A Fundamental Paradigm Shift


Yep, I know I’ve used one of the worst business clichés as the title of the blog – but just this once, it’s true.

On February 4th the Economist published an article entitled ‘A Fistful of Dollars.’ It referred to quite a lot of dollars – specifically a hundred billion of them – that was the value placed on Facebook for its IPO.

Here was a business started a mere eight years ago – almost as a joke – and run by a “cocky 27 year old,” that investors now rated as being more valuable than Boeing, the world’s largest manufacturer of aircraft. As the Economist asked, “Are they nuts?”

Let’s leave discussion of that to one side for a minute. Now consider this: if you don’t use Dropbox, or haven’t even heard of it, go here and have a look. Seriously: it is an invaluable tool. Now let me give you a few fundamental facts about Dropbox:

• It was started in 2007 by two graduates of MIT
• According to Wikipedia, it has received $7.2m in funding
• It’s now valued at anywhere between $1bn and $10bn
• As of October 2011, Dropbox has 50 million users
• It costs almost nothing to use – in fact 96% of Dropbox users don’t pay at all
• But most importantly, once you’ve used Dropbox, you simply cannot imagine life without it.

Now, for me, comes the really stunning statistic. Dropbox employs around 100 people. As a tweet from Drew Houston, one of the co-founders, recently put it: “We are a 100 person company and we serve 50m people. That kind of leverage has never existed before.”

Damn right. Facebook has over 2,000 employees and what? 800 million people with profiles? “A fundamental paradigm shift” is a much-overused business cliché, but if the staff to customers ratio of companies like Facebook and Dropbox isn’t one, I don’t know what is.

So Facebook has gone from a Harvard bedroom to $100bn in eight years. Where will we be in another eight years? I wouldn’t be surprised if it owned the American movie industry. I wouldn’t be surprised if it didn’t exist. But something will exist allowing people to connect, just as something will exist allowing you to share files with friends and colleagues and store them remotely. And whatever does exist, it will have a staff/customer ratio pretty similar to the ones I’ve quoted.

The world is changing, shrinking and at last, becoming truly global. Customers are starting to ask themselves questions that are unsettling for those of us running a business in North Yorkshire.
Why should I bother with an employment agency when I can go on Odesk or Elance and get a freelance contractor for a fraction of the cost of someone from the UK?

Why use a Yorkshire web designer when there are infinitely cheaper ones in Eastern Europe, India and the Philippines?

Your business is going to face competitors you never imagined – and technology is changing so much that these competitors will be able to do things that even a couple of years ago were impossible. So please don’t think you’re secure, because you’re not. Don’t think, “It can’t happen to me” because it can. As the Greeks pointed out, hubris is quickly – and inevitably – followed by nemesis.

Want an example? I’m delighted with the progress of The Alternative Board in York. Absolutely delighted. I have some outstanding clients; I love dealing with them; the future is bright. And what do I receive as I’m finishing my breakfast at Venturefest on Wednesday? An e-mail from a friend. Have you seen this, Ed? A new coaching/mentoring company that says they’re planning to open in York.

Did it give me indigestion? No. But if you saw me on Wednesday I hope you noticed a bit of extra determination. And not a trace of hubris…

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10 comments

  1. Joni Gammage · February 9, 2012

    Really fascinating thoughts, Ed, as ever and I couldn’t possibly disagree 😉 We’ve had a really exciting year in Cambridge and I am desperately trying to get my head round social media (and couldn’t do without Dropbox) but one of the most important things I’ve re-learnt this year is that face to face contacts continue to be so important and valuable to SMEs – it’s the way they do business. So, no, of course you cannot ignore the online revolution and the impact it has on business but, it still does not take away the value of seeing the whites of the eyes of people we deal with, be they customers, employees, suppliers or business partners.

    • edreidyork · February 10, 2012

      Hi Joni – I’m in 100% agreement with you. However progressed social media becomes, it will never replace face-to-face.

  2. Louise · February 10, 2012

    Great blog Ed. I use Dropbox for everything. I can’t believe only 100 employees! Food for thought.

    • edreidyork · February 10, 2012

      Thanks Louise – another DropBox convert! Great to see you the other day

  3. Steven Partridge · February 10, 2012

    Interesting as usual, Ed.

    Without being in any way complacent, we do (hopefully) have the advantage of knowing our local communities and what is likely to work (and what isn’t). we need to make the most of that.

    • edreidyork · February 10, 2012

      You’re right Steven; it’s one of the joys of working “locally” isn’t it – as long as you do a good job for people and your reputation remains strong, local work is absolutely not to be over-looked

  4. Andy Gambles (@andygambles) · February 10, 2012

    The comments about Face to Face meetings are very interesting.

    There is a significant cost to meeting customers face to face. When you look at products like Dropbox do you imagine they meet customers face to face?

    The internet is allowing the development of many efficient low cost solutions for businesses. Such as online account for £15 a month or email and CRM systems for as little as £4 per month.

    The profit does not exist in these products to meet face to face to discuss them. Unless of course you charge the customer for the meeting (shock horror!).

    Social media means you can have a one to one that is actually stored for posterity as a one 2 many.

    Now if I was buying a new house I would of course prefer a one 2 one!

    • edreidyork · February 10, 2012

      Andy – can’t believe it’s taken you this long to reply on this theme!! The differentiating factor for me is the product/service you offer your customers which should determine whether face-to-face is appropriate. Interesting thought that social media comms are stored for posterity.

      • Andy Gambles (@andygambles) · February 10, 2012

        Sorry Ed my cape got in the way of the keyboard.

        Example of posterity – I continue to make sales based on a forum post I made 7 years ago which answered one individuals question.

      • edreidyork · February 10, 2012

        V good re the cape! Terrific example on posterity – get it!

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