Gagglescape's good friend and co-founder of the unstoppable BarCamp (not BaseCamp as David Crow just kindly pointed out) movement, Tara Hunt, was on CBC radio this morning. The CBC's mid-morning radio show did a piece on the "long tail" phenomenon now manifesting itself on the markets of the world. For those of you who have been sleeping for the last two years or so, the long tail is the segment of the market that in traditional mass-markets was overlooked by big retailers.

Suddenly, because of the Internet and now its derivation, Web 2.0, long tail markets are economically viable - hell, even down right profitable.

One example that Tara and company spoke about was the music industry. In the past, the record industry promoted a few top stars whose sales drove the label's bottom-line. Someone like, say, Madonna, enjoyed huge mass market success. The market has fragmented. Long tail channels now allow ten bands to survive where once one got by. That means more choice for consumers.

Coincidentally, Yahoo ran a story today from Business 2.0's September issue. The title is ''The Smartest Companies to Start Now.'' Some are related to the long tail market:

Jim Breyer, partner, Accel Partners

WHAT HE WANTS NOW: Social-networking sites may be sprouting like weeds, but none yet operates as a bona fide marketplace, with members buying and selling their own creations as much as they blog, link, and post. Breyer, who sits on Wal-Mart's board, is interested in backing an international network for indie artists, musicians, filmmakers, authors, designers, and other creative types from dozens of countries. Ideally, the site would have the download and payment features to create what he calls a "micromarket" for members' wares.

WHAT HE'LL INVEST: $10 million.

Here are Time Magazine's 50 top web sites.
Every once in a while Time comes out with this list -- old media meets new. We are not sure if we agree with all the choices but it is good to see Canada's Drawn! at the top of the list.

Entertainment, Arts & Media
Drawn!
Jumpcut
Sundance Splinks
Wolfgang's Vault
Photo Muse
Podcast Pickle
Pandora
The 9
YouTube

Shopping, Lifestyles & Hobbies
Phone Scoop
Delicious Days
Not Martha
Shop Intuition
Kids-In-Mind
Mighty Goods
Zunafish

News & Information
The Morning News
Kevin Sites in the Hot Zone
Charity Navigator
Footnoted
Tailrank
Deadspin
Digg
The Human Clock

Staying Connected
MySpace
Google Spreadsheets
SingShot
Meebo
Dodgeball

Time Wasters
TMZ
Shockwave
Yu-Gi-Oh Groove
Cute Overload
Jackson Pollock by Miltos Manetas
Number Logic

Travel & Real Estate
Zipcar
Farecast
Kayak
Zillow
HopStop
CentralPark
Yelp

Web Search & Service
Accoona
Kosmix
Snap
Pixsy
Argali White & Yellow
Blurb
Seamless Web
McAfee SiteAdvisor

Friedman's The World is Flat, How Companies Cope, Lesson #7

Outsourcing isn't just for Benedict Arnolds. It's also for idealists.

Triple convergence, has, as Friedman insists, flattened the world. Information can access regional manpower capabilities in ways never before imagined. From an idealist's perspective, one benefit is the ability to enhance the lives of people in 3rd world nations.

Two ex-McKinsey employees started a digitizing company with typists in Cambodia. Those typists were paid twice the country's minimum wage, worked six hours a day six days a week, and went to school for the rest of their workdays. The company now employs 170 people in three offices.

"Our goal was to break the vicious cycle there of young people having to drop out of school to support families," says founder Jeremy Hockenstein. "We have tried to pioneer socially responsible outsourcing."

Friedman's, "The World is Flat," How Companies Cope, Lesson #6

The best companies outsource to win, not to shrink. They outsource to innovate faster and more cheaply in order to grow larger, gain market share, and hire more and different specialists -- not to save money by firing more people.

Friedman argues that outsourcing is a growth strategy. As noted earlier, anything a company can do to enhance its core competencies will benefit the long-term success of that business. Outsourcing then becomes a way to grow your business. Some CEOs, unfortunately, have taken a narrow view and used outsourcing to generate short-term profits at the expense of long-term corporate health.

That is a systemic problem more than an individual one though. Information technology became a panacea for many corporations. It was relatively easy to save money by investment in I.T. and this strategy became a standard tool to boost profits when, actually, the company was in a downward spiral. The very people a business might depend on for innovation and commitment to corporate well-being were decimated by often indiscriminate mass layoffs. The US auto industry comes to mind as an example.

Toyota and Honda used their much more cohesive employee social structures to reinvent the way cars are built. In response to the early days of the Japanese auto threat, US industries looked for efficiencies in I.T. rather than in understanding how to better compete with the Japanese. The US auto industry's latest dismal performance reflects the sad truth that, among other business performance issues, they never did understand lesson #6.

e-consultancy.com has a story on "Kiko" the Web 2.0 Calendar company that is putting itself up for sale on e-Bay for a reported sum of $50,000. While that in itself is interesting enough, the story gains traction when discussing the forces behind the funding of Kiko. It turns out that the company's funding came from a micro-cap investment by "Y-Combinator," a company that believes in the "Get scale, get business model, and get acquired," approach to building companies. Y-Combinator's web site begins:

Y Combinator is a new kind of venture firm specializing in funding early stage startups. We help startups through what is for many the hardest step, from idea to company.
We invest mostly in software and web services. And because we are ourselves technology people, we prefer groups with a lot of technical depth. We care more about how smart you are than how old you are, and more about the quality of your idea than whether you have a formal business plan.

Turns out that the management behind YC will throw a few dollars at almost any idea just to see what sticks - the shotgun spread approach to Web 2.0 investment. It will be interesting to see how successful the company is. e-consultancy.com writer, Chris Lake, does not think much of the idea:

Last month I threw a little mud at Graham, a notable entrepreneur, respected programmer and essayist, after he made some comments about a) geeks running businesses and b) there being no need to worry about a business model until a website achieves critical mass. I agree with Graham on a lot of things, but this sort of talk is downright dangerous.

I wonder if there are any Canadian VC firms taking this approach.

Friedman's The World Is Flat, How Companies Cope, Lesson #5:

In a flat world, the best companies stay healthy by getting regular chest X-rays and then selling the results to their clients.

Chest X-rays are good but only look at one part of the body. Really, Friedman means to say complete medicals but that metaphor is not as vivid. Whatever the comparsion, the best companies understand their inputs, processes, and outputs. They get this understanding by having very smart people -- internal and external consultants -- review the company on an ongoing basis. Their task is to identify operations that are essential to the growth of the company and separate them from those that can be outsourced to free up cash for reinvestment.

Friedman argues that an average healthy company is doing well if 25% of its activities are core competencies. Think about it for a moment. In a healthy company, 75% of operations can be improved or outsourced. Doing so would improve the company's health. Imagine what unhealthy companies might achieve.

Once a company has identified an inefficiency and improved it, it can then sell that capability to customers.

The example Friedman uses is HPs contract to implement and manage the core banking system of the Bank of India in Mumbai. 750 branches were included in the deal. Why did HP win this contract? Through a process of self-diagnosis, it had reduced eighty-seven different supply chains down to five across 178 different countries. Get this number right: Five supply chains managing $50 Billion in revenue. No wonder the Bank of India thought it could benefit from HP's core competency.

Many people see these gains in efficiency coming on the backs of lost jobs. In fact, what happens is that good companies use the free cash to grow their operational competencies. (...read more...)

The Google Campus in Mountain View

Turns out that information does want to be free. Thanks to Stuart Brand for the quote and to Google for making the decision to push the free information ideal to extremes. Yesterday, the Internet colossus rolled out its first free WiFi system in the community of Mountain View, California. The next stop is San Francisco. What does this mean for the ISP industry?

Telephone and VoIP companies may have cause for concern as well. There are already reports that VoIP calls were easily made over Google's WiFi service. Though Google still maintains that it will not expand its WiFi offerings to the entire nation, telephone, VoIP, and cable companies will clearly see Google as a very real threat. At the very least, Google stands to take away some business from these companies in the Bay Area.

How will this act play against recent moves on the part of ISPs to restrict user access to certain sites? Is this a strategic, game theory move on Google's part to say to the industry, hey, if you want to limit access to us or make us pay you to carry our search engine and other offerings, well, we just might put you out of business. And they can do it too.

Interesting move.

Friedman's The World Is Flat, How Companies Cope, Lesson #4:

The best companies are the best collaborators. In the flat world, more and more business will be done through collaborations within and between companies, for a very simple reason" The next layers of value creation -- whether in technology, marketing, biomedicine, or manufacturing -- are becoming so complex that no single firm or department is going to be able to master them alone.

The world -- especially the world of technology -- is so complex and specialized that no one company can dominate their market landscape: not even GE. What can smaller companies do to make sure they remain competitive in this environment? Collaborate, collaborate, collaborate says Friedman. There are millions of opportunities out there for companies who can put complex pieces together in new ways. Think of world flattening as a kind systematized version of what Buckminster Fuller use to describe as the Creative Generalist. These generalists, so it goes, are people who are highly skilled but who have chosen not to put blinkers over their eyes by narrowing their world-view through specialization. Fuller maintained that it is these people who piece together things that were formerly unassociated and thus create new wealth.

Friedman calls this the connection of knowledge pools through world-flattening and declares it a paradigm shift. I'm not sure that's what Thomas Kune had in mind when he developed the phrase but it is a shift in how we organize strategic information. Companies that are able to dip into these pools through the process of collaboration will have an advantage over their competitors as a result.

Rolls-Royce is an example of a large company that does collaboration well. Back in the 80s it decided to become more international in focus. They had long since divested themselves of (...read more...)

Image Of Game Player Types By David Drell
Microsoft's announcement that it will release a free toolkit for video game developers shows that the lumbering digital industry giant does have a division or two who understand the power of open networks. Called XNA Game Studio Express, the toolkit will be available for free and is to debut by the end of this month.

Everyone knows that the digital gaming business needs some new ideas. Nintendo's successful "Brain Age" games illustrate there are markets for more than just first-person shooters out there. Scott Henson, director of platform strategy for Microsoft's game-developer group, says:

"Some of the stuff we're going to do will help spark more excitement," he said. "You don't see a lot of fresh, new ideas. There aren't enough of those."

Henson also goes on to say that Microsoft wants to host a community-powered arcade that features homegrown games. By making development tools more broadly available to gamers, Microsoft hopes to improve the number and quality of games available - and that is a good thing.

The digital gaming industry has developed simulation tools that far exceed anything the military or construction industries might have come up with. It is time to start applying those new tools to other fields.

The CBC's Dragon's Den -- you remember, the entrepreneurship reality show competiton -- is in the news again. This time the Toronto Star has a good story about the people who will take their own money and invest it in the winning proposals. Here are the judges:

Kevin O'Leary, co-founder of The Learning Company, an educational software firm that was sold to The Mattel Co. in 1999 for $3.2 billion.
Laurence Lewin, co-founder and president of national women's lingerie chain La Senza Corp.
Jim Treliving, the former cop who founded casual dining restaurant chain Boston Pizza.
Jennifer Wood, a bush pilot, Alberta cattle rancher and businesswoman.
Robert Herjavec, a pioneer in computer networking and security, and head of The Herjavec Group.

Stay tuned. The show begins in October.

Friend of Gagglkescape.com, Sean Wise, has the last word in the story.

On the other hand, any one of the many applicants who will be rejected by the Dragons over the next four days may go on to be very successful in their business, said Lewin.
After all, as Wise points out: "Everyone told George Lucas that Star Wars wasn't a good idea."

After a rejuvenating week kayaking the waters of northern Georgian Bay, Gagglescape's Editor is back. We'll be bringing our readers the latest news and information about Web 2.0, local entrepreneurs, and the VC industry. If you have any news you want to share with us please send the editor an email.

The good people at Deloitte did a survey of Canadian venture capitalists. Deloitte asked how many firms are making offshore venture investments. The answer? Not many. Unlike their US counterparts who are extending their foreign investments, Canadians are not venturing far.

Canadian VCs continue to stick close to home, with more than half (58%) of Canadian respondents to Deloitte's 2006 Global Venture Capital Survey citing they have no plans to expand investments outside the country over the next five years, compared to 47% of U.S.-based VCs and 44% of investors overall globally. 'Adequate deal flow in existing markets' was cited by Canadian VCs as the primary reason for not pursuing global investments (33%), followed by 'contractual' and 'legal restrictions' (22% each).

Of course, with very few venture dollars available to invest it is easy to see why our VCs are not going abroad.

On the other hand, the upside is that a lot of those US foreign investments are in Canada.

"The survey findings show that Canada is not only viewed as an investment hotspot with abundant opportunity from domestic VCs, but it is also on the radar for investors around the globe," says John Ruffolo, National Leader, Technology, Media & Telecommunications, Deloitte. "These findings are very encouraging for the Canadian market and indicate that investors around the globe are enthused by Canada's economic prospects by continuing to fund emerging companies."

It was inevitable. Yesterday YouTube announced it was serving 100 million videos per day. Who needs television? Another announcement followed. YouTube was being sued by the owner of news footage that had been appropriated by YouTube users without their consent. The Hollywood Reporter posts:

A Los Angeles video news service sued YouTube Inc. on Friday in federal court for allowing its users to upload copyrighted video footage onto the popular Web site, including the beating of trucker Reginald Denny during the 1992 riots.

Los Angeles News Service and its owner and operator, Robert Tur, assert in the lawsuit that in one week's time, one version of the Denny beating uploaded by a YouTube user was viewed and downloaded 1,000 times via the site.

Will Tur win the battle? Fred von Lohmann of the Electronic Frontier Foundation writes:

Fortunately, YouTube has an important legal shield that was not available to the old Napster: the so-called "online service provider safe harbors" created by Congress as part of the DMCA. One provision, Section 512(c), was designed to protect commercial Web-hosting services, which feared they might be held responsible for the posting habits of their customers.

Whenever a service like YouTube becomes immensely popular - think Napster here - the litigation soon follows. Lohmann believes YouTube will win but, in any case, there has to be a way for services like YouTube to compensate the original copyright holders.

As a follow-up to yesterday's posting about big media's increased interest in controlling the Net, Associated Press reports that television continues to lose viewers:

A Low-Water Mark for Broadcast TV Viewing

TV viewers must have taken to the beach: It was the least-watched week in recorded history for the four biggest broadcast networks.

CBS, ABC, NBC and Fox averaged 20.8 million viewers during the average prime-time minute last week, according to Nielsen Media Research. That sunk below the previous record, set during the last week of July in 2005.

With the acquisition yesterday of CHUM Ltd. by Bell Globemedia, Canada's media landscape just got a lot smaller. For years the City TV Group had been in a David and Goliath struggle with Canada's larger media players. Its strategy was to be so different from the CTVs of the world that people would take notice - and they did. Moses Znaimer brilliantly grew a soft-porn playing down on the dial UHF channel into one of the world's most influential television networks.

Now this. It was inevitable. Znaimer sold to CHUM a few years back and now the majority owners of CHUM (the Waters family) are selling to BGM. That's the way the media world works. With one exception. The Internet and blogging technologies have driven access to media delivery channels down into the hands of almost everyone with a computer and ISP. The result? Newspapers are losing their readers. Television is losing viewers. Bloggers, however, have gained audiences in big numbers.

Media conglomerates are vast industries and they are fighting back. The US government is passing legislation pushed by big media lobby groups that will allow them to tier delivery of content on the Net. So, if you want to see a Rocketboom.com episode, for example, you'll have to pay more for access to it. Or if you want to use Google instead of some other search engine, well, that will cost more too. Think bronze, silver and gold plans here. No more Net Neutrality.

As the history of City TV illustrates, having a more open media infrastructure allows for innovation that ultimately drives economic growth. When local media begins to consolidate through acquisitions like the CHUM sale, we have to wonder what the future of the Net holds in store for Canadians. We can only hope that our government - (...read more...)