tag:stream.growthink.com,2013:/posts Growthink: The Stream 2014-10-13T18:23:52Z Growthink tag:stream.growthink.com,2013:Post/754807 2014-10-13T18:23:51Z 2014-10-13T18:23:52Z Client Success - Studiovox Signs Partnership with Sundance Group StudioVox Partners With Sundance Cinemas to Expand Opportunities for Creatives With New Professional Network

StudioVox

LOS ANGELES, CA--(Marketwired - Oct 8, 2014) -StudioVox, a Los Angeles-based online network for creative professionals offering a platform for visual artists, photographers, interior designers, performers, filmmakers, musicians and other artists to network with likeminded colleagues, agents, companies and fans, announces its partnership with Sundance Cinemas Galleries, of Robert Redford's Sundance Group. StudioVox serves as the submission and curation platform for artwork to be exhibited at Sundance Cinemas' fine art galleries in West Hollywood, San Francisco, Seattle, Houston and Madison, Wis.

Unlike LinkedIn and traditional social media sites,StudioVox fills the gap as a credible site for showcasing creative talent, connecting and collaborating with others, finding work, building teams and hiring talent. StudioVox allows creatives to promote themselves by creating a comprehensive profile with which they can share their portfolios and work.

"Our partnership with Sundance mirrors our purpose. It offers our community of artists a chance to be seen and have their art recognized by a brand built on creating opportunities for new voices in the arts to be heard, as well as its continuing commitment to quality in the arts," says StudioVox CEO and Co-Founder Amanda Slingerland.

StudioVox' platform offers instant promotion and exposure, with the additional abilities to schedule and invite people to events and house personal blogs, as well as soon-to-be-added capabilities that will streamline the ability for users to push their StudioVox content out to Facebook, Twitter and LinkedIn profiles and sell art, music and merchandise directly from the site.

"Our new relationship with StudioVox is a gift. It's a gift to us, as we are now able to draw upon their fantastic connections in the art world, and a gift to the artists, as not only will they have shows at Sundance Cinemas, but StudioVox will be enhancing the way the shows are marketed, thusly giving the artists much deserved acknowledgement," says Nancy Klasky Gribler, Executive Vice President of Marketing, Sundance Cinemas.

The partnership is being celebrated with a private party at Sundance Cinemas in West Hollywood on Oct. 9, where StudioVox artist and Los Angeles-based abstract painter Lori Dorn's artwork is exhibited through November.

To submit your artwork for consideration for exhibition at the Sundance Cinemas Galleries, peruse artists' portfolios and creative works, or look for talent, visit StudioVox.com.

Source: See articles on StudioVoxMarket Wired or Yahoo Finance.


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Growthink
tag:stream.growthink.com,2013:Post/753154 2014-10-09T17:48:18Z 2014-10-09T17:48:19Z Teens are officially over Facebook

(Paul Walsh/Flickr)

By Caitlin Dewey

Since children are the future, and no one over 21 really knows what they find “cool” (do the kids even say cool these days…?), researchers have devoted many, many surveys to the exact quantification of what it is #teens do online.

In May 2013, they were fleeing Facebook’s “drama.” A year later, they flocked back to the network like lil’ lost sheep.

Now, a pretty dramatic new report out from Piper Jaffray — an investment bank with a sizable research arm — rules that the kids are over Facebook once and for all, having fled Mark Zuckerberg’s parent-flooded shores for the more forgiving embraces of Twitter and Instagram. Between fall 2014 and spring 2014, when Piper Jaffray last conducted this survey, Facebook use among teenagers aged 13 to 19 plummeted from 72 percent to 45 percent. In other words, less than half of the teenagers surveyed said “yes” when asked if they use Facebook. (A note: There’s no spring data available for the “no networks” option, which is why that spot is blank.)

Surveys of this type are, of course, a dime a dozen, and teen whims are as volatile as Twitter’s trending hashtags. That said, Piper Jaffray’s research is pretty thorough: It surveyed a national group of 7,200 students and accounted for variables like gender and household income.

Among the survey’s other findings: Kids love Apple products above any other consumer tech brand, though only a sliver — 16 percent — were interested in the iWatch. They overwhelmingly predicted that, by 2019, they’d watch all their movies on Netflix. They’re cooling on Pandora radio, which has seen a host of streaming apps and other competitors crop up in the past five years.

Alas, none of this helps explain why teens like the things they do, a question as old and impenetrable as time. Both research and anecdote would suggest, of course, that it has something to do with the presence of adults on the site, as well as the typically high-school plagues of oversharing and in-fighting. The recent rise of anonymous social apps — things like Whisper and Yik Yak, which is dominated by college students — would also seem to suggest a youthful wish to escape the confines and responsibilities of a fixed online identity. (Facebook certainly seems to worry that’s the case: On Tuesday the New York Times reported that the Web site was working on an anonymous, stand-alone messaging app of its own.)

That should perhaps worry parents, of both the helicopter and cool-Dad variety: You can’t really interact with — or “check up on” — your kids on Whisper the way you do on ye olde FB. (Whisper users don’t have friends and go on under pseudonymous usernames, which, arguably, is the app’s main draw.)

Facebook needn’t panic, though. Even if it’s namesake platform is now totally passe, the kids still love Instagram — so Zuck wins, either way.

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Luke Brown
tag:stream.growthink.com,2013:Post/752755 2014-10-08T20:59:25Z 2014-10-08T21:44:34Z Growthink Exhibits at LAEDC 2015 Economic Forecast On October 8th, LAEDC presented the 2015 Economic Forecast Event.
LAEDC’s twice-yearly economic forecast events provide insight and planning information to our members, partners, LA County leaders, and the general public.  For this event, LAEDC shifted its format to include a five-year planning horizon, and with the help of our guests such as Cal State University Chancellor Timothy White and expert panelists, we discussed the drivers in the economy related to education and skills.

The industry panel discussed how their workforce needs are changing and made recommendations on the skills needed to remain relevant and in-demand

  • Jodie Lesh of Kaiser Permanente
  • Michael Bissonette of AeroVironment, and Steve Nissen of NBC Universal
  • Art Yoon, FilmLA
  • David Rattray of LA Area Chamber of Commerce
Growthinkers Myke Andrews, Luke Brown and Justin Goodkind represented Growthink, below.

The full industry report is available here.



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Luke Brown
tag:stream.growthink.com,2013:Post/750664 2014-10-03T21:20:25Z 2014-10-03T21:20:26Z Tips on Negotiating a Termsheet

Last year, OpenTable founder and all-around great guy, Chuck Templeton, asked me to put together a talk on negotiating termsheets for participants in his Impact Engine program. Although Chuck thought he was asking a favor of me, I found the process of organizing my thoughts on negotiating termsheets (and in general) a personally useful exercise. Below is a digest of the talk including some of my tips.

You see, I got a “B” grade in my negotiations class at Chicago Booth. It’s my own fault for not doing a great job on my final paper. The only time I’ve ever tried to discuss a final grade with a professor (in undergrad or grad) was that class, since I figured that a negotiations professor would have no choice but to appreciate a student trying to negotiate a better grade. The professor never responded to my request for a meeting, which branded upon my forehead one of the great tactics in negotiations: don’t negotiate at all. Well that’s why he was the professor and I was the student.

 

Ever since then, I’ve been trying to make up for my “B” and have given much thought to the many negotiations I’ve been through in the last 13 years (including buying cars). I’ve paid close attention to great negotiators and bad ones.

 

Sharing these tips may come as a surprise to people– a VC sharing the secrets of negotiating?! But I don’t see it that way. My philosophy is that I want an entrepreneur to understand in detail the deal they are signing up for. Anything different results in disappointment and a bad partnership eventually. A good negotiator on the other side will express the principles behind their goals (not positions) and we can get to a solution (or not) quickly. Bad negotiators hide their true intentions, obfuscate and confuse, which makes it much harder for the other party to fashion an agreement that satisfies the counterparty. It’s like refusing to tell your spouse what types of gifts you would like for the holidays– you are less likely to be happy with the outcome, or worse yet maybe you won’t get a gift at all!

 

Not all negotiation tactics/strategies are applicable for all situations. And the approach you use will also depend on your personality and style. It will also depend on your business. For example, distressed investors negotiate with the power and asymmetric leverage of certain doom as an alternative to their deal. Yet a different approach is required for the president of the tiny country of Maldives trying to convince world powers to stem global warming (see the film The Island President in my list of documentaries). So this advice below is applicable in situations where there is balanced leverage.

 

I like to approach negotiating and a problem solving exercise. I find that makes it less confrontational and less uncomfortable for everyone. When I was negotiating the Base CRM investment, Uzi and I sat at a Carribou Coffee on Clark Street with the cap table in front of us on one computer, and we would just change the numbers together to find something that was fair, Excel goal seek be damned.

 

Here are some of my observations from great negotiators over the years:
goodnegosh
Some of these are worth highlighting. Finding “trades” is a great one that you learn playing Monopoly. When two people assign different values to items in a negotiation, there arises a great opportunity to trade. Without Park Place, Boardwalk isn’t as valuable to you as it is to the owner of Park Place. And if that owner has a property you need to complete a monopoly, that they in turn value differently than you do, there’s a good chance for a deal. This is a great example of how negotiation can create net value– both sides gain. This is opposed to value-claiming, when creativity doesn’t result in more total value- it’s just a land-grab for the existing value. Given the endless customization of termsheets, there usually lies opportunity to create value for those who are creative. So when in a negotiation and there is disagreement about what terms are important, that’s generally great news!

 

Seeking fair deals may also surprise some as a tip. I’ve seen countless examples of deals that were funded with unfair terms in earlier rounds. Regardless of which side “won” the negotiation, it winds up biting in later rounds, especially as one side feels scorned.

 

And in contrast, here are some of the mistakes I’ve seen lousy negotiators make:
badnegosh

 

There is one mistake I’ve seen a lot of entrepreneurs make that ultimately costs them: singular focus on valuation. The truth is that economic value in a termsheet is a function of many terms: pre-money valuation, liquidation preference, size of the option pool, if the option pool is pre or post money, warrants, anti-dilution provisions, dividends, etc. Good negotiators treat all of these as a package. And while each of these economic terms have different magnitude and behavior (some are a function of time, some emphasize downside others upside, likelihood of being negotiated away), they all play a part in the overall economic outcome for a founder. I understand that it’s more impressive to the market to have a big valuation, and no one is going to write a blog post highlighting your small, post-money option pool. It’s just not as exciting. But if all of the PR and personal pride is at the expense of all the other economic terms, that ability to brag has a real cost to it. Per-money valuation is like the MSRP of a car– every educated person knows that’s not what it’s really worth, and that there are a lot of factors that determine the true value.

 

So good luck on whatever you are negotiating. And here’s to hoping that my former professor reads this post….
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Luke Brown
tag:stream.growthink.com,2013:Post/749181 2014-09-30T22:35:34Z 2014-09-30T22:35:34Z Definitive Guide to Crowdfunding Sites (Infographic) In the last few years, the crowdfunding scene has exploded. Now there are hundreds of platforms to choose from, with more popping up every day. But which crowdfunding site is best for your small business? Or charitable cause? We covered 26 Top Crowdfunding Sites by Niche, and now we've created an infographic with all the essential details. 

 
Check it out! 


26 top crowdfunding sites to choose from for your next campaign

-- 
Melissa Welch

Director of Client Development

Growthink

melissa.welch@growthink.com

(310) 846-5015


Follow me on Twitter: http://twitter.com/MelissaAWelch

Join my network on LinkedIn: http://www.linkedin.com/in/melissaawelch

Become a Growthink Fan on Facebook: http://www.facebook.com/growthink

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Melissa Welch
tag:stream.growthink.com,2013:Post/748940 2014-09-30T16:36:49Z 2014-09-30T19:02:10Z Happy Anniversary Kevin McGinn Please join me in congratulating Kevin McGinn on his SEVENTH anniversary here at Growthink.


Thanks Kevin for all your contributions over the year!

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Dave Lavinsky
tag:stream.growthink.com,2013:Post/747305 2014-09-27T00:10:56Z 2014-09-27T13:10:00Z Welcome to the Team Krissy Nguyen!!

Congratulations to Krissy Nguyen on her first week here! She's a great addition to the team and brings a positive attitude! 

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Growthink
tag:stream.growthink.com,2013:Post/747120 2014-09-26T15:15:11Z 2014-09-26T15:15:11Z The All-You-Can-Eat Apps Mobile Trend Coming From Asia
Editor’s note: Jay Eum is a co-founder and managing director of Translink Capital.

Although the word “disrupt” has taken a lot of flak recently, there are still innovations that can reorder an entire market – and one has just crossed the Pacific Ocean.

On Tuesday, August 19, Sprint announced the release of App Pass, a subscription service that allows customers to access a curated selection of premium apps and games for $4.99 per month. Subscribers also get a monthly $5 credit to spend on in-app purchases. Essentially, it is Netflix for mobile apps.

This announcement sparked little interest from mainstream media. However, if you look at the rise of app-bundling in East Asia, you’ll understand why this business model could disrupt mobile development and consumption throughout the U.S.

Telecom Operators Strike Back

According to a March press release from KDDI Corporation, Japan’s second-largest cellular service, the company’s app-bundling program called “au Smart Pass” reached 10 million subscribers just two years after launching. For the basic au Smart Pass, subscribers pay ¥372 per month, or roughly $3.50 USD for unlimited use of more than 100 apps. This means that KDDI, now the county’s largest app bundler, is raking in a half billion per year from the app market.

This is significant because up until KDDI and its competitors introduced app-bundling, telecom providers were effectively cut out of the app ecosystem. Back in late 1990s and early 2000s –the days of the Nokia 6110, Motorola RAZR and games like Snake – telecom operators owned the distribution channel for all services and applications, which was appropriately labeled as their “walled garden”. When the Apple App Store launched in 2008, that monopoly ended. App developers, Apple and eventually Google both captured the market for extra services and applications. Through app-bundling, telecom providers finally get piece of the action back.

Considering that Sprint is owned by SoftBank, Japan’s third largest cellular provider and one of KDDI’s bundling competitors, it is no surprise that they are the first carrier in the U.S. market to offer an app-bundled subscription. In fact, App Pass is the first coordinated service launched together by Softbank and Sprint since the completion of their merger in July 2013. Although Sprint now has a lead on Verizon, AT&T and T-Mobile, I suspect that App Pass may soon face stiff competition. Much the way that NTT DoCoMo launched their own app-bundled service about a year after KDDI, Verizon, AT&T and T-Mobile may try to launch similar services in the near future.

So Who Wins?

If app-bundling takes off – and I suspect it will – we should consider this a win for app developers, consumers, cellular operators and Apple and Google. Let’s imagine that for a $1 premium app, currently 30 cents goes to the App Store or Google Play, and 70 cents goes to the developer. With a bundler like Sprint in the equation, perhaps the developers takes 35 cents and give the other half to Sprint, which will put the app in front of more than 50 million mobile subscribers.

In terms of customer acquisition and marketing, that is a tremendous win for most app developers. The expanded user base will offset the acquisition cost. App-bundling is also a great deal for any consumers that spend money on apps – especially since the $5 credit each month to spend on in-app purchases offsets the $4.99 monthly subscription fee.

The App Store and Google Play don’t necessarily lose anything in this new dynamic. They still take their cut from downloads and in-app transactions. Interestingly, iOS 8 is actually going to let developers create their own bundles with up to 10 apps, but Apple is not yet facilitating a bundled subscription model like Sprint’s.

So app-bundling appears to be a win-win-win for everyone involved. It is extraordinarily lucrative in East Asia, and it appears likely to succeed here. Device makers like Samsung, HTC and Sony may try to come out with their own app bundles, too. This would create competition among bundlers and exert pressure to curate the best selection of apps.

However, app-bundling services are not as simple as they sound. Somebody has to integrate SDKs and connect everything to a billing system that enables revenue sharing on the back end. This is probably why Sprint outsourced this function to Mobiroo, according to the App Pass press release. Carriers may have the resources to replicate this technology, but how quickly? What will waiting cost in the long run?

Will NFC Arrive Next?

The irony of app-bundling coming to America so quickly is that the U.S. has, for over a decade, withheld from importing one of Asia’s most popular mobile technologies: Near Field Communication (NFC). It undergirds the entire public transportation and point-of-sale (POS) infrastructure in both Japan and Korea. In fact, in Korea you need to use the T-Money NFC payment cards if you want to transfer buses and subways at no extra charge.

With Apple embedding NFC technology into the iPhone 6, this could be a year where we see two major mobile trends spread from Asia to North America. NFC technology would allow your smartphone, smartwatch or other wearable device to store information and complete transactions for public transportation, e-money payments, boarding passes, ID cards, loyalty points and more.

Whereas app-bundling can launch and scale within a year or two, NFC mobile payments will take longer to gain a foothold. The U.S. has been slow to adopt most POS technology because infrastructural upgrades are madly expensive. For example, the total estimated cost of adopting Chip-and-PIN (EMV) card technology in the U.S. ranges from $15 billion to $30 billion, according The New York Times. For NFC, too, every point-of-sale terminal would need to be replaced. In places like Japan and Korea, which have high population densities and small land masses, the costs and speed of transitioning to NFC weren’t as daunting. In U.S., NFC won’t pay off or catch on very quickly. In contrast, app-bundling will produce a quick return on investment.

The Future of U.S.-Asia Mobile Exchange

The U.S. and Asia have a habit of exchanging mobile trends, and the Asian trends often seem ridiculous to Americans technologists. The first camera phones came out in Japan in 2000, but at U.S. tech conferences in 2002 and 2003, panelists were still debating why anyone would want to take photos with their cellphones. Speaker phones, color screens and SMS were once controversial topics in the U.S tech community.

It’s inaccurate to say that the U.S. is always behind Asia in mobile technology. Let’s not forget that Apple created the app ecosystem in the first place. Cross-pollination between markets is one of the keys to sustaining global innovation. Foreign mobile markets can become laboratories for observing what business models and technologies will or will not work. So far, app-bundling is thriving in the markets where it has been introduced.

So here’s the takeaway: based on KDDI’s au Smart Pass’s rapid success in Japan, app-bundling has the potential to disrupt the North American mobile market within a few years. While North America will start following Asia towards NFC, adoption will be significantly slower, even if the iPhone 6 does include a NFC chip. Before you spend too heavily on individual apps or a new wallet, recognize that both are in line for disruption.
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Luke Brown
tag:stream.growthink.com,2013:Post/747067 2014-09-26T13:22:40Z 2014-09-26T15:31:57Z Great work by Marci Haire of Growthink's Expert Market Research Team! Awesome client testimonial for work done by research analyst Marci Haire! Great job!

"I clicked through to the Growthink website with some trepidation - most internet promises are only virtual.

On completing the process - after watching an engaging video (if you like to read!) - I was surprised at how easy it was to acquire (download) the Business Plan. A minor glitch connecting with the Market Research section was quickly resolved as there was a real person monitoring the web stuff. Another surprise. And when the report I asked for came through, it really came through! I had expected something pretty generic, and not australian specifically. Wrong on both counts. Delighted on all other counts.

Thanks Growthink - you made me think I could grow."
Dr Kim Kendall Cat Vet
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tag:stream.growthink.com,2013:Post/746789 2014-09-25T22:01:26Z 2014-09-25T23:47:28Z Justin Goodkind, One Year Anniversary at Growthink!

Congratulations to Justin Goodkind on his one year anniversary at Growthink! He's a great team player and always brings fresh ideas.  

"Growthink has provided me with a tremendously rewarding opportunity to help entrepreneurs grow their business and succeed in their aspirations."- Justin Goodkind, 9/25/2014

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Growthink
tag:stream.growthink.com,2013:Post/746657 2014-09-25T17:50:23Z 2014-09-25T17:50:23Z MEET JUSTIN, LUKE AND MYKE AT THE FORECAST!

Justin Goodkind

Luke Brown 

Myke Andrews

Meet Justin, Luke and Myke at the LAEDC 2015 Economic Forecast Event- Introducing A Long-Term Look at Our Economy!

When: 

Wednesday, October 8th 

7:00am -11am (PDT)

Where: 

L.A. Hotel Downtown 

333 S. Figueroa Street 

Los Angeles, CA 90071

Register Here

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Growthink
tag:stream.growthink.com,2013:Post/745743 2014-09-23T20:01:06Z 2014-09-23T20:05:25Z Great Teamwork on Aladdin! (Healthy Fast-Food Middle Eastern Restaurant) Samuel Park

Darlene Fukuji

Phillippe Chau

Melissa Welch


Aladdin is a Middle Eastern fast-food restaurant looking to open locations in Southern California and Amman, Jordan.  Growthinkers provided value with market research, a business plan and financial model. Bassem Zraikat, Aladdin founder and CEO, wrote this note: 

"Sam,

It was a great pleasure working with you and the Growthink team.  You have been instrumental in making this possible and I truly appreciate all your efforts!

I hope we stay in touch and I will keep you informed of Aladdin's progress.  It would be real nice to see this come alive and have you as Aladdin's guests.

Once again, thank you all for a job well done!

Best Regards,

Bassem Zraikat

CEO & Founder of Aladdin " 


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Growthink
tag:stream.growthink.com,2013:Post/745145 2014-09-22T15:59:26Z 2014-09-22T19:26:31Z Stacey Polychronis 5 Year Growthink Anniversary! All - today is Stacey's 5 year anniversary of starting work at Growthink!  Stacey - thank you for all of your hard work and fantastic attitude - very much appreciated and looking forward to building on our work together in the months and years to come!!


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Jay Turo
tag:stream.growthink.com,2013:Post/743597 2014-09-18T18:55:02Z 2014-09-18T19:18:40Z Great thrill!

Great thrill to moderate the VC panel at the IBA Silicon Valley from Startup to IPO/ Exit conference this am!  

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Jay Turo
tag:stream.growthink.com,2013:Post/743254 2014-09-18T01:46:13Z 2014-09-18T13:33:37Z Great Job Antonio Barzagli and Sam Park with Tyso Entertainment Limited!

See what Henk Leferink, Tyso CFO said: 

"Through the development of Tyso Entertainment Limited we've engaged with many professionals, service providers and partners. So far none of them has been as supportive and professional as the Growthink team."

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Growthink
tag:stream.growthink.com,2013:Post/743246 2014-09-18T01:35:34Z 2014-09-18T13:32:32Z Congratulations to Jonathan Gomez for His Spectacular Work with Craft Beer Cellar!

Check out the note Jonathan received: 

"Thanks for getting our business plan turned around to us on schedule. I had a chance to look it over last night. I must say, I am very pleased. The work done by you and GrowThink really represents our voice and vision for our business, and presents us in an even more polished light. Going forward when speaking to people about our business I'll probably try to adopt a lot of the language and concepts you incorporated into our plan...Just wanted to say "thanks" for a job well done. It's been great to work with you."

-Erin Molyneux, Craft Beer Cellar Co-founder 
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Growthink
tag:stream.growthink.com,2013:Post/740170 2014-09-11T17:36:07Z 2014-09-11T17:36:07Z 7 Skills All Digital Marketers Need to Succeed (Infographic)
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Luke Brown
tag:stream.growthink.com,2013:Post/736594 2014-09-04T19:36:10Z 2014-09-04T20:13:27Z Job well done by Sam Park! Congratulations to Growthinker Sam Park on a successful engagement with our client, Burger & Beer Joint!

From our client:

Hi Guys, 

I Just did the last review over the document and a couple of soft details.

Thank you for your help. This really was a great job.

We hope the best things for you guys.

Kind regards,
Paul Melean
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Growthink
tag:stream.growthink.com,2013:Post/733908 2014-08-29T21:14:47Z 2014-08-30T01:24:49Z See Growthink on Inc. 5000! http://www.inc.com/profile/growthink

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Jay Turo
tag:stream.growthink.com,2013:Post/733313 2014-08-28T14:34:16Z 2014-08-28T15:22:30Z Growthink Client Traklight Secures Financing!
http://www.pehub.com/2014/08/traklight-grabs-350k/
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Jeff Jones
tag:stream.growthink.com,2013:Post/732547 2014-08-26T19:34:07Z 2014-08-26T19:34:07Z "Note And Vote": How Google Ventures Avoids Groupthink In Meetings

By Jake Knapp
You know when a meeting turns into a complete waste of time? Maybe you’re trying to come up with ideas, or make a decision. Before anyone realizes it, the meeting starts to suck.

Meetings want to suck. Two of their favorite suckiness tactics are group brainstorming and group negotiation. Give them half a chance, and they’ll waste your time, sap your energy, and leave you with poor ideas and a watered-down decision. But meetings don't have to be that way.

On the Google Ventures design team, we dislike sucky meetings as much as anyone. We use a process hack that short-circuits the worst parts of groupthink while getting the most out of different perspectives. For lack of a better name, we call it the “note-and-vote.”

The next time you need to make a decision or come up with a new idea in a group, call timeout and give the note-and-vote a try.

HOW IT WORKS

1. Note

Distribute paper and pens to each person. Set a timer for five minutes to 10 minutes. Everyone writes down as many ideas as they can. Individually. Quietly. This list won’t be shared with the group, so nobody has to worry about writing down dumb ideas.

2. Self-edit

Set the timer for two minutes. Each person reviews his or her own list and picks one or two favorites. Individually. Quietly.

3. Share and capture

One at a time, each person shares his or her top idea(s). No sales pitch. Just say what you wrote and move on. As you go, one person writes everybody’s ideas on the whiteboard.

4. Vote

Set the timer for five minutes. Each person chooses a favorite from the ideas on the whiteboard. Individually. Quietly. You must commit your vote to paper.

5. Share and capture

One at a time, each person says their vote. A short sales pitch may be permissible, but no changing your vote! Say what you wrote. Write the votes on the whiteboard. Dots work well.

6. Decide

Who is the decider? She should make the final call--not the group. She can choose to respect the votes or not. This is less awkward than it sounds: instead of dancing around people’s opinions and feelings, you’ve made the mechanics plain. Everyone’s voice was heard.

7. Rejoice. That only took 15 minutes!

The note-and-vote isn’t perfect (remember, I said “pretty good decisions”). But it is fast. And it’s quite likely better than what you’d get with two hours of the old way.

You might want to adapt the specifics to suit the problem and your team. Sometimes multiple votes per person are helpful. Sometimes sales pitches give crucial insight. We often jump right to voting when there's a finite list of options. So long as you do most of the thinking individually, you’ll see a big efficiency boost.

WHY IT WORKS

Quiet time to think

Meetings rarely offer individuals time to focus and think. Group brainstorms--where everyone shouts out ideas and builds off one another--can be fun, but in my experience, the strongest ideas always come from individuals.

GROUP BRAINSTORMS CAN BE FUN, BUT THE STRONGEST IDEAS COME FROM INDIVIDUALS.

Parallel is better than serial

Normal meetings are serial. In other words, one person is talking at a time, and someone is always talking. That means there’s one thread of thought for the length of the meeting. Parallel work increases your bandwidth. More solutions are considered and evaluated.

Voting commitment

Writing down your vote ensures that you won’t be swayed when someone else you respect votes for something else. This is a social hack--we naturally want to make other people feel good and form consensus in meetings. Conflict is useful.

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Luke Brown
tag:stream.growthink.com,2013:Post/731036 2014-08-22T16:55:06Z 2014-08-22T18:07:50Z Bret Stewart Growthink Anniversary Congratulations to Bret Stewart.  Today is his 3 year Growthink anniversary!



Keep up the good work Bret!
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Jeff Jones
tag:stream.growthink.com,2013:Post/728027 2014-08-15T22:58:54Z 2014-08-15T23:47:16Z Growthink Excited and Proud to be Named to the 2014 Inc. 5000 List!

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Jay Turo
tag:stream.growthink.com,2013:Post/721662 2014-08-01T15:17:16Z 2014-08-01T21:07:36Z Melissa Welch 7-Yr Growthink Anniversary!

Congrats Melissa!  Thank you for all your hard work, contributions and dedication over the years.  You've been an instrumental part of our growth since you began your career here at Growthink.  Many more to come...  
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Jeff Jones
tag:stream.growthink.com,2013:Post/717759 2014-07-23T21:24:17Z 2014-07-23T21:24:18Z The Majority Of Today’s App Businesses Are Not Sustainable

By Sarah Perez

Though the app stores continue to fill up with ever more mobile applications, the reality is that most of these are not sustainable businesses. According to a new report out this morning, half (50%) of iOS developers and even more (64%) Android developers are operating below the “app poverty line” of $500 per app per month.

This detail was one of many released in VisionMobile’s latest Developer Economics report(for Q3 2014), which was based on a large-scale online developer survey and one-to-one interviews with mobile app developers. This report included the responses from over 10,000 developers from 137 countries worldwide, taking place over 5 weeks in April and May.

That mobile app developers are challenged in getting their apps discovered, downloaded and then actually used, is a well-known fact. But seeing the figures associated with exactly how tough it is out there is rather revealing. It seems the “1%” is not only a term applicable to the economy as a whole – it’s also taking place within the app store economy, too.

The report’s authors detail the specifics around the trend where a tiny fraction of developers – actually, it’s 1.6% to be exact – generate most of the app store revenue. Slyly referencing the “disappearing middle class of app developers,” the report’s analysis groups the estimated 2.9 million mobile app developers worldwide into a handful of different categories for easy reference: the “have-nothings,” the “poverty-stricken,” the “strugglers,” and the “haves.” And, as you can tell, most of these categories don’t sound too great.

info4

Have Nothings

Accounting for 47% of app developers, the “have nothings” include the 24% of app developers – who are interested in making money, it should be noted - who make nothing at all.

Meanwhile, 23% make something, but it’s under $100 per month. These developers are sometimes unable to cover the basic costs of development PCs, test devices, and an account to publish apps, the report states. However, in case you’re wondering why so many developers still go iOS first, it’s because those who prioritize iOS app development are less likely to find themselves in this group, with 35% earning $0-$100 per month, versus the 49% of Android developers.

There’s also a portion of the app developer population (35%), some of whom aren’t interested in making money. The report refers to these part-timers as “hobbyists” or “explorers,” who may be just testing the waters, or working on apps that have yet to launch. Still, more than half of this crowd is interested in making some money from their applications, while less than half make $0 per month.

Poverty Stricken & Strugglers

Meanwhile, 22% are “poverty stricken” developers whose apps make $100 to $1,000 per app per month. At this rate, the companies behind the apps couldn’t afford standard app developer salaries. 15% of developers make between $100-$500 per app per month and 7% make between $500-$1,000 per app per month.

When combined with the above “have nots,” that means 62% of developers are below the “app poverty line” of $500 per app per month, and some 69% can’t sustain full-time development.

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The “strugglers” are a bit more fortunate. 19% of developers earn $1,000 to $10,000 per app per month, which could either be a supplement to full-time work or even a something of a good living, if in the high-end of that band. But these apps also tend to be more complex, requiring more development effort, and possibly ongoing server costs which can cut into the developer’s bottom line.

Winner Takes All: The “Haves”

Finally, there are the “haves.” The top 12% make more than $10,000 per app per month. 17% of iOS-first developers are in this group versus 9% of Android-first developers. To give you a sense of this group’s members: a rank-100 grossing game on iOS in the U.S. would expect to make $10,000 per day.

However, states the report, only the top 1.6% of developers make more than $500,000 per app per month, but of those who do, some are earning tens of millions per month. The next 2% – those who make between $100,000 and $500,000 per month – are making more than 96.4% of the rest of the app developers out there.

“More than 50% of app businesses are not sustainable at current revenue levels, even if we exclude the part-time developers that don’t need to make any money to continue,” states the report. “A massive 60-70% may not be sustainable long-term, since developers with in-demand skills will move on to more promising opportunities.”

As Apps Disappear, Will They Be Seen As Disposable?

The interesting thing about these numbers, besides just indicating how hard it is to have an app really hit big, is that the market economics are actually encouraging developers and users alike to see most apps as disposable things, not businesses you remain committed to long-term.

These days, many mobile app startups look more like resumés for developers who will soon abandon their work following acqui-hire M&A deals. And the continuous exits and new launches – where some startups are even being scooped up pre-launch – are creating an app consumer user base which thinks of apps as things that will quickly disappear (if you’re not Facebook, I suppose).

That makes it harder for many users today to buy into claims that an app wants to be your go-to home for important, lasting communications – like messaging clients aimed at businesses or the apps that want to store all your precious photo memories. And of course, most games have limited life-spans, too.

But on the flip side, today’s younger consumers are wired differently from their Gen X or Y (and older) counterparts. They’re fine with impermanent messages, deleting their social media accounts at will, data loss be damned. This group of consumers is an ideal audience for the increasingly disposable nature of mobile apps – at least while the current consumer app gold rush continues.

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Luke Brown
tag:stream.growthink.com,2013:Post/713254 2014-07-11T23:36:29Z 2014-07-17T20:50:55Z Growthinker's on the Ground in China!
Growthinker's Jeff Jones and Sam Park travel to China for client retreat.

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Jeff Jones
tag:stream.growthink.com,2013:Post/713214 2014-07-11T20:30:55Z 2014-07-11T20:30:55Z NEA busiest VC firm in hottest market since 2001; Here's the rest of Top 20 Cromwell Schubar

Senior Technology Reporter-Silicon Valley Business Journal

New Enterprise Associates averaged a U.S. funding deal every three days in the first half of this year, the hottest six months for the industry since the end of the dotcom boom in 2001.

Not far behind NEA's 64 first half deals were Kleiner Perkins Caufield & Byers (54), Andreessen Horowitz (52) and Google Ventures (50), according to a report from investment database research firm CB Insights.

An interesting fact from the report is that NEA wasn't involved in any of the huge deals that went down in the most recent quarter, nearly all of which happened here in the Silicon Valley and San Francisco area. That includes Uber ($1.2 billion), AirBnB ($500 million), Lyft ($250 million), Pure Storage ($225 million) Intarcia Therapeutics ($200 million) and Pinterest ($200 million).

CB Insights only tracks deals that include venture firms, so it doesn't factor in any of the big late-stage fundings that came entirely from hedge fund and private equity investors.

The firm said that investors poured 39 percent more capital — nearly $24 billion — into 11 percent more deals than had been recorded in the first three months of the year, the hottest quarter since the second quarter of 2001.

After Q1’14 saw venture capital investment hit its highest quarterly mark since Q2’01, investors deployed 39 percent more capital across 11 percent more deals. In aggregate, H1’14 saw U.S. VC funding leap to $23.87B, a 71 percent increase versus H1’13.

Overall, there were more than 300 funding deals and more than $4 billion invested in each month in Q2.

Among Kleiner Perkins' 54 deals in the second quarter was the $40 million funding of Palo Alto-based Big Data company RelateIQ, which was acquired Friday by Salesforce.com for $350 million.

Here is CB Insights' full list of the most active venture investors in the first six months:

— 1. New Enterprise Associates: 64.

— 2. Kleiner Perkins Caufield & Byers: 54.

— 3. Andreessen Horowitz: 52.

— 4. Google Ventures: 50.

— 5. 500 Startups: 47.

— 6. Khosla Ventures: 40.

— 7. SV Angel: 35.

— 7. Accel Partners: 35.

— 9. Sequoia Capital: 33.

— 10. First Round Capital: 32.

— 11. Greylock Partners: 30.

— 12. Lerer Hippeau Ventures: 28.

— 12. Foundry Group: 28.

— 14. True Ventures: 25.

— 15. General Catalyst Partners: 25.

— 16. Battery Ventures: 24.

— 16. Atlas Venture: 24.

— 18. RRE Ventures: 23.

— 19. Lightspeed Venture Partners: 22.

— 19. Intel Capital: 22.

— 19. InterWest Partners: 22.

— 19. Bessemer Venture Partners: 22.

-- 

Melissa Welch

Director of Client Development

Growthink

melissa.welch@growthink.com

(310) 846-5015


Follow me on Twitter: http://twitter.com/MelissaAWelch

Join my network on LinkedIn: http://www.linkedin.com/in/melissaawelch

Become a Growthink Fan on Facebook: http://www.facebook.com/growthink


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Melissa Welch
tag:stream.growthink.com,2013:Post/713083 2014-07-11T15:05:08Z 2014-07-11T15:05:08Z Beware the ‘Edifice Complex’ — and 9 Other Ways to Damage a High-Growth Startup

BY MARC ANDREESSEN

Here are 10 ways to damage your fast-growing tech startup – and hurt the perception of Silicon Valley in the process. None of these are specific to any one company; they’re general patterns we’ve observed across multiple cycles of tech startups.

#1 Only hiring — or training/motivating/incenting your managers to hire — without focusing on firing. Or on performance management and efficiency optimization.

#2 Selling too much of your own personal stock too quickly, which alienates employees and leads people to question your long-term commitment as a founder. On a related note, letting private stock sales by employees get out of hand creates a “hit-and-run culture” — and forces your company to take on the burdens of being public before actually going public.

#3 Diluting the crap out of the cap table by being sloppy and undisciplined with stock grants to early employees. This also plants hidden “morale landmines” for later employees.

#4 Maximizing absolute valuation of each growth round, which not only makes later rounds harder and harder to achieve but can trigger a disastrous down round.

#5 Letting investors (including, occasionally, private equity firms and hedge funds) suck you into terrible structural terms on growth rounds. You’re guaranteed massive trauma if anything goes even slightly wrong there.

#6 Going public too soon! Going public before you’re a fortress, before you can withstand all assaults leads to a stock-price death spiral and ends up in a train wreck for everyone.

#7 Pouring huge money into overly glorious new headquarters — “The Edifice Complex” — then repeating two years later. There’s also a danger in signaling to employees “we’ve made it, we’re amazing” (and while everyone hates the cramped but collaborative space when they’re in it, they miss it terribly after the move).

#8 Assuming more cash is always available at higher and higher valuations, forever. This one will actually kill your company outright.

#9 Confusing the conference circuit — and especially the party scene — with actual work. This also creates a toxic culture on multiple fronts by encouraging alcohol/drugs and valuing so-called “ballers” over other important, less “loud” contributors.

#10 Refusing to take HR seriously! This issue isn’t specific to just tech-heavy environments; it’s prevalent in any highly creative, highly skilled workplace. At a certain company size, you need both the ability to manage people and an effective HR person. (Even though it is absolutely worth training company leadership in good HR practices, most managers are dangerously amateur at doing actual HR). Without smart, effective HR, terrible internal managerial and employee behavior leads to a toxic culture that can catalyze into a catastrophic ethical — and legal — crisis.

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Luke Brown
tag:stream.growthink.com,2013:Post/710066 2014-07-02T22:26:32Z 2014-07-02T22:26:33Z This quarter had the most venture capital invested since Q1 2000 Venture's Q2 surge: Dollars, deals and dominant players

Cromwell Schubarth Senior Technology Reporter-Silicon Valley Business Journal

Valuations on venture-backed companies jumped again in the second quarter as the number of IPOs and the amount VCs invested in startups both hit post-dot-com highs, a new report from PitchBook Data shows.

The total amount invested has climbed steadily each quarter in the past year, jumping from $12.8 billion in Q2 of 2013 to $21.5 billion in the same period this year. The $13.9 billion raised in 76 new venture funds is also a recent high.

Sequoia Capital invested in the most companies in the quarter — participating in 35 deals — and tied with New Enterprise Associates for the most exits with eight.

The big deal for the Menlo Park firm was Facebook's $19 billion acquisition of WhatsApp, which was announced in the first quarter but closed in the second quarter.

That deal also skewed the total amount of capital exited, which jumped from between $16 billion and $19.2 billion in the previous three quarters to $37.9 billion in the second quarter.

The biggest deals Sequoia participated in were the $100 million round for South Korean e-commerce company Coupang, a $100 million round for Chinese content distributor Toutiao and a $75 million round for San Francisco identity management company Okta.

After Sequoia's 35 deals, Andreessen Horowitz was the second most active with 31 deals, followed by Accel Partners (29) and Kleiner Perkins Caufield & Byers (27).

Pre-money valuations were also up compared to last year's second quarter, ranging from a 34 percent jump to $6.2 million at the seed/angel stage to a 122.2 percent jump in Series D and later rounds.

The length of time between when a startup was founded and when it paid off in an acquisition (the vast majority of exits) was about 6.4 years. PitchBook reported 193 of those deals in the quarter.

The average time to exit for the 47 IPOs in the quarter was 10.8 years. That number has been hovering between about 10 and 11 years since 2009. That's up markedly from prior years when it was typically between seven and eight years between launch and going public.

The average time to exit for the 15 private equity buyouts in the quarter was 11.3 years.

Software companies had by far the most exits, with 107 of the 255 exits reported in the second quarter. That is double the 28 exits each reported in the two sectors that were next — commercial services and biotech/pharmaceuticals.

The software sector also had by far the most fundings in the quarter, accounting for 641 of the 1,590 deals reported.

-- 

Melissa Welch

Director of Client Development

Growthink

melissa.welch@growthink.com

(310) 846-5015


Follow me on Twitter: http://twitter.com/MelissaAWelch

Join my network on LinkedIn: http://www.linkedin.com/in/melissaawelch

Become a Growthink Fan on Facebook: http://www.facebook.com/growthink


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Melissa Welch
tag:stream.growthink.com,2013:Post/709596 2014-07-01T16:58:00Z 2014-07-01T16:58:00Z McKinsey Quarterly: Strategic Principles for Competing in the Digital Age

Digitization is rewriting the rules of competition, with incumbent companies most at risk of being left behind. Here are six critical decisions CEOs must make to address the strategic challenge posed by the digital revolution.

The board of a large European insurer was pressing management for answers. A company known mostly for its online channel had begun to undercut premiums in a number of markets and was doing so without agents, building on its dazzling brand reputation online and using new technologies to engage buyers. Some of the insurer’s senior managers were sure the threat would abate. Others pointed to serious downtrends in policy renewals among younger customers avidly using new web-based price-comparison tools. The board decided that the company needed to quicken its digital pace.

For many leaders, this story may sound familiar, harkening back to the scary days, 15 years ago, when they encountered the first wave of Internet competitors. Many incumbents responded effectively to these threats, some of which in any event dissipated with the dot-com crash. Today’s challenge is different. Robust attackers are scaling up with incredible speed, inserting themselves artfully between you and your customers and zeroing in on lucrative value-chain segments.

The digital technologies underlying these competitive thrusts may not be new, but they are being used to new effect. Staggering amounts of information are accessible as never before—from proprietary big data to new public sources of open data. Analytical and processing capabilities have made similar leaps with algorithms scattering intelligence across digital networks, themselves often lodged in the cloud. Smart mobile devices make that information and computing power accessible to users around the world.

As these technologies gain momentum, they are profoundly changing the strategic context: altering the structure of competition, the conduct of business, and, ultimately, performance across industries. One banking CEO, for instance, says the industry is in the midst of a transition that occurs once every 100 years. To stay ahead of the unfolding trends and disruptions, leaders across industries will need to challenge their assumptions and pressure-test their strategies.

Opportunities and threats

Digitization often lowers entry barriers, causing long-established boundaries between sectors to tumble. At the same time, the “plug and play” nature of digital assets causes value chains to disaggregate, creating openings for focused, fast-moving competitors. New market entrants often scale up rapidly at lower cost than legacy players can, and returns may grow rapidly as more customers join the network.1

Digital capabilities increasingly will determine which companies create or lose value. Those shifts take place in the context of industry evolution, which isn’t monolithic but can follow a well-worn path: new trends emerge and disruptive entrants appear, their products and services embraced by early adopters (exhibit). Advanced incumbents then begin to adjust to these changes, accelerating the rate of customer adoption until the industry’s level of digitization—among companies but, perhaps more critically, among consumers as well—reaches a tipping point. Eventually, what was once radical is normal, and unprepared incumbents run the risk of becoming the next Blockbuster. Others, which have successfully built new capabilities (as Burberry did in retailing), become powerful digital players. (See the accompanying article, “The seven habits of highly effective digital enterprises.”) The opportunities for the leaders include:

  • Enhancing interactions among customers, suppliers, stakeholders, and employees. For many transactions, consumers and businesses increasingly prefer digital channels, which make content universally accessible by mixing media (graphics and video, for example), tailoring messages for context (providing location or demographic information), and adding social connectivity (allowing communities to build around themes and needs, as well as ideas shared among friends). These channels lower the cost of transactions and record them transparently, which can help in resolving disputes.
  • Improving management decisions as algorithms crunch big data from social technologies or the Internet of Things. Better decision making helps improve performance across business functions—for example, providing for finer marketing allocations (down to the level of individual consumers) or mitigating operational risks by sensing wear and tear on equipment.
  • Enabling new business or operating models, such as peer-to-peer product innovation or customer service. China’s Xiaomi crowdsources features of its new mobile phones rather than investing heavily in R&D, and Telstra crowdsources customer service, so that users support each other to resolve problems without charge. New business or operating models can also disintermediate existing customer–supplier relations—for example, when board-game developers or one-person shops manufacture products using 3-D printers and sell directly to Amazon.

The upshot is that digitization will change industry landscapes as it gives life to new sets of competitors. Some players may consider your capabilities a threat even before you have identified them as competitors. Indeed, the forces at work today will bring immediate challenges, opportunities—or both—to literally all digitally connected businesses.

Seven forces at work

Our research and experience with leading companies point to seven trends that could redefine competition.

1. New pressure on prices and margins

Digital technologies create near-perfect transparency, making it easy to compare prices, service levels, and product performance: consumers can switch among digital retailers, brands, and services with just a few clicks or finger swipes. This dynamic can commoditize products and services as consumers demand comparable features and simple interactions. Some banks, for instance, now find that simplifying products for easy purchase on mobile phones inadvertently contributes to a convergence between their offerings and those of competitors that are also pursuing mobile-friendly simplicity.

Third parties have jumped into this fray, disintermediating relationships between companies and their customers. The rise of price-comparison sites that aggregate information across vendors and allow consumers to compare prices and service offerings easily is a testament to this trend. In Europe, chain retailers, which traditionally dominate fast-moving consumer goods, have seen their revenues fall as customers flock to discounters after comparing prices even for staples like milk and bread. In South Korea, online aggregator OK Cashbag has inserted itself into the consumer’s shopping behavior through a mobile app that pools product promotions and loyalty points for easy use across more than 50,000 merchants.

These dynamics create downward pressure on returns across consumer-facing industries, and the disruptive currents are now rippling out to B2B businesses.

2. Competitors emerge from unexpected places

Digital dynamics often undermine barriers to entry and long-standing sources of product differentiation. Web-based service providers in telecommunications or insurance, for example, can now tap markets without having to build distribution networks of offices and local agents. They can compete effectively by mining data on risks and on the incomes and preferences of customers.

At the same time, the expense of building brands online and the degree of consumer attention focused on a relatively small number of brands are redrawing battle lines in many markets. Singapore Post is investing in an e-commerce business that benefits from the company’s logistics and warehousing backbone. Japanese web retailer Rakuten is using its network to offer financial services. Web powerhouses like Google and Twitter eagerly test industry boundaries through products such as Google Wallet and Twitter’s retail offerings.

New competitors can often be smaller companies that will never reach scale but still do a lot of damage to incumbents. In the retailing industry, for instance, entrepreneurs are cherry-picking subcategories of products and severely undercutting pricing on small volumes, forcing bigger companies to do the same.

3. Winner-takes-all dynamics

Digital businesses reduce transaction and labor costs, increase returns to scale from aggregated data, and enjoy increases in the quality of digital talent and intellectual property as network effects kick in. The cost advantages can be significant: online retailers may generate three times the level of revenue per employee as even the top-performing discounters. Comparative advantage can materialize rapidly in these information-intensive models—not over the multiyear spans most companies expect.

Scale economies in data and talent often are decisive. In insurance, digital “natives” with large stores of consumer information may navigate risks better than traditional insurers do. Successful start-ups known for digital expertise and engineer-friendly cultures become magnets for the best digital talent, creating a virtuous cycle. These effects will accelerate consolidation in the industries where digital scale weighs most heavily, challenging more capital- and labor-intensive models. In our experience, banking, insurance, media, telecommunications, and travel are particularly vulnerable to these winner-takes-all market dynamics.

In France, for instance, the start-up Free has begun offering mobile service supported by a large and active digital community of “brand fans” and advocates. The company nurtures opinion-leader “alpha fans,” who interact with the rest of the base on the Internet via blogs, social networks, and other channels, building a wave of buzz that quickly spreads across the digital world. Spending only modestly on traditional marketing, Free nonetheless has achieved high levels of customer satisfaction through its social-media efforts—and has gained substantial market share.2

4. Plug-and-play business models

As digital forces reduce transaction costs, value chains disaggregate. Third-party products and services—digital Lego blocks, in effect—can be quickly integrated into the gaps. Amazon, for instance, offers services that let businesses “insource” logistics, IT services, and online retail “storefronts.” For many businesses, it may not pay to build out those functions at competitive levels of performance, so they simply plug an existing offering into their value chains. In the United States, registered investment advisers have been the fastest-growing segment3 of the investment-advisory business, for example. They are expanding so fast largely because the turnkey systems (including record keeping and operating infrastructure) they can purchase from Charles Schwab, Fidelity, and others give them all the capabilities they need. With a license, individuals or small groups can be up and running their own firms.

In the travel industry, new portals are assembling entire trips: flights, hotels, and car rentals. The stand-alone offerings of third parties, sometimes from small companies or even individuals, plug into such portals. These packages are put together in real time, with dynamic pricing that depends on supply and demand. As more niche providers gain access to the new platforms, competition is intensifying.

5. Growing talent mismatches

Software replaces labor in digital businesses. We estimate, for instance, that of the 700 end-to-end processes in banks (opening an account or getting a car loan, for example), about half can be fully automated. Computers increasingly are performing complex tasks as well. “Brilliant machines,” like IBM’s Watson, are poised to take on the work of many call-center workers. Even knowledge-intensive areas, such as oncology diagnostics, are susceptible to challenge by machines: thanks to the ability to scan and store massive amounts of medical research and patients’ MRI results, Watson diagnoses cancers with much higher levels of speed and accuracy than skilled physicians do. Digitization will encroach on a growing number of knowledge roles within companies as they automate many frontline and middle-management jobs based upon synthesizing information for C-level executives.

At the same time, companies are struggling to find the right talent in areas that can’t be automated. Such areas include digital skills like those of artificial-intelligence programmers or data scientists and of people who lead digital strategies and think creatively about new business designs. A key challenge for senior managers will be sensitively reallocating the savings from automation to the talent needed to forge digital businesses. One global company, for example, is simultaneously planning to cut more than 10,000 employees (some through digital economies) while adding 3,000 to its digital business. Moves like these, writ large, could have significant social repercussions, elevating the opportunities and challenges associated with digital advances to a public-policy issue, not just a strategic-business one.

6. Converging global supply and demand

Digital technologies know no borders, and the customer’s demand for a unified experience is raising pressure on global companies to standardize offerings. In the B2C domain, for example, many US consumers are accustomed to e-shopping in the United Kingdom for new fashions (see sidebar, “How digitization is reshaping global flows”). They have come to expect payment systems that work across borders, global distribution, and a uniform customer experience.

7. Relentlessly evolving business models—at higher velocity

In B2B markets from banking to telecommunications, corporate purchasers are raising pressure on their suppliers to offer services that are standardized across borders, integrate with other offerings, and can be plugged into the purchasing companies’ global business processes easily. One global bank has aligned its offerings with the borderless strategies of its major customers by creating a single website, across 20 countries, that integrates what had been an array of separate national or product touch points. A US technology company has given each of its larger customers a customized global portal that allows it to get better insights into their requirements, while giving them an integrated view of global prices and the availability of components.

Digitization isn’t a one-stop journey. A case in point is music, where the model has shifted from selling tapes and CDs (and then MP3s) to subscription models, like Spotify’s. In transportation, digitization (a combination of mobile apps, sensors in cars, and data in the cloud) has propagated a powerful nonownership model best exemplified by Zipcar, whose service members pay to use vehicles by the hour or day. Google’s ongoing tests of autonomous vehicles indicate even more radical possibilities to shift value. As the digital model expands, auto manufacturers will need to adapt to the swelling demand of car buyers for more automated, safer features. Related businesses, such as trucking and insurance, will be affected, too, as automation lowers the cost of transportation (driverless convoys) and “crash-less” cars rewrite the existing risk profiles of drivers.

Managing the strategic challenges: Six big decisions

Rethinking strategy in the face of these forces involves difficult decisions and trade-offs. Here are six of the thorniest.

Decision 1: Buy or sell businesses in your portfolio?

The growth and profitability of some businesses become less attractive in a digital world, and the capabilities needed to compete change as well. Consequently, the portfolio of businesses within a company may have to be altered if it is to achieve its desired financial profile or to assemble needed talent and systems.

Tesco has made a number of significant digital acquisitions over a two-year span to take on digital competition in consumer electronics. Beauty-product and fragrance retailer Sephora recently acquired Scentsa, a specialist in digital technologies that improve the in-store shopping experience. (Scentsa touch screens access product videos, link to databases on skin care and fragrance types, and make product recommendations.) Sephora officials said they bought the company to keep its technology out of competitors’ reach and to help develop in-store products more rapidly.4

Companies that lack sufficient scale or expect a significant digital downside should consider divesting businesses. Some insurers, for instance, may find themselves outmatched by digital players that can fine-tune risks. In media, DMGT doubled down on an investment in their digital consumer businesses, while making tough structural decisions on their legacy print assets, including the divestment of local publications and increases in their national cover price. Home Depot continues to shift its investment strategy away from new stores to massive new warehouses that serve growing online sales. This year it bought Blinds.com, adding to a string of website acquisitions.5

Decision 2: Lead your customers or follow them?

Incumbents too have opportunities for launching disruptive strategies. One European real-estate brokerage group, with a large, exclusively controlled share of the listings market, decided to act before digital rivals moved into its space. It set up a web-based platform open to all brokers (many of them competitors) and has now become the leading national marketplace, with a growing share. In other situations, the right decision may be to forego digital moves—particularly in industries with high barriers to entry, regulatory complexities, and patents that protect profit streams.

Between these extremes lies the all-too-common reality that digital efforts risk cannibalizing products and services and could erode margins. Yet inaction is equally risky. In-house data on existing buyers can help incumbents with large customer bases develop insights (for example, in pricing and channel management) that are keener than those of small attackers. Brand advantages too can help traditional players outflank digital newbies.

Decision 3: Cooperate or compete with new attackers?

A large incumbent in an industry that’s undergoing digital disruption can feel like a whale attacked by piranhas. While in the past, there may have been one or two new entrants entering your space, there may be dozens now—each causing pain, with none individually fatal. PayPal, for example, is taking slices of payment businesses, and Amazon is eating into small-business lending. Companies can neutralize attacks by rapidly building copycat propositions or even acquiring attackers. However, it’s not feasible to defend all fronts simultaneously, so cooperation with some attackers can make more sense than competing.

Santander, for instance, recently went into partnership with start-up Funding Circle. The bank recognized that a segment of its customer base wanted access to peer-to-peer lending and in effect acknowledged that it would be costly to build a world-class offering from scratch. A group of UK banks formed a consortium to build a mobile-payment utility (Paym) to defend against technology companies entering their markets. British high-end grocer Waitrose collaborated with start-up Ocado to establish a digital channel and home distribution before eventually creating its own digital offering.

Digital technologies themselves are opening pathways to collaborative forms of innovation. Capital One launched Capital One Labs, opening its software interfaces to multiple third parties, which can defend a range of spaces along their value chains by accessing Capital One’s risk- and credit-assessment capabilities without expending their own capital.

Decision 4: Diversify or double down on digital initiatives?

As digital opportunities and challenges proliferate, deciding where to place new bets is a growing headache for leaders. Diversification reduces risks, so many companies are tempted to let a thousand flowers bloom. But often these small initiatives, however innovative, don’t get enough funding to endure or are easily replicated by competitors. One answer is to think like a private-equity fund, seeding multiple initiatives but being disciplined enough to kill off those that don’t quickly gain momentum and to bankroll those with genuinely disruptive potential. Since 2010, Merck’s Global Health Innovation Fund, with $500 million under management, has invested in more than 20 start-ups with positions in health informatics, personalized medicine, and other areas—and it continues to search for new prospects. Other companies, such as BMW and Deutsche Telekom, have set up units to finance digital start-ups.

The alternative is to double down in one area, which may be the right strategy in industries with massive value at stake. A European bank refocused its digital investments on 12 customer decision journeys,6 such as buying a house, that account for less than 5 percent of its processes but nearly half of its cost base. A leading global pharmaceutical company has made significant investments in digital initiatives, pooling data with health insurers to improve rates of adherence to drug regimes. It is also using data to identify the right patients for clinical trials and thus to develop drugs more quickly, while investing in programs that encourage patients to use monitors and wearable devices to track treatment outcomes. Nordstrom has invested heavily to give its customers multichannel experiences. It focused initially on developing first-class shipping and inventory-management facilities and then extended its investments to mobile-shopping apps, kiosks, and capabilities for managing customer relationships across channels.

Decision 5: Keep digital businesses separate or integrate them with current nondigital ones?

Integrating digital operations directly into physical businesses can create additional value—for example, by providing multichannel capabilities for customers or by helping companies share infrastructure, such as supply-chain networks. However, it can be hard to attract and retain digital talent in a traditional culture, and turf wars between the leaders of the digital and the main business are commonplace. Moreover, different businesses may have clashing views on, say, how to design and implement a multichannel strategy.

One global bank addressed such tensions by creating a groupwide center of excellence populated by digital specialists who advise business units and help them build tools. The digital teams will be integrated with the units eventually, but not until the teams reach critical mass and notch a number of successes. The UK department-store chain John Lewis bought additional digital capabilities with its acquisition of the UK division of Buy.com,7 in 2001, ultimately combining it with the core business. Wal-Mart Stores established its digital business away from corporate headquarters to allow a new culture and new skills to grow. Hybrid approaches involving both stand-alone and well-integrated digital organizations are possible, of course, for companies with diverse business portfolios.

Decision 6: Delegate or own the digital agenda?

Advancing the digital agenda takes lots of senior-management time and attention. Customer behavior and competitive situations are evolving quickly, and an effective digital strategy calls for extensive cross-functional orchestration that may require CEO involvement. One global company, for example, attempted to digitize its processes to compete with a new entrant. The R&D function responsible for product design had little knowledge of how to create offerings that could be distributed effectively over digital channels. Meanwhile, a business unit under pricing pressure was leaning heavily on functional specialists for an outsize investment to redesign the back office. Eventually, the CEO stepped in and ordered a new approach, which organized the digitization effort around the decision journeys of clients.

Faced with the need to sort through functional and regional issues related to digitization, some companies are creating a new role: chief digital officer (or the equivalent), a common way to introduce outside talent with a digital mind-set to provide a focus for the digital agenda. Walgreens, a well-performing US pharmacy and retail chain, hired its president of digital and chief marketing officer (who reports directly to the CEO) from a top technology company six years ago. Her efforts have included leading the acquisition of drugstore.com, which still operates as a pure play. The acquisition upped Walgreens’ skill set, and drugstore.com increasingly shares its digital infrastructure with the company’s existing site: walgreens.com.

Relying on chief digital officers to drive the digital agenda carries some risk of balkanization. Some of them, lacking a CEO’s strategic breadth and depth, may sacrifice the big picture for a narrower focus—say, on marketing or social media. Others may serve as divisional heads, taking full P&L responsibility for businesses that have embarked on robust digital strategies but lacking the influence or authority to get support for execution from the functional units.

Alternatively, CEOs can choose to “own” and direct the digital agenda personally, top down. That may be necessary if digitization is a top-three agenda item for a company or group, if digital businesses need substantial resources from the organization as a whole, or if pursuing new digital priorities requires navigating political minefields in business units or functions.

Regardless of the organizational or leadership model a CEO and board choose, it’s important to keep in mind that digitization is a moving target. The emergent nature of digital forces means that harnessing them is a journey, not a destination—a relentless leadership experience and a rare opportunity to reposition companies for a new era of competition and growth.

http://www.mckinsey.com/insights/strategy/strategic_principles_for_competing_in_the_digital_age

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Luke Brown