10 Trends Driving The Future Of Book Publishing

Printing Press Letters — Remember those days?

Mark Coker (@markcoker), Founder of Smashwords, the world’s largest indie book distributor, gave a great talk at the excellent Edinburgh Publishing Conference on the key trends driving the future of the book publishing industry.

The conference brought together a wide range of experiences from across the publishing industry under the title ‘Publishing: Evolution, Disruption & the Future’ and further posts will follow in due course.

10 trends shaping the future of publishing from Smashwords, Inc.

Founded in 2008, Smashwords is now the world’s largest indie book distributor, with 60,000 authors and it shares data about what book sales looks like. Mark’s wife was a former reporter for a soap opera magazine. She told him that the actors and actresses in the soaps were more crazy in real life than their onscreen characters so they figured that there was great material there for a book based on interviews that would sell.

Together, they wrote a novel called ‘Boob Tube‘. They tried to get it published but received rejection after rejection for two years in a row. They had two options to dealing with such rejection – they could either accept failure or look for a solution. Their conclusion was that the problem wasn’t the book; the problem was the publishing industry which, they decided, was broken. Furthermore, the print industry in itself was harmful (to writers, readers, publishers etc).

Mark’s view is that the publishing industry has developed a culture of ‘no’. It’s the practice of rejecting the majority of opportunities based on an assessment of perceived commercial success. Yet Mark believes that every book has a right to be published even if that’s only going to be read by 10 people. The industry’s problem is that they may be rejecting future best-sellers because the industry is no position to judge what will be successful in reality.

So Smashwords was founded to answer the question – what if we could make it possible for any writer, anywhere in the world, to publish for free – meaning to upload, distribute and to get paid. The answer is that in their first year (2008), they published 140 books. In 2012, they published 230,000 books. We live in uncertain times. But that change brings both threat and opportunity to authors and publishers. Your reaction determines your outcome.

THE TEN TRENDS IN BOOK PUBLISHING

1. The rise of ebooks.

Reading is moving to screens. In the US, ebooks only accounted for around 1.1% of the market in 2008. In 2012, that figure had risen to around 30% of the market. The US is ahead of the world but the UK is coming up that curve quickly. Mark is certain that ebooks will overtake print in volume in due course. Whilst it is very important to know where we’re going as an industry, it is less important to know when we’re going to get there. In fact, the existing data underestimates the real value of the market as if you measure by words consumed onscreen. Ebooks are cheaper than print books, therefore the US must be close to the tipping point (probably this year if it has not already happened).

Why are ebooks so much better?

Better reading experience (changeable font size)
Lower cost (than print)
Convenient (sampling & purchasing)
Greater selection (huge)

2. Book selling (print and ebooks) is moving to the web

In the US, more books are published online than distributed in hard copy in book shops. The reasons for this are again price, convenience and selection. We all love bricks & mortar bookshops yet almost every single one of us is buying online. This has dramatic implications for traditional publishers. It also now means that a self-published author can be listed – because there is unlimited shelf space online.

3. Democratisation of Publishing

No more than five years ago, publishers controlled the printing presses, access to retail distribution & the knowledge necessary for professional publishing. When Mark tried to publish a book, he was a failed writer because without a publisher, he had nothing.

Yet today, the printing press, distribution networks and knowledge of professional best practices is free and available to all. Publishers are losing their monopoly and are no longer essential to the process. This means that writers are starting to ask two questions that are particularly dangerous for publishers:

What can a publisher do that I can’t do myself?
(Far more dangerously) Will a publisher harm my ability to reach readers? To which, the answer often is yes.

4. The self-published are gaining a competitive advantage

The advantages to self-publishing are numerous:

Faster to get the book to market
Greater creative control (if a publisher already has 3 books on paranormal bunny rabbits, they’re not going to publish yours, however good it might be…)
Lower expenses
Your books never goes out of print
Better royalties

It’s worth considering the royalties further. Independent publishers are getting royalties of 60-80%, compared to 12-17% in traditional publishing. This means that at a price of £2.99, indie authors would earn roughly £2 per book. For a traditional author to earn an equivalent amount, the book would have to be priced much higher, at around £10 – £15. It doesn’t take a genius to see that a consumer will buy the cheaper product! And with a lower price, it means that the author has the potential to reach more readers and therefore to make more sales at higher profits per sale.

5. Book buyers are price sensitive

There are arguably two benefits for an author from every sale of a book. The first is obvious – money, in the form of a royalty. But the second – and more valuable – is that you gain a reader. This is more important because every reader is a potential fan. And each one of those is a potential super fan. These are people who will buy everything that you write and also act as your marketing department for free. [Note: apologies for yet again referring to this post but this ties in with one of the most important blog posts that I’ve ever read – 1000 True Fans – if you haven’t read it, I promise you, it’s important]

Smashwords carried out research into their sales in order to work out the price at which an author can reach the most readers. A free price means that you’ll reach 100x more readers than you’ll reach at any other price – but you can’t make money (directly). The evidence shows that readers don’t respond well to $1.99 – an author can sell more books at $2.99 or $3.99 and that $3.99 earns more than any other price point. I’ll probably dive into this in more depth in a future blog post but for now, you can check out the post at ‘New Smashwords Survey Helps Authors Sell More eBooks‘.

6. Print is dead for most self-published authors

Brick and mortar bookstores are disappearing. They are essential if you’re looking to sell print books but you don’t need access to them if you are self-published (with a few minor exceptions – such as for public speakers selling hard copies at the back of the room).

7. Ebooks are going global

Mark believes that the market for English language books outside the US will soon become larger than the market within the US. Demand is exploding. Ebook retailers are going global (Apple iBookstore is in 51 countries, Amazon in 12, Kobo in 14; 44% of Smashwords/iBookstore sales are global)

8. Big publishers are getting into self-publishing

In July 2012, the parent company of Penguin (Pearson) acquired Author Solutions. As Mark explained in strong terms, Author Solutions is in the business of selling services to authors yet most of their revenues are derived from selling to authors who are not already selling. He argues that this shows precisely how incredibly out of touch how some of the big publishers are – by attempting to simply sell services to authors to make money. His view is that this goes against the fundamental principle of publishing which was always about investing in writers. The money in the industry should always flow from publisher to author and never the other way around.

9. Previous stigma of self-publishing is disappearing

Self-publishing used to be seen as the option of last-resort. There was shame associated with it, with fellow writers who had been professionally published mocking those who took the self-publishing route. This was down to the myth that pervaded the industry: that if you were good enough, a publisher would happily publish you and that if you then listened to what the publishers wanted (regarding genre choices etc), you would then be successful. Now we’re seeing this stigma totally disappearing, with indie authors often publicising the fact as a badge of honour.

Mark believes that we will have a day in the future when more writers aspire to be self-published rather than published. At this stage, we will have truly shifted from a culture of saying no and telling writers that they suck to being in a position where every writer can start working today with the 100% assurance that his or her final work can be published.

10. Indie authors are beginning to outsell traditionally published authors

The New York Times bestseller list now has self-published authors on that it every single week. One year ago, that was very rare. Mark believes that within the next three years you will see a tipping point where more authors are self-published than take the traditional route. Indeed, if you look at iBookstore in the US today, six of the top ten today are self-published. Today’s top-selling ebook in the world is a Smashwords book

So What Next?

Taking account of these ten trends, it’s clear that a future is evolving that benefits self-published authors. You have the opportunity to publisher faster, smarter and more profitably, at lower prices.

If you’re a writer, recognise that you’re now in charge. You now decide when you graduate to become a published author. But be aware that this with this opportunity comes responsibility. Readers want quality books. Therefore, each author must assume all the best practices that every top publisher would previously carry out (i.e. ensure each book is well-written, well-edited, has great cover art, distribution etc).

And what if you’re a publisher? Well, the good news is that not all authors want to become self-publishers because it’s a lot of work. But the difficulty is that it’s going to become harder for you to add value. Yet your opportunity remains in seeking to do for authors what they cannot/do not want to do for themselves. If you’re a publisher, think carefully about the culture of saying no – because every time that you say no to an author, you’re sending them down a different path that probably means they won’t return to you if they’re successful.

Mark believes that there has never been a better time to be in publishing. The world needs more smart people in publishing adding value to books. The question of indie/traditional publishing tends to be framed as an either/or battle but it doesn’t need to be.

Above all, ensure that, whatever you do, you add value to books.

Note: three (free) handy guides to self-publishing (also available on Amazon):-

Secrets to Ebook Publishing Success

Smashwords Book Marketing Guide

Smashwords Style Guide

photo credit: Creativity+ Timothy K Hamilton via photopin cc

The Profound Shift In Scholarly Publishing and How The Future Looks

Notes from the Edinburgh Publishing Conference which brought together a wide range of experiences from across the publishing industry under the title ‘Publishing: Evolution, Disruption & the Future’.

In this post, Cameron Neylon, Advocacy Director of the Public Library of Science (PLOS) opened the day.

Cameron started off with a couple of soundbites from Clay Shirky:-

“Publishing is no longer an industry. It is a button”

As we all know, you can now publish directly yourself wherever you are and that publication has at least the potential at least to reach millions of people. However, we must be aware of the dichotomy of publishing: ‘making something public’ is very different to turning it into a product that someone else is willing to pay for.

“It’s not information overload. It’s filter failure”

In the video of his talk from 2008, what Clay is actually saying is that it’s not the question of whether the vast flood of information that is coming at us is a good thing or not that we should be concerned with. Instead, we need to be aware that our filters through which we receive relevant information have been broken down due to nature of the internet. This is all part of the process by which power has changed hands from being in the hands of the few to the many. The real question is how do we take the existing value-chain, tools, organisations (old and new) in the publishing industry and create the filters that are essential to ensure that, whilst we allow anyone to publish, that information is filtered in order to maintain its value.

The history of scientific publishing developed from the growth of the research community in the seventeenth century in which researchers sent out their own letters directly in order to update other members of the community with their progress. In order to build on efficiencies of distribution, this developed so that these items were communicated via short articles in journals.

The result was that, up until very recently, the standard business model for scientific publication was subscription (primarily by academic libraries). Journals were generally collated by organisations (publishers) that acted primarily for profit. Of course, research tended to be publicly-funded (in order to create a public good). That value was transferred (with copyright assigned) free-of-charge to the private (commercial) organisations who would then deal with the publishing and the peer-review process (whereby scientists would provide their services, again free of charge).

At one level, there’s an obvious issue here. The entire costs of production of scientific publications are being paid for with public money. But the existing system is designed in such a way that we don’t then make that valuable research available outside a small group of individuals.

It’s important to be clear about the distinction between scientific publishing and other forms of publishing. Science is fundamentally a long-tail activity. The biggest market possible is maybe 10,000 people so the key questions about the correct model to use must involve consideration of lots of niche markets. However, by opening this access up, other groups of interested people from across many different disciplines will be able to access the research that they otherwise couldn’t afford (they may not have access to academic libraries, work in different areas, locations etc).

Clayton Christensen famously wrote that innovative companies don’t disrupt by appearing to be disruptive when they arrive. They work precisely because they appear to look exactly like the existing model initially whilst completely changing the rules in order to provide a product or service that is much better.

In 1994, ArXiv was set up – a centralised repository which puts research papers online and is now hugely useful to various communities, particularly for maths and physics research. Around 2000, a series of new initiatives were set up by publishers. BioMed Central (BMC) was established with the principle that scientific information would be freely available online. BMC started off with the idea that advertising would cover the costs but this didn’t work (for obvious reasons in retrospect – niche market, long tail). It therefore flipped to an ‘author-pays’ model. To those who are unfamiliar with scientific research, this may sounds like vanity publication. However, it is far removed from that because the existing quality control mechanisms (i.e. peer review) remained a vital part of the process.

Ultimately, the new model comes down to a change in mentality. If you carry out a very important piece of research that cost a couple of million pounds, and it simply sits in your drawer unread, it’s useless. Therefore, the cost of publication in order to get that work out to a wider audience means that the ‘author-pays’ model is likely to be attractive.

Public Library of Science (PLOS) then built on the success of BMC. PLOS was designed to be highly selective in order to ensure that publication remained prestigious. By ensuring that it was difficult to get into it, they were able to create a brand around the organisation. It’s worth noting that both BMC (for-profit) and PLOS (not-for-profit) are sustainable businesses and that both now turnover in excess of $20m p.a.

PLoS wanted to set up a journal that takes advantage of the internet’s attributes whilst maintaining that essential quality standard. The traditional journals would say “we publish the most important and interesting articles”. Yet it’s almost impossible to predict what will be successful or what actually matters in time. So when PLOS ONE was launched in 2007, it agreed to publish every piece of research provided that it met the quality criteria of having been ‘properly done’ in science. In 2010, PLOS ONE became the largest journal in the world and it continues to grow.

Scientific publishing is fundamentally different because it was developed as a means of peer-to-peer communication, as opposed to a broadcast system. Although science has fallen behind in many ways in embracing the disruption that has engulfed all other parts of the media, Cameron now argues that it is where you should look to see what’s coming in the future. Sure, the mass media opportunities will continue to be controlled by a few organisations. But the second set of opportunities in publishing come from within the networked world, where the long tail of interest can be used effectively to serve niches that the large organisations couldn’t dream of serving. And, to use Clay Shirky’s words, that is where we’ll develop the filters that are truly useful. And that is the future of publishing.

Zach Braff’s Unjustified Beating On Kickstarter

Film Fans on a red carpet — Movie Fans Or Investors?

If you’ve been following the irresistible growth of crowdfunding over the last few years, you won’t have missed the furore surrounding the use of Kickstarter by some high-profile individuals. Most notably, US actor Zach Braff went to the site to seek funding for a follow-up to his successful Garden State (2004) entitled ‘Wish I Was Here’, successfully hitting his target of $2 million in just a few days.

Yet no sooner had Braff announced his project than he was subjected to a barrage of criticism online. The outrage seems to be very familiar if you take a look back back at Bjork’s failed Kickstarter earlier this year. Who would have thought it: it seems that some people get upset when a (presumably) rich and (undoubtedly) successful individual goes to the public to ask for cash. A collective shout of “why doesn’t [he/she] just pay the $[insert as appropriate] him/herself?” can be heard from disparate edges of the web as people turn up their noses in disgust (see here) .

This particular story’s grown so big that Kickstarter themselves have posted a blog which seeks to set the record straight about how the platform should be used (Who Is Kickstarter For). In addition, Zach Braff has released an engaging 17-minute video defending his reasons for going down this route.

The most worrying thing here to me isn’t the potential damage to Kickstarter brand. Far from it. It’s the total lack of understanding shown by some people who just don’t seem to understand how crowdfunding can work for these types of creative projects – and precisely why this model is so disruptively different.

Just to be clear, people aren’t allowed to invest on Kickstarter in order to make money. If you back a project, you’re doing it because you want to support a project. In most cases, in return you will get rewards of some description (either physical or experiential). But, for the most part, with creative projects, a large number of supporters are ‘simply’ fans who identify with the creator in some way and just want to get involved.

Fundamentally, these creative projects are not about the money alone. Now, cash is clearly often an important factor, more so in some cases than others. But in reality, publicly seeking validation before a project starts to incur significant cost means that you are cementing a relationship with your existing fans and supporters. Also known as the people that will ultimately help you sell it (by all-important word of mouth). By doing it early, well before any launch, it ensures that your platform is primed and ready to go so that you can hit the ground running on the release date.

So the guy’s already successful? Big deal. Let’s remember, Braff is no social media newbie. He’s got over a million followers on Twitter and is an active Redditor. Plus the funds that were targeted are only part of the overall funding package for the movie. I repeat – this was never about the money. He understands the web sufficiently to understand how valuable the engagement is in order to increase the film’s ultimate chances of success. With the added bonus of providing him with the opportunity to retain artistic control.

Perhaps it’s good that the debate’s being had. But I have to admit that I’m surprised that some people still don’t seem to get it. There are a few subtleties here when it comes to crowdfunding, and on Kickstarter in particular: from “the gates are down/we are the media” approach of Amanda Palmer (famous for setting a $1.2 million record last year for the most funds ever raised for a music project on the site to the fact that the site hosts more failed projects than successful ones.

But I think a few people need to take a deep breath here. The statistics show that the funders of Braff’s project were not, for the most part, regular investors in Kickstarter projects. Some have gone on to fund other projects also. The website itself had the highest level of traffic ever as a direct result. And what if the support hadn’t been there to fund his new project – how could you even say that being unable to raise the cash from your target market is actually failure? Surely true failure is ignoring the opportunity to engage in advance, incurring the production costs anyway, releasing the film and only at that point, finally realising you don’t have any customers?

What are your thoughts?

(Photo via wvs under 2.0 CC licence)

EIE’13: Sherry Coutu CBE Keynote

Sherry Coutu EIE'13 — Sherry Coutu onstage at EIE (Edinburgh, 8 May 2013)

Today the annual Engage Invest Exploit conference took place in Edinburgh. Described as “Scotland’s premier annual investor event, showcasing the best companies spinning out of Scotland’s world class universities and start-ups from our wider entrepreneurial eco-system”, the event was significantly larger than previous years.

There were two keynote talks during the event – Sir Tom Hunter (Scotland’s first home-grown billionaire businessman – see post here) and noted entrepreneur and business angel Sherry Coutu CBE. I wrote a liveblog during the event on the MBM Commercial Startup Blog. I’ve reproduced the notes here as there were some valuable points made by both speakers – apologies for the length but I’ve not spent any time tidying this up yet.

@mbmcommercial @dugcampbell @infventures thanks! Lovely summary 🙂

— Sherry Coutu (@scoutu) May 9, 2013

EIE’13: Sherry Coutu CBE Keynote

Sherry Coutu started by saying that she can clearly identify a buzz around Edinburgh. It’s a city that she used to visit frequently a few years ago and she believes that, for the most part, from her viewpoint in Cambridge, we do have it ‘right’ up here.

A brief history: Sherry came to the UK to study at the LSE before moving into work as a computer programmer. Crucially, she then attended Harvard Business School where she met around 850 entrepreneurs and studied entrepreneurship in depth. Surrounded by this level of inspiration gave her the confidence to jump into starting up her own venture. Her advice for those at the start of an entrepreneurial journey is to make sure that you meet as many entrepreneurs as possible. When you do, you start to realise that all entrepreneurs are the same type of people – focused on solving problems.

Based currently in Cambridge, Sherry is involved in a large number of businesses and organisations (both for-profit and not-for-profit) as advisor or angel investor, including some well-known names such as LinkedIn, Raspberry Pi(the fastest growing company to ever come out of Cambridge), the Francis Crick Institute,Tyze, Founders4Schools and Silicon Valley Comes To The UK. It’s crucial in her view that we collectively encourage people to pursue entrepreneurship at an early age: particularly because the evidence shows that three times the percentage of children made different subject (and career) choices when they were exposed to quality role models – not the only overlap with Sir Tom Hunter’s keynote speech this morning.

Sherry has made a total of 45 investments over the years at a rate of three or four a year (in order to insulate her risk and benefit from the crucial portfolio approach). She makes the point that being a business angel is more compatible as a career choice for a mother than being a full-time technology CEO. Impressively, the aggregated turnover of all of the companies with which she is involved was over $1 billion last year.

Sherry’s focus in her keynote today is to run through nine key lessons from‘Startups That Scale – Why It Matters And How To Do It: Lessons From Silicon Valley Comes To The UK 2012’ [DC Note: the report is well-worth reading if you haven’t already]. We often focus on the failure rate for startups. However, it’s crucially important to understand how businesses actually scale up when they’re successful – because it’s only at that point that they create the all-important significant gains in employment, wealth, tax revenue etc.

A couple of numbers to start off from research by NESTA:-

40 years old: the average age of the founders of the 500 fastest-growing companies in the US (ref: Kauffman Foundation) – debunking the prevalent media myth that entrepreneurship is the sole preserve of the young.

40%: the average US GDP that is produced by companies that did not exist 30 years ago.

6% of SME’s produced 54% of all jobs in the UK over the last 7 years – or, to put it another way, 1.3 million jobs from a total of 2.4 million.

Of course, you will hear people complain that technology is ‘bad’ because it threatens jobs. And it does – but mostly for those who remain in businesses that are unwilling to adapt and change. For everyone else, technology represents a significant employment opportunity. It is growing quickly – it was estimated that the UK’s internet economy accounted for 7.2% of UK GDP recently. The sector is growing faster than any of the UK’s construction, transportation or utilities industries and projected to grow to 15% by 2015. Think of what this means for what we should be teaching (to children) and funding (as investors).

There are nine key lessons from the Scale Up Report 2012 which it’s worth everyone taking notice of:-

1. CHOOSE A BIG ENOUGH PROBLEM

We have really big problems to solve in today’s world. You may understand a technology and view it as useful. But if it’s only ever going to be useful to another ten people in the world, you’re not going to be able to scale your business.

Think hard: how many customers are there out there? Are they all easy to get to or are they all disparate and difficult to reach? It’s important to remember that a business that has insufficient potential customers in one country may in fact have the required number of customers when viewed on a global basis to ensure that the economics of the venture do start to stack up. Think of who your potential customers are, where similar people might be living around the world and consider whether you can structure your organisation effectively to service them.

2. EMBED YOURSELF IN THE RIGHT NETWORK

Basing yourself in an ecosystem that will support your aspirations is critical to build scale. For example, Cambridge is a cluster and Raspberry Pi wouldn’t have happened in any other place. This impacts on any decision that you make about where to base your subsidiaries also.

3. RECRUIT PEOPLE WHO HAVE DONE IT BEFORE

Evidence that compares an individual with experience of growing a business on a larger scale than another shows that the skills and the productivity gap between the two individuals is huge (perhaps as large as a 20-fold improvement). So the lesson for entrepreneurs is that you must hire people who have done it before. Don’t just rely on your best friend who is keen and wants to learn. As an investor, of course, you should encourage those who are running your invest companies to hire such individuals.

4. HIRE FOR TOMORROW, NOT FOR TODAY

If you have an opportunity to grab a market share of £3 billion over the next three years, you really need to hire people who have achieved that level of success before. This is important in part simply because you will learn from working directly with them everyday about precisely how to do it. Sherry states that if she has a secret at all, it’s that she has always surrounded herself with such people.

5. EMBRACE DIVERSITY

This is much more important than simply looking at the gender balance within an organisation. In order to understand a range of viewpoints, mix it up – get a social scientist into the same room as a data scientist, an accountant, whoever else and ask them to figure out problems. You will only restrict your potential if you simply get the same people together in a room to consider problems. In her experience, the most amazing innovations that she has seen have invariably come from people who just happen to be interested in a subject – for example, that’s why she is so excited about the progress and potential of current EdTech and MedTech ideas.

6. NURTURE COMPANY VALUES

As a founder, you must keep a strong sense on the company’s core values. For example, the recent statement by Marissa Mayer that she wanted to be involved in every single hiring decision at Yahoo raised a great amount of comment online. But Sherry entirely understands this position. If you hire someone who embodies the right attitude that you want (with a unswerving focus on delighting your customers), their intuition should (hopefully) not be too far away from yours in the future – and this should ultimately benefit your customer.

7. BUILD SYSTEMS THAT SCALE

Make sure you build your business in a way that makes it easy to scale. For example, Sherry discovered that one of her investee companies were using 23 different versions of their Terms and Conditions. The corporate infrastructure had therefore been built in a way that hampered the growth of the company. Focus on simplicity in the business. As an entrepreneur, imagine that you’re suddenly ten times your current size. This will help you to ensure you can scale fast when you do (hopefully) grow to that size.

8. TEST PRODUCT/MARKET FIT

Entrepreneurs work hard because they believe that they’re making something that will make someone’s life better. Clearly, it’s essential any business to have a customer in the first place. But it’s also critical to make sure – repeatedly – that the ‘something’ fits what the customer actually wants.

Sherry spoke about the importance of doing A/B testing and how one business in particular releases updated code ten times a day. Immediately following each update, the businesses records all of the behavioural responses. Now compare the level of insight and learning that you get (from ten separate learning ‘experiences’ a day) to another business that perhaps only releases new code once a week. That is a huge, cumulative difference in the speed of development based on real customer feedback. This is the route towards delighting your customers.

Ultimately, your business must focus at all times on one question – how do you blow your customer away and make them love your product? Don’t ever rest in this continual testing process or stop thinking about what would be great for the customer and truly delight them. Everything you do must always be for the customer – if they don’t buy it, you have no business. It’s critical to ensure that you measure how much value is added by every incremental change in the eyes of the customer – focus intensely on learning from them everyday.

Whatever you do, do not get stuck in the old-fashioned model of “it’s not perfect yet so we can’t launch”. Nonsense: if a customer gets angry with you, that’s a great sign because it is a signal to show you that something needs to be improved. The incumbent big business that you are competing against as a nimble startup can’t move and improve as quickly as you can so take advantage of this ability.

9. TAKE THE RIGHT KIND OF MONEY … AT THE RIGHT TIME

The sources of available finance are varied – business angels, VC’s, incubators, escalators, venture partners etc. It can be very confusing initially as an entrepreneur so make sure you understand the differences and the pro’s and con’s of each option. Ultimately, if you’re solving a big enough problem well, you’ll find that there are a queue of people who are wanting to give you money. A useful mentality to adopt, therefore, is to think about what the potential investor can do for you if you choose to let them have the opportunity to invest in your business.

Another obvious point but worth making – ensure your potential investor has enough money to follow his/her/its investment in a future round as you scale up the business. It may be a matter of fact that they have no cash to follow-on in the future but an investor who doesn’t invest more money in your business even if it is successful is unwittingly sending out a warning signal to other potential sources of money that all might not be quite as healthy in your business as it appears at first glance.

Sherry rounded off her talk off with a summary of exactly why she gets so much enjoyment out of angel investing, whilst highlighting some of the important research that we’ve mentioned a number of times previously on this blog.

Some key statistics about business angels:

* The average return from business angel investments is 22% (IRR) – significantly higher than for shares, gilts etc.

* The average business angel has founded 2.5 ventures.

* The average business angel is 53 years of age, has worked 14 years with a large company and 93% are male.

The split of male and female business angels in particular remains surprising to Sherry given how compatible she finds the activity with her role as a mother in a family. [DC note: the UK Business Angels Association continue to actively campaign to improve this gender disparity].

Sometimes an entrepreneur will talk about how they got money after only a 15-minute chat with a business angel. However, the evidence clearly shows that the more time that a business angel spends asking questions before investing has a significant positive effect on his or her returns. Doing proper due diligence significantly improves an investor’s chances of success so don’t be offended by the number of questions that he or she has for you. In Sherry’s experience, being on the receiving end of such questions during funding rounds has actually provided her with a great deal of insight into her businesses.

As an investor, the evidence shows that you should invest in things that you understand. Sherry learned this the hard way in the early days as an investor by investing in areas that she was interested in and simply wanted to learn more about (as opposed to knowledgeable about).

Another takeaway for the investors in the room: the success of investments for business angels increases significantly if the investor takes a seat on the board post-investment. Of course, the statistics on this point may look very different in the near future when the more recent effects of the growth in crowdfunding are factored in. From an entrepreneur’s point of view, however, the involvement of business angels on the board is significant as well in terms of experience and helping the founder to avoid certain potholes.

Sherry rounded off by comparing the high-growth technology scene in Cambridge to Edinburgh. Incredibly, in Cambridge there are some 1,525 technology companies that directly employ 50,980 people (in a place that only has a population of c.122,000). These companies have generated sales of £11.8 billion, with the top 50 companies hired 5,901 people in 2011 (a 23.2% increase), growing their revenues by £1.3 billion (a 17.6% increase). If you are in any doubt about the power of successful technology businesses to create success, these figures should convince you otherwise.

The final message is ultimately one that chimes with Sir Tom Hunter’s message from the same platform this morning: entrepreneurship is critical. We should focus on startups but we also need to think really hard about how to help the successful companies transition to the next level. In the UK, we have the same number of startups per capita as in the US, yet we only manage to scale up between 1/3 and 1/2 of the number that reach scale in the US. Just think of the results if we start to raise this figure – for the entrepreneurs, for the investors but most importantly, for the country as a whole.

“The person who says it cannot be done should not interrupt the person doing it” (Chinese Proverb)

To finish with Sherry’s final words: if you’re an entrepreneur – please do it. We have some really big problems that we need to solve – and there’s no-one better placed to solve them than you.

EIE’13: Sir Tom Hunter Keynote

Engage Invest Exploit Conference 2013 — Engage Invest Exploit Conference, Edinburgh, 8th May 2013

There were two keynote talks during the event – Sir Tom Hunter (Scotland’s first home-grown billionaire businessman) and a later keynote from Sherry Coutu CBE (see post here). I wrote a liveblog during the event on the MBM Commercial Startup Blog. I’ve reproduced the notes here as there are some valuable points made by both speakers – apologies for the length but I’ve not spent any time tidying this up yet.

EIE’13 Keynote: Sir Tom Hunter

Tom started by stating that it was an honour to be at EIE13 today for one simple reason: the entrepreneurs who start, grow and build businesses are his heroes. Since he sold his Sports Division business back in 1998 he’s become an ‘entrepreneurial anorak’. He loves entrepreneurs and to work out what makes them tick – because quite simply we need them to succeed. If the entrepreneurs in the country succeed, Scotland succeeds

Back in 1998, Tom sold his first business but he’s more interested in talking about something different today. In that year, a beautiful G4 gulf stream airplane landed at Edinburgh. On board was one of the world’s best technology investors, Eric Schmidt (back in the pre-Google days). And the point is that he had travelled to Scotland to visit a Scottish tech company because he felt that it was worth it. The internet was a very different place back in those days. Remember, back at the time of that visit in 1998, there was no Google (which started on 4th Sept 1998); iTunes didn’t start until 2003; Facebook didn’t start until 2004.

Eric Schmidt was visiting Orbital Software which, when it listed, made its then CEO, Kevin Dorren, the youngest CEO to ever IPO. Orbital was of course subsequently swallowed by a technology giant. If you listen to many people, they will claim that this was a failure. Tom is adamant that this is not the case. The reason? After making the cash from the successful exit, both founders may have travelled to seek education but they then came back to Scotland and – importantly – brought their knowledge back to the country to help others build businesses and to create opportunities. Both along the way have created hundreds of sustainable jobs in Scotland.

Small to medium sized businesses are the lifeblood of our economy – and indeed of any economy. We need to foster and build as many successes as possible. The media will often tell us that selling out the business to a foreign acquirer is a ‘bad thing’. But this is so far from the truth because entrepreneurs have it in their blood to go again – to pay their taxes, to repeat it, and by doing so, to make the economy flourish.

If we look back at the example of Orbital, it proves a number of things. First, in Scotland, we can build globally acclaimed tech businesses. Second – we can attract the biggest and best investors. Thirdly, our entrepreneurs are serial in nature, and by virtue of their successes, they are delivering the much-needed tax.

Remember that back in 1998, some people at the time didn’t think the internet was going to continue. A sizeable proportion of of folk thought that it would collapse catastrophically – after all, who was ever going to buy goods over the internet, read news on the move etc. Yet on Tom’s last trip to Rwanda, Tom noticed fishermen using their web-enabled mobile phones to check the best prices and locations for them to sell their catches. The mobile phone is the single most powerful thing in the mobile world – it’s being used to increase trade, prevent civil unrest and getting people out of poverty.

Eric Schmidt’s predicts in his new book that the 2 billion users on the internet who grow – in the short term – to 7 billion. That is explosive growth and will allow a designer in Madagascar to compete with Edinburgh firm – or as Tom prefers to think of it, a designer in Edinburgh to compete with one in Madagascar.

The Head of Goldman Sachs has personally told him that he views SME’s as by far the most important sector for any economy. Similarly, the Chairman of a major music company has told him he now insists on spending 50% of his time in Silicon Valley as he is determined that he will never again be caught out again by an upstart grabbing control of music distribution. And then you have Sergey Brin telling everyone that is not the tech behemoths such as Microsoft that he worries about. It’s the guy in his bedroom. So why not someone in his bedroom in Scotland? If some of the brightest people in the world can identify this as a source of the next big disruptive business, why should we not?

Tom talked about his frustration when he hears entrepreneurs moaning. Don’t moan about the barriers (there’s just no funding, support organisations are useless etc). He just doesn’t accept that that is a valid reason. In Scotland, 4 of our universities are in the top 100 universities globally – for a 5 million country, we’re punching way above our weight. Another trend: look at some companies that are now choosing to leave the Valley to return to the UK to seek funding. Shazam, for example has returned to the UK precisely for that purpose).

Entrepreneurs have an incredible chance to succeed and they remain the lifeblood of our economy. Scotland’s history is unbelievably rich and our endeavour is almost unparalleled

We’re also on the cup of getting the support right for startups. There is a marked improvement in collaboration – look at the various organisations involved in today’s event which has grown significantly this year. The Scottish Government is, in his view, listening – something to do with the Referendum next year, perhaps, but make the most of it.

One of the key stipulations that Tom gave RBS when they went into Entrepreneurial Spark was that they had to commit to actually embedding their managers into the hatcheries for one simple reason – it would teach the bank managers to adopt a far more entrepreneurial mindset. Entrepreneurs can only depend on one thing though – themselves. If you’re going to worry about referendums, tax or a myriad of other external factors – forget it. Go and be a politician

As you continue or consider building a business, note that SME’s account for almost 50% of all UK’s economic output and 60% of employment. Yet startups only get about 6% of available finance! So we need to innovate in funding models. A great example is Brewdog in Fraserburgh. Founded in 2007 founded, it has now become Scotland’s largest independent brewer, with global exports. When they couldn’t get finance, they innovated – crowd funding raised £3 million. But even more importantly, it turned every investor into a loyal customer. They even had 2000 people turned up to their AGM in Aberdeen! Not to harangue the board (perhaps the free beer helped…) but because they loved the brand.

Another of his gripes is common: every business plan that he’s ever seen shows a line that goes straight up and to the right. None ever tells the truth – a tough year in Year 1, a catastrophe in Year 2, back to beg for more cash from the investors in Year 3! The only people that Tom is interested in investing in these days are the ones that come up to me and show me how they’ve dealt with adversity. Fail fast, fail cheap and do it again.

When Tom came into his wealth from the sale of Sports Division, he had to work out what to do, at the ripe old age of 37. So he knocked on the door at Carnegie Corporation to see the President

and received some fantastic advice. He was told that the great wealth that had come into your hands was not actually his and he was challenged by the question – what is your legacy going to be? Tom didn’t understand this at the time but now he’s worked it out and he hopes everyone else in the room today will do so as well.

So what is your legacy going to be for Scotland, for the Uk, for us all. If you are an entrepreneur, we simply need you to flourish. And if you do, we do.

How Adaptive Learning Could Change Education Forever

There’s a famous quote that’s been doing the rounds for a few years from the US Department of Labor.

65% of the kids at school today will end up in jobs that have not yet been invented

Accurate or not, there’s no doubt that those responsible for designing education systems are facing some real challenges. After all, how do you teach students effectively if you’ve got no idea of the skills they need to be successful?

With an uncertain future, the one thing that is clear is that there are opportunities for us to improve the system of education that’s in place and which hasn’t, in many cases, changed for decades. I’m coming across increasing numbers of articles online about the challenges – for example here and here. Now, I’m far from an expert in this area. But as a keen advocate of the disruptive potential of Massive Open Online Courses (or MOOC’s, as they’ve become known) (tip: check out Steve Blank’s excellent ‘How To Build A Startup’ course on Udacity) and the author of an MBA dissertation on open access publishing, I’m pretty certain that removing the barriers to learning that currently exist can only be a good thing.

Knewton And Adaptive Learning

When I was in Glasgow at the Digital 2013 conference last week, Tom Hall (@tomjhall) from Pearson introduced me to something that had – somehow – passed me by so far. Knewton is an adaptive learning platform that provides personalised educational content. It accumulates data from students as they move through the learning process and then uses that information to make the process more effective by personalising the experience for each individual.

The net result is that the curriculum adapts to the needs of each user directly and then pieces together the perfect individual bundle of content for each student. To put it simply: if it works well, more people will be more engaged and therefore successful at learning as they will be presented with the information (and subsequently tested on it) in a way that suits them, as opposed to the ‘one-size-fits-all’ mentality that we’ve been forced to adapt up until today.

Big Data And Education

To me, it sounds like a no-brainer. It’s a fascinating use of Big Data (there’s that buzz word again) that has the potential to create significant change for the better on a massive scale. What’s great is that the success should be organic: the more students that use the platform, the better the experience should become. In the same way that search engines benefit from critical mass, the more information there is, the more accurate the personalisation to each student. Check out the video below for a bit more information.

Losing The Human Touch?

Of course, not everyone agrees. After digging around a little further online for information, I came across a fascinating and incredibly detailed blog post by Phil Macrae, a Canadian ‘explorer in the field of education’. Please do give it a read for a far more insightful commentary on the area than I could ever provide here. It provides a considered warning to such tech-evangelists (…guilty) against the simple replacement of the human dimension of learning with a ‘teaching machine’.

I’m relatively new to this subject so I have to remain open to persuasion. But it’s clear that Knewton are making waves. So far, they’ve attracted the notice of some pretty heavyweight players, including Pearson and investment from the Founders’ Fund and they’ve been recognised as a Technology Pioneer by the World Economic Forum in Davos (following in the footsteps of companies like Twitter, Firefox and Paypal).

The Potential Of Personalisation

It’s hard to say what education will look like in the future. Information is increasingly become simple to store and retrieve, disrupting the traditional methods that have been employed for many years. So it’s easy to believe that, like so many other areas of real life, personalisation must come into play whilst technology continues to drive down the costs. And that – surely – can only be a good thing.

Regardless of whether it’s likely to succeed or doomed to failure, as both a bystander and a parent, I can only be in favour of Knewton and what they’re looking to achieve. Whether they are the ones who actually succeed, by going after such an audaciously large goal, or simply prove to be the first of a new wave of technologies however still remains to be seen.

Do you think that technology will ever replace the need for classroom-based teaching entirely? Or would relying on technology too heavily within a learning environment actually damage the process? I’d be interested to hear your comments below.

photo credit: University of Maryland Press Releases via cc

Creativity And The Growth Of The Remix Culture

As a huge music fan, it’s been fascinating to watch the music industry try to figure out how to preserve the rights of its creators (and, by extension, its own revenues) whilst harnessing the efficiencies of digital distribution. We live in a very different world to pre-1999 and it’s been clear for a long time that a new approach is required. Yet the industry has collectively shown itself time and again to be either incapable or unwilling to turn that particular oil tanker around to take advantage of new possibilities.

A Lawsuit Waiting To Happen

One area that it has always struggled with in particular is how to deal with the remix. I came across a great article earlier last week on Girl Talk. Greg Gillis is a guy who plays live in big venues in front of a passionate fanbase ‘simply’ using uncleared samples of well-known tunes mashed together via a laptop. Of course, the record industry don’t usually take too kindly to this kind of thing and his mashups have been described as ‘a lawsuit waiting to happen’. And yet Greg Gillis doesn’t simply play live – he also releases albums with the material and, to the best of my knowledge, the record industry has yet to act.

Why Sampling Is A Creative Act

Here’s a question that divides some: do you think sampling is merely the theft of another’s content and has no individual artistic merit of its own? If so, how about a fairly innocuous six-second drum break from a funk track by The Winstons back in 1969. That one piece of drumming was sampled and “spawned several entire subcultures“. If you’re not familiar with it, just take a listen to some of the tracks that have used the ‘Amen Break’ (as it became known) over the years.

Look closely and we are increasingly surrounded by examples of existing content having been spliced together to create something that, for better or worse, didn’t exist previously. The past few years have seen an explosion in Remix Culture, across all forms of creative content, driven by the collapse in the cost of technology required (no longer do you need a film studio to edit footage), the increasing availability of digital content to be manipulated and the simultaneous growth of file-sharing and platforms such as YouTube which facilitate the frictionless distribution of the end-product.

Yet more fantastic examples of the way in which modern popular culture stands in many cases on the foundations of past creativity can be seen in filmmaker Kirby Ferguson’s series of ‘Everything Is A Remix’ videos (see Part 1, Part 2, Part 3 and Part 4).

You might also have seen another great talk on the subject recently that was given by Andy Baio (@waxpancake), the former CTO of Kickstarter. Andy was on the receiving end of a high-profile copyright action when he co-ordinated the creation of ‘A Kind Of Bloop’, a chiptune remake of Miles Davis’ classic LP ‘ A Kind Of Blue’. Somewhat surprisingly, the case arose not as a result of the music itself (he diligently secured all the necessary clearances before the release) but when the owner of the rights in the original LP photograph took objection to the pixellated cover art image on the final CD. A thought-provoking talk, I recommend you watch it and check out his blog post also which he fought to be allowed to publish as part of the settlement which ultimately cost him a serious chunk of his savings.

As Andy points out in his talk, exactly how should we be dealing with so many youngsters who are growing up believing that they are fully protected from any legal liability when uploading protected content to YouTube simply by adding the words ‘No Copyright Intended’? Let’s not forget that this is no small issue when the total numbers of individual uploads are north of 500,000 and continue to rise daily and the current system acts to classify each of those members of society as criminals.

Something isn’t working.

How The Law Isn’t Helping

It’s a big debate, with many engaged interests and it’s prompted me to dip back into ‘Remix: Making Art & Commerce Thrive In The Hybrid Economy’ by Larry Lessig, a guy I have a huge amount of respect for. Often described as the net’s most celebrated lawyer, he’s certainly the only lawyer I’d invite to one of those fictional dinner parties you get asked about from time to time. I’ll not go into the details about the book here as I intend to revisit it in the future but if you want a quick summary of the issues surrounding remixing in a modern world within 18 minutes or so, check out his TED talk from a few years ago.

For those that fancy getting into the issue in more depth, here’s the book in full (published, as you’d expect, under a Creative Commons licence from Bloomsbury Academic).

It Shouldn’t Be A Zero-Sum Game

I suspect that we’ll see a significant change over the next few years but to get there, society will need the input of as diverse a selection of interests as possible. Not simply the established music industry stalwarts nor the copyright abolitionists, but everyone in between those two extremes. Only then can we protect ourselves against the risk of the very real benefits arising from the creative process (financial and artistic, for individuals, organisations and society itself) being damaged to the extent that no-one wins.

(Photo of Lessig: photo credit: evmaiden via cc)

Why Google Glass Is Only The First Step

The Start of Something Big?

On the week that the first Explorer editions are being shipped to developers, I’m hardly alone in my excitement about just how important Google Glass could turn out to be. Not only for the applications that we can imagine here today, in April 2013. But more importantly for the potential that this type of technology brings for advancements across areas that we haven’t yet considered.

If you view it as a building block for the re-imagining of almost every daily activity, from work, sport or just basic methods of human communication, we can have no idea at this stage of how significant this next move into mobile computing/augmented reality will prove. However, I’m betting on it being a huge jump forwards.

I’m sure there will be issues with version 1 but we’ve got to be careful not to have unreasonable expectations. Bleeding edge products always lack the initial crucial customer feedback that can only come once you’ve let third parties loose on your product. And it’s precisely in that area, where people start to see how the technology could be used in their every day lives and make the necessary adaptions, that will drive a steep growth in its popularity.

…Or The Green Light For Conflict?

But putting the optimism to one side for a minute, it’s obvious that the path towards widespread adoption is not going to be straightforward. Moving past the geek-attraction phase (“ooh, it’s shiny, I want one of those…“), the technology unearths a whole raft of issues that will inevitably cause tension between different groups.

By far the best article that I’ve read recently about the impact of Glass is by Jan Chipchase, Executive Creative Director of Global Insights at Frog. It’s well worth taking the time to read through this, particularly given the calibre of the author. For a product that’s both “on your face and in your face”, he argues that Google is the right company to bring this technology to market as:-

[a business with] a recent record of genuine innovation that stretches/defines social and behavioural norms with a strong revenue stream and deep enough pockets to have a fighting chance of medium to long-term success.

Privacy And The Invisible Impact

Positions are starting to be taken on either side of the privacy debate around Glass. Yet amongst such high profile posturing, few hold solid research about how the human condition will be affected, consciously or otherwise, when we become acutely aware of someone wearing technology which can record our every move. How many of us would think twice before making a statement in the future if we knew that it was to be recorded and retrievable by a company whose goal was to index that data for the purposes of serving ever-more relevant advertising to you? As Chipcase writes:

Any idiot can collect data. The real issue is how to collect data in such a way that meets both moral and legal obligations and still delivers some form of value.

An Argument For The Wider Public Good?

One way to ease the widespread adoption of Glass is to enable anyone to access on demand the video feed being recorded by others around them. Transparency of information will no doubt help ease a few concerns whilst crowd-sourcing views to make them collectively useful is likely to convince people of the wider public good in certain situations, with emergency situations or entertainment events being the most obvious.

Regardless, It’s Happening

The issues surrounding the introduction of Glass – whether in terms of privacy, the ownership of data, legislation or the evolution of basic body language in a social setting – are only just now starting to be considered. But I for one can’t wait to see how things move forwards. There are bound to be mistakes but progress demands failures along the road.

You may not agree with Ray Kurzweil et al about his predictions about the approaching singularity – the point when technology and humanity are will no longer be separate (current predictions point to 2040). But this looks very much to me like a significant jump forwards along that path. And, one way or another, whether in Google’s hands or elsewhere, it’s going to happen. And it’s going to be a helluva ride.

photo credit: vyxle via cc

Filling In The Gaps With Tim O’Reilly

Tim O’Reilly is a guy that you should really pay attention to. He’s been a leading commentator around key technology areas such as publishing, Web 2.0, open data and the burgeoning Maker movement for a number of years. The organisation he founded, O’Reilly Media, lives by the mantra of ‘changing the world by spreading the knowledge of innovators’ and he’s viewed as something of a master at both identifying trends and amplifying them.

Despite this reputation, he claims that he’s not very good at predicting the future. Instead, he simply talks about things that are happening today that seem interesting to him. As William Gibson once said, “The future is already here – it’s just not very evenly distributed” and O’Reilly’s mission is to help smooth that process.

He recently gave a talk to the Stanford Technology Ventures Program which is well worth checking out. Here are a few key themes from the talk:-

DO LESS

The importance of mobile computing is clear to anyone looking at website analytics. Yet we’re still very much in the early days of mobile and the change that’s coming is much more fundamental than simply a shift in the way that people access your website whilst on the move. Why? It’s all down to that piece of technology that you carry in your pocket which increasingly knows more – and better – information about you as an individual.

Why do applications like Foursquare or Runkeeper, for example, still need us to take an active part? Why do you have to check-in or click a button to tell your phone that you’ve started running? It already knows this information. There’s a revolution coming as businesses get built on the foundation of information that individuals don’t even have to go to the effort of submitting themselves. It’s all being done for them.

You’ve probably heard of Square. Set up by Jack Dorsey, founder of Twitter, it lets users accept credit card payments on their mobiles. But the clever thing is that if you have the App open on your mobile, you can walk into a shop that’s using it and the cash register already knows that you’re there. That connection’s already been made – it’s live and waiting, ready for you to use it.

SOFTWARE ABOVE THE LEVEL OF THE DEVICE

Too often, we’re still thinking about software as being something that lives inside a device. A good example is Linux. For many, it’s at best some kind of mysterious operating system that tech folk discuss and has no relevance to the laptop they use for work. Yet if you’re searching on the web, the chances are high that you’re using Google – which is powered by Linux.

RETHINK CUSTOMER EXPERIENCE

Think about how to update the work of employees to make use of the fact that individuals will increasingly be connected with the internet in more powerful ways in professional settings.

Who doesn’t love the videos of skydiving prototypes of Google Glass? But whilst the current excitement (and concern) is currently focused on the consumer applications of this technology, once you start thinking about how these technologies could potentially impact workflows, a new picture emerges. Give people ready access to the indexed knowledge of mankind and it’s fairly easy to imagine how certain low-level jobs can be turned into high-level jobs. After all, why train for years to learn something when you can simply follow live instructions?

MAN-MACHINE SYMBIOSIS

The phrase comes from a 1960 research paper by JCR Licklider that foresaw the development in cooperation between men and computers. The technology businesses (such as Google and Amazon) that survived the dot.com crash before moving on to further success did so, at least in part, because they worked out how to get their users to contribute to what they did. Take a bow, Web 2.0.

MORE (AND BETTER) DATA

Peter Norvig, Chief Scientist at Google once said: “We don’t have better algorithms. We just have more data”. Look at Google’s self-drive car. In 2005, the winner of the DARPA Grand Challenge, a competition for American driverless vehicles, drove 7 miles in 7 hours. Yet only six years later, Google has designed an autonomous car that has driven hundreds of thousands of miles in ordinary traffic. So what changed?

Google had access to the data behind Google Street View. Or, to put it another way, the recorded memory of humans who drove those roads, stored in a global brain.

CLOSE THE LOOP

Investor Chris Sacca has been quoted as saying “What I learned from Google is to only invest in things that close the loop”. That is an incredibly important principle for startups who should always be trying to discover the loops in the world that their business can close.

For example, Uber is a taxi business that connects individuals with luxury cars for hire. The app knows the location of both the passenger and the driver and makes the connection so that you always know precisely where the vehicle is. Uber has closed the loop.

Think of just how powerful the business becomes when combined with the rating mechanism that I mentioned in an earlier post has been integrated. A relatively small change now has the potential to completely disrupt the traditional regulation of taxi cab services. No longer does a cab driver just need to be trained and certified. In the modern world, he or she must also display social validation in the form of positive customer feedback – a bleak future no doubt for those drivers who drive carelessly, treat customers rudely or even play music too loudly in their vehicle.

CREATE MORE VALUE THAN YOU CAPTURE

O’Reilly argues that the concept of a business that exists solely for the purpose of making money for its shareholders is fundamentally flawed. Every business has an obligation to create value.

Current high-profile tech businesses (see Etsy, airbnb and Kickstarter) are successful precisely because they’ve focused on building an economy around their business. It is not simply about making money for themselves – they want other people to succeed on the back of what they’ve created in building an ecosystem.

YOU WANT TO LEARN? FAIL BIG

To paraphrase a poem by Rilke:

What we fight with is so small that when we win it makes us small; what we want is to be defeated decisively by successively greater beings.

Find hard problems. Take the example of a guy who quit a well-paid role with a hedge fund to work for a high-altitude (and high-risk) wind energy company. When asked why, he had one simple answer. He’d wanted to work for the startup was because ‘the math is harder’.

People who want to work on a hard problem are the types of individuals you want with you in a startup. If you can get people to work on things that matter and inspire, it will carry far more weight than being driven by simple monetary gain.

JOIN THE DOTS

So – how hard can it be?

Simplify, move to the cloud, automate, enhance intelligence, collect better data, help other people succeed and set goals worthy of your efforts.

There has to be a business idea or two in there, don’t you think?

(photo credit: Patrick Hoesley via photopin cc)