I’m always fascinated by business models, i.e. at how entrepreneurs and companies put together services in order to make money from them. I’d call it the source code of business if I hadn’t seen the other source code in Luxembourg —legal and accounting—but arguably that’s more like binary code, i.e. 99% unintelligible.

Sarah Lacy writes about SMSONE, a ultra-local news provider in India similar to Outside.IN, a Union Square Ventures funded US-only company that provides news updates via the web. SMSONE does it, as the name suggests, via SMS. And it spreads through a franchising model, working with local entrepreneurs that pay a franchise fee and also collect a share of the advertising revenue from locally focussed businesses. It is able to do this because of something that apparently doesn’t exist in the US (but does in Europe): receiving an SMS in India doesn’t cost the recipient anything.

When reading about this, I was immediately reminded of a similar business model employed by a Dutch entrepreneur in Russia, Ms. Annemarie van Gaal, founder of Independent Media, a company that distributed Russian versions of magazines like Cosmopolitan, Marie Claire en Good Housekeeping (source). When she spoke at the Star entrepreneurial seminar in Rotterdam a year ago, she told us about how she differentiated herself from the competition (paraphrased as I haven’t got my notes with me):

The trouble with getting your magazines distributed in Russia was that you had to pay quite a lot of money (some would call it bribes) to companies that would then take care of it… badly. Instead van Gaal decided to do it differently. She would hire street kids to distribute her magazines, similar to the gold days of newspapers: the newspaper boy.

If you read Sarah Lacy’s account on Techcrunch, you’ll see that SMSONE does it similarly, hiring local kids, often without much education, to take care of distribution. Doing it via official channels is likely a nightmare over there, and centralising distribution kind of defeats the purpose of micro-news.

It’s a different way of thinking, which many of us westerners don’t have. I mean, would you entrust your products to a beggar on the street or to a street musician? Not only is it probably against the law (except if the government does it), we pride ourselves on our super-organised infrastructure, where anything from temp-workers to interns are there to provide companies with a flexible workforce, and anything from printing presses to mobile internet exists to produce and distribute your stuff.

Of course, I wouldn’t just leave you with these two examples. In the beginning of 2008, Boston Consulting Group published a study of “local dynamos”— domestically focussed companies, which use creative business models to capture value from emerging markets that are filled with challenges, like lacking infrastructure and low-income consumers. The map below shows how widespread these companies are.

Some very interesting examples are mentioned, like:

• Shanda, a Chinese gaming-company, that, in order to combat software-piracy, focusses on providing interactive services through gaming, services that are impossible to pirate. And to overcome a lack of a financial infrastructure to pay for online services, they work with pre-paid cards.
• Indian CavinKare, which sells cheap sachets of shampoo through small local retailers, while using educational marketing to teach customers how to use their products.
• Goodbaby, which targets the many 1-child families in China, who are both willing to spend more on their child than multi-child families would, but are also in need of education.
• Amul, an Indian food-and-beverage-marketing-organisation, which collects and pays for milk locally, while tracking all operations via satellite and uses ERP solutions to make analysis based on the data and gauge whether future supply needs to be increased or decreased.
• Wimm-Bill-Dann Foods (Russia), which works extensively with local partners, and has devised leasing schemes for expensive machinery to boost their production and is able to serve 280 million consumers nation-wide.

The BCG, of course, takes the stance of its customers, Western companies, and the study is mainly aimed at how multinational companies (MNCs) can replicate 6 of these dynamo’s advantages, in order to compete with them. They are:

1. Customising to local needs – which involves first understanding these needs, and then meeting them.
2. Devising innovative business models that overcome local challenges – a logical follow-up to the last point, how to make money from the info you gained.
3. Leveraging the latest technologies – meaning that these emerging economies are less burdened with traditional infrastructure and quicker on the uptake of more affordable, newer, and easier-to-spread technology, e.g. mobiles.
4. Benefiting from low-cost labor and overcoming shortages of skilled labor – there’s two ways to look at this; a local workforce will be better equipped to interact on a local level, a highly-trained workforce will be better equipped to run a business. Tough call.
5. Scaling up fast – Russia, India, China, Brazil, etc. are all giants with the promise of huge rewards when you capture them. Many of these dynamos grow quickly through both through acquisitions and building up their network of suppliers and distributors.
6. Sustaining long-term hypergrowth without imploding – this kind of follows on to the last point

Some of the Western companies mentioned, which have managed to compete on a local level, include:

• General Motors, which has adapted its luxury-liners to meet the demands of its Chinese customers, who are usually sitting in the back;
• LG, in China, which has learned that the audio-quality of its televisions is more valued by its customers, who often reside in noisy environments;
• Carrefour, which has started to work with local municipal governments in China, as these don’t meddle in their operations like local dept. stores would, and are able to provide access to prime locations;
• Perfetti Van Melle, in India, a candle/chewing-gum manufacturer, which has found local means to advertise, interacts frequently with local partners, and has adapted its products to local tastes;
• and Yum! Brands, which owns Pizza Hut and KFC, and has adapted its menus to meet local Chinese tastes, started a new food-chain aimed specifically at the market, and uses its international expertise to integrate IT, lean supply chains, and a higher level of food standards into their offering.

It shows the value of out of the box thinking in terms of reaching people, and I believe that traditional “Western” thinking should long ago have been thrown out the door anyway, particularly in light of the troubles that media-, automotive, and financial industries are going through. We are in the flux of disruptive innovation and only those quickest to grasp new technologies and ways of thinking are able to survive another day.

No shortage of lessons on that from entrepreneurs in emerging economies…

Vincent out

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I’m no lawyer, my only exposure extends to our company law activities at my workplace and past legal battles regarding farming ground and such—did you know that as a farmer you can let you cows graze on someone else’s lawn and if he doesn’t object, you can argue that you are the owner? At least in the Netherlands, this happened to my family once.

I think there is a certain danger here, if Apple doesn’t fight it, which it does, while Palm Pre continues to try and gain access anyway. It seems very shady on Palm’s side, but doe sit have a case here? I will discuss the strategic implications, as far as I can identify them.

Apple, as we all know, is a very interesting company. It is very vertically integrated, building hardware, software, and has a large influence on the connection between them (e.g. mobile internet), as well as the content provided on them (e.g. music, movies, the app store). Some would call this a monopolistic situation and it seems strange that it gets away with this, while Microsoft, with something that is, for now, as trivial as a browser, does not (in the EU at least).

iTunes is a powerhouse for media and mobile software, but this can be segmented into different areas and different phases. The iPod was released at the beginning of this decade (phase 0), shortly after iTunes, which then built up a power-position for music (phase 1). As the iPods became mobile computing devices, more content was being shipped via iTunes, such as video and those little games (phase 2). Finally, 2 years ago, the iPhone was released, with about a year later, the App Store (phase 3).

Music, phase 1 of ITunes’ power play, is the area which the Palm Pre (to my understanding) is impeding upon. You could easily see Video being the next thing to sync, though I’m not sure if this is possible now. Unless the iPhone takes a step back towards a more web-app-based approach, I don’t see the Palm Pre being a threat to Apple on the App Store front.

Apart from a phase-based perspective, there is also the matter of the lowest common denominator (LCD). Why do people buy mobile Apple products? I would argue that nearly everyone buys an iPod, because of playing music (and not so much video), while a growing niche segment buys the iPod Touch and iPhone for applications and games, as well as media. The LCD is music and it continues to be of strategic relevance to Apple, even with the hyping of their App Store, where Apple will continue to stay entrenched indefinitely.

So, from a strategic perspective, Palm Pre does not stand a chance. Apple will continue to make iTunes incompatible with each future version. Legally, on the other hand, I am not nearly qualified enough to make that assessment, though I think the “cow argument” may apply. If Palm Pre keeps trying hard enough, and continues to get a user-base that desires this link, there may be a legal argument towards loosening Apple’s grip on mobile media.

Since iTunes isn’t very profitable for Apple, I’m not sure what the implications will be for it, but I expect them to fight ’till the last breath.

Vincent
(Picture has no relation to this topic, but is of a cool movie nevertheless)

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The coming weeks, I’ll be pretty busy with a business development project in the technology sector. As usual, I cannot discuss it in depth (ok, it’s Fight Club, we bash each other half to death every week and can’t talk about it), but I want to discuss some stumbling blocks that we’re sure to be hitting. To give you an idea, some of the questions are now:

• Patents and their limitations: while we have filed for a number already, the issues are whether there is prior art and how to deal with it, as well as whether patents are really enough protection against competitors. Since, I’ve attended a pretty interesting New Venture seminar last week on IP, I think that will be my next post.
• The usefulness of market research: I breached this topic before already, but I don’t believe in researching innovations that consumers cannot touch yet, and will instead focus on expert-input, I think, as well as getting a testable prototype ready as soon as possible (we’ll be looking for subjects!). I hope to have something more to write about it soon.
• Pricing strategy: this is really exciting! I’m reading the excellent book “The strategy and tactics of pricing” and am in the position to apply some of it’s lessons now. Thoughts about it to follow on Tech IT Easy soon, but to give you an idea, it’s about the battle between costs, what the competition charges, and what your customers want to pay for your product.
• Dealing with bureaucracy: Since, we’re going to be applying to an incubator, it might be interesting to see how that process goes.

In other, equally important news:

• Verteego: You may have noticed a new badge on our site. It’s the Verteego sustainability badge, which links to a report analysing our weblog. I’ll be trying to increase our grade a little there/here and will write about my impressions. I didn’t even know that I can take leave for pregnancy-reasons, wow!
• Public transport in the Netherlands: I don’t know how it is in your country, but we’re doing exciting RFID-related stuff here. Starting February, we’ll be going through the transition of going from a stamp to a beep, and I’ll write a little about my impressions here.

That’s all I can predict for now, and I hope to make it all a reality soon! Until the next time, on Tech IT Easy!

Vincent

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It feels strange to start 2009 with a dream, but a new year means doing new things and this one felt right. I sometimes have some pretty strange dreams and find it worthwhile to write it down. I don’t quite have notebook lying next to my bed, but close enough. This one was strange too, much stranger than what I’m about to tell you.

In my dream I was looking for a Christmas gift for my brother, a T-shirt actually. For some reason, I imagined that I entered some sort of electronic boutique to do it, I went to pick a shirt, and went to try it out (my brother and me are pretty much the same size).

So there I was in the changing room when I noticed some sort of display on my shirt. It gave me all kinds of options, many of which I can no longer remember, but basically they were something like:

• “Do you want to see the news when eating breakfast?”
• “Do you want me to operate as a timer when brushing your teeth?”
• “Do you want to see traffic information when driving to work?”

You get the idea.

I then had another dream within my dream, which was about imagining other applications, like:

• You’re listening to the radio and the thing suggests Wikipedia entries related to the topic.
• You’re doing exercise, and it suggests other related ones, with instructions.
• You put it on and it sends out a signal to other clothes that match and they start beeping.

And then I woke up, good morning and happy new year, guys!

Ignoring some inconsistencies, like where the display could be on a short-sleeved T-shirt, whether it’s not a little unnecessary for it to display traffic information or a timer when brushing, if those technologies already exist in cars and electronic brushes, and some others, this is the way I imagine it, let’s call it e-clothing, to work:

• It has a wireless connection, which enables it to talk to other devices (including clothes.)
• It has an accelerometer, which senses things like you brushing or doing exercise.
• It can be programmed, manipulated within or remotely, to become relevant to your context.
• It takes on the colour of your clothing when it’s dormant.
• It also has no problem being folded, etc., so it’s like e-paper or better, like e-cloth.

That’s all for now. I would personally love for electronics to be part of our everyday clothing, it makes a lot of sense when thinking about exercising-contexts, where other devices are cumbersome, and for finding matching clothes (hell for some).

Hope you had a happy new year celebration!

Vincent

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A lot more multi-part blog posts on Tech IT Easy; finally some continuity again, which is nice for both you and me! So, today was the ceremony for stage 1 of the New Venture business-plan competition, the submission of the idea, of which a prize of €500 was to be won by 10 contestants. As I expected, for several reasons, I wasn’t among those 10, though the race isn’t over yet! The next submission is February 26th 2009, the feasibility-study, for which I may compete with my own idea or change it (to another, if needed). The feasibility of an idea entails technological and business aspects, and there’s still a lot to be worked out on both ends. I’m letting you know for completely selfish ends—it would be nice to see a familiar face, if only on the other side of the court. Of course, one team-member must be residing in the Netherlands!

So how was today? I wasn’t really top-fit as it feels like I’m doing a 101 things and am a little overwhelmed, i.e. stressed out. So I didn’t come with high expectations, mostly to check out the competition and perhaps meet some people. The event was presented by Roland Koopman, a Dutch TV-presentor, and the awards were handed out by Pim Batist, founder of SellaBand.

Two “insider”-stories were presented, one was SellaBand and other was Taniq, a rubber-company, for lack of a better word—the company makes it so that rubber hoses and similar are more stable, while using less materials and no metal. You should check out the film their site, it’s very well-made. Most important insight from Taniq: the importance of coaches/mentors, which appear to be abundant if you take part in the competition, for bouncing off ideas & solving problems. But also on the hiring process—when the three young founders decided to look for some “grey haired” commercial talent, they found out, the hard way, that big-company sales-talent is not the same as small-company talent. In the end, if you can’t sell your own products as an entrepreneur, you’re probably in trouble!

The best example of this was perhaps Pim Betist; what a magnetic personality! SellaBand is a crowdfunding mechanism for bands, who, instead of walking to a record-company (for whatever reason), can place themselves on the site, after which fans can vote—with their wallets!—for the band they like. And with that a music-cd, etc. can be produced… He came up with the idea in 2001, residing in New York. Then, for reasons unexplained, he decided to take on a 3-year job at Shell, until he finally quit that job, sold his car, moved into some (illegally) free housing and focussed all his energy on working out the idea. He recruited a guy from Sony BMG as co-founder, by posing as a student wanting to write a thesis and holding several meetings with the company under that subterfuge—a side-note: recruiting people from Sony should never be hard, these guys, from my experience, are all chronically made unhappy by the politics in that company. I’m a little more into music over rubber, as you can tell, but that’s maybe also because the presentation was excellent. Not that Taniq didn’t have a nice movie either, definitely to be watched on their site!

So what about the winners? If there was a definite theme to the evening, apart from innovation, it was that pretty much all of the prize-winnars had a sustainable idea. It wasn’t necessary green, but more efficient, more ethical, more social, etc. What I remembered was:

• a one-handed fire-extinguisher for handicapped people
• a crowd-funded electrical cart for people in third world countries
• a way to make fuel consumption more efficient in cars
• a sensor that measures how people sleep

On the off-chance that you are planning to take part in round 2 (send me a mail, if interested), that should give you a hint of where to direct some energy at! Looking at the credit crisis now, it should perhaps not be a surprise that attention is being drawn towards both efficiency, but also more sustainable ways of doing things—that is, incidentally, one the conditions that will probably be imposed on the car-companies, if they receive financial aid: to become more green.

That’s it from me on this subject! It’s not too far a leap for me to write a feasibility study, but I’ll only know for certain if I’ll take part a few months from now. So, let’s hope for a part 3, 4, and beyond!

Have a nice weekend!
Vincent

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Where does most radical innovation come from? Where, as an individual, can you expect to get plenty of access to that type of information? If your answer isn’t universities, please let me know!

As promised, I’ll be focussing more on innovation on Tech IT Easy these coming months, and you can be sure that my search for content will focus on universities and other institutes, rather than the internet.

It’ll be interesting challenge for sure, particularly as I’ll be reading a whole bunch of dry scholarly articles and dissertations, as well as tracking down interesting organisations for interviews, to hopefully produce something of value for you and me.

As I’ve asked before, if you have interesting ideas for content of this nature, or even want an interview, article, or thesis (summary) of your own to be published here, please drop a comment or mail!

Bookmark this site for more info!
Vincent

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Just tried the FriendFeed beta, which was released to the public last night. It introduces some nice features, the main one being that you can now categorise your “friends” into lists. The thing is that the more both FriendFeed and Facebook evolve, the less I can tell them apart anymore.

Some differences are the app-ecosystem on Facebook and the amount of feeds you can feed to FriendFeed (though I think some apps take care of that). And maybe FriendFeed will eventually integrate apps as well, who knows?

The thing is that I don’t mind. FriendFeed is my way of staying in touch with the countless people that have something to say online. It’s unrestricted. Facebook is about the people that I want to have strong ties with, and I purposely don’t add people that I don’t know. So both can definitely co-exist as far as I’m concerned.

But that doesn’t take away that we essentially have a clone on our hands, and it’s a good thing that patents on the internet are apparently not worth squat anymore.

Vincent

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