Tony Hsieh’s field of dreams

Can Tony Hsieh build Las Vegas into a tech hub?

Stepping off the bus at Las Vegas’ Fairmont Street in the early morning is a reminder of how seedy nightlife areas look in the harsh daylight.

The reason for being in Downtown Las Vegas on a warm Monday morning was to tour Tony Hsieh’s Downtown Project, a scheme to revitalise the rundown and neglected town centre of the gambling and convention mecca.

One of the striking things about Las Vegas is how much of it pretends to be somewhere else; The Luxor, New York, New York, The Ballagio. It’s almost as if the fantasy land of the American Dream is a little embarrassed about where it is.

Not that the tourists are embarrassed with millions pouring in every year to enjoy the gambling, entertainment and the pasteurized sin on offer along Las Vegas’ glitzy strip of mega casinos.

welcome-to-las-vegas

Five miles north the mega casinos and bright lights, the luck runs out. The best thing locals have to say about Las Vegas’ downtown district is “it is better than it was.”

One of the reasons it’s better is because of one man — Tony Hsieh, the founder of online shoe retailer Zappos. Hsieh moved his business to Las Vegas because, in the entrepreneur’s view, San Francisco was ‘hostile towards company service.’

The Downtown Project is the result of a promised $350 million investment by Hsieh to invigorate the city centre of Las Vegas.

However the project has hit problems with Hseih recently stepping down from his position, layoffs being announced and community programs being cut back, leading critics to claim the project is in jeopardy.

So a tour of the project during a recent visit to Las Vegas was well timed to judge how things are going.

The tour starts with the small group meeting at The Window, an arts and meeting space on the ground floor of the Ogden residential tower which closed down in September as part of the scheme’s recent cutbacks.

Gathering in the room with our tour leader Maggie is a somewhat spooky experience with all The Window’s furniture, books and exhibits intact as on the day they were left at the end of the space’s six month lifespan.

las-vegas-downtown-project-tony-hsieh-tour-deserted-windows-space

Leaving the room’s contents intact and unpacked doesn’t engender confidence that The Window will find a new home. In all, starting the tour in the abandoned workspace is an unsettling start.

After a quick explanation of The Downtown Project, Maggie leads takes us around the corner to the Ogden’s residential entrance where we ride the elevator to Tony Hsieh’s upper level apartment.

The building doesn’t have a fourth or fourteenth floor; something familiar to anybody who’s lived in a city where property developers are courting Chinese investors — the sound of the word ‘four’ in Mandarin and Cantonese has unlucky overtones.

On the way up to the Twenty-Third floor apartment it’s also an opportunity to gauge the dynamic between the residents of the building; in reviews of the complex, many residents not associated with Hsieh’s projects have complained they have been marginalised.

las-vegas-downtown-project-tony-hsieh-tour-apartment-hanging-garden

Once in Hsieh’s apartment, it’s an impressive look into the domestic life of a modern successful internet tycoon with common workrooms, open plan living and a jungle themed party room featuring a hanging garden.

las-vegas-downtown-project-tony-hsieh-tour-refurbished-casino

The most important thing about Hsieh’s apartment is it gives a sense of perspective of the project with views across the downtown district, a panorama of the Las Vegas strip with the huge casinos rearing out the suburbia and the refurbished Goldspike Casino that is becoming a community hub of sorts.

Hsieh’s apartment also gives some ideas of the plans the tycoon has, particularly the  Life Is Beautiful festival that Maggie promises will be a “combination of Burning Man and South by South West.”

las-vegas-downtown-project-tony-hsieh-tour-life-is-beautiful-festival

Returning to street level from Hsieh’s apartment does give the impression there are two breeds of residents in The Ogden; the Zappos and Downtown project crowd who treat the other residents with polite disdain.

The dismissive attitude towards non-tech outsiders is common among the technology startup communities around the world but that doesn’t make it any less jarring for those living with it in their building.

Stepping out into the mid morning heat of Las Vegas, we go around the corner to the Beat Coffeehouse, part of the Emergency Arts Collective that’s based in a disused medical centre and which, interestingly, isn’t part of Hsieh’s downtown project.

las-vegas-downtown-project-tony-hsieh-tour-refurbished-department-store

A block further along is The Container Park, the retail and entertainment hub of the Downtown Project that welcomes visitors with a giant preying mantis, shown at the beginning of this post.

The container park is an interesting rag tag collection of independently owned food and retail outlets, a test laboratory for hospitality and bricks-and-mortar shopping outlets. In the mid morning heat it’s somewhat deserted.

Unfortunately that’s where our official tour concluded and it was time to explore the dubious delights of downtown Las Vegas on our own. The locals are right, there isn’t much.

Later that evening I returned to see how The Downtown Project and downtown Las Vegas itself do at night. The difference with daytime is spectacular.

Getting off the bus at the Fremont Street Experience with its roofed in mall the boasts the world’s biggest video screen is a great difference from its dowdy daytime appearance.

Fremont Street jumps with the tame bacchanalia that’s the hallmark of Las Vegas; all the false unfulfillable promise of sexual and economic success that defines modern America.

las-vegas-downtown-project-tony-hsieh-tour-fremont-street-experience-at-night

The three block walk from West Fremont street to the Container Park is stark; while the Beat Coffeehouse is packed with drinkers enjoying the live band, the street is dark and quiet; it’s quite easy to feel uncomfortable on the short walk.

At the Container Park itself, things aren’t exactly busy. A few families play on the central green while a band plays. Few of the food stalls are selling anything and most of the shops are closing at 8pm. While it’s a Monday night, it’s not encouraging.

las-vegas-downtown-project-tony-hsieh-tour-container-park-at-night

Leaving Downtown Las Vegas on the WAX express bus — fifteen minutes to the MGM Grand down the interstate rather than the hour plus trudge down the strip on the Deuce — it’s a good opportunity to reflect on a superficial tour of the Downtown Project.

For young families wanting to move from the wallet crushing costs of San Francisco  and Silicon Valley, Las Vegas could be an option but it’s going to require more business than Zappos and a small cluster of startups.

The city is going to need more drop in spaces like The Windows — something like Google Campus is going to be needed to encourage smart young entrepreneurs to make the journey and try their luck.

Another aspect is more accommodation is needed as right now the housing stock around the downtown district is either run down or overpriced — while cheap by San Francisco or New York standards prices don’t reflect the fact Las Vegas is not an economic powerhouse like the two cities.

The Ogden building is an example of everything that is wrong in the current global property mania with high priced, high maintenance apartments aimed at rich investors rather than ordinary people and their families.

For residents transport also remains a problem although Las Vegas’ public bus system is surprisingly good, one suspects the service is subsidised by the immensely popular Deuce double decker buses carrying crowds of tourists up and down the strip.

To get a San Francisco or Brooklyn type critical mass into the city requires a high density population and a deeper local tax base which is something beyond Hsieh’s power.

Las Vegas also has the problem that it is in a competitive field with towns like Kansas City and Des Moines among others all vying to attract young entrepreneurs to their low cost communities. Just being cheaper than Mountain View or South of Market is not enough on it’s own.

Overall, it’s not hard to leave Las Vegas with a feeling that the Downtown Project is floundering. To build a community like that envisioned by Tony Hsieh takes more that $350 million and a few years work; it’s a lifetime commitment and it needs several generations of funding.

That the Fremont Street Experience and The Beat Coffeehouse are both jumping while the Container Park is quiet also tells us that building a community requires diverse groups and that no one guiding agency, private or public can build a thriving industrial centre.

It is possible that Zappos and Hsieh may plant the seed for Las Vegas to become a technology and business hub, but there’s a long way to go and it will need more than one man to drive it.

“Build it and they will come,” was something I heard constantly about the plans to invigorate the city’s centre from its supporters and Las Vegas residents. Whether the Downtown Project is Tony Hsieh’s field of dreams is for history to judge.

las-vegas-downtown-project-tony-hsieh-tour-apartment

 

 

A lack of entrepreneurial imagination

Google founder Larry Page has some interesting ideas on what entrepreneurs should be doing.

A fascinating interview with Google founder Larry Page in the Financial Times raises the question of whether the current startup mania lacks imagination.

Certainly looking at the lists of many startup competitions, incubator admissions and accelerator programs, it’s hard not to be depressed at the number of ‘platform plays’ aimed at clipping the tickets of an established industry.

If anything, it’s encouraging the Google founder is looking at doing more interesting things than taking a few dollars clipping the tickets off industry. We can, and should, aspire to do better.

Chinese businesses take on the world

Xiaomi and Lenovo’s appearance in the global smartphone rankings show the increasing confidence of Chinese businesses

We’ve looked previously at how Chinese manufacturers are moving up the value chain, proof of how PRC based companies are beginning to make their mark on markets are the latest smartphone IDC rankings.

Two Chinese companies, Lenovo and Xiaomi, entered the rankings with the latter recording a threefold increase on the previous year’s sales.

Remarkably, Xiaomi only had a few hours as number three in IDC’s global ranking as Lenovo closed its Motorola acquisition shortly after the release which pushed the combined company into third position.

Top Five Smartphone Vendors, Shipments, Market Share and Year-Over-Year Growth, Q3 2014 Preliminary Data (Units in Millions)

Vendor

2014Q3 Shipment Volumes

2014Q3 Market Share

2013Q3 Shipment Volumes

2013Q3 Market Share

3Q14/3Q13 Change

1. Samsung

78.1

23.8%

85.0

32.5%

-8.2%

2. Apple

39.3

12.0%

33.8

12.9%

16.1%

3. Xiaomi

17.3

5.3%

5.6

2.1%

211.3%

4. Lenovo*

16.9

5.2%

12.3

4.7%

38.0%

4. LG*

16.8

5.1%

12.0

4.6%

39.8%

Others

159.2

48.6%

113.0

43.2%

40.8%

Total

327.6

100.0%

261.7

100.0%

25.2%

Source: IDC Worldwide Quarterly Mobile Phone Tracker, October 29, 2014

The two companies illustrate the different strategies Chinese companies are making in taking on the world; while Lenovo is growing through acquiring ‘cast off’ operations like Motorola Mobility from Google and the various hardware arms of IBM, Xiaomi is growing through selling lower budget devices into East Asian markets.

Both approaches have their strengths and benefits and illustrate as much the diversity of the markets the two companies are chasing as much as the differing management philosophies of the business.

The other message from the respective successes  of Lenovo and Xiaomi is that Chinese companies, particularly manufacturers, are increasingly confident in competing in the global marketplace.

Just as Japanese manufacturers found their feet in the 1970s with many becoming global brands and market leaders, we are seeing the same thing happening with the Chinese businesses today.

Where next for the telco industry?

The telecommunications industry is facing a cultural shift as the market moves against the sector

The last thirty years have been good for the telecommunications industry; a wave of privatisations, regulatory reforms and technological change drove the sector and company profits.

As populations around the world adopted mobile phones users started enthusiastically calling and texting, Telco profits exploded.

Twenty years later the massive growth to the industry has peaked as customers have moved to using their cellphones for  less lucrative data services.

So where do the telecommunications companies go next for growth and profit? Today and tomorrow I’m attending the Ovum 2020 Telecoms Summit where they’re looking at the future for the industry.

Salvation from the internet of things

The great white hope for the telco industry is the internet of things and the machine to machine (M2M) technologies; the hope being that putting SIM cards into every car, kettle and shipping container that this will be another lucrative revenue stream.

Martin Creighan, Managing Director for Australia and New Zealand at AT&T, points out that by the end of the decade there will be seven times as many connected devices as live mobile phones. This is where the opportunity lies.

The problem with the M2M vision is annual revenues per user (ARPU) for connected devices are a fraction of those from voice and messaging over the last twenty years and telcos will need more than that to maintain their revenues, let alone grow.

Moving into the cloud

One of the other revenue streams is adding cloud services, again this is a low margin business and involves competing with global giants like Amazon and Google along with the myriad of specialist companies.

Another possibility is in providing professional services as Jennifer Douglas, Director of Fixed voice and platinum for Telstra, described in the company’s home support product.

The problem with both the cloud and professional services model this requires a change in culture for the telcos, the traditional contempt telecommunications executives have for the end user doesn’t cut it in the professional services and cloud computing industries.

For the telcos, this major change is something that’s been experienced by many other industries. That a comparatively protected industry like telecommunications companies are subject to these disruptions illustrates just how no sector is safe from being uprnded.

The fight for cloud computing’s sweet spot

An old PC industry was is being re-fought in the cloud. Will the result be different this time.

One of the great market battles of the PC era was the fight between the ‘best of breed’ software designed to do specific jobs well — Lotus 123, WordPerfect, and Harvard Graphics — versus the bundled ‘suites’ led by Microsoft Office.

Bundled suites of programs offered a common platform and cheaper price over buying products individually.

In the case of Microsoft Office, it also helped that the software giant was aggressive in undercutting the market and leveraging the deals it had made with hardware vendors and system integrators.

The winner of that battle was Microsoft as it turned out customers preferred the cheaper price points of the bundled packages and the common software platform made it easier to share data across the applications.

In the cloud computing field that fight is happening again as Zach Nelson, CEO of Netsuite, describes; “I think the next battle is going to be the same battle that happened in the client-server world. Is it the best of breed cloud apps or is it the suite?”

Nelson believes the suite vision will win out, “the suite is going to win again for exactly the same reasons why the suite won in the client-server world — it’s very hard to synchronise data between applications.”

Given Netsuite’s business, as its name suggests, is in providing a suite of software it’s no surprising that Nelson believes their way of doing business will prevail. Those providing ‘best of breed’ stand alone cloud applications naturally disagree.

Chris Ridd, Australian General Manager of accounting service Xero, disagrees with Nelson’s view. “With cloud and open APIs you have the holy grail of interoperability,” Ridd says. “In the 1990s the open systems were too early and didn’t work as well as they do today.”

Ridd also points out that Xero has over 350 add on services, ” I don’t think any suite can deliver that” he says.

History is on Nelson’s side but it may be that in this case history doesn’t repeat as the technology has moved along and now stand alone apps are what the market wants.

Time will tell although its unlikely whichever prevails will have anything like the success and market domination of Microsoft Office during the PC era.

Zuckerburg’s curse

Zuckerburg’s curse — Twitter is not Facebook and nor are most startups

Twitter yesterday released its third quarter 2014 results which saw the stock drop a stunning thirteen percent in the half hour after the announcement.

For Twitter’s management and shareholders the worrying thing about the stock drop is the result was in line with analyst’s expectations, the shares fell because its clear the service isn’t getting the traction investors believe is necessary to succeed online.

Investors however have only themselves to blame; as a business Twitter is simply not worth it’s thirty billion dollar stock market capitalisation; it may be worth five billion, it may be worth ten but it’s desperately overpriced at its current prices.

Zuckerberg’s curse

Almost all social media services, and many tech startups, are suffering the curse of Mark Zuckerburg — Facebook’s success has led investors to believe that all online businesses should be valued in the ten of billions.

Making matters worse, Facebook’s billion dollar purchases of Instagram, Oculus VR and WhatsApp have baked the expectation of huge valuations into the startup community. Now every service with a modest user base believes it’s worth something similar to WhatsApp’s $19 billion.

The worry is that companies like Twitter carry out dumb and ill advised things to emulate Facebook and maintain its overvalued stockprice which will damage both their brands and customer base.

For many of these social media services it might be worthwhile admitting that they aren’t Facebook and accept they are a niche product.

It may well be those niches are more profitable than being a mass market product and the idea that online success involves huge takeup is just another relic of the Twentieth Century broadcast model.

Unfortunately while Facebook dominates the social media market and Google continues to draw most of its revenue from online advertising, the wild over valuations and flawed business models will continue.

Klout and marketing’s holy grail – an interview with Joe Fernandez

For three months in 2007 Joe Fernandez had his jaw wired shut following surgery and found himself relying on social media for news and companionship.

Over that three months of sitting on the net Fernandez found he had become a social media influencer and the idea for Klout was born.

In many respects Klout is the classic startup in that Fernandez started with a series of spreadsheets with the algorithm being an Excel formula, something he now calls a ‘Minimal Minimum Viable Product’.

“It was super minimal,” Fernandez remembers. “When people would register for Klout, it would send me an email and I would manually download their social media data into Excel and run the algorithm and then I’d manually update their page.”

Today Klout processes fifteen billion accounts every day with data pulled from four hundred data points including 15 social media services.

Like all tools, Klout does have some limitations and Fernandez admits he gets frustrated with businesses giving priority to users with high scores, another area that concerns him is marketers who don’t examine the relevance of individuals to the business before making judgments on that person’s influence.

One of the key things that Fernandez is proud of is how Klout is spawning its own alumni in a similar way to the PayPal mafia that developed out of the payment service at the beginning of the Century.

“It’s really awesome to see people go on and take on big challenges and do different things.”

As social media develops, tools like Klout are going to become more important for businesses trying to understand how

Old business and new tech

When old businesses embrace new tech they have to be thinking of their customers’ problems, not theirs.

The payments war has been well and truly on as companies like Stripe, Apple and PayPal battle it out to control the next generation of currency.

One of the more hapless bystanders in this has been the CurrentC consortium, a group of US retailers set up to take advantage of mobile technology and bypass merchant fees.

This weekend news leaked out that some of the consortium members have disabled Near Field Communications functions in their store Point of Sale systems to prevent Apple Pay and Google Wallet from working while they wait to roll out CurrentC.

In a deep dive review of CurrentC, Tech Crunch looks at how the service works and its limitations. One of the things that jumps out in Tech Crunch’s review is just how cumbersome the system is compared to its competitors.

Despite being founded in 2011 and having the backing of some of America’s biggest companies, CurrentC is two, or possibly three, iterations behind other services which illustrates the problem of incumbents trying to innovate their way out of problems.

No doubt the committee model of CurrentC hasn’t helped the development process along with the aim being addressing the consortium’s fixation with merchant fees rather than making things easier for customers.

It’s hard not to conclude that CurrentC is doomed and the actions of retailers in blocking competitor’s products is only staving off the inevitable. When old businesses embrace new tech they have to be thinking of their customers’ problems, not theirs.

Google moves deeper into the smarthome

Google Nest’s acquisition of Revolv is about further locking in the smarthome market

Since Google bought smart smoke detector company Nest earlier this year it’s become apparent that the search engine giant sees the smarthome as one of its big marketplaces in the near future.

Nest’s acquisition of smarthome automation company Revolv yesterday illustrates this and shows that Nest is Google’s smarthome division.

As the smarthome becomes more common, the value of controlling the systems that run the connected home’s devices becomes greater. So the positions being taken by Apple, Google and Samsung are going to be important as the marketplace develops.

The latter relationship — Google and Samsung — is particularly fascinating as Samsung’s smartphones and tablets are locked into the Google Android system which makes it harder for the Korean industrial giant to strike off in an independent path.

All of this of course is based upon homeowners being happy with having their smarthomes locked into one vendor’s platform. We may yet see the market rebel against the internet giant’s ambitions to carve up the connected world.

On being a digital anthropologist — brian solis on technology disrupting buiness

Innovating within a business can be hard work says Brian Solis

“Technology is part of the solution, but it’s also part of the problem,” says Brian Solis, the

Brian Solis describes himself as a digital anthropologist who looks for how businesses are being disrupted. We talk about digital darwinism, how businesses can approach change and the role of individual changemakers within organisations.

“My primary responsibility is to study disruptive technology and its impacts on business,” says Solis. “I look at emerging technology and try to determine which one is going to become disruptive.”

To identify what technologies are likely to disrupt businesses it’s necessary to understand the human factors, Solis believes.

One of the problems Solis sees is the magnitude of change required within organisations and particularly the load this puts on individuals, citing the story of one pharmaceutical worker who tried to change her employer.

“Her mistake was thinking this was a short race, she thought everyone could see the opportunity inherent in innovation and change when in fact it was a marathon. She burned herself out”

“What that means is to bring about change you really have to dig yourself in because you’re ready to do your part. You can’t do it alone, you have to do change in small portions and win over the right people.”

Returns in a low growth world

GE CEO Jeff Immelt sees a different world of investing and business in coming years where growth is slower

Today GE had their At Work conference in Sydney where CEO Jeff Immelt was interviewed by Westfarmers’ boss Richard Goyder.

One of the key messages from Immelt in his interview with the Australian conglomerate’s CEO was that finding growth in a flat global economy is going to take hard work and creativity; just relying on increased domestic spending is not longer an option.

Immelt was particularly pointed about the developed world’s economies, “the US is best since the financial crisis, growth is broad based but it’s still in the two to two-and-a-half percent range. It may be that’s the new normal.”

“Europe and Japan are pretty tough, forty percent of the world’s economy is still difficult, not going downward but stable and flat.”

Preparing for a slow growth world

“We’ve prepared ourselves for a slow growth world but one where you can invest in growth.”

“There’s still opportunities out there,” Immelt observed. “We’re going to have to make our own growth.”

Part of that growth story relates to the end of the consumerist era where debt funded consumer spending, particularly in the US, drove the global economy.

“We are coming out of a time period of the last ten or fifteen years where the US grew four and half percent every year with no inflation. So the US was the dominant economy in the world during the 1980s and 1990s.”

“We knew that was not going to be the same, so we’re in a world with no tail wind where we think greater focus on things like R&D, globalisation and things like that which will be critically important.”

Changing business focus

One of things Immelt did after the global financial crisis was to change the focus of the business away from the consumer finance division that had been a river of gold over the last thirty years back to being an industrial infrastructure company.

“Everyone needs to paranoid about relevancy and what they do great in the world today. There is no shelf life for reputation or anything else.”

“The engine of growth in the US when it was growing at its best was the US consumer, both in the combination of their own wealth and in taking on leverage. That was the engine of growth from 1980 to 2007.”

“It ended badly, but those were big engines of growth. What will be the next engines of growth?” Immelt mused.

Asian consumers to the rescue

Immelt sees the rise of Asian economies as being the next growth drivers with over billion consumers rising in affluence.

Whether those Asian economies can generate the growth that the hyper-developed economies of North America, Europe and Japan were able to provide during the past thirty years remains to be seen given China’s, and most of Asia’s, consumers having nothing like the West’s spending power.

The truth is we’re decades off Asia’s huddled masses having the economic strength to carry the global economy in the way the western world’s consumers did for the closing decades of the Twentieth Century.

For economies like Australia that are largely based upon domestic consumption funded by debt, this will mean a massive redirection of the economy away from renovating houses to investing in productive industries.

Immelt’s message to business leaders is clear; don’t rely on a rising tide of domestic growth to keep you afloat. Companies are going to have to find new markets and products if they want to grow, waiting for customers to arrive is no longer an option.

Apple launch a local listing service to succeed where Google and Facebook failed

Apple may be able to succeed in small business listings where Google and Facebook failed.

They are late to the party, but given both Google and Facebook have missed the opportunity to grab the local listings market, Apple just might be the company that gets it.