Free – By Itself – Doesn’t Work, Says Chris Anderson

January 31, 2009 at 5:10 pm · Filed under Web 2.0

Chris Anderson, the author of Long Tail and Editor of Wired magazine, writes in today’s Wall Street Journal that in our new economic reality, offering a Web app for free is not a standalone business model. He writes:

What about those companies trying to build a business on the Web? In the old days (that would be until September of last year) the model was pretty simple. 1. Have a great idea. 2. Raise money to bring it to market, ideally free to reach the largest possible market. 3. If it proves popular, raise more money to scale it up. 4. Repeat until you’re bought by a bigger company.

Now steps 2 through 4 are no longer available. So Web startups are having to do the unthinkable: come up with a business model that brings in real money while they’re still young.

Actually, that was never a business model for a Web or software business itself. The underlying Web application, if it was completely free and unsustainable by advertising revenue, never had a business model.

Sure, there was a business model — of entrepreneurs “flipping” startups.  They were never in the software business, they were in the business of incubating companies and turning them over quickly.  Comparing them to a software business is like comparing a house flipper to a landlord. One is in it for the short term, looking ahead to the exit. The other is in it longer term and expects the property to pay its way.  Two totally different things.

But as Anderson points out, just like after the Dot Com bust of the early part of this century, the current downturn forces us all to reflect once again on the realities of business. Not only is “free” unsustainable as a standalone business model for entrepreneurs, but I would add that free is also risky for end users.

Is there a role for “free”? Certainly — as a marketing strategy that supports your business model:

• Use free as a limited time promotion.
• Use free for an entry level product to develop demand for premium products with a price tag.
• Use free to sell something else with a price tag (the old “give away the razor to get them to buy razor blades” strategy).
• Use free as a strategy to get at startups and young people, to encourage them to “grow into” a habit of customer loyalty.
• Use free as a strategy to sell high-margin add-on services.

But whatever you do, don’t expect “free” to be the end goal for a software application.  That’s crazy.

More at Paid Content and Techmeme.

“Social Processes: Show Me the Money”

January 31, 2009 at 5:01 pm · Filed under Collaboration, Web 2.0

With the best possible Robert K. Merton “serendipidity”, reading Patti Anklam’s post here on “All work is social. Work is conversation”. was followed by discovering Mark Masterson’s epic blog post: Social processes: if you add social software to BPM, do you get Enterprise 2.0’s killer app?  and his thoughtprovoking related slide shows.

If your interest is ”the future of work and how new tools are addressing age-old challenges of organization, collaboration, and innovation” (TheAppGap’s mission)  the slide shows are highly recommended.

The first on Social Processes – BPM + Enterprise 2.0  inspires thinking beginning with the cover quote from Saint-Exupéry:

“The machine does not isolate man from the great problems of nature, but plunges him ever more deeply into them.” ~ - Saint-Exupéry, Wind, Sand, and Stars, 1939 (Wikiquote)

The second , from which I borrowed the title of this post, is valuable in demonstrating the difference in working using traditional, process oriented BPM approaches versus BPM with Enterprise 2.0 collaboration tools integrated. The application is life insurance claims processing and the focus is “Show Me the Money”.

The exchange between @mastermark and readers in the comments following his foundation August 08  post is also essential reading. It plainly discusses the real world issues of implementing new, more collaborative platforms.

I had the privilege of meeting Mark Masterson (who works for CSC in Europe) at Enterprise 2.0 Hanover last year.  If you are attending FOWA Miami, February 23-24, you will have an opportunity to continue the conversation about creating business value from integrating social processes in enteprise BPM platforms unfolding on Mark’s blog.

All work is social. Work is conversation.

January 30, 2009 at 11:04 am · Filed under Enterprise 2.0, Management, Talent Management, social networks, social tools

Last fall, I started thinking out the various  roles and approaches of social software vendors. I was intrigued by a conversation with with Duncan MacPherson, co-founder and co-CEO of Pareto Systems and Pareto Platform. Pareto’s web-based subscription model has been augmented with a free social networking platform called my8020.com. my8020.com implements social capabilities within the application:

• It allows a user to create networks and invite friends to join them. Membership in a network requires the approval of the network’s creator
• Users can also define themselves as “networks” that others can “join,” hence providing a friending/connecting capability that enables users to endorse each other and make introductions
• It provides users the ability to search for an existing network they are interested in joining
• It provides a private blog (journal)
• It lets users manage RSS feeds
• Users can message one another via the platform

I thought this was an interesting pick-up on bringing social elements into a niche application. Then this past week I spoke with A.G.  Lambert, VP  of Saba. Saba, with the Human Capital Institute, published just this last week a research report* on opportunities for adoption of corporate social networking. Currently in Beta, SabaSocial brings social features as those listed above into the context of Saba’s talent management system. Historically an eLearning vendor, Saba purchased Centra in 2005 to become one of the leading vendors of talent management solutions. A key aspect of these systems is that they maintain information about individuals’ skills and courses taken while managing the flow of courseware itself.  SabaSocial can build on the richness of these profiles as it adds the social element.

I posted some time ago a  taxonomy I borrowed from Tony Byrne, that summarizes the different paths by which technology vendors bring our social sides to life. There are the “pure-play” vendors, Facebook and LinkedIn, that start as standalone social networking sites and are looking to build APIs that corporations can plug into. Next come the social/collaboration vendors (like Jive) that start with the assumption that work is social social networking features and integrate work capabilities (project and task management, groups, discussion forums, and so on) onto their social networking platforms.  So this offering of Saba that brings the social element into an enterprise-wide application looks like another signal that there may come a time when the lack of social networking in an application may present the barrier to entry of a product into the market.

It is interesting to see how these two vendors approach the social network integration. It’s not just in the selection of specific social tools to bring to their customers, it’s also in the understanding that networks are how works get done in successful businesses. As MacPherson said when I spoke with him, the social networking mindset embodied in my8020.com is “not to connect with the masses, but to manage my core relationships and make it possible for them to generate business for each other.”  In the case of Saba, the social element adds richness to employee profiles and makes critical expertise searches more effective.

“Work is conversation” is a tenet I adopted over fifteen years ago in Digital management workshops based on the work of Werner Erhardt (see interview excerpted from Industry Week of June 1987). Nothing happens outside of speaking and listening. So the advent of social networking — conversational capability — into all the tools we have makes perfect sense.  Work happens when ideas are being connected, relationships are being developed, learning and innovation occur, and the right people are found at the right time in the right context.

The trouble with web apps: instant upgrade

January 30, 2009 at 10:30 am · Filed under Web 2.0

I’ve always been a fan of Wordpress, which I use in all my blogs. However, the latest version, 2.7 or Coltrane, gave me mixed feelings. While I welcome all of the security fixes and added features, I didn’t like the admin interface redesign. Now this is entirely subjective, as most people probably like the slick UI. For me, however, the older ones were more intuitive out of the box.

For my self-hosted installations of Wordpress, this isn’t much of a problem as I could choose to skip this upgrade (with its own consequences) or rearrange the admin page and install a few plugins. But for my Wordpress-hosted blog, I’ll have to live with it, and in time I may eventually come to like it. Still, this got me thinking about web apps in general, and how the instant upgrade it affords may need a second look.

In terms of interface design, I hope that changes are incremental, or even optional (e.g. users can choose between “classic view” and “standard view”). Like I said, security updates are fine and I appreciate that web applications are constantly upgraded for bug fixes while I sleep, with no effort required on my part. However, the user interface is both a matter of function and taste, and so developers should take both into account.

As web applications become increasingly complex, I also see speed as being an issue for downloading heavier pages. Not everyone is on high-speed broadband, and I’m sure users will appreciate being given the an option to pick a plainer version of the web app if the need arises, as in the case of Gmail’s HTML and AJAX versions. This may not be possible with everything, but it’s a nice thing to have for those that can.

Being fed something passively may be more convenient, but sometimes it’s also good to be in control.

Notable + Quotable: On saving time, the semantic enterprise, and ensuring unified communications security

January 30, 2009 at 10:02 am · Filed under Notable + Quotable

More pointers from earlier this month:

The Semantic Enterprise
On Collaboration 2.0, Oliver Marks shows a video overview of the semantic web, and shares his thoughts on its complexity: “Enterprise search, currently a huge challenge, particularly across multiple applications and their associated databases, will be transformed into a powerful context engine. The productivity and efficiency gains of this approach will be substantial, but more importantly the ‘knowledge is power’ factor provided by these rich referrals will create smarter minds more quickly. This also has major implications for training and learning management systems.”

Seven reasons cloud computing works in a tough economy
Instead of a conservative approach, companies may need to be more aggressive in finding new technologies like cloud computing to reduce expenses writes Kathleen Lau in ComputerWorld: “When introducing a new application, hardware is a significant upfront cost, said Armijo. But cloud computing means the IT department can acquire the resources by paying the provider “by-the-drink” while not spending on hardware up front, and “and this allows you to spread that cost over time, and also to really manage that cost.” So, the required 10 servers by application, once successful, can be purchased incrementally.”

The Essential Time-Saving Guide for Busy People
Meant as a guide to conquer the holidays, Leo Babauta’s advice on Zen Habits can easily be adapted to everyday life: “Pick the top 2-3 things you need or want to accomplish today, and get those done first. While on other days you might push these important things back (and possibly not get them done at all), if you do them first the rest of your day will be gravy. In fact, if you have the freedom, you can sometimes even call it a day after you get the important stuff done – the rest can wait until tomorrow.”

Security in a Unified Communications Environment
Richard Grigonis writes about the difficulty of securing a UC system given the increasing number of users and the diversity of remote location access, and what top players are doing to address them. “Customers also want to be able to deploy security as seamlessly as possible, preferably from Day One onwards, rather than building a UC system first and then securing it later, which can lead to various issues, such as limited options in the way they can secure things. We’re also are trying to solve some of the interoperability problems.”

Online Stimulus
A Baltimore Sun opinion piece opinion piece on the need to invest in Internet infrastructure to help various parts of society, as well as the need to proceed with caution: “Beyond education, other potential benefits of high-speed Internet are apparent. Wider access would lead to more efficient and effective health care, spur entrepreneurial efforts, particularly in rural areas, and promote the arts, science and social interaction. Mr. Obama himself has shown how the Internet can be an effective tool in promoting a political agenda and spurring wider participation in the democratic process.”

Dynamic Infrastructure: Networking Industry’s Biggest Hope
Gregory Ness of Seeking Alpha talks about the shifting focus from speed to flexibility and easier to manage networks: “When you combine rising (manual labor) costs on a per IP address basis with the ongoing expansion of the network (more IP addresses) within the context of a global recession you have the makings of a wake up call for vendors and CIOs: a wake up call driven by rising operations expenses, increasing outages and fixed or even declining budgets as networks become more operationally significant. Those who embrace the power of automation will crowd out those who fail to see the implications of new demands.”

Seven corporate resolutions for an austere new year
The Financial Times’ Andrew Hill made a humorous list of what top businessmen and policymakers should do in the coming year. “Learn a new skill or seek a new challenge. Sir Philip Hampton, chairman of UK Financial Investments, and John Kingman, his chief executive, have taken up juggling. Their task in 2009 is to balance UKFI’s aim of increasing the value of taxpayers’ stakes in banks with the same taxpayers’ desire for the banks to extend more loans to them.”

7 Work Life Culture predictions for 2009
Judy Martin gives her personal take on what offices across America should expect in the year ahead: “In response to rising unemployment and battered stocks a flood of risk takers will emerge as entrepreneurs. Although the economic climate is not ripe for taking chances, people will be working harder and longer because their retirement funds have dwindled down to nothing. In the face of adversity, we might see more small home based businesses and entrepreneurs emerging from the retirement pool as getting a job after 60 can prove difficult.”

Cloud Hosting’s Identity Crisis

January 29, 2009 at 11:07 pm · Filed under Web 2.0

Two thirds of small businesses are unaware of cloud hosting, says a recent Rackspace survey (press release here). 

Actually — I’m surprised that even one third of small businesses know what cloud hosting is.  When I saw the press release, I had to stop and think about it myself.  It’s one of those terms that is hard to get your arms around.

Cloud computing as a general category is easier to understand.  For instance, I can quickly grasp that getting access to software on a “rental” basis via the Web is cloud computing. 

But cloud hosting seems redundant.  I could envision any outsourced hosting arrangement where your website is on a shared server, as cloud hosting.  I am not sure of the difference between a shared hosting arrnagement and cloud computing — after all, aren’t they both “in the cloud?”

Web Hosting Unleashed notes the challenge inherent in the terminology:

The latest trend-maker in the tech industry is cloud computing, a term that is struggling to find a concrete definition. Ask any IT pro to define cloud computing and you’ll get an unrefined answer punctuated by a lot of hemming and hawing. This ambiguity is expected for brand-new computing paradigms, but it makes cloud computing tougher to sell to corporate IT managers. Still, cloud computing — which is similar to grid computing, utility computing and SaaS (software-as-a-service) — is catching on …as a relatively cheap way to access enormous, highly flexible computing resources.

And therein lies a challenge for technology vendors: simplifying and de-jargonizing the message. It’s doubly hard to attract small business customers when your target market has no idea what you’re selling.

You can download the published results from the Rackspace survey here (PDF).

MeasuredUp Opens Up Customer to Company Conversations

January 28, 2009 at 9:02 pm · Filed under Web 2.0

There are many rating sites on the Web for both general audiences and all kinds of niches (food, movies, doctors, lawyers, teachers, consumer goods, etc.).  Usually, you rate something along with a lot of others and then other people go there to see how everyone felt before they make a decision to engage with or purchase whatever was rated.  With the urge to rate, I am surprised that no one has added this to dating services, and then perhaps they have.

Marc Karasu, founder of MeasuredUp, was frustrated by an increase in poor treatment by businesses both large and small. So he designed a platform where consumers could share their experiences, vent or praise as appropriate and, ultimately, effect change.  It is this last factor that makes it different from most other rating sites that I have seen so far.  While it is a customer-service driven social networking site, it also helps companies make things right when consumers feel wronged.  Marc has introduced the possibility of conversation between customer and company. MeasuredUp both gives customers a platform to express their views and it provides companies with tools to reach out to customers to solve problems and, in the process, have the opportunity to build trust, loyalty and satisfaction.

I have spent a lot of time in the customer service space in a former professional life. It takes around five times as much effort to get a new customer than to keep an existing one. If a customer gets bad service they will much more likely tell many others than the offending company. However, if the company takes the extra effort to fix the problem, the customer is usually much more loyal than before the transgression. The Web only amplifies this.

Marc explained to me how MeasuredUp works. The focus is more on customer service than product reviews.  They do not want to simply provide a place for rants, but also try to obtain positive reviews when they are deserved. Anyone can set a page for a company. A consumer can write a customer service review or question and open up a support ticket requesting direct help from a company. This is all free and everyone can see what is said and any responses.  Here is the MeasuredUp home page where you can see some of the features.

Companies can “claim their company name” through a new product called MeasuredUp Direct Connect for free.  This gives a company access to a private turnkey dashboard to see aggregated company  results and a history of support ticket actions. It does not give them opportunity to take down complaints. Only MeasuredUp can do this if they feel the complaint is unwarranted or not authentic.  Here is the company claim form.

I asked Marc how MeasuredUp handles the possibility of unwarranted trashing by a competitor or other party with bad intentions. He said they have several approaches to this. First, they do IP filtering so if one IP address is putting up lots of reviews they look closely at what is being said. If it seems inauthentic they contact the reviewer. While reviews can be done anonymously, the reviewer must supply their email address that is not displayed. This is a common practice on many sites. If the reviewer fails to response to the MeasuredUp inquiry, they take the review down.

They also give the company a chance to respond to the review. If they feel the company has acted in good faith to address the problem and the reviewer does not respond, they also take the review down. They also do not allow bad or inappropriate language. However, if this occurs, they point out the terms of use and give the reviewer a chance to rewrite the review.  Marc said with practice it becomes fairly easy to spot the fake reviews, both good and bad.

Small companies that cannot afford a customer service function can use MeasuredUp in this capacity. They just have to dedicate an employee or employees to keep up with the support tickets. These employees will receive email notification whenever a customer creates a support ticket. This service also gives small companies a chance to build brand presence in their category, as they will be operating from this aggregated site.  Here is sample company page.

For large companies they can offer an independent third party review and support channel.  Brands that are interested in their customer service image should welcome the openness and feel comfortable giving up control over what stays up on the site.

I asked Marc about the business model. He said that a company can claim their page for a fee which allows them marketing access to an identified space at the top of their company page where they can place messages, ads or speak to their customers as they choose. They also have access to aggregated results, as I mentioned. A company can also “sponsor a category” and have targeted banner ads and a stronger presence within that category.

Like Marc, I have been frustrated by poor customer service. It is an area that I have long had a passion about. I used to write the president of the company. Now I can still do that but through a site that allows others to see what I say and yet allows the company a chance to respond. I like the two-way nature of MeasuredUp and the efforts they are taking to have fair content.  In this way it goes beyond what I have seen on many rating sites.

Marc also writes the MeasuredUp blog that covers both general customer service issues and what is going on at MeasuredUp.  The key for the site will be volume and I wish them luck as I think they have a good set of features and business model.