The Kuhn Connection

(Or what a scientist from 1962 can teach us about ad tech in today.)

In a moment of frustration after meeting some potential tech partners who seemed not to sense that going forward, ad tech will be about the “how” – not the disruptive “wow,” I wrote a post in Ad Age explaining the importance of operational structure in ad tech: “Here’s the only marketing trend you need to know for 2016”.

While my arguments were lost on the tech folks, the article struck a nerve with Ad Age audiences because it expressed a deeply felt marketer frustration that tech is just too damn dominant in the ecosystem, making a marketer’s job just too hard.

I go on to suggest ad tech is overdue for a “paradigm shift” itself that can disrupt the colossal mess of complexity, fraud and technological black boxes that is now ad tech.  My conclusion is that in 2016, “…marketers will replace the “awe” of algorithmic magic with awe-inspiring new questions about how (not if) we balance ad tech with the art of marketing.”

The groundswell of community support for the post was overwhelming. Amid the inbound, there were tons of questions curious about Thomas Kuhn and secondly, which solutions will realize the promise of integrated user experience out of the current ad tech operational chaos.

Therefore, to answer these questions, let’s take a 50 year trek through the historic evolution of paradigm shifting and the disruptive innovation myth so we can see just how ad tech is about to get disrupted itself (and by whom).

Thomas Kuhn – the Father of Paradigm Shifts.     

Thomas Samuel Kuhn was a noted American physicist, historian, Harvard professor and philosopher of science, who published a highly respected book in 1962 entitled: “The Structure of Scientific Revolutions.”

The oxymoronic title of the book alone alludes to its quirky nature but does nothing to hint at the profound impact the book was to have in its day and for the next 5 decades.

When Kuhn was working, the 1960’s were tumultuous and exciting times with many major scientific advances being made in rapid succession. Kuhn undertakes, with profound scholastic discipline, to lay the groundwork for how the scientific community can standardize revolutions; using the well-known term “paradigm shifts;” so they are responsibly vetted before being unleashed on the public. Kuhn didn’t invent the term paradigm shift, but he gave it a specific meaning so it could become the foundation upon which scientific progress can rest upon with confidence.

Kuhn was deeply concerned with ensuring that scientific advancement is based on solid evidence and not wild conjecture or speculation. His emphasis on structure (as in the title) reflects Kuhn’s deep ambivalence about the concept of paradigm shifts. Paradigm shifts for Kuhn were extraordinary events that can only occur when there is an increasing number of paradigm-busting anomalies that challenge known paradigms.  He fully appreciated their fundamental place in scientific advances; “[A paradigm shift] represents a shift in the problems available for solutions … transforming the imagination to change the very nature of how the work is done.”

But he advised caution because: “Almost always the men who achieve these fundamental inventions of a new paradigm have been either very young or very new to the field whose paradigm they change.” This was the scientific version of; “Ah – all these young whipper snappers with their crazy new ideas.” Kuhn was the ancient age of 40 when his book came out.

Kuhn’s Legacy  

Kuhn understood that science was just smart enough to be truly dangerous. He articulated the process for advancement that spoke to generations of scientists because it delivered the needed framework for establishing responsible scientific advancement given the haphazard and dangerous nature of paradigm shifting. His established hallmarks for managing a paradigm shift are:

  • Default position is trust in the current paradigm the scientific community has accepted (“normal science”) even in the face the unexplained anomalies
  • If the number of anomalies continue to increase especially as a result of new data, then the scientific community must reach new agreements about how to measure the characteristic of the anomalies. Note – there is no paradigm jumping going on yet – but a simply a community consensus on how to accurately measure the results observed.
  • Vetting of scientific results must include peer reviews and repeatable results from independent experiments
  • Once community verified, the new paradigm is accepted by the community and thus becomes the “new” normal science
  • “rinse and repeat” …

These principles are widely and rightly credited with the creation of well-established methods and processes for managing paradigm shifts. Kuhn puts tremendous responsibility on the shoulders of the scientific community; “As in political revolutions, so in paradigm choice—there is no standard higher than the assent of the relevant community… This issue of paradigm choice can never be unequivocally settled by logic and experiment alone.”

All this structure allowed the 1970s, the direct heirs to Kuhn’s ideas,  to be considered the Scientific Golden Age. More than that, Kuhn’s principles gave us nothing less than our very high standard of living because scientific breakthroughs could safely developed and adopted.

Clay Christensen – the Father of Disruption Innovation  

Kuhn may have deeply impacted everyday life but he remained obscure to most folks until Clay Christensen who, in 1997, published the run-away best seller business book called:  ‘The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail.” It was a roadmap for how businesses take “paradigm shifts” (from Kuhn) and create a competitive advantage through “disruptive innovation.” Failure to ride the disruptive innovation wave, the book cautioned, was likely to put a company on the path to destruction. Disrupt or be disrupted became, arguably, the first mega business meme.

At its core, Christensen’s idea rests on Kuhn’s concept of paradigm shift but it was recast in a decidedly sleeker package:

  • Identify those paradigm shifts likely to change industries
  • Create the disruptive innovation to capitalize on the paradigm shift
  • Automate everything so you can produce a product at a lower price with lower but acceptable quality
  • “Rinse and repeat” so as to maintain competitive advantage

Christensen astutely provided stress relief to business leaders who were reeling in the chaos of the 1990’s digital revolution with his “silver bullet” answers to complex problems. The 1990’s were a “Reality be damned as long as it’s disruptive enough” kind of decade.

An important side note is to recognize that in the 1990’s, many future VCs were cutting their teeth at organizations where the Disruption Myth was a widespread, accepted business strategy. As we will see, this plays an important part of our story.

What’s different between Kuhn and Christensen?  

The decades when Kuhn and Christensen were influential had many similarities. Generally speaking, both decades saw major technological advances; the 1960’s focused on industrial scientific advancements and the 1990’s digital revolution kicked off on August 6, 1991 when: “Berners-Lee posted a short summary of the World Wide Web project on the alt.hypertext newsgroup, inviting collaborators.” (Wikipedia). Just a few years later, Amazon and Google launched and the digital revolution attracted investments to anything “dot com.”

Whereas the decades themselves strongly paralleled one another, each man’s response was quite different. For Kuhn, a clearly paid out process for integrating new ideas into scientific knowledge was critical. By contrast, Christensen’s model was more concerned with the “big” concept around the importance of disruptive ideas, leaving big operational (yes – structural) gaps in his theories.

  • How was one to define a paradigm shift?
  • How do these disruptive innovations get incorporated into existing business models?
  • What were standards for measurement?
  • Could technology be duplicated so that it was transparently verifiable?

These and many other questions remained unresolved in Christiansen’s theory because he offers no framework for the industry’s development and evolution for disruptive innovation.

In practical terms, this meant and still means a lot of bumbling around in pursuit of the disruptive idea. Christensen’s meme did what every good meme does – go viral and in the process become a “truth” upon which almost all technological disruption since must rest.

Reality be damned.

In Disruption We [shouldn’t] Trust

Kuhn’s legacy is our trustworthy system to integrate new scientific ideas into our body of knowledge which has helped commercialize many new technologies; improving our standard of living decade after decade.

By contrast, while Christensen’s book itself was financially successful, it seems his theories were not. Probably because of its popularity, it took nearly 17 years for anyone to actually pick apart the math behind the Christensen’s work. Jill Lepore, a professor of American history at Harvard University and chair of Harvard’s History and Literature, analyzed the data behind his theories and scathingly observed in her 2014 New Yorker article, The Disruption Machine: What the gospel of innovation gets wrong:   “Disruptive innovation is a competitive strategy for an age seized by terror …founded on a profound anxiety about financial collapse, an apocalyptic fear of global devastation based on shaky evidence.” She continues; “Most big ideas have loud critics. Not disruption. Disruptive innovation …has been subject to little serious criticism,”

Lepore’s goes on to challenge the underlying assumptions about the disruption myth and wryly notes that the investment fund established by Christensen using his principles was a total failure and shut down.

While Christensen spoke to the angst many business leaders felt, he left out any process for vetting the new technologies that were flooding the market. We can’t chalk it up to coincidence that the “dot com” bust happened just three years after Christensen’s book was published, washing away many disruptive Internet ventures. In other words, our faith in disruptive innovation to build sustainable business is as real as a unicorn in the forest.

Christensen’s Legacy Haunts Ad Tech Today

To this day, ad tech continues to live in the shadow of the Disruption Myth, trapped there by an investment community that believes unblinkingly in the ideology of disruptive innovation, largely I think because of their early exposure to Christensen’s model. This devotion shapes what and who VCs invest in, with blinders on as to the effect the tech has on marketers (agency and advertisers). This Ad Age post I did called, “Why Excluding Marketers from the Ad-Tech Boom Is a Failed Strategy” (April 30, 2015) laments the flood of “cool” ad tech that is increasingly detached from the real world of marketing. “My anger swelled at the scope of the marketing efficiency devastation. And my frustration knows no bounds at the abundance of tech “products” with an appalling lack of “productive” solutions. Mostly though, we lack systems where everyone has a chance to benefit — investors, ventures, advertisers, agencies and of course “Judy Consumer.”

The vestiges of the Disruption Myth that continue to haunt ad tech today are:

  • VCs who continue to fund ventures based on their disruptive algorithm or automation platform without considering how the technology lives within the marketing ecosystem
  • CEOs with little or no direct experience in the industry who create disruption without necessarily creating value for marketers
  • The community of marketers that has largely been marginalized leaving the disruptions to be shaped in the VC/ tech echo chamber
  • Measurement standards that are “best we can do” – not the best that can be done
  • Lack of transparency fed by the “black boxing” of disruptive tech

On a human level, Christensen’s legacy means that if you work in marketing today, you are in peculiar type of hell. You appreciate the potential of digital marketing to build businesses yet you’re frustrated at the chaos and corruption of ad tech that is built on pillars of impressions sand funded by disruption-obsessed VC money.

Marketers are reeling from trust issues; between agency and advertiser and between brands and digital audiences. They are reeling from attribution issues and most challenging of all – they are overwhelmed in understanding how measure the artistry of marketing into the ecosystem as an equal partner to the technology. This is why the word “bust” is not far from the lips of any investor in ad tech in a “history repeating itself” déjà vu moment evocative of 2000. But it doesn’t have to be that way.

Slaying the Disruptive Innovation Myth.

Till 2014 or so, marketers were all too happy to take a hands-off approach, leaving the geeks to work it out amongst themselves. Marketing trade organizations belatedly scurried to catch up, by that time, the VC disruption die had been cast and tech disruption obliterated any investment in marketing artistry or operational excellence.  Marketers had very much lost control of their own industry.

Reality be damned ads long as it was disruptive enough.

By 2015, though the “disruption” cracks were becoming gaping holes as marketers struggled even more in the fragmented ad tech landscape. An Entrepreneur article I did exposed the high cost of ad tech to people: “Disrupting the Disruption Myth” (August 2014) My aim was to crack open VCs narrow definition of what a disruptive venture can be, using Xiaomi’s (pronounced SHOW-me) phenomenal growth as a prototype of a wildly successful venture without any disruptive tech in sight.

Back in 2014, I may have been just one voice, but by 2015, there was a growing chorus of marketing voices demanding ad tech disruption be about human disruptive technology.

Looking for Disruption in all the Right Places.

If Kuhn had been writing in the 1990’s instead of Christensen, I suspect the ad tech landscape we have today would have been far different. There would have been “community” due diligence around how a disruption is an improvement over existing approaches.  There would have been peer review to establish standards to describe these approaches. And most certainly there is would have been vetting process ensuring that potentially deeply invasive technology is used responsibly and to serve people well.

But as it was, the technologists and the “disruption myth” devotees at investment firms, have been in charge for the last five years with pretty much a free hand to “disrupt” at will. Now that many ventures are struggling – even the high flying ones, many VCs and technologists are scratching their head wondering what went wrong.

Any marketer can tell you. The only thing that ad tech really disrupted is the human element of marketing; so crucial in the creation of meaningful connections between brands and audiences.

That’s why going forward, there will be a new paradigm in marketing where the “how” is more valued by investors than the disruptive “wow.” The ventures emerging will create innovation specifically geared to balancing the art and science of marketing within a structured model of transparency, vetting and measurements. From 2016 and on, the community of marketers will be far more active in creating and assessing the disruptive value of new tech as disruption will mean innovation that drives genuine progress.

Ad Tech Disruption in the Future

By now, we can appreciate how the structured approach to “paradigm shift” that Kuhn imagined, was morphed by Christensen into a non-structured disruptive myth ideology that for ad tech, means a lot of chaos and operational dysfunction.

In 2016, the disruption dust cloud will lift, allowing clear heads to pivot; abandoning their reliance on tech-based disruptions in favor of ventures that focus on operational ad tech as their innovation.

Strategically, these ventures will share some common characteristics that are Kuhn inspired, distinguishing them from their Christensen-imbued predecessors:

  • The distinct lack of disruptive “wow” or black boxes in favor of an operational analytical “how.”
  • Abandoning the near sacred MVP (minimum viable product) model of most ad tech startups in favor of a new MVP = Maximum Valuable Product. Consumers are very sensitive to subtle changes that can occur in frequent platform iteration causing changes to expected campaign ROI.
  • New “outcome-based” SaaS models as marketers begin to drive better contextual experiences through new contextual tech AND processes.
  • Engineering obsession around a highly satisfying and frictionless user experience without ad tech compromise.
  • The financials of these ventures will be realistically investable but also sustainable by the industry. Plainly put, today’s current VC expectation that ventures achieve 60%+ margins is unrealistic causing much of the click fraud that is weighing down the industry.
  • Their leaders will likely be experienced marketers rather than 20 something tech geeks. Marketing is as much about processes as it is automation. It takes real world experience to create that merged vision of art and science.

And the winners are…

Taken together, we will see a blossoming of ad tech over the next five years in various industries and functions making these ventures interesting (and dare I say disruptive):

1) Healthcare as an industry is going through a “retailization” transformation that is largely about creating user responsive systems and services. This is, for the healthcare industry, a paradigm shift as the industry moves from “fee for services” model to an outcome based model.

A host of disruptive marketing technologies will burst onto the market from innovations around wearable tech to tackling the mountains of medical/ provider data. Healthgrade (http://www.healthgrades.com/) is an example of a company working on wrestling all this data into a user friendly format. Today, they help about 1 million people a day make sense of the vast amounts of doctor and hospital data (like reviews) available all customized to meet the needs of that individual. They plan to expand to power better ways for consumers to manage medical expenses through aggregating medical information, offering product information and making it transparent for the patient to decide while managing users’ online security.  Ultimately this, like other ventures in this space, rely on an excellent user experience.

2) Direct marketers are likely to be winners in the new ad tech disruptive game because they are making the leap to deliver personalized experiences where tech supports the very human side of customer acquisition and retention.

Going forward, direct marketers will expand their email/ database capabilities into new marketing cloud offerings like Bombora (http://bombora.com/products ) who; “Aggregate. Organize. Activate.” data to make it incredibly useful for B2B marketers across business applications.  Cue Connect (http://www.cueconnect.com) is also interesting because it takes a “direct” product level approach to helping retailers stay connected with customers and create excellent user experiences. Their online platform gives retailers new insights and tools to provide a better, integrated on/offline shopping experience for their customers using products level (not the more typical user level) insights based on their behaviors (i.e. – share or saving as a favorite).  This product centered approach reflects a sensitive understanding of “how” real people shop for stuff – the “wow” is there but it’s not the point.

3) Content marketing is on ascend almost in direct inverse proportion to the degradation of CTRs on many forms of display advertising.

Today though, this category of ad tech is a messy, fragmented, incomprehensible landscape of content creation, social publishing, sentiment tracking and on. Each venture, eager to be disruptively investable, went deep into a functional silo leaving the marketer with a dizzying myriad of options that don’t play together too well. Native, just one form of content marketing, is an example with its dizzying array of networks and “platforms.”

Disruption here will revolve around ability to deliver true relevant brand messages through contextual advertising technology that will be well-defined; merging human creative process with programmatic RTB technologies. Our venture is an example in this space as we link data related to content and RTB programmatic advertising. Another example is Kargo, a great mobile venture that excels at amazing, rich and personalized video experiences.

4)  The massive business called TV will be (finally) disrupted with the arrival of VR (virtual reality) in 2016 and Apple TV which will drive the final nail in the old world TV distribution model. The paradigm shift here will be the reverse of control from broadcasters and content providers to individuals where video streaming, gaming, shopping are all delivered seamlessly across devices.  It is likely that TV disruption will come from the mega networks (ie Facebook) as any large tech company (ie Samsung).

The way forward depends on the human element.

Current marketing chaos is rooted in an excruciatingly unsustainable model imposed on marketers by VCs who limit their vision to disruption described with words like scale, algorithm and SaaS anything.

But now the alarm bell is ringing in everyone’s ears because more money is spent on more tech, yet marketers are getting less done and investors are getting less returns.

We can do better and Kuhn showed us the way.  In 2015, marketers have experienced a paradigm shift of their own in the form of community unity propelling marketers to take back control from the technologists. Redemption will come from discarding the unproductive Disruptive Innovation mythology from our thinking (it may take VCs longer to let of this cherished tenant) and replacing it with a disciplined process as Kuhn imagined but coupled with a new sensitivity around the need for practical solutions that allow marketers to create new user experiences.

2016 will see the triumph of marketing brains and art over pure disruptive tech brawn. I’d like to think would Kuhn be proud.

The Surprised Entrepreneur turns Rebel Entrepreneur

What makes a rebel.

What makes a rebel.

“Judy,” a sweet tech project manager said to me recently after I discussed some of the gaps in the social marketing ecosystem “You are on a crusade.”

I didn’t see that one coming so it stopped me dead in my tracks. What crusade was that I wondered? I probed but she dodged answering me. The word crusade is laden with meaning so it stuck with me – what had I said to give her that impression?

In hindsight it seems obvious but in the moment, I was oblivious to the shift in my thinking from simply being a Surprised Entrepreneur (as I posted here) to becoming a Rebel Entrepreneur.

My cause was simple – to put the human element back into the business of marketing that has been platform’d to a near digital death. I am driven to re-infuse marketing with the sense of wonder, joy and creativity that I had the good fortune to revel in during my earlier career days.

In those ancient days (one generation after Mad Men but before the Internet revolution had really hit) we could put hearts into our work because there were few tools or platforms or technologies to guide the work. It was pure creativity and smarts. It was hard to measure the effectiveness of the much of the work but you knew your work made a difference when the company did better – jobs were created and bonuses were happily doled out.

Over the years, technology improved how we deployed marketing but we continued to be driven by our nobler motivations to create great marketing that improved people’s lives. We knew we could make a difference.

But there’s been a shift in the industry over the past 3 years. Marketing, especially social marketing has become a tech-heavy exercise of manipulating retargeting platforms, or reward systems or algorithmically based big data platforms. Social marketing is reduced to a conversation about content syndication or sentiment analysis.

So it’s no surprise that over that period of time, inextricably, I have seen tech and platforms taking the joy and the nobility out of the system. I have become overwhelmed by the supremacy of marketing platforms over serving people and algorithms over inspiration.

My sense of alarm was quite publicly aired in the digital pages of Ad Age and Huffington Post. I ranted at Facebook when I felt defeated at using Facebook productively. I admitted frustration at the black-box techno-jargon wave that swept over us marketers drowning us in confusion. I’ve even had the chutzpah to question the funding strategies of VCs who are basing their investments on marketing principles that simply don’t apply anymore. But mostly I challenged the 20 something CEOs who created marketing platforms that are long on cool but short on practical application for real marketers.

In the process, I have been:

  • Flamed by Macboys and called a hack (look up “Judy Shapiro” and “mac security”)
  • Accused of being techno-phobic and capable of only kitchen related work, ideally pregnant at the same time thus preventing me from ever writing offending articles ever again
  • Tarred and feathered as an “old line” marketer unable to keep up with the iteration savvy tech guys
  • Harangued for questioning if the “Content as king” model was sustainable
  • And very nearly digitally lynched when I first suggested in 2010 that perhaps Facebook had jumped the shark.

And so against all odds – here I am, founder and CEO of a social tech company, readying the BETA launch of our new network called Eden for Q1.

Against all odds, this little venture that started a year ago will be introducing a different type of social marketing framework that is a based on an “opt-in” paradigm. We are going up against the big “push based” social marketing platforms and networks. It is an uphill but noble fight. In our vision, Eden is a place where users control the action – how they see content or which brands they interact with. It is a reversal of the; “It is our platform so you have to play by our ever-changing rules” social network that dominates social marketing today.

Against all odds, we managed to secure funding including from an early stage VC for which we are eternally grateful. We’ve created relationships with agencies ready to sell Eden to their clients and we’ve sealed meaningful partnerships that help us gain access to the highest levels within publishing and brands.

Against all odds, as one woman in her 50’s, I am privileged to be joined by a community of seasoned marketers to help in this crusade. Our collective goal is to right the marketing ship listing dangerously to one side from the weight of platforms and big data. I can’t express my gratitude to this brave league of fellow crusaders other than to give them full credit for their invaluable role in our noble adventure. I give them a place of honor in our company’s history:

  • Peter Hubbell, CEO of BoomAgers and former Saatchi Board member. www.boomagers.com
  • Griffin Stenger, a founding partner of Concept Farm, a leading social marketing agency [Crain’s]. www.conceptfarm.com
  • Robyn Streisand, Founder and CEO of The Mixx Group – a branding agency and an early investor in engageSimply. www.themixxnyc.com.
  • David Hoffman whose career spans four decades as a film producer and corporate strategic communicator. Wikipedia’s simply calls David: “One of America’s veteran documentary filmmakers.” http://en.wikipedia.org/wiki/David_Hoffman;
  • John Bowman, was Exec VP Strategy at Saatchi working on their premier brands and is now authoring a book about his great Grandfather, Archibald Stark Van Orden http://theassassinsassassin.com/about/
  • George Collins, a long time database expert and CEO of Research & Response – a database management consultancy. http://www.rresp.com/
  • Mark Bonchek, Founder of Orbit + Co whose strategic consultancy is “creating a new direction in business by shifting the relationship of individuals and institutions from PUSH to PULL.” http://www.thinkorbit.com/

Against the odds, I have been able to attract a seasoned management team of  marketing practitioners who had to “build it” after the consultants talked about loving it but conveniently left when the real work began. They were the ones who built those first generation eCommerce sites and created the principles that good UE designers use today. Our journalists understand SEO and our artists are offering their images for free all in an effort to be a part in the creation of an alternate social marketing reality – a fresh start called Eden.

So against all odds, I find I have become a Rebel Entrepreneur – so strange especially given my training, temperament and age. The potential high rewards of being a rebel all too often comes at a high price and we’ve seen our share of deals gone bad, betrayal by trusted colleagues and funding plans gone awry (Sandy was devastating to the startup community).

And yet, despite the odds, we are close to the launch of our network.

So I invite you all over to Bit Rebel to experience this journey with us as we sprint to Eden’s launch in Q1. Celebrate our highs and feel the unnatural lows that are endemic to startups. Share our anxiety as our burn rate increases but our funding outlook seems further out (we are doing a second round of seed funding now). Take a peek behind the startup curtain, see what’s really going on and help shape what happens. The success of Eden will be a triumph of us marketing practitioners like web designers, SEO geeks and developers over algorithmic feats of IP muscle.

Our mission is noble and our cause true.  Come join us.

I guess like any good crusade, we need a flag and a manifesto. Stay tuned – I am just learning how to be a rebel. Kinda of exhilarating actually. But

Judy Shapiro

P.S. My rebellion gets its own website: http://judyshapiro.wix.com/rebel-entreprenuer. Viva Le Rebellion.    

Why the “cha ching” of the $1B Instagram sale might actually bankrupt Boomer parents.

By now, most of you have heard of Facebook’s $1Billion sale of Instagram, an app developed by a bunch of young 20 somethings that lets users post photos. Today, Instagram has about 50 million users which works out to about $20/ person. “Cha ching” for anyone involved …

Punditry aside about whether it is a shrewd deal for Facebook – instead of “cha ching” – all I hear is hissing as the air escapes from Boomers’ retirement funds.

It is alarming and here’s what I mean.

You see, I have worked with tech ventures for over a dozen years, starting at Bell Labs New Ventures and continuing to this very day. In that time, I have worked with many startups, often gratis, because it’s so rewarding when my expertise can really make a difference in the early days of a venture. CEOs have the product vision but they rarely have marketing know-how to get the product to market.  That’s where I step in. I help startups assess their market potential so they can monetize.

And in the dozen years or so I have been doing this, I see an alarming new twist to the never ending parade of venture dreams that haunts me. I liken it to the disturbing “Gold Rush” era where many more prospecting failures bankrupted folks versus the rare, outlier successes.

In today’s day and age – here is how it goes down.

Johnny or Jane are in college and – wham – they hatch an idea for a company often inspired by the innovation incubators on every campus. The idea grabs their passionate attention because at least they can try and make it happen versus trying to get a job which is tough and depressing.

Mr. and Mrs. SupportiveParents are happy their kids have found something that inspires them, so they cover more of their kids’ living expenses so the kids can commit themselves to their “passion.”

After about three or four months, their idea has some substance and the kids realize they need some money to create a “demo”. Of course, there is no cogent business plan (if a business plan even exists) but Mr. and Mrs. SupportiveParents kick in the $10,000 or $20,000 to create said demo –  on top of the extra expenses they are already incurring to keep their kids in school. (This is when you can start to hear the air escaping from Mr. and Mrs. SupportiveParents 401K accounts!)

A couple of months later said demo is “almost done” but not quite because the kids did not really do a business plan and as they worked, the idea kept changing (translation = more cost). “But I only need another $20,000 to finish it off. Then it will take off because it is so cool. Please …” Again, as we would expect, Mr. and Mrs. SupportiveParents step in and shell out what their kids need.

Slowly but surely, over time, as their kids refine their idea; there is steady attrition of the parents’ savings plans because startups need constant funds. This tableau is playing out again and again and I know it because I have met too many Mr. and Mrs. SupportiveParents in the last few months who have depleted their savings by $150,000 or more to help their kids live their passion.

It is frightening to see since most new ventures are “high risk” in the best of circumstances, making them wholly unsuitable investments for most any Boomer given their proximity to retirement.  And if that’s not bad enough, it’s even worse once you understand that kids’ ventures, proportionately, have a higher mortality rate because they are borne of 90% enthusiasm and 10% practicality despite their parents’ 100% support 100% of the time.

This is a dangerous combination – especially in frothy times like ours where opportunities for kids are limited yet perversely, the potential for untold wealth is tantalizingly possible.

And this brings me back my point. The Instagram sale was an aberration – a fluke – an outlier event – possible because of a unique set of circumstances. Yet it infused a new level of Gold Rush fervor into the passionate hearts of ambitious young entrepreneurs despite the reality that the chances of striking it rich today are about equal to striking it rich in the Gold Rush of 1848.  And just as sadly, their loving parents are funding these ventures despite the improbable odds.

So while many people hear the “cha ching” of $1B, all I hear is the air escaping from parent’s retirement funds. It is not a happy sound. Not at all.

Judy Shapiro

P.S. – I am posting this as my personal Mother’s Day present to Mrs. SupportiveParent. Be careful – please!

The surprised entrepreneur – The last moment I can allocate GRATITUDE Grants

I am surprised how fast shares go in a startup company that people are excited about. Our plan is mostly done and the investors have begun to make overtures. My total ownership has been happily whittled away to include the wonderful talent this company will need.

I gratefully allocated shares to our president who is deeply experienced as both an entrepreneur and a VC. I was deeply honored when our CTO, who gets hundreds of business ideas in a year but only considers “one or two,” signed up.

Ever so carefully, I identified the key talent we would need and one by one each person on this amazing team is coming onboard with their allocation. Yet until we officially close our first round (scheduled for February), I’ve still got ability to allocate shares pretty much as I want.

But not for long.  

Now, much to my surprise, I realized how very quickly my ability to make unequivocal awards of shares will be gone. Now is the last moment I have to express my gratitude to people who have believed in my ability to create a new way forward in marketing.

So with the urgency imposed on me by our first formal funding round, I have barely a few weeks to share these gratitude grants.

I get to tell my dear gentle creative storyteller, a giant in the business of video, how valuable his lesson was in the meaning of video to create a powerful experience.

I finally get to ‘give-back’ to my “hard core” (hehe) entrepreneur, investor and civil liberties activist friend. She taught me perhaps one of the most important lessons in this space – the focus needs to be about creating shared experiences using content rather than solely focusing on the content. It is a powerful mind-bending insight that has deeply shaped how engageSimply develops its concept.

I can go back and reconnect with some of my ex-colleagues and CEOs who, over the years, inspired me, instructed me when I just didn’t get it and generally invested in me by teaching me ever so patiently. I can’t imagine how I would be doing this without their support and faith.

In the end, each gratitude grant is my way to repay the gift of confidence that each person so unselfishly gave me. It helped me turn a blind eye to the limitations imposed by stereotypes about what a tech CEO looks like (age or gender) or should do.

Over the next few weeks, I will have the distinct privilege and (one time only) opportunity to award these gratitude grants – without justification or encumbrance. To those of you on the list – stay tuned.

Lots of people track “firsts” (e.g. first investor, first alpha) – I want to note the “lasts.” I want to acknowledge these last few precious moments when I have full control of my company and I can still allocate equity as I want. This privilege is fleeting likely not to be ever repeated.

I best be sure I don’t leave anyone out. What a happy chore.

Judy Shapiro

The Surprised Entrepreneur – Why Me?

These posts about my journey with this new venture are often characterized as a surprise. In fact, it’s a surprise on so many levels that the unlikeliness of this enterprise is, in itself, a pretty big surprise.

So in this sea of surprises – the biggest surprise rests in the unlikeliness of me as the one to coalesce this vision; only useful to ponder so that we know what makes us different from many other marketing tech companies out there today.

Clearly I am an outlier given my age, gender, training and temperament causing even the casual observer to wonder: “Why me?”

On the surface, one could point to my diversity of experience spanning B2B and B2C marketing. I’ve been fortunate to have worked in a diversity of industries spanning advertising (NWAyer), technology (Bell Labs, CloudLinux), software (CA, Comodo) and telecommunications (AT&T, Lucent, and Paltalk). The combination means I have a quirky understanding of how to look at a marketing situation from the brand point of view as well as the end-user perspective at the same time.

O.K. – That begins to answer the question but doesn’t wholly get at it since many of my colleagues are tech savvy too. While they express curiosity about the new marketing technology, they aren’t going off and creating new businesses.  Instead, most of my friends leading marketing agencies or marketing departments (like I was) are banging their heads against the marketing brick wall trying to figure out how to incorporate the “new” technologies into the “old” system profitably. In the chaos of “creative destruction” (a term coined by economist Joseph Schumpeter), my peers can’t see the marketing forest for the financial trees.

So again I ask; Why me?

In digging deeper, I then realize that my experience with communications networks gave me a unique understanding about social networks. Both types of networks serve a similar purpose – the efficient transport of a call or a marketing message from the network edge (the initiation point) through the switching stations along its way to its ultimate destination.

Side by Side Comparison: Telecom vs Social Media Network

It also became clear to me that as social networks evolved into a powerful marketing network – it urgently needed system architects. But I saw no hint of any serious understanding of the issue or how to address it – not at the agencies or the social network companies or even the armies of consultants who offer insights but few tactical road maps.

When at first I noted this architecture gap back in 2010, I wondered out loud in Ad Age about the impracticality of integrating new technologies into existing marketing systems in posts like “Five Trends That Marked TechCrunch Disrupt Conference 2010.”  Then, my wonderment continued unabated at the lack of system attention when I wrote: “Has Facebook jumped the Shark”. Actually, I was writing mostly in the hopes of uncovering the technology companies that were focused on solving this system gap. I knew someone had to it…

But all I heard was deafening silence. I seemed rather alone in recognizing the utter futility of trying to retro-fit the older marketing system with the newer technologies. The sheer tonnage of all these new marketing “platforms;” so defined because they incorporated some combination of the mighty  local, social, mobile triad; were built by technologists (usually under 30) and not marketers. This meant they were long on cool but pathetically short on practicality. Yet as slim as many of these businesses seemed, they were getting valuations disproportionate to their real world usefulness (think Groupon), further highlighting the underlying weakening of the business of marketing.  It was an ominous echo from a decade ago.

This explains “Why me.” It takes depth of experience to see beyond the buzz to the potent marketing model evolving. I wanted a role in that evolution largely because it seemed few of us with any real world marketing experience were doing the heavy lifting of operationalizing the brilliance of all this new technology.

The journey to understand “Why me” is useful in that it defines the business we are in – creating the system upon which the rich marketing innovation engine can flourish.  It’s a surprise that it is me – but perhaps, this is the sweetest surprise of all.

Judy Shapiro

The Surprised Entrepreneur-Diary of new venture (Entry #4): A tale of two VC meetings.

For the last 3 months I have been very focused on sales of our Interaction Engine system and we are doing well on that score. As a result, though, I have not really shaped the business plan and the structure of our company for the inevitable VC round to come. Getting funding has not been an urgent requirement and it seemed far better to generate real revenue and then go for funding.

So as we are chugging along, our work has gotten the attention of two VCs who reached out for a meeting. This was my first introduction to the world of VCs and I confess, the meetings were startling and sobering; leaving me strangely ambivalent about the journey ahead on this front.

VC meeting number 1.

It was a rainy, NY winter day and we decided to meet at a coffee shop. I knew that this fund was more an incubator type which offered me the potential of being part of a startup community. It seemed like a good idea that I perhaps become part of the NY “Tech/ CEO club” since now, I am an outlier. I don’t hang out in Meetup sessions and I am not trekking across the country chasing the cool tech conferences (OK – I confess I am going to SXSW but only because they asked me to speak).

I enter the coffee shop with only the vaguest sense of what the VC looked like (his Twitter pix was decidedly not very useful). It took me a solid 8 minutes to spot him. As I approach I see this 30ish guy with a quirky winter cone hat that was just 2 degrees “off” – IMO wandering into “silly land.” It was hard not to laugh out loud at the effect – but I held my composure.

I sit down and we start chatting.  I was curious to understand his investing philosophy. His focus decidedly was on individual technologies – why Foursquare will be huge or how this new app model will revolutionize some trend or other. When I wondered with him about the lack of a clear business model which limits their practical use for marketers, he dismissed that concern with a wave of the hand. “Well, that’s won’t be a problem for long – once the old guard is gone.”

Wow. Clearly that meant me. I took his comment to mean that only the “newer” generation have the depth to understand new marketing technologies. I was dumbfounded and I was shaken. The gap between us was, technologically speaking, generational – perhaps never to be bridged. But mostly I was stunned at how immature his thinking was about how the business of marketing really works. I was shaken knowing his company was helping drive the evolution of marketing without a clue about what marketers really need.

The rest of the conversation was a haze TBH. I left traumatized and angry at how dismissive he was of the impracticality of his vision of marketing technology evolution.

VC meeting number 2

This CEO leads a well-respected large VC shop that does $2- 5MM deals. I had been introduced to this VC through a mutual colleague and we met at his office one snowy day.  He sat down in comfortable business casual attire that was in keeping with his experienced CEO role.

We started by talking about his company which was relocating to the East Coast from the West Coast. Interesting move and I asked him why. “Increasingly the smart money is coming to NY as this where many of the major new media and marketing operating business trends are evolving,” he said.

This was my dream VC – he understood the space and the problem my company was trying to solve – how to practically create the “many to many” marketing model. We compared notes on how the technology in this space was similar to CRM in the 1990s – full of possibility but lacking in coordinated systems to activate the technology. I suggested that we are a bit like what Siebel who, at the time, integrated all the telemarketing technologies into the system we now know as CRM. I feel that is what we are doing for the emerging “many to many” marketing model. We met for a solid 90 minutes at which point he asked me “What next?” Shockingly, I had no “ask.” I had been so traumatized by the first VC, that I had not really expected a question like that. I stumbled around and just admitted – “I don’t know.”

But then I turned it around and asked him: “How would you categorize my company? We are part system integrator, part content and media company. We are a “creative shop” in that we create customer interactions with technology. Are we a tech company, a services company?”

I could see he was sensitive to the dilemma of my question. Finally, he said, “I would put you in the digital media space.” I was shocked until he hastened to add: “You need to be defined somehow so people know to work with you and help you.” But in his gentle smile I could see his answer left him unsatisfied as well.

We parted agreeing to keeping up the dialogue. As I walked out of his office, I felt cautiously optimistic that the work we are doing is needed in the market.

One thing I learned from both meetings – the journey of starting a company will continue to be a journey of surprise. I never expected to have so dramatically divergent experiences as I tentatively start down the path of funding my company – even if I don’t know exactly what type of company I am creating.

All I know is that the “smart investment money is going towards the business operating companies” and that’s me. Cool – right?

Judy Shapiro

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