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.

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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?

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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:

July 1, 2010

57) Google Image Labeler

危 wēi  danger

Google owes much of its success to its phenomenal search algorithm, invented by Larry Page and Sergey Brin while they were attending Stanford University as Ph.D. candidates.

Broadly, Google search works in three distinct parts:

  • Googlebot, a web crawler finds and fetches web pages.
  • An indexer sorts every word on every page and stores the resulting index of words in a huge database.
  • The query processor compares your search query to the index and uses the algorithm to recommend documents that it considers most relevant.

Google harnesses a distributed network of thousands of computers to parallel process this information.   This approach has proven incredibly effective, with perhaps one major exception: image search.  Image search is less reliable because the indexer mines pages for words and therefore only labels images based on their context (and most images on the web are untagged).  Many companies have tried to build software to interpret images but it’s tough to do  – that’s why identifying unclear letters remains one of the last ways of evidencing that we are in fact human, not machine.

Proof you’re [sort of] smarter than machine:

Although there is clear value in being able to search for images accurately, even Google couldn’t afford to have people complete the labour-intensive task of tagging images one by one.

机 jī opportunity

Google asked a different question  - how can we have consumers do this for free?  Answer: make it a game.  Google licensed ESP gaming technology, originally conceived by Luis von Ahn of Carnegie Mellon University and launched Google Image Labeler in 2006 as a beta.

In the game users are paired with another and they compete in tagging images.  The game is great fun: some users reportedly play over 40 hours a week.  The game has enabled the company to ensure that its keywords are matched to correct images, building an accurate database for Google Image Search.

Gaming has great potential for good, other recent examples include Matchin (helping build a database of the web’s most attractive pictures) and Solarstormwatch (helping astronomers spot explosions on the Sun to give astronauts an early warning if dangerous solar radiation is headed their way)

How About…

  • Developing a game to harness consumer power economically?
  • Applying gaming ideas & principles to your existing offer?

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Here’s a screenshot from the game:

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?

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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)?

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