Mint.com is an exceptional Web 2.5 success story as documented by a great article in Slate on Friday. In a scant 2 years since their launch they grew to over 1.5 million users, and their free money management software became Quicken.com's key rival. Last week they were acquired by Intuit in a $170 million all cash deal. How did they do it? Slate attributes their success to what they call Web 2.5 - companies built on Web 1.0 and 2.0 infrastructure. However, a little closer look shows that applying the fundamental principles of a White Space Strategy are what really led to Mint.com's success.

Mint capitalized on multiple key market creation enablers to create new value and establish it's own unique market space for a free, thrift focused and easy to use money management application. First, Mint capitalized on the emerging market space created by the recession and a new focus by consumers on thrift. The external environment created an emerging and unmet demand for new value in the form of a free, cloud-based, personal finance tool. Here, a quick "market extents" analysis that identified the differences between edge-case quicken.com users and non-user near-customers could easily identify a value gap that needed to be filled - free, easy to use, thrift focused personal money management.

Second, Mint redefined the business model in the market by creating an agile and lean model that capitalized on enabling technologies and services in the cloud to run their business. In order to be a free service and offer compelling new value, Mint had to take advantage of new business model elements. Instead of huge ad campaigns, MInt used free social media and piggybacked on "popular new communications technology" - Facebook, Twitter and blogging. Their largest marketing expenditures lie in purchased search engine terms and moderate sums spent on analytics. They run their web site on Wordpress, use Google Analytics to track it and Zoomerang to conduct surveys - all free services that enable their new, low cost business model.

Finally, Mint redefined the value chain to create new value in its emphasis on thrift and adding value to the user experience through helpful hints, alerts and identifying opportunities for their users to save.

Yes, Mint's success was built on the infrastructure of Web 1.0 and 2.0 but it was even more built on fundamental white space principles - Enabling technologies, business models and value chains focused on real, relevant market needs for new, previously non-existant value to create new market spaces.

(Disclaimer: For those who may misunderstand, Mint.com is not a White Space Strategy client, but an excellent example of the application of White Space Strategy principles. We chose to use Mint.com as an example of how White Space Strategy principles can be applied and apologize for any misunderstanding.)

Strategic Positioning is a very deliberate choice of what differentiated value to offer and emphasize to your customers and how it establishes your competitive differentiation. In White Space Strategy, we talk about the Compelling Value Equation (CVE) which is a strategic choice of what new and differentiated value a company chooses to offer it's target customers and how that value creates a compelling reason to buy that has previously not existed. Unlike artificially manufactured "positioning" it's critical that value based positioning actually create compelling new value. This approach to positioning is the strategic one that creates and captures new "White Spaces" that are both competitively advantaged and sustainable based on the new value proposition.

A BBC Magazine article this morning chronicles the "travails" of a 13 year old Brit who traded in his iPod for a 30-year old vintage walkman for a week. One of the most interesting statements in the entire article (well worth reading, by the way) was his statement that "I'm relieved that the majority of technological advancement happened before I was born".  Having been the owner of a "14-Transistor RCA Pocket Transistor Radio" when I was 13, I must admit, I was sufficiently fascinated by the power of the technology that came before that I became an Electrical Engineer. However, my education quickly taught me that "the majority of technological advancement" had yet to be defined.

White Space Strategy isn't just an offensive weapon, it's imperative for companies to avoid being suddenly and decisively marginalized. Every day companies who "had a lock" on their markets suddenly find a new entrant taking advantage of an emerging opportunity to create new, highly relevant value for their customers and making significant incursions into their markets. Therefore, pursuing a White Space Strategy approach to your business is not only a highly effective approach to growing your markets and revenues, but a necessary defensive technique to prevent you from being blindsided by a competitor who comes out of nowhere with a value proposition that "minimizes" your own.

The iPod instantly marginalized all the other mp3 players by providing the highly relevant value of massive storage and the much simpler, more elegant and effective click wheel interface to make that "thousand songs in your pocket" easily accessible. Salesforce.com instantly marginalized the vast majority of CRM software, especially for price sensitive buyers,  by providing a new "pay for use" paradigm in it's software as a service offering.

No company can afford to ignore the formation of white spaces within and around their current businesses and markets except at the peril of suffering the same kind of fates. It's an imperative that your company have an active program to monitor evolving customer needs and wants both within and at the extents of your markets as well as the potential evolution of the core technologies, business models and value chains upon which your strategy is built.

It's simply not enough to keep pushing the current foundations of your bussiness toward "more" - more features, more product variations and options, more "speeds and feeds" - and not actively montor the potential for fundamental changes that create compelling new value. In today's markets in particular, those companies that are actively seeking out and capitalizing on white space opportunities to create new, less competitive and more profitable markets and address them with new, compelling value, will be the big winners. And those who cling to the safety of a scaled down, recession driven version of "business as usual" will be relegated to "also rans".

An article in today's Wall Street Journal, "In Recession Specials, Small Firms Revise Pricing" points out one of the fundamental levers of White Space Strategy - pricing. Pricing is a major contributor to business model innovation that can capture opportunities both within and around your existing markets. Pricing has an innate value that is, as we see today, very closely tied to the prevailing economic environment.

It pays to remember that the basic tenet of White Space Strategy is creating NEW compelling value to fill in a value gap. The WSJ article points out a number of ways of creating new value through pricing that capitalize on the white space opportunities created  by today's economic environment.

Pricing  and Service Segmentation
Towerstream, a high speed internet access provider cited in the article, found that its $999/month, eight megabit per second offering was becoming harder and harder to sell. After offering a mid-range product priced at $500/month and 5-Mb/second they had a record first quarter. Clearly there was a white space in the market for a lower price, lower performance offering.

Similarly, Lone Star Limousine of Palo Alto was suffering from declining use of limos for both economic and image reasons. The addition of a van to its fleet of limos and high-end SUVs provided both a different value proposition and a lower price. This not only provided the new, less ostentatious, value that corporate users wanted, but engaged an entirely new client base in wedding venues, lodging and destinations such as wineries.

Adding New Value to Current Services
Mr. Transmission in Georgia, also mentioned in the article provides yet another angle on the "creating new value" element of white space strategy. By adding food and gasoline vouchers for customers who had to have pricey transmission overhauls, Mike Cook, the owner, added highly relevant value to his product and increased sales by 60% compared to last year.

Similarly, CouponCabin.com, after adding grocery coupons to its traditional offering of soft goods such as clothing and home goods has seen a 300% increase in visitors to its site. Once again, a white space created by the new needs of a recssionary economy when filled with relevant new value created substantial growth for CouponCabin's business.

These are just a few simple small business examples of the Value of Price in our current economic environment, but a wealth of opportunities abounds. We all need to ask ourselves several questions:

•  Are our price/value ratios and value propositions appropriate to the current environment?
• Are there ways to add and/or create relevant new value in our product offerings that can capture more of our existing markets and enlarge and extend those markets by drawing in new market participants?
• It there an opportunity in the current market environment to create a whole new market defined by the new needs, technologies business models and value chains that we can apply?

The SMB's are going to lead the way out of recession. WE've alwasys know that SMBs lead the way in job creation, but a recent Forrester report on the potential of SMBs points out that small businesses also don't cut as deeply during, and recover faster after, a recession. However, the report goes on to point out that the new breed of SMB's that is emerging from this recession is also very different - more tech savvy management and with a very techa-savvy millennial fueled work force.

What does that mean for technology companies? - That there's a huge, growing and urgent set of unmet needs for new value in the SMB market. In short - The SMB market represent a vast new White Space for new value creation NOW!

SMB’s represent a tremendous opportunity because:

• The “New Rules” of the SMB segments have yet to be written
• More tech savvy and tech enabled
• New workforce demographics and dynamics
• Web and social media enabled
• Vendor direct and vendor specific relationships
• The window of opportunity is NOW
• SMB poised to grow again
• New segmentation is already emerging

This Emerging new SMB Demographic presents an opportunity for vendors who are savvy in taking key actions:

• Targeting the Small Business Owner in relevant SMB segments
• Providing broad small business value
• Going where the small businesses are – Following the path of influence
• Adopting a mobile, social marketing communications strategy
• Engaging Universities, Associations, entrepreneur groups and and other sources of entrepreneurial activity

Vendors who recognize this new market opportunity and actively take part in defining the emerging white space will profit handsomely.

• Unified Sign-on

• Social Syndication 

• On-site Chat and Instant Messaging
  

• The Lifestream Platform
  

• The AIM & ICQ Messaging Platform 

• The AOL Open Authentication API (OpenAuth)

Last night's "How to Run Your Business on the Cheap" session at the SF Entrepreneur MeetUp Group not only got me thinking about how myopic we can be about seeing opportunities to save money, but also about seeing new opportunities to generate revenue. We're all guilty of being so familiar with or so expert about the status quo, that we often simply can't see a new opportunity that's right in front of us.

A Kick in the Side of the Head
Most of us read or heard about the principles of creativity in Roger von Oech's two seminal books "A Whack on the Side of the Head" and "A Kick in the Seat of the Pants" first published in the 80's - but that was so "two decades ago" that we've forgotten how to get back to the basics of framing creative questions. More importantly, now more than ever we need to apply creative questioning in a context that leads quickly to answers specifically focused on identifying short term  business opportunities. The White Space Strategy framework is geared to do just that.

White Space acknowledges that we've all gotten so good at doing what we do, and knowing what we know, that we simply can't see white space opportunities to create new value  and new markets simply because we "know" too much to see them. The key to finding the opportunities that are staring us in the face is to put what we "know" in a framework geared to discovery, then use that knowledge as a starting point for a whole new piece of paper where we creatively evaluate what we know and don't know and how the combinations can create new opportunities.

What We Don't Know
What we don't know can be grouped into a number of high level categories that all focus on the opportunities that could create new value and new markets. We don't know:

1. What are our customers and "near-customers" still unmet needs? If we knew this, we'd be busy meeting them, but all too often the customer service driven, incremental improvement model of product development and evolution gets in the way. Instead of asking "what are the really important opporunities to meet new customer needs?" we ask, "what should be the incremental improvements in our next release?" and miss the really big opportunities for a quantum leap in compelling value creation. Cadence, Mentor and Synopsis in the EDA space ignored the need to resolve timing issues that allowed Magma to virtually erupt onto the EDA scene and become the number 4 EDA vendor in only a few years.
   
2. What are the changes in relevant technologies, applications, value chains and business models that have occurred since the product and market were first defined that enable it to be redefined? We all "know" so much about our businesses, technologies,  products and markets that we often miss changes that are relevant, but not dead center on our radar screens of important things to watch. Sony, Panasonic, and even Creative Labs were so focused on the technologies underlying their portable music player products that they missed the opportunity provided by the evolution of the "micro-disk drive" to mutiply music storage that Steve Jobs capitalized on with the first disk-based iPods. Barnes & Noble, Walden Books, Crown (remember them) and a plethora of others were so focused on the technologies underlying their current business models that they missed the enabling technology of the internet and the overnight shipping value chain that let Amazon become the world's biggest bookseller.
3. How can these unmet needs and new enablers be combined to redefine, extend and/or create whole new market opportunities? Once we've creatively discovered and inventoried  what we don't know, how can we bring together the requirements of unmet needs and new enablers to define new opportunity. Can we create compelling, new and innovative value through applying or inventing new technology in new ways? Can we change our value chain and business model to create relevant, new and compelling products and services that open up whole new markets or market segments? All of the relevant combinations and permutations need to be quickly envisioned, examined for value and opportunity creation potential and cataloged.
   
4. Which of these potential new opportunities best fits the current needs of the company? The opportunities that emerge need to be ranked by the criteria key to the companies strategy and needs. A basic list of criteria includes; timing, opportunity size, addressability, resource requirements, strategic fit and of course financial returns. Some opportunites will emerge as short-term, rapid revenue generation opportunities that in today's market environment may be critical to implement immediately. Others may be longer term, but much greater in strategic importance. And, in the best of all worlds, some may emerge as having both short term revenue generation potential and significant long term strategic importance.
   
5. FInally, what should be our strategy for capturing these new opportunities? A simple market extension via new pricing or business model adaptation may be mainly tactical. New market creation will be highly strategic. In either case, there still needs to be underlying strategic thinking to ensure long term success.

"An institution that instills fear in many people seems the last place a retailer would want to open a shop, but companies that set up small outlets in hospital lobbies might be helping to create an emotional bond with consumers.

In our survey of more than 3,000 visitors and outpatients at seven hospitals in the Toronto area, seven out of 10 people indicated that the presence of businesses added great value to the hospital experience—specifically, many said they appreciated that the companies were there for customers in a time of need."

"Some 68% of respondents also reported that a retailer’s presence in a hospital had a positive influence on whether they would purchase from the business again at another location—and whether they would provide favorable word of mouth to relatives and friends."

"People in hospitals said they were interested in shopping for books, electronics, apparel, and jewelry and visiting hairdressers, banks, and grocery stores on site."

It's Time
It's time to get busy - The S&P 500 is up 25% over its March 9 bottom, the President is "seeing glimmers of hope across the economy," and venture capitalists optimism is on the upswing, according to the most recent USF Entrepeneurial Progam survery. The number of "white space opportunities" to create new market opportunities for both start-ups and enterprises has multiplied significantly as the new economic reality we face puts even more emphasis on creating new, real, and relevant value. Right now green tech, music, social media and networking, advertising, web analytics, helper applications, revenue generation tools and a host of other market areas all exhibit significant white spaces for new, relevant and cost effective value innovation.

The SMB Opportunity
The small and medium business sector (note that I said SMB, not the artificially created SME moniker) is continuing to fight for growth and at the same time beginning to create new jobs again. A recent report from Forrester Research points out that not only do SMB's shed fewer jobs during a recession, but they also begin to hire earlier as recessions abate. More importantly, this is the first business cycle where new small business entrepreneurs will be both tech-savvy and have the ability to tap into the "grown up digital" MIllennial workforce for their employees. This phenomenon will create a new wave of opportunity for tech vendors to capitalize on the SMB sector's growing hunger for technology during the recovery.

Understand the Market

Vendors who want to capitalize on this white space opportunity need to take the time to understand the SMB sector and recognize that it is compriesed of multiple segments described by Forrester as SOHO, Small Business, small-medium and large-medium business. These segments behave differently, have different needs and diffrent adoption profiles for technologies like Web 2.0 and cloud computing. Vendors will do well to understand these subtle differences and craft marketing and sales strategies that take them into account.

Understand the new Small-Business Demographic

The new small business will not only be started by tech-savvy professionals, but represent both a new breed of entrepreneur and a new MIllennial-fueled workforce. These new SB's will understand both the potential and the necessity of tech-driven business models and processes that can improve efficiency, scale and reach.

Understand the new Small-Business Landscape

New SB's will know how to find, evaluate and acquire technology via online communities and new channels, including social networks, communities and vendor-direct options.