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Sunday, February 22, 2009

GreenCards, GreenBacks, Startups & Bailout

Thomas Friedman finds the US to be still bursting with innovators looking for capital. He points out that companies like Intel, were started in recessions, when necessity makes innovators even more inventive and risk-takers even more daring. He advocates more government targeted investments in startups. Friedman emphasises investment in the future (startups), not sustaining past failures through bailouts). Startups created with a focus and in time can become huge success reckons Mr. Friedman. In an earlier column, Mr.Friedman pointed out how more immigration could provide a booster to the US economy. I have to agree with Friedman when he points out that money at the hands of those capable of focussed efforts towards innovating would fetch better results and create more jobs. In this fast changing internet centric world, there a multitude of fresh opportunities ready to be tapped by a new class of entrepreneurs. Therein lies the opportunity to ideate, start ventures, give birth to new solutions/products, create jobs and generate wealth. In general, I find that of late, some forward looking emerging nations are able to make their investments in a more focused and productive way. Fred Wilson feels that government need not help the VC’s –they are already flooded with capital. A recent Goldman Sachs report notes that VC investments were down 8% in 2008 to $28 billion, with investments in Tech down 16% to $11 billion. Tech again attracted the most VC money at 39% of the total in 2008. To be fair to the VC community, maximum investments is going towards the cleantech space but as Friedman points out tax credit concerns almost crashed the cleantech industry last quarter. I like Don Dodge’s view that VC’s need to invest more in services and Sramana’s pioneering view that angels should also be allowed to create pools of tax-free capital for investing in start-ups–especially in unknown, unproven entrepreneurs who often don’t have access to venture capital and that it is not so different from a tax-free account set aside for a child’s education.


Thursday, February 19, 2009

The Real Leaders!

Close on the heels of Barry Diller’s Lay Off The Layoffs talk, comes a brilliant note form Mark Hurd. Faced with a deep slowdown and disappointing growth numbers, he highlights the challenges for HP and his plan of action.
From a productivity standpoint, you’re supposed to reduce headcount on par with declining revenue. If you believe the environment isn’t going to improve, you should take a bigger cut to get in front of the problems. Confronted with the challenge of 20% revenue down, he argues that a company wide level restructuring /retrenchment is not the solution as he believes that he does not see a structural problem of that magnitude(to reduce 20% workforce). In his words, he sees HP as fundamentally sound, and when the economy picks up, he wants HP to be strong, and to take share and to outgrow the market. Proposed action : Further variablize our cost structure by reducing base pay and some benefits across HP. CEO base pay will be reduced by 20 percent. The base pay of Executive Council members will be reduced by 15 percent. The base pay of other executives will be reduced by 10 percent. The base pay of all other exempt employees will be reduced by 5 percent. For non-exempt employees, base pay will be reduced by two-and-a-half percent. Additional efficiencies, including changes to the US 401(K) plan and the share ownership plan, will also be implemented. and all of these actions would be subject to compliance with local laws and regulations.
In an age when the corporate chieftains believe in laying off as a safe and acceptable option, it requires real courage and determination to hold on to your people on changed terms , motivate them to contribute more for a fast recovery and eventual growth. Looks simple but 90% plus organizations do not think that way – they act without class and no doubt – Losers!

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Monday, February 09, 2009

Evolution Of A New Digital Newspaper Industry

Courtesy of Techmeme,I saw this nice piece by Mathew Ingram on the Times move to make their digitial presence as a platform, extensible via API’s. Basically the NYT team has accumulated quite a few blocks/articles over the last 28 years — all of them tagged and labeled. This means programmers can now easily access 2.8 million news articles starting from 1981 and more importantly thanks to the great effort of the Times team - sort them based on 28 different tags, keywords and fields. The richness of the data and its organization looks mind-boggling – Derek Gottfrid claims that the Times articles can be searched using the 35 searchable fields Content is data at its core –properly parsed and efficiently indexed content can be made available in various formats and can be put to a variety of use. The newspaper industry is reeling under call kinds of pressures. There are calls for bailout of the industry! The Times initiative is indeed a pioneering one. At a time when there is a widely held view about the demise of the newspaper industry, pioneers show how by embracing instead of resisting the technology change, they can retain their pioneer status. Clearly the newspaper industry’s problems are similar in nature to that of the music industry’s challenges before Apple i-Pod days. The thought of buying a complete album looks outdated in this i-Pod age where once can safely buy good songs at much reduced prices. This forced the music industry in large measures to transform their business model around iPod/MySpace. The print media needs to look at similar moves and the NYT move is commendable – for its vision and execution. Clearly this will pave the way for the evolution of a new future for digital newspaper industry.

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Tuesday, February 03, 2009

The Free & The Paid

Chris Anderson has an excellent post on the ‘Economics of giving it away‘ in the Wall Street Journal. Very insightful article indeed.

He is bang on when he writes, “The last decade has seen the extension of this “two-sided market” [one side pays while the other gets for free] model far beyond media, and today it is the revenue engine for all of the biggest Web companies, from Facebook and MySpace to Google itself” In other cases, the same digital economics have spurred entirely new business models, such as "Freemium," a free version supported by a paid premium version. From a consumer perspective, it should only help. After all, when you have no money, $0.00 is a very good price. Expect the shift toward open source software (which is free) and Web-based productivity tools such as Google Docs (also free) to accelerate. These same consumers are saving their money and playing free online games, listening to free music on Pandora, canceling basic cable and watching free video on Hulu, and killing their landlines in favor of Skype. It's a consumer's paradise: The Web has become the biggest store in history and everything is 100% off. The psychological and economic case for it remains as good as ever -- the marginal cost of anything digital falls by 50% every year, making pricing a race to the bottom, and "Free" has as much power over the consumer psyche as ever. But it does mean that Free is not enough. It also has to be matched with Paid.

What chris says in indeed true in the digital world but the service world is almost following suit – therein lies the secret of an emerging all encompassing business model.

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