The E-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It
Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant
The Know-It-All: One Man’s Humble Quest to Become the Smartest Person in the World
I haven’t done a recommended links post is a while and so here we go:
Seth: This week Seth Godin directed me to two very cool web resources that I urge you to take time to read and view.
The first is the video Lemonade. It deals directly with folks in the advertising agency business who have been laid off and how they found their next steps. Some people feel that it is talking about the need to start a new business, but my take is that it shows that you really can make Lemonade out of lemons if you pursue your dreams. The video is well made and totally engaging.
The second is a free e-book on pricing. How exciting can that be, you ask? Well, the author, Todd Sattersten who has developed the business book review site inbubblewrap, clearly explains the components of pricing, costing and especially margin. He also delves into the concept of free. All in all a very quick and information packed presentation. And the price is right!
The Brain: Harvard Business Review had a nice article on how the middle aged brain (of which I am the proud owner) has some inherent benefits as it relates to businesses. It is good to hear that while we sometimes can’t remember names, we have built other skills that can help us in the business world.
Microsoft: Microsoft’s perception in the marketplace has changed over the past 25 years. The New York Times has a nice article on what the company has done to put itself in their current market space. This is a good warning to Google as well as any other company that goes through significant growth.
Before you go any further in reading this, watch this video.
Have you watched it? OK, then let’s proceed.
I have been reading Every Patient Tells a Story by Lisa Sanders, a technical advisor to the television show House. Lisa is an internist at Yale and an expert in the diagnosis process. The book provides an excellent description of how our medical system is predisposed to have difficulties in finding the causes to the unusual diseases. She talks about doctors focusing on the common solutions to a complicated combination of symptoms, not understanding the problem in depth before providing a diagnosis and relying too much on technology to make decisions that should have a human component.
This led me to thinking about how in business we also make these same kinds of errors. Normally, these errors don’t have a human life or death hanging in the balance, but the viability of the business sure might. The video that I pointed to at the beginning of this post shows that sometimes we don’t have the right attention to detail.
Extrapolate that finding into your business life and you will find all kinds of ways to increase your vigilance and gather more information to make informed decisions. Now, I am not advocating analysis paralysis here. Just as in the medical field, if you wait until you have every piece of evidence, the patient could likely be dead. But you should be thinking about how to gather the right information and how to be aware of changes from your expectations. In general, if everything is at status quo, you are missing something. Perhaps it is the marketplace asking for something new. Perhaps it is your competition who is planning a different strategy. Perhaps it is the legal or regulatory environment. Perhaps it is just your own employees who are tired of the same old thing and are letting up on quality. Any of these can have a huge impact on your business. Your job is to watch out for the color changes, while the cards are being dealt.
Normally, this blog wouldn’t be the first place to go for sales advice. But, Jeff Leitner wrote this a while back and I have been thinking about it recently as I work with one of my consulting companies. It is a classic.
Step 1 in sales, determine the prospect’s stomach for change.
No matter what he says, there’s a significant cost to changing.
Even if what he’s changing is no product/service.
Figure out what the financial cost, the psychic cost, the emotional cost of change.
And only then do you turn your attention to step 2.
Step 2 is to change the game.
If you’re competing against an existing product/service, there’s little chance he’s changing vendors.
Instead, you have to craft and then sell something very different than the incumbent sells.
You can’t sell better or more or enhanced or even cheaper (commodities aside).
You have to sell something substantively different, that solves a qualitatively different problem than the incumbent is solving.
Men don’t leave their wives for prettier girls.
Men leave their wives for substantively different, qualitatively different things that they can’t get from their wives.
Prospects are the same.
If you can’t put together a substantively different offer, you can’t win.
Even if you’re competing against no product/service.
Or an ugly wife.
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.
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.
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.
DePaul: Thursday was a long day and thus no blog post. DePaul University’s Coleman Entrepreneurship Center had their gala event and gave out several awards. Congrats to Chris Campbell of Lakeshore Branding and Greenwerks, Jen Moran of Greenola and Ben Meader of CareerHook. Also congratulations are in order to my friend Bruce Leech of evolve who was named the Coleman Foundation Catalyst Award Recipient.
Business Strategy: Tim Ferriss talks about a book by his friend, Alan Webber, called Rules of Thumb: 52 Truths for Winning at Business Without Losing Your Self. In the article, he has an excerpt of the book, RULE #24 – If you want to change the game, change the economics of how the game is played. After reading this, I need to read the entire book.
Behind the Scenes: We all remember the heroism of Captain Chesley Sullenberger in the saving of US Air Flight 1594 on the Hudson River. What we have never seen until now are the pictures of the plane as it was recovered from the chilly waters of the Hudson. Photographer Stephen Mallon was there and photographed the scenes for Wired.
Fun: A fun new toy to play with, but one that has significant potential to be a solid research tool is Wolfram|Alpha. Gina Trapani played with it and wrote a multi-faceted review.
Talent: Stephen Dubner of the Freakonomics blog pointed to a poster that he found in his neighborhood in New York. He looked at it as an interesting example of the Talent discussion that has been discussed by Colvin in Talent is Overrated and Gladwell in Outliers. I look at it as an example of entrepreneurship starting early.
Wordplay: I love a pun more than the next guy, so I was tickled by this picture. On so many levels.
Entrepreneurship: Jason Calacanis, CEO of Mahalo.com, wrote a deeply personal and enlightening article in Business Week on What to do if Your Startup is Failing. No sugar coating here, but required reading for any entrepreneur in this economy. If you are still looking for that perfect business idea, check into this post on fear.
Strategy: The chatter around the The Cult of Done Manifesto is increasing. I agree with a lot of this, but what I really love are the posters.
Philanthropy: Trendwatching.com writes about Generation G, the generation not of Greed (see Gordon Gekko of Wall Street fame), but of Giving. In these troubled economic times, it is interesting to see that the generation coming of age now seems to be more interested in the G for giving.
Just this week, a group I am affiliated with held a fundraising breakfast. This year’s total amount pledged was 40% more than last year and the official I spoke with said that she is seeing this trend at many of the breakfasts she hosts.
Lastly, my favorite Generation G story relates to Adam Carter. Adam is the son of a good friend of mine. Adam spends about 7 months each year providing funds and manual labor on humanitarian missions in Latin America, the Middle East, Africa and Southeast Asia as a part of a group called 100 Friends. The other 5 months of the year, Adam earns his traveling money as a beer vendor at Wrigley Field and US Cellular Field. He maintains a blog with his current exploits (including a video about his visit to Senegal).
Marketing: Brand Execution. I have a friend who likes to say “It’s all about me.” In her case, it usually is . But when it comes to your business, it can’t be all about you. It has to be about the business. Jeff Leitner has brought this point together with a short riff on American Idol.
I don’t know if you watch American Idol, but every now and then the judges ask the kids why they chose to sing a particular song.
And the kids ALWAYS say it’s because the song means a lot to them.
And, of course, that’s the wrong move.
Sing a song that best shows off your vocals – whether you’ve got a big voice, small voice, high range, low range, big range, whether you can do runs or are particularly good or bad at expressing the lyrics.
I see the same dynamic in business all the time.
Business owners choose locations, hire people, design logos and launch products because they like those locations, people, logos and products. That’s fine that they have taste, but they should leave the taste at home. Choose locations, people, logos and products that will make you successful in your business.
If you have thought through your business and made the vision tight, you can’t afford to bring in extraneous items just because you like them. If your concept is a classic French bistro, you can’t hang Chicago Cubs paraphernalia from the walls, just because you are a die-hard Cubs fan. You can bleed Cubbie blue in the comfort of your home. But unless you are opening a sports bar in Wrigleyville, the Cubs stuff needs to stay at home. Utrillo prints, maybe. In a dark corner.
Entrepreneurship: On Tuesday, I posted about the Open Source Challenge that Mark Cuban had started. Today, Seth Godin talked about it and helps provide future entrepreneurs with some ideas to get started.
Security: Bruce Schneier pointed me to this article on Facebook security. Note than on that page, there is a link to a free Facebook security e-book to pass along to others.
Big Picture: In a post earlier this week, I pointed to a discussion with Amory Lovins where he posited that electric generators will soon be microsized and distributed into a giant web. Kevin Kelly has also broached the same general topic in his article “The Surest Way to Smartness is through Massive Dumbness”.
The future of business is distributed systems. Look at Google. Google could not serve its customers with mainframe systems; they use an extraordinary number of cheap, custom processors. Kevin Kelly’s article highlighted a most basic industry – cement delivery – and how distributed systems (computers, GPS, authority) created a competitive advantage for one company. How can you take advantage of this trend in your business?
Strategy: Andy Sernovitz talks about why things are going to be better. And I think I agree with him. (hat tip: JL)
Fun: The first harbinger of spring is about to arrive. Not the robins. Not the daffodils. But the call for “Pitchers and Catchers Report to spring training.“ The Cubs are scheduled to start on Friday, February 13 and the White Sox are scheduled to start on Sunday, February 15.
Entrepreneurship: Andrew Anker introduces the term “flashlight” as it relates to corporate leadership. Flashlights are “people who shine brightly in one direction, but don’t let off too much light otherwise“. He manages to compare the New York Yankees and Apple Computer into this discussion.
Politics: One of the things that I actually enjoyed about this past presidential election was the fivethirtyeight.com website that was created by Nate Silver. Nate, who in his day job develops statistical models for Baseball Prospectus, took that same talent and used it to very accurately predict the outcome of the presidential and congressional races. He continues to write about current political issues with a statistician’s flair. Mental Floss took a look at Nate’s work in this article.
Talent: I am currently reading Geoff Colvin‘s latest book, Talent Is Overrated: What Really Separates World-Class Performers from Everybody Else. I also have Malcolm Gladwell‘s book Outliers: The Story of Success on reserve at the library. Each book uses examples of extraordinary achievers to show that there is no such thing as talent. Each author uses the work of Anders Ericsson, professor of psychology at Florida State University, as a basis for debunking the talent myth. The Australian does a nice profile on Ericsson.