The Blog of Burgher Jon

Twitter announced today that they will be monetizing in another new way.  They have started the @earlybird account.  This account, will (for a small price) tweet about the time bound deals your company is offering.  The concept is pretty creative and should result in some serious revenue for Twitter, especially if they can get influential people to follow @earlybird and retweet the message to their followers.

I am sure the good folks at Twitter have done their research, but it does leave me a bit concerned.  The problem, as I see it, is that Twitter is monetizing on top of their platform rather then monetizing the platform itself.  If you’re monetizing on top of the platform you don’t really have a competitive advantage, unless you disallow competition (which they have).  Disallowing competition though, means that the platform won’t benefit from competition amongst ad providers, which in and of itself hurts the platform.  How much do you think Alexander Graham Bell made off the telephone?

So do I have an alternative?  I’m glad you asked.  What if they required all companies that serve commercials to use a particular hash tag or URL shortener.  Then you tax those per display.  In this manner you’re monetizing the platform itself rather than trying to monetize on top of it (and either losing competitive advantage or stifling the kind of competition that would be good for your platform).

Some companies have become famous for innovating (think 3M), while others derive their reputation from operational efficiency (think Honda).  I’ve long been a proponent of innovation.  In a paper for my MBA program I was asked to defend this decision and setup a structure with in a fictitious organization that would convert the culture from operationally focused to innovation focused.  The question made me think for a little while, but I ended up posing the following solution (excerpts and paraphrasing are written as a memo to my boss explaining my next steps):

In order to establish an innovative culture within my new division, I will be following two critical steps.  I will first determine the most critical areas of innovation that are required; establishing these critical areas as the goals for innovation within the division.  Then, I will identify organizational constructs, processes and controls that will allow us to achieve these goals.

…

We need to establish an innovative culture that revolves around three primary goals:

1. Locating and pursuing the appropriate markets for our new product.
2. Identifying threats and opportunities brought on by disruptive innovations in our industry.
3. Ensuring that our division leverages and contributes to communities of innovation in our industry and our supply chain.
4. Maintaining a commitment to carrying innovative products.  << I didn’t focus on this one, because a solid R&D process was already in place at the company >>

…

The first three of these items will be implemented by setting up a series of innovation focused virtual teams.  These virtual teams will be composed of executives, managers and line workers from many existing teams as well as dedicated business analysts.  Their job will be to review the fruits of our new innovation suggestion process (a web submission process designed to transform water cooler complaints in to helpful innovations).  They will analyze the feasibility and priority of each of these suggestions.  Membership on these teams will rotate so that all employees gain exposure to the innovation process and gain an active role in selecting and refining innovations.  Additionally, employees will be measured moving forward, in-part, based on their innovative recommendations.

This is a rather harsh chopping of a 6 page paper that went in to the theory behind each of these points.  I’ll get a chance to get a grade on the theory from my professor; I placed these words on this blog because I’d like to hear your thoughts.  My guess, based on the people who read the blog that I’ve interacted with, is that one or two of you have actually faced this challenge in the real world and I’d be interested to know how you tackled such a problem.  Also if you agree with my four general areas of corporate innovation.

Image from Wikipedia

I think you can tell a lot about a person by their response to the question, “can you be in at 6:00 tomorrow?”  I don’t think the right answer is, “YES” or “NO”.  I think there’s a thought process that responsible, hard-working people take to the process.  I think that process goes like this:

1. Why?  There are good reasons to be in the office at 6:00 and there are bad ones.  If there truly is a time sensitive issue that needs to be addressed before business, then fine.  If its something I can do tonight before I go home, you owe me that option.  Furthermore, if its not really necessary for me to be there, don’t ask me to be.  I’ll resent you thoroughly for it.  If you’re the kind of manager who measures my contribution by the time on the clock when I’m coming and going, we won’t be working together long.
2. Assuming all those questions are answered to my satisfaction, the answer is YES.  If you can’t handle days that require you to be in the office at 6:00, then don’t work for a startup.  When you’re working for a company of a couple dozen, any one person dropping the ball can be heard around the office.  These pressure moments when you see everyone coming together to get a product out the door should be the ones that you’re excited about, not the ones that you dread.  I’m here in the office at 6:00 this morning waiting for a build of our product from the developers that I can test before showing it to some clients at 9:00 and I’m excited.  The team made some amazing progress on it overnight and I’m excited to share that with my clients at 9:00.

What gets you excited enough to get out of bed at 6:00?

Provide more value then you charge for.  If this isn’t your motto then you won’t last long.

I was reading Chris Dixon’s popular post last week about builders.  He points out that there are two types of people in the startup world.  People who are builders provide more value then they take from the system, extractors take extra value out of the system.  I think this advice is more practical then Chris or even Tim O’Reilly stated.  I think that people and companies that provide more value then they charge for are the only ones that can consistently succeed.

The most obvious reason that this is true is that people just aren’t any good at determining how much something (or someone) is actually worth.  Whether you’re an individual or a company, if you insist on charging for every penny of value that you or your product provide, you are assuming that your customers (or employers) will see that value and be willing to pay for it.  That’s a lot of trust to have in your fellow man, too much.  It’s worth noting in this space, that you’re also trusting yourself not to overcharge for your own services or product.

If you’re a person working for a living (as opposed to a business), creating more value then you’re paid provides instant job security.  Your company would be foolish to fire you and if they’re thinking about cutting your position they will go out of their way to find another spot in the company for you or even recommend you to a competitor.  In this example I always think of one of the Professional Deployment Managers (PDMs) I worked with at IBM, let’s call him Bill.  One day I read an email that he has moved over to another team in the company and it occurs to me that it’s an enormous shame, because he always seemed to me to be one of the best we had.  Not more then a month or so later I got word that they were getting rid of the PDM role and replacing it with engagement managers.  All the PDMs had a month to find another job in the company or be let go.  I have no doubt that Bill’s management tipped him off and helped him move before the resource action occurred and I have no doubt it’s because he was consistently providing a great deal of value to the company.

If you’re a company, providing more value then you charge for makes it difficult for other companies to compete with you.  You don’t have to look any further then the classic business analysis, Porter’s Five Forces, to discover this.  Companies are unlikely to enter a business where customers have preferred providers and profit margins are lower then they are in other sectors.  I’m not saying you go without a profit, I’m merely suggesting that you make sure your customers see more value then you charge for.  If this requires that you lose money, you’re probably in the wrong industry.

I was watching the movie Robin Hood last night and thinking about the difference between great men in the middle ages and great men today.  A great man in the middle ages routinely risked life and limb to pursue greatness (whether that greatness be in business, thought, science or politics).  The best of the best in each of these disciplines regularly died for their possessions, philosophies or discoveries.  The great people of today, rarely are this brave.  They do not command the respect that a great man of the 13^th or 14^th century would have.

This deficiency in the greatness of the greatest is more than made up for by the enormous increase in the greatness of the median.  The median person in the middle ages was a surf on a leased plot of land.  He gave a bit of his harvest to the landlord, a bit to the king and used most of it to feed himself.  The median man today on the other hand, likely works in a factory or services position; a position where he supplies the labor that runs the world.  Perhaps he builds cars for Ford, something that would have been considered a very rare skilled position in the middle ages.

The question this logically leads to is, why?  I think the largest reason is the wider distribution of technology and the advancement of freedom.  The technology justification is easy to see.  Automation of simpler tasks means that hundreds of acres of land can be effectively harvested by a handful of men.  Freedom allows men of all stature to create ideas, earn money and contribute scientific advancements without the risk of facing persecution or jealous violence.

The great man is challenged by such technologies and freedoms though.  The automation of more and more complicated tasks (take computer driven computation for example) makes it more and more difficult to distinguish one’s self.  Great men of these days not only need to have original thoughts, but be able to leverage the new technologies and available information.

Now that I’ve bored you with the difference between the middle ages and today, it’s time to bring it back around to the blog.  I believe you want to make your company more like today than the middle ages.  This may seem obvious, but it can be threatening to great men (which your company will need).  In order to encourage these men, you will need to identify them, train them in how to use the technologies and information available to them, and encourage them to achieve what they can achieve.  By doing this while promoting an atmosphere full of technology and freedom you will enable both great men AND make the median men in your organization stronger.