Dear Reader

Business Development is a complex topic. In such case the questions raised are more important than potential answers. Therefore, this blog will focus on presenting questions. There will be answers, full or partial, to be supplamented by links presented when relevant. The answers from my experience will be clearer once the questions are clearer.

While this is not a discussion forum, readers are invited to comment, and the comments will help determine the topics and current issues to be explained in the future.


Friday, July 30, 2010

Which came first Technology or market demand?

Before you rush forward with the answer, or get annoyed, this is more than just a philosophical question. When you start learning marketing or economics you learn about demand and supply, you learn to draw the curves and to fix a price. Of course for marketing, once there is a demand in the market, the rest is a long solved problem on how to respond. So if your answer if that the demand came before the supply, than at least in the classical world of marketing, you know how to proceed.
But, I can hear some of you asking, about those few cases in which the technology preceded the demand, the internet and its environment are such cases, there were many services / products that did not exist before and demand did not exist.
So it would seem that the right answer to the question above would be "YES". While you think about that I would like to mention a small joke that anyone learning marketing in Israel must have heard at one point at least (could be just an Urban legend): in the 1950's a shoe factory in a kibbutz sent two salesmen to Africa one to east Africa and one to the western parts, to assess the marketing potential of the factory. The first evening the first salesman calls the factory and says:"There is nothing here for us, everybody is walking barefoot, I return tomorrow". Before they can get their balance back, the other one calls and says:" start working in three shifts, the market is enormous, everyone here is barefoot". The story as I know it stops here.
The first salesman is the case of missing demand, even if the technology / product exists. It requires educating the market into creating the demand. This can often be lengthy and expensive, and as a result of that - risky.
While the risk may be acceptable to a large firm, for an SME, or a start-up it could be dangerous. The firm may spend its limited resources and die before the market is created, or may create the market just to have a larger firm exploit it.
In Israel where many of the start-ups are technology based, this is a very risky point. There are many firms starting with a wonderful technology, but with little market demand, and what is "obviously a great idea" to the technology people is often not so clear to the customers in the market. These are the great technologies that fail, not due to lack of ideas, or capabilities, but due to better understanding the technology than the market.
If one recalls the High-Tech crisis that occurred when the 3rd generation of communication failed to be accepted by customers, not because it was not good, or not impressive, it was just that the market was not used to such rapid technology changes. It was necessary to make people understand that they wanted / needed the new capabilities before they were ready to make the change.
Great technology is not all - a great market can be.

Thursday, July 15, 2010

Taking your kids to work - The great Summer Opportunity

The Summer is here - a point very difficult to ignore in Israel, and many parents are facing the problem of what to do with their kids during the Summer. There are Summer schools and other possibilities such as vacation with the family, but they rarely cover the entire vacation period.

So at some point the bright idea - "why not take them to work ?" pops up.

Some places do not allow children, they claim that it is due to the fact that having the children come to work reduces productivity and may be disruptive. Unless it is a question of safety, I think the real reason is the wish to avoid being embarrassed by having them see something like that::
By the way, do not be surprised if in today's world when you come home and tell at dinner that you had a real big fight at work that they think it went something like this:
Getting back to our discussion, the big question is:"can you get something out of their visit?" that is in addition to spending time with the younger members of the family - that is to say that this post is just as rlevant for grandparents as to parents.
In a recent post Prof. Shlomo Maital mentioned that the point of view, innocent outlook and lack of filters regarding asking questions that children have can help innovators with promoting their innovations. I claim here that not only entrepreneurs, or grand innovators can benefit from that but rather every business with open enough attitude.
In many veteran organizations, routines have developed, and due to embedded inertia have not been reviewed and updated according to needs and new technology. Many of the currently employed routines are no longer efficient, but we are used to them and do not review them daily. It is at that specific point, that when you explain to a child what you do, that their questions may help you see that some things need and can be changed / improved. If they see that A sends a request to B for something that C has to do, they will ask why not just ask C? In the past that routine had a reason, but that reason is long gone - the cycle can be made more efficient. The maximum risk is that you just practice explaining what you do (always good), and might get some funny insights regarding your work, the best scenario is to you learn something that can be improved.
While this is general, and might have always been true, there is a more current benefit to consider. Most of us are not computer native (e.g. me), that is to say, have been borne into a computerized environment, but rather have learnt to work in a computerized environment as these evolved in the 1990's and 2000's. I would dare say that none of the workers at your place are web natives (these are too young to be workers - if you do have any of those please check your employment policy). Our kids are web native, for them processes that can be done by computer, or better by web and are not being done seem strange and they will ask you why? This could be your opportunity to see how your work is seen by a web native - you many never see it the same again.
Many organizations spend a lot of money on organization consultants, where some preliminary checks can actually be done by having the kids over to work and explaining to them what it is we do. At minimum they will understand us better (a great value just by itself), but at maximum we could get a free consultant (not really free I know - have kids of my own) over view our workplace.
Going back to the point above regarding safety at work, if you think we cannot learn from them there please see the small movie below:
One interesting point that I noticed bringing my kids to work a few years ago, is that they analyze the "chain of command" very astutely, ignoring completely titles on the door. They see who tells what to do, who needs to ask permission and for what, they look at the real "chain of command" and not the official one.

Wishing you a happy warm Summer

Sunday, July 4, 2010

Technology Incubators - a Sad Story

The Israeli Technology Incubator program which started in the early 1990 (first one was owned by the Technion - started in 1989) as a program initially intended to assist in absorbing the new immigrants from the former USSR, is considered a raw model, worthy of study and copying attempts by different countries. As mentioned in an earlier post there was a Finnish delegation here last month which was interested in checking and adapting the model for their needs. Together with the development of the VC market here the two formed two of the founding stones of the myth of Israel the entrepreneurial state, the homeland of innovation.
Recent set-backs to the VC market in Israel have exposed that founding stone of the myth, as a myth by itself. The fact that the VC in Israel could find investment was true enough, that they could make these investments pay-back enough to sustain the industry was not. More than that, it would seem that the damage the VC's and their strategy have done to the Israel economy could be fully understood only at a much later date. Their policy of sale to large multi-nationals that moved the core out side the country and negated the formation of an employment center has had a negative impact on the employment rate and growth, that only with time could be accurately estimated. The damage from VC and their capitalization or return on investment strategy can be seen in Prof. Maital's Lecture.
Recent publication regarding the Technology Incubators and their loan from the Ministry of Finance in 2003, seem to start peeling the myth from that founding stone as well.
In 2003, as it was decided that the incubators should be set to be financially independent. New agreements were made, the incubators' ownership changed hands in many cases and a new era began. Based on the change and a part of the agreement, was that Ministry of Finance fronted as a loan to the incubators over 80 million NIS. They were supposed to return the loan from the proceeds on the sales of their shares in the firms. These shares were the collateral for the loans. Now as according to publication less than 15 Million NIS have been returned so far, MoF which according to the agreement owns the shares, is considering its next move.
The original concept was, that in the post high-tech crisis the incubators would be set on a footing similar to that of VC's and that they could sustain their own operations based on the sale of their holdings. The market was estimated to be ready for such action. If the program worked, the government would be free from supporting the incubators, and could focus on supporting just the firms, and later on release more funds due to their income for investment in firms and projects.
While some may say that the market is at fault as it could not allow the sale of the firms held by the incubators generate enough income to sustain the incubators and more than that make them profitable enough to return the loans and become independent. My personal view is that the model is at fault. If the government is no longer looking at Technology Incubators as a means for absorbing technologically enhance immigration, but as a growth engine than the out look should change completely.
When I was CEO of a company in a Technology Incubator in the 1990's we managed to complete the development of a first generation of products and do some sample sales. While the sales were commencing only, we received from the Incubator's authority in the Chief Scientist a caution that if we start sales they would reduce our loan by the amount we raise by sales. So we labeled the sales we did as experimental sales and stopped, moving instead to the development of the second generation of products.
In the current state of affairs I think that firms in incubators should be encouraged to become economically independent asap, this should differentiate them from firms outside the incubator. It would allow them to generate income for the incubator, and perhaps also if sales are expected allow them to get better prices. It would also increase the chances of sustaining here the employment center.
While is seems that other countries envy us for our "achievements" in innovation, which seem to vanish with time, we could learn from our experience and try and make the legend come true.