Social networking sites are everywhere these days, from myspace and facebook to twitter and linkedin. What I find interesting is the unique culture beheld by each, even with a largely identical user community.

Even more interesting is how the social networking concept has permeated into mainstream media and business applications. Major news outlets have revamped their websites to allow self-registered users the ability to comment and share thoughts about specific news topics. Businesses have created blogs and facebook pages encouraging clients and prospects to provide feedback on products and services.

It’s the latter of these two that, if executed properly, can create a living and breathing business model that’s highly adaptable to the customer’s needs. Imagine a business application user community that is encouraged to provide feedback on how the application can better be shaped AND the business responds with seamless upgrades to the application across its entire base. Enter agile development.

That’s what we’re up to here at Envysion. Our convergence of SaaS and video surveillance has broken the mold of the point-in-time purchase model and end-of-life asset concern. We’ve taken enterprise-class software off the clients network and put it in the cloud so they can focus on their business and not worry about straining IT resources. Our application is ever-developing as we react and shape our unique video solution to our valued customers.

Feedback encouraged.

I’m tired of the term ”bailout”.  While the origins of the term are varied, in 2009 it has become synonymous in the U.S. with a government-led cash infusion into troubled businesses.  We could debate whether the recent government actions should have occurred.  That notwithstanding, I have grown weary of hearing about them.

So you would understand my dismay at seeing the following headline:  Google Employees Get A Bailout.

I had to read this.  Thankfully it wasn’t what I thought.  With the market slide, many of Google’s employee stock options have become “underwater”.  This means that the strike price of the option to purchase Google stock is below the current market price.  The options are worthless unless the stock price improves.  So the company has offered employees another “option”, to trade-in their current options for others that have a strike price equal to the current market price of Google stock.

The conversion is not free to the employees, as they must agree to a new vesting schedule.  But it is refreshing to see a “bailout” without governmental involvement.  Well, until the tax bill comes…

The topic of the infamous car crash was touched on in a meeting today.  To my surprise, someone on our team was not aware of its existence.  So here’s the link to YouTube.

I was not at Envysion when this occurred (Nov. 2006), but this must have been an interesting way to break up the day.  Kind of gives new meaning to the phrase, “yea, I’m at a stopping point.”

As an aside, my understanding is that the driver was not injured, but rather startled by the experience.

I’m feeling good about 2009.  Does this mean that I’m predicting a broad and dramatic economic upturn?  No.  But there is so much opportunity still present for MVaaS companies, and other industries, if they just look.

A useful list of the top 11 benefits of a recession was compiled at SandHill.com.  I believe these types of reminders are important, especially when confronted with the constant drumbeat of negative economic indicators.  I actually read a recent headline purporting that gold was at a two week low.  This is certainly a “glass half empty” headline, which fails to highlight the potentially positive underlying causes noted in the article (e.g., strengthening dollar in response to the Obama stimulus plan, and lessened concerns about inflation).

Envysion Chairman and Zayo CEO Dan Caruso, in a series of posts (I, II, III, IV), retells an interesting story from his early days at MFS.  Jim Crowe, then CEO of MFS, introduces the “internet” to his senior executive team.  Dan describes the event as career-altering.  Think about when this meeting occurred – only13 years ago!  Mr. Crowe was right, so many things have changed.

I also have a “career-altering” story to tell.  While an analyst at one of the “Big 3″ automakers, I was getting a tour of one of the development facilities.  The building was decidedly non-descript, brick and mortar, few windows.  But behind the well-guarded walls the company was developing the prototype vehicles that would form the basis for style and design at the company for years to come.

The workers at the location were specialists, and included engineers and hourly workers.  As was explained to me, these were the ”best of the best”, especially with regards to the UAW workers.  I recall my guide referring to them as ”skilled tradesmen”, since they had acquired specialized knowledge in operating certain machine tools.

While happening through a work area, I was initially impressed by the relative lack of ambiance.  It was the mid-nineties, and I guess I was expecting a little more “space-age”.  Instead it was much more pedestrian, with the feel of an elementary-school cafeteria.

The activity level was also low.  It was mid-morning on a standard work-day.  The lead over the competition this company had enjoyed evaporated long ago.  I expected to see feverishly-paced activity to regain the advantage.

I asked, ”Where is everyone?”

“They are sitting around the corner,”  said my guide. 

“Must be their coffee break, I guess.” 

“Nope.”

We turned the corner and there they were, at a table next to their locker spaces.  Five or so guys, playing cards.  How could this happen?  It was explained to me that part of the negotiated union contract included quotas for each of these workers.  When they filled there quota, they were done.  And since the quotas were remarkably low, they often had ample free time to kill.

To add insult to injury, this site utilized “contract” workers to help control costs by enabling a more flexible workforce.  However, the union contract stipulated that if the facility used contract workers, the union workforce had to be guarenteed OT.  So they guys had low quotas and OT.  Good work if you can get it.

This was the moment that I knew that my career in the auto-industry would be short-lived.  I sometimes look back at what might have been, and it is this moment that I credit with providing clarity.

Not sure if you get Security Systems News, but one of yesterday’s headlines grabbed my attention.  The article described the death of a leading technology innovator, Steelbox.  To summarize the already short article, Steelbox had an amazing technology solution (see their website – they have some cool overviews and the obligatory technology awards – even a recent Frost & Sullivan product innovation award) but had no market so ran out of cash, were forced to let all employees go, cease operations and had their intellectual property seized by their lendors.

I know both their bank and their equity investors so I can definitely imagine how hard it was for them to come to this conclusion and take these drastic steps.  So what’s the lesson here?  I am not close enough to Steelbox to armchair quarterback their specific situation.  Let me just generalize from it a bit.  A key measure of a company’s success is whether there are enough customers willing to buy the service at a price that makes the company’s investment worthwhile (says Captain Obvious).  If you have a tremendous product technology that is absolutely unique, incredibly differentiated, and drives tremendous value to a target market of 10 companies, then you had better hope that you can charge them a fortune and that those industries are doing well so your customers don’t go out of business.

The article reminded me of the last ASIS show I attended where I think Steelbox had a rather large booth and a lot of cool marketing material.   There were probably a hundred other companies there also showing off the latest technologies around facial recognition, object detection, megapixel cameras etc.  Many of them had very clear value propositions and I could understand their markets.  Others were less clear to me.  Cool technology for certain, but I couldn’t get my head around who would actually use it.

Innovators in the video market will be successful if they innovate in ways that are valuable to a meaningful market.  If you try to go too narrowly down the needs of a specific market or a specific user group, you had better be confident that it is a big enough market.  If you are looking at the emerging technologies in the video world right now (as customer or investor) and are overwhelmed with all the PR and marketing hype around the latest and greatest, just make sure you see some customer wins in addition all of the technology awards.

Image via Wikipedia

While perusing my blog reader, I noticed an interesting headline on A VC, Bustup Not Bailout.

Certain that the post was related to the current issues facing GM and Ford,  I read on.  I worked briefly at one of the large U.S. automotive companies, so the topic is of particular interest to me.  Also, as the title suggests, there are options to a pure bailout, and they should be considered.  If we, the taxpayers, choose to allow our government to subsidize a failing business or industry, shouldn’t the monies come with significant conditions?   

Most striking to the post was the quote “too big to fail means too big to exist”.  Although it’s origin is unknown to me, it was at least uttered recently by Sen. Bernie Sanders of Vermont.

Image via Wikipedia

The current economic environment is tough.  This fact is not lost on most people.  It has certainly been on the minds of many, and it undoubtedly loomed large in the November 4th election. 

This environment also provides investors with a unique opportunity.  The U.S. economy has had several recessions since 1945.  But these periods have all been two years or less.  Overall, the U.S. economy has been in recession for roughly 14% of these 63 years.  This means that even our oldest investors have very little experience at this.  Even an 83 year-old has had only 9 years in this type of environment.

Determining which companies will suffer and which ones will thrive, both now and when the economy turns upward, is the problem they are attempting to solve.  Add to this, the proliferation of new industries that have not faced a down economy, and the “math” becomes even more challenging.

Many of the outcomes will seem so obvious with hindsight.  “They had a differentiated product or service, a demonstrable and proven ROI for their customers, and a large and growing market.  Of course they succeeded!”

When it comes to software, best of breed is a great goal, but usually carries a high price tag that is very difficult to estimate; so unknown that often it’s not done.  Or so expensive that sometimes building capabilities into existing applications is less expensive than performing an integration in the first place.  Right now in the video industry, these are perhaps true more often than not.

I predict that in about 5 years this will change for most of the software and hardware for video and audio surveillance.  The standards will enable growth in the network video industry because products will bring more value.  This value will come from being will be better able to meet customers needs and doing so at a lower cost.

From surveying the activity around ONVIF, SIA and PSIA the first standards will likely do the following things:

1. Enable video streaming from any video source (ie: camera or video recorder)

2. Device discovery to speed installation

3.Method to transmit and receive “meta” data, such as dry contact alerts, video analytics information

4. Security between network video devices

Oh, it won’t take 5 years to make these standards.  But it will take years before there is enough “rough consensus” between vendors in the market that customers will be able to buy equipment and expect it to actually work together when it’s plugged in.

I believe the most important of the above is #3. I’ll explain why in a later post…

It’s actually possible to do almost all the above today using existing standards, it’s just that most vendors do not sell equipment or software that do the above.   Most integrations existing today are custom tailored software.

The recent economic turmoil has been a popular topic of discussion the past month.  I’m personally impressed at the incredibly high level of volatility of the world stock markets.  As investors react to new information, the U.S. market has taken some wild swings.  Down 7, up 5, down 6, down 8, up 11 (as measured by the S&P 500 Index).  This is the type of volatility usually reserved for emerging markets.

What explains this volatility?  Is it simply that investors are more uncertain than is customary as to the direction of the world’s economies?  Or does this reflect growing distrust (and counter support) of the fundamentals of western-style capitalism?

If you “know” the answers, this volatility provides an excellent opportunity. 

Dan Caruso has several posts on this topic of Contrarian Investing in bearonbusiness (Investor Riddle and Contrarian Investing).  It would be worthwhile to read them as you ponder your next move. 

Of note, when many of us were selling, Warren Buffett was buying, both through Berkshire Hathaway and his own personal holdings.  As Mr. Buffett writes in his op-ed to the New York Times:

“A simple rule dictates my buying:  Be fearful when others are greedy, and be greedy when others are fearful.”