1. Break the assumption to be a game rule changer

“Computers are for scientists.” – broken by Microsoft.

“Search engine canot make money” – broken by Google

“On the Internet, nobody knows you’re a dog” – broken by Facebook.

The most unique/outstanding thing about FB’s is that users are required to utilize their true identity. Everything is REAL – real name, real experience, real feeling, real people and as a result TRUST is built on the internet for the 1st time in such a low cost.

2. Right “go to market” strategy

If we look at history of FB carefully, it starts with Harvard university, next to more universities, and than to high school and finally to anyone older than 13. It sounds ridiculous when a web site requests your private information even today, but we have to get early adopters. Students are ideal candidates – They are young, easy to change, happy to share, risk-taking and need friends. Coincidentally(Intentionally? I guess not), Mark did a extraordinary product launch.

Of course, FB also failed product launch, for example, bacon. I always believe if bacon is launched as “opt-out by default”, it will be another story.

3. Follow your users, then everything else will follow you.

Make users happy, and then employees and investors will be happy as well. To please investors by hurting user experiences(for example, big banner AD) seams like gaining returns in short term, but it will adversely affect user adoption in longer term. This is proved over and over again in many places.

4. Simple and fun.

In a nutshell, most web sites fall into the category of consumer product, as opposed to business or enterprise product. Be human. Be simple. Not everyone is a PhD.

Moreover, in the early stage of FB, it is nothing but a university version of hot or not. Start with a extremely simple idea.

5. A hero

People need hero in many reasons, not only in film, but also in real life. Mark has many similar attributes to ones in Hollywood films in addition to smart and hard-working:

• Ambitious – He wanna redefine the web. “The web is about people, instead of code.”
• Idealist – He walked away from a $1B check.
• Have a strong opponent which is said unbeatable. Everyone knows its name.
• Sales man traits. Having a belief is good, but not enough. One have to sell it to others, especially investors(to get  money to grow), employees(hire the best people and make them work happily), media(get people talk about you and your young company), etc.
• Unconventional. Looking not a CEO in many aspects – young(25), less-experienced(no top star company working experience), a dropout
• Handsome? :=)

6. Get more friends

To meet people needs in such a large scale, you have to focus on individual segmented customers(or market). But that is not good invest financially. How to do that? Be a platform. Invite other partners to meet niche market needs but put you in the center. That is open platform strategy.

7. Right timing and place

Right place(what if this happens in China), right timing(what if this happens 10 years ago), …

I have also similar type of comments about Microsoft’s success here.

Origin

Hulu, an online video streaming company, managed to do something which YouTube failed to do. Copyright is one of YouTube’s headaches, but it is incredible positive thing for Hulu, because it is built intentionally aimed to server property content by two major stream media dogs, NBC Universal and Fox.

{YouTube, watch someone’s DIY video} VS { Hulu, watch TV & Movies online legally} -> Similar but different market niche.

People might be asking, why NBC and Fox executives don’t rely on YouTube to serve their plays? You can imagine following conversation which probably happened behind the scene:

This is the first site who delivers property video to your computer for free. Traditional Media Company gradually realized that they have to embrace the changes if they are not able to prevent them. It is online streaming, in this case. Hulu has more than 120 sources now.

Key is property content sources are nonrenewable rare resources.

Independence

Hulu’s CEO said to capital angels, “I don’t think you’ll be seeing the name Fox or NBC on the site hardly at all, Hulu is about the shows, not the networks. The shows are the brands that users care about.” Another quote, “the key to Hulu’s success is its freedom to operate essentially as a stand-alone company…”

From startup’s perspective, captical can be good thing, or bad thing. It can help you grow much faster, but it can also easily enable you miss your initial goals. Capital often appoints some seemingly smart guy, who is with XYZ MBA degree or n years of experience in ABC company, to take over the company as one of its investment agreements.

That is indeed one of the worst investment risk controls, although it happens again and again. Give money to most passionate guys, and letting them be passionate always is the only way to maximize the probability of getting most out of your investment.

Feature?Solution? Experience!

Question: If you are given a task to build a video streaming site within less than 3 months, what would you do?

We were taught this way:

1) Identify who will be using your site

2) Draw use case diagram

3) List scenarios for each user role

4) To support each scenarios, figure out needed features

5) Design/Code/test your features

6) Go live

7) Yeah! Party! :- )

If you follow this in your next interview, I can almost guarantee a pass. Do we miss anything? Actually we missed most critical one – Experience! Experience is a combination of brand/feeling/easy-to-use/enjoyable process. For example, given below requirement:

“Design something which is used to sit on, commonly for use by one person. It often has the seat raised above floor level, supported by legs.”

People will respond immediately, “Chair!”. You may notice that there are at least hundreds of types of chairs in the world, if not thousands of, if not millions of. Only most imaginative ones who deeply understand that particular set of users’ needs, care about their feelings and eventually apply those into product designs can do the best work. Let us take a look at “art of chair”.

Be COOL, in show time, although you might have the similar hard time figuring out what some of them really are. Just like someone said about iTune – “iTune is not selling features. iTune is selling experience.”

Hulu’s key experiences:

1) Simple

2) Larger screen

3) High-resolution video

4) Clutter-free

5) Quality control

6) Free to users

7) No download

Obsessed with users

Brand. Brand. Brand.

For many people, word of Google has close sentimental connection with bunch of splendid words such as cool, innovation, unselfish, impartial, revolution, and powerful, etc… With brand, Google claims that “People don’t work at Google for the money. They work at Google because they want to change the world!”. With brand, debut of Google’s every new service always arouses buzzes, but seldom notices that Live also has compelling equivalence. With brand, people think only Google can provide best results, but often they can’t tell who is search provider when presented anonymous results set. It is very interesting to take a look at curve of Cuil’s daily unique visitors:

At launch momentum, people rushed to see what this Google killer looks like because of Google’s brand. Ridiculous? Not actually. It is everyone’s inherent attributes as people love to check out events of small probability such as Shoes thrown at Bush, one crazy million-dollar idea. As part of branding strategy, naming is essential. Cuil might not a good name actually. Let me share a story of mine. Back to several years ago, a group of my friends decided to build a website aimed to provide 3^rd service for franchising, called JiaMeng in Chinese. The guys with solid academic management background came with the domain name of 51franchise.com. It turned out a real trouble – hard to explain to customers, not localized. Even ordinary college students don’t know the word franchise, not to mention clients with much less schooling. So, ditu.live.com for Chinese is much better than chinamap.live.com if you take a look at average education level of internet users. All in all, BRAND works like religion, and it takes lifetime to build.

“A Google approach to email” – see how brand helps product marketing.

Infrastructure

GFS. BigTable. MapReduce. They can be competitive advantages. With these put in place, Google can roll out new internet services faster, cheaper, and at scale at few others can compete with. They are designed solely for Internet services. Users quit quickly after dissatisfied performance experience in Cuil. Microsoft software is mainly for an enterprise, supporting 100K concurrent users is “good enough”, but it is far more perfect in internet scenario.

Understand/Repsect Customers

There is no one-size-fits-all solution given the growingly diversified market. Of course you can educate customers, but never expect to change their inherent attributes coming from culture/history/economic development level. If you doubt this claim, check out this article: Search site moves at the speed of China, which reports, “But appreciating such cultural differences is what Baidu.com Inc.’s chief financial officer, Shawn Wang, says gives the Chinese search giant unique insight into the country’s 1.3 billion people as it competes with American rivals such as Google Inc. and Yahoo Inc.” As a result:

Culture

Per Wikipedia, culture means the set of shared attitudes, values, goals, and practices that characterizes an institution, organization or group. Google’s business is built on top of internet, so its organization/knowledge base is built for the internet, just like Microsoft is built for software, mainly enterprise software. I met strong feature PM with deep knowledge needed for enterprise software, say reporting, admin UI, DB admin UI, and information work flow. They understand their customers so much after years of interactions with them. It takes time to accumulate. Top-down hierarchy, heavyweight development process, years of in-house development can hardly catch up with the pace of internet evolution. The same thing is applied to Google – I am equally not optimistic if Google step into enterprise software because of the same reason – culture, enterprise’s DNA.

Web Competition Strategy

What is Cuil’s selling point? (1) Fancy UI. UI is critical for adoption and usage, but it hardly provides a moat. This is provided by two case studies of Apple computer of the nineties and the “X window” system on *nix OS. Both these systems with more attractive UI couldn’t beat windows OS with lower cost and rich applications available. (2) More relevant result. This is an ambiguous area which lacks of widely accepted measure criteria. (3) Cheaper solution. There is a question of sunk cost, of course you can claim you are 1/10 cheaper once reaching Google’s current scale. None of these is compelling from users’ point of view. Why do users bother to go to your site instead? One of the significant differences between web service (say, search) and traditional software business(say, DB) is purchasing decision making process. DB vendors can send to salesmen to target customers’ office and argue the deal. Only quite a few key persons have the final call. They are more analytical, love data. As comparison, everyone can be customers of search, we are more emotional. If I don’t miss anything, looks like the best strategy to monetize Cuil is to be acquired by Google.

No chance to win in search?

Definitely No. But you are doomed to fail if following essential parts are missed:

1. Remember brand. Remember “winners take all”.
2. Build your DNA towards internet. DNA = SUM(people, team arch, process, knowledge, …)
3. Put infrastructure in place. This is the way to help turn your idea into profitable traffic. Not scale-up, scale-out instead.
4. One thumb rule to compete with dominant market leader
   • Avoid playing games whose rules are set by opponents. You can hardly win. In this case, better search engine defined by Google are faster, relevant results, simple UI, magic algorithm, PB of data, … Let us think of solving same problems with different approaches. Why search? Help explore and share information. If someone tries to solve this problem by following Yahoo’s tail light to build yet another portal, he has little change to take off. Another example is download – P2P technology solved the download problem without adding more expensive servers/bandwidth.
   • Attack opponents’ weak points. Google is designed to search everything, but it may not be good at all vertical industries, say shopping. Nibble at its market share if we can’t win in head-to-head way.
5. Before rolling up sleeves, why we have to win? Why not step away and go find next big thing? Let Google be Google.

1.         Right timing & place. MICROSOFT is growing up along with the booming trend that computers help people in every way. Under the background of times, there will be another Microsoft even without this one, but all of them will be likely to appear in US only.

n  People here are expensive – It will cost you at least $150 to call a repairman to check your air conditioner; you should be pretty rich to have a in-house maid;

n  People tend to use machines instead of human to complete jobs – people like to weed by themselves, even if it is general manager in cooperation;

n  Embedded immigrant cultures empower people with the belief of being risk-taking entrepreneur. In a general MS engineering team, you can easily find people with various faces, speaking various English dialects.

n  Personal contribution is respected and protected seriously. The right way of buying DVD is logging on amazon.com, instead of turning to the street peddlers.

2.         Have passions for what you are doing. The leader, especially founder, should possess religious worship to what he is doing and make every effort to realize it. Leaders focus on vision and strategy, while managers focus on execution and plan. That is the main reason why industry is pretty concern about Microsoft’s future in post-Gates. The targeting market must be big enough, better potentially. Over three decades, Microsoft had a clear cut vision: put a desktop computer on every desk. MICROSOFT has a strong belief that he is doing the right thing and be ready to make every effort to realize it. Now MICROSOFT has a new one with much bigger scope.

3.         Hire smart people & help them enjoy their job. Top3 hiring rule for engineering guys is smart, hard working and passion for technology. They also need appreciate MICROSOFT culture, of course. Take education background as example, you can easily find folks graduated from Ivy League. Microsoft, especially in Redmond, is just like a university. You can always easily find various online/in-person trainings, talks and courses. “Knowledge sharing” & “Help others success” are highly encouraged and awarded. You know what will happen if a group of well organized smart people happily work for a single goal.

4.         Understand your customers. From latest annual report, 3 of 5 operating segments( which targets enterprise customers) are earning money, but the other 2(targeting consumer market) are losing money. MICROSOFT is claiming that GOOG does not understand businesses today. At least, I can prove MICROSOFT does understand in his own field. If you visit Sharepoint team, you can see that every user scenarios are discussed seriously in board. I ran into a 10-year researcher for a security product, whose job is monitoring hacker’s blog and propose features in upcoming releases. TAP(Technical Access Program) is a program which allows development team to receive representative customers feedbacks prior to product RTM.

5.         Build up your core competence firstly, and then fully leverage your dominant position. Obviously Windows is the most successful OS in the world, especially when you look at its dominant popularity. Can you image a world without Windows? MICROSOFT builds lots of software around Windows – Office, DB, Dev tools, virtualization, security, search, you name it. But be careful all the time. J

6.         Be aggressive. Getting an aggressive& passionate leader is the first step. Want every dollar in the market like a shark. Not to advance is to go back. Anybody remembers Borland Delphi, Netscape? What is MICROSOFT’s response seeing IPod’s success?

7.         Think of an open platform. Big enough but simple. Serve as many customers as possible. If you look at Mac OS and Windows especially in initial age, you will find that they are taking quite different ways. MICROSOFT builds an open platform upon which everybody is encouraged to build software; while Apple has the belief that only Apple can provide best end to end personal computing experience to customers. While customers enjoy Windows software from third party, they are also paying dollars to MICROSOFT unconsciously. Also, remember why Facebook gets its heyday while Myspace dominates SNS market?

8.         Play with big dogs and share your success. Business is like battle to certain extent. MICROSOFT needs friends to fight together. One or two loyal friend is essential. Wintel alliance is much better. But remember that “no permanent friends, only permanent interests.” Sometimes, enemy can be also friend in some angel. J Share your success by allocating some dollars to your friends/partners.

9.         Keep learning. The world is ever changing. Keep sensitive to opportunities and threats all the time. Sometimes, one trivial careless omission might result in big troubles. For example, IE for Internet browser and Google for online AD. Especially be alert to industry evolution trend.

10.     Who knows. Why it must have reasons? Actually I would like to keep it open. J

Looking at above, I believe that Microsoft has intense confidence to compete with any software makers in the planet.  However the biggest challenge ahead is game rule changing. That often means rebulding the whole business model, which is extremely painful and expensive for a mature company. Unfortunately, we have to sometimes. Microsoft makes money by selling bits to customers, someone is expecting a transformation:

• Google. Google’s revenue is less than one third of Microsoft’s, but they are building software in Internet and sell them in AD-funded model. They also plan cloud computing.
• Redhat. Open source.  You can use my software for free and only need pay a little dollars for upgrade and service.
• Salesforce. SaaS model. You pay for what you need. No software. No installation.
• Facebook. Internet app for Social graph. People build trust better there. More targeted AD.
• …

They are actually the real fatal killer from Microsoft’s perspective.