“What is defensible about this concept?”

“Are there any opportunities to patent something technical about it and make it defensible?”

This was the rather sad discussion I had recently regarding a concept I’m pitching at Citi. It’s unfortunate that managers at companies are thinking this way about innovative new business ideas (and this guy was young, which made it even more saddo).
The notion that you enter the market with competitive advantage rather than earning it is a complete nonevent in the new consumer space. Investment capital is flowing and accessible. Technology can be matched at breathtaking speed leaving parity on that capability level. This leaves only the thorny arena of execution to differentiate oneself.
Dead set in the center of the execution is customer experience. More products have continued the shift to a service paradigm and consumers are more willing to seek out the quality experiences because can sort through overchoice with ever greater efficiency online. The same connectivity gives consumers the ability to take a superior experience and market it for you with their endorsement. It also gives the opportunity for the most vociferous customers: those who have not been satisfied. They will start blogs, post scathing reviews, hold group Skype chats and generally ruin the reputation of a business.

Brilliant customer experience is your defensibility and competitive advantage.

I have had a second child, Yash, who is now 3 months old.  He is making think about personal change and evolution.  To that end, as a start,  I have added links to my CV and my LinkedIn profile at the top of the page.

I am considering an entry into venture capital as well as continued work on the corporate strategy side.  Recently, my work with a firm called Whatif?! and their focus on innovation process has struck my interest in a keen way.  They are the scientists that research the data necessary for innovative business models.  They also charge a pretty penny for it.

Let’s see where we end up.

The recent Vodafone acquisition of Hutch Essar for $11 Billion has been garnering a tremendous amount of press globally. In India, the media has been heralding the size of the price tag as the price of a ticket to the Indian consumer market. In the West, the academic and management consultant skeptics suggest that the Eastern bubble is growing to unmanageable proportions with an impending correction as these valuations give way to margin compression and delayed infrastructure modernization, etc. The M&A bankers are test driving Lamborghinis with gold-plated shifter knobs.

With the emphasis on customer franchise size and lifetime valuation of customers, we are kind of seeing a bubble ala the Internet days, inasmuch as the distorted lifetime value numbers in the current context. Google is the only model that emerged with the lifetime economics even close to its original estimates, because its search became the start point of virtually every web session. However, given mobility’s inevitable centrality to emerging market Internet strategies (see NetCore CEO Rajesh Jain’s comments last October), should we be discounting the future Google + Verizon’s of the emerging global economy?

The question that does come up is how do these companies avoid commoditization and business model decay as it should happen even faster in markets with lower margins than the US and EU. One cans see the need to welcome true customer service providers such as banks and health services to the network in a strategically significant manner. Co-developed, innovative solutions that bring traditional services to a secure, mobile, customer centric platform can feed both heads of the beast, allowing further capitalization of the networks, allowing them to fulfill the dream valuations they have today.

Recently, I was chatting with a bank marketing manager about direct mail marketing and the ever-decreasing response rates and the increasing battle for that scrap of attention in apartment building lobbies and on the porches of the suburbs every morning. She was talking about tweaking a program to get up from 15 to 20 basis points of response. I imagined the 100 other marketing managers doing the same thing for this months mailing. The consumer finance industry sends 8 billion pieces of direct mail in the US with a response rate heading to 25 basis points.
Quick math shows that a fully loaded piece of normal direct mail (color and first class postage) will go to about 40 to 50 cents plus the list cost. That’s a $500 CPM people.
What banks should do: Be the first to kill off direct mail and go all electronic. You ask your customers to do it, so practice what you preach and it should pay off in the same way.

I’ve been holding off on writing about Wesabe, just to give sometime for the service/platform/network to take hold. For those who don’t know or keep their money in mattresses, Wesabe does for finance, what LinkedIn does for looking for a job: allows you to announce, share and track your goals and interests with others.

In addition to the social aspects of the platform, Wesabe also provides an aggregation engine that grabs your financial data from your various institutions and pulls it into your Wesabe profile. Aggregation is a Web 1.0 term that recalls names like Yodlee and Chaabi and other screen scrape specialists. It is enjoying a bit of a resurgence with CommerceBank acquiring eMoneyadvisor and Nextgen bank sites getting up.  There are two quite notable aspects to Wesabe’s approach to transaction data:

1. Interesting use of a web-enabled application that simply automates the login and download (and subsequent upload to Wesabe) of a statement on a periodic basis. Aggregations big issue back in the day and what we thought we solved with screen scraping was that pulling secure data from a banks server was a task that could not be performed on the “server-side”. This is not server side either but the effect is pleasant and more importantly transparent to the user.
2. Intelligence on the data pulled from your bank. Unlike the early aggregators, this is not about create “one site” or a portal for your financial data. You can actually due things with your info that you cannot do on your bank site. Useful things like tag recurring transactions that come up with a foggy MCC code and poorly tagged merchant like STARBU–ACH-399PA. That’s my Starbucks which is on Lexington Avenue and 53rd. In Wesabe, it’s called simply MORNING STARBUCKS. Then I can see how much or little I spend on caffeine.

Word on the web is that the Wesabe folks are bootstrapping and running lean at 4 or 5 heads. Which is a brilliant example of how you can take a banks information at actually make it interesting and useful without much investment, just a smart approach.

I’ll be tracking them as the community grows, as the value of social finance is driven directly by who joins and gets active.