CollaboRhythm and I'm Listening

Video for two very cool projects out of the New Media Medicine group at the MIT Media Lab.  And some excellent acting by my friend Nicole Prowell.

New Media Medicine from nextlab on Vimeo.

Howard Anderson says goodbye to venture capital

A must read in the Technology Review.

Howard Anderson, the founder of Battery Ventures and YankeeTek gives five reason why he's getting out of the venture game.

New Product Spotlight: The world's best pickle mix...

One of the nice things about having a blog with a decent sized readership is I can occasionally plug a product that I like and hope others buy it.  If the product does well and gains distribution, then I don't have to go on a quest (in this case to the Cambridge St. Whole Foods to get it).  Or at least they stay in business so I can order it off the web.  

Plus, a great topic in entrepreneurship is new product marketing.

So onto the plug.  Those of you who know me well know that I love pickles.  

Well, I think I have found a truly world class jar with Root Cellar Preserves' Sweet and Spicy Pickle Mix.  It's just the right amount of sweet.  It's just the right amount of spicy.    It's all-natural.  I practically drank the brine.  I'm actually saving it to dip cucumbers in later this week.

I tried to learn a bit more about Root Cellar and it turns out they are in Wellesley, MA where my family has owned a restaurant for 31 years and still live.   And it's a double bottom line business, which is just great - half their profits go to preserve early American homesteads.   I love this - I encourage you to support the brand.  I don't think you will be disappointed.  

Here's a full list of where you can get this amazing pickle mix.  Going to make a run this weekend to pick up a few more of their products.

Demand Aggregation in Cloud Computing

This is a slightly enhanced version of a section of more detailed post I made about the cost structure of cloud computing.  I noticed from incoming Google searches that there is a lot of interested in the demand aggregation side.  If you use this, I hope you will cite it.  

Key to the value proposition offered by utility computing is the ability to share resources across multiple users, or the principle of demand aggregation. If the peak computing requirements of a customer are not correlated, then the total peak demand will smooth out.   

Demand Aggregation Example

G.A. Paleologo’s explained in well in his paper paper. He illustrates the phenomena with a simple example. Imagine a customer whose demand oscillates between 5 and 10 service units per day, with an average of 7.5. If the customer were to build their own computing system, they would need 10 service units per day to meet the peak demand. The average utilization of the system is 7.5/10, or 75%. If there are 8 customers running the same system with the same demand profile, a utility can aggregate them. The total demand would be smoothed, and the capacity required would be 66, to serve an average demand of 60. The average utilization is 60/66, or 91%, a 16% gain. (Paleologo, 2004)

In modeling businesses that do have variations, there will be a gamut of profiles. Obviously, a relatively established business will differ from a new business (for example, a venture-backed startup). In stochastic modeling, the potential large variation in demand that goes hand-in-hand with some of the dynamics of the Internet must be taken into account. Established businesses, as well as overall aggregate demand, will have some cyclical profile to the demand curves.

Customer Demand Variation

Joe Weinman suggests a few other customer profiles on his ComplexModels.com website that can help smooth out demand.   Joe is one of the best thinkers on this topic and I recommend you read his work.  If nothing out, check out the 10 Laws of Cloudonomics article at GigaOM.

Gamer Demand: Weinman suggests gamers will tend to have day jobs and will be more active nights and weekends. This means that it will make sense for companies that are building high capacity to support enterprise processing that will primarily happen during the work day to recruit recreationally oriented customers to help smooth capacity and increase utilization during non-working hours.

Event Demand: Computer power providers with extra capacity can single out event demand. Examples are a concert, a one-time promotion or perhaps an annual event. These users should have a relatively high willingness to pay, since it makes little sense to deploy a large scale hardware solution for a single event.

Constant Demand Profiles: A substantial portion of the demand for computing services will have constant demand profiles without the peaks and valleys of typical business users. These users include bioinformatics processing and other scientific simulations that will run around the clock. Sellers of utility computing services would do well to segment these customers out and offer them lower prices. First off, since their demand is easily forecast and stable, the value proposition of being able to smooth out demand peaks does not apply to these customers. 

As such, their willingness to pay should be lower per unit of computing power. They will still benefit from shorter time to deployment, disaster recovery and other benefits of utility computing. These customers offer a significant potential advantage for utility computing vendors – they will provide consistent utilization at lower demand times of the day and year. In many cases, they may be able to shift their usage to maximize capacity utilization (for example, some customers may need X units per day performed and are indifferent to whether there is one processing node running all day or a number of them running in parallel during off peak hours).

Flexible Demand: One other offshoot is that enterprises that can design their systems so that their demand for computer power is flexible should get better pricing as the economics work out.  I think CTO should be thinking about how to do this.  For instance, batch jobs that are not time sensitive can be run for cheaper at 3 AM than if they are processed constantly through the day.  If you are running millions of transactions, this could save your company a lot of money.  Just another idea to create value.  

John Landry from Lead Dog Ventures on Lessons from his Time at Lotus

John Landry, CEO of Lead Dog Ventures, and previously CEO of Lotus came in to talk to us about Lotus' role in the evolution of the enterprise software business.  It was a pretty interesting talk, some of which I don't feel comfortable posting in a public forum.  Here are some of the lessons from class.

Know what strategic partners want from you and whether their strategy will work: Companies who partnered with IBM and were asked to build OS/2 software before Windows got killed. 4,000 sales reps. selling your software for an operating system that no one uses is worse than 3 sales reps selling on the right platform.  

The key to software is integration: Software has to be able to talk to other programs to really create an effective ecosystem. Lotus was always behind in integrating with the operating system once Microsoft took that office, a major competitive disadvantage. Speed and quality of integration are key drivers for a enterprise software company success.  

Co-location is important for software projects: Communication is essential for integration. Lotus made a mistake putting its Iris group, essential to its strategy 25 miles away in Westford. That slowed integration speed and created two separate corporate cultures that didn’t communicate well.  

“Empowerment is a zero sum game”: If you empower someone, you’re likely taking power away from someone else. So think about who you want to have control.
Innovation-focused spinouts must be structured properly: Many companies these days are using spinouts to innovate. The thought process is that creating these small entrepreneurial shops permits quicker innovation. However, with Iris, Lotus did not get the incentive and cultural structure right to meet their goals. The organization needed innovation, but it needed to be integrated with their existing products. Setting up a separate company in a separate location did not fit that goal.  

Being evil can be a business model: Several of the industry veterans who were in the class pointed out how effective Computer Associates was in acquiring software companies whose clients were locked in. CA would then cut costs and treat these clients terribly to improve margins, but since the clients were locked in. 

John Landry Biography

With 25 years of experience building software and software companies, Landry manages Lead Dog Ventures, a disruptive new-age business accelerator, providing emerging technology enterprises access to a well developed network of intellectual, relationship and financial capital. Landry currently serves as Chairman and CTO of one of Lead Dog's largest investments, Adesso Systems, where he led the design and development of Adesso's revolutionary distributed applications platform. Additionally, Landry has served as chairman of various companies including Agility Systems, Narrative Communications, Anyday.com and Adjoin Solutions.

Joe Weinman on the economics of cloud computing

Joe Weinman's 10 laws of the economics of cloud computing. Joe is really one of the best thinkers that I have found on this topic.
For more reading, check out my post from awhile back on the cost structure of running a cloud.

How to dream up new ideas: a talk from Sung Park from Umagination Labs

I attended and enjoyed this talk on how to create innovative talks by Sung Park from Umagination Labs. Check it out if you have a few minutes.


Umagination Labs: Innovation Techniques presentation from nextlab on Vimeo.

Marsh Carter on defending your company against a hostile takeover

Marsh Carter, the former CEO of State Street, was faced with a takeover attempt from Bank of New York that he felt had to be defended.  In class today, he discussed some of the strategies that he utilized to keep his organization unified and fend off the takeover.

• Use a non-approval strategy if the offer is not even a consideration: No negotiations or contact with the other party.  There is one issue with this strategy - it may open you up to a lawsuit if shareholders feel you are not representing their best interests and ignoring an offer that offers substantial value.  
• Prepare to communicate to your shareholders how you will create more value: If it goes to the shareholders, you must be able to persuade them that you can increase the share price more if they vote for you to retain control  
• Provide clear guidance to your negotiating team: Executing on a strategy like non-approval requires clear instructions from the top down on what exactly to say and do.  
• Work to increase stock price: Focus on operations, merge business units if necessary - this makes it harder for shareholders not to support you, and more expensive for the potential acqurier to buy you.
• Poison pills aren't easy: They require shareholder approval and this is not easy.
• Take advantage of your corporate structure and classification: State Street was and still is a Massachusetts Commonwealth bank, meaning state banking commission must approve any acquisition.  This means that the hostile acquisition must have material benefit to the residents of these state to be approved.  State Street was and still is one of the biggest and best employers in Massachusetts, with an 85% university educated workforce.  The state wouldn't let go of these jobs without a big fight. A great lawyer can be of great value in understanding these types of issues. 
• Prepare in advance for crisis: Take classes that prepare you for stressful situations, perform "war game" type simulations
• Get communications right: Carter and the State Street board had a small, expert communication firms manage all statements to make sure they were tuned perfectly.
• Set clear objectives for your organization: Everyone in the organization should know what they are working towards and why it is important for the organization to remain independent.
• Manage your board tightly: Carter received a tip that BNY was going to call their weakest board member and try to win him over and get him to speak up at the next board movement.  Carter knew who the weak board member was and moved at the next meeting to quash any board dissent.
• Consensus management whenever possible with your top 25 managers: The challenge as a CEO is to know when to put your foot down and make a decision.
• Protect yourself from the beginning: With the NYSE, share ownership over a certain percent can only vote a half share (20% ownership can only have 10% of the voting rights)
• Set up a way of controlling rumors:  State Street had a rumor control number that employees could call to find out whether they were something was real.  This allowed management to deal with any heresay quickly.  
• Your motivation as a CEO cannot just be money: Protecting your company and people should be one of your values.  The MCI folks sold out to Bernie Ebbers when their stock was around $20 for a $38 offer.  When you're a Fortune 500 CEO, it shouldn't be about the money. 
• Life balance: It should be a three legged stool with a balance between work, family and a strong outside interest.  The fourth leg can be religion for those who are into that.  This is essential to be able to deal with the stress.
  

Marsh Carter Bio

A leader in the banking industry, a Marine Corps officer, and a decorated Vietnam veteran, Marshall N. Carter took over as chairman of the New York Stock Exchange (NYSE) in April 2005. Carter’s 25 years in banking include a nine-year stint as chairman and CEO of the State Street Bank and Trust Co. and 15 years with Chase Manhattan. 

A veteran of mergers such as Chase Manhattan’s 1984 acquisition of Lincoln First Bank and a key player in State Street’s evolution into a global leader in the financial services industry, Carter has witnessed the challenges first-hand when a company grows more than six-fold under your watch. 

As NYSE chairman, he is transforming the Exchange from a company with “85 percent market share in a product sold one way” to a company with an expanded product base and widened global reach. With characteristic understatement, he adds, “We are in a global industry.”

9 Pricing Strategies for Creatives

See my post over at the Creative Ledge that discusses out of the box pricing strategies for creatives.  

Six Case Studies for Education Entrepreneurship

Here is a slide deck I put together with three colleagues (sorry about the font, Scribd couldn't match it exactly) that covers six case studies we looked at when thinking about how to create a sustainable plan to launch new schools in India.

The cases covered are:

Sistema Educacional Brasilero (Brazil)

University of Phoenix (United States)

Mediterranean Business School (Tunisia)

Southern New Hampshire University (United States)

Ashesi College (Ghana)

University of California Extension (United States)

Distance Learning - Education Entrepreneurship Case Studies

Publish at Scribd or explore others: Presentations & Spre schools brazil

Marina Hatsopolous: Lessons from founding Z Corp

Marina Hatsopolous, the founder and former CEO of Z Corporation, came to speak to our CEO Perspectives class today. Here are some of the lessons I gleaned from her.

• With pricing, what's big to you is not big to Fortune 500 companies. Don't focus on a $20,000 difference in the cost of a capital investment, but rather the way you add value.
• Additionally, don't apologize for being new. Again, focus on the value that your product generates for a customer.
• New products that change the process of how companies and people work require a lot of education. Sales cycles for these products will be longer than you expect, and the cost of building an educational work force is high.
• Cost of development for complex products will tend to be higher than you expect.
• The cost of development and manufacturing quoted to you by the scientist will tend to be lower by at least an order of magnitude. Marina was quoted $1,000 by the scientist for cost of materials, it costs closer to $15,000 to create the product.
• Understand how your technology is REALLY different. Z Corp discovered that it was really the chemistry of their powders that was really a differentiating factor.
• Key question: Can you exploit the window of opportunity within the life of your patent?
• Demo parts work better when you can use your clients products. Use custom marketing tactics whenever possible with new and innovative products.

Marina Hatsopolous Bio

Ms. Hatsopoulos was the Founding CEO of Z Corporation (www.zcorp.com) from 1994 through its successful sale in 2005. Z Corporation is a market leader in 3D Printing, a technology used to produce physical prototypes from design data at very low cost and high speed. At the time of sale Z Corporation had revenues of $30 million and a strong history of profitability. With 125 employees, Z Corporation was the technology leader and had reached a strong #2 in market share within its industry.
She is currently serving her fourth year on the Advisory Board of the Nantucket [technology] Conference and is also on the Board of Trustees of the Buckingham Browne & Nichols School in Cambridge, MA.
She was a Director of Contex Holding, the $100 million leading manufacturer of large-format scanners and software, from 2005-2007. Prior to that, as Chair of the Committee on Finance and Investment of the American Society of Mechanical Engineers (ASME), she oversaw the budgets and investments of this 120,000-member organization.
Ms. Hatsopoulos graduated with a B.A. in Pure Mathematics and a B.A. in Music from Brown University in 1987 (Phi Beta Kappa, Magna Cum Laude, Mathematics Prize, and Faculty Fellowship). She received her M.S. in Mechanical Engineering from MIT in 1993 (Sigma Xi).
Background

10 points on how to deal with a crisis from Jim Foster, CEO of Charles River Laboratories

Jim Foster, the Chairman, CEO and President of Charles River Laboratories came to our Managing Adversity class and talked to us about how his company dealt with a crisis at his company having to do with a contimination of one of their best selling products.  I'm especially excited about this class - it's taught by two former CEOs, Howard Anderson and Peter Kurzina, and it fits into my training (I'm a Certified Business Continuity Planner).  

These were 10 takeaways:

1) Integrity is essential.  You want to handle situations the way J&J handle the Tylenol poisoning crisis, not the way Merck handled Vioxx.  

2) Take no short cuts in ensuring quality - Pressure from CRL's parent at the time, Bausch and Lomb, had caused cost cuts that reduced CRL's safeguards at the time.  Foster took accountability for this, told B&L that they needed to invest in the business and got the problem fixed.

3) Always protect your customer

4) Maintain open and efficient lines of communication with your customers and employees

5) No auto-pilot - It should raise an alarm if any employee says "This business is on auto-pilot".  Prevention must be practiced - anything on autopilot will eventually crash into the side of a mountain.

6) Think twice about retribution; no scapegoating of employees - Foster as CEO took the blame himself in the case.  This built employee loyalty and brings us to the next point...

7) Let employees focus on fixing the problems rather than losing their jobs.  In times of crisis, you need their hard work and loyalty the most.  

8) The mark of a great company is how it deals with adversity.  CRL's transparency and honesty with its customers actually helped the company increase its reputation.

9) Responsiveness to your customers is key.  

 

10) At the end of the day, it's all about your people.