Let me ask you a question. Do you recognize this logo? Did you buy your TED ticket using one of these? Do you have one of these?
Did you know that per year VISA processes 4.4 Trillion Dollar in payments, handles 64 Billion transactions and operates in well over 200 countries.
Do you think VISA is a financial institution employing more than 20,000 people worldwide?
In truth, VISA is an established, trusted global company that until just a few years ago, employed only 3,000 people in 21 offices across 13 countries. Strangely small for the impact they’ve had all over the world.
They’ve had that impact through delivering their service using an intricate web of a small core and a vast network of tens of thousands of connected local banks. A model of connected but sometimes distant nodes agreeing on core principles and yet fiercly competing for customers.
A model that functions in something VISA’s CEO Dee Hock named a “chaord” — the unity of chaos and order.
VISA’s model was prophetic. It was developed and proven nearly 40 years ago and right around the same time the Internet was born. And, when mapped, these two systems are nearly identical in their structure. Grown separately, but a reflection of each other.
Enter the age of participation. The action of taking part.
Germinating and growing on and through the Internet, the participation culture is its own “chaord” with a set of rules unique to itself.
It’s decentralized, open and inclusive — and not controlled by a single gatekeeper. It connects talents and passions all over the world.
So how can we define the participation culture? Participation culture is a culture in which private persons (the public) do not act merely as consumers, but also as contributors or producers.
Last year a Stanford professor opened his entrepreneurship course to the world. He invited students to not only listen to his lessons but also to openly share and collaborate through an online platform.
Literally thousands of students from all over the world joined this call — often coming from places far away from Stanford’s campus and from walks of life which would never be able to attend this institution.
These students not only learned how to be entrepreneurs — but became entrepreneurs. And went on to create dozens of companies which set out to change the world for the better.
These students were nodes interacting with distant nodes.
Today Stanford opens up more and more of its courses — instigating change all over the world.
But there’re more — and all without permissions granted by a gate keeper: The 99% movement, the Arab spring, fashion and sporting good manufacturing practices changed for human good, food handling, consumer product safety, child education, higher education, encyclopedias, flash mobs, crowd funding, micro loans - even car design or superbowl commercials… those who participate are the ones who begin to make the decisions — from politics to how our food is grown.
But it’s not only about revolt, only about political revolution. Like we saw from the Stanford class, it’s about participating in making things “better”. Solving problems that we’re compelled to solve, it’s about coming together and truly collaborating. But this kind of working together, participating requires us to show up ready to play but it’s rules.
To participate in a “chaord” we must tolerate that tension between chaos and order. For some of us that’s easy, for other’s it’s hard, and for some — it’s just plain confusing. So, let me share with you the “rules” of the system and help you engage. Whether you’re an organization, a single human or a cause — and either to participate or to attract participation.
Here we go:
Rule #1 – Make something magnitudes better than the status quo. Build superior products — as mediocrity is boring and exhausting.
People will participate when the stakes are high and the vision is clear and ambitious.
Nobody roots for something which is only marginally better. So be bold.
Rule #2 – People can’t just feel empowered, they must be empowered. That means that the decision-making process must be pushed to the edges. Allow people to make decisions. And allow the nodes in your system to route around the structure. Sounds simple and obvious but to some it’s a real switch: Nodes don’t ask permission.
Rule #3 – Allow participation and participate. Be open about your decision making process, allow people to participate and become part of it. If you let this happen, you turn outsiders, supporters and bystanders into committed insiders.
This is how you grow organizations build on the principle of participation.
Rule #4 – Treat and expect to be treated as a community of citizens. They are you — and you become them. This is the essence of participation.
It is these four simple mechanics which, when combined with the power of technology and networks will turn into unprecedented opportunity.
Adopting these principles is hard. If it’s not what we grew up in, it can take some letting go to engage in a meaningful way. And as we’ve all experienced one time or another in our lives, letting go of something to make room for something else, is a cornerstone of transformation.
So what do we have to let go of to lean into this participation culture - to leverage our own passion and the talents and passion of other nodes far across the world or right next door?
First, let go of command and control, it dies in the face of the participation culture. It can not survive.
Second, let go of perfection. Don’t wait for something to be perfect before we share. Set the vision, the big hairy audacious goal, and let participation happen.
Let go of hierarchy. This is a tough one — because it means that YOU are the one to grant permission and WE are fully empowered to insert ourselves and act on the vision or change we believe in. WE act on it. WE are the ones to work on the HOW the problem gets solved. There is no one to ask, no one to give you a key, no one who says you are either in or out. And, no one to take the “blame”. No king to behead if things don’t go as planned.
Let go and you’ll be nurturing and accelerating the evolution of new way of being.
Let me leave you with these last thoughts:
The participation culture is here. It is thriving, growing, emerging.
And like the Internet, it is connecting people and movements in a way we haven’t seen before.
Soon there will be too many examples to point to. Too many to say it is the exception, instead, it is my belief that it will be the rule.
So, today we have a choice to say “yes” to it and lean in, or say “not yet” and be dragged into this new way of being.
A global society of humans connected in a “chaord” participating, empowered and validated by hearing our own voice in this new world.
Yesterday I had the great honor and pleasure to present (on a very high level) Mozilla’s approach to Open Innovation and the lessons we learned along the way at the OPTIMIZING INNOVATION conference in New York City.
It was a fun experience talking to a group of absolutely amazing innovation practitioners from such amazing companies as KRAFT Food, Danone, DHL, Goodyear or Mattel. I definitely learned a lot and gained some very valuable insights into the innovation process at huge companies.
Here’s my deck:
This summer I spent a week mentoring the awe-inspiring startups at The Unreasonable Institute in Boulder, CO. During this time I toyed with the idea to create a mentor network of some of Silicon Valley brightest and match them up with social enterprises and budding social entrepreneurs. The aim is to help, accelerate, open our networks, inspire and provide hands-on support.
Jane and I have been doing this for a while now - literally from our kitchen table, working with such wonderful organizations such as Aunt Bertha, CASH Music, Goldie Blox and One Leap. Now is the time to give this effort more structure and prepare it for scale.
So it is with great pleasure and pride that Jane and I are launching Mentor for Good! Check out the website, help us spread the word, refer your friends to us if they do something amazing and want to change the world and get involved.
This is the first step along a long journey.
The German business magazine WirtschaftsWoche (essentially the German Businessweek) recently published a list of their 100 Internet thought leaders (the German headline is “Welche Menschen die deutsche Internetwirtschaft bewegen”).
They kindly added me to their list at position 55 - which was surprising (especially given that I haven’t spent pretty much any time in Germany for the last couple of years). But there you have it.
I feel honored. Thank you!
Head over to Fast Company to read my article on “5 Lessons For Using Open Innovation To Maximize The Wisdom Of The Crowd” - it’s one of my better ones (I think). :)
And please know - I wouldn’t have been able to write this article if not for the superior work of some of the smartest people I know. I couldn’t give them credit in my article, so I do it here:
I stand on the shoulders of giants.
My dear friends at Pollenizer recently asked me if I could write a guest post on their blog discussing the lessons we learned at Mozilla, which are particularly interesting for entrepreneurs and startups.
Head over to the Pollenizer site for the article and do let me know what you think of it!
Last week I was invited to speak at Stanford’s E-Bootcamp event about… myself. The invitation to the event read:
The event will feature 100 of the best entrepreneurial students around the world and over 50 of the most successful and inspiring Silicon Valley leaders. As an E-Bootcamp speaker, you will share your personal story and entrepreneurial spirit with our student participants. You will give two 20 minute presentations to two different groups of 10 students, leaving 10 minutes each for questions and answers with time for transitions. I believe the students will be excited to learn about your personal experience and insights from having worked at Mozilla and other startups.
It was an intriguing and interesting experience. Usually, even if I talk about my career and the lessons I learned along the way, I weave this into a broader discussion about some aspects of creating and running a business.
I decided to do a quick screencast to record the talk - probably it’s interesting for you. You can find the slides on Scribd as well.
A few weeks ago I talked at the inaugural tl;dr conference about “platform wars”. I recently was asked by the organizers of Russia’s Internet Forum to give the same talk to their audience. As we had to work with some nasty timezone challenges, we decided to go with a recorded version of my talk. Here it is:
Are you also wondering about the sky-high valuations and exits some Silicon Valley companies are seeing for a little while now? Well, consider this a black swan - they are anomalies, outliers - but not the norm.
In Inc. Magazine’s latest issue you find this neat little infographic - which is eye-opening: Only 2% of all private companies being sold in the time-period from 1995 to 2012 fetched more than $2 million. A whopping two thirds got sold for less than $250,000. And this doesn’t take into account that a whole bunch of companies never make it.
Now - this is all not bad news. The challenge is - human bias is to believe that your startup can be the next Instagram. Which leads to behavior which values user growth over profits - and, unless you win the startup lottery (and your chances are probably as good as playing the lottery), will bite you in the backside.
So - just focus on building an amazing product which users love. The rest will come. Don’t fret an exit. Ever. It will happen - or not. And if you do things right, it doesn’t really mater.
A few weeks ago I had the great fortune and pleasure to pick Jed Christiansen’s brain for a good two hours. Jed is probably the one person on this planet with the best data set about incubator and accelerator programs around the world, the companies which go through them and the possible reasons why some incubators are so much more successful than others.
I fundamentally believe that most incubators (which seem to shoot up like mushrooms after a rainy late summer day) are destined to fail - and I also believe that it doesn’t matter.
Let me explain - and start with a disclaimer: The following is especially true if you’re building your incubator outside of the US and more specifically outside of Silicon Valley. With that out of the way - the reasoning is simple: The math doesn’t work.
Most incubators take a rather small chunk of equity for their investment and services (often in the sub-5% range). I believe the reason for this is that some of the super-successful incubators such as Y Combinator have “poisoned the well” by introducing these terms (and they do work for them - more about that later) and forcing the whole industry to follow suit. Also incubators usually take founders stock - i.e. stock without any preferences or protections as are often found in seed and VC rounds.
What happens is this - by the time a company has an exit, they have often gone through a couple of rounds of financing, diluting the original founders shares by 50% or more. Which means that the initial 5% our incubator held become a mere 2.5% or less. Now apply the typical VC logic that out of 10 companies you can count yourself lucky if one or two of them hit it big, three to four do okay and the rest goes under. Now - in most areas of this world a “good exit” is considered something in the $10m range (even in large markets such as Germany there aren’t that many $10m exits). Take into account that a portfolio takes time to mature (somewhere around 5-10 years for the companies to go through their growth phases and come to an exit) and start doing the math, the picture is rather bleak.
Here’s an example calculation: An incubator runs a class of 10 teams, investing $15k into each team and spending 3 months of intense work with them, running the incubator with three people as staff. Assuming that these people have opportunity costs of $150k p.a. (meaning that the people running the incubator could find work at this rate somewhere else) and taking into account costs for office space, etc. you easily have invested $350k into this batch of 10 teams. Five years later you might (this is a risky proposition - no guarantee that anything comes out of it!) make 2.5% on one $10m exit ($250k) and another 2.5% on three $3m exits ($225k), bringing you to about $.5m in returns. Potentially. With a rather high risk. The math just doesn’t work that well.
And that’s precisely why I think the incubator model doesn’t work. To make it work you would need to do two things - take a higher percentage of equity in your first round (much to the grumbling of the founders) and have the ability to protect your position by being able to do follow-on investments (i.e. you invest alongside other investors in the next rounds to prevent dilution of your equity position) - which requires money most incubators don’t have.
Now - why this all doesn’t matter…
Here’s the thing: As much as I think this is bad news for people building and running incubators, it’s perfectly fine for entrepreneurs and the economy at large. The worst outcome of this scenario is a bunch of failed incubators - which in turn have taught and enabled hordes of people to become entrepreneurs. And who knows - even if their first startup didn’t work out, they hopefully learned a lot and will be better off for their next one.
With all that being said - here’s another disclaimer: The well known and established incubators such as Y Combinator, TechStars, 500 Startups, SeedCamp and some others will be fine. They have built their models around these dynamics, have created very specific value propositions for themselves and thus their teams and they have unparalleled access to the market.
For quite some time now I find myself talking to entrepreneurs all over the world about the lessons we learned here at Mozilla, turning the unlikely contestant Firefox against all odds into a hugely successful product used and loved by millions of people.
I believe that our story holds a couple of key concepts which are highly applicable for startups of all colors. In the past I have used a modified version of John Lilly’s excellent “7 Lessons from Mozilla” deck. Over time I added a couple of lessons of my own - partly based on my work and understanding of Mozilla as well as personal experiences in the world of startups, venture capital and mentoring a ton of startups through programs such as TechStars, Seedcamp or The Unreasonable Institute.
The following deck is a first pass at uniting all those experiences and influences into a coherent deck. What do you think? What’s missing? What doesn’t make sense? What’s good and terrible?
A few days ago I had the great pleasure to talk at the inaugural tl;dr conference in San Francisco. The conference’s aim was to bring voices around the Post-PC revolution together.
In their own words:
With the launch of the iPhone we entered the era of the Post-PC device. This new generation of connected devices brought the promise of exciting new applications. And these days a massive rolling upgrade of the web into a fully fledged application platform is building incredible momentum, all under the umbrella of HTML5. We are still in the early days of this new technology cycle and it’s a time of significant opportunity. A time to think beyond the traditional web site. Tomorrow’s users will expect more.
In my talk I focussed on the risky reliance on the new platforms which are currently ruling this world and explore how HTML 5 is emerging as the de-facto lingua franca of the new era of connected devices and the Internet of Things.
My talk contained swear words and a quote by Bob Dylan. Enjoy!
And there’s another option for startups that don’t want to go public: Forgo VC and angel investments entirely and fund the company with the profits from your business. That organic-growth option may sound quaint, but it can still be quite successful. Indeed, VC funding is by no means necessary to fund a fast-growing company. In 2009 Paul Kedrosky, a Kauffman Foundation senior fellow and venture capitalist, looked at the Inc. 500 list of the fastest-growing companies in the US for every year between 1997 and 2007—a period that includes the VC boom of 1999-2000. He found about 900 companies in all, of which only 16 percent had VC backing. “Such companies almost certainly could have venture investors, if they wanted them,” Kedrosky wrote in a paper for Kauffman. In other words, the overwhelming majority of the fastest-growing companies decided that they didn’t need VCs.
For High Tech Companies, Going Public Sucks - WIRED
Good food for thought. And here is the quoted study by Paul Kedrosky.
One of the more complicated questions we ask ourselves here at WebFWD every time we receive a new application is: How innovative is the idea? And how do you measure this in an objective fashion?
A while ago I came across Doblin’s “Ten Types of Innovation” model - although it is by far not perfect, it provides a really neat, concise way to look at (and evaluate) innovation. The way Doblin’s model works is: For each innovation (project) you check them on each of the ten factors of the model (which fall into three broad categories: Configuration, Offering and Experience). Essentially you then make a binary decision - does the project innovate on the profit/business model? Does it innovate on the network? etc. The more boxes a project ticks, the more innovative and disruptive it will be. Clean, clear and easy. Not perfect - but usually good enough.
Harvard Business Review published an excellent infographic on the model and its application and if you like long(er) form content, the W.F. Kellogg Foundation has published a paper on “Intentional Innovation” (in the context of philanthropy and social impact”.