Archive for start-ups
As I began writing this post, my wife was in a car a thousand miles away with a brand new smart phone. I received a call on someone else’s phone informing me that my wife’s smart phone had quit working completely after following the instructions she received from tech support to fix the GPS system in her phone. The GPS had quit working that morning after tech support had her do another set of procedures to fix another problem. Now she had no GPS and also couldn’t make or receive calls. The problem would later be resolved. I’m still not sure how much of it was due to network trouble (the black hole effect I describe below), hardware trouble, user error, and questionable tech support, but after almost 3 weeks of experience, I can say two things about the Palm Pre: 1) It is a terrific and beautiful phone with many innovations, and 2) Palm is doomed. Doomed, I fear, unless they make some changes in their business model and better consider the harmful long-term impact that some short-sighted decisions may have. The exciting work of the innovators within Palm may be destroyed, in the long run, by Innovation Fatigue Factor #5, “Flaws in Decision Making and Vision”(the subject of Chapter 9 in Conquering Innovation Fatigue).
The problem, in a nutshell, is that Palm and Sprint (the only network for the Pre) apparently have decided to focus on getting the limited production of Palm Pres into the hands of as many users as possible, rather than letting tech support staff have them. The quality of customer service is being deliberately sacrificed to grab more market share and get more buzz among consumers, but this may backfire and create negative buzz due to some compounding factors. Some users may be happy with what they can figure out on their own and never need tech support, but I think many Palm Pre users are likely to need support. I say this because users are not given the Palm Pre manual and the manual in PDF form is not provided on the Palm Pre, cannot be downloaded from the Palm Pre, and even if loaded onto the Palm Pre, cannot be read by its PDFView application without crashing the phone. It’s a painful irony that makes aggressive users rely more than they should on tech support, and yet tech support is in the dark. When you call 888-211-4727 for support, you will be speaking with someone who has never used the phone, perhaps never even seen one. You can usually get to a human in under three or four minutes, which is wonderful, but simple questions can take far too long to be answered, if an answer ever comes. If uncorrected, this will drive consumers away from this phone and toward the many alternatives that can do many of the same things.
Here’s an experience that illustrates the problem of using inexperienced tech support instead of people familiar with the phone. I had a problem with a disappearing icon. There are five icons across the bottom of the screen for a newly installed phone: one for dialing, one for contacts, one for email, one for the calendar, and one that brings up a directory of apps and services. On day two of using my phone, the email and calendar icons disappeared. I’m still not sure how. There were suddenly just 3 icons, not five. I was able to still find email by navigating through the apps, but wanted the convenience of rapid access to email that the icon provided. So how does one get it back? Nothing in the skimpy guide given to new users addressed the issue. So I called tech support.
After being escalated through three levels of tech support over the course of an hour, I still hadn’t found anybody who could answer that question, so I gave up when, mercifully, the signal dropped. The top-level person didn’t call back. The next day, when I had to call again for another issue, and while talking to a rep, I asked this new guy if he knew the answer to the icon puzzle. He put me on hold for about 60 seconds, and then came back with the simple solution: press any icon in the apps window for several seconds until it glows, then drag it into the row of icons at the bottom of the screen and it will stick. I was delighted. “Wow, that’s great. Do you mind if I ask why you were able to help so quickly when three levels of tech support yesterday all searching for the answer couldn’t help?” “Oh,” he said, “there’s another guy over here who owns a Palm Pre. So I asked him and he was able to show me.” Ah, someone with experience – someone with a phone!
Because the person I reached knew someone with experience, he was able to reach out to his local value network and get the knowledge I needed, and he could do it in 60 seconds, compared with a fruitless hour of my time and Sprint’s when talking to people without experience. My wife and I have been contacting tech support a lot– far too much, but usually out of necessity–and nearly everyone I’ve talked with didn’t know much about the phone at all. Thank goodness one person had access to someone who had one.
By going for short-term market share by getting more sets into the hands of the public instead of into the hands of your own support staff, Palm is taking a huge risk and incurring costs that may well outweigh the benefits of the accelerate distribution to the public.
The Entrepreneur Daily Dose Blog from Entrepreneur Magazine discusses a new web tool that calculates business success. The Odds of Success Calculator from StartupNation.com takes 8 factors into account that have been correlated with the eventual success of a startup. They note that entering the information for Twitter gives it only a 46% chance of success:
The Wall Street Journal blog, Venture Capital Dispatch, tested the calculator using Twitter’s information. The Odds of Success Calculator gave Twitter a 46 percent odds of success over the next five years. The lack of confidence shown by the online tool for one of the most revolutionary startups underscores the improbability for any algorithm, much less one constructed of only eight variables, to provide accurate or even directional guidance. Think about it. If you were Evan Williams, the chief executive of Twitter, would you quit?
46% chance of success? That’s better than my current estimate for Twitter’s success, if success is defined as being profitable. Lots of money sinks achieve popularity – just try handing out cash and you’ll see. But sustained profitability? I give them a 40% chance of success. And that’s terrific, because in reality, the odds of success for any startup are painfully low. Innovation is a high risk activity and failure is the norm. There are things you can do to increase you odds and reduce the risks, but nothing short of totalitarian power will guarantee your success, and even that tends to be short-lived.
In Conquering Innovation Fatigue, we look at the many barriers to innovation success and reveal many steps that bold, courageous, persistent innovators can take to overcome them. But even when all is done, there are market risks, legal risks, political risks, technical risks and other risks that cannot always be anticipated or easily conquered. But by taking the right steps, you may increase your odds by five to ten times or more. For example, Clayton Christensen has shown that if an innovation can be positioned as a disruptive innovation, its odds of success increase from about 6% to about 36%. Still challenging, but much more likely to succeed.
I don’t think the success calculator should be taken too seriously, but I agree that it may be a helpful reminder that even well-funded efforts with lots of positive factors on their side may still face an uphill battle in achieving success. That’s the reality of life and of innovation. Nothing in the journey is meant to be easy. But when you do realize success, it can be very rewarding to see the difference you’ve made. So go for it with a combination of wild dreams and tempered realism. The realism part comes in listening to sound advice and understanding the risks that you face, in spite of tremendous hope and enthusiasm. You will be beaten down. It’s the ones who can keep moving forward in spite of the initial barriers that are more likely to win the prize.
Anecdotal evidence of innovation thriving in times of economic trouble have found broader confirmation in a recent study from the Kaufman Foundation. Their press release, “Kauffman Foundation Study Finds More than Half of Fortune 500 Companies Were Founded in Recession or Bear Market,” summarizes the story nicely. Here is an excerpt:
According to a new study by the Ewing Marion Kauffman Foundation, challenging economic times can serve as the rebirth of entrepreneurial capitalism, leading to the creation of much-needed new jobs.
The study, “The Economic Future Just Happened,” found that more than half of the companies on the 2009 Fortune 500 list were launched during a recession or bear market, along with nearly half of the firms on the 2008 Inc. list of America’s fastest-growing companies. The report also suggests a broader economic trend, with job creation from startup companies proving to be less volatile and sensitive to downturns when compared to the overall economy.
“You can see the story of the American economy in these numbers,” said Carl Schramm, president and CEO of the Kauffman Foundation. “History has demonstrated this time and again: new firms create new jobs and fuel our economy. Policies that support entrepreneurship support recovery.”
The study points out that while recessions often create widespread economic grief, they also can encourage potential entrepreneurs, acting “as an extra spur to founding a new company, if the founders perceive their prospective competition might be weakened.” Rising unemployment can benefit new enterprises: entrepreneurs may view unemployment as an opportunity to start a company, and seize the advantage provided by the ability to tap into a larger pool of potential employees.
This is no time to succumb to innovation fatigue, as painful as this recession is. This is the time to ramp up innovation efforts on all fronts. The winners of the future are being shaped now.