Category: Innovation

Why competition is great for Google

The SEO industry threatened to devalue search. Now things are changing.

We often talk about competition being good for consumers and, ultimately, businesses. The technology industry is a good case study.

Microsoft shows how competition forces a business to raise their game; when they won the browser wars by dispatching Netscape early in the Internet era, they let Internet Explorer stagnate until the Mozilla Firefox, Opera and Apple Safari web browsers came along.

Similarly, they allowed their flagship product Microsoft Office drift once they dominated the productivity software market. The arrival of Google Docs and some other new players forced them to refresh and redesign the Office package.

Today Google find themselves in the same position – Facebook, Microsoft’s Bing and various other search engines are reminding the leader that their position is not safe.

The Business Insider website recently took a critical look at Demand Media’s business model, a service that publishes low quality articles that tend to rank high with the aid of clever Search Engine Optimisation (SEO). As a result of Demand’s high rankings on Google searches these articles tend to attract advertisers.

In a search engine market where Google is the only noteworthy game in town, this situation would suit Google and Demand Media as both would have a nice predictable stream of advertising and neither party would have any great incentive to change things and for a while it appeared that might be the case.

With the arrival of real competition to Google such as Microsoft Bing and Facebook, all things change as now search engine results matter – the whole reason Google beat out competitors was because their search results were better than anyone else’s – if Google’s results aren’t as good then users will switch.

So Google’s been changing their algorithm, the formula they use for searches, in order to improve the results of queries on their system. So much so that my fellow Smartcompany blogger, Chris Thomas, accuses them of Attention Deficit Disorder.

This is good news for Google’s users who now get better quality search results and great news for Google’s advertisers who get better quality pages where potential buyers are likely to stay longer and click more.

Google though is the biggest winner as the better results they deliver, the more profitable and long lasting their core advertising business will be.

For Demand Media, things aren’t so good as there’s no shortage of poorly written tripe on the Internet and if they can’t get Google ranking goodness then their business model dies.

Which may show that in the new economy, bad soap doesn’t necessarily replace good soap.

Failing Fast: Google Wave’s real business lesson

The fail fast philosophy is changing how businesses in all industries are operating.

A key philosophy underlying much of Silicon Valley’s successful companies is the “fail fast” concept where a business releases a rough version of a new idea and asks the world what it thinks. Should people like the idea, it gets developed and if they don’t, it gets dropped and everybody moves on to the next brainwave.

The “fail fast” philosophy was behind Google Wave’s dropping last week, as CEO Eric Schmidt said at the Techonomy Conference on the day it was announced; “….we release it and see what happens. It works, you announce product, you ship it…”

Until recently, “failing fast” was restricted to hot shot Internet businesses but as the cost of product development falls due to better collaboration tools, testing methods and global outsourcing, it’s become easier for all businesses to experiment without risking an organisation’s future.

This is very different from the old style of doing business, a good example of how things used to work was Boeing’s development of the 747 Jumbo Jet which was a $2 billion dollar bet, $14bn in 2010 dollars, on a big lumbering subsonic jet in the mid 1960s when the future of aviation seemed to be with sleek supersonic aircraft like the Concorde.

While Boeing’s bet paid off, it took 15 years and nearly sent the company broke.

Most of today’s businesses aren’t locked into 14 billion dollar and 15 year investment cycles as we can test products with simulation tools, computer aided design programs, fast prototyping and oursourcing services like o-desk for labour and alibaba.com for manufacturing without risking the farm.

For most businesses, it’s not even a matter of spending time and money actually developing ideas, usually it’s something as simple as testing a new idea by buying a domain name and setting up a low cost website on a cheap hosting service for under $200. If the idea flies then you start looking at spending real money on making the product ready for the broader market.

Failing fast presents a great challenge to the traditional organisation where the slightest failure is a stigma. In the new economy, a risk adverse culture is going to be punished by competitors who accept that not every idea is right for its time and learn lessons rather than punish those associated with the unsuccessful project.

While this is bad news for large organisations run by risk adverse managers it is one of the great opportunities for nimble and smart companies. If your business is prepared to take small risks, learn from the misses and celebrate the wins then your business could well be on the way to being the next Google.

Does innovation scare customers?

US consumers ranked Facebook with airlines and cable companies in satisfaction. Is this because of innovation?

Read Write Web reports the 2010 American Customer Satisfaction Index found Facebook in the bottom 5% of trusted US companies. The article goes on to quote Larry Freed, CEO of ForSee Results, as saying “it’s clear that while innovation is critical, sometimes consumers prefer evolution to revolution”.

There’s no doubt Facebook’s many user interface and privacy changes have upset consumers however can this be blamed on “innovation”?

Perhaps Facebook’s problems were because those “innovations” largely didn’t benefit the site’s users and the few that did were poorly communicated.

For innovations to be accepted by the market they have to provide some benefit; generally people don’t like change and the old saw “if it ain’t broke, don’t fix it” applies. If something is working fine, then why make a change that isn’t going to benefit the people who use it?

An overlooked angle with social media platforms like LinkedIn, MySpace and Facebook is how their business model is more like a free to air commercial TV station where the users, or viewers, are not the customers; the advertisers are.

So to put Facebook’s recent mistakes in context perhaps we should be looking at how their innovations were aimed at improving things for their customers, the advertisers, but had the unfortunate effect of upsetting users who are the reason advertisers buy space on the site.

Perhaps Facebook’s changes didn’t upset their customers and, given users have stuck with Facebook despite their fall in reputation, it shows their innovations have actually delivered.

A question of innovation

Is Apple the world’s most innovative company and what lessons does Apple offer for other businesses.

Since the iPad was announced there’s been much talk about how Apple is the world’s most innovative company. Is that true and if so, what lessons does that have for other businesses?

There’s two schools of thought about what innovation is;  the big, new invention that changes industries, like the light bulb or the Hills hoist, or incremental improvements like the stump jump plow and the wave piercing catamaran. The latter, building a better mousetrap, is what Apple do best.

When the Apple Mac was released there were hundreds of personal computers, at the time of the iPod’s launch there were thousands of MP3 players in the shops and Apple’s iPad enters a tablet PC market that has been around for a decade. With all of these products, and most notably the iPhone, Apple redefined the market by releasing a better mousetrap.

The good news is most business don’t need Apple’s fat margins to test ideas. Cheap computers, pervasive broadband, rapid prototyping and social media tools allow you to design and develop new solutions while monitoring how your staff and customers respond to the changes.

We’re living in a time of great technological change — new products and business methods are overwhelming or about to overwhelm most industries. It’s going to be the innovative companies that survive and prosper in this new era.

It’s time to start experimenting.

Is your business dying?

the Internet is more than a marketing tool. Like the motor car and electricity, it is changing business fundamentally.

At the release of a report into technological change and the accounting profession last week, Melbourne University’s Professor Colin Ferguson said “I could see as many as 25% of companies listed on the Australian Stock Exchange (ASX) disappearing in the next decade because of the proposed National Broadband Network (NBN) roll out and other rapid technological change.”.

Professor Ferguson could be optimistic. The Internet today is where the automobile, telephone and mains electricity were eighty years ago — all were established technologies that had been around for a while, but the society wide benefits only began to be felt in the 1930s.

Many industries failed as motor vehicles became common and communities were connected to electricity grids and phone networks. Businesses who didn’t recognise those changes simply ceased to exist while those who survived embraced and adapted to the new technologies.

The best example of why more that a quarter of enterprises will probably fail this decade is that 44% of businesses still haven’t bothered to get a website despite three quarters of consumers and almost all business now researching their purchases online. These businesses without websites are invisible to those customers.

The tragedy is business websites are free with both Sensis and Google offering free Local Business Centre and Yellow Pages online listings. While these websites aren’t flashy, they give the basic information about your business that prospective customers are looking for and filling in the forms only takes a few minutes.

Business Internet though is far more than just a bit of brochure ware on the web, a few weeks ago we discussed location based services like Foursquare and bar code readers like Red Laser. These are small examples of how technology is changing entire business processes and models, not just the marketing.

Like the car, telephone and mains electricity, the Internet fundamentally changes business methods and the markets they sell to. If you aren’t adapting to those changes then your business won’t be around to talk about it in three years time.

The truth is Australia’s National Broadband Network has little do with it. These changes are happening now as pervasive broadband is being rolled out across major population centres. The role of initiatives like the NBN and Google’s US Fibre network is to make sure those benefits are being applied equally across nations and not just in downtown Melbourne, New York or Beijing.

Regardless of where your business is, it’s almost certain your industry is being radically changed right now. Is your business aware, prepared and flexible enough to adapt to those changes?

Twenty three great ideas

A few weeks ago more than 40 of Australia’s most exciting innovators showed off their products at Tech23. Twenty-three of those business were selected to give a four minute pitch to industry leaders in front of several hundred spectators at a Sydney auditorium.

A few weeks ago more than 40 of Australia’s most exciting innovators showed off their products at Tech23. Twenty-three of those business were selected to give a four minute pitch to industry leaders in front of several hundred spectators at a Sydney auditorium.

All the inventions were great – the highlights included Heard Systems; a bovine pregnancy detector, We Are Hunted; a music charting system that tracks a work’s popularity across the Internet and Posse; a ticket seller that harnesses a band’s fan base to fill venues.

The intriguing thing about two of these companies is they rely on communities. The fact both these businesses come from the music industry isn’t surprising. This is a sector where social and peer power has been long understood through sales charts and fan clubs.

With all of us having grown up with Top 40s and music videos we have an intuitive understanding of how these communities work.

An advantage all three businesses had were passionate, informed presenters who believed in their product and who could explain the benefits in 240 seconds. Those 23 presentations showed was just how important a good pitch is to communicating how a great idea is going to change the world and make investors happy.

Another thing that stood out was how a well done Powerpoint enhances a speaker while a poorly done one distracts and irritates the audience. Interestingly only one of the three pitches mentioned had a memorable overhead shows how a passionate speaker who believes in their product trumps even the most elaborate presentation.

In some ways it’s another variation of the rule of threes in that you have a three second pitch, a 30 second pitch and the three minute extended version. Indeed the ReadWriteWeb site has an extended rule of threes, describing how an “insanely great” service is being spoken about after three days, three months and three years.

While you can’t control what people will say about your business three years after hearing about it, you should be able to get across what your business does in three seconds.

Funny enough, that’s pretty close to how long it takes to read a 140 character SMS or Twitter message. Can you describe your business in one tweet?

The new global businesses

The business of going global is even easier than before. Services like Magcloud, Createspace and remote access tools are making it easier than ever to get a product out to the world.

It’s old hat to point out the internet is changing business and globalisation is making the world smaller. But last Tuesday I saw three businesses that showed just how profound these changes are.

That Tuesday morning Mark Fletcher’s Australian Newsagency Blog had a post about the Strange Light Magazine, a collection of photos around Sydney during the recent dust storm.

Some notable points about Strange Light – it was self-published in 31 hours using HP’s Magcloud, the photos were all sourced from Flickr and Derek Powazek, the publisher/author, did everything from San Francisco.

Publishing on demand using services like Magcloud and Amazon’s Createspace is worthy of many blog posts in themselves. Derek’s story of Strange Light on his own blog is a terrific step-by-step guide to creating a self-published magazine. Notable are his points about obtaining permissions and proof reading.

It isn’t one-way traffic between California and Sydney, Australians are also doing business in the US without leaving home. The same day I read the Strange Light story, I had a coffee with Andrew Rogers from Sydney’s Anchor Systems, who set up a new data centre for US-based developer management system, GitHub.

All of GitHub’s hardware is in the US and their new data centre equipment came completely bare, without operating systems or software. Andrew’s team was able to build, configure and test the systems from their Sydney office.

The fact GitHub were prepared to accept a quote from a business 11,000km away and have full confidence the job could be done from across the world shows just how distance no longer matters to forward-thinking enterprises.

Finally, that day I managed to catch up with an old contractor who now runs a remote support business for homes and small offices. You call him and he logs into your computer to fix the problems.

Nothing particularly special there except he operates out of Thailand. So he gets to run an Australian business from a Phuket beach hut. He has business he enjoys without sacrificing the lifestyle he wants.

These entrepreneurs are showing how the globalised economy is really working. Each are using freely available tools that allow individuals and small teams to offer their talents across the world.

You might want to have a look at the tools which are revolutionising your industry, you can be sure your competitors around the corner and around the world are already doing so and might soon be offering innovative new ideas to your customers.

The Future Summit 2: Artificial divides

I took a lot from the Melbourne Future Summit, many good and some worrying.

One of the worrying aspects was the hostility from the “creative thinkers” towards Engineers and scientists.

I took a lot from the Melbourne Future Summit, much of it good and some of it worrying.

One of the worrying aspects was the hostility from the “creative thinkers” towards Engineers and scientists.

This was apparent in the Innovation Imperative seminar where many of the panel’s and audiences’ comments were notable for their hostility towards Engineers and scientists along with their view it was time for some “creative thinking”.

Most of questioners from the floor went as far to blame Engineers and scientists for the Global Financial Crisis.

This is odd as scientists and Engineers are no more responsible for the banking sector’s financial engineering any more than artists are responsible for the bankers’ creative accounting.

Creating artificial barriers between “creative” and “scientific” thinkers is dangerous and foolish. Our greatest Engineering and scientists are creative thinkers by definition. Many great artists have applied science to their work.

If we force people into these pigeon holes where an Engineer can’t be creative and an artist can’t use science then we are all the poorer for it and less equipped for the challenges ahead of us.

Ignoring your customers

The new Facebook design has picked up lots of critics with nearly 800,000 users giving it the thumbs down.

However Dare Obasanjo claims Facebook founder Mark Zuckerburg doesn’t care. Apparently Mark’s view is “the most disruptive companies don’t listen to their customers“.

That’s true – Steve jobs ignored the howls of protest when Apple dropped support for floppy disks and the Apple Desktop Bus which left millions of Mac users stranded with obsolete equipment.

Even more famously, Henry Ford told customers they could have any colour Model T they liked as long as it was black.

Both were right and the customers followed them, although not without some grumbling.

So you can succeed by knowing your customers needs better than they know them, but it’s a risky ask as Microsoft found with Windows Vista, Ford with the Edsel and Coca-Cola with New Coke.

Time will tell if Mark Zuckerburg’s right. It’s a high risk strategy though.

Every business is different

different

One of the things I’ve always believed is every business is unique.

Your character, your staff, your processes, your customers, your premises and every little thing your business does makes it totally different to every other business in the world.

That’s the beauty of business and it’s why any advice you recieve should be tempered by the knowledge that no-one knows your operation better than you.

This isn’t to say you shouldn’t listen to advice. You should because a fresh pair of eyes or ears can alert you to something you’ve missed.

This isn’t to say you shouldn’t experiment with new ways. Those businesses who don’t will probably not survive the next five years.

But what’s works for the guy up the road won’t necessarily work for you. His blog might be successful while yours may fail; she might be able to ditch the Yellow Pages while you cannot; they might be able to use social media while your contacts ignore it.

So understand your own businesses, its staff and the customers.

And most of all understand your own strengths and weaknesses.

Does IT kill competition?

Andrew Mcafee’s article of the effects of IT on competition and businesses raises some interesting points .

http://blog.hbs.edu/faculty/amcafee/index.php/faculty_amcafee_v3/curiouser_and_curiouser/

His conclusion is technology isn’t a leveller between businesses – instead it creats a greater concentration of market power.

I wonder if those results Andrew cites are biased because of the economic boom and easy credit we recently been through; start ups were bought out by cashed up bigger players and that’s why we saw a concentration of businesses.

Regardless of the reasons, there’s a caveat for the bigger players; Andrew’s view is this because “good ideas and good execution separate winners from losers” and technology is what allows these good ideas to spread in a well run company.

This week’s collapse of Wedgwood is a good example of when a company’s culture stifles ideas and innovation. The New York Times has an excellent description of what went wrong and Seth Godin has some wise comments on the NYT strory.

Should Australian tech startups head to Silicon Valley?

Paul Graham’s VC blog has a provocative story on why startups should move to Silicon Valley to improve their chances of success. This raises the question should Australian startups follow his advice.

My view is a firm “yes”. Not only are Australian investors inexperienced in finding and nuturing startups but they are notoriously reluctant about putting money into anything remotely innovative or “outside the box”.

So it’s probably even more important Australian innovators to go the US than it is for their British, Irish or Indian counterparts.

What’s always amazed me with Australian investors is how they will keep backing known dogs. The best example was One.Tel where the founders repeated the mistakes they’d made in previous ventures but we’re able to keep the investor’s cash coming in because they were the right people who’d gone to the right schools.

For an unknown kid without connections and with a truly original idea (and One.Tel was certainly not an original idea) it’s difficult to see how they’d have any reason not to be on the first plane to San Francisco.

Interestingly, Paul Graham’s follow up blog post on the future of startups says “you don’t beat the incumbents; you redefine the problem to make them irrelevant”.

It’s going to be interesting to see how the incumbent Australian investors are going to deal with the new economy. Will they just sit on their behinds and enjoy the blessings of the current commodities boom and wait for the next housing boom? Or will they learn new tricks?

Or will a new generation come along and redefine the problem?