NPR’s How I Built This is a fantastic podcast that brings the stories behind some of the world’s best-known companies. How I Built This interviews innovators, entrepreneurs and idealists about the movements they built.
Peloton co-founder: John Foley
In this episode, they interview John Foley, one of the co-founders of Peloton; the fitness and media company that you’ve probably seen commercials for.
In the interview, they greatly undervalued John Foley’s network and experience but nonetheless, this episode touched on several relevant topics my clients often face. I picked this episode because it was a little more in-depth and enlightening than other episodes in that Foley he talks about:
having the discussion with this wife about moving in with her parents if the company fails,
how everyone is similarly able including Harvard MBAs,
how Peloton is only recently profitable after 7 years
There are also great questions asked by interviewer that touches on market trends such as arcades no longer thriving due to user experience-to-price dynamics (i.e. video game consoles vs arcades due to quality of experience), penetration/awareness strategy which led to their distribution model given that malls are making an industry correction, and lastly the trademark question: “How much of this was because of your intelligence and hard work, and how much of this was just luck?”
FYI, I always discuss market and industry trends, launch and penetration strategy, as well as bootstrapping in all my business plans.
Often entrepreneurs come up with their business idea because of their own personal experiences or that of someone in their circle of friends & family. This is a great strategy but sometimes doesn’t tap into a market large enough.
In episode #850 of Planet Money, The Fake Review Hunter the hosts interview Tommy Noonan, creator of SupplementReviews.com. SupplementReviews.com is a highly popular website that provides unbiased user reviews of health supplements. However, Tommy soon found that there were reviews that were suspiciously positive. Because Tommy’s entire website was based on authentic user reviews, fake reviews became an existential threat. After a lot of research, he found that some of these reviews were being written by the supplement companies themselves. He uncovered so many fake reviews that he started noticing a pattern; almost like a modus operandi. They were often single product/brand reviews, used fake pictures, lots of reviews in a short period of time, and/or only had one review. Sometimes the “reviewer” would give positive reviews for one brand and negative ones to competing brands.
This is when Tommy had his a-ha moment. If his website had fake reviews, others would also probably have them too. So he created another business that aligned with one of the juggernauts of the internet, Amazon. Tommy’s site which uncovers fake reviews is called ReviewMeta.com.
How to find a need
As mentioned at the top of the post, most rely only on their personal experiences or that within their network. Sometimes the need is obvious. For example, at a 7-Eleven in Shirley, New York one 7-Eleven sells more coffees than any other franchise in the US; all because of one store manager than knows virtually every customer’s name and greats them. No special location mojo or customer flow algorithm, just old fashioned customer service. You can read more about it in my post Competitive Advantage and Coffee.
Other times it is not that obvious. In that case, you have to hustle in a different manner. How do you do more “work” when you’re already working to the bone? Find efficiencies: know your customers, know your competitors, lower your expenses, by working to learn more doing more research in episode #700 of Planet Money, Peanuts and Cracker Jack. In Boston’s Fenway Park, Jose Magrass is the top seller. One year, on opening day he sold 500 hot dogs, $2750 worth of hot dogs in a single game. In fact, Jose has been the top seller for over 5 years. Part of his secret? He has a spreadsheet where he analyzes many factors beyond just the weather such as what his competing vendors are selling and what fans are likely to purchase depending on the price of their seats. For example, behind home plate diet coke sold better because possibly that is where the “vain people” sit. That kind of analysis is impressive.
According to data from the Census Bureau and IRS the average age of successful business founders is 42; so the 20 year old entrepreneur is a true rarity.
The team looked at data around the 2.7 million people who founded businesses between 2007-14 and went on to hire at least one employee. Along with average entrepreneur age, they also learned those new ventures with the highest growth had an average founder age of 45.
The researchers broke out the data into high-tech employment, VC-backed firms, and patenting firms. Across the entire United States, the average founder ages were 43, 42, and 45, respectively for those divisions.
Part of this reason is because experience, social capital, skill sets, etc. play a large factor in the success of a business. So even if you’re over 40, roughly 50% of successful entrepreneurs are above that age.
Sans Bar is a one-of-a-kind sober bar in Austin, TX. Their mission is to provide a safe, sober environment for adults to celebrate life while promoting personal and social wellness.
I had the pleasure of creating financial projections for founder, Chris Marshall. With the help of this important document, entrepreneurs can see how much they need to make and save in order to meet their financial needs; in addition to many many other uses. You can read more about the importance of a financial plan.
Cryptocurrencies took quite a hit in 2018 has not been a good year for the market so far. Having reached a valuation of $834 billion as of January 7, 2018, CoinMarketCap reported that the market witnessed a drastic plunge of about 66%, losing over $553 billion. Bitcoin recorded a huge loss of over 50% in February, with valuation dropping below $7,000. Ethereum and Ripple also suffered similar drops, both recording losses of over 40% during the same month. Even as of late March, the leading currencies have not bounced back as of March 21, 2018.
Most signs point to a bubble. Market speculation that drove prices to an untenable price for the time being. This bubble was exacerbated by the unregulated nature of cryptocurrency. For example, banks are required to physically hold a certain amount of cash in reserve, also known as Regulation D, which allows for an amount of liquidity in the market in case of lean times. Given the unregulated nature of cryptocurrencies it is possible that market manipulation was also behind the plunge. In 2013, Bitcoin rose from $150 to $1,000 within a period of 2 months. A rise that researchers have found was caused by one person. Last month, one anonymous investor bought $400 million in Bitcoin. For securities transactions such as stocks and bonds, the identities of the buyers and sellers are known and recorded. In cryptocurrency transactions, the transaction is known but not the entities.
However, to understand a little about what is happening, it helps to understand what cryptocurrency is.
Bitcoin, created in 2009, was the first decentralized cryptocurrency. Since then, numerous other cryptocurrencies have been created. These are frequently called altcoins, as a blend of alternative coin.
That is a lot to digest so to summarize and generalize: cryptocurrency is an electronic asset that is created through among other methods, “mining” (the details of digital asset creation go beyond this post). Once this digital asset is created, a record of its created is added to a decentralized ledger. This ledger is known as a blockchain. Blockchain is like a title chain in real estate; everyone knows who owned it in the past and who owns it now. Furthermore, transactions using cryptocurrency is also recorded in the blockchain.
The blockchain is starting to look more useful than the actual cryptocurrencies, but more on that in a future post.
Differences from other currencies
Crypto isn’t going away but probably won’t replace sovereign currency because it doesn’t have that backing of an entire nation. There’s more power when you have a nation that promises the worth of something vs many individuals that aren’t a cohesive entity
A nation has natural resources, a military, existing contracts, labor forces, etc. that can be used to back the value of their currency. Crypto does not. They are kinda like fidget spinners. Some people highly value it and trade it but not likely to replace dollars.
Similarities to commodities
More than a “currency” cryptocurrency seems to have properties similar to commodities such as silver in that people can “mine” it too. That said no government uses, say rubies, as their official currency.
Cryptocurrencies are also relatively unregulated like commodities. Beyond futures contracts and derivative markets the industry did not see much action beyond the Commodity Exchange Act of 1936. Other than a few laws, regulatory bodies such as the Commodity Futures Trading Commission did not see much action until Dodd–Frank was enacted in response to the 2008 financial crisis.
For the reasons mentioned, it seems like a judge also agrees that cryptocurrencies are commodities. Maybe it is time to call them cryptocommodities.
Are Cryptocurrencies here to stay?
Probably not going away but many hurdles block mainstream adoption. Of course, if a government officially recognizes it then it’s all systems go. For now, China says no and S. Korea is hesitant. Furthermore, Warren Buffett considers cryptocurrencies speculative.
It’s summer and festival season is here. Events are big business with over 87 million people attending trade shows, conventions, & conferences; while 32 million people attend music festival. Some annual industry and market stats:
Events are targeted. So attendees are in your market, many in your target market. Renting a booth, depending on the event, can be fairly inexpensive. This is an economical means of raising awareness for your product/service for the following reasons:
You are not locked into a commercial lease contract
Can test the viability of your product/service
Get targeted market feedback
Some of what you may need depending on the event:
Mobile merchant services such as Square
Email collection method
Banners and booth appeal
Or compelling marketing materials (videos, images, samples) of your product/service.
Question: How should new products/services be created?
A) Make a novel untested product/service then find customers for the product/service?
B) Find a group of customers, find one of that group’s unmet need, then create a product/service to address than unmet need?
Reason: The development process of the product/service will take time irregardless of choice A or B. However, with choice B, the likelihood or having to rework the product/service to make it more closely meet the needs of the target market is lower. Also, with choice B, you have a better idea of the size of the target market. Having a market large enough to grow your business is very important. More on that below.
A great example of choice B is Girls Auto Clinic. Girls Auto Clinic is a brilliant combination of female-focused auto repair shop and salon.
Founder Patrice Banks felt what many of us feel when car issues come up:
“I felt like an auto-airhead. I hated all my experiences going in for an oil change, being upsold all the time for an air filter,’ she said. “Any time a dashboard light came on, I panicked.” – Patrice Banks, Girls Auto Clinic Founder
Of course many people come up with business ideas like how Patrice did: through personal experience. However, where most people fail is that their own experience might be too niche. In other words, the market might be too small. How do you know if your market is too niche? Market research. Market research is a process of analyzing factors such as demographics, purchasing habits, direct and indirect competitors, macro and microeconomics, and other elements. As much art as science, thorough market research is a critical step before moving forward with any concept.
Market research is one of the many services I offer at the most competitive prices in the industry. Contact me and let’s find your niche for your new business.
According to a new Credit Suisse report, up to 25% of U.S. shopping malls may close in the next five years.
What are the reasons? Of course Amazon and online shopping is a major reason. However, another factor is mall overexpansion. Currently there around 1,200 malls in the US. Between 1970 and 2015, the number malls grew more than twice as fast as the population. As such, it is predicted that within the next 10 years, that number will decline to 900.
Of course brick-and-mortar retail stores will never completely disappear because of the needs listed above and because of the fact that humans are social by nature. Just the type and make-up of retail stores will change. Possibly pop-up stores (a strategy utilized with great effect by Halloween stores) will become more common?
What to do with vacant buildings? That’s a lot of land that could be used for other use. Maybe mall owners will lower their rental rates. In some areas of Manhattan, retail rents have declined 10-15%.
More housing? Closures from major chains like Macy’s and J.C. Penney are pouring up to 37 million square feet of space back into the market. That could reduce some housing costs. Although, generally more expensive housing markets have greater discretionary spending which is often used for shopping. Also, the time and cost to demolish existing structures, rezone, and rebuild into residential properties along with its infrastructural linkages is not insignificant.
Some mall owners have indicated that vacant properties will be renovated and updated in efforts to attract new tenants and raise rental rates.
What to do?
Who knows that the future will bring but keep in mind that juggernauts like Walmart, Macy’s, and Sears are affected. So starting a service or online store that doesn’t compete with what Amazon sells is a safer option. Brand your own product (e.g. Bonobo, Dollar Shave Club) and controlling your own distribution is another option (of course be aware of knock-offs). B2B businesses (e.g. no one buys industrial components at malls) is insulated from mall closures.
Services such as dentistry, restaurants, car mechanics, large difficult-to-ship products such as mattresses, etc. will remain (so far) an insulated industry.
Analyses such as what I have done above is a small and cursory part of the industry/market analysis and strategy consulting services I provide to clients.
When selling something as ubiquitous as water, differentiation from your competitors is key. How do you differentiate? One way is through the right marketing mix. The marketing mix is comprised of: Product, Promotion, Price, and Placement. Also known as the 4 P’s of Marketing.
Product: Of course it’s not just water. There is value added features, such as electrolytes, flavors, caffeine, anti-oxidising manganese, etc. that companies are emphasizing to differentiate their product from the competition.
There was Life, Volvic, Ugly, Sibberi (birch or maple), Plenish, What A Melon watermelon water, Vita Coco, Coco Pro, Coco Zumi, Chi 100% Pure Coconut Water, Rebel Kitchen Coconut Water and coconut water straight from the nut (“you have to make the hole yourself”, explained a shop assistant). Also: an electrolyte-enhanced water pledging to hydrate you with 40% less fluid than ordinary water (Overly Fitness), a birch water offering “a natural source of anti-oxidising manganese” (Tapped) and an alternative birch water promising to “eliminate cellulite” (Buddha). There was also a “water bar” – a tap in the corner of the shop – that, according to the large sign hanging from the ceiling, offered, for free, the “cleanest drinking water on the planet”, thanks to a four-stage process conducted by a “reverse osmosis deionising water filter”.
You can read more about the concept of “product” from a marketing standpoint in my post about the failed McPizza.
Price: Another way to differentiate yourself from the crowd is by pricing your product/service at a rate that is considerably higher than your competition. How about a $100,000 bottle of water?
This self-proclaimed “champagne of waters” quickly won FoodBev Media’s Beverage Innovation award for the “World’s Best Still or Sparkling Water”. A case of 24 500ml bottles is $72, while a bottle from the “Luxury Collection, Diamond Edition” will cost you $100,000. It has a white gold cap set with more than 850 white and black diamonds and holds the profoundly questionable honour of being the world’s most expensive bottle of water. If you buy it, Riese will present the bottle to you in person at a private water tasting anywhere in the world.
Promotion: Promotion goes beyond just advertising. What do you communicate? Once you’ve exhausted the typical “it’s delicious!” “it’s cool!” “it’s a great value!” You can go into educating the market about the process, the people, the ingredients, etc. that goes into your product/service. It might be the same things as your competitors, but if you say you “add double the standard amount of X” while your competitors just say “they’re delicious!” then your market might assume your competitor does not add double the amount of X.
Fiji water, for example, contains 210mg TDS, including 18mg sodium, 13mg magnesium and 18mg calcium. (Fiji appears to have pulled off some fairly heavy-duty trademarking, including “Untouched by man™” and “Earth’s finest water™”.) Compare those numbers to San Pellegrino, which contains quadruple the TDS, at 925mg, including 33.6mg sodium, 53.8mg magnesium and 178mg calcium. Fiji, with far fewer solids, tastes smoother, while the San Pellegrino is bolder, saltier and naturally fizzy.
Melted iceberg essentially has no taste, having the lowest TDS (9mg) of any water on earth. It is like the ur-water, the water that pre-dates all other waters. “This is your starting point,” said Leonard, gravely. “Your baseline.”
Surprising right? Now tell me you’re not at least a little curious as to how the various waters taste. If the marketers did their jobs right, you might at least be open to trying the product once.
Placement: Placement mainly deals with distribution. Which is, where does your customer purchase your product/service. You’re not going to sell a $10 bottle of water at a gas station. You have to sell your product/service at where your market is. They are upper-middle class, baby boomers living in Massachusetts? Distributing through Whole Foods or Wegmans is a start, if you can meet their supply chain management requirements.
The dress code of the clientele in Planet Organic, Notting Hill is gym chic. On a hot day in mid-August, the men wore mid-thigh shorts, pectoral-enhancing vests, neon Nikes; the women were in black leggings and intricate ensembles of sports bras and cross-strapped Lycra. They had all either just worked out, were about to work out, or wanted to look as if working out was a constant possibility.
They examined the shelves. As well as the usual selection of kale crackers and paleo egg protein boosters, there were promises of wizardry, such as a packet of Alchemy Organic Super Blend Energy Elixir (£40 for 300g of powder). But never mind the food. Life, in 2016, is liquid. Opposite a display of untouched pastries and assorted bread products (who, in Planet Organic in Notting Hill, still eats bread?), were the waters.
The marketing of bottled water is pretty amazing amazing. Some is ridiculous snake-oil shilling. Some may have benefits, depending on the needs of the individual, that regular water cannot meet. Nonetheless, it is a $5 billion dollar industry in the US that is projected to grow 5-6% over the next five years.