• Wuhan Kindstar Diagnostics does lab work for more than 2000 hospitals in 320 cities in China. Last year, the startup added 700 new hospitals as clients, and it expects to keep growing as more Chinese enter the middle class and can afford diagnostic tests. Kindstar's CEO, Dr. Shiang Huang, was educated in China, but spent time working in the United States before returning to China and starting Kindstar. The company recently received investment capital from the Mayo Clinic, as well as from Kleiner Perkins Caufield and Byers. 

    In starting Kindstar, Huang had to work through some of the government bureaucracy in China, where local officials wanted to own a part of the company before they would give him a license to operate. He also had to develop his own logistics network to transport samples from hospitals to his lab, and currently half of Kindstar's 1000 employees are couriers that pick up over 25,000 blood, urine, and tissue samples each day.

    Having to start your own logistics network for small parcel pickup and delivery is one challenge US and European start ups do not have to face. If you are going to start a logistics intensive start up in many less developed areas of the world, you do need to consider how you will get products from your suppliers and to your customers. FedEx and UPS simply do not have the coverage they have in the developed world. The same is true in Africa, where many products travel the last mile to customers by bicycle or motorcycle.

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  • Speaking of the man biting the dog, Macy's has decided to build a new network of internet fulfillment centers across the US–using the backrooms of their existing stores. The reason? Amazon and their success at capturing the consumer with high in stock positions of hot items and rapid shipping.

    Macy's might have a hot item in stock in the stores but not in one of its current on-line fulfillment centers. As a result the consumer is disappointed and the store may end up selling the hot item at a discount since no one in that region wanted it.

    This will end up being a major and costly undertaking…about one-third of their 800 plus store backrooms will be expanded, additional inventory added and new technology put in place to identify available inventory across all stores so as to be able to fulfill on-line orders.

    The upgrades will be particularly valuable for selling hot items, such as new ready to wear fashions from leading designers, which typically sell out on-line in a few days, but can languish in the stores for weeks and often end up in markdown if no physical buyer shows up.

    But we are not speaking about super efficient  pick, pack and ship operations like Amazon robotic driven fulfillement centers. The entire store level process at Macy's is manual, with runners finding the product in the store and hustling back to the storeroom where employees wrap and ship orders.

    Macy's is playing catch up in the "omnichannel" strategy world, where bricks & mortar retailers are integrating internet and physical locations to try and compete with Amazon and eBay. On-line sales are growing at four to five times physical store sales and show no signs of letting up. Nordstrom's started t a similar program in 2009 and can ship internet orders from any of its stores. Same for Toys R Us, which was useful last year for me to acquire a hot Lego set from a midwest store when the New England ones were all sold out.  You can even be notified when new stock of a desired item appears in one of the Toys R Us stores and order it for direct shipping.

    But the reality of this "new" approach to supply chain management is much higher fulfillment costs compared to Amazon.  Stores like Macy's and Nordstrom's can justify these costs to avoid lost sales and keep high margins on hot items, but the fulfillment of ordinary items will suffer margin degregation if done at an inefficient store-level back room. Long term, look for the physical retailers to adopt a model similar to Amazon.  It is ironic that Amazon bought Kiva Systems and now gets to sell the technology back to its competitors.

  • A diagram showing the reverse side of a typica... (Photo credit: Wikipedia)

    According to BusinessWeek (27 February 2012),  when Patrick Collison began trying to sell Marc Andreessen on the need for a drop-dead simple way for website owners to accept credit cards, the venture capitalist and creator of the Netscape browser cut him off. “I know!” Andreessen said excitedly before launching into a story about how he and the original Netscape team had wanted to make payment processing as fundamental to the Web as the ability to e-mail or display pictures. They were foiled by the complexity of working with banks, credit card companies, and other essential partners.

    Stripe aims to pick up where Andreessen left off. Founded by Collison and his brother John, both Irish emigrés and college dropouts, the four-month-old service is winning praise from Web developers. E-commerce sites typically accept credit cards online by connecting withPayPal software, which some say is hard to use, or by spending time and money to set up a merchant bank account and build a network for storing card information. Big companies such as Amazon.com have already mastered this; Stripe lets Web developers of any size do the same thing in minutes. “Using Stripe is almost as easy as embedding a YouTube video into a website,” says Mike Moritz, a venture capitalist with Sequoia Capital. The Collisons expect that ease of use to inspire entrepreneurs to proceed with ideas they might have scuttled due to the hassle of getting paid. Making payments easier “doesn’t just make it more pleasant. It also changes what gets done,” says Patrick.

    The idea is big enough to make Stripe one of the most highly valued early-stage startups in years. In early February, Sequoia led an $18 million investment at a valuation of about $100 million, according to the venture capital firm. Andreessen invested, as did three PayPal founders—Peter Thiel, Elon Musk, and Max Levchin—say the Collisons.

    To a consumer, a Stripe-powered website looks ordinary, with the same credit card submission forms seen anywhere else. Developers love it because Stripe handles the dirty work. They simply sign up for an account and enter a few lines of JavaScript into their site’s source code. When users enter their card information, it goes straight to Stripe’s servers, so site owners don’t have to worry about securely storing sensitive data. Stripe processes the payment, checks for fraud, and takes a fee of 2.9 percent plus 30¢. The merchant gets a deposit in its bank account with the proceeds seven days later.

    The brothers Collison, who hail from tiny Dromineer, Ireland, built Stripe because they wanted something like it for their own projects. The pair stand out even in an industry known for precociousness. Patrick, now 23, won an Irish national science award in high school for creating a new version of a 50-year-old artificial-intelligence computing language called Lisp. At the Massachusetts Institute of Technology, he majored in math and physics. John, 21, received the highest score ever on Ireland’s nationwide college entrance exam, then headed to Harvard. While in Boston, the pair built an Ebay competitor called Auctomatic and sold it less than a year later for $5 million.

    The idea for Stripe came when Patrick realized that although the brothers had created a number of programs, the only ones they’d charged for were iPhone apps that rely on Apple’s (AAPL) easy-to-use payments infrastructure. The Web software they ended up distributing for free. “We’d looked into various payment options, but they all seemed like way too much of a hassle,” Patrick says. Just complying with government regulations would have required hiring payments experts, he says.

    The most common alternative is PayPal, which has a mixed reputation with merchants. Some dislike that PayPal whisks customers off to its own site to complete a transaction, reducing the merchant’s control over user experience. And the pricing of PayPal’s many features mystifies some. “It was very hard to tell how much PayPal would cost,” says Russell Quinn, digital media director for McSweeney’s, a San Francisco publishing company that ended up using Stripe. PayPal spokesman Anuj Nayar says that over half a million small businesses started using it to collect payments in 2011, and “we are already light-years ahead” of startups just developing their technology now.

     

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  • Image representing Fred Wilson as depicted in ...Image via CrunchBase

    Fred Wilson of Union Square Ventures had a great post in BusinessWeek recently on how to run a board meeting. The only addition is making sure that you speak with all Board members in advance if you have a possible contentious item on the agenda.  No one likes a surprise….

    "Board meetings should not be for the benefit of the board. They should be for the benefit of the CEO and the senior team. Some boards meet monthly, but for most companies that’s overkill. Eight meetings a year is a great heartbeat for a board. Some CEOs and board chairs make the mistake of driving the board line by line through the agenda, cutting off meaty discussions in the name of staying on schedule. The purpose of board meetings is to have those meaty discussions. Most of the items should be strategic and thorny questions that the business must tackle to be successful. A technique I like a lot is when the CEO puts up a list of the three or four things that are “keeping me up at night” at the start of each meeting. Possibly the most important technique I’ve observed is the executive session at the end of the meeting. This is when the board meets without the CEO and team in the room and debriefs the CEO afterward. Boards should not miss this opportunity, and CEOs should demand it of them." 

    This article is an adaptation of a longer post on Wilson’s blog, AVC.com.

     

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  • SEATTLE, WASHINGTON  - APRIL 24:  Planetary Re...SEATTLE, WASHINGTON – APRIL 24: Planetary Resource's Arkyd Seris I satellite seen as a full-scale mockup during a press conference announcing plans to mine asteroids at the Museum of Flight April 24, 2012 in Seattle, Washington.

    Well, this post will probably mean most to my grandchildren, who will likely think nothing of designing and implementing supply chains to support efficiently mining the universe.

    Funded by a number of billionaire innovators (think Larry Page and Eric Schmidt of Google, James Cameron, among others), Planetary Resources plans to send an unmanned spacecraft to an asteroid and mine it for valuable metals and water that could be used for further space exploration or returned to earth. In their own words:

    "Planetary Resources is establishing a new paradigm for resource discovery and utilization that will bring the solar system into humanity’s sphere of influence. Our technical principals boast extensive experience in all phases of robotic space missions, from designing and building, to testing and operating. We are visionaries, pioneers, rocket scientists and industry leaders with proven track records on—and off—this planet."

    Of course, the plan is not without huge risks and costs (hundreds of millions of dollars for starters). And what about an effective vehicle for bringing supplies to and ore from distant asteroids? Gotta invent that one as well.

    But many reputable scientists believe that we must look to mining asteroids if we are going to extend space exploration. Instead of hauling stuff up from earth to build space stations or colonies, why not mine it at the source, or nearby?

    I must admit to being skeptical, but have the strong feeling that my grandchildren will consider this to be a normal part of their lives….

     

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  • Roger Jones, a top management consultant and good friend, provides some interesting insights into how you can get buy-in for transformative change in your company:

    "Firstly I suggest that leaders have to act in a way that is consistent with the change they want to see in others. In other words, they have to lead by example. I get Einstein to help out with a few well-chosen words. (I was in Princeton last week where he did much of his work).

    Secondly, it's not surprising that leaders get frustrated when their attempts to change an organisation are mired in resistance.

    "You may see the need for change", I counsel, "but you need to arrive at a shared epiphany".

    The simple truth is we resist change if we see it to be pointless or harmful.

    It's a leader's job to have stakeholders realise that change is essential and beneficial.

    Having witnessed so many failed change initiatives, I've prepared a 6-page complimentary ebook that sets out a few lessons and ideas.

    Do you lead by example?

    Many leaders can't get buy-in because their behaviour is inconsistent with their rhetoric.

    "Do as I say and not as I do", is the message received.

    What's often lacking is integrity.

    During the recession of the early 80's, the Chairman of a £3 Billion-turnover UK company visited each Office and Plant.  He was an elderly man, a decade or so past retirement age.

     

    While his visits were typically unannounced, they were widely welcomed.

     

    He would arrive in a 15 year old car, and often bring his own lunch. Failing that, he would eat in the canteen.

     

    The message was clear: we don't waste a penny, we're all in this together, we will each make sacrifices.

    In recent times in the UK, we've heard from both the government and the Opposition that "we're all in this together". Does this ring true?

    In the Daily Mail, Mr Miliband admitted Mr Osborne* had been 'onto something' when he coined the slogan before the last election – and that it had helped convince voters that austerity meant "shared sacrifice".

     

    Will "shared sacrifice" affect the remuneration and benefits of MPs, or is it code for cuts and tax increases for the rest of us?

     

    Leading by example, and integrity

    Leading by example requires integrity: consistency of actions, values, methods, measures, principles, expectations, and outcomes.

    Teaching by example

     

    As Einstein observed, "Example is not only a way to teach; it is the only way to teach."

    What if the dominant culture within your organisation was leadership by example?

    I argue that judging people by what they do (their integrity), rather than what they say (their stated intent) would have a profound effect.

    The emphasis within the organisation will be on the positive and active position. Too much time is typically devoted on seeing what is wrong with a process, plan, system or person. Not enough time is spent on creating the solution.

    Question: Who gets more air time at your meetings? The expert who is perpetually critical of the way it is, or the hands-on pragmatist who can both propose and implement a solution?

    The answer to this question lies with leadership.

    Do you set a can-do example, or are you inclined to allow meetings to dead-end with little or no agreement on a solution?

    Does your leadership team teach by example, and if so are these positive and active examples?

    As the late Jack LaLanne said, "If you want to change somebody, don't preach to him. Set an example and shut up."

    Leading by example is wise leadership. Stories of the 'way we do things' are the foundations of culture. Wise leaders tell stories of a way of life, and act accordingly. By doing so, they are judged to be authentic, and worthy of respect.

    And people follow leaders whom they respect.

     Arriving at a shared epiphany

    It's not surprising that leaders get frustrated when their attempts to change an organisation are mired in resistance.

    "You may see the need for change", I counsel, "but you need to arrive at a shared epiphany".

    The simple truth is we resist change if we see it to be pointless or harmful.

    It's a leader's job to have stakeholders realise that change is essential and beneficial.

    Before change can happen, a series of internal agreements must be reached since "the way things have always been done" is being challenged.

    People will only do what they are comfortable with and what they have agreed to do. It's nonsense to assume that people will change because they have been told to.

    It's also a fatal strategic error, in that it results in active and passive resistance.

    A crucial point is this: you have created a business system that is intentionally impervious to change (or it wouldn't be a system). You are changing the rules and that has multiple effects.

    Imagine announcing in Manchester United's dressing room that the club would in future be playing Baseball.

    Is this any more challenging than recreating a hardware vendor as an Information Service provider?

    Possibly not. Yet the latter has not only been proposed, it's been attempted – and without the buy-in of key stakeholders.

    We live in exponential times. The rate of change is breathtaking.

    In many cases we need to develop disruptive strategies, and innovative or unexpected solutions.

    As captain of the ship we have a perfect view to the horizon.

    We can see the need for change. We can chart a course. We've experienced our epiphany.

    But what if the vessel has the responsiveness of a supertanker?

    It's no good yelling louder that the course must change, we need to create a vessel that is more responsive.

    A lot is talked about shared vision, but it's rarely shared. It's more often imposed.

    I'll leave the final words to New York Times best-selling author Peter Gruber.

    "Over the years, I've learned that the ability to articulate your story or that of your company is crucial in almost every phase of enterprise management. It works all along the business food chain: A great salesperson knows how to tell a story in which the product is the hero. A successful line manager can rally the team to extraordinary efforts through a story that shows how short-term sacrifice leads to long-term success. An effective CEO uses an emotional narrative about the company's mission to attract investors and partners, to set lofty goals, and to inspire employees."

     


     

     

     

     

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  • Image representing ecoATM as depicted in Crunc...Image via CrunchBase

    Tired of trying to sell that old phone on eBay? Or finding a charity who will take it? Or giving it for free to Verizon, who then certainly resells it? Then ecoATM is for you. And it solves a big supply chain  problem–making it easy to recycle small electronic products that often just end up in landfills.

    According to Xconomy, ecoATM, a company that creates kiosks that automate the buy-back of used mobile phones and other used portable electronics directly from consumers, has raised $17 million in funding from Claremont Creek Ventures, Coinstar, TAO Ventures, PI Holdings, Moore Venture Partners, AKS Capital and Koh Boon Hwee.  Coinstar operates the change conversion kiosks and owns DVD kiosk service Redbox. The company previously raised $14.4 million from Coinstar, Claremont Creek Ventures, and others.

    Here’s how ecoATM works. The seller places their phone into the kiosk (the company says it will not damage the phone nor read/copy any personal data from the device). The kiosk then visually identifies the phone as best it can from a database of around 4,000 devices and uses visual recognition technology to determine if the device has been damaged, and also offers up a device-compatible cable connection which allows it to analyze whether or not the device boots.Based on the type of phone and the shape it’s in, ecoATM makes an offer. Users can then cash out (or cancel the transaction and get their phone back at any time), with the option to donate any percentage of the sale to any one of many charities. The kiosk also accepts MP3 players and others gadgets.Every week, the company picks up the phones sold and sells these to middle market electronics refurbishers, who fix the devices up and resell them or sell the parts to other electronics companies.

    Tom Tullie, Chairman and CEO of ecoATM, states that currently there are around 50 ecoATM kiosks operating in the U.S., mostly in California, for now. They are located primarily in malls, grocery stores and big-box retailers, and there is one on the Microsoft Corporate Campus. In addition, ecoATM announced it has been awarded a Phase II grant for up to $1 million from the National Science Foundation. The NSF received 171 Phase II proposals in July 2011, and ecoATM’s grant was one of only about 60 Phase II Awards NSF granted in fiscal year 2012. And ecoATM won the 2011 Crunchie Award for Best Clean-Tech Startup.Tullie says the new funding will be used toward mass commercialization and a national roll-out. 

     

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  • It happens at almost every start up I have worked with over the last decade–the emergence of a huge potential client who wants to pay a lot of money to use your technology. Sounds simple enough and could be a breakthrough event for the company, right? The Board gets all excited along with the founders– "This could be the deal we have been waiting for!" Or it could be a disaster.

    I call it the Wal-Mart Syndrome, but not to single out the world's largest retailer as the offender. Numerous large companies have been known to play the game. Here's how it goes:

    The Large Potential Customer (LPC) is a known consumer of innovative technologies like yours. They approach your sales guy with a request for a demo. The demo goes great, the company asks for a proposal to get going immediately. Then the fun starts…

    Your proposal/contract language is great, except for a few changes suggested by our Legal Department, the LPC says. Like giving them a copy of your source code so they can adapt it to their needs, but still supported by you with all upgrades in the future. (Note: this was a request made more than once among my portfolio companies.) And all changes you might make for us become our IP that cannot be used in your future versions of your software. The list of demands can go on and on, but end up making such a deal not very interesting.

    My companies walked away from these deals, in spite of the potential to acquire a world-class client and get paid a lot of money. Truthfully, the long term cost was not worth the publicity. When we walked away from one such deal, a competitor walked right in and took the "prize". They are cursing that deal to this day, partly due to lost IP and partly due to the deal they signed required them to make any changes the client requested for up to 5 years from contract inception (without cost).

    Having said all this, I have signed mega deals with world-class companies which were very successful for both parties. You just have to be very careful up front in choosing your partners….

  • A candidate icon for Portal:Computer securityA candidate icon for Portal:Computer security (Photo credit: Wikipedia)

    The U.S. Department of Commerce requires all organizations that accept personal data from the E.U. and Switzerland to comply with the U.S.-E.U. Safe Harbor and U.S.-Swiss Safe Harbor program.  This program requires organizations in the U.S. who accept data from the E.U. and Switzerland to make legally binding representations that they will address and implement safeguards that meet the data transfer standards under E.U. privacy law.  Non-compliance with the Safe Harbor program can result in federal and state government enforcement, European Data Protection enforcement, civil penalties (up to $12,000 per day for violations), de-certification or permanent ineligibility for Safe Harbor, and reputational sanctions.

    Companies certifying under the Safe Harbor program must adhere to the program's 7 Privacy Principles:  (1) Notice, (2) Choice, (3) Onward Transfer, (4) Security, (5) Data Integrity, (6) Access, and (7) Enforcement.

     

    (1)  Notice

    • Organizations must notify their customers about how their personal information will be collected, used, and disclosed. 
    • Organizations must provide contact information within the company for any questions or complaints about privacy related matters.
    • Clear and conspicuous language must be provided at the time of collection.

    (2)  Choice and (3) Onward Transfer

    • Individuals must have the opportunity to choose whether their personal information is disclosed to independent third parties.
    • Individuals must be able to choose whether their personal information are used for purposes that are not compatible with the original notice provided to them.
    • Notice and choice principles also apply when data is transferred to independent third parties.
    • If the data is being transferred to an independent third party, the individual must be given the opportunity to opt-out; if sensitive information is involved, opt-in consent must be obtained.

    (4)  Security

    • Organizations must take reasonable precautions to protect personal information from loss, misuse, and unauthorized access, disclosure, alteration, and destruction.
    • Such examples of reasonable precautions include without limitation implementing policies and training, encrypting backup tapes, limiting access to personal data on a need-to-know basis, securing areas with access to sensitive data, terminating promptly data access for departing employees.

    (5)  Data Integrity and (6) Access

    • Organizations must take reasonable steps to ensure that data is reliable, accurate, complete and current.
    • Individuals must be provided with access to and have the ability to correct, amend or delete inaccurate information (exceptions include: if the burden or expense is disproportionate to risks to the individual’s privacy; or if the rights of other persons would be violated).
    • Organizations should only collect and process personal data that is relevant for the business purposes for which it was collected.

    (7)  Enforcement

    • Organizations must include mechanisms for ensuring compliance with the Safe Harbor Principles (e.g., monitoring/auditing).
    • Organizations must make readily available and affordable independent recourse mechanisms.
    • Organizations must have in place follow-up procedures for verifying assertions regarding privacy practices.
    • Organizations have an ongoing obligation to remedy problems arising from non-compliance. 

     

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