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What are we doing?

For the last few months, there’s been a storm brewing.  It’s a storm that eventually confronts almost every startup on earth, and it’s named “What are we doing?”

Questions of strategy, vision, and objectives do drive the conversation with investors, and the further along the path to funding you go, the more critical it becomes to have consensus on these three points:

  • Objectives – What do we want?
  • Vision – Who do we want to be?
  • Strategy – How do we achieve these goals?

You’d think that having a common viewpoint on these questions is simple or easy or intrinsic.  But unfortunately, it isn’t.  Later down the road you may be confronted with a confounder who wants to sell out to the first bidder, as soon as possible, because their objective was instant gratification, and their vision was immediate buyout, and their strategy was to push the product into the lap of anyone who had the cash and moderate interest.

The best piece of advice that I’ve received from VCs I know is to figure out what I want, and communicate it to my partners/cofounders.  An honest, open discussion is the right place to start.  It definitely is worth it to know if there are differences early; then there exists the possibility of making sure those differences don’t become issues.  Funnily enough, at the time I considered this advice to be somewhat worthless.  I said to myself, “what crap! I mean really! Obviously I want the company to be successful and I want to make millions of dollars!”  Later, when I remarked on what was said, it sparked a conversation between my teammates and me.

And that conversation was mind-blowing.

What we discovered was that:

  • Person A is ‘in this’ to make money, and cares little about the company, the product, the vision, or anyone else. (I’d like to add that  this is not necessarily a bad thing since this person reminds the team constantly to monetize the product, meet deadlines, and move forward)
  • Person B:   sees entrepreneurship as a lifestyle and plans to start many businesses, not just this one, and needs the company to be successful because they view this as a long term relationship building exercise (success meaning, “worth millions” vs just being profitable, which we are)
  • Person C:  is an ideas person and wants to change the world through technology, and thus really cares about design, code, efficiency, and user experience… but not about money whatsoever
  • Person D: is really deeply involved in nonprofits and social media and truly cares about this particular product/field’s ability to help organizations fundraise and gain traction, and thinks it should be given away for free as a service to humanity

That’s a lot of difference, right?  Not only that, but some people wanted to sell out early, and others want to keep the company and generate revenues … no matter what. Some people support getting VC funding and others think, “why bother?” It was really eye opening, and I realized that it is a conversation that needs to be had.

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Business Intelligence vs. Predictive Analytics

As a person with an ERP background, and deeply held respect for data, I’m not usually one to rag on Business Intelligence. There is, undeniably, a lot of value in knowing where you’ve been.  But there’s an evolution in thinking, and I think it’s very exciting, and that’s in the realm of predictive analytics. What I’ve seen in my six years of implementations is a lot of ‘stuff’ (data) that is basically gathering cobwebs in the database tables. Unused.  A lot of companies archive this information without even looking at it.  And analysis of all the data might yield interesting results, some facts and figures, but most people don’t have the skills to make real predictions using data, no matter how much of it there is.

Consider, for a moment, the stock market.  I can take any stock on yahoo, and I can get daily, historical returns. I can get the PE multiple, EBITDA, the SEC 10k, and I can learn everything about the management team, including their kids’ names. But does this wealth of information get me anywhere? Not really. Why not? Well, because I’m not a financial analyst. Even with financial analysis experience (which I do have, incidentally), I’m not necessarily able to make conclusions about future performance with certainty. Even if I took all the information available about the market, the competition, and rolled it all around in my brain, the chances I’d come up with an accurate prediction are practically 0.

In the same way, companies aggregate their own floods of information, but the person doing all the number crunching usually 1)doesn’t understand all the information that they are looking at and 2)isn’t trained in predictive analysis.  I think a wealth of tools exists that have enabled organizations to look at the crushing load of data and derive insights from it. It can be described sufficiently in business intelligence to give it meaning to the user. But, that still doesn’t take us all the way to what we need, which is predictive capability.

What would be really incredible would be real-time predictions, with abilities to change certain key parameters. I want to know, with 95% confidence, with an error rate of 3%, what are the chances we will make our numbers for next quarter given our standing as of right this moment. And no, I dont want to schedule a meeting with Bob from Accounting and John from Strategy to tell me this, I want an application to do it.  Sounds awesome, right?  And that’s a financial calculation, mostly. But what about even better predictive analytics, that looks at several different data sets, and joins them all together so that it can tell me if I discount one product, would we beat our financials, and how much can I discount it, and what are other possible solutions?

In short, applications that advise rather than show and tell.

(Sidenote: Hey Mike. I think this should be our next product. Whaddya think?)

There are a lot of players in this space (SAS, Teradata, MuSigma, not to mention the BI integrators, etc.), but there’s plenty of room for more. It’s a universe of data. And I think that the modeling tools , and their hideous interfaces, could definitely use an infusion of creativity. And perhaps also some taste. Whatever, you know what I mean.  There’s a conference in DC in October (details) and I’d love to go but it’s expensive.  What’d be better is if any start ups in the DC area in this field would email me and we’d have a get together. Hint Hint.

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