Business Models

Peter Rip writes: “In preparing for this entry, I started to ask myself how do I think about a business model? And how do I test if business models are complete, coherent, and compelling? When I worked at Bain in the early 1980s the firm then specialized in strategy and business definition, equally amorphous concepts. (Amorphous is good when you bill by the hour). We used to refer to three tests to define whether two companies were in the same business similarities of cost structures, competitors, and customers.”

There is a great accompanying graphic.

CellBazaar writes about a mobile marketplace:

Bangladesh’s top mobile phone operator GrameenPhone, and USA-based CellBazaar have introduced a service connecting buyers and sellers in an electronic marketplace over the mobile phone.

“It’s like a more direct, more primitive e-Bay, a phone-based equivalent of newspaper classified advertisements. The concept was developed at the MIT Media Lab.

The service will enable sellers to list details of their products, produce or even services in a database while buyers can look for any of this information through SMS. It will not handle transactions, but will simply put buyers and sellers in contact with each other via mobile phone.

… For countries like bangladesh, where the transport infrastructure is often poor, electronic commerce could prove to have even greater appeal, than in developed ones. ”

Larry Ellison Interview

Quotes from a Forbes interview with the Oracle CEO:

You have to take a broader view and realize this is an industry like any other–telecom, railroads. They went through consolidation. Why shouldn’t the computer industry be any different?

This shouldn’t have been a surprise to anybody. But it seemed to be, and a lot of people thought I was nuts when I said these things. And that’s why we’re out there alone as a consolidator.

Building Oracle is like doing math puzzles as a kid. I was vehemently against acquisitions. Now, let’s buy everything in sight. Well, that’s a slight exaggeration. We’re a little more strategic than that. But everything was on sale.

I love problem solving. How to make the closet bigger in the house I’m designing. I know, it sounds funny. SAP is twice as big. Now, there’s no growth–what do we do? It’s all problem solving. Designing, building, problem-solving.

Competing with Google

Jeff Jarvis offers a number of ideas:

Specialized search: Like Google, the internet has gotten too big. A one-size-fits-all search is becoming as satisfying as one-size-fits-all media. What the internet needs now is topicality: searches within health, business, sports, my town, video, books, and so on.

Ad networks: Googles AdSense and AdWords grab important marketing dollars, including those from advertisers too small to afford the big, old ad vehicles; from businesses that could never reach this level of targeting before; from big businesses that are eager to buy online but cant find any easier and more efficient way to do it. But these programs are still built on the coincidence of a word on the page on shallow content connections and not on the essence of the internet: relationships.

WiFi on Mobiles

The New York Times writes:

What if, instead of burning up minutes on your cellphone plan, you could make free or cheap calls over the wireless networks that allow Internet access in many coffee shops, airports and homes?

New phones coming on the market will allow just that.

Instead of relying on standard cellphone networks, the phones will make use of the anarchic global patchwork of so-called Wi-Fi hotspots. Other models will be able to switch easily between the two modes.

TECH TALK: Mobile Internet: PCs and Mobiles

The Personal Computer celebrates its 25th year. With more than 700 million users worldwide, it is one of the most important technological inventions of our time. The PC, together with the Internet, have for many of us become indispensable. As we look to the future, I believe that it will be the mobile-based Internet which will have an even greater impact on our lives. The promise of the mobile Internet has been there for long but only now are the pieces starting to come together.

Before we look ahead, let us begin by looking back. The Economist recently carried an article celebrating 25 years of the PC, and added:

Although the PC has its merits, it also has its faults. Its flexibility has proved to be both a strength and a weakness: it encourages innovation, but at the cost of complexity, reliability and security. And for people in the developing world, PCs are too bulky, expensive and energy-hungry. When it comes to extending the benefits of digital technologychiefly, cheap and easy access to informationto everyone on the planet, the PC may not be the best tool for the job.

Look on the streets of almost any city in the world, however, and you will see people clutching tiny, pocket computers, better known as mobile phones. Already, even basic handsets have simple web-browsers, calculators and other computing functions. Mobile phones are cheaper, simpler and more reliable than PCs, and market forcesin particular, the combination of pre-paid billing plans and microcredit schemesare already putting them into the hands of even the world’s poorest people. Initiatives to spread PCs in the developing world, in contrast, rely on top-down funding from governments or aid agencies, rather than bottom-up adoption by consumers.

There is no question that the PC has democratised computing and unleashed innovation; but it is the mobile phone that now seems most likely to carry the dream of the personal computer to its conclusion.

Take India for example. The 18 million installed base of personal computers compares with 100 million mobile phones. Mobile users are growing at nearly ten times that of the computer base. The dream of the broadband Internet in India still remains that for the most part. As a result, the benefits of the Internet for most people in India are still limited. Even though 40 million are believed to use the Internet, my estimate is that three-quarters of this user base spends only a few minutes a day on the Internet from cybercafes. In this situation, it is very difficult to rely on the PC-based Internet for ones information, communication and transaction needs.

At the same time, the mobile Internet isnt yet there. For the most part, mobiles are still used for voice and text-based messaging. There are only 3 million or so GPRS-enabled handsets in India. So, what makes me believe that Indias Internet will be more mobile-centric than PC-centric? To look to the future, one needs to peer into the past.

Tomorrow: NTT Docomos i-mode

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Movie Buzz

Robert Young has an interesting idea in respond to a challenge by Mark Cuban: “How do you get people out of the house to see your movie without spending a fortune. How can you convince 5 million people to give up their weekend and go to a theater to see a specific movie without spending 60mm dollars.”

Whenever anyone goes to a movie theatre, they end up with a ticket stub. I would propose that you create a program/system to make those ticket stubs into currency essentially a coupon that can be passed around, traded, bought/sold, etc.

Allow me to illustrate with a hypothetical. Lets assume I went to see The Pirates of the Caribbean on opening day and I paid $8.00 for my ticket. I leave with a ticket stub that has been date/time-stamped. Then sometime during the following week, I run into my friend Sarah at Starbucks.

During the course of our conversation, I tell her that I had seen Pirates and recommend that she should see also it. As a friendly gesture, I pull out my wallet and give her my ticket stub. Sarah decides to go see the movie the following weekend, and since exactly one week has passed since my ticket stub was stamped, she is entitled to receive a $1.00 discount. Now, had she waited two weeks to see the movie, she would have received a $2.00 discount.

India’s No to OLPC

Atanu Dey comments on India’s decision to decline the $100 laptop:

Tens of millions of children dont go to school, and of the many who do, they end up in schools that lack blackboards and in some cases even chalk. Government schoolsespecially in rural areasare plagued with teacher absenteeism. The schools lack even the most rudimentary of facilities such as toilets (the lack of which is a major barrier to girl children.)

Attention and funds need to be directed to those issues first before one starts buying laptops by the millions. Fact is that we need basic education (literacy, numeracy, etc) and secondary education. These have been provided very successfully without computers around the world. Every one who went to school and became educated more than a mere 30 years agoin the entire history of human civilization, billions of people in alldid so without having ever seen a computer. What they had was much less expensive than PCs: they had teachers and an environment conducive to learning.

Slowing Tech Growth

WSJ writes:

Some economists argue that the tech industry is still suffering a hangover from its blistering 1990s pace, and that growth will eventually ratchet back up. But market-research firm IDC predicts that information-technology spending by the world’s largest companies is likely to increase just 5% a year between 2005 and 2009, down from the double-digit growth rates of the boom years.

Making money in maturing markets requires companies to compete more aggressively for market share. That can mean either buying access to new customers through acquisitions or attracting them with more compelling or cheaper products or services. Keeping prices as low as possible requires a keen eye on costs.

ICICI’s Kamath Speaks

Knowledge@Wharton has an interview with the ICICI CEO:

Our challenge is to invent a new business model where we can create a distribution base effectively in 600,000 villages in India, and to learn to do that at one-tenth the cost of urban India. Just to put that on a scale that someone could understand, we believe that to succeed in urban India, we need to do be able to do business at one-tenth the cost of the West. The reason is that the ticket size of the banking product in India is one-tenth that in the West. If it is a deposit of $10,000 in the West, it will be $1,000 in urban India and $100 in rural India. Loans operate at a similar scale.

We need to be able to conceptualize how to deliver value to this market at an extremely low cost. That’s where the challenge is, as well as the opportunity and the excitement. The challenge is to be able to work with partners because we believe that the branch-led model will not work in this context. The branch-led model would simply replicate our existing structure, and even though we might try to scale things down, the costs are unlikely to go down as much as we need to succeed in rural India.

Insights for Founders

OnStartups has a list of 17 pithy insights. Among them:

6. Eventually, your product will need to work and do something useful. No amount of marketing or strategy will get you around this.

7. At the end of each day, ask yourself: Did the product get better for customers today?. If you dont have a good answer, stay up until you do.

8. Until you are profitable, time is working against you. Once you are profitable, time is on your side.

Mobiles and Rural India

Business Week writes:

While India has a very long way to go in establishing a nationwide network of landline telecom networks, let alone high-speed broadband service, paradoxically, the country could overtake China in the next several years in terms of mobile-phone subscription growth. Rolling out towers and base stations to support wireless networks certainly isn’t cheap. But it likely will be wireless networksnot copper-wire fixed linesthat do most to pull India out of the telecommunication dark ages.

To really develop India’s full potential, local telecom providers will need to spend massive amounts of money to expand coverage to the country’s sprawling rural regions. “A lot depends on how fast the players roll out their networks into the rural hinterland,” says Kuldeep Goyal, a general manager with the government-owned telecom carrier BSNL.

Microsoft enters Healthcare Software

The New York Times writes:

The software system Microsoft is buying, Azyxxi (pronounced ah-zik-see), is designed to retrieve and quickly display patient information from many sources, including scanned documents, E.K.G.s, X-rays, M.R.I. scans, angiograms and ultrasound images. It was first used in Washington Hospital Centers emergency department in 1996, and has since been adopted at six other hospitals, including the Georgetown University Hospital, that are part of the MedStar Health group, a nonprofit network in the Baltimore-Washington region.

Analysts and health care experts who have seen the software work in the Washington hospitals say it is impressive technology. Many hospitals and clinics, they say, have various kinds of patient information in electronic form, but the different computer systems and software programs cannot share the data. That is the principal problem the Azyxxi system addresses, analysts say.

Open Infrastructure Rise

Jon Udell writes:

When entrepreneurs pitch their software-as-a-service ideas to me, I always ask how they plan to compete with what I call the galactic clusters — Amazon, Google, Microsoft, and Yahoo. These giants have set a high bar for Internet-scale operations, and theyre relentlessly pushing it higher.

Weve already seen how open source software projects harness collective effort to produce quality results. Were now seeing how open content projects such as Wikipedia do the same. Can open infrastructure be far behind?

Arguably its already here. Yochai Benkler, author of The Wealth of Networks, notes that if we regard the P2P file-sharing networks from a technical rather than a political/legal perspective, we observe the evolution of robust decentralized storage systems. These systems could well represent a bigger threat to Amazons metered disk in the cloud, S3, than any of Amazons galactic peers will.

Music Industry Challenges

Knowledge@Wharton writes:

Wharton business and public policy professor Joel Waldfogel notes that the music industry’s journey isn’t as easy as it seems. The biggest task, he says, is still convincing young consumers that they can’t share their tunes at will. And to do that, the industry has to walk the fine line between wooing consumers and protecting copyright. “Part of the challenge here is cultural. The industry’s strategy has to change values about music.”

What has sparked [the] rash of experimentation in the music industry? Most observers suggest it was inspired by the launch of Apple Computer’s iTunes, which has quickly become a key means of distributing legal music for 99 cents a song. “It seems that Apple’s iTunes has opened the music industry’s eyes to the opportunity, rather than the threat, of the Internet,” says Whitehouse. “In the early days there were no alternatives. iTunes changed all that.”

The Long Tail: Another View

WSJ has a report by Lee Gomes:

Wired Magazine editor Chris Anderson’s hot, new best seller, “The Long Tail,” is causing a sensation with its eye-opening claims about the way the Web is rewriting the rules of commerce. But I’ve looked at some of the same data, and some more of my own, and I don’t think things are changing as much as he does.

t would be wonderful if the world as Mr. Anderson describes it were true: one where “healthy niche products” and even “outright misses” collectively could stand their ground with the culture’s increasingly soulless “hits.”

But while every singer-songwriter dreams from his bedroom of making a living off iTunes, few actually do, mostly because so many others have the very same idea. And to the extent that Apple is making money off iTunes, thanks go to Nelly Furtado and other hitmakers. Indeed, you can make the case that the Internet is amplifying the role of hits, even in relation to misses, not diminishing them.

So maybe Mr. Anderson really has unlocked the sort of new business rules the cover promises. I say we wait before ripping up any business plans.

Chris Anderson responds.

TECH TALK: Good Books: Everyware

Adam Greenfield’s book has a catchy title. Everyware is about the dawning age of ubiquitous computing. Here is the book’s description:

Ubiquitous computing–almost imperceptible, but everywhere around us–is rapidly becoming a reality. How will it change us? how can we shape its emergence?

Smart buildings, smart furniture, smart clothing… even smart bathtubs. networked street signs and self-describing soda cans. Gestural interfaces like those seen in Minority Report. The RFID tags now embedded in everything from credit cards to the family pet.

All of these are facets of the ubiquitous computing author Adam Greenfield calls “everyware.” In a series of brief, thoughtful meditations, Greenfield explains how everyware is already reshaping our lives, transforming our understanding of the cities we live in, the communities we belong to–and the way we see ourselves.

Here is an excerpt (via A List Apart):

Everyware is an attempt to describe the form computing will take in the next few years. Specifically, its about a vision of processing power so distributed throughout the environment that computers per se effectively disappear. Its about the enormous consequences this disappearance has for the kinds of tasks computers are applied to, for the way we use them, and for what we understand them to be.

Although aspects of this vision have been called a variety of names — ubiquitous computing, pervasive computing, physical computing, tangible media, and so on. I think of each as a facet of one coherent paradigm of interaction that I call everyware.

In everyware, all the information we now look to our phones or Web browsers to provide becomes accessible from just about anywhere, at any time, and is delivered in a manner appropriate to our location and context.

In everyware, the garment, the room and the street become sites of processing and mediation. Household objects from shower stalls to coffee pots are reimagined as places where facts about the world can be gathered, considered, and acted upon. And all the familiar rituals of daily life, things as fundamental as the way we wake up in the morning, get to work, or shop for our groceries, are remade as an intricate dance of information about ourselves, the state of the external world, and the options available to us at any given moment.

In all of these scenarios, there are powerful informatics underlying the apparent simplicity of the experience, but they never breach the surface of awareness: things Just Work.

Overall, Everyware is a fascinating insight into tomorrow’s world.

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Jotspot’s Suite Plans

Nicholas Carr writes:

JotSpot is getting more ambitious. It’s transforming its wiki tool into a wiki platform – a Swiss Army Knife of office applications that run inside wiki pages. There’s word processing, spreadsheets, calendars, personal directories, even a photo gallery. JotSpot seems to be pinning its hopes on being a web version of Microsoft Office.

Can mini-Offices survive in an Office world? To see the challenge that a company like JotSpot faces, just listen to how it’s positioning its new suite. “It has some of the familiarity and functionality of Office,” Kraus tells MacManus; “it’s wikis meets Microsoft Office.” On the JotSpot site, the company says its word processor is “just like Microsoft Word.” It says its spreadsheet application “feels just like Microsoft Excel but on the web!” All of which leads to a simple question: Why do I need stuff that’s like Microsoft Office when I already have Office?

MySpace Forthcoming Attractions

Hollywood Reporter writes:

What’s next for FIM is leveraging MySpace’s online community and communication into a peer recommendations framework for leads on everything and anything: the best children’s playgrounds in Los Angeles to the best concert seats in Madison Square Garden to the best steakhouse in Dallas. Such peer recommendations provide a gentle seaway into targeted, fine-tuned behavioral marketing for national and local advertisers wanting to reach MySpace’s 15- to 34-year-old core user.

News Corp.’s challenge is to utilize that viral marketing and communications to develop a host of next-generation media services in-house so as to keep the lion’s share of the revenue they will generate. Most significantly, FIM is developing refined advertising tracking, pricing and sales tools that will cater to every new-media platform and device, and quantify the collective reach of content and services reaching consumers anywhere, anytime.