Imagine taking your hands off the steering wheel, kicking back, and letting your car drive itself. It may sounds like the futuristic life of the Jetsons, but if you live in Nevada, this could be your reality. According to a report by the New York Times, Google has introduced two bills into Nevada’s State Legislature to allow self-driving cars on the road. The first bill allows for licensing and testing of autonomous vehicles; the second will permit texting in these vehicles. READ MORE
The recession has pummeled small businesses’ IT budgets, but that’s no excuse to slack off on electronic privacy and data protection safeguards. In fact, hard times make keeping an electronic eye on privacy and IT security critical as economic factors are contributing to more frequent data breaches from outsiders and information theft from just laid-off employees and other company insiders, according to attorney Charles Kennedy, a privacy and data protection expert. In 2008, reports of data breaches at U.S. companies jumped 47 percent to 656, according to the Identity Theft Resource Center, a San Diego nonprofit. Reports of laid-off employees taking company information with them are also on the rise says Kennedy, with the Washington D.C. office of Morrison Foerster. Over half of 945 laid-off workers responding to a recent poll by Ponemon Institute, a Traverse City, Mich., privacy researcher, admitted taking company data when they quit because they felt entitled to it, thought it would help in their new job or didn’t realize it was stealing. With breaches on the rise, small businesses simply can’t use the bad economy to rationalize trimming their electronic data protection program budgets, Kennedy says. Another reason companies can’t let down their guard: state and federal regulators continue to pass stringent electronic data protection rules. One of the latest is the Federal Trade Commission’s Red Flags Rule, which takes effect Aug. 1 and requires financial institutions, health care providers and loan processors to create identity theft prevention programs. The Obama Administration’s economic stimulus bill included a stepped up health-care records security breach notification requirement that takes effect in February 2010. In addition, states such as Massachusetts and Nevada have passed laws requiring companies to use encryption and put in other controls over consumers’ personal information. Regulations aside, following stringent privacy and security protocols is good for business. “If you have good privacy practices you can make it a feature of your advertising,” if you don’t exaggerate claims, Kennedy says. “When the other guy has a breach and you don’t, that’s good for you. Security is an edge you can’t afford to ignore.” Doing the same or more with less Still, no one expects small businesses to spend half their revenue on the latest firewalls and other data protections. Companies have to maximize whatever manpower and financial resources they’ve got. Kennedy and Alex Puertas, a program development manager at Iron Mountain, the data storage and protection vendor, recommend the following: Squeeze every penny from existing privacy protections. If you’ve already purchased encryption, intrusion protection and other security technologies, make sure you’re using everything you’ve paid for. “Some data breaches occur because companies didn’t do things they should, like update passwords and firewalls. They’d already paid for them, they just didn’t use them,” Kennedy says. Eliminate redundancies and shift resources. Cut costs by eliminating some of the overlapping functions in the security technologies you use. Likewise, reallocate funds from less critical IT and compliance programs to privacy and security, Kennedy says. Create written policies and make sure employees know what they are. Written policies can stop problems from happening in the first place and the more trouble you avoid, the less money you have to spend mopping up after the fact. Policies should cover electronic records management – what data is saved, who saves it, how often, and by what method. Policies should also cover employees’ use of portable electronics, updates on new regulations and what to do to limit employees’ access to sensitive data if there’s a layoff. Lean on outside contractors. Small businesses might not have the financial resources to maintain an in-house chief privacy officer or compliance department. If that’s the case, make sure you’re working with lawyers, CPAs, or other consultants who can provide you with reliable guidance and technology on privacy and security matters. “I deal with small, medium and big companies and I don’t know of any that can handle all phases of this alone,” Kennedy says. Pick an insider as your privacy policy point person. Even if you use a third party to run privacy programs, choose a company insider as a liaison to ensure policies are being followed. That person should also head up formal audits every year or two so programs can be altered to adhere to new laws or industry regulations. Tap into industry groups for cheap assistance. Trade associations are great resources for timely information on privacy regulations. In some cases, you don’t even need to be a member to take advantage of reference material that’s available for free on a group’s Website, Kennedy says. SIDEBAR: Electronic Privacy and Security Policies Resources Here are additional resources for creating and electronic privacy and IT security practices: Fighting Fraud with the Red Flags Rule: A How-To Guide for Business — A 17-page guide from the FTC on its new identity theft prevention requirements that includes step-by-step instructions businesses can use to create their own programs. The Identity Theft Resource Center — Theft prevention information for businesses and consumers, plus updates and statistics on data breaches at U.S. companies. HIPAA health-care records data breach notification — Health and Human Services Department document spelling out details of health-care privacy protections included in the economic stimulus bill that take effect in 2010. Iron Mountain Knowledge Center — Free white papers, webcasts, and other materials on electronic privacy protection and security issues.
There’s no one right way to run a virtual small business. There’s only the right way for your particular business. That’s the consensus of executives who own, run or are employed by virtual small and mid-sized companies, all businesses that exist on paper but don’t necessarily have a headquarters, or in some cases, even employees. People who run them believe that while virtual companies don’t have all the characteristics of a conventional business, they can be as successful if owners and managers are committed to: Maintaining a strong corporate culture Using technology to get work done and promote communications internally as well as with customers and suppliers Getting staff together periodically for strategizing, team building and having fun Here are some observations and lessons learned from owners or managers at two virtual companies: Automattic — Keeping it small for a reason Matt Mullenweg started a free blogging website called WordPress.com That has become one of the biggest names in the blogging business. Five years and three million users later, Mullenweg, head of the blogging website’s parent company, Automattic, still works at home. Over five years, Automattic’s staff has grown from a handful to the purposely small number of 20. Employees live around the United States, Australia, and Europe. Since blogging is the company’s business, employees keep track of each other through their blogs. Automattic also holds regular in-person powwows to strategize and have fun, according to Mullenweg. Earlier this year, Automattic picked up $29.5 million in funding from Silicon Valley venture firms and The New York Times, which uses WordPress to host blogs for the paper and About.com, which it also owns. But even that hasn’t convinced Mullenweg to open an office. “I live about a block away from the offices of one of our investors, so if we have meetings we go there,” Mullenweg says. Mullenweg reasons that the lower the company’s operating costs, the more money he can sink into research and development. “With the new funding we’re hoping to be as efficient as we were with” the initial $1 million the company raised, which never left the bank. “It’ll allow us to take some small action and invest in more long term” projects, he says. Cheetah Training — Outsource everything About 100 people work for Cheetah Trainingbut only a handful of them are employees. The $10 million Carson City, Nev., training firm has a core staff of 13 who run the show, but trainers for the project management courses it offers are independent contractors. The balance of the business is outsourced to third parties that handle functions such as accounting, IT, marketing and advertising. “I used to have an office but I got rid of it because it wasn’t adding value, just cost,” says Cheetah Learning founder Michelle LaBrosse, who commutes between offices in Carson City and Haines, Alaska. Communications between employees, outsourcers, and contractors “is a well-oiled machine,” LaBrosse says. People use e-mail, weekly phone check-ins, and IM to stay in touch on daily business and projects. The company also uses wikis hosted by Joomla to collaborate on new initiatives, LaBroose says. “My corporate culture is strong even though people rarely see each other. Everyone prides themselves on being a Cheetah and I don’t need a specific location to make that come alive. I just need a really good information management system.” “We don’t really care when people work. We manage based on deliverables,” adds LaBrosse. “People who aren’t responsive don’t last.” People who do need face time are “extremely annoying,” she says. “If they can’t work independently why am I hiring them?” By using independent contractor trainers who live all over the place, Cheetah can offer classes in the United States, Europe, and around the world, a distinction that’s earned it training industry honors. SIDEBAR: Learn More about Running a Virtual Company Read more about virtual companies here: This ‘Virtual’ Company is for Real — An article from Fast Company magazine’s December 2007 issue of about a Marietta, Ga., virtual company start up that makes lightweight PCs. Gigaom — This article on the Gigaom technology blog examines a law the state of Vermont passed in June 2008 that revamps requirements for establishing a corporation by allowing for online board meetings, among other things. The Handbook of High Performance Virtual Teams — A guidebook to managing virtual teams, published in March 2008 by John Wiley & Sons.
Techies who subscribe to IT-related blogs, RSS feeds or podcasts have already been exposed to the hype surrounding Microsoft’s Surface, the first in a recently-unveiled category of “surface computing products” from the Redmond, Wash.-based software giants. But is this new category ready for primetime, and if so, is it relevant to your small business needs? For the uninitiated, the first Surface product is a 30-inch tabletop computer with a dynamic surface that redefines how we interact with a Vista-powered PC. Through natural gestures using your fingertips to placing down an item on the screen and have it immediately recognized, this promising new technology — that doesn’t require a mouse or keyboard – is primed for retail outlets, hotels, restaurants and casinos. “Surface cross-pollinates cyber with fiber, blending the virtual with the physical,” says Microsoft’s Mark Bolger, senior director of marketing for Surface. “It breaks down barriers typically associated with technology, such as intimidation, since they’re so natural and intuitive to use, and isolation, because its 360-degree user-interface is great for groups.” How it works, applications Surface computing, which has been in development for more than six years, works using a rear projection inside the table, producing a 30-inch display. What senses the user’s movements are five cameras inside the table that recognizes objects and hand gestures. Imagine putting your digital camera down on a Surface tabletop while vacationing in Hawaii, when all of a sudden your photos appear on the screen. You can view, rotate, enlarge or even “flick” the virtual photos to your spouse sitting on the other side of the table, before deciding to use your favorite shot as a postcard to send to friends and family. Bolger explains the camera must be equipped with wireless technology, such as Bluetooth or Wi-Fi (or presumably, down the road, RFID). “Surface is the most exciting thing to happen to the technology industry since DOS made way for GUI [graphical user interface],” says Bolger. “Now we’re moving from GUI to NUI: Natural User Interface.” While Surface might sound like science fiction, clients are ready to deploy the technology as early as the spring of 2008 include Starwood Hotels and Resorts, T-Mobile USA and Nevada gaming companies, Harrah’s Entertainment and International Game Technology (IGT). While it varies, Bolger says Surface computers could cost between $5,000 and $10,000 apiece. Consumer versions might be available in three to five years following the same model as plasma TVs, says Bolger, migrating from a primarily commercial application to the family room. “Microsoft’s Surface computing has unlimited number of capabilities – it’s just a matter of time at this point,” believes Doug Bell, research analyst at IDC, a Framingham, Mass.-based technology firm. “Depending on the size of the business and the industry they play in, applications can be customized to meet their needs. I would expect each company would have their own unique features,” says Bell. “Many will use this for customer interaction, such as reading and interacting with information, where the customer experience can be customized.” When asked about foreseeable shortcomings, Bell says at this stage of the game, the biggest shortfall is price and availability. Many small and mid-sized businesses “do not see a value proposition at this point.” “Plus another hurdle will be the customization process and learning curve.” Being so new, adds Bell, it will take time for companies to get used to what Surface is and how to best take advantage of it.”
Money Markets A slew of start-ups are storming the personal-finance industry by targeting populations that traditionally have been underserved What do women really want? Some start-ups think the answer is customized financial advice and business services. Those companies want to be the vehicle through which women do all their money-related tasks: paying bills, buying stocks, seeking loans, selecting insurance, and so on. They insist that women’s financial needs are different from men’s, especially because women tend to earn less than their male counterparts yet live longer lives. The thinking is that those two conditions have created a distinct marketing niche — a “niche,” mind you, that comprises 51% of the U.S. population. Do women truly need specialized financial attention? Predictably, the founders of the aforementioned start-ups believe they do. They cite the needs of the aging baby-boomer market — a megapopulation of educated women now entering their peak years of earning and spending. Those women, the first female generation to wear the proverbial pants of financial planning, will begin to look for advice on the Web and elsewhere. And the information that they’ll need will not only cover the basics but also emphasize “more relationship-oriented and life-stage topics than bottom-line transactions,” says Liz Davidson, founder and CEO of Financial Finesse, a company in San Francisco that’s dedicated to serving women’s investment needs. Such target marketing — be it to women or to any other population subgroup — dovetails nicely with the audiences that already exist on the Internet. “For some time, the Internet has been aggregating people in communities,” says Chris Musto, director of financial services and an analyst at Gomez Advisors Inc., a research firm in Lincoln, Mass., that focuses on Internet commerce. “So a start-up can work with sites that have already congregated certain groups.” Indeed, the Web — already home to such affinity sites as Women.com Networks, Gay.com, and AsianAvenue.com — lends itself to businesses hoping to attract a given demographic. Still, common sense suggests that all personal-finance customers — regardless of gender, ethnicity, or sexual orientation — would want the same commodity: trustworthy advice. Yet the specialization of personal-finance businesses, both on and off the Web, is well under way. Name a target market — teens, Hispanics, newlyweds, high-tech workers — and you’ll find a financial start-up whose raison d’être is serving it. Wrapping it up Lenda Washington first had the notion of putting a female spin on traditional investment products during her days at PaineWebber. As a thirtysomething junior broker learning the art of cold calling, she was taught to ask, “Is your husband home?” if a woman answered the phone. For Washington, those days of making cold calls inspired the idea for a business targeting female investors. Sure enough, Washington’s new start-up is now calling on women to buy its first product. The company, Allison Street Advisors, based in Washington, D.C., is selling an investment vehicle called a wrap account, which gives customers with $250,000 in assets access to big-name institutional money managers. (Normally, that kind of access requires $5 million. A wrap bundles smaller amounts into an aggregate that’s still worth a manager’s time.) For years, brokerages have sold wraps as an investment option. Allison Street’s wrap has a novel twist: the managing institutions are owned by women or minorities. Washington hopes her wrap fund will appeal to women, minorities, and institutional investors such as schools and pension funds — all of whom, she thinks, will appreciate the precept of investing through female- and minority-owned firms. The obvious issue is, Wouldn’t the potential return on investment matter more to an investor than conscientiousness about social causes? Washington, who’s African American, doesn’t disagree. But she stresses that study groups show that investors have an affinity for advisers of a similar gender or ethnic background — those “who ‘get them’ and share common experiences,” she says. Her concept is no different in principle from an environmentally aware mutual fund, for which performance is “the meat,” but “the social ticket is the gravy,” she says. Getting minority-owned money managers to sign on was the easy part. The hard part has been persuading the Merrill Lynches of the world to offer Allison Street’s wrap fund among their investment products. The sales challenge, besides navigating through bureaucratic straits, is convincing brokerage firms that customers will favor Allison Street’s wrap if they are deciding between it and an equally performing but less diversely managed fund. So far, the fund hasn’t been around long enough for its popularity to be compared with that of other wrap funds. At press time, the fund retailed only at five brokerages — including W.S. Griffith, in Hartford — and had less than $500,000 in assets under management after six months of active selling. But Washington believes the wrap could be a $50-million fund five years from now. Even if the fund isn’t a smash with women or minorities, she says, it’s sure to lure investors from large institutions. Which means it just might be a hit with anyone who has $250,000 to invest. “White males would also be interested in top managers,” she says. “We’re not excluding anyone.” Pride of ownership “You want two guys buying a one-bedroom condo to be comfortable,” says Brian Farley, founder of Pride Mortgage Inc., in Provincetown, Mass. “They don’t want a starchy banker asking, ‘Where’s he going to sleep?’ “ It’s hard to doubt Farley’s credentials on the subject. His $1.4-million business brokered $67 million in loans in 1999, and gay men and lesbians constitute a sizable portion of the business’s clientele. It’s a population that he classifies as very loyal to good service — and quick to bolt from bad, even when the bad service comes from a company that’s gay-and-lesbian-friendly. “If you don’t do a good job, it doesn’t matter if you’re called Rainbow Mortgage,” he says. Though he chose the name Pride in part because it connotes the gay and lesbian community, Farley says, “we don’t market solely to them,” and his efforts to target that community are no different from any other group marketing at Pride. In fact, the company’s eight other loan officers, some of whom head regional offices, have considerable leeway in how they promote Pride’s services. The Seattle office, for example, could market to that city’s large Asian population. As Farley sees it, the commission-earning officers’ motives are simple: to close as many loans as possible. If that means targeting a niche, many niches, or no niches at all, then so be it. At the same time, Farley’s pitch to the gay community is not some affinity-marketing facade. He’s well aware of how that community’s needs differ from those of conventional mortgage applicants. Besides facing the ever-lingering issue of potential discrimination, gays and lesbians face the possibility of being outed at their workplaces when a lender, seeking employment verification, sends paperwork to employers that lists the names of both applicants. There are also complications surrounding breakups of home-owning couples: an exiting partner will often neglect to notify the lender of the change in status and is still bound to a mortgage even if his or her name has been removed from the deed. Farley founded the company in 1998, and he generated $700,000 in revenues as Pride’s only loan officer for most of that year. By year’s end, he was ready to bring on more loan officers. Rather than expanding locally, Farley simply opened offices wherever prospective employees happened to live, which is why Pride’s non-New England locations are in the random states of Washington, Nevada, Florida, and California. Coordinating their efforts hasn’t been a problem, because loan officers don’t need much day-to-day management, and all loan applications are electronically sent and processed at the company’s operations center. Farley has a wait-and-see attitude about further plans to expand. “There’s no rock-solid business plan,” he says. One thing he knows for sure: niche marketing will continue. In fact, Farley is touring nationally to speak on the topic for Mortgage Originator magazine. “We’ve found,” he says, “that niche marketing is the best way for us to get into a city and do a good job.” The young and the eager Todd Romer’s initiation into the world of personal finance began at 15, when he watched his father use a magnifying glass to scan the small numbers of the newspaper stock listings. More curious about bulls and bears than birds and bees, Romer asked for a lesson in where to invest his lawn-mowing money. Now 32, Romer has started a magazine called Young Money, based in Loveland, Ohio. He’d had the idea since college, when — despite what he’d learned from his dad — he found the personal- finance magazines of the adult world both too difficult to understand and “too targeted to the married, working adult.” And so, after six years of building his own nest egg as a salesman for Syncor International Corp., a publicly traded pharmaceuticals company, Romer launched the magazine that he’d longed for since boyhood. With nine issues on the books and a barely profitable first year based on $275,000 in sales, Romer is pleased with the project so far. In typical new-economy fashion, he isn’t just trying to sell magazine ads; he’s hoping Young Money‘s Web site can become a popular destination for preadult investors. He’s struck a deal with Stein Roe to resell that company’s mutual funds at www.youngmoney.com and is transforming his site — now just an online face for the magazine — into a transaction-oriented one that he describes as “E*Trade for kids,” where they can do online trading with very little money. So far, Young Money‘s audience has been composed, in large part, of teenage boys. Romer didn’t plan it that way, but he believes he can parlay that following into ad sales because he can tell advertisers that he has “a young male readership that can’t be seen outside of Thrasher,” a skateboarding monthly. Romer doesn’t know why his readership is mostly male, but he guesses that it’s for the same reasons that business magazines have always had larger male audiences. These days, as more teenage boys ponder forgoing college for high-tech jobs or starting their own companies, his young male audience seems larger than ever. Because Young Money‘s audience is driven to succeed, Romer thinks he can convince advertisers that his readers are more than “just boys”; they’re the boys who’ll make a difference. “We can say that our readers are savvy, they take action, they want to get ahead,” he says. It’s not lost on him that potential investors would also have an interest in a Web site that attracts teenage boys, particularly those with a high-tech or entrepreneurial bent. Romer himself is wasting no time courting angels and venture funds. “We’re doing a full-court press on the investment community,” he says. Q&A Does Niche Marketing Make Sense? Personal finance is a hot topic. These days it seems that people everywhere are more conversant about money and investing than they were just a few years ago. That’s largely because the nation’s record prosperity has brought unprecedented wealth to many different groups, including women, minorities, and other demographic subsets. Hoping to reach those prospective investors, a bevy of start-ups are specifically targeting one group or another with their finance offerings. Will target marketing work? We asked Cheryl Russell, demographer, author, and editor-in-chief of New Strategist Publications Inc., in Ithaca, N.Y., to tell us. Inc.: For personal-finance start-ups, is simply targeting a niche enough to lure customers? Russell: Only if the start-up also provides products and services that are worthy of attention. Because women live longer and are often widowed, they will have different financial situations than the general market will. But whether those differences alone will attract women to these start-ups remains to be seen. Financial advisers worth their salt will customize a plan to suit the individual customer. So does the field require a Web site just for women? I have my doubts. Inc.: But the start-ups keep coming, and they keep attracting tons of funding. Why will they have such a tough time? Russell: It’ll be difficult for them to get people’s attention. The giants have the advantage already. The start-ups will have to offer something more than the financial advice you can get anywhere, or they somehow have to be perceived as cool or hip. Otherwise, they’ll get lost in the shuffle. On the Web, the cream is already out there, and it’s hard to get people to change their Web patterns. It’s like getting people to watch new TV shows: a daunting task. You almost have to use traditional forms of advertising, like TV and radio, which can get very expensive. Inc.: So where will all those personal-finance start-ups be five years from now? Russell: That’s anybody’s guess. It’s a huge pie. In just about any business area, you end up with two or three dominant players, and business on the Internet is no different. Women might emerge as one separate area, especially if the start-ups capture a lot of the baby boomers who are now in their mid-fifties and are financially peaking. But for other targeted groups, like the superwealthy or high-tech workers, we’re dealing with more myth than reality. For most of the country, having a lot of wealth doesn’t define your twenties and thirties. That’s the type of niche that sounds like marketers’ just trying to go after the latest thing. It’s the sort of fad that’s going to change as soon as the stock market crashes. Please e-mail your comments to editors@inc.com.
