Irrational Complexity

I just got back from the gym, and tonight I saw what I see every time I go for a workout. A very out of shape person doing some kind of ridiculously complex exercise for a particular body part. Which any experienced trainer will know is clearly a waste of time.

The reality of weight training is that the entire body can be trained incredibly well with 5 simple exercises:

Bench press

Chin ups

Squats

Shoulder press

Running

Everything else really is only for the hardcore and professional sports people. Problem is this truth doesn’t sell books, personal training sessions or gym memberships at locations which look like a NASA astronaut training facility. Success in gym programs is more about eating well and doing simple exercises which well executed with good frequency.

There is actually an important human psychology associated with such behaviour in the gym. We think there is some kind of secret formula. That success is associated with a complex algorithm which we must try and find, unlock and use. That success in the gym is rare because it is difficult to know how to do it.  That when we find these special trick techniques, our success will come much quicker. That we’ll be transformed overnight.

As humans in the 21st century we have a preference for irrational complexity. We know the truth, but we’d rather pretend it isn’t so. We’ve been so shaped by the media and a lack of hands on experience that we often believe success is hidden behind secret walls. And so we look for get fit quick schemes (Get rich quick scheme anyone?) rather than a get fit slow routine, which requires a consistent diet and a lot of sweat.

It’s pretty much the same in startup land. There aren’t great deal of tricks out there either. The formula is hard work, a lot of sweat, serving customers well and using the age old business maxims which were written about by Adam Smith over 200 years ago.

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Usability defined

If you want to know what a true consumer insight looks like. What it is to have the ‘user in mind’, then take a look at this picture below. It’s one of the simplest and best innovations I’ve seen in a while. The key question is this:

‘Why did it take the industry more than 100 years to think of it?’

electric plug

Startups: What simple user centric innovations are waiting to happen in your industry?

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Transaction Friction

I’m currently in the midst of improving the usability of rentoid.com. We are quite certain that it will improve things dramatically from where we are today. easy to follow steps and visuals to first time users.

But in truth it really won’t be enough to be game winning. After this website improvement, we’ll need to continuously iterate what we have.  And if I am to tell you all a secret here on startup blog it’s this… Some the new changes will need to be replaced in a couple of months, and so on in perpetuity. The reason is that I get phone calls all too often which sound like this:

Customer: ‘Hi I’m ring up about renting that double bed you have listed on rentoid.com’

Me: ‘Sure, are you new to rentoid? If so let me explain very quickly how it works…..

(I say we don’t own items, rather have a website that people use to rent items to and from each other. I tell her how to join / transact)

Customer: So it’s some random person?

Me: Usually things like beds are rental business – it will be identified as such saying’rentoid business partner’

Customer: Ah, no sorry… It sounds just too hard sorry…. thanks.’ Hangs up phone.

* If the first contact was with the owner, things may have been very different.

There’s too much friction. As a little reminder this is the definition of friction as it pertains to physics:

A force that resists the relative motion or tendency to such motion of two bodies or substances in contact.

Friction

The bodies in this case are the customers and the website. And transaction friction occurs whenever these bodies interact.

Currently, there are too many interactions before a transaction can happen. The reason the system has been designed this way has been to ‘protect revenue’, as all my readers will know I don’t believe that “Free” is a business model. But the question I am seriously asking myself is ‘How much revenue are we losing because of friction?’

It is free to join and list on rentoid.com and we take 5% revenue of each rental. Which means both the renter and the rentee need to do quite a few clicks before the transaction is complete. Both parties have to deal with significant fraction in order to transact with each other.

The owner has a lot of friction listing the item

The person renting also has a bit of friction when paying the 5 % deposit on rentoid to get the owners details.

This process protects our revenue, but slows things down and is painful.

There is no doubt it that turns many people away – how many we just can’t know. Don’t get me wrong, I’m not about to make it ‘free’ – but maybe it’s time to make people pay to list. Which we have avoided to reduce barriers to entry for listers, as listings (having the most items for rent in one place) is game winning. That said, listing already has a lot of friction in any case…. it takes time & effort, maybe asking for a few dollars up front isn’t really a problem? Maybe people wont mind if it creates more rentals for them because their phone number is on display for the renter to call them immediately and get renting? There is only 1 way to find out the answer to this question and that is to implement it. But friction has to be balanced. We need the minimal amount of friction to to move things forward, but enough friction to make so money as well.

The other benefit of changing the system is that it will bring the money forwards and reduce complexity of the site mechanics. But it does open to other competitive risks like screen scrapping, and listings being stolen.

I’ll let you know which way we go…. In the mean time think about this in relation to your business or startup:

“How can I reduce transaction friction in my business?’

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Collective Intelligence

You are in a room full of people.

You are speaking to them on stage and have their full attention.

You tell them to pretend all the people in the world are in this room

You ask the people who believe they have ‘above average intelligence’ to raise their hand.

All the people in the entire room  raise their hand.

The fact is, exactly half will be above and half will be below… we all assume we are the smart guys, the good guys, the people make things better…. we all believe we are adding positively to the collective intelligence.

But collective intelligence has a slight nuance. It only works when we let people with specialist knowledge fill in our own knowledge gaps and or take the lead in areas of expertise. If instead, we take the average viewpoint of the collective audience we usually end up with a pile of crap. Collective intelligence can only occur when we segregate and allocate information requirements, not when we aggregate. The latest proof of this is Youtube.com

youtube logo

Once upon a time youtube was a reliable source of cool and important videos. Circa 2005 the most viewed, most discussed for the day, week or month was an intelligent reflection what mattered. Now it’s a mish-mash of over produced pop songs, inane  comedians, and soft porn. A sad failure of the digital ‘Wisdom of crowds’. Youtube is still incredibly valuable, it just takes a little more digging these days.

The point for entrepreneurs is this: The crowd is not always right. Taking all advice from the crowd on how to iterate your product, service or website could result in a very average product. Intelligent design is usually the work of intelligent people.

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Office Blind

One of my favourite business quotes of all time is from marketing Polymath Al Reis who was co-author of the 22 Immutable Laws of Marketing (A must read for all entrepreneurs) and it is this:

‘An office is a very dangerous place to watch the world from”

Nice view from office
pic by Altus

This is really a key for anyone no matter what our life is. Decisions from the desk are rarely as insightful as decisions made from the filed. For all the reasons we are aware of such as message dilution , the grape vine et al.

I have been witnessing this first hand as I have invested the past few weeks out on the road visiting my business customers for www.rentoid.com. Put simply I’ve learnt more in the past few weeks than I have in the past few months. Incredible insights as deep and wide as web usability to asset management.

I’ll I can say to startups is this. Get out there and press the flesh and make sure you are not ‘Office Blind’.

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Community overload

Today I had a discussion about an entrepreneur who runs a well know business in Australia. He commented about building a community, then working out how to extract revenue later.

Seems everyone is trying to build on line communities these days. How many auto generated emails are you getting? My inbox is full of them. Sure we know it works, we know it’s crucial, we know its all about the community. Interestingly when we say community we don’t really mean it. We mean bunch of people who we can do direct selling to. But here’s a thought:

There are only so many communities we can all belong to.

People are suffering from ‘Community Overload’.

The law of diminishing returns is not excluded from community participation. We only have 24 hours a day – something the internet hasn’t been able to revolutionize just yet. And just maybe some of our people / customers / community don’t care as much about what we do as we’d like to think.

It just might be time to flip our thinking a little here. Maybe we can just sell something instead. Maybe create a great product or service which people value – and just leave them alone. The ultimate community which matters is family and friends, and the best way we can serve that group is by not stealing time from it.

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