Tuesday, December 22, 2009

Google and Open Systems

Google’s SVP-Product Management Jonathan Rosenberg has published a manifesto explaining Google’s commitment to open systems. The post — otherwise a paean to the virtues of openness — contains a crucial caveat about the proprietary platforms that provide 99% of Google’s revenue. Rosenberg says:
While we are committed to opening the code for our developer tools, not all Google products are open source. Our goal is to keep the Internet open, which promotes choice and competition and keeps users and developers from getting locked in. In many cases, most notably our search and ads products, opening up the code would not contribute to these goals and would actually hurt users. The search and advertising markets are already highly competitive with very low switching costs, so users and advertisers already have plenty of choice and are not locked in.
So, search and related ad markets are highly competitive. Really? To echo Rosenberg’s point about the definition of open, competitive is “a Rashomon-like term: highly subjective and vitally important.” Many antitrust economists would balk at describing a market with just two players as highly competitive. That aside, Rosenberg’s analysis brings to mind the browser business in 2000, when Internet Explorer and Netscape had 80% and 20% market shares, respectively. That market was also “highly competitive with very low switching costs.” By Rosenberg’s logic, there was no need for an open source browser.
Has Rosenberg given us reliable rules for when it makes sense to open a platform? Chris Dixon doesn’t think so. He sees Google’s “closed core” strategy as a classic case of a platform owner seeking to commoditize complement providers and thereby extract more rent from its ecosystem.

I have two additional observations about the post:
  • Rosenberg’s claim that MBAs don’t learn about the merits of open systems is wrong.
  • His call for a clear and precise definition of open is on target.
Open Systems and MBAs. Rosenberg asserts that open systems are counter-intuitive for traditionally-trained MBAs, who are “taught to generate a sustainable competitive advantage by creating a closed system, making it popular then milking it … [seeking to] lock in customers to lock out competitors.” He promises that Google’s strategies for open systems will “rewrite the MBA curriculum for the next several decades.”

I hope so. I make my living teaching MBAs about platforms, and in the spirit of openness, I welcome new ideas from Google. However, I take exception to Rosenberg’s assertion that MBAs don’t learn about the merits of open systems. This topic wasn’t covered when Rosenberg got his MBA in 1985, but most business schools now have courses that examine open platforms and open innovation (for example, at Harvard Business School: Managing Networked Businesses, Strategy & Technology, Competing with Social Networks, and Managing Innovation). Scholars have learned a lot about the merits and drawbacks of open platforms. My working paper with Geoff Parker and Marshall Van Alstyne, "Opening Platforms: How, When and Why?" summarizes some of this thinking.

Defining “Open.” Rosenberg says “in our industry there is no clear definition of what open really means.” I agree and would add that in classifying a platform as open or closed, it’s vital to specify which platform layer is being referenced. Conversations about open systems often get confusing because open source and open APIs refer to fundamentally different platform layers. The following excerpt from my working paper with Parker and Van Alstyne expands upon these points.
A platform is “open” to the extent that: 1) no restrictions are placed on participation in its development, commercialization or use; or 2) any restrictions—for example, requirements to conform with technical standards or pay licensing fees—are reasonable and non-discriminatory, that is, they are applied uniformly to all potential platform participants.
Platform-mediated networks encompass several distinct roles, including: 1) demand-side platform users, commonly called “end users”; 2) supply-side platform users, who offer complements employed by demand-side users in tandem with the core platform; 3) platform providers, who serve as users’ primary point of contact with the platform; and 4) platform sponsors, who exercise property rights and are responsible for determining who may participate in a platform-mediated network and for developing its technology. For a given platform, each of these roles may be open or closed.
The Linux platform, for example, is open with respect to all four roles. Any organization or individual can use Linux (demand-side user role). Likewise, any party can offer a Linux-compatible software application (supply-side user role). Any party can bundle the Linux operating system (OS) with server or personal computer hardware (platform provider role). Finally, any party can contribute improvements to the Linux OS, subject to the rules of the open source community that maintains the OS kernel (platform sponsor role).
By contrast, Apple’s iPhone is closed with respect to all four roles. In the U.S., only AT&T Wireless subscribers can use an iPhone. To buy one, other mobile carriers’ customers must switch to AT&T, incurring inconveniences and contract termination fees (demand-side user role). Software applications for the iPhone are only available through Apple’s iTunes Store. Apple reserves the right to reject third-party applications due to quality or strategic concerns, and often does so (supply-side user role). Finally, only Apple manufactures and distributes the iPhone (platform provider role) and Apple is solely responsible for the iPhone’s technology (platform sponsor role) 
Between these extremes, we find platforms that mix open and closed roles in different patterns (see figure above). For instance, Microsoft’s Windows platform is closed at the sponsor level but open with respect to other roles. Apple’s Macintosh platform is closed at the sponsor and provider levels but open with respect to both user roles. Since all of the platforms in the figure are successful, it should be clear that without careful definitions, we cannot make general statements about the attractiveness of open versus closed platform strategies—notwithstanding enthusiasm about the profusion of open source software and content created in collaborative communities like Wikipedia’s.

Sunday, December 6, 2009


Last week, one of my students shared the pitch deck for his startup. His ideas were great – he’d come a long way in a couple of months – but I was also struck by the quality of his presentation. The text was sparse, the fonts and colors were attractive, and the design was simple and elegant without drawing attention to itself. I was surprised, because most of my students — trained at consulting firms and investment banks before arriving at Harvard Business School — produce over-complicated and unappealing PowerPoint decks. Unfortunately, at HBS, we teach our students nothing about how to create and deliver a great presentation.

I said, “You did this on Keynote, right?” He acknowledged using Apple’s presentation software. I said, “This is very good, but you can make it even better. Track down the presentation that Matthew Prince and Michelle Zatlyn delivered when their startup, CloudFlare, won last year’s HBS Business Plan Contest. It’s the best I’ve ever seen, and I think it was a big factor behind their success. You can learn from it.”

Matthew shared the presentation, along with some good advice. Here’s his email to my student:

I've attached the printed version of our Business Plan Contest presentation. This is the version that judges had in their hands while we presented. It is a reflection of, but different than, what we actually projected on the big screen while we talked. A few points:

1. The presentation itself is important, but energy and comfort are the real keys. What I think really came across in our presentation for the Business Plan Contest was that Michelle and I were having fun, we were comfortable public speakers, and we had a real enthusiasm for what we were doing. Great slides help, but they can’t replace these crucial ingredients.

2. Recognize that the printed page and projected screen are different media and should be treated as such. For our presentation for the Business Plan Contest we only had 20 slides in the printed version and maybe 60+ in the projected version. For example, the printed deck may have a list with 6 bullet points where the projected version would have a slide for each bullet. While not everyone will agree, for a projected presentation to an audience, I'm a big believer in a lot of slides, with little content on each slide, big fonts, and the whole thing rolling by almost as fast as I can advance my remote. If I use transitions at all, I turn down their play time to a fraction of a second — significantly below the default. I think this all helps ramp up the energy and excitement levels.

3. You want your audience watching you, not your slides. Your presentation is what you’re saying, your slides are there to help emphasize the key points and make sure your audience is following you. For example, my favorite slides often have one word on them, like "MARKET." They serve primarily as a cue to you and your audience as to what’s coming next. Slides should never be so complicated that someone is squinting to decipher them. Instead, they should serve as chapter headings to help the audience focus on what you're saying.

4. PowerPoint makes ugly presentations. Period. If you want great slides get a Mac and buy Keynote. We actually had a VC at the Business Plan Contest say, "Well, I'm not sure about the business, but I'm 100% convinced that I need to get a Mac before I ever do another presentation." At CloudFlare we use PowerPoint for things that will primarily be printed. Anything that’s going to be displayed on a screen to an audience of more than 6 people we build in Keynote.

5. Use the technology to look smooth. For example, both Keynote and Powerpoint let the display on your laptop — but not on the main screen — show both the slide you're on and what’s coming next. I’m amazed that everyone doesn’t use this because it is so helpful. Being able to see what is next up and talk to a transition that makes sense really helps the flow. It helps you look extremely practiced even when you just finished the presentation a few second before you’re giving it.

6. Watch great presenters, especially great product demos, TED talks, and Steve Jobs's keynotes. I like this Larry Lessig talk on copyright:


In that video you don't see Larry speaking but you do see how he uses very simple slides to help signpost the complicated concepts he’s talking about. What you don't see are any bullet-point lists with tons of text.

7. Finally, know your audience and be careful about going too far. You can take this advice and put together a terrible presentation that will come across as gimmicky. For example, while I think the Lessig talk linked to above is great, I watched him give it at a highly technical conference where it just didn’t work. The audience grumbled about how thin the slides were and how the talk contained almost no real information. A presentation has got to be aware of its purpose, which is defined by its audience, and it must clearly serve that purpose. It has to feel comfortable. And, most of all, you have to feel really comfortable when you're giving it.

Good luck!

I’m no expert in this area — I have a lot to learn myself about designing and delivering presentations. Books that have proved helpful include Presentation Zen by Garr Reynolds, Art of the Start by Guy Kawasaki, and Confessions of a Public Speaker by Scott Berkun. I hope that readers will share other recommendations.

Addendum, Dec. 23: Phil Michaelson, founder/CEO of KartMe offers a terrific set of pitch tips. He makes the case for presenting without Powerpoint and building energy by featuring the product.

Jan 3: Carmine Gallo's slide show on the Presentation Secrets of Steve Jobs is also superb.

Wednesday, November 25, 2009

A Compilation of the Web's Best Advice for Entrepreneurs

Below, I link to blog posts and other online resources that offer advice for entrepreneurs. My selections are tailored for consumer Internet startups, but should be helpful to teams in other sectors. There’s a lot of information here, so don’t try to digest everything in one session. I'll update this post periodically (and mark additional links as NEW), so please share suggestions via comments, email, or Twitter.

Key Factors for Startup Success

Personal Motivations and the Entrepreneurial Lifestyle

Startup Management Practices
Team Issues
Startup Marketing

Product Development
Other Resources
  • The HBS Rock Center has compiled a list of resources for entrepreneurs on a range of topics, including developing a business plan, fundraising, legal issues, finding a team, etc.
  • The Stanford Technology Ventures Program has a terrific library of audio and video podcasts of presentations by entrepreneurs and venture capitalists
  • Jason Calacanis hosts the weekly podcast, This Week in Startups, which features interviews with entrepreneurs and VCs
  • List of monthly "Starting Up" columns from Boston Business Journal covering many of topics above by Joseph Hadzima of MIT Sloan School and Main Street Partners (NEW 11/30)
  • Podcasts with entrepreneurs and VCs from Highland Capital (NEW 12/1)

Friday, April 17, 2009

Thoughts About Twitter

Two observations from today's class discussion in Competing With Social Networks seemed especially important for understanding Twitter's future:
  1. The service has an exceptionally high abandonment rate.
  2. Twitter's network is comprised of asymmetrical ties, i.e., those followed need not reciprocate.
The question is: To what extent does #2 explain #1?

Before tackling that question, it's worth noting that high abandonment rates are common with buzz-fueled, fast-growing social networking services. CSN Prof. Misiek Piskorski pointed out in class that 40% of Facebook profiles are barren. In Second Life, 90% of new users abandon their avatars after just a few hours. Second Life faces two barriers to retaining users: fiendishly complex and crash-prone software that takes weeks to master, plus a big "what's this for?" problem. By comparison, Twitter is very easy to use, yet its abandonment rate is still very high. In Managing Networked Businesses this week, a class guest suggested that Twitter's abandonment rate may be as high as 98%!

In CSN, the class advanced a hypothesis that Twitter's low engagement levels might be explained by:
  1. A "howling at the moon" problem. There's little incentive to produce content if no-one is listening. Twitter's asymmetric tie structure exacerbates this problem. Some users are happy to produce with no audience, but most fail to see the point, so they quickly abandon their account.
  2. Twitter's lean, text-only format. Expressing yourself in 140 characters, without photos, etc. was held to be intimidating or at least in some way unsatisfying for many users.
I don't buy the second point. The mass market is very comfortable with IM and SMS, which typically display only short text messages.

With respect to the first point, is a new user's difficulty finding followers: a) a temporary problem that will fade as the service grows and improves friend search tools? or b) a permanent problem endemic to a service with asymmetric ties? I favor the first hypothesis. Twitter will soon have a few million loyal users comprised of the digerati/social media elite/SXSW crowd; self-anointed prophets without followers who like to howl at the moon; and celebrity fans. After it reaches a threshold scale, mass market users should be able to sign up and find some real world friends/colleagues/acquaintances who'll follow them.

If my hypothesis is correct, there are still questions about how Twitter will manage the conflicts it is likely to encounter as the service evolves:
  1. Can two fundamentally different modes of use — one-way broadcast by celebrities/gurus vs. one- and two-way communications between real world friends — continue to coexist on the same site? Technically, yes: you can follow Ashton and Oprah and Leo Laporte, and never post; I can post frequently for friends and fill my feed with @replies; others may use Twitter in both ways. But will the service ever have a coherent brand identity if it continues to accommodate both usage modes? That's a very tricky marketing problem. If I had to bet, communication between friends will gradually overwhelm celebrity micro-blogging.
  2. How will Twitter handle the inevitable tension between early and late adopters? Newbies always cause friction in social networking services because they do not understand community norms. In addressing this conflict, the asymmetry of network ties should be a benefit for Twitter: Ms. SXWS need never follow Mr. Hoi Polloi, although she may need to contend with some annoying @replies that he generates. On the other hand, Twitter will be unusually vulnerable to spam problems due to asymmetric ties and the ease with which bots can auto-search and @reply to public conversations.
  3. How will Twitter handle the blurring of social context that occurs when users co-mingle personal and professional relationships? Misiek suggested that Twitter might offer a very effective way for co-workers to coordinate and communication. This rings true, but mixing social and business relationships with a single account is a high maintenance task, as we are learning from Facebook. Users could maintain two accounts, or Twitter could support filtering for groups, but this takes more work on the part of the user.
  4. How will monetization strategies impact value perceived by the community? Daniel Palestrant, founder/CEO of Sermo, an online professional network for physicians, contends that almost online communities eventually 'arc,' that is, grow rapidly then decline, often because they introduce a revenue model in conflict with the community's preferences. Example: Facebook cluttering the site with distracting, low-CPM ads or using profile/behavioral data to target ads in creepy ways. How will Twitter handle this challenge?