Disruption And The Incumbent's Dilemma…

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When a market or industry is stable and predictable, the incumbent players can have what appear to be unassailable structural advantages – solid revenues, top talent, access to capital, and economies of scale just to name a few. But those advantages can end up being the catalyst for their undoing during times of disruptive change.

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For a timely case study, consider what’s happened in the print news industry.

A decade ago, newspapers were high-margin businesses. Because entry costs were high and distribution was physical, they could effectively operate as localized monopolies with little competitive pressure. Outside of a few nationally recognized publications, most newspapers served a particular city or region, and local businesses saw them as the most effective way to advertise to the regional demographic they wanted to reach. When they combined this with the classified advertising component of their business, newspapers enjoyed an operating model that was both predictable and highly profitable. That, in turn, attracted larger media conglomerates who started buying up these local newspapers, often at incredible valuations.

It was a great time to be in the newspaper business.

Fast forward to today. The newspaper business is on the brink of collapse. The industry has spent the last several years struggling unsuccessfully to recreate itself into something that is both relevant and financially viable. The key factor in this reversal of fortune has been – no surprise – the accelerating adoption of the internet. It isn’t that everyone in the news industry missed what was happening here or simply chose to ignore it. Most understood the corrosive effect the internet was having on their traditional business model and created their own web properties to try and offset it. What they quickly found out, however, was that the revenue they can produce from online advertising is no where close to what they are used to getting from print advertising. This has left them in a ‘no win’ position. They are sitting at a significant tipping point in the business being asked to choose between a new revenue model that can’t sustain the business they’ve built, and a current revenue model is just plain unsustainable.

And that’s the dilemma all incumbents ultimately face.

During periods of disruptive change, the only solutions that are rational for an incumbent to consider are ones that contain some recognizable form of themselves at the new “end state”. They don’t have the luxury of being able to envision optimal future states, and working backwards to reconstitute the assets they have into a form that can be successful there. They need to work from where they are and find a way to move forward.

But their obligations to the present can be overwhelming…

The additional irony here is that the options they can realistically pursue are likely limited by the very elements that made them successful businesses in the first place. This is the point where the advantages they had as incumbent’s can come back to punish and even paralyze them.

  • Solid Revenues – Revenue is something that may be pried from a company’s hands, but is almost impossible for them to let go of it on their own. They’ve typically developed an operational cost structure that depends on it – one that’s optimized for the current business model and could be difficult and disruptive to change. If a company is publicly traded, they have shareholder expectations that they are obliged to consider, and that puts pressure on them to optimize for the near term even at the expense of the long term. Before making any significant changes to their business/revenue model, a company will need a reasonable understanding of the current market dynamic. Unfortunately, while it may be possible to predict that a tipping point is coming, timing when it will arrive is really just guesswork. And that means most companies won’t make any significant changes until after a tipping point has been crossed. By then, it may be too late.
  • Top Talent – The ‘Top Talent’ at most firms is the driving force that effectively runs the business. They provide both the strategic vision and tactical execution a company depends on to succeed, and they are typically well paid for doing so. The challenge here is that these individuals have a vested interest in maintaining the model that rewards them so well. They will instinctively direct their considerable talents toward optimizing and preserving the status quo, and not risk taking effective action until failure seems imminent. During periods of disruption, “Top Talent” can move rapidly from being an major asset to an expensive liability.
  • Access To Capital – Any firm that tapped into the debt markets or accessed credit lines or private equity has taken on an obligation to service that debt. Debt is an anchor that ties a company to the past. It requires a level of cash flow beyond immediate operational expenses. It is normally tied up in longer term projects, some of which may no longer be relevant or economically viable. It may have operational triggers attached to it that may force early payment or changes in rates. In times of change and realignment, debt is a liability that can destroy an otherwise viable business.
  • Economies Of Scale – When a company points to their “Economies Of Scale”, what they usually mean is that they have optimized their processes and relationships to cost effectively deliver very specific services the market is looking for. Almost without exception, optimization comes at the expense of flexibility and adaptability. So when a marketplace is in transition, optimized organizations can find themselves at a loss for how to respond, and become extremely vulnerable to more nimble rivals.

While I used what’s happening in the newspaper industry as an example of struggling incumbents, this isn’t a situation that is unique to traditional industries. In fact, many technology companies find themselves in very similar situations.

Sun Microsystems, the company that powered the first push to the internet, never recovered from the market crash of 2000. After building a reputation and business model based on proprietary hardware and software, they were never able to adapt when the industry shifted to high performance commodity systems running open source software. Even though they have remained technically innovative with developments in areas like JAVA and the NFS file system, they never regained commercial viability. The rumor circulating now is that they will likely be acquired by IBM. If that doesn’t happen, I could easily see them shuttering the business.

Even the massive, technology savvy firm Microsoft is struggling with changes that are happening in the marketplace. Each of their key business franchises is under pressure from significant long term shifts that are taking place. Many corporations are starting to view the internet & browser as their real operating platform – not the desktop operating system and office suite. They have shown little interesting in doing costly upgrades to Microsoft’s Vista or Office 2007, while their investment in web delivered platforms and services remains reasonably healthy. Microsoft’s server business is being threatened by open source technologies, specifically, Linux, MySQL, and Lucene, that offer exceptional performance with no licensing fees. And the big macro trend – cloud computing – is maturing rapidly. It has the potential to overtake the traditional software industry and reshape it significantly. Microsoft has jumped into this space with their own Cloud-based platform called Azure, but it isn’t clear that this could become a viable replacement for their existing business models. What essence of what Microsoft is struggling to respond to is a an irreversible move to low cost or free software and services. This shift is starting to erode their pricing power, and is commoditizing any proprietary value that may have delivered in the past. This hasn’t reached the tipping point quite yet, but it is coming. When it arrives, it will likely undermine their entire business model and threaten their survival in any form that resembles the Microsoft of today.

Change like this is a constant. It ruthlessly prunes anything that lacks value, and provides an opportunity for the new and innovative to grow and flourish. There’s a quote from American social writer and philosopher Eric Hoffer that speaks to this so eloquently:

In a time of drastic change it is the learners who inherit the future. The learned usually find themselves beautifully equipped to live in a world that no longer exists.

The disruptive change he observed in this quote isn’t something new. It’s the force that has shaped our history while bringing the promise of opportunity to our future.

And its happening faster than ever.

InfoNgen Named a 2009 CODiE Awards Finalist…

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We received some good news yesterday…

My company, InfoNgen, has been named a finalist in the 2009 SIIA CODiE Awards in the category of Best Content Aggregation Service:

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For those not familiar with them, the CODiE Awards were established over 20 years ago by the Software & Information Industry Association (SIIA), as a way to showcase the software and information industry’s best products and services.

According to the SIIA’s website:

The CODiE Awards hold the distinction of being the industry’s only peer-reviewed awards program, which provides member companies with a unique opportunity to earn praise from their competitors. Now in its twenty-fourth year, the CODiE Awards program has raised the standard for excellence and serves as prestigious representation of outstanding achievement and vision in the software and information industry.

There are a lot of people at InfoNgen who have worked very hard to get us to where we are today, and it’s great to see their effort recognized by our peers in the technology space. And though we’re excited by what we’ve been able to accomplish this past year, we’re even more excited about some of the new features and capabilities we’ll be rolling out in the coming months. This is a fantastic time to be involved with textual analysis and information discovery.

We have a lot of good things planned for 2009.

NOTE: If you’d like to do a review of InfoNgen, just contact me (email, twitter) with your details and I’ll get in touch with you right away to follow-up.

A Dell By Any Other Name…

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I’m not sure Dell has the best timing here…

At CES 2009, Dell held a press event to introduce their new high-end laptop brand called “Adamo”. Their first laptop in the line was only shown briefly – more in the role of a prop for their fashion model than anything else – and no one there got to spend any time with the device.

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This initial offering in the Adamo line is supposed to be a thin, light notebook that they believe will compete directly with Apple’s MacBook Air. In fact, they are claiming it will be the world’s thinnest laptop when it’s released. It’s hard to tell from the photo if they can really back that up.

The interesting point here is NOT the laptop itself. It’s that Dell isn’t calling Adamo a new product line (like Precision, Inspiron, XPS, or Vostro) – they are calling it a new product brand.

And that’s a big difference…

A true brand needs to be able to stand on it’s own. It needs to develop a unique identity and present a compelling value to the marketplace independent of the parent brand. It’s needs to develop it’s own following – a market segment that is loyal to it.

It needs to be independent…

At the event, Michael Tatelman (Dell’s VP of consumer sales and marketing) compared Adamo to Dell’s one other successful independent brand – Alienware:

    “Alienware is our top performance brand, Adamo is our top design brand.” … “If you look at Adamo, it’s the top of design, franchise, and materials.”

Alienware was a successful independent computer gaming brand that Dell acquired several years ago. An interesting point here is that Alienware still maintains a completely independent identity from Dell, and the systems they sell are only available directly from alienware.com – not from Dell’s own web site.

The fact is, Dell has never really created a second, completely distinct brand on their own before. Every product they have introduced has been firmly anchored in the parent brand. Creating a truly new brand would be a big step for Dell, and it will require a significant investment in both management focus and marketing dollars if they hope to get it off of the ground.

Why?…

Because brands are complex and difficult to build. Successful brands need to create an emotional attachment to something iconic or aspirational – not to specific products, features or capabilities. That’s a somewhat amorphous goal, and there is simply no way to guarantee that you will be successful when all is said and done. Creating a brand requires a long term commitment. Brand value can take time to build – years or even decades. You can’t just create a new brand and expect it to mean something.

And until it means something, a brand is just an expense…

I’m not convinced Dell has the patience in this market to wait long for a payback. This feels more like an attempted quick fix rather than a first step down a strategic path – a bid to escape the compressed margins that are crushing them at the low end of the market.

For the Adamo brand to have any chance of success Dell needs to create some daylight between it and the parent brand – “DELL” – which is clearly tied to the value end of the market. People can’t feel that they are simply buying a Dell with a different name on it. They need to be buying an Adamo, and that needs to make them feel special. It isn’t necessarily logical, but then brand attachment isn’t a logical thing – it’s all about emotion.

With all of that said, If Dell really is serious about creating a new, unique Adamo brand, they are already off to a bad start.

Just look at the big DELL brand on the wall behind the model in the photo…

Photo of Adomo conference courtesy of Engadget.com..

Best Practices In A Bad Market…

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Without a doubt, it’s a tough market out there…

I’ve been a tech entrepreneur for nearly 25 years. Over that time, I’ve seen some incredibly good markets as well as some incredibly bad ones. And while I most certainly prefer operating in a good market, I know from experience that it is possible for your business to be successful even through a downturn.

The key is to be sure you focus on the right things.

While there is no way to guarantee success in business – even in good times – here are five “best practices” that I believe can improve your odds of successfully navigating today’s choppy markets:

1. Deliver immediate, measurable value:

    People today aren’t making buying decisions based on a vague value propositions or glossy sales fliers. If you aren’t offering something that addresses real business challenges in a way that clients can benefit from right away, forget about making any near term sales.

    Realize that you aren’t selling a product – you’re selling a solution. The “product” is just the packaging the solution comes in. You need to understand in detail what a prospect is focused on now, and be able to explain in very specific ways how your company offers them the best solution to deal with it. Also remember that “value” is a function of both “capability” and “cost”. People will only be willing to pay for the specific capabilities they need regardless of what else may come packaged with it.

    You’ll need to price that capability competitively, but avoid the temptation to do whatever it takes to close a deal. Even in a down market, not all business is good business.

2. Treat existing clients like gold:

    As budgets tighten and sales cycles grow longer, every client you already have becomes even more valuable to you. While the revenue they generate for your business is a critical element of your relationship, clients also can provide a lot of value beyond that.

    First, they can offer you real market feedback on what you are doing. This can help you refine the capabilities you bring to the market, and give you a better sense of where to focus and what to prioritize. Some of the best features I’ve developed in products have come directly from client suggestions. And those features helped me win new clients.

    Another value you get from having a resume of clients is credibility. Prospective clients are much more comfortable doing business with someone that is already selling into their marketplace. The fact that others are willing to pay for your service can instill confidence in people considering doing business with you. The clients you already have are a measure of your success. And in any market, success attracts more success.

    Happy clients are also likely to recommend you to other people in the business, helping you grow by word of mouth. Referrals from satisfied clients can be powerful.

    So what do you need to do?

    I have a simple rule for taking care of clients. Stop looking for ways that they can make you successful and instead look for ways you can become an invaluable part of making them successful. Good things will follow from that.

3. Listen, listen, and listen some more:

    Talk is cheap, but listening is completely free. You need to get out and start hearing first hand the conversations going on in your marketplace. This isn’t just attending conferences and trade shows. You also need to go out in the trenches where business is actually happening. Try to understand the full range of issues people in your market are dealing with – the day to day issues as well as the macro challenges they face. Call people up and just ask for a meeting – you’d be surprised how many will say yes and be willing to talk to you!

    To make this exercise worthwhile, check your ego at the office before you head out. Don’t go out looking to justify your own perspectives and plans. Explore the outliers and seek out opposing points of view. Welcome criticism. Reality may not always be flattering, but it’s what you ultimately need to deal with if you want to be successful.

    Be open to being wrong, and willing to make adjustments. Talk less and listen more.

4. Grow your “contact footprint”:

    The more conversations you have going on in the market place, the better your chances of finding new opportunities and closing new business. It’s the basis for most marketing, and ultimately a matter of statistics. So does that mean you should your start sending out mass emails and printing out product brochures?

    Hardly! People just tune that out, especially in a tight market.

    The key here is to aggressively network. Scour through your contacts looking for potential opportunities. Leverage sites like LinkedIn to target people you’d like to reach and looks for ways on- and off-line to get introduced to them. Become involved in industry groups and organizations that improve your odds of connecting with people that can help you. Reach out to relatives, friends, and even fellow commuters – they can all be sources of leads and opportunities.

    If you’re thinking that this is standard operating procedure for everyone on your sales team, you’d probably (hopefully!) be right. The point here is that networking like this isn’t something that just sales should be doing. Programmers, secretaries, administrators, and managers – people at all levels within your company – have something of value to contribute here, and you need to find ways to capture it.

    You need to develop a “networking culture” across your entire organization. Reward people that bring in new opportunities or open doors to difficult to reach prospects. Make it a habit to brainstorm as teams for new, specific opportunities. Challenge people to make creative suggestions.

    Most people tend to do what is expected of them, so create an expectation here. If you’re not tapping into the networking value of everyone in your company, you’re leaving money on the table.

5. Sell to markets and relationships, not just to customers:

    All of your customers have customers of their own and are looking at ways to strengthen those relationships. They face competitive pressures that drive their priorities and create unique demands. They have partners they work with, and suppliers they depend on. In short, your customers are members of a complex business/social network.

    So go beyond just selling to them as if they were isolated entities.

    Approach the market the same way an M&A firm does. Look for opportunities that exist between various people or various companies and start selling both side of it. Look for compelling combinations of content or capabilities that are being sold independently, and find ways to package them for customers that can increases their value or reduce their integration costs.

    You’ll find opportunities like this in every market once you start looking for them.

    While these types of opportunities may be more complex to pull together than ‘single client sales’, they do offer some meaningful advantages. These “strategic sales” can let you leverage the selling power of other individuals or organizations, extending your reach and helping you grow more quickly than you could on your own. Many of them can having multiple revenue streams associated with them, making them more dependable sources of income. These types of deals also become ‘stickier’ for clients since the cost of unwinding them tends to be much higher than the cost of replacing just a single vendor. You’ll also find that deals based on relationships between a firm and its clients can be less price sensitive then deals done directly with one firm. They are also less likely to be unwound when times get tough.

    Exploring opportunities like these should become a component of your overall selling strategy.

Hopefully, these “best practices” will inspire you think more creatively about things you can do to optimize your own business. I’ve tried to make each one specific enough to be meaningful, but general enough to remain relevant to most corporations. That said, there’s no “one size fits all” when it comes to running a business.

The title of this post not withstanding, I think the points I’ve made here are applicable during both good and bad times. I’m visiting them now because bad times can be a lot less forgiving, and demand that we pay a lot more attention to the business decisions we need to make. Good times have the grace to cover a multitude of sins.

To wrap up, I’d like to share two quotes that I think really capture the spirit of what it takes to be successful, regardless of the market:

      “I’d rather be lucky than good.”

      – Lefty Gomez

      “The harder I work, the luckier I get.”

      – Samuel Goldwyn

There’s a lot of wisdom packed in a those few simple words…

Good Luck!…

The Birth Of The Web Industry In NYC…

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Web 2.0 Expo was at New York’s Javits Center this week…

My friend Fred Wilson from Union Square Ventures gave a keynote presentation there Wednesday exploring how the web scene in New York City developed. It’s a great perspective piece on the birth of an industry that is still very much in its early stages:

Though not mentioned in Fred’s presentation, my prior company Multex (which Isaak Karaev and I also started together) was part of that early community of NY based web companies, so the history takes on a more personal meaning to me. Fred was also the first investor in Multex, so our personal histories are interwoven as well.

Perhaps the strongest memory I have of that period was the pervasive feeling that what we were doing was going to change everything. There was a sense that anything was possible. And though tempered by the crash in late 2000, and matured by the experience of growing and running a company, that feeling is still very much alive in me today.

I love what I do…

Targeting Events…

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Having a presence at select industry events can be important for your business…

As old-school as it may sound, becoming involved in conferences and trade events is an important component of establishing a growing business. That said, it typically isn’t the best use of your money and time to go to the mega-shows that are out there. They are expensive to attend, and small companies tend to get swallowed up in the noise and dwarfed by the scale. I’ve also found that at these types of shows, you can end up with more competitors than prospects coming to watch your presentation or visit your booth.

And that won’t do you a lot of good…

A better approach is to choose smaller events that are important to your target market. The theme of the conference should align well with your value proposition to the marketplace – that should be one of your top criteria. As you research potential conferences and events, the organizers will typically give you lists of the companies that have attended in the past. Remember that is only part of the story. Companies don’t come to these conferences – people do. If you plan on making your investment in the event a success, make sure your products or services will be relevant to the likely individuals that will be attending. Look into the specific sessions that are being held there to be sure the fit is good. Talk to some of your existing clients to see if they will be attending.

And if not, find out why…

My company InfoNgen is ramping up to participate at a series of conferences through the end of the year. The next one coming up is the Pharma CI Conference and Exhibition on September 15th.

It’s a perfect example of a highly focused event that is well aligned with the value we bring to the marketplace.

Beyond just having a booth at the conference, I will also be giving a keynote presentation on leveraging the web in the fight against Third World diseases. Looking for openings to actively participate at conferences is another way to engage with prospects and clients. Many conferences are looking for engaging panelists and speakers, and also have sponsorship opportunities that may offer the chance to network or present on a topic. The thing to remember here is that you should leave the hard-sell back at your show booth – that will be a turn off for most people. Instead, try to make a connection with your audience. Demonstrate that you understand the challenges they face, and explore new ways they can address them. Share their interest and passion, and be open to their comments and questions

If you do that successfully, they’ll show up at your booth when you’re done…

The 'Hidden' Bane Of Successful IT Projects…

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Many organizations seem to have trouble delivering on IT projects they start…

it-collage-sm.jpgThere have been numerous studies into why so many IT projects fail to deliver on their initial promises. (Some studies put the number as high as 70%) Reasons cited typically include poor IT management skills, poor specifications, lack of user involvement, scope creep, and poor testing. Having been involved with many IT related projects, I know first hand that all of these can play a role in creating these IT ‘projects from hell’. But there is also another issue in play here that’s obvious to everyone involved in IT, but isn’t often articulated.

Most IT projects are born and grow up in political environments…

Many organizations, especially large ones, have very complex political ecosystems. There are egos involved in decisions that cry out for a dispassionate hand. There are multiple competing agendas vying for limited company funding and attention. There are the many stakeholders in the ‘status quo’ that actively resist any changes that could threaten their position.

And there the ‘high level’ project sponsors that protect their pet projects from any meaningful critical review…

When those elements are tossed into the mix with the usual challenges associated with successfully delivering an IT project on time and within budget, it places incredible demands on everyone involved and requires a manager that is willing to fight to make sure the correct decisions are being made for the correct reasons. An unfortunate fact is that it’s hard to find these types of managers, most especially at the organizations that could use them the most. Fighting the political tide is a thankless, dirty job that rarely helps a person’s career. It eventually chases most qualified managers away. And the void in quality typically ends up being filled by the tech equivalent of corporate ‘yes men’.

The kind that believe the toughest part of a project is making a PowerPoint…

I believe that politics plays a far larger role in the failure of IT projects than most people recognize. Anyone that has been around IT long enough could tell you stories: The massive ‘conceptual’ projects that are able to get started even though everyone involved knows they are doomed to fail. The commitments made to clients or prospects that are clearly unrealistic, yet get written into contracts. The deals made to partner with specific technology vendors without involving real technology people in the decision.

There is no shortage of these examples…

Many of the other ’causes’ cited for failed IT projects are actually symptoms of more fundamental political forces that set them in motion in the first place. No matter what other steps an organization takes to get a handle on run-away IT projects, they will continue to happen unless political decisions can be largely replaced by practical ones.

Needless to say, I don’t expect this problem to go away any time soon!…

The Legacy of Efficiency…

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Efficiency is the mantra of modern corporate culture…

Digital technologies have enabled companies to persue efficiency in increasingly aggressive ways, transforming the business landscape radically over the past decade.

The first wave of this transformation has impacted workers the most…

Many jobs today can now be outsourced to virtually anywhere in the world, with companies chasing the lowest cost structure that can produce a reliable product. It isn’t even a question of hiring domestically vs. outsourcing anymore. Outsourcing has become a given, with the question becoming “where to?”.

It’s a dynamic environment. Some of the more mature outsourcing hubs like India are starting to lose their cost advantage. As business has grown in these regions, many of the advantages they used to provide have been eroded. Costs have risen as the pool of available talent starts to shrink, and underlying regional infrastructures have struggled to keep pace with demand being placed on them. And new regions are starting to emerge – like Latin America – looking to attract similar clients.

The services being offered in many cases are more virtual than physical, and can move anywhere around the globe that makes sense. And that has changed how we think about business. We have become almost nomadic in our approach, ‘grazing’ in one area till it becomes less attractive, then simply moving on to the next ‘lush’ region.

For many companies, outsourcing isn’t a matter of maximizing profits. In a global economy, its a matter of survival. Firms that don’t become efficient lose out to their competitors that do. I believe the ‘talent arbitrage’ we see going on in this market is probably here to stay.

Welcome to the new Darwinian ethos – ‘Survival Of The Efficient’…

But efficiency impacts us in other ways besides outsourcing. Just look at all of the ‘Big Box’ stores littering our malls. They are all monuments to efficiency – a perfect storm of bulk purchasing, point of sale inventory tracking, supply chain optimization, and just-in-time restocking. And though we end up getting ‘Everyday Low Prices’ from them, it seems to be on mostly lower quality merchandize without much of a selection. These stores have taken nearly every product category and commoditized it to make it fit into the low margin/high volume equation they depend on. And smaller competitors end up getting crushed in their wake.

So what’s wrong with efficiency?…

Nothing in theory, but looking at ‘efficiency’ itself as a goal tends to make people focus only on very tactical things. It makes you resistant to change, and therefore vulnerable to it. You try to preserve the status quo because that’s what you’re optimized for. To be efficient, you need uniformity and consistency. And that’s a path that can blind organizations to some of the key ingredients necessary for their long term success.

Innovation. Creativity. Uniqueness…

yingyang.jpgThese are all disruptive elements. They don’t fit well into the way ‘efficient’ organizations plan and operate. But without them, companies and industries – and even countries – will grow old and irrelevant. As the value of what they offer decreases in the market, they compensate for it by doing the one thing they know how – squeezing out even more efficiency so they can lower costs to compete. It may save them in the short term, but it starts them on a long term decline that can be hard to pull out of. Some solutions require a break with the past, not a renewed attempt to preserve it.

If you want proof, just look at what happened to Dell

I don’t mean this as a screed against efficiency – far from it. If creativity is left unchecked by process and efficiency, it will quickly spiral into chaos. What we need to achieve is a sustainable balance between being efficient and being innovative. They need to coexist in the cultural ecosystem of any company that wants to remain relevant.

Efficiency alone will leave a legacy. Combined with Innovation, it can define the future…

Doing What You Love…

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I never think of myself as getting old. Age isn’t a something I define myself by…

On Fred Wilson’s blog, he posted yesterday about the struggle entrepreneurs seem to face as they get older – especially those of us that have had success in the past and are searching for the “What’s Next” in our lives. He pointed to the fact that only one company in his portfolio – mine – has entreprenurs over the age of 45. (Both Isaak Karaev and I have passed that milestone) All of the others were started by folks in their 30′s or younger.

Isaak and I are clearly messing up the bell curve here…

This got me thinking about why it is I do what I do, and what impact age has on me as I look to the future. As it crystalized for me, I wrote the following comment in response to his post. I think it captures it my feelings pretty well:

George Bernard Shaw once said that “Youth is wasted on the young.” For many people, they reach a point in their lives where the limitless opportunity they saw in their youth has vignetted into limited options and choices driven more by momentum than intent. Despite the wisdom and maturity they have gained, they feel trapped by the course they have set.

They grow old mentally.

Speaking as one of the ‘over 45s’ in Fred’s portfolio, being a serial entrepreneur is like finding the “fountain of youth”. Each new venture gives you the same sense of limitless opportunity. The creative rush of being asked to fill a blank canvas. The challenge of starting at the bottom and proving you can make it work one more time.

You get to be young again, but to do all of it with the focus and perspective gained from past efforts.

Is it hard work? Absolutely! But it would be much harder for me to work at something that I wasn’t passionate about; something that I didn’t feel made a difference.

For me, being an entrepreneur is something that just gets better with age.

At he end of the day, it’s all about doing what you love…

Reuters Grabs Clearforest…

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When you’re a small company, being acquired is an interesting experience…

It has happened twice for me, having sold our last two companies to large firms. After clandestinely going through seemingly endless due diligence, negotiation, and planning, you jump right into a frenetic few days surrounding the ‘big bang’ of the public announcement. You need to keep your own people calm in the wake of what is for most of them a shock. You need to work with your acquirer to ‘meet and greet’ all the key people and get the integration started up. You also need to deal with all of your major clients, your partners, and the media.

It’s hard to keep up…

When Reuters announced on Monday that they had acquired ClearForest (an Israeli technology company that analyzes and classifies textual content), a lot of thoughts ran through my head.

Reuters started out as a news organization, and ‘editorial process’ is a part of their corporate genome. Automated tagging and summarization are big elements behind Reuters’ acquisition of Clearforest. That is almost anethma to the traditional editorial mindset that places a premium on the experience and perspective of individuals, and the integrity of the process they operate in. Finding a way to make these divergent camps work together will be key to the success of this merger.

No doubt joining big companies can be tough on entrepreneurs, and their post-acquisition enthusiasm and energy can quickly be subsumed by the reality of how large organizations work. It is a clash of cultures, and cultural issues more than anything else present the biggest challenges in an acquisition.

I know this first hand…

My last company – Multex – was also acquired by Reuters. Large companies simply operate in a fundamentally different way from small ones. You have deliberation over decisiveness. Consensus over correctness. Powerpoints over prototypes. I knew after about four months that I didn’t fit in and that I needed to start something new. That said, everyone is unique and their choices will be driven by different expectations and ambitions.

Early optimism is good, but coming in from a small company, it is unrealistic (read: delusional) to expect that you can change the culture of your acquirer. It just won’t happen. The best you can do is firewall yourself for a while – sometimes even with the bigger company’s blessing – to get things done with the least disruption. But it will only be temporary, and cultural assimilation will be inevitable.

It will be interesting to see how the key folks at Clearforest handle the transition…

Automated text analysis and classification are a core part of what my current company – Instant information – provides in our product offerings. Having a company like Reuters recognize the significance of what we are doing, and having them validate it in the marketplace by acquiring Clearforest is actually pretty exciting. In a rapidly developing segment of the market like this, success will require creativity, speed, and agility.

I feel good about where we are right now…