Category Archives: Business Development

The Origins of Product Management (part 2)

NOTE: Part 1 can be found here.

The high technology industry, and in particular, the software industry is much younger than the Consumer Packaged Goods industry. And the role of brand or product management in high-tech and software is even younger still.

Certainly one of the earliest software companies to apply “brand management” principles to software products was Intuit. Intuit was founded in 1981 by Scott Cook, who was a former P&G “brand man” himself.

In developing Quicken, Intuit’s first product, Cook wanted to create finance software that home users who were NOT financial experts could use.  Cook knew he had to differentiate himself in the market. There were already a number of home finance/checkbook balancing software products available, but most of them were difficult to use for the average person.

Cook wanted someone like his wife, an intelligent woman but not necessarily a finance or computer expert, to be able to easily perform the calculations she needed. To do this, Intuit went so far as to emulate the look and layout of the traditional physical checkbook, within the limitations of the monochrome 80×25 character text screens of the time.

This type of innovation, and focus on customer needs, led Scott and his team to create one of the most successful and enduring consumer software packages of all time.

The book Inside Intuit, gives some great insights into the early days of the software company and describes many of the challenges they faced, but also many of the innovations they made. One unique innovation, at the time, was their “Follow me home” program.

In the 1980s, ease of use was not something you would associate with personal computers, particularly those running DOS or Windows. The technology was still relatively new and a lot of software vendors were simply focused on getting software out the door, let alone focusing on usability. But Intuit was not one of those companies.

They realized that the only way they could truly understand how their customers used their software, was to observe those customers in their actual usage environment. i.e. the home. So Intuit created the “Follow me home” program where they would get permission from Intuit customers to send a company representative to the customer’s home and watch the customer install and use the product on their home PC.

Note task 3.1 (field studies) in McElroy’s memo.

These field studies, called ethnography in the social sciences, are only now becoming common in technology companies. Intuit gleaned many insights from the Follow me Home  program which led them to continue to enhance their product and create what can only be described as an incredibly loyal customer base.

In fact, Intuit’s customer base was so loyal that when Microsoft tried to lure them away by offering free copies of its rival Money product, very few customers took that offer.

Today, aside from their successful products, Intuit is well known in the software industry for a very strong Product Management discipline. I’ve previously blogged about Bill Campbell’s (Intuit’s Chairman of the Board) views on Product Management. Certainly, Intuit had a pivotal role in the development of technology product management but others helped shape the profession as well. I’ll get into one other very influential person in part 3.

Saeed

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Canada’s Innovation Gap (part 2)

In part 1, I discussed the findings described in an article entitled Canada’s Innovation Gap, which was published in the Globe and Mail earlier this year.

In short, it indicated that Canadian businesses are not investing in research and development at the levels they should be (relative to businesses in other countries), and the heavy reliance of the Canadian economy on the resource and manufacturing sectors (both beaten down heavily in the recent economic downturn) put Canada at risk of falling behind other nations in economic growth, standard of living etc.

It’s a sobering article, and if you live in Canada, you should read it, because unless there are clear changes in how we conduct business in Canada, we’re headed for some hard times ahead.

I had mentioned that in this post I would look at some of the solutions proposed by the article’s author Konrad Yakabuski. But in researching the topic more, I came across some other research from the Conference Board of Canada (an independent think tank) that provided additional context on the innovation problem in Canada.

I’ve reproduced some of the Conference Board’s research below, but as always, go to the source and get the full details there.

***Warning to readers who worry about Canada’s future. The information presented below is rather ugly.

The Conference Board of Canada publishes an annual report entitled, How Canada Performs – A report card on Canada. It measures and compares Canada to a number of other industrialized countries in 6 areas of measurement. These are: Economy, Innovation, Environment, Education and Skills, Health and Society.

The scorecard below shows the 2008 numbers and some of the 2009 data. The final 2009 data will be released soon. The grading is similar to how many schools grade students. A is the best, followed by B, C and D. I didn’t see any Fs in the scores, so D can be considered the worst mark.

As you can see, Canada does fairly well in the first 4 categories, but rates a D in Innovation.

The following scorecard shows how Canada rates against a number of other industrialized nations in innovation. Canada occupies the lowest category, along with Austria, Australia, Italy and Norway. A surprise for me was seeing Ireland with an A score. I don’t know much about the Irish economy, but I have never pictured them as a more innovative country than say Germany, Japan or even Sweden and Finland.

2008-Innovation-Countries

And finally the Conference board provides a breakout of the various categories that make up the Innovation score. The table below — you’ll have to click on it to see it clearly — makes it patently clear that Canada’s innovation problems are widespread.

2008-Innovation-Indicators-Breakout

Click the image above to view in detail

Cs and Ds across the board for Canada. What’s most surprising is that Canada only got a C for scientific articles and a D for the manufacturing category. Even with good educational institutions, it seems we’re not publishing enough new research. And for a country that has traditionally had a large manufacturing sector, most of it is clearly pretty low tech; processing for natural resources, and of course, the auto manufacturing plants in Southern Ontario.

So, what can be done? One thing to keep in mind is that what the Conference Board, and the original article by Konrad Yakabuski talk about is innovation by large corporations and universities,  Hi-tech manufacturing is not something done by startups. Fundamental research is not done by entrepreneurs. The objective here is not to simply raise Canada’s grades on national report cards.

The objective must be to create, grow and instill a business environment and culture that enables entrepreneurs, small, medium and large companies to develop and go to market with new products and services on an international scale. Our captains of industry and successive governments have enjoyed direct proximity to the world’s most affluent nation for decades, but have focused on short term profits without long term investment and growth in mind.

In Part 3, (I promise) I’ll look at some of the ways to help address the innovation problem.

Saeed

BTW, if you want to see what other Canadians think of this problem, read the comments on this article in MacLean’s magazine. The article itself is not too interesting, but most of the reader comments are spot on.

Related Article:

Canada’s Innovation Gap (part 1)

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Canada’s Innovation Gap (part 1)

While this post is targeted at the innovation, funding and technology issues in Canada, it may apply to other geographies as well, particularly if you don’t live/work in technology hot spot such as Silicon Valley or Boston or Banglalore etc. This is a topic that is very dear to me, given that I currently live and work in Canada, but spent 6 years earlier this decade living and working in the San Francisco Bay Area.

A couple of weeks ago, there was an great article in The Globe and Mail newspaper (one of Canada’s leading daily papers) entitled Canada’s innovation gap. The article, by Konrad Yakabuski, outlined what I think is both an accurate and troubling picture of the state of R&D and innovation in Canada. Here are some highlights from the article.

  • Innovation in Canada is in deep trouble. Productivity is stagnating; the manufacturing sector in imploding, and the government policy makers seem asleep at the wheel.
  • Once the flagship of Canadian high tech, Nortel is being dismantled and it’s best assets are being sold to foreign companies.
  • While Blackberry maker Research in Motion is a true global leader, and often cited as an example of what is possible in Canada, there are few if any other Canadian companies that can be held in the same light.
  • Canada’s economy is heavily resource based, and those companies spend very little of their revenues on R&D, even though they made enormous profits before the recession due to high commodity prices.
  • While Canada was moderately successful at moving from a provider of raw resources to foreign countries to a more modern economy, the last 10 years have reversed that process.
  • Historically, the  small group of elites that got rich on these resources controlled the political levers to ensure nothing changed. [Note: I personally think this still applies although not as much as it once was]
  • Innovation is the only sure way for Canada to be more productive.

I could go on. It’s a great article, and it should be a wake up call to every politician and business leader with any sense of commitment to the future and well-being of this country.

Change is a process

Change is needed on a lot of fronts. While many politicians are quick to highlight that the Canadian economy has faired better than other industrialized economies in the current economic crisis, it doesn’t change the fact that there has been a huge disruption in the Canadian economy, widespread layoffs, plant closures and bankruptcies.

Keep in mind that billions were spent to help manufacturing companies, particularly automakers with vociferous unions, but little if any was spent or allocated to help technology companies or create environments to make investment in high-tech much easier. A quote from the article:

“Canada is not being productive because it’s not being innovative,” said Robert Brown, chief executive officer of Montreal-based CAE Inc., the world leader in aircraft flight simulators and training. “A lot of innovation occurs at the interface with the customer. But when you look at the make-up of Canada’s economy, with so much dependence on resources, there is less contact between [our biggest] companies and end users.”

I think this is a polite way of saying that there are a lot of companies that are more than happy to cut down trees or dig minerals  or pump oil out of the ground and then ship it off to some other country to be processed and have value added to it.

Aside from being innovative, Canada needs to look to add significant value to whatever industries it has. We have great R&D minds in this country, but there are problems in productizing the research and funding and scaling businesses.

My personal experience

I moved to California back in 2000 to seek better opportunity – i.e. professional and financial gain — than I could find here in Canada. One of my best friends from high school — a brilliant guy who did his undergrad at Harvard and his Ph.D at Princeton, is now a research professor at another Ivy League school, even though he really wanted to come back and live and work in Canada. He told me back in the early 90s that the opportunities just weren’t here for him. He’s a great example of the brain drain this country faces on a regular basis.

I moved back to Canada a few years ago for personal reasons and I have to say it wasn’t easy coming back. Aside from the nicer weather in California, I knew that my career opportunities would be more limited than they were there.

And trust me, there is a huge difference in the technology industry here in Toronto and that of Boston or San Francisco. Everything from the amount and quality of investment funding, to the networks of people with connections into technology giants to the breadth of skill sets of individuals, and even to the aspirations of company founders are very different.

We’ve got brilliant people

I’m not slagging anyone here. There are very bright, dedicated and passionate people here. I’m proud to know a number of them. But when it comes to goals, too often a Canadian VC or company founder sees a $50 million exit as a big win, whereas in the US, that’s on the low end of their success scale.

And that exit often means jobs moving to the US or offshore. In many cases the key people in the acquired company (the bright, dedicated and passionate ones) move down to the US to work “at corporate”, and the brain drain continues.

I don’t want to paint a completely bleak picture of the situation here. As I said earlier, there are very bright, talented and passionate people here. In fact, after I moved down to Silicon Valley in 2000, one thing I realized was that the people down there are not smarter than the people here.

But the level of investment financing, the personal networks of skilled people, the institutions like Stanford and Berkeley all provide a critical mass of infrastructure that enable risk taking and innovation on a scale we don’t really have in Canada. The infrastructure and culture there pull bright people from other parts of the country and other parts of the world.

The issue is not the people here in Canada, it never has been. It’s all the other business levers that innovators need to “nail and scale” their businesses to be world leaders. I personally think the co-founders of RIM (Mike Lazaridis and Jim Balsillie) should be viewed as national heroes, on the same scale as Wayne Gretzky or Gordie Howe (famous hockey players for those of you who didn’t grow up on hockey!).

I’m sure Mike and Jim had numerous incredibly lucrative offers to sell their company over the years. But they didn’t. They held on, grew the company, fought off lawsuits, challenged rivals and continued to innovate and create a global leader based in Waterloo Ontario. And just recently RIM was named the fastest growing company in the world by Fortune magazine.

So what can be done to close the innovation gap? Konrad offers some solutions in his article. I’ll get more into that in part 2.  But in the mean time, I’d like to hear what you think, particularly if you are here in Canada, or are Canadian and are living/working outside of Canada.

Saeed

Related Article:

Canada’s Innovation Gap (part 2)

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Tr.im should have figured out their revenue model first!

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Not to sound like a broken record, but here’s a great example of what I was talking about in my recent post entitled “5 benefits in thinking about revenue models right from the start“.

A couple of weeks ago, Nambu, the parent company of the URL shortening service tr.im, announced that they will be shutting the service down. You should read their entire post because it is very well written and makes some very good points that should serve as lessons to virtually any aspiring business out there.

trim-ripI’ve also captured a jpeg image of the page in case they take down the original. Click the image on the right to read the entire text.

Here’s a synopsis of that post.

  • tr.im is being shut down.
  • It is good at what it does and is a popular service, but that is not sufficient.
  • tr.im’s costs are real, both in terms of development effort and operational costs.
  • Those costs need to be recouped.
  • But there is no way to monetize URL shortening and the quest to find an acquirer failed. [SK – probably because there is no way to monetize it].
  • Users will not pay for URL shortening. [SK – URL shortening is a commodity; a cheap one at that.]
  • The data that tr.im collects – what URLs people are shortening and clicking on – is of little value to outsiders because “everyone has that data” as it is harvested by bots. [SK – the collected data is also a commodity.]
  • An 800lb gorilla named Twitter has anointed a tr.im competitor (bit.ly) as the URL shortener of choice. [SK – if your success is dependent on a single larger entity, be the clown fish to their anemone!]
  • This effectively blocks growth prospects for tr.im (and by inference, other competitors to bit.ly)

I use tr.im. I like it. It’s simple to use and gives me some good analytic data about click-throughs on shortened URLs I post around the web.

But I always wondered how they made money. For as long as I’ve used the web, tinyurl.com was the only URL shortener that I knew. Then with Twitter, others jumped in, providing extra services, like accounts, click-through stats and simple analytics. Here’s a chart of monthly visitor statistics.tinyurl-bitly-trim

Clearly, it was a losing battle for tr.im in terms of traffic. Even the venerable tinyurl, long the king of URL shortening is falling in traffic, with bit.ly continuing to climb.

So the question is: how will bit.ly cover it’s costs? The server and operational costs  must be significantly more than that of tr.im.

How is (or will) bit.ly generate revenue? Can they sell their data? If so, to whom?

Does anyone have any insight into how bit.ly does or will create a sustainable revenue stream? And what has Tinyurl been doing all these years to pay it’s bills? I’m genuinely curious.

Saeed

5 benefits in thinking about revenue models right from the start

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moneymanThere are a number of Web sites and applications — two of the most well known examples being Twitter and Facebook — that offer very good, free services. And over time, as they grow larger, the quest begins to find a revenue model or models to turn the service into something that actually resembles a sustainable business.

The problem is that after the fact, trying to find and attach a revenue model onto something that people know and expect to be free is difficult. There may or may not be technical difficulties in doing this, but there will almost certainly be business and cultural difficulties in adding revenue models after the fact.

A lot of people like to cite Google as the model for a company that started out without any revenue models and then figured out an incredibly successful one later on. There’s nothing wrong with wanting to be the next Google, but the story of Google’s revenue model success is not one that can be recreated simply by positive thinking and hard work. Ask the folks at Cuil about that one.

The conditions and circumstances, market opportunities and market needs may be totally different. There’s so much we don’t know about the market that leaving revenue generation to an afterthought is hardly good business strategy.

It’s great to tout 1,000,000 or 5,000,000 or even 100,000,000 “users” or “visitors”, but when they cost you money everyday instead of helping generate positive cash flow, more is not better. And this, after the fact thought process of figuring out revenue models, is problematic to say the least.

Instead, why don’t these companies consider revenue models right from the outset or very early into their startup process? Whether the revenue comes from users themselves, advertising, premium services, data collection and licensing or some other means, it’s very important to think this through upfront and act accordingly to understand and implement those models that make the most sense.

There are a number of benefits in thinking and working this way:

  1. It requires you to actually segment your buyers and your users
  2. It helps you understand who you are truly competing against
  3. It reinforces the value proposition to your existing and potential users or buyers
  4. It sets up a revenue-centric culture within your company
  5. It’s the right thing to do

Let’s look at each one of these in more detail.

1. It requires you to segment your buyers and users

Who is the target customer? Now that’s a common question that gets asked all the time for virtually every product or service. Unfortunately, too many times the answer comes back as “everyone”, or “consumers”, or “anyone who needs our product”, or something equally vague and not very helpful.

It’s not always easy to know everyone who will find value in an offering, but it really helps to start with at least one or two target groups. Understanding who they are, what they need, and the value your offering delivers are key to defining a sustainable revenue model.

A lot of times people don’t do this for fear of missing or eliminating key groups of people, but if you can’t identify the kinds of people who might pay for your product or service, how can you decide how much value it is to them and how much to charge?

Keep in mind that users and buyers are not always one in the same. Taking Google’s search engine as an example, the users are the people conducting searches through the site. That service is free to them. The buyers are those organizations that buy pay-per-click (typically Adwords) advertising that is displayed in the search results.

The system of connecting searchers with ad buyers (i.e. targeted ad placement when people are searching for information), creates an incredibly efficient and scalable engine for revenue, and it must be noted, one that few companies have been able to emulate with as much success.

2. It helps you understand who you are truly competing against

There is competition for virtually every product or service. For some it’s very obvious, and direct competitors can be listed without thinking. For others it’s not so obvious, but incredibly important to identify. Why? Because the word “competitor” must be thought of as “other options for your target buyer to achieve the same or similar result”.

If you are going to charge for something, you need to know how your target buyer spends their money today (if they do at all) for similar results. Too often focus is simply put on very similar offerings in the market, and using those offerings as a basis for thinking about revenue models.

But if you truly put yourself in the context of your buyer, understand their options, and what final results or outcomes they want, your perspective can change significantly.

Southwest Airlines sees their competitors not only as other airlines, but also cars and intercity buses. Why? Because these are the most likely alternatives that their target customers (budget minded travelers) would look to in order to travel between cities. Keep in mind that a lot of SouthWest flights are short-haul routes.

Similarly, when Intuit introduced Quicken, they viewed their competition as not only other home accounting software packages (of which there were many), but also the pencil and paper, because that was also a common option for people who wanted to perform home finance calculations.  The outcome — balancing a checkbook or simple budgeting — can be achieved by computer as well as by hand.

In both cases, clearly understanding their target users’ desired outcomes and their likely options helped the companies understand the value they could deliver and in Intuit’s case, a benchmark for the price they could charge.

3. It sets up a revenue-centric culture within your company

What do you call a business that doesn’t care about revenue? Answer: A hobby.

Employees in a business need to think and act for the benefit of the business. People are hired, culture is developed, processes are defined, decisions are made and systems are built that align with the objectives of the business. If the goals of the business (at least initially) do not involve revenue (in some form), the culture, decisions, processes, systems and people within the company will adapt to that.

And when at some point revenue becomes a priority, then changes, possibly significant ones, will have to be made to accommodate for that. Decisions, which were likely technology or user driven will need to start incorporating revenue and business considerations. Does your service or product have a licensing mechanism? Is it flexible enough to accommodate the business? What changes in the Engineering, Marketing or Finance teams are needed? Do you need to create a Sales team?

It sounds trivial, but it isn’t. Consider what happens when something as simple as a pricing change is required in an existing business. There are many existing internal AND external parties and processes that need to adapt to that change.

Now imagine the impact if that pricing change goes from “no pricing at all” to some form of pricing. New people would have to be hired, for example, in finance. New systems would have to be created to collect revenue and process it. New processes are needed to handle refunds, discounts, create financial reports etc. Decision making criteria need to change to focus on what can generate and sustain revenue. These are just some of the changes that would need to occur to create a culture in the company that is revenue centric.

Why not set up the company early on to manage and deal with these kinds of issues and possibly accelerate the process of generating revenue.

4. It reinforces the value proposition to your potential users or buyers

There is absolutely nothing wrong with providing a free service. If  the objective is to only have a free service and it can be funded then go ahead.

But most services are not created to be completely free forever. Even open source software, which originally was viewed as “free” has developed business and revenue models that leverage the value their customers derive from it. Redhat, Suse, MySQL and JBoss are all examples of very successful businesses founded on this so called “free” software model.

For any aspiring profitable business, there is a very clear need to identify upfront what is truly free (e.g downloading and using open source software) and what requires payment (e.g technical support for open source software). Not only does this delineate the difference between free and paid offerings but it also defines the relationship and expectations a customer or buyer will have with the company.

Flickr provides a good example of this in action. You can upload a fixed number of photos for free and share them with anyone, but for a large collection of pictures, there is a small  fee ($25 per year for a Pro account). Flickr commits to never deleting your photos, even if you fail to keep your paid account current. They’ll simply restrict your access to them.

So why is this important for customers/buyers? It positions the company very clearly as one that is in business to generate revenue, that will deliver a set of services or offerings that have some intrinsic value that costs actual money, and one that, if successful, will be around in a few years time to continue delivering the service that is being paid for.

I like free stuff as much as the next guy, but if I’m going to commit my time and effort to using someone’s services, I’d like to know that they’ll be around so I can continue to use them. Now, there are plenty of companies that charge for their services that go belly up, but that is not new to the Internet. That’s a simple fact of life for any business. But I’m sure you’d agree that it’s more likely that a company that DOES charge money for their service or has a very clear and scalable revenue model will be likely be around longer than one that doesn’t.

5. It’s the right thing to do

rightthingWhy are most businesses started? To make money? Well more bluntly, to make money for the founders and investors in the company. If that is the case, then it’s Business Basics 101 that understanding the market, potential customers, their buying needs, budgets, willingness to pay etc. are all critical to any form of business planning. So, why not start right and do some homework upfront?

It used to be the case that the investment to build a product was significant, typically involving manufacturing processes, sourcing from suppliers, warehouse and delivery expenses and logistics etc. But the combination of mature software development tools and the Web as the distribution medium has created an environment where creating and distributing the “product” is simple and rather inexpensive. In fact, identifying buyers, buyer needs, budgets etc. is likely harder than creating the product. So what do many people do? They build something and see “what sticks”.

While there is benefit to this approach, it should not be done without forethought to the business aspects that will underlie the offering. Both product definition and business planning need to be done together and up front. Just as iterations are needed to get the product right, iterations will likely be needed to get the business working well. Both product and business strategy need to evolve together, and as knowledge is gained and changes needed, then those changes can be made in tandem.

And while people will hold up the few successful companies, like Google, as their models for achieving success, it’s telling that they willfully ignore the myriad of companies that tried the same “we’ll figure out the revenue model later” approach and utterly failed.

Saeed

What was Twitter’s Biz Stone smoking?

NOTE – THIS BLOG HAS MOVED

You can see the new version of this article at the following URL:

http://onproductmanagement.net/2009/08/19/what-was-twitters-biz-stone-smoking/

A couple of months ago, Twitter co-founder Biz Stone appeared on The Colbert Report. Watch the interview below and then continue reading the blog post. Pay close attention during the latter part of the segment as Stone describes Twitter’s plans for revenue generation.

Vodpod videos no longer available.

[NOTE: If you don’t see the video in your browser, wait a few extra seconds for it to load, refresh the browser window or view the original here, or if you live in Canada, view it here]

If you were impatient and couldn’t watch the whole thing, here’s a recap of the key parts, starting at about 2:55 into the video:

Stone: Twitter provides a new way of messaging. It’s really the messaging service we didn’t know we needed until we had it. You send out 140 character bursts of information to anyone who wants to receive it; they receive it in real time and that’s when some of the magic happens.

Colbert: [looking perplexed] It’s the what? It’s the what?

Stone: [matter of factly] The messaging system we didn’t know we needed until we had it.

Colbert: [astutely] That sounds like the answer to a problem we didn’t have until I invented the answer. [audience laughs loudly]

NOTE – THIS BLOG HAS MOVED

You can see the new version of this article at the following URL:

http://onproductmanagement.net/2009/08/19/what-was-twitters-biz-stone-smoking/

Analysis part 1

I do agree with Stone on his first sentence. Twitter does provide a new way of messaging. I wrote about it previously in Twitter: The Napster of Messaging. But after that, Stone starts speaking mumbo jumbo.

The “service we didn’t know we needed” line makes little sense. Thankfully Colbert quickly calls Stone on it almost immediately.

Later, starting around 4:30 into the video, the following exchange happens:

Colbert: Does Twitter charge anything?

Stone: It’s totally free.

Colbert: So I assume that “Biz” in Biz Stone doesn’t stand for “business model”?

Stone: [somewhat sheepishly] No. No it doesn’t.

NOTE – THIS BLOG HAS MOVED

You can see the new version of this article at the following URL:

http://onproductmanagement.net/2009/08/19/what-was-twitters-biz-stone-smoking/

Analysis part 2

This in my opinion was the best exchange of the interview. Colbert intentionally asks a question to which he knows the answer, only to follow up with a real zinger; an easy target, but quite effective. This does set up the context for further questions a few moments later.

The interview later continues:

Colbert: How would you make money? Are you going to make money off of this? How?

Stone: Yes we are. We are going to become a strong, profitable, independent company. We are going to continue to stay based in San Francisco.

Colbert: You and Pets.com.  [audience laughs. Stone looks annoyed.]

Stone: We are recognizing a difference right now between profit and value. We are building value right now.

Colbert: Wait. What’s the difference between profit and value?

Stone: Well right now we are building on value. That means extending the service worldwide, globally, so that more people have access to the real-time network. And not just on the internet. There are over 4 billion mobile phones and when we network them together it is very transformative especially when you realize it works over both texting and the web.  As we grow that network it becomes more valuable; as we add features to it, as we make it more robust. When we get to a certain point where we feel we’ve gotten there, we’ll begin experimenting with revenue models. This is not unlike how Google approached their revenue.

NOTE – THIS BLOG HAS MOVED

You can see the new version of this article at the following URL:

http://onproductmanagement.net/2009/08/19/what-was-twitters-biz-stone-smoking/

Analysis part 3

This last exchange is where I think Stone goes right off the rails. His line about “value” and “revenue” is utter rubbish.

Extending the service – taking it global etc. — has nothing to do with value. That’s called “extending the service”. Value is not added with new features and capabilities. To quote Warren Buffet:

Price is what you pay. Value is what you get.

Value is delivered or derived, not added through code and new functionality. Newsflash Stone! Millions of people are getting value today out of Twitter. Even with the frequent appearances of the Fail Whale, people continue to use the service.

And what’s this about Twitter networking the world’s 4 billion mobile phones together and being “transformative”. That’s just more mumbo jumbo.  I guess with 45 or 50 million users of Twitter today, that’s just not enough to figure out how to generate some revenue?

Finally, what’s with the line “When we get to a certain point that we feel we’ve gotten there…” Huh???? Biz, could you just be a little more specific? And, hey VCs who’ve invested MILLIONS into Twitter….is this what passes for intelligent business speak from the founder of one of your portfolio companies?

But the interview continues:

Colbert: How long out is that?

Stone: How long is what?

Colbert: Before you experiment with revenue.

Stone: We’re going to start experimenting this year. But we don’t have to hit a home run right away. We have patient investors. We have time to work it out. We’re going to be exploring and experimenting starting this year and we have time to figure out what the perfect revenue model is.

NOTE – THIS BLOG HAS MOVED

You can see the new version of this article at the following URL:

http://onproductmanagement.net/2009/08/19/what-was-twitters-biz-stone-smoking/

Analysis Part 4

Hold on a minute. Almost immediately after saying “When we get to a certain point that we feel we are there…“, Stone indicates that “this year” is when that certain point will be reached that they will feel they are there. Wow. So why didn’t he say that in the first place?

So in summary what is Twitter?

It’s a free service that solved a problem people didn’t know they had. They’ve raised tens of millions of dollars in VC money, and the company’s goal is to be a strong, profitable, independent software company based in San Francisco. They’re currently in a phase of value building but later this year they will start “exploring and experimenting” with revenue models, but there is no urgency to find great model because they have patient investors.

For those you reading this, I’d love to hear your thoughts. Personally, I find the whole interview rather amusing; and not in the typical Colbert way. Stone seems like a nice guy, but his comments in the interview truly leave me suspicious about Twitter ever generating sustainable revenue, and also leave me wondering, what he was smoking when he went on the show?

But maybe I’m wrong. What do you think?

DID WE SAY THIS BLOG HAS MOVED?

http://onproductmanagement.net/2009/08/19/what-was-twitters-biz-stone-smoking/

Saeed

Product Management by Committee? – pt. 2

There were some very interesting responses to my post “Product Management by Committee?”. I also posted a question in the LinkedIn Internet Product Management Group [LinkedIn login and group membership needed] on the same topic.

I asked the following specific questions about companies using committees instead of dedicated Product Managers:

  1. How common is this in your experience?
  2. How effective do you think this is?
  3. Finally, at what point do companies like this decide they need an experienced PM in place?

Here’s some key points of the feedback from the LinkedIn group:

Michael Schmier responded first indicating 2 scenarios for Product Management in early stage companies:

My experience is that it primarily depends on who is in the committee.

Situation 1 – The company is founded by those with business and marketing experience (MBA types).

Here I think “official” product management comes in later…the founders play the role of product management, in addition to the role of CEO, CFO, CMO, VP-Sales, etc. and work closely with engineering and development.

Model 2 – the company is founded by less experienced business types – e.g. technologists.

In this scenario, I’ve seen product management come in much earlier – usually before revenue is ensured but after the technology concept is somewhat proven and there is validation through a first round of funding (Series A).

Guillermo (Willie) Hernandez agreed with Michael’s comments and warned about CTOs who act as Product Mangers in early stage firms.

I believe that this is a big problem and it is hurting many good startup companies that, otherwise, will do great if they would let professional Product Manager teams lead the way. It is getting to the point that I believe it is necessary to start defining what the role of the CTO should be and where does the CTO office ends and Product Management starts.

Dan Leeds gave his view quite succinctly:

To me it’s simple: committee = consensus = average = bad product design.

The only effective model for product development is dictatorial, expert leadership informed by deep understanding of customer and market.

I tend to agree with Dan, though I wouldn’t use the word “dictatorial” myself. Product Management is about leadership and focus and a committee will embody neither leadership nor focus in decision making. I’ll write more on this in a subsequent post on the topic.

Steven Goldner makes a case for committees (if done correctly):

In the PM roles I have had, I have made myself the Chairman of a product committee bringing in all disciplines in the organization. So I DO think that product by committee is the way to go, BUT you need a strong leader in charge of the committee. So, even small companies need a product manager, product owner.

So while committees are good, Steven insists that the right leader be in charge. I agree to that. Someone with the right background must have authority to make the right decisions (and be held accountable as well).

Sameer Pirmohamed mentioned financial constraints as a reason for not having dedicated Product Management:

Founders of startups may play the product manager role out of financial necessity at the start.
Then they may hire a product manager because they don’t have the necessary skill/experience to play the role long term.

While the above is definitely true, my question is more focused on companies that have funding, typically series A or even Series B venture capital or other financing where the management team extends well beyond simply founders.

Victor Doundakov basically agreed with Dan Leeds with his view on committees:

Committee means shared responsibility. Shared responsibility is nobody’s responsibility. Avoid it like a plague, it can be lethal for the business if not treated early. … Instead of committees, early startups should use “take charge, communicate and execute” model.

And finally Pankaj Mhatre summed it up as follows:

I think we almost see a consensus that consensus is not a great way to fulfill this role 🙂 However, the attitude of listening is very important and yet, just listening to the market/customers has never given us great products, so one does need individual intuition to kick in. So, I think only one mind can fill the ‘Product Leadership’ role, even if you have multiple team members contributing.

It was very interesting to see the views of the various people participating in this discussion. Given it was from a Product Management group, I wouldn’t expect the answers to support a committee NOT including Product Management itself.

My view on this is that the role of Product Management goes far beyond simply identifying market needs and problems and helping the company address them. Product Management needs to be thinking about the market needs, the proposed solutions and (at minimum) how and when to take the solutions to market. This last part means that Product Management should be responsible for defining the Go-To-Market Strategy. Others may execute it, but Product Management needs to define it.

I’ve seen far too many companies build complex products that they thought could  be sold via a volume channel (and weren’t!), or take “enterprise” products to market that were far from being release ready. The companies thrashed and floundered, spending time and money on sales and marketing activities that they had no right engaging in. This not only burned cash, but delayed revenue and built skepticism amongst their prospects and partners.

Product Management needs to have a well defined and understood role in any technology company, especially ones that have raised millions of dollars in funding.  They can certainly afford Product Management. And I’ll say quite openly, I’m surprised that VCs and other investors don’t realize quite plainly that they can’t afford NOT to have it in the companies they invest in.

Saeed