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Why Crowd Wisdom is Important May 22, 2007

Posted by Brad in Ideas.
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Due to my interest in economics, I often do a lot of thinking about the principles of reflexivity, the efficient markets hypothesis, and market inefficiency in general.  I believe a great deal in the power of the free market and wonder where the line between regulation and freedom should be drawn.

It was interesting, then, on the train today when I overheard a man wondering aloud why a certain stop on the line was necessary.  His reasoning came from a self interested perspective, i.e. he lived near a different stop and in his mind the number of stops contributed to an increase in time in getting to his stop. This self interested actor didn’t realize that he wasn’t the only one who rode the train and who’s money paid for it.

Self-interested actors have a role and would have a greater roll if we lived in a linear and non-hierarchical society. The problem is that we live in a hierarchical society and if the people in charge acted only out of self-interest then we’d have a lot fewer train stops, (metaphor of course) a lot less people served, and an even less efficient system.  The real question is how to decide when the few know what’s best for the many…

Anyway, just doing some thinking out loud.  Anyone have any contradictory opinions?


Ideas May 12, 2007

Posted by Brad in Entrepreneurship, Ideas.
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Like most potential entrepreneurs, I constantly have ideas bouncing around in my head. Most times these ideas are little more than that. Sometimes though, I’ll start to take an idea further. What follows is my typical process.

I find the the best way to come up with a good idea for a business is to solve a problem. Though, sometimes, it is hard to even identify the problem. This is where certain techniques come in. The first is the idea book and the second is the bug list. The idea book and the bug list are complimentary. Your idea book keeps everything together and acts as a scrapbook of sorts when fleshing out the ideas you create with your problem list. Some people I’ve read talk about doing exercises to find where your skills, talents, and interests intersect. This tells you a great deal about yourself, but all the self-knowledge in the world won’t bring you to a viable business idea.

The bug list or problem list is a way of brainstorming. Basically what you do is write down things that bug you or things you have a problem with in your everyday life and then you figure out how you would change them or make them better. Hit on one idea that you can think of a creative solution for and you’ve found your business idea. This works better than brainstorming about yourself abstractly because you’re still involving yourself in the thought process but you’re finding problems you’re passionate about. I think that being passionate about the problem you’re solving is one of the keys to running a great business.

Now there are certain things that will further set your idea apart. Your idea needs a niche. Like it or not, in the beginning, you’re not going to take on the big boys. It wouldn’t be smart to take on Sherwin Williams when it comes to paint manufacturing. The manufacturing process and distribution methods are just too complex. The barriers to entry are too great for an individual and the business is too traditional. Often times, in cases like this, people may argue that they’re really passionate and dedicated and they don’t care what anyone says, they will succeed. Those people would be well advised to take another look at what they’re doing. I’m not saying that one shouldn’t be dedicated and passionate but perhaps one should steer that drive and tenacity to the place where it intersects with a path of less resistance.

You need to find a niche within a larger market. A level on which the little guy can compete. If, for example, you had your mind set on the paint market it might be better to find a smaller problem you can tackle. In this case your “bug thought” might go something like this. You’re older and have an arthritic hand makes it tough for you to grip a paint brush. This is your problem, it bugs you that you can’t paint your house. The solution is that you create a more ergonomic paintbrush handle. To view it in more mainstream Internet terms, the guys at Google were bugged by the fact that they couldn’t find what they were looking for on the Internet. They set out to find a better way to do it and well you know the rest of the story.

Now taking off on the niche idea, you can’t just find any niche. You must find a niche you are passionate about, this is why solving problems that you have an interest in is going to serve you. If you look at it like you’re solving a problem rather than building a business, you’re likely to work a little harder for the outcome than if the preferred outcome is just a profitable business. Passion and Enthusiasm make up for a lot in the beginning and people react positively to it when it comes to the help you’ll inevitably need. Simply put, if you enjoy what you’re doing you’re more likely to do a good job.

The final thought here that’s a bit contradictory to what’s been said is that you shouldn’t over emphasize the need for the perfect idea. Ideas are a complex concept in today’s entrepreneurial world. Many daydreamers find that the idea is the stumbling block that prevents the process from ever beginning. It is my opinion, right now, that the big idea is not a necessity and in fact the exception to the rule. The greatest impediment to startup success is not the lack of a good idea but instead the lack of ever doing anything at all. The idea is used as the scapegoat and a cover for procrastination.

Throughout the history of business, examples of company metamorphosis are plentiful; from Virgin Brands getting its beginnings as Richard Branson’s student newsletter to the Land’s End catalog company beginning as a catalog that sold nothing but boat parts. What’s not necessarily always noted is that the reason these companies were able to successfully change is that they started with a somewhat viable idea in a related market. When the true idea for their business did arrive they had already formed a community around their business that would accept the change in the product and facilitate the change in the company as well. Branson sold album’s cheaply to students and Land’s changed to sell clothing to boater’s. Essentially their first idea hit their market but it just took them time to find the product that best fit their business and the community it had created. The rapid expansion of the companies came from relatively simple lateral expansion that occurred after that cash had already begun to flow in, even if only slowly.

The one thing that can be directly linked to their success is that they started doing something in their target market. They didn’t just sit there wondering what would be the perfect product. By just doing something they were able to build a community that eventually told them what their successful product would be. They may not have created a hit product on the first try but they did create a hit market.

In the examples we’ve talked about, those businesses have become successful because they got in at the front end of the trend. They didn’t try to emulate and compete against large and well established enterprises in their field, they either created the field or served it differently.

The Importance of Traffic May 11, 2007

Posted by Brad in Entrepreneurship, Ideas.
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If a tree falls in the forest and no one is around to hear it, does it make a sound? The same thought could apply to the Internet. If a great website exists but no one knows about it, what’s the point?

It’s true, great content is what keeps visitors coming back and with the advent of RSS and other web technologies it is becoming arguably the main thing that attracts visitors. However, with the amount of content on the web today, the ability to market your offering is still incredibly important.

Like it or not, your website or blog is a brand. It is important to make sure that your content and presentation is uniform and professional. You also need to take steps to establish your “brand” and to make it known to others. The most effective way to do this is to network through the Internet and especially in the blogosphere. Make friends, read blogs frequently, and join their communities by posting correctly. The more friends you make the more allies you have to drive traffic to your site.

***NOTE: learn the blog, read some posts and get a feel for how the community works. Above all do not post spam. If you are going to contribute a link please also take the time to contribute a relevant comment. Behave on other people’s websites as you would wish them to behave on yours.***

We also hear a lot about Search Engine Optimization (SEO) these days. Search engines, if used correctly can generate a lot of traffic for your site, especially as search technology improves. Thankfully this cottage industry has far more information on the web than one could ever ask for and more than I could possibly present. If you’re interested, check out Search Engine Watch to learn more. Perhaps, the best advice I can give is that it is very important to learn how to develop and implement an effective META Tag. It will prove very valuable when it comes to controlling how your site is indexed by a search engine.

Another often overlooked tool is a press release. Chances are if you’re publishing a website worthy of traffic, you’re doing something newsworthy as well. In a sense, your website is a community or a project and big or small you’re working towards something. The media is always looking to keep tabs on these types of things and specifically if you target your release to members of the media who cover the area of interest that encompasses your site (this takes some research), a press release can provide you with leads, contacts, and media coverage. All of which can lead to increased traffic for your site, not to mention opportunities you may never have even thought of when it comes to getting involved with an area you love. Here is a great article on how to use this tool to market your site. If nothing else you’ll gain great experience in media relations.

Finally, we touched on Really Simple Syndication (RSS) in the beginning and it has become an increasingly important traffic tool. Users are becoming tired of having to check all the different sites every day to get their information. RSS brings information and your content to the reader through a feed. This makes it easier to get return visitors and to keep visitors tuned into your site. Projects like Feedburner and Technorati have simplified the process even further and remove any hassle that was left from syndicating your feed. If you’d like to learn how to make any site into an RSS feed check out this link from Search Engine Watch: Making and RSS Feed.

I really can’t stress it enough but in anything you do you should be conscious of how you are going to sell it. If people aren’t interested in what you’re doing, you need to take steps to either reach a different audience or to make what you’re doing interesting. If you’re creating a website or a web application, it would serve you well to reread Everyone Should Learn to Sell, it applies to your website as well as your person.

Wanna be More Productive? Get an Idea Book May 6, 2007

Posted by Brad in Career, Entrepreneurship, Ideas, Life Entrepreneurship.
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You’re like most young adults, ideas, thoughts, plans, and things you want to and have to do fly through your head all the time. You probably don’t even remember most of them. You doodle things in class and jot notes at work, you have dreams and ideas all the time. You probably already realize this but are wondering what good these ideas are to you. Ideas are a lot of good, but only if you organize them effectively. This is why one of the most important things you can do for yourself is to get an idea book. Writers and other creative people use them and entrepreneurs are adopting them but anyone can use them. Ask around, I bet you’ll be surprised to see who has a book like this. Used correctly they can be an incredible tool for figuring out whatever it is that’s on your mind.

Since you don’t know exactly who you are yet or what you’ll become, you shouldn’t rule this out. Who knows what could blossom? I’m sure most of you do it without thinking about it. Now you’re going to give a place and a name to your thoughts. It doesn’t take much time. You’ll be writing down things as they strike you and working on your passions so it shouldn’t be that hard to find motivation.

Its equal parts journal, to do list, sketch pad, shopping list, and whatever else you can think of. It can be big or small and what ever form you choose; notebook, binder, a box full of post-it notes, or even index cards. The most important thing is to get your thoughts down and to have a place where you can work on them and develop them. Write down ideas that you don’t even think are important, the book is your story and while one piece may not make sense, it is interesting to see what comes together when you read back through. It’s pretty tough to reach your dreams and accomplish what you want to do if you don’t spend time working at it. Putting ideas on paper also has the added benefit of making you accountable, if only to yourself, when it comes to following through. Try it for a while, who knows what will come together?

The Perils of Being First May 6, 2007

Posted by Brad in Entrepreneurship, Ideas.
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In light of the discussion floating around in business today regarding the necessity of an incredible idea when starting a business, The Wall Street Journal published an article pointing out the downside of being the first one to market with an idea. The article is based around a company named Sambazon which imports the pulp of the nutritious acai berry into U.S. Markets. Much of the article is a business profile but the really important part takes place in this editorial aside:

One cornerstone of entrepreneurship is to be at the forefront of trends, pushing the envelope to find and deliver the next big thing. But being ahead of the pack can also be a tough place to be, and — as the story of Sambazon shows — being first can be even tougher. From educating consumers to outmaneuvering new rivals and perfecting packaging, trailblazers like the Blacks face a raft of challenges.
“The first guy on the beach usually gets shot,” warns Jeremy Black. “That’s the danger when you are a small guy, a pioneer.”

I think the important thing to be gleaned from this statement is not the difficulty of being a pioneer, but the importance of developing a competitive advantage; building a moat of quality, service, or innovation that separates your company from competitors and gives customers a reason to choose your product or service. Dick Costolo, the CEO of Feedburner articulates a critical point in his blog discussion of strategic advantage. Costolo postulates that:

A company’s strategic advantage is based around Quantum Hidden Barriers to Entry… Of course, hidden barriers to entry are those great things that cause lots of people to look at what you’re doing and say “that’s simple, I could do that”, only to realize that the more work they do to try to copy your solution or position in the market or whatever, the more they realize they are farther and farther away from what you’ve accomplished…

Hidden barriers to entry are particularly helpful to your company because potential competitors will severely underestimate the level of investment and resource commitment required to compete with you. I cannot tell you how many times since we first launched FeedBurner I have heard the following comments from senior executives at large companies, industry pundits, hobbyists, and my five year old son: “We could build FeedBurner in [a weekend, three months with three people, whenever we wanted]”. When you have hidden barriers to entry, you don’t get too worked up about these kinds of comments because you know there are lots of pitfalls and issues and challenges that you don’t understand fully until you are far enough along in development that you stumble into them and think “oh wow, now what do we do”… [Read More]

It’s important to realize that these hidden barriers to entry are one of the key reasons that it is more important to just begin working on something and to hash it out by doing than to over-plan and attempt to perfect an idea in theory and on paper before working towards solving the problem in practice. Having the perfect idea or being first to market has less direct influence and less importance than is often thought. The real benefit of being first to market it seems is being the first to work through and solve the hidden barriers to entry. Thoughts?

Interesting Discussion May 4, 2007

Posted by Brad in College, Entrepreneurship, Ideas.
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Blogger Ben Casnocha put a thought provoking post up today regarding the need, or lack there of, to have a degree or certification when entering the business world. The gist of his post is this:

Can you imagine if there was a law requiring all wannabe businesspeople to have MBAs (or some other degree)? It would be pure madness.

Why, then, is there a law requiring someone who wants to be a lawyer to have a JD? Why is there a law requiring someone who wants to be a public school teacher to have an education certificate? Why is there a law requiring someone who wants to be a doctor to have an MD?

Why wouldn’t we just let the market self-sort itself like we do in the business world? Some people get MBAs, some don’t. Some people value MBAs more highly, some don’t.

Obviously it hit a nerve as it has sparked quite a discussion on Ben’s blog. As I’ve written in the discussion over there, I feel the major reason is that the consequences of a failed business are far less than the consequences of a failed court case or failed education. It is interesting then, now that the discussion has begun to focus on the free market, that two reasonably educated people can come to incredibly different conclusions regarding the same subject. My opinion is that Reflexivity plays too large a role in the market in the short term for society to be able to weather the ups and downs without at least a little market regulation. What do you think?