Finally! A Free Lunch!

I wish I had a nickel for every time my mother told me “there’s no such thing as a free lunch”.  Most of us learned from an early age that if something sounds too good to be true, it probably is.  The funny thing is that we all either seem to forget that truism, or just abdicate reason and assume that the person offering the free lunch must have just figured out a way around the rules to which the rest of us are forced to adhere.  

What does this have to do with technology?  A lot, actually.  It never ceases to amaze me that people (me included) fall into the “free” trap.  If you are short on time, I’ll cut straight to the chase – there is always a cost.  At least once a year I hear of a company either directly competing or tangentially in a  market we serve who is offering a service at no-charge.  The initial reaction is fear: “oh no, how will we compete?”, then amazement: “how are they doing that?”, then anger: “what am I missing?”, then finally enlightenment: “ah hah, there’s the catch” or even sometimes “what in the world were they thinking?”.  Maybe its cynicism sneaking in with my old age, or maybe it’s just experience, but I’m getting much better at saving myself the trouble of going through the reaction cycle, and just wait for the inevitable “catch” to appear.  

I lived through shutting down a company that rode the free model to huge client acquisition gains, only to find we couldn’t reach profitability.  I’ve also watched as a half dozen companies that have sprung onto the public safety scene with free offerings, only to eventually either shut down or drastically change their model (much to the detriment of their customers).  Guess what?  It costs money to sustain a product, evolve it, and provide the proper level of customer support.  Furthermore, if what a vendor is doing is delivering value, customers will want to pay to keep it!

So, in the spirit of sharing lessons learned, let’s look at the common “catches” of Business-to-business free models:

1. We’ll make it up on volume or the google exit strategy.  In this model, the idea is to get such a large footprint of your service that someone that actually has a sustainable business model will eventually buy the vendor as a either a channel to sell something or as a feature of their broader offering.  This may actually work out for the customers assuming the business doesn’t going belly up spending its way to an exit, however, the reality is that most companies in this bucket either go out of business leaving their customers holding the bag or eventually try the painful transformation into a paid service with a sub-par offering.
2. Drug pusher strategy.  In this model, the vendor offers a basic level of service that is useful, but either requires extra services (read big consulting fees) to really deliver value or has frustrates you by withholding the features you really need (the freemium model).  Either way, you need to recognize going in that the service isn’t really free, but instead you are entering an extended sales process.  Again, as long as you go in with your eyes wide open this can be a decent way to test drive something but recognize that the long term investment may end up being more than a traditional procurement process for the optimal solution at the onset.  
3. Building a fence.  In this model, the vendor may actually have a sustainable business model but sees a potential competitive threat coming from an adjacent market and wants to cut it off.  The issue here is that, assuming the “threat” is actually focused on the service they are offering, it is very difficult for a vendor to create an offering of competitive caliber.  In other words, the vendor will offer some validation to the market but rarely actually provide a service of comparable value to the one they are trying undercut.  From a customer standpoint, you need to take a hard look at your requirements.  If the “free” offering actually meets your need with the service levels you expect, congrats you may have actually found the elusive free lunch; but I’m willing to bet the offering falls short – it was probably designed to cut someone else off, not solve your business problem. 
4. Advertising.  Need I say more?  Sure, there may be a way a vendor can make money offering a service for free in exchange for some form of advertising rights, but ultimately either you (the enterprise) or your customers will eventually need to respond to the ads for the vendor to make money.  Beware of the impact this model has on you (productivity, friction in a process, etc) or your customers (brand impact of ads, reduced value of your product, customer satisfaction, etc.). 

Gardening a Start-up

I’ve gone through a number of cultural transformations in various companies over the years and the process is one that always amazes me.  As I embark on my second year of gardening (a project that somehow fell into my lap after being initiated by my wife and kids), I’m struck by the similarities between what I need to do to improve the yield of my small patch of dirt and weeds and what is required to get the most out of a start-up team.

Thinking about the challenges presented by my little 12’ by 20’ patch of dirt helps to frame a lot of the challenges of cultivating the right culture in a start-up.  While attempting to not carry the analogy too far, here are some of my lessons on gardening a start-up:

1. Growth – I learned last year that rapid growth sometimes causes big issues.  Certain parts of the garden grow out of control and if not managed only yield stalks and leaves, and little fruit.  My tomatoes grew into huge bushes when all the energy went into the plant growing huge leaves and branches but very few tomatoes. In other words, unchecked growth can cause lots of work and expend lots of resources without a corresponding increase in value.  We need to constantly stay on top of the different parts of our organization to make sure the culture is evolving in a way that doesn’t create busyness at the expense of productivity.  The need to prune is also a constant.  Even during a high growth period, we need to remove what isn’t contributing to a better yield – whether that is people or a dis-functional organizational structure.
2. Downsizing – My friend put in a huge garden his first year, and then realized he didn’t have the time to commit to managing it properly.  Most of it just went to seed.  The following year, he brought in his fences and downsized to something that was more in line with the time he could invest.  Most start-ups go through a cycle of ups and downs.  Hopefully, the downs are small blips that don’t require a major restructuring but the reality is that many of us face those major down slides at some point.  Recognizing the need to bring in the fences early, and understanding how to do that without trampling all the yielding crops is a science.  Some of the most amazing leaders I’ve seen were able to pull the trigger on change before there was a major issue.  They saw a pending disaster and headed it off, and did so in a way that preserved the valuable elements of the company’s culture.
3. Over watering or over fertilizing.  Sometimes we try too hard.  We think a little more of a good thing can’t be bad.  Unfortunately, our good intentions sometimes end up drowning fledgling plants.  One of the challenges of a start-up is knowing when to back off and watch what you’ve planted sprout.  If you have good people and they are in the right roles, sometimes you just need to get out of the way.  Make sure they know the resources available to them and what the vision is and then stand back and admire the fruit they bear.
4. Market Dynamics – Sometimes a garden doesn’t yield because the eco-system just doesn’t support growth.  Maybe you are farming pineapples in Maine (or in my case you accidentally sprayed round-up instead of fertilizer in a corner of the garden).  This is perhaps the hardest situation to deal with but often the most obvious.  This isn’t about the people; it’s about what you are doing with them.  If you have a fundamentally flawed business model or value proposition, the right thing is sometimes to step back and re-trench.  You might have all the tools to be the next Facebook, but you are trying really hard to be the next HP.  Or maybe you have the right tools to be the next HP but the economy and business conditions just don’t support a second HP right now.  It’s hard but sometimes starting over is the only answer.  The trick here is to recognize if it is truly the market dynamics or really your execution.  In situations like this you have to look at shaking things up.  Look at modifying structures, responsibilities or incentives.  You might not need to over-seed the garden with grass, just shock the system a bit.

The trickiest management challenge, but the most beneficial, in any organization is people.  If you do it right you can navigate through any drought.  If you do it wrong, even the best of conditions can result in barren ground.

Patent Reform... Feeling the Pain

I've had the unfortunate experience of being both sides of the patent fence - defending IP and  defending claims of infringement.  The experiences left me both frustrated and with a deeper understanding of the complexity of patent reform.  After many months and years of struggling with legal nuances and arguments that have nothing to do with the true validity of a unique invention claim, the results often leave both parties with a sense of empty accomplishment and a question of "isn't there a better way". 

Spend anytime in the patent world (sorry if you've had to) and you'll quickly realize that the one thing the current system does really well is perpetuate attorney billing hours.  The patents themselves are written in a language that sounds like someone from the 18th century was dropped in and asked to explain how a silicon chip works.  Only an expert can interpret the real intention and meaning of the claims.  The process application process itself takes an extremely long time and the results are ultimately very dependent upon the individual reviewer in the patent office and the amount of time and treasure you are willing to invest in making your argument. 

Once a patent is granted the process of defending it begins.  The decision to pursue a patent infringement case is not easy for a small company.  Large companies may simply assign some of their corporate attorneys and dispense with any business discussions at all, but for most companies the reality is a delicate dance to see if there are better options than a costly legal battle.  What IP does the "offending" company have of interest?  Will they counter-sue as a defensive measure?  Is it possible that a partnership can be crafted that both parties will be happy with?  Should we just ignore it and focus our limited resources on winning in the marketplace?  If so, do will it be even harder to defend the patent in the future?

Although fraught with issues, the patent process does serve a very valuable purpose.  The frustration involved in the patent application process pales in comparison to investing untold hours developing a unique product only to have a later follower blatantly steal the concept and profit from it.  Without a method for protecting IP there is no incentive to make the initial investment in a new invention that may ultimately fail in the marketplace.  It's kind of like the inherent flaw of socialism... why take all the risk and do all the work when you can let someone else and you share in the benefits?

I hate to lay out a list of challenges without offering some solutions, but this is a tough one.  Here are some concepts off the top of my head:
1) Initiate a peer review process before patents are issued.  Similar to the collaboration in any standards body, maybe a 30-day open comment period is appropriate.  If the patents were effectively tagged and indexed you could easily subscribe to areas of interest and comment on patents that in your area.  A ranking similar to those used in many social media sites could be used to score and prioritize comments from those in the industry from "yahoos".
2) Eliminate patent trolls.  Trolls are the bane of any true inventor.  If patents had some requirements around commercial viability or implementation periods, many legal trolls would be eliminated.  If a commercially available offering has not come out of a patent within some period of time, or if it is not held by a company clearly in field related to the patent there could be some accelerated expiration clause. 

Innovator’s Dilemma: Our History Determines our Future

I have a cool job.  I get to spend time with a bunch of really good folks (those in the public safety field are great if you’ve never had a chance to meet with them), listen to their challenges, and figure out if we can build something to solve their issues.  Sometimes I can’t figure anything out, sometimes I can’t figure out how to do anything profitably, and once in a while we end up with a cool new product. 

Over the last couple weeks I’ve had a number of meetings that have really got me thinking about the prism through which we innovate.  Each of us looks at challenges through the lens of our experience.  In my meetings what struck me was how much that lens can bias or even obscure how we think about solving a problem.  Consider the music business.  The “value chain” consisted of musicians, producers, record labels, radio stations, promoters, and others.  Each of these players works to optimize their piece of the pie. Then suddenly a tool comes along, let’s call it iTunes, that changes the playing field.  The musicians realize they have a more direct means of distributing music, and the value chain changes drastically.

I’m not in the music business, but I’ve seen this trend repeated time and time again. In fact, it's possible I'm repeating the trend and don’t even realize it yet.  The challenge is that we are tainted by our experiences.  Every day I speak with public safety executives.  Every day I work on the same technology platform with the same people.  My viewpoints are biased based on what I experience.  I think about solutions based on the vantage point to which I’ve been exposed.   

Lately, as I’ve met with folks in my industry who create solutions targeted at other parts of the value chain, I’ve wondered why they don’t see things I think are so clear.  The reality is that my vision is only clear when seen through my lens.  Traditionally, I’ve always thought that listening to the customer was the best way to innovate.  I still believe that is true, but have now grown to realize that to truly innovate you need to make sure your definition of the customer encompasses all parts of the value chain or you risk not being part of that chain in the near future.