How Efficiently You Can Reach The Network May Be More Important Than How Good Your Network Is
Topic: 4) A Random Walk

Interesting information from The Wisdom of Crowds, by James Surowiecki. The book recounts some stats from the TV show, "Who Wants To Be A Millionaire".

For those unfamiliar with this groundbreaking multiple-choice Q&A contest show, participants were given "lifelines" that they could rely for assistance when they did not know an answer to a question. For one of the lifelines, the show participant was able to call up any trusted person that they could think of. The other lifeline enabled participants to poll the audience in the studio, where the masses would respond to the multiple choice question via keypad, the results would be displayed via histogram. The histogram, in effect, showed whether the majority of the crowd believed the correct answer was A, B, C, or D.

Turns out that for response accuracy, 65% of the time "phone a friend" resulted in the right answer vs. 91% of the time "ask the audience" resulted in the right answer. Although the results may be be subject to some selection bias where show participants tended to ask easier questions when polling the audience, it is a very interesting finding for those that leverage networks in personal and business contexts.

How often in the real-world have you gone to friends and business contacts to try to get answers? Now there appears to be a case for reaching a larger audience if you want to get more accurate information. Good research finding for those exploring wiki, open source, blogging, and information market technologies methinks.

Steve Shu
Managing Director
S4 Management Group
Email: sshu@s4management.com
Web: http://www.s4management.com

You Can Still Get A Coke With Loose Talk, But You Need To Be Careful In The Management Consulting Business
Topic: 2) The Consulting Trade

Brian had the following post which covers the geographical differences of the use of the terms "Soda", "Coke", and "Pop". Thought it was a pretty striking graphical map of a social norm that I've never been able to put a finger on. In any case, it triggered me to write down a couple of brief thoughts about the importance of nomenclature, and more generally, clear communication in the field of management consulting.

On the one hand, in the early phases of a consulting engagement, there is usually a steep ramp-up curve to gain a common understanding of where detailed operations are at (even in cases where the consultant has experience directly in the client's vertical industry). I have sometimes referred to the ramp-up period as "drinking from the firehose." During this period, both the client and consultant use terms that may not be fully understood by one another. Regular dialogue and monitoring are needed to make sure things are on track.

Such early problems usually work themselves out. However, for all parties to ensure that the consultant is adding the highest amount value, it becomes more and more important as the engagement moves forward to get beyond nomenclature and to understand the vision of what needs to be achieved. As an example, when a client says, "No problem at all. I have that operational data," there is a difference between "having that data" and "having that data and proactively using the data to manage the business". Proactive management requires organizing data regularly, synthesizing new information from the data, developing hypotheses, setting goals, proactively applying controls on a day-to-day business based on the information (as opposed to treating data like exhuast eminated from an automobile), and making data and results transparent to all."

Steve Shu
Managing Director
S4 Management Group
Email: sshu@s4management.com
Web: http://www.s4management.com

Non-Tech Phishing
Topic: 4) A Random Walk

Paul Brown has a very well-written (but sobering) post on the symmetric identity problem. Also demonstrates how phishing can be done without ever touching a computer.

I'll also support Paul and vouch for his wife - she is smart.

Interesting Article On Outsourcing From The Perspective Of Current Employees
Topic: 1) General Management

This post has been cross-posted at The CIO Weblog.

This InfoWorld article portrays a positive outlook for companies that consider outsourcing with respect to employees who have their current jobs outsourced elsewhere. Survey results indicate that while an overwhelming majority of employees are anxious about their futures prior to an outsourcing event that post-outsourcing a majority of employees are more satisfied with positions after the transition. From the article:

The poll, conducted in Europe and commissioned by IT services company LogicaCMG, examined the opinions of 200 employees in large organizations before, during, and after their positions were outsourced. While a majority of those surveyed, 84 percent, felt apprehensive at the prospect of having their positions outsourced, around 70 percent said that they were more satisfied with the new roles they were given following the transition.

One important thing to note, however, is that employment and labor laws differ between the United States and Europe in that European laws are more employee-friendly in the outsourcing area. The article goes on to point out:

Outsourcing is often confused with offshoring, Dunn said, which involves moving jobs to lower-cost markets such as India, while outsourcing involves a company's decision to move a particular operation or function out-of-house. When companies outsource, European regulations stipulate that affected employees retain the same conditions they had in their previous positions ...

Does this nullify the relevance of the study to US employees? Perhaps. However, I do find that articles like this one highlight the importance of showing everyone the light at the end of the tunnel when working an organization through change.

Steve Shu
Managing Director
S4 Management Group
Email: sshu@s4management.com
Web: http://www.s4management.com

Perhaps Not The Best Choice Of Domain Name
Topic: 4) A Random Walk
Perhaps marketing genius. Perhaps an oversight. You be the judge. (safe to click through today [until someone decides to trade it away ...]) http://www.penisland.net

Quick Thoughts On New Business Initiatives and On-The-Fly Information Technology
Topic: 1) General Management

Over at The CIO Weblog, I pointed out a review by InfoWorld of four hosted, customer relationship management (CRM) solutions. Now in many cases information technology (IT) initiatives are thought of as corporate-wide programs, and thus, solutions like these are not in the perview of those within a division of a company launching either a new product, new services offering, or backoffice services operation. It is often presumed that if a new business initiative is successful that the processes of the new program will utilize the legacy platform as its core. In many cases, this will be true and one will not want to introduce another system (because of side effects like having multiple processes in place or having exception processing).

Consider, however, that pilots and new business initiatives can move at breathtaking paces and that hosted applications and application service provider (ASP) software can be introduced sometimes instantly or within a few days. Some can also be reconfigured on the fly when flows need to be optimized. Then consider a perspective that people and processes need to be serviced first (even if it means reverting to paper and pencil or Excel spreadsheets and throwing out the IT to get the job done). Then consider whether hosted software might be a good way to get your pilot done. With the monthly subscription plans of many providers, there is often little financial risk.

Steve Shu
Managing Director
S4 Management Group
Email: sshu@s4management.com
Web: http://www.s4management.com

Good Article on Venture Capital Blogging ... And Random Thoughts on Business Blogging
Topic: 4) A Random Walk

By way of Jeff Nolan ... one of the best profile articles I have seen on the Net on the small, but distinguished population of venture capital bloggers. Covered in the Venture Capital Journal.

To digress a bit, as a freelance management consultant (and not a VC), I resonate with some things here with respect to business blogging (as opposed to personal blogging): 1) blogging helps me to keep track of non-confidential information that I want to keep track of in a richer format that is better than bookmarks, spiral notebooks, etc., and 2) blogging forces me to actively process information and thus serve a goal of continuous learning. The publishing aspect of blogging is good too in that it is an efficient means to deliver and synthesize information in new ways. Good for low-level, bootstrap marketing (or at least branding if you take a stricter definition that marketing is about lead generation).

Some of my original goals for blogging were to learn more about the format, its use as an informal communication channel, impacts on search engine cataloging, and use as an online networking tool. For the most part these goals have been satisfied.

Unlike some of the VCs in the article, I have not yet experienced any impact on deal flow from maintaining a blog. My product offering is different though, and my audience is different too.

In any case, this circles back to my addition of blogging more about technology in 2005. It serves a goal of continuous learning. It makes no presumptions that efforts will lead to deal flow. Based on reader feedback, however, thoughtful and professional blogging does help me to preserve the brand of my reputation. Reputation and integrity are most important to me.

Steve Shu
Managing Director
S4 Management Group
Email: sshu@s4management.com
Web: http://www.s4management.com

Search Engine and Advertising for Music Brought to A New Level
Topic: 6) Technology
This was brought to my attention via the blog "A VC". Although words can describe it somewhat, you've got to try it. You can basically search by band, musician, or album and pull up a visual map of music that sounds similar and/or may match your tastes. Includes links to Amazon.com for purchasing. Given music is one of the huge topics on mainstream, personal blogs, I wouldn't be surprised if we start seeing this kind of music search engine and advertising technology applied to contextual marketing and widgets on the Internet.

Six Apart to Acquire LiveJournal
Topic: 6) Technology

Big blog news of the day. Six Apart, provider of the MovableType blog platform, will acquire LiveJournal, the largest open-source blog platform provider. If this goes through, Six Apart will be one of the largest providers in the world.

I guess I will have to update my mental map of the space given this big M&A news in the blog community.

Cool Vision for Event and Calendar Management
Topic: 4) A Random Walk

Scott McMullan has a cool vision for event and calendar management. From his post:

In the spirit of "tags are the new black," here's a vision for how event and calendar management should be handled by 2006: Wouldn't it be grand if all events in the world, from a garage sale in Lexington to a tech conference in SF, could be automatically discovered (Google), stored in one central, public domain, web services accessible database (Internet Archive), where the events could then be categorized (Topix), community rated and recommended (Amazon/Netflix/Last.FM), personally tagged (Flickr/del.icio.us), and ultimately custom-fed (PubSub) directly to your calendar device of choice (Calconnect)?

Some Things to Consider When Negotiating Against Those Venture Capital Barbarians At The Gate
Topic: 3) Ventures

A little tongue in cheek I guess. A post by Brad Feld (VC at Mobius) followed by a post by Jeff Nolan (VC at SAP Ventures) triggered me to write this post about term sheets. Having worked mostly on the operating company (seller) side of things, I thought it would be interesting to note a few perspectives on terms and negotiating from a side other than the VC side of the table. Here are a few thoughts:

1) Valuing an "investment" depends somewhat on the other things in your "portfolio". An investment (whether taking money or giving money) cannot be looked at in isolation of what else you hold. As an example, home owner's insurance is worthless to someone who does not also have a home. The insurance is a hedge investment that goes up when you lose the home though. Now for the entrepreneur, the value a VC brings (e.g., complementary connections, partners, or expertise) to the table should also be factored in beyond price they value your company at. Look at what assets you have (e.g., current people on your team pre-funding). I recall (hopefully correctly) that Mena Trott (at Six Apart) blogged about how Sequoia Capital's money was the "best" even though it was not necessarily best from a pre-money valuation perspective. Now some will say there is an age old saying that "Money talks, _____ walks" (ask mom or dad about this one if you don't know what I'm referring to). Nevertheless, go through the thought process of not just looking at price.

2) Consider using lawyers as a part of good cop/bad cop tactics during negotiations. I've worked with counsel from firms like Piper Rudnick, Greenberg Traurig, Jenkins & Gilchrist, and others - lawyers are smart. Though they can be expensive and extent of use should be weighed by stage of investment and company specifics (vs. using a company godfather, experienced friends, or management's own experience, say), lawyers can help you effectively wade through mechanics of term sheets, stock purchase agreements, amendments to articles, investors rights, etc. Sometimes you can get the lawyers to draft bad cop memos (or play bad cop roles) for you to respond to VCs on legal docs while you stategize, value the terms from your perspective, and play good cop.

3) Be able to "name the game". A key to negotiating is being able to understand the game being played. Playing some games require greater understanding of mechanics. The term sheet and the subsequent legal docs (if a term sheet is executed) are areas where mechanics can be hairy than the "average bear". Unfortunately, entrepreneurs tend not to negotiate legal docs every day. Lawyers and VCs, on the other hand, do. Plus, market terms change over time (even within a period of a few months). In any case, utilize the Internet, books, and informal networks to gather as much baseline info as you can. Brad Feld looks like he has some good upcoming posts on the subject of term sheets.

As a closing thought, to start to get familiar with the general idea of term sheets, the AllBusiness website has a vanilla short form agreement and long form agreement on the web (not the only source and not necessarily the best source but instantly accessible and another data point for you).

Steve Shu
Managing Director
S4 Management Group
Email: sshu@s4management.com
Web: http://www.s4management.com

Will Be Interesting to Watch the Pluck Corp. Venture (Software Like TiVo for the Web)
Topic: 6) Technology

I was reviewing 3Q'04 Texas venture capital financings in the software space and ran across an Austin-based company called Pluck, a company dedicated to making it easier to find and manage information online. Founded in 2003, Pluck received a recent Series B round of $8.5 million. Investors to-date are well-known VC firms: Austin Ventures and Mayfield.

Pluck markets itself as follows:

"What TiVo did for television, Pluck is doing for the web. Pluck is an Internet command center that takes the web to a whole new level.

No matter how you use the web today, you can do it better with Pluck. Searching? Better. Shopping? Better. Browsing? Better. News? Way better.

Seamlessly integrated with Internet Explorer, Pluck retrieves, organizes, and automatically delivers your favorite web stuff in a single-view. Pluck lets you browse multiple sites at once, share stories and folders with anyone, and it even finds things when you are not online. Pluck also organizes and stores all your Web information so you can access it from anywhere."

Given that 1) further advances of Internet Explorer have seemingly stopped, 2) the Firefox browser is making advances both in reality and in mindshare regarding both security and new features, 3) Pluck's product seems to be offered only on the IE platform to date, and 4) there may only be tens of thousands of users (before opening, note PDF file) right now, it will be interesting to see what plays out product development-wise over the next year. I like Pluck's concept of better organization. Too bad IE advances have for all purposes ceased - I have already said goodbye to IE and hello to Firefox.

For those still using IE, the Pluck software is currently *free*. Go ahead and download it.

Note to self: Revisit Pluck progress over the next 12 to 18 months as it uses Series B monies.

Steve Shu
Managing Director
S4 Management Group
Email: sshu@s4management.com
Web: http://www.s4management.com

A 10-Year Old "Angel" Recognizes Signs of Tsunami and Saves Lives
Topic: 4) A Random Walk
http://www.hindustantimes.com/news/181_1179413,00050003.htm

2005: The Spyware-Spam Wars Continue (Enter Microsoft)
Topic: 6) Technology
Despite CAN-SPAM legislation, I sure got more email spam in 2004 than any other year in my life. Spam got so bad that even some of my spam filters broke.


On the spyware front, it looks like the public has also been losing this war. As summed up in a PC World article, "In April, Internet service provider EarthLink and Webroot Software released the results of a survey of over 1 million Internet-connected computers that found an average of almost 28 spyware programs running on each computer. More serious, Trojan horse or system monitoring programs were found on more than 30 percent of all systems scanned, raising fears of identity theft, according to the companies."


Perhaps a concern in the workplace ... perhaps only a concern at home. Episode 2 (to take place begining in 2005), however, has Microsoft entering the anti-spyware game with recent acquisition of Giant Company Software. Sometime this January, Microsoft is expected to release a free evaluation version of anti-spyware software. I view this move as Christmas in January for PC users. I don't think the average person can tell whether anti-spyware software comes from reputable sources. A spyware offering from Microsoft will be recognized though.


Whether we ultimately win the war ... unfortunately we may have to wait for Episode 3 of the trilogy. Hold on to your hats. Episode 2 may be a dark one a la George Lucas style.


Update (January 1, 2005):
Enter Arnold ... Asta la vista, Baby


Steve Shu
Managing Director
S4 Management Group
Email: sshu@s4management.com
Web: http://www.s4management.com

Asia Tsunami Footage in Beach Bar (Via Blog Entry)
Topic: 4) A Random Walk
I guess it's still hard to find much tsunami video footage on traditional news websites. I get essentially all of my news from people and the Internet (not TV). Here's some footage I found via a blog entry. Note: Windows Media format.

Located via: http://xo.typepad.com/blog/2004/12/amazing_tsunami.html

Update (Jan. 2, 2005):
This is a terrible tragedy beyond comprehension. For those still seeking information, here is one of the best sources of consolidated and comprehensive information I have run across: http://en.wikipedia.org/wiki/2004_Indian_Ocean_earthquake.

A Weblog Dress Rehearsal
Topic: 6) Technology
Just like a preview opening of a restaurant where friends and family can come to eat for free, experience all of the glitches, enjoy rough service, etc. ... well if you found this weblog entry, you are hereby invited to a new CIO blog that I will be authoring for on software technologies. The blog is part of the Creative Weblogging network of blogs, a UK-based company. Come on in through the backdoor not available elsewhere! (Note that the permanent CIO Weblog links may change once I get completely rolling in 2005.)


Update:
New link at http://www.cio-weblog.com.


Steve Shu
Managing Director
S4 Management Group
Email: sshu@s4management.com
Web: http://www.s4management.com

More Glamour Than Cash With No Guilt And No Guesswork ... The Gift of The Gift Card!
Topic: 4) A Random Walk
Still having trouble thinking of a gift for the holidays? Yesterday the Christian Science Monitor interviewed my wife (Dr. Suzanne Shu) about the growth of gift certificate purchases. One would think that since gift certificates aren't fungible like dollars that there would be no rationale for their existence (applying pure economics theory). The positives for purchasing gift certificates are clearly there ... including glamour and providing the recipient a way to circumvent guilt of buying things. Make sure you read the fine print associated with gift certificates though. I'm still sore about the Chili's card mentioned in this article.


Steve Shu
Managing Director
S4 Management Group
Email: sshu@s4management.com
Web: http://www.s4management.com

New Study By PRTM in CFO Magazine Paints Bleak Picture for General Capex Trend But Reflects Optimism for Best-of-Breed Companies
Topic: 4) A Random Walk
December's issue of CFO magazine references in detail a study by my alma mater, Pittiglio Rabin Todd and McGrath (PRTM). I never knew Amram Shapiro when I was with The Firm, but Amram's reputation was great and preceded him.


What can I say? The CFO article is a great one to look at more closely. Here are some of my quick takeaways from CFO magazine's report on the PRTM study:
- Some of the largest companies in the world have cut back capital investment expenditures (Capex) substantially *in spite of* healthy increases in revenue.
- The Capex trend does not look like it is going to reverse soon.
- The hold back will, in turn, hold back the global economies.
- When segmenting out top performers (i.e., best-of-breed companies), results show that capital expenditures can be increased without affecting the bottom-line adversely.
- Key is integrating R&D and Capex (e.g., operations and product development) processes.


Steve Shu
Managing Director
S4 Management Group
Email: sshu@s4management.com
Web: http://www.s4management.com

Entrust e-Card Gives New Meaning to Having a Safe Holidays
Topic: 4) A Random Walk
The world is not safe enough. No longer does Frosty the Snowman have simple issues like evading greedy magicians after his magical hat. In today's scary world of malware, spyware, worms, phishing, and Trojan horse attacks to steal people's login information to online banking ... well Frosty has new issues to deal with. John Heltzel sent to me the following e-Holiday card, brought to us by Entrust, a security software provider.


While recent contextual advertising innovations by companies like Google, Kanoodle, and Quigo are clearly up and coming, I thought the branding associated with having a straight-up, cynical yet humorous, and timely e-Card was pretty clever.


Steve Shu
Managing Director
S4 Management Group
Email: sshu@s4management.com
Web: http://www.s4management.com

Revisiting "The Blogging Iceberg"
Topic: 4) A Random Walk
Just more than a year ago (October 2003), Jeffrey Henning (COO and CTO, Perseus Development Corp.) wrote the influential article on "The Blogging Iceberg".


There are some that have indicated that Henning's research is flawed in that it does not address this, that, and the other thing. Yet others that criticize the research may have misunderstood Henning's use of statistics terminology. I lean towards the perspective that Henning's research was on target and that the scope of the research and limitations had been clearly cited in the original release.


That said, what is interesting to reflect upon as we draw to the end of 2004 is how the picture portrayed in "The Blogging Iceberg" has changed.


On the one hand, it appears unlikely that the hosted blogosphere will have grown to more than 10 million by the end of this month. Nevertheless, the blogosphere is clearly growing very rapidly as cited by sources like David Sifry of Technorati.


On the other hand, Henning's observation of nanoaudiences has begun to take shape in other areas. Numerous blogging authors are starting to point out the increased formation of microbrands. Although Henning refers to nanoaudiences in the context of small blog audiences consisting of family, friends, etc., the concept of microbrands stems directly from the nanoaudience concept. Microbrand blogs have developed identities analogous to niche magazines like Cigar Aficionado or Modern Drummer. In any case, I suspect the nano-micro-thing will continue to play out given sheer economies and that blogging may have an oversupply of authors right now.


On the demographics front, things didn't change that much in 2004, and I don't expect the blogger makeup on US soil to change all that much in 2005. That said, blogging technologies are going to be much more widely available given 2004 happenings such as Microsoft's entry with MSN Spaces and venture capital financing of Six Apart and Technorati, to name a few events. Who would have known that "blog" was going to be the #1 searched word and added to the dictionary?


Although Henning's research did not cover sociological impacts, it probably would have been difficult back in 2003 to predict that blogging would have created such a polarization effect with people. As evidenced by the massive split in the election results, I think that users are beginning to become more acutely aware of the power of a blog author to get a polarized readership (i.e., there are either those that love you or hate you). As companies begin to grapple with corporate blog policies and use of blogging as an informal marketing channel, it will be interesting to see how the polarization effect (if even mildly inherent to the beast) can affect customer acquisition and retention strategies.


2004 has been a year of blog activity for sure. For 2005, I personally expect to author a little more on the software markets. More details and experimentation to come.


Steve Shu
Managing Director
S4 Management Group
Email: sshu@s4management.com
Web: http://www.s4management.com