The future of marketplaces

Marketplaces are some of the hardest businesses to build (as our own testimony at PeoplePerHour shows). They are complex beasts with lots of moving parts, the parts need constant tweaking and polishing, and the sum of the parts – when they are put together properly – is greater than the whole (the ‘network effect’). It takes a lot of hard work, analysis, creativity and most of all persistence to get to what’s commonly called ‘critical mass’. But once you do marketplaces are some of the most defensible and beautiful businesses.

If you’ve read the latest Malcolm Gladwell book What the Dog Saw  (another masterpiece of his) there’s a chapter on ‘The Ketchup Conundrum’ which addresses the question of: why has the monopoly once held by French’s mustard been broken whilst that of Heinz ketchup hasn’t? In that chapter he refers to something called ‘umami’ which apparently is one of our five human palates (along with salty, sweet, sour and bitter). Umami is the thing that blends it all together so that the sum of the parts just works. In other words: you could deconstruct ketchup into its ingredients and put it back (or Coke for that matter) fairly easily (in fact they are listed on the label!). What’s hard is to get the umami right.

As with food consumer taste is getting more sophisticated over time. So the umami needs to keep up with it. There are many more condiments and food products today to evolve umami to suit people’s evolving taste buds. And similarly there are more tools today than ever to do the same for marketplaces  to serve people’s growing demands.  What began as nothing more complex than listings sent to people via email (the origins of Craigslist), evolved to be two-sided listings (‘wants’ and ‘offers’) online called  Classifieds, which later evolved to be ‘community marketplaces’ with richer profiling, online reputation systems (the eBay franchise), and later social integration (the Airbnb  franchise). Today we are witnessing the next step change.

This I believe is the beginning of Marketplaces 3.0.  Rich profiling and social integration which no more than a few years ago was pure genius is no longer enough. Those are great features that serve discovery – giving customers the tools and date to make more informed decisions.  In the era we are entering people want the exact opposite: to NOT make a decision at all. They want the smart box in the middle to do it form them.

The best example of this is Uber. Uber’s genius extends far beyond  letting you book a taxi. Its the black box in the middle that sets the right price to match supply and demand in real time (as we all know from the infamous price hikes), and route the most relevant, available cab near you with a satisfactory quality rating. You don’t interview your taxi driver, or negotiate prices (a notorious albeit fun experience for anyone who’s taken a ‘mini cab’ in London on a late Saturday evening!). Nor do you have a choice to compare. It’s just done for you.

This ‘Uberized’ experience will be the next evolution of marketplaces. The platform in the middle  which today connects the two sides to any marketplace will evolve to become an ‘end to end’ experience with the software in the middle taking a lot more decisions on the customers’ behalf.  We are moving from light software with liquidity being the name of the game, to deeper software with liquidity as a feature.

There is a clear trade off: standardization and convenience Vs. flexibility and diversity.  So for the more arcane and ‘long tail’ inventories that the applications serves this may be harder and will require much deeper technologies, leveraging the power of big data to make sense of the chaos in the middle. For more commoditized categories like a taxi ride it will take off much faster.

This is why at PeoplePerHour we launched SuperTasker: an Uberized marketplace for  (initially) a few digital services categories that are easier to ‘packet’ and standardize. We are an end-to-end experience much like in the Uber analogy: we deploy the data and information we have from over 600,000 profiles on the platform and hundreds of thousands of completed jobs, to take out all the decisions the customer needs to take in a classic two-sided marketplace: the ‘who’ (or what), the ‘how much’ and the  ‘when’ . The customer simply selects a task and the ‘black box’ in the middle does the rest.

For now SuperTasker is focused on small tasks that are easier to standardize, like design edits and production of digital content in highly common formats (banners, infographics, logos, standard article formats etc). But the vision is to deploy the leanings from that to many more categories to scale it. Not surprisingly Uber is expanding brilliantly into categories outside cabs, leveraging the technology and logistical backbone to do increasingly many more things (I got ice cream delivered to me in Miami recently via Uber! Brilliant)

No doubt this new paradigm shift will (sooner than we can imagine) get disrupted again by a fourth (or fifth depending on where you start the count) evolution to marketplace models. What that will be is still uncertain. But technology has shown again and again that is is not without a sense of irony. One era’s fad is the next eras nemesis. So automation and de-personalization may well loop back to a more advanced and mature version of what we have today.

be-snazzy-com:

A bit of India in London
What if you could find the very best of India’s handcrafted embroidered bags in London?  Lucky for you, we’ve done all the work, creating a fresh new range of modern ethnic bags and clutches handcrafted specially for be-snazzy by local artisans in India. On Sunday, May 18, from 6pm until 10pm, we’ll be exhibiting our range for the first time in Notting Hill’s quirky bar Trailer Happinessin an intimate pop-up shop / launch eventopen to all.
 
Online boutique www.be-snazzy.com was launched just a few months ago by Stefani, a young entrepreneur who has a passion for quirky and unique accessories. Her goal was to create a website where one could find the hidden little gems that you would normally find whilst on an exotic holiday in Greece, or in a little stall in one of London’s many hip fashion markets. For SS14 Stefani went a little further, when she discovered the beauty and abundance of India’s art of embroidery and decided to bring it all the way to the United Kingdom. 
 
“I wanted to bring something truly different to the brand, and as a lover of unique, exotic fashion, I decided that there’s nothing better than owning a one-of-a-kind bag, made ethically and hand sewn by artisans in a place where the art of embroidery is so rich and diverse, such as India”, she says. “When I started my research I was simply astounded by the history and skill or a particular tribe, the Banjaras”.
 
All bags are handcrafted using vintage embroidery and ancient tribal textiles by the Banjara tribe. According to some authorities, the Banjara lineage goes back some 2000 years. The Banjaras are said to be the descendants of the Roma gypsies of Europe who migrated to India through the rugged mountains of Afghanistan before finally settling down in Rajasthan. The colourful stream of the Banjaras began to travel down to the South in the 14th century.
 
Join be-snazzy for a sneak peek into their new range and choose your very own statement bag for the Summer season. Fashion bloggers and members of the press are eligible for a special discount. For any further information join our event here or find us on Facebook

“Look, kiddie. I built this business by being a bastard. I run it by being a bastard. I’ll always be a bastard, and don’t you ever try to change me.”

— Charles Revson to a senior executive in the company

The main essence to The Innovators Dilemma

The Innovators Dilemma is arguably one of – if not the - most important book in describing how technological innovation works and why almost always the incumbents and leading players in markets fail to capture the next wave of innovation in their market   and have their lunch eaten by a newcomer. This book is so good I read it multiple times and every time I learn more.  Below I share what I think is the most important excerpt from this book which captures its key essence (although I highly suggest anyone operating in the technology business to read the entire book)

“The reason [for why great companies failed] is that good management itself was the root cause. Managers played the game the way it’s supposed to be played. The very decision-making and resource allocation processes that are key to the success of established companies are the very processes that reject disruptive technologies: listening to customers; tracking competitors actions carefully; and investing resources to  design and build higher-performance, higher-quality products that will yield greater profit. These are the reasons why great firms stumbled or failed when confronted with disruptive technology change.

            Successful companies want their resources to be focused on activities that address customers’ needs, that promise higher profits, that are technologically feasible, and that help them play in substantial markets. Yet, to expect the processes that accomplish those things also to do something like nurturing disruptive technologies -  to focus resources on proposals that customers reject, that offer lower profit, that underperform existing technologies and can only be sold in insignificant markets– is akin to flapping one’s arms with wings strapped to them in an attempt to fly. Such expectations involve fighting some fundamental tendencies about the way successful organizations work and about how their performance is evaluated.”

A frequent misinterpretation of the innovators dilemma is that incumbents (described above as great companies which in many cases they were) fail to develop these disruptive technologies or to embrace them due to the inability of the organization to adapt operationally or technologically to these new innovations.  In other words conventional theory zeros in on the inability of management to spot, develop or reorganize to bring these new technologies to market. That is plain wrong and the opposite is in fact shown to be true.

What the theory (and the extensive supportive evidence) in fact supports is that in the incumbents are most often the ones to spot and develop these technologies  and reorganize themselves just fine to do so. The problem is t in fact they fail to value them properly because they  apply them to their existing  customers and product architectures (what the author calls ‘value networks’).  Often these new technologies are still (at their early stages) weak  for the more advanced and mature value networks that these incumbents operate in,  so the ROI on the effort needed to advance them is seen as low. In other words, management acts sensibly in rejecting the continued investment in these new technologies acting in the company’s best interest to protect profits and avoiding cannibalization. Moving into new markets is rejected as they are seen as too small to make a dent for them and their cost structure prohibitive to enter at sensible margins.  

Therefore what ends up happening is that new entrants (often founded by frustrated departing ex-employees of the incumbents) with little or nothing to lose do gown down-market (or upmarket for them from their ground zero starting point). Initially that doesn’t pose a threat – the new entrants just find new markets for these technologies largely by trial and error, at low margins but their nimble and low cost structure allows them to operate sustainably where the incumbents could not. However, the error in valuing these technologies comes from what happens next. By being intrinsically superior technologies that find new niche markets, they advance very rapidly and hit that steep part of the classic ‘S’ curve, eventually entering the more mature markets of the incumbents and disrupting them. In other words, the smaller markets (the classic Trojan horses) are the guinea-pigs that help the technologies advance enough to play in the big boys league. In many cases the entry-point markets become an insignificant share of the eventual total as the new technologies move into higher margin upmarket territory disrupting them due to their superior performance.

So technology leaders evaluating whether to invest in new and immature technologies must do so with a futuristic frame of reference. The key question being: if these technologies  found new customers, new markets which may in themselves be small and insignificant (now and in the future), could they mature enough to make inroads into the big boys league and have our lunch? And if so, does investing in them today at the risk of cannibalizing ourselves make sense in the longer term? Hence, the innovators dilemma.

The 3 attributes of true leadership

“The ability to charm dogs off a meat truck”…   “When people want to follow you even if just out of curiosity” …  “The ability to make the other guys feel in charge”.  To “empower”, to “motivate”, to “inspire”…  The list of attributes to what makes a great leader is countless.  They all make a good read, but none of them fully capture the true essence of what makes a great Leader in a complete way, I believe

Great leaders may posses a myriad of attributes, no least of which are smarts, intelligence, charisma and natural charm. All of these things matter. However you can be a great leader and not be naturally charming or very intelligent, or many of the other attributes named. 

The below are in my view the three must-have attributes to be a great leader,  and in this priority,  (although reverse order of difficulty).

1. VISION 

The ability to amass a great team, motivate and inspire them is plain useless if you don’t have a clear vision of where you need to get to.  Leadership is first about seeing the future and being able to figure out a feasible path to getting there. It’s seeing the iceberg before the Titanic hits it and taking fast and decisive action. It’s seeing beyond the forest when all everyone around sees, is the forest.  Its doing the one right thing versus doing many things right. It’s being different, not following the herd, being controversial, seeing what others don’t see. It’s having a nose for what’s coming, and the eyes and ears to react at the right time, before others do. Without vision, you can empower people all you like but you won’t get anywhere. You may have people drooling at your feet for attention - you are still not a leader.  You have a following but no direction. You may make a great motivational coach bit not a leader. The thesis that you can collectively find the direction is nonsense.  That may work in maintaining the status quo when things are going well. But every really hard situation (and no leadership of any kind is ever devoid of them) needs a visionary leader to point the way and take a tough decision.  

2. INFLUENCE  

Once you have a clear vision (but only then), next you need a sting followership because you are unlikely to fulfill it alone.  That requires the power of influence.  Whether you are a hired gun put in an existing situation to lead it, or the creator of one, this is very hard thing to do. Exceedingly hard.  First because you are a newbie in either scenario. People are used to measuring  the odds, that’s how they size things up, and the odds are against you. Why should people trust a newbie? Secondly, the vast majority of people are resistant to change, no matter the odds.  Doing what you are used to is far easier, always. Yet to fulfill any grand vision you need to drive change, by definition, otherwise you are just a puppet master holding the strings waiting for the show to end. In that process you need to influence people across the board:  employees leave secure jobs and come join you; investors to give you money when you haven’t proven anything, customers and fans to support you, your bank manager to give you an overdraft, your landlord to give you a lease and rent-free period; your wife to put up with sleepless nights, cold sweats and no pay; your mum to let you camp in the basement when your wife finally kicks you out.  What makes this even worse is you carry that burden of influence with you.  Every day that passes you get a little heavier knowing that if you go down you take more people with you than yesterday.

3. COURAGE 

Hence the third element and the hardest. You’ve clarified a vision and built a followership by begging, charming, coercing, schmoozing….ultimately influencing enough people.  After all this work you realize its just day1. Because all of these are like the boat (more like a raft) and the compass. You now need to cross the ocean. This is the final and true test of great leadership. And it ultimately comes down to courage. Intelligence and knowledge are advantages of course, but without courage they are wasted. Whilst courage without them will get you there, albeit slower and with more pain. So the key question is: do you have the courage to keep going when everyone tells you to turn back; to know you’re right when everyone says you’re wrong; to stick to your instincts when people call you crazy knowing that if you fail you will be called a stubborn loser (and if you succeed a genius); to carry other people’s weight when they fall, to set the tempo and beat the drum however tired  you may be, to keep people together when they are drifting apart and losing faith; to give them courage but not fake hope; to tell it how it is even if they don’t want to hear it; to say NO when they are desperate for a YES; to cut the rope when the load gets too heavy and may sink the boat; to let go of some to save the  many;  to weather the storm but not bask in the sunlight when it ends, because by now you should know: it never ends.

—-

Vision and Influence make you a well equipped Captain. But courage gets you there. On the other hand courage alone is being a fighter without a cause.  A hero  but not a leader. You may be good at creating lots of noise, but, to paraphrase Sun Tzu’s Art of War: it’s just “the noise before defeat” 

“Empowerment is what you are given. Self-leadership is what you do with it”

— The one minute manager

“I don’t believe in statistics. I believe in calculus”

— Ben Horowitz

“We shall not cease from exploration, and the end of all our exploring will be to arrive where we started and know the place for the first time.”

— T.S.Eliot

10 reasons to carry on doing what you’re doing

I was recently asked by someone why I do (or carry on doing) what I do. It’s such a simple question yet it startled me. It’s easy enough to jump in to a knee-jerk textbook answer. But its really hard to articulate why it really is that you do what you do (short of things like necessity, habit, or lack of choice. The ‘why not’ is not a valid answer.

So I applied the ‘amnesia test’. If I woke up tomorrow and had no recollection of what it is that I do, devoid of any emotional attachment to it, or habit, what would be the ten criteria I would write down in evaluating whether ‘it’ is what I really want to do? Here’s what I came up with:

1. Do I really enjoy it? Plain and simple. Do I feel eager every day to get out of bed and crack on doing it?  Or do I snooze the alarm clock? Somehow my body clock precedes my alarm every single day, no matter what time zone im in or what time I set it to.  Not the be all end all but certainly a good start.

2. Can I do it better than others? Or stand a good chance to be amongst the top handful of people in the world in what I do? If I push myself can I compete with them ferociously even if today I’m still the underdog? This can’t be for high level things like ‘being a CEO’, or an investor . It has to be specifically for the field you specialize in. Be brutally honest in drawing that boundary but equally honest in the answer. Life is too short to waste it in second place.

3. Can I make a difference in the world doings what I do?  Is what I do important, in a meaningful way, beyond just making money. Happiness is amplified multifold (in most people and certainly in my case) when there is a purpose to what ‘it’ is other than short term gain. It has to outlive you.

4. Does it keep me challenged? Do I work on hard enough problems that rack my brain every day and push my limits? The only thing worse than not being good at what you do is – paradoxically – being too good at it. Boredom is far worse than the agonizing feeling of trying to crack really hard problems, sometimes out of your depth. That’s how I feel every day.

5. Do I learn every day doing it?  This goes hand in hand with 4) but its not exactly the same. You can be challenged without necessarily developing yourself. There are different forms of challenges, those that test your endurance, those that test your interpersonal skills, your ability to adapt or your ability to stretch and venture into new grounds. 

 

6. Do I get to work with people I enjoy? One of the worst moments in my memory as an entrepreneur is walking into the company I founded and feeling alien. Feeling that this is not what I had in mind. It’s a painful feeling, that thankfully I no longer have and one I will never forget. It’s like watching your kid grow and one day you take a look at him and think: how on earth did you turn out this way? This experience thankfully became a catalyst of change for me. I implemented ruthless cut-throat cuts getting rid of all those misfits. The people left behind now at PeoplePerHour are like family. Bonded by something beyond a contract of employment. We are on the same page. Before we weren’t even in the same book! 

7. Equally, do I get to NOT work with people I don’t enjoy?  Choosing who to work with is as important as being able to say NO to those you don’t like. Which is not obvious. In most jobs you will have some asshole you cant get rid of – even as a Founder. Maybe its an investor, a member of management planted by them, Clients you depend on etc.  At PeoplePerHour we are lucky enough to be at the top of the food chain and choose who to work with. As I often like to joke: there’s only space for one asshole in the room. And that’s me!

8. Do I get to NOT have to do the things I don’t enjoy. Jeff Bezos was asked once whether he would do another Startup if he sold Amazon. To which he chuckles: “that’s; like going back to kindergarten”. There is an awful lot of things a founder needs to do in the beginning that they don’t enjoy and are not good at. Reaching a point where you no longer need to do this is an important soft milestone that - in my experience - paved the way for accelerated success. It means you can focus on the things you enjoy and are good at. 

9. If I stopped doing it would it matter to anyone? A measure of how much you matter in the world is to imagine what would happen if you just didn’t. Would anyone care? And by that I don’t mean how many people. You can have more impact in this world if 1000 people really REALLY care versus 10 million who sort of do. 

10. Does it allow me to develop myself in other ways, other than just doing it? Does it give me the time and energy to be a more complete person? If what you do is completely dominating your life firstly you will not be as productive in it. You will develop tunnel vision and lose your creativity. I find that my best ideas hit me when I’m doing other things, like a sport or painting or reading, visiting a museum or writing a post like this, or just lying on the beach. Over the past 12 months I’ve made a concerted effort to do more of those things and as a result I’ve become a lot more productive at my work. And happier!  

So there it is. That’s my 10 point checklist. What’s yours?

My latest painting, inspired by watching Luis Banuelos play the guitar at SXSW in Austin. 

My latest painting, inspired by watching Luis Banuelos play the guitar at SXSW in Austin. 

Disaggregation of a Bank

fermivc:

There are lots of cool charts thrown around the startup/VC world. One of the best is the “Disaggregation of Craiglist,” originally created by Andrew Parker in 2010 and updated by David Haber in 2012 (shown below):

USV has recently invested in a host of internet-enabled financial services,…

Passionate entrepreneur and artist at heart, lover of life with an overly curious mind. Advocate of the different, creative and unconventional; follower of art, design, anything creative, pretty and cool. Fan of elegance found in simplicity and minimalism; allergic to the verbose, the superfluous, the non-colorful and the dull. Life long enemy of conformity; specializes in poking the fire and stirring things up, accidental Founder of and now fully and truly wed to PeoplePerHour.com