According the AFL-CIO, the average Fortune 500 CEO made $12.9 million in 2011. After taxes, that's about $430,000 per month -- or $198,000 every two weeks. CEOs at big companies get paid a lot of money -- and my sense is that the top priority for most of them is to do whatever they can to keep those checks coming.
That's an important thing to remember the next time you're asking one of them to take a big risk on your product.
Over the holidays I watched the movie Margin Call (for the second time).
The movie is a fictional depiction of an investment bank crumbling during the 2008 financial crisis (it was likely inspired by the real life Bear Stearns or Lehman Brothers). The story revolves around a brilliant, young analyst in the company's risk management group. One night he discovers that the company has over-leveraged itself through an over-investment in synthetic CDOs and MBSs. Throughout the night and into the early morning the analyst's discovery makes its way to the highest levels of the company. The movie is a depiction of how the company handles the crisis.
Margin Call is a phenomenal movie. It's brilliantly acted by some excellent actors (Kevin Spacey, Jeremy Irons, Stanley Tucci, Zachary Quinto, Simon Baker and Demi Moore to name a few). And the suspense around watching management learn what has happened and how they handle it elegantly depicts what were probably real events inside many investment banks at the time. The more senior you were, the less likely you were to understand the financial mechanics behind the crisis.
In what is probably the best scene of the movie, the young analyst (played by Zachary Quinto) is asked to explain what he has discovered to the CEO of the company (played powerfully by Jeremy Irons). Irons' character says to him:
Maybe you could tell me what is going on. And please, speak as you might to a young child. Or a golden retriever. It wasn't brains that brought me here; I assure you that.
That line just about sums up much of the cause of the financial crisis of the late 2000s. The people on the ground were packaging and selling a product that management at our largest and most reputable financial institutions did not -- and could not -- understand.
If you haven't seen it yet, I highly recommend renting Margin Call.
You may have noticed that I’ve redesigned my website. I decided to move to this new theme (the Ari theme) for a few reasons.
I’m pretty happy with the change, I hope you like it.
Last month marked the fifth year that I've been writing on this blog. As I did last year, I thought I'd post a graph showing the number of posts I've written each month. I wrote 77 blog posts in 2012 (6.4 per month), the most since I started writing -- and the trendline shows that I'm definitely writing more over time, which is a good thing.
One of the challenges I've had with writing more frequently is that I'm always concerned that the quality of the posts will suffer. I'm going to try to worry a little less about that this year and plan to commit to writing 15 posts per month. That's a big increase over last year -- we'll see how I do.
Google Health, the self-managed patient portal that launched back in 2008, shut down on December 31st. According to Google's blog post, they made the move due to a lack of user adoption:
Now, with a few years of experience, we’ve observed that Google Health is not having the broad impact that we hoped it would. There has been adoption among certain groups of users like tech-savvy patients and their caregivers, and more recently fitness and wellness enthusiasts. But we haven’t found a way to translate that limited usage into widespread adoption in the daily health routines of millions of people.
Google Health faced the same challenge that EHR (electronic health records) faced in driving adoption among physicians: everyone sees the long term benefit of getting patient information online, but in the short term, it's a lot of work.
In order to drive wide-ranging engagement and adoption of a self-managed patient portal like Google Health, there has to be an instant piece of value in return for the patient's time and effort. That value can be money, time savings, or some other functional piece of value -- the greater the value, the greater the adoption. Case in point: EHR adoption finally picked up after the government provided high value, short term financial incentives to physicians that reached an acceptable rate of usage.
Because Google didn't offer some kind of immediate, tangible benefit to their users they weren't able to drive the wide-ranging adoption they expected. It may sound a bit simplistic to claim that companies have to offer some kind of tangible reward to drive real adoption of a patient portal. But in some cases, it really is that simple.
2012 was a super busy year for me that included lots of big changes. I thought I'd take a few minutes to capture some of the more notable events of the year. January was moving month. After five years of living on 22nd street in NYC, I moved one block up and two blocks over to the Flatiron neighborhood. I'm glad I made the move; I'm in a much nicer building with a doorman, a concierge, a couple of game rooms and -- most important -- a great roof-deck.
February was a difficult month. In the afternoon, on Wednesday the 8th, my father passed away. It was a very difficult time for my entire family. But the funeral was a wonderful tribute to his life and I'm proud to say that we sent him out in style. There was a great obituary chronicling much of his life in all the local papers and the funeral drew a large group of family, friends and former colleagues. It included a military funeral ceremony followed by a wonderful reception where we laughed, cried and remembered his life and accomplishments. I know it was exactly what he would have wanted.
February was also the month that I made the difficult decision to resign from Next Jump (after being there for there for more than five great years) to pursue an awesome opportunity with a healthcare technology start-up.
March brought some free time as I took a few weeks off before starting with the new company. Early in the month, I took a trip out west. I flew to California and stayed with a friend in Hermosa Beach for a couple of days, then drove to Carmel, Big Sur, San Francisco and ended the trip with three great days of snowboarding in Lake Tahoe before flying back to New York. It was an awesome trip and just what I needed to recharge before starting the new job. Towards the end of the month, I also caught a Celtics game with my Mom and made a quick trip down to Fort Lauderdale for work.
April was a complete blur with the start of my softball season, a bunch of work travel, a bachelor party in Las Vegas and a wedding in Miami.
May included a busy streak of client meetings – I spent nights in Boston, Philadelphia, Baltimore, Washington DC and Chicago. I also closed my first big strategic partnership at work. And along the way I found some time to catch a great Reckless Kelly concert at the 9:30 Club in DC.
June was a fun summer month. I played a bunch of softball, caught a Red Sox game at Fenway, saw a Felice Brothers concert in Brooklyn and took my first trip to Coney Island.
July was pretty busy. I made a three day trip out to Minneapolis for work. I got to explore the town quite a bit and catch a Twins game. Though the highlight of July was my friend's wedding in Los Angeles. They picked a great spot in Redondo Beach overlooking the Pacific. Here's a shot of some friends and I before the fun started.
August was another busy month with lots of travel. But the highlight was my brother bringing my sister-in-law and my niece up to Boston to celebrate his birthday. We spent a couple days showing my niece some of the Boston landmarks. And we took this shot at Samba Steak & Sushi House, a great Japanese Steakhouse just west of Boston.
September brought my first overnight sailing trip out on the Long Island Sound. I took this shot as the sun was setting. Great trip.
October brought hurricane Sandy to New York City. I captured some of my thoughts on the tragedy here. I made my first trip down to Nashville to accept my company's Best Place to Work award. And I made a trip back up to Boston to get away from the flooding and to catch an awesome Ryan Bingham concert at the Royale Nightclub. I took this shot of the Flatiron building in NYC the day the hurricane started. The streets were empty at rush hour that day, but nobody knew the devastation that was coming to the area at that point.
November was a crazy month. One of my writings was published on a popular healthcare blog. I caught a Patriots game and the Celtics home opener. I also made a trip out to Chicago for work. My Mom came down to NYC for Thanksgiving. I took a couple days off and we kept busy; we saw Lincoln and The Lion King musical, went to the top of the Empire State Building, had some great meals and visited the World Trade Center Memorial. Here's a photo of one of the waterfalls at the exhibit. Someone laid a rose over their friend's name.
December brought me back to Chicago for work and back to Boston to watch a miserable Patriots game in the pouring rain. The month was full of holiday parties. And I was recognized as the top performer on my team at my company's annual meeting. Though the highlight, of course, was spending a week down in Virginia with my family for Christmas.
I'm sure there's lots of good stuff that I'm leaving out, but I'll leave it there for now. 2012 was a good year...but I'm ready for 2013. Happy New Year everyone.
The other day I wrote about the fast growing b2e2b business model where enterprise software companies make their product available (often for free) to individual employees. Then – after those employees love the product – they put pressure on their employers to buy the premium version or to buy the product for the entire enterprise. While I believe that this model is going to continue to grow at an extremely fast pace in 2013, there is no doubt that it’s inefficient – i.e. the employee has to go through a bureaucratic purchasing department to buy a tool that will make them better at their jobs.
That’s why I believe that, as we see b2e2b grow, I think we’ll also see this inefficiency addressed. That is, we’ll start to see more budgetary control put in the hands of the individual employee. Many companies – even large companies – already give their employees a cell phone budget. I think we’ll see this kind of control flow down to other productivity tools as well to the point that budgets won't be bucketed by division or group or team -- we'll see more and more money flowing into individual employee budgets.
Of course there are internal compatibility, security and scalability concerns that will slow down this trend, but I think this it's something for enterprise focused companies to watch out for in the coming years.
Fred Wilson posted a talk he did the other day on enterprises and networks. Including Q&A, the talk is nearly an hour. For me there is one incredibly important takeaway for software companies that are focused on the enterprise. And that is that in today's environment, in the long term, you must remember that your business model is a commodity, your software is a commodity, your customer service is a commodity and your sales team is a commodity. The thing that will provide you with sustainable, incremental value over the long term is your network of users. That is the one thing that is extremely difficult to copy in the long term. Enterprise focused companies that have large networks of engaged users that are adding value to the product simply because they use the product are the products that will win over the long term. Here are five good examples of enterprise software products that are successfully using their network to increase engagement and product value.
We all know b2b and b2c, and even b2b2c. I'd propose that an emerging software business model is b2e2b (business to employee to business). While it hasn't been called out clearly like this (trust me, I've 'Googled' it) there are many companies that are already using this approach (Yammer, Dropbox, Xobni and others). The way it works is that a company builds a product that can be accessed directly by a single employee of an organization. As the number of users within a company grows and reaches a critical mass, the company then has a salesperson contact the organization to make the upsell -- e.g. business to employee to business.
Of course, this model is interesting in its own right. But there are much larger implications for enterprise software. Chris Dixon and others have talked a lot about the fact that enterprise technology is far behind consumer technology. As I've written before, I believe that the reason for this is that enterprise technology can get away with being bad. For example, if you're a payroll provider and you provide a lousy interface for employees you can get away with it because you only have to sell one person in HR on your product (and then they force ten thousand people to use it). But if you're a consumer site like Mint.com you can't get away with being lousy because you have to sell 10,000 people, one by one. You have to be great or you'll fail.
And this is why the b2e2b approach is so important. It’s radically changing the way enterprise software is built and sold. And as a result, we should see the quality of enterprise technology begin to catch up with consumer technology. And when it does, those big b2b companies that continue to rely on their brand or their sales force to drive sales will begin to collapse.
Image via Fred Wilson.
You may have noticed that there are fewer posts in your Facebook feed these days. The reason? Facebook is now selling its ‘sponsored posts’ feature to individual accounts in addition to business accounts. So now, when you post an update to Facebook telling your friends that you’re going to the gym or looking forward to watching your favorite television show that post only appears in approximately 15% of your friends’ news feeds. But, if you pay a small fee (I hear around $5 to $10) Facebook will show that post to a much larger group of friends. This change has caused quite a bit of frustration for Facebook users. And rightfully so. Many businesses and individuals have spent massive resources acquiring Facebook followers and have been using Facebook as a way to engage their customers for years. You can understand the frustration among businesses and individuals that suddenly have to pay to speak to their own network.
For Facebook, though, the move makes a lot of sense. They’re a public company now, and the market wants to know how they’re going to continue to add shareholder value. And given that there are reasons to believe that their user growth is beginning to top off, there’s lots of pressure on them to monetize their user base. Offering a paid product to their entire base of users – which, by the way, equates to about one seventh of the world’s population – is arguably a step in the right direction.
Of course, what’s good for Facebook’s stock price in the short term may not be good for its users. Beyond the anecdotal frustration, Mark Cuban and others are advising their companies to pull back from using Facebook as a primary marketing channel. And some of the bands I follow on Facebook have asked their users to begin following them on Twitter instead.
Facebook has to walk the thin tightrope of providing an accessible and valuable platform to the masses while it tries to monetize more and more of their user base. In the past, shareholders could argue that Facebook may have leaned too far towards providing the free platform. With this change, they’re now leaning in the opposite direction. They'll have to adapt their product and communication strategy to figure out how they can continue to thrive using this new model – and they better hope their users stick around while they do.
5 years ago when I started this blog, I had a theory. The theory was that participating in big, broadcast marketing was a bad strategy. And that companies that continued to participate in it would likely see their stock prices fall over time. To test this theory, I selected a group of 6 companies that ran television commercials during that year's Super Bowl and noted their stock prices with the intention of measuring their performance against the S&P 500 index. The 6 companies were Pepsi Co., E-Trade, Anheuser Busch, Coca Cola, Bridgestone and FedEx.
Anheuser Busch was of course acquired by InBev back in 2008 so 5 years later that leaves me with 5 companies to test my theory. Here are the results:
Given the small sample size, I'm not sure the data is all that conclusive. But it certainly doesn't conflict with my theory. So I'll stand by it for now...