Sokanu: The Blog

This is going to be a little bit more of a technical post, but it has everything to do with the "normal" web user, who represents 99% of all users. One of the things in the web world that you will notice is the theme of the latest "technology trends". In 2010, the hot trends are location-based apps (like Foursquare, Gowalla, Loopt, Yelp, Brightkite, etc.,) as well as "flash-based" marketing deals (Groupon, Gilt Groupe plus thousands of others). Trends are very cool because the media is on your side, investors are willing to put in money and you can make a lot of money very quickly.

Furthermore, there is a longer 'trend' that occurs in the start-up world. And that is the idea that most companies and products that you see online today have built-in limited markets. They don't believe so, but most products can only be marketed, sold and used by other technology people. In terms of Moore's chasm, they never get past the early adopter phase - and never get to see the chasm. The reason? Most products you see online are not built for Jack and Jill, they are built for the tech world.

There are millions of problems on this planet, some bigger than others. This is what defines your market size. The more people with a problem = the bigger your market. The issue lies when you don't solve a problem whatsoever. It's tough to build a company without a mission. When you are building with Jack & Jill in mind, you can think of their needs rather than what's 'cool'. Jack & Jill probably only use around seven websites on average (see Reid Hoffman's Start-up School Talk), and you can guarantee that those seven include: 1.Google 2.Facebook 3.Youtube 4.Hotmail 5.Wikipedia 6.Other 7.Other. Not a lot of room is there? That is not to say that these are the only websites they visit, these are just ones they frequent. 

When you solve a real problem, things can become a lot easier. Releasing a product that actually helps people solve their problem (where there is no solution) will cover up many mistakes. People will be willing to overlook mediocre design, some missing features, some bugs, etc... just because they need your product so much. We have always thought that a mediocre product with an unbelievable problem, can beat a great product with a mediocre problem.

Metrics are very important in any web company (or any company for that matter). Without users/customers, you have no business. And yes, there are many ways to optimize for those users. Make your signup button red, not green, create an easy signup process, etc.,  But past this point, you are not dealing with data anymore. Track your users around your website all you want, but once they are in, it comes down to psychology. How does the user feel interacting with the product? I'll give you an example. I love visiting Etsy. Have I ever sold one thing? No.  Am I crafty in any way? No. So why do I visit? Etsy has a great sense of design and their users are incredibly passionate. The sense of community on Etsy is what makes it tick. Does Etsy optimize their site for this experience? Or course! But they are focused on delivering positive feelings, which is what creates a great product. 

• Step 1 - Acquire the user through XYZ marketing channel
• Step 2 - Figure out the cost of acquiring that user
• Step 3 - Convert those eyeballs into a signup/payment
• Step 4 - Optimize that signup into a repeat user
• Step 5 - Help that repeat user share the product (go viral)
• Step 6 - Calculate the $$$ that each user is worth
• Step 7 - Increase the value per user through XYZ
• Step 8 - Repeat

But what about a fresh company? Why do we apply the same method? Take a look at the image below from Steve Blank.

If data is the weapon of choice for large companies, emotion is the weapon for small companies. Solving a real problem and optimizing your product for the solution is the best thing you can do. These two things only lead to one result, and that is to create the best possible experience for the user. If you optimize your design, culture and community around the needs of your users, you can have a fighting chance in the beginning. In order to become one of those seven sites that we talked about earlier, you need to make the user feel good when they come to your site. And Jack & Jill will feel good about a totally different site than Larry & Sergey. Just remember who your market is.

Overall, it just comes down to creating real value for real people. If your company has a fantastic mission, people will want to follow. And if the mission provides a solution to a great problem, you are off to an amazing start. 

In reading Tony Hsieh's new book, Delivering Happiness, one thing becomes clear: this is not an average book.  Most business books are the same, sticking in a generic biography with some copied Think and Grow Rich principles.  They then sell the book as new and revolutionary. These are average books. What Tony has created is a simple book; easy to read, yet really big on new content. Even though the first two sections were really interesting and educational, I am going to focus on the third section of the book in this blog post.  

The third section of the book focuses on something called the science of happiness.  The scientific field of positive psychology is dedicated to researching and learning more about this science, which is a relatively new branch of psychology.  Some of the current researchers in positive psychology include:  Martin Seligman, Ed Diener, Mihaly Csikszentmihalyi, Christopher Peterson, Carol Dweck, Barbara Fredrickson, Sonja Lyubomirsky, Kennon Sheldon, Jonathan Haidt, Shelley Taylor, C. R. Snyder, Robert Biswas-Diener, Donald Clifton, Albert Bandura, Charles S. Carver, Michael F. Scheier, and Ilona Boniwell.

But what good is this research if we don't have a framework to apply it to?  How can we, as average humans that don't have a PhD in cognitive neuroscience, relate positive psychology to our everyday lives?  Well, there is a fantastic framework presented by Tony in the third section of his book that does a great job of explaining this.  While you will see that Martin explains the same theory in the video below, the method I will write about is a little easier to understand.

The system revolves around understanding that happiness is not a singular object.  It is not a carrot on the end of stick that we attain.  This is the mistake that most people make.  They assume that if they attain a ton of money, a beautiful wife (or rich husband) and a Ferrari (or Tesla for the tech crowd) then they will be happy.  We begin this process by getting the right grades in high school, picking the correct college and then transitioning into the best job.  This is the apparent correct path to happiness.  I wish I could say the path to happiness were that easy, but we know that this is not true.  

Instead, we need to research what truly makes us happy.  What makes us tick?  What makes us get out of bed in the morning?  Well, we can best explain this by dividing happiness into three types: pleasure, passion and then purpose.  Let's go through each one in order to get a better understanding of what each means.

Pleasure

Pleasure is the most common form of happiness.  We all know what this means.  Pleasure is actually measurable via our emotions. We are all aware of what makes us happy and what makes us sad. If we interchange the word happy for pleasure we know what apply our experiences to this section. Many people derive pleasure from eating good food, spending time with friends and going out on a Friday night. These things make us smile, laugh and show noticeable happiness to others.  

So what is the problem with pleasure?  If we put ourselves in situations where we are always smiling and having a good time, haven't we figured out the secret to life?  What is the point of even going through the rest of this post?  Well, the problem comes when we analyze what people are feeling with the rest of their time. Humans, in general, tend to follow a simple graph. The graph spikes Friday afternoon around 5:00 and seems to drop Sunday night.  We have long periods of mediocre happiness during the business week (school or work) followed by high points on the weekend.  And this is not sustainable.  So while pleasure is great for short term moments, it is not going to give us the happiness that we as humans require for the rest of our lives. 

So what can we do to make sure that the graph does not dip every week?  Well, we must learn to master the second form of happiness, passion.

Passion

Passion is a tough thing to explain since it is unique to each individual.  While pleasure is easy to both detect in other people and in ourselves, passion is unfortunately not the same.  And this is because passion is not measurable by emotion like we stated before. The form of happiness involving passion is a state, not an emotion.  Finding this medium of happiness can also be called finding flow or the zone. Mihaly Csikszentmihalyi wrote explaining this phenomenon is his excellent book Flow: The Psychology of Optimal Experience.  

Finding this state is the key to understanding this level of happiness.  And this involves finding your passion in life.  Sokanu's goal is to help people find their passion in life, in order to push people to achieve this second level of happiness.  Once you find something that you love to do, it doesn't feel like work anymore.  This is how you get the middle part of the graph to rise up to meet the level of the weekend.  If we can discover what we love to do as our career, life becomes much easier.  Finding the portion of happiness called passion is goal that most individuals work for a long time to achieve.  Unfortunately, most wait until too late to start discovering what makes them happy.  My advice?

While you are young, have no responsibilities and have time on your hands to figure out what you want to do (university), PLEASE find your passion. It doesn't matter if your friends think that it is not "cool" or lucrative.  If you know internally that the passion you have found is something that you love, start doing it.  And once you start doing it, work as hard as you possibly can in order to be the best in the world at it. Period. 

So how can there be a level past this?  Isn't finding your passion in life the ultimate goal?  Not only have you identified what makes your emotions happy with pleasure, but now you have found a career that you have a passion for.  What else can there be?  Well, we have been very selfish up until this point. In order to reach a point where we are truly and fully happy, we must find our purpose.

Purpose

Finding your purpose in life is a very personal subject.  I can't help you find this by giving you a guideline like we can with pleasure or passion. So where do we start?  Well, just remember this statement:

Finding your passion in life means that you are part of something bigger than yourself.

Something bigger than yourself can mean a variety of things.  Being involved with charity, politics or religion are the most common versions of this. Or it can be a part of a mission that involves a huge number of people, igniting a global movement.  

Some recent examples can be Al Gore advocating for the climate crisis, inspiring millions of people to make a change in their environmental lives.  In charity, Craig and Marc Keilburger and their charity Free The Children have done some amazing things trying to solve problems that are much bigger than themselves.  In religion, I can think of no-one happier than the Dalai Lama, Tenzin Gyatso. He understands that he is a part of something much bigger than himself.

Another example that we may not think of are scientists and researchers.  So many people work tirelessly to solve huge medical problems like disease, scientific problems like where the universe comes from and understanding how the brain works.  These people are working on problems that have existed since the beginning of civilization. One person can not possibly understand how the brain or universe works, yet they realize that they are a small part of a much greater purpose.

This is the reason that you see wealthy individuals turn to charity full time later in their lives. Some of them realize at one point or another that making all of their money and buying nice cars gives them pleasure, but does nothing for their legacy.  They then turn to themselves and say, "what impact have I made on the world?"  And very often that impact is very minimal as selfishness has dominated their life previously. They then work to be a part of something much bigger.

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So through these three words we can begin to understand how to build a happiness framework for ourselves. It is not an easy task, but it is easily the most important one that we have in our lives.  After all, what is the point of living if we are not happy?

If you have made it down to the bottom of this post, thank you.  I have embedded a video below from positive psychologist Martin Seligman explaining the framework above in proper terms (I am no psychologist). It is a fantastic watch and gives interesting insight into the world and work of positive psychology.

Have you ever watched Minority Report? Many of us have wondered if the technology seen in that movie could ever be possible.  Well it is. Here is the man to show it to us.

Minority Report science adviser and inventor John Underkoffler demos g-speak -- the real-life version of the film's eye-popping, tai chi-meets-cyberspace computer interface. Is this how tomorrow's computers will be controlled?

I was reading Vivek Wadhwa's excellent article today in Techcrunch and then observed some of the comments following the article.  It seems as if people were coming from two sides, one that supports the idea of no outside funding and profitability, and the other supporting the idea of lots of the Seed/A/B/C/Exit theory.  Which is right?  Which is wrong?

As long as there will be external funding, there will be debates on which is the right way. Profitable, independent companies will feel pity for those poor souls that chose to take the nasty VC money, while VC-supported companies will feel bad for the slow moving, "lifestyle" businesses that don't have any funding.  Why does one party have to be right?  Why, as entrepreneurs, do we care about what other companies do so much?  It's because we have to relate to something similar, and we choose that side and stand by it.  It's the same principle as politics.

I believe that each company is unique and there is no wrong answer in terms of funding. Instead, companies should be more concerned about who they are competing against.  There are two kinds of companies in the tech world; those that compete on technology and those that compete on service.  

Technology

In order to get an idea of what kinds of companies compete on technology, take a look at either Techcrunch or Mashable every day.  You will see headlines of companies that compete solely on technology.  You will see sites like Blippy, Quora and Foursquare.  These are companies that are integrating the latest technologies into their products, whether that be location software, real-time data or social networking.

Companies like these receive huge valuations, get massive Venture Capital investments and hire incredibly brilliant software engineers.  The other trait that runs true with these companies?  They generally don't make a profit early on.  They develop their technology until they have acquired a large enough user base that they can flip on the revenue switch. Sometimes it takes three, sometimes five years to get to that point.  But until that point is reached, companies relying on their technology will have to survive on outside investment raised through VC's or private institutions.  

The way out of these companies is through an buyout or an IPO.  A buyout consists of a Merger & Acquisition, usually by Google or a company in a specific competing industry.   So all of that VC money put in will come back in the end (hopefully) along with a nice multiple return.  What's the difference in a business based off of service?

Service

A business that bases itself on service usually focuses on content rather than the technology that it is running on.  For an example, go back to Techcrunch or Mashable and take a look at their products.  I'm not discounting that their sites don't look good or they were not a lot of work to make, but rather that none of their back-end technology is proprietary.  They are valued on their content and ability to produce it rather than a web app.  Techcrunch is built on a Wordpress platform and has a huge team of writers and interviewers developing many articles per day.

Another story I read the other day on a company that competes on service rather than technology.  They are now a $100 million company, and they are called O'Reilly Media.  Tim O'Reilly, their founder and CEO, has slowly built his company into a behemoth by focusing on their product and core service, year after year.  Also take a look at Inc.com, the website for the magazine with the same name.  What does it compete on?  Better quality content and its service, not its technology.

Generally, companies that compete on service don't need huge amounts of outside investment to get going and to become profitable.  At most they will raise an angel capital round of ~$1 million to grow the company.  That is because rather than competing on their platform, they compete on content, sales and partnerships.  They can start slowly and grow from there.  Many of these companies do not get the media attention that technology companies do. 

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This method of running a business is no better or worse than running a business based off of technology.  It's just different.  I think people need to understand that.  It's just like politics. The Republicans and Democrats (or Liberals and Conservatives up here) represent different methodologies, different views and different leaders.  But is one better than the other?  No. They both produce presidents, they both represent counties in Congress and they voice their opinion.

It just so happens that we decide which party resonates more with us.  Sometimes it is a hybrid of the two.  That is the position I am in, both with politics and the tech world.  I can appreciate both sides of the argument, and take pieces from both parties.  Sokanu is going to compete on both our technology platform and our unique service.  This is what works for us. For companies like Pandora (which I am listening to right now), they have developed an incredible piece of technology that it has raised a lot of money for.  But the service they provide, as a result of their technology, is awesome.  That is why 40 million people have signed up for it.

So when it comes to starting a company and deciding which model to follow, just ask yourself what your competitive advantage is.  Is it your proprietary technology? Or is it the unique service that you provide to the world?  Decide on this and then go for it.