The truth about crowd funding
Most web tools that are re-shaping commerce are doing one thing, handing over control to the users from the producers. They are democratizing the factors of production so that anyone with access and ideas can now play. They do this through cutting out two things that existed and thrived in the industrial era: middle men and gate keepers. The power of collaboration has been touted as a revolution consistently since the the word web 2.0 exited the mouth of Tim O’Reilly. I think it is entirely justified. This is particularly the case with the latest disruptor to emerge – crowd funding. The reason that funding our projects from the crowd changes everything, is because it doesn’t really change anything.
All things have always been funded by the crowd, we just didn’t know it before.
To bring this idea to life let’s consider a couple of examples:
Debt funding via banks is a form of crowd funding: They take our deposits, assess and carry the risk of ‘sub-letting’ our deposits on margin. Essentially banks make money from crowd funding projects and managing the organisation of it.
Capital raising via VC firms is a form of crowd funding: They take large portions of their venture money from Superannuation or 401K funds which has been allocated to ‘high risk’ investments. This is typically between 1-5% of the total asset allocation. Again, our money is being allocated in our behalf from which transaction profit margin is made.
The point is that pretty much every type of investment that involved aggregated money, has always been the money of the ‘audience’ hidden within a structured system. A system which we are now re-structuring with deomcratised tools so that we can organise our capital amongst ourselves. So that we can access each others funds without permission from financiers. So that we can decide what is worth funding. So that we can make the margin available on float capital. And this is just the start of the inevitable changes to the financial system.
The very truth about crowd funding is that before it arrived in its current ‘web organised’ form – we got locked out of the system that our money funded. And it feels like crowd funding of micro projects is just the begging of something much bigger and more important. The question for aspiring entrepreneurs is how can we disrupt the finance industry further with newly connected commercial eco systems?
The open API secret
The biggest flip the technology age has done on the industrial era is the open API. For the uninitiated, an open API (Application Program Interface) is a word used to describe sets of technologies that enable websites to interact with each other. It is also a system where web companies ‘open up’ their platform for external non affiliated software developers to create applications on. Facebook most famously did this with their ‘Facebook Platform‘.
While this sounds like some kind of nerd nirvana, it is actually a counter intuitive move that forms a large part of the marketing genius of social web 2.0 applications. And that is outsourcing the R&D to total strangers. That is, entrepreneurs who have new and interesting ways to mash up their content. It is quite revolutionary in fact. Corporations from the pre-web industrial era would rarely let people use their logo, let alone open up part of the factory for hackers to come in and try and build something interesting. But this is exactly what is happening, the most amazing stuff is usually coming from external organisations and the entire ecosystem is the beneficiary.
- Existing web companies get their new product development for free
- Entrepreneurs get a shot at being acquired by the firms whose API they focus on
The open API idea has to be one of the major reasons why technology companies are eating the world. The only question remaining is why don’t old world industrial companies open up their doors to some new, fresh and external innovation?
Business trends in 2011
A great piece from the Cannes Advertising Festival which is a great summary of key trends in business, more than advertising or marketing. Enjoy!
Car smash marketing – Rebecca Black
I’m not about to make any comment on the song Friday, or about Rebecca Black. She seems like a nice enough kid having a crack at the music industry.
It is interesting how anything has a chance in a zero cost media world. Sure, not everything will cut through, but in 1991 Rebecca didn’t stand a chance. She had no where to put her song (Youtube), nowhere to sell it (iTunes) and no one to spread it (Twitter / Facebook ). The invention of all this infrastructure made it possible. The thing that is different about the infrastructure versus 20 years ago is that cost of entry has been removed. Extremely good and bad start in the same place. And occasionally something unusual makes it through – so long as it is extreme in nature. No-one has placed multi-million dollar media bets on selling Rebecca’s song, so the cost of promotion has been reduced to taking 3.48 minutes from our day, or typing 140 characters. It’s like a car smash, we can’t help but slow down and take a look.
The question it makes me wonder, is if there is a valid strategy in being the ‘worst’? And if there is, how do we make sure we qualify? And if we qualify, how do we then transform?
Love or or hate her, right now Rebecca has 100% share of voice.What that turns into is entirely up to her.
Simultaneous radness
So how do we leverage a human revolution from a commercial perspective? It’s a big question. And even though the web has gone a long way in deconstructing power bases, business and human evolution are still inextricably linked. So I thought I’d post a few things that matter in a digital world so all players (people and commerce) can create value for each other simultaneously.
Rules of engagement
- Authenticity pays. Be real, don’t pretend to be something, or someone your not. Brand respect comes from understanding the rules and respecting the on line world as the real world and vice versa.
- Speak with a human voice. We don’t listen to Corpi-speak. We listen to voices from people. We ten must personify our brands.
- Engage the crowd. They own our brands. You want proof. When they stop feeding our brand (buying) it dies. We must pay the respect the real brand owners deserve. It’s always been this way, but we didn’t know…. because we couldn’t hear their voices. Now they they have a voice, we must act on it. We have to let our people hijack our brands. User Generated Content and Crowd Sourcing is where it’s at.
- Compound effort. Benefits take longer to garner in the new world. It’s not like the old days of a large media campaign with instant results. We are moving from a low human capital, high financial capital environ, to a large human capital, low financial capital world.
- Learn on the job – it can’t be strategized. It’s too unorganized and changeable… the web is humanity in digital form. Then they only way to play is to embrace the chaos and be part of the conversation. It can’t be justified to a board room, but the companies and brands who choose not to play will be wondering what happened a few short years from now.
Most of all, have fun doing it.
Feed your conscience
I’m currently working on a project with a social enterprise called Abbotsford Biscuits. Which I am proud to be involved with.
Abbotsford Biscuits is a social enterprise that had its genesis back in 2005. It exists to employ people who have been excluded from mainstream training and employment. Abbotsford Biscuits has an ambitious vision of becoming a self sustainable social business over a 3 year period. And I’ve been called in to help make it so. My part will be getting the company involved in digital media and getting people like you (those who care about stuff because it’s worth doing) involved.
First – how good is this tag line:
Second: I’m aiming on for some crowd sourced strategy ideas to supplement what I already have planned. So I’d love some input in the comments.
The current plan includes the following ideas:
- A loyalty club. Where shareholders get paid in biscuits not money. Where members can get customized gourmet biscuits. Ideas include members own design or company branded biscuits?
- Fund raising for other organisations utilizing AB products.
- Customised biscuits for members which can be their own design.
- Micro financing to support the brand and grow the brand.
- Access to exclusive events with leading Australian chefs.
But it’s an open book, which could make this project a lot of fun. I’d love some input.
Here’s a couple of pics I took while on premise recently, they look like twitter biscuits!
Yummy!
Can boring brands create word of mouth?
This is the sixth of my crowd sourced blog entry ideas as suggested by Ben Rowe. Ben wanted to get my thoughts on the following:
“Can boring brands and products create word of mouth?” Discuss.
In a word, no. But given the task is to discuss, I’d say the fact that matters here is the word emotion. Does a brand generate an emotional response from the audience. Does it generate passion and fervor? Good or bad? If the response isn’t emotional. There will be no discussion.
The product or service may be very good, have a reasonable price and even be a market leader. Yes it may suffice or dominate it’s category, like cornflakes do as breakfast cereal, but I’m hardly about to email my brother with a link to the Kelloggs website.
We need to think about things that are emotional responses: Joy, Anger, Sadness, Elation, Fury, Disappointment, Love, Hate….
The heavy emotions every human is familiar with. A brand has to engender these type of emotional responses to get on the word of mouth agenda. Case in point is banks. They are seen to take advantage of their customers, and we have a strong distrust and hate for them. And even though the response is negative, it’s emotional and generates a great deal of discussion. That is, it’s not boring. It’s often the case that brands which have factional parties in the for and against camp (love / hate) generate the most word of mouth. Some recent examples of brands with this effect include:
All of these have been worth talking about. Our brand reputations as people wouldn’t be hindered if we mentioned these.
As far as start ups are concerned we should thinking less about trying to generate a viral campaign, and more about the emotional impact our offer has on our audience. Being new and innovative isn’t enough, it’s got to have an emotional impact on people. With boring brands we are simply indifferent, and so we just get on with our lives.
Selling a vision
Aj Kulatunga of Dream Build Inspire Lead asked me via twitter the following question:
Quick advice. #1 Tip for selling a vision ?
So I thought it was worth sharing the answer here because the answer had to be delivered in less than 140 characters.
It’s about their vision, not yours. You need to demonstrate what’s in it for them. Not you. Let them own it. Perceived co creation.
Why scoreboards matter
Humans are compelled to count. We count everything. Days, weeks, months, years, birthdays, money in the bank, salary levels, years of experience. It’s part of the human condition, maybe it helped us evolve to a civilised existence .
As startup entrepreneurs we need to let our people count something. Whether it’s the savings they made or they friends they have, there needs to be a way for them to keep track. So our people know they have made progress. Commerce is an anthropological game of football. So we must keep score. But it must go beyond the corporate scoreboard of profit, share price, turnover, number of employees… it has to be an audience focused score. Like followers on twitter. It has to be about them, not us, it’s how humans roll.
When to quit
This is the fifth of my crowd sourced blog entry ideas as suggested by Cameron Reilly. Cam wanted to get my thoughts on the following: When to call it a day. When to close up shop.
This is one of the most difficult propositions as an entrepreneur – when to stick and when to quit? My view is a simple analogy. When the startup or business feels like a bad romantic relationship you’ve had. The type of relationship you knew you had to get out of, but couldn’t. The type of relationship you had an unhealthy addition to, or found it too hard to leave emotionally, or was scared of the financial losses and asset split associated with leaving it. When your business feels like that, it’s time to leave. If you view your business as a relationship you have with it, then it will become clear if it’s over. Because we all know that feeling. And we usually know the truth deep down in our hearts when things are just not right. When your startup feels like that, it’s time to shut up shop.
Here’s some simple sentences that may also help you know if it’s time to quit:
It’s time to quit when, you’ve lost interest in the project, and your only doing it for the money.
It’s time to quit when, you only keep going because of the time and money you’ve already invested.
It’s time to quit when, you can’t sustain yourself or family on the income it provides, or the little time it leaves.
it’s time to quit when, you’ve had enough and would have a less stressful life in a job.
It’s time to quit when, you’ve run out of money, time or desire.
It’s time to quit when, you know who can achieve more moving onto the next project.
It’s time to quit when, your not quitting because the newness has worn off, but the business is genuinely not working.
it’s time to quit when, you achieved multiple set milestones set and they still didn’t pay off financially.
it’s time to quit when you no longer believe in what your doing.
It’s time to stay the course when none of the above applies.
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