Monthly Archives: February 2008

Triggers for Exponential Growth

Last week we decided to have a look at Triggers for Exponential Growth at the Churchill Club.  The event was based on my question “Are there identifiable triggers that send a business absolutely mental?”  Although not truly meeting the definition of “exponential”, we did pick 3 companies that had achieved massive growth and convinced their leaders to talk about what was going on.

I thought it was worthwhile to share the main points.

The companies were:
Red Bubble
An online art store that launched just over 12 months ago and now has 38,000  members and over 600,000 pieces of art online.

REA Group
7 years ago the operators of Realestate.com.au had revenue of $4M with losses of $6M.  Today they have revenue of  $110M and profits of $15M

Roo Online Video Network
From 3 men in a garage in Caulfield in 2001, this online video company now headquartered in New York and listed on the NASDAQ,  streams its content to 60+ countries via 10,000 servers.

According to my notes, the main points from each of our speakers on the triggers for them to achieve exponential growth were:

Peter Styles –  CEO, Red Bubble
1.    You need to bring on board people whom are passionate about what you do, as achieving exponential growth isn’t a 9 to 5 job.

2.    Delivering a “Remarkable Experience” in every area of the company will make the growth sustainable.

Simon Baker – CEO, RealEstate.com.au
1.    Focus.  Get rid of distracting/unprofitable business lines and concentrate energy on your strategy.

2.    Hire well.  And be prepared to stand people aside if you need to.

3.    Have an infrastructure that will support your growth.

Tristan Place – Vice President of Sales/Strategic Partnerships for ROO Online Video Network
1.    Make sure you have the right people in place.

2.    Stay Disciplined.  When growing there are millions of potential distractions.

Each speaker also mentioned that in the early days each company had the right to experiment with markets, business models and products.  However the mistakes were quickly (or sometimes slowly) identified and the business tightened up into growth machine that now exists.

Once again there was no “secret to success” or magic button that was pressed.  Massive growth came down to focus on strategy and hiring the right people.

Facebooked!

From a technology business point of view, I learnt a couple of nasty things about Facebook last week. Like about 70 others I attended the Facebook Developers Garage in Melbourne to see what was going on with Facebook. Facebook is the American social networking phenomena that was launched in 2004 and now has over 64 milllion active users . It allows anyone to write and connect up an application available to those users. Think being able to play scrabble with your friends on line. Facebook provides the environment and scrabble is the application written by someone.

Sounds pretty sweet that you could tap into that large a customer base really easily. Additionally, if people use your application, you get a cut of the advertising action, and this is apparently making some developers people nice revenues simply riding on Facebook coat tails.

But here’s the rub.
1. Facebook is a set world. If you want to do something on Facebook, it is going to look like Facebook application. This means the Facebook font and a blue coloured environment.
2. The Facebook environment is changing regularly (apparently weekly) so this means you may have to be updating your application on a weekly basis.
3. Facebook isn’t going to tell you if your application will be killed by their changes, you have to monitor it yourself.

Therefore building a Facebook application isn’t like building up website, in that you have to be constantly maintaining it at a technical level and you are really constrained in that you can do.

There was also some nasty commercial lessons learnt.

1. Most applications fail to attract users. A tiny installed base in the hundreds of users only is the norm, and this isn’t a critical mass.
2. Monetisation of applications, other than by getting a cut of the advertising, is extremely difficult to achieve, the “buy a virtual gift for a $1” applications quickly run out of steam.
3. Marketing your application virally is the main way to get people to use your application and this is pretty difficult to achieve. With Facebook you are in a closed environment where thousands of other developers are competing to market their application virally.
4. The lesson appears to be that Facebook users of an application, don’t jump out of Facebook. Ie your Facebook based users stay Facebook based users.
5. The reason Facebook has opened up their system so that you can write your own application, is so that they can get more users, not the other way round. There is a reason they have 64Million users in three years, and was valued by Microsoft at US$15Billion.

One again it appears that there is no “magic button” solution for business.

I Hate Favours

Since I have been getting up on my high horse lately about quality executions, I felt compelled to rant a bit about favours.

I hate favours.

Favours drive me insane, because mostly they are not favours at all.  So what do I mean? Consider this experience of mine…

One of my IT services companies had a rack mount server ( a skinny little computer 1 inch high, that belongs in computer racking).  This computer ran a variety of services for us, a couple of websites and our email system.  The computer was kept at an Internet Service Provider, which means it benefited from a high bandwidth internet connection.  Because some of my staff were mates with staff at the ISP, and had helped them out on occasion, they did us a favour.  The favour was they “hosted” the computer for free.  A saving of around $2,500 pa.

Now I didn’t like this favour , but couldn’t put my finger on exactly why.  My staff though I was mad wanting to pay for hosting the computer, and argued heavily against changing the relationship.  Because I couldn’t put my finger on exactly what I didn’t like about the arrangement and had the other usual distractions, I let the situation run.  Right up until the moment that our computer was disconnected without any warning.  What happened was that the IT manager at the ISP ran out of space, and needed our slot.  Since we didn’t have a contract, he pulled out or box, so that he could keep a paying customer happy.  This “pulling” of our server was of course  very bad thing, and caused heartache, stress and problems for the best part of a week.  The billable time chewed up fixing the situation that was worth well over the $2,500 we hadn’t paid.

Now this isn’t the only issue I have had with favours.  So here’s 10 reasons why I don’t like favours.

1.    Nine times out of ten its not a favour at all – you are actually just bartering services.  Have you ever had someone say to you “Hey, I helped you out last week!”.

2.    Favour means service without the same quality you would get as a customer.  Have you ever had a plumber mate do you a favour and fix your plumbing at cost, only to be left with no water in the bathroom for a week?

3.    Favour means you lose the right to complain about poor service.  See above.

4.    Favours don’t come with enforceable warrantees or contractual arrangements.

5.    Favours don’t generally come with trade practices act protection.

6.    The person doing the favour, may not be authorised to do it.  I have had some really angry customers when they found out they were no longer going to get free web site hosting in return for giving a staff member free drinks at their bar.

7.    The person doing you the favour leaves, and all of a sudden you have an urgent mess you need to deal with.  Which helped cause the ISP problem I initially talked about.

8.    The favours have real commercial value so you end up have to keep track of the favours anyway.    I have provided lead to a colleague who generated $100K profit out of it.  In return they bought me a $12 lunch.  (No more favours for him!).

9.    The person doing you the favour may compromise you down stream.  Think any politician in the last decade whom has been done a favour by Brian Burke.

10.    The person doing you the favour may have a specific agenda for doing you the favour.  Think about the guy that gives you free service then wants a testimonial in return.

Now I am not the grinch, and not someone to cut off my nose to spite my own face, and agree that some favours are easy and no-brainers .  However If its more than just a replacement cup of coffee, think carefully about how the favour could play out.

The Opposite Of Camouflage

The other week I mentioned how to give quality instructions.  A lesson I had learned from the Army that I had transferred to the commercial world.

It was suggested to me that I might like to pass another Army method -> Commercial tool lesson on.  So having watched a Harry Potter Movie with the kids on the weekend and been fascinated by Harry’s invisibility cloak, I thought I might pass on how the Army feels about invisibility (or camouflage anyway) and how it makes me think about marketing.

My thought processes are simple.  If camouflaging yourself makes you hard to see, then doing the reverse will make you more visible.  Transferred to commercial terms, more visible means getting noticed and more customers.  Marketers call it cut though.

The Australian Army teaches (or did when I was around) that the principles of camouflage consist of 5 S’s and an M.

Shape
Almost nothing in nature is symmetrical,  therefore if you wear triangles and squares you will stand out.  Much better to be lopsided.   The same principle applied commercially is to make your offering stand out from the competition. If everyone has square business cards, why not a round one?  In fact if everything is symmetrical, why not something lopsided?

Shine
Shiny objects catch the eye, so make sure everything on you has been dulled.  The commercial reverse of this is make sure your advertising is eye catching.  No one reads a dull sign, but something with outrageous colours will catch the eye and from a much greater distance.

Shadow
Your shadow can betray you, for example if you are hiding behind a tree.  Commercially this makes me think about the footprint of my actions.  If we are giving great service, make sure that others are aware of it after we have gone.  Eg the fridge magnet so we can be recommended weeks later.

Silhouette
If you stand on the crest of a hill, you will be easily seen as behind you will be blank canvas of sky.  Commercially I think a about how my offer stands in the clutter of other offers.  How do I get my offer to “stand against a blank canvas.  This may be as simple as arranging a breakfast meeting so that there is nothing else on my customers mind when they meet me.

Sound
Quite obviously if you are making a lot of noise, you will be noticed.  To me this translates into turning every day occurrences into exciting dramatic events.  Letting customers known when we get new staff, or change the way we operate.  Everything is news=worthy when portrayed the right way to the right audience.

Movement
Finally movement catches the eye every time.  Commercially this means that we must be either constantly be innovating, or be seen to be innovating.  When your offering is the same day after day, you are almost guaranteed to lose mindshare.

More on camouflage in the military world can be found at resources like http://everything2.com/index.pl?node_id=1452904 and http://www.camo-store.com/sniper_camo.htm .  Wikipedia has an interesting article on camouflage that is much more focussed on the animal kingdom.  Quite an interesting article, especially when you approach it with the thought – “Is there a commercial tool here?’.  Herd animals deliberately make it difficult to distinguish individuals.  I’d have to say that the majority of the IT business works pretty much the same way.

Rotating Cube

I was looking at a problem over the weekend, around a correct business model for calculating shipping fees for a client.  The problem was really about determining how they determined their shopping costs as the variations can be complex (flat rate, weight based, quantity based, distance shipping, speed shipped, supplier used etc).  I was rolling the problem around in my head, a bit like a mental Rubik’s cube, when something else occurred to me.  Most websites today are either built from a designer point of view or a technical point of view, and rarely from a commercial point of view.  However, websites that are built from all three points of view are extremely rare.

Most commercial websites have an extremely varied audience; existing customers, potential customers, competitors, potential employees, journalists and a variety of others.  If we drill down a bit further into the audience that probably matters the most to website owners, i.e. “potential customers”, we can normally also see a lot of variation in size, industry and location.

However when a website claims to be dynamic, most technical people are referring to the way web pages are generated “on-the-fly” from records in a database.  I rarely see a website that is really dynamic and customer focussed.  An in the case of organisations selling old world industrial products or consultancy services, I have never seen it.  (I should say though that this is an area where many of the so-called web 2.0 websites are really good, remembering who you are and what you are interested in).

Now I’ll put my hand up to say design is not my forte, however I can say that I have a strong grasp of both the commercial and technical drivers of a website.  Therefore I’m thinking that I would like to see a website that works in the following way.

The website would have two levels of public access.  The first level is full of fixed pages, such as company address, an overview of what the products and services are etc.  The second level is then accessed through a gateway, and provides information customized to the person visiting the website.  Potential customers would have incentives to go through the gateway, as free resources (checklists etc) would be available on the other side.

The gateway would probably ask the following questions:
1. What’s your Industry?
2. What’s your Location?
3. What’s your Size?
4. What are your contact details?

The second level would customize the information available to the visitor.  Rather than have a list of articles, products or services generated from a database (as is the norm), the list is still generated but now the information that is most likely relevant to the customer is at the top and highlighted.  From a customer experience point of view, it would appear that you specialize in organisations just like them.  I kind of see the website like a large virtual Rubik’s cube.  Once you know what the potential customer looks like, you can rotate the faces to give them an optimized view of your organisation.

So why is this good thing?

Reason no. 1.  Your website is now working for you by actively capturing leads for you to follow up (with some useful reference information).

Reason no. 2.  The potential customer now thinks your organisation is exactly the right one to help them with their problem, as you appear to specialize in their industry, size and location.

Effective Briefing

Everybody loves the word Strategy.  MBA’s specialize in Strategy.  So do a variety of consulting firms such as McKinsey and Bain & Co.  This is another organisation that specializes in strategy and has been doing so for thousands of years. This organisation is very good at learning from its competitors, and learning from its mistakes.  Unfortunately most consulting firms aren’t that good at learning from their mistakes.

Anyway this organisation is called the Military.  I don’t call it the Australian Army, as that would deny an intellectual heritage of thousands of years.  In this I mean the Australian Army wasn’t formed from scratch, it used staff from other Armies (notably the British) and thousands of years of lessons to build its intellectual capital from.  Now here’s the interesting thing about the Military, its emphasis when training its leaders is on quality execution, rather than strategy.  Why?  Because it if you can’t execute well, you will never know if your strategy is any good.  Additionally, an average strategy, executed well, will beat a good strategy, executed badly any day of the week.

To execute well, there are a number of key components, but giving quality orders at an operational level is critically important.  Having spent a fair bit of time wearing a uniform, and having transformed a lot of the military’s intellectual capital into commercial tools, I thought I’d share how to give quality instructions.

I give these instructions in one go, to everyone involved so that everyone knows the what’ why, how and when of themselves and everyone else.

1.    Background.  Everything needs to be placed in context of the bigger picture.  What are our overarching objectives, what are other groups doing towards the goal, what kind of opposition is around.

2.    Objective.  In a very concise statement, what exactly is to be achieved?  Eg.  “Have the tender document completed and presented to me by 9am Thursday next week in both bound hardcopy and PDF format.”

3.    Tasks.  First a general outline of what is to be done, then the specific tasks of each person, running through their tasks, responsibilities and timelines.

4.    Administration.  The budget that’s been allocated and what resources they can draw on, plus any administrative overheads.

5.    Communications and Management.  The management and reporting lines; plus the how, what and when we will communicate what we are up to.

This structure ensures that everyone understands what exactly they need to achieve and why.  Its worthwhile remembering that this format has been developed over thousands of years by people whom have died or killed others when they make mistakes.  Therefore its likely to be more robust than something thought up by a group of Academics.