Are you wondering why iPad apps, especially news reading apps like Flipboard, Wired and WSJ, keep getting so much praise and media attention? Well let’s do a head-to-head comparison of The Wall Street Journal iPad Edition and Online Edition (WSJ.com). Why do you think users prefer the WSJ iPad app?

WSJ iPad Edition (click to enlarge)

WSJ.com Landing Page (click to enlarge)

When put in these terms the choice should seem obvious. It actually is. Most websites overwhelm their customers with far too much information and far too many choices. If I simply want to read the morning paper (the primary WSJ use case), the iPad app is better-suited to doing that, even independent of the specialized iPad hardware. Consider how many words, links and pictures there are on the WSJ.com Online Edition. If you studiously read every word and studied every picture, how long would that take you? Of course users don’t read every word, they scan, but you are forcing your users to do far more work to find the information they do care about.

I also believe despite its “lack of features” the iPad Edition is just about as functional as the Online Edition. Most of what most users are looking for most of the time can be found in the iPad app. That’s who you should design for, your majority. Design for the majority of a specific target customer with a minority of features. My rule of thumb is the Pareto Principle: 20% of your features deliver 80% of your product’s utility. Do not design for the corner cases, especially at the outer layer of the onion (ie the first part of your product customers interact with). WSJ.com was designed by committee and designed by feature creep. It was designed by “Hey why don’t we throw in XYZ feature!” I am not opposed to WSJ.com containing all the features they have, but they certainly shouldn’t all be on the landing page. In reality, though, it can be difficult for a company to force discipline and simplify. I’ve seen it before in the real world. Why? Because somewhere in The Wall Street Journal‘s offices a coversation such as this would take place:

Product Marketing: Our data says that many users find our website confusing and overwhelming. They prefer the simplified iPad edition. Let’s start simplifying. Why don’t we move the Personalized Stock Quotes off the landing page?

Web Manager: Oh, no we can’t ditch the Personalized Stock Quotes. They get a good number of clicks. Do you want to lose all those clicks?

The problem with this conversation is that it takes a fixed pie, zero sum approach to product design. This is not how the world works. Removing a feature doesn’t mean you “lose.” This viewpoint doesn’t even begin to account for all the clicks lost / never had due to a confusing and overwhelming website. In fact, a simplified site could enlarge the pie and drive more total clicks to the things you really care about.

I am telling many of the startups I advise to conceptually “design for the iPad, not for the web.” It’s too easy to create an overly chromed-out website from the get-go. The iPad is a great design tool in that it forces trade-offs. (Unbeknownst to most people, trade-offs are actually the critical factor that drives the greatest innovation and the best products. It is the iPhone’s lack of a physical keyboard that makes it great, even though that makes it harder to type on.) Apple understands trade-offs. Products that try to be everything to everyone usually fail. They fail because they don’t have a target customer in mind and thus have to keep adding on extra features to accommodate every possible user and use case. In the end you, you wind up with Windows Vista.

So why are iPad apps such as Flipboard and WSJ getting so much attention? It’s because they are easy to use. They make reading the news what it should be, fun, as opposed to work, which is what WSJ.com feels like. They look nothing like most of the crap we put up with in HTML. Some of this can be attributed to the natural product value advantages of the iOS SDK over HTML (as I’ve previously written about) and some of this can be attributed to the great design decisions and trade-offs the iPad is fostering.

Here’s a theory I’ve been working on: Multi-billion dollar tech startups (excluding healthcare) require one initial innovation to get the fire started underneath them, let’s call this the kindling, and a second major innovation that works hand-in-hand with the first to throw some real wood on the fire to turn them into companies that stick around for a decade or more. It also seems that each decade requires additional fuel on the fire. If a decade goes by without fuel, the fire turns to a smolder and may extinguish.

● Microsoft was just an OS that had some lock-in but not total, until they found Office. Office has been their behind the scenes showstopper that rakes in the cash and keeps Linux and OS X at bay and it wouldn’t have been possible without Windows. Windows got Microsoft from the mid-1980s to the mid-1990s and Office (aka Information Worker) from the mid-1990s to the mid-2000s. Since then Microsoft hasn’t had another major innovation and it’s fire has been throwing off less heat.

• Google was just a much better AltaVista that didn’t have a revenue model and, even worse, had one of its differentiators based on the idea they wouldn’t sell advertisements on their landing page. Google’s second great innovation, AdWords hit the scene in 2000 just a few years after the search engine launched and is responsible for the majority of the company’s revenues and profits. Of course, it would not have been possible without nearly every internet-connected individual on earth having used Google as their search engine of choice. AdSense carried Google from 2000-2010 and it seems that 2010 will be the year of Android-just in the nick of time to keep Google on top for a second decade.
• Apple had their first hit with the personal computer powered by a graphical OS in the 1980s but that idea alone slowly decayed for Apple over time as a competitive advantage. The personal computer carried Apple from the early 1980s until the early 1990s and then the company began its decline. It wasn’t until Steve Jobs returned with his vision of the Mac as a “media hub” which started coming together around 1997 that Apple’s fire was reignited for another ten years. Exactly ten years later Apple had their third epic innovation in iPhone OS which of course would not have been possible without the prior innovations.
• Adobe started off in 1982 with their awesome fonts and PostScript, but it wasn’t until 1989, seven years later, they gave Photoshop to the world, which ultimately put a halo around what became their Creative Suite. Creative Suite, like Microsoft Office, has been the rainmaker for Adobe. Photoshop carried Adobe on an unstoppable growth trajectory from 1989 until the early 2000s but then Adobe’s fortunes suddenly looked less bright and avenues for growth became less evident. In 2005 Adobe purchased Macromedia and their Flash technology. Adobe is clearly hoping to get another five years of dominance from Flash, hence why they are willing to battle Apple to the death to keep it around. Can Adobe innovate again?

The list of reinforcing examples could go on and on. There are surely examples of companies that have defied this logic, but not as many as you’d think. There are so many examples of companies that died because they never had a second innovation they are not even worth listing. We also have contemporary examples of companies caught somewhere in the middle.

• Facebook had their…online facebook (for lack of a better word) and that product was innovative enough to inspire what feels like half the world to go online and trust Facebook with their most sensitive information. But will Facebook have a second innovation, one where they invent a radically new and better way to monetize their information and turn those users into cold, hard cash? Will Facebook have an AdWords moment? That is the key question and I believe they won’t succeed unless they do.
• Twitter gave the world real-time access to the world’s eating habits, but like Facebook, the question is whether or not the young company can have an AdWords moment.

A few takeaways:

1. None of these companies knew what their second great innovation (and real money maker) would be when they launched.
2. The closer together the innovations come, the faster the growth. Hence Google’s AdWords was more akin to pouring gasoline on the fire than chucking on another bundle of wood. However, AdWords was probably more necessary too as Google had absolutely no way to become profitable beforehand and may have gone out of business before a full decade came to pass.
3. This framework can be used to analyze the fates of current companies such as Twitter and Facebook.

"You're not in the Valley anymore."

I’ll be spending this summer, between my first and second years at Kellogg, with the experienced team at Lightbank, the newly formed $100mm Chicago-foucsed venture investment vehicle led by Mssrs. Eric Lefkofsky and Brad Keywell. Eric and Brad were co-founders and investors in Groupon, Echo Global Logistics, InnerWorkings and MediaBank. Lightbank isn’t traditional VC as it’s more like a very large angel fund since most of the capital belongs to the GPs. It’s more of an angel fund, VC and incubator all rolled into one flexible environment. They operate out of 600 W. Chicago Ave along with all of their aforementioned successes. This is what excites me most-the possibility for a “600 W. Chicago Mafia” to emerge and kick-start some real innovation in Chicago, vis-a-vis PayPal.

Having worked in the industry as an entrepreneur and VC in New York and manager in the Valley, I am very excited to try Chicago out. If you’re around this summer give me a shout.

Fred Wilson's avatar demonstrates his awareness of branding.

Having worked in VC and also in marketing, I’ve been thinking a lot about VC marketing, that is how VCs market themselves. If you sell something, be it bubble gum or venture capital, you engage in marketing. Traditionally, VCs have been absolutely crap at marketing because they failed to recognize this basic premise. I think this has been primarily because VCs have thought they were somehow “above” marketing, too important for it. Fred Wilson changed all this in my opinion.

Some years back a handful of VCs built strong brands that helped them attract the best and brightest entrepreneurs. Folks like KPCB and Sequoia trolled the Bay Area, found amazing entrepreneurs and backed companies that eventually became the eBays and Googles of the world with huge multi-billion dollar exits. These spectacular exits signaled to entrepreneurs across the world, like fireworks in the sky, where to go for capital and sage advice.

Here’s the problem with that approach: it’s all about being in the right place at the right time and even then it’s really hard to do. It takes a long time, is difficult to reproduce and doesn’t necessarily prove causation that you are the best and the brightest. It could just mean you got lucky once and then got better access to deal flow based on that lucky strike (I am not saying this is the case, I am just positing it as an existential possibility). It’s also a strategy that is hard to duplicate if your address doesn’t contain “Sand Hill Road.”

So what do you if you’re not an incumbent player? How can you display your fireworks for all the world’s entrepreneurs to see (show your plumage, if you will) to get great deal flow access?

Incumbent Sand Hills VCs = Oligopolists (or perhaps Local Monopolists) within their specific verticals. Sand Hill doesn’t need to market or advertise to bring in “customers.” They just bask in their storied histories while the customers come to them, like Ma Bell (got the ill communication). NYC (and other non traditional VC market) VCs = Market Entrants. If you’re a newcomer you must get the word out. Think MCI vs. AT&T in the long-distance phone wars. You must market.

That’s exactly what Fred Wilson and his partners at Union Square Ventures did. When I started my career as a VC in NYC in 2005, everyone knew Fred’s name and had tremendous respect for him, but he was just another star in the sky. And remember, Flatiron had some names we all remember, but not necessarily for such great outcomes (Kozmo.com anyone? Alas, the bubble was hard on everyone, not just Fred.) But let’s not misremember history here. Fred invested in Twitter because he was a genius marketer, not the other way around. Fred didn’t invest in Twitter, earn a gold-plated reputation and then invest Foursquare. No, no, no. That would be the Sand Hill Road way. Fred made a name for himself by creating a brand first. He selected a target: Web 2.0. He positioned his product: willing to take risks on young, bold entrepreneurs. He established placement: with his simple, easy to find URL http://avc.com (what could be more memorable than “A VC”?) Then he promoted his product: he blogged, twittered and spoke at meetups and other physical gatherings almost every day of the year. Fred thus established a brand. This is marketing 101. This brand then opened doors for Fred and USV.

Fred Wilson succeeded in turning venture capital on its head by inverting the VC branding model. First he achieved fame, then he found the great entrepreneurs (and hopefully the exits soon too). Need some proof of this? Check out the Top 10 VC Blogs. Two of the top five are not from California (#1 Fred in NYC and #4 Brad Feld in CO). Also note how the name brand firms are underrepresented in the Top 10. If you look at Twitter activity, the picture is even more convincing. Particularly early on in Twitter’s days, NYC and small market VCs were all over Twitter while Sand Hill was late to the game. Why? NYC had relatively more to gain on the new medium and thus could assume more risk. Fred wasn’t afraid to take these risks. He doesn’t view being in the limelight as somehow beneath him. I still don’t see that many name brand Sand Hill VC GPs on Twitter. They prefer to maintain an aura of exclusivity. They don’t want to take down the velvet rope just yet.

What does all this mean? Sure Sand Hill Road is a clubby, old boys network, but you can circumvent it through good ole business fundamentals. There’s no reason things need to be the way they are. Traditional wisdom says that being smarter and working harder won’t get you anywhere in venture capital, but I disagree and I think Fred might too. It’s not all about being in the right place at the right time. If you have good ideas and work hard, people might just listen and that can be just as valuable as a coveted Sand Hill Road address.

So Chicago might not be taking my advice and trying to transform itself into a hub of mobile application development, but New York certainly is (though I cannot take any credit for it). The NYC BigApps competition is exactly the sort of government prodding that I think can be helpful in stimulating further entrepreneurialism and innovation. Let me be clear when I say that government action is not a necessary condition for any city’s startup culture in the US, but I do think it’s a positive NPV way for a city or state government to use its funds. I can guarantee NYC will get back more than the $20,000 in cash distributed at BigApps plus whatever G&A expenses incurred in the form of taxes and other revenues.

In the long run, this is a good bet for NYC. Mobile apps make a lot of sense for dense urban environments. Urban dwellers are more likely to derive a lot of utility from mobile apps (think about how much more helpful Yelp is in NY than a farm town) and mobile development teams are particularly well-suited for a metropolis since they works in small teams often of a dozen or less as opposed to packing 1,000s of folks into vast, suburban campus sprawls (Yes, I am thinking of you Adobe, Sun, Microsoft, Apple etc.)

Bravo to New Yorkers Mayor Bloomberg, Fred Wilson, John Borthwick, Kevin Ryan and Danny Shultz among others for getting involved and lending their names and credibility to the event. At the end of the day, any such initiative is only as good as the people putting it together and those competing.

(Also, in another bit of great news for NYC mobile app development, CNET co-founder Kevin Wendle and MusicNation co-founder Daniel Klaus recently announced the AppFund which will be based in NYC. Things are really coalescing for a new era in New York-based entrepreneurialism. Great news for us native New Yorkers with a deep tech passion.)

Dear Politicians, Entrepreneurs and Financiers of Chicago,
Now is the time for Chicago to make a bold move to develop a technology and innovation-based economy. The proposal is straightforward: offer a basket of tax incentives, political support, direct subsidy, and venture capital to establish a “Mobile App Development Economic Zone” in downtown Chicago. The initiative should be aimed at both incentivizing existing mobile app developers and publishers to relocate to Chicago and for new entrepreneurs to choose Chicago as their metropolis of choice.

Chicago & IT: Now or Never?
Why do this? Let’s be honest. Chicago almost entirely missed the boat in the past 20 years on that whole “personal computer” and “internet” revolution that has energized state and local economies in just about every other major metropolitan center in the  US. Mobile app development is one of the great frontiers of technology today with the potential to create jobs and wealth for Chicago and Illinois, while further diversifying the portfolio/mix of industries. Looking forward to the century ahead, it should be obvious to all residents that technology and specifically mobile technology will become increasingly important to our society and economy. If now is not the right time for Chicago to get involved, when is?

Why Mobile App Development?
Compared to other technology frontiers, mobile app development is particularly lightweight and democratic. For instance, it would be difficult to start a new semiconductor-based economy in Chicago now because of 1) extensive relocation costs for any preexisting company to make the leap since semiconductors are a capital (physical and human) intensive business 2) Chicago lacks the throngs of specialized hardware, firmware, tools, test and services engineers that are part and parcel of semiconductor engineering. You can’t just start a semiconductor business by yourself. You need at least 10-40 employees, which implies a much larger pool of potential employees with such backgrounds. 3) You can’t just start a semiconductor business with an idea that came to you in the shower. Semis are built on specialized knowledge generally hatched out of larger semis firms (see Intel). Chicago lacks all of the above. And this isn’t specific to semiconductors–these points apply as much to semiconductors as they do to enterprise software, consumer hardware or any number of the bedrock segments of an IT-based economy.

On the other hand, today any given mobile app development startup requires a couple of generalist software engineers and a graphics wizard/human interface designer. The idea behind the next great iPhone or Android app will not be found in some corporate headquarters in Santa Clara, CA or Waltham, MA, it could come to a Chicago CTA rider or a local university student. In fact, this has already happened with a notable startup named Bump Technologies, which was founded by a couple of Chicago Booth full-time MBAs. Unfortunately, without any incentives to stay, that company has since relocated to Mountain View, CA. Chicago had the idea and gave it up.

A Proposed Solution

1. Establish Chicago as a MADE Zone, “Mobile App Development Economic Zone”
   • Appoint leading business executives, venture capitalists, entrepreneurs, professors, investment bankers, consultants, and politicians to the Council. I’d like to see Mayor Daley, a Motorola executive, J.B. Pritzker, Kellogg/Booth professor(s), an IDEO consultant from their Chicago office, a Deloitte big wig, and a young entrepreneur such as one of the Threadless founders on the Council
   • Powers and characteristics of the MADE Zone are established below
2. Offer a 5-year state and city tax holiday to mobile app developers & publishers in Cook County (ie Chicago)
   • Specify the qualifying platforms: iPhone, Android, Blackberry, Palm, Windows, and Symbian and other requirements
   • Require all participants to submit formal applications to qualify. Companies must meet various requirements, be under a certain size, etc.
3. Offer direct subsidies for relocating companies
   • Establish a $XX million fund to promote and assist in the relocation of existing startups to help seed the project
   • Market to and work with some leading, notable and young mobile app startups to bring them to Chicagoland
   • Let’s get some really big names ones to make a splash
4. Raise $X million to lease/purchase and rehabilitate a specific industrial building to turn into a MADE Zone incubator  office building for X years–proximity of entrepreneurs drives innovation
   • Offer subsidized rent to occupants
5. Establish a venture capital initiative with Chicago & Illinois as GP or LP to fund mobile app development
   • This could be in the form of a single fund run by the city/state as the GP (somewhat akin to the New York City Investment Fund) or as an LP to third party funds
6. Offer additional tax and other incentives to qualifying new entrepreneurs and startups
   • Have you ever worked in an early stage startup? Life isn’t easy. Payroll tax breaks and other such incentives could help on the cost side, preventing the death from a thousand cuts that kills innovation. How about some pro bono basic legal and tax consulting from MADE Zone Council Members such as Deloitte?
7. Involve the Universities
   • Get the University of Illinois, Northwestern, University of Chicago, DePaul, IIT, Loyola and the other Chicagoland and Illinois (hell, all of the Big 10 and Midwest) schools onboard with mobile app development  courses (see Stanford’s CS193P taught by my good buddies), lectures, student club involvement etc. Give professors advisory positions and align incentives
8. Involve local businesses
   • Local businesses (big and small) should have every reason to support this. Think about it. Motorola: Absolutely! NAVTEQ: Yes! The sandwich shop across from where the incubator building is located: of course!
9. Get the word out
   • This is perhaps the most important initiative of them all and its the one upon which all depend
   • Take out ads, get on Twitter, scream at Michael Arrington until he writes an article and setup press conferences until the whole world knows

Now is the time to act Chicago. Become a leader and innovator.

Sincerely,

Tom Loverro