Tracking Market Statistics

As an entrepreneur and product manager, I am always on the look out for new opportunities.  One of the first things I am trained to do is to Can I expand into an adjacent market by adding a new feature?  What is the size of market for a completely new product which I can bring to market with existing technology?  Good market data is hard to find.  Sometimes, our companies have access to analyst resources like IDC, Gartner, Forrester, etc.  However, I have found a lot of great information pop-up in newspapers and other popular media outlets.  I keep track of some of the key statistics in a spreadsheet.  Here are some entries from my market data spreadsheet -

• Number of vehicles sold in 2010 = 12M
• WW PC sales (2011 estimate by Gartner) - 364M 
• WW PC sales (2012 estimate by Gartner) - 368M

Collecting this kind of information has helped me develop an instinct and enough data points to quickly size different opportunities.  What would be really terrific is if the marketing firms that keep track of such data democratize this information.  In other words, instead of charging $1,995/report, expose the high level data for free.  This would hook users like me and if I need more data, I wouldn't mind paying $20 for every additional piece of information.  Something like this (numbers are made up) -

 

Roomba - Product that I love

A friend asked me recently to think about some products that I would love to manage.  Roomba was the first thing I could think of.  I acquired my first Roomba almost a year ago and liked it so much that I bought another one as a gift for my parents.  The Roomba is a great product because it solves a very common problem  in an unconventional, but effective way.

As the parent of a toddler (think spills and dirt), I love switching on my Roomba when stepping out of the house and coming back to a clean room.  What a time saver!  Some features that I would introduce in the Roomba (or other products in the portfolio) would be -

1. Ability to clean stairs
2. Make it less noisy
3. Ability to mow my lawn 
4. Ability to remove dust from furniture (a la swiffer)
5. Ability to clear cobwebs

McAfee - Strategic value or Botched Acquisition?

McAfee was one of the absolute best companies that I have worked for in my short career. From 2006 through 2011 (just before its acquisition by Intel), McAfee nearly doubled its revenues at a healthy CAGR of 12.51% -

The only other large security company (500M+ in revenue) growing at a similar pace was Checkpoint

Intel acquired McAfee for $7.68B in 2011. As an insider, I was surprised that Intel never clearly articulated the rationale behind the acquisition. I also know that a number of senior execs left McAfee shortly after the acquisition was announced - Dave Dewalt, George Kurtz, Rosen Sharma, Dmitri Alperovitch to name just a few.

Looks like the exodus was a leading sign of a massive step backwards. Today, Intel announced its 2011 results with breakup of the Software and Services group which is the unit which includes McAfee and Wind River. Intel claims that it wrote down $204 in deferred revenue. The accounting period is also a little different (McAfee's fiscal year was aligned to the calendar year, Intel's FY is staggered by 3 months).

But, these adjustments should be more offset by the revenue from Intel's Wind River and other software operations. Wind River had revenues of $350M+ when it was acquired in 2009. In other words, McAfee's post acquisition performance has been disastrous. I'd guess that Checkpoint, Imperva, Palo Alto Networks, Splunk and even Symantec are the ones who have benefitted from Intel's acquisition of McAfee. Thoughts?

Identifying New Ideas for a Startup

One of the biggest challenges for an entrepreneur involves how to rate new ideas before you decide to chase it. There are different aspects that you can evaluate, but here is the fundamental list from Berkeley, especially for those interested in seeking VC money -

1. Unmet or Underserved need - we must start by critically analyzing whether the idea meets an unmet or underserved need. In other words, is there at least 1 customer whose hair is on fire when he hears about the idea from you?
2. Market size - Most successful entrepreneurs will tell you that chasing a large or growing market played a huge part in their success. Current thinking is that VCs are loathe to funding ideas which do not have a $1B potential.
   
3. Sustainable competitive advantage - do you have a secret sauce or technology that increases the barrier to entry or makes it extremely difficult for your competitors to battle you?
4. Scalable business model - can you build a scalable business around the idea. Are the fixed and variable costs such that you can increase and maintain high margins in steady state?
5. Why us? Why now? - do you have the right team with the experience, network or other necessary attributes to win with this idea? Is this the right time to go to market with this idea or will it take another 5 years for this idea to gain mainstream adoption.

At a minimum, you should be able to pass these five checks easily. Of course, it helps to examine the idea to gauge the attractiveness of the idea using personal metrics also. For instance, you may want to see how well aligned the idea is to your own interests, the cost of other opportunities you'll have to forgo, etc.

Corporate Blogs - the real audience

In the last 3-4 years, I have seen most software vendors starting their own corporate blog. I have seen first-hand how these corporate blogs help in lead-generation and sales. Most of us think that this requires a lot of thought-provoking, high quality content, but that is not necessarily true. This is because the true audience of the corporate blog is NOT the CIO or IT manager or admin who is looking to learn about new technologies. The real audience is actually the search engines and corporate blogs provide a great way to improve where one shows up in the search results.

One of my close friends, a great marketing person, gave these tips to get maximum mileage out of corporate blogging efforts -

• Create a shortlist - start by creating a list of keywords that you'd like to improve your search rankings on. At Solidcore, these keywords would normally include Change Control, File Integrity, Whitelisting, etc.
  
• Post Regularly and consistently - every blog post must target 2-3 of these keywords in a consistent manner. For best results, try to incorporate these keywords in your titles or tags. And be regular - it takes at least 3 posts a week for 6 months before your search rankings improve
• Link back - linking to other articles about the topic you are posting about also improves the search rankings. In fact, you should aim to link to at least 1 (preferably 2-3) other posts in every blog post

As you can see, this is fairly simple. If you don't find any good topics to blog about, just repeat the words in random order, a la "change control is solidcore and my file integrity oops what a neat way to cheat the search engines". I haven't seen too many instances of such obvious posts, but don't for a moment get beguiled into thinking that the corporate blog is aimed at you, the reader. It is not.

Tools for the Starving Entrepreneur

I found a couple of very interesting (and free) tools that I wish I had known about earlier -

1. SSL Explorer, an SSL based VPN solution. The company behind this product, 3SP, got acquired by Barracuda, but this product is still available from Sourceforge
2. VirtualBox virtualization products. This is a wonderful product and is available for most platforms, including Macs. Quite likely this will be discontinued after the Oracle acquisition of Sun is complete, so download it ASAP. As an aside, Oracle already has 2 virtualization products - their own xen-based one and one from their Virtual Iron acquisition.
   

Textbook Rentals

WSJ is reporting that Case Western will start experimenting with Amazon's Kindle for some of their classes this Fall. I hope this is a success and that we'll eventually see more electronic books going forward. If this happens, traditional book publishers will have to find better ways to remain profitable than resort to printing a new edition every year.

Profit margins of book publishers is a very well kept secret. Publishers invest between $1-2M for the first edition of a new book. If it is a success, they keep printing a new edition every year or two. Interestingly, most of the changes between editions are cosmetic - a few color changes, end of chapter problems rearranged, etc. Ever wondered why? Unless they do this, students will stop buying new books and prefer to buy used books from their seniors in school. Also, the cost of reprinting a successful book is less than $1/copy. Yes, that is right - the books that we typically buy for an average of $80-$120, actually cost about $1 to print. Clearly, it is in the publisher's best interests to suppress the used book market. The real cost, sadly, is borne by the environment.

But, despite the publisher's best efforts, the used book market continues to thrive. I recently heard about Chegg.com, a startup which offers textbook rentals and has a Netflix-style business model. They even allow you to highlight the rented books, so long as you don't make the books completely unusable for the next renter. I'm sure Amazon's Kindle will feature an electronic expiry of the books, using which publishers will be able to offer subscription and perpetual pricing. But, the real question is will the publishing industry survive? What if the authors published to Amazon's Kindle directly instead of using the service of a publisher? How would you stay relevant if you were the CEO of a publisher? I don't know, but would love to hear the thoughts of anyone in this industry