Disintermediation - Getting Rid of the Middle Man

The new Internet economy is all about getting rid of the middle man. Part of it is about eliminating information asymmetry, so that all parties in the transactions have equal grounds, like real-estate sales (Zillow) and car sales (TrueCar) eliminating the privileged information withheld by the sales agents. Part of it is about providing an efficient virtual market place where buyers and sellers can mingle with minimal friction (Ebay). And yet other part of it is about new technological innovations enabling novel distribution mechanisms previously unthinkable (BlockChain).

Here are a few more examples that either have happened since the dawn of the Internet age, or emerging as new and powerful disruptive forces. 

• Newspapers - Middle man that edits and disseminates noteworthy information, now partially eliminated by Twitter and Bloggers (Huffington Post).
• Book publishers - Middle man that selects and distributes original writing from otherwise unknown authors, now partially replaced by self-publishing houses Lulu and Amazon Kindle.
• Taxi - Middle man that employs drivers to transport people, now threatened by Uber that connects drivers and passengers directly. 
• Hotels - Middle man that manages empty rooms to host travelers, now partially replaced by Airbnb that connects unused room owners with travelers directly.
• Schools - Middle man that employs teachers to educate students, now threatened by online P2P education services like Coursera and MIT Open Course Ware, which connects people desired to learn with teachers and knowledges.
• Cable TV - Middle man that licenses video entertainment and redistributes to consumers, now threatened by both new distribution technologies (IP streaming) and bundling business models from Netflix, as well as original content owners starting to serve consumers directly as streaming technologies mature, such as HBO, CBS, Univision, NBA Sports and Starz.
• Banks - Middle man that makes a living by collecting deposits from people that have extra to save and lending it to people who needs cash, now threatened by peer-to-peer lending such as Lending Club, peer-to-peer payment Paypal, and crowd funding Kick Starter.
• Credit card - Middle man that runs proprietary payment networks and charges on-average 3% transaction fees for the convenience of money transaction between consumers and merchants who want to avoid cash handling, now threatened by decentralized payment network Block Chain, and its virtual currency BitCoin.
• Notary Service - Middle man who is authorized to perform numerous legal formalities and record keeping, now threatened by distributed Blockchain ledger and services like Proof of Existence.

So if you want ideas for starting up a new company, think about how you can eliminate the middle man, or any middle man.


image credit Ahmad Nawawi

Note on Berger's Contagious - Why Things Catch On

The biggest insight was, influencers and mavens are not the only means to make an idea catch fire. The idea itself has to be sticky, already alluded to by Malcome Gladwell but never never elaborated in his "Tipping Point". 

Bergers gave six STEPPS approach to make an idea stick, which I think was simple, insightful, actionable. 

Social currency

give people something to brag about;

Trigger

associate your idea with everyday life, top of mind is tip of tong;

Emotions

with a strong feeling you can't resist talking;

Publicity

if it can't be seen, it can't be talked about;

Practicality

people like to help each other out;

Story

details get left out but a good story survives word of mouth.

Many anecdotes and research results were included in the book. Albeit small inconsistencies, they back up the overall thesis for the most part. Enjoyed the book.

Develop An Idea Into Fundable Business

Every business starts with an idea. Not every idea turns into a business.

The purpose is to filter, refine and develop ideas into a fundable business. Apparently, many people have spent time thinking about this. Evan Williams article "Will it Fly" is a useful one to start. The following is the methodology I will embark for that purpose.

1. Passion

It's going to be a tough journey. You may as well do something that you care deeply about. I believe that education enables and enriches people; thus education changes lives. People change the world; thus education changes the world. I am going to stick to that.

2. Market

The biggest market, or rather the biggest potential impact in education is where the most people are. That is clearly China. Just English language training itself is projected to reach $13.6 Billion dollars in 2014.

3. Making money

Sustained impact comes from sustainable growth. Sustainable growth requires valid, proven business model, where added value per users is larger than average acquisition cost per user. Unless incoming traffic is astronomically high, advertising is not going to be the solution. It needs to be one of transaction, subscription, or lead generation.

4. Validation

The idea needs to be validated, i.e. there is some dude, who you can name and locate, actually willing to reach the wallet to get some version of your product offering. Find the dude and offer him "a solution". A great example, which was used 10 years ago for Zappos was, to just take pictures of shoes from other people's stores and offer them online.

5. Secret sause

Is it possible to build one aspect of the solution exceptionally well so that nobody can compete with. It must be a dimension that real customers actually care about.

6. Scalability

How difficult to scale the operation, hardware cost, salesforce build up, customer support team?

The ideas will be going through this methodology, filtered, refined, and developed. The eventual results will be published in a later post.

Founder Institute Learning: Team Work and life

I was excited to enroll the Founder Institute Silicon Valley Summer semester. Only a couple of days into the program, I already feel learning a ton.

Everyone dies if the team die

Everyone knows the importance of a team, complementary skills and all that, but only when you experience a live or die situation do you realize what it truly means for a team to band together.

I was a few minutes late to show up at the second session, and looking forward to the next few hours of adventures, only to be greeted, "Why do you show up here? You dropped out!". I was stunned, "What the ...?" I realized later that, only 30 minutes earlier, some sophisticated issues triggered an email to Adeo indicating that a member on my founding team is dropping out, and that caused me to drop out as well immediately after. I hassled in the next hour or so trying reach my team with emails, phone calls, whatever communication channel I could get my hands on, and eventually we reached an agreement. This program is important for us and for the company, and we need to do whatever it takes together to stay in.

The environment is brutal out there. Unless everyone holds up, the whole team sinks. You may still die even if you had done everything right yourself.


Paying a price for screwing up

Life is unfair sometimes, but it's brutally fair in business. Whatever you screw up will come back and you have to make up for it. No short cuts. No second chance. Learn from mistakes but never repeat a mistake.

We were hoping to negociate our way back in, but it seems clear that we have to give a one-minute pitch on the spot. If the average score is 2.5 or above, we stay, otherwise, we're out. We'd better put our act together.


Live or die in one minute

You have to deliver under huge pressure. Just one minute, any mistake in execution and you die. That's life.

I delivered. Even nurvous as hell, I managed to cover the essential elements of a good business idea and convinced the three mentors that it's a 3+ pitch. We stay.

It turned out that a little bit of luck does strike, only when you expect it the least. At the Zuckerburg Bar after the session, my team member struck a genius idea, i.e. asking Adeo to credit the 3-score pitch to the team, even though I was not "officially in" the program when I delivered the pitch. Adeo decided to flip a coin, and I called Head, and it was Head. Cheers, team!

Only a beginning. More adventures to come.

North-America Chinese Professional Business Plan Competition

The UCAHP Chinese professional business plan competition was held on Jan. 9th. 20 startup teams, selected among more than 100 submissions, presented their ideas and business plan, in front of judge panel consisting of top-tier VC's and angel investors, such as Northern Light, GSR Ventures, West Summit Capital, NEA, Sierra Ventures, etc. 

Among the contenders, I was particularly impressed by the following teams. (the winning team can be found here at UCAHP).

• Zebra - multi-media storage and bandwidth optimization
• PalMap - indoor map for shopping complex and convention centers
• BCBM - converting low-value coal into natural gas
• Clean Solar - Titanium dioxide solar power panel
• HealO - wound care chamber treatment

What I observed and learned was that two types of ventures have higher probability of succeeding, or surviving:

1. Deep technology accumulation in solving a bottle-neck problem in an established market;
2. Creative user experience, or business model, that acquires user base rapidly in a fast growing new market;

In both cases, business operation is as important as technology, in terms of sales channel establishment, average cost of per customer acquisition, and brand building. It all depends on the founding team, and a bit of luck.

The Perfect Pitch - Biz Idea In 140 Characters

The business idea competition on Twitter hosted by @perfectbusiness completed. I covered this in an earlier post about what to do with your startup ideas.

Thousands of idea was Twitted in the short period of time, many of which are extraordinarily bright ideas. The final winner was indeed an excellent one, quoted here:

@perfectbusiness #micropitch Power from water: turbines safe for fish, drop-in w/no dams, 1M+ sites, helps 1B+ people www.hydrovolts.com

My idea 28 on mobile route sharing and smart calpooling was featured in the top 10 runner up. The full list is here.

Thank you @perfectbusiness! This gives me enough confidence to pursue the idea further and continue this blog with even better ideas.

image credit Sir Richard Branson & PerfectBusiness

Entrepreneurs: Be An Enabler

Having a brilliant idea is still far from real entrepreneurship; striving to provide real value to real customers is.

One efficient way to do that is to be an enabler, an enabler in technology, relationship management, customer service, supply chain, or whatever area that is critical for your customers to do their business.

1. Develop a process, or as people in academia like to call, methodology.

It's better to know a whole lot about one thing, than a little bit of everything. Any Ph. D. graduate will tell you that a methodology with good theory can save a lot of hard work. Be an expert. Use the expertise to invent new ways of doing things, selling staff, or managing operations, not just a little better, but 10 times or 100 times better than the ordinary.

Sometimes, it requires a few genius minds to work things out. Just check the TED talks for some mind blowing new inventions, like the wireless power transmission; or the processor with order of magnitude less power consumption from PA Semi (accquired by Apple).

Other times, it's just a bag of accumulated tips and tricks. John Chow, like other probloggers, has developed a system of how to make a living through blogging, and enjoys a good life style teaching others doing the same.

2. Develop an algorithm to automate the process.

Don't stop at the methodology. Automate it. Turn it on and forget it, if you can.

Google is a great example of process automation. You hardly need to talk to a real person when dealing with Google services. It uses algorithms to figure out where the hotspots on the web-sphere are; uses algorithms to match buyers and sellers through keywords; uses algorithms to pull and push information to just about every corner of the web.

The electronic design automation (EDA) industry itself is enabling semiconductor design companies to tape out their chips faster, cheaper, with better quality. It emerged from simple drawing tools like magic and zero revenue in the early 80's, to now a $4 billion industry (estimate).

3. Duplicate the process.

With a methodology and automated process, all that's left is to enable everyone to do the same, so the entire world runs more efficiently. There goes your entrepreneurship dream and global impact.


Just some thoughts. If you liked it, good, subscribe the newsletter for more exciting updates; otherwise, let me know and let's start a conversation.

image credit estherase

How To Generate New Ideas - Part 1

In this intriguing video presentation at MIT, Prof. Patrick Winston summarizes his recent research work on how to make computer smarter by developing algorithms to learn basic reasoning and associations, which he call "common senses".

The key insight is that creative thinking process of us humans, is not a linear progression of words or ideas, but rather a complex combination of images, languages, symbols, dialogues, and interactive feedbacks.

He summarizes four things to do in order to become smarter, which I agree and think are also the key points in coming up with creative new ideas.

1. Take notes - The act of taking notes forces us to reason about the thought, and use the logic of language to formalize the thought. With an iPhone in my pocket, it is now easier than ever for me to take notes anywhere, any time.

2. Draw pictures - We think with images. Even with things we have never experienced, we use our imagination to picturize sequences of images, no matter how blurry they might be.

3. Talk and imagine - We learn by talking. There are certain logic reasoning skills we acquire in our childhood only after learning how to talk. Talking not just solicits feedback of your ideas from others, but yourself also.

4. Tell stories - Life consists of stories. Ideas are illustrated best with real-life stories.

The video is rather long, but worthwhile to go through. If you're pressed on time, then check out the conclusions section, at around 41 minutes into the presentation.

video source MIT world

Six Things To Do With Your Brilliant Startup Ideas

You've got a brilliant idea for startup. What do you do? Hopefully this article will give you some ideas.

Before we jump in, let's make a few things clear. First, search around and make sure someone else hasn't already done it, because the same old ideas do get picked up again and again. Martin Zwilling has more to say about these recycled ideas.

Next, you probably heard that you should not hide your ideas in the closet. Chris Dixon explains why in this excellent article from both an entrepreneur and investor's point of view.

Knowing that the market for ideas does not exist, you can not sell it. (If not convinced, Joshua Gans' research paper may give you some theoretical grounding.) The best thing to do is probably find a partner, start a company, and make the idea work. But before launching the effort, following are six things you might consider.

1. Cultivate you ideas with community support

The best ideas usually emerge after a few rounds of brain storming, iterations of prototyping and tuning. The concept of real-time search was latched on only after many people have used it and explored for a long time. So iteration is useful. Embarkons.com is a social network platform for people to share, cultivate, and tweak ideas. There's even a market place for mature ideas to eventually find funding and launch projects. In addition to finding feedback and getting insights from other peoples' ideas, you may find biz partners as well.

Similar sites include Ideablob.com and Ideazinger.com. Ideablob also has regular $10,000 challenge, which picks its winner based on user ratings. It would be a nice bonus if you win.

2. Get funding from the crowd

If you are in the mature stage of an idea and want to seek funding for launch, there are a few places to look without bothering a VC. Kickstarter.com has a very interesting "all or nothing" model. You may launch a campaign for a pledge of X amount within say 3 months. If enough people pledge, you get the deal, or else, you still receive plenty of feedback and encouragement.

Similar sites include Joel Yatscoff's crowd-funding of ideas.

Update: Open Fund wants to fund your startup ideas related to the web and other emerging technologies. The first call for applications is open until Sep. 30, 2009.

3. Get noticed with a big corporation idea

If your idea is more on the improvement of a big corp guy, you may try sharing it on an idea exchange site like innocentive.com or ideasxchange.com, and hope it gets picked up. Chances are slim though.

Or, if your ideas are specific, these smart companies have established channels just to tune in to you: Virgin's entrepreneur got a big idea campaign, Dell's idea storm, Starbucks my starbucks ideas. These guys are on the front-line of biz innovation.

4. Enter a biz-idea competition

I was amazed at how many such idea competitions are taking place at any given time. Most of them are local though. One of a recent buzz was put forward by perfectbusiness.com, who invited Sir Richard Branson to review micro-business ideas on Twitter, each under 140 character limit. All you need to do is tweet your idea in reply to @perfectbusiness with hashtag #micropitch, to get a chance to win a $2500 trip to L.A. for further elaboration of your idea. A really neat idea by itself!

If you're into B2B selling, then take a look at another ongoing $10,000 startup idea challenge launched by Chinese Alibaba.com.

5. Have some fun with impractical ideas which you'll never implement

Ideas come and go. Some are witty, funny, intriguing, yet you just don't know how practical it is, then come to halfbakery.com. As the creator put it, it's a communal database of poorly thought-out ideas for inventions. Quite a lot of interesting people hanging out there, and once in a while, there is something truly unique pop up.

A good site almost always has a clone. For halfbakery, it's whynot.net.

6. Twitter.com

Well, if after exhausting all of above, you still don't know what to do with your brilliant, original, world-changing idea, then just tweet it on Twitter.com, and tweet it again. Search people from the keywords in your ideas and tweet them. Good things will happen.


That concludes my short summary of things to do with your brilliant startup ideas. Hope you found this useful. If you find any other ideas on ideas, please, do contact me and let me know. Thanks.

image credit Cayusa