August 2, 2010

Why I think OpenIDEO is important

This is a break from my usual blog post format but today is a special day: we’re launching OpenIDEO – a platform designed to bring people together to solve problems for social good. Here’s a quick intro video (those of you that know me may recognise the voice):

I’ve been thinking about and developing this opportunity for a few years and thought I’d jot down a quick personal perspective on why I think it’s important.

Collaboration works. Cities have always been hotbeds of innovation.  Why?  Because high population densities bring together minds and enable collaboration.  Solitary inventors deliver, but the world is getting too complex for individuals to make breakthroughs at the societal level as frequently.

vs  

Take helicopter design: although Leonardo Da Vinci had a good go at designing a whole ‘helicopter’ in the 1480s no individual on the planet would be able to design and build a groundbreaking one today from scratch.  I don’t imagine there’s even an individual that could design and build all of the electronic systems. Today, most breakthroughs require collaboration.

Collaboration works between similar individuals: 1+1 = 2.5. But we have learnt through our work that collaboration works even better between diverse individuals (whether the differences stem from culture, experience, knowledge, approach or all of the above): 1+1 = 3. Diversity of perspectives drives better results.

And it doesn’t need to be ‘physical’ anymore. In the past collaboration has generally required physical meetings, it’s still arguably the most effective approach.  But technology is providing new means to meet and collaborate virtually, for example social networks (including Twitter, Facebook and LinkedIn) provide us all with new tools for collaboration.  Harnessing technology will be essential for impactful collaborations in the future, particularly since we know that diversity is important.

When companies choose to prevent employees from using social networks (usually to keep them focused) I wonder if they’ve thought through downsides – not least that they may be preventing their employees from developing these new collaboration muscles.

And we care. Although voter numbers are dwindling, consumer and citizen engagement around brands and local politics is increasing – partly because these are the areas where we believe we can have impact. This is likely to increase – particularly after a period where we have all been forced to reassess our values (the economic meltdown) and because technology is offering us all greater power to affect that change.

–

So, with these big trends in mind, we built a technology platform to enable diverse people to collaborate in solving problems for social good.  We hope that it makes a difference.

July 13, 2010

58) Dropbox

危 wēi  danger

MIT-grad Drew Houston was frustrated with how often he forgot his USB drive.  He was sure that there was a better solution, probably a Web-based file hosting service but he couldn’t find one available so he founded Dropbox with a fellow MIT-Grad to build it.  Shortly after receiving seed financing from Y-Combinator in 2007 they released a short video explaining their plans on Hacker News – the video received 1200 Diggs and Houston realised that they must be onto something.  They built the product (which is worth checking out for its wonderfully simple UI here) and officially launched at 2008′s TechCrunch50, an annual technology conference.  Initial users loved the product so the next logical step seemed to be to advertise and they launched an Adwords affiliate programme.  The results were shockingly poor – customer acquisition cost proved to be $233-388 (for a $99 product).  Perhaps the company’s VC backed competitors were overspending and the company would never be able to compete?

机 jī opportunity

The team interpreted the situation differently – they didn’t see the cost of Adwords advertising as the problem, they concluded that their challenge was that consumers don’t search for problems that they don’t know they have.  In other words the team needed to find a way to create demand, not harvest it.  The team knew that users that were referred to the product invariably loved it so they developed a system to incentivise the referral process (gifting both the referrer and the new users free memory – a 2-sided incentive).  The approach worked: user numbers from Sept 2008 to Jan 2010 have increased from 100k to 4m, and 35% of these new users joined directly from the referral programme.

How About…

  • Questioning whether your aim is to create or harvest demand?
  • Using 2-sided incentives to drive sales?

–

I like the low-fi introductory video (the only information on their homepage), it reflects the team’s humility and dives straight into the benefit using an analogous situation:

June 10, 2010

55) ITC Limited (eChoupals)

危 wēi  danger

As I outlined in a post last year the Indian agricultural market is tough.  Farm ownership tends to be heavily fragmented, the infrastructure is often poor and historically the supply chain has been clogged by middlemen. This makes life difficult for both farmers and the buyers.  For example, often farmers would have to travel for days to a market with no knowledge of current prices, once there the exploitative middlemen could pay below the market rate and refuse to pay any premium for quality.  It has been estimated that farmers were losing up to 60% of the value of their crop as a result.  This in turn disincentivised the farmers from improving their crop quality and made supply to the industry’s big buyers unpredictable.  Large food buyers, such as ITC Limited (an Indian conglomerate), would surely have to accept this status-quo?

机 jī opportunity

No, to the contrary ITC has harnessed technology to overcome these structural problems by investing in internet kiosks in rural villages.  The kiosks, named eChoupals, enable the farmers to sell direct to ITC at an agreed price, give access to best practices and enable them to place orders for agricultural inputs such as seeds and fertilizers.  In order to instill trust in the system ITC trains a local farmer to run the system and places it in their house – on average each serves 600 farmers in the surrounding ten villages.  To ensure that they remain incentivised the sanchalaks receive a small service fee.  Even after this service fee it is estimated that farmers’ profits have increased by more than a third and ITCs costs have reduced. The conglomerate plans to scale up to 20,000 eChoupals by 2012 (from 6,500 today) potentially servicing 15 million farmers.

How About…

  • Harnessing technology to disintermediate inefficient value chains?
  • Empowering local talent to assist in supporting your customers?

–

May 25, 2010

53) eBay

危 wēi  danger

In September 2005 online auction house eBay paid over $3bn for Skype, which had been founded in 2003 by Niklas Zennstrom and Janus Friis.  In stark contrast to when it had bought PayPal (the internet-based payment company), industry commentators were quick to question the logic behind the deal, pointing out that there was little obvious fit between eBay and the internet phone company.  CEO Meg Whitman defended the deal vigorously, stating in a BusinessWeek article on the 12th titled “Why eBay Is Buying Skype” that “Together, we can pursue some very significant growth opportunities. We can create an unparalleled e-commerce engine.” But, within a year of the acquisition Ebay had written down the value of Skype to $1.2bn, suggesting that it too began to think that the company was not a strategic fit and it had overpaid. Perhaps the purchase of Skype was a case of what Warren Buffet calls “Institutional Imperative” – the “need” for managers to act and do like their peers no matter how irrational it may seem (in this case drive growth through technology company acquisition).  However, with eBay having sunk so much emotional energy and resource into Skype surely they’d sit on the investment indefinitely?

机 jī opportunity

Under eBay’s ownership, Skype continued to grow – the number of registered Skype users rose from 53 million to 405 million.  Even though this progress had been made, on September 1st 2009 eBay sold 65% of Skype to a group of private investors in a deal that valued the firm at only $2.75bn – stating that ‘limited synergies exist’.  eBay was smart to realize that the companies might do better apart, to ignore sunk costs in the process and to retain 35% of a business that remains full of opportunity.

How About…

  • Taking a breather before any strategic decision to remind yourself to ignore sunk costs (easy to say, tough to do)?
  • Asking if your M&A will make your company better (rather than just delivering growth)?

—

April 14, 2010

47) Facebook

危 wēi  danger

Many technology startups, particularly social networks, are heavily dependent on network effects (the phenomenon whereby a service becomes more valuable as more people use it, thereby encouraging ever-increasing numbers of adopters).  This makes it very challenging to attract the first users to the system because they see relatively few benefits until others join. When Facebook was launched in February 2004 by Harvard undergrad students as an alternative to the traditional student directory it faced exactly this challenge, how would it get to critical mass?

机 jī opportunity

Facebook overcame this challenge because it tapped into an existing offline community – Harvard University students.  And that group had a real need – it was difficult for them to meet fellow students outside their social groups.  The most pressing need to meet students came from those searching for dates – the group that became the system’s earliest adopters.  Facebook initially only allowed students with a Harvard email address to use the site, and then opened it up to other Ivy League schools.  This enabled the startup to control its growth and in the process made it more aspirational to the wider population.  Since launch it has grown to more than 400 million active users, with over 50% logging in on any given day.  Profits are believed to exceed $1bn per year.

I noticed that for the week ending March 13th 2010, Hitwise said that for the first time more Americans typed Facebook into their browser than Google.  It made me wonder if Google’s algorithms for search are being disrupted by different types of recommendation engines – if Facebook can harness its community to offer ‘discovery’ it might become the search engine of choice.

How About…

  • Piggy-backing off an existing offline (or online) community?
  • Initially targeting those that are likely to be influencers for other groups in due course?

—

« Older Entries