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April 23, 2006

You Can’t Get There From Here

There are lots of great business ideas that won’t work because YOU CAN’T GET THERE FROM HERE.  Conversely, some great business successes happened because the founders did figure out how to get from here to there.  Two reasons why I’m thinking about how to get from here to there.  If you figure out either one, you’re rich (assuming, of course, that you execute well). If you want, you can skip down to the bottom of this post for the challenges now and skip the rest of my pontificating.

Skype is a great example of here-to-there success.  Lots of us VoIP types said “it’s really gonna be great when everyone has one of our clients because then they’ll all be able to talk to each other free.”  Some communities like Free World Dialup reached group critical mass.  Most communities stayed very small so – according to Metcalfe’s law – the value of their networks was very small.  New users didn’t have sufficient reason to join because there was small chance that they would find anyone else they wanted to talk to in the group.

Skype piggybacked on the download distribution model and caché of Kazaa.  Soon there were a critical mass of people with clients.  “Skype” became a verb and the rest is history.  All because the founders figured out how to get from here to there.

Del.icio.us is another good example.  “Wouldn’t it be great if a bunch of people tagged interesting things so other people could find them.”   Right.  Problem is that the first visitors won’t find anything tagged for them so why should they come.  In fact, tagging has to go on for a while before it is socially useful.  The genius of the del.icio.us founders was to make tagging useful as a way to find stuff you’d run across on the web and might want to find again.  This is useful to the very first visitor.  But, after people tag things for their own use for awhile, then there is a critical mass of tags and the site becomes socially useful.  Network effect takes over.

It’s all about giving the early adopters a reason to adopt – which may not at all be the same reason your product or service will eventually be a great hit.  If you are depending on network effect for value, it’s almost certain that you’re going to need some strategy other than what will eventually make you rich and famous to get there from here.

This is a lot like evolution.  Whatever led up to the evolution of the eye, for example, had to be useful for something other than seeing how exquisite a sunset is.  Could have been – probably was – just a little photosensitivity which was useful for cluing the organism to get in or out of the sun as appropriate. Whatever the predecessor trait was, it wouldn’t have been “adopted” by evolution just because it was going to lead to something better: it had to be immediately useful.  Same thing at every stage of your new business.  Users only do what is immediately useful to them.

The Opportunities

  1. Hydrogen cars.  Everybody knows they’re the future of personal transportation.  Save the planet from global warming.  Save us from sending too much money to the unstable Middle East or into the retirement plans of oil execs.  But not very practical to have a hydrogen car if you can’t go somewhere to top off your fuel cell. And you’d be lonelier than the Maytag repairman if you opened the first top-er-off station for fuel cells.  How do we get from here to there? I did post that China might get there first since they have to build a transportation infrastructure from start.  We don’t want that to happen, do we?

  1. Dynamic peer clusters. Huh, you ask? These are the groups which are going to replace traditional gatekeepers – book publishers and book critics, for example.  You don’t have time to sample every book in the world.  If you don’t rely on official critics who, in turn, rely on publishers, to be gatekeepers, how do you find new stuff to read with a reasonable chance of success? 

You don’t want just a one-dimensional report of just what’s popular  because, given your tastes, you probably won’t like what’s popular anyway.  Amazon’ll make recommendations based on what you’ve ordered and that’s part of the answer.  What you really need, though, is a service which correlates your taste over many books sampled, liked, and disliked with a group of people who react to many books in the same way.  You need to be clustered with people of similar tastes.  So, when someone in your cluster decides that hackoff.com is the best new novel of the year, you can be pretty sure you’ll like it. And vice versa.

But, in order for clusters to form around books or music (I first typed “records”) or movies or unheard of politicians, in order for the long tail to reach its full magnificent bushiness, a lot of people have to spend some time ranking what they like or dislike without benefiting from an existing critical mass of rankings.

If you figure out a way to get from here to there, if you can get the clusters formed, you will have a goldmine.

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» Building network economics from What's Next?
Most people talk about the network value of successful sites. However, before a site is successful, the network value is much smaller than the non-network value. Until a critical mass of users exist, the only value to a new user is the "selfish motiv... [Read More]

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