Congrats to @Square and @jack for surpassing $2million in payments today!!

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Congrats to @Square and @jack for surpassing $2million in payments today!! http://bit.ly/kAAdMr

 

8 Problems Every Startup Should Anticipate

Starting a business is a lot like starting a marriage. At first, all parties are in dreamland, with a vision of changing the world, having lots of fun, and raking in the profits. But all too soon, reality sets in. Product development is stuck at that 90% mark, a key person leaves, and customers are talking but not buying.

In his book Reality Check, Guy Kawasaki summarizes some of the key issues. I’ve seen them, and they seem to be the same for every company (and every marriage) no matter how great the team is. I challenge any startup to show me they have avoided all of these:

1. One of the founders isn’t delivering. Maybe he was the only guy around who could design the product you envisioned, but delivering a scalable, quality product is another story. Besides, he is now more interested in designing the next product.
2. The product is behind schedule. As a manager, I always try to get a “bottoms up” time estimate from the team, and then pad it by 50%. Invariably we are always in crisis mode by delivery time, and the common complaint is that “management” always forces unrealistic schedules.
3. Sales aren’t meeting projections. The team buys its own propaganda, and fully expects customers to be leaping tall buildings to get to your product. You never dreamed that customers would be slow to accept an unproven product from an unknown startup in the middle of an economic downturn.
4. The team is not getting along. Things go wrong. People on the team haven’t worked together before, and they don’t fully trust any ideas except their own. As the top executive, you have to make some tough decisions, and spend much more time than you expected on communication and mediation.
5. Your marketplace buzz is non-existent, skeptical, or even negative. You have been too busy with your own issues to be out there building the wave, but your competitors have been actively positioning you far below them. The press is focused on things that exist, rather than your early marketing hype.
6. Requirements changed in the middle of the cycle. While everyone was busy building the product and business model you detailed in your business plan, early feedback from the field makes it clear that you were somewhat wrong. Or the economy has taken a sudden turn for the worse, so your high-end product no longer has a market.
7. Investment partners are squeezing you. It may look like micromanagement, but they are just nervous that the milestones you promised have disappeared from your charts. Maybe you think they aren’t “rolling up their sleeves,” but that can’t happen until you actually admit your failures and ask for help.
8. Cashflow is killing you, with no new money in sight. You scaled up your infrastructure, to make sure early sales didn’t swamp you. Nothing is coming in, money is going out, and you are too busy managing pennies to look for a new funding round.

If you are a true entrepreneur, these should scare you, but they shouldn’t immobilize you. As I asserted earlier, virtually every new startup experiences these problems. What separates the successful ones from the failures is how effectively they handle the problems, rather than how many they avoid in the first place.

So I encourage you to take full control and responsibility for your company’s destiny, learn from the challenges, and emerge from every crisis stronger than before. Remember that when the honeymoon is over, that’s when the real fun begins.

 

 

Want to Purchase MySpace? Bidding Starts at $100 Million

News Corp. is expected to begin entertaining bids for MySpace this week, with a minimum asking price of $100 million, according to a Wall Street Journal report.

In addition to about a half dozen private equity firms expected to submit offers, a couple of Internet companies have also expressed interest in the foundering social-networking site, according to the report, which cited people familiar with the matter.

The media giant revealed in January that it was exploring the possibility of selling or spinning off MySpace after months of rumors and its own dissatisfaction with MySpace’s performance.

News Corp. bought MySpace in 2005 for $580 million as part of its purchase of Intermix. But the former social-networking sensation has fallen on hard times lately, losing more and more ground to Facebook until it finally underwent a massive redesign that left it focusing on pop culture media-sharing for young users rather than attempting to be a universally appealing social network.

However, in the face of News Corp.’s public frustration with MySpace, those efforts were not expected to result in a major turnaround capable of saving the site. News Corp. revealed last November that quarterly revenue at MySpace was down $70 million compared with the same period the year before. During the earnings call at the time, Chief Operating Officer Chase Carey called out MySpace’s poor performance and said “current losses are not acceptable or sustainable.”

Yahoo pays $20 Million for a 12-week old Company, Brilliant!

It has recently been made public that Yahoo! has acquired a minor startup company named IntoNow. IntoNow are the creators of the iOS TV check-in app that launched just a few months ago. The IntoNow app, which recognizes the audio of the show you’re watching, identifies it, tags it and puts it up on your social networks for everyone to see what you’re listening to is like some sort of Foursquare – but for TV. 

While it isn’t clear what Yahoo! will be doing with IntoNow, in the press release it is mentioned that “The addition of IntoNow will enable Yahoo! to provide enhanced media experiences and video programming, bolstering its social engagement across the Yahoo! network and on all screens.” The folks over at PC World believe that with the power of IntoNow’s app, Yahoo! will be able to create a whole new platform for targeted advertising.

Imagine this: you see an ad for a particular pizza restaurant on TV, and because IntoNow knows what you’re watching, it can push a discount coupon or promo offer for that pizza place to your phone at that very moment. This form of advertising could prove to be pretty successful.

What do you think? Check out IntoNow for free on the App Store.

 

It’s Official, Netflix now Larger than Comcast!

Netflix continued to post impressive quarterly financial numbers, ending the first quarter 2011 as the largest subscription video service in North America.

In the first quarter, Netflix added 3.6 million subscribers, ending the period with more than 23.6 million subscribers in total. That was up 69 percent from the 14 million subscribers it had a year ago. To put that into context: Comcast ended 2010 with 22.8 million pay TV subscribers. While it’s always possible that the cable company could report subscriber additions in the first quarter, it’s unlikely to do so, given its declines over the last several quarters.

Netflix CEO Reed Hastings

Most of Netflix’s customer additions came in the U.S., where it added 3.3 million new users to end at 22.8 million subscribers. Internationally, Netflix added an additional 290,000 subs, to bring total international users to 800,000.

Netflix’s revenue for the quarter came in at $719 million, which was 46 percent higher than the prior year’s first-quarter sales of $494 million. The company recorded net income of $1.11 cents a share, compared to 59 cents a share in the year-ago quarter and 87 cents a share in the fourth quarter of last year.

Netflix forecast 24 million to 24.8 million subscribers in the U.S., and expects to have between 900,000 and 1.05 million international subs, by the end of the second quarter. The company expects domestic revenues between $762 million and $778 million, and international revenues between $16 million and $20 million. Total net income is forecast between $50 million and $62 million, or 93 cents to $1.15 per share.

 

The Games Businesses Play with Customers

Part 3 of 3 in a series on innovation, change, and business management.  Be sure to check out the previous stories on Tony Hsieh of Zappos, and Jack Dorsey of Twitter.

As a child, you most likely played two very popular playground games, dodge ball and four square. If you’re an adult who is also an early adopter of emerging mobile applications, chances are you play them once again. The difference is that this time a mobile phone takes the place of a ball and it’s usually not hurling toward you. 

Dennis Crowley knows a thing or two about both games. In fact, he’s re-imagined them for the mobile and social markets as a way of connecting people both online and also in the real world. Crowley is a tireless advocate in the concept of geo-location social networks and the idea of using mobile technology to “check in” to physical locations. He earns the tag “tireless” because his first foray into check-ins dates back a decade. Dennis Crowley and his co-founder Alex Rainert started Dodgeball in 2000 to transform mobile devices into a platform where users could text their location to reveal friends, friends of friends and interesting venues nearby.

Playing a New Game

Looking back to that year, much of the world wondered whether or not the now infamous Y2K or Millennium bug would cause a system-wide and worldwide meltdown of digital information. Even though computer systems and our data safely made the transition from 1999 to 2000, the U.S. economy didn’t fare so well. The dotcom bubble burst and the historic stock market crash that ensued caused the loss of $5 trillion in the market value of companies from March 2000 to October 2002.

While the dreams and hopes of many entrepreneurs were dashed during these uncertain times, others, such as Dennis Crowley and Alex Rainert, sought to break new ground. Before Twitter and even before Facebook enchanted the world to start social networking, the pair ushered in a new era of geo-location social networks and introduced us to the act of digitally “checking in” to physical locations.

At the time, Crowley worked as an analyst at Jupiter Research and Dodgeball would serve as his thesis project at New York University’s Interactive Telecommunications Program. The platform initially found adoption among the New York tech elite and generated a significant amount of underground buzz.

Dodgeball fever eventually caught the attention of Google and in 2005, Google acquired the five-year-old startup and ultimately employed the founding team. With Google now behind the Dodgeball brand, interest was piqued, causing a torrent of adoption among the digerati. While usage was growing within tech capitals around the country, Dodgeball was unable to secure the interest of day-to-day mobile phone users. When Twitter emerged in 2006, attention focused elsewhere. And without support from Google, Dodgeball faded into obscurity. Crowley inevitably left Google in 2007, not on the best of terms either. While loyal users kept the service alive for another two years, Google eventually pulled the plug and officially killed Dodgeball in 2009.

In reality Dodgeball was one of the first mobile social services in the US. While it was ahead of its time, it would reveal the birth of an entirely new kind of social network, one that wouldn’t see its first true mainstream adoption until almost a decade after its debut.

Game Theory: A New Look at Mobile Commerce

Fast forward to the present. While Google focused elsewhere, the competition for geo-location was heating up. Twitter was slowly garnering mass appeal, but rather than compete for location, it evolved into a real-time communication network. Other services such as Loopt and Brightkite were carrying the torch for geo-location networking while Google transitioned its Dodgeball service into what we now know as Google Latitude.

In March 2009, Crowley and Naveen Selvadurai founded Foursquare, which one could view as an evolved Dodgeball 2.0. Crowley and company knew that the key to unlocking the true promise of geo-location networking lay beyond connections, the location of friends, and the act of checking-in to local establishments. In order to attract users and convert them into evangelists, Foursquare would have to empower the “me” in social media.

“The inspiration behind Dodgeball was based on the idea of carrying a map in your pocket that shows everything about where your friends are and where they’re going. With Foursquare, the question now was, if you have this map, how can you crowdsource everything a city has to offer…taking the experiences of your friends in an offline world and bring them online so other people can discover them.”

The Foursquare experience starts with checking-in to a location via a mobile phone using the free Foursquare app. Users could easily share their location with friends and also see who’s nearby. Instead of sending Tweets like Twitter, Foursquare players could “shout” out to one another to share experiences and observations. Check-ins and shouts can also syndicate to Twitter and Facebook to unite multiple networks with one action. But, that’s only the beginning. This time, Crowley and team employed a clever system governed by game mechanics evoking a spirit of competition propelled by a reward system that coaxes active and deeper participation.

Game On

Foursquare was developed to change how people experience the world around them. As Crowley explains, “I thought a lot about the amount of time that people spend creating and curating their online persona. We wanted to create a network where people could connect and socialize online around the activity that they’re already doing in real life”

Crowley also revealed why check-ins emerged as a foundation for a new dimension to the social economy, “When people check-in, we know that a person goes to any given place and that they’re there with these people, and we look at how this place relates to the other places they’ve been to in the past. It’s now giving people digital breadcrumbs to leave behind as a reminder, but also to share with others. When people go back to those establishments, it creates an even richer dataset that inspires us to create new products to encourage engagement and exploration.”

With the introduction of gameplay, points were now earned for all previous activity as well as the introduction of new gaming elements, each of which contributed to a local leaderboard. In addition to points earned for check-ins, shouts, etc., players were encouraged to also leave tips about each location to help guide the experiences of others. And, the more players checked in to each establishment as well as greater varieties of locations, Foursquare would unlock hidden badges as rewards. These rewards ranged from prestigious mayorships for each location to achievement badges commensurate with the experience.

Why is this innovative?

First, it was addictive. In its first year, Foursquare attracted its 1 millionth user. In just a year and a half, Foursquare skyrocketed to over 3.5 million users with over 20,000 new users checking-in every day. But it’s also so much more than that. The act of checking-in ushered by Crowley dating back to 2000 was now ubiquitous. Competitive social services such as Yelp, Gowalla, and even Facebook, also introduced the ability to check-in to places within their respective networks.

Foursquare Brings the Yellow Pages to Life

Not only are check-ins done to notify friends of an individual’s current location, these random acts of patronage have now become a form of social currency. The check-in has already evolved into formal personal endorsements, with repeated check-ins practically shouting out, “I highly recommend this place!” Check-ins as a form of social currency also redefined the role of the patron and the relationship between businesses and customers.

“The network started to take on a life on its own. Foursquare gave everyday people, venues, and local merchants a voice. It opened the doors for businesses see a whole new way of seeing their customer.”

Crowley envisioned a new dynamic between people and also between places and people and as a result, introduced a working archetype for consumer empowerment and also customer engagement. He created a new channel where customers create a community around each business. And, as a result of people earning points, leaving tips, winning mayorships, or simply checking-in, business owners awoke to an already vibrant and still growing customer base that now expects their participation and attention. Essentially, Crowley handed business owners the keys to open the doors to social media and fresh business opportunities.

Crowley and company realized that business owners would ultimately benefit from the consumers who were willfully checking-in to their location. As such, businesses would have to jump into the game to steer experiences, encourage points and mayorships, and the creation of helpful and beneficial tips. Crowley and team then focused on empowering businesses by developing tools that gave merchants more control. And, more importantly, they gave businesses the ability to activate their customers through social specials, promotions, and rewards to further entice visits and commerce.

Online Check-ins Lead to Real World Commerce

Local businesses such as AJ Bombers, a popular burger joint in Milwaukee, are realizing increased business as a result of offering free burgers for mayors and free cookies for adding tips. They’ve also offered dedicated badges to guests who attend special events all organized through Foursquare. Larger chains are jumping in as well. Starbucks offered discounts or free products for mayors and subsequently noticed a 50% increase in check-ins. Recently Old Navy experimented with offering 25% off coupons simply for checking-in. As a result, many consumers did just that. Consumers also took to Twitter and Facebook to share the news of the promotion acting as a surrogate sales force or a digital street team designed to trigger foot traffic.

“The activity in Foursquare gives local merchants special insight behind the check-in in order to improve customer relationships, such as understanding who these people are, how often they visit, where else do they go, do they come in with certain friends, etc. It also helps merchants learn who their best customers are and how to ultimately help everyone become their best customer.”

Doing so connected people online and offline, brought local establishments to life in a highly popular digital domain, and also put the customer front and center of the business owner, forever changing how companies think about the people they serve.

With Foursquare, Dennis Crowley reimagined what Dodgeball could be and built an ecosystem that is growing in popularity to the tune of over 20,000 new users a day. And, the company celebrated its 200 millionth check-in this past October.

The company has already fielded acquisition offers from the likes of Yahoo. It was also rumored that Facebook was entertaining the possibility playing Foursquare as well. Instead, Crowley and the Foursquare team closed a second funding round of funding at $20 million led by Ben Horowitz of Andressen Horowitz.

The work is only beginning though. As Crowley explained, “As a startup, we have to continually focus on developing the ecosystem that we’ve created. And it’s not just about consumers; we’re developing solutions for merchants as well to encourage people to check-in more. This is about changing the way people experience the world around them.”

The evolution is far from over, but it has seen validation lately. Local reviews network Yelp and now 800-pound gorilla Facebook have entered the business of checking-in, to which Crowley responds with open arms, “Facebook doesn’t keep us awake at night, but it does inspire us. They’re validating the market, but we’re still focused on innovating and growing our ecosystem.”

In the end, Crowley’s vision is clear and focused. The future of Foursquare will focus on transforming how people experience their world online and offline, “Foursquare is about improving relationships, making cities easier and more fascinating to experience, and making the world a more interesting place to explore.”

Have you checked-in to the future of business?

Twitter Founder Jack Dorsey and the Ideas that Sparked a Revolution!

Part two in a series we will bring to you on innovation, change, and business management…

Jack Dorsey is the co-founder of Twitter and Square. He has since rejoined Twitter as Executive Chairman and will focus on product development to further Twitter’s mainstream appeal. He also remains CEO of Square. What follows is my uncut interview with Dorsey for a recent Entrepreneur Magazine cover story.

Maybe you have to have helped conceive Twitter to be bold enough to take on a change-resistant industry like the financial sector. That’s what Jack Dorsey, a co-founder of the ubiquitous 140-character phenom, is doing with his newest endeavor, Square. It aims to transform any mobile device into a credit card reader, allowing any business to accept credit cards and process transactions in less than 10 seconds. Dorsey’s simple vision is to make payment systems more accessible. Two great ideas…two great companies.

Sarah Lacy, Silicon Valley pundit and Web 2.0 author, once noted of tech entrepreneurs, “Once you’re lucky, twice you’re good.” Such is true for Jack Dorsey. Perhaps Mr. Dorsey isn’t a household name yet like say, Mark Zuckerberg. But, that’s all about to change. Jack is the co-founder of a fledgling startup that you may have heard of. Along with Biz Stone and Evan Williams, Dorsey co-founded microblogging sensation Twitter in 2006. The idea was unconventional in its inception, but pioneering in its capacity. Not only has it changed how people share information, it is changing how people create and consume information, 140 characters at a time.

Before Twitter hatched, Dorsey’s lifework focused on developing dispatch software to track ambulances and taxis to visualize where they were and what they were doing. As he’ll tell you, he fell in love with visualizing cities to uncover what did and didn’t work and also how to invent solutions to streamline the system.

In 2000, Dorsey realized that his work was missing something vital to these cities, the very citizens who populated them. Like ambulances and taxis, he wanted to better understand where his friends were and what were they doing. His vision was to capture and share experiences in the moment, “If I were in the middle of Washington Square Park, I could share the experience in real time using a mobile device. But in 2000, it was a bit too early, and the idea didn’t work out so well.”

Dorsey put the idea to rest. Fast forward five short years. As always, technology marches ahead and by 2005, advancements in mobile communication and adoption set the stage for idea 2.0. At the time, SMS was taking off in the U.S. and was already widely adopted in Europe and around the world. By 2006, it was time to revisit his plans and introduce the world to the live web.

Tweet This: An Idea Reborn

At the time, Dorsey was employed by Odeo, a podcasting company where Evan Williams was an investor and founder. For those who don’t know, Williams was the inventor of not only the term “blogger” but also was the founder of the weblog authoring web applications of the same name. It would eventually sell to Google and the proceeds of that deal would lay the foundation for Twitter. Unlike the success Williams found at Blogger, Odeo was on a path toward uncertainty. The team sought the next big thing and during what is now considered a revolutionary series of deep company soul searching, Jack presented his concept for “my.stat.us.” The idea was to text message what you were doing and have a group of friends follow along. What was once a system for tracking ambulances and taxis would now set the stage for creating a dispatch service that connected people through their phones and text messaging.

Odeo embraced Jack’s idea and dedicated staff and resources to developing version 0.1. My.stat.us eventually was code-named twttr, inspired by the Yahoo-owned social photo network Flickr as well as the fact that American shortcodes are five characters long. Eventually named Twitter, the micro-blog as it was originally referred to, would combine mobile and web services, and limit communications between its users to 140 characters with each message. Jack found that the constraint of 140 characters was actually easier to approach and thus reducing the barriers to entry. Messages evolved into “tweets” and suddenly, everyone with a phone or computer represented a potentially new connection.

Don’t Call it a Social Network: Twitter as an Information Network

But Twitter quickly evolved into something much more than a messaging or friend tracking service, it became a medium for reporting experiences to highly connected audiences. “Twitter is about simplicity. The constraint of 140 characters is easy to approach and consume, without a great deal of barriers to entry. One message and suddenly the whole world has access to that Tweet.”

Jack’s idea for Twitter is also transformative in that it’s not designed to be a social network, but instead it serves as a raw utility. It was unique in terms of how people approached and defined it and as Jack described, “there wasn’t a lot of product definition around it. People could report about the earthquakes they just felt, what they had for breakfast, and each time they Tweet, it sparks interaction.”

The evolution of human communication was introduced to a new branch off the main road. Tweets now served as the impetus to engender reactions that would lead to responses, Retweets (sharing the Tweets of others), memes (threads dedicated to the subject), and also real world, face-to-face interaction. Each time, these exchanges further relationships in any given direction.

But Jack’s vision also proved to have a dramatic near-term impact on human connections that’s quite literally making the world not only a much smaller place, but also more empathetic.

The 2009 election in Iran was forever immortalized because of Twitter. It served as the catalyst for humanizing the experiences of real people during times of political and civil unrest. The whole world watched as Iranian people took to services like Twitter to voice their emotions and share snapshots of everything the Iranian government tried to suppress. Twitter became a platform for protests. In just a few years, Twitter had also emerged as a global network for spreading news and events, as they happened, much faster than any news network could report. From dispatch to My.Statu.s to Twttr to Twitter, Jack’s vision essentially created a real-time system for tracking the pulse of a global community and the experiences of everyday people.

“The more we share what’s happening around us, the more we understand how someone lives their life. The greater the understanding we have, the more empathy we have for each other. By and llarge, that reduces conflicts. When you have an understanding of how someone else lives, the less likely it is that you conflict with them.”

Fitting a Square Peg into A Round Hole

Sometimes lightening strikes twice and with Jack, the unique combination of financial crises, the ability to spot opportunity, combined with a little luck, would prove fortuitous.

Jack was set to disrupt an industry impervious to the constant pace of Silicon Valley innovation, the financial sector. In order to do so, he credits three takeaways he gleaned from his experience at Twitter:

1. The concept of immediacy helps bring people into the content and encourages personal publishing and resulting subscriptions

2. Being transparent about what’s happening makes exchanges and transactions more human

3. As a result, we are creating a dynamic where people and organizations are inherently more approachable.

These three lessons would serve as the foundation for targeting the financial world, as he observes, “The financial world has long been missing immediacy, transparency, and approachability and this is what’s needed now.”

As with many ideas, necessity serves as the mother of invention. Jack’s partner and co-founder Jim McKelvey is also an accomplished glass artist. But because he could not accept credit cards as payment, he was unable to sell his work to meets its true potential. Discouraged by the arduous and intimidating process of accepting payments via plastic cards, Dorsey focused on developing a solution that worked for everyday people who also happened to run businesses of varying size and scope.

Indeed, payment systems were in dire need of access and incorporation to keep pace with the evolution of commerce. Jack envisioned an idea where payment systems would become approachable, sociable and actionable. And thus, Square was born, ironically, next door to the old US Mint in San Francisco.

Innovation in a Time of Financial Crisis

They say timing is everything and certainly Dorsey would agree. At the time Square was coming to life, the financial industry was experiencing a meltdown, and while it was a painful experience for many, it also opened the doors to opportunities for innovation and new partnerships.

“At the end of 2008 and in early 2009, the market was resetting itself with the clearing of existing management teams across the board. MasterCard and VISA were under a serious microscope by the Federal Government, So everything was in place to do something. We were able to quickly move in and talk to the right people in order to do some very interesting things quickly.”

Square was the merging of several important elements: technology, mobile, social, and financial.

90% of the world uses plastic cards to pay, but only about 2% of merchants can accept them. Since a sweeping majority of consumers rely on cards, Square was faced with the challenge of replicating the simplicity on the receiving end. The team set out to transform payments to create as Dorsey describes, “A magical experience around payments and what it means to pay people. Innovation could impact everything, making payments, faster, richer and more information dense as well as actionable and memorable.”

Creating a Magical Experience Around Payments

Jack looked to Apple’s in-store payment network when designing the Square experience. Rather than forcing people to stand in line behind a cash register, he appreciated the process of swiping a card right at the moment of decision. Thus, he set out to extend that “magical” experience to everyone.

Starting with the technology, Square set out to completely reinvent the payment processing system by aligning with important trends in the adoption of consumer electronics. Smart phones are pervasive, propelled by the likes of Apple’s iPhone and Google’s Android. On the horizon, tablets, such as the millions of Apple iPads already on the market, were set to disrupt mobile computing. The one thing each shared in common would set the stage for Square and an unlikely form of innovation for the payment services industry, the standard 8mm headphone jack.

Square is the size and shape of a sugar cube and features a small opening that houses the ability to read a card once swiped. The cube includes a plug that resembles that of a regular pair of headphones and plugs directly into the headphone jack of the mobile device. Combined with the Square software app, phones and iPads essentially transform into mini card processing centers. With each swipe, money is deposited into the individual’s Square account with modest fees extracted, and is there for future use or simply to transfer into the designated bank account.

Out of the gate, Square works with any US-issued credit, debit, pre-paid, or gift card with a Visa, MasterCard, American Express, or Discover logo.

Accepting payments is just the beginning however, as Dorsey and the Square team envision payments as catalysts for social and actionable interactions. Everything begins with receipts. Print receipts aren’t actionable. Such is true with electronic receipts. Square believes that there is life after the transaction as Dorsey asks, “What if you could actually browse the receipts?”

His point is that the receipt will move beyond that of a static record. The receipt becomes a platform for extending experiences and facilitating the exchange of information and communications during and after the sale, between the people on each side of the transaction. The acts of quickly and easily paying or receiving payments is just the beginning. Square seeks to improve the dynamics and relationships between businesses and their customers.

The examples he shares are as interesting as they are practical. “When you get home, the receipt could serve as an ingredient list to discover the blends that went into your espresso, to see how many times you’ve been to that particular location, used a loyalty or rewards system, click into a merchant’s Twitter or web site, forward the receipt for expenses, and see, through a beautiful visual, where the transaction took place.”

Twitter is the Internet’s rising star with 200 million people sending over 140 million tweets every day. Jack’s vision is now in reality, transforming culture, business, and media with every Tweet that flies. And with Square officially live, Jack is going up against not just one, but several Goliaths. These industry giants though, can’t deny the ingenuity and outside-in innovation Dorsey introduced into an aging industry that so desperately needed it.

Change and innovation, two pillars of business that open the doors to new opportunities. Everything begins with imagination, the vision to see things differently and the passion to connect your idea to the people who will benefit from it. What are you working on?

Watch this video on Dorsey at Entrepreneur for more insights…

 

Amazon Cloud Servers Crash and Take Down Several Companies!

This post has been updated.

Amazon’s popular cloud-based EC2 web hosting service is experiencing technical issues that have taken down the websites of several social media companies, including Reddit, Foursquare and Quora. 

The failure of the EC2 (elastic compute) service stems from Amazon servers based in Northern Virgina. Amazon Web Services‘ Service Health Dashboard reports connectivity, latency and errors, which have continued for over eight hours.

Arik Hesseldahl of All Things D has maintained a list of the sites affected by the crash, as well as Amazon’s responses to the problem.

Here’s the latest from the EC2 team:

8:54 AM PDT We’d like to provide additional color on what were working on right now (please note that we always know more and understand issues better after we fully recover and dive deep into the post mortem). A networking event early this morning triggered a large amount of re-mirroring of EBS volumes in US-EAST-1. This re-mirroring created a shortage of capacity in one of the US-EAST-1 Availability Zones, which impacted new EBS volume creation as well as the pace with which we could re-mirror and recover affected EBS volumes. Additionally, one of our internal control planes for EBS has become inundated such that it’s difficult to create new EBS volumes and EBS backed instances. We are working as quickly as possible to add capacity to that one Availability Zone to speed up the re-mirroring, and working to restore the control plane issue. We’re starting to see progress on these efforts, but are not there yet. We will continue to provide updates when we have them.

11:09 AM PDT A number of people have asked us for an ETA on when we’ll be fully recovered. We deeply understand why this is important and promise to share this information as soon as we have an estimate that we believe is close to accurate. Our high-level ballpark right now is that the ETA is a few hours. We can assure you that all-hands are on deck to recover as quickly as possible. We will update the community as we have more information.

 

Zappos’ CEO Tony Hsieh on Customer Service and Innovation

Part one in a series we will bring to you on innovation, change, and business management…

To call Zappos an online shoe store takes away from the brilliance behind the 12-year-old e-commerce powerhouse. While its original premise was based on helping people find the shoes they want, in one place, online, and discounted, it certainly evolved into something nothing short of disruptive. As we hear so often with technology startups, Zappos was born in a college dorm room.

Already a success by any startup standards in just a few short years, Tony Hsieh, CEO of Zappos, looked at the $32 million his company generated in 2002 and challenged his team to do better.

Roughly four years into the game, Hsieh decided it was time to look beyond shoes and move his company toward a more significant mission. His epiphany was the result of learning through research that companies serving customers with a higher purpose outperformed those that focused on market leadership and profitability in the long run.

Putting the Customer in Customer Service

In 2003, the Zappos brand evolved from an online shoe etailer toward a customer-centric organization powered by service. Everything started with looking at the pains customers were experiencing and the options they faced when making purchase decisions. One of the biggest sore spots for the company was something that was out of the company’s realm of control. While drop shipping equated to 25% of the annual revenue at the time, it was also the very thing that prevented the company from keeping its promise of delivering exceptional customer service. If the company was truly to become customer-focused, it would need to take control of the entire experience, from beginning to end. After killing drop shipping and taking control of its inventory, Zappos’ new customer service program resembled that of industry retail giant Nordstrom where the customer experience was paramount. Leaders for both companies will say that doing so, directly correlates service to loyalty, repeat business, word of mouth, and increased revenues.

“If you’re looking for a pair of shoes, and we’re out of your size, we made it part of our policy to refer them to a competitor that had it in stock.”

Almost immediately, the team noticed a difference Customers weren’t the only people singing Zappos’ praises. Employees were more engaged and passionate as a result. The new focus gave representatives something they could stand behind. Customers could hear the passion of the person on the other end of the phone. They cared. And, vendors noticed too. Suddenly their onsite visits would increase in frequency and length to see what the new Zappos was all about.

Focusing on customer service caused a snowball effect that helped Zappos soar to new heights. At the end of 2003, Zappos nearly doubled its revenues to $70mm. By 2004, the company earned $184mm.

Culture Shock

Business leaders, especially innovators, are continually looking at what’s working, but more importantly, what’s possible. By the close of 2004, the Zappos team believed that focusing on customers and their experiences had not only boosted revenues by 600%, doing so created a global community of enthusiasts and advocates behind the Zappos brand. In 2005, the team was set for its biggest transformation yet.

“We never really paid much attention to what other companies were doing. We never knew that the decisions we made were in direct contrast to those of our competitors.”

Tony believed that if making customers happy would help improve business, then focusing on company culture was a natural progression. Making company culture the number one priority resulted in the creation of a pipeline team, a group of trained professionals who host more than 40 classes to help improve morale and career development. Courses ranged from career and interdepartmental training to Zappos history to personal development programs such as strength finders, the science of happiness, and optimism. In 2005, early Zappos investor and professional life coach Dr. Vic moved into the Zappos HQ. He offered onsite coaching to employees looking for empowerment and direction and as a result, employees continued to evolve from a role driven by passion to one of now of a company stakeholder. The evidence of success was in the sales. 2005 hit a new high with $370 mm and 2006 generated almost $600 mm. With a customer and employee focused organization, the company would eventually hit $1 billion in 2008.

Delivering Happiness

In 2009, Zappos sought to reinvent Zappos once again, this time by focusing on employees, customers and also other companies through one powerful, yet uncommon business term, happiness.

“Customer service is about making customers happy, company culture is about making employees happy, so let’s just simplify it and at the same time, amplify our vision for our customers, employees, vendors, and peers.”

Following the success of investing in company culture and customer service, Hsieh was introduced to positive psychology. So the team took a step back and looked at the science of happiness in order to develop the company’s next growth strategy, delivering happiness to the world.

It started within.

For example, the management introduced elements of progress into its career advancement program to help employees stay happy consistently. Rather than give big promotions every 18 months to deserving employees, management introduced incremental advancement every six months.

Zappos also formalized the definition of culture into 10 core values:

1. Deliver “wow” through service;

2. embrace and drive change;

3. create fun and a little weirdness;

4. be adventurous, creative and open-minded;

5. pursue growth and learning;

6. build open and honest relationships with communication;

7. build a positive team and family spirit;

8. do more with less;

9. be passionate and determined;

10. be humble.

Following in the footsteps of the Walt Disney Company, Zappos looked externally to find ways to share its experience with culture and service to help others reinvent their businesses. As a result, Zappos introduced its Insights program, a series of immersion workshops designed to bring other businesses into the world of Zappos. By exposing its company secrets around happiness, culture, and service, other organizations could learn the Zappos way to improve relations with customers and employees.

To date, the Insights program has helped many businesses, many of which report that learning the Zappos Way helped increase sales and morale almost immediately. Zappos didn’t do too bad either. It closed 2009 with $1.2 billion in revenues and Amazon also acquired Zappos for $928 million in November that year.

The deal with Amazon proved gratifying. Over the years, Amazon attempted to “kill” Zappos with Endless.com, but Tony credits the company’s unique championing of employees, customers, and happiness with winning. Under Amazon, Zappos now runs as an independent brand, a brand that only continues to excel under the banner of happiness.

And, when you create an empowered workforce that is not only happy, but evangelical, placing them in front of social networks such as Facebook and Twitter ensures that the company’s mission, purpose, and culture scale as social media become pervasive as next generation platforms for sales, marketing, and service. At current count, 436 Zappos employees use Twitter, including CEO Tony Hsieh. For the record, Tony has over 1.8 million followers.

As Tony says, “Your culture is your brand. Customer service shouldn’t just be a department, it should be the entire company.”

Do we really learn from failure?

Most people believe that entrepreneurs learn from failure. Pick up USA Today,Entrepreneur, or any of a multitude of popular publications and you will find stories about how entrepreneurs learned from their mistakes to become successful the next time around. Using examples of Apple’s failure with the Newton, Frederick Smith’s low grade on the Fed Ex business plan, and Bill Gates’ unsuccessful first computer business, many authors argue that entrepreneurial failure is no obstacle to later success.

In fact, some observers, like entrepreneur and Harvard Business School lecturer Shikhar Ghosh, even say that business failure helps entrepreneurs become more successful the next time around.

Policy makers often echo this view. For instance, the Director General of the European Commission’s Enterprise Directorate Horst Reichenbach writes, “Usually, failed entrepreneurs learn from their mistakes and are more successful at the next attempt.”

There’s only one problem with the “failure helps” perspective. There’s no serious scholarly evidence that prior business failure enhances later entrepreneurial performance. Quite the contrary, the existing evidence indicates that entrepreneurs who failed before perform no better than novice entrepreneurs and significantly worse than previously successful entrepreneurs.

For example, in a working paper released by Harvard Business School, Paul Gompers, Anna Kovner, Josh Lerner, and David Scharfstein showed that venture capital-backed entrepreneurs whose earlier business had an initial public offering (IPO) had a 30 percent chance of having another venture that also went public, but those entrepreneurs whose earlier ventures didn’t go public had only a 20 percent chance of an IPO the next time around, statistically no better than the 18 percent chance of novice entrepreneurs.

Explaining why previously successful entrepreneurs do better the second time around is easy. They might simply be better at creating new companies than those who have never done it before or failed their first time around. Or previously successful entrepreneurs might not be more talented, but key stakeholders – suppliers, customers, employees and investors – might think they are and lend them their support. Even if stakeholders provide assistance on the mistaken notion that previously successful entrepreneurs weren’t just lucky, their beliefs become a self-fulfilling prophecy. Because the previously successful entrepreneurs garner the support of stakeholders, their prospects end up better than those of novice or previously unsuccessful business founders.

More difficult to explain is the truism that “entrepreneurs learn from failure.” Our collective belief in its veracity stems less from a reasoned look at data and more from what we want to believe. The idea that prior business failure helps fits perfectly with the motto “if at first you don’t succeed, try and try again.”

You might say it’s fine to think that entrepreneurs learn from failure even if there is no evidence that it’s true. But this inaccurate belief has a cost. Many unsuccessful entrepreneurs start additional businesses in the mistaken belief that their previous failures taught them how to do better the next time around. And many of these entrepreneurs end up losing money again.

Investors who focus on experience and not past performance often earn less those who back only previously successful entrepreneurs. And policy makers who choose not to focus limited resources on business founders with winning records, under the assumption that “experience” is what matters, often miss the opportunity to enhance economic growth and job creation.

While I am deliberately trying to be provocative in this post, I think it’s worth considering the validity of the assumption that entrepreneurs learn from failure. Do you think that we overestimate the degree to which this actually happens? Or do you think that small business owners learn too little from their errors to do better the next time around? Or do you believe that only a small minority of entrepreneurs manage to learn from failure? Or is it perhaps that academics studying the topic aren’t very good at identifying what entrepreneurs learn from their mistakes? I’m interested in hearing your thoughts.