Tag Archives: entrepreneurship

Essay

Absence makes the heart grow fonder

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Your mother was probably fond of the saying “Absence makes the heart grow fonder”.  Mine certainly was.  She usually trotted it out when she wanted one of us to go on a trip where we would have to leave the current boyfriend or girlfriend home for a week or so.

I was reminded of this when I read the book Yes!: 50 Scientifically Proven Ways to Be Persuasive on vacation. In the book, the authors use scientific studies to validate ways that people can be persuaded to do something.  Some of the ways involved differing methods of getting people to reuse hotel towels.  But what prompted this post was the idea that scarcity of a product can increase its demand.  Not absence, scarcity.  The idea is that if there is a hope of getting a scarce product, then consumers will desire it more.

They used the case of the Oldsmobile.  In 2004 GM discontinued the manufacture of the Oldsmobile line due to low sales.  The ironic thing is that the sales of Oldsmobiles in 2003 were their highest ever.  People were induced to buy because of the scarcity of the brand.

I am convinced that the popularity of the Wii gaming system from Nintendo was also a case of the scarcity inducing purchase envy.  Nintendo released the Wii with only a few systems available.  If you knew of someone who got one of the first ones, they raved about the user interface and the general fun factor of the games.  This just stoked the purchasing flames, when people could not get one.  Those folks staked out the Best Buys and the Costcos just waiting for the next shipment to arrive, so that they might get their hands on one of the 25 just arrived systems.

However, scarce does not mean late.  Note that Boeing has upset more customers with a late delivery for their 787 Dreamliner than made potential clients excited.  You have to make your dates.

Scarce also does not mean boring.  Something that is scarce and boring does not make people excited.  See any number of cell phones that are released for use on one cellular network and has me-too features.  Who really cares?

And despite what my mom said, absence won’t really get you talked about.  You need to have something there for people to get excited about and envision themselves owning.  Nintendo and Oldsmobile (probably inadvertently) got the mixture right.  This same story was critical in the Tickle Me Elmo, iPhone and Cabbage Patch Kids.

Find a way to make your product good and scarce.  It has to be both. And you just might have the next remarkable product in the land.

Essay

I yam what I yam!

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There are so many great one line catchphrases that have come to us from cartoons.  But one of my favorites is from Popeye — I yam what I yam, and that’s all that I yam.  One of the things that I have learned over the years is that you have to know what you are, what your strengths are and look to enhance them, rather than look at trying to solve every weakness.

In business too, we seem this same dynamic.  Too many successful companies are looking for the newest thing when they have a good thing right in their own companies.

In Chicago, WGN Radio is a powerhouse.  It has a 50,000 watt transmitter that allows its signal to be heard in 37 states.  It is always in the top 2 in terms of market revenue.  If you asked anyone in the city what the demographic of the radio station’s listener was, they would know: it was an older, white, mixed politically, educationally advanced audience.  The station was a throwback to old times.  The announcers still read commercials live.  It had personalities who were engaging and a devoted audience for those personalities. The station had the ability to do indepth shows on topics that others could not. In short, it held its own place as a unique place on the radio dial.  But then Sam Zell bought the Tribune Company and with it, WGN Radio. In short order, their morning drive time host retired.  This was not a surprise — the host had planned his retirement for over 6 months.  Management named one of their afternoon hosts as the new morning host.  After 6 months, they moved him into a spot that they created by firing the hosts of a unique morning show directed at women that had been on the air for 20 years and had a hugely loyal following.  In the meantime, they fired the hosts of unique shows that focused on money, pets and gardening and replaced them with what the rest of the world sees in talk radio – bigoted, loudmouthed talk radio guys.  I am convinced that although WGN had a good thing going with their market, the moves that they made will make them a middle of the road player. By going after the coveted demographic segment (men 25-45), they will be indistinguishable from all of the other stations out there. The latest numbers are not in, but my prediction is that they will be trending in the wrong direction.

Consumers are looking for what you can bring to the table. They like knowing who you are and what you can do for them. Bring them something different, but don’t bring something different to an audience that is not yours.  Don’t be like everyone else.  Know what you are and bring it – better, faster, cheaper – but bring it.

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Big Picture, Business and Entrepreneurship

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Big Picture: And small differences.  The Washington Post op-ed today talks about statistical evidence that indicates that we should believe that the election numbers in Iran were fudged. Interesting conclusions.

Business: One of the internet’s success stories has to be Amazon.com.  What a lot of people don’t realize is that there is a lot going on at Amazon behind the scenes to ensure that you as a consumer get the right information to buy the right products.  And how they make money was an eye opener to me.  This is one case where the answer to how can you sell products at a loss can truly be Volume!

Entrepreneurship: On the other side of the coin, Clear has stopped doing business.  Joel writes about the lack of a change in business model that helped cause the failure of this company.

Essay

Find the Highest Value

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Being an entrepreneur is not an easy job.  There are so many things that pull at you to spend time and effort and energy to address.  How do you make sense of what is important?

Well, other entrepreneurs have taken it upon themselves to try to help you by building productivity systems.  People like David Allen, who created the Getting Things Done process or Stephen Covey who created a system around his book, The Seven Habits of Highly Effective People. Other systems break things down into categories of Urgent/Not Urgent and Important/Not Important. There are many people who swear by these systems as they try to find ways to  manage the complexity of their work (and personal) lives.  But in the end, you have to find out what works for you. And in many cases, you don’t need a system.

I bring this all up because I have had several conversations lately with entrepreneurs that addressed this very topic, although I don’t think they thought of it in this way. Most entrepreneurs feel like they have to do everything.  I wrote about this in my column last week about Superheroes. It is a fallacy.  You have to look at where you can provide the highest value to your business at that particular point in time. The area will change over time, as you get smarter, more experienced, more valuable in your company and as your company changes.  But you need to make that evaluation every week (at least).

As an example, I know an entrepreneur who, before he started his business, was a top salesman.  Loved living the rough and tumble world of no-base pay, just full bore commissions.  And he did it for years, attaining recognition as a top salesman and big bucks. Now he is in charge of building his own company.  What he needs to do is to sell.  What he is doing is taking care of the details of the business.  He is doing a fine job of it, but in reality he is the best one to sell his product and service to prospects.  But, it seems, he looks at it as beneath him, not presidential and therefore tries to manage a salesman rather than sell.  His highest and best usage of time and energy is to utilize the skills he learned earlier in his career to sell his product. At this point in time, he should be the face of the business and help to build a sales team through example, not management. When that is working to his satisfaction, he can find other projects where the value is highest for him to participate.

Look around you to ensure that you have the highest value discussion frequently.  Sometimes you are so in the midst of running and building your company that you can’t determine which side is up, much less where your skills could best be used.  Take an opportunity to discuss it with someone you can trust who is outside of the maelstrom: a partner, a board member, a mentor, a business friend. Find ways to utilize your strengths and help (delegate to?) others to utilize their strengths in order to benefit the business.

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Behind the Scenes, Entrepreneurship and Thought

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Behind the Scenes: Sometimes the government does it right.  A couple of stories from the past several weeks have shown that our government does not necessarily have a tin ear when it comes to public opinion.  First the story about President Obama writing a note to excuse a student, who was attending a Presidential speech, from class.  Some of the people that I have talked to think that President Obama was being a smartass, but I believe that he took the time to talk one-on-one with a student in a very real and meaningful way.  Another story was the US Navy allowing a group of top bloggers, including Robert Scoble and Guy Kawasaki to spend 24 hours on the USS Nimitz, an aircraft carrier.  These bloggers were able to tell a story of the servicemen and servicewomen who work on our behalf and provide a very interesting group of reports including photos, podcasts and videos.

Entrepreneurship: Inc. Magazine wrote a nice piece on Paul Graham, founder of Y Combinator.  When I grow up, I want to be like Paul.

Thought for the Day:

My life is not adrift.  There is no road map, but there is a horizon that I am moving towards. That horizon is broad, but it is informed by what I believe… The keel to your boat needs to be to your values, your principles, your beliefs and some sense of purpose, but that needs to be aimed at a horizon, not a point of latitude and longitude, because that point may turn out to be irrevelant.

– Randy Komisar

Essay

Entrepreneurs as superheroes

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Entrepreneurs in our world are venerated for their risk-taking and innovation skills.  It is always a great story to tell when an entrepreneur is successful.  But we must be careful to ensure that we recognize and applaud the skills that got the entrepreneur to the success and understand that most entrepreneurs cannot do it on their own.

Let’s take a few examples.  Steve Jobs is rightly considered an entrepreneur.  When he and Steve Wozniak developed the Apple I computer, they came up with a radical new approach to delivering personal computers.  Steve Wozniak developed the hardware and software and Steve Jobs sold the vision.  Over time, Steve Jobs became the design guru and leads Apple in the development of unique products.  But this grand picture wouldn’t have happened without a man named Mike Markkula. Mike was the initial angel investor in Apple and served as the first president.  It was his leadership that gave both Steves the ability to do their best and allowed Apple to grow.

Another famous entrepreneur is Oprah Winfrey.  She is famous for her TV show, movies, magazine, XM Radio channel, Oprah.com and her tremendous philanthropy work.  She is the master of her domain, keeping on top of all of the vehicles that bear her name.  But if it wasn’t for Jeff Jacobs, an entertainment lawyer, CEO and 10% owner of  Harpo, Inc. (Oprah’s master organization) who runs the businesses, she would not be able to “be Oprah”.

Bill Gates is another entrepreneur who was fantastic at some details, but didn’t have a particularly strong business background.  Bill was able to understand the state of technology and envision a world where every desk would have a computer running Microsoft products on them.  True innovation, absolutely.  But it required Steve Ballmer, Microsoft’s  first business manager to bring the company to the heights to which it ultimately reached.

Too many entrepreneurs have watched Oprah Winfrey (or Steve Jobs or Bill Gates) and thought that they needed to do everything themselves.  Some people chicken out because they know they don’t have all the skills and discount the ones they do have.  Others continue through this phase expecting somehow to become Superman (or Superwoman) and manage all aspects of running a business by themselves.  Neither of these solutions is optimum.

Entrepreneurs need to be open to get a helping hand in developing their business.  Sometimes they can get free advice to help them along.  But more often, they need to understand that they will need to pay to get the highest level of support.  Sometimes it is cash and other times equity. In all cases, it is better to have 50% of a million dollar idea than 100% of a failure.

The real test of the entrepreneur is how much they are willing to sacrifice to see their idea become a success.  Find those folks who have skills where you are lacking.  Sell them on your vision and get them to help you deliver.  You will be the richer for it.

Essay

Who is your Customer?

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Jeff Leitner writes about the questions that you should be asking when you start your business. They include: What is the pain that you are trying to relieve? and What one thing are you trying to sell?.  Both of these are great questions, but I would like to add another to your list.  It is, at once more basic and for some of us, it is a no brainer.  But be careful, the answers might surprise you.

The question is Who is your customer?  Yes, who are you trying to make your products or services for. The reason it is important is that if you truly know who your customer is, you can design the company’s products and processes to support that customer to the best extent. Let’s take a look at some examples to see where this could go.

Pharmaceutical companies – The customer is the patient who needs the medication, right?  Well, if that is the case then why do they sell to the doctors, who do not buy the product, but authorize (through prescriptions) others to purchase the drugs.  I’d have to say that the doctors are the customers.  They pharmaceutical companies do everything they can to influence the doctors and dabble in consumer education, hoping that the patient will be able to demand a certain drug from the doctor.  But the doctor is still the customer, because the buying power remains with them.

Physicians – While we are on the topic of medicine, who are your typical physician’s customers?  It seems you have two choices, either the patient or the insurance companies.  Based upon the way that most doctor’s offices are run, it is obvious that the insurance companies are their main customer.  Everything that the physicians do is designed to make sure that the insurance company gets what it needs.  The patient is the one who allows the doctor to get paid, but the gatekeeper is the insurance company. Concierge care (I love that description) has started to catch on in wealthy areas.  Basically, the doctor does not take insurance and charges an annual membership fee to his or her patient base.  Does this exclude people who must use insurance to cover their health needs?  Yes, of course.  But it allows the doctor to change the customer relationship from the insurance carriers to the patient.

Google – Who is Google’s customer?  Good question.  Google sold over $22 Billion worth of services in the last 12 months.  Most of that came from advertising.  So, of course, Google’s customer would be the advertisers who pay for the services.  Not so fast. I would venture that the users, not the advertisers are Google’s customers.  Most of the new things that Google rolls out are enhancements to the user experience and they are focused on making the world’s information available to everyone.  If they added an additional advertising service, they might increase revenues a little, but if they stopped providing excellent search (and other) services, the advertising would dry up very quickly.

This is all critical as you are building your business.  If you design your business around the wrong customer, you will never see the full benefits that you could be getting.  Think through this question (and Jeff’s above) as you start to build your business plan.  There are significant benefits for not taking the easy road and just picking the customer that everyone expects.  You may be able to garner a much more substantial or lucrative (see physicians above) customer base from a group of folks who are not supported by other organizations.

I would love to hear about more cases where you believe that the customer is not exactly the end user.  Contribute in the comments.

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Data Edition: Behind the Scenes, Strategy, Behavior

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Lots of talk lately about data.

Behind the Scenes: The credit card industry has changed a lot in the past 25 years. The amount of data that the credit card companies know about you and use to predict the future is astonishing. The psychology of getting late payers to get current based on that data bank is also amazing.

Strategy: How do we keep track of the right metrics when determining future plans?  Eric Reis says scientific methods can help determine the best ways to dig deeper into the metrics that we collect.  Simple things like using a split A/B test will provide you with more data to make better decisions.  Eric goes into a lot more detail about tests in his article on the FourHourWorkWeek blog.

Behavior: Google probably collects more data about us than we can imagine.  They are now using this data on their own employees to try to determine who will be the next to leave the company.

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Entrepreneurship, Strategy, Behavior and Turkey Fun

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Entrepreneurship: Think the inner city can’t be a place to start a new business?  Think again.  Given that there is a whole lot more real estate out there available, albeit some with bank branches and auto dealerships.  Smart entrepreneurs are going to be looking for ways to make a business around these sites.

Strategy: Another Seth Godin gem. Knowing how to ask is more important than the ask itself.

Behavior: Dan Ariely, author of the terrific book Predictably Irrational: The Hidden Forces That Shape Our Decisions, spoke at a recent EG conference. EG is an offshoot of the TED conference. Dan’s topic was about how we make decisions. Besides the usual visual games, he discusses some of the reasons that we make decisions and how options that have absolutely no value often distract us in our decision-making process.  Marketers are using this information today to get you to move on their buying process.  In fact, as Dan describes, it could be a matter of life and death in a medical setting.

Fun: I was one of the unnamed friends at Kristin’s turkey (and other assorted goodies) fry-off last weekend.  Pictures and recipes are included in her blog. I admit that I was unsure about the whole deep frying bit, but man, these treats were wonderful.