Welcome back.

Have you thought about subscribing? It's free.

Graduation day

True confession: I didn't attend graduation from Stanford Business School. They mailed me my MBA instead. I hadn't been on campus in months, I was already busy running a brand in Boston, learning more than I could have in school. A generous teacher made sure I got the diploma (and of course, they got the tuition, so it was probably a fair trade).

Today, though, I attended final graduation for my informal free MBA program. You can read some of the student recaps right here. The photo was taken just before I fell in the Hudson River.

I'm thrilled at the new friends I've made (for life, probably) and thrilled at how much they learned, how smart they are and what a difference they'll make in the world. But most of all I'm thrilled that every single one of the nine realized that I had nothing much to do with their transformation, they did. Which means the opportunity is available to everyone, whether or not you get a cross country skiing lesson from me.

We didn't have a fancy commencement with speeches (actually, we had pizza). What we ended with was the idea, "Go, make something happen."

Four words. That's not a lot, but all you might need.


A few weeks ago, my tooth fell out (on a cross country flight no less). I managed to get home and then eagerly put some Anbesol ("for oral pain relief, dentist strong so the pain is gone!") on the hole. Yes, that was my screaming you heard all the way from here.

The next morning, my dentist explained that not only doesn't Anbesol work on exposed nerves, it makes them worse.

You can read the label all day long and you won't see that mentioned. But hey, they made a sale (one sale).

41VHG8MG0EL._SL500_AA280_ Or consider this item on Amazon. How big do you think these "mixing bowls" are? The reviews point out that the smallest one is not big enough to hold an egg. Does that change your perception of the item?

Why not tell the truth? Why not call them "mini bowls"? Why not change the label from "toothache relief"? (Technically, it's not a toothache if you have no tooth, okay, thank you Mr. Lawyer, that's exactly the sort of weaseling I'm talking about.)

There are lots of things you can do to make the sale. They often are precisely the opposite of what you should do to generate word of mouth. I know, you can't have word of mouth unless you have a sale, but a sale that leads to pain is hardly worth it.

My rule of thumb is this: every person you turn away because your product or service isn't right for them turns into three great customers down the road. Every bad sale costs you five.

Facts always win, right?

If you're selling a business to business service and you can prove that it's better, that it delivers more value, that it's cheaper or more durable or more efficient, shouldn't that mean you will close every sale?

Even hard-headed business people end up buying the thing they want, not the thing they necessarily need.

The real danger of relying on facts to make your sale, though, is that when the facts are no longer on your side, you're toast. The low-cost supplier gets hooked on the easy sales that come from acting like a commodity, and if that changes, you've got little room to maneuver.

Great brands and projects are built on real value and a real advantage, but great marketers use this as a supporting column, not the entire foundation. Instead, they build a story on top of their head start. They focus on relationships and worldviews and interactions, and use the boost from their initial head start to build competitive insulation.

The CPM gap

Ads online typically cost $5 to $20 for one thousand impressions. A fancy magazine might cost two or three times that. But it's still pennies a person.

Attending a conference, on the other hand, costs $1000 by the time you add up the expenses. That's a CPM of $1,000,000. One thousand of the right people at the right conference costs a million dollars, as opposed to $12 for the same thousand people online.

That seems nuts. Same people, radical difference in price. Apples and oranges. It's not a valid comparison because one is about ads and interruptions, the other is from the point of view of the conference organizer or the attendee awash in attention and connection…

Here's the thing: advertisers treat prospects online as targets, as victims, as people to subject to interruption. Conferences treat attendees as royalty, as paying customers who invested time and money to be there.

And that's the difference. As long as your site is about something else and the ads are a distraction, you'll see CPM rates drop. As soon as you (or the advertisers) figure out that creating online communities aligned with the advertising, where attendance is a choice by the consumer, then you're creating genuine value.

The irony is that advertisers continue to push media people to create the very environments that don't work. They want a bigger M and a lower C.

Far more useful for everyone to do the opposite. Pay a lot and get more than you pay for.

Busking at the airport

I have no patience for bureaucracies that proclaim that they are unable to innovate. It's not that they are unable to do so, it's that they don't want to do so.

The other day as I walked through SFO, I heard live music. Live! Looking over, there was Bart Davenport and his band, playing real good for free. Probably not for free, actually, but collecting plenty of tips in the box out front. They sold a lot of CDs too.

What a great venue. What a service (for Bart, for me, for the airport).

Go ahead, do something impossible.

The art and skill of working with bureaucrats

Have you noticed that most airports feature the same restaurants? It's not an accident. The people who run these chains have organized themselves to be good at dealing with municipal organizations.
Same thing goes for design firms, creative firms, accountants etc. that deal with large corporations.

In my experience, 40% of the fee goes for the work and 60% goes to pay for the do-overs, staffing, project management and hassle that comes from working from big organizations and committees.
A lot of small businesses get burned when they charge just the 40% and the client expects that the other 60% comes for free. It doesn't.
If you want to be good at this capability, you can. You can buy it and learn it and then turn around and sell your skill. But it's unlikely you will randomly back into it.

Quality, scale and the regular kind

When we talk about quality, it's easy to get confused.

That's because there are two kinds of quality being discussed. The most common way it's talked about in business is "meeting specifications." An item has quality if it's built the way it was designed to be built.

There's another sort of quality, though. This is the quality of, "is it worth doing?". The quality of specialness and humanity, of passion and remarkability.

Hence the conflict. The first sort of quality is easy to mandate, reasonably easy to scale and it fits into a spreadsheet very nicely. I wonder if we're getting past that.

Consider two eggs:

If I go the local diner, I can get a high quality diner egg, over easy. The egg is a standard manufactured egg, created in quantity by drugged chickens in prison. It retails (raw) for about 14 cents. The egg is cooked on a griddle the way it always is, a grill neither spotless nor filthy, covered with a sheen of slightly old oil. It's cooked on one side until set, flipped for a few seconds, put on a plate, given a shake of iodized salt and served, usually with a piece of generic white bread toast.

This is the regular kind. The kind most people grew up with. Easy to produce on demand, reliable and expected.

If I make an egg at home, I'll use a free range egg from the farmer's market, which I'll happily pay 39 cents for. This egg tastes like an egg, and the extra money pays for a local farmer and a (slightly) happier chicken. I'd cook it in a very hot cast iron skillet with really tasty olive oil, and I'd leave it in longer until it gets crisp around the edges, then I'd put some David's salt on it (which, due to its pointy edges, in fact does taste better). All told, it costs about thirty one cents more altogether.

This is the undependable kind. You might not be able to get the eggs. Cleaning the pan is more work too. But this is a remarkable egg, an egg worth talking about, an egg worth crossing the street for, an egg worth writing about.

If you can do this to an egg for thirty cents, imagine what happens when you bring the same approach to quality to your job.

Best new way to make an internal sale

How do you get your boss to approve something, the customer service people to understand the pain a system is causing or the folks in engineering to see things your way?

Powerpoint was invented for this precise function, and we all know what’s become of that.

Here’s a new way that’s extraordinarily effective: Make a video.

Take a Flip or cheap video camera and interview your customers. Ask them questions and show the answers to your team. Ji Lee at Google masterminded this man on the street interview:

Invest an hour and suddenly, it’s not you who’s talking, asking, complaining or being ignorant. It’s your customers.

The fan chasm

How big is the gap between customer and die-hard fan? In other words, between engaging and loving, between attending and craving?

For World of Warcraft, it's huge. It's very difficult to spend just an hour or two. There's a chasm between encounter and enjoyable experience. Tetris was oriented in precisely the other way–everyone who tried it instantly became almost as smart as an expert.

If you want to be an insider at the Four Seasons restaurant, you might have to go thirty times and spend $3,000 over time. There's a barrier to becoming an insider.

For Star Trek, not so much. After one TV episode, you might not know a Tribble from a Romulan, but you've probably figured out the whole Vulcan thing. Much more approachable, much easier to fake your fanhood.

There are very few products, services or organizations that are simultaneously easily approachable and quite deep. That's an opportunity for you if you can figure out how to be both, but choosing just one is a more likely scenario. So, which are you?

Taking the leap

The best businesses and the best projects are a quantum leap above the competition. This gulf represents competitive insulation, because others can't figure out how to get up there with you.

Amazon, for example, has a leap between it and other online retailers. Sure, you might be able to mimic part of what they've got, but the gulf is so huge, it's hard to imagine displacing them any time soon.

Nike has spent billions on advertising, sponsorship, manufacturing, technology and distribution. It's a quantum leap between them and some start-up that wants to compete.

I think going for the leap is essential for creating a business for the ages, and I want to speculate that there are three ways to make it:

  1. BUY IT–you can raise a lot of money or spend a lot of the company's R&D or marketing money and just buy yourself a huge head start and this provides insulation. (This is my least favorite, because spending like a drunken sailor often leads to other drunken behaviors, including remorse the next day).
  2. SNEAK UP THE CURVE–you can quietly develop your business fairly cheaply and then, by the time the competition notices you, it's too late. Build a Bear Workshop is a great example of this. One store at a time they built a brand, a cash flow and a nationwide footprint that makes it awfully difficult for others to compete. McDonald's did the same thing.
  3. THE NETWORK EFFECT–some markets are ready for one (and usually only one) intermediary to show up and be the default winner. Twitter and Comdex and Alexander Graham Bell are great examples of this.

There are probably some others (like make a genius innovation in your basement and then patent it) but these three are good ones to start with.