Feedback is the food of champions

feedbackAs an entrepreneur it would always drive me crazy when I’d be pitching the business to a potential investor and receive nothing in return by way of feedback. It would happen often – you’d reach the end of your pitch and there would just be a brief thank you and a handshake.

I’d be left wondering what they really thought and also whether they’d even been listening. This was usually made worse by the constant checking of the Blackberry during the meeting.  You would be left with the overriding impression that the investors felt they were much more important than you.

Now that I’m an investor myself I try hard to never be like this. Partly, because it’s just not good manners. But more importantly, because I honestly believe that the entrepreneur is the most important person in the meeting. I think any good investor feels the same way.

The entrepreneur is the person who has done all the preparation before the meeting and done most of the talking during it. But more broadly, the entrepreneur is the one putting their careers on the line for something they believe in. They are the ones with the big dreams and the big risks.

When an entrepreneur pitches to me I will try to concentrate 100%. I will also always try to give feedback there and then. This forces you to shape your thinking and your first instincts are usually the right ones anyway. I think this is the least I can do.

I hope that some of my feedback will be useful. But I also do it for my own benefit. By giving feedback I think I’m contributing to a more balanced and constructive meeting. I also think it will help to develop a better and more connected relationship with the entrepreneur. This puts me in a better place to be the preferred investor should we decide to move forwards. But, even if we don’t, it leads to a more positive experience which is good for my reputation in the market

So I think giving feedback in the moment leads to better meetings, better communications and better relationships. You could actually probably say the same thing about any meeting.

Is Facebook down with the kids?

images2I was reading a piece in the FT on Friday about ‘facebook fatigue.’  It was making the case that Facebook’s growth was slowing and that they were losing the support of the all- important 18-24 demographic. The article was mainly based on on anecdotal evidence but it is something that I have also felt recently so it struck a chord with me.

The ‘buying cycles’ for technology are getting shorter and shorter. This is because devices are cheaper and cloud based services are both easy to sign up to and also to move on from. So we are in a constant state of upgrading and trying new devices and apps.

This is especially true of the consumer market. With the business market cycles will always be longer because of the integration and training implications of adopting new technology.

Young people will generally move away from a mass market player. They want something that’s ‘cool’ and at least a bit anti-corporate.

Facebook is now the ultimate mass-market player. More than a billion people are on Facebook – that’s 1 in 7 of the world’s population and nearly half of all Internet users. What’s more they have moved heavy handedly into commercializing their service. On top of this the whole world is moving more and more onto mobile devices where the Facebook service doesn’t work so well.

With all this in mind it is hardly surprising that the younger generation are looking elsewhere.

Microsoft and Google didn’t face the same problems – or at lest not so quickly. They also relied more on the business buyer and provided more of a utility that was less susceptible to trends.

All this makes me worry about the future for Facebook. I know that with their platform strategy the company ismore entrenched across the web than people realize. I also appreciate that they have made good progress on mobile.

But if you take the younger generation as a proxy for where the market is heading then I’m not at all convinced about their future as a business that will continue to grow and take its place at the top table of lasting technology brands.

Microsoft & Innovation

windows8I’ve been interested to read all the coverage over the last few days on Windows 8 and how Microsoft are preparing for a major climb-down in the way the software is designed. The news is almost entirely negative and saying that the attempts to combine the classic Windows software with their new ‘tiles’ design used on mobile devices has led to confusion and a poor user experience.

I actually think that this might be a positive thing for Microsoft. I’ve thought for a long time that Microsoft has been sleepwalking through the huge shift in the industry away from PC’s and software towards mobile devices and the cloud.

The company has sat back and relied far too much on its major cash cows of Windows and Office. At the same time they have been very late into software-as-a-service, smartphones and tablets. You can keep milking major product lines for a time especially if the product is Windows – perhaps the most successful franchise of all time. But the problem is that the bigger and more successful your core product is the more difficult it is to change when the market starts moving away from you.

But now Microsoft’s problems have become so severe that they can no longer just keep ‘muddling through.’ IDC recently announced that PC sales had declined by 14% year on year – the biggest decline they have ever seen since they started tracking the market in 1994.

This is forcing the company to pursue a new strategy and start taking bigger, bolder risks. To my mind this kind of desperate, nothing to lose situation is very often where the best innovation comes from. When you no longer have some to protect it can free the mind and force you to look to the future.

The Windows 8 roll-out is an example of this innovation. It didn’t work but I think it actually makes me more excited about Microsoft’s future.

The company still has lots of talented people and tremendous resources and I look forward to seeing them continue to roll the dice. It may never lead to the kind of resurgence that they are looking for but at least they are giving themselves a chance – something they haven’t been doing for a very long time.

Music sales rise again as the industry enters a new phase

imMusic sales saw a slight increase in 2012, marking the first rise for 13 years, according to figures from the International Federation of the Phonographic Industry (IFPI) and as reported by numerous media outlets.

Digital music is the big growth area as you would expect where sales rose about 9% over 2011 to $5.6bn and a 34% market share

Subscription services such as Spotify and Deezer “came of age” last year, according to the IFPI, and this year will cross the 10% mark as a share of total digital music revenues.

Spotify has more than 5m paying subscribers (nearly twice as many as previous year) and is the second largest source of digital music revenue in Europe.

Even though it is only a small increase after all this time I still thought it was a significant milestone. The arrival of Napster in 1999 fuelled an explosion in on-line piracy. Music labels were up in arms and people were predicting that the industry was doomed.

I think what really happened was an industry got disrupted and this usually takes a few years to play out.

For an industry to be disrupted there is a significant development (in this case the Internet and file sharing) that leads to innovation and opens customer’s (especially early adopters) eyes to a new and better way to do things (in this case download and share music in a digital format). This was further fuelled by the introduction of the IPod music player and the iTunes music store in 2001.

What usually happens is that the incumbent suppliers (the record labels and retail stores) dig their heals in having made such a huge investment and so much money from the way the market currently works. They do what they can to slow down progress, position the innovators as untrustworthy (and often much worse) and do what they can to protect their market dominance through legal action, lobbying and media relations. Very rarely do they think to innovate themselves.

But the customer will always win out in the end – it’s just a question of how long it takes for supply to catch up with demand.

From the late 90’s onwards users have increasingly wanted to consume their music in a digital format. When that proved to be virtually impossible in any legal way, many decided they had no choice but to break the law. The benefits of digital music outweighed the risks of getting caught. This is often how progress gets made – laws are usually designed to protect the status quo.

But I don’t believe that most people want to break the law, it’s just that they had no choice. Most of us want the artists and the brands that we love to do well and don’t resent paying for it.

Over time the supply side has started to catch up with the demand side and this is why the market is starting to grow again. iTunes, GooglePlay and others now offer the vast majority of available music for download. There are also smaller download providers such as emusic who do a better job of representing the smaller or more specialized bands. In the last few years we have also seen the emergence of various different types of subscription based streaming services like Spotify, Pandora, Deezer and Songza. What’s more, all these services don’t just make is easier to buy or listen to the music you want. They also have great discovery and recommendation tools to help you find more music.

From my own perspective, I now spend more money on music than I ever did in the old world. I have also discovered loads of great music that I don’t think I would have found before. In short, I enjoy music much more than I used to and think I get good value for money.

So why did it take so long? The record labels were not full of stupid people blind to what was happening in their market. But I think even when you know that the market is changing, if your company makes all its money from the current way of doing things and has built its entire business around that, it is virtually impossible to change.

Indeed, it’s usually easier for a start-up to move into the market, despite its limited resources, than it is for a large company to change. We see this all the time and that’s why start-ups always stand a chance of success. It’s a bit like the difference between a gut renovation of a house within an old structure as opposed to building a completely new house – it’s actually easier to start from scratch.

The dynamics of the music industry have changed with the labels having a less dominant position, the power of iTunes and the emergence of the streaming players. But music has never been easier to discover, to buy, to share and to listen to and I believe this will lead to healthy growth moving forwards.

Buying Stuff

7f006cee-70cb-11e2-85d0-00144feab49aI read an interesting investigative type piece in the w/end FT about Amazon and what it’s like working in one of their warehouses. It painted a pretty sorry picture of a giant warehouse the size of nine football pitches and disillusioned workers plodding around collecting products for shipment in their oversize trolleys. Everyone takes their orders from a handheld computer device that measures productivity and tells them when they are falling behind. Apparently it’s not uncommon to cover more than 10 miles of walking in a single shift!

It got me thinking about how we buy stuff and how much has changed in the world of retail. The basic principles have never changed – companies make stuff and people buy it. Retail is about bringing the two groups together.

But everything in between has changed and is changing massively and Amazon is at the center of it.  The numbers are staggering. According to an analyst at Morgan Stanley, the ecommerce market is expected to reach $1tr in 2016 with Amazon taking at 23.5% share. That would place ecommerce at more than 20% of the entire retail market and Amazon by far its fastest growing and largest player.

So will Amazon continue to grow relentlessly? Will they continue to build out more and more huge warehouses and start to populate them with robots to further drive efficiencies? Will ecommerce dominate virtually very product category apart from the obvious ones where is doesn’t work like petrol and convenience stores.

Amazon is a great company and a trailblazer for the ecommerce industry. But my view is that is their growth will slow and their hub based infrastructure can only go so far. I believe that local retailers will hold on to a meaningful share in the market. Why? Because there is and always will be value in local. For this reason I believe retailers must be multi-channel if they are to reach the most customers with the most products.

Local has a tremendous amount of value that I think there is a temptation to overlook in the face of this stampede to all things on-line.

With local you can see your product, you can feel it and try it on for size. You can talk to people who are knowledgeable about the products and ask them questions. You know where to go if you have to take it back. You can feel more in tune with products that are made or produced locally. And, perhaps most importantly, you can get your hands on products instantly.

That’s why same day delivery is becoming such a big opportunity and what drove our investment in Shutl. We are living in a world that is becoming ever more mobile and fast moving. We want what we want, when we want and where we want.

Even Amazon is talking about the possibility of local warehouses and same day delivery. But this would require them to fundamentally change their hub-based model and would have an impact on their already super-slim margins.

I’m sure Amazon will make some kind of move in this area. I wouldn’t be surprised if they even opened stores or what they will more likely call ‘showrooms.’

Whether you are the world’s largest ecommerce player or a small store the optimum model is a multi-channel one where you can leverage the best of both.

Services that help retailers get as many products as possible into the hands of as many customers as possible is a really dynamic market right now full of opportunities. I’m looking forward to seeing how things play out over the coming years and, as an investor, I’m looking forward to making more investments into companies that are playing a part in this change.

Openess + Honesty = Strong Relationships

I read a piece recently about the transparent culture at Square which I thought was interesting. There was also a great post by Brad Feld a couple of days ago about the value of being ‘vulnerable.’ I think about this allot. Maybe because I’m not great at being open and I have realized over time […]

Captive Content

Marketers used to talk about a ‘captive audience’ when discussing marketing strategies. The general thinking was a brand wanted to find a captive audience and then bombard them with marketing messages as often as they could get away with or could afford. In recent years the tables have turned and ‘the audience’ has broken free […]

How dare Instagram try to make money?

I don’t understand all the uproar over Instagram’s decision this week to ensure it had some level of access and control over the content that is generated across its service. There seems to be a sense of entitlement these days amongst consumer web services users that everything should be free. People seem to forget that […]

HP & Autonomy

I was both shocked and saddened to hear the news today that HP has accused Autonomy of effectively ‘cooking its books’ in the run up to their $11bn acquisition of the company in October 2011. HP is accusing Autonomy of “serious accounting improprieties” and “outright misrepresentations” and is seeking damages that will be substantial and […]