Digital Payments on the Rise

One of the best way to connect online and offline purchases is through data provided by payments. With an increase in digital payments omnichannel retail becomes an easier target.

Consumers seem to be adopting digital payment options at a staggering speed, all over the world. Here are the numbers:

China: Union Pay reports 260 million digital (internet and mobile) payment users

The 260 million internet and mobile payment users show a great appetite for change. The number of mobile payments itself increased by over 445% in the past year as numbers from Q2 show.

PayPal grows steadily and lists 169 million users

Across the globe e-payment leader PayPal shows a steady increase in the number of users and has big plans after its separation from eBay. Though the separation has been long debated, it seems it is for the best.

Number of PayPal Users [source]

51 million mobile payment users expected in Europe, 2016

Europe lags behind with just 51 million mobile payment users expected in 2016. However – that may change in the future as there is lots of potential. For example Iconiq, an investment fund described as “Zuck and friends” backed Dutch payments company Adyen this year.

Adyen alone is expected to process roughly $45 billion this year, so there is still hope for the old continent.

Meanwhile tech giants such as Apple or Google are engaging one another for the mobile payments market, a seemingly enchanted land in the world of future finance.

Is Facebook building a Mega-Bank?

Facebook recently secured a patent for a system that builds credit rating based on social connections. Is this a piece of what could be the Facebook bank?

There are some strong arguments that yes, Facebook is building a peer to peer lending service for its 1.49 billion users.

Here’s the backstory:

PayPal president David Marcus resigned from PayPal and joined Facebook a year ago. Reportedly he joined the company to work on the Messaging products. Quite a big change. So the obvious question was why would the president of the biggest online payments company would quit his job to start working on the messaging app?

But then, in March 2015, Facebook announced a new feature in Facebook Messenger: payments. Basically anyone could send their friends a couple of bucks without having to leave the app. Plus – it charged zero fees. Zero. This sounds great but … how would they monetize it?

The credit scoring patent may be the answer. What if Facebook would roll out a general feature that lets anyone lend anyone in the network based on their credit score? Peer-to-peer lending is one of the biggest and yet most underrated innovations in digital finance.

With a stable payments system, a great credit scoring patent and 1.49 billion lenders and borrowers Facebook may be building the largest bank financial system in the world. All digital, peer to peer, decentralized and ready to come online just as banks are faced with an impending meltdown.

Think that’s crazy? Maybe not. Meet George Soros, “the man who broke the bank of England” when he short-sold $10 billion worth of pounds. He did this during the Black Wednesday Financial Crisis and earned $1 billion in the process.

In 2012, when Facebook stocks were plummeting, Soros bought Facebook stocks. When he bought these stocks, the social network looked like it was in a really bad shape:

Let’s just say things are a bit better now:

But his great investment timing is not what points to Facebook being on the verge of a huge financial change. No. It’s the fact that just as Soros was purchasing his Facebook stocks, he was selling his stakes in financial companies such as Citigroup, JP Morgan, Goldman Sachs and Wells Fargo.

So if it looks like a duck and it quacks like a duck, it’s probably a duck.

Facebook has built a peer-to-peer payment system. It hired the man that helped PayPal grow to its present market share. It secured a credit scoring patent that works within a network. Soros moved his bets from the big banks to the most popular social network. There is a growing need of peer to peer lending across borders and Facebook can deliver.

We’re in for a 1.49 billion customers bank that works across nations and lives inside your mobile phone. I guess this qualifies as a Mega-Bank.

What are Object Oriented Organizations?

We are at the peak of our civilization in terms of economic development, social cooperation and global communication. Though conflicts still arise and will probably exist for the foreseeable future, we are witnessing a historic moment: for good and for bad we are on top of our game.

This change has been made possible by a lot of factors including recent destructive conflicts and potential conflicts (nuclear destruction), improvements in communication technology, improvements in transportation and more.

But if we were to point out a specific factor in the emergence of this globalized society, that must be the fast evolution of organizational management tools and techniques.

Whether we are talking about multinational corporations, governmental or military organizations, they have all evolved due to technological and know-how management advancements.

Companies can now grow bigger than ever and governments extend their influence farther. Military organizations are now stronger and can perform better than ever in terms of logistics and operational management. According to prof. J. Bradford DeLong from UC Berkley, the estimated GWP (Gross World Product) is at its highest and growing the fastest:

Annual GWP

So basically we are working better, faster, more productive and yet it seems the world stumbles from one financial crisis to another. Many theories have been put forward regarding as why this happens. These theories range from pure economic theory to sociology, psychology, geopolitics and more. Don’t be fooled – we don’t for sure know why this happens. It’s a paradox that we are more productive, fare better in terms of conflicts and have a more connected world and still we deal with inequity and financial strains in the form of huge debt.

But there is hope. Whenever humankind dealt with seemingly insurmountably issues, we appealed to metaphors to change our perspective. The metaphor I’m proposing today is the computer hardware – software ensemble as a way of thinking of human organizations.

How do organizations work now?

In this metaphor we have the human nature and human nature as the hardware and management acting as the software. With a combination of these two we were able to reach our present position.

Most of management theory and lingo are adapted from military procedures. As the military has been the single most enduring form of human organization throughout history (seconded only by religious organizations), it seemed logical to approach civil management in a similar way. The largest companies known are organized and behave just like armies. Top down command with intel going upstream and orders going downstream. The multinational companies “conquer” markets, “target” customers and “secure” market share.

As companies need effectiveness to stay profitable, strategy is designed by a small group of people (the board of directors) and implemented top-down by an executive staff. To do so – the executive staff uses company process design and procedures that are followed by those lower on the hierarchy.

This same principle was also used in the beginnings of computer programming. Programs were fed into computers to compute differential equations for things such as the trajectory of a shell, a blast radius or weather predictions. These programs were fed into a general purpose machinery (the computer) and based on these instructions computations would be made.

But as the computer industry grew, so did the computers’ capacity to run programs. With the digital revolution computers became more than simplistic machinery built to output specific data. Programs could be now written to answer mathematical questions but also to output imagery, sounds, allow users to play games and more.

To make this possible, a new paradigm in computer programming changed the way programs were written. Instead of the previous functional (procedural) programming, the concept of building a program started working with the concept of “objects”.

Technically, objects are a collection of data and functions. Conceptually they are the bridge between machine processing and human conceptual thinking. We are able to tell a fork from a spoon and still see the resemblance between those because we think in terms of “objects”. Previously programs were working mostly on concepts of functions. Simply put: If this, than that.

That made writing complex programs extremely hard. It also made maintenance even harder. Without becoming too technical, OOP (object oriented programming) allowed for even more complex programs to appear and made it easier for software teams to build, update and maintain these programs.

The difference, if you will, for those programs is the difference between the old DOS versions and today’s Windows OS or Apple’s iOS. It’s worlds apart and today we are in a DOS world trying to build video games.

The need for Object Oriented Organizations

Though it may seem strange to use software development lingo when it comes to managing organizations – it makes sense in the metaphor proposed earlier. Human organizations (the hardware) may yield a lot more than they do today. As robotics may soon take over menial jobs, they have to.

The problem does not lie in the hardware (human intellect, creativity and production) but rather in software (the ability to manage this creativity and productivity).

We are not fit to deal with this level of complexity in the way we do today. Think about the basic organizational challenges. They are not production or infrastructure related, but rather human complexity related. Someone from the headquarters of Uber may devise an absolutely brilliant software and business model, but they still have to deal in terms of organizational management with the fact that Paris taxi drivers hate competition. And the fact that the french government will not allow the company to function without the right permits.

To make such a global organization work, there have to be some type of new management technique in place. One that can use the managerial basics but still be able to develop specific procedures to handle cultural differences.

That’s exactly what OOP (object oriented programming) works for. Handling complexity through object manipulation.

So how would such an organization look like?

How to build an Object Oriented Organization?

To help you glimpse into the structure of a potential OOO (Object Oriented Organization) I will use the basic characteristics of a software object and translate those into organizational concepts:

1. Encapsulation

The term (data) encapsulation points to objects being self-contained in terms of both data and functions. The object keeps the data and functions protected from outside (potentially harmful) interventions.

If you’d like to think of objects in terms of organizational objects I’d advise you to look beyond the usual “department” paradigm and rather into specific teams. Think of the product design team at Apple. That is an organizational object, that stores both specific data (things such as product specifications and test results) and functions (builds product demos, designs usable products etc.).

The organizational object could, in theory be self sufficient and usable in any part of the organization or even within external organizations.

2. Polymorphism

The idea of polymorphism may seem complicated but it actually solves a lot of complexity issues. Simply put, it allows for contextual responses.

Take the previous Apple design team for example. If the iPhone development team were to ask it for a design it would probably forward the team the specs they are working on and receive a few sets of product designs. If the iMac team would ask for a new design, they would also forward the iMac specs. They will however, receive another type of design, one fit for their product.

The idea of polymorphism, in the organizational sense is that decisions based on context would happen within the design team object. Both the iPhone and the iMac team, or any other product design team could ask for a product design and receive something that’s fit for that specific product.

But let’s take that a little further: what happens if the marketing team needs a specific page covering the new iPhone. Wouldn’t the product design team be the one best fit to output such a page? Probably so, but some upgrades may be needed and this is where the third object oriented organization principle comes in:

3. Inheritance

This term shows that one object can be the prototype for another object. In our example we need Apple’s product design team “upgraded”. So far they have been doing product design so they may not be able to output iPhone’s webpage so well.

By building on their expertise, we may assign a new member to the team, a member that is specialized in designing web pages. By working with his or her team peers we will have built a new organizational object on top of the previous one. The marketing team will request a specific design, by forwarding some specifications. At this point all three external teams (iPhone product development, iMac product development and marketing) have basically done the same thing: asked for design-related work, by forwarding specifications to the the design organizational object. The work was done within the object and results were output successfully.

Notice also that there is no absolute need for management. Objects interact with one another thus leaving management in charge of developing these organizational objects and the overall purpose of the company.

Why build object oriented organizations?

The one big reason is complexity management. We have not put a man on the moon using the abacus. We have upgraded our tools to reach further. Object oriented organizations can be a new breed of organizations in different sectors where effectiveness rather than hierarchy is important. These areas can range from business to NGO’s to governmental agencies to banking and more.

Basically each organization that deals in large numbers of either employees or “customers” can benefit from a networked object oriented organization approach.

Source

Why do that? Think about how today’s concept of having a job feels. Most employees report their bosses are awful. But it’s not that simple – it’s not that the boss just wakes up one day and thinks … “hey, I’m going to act terrible to my fellow colleagues”. Today’s managerial concepts and techniques are outdated and provide managers with poor tools.

This results in “less than perfect” working conditions, poor performance, organizational ineffectiveness and overall social tensions. With our current management system the world has grown more productive yet more indebted. Productivity has risen yet poverty stayed the same or increased.

The fact is we need a new type of leadership and chances are this too is a human problem with a software solution.

Apple Music is Big News for the Music Industry and a Direct Blow to Spotify

Where does a 800 pound gorilla sit? Anywhere it wants to.

That 800 pound gorilla is Apple and today it introduced what is probably the biggest change in music business since 2001, when it launched the other big change in music business, iTunes.

Though some might undermine the impact Apple Music will have, that would be a mistake. Apple Music is a huge change for music and it will by a serious blow to Spotify and other streaming services.

Here’s why:

1. Apple has at least 800 million iTunes user accounts. Lots of them are paying customers.

Last year Horace Dedieu of Asymco tweeted this chart, comparing the number of Amazon and Apple accounts:

Compare this to Spotify’s 60 million.

2. Apple owns the platform. And it’s spreading to other platforms.

The biggest asset Apple has is its software-hardware platform. And I’m not talking about iTunes only. I’m talking about iPhones, iPods, iPads, Macs, OS, iOS, Watch OS etc. Anyone willing to compete against Apple, has to compete on Apple’s turf, with its hands tied.

Why is this so important? Say Apple decides to optimize its streaming process for certain apps and also decides not to share this info with outside app developers. Such developers may be left in the dark regarding optimum hardware usage for a better sound or longer battery time. By the way – iOS 9 comes with a better battery time. What a coincidence.

Even more, Apple Music will be available on Android too, coming this fall. So there you have it. It’s spreading.

3. Apple is closer than ever to artists and labels

Jimmy Iovine

But this is just the cherry on top of more than 14 years of continuous business development with global labels. The fact that Apple Music will be available in 100 countries is an extraordinary business feat. Anyone knowing just how complicated licensing is, knows how hard it is to stream, collect fees and distribute revenue to and from 100 countries.With its Beats / Jimmy Iovine / Dr. Dre acquisition, Apple also purchased a certain level of influence it previously lacked within the music industry. The proof is today’s event, showcasing the deep integration and the many people involved in launching Apple Music.

4. Apple is not stepping on Spotify’s toes alone, it also steps into Facebook and Youtube territory

Apple unveiled more than just a streaming service. Just like when Steve Jobs launched the iPhone, today Apple launched a product that never existed before.

Apple Music is a music streaming service, a video streaming service, a social network, a global radio and most of all, a curated music experience.

Let me just emphasize the “video streaming service” area. If you didn’t know this already, iOS alone dominates online video streaming. So Apple is already king of the hill on lots of user behaviors and now it just collected them all into one big service. Maybe that’s why Google never could pull a decent Youtube streaming experience on iOS.

And it’s not just Youtube Apple is going after. Facebook should be a bit worried also. Artists get a little more reach on their Facebook pages than, say, commercial brands. But if they want to share their news with all their Facebook fans, they still have to pay.

Apple Music makes a point by letting artists and fans connect in a seamless way. And this should send some chills up Mark’s spine. Once the artists are gone, there is also a big gap left within the social network.

5. Apple gets that technology is useful, but it’s not core

Let’s face it. Technology can be boring and frustrating. The best thing Apple has done so far is teach the world that great products happen when technology meets the arts. And its Music service does just that. From curated lists to making sure artists get an way to connect to improving the battery time so users can have a better experience, it all ads up to a human experienced enhanced by technology, rather than the other way around.

Technology and humans

This is where most of the recent tech companies have failed to understand their place in the world. Maybe Google can get away with being the Lovable Borg, but Spotify can’t. Facebook can’t. The lesson Apple Music will teach to the tech world is that technology is just not enough anymore.

6. Apple is rolling in cash and it’s rolling out cash

Say what you will but one thing is for sure. Apple has deep pockets. With more than $194 billion in cash it can survive the end of the world on champagne and cigars (that’s not really a great combination, is it?).

Even more, it just reported it paid out $30 billion to its app developers. I’m not exactly sure how much it paid to record labels, but I can bet it’s a liiiiitle bit more than Spotify’s $3 billion.

What do Uber, Tesla and Global Logistics Have in Common?

We expect historic changes to be a bit dramatic. We think of “Evrika!” moments when inventors discover new technologies that make our lives better.

The reality, however, seems to sneak up on us. We now know how important the Internet is but few would have guessed it when it was used to exchange short bits of information between academics. Same for Google – it is now easy to see how important having the global stream of information at your fingertips actually is. But it was a lot harder when the concept was still in its infancy.

Not even Steve Jobs could have predicted the impact the iPhone would have on the world. And I believe Elon Musk will look back on these days and be surprised by the changes Tesla brought to the world.

When Elon Musk announced the Powerwall, the world shook a little bit. Its beautiful design and promise of energy independence seemed almost dreamlike. But the Powerwall shows a far larger vision than just making the home energy independent.

Powerwall 2 & Solar Roof Launch from Tesla, Inc on Vimeo.

It is a promise that we could harness the virtually unlimited energy of the Sun and store it. Storage, you see, is the real problem. The complex systems we use are powered by energy that is consumed almost instantly. Our cars, our electronics, our planes – they feed on streams of energy as it is formed. Even the best energy storage systems fail after a short while.

The batteries that can save the world

The promise that one day a company (could it be Tesla?) can find a way to harness and store the sun’s energy (or any type of green energy for that matter) has an impact we can hardly predict.

The implications range from pollution reduction to geopolitics to economics. Especially economics. To understand how much we could save by switching to green energy, have a look at this estimate for an average Tesla car compared to one running on fossil fuel:

Think that’s a lot? That car “only” logs 120 000 miles. Compare that to the 397.8 billion miles logged by all trucks used for business purposes (excluding government and farm)In the US alone.

Now mix the numbers and add the savings Tesla’s technology can bring.

Add something else: sun-powered electricity. Think of trucks and ships that can move goods around without any need for refueling.

Because that’s where the real change comes in. When products are manufactured and shipped at a tiny fraction of what they are today, everything changes.

When we take out the distribution costs, the energy costs and any other costs associated with energy from our current commerce paradigm, everything changes in the world.

The products we buy would have costs that would be driven to the ground. Without costs associated with energy consumption and storage, goods would be manufactured cheaper and faster (instant energy), shipped cheaper and faster and consumed by more. We could have cheaper products, consumed by more and believe it or not, more profitable to sell.

But how could the system change?

There is only one thing stopping this: the current transportation and energy system. Musk’s vision has already stirred things a bit with car dealers. What happens when the company will go against the global leaders in energy and transport companies, the ones still relying on fossil fuels? These companies would have to change or fight the change. The former is what one might expect.

That’s where the Uber concept comes in. Uber connects, as you know, smaller professionals that provide transportation services. Right now this is limited to personal transportation. Uber, today’s Uber, acts as a glorified cab dispatcher.

But tomorrow’s Uber may have bigger ambitions. Somewhere behind the scenes, investors know that there’s more to Uber than meets the eye. The reason the company landed a $41 billion valuation is that it has the potential to change the global transportation system. Not just personal transportation but all kinds of transportation.

That includes making sure goods are quickly moved from manufacturing to storage to the consumer. Don’t take my word for it. Uber has been experimenting time and again with logistics. And if Uber won’t, there are other companies that will.

So you have virtually unlimited power. You have storage. You have the a system that makes sure goods are sent to the right destination by the optimum freight. This means the kind of change we now can’t fully comprehend.

It means that good is now in motion.

DHL, FedEx and UPS Provide Support Following Nepal Earthquake

As you know, a disastrous 7.8 magnitude earthquake has hit Nepal. The earthquake claimed the lives of thousands and left many more wounded or without shelter. In an effort to bring relief to the area many nations, individuals and global companies joined hands.

Nepal Rescue Efforts. Source.

Among these were global logistics companies DHL, FedEx and UPS. Since disaster hit, they have been providing logistics support, know-how and even funds.

Their humanitarian efforts are worth recognition and their philanthropic commitments need to be known:

DHL Group responded in just 48 hours after the tragedy. Their Disaster Response Team was deployed on the scenes to help with incoming international aid and provide logistics support in distributing goods.

FedEx was also among the first to provide support to disaster relief agencies. Their efforts included assessing needs, shipping water treatment systems from Water Missions, water chlorinators and large water tanks, thus providing fresh water for up to 70,000 people per day. FedEx soon followed with logistics support for medical treatment, serving 10 000 people per day.

Last but certainly not least, The UPS Foundation committed to providing both logistics support and $500 000 in funds to aid recovery efforts. The foundation, acting as the philanthropic arm of UPS, provided these funds to “United Nations High Commissioner for Refugees (UNHCR) to secure shelter supplies and solar lanterns as well as to The World Food Programme for emergency food assistance such as high energy biscuits, and to CARE for the purchase of supply kits including tarps, blankets, jerry cans and toiletries.”

These efforts show just how important logistics support can be in helping those in suffering, especially in such times of distress.

L’Oréal plans Digital Transformation through Omnichannel Marketing, Ecommerce

With the launch of its first digital edition of the annual report, L’Oreal steps into a new era.

The report is an impressive tool on its own, aimed at investors, shareholders and journalists. But the real change comes with the overall shift to digital as a tool to engage consumers.

For example, the “Digital” section of the annual report states just how important naming the first Chief Digital Officer actually is. This move shows L’Oreal as an up and coming major digital player. The company will probably focus on ecommerce, data technologies as well as engaging consumers both online and offline.

An example in the digital report shows just how promising ecommerce is, especially in China:

“In China – the world’s number one online-purchasing market(1) – e-commerce already accounts for 10% of L’Oréal sales, and more than 15% for brands like VICHY, LA ROCHE-POSAY and MAGIC(2). These promising results are underpinned by partnerships with online distributors like Alibaba and Tmall. On Singles’ Day, a very important day of special offers, L’Oréal’s brands performed well, particularly MAYBELLINE NEW YORK – the number 1 make-up brand in the country(3) – and MAGIC, which sold over 11 million face masks in 24 hours” 

The shift towards omnichannel marketing AND ecommerce is spectacular. L’Oreal has traditionally relied on third parties to distribute products to consumers through retail shops. Could this shift be a change in strategy with a direct-to-consumer approach or will it be an improvement in dealing with online and omnichannel retailers? Nevertheless, the move will probably ripple trough and be adopted by others.

It may be a tectonic shift in manufacturers switching from traditional models to new digital models, engaging their customers, as well as providing them with the opportunity to purchase. How will this affect traditional partners remains to be seen.

Three Web-Only Retailers with Winning Business Models

Online commerce is growing fast and innovation is key to staying relevant on the market. The simple catalog model is still here but for how long? With customers in need of customized products and personalized offers, with omnichannel gaining momentum, it’s the new and innovative startups that are defining tomorrow’s shopping standards.

To show just how important innovation is in online retail, this post will showcase three web-only business models that proved successful. Each of these companies has been listed by Internet Retailer as a top-growth retailer.

Let’s start with …

eSalon.com – custom formulated hair color products

Year on Year Growth: 200.3%

You know how cosmetics and hair care companies list so many hair coloring products? Yeah, that’s because hair color is quite a personal choice. So eSalon has made sure it stays this way. They provide a special customization form where customers can offer personal info, relevant to building the perfect hue. Hair coloring delicate and often hard to do perfect. So there really is a lot of data you have to fill in before you get the right product but I believe it is worth it.

The company’s main target are women and do it yourself hair coloring is not an easy process. Help from expert that can combine and blend multiple ingredients in one perfect hue is great. But eSalon doesn’t have to do this blending too often. Once the hair color is just the right fit and the customer is happy with it, it will probably keep coming back.

Dollar Shave Club – Shaving Blades delivered monthly

Year on year growth: 242.10%

Here they are – shaving blades. It’s the one item most men have to use daily. Dollar Shave Club manufactures shaving accessories and personal care products for men. Their main product: shaving blades, sent each month to customers, for 1-9$ subscription fee.

Blue Apron – Recipes and recipe ingredients delivered at home

Year on year growth: 550.2%

Blue Apron is the fastest growing US retailer, with a 550% growth from last year. Any kind of business that grows five times in one year has to be a pretty amazing concept. And it is.

Think of Blue Apron as IKEA for the kitchen. Cooked meals get a lot less expensive when they’re purchased as ingredients. Basically a web web grocer, Blue Apron has decided to take a special approach. By showing how ingredients fit together with recepies, they were able to increase the number of products purchased by customers.

A great concept like Blue Apron has to have a great team behind it. That team is made up of a previous VC investor, a previously technical architect and of course … a chef. A recipe for success, if i might say so.

Econsultancy / Adobe Report: Omnichannel will become a reality in 2015

Adobe and Econsultancy recently released their 2015 Digital Trends report and data shows some really interesting insights. The report is a result of interviewing almost 6000 marketing, digital and ecommerce professionals. The general consensus is that marketing is moving fast and content, personalization, mobile and omnichannel will be key aspects to maintaining a relevant connection to consumers.

Among other facts, the report shows an emergent need to understand customers journeys across multiple channels and a need to insure consistency across these channels. 97% of all respondents pointed to having a clear understanding of customer journeys across channels as being either very important or quite important. Content consistency across channels is also a key priority for 96% of all respondents. 66% of marketing, digital and ecommerce professionals list content consistency as being very important and 30% list it as quite important.

Because omnichannel success is usually a result of strategy and team effort, the report shows training teams in new techniques, channels and disciplines is very important and quite important for 95% of the professionals surveyed.

Personalization, Big Data and Multi-channel campaigns – very exciting in 5 years time

As the customer is getting more and more empowered by digital technology, results show that some aspects of marketing and retailing will become highly popular in the next 5 years. The most exciting for those surveyed are:

  1. personalization: ensuring a relevant message to the customer in terms of marketing campaigns and content
  2. big data: by using large volumes of data campaign management and marketing can be more relevant and results more personal
  3. multi-channel campaign management: addressing campaign consistency across channels seems to be a very exciting opportunity for professionals, but not really feasible right now. While 12% listed this option as very exciting in 5 years, only 7% listed it as very exiting in 2015. This probably has to do with the fact that although professionals and senior management understand the need for multi and omnichannel campaigns, there are few successful use cases that can be used as a threshold right now.

Overall, the report paints a very optimistic picture for omnichannel followers and professionals. 67% of those surveyed agree that omnichannel personalization will become a reality in 2015. 

You can download the full report at here

Book Review: The Hard Thing About Hard Things by Ben Horowitz

Ben Horowitz tells it like it is: starting and running a tech company is hard. Really hard. But not for the reasons you would think.

Founding and running a tech company is generally viewed as the thing anyone should aspire too. The fame, the riches and everything that goes with it is the dream of our generation. Silicon Valley is just as attractive as a career in Hollywood or being a rock star. With poster boys such as Mark Zuckerberg or Elon Musk, young men and women grow up believing that all you need is a great idea and the guts to start it.

But that dream fades when your bright idea and optimistic vision have to face the hard truths of running the company you’ve just founded. Ben Horowitz has a reputation of being a no-bullshit kind of guy and you can actually feel his straightforward words telling you that your dream will be squashed by reality.

Unlike the glamorous and relaxed articles you’re reading about the likes of Facebook, Google or PayPal, Ben’s book is a clear indication of what you can expect when running a company and what to do about it.

It’s definitely not a perfect guide to running a company but it is a great start to understanding what to expect. Being a CEO is a tough place to be in. It’s a lonely place. It’s full of doubt and decisions that may or may not be right.

Telling it like it is

One of the greatest idea I’ve found in the book is telling it like it is. Yes, telling it like it is when things fall apart. Because they constantly do and someone has to constantly put them together.

Sometimes CEO’s start trusting their PR too much. They start living the persona they need to project to customers, investors and the media. Of course, no one can just go and tell the world that they don’t have enough data to make a decision. Or tell investors that the company may or may not exist in the next 6 months or the product development is stalling. Or tell customers that the product they’ve just purchased may be out of the market in the next year.

No. The CEO’s job is to project confidence and show the world that everything works just smooth. Right? But what do you do when things are the opposite of smooth? What should the CEO do when they fall apart and everything starts running amok. How can you tell the engineers that the customers hate the new features and they just have to rewrite everything so it can be spotless. How can you tell the marketing team that the last campaign they’ve pulled is bringing in no results.

Ben’s answer is simple:
“[…] give the problem to the people who could not only fix it, but who would also be personally excited and motivated to do so”

 

There are three big reasons to do so:

  1. number one is trust: when people get all data, good or bad, they will respond with trust. When dealing only positive thoughts the bad things are kept to only few people. Eventually they will leak.
  2. number two is problem solving: the CEO is not necessarily the smartest person in the company. Nor does he or she need to be. It just needs to relay the correct problems to the correct people and make sure they solve them.
  3. number three is culture: a culture where bad news are swept under the rug is a flawed and inefficient. People spotting the problems don’t have to be the ones who solve them.

 

Take care of the People, the Products, and the Profits – in that order.

Throughout the book Ben Horowitz deals with hiring, managing and retaining employees best fit for the company. And he stresses the “fit” part. People that cannot work in a team should not be part of the team. Egos and politics can destroy companies if not properly managed.

The people themselves have to build products that the market needs and wants and there’s plenty of advice on this topic also. Concise, clear and to the point advice.

Ben shows that innovative products and successful companies are built by CEO’s that lead without knowing where the path would lead to. They lead their teams and they try and try. Sometimes they get the right answers. Sometimes they don’t. That’s because there is no formula for building the equivalent of Facebook or Google or Apple. If it were – more people would be doing it right.

The hard things are things all responsible entrepreneurs and CEO’s have faced. It’s the worrying, the lack of direction or know how, the lack of guidance and the loneliness. It’s keeping your emotions in check and being stronger because of it. It’s finding answers without showing weakness. It’s the struggle you have to embrace so you can continue when things get rough.

In the end I would highly recommend this book to anyone starting or running a tech-related business. My only regret is not having read it five years earlier but then again – it was not written then.