Archive for the ‘Entrepreneurship’ Category

On price and value

Thursday, September 2nd, 2010

As this cartoon points out, the iPhone apps business isn’t all fame and fortune. Customers who don’t hesitate spending $5 on a quick, fancy cup of coffee think twice before paying less than a quarter of that for an app that may give them hours or days of enjoyment and productivity.

This highlights one of the challenges for entrepreneurs in the new economy: people still often equate value and cost with physical things. Creative works may require weeks or months of hard work by multiple people, yet consumers often feel these products should be free because no physical atoms are exchanged.

At the same time, consumers don’t always value their own intangibles. They are willing to give away tons of private information and let others monetize it. Companies like Facebook and Google are making billions taking advantage of this dynamic.

Success in the economy of intangibles requires a new mindset, along with a deep understanding of what drives and motivates people. The times are changing. Bob Dylan’s prophetic words of more than 45 years ago still ring true today. You better start swimming or you’ll sink like a stone.

ACT Member Peter Carnes Storms the House!

Thursday, July 22nd, 2010

CT member Peter Carnes (CEO of Traffax, Inc.) testified before of the House Committee on Small Business today about “The Impact of Intellectual Property on Entrepreneurship and Job Creation”. Peter shared the stage with a really diverse group of IP owners – from ABRO, which has problems protecting its trademarks, to Rick Carnes, a songwriter who has written songs for Reba McEntire and Garth Brooks. The President of the Business Software Alliance and the CEO of t3 (they sell mainframe software) rounded out the mix.

The Committee has Peter’s oral testimony up on YouTube here, but for those of you who want to read the full version, here’s a link.

Overall, the witnesses really hammered on the message that IP was a key way for America to move forward, and that it wasn’t going to happen without some help from the government. Holleyman and Rick Carnes (Songwriter’s Guild) pointed out that the BRIC nations are really doing a number on US copyright holders – stealing software, music and movies as fast as we can make them. Peter talked about the need to get the USPTO fully funded, and to get the backlog of patents dealt with so that businesses that file for patents aren’t hanging out in the wind for nearly 2 years after their patent has been published.

Peter also pointed out that adding IP to international trade agreements had an impact not just on the macro level, but in day to day business as well. He noted that he had been dealing with China for years, and he has begun to notice that IP issues have now become “part of the narrative” of business negotiations, when before they weren’t even an afterthought.

On patents, Congressman Luetkemeyer referenced a constituent of his who said  ‘filing a patent lets your competitors see what you are doing, and then they just tweak it to work around, so why bother?’ Peter noted that this is the heart of the patent system; it drives innovation forward because by teaching others how you do things, they come up with ways to jump ahead. In exchange for sharing the secret of  how my invention works, I get a time restricted monopoly on my design.  I share so that I can get (temporary) exclusivity. But this delicate balance is being thrown out of whack by a patent system that takes far too long between publishing and granting. During that nearly 2 year gap of time the patent filer can do next to nothing to protect his idea.

We agree with Peter that something needs to be done to get USPTO on the right track of eliminating the patent backlog; in support of this, ACT has asked Congress to give the USPTO access to all the money it collects for FY2010 during FY2010, rather than wait a whole year to spend the money we’ve given them.  Here’s a copy of the letter we sent to the Senate Appropriations Committee.

Finally,  Peter talked about the difficulty small tech companies have had when trying to get a loan through SBA. Banks have almost no ability, and no interest, in granting loans to companies that have few tangible assets.  Innovation companies don’t buy buildings, they don’t buy furniture, they don’t buy trucks, they may not even buy computers.  Instead they pay wages for engineers, they hire software developers, they build and destructively test prototypes – none of which is a tangible asset that a bank can attach if you fail.   Peter asked Chairwoman Velazquez to work with SBA to improve how SBA deals with IP as an asset for the purposes of securing loans.

Overall, Peter was a rockstar today, and made all of us at ACT very proud to have him as a member.

The Meaning of Innovation—And What’s Coming Next

Thursday, October 15th, 2009

It’s a term that’s been thrown around a lot over the past couple of years, at times being more popular than at others.  Now seems to be one of those times when “innovation” is the hot word—but what the heck does it even mean?

I was at a Business of Innovation conference last week—there’s “innovation” right there in the title!—and defining “innovation” was a portion of several presentations. 

The dictionary says that innovation is simply “the introduction of something new.” But for people looking to make money from innovation, it’s got to be more than that.  “Something new” comes along all of the time, but does that mean it’s innovative?

One of the presenters said that a renewed interest in “innovation” is a result of the recession. He went on to say that 18 months or two years ago you would have been hard-pressed to find a conference on innovation, and now they’re everywhere. Since companies have laid off as many people as they could and cut expenses back as much as possible as a means to surviving the downturn, now they must concentrate on growth in order to survive. And how does that happen? Innovation.  And apparently history shows that recessions are a pretty good time to introduce and sustain innovation.

One definition of business innovation was the “successful outcome of bringing a novel product, service, or customer services to market in a way that creates significant new customer value.” And many innovations fitting that description have been introduced in recessions, including:

  • Light bulbs (1876)
  • Scotch tape (1930)
  • Fluorescent lamps (1938)
  • Disposable diapers (1961)
  • Post-its (1974)
  • World wide web (1991)
  • iPod (2001)

These innovations weren’t just about novel products, or about the R&D behind them (there does not seem to be a correlation between R&D and innovation), their patents, the creativity of the team, or product improvements. These were about establishing positions of “ownable distinction”—things like their market positioning, being first-movers, branding, and the totality of their intellectual property rights (IPR).

Over at the Innovators Network, our Entrepreneurs in Residence have written about the role of intellectual property in economic downturns. Andre Carter wrote about how “Times like this support and encourage new ideas, methods, and channels; in turn, this makes the likelihood of increased small business activity, especially IP-based, high” and looking at the full scope of your intellectual property rights to find new opportunities. IP attorney Rob Cogan gave us this chart to help distinguish and define those various assets that comprise the totality of your IPR.

Thinking about all of these things combined has me sort of excited. Since most economists say that the recession is ending, that should mean that we’re also just about due for some ground-breaking, disruptive innovation.  I feel like a kid on Christmas Eve wondering if Santa’s going to come and, if so, what’s he going to BRING?? (Somebody at the conference suggested that the big innovation to come out of this recession is going to be LED lighting. I suppose that’s cool, but doesn’t seem life-changing. Unless, of course, all hotels and stores change from their horrid florescent lighting to the more flattering LED. In that case, I’m on board.)

WSJ: US Misses Target for Small-Business Contracts

Friday, August 21st, 2009

We've done a lot of writing recently about the importance of giving small firms a level playing field to compete for government contracts, but according to the Wall Street Journal today, the US government has missed its target for giving contracts to small firms again, and by a larger margin than last year. 

Federal agencies awarded 21.5% of their contracts worth just over $93
billion to small businesses in fiscal 2008, which ran from Oct. 1, 2007
through Sept. 30, 2008, falling short of its 23% goal set by law.

As the WSJ notes, this is particularly problematic given the economy:

Hit by the recession, small-business owners are eager to win Uncle Sam
as a new customer, and right now there are billions of dollars of extra
dollars up from grabs as contracts start to flow from the $787 billion
economic-stimulus package passed five months ago…

Hopefully, Commerce's new efforts can help reverse this trend:

On Tuesday, Commerce Secretary Gary Locke and SBA Administrator Karen
Mills announced a government-wide plan that includes federal agency
procurement officials holding or participating in more than 200 events
over the next 90 days to share information on government contracting
opportunities, including those available under the American Recovery
and Reinvestment Act.

Realizing the Real Value in Interoperability

Friday, April 24th, 2009

I attended the HIMSS (Health Information Management Systems Society) conference in Chicago earlier this month, along with upwards of 20,000 other people. Most of them are involved in the sales and procurement process, representing thousands of vendor companies and the health systems, hospitals, clinics, governments, etc., that use their products and services.

I’d never been to HIMSS before and it’s overwhelming.  There are hundreds of exhibitors, some of whom have exhibits broken down into two, three, or four “theaters” for their different products or solutions.  That makes for upwards of 2,000 products and solutions being offered (maybe more).  I guess I expected showcases of awesome gadgets and super-cool space-age technologies—not sure exactly what those would be, but maybe something like a Smartphone that is also a brain scanner.  Or a wristwatch that performs the Heimlich maneuver when needed.  Kind of like when you go to the auto show and the manufacturers whet your appetite with concept cars whose features won’t be available for several years.  I expected that these innovative technologies, largely dependent on IP and huge amounts of R&D, to be the focus of the show.

But it wasn’t.  The focus there was on records management—electronic health records, patient health records, workflow management, and the various considerations within these solutions—and interoperability.  It made me wonder if we’ve gotten to the point that technology and innovation in healthcare has surpassed our ability to fully utilize it.  I mean, if we have all sorts of new HIT innovations and tools but they can’t be passed from doctor to doctor, or integrated into a hospital’s records management, then the technology’s usefulness isn’t being fully realized.

And that’s why interoperability is such a huge issue in the HIT community—interoperability is critically important to improving health and medical care worldwide.  The majority of people’s experience with interoperability is being sent a WordPerfect document that they’re unable to open, but there are dozens of online tools that take care of converting in minutes (if not seconds). 

But in the healthcare world, interoperability means (among a plethora of other things) being able to move to electronic records, share that information with patients and providers around the world, integrate the appropriate information into insurance and billing systems, and provide public health information without sacrificing flexibility, accuracy, privacy and security, all with the goal of providing better care.

We’ve been involved in many issues over the years involving interoperability. When looked at it through the healthcare prism, I finally saw its true value.  If we can’t come up with some interop solutions in healthcare, it’ll end up having a negative effect on innovation. If new innovations in healthcare can’t be widely deployed, what’s the point of spending the time and money on creating new IP?

We should keep in mind that interoperability can be achieved in many ways and doesn’t just magically happen on its own.  It takes smart people creating innovative answers to problems, which means that IP can (and will) play an important role in developing sound interoperability solutions that will flourish throughout the healthcare industry. 

And a note to you innovators: take a look at how your current/in development products and solutions can be applied to healthcare.  Healthcare is one of only two segments of the economy currently growing (the other is government, and they’re closely connected at many points), and is not solely the playground of the big guys.

Even If It Doesn’t Move… Regulate It

Friday, April 17th, 2009

I can’t believe that I’ve let a whole week go by without
posting this article from the Wall Street Journal.  I hadn’t seen this reported elsewhere, but
Treasury Secretary Geithner apparently said before Congress that VC firms
should be registered with the SEC, submit regular reports on investors and
portfolios, and that data should be assessed to ensure that VC firms aren’t “a
threat to financial security.”

As Mr. Freeman points out, this is confusing
news since VC work doesn’t really involve banks, and is generally made up of
private investors taking stakes in small companies. Even if VC firms–and all
of the companies in which they invest–failed, how would that be a “systemic
risk” that risks the security of the financial system?  And when the financial system is in shambles,
with no credit or capital to distribute, shouldn’t we be looking to private
investors who are willing to take risks?

Perhaps even more confuddling is trying to justify this
proposal by saying that investors need more protection post-Madoff.  Apparently Mr. Geithner’s selective-memory
isn’t limited to taxes owed, but to larger financial matters—Madoff was
registered with the SEC and investigated several times, but the SEC didn’t
protect investors in that case. (And Madoff wasn’t running—or, more accurately,
purporting to run–a venture firm.)

Venture capital is a risky business, but one that investors
enter with full knowledge of that risk. 
At Innovators Network seminars for entrepreneurs we regularly have
venture capitalists talk about the importance of intellectual property to the
business plans of companies that get funded, as it helps stem that risk by
providing inherent value to the company. Geithner’s plan would have a chilling
effect on the availability of venture capital, and therefore a disastrous
effect on the ability of companies built around IP to generate capital.

It is a great article, IMHO, and worth a close read. My
favorite part is where Freeman writes, “Moral hazard? Not in Silicon Valley. No
tech-company founders or VCs could possibly believe that they are too big to
fail.”

And the closing quote from Cypress Semiconductor CEO T.J. Rodgers, referring
to government regulation of VCs, is classic:

It’s like watching children
deface an economic work of art.

Yep, That’s Their Business Model

Friday, April 3rd, 2009

Just a week after a widely read news story about how Twitter, three years in, doesn’t have a business model, here comes the news today is that Google is in late stage talks to buy Twitter. Gosh, I wish someone had suggested last week that lack of a business model is, actually, a form of a business model and means for cashing in.

That’s all for now.  I’m off to make some Lotto picks.

What Everyone is Talking About

Tuesday, February 24th, 2009

It's what everyone is talking about. The
decision and its effect on America is sparking dinner table and water cooler
conversation, pitting friend against friend.  No matter on which side you
fall—for or against—your arguments are sure to be passionate, with examples and
anecdotes to support your position.  Few people are indifferent. People
ask, “What are the long term effects?” Others say that a dip in the numbers
doesn’t require so drastic of an overhaul, especially an overhaul about which
so many people disagree.

 

I’m talking, of course, about the addition of the fourth
judge on “American Idol,” Kara (pronounced care-uh? Car-uh? Who knows)
DiSomething. For the record, I think the show needed another actual judge
(since Paul Abdul’s nonsense about wanting to squeeze cute contestants’ heads
and mount them on her rearview mirror shouldn’t really count as “judging” in a
singing contest) but I just don’t like Kara.  Her pro-cute boy, anti-cute
girl attitude reminds me of high school, and she’s prone to
borderline-inappropriate outbursts that are slightly reminiscent of Meg Ryan’s
infamous “When Harry Met Sally” scene. 

 

As much as I dislike her, I found myself imitating her this
morning—pounding my fists and saying, “Yes! Yes!"–when I read this piece in
the Wall Street Journal by Tom Hayes and Michael Malone. There have been
countless recommendations on how to help small businesses during this recession
(we made some here),
but, as a certain "Idol" judge might say, these guys just nailed it.

 

The column has real-world suggestions that would help
entrepreneurs and, therefore, the economy as a whole since small businesses do
most of the hiring and create somewhere north of 70% of all new jobs in this
country.  And the suggestions, like eliminating the payroll tax, would be
of immediate benefit to small firms, allowing for additional cash flow. (I’m
still a fan of this,
which would have the same immediate effect, but is probably harder to
implement.)

 

So, what do you think, small business America? Do you agree
with the judge’s reaction? As it goes with Seacrest, DiSomething, and crew… The
choice is yours. The phone lines are now open.

A BRIDGE in the Stimulus That Everyone Could Support

Tuesday, February 10th, 2009

The Senate signed the “stimulus” bill today and is headed to
a tough conference with the House. 
People of differing opinions can have honest debate about whether or not
this thing is going to work, and to what degree. Unfortunately there’s one idea
that everybody seems to like and yet nobody decided to include.

Back in 2001, then-Rep. Jim DeMint championed the BRIDGE (Business
Retained Income During Growth and Expansion) Act, a measure with wide
bi-partisan support that would help get additional capital into the hands of the
small businesses who need it. Better yet, it was devised by an honest-to-goodness
Washington outsider whose company provides services to honest-to-goodness emerging
companies that need help.

BRIDGE would allow small companies with receipts under $10
million to defer up to $250,000 in federal taxes, allowing them to reinvest
that money in their company.  The company
would begin repaying the government—with full interest—after two years. Many in
the business community heralded the idea as it would provide a source of
capital for companies that are in the critical stage where they’ve gotten too
big to rely on friends-and-family loans and credit cards, but still too small
to meet the typical venture capitalist or angel investor’s investment
criteria.  And it seems like an even
better idea now when small companies find themselves in the same situation compounded
by a credit market that is essentially frozen.

It’s a win-win for everyone. The small businesses that are
the engine of America’s economy get the capital they so desperately need to pay
their current employees, develop new products and services, grow, and hire more
employees. And the government comes out AHEAD in the end since they’re getting
the taxes plus interest.

Unfortunately, this isn’t included in the current stimulus
package and won’t be. Small businesses will continue to struggle, won’t create
jobs, and a bunch will fail. But Alaska has asked for $630 million for
transportation projects, so maybe we’ll be getting that infamous Bridge to
Nowhere instead.

Why Policy Matters

Friday, January 16th, 2009

Over at the Innovators Network—ACT’s project that focuses on intellectual property and entrepreneurs—our pal Andre Carter has a post about that Carnegie Institute conference this week. (Morgan wrote about aspects of it here.)  I think that Andre’s piece is particularly important because it drives home the points that we’re always trying to make: a) that policy is important, and 2) if you don’t pay attention, people who know little about the real world implications of their decisions end up having a disproportionate amount of say in the matter.

Andre points out that at a conference focusing on intellectual property rights (IPR), the panelists at this particular panel agreed that IPR are a problem for small business. According to them, because there have been a couple of outrageously bad patents issued over time, all patents should be invalidated. 

There were just a few voices at the panel arguing that IPR are important to small business, and that a standards process that neglects IP is a standards process that neglects small business. And that’s why, as Andre points out, it’s important for people to be involved, either directly or through participation in trade groups.

P.S.  This is unrelated and probably doesn’t garner its own post, but seriously… Is this not the most important news in technology these days?  Perhaps the only thing more exciting and useful, IMHO, would be a spelling- and grammar-check feature for Twitter and Facebook status updates.