I think Web2.0 is making me sick. It seems that every new company I see launched or funded has the same strategy – grab eyeballs by allowing users to do X on the web and then monetize the model by selling advertising. That's all fine and good, and it is a valid business model, but there are dozens of different strategies entrepreneurs can use, so I've decided to start writing about them on a semi-regular basis (I'll try to do weekly but that may not happen) to jog the memory of those of you old enough to remember that startups existed before the web, and to educate those of you that think startups = new web businesses. Some of them will be basic and boring, and some of them you may not have thought of before. I want to start with one that is right in the middle: Measure Something That Isn't Being Measured.
Business strategy is built in large part on probabilistic decision making. No one ever knows with 100% certainty where markets are going or how customers will respond to changes and incentives, so you have to plan using a best guess. The more information you have, the better that guess will be. One way to gain more information is to be able to measure something that wasn't measured before. Don't believe me? Think about this… would you buy a car if gas mileage numbers were not available? You probably would if no car at any dealership displayed gas mileage. But think how much better of a decision you could make once someone figured out how to measure gas mileage and posted that information on all cars.
For companies, better decision making means more money, and if your product can help companies make more money, they will buy it from you.
I happen to know of two local companies that got started this way. The first was a company called Genscape. The two entrepreneurs that founded Genscape are sort of local legends. The company:A good description of the company comes from their press releases.
Genscape's information gathering and distribution system consists of technology to monitor the real-time power output of power plants and load on high-voltage transmission lines. Information reported to customers includes highly accurate estimates of the real-time power output for generating facilities and power flows over strategic transmission paths in the U.S. and Europe and associated information for the U.S. natural gas, coal and emissions markets.
Genscape Inc. is the only company to have commercialized the provision of real-time power supply information to support decision-making for energy traders, power plant and line owners and operators, regulators, and other energy market participants. Genscape maintains a 60 person staff and an international headquarters in Louisville, Kentucky with additional offices in Amsterdam, New York, London and Washington D.C.I've never met the founders, but my understanding is they were both working on MBAs at the University of Louisville when they got this idea to measure power transmission information. They contacted an engineering professor and paid him to design the black box that they needed. Then they began testing it, tweaking it, and eventually selling it to power traders. The traders could make more accurate decisions than before and thus be more profitable.
Did Genscape have a good strategy? Well in 2003 they were featured in Inc. magazine for having revenue growth of over 2000%. I think that is pretty impressive.
The second company is called Two Dimensional Instruments. While this company addresses a much smaller market than Genscape, the principle is the same. 2DI makes temperature monitors that record the temperature electronically at set intervals and allow users to download that data. I know one of the entrepreneurs that founded this company, and he said the idea came from a guy that had propped a freezer open to load some things into it. The temperature had briefly warmed to 37 degrees as a result, and an inspector (food inspector, if I remember correctly) wrote him up for having a freezer too warm. He protested that it was only that temperature for a few minutes, and that this was just bad timing, but he had no way to prove it. So he found some partners and developed a device that would help solve that problem by measuring temperature at regular intervals.
If you are looking for a business idea, I think this is a great place to start. Think about what needs to be measured at your work or in your industry. Ask yourself if measuring such a thing would help you make better decisions, be more productive, and be more profitable. Then develop a tool, a device, or some software that will do so. From there, execute like hell and after a few years of hard work, you've got a very nice business.