Nine Things that You Can Do for the First Time In Recorded HistoryBecause of the Internet

Prepared for: IEEE/IET (Ottawa) Date: Nov. 18, 2010

Professor Bruce M. Firestone, B. Eng. (Civil), M. Eng-Sci., PhD.; Entrepreneur-in-Residence, Telfer School of Management, University of Ottawa; Founder, Ottawa Senators; Executive Director, Exploriem.org; Real Estate and Mortgage Broker, Partners Advantage GMAC Real Estate

http://twitter.com/ProfBruce http://www.eqjournal.org

Nine Things that You Can Do for the First Time In Recorded History For 10,000 years humans have been trading on this

planet But they’ve been trapped between choices:

a. Artisans (Suits of Armour/Consultants)

b. Mass producers (Henry Ford: “You can have any colour of car you want as long as its black.”)

-The Internet is the most important new invention of the last 40 years

-It is where electrification was at same stage, 20 yrs in

Nine Things that You Can Do for the First Time In Recorded History Now you can get custom outputs from standard inputs

Nine Things that You Can Do for the First Time In Recorded History Virtual home builder:

-Tried in 2000 to get home builders to do this-Very conservative industry-Put lots available and designs online in a physics engine

together w/ all options/finishes/lots/designs-Allow everyone to use physics engine-Can get virtually infinite customization from standard

inputs

Nine Things that You Can Do for the First Time In Recorded History -Go online: choose lot, design, fit-up, finishes (carpet, tile,

kitchen cabinets, lighting package, plumbing fixtures, etc.)

-Put cash register online too

-Consumer can see what granite or concrete counter tops add to cost

-Can fool around for 30+ hours

-Then hit “submit” button

Nine Things that You Can Do for the First Time In Recorded History -Homebuilders fear putting prices online – their competitors

might find out!

-Ever heard of “Secret Shoppers?”

-Put CPM (schedules) online: let customers see where their home is at and let suppliers see too when they’re needed for Footing and Foundation, framing, roofing, windows, electrical, plumbing, insulation, dry wall, paint, carpet, cabinets,…

Nine Things that You Can Do for the First Time In Recorded History -As more options are available, more users will visit the site, as more

users visit the site, more suppliers come onboard and you have a virtuous cycle

-Now “Best Homes 4 U” is enjoying network effects-Suddenly, the flow of cash could reverse direction w/ suppliers

becoming advertisers and sponsors

Nine Things that You Can Do for the First Time In Recorded History -Allow lawyers access for e-closings-Allow lenders access for e-funding-Now if your WS attracts 10,000s of visitors, you can get

your suppliers and your suppliers’ suppliers to pay for ads so more people will buy higher-end products (chandeliers, beveled mirrors, granite, counter tops, home theatre,…)

-More options => more people => more options => more people…

Nine Things that You Can Do for the First Time In Recorded History -In a virtuous, self-reinforcing cycle (Google is also an

example of Network Effects)-30+ hours in Design Centre with clients can become just

60 minutes-Imagine the productivity increase for homebuilder sales

staff, lawyers, mortgage lenders, the GC, the foreman (Worst problem? Homebuyer questions about when this or that happens..), suppliers, trades, subs, …

Nine Things that You Can Do for the First Time In Recorded History Also, customer satisfaction increases since:

a) they get EXACTLY what they want,

b) they feel they had a hand-in its creation (like Aunt Jemima Pancake Mix: just add eggs and milk).

Nine Things that You Can Do for the First Time In Recorded History The folks who bring you this pancake mix famously had

an erroneous insight years ago—they thought that by adding powdered eggs and milk to their mix and eliminating the instructions “Just add eggs and milk”, they could save the busy consumer time and sell more product.

It turned out that homemakers liked adding ‘real’ eggs and milk: first, they thought it was healthier that powdered eggs and milk and, second, they wanted to be involved in ‘making’ their kids’ breakfasts.

Nine Things that You Can Do for the First Time In Recorded History

For most kids, you are what you do for them. By taking this away, sales went down not up.

Best Homes 4 U, by involving the consumer in the design of their own home, are catering to a deep seated need in humans to ‘buy-in’.

Nine Things that You Can Do for the First Time In Recorded History So what are those nine things?

1. Create custom outputs from standard inputs/mass customize products and services. (http://www.dramatispersonae.org/CustomeOutputsFromStandardInputs.htm)

2. Reverse out the work to clients and suppliers. (http://www.dramatispersonae.org/GTBR/GettingTheBusinessModelRight.htm)

3. Embed your enterprise in a networked business ecosystem made up of your clients, your suppliers and yourself plus your clients’ clients and suppliers’ suppliers. (http://www.eqjournalblog.com/?p=581)

4. Match making—directly connecting your clients to your suppliers making service industries scalable for the first time ever.(http://www.dramatispersonae.org/TheInternetIsEatingAHoleInTheGlobalEconomy.htm)

Nine Things that You Can Do for the First Time In Recorded History 5. Mass communicate planet-wide through social media and other

Internet tools at almost no cost (http://www.dramatispersonae.org/EntrepreneurialistCulture/FutureVision.htm)

6. Crowd sourcing (using the Internet as intermediary) means relying on the wisdom of the crowd to, for example, pick and vote on stories for Digg.com or t-shirt designs for Threadless.com (http://www.eqjournalblog.com/?p=1541)

7. Relational data base allows you to mine your customer (or supplier) interactions so you can ask, if you are Amazon (for example) questions such as: “Would you like to see what other people who bought this book (CD, video, etc.) also bought?” Increases average order size and volume of sales (http://www.eqjournalblog.com/?p=1541)

Nine Things that You Can Do for the First Time In Recorded History 8. User generated content, a form of reversing out the work to

customers or suppliers, underpins the business models of YouTube.com, Reddit.com, Threadless.com, Facebook, Twitter, Digg and many other Web 3.0 enterprises. (http://www.eqjournalblog.com/?p=1541)

9. Network effects are created when, for example, a virtual homebuilder’s website becomes the go-to place for design options a client can choose from. As more visitors use the physics engine of the site to calculate what the costs are for their new home and all selected options, more suppliers of household goods (kitchen cabinets, plumbing fixtures, lighting packages, counter tops, tile, carpet, home theatre, etc.) will want to be on the site (and pay to be on the site) which will encourage yet more visitors (i.e., prospective homebuyers) to use it in a virtuous cycle, each reinforcing the other. Google is an example of this effect as well. (http://www.eqjournalblog.com/?p=692)

Nine Things that You Can Do for the First Time In Recorded History Reverse out the work to clients and suppliers

-GradeATechs.com reverses out the work to its suppliers and clients

-match making is key

-GASnet is the “brain” of the biz, its back end system (matches techies to clients, contract billing, orders, supplies, software, hardware)

Nine Things that You Can Do for the First Time In Recorded History Embed your enterprise in a networked

business ecosystem made up of your clients, your suppliers and yourself plus your clients’ clients and suppliers’ suppliers (2-D, 3-D, …)

-Example– the Spa

-Who are your clients? Mostly females

-Who are the clients of your clients? Mostly men

-What do they want?

Nine Things that You Can Do for the First Time In Recorded History Gift certificates! Sold $250,000 the first year 1-year to redeem $80,000 not redeemed 46 weeks later $60,000 never redeemed Money for nothing! See these relationships by examining the

ecosystem

Nine Things that You Can Do for the First Time In Recorded History Who are the spas suppliers? Manicurists/pedicurists/hairstylists/colorists/

massage therapists/facials/dieticians/yoga instructors

Who are the suppliers to your suppliers? Cutting tools, hair and makeup products,

massage oils, jewelry, perfumes, etc. Can the direction of money reverse instead of

from you to your suppliers or suppliers’ suppliers from them to you?

Nine Things that You Can Do for the First Time In Recorded History Yes! If you buy enough volume, they will pay you

volume bonuses at year-end Plus send your suppliers (formerly called

employees) on course and on junkets

Nine Things that You Can Do for the First Time In Recorded History Your customers pay you, right? Maybe there are times when you might pay

them Huh? Would you pay a local celebrity to come to your

Spa and promote her experience to her followers?

Sure, you would

Nine Things that You Can Do for the First Time In Recorded History Mass communicate planet-wide through

social media and other Internet tools at almost no cost

Are you on Twitter? If not, why not? Imagine if the Internet was where it is today

when I was 28? Imagine having 500, 5,000, 50,000,

5,000,000 followers on Twitter And it’s FREE (www.Twitter.com/ProfBruce)

Nine Things that You Can Do for the First Time In Recorded History Crowd sourcing (using the Internet as

intermediary) means harnessing the wisdom of the crowd

But it’s more subtle than you might think Their use of their relational d-base saved

Amazon: “Would you like to see what other people who bought this book/CD/video/etc also bought?”

Increased order size, overall volume and profitability

Nine Things that You Can Do for the First Time In Recorded History Threadless.com: their community uses a voting

system to select winning designs for Tees submitted by independent artists

Extensive social comment on whole process More recently, other companies such as Dell and

Alpargatas use (and pay to use) Threadless’ voting system and community to select winning entries for the design of PC covers and sandals.

-Here is Threadless’ Biz Model, circa 2010:

Nine Things that You Can Do for the First Time In Recorded History Threadless.com is reversing out the work to

suppliers (for the design of their Tees) and to customers (to select which products will be put into production)

It is also harnessing the wisdom of the crowd (through their voting system)

It is also treating their biz model as a platform Even some of their supply costs (for design

services) could turn into negative costs if artists pay them to feature their work on Threadless.com

Nine Things that You Can Do for the First Time In Recorded History In the modern economy, the answer to the

question of ‘Who pays whom?’ isn’t always obvious.

Should a cable company pay ABC because ABC has content, shows like Diane Sawyer and Primetime News?

Or should ABC pay the cable company because it has the feed and access into millions of homes?

Nine Things that You Can Do for the First Time In Recorded History Steve Jobs understood the importance of

this before he launched the iPhone He insisted that AT&T give him a share of

its subscriber revenues– never before granted

He used Apple’s brand to leverage unprecedented concessions from AT&T

AT&T feared losing exclusivity to Verizon

Nine Things that You Can Do for the First Time In Recorded History Jobs told AT&T he ‘might’ give them a share of

app revenues. So he revolutionized yet another industry’s biz

model Cell phone manufacturers went from selling a

’shrink wrapped’ gadget for a one-time payment in a brutally competitive market that was racing to the bottom to an industry with multiple sources of revenues, some of which are recurring: the holy grail of techdom.

Nine Things that You Can Do for the First Time In Recorded History Imagine how much harder Steve Jobs and Apple would have to

work and how much lower their productivity as measured in revenue per employee would be without recurring revenues from iPhone app sales and revenues, advertising revenues on their mobile platform, downloads of paid content from iTunes and a share of their carriers’ subscriber fees in addition to revenues from the sale of the gadget itself?

From a simple question and a tweaking of their business model flowed great benefits. The harder they work, the more money they make and, in Apple’s case, this relationship has become geometric.

Nine Things that You Can Do for the First Time In Recorded History Business models are powerful weapons in

the fight for market share and profitability Intricating the Internet into your Business

Models is crucial too Just as important for

Intrapreneurs/NGOs/Charities/Non-Profits as for Entrepreneurs

BUT YOU ALSO NEED TO BE ABLE TO EXECUTE!

Nine Things that You Can Do for the First Time In Recorded History How did we win a NHL franchise v. Seattle, Portland, Hamilton,

Milwaukee, Tampa, St. Petersburg, Houston? Only 21 voters and President of NHL Political Campaign Person to person, F2F meetings Sell Ottawa and us to the NHL Ste your goals then execute, expertly 120 people including Ottawa Fire Department Marching Band

in Palm Beach Use humour Bumper stickers (taxis, hotels, airport) “Bring Back the

Senators” Hard work

Nine Things that You Can Do for the First Time In Recorded History Last thing they saw before making their

decision? Bruce’s Happy Face Night before: “You will never, ever, ever get a

franchise in… Ottawa” Norm Green Keep working/Phil Esposito Unanimous vote 21-0 3 weeks later, a surprising phone call … THANK YOU.