Is Innovation Accelerating Or Decelerating ?

I came across a great debate the other day between Peter Thiel and Marc Andreessen on the question of innovation and whether it is accelerating or decelerating. I found Thiel's perspective on this super interesting as he talked about the massive lack of innovation we've seen since the 1970s with regard to transportation and energy and infrastructure. I also enjoyed the debate around which metrics are best to use when measuring innovation acceleration -- things like GDP per capita, number of engineers and researchers, cultural attitudes toward technology, speed of cars and planes, patents filed, etc. Finally, I've always wondered why it seems that most of the notable venture investors out there always seem to be so heavily focused on computer and software engineering as opposed to more structural opportunities like energy, transportation, construction, finance, education or healthcare. The simple reason is that computer and software engineering is the one area that government regulation has (for the most part) not yet slowed down. This is why you're seeing the venture community so interested in things like virtual reality, drones and Bitcoin -- these are opportunities outside of software engineering that haven't yet been regulated. Little regulation means good opportunity for growth.

I enjoyed the debate so much I posted the video below. It's about 57 minutes long.

[youtube http://www.youtube.com/watch?v=VtZbWnIALeE&w=560&h=315]

Facebook's Defensibility Is Gone

Traditionally when people have thought of Facebook and their defensiblity, they've pointed to its ubiquity and the size of its network – at last check they had something like 1.1 billion active users. People reasoned that Facebook would continue to dominate social because it's the one place that has profiles for all of your friends. All other social  networks would be forced to plug-in to the Facebook ecosystem. But as Facebook’s defensive purchase of WhatsApp shows, this is no longer the case. Users are bouncing from social network to social network. Social apps are much, much less sticky than initially thought.

Benedict Evans and others have pointed to the seemingly minor but incredibly impactful fact that any newly launched social app can easily tap into your mobile phone's address book and instantly build out a network equal to -- or better than -- Facebook's.

This wasn't a big a issue when most users accessed Facebook through the desktop site, but now that most users access it through their mobile app, Facebook's unbundling has accelerated.

More and more users are migrating to WhatsApp for messaging, Vimeo for video, Instagram for photos, Foursquare for location sharing, etc. And there are niche players internationally that are focused on badges, stickers and other features valued in those communities.  There are now dozens and dozens of social apps in the app store with more than one-million downloads.

Facebook's strategy of running the social ecosystem seems to be shifting more rapidly than they had planned. Because of the mobile phone's address book, the approach of plugging social apps into Facebook may be losing steam. Instead of just letting them plug-in, the better approach, it seems, might be to buy them.

Internet Marketplaces: Buyer Utility & Seller Reviews

Charles Hudson had a good post this week titled, Marketplaces, Rating Systems, And Leakage. In it, he talks about leakage in online marketplaces. Leakage defined as a user coming to a marketplace to transact and then completing subsequent transactions off of the marketplace.

Once they’ve acquired a new customer through a service, there’s a significant financial incentive for sellers (Open Table restaurant owners, Uber drivers, Task Rabbit workers) to try to get the user to make their second transaction offline – to avoid paying the marketplace a commission.

But these marketplaces aren’t seeing this type of behavior. They’re seeing that subsequent transactions are staying in their marketplace.

The reason for this is twofold:

1. The user values the utility of the service (it’s much easier to book a restaurant reservation on Open Table than it is to call, wait on hold, and find they don't have any tables tonight).
2. As Charles points out, sellers place a high value on reviews from the marketplace. A commenter notes that he once offered to pay for his Task Rabbit project offline and the seller declined. The seller would rather the transaction happen on Task Rabbit so a review gets logged for his work, improving his Task Rabbit reputation. For savvy sellers, a good review on a trusted marketplace is like gold.

Internet marketplaces are always at risk of becoming a lead generation service instead of the central spot where transactions happen. To keep people transacting in the marketplace, it’s important that buyers value the utility of the service and sellers value the reputation gained through post-purchase reviews. Open Table, Uber and Task Rabbit do both of these things well.

Open Conversations

Back in 2005, Union Square Ventures -- the well-known NYC-based venture capital firm -- converted the homepage of their website into a blog. Brad Burnham, one of USV’s partners explained their reasoning at the time.

"We realized that our thesis evolves incrementally as a result of our dialogue with the market, and that the best way to manage that was to accept that we would never get to an answer, so we should just publish the conversation. The best way to do that is with a blog. So here it is."

A few months ago, they took this a step further and turned their website into a conversation, allowing anyone to share links and discuss topics related to the firm and the firm's investments. They also now cross-post their own blog posts and even take pitches from entrepreneurs on their site. Really cool.

In some ways, it’s surprising that an institutional investor would be so open and willing to have a public conversation about their investments and their investment strategy. VCs don’t have hard assets, they don’t have engineering talent, and they don’t have a product. Their entire value is really their investment thesis and their ability to execute on that thesis. So it’s a pretty bold move for them to open up all of that intellectual capital to the world.

But as Brad noted, he believes that opening up the conversation actually puts them at an advantage.

I’d love to see more companies be as open as USV, and to begin having open conversations with their employees, vendors, partners and customers. Personally, I’m constantly having conversations with my colleagues and with the market about the things I’m working on. These conversations help me get better at what I do. Part of the reason I write on this blog is to help me think things through.

What USV has done is scale their conversations and their ability to get better at what they do enormously. Instead of just having conversations with their colleagues that sit across the hall, they're having conversations with (potentially) anyone in the world. That kind of scale has to put them at an advantage over other VCs.

The obvious concern with this approach is that opening up the conversation about your work and what your company does will give away sensitive, proprietary information that would put the company at a disadvantage against the competition.

But I think there are two critical insights here that strongly counter that concern.

1. With very, very few exceptions, companies don’t have some secret and final solution that will drive their success. As Brad notes, most growth and success comes incrementally as a result of perpetual interaction with the market. The thesis is never final, it is always evolving. This is true of nearly every company.
2. Just because you can view and participate in the conversation that a company is having doesn't mean you can recreate what that company is doing. When I write about a new approach I'm taking, by the time someone reads it, internalizes it, and acts on it, I've already moved on and improved on that approach. In addition, my approach is probably wrong for you anyway. You're in a different situation, have different resources, have different connections, have different opportunities and different constraints. It's useful for us to have a conversation, it will help us both. But it doesn't put either of us at risk.

So with very, very few exceptions, I think more companies should begin to open up their internal conversations, challenges and ideas to the public. In the book The Wisdom Of the Crowds, James Surowiecki talks about the fact that across multiple applications (business, military, psychology) large groups of average people are much smarter than any small group of elite thinkers.  I think it's a mistake for companies to think through their challenges in private. A company's likelihood of success is much greater if they open up their challenges to the 6 billion people outside of their walls -- in addition to the small group of individuals inside them.

Put simply, in most cases, the long-term benefits of open conversations are far greater than any potential short-term risk.

Selling Innovation & The Challenger Sale

When you go to market with an innovative product the good news and bad news quickly become obvious. The good news is that, depending on how novel your product is, there’s generally little (if any) competition.

The bad news is that your buyer doesn’t need what you’re selling.

Your buyer has been running their business just fine without your product. They’re busy. They generally don’t want to think about something that isn’t already on their radar.

Trucking companies need tires. Building developers need concrete. Apartment buildings need insurance. Of course selling that stuff is never easy, but buyers have budgets, buying processes and an understood need for those products. If you do the things that good sellers do -- present well, build relationships, follow-up promptly, address concerns, be responsive -- by the end of the year you’ll sell some tires.

But when you’re selling innovation -- that is, selling something that your buyer has never bought and doesn't know they need -- you can do all of the things that good sellers do and still end up selling nothing. Literally nothing. Zero.

This is why the notion of the Challenger Sale is so important. To sell innovation the seller has to challenge the buyer.

• Challenge what business they’re in
• Challenge their buying process
• Challenge their future state
• Challenge their goals
• Challenge their understanding of their own market and where their market is heading
• Challenge how they think of themselves against the competition
• Challenge who their customer is and what that customer wants

A buyer has a point of view on their work that satisfies them, that makes them comfortable. And that point of view, up until now, doesn't include your product. To win, you have to break that point of view and shift the context so that they see a future where your product is a must have. Successful innovation selling is a function of a seller's ability to change the context and point of view of the buyer.

5 Great Apps You Probably Don't Use

The other day I was talking with a few colleagues about some of the less conventional apps we use on a day-to-day basis. Here are five that I've begun using regularly that you may not have heard of but are definitely worth checking out:

1. SoundGecko reads to you. If you ever come across a long article online that you want to read but never have time to get to, copy and paste the link into this app and SoundGecko will read it to you. This is great for long Atlantic or New Yorker pieces that I know I'll never get to -- you can listen while driving or walking around town. I've used it quite a bit over the last several weeks. Thanks to Michael Katz for the recommendation on this one.
2. Lift helps you create good habits. There's lots of research that suggests that habits are the secret to high performance -- it's just too hard to motivate yourself to do the hard stuff every day. You have to create good habits. Exercise has to be a habit like brushing your teeth is a habit. The Lift app helps you do that by allowing you to track and share your habits. Spark Capital invested in these guys a while back and Bijan Sabet wrote a good post on them that gives a good summary of how people use the product.
3. Amazon Instant Video is a no-brainer. If you're an Amazon Prime subscriber (if you're not, you should be) you get free access to Amazon Instant Video. Download the app -- it's comparable to Netflix, can be streamed to your television and is included with your Prime Subscription.
4. Cal is the best calendar app I've ever come across. The challenge I've always had with calendar apps is that they typically have terrible usability. They never seem to work nearly as well as desktop calendars. Cal has a fantastic look and feel and is super easy to navigate. It instantly syncs with your work and personal calendars. It even syncs your Facebook calendar and TripIt itineraries so everything is one place.
5. Refresh gives you the 411 on people that you meet. This one was recommended to me by a colleague and I have to caveat this in that I've only been using it for a few days. But so far I like what I see. Refresh integrates your calendar and social networks to create a quick snapshot of the people that you're meeting with. When you open that app you'll see a snapshot of your upcoming meetings and the people that will be attending those meetings. Refresh then aggregates a ton of information (mostly from social networks) into a "dossier" for each individual --where they've worked, where they went to school, what they Tweet about, what their interests are, etc. It's basically a more accessible and beefed up LinkedIn profile. I haven't been using it long enough to speak to its utility but it works well and has a slick design. If you have lots of external meetings with people you don't know a lot about it's worth checking out.

Healthcare Reform & Prioritizing The User

I was really interested to read the other day that the president of Comchart Medical Software (an EMR vendor) just announced in a blog post that his product is no longer going to be certified for Meaningful Use. For those readers that don’t work in healthcare and don't know what I'm talking about, Meaningful Use is a really important qualification program happening right now in healthcare.

Some background. As part of healthcare reform, the government wants healthcare providers to use software (as opposed to paper) when providing care. Specifically, they want providers to invest in and use an Electronic Medical Record (EMR) system. The hope is that the use of these EMRs will enable interoperability between providers; improve care quality, safety, and efficiency; engage patients in their care; and improve overall population health.

With that in mind, the government has laid out a five year plan and three stages of Meaningful Use implementation and compliance that EMRs must meet. Just like the name suggests, the government wants providers to use their EMRs “meaningfully." In each stage of the implementation, the usage requirements of electronic healthcare become more and more significant.

The government is pretty serious about this effort. In the short term, they’re providing financial incentives (specifically, higher Medicare reimbursements) to providers that meet Meaningful Use requirements.  In the longer term, those incentives will turn into penalties.

As you can imagine, this change in the law has led to massive technology investments on the part of healthcare providers. They’re all scrambling as fast as possible to implement their EMRs -- and vendors that make software for healthcare have seen their sales skyrocket. On a side note, this is a large part of the reason that you’re seeing more and more independent doctors becoming employed by large hospitals and health systems. They can’t bear the cost of installing an EMR on their own.

But now that EMRs have gotten some traction with providers (Stage 2 goes into effect in 2014), things are starting to get interesting. As providers are further along in their meaningful use certification, they’re finding that they actually use (and need) these products to run their businesses. Like most users, they want the software to be user friendly and to align with what's important to them and their patients.

And of course, the good EMR vendors -- like most good software companies -- are learning, iterating and releasing changes and improvements to delight these providers.

But, wait a second, not so fast. Maybe they're not.

Remember, the priority and goal of the EMR vendors isn’t necessarily to serve their customers (the providers) and, by extension, patients. The priority and goal of the EMR vendors is to help their customers reach a specific list of objectives as laid out by the government 4 years ago. The EMR vendor's goal isn't to make a product that helps providers and patients, their goal is to make a product that complies with a series of strict government mandates and timelines.

Anybody that knows anything about product development, especially software development, knows that the the product you set out to build in the beginning is always wrong. You have to launch and iterate and iterate and iterate to get it right. You can't know in the beginning what is right so you must change and release, change and release.

But given that the government is likely the least agile organization you'll ever find, they can't change their product requirements to meet provider needs. Or at least they can't do it quickly. So it was just a matter of time before Meaningful Use requirements and what's good for providers and patients began to diverge.

And that’s what we’re seeing with Comchart’s decision to halt their product’s Meaningful Use certification. Take a look at this excerpt from their President's blog post:

While the individual people involved in promulgating these EMR mandates (mostly) have the best of intentions, they clearly do not understand what transpires in the exam room, as many of the mandated features confer little or no benefit to either the patient or the healthcare provider.

And this:

As a result of the mountain of mandates, ComChart EMR  and the other small EMR companies will have to choose to implement the mandates or use their resources to add “innovative” features to their EMR. 

So, in short, a software vendor has decided to prioritize its users over government mandates.

Now of course I don’t know enough about the clinical value of Meaningful Use requirements to understand how off base they actually are, but I’m confident that we’re going to see more of this in the months to come. You just have to assume that, despite their good intentions, the government missed the mark with these mandates. And because big government mandates aren’t at all agile – like software development needs to be – you just know that Meaningful Use mandates are getting further and further away from what’s best for providers and patients (they just didn’t know what they didn’t know whenthe requirements were written).

Related to this, I’ve written a quite a bit about how bad enterprise software is when compared to consumer software. For the simple fact that, traditionally, big enterprise software companies could get away with it – they just needed good salespeople that could sell an individual or a small group of individuals on their product and those individuals would force their employees to use the product. Enterprise software companies can survive (and thrive) with a weak product.

But what's happening here is even worse. The government, who’s even further removed from the needs and wants of the end user, is mandating what the software must do with virtually no ability to iterate on it as priorities change and new discoveries are made.

Despite everyone's best intentions, this is a recipe for a terrible product. It is so far removed from what's good for the end user.

In the long term, I think we'll see more and more of these small, user-driven EMRs abandon Meaningful Use certification. And this will result in two types of products, or two different somewhat radical product directions: one that meets Meaningful Use requirements but is painful to use, and one that doesn't meet those requirements but is a delight to use.

In my view, in the long, long term, as Meaningful Use requirements are scaled back or phased out completely, the lighter-weight, user-driven EMRs will be the vendors that win. They'll have such a strong and inherent product advantage over those that were forced to rely on the government to design and dictate their product roadmap.

That said, I recognize the challenges for EMR companies that go their own course. This is going to create a major client management problem in the short term. And I recognize that it's likely going to take years for these vendors to win back clients. But physicians are no different than any other consumer; they want great products that are beautiful and intuitive and easy and seamless. Eventually they'll demand it. And eventually they'll get it.

As I wrote about in my post about the business to employee to business sales strategy, this is the same course that companies like Yammer and DropBox and Xobni are taking. They've prioritized the user and built a sales and product strategy that relies on user satisfaction and product quality to succeed. These companies are winning because they're bypassing the bureaucracy and misplaced priorities that lead to large, lumpy sales and mediocre product offerings.

They've prioritized the user. And the EMR vendors that do the same will be the ones that win.

This is going to be fascinating to watch.

Your Product Doesn't Sell Itself

Blake Masters posted his notes from a class that Peter Thiel taught at Stanford a while back. The class was focused on distribution for startups and the notes are awesome, awesome, awesome. I've been meaning to write about them for a while. They're a must read for start-up sales & marketing professionals. The whole thing is great but the piece I want to talk about today is where he points out that the idea that a product can sell itself is a complete myth.

Given all of the focus on product lately – particularly in the consumer internet space – you might be surprised to hear this from Peter Thiel. But he’s spot-on. Here are the key paragraphs:

People say it all the time: this product is so good that it sells itself. This is almost never true. These people are lying, either to themselves, to others, or both. But why do they lie? The straightforward answer is that they are trying to convince other people that their product is, in fact, good.  They do not want to say “our product is so bad that it takes the best salespeople in the world to convince people to buy it.” So one should always evaluate such claims carefully. Is it an empirical fact that product x sells itself? Or is that a sales pitch?

The truth is that selling things—whether we’re talking about advertising, mass marketing, cookie-cutter sales, or complex sales—is not a purely rational enterprise. It is not just about perfect information sharing, where you simply provide prospective customers with all the relevant information that they then use to make dispassionate, rational decisions. There is much stranger stuff at work here.

To emphasize his point, he uses this framework:

Consider the quadrants:

Product sells itself, no sales effort. Does not exist. Product needs selling, no sales effort. You have no revenue. Product needs selling, strong sales piece. This is a sales-driven company. Product sells itself, strong sales piece. This is ideal.

If you believe that your product is so great that it can sell itself you’re either delusional or your aspirations aren't nearly high enough – and it’s great to see a hugely successful, product-driven investor make that point.

The Perfect Social Network

I don't consider myself to be all that active on social networks, though I'm registered for lots of them -- you can see the full list on my About page. I use Foursquare and Instagram fairly frequently, I use LinkedIn for work often, I occasionally Tweet and almost never post to Facebook. That said, there are two social networks where I'm really, really active -- much more than all of the above networks combined. Those social networks are two iMessage threads on my iPhone -- one between a large group of high school friends spread out around the country and another with a group of friends in NYC (mostly former co-workers). On average, I message my high school friends several times a day and my NYC friends about every other day. It's a great way to keep in touch.

That said, it goes without saying that the iMessage app provides me with an extremely sub-optimal social networking experience. It's annoying that the place where I do the majority of my online sharing has absolutely none of the features of a good social network. Many, many people have these ongoing iMessage threads with their friends so I know there's a product opportunity here.

With that in mind, I'm recommending a product that I think would be extremely useful to millions of people. Here's the feature list -- iMessage, with:

• Searchable archives (with advanced search capability by sender, keyword, date and date range)
• Photo logging -- all of the photos in the thread should be compiled, easily accessed and searchable
• Check-in -- instead of having to tell people on the thread where I am, I should be able to check-in to the location and it should message everyone (I think Foursquare has an API for this now)
• Cross platform -- it should work with Android, BlackBerry, iOS, etc.
• Group calling feature -- it should be easy to click on a few names in the thread to start a conference call
• Payment feature -- if I owe money to a friend on the thread or we're planning a trip somewhere that I need to front the money for I should be able to easily transfer the dollars (the app could sync with PayPal, Google Wallet, Bitcoin, etc.)
• Self-destruct option -- for privacy purposes, there should be an option to have a specific photo or text disappear from everyone's phone after it's been viewed for a short period of time (similar to what Snapchat does now)
• Share buttons -- it should have the option to share specific text or media on other social networks
• No download requirement -- if one of the people on the thread doesn't want to download the app, it should work with iMessage (they'll see the texts and media without the added features)
• Reporting -- this isn't critical, but it would be neat to see how many texts have been sent, by who, over a given time period

I realize that WhatsApp has much of this functionality now but it's still missing a lot of useful features.

I think traditionally there's been some hesitancy around building apps for small, closed-loop social networks such as a text message thread because it's only offered to a limited number of users and it doesn't scale well. That may be true, but what's lost in scale is made up for in engagement. I wrote a post a while back about the success of Snapchat and the demand for discreet social networking. Since I wrote that post, Snapchat has exploded -- their users now share 400 million photos per day (more than Facebook and Instagram combined).

I'd argue that if and when Apple, WhatsApp or another app builder releases an enhanced version of text messaging like the one I've described above, they'll see comparable success.

5 Reasons You Should Read Blogs Written By VCs (even if you're not a VC or a founder)

The other day I was looking through my blog feed (I use the Reeder iOS app) and it occurred to me that I follow just under a dozen blogs written by venture capitalists. My three favorites are Fred Wilson, Chris Dixon and Bijan Sabet.

I started thinking about why I read so many of these blogs. I'm not a VC, and I don't really want to be. Are they really worth the time?

Here's why I think they are absolutely worth the time. Any why you should read them too.

1. Because of the risk profile of VCs they are always ahead of the game. VCs focus on ideas and technologies that, for the most part, are ahead of their time. They make investments in ideas that are highly risky that haven't yet gone mainstream but eventually will. Whether you're just investing for yourself, thinking about staying ahead in your career or just a curious person, it's important to be aware of what's coming next. In addition, most of them are investing in consumer products. An extra perk is that VC blogs will help you stay aware of consumer software and services that you might want to use yourself.

2. They attract communities of smart, motivated people. Every day I read blogs on sports, career, fitness, healthcare, technology and marketing and it seems that the VC blogs get way, way more comments from readers than the others. In addition, the quality of conversation happening in the comments sections of VC blogs is extremely high. Often when I read a VC blog I'll only scan the post but I'll scroll down and read the most popular comments in detail (there's great stuff in there). The people hanging out on these blogs are people you want to hang out with (at least virtually). In addition, I'm sure there are some out there, but I haven't yet seen a VC blogger that doesn't interact with their readers.

3. They'll make you a better blogger (and thinker). One of the neat things about VC bloggers is that they don't have all the answers -- and they know they don't have all the answers. In their posts, you'll find that they're really just putting out ideas, and thinking out loud (if they had all the answers, their investments wouldn't be so risky). As a result, they'll help you generate some great ideas on things to write about and think about. See an example here.

4. They write about things that you should know about. I remember back in college the career counselors would tell us, "before you go into an interview, make sure you know what's being written about on the front page of the Wall Street Journal." Those days are over. These days, if you're interviewing in tech, you better know what VC bloggers are writing about.

5. They'll give you better context. One of the challenges in working at a startup (or any company, really) is that you don't always get to see the context of leadership. I always try to remind people to keep in mind that everyone has a boss (the exec team reports to the CEO and the CEO reports to the board). CEOs don't make decisions to make your life miserable, they make decisions to help make the company better -- or, more practically, to make their boss (the board) happy. I've found that by reading what's going on in the mind of VCs (who very often hold board seats) I get to see a bit of what a founder or CEO is facing. And that gives me a better understanding of what their context might be when making decisions that impact my team. In any company or any situation, context is crucial.

I highly recommend the three blogs I mentioned above. In addition, Forbes did a pretty good article a while back on the Top 10 Best Venture Capital Blogs. I recommend checking out some of those as well.

EMR Unbundling (Continued)

The post I wrote about the unbundling of the EMR a few weeks ago received quite a bit of attention. KevinMD republished it and Deanna Pogoreic from the Med City News featured it in her own article on the topic titled, What Craigslist can tell us about the future of health IT startups and the EMR market. Combined, the post was Tweeted well over 100 times. Given some of the commentary around the post, I wanted to provide two quick clarifications:

1.  I actually believe that unbundling is good for the bundler. In my post, I talked about how much value Craigslist brought to consumers when they bundled everything into one place on the web (apartment listings, job listings, personals, etc.). Now they’re finding that niche players are coming in and providing superior value and biting off pieces of their business. On the surface this seems bad for Craigslist. But I don't think it is. Allowing competitors to bite off areas of weakness will make Craigslist better. Back when online classified listings were valuable, simply aggregating them into one place was valuable. But now that's a commodity and Craigslist has spread themselves too thin. Competition will force them to pick an area where they can add real consumer value (as they did back when they started). The same will be true for EMRs. Unbundling (competition) is good for everyone.

2.  I probably wasn't clear enough about how long the process of EMR unbundling is going to take. As I mentioned in the post, there are large switching costs in B2B products that don't exist in B2C products. In addition, because of long-term enterprise contracts, strong vendor relationships, risk mitigation and other factors, it will likely take a lot more time for the EMRs to become unbundled than it will for a consumer website like Craigslist to become unbundled. Also, successful unbundling requires the EMRs to open up their platforms for integration -- which will take time. But my overall point still stands. Demand for the best product, over time, will always overcome switching costs and vendor resistance. Doctors and healthcare execs are consumers just like the rest of us. They want the best value -- it just takes them a bit longer to make the purchase.

Internet Marketplaces Should Be Seller Agnostic

When you're running an internet marketplace (Etsy, OpenTable, eBay, Uber, KickStarter, Yelp, etc.), it's very tempting to give sellers the opportunity to buy premium placement. This could be things like homepage placement, better placement in search results or enhanced profile pages. Selling this stuff is certainly a very logical way to monetize your user base.

But the problem with this approach is that every time you give priority to a seller that pays you more money, you've muddied your value proposition and taken an equal amount of value away from your user base.

A good marketplace is one that creates an easy, beautiful, seamless and open buying experience that enables rating and recommendation systems so that users can decide the best sellers and the worst sellers. Selling premium placement effectively circumvents your users' preferences putting you in a race to the bottom.

Sure, by charging for premium placement, in the short term, you'll generate some cash. And you can use that cash to do some marketing so that you can generate more users. But over time, if you want to continue to grow, you'll need more and more money and more and more marketing. That will force you to create more and more premium placement options (subsequently devaluing your marketplace).

The better approach is to prioritize the user and compete in the race to the top. Give your users the best possible marketplace experience and let them decide which sellers should win and which sellers should lose. Those great experiences will result in buyers telling their friends to use your service and that will result in more people going through the experience and more people telling their friends to use your service and on and on.

That's the way to scale. And you can't do it favoring one seller over another. Give sellers a great experience too, but don't prioritize them. Prioritize the user.

Fighting For Mobile Real Estate

The other day I wrote about the unbundling of web services. That's where an aggregator comes along and adds value by pulling lots of different services into one place -- Craigslist and Facebook are good examples. As these companies become successful, competitors come in and bite off little pieces of their service and build slick apps that do one thing really, really well. StubHub and AirBnB are good examples of apps that are 'unbundling' Craigslist.

With this in mind, I came across this chart noting that later this year mobile internet usage is going to exceed desktop usage.

As mobile usage overtakes desktop usage, specialized apps that do one thing really well are going to be more and more important.

As we know, the challenge with a mobile app is that they're very limited in what they can do. You can't do as much on an app as you can do on the desktop. So as mobile becomes a bigger part of our lives I think we'll see more and more of this unbundling.

But I think we'll also see more and more bundling of retailers and merchants. That is, we're not going to download multiple grocery store apps or multiple clothing store apps or multiple travel apps.

Using myself as an example, I travel a lot. I book with 5 different airlines and probably 6 different hotel chains. As we move towards more and more mobile usage, am I going to download 11 apps? Of course not – I’m going to download one -- Expedia.

The interesting paradox with mobile is that while it will certainly continue to force innovation and specialized, "unbundled" web services, it will also drive lots of "bundled" retailer and merchant applications. Consumers will increasingly demand (and need) less and less clutter on their screens.

In short, the apps that will win the fight for real estate on our home screens will be those that serve a very narrow function very effectively (buying a plane ticket) while at the same time offering the broadest variety of options (tickets from every carrier).

BlackBerry's Rise And Fall

The Globe & Mail had a great profile of the rise and fall of BlackBerry last week that’s worth reading when you have some time – it’s a fairly long piece. It got me thinking, BlackBerry is going to make a great business school case study some day. Anyway, I’ve always been of the opinion that BlackBerry didn’t fail because of hardware. As a very loyal user for eight years, I've always believed that they failed because they were way, way too late to the app game. I remember buying a new BlackBerry long after they launched the app store and finding that the app store didn’t come installed. I had to go download the App Store app so I could start downloading apps. And when I downloaded it I found that it was super hard to use. It’s clear that apps weren't a priority for BlackBerry.

When Apple released its App Store it was the core part of the phone. It was easy to use and the app options were nearly unlimited. The advent of apps literally made the iPhone 100x better. That's not an exaggeration. And for some reason BlackBerry missed this opportunity and got into the app game way too late. As a result they literally had no chance of competing against the iPhone or the Android.

I’ve always wondered why they missed this and the Globe & Mail article offers some insight. Check out this excerpt:

Trying to satisfy its two sets of customers – consumers and corporate users – could leave the company satisfying neither. When RIM executives showed off plans to add camera, game and music applications to its products to several hundred Fortune 500 chief information officers at a company event in Orlando in 2010, they weren’t prepared for the backlash that followed. Large corporate customers didn’t want personal applications on corporate phones, said a former RIM executive who attended the session.

Surely BlackBerry had lots of problems but imagine operating in a super competitive business and having one group of customers holding you back from creating the best product you can for another group of customers?

Blackberry could’ve tried to serve both sets of customers but intrinsically and culturally their corporate customers put them at a massive disadvantage when it came to innovation and serving the consumer.

What a paradox: it seems that what once made BlackBerry so successful – large corporate contracts – may be the thing that eventually caused their demise.

Craigslist, Facebook & EMRs

Benedict Evans has a phenomenal post up on his blog where he discusses the future of LinkedIn. Go read it, it’s excellent. In it he talks about the law of bundling and subsequent unbundling of web services. He uses Andrew Parker's brilliant image below to illustrate the point.

Craigslist came along and bundled everything into one place and, as a result, completely dominated. They destroyed multiple businesses in the process (including the rental and roommate web service I worked with just after college). They were immensely successful.

But now we're seeing the unbundling of Craigslist. Small players are coming in and biting off small pieces of their business and providing superior value. AirBnB does room rentals better than Craigslist, StubHub is a better ticket reselling service, LegalZoom is a better place to find legal services, etc.

Craigslist detractors believe that this will be death by 1,000 cuts.

Craigslist isn't alone. This is exactly what Facebook has been going through over the last several years: Twitter is attacking the status update, Foursquare is attacking the location feature, Instagram is attacking photo sharing (so much so that Facebook was forced to buy them), Vimeo is attacking video sharing, etc.

Of course, while unbundling is bad for the bundler, it’s great for the consumer. Consumers get more value, more features and easier to use web services.

When I saw the Craigslist image I couldn't help but think of the large EMR (Electronic Medical Record) companies -- Epic Systems, Cerner, Athena, Allscripts, etc. These companies have provided immense value by bundling and integrating a massive amount of clinical data with a nearly endless variety of healthcare related software services. They manage ambulatory clinical data, inpatient clinical data, practice management, patient communication, prescription filling, patient scheduling, billing, meaningful use compliance, population health, specialist referrals, patient engagement, risk management and many other things under the same platform. And just like Craigslist and Facebook, they've benefited hugely as a result.

But you can begin to see some cracks in their armor. As clinical data moves to the cloud, more and more startups are coming along and biting off small pieces of the EMR business and providing better value. This is the beginning of the unbundling of the big EMRs.

That said, what's easy to do in b2c software isn't so easy in b2b software. There are significant switching costs associated with switching health IT vendors and most hospitals and health systems are very risk averse and will take their time adopting new technologies (it's much easier for an individual to buy a ticket on StubHub than it is for a hospital to buy a new patient portal).

But with the dollars that are flowing into healthcare focused venture capital and the excitement around those investments, it’s only a matter of time before we see this unbundling accelerate and see more value flowing to providers and patients. And that's a good thing for our healthcare system.

When Selling A B2C Marketplace, Worry About The C, Not The B

A traditional tactic for enterprise salespeople is to be very focused on their prospect’s business – their strategic priorities, their competitors, what keeps them up at night, how they’re growing, etc. But when you're selling a marketplace the focus should be less on the prospect’s business and more on the consumer. Some examples of these businesses include:

• Yelp
• Etsy
• Open Table
• WorkMarket
• Expedia
• Skillshare
• Amazon Marketplace

These businesses are selling their marketplace. They're really just a middleman between a business and a set of (hopefully) engaged consumers.

It's important for Open Table’s restaurant salespeople to understand their prospect’s business, but it’s much more important for them to understand the consumer. What do they want to eat, when do they want to eat, what kind of experience do they want, how do they want to be marketed to, etc. And most importantly, why is Open Table going to be their destination when they look for a restaurant?

Your customer’s know their business better than you do. There’s not much you can tell them that they don’t already know. But they very likely don't understand the consumer as well as you do. So when you’re selling a marketplace, don’t bore them by trying to be an expert on their business, educate them by being an expert on the consumer.

In An Internet Marketplace, Competiton Helps

Fred Wilson had a good post yesterday talking about the Fallacy of Zero Sum Game Thinking in internet marketplaces. The Zero Sum Theory suggests that as more sellers come onto a marketplace it hurts the early adopters. I’ve worked in internet marketplaces in 3 different industries -- real estate, e-commerce and now healthcare -- and I can tell you that this theory is a myth. I posted the following comment on Fred's blog:

The zero sum game theory is really just a misunderstanding of how good marketplaces drive traffic and acquire new users.

If most of Etsy's traffic came from them buying SEM or running TV ads, then yes, there is a fixed amount of traffic that sellers are competing for. But I'd bet that the vast majority of Etsy's new buyers come to them organically. That is, a buyer has a good experience on Etsy, then tells a friend, and that friend tells a friend, and that friend tells a friend, and on and on.

More sellers >> more good buying experiences >> more buyers.

The beautiful thing about marketplaces where traffic is driven by a quality buying experience (and word of mouth) is that instead of sellers competing with one another for traffic, they actually rely on one another for traffic.

I recommend checking out the original post. There's some great stuff in there on how, despite the controversy, Spike Lee raising money on Kickstarter actually increased funding for lesser known filmmakers. Great topic.

Spreading Innovation

There’s a long but good Atul Gawande article in this week’s New Yorker worth reading that’s relevant to what many of us are trying to do -- spread innovation and change minds. He writes about why some new innovations spread quickly and others don’t.  Talks about the fact that doctors adopted anesthesia really quickly but it took them years and years to begin sterilizing operating rooms (arguably a more important innovation).

Talks about the critical importance of the human factor in spreading innovation – and how a simple treatment for Cholera (a mix of sugar, salt and water) never spread in Bangladesh until human beings went out on foot and sold it, door to door.  Also uses a more relevant analogy:

This is something that salespeople understand well. I once asked a pharmaceutical rep how he persuaded doctors—who are notoriously stubborn—to adopt a new medicine. Evidence is not remotely enough, he said, however strong a case you may have. You must also apply “the rule of seven touches.” Personally “touch” the doctors seven times, and they will come to know you; if they know you, they might trust you; and, if they trust you, they will change. That’s why he stocked doctors’ closets with free drug samples in person. Then he could poke his head around the corner and ask, “So how did your daughter Debbie’s soccer game go?” Eventually, this can become “Have you seen this study on our new drug? How about giving it a try?” As the rep had recognized, human interaction is the key force in overcoming resistance and speeding change.

Some SEO Insights

I picked up some good insights on search engine optimization (SEO) over the last few weeks. For those that aren't familiar, SEO is the process of affecting the visibility of a website or a web page in a search engine's "natural" or un-paid ("organic") search results. So these are not the 'bolded' results at the top or right hand side of a Google search page. 80% of users click on the organic links instead of the paid links (personally, I almost never click on paid links).

16% of Google searches that occur each day were never searched for before.

Google’s primary job is to satisfy the user, so they’re going to send the user to the place that will make them the happiest. So the primary drivers of good SEO results (in no particular order) are:

1. Number of inbound links to the content
2. Amount of content
3. Recency of content
4. Click-through rate (from search result to click)
5. Stickiness of site (time spent on site)
6. Lack of dummy content (content that isn't relevant to the page or topic)

There have been incidents in the past where e-commerce sites would intentionally and blatantly ripoff a portion of their customers -- causing those customers to go to the internet and write bad reviews with links back to the offending site. It used to be that this kind of behavior would cause the site to be listed higher in organic search results (more links = higher SEO score).

To prevent this, Google has started to use something called sentiment analysis or opinion mining. By applying an algorithm against a variety of social media sites, discussion boards, blogs and news sites, Google can get a pretty good sense of whether or not the internet likes your site. And if they do, you'll rank higher.

Of course, sentiment analysis is complicated and not 100% reliable (due to cultural factors, language nuances and wide-ranging contexts) but is a useful way for Google to ensure that individuals aren't gaming the system.

In short, I think the key insight is that if you want to rank high in SEO over the long term, you have to do the right thing. You have to give users a site that makes them happy. You may be able to fool Google for a little while, but they'll eventually catch up and when they do you can forget about SEO as a source for acquiring new business.

The UP By Jawbone

The other day I bought a Jawbone UP, the popular health monitoring device that tracks steps, sleep and sleep quality. I’ve only been using it for a few days but so far so good. I mostly bought it for the sleep monitoring feature, and because I've been generally a bit anxious to test out a health monitoring device.

I’m slightly obsessed about the amount of sleep I get. Often there are nights where I get a good night’s sleep, but I don’t think I did so I worry about it. UP has begun to put my mind at ease – I’m actually getting more sleep than I had thought. The sleep part of the app monitors how long it took me to get to sleep, how long I slept and even deciphers periods of deep sleep versus light sleep.

I measure my daily workouts fairly closely and I use the MapMyRun app for my outdoor runs so the step measuring feature isn’t all that useful to me. Though I think over time it’ll be interesting to look back at the data to see how much I’m moving, and how I'm moving more or less during different periods. I also like being able to view my general activity levels in contrast to my rest.

The wristband itself is good. It looks decent on my wrist, seems durable, the controls are really responsive and it's easy to sync. The iPhone app is fabulous. It’s easy to use and has a seemingly endless number of ways to slice the data it collects.

There are a few more features I haven't used yet that I'll try out in the coming weeks. Lots of people believe that this kind of self-monitoring is the future of healthcare (particularly to help monitor various physiological statistics and behavior change for people with acute illness and/or high risk factors).

I'll write another post on my experience with the UP in a few months after I've compiled a bunch of data.