I was recently speaking with someone about training staff, and the benefits of really investing in our people. To which he replied:
‘What if I train them and they leave?’
I said:
‘What if you don’t, and they stay?’
Tag: startups
Value creation & extraction
The web has changed business models so much, it’s hard to know where to start when discussing the implications of revenue streams.
In the past I’ve been very clear on my views about Free – it is not a business model. It’s a sampling campaign, or a related revenue strategy. But in truth, the methods for extracting revenue are being totally reinvented by the web. Given the cost of producing everything from flat screens, the flat pack furniture to microchips is in a state of rapid deflation means we need to reconsider the revenue equation – or more appropriately, the timing of the revenue.
For a business to survive, revenue must be extracted.
But before revenue can be extracted, value must be created.
When creating web based startups it is very hard to create value, until we have large numbers of participants (espoecially if we are not selling physical or virtual goods). The way to get large numbers of participants is the reduce the barriers to usage and entry. And the best way to reduce the barriers to entry, is to reduce the price, or even remove it entirely in the short term.
So when thinking of pricing models we need to forget about the price and start thinking about value. It isn’t until we have created value, that we will be able to extract it. So the real question is not ‘what to charge’, but has value been created yet?
Trust and my dad
My dad has an interesting viewpoint on the idea of trust. He says that it doesn’t need to be earned with him rather, he gives it out freely and automatically with anyone that he meets. He says that it is implicit in the human make up. He says that trust should be an automatic ‘gift’ in the human operating system.
Occasionally his trust gets abused – that’s the price he is willing to pay for it does happen. The upside of all the trust given far outweighs the few exceptions.
In startups and business, we’ve tried to de-humanize trust and replace it with forms and legal agreements. I really believe that we should trust ourselves and our gut just a little more. But I’m excited that new technology is making us more human again. The fact that digital footprints are largely permanent may even circumvent the need for mistrust and formal agreements. We can instead go back to trusting peoples word and enjoy the speed that organic development gives us versus making lawyers wealthy.
Pricing relativity
When I buy something via iTunes it doesn’t feel like money. Especially when it is an app that is a few dollars at most. It’s easy to press a button which confirms a purchase at a value which is lower than anything you can buy in the real world. A coffee or coca-cola is $3.50 these days. it doesn’t end there though. When we get the bill on our credit card it’s the smallest number on the page.
Mobile phone plan $59
Restaurant XYZ $179
itunes $2.99
Again – the comparative spend makes it easy to ignore it as inconsequential expenditure. Yet, for some reasons we’ll switch brands at a supermarket to save 15 cents on the purchase of toothpaste.
There’s an important lesson for entrepreneurs here, and that is the selling environment and immediate comparison.
Relativity.
How can we sell our brand in place where it looks cheaper than everything else on offer, as the biggest barrier isn’t how much money it costs, but how much it costs relative to the things around it? It turns out that what the price is, is not nearly as important as where the price is.
The art of the future
The art of the future is about taking seemingly disparate pieces of technology, information and ideas and linking them in a new and meaningful way.
The beauty of this truth is that it is something that can’t be outsourced to the microchip, structured in a spreadsheet, the singularity wont replace it, and the incumbents wont embrace it. The only way it will arrive is when you discover the pieces and show us why they belong together.
The Service Shift
I recently tweeted something that, I think deserves a more detailed explanation:
This is true for a few reasons.
A direct world: all customers can and will contact brand controllers directly. Information services and direct brand channels such as twitter mean that customers deserve and expect direct answers and interaction. Something only traditional service companies would once provide.
The manufacturing gap: Every year the chasm between between brands and manufacturing is widening. In fact, many of the worlds most adored brands don’t make what they sell. They either design and direct (eg Apple) or only make information (Facebook / Google). In fact consumer manufacturing stalwarts like Kraft and Proctor & Gamble produce far less than they ever have. The gap between makers and marketers will only continue to widen. And require traditional brand owners to become more service oriented in the process.
The virtual replacing the physical: Increasingly we are making and selling virtual goods. Goods that are consumed intellectually. Think video games – and then think far wider. Just because we can’t touch something, it does not mean it doesn’t provide significant utility. Paid for mobile apps and software are great examples, as is music in digital format. The CD only provided utility in that it delivered the music, nothing more.
Recently Marc Andresseen, was quoted as saying ‘Software is eating everything’ which is a very important statement. The shift is happening, and even if we still make stuff – increasingly our service orientation will be how we win.
The system is dead
Journalism is dead. No, newspapers are dying. Writing has never been more omnipresent or important.
The music industry is dead. No, more artists are making more music. It’s just not in a record store.
TV is dead. No, TV is different. ‘t now has 6 billion channels with www. addresses rather than 200 numbers to choose from.
Advertising is dead. No, we no longer “tell then sell”. We now collaborate and create before hand. The 4th P is now the 1st.
Print production is dead. No, we print on our desktop. We print millions more pages than ever.
Book stores are dead. No, stories and reading continue to grow via the screen and home delivered books.
Retail is dead. No, it’s growing rapidly. In different places, in different ways, all digitally augmented.
The point is that anything that is culturally or economically important will never die. Humans will find new ways to keep them alive, or more truthfully make them more alive by knocking down the previous barriers to entry held in place but the profitable incumbents. They loved their systems because it made them rich from keeping us out.
My question to all entrepreneurs is this; how are we making the most of the change old dying systems are presenting us?