September 2023

In 1985 Roy Wilkens was serving as president of Williams Pipe Line, a division of The Williams Companies in Tulsa, Oklahoma. An electrical engineer by training, Wilkens had risen through the ranks in the energy industry and now was leading one of the country’s largest petroleum products pipelines. Little did he know that he was about to jumpstart an entirely different industry.

From a regulatory perspective, the Department of Justice had just ordered the break-up of AT&T, leading to the emergence of dozens of new long distance competitors. From a technology perspective, fiber optics was emerging as a viable means of transporting telecommunications signals with high reliability and low cost over long distances. Roy and his team recognized the opportunity to build and operate a new kind of pipeline — one carrying bits rather than BTUs.

Many of the new long distance competitors were ambitious entrepreneurs who saw the opportunity to sell long distance voice services to homes and businesses. Each of these startups raised enough capital to buy a long distance telephone switch and then connected that switch to all the Bell operating companies that had been broken out of AT&T. The closer they could connect into the Bell networks to where a call was originating and completing, the lower their cost. The scary situation for these startups was that the only company that could sell them the circuits to make all of those connections was AT&T, the very company they were competing against. 

One of those entrepreneurs was Clark McLeod. He started Teleconnect by taking out a second mortgage on his home and raising money from friends and family. McLeod had been in talks with six other entrepreneurs, each of whom had raised enough funding to build a regional fiber network, but none of whom could afford to build a nationwide network. Although competing with each other for long distance customers, the seven carriers decided to band together to solve the longhaul interconnectivity problem. They formed the National Telecommunications Network (NTN). Rather than build its own fiber network, Teleconnect contracted with Williams to build a “midwest cross” from Minneapolis to Kansas City and Omaha to Chicago and connect it into the NTN network. 

The partnership was a huge success. The companies interconnected their networks and figured out the operational details for provisioning a circuit across multiple networks. NTN’s president, Martin McDermott in Washington made sure everything operated smoothly and directed the lobbying efforts to protect the rights of the emerging competitive communications carrier industry. Each company immediately had the combined reach of its brethren, cutting their costs and improving the quality of their calls. Williams remained a carrier’s-carrier, not competing for retail long distance customers but selling circuits to all the other long distance carriers and some very large business customers. 

Through the combined efforts of all, long distance prices continued to come down and the market grew. Eventually long distance calls became so inexpensive that they were bundled into unlimited cellphone and broadband offers. Without the collaborative efforts of the NTN members, it’s impossible to know what would’ve happened, but if AT&T had successfully crushed the nascent industry it’s likely we would not have seen the innovation and falling prices that we have all enjoyed.

Read the full article here.

There’s No Such Things as Business Ethics was written both at the peak of John Maxwell’s popularity and in response to a number of high profile corporate ethical failures (Enron, MCI WorldCom, Tyco, Adelphia, etc.). I only recently picked the book up when I had sold a box-load of books at the local Half Price Books and scanned the shelves for an interesting title I could buy with my paltry earnings. The book is 134 pages, but the pages are small and the type is large. Each of the 8 chapters can be read in 10–15 minutes, so the entire book could be consumed in a couple of hours.

If you want to know the key takeaway from the book, it’s quite simple: The Golden Rule (“So whatever you wish that others would do to you, do also to them, for this is the Law and the Prophets.” Matthew 7:12) is the only guideline necessary for business ethics.

It doesn’t take 134 pages to make that point. What makes the book worth reading is the 7 chapters plus conclusion that follow that observation. Each provides practical guidance for how to consistently put the Golden Rule into practice in your life and your work. Each chapter introduces it’s topic, uses a list of things we need to understand or practice, heavily relies on quotes from well known leaders throughout history, and uses helpful examples to show what good and bad behavior looks like.

Click here to read the full review.

Last week I wrote that sometimes an early stage startup simply doesn’t have what it takes to single-handedly create a new category. The first example I recall of watching that happen first-hand was at the birth of what we now know as the Internet.

Towards the end of the 1980s and beginning of the 1990s (even before the Web was invented) more and more companies were looking for ways to leverage the global connectivity that the Internet provided. It was becoming apparent that some commercial form of the network would emerge. IBM and MCI were anxious to monetize the investment they’d made in building and operating the NSFnet backbone. Both companies thought the current model of telecommunications worked just fine. They wanted to build a commercial Internet modeled on the status quo with toll gates and usage-based billing.

At the same time entrepreneurs were developing a very different vision for a commercial Internet. UUNET and PSInet recognized that the world was changing. Packet switching was riding Moore’s Law to drive the cost of connectivity towards zero and new applications were emerging that would drive network utilization exponentially higher. Metering the Internet would limit both usage and innovation. Their vision for the commercial Internet was not just better, it was different. It was a new category, not just a new service in the old category.

But how could these early stage startups hope to challenge the status quo, change the thinking at government bureaucracies like the NSF, and take on corporate giants like IBM and MCI? By themselves, they didn’t stand a chance.

Click the link below to read my story of how they formed a coalition to challenge the status quo. I believe that the Internet would be very different today if those early stage startups hadn’t joined together to establish the Commercial Internet category. I am thankful that otherwise fierce rivals were willing to come together to establish the better and different vision that they shared.

Read the full story here.

Creating a new category is a long, hard, and expensive process. In the best cases, customers quickly see the value in the new category, change their ways, and adopt the new way of doing things. Even these seeming overnight success are the results of years of innovation and foundation building. They take time and a lot of money.

However, when the target customers are risk averse and the category creators are early stage startups, an innovator may simply not have what it takes to establish the category on their own. 

For example, IT decision makers at large corporations are, almost by definition, risk averse. A big part of their job is to make sure that the company’s information infrastructure is always available. They are always busy behind the scenes keeping everything running well. No one notices when IT does their job well and everything runs as expected, but as soon as something fails, everyone starts pointing fingers at IT. Therefore, IT leaders often live by the mantra “if it ain’t broke, don’t fix it.” They are reticent to make changes, especially when those innovations come from unproven new vendors. By sticking with the long established industry “best practices”, even if something does go wrong, the IT leaders can claim that they did everything “right.”

So, what does it take to change their minds? Category makers need to develop a compelling story that explains why the long established industry standards no longer work or will soon cause major problems. They need to educate IT buyers on how their technology overcomes these challenges, and they need to convince those buyers that implementing their new solution is actually the lowest risk option for buyers. They then need to tell that story over and over again through multiple platforms with a high level of consistency so that it starts to sink in and eventually become ingrained in how potential buyers think about the future.

But early stage startups lack the three things most critical to creating credibility and trust with potential customers. First, they haven’t established their brand. Customers have never heard of them. They have no reputation and there’s no reason for customers to take a chance on them. Second, early stage startups often offer a relatively small part of the total solution. IT decision makers will need to combine the startup’s part with parts from other vendors to have a complete solution to replace the status quo. That increases both the effort and the risk for the IT leaders and often simply isn’t worth it. Third, telling the story loudly, persistently, and consistently will typically require a level of investment well beyond the resources of an early stage startup.

A powerful move to overcome these challenges is for startups to pull together into a coalition to clearly establish the viability and value of the new category in the minds of IT decision makers. Together these startups should develop one consistent compelling story that each can each tell over and over again to awaken potential buyers to the risks they are already taking and to position the new category as a great solution. Their combined voices create greater credibility and their combined spending creates greater reach. The unique capabilities each startup brings to the table adds to the overall value of the category, providing a more complete solution for the customer.

Click the link below to read my full article on what this looks like in practice.

Let me know if you need any help on your category making journey, whether that be on your own or as part of a coalition.

https://clearpurpose.media/when-it-takes-collaboration-to-create-a-category-94939a81f72?sk=9826c23394d236b1a7968b39df1171ed