Chat Bubble

I have seen a new trend of applications being advertised on TV. Some of the ads have celebrity endorsements. It looks like a lot of money is being put into applications like WhatsApp,LINE,WeChat SnapChat etc. These applications are being tipped to take over from Facebook in the social media space.

Having installed WhatsApp and looking at the features of LINE,WeChat & SnapChat, I have come to a rather unflattering conclusion. These applications are glorified “Yahoo Messenger” of old.

Facebook,Twitter & LinkedIn have done well  attracting lots of users and then figuring out how to make money out of these users. Earlier, Google followed the same strategy and are one of the giants of technology now.So, there have been examples of companies that have done well by initially concentrating only on acquiring users and then figuring out the business model.

So, what is wrong with gaining users and then figuring out how to make money out of them? I can’t say there is anything wrong. But, there are frightening similarities between these chat apps and the dotcom bubble startups of late 90s. These similarities are –

  • Advertising on TV
  •   “We will make money through advertising“.
Bubble

Bubble

 

Yes, Yahoo survived, so did rediff.com, but history is littered with thousands of websites that died when funding stopped a new alternative for banner advertisements came into existence.

Lets consider the existing companies and see how they are making money off their user base –

  • Google/Facebook/Twitter –  Google and then Facebook manged to monetize their users by building excellent advertising platforms. These platforms enabled even small businesses to advertise tiny amounts of money(As low as Rs.40 a day  in Facebook) and gain customers. This created a long tail of customers and instant monetization covering all their users.
  • LinkedIn – Has a set of excellent products for HR professionals which enable them to look at lots of LinkedIn profiles and then contact them for hiring. So, they provide a hiring platform for HR professionals. These products have an annual subscription fee.

Advertising will not work in “Chat” applications since people are not on the app most of the time. People are inclined to check the app only when they get a notification. Showing an advertisement using notification or embedding an advertisement into a chat message would make it too intrusive. Facebook and Google have a very nice way of showing non-intrusive advertisements.  Hence, these applications would have to come up with a new business model.

Let us see what the current applications are doing to monetize –

  • WeChat/LINE – They have unique virtual stores which provide virtual goods like stickers and profile add-ons to use. Although this is innovative, it does not cater to businesses like the above platforms. Most of the users are unlikely to purchase anything(at least in India).I predict that it is unlikely these apps will ever recover the money invested in advertising on TV with celebrity endorsements
  • WhatsApp – In some markets like US, this is a paid app. However, in India it is still free to download and use. The moment they charge, 90% of Indian users will migrate to another application. So, I don’t see any future for this business model.
  • SnapChat  – None so far.

 

Having looked at some of the applications, I don’t see any of them growing to be the technology giants of the future. SnapChat refused a 3 billion dollar offer from Facebook. The VC who funded this startup & the founders are living quite cozily in the center of the bubble. I predict that most of  these apps are going to disappear.

Having said that, people will not be using Facebook for social networking in 20 years time. There will be innovative new applications that are going to replace Facebook.  These applications will have business model that would be considered very radical. As radical as pay-per-click was to usual banner ads that were prevalent during dotcom bubble.

All I am just saying is that the current crop of chat applications are not going to replace Facebook. We are yet to see the replacement.

What do you think? Do comment!

PS – Dotcom bubble seems so nice. When the current bubble bursts, what will people call it? Chat App bubble? Please suggest some nice names which we can use in the future :-)

 

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Problems with Stack Ranking for performance management

Microsoft recently announced that they are doing away with the stack ranking for employee performance appraisals. Many people had blamed Microsoft’s stack ranking as the primary reason for driving away great programmers from working there and resulting in them losing out on mobile and social media to other companies.

Stack ranking is a process by which employees are fit into a bell curve of performance. When a company follows stack ranking, the managers are forced to put a certain percentage of employees into “under performer” category and only a certain percentage of people are allowed to be given “star performer” rating.Majority of the employees have to be given “average” rating.

The theory behind this process is that by forcing the management to identify the low performers and removing them, the overall team can be made much stronger with performance of people increasing year on year.

However, in reality, it is very hard to make it work. The expectation is that every year, the low performers are removed and replaced with new employees who are expected to be better. However, the compensation given by a company for a given position remains same. For a given salary, one cannot expect  the industry geniuses to work for you. So, after a few years, the employees hired to replace the low performers are no better than the average performers in the company. Also, these new hires would involve a lot of cost for the company and need some time to learn the ways of working and become productive.

Hence, companies with stack ranking  come up with a performance improvement program for the under performers. This program usually involves frequent meetings with the manager to set specific, measurable targets and discuss the progress on these targets. For an under performer, it becomes easy to meet the targets as it is specific and there are frequent meetings with the manager. The manager also wants to give good rating to the candidate to save himself from hiring a replacement who may or may not be better than the current employee..

The result is that during the next cycle, these under performers are given an average rating and the manager has to find other people to give “under performer” rating. This gives an uneven performance rating for most of the people. A person might get “star performer” one cycle and “Average” the next while others will get “Average” in one and “under performer” in another.

However, in all the individual sports and even in manual work where there are clear measurements, we see that people who are good tend to be always good while people who are average or below average tend to be so every year. This shows that usually, a person’s performance is consistent. A stack ranking forces the manager to given uneven ratings to a person who is performing consistently.

This results in employee dissatisfaction and many people who get “under performer” rating when they should actually be given “average” resign and go find another job where hopefully stack ranking is not used. This leaves a gap in the company’s employee standards. Only those who are really under performers are happy to stay back in the company as they get “average performer” rating most of the time.

Similarly, many companies have a rule that a person given “star performer” rating more than a certain number of times should be promoted. This results in the star performers also given “Average” rating. A Dilbert cartoon showcases this very well-

dilbert-performance-review

Those who are marginally out performers don’t mind this. However,those who are really good, would resent being given “Average” and would look for a different company to work for.

Hence, stack ranking actually drives away the truly high performers and the truly solid performers. Over a period of time, the marginal out performers would be considered “star performer” and the truly “under performer” would be considered “average” or solid performer.Hence, stack ranking causes exactly the opposite effect of what it is designed to do. Stack ranking causes the overall productivity of the employees to drop after a few cycles.

 

So, what is the alternative to stack ranking? I propose that we combine some of the ideas I had written about earlier and create a new framework. Here are some of the key points –

  • A team has a set of targets to meet. This target is based on the metrics I had blogged about here.
  • A team has a budget. The budget has a bonus component which is based on whether the team achieves its targets or not.
  • The Bonus component for a team is fixed irrespective of the size of the team. So, if you work in a smaller team, your bonus would be higher.
  • The team decides whether to hire an extra persons to the team. The team can stretch and meet the target and share a larger part of bonus or hire a person and get a smaller part. This ensures best team work and productivity
  • The team members rate each other & practice feedforward to improve team dynamics.

What do you think? Are there any loopholes? Do you think it will improve employee morale and perceived fairness of appraisals? Do Comment!

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How to predict if agile transformation is viable in your organisation?

The most important factor in the success or failure of agile transformation is the attitude of the managers and the developers. How do we know if the organisation has the right kind of people?

In my experience, there are multiple categories of developers in the world. Each of these categories of developers is essential for the team to be successful in agile. Some developers can and will show characteristics of more than one category. These categories are –

  • Fire Starter – Developers belonging to this category are always full of new ideas. They would be the first to work with new technology and do a few  proof-of-concepts(POC). They would be happy to work on tasks like “compare technology A,B,C and recommend one”. However, they get bored once the POC is done and there is no challenge or learning involved in the work.
  • Finisher– Similar to cricket, finishers relish in taking a project to completion. Ideally, the project would be initiated by a Fire Starter and then once the POC is done, it should be handed over to the Finisher to keep both these categories happy.
  • Tinkerer – Tinkerer is a perfectionist. He is not happy with something that “just works”. He will continue to work on the project to improve any one of the following aspects of the code – performance, re-factoring for readability, adaptability etc.
  • Fixer – Loves investigating. Any hard-to-reproduce bugs or recurring environment issues are best handled by a fixer. This person gets satisfaction out of permanently fixing such recurring issues and bugs in a project.
  • Tool Smith – Notices inefficiencies in the system and builds small,easy to use tools to fix it. You will find these people write scripts for such things like build automation, scripts or short-cuts for repeated steps like clearing browser cache etc.
  • Worker bee – Is happiest when given a specific task. This person will work efficiently on any task given, but will not take up any task on his own initiative.

Did you picture any developer in your team or organisation when you read the descriptions? The more categories you could picture, the more chances of success with the agile transformation. Let me explain my theory –

Paul Graham of the Y-Combinator fame says that one of the traits of a great programmer is “incredible difficulty in making them do something they don’t like”.

Unfortunately, work does have some unpleasant bits which many people don’t like to do. This is where a manager comes in. A bad manager takes  a task and assign it to whoever is free at that particular point. This means a boring task can get assigned to anyone in the team. If enough unpleasant tasks gets assigned, the developer revolts and quits the company. The only category of developers happy with this kind of environment is the “worker bee” developer.

If a group of  managers are allowed to work in this way for a long time,pretty soon your organisation will be devoid “great programmers”. You will be left with only worker bee group of developers.

Now, if we attempt to transform to an agile way of working, none of the developers will be happy as there will be no one to guide and assign tasks to them. Teams will naturally fail. Many organisations then come to the conclusion that they need to take step-by-step approach to going agile. Unfortunately,there are no in-between steps for going agile.

The analogy I can think of is teaching someone to jump.

Step1 – Standup.

Step2 – Push the ground with both your legs as fast and as hard as possible.

There is no intermediate step.

If you are in the situation where you cannot picture anyone in the first 5 categories of developers, your organization is going to fail.

My recommendation is to first hire or train existing managers to identify these categories and encourage them to assign tasks that are compatible with their category. Once you have a good mix of developer categories, transforming to agile would be one easy step away for two basic reasons –

  • You now have great managers
  • You now have great developers.

 

What do you think of my theory? Do comment!

 

 

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Impulse art – Making painting a viable profession

I always knew there was something seriously wrong with the art world,but when I  learnt that a painting that looked like it was drawn by a two-year old got 44 million dollars – Blue canvas, I couldn’t stop thinking about how broken the art world is.  In the world of art, the person who has painted has become more important than the contents of the painting.Personally, I wouldn’t spend even 50Rs on the Blue canvas. Here are some more ridiculous paintings that sold for millions

The world of paintings is having a clear divide. Those that are famous can charge whatever amount they can think of, while those who aren’t struggle to make a decent living. The painters who aren’t famous are forced to take up another job and keep painting as a hobby or a side-business.

Problem

A good painting is expensive since it takes the painter a week or more to come up with the art work. If a painter has to take it up as a profession, he needs to get an equivalent of a  week’s salary at a regular job for this artwork. This inherently limits the market to a very few rich people. This also limits the number of  professional painters.

Solution

To make painting a viable profession, we need to first increase the market. We can increase the market only by reducing cost. However, paying less for a painting is not an option since it would pay the artist less. Traditionally, cost of producing something can be reduced by mass producing and standardizing the items. So, how can we mass-produce paintings?

One way is to mass produce is to take a photo of the painting and take multiple printouts of the photo. The cost of taking a printout and hence cost of replication is low. We can now frame each of the photos and sell them at lower cost. The original artist gets a share of profit every time a copy sells.

The business now changes from selling the original to  people from galleries to selling lots of copies from regular shops. The artist will get his week’s worth of salary, but not at once. The advantage for the artist is that if he can produce one “hit” painting, he can earn from it through out his lifetime.

It sounded like a good solution to me. However, I was not willing to bet my life savings on it and start an Art showroom. Then I remembered the principles of Lean Startup and broke down my theory and assumptions into a series of inexpensive experiments.

Experiment 1 – Is there a market for cheap photo print of paintings?

I conducted the experiment on a street in Nagarbhavi last month. The results were promising. We sold a total of 14 paintings in the space of 3 -4 hours. Here are some pics of the experiment –

Paintings on the car - 1

Paintings on the car – 1

car_front

 

I am now willing to go for the next experiment. I will update you on the progress of this idea here. In the meantime, I have created a facebook page Impulse Art India to grow this idea.

 

PS- If you paint, or know anyone who paints well, I would like to hear from you.

 

 

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Democratizing careers

What is common between Infosys, IPL and Indian Idol?

They all democratized one profession and made money doing it. Let me explain –

Would you allow your kids to take up hockey,football,painting,dancing,singing,swimming,cycling as their career? You have watched them perform and you know they are good. Would you allow them to take it up as their full-time career?

What about cricket?What about computer programming? Why is there a difference in our opinions about these career paths?

According to me, the problem is with long-tail effect. Many of the careers like the ones I mentioned above are stuck with a very narrow range of profitability. In case of careers, profitability translates into quality of life for the person. We keep hearing horror stories of great Indian athletes and hockey players living in poverty now. This scares people off these careers.

Let us see how the cricket and software engineering became  “acceptable” careers now –

  • Cricket – Cricket used to be one of the unacceptable careers just a few years ago. In earlier days, if you decide to become a cricketer, the only chance of making it big was to somehow get selected at the national level. State and lower level players were not really valued and their contribution and their compensation was often low. Parents would allow kids to play for a few years,but never allowed them to give up other career  opportunities. So, the unsaid order was “You can play cricket, but if you get ‘that’ job, you stop playing and take the job seriously”.

  Cricket was popular. Every Indian watched cricket and yet only a select few were able to make a career out of it. There was something seriously wrong with the picture and the solution was provided by another sport – football. Zee TV had a brilliant idea of copying the European leagues concept into cricketing context.  Unfortunately for Zee TV, BCCI came up with a better execution of the idea and came up with a counter tournament – IPL. Although the innovator( Zee TV) got crushed, they democratized cricket. Since IPL has 8-10 teams, lot more Indian players got plum contracts and these franchise owners are now scouting at school and college level. So, a player who has not even played for his state has a good chance of getting an IPL contract and with it a chance to live a handsome life as a cricketer.

  • IT industry – Computers were expensive. Only the top universities and colleges had computer science lab where students could book time on the machines to create programs. Only the truly great programmers would have enough interest to wait for their computer time to execute their programs. All the first IT companies were started by these students and they hired only other computer science students as their companies grew.  Software Engineering was reserved for a few highly technical people working on huge projects with very high pay packages.

During the 1990s the prices of computers dropped and more and more people became comfortable using a computer. However, it was still not a career for most of the people.  Soon, some Indian entrepreneurs like Narayan Murthy of Infosys realized that most of the IT projects do not need programmers with very high skills. These companies soon bid cheaper rates for big maintenance projects and started recruiting people from other engineering streams. These engineers were given training for a few months and were good enough to execute these projects well. Pretty soon, these companies were flooded with so many projects that they literally hired bus loads of people from the engineering colleges.

There are other examples like TV shows like Indian Idol which are attempting to democratize singing and I am sure the people behind the idea are raking in the money. However, there is still huge scope of increasing the number of singers that can sing for a living.

There are other professions like painter, poet, dancer,music composer,singer etc  in which a select few are earning very high amounts while the rest of the talented people are unable to find enough work to lead a comfortable life. Can you think of ways to democratize these professions? You could be the Narayan Murthy of these fields!

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