The Age of Enlightenment

How Today’s Changes Require a New Path to Success

By

Brad Smith

©Bradley Eric Smith | The Age of Enlightenment 1

About the Author

Brad Smith is an entrepreneur and consultant from Southern California. He

is the founder of Realskape, Inc., a digital marketing consultancy and

entrepreneurial investment company. He has consulted for a variety of

companies across industries including software, media, travel, and

commercial real estate. He focuses primarily on exploiting growth through

disruptive technologies and aligning businesses strategies to take

advantage of these profitable opportunity gaps. Brad is also co-founder

and President of MySoccerImage.com, a college soccer recruiting resource. Brad blogs regularly

at BradleyEricSmith.com.

©Bradley Eric Smith | The Age of Enlightenment 2

Prologue

During the 18th Century, a philosophic movement swept Western Europe and made its

way to the American Colonies, eventually inspiring the American Revolution. This

influential period became known as the Age of Reason, or Enlightenment, because of its

roots in the conviction that reason was the key to prosperity and validity.

This collection of ideologies was at times contradictory or divergent. However that’s

also the reason of its success. The Enlightenment wasn’t about a final destination, but

the journey. It wasn’t about success or failure, but rather the evolution of ideas, the

creation of sound principles and a roadmap for a better way of life. The very essence

was the conviction of rational, critical or scientific thinking and the questioning of

traditional institutions, customs and principles.

In 1794, Immanuel Kant published his influential essay Answering the Question: What Is

Enlightenment? in which he summarized that the Enlightenment’s existence was,

"Mankind's final coming of age, the emancipation of the human consciousness from an

immature state of ignorance and error” – or essentially, the “freedom to use one's own

intelligence”.

The Key

Due to recent catastrophic business changes and global evolution, we must change our

way of thinking about success and adopt a new prescription for future business

prosperity. The chief tenet of this essay is the solution.

The key to future business prosperity is by developing a broader, unique skill-set,

possessing a native understanding of technology and a fluent grasp of the disruption

and opportunity it yields.

Global macroeconomic shifts and the proliferation of evolving internet technology have

changed the way business will be organized and conducted. In the future, leaders will

need to develop into entrepreneurial generalists to possess the necessary skills to

mitigate creative disruption and capitalize on the unique opportunities presented.

In this sense, an entrepreneurial generalist is the charismatic, influential and

revolutionary leaders who bring change and push boundaries. This individual is the

visionary that steers the ship’s strategy, acts as the catalyst to motivate those around

them, and above all else – gets things done.

©Bradley Eric Smith | The Age of Enlightenment 3

The future business leader will have to be more entrepreneurial. They’ll focus on

projects, production, equity, continuous learning and experimentation. They will have

to embrace career management as a discipline, unafraid to temporarily stumble or

change route. Visionary insight will come from innovative thinking, which is derived

from a unique combination of skills from different vocations or experiences.

The ripple effects of rapid technological innovation have brought about mass disruption

of old incumbents. Future business leaders will have to search and exploit this

technological change to find the massive opportunistic gaps presented as the greatest

sources for innovation and growth. The prosperity for every business (or person) is

through innovation. And the greatest source of innovation or growth in our lifetime has

come from technology. So this “entrepreneurial generalist” must fluently understand

the problems associated with technological disruption, and look to the opportunistic

gaps it creates for innovation and value.

©Bradley Eric Smith | The Age of Enlightenment 4

Act I: The Problem: The New Normal

There are two problems actually. The first problem is that the world around us has

changed and evolved, leading to huge shifts in our lives. The second problem is that

people don’t want to acknowledge or embrace it. Everything was fine the way it was<

Why rock the boat?

The reason we need to embrace these changes is because they’re here to stay. Global

competition has increased dramatically due to the interconnectedness of internet

technology, or a flattening of the world. While the United States will remain the sole

super power in politics, finance, commerce, and technology, these other nations will

experience much more growth over the course of our lifetime and will rise to become

major regional powers in their own right. The U.S. (and thus the world) has long

depended on systemization and standardization through the industrial revolution to

predict what will happen in the future. This is the root theory of modern

macroeconomic thought. However they’ve forgotten one crucial point: historical

evidence is irrelevant when you’re dealing with habitually irrational variables: humans.

And the chief economic driver in this scenario, technological innovation, has the nasty

habit of creating disruptions where you least expect it.

Increased Competition & The Rise of Everyone Else

While the United States is still the global leader, there is also a rising tide of the other

counties who are experiencing unprecedented growth. Lead by the BRIC countries,

emerging economies leveling the playing field. Fareed Zakaria’s thesis in The Post

American World is one where the United States will remain the global leader but other

emerging nations will also rise to prominence. There will be one superpower, but there

will also be major regional powers developing.

This concept is also discussed at length in The World is Flat by Thomas Friedman. This

time, led by technology, people from all over the world can communicate, create, and

provide value anywhere at any time.

The Education Bubble

Recently, an article in the Economist entitled Think Twice, author Philip Delves

Broughton suggests most don’t bother. Due to the obscene cost of most programs, and

the opportunity cost missed during 2-3 years, most MBA graduates probably won’t be

able to recoup their investment. In the face of increasing demand and competition (both

©Bradley Eric Smith | The Age of Enlightenment 5

domestic and from overseas), annual tuitions have skyrocketed. The United States has

always excelled in leading higher education, but what the traditional MBA is a broken

model. The Master’s in Business of Administration is a relatively modern creation,

Beginning at Tuck Business School (Dartmouth) in 1900, the MBA degree was created

during the Industrial era to teach applied scientific testing to management theories. So

for roughly 111 years, the MBA degree has stayed relatively unchanged. Despite two

World Wars, a depression, and lately a recession-depression, the main MBA program at

most colleges is two full years during days, nights and weekends during your late 20s

and early 30s. While the real world has had to change and evolve, the traditional MBA

has become obsolete. Due to the tremendous initial investment, and opportunity cost

(lost wages), many business people are unable to make up for this shortfall. The

problem is that Business school isn’t like Medical school or Law school where you’re

almost guaranteed to be fast tracked to wealth if you stick to a chosen path.

As the internet continues to proliferate daily life, and as the quality of online programs

increase, they will become a staple in American’s pursuit of education. An important

barometer is the adoption of top universities. This is already taking place, as several top

universities including Carnegie Mellon, Thunderbird in America, Warwick or IE in

Europe are embracing online programs to supplement their traditional programs.

Venture capitalist, hedge fund manager and PayPal co-founder Peter Thiel believes a

bubble (or a gross over-valuation) has moved into higher education. He believes that

the cost of attending schools has become astronomical – putting kids in the precarious

position of loading up with student debt that George W. Bush declared in 2005 as

immune from personal bankruptcy. But further he believes that the idea of pinning

your hopes and dreams on getting in to school is an unhealthy, exclusionary process

that leads to entitlement. Thiel believes the fundamental problem of pinning all your

hopes and dreams on college

According to a recent Techcrunch interview, Thiel is putting his money where his

mouth is. He and Luke Nosek, Founders Fund managing partner, have organized a “20

Under 20″, where they select the top twenty students and pay them $100,000 over two

years to leave school and start a company. So far they’ve received over 400 applicants.

The biggest detractors, he says, are the “The people who are the most critical of this

program are the ones who are most complacent with where the country is right now”.

©Bradley Eric Smith | The Age of Enlightenment 6

Shifting Tides – the Failure of Macroeconomic Theories

Over the past few decades, work was systemized and compartmentalized in order to

produce the most work at the greatest rate. Beginning first in the factory, this process

quickly spread to the offices in order to “stamp out disparities” and “improve

efficiency”. Quality control programs like Six Sigma gained fame as they helped

measure and eliminate errors. Goods (and services) were churned out as quickly and

inexpensively as possible. Multinationals were constructed like manufacturing plants

into a giant, transatlantic bee hive.

This systematic and scientific approach to business theories is a positive thing. However

the problem is that with success, people began believing in causation and preaching its

gospel. If you can get production and distribution down to a science, then why can’t

you use the same techniques in a white-collar office? And if that works, why can’t you

predict stock performance of these companies? And if we can do all of this, then surely

we must be able to predict what the stupid consumer wants?

The focus during this time was aimed chiefly at predictive research and macro-trends of

consumers based on historical evidence. The problem is that econometrics and

statistical modeling of consumers is inherently flawed. People, by their very nature, are

incredibly irrational creatures that make decisions on a whim and don’t always choose

what it’s in their best interest. Don’t buy it? Then why do people still smoke?

Elaborate graphs, charts and statistical models produced by MBAs and Quant Geeks are

a red herring. While helpful, it’s inane to believe you can accurately predict how

consumers will behave – especially when it’s almost always based on historical

evidence.

The greatest investor in the world, Warren Buffet, is a product of this old system. His

investment philosophy focuses primarily on intrinsic value – which is simply his own

definition for what a company’s underlying value should be worth. One of the greatest

elements of defining intrinsic value is looking for moats – or defensible, sustainable

competitive advantages. His latest large investment recently was in railroads, which

isn’t exactly a sexy business. It is however a defensible position that can’t be upset by

new upstarts or existing substitutes. It’s telling then that when asked why he has shied

away from tech-investment, he remarked that he doesn’t want to invest in a company

that two kids in a garage could break.

©Bradley Eric Smith | The Age of Enlightenment 7

The introduction of personal computing and access to global high-speed internet access

has helped change macroeconomic theories, and brought about with it the interesting

and devastating concept of Creative Disruption.

Creative Disruption – The Effects of Constant Change on Companies & Individuals

Creative disruption, and the core principle behind business/industry cycles, has never

been more apparent than today. Despite the financial upheaval in the last few years, it’s

clearly evident that classic macro-economic models and traditional business practices

are coming undone. The theories popularized by the “dull science” for the past 50 years

have proved largely flawed. One of the chief engines behind this disruption is

technology: software, hardware, personal computing, broadband connection, Wi-Fi,

social networking, etc., etc. Technology has also sped up the pace of business and

industry cycles at an amazing clip. Today’s David can be tomorrow’s Goliath over the

course of just a few short years. Interestingly, these disruption cycles and trends have

even hit the technology sector – kind of like modern-day cannibalism if you will.

Technological disruption has even gone after the hand that feeds it.

Most of the early technological innovation has been led by Capital – primarily VC

backed companies and access to public financial markets. However as initial

investments (in time and money), operating expenses and costs to scale has come

crashing down, there is a growing trend of tech start-ups opting to remain private.

Facebook is a great example of a private company that essentially has access to capital

whenever it wants without having to come under the rules and regulations from the

SEC, SOX, etc. Could the New York Stock Exchange be disrupted?

Even VC money is looking like an expensive option for start-up entrepreneurs. They

don’t need the huge sums of money that VC’s have to invest in order to achieve

significant returns for investors. Another interesting trend is “early seed investing”

popularized by the wildly successful Y-Combinator, and Founder Paul Graham. In this

sense, young start-ups have access to capital (not a lot, but enough) to get started

prototyping their concept and getting a product or service to market quickly. They have

“cycles”, which culminate in Demo Day where companies display their work. Due to

their dramatic success, Y-Combinator now has a pretty extensive alumni network that

also acts to help groom new founders. Perhaps the greatest advantage of this model is

the ability to deal closely with So far, their track record speaks for itself. They’ve funded

over 250 companies, including:

©Bradley Eric Smith | The Age of Enlightenment 8

Loopt, Reddit, Clustrix, Wufoo,Scribd, Xobni, Weebly, Songkick, Disqus, Dropbox,

ZumoDrive, Justin.tv, Heroku,Posterous, Airbnb, Heyzap, Cloudkick, DailyBooth, WeP

ay, and Bump

This latest trend has upset larger Angel investors and VC’s, because it potentially

dilutes their later investments, and pushing up valuations (not to mention

marginalizing their influence on the ultimate success of a start-up). In the coming years,

it will be interesting to see how these early-stage investing groups impact traditional

VC markets. While larger, more established VC’s will remain, they will become less

influential and could become even more of a “red-ocean” industry.

The Need to Self Disrupt

Due to these moving markets and technological upheaval, there will be a prevalent need of self-

disruption. When it becomes evident that your market is moving, you can either make the

conscious choice to invest legacy revenue in growth opportunities, or let the external pressure

kill your business for you.

Cisco recently announced the shutting down of their Flip Video Camera business in an

effort to restructure its consumer business. John Chambers, Cisco CEO, stated:

We are making key, targeted moves as we align operations in support of our network-centric

platform strategy…As we move forward, our consumer efforts will focus on how we help our

enterprise and service provider customers optimize and expand their offerings for consumers,

and help ensure the network’s ability to deliver on those offerings.

This hand-held, point-and-shoot video camera was a huge hit in recent years riding the

wave of user-generated-content. It allowed you to easily shoot short, simple videos and

quickly upload them directly to YouTube, Facebook and more. The Flip business was

part of a $590 million acquisition of Pure Digital just two years ago.

As smartphones (and namely the iPhone) have improved technically over the years and

have undergone massive consumer adoption, the Flip can’t compete anymore. The

iPhone gives you a comparable video quality, cellular (3G), Wi-Fi connection, and the

ability to seamlessly integrate with third party video streaming services like Ustream. In

an increasingly competitive landscape of simple point-and-shoot video devices, the Flip

can’t hold on.

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What’s interesting about this announcement is its timing. Typically, companies hang on

to declining legacy revenues until the very last drop. Sure the Flip won’t lead the

market anymore, but in reality they probably had a few years left to milk revenues from

its great brand.

Instead of clinging to past revenues and denying change, they’re self-disrupting. One of

the themes in Seth Godin’s short novel, The Dip, is to recognize when quitting and

admitting defeat is a smart strategy. Cisco is acknowledging their place in the market

relative to competition and future market trends, and they’re strategically quitting. This

means admitting they overpaid just two years ago, taking short-term stock pressure,

and laying people off. However in the long-term, Cisco will be a stronger, more

profitable company poised for revenue growth – not legacy revenue.

Cisco’s move was a sign of preemptive disruption due to fierce competition in the point

& shoot consumer camera market.

Onward

Traditional businesses not directly concerned with e-commerce are still heavily

impacted by the way their customers organize themselves online. It may seem trendy or

hip to banter about today’s effects of social media, but the web was social since the

beginning. People were looking for information on Prodigy nearly two decades ago.

They were even in AOL forums long before Friendster, Myspace, and then Facebook

came about. This emergence of a mature “social layer” will soon integrate with every

website, search engine, and mobile device.

Despite the rapid acceleration of technology, most of the world’s controllers (people 45

and older) haven’t fully embraced the shifting tides. However in the future, being

technological inept will be analogous to illiterate. Every business owner, CEO, or entry-

level grunt will have to accept the perpetual technological evolution. It’s not always

clear where things are heading, but you must jump in the deep end and try to stay

afloat.

©Bradley Eric Smith | The Age of Enlightenment 10

Act II: The Individual: Creating a Personal Competitive Advantage

How does the individual react and flourish in this tumultuous time? Today’s individual

must adopt more entrepreneurial qualities, or behavior traits that make them

visionaries and indispensible. They must focus on career management first, whether

that is personal branding or re-learning new skills as their old ones become obsolete.

They should mash-up their different, unique qualities or experiences to create a new

approach to solving tough problems. This new focus on “generalization” is a new

specialization. By incorporating different or opposing skills, visions, and behavior traits,

the individual will be able to create a sustainable, defensible competitive advantage.

Adopt Entrepreneurial Qualities

In this day and age of constant change and upheaval, a business leader must be a

master of gray areas. They need to be problem solvers, broad strategic thinkers, and

skilled diplomats. They must understand their market, and align their marketing and

financial strategies accordingly. They need to sell, encourage, and inspire. They need to

question conventional wisdom, experiment, risk failure, and iterate to change or correct

course. In a word; they must be more entrepreneurial.

In his seminal classic, Innovation and Entrepreneurship, Peter Drucker stated:

The entrepreneur always searches for change, responds to it, and exploits it as an opportunity.

Innovation is the specific instrument of entrepreneurship.

The purpose of the entrepreneur then is closely related to the concept of “creative

destruction” popularized by Joseph Schumpeter. This same philosophy is discussed at

length in Clayton Christensen's The Innovator’s Dilemma.

The nature of business and individual work is becoming more projects based. Dan Pink,

author of Free Agent Nation, has these interesting statistics:

Fewer than 1 in 10 Americans works for a Fortune 500

There are between 16 and 25 million are freelancers or independent contractors

Microbusinesses (fewer than 4 employees) employ between 12 – 27 million people

Management writer Tom Peters, wrote in Talent that:

©Bradley Eric Smith | The Age of Enlightenment 11

Lifetime and stable employment is over. The average career will likely encompass two or three

occupations. In addition, most people will spend sustained periods of our career in some form of

self-employment.

In order to become more entrepreneurial, the future leader should focus on creating

more tangible assets with a direct equity ownership. This could be in companies,

projects, or hobbies. They could start a new business, create a new blog, or write a new

book. This is importance for two reasons. First, having personal equity ownership is the

only way to building wealth. Creating value and sustainable, passive return only come

from starting movements – not joining them later. Secondly, it teaches people how to

succeed. Only after they’ve begun, will they understand the difference between an

individual who talks about all the ideas they have, and those that do something about

it. This posture shift and ability to handle responsibility to find solutions means

everything.

Action, or the ability to drive through obstacles at any cost, is the true underlying

essence of entrepreneurs. Whether its determination, persistence, or stubbornness, an

individual has to find unique solutions to complex problems.

The Company of One

In this age of individual work, it’s imperative to think about work and career trajectory

differently. Jeremiah Owyang wrote a blog post about career advice, and one of these

major points was that you’re a company of one.

The other observation I share is that you are a company of one. Even though your paycheck is

being delivered through your employer, you are solely responsible for your direction, what you

learn, how you perform, and how much you’re paid.

He also wrote another blog post entitled Build your network before you need them:

1) You’re always looking for the next opportunity, simply shutting down what else is in the

market is fool hearted. It doesn’t mean you need to jump ship before 1 month, or 1 year,

but it means you should be talking to recruiters, companies, and hiring managers to see

what next skills are needed now, and in the future. This will actually help your current

employer, as you continue to skill up, take on new projects, as they invest in you.

2) Those who ignore the party/conversation/network when they are content and decide to

drop in when they need the network may not succeed. It’s pretty easy to spot those that

are just joining the network purely to take –not to give. Therefore, be part of the

party/conversation/network before you need anything from anyone. Start now, and

continue to build relationships by giving now: share knowledge, help others, and become

©Bradley Eric Smith | The Age of Enlightenment 12

a trusted node and connector, not just an outlying ‘dot’ of a comet that swings in every 4

years or so.

The old adage “it’s who you know” will become increasingly more important as jobs and

careers become more unstable. With a vast, connected network, leaders are able to reap the

benefits and opportunities when needed.

Embrace Career Management – The Importance of Learning, Iteration, and Re-Learning

Published in 1993, Innovation and Entrepreneurship by Peter Drucker should still be

considered the blueprint for innovation. One of the main lessons from this work

regarding career management is the importance of a liberal education:

One implication of this is that individuals will increasingly have to take responsibility for their

own continuous learning and relearning, for their own self-development and for their own

careers. The assumption from now on has to be that individuals on their own will have to find,

determine and develop a number of “careers” during their working lives.

If this challenge is not faced up to, we risk losing the fundamental concept of a “liberal

education” altogether and will descend into the purely vocational, purely specialized, which

would endanger the educational foundation of the community and in the end, community itself.

In an entrepreneurial society individuals face a tremendous challenge, a challenge they need to

exploit as an opportunity: the need for continuous learning and relearning.

The correct assumption is that what individuals have learned by age twenty-one will begin to

become obsolete five to ten years later and will have to go be replace – or at least refurbished – by

new learning, new skills, new knowledge

One implication of this is that individuals will increasingly have to take responsibility for their

own continuous learning and relearning, for their own self-development and for their own

careers. The assumption from now on has to be that individuals on their own will have to find,

determine and develop a number of “careers” during their working lives.

In software, the necessity of iteration is an important concept. Essentially, a company or

person iterates by incrementally making changes back and forth until you find a

solution. This process should also be applied to career management. Sometimes the end

of the road isn’t always clear, so one must decide on a general direction and use an

iterative process until the path becomes clear.

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The combination of a liberal education and an iterative process sets the individual’s

foundation to focus on re-learning. However the third key to this is action. The initiator

of learning, studying, or development is some type of forward motion – the ability to

motivate oneself, or be in the right place to be motivated, to make positive changes in

one’s life. Typically, that involves some sort of sacrifice. Peter Drucker advocated

spending a few hours each day working on a new skill or studying of some kind. After

brief, intense sections like this for a few years, an individual will be able to fluently

understand each new skill set. The ability to develop new skill sets, and re-develop old

ones is the real key to career management.

Response to a Flattening World

Sometime after writing The World Is Flat, Thomas Friedman gave a Keynote Address at

the MIT Milestone Celebration. After summarizing the concept and evolution of the

book, he went on to offer his solution for dealing with these new changes. He discussed

the importance of mash-ups; of combining the framework for one specialty with that of

another. He believes that the solution to ever-increasing outsourcing of blue and white

collar disciplines is the mashing-up different skill sets or specialties that someone may

possess. Friedman gave the examples of true polymaths like Leonardo Da Vinci or

Benjamin Franklin. The combination of diverse qualities or experiences is where

interesting ideas come from, and unique solutions to complex problems.

This makes perfect sense. For a fraction of the original price, someone can have surgery

in Brazil, software development in India, legal work from LegalZoom.com, and real

estate help from Redfin.com. Over the past few decades, nearly every service and good

has been commoditized. The world is catching up to the United States by<

specializing. They’ve seized their opportunities to become great doctors, accountants,

software developers, and even attorneys.

Generalization is the New Specialization

There are two choices in this ever flattening world. Individuals can become hyper

specialized in a particular niche, or can take Friedman’s advice and mash-up our skills

to become more innovative. Specialization will become increasingly less productive,

and the return on investment won’t be worth the costs in time, energy, education,

financial, and opportunity.

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The future business leader should develop a unique blend of several skill sets that

makes them more dynamic, competitive, and entrepreneurial. This can be the doctor

with a business degree or the marketing executive with a background in corporate

finance. These are the people who are more employable and important to an

organization because they understand the bigger picture, and can align the different

components of a business to harness the sought after synergy.

Another great example of innovation is looking across industries and combining

different elements to develop a unique and defensible competitive advantage (this

applies to both people and corporations). This is a concept from Blue Ocean Strategy,

one of the best works on business strategy over the past decade. The best example is the

“Four Actions Framework”, used to analyze which elements you’ll Raise, Create,

Lower or Eliminate in order to develop a sustainable competitive advantage.

In this lifetime, the single greatest driving force of innovation, growth, and competitive

advantages has been technology. Future business executive will have to innately

understand how it affects their business, and look to it to provide the biggest

opportunities of growth, success, and prosperity.

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Act III: The Opportunity: Capitalizing on Disruption for Growth

The only constant in our lifetime will be the profound impact of technological

innovation. With its origins in the Defense department and a commitment to open

source technology, the internet was able to expand and thrive. In addition to personal

computing and lowering costs, technology began to seep into our daily lives through

osmosis. While we’ve already discussed technologies capacity for creative disruption,

we need to understand how and why it’s disruptive. Only then, will we possess an

innate understanding of its potential. And only when technologically fluent, can the

individual begin to look for the opportunity gaps that will be created. Like small cracks

or fissures, these gaps will begin as small insights and create massive room for growth

and prosperity.

Dual Drivers

The proliferation of (internet) technological advancement has been driven largely by

open source technology, like Linux and popular programming languages that are freely

turned over to the masses. As internet-technology was democratized, personal

computing experienced a rapid, fundamental shift from innovators and early-adopters

to the majority. Initially Netscape, and then AOL, made the internet accessible (and

more importantly – easy and fun) for the mainstream audience to accept and embrace.

From then up to today, there have been mainly two driving forces behind the growing

acceptance, and success of internet technology.

1. Lowering Barriers to Entry: The financial cost (investments in infrastructure) and

human cost (time spent) have lowered dramatically over the last ten years.

Obviously the explosion of open-source technology has been the primary driver;

however technological advancement (investments in R&D) has dramatically

driven down the cost of computers, broadband connection, software and even

domain names. The cost (financial and time) of failing has also become a lot

cheaper as well. This enables people to take greater risks, or experiment and

iterate at a much faster pace. In the beginning of the World is Flat by Thomas

Friedman, he explains several driving forces behind this shift, so it would be

redundant to repeat them here. Today, people located anywhere with WI-FI are

able to connect and compete in this flat world.

2. Lowering Costs of Distribution: In this case, the internet has created a new,

powerful channel. This has dramatically lowered the cost distribution in a

physical sense as well as the ability to go directly to end users. The significant

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benefits of this second shift have resulted in positive growing trends for both

people and businesses of all sizes. The popularity of social networks (and before

them, AOL) has provided a platform and organization for people to hang out

online. However, it has also had a significant impact on the “middlemen” or

“gate keepers” who are continuing to be displaced (remember travel agents?).

These two driving forces have caused serious symptoms specific to businesses on the

internet and functions typically associated with marketing (such as distribution, pricing,

etc.). Some of which are explicit and widely understood, while others are not readily

apparent.

Inbound Marketing Practices

Inbound marketing, or pull marketing, is the fundamental shift from traditional

marketing to permission marketing. Traditional mass marketing is built around

interruption and “pushing” messages to consumers. The Internet has turned this on its

head, popularizing the term “permission marketing”. The most effective internet

strategies are built around providing content and information that helps consumers, in

order to get their attention. The next goal is to foster the relationship with them and

hopefully translate that into providing products or services to meet their needs or

wants. The underlying theme of these methods is communication (two-way

engagement), not broadcasting (one-way pushing). Internet marketing tactics have

become “low hanging fruit”; like blogging, SEO/SEM, and social media, which are easy,

cheap, and accessible to everyone.

Increased Measurement

One of the biggest benefits of internet marketing is you can measure almost everything.

You can measure the impact of all types of advertising including pay-per-click (PPC),

cost-per-click (CPC), cost-per-engagement (CPE), etc. You can also measure conversion

rates; like how many times someone clicks your ad, versus actually purchase your

products. Again, the proliferation of free technology (Google Analytics) has enabled

every size and shape of company to track their progress.

Intersection of Distribution, Sales, Marketing, Advertising, PR, Customer Relations, &

Branding

Internet marketing is now a combination and blend of sales, marketing, advertising, PR,

customer relations, and branding. The intersection of the dynamics we’re discussing has

forged these disciplines together. The result is a massive shift and opportunity for

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businesses. Smaller operations are able to scale their efforts (see next point), and do

more with less. Increases in production, while great for business, don’t bode well for

unemployment.

Scale

With the ability to go direct to consumer, and the significant deterioration of

distribution costs, companies of all sizes are able to scale. This has leveled the playing

field for all types of companies and has opened potential markets domestically and

internationally. Micro, 3-person operations can now reach, satisfy, and compete with

international companies for emerging niche markets.

Inventory

The costs of holding inventory have become increasingly marginalized. Obviously this

is true for digital products, which can be stored on ever-expanding servers. However

more companies are now able to adopt just-in-time (JIT) methodologies of producing

and shipping goods due to the speed and efficiency of the network. There is no longer a

need to deal with high holding costs. Chris Anderson’s The Long Tail describes this

concept in detail. This has created all types of opportunity in narrow, specialized niches

– effectively creating new, niche markets.

Viral Information

The greatest impact of social media has resulted in an increasing connectedness and

spread-ability. Basically, social networks make the world smaller. This has ushered in a

return to small-town business practices that value trust and referrals (third-party

reviews). The goal then is to make everything more “shareable”, and engage the

communities that exist with or without you. The theory is that people would rather find

what they want through their friends instead of a neutral medium (i.e. search engines).

So a large social layer will provide more contextual information based around what

your friends see, do, love, or share.

Transparency, Authenticity, Openness

Springing out of the early internet days, and further cemented by generous

contributions to open-source technology, the internet has become a big fraternity, where

people help each other with no questions asked. This spirit of openness has survived for

so long because of the absence of for-profit motivation. Now that the web is becoming

so commercialized, there could be another shift on the horizon.

©Bradley Eric Smith | The Age of Enlightenment 18

Interaction

Recently, Steven Wynn was describing his reasoning for the significant capital

expenditures in his current Las Vegas properties, Wynn and Encore. The answer was to

better position it for the younger generations. He remarked that the most striking

significance of this demographic is that they don’t want to be a passive audience; they

want to be actors engaged and interacting in the performance. These “digital natives”

want increased customer involvement. In Las Vegas, this describes the huge popularity

of the club and nightlife industry. Online, the huge popularity of social networks is

another great example. Some call it interaction, and some call it narcissism.

Hosted in the Cloud

Soon, all of your computer’s information and data won’t be hosted on your computer, but

through cloud computing. The best example of personal computing’s shift toward adoption of

cloud computing is the Apple Air laptop. The dynamic mobile device market over the past few

years is also being powered by the strength of cloud computing and hosted software to power

their devices. In the cloud, your information can be accessible from any computer, in any

location. You’ll never have to worry about your hard drive crashing or losing information due

to viruses. And with the strength of network privacy, you generally never have to worry about

security concerns. You also will have access to the latest versions of software, so you’ll never

need to buy an expensive upgrade. This has helped move pricing models to low monthly

figures instead of excessive one-time charges.

Plight of the Middlemen

Being able to go direct-to-consumer has leveled the playing field. Unfortunately,

middlemen (or middle-companies) are going to be squeezed out of existence. Examples

include travel agents, real estate agents, retailers, advertising agencies, and many, many

more.

Mostly, these entities are project or process managers. Increases in software stability

and consumer acceptance will eventually replace large parts of their business. The

simple truth is that software isn’t prone to errors of judgment, or burdened by human

emotions. These industries will either be severely limited (declining), go away

completely (travel agents), or be absorbed with like-kind business (a consolidation with

other related businesses).

These markets won’t go away. But the bottom is falling out. Businesses can get better

results (i.e. conversion rates, or return on investment) through advertising with Google

AdWords. Despite new media sensationalism, traditional advertising will still be

©Bradley Eric Smith | The Age of Enlightenment 19

around for major brands. However the competition for these middlemen will become

much fiercer, as they will be chasing fewer dollars.

©Bradley Eric Smith | The Age of Enlightenment 20

Act IV: The Future: Skate Where the Puck is Going

Arguably one of the greatest hockey players in history, Wayne Gretzky, famously stated that

one of the keys to his success was, “I skate to where the puck is going to be, not where it has

been”. So although it’s impossible to make exact predictions, there are general themes you can

see developing and you can align your business or strategy accordingly to be there when they

fully develop. Instead of planning and strategizing from where you are today, analyze where

you currently are and determine how you’ll be where the puck is 3-5 years down the road.

Dave McClure, entrepreneur, founder, and angel investor places a heavy emphasis on

distribution strategy when funding new businesses. Growth in this early stage is defined by

scale and cost-effective customer acquisition. What that means is an emphasis on search, social

and mobile platforms (i.e. Google, Facebook, Twitter, YouTube, Apple, and Android).

Starbucks is also firmly positioning its business to take advantage of the social and mobile

revolution. A recent report in Mashable explained Starbucks’ Blueprint for Growth:

Mobile payments is just one element of a much larger social and digital media strategy that Schultz refers

to as a “blueprint for growth.” This involves the brand crossing over into the consumer packaged goods

(CPG) category by leveraging its digital and social properties. Schultz was eager to inform shareholders

that the Starbucks brand is number one on Facebook with 29 million fans, and is also a top brand on

Twitter and Foursquare.

Schultz used Starbucks’ new instant coffee brand VIA as proof of the crossover strategy. VIA generated

$194 million in sales in its first year, and is now in 40 points of distribution. Schultz used Starbucks’

new instant coffee brand VIA as proof of the crossover strategy. VIA generated $194 million in sales in its

first year, and is now in 40 points of distribution.

Ultimately, Schultz believes the company’s CPG business will rival its retail business — and that the

Starbucks Card Mobile application will connect both sides of the brand’s identity through loyalty

programs.

In order to launch VIA and their new CPG business, Schultz and Starbucks have been

on the forefront of disruptive technologies and have successfully utilized them for their

tremendous reach.

The past financial quarter was the best performing in the 40-year history of the company, according to

Schultz. Starbucks cards now account for 22% of all transactions, he says.

Mobile Revolution & Always On

The iPhone’s introduction in 2007 paved the way for hundreds of thousands of interested third

parties to jump on their back and reach potential consumers directly. The Mobile App Market

literally exploded overnight, creating a new dynamic and profitable marketplace. According to

©Bradley Eric Smith | The Age of Enlightenment 21

a recent report by research firm IDN, the global mobile smartphone market grew 17.6 percent in

the fourth quarter of 2010, its highest growth rate since 2006. With consumer adoption

skyrocketing, the ability to reach people virtually anytime anywhere has ignited huge

investments into mobile platform technologies. While Apple led the way, you also have huge

players such as Android, Research in Motion and Microsoft operating systems powering every

mobile manufacturer’s newest offering.

Another interesting trend and huge potential is the cross-device usage. Again, Apple has been

able to pioneer and lead in this category based upon their strict development guidelines and

single operating system, iOS. This allows mobile developers to develop one application and

reach consumers on their iPhone, iPod Touch, and iPad. This enables them to reach new

audiences and demographics through expanding their ecosystem and centralizing distribution.

Although the Android operating system has grown significantly, and will continue to do so,

they often have problems with cross-device compatibility. This is especially true with tablets.

They’ve recently released Honeycomb as a new operating system for tablets, so it’s still

premature to tell how well they’ll integrate current Android applications with the Honeycomb

tablets.

When deciding to invest in mobile applications, there are basically two options: native and

mobile web app. Native simply means an application that users can download straight to their

mobile device and have direct access to your offerings. Typically, these are custom

developments and provide a range of functionality. However there is also a huge push from

new platforms that allow you to develop, host, and submit your apps without any

programming experience (Yes, even software developers are being disrupted). This will

undoubtedly be a growing future trend as it dramatically lowers the cost of investing in mobile

technologies.

The second option is to develop a mobile web app. This is just a mobile-friendly version of your

current internet or website options. Obviously this is cheaper, easier and absolutely essential. A

recent decision by software firm 37 Signals has breathed new life into the mobile web app.

When deciding to make their hugely popular Basecamp project management software mobile,

they opted against developing a native app. Their decision was that it was too difficult and time

consuming to develop separate applications for each operating system (and deal with the

associated problems of integrating all data), so they opted for a single web app. Although

definitely more logical, it goes against the massive popularity of native apps, and could signal

and shift in businesses’ mobile strategy.

©Bradley Eric Smith | The Age of Enlightenment 22

The Value of an Ecosystem

There have been many reports about Android’s exploding market share, and its current course

to lead the pack of smartphone operating systems. Android has exploded across mobile carriers

by embracing open-source development, being distributed across mobile wireless carriers and

embracing open-source development. Recently, Microsoft has made a serious attempt to enter

the mobile market through Windows 7 and an exclusive deal with Nokia. What affect will this

have on the mobile market landscape? With all this attention on Android and Windows 7,

where will Apple’s iOS fall?

Apple’s sustainable, competitive advantage isn’t its beautiful devices, leading technology, or

first-to-market innovation. Apple’s real key is its iOS ecosystem. By designing beautiful,

different devices, and completely centralizing all development with an iron-fist, Apple has

created a giant moat around its devices.

Interestingly, this is precisely the reason so many people have rebelled against Apple’s products

and mindset. Through exclusion, Apple has avoided and turned off many people. Their strict

development guidelines and dictator-like rule has spurned many towards adopting open-

source alternatives. But this single-minded approach is also the reason for its success.

When we recently analyzed the mobile app market, we discussed the strength of Apple’s

operating system. The iOS is Apple’s mobile operating system used on the iPhone, iPad, and

iPod Touch. It’s currently has the largest app store (~300,000) and boasts the most profitable

apps (meaning iOS users spend more money).

According to a recent Nielsen Whitepaper:

Apps users who go to the Apple App Store tend to download nearly twice as many apps as those who go

to the Android Market or the BlackBerry App World Store. They also seem more willing to pay for their

apps: Apple App Store customers report that for every two free apps they download, they typically pay for

one. In contrast, apps users who frequent the Android Market and Blackberry App World stores report

downloading more than 3.5 free apps for every one they buy. Meanwhile, BlackBerry owners are the least

likely to convert from a “lite,” free trial version of an app to a full, paid version. Average price based on

Top 100 Apple Games is $2.

So while Apple’s mobile devices have created a new market, they’re also extending their

presence to television. Apple’s new version of its Apple TV streams content directly from the

internet. So not only is this ecosystem extended to your TV through iTunes, they’re also signing

up big players like Netflix. And with the obligatory 30% of revenue Apple takes off the top,

they’re again creating a revenue stream that’s difficult to disrupt.

©Bradley Eric Smith | The Age of Enlightenment 23

Entering a Post PC Era?

Beginning with the iconic iPod, Apple's mobile devices have nearly revolutionized each market.

Steve Job's hinted at this mobile vision recently when he discussed the "end of the PC era".

Many comments and critiques question the validity or sanity of this statement. Obviously it

won't happen overnight, but few companies like Apple are able to create and define a new user

experience that consumers are willing to adopt.

In October of last year, Ray Ozzie, Chief Software Architect and heir apparent to Microsoft's top

job, resigned. He also posted a 3,445 word essay entitled "Dawn of a New Day" where he

remarked that we're entering a Post PC era.

As we've begun to embrace today's incredibly powerful app-capable phones and pads into our daily lives,

and as we've embraced myriad innovative services & websites, the early adopters among us have

decidedly begun to move away from mentally associating our computing activities with the

hardware/software artifacts of our past such as PC's, CD-installed programs, desktops, folders & files.

Instead, to cope with the inherent complexity of a world of devices, a world of websites, and a world of

apps & personal data that is spread across myriad devices & websites, a simple conceptual model is taking

shape that brings it all together. We're moving toward a world of 1) cloud-based continuous services that

connect us all and do our bidding, and 2) appliance-like connected devices enabling us to interact with

those cloud-based services.

Market share in the mobile industry is very important, as its growth will be tremendous.

Android (and Google) have done a great job trying to extend its platform to new tablets as well.

However it’s also not the point. With increases in market share, carriers and devices, it will

become increasingly more difficult to unite its services. Is the real value or wealth in this space

going to be in operating system’s market share?

Are they creating new markets, new experiences, new usage scenarios, and defining what the

next era in technology will look like – or are they reacting? So while straight market share

numbers are easy to debate and report, is that really all that matters? What is the value of a

creating an ecosystem that may (or may not) revolutionize mobile devices, personal computing,

and the way people access content?

Mobile Payment Systems

With the increasing consumer adoption of smartphones, mobile payment systems have begun

to heat up. Although in its infancy, the intent of mobile payment systems will be to eventually

replace wallets.

©Bradley Eric Smith | The Age of Enlightenment 24

Some companies have already embraced mobile payment systems in their native applications.

Chipotle allows you to order and process payment through their native app. Starbucks recently

began allowing consumers to pay with their rewards card on their mobile devices. They've

already announced over 3 million people have begun paying through the Starbucks Card

Mobile.

The Starbucks mobile payments offering is a “touch to pay” system. It allows the customer to hold up the

app’s barcode to the in-store scanner at the register to pay using the electronic tender. The program was

piloted at select stores in September 2009. After extensive testing, it was found to be the fastest way for

customers to pay. The past financial quarter was the best performing in the 40-year history of the

company, according to Schultz. Starbucks cards now account for 22% of all transactions, he says.

While the activity in this space is exciting, Forrester Research reminds us that disruption will be

slow.

This disruption will be slow to occur. Why? Because: 1) vendors and providers will need to create

consumer demand, which is currently nonexistent; 2) merchants will also require significant motivation;

and 3) stakeholders will need time to iron out business-model problems.

Nevertheless, mobile payment systems could provide huge potential over the next few years

and revolutionize point of sale (POS) transactions.

Currently, there are two mobile payment systems:

1. Mobile payment processing

2. Near-Field Communication

Mobile Payment Processing

One of the most exciting devices and start-up's in the mobile payment processing space

is Square, which allows someone to accept credit and debit card payments with mobile devices.

By attaching the small device into your headphone jack on Android and iOS phones, you're able

to simply scan credit and debt information using the free Square app. The only catch is a flat

2.75% transaction fee (much like Paypal).

What's really exciting about Square's future is that Apple just agreed to place it in its online and

brick-and-mortar stores. This presents a huge opportunity and retail channel for Square,

perfectly positioning it in front of the innovators and early adopters. Square's device is selling

for $9.95, but comes with a $10 Square credit - essentially making the device free and

significantly lowering barriers of risk. Visa has also invested in the future of Square, firmly

positioning it for a bright future.

©Bradley Eric Smith | The Age of Enlightenment 25

Near-Field Communication

Near field communication has been around for nearly 10 years, but has just recently begun

creeping into mobile devices. This system consists of an initiator and a target; the initiator

actively generates an RF field that can power a passive target, and requires a distance of 4cm or

less.

The idea is that you'll simply wave your mobile device next to a payment terminal. Large credit

card companies including Visa, Mastercard, Bank of America and American Express have

already signed on.

Mobile Payment Security

A recent Mashable article outlined some of the mobile security concerns. Rick Orr, from

TabbedOut, outlined three considerations for users and merchants to consider when making

payments via a smartphone. Orr says it is essential to ensure that credit card information is:

Only sent to the venue’s POS system, rather than passing through third-party services.

Only stored on your phone, where it’s safest, and not in the cloud.

Always encrypted when it is sent to the POS system, where the transaction is taking

place.

Socialization and the Web

Social media as we know it will cease to become an isolated “thing” and will blend in to our

“traditional” internet properties to create a more dynamic user experience. Businesses who

understand how to combine the best of both worlds and provide a rich, internet experience will

reap the benefits of their early adoption. Specifically, blog and social networking integration is

already here. Although from a business application standpoint, most still lag and don’t

understand the true principles of the social web.

The reason for building a legitimate social media presence isn’t just to interact with current

consumers, but to also find new ones. While search engines (mainly Google) are still leading the

way people find you on the internet, social networks are morphing into recommendation

engines. When someone is actively searching for some information (i.e. Google), they’re driven

by some intent. However on social mediums, that information finds people by way of referral

or recommendation. This is closer to discovery or serendipity, which means that interesting and

compelling information has a way of finding people who are interested.

©Bradley Eric Smith | The Age of Enlightenment 26

The premise goes back to relevancy. People are similar to friends and family, so they value their

opinions or recommendations more than some disinterested third party with a commerce bias

(a search engine). It is absolutely essential that businesses and leaders understand how to

leverage the tremendous opportunities a social web creates, while also understanding the

“unwritten” rules that people abide by.

Understanding the Social Graph

This concept of an online social graph became popular back in 2007 when used by Facebook to

describe the social ecosystem they’ve constructed. Jeremiah Owyang sums it up best:

The Social Graph is the representation of our relationships. In present day context, these graphs define

our personal, family, or business communities on social networking websites. Alex Iksold further breaks

down the social graph into three specific elements: People Identity, Type of Relationships, and

Relationships Identity. These relationships can be mapped, displayed, or documented in what we call the

Social Graph.

Understanding this concept sheds light on the popularity and future evolution of social

networking and the internet. As this social graph is maturing, it’s beginning to integrate

seamlessly into every aspect of the web as we know it. A social graph makes the web more

interconnected and relevant. This slippery social proliferation has profound impacts, but let’s

analyzes how it’s developing to see where it’s going.

Facebook’s Impact

Despite the ever shifting landscape of social networks and constant fluctuation of popularity,

Facebook is still king. But why is it essential for business?

Facebook as a marketing platform is huge. Brands and businesses have already been utilizing

Facebook Pages, but this trend will only become more pervasive. Facebook has also extended

their presence into the Geo-location market with Facebook Places, and will continue expanding

into the mobile market. Finally, the "Social-connect" function will become another huge trend,

allowing users to sign in to any website with their Facebook account (thus spreading Facebook's

connection and influence exponentially). On an external website, someone can now Log-In to

their account, “Like” an article, and comment on an article, all with a Facebook account.

The following statistics are from Facebook shed light on user engagement:

There are more than 500 million active users

50% of active users are on Facebook any given day

People spend over 700 billion minutes per month on Facebook

©Bradley Eric Smith | The Age of Enlightenment 27

There are more than 200 million active users currently accessing Facebook through their

mobile devices.

About 70% of Facebook users are outside the United States

But the most interesting statistic is that the average age of Facebook users is 38 years old. So

despite humble college beginnings, Facebook has been readily adopted by older consumers at a

quick pace. Still don't buy it? Facebook's diverse user base, volume of users, and incredible

activity level make it an essential marketing platform for any business - not just "tech

businesses".

Value of a Liker

The Facebook “Like” changed the game and increased the level of relevancy, interactivity, and

potential for brand affinity. The following information is from Facebook:

Who are “likers”?

People who click the Facebook Like button are more engaged, active and connected than the average

Facebook user. The average “liker” has 2.4x the amount of friends than that of a typical Facebook user.

They are also more interested in exploring content they discover on Facebook -- they click on 5.3x more

links to external sites than the typical Facebook user.

As publishers work to identify the best ways to reach a younger, “always on” audience, we’ve found that

the average “liker” on a news site is 34, compared to the median age of a newspaper subscriber which is

approximately 54 years old, as reported by the Newspaper Association of America.

Search vs. Social

Perhaps one of the most interesting trends is the influence of social connections on decision

making. People are beginning to use Facebook (and their friend's interests and

recommendations) to find answers, instead of turning to Google. This doesn’t mean search is

dead. However the growing influence of social connections in finding and accessing

information over the internet will be intriguing. In effect, pulling in social data will make search

results more relevant and personal to what people want, instead of what Google wants.

The Power and Purpose of Commenting

Comments, and the act of commenting has become incredibly important on this social web.

Sticking with the aforementioned principles of democratizing power, anyone with a pulse can

now become a commentator – for good or bad. This aspect of commenting is popular on blogs

and social networks, but it’s also quickly spreading around the internet. One company, Disqus,

powers some of the most popular websites with its centralized commentating platform that can

be used across websites with one account. This new social layer has become such a powerful

concept that Facebook just announced its own commenting platform. The Facebook Comments

©Bradley Eric Smith | The Age of Enlightenment 28

plug-in allows users to comment on any website by simply logging in with their Facebook

account. These comment platforms are powerful primarily for two reasons. First, they improve

authenticity and cut down on spam, or inappropriateness. Second, they allows someone to have

one “profile” extended across websites, allowing you to connect with others in new, unique

ways.

©Bradley Eric Smith | The Age of Enlightenment 29

Epilogue

Today’s changes have caused significant ruptures in how business will be conducted in the

future. The key to future business prosperity is by developing a broader, unique skill-set,

possessing a native understanding of technology and a fluent grasp of the disruption and

opportunity it yields.

Major global changes and trends have forever shifted our business landscape. Competition has

increased dramatically due to the flattening of the world. Technology has enabled the rise in

education, and living standards globally. As a nation, we’ve depended on systemization and

standardization to predict what will happen in the future. However historical evidence is

irrelevant when dealing with humans and people, who are innately irrational. The chief

economic driver in our lifetime, technological innovation, has the nasty habit of creating

disruptions at every turn.

Today’s individual must adopt entrepreneurial behavior traits that make them indispensible

visionaries. They must focus on career management first, and possess the ability of mashing-up

their different specialties to create new insight. These “entrepreneurial generalists” will search

for, create, and exploit changes in search of innovation. The necessity of deep domain

knowledge is deteriorating due to an ever-evolving landscape. For far too long, domain

knowledge and specialization has been the sole-source of prosperity. The success for every

business (or person) is through innovation. And the greatest source of innovation or growth in

our lifetime has come from technology. So this “entrepreneurial generalist” must also fluently

understand the problems associated with technological disruption, and look to the

opportunistic gaps it creates for innovation and value.

Technology has been and will continue to be the greatest driving force of innovation in our

lifetime. The combination of personal computing and lowering costs brought new internet

technologies to every home. It’s clear that the internet is impacting the way every business is

organized and conducted. The future competitive advantage in any business is in technological

advancement and its application.

There’s an importance difference between your business model (how you make money), and

your business (how you provide value to consumers and positively impact the world). The

ultimate goal for these entrepreneurial generalists (despite your business model or vocation) is

to ultimately make a difference. Steve Jobs once said about Pepsi:

Do you want to sell flavored water, or do you want to change the world?

Rapid acceleration of creative disruption has never been more present than today. The formula

for success yesterday is different then it will be tomorrow; like quicksand under the slow, dim,

©Bradley Eric Smith | The Age of Enlightenment 30

stubborn and inept. It is up to the enlightened individual to embrace these changes, take

control, and seize the opportunity at hand.