First Mover Disadvantage

One of the interesting themes discussed at TechTalk in association with our Investment Forum in Sheffield yesterday was that he who dares doesn't always win. Being first to market can mean you do all the R&D, validate the idea and educate potential users only to see the competition eat your carefully prepared lunch. Equally, being best technically doesn't necessarily equal success either.

As Lee Strafford emphasised as he spoke about his success story at Plusnet, route to market can be a real differentiator when it comes to execution. Stuart Green CEO of ZOO Digital warned that while you are evangelising about how beneficial your innovation will be to users, potential competitors will be readying themselves to shoot arrows in your back. And Steve Barnes, CEO of Infoserve reminded us that history is littered with those that tried first and failed or thought being (second) best equals success. Oracle didn't have the first relational database and VHS wasn't the best video technology, but each ended up the 800lb gorillas in their respective markets.

Being at the bleeding, rather than the leading, edge can leave you exposed if the market or infrastructure just ain't ready. Equally stealing a march on the competition is what innovation is all about, so this all has to be finely judged. Being first or best certainly isn't a prerequisite for commercial success.

There Be Dragons Ahead

At the Business North West event, Doug Richards of Dragon's Den fame gave a inspirational talk charting his ups and downs (yes even he has them!). Mainly anecdotal, but some of his take home messages that particularly resonated with me were:

1. Luck and serendipity plays its part in any successful venture; the path to greatness is not deterministic. Deal with it.


2. Don't only listen to those that have only tasted success; they are the exceptions not the rule. Also take council from people that have tasted failure as well. Inductive learning requires negatives as well as positives.


3. Yes, have a cunning well thought-out plan but be prepared to deviate from it as necessary (recognising this is not what funders necessarily want to hear): The reality is that you have to be flexible and opportunitistic (which is what the big boys aren't, so you have the advantage).


4. Cash and share price are not equivalent currency: Market Cap ain't worth anything until you have exited with money in the bank.
   
5. Leadership is about enpowerment. "Ask for my forgiveness not my permission". The founder/CEO should strive to be operationally redundant - he or she is generally not replicatable nor reliable. Surround yourself with people more able than you!

Pile It High...

At BarCamp Leeds last Saturday, Dean Saddler CIO at PlusNet evangelised about how you can build a web-based applications quickly and easily and one of the tricks was to repackage and reuse the same underlying technology in different market niches and applications.

His take on monetisation was that if you have been smart about development, you only have to charge sensibly and adopt a subscription model to take market share from bloatware providers charging perpetual licence fees (where have I heard that before?). He also emphasised that his development plan only extended as far as the next round of features that users had requested. Sounds like the whole concept of component reuse and evolutionary development has finally caught up with web designers!

Not sure I totally agree you can produce something of any substantial worth so cheaply - even if you outsource development to China - but the idea that you have to work smart, reuse components, adopt incremental development strategies that keep you close to the users and offer something significantly better and cheaper than what has gone before is undoubtedly true.

Yorkshire Means Business

Nice to see former Yorkshire Post Business Editor David Parkin's new venture hit the streets (OK its virtual equivalent!) this week. http://www.thebusinessdesk.com/ aims to bring news, information and events about and for the business community based in Yorkshire. Needless to say I have signed up for news alerts and it will be interesting to see how this venture progresses versus more traditional publications, not least the YP!

As with my previous post on monetising online communities, the key to such a venture will be how to produce content at reasonable cost and in the business model who pays for what, when. I am sure he has done his numbers -particularly as Colin Glass is his Finance Director!

The Second Bounce

Ronald Cohen of Apex fame argues in his new book that the everyone can see the first bounce of the ball; it's the second bounce that is uncertain. And it is only in situations of uncertainty that significant investment gains can be made. Well I beg to differ - until you bounce the ball once there is the highest degree of uncertainty - one can only guess at the outcome. Once you have seen a bounce, you have data to predict pretty well what the next bounce will do and even fix things that fall flat!

Releasing Version 1 of a product into a market is always the most uncertain stage. Once users have something to play with they can give you feedback and the whole market research process can be brought to bear on the problem. When all you have is ideas, hand waving and hopefully some passion and a committed team, most potential users will still just stare back blankly at you - they ain't good at looking at a blank canvas and saying what will make it a masterpiece.

That thought dovetails pretty nicely with a talk I caught on the first bounce at BarCamp Leeds on Saturday on the futility of trying to predict the future. Sure, it's hard but unless you can make an educated guess at where things are going how can you ever hope to align the technology idea you are working on with what the future holds. That said, the prevailing view was that the best way of predicting the future is to implement it!

Monetising Digital Communities

With the rise of Web 2.0 promoting participation, sharing and collaboration it still requires that someone pays for it all. Advertisers may now be able to target viewers by their individual profile and as pay per view gives way to pay per response the theory goes that communities means money. Subscriptions are another way of generating revenue and the great thing about online is that you can collect this little and often or integrate a smorgasbord of premium services at a price, while maintain the ethos of everything being free at the point of delivery. Taking a percentage requires an online transaction, but for some communities this may be part of the business model. How to gain users is always the first challenge, but how to turn users into revenue is always a bigger one!

The likes of YouTube, MySpace and Facebook (Microfoft paid about $500 per user for their stake) can put of the day they make a buck (although with the fikkle nature of consumers they might need to hurry it up) , but for others the balance between building a community and getting paid in something other than spirit is a little more pressing.

Shifting Sands

Project Sahara is a new initiative which I am sure Lee Strafford will be plugging when he speaks at our Techtalk 2007 event in Sheffield on the 28th November. He is seeking to create a community of Web 2.0 companies across the North of England and provide a support infrastructure to maximise the potential of their early stage ideas. This will potentially incorporate physical incubator space, mentoring and all the other things an early stage business needs. In addition, they are seeking to develop a set of online tools that members of the community can contribute to and ultimately benefit from.