Sep 092014
 
visa-mobile-payments

Interviewing Stripe co-founder John Collison in the company’s crowded, noisy lunch room in San Francisco’s Mission District is a good place to appreciate how quickly the online payment service has grown since it was founded three years ago.

Stripe was founded after twenty-four year old Collison and his brother Patrick encountered problems with online payments in their previous businesses, “we came to Stripe because we had built apps and webservices before and it was phenomenally difficult to take a product you had built and turn it into a business.”

“At the time you had two options; you could turn your business over to PayPal, which was problematic for a whole bunch of reasons, or you’d build something from scratch.”

“It was clear to us that neither of the options were very good so we went about building something better.”

Silicon Valley’s strengths

Since its establishment Stripe has grown from ten employees to 150, something the founder believes shows the strength of California’s Bay Area over areas like Collison’s native Ireland.

“One of the things that I like about Silicon Valley is that people here tend to be relatively risk tolerant. Joining an unknown internet payments company three years ago, most people would say ‘you’re out of your mind’. But the psyche around here is that’s a reasonable thing to do.”

Another aspect that attracts Collison to San Francisco is that most of his employees at Stripe have run their own businesses or startups themselves. Having a workforce of risk tolerant, independent self starters makes it easier to manage a fast growth company.

Pitching for funding

The Bay Area’s appetite for risk is reflected in how investors look at businesses; “in the startup world, people like to maximize the opportunity rather than reduce the risk,” observes Collison.

Collison’s advice for startups seeking funding is to get have users on board that validates the idea, “when we pitched Peter Thiel we had production user for four or five months. What made us think there was something here was that those users were really passionate.”

The other attraction for Thiel and other members of the ‘PayPal mafia’ – Thiel’s fellow PayPal founders Elon Musk and Max Levchin are also investors in Stripe – was their first hand dealings with the problem of online payments.

“With the PayPal guys specifically, they really get this. Early on this was what they were trying to do with PayPal – make it easy for people to move money around the world.”

Entering the era of mobile commerce

The problem today that Collison sees with PayPal is that it is a product based on a desktop view of online commerce in a time where the industry is moving to mobile.

“One of the things that has held online commerce back for so long is the purchasing experience has such a high barrier to it.”

”We’ve replicated the mail order form on the internet. It feels to me that in five to ten years time we will not be in the same world with people like Google and Facebook improving the identity story. That’s exciting because that helps merchants sell more.”

“That whole model comes from a desktop era so if your building a lyft or a mobile site it doesn’t make much sense.”

Beating the 1980s business model

For the credit card and banking industry, the payments sector is even further behind. Collison believes that until recently the payments industry was based upon a 1980s business model where the costs of inefficiency were pushed onto merchants and small business.

“All the banks and companies that offered services at the time were operating in the 1980s,” says Collison. “The business model was based on the old way of your customers being people within a fifteen block radius, on the internet your customer base is the whole world.”

Building new industries

With Stripe Collison sees an opportunity for new industries to develop out of easier ways of collecting payments, particularly given much of the world’s population in areas like Africa and China doesn’t have credit cards.

“If we just building a business to take transactions from PayPal and get them onto Stripe, that’s not that interesting. What is interesting is if we can create new types of transactions that would not have existed otherwise.”

“By providing better infrastructure for anyone to build a global business. That will change the kind of things people will build.”

Sep 052014
 
sine_wave_cycles.

When consulting group Gartner placed the Internet of Things at the peak of their hype cycle last month it raised concerns that the technologies might be about to take a tumble.

Speaking to Networked Globe this week in San Jose; Maciej Kranz, VP and GM of Cisco’s technology group described how he believes the IoT’s evolution from the top of the hype cycle to the plateau of acceptance will be quick.

“We’re happy that Gartner put IoT on top as it means there’s awareness,” said Kranz. “We hope to prove Gartner wrong, that in IoT we don’t go through the classic hype cycle we go from hype into reality.”

Kranz’s reasoning while the IoT will suffer a short spell, if any at all, in Gartner’s ‘trough of disillusionment’ is because the major industry players are working closely together to build the sector and its standards.

“Where we think it’s a little bit different from some of the other hype cycles than some of the other hype cycles is that we continue to work very close at the industry,” Kranz explained.

“Because we’re all working as an industry to make it real it will go through the disillusionment and quickly into a reality.”

This may well turn out to be true if the big players like Cisco and GE in the industrial space along with companies such as Google and Apple in the consumer sector stay committed to the concept. If the major vendors stay the course, then it’s likely IoT technologies won’t suffer much at all.

Another aspect in the IoT’s favour is that it isn’t really a specific technology or product at all, instead being more of a concept bought about by various technologies such as home automation, industrial controls and cloud computing all reaching maturity.

Rather than one separate item on the Gartner hype cycle, the IoT is really made of dozens of different technologies that are mostly on the ‘plateau of acceptance’ themselves.

Kranz sees Gartner’s listing of the company as being on the top of the hype cycle as being a vindication for how the IoT has been adopted by industry and the community, “it is remarkable how we’ve gone in the last nine months from people saying it’s a vision to n

Aug 242014
 
Webvan-home-delivery

At the peak of the dotcom mania in 1998 delivery services were all the go, those days are back reports Claire Cain Miller in the New York Times.

“We’re really well funded, so that is not something we’re as worried about,” Aditya Shah, Instacart’s general manager says. “Growth is the most important factor.”

This is the classic Silicon Valley Greater Fool model, where the aim is to get as many customers as possible to make the business attractive to a cashed up large corporation.

It might work, but the odds of being an Amazon or Salesforce – both companies have barely made a profit in the decade and a half they’ve been running – is unlikely.

One of the big problems is that delivery doesn’t scale, the ‘last mile’ problem of getting the goods to the customer remains the most complex and expensive part of the process.

Drones may solve the labour cost problem and sophisticated algorithms from companies like Uber may make the process more efficient but it’s unlikely an ad-hoc delivery service can ever scale to the degree these entrepreneurs project, unlike the post office and courier services where the system is built around predictable delivery routines.

Uber is the company that validated the model of today’s delivery startups, as Miller mentions;

“Meanwhile, venture capitalists joke that every other entrepreneur they meet pitches an “Uber for X,” bringing goods and services on demand: laundry (Washio), ice cream (Ice Cream Life), marijuana (Eaze) and so on.”

It’s hard to see how the current craze of delivery startups will end any better than the Webvans and dozens of other services that soared and crashed in the late 1990s, however business models are changing and it may be one of these will find the formula that works in the new economy.

Aug 182014
 
despair

That the Internet of Things is posed to fall into the depths of the trough of disillusionment according to Gartner’s latest Hype Cycle should come as no surprise to those following the industry.

For the industry, such a fall might not be a bad thing. During the upswing to the Peak of Heightened Expectations technologies attract the hot, dumb money along with the motley collection of shysters and opportunists a gold rush always lured in by the prospect of easy returns.

When a product, technology or industry falls into what Gartner calls the trough of disillusionment it’s usually the time when its real value is discovered. Without the distractions of hype or dumb money distorting the market, the industry finds a way of using a product that’s become somewhat passe.

For the Internet of Things, it won’t be a bad thing if the sector tumbles into the abyss. The sooner it happens, the faster industry will figure out where the real value and benefits lie.

The only damage might be to some of the more prominent boosters’ egos and the hip pockets of some of the more over eager investors.

Aug 142014
 
Enlighten electorates PH 2011

In mid 2003 I put an employment ad online for two computer technicians. I was expecting a healthy response as it was the depths of the computer industry’s depression following the tech wreck two years earlier.

A healthy response is what I got. Two thousand job applications came in; it took me a week to wade through them.

I was reminded of that story with the Federal government’s recent thought bubble requiring those on unemployment benefits to apply for forty jobs a months.

Like most of the business community I was appalled at the thought of being buried under hundreds of pointless job applications that served nothing but to fulfil a Liberal Party staffer’s ideological fantasies.

Within a week an Adelaide grandfather had come up with the idea of a jobseeker app that would automate the task which shows just how far out of touch both sides of politics have become with the modern world, particularly the digital economy.

The Australian political classes’ lack of understanding of technology has been on painful display over the last week with the Federal government’s fumbling over proposed data retention laws; one gets the impression George Brandis needs other people to use the toaster for him, let alone be trusted to use a computer without assistance.

This incomprehension of what’s driving the modern economy among our political leaders is no longer a joke – when the Prime Minister himself proudly states ‘I am not a geek’, it’s clear this nation is being led away from having any serious role in the 21st Century.

In fairness, this is not the fault of any single party or individual; it’s the result of Australians – particularly Australian businesses – voting like sheep for the blue team or the red team at every election.

As a consequence, Australian politics is now dominated by comfortable, arrogant and somewhat dim careerists who have little in skills beyond being able to float to the top of the shallow, fetid sewers that are the party political machines.

This is our fault and it is where Treasurer Joe Hockey is right in bemoaning how business won’t stand up and strongly lead the nation’s reform agenda.

Unfortunately for Joe, a true reform agenda is about making the nation more competitive in an era where the world’s economy is radically changing. The old ‘ship out resources and watch your property go up in price’ model that has sustained the Aussie economy is not a recipe for long term success.

If Australia is going to compete in the Twenty-First Century then we are going to have to invest in modern training, education and capital equipment while putting in the tax and social security systems that reward genuine entrepreneurs and job creators over property speculators and corporate ticket clippers.

Right now Joe, and his friends in both the Liberal and Labor parties, are doing exactly the opposite.

Joe’s right. We need to voice our concerns loudly. We also need to demand our politicians at least take the time to understand the basics of the technologies that are radically changing today’s world.

Next time you see a politician, of either colour, try to get five minutes of their time to explain how technology is changing your business. Hopefully it might make them pause before the next thought bubble.

Jul 132014
 
neutral-bay-radio-shop-frontage

One of the questions about the development of Big Data has been how small businesses can use all the information pouring into their operations.

The New York Times this weekend has a feature illustrating some small business applications for big data.

In one of the case studies Brian Janezic, a 27 year old owner of two car washes in Arizona, created his own application that automates his business and monitors consumable levels.

The story further highlights how businesses like The Serbian Lion that haven’t done the simple basics like online listings are being left far behind more nimbler operations like Janezic’s.

Contrasting the two operations illustrates the digital divide between businesses. The sad thing is that many of the baby boomer owned enterprises not embracing the new technologies are further compromising the assets their proprietors are depending upon for their retirement.

Jul 082014
 
Digital Day for Small Business September 2011showing how to use cloud computing and social media to grow your business

“My job is to spread good news,” says Guy Kawasaki of his role as Canva’s Chief Evangelist.

Kawasaki was speaking to Decoding the New Economy about his role in popularising the online design tool which he sees as democratising force in the same way that Apple was to computers and Google to search.

Democratisation is a theme consistently raised by startups and businesses disrupting existing industries and Kawasaki continues this theme.

“The world is becoming a meritocracy; it’s not about your pedigree, it’s about your competence,” states Kawasaki.

Falling barriers to entry

What excites Kawasaki about the present business climate are the falling barriers to starting a venture. “Things are getting cheaper and cheaper, in technology you had to buy a room full of servers, have IT staff in multiple cities. Today you call Amazon or Rackspace and host it in the sky.”

“Before you had to buy advertising for a concert, now if you’re adept at using social media – with Google Plus, Facebook,Twitter, Pinterest and Instagram – you have a marketing platform that fast, ubiquitous and cheap.”

“What excites me is there are going to be more technologies, more products and more services because the barriers are so low.”

Creating a valued and viable product

For those businesses starting into this new environment, Kawasaki believes the most important thing a startup should focus on is getting a prototype to market; “at that point you will know you’re truly onto something.”

“If you build a prototype that works you may never have to write a business plan,” says Kawasaki. “You’d never have to make a Powerpoint, you may never have to raise money as you could probably bootstrap.”

Kawasaki view is the MVP – Minimum Viable Product – model of lean product development should have another two ‘V’s added for ‘Valuable’ and “Validated’.

“You can create a product that’s viable, ie you could make money, but is it valuable in that it changes the world?”

“Is your first product going to validate your vision? If it’s not then why are doing it?”

The story Kawasaki tells is the tools to deliver valued and viable products are more accessible than ever before; that’s good news for entrepreneurs and consumers but bad for stodgy incumbents.