Retooling Stale Businesses

There was a great conversion in the comments to yesterday's post that I'd like to highlight. It was about retooling stale businesses and it was initiated by comment blogger JLM. A "comment blogger" is a person who leaves comments that can (and should be) entire blog posts, but they leave them on other people's blogs. We've got a bunch of comment bloggers here at AVC and JLM is certainly one of the very best. Here's what he had to say on the topic of retooling stale businesses:

There is a huge opportunity in America today to acquire "old school", low tech businesses and retool them with modern management, modern marketing including social media, a well crafted financial structure and a dab of leadership to make an otherwise boring business into a highly scalable and expanding enterprise in which the growing size provides an enormous financial operating leverage.

In effect, this approach takes the cutting edge of the evolving technology (including the basic impatient thinking and genius of the entrepreneurs in that space) and cycles it backwards to apply it to other opportunities.

If you click on this link you'll find the start of the discussion and you can follow it down the thread.

When my partner Brad and I were starting Union Square Ventures in 2003, we both read Carlotta Perez' book called Technological Revolutions and Financial Capital. We were inspired by her description of the "second phase" of technological revolutions where the revolution is applied to the broad based business sector and society itself. An example from her book is the way the auto revolution allowed for fast food and malls to develop as big industries. They auto revolution reshaped the food and retail industries along with most other industries.

So when we wrote the business plan for Union Square Ventures, we consciously decided to focus on the "applications layer" (ie web services and now mobile web services) and not on the infrastructure layer which we saw as the largely played out "first phase" of the Internet technological revolution.

But as JLM so rightly points out, there is a much broader opportunity than the one Union Square Ventures is focused on. You can invest in existing but stale businesses and apply the lessons and benefits of the Internet technological revolution to them. But not only that, you can apply good old fashioned leadership to these businesses. This is not a new idea and I know of a bunch of entrepreneurs who have been doing this for a while now. But there is enormous opportunity here and I think we need to see even more of this kind of investment of time and money going forward.


Comments (Archived):

  1. RichardF

    I’ve been thinking lately how I can easily grab some of JLM’s comments, file and index them for my own personal reference because there are so many nuggets it would fill up and make great business management book.

    1. Fernando Gutierrez

      I’d buy that book!

      1. Senith MBA tutor

        Ill buy that book too. Fantastic contributions to this community. Thank you JLM!

        1. Senith MBA tutor

          Want to add that what this community gets through Fred’s thoughts and commenters like JLM cant be learnt in a finance text book!

    2. whitneymcn

      Remember that this is happening with Disqus — if you click through the link to JLM’s Disqus profile in Fred’s post you can “subscribe” to JLM’s comments and effectively have a ready-made archive.I haven’t looked at it recently, but if I remember correctly the Disqus’ API would even make it possible to pull all of them down locally.

      1. RichardF

        I haven’t looked at the api yet, thanks for the reminder. I did look at the subscribe option and rss feed but this doesn’t give me the option to tag and organise in the way I want to.If the api allows me to download all of them locally then that’s the answer to the problem.

        1. whitneymcn

          Just checked, and unfortunately it doesn’t look like you can do this via theAPI: you can only pull down comments from sites that you own.I really like Disqus as it is, and it has such potential in many directions,but it’s also the winner for my personal “this could be interesting totry…oh, but the API doesn’t support that” contest.

          1. RichardF

            yep just checked too! I know how I’ll do it going forward, I’ll just have to trawl back a bit manually when I have some time.

          2. obscurelyfamous

            Our API pretty much sucks. We’re working on Disqus API 2.0 and we’ll be promoting it much more when that’s ready.

          3. Tereza

            Appreciate your honesty, Dan! Goes a long way. We’ll get you there yet!

          4. JLM

            Hahaha, pretty damn…………………………………………………………………………………..funny & honest.

          5. ShanaC

            Thank you for your honesty, it is a breath of fresh air.

        2. kidmercury

          you can grab the RSS feed adn plug it into, an on-demadn book publishing site, and re-organize and publish as physical or ebook from there — might be of use to this project

          1. RichardF

            thanks for that just took a look at fastpencil, interesting model. I was going to grab the rss feed, stuff it into a database and then put a front end on it.

          2. Ellie Kesselman

            Yes, that’s exactly how I do it! I get the RSS feed for anyone on Disqus I want to follow, and that way I can get their activity feed through out Disqus, not just on a single blog or site.For me, it is sufficient to stuff the RSS feeds into a reader, but there are a number of on-demand book publishing sites as you described, for more permanence for really worthwhile content. Thanks kidmercury. Good idea!

    3. rebeccastees

      i grab quotes and put them in tumblr with a bookmarklet.

      1. RichardF

        I do the same Rebecca at the moment haphazardly but I really wanted to automate the process and capture the info so I could organize it anyway I wanted.

  2. Fernando Gutierrez

    I love that you (and JLM) bring this out. Sometimes we focus too much on the latest technology and forget about all other businesses. That makes sense because you invest in tech. But it also doesn’t make sense because there are so much businesses that aren’t about technology, although they use it.I must be great to reshape how the world works/communicates/entertains. To be the next Bill Gates, Larry Page or Sergei Brin. But there are also thousands of people who start traditional business who are hugely successful because they do it right.In Spain, where I live, I can think of Amancio Ortega. He started Zara (clothing) and made around 25 billions (Forbes). Ingvar Kamprad started Ikea (furniture) in Sweden and got around 23 billions (Forbes). Both used technology to change how business was done in their sectors. Zara manufactures everything with real time information of what is being sold in the shops, being able to have what they call “continious collection” at very affordable prices. Ikea… well most of you know about Ikea, you’ve built their furniture many times!

  3. Greg Leman

    This is the classic build vs buy issue. Do you attack an old market segment by building a competitor from scratch, or just try to drag one kicking and screaming into the present? Having been involved in several turnarounds, retooling the stale business isn’t as easy a proposition as it is often made to be. These companies get stale for a lot of reasons, and it’s not just that they haven’t heard of how cool Web 2.0 can be. Legacy infrastructure, corporate politics, and customer relationships can all trip you up in the attempt to infuse modern technology and management.The real chances for success in this scenario are to roll up several legacy pieces via acquisition and hit the market with a very different approach. But that’s extremely capital intensive, and their aren’t many financing options for a first round of $50M these days. That’s a shame, because there are plenty of $1B businesses that could be $10B if you could just break enough glass.

    1. fredwilson

      we don’t buy companies so we focus entirely on buildbut as to buld vs buy, a lot depends on if you can get something for cheap enough

      1. Greg Leman

        Building is a matter of perspective — it depends upon the size of your building blocks. It’s not just the cost of slinging code, it’s the value of the customer relationships and time to market as well. To the entrepreneur, the value of cutting 18 months out of a schedule by purchasing an existing company’s product can be a lot more than just the cost of developing the product — you can be in the position to skip a funding round, eliminate the risks of development, and start off with traction.People were doing rollups in the 1980s with LBOs, and while it was a turbulent time a lot of productivity and profit was created. Today that’s been replaced with large companies rolling up smaller companies. Same activity, just the financing has changed.

        1. JLM

          The real opportunity is not limited or constrained by size — that is the beauty of this otherwise dead simple concept. You can buy something of very modest size, perfect the prototypical operating unit and then go buy as many as you possibly can buy. It may be easier to retool one and then go knock off the rest.It is a acquisition, retooling, growth and technology strategy in businesses which can be scaled enormously. Then you change out the people to folks who can run a BIGGER business.You are constantly looking to improve margins through efficiency and retooling but also to leverage a fairly static corporate overhead thereby making a greater marginal profit on each incremental dollar of gross profit.It is so simple as to be incredulous. But it works.

    2. ShanaC

      I think this is a total people decision and org decision. It’s not a one off.Good example: Nordstroms has a really wonderful web shopping experience for shoes. Not so great reviews (they are ok, depending on the shoe, it isn’t in their blood) but perfect search, perfect fit guides, more so than Zappos. They’re very legacy for shoes.Sak’s, despite having a larger online shoe department, I would rather run through brambles.Really a total organizational thing and what they are willing to embrace.

      1. JLM

        This is a very, very interesting comment.What is teaches us is this — a huge company like Sak’s can be beaten at the POS by a nimble competitor who makes the experience pleasant. I think the number one piece of low hanging fruit is simply greeting your customers at the door. This may be the BIG secret of WalMart.Here is something I do that is weird — I use scent machines to scent my business units. It works and nobody can really figure out why.

        1. ShanaC

          It is probably THE Secret of Walmart. It is also knowing when to say hello. I think Estee Lauder and L’Oreal both have rules about when to approach someone, because apparently they followed around customers and there is a point where customers want to be approached rather than being left alone to figure it out. The experience of being in Saks for shoes is very different.Now if only I could figure out how to bottle JLM scent machine scent as the perfect perfume for luck for me.

          1. JLM

            The earlier I get up the luckier I get.

          2. ShanaC

            Working on it. It’s been getting better this week. I definitely needsomewhere to go. I just found something to do (for myself), which is makingthe process better.Also I realized, despite the heat- running at 11pm/midnight bad!

    3. JLM

      The twist that I see (and have done and am in the process of doing) is to find a business — a business which is scalable if by no other measure than being a multi-unit, multi-state operating business which can expand through consolidation or creating additional units — which is small and has almost no current growth dynamic. The owner may simply be content with his lot in life or he may be one step from failing.You buy the business.You retool the business plan, the systems, the processes, the staff, the financial structure, the marketing — all the while “modernizing” everything while deploying not cutting edge technology but the very best proven technologies. White button down collar type technology.Oh, yeah, streamline everything and make it possible to run the business remotely.Then create an analytical system for evaluation which is automated and viciously detailed and run the beastie by the numbers.This can be done w/ almost any local boring business which can be scaled. I am currently doing this w/ bingo halls. Huh? Right!

      1. joeagliozzo

        It occurs to me that these types of entrepreneurs (JLM and those who buy stale businesses) are the best customers for web app developers looking for product/market fit where your app has positive ROI, especially where the current tech overshoots. Example: – I have used it and it is great for managing a sales team and the sales pipeline, but it is probably overkill for most small businesses and it is not cheap. A simple web based alternative that helps a CEO like JLM build his digital dashboard for the sales pipeline (at the right price) is probably going to be a winner. Same with managing social media and other web presence, CRM, telephones (Grasshopper) etc. Simplified, cheaper web-based tools, with almost immediate positive ROI and little to no internal IT support requirements.Interesting to think how many business functions in JLM’s post on the “4 columns” method to revamping the business could be improved with existing or future web2.0 services.

      2. PhilipSugar

        Hope your flight this morning was good. Looks like you’ll be dodging pop-ups tonight.I did look up your business and really respect your strategy.Instead of fighting with tons of smart people that have been backed with too many dollars, you have the pick of the litter.I’d wish you luck, but you don’t need it.

        1. JLM

          I was dodging storms from La to SC. Great weather flying experience — flying the stormscope. I am just amazed at how accurate the stormscope really is. Lately it seems like every flight is a new lesson in weather flying.

          1. fredwilson

            i would not enjoy thati don’t like to be in a small plane periodand worse is being in a plane in or near a stormyou guys are much tougher than me

          2. JLM

            Most days are a piece of cake — no weather, no clouds and just smooth sailing.

          3. fredwilson

            that’s when i like to flyi wish i could fly whenever i wanted to and then i could always fly in goodweather

      3. Tereza


      4. Tereza

        I have a friend previously in the “human health care” business who’s switched to veterinary care.He is buying up medium-sized vet practices and also vet surgical centers and driving massive efficiencies to this highly fragmented and non-business-y business. These are businesses that not only are late to 2.0, but missed 1.0 too.You might be shocked at how much people spend on their pets’ health. Hard to say no to Buddy’s surgery or chemo when he’s been such a good friend to you over the years.Swipe the credit card and you’re paid. No dealing with insurance companies.If that’s not JLM’s style, I don’t know what is!

        1. JLM

          One of the reasons that people spend so much on animals is that the animals never get a vote as to whether they actually go to the vet nor can they speak and tell you what is wrong. They are actually more expensive than BMWs out of warranty.

  4. kidmercury

    what do you guys think is after the app layer? and when do you think that world may come? IMHO that would make for a great blog post.IMHO what comes after the app layer is “the governance layer,” or the human layer, the trust layer….whatever you want to call it, something like that. this is the layer in which value shifts from the apps to platform governance. from the perspective of clay christensen logic i expect apps will be commoditized and value will shift to non-technological things: blog stars, sociologists, artists…..that type of stuff. the skills needed to build a civilization. the governance layer will enable us to build the world beyond the nation state, just as the nation state is collapsing. as for when this trend really kicks off….well i think there will be increasingly be opportunities as we approach 2012……it’s the layer that saves the world! lol

    1. fredwilson

      totally agreemy partner Brad has been saying internally this for a few years now

      1. kidmercury

        lol brad should definitely do a guest verse “the business plan that saves the world”

        1. anand

          Love the video kid

          1. kidmercury

            lol thanks. i encourage all to upload their own version to youtube. then we can create an album and put it in itunes! lol

          2. Satish Mummareddy

            Kid, you need to start adding costumes in your videos. šŸ˜›

          3. kidmercury

            hahahha good idea! i was watching the batman movie “dark knight” the other day…..i def need to get a cape

          4. Satish Mummareddy

            that would be cool.

    2. Dan Ramsden

      Is that really a world “beyond the nation state” or just a transference to new nations? Or new types of nations? If what makes a nation is a shared heritage, then is the nation of Apple fanboys a superior form? And is a war with Android fanboys less likely than one between Argentina and the UK?

      1. kidmercury

        great questions dan! here’s my take:1. i suppose you could think of it as the end of thinking of nations as being geography-based, and mroe about being network-based. though i think there will be a geographical component (for instance, in fredland, we would likely see a cluster of fredlanders in new york, san fran, and perhaps other cities where fred frequents or invests)2. crapple is certainly a nation of sorts. $teve is their dictator, and like any dictator, his success depends on deception and charisma. notices how crapple always focuses on creating an enemy; flash ruins everything, msft is not cool, etc. unifying the people against a common enemy helps create groupthink, a key component of any fascist state.3. as for allegiance, i have two primary thoughts: first, the idea of patriotism is going to be vastly reshaped, primarily because the nation-state as we currently know it is a form of lock-in. when nations are digitized, the lock-in will be removed; if you don’t like the way your nation rolls, you’ll simply get a new RFID card and “move” to a new network. then, nations compete for you. this will create a new consciousness characterized by individuality. to give an example, currently, the collective consciousness is such that we are not really allowed to challenge government in many ways; i.e. saying 9/11 was an inside job, is forbidden, focusing on history that acknowledges JFK and RFK were killed by the CIA is also forbidden, understanding real economics is forbidden….so much stuff is forbidden, and people keep voting for the same two party system that robs them every time, largely because htey feel there are no other viable options and because thinking about bad things makes them sad and they don’t want to feel sad. once it becomes easier to “move” to a new network, that’s exactly what people will do. it is not that controversial to bash $teve and crapple; if you don’t like them, simply move to another platform. it will be similar to that, and thus tyrannical, parasitical government will be less successful. secondly, allegiance will transfer to niche social networks we are a part of and engage in daily. already, the idea of nationalism is becoming fractured; most americans, for instance, are americans, but they have no real allegiance to this country or its principles, more interested in sports, entertainment, their friends and family, and local clubs they are a part of. in many ways this is nothing new, as all government is local and the united states in particular was founded on principles of strong local government; in fact the US federal government is supposed to exist to serve the US states, not the other way around. anyway, as things break down, we will realize we have more in common with those who have shared interests with whom we interact with daily rather than those who were simply born on the same plot of land we were. i think we are already seeing some of these concepts play out in fredland.4. i think platform wars will occur, and i think false flag attacks may occur as well. if there is ever a major security breach at crapple, and if crapple responds with more draconian policies (like how the patriot act was the response to 9/11), i would be very interested in seeing if there is any evidence to suggest elements within crapple were behind it.

        1. NicolasVDB

          As appealing as it may be, Fredland may be a few decades or even centuries (if we freeze Fred) away. But I think that the concept of “Citizen of the World” is within reach. We already have the UN as superstructure, all we need is to gradually shift over more responsibilities from the nations to that supra level, the way it was done in Europe, from the Rome treaty in 1957 to its current Constitution. The driving force will be exactly what you say, “we will realize we have more in common with those who have shared interests with whom we interact with daily rather than those who were simply born on the same plot”. I certainly feel more in common with our designer in Bolivia and the developers in Romania or China than with the boulanger in my hometown of Marseille or the fireman in Dallas.OK, we’re completely digressing from Fred’s post – another great one!

          1. kidmercury

            IMHO the true catalyst for fredland will be that the nation-state as we know it is collapsing, and thus SOMETHING must replace it. the global governance you suggest is what we are on the path of reaching. this will not replace the nation-state as we know it, but rather will be ANOTHER layer of government added on top. this means another layer of taxes, and further movement away from local government towards a socialist, one world government. those who think this is a good thing should consider that it is the trajectory we are currently on, and that the trajectory we are currently on is the one in which the world is increasingly dominated by a handful of corporations while everyone else lives in poverty. this is because greater centralization of government leads to greater corruption and inefficiencies.participation in the UN is unconstitutional by US standards as it relinquishes national sovereignty to a global government, though most things in the US are unconstitutional, so i guess the constitution, the ideology that is supposed to unite the national consciousness of the US, is no longer adhered to.

          2. ACM Johnson

            Big multinational companies have been quietly doing this for many years – there’s a strong ‘belonging to a known entity’ feeling among employees of HP, IBM, Shell, Schlumberger, HSBC and the like, supported by internal private social networks. Many of the multinationals have more annual revenue than most of the countries where they operate. Countries compete for their investments. They aren’t run as democracies – Facebook isn’t a democracy either.

          3. NicolasVDB

            yes but actually I think the influence of corporations is diminishing, as new online social networks appear. So the Citizen of the World will not be brought over by IBM, it will be brought over by the new generation of Facebookers. If corporations contribute, it will be indirectly through their wealthy owners, like with the Gates Foundation

    3. Matt A. Myers

      Hey Kid – I agree completely. I have my backburner of ideas for this layer already lined up.And “Saves the world in 2012” – Indeed. It’s hopeful for community.

    4. markslater

      Kid – you touch on a very interesting topic.For “non-tech” enthusiasts such as myself ( i define non tech as someone with limited programming experience, that is not an engineer – but likes to “tinker”) i had a bit of a eureka moment when in my first job as a financial analyst for a carrier class network, i was taken in to the NOC by a core engineer who spent the afternoon explaining to me what the OSI stack was. This was important to me as it helped me to really grasp the guts of networking, and thus how to begin to properly model its cost structure and so on. The OSI stack describes 7 layers of a networks architecture starting with the physical wires, and ending with the application layer. I believe there is also a TCP | IP network architecture model that follows a somewhat similar theme. Fred’s investment thesis really occupies layer 6 & 7 although you might argue that the likes of Twilio or the other company that makes the Bug come down the stack. But this is a great thesis because if you think of the stack in the context of roads – fred is focused on what the road can be used for rather than actually building it. So while some VC’s (i can think of 2 here in boston) are rolling trucks and fixing the infrastructure so that it is safer, or faster, or smoother, or simply more efficient, the world of possibilities that come from the first 4 layers having been built are mindblowing.Boring as that may sound – there are opportunities all up and down the stack still today. I’m mean shit an entirely new stack (or the invention of the highway if you like) is in its infancy and its called mobile. but it is an interesting question as to what comes above layer 7. i’ll probably get laughed off here technically speaking, but this blurring of the application layer (API’s etc and the mobile stack) is beginning to dramatically evolve how we as a species communicate. there’s no doubt in my mind that this evolved communiction is leaving behind vast institutions like government, possibly education and so on.

  5. ShanaC

    I don’t understand why this is an either/or. Although I have yet to read Carlotta Perez, all of these revolutions seem to be driven by the fact that we make tools. Just because someone made a tool and said “do this” doesn’t mean we’re going to do “this.” Or “this” exclusively.It seems almost innately obvious that the biggest benefactors of technology are not technology companies per say, but surrounding industries. It just seems to be a matter of choice of how to handle those surrounding industries. I also don’t think there is a good answer, at the end that’s also a people and org issue.

    1. JLM

      In business, competitive business, there is a very simple rule —In the land of the blind, the one eyed Jack is King.You don’t have to be perfect, you just have to be more competitive than your competitors.You don’t have to outrun the bear, you only have to outrun your hiking companion.

      1. ShanaC

        One thing to add: You have to know why you are competing to give yourself spirit. Sometimes you need to fall a bit in love with what you do. With the happiness: And you are right, perfect is the enemy of the good.Though I have to say, if you are going to try to outrun a bear (or try to) be nice to your wife along the way. I got that from you from when you went hiking and saw a bear…..

  6. Jan Schultink

    I am not staying that my sector is “stale”, but still things are going upside down in professional services as independents (like me) are organizing themselves using basic technology and an increasing trust in personal brands:Find customers anywhere around the globeService customers in loosely connected networks of independentsBuild reputation and share it with the worldA bit like when aviation enabled you to eat fresh bananas all year around… (Sort of).

  7. Satish Mummareddy

    The cool thing about moving to the west coast is that I roll off the bed and turn on my laptop knowing for sure that Fred would have already posted on šŸ™‚ On the est coast i would hit refresh a bunch of times from 6am -8am. šŸ™‚

    1. fredwilson

      bummer that you moved to the west coast though

      1. Satish Mummareddy

        The good thing though is that I Still wake up to :)I was in State College PA for 7 years and on the road in DC for 3. šŸ™‚ I had my head down as an early employee who worked put in sweat equity like a founder(didnt go to india for my brother’s nor my sister’s weddings in the last 18 months šŸ™‚ as there was some impt deadline or other). So I was pretty burnt out a few months ago. And it was time for my wife to find a good hospital for her residency. More importantly, I had no mentors. šŸ™‚ I tried my best to learn online.Thank you for writing every day. Even though none of you know me personally: you, Marc Andreessen (and Ben now), Brad Feld, Josh Koplemen, Ed Sim, Chris Dixon, Mark Suster, Paul Graham, Steve Blank, Seth Godin, Joel Spolsky, Dharmesh Shah, and surprise surprise Steven Sinofsky (he had an amazing blog once) have had a significant impact on me.I’m sure moving to NY might have had a similar effect as moving to San Francisco, with so much going on in NY starup scene in the last few years. San Francisco is helping me recharge and regroup.Nothing inspires you more than hearing Elan Musk talk about how he put all his liquid assets into Tesla in 2007 because it was either that or let Tesla die. I go to get coffee on Philz near ATT park and at any point in time there are 3 or 4 groups of people discussing ideas or talking to mentors about what to do next. (my wife teases me that I dream about getting picked up in a coffee shop to do a starup) I went to founders institute showcase yesterday and saw 3 VCs & jason calcanis & sarah from techcrunch give feedback about different areas (I see 5 startups with the same idea every week or this area is huge & I dont see much activity here). I’m getting a fast track education. :)Kinda interesting for now. Lets see what life brings next. I never thought I could live in a city and i love San Fancisco. So maybe next stop will be NY in 6 years when my wife finishes up fellowship and is ready to practice. šŸ™‚

        1. fredwilson

          i am happy to see young guys like you and @andrewparker supporting yourwives careers. as the father of two girls, that’s a big deal to me

          1. Satish Mummareddy

            We’r trying to do our best with that.All I can say is, if your wife is going to sit in your office at midnight for a week at a stretch (even though she has to show up at work at 6am the next morning) to make sure you stay awake and meet customer deadlines, you need to do everything in your power to make her happy. šŸ™‚ Like format her thesis, give her a ride when shez late and visit her parents when ever she wants. šŸ˜›

  8. Dan T

    An example of construction supplies distribution. I am sitting in a hotel room with a friend in China in 2005 reading “The World is Flat”. I ask him if he’s read it before. Then I feel kind of stupid as I remember he is talking on Skype with a prospective customer in the US, who dialed him up on his local Florida number, and then he calls back to his office in his apartment in Beijing and speaks in Mandarin to one of his sourcing agents about the specs. He is American, runs the full business from China and the only function in the US is sales agents. I was encouraging him to buy an old-school construction supplies business in the US – could have been a nice retooling of old from new. He went a slightly different direction and effectively became a new procurement arm for an old-school construction company instead.

    1. fredwilson

      oh man, that makes me laugh “then i feel kinda stupid”

  9. andyswan

    My neighbor made a LOT of money buying a dying, local distribution/shipping company. He had an invention (with patent) for the equipment/process of shrink-wrapping pallets of goods. So he took his “revolutionary technology” to an old market and turned a company that was used to hauling a few things here and there into a platform for his new invention. $50m + annual royalties later…..He never thought of himself as an “entrepreneur” at all. He was just PASSIONATE about getting his IDEA into the hands of the end user. Since no one else could see the level of efficiency and safety his idea provided, he figured out the fastest way to prove it….and put many of them out of business while now leasing his creation to the rest.TONS of stories like these, especially if you get away from the application-coasts and into the areas where men drive on 18 wheels for 18 hours lol.

    1. fredwilson

      “he was passionate about getting his idea into the hands of the end user”that’s entrepreneurship

  10. PhilipSugar

    I could not agree more. I’ve said here before that one of these days I want to go work in a low tech, old school business, where my competition is much, much less talented than here in the high tech space.

    1. JLM

      Don’t do it unless you really want to make a shit pot of money. It is otherwise not very fulfilling.

  11. kirklove

    Great post. I’ve been trying to help Lili see this because she works for a non-profit stuck in 1985. Man, pretty much every non-profit should follow “Charity Water” or “Do Something” and their embracing of the tech approach. It works. It can work for any company for that matter. Lean. Aggressive. Innovate. Lead. Nothing original, but oh so powerful.Also it doesn’t take a ton of money. Currently reading Zilch ( Solid book.

  12. Boris

    Fred, it would be great if you could convince JLM to get on Twitter and start a blog.Also, Disqus needs to add search functionality. I tried tracking down the comment where JLM talked about his real estate RTC experiences (great history lesson on how to buy low sell high) and it took a bit of digging around. I only found it because you highlighted it in a blog post “When Greed is Good.”

    1. fredwilson

      i agree on both. i’ll get on it

    2. Tereza

      I’d love to see search functionality on comments too.

  13. benortega

    I think Carlota’s assessment and theories are on point. If anyone wants to know what the future holds and why we are just at the beginning of a truly “technological revolution” that lifts everyone up; read this: (S+B article:’ve been following her since 2005 and she’s given me many insights.Glad to see you guys think she’s cool too.

  14. Mark Essel

    This post gave me an image of a technology wave washing over the world with entrepreneurs in the white water.Thanks for calling out JLM’s comment yesterday and the thread, I miss posts/comments without mobile wireless now Mon-Wed (snuck on today). Will catchup later this week.

  15. Brad Dickason

    My fiance and I opened a salon recently and it baffles me that these industries are using such old technologies. Yes, the hardware layer (or infrastructure, as you put it) have alot of room to grow, but simple things like “How to sign up for Twitter” are still killing it on the conference circuit in these sleepy industries.

    1. JLM

      Put up a sign that you are offering a discount on your website, FB or on Twitter and watch how quickly your customers become incredibly computer literate.

    2. ShanaC

      Umm, you have no idea. I once got a reccomendation about jobhunting through twitter. The person who sent it didn’t realize that I was a little more on top of the issue than average. To be honest, I am not finding the biggest gain, but…you never know (I also think it is the ending of the slow hiring season, another issue)

  16. kirklove

    At first I thought you were talking about The Knicks. šŸ˜‰

    1. fredwilson

      don’t go there

  17. Gus Fuldner

    Increasingly, the “retooling stale businesses” strategy is being pursued by so-called “search funds”. Search funds are a form of entrepreneurship through acquisition. The way it works is that entrepreneurs, usually one or two, raise a small fund (low 100Ks) from several investors to support their operating expenses during a search period of 1-2 years. During this time they try to find a business to buy and grow through improved management processes. Once an acquisition is found, the investors in the search have a right of first refusal to invest in the acquisition itself. The entrepreneurs who were initially searching for the acquisition become the CEO/COO and run the company. Often search fund entrepreneurs are recent business school graduates.Stanford GSB’s Center for Entrepreneurial Studies has site with lots of resources about this strategy at…The WSJ also recently wrote a story about search funds, but it is behind the pay wall.

    1. JLM

      There are funds who warehouse CEOs and find their next deal typically bigger consolidation plays. I think the big opportunity is how easy it is for YOU to singly do the same thing. Very few small businesses trade for cash because the sellers need a periodic income.The dumber the business, the better the opportunity.I literally have a next door neighbor who had a pest control company which now has landscape mn, home repairs, etc. etc. etc.We discussed the business and I asked him what was the biggest asset he owned?After discussing it for a bit, I told him I thought it was a loyal customer list who was prepared to allow him and his workers into their home!I would bet you this guy has created a business that is worth $25MM by using that one competitive advantage and slapping it with a modern marketing and management system.Take any type of plain vanilla tech api and he is using it. That’s all that is required.

      1. ShanaC

        Both sides have to be ready for it. Look at apartment hunting in NYC. It is a mess. There a number of startups that are trying to crack the problem: the real heart of the problem is that it is basically private owners in a few buildings that makes apartment hunting a mess. A plain vanilla tech application that isn’t craigslist would resolve so many of these issues, but I’m not sure how technically literate all of NY is both from the apartment rentee/seller side or from the renter/buyer side.

        1. JLM

          Apartments are always going to be a bit wacky because they involve a person’s private residence — a very special place.I have often thought that there is a Charles Schwab type application for an automated office or warehouse stock exchange which would simply list buyers (tenants) and sellers (landlords) but which would avoid having to pay leasing commissions because there would be a direct connection and it would not go through the brokerage community.Think how similar this is to what Charles Schwab did! He automated the transaction and thereby made his electronic cost center the real “cost” and eschewed brokers thereby eliminating the greatest cost to stock transfer transactions.There is a similar opportunity in the commercial real estate business. Even better w/ subleases.The typical leasing commission is calculated thusly — total rent during the term of the lease (term x annual rental rate x SF) x 4% — and is paid in cash up front. The numbers are huge. These are million dollar transactions which really could be reduced to a cost of $1000.Your big opponents are going to be the real estate brokerage community and the state real estate licensing boards. Screw them, go get a license.

          1. ShanaC

            My passion is not real estate. I’m very tempted to forward this to twodifferent friends whose passion is real estate. One has already gotten aton of accidentally private training in real estate. Unfortunately, nietherof them are in love with techy things. *sigh*Though I have one guy who may be with it enough, and definitely may behungry enough. Maybe. And I have this deep love of helping other people…

  18. LIAD

    not to blow smoke up our own a**’s – but we’re light years ahead not just in terms of leveraging technology (as we well should be) but in regards lean methodology, customer development, pivoting strategy, conversion/retention tactics etc – much of which can be easily transfered to industries other than our own – which are exponentially larger.We’re fortunate to have industry thought leaders who make public their thinking gratis – and not behind expensive books/$3,000 conferences -as well as agile and vibrant communities where we can dissect and expound ideas quickly and efficiently.In days of old, due to transportation requirements – industry and innovation built up alongside physical rivers – nowadays they build up alongside rivers of information. How can industries which still utilise fortnightly printed newsletters/journals as their sole mode of communication compete with our real-time, digital, conversation and feedback loops. If we as a community decided to focus our creativity and skill sets on other industries – think for a second how much financial and social value we could create.

    1. JLM

      Another aspect of the ‘net and communities which is useful is the ability to cross age divides. This is a proxy for mentoring, apprenticeship and being current in the current culture. It is a huge opportunity to broaden one’s view of the world.

  19. Chris Waldron

    I think there are several things happening to “stale businesses”.-data mining (LTV, CTA, Customer Surveys)-improving culture and giving purpose to your team-leveraging technology to help scale the business from local/regional to the industry leader-understanding that an awesome customer experience has to be a core part of your businessOur business isn’t sexy enough to be written up in Techcrunch or RT’d but we are getting it done in an industry where low technology use and bad user experience is rampant. Our score card doesn’t include page views, blog posts or Twitter followers. Our customers aren’t checking in. But we can understand (and leverage) influence, and customer engagement through social media. We can study game theory and add a little spice to our customer experience. We maximize tools like Indeed to help us hit our key metrics. Or we study great companies like Etsy or Meetup and how they are creating an awesome community.Our focus is to revolutionize the space we are in through applying lessons and new technology.

  20. Bhanu

    I’ve always been curious why “tech for underserved markets”, isn’t a big theme for investors and entrepreneurs. JLM is right. The quest for building and funding the new, new thing, or the next big thing, seems to far surpass the focus on dramatically enhancing massive existing investments.Another fork of this thought is developing nations. The American economy can greatly benefit, even more so than its done in the past, by leveraging what we know so well here, and taking that to hyper-growth markets like Asia/Africa.Except large PE firms and their LBO efforts, we don’t see much activity in the venture community, in breaking away from the mostly “follow the herd” model (USV not included), to “lead the pack to new grazing land”.I think underserved markets are a huge potential, and entrepreneurs should constantly try and think of “taking 2.0 models to 1.0 lands”

  21. Aaron J. Ruckman

    Iā€™m a daily reader of this blog, but a very, very rare commenter. JLM is absolutely correct. And Fred, my hat is off to you for picking this issue out of the comments and shinning a light on it in a separate blog post.I own an old economy industrial company that’s trying to do this very thing. I’m almost certainly at the low end of the technology competence ladder for readers of this blog, but I’m at the very high end within our old economy industry. Despite this awful recession, business continues to be great for us because we’re leveraging technology and changing our business model in ways our competitors are not.You would not believe how many $10 – $50 million dollar old economy businesses are out there with a year 2000 understanding of technology. (Example: We have one large vendor that takes 3 full days to ship in-stock products! It literally takes them 3 days to pull a box off the shelf and put a UPS label on it.)I go to sleep at night not worrying about this recession, but that our competitors will awaken from their slumber before our business is fully developed.

    1. JLM

      The other thing that is fantastic is that many of these successful old economy businesses have no succession plan and they WILL sell the business to you if you can be a comely courtier.They sent their kids to Harvard and the kids want nothing to do w/ the family business.

  22. Jay Bregman

    A post like this is long overdue.For the past 5 years I’ve been building with the vision of breathing life into the ASAP delivery business through technological and brand innovation. The same day courier business is as stale as it gets–and would be high in the running for the grittiest industry around. The only reason I really got into it was because of poor service experienced at the hands of other London courier firms. When we looked at the market we saw a business ripe for improvements, but improvements which could only be realised with the development of technology that was far too advanced for the industry to develop on its own (GPS tracking + great web interface + a real-time optimisation algorithm to handle as-it-happens consolidation). We’ve since grown it into a $10m, profitable business which is still growing fast.

    1. JLM

      There are still companies who fly bank checks overnight to pick up a couple of days float. Physically fly airplanes with checks to accelerate clearing. Huh?Look at BankAir in Columbia, SC.

      1. rebeccastees

        Chase Customers Can Now Deposit Checks via iPhone…

  23. Tereza

    I like to see that the business has a core of loyal customers despite the antiquated business.What’s the essence of what they’re getting and how can you extend it in different ways to make more money…..while stripping away and streamlining the non-essential.

  24. MikeSchinkel

    In the old days those were called “roll-ups.” šŸ™‚

    1. JLM

      They still are, the wrinkle is that they are “re-tooled” roll ups.

  25. kagilandam

    After the N+1 post…this is the M-1 post.There are so many M-1 products which needs N technology adoption and improvement. Everyone is blindly pushing for M+1 and N+1 … this opportunity is left behind.I know for sure there is a huge opportunity for M-1 products in medical diagnostic field. The high end CT,MR,PET scanners ranges from 400K$-2M per unit. But in most reality what we need is M-1 products (10-15-years old tech) which can be made within 40K. App-layer can be as modern as possible …I call them “Serves the Purpose” machines…which will ultimately reduce the health-care cost…with no compromise on quality.N+1 really fits the CT technology…started with 1-slice…then to 2 & 4 slice… then to 12&16…then to 32&48…now it is at 128&256 … the 256 model is 2M+$ but needed only for 0.1% of patients. I donno whether there are radiologists in this community…who can tell that he can make all diagnosis with 6 or8 slice CT. There are many N+1 products which really does not serve any extra-purpose …like 48MP camera in mobile!!!

  26. Jordykoski

    I think of airbnb as a good example of what a great web application can do for a traditional and stale business: renting rooms. The companies IP is really all around the application and that’s what facilitates the business. Take that thinking and approach and you can shake up a lot of stale businesses.