April 26, 2009

Founders At Work: Flexible Approaches to Entrepreneurial Business Models

Jessica Livingston - Founders At Work album cover art

Jessica Livingston - Founders At Work

Jessica Livingston's Founders At Work: Stories Of Startups' Early Days is a really excellent book of interviews with founders of key technology companies that helped build the web, from Apple to PayPal to TypePad, making it also an oral history of the creation of an infrastructure and tools for web publishing.

Many of the interviewees are programmers who became entrepreneurs and belie the cliches regarding everyday programmers' communicative abilities, though Joshua Schachter of Delicious does talk kind of like a machine and Philip Greenspun, cofounder of the defunct ArsDigita, explains why most programmers are conditioned to be unlikable commodities.

Since my web projects typically involve off-the-shelf services with html I can tweak, I haven't gone through the process of learning to work with programmers on web projects where they hold the key knowledge cards nor have I worked with offshored workers. However, I do have some limited experience of working with programmers on mobile projects and I'm convinced that building positive relations with key programmers is crucial to survival in web publishing. On a related note, the more you know the better because programmers will test your knowledge and do tend to propose solutions that they are capable of implementing as opposed to the best solution.

On the Need for Flexible Business Models

There are many aspects of Founders At Work as a whole worth discussing but one that's relevant here, even for someone starting a basic blog, is the fact that many of these companies started with a particular development focus or business model or general plan for making money that was discarded as more solid opportunities emerged.

Such opportunities were often indicated by customers and potential customers who were sometimes initially ignored before the founders could make the adjustment, which is not to say that these founders were necessarily obstinate. The most promising possibilities for true entrepreneurial endeavors are not always obvious because they're new to the world or new to the individuals involved.

The ability to adjust to an unknown reality is a trademark of many of these highly successful founders that Livingston interviewed and a few striking examples are especially worth considering. Though I refer to flexible business models what is key here is flexible thinking and acting regarding business models whether or not your initial business plan indicates such possiblities.

Philip Greenspun: ArsDigita

Philip Greenspun relates that he was creating software tools in the mid '90s to facilitate a website with a discussion forum about photography (pp. 318-19). He wasn't planning to build a business but saw that many other webmasters were struggling to set up such services, as well as registration and ecommerce, and made his software tools available for free as an open source product.

Eventually he started getting contacts from corporations who wanted to pay him large amounts of money to set things up and so was born the business model of offering free or low cost open source software packages and then monetizing those products through paid services.

Max Levchin: PayPal

Max Levchin's PayPal service was initially launched for Palm Pilots and he got funding for the company with a plan to continue to develop for mobile devices (pp. 5-6). But the website that they developed as a demo kept attracting folks who were trying to use it while the mobile users soon peaked. Soon Ebay sellers were trying to use it for their needs and Levchin says the initial response was to turn them away!

Eventually he and his cofounders recognized that these folks could be customers. They focused on the website and eventually ended the early version of their mobile offering and became an incredibly successful service.

Business Model Flexibility

Such examples recur throughout the book and often involve people launching with one approach and, ultimately, taking a different approach based on encouragement from users and/or potential users. This is a somewhat different issue from listening to and observing customers to develop particular features. That's also very important but having a flexible business model is about being willing to change one's preconceptions and sometimes even leave behind what one knows best.

Google is an excellent example of a company that began with a focus on search, monetized that with contextual ads and then eventually used that technology to develop an ad network. Later they began to develop services that went beyond search, such as Gmail, that also became quite popular. But as Gmail creator Paul Bucheit points out, many of his fellow employees resisted the idea of Gmail because they felt that Google should continue to focus only on search.

Though Gmail also presented different technical issues, it has become a strong platform for deploying search and contextual ads. Google's moves into news and book scanning can be also be viewed in terms of search and ad opportunities but could be considered moves into web publishing as well.

But I'm Just a Blogger!

You don't have to be going for venture capital or even writing business plans to benefit from these tales of tech startups. For example, my most successful blog, ProHipHop, began with a general focus on hip hop business news across industry sectors. While that attracted attention, I eventually realized that hip hop marketing was where hip hop's broad reach could be most readily observed and focused on that aspect.

Focusing on hip hop marketing at that time allowed me to interest more people involved in hip hop business while also affording me an opportunity to reach out to marketing professionals in other arenas. Though the twists and turns of the ProHipHop saga undermined that development, having an openness on a thematic level offered me the opportunity to build a much stronger relationship to a much larger audience.

Unfortunately, I did not take such a flexible path to monetization and so missed out on what now would clearly be the most profitable path to building ProHipHop. In the early days, as now, the majority of ProHipHop's income came through ad networks which allowed me to focus on news gathering and writing while the networks focused on ad sales.

Periodically I would receive contacts from folks who wanted to advertise on my blog but I didn't have an ad server and wasn't really able to effectively meet people's needs. Though the launch of Blogads appeared to offer a solution, for a number of reasons which included a confusing interface, Blogads never emerged as a successful solution to individual ad sales.

Rather than biting the bullet and stepping further outside of my comfort zone by tackling the ad server issue, I continued to focus on the things that I wanted to pursue and turned away from potential customers' requests that would have required me to find and work with someone who could take care of the technical issues involved with ad serving which, when all is said and done, were not exceptionally large problems. That was probably one of the worst decisions I made during ProHipHop's early years.

So, during that time, my thematic flexibility was successfully implemented but I dropped the ball on the key survival issue of monetization. I will return to lessons learned at ProHipHop but, for now, my main point is that holding on too tightly to what one believes is the correct path or being unwilling to expand beyond one's comfort zones can undermine one in the long run.

Even the Worst Drag Queen Can Find an Audience

Being flexible is just one aspect of success and the startups chronicled in Founders At Work had the potential to go under even after finding the right business model. The reality is, while many experience launching a project and receiving only blank looks and disinterest, the bigger danger is in getting enough encouragement to convince yourself that you're on the right path when you're only pleasing a handful of people.

Of course, sometimes a handful of people is all you need but that's a topic for a future post as we continue to explore flexible thinking and web publishing.

Comments

Cool,
This is a great book acknowleging the entrepreneurial buisness models,
Anyway, thanks for the post

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