Creating rich, immersive and scalable experiences is the biggest opportunity in marketing today, and “experience artists” are going to play a large, rich role in marketing going forward.

The evolution of a thought is a funny thing. I’ve long obsessed over the idea of context, inspired and shaped by Umair Haque’s line of thinking about user generated context, markets, networks and communities and many of his other principles.

Later, I picked up the idea of culturematics from Grant McCracken, a concept I’ve applied in thinking about communities, the power of “doing cool (meaningful) stuff”", and creating relevant, shareable events and experiences as participatory “marketing” campaigns.

About “doing cool (meaningful) stuff”:

“Cool stuff” grows only if it resonates, if it’s meaningful, if people care. “Cool stuff” are the small-scale, human examples of the power of focusing on creating rather than capturing, of focusing on product instead of marketing. Demonstrations of the power of living a life too cool to ignore.

“Doing cool (meaningful) stuff” is powerful because it’s the foundation behind turning relevant, shareable events and experiences into participatory “marketing” campaigns:

I believe there is a huge opportunity for people to follow their passion and evil plans to create relatable experiences and culturematics as “marketing campaigns.” Because these experiences are inherently human, they can invade niches and propagate through communities cheaper, better and faster than traditional marketing efforts.

… What are the keys? Passion, meaningfully directed. Transparency. Authority. A unique point of view. An ability to connect discrete actions to a meaningful cause. Resonance with a community. An obvious, transparent business model that “fits” the product, service, experience and community.

In my recent post, “Instead of focusing on the image, focus on everything around the image”, I applied the continuation of these thoughts to the photography industry.

But it’s a concept that applies to all forms of marketing.

Creating rich, immersive and scalable experiences is the biggest opportunity in marketing today, and “experience artists” are going to play a large, rich role in marketing going forward.

Why? To repeat (and add to) my recent post,

• Content is far easier to copy than context.
• Content is cheap to create and distribute, but context is (still) expensive.
• Content creation is an evolutionary process. The evolution builds valuable, immersive, rich context for leaders and shapers to create and guide the markets, networks and communities behind the evolution.

  How? The path taken to create content impacts the final product, but the path to create context is *part of the final product*. Remember, paths are more valuable than destinations.

• The economics of the web have increased the competition between content creators, flattened the experience advantage and upended supply and demand for content. But at the same time, it’s expanded the opportunity to create context, made context easier, cheaper and more accessible to create than ever before. People that recognize how context is created, what type of context they can create, and why context is important will create economically meaningful, valuable and sustainable products, services and experiences. And more than anything, that’s what we need.
• Marketers and business strategists today are fond of giving the advice “join the conversation.” While I agree, it’s only a step towards the larger goal: “join (and create) the experiences”. First: join, listen, learn and understand the best practices, cores and edges in your markets, communities and networks, because it’s step one towards building the knowledge and confidence to take the next step: “join (and create) create the experiences”.
• Experiences are more powerful than conversations in creating the rich, immersive context, social objects and shareable, participatory media necessary for marketing campaigns. David Cushman and Jamie Burke asked “Can you buy space in conversations?” in their recent presentation about The Death of Advertising; to extend the thought, my question is “can you buy space in experiences?” Conversations, no; but experiences, yes.

Lest one think of this as idle thought, the examples are being created by bleeding edge practitioners today.

If you’d like to discuss examples and see how you can apply these concepts to your business, drop me a line at tdavidson@taylordavidson.com or @tdavidson; hire me to consult and I’ll help you devise strategies and execute campaigns applying these principles.

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I’m moving to New Orleans, Louisiana. Here’s why.

Last year didn’t turn out as I had planned. This year I stopped planning and just lived, and in doing so finally created “The Good Year” that I had envisioned for a number of years.

My simple goal was to spend a year traveling, following my passions, exploring and creating without any expectations for it to pay off right away. I wanted to test my idea that the universe will take care of me if I let it and give myself the time and space to let the year lead to something bigger.

The original idea was to spend a month of two in about eight different places, to live, work and photograph lives in each city, to dig into each new place and culture as a temporary citizen. The goal wasn’t to find myself or explore the world, but to live and observe different lives around the world.

But it didn’t go as planned. For one, after I quit my job last November I spent the next twelve months driving across the USA, bouncing on trains throughout Europe and flying around the world. Each time I tried to stay in one place and slow down, I found myself moving on and going faster. Why?

In short, the draw of people and opportunities over the horizon, the beckoning of the next place, the next person to meet, the next experience to create.

And secondly, the planned year of observing became a year of interacting, creating and sharing. Each step forward, each hello, each exploration, each person and each story led me to another, simply by embracing the opportunity, listening, caring and giving. The solitary journey evolved into a shared adventure, connecting thoughts to thoughts, thoughts to people, people to people, powered by serendipity, part of an introvert’s awakening, thirty-one years in the making.

It wasn’t as glamorous as it sounds. Littered throughout the year were misplaced steps, missed connections, miscalculations, incomplete thoughts, failed challenges, hopes and ideas dashed by realities, limitations and mistakes.

But even with the numerous failures, I’m still looking forward to where it could lead.

And thus, with “The Good Year” drawing to a close, having tested and found the limitations of the way I lived this year, it’s time to change it up and find a better way to live another good year (and more). For me, for now, that means I need to live in one place and build a core to bring together the edges I’ve opened throughout the year.

I considered lots of places to live, focusing on the typical hubs of business, culture and recreation that regularly grace the “best places to live” reports and pop up in the “what is your city” quizzes I’ve taken repeatedly, trying to think about what’s important and envision alternate lives.

Nothing ever indicated New Orleans.

But that’s where this year has led me. New Orleans first popped up though introductions by Lyell to Chris and Jessica, my first real tests of a year of showing up, meeting new people and asking friends and acquaintances to help curate my life.

As the year continued, New Orleans kept popping up, interjecting herself into conversations, showing up in my mind, my heart, my memories. I lingered over photos I took of the Quarter and the Garden district. Every news article with a snippet about New Orleans drew my attention. I felt a tug every time I saw news about friends doing cool stuff in New Orleans, stung by a small bit of feeling of missing out. I extolled the virtues of New Orleans as an example of one of the few unique, culturally vibrant American cities, proclaiming my love for New Orleans to fellow travelers in Bulgaria, Japan, India, Australia, Malaysia and England.

But I never told New Orleans that I loved her, with the type of love that’s only seen a glimpse and is unsure what lies deeper underneath, but is sure of itself nonetheless. The type of love that needs to be demonstrated and shown, not just said.

What better way to show it than to move there?

And that’s my early Christmas gift to myself: a home, an opportunity, a life.

Of course, I’m going to need your help, New Orleans. I’m scared the rush of a new city will fade quickly. I’m worried it will take me awhile to settle in, based on my mixed past in establishing lives in past cities. I’m nervous about not living up to expectations. I’m worried about creating a professional life that fits my professional and life goals (more, later *). In a way, I’m scared of getting what I want.

But I’m going to try.

I’ve never truly loved a city or a community; New Orleans, I’m hoping you can help change that.

So New Orleans, I’m moving here for you and for me. I’ll love you and give you my all. All I ask is for you to love me back.

—

* Later, a deeper dive into why New Orleans is a great professional opportunity for me and many others. But first, start with Sloane’s great summary of what New Orleans has to offer and my past thoughts on New Orleans’ opportunity to leverage its vibrant cultural life into a vibrant hub for entrepreneurs (video, about 1 minute in). More to come.

Kleenex, anyone?

Thinking through a venture capital investment thesis.

I traditionally think about startup and investment opportunities through broad frames, sectors and trends; but in an effort to get a bit more tactical, here is a general investment thesis:

• Products and services that build markets, networks and/or communities,
• Focused in industries with inefficient, expensive middlemen, high transaction costs,
• That aggregate and structure data,
• To create valuable relevance,
• Created and accessed via any device, anytime,
• Built as an API from the beginning,
• Monetized through API access,
• Requiring a small funding gap between costs and profits,
• Created by founders that embrace a grand challenge.

Perhaps that’s too broad an outline to be a meaningful and actionable thesis, but let’s start here. Breaking it down…

• Products and services that build markets, networks and/or communities.

  Markets, networks and communities form the base of successful next-gen companies; they create and serve niches, promote humanity and meaning, organically incent repeated competition and collaboration, create viral marketing and engagement loops and have “built-in” business models that facilitate creating and exchanging rather than allocating.

• Focused on industries with inefficient, expensive middlemen and high transaction costs.

  The media and entertainment industries get all the attention for the collapse of their legacy business models, but they are just the canaries in the coal mine for many more industries.

  The world doesn’t need another app for sharing photos and music: we need another app for solving expensive problems, understanding our actions and lives, valuing our impact, sharing meaning, being human.

• That aggregate and structure data.

  It should be fairly obvious by now that there are a world of opportunities in a world of increasing unstructured data. Why?

• To create valuable relevance.

  Data is cheap to create but expensive to understand. The basic need of people and businesses to understand the world and make sense of what is happening is the fundamental driving force behind innovation on the web today. Better yet, the high cost of context and relevance is creating opportunities for a variety of businesses. Relevance is a fundamental concept behind many of the web’s current fascinations: realtime, social search, the business models behind news and journalism, social capital, social anything.

  Examples? To start: surfacing and pricing externalities, reducing the cost of relevance, cheaper serendipity, faster, better and cheaper links between online and offline.

• Created and accessed via any device, anytime.

  How, when and why we interact with applications and web services determines their eventual impact; just like “the best camera is the one that’s with you” , the best computer is the one that’s with you. Neglecting to develop applications for mobile interfaces and use cases is at best a limiting strategy, and at worst a death wish.

• Built as an API from the beginning.

  Highlighting a comment by Joe Lazarus on APIs in the Late Afternoon:

  I’m not an engineer, so I don’t know how technically realistic this is, but I’ve always thought that conceptually, companies should build APIs before they build their own interface. That way, they ensure that all the APIs needed to replicate the experience are already in place. The company’s front-end engineers simply become part of their own API developer community.

  Given the importance of APIs (read and write APIs, btw) in linking together web services, creating development communities and building effective business models, developing an API at the same time as creating the technical infrastructure and user interface is an important part of building a web services company today.

  One might read this to think that I’m only creating an investment thesis for a web services company: however, the same principles apply to any company and person today. At its core, an API is a rules-based structure for collaboration, and the basic premise of developing and using APIs can be used by any company using the web for any part of its business.

• Monetized through API access.

  Disrupted businesses often misunderstand what business they are really in: focusing on the products they sell, rather than the needs they serve and the problems they solve, is a recipe for unnovation. Businesses based on multi-sided platforms are often the most confused, failing to understand how to evolve the platform as the markets on either side of their platforms change.

  Media companies are obvious examples of this confusion; but they won’t be the last to make this error.

  Focusing on APIs is a powerful way to focus on the core business, because APIs are structured around exchanging and transacting value. At the moment, only businesses are able to really publish, use and pay for APIs, but eventually using and paying for APIs will be easy enough for individuals to use APIs in their daily lives.

• Requiring a small funding gap between costs and profits.

  Venture capital emerged to serve a need, to fund the timing gap between costs and profits that would otherwise stop new businesses formation. To avoid diving deeper in an oft-discussed subject, the economics of funding new ventures aren’t what they used to be. Start cheap, create a minimum viable product and iterate often.

  Value attracts money; focus on value first and the money will come.

• Created by founders that embrace a grand challenge.

  Embracing grand challenges as an organizing principle helps build adaptable institutions that reward passion and create awesomeness.

  Why place big bets on small ideas?

How would I use this investment thesis? If I was an outside investor, this is how I would use for evaluating businesses as investment opportunities. If I was an entrepreneur, I would start by first determining what problem angers me deeply, and then apply this same thesis to help figure out how to structure the solution.

Obviously it’s only a framework, but it’s a start…

As always, I’m open to thoughts. Feel free to tell me what’s wrong, misguided, unclear, naive; and of course, I’m curious about what’s right…

—

Related

• Fred Wilson, Thematic vs. Thesis Based Investing
• Michael Karnjanaprakorn, If I Started an Investment Fund
• Charlie O’Donnell, Free Business Plan: How to start a venture capital fund in New York City
• Seedcamp, Seeding Ideas for Seedcamp 2009
• Seedcamp, Seeding ideas Round 2
• Me, Five cultural and technological frames shaping new business opportunities.

In January I released a free financial model to help entrepreneurs model and understand the story behind their business. After a lot of interest from entrepreneurs for a simplified version of that model, today I’m releasing a streamlined version that will make it easier for entrepreneurs to start understanding the equation underlying their businesses.

Download the free, completely functional Excel financial model below:

Basic Financial Model created by Taylor Davidson Right-click to download. Zip file, 244 KB.

This streamlined financial model is intended to help entrepreneurs:

• Create marketing plans and estimate the costs and success in acquiring customers
• Estimate pricing plans, price points and estimate revenues
• Understand the key components of cost of goods sold (COGS) and selling, general and administrative (SG&A) costs behind the business
• Understand the basic net income behind these estimates

The model uses a mix of assumptions to estimate all revenue and cost line-items monthly over a five year period, and then sums the monthly results into quarters and years for an easy view into the various time periods. Even though years three to five are not terribly important for most early-stage startups, I built the model on a per-month basis for all five years for consistency and flexibility.

Please note a couple limitations:

• The model is not built for all types of businesses or for all different types of revenue or cost models.
• The model is not robust enough for raising investment capital. It does not estimate complete balance sheets, statements of cash flows, sources and uses of funds, financing requirements, calculate capitalization tables and other information necessary for potential investors.

But this model is enough for an entrepreneur to get started understanding their business idea. And of course, if you do need a full financial model for raising investment capital, that’s one of the things I do.

But wait: why is creating a financial model important?

To quote past thoughts:

Creating a financial model forces an entrepreneur to outline very specifically how a business “works”: how a company creates their products, how users and customers find and use their products and how those processes create revenues and costs. The result, a set of operational metrics, financial statements and the “equation of the business”, is one view of a potential reality of the business. While any one view is inevitably wrong, by digging deeper and analyzing the key drivers and testing a range of assumptions an entrepreneur can create multiple views to help make crucial product design, marketing, organizational and strategy decisions.

Instead of focusing on the bottom line profit and net income, focus on the assumptions and key drivers of the business. Developing a financial model creates the type of thought and data that helps entrepreneurs figure out what they are betting on and how likely their bets will pay off.

What is needed to start creating a financial model?

The best way to start building a financial model is to start thinking about how the business works:

• What is the product / service and what customer need does it serve?
• How do you identify your addressable market and target customers?
• How do you market your product/service and acquire customers?
• What are the revenue streams? (prices, sales of products or services, advertising, usage fees, etc.)
• What costs will the business create? (i.e. employees, web hosting, SG&A, various fixed costs, variable costs)
• What timeline of development and product launch and market / customer adoption are you expecting?
• What do you know about the market? (# of potential customers, $ spent currently, market trends, growth, competitors, etc.)
• What lessons, revenue / cost models and performance / operational metrics exist from studying existing competitors and complementary and substitute products?
• What big bets are you placing (implicitly or explicitly)? What are the key drivers in the equation behind your business?

And building a financial model is a great way to understand one’s business, the key decisions you face and the bets you’re placing. As Mark Suster explains:

Financial models are the Lingua Franca of investors. But they should also be the map and the Lingua Franca of your management discussions.

—

Basic Financial Model created by Taylor Davidson Right-click to download. Zip file, 244 KB.

—

Note: if you’re interested in a basic Excel model for understanding your personal finances, click here to start getting a grip on your personal finances.

—

Updated Nov 18: Thank you to Matthew Ward for finding a couple calculation errors in the original model, now fixed.

Following up from the discussion at TribeCon about the power of making yourself uncomfortable, a recent story about putting the idea into practice on a New Orleans Halloween late night extended to a morning’s flying to Houston and San Francisco.

At TribeCon 2009 in New Orleans last week I got to participate in a panel discussion about how to embrace making yourself uncomfortable for personal and professional growth.

Little did I know I would get to put the idea to use just a couple days later.

—

When I originally planned out my travel schedule for this fall, I booked my flight from New Orleans to San Francisco on the only reasonably-priced flight I could find, a 7 AM departure on the Sunday morning after Halloween. As I booked the ticket, I knew very well that I was also planning on either spending the night at the airport or going straight to the airport from a rollicking good time.

What I hadn’t planned on:

• Having the best Halloween of my life,
• Having a great time at Voodoo Music Experience with great guides and partners-in-adventure,
• Getting my face painted as a Zombie at the music festival,
• Taking a 5 AM challenge to keep the face paint on during my flight from New Orleans to Houston to San Francisco that morning.

But that’s why it was so fun, freeing and powerful.

First off, an important point: I’m an unquestioned introvert, and I’m not an exhibitionist. I’ve never liked Halloween; I’ve always loved to see the creativity and costumes, but I’ve never wanted to participate. I’ve skipped many Halloween parties, and taken a general pass on the holiday throughout my life. I can’t remember a single good costume I’ve worn over the years. I was a face-paint virgin.

But, when friends Sloane and Kyle jumped right in to get their faces painted as zombies at the festival, despite a bit of reluctance, it seemed like a good opportunity to try something new.

Without feeling physically different, I initially felt emotionally different, a little self-conscious, even if everyone else was doing it. I showed pictures from my camera of what I looked like without the face paint. But the feeling faded, and as the night continued at the festival and deeper into the New Orleans nightlife, I forgot about it.

And thus, helped by a little liquid courage, when Kyle and Sloane offered to drive me to the airport at 5 AM to catch my flight, on the condition that I kept the zombie face paint on for my flights to Houston and San Francisco that morning, it wasn’t even a decision. Of course I would.

Louis Armstrong New Orleans International Airport, New Orleans, LA

Would you let a friend board a plane looking like this?

Louis Armstrong New Orleans International Airport, New Orleans, LA

Waiting to go through security, worried a little bit about whether security will let me through without taking off the face paint, an unfounded concern as it turned out.

Sharing the moment on Twitter:

Getting ready to go through security at MSY (ping @feelgoodz @sloane) http://flic.kr/p/7c4tBV (tweet)

Sharing the moment on Twitter:

#photo a guaranteed conversation starter, getting ready to board flight http://flic.kr/p/7c8t9N (tweet)

On board the first flight from New Orleans to Houston

On board the plane from New Orleans to Houston, around 6:45 AM. As it turned out, I sat in the front row, at the entrance to the plane, enjoying the many looks from people getting on. Looks, smiles, quick glances, but no comments.

Sharing the moment on Twitter:

Taking a bit of #Voodoo and a NOLA Halloween on my flight (cc @feelgoodz @sloane) http://flic.kr/p/7c8A6u (tweet)

Layover at George Bush Houston Intercontinental Airport

Enjoying an hour’s layover at George Bush Houston Intercontinental Airport. A normal Sunday 8 AM, obviously.

Sharing the moment on Twitter:

A zombie’s layover in Houston airport (a late Halloween night, extended) #greatstory http://flic.kr/p/7c6cdt (tweet)

On board the second flight from Houston to San Francisco

Sharing the moment on Twitter:

Bringing a New Orleans #Voodoo Zombie to SF (on the second plane) #greatstory http://flic.kr/p/7c6z6g (tweet)

On board the second flight from Houston to San Francisco

Hanging with the airplane staff on the second flight from Houston to San Francisco.

At final destination, San Francisco International Airport

Arrived, a deal completed, at San Francisco International Airport, around 11 AM local time.

Sharing the moment on Twitter:

The Deal, completed; a NOLA #Voodoo Halloween zombie lands in SF http://flic.kr/p/7cfCQY (tweet)

Sharing the moment on Twitter:

Done. @sloane: The Deal. @feelgoodz & I drive @tdavidson to dawn flight, the #Voodoo NOLA Halloween makeup stays on. http://flic.kr/p/7c8A6u (tweet)

Once I arrived and took a couple pictures, I washed off the face paint the men’s bathroom. Interestingly, a couple guys came up to me and said they had flown the same route and had noticed me get on the planes in New Orleans and Houston and had been betting why I was in face paint, but hadn’t asked me.

And that was the most curious thing to me. Nobody asked me about the face paint. Not security, or the airline ticket-takers, or fellow passengers, or the stewards and stewardesses, or people walking in the airports, or even the passengers I sat next to (perhaps, especially the passengers I sat next to). All probably curious, but afraid to ask.

But instead of waiting for people to ask, I embraced this as an opportunity to start a lot of conversations. I converted many glances and quick smiles into conversations and laughs, simply by reaching out to people and explaining a little bit about why I was dressed in muddy shoes, a blazer and silver Zombie face paint that morning. Simply by being a little uncomfortable, by being willing to make a fool of myself, I hope I brought a little bit of joy to everyone that day: to everyone that saw me but didn’t say anything, to everyone I talked to and laughed with that morning and hopefully to everyone that followed the story on Twitter around the world.

Would I do it again? If the opportunity presented itself, yes. Would I plan to do it? No.

Why the difference? Because the joy was in running with the moment, with accepting the opportunity, to embracing the simple fun involved with carrying an in-context joy to an out-of-context oddity, to creating an unexpected experience and story for us all to enjoy.

The lesson? Being different usually isn’t the plunge we think it is; instead of shying away from trying something new or standing out, embrace the opportunity for yourself and for others. Being “a human in public” both online and offline is a fantastic way to connect with people and build real relationships, whether they exist only in the moment or forever.

And I couldn’t have done it without you.

—

Thanks to Sloane, Kyle and Andrew and the rest of the New Orleans community for showing me a truly great time and helping create a story for all of us to share. I’ll see you all again soon.

—

All the pictures above on Flickr, A Zombie’s Journey.

A short note highlighting the need to understand economic realities in order to develop new business strategies (yes, including “free”), highlighted by a couple points by Cory Doctorow.

From a conversation with writer Cory Doctorow by Diane Coutu in Harvard Business Review (behind the paywall):

Coutu: What about the impoverished artist who wants her compensation?

Doctorow: Art is an economically irrational activity. That’s as true in the twenty-first century as it always has been. The majority of people who have practiced art never earned a living doing it. But artists create not only for economic reasons; they create to be heard. There’s no question that the internet does a better job than any other system of allowing people to be heard.

Agreed; the Internet is the most powerful mechanism for allowing people to be heard that we’ve ever seen, but it grants that ability as an opportunity, not a guarantee, even within tight networks. * Attention is a scarce resource, one we value far too lightly, in my opinion.

Continuing,

Coutu: This raises what to my mind is an interesting question: What is contemporary art?

Doctorow: I believe that from the artist’s perspective, today’s art must presuppose copying. If you are making art that you expect people not to copy, then you are not making contemporary art.

When attention is a scarce, obscurity is a bigger hurdle than piracy; if an artist today truly wants to be heard, it’s critical to make art that can be spread, shared and discussed, and in today’s world that means leveraging the structures and economics of the Internet’s copy machine. **

But most importantly,

Doctorow: I post all my books for free on my website, and people can remix them, translate them, distribute them to friends; they can do anything they want so long as it is for noncommercial use. the model works because for most people a free electronic book is not a replacement for a printed book, but rather an enticement to buy one. I sell the hell out of printed books by giving away electronic ones. That may change someday. A meteor might hit the earth, or we may lose our taste for novels altogether. But for now, giving away my books for free on the internet is earning me an income. If that changes in the future, it will probably change in a way that’s easier for me to understand, as I am already engaged with copying, than it is for someone who refuses to try to understand it.

As I noted to Jim Goldstein: ***

… the key is to evaluate the time, cost, and expected returns from strategies using “free” before blindly diving in. Too few creatives are thinking about the nuances of free and how trends largely beyond their control are changing their businesses. Fighting the “problem” of free won’t get anyone anywhere.

Free isn’t a problem, it’s an opportunity.

New markets, ready to be attacked. New structures, ready to be utilized. Confusion about copyright and piracy, ready to be cleared up. ****

Engaging, educating, thinking, sharing, helping, competing: it’s the only way we’ll move forward.

—

* Does the Internet destroy serendipity? No. In fact, the Internet enables us to experience the joy of serendipity through the power of the largest positive variable intermittent reinforcement engine ever created.

** See marketing, viral and the structures behind viral loops.

*** See Jim Goldstein’s recent posts about Free for a great discussion about how the principles of free apply in the photography business and for photographers, namely The Value of Free: Where Is It? and The Marginal Cost of Creativity.

**** Ok, so what does this mean tactically? I’ve posted my thoughts before in Lesson 2 and Lesson 3 of my series on how photographers can create new business models. Also, see Miki Johnson’s How can “free” work for photographers? on the RESOLVE lifeBooks blog for additional thoughts on how to leverage “free”.