Archive for the ‘Business’ Category

The Affect of Minimum Wage on the Recession

December 18, 2008

A few days ago while standing in the Wal-Mart line the cashier asked me, “Hey, didnt you go to Southern Adventist University?” Ends up we were classmates about 9 years ago. He told me after graduation he’d spent most of the last decade managing a construction firm until it went under. Thus the entry level job at Wal-Mart.

I don’t think this is an isolated incident. As industries shake up highly qualified and motivated people end up jobless. Smart employers snap them up in jobs that normally never hope to attract such talent. The people that normally occupy those jobs shift lower into less desirable jobs, or no job at all.

Established companies aren’t the only ones shopping for unemployed talent Entrepreneurs also thrive on the low cost labor. Back in the 1930’s my grandpa spent a summer working in an entrepreneurial startup–an iron mine. The project failed and he walked away with only food and board. (And some great stories for his grand kids)

Low wage employment isn’t optimal, but at least it keeps money flowing in the economy preventing further disruption. As conditions improve (due in part to some of these new businesses succeeding) the demand for labor is slowly restored. The competition for employees pushes wages back up to their pre-recessionary rates.

But can this happen today? The Federally mandated $6.55 an hour minimum wage means employers must risk at least that much on an employee. For most business that’s not much of a barrier, but for some new business putting out that much cash may simply be too much risk. Will people at the bottom of the economic ladder go unemployed instead? Will this extend the recession? The evidence suggests the answer to both questions is yes.

 


*I’d like to give credit to the Let’s Talk Money show on Chattanooga’s WGOW whose discussion on whether the minimum wage increase caused the recession inspired me to write this article.

Why Didn’t it Take Off? Pathology of a Floundering Web 2.0 Startup

May 25, 2008

Tipjoy is a web startup for tipping web authors/personalities funded by Y Combinator. It went live in February to decent press coverage. The concept is simple—if you see something you like tip the author by either clicking on participating author’s link, using the Tipjoy bookmarklet or going to the Tipjoy site and entering the URL.

It’s a good idea and the founders have worked hard to overcome a number of the inherent problems with small money transfers. However, there’s one little problem remaining. It’s not generating revenue.

On the main page of Tipjoy the technically savvy, but perhaps not as financially savvy, authors post their latest statistics:

 $2,519.01 (red arrow) is not a large sum of money. Compound that with the time period indicated by the blue arrow. Elsewhere in the site founders explain that they charge a 3% transaction fee. In other words they pulled in $75.57 over 4 months. Nice. Probably doesn’t even cover hosting fees.

Of course this isn’t the full story. There is likely between a few hundred up to a few thousand dollars sitting in accounts either waiting to be given out as tips or claimed by the tip recipients. With money markets at around 2.5% that may represent another $20 in interest. Thrilling.

It appears the failure to generate revenue has had it’s costs. The founders haven’t blogged for nearly a month—and previous postings are uninspiring to say the least. It seems that around the end of March the founders attention wandered from the site—after less that 2 months live! How many successful businesses ever got it right in that short of time? <Right now imagine a typical rant about generation Y’s failure to follow through>

 OK, now clear those thoughts. Generation bashing is never fair. Let’s look at the site itself.

 First, what’s right.

  1. Design: It’s an easy to understand, easy to use site. The color scheme is clear and inviting.

  2. Concept: The idea is simple and the implementation is straightforward.

  3. Technology: Excellently implemented. The site isn’t foundering through lack of technical expertise.

  4. Ease of use: It took about 15 seconds to sign up. Try it.

 So what went wrong wrong? Let’s disassemble it a bit:

Product: In my opinion the product stinks. No, not the idea. The idea is great. Not the implementation. It’s a solid web site. But the product. Let me illustrate. As you may know I live in Tennessee and it gets hot in the summer. A few years ago a deer got hit by a car along the road I drive to work. After a few days of that mid-summer heat that thing could be smelled from nearly a mile away. Some people may take from that experience that deer stink. Well, not all deer. Rotten deer. This product is rotten.

Tipping is a very abstract “product”. “Social well being” is probably as close as it gets. One evening my wife and I dined at our local Olive Garden and by bad luck ended up with a barely competent–if that–waiter. Luckily the lady serving tables near us was very good and bailed him out a couple times. Understandably his tip was very small. But on the way out the door I slipped her a couple bucks. She felt good and I felt good.

Replicating that experience on-line is difficult. Tipjoy is notably lacking in that regard. The main page is made up of a bunch of (dry) statistics. Hello, this isn’t Microsoft Excel! What are they trying to sell—business analytics?? Where’s the sidebar advertising how your Tipjoy data can be added to your Facebook/Myspace site? Where’s the banner that says “Show your girlfriend you really like her latest Facebook post?”. Where’s the “attach a message to the tip” feature? Tipjoy is a social site—it must market itself as a social service. It must integrate into life, or life will continue to pass by outside of it.

Advertising: People have to know about a site in order to use it. Tipjoy did enjoy good initial coverage from TechCrunch and other scattered outlets. However, it lacks long-term support. If I were them I’d contact as many bloggers and Myspacers (if that’s what they’re called—I’m getting too old school for that stuff) to include links on their sites. Tipjoy must become integrated into the social framework.

And one last thing. No credit cards? Hey dudes, it’s 2008, Web 2.0. Instead of “Coming Soon” it should say “transaction charge”. Leave the choice to the consumer.

Lesson: To succeed in Web 2.0 your site can not be an optional layer added to people’s lives. It must be inserted directly into the lives of the consumer. Until Tipjoy finds that recipe it can only founder.

Like this article?  Leave me a tip


 Disclaimer: I have no investment in Tipjoy, nor do I have any business relationship with the company. I don’t know the founders personally, but best wishes to them. I have only the greatest respect for anyone who has the guts to start a new company. My analysis may sound harsh, but remember that anyone who gets as far as Tipjoy is clearly a star.


Want the same analysis on your web 2.0 business?   See the about page for details

The Meaning of (Software) Quality

February 14, 2008

Introduction

I had just finished reading a bedtime story to my young son, but before putting up the book I flipped a few pages to see what was coming up and came across a nice full page COLOR picture. Keep in mind this book is an original 1950 edition of Uncle Arthur’s Bedtime Stories. In 1950 color was not an easy or affordable technology. The color photos were carefully chosen and strategically scattered—one every few chapters. My son and I paused to take a look at the picture before putting the book up.

Color photos are a dime a dozen now.  I get fancier printing on credit card offers. Yet, a slightly grainy 58 year old photo still had the capacity to engage. It was something extra that had been put into the book on purpose to make the book extra special. In short, it had quality.  Quality that was still obvious 58 years later.

Quality in Software

Of all the traits we strive to put into software, quality is one of the hardest. Merriam Webster defines quality as “a degree of excellence”. But excellence at what? At the most basic level quality is a measure of functionality.

Base Definition: Quality Products are Accurately Specified and Match the Specification

That doesn’t necisarrily mean a formal set of “design documents”. However, every software system needs to have a clearly defined purpose and it needs to actually work! We spend a lot of effort on this—requirements analysis, use case analysis, unit testing, regression testing, etc. And for good reason.  If the software “doesn’t work” it will never achieve anything. However, once we’ve satisfied this basic level of quality we should move on to a higher quality.

Advanced Definition (Inherits Base): Quality is the Delivery of Exceptionally Meaningful Features

This is “fuzzy” and “illogical” and that’s OK. A good illustration is the classic Star Trek tension between Mr. Spock’s Volcan “logic” and the “illogical” humanity of the rest of the crew. Software is typically approached with a Volcan perspective–which is OK when defining specifications and testing logic.  But software is for humans. It’s the human quality that allows iTunes to realize that when I put a music CD into my drive it means I want to rip it. (Media player thinks I want to click on the “CD” tab and then click the “RIP CD” button)  Microsoft misses from time to time on the human level, but it has made some hits.  When Word started suggesting spelling corrections as a right-click mouse button option I was overjoyed–no longer did I have to wait and spell check the entire document and loose my sense of context.  I could correct my mistakes immediately, in context, as if they never happened. I still feel a sense of liberation each time I zap a misspelling. 

Summary

Quality is a two sided coin.  Quality is about accuracy, but it’s also about emotion.  Quality software must work.  But it also must give something meantinful to the lives of the people that use it.  “Meaningful” may be “fuzzy” and “illogical”, but it’s what divides the accurate from the fantastic, the good from the great.

Microsoft’s Yahoo Blunder

February 3, 2008

 The news of Microsoft’s 40 billion offer to buy Yahoo astounded me. (CNN) Almost in a daze I listened to it again and again on one media outlet after another. All reported the same story: Google is gobbling up the lucrative Internet advertising market and Microsoft wants a share. I’ve seen some bad business moves—Time Warner’s purchase of AOL for example. But this one tops the charts. Not only will it fail. It will fail spectacularly.

Microsoft has had a remarkably successful run selling software. I use this term rather loosely since much of the software it sold is operating system code. Selling “code” may be a better term. Excluding a few minor (and late) exceptions—such as the Xbox–Microsoft made its fortune selling code.

In the early days selling code worked well. In fact, it was the only model around and it still works well in niche markets. In the 80’s anything computer related was by modern standards a niche market. Microsoft focused on owning the largest of these niches and rode those markets to stardom. Microsoft still thinks in terms of owning software market space. Even worse, Microsoft seems to think that everyone else thinks that way too.

This is where Microsoft comes into direct ideological conflict with Yahoo and Google. Yahoo and Google do not sell software. They sell advertising. Yahoo and Google don’t act like software companies. They don’t think like software companies. Because—they aren’t software companies! They are advertising companies. Microsoft doesn’t understand the advertising business. Most people don’t. Although it’s a very simple business.

Definition: Advertising is the art of consistently drawing lots of attention.

That’s it. Find a way to consistently draw attention and you have created advertising space. If you don’t believe me—think about the Super Bowl. It is the king of advertising. Why? It gets LOTS of ATTENTION. World class sports and world class entertainment rolled up into one massive show available for—you guess it—FREE.

Google has been winning the war on Internet advertising war because it’s really good at getting lots of attention. In addition to providing the best search engine on earth Google has found another way to get lots of attention: Offer free software services. People flock to Google services by the millions. Google doesn’t really care about the “code markets” it’s poaching. It doesn’t even think in terms of “code markets”. Google is just looking for “cheap” attention—and it’s getting it. The fact they have eaten up some of Microsoft’s “code markets” is mostly an accidental byproduct of their business plan.

Yahoo is very similar to Google, just less successful. In order for Yahoo to regain momentum it must capture advertising space (i.e. get and hold attention) quickly. That will come in direct conflict with the existing Microsoft for-sale software model. Microsoft will never let Yahoo poach any of their “code markets” until those products are no longer producing significant revenue. By that time Google will have poached all the useful advertising space and moved on. A merge with Microsoft is the death-knell to Yahoo’s ability to compete with Google.

On the other side, Microsoft gains very littel from Yahoo.  An advertising company has very little in common with a niche software company. It can do nothing to defend it from Google. Microsoft may gain something in intelectual property and people, but certainly those things can be aquired much more cheaply from small startup firms. Ultimately, the main problem with the Yahoo acquisition is it will distract Microsoft from what it really should be doing—abandoning declining niches (like OS and Office Products) and moving into new niche space. The purchase of the ProClarity business intelligence suite was an excellent start down that road. Microsoft needs to build on those kind of small purchases.

I predict that if Microsoft goes through with the Yahoo purchase it will find itself caught between being yesterday’s niche software player and tomorrow’s advertising company and will fail at both.

 

Disclosure: I do not own any positions in either Microsoft, Yahoo or Google.

Hints for Self Management

August 6, 2007

In spite of the micromanagement horror stories that regularly appear on the whole IT is very self-managed.  Unfortunately, most of emerge from the university with little more than “Introduction to Management”.  Until the schools start addressing that shortfall here’s a crash course.

Peter Drucker in his classic work The Practice of Management identifies 5 key areas of management*.  Here is that list (minor modifications) with thoughts on application to self-management.

1) Set Objectives

Software systems typically start out a mess—and get worse over time.  One of the reasons is that so much is done for the short term with little long-term focus.  Force yourself out of that mold.  Look ahead 3 to 5 years.  Use designs that anticipate needs for change.  Refactor and fix old code.  Think long horizons.  Daily objectives are fine—but it’s better to think of accomplishments in 3 to 6 month time segments.

 

2) Organize

If you work in a typical corporate IT shop, you are probably equipped with some sort of automated to-do list.  (They go under a dozen names—ticket system, request system, etc.)  It is tempting to think that the system alone will organize your work.  While useful, it certainly will not organize.

First, users don’t report everything.  At best the system will contain only a slice of your user’s real needs.  Furthermore, if you have much of a backlog, much of that slice may be out of date.  Simply pulling the highest priority request does not mean you’re fulfilling the user’s real needs.  If at all possible, get to know the users and what they are trying to accomplish personally.  Then pick what you work on accordingly.  Every minute spent understanding the world from their perspective will pay back in hours.

 

Once I spent weeks coding a piece of functionality.  After a few days I began to wonder if it really made sense—but it was requested so I proceeded.  I finished it up and demoed it to the primary user.  She looked up and me and said “You aren’t going to like this”.  Yes—you guessed it–two weeks work, completely thrown out.

 

In addition to incompleteness, automated systems come up with a random ordering of requests are not technologically related.  (Even if categorized—the categories are the users, not yours)  Technological schizophrenia results in high context switching costs and high costs from lack of learning–you never work at anything long enough to learn it deeply enough to do a quality job.  User requests must be groups into technically logical units and worked on in concert.  However, this must be compatible with the user’s goals—another reason to take the time to get to know the user community and their goals.

 

3) Motivate and Communicate

Software developers are notoriously poor at documentation.  One of the main problems is so much documentation is so formal.  Formal documentation is no fun to write and rapidly gets out of date.  I’ve found that informal in-code documentation and wiki sites are far more effective. 

When writing documentation—think big picture.  What does this system do?  What does this class do? Etc.  If (when) your code gets into the hands of another programmer they can always figure out the details (by reading your code), but they won’t know the reasons behind your design decisions.  Understanding how a system was shaped can really help in making decisions to modify/extend a system.  In short—don’t document code: document design.

 

4) Measure/Evaluation

All the great software developers are I know are pretty brutal self evaluators.    We are probably too good at self evaluating and undermine our own (and others) confidence.   Keep in mind mistakes and errors are statistically random.  Some days are going to be worse than others.  If you aren’t creating a few errors—you probably aren’t writing much code.  J

5) Personal Development

Read, read, read.  I spend my lunches reading blogs like Joel Spolsky’s at http://www.joelonsoftware.com.  Get involved in local user’s groups.  For example–my hometown’s .Net user’s group (http://www.chadnug.org).  Sometimes bosses will even let you cut back on work time to attend meetings.  J

 

*The Practice of Management  Page 333, 334

** For a great series on (real—not self) management in Software see Joel Spolsky articles starting with: http://www.joelonsoftware.com/items/2006/08/08.html