On Strategy for Technology Companies

June 28, 2007 4:21 pm 0 comments

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This is beginning to look like a Jawwad Farid link blog, but he is currently writing like the Marc Andreessan of Pakistan (i.e. really really well).

Most recently he writes about strategy for the technology industry, the best summary of which would be: “For God’s Sake! Build a Product Company!”

Create Innovative Businesses! Change the world! Get that Guy Kawasaki mentor drumming a beat in your head.

I still think we cannot replicate the Israeli industry without the right angel support network in place.

Go to any convention in Silicon Valley and about 20-30% of VCs in the room say “We’re Israeli so we just invest in companies in the homeland”. These are the funds which allow people to succeed in the R&D and innovation front.

Some other comments to specific sections:

If you are looking for ideas, don’t be
creative; steal something that has already worked in North America and
Europe. Execute it well and you will find that there is a market for
the same solutions here.  Payroll processing (ADP), Check Imaging and
Reconciliation, Retail brokerage (MixIT, Kolachi), Index funds, Ebay
(lootmar), Elance (virtual women network), Paypal (amanna), Monster
(rozee, workjunction, Brightspyre)… you get the drift.

While this can certainly get you going, I dont think a product company focusing on the local market can gain a $100MM valuation in 3-5 years.

If you do agree to move away from building a BPO, and you agree to undertake the massive risk of building a product, then might as well build something with a global potential market.

If you ARE going to think, think big!

The risks with just rehashing an idea that worked in the west are:

1- The resulting products will typically not be localized enough. Do people in Pakistan really want a mobile transaction engine for automated utility bill payments over an ATM network, or do they just want a friendly Pakistan Post?

2- Products can, but Business Models do not replicate. A local version of Ebay cannot be successful until enough homemakers and casual users (“Joes”) frequent the net (thankfully, that is starting to happen);

Rozee cannot have operations as smooth or scalable as Monster, nor can it rely on CPM advertising for its business.

Rather than just looking at what worked in the west that could have a market here, think: How can the needs of this market be served only with a technology product?

3- Your Market will be limited to begin with.
What happens if the growth of internet penetration does not happen with the speed that was crucial for your success?

With no market in the country for your product, nor in the west, the only other markets you could explore would be countries that are “less-tech-savvy” than Pakistan, which shrinking rapidly anyway.

Instead, I think that if you ARE going to build a product, make something that can scale to a global market.

You will notice that if you do identify such a thing, there are many groups and people from the West who would happily fund you even in Pakistan even at the SEED round.

Academia first.  We need
to do a lot more at the undergraduate and graduate level on the
entrepreneurship side.  I am not talking about the lone course or
seminar or guest speaker on new ventures.  I am talking about a
complete change in curriculum that focuses on product development,
gorilla marketing, startup finance, and bootstrapping. In addition a
change in mindset is required, where Universities do the MIT and
Stanford model of encouraging kids to take crazy risks with their idea
and supporting them by providing temporary office space, connectivity,
accounting, back office and protection from the government (more on
this later).  Not the IBA model that says that yes we would like you to
participate in a business plan competition, but it would not be
appropriate for you to follow this through while you are a student at
IBA.

Some universities such as NUST and LUMS are providing such environments here, and more are planning to. I think these people do a fine job to convincing kids to shun away from corporate experience and go on the less-trodden path.

There is one problem with over-encouraging an “entrepreneurial culture”, and thus I feel an “Innovation Culture” is more important for universities to promote.

First the problem. Simply put, a person straight of college cannot build the next PayPal. Managing the large set of transactions requires some prior experience with large-scale enterprise architecture, which is just something they dont teach in college.

You cannot build a disruptive product to reshape workflow management until you’ve actually seen the problems that you are willing to solve.

There are people that I’ve mentored who were smart, but were so eager to start something that they did not stop to understand how to be successful in a vertical.

So rather than studying usability design, and studying how to disrupt the travel industry, which would have let them make the killer product they wanted to, these eager kids fresh out of college ended up making yet another website development shop.

So, rather than just encouraging an “Entrepreneurial Culture”, universities need to create an “Innovation Culture” which Stanford, UT Austin and others do very well. Teach students how to identify needs, pains, and how to build innovative businesses (not products) that serve those needs.

Keep these deep insightful pieces coming Jawwad.

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