Category Archives: Favorites

Those posts that I like (unique perspective, interesting writing), get referred to others often, or have been popular in the community.

Start with the End In Mind: Switching Business Models is Hard

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I have come to a conclusion that I think is important to share with all of you out there inventing new products and companies. I used to believe that great products could find their way in the world, that good products, once customers got ahold of them, could find their way to business models that pay for their existence, and that with enough customers and enough turning over rocks, that would become apparent.

I no longer believe that is the case.

I now believe that a semblance of the business model has to be in place before release and that it does no good at all to hunt and peck for it later. Part of proving that the product is viable is proving that the product can generate enough money to support its existence. The business model is what defines that.

The entire company, at the beginning, has to focus on proving that the product is viable. And the only way to do that is to focus on proving that business model from the beginning. Otherwise there is no business.

It is possible to pivot or change but by human nature it is extremely hard to pivot from a business model that is generating revenue, just the wrong kind. When that income is the only thing that stands between you and destitute, when that income is the thing that feeds your two small children, it is almost impossible.

With powerOne, I proved that we could generate one-off income in the App Store. At $5 per copy its a grand bargain. I always thought that I could eventually figure out how to turn that into recurring revenue. After all powerOne has been very successful! Apple has featured it a number of times now, we have consistently been the number one selling financial calculator app for both iPhone and iPad, and customers love it.

But powerOne is what it is, a reasonably successful product (money-wise) that will never earn enough to pay the bills by itself but has been successful enough that throwing away that success and betting it on a different model would be devastating.

So as we start a couple of new projects — one close to release and another coming later this year — I try to learn from powerOne and try to focus the learning on business models that can sustain us and help us thrive as a business. I’ve enjoyed this too thoroughly for 14 years to quit now.

Generational Technology Change Means New Winners

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We are in the midst of a massive disruption of an entire industry: the technology space. My children, currently aged 5 and 3, are already using technology in a way that previous generations did not. And we are seeing a massive change coming from the major providers of software in this space: Apple and Microsoft.

Apple, of course, built off of the work Palm did a decade ago to make touch interfaces mainstream. The iPad, though, is the culmination of that effort and companies are rushing to emulate their work. Microsoft, too, is now demonstrating a massive change in the next generation of Windows. The video is extremely intriguing and could modernize Microsoft in one fell swoop… if the rest of the company falls in line.

There has been a lot of commentary on Windows 8 preview. John Gruber, Jared Newman and others focused on the touch interface and whether it really can be combined with the old world of mouse-driven interfaces or whether a clean break is required from the past. I’m less interested in this issue. I think we need to play with it to see if it really works.

Instead I want to focus on the massive change this means for developers. I’ve been analyzing the history of spreadsheets and realized that each successive computing generation meant a new leader in the area of spreadsheet. Visicalc dominated the first wave when the Apple II series was the most popular. Lotus 1-2-3 dominated the second wave when DOS was the powerhouse. Then Microsoft took over when windows-oriented machines (small “w”) took over. Excel has been the mainstay on Windows (big “W”) and Macintosh computers ever since.

But what is emerging now is the fourth generation. The iPad, Android devices, Windows 8 all signify this change. And the question becomes how does the software we use change to match? With this change is a massive opportunity to re-write products and change expectations. Was the spreadsheet (and calculators) the past for calculation and something else is the future or will a new company emerge with a slightly improved spreadsheet but the form factor and functionality will likely remain the same?

Mike Mace said it cleanly:

…ask yourself how a new competitor could use the platform transition to challenge your current products.  Here’s a sobering thought to keep you awake tonight: the odds are that the challengers will win.

I’m placing my bet: I think the future will be different. I’m betting that the direct manipulation of on-screen objects by touching them makes products designed for a mouse and keyboard obsolete.

Computer Science Is a Misnomer

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I was talking with a good friend recently about his start-up company and he was asking me questions about working with developers. I commented to him, off-hand, that the idea of managing software development changes drastically when you think about developers as creatives instead of scientists. Artists, musicians, software developers all spring from the same well.

My friend thought this profound and suddenly understood so many things he couldn’t get before like 60 hour days, a disdain for distractions, odd work schedules, and behavorial hiccups that he couldn’t relate to scientists.

I thought it ordinary, after all I have managed developers for over a decade and have been one of them off and on during that time. I always felt that calling developers computer scientists was a disservice, that placing them within Math departments only described a quarter of the job description.

I learned to program because I wanted to invent. Before programming I used to make dice and baseball card-based baseball games on paper. Programming expanded the realm of possibility, the ability to be creative in a new medium. Learning various languages feels that way to me also. Some artists become proficient in water color or charcoal. Programmers become proficient in JavaScript or C.

The funny thing is I never thought to share this with anyone before, figuring most in the computer industry already knew this. But my friend is a 30 year Silicon Valley veteran who worked with some of the best and brightest. If it’s profound to him, maybe it is profound to you, too.

A New Year, A New Perspective: Web Economics in an App World

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January starts my 14th year running Infinity Softworks and being in the mobile space. I have seen this market change drastically in those years, from a market dominated by Palm to a market dictated by Microsoft, from handheld computers to smartphones, from Nokia and BlackBerry to Apple and Google. And, from my perspective, the most important change: from software to apps.

I have struggled with these changes the last few years. The methods to market an app have changed drastically with the introduction of app stores. The levers of marketing — place, product, price and promotion — have been reduced by one, eliminating a lot of control we used to have as developers, and the extreme focus of finding all apps in the same place forces a decrease in price. (Amazing how a speech I gave two years ago is still applicable. I just didn’t realize how much.)

powerOne calculator for Palm OS and Windows Mobile ran anywhere from $60 to $160. Now our attempts to raise the price to $10 fails. $4.99, it turns out, is the optimal price. As Fred Wilson pointed out, the economics of mobile are trending toward web economics where alternative licensing models are the norm: micro-purchases, subscriptions, freemium, ad-supported. No surprise that the revenue generated from in app purchases (micro-purchases) is about to pass licensed software revenues.

But while the economics of mobile may be converging with the web, I am increasingly convinced that distribution will not. In other words, I don’t believe that the default way for consumers to use apps in the mobile space will be via a web site; instead, the average consumer will always prefer to download apps. (This is not to say we won’t use the web technologies of JavaScript, HTML and CSS to write them.)

Horace Dediu lays out this argument beautifully, although I don’t think he thought of it the way I am, in his recent article on the mistake of making strategic decisions based on technology:

Google should be asking itself if mobile computing will allow browsing to remain the predominant interface for internet consumption. If, as I suspect, it won’t then no amount of browser tweaking will help. The browser is already infrastructural. It can’t be the object of strategic focus.

To get an idea of how this would work consider Flipboard. Flipboard turns the entire browsing paradigm inside-out. Instead of consuming social media inside a browser, the app presents it in a more natural magazine-like format.

The browser is infrastructure: it is the technology we use when we don’t have an app to use. At least for the average consumer (not most of us technologists who will read this article) it is far more comfortable to run an app then open a browser, type in a url and use a web site. The browser  — or more specifically the web — is infrastructure. It acts as a protocol that lets us keep currency rates up-to-date or connects us to news or enables sharing with friends.

And that leads me back to powerOne. In the past three years of developing powerOne first for BlackBerry and then iOS it has become clear to me that that product and that business model are not sustainable. powerOne is a “heavy” application, extremely complex in development and advancement. While it goes far beyond what other calculators do in the iOS App Store, the app store dynamic makes it nearly impossible to differentiate from the other 5,000 calculators there. The complexity of the app means it takes six to nine months to port to a new platform, taking away this small company’s nimbleness.

There is another, much more dangerous problem with powerOne. We built our market in the old days with partnerships and affiliate relationships. We bundled with Palm, Sony, Garmin and other hardware vendors. We did affiliate deals with leading companies in real estate and education. We partnered with leading marketers in the space to promote our solutions. These models — where us and the partner make money on every transaction — are gone because of the diminished flexibility of app stores. We are restricted to the models that make sense in those environments and affiliate deals are not currently implemented.

So it has become clear to me that my thinking needs to change. It is critical to think about apps as connected entities to the world at large. It is critical to think about apps as “light-weight” and extremely portable so we can remain nimble and take advantage of the shifting market dynamics and the fact that our customers are often using three or four different computing devices. And most of all it is critical to think about how to market in a world where all purchase decisions are compressed into 2000 character descriptions and a few pictures. I have to think about the web economics and how they affect our business.

The business has changed, web economics are taking over, and how we market and build products needs to adjust, fast.

Are You the Customer or the Product?

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If you aren’t paying then you aren’t the customer, you are the product.

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A customer emailed me last evening and asked me to justify the price of powerOne for iPhone, iPod touch and iPad. At first, I have to admit, I was a little insulted but as I thought about it more I decided it was a legitimate question. In this day and age where every software product seems to be free, why should he pay?

And my answer was pretty straight forward: if you aren’t paying then you aren’t the customer, you are the product.

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The Wall Street Journal recently studied 101 iPhone and Android apps and found these apps were commonly relaying personal data about the user, in some cases current location and in others age, gender, even a user’s contact list, to third parties. In almost all of these cases the WSJ was looking at free apps.

Am I surprised? Of course not. Because if you didn’t pay then someone else did, and that someone else wants as much information as possible. My role as a developer is to satisfy my customer to get more of them to pay me money. If you aren’t my customer then someone else is, and then my job is to satisfy them. And that means providing them with what they need to make decisions, even if it isn’t in your, the users, best interest.

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Google, I think, thrives beautifully in this system. You get free stuff (hurray!) and they get money from advertisers. Google is in the business of collecting every scrap of information they can about you so they can do a better job of selling to advertisers.

There is another benefit to Google: since you aren’t paying for the software then Google doesn’t need to support you. Since you aren’t paying for the software than Google can cancel products at any time without worrying about what you think. After all their customers — advertisers — just shift their dollars to a different Google product.

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But wait, you say! If I don’t use these free products than they don’t have the customer base to sell to advertisers. I’m their customer, too.

Sure, you are. Kind of. But in reality you aren’t. It is in Facebook’s best interest, for example, to keep you engaged but they will only do this to the extent you leave their free service. This means that they will push the boundary of what they can get away with. It means they will, as the saying goes, implement today and ask for forgiveness later.

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There are lots of reasons to pay for software. You want to get support, you want to reward the developer, you want to make sure that the app keeps improving. But the most important one is that you want me, the developer, beholden to you and not to some third-party that doesn’t have your interests in mind.

Always remember: If you aren’t the customer, you are the product. And the customer is the one who pays for it.