Tag Archives: Starbucks

Are the eyeballs back?

shutterstock_110934842 line_600pxThe other day New York Times had an interesting article about 1 Billion dollar (Internet) startups. The piece opened up by saying:

The number of privately held Silicon Valley start-ups that are worth more than $1 billion shocks even the executives running those companies.

That kind of gives a flashback of the Dot Com Hype, doesn’t it? Do you remember the “eyeball logic” i.e. the acquired companies had no business model, no assets, but only data of people come came to their site.

Maybe it is different this time? Or, like Gordon Gekko in Wall Street: Money Never Sleeps, looks different but is still the same.

Let’s start answering that by asking is Billion dollars a lot of money? Of course it is. But in relative terms and as an investment? For comparison, the beer company Anheuser-Busch paid 20 Billion to get their hands on Corona, and their competitor SAB Miller paid 10.2 Billion for Australian Foster’s.

And all that is, paraphrasing the late Steve Jobs, not really changing the world, but just mixing barley with water.

Okay, okay.  Fair enough. Those acquisition pricetags surely cover more than just the brand goodwill and the customer base. There must be “hardware” involved. Bottling plants, distribution, exclusive contracts and so on. I am definitively not an expert, but, apart from the time it takes to replicate those, how valuable is all that really? So I am sure the math still contains big numbers for the brand and customer base value that make “investing 1 Billion to acquire a household Internet brand(s)” to sound more reasonable.

A billion here or there, but somehow the the get-rich-with-internet story may not feel that glorious. Could feel more like luck, gold-digging or opportunistic. People can picture how the blue collar beer makers brewed and bottled beer in the farmhouse, with the family helping, to meet the increasing demand, as the grapevine spread the news about the awesome, differentiated product. And, in comparison, the Internet entrepreneur did what? Sat at Starbucks hacking some code to his Mac, while making sure none of the Asian subcontractors were using child labor?

None of this matters. The valuation is what it is, because somebody built a product line or a customer base that Big Corporations need, but wouldn’t, or couldn’t, build organically.

And, unlike some of the beer companies going directly to the acquisition mode, most technology companies have first tried to build the new things themselves. Because that coding at Starbucks was supposed to be easy, remember? But it turned out to be everything but, their build-it-from-scratch efforts failing miserably. And often failing for so many different reasons, nothing to do with technology, but more with business model conflict and leadership culture. So companies are willing to pay the big bucks for the acquisition so that they don’t need to go through those self-inflicted failures again.

So in a way, yes, “eyeball acquisition business logic” is back.

But there is one major difference to the Dot Com era. Today’s Internet is no longer an experimentation of the early adopters, but the necessity of the Main Street (how do you think most people would answer: “Which one, and only one, would you take to a deserted island? A case of Corona or the Internet?”). Unlike ten years ago, people are quite much more willing to pay for, or truly engage with, services. And stick with them. Yes, people might switch away from Spotify or Dropbox, like they could switch away from Corona or Foster’s. But that churn probably can be estimated way better than 10 years ago. So good are many of these services, and so high is the user engagement. Which, in turn, means the investment banker estimates for the net present value of those eyeballs is more reliable.

The M&A excels aside, at the end, the payback of any acquisition is largely defined by what the Big Corporation does with the new stuff it owns.  In 2000, a major global conglomerate acquired a known-but-not-yet-mega-known, unconventiontal ice cream brand for USD 326 Million. It continued to let the brand do its thing, perhaps learning also something about its culture along the way. And now everyone knows Ben and Jerry ice cream, owned by Unilever, which by the way recorded its all-time high share price.

Maybe one day the price tags go down, as big corporations learn to innovate better themselves. It just may take some more ten-year cycles.

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Product guy – find your inner hipster

glasses shutterstock_124465828 500pxYin and yang. Fire and ice. Maverick and Iceman. Design and engineering. While it may be entertaining to watch the opposite forces go at it, making great products requires that those forces work together.

When that happens and the cross-functional team is on the high gear, all that friction turning into energy enables the team to go forward at an unbelievable pace. No day is the same. No one settles for the status quo, and everything moves like crazy, unfortunately including features, schedules and the confidence to any commitments given.

The best way for the product guy to fix the situation? Duh. Never let things go so far out of hand.

Not easy, but it can be done. The prevention starts with the product guy understanding the prevailing corporate culture. More specifically, how does the gravity work in the power balance between design (either UI design or industrial design) and engineering (either hardware or software). For example, I worked at Nokia where, in my opinion, the engineering had the upper hand, especially in software, though the gap did start to close as fast as the iPhone ate market share, including some periods of an excessive pendulum swing the other way.

In any given day, the product guy should make the extra effort to be on the side of the weaker, or the misunderstood, party. This isn’t really because rooting for the underdog is a more interesting movie plot, or because product guys somehow are better people, but because of the mission ahead. Greatness often is the result of minds the meeting in the tough debate that stretches the boundaries (and the nerves) of everyone. Had Marty McFly had not the courage to coach George McFly stand up to the bullying of Biff, Michael J.Fox wouldn’t have gone to rule the box office (and, by the way, to help to create a foundation that supports medical research in beating Parkinson’s disease with about 50 MUSD yearly spend)

But how to relate to those trendy design folks? Is it a problem if the product guy can’t fit his kids and the he-ain’t-puppy-no-more -sized dog into a Mini Cooper, but has to opt for a Volkswagen Touran instead? Or that he prefers football shirts over turtlenecks? Or thinks that 5 euros for the coffee that is more milk than coffee, is just modern day highway robbery? The list of self-doubt goes on and on and on…

The solution is that the product guy must find her/his inner hipster.

Now, I don’t mean just suddenly starting to wear intellectual-looking wardrobe or to instagram every piece of lunch the Sodexho office campus cafeteria offers. Nobody wants to be as shallow as Justin Timberlake in Bad Teacher (who, as the Touran-driving product guy wants to note, ultimately was no match to the gym teacher in the quest for Cameron Diaz’s affection)

The point is to be interested in aesthetics, good taste, emotion and beauty. And, like the sometimes forgotten definition of hipster, do that by not taking yourself too seriously, always remembering the difference of actually being intellectual or artistic, and just playing the role. The more open the product guy’s mind, the more he will learn to respect the masters of the artistic universe. And the tens of thousands of hours of practice it takes to become great, often starting early. Mozart delivered his first opera at the age of 12 and Justin Bieber his first youtube hit at 13.

Through the journey of learning to respect the mastery of art, and learning to separate the real from the fake and the wanna-be, the product guy gets the answer to the most mission critical decision around design– who should I trust in the decision of aesthetics and good taste in this particular product.

With an open mind, you may find helpful talent in unexpected places. For example, during my Nokia years, I found many middle-aged, loafer-wearing engineers from places like Jyväskylä (Finland) or Ulm (Germany) to be highly aesthetically competent. And these places don’t have any Starbucks or much choice of a sushi place, so the nurturing of the contemporary art skills shouldn’t be possible. But those places have great outdoors, and, when you really think of it, the nature is one of the most beautiful things ever.

Nature is the answer also if the cross-functional friction turns into an all-out full office warfare. Take your running shoes, put your sportstracker on, and take a run into the woods. And when no one hears, scream your lungs out. It helps.

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Happened in the previous episodes of Product Guy series:

Stay tuned for the next episode: Product guy – dream living other people’s lives

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