Innovate at the Point of Pain

I get a lot of ideas across my desk and I’ve learnt the hard way that you need to question everything before offering to back someone else’s idea with your own reputation. One of the first questions I ask aspiring technology entrepreneurs is – what is the problem you are trying to solve?

This may seem like an obvious question but you would be surprised how many projects are launched on the basis of a good idea rather than upon a soundly researched market. It pays to question the market data as well because, after spending hundreds of hours on development, an enthusiastic technologist will do just about anything to justify their emotional investment in a product.

Many great ventures began as a personal point of pain for the founder. But the ones that survived were those that actually identified a mass market and then went on to execute well. A good idea on its own is not enough and the fact that there is “no competition” is not a selling point either. You need competitors for benchmarking and to validate that a market really exists.

For example at ideegeo we made a conscious decision to build a domain registrar site that rejected traditional norms of presentation because we observed that a lot of people really disliked having to grapple with poor navigation and invasive advertising found on other sites. Although the product caters for a design-centric niche user base, it turned out to be a winner because other companies approached us to help them improve their own offering.

Before you write a line of code or partition off your first protein molecule, ask yourself – where is the point of pain? What is the problem that you are trying to solve and are there a million other consumers out there who are suffering the same pain? If you can answer that question objectively and in the affirmative, you might just have a successful product on your hands.

Seismic Survey Data Decision Rocks

In what amounts to the first substantial new investment by the government in economic development since last year’s election Minister Gerry Brownlee has announced a spend up of $20 million on the acquisition of geophysical data in New Zealand’s offshore petroleum bearing ocean basins.

With a government services spending drought firmly in place one has to admire whatever MED mandarin it was that managed to make the business case for the project. National are claiming it as an election promise delivered, but the reality is that it needed to happen no matter which government was in power and here’s why. In 2006 Crown Minerals went to Court to force petro-giant Exxon Mobil to hand over data that had been generated by the company and its partners but not exploited. About the same time the government began undertaking its own surveys. In 2007 there was another tender round for fresh exploration blocks but the response from major players was muted.

Notwithstanding that legal action by the Crown raises questions about ownership rights and foreign investment; by owning the survey data, the Crown has far greater influence over how it is used. It also mitigates the risk of any further expensive and wasteful Court actions by multi-nationals keen to defend their patch. Exploration companies build survey estimates into their financial reporting data, but will quite happily sit on this information until it suits them to act on it, possibly for decades. The Great South Basin is by far the most promising of New Zealand’s licence areas, but is also the most treacherous. At $55 per barrel small players could not possibly justify the several hundred million dollar invest required to bring a deep water well into production.

Offshore oil exploration is a dirty business and Exxon-Mobil in particular have an appalling environmental track record for which they make few apologies. So the government needs to be careful about how it spreads the financial and environmental risk associated with this game. On the upside, making the survey data available could potentially lead to a multi billion dollar exploration and production investment once the oil price rises again (which it no doubt will). Unfortunately because of the development timeframes involved, it is unlikely to contribute to the economic recovery in the short term.

Can Web 2.0 Save the World?

Last year Umair Haque, a Harvard University technology commentator, vented his annoyance about the fact that the new wave of Web 2.0 start-ups being funded out of Silicon Valley mostly contribute very little towards solving the world’s really big problems. I’m inclined to agree. So are New Zealand’s online ventures providing anything of real social value?

I’m not saying that simply selling stuff and making a profit is not an admirable goal in itself, because it is. Such activities generate taxes and contribute to the fabric of society in a variety of ways. But it would be great to see some more initiatives that have purely social or environmental goals, but with a sustainable business model. So I drew to Haque’s attention a New Zealand venture called Celsias.com. This is a community site that aims to “solve global warming one project at a time”. The site so far has no fewer than 126 global projects listed in which organisations or individuals commit to changing the environment for the better. Celsias also aggregates recent articles on green issues and has a discussion zone where users can initiate conversations on topics of their choosing.

Celsias looks great and makes a tangible contribution to society and probably doesn’t get the attention it fully deserves. Every workplace should have an account on their site. As Ben Milsom CEO of Nexx points out in this well considered blog article, for the most part we haven’t really progressed from simply being online consumers. After all, the sites with the most traffic in NZ are actually Web 1.0, simply replicating real life activities online such as banking and selling consumer goods. As Ferrit discovered, there is not a lot of upside left in this business model. We need more innovative online services that actually solve real problems.

Very few of the most highly trafficked websites offer true interactivity or provide an opportunity to be creative. As a nation, we are possibly not as digitally savvy as we might like to believe. However Ponoko is one site that simply shines because of the way it pools and leverages talent. Ponoko won’t save the world but it does allow its community of users an unusual creative outlet, one that has garnered global interest. It also facilitates collaboration and provides lots of advice and guidance on designing and selling. It is good to see new online business models emerging. Recently launched TribeHQ also takes a fresh approach to online knowledge sharing and, by acknowledging network effects and cluster theory, looks set to redefine white collar recruitment.

But ventures like Nexx, Celsias, Ponoko and TribeHQ can change the world, if for no other reason than that they remind us that the economic order is changing. Unfortunately there is a great deal of inertia out there. The battles with bureaucracy encountered by Nexx and other “social lending” platforms are instructive. The gatekeepers haven’t yet realised that we are in the midst of an economic, technological and social revolution. If a platform like Kiva can be allowed to facilitate micro-financing to clients in developing nations, why can’t we have a peer-to-peer lending platform in New Zealand? If we can get a project like Nexx underway perhaps it would expedite some much needed capital flowing into the technology sector too!

Got any other online ventures that have social, creative or environmental objectives? Let us know.

Almost Free Software – Have Your Cake and Eat It Too

The debate over whether or not software should be made freely available has been around for a long time. Can we afford such idealism? Perhaps there is a middle ground.

There are two different threads when we talk about “free software”. The first involves releasing actual code for public use; the second discussion is about providing free access to an application but without giving away the code. The latter is obviously a lot more manageable these days because of the SaaS model. But why would you bother? If you have to pay for employees, premises and some hosting, you better make sure there is some revenue coming in.

On the other hand, the fact that I can even publish this article here today is a direct result of the “crowd sourcing” approach that has spilled over from the open source community into the development of social media. Also, I’m sure we can all think of plenty of businesses which gave away their software and then built a lucrative consulting revenue stream around it. So there are clearly some tangible benefits to encouraging the open source philosophical movement to flourish and grow.

There was a great discussion thread about the (non)monetisation of Web 2.0 over on Diversity recently. Giving your product away, before you can figure out how to make money out of it, is the quickest way to destroy value in any business argues Ben. I agree. Using venture capital to prop up an ultimately unsustainable business model with over-inflated valuations is an abomination only one step removed from pyramid selling. But, maybe it’s how you go about giving away your software that matters.

We have a couple of products in the pipeline at ideegeo but with two completely different marketing and monetisation strategies planned. The first is a mobile application targetted at a niche audience which we will sell for quite a low margin through an online store. I will be overjoyed if we break even on the time spent developing it. However, it will raise our profile and demonstrate capability. The second product will be given away completely for free through our own website. The hook is that we get paid a small amount every time someone actually uses it (which is often). The clients will happily pay because the application demonstrably drives more business their way. If the application needs improvement, we will also get very rapid feedback.

My point is that the Internet has completely revolutionalised both software development and marketing. If you develop “almost free” software and then make it available to a very large number of users at only a very modest cost, everybody wins.

Next month Unlimited Potential are proudly hosting Richard Stallman as special guest speaker in the lead up to the Geeks, Games and Gadgets ’08 event.

Stallman founded the GNU Project an open source software development project that contributed substantively to the genesis of the Linux operating system. At times controversial, the title of “open source guru” seems quite aptly applied in the context of Stallman’s thought leadership. Social media and especially Wikipedia had not even been conceived of at the time of this 1996 interview, but it illustrates his visionary abilities.

Whatever your position on open source or the debate around competing public licensing systems, this seminar is likely to be a thought provoking one. Registration is highly recommended for what will no doubt be a popular session.

Not in the Spirit of Good Customer Service

I have always been fascinated by things aeronautical and have had a long association with the local aviation industry as both a recreational and commercial pilot. I’m an unashamed plainspotter from way back and I follow developments in the global airline industry quite closely. So it was with some surprise that I read about an appalling incident in which the arrogant CEO of a U.S. airline sent a vitriolic personal email response to a customer that had complained.

I always thought that customers were stakeholders in any business, the oxygen supply that ultimately determines the difference between success or asphyxiation. Apparently not according to Ben Baldanza, CEO of Spirit Airlines in Florida. Spirit is a high growth low cost carrier that primarily serves a niche market between the U.S. and Carribean/Central America. Most of its customers are low to middle income holidaymakers and returning migrants.

Last year Baldanza was forwarded a complaint by a couple who missed a concert because their flight was delayed. The couple wanted a refund for both their flights and concert tickets. In any angry outburst Baldanza “inadvertedly” replied directly to the couple by email instead of forwarding his response to the customer service rep. He basically told them where they could shove their refund claim form. “We owe him nothing…let him tell the world how bad we are.”

That’s exactly what the complainants did, with just about every consumer advocacy and business blog in the U.S. picking up and running with the story. Bad news travels fast. I first read about this incident through an article in Air Transport World appropriately entitled “How Low Can You Go?”. Apparently Spirit Airlines prides itself on the fact that there is no receptionist to greet visitors arriving at their headquarters because this saves 2 cents per customer. It seems like the company has a lot to learn about relationship building and delivering on service.

I mention this episode because it underlines how the Web can be a twin edged sword. Sure it allows aggregation of content and customers and a hefty global reach. But it can also bite back hard when things go wrong. Corporations can no longer rely on anonymity in a connected marketplace. It doesn’t matter that James and Christine only paid 75 buckseach  for their air ticket – they are still valuable customers. Reputational capital is an important part of a company’s intangible asset base.

To be fair, the airline did offer to refund the price of the air tickets only. But why was the CEO even dealing with this complaint in the first place? Clearly not his area of expertise. If your business does not have a quality assurance programme and strategy for dealing with complaints it is fatally flawed. Oh – and by the way, Spirit Airlines made a loss of $US 49 million in 2007.

Research Funding Equity Sought by CRIs

Outspoken AgResearch CEO Andy West has this week raised the volume level over the ongoing debate on the issue of funding uncertainty for Crown Research Institutes (CRIs).

University based research organisations receive public funding based on periodic review of their output performance and through the Marsden Fund. The current arrangements mean that a university PhD project on “Bogan Westies” can theoretically get funding whilst a three year CRI study on bee mites or biofuel feedstock crops might not. The CRIs argue that this is unjust.

The sometimes humourous and occasionally “ACRI-monious” shouting match between Universities and CRIs spills into the public domain periodically. But the debate has a more serious side. It’s bad enough that universities are competing with each other for funding and students but it beggars belief that our national innovation system pits talented researchers against each other in Darwinian fashion. Inevitably some worthy research projects will miss out on resources.

For several reasons I’m entirely in favour of blue skies research that explores social issues or esoteric science which may have no immediate obvious commercial return. Firstly we need to cultivate a pool of intellectual talent across the entire research spectrum and not just in the physical and biological sciences. Secondly, non-commercial research sometimes has unexpected commercial applications and frequently involves building international linkages with agencies and researchers abroad, which can lead to profitable collaborations downstream. Finally supporting a diversity of research is the responsibility of any open and inclusive society.

But as AgResearch point out in their 2020 blueprint for agricultural sciences research in New Zealand, over half of our national income is derived from exporting agricultural produce. Is it fair then that agricultural research organisations feel so hard pressed obtaining secure and long term funding for research that underpins the growth and especially the sustainability of this enterprise?

Silicon Valley Challenges Auto Makers to Think

A brainstorming conversation held at Google’s headquarters has led to VC investment in a new kind of electric car. Think, a Norwegian based manufacturer of next generation electric cars, is pitching the project as foreshadowing a paradigmatic shift in the logic around personal mobility and connectivity. Not only does their concept vehicle have green credentials, but it is marketed entirely via the Internet and is itself web enabled with communications and self-diagnostic tools. In an article in Business 2.0, Think CEO Jan-Olaf Willums outlines just how the company intends to compete against the huge car manufacturers.

But the technology is not without issues of its own. One glitch is that the kind of battery you need to provide energy for a small car still comprises about half the capital investment of such a vehicle. To solve this problem, Think plan to set up battery leasing and reconditioning franchises to support vehicle owners. There is also the question of the environmentally sound disposal of battery components when they reach life’s end. With input from other tech firms in Silicon Valley, these and other problems with the batteries will no doubt be addressed over time.

The only real question is about what uptake will be like in the world’s largest car market. But given growing unease over climate change and uncertainties around oil supplies, it seems like quite a good time to be revisiting the electric car idea. Traditional car manufacturers have struggled to innovate around finding greener solutions for transport. In fact they have struggled to redefine their industry at all despite huge financial losses.

But liquid fuels (of one sort of another) seem likely to remain a major part of the mix for a long time yet and electric vehicles may still struggle against the prevailing marketplace until there are further stepwise break-throughs in the technology.

[tags] cleantech, sustainability, technology [/tags]