Category: Thematic

A lot of startups and well established businesses struggle with when the right time to expand into new verticals or new geographies. The short of it: Not before you’re dominating your first vertical and first consumer segment.

There’s an old tale in Silicon Valley that goes something like this: When Jeff Bezos, founder of Amazon, pitched his initial idea to Kleiner Perkins Caufield Byers, he told the VCs there that he wanted to sell everything online; every product in the market converted to the online channel as the future of transactions. But one of the VCs suggested he refine that idea: First, you must go deep in one vertical before eventually expanding into the next. And how do you know when to stop expanding in a particular vertical? When you’ve stopped learning.

Such as the cycle continues, as you continue expanding to new verticals, you won’t have to go as deep and your time to entry will be significantly shortened each time around. Over time, your company becomes wide — on an expedited timeline compared to the first plunge — and not because the company fully understands the business model and market factors to success.

Ultimately Bezos, of course, took the advice and decided to go deep in books before he went wide. After drilling all the way down into books, Amazon owned the market — even forcing companies like Borders (who chose to useAmazon to handle its ecommerce efforts) out of business.

Up next were CDs and DVDs — all the things you’d buy in a store. Then on and on Amazon went, adding everything from diapers to espresso machines to its arsenal. The company kept pace with technology, too, adding Kindle, streaming music, and streaming video options.

Deep and Wide in Action

My first startup spent a really long time focusing on recruitment and job advertising. Eventually, we added real estate and auto to our offerings, and we only had to spend a fraction of time during expansion. Pricing was the same, acquisition was the same, and the backend database was the same. We spent six months on the first vertical and three months on the second.

Another startup, Telerik, also followed suit, going deep by going deep with a robust Microsoft developer tools and then wide with cross-platform developer toolkit marketplace. We then switched to building out solutions for CMS, but because it was radically different from what we originally built, we were forced to go deep again. This wasn’t as fast and seamless, due to the differences, and it took just as long to master.

When you go deep, the right way, you gain the expertise and infrastructure to expand into new verticals. Then you’re well-positioned to go wide — and quickly.

Lessons from Amazon

Amazon spent about three years on books before moving into CDs, then six months on CDs before moving into DVDs, then four months on DVDs before opening up Amazon Auctions (which competed directly with eBay at the time but pivoted to what is the Amazon Marketplace today).

When you go deep into the first vertical successfully (e.g., after one year), it should be a lot quicker (e.g., six months) to make progress into the second vertical. And it should be even quicker (e.g., three months) to make progress in third. And so on. If it’s taking you longer to make progress in a subsequent vertical, you’re probably doing something wrong.

In order to stick to the “half time to success” formula, here are three major things to keep in mind:

• Move on when you stop learning. Don’t target the next vertical until you figure out the successful, scalable sales channel and business model before jumping to the next one. When Telerik hopped from dev tools to CMS, we faced challenges because the market and segment were both different. You must move into a market with a similar business model and segment to be able to go wide according to the shortened time frame. In Amazon’s case, books, CDs, and DVDs were no brainers.

• You need to diversify. A lot of companies stay on the proverbial books, CDs, DVDs track and then get sold or collapse. Companies that IPO or become big, on the other hand, go deep and wide in several different industries.

• Think outside the box. It’s no secret Amazon dominates the ecommerce market; the company was singlehandedly responsible for 60% of the United States’ ecommerce growth last year. After conquering ecommerce, the company wasn’t finished. It expanded deep into cloud computing with Amazon Web Services. Now, it’s going deep into brick-and-mortar with newly announced grocery stores you can walk into and out ofwithout standing in a line. It’s not hard to see them going wide there, too.

When you master one way to do something, it’s much easier to target a new vertical or a new geography with the same tactic. Go deep first, learn the tricks, and then go wide. That’s the ticket to a strong, sustainable business with limitless potential.

1. Corporate Innovation Strategy

How should companies approach innovation in an unstable world?

“Every contemporary company has to be a balanced mix of established products and new products that are searching for profitable business models.” — Tendayi Viki

Tendayi introduces a useful five part framework for how established companies can manage the inherent tension of managing both established products and new innovation. Read more…

How to set up a corporate innovation outpost?

“Successful Innovation Outposts typically develop over a period of time through three stages. In the first stage the Outpost focusses on networking and partnering in the Innovation Cluster in which it is based (i.e. Silicon Valley, Boston). In the second stage, it moves into Investing, Inventing, Incubating and Acquiring technologies and companies, and in the third stage building product(s).” —Steve Blank

Steve shares the details of the three stages of setting up a corporate innovation outpost, including key questions and milestones. Read more…

Is your innovation outpost working?

“You have no dedicated system for keeping track of startup ecosystem interactions and information.” — Tytus Michalski

Tytus reviews this and four more warning signs about innovation strategy and outposts along with the solutions for how to fix these problems. Read more…

2. Engaging the Ecosystem

Why should large companies work with startups?

“The most innovative companies are also the most valuable.” — Kite

Both the data and the anecdotal stories combine for compelling evidence that the most innovative companies are engaging proactively with startups in many ways to create more value for all stakeholders. Read more…

How to build a successful innovation ecosystem?

“Just as momentum is the product of mass and velocity, the ecosystem with the most participants and fastest turnover of ideas will be the most successful.” — Martin Curley

Martin provides case studies, context and 12 principles for successful ecosystem innovation across companies, customers and other partners. Read more…

Where are the opportunities in the global ecosystem?

“We love small businesses, we love young people, and we love women.” — Jack Ma

Jack Ma shares his views on global ecosystem opportunities and more during an interview with Stanford GSB. Read more…

3. Innovation as DNA

How to innovate like Google?

“To better understand how Google innovates, I took a close look at what it’s doing in one area: Deep Learning.” — Greg Satell

Writing for the Harvard Business Review, Greg uses Deep Learning at Google as a specific case study to learn about how the company has put innovation at the core of its DNA. Read more…

How to get started with intrapreneurship?

“Never before has there been such a push for employees to take ownership of their own corner of a company.” — Alyson Krueger

Alyson provides examples of intrapreneurship, overall context about why more employees are interested in this option and the benefits for companies. Read more…

What will change most in the next 10 years?

“That’s a good question. But a better question is: What’s not going to change in the next 10–20 years?” — Jeff Bezos

Peter Diamandis highlights this important point by Jeff Bezos about focusing resources on high conviction trends, and expands with his own ideas about what won’t change even in an unstable world. Read more…

What other content do you highly recommend about corporate innovation?

If oil dominated the last century, data is the leading candidate to dominate this one. An often repeated phrase is that “data is the new oil”. But beyond the simple similarity of being important, is it useful to use oil as an analogy for data? How are they different?

1. Scarce vs. Cumulative

Oil is a scarce resource. Technology innovations related to discovering and processing oil merely help to contain price increases. Data is not just abundant, it is a cumulative resource. Technology innovations lead to a collapse in the cost of collecting and manipulating data, and our new data builds on top of our existing data. Personalization is an obvious application of this idea. To date, companies have mostly used this for targeted content and commerce. Going forward, the bigger opportunity is in areas like personalised learning and medicine.

2. Rival vs. Non-rival

If oil is being used, then the same oil cannot be used somewhere else because it is a rival good. This results in a natural tension about who controls oil. If data is being used, the same data can be used elsewhere because it is a non-rival good. It is up to us to appreciate this difference and embrace the potential. An obvious example is the power of open source. Our Internet would not exist in its current form without the positive impact of open source. It’s also clear that our intellectual property laws have not fully understood the implications of data being a non-rival good.

3. Tangible vs. Intangible

As a tangible product, oil faces high friction, transportation and storage costs. These costs place limits on the applications of oil. As an intangible product, data has much lower friction, transportation and storage costs. The result is a much wider range of applications due to fewer physical restrictions. The exponential growth in content and media is an obvious result of the fact that data is intangible. Less obvious is the transformational opportunity for a globally distributed manufacturing supply chain which would be connected by data rather than the current system of shipping and flying physical goods everywhere.

4. Process vs. Relationships

The lifecycle of oil is defined by process: extraction, refining and distribution. This process is relatively stable and predictable. The lifecycle of data is defined by relationships: with other data, with context and with itself via feedback loops. These relationships are dynamic and uncertain, requiring an entirely different approach to building value. This highlights the difference between complicated and complex systems. Oil and industrial assets benefit from the use of ideas like six sigma to enhance efficiency. Data benefits from the use of technology like deep learning to learn from the data itself, a form of exploration.

5. Linear vs. Non-Linear

A fixed amount of oil results in a predictable amount of output. There is no possibility of non-linear upside surprise. A fixed amount of knowledge can create huge value in a non-linear way. The laws of physics really do limit the benefits we can derive from a given amount of oil. On the contrary, the concept of zero is a core building block supporting our entire digital technology infrastructure. A completely non-linear benefit from a deceptively simple idea.

The Implications

Each of the above differences is valid individually, but taken together they multiply in importance and reflect the emergent nature of systems based on data. While our current oil based system has some features of emergence, the new data based system has vastly more potential for new and unpredictable applications.

To be clear, the impact of these applications is not always going to be good for society, certainly at an individual level, and sometimes at the aggregate level. Even with a much smaller level of emergence, we’ve already seen the damage that our oil based system can leave to our planet.

We should not be blindly following data and need to appreciate that the emergent properties of data make it much more powerful than oil. As data becomes increasingly important, it’s critical to understand the differences between oil and data. To fully enjoy the benefits of data, we need to fundamentally update all of our global ecosystems as soon as possible across business, government, and society. This is not something that can be done by any single person, company, or country. For those interested to build a stronger global ecosystem together, let’s connect and make it happen.

Taken together, the evolution of technology, macroeconomic trends, and political shifts all point to the same conclusion: We’re nearing the end of a cycle. It’s only a matter of time before the industrial age disappears altogether, giving rise to the information age.

As we become even more submerged in this new fast-paced digital age, it’s becoming increasingly clear that everything will be disrupted sooner or later — even doctors and lawyers.

In the past, the old rules of economies centered on the concept of “choice under scarcity” — which is how “supply and demand” became a phrase everyone knows. But things are changing in the new economy. Now, it’s about “choice under abundance.”

Customers — in every sense of the word — have more choices than ever before. Consumers can compare a ton of brands in a few minutes, and companies have their pick of freelancers and contractors on a project-by-project basis.

For this reason, the job market is shaping up to be dramatically different in the coming years. In many ways, the gig economy is already here. But by 2020, experts predict as many as half of U.S. workers will be freelancers.

Beyond the change in the job market, we can also expect international barriers to break down further thanks to new technologies. Syrian refugees, for example, were able to get across Europe and find their neighbors and families thanks to smartphones, Facebook, and WhatsApp.

How can companies survive this changing business, technological, and economic landscape?

How Startups Can Win

Succeeding in this new age requires an immersion in the technologies and understanding of the economic implications inherent in the information age. Quite simply, companies need to prepare for disruption because it’ll happen sooner or later. Don’t hide behind regulation (e.g., San Francisco). You’ll eventually get burned.

If you’re a startup, go attack the areas where regulation meets technologies. While venture capitalists used to not invest in these battleground areas, that’s precisely where the opportunity lies these days.

Case in point? Uber, which is now valued at $80 billion.

The company lives in gray areas. In the early days, there was an argument as to whether the ridesharing company should be able to pick up and drop off customers at New York City-area airports. After the New York City Taxi Commission said that Uber shouldn’t be able to serve airports because drivers were uninsured, Uber ponied up money to get their drivers insured and cover costs associated with legal representation.

What’s more, when Mayor Bill de Blasio was threatening to cap the number of drivers Uber could have in New York City, the company released a feature on its app that showed how long it would take to hail an Uber if the proposal succeeded. De Blasio eventually capitulated. Uber had too much support to fight.

It seems quite plausible that the successful companies of tomorrow will all have an Uber-like policy that toes the line and tests regulations — giving customers what they want before politicians can take it away from them for the sake of the status quo.

Change Is Everywhere

Ten years ago, who would have thought that the restaurant industry could be drastically changed by technology? But here we are. There are manytablet-driven restaurants. As any restaurant owner knows, margins are tight. The use of tablets lessens operating expenses and reduces the frequency of errors.

Technology has also disrupted the coffee shop (well, at least Starbucks). Though in my opinion the Starbucks app leaves a lot to be desired, I still use it because it beats waiting in line.

Thanks to outsourcing software and platforms, higher-end jobs — like design specification managers and systems architects — are becoming increasingly available. This is great news for workers and companies alike. Engaged on-demand talent is closer than you think.

The economy has changed; this is your new way of looking at it. The more prepared you are for disruption — and certainly the more aggressively you pursue the opportunity to be the disruptor — the more likely your company will live to see brighter days.

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Photo by flickr user Tsahi Levent-Levi

Here at Fresco Capital, we love to eat our own dogfood so we have been using Pipedrive for years. Pipedrive is a sales management tool that helps sales teams manage a sales pipeline in a visual way. At Fresco we enter everything into Pipedrive: our portfolio companies, startups that pitch us, our investors, potential investors, etc.

Since we embraced Slack at Fresco for our internal conversations, it is the one stop shop for all of our communications. (I joke with our partners, if it is not in Slack, it didn’t happen.) In Slack we created a #pipedrivebot channel where we would alert each other of a new update we just entered into Pipedrive. After doing that a few times, I wanted to automate this process; we needed to automatically wire up Pipedrive to a Slack channel. The easiest way to do this is with a bot.

Bots As a Service (BoTaaS)

Fortunately our friends over at Recime have created a bot to do just this. Recime is a cloud based bot infrastructure backend and hosting platform for developers (BoTaaS). Recime automates all the plumbing a bot developer runs into, similar to what parse.com did for mobile devs before Facebook acquired it. One of the free bots hosted on their platform is a Pipedrive to Slack Channel bot.

Connecting Pipedrive to a Slack Channel

Using the bot is easy, but you have to configure a few things in both Pipedrive and Slack. In order to configure the Recime pipedrive bot, you need to do the following:

1. Enable integration Webhooks in slack
2. Enable push notifications in Pipedrive to trigger the Recime pipedrive bot.

Enable Integration WebHook in Slack

In Slack, from account menu, go to menu->app & integration and then click manage in the navigation bar:

Click Manage -> Custom Integrations -> Add Configuration:

This will take you to a wizard where you can configure which Slack channel the bot will send messages to. Once completed you will be given a Webhook URL that you will need to configure the pipedrive notification. (Image and other metadata information are configured automatically by the bot therefore you can leave them as it is. ) Copy the URL to a safe place.

Enable Notifications in pipedrive

This task has three easy steps.

First you need to obtain an API Token from Pipedrive. Go to your Pipedrive Settings and click API. Copy the API token to a safe place.

Next up you have to create a URL out of the Slack WebHook and Pipedrive API token for Pipedrive’s push notification to enable the bot to connect the two together. You can do this by going to the Recime website and entering the WebHook URL and API Token into this form:

https://recime.ai/bot/pipedrive

The Recime website will return to you a URL, copy it to your clipboard and go back to Pipedrive for the past step.

In Pipedrive, go to Settings -> Push Notifications and create a new notification:

Enter in your Pipedrive user name, the URL that the Recime form gave you and the events in Pipedrive you want to enable the push notification bot for.

If you want to get notified about everything you enter in Pipedrive, put in *.*, or if you just want to be notified when a deal is updated you would put in updated.deal, or if you only want a new note notification put in added.note. If you are not sure use *.* and experiment.

Now your bot will now send a message to the #pipedrivebot channel in Slack every time you update your Pipedrive.

Enjoy. 😉

What’s going on with smartphones these days?

The smartphone slowdown
It seems like every major player is reducing, and reducing, forecasts.

Here’s the big picture:

Smartphones are effectively ex-growth.

Is mobile dead?
Many people will jump directly to the conclusion that mobile is dead.

But…

MOBILE > smartphones

Mobile is much, much, much bigger than smartphones. More specifically, the value has clearly moved up the stack from the phones themselves to how we use them. The first wave of innovation has been doing things we already do, just better. Want to get a ride from a stranger in a car? It’s an old idea, now much improved.

Forget SoLoMo, just Go
Doing things better was also behind the theme of SoLoMo. Only, up until now, it didn’t really work that well.

And then along came Go, or more specifically Pokémon GO. Running around chasing virtual characters in the real world is not an old pastime. This is totally new (which of course means lots of new problems too).

Pokémon GO has turned your smartphone into a shell. Yes you need the shell, but all of the excitement comes from the ghost in the shell.

Smartphones are shells. And they break easily.

Mobile is the ghost. It lives on.

What is the best startup ecosystem? There’s no shortage of reports trying to answer that question. Take your pick for 2015.

We crave these lists because our education system, culture and business world have all taught us to appreciate the value of competition. And it does have some value.

My Answer
When asked personally, I would always start with the SF Bay Area as #1. Although some locals refer to it as three distinct ecosystems, it’s really a single ecosystem with bad traffic. The data supports the #1 ranking, but just as important is my personal experience on the ground. Things generally do work faster and better in this ecosystem.

But I was wrong.

The Nature of Networks
My change of heart started because I was constantly being asked to rank startup ecosystems in Asia, where the answer is not obvious and the competition is intense. Beijing, Singapore, Hong Kong, Bangalore, Tokyo, and many more contenders. Which is the best?

To answer that question, first let’s take a detour to discuss networks. Twitter is not about 140 characters, it’s about the network of people. A smartphone can be used on its own, but the real value is being connected to the network. Uber could not exist without a network. We automatically understand the power of network effects for companies and people.

Most of the energy in building startup ecosystems right now is focused on local optimization in order to be better than the competition. To climb up the rankings. But this quickly reaches diminishing returns precisely because of local constraints. Opposition to immigration. Housing prices. Traffic. If this starts to sound familiar in your city, it’s because these are common challenges in almost every major startup ecosystem in the world.

A New Perspective on Ecosystems
Instead of focusing primarily on local optimization, startup ecosystems should spend more energy on building connections to other ecosystems. Fortunately, this process is already happening and startups are leading the way by growing their teams remotely, connecting with cross-border capital and finding global customers. But it’s still the early days in this trend and more can be done at the overall ecosystem level.

As we know from personal and business experience, becoming more connected across diverse worlds is a powerful way to increase value.

Similarly, when two startup ecosystems are more connected, they both receive more value because it is not a zero sum game and those connections will then feed back into the local ecosystems. They will both be better off on an absolute basis, and of course also move up in the rankings.

We know that network effects don’t stop at the local level. Instead, positive feedback loops continue to increase across the network as it scales.

This system perspective exposes the reality that our current ranking system is missing an obvious point. The #1 startup ecosystem in the world is not the SF Bay Area, or any other individual ecosystem, but instead the overall network of connected startup ecosystems.

The network is the ecosystem.

As investors in scalable businesses, we love the benefits of technology, which helps to create massive positive impact at scale. We appreciate how software can personalize our experience and even learn over time. We are also active investors in companies using connected devices and so understand the benefits of how atoms work with bits. But your company, as an entire entity, is not a machine.

The idea of a company as machine dates back to the industrial economy and it did not disappear as we transitioned to a service economy. There is a reason why customer experiences in service industries as diverse as banks and airlines are generally terrible. The companies view themselves as machines with employees as cogs and customers as throughput. Even our education and healthcare systems are still struggling to evolve past the outdated view of churning through people like widgets.

One would think that modern technology companies would be different given the need to attract younger employees and customers. But many of these companies actually forget that technology is supposed to support people rather than people supporting technology. The emphasis is still on factories, engines and processes even though the technology is different. While these may only be words, words build habits and habits create lasting outcomes.

So what should the vocabulary be instead? Clearly the network is the defining structure of the information economy, replacing the factory. Whereas the factory worked through engines and processes, the network works via emergence and relationships. Ultimately, a human focused perspective works best. People first.

The bad news for society is that a people first approach is still rare. The good news for you is that a people first approach is a competitive advantage precisely because it is rare. So forget the tired industrial economy metaphors and make sure your company has a human focused perspective. It’s good for you and good for society.