09
Aug 09

The Large Market Fallacy

Last week, during a new product presentation, I had an all too familiar moment. We had reached the point in the meeting where it was appropriate to review the business logic behind the concept at hand. At this point the presenter threw up a massive sheet of numbers and calmly commented to the audience, “well, overall this is a $4 trillion dollar market, so we think if we only capture 5% of the market, we’ll earn around $200M in the first year.” She didn’t even blink. (I changed the numbers to protect the innocent…the sad part is they’re lower than the actuals.)

I sort of live for these moments in presentations. It’s probably the same attraction that keeps baseball fanatics glued to their television for hours of what appears to be a pretty boring game. After waiting patiently, and watching things slowly play out, something goes very wrong, At that point, all hell breaks loose. At that point, you see who’s the power player in the room, who’s done their homework, and who’s completely out to lunch. This part of the meeting was pretty mush a wash, that argument basically threw itself out the window. This presenter had just committed a pretty common error, one I now refer to as a Large Market Fallacy.

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14
Jul 09

Speaking of measurements…

…and I just was. I noticed a really nice twist on the old restaurant secret shopper scheme. According to this article, Five Guys Burgers & Fries hires secret shoppers to find people who are doing things right. So instead of feeding a fear-based culture of screwing up and getting caught, they find ways to highlight people who are getting it right. And by doing secretly, they’re probably getting around the apple polishers who only do it right when they think it counts….because really, it always counts.

Funny how your perspective really influnces how your solve you problems.


12
Jul 09

Airlines, mind your measures

Four years ago, I was at work sitting through lunch meeting around the health of our office. At the time what we were producing was great, and moral was high…but profitability was sort of lagging. My coworker deadpanned, “I supposed you can’t be considered successful until you’re considered profitable.” I sort of chuckled at the time, because I figured it was his way of basically stating that we were screwing up. I mean, isn’t the only way a business can be successful is if it’s profitable?

That moment has stuck with me over the years, and probably has done a decent amount to deprogram my b-school education. I was surprised at the automatic leap I had made to equate profit and success. I know that successful businesses are usually sustainable and profitable, but I had let something else define what success means. And when someone else defined success they implicitly defined what we would measure to be successful.

Its pretty fascinating that people are really good at optimizing what the measure. The act of tracking anything socially elevates its importance. And if we think something is important, we make sure we tend to it. On the job accidents, profitability, CO2 emissions, return on investment, net promoter…you name it, we can track it. Things get sticky though when the ideals we measure conflict with each other. Is profitability more important than customer satisfaction? Is avg. purchase price more important than how many people I tell about what I purchased?

I’ve been noticing lately how the airlines measurements get them in trouble time and time again. There’s the standard bullshit we all sort of laugh about when they push back from the gate for an ‘on-time departure’ only to sit on the runway for an hour. Last week, I noticed a new one. Since some airlines charge for every bag checked, the overhead storage space on the plane has become even more of a premium. As passengers filed on the plane, a flight attendant told a man he would have to gate check his bag. He smugly replied, “I guess no one else wanted to pay that $25 bag surcharge either.” We had so many bags to gate check that the plane left late. So in this case, the airline didn’t make any extra money (they don’t charge for gate check), the flight left late, and everyone was miserable. Way to go, Delta.

Dave Carroll of the band Sons of Maxwell have been getting a lot of attention because of one of their airline horror stories. Apparently United broke some of their music equipment in 2006. After no one at United helped them repair the damage, they wrote a song about it and posted it on You Tube. So what would might have been a $2k repair bill for United turned into a decent sized fiasco, 2.4M people have watched that video in 6 days. (That’s the population of Houston.) Good news for the Sons of Maxwell, bad news for United.

I guess it’s no surprise that the airlines who are thriving in today’s environment (southwest, virgin, jet blue), are the ones who have figured out that the customer experience (and how they measure it) are arguably one of the most important pieces of their strategy.

If you think about it, how you measure success is probably more important than how you define success. If you goal is to go east, and you measurements reward your for going west, where do you think you’ll end up?


12
Jul 09

Back to the Craft

An interesting thing happens to people who becomes ‘stars’, many times they stop doing the thing that made them special. Star employees are often promoted to management. Star artists become celebrities first, artists second. Successful authors spend more time becoming PR machines. I guess none of this is inherently bad, but I often wonder why people lose touch with their craft. I’m sure there’s a host of reasons, but I wonder if you truly love that thing you do, why would you stop doing it?

I was pretty excited to see Beck taking on a pretty interesting project. Beck’s basically collaborating with different artists to cover songs he loves, and then he’s giving it away on his website. This is one of those little moments where you go, ‘yeah, ok, so…” and if you let it sink in a little, you see the genius.

Putting out an album is a huge ordeal. There’s lots of investments of time, money, and sanity. Releasing an album lets you connect with your fans and make some money touring. But how could Beck stay relevant when he doesn’t have a new album out? And in today’s market, months between albums can feel like years. People are bombarded with a million times more content than before, it’s easy to fade into the noise. By no fault of your own, time could passes and you just become irrelevant. I’d even argue the lower you are on the celebrity musician chain the more dire this situation is. A flash in the pan burns brighter and quicker than ever before.

So what’s Beck’s way around the problem? Stop playing everyone else’s game. Invite some people over you’d like to work with, cover old songs in one take, and post them to your site. Now, with just a little coordination you have artist exposure, fresh content for your fans, collaboration and inspiration for yourself, and you can elevate older artists you enjoy and share them with the world. I don’t think you’d get to the place Beck seems to have found if you didn’t care more about the craft than anything else.


07
Jul 09

Business in Beta

Sort of not new news, but I semi-published some thinking through work a few weeks ago. Nothing that major, but I’ve been writing about some similar stuff around this blog, so I thought I’d make the connection for those that are interested. Check it out, let me know what you think.

Business in Beta.


07
Jul 09

Immediate vs. Reliable

Ryan posted up a response to my questions around immediate vs. reliable. I have to admit, that’s an impossible question to answer, but I guess that’s sort of the point of the exercise. You can tell Ryan did a lot of thinking around this, and I think his response is pretty inspiring.

The first big thought was around posing the question. He said.

The question you pose is often just as important as the answer you find.

That idea made me think of David Foster Wallace’s now famous Kenyan convocation speech (see next post). In that wonderfully inspiring bit, he talks about how the mind is a wonderful servant and a terrible master. That if we can harness the power of thinking about what we do before we do it, we can end up in a pretty amazing place. I think Ryan was onto something similar. By carefully formulating your questions, you move with intention. It’s not emergent, it’s not post rationalized, it’s just well thought through.

Secondly, I like we’re Ryan started to break apart the standard unanswerable question and graft some of those qualities onto people and methods.

I want reliable people posing provocative questions and processing more immediate inputs.

That’s pretty genius if you think about it. Immediacy and reliability are just concepts, without context they aren’t real. Taking those things and attributing them to who/what/when/how gets you much closer to a designable state. It’s a nice aspirational equation for who you should find and how they should work. Thanks Ryan.


07
Jul 09

DFW Rant

As I was writing my immediate vs. relaible post, I wanted to refer to DFW’s convocation speech that’s been posted online since 2005 here. (You can find it preserved in a web archive here.) I’ve forwarded this bit to dozens and dozens of people. For me, it was/is an extremely inspiring piece. Being able to share it with people who would care about it was a really special thing. It’s wonderful writing, an inspiring message, and a large dose of humility in about 8 pages of text

Since DFW’s death the speech has been committed to print. Which, I guess in the long run is a good thing. However, the lawyers of the publishing companies sent a cease a desist order to the person who originally hosted the passage. It was from that site that the text went viral for the whole world to read and ultimately created the market for the book that is now on the shelves. I wouldn’t be surprised if the now publisher originally read the passage on that site. Now, because someone needs to make money, everyone has to pay to read it. Three months ago it was free. The whole passage is 8 printed pages. For some reason on Amazon the book is 144. They put one sentence per page, how clever. I’m very sure the artist who wrote a 1104 page tomb that sells for less that this book would be over himself with joy.

I’m pretty happy that the web preserved it in a way that everyone could read it b/c it’s meant to be read – part of the reason I’m even linking it here now. It’s nice to see our own systems making sure we do a little less harm to each other. Still though, the whole idea makes me really angry.

And to you petty publishers standing over a cold dead artist shaking his bones so that $15 increments fall out one SKU at a time, may your hell be hot. You should keep one of those books close to your bed stand as a reminder of why your industry is hosed.


14
Jun 09

Adwords Evolved

I don’t usually get too inspired by advertising. Some times it makes me laugh or pulls at some heartstrings, but it doesn’t really inspire me to look at the world in a different way. Then my co-worker Clark showed me this.

Converse just won an Effie for flipping Google Adwords completely on its head. In the past, if people wanted to sell shoes, they would by the Adword for ‘shoes’ or ‘footwear’ or if they’re feeling adventurous, ‘kicks’. Then if people search for “shoe” they’ll see the link. The more marketers buy the same words, the more expensive that Adword is. That basically means every shoe marketer in the world is inflating the price of the word, creating more competition for themselves, and probably not meaningfully reaching anyone. (When’s the last time you searched for shoes? You either hit the brand or you go to Zappos.)

Converse flipped the script, they started buying Adwords that their demographic were already searching on. How did they know what they were searching? They just looked at Google Zeitgeist. So now, when a teen is searching for ‘how to kiss’ they might see a link for a Converse mini-site. The mini site is a moment to connect, and it’s a link back to Converse (if they want it). The only way you get to pull that off is by intimately knowing your customers and knowing what they want.

I would expect that Google will start to price terms in Zeitgeist slightly higher (if they don’t already). I think this campaign will probably change the way people buy Adwords. It’s like human-centered media planning…what an oxy-moron.


05
Jun 09

Business Models Happen

So I’ve been following Umair Haque for a while. A few months ago he made a comment that stuck with me, but didn’t sink in until just recently. He was discussing edge economies, so not traditional established businesses, rather new organizations creating value in a new ways. When discussing these bold new businesses he sort of made an offhanded comment that “business models just happen“. Wait, what?

That statement sort of offended my sensibilities at first. How can business models just happen? They take time, they’re complicated, and most of the time they fail. Also, edge economies are less proven. Wouldn’t that require more big brains and lots of ‘innovation’? It felt odd to say those models just happen.

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03
Jun 09

Experience: the biggest lever you don’t know you have

Springwise has a post about a concept called Charlie’s Burger’s. It’s an anti-restaurant of sorts that does dinners by private, sporadic invites. One thing that caught my eye was that people weren’t emailed directions when the event was happening, they were directed to a satellite location to pick up the actual dinner location and directions. In the rave days, that sort of maneuver was called a “map point”. Some guy hanging out in car or a record shop with the actual directions to an underground party. You didn’t get directions to the party, you got directions to the map point and you would go from there. (There’s other variations, sometime it was a phone number with a voice recording.)

Can you imagine how much this dials up the experience for the diner? Instead of wading through a crowded restaurant to speak with a stressed out greeter, you’re going on an adventure. Even better, once you arrive at the venue, you have a shared experience to share with 20-30 other people.

I think a lot about how to flip business models on their head to build something different. I’m beginning to think I’ve been going about things all wrong. I’m beginning to believe business models happen only when you create a compelling offering or experience. (I’ll blog more about that next.) I’m starting to think you that you have to start by to flipping the experience around, then figuring out what kind of business model could deliver that experience. I think building models for the sake of building models doesn’t get you to the right place.