Good programming must rest on a rigorous foundation, or, as my mentor Edsger Dijkstra used to point out, it is a branch of applied mathematics, and anyone who forgets that, risks irrelevance. However good programming is also a craft. And sometimes in the evolution of design we become the victims of a paradigm, which needs to be broken before progress can happen.
Under the link of the title is an article from one of my favorite columnists, John C. Dvorak, on the death of Internet Explorer, titled "The Great Microsoft Blunder." I always enjoy his columns, not because I always agree, but because he has a strong opinion and is provocative. This time I also agree with him. Internet explorer is a dead duck, and the only place I used it is if I absolutely must download something from Microsoft.com, which tends to misbehave with alternative browsers, on purpose. Other websites that are not browser-friendly I simply ignore any longer, for the independent browsers are winning, and within six months those sites will be forgotten if they don't conform.
One of the mysteries around Internet Explorer is the question of why Microsoft would have made such a fuss over it, and have put themselves in a massive state of corporate fear over the appearance of Netscape, and successfully killed it off in the market place, only to forget about the whole opportunity after they killed their prey? This is a classic mistake in business, if you focus on beating your competitor, you forget about delivering service to your customer, and thereby you hasten your own demise, all the while thinking that you are perhaps succeeding in killing the competition. Opera, Firefox and many others have demonstrated superior browsing for years now, and are making steady inroads as people grow tired of IE and its problems. Meanwhile Microsoft is grudgingly fixing security problems but failing to deliver functionality. And Dvorak is right, the defense of coupling IE to Windows, with the idea of protecting Windows, is what helped kill it as a platform. That may not be evident to consumers yet, but it is evident on the margin of the technology world, in those places where fast growth does happen, and where economists know you need to look to see what is really going on. Microsoft's biggest problem right now is that it's making money hand over fist, and therefore is in a delusion of being successful. The stock market is starting to have second thoughts, though. Corporately it is squandering its resources on numerous rear guard actions to defend what it has, rather than to build value for its customers. And that's deadly.
Of course this little reflection only serves as an intro to my favorite topic of late, Kanosis and the COIL(r) operating system. By way of an introduction let me share an experience. I talked to an old friend about Kanosis, and he told me that he and his partners had just had a meeting and were bemoaning the fact that they all hated ACT! but had been unable to find an alternative. I started to laugh, for the first victim on my desktop after I decided to move to Kanosis, will be ACT! That is already a given, though I'm taking my time getting there. My friend is presently evaluating Kanosis, but I don't know today if the consumer version will be viable in his business, though if it is, his partners will soon start using it also.
ACT! is a program I have used since its inception, and it has struggled to provide meaningful integration in the Windows environment, and has consistently failed to deliver. This is not per sé their fault, within the given paradigm they pursued a strategy that seemed reasonable, but the reality is that in the Windows environment integration is done with Scotch Tape and bailing wire, and is a very delicate affair, prone to constant breakdowns, something which my experience with ACT! constantly demonstrates, and in recent years, the more features they add, the more I don't use. In fairness I will not totally abandon ACT!, because for some telemarketing work it can be useful, because it allows me to keep a database separate from my own data, but for my own work ACT! will not be seen any longer, and all its wonderful "integration" features are therefore useless to me.
What I'm finding sofar in Kanosis -- and I'll write more on it after the launch on May 1st -- is an integration of a number of functionalities in a way that promises huge leaps in productivity both for myself by integrating my own desktop, and for any collaboration, as I'm presently experiencing in my collaboration with one of my associates in Kanosis, as we are starting to use the Kanosis interface in our marketing work for Kanosis. The convenience of drag and drop functionality in collaboration with others, for file-sharing and soon for payments etc. is not to be missed.
Another way of looking tat this issue is that Microsoft's ace in the hole is always unnecessary associations which compromise elegant architecture, but which benefit their marketing. An example is the needless "personal" in computer, and the compromise of one's data and information by that association. Presently in the Internet age, a service like Kanosis offers to separate the personal from the computer, and provide professional management of at least some critical set of your data, with mirroring and backup, and thus much reducing the risk of data loss or compromise. If you switch to using Kanosis, you will see yourself increasingly becoming indifferent to the hardware you're running on, and you're then free to pick the hardware that's best suited to other tasks you wish to perform, be it Apple, Wintel, Lintel, a Sun workstation, a Wyse workstation, or Linux on PPC, any of them will do, as long as you have an internet connection a browser, and Java.
Stephen van Zutphen has expressed publicly that his vision was that of a "personal operating system" as opposed to a computer operating system, and based on the previews sofar of the "beta version" of COIL/Kanosis, he is well on his way to delivering on that promise, and the release of the final version on May 1st should fill in most of the remaining blanks. The result seems very important to me, also in the context of the discussion John C. Dvorak raised. At the launch Kanosis will offer an integration of upto twelve applications into one interface, and thereby offers the opportunity of drastically simplifying anyone's desktop. And, in the case of a user like myself, who works at times with Windows, or with Mac or with Linux, this Kanosis interface is the great equalizer, to make me platform independent because it provides a core of applications, so that without any further worries about integration problems, I can use Mac for what it does best, and Linux for what it does best, and Windows... well really only because other people do, and my business requires it for that reason. In other words, the corporate world moves slower than I do, but they'll catch up eventually. And that is where I've been headed for the last ten years, ever since I set up my first dual-boot Linux machine, when the first kernel was going around.
It is very funny that the Kanosis phenomenon should hit the market now, just when Apple has made itself furthermore technologically irrelevant by switching to Intel. I have a publishing business, for which I was planning to switch to Apple, and Kanosis provides me with the last missing link to make such a mixed environment feasible for a small business without huge integration costs and diseconomies of scale. I may end up still acquiring one of the last PowerMacs G5 with the last dual-core Power processors, but meanwhile DTP on Linux is far enough along, that in two years I'll probably be running my publishing work on a PPC- or AMD64-based Linux box, or on a Sun workstation, and most likely not on a Mac. In other words, whatever else Kanosis may be, to me just now it has removed the last remaining inefficiencies and worries of integration of Mac, Linux, and MSWin in a small business setting. And therein lies the rub.
Copyright © 2006 Rogier F. van Vlissingen. All rights reserved.
Saturday, April 29, 2006
Monday, April 24, 2006
Labels, Stereotypes and Prejudice Cover for Bad Decisions
This post is yet another in a series of analyses of some issues around the new SAAS (Software as a Service) venture Kanosis (we used to call these ASPs...), which I've committed myself to. I feel it is a brilliant, minimialistic, elegant and functional solution to some of the "digital divide" issues which this blog is meant to address.
However, I'm realizing that some of the issues here connect to other matters in relation to IT, namely the fact that business decisions in general are hard, and the responsibility for them is preferably to be shirked by corporate politicos, and IT decisions are even harder and even more likely to be the subject of games playing. In another post I have already addressed the issue of the popularity of SAP with Wall Street Analysts. Other examples are the popularity of Windows, or the time when CIOs (then mostly called IS Managers), "could not be fired" for choosing IBM. Thus labels often got in the way of sound decision making and outsiders labeled as progress many dysfunctional IT decisions.
It gets worse when, as my friend Michael Hugos related recently, a CIO is appointed for his presumed ability to "implement SAP" similar to choosing a secretary (excuse me: Personal Assistant) because he or she "knows" Microsoft Word. And then if SAP fails to deliver the CIO is fired, because obviously Wall Street aproves of SAP. Such companies don't seem to get that they should choose CIO for his ability to analyze and decide if SAP is an effective solution for their company, and possibly should fire him if he chose SAP for the wrong reasons. They should not saddle a CIO with responsibility for dysfunctional IT decisions over which they have no control, or otherwise limit them to being implementers of someone else's strategy. And so on.
The same goes on with people's lack of analysis of marketing plans in the Network Marketing/Direct Selling industry, and as a result we're encountering this in spades around the launch of Kanosis. Some examples:
The "P" Word.
------------- "Pyramid scam" is a bad word, and it denotes a business concept that fallaciously assumes an ever expanding base, and therefore is unsustainable in the long run. This is quite contrary to the positive meaning of the word, denoting certain architectural phenomena in Egypt, which is where the term comes from, and which are based on a solid foundation, and have now lasted in excess of 6,000 years. Similarly some quite functional business hierarchies look like pyramids, as do some very dysfunctional ones. In other words the negative connotation of the word refers purely to the false assumption of an ever expanding base. According to some credible analysis by Bill Parish & Company, which has been published among other place in Barron's, Microsoft is just such a phenomenon, and the findings are hard to refute:
http://www.billparish.com/msftfraudfacts.html
Thus when I Googled "financial fraud" today, the above URL comes up at the top of the page. That speaks volumes. Conversely when people see a multi-level pay structure like Kanosis has, they say: "Oh a pyramid scheme," as if they knew what that meant, when clearly their very statement shows that they don't, since in this specific case the model evidently means that this company in particular enjoys a predictable distribution margin of 70% paid from REVENUE, and which therefore does not require an additional up-front capital infusion, and also ensures that there is a high degree of commitment for the early birds who help build the company. Evidently only people who really believe in the product or service would commit their time and resources to the vision. The level of commitment of your $200K VP of Sales and Marketing might not be as certain.
Therefore the humorous way in which Kanosis deals with the "P-word" on their site, is in fact the only way that you can counter this non-serious label (for it isn't even an argument), see:
http://www.kanosis.com/index.cfm/id/support/lang/english
There it says: "Is Kanosis Pyramid selling? No we do not sell pyramids. They are too heavy and expensive to ship!" And that is all you could say to this kind of non-serious "objection." And still some people will say: "Oh, it's a pyramid," and that will be the end of their "business decision." I guess it's just one more example of how labels are used to mask an inability to make proper decisions.
The "M-word."
------------- "Matrix" compensation plans have featured in so many Internet scams that there is a site devoted to steer the gullible out of trouble:
www.matrixwatch.org
The intentions are evidently good, however the discussion around Kanosis on this site suffers from a knee-jerk response that if it looks like a matrix at all, the specifics are ignored, and it is assumed that the venture in question is automatically a scam. Jim Southworth, the Chief Technology Evangelist (he's the CTO with an emphasis on explaining the technology to the outside world) for Kanosis has had quite a time of it on that site to try and keep the dialog meaningful while wading through piles of invective and prejudice.
Again the same applies here as did on the discussion of the "P-word," and that is that if you analyze the specifics, you are likely to find a gem of efficient and effective marketing in the form of the Kanosis marketing plan. Based on my analysis, I continue to bet that Kanosis has struck just the right balance. As of this week the jury's still out on the feature set they are about to deliver May 1st, but provided that lives up to its billing, there can be no question where this company is headed.
There are other "M-" and "P-" words, such as MLM, for Multi-Level Marketing, and Ponzi-scheme for a venture where the early investors are given phoney returns based on paying them from the investments of subsequent investors. All of them are evidently nefarious schemes, and any student of financial fraud will recognize them. Many a time the studies of the actual schemes people came up with are quite hilarious and instructive as to how people defer decisions and hurt themselves by reliance on irrelevant externals. The best resources to sort right from wrong are (among others)
www.quatloos.com (provided by a non-profit corporation)
www.mlmwatchdog.com (provided by the best network marketing consultant in the country)
www.ic3.gov (collaboration of FBI and National White Collar Crime Center).
So resources abound, and anyone should do their own due diligence on any venture they decide to get involved with by standards that makes sense to them.
It is very clear to me already that one reason network marketing scares off people is because they have to make their own decisions, because in this business model you hire the company instead of the company hiring you. Unfortunately it is the same mentality which causes people to later be herded into many of the same business opportunities, since by then they consider them credible because the neighbors are doing it. This behavior is no different from a company throwing out a perfectly good Unix architecture in favor of Microsoft Windows, which breaks down far more often and requires 5-10 times the number of administrators to users of Unix, not to mention every seat has 10 times higher power consumption than e.g. a SunRay terminal 250 Watt for a PC, vs 25 Watt for a SunRay). They are making the choise because the neighbors are doing it, or because the boss's kids have a Microsoft PC at home, or whatever. It has nothing to do with analysis.
One of the best scam artists I ever met, David Eastes, who was a big succes in Best Line (that was the "other" soap company besides Amway) at one time, and was barred from the direct selling industry because of some dubious practices, had a saying that demonstrates the issues clearly: "Logic and reason are the horse the emotions ride in on." I met him in my early days in the phone card industry, when he was trying to do it again in Amerivox, one of the first phone card companies, and one which definitely helped create that industry, even though they collapsed because of a defective strategy as well as sloppy execution.
To come back to the underlying issue here of deciding by appearances rather than by facts, another important example is the whole business of website design and the availability of reasonable and adequate disclosure on the website of any company. I have seen many criticisms of Kanosis in this regard, meanwhile they have improved the site on an ongoing basis, and I guess the critical point will come now that the company is launching their service as of May 1st, if the site will provide enough hard information. I am currently dealing with the same issues for another start-up company I'm tangentially involved with, where an interim website has garnered negative responses because of lack of information, and so it becomes a hindrance not a help in discussing the venture with others. So here is an area where companies can help themselves a lot by creating the right impression and providing sufficient answers to any potential issues. However in the spirit of caveat emptor, it does remain incumbent upon any buyer to do their own assessment, and by facts, not appearances.
The bottom line is first and foremost we should guard against being intellectually lazy, and doing our own due diligence by analysis, and not by proxy, either negatively by applying the label of "scam," based on appearance not facts, or positively, because the neighbors are doing it, so it must be alright. Any attempt to decide by proxy is ultimately only a way of avoiding responsibility for your own decisions, and making sure that you have somebody to blame if things go wrong.
Copyright © 2006 Rogier F. van Vlissingen. All rights reserved.
However, I'm realizing that some of the issues here connect to other matters in relation to IT, namely the fact that business decisions in general are hard, and the responsibility for them is preferably to be shirked by corporate politicos, and IT decisions are even harder and even more likely to be the subject of games playing. In another post I have already addressed the issue of the popularity of SAP with Wall Street Analysts. Other examples are the popularity of Windows, or the time when CIOs (then mostly called IS Managers), "could not be fired" for choosing IBM. Thus labels often got in the way of sound decision making and outsiders labeled as progress many dysfunctional IT decisions.
It gets worse when, as my friend Michael Hugos related recently, a CIO is appointed for his presumed ability to "implement SAP" similar to choosing a secretary (excuse me: Personal Assistant) because he or she "knows" Microsoft Word. And then if SAP fails to deliver the CIO is fired, because obviously Wall Street aproves of SAP. Such companies don't seem to get that they should choose CIO for his ability to analyze and decide if SAP is an effective solution for their company, and possibly should fire him if he chose SAP for the wrong reasons. They should not saddle a CIO with responsibility for dysfunctional IT decisions over which they have no control, or otherwise limit them to being implementers of someone else's strategy. And so on.
The same goes on with people's lack of analysis of marketing plans in the Network Marketing/Direct Selling industry, and as a result we're encountering this in spades around the launch of Kanosis. Some examples:
The "P" Word.
------------- "Pyramid scam" is a bad word, and it denotes a business concept that fallaciously assumes an ever expanding base, and therefore is unsustainable in the long run. This is quite contrary to the positive meaning of the word, denoting certain architectural phenomena in Egypt, which is where the term comes from, and which are based on a solid foundation, and have now lasted in excess of 6,000 years. Similarly some quite functional business hierarchies look like pyramids, as do some very dysfunctional ones. In other words the negative connotation of the word refers purely to the false assumption of an ever expanding base. According to some credible analysis by Bill Parish & Company, which has been published among other place in Barron's, Microsoft is just such a phenomenon, and the findings are hard to refute:
http://www.billparish.com/msftfraudfacts.html
Thus when I Googled "financial fraud" today, the above URL comes up at the top of the page. That speaks volumes. Conversely when people see a multi-level pay structure like Kanosis has, they say: "Oh a pyramid scheme," as if they knew what that meant, when clearly their very statement shows that they don't, since in this specific case the model evidently means that this company in particular enjoys a predictable distribution margin of 70% paid from REVENUE, and which therefore does not require an additional up-front capital infusion, and also ensures that there is a high degree of commitment for the early birds who help build the company. Evidently only people who really believe in the product or service would commit their time and resources to the vision. The level of commitment of your $200K VP of Sales and Marketing might not be as certain.
Therefore the humorous way in which Kanosis deals with the "P-word" on their site, is in fact the only way that you can counter this non-serious label (for it isn't even an argument), see:
http://www.kanosis.com/index.cfm/id/support/lang/english
There it says: "Is Kanosis Pyramid selling? No we do not sell pyramids. They are too heavy and expensive to ship!" And that is all you could say to this kind of non-serious "objection." And still some people will say: "Oh, it's a pyramid," and that will be the end of their "business decision." I guess it's just one more example of how labels are used to mask an inability to make proper decisions.
The "M-word."
------------- "Matrix" compensation plans have featured in so many Internet scams that there is a site devoted to steer the gullible out of trouble:
www.matrixwatch.org
The intentions are evidently good, however the discussion around Kanosis on this site suffers from a knee-jerk response that if it looks like a matrix at all, the specifics are ignored, and it is assumed that the venture in question is automatically a scam. Jim Southworth, the Chief Technology Evangelist (he's the CTO with an emphasis on explaining the technology to the outside world) for Kanosis has had quite a time of it on that site to try and keep the dialog meaningful while wading through piles of invective and prejudice.
Again the same applies here as did on the discussion of the "P-word," and that is that if you analyze the specifics, you are likely to find a gem of efficient and effective marketing in the form of the Kanosis marketing plan. Based on my analysis, I continue to bet that Kanosis has struck just the right balance. As of this week the jury's still out on the feature set they are about to deliver May 1st, but provided that lives up to its billing, there can be no question where this company is headed.
There are other "M-" and "P-" words, such as MLM, for Multi-Level Marketing, and Ponzi-scheme for a venture where the early investors are given phoney returns based on paying them from the investments of subsequent investors. All of them are evidently nefarious schemes, and any student of financial fraud will recognize them. Many a time the studies of the actual schemes people came up with are quite hilarious and instructive as to how people defer decisions and hurt themselves by reliance on irrelevant externals. The best resources to sort right from wrong are (among others)
www.quatloos.com (provided by a non-profit corporation)
www.mlmwatchdog.com (provided by the best network marketing consultant in the country)
www.ic3.gov (collaboration of FBI and National White Collar Crime Center).
So resources abound, and anyone should do their own due diligence on any venture they decide to get involved with by standards that makes sense to them.
It is very clear to me already that one reason network marketing scares off people is because they have to make their own decisions, because in this business model you hire the company instead of the company hiring you. Unfortunately it is the same mentality which causes people to later be herded into many of the same business opportunities, since by then they consider them credible because the neighbors are doing it. This behavior is no different from a company throwing out a perfectly good Unix architecture in favor of Microsoft Windows, which breaks down far more often and requires 5-10 times the number of administrators to users of Unix, not to mention every seat has 10 times higher power consumption than e.g. a SunRay terminal 250 Watt for a PC, vs 25 Watt for a SunRay). They are making the choise because the neighbors are doing it, or because the boss's kids have a Microsoft PC at home, or whatever. It has nothing to do with analysis.
One of the best scam artists I ever met, David Eastes, who was a big succes in Best Line (that was the "other" soap company besides Amway) at one time, and was barred from the direct selling industry because of some dubious practices, had a saying that demonstrates the issues clearly: "Logic and reason are the horse the emotions ride in on." I met him in my early days in the phone card industry, when he was trying to do it again in Amerivox, one of the first phone card companies, and one which definitely helped create that industry, even though they collapsed because of a defective strategy as well as sloppy execution.
To come back to the underlying issue here of deciding by appearances rather than by facts, another important example is the whole business of website design and the availability of reasonable and adequate disclosure on the website of any company. I have seen many criticisms of Kanosis in this regard, meanwhile they have improved the site on an ongoing basis, and I guess the critical point will come now that the company is launching their service as of May 1st, if the site will provide enough hard information. I am currently dealing with the same issues for another start-up company I'm tangentially involved with, where an interim website has garnered negative responses because of lack of information, and so it becomes a hindrance not a help in discussing the venture with others. So here is an area where companies can help themselves a lot by creating the right impression and providing sufficient answers to any potential issues. However in the spirit of caveat emptor, it does remain incumbent upon any buyer to do their own assessment, and by facts, not appearances.
The bottom line is first and foremost we should guard against being intellectually lazy, and doing our own due diligence by analysis, and not by proxy, either negatively by applying the label of "scam," based on appearance not facts, or positively, because the neighbors are doing it, so it must be alright. Any attempt to decide by proxy is ultimately only a way of avoiding responsibility for your own decisions, and making sure that you have somebody to blame if things go wrong.
Copyright © 2006 Rogier F. van Vlissingen. All rights reserved.
Saturday, April 22, 2006
Internet Marketing dos and don'ts: Network Marketing, really?
The link under the title of this article you will find a link to Eric Scheibeler's Merchants of Deception site. He provides very interesting material about the business methods of Amway and Quixtar, and the fact that those businesses are not at all what they seem. Whatever they are - and I've always thought that any money made in Amway was made on motivational and promotional seminars and tapes, not products - they are, I think, one example of a business who simply exported their existing business methods to the net, realizing some advantages, and in this case, among other things, brilliantly avoiding the estate tax by having the heirs to the Amway fortune launch Quixtar and cannibalize the Amway business. However they are not examples of Internet marketing in pure form, in which business concepts are not exported from the brick and mortar world, but conceived from the outset with the Internet reality in mind. The tenets of Eric Scheibeler's book coincide with my exposure to the phenomena of Amway and Quixtar, which have always seemed very cult-like to me, and not even good examples of what MLM could be or should be. There are plenty of good examples however, which may include Avon, Mary Kay, Tupperware, Creative Memories, Prepaid Legal, Primerica, and many other companies with legitimate products, services and marketing plans. In saying that, I am not concerned with legalities. Amway has always managed to stay clear of the law, and validate its business methods against legal challenge. That is different from saying they represent a sensible business opportunity. But I'm not going to attempt a history of MLM here.
On the Internet, things are different. Many companies have moved their presence to the Internet, including most MLM companies of old, and they naturally have realized some benefits and efficiencies in doing so. But few true Internet plays have proven viable. Personally, I would consider even Amazon a questionable case nowadays. To say the least, the jury is still out on them. It is proving more and more dubious if their wild expansion into everything including kitchen sinks, is going to provide the payoff for their technology investments, with which they have justified their infrastructure spending.
However if we look at successful marketing launches, we notice that the "network effect," is alive and well on the Internet, and has been the driving force that made many companies what they are today. Paypal offered referral fees for opening accounts with them, and they became an overnight success. INGDirect did the same, though less successfully so. AllAdvantage, Google, Skype, MySpace, and most portals somehow or other leveraged the network effect, and a few reinforced the network effect through incentives, referral fees, and sometimes multi-level compensation. The results are visible in inflated stockmarket evaluations of some companies which are temporarily deemed successful, but the question remains how well they serve all stakeholders, not just shareholders. MySpace and Google are examples where the "value creation" accrues entirely to the founders and shareholders, and not to the users except through the functionality of their services, which are paid for with advertising, and to some degree the sacrifice of privacy, not hard cash. I liken this part to the early days of television, and network TV, which became all paid for by advertising.
In TV, the development is perhaps further along than on the Internet in that some clear winners of pay TV seem to have emerged, while commercial TV is losing the battle on all fronts both against pay channels on cable, and against the Tivo on the hardware front. Consumers are sending a clear message: they want the content, but preferably without the ads. To assume that the Internet will be any different is naive. Users want the functionality, not the ads. Therefore superior functionality in some form or other will warrant payment. Salesforce.com seems to be an example, and there are others. In spite of the apparent successes of Google, the ad-supported model therefore may peak at some point if people switch to ad-free pay-services in massive numbers. Right now Johnny-come-latelies like Microsoft are getting more and more into the ad-supported model, which again is going to do nothing but depress advertising rates, and undermine the value of on-line advertising, which, as it becomes ubiquitous, becomes as boring and annoying as TV commercials. So right now the ad-supported model is most likely in a "bubble" mode, and overdue for a correction.
On the software front meanwhile, the revolution that is going on is that of "Open Source" vs. the proprietary software model. Here one of the most central themes is control, but there is another stakeholder issue, which is sometimes overlooked. If I submit an improvement to Microsoft, they own my improvement, and I get charged for the privilege with their next upgrade. The only benefit these stakeholders get is the functionality of the software which they pay for. User frustration therefore sets in if "upgrades" do not match their perceptions of what they need, and merely force them to acquire more powerful computers, to little actual benefit in the long run.
To get back to the MLM discussion, MLM is annoying when the economic incentive gets people to push products or services I don't want, just as much as advertising is annoying when it pushes products or services I don't want. But if I found a superior product due to a good ad, then I accept the ad, since it did me a service. Successful advertising therefore needs to be entertaining, engaging, and helpful.
What sets aside the Internet as a medium is among other things the ease with which the network effect can manifest, AND the ease with which economic drivers can be tracked and rewarded, which can in turn reinforce that network effect. Therefore the Internet and a network model of payments is potentially an optimal combination, since it offers the potential of engaging more of the stakeholders more fully, in particular extending the benefits of growth from the network effects to the users who create it. Doing so will not prevent a bad product or service from tanking eventually however. And that, among other things is the reason why scams ultimately flame out, quite aside from legal and regulatory challenge, which merely serve to hasten the crash of the deserving. Therefore in general it will also be helpful to speak of network marketing as a category, in lieu of the particular pay structures, such as mlm-, matrix-, or pyramid- which have become labels that confuse more than they explain, and in the realization that the economic effect of the network is the natural ally of would-be "network marketing" programs, and that conversely if the economic potential of a product, application or service are not well aligned, they are always doomed.
Further, once we properly understand the tremendous power of the network effect, in conjunction with efficient and effective economic incentives, it becomes very easy to see why a private company like Kanosis could easily outcompete a traditional business that is publicly financed. More start-ups bit the dust who were done in both by a combinaition of the high cost of capital, and the tremendous cost of sales and marketing, which might constitute as much as 80% of the runrate in the early years. To pay for (word-of-mouth) marketing from revenues, at a predictable 70% as is the case in this particular example, is positively a bargain by comparison, and a model of economic efficiency.
As a cautionary note meanwhile, it should also be noted that while this type of a company launch is by and large easier because of lower startup costs, it is also harder because the execution is much more demanding. Namely if the reputation of your product or service is directly linked with your user constituency as it is in this case, if relations between the company and its user base break down, that breakdown will happen that much more quickly, and it takes truly extraordinary management talent to maintain the social compact between the company and all of its stakeholders, because feedback is very fast. Better have a LeMans driver at the helm then...
A lot of confusion stems from the fact that many people have lost money in non-viable MLM companies, or in various Internet scams, or they have loved ones who have done so, and then they come to the erroneous conclusion that all MLM is bad, in an obvious confusion of ends and means. I'm seeing this phenomenon in respect of my involvement with Kanosis. Many people have a priori notions which prevent them from examining the actual business model, due to a prejudice against MLM, pyramid schemes, or matrix pay-outs, when they don't even understand the actual definitions of those concepts, or much less are able to distinguish right from wrong in any meaningful way from either a business or a legal standpoint.
On the level of functionality I tend to think that Kanosis represents a value which can be easily justified, and compares favorably with some other pay services, since it offers a level of integration and convenience that is not otherwise available. I have obviously arrived at the conclusion that Kanosis is a winner, and decided to market it. Only time will tell if my analysis was correct. However, if it is, many otherwise intelligent people who opted against it only because of an irrational prejudice against MLM, will regret their short-sightedness, and at some point it should become evident that prejudice is not a good substitute for business analysis.
Leaving aside therefore for a moment the consideration if Kanosis itself will succeed, there can be no question that in consumer marketing in particular, and of products and services with a strong network effect (like the collaboration features in Kanosis), network-type compensation plans will be increasingly popular in order to engage the users as the best qualified sales people. That logic is impeccable. After all what does any buyer do? Ask for references! I routinely ask drivers of a car I want to buy how they like it, etc.
It should be noted also that Kanosis is developing an interesting hybrid model, and will set a precedent by developing a professional, certified salesforce for their corporate services, which will be released starting three months after the consumer service, and they will have a profit sharing mechanism for their regular consumer users, on the strength of the theory that it is the popular use of the service which will help promote corporate adoption. This will be the vindication of word-of-mouth advertising and the network effect. This innovation alone is likely to be a brilliant marketing vision.
While all of this analysis remains to be proven for the historians, I'm not waiting for the history to be written, and in the interim I've put my money where my mouth is. Further, by publishing this analysis here, I'm on the record, and I will be duly curious myself what the outcome will be, even while I'm obviously banking on being right about it.
Copyright © 2006 Rogier F. van Vlissingen. All rights reserved.
On the Internet, things are different. Many companies have moved their presence to the Internet, including most MLM companies of old, and they naturally have realized some benefits and efficiencies in doing so. But few true Internet plays have proven viable. Personally, I would consider even Amazon a questionable case nowadays. To say the least, the jury is still out on them. It is proving more and more dubious if their wild expansion into everything including kitchen sinks, is going to provide the payoff for their technology investments, with which they have justified their infrastructure spending.
However if we look at successful marketing launches, we notice that the "network effect," is alive and well on the Internet, and has been the driving force that made many companies what they are today. Paypal offered referral fees for opening accounts with them, and they became an overnight success. INGDirect did the same, though less successfully so. AllAdvantage, Google, Skype, MySpace, and most portals somehow or other leveraged the network effect, and a few reinforced the network effect through incentives, referral fees, and sometimes multi-level compensation. The results are visible in inflated stockmarket evaluations of some companies which are temporarily deemed successful, but the question remains how well they serve all stakeholders, not just shareholders. MySpace and Google are examples where the "value creation" accrues entirely to the founders and shareholders, and not to the users except through the functionality of their services, which are paid for with advertising, and to some degree the sacrifice of privacy, not hard cash. I liken this part to the early days of television, and network TV, which became all paid for by advertising.
In TV, the development is perhaps further along than on the Internet in that some clear winners of pay TV seem to have emerged, while commercial TV is losing the battle on all fronts both against pay channels on cable, and against the Tivo on the hardware front. Consumers are sending a clear message: they want the content, but preferably without the ads. To assume that the Internet will be any different is naive. Users want the functionality, not the ads. Therefore superior functionality in some form or other will warrant payment. Salesforce.com seems to be an example, and there are others. In spite of the apparent successes of Google, the ad-supported model therefore may peak at some point if people switch to ad-free pay-services in massive numbers. Right now Johnny-come-latelies like Microsoft are getting more and more into the ad-supported model, which again is going to do nothing but depress advertising rates, and undermine the value of on-line advertising, which, as it becomes ubiquitous, becomes as boring and annoying as TV commercials. So right now the ad-supported model is most likely in a "bubble" mode, and overdue for a correction.
On the software front meanwhile, the revolution that is going on is that of "Open Source" vs. the proprietary software model. Here one of the most central themes is control, but there is another stakeholder issue, which is sometimes overlooked. If I submit an improvement to Microsoft, they own my improvement, and I get charged for the privilege with their next upgrade. The only benefit these stakeholders get is the functionality of the software which they pay for. User frustration therefore sets in if "upgrades" do not match their perceptions of what they need, and merely force them to acquire more powerful computers, to little actual benefit in the long run.
To get back to the MLM discussion, MLM is annoying when the economic incentive gets people to push products or services I don't want, just as much as advertising is annoying when it pushes products or services I don't want. But if I found a superior product due to a good ad, then I accept the ad, since it did me a service. Successful advertising therefore needs to be entertaining, engaging, and helpful.
What sets aside the Internet as a medium is among other things the ease with which the network effect can manifest, AND the ease with which economic drivers can be tracked and rewarded, which can in turn reinforce that network effect. Therefore the Internet and a network model of payments is potentially an optimal combination, since it offers the potential of engaging more of the stakeholders more fully, in particular extending the benefits of growth from the network effects to the users who create it. Doing so will not prevent a bad product or service from tanking eventually however. And that, among other things is the reason why scams ultimately flame out, quite aside from legal and regulatory challenge, which merely serve to hasten the crash of the deserving. Therefore in general it will also be helpful to speak of network marketing as a category, in lieu of the particular pay structures, such as mlm-, matrix-, or pyramid- which have become labels that confuse more than they explain, and in the realization that the economic effect of the network is the natural ally of would-be "network marketing" programs, and that conversely if the economic potential of a product, application or service are not well aligned, they are always doomed.
Further, once we properly understand the tremendous power of the network effect, in conjunction with efficient and effective economic incentives, it becomes very easy to see why a private company like Kanosis could easily outcompete a traditional business that is publicly financed. More start-ups bit the dust who were done in both by a combinaition of the high cost of capital, and the tremendous cost of sales and marketing, which might constitute as much as 80% of the runrate in the early years. To pay for (word-of-mouth) marketing from revenues, at a predictable 70% as is the case in this particular example, is positively a bargain by comparison, and a model of economic efficiency.
As a cautionary note meanwhile, it should also be noted that while this type of a company launch is by and large easier because of lower startup costs, it is also harder because the execution is much more demanding. Namely if the reputation of your product or service is directly linked with your user constituency as it is in this case, if relations between the company and its user base break down, that breakdown will happen that much more quickly, and it takes truly extraordinary management talent to maintain the social compact between the company and all of its stakeholders, because feedback is very fast. Better have a LeMans driver at the helm then...
A lot of confusion stems from the fact that many people have lost money in non-viable MLM companies, or in various Internet scams, or they have loved ones who have done so, and then they come to the erroneous conclusion that all MLM is bad, in an obvious confusion of ends and means. I'm seeing this phenomenon in respect of my involvement with Kanosis. Many people have a priori notions which prevent them from examining the actual business model, due to a prejudice against MLM, pyramid schemes, or matrix pay-outs, when they don't even understand the actual definitions of those concepts, or much less are able to distinguish right from wrong in any meaningful way from either a business or a legal standpoint.
On the level of functionality I tend to think that Kanosis represents a value which can be easily justified, and compares favorably with some other pay services, since it offers a level of integration and convenience that is not otherwise available. I have obviously arrived at the conclusion that Kanosis is a winner, and decided to market it. Only time will tell if my analysis was correct. However, if it is, many otherwise intelligent people who opted against it only because of an irrational prejudice against MLM, will regret their short-sightedness, and at some point it should become evident that prejudice is not a good substitute for business analysis.
Leaving aside therefore for a moment the consideration if Kanosis itself will succeed, there can be no question that in consumer marketing in particular, and of products and services with a strong network effect (like the collaboration features in Kanosis), network-type compensation plans will be increasingly popular in order to engage the users as the best qualified sales people. That logic is impeccable. After all what does any buyer do? Ask for references! I routinely ask drivers of a car I want to buy how they like it, etc.
It should be noted also that Kanosis is developing an interesting hybrid model, and will set a precedent by developing a professional, certified salesforce for their corporate services, which will be released starting three months after the consumer service, and they will have a profit sharing mechanism for their regular consumer users, on the strength of the theory that it is the popular use of the service which will help promote corporate adoption. This will be the vindication of word-of-mouth advertising and the network effect. This innovation alone is likely to be a brilliant marketing vision.
While all of this analysis remains to be proven for the historians, I'm not waiting for the history to be written, and in the interim I've put my money where my mouth is. Further, by publishing this analysis here, I'm on the record, and I will be duly curious myself what the outcome will be, even while I'm obviously banking on being right about it.
Copyright © 2006 Rogier F. van Vlissingen. All rights reserved.
Tuesday, April 11, 2006
A Dream Come True?
In 2002, after leaving NTT/Verio, amid the ashes of 9/11 and the dot com bust, I continued in the business selling security solutions, and at some time, as part of the effort we developed a business concept with a working title of My Virtual Computer, aiming to provide a hosted personal working environment with superior security features. One of the driving concepts was that managing PC hardware and software is a constant challenge for more than 99% of the population, and too often data is lost, due to hard disk crashes, system changes, and God knows what all. Also, the reality is that people often times share hardware, and existing technologies are hopelessly inadequate to do that effectively. People also want PRIVATE access to their personal data from the office, or anywhere for that matter. Therefore a professionally managed service, accessed over the web would be the answer.
We conceptualized this in two flavors, for broadband and for dial-up, and we worked for a while with a development company which provided secure email, which was also developing a sort of personal desktop which embodied the key ideas we had for the service. When I explained the initial concept to my partner Roger, he exclaimed: "Rogier, I KNEW you had it in you!" Still, for various reasons, both technological and business, the plan did not come to fruition, but my conclusion was that the idea was too logical, so that inevitably someone, some day would figure it out and make it a reality. This blog was actually started once I gave up on ever realizing this idea myself, and decided instead to just share some of my thinking on appropriate IT with the world. The central notion was about Personal Computing, as opposed to Personal Computers.
Unbeknownst to me in Cyprus a developer by the name of Stephen van Zutphen was working on the very idea we had been talking about here in New York, and actually he was able to implement it. Apparently he first thought of lawyers, appointment calendars, and time billing, and he should be forgiven for that, since he is a lawyer himself, so he can't help it. Fortunately however events took a different turn and the product is now being launched as a consumer service under the name of Kanosis, and later will be re-released for the corporate market.
As of this writing we are still working with a pre-release version of the Kanosis service, but I will sum up some of the basic functionality here, however I will also preface this by saying that I think the solution is BRILLIANT because of its simplicity. Stephen van Zutphen's vision was that of a "Personal Operating System," as opposed to a computer operating system. I see that as another way of expressing the ideas of Personal Computing vs. Personal Computers. Most PC software suffers from featuritis, and complexity, which tends to grow out of control until a competitive software arrives and takes the old champ down.
Kanosis is a paradigm shift centered around the idea of Personal Information Manager, (PIM), but delivered over the net as an ASP, or Software As A Service (SAAS). The brilliance of the design is in the integration of features, combined with the effectiveness of facilitating collaboration among users of the service. In effect it provides on a membership basis a collaboration platform to beat many of the best corporate platforms, which are available only to employees or business partners of said corporations. From a marketing standpoint he adoption will strongly benefit from the network effect, and supporting that with an appropriate multi-level compensation plan was another brilliant move.
An example of this was during my visit to the Cingular store this morning to upgrade my phone. The salesman pushed me towards a PDA, and I rebuffed him, describing how I used this new on-line service which I use for managing my contacts, and scheduling, etc. and that I found it kind of pathetic how people around me are constantly synching their Blackberry. To me it seemed like more hassle than it is worth. He listened up, and he already wants to join Kanosis. And that's just one aspect of the service.
What Kanosis is in full is:
- a live, on-line, and cross platform (java-based) Personal Information Manager (PIM): contacts, schedules, task management, including organizing files by contacts.
- a communications center: email, chat, internet telephony, video conferencing/video mail
- a secure on-line storage facility with 5Gb of personal space
- low-cost international financial transactions, including an on-line account in up to twelve currencies, along with a company debit card.
- a store for video and audio downloads, which will reportedly have the largest on line movie inventory yet starting from the launch date of May 1st.
- a business opportunity which allows consumers sales ONLY by members, and on a personal level those are the best sales people, because as users of the service they are eminently qualified to sell it to others.
In short, if simplicity sells, this service will be hugely successful, and it will cut a wide swath through the territory of Salesforce.com, the Outlook/Exchange franchise, Google, and others. I think the KISS principle is likely to win out, and win big. One of the fascinating aspects of the service is also that it provides better security, in creating a VPN like environment between the IPV6 compatible clients and the central server, so that users enjoy above average security and privacy by collaborating through this platform. For the moment access security remains limited to username and password, but hopefully better alternatives for that will be provided in due course as well.
Last but not least I can only say that on the whole that if Kanosis is an implementation of the idea for My Virtual Computer, they did a far better job than I was envisaging, and I salute Stephen van Zutphen for his vision, and all the other people involved for ultimately realizing this idea and bringing it to market in the form of Kanosis.
Besides the competitive issues discussed here, I also think that this service will make it easier for people to switch to a Linux desktop. In fact, I would suggest a small business could get by with a Linux PC, Open Office, GnuCash, and Kanosis. In short, this service is going to change the landscape, and help close the digital divide just a little bit, by providing appropriate technology, device independence, and ease of use.
By clicking on the title to this article you will find a link to the Kanosis website, which will show that you were referred by me. Have at it, have fun, join the revolution... I'm sure I will write about this again, for I enjoy seeing an old dream realized in this fashion, and I enjoy technological revolutions and paradigm shifts, and this surely is one of those!
Copyright © 2006 Rogier F. van Vlissingen. All rights reserved.
We conceptualized this in two flavors, for broadband and for dial-up, and we worked for a while with a development company which provided secure email, which was also developing a sort of personal desktop which embodied the key ideas we had for the service. When I explained the initial concept to my partner Roger, he exclaimed: "Rogier, I KNEW you had it in you!" Still, for various reasons, both technological and business, the plan did not come to fruition, but my conclusion was that the idea was too logical, so that inevitably someone, some day would figure it out and make it a reality. This blog was actually started once I gave up on ever realizing this idea myself, and decided instead to just share some of my thinking on appropriate IT with the world. The central notion was about Personal Computing, as opposed to Personal Computers.
Unbeknownst to me in Cyprus a developer by the name of Stephen van Zutphen was working on the very idea we had been talking about here in New York, and actually he was able to implement it. Apparently he first thought of lawyers, appointment calendars, and time billing, and he should be forgiven for that, since he is a lawyer himself, so he can't help it. Fortunately however events took a different turn and the product is now being launched as a consumer service under the name of Kanosis, and later will be re-released for the corporate market.
As of this writing we are still working with a pre-release version of the Kanosis service, but I will sum up some of the basic functionality here, however I will also preface this by saying that I think the solution is BRILLIANT because of its simplicity. Stephen van Zutphen's vision was that of a "Personal Operating System," as opposed to a computer operating system. I see that as another way of expressing the ideas of Personal Computing vs. Personal Computers. Most PC software suffers from featuritis, and complexity, which tends to grow out of control until a competitive software arrives and takes the old champ down.
Kanosis is a paradigm shift centered around the idea of Personal Information Manager, (PIM), but delivered over the net as an ASP, or Software As A Service (SAAS). The brilliance of the design is in the integration of features, combined with the effectiveness of facilitating collaboration among users of the service. In effect it provides on a membership basis a collaboration platform to beat many of the best corporate platforms, which are available only to employees or business partners of said corporations. From a marketing standpoint he adoption will strongly benefit from the network effect, and supporting that with an appropriate multi-level compensation plan was another brilliant move.
An example of this was during my visit to the Cingular store this morning to upgrade my phone. The salesman pushed me towards a PDA, and I rebuffed him, describing how I used this new on-line service which I use for managing my contacts, and scheduling, etc. and that I found it kind of pathetic how people around me are constantly synching their Blackberry. To me it seemed like more hassle than it is worth. He listened up, and he already wants to join Kanosis. And that's just one aspect of the service.
What Kanosis is in full is:
- a live, on-line, and cross platform (java-based) Personal Information Manager (PIM): contacts, schedules, task management, including organizing files by contacts.
- a communications center: email, chat, internet telephony, video conferencing/video mail
- a secure on-line storage facility with 5Gb of personal space
- low-cost international financial transactions, including an on-line account in up to twelve currencies, along with a company debit card.
- a store for video and audio downloads, which will reportedly have the largest on line movie inventory yet starting from the launch date of May 1st.
- a business opportunity which allows consumers sales ONLY by members, and on a personal level those are the best sales people, because as users of the service they are eminently qualified to sell it to others.
In short, if simplicity sells, this service will be hugely successful, and it will cut a wide swath through the territory of Salesforce.com, the Outlook/Exchange franchise, Google, and others. I think the KISS principle is likely to win out, and win big. One of the fascinating aspects of the service is also that it provides better security, in creating a VPN like environment between the IPV6 compatible clients and the central server, so that users enjoy above average security and privacy by collaborating through this platform. For the moment access security remains limited to username and password, but hopefully better alternatives for that will be provided in due course as well.
Last but not least I can only say that on the whole that if Kanosis is an implementation of the idea for My Virtual Computer, they did a far better job than I was envisaging, and I salute Stephen van Zutphen for his vision, and all the other people involved for ultimately realizing this idea and bringing it to market in the form of Kanosis.
Besides the competitive issues discussed here, I also think that this service will make it easier for people to switch to a Linux desktop. In fact, I would suggest a small business could get by with a Linux PC, Open Office, GnuCash, and Kanosis. In short, this service is going to change the landscape, and help close the digital divide just a little bit, by providing appropriate technology, device independence, and ease of use.
By clicking on the title to this article you will find a link to the Kanosis website, which will show that you were referred by me. Have at it, have fun, join the revolution... I'm sure I will write about this again, for I enjoy seeing an old dream realized in this fashion, and I enjoy technological revolutions and paradigm shifts, and this surely is one of those!
Copyright © 2006 Rogier F. van Vlissingen. All rights reserved.
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