The 2.0 shakeout – lessons from GE on surviving

I've written several times about moving up the tree, no longer eating the low hanging fruit. Almost everything we currently call 2.0 is low hanging fruit. A shake-out is looming for sure.

How does this company of ours survive it? To look forward let's first look back.

Remember the .com boom? Everyone (and his dog) had a website and was doing some ecommerce. A shake-out was inevitable because anyone (literally) could install a web editor (or use GEOCities) and make a site. Anyone could sell at zshops at Amazon or Yahoo smallbusiness stores or many many other options. With a small bit of javascript I "monetized" my TopXML website by selling training CDs. Anyone could do it.

And it got easier and easier for anyone to do. This article "The Earth's learning curve" discusses the same event, which they call diffusion of knowledge, in the sphere of science.

Put simply, human beings were getting smarter … If the rise of science marks the first great trend in this story, the second is its diffusion … This diffusion of knowledge accelerated dramatically in recent decades … The diffusion of knowledge is the dominant trend of our time and goes well beyond the purely scientific

They state that with the advent of science 300 years ago and the diffusion of knowledge across the earth and into more and more people's lives and homes (I have 3 different types of discovery channel at home!) that people stopped trying to work out where they fit into the world and we began to figure out how to change the world to suit our needs.

Humans were no longer searching for ways simply to fit into a natural or divine order, they were seeking to change it.

The same thing is happening on the internet. Diffusion of IT-related knowledge has been accelerating exponentially. With talent, Javascript, Ajax, VS.NET (or Eclipse), a good team of similarly talented people and a lot of determination you can join the growing throng of 2.0 "me too" websites scrambling to make a living.

So what happened with the dotcom boom is happening again. And the choke point remains – what stands between you and success is: getting traffic and monetizing it.

What have we figured out so far?

  1. Everyone can build 2.0 applications because the tools are free or cheap and skills are common
  2. The dotcom boom was followed by a bust/shakeout and only the ones which actually made money managed to survive (usually those who have done more than just one narrow thing – Yahoo, Amazon, Microsoft)
  3. Although monetising gets easier, actually making money gets harder as more people enter into the fight for resources/revenue. Only the ones who make money actually survive or get bought out.

So where does this leave us? What's the solution? I once heard an interesting comment – I have found a useful quote on a webpage which is pretty similar to what I heard many years ago:

It's important for you to remember something about gold rushes. The people that make money in the gold rushes are not necessarily the people who are looking for the gold. The people that make money in the gold rushes are the ones selling the picks and shovels and tents to the other people who are looking for the gold.

You can read more about that here in Vinton Cerf's keynote speach about telecommunications and the internet.

Please take a moment to read Dreaming sessions By Jeff Immelt. You probably know Jeff is CEO of General Electric. That is a great article with a silly name. Someone did great research and a fab interview and was forced to hype the article. Anyway. Moving on. The key thing we can learn is this:

We've been in the diesel-locomotive business for about 90 years. We have deep relationships with the major U.S. railroads, and increasingly with foreign railroads, too. Those companies would like to do a better job of computer-aided dispatching, to know when a locomotive has been shut down for a long time and to figure out how they can get it into more productive service. So it was natural for us to get into rail-information technology. … And it comes not from golly-gee-whiz innovation, but from a whole new business that came to us from solving traditional customers' problems.

There you have it. They are shifting from making railroads into helping other railroad companies make money. Clever. They collect the knowledge of others and massage it, flip it, organize it and sell it back to them. You've probably heard of The knowledge economy – from the awesome wikipedia:

a knowledge-based economy is a phrase that refers to the use of knowledge to produce economic benefits. The phrase was popularised if not invented by Peter Drucker

That is profound. That's the change in GE. It's what reBlogger is good at – collecting knowledge to produce economic opportunity for our company and especially for our customers!

BillG sees the same shift in the use of knowledge has occured. In his article for Newsweek he says:

It's hard to say exactly when it happened, but at some point in the last 20 years the word "knowledge" became an adjective.

The rest of the article is fluff, but that point is profound to me. Here is a more in-depth consideration of the english language perspective of the whole knowledge is an adjective thing (it's non-essential to this discussion).

Access to knowledge is essential #1: When Googling became a verb "to google" or "i googled it" then it was clear the search engines had arrived and were now a significant part of everyone's life. Everyone wanted to access knowledge.

An ability to find and retrieve knowledge is essential #2: A few days ago a father said to me that he would have to get a PC in his home (which he didn't want) because his kid needed it for school homework. If the father doesn't allow the internet (with it's dangers and rubbish) into his home, the child can't do his homework. Wow. Access to knowledge is therefore essential to growing up.

Regardless of if knowledge indeed is now an adjective – I agree that things are changing. Access to knowledge is very important and the ability to manipulate knowledge is crucial for businesses. As Jeff said the key is "not from golly-gee-whiz innovation". Golly-gee-whiz innovation in our industry would be things like CSS, a cool name/url, Ajax or a new framework library. That's where the current competition is at, but that's not what it will take to survive.

So how does a company survive? What change is required? The way to survive when there are literally hundreds and hundreds of competitors is – not to have even better Ajax tricks, not to have cooler CSS! Why not? Because everyone can go view > source and have it for themselves within minutes. That's the low hanging fruit. We need to look higher up the tree for food.

As Jeff moved GE into rail-information technology and solving traditional customers' problems, we must consider what our equivalent is to that. Here's what we're not going to build:

  • another corporate blogging system,
  • another meme website,
  • another DIGG clone,
  • another bookmarking website,
  • another feed-markup service

This is a short list of the enormous number of different types of rail road companies, the miners.

We need to solve their problems. What problems do they have? If we just look at corporate blogs, their major problem (and our opportunity) is to help the business owners to track, collate and research their employee blogs and

In summary, what advice have we collected so far?

  1. Move up the tree, eat higher fruit – the harder to reach "knowledge" stuff
  2. Make tools that others use and will pay for (not free stuff unless it's a loss leader)
  3. Make actual money, not just build coolness factors

So we finally come to this business of ours. Where can we go from here to survive the shakeout that will inevitably come after the big buyouts?

  • reBlogger should become a value added (marketing/research/management) application. We need to understand what metrics companies will be looking for. This is like the GE-railroad companies approach above.
  • that we are building is a me-too idea which is going to compete directly against the coolness of the other 2.0 sites – unless we have something significant in mind that will drive sales, we should look long and hard at this. Any idea we innovate will rapidly be copied by the hundreds of others out there.
  • We can build a crawler and selling the combined data as a service to the hundreds of 2.0 companies out there. This is like the building tools approach above.



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