While many derided Google for bringing a knife to a gunfight, Google has responded today saying that Microsoft is trying to pull one over on everyone. Google’s David Drummond, SVP and Chief Legal Officer, said Microsoft’s offer to cooperate on the Novell bid was a “false gotcha,” that wouldn’t have necessarily afforded Google or other Android partners any protection had Google jointly purchased the Novell patents.

“Microsoft’s objective has been to keep from Google and Android device-makers any patents that might be used to defend against their attacks. A joint acquisition of the Novell patents that gave all parties a license would have eliminated any protection these patents could offer to Android against attacks from Microsoft and its bidding partners. Making sure that we would be unable to assert these patents to defend Android — and having us pay for the privilege — must have seemed like an ingenious strategy to them. We didn’t fall for it,” Drummond wrote.

What he means is that even if Google had won the Novell patents with Microsoft, Microsoft could have still licensed those same patents to another company, who could have in turn sued Google or other Android licenses. And then the Novell patents would not be a deterrent any more against attacks or would be weak leverage to force a cross-licensing deal.

The Novell patents were eventually bought by Microsoft, Apple, Oracle and EMC. But the Department of Justice in April ordered that the patents should be available for licensing at a fair price. Google is now hoping to get the DOJ to do the same with the Nortel patents, which Apple, RIM, Microsoft and others purchased for $4.5 billion last month, beating out Google in the process, something Google called “anti-competitive strategy.”

Frank Shaw, Microsoft Head of Communications, responded to Drummond’s latest comments on Twitter explaining why he thinks Google turned down Microsoft:

“Because they wanted to buy something that they could use to assert against someone else. So partnering with others & reducing patent liability across the industry is not something they wanted to help do.”

Drummond and Shaw raises a good points. Google wouldn’t want to buy something if it didn’t provide blanket protection. But Shaw points out that Google is only interested in using patents to force cross-licensing deals for itself.

The back and forth is certainly entertaining. But it still doesn’t undercut some of the other criticisms that Google has faced in the last day concerning Drummond’s original remarks. As John Gruber and others have pointed out, Drummond is quick to call the patents used to attack Android “bogus” but it didn’t say which ones nor did it explain why it was anti-competitive behavior when Apple and other bid on the Nortel patents but why it would be different if Google had won. And as some like Paul Thurrott have pointed out, Google is able to leverage its dominance in one market to offer a free product in another, disrupting the business of Microsoft, Apple and others.

Despite all the rhetoric, Google is in a tough spot. It has to obtain more patent heft. The company continues to rail against the patent system but has to work within it to compete. At some point though, if Google can’t come up with the necessary leverage or protection from regulators, it will have to start paying up. And that, Android’s competitors would probably argue, wouldn’t be anti-competitive but would actual restore competition, forcing the formerly free Android to compete against paid operating systems. We’ll just have to see whose definition of anti-competitive wins out here.

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• The rise of tablets in the enterprise
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Have you lost your password recently, or had someone try to steal it through a “phishing” attempt? Maybe you’ve been hacked, or had someone pretend to be you online. Even if you haven’t suffered from actual identity theft or hacking, it’s something we all probably worry about as we live more and more of our lives online. But trying to maintain a secure online identity across hundreds of services is a daunting task, so the federal government wants to help. It says it doesn’t want to take over managing your identity though, or give you some kind of federal digital ID card. Instead, it plans to try to get the private sector to create a set of standards that allow an open “identity ecosystem” to form.

To that end, the Obama administration introduced its long-awaited National Strategy on Trusted Identity in Cyberspace on Friday, a document that has been in the works for over a year and is part of the government’s Cyberspace Policy Review plan. Those involved in shepherding the strategy — including Commerce Secretary Gary Locke, who introduced it during a live event followed by a panel discussion — took pains to point out that this effort will be led by industry, and that it isn’t some kind of Big Brother-ish system that everyone will be forced to use.

Secretary Locke said, “the old password and user-name combination we often use to verify people is no longer good enough” because it leaves too many consumers and businesses vulnerable to ID and data theft, since many people can’t remember their passwords or have too many to keep track of and wind up losing them. So the strategy — which involves the Commerce Department and the Department of Homeland Security, as well as other parts of the government — is designed to create an identity “ecosystem” that the administration hopes will jump-start private sector initiatives to create what Locke called “a uniquely American solution” to the problem of verifying identity online.

The ability to verify identity is the “endoskeleton of our online lives,” said Jane Lute, deputy secretary of the Department of Homeland Security, in a speech following Secretary Locke. She added that “the goal here is confidence, not centralized control.” A copy of the strategy is available here (PDF link).

In a prepared statement, President Obama said the Internet “has transformed how we communicate and do business, opening up markets, and connecting our society as never before. But it has also led to new challenges, like online fraud and identity theft, that harm consumers and cost billions of dollars each year.” According to a recent survey by Javelin Strategy and Research quoted by the Commerce Department, over 8 million U.S. adults were the victims of identity theft or fraud in 2010, with total costs of $37 billion.

While other countries have chosen to rely on government-led initiatives to essentially create national ID cards, Locke said “we don’t think that’s a good model, despite what you might have read on blogs frequented by the conspiracy theory set,” and that having a single issuer of identities “creates unacceptable privacy and civil liberties issues.” Instead, the Commerce Secretary said that the private sector would lead the way, with the government providing the framework for developing standards that everyone can agree on. The strategy is being supported by companies including Verisign, Microsoft and PayPal, the latter of which wrote a blog post about its support of the strategy.

Dr. Andy Ozment, White House Director for Cybersecurity Policy, said on a conference call prior to the announcement of the strategy that it’s designed to do four things:

• protect consumers’ privacy on the Internet
• protect them against identity theft and fraud
• foster economic growth by moving more businesses online, and
• create a platform for innovative services online

Ozment said the plan is to create a “marketplace” with businesses and agencies of different kinds, all of whom are trusted identity providers. Users could obtain identity credentials from anyone who met certain standards, he said: “[I]t could be something on my USB drive, it could be a smart card, or maybe a one-time password generator.”

The administration said it plans to have several workshops with industry and other interested parties to discuss how the plan will be rolled out and what kind of governance model it will involve — whether it’s run by the private sector alone, or whether it involves a hybrid private-public model. The next step is to run public pilot projects in 2012, but one of the officials involved said it “could take three to five years for the private-led steering group to settle on the standards.”

As with most such government-led initiatives, one of the big questions is whether the private sector will want to adopt this strategy, and what role the government will play in setting the standards that eventually emerge (former Twitter CEO Evan Williams wrote a blog post recently about the difficulties of dealing with digital identity). Locke and Ozment both made it clear that participating in the strategy is “completely voluntary” both for consumers and for businesses, and that all the Obama administration wants to do is help facilitate the efforts to agree on standards, and give its blessing to some kind of “trust mark” system for identifying who is participating in the system and who isn’t.

The risk, of course, is that companies and agencies that are already enforcing strong privacy and identity-management principles — and those who are trying to build market share as identity intermediaries, as Facebook and LinkedIn are — will join the effort, while those who are making millions by doing the opposite will continue to ignore it.

Post and thumbnail photos courtesy of Flickr user Kathryn

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It’s back to the future time at Yahoo, it seems. The Internet portal/media giant has decided to invest in original content again, embarking on a hiring spree that’s so far added almost a dozen journalists from both traditional print media outlets (like Jane Sasseen from BusinessWeek) and online media entities (like Michael Calderone from Politico) and even opening a bureau in Washington, D.C. Yahoo is also hiring TV veterans, including Anna Robertson, a news producer from “Good Morning America.” Does this strategy spell success for the beleaguered web giant? Only if it goes about it in a very different way from the last time it bet the farm on creating original web content.

Rewind the calendar a few years, and this sounds an awful lot like what Yahoo was doing under Lloyd Braun, the media genius that then-CEO Terry Semel hired to turn what was a portal into a multimedia colossus producing TV-style content and journalism. The company hired dozens of writers, editors and producers for its media unit, and launched some ambitious original content ventures, including a web-based breaking news operation called Hot Zone hosted by former CNN war reporter Kevin Sites.

But the original content train derailed fairly early. As a BusinessWeek piece described it:

Yahoo’s original content endeavors, from celebrity blogs to the online reality shows, have fallen flat or been stuck in development. Web-traffic numbers have stalled on a couple of its media sites. And Yahoo’s media group only hit internal financial targets last year after revising them downward, according to two sources familiar with the media group. “Things at Yahoo just get stuck in Never Never Land,” says an executive at one of Yahoo’s content partners.

Eventually, of course, both Semel and Braun left the company and Yahoo started a long slide that included the return of co-founder Jerry Yang as acting CEO, followed by Carol Bartz, and an on-again, off-again romance with Microsoft around the search business. But even before the recent hiring wave of journalists, there have been signs that Yahoo wanted to get back into the content business in a big way, including a deal with WPP Group to produce advertising-branded TV-style webisodes. As Liz reported in January, Bartz has also said that Yahoo sees its main competition as being television.

There’s no question that Yahoo is already a media force, with a news site that gets close to 45 million unique visitors a month (far more than Google News) and several properties such as Yahoo Sports and Yahoo Entertainment that also pull in fairly huge numbers of users. But the majority of that content comes from media partners, not Yahoo itself — and therein lies part of the problem with the company wanting to become an original content creator: How are the big media entities going to take it when Yahoo starts competing with them by generating its own journalism and other content? They didn’t like it much last time, and that was part of what spelled doom for the strategy.

Yahoo isn’t the only company banking on original content, either: AOL has also been spending wads of cash hiring traditional journalists either away from existing media outlets such as the New York Times (including Saul Hansell, who is running the company’s Seed project) or those who have been laid off in the many waves of downsizing. As of last year, AOL had an estimated 1,500 journalists working for its various properties, and has said that it plans to pour $50 million into a hyper-local news venture called Patch. More recently, however, the company’s media plans have been described by some as “a mess,” complicated by what CEO and former Google executive Tim Armstrong has said is a culture of failure..

The bottom line for Yahoo is that CEO Carol Bartz had better have some new tricks up her sleeve, or her original content bet could wind up on the same flaming pyre along with the vision of Braun and Semel.

Related content from GigaOM Pro (sub req’d):Developers, Meet Your Hungry New Market: The News

Post photo courtesy of Flickr user Paulo Brabo

Matt Chasen, CEO and Founder, uShip

Six years ago I attended a business plan competition where I watched a couple of guys explain how they wanted to streamline the process of shipping bulky items across the country by linking folks up via the Internet. The social web was starting to heat up, but I liked how these guys and their company, uShip, were trying to take the web and use it to bring people together, not to swap songs or photos but to take advantage of empty space in moving vans. uShip will hold a panel at the upcoming South by Southwest conference explaining how to build a profitable business, so in the meantime, I decided to check in with the company to see what the founders have learned.

uShip, which provides a matching service that connects people who want to send things across the country and those who happen to have space in their vehicles as they drive across country (and also offers an alternate revenue stream for  professional shippers) is now profitable, thanks to commissions the company takes when it matches shippers and shippees. The Austin, Texas-based company brought in between $5 million and $7 million in sales during 2009, double that of the previous year.

uShip has raised $7 million in outside capital from Benchmark and DAG Ventures, and has helped broker more than $140 million in shipping contracts — with about 85 percent of those occurring during the last two years. Last week, it received its 1 millionth listing on the site. So I asked founder and CEO Matt Chasen for a few lessons he learned as part of building uShip and he offered up via email the following tidbits:

• Know Thy Revenue Streams. “Focus on proving out how you will make money. It is critically important to build a unit economic model that shows how much it costs to acquire a customer and the metrics around how much you can earn per customer.”
• Avoid PPC Addiction. “Don’t be overly reliant on paid search marketing. It’s okay to use search engine marketing to seed a business, but have plans in place for how you will grow the business with search engine optimization, word-of-mouth and other free channels.”
• Launch the Minimum Viable Product. “For internet-based businesses, don’t wait until your product is “perfect” before launching, because you will likely just end up changing it. I’m a big fan of the Minimum Viable Product (MVP) concept – build and launch only the bare minimum that is necessary to get customer feedback and data. Sometimes this may even only be a landing page describing your product and value proposition – with AdWords you can inexpensively test entire business models and start understanding your customer acquisition cost before you even start building your product.”
• Stay Lean. “Continually revisit your budgets, assumptions and strategy. Focus on niche markets that are big enough to build a profitable businesses – but that also have very large adjacent opportunities.”

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This article also appeared on BusinessWeek.com.

Netgear isn’t the first hardware company to get on the Web 2.0 bandwagon. Maxtor back in 2006 teamed up with Fabrik and bundled MyFabrik service and software with its drives. Fabrik has since bought Simpletech, a drive and peripherals company. And last year, RCA teamed up with Box.net for its Small Wonder video camera. Of course, the company that has embraced Web 2.0 more than any other is GPS/Internet navigation device maker Dash.

Given that Web 2.0 technologies are well-suited for improving user experience, I hope this trend catches on and makes some of today’s digital devices even easier to use. I wonder what gadget gurus David Pogue, Walt Mossberg and my former boss, Josh Quittner, now a columnist for Time Magazine, have to say about it.

PS: If there are any more examples, let me know and I can add them to the list.

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It’s definitely easy to lose sight of the 20,000 foot strategic goals and vision when battling daily issues. What’s worse, is how easy it becomes to change strategies quickly when you lose sight of what you were originally setting out to do. Strategies, goals and visions will change. There’s no doubt about that. But it strikes me how easy it is to change gears too quickly because of factors “on the ground” … without stepping back and taking an overall view of things.

On that front, here are [5] things I’ve been thinking about further …

1) Have a Strong Vision. The stronger your initial vision and goal, the better. That doesn’t mean your business needs to be dedicated to saving the planet, or some massively grandiose mission of dethroning Google and being worth $20 billion in a single year. But whatever your goal – keep it top-of-mind, believe in it, and reference it on a regular basis. Chances are when the going gets tough, you’ll ask yourself, “Why the hell am I doing this?” Having a strong vision will remind you. And the stronger it is, the harder it is to deviate from it in a blink of an eye.

2) Have Strategy / Vision Meetings. Take time out of your insane schedule to meet with your other founders and team members to look at the big picture. It’s a good time to re-align and re-adjust goals without radically changing them on-the-fly. At Standout Jobs we haven’t succeeded at doing this a lot – especially with the team – but it’s something that I do think is important.

3) Make Small Adjustments Before Big Ones. The path of least resistance is probably a good one to take. You don’t want to get out of the gate, launch your startup, and five nanoseconds later change everything up. Try and make small adjustments – fine tune things – and see how it goes from there.

4) Stay Analytical & Objective. Having a strong mission is great, but if you’re too focused on it and unable to see problems and make changes you’ll be in trouble. So stay analytical and objective. Measure as much as you can. Don’t make changes blindly.

5) Keep Your Options Open. Options are always good. So any strategy or change in strategy that reduces options is risky. If you can make small changes to your vision and increase your options, then you’re heading in the right direction.

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Ben points out an all-too-common shortcoming of cash- and time-strapped startups: a lack of attention on customer support. Maybe we’re overly focused on our code or our funding. Whatever the reasons, this is a weakness Ben argues — and therein lies a potential strategic advantage.

Of course it’s just good business to offer quality customer support. The fact that so few startups do so only compounds the value to you if you can:

Luckily for you, very few companies (especially startups!) provide anything remotely resembling quality customer support and so you can immediately use it as a differentiator…

What is more, tying in to our post yesterday on the perils of pursuing product perfection, Ben points out that providing good support can compensate for the inevitable glitches, bugs and necessary tweaks that you — and your users — will be dealing with post-launch.

Invariably your product will be rough around the edges, bugs will emerge and there will be a shortage of features. On top of that, you’re the new kid on the block, so customers may look at you with a bit of concern (especially in a B2B market.) “How long will they last?” “Can they really provide the level of product quality and service we need?” To assuage those concerns, and balance against the shortcomings of an early product, use great customer support.

So this is how, Ben concludes, what must of us think of as a “cost-center” actually becomes a value-creator.

Read all of Ben’s post, I Love Customers , and for more of his writings, see also:
* DEMO Went Great, Then “All Hell” Broke Loose.
* Presenting at DEMO: 12 Do’s. 5 Don’ts.
* Are you a leader?

* This is Your Brain. TiYB when fundraising…
* How-To Create the Perfect Company Blog

Image credit: CartoonChurch.

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“This is the position you want to be in … you like being down 4 points at the end of the game and you gotta to score a touchdown to win. If your down 3 points you might settle for a field goal [so] you’re not as aggressive.”

This is what quarterback of the New York Giants, Eli Manning had to say this evening when asked to explain his team’s stunning — make that, “an absolute shock to the sports world” — comeback to win Super Bowl XLII, with a score of 17-14, against the New England Patriots. New England had been all oddsmakers’ favorite to win, which would’ve made it a Pats’ Perfect Season.

Behind most of the game, and down 4 points with just minutes left on the clock, Manning drove his team the length of the field in a series of gutsy plays — including one they’re calling the “Eli Miracle” and in the last 40 seconds, gunned it into the end zone for the game-winning touchdown. It was thrilling, for sure, if only because the odds were so stacked against the play — as the video clip shows (suffer through the ad, and listen to the commentary).

Manning’s point is a good one to remember next time you feel neck-deep and against he odds in your startup: Sometimes it takes a slightly larger challenge to draw the high performance out of you. And in case you think this game is just a one-off metaphor for overcoming big odds, think again.

Manning is a walking case study for how to dig yourself out of a pit in the name of ambition: He threw more interceptions than any other “signal caller,” as QBs are known in the league during the regular season (hey founder’s, signal caller: that’s you!), which got him beaten up by the press for being the first “legacy draft pick in the NFL” and taunts that the Giants had overpaid for him as a first overall pick in the NFL draft. (His brother is Peyton Manning.)

Listen to what Manning had to say about finding his way out of the pit (substitute ‘QB’ for ‘founder’ and game for, well your game):

“As a quarterback you can never lose your confidence. You might have some bad plays, I might throw some interceptions, but you have to go into each game and think I can do it, I can wing this… I knew I just needed to give it some time, this is not an easy game to play, but I knew I could play [it] at a higher level. I just had to believe in myself, keep working and it would come.”

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Chess has long-been a metaphor for business, and there is plenty of strategy to borrow from Fischer — that’s from the chess board, not his life. Beginning in mid-1970′s, Fischer clashed with the U.S. government over politics (Israel; Yugoslavia), ultimately relinquished his U.S. citizenship, and lived out the rest of his years as a near-recluse in Reykjavík, Iceland, the same city where the chess match that had made him famous in the first place was played.

Controversial and erratic as he was personally, on the topics of competition, strategy and tactics he was concrete and productive. For starters, he wrote a book: Bobby Fisher Teaches Chess, which we recommend you read. The New York Times obituary also writes of Fischer’s hallmarks for winning…

In a description that might easily fit the classicly impassioned entrepreneur, the Times writes:

[Fischer] was fiercely competitive — some said he was driven by an abject fear of losing. At the chessboard he possessed the pitilessness of a tyrant — “I love to see them squirm,” he once said of his opponents.

A few of Fischer’s Success Hacks include:

1) Study:
“From early on, he buttressed his penchant for original thinking with monumental study, and he became known for his mastery of the game’s literature. “Practice! Study! Talent!” was his formula for success. In a short time he would become incomparable at all phases of chess, from openings to endgames.”

Others we call by their chess names:

2) The King’s Gambit — an opening strategy in which White sacrifices a kingside pawn to get a quick attack — had long been dismissed as too risky and romantic… The business equivalent would be the free giveaway we wrote about earlier today.

3) The Sicilian Defense: “The epitome of a sharp counterattack by Black.” In business things (other than corporate raiding or greenmail) this would be “the upsell.”

4) The Ruy Lopez :”a slowly building game of maneuver.” We call this execution.

But the best thing said of Fischer’s philosophy today reveals, in fact, a devotion to much more than any game or even winning. Bobby Fisher cared about innovation:

“But Fischer’s argument was that the old ideas were not necessarily bad ideas,” Mr. Pandolfini said [of him]. “They had merely fallen out of favor, and by injecting new thinking into an old idea, you created state-of-the-art logic.”

He also excelled at it, in his own way. Read Fischer’s book for more explanation of good offensive and defensive strategies that have application off the chess board.
And for an early biography of Fischer, we also recommend Bobby Fischer: Profile of a Prodigy, by Frank Brady.

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McKinsey offers specific guidance on how to do this in Preparing for the next downturn. Having studied 1,300 companies, the article details the winning strategies used to survive the last economic lull by Starbucks, Verizon and Talbots, and highights others in this handy chart.

I know what you’re thinking: Verizon, Starbucks and Talbots are all far larger than your company, and you’re neither an industrial shop nor a bank. It’s true that “balance sheet adjustments” might not apply to you, but the “operational flexibility” tips sure do.

We’ll break it down. Start by thinking about 3 things:
* do cut SG&A by hiring more part-time staff
* so you don’t need to cut R&D
* so that you can continue to invest in diversifying your product offerings

Here’s how it works:

Talbots, for example, increased the flexibility of its workforce in the years before the recession, adding part-time workers during the growth period of the 1990s at almost double the pace at which it added salaried workers … Then, as the recession took hold in 2000 and 2001, Talbots also radically shifted its advertising mix away from TV and catalog operations and toward focused activities targeting customer groups with the highest sales potential. Although this strategy somewhat reduced the company’s ratio of advertising expenses to revenues (from 5.5 percent of revenues in 2000 to 4.3 percent in 2001), Talbots maintained advertising levels far above the sector in general [and] helped Talbots emerge from the recession as a leader in its sector, though it entered the recession as a challenger.

And…

… less successful companies cut their R&D and advertising more deeply [than SG&A overhead], putting them at a disadvantage for tapping the opportunities these expenditures might create. Before the recession, their productivity per employee was lower than that of the leaders, and so they had to lay off more employees during the downturn, perhaps damaging their ability to attract and retain talent in the future.

There’s plenty more the in the McKinsey piece to help you “succeed in the face of decline.” Read and learn. Several months on, we’ll bet this is knowledge you’ll be very glad to have. “Preparing for the next downturn” was authored in April by McKinsey partners Richard Dobbs (London) and Tomas Karakolev (Prague), and consultant Rishi Raj (Delhi).

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The piece outlines why the Silver brothers abandoned managing “activities” through their org chart hierarchy, in favor of a flat, employee-empowered strategy that they’ve dubbed, “managing by objectives.”

This is the second time Found|READ has addressed the virtue of weighing Outcomes vs. Activity. It is a subtle discipline, but based on how it helped Printable, you might want to try it, too. As Scott tells Crain, it works because: “Sales feed egos. Margins feed families.” (Just look how happy his staff is!)

According to Crain, in Printable’s early days, when closing sales mattered most (as it does at all startups) Silver’s 15 employees were reviewed based on activities like “did [you] call all these customers to follow up on the fact that they owe us money?”

Notice: the criterion was ‘did you follow up,’ NOT ‘did you get the money!’ Sales are an activity. The margin is the ultimate result of the activity.

Scott tells Crain that managing activities this way

“[created] a lot of internal inefficiencies, with all sorts of back and forth. If there was a problem, sales would look into it, then production, then I would, then it was back to accounting for a discount or to fix it some way… once we started to reach critical mass, there weren’t enough hours in the day for us to be part of it.”

So in 2006 the brothers switched strategies to focus on the results of the activity, not the activity itself.

For example, instead of “following up” the goal became: “I will acquire five new clients” or “I will keep my profit margin at a certain level.” Or, for the non-sales people, something like, “I will collect 85% of our receivables within 60 days.”

Then, to alleviate management’s need to oversee everything…

…the Silvers empowered their staff to make decisions, as long as they could answer ‘Yes’ to 5 questions:
1) Is it right for the customer?
2) Is it right for our company?
3) Is it ethical?
*4) Is it something for which you are willing to be accountable?
5) Is it consistent with our company’s basic beliefs?

We emphasize #4, because we think is the most important: Printable’s employees now set their own goals, and it’s up to them to figure out how to reach them. This includes personal goals, like quitting smoking. Why?

“It’s more about principles than tactics,” said Scott. “The idea is goal-setting is for your whole life, making you a more complete person,” Scott emphasized.

A more complete person is a more complete team member. This is how focusing on results, rather than activity, has transformed the Silvers’ business. According to Scott: “[We used to have] 50% of sales people meeting their goals. This quarter, I think everyone is going to hit them.”

For more on why results matter more than activity, read Chris Michel’s earlier Found|READ post:Outcomes vs. Activity. Chris knows a lot about this. He founded an early social networking site, Military.com in 1999, sold it to Monster.com in 2004 for $40 million, then founded Affinity Labs, which he sold to Monster for even more — $61 million — earlier this month. Talk about outcomes. Congratulations, Chris!

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Take a look at this abbreviation of Rag’s list. As yourself if your startup can address his questions, or ours (in itals). If not, consider whether, with some strategic modification, your b-model, product, or service could. Do this and chances are you’ll be better-positioned for 2008.

1. Can user-generated video be directly monetized and made to be profitable? I’m skeptical that the effective CPMs from running ads on UGV will outweigh the cost of goods sold (bandwidth, etc.) to make a good business. Does your video startup have a revenue-model than beats COGS?

2. Will recorded music continue the march towards being ad-supported? Deals like iMeem indicate that the ad-supported model is very much top-of-mind with the major labels. … But a great ad-supported business takes time to build. How can you build a startup in this space that has sufficient runway?

3. Will handset makers continue to gain more leverage with carriers? Recent announcements indicate [carriers'] willingness to … cede more power, and risk, to handset makers and others… Could your mobile startup leverage this shift?

4. As the social network turns, where will it go? Most social networks have either opened up their platform to third-party applications [but] how will the social networks and apps monetize this? Does your startup monetizes social nets?

5. Will there be a macro-economic slowdown [and] what will be the effects on the online space? … look for a flight to quality … That means Google, Yahoo … Marginal sites that [are] not part of a quality network will suffer, as will unproven advertising media like widgets, UGV and virtual worlds. That would spell trouble for startups that lack traction and are too dependent on an ad-supported model. Do you have a plan for forging an alliance with a “quality network”?

For the full text of Rag’s trend-questions, continue reading here.

Based in London, Raghav “Rags” Gupta is VP of International Partnerships at Brightcove, where he has worked since ‘05, prior to which he was a senior executive at Live365. Check out his blog at www.ragsgupta.com.

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For four years running, from 1999 through 2002, Aquascape landed on the Inc. 500 list of the fastest growing privately held companies in America. Yet on December 31, the core business that achieved that feat with will be dead. Why would we kill what was a successful and prosperous business in favor of another model that is completely untested, you ask? Simple. We decided to stop trying to be all things to all people and figure out for the first time what we truly want to be when we grow up.

Greg’s rationale borrows from another Goldsmith maxim, articulated in his book:“What Got You Here Won’t Get You There.” The book is really an elaboration on a piece of Goldsmith’s Success Delusion — the part where he explains why past successes can delude us into expecting that a repeat performance will lead to repeat success. It does not.To his great credit, Greg Wittstock appears to have figured this out sooner that most successful founders do. So, on on Jan 1, Aquascape will switch over from being a direct-to-contractor vendor of water garden stuff, to focus on being a distributor. There are risks, of course:

We will see how our gamble pays off … To even contemplate turning over our customers, the lifeblood of any business, to our [distribution] network — a network that didn’t even exist one year ago — seemed preposterous when we first began considering this.

But Greg understands what Goldmsith, and Harvard’s Clayton Christensen, have been lecturing about for years: businesses must be dynamic — especially the previously successful ones — if they hope to continue to innovate and growth into the future.Read Greg’s piece in full, and about how his new game plan may already be bearing fruit, here.

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The truth is it’s not enough to be smart. Luck is an irrevocably part of the Success Equation, no matter how many cycles we spin — on this and in other founder-forums or in Ivory Tower business schools — trying to minimize that annoying variable of chance.

Still it can be oddly comforting to remember that we can’t control everything, no matter how smart we are or how hard we work. But serial entrepreneur and blogger Marc Andreessen, whose wisdom and advice we often share with you, thinks we can learn to leverage luck better. A few months ago he began a serial post dubbed, Luck and the entrepreneur.”

In chapter 1 Marc addresses “the four kinds of luck.” The definitions are complex, so I’ll paraphrase:

1. Blind luck, the sort that cannot be influenced
2. Action-inspired Luck, which is promoted by curiosity and even repetition.
3. Mindful Luck. Think of Louis Pasteur: “Chance favors the prepared mind.”
4. Hard Work Luck: Marc writes, “this is the kind of luck that develops during a probing action which has a distinctive personal flavor… it comes to you, unsought, because of who you are and how you behave.” Or as Benjamin Disraeli, put it: “We make our fortunes and we call them fate.”

In this sense, the 4th type is the kind of luck that you can most influence in your life as a person, and as a founder. By your probing action, distinctive personal behavior you influence your “luck” with becoming successful.

The best part of Marc’s post comes at the end, where he offers tips for how to leverage this kind of luck. “In short, I think there is a roadmap to getting luck on our side, and I think this is it,” he concludes.

So here is Marc Andreessen’s Luck Roadmap:

• How energetic are we? How inclined towards motion [action] are we? Those of you who read my first age and the entrepreneur post will recognize that this is a variation on the “optimize for the maximum number of swings of the bat” principle. In a highly uncertain world, a bias to action is key to catalyzing success, and luck, and is often to be preferred to thinking things through more throughly.
• How curious are we? How determined are we to learn about our chosen field, other fields, and the world around us? In my post on hiring great people, I talked about the value I place on curiosity — and specifically, curiosity over intelligence. This is why. Curious people are more likely to already have in their heads the building blocks for crafting a solution for any particular problem they come across, versus the more quote-unquote intelligent, but less curious, person who is trying to get by on logic and pure intellectual effort.
• How flexible and aggressive are we at synthesizing — at linking together multiple, disparate, apparently unrelated experiences on the fly? I think this is a hard skill to consciously improve, but I think it is good to start most creative exercises with the idea that the solution may come from any of our past experiences or knowledge, as opposed to out of a textbook or the mouth of an expert. (And, if you are a manager and you have someone who is particularly good at synthesis, promote her as fast as you possibly can.)
• How uniquely are we developing a personal point of view — a personal approach — a personal set of “eccentric hobbies, personal lifestyles, and motor behaviors” that will uniquely prepare us to create? This, in a nutshell, is why I believe that most creative people are better off with more life experience and journeys afield into seemingly unrelated areas, as opposed to more formal domain-specific education — at least if they want to create.

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“Venture Capital is really all about pattern recognition. We look for patterns it the market, patterns in entrepreneurs, cultural patterns at the startups pitching us.”

Pattern recognition is important for founders, too, especially when it comes to identifying the patterns that suggest a market is evolving and expanding = new business opportunities.

We found a nice mini-case study of this phenomenon in a recent post on Read/WriteWeb about the evolution of personal publishing. It is based on a new essay by the very thoughtful VC, Fred Wilson, on why and how the latest iterations of personal publishing, Twitter and Tumblr, evolved out of the earliest forms, such as Movable Type and WordPress. It’s no accident, he says, it’s verticalization. (Read Wilson’s original post here.)

We think Wilson’s analysis of the personal publishing space is useful not just for what it says about the evolution of that particular market, but also as an exercise in recognizing the pattern(s) of any market in evolution.

Fred writes about the culmination of personal publishing represented by Tumblr and Twitter:

But my gut tells me that combining the personal expression elements of blogging with the emotional aspect of social networking in a lightweight manner that allows anyone to be a blogger with ease and not much commitment (think iphone walking down the street and seeing something cool), will yield a very large market of people who both consume and contribute content in these social blogging systems.

So one potential pattern of a market in expansion is represented in the itals above: the pattern is one where user-experiences are compounded and simplified at the same time, allowing us to do more with less (less effort; less money, etc.) The very same pattern can be seen in the evolution of, say, network infrastructure (more data; fewer servers; less time, etc.).

R/WW makes further observations on the evolution pattern in the personal publishing market. First people had static static websites. Then blogs morphed websites into dynamic online diaries.

blogging platforms made it easier for people to publish online without having to deal with HTML. Liberated from the need to deal with technical quirks, people finally had the chance to focus on the content. And they did.

Again, it’s more (content) with less (headache).

Then social networks added even more ‘ease-of-use’ (more for even less) and we hit the next level: multi-demographic personal publishing, as opposed to publishing in a niche demographic.

[with social networks] the publishing occurs in the context of socializing and therefore is transparent. More important, it is perceived as easy. Writing a long blog post is much harder than posting a photo.

Then Twitter and Tumblr add “compactness” to the pattern of ‘more for less’ and it evolves again into microblogging:

The idea of expressing of what you are doing right now in less than 140 characters is clever, but remixing other users’ posts and allowing people to subscribe to each other’s messages was the stroke of genius that made Twitter a hit… Tumblr dramatically simplifies blogging in the same way that blogs simplified web sites … focusing each post on a single object – a photo, a video, a link…

In network optimization we might liken this to leveraging the capacity of a “window” or “frame” to carry more bytes per trip across the network: ‘compactness’ means we can send/convey/do more with less, as you can on Twitter and Tumblr. As Wilson describes Tumblr: ” [you] can create a tumblog of your very own without ever posting anything directly to tumblr.” Customized personal publishing with almost no effort.

R/WW concludes “the personal publishing market evolved from cumbersome web sites to online diaries called blogs to social networks and more recently to microblogs.” Wilson refers to this evolution as a “verticalization.”

In truth many markets in evolution are actually being “verticalized.” And later today I’ll be posting an interview with a three-time founder who believes that business models always evolve through verticalization, too. It’s a pattern. (Tune in, Zack Rinat of Model N is worth reading about.)

The point here is use the example of the evolution of personal publishing to identify one important pattern, so that you can recognize it when it begins to happen in your own industry. The sooner you do this, the sooner you see the next round of business opportunities. As Ray Rothrock says, there are all kinds of patterns that must be recognized if we are to be succesful in business. Verticalization is just one of them. We’ll address more in future posts.

Is your market being verticalized? How can you tell?

What other important patterns do you see in your industry that inform your strategic thinking?

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So how can a tiny startup compete? Fambro has a clever tactic: aim low; be quaint.

Rather than go head-to-head against Tesla or Prius with another full-sized car model, Fambro opted to launch Aptera with a cute three wheeler that is “more-furniture-like” than automobile.

Writes Katie:

…you can’t help but root for the startup’s almost friendly, outsider’s market position. Three-wheelers aren’t usually thought of as game-changing cars that could disrupt Detroit, or even compete with Prius sales. Even Fambro says, “We’re not trying to emulate GM. We shouldn’t even be thought of as a car company.”

It’s a strategy to make Aptera stand out, and hopefully snare a seat (or a maybe just a stool) at this very crowded table. If Aptera succeeds, then Fambro will add that last wheel and go mainstream.

The company’s plan is to use the three-wheeler to help establish the Aptera brand and generate revenues while it works on other “more mainstream” products. [Then] Apetra could one day fall into the category of a disruptive car industry upstart several years down the road. For now, Aptera just needs to get its first product to market, which they plan to do in the fourth quarter of 2008.

Fambro’s example is just one more lesson in how important it is to know your market, and your potential place in it, if you are to be successful. In a particularly crowded space, don’t try to ‘do it all’ right away. In this circumstance try turning an old slogan on it’s head: Aim low. Get noticed. Then aim higher.

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