high every year at USC. This is not the case when it comes to basketball so it is a pleasant surprise when the basketball team has a good season, as they did last year. Expectations are a bit higher this year since they have one of the premier freshman in the nation (OJ Mayo). So far, the season has gotten off to a fairly good start but none of this really counts until you get to March Madness.