Month: November 2009

Black Friday: Advertising Thoughts

It’s been awhile since I wrote about advertising, so seeing as it’s Black Friday and millions of Americans woke up early (or stayed up all night) to go shopping at ungodly hours, I thought I’d write a little about some of the current campaigns that motivated Americans to shop.  First, the bad.

AT&T has been in a battle with Verizon for mobile phone dominance for the past few years.  Verizon still has more subscribers and a bigger network, although AT&T has closed the gap and even taken the lead in some areas.  AT&T’s launch of the iPhone has been a huge boost for AT&T, but lately Verizon has been hitting back.  They launched a commercial that shows two maps of the US, one showing Verizon’s 3G coverage and the other showing AT&T’s 3G coverage.

ATT&T wrote an open letter trying to explain the situation, but they also created their own commercial to show that they too offer service in most of America.  It sounds like a good idea, but for me, the commercial fails.  It opens with Luke Wilson standing on a map of America saying that he got postcards from people all over the US who are able to use AT&T’s network.  Wilson reads off tons of cities and tosses the postcards where the cities are on the map.  Pretty soon, the entire map is covered in postcards.  It might be a cool idea, but they picked Luke Wilson.  As the viewer, I immediately think, “why couldn’t you get Owen Wilson?”  Is AT&T really the second most famous Wilson brother and Verizon is Owen, the big movie star?  It’s almost too perfect since AT&T is playing second fiddle to Verizon and had enough of an inferiority complex to respond to Verizon’s national 3G coverage map with an open letter to consumers.  At least they didn’t pick Andrew Wilson to be their spokespan.  Then people would think they were US Cellular.

http://www.youtube.com/watch?v=wjwBHqa6lZI

Sears has always had fairly tame advertisements around the holidays an this year isn’t any different.  Their ads are actually fairly good until the end, when they show their 2009 Christmas slogan.  Their slogan is “More Values, More Christmas.”  It hardly seems right to equate buying more things with more Christmas.  Wal-Mart does the same thing with their slogan “Christmas Costs Less at Wal-Mart.”  It seems wrong to me to equate being able to buy more things with “more Christmas.”  I’m not even going at this from religious perspective, simply a materialistic one.  Both stores are equating buying more things with being happier.  It’s a good message for the stores’ bottom line, but not for everyone else.

Finally, the last of the bad.  Kopps Custard, a local institution in the Milwaukee area used to have a billboard on I43 that showed the flavor of the day.  It let you know if you should take a right turn when you got off the highway or continue to your destination.  If it was a good flavor, you got off and got custard.  If it was bad, you continued on.  I can’t count the number of times I’ve stopped because the billboard showed Tiramisu, Chocolate Peanut Butter Chocolate or Grasshopper Fudge.  It was a great ad because it motivated people to change behavior and buy.  You can now follow Kopps on Twitter, but it’s just not the same.

Now, onto the good.  This year, Best Buy sent out their Black Friday circular in newspapers around the country, just like they did in other years.  The only difference was that in heavily Muslim areas, they included a bubble at the top that said “Happy Eid Al Ahda.” Eid Al Ahda is a holiday celebrated by Muslims that runs from Friday until Sunday.  Predictably, Best Buy’s decision has drawn criticism from some right wing Christians, including some who want to boycott the store.  I think this is yet another manufactured issue and commend Best Buy for using some innovative marketing to try to tap into an underrepresented market.  As an aside, I also laugh at companies that refuse to mention Christmas in their holiday ads.

Happy Thanksgiving and if you are shopping today, good luck finding those deals.  Remember, door busters don’t mean that you should literally bust the door down.

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Is Your City Startup Friendly?

I was talking with a few people at the last High Tech Happy Hour and the last Capital Entrepreneurs meeting about what makes a city startup friendly.  We came up with a short list, but I’ve been thinking about it ever since.  What makes a city startup friendly and how can cities that are not startup friendly make changes to become more startup friendly?

Startup friendly cities need to have a high density of smart people.  Potential founders of startups need other smart people who could be potential partners, contractors or employees.  Most cities that have a high density of smart people happen to be cities with large universities that attract a huge supply of smart people each year.  It helps that these cities have universities because it’s even better to have young smart people, rather than simply smart people.  Young people can afford to take bigger risks and are more willing to work longer hours for little or no pay than older people who may already have families, mortgages or other obligations.

Another helpful characteristic is low cost of living.  If founders can live cheaply and find cheap office space, it makes it much easier for a startup to get off the ground.  Additionally, having a low cost of living allows startups to stretch their investment dollars much further.  Employees, rent and just about everything else is cheaper.  I talked to one Madison-based founder who has successfully sold one company and is on his second startup who believes that Madison’s low cost of living is one of the most important reasons why his company succeeded and his competitors did not.

Access to affordable office space in a business incubator is another key characteristic of startup friendly cities.  Business incubators are an important asset for startups, especially if they are affordable.  Unfortunately, many incubators I’ve seen end up charging close to market rates.  Incubators are an important step for startups because they are usually the first move from working out of the founder’s bedroom.  They also provide camaraderie, connections and bring startups out of isolation because the rest of the people in your office are also running startups.  It’s much better for a startup to move into an affordable business incubator with other startups, rather than move into an affordable office space next to a lawyer, construction contracting company and a non-profit.

It is extremely important for startups to interact in a community of other startups. Having other entrepreneurs around, especially entrepreneurs who have been successful in the past, is important because founders can ask for advice when they have problems.  A mentor program like MERLIN Mentors is very important because it matches up experienced people who have been successful before with inexperienced startup founders.  These mentor programs not only build a community of startups, but they provide specific feedback to startups and help them overcome challenges that they might not if they were left on their own.

Another important aspect of an entrepreneur community is free networking events like the High Tech Happy Hour and Capital Entrepreneurs. Events like the High Tech Happy Hour bring smart people together who are not necessarily focused on entrepreneurship and startups, but are fertile ground for finding employees.  Local, free entrepreneurship groups like Capital Entrepreneurs offer founders of startups a place to meet others who are doing what they are doing.  It also creates a community and gives founders of startups some semblance of co-workers.  Starting a startup can be lonely if you do not get out and interact with others who are facing the same challenges and dilemmas that you are.

These free networking events provide a way for experienced entrepreneurs to mingle with people who are just getting started.  Experienced entrepreneurs set an example and show everyone in the city that starting a company is viable.  They can also provide advice, but simply having experienced, successful entrepreneurs in your city makes your city startup friendly.  Cities like Boston, San Francisco and Seattle have these networks.  Others like Madison and Boulder are just getting started, but are on the right track.

These experienced entrepreneurs can introduce inexperienced founders to professional service providers like lawyers and accountants who are willing to help entrepreneurs.  It also helps if your city cultivates a network of experienced, flexible professional service providers.  These service providers should be willing to take equity, give discounts or defer payments into the future for startups that they think are going to be successful.  It is extremely helpful if startups can still get top notch professional services, without breaking the bank during the company’s research stage.

These professional service providers can help startups gain access to capital that they need to fund their business.  Ideally, a startup friendly city will have VCs, angels and other rich people who are interested in investing in startups, but not all cities must have all three.  A strong network of professional service providers who work with entrepreneurs can make introductions to rich people who are willing to invest.  Some startup friendly cities can be heavy on angel and rich individuals, but light on VCs.  Another way cities can help entrepreneurs is by advocating for small business loans and other alternative ways of funding.

Startup friendly cities generally have support programs in place for entrepreneurs.  They tend to have low taxes.  It is much easier to start a startup in a city that does not have 10% sales tax, like the city of Chicago.  The state of Wisconsin provides a 25% tax credit to angel investors who invest in certified Wisconsin startups.  Wisconsin also offers low interest loans that are forgiven if the startup fails.  Both of these programs help entrepreneurs succeed.  Other states have implemented programs that fund early stage startups.

Finally, many people who start statups generally like living in cities.  They like walking to work and living in tolerant environments.  They like to be able to meet in coffee shops, go to interesting restaurants and enjoy life with their peers.  It’s best to have good weatherLow crime and good schools are also helpful.  Overall, creating a city with high quality of life keeps the three most important ingredients, experienced entrepreneurs, rich people and smart, young people, in one place.

Cities can begin to implement policies that help foster entrepreneurship.  Cities can start by creating a business incubator for startups that offers offices (with windows) at 50% discounts.  They can start to create mentor programs like MERLIN and create entrepreneur networking groups like Capital Entrepreneurs.  Service providers can start offering discounts or equity for service deals.  Once one service provider has success offering this deal, it quickly becomes the industry standard.  I’m not advocating that government do all of this.  People who want to see their cities become more friendly to startups have to do some of the work themselves.

Government does have a place.  It can offer incentives for startups to move to their cities.  It can lower taxes or offer government programs that provide easier access to capital.  It could create a new business incubator and it could help create a community of entrepreneurs by publicizing entrepreneur success stories or the local startup community.  Government could help make cities more startup friendly simply by being more friendly to startups themselves.

Characteristics of Startup Friendly Cities

Figure out if your city is startup friendly.  Rate your city on a scale of 0-2 for each characteristic and score total the score at the end.  0 means that your city does not do it at all, 2 means your city does is very well.

  1. Access to capital
  2. High concentration of smart people
  3. Low cost of living
  4. High concentration of rich people
  5. Network of experienced entrepreneurs
  6. Mentor programs
  7. Low cost startup incubator
  8. Low taxes
  9. Governemnt support
  10. Flexible professional service providors
  11. Free networking events
  12. High quality of life
  13. Tolerant, vibrant, walkable cities
  14. Large universities
  15. Culture of entrepreneurship
  16. Educated workforce
  17. Good weather
  18. High concentration of science and technology workers
  19. Direct national flights
  20. Entrepreneurship advocacy groups

I would say Madison, WI gets a score of 23/40.  Milwaukee gets a 13/40.  San Francisco gets 36/40.

How startup friendly is your city?  Do you agree with my list?  Do you have any characteristics to add?

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How NFL Coaches are like Midlevel Workers in Corporate America

Bill Belichick is widely thought of as the smartest coach in the NFL.  He has been hugely successful, coaching the New England Patriots to the Super Bowl four times in his 9 years of coaching, winning three.  Like many successful people, Belichick rubs many NFL fans the wrong way, leading many to revel in his failures.  Part of the schadenfreude can be explained by his somewhat abrasive personality and win at all costs mentality.  He was caught up in the NFL cheating scandal a few years ago where he was accused of ordering Patriots employees to tape opponents practices before important games.

It was no wonder that Belichick was universally slammed by pretty much everyone after his decision to go for it from his own 30 yard line in the 4th quarter last night’s Sunday night game against the Indianapolis Colts.  Here’s the situation.  The Patriots were winning by six points with a little over two minutes to go.  The Patriots faced 3rd and 2 from their own 28.  A first down in this situation wins the game.  The Colts defense stopped the Patriots on 3rd down, forcing a 4th and 2.  Instead of punting, Belichick ordered his offense back out onto the field to go for it.  They didn’t get it and Peyton Manning drove the Colts 28 yards for the game winning touchdown.

It’s obvious that the Patriots should have punted and forced the Colts to go 70 yards to try to win the game, right?  To steal a line from Lee Corso, not so fast my friend.  Belichick is way ahead of the curve.  According to research by David Romer at UC-Berkely, NFL teams punt way too often.

The Patriots convert first down from 2 yards out 76% of the time (ESPN’s stat from Sportscenter).  This stat means that by going for it, the Patriots had a 76% chance of winning the game.  Belichick only had to think that his defense would give up a touchdown to Peyton Manning and the Colts offense at a lower rate for it to be a good decision.  Manning had already driven the Colts to three 75+ yard touchdown drives in under two minutes in the game.  Belichick made the decision to go for it and this time it did not pay off, which brings me to why I love watching him coach a game.

Coaches in all sports, but especially football, almost always play it safe and go with conventional wisdom.  I’ve written about the lack of innovation in football before, mostly relating to play calling.  Last season I came up with a hypothesis:

I think it is because coaches fear being fired for not just doing poorly, but doing poorly a different way.  If coaches go with the conventional wisdom and fail, they will not be criticized as harshly as if they experiment and find new ways to fail.  If they succeed, like Mike Martz’s high-flying pass offense for the Rams called “The Greatest Show on Turf,” they are given some credit, but when the same coach experiences a minimal decline, he is criticized more harshly than a conventional coach.  For example, when Martz decided to pass in a late game situation, just like he had during other times in the game and failed, he was roundly criticized.  If he had run and failed, the players would have been criticized for not executing.   There is no upside for innovation here.

Today, I found out that this hypothesis has a name, via the Freakonomics blog:

If his team had gotten the first down and the Patriots won, he would have gotten far less credit than he got blame for failing. This introduces what economists call a “principal-agent problem.” Even though going for it increases his team’s chance of winning, a coach who cares about his reputation will want to do the wrong thing. He will punt, just because he doesn’t want to be the goat. (I’ve seen the same thing in my research on penalty kicks in soccer; it looks like kicking it right down the middle is the best strategy, but it is so embarrassing when it fails that players don’t do it often enough.) What Belichick proved by going for it last night is that 1) he understands the data, and 2) he cares more about winning than anything else.

It takes a leader to be willing to go against the grain, even when he knows that he will be excoriated by his peers.  He could have taken the easy way out.  If he did, today’s headlines would most likely read “Patriots defense no match for Peyton Manning and the Colts.”  Instead, we have “Colts make Pats pay for Bill’s unusually dumb decision.”

I think that this problem helps explain why big companies are slow to innovate.  They face the same problem.  Mid-level employees face the same problem as NFL coaches.  If they simply keep their heads down and do what 99% of the other workers would do, they will get credit if they succeed, but face much less criticism if they fail.  Most corporate cultures punish failing in a new way much more than failing the same old way.  If a mid-level employees actually do something innovative and it works, many times they are given less credit than they deserve.

I think this problem helps explain why startups are able to innovate much faster than big companies.  If big companies want to innovate faster, they need to empower their employees to go against the grain and make tough decision.  They need to actually mean it.  Companies need to view a failure for what it is, a failure, rather than get caught up in how the person failed.  This is not to say that someone who decides to pull the corporate equivalent of going for it on 4th and 20 from their own 5 yard line shouldn’t be criticized.  As long as the decision has a reasonable chance of success, they should be applauded for their innovation, rather than criticized for thinking outside the box.

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A View of the Internet from 1995

I just came across one of my favorite articles again today.  It’s a Newsweek feature from almost 15 years ago about whether the Internet would actually catch on or not.  The article, The Internet? Bah! Hype alert: Why cyberspace isn’t, and will never be, nirvana, attempts to bring a dose of reality to the “Internet craze” sweeping the nation.  Written in 1995, the author starts the article with this quote:

After two decades online, I’m perplexed. It’s not that I haven’t had a gas of a good time on the Internet. I’ve met great people and even caught a hacker or two. But today, I’m uneasy about this most trendy and oversold community. Visionaries see a future of telecommuting workers, interactive libraries and multimedia classrooms. They speak of electronic town meetings and virtual communities. Commerce and business will shift from offices and malls to networks and modems. And the freedom of digital networks will make government more democratic. Baloney. Do our computer pundits lack all common sense?

Reading it now, the first part seems like it has to be an Onion article.  While most are laughable now, I don’t want to focus on what he got wrong.  Here’s a quick taste of some of Clifford Stoll‘s predictions from 1995:

  • “The truth in no online database will replace your daily newspaper”
  • “No computer network will change the way government works”
  • “You can’t tote that laptop to the beach”
  • “We’ll soon buy books and newspapers straight over the Intenet. Uh, sure.”
  • We won’t be able to find the information we want
  • The Internet won’t be useful in government
  • Computers in schools? “Bah. These expensive toys are difficult to use in classrooms and require extensive teacher training.”
  • “We’re promised instant catalog shopping–just point and click for great deals. We’ll order airline tickets over the network, make restaurant reservations and negotiate sales contracts. Stores will become obselete. So how come my local mall does more business in an afternoon than the entire Internet handles in a month? Even if there were a trustworthy way to send money over the Internet–which there isn’t–the network is missing a most essential ingredient of capitalism: salespeople.”

He was clearly wrong about pretty much everything in the first section of the article, but I think he gets the second part partially correct:

What’s missing from this electronic wonderland? Human contact. Discount the fawning techno-burble about virtual communities. Computers and networks isolate us from one another. A network chat line is a limp substitute for meeting friends over coffee. No interactive multimedia display comes close to the excitement of a live concert. And who’d prefer cybersex to the real thing? While the Internet beckons brightly, seductively flashing an icon of knowledge-as-power, this nonplace lures us to surrender our time on earth. A poor substitute it is, this virtual reality where frustration is legion and where–in the holy names of Education and Progress–important aspects of human interactions are relentlessly devalued.

I think he was right that ultimately, online connections are indeed “limp substitutes” for the real thing, but he missed that the Internet could help people make connections with people they never would have had the chance to meet in their non-Internet lives.  I’ve made connections with people though my blog, facebook, twitter and other networks like Brazen Careerist, who I never would have run across if I weren’t online.

This article brings up another interesting issue.  People love this article now because Stoll was so wrong about so many things.  How will people in my generation look 15 years from now?  We have created huge amounts of content on blogs and social networks, much more than previous generations.  Much of this content contains strong options.

Surely many of us will be as wrong as Stoll was in his Newsweek article.  In 1995, Stoll’s article was fairly reasonable.  He was well informed, involved in the industry and took a strong stand on an issue he believe in.  Unfortunately, today it looks ridiculous.  There is no way Stoll could run for office and win.  His opponent would have more fun than Republicans who make fun of Al Gore for “inventing the internet.”

If an informed stakeholder can get something so wrong, isn’t it likely that most of us will probably write something that will be completely wrong 15 years down the road?  Will articles like these preclude us from running for office?  How about getting a job?  Should we be worried about how history will view our blog posts?

Like unflattering pictures posted online, I hope that blog posts that history proves to be wrong are forgiven.   As long as the posts were well written, logical and thought out, posts where we are wrong should not count against us.  Knee-jerk reactions or Glenn Beckesque rants SHOULD be held against the writer.  If not, we will have some boring future leaders who weren’t even willing to take a stand when they were young!

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