Insight For BC Technology Entrepreneurs
By Brent Holliday
Internet Buzz-word Bingo
"There must be some misunderstanding,
There must be some kind of mistake
" - Genesis, Misunderstanding
We live in a Dilbert world. Just this morning, the front page of the paper has an article on a new BINGO game that you can pick up for work. Instead of numbers, the BINGO card has "buzzwords" and "clichÈ phrases" of the late 90's. Next meeting when the manager stands up and talks, you and your short-sleeved, four-eyed buddy start ticking off used words until one of you gets a row or a column. "Oh man, I'm just one "synergy" away from the jackpot!"
This is not a column on how Dilbert has subverted any useful management initiatives in the corporate world because we are all so damn cynical about our bosses with pointy hair. No. This column is about successful understanding, which is the endpoint of communication, right? Buzz-words are a crutch we use to avoid understanding. Memorize a few key buzz-words and the world is your oyster. You will hang with the "in" crowd. It's so easy.
A short confession: I hate not understanding. It's right up there with bamboo shoots under the fingernails or Clinton's impeachment trial. I do have a certain talent. It is the ability to remember the most useless details. But it doesn't get me much further than "most likely to be a Universal Studios Tour Guide" award or to go 4 on 1 in Trivial Pursuit. Memory ain't understanding. I was once called a "term-abuser" by my former staff. When I tried to sound smart and wordly in the software lingo, the engineers would look at me as if I had just become an HB pencil. I was a pointy haired boss. Arrrrrgh. It is has become fundamental for me to understand. Call it a quest.
I think that it's high time we look at buzz-words and concepts about the Internet and tried to get a more fundamental understanding. Rather than use quotes every time I type a buzz-word in need of explaining, I will hook up my Detector of the Usual Meaningless Buzz-words (DUMB for short) to a small electrode which in turn is attached to the fleshy part between my toes. Whenever I type an "abused term", I will respond with an italic Ouch or Yowee. This will help you identify the terms more readily.
I started down this road when discussing the Internet stocks and the continuing mania surrounding their value. (See "Internet Insanity... or is it?") I talked about the on-line business models in a general sense. There are the portals (Ouch) like Yahoo, Snap, GO and the recently purchased Excite. A portal is a site that people go to in order to find other sites or get quick snippets of information. A flood of U.S. venture capital has poured into the micro-portals (Yowee) touting every imaginable niche of interest. The business model is purely money for eyeballs. Now think about the service that they provide and the business model again. What incentive is there for any search or directory site to actually help you find what you are looking for? Enough that you come back and use the service, but not enough that you jump immediately off the site and away from their advertisers. The portals refer to the ability to keep people on the site as stickiness (Ouch). But as users of the Internet, we do not want to stick to a portal.
Two new strategies have emerged for the companies known as portals. One is to add tons of "free" features and applications that will keep you in the gunsites of their advertising banners. Free e-mail, free stock quotes, free news, free personal pages, free chat and more. Hey, I use My Yahoo as an opening page. It's very useful. But I quickly leave for other sites if nothing grabs my attention there. The consolidation of the freeware (Ouch) companies, being absorbed by front-running portals, was inevitable as soon as this strategy gained acceptance. Now, a new strategy is emerging and it is more ominous. Mark Anderson calls it the Gates and he doesn't mean Bill. Excite bought by AtHome. AOL does a deal with Baby Bells for broadband access. Look for Disney's Go to buy or partner with a broadband provider soon. When you get faster Net Access, you will soon get a Gate. You will not be allowed to have any other opening screen other than your broadband provider's choice. I loved Mark's analogy. It's like selling you an antenna that gets only one channel. Kind of takes the freedom out of the Net, doesn't it?
Another on-line business model is to be a store. I'll save that for the biggest abused term, e-commerce (Yowee). But, first I'll talk about the community sites (Ouch). Their business model is still eyeballs and advertising. The reason they are better at making money is that people will stick around long enough to get a meaningful advertising impression. People choose a community because they want to hang out there with other people. The portals know this and they are either developing communities of their own or they will start acquiring the community sites. Look for GeoCities, iVillage and others to be bought soon.
Now for the mother of all misunderstood Internet buzzwords, e-commerce (Ouch) (Yowee). As it begins to permeate our lives, all of us will have to understand what e-commerce is and what it means. I liked the term "new media" when it came out because it was as succinct and descriptive as a buzz-word could be. Therefore, I'd like to toss e-commerce out on the heap of tired, meaningless phrases and introduce "new business" (Ouch). That's really what were talking about here. A new business medium. I don't mean to gush, because it sounds trite. But, we are just at the beginning of this profound change.
Selling stuff on a web site is only one aspect of the new business. There are companies that have mastered the blatantly obvious business model and established themselves as stock market behemoths by selling things that are easily shipped and commoditized (books, CDs, toys, computer parts, software). When these pioneers actually started selling millions of dollars of merchandise, with no overhead and (in most cases) no inventory, the rest of the world caught on. Large brand names needed to get on-line and sell their stuff. This has now happened in a big way. Billions of dollars are now being spent by consumers on-line. And tens of billions of dollars more are being spent on goods or services researched and decided upon using information found on the web.
Here comes part two of the new business: the guys that get rich during the gold rush are the ones that sell the picks and shovels. By selling software that enables the sell-side (Yowee), companies and system integrators are getting rich, too. Sell-side tools and applications (tools are for programmers, applications are for dummies like me) were the next most obvious thing to provide in the new business. Companies needed a way to
1) present their wares on a web site
2) offer security for the transaction
3) keep a real time list of items bought and
4) process the money transfer between buyer and seller.
Some software companies focused on entire solutions encompassing all four sell-side tasks. Others specialized in just one area. Dominant companies among the 300 or so in the sell-side game are Open Market, Intershop, Pandesic and Verifone. My former employer, Multiactive has ec builder, a small business sell-side solution. The market is still quite fragmented and depending on how big your company is, you might be better off having your own sell-side functionality built by programmers using tools from providers like Broadvision, Lotus, Microsoft or two dozen other companies in this space. One interesting subset of the sell-side providers is the on-line hosts (Ouch). The hosts are Internet Service Providers or (gasp!) portals like Yahoo that give a company the functionality to create their store and then host it on their servers. No expensive server computers or Internet connections to worry about from the merchant side.
So, to this point, we have shown that e-commerce is actually a) companies created on-line to sell stuff and b) companies that create the tools and applications to give existing merchants an on-line store. Time to massage the temples... because we aren't done yet. There is my favourite new business reality, the market maker (Ouch), the customer service apps (front-office (Ouch) extends to the web), the new buy-side (Yowee) tools and applications and the plumbing equivalent for the new business, supply chain integration (Yowee).
The real brainiacs, the folks that spent some serious processing time on the new business realities, found an entirely new way to do business. These folks created companies and web sites that became market makers. While rear-view mirror types were espousing the destruction of the middle man, so-called disintermediation (Yeeeeeeeeeow), new companies like Priceline and OnSale were showing that there is a new middle man in the new business. Priceline lets you, the consumer, set the price for travel. It then bids your offer out to travel agents or charters that can fulfill your dates and locations. Imagine that! The world is upside down. You can simply say Toronto on the 5th returning on the 8th for less than $400 and then go about your work. Neat, huh? Possible before proliferation of the web? Nope. OnSale is the pioneer of the auction. Dozens of copycats and variants have now arrived. OnSale took a market for out of date stock and returns and made it into a revenue item. These items were now sales not an inventory write down expense for major electronics and computer makers. And the consumer loves the action and the deals. Brilliant!
The only backlash that the on-line businesses will face in the coming months is the fact that their customer service, for the most part, stinks. That is why an emerging new business area ready for smart applications is in making the consumer experience more pleasurable and efficient. Balisoft is a Canadian company founded by the ex-founder of Delrina. They enable two way voice contact through a web site for buying consumer goods. Sort of an instant help line or a virtual sales person. The neat trick is that the person at the other end can manipulate what the consumer is seeing. Example: Well, Mr. Jobs, if you don't want the jade green colour, how about this snazzy yellow number? And up pops a new picture without the consumer touching the mouse. Other companies are enabling help desks on the web to support customers. A subset of the new business customer service is the re-emergence of the agent (Ouch). MySimon is an example of an intelligent agent that does comparative shopping for you. Useful, if it works.
So far, we have talked about business to consumer e-commerce. Many pundits feel that while the public will be more familiar with the transactions on this side of the new business, the real garagantuan dollars will be transferred between companies, in the business to business (B to B) (Ouch) market. In 1998, the buy-side of the new business arrived. Millions of VC dollars poured into companies like Ariba, Employease, Commerce One and a Toronto company, Necho. Somewhere, a couple of years ago, after the dawn of the intranet, a light went on. Why can't we automate the mundane world of company travel, expense reporting and office supply ordering? Big corporations spend millions of hours of paid employee time filling out forms to accomplish these tasks. The new companies in this space utilize the cheap new network called the intranet to centralize the processing of getting stuff that you need to do your job. The companies enabling the buy-side are becoming a significant part of the B to B market.
The real B to B market is the so-called supply chain. More simply put, it is the automation of purchasing your parts using the web on a secure link between your company and the supplier, the extranet (Ouch). It also means the automation and control of outsourcing for all you non-manufacturing companies. You use contractors in the process of building your product or conducting you service, don't you? If you want to understand the impact of the automated supply chain, read Regis McKenna's book, Real Time. It saves big companies big money if they can get parts only when they need them. This market space is a quagmire of application companies and tool companies that are all partnered with integrators. It is so fundamental to the new business process of a company that decisions here are very long and negotiations are tedious. And to make matters worse, this is the one area of the new business where terms like EDI (Electronic Data Interchange) surface. After all, EDI was the precursor to B to B, but was only affordable for giant corporations. EDI is like Homer Simpson's dad: old, slow and ugly. But like COBOL, it will be with us for a while. Some companies and integrators will make great gobs of money getting the new business to be backward compatible with the old EDI world.
There you have it. Do you understand? If not, or at least not completely, you should try reading Internet World, Information Week and Red Herring. These periodicals are stuffed with buzz-words. But as you read buzz-words over and over again in context, you start to get the meaning. And ask lots of questions to people "in the know"
I'm really interested to hear if I have turned any light bulbs on or if my attempt to help you understand has just muddied the waters even more. Let me know.
- Here is one of the craziest examples of old world thinking that only Alberta (them again?, sheesh) Manitoba and now Ontario have obliterated: Forcing software companies to pay full Workman's Compensation fees. Here in Glen's world, software companies pony up just as much per employee as logging companies or the bomb squad. Quick, when did the last employee at Seagate Software (nee Crystal) get long term disability paid out for injuries sustained at work? Was it when the guy got the new 21" monitor dropped on his head? Was it when the new engineer was committed to Riverview due to mental damage inflicted when trying to write Windows apps that actually worked? What? Who? And don't give me the repetitive stress argument. I'm not sure the loggers find it amusing that they pay into a program that supplements sore wristsÖ JetForm will save $200,000 a year with the new ruling in Ontario. Seagate might want to keep that cash, too.
- Speaking of old world thinking, the recorded music association (really, the big five music publishers including Edgar Jr.'s Polygram) clearly does not get new business. The new tax on recordable materials like cassettes and CD-Rs is a new low. It's time to think of a new business model for recording artists. Royalties on sales will be getting lower and lower as MP3 recordings start moving through the Internet. In fact, some artists, like Prince, have become new business entrepreneurs and moved to selling their music directly through the Net. The Feds are clearly enjoying the view through the rear view mirror along with Edgar & Co. becasue they let this ridiculous tax grab through. Speaking of the Feds, will someone PLEASE stop the impending trade war over culture? To let our fragile economy be broken by a stubborn woman who is clearly trying to grab more attention then her dubious minister title allows is REALLY DUMB. Message to the Feds. You cannot stop the Americans. The Net changes everything. I can watch whatever I want. We look as dumb as France, for chrissakes!
Response From Last Week's Column:
Re: Canadians and on-line sales
Another factor preventing CND cos. is big banking...Just try to get a
merchant card for on-line transactions in Canada. But Wells Fargo will get
you going in 48hrs, as will Bank of Oregon and Bank of Nevada...and you do
not have to hold back 90 days in your account...
And do you really think that the merged mega-banks would have sped the transition to the new business?
Happy New Year to all,
If you need a Tiger or 2 to come and assist ;) reply as you like.....
I have been running my own business for a few years - small basis, never looked for help tho, but never afraid. That's the Irish part of us - A Crock of Gold is (IS)
always just across the road, so be a chicken and cross it.
The Celtic Tiger is charging along, am currently considering a move to Canada.
A friend is looking to move and setup a business there.
Will be travelling to Vancouver in Mid March
All the Best to All.
I hope the Tiger in you all wakes up again soon........
I had to print this. My first international correspondence! Brendan, yer a fine lad and I'd love to lift a pint with ya when ya come by. We need some Celtic Tiger in all of us. US Federal Reserve Chair and the most powerful man in the world, Alan Greenspan said on Wednesday, the reason the U.S. is charging ahead (and I suspect that Ireland has emerged) is because of what he called "creative destruction". Simply put, massive layoffs due to changing business realities has actually led to more jobs in the U.S. This "churn" of jobs is fundamental to them keeping the lead. Here in BC, this would be the last thing that an NDP government would allow.
Further to December column and the 1999 wishlist, I'd like to add a
firsthand commentary on lessons we can learn from jurisdictions like
Ireland. I had an opportunity to spend a week in Ireland as part of a deal
I was working on with a BC technology company in November. Yes, a BC
technology company. Yes, expanding in Ireland. How many do they employ in
Ireland? Over 100, and rapidly growing. Two years ago, they employed zero
people there. Within the next few years, they expect to add several hundred
jobs to their Irish facility.
I was absolutely floored by the optimism in the business climate in Ireland,
particularly for the tech companies. Everyone in Ireland is pumped about
the prosperity that this industry brings. And the prosperity seems to be
everywhere. I did not meet a single businessperson who was down on the
business environment, everyone seems to think that the elected officials are
actually getting things right. Imagine such a thing! Sounds like a pipe
dream if you happen to do business in BC. The Irish deputy Prime Minister
and federal Minister of Industry showed up for the new product launch and
official factory opening of the BC-based company in question. Pretty
impressive support for a BC-based company that our own government probably
doesn't even know exists. Oh, and by the way, when the government comes
calling on the Emerald Isle, it's not to collect taxes , but to see what o
they can offer-up to make sure you are happy and want to create more jobs
and contribute more to the Irish GDP in the future. I've seen it with my
own eyes, the fabled positive business climate does actually exist out there
in the real world!
Ireland is rolling out the red carpet for tech companies, and the entire
country is benefitting. Meanwhile, back in BC, the government is scaring
them away. Maybe Guinness does make you smarter after all....
Steve: I hope that you show your trip slides to your fellow TIA board members and then use them in all of the efforts in lobbying all levels of government. Great report! Kind of echoes what our friend from Ireland said.
What Do You Think? Talk Back To Brent Holliday
Something Ventured is a bi-weekly column designed to supplement the T-Net British Columbia web site with some timely, relevant and possibly irreverent insight into the industry. I hope to share some of the perspective and trends that I see in my role as a VC. The column is always followed by feedback (if its positive or constructive. I'll keep the flames to myself, thanks).
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