Lessons for Startups

Paul Graham writes in his essay:

What you should fear, as a startup, is not the established players, but other startups you don’t know exist yet. They’re way more dangerous than Google because, like you, they’re cornered animals.

Looking just at existing competitors can give you a false sense of security. You should compete against what someone else could be doing, not just what you can see people doing. A corollary is that you shouldn’t relax just because you have no visible competitors yet. No matter what your idea, there’s someone else out there working on the same thing.

That’s the downside of it being easier to start a startup: more people are doing it.

Microsoft Moonshot

Robert Scoble (who works at Microsoft) writes:

What’s the moonshot? A guaranteed Terabyte of Internet-based storage space for EVERYTHING and for EVERYONE running Windows in the world.

A simple vision. Yes, Mr. Gates, it’ll cost billions. We’ll need dozens, maybe even hundreds, of data centers around the world. All with state-of-the-art connections. All with state-of-the-art 64-bit servers. All with state-of-the-art backup systems. All with state-of-the-art power and cooling systems. All with state-of-the-art load balancing and data serving technologies. That stuff isn’t cheap. But I hear we have a few bucks we can use in such a “bet the company” effort.

In this terabyte, integrate all of the new Live services into one data store. A sort of “WinFS” for our server farms. Why shouldn’t Live Mail share the same data store as Live Local or Live Expo? Think about the searching, and data presenting, features our developers could build quickly if we had a common data store with a common framework and a common set of APIs!

Monetising User-Generated Content

Nicholas Carr writes:

The way the Web 1.0 dot-com pioneers used pricey computer gear, the Web 2.0 digital-media pioneers use bandwidth. They devour huge gobs of it. YouTube, Forbes’s Dan Frommer writes, is probably burning through a million bucks a month in bandwidth costs, a number that’s going up as rapidly as its traffic. Follow the money. In this case, as Frommer reports, the trail will lead you to Limelight Networks, which YouTube uses to stream all that user-generated content – like 200 terabytes a day – back to us users. Once again, it looks like it’s the suppliers – in this case, the content delivery networks – that are positioned to be the most reliable money-makers as more and more investment pours into the creation of our vaster, user-generated wasteland.

Local Search

Forbes writes:

“Everyone is tantalized by the sheer volume and wants to tap into these billions upon billions,” says Greg Sterling, principal analyst at Sterling Market Intelligence, “but it’s very difficult to capture those dollars–it’s a complex, fragmented and inefficient market.”

The biggest problem is getting small mom-and-pop business owners–some 23 million of them–to sign up and pay for online ads. The auctioned-off, pay-per-click pricing for ads at search engines like Google and Yahoo! are far too complicated for small retail and service businesses, says Assaf Ran, chief executive of DAG Media, a niche online directory company.

Mobiles for Video Recording

WSJ writes: “Mobile phones with video-recording capabilities have come of age. Released in increasing numbers over the past two years, the latest models take higher-quality pictures than their predecessors, record as much as an hour of video without a memory card and transfer the final product at higher speeds than before…But how many people make movies with their mobiles? The videos still aren’t camcorder quality, and as with digital photos, it might be hard to find an appreciative audience.”

TECH TALK: Blue Ocean Strategy: Dos and Donts

Here is an excerpt from one of the online customer reviews on Amazon.com by Peter Leerskov about the book:

What is a BLUE OCEAN STRATEGY? The authors explain it by comparing it to a red ocean strategy (traditional strategic thinking):

1. DO NOT compete in existing market space. INSTEAD you should create uncontested market space.
2. DO NOT beat the competition. INSTEAD you should make the competition irrelevant.
3. DO NOT exploit existing demand. INSTEAD you should create and capture new demand.
4. DO NOT make the value/cost trade-off. INSTEAD you should break the value/cost trade-off.
5. DO NOT align the whole system of a company’s activities with its strategic choice of differentiation or low cost. INSTEAD you should align the whole system of a company’s activities in pursuit of both differentiation and low cost.

A red ocean strategy is based on traditional strategic thinking – e.g. Harvard’s strategy guru Michael Porter.

A blue ocean is created in the region where a company’s actions favourably affect both its cost structure and it value proposition to buyers. Cost savings are made from eliminating and reducing the factors an industry competes on. Buyer value is lifted by raising and creating elements the industry has never offered. Over time, costs are reduced further as scale economies kick in, due to the high sales volumes that superior value generates.

Examples of strategic moves that created blue oceans of new, untapped demand:
– NetJets (fractional Jet ownership)
– Cirque du Soleil (the circus reinvented for the entertainment market)
– Starbucks (coffee as low-cost luxury for high-end consumers)
– Ebay (online auctioning)
– Sony (the Walkman – personal portable stereos)
– Cars: Japanese fuel-efficient autos (mid-70s) and Chrysler minivan (1984)
– Computers: Apple personal computer (1978) and Dell’s built-to-order computers (mid-1990s).

Blue Ocean Strategy provides a framework to start thinking about new opportunities. strategy+business writes:

Blue Ocean Strategy offers both a process and a set of supporting tools that practitioners can use to navigate. It begins with a strategy canvas that visually maps the current industry environment in two dimensions. The horizontal dimension includes the range of factors on which an industry currently competes and those factors in which it invests. The vertical dimension shows levels of performance against each factor, measured qualitatively. A strategy canvas is a conceptual tool remarkable in both its simplicity and its usefulness. It can be used to understand the current strategy of a company and its competitors, to communicate the strategy, and to imagine business directions. To do the latter, Professors Kim and Mauborgne recommend that a company create several alternative, radically different strategies, each aimed at delivering superior value to potential not existing customers by:

  • Reducing cost by eliminating some factors that the industry takes for granted and reducing other factors below the industry standard.
  • Enhancing differentiation by raising some factors well above the industry standard and creating additional factors that the industry has never offered.
  • Tomorrow: Thinking Shift

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