Startup evaluation

Having worked in an entrepreneurial environment in the past, and wanting to return to the innovative, creative, and fast-paced high-tech startup world, I have been giving some thoughts to how to evaluate opportunities that will present themselves in this space.  This thought came about from talking to colleagues who have worked at or are currently involved in new ventures and the wisdom gleamed both from my as well as their experience.  There is a lot of new venture activity in the analytical BI and CRM space where I am positioned, especially with SaaS analytics companies and new DWA vendors.  

The issue is not in finding companies, but more so in picking a winner...  In my venture evaluation, these are the criteria that I believe would be the most valuable (feel free to debate):

1. Venture funding partners... Who in the venture capital market has bought into their business plan and are supporting them with capital and leadership?  What are the reputation of these firms and the companies that they fund?

2. Leadership team... What is the experience and reputation of the executives and founders of the company?  Have they succeeded before (like Brett Hurt of Bazaarvoice who founded CoreMetrics)?  What is their experience in the space (such as Foster Henshaw of Dataupia, who founded Netezza which is now public, profitable, and has revenues of over $150M/year)?  What type of people are they to work for?  What type of corporate cultures do they incubate?  

3. The technology... Is the technology differentiated in a real and relevant way?  Is the value proposition compelling?  

4. Customers (tie with technology)... Who from a customer standpoint has bought into the venture's value proposition and put "skin in the game" to invest in it for themselves?  What has their success been with the technology?  

Obviously, all of these are relevant and important.  In addition, the order of consideration does depend on the amount of risk you want to take... for example, customers may be #1 if you're more risk averse... and leadership team before venture capital if you're more of a risk taker.  I have seen some interesting ventures in the market (a couple I listed above) and it'll be exciting to see what their future may be... 

Mass Blast no more... but how?

Talking to a number of folks in the CRM and digital interactive marketing spaces over the past months and weeks, the ancedotal truth that the old "mass blast" form of marketing is either on its way out into extinction or may already be there.  I think that there may be a place for it in some way (TV, radio, print advertising that is) but it is no where near the force that it once was in the brand managers' world.  

That's the bad news... the good news is that with all of the digital media outlets that we have today, there is a plethora of data out there for marketers to mine and gain insights into segmented or even one-to-one marketing.  The better news is that there are technologies out there today that allow companies to store and harness that information (data warehouse appliances, analytical toolsets in SaaS delivery, user friendly BI tools, plug-in application delivery mechanisms to user connection points, etc.), so in a sense a company can actually know you and market to you individually if they wanted to.  

But there's some bad news about that... This can (and does) creep people out.  Like, in a "1984" kind of way (the George Orwell book, not the Macintosh ad)... or think about how the billboards were talking to Tom Cruise's character in the movie "Minority Report."  Technically, something along those lines could be possible with the data and delivery mechanisms... the problem is that it is (or can be) a major invasion of a person's privacy if permission to market has not been given.  In a harmless way, people like me are clearing spam out of their inboxes because of all of the marketing aimed at us based on some action or actions we have taken online... in a less harmless way, people start to feel uncomfortable and start bailing from good services that they once trusted.  

The key for a marketer in this world, I believe, is gaining permission to market to a consumer... to engage in a dialogue with them that feels more like a "pull" than a "push."  In a sense, consumers that trust companies they do business with and engage them on their terms ("market to me on my terms") will become raving fans and will be more loyal.  The trick is how to obtain permission... because we have the tools and the technology.

Now, we need to earn the trust.... and not betray it.  

Food for thought. 

Is John McCain getting Web 2.0 on us?

For anyone who had an opportunity to check out the clips from the Saddleback Forum on the Presidency on Saturday (or the replays on Sunday and/or on CNN.com), you may have been intrigued by some of the answers provided by the candidates to Rick Warren's questions.  

One that particularly intrigued me from John McCain was his final choice for an advisor for the "Who are the three wisest people you would rely on in your administration?" question.  His choice was Meg Whitman, the founder of eBay.  Hers is, in the words of the candidate, "one of the great American success stories." and also someone whose entrepreneurship has transformed the way that many of us conduct our business today.  In an essence, it was the invention of "social commerce."  

I believe that answer was not only strategic on John McCain's part (what public comment of a Presidential candidate isn't?), but also signaled a realization of the importance that technology, eCommerce, and social networking mechanisms are playing in the U.S. economy today.  His response to leverage her experience signals that he believes that this is the direction that we are headed.  Not knowing whether Senator McCain knows how to Twitter or not, he does campaign on LinkedIn and Myspace and is obviously a little bullish on the future of web-enabled businesses.  

Food for thought for today... 

Starbucks $2 Receipt Special

As many in the Retail (and hospitality) industry know, Starbucks just recently announced (and executed) their plans to start a loyalty program similar to the ones being deployed by grocery and general merchandise retailers. I'll be interested to learn about how they feel their success with the program is being, but a couple of developments are interesting:

First, every successful loyalty program has some sort of "carrot" that is offered to entice consumers to sign up for the program. Starbucks offered three "carrots" to its' caffeinated consumer base to motivate the sign-up. 1.) A free tall coffee once a consumer signed up. 2.) 2 hours of free wifi through AT&T per day for consumers signed up through the card program, and 3.) A free flavor shot for lattes purchased with the card (It's worth about $0.30 for each peppermint latte I get). I imagine that would entice a certain amount of participation, especially for those of us that like to work from coffee shops that hated going to Starbucks to pay for T-Mobile.

My action item now is to research what their participation rate is... more to come.

I'm curious though if their current "magic receipt" promotion is likely coming out of some of the consumer insights initially gleamed from the card program. For Starbucks and it's peers, there are generally 2 buying and usage occasions... the morning coffee rush which usually results in more sales of drip coffee (like Pike Place Roast) and the afternoon/evening occasion in which more lattes and frappucchinos are sold.

Now, the promotion goes like this... buy a drink in the morning and the barista at the counter will stamp your receipt with a mark that in essence makes your morning receipt into a "coupon" for a $2.00 iced beverage in the afternoon (after 2PM). Notice the synergy with the number "2" in the promotion. After 2PM, this receipt can be redeemed for a grande frap, iced latte, or Vivanno for $2.00 plus tax.

What I imagine the analysts in Seattle observed with this were: The people buying in the morning and the people buying in the afternoon were two different segments of consumers. A lot of people buying <$2.00 coffee in the morning weren't coming back in the "evening occasion" to get the $4.00 lattes, which are probably more profitable for Starbucks. The "afternoon" consumer is likely the "coffee culture" buyer that is pretty loyal to Starbucks anyways and is the "coffee date" type of person (I'm speculating here)... more of the Gen-Y or Millennial crowd. So, I imagine that Starbucks is attempting to entice the "morning consumer" to come and try Starbucks in the "after work" occasion and create a new occasion for them, realizing that many of them do not buy coffee after lunch (perhaps because of price). So, by making the after-work drink the same price as the "work drink" they may get a greater share of wallet and more repeat business from them?

It'll be interesting (for the Starbucks folks) to see if this promotion creates some "sticky" behavior there. What will the drop off from the sales spike be after September 2nd (when the promotion ends)? Will the professionals they enticed with $2.00 iced drinks come back and consider Starbucks the "new non-alcoholic happy hour?" or will they return to their pre-promotion behavior?

It is a good idea, at least from my perspective. Perhaps, however, I'm just enjoying the $2.00 drinks :-).

Self-Service and Real-Time Analytics

As I had written before, the consumer-facing market is migrating into more and more of a self-service model with the prevelent use of ATMs in banking, self-checkout and self-ordering devices in Retail and Hospitality, and the growth of eCommerce online merchants. This channel obviously provides the consumer and the merchant with some advantages (convienence, efficiency, etc.) but it has one notable disadvantage. This disadvantage is obviously the lack of person-to-person interaction in these exchanges. In such an environment, how does the consumer feel that she is "known" and the merchant able to conversely "know" the consumer?

In businesses where self-service works well, the merchant has to "know" the consumer based on her previous interactions with the company. What are her tendancies, history, affinities, etc? Based on the occasion that she is shopping within, what type of merchant offers will be relevant to her? This type of knowledge requires "real time analytics" in the sense that the shopper's behavior is analyzed and her tendancies are known... and then based on the predicted shopping occasion (fill-in, splurge, pantry filling, convienence trip, etc.) can the merchant offer her an incentive to make that visit more profitable for the merchant and more valuable for the consumer?

Obviously, in the eCommerce world the merchant will know through the contents of the consumers' shopping basket and her session clickstream behavior. Is this possible in a brick and mortar world? Is it possible without real-time basket information? Possibly... but this would require that the shopping and occasion data is available and the patterns are analyzed on every customer... something that requires sophisticated analytical CRM tools and an active data warehouse environment with the horsepower to support it (obviously the merchant needs to know in some way when the consumer is interacting with them). In the banking world, this can effectively be handled through the ATM device similarly to the way Amazon would offer a next best offer from a purchase.

However, what would the ROI on consumer marketing efforts be if, like eCommerce, you could analyze and dynamically offer value-added services in the midst of the shopping occassion... at the point of purchase instead of the point of sale? There are some mechanisms for doing that today, but they are by no means segemented. There is one retailer that is experimenting with self-scanning technology within the store... if this could be married to the offer and relationship management technology it could be a huge win for them, both in terms of understanding their shoppers but also in marketing effectively to them on their terms.

Keeping it light today

A little bit of trivia: Did you realize that this year, the iTunes Store became the #1 seller of music in the United States? Over 5 billion songs have been downloaded from the iTunes site since it's inception in 2003.

Those are a lot of $0.99 plays. Is the compact disc format on its way out?

http://en.wikipedia.org/wiki/Itunes_store

The growth of self-service

Time Article Link: Time Self Service Article

I thought that it was very interesting back in 2007 when NCR and Teradata split off that the young, aspirational, motivating CEO of NCR Bill Nuti was chosen to head up the new NCR versus move over to the Teradata division spin-off to drive the growth of enterprise intelligence. Seeing where he is now and the aggressive repositioning of the "National Cash Register" company into the self-service juggernaut, the move is making sense. Especially as this market is poised, based on most analyst reports, for incredible growth which NCR can take advantage of if it's positioned to uniquely meet the market needs.

Self-Service in commerce is prevalent and hits all aspects of our daily lives. Obviously, the first mainstream application was the ATM machine back in the '80's but with the growth of the Internet and Web 2.0, consumers are becoming much more comfortable with shopping and selecting services without the in-person assistance of a human being on the other side. This phenomenon is moving into the brick and mortar world as well as electronic kiosks and self-service checkout devices are becoming more common, with the trade off being between that personal service we love and convenience.

It's not always successful, but when it is (as companies like NCR, IBM, eBay, and Amazon.com would like it to be) the following criteria is usually met:
- Customer convenience is delivered
- The consumer trusts in the outcome of the transaction
- The consumer continues to feel an affinity to the merchant's brand
- The merchant is able to use the channel to offer value-added services that consumers value
- ... and even more interesting, if the devices include personalization, then companies can deliver unique offers through Relationship Management technology at a key selling opportunity

For instance, my favorite self-service application may be the Papa John's online ordering tool. Through it, I find out about specials without having to sift through my mail, order quickly, and usually get the pizza at my house quickly. It's worth checking out.

The Analytics ROI Question: "Which came first, the chicken or the egg?"

Everyone has likely heard the riddle: Which came first, the chicken or the egg? I do not know what the answer to that question is, and perhaps it is more a philosophical one to assess a person's position on origins...

Having spent a signifiant part of my life in the business development world in the Enterprise Data Warehousing market over the past couple of years, the question is also generally heard but in a different form: "Who takes credit for the ROI on my Business Intelligence project, the data warehouse infrastructure or the analytics/applications that make sense of all of this data?" In the sales world, this is an important question because it determines the strategic importance of a vendor's products. Of course, that strategic importance ultimately determines the vendors' share of wallet with that company and over the long term in the industry. Money talks. Therefore, like a good politician every technology is out there to take credit for the analytical ROI.

For an analytics or application solution like SAS, Retek, Siebel, TRM, i2, SPSS, Microsoft analysis tools, etc... the value is obvious. The deep analytics and decision-making capabilities enable companies to drive to decisions and answers they were not able to reach prior to having those tools and applications in place. Without the decision-making intelligence, no decision, no benefit, no ROI.

However, the database and infrastructure vendors also have a case to be made... especially the MPP (Massively Parallel Processing) database technology vendors like Teradata, DATAllegro, and Netezza. Without the ability that the database engines provide to crunch through terabytes worth of detailed data at the atomic level, the analytics engines that depend on this machinery would not be as effective. Therefore, they may say: "Not too fast, you're delivering that value on our nickel. We should take credit here."

Interestingly enough, only recently the BI market was relatively fragmented. Application vendors, BI vendors (Cognos, Business Objects, Hyperion, Microstrategy, etc.), and the database infrastructure vendors (Oracle, Teradata, IBM, etc.) were all in their own camps. And as such, each vendor sold on the merits of their own tools in this interdependent technical environment. Today, the industry is starting to consolidate where BI and application companies are being bought up by larger infrastructure players (IBM, Oracle, and SAP... who is taking the analytical market more seriously now). As such, it is now possible for a company to get all of their analytical needs met by a single vendor and gain a complete picture of the benefits and returns without necessarily having to ration the cost/benefit among tools offered by different vendors. Of course, this is being said as the ROI evaluation process provided by technology vendors is, at the end of the day, a marketing and sales function rather than a consulting or financial evaluation function. In this world, having a vendor that can offer a single package that will deliver all of the goods will be to your benefit.

However, while there is consolidation in the market, all of the tools are (as far as I know) compatible with all of the major infrastructure platforms. Additionally, the deep analytics powerhouses remain independent (I'm thinking of SAS here) so there will be tension in the ROI credit discussion. Yes, even with all of the consolidation this is a very competitive market... especially with the DWA (data warehouse appliance) significantly lowering the cost for performance for infrastructure which is a great thing for IT staffs with limited budgets.

For an industry poised for growth, and a market ready to leverage those capabiliites, that is a good thing.

Barack Obama's Fundraising Coup

We still have 2 1/2 months until the US presidential election's outcome will be decided, and it is yet to be decided. However, one lasting change is going to resonate from this year's political season.

Traditionally, conservative Republicans and "establishment" candidates have dominated in the political fundraising wars, generating millions in donations from wealthy contributors and corporations through lavish fundraisers and photo opportunities. Of course, those aspects of fundraising continue to exist in today's political season, but the winner of the fundraising battles may surprise... as well as where a lot of his support is coming from.

Barack Obama is neither an establishment candidate nor is he a conservative Republican. His platforms are highly progressive and he definitely aligns ideologically with the Democratic party. However, he IS the runaway winner in political donations this year, far ahead of rival Republican John McCain and fellow Democrat Hillary Clinton (who would be considered as a Democrat to be the establishment candidate). While donations have come from traditional sources for Senator Obama, a significant portion of his support is coming in chunks of $50 by online donations through the BarakObama.com website... a cumulative total of donations that netted him over $50 million in June 2008 alone. This is not an altogether new phenomenon, however, but Howard Dean was unable to finish after a poor showing in Iowa in 2004.

I imagine that in 2010 and 2012, we will see a greater emphasis on populist web support, donations, and blogging take hold in Presidential elections, especially if Barack Obama is elected in November. If you look at Mike Huckabee's website, you'll see some similar strategies as he continues to position his populist conservative platform to the party base and possibly positioning himself for another run in 2012 or 2016. He's deploying the same mechanisms to reach dissatisfied limited government /populist conservatives as Barack Obama is going after citizens longing for change in our political environment.

Additionally, it will be interesting to watch how the Web 2.0 enabled strategy plays out for Obama in the general election, as neither Bush nor Kerry leveraged these tools much 4 years ago.

Facebook for iPhone application

This past weekend, a friend of mine showed me her new iPhone 3G device. This is the first time that I have seen the new 3G "in the wild" and I of course started to play with it. My friend showed me not only the functionality of the phone itself (which is extensive... GPS navigation, integration with email, high quality photo, etc. - oh yeah, and it can be used as a phone too!) but also the Facebook for iPhone application that she downloaded for it. I browsed around for a bit and saw what was going on in my virtual world and saw my own profile on the device.

If I'm a marketer looking at this, and I'll be many including myself are, they are probably thinking to themselves: "Wow, this takes the social networking space to an entirely new level... 24/7 access through an iPhone (or Blackberry, there's an app for Blackberry too)... How can I use this to get the word out to my fans?" Social networking is, but may not be for long, confined to instances where a user is "at the computer." However, with the iPhone handy (this isn't an iPhone ad... I swear!) their Facebook and social networking gossip is only a button's click away which makes the medium much more real-time for the user. This could spell out opportunity for marketers that are smart about it.

... and I say "smart about it" because the consumers (including myself) who use social networking sites like Facebook are not the types that want to be overtly marketed to. Even though, as a marketing aficionado I love listening to/watching commercials, they usually go through my analytical, "what message/positioning are they trying to convey?" mind, versus the moldable consumer mind that most advertisers want to sit and be influenced through these 30 minute spots. I want to be sold on my terms, as do many in Gen X, Gen Y, etc..

Consumers today are much more independent minded in terms of commercialization than previous generations and the backlash on early marketing push efforts by Facebook is evidence. They want to be informed about products and services that they care about, but at the end of the day (and research supports this), they want to be advertised to on their own terms by trusted people like them. This spells out an opportunity for Facebook, Myspace, and companies that would partner with them, especially as the technology moves beyond the web browser and into the everyday "iPhone" device. Those companies do need to be careful... but if they are it could be very successful.

Especially since... people only watch commercials during the Super Bowl nowadays. For all other occasions, there is TiVO.

The tangled web of marketing

Remember 30 years ago, when a brand manager would have the following (perhaps a few more, but these are the main) options available to him or her?
- Television ad spots
- Radio ad spots
- Newspaper and Magazine advertisements
- Trade promotion dollars for endcap displays

Fast forward to today: Retailers have more power in the negotiating process than ever before, slick technologies like TiVO, the web, etc. are reducing (or possibly eliminating) the influence of commercials and print advertisements, and there are more and more devices out in the market by which marketers have options to position their products today.

Add to that, the ever-increasing influence of the online space... which has been growing double digits for many years and is pulling more and more ad dollars away from traditional media. The good news is that the web offers advertisers and merchandisers new means to market to, especially younger, consumers. Better yet, the web offers what traditional ad spots have not really been able to definitively provide, quantifiable metric-gathering ability by which to measure the Return on Marketing Investment... which in a world where marketing (and all expenses for that matter) is being increasingly scrutinized is a really good thing.

However, the not-so-good news is that the web, and especially now the emergence of Web 2.0, provides an increasingly complex number and types of channels available to use in the marketing mix. Paid search, unpaid search, website impressions, click-through advertising, email, affiliate marketing, social commerce, social networking, SEM, cell phone couponing... you get the picture. And I'm sure that there are more options than that. With options, of course, comes the risk of analysis paralysis... "Which options should I use?" "What's the latest 'new' thing?" "What am I getting out of this ad, really?"

In reality, depending on your target segments and the types of behaviors/actions you want to influence, any one or a combination of these tools may be used. I will not go into any one of these right now (that would be for future blogs, of course), but here are my thoughts about evaluating your mix:

- Who are your customers? And how do they interact with you and others online?
- What is your desired outcome? Is it awareness? Visiting your website? Creating UCG to support your brand? Sales (obviously everyone's endgame)?
- What tools provide the most logical resource to accomplish your desired outcome and can the technologies/partners you use provide accurate and actionable measurements to help you assess your Return on Marketing Investment?
- How do these online channels interact with your current offline channels? Can you leverage cross-channel marketing?
- Do you have the right data on your customers (behavior, preferences, history, etc.) and sufficiently robust analytics available to make intelligent decisions about targeting with these channels?
- How rapidly can you adjust your messenging/strategy using this means if there is a need to course correct?

These are my initial thoughts. I will provide thought on specific tools later.