HIP Investors which stands for Human Impact + Profit

Now it is true that my daughter Sasha is interning there this summer. But it is also true that the company was written up in Fast Company earlier in the year and the founder is working on a book on their approach to scoring companies based on their contribution to human impact + profit. Normally, investing in companies based on any criteria other than risk and return is a bad idea, however we don’t live in normal times. During the last few years, companies that scored well on human impact + profit also delivered exceptional return to investors – well above the S&P. HIP Investors is still working on its product and not yet accepting investors – still this is one to watch.

Relevant Links
HIP Investor
Fast Company Article – illustrating the HIP portfolio approach applies to oil
What’s Your Green Strategy

Over at Tech Crunch, talking about a company called Kluster which just launched in open beta.

Kluster, … is designed so that companies can offer cash rewards for each phase of a project. Participants who back the winning idea get to share the reward. Projects can range from creating logos and marketing campaigns to designing a product. Participants start off with points, or “Watts,” that they can invest in different projects. Explains Kaufman:

“Our Watt system is like a currency. You get a certain amount of Watts. As you do more things you get more Watts. Instead of voting on ideas, you invest your Watts in concepts you like.

So if a company decided to offer $5,000 for the best new logo to come out of Kluster, some graphically-inclined members might upload a few sketches. Other members could then invest Watts in the design they think is best suited for the company’s product, make suggestions for improvements, or upload their own variation of the logo. Whichever logo gets picked by the company at the end wins the $5,000, which is distributed to all the members who backed that particular logo based on how much they contributed to the idea, how early they got behind it, and what percentage of their total Watts they put at risk. Kluster computes what your stake is in any given project.”

Watts are never directly convertible into dollars, but they do influence how much of a cash reward each member is entitled to. At the end of each phase, all the Watts invested in the losing ideas are redistributed proportionately to the investors in the winning idea. As people collect more Watts, they gain standing in the community and have more to invest in subsequent projects.

What I Think
The problem with these and similar ideas is that the success of the underlying business depends on getting to critical mass. Kluster seems to have spent a great deal of time thinking through how to make their currency appealing to a mass market of creative types and also how to create an ecosystems around its site. It remains to be seen whether Kluster – which is launching at the TED Conference will attract enough followers to create a vibrant community as needed to make wattage take off as a currency. The site itself is very appealing and the founders have obviously spent a lot of time thinking through how to use great design to appeal to “connected creatives” as the target demographic.

Relevant Links

• Tech Crunch
• Behance Magazine article

Launched just before the holidays, Los Angeles-based nvohk aims to create the first community-managed, environmentally conscious, surf-inspired clothing company. It is currently recruiting a minimum of 20,000 members (capped at 40,000), each of whom will contribute USD 50 in exchange for the chance to co-develop the nvohk brand. Members will make major business decisions including logo, web and product design along with advertising; they’ll also receive 35 percent of nvohk’s net profits in the form of points that can be redeemed to purchase products, as well as 25 percent off all nvohk goods. nvohk, meanwhile, will donate another 10 percent of its net profits to environmental organizations selected by its members.
Brendan Lynch, nvohk’s president, explains: “Consumers are concerned with the environment and want to be associated with brands that are too. With nvohk, members have the opportunity to make critical decisions that not only affect the direction of the brand, but also make a positive impact on the world around them.”

nvohk has just started to recruit members, with only 400 or so signed up by early January, so it’s still too early to tell whether it will meet its target number. Assuming it does, however, this will test the power of the crowds on a new level. Joint corporate decision-making by tens of thousands of people should make for an interesting ride; on the other hand, with a common interest in surfing and a shared concern for the environment, they just may have what it takes to make it fly. One to watch!

Relevant Links
As Reported on Springwise, 1.08.08
Project Nvokh

OpenDNS is a great company with a somewhat geeky product that almost everyone can benefit from. DNS servers track user-friendly web names (like www.openmarketing.com) and how they correspond to hard to remember IP addresses (mine here at OpenMarketing is 207.44.169.197. Kind of rolls off your tongue doesn’t it.) Every time you surf the web, a DNS server somewhere is doing a look up to translate the web address you requested into an IP address. If you’re running a home network, it’s likely that your ISP – those nice folks at Comcast or AT&T – gave you a set of IP numbers and told you to enter them into your router, to tell your router where to go to do DNS lookup.

To use OpenDNS, set up an account and (optionally) enter the OpenDNS servers IP addresses into your router:

From within your account, you can set up shortcuts to directly navigate to the various sites you frequent. For example, if you use Google mail for applications, set up a shortcut called “mail” or even “m” and everytime you enter “m” into your browser window you’ll go directly to Google mail. Short cuts are very handy and I’ve become addicted to them.

Equally handy is the ability to block adult sites. I’ve got nothing against this kind of content in theory. In practice, I don’t need or want to fall into a X-rated site by accident nor does anyone else in my family.

How OpenDNS makes money is using what is called the direct navigation method. Shortcuts are great but every once in a while we humans make mistakes. To the extent we enter something in the navigation bar that is not a shortcut up comes a page that looks like this:

This page and all the links on it are controlled – and presumably monetized by OpenDNS.

What Makes this an example of Open Marketing?
Aside from the name, OpenDNS is based on open-source technology and as such can’t charge a licensing fee for its software or for its core service it offers customers. What makes this an interesting example of OpenMarketing–in my view–is that this hasn’t stopped the company from monetizing what it has. My best guess is that the company is profitable. Certainly, the company is growing at a torrid rate.

Relevant Links

• OpenDNS
• Comments on OpenDNS
• Almost everything you always wanted to know about Direct Navigation Business 2.0 Magazine cover story dated 5.22.07

On the one hand, its delightful to see AT&T touting itself as “Open”. That gives us three ostensibly open-mobile networks here in the US … in the form of Verizon, AT&T, and T-Mobile. AT&T has always been open as has T-Mobile – in the sense that their GSM technology allowed you to purchase unlocked devices to run on their networks. Contrast this with Sprint and Verizon each of which supports a slightly different flavor of CMDA. Sprint does not allow foreign devices … although it is considerably more liberal when it comes to foreign applications like Mobio’s. Verizon has always run one of the most closed networks, where both foreign devices and applications are barred from its networks. So its great to see Verizon joining the Open bandwagon with a commitment to open up its network by the end of 2008. T But the end of 2008 is a long time away and a lot can happen in a year. So while we applaud Verizon’s for saying they’re “Open,” we want to see them put their money where their mouth is … that is put capital behind making their network open.

Not to be outdone, AT&T followed with an “open announcement” of its own. This is clearly a marketing announcement only and one that does not rock the mobile world here in the US. GSM-based mobile phone companies – we have two in the US … AT&T and T-Mobile … start out far more Open than those based on CDMA. The technology allows you to take any unlocked phone and run it on any GSM-based network in the world. And AT&T has always allowed both “foreign” (not purchased through AT&T) devices and foreign applications on its network. T-Mobile is not quite as liberal on the application side so the AT&T announcement will – no doubt – put pressure on executives there to open up their network to downloadable mobile applications other than those available through its TZone program. Largely the issue with T-Mobile is that they don’t have their own data network but lease capacity from others, which means that they have kind of a love:hate relationship with all-you-can-eat mobile data plans. Love ‘em – but only so long as I can ensure the consumer is buying a lot of value-added applications from T-Mobile. Hate ‘em otherwise … because there’s a chance we might be losing money on ‘em. If you get my drift.

Both AT&T and Verizon are getting in on “Open Chic” in response to Google’s announcement of the Open Handset Alliance aka “Android”. This is a move to create a phone operating system based on Linux that will work across networks and will allow customers to create their own mobile widgets and applications and contribute them to the phone ecosystem. However this shakes out, one thing is clear. Mobile phone companies like to sell applications that Google, Mobio, and others in the mobile ecosystem would like to give away for free in exchange for advertising support. And consumers are getting fed up with paying through the nose for mobile phone service in the US that is far inferior to that seen in the rest of the world. The situation is likely to get worse before it gets better. Why? Because Census data shows that the cost of telephony service – which used to amount for 7% of household income – is now pushing into double digits.

Relevant Links

• ‘Open’ is the New Green
• Mob Happy’s analysis of Verizon Open Announcement
• AT&T flings cellphone network wide open
• Analysis of Google’s Open Handset Alliance announcement aka Android on Gizmoda

Henry Chesbrough, a strong proponent of “open innovation,” is touting a new concept: open business models. In his current book, “Open Business Models: How to Thrive in the New Innovation Landscape,” Chesbrough cites case studies from IBM and Procter & Gamble that illustrate how major corporations can successfully remake closed business models into more open ones that rely on outside networks and crowdsourcing. One way to open up involves capitalizing on R&D efforts that fall outside a company’s core business, a strategy Chesbrough dubs “inside-out”: “There are usually lots of products within most large companies that are stuck, bottled up, or on the shelf. Some of those ideas can become more viable if licensed or sold to an outside company. Another tactic for companies who want to try new, open business models is to create experimental or spinoff brands that, if they fail, won’t damage the main brand. For instance, Google has a separate Web page, mashedup.com, where it can try things out under another name and see how customers react. What they want is indicators of success in a lower-volume environment before going big and without doing any damage to the brand.”

Source
Business Week 28 Nov 2006

To attract more users to its Firefox browser, Mozilla’s business development team turned to Stanford University. Not the business school, but the Hasso Plattner Institute of Design. A B-school class would have focused on market size and used financial analysis to understand it. This D-school class used “design thinking” instead. They began with consumers and used ethnography, the latest management tool, to learn about them. The power of this new approach to promote innovation and open up business opportunities is attracting the attention of leading corporations. Design has evolved from a narrow discipline dealing with the form and function of products into a major new approach to developing business models. As BusinessWeek recently put it, “If engineering, control and technology were once the central tenets of business culture, then anthropology, creativity and an obsession with consumers’ unmet needs will inform the future.” The best design schools and programs are multidisciplinary. They combine engineering, business, design, and social sciences. They team-teach using groups of professors and outside professionals. And the students are organized in groups to operate as teams. D-school grads often have both extraordinary depth in a field and the breadth of knowledge to apply it. Having all those parts embedded in one person’s brain can put you over the top in terms of the ability to innovate.

BusinessWeek 1 Oct 2006