Friday, March 24, 2006
Businesspundit: Entrepreneurial Strategy: Measure Something
Businesspundit: Entrepreneurial Strategy: Measure Something
I think Web2.0 is making me sick. It seems that every new company I
see launched or funded has the same strategy - grab eyeballs by
allowing users to do X on the web and then monetize the model by
selling advertising. That's all fine and good, and it is a valid
business model, but there are dozens of different strategies
entrepreneurs can use, so I've decided to start writing about
them on a semi-regular basis (I'll try to do weekly but that may
not happen) to jog the memory of those of you old enough to remember
that startups existed before the web, and to educate those of you
that think startups = new web businesses. Some of them will be basic
and boring, and some of them you may not have thought of before. I
want to start with one that is right in the middle: MEASURE SOMETHING
THAT ISN'T BEING MEASURED.
Business strategy is built in large part on probabilistic decision
making. No one ever knows with 100% certainty where markets are going
or how customers will respond to changes and incentives, so you have
to plan using a best guess. The more information you have, the better
that guess will be. One way to gain more information is to be able to
measure something that wasn't measured before. Don't believe
me? Think about this... would you buy a car if gas mileage numbers
were not available? You probably would if no car at any dealership
displayed gas mileage. But think how much better of a decision you
could make once someone figured out how to measure gas mileage and
posted that information on all cars.
For companies, better decision making means more money, and if your
product can help companies make more money, they will buy it from
you.
I happen to know of two local companies that got started this way.
The first was a company called Genscape. The two entrepreneurs that
founded Genscape are sort of local legends. The company:A good
description of the company comes from their press releases.
Genscape's information gathering and distribution system
consists of technology to monitor the real-time power output of power
plants and load on high-voltage transmission lines. Information
reported to customers includes highly accurate estimates of the
real-time power output for generating facilities and power flows over
strategic transmission paths in the U.S. and Europe and associated
information for the U.S. natural gas, coal and emissions markets.
Genscape Inc. is the only company to have commercialized the
provision of real-time power supply information to support
decision-making for energy traders, power plant and line owners and
operators, regulators, and other energy market participants. Genscape
maintains a 60 person staff and an international headquarters in
Louisville, Kentucky with additional offices in Amsterdam, New York,
London and Washington D.C.I've never met the founders, but my
understanding is they were both working on MBAs at the University of
Louisville when they got this idea to measure power transmission
information. They contacted an engineering professor and paid him to
design the black box that they needed. Then they began testing it,
tweaking it, and eventually selling it to power traders. The traders
could make more accurate decisions than before and thus be more
profitable.
Did Genscape have a good strategy? Well in 2003 they were featured
in Inc. magazine for having revenue growth of over 2000%. I think
that is pretty impressive.
The second company is called Two Dimensional Instruments. While this
company addresses a much smaller market than Genscape, the principle
is the same. 2DI makes temperature monitors that record the
temperature electronically at set intervals and allow users to
download that data. I know one of the entrepreneurs that founded this
company, and he said the idea came from a guy that had propped a
freezer open to load some things into it. The temperature had briefly
warmed to 37 degrees as a result, and an inspector (food inspector, if
I remember correctly) wrote him up for having a freezer too warm. He
protested that it was only that temperature for a few minutes, and
that this was just bad timing, but he had no way to prove it. So he
found some partners and developed a device that would help solve that
problem by measuring temperature at regular intervals.
If you are looking for a business idea, I think this is a great
place to start. Think about what needs to be measured at your work or
in your industry. Ask yourself if measuring such a thing would help
you make better decisions, be more productive, and be more
profitable. Then develop a tool, a device, or some software that will
do so. From there, execute like hell and after a few years of hard
work, you've got a very nice business.
Trackback: http://www.creative-weblogging.com/cgi-bin/mt-tb.pl/18147
I think Web2.0 is making me sick. It seems that every new company I
see launched or funded has the same strategy - grab eyeballs by
allowing users to do X on the web and then monetize the model by
selling advertising. That's all fine and good, and it is a valid
business model, but there are dozens of different strategies
entrepreneurs can use, so I've decided to start writing about
them on a semi-regular basis (I'll try to do weekly but that may
not happen) to jog the memory of those of you old enough to remember
that startups existed before the web, and to educate those of you
that think startups = new web businesses. Some of them will be basic
and boring, and some of them you may not have thought of before. I
want to start with one that is right in the middle: MEASURE SOMETHING
THAT ISN'T BEING MEASURED.
Business strategy is built in large part on probabilistic decision
making. No one ever knows with 100% certainty where markets are going
or how customers will respond to changes and incentives, so you have
to plan using a best guess. The more information you have, the better
that guess will be. One way to gain more information is to be able to
measure something that wasn't measured before. Don't believe
me? Think about this... would you buy a car if gas mileage numbers
were not available? You probably would if no car at any dealership
displayed gas mileage. But think how much better of a decision you
could make once someone figured out how to measure gas mileage and
posted that information on all cars.
For companies, better decision making means more money, and if your
product can help companies make more money, they will buy it from
you.
I happen to know of two local companies that got started this way.
The first was a company called Genscape. The two entrepreneurs that
founded Genscape are sort of local legends. The company:A good
description of the company comes from their press releases.
Genscape's information gathering and distribution system
consists of technology to monitor the real-time power output of power
plants and load on high-voltage transmission lines. Information
reported to customers includes highly accurate estimates of the
real-time power output for generating facilities and power flows over
strategic transmission paths in the U.S. and Europe and associated
information for the U.S. natural gas, coal and emissions markets.
Genscape Inc. is the only company to have commercialized the
provision of real-time power supply information to support
decision-making for energy traders, power plant and line owners and
operators, regulators, and other energy market participants. Genscape
maintains a 60 person staff and an international headquarters in
Louisville, Kentucky with additional offices in Amsterdam, New York,
London and Washington D.C.I've never met the founders, but my
understanding is they were both working on MBAs at the University of
Louisville when they got this idea to measure power transmission
information. They contacted an engineering professor and paid him to
design the black box that they needed. Then they began testing it,
tweaking it, and eventually selling it to power traders. The traders
could make more accurate decisions than before and thus be more
profitable.
Did Genscape have a good strategy? Well in 2003 they were featured
in Inc. magazine for having revenue growth of over 2000%. I think
that is pretty impressive.
The second company is called Two Dimensional Instruments. While this
company addresses a much smaller market than Genscape, the principle
is the same. 2DI makes temperature monitors that record the
temperature electronically at set intervals and allow users to
download that data. I know one of the entrepreneurs that founded this
company, and he said the idea came from a guy that had propped a
freezer open to load some things into it. The temperature had briefly
warmed to 37 degrees as a result, and an inspector (food inspector, if
I remember correctly) wrote him up for having a freezer too warm. He
protested that it was only that temperature for a few minutes, and
that this was just bad timing, but he had no way to prove it. So he
found some partners and developed a device that would help solve that
problem by measuring temperature at regular intervals.
If you are looking for a business idea, I think this is a great
place to start. Think about what needs to be measured at your work or
in your industry. Ask yourself if measuring such a thing would help
you make better decisions, be more productive, and be more
profitable. Then develop a tool, a device, or some software that will
do so. From there, execute like hell and after a few years of hard
work, you've got a very nice business.
Trackback: http://www.creative-weblogging.com/cgi-bin/mt-tb.pl/18147
