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Adversity and the route to success

Resource-rich regions often fall behind in developing significant industrial and cultural capabilities. Japan does well despite having very few resources at all.

Well-rounded and popular people rarely change the world. The one voted most likely to succeed probably won't.

Genuine success is scarce, and the scarcity comes from the barriers that keep everyone from having it. If it weren't for the scarcity, it wouldn't be valuable, after all.

It's difficult to change an industry, set a world record, land big clients, or do art that influences others. When faced with this difficulty, those with other, seemingly better options see the barrier and walk away.

Why bother? The thinking is that we can just pump some more oil or smile and gladhand our way to an acceptably happy outcome.

On the other hand, people who believe they have fewer options take a look at the barrier and realize that even though it will be difficult to cross, it's the single best option they've got.

This is one of the dangers of overfunded/undertested startup companies. Without an astute CEO in charge, they begin to worry more about not losing what they've already got than the real reason they started the project in the first place.

Independence and subjugation

Tribal management often involves power struggles. One thing that's been shown again and again–subjugating another tribe, taking it over–it almost never works. It can take hundreds of years before the two tribes get into sync, if ever.

On the other hand, granting independence to a rising tribe, letting them go–this is harder to swallow but it generally leads to a quick and beneficial relationship between the two new groups.

When Atari was struggling after it was acquired by Warner, many top programmers left, some to start companies like Activision. Activision, ironically, was one of the bright spots for Atari after that. The passion and creativity of the nascent group was exactly what the original group needed.

Or consider the excellent relationship that the UK has with both the United States and India. In both cases, the wars of independence weren't as nearly brutal or as drawn out as they could have been.

While conventional views of power and authority seem to indicate that you should co-opt and capture other tribes, you can often achieve more by freeing your own people to maximize their vision alongside yours.

Lifetime value of a customer/cost per customer

Two things every business and non-profit needs to know:

  • How much does it cost you to get one new customer.
  • On average, what's that customer worth over the relationship you have with her?

The internet revolutionizes both sides of the equation.

Facebook and Twitter are marvels because for each, the cost of a new customer is vanishingly close to zero. When you can get people into a relationship for nothing, you don't need to make much on each one to be delighted with the outcome.

Note that the ongoing, digital connection with a customer can dramatically increase the lifetime profit as well. Netflix is far more likely to have a higher average lifetime value than the local video store. Musicians are moving from making a dollar a listener from CDs to hundreds of dollars a true fan in collectibles and concert tickets–things they can only deliver because they know who their best customers are.

On the other hand, legions of unsophisticated marketers are getting both sides of the equation wrong.

They invest a lot in hoopla, spin and hype to get strangers to notice them (once), making the cost of a connection high, and then, once they borrow a little attention, they put everything into a one shot transaction, which few people engage in, and those that do create little value, because the permission asset is then discarded.

Dates, not singles bars. Subscriptions, not vegomatics.

The unreasonable customer

There are a few reasons to tolerate the customer who makes unreasonable demands:

  • You promised you would
  • She helps you raise your game
  • Her word of mouth is very powerful
  • The cost of frequently figuring out which customers to fire is too high compared to the cost of putting up with everyone

It's probably worth firing a customer if:

  • He willfully corrupts your systems at a cost to other customers
  • Your employees are prevented from doing their best work in the long run
  • His word of mouth can't be changed or doesn't matter
  • He distracts you from delighting customers that are reasonable

In general, organizations are afraid to fire customers, no matter how unreasonable. This is a mistake. It's good for you.

The starfish and the long tail have trouble getting along

We've all heard the parable of the kid throwing back the starfish, even though there are a million on the beach. "It makes a difference to that one!"

The Long Tail argues that if you can aggregate enough choices, people will make a choice and you'll do fine. Netflix, superstores, eBay–these are all long tail businesses. They might not sell that thing, but you can bet they're going to sell something.

Long tail businesses excel at selling anything, but they're not so good at selling one thing.

Which is fine, unless you're a starfish.

In a world of endless choice, it's mathematically obvious that something's going to get picked, but you, you the creator, the marketer, the one with something at stake–you're not at all concerned about something. You're concerned about you and your product.

If you're a starfish, then, don't sign up with the long tail guys. Build your own universe, your own permission asset. Find a tribe, lead it, connect with it, become the short head, the one and only, the one that we'd miss if you were gone.

The long tail is for organizations that own warehouses.

The extraordinary revolution of media choice

In the traditional model, you can only play one program at a time. One radio show or one movie or one show…

Scarcity of spectrum has changed just about every element of our culture. Scarcity of shelf space as well.

There are just a few radio stations in each market, and each station gets precisely one hour to broadcast each hour. Scarcity of spectrum, inflexible consumption (listen now or it's gone forever).

There are only a hundred or so channels on most cable systems. Each viewer is precious and you can only program one show at a time. So program for the largest audience you can find, because that's how you get paid. Share of viewership is everything.

There's only one shelf in front of that bookstore visitor at a time. That bit of shelf space is quite valuable… winner take all. Either the book is on that shelf or it's not.

And every trade show booth takes up a few hundred square feet. There can only be one booth in each location, so the trade show operator charges as much as she can for this particular spot. And having paid so much, the exhibitor tries to get people in and prevent them from leaving so soon. All of them.


And it's a big but…

In a world where everything is a click away, and in a world where everyone can have their own YouTube channel, ten blogs and a thousand email accounts… the only thing that's scarce is attention.

Shelf space is worthless now. Why worry about making a particular hour of radio all encompassing and wildly popular when you are welcome to broadcast a hundred hours–and people can listen whenever they like.

[Stop for a second and think about the fact that there is no real gatekeeper, no scarce shelf space, no superpowerful owner of spectrum in the long run… how does that change your work?]

FlashmaticThe idea that someone can program our consumption is becoming obsolete, and fast. The front page of the paper disappears in a digital world, where there is no front page–merely the page I got to by clicking on a link from a friend. The tenth minute of a sitcom isn't necessarily the part that comes after the ninth minute, and in fact, I might never even get to minute nine.

Fifty years ago, the remote control freaked out TV executives. Today, the exception is the linear consumer, the rare bird that sits from the beginning to the end. Weird is in, mass is fading.

In a world of surfers, all you can do is work to make the best wave you can. The real revolution is that you get to make waves, not just ride them.

There’s nothing wrong with having a plan

Plans are great.

But missions are better. Missions survive when plans fail, and plans almost always fail.

Six questions for analyzing a website

It's tempting to believe that any website can become a perpetual motion machine of profit. But before you start one, invest in one or go to work for one, a few things to ask:

  1. What's the revenue per visit? (RPM). For every thousand visitors, how much money does the site make (in ads or sales)?
  2. What's the cost of getting a visit? Does the site use PR or online ads or affiliate deals to get traffic? If so, what's the yield?
  3. Is there a viral co-efficient? Existing visitors can lead to new visitors as a result of word of mouth or the network effect. How many new visitors does each existing user bring in? (Hint: it's less than 1. If it were more than 1, then every person on the planet would be a user soon.) This number rarely stays steady. For example, at the beginning, Twitter's co-efficient was tiny. Then it scaled to be one of the largest ever (Oprah!) and now has started to come back down to Earth.
  4. What's the cost of a visitor? Does the site need to add customer service or servers or other expenses as it scales?
  5. Are there members/users? There's a big difference between drive-by visits and registered users. Do these members pay a fee, show up more often, have something to lose by switching?
  6. What's the permission base and how is it changing? The only asset that can be reliably built and measured online is still permission. Attention is scarce, and permission is the privilege to deliver anticipated, personal and relevant messages to people who want to get them. Permission is easy to measure and hard to grow.

Do the math on successful companies online and compare it to those that are struggling and these six metrics will help you understand the difference. For example, if the RPM is less than the cost of getting a new visitor, you've got trouble. If the site is relying on fads and occasional PR but isn't building a permission base, that's trouble too.

The good news is that each of them can be changed if you're alert and willing to do surgery on the business model and structure of the site.

The ideal structure is a business that's a platform, not merely a place to stop by. Once people move in and become members, they're hesitant to leave, they share permission over time, they tell their friends, their RPM goes up and the cost of acquiring and hosting members goes down. The real question is: are you on that path?

What do you do when you don’t know the answer?

"Nothing" is the most common response.

Do nothing until you do know the answer. Study and practice and wait for approval and then do something.

Which is fine (for a surgeon) but what happens most of the time? Most of the time there's something that needs to be done where the answer is unknowable until you do it…

That's what we're waiting for you to do.

When “minimal viable product” doesn’t work

One of my favorite ideas in the new wave of programming is the notion of minimal viable product. The thought is that you should spec and build the smallest kernel of your core idea, put it in the world and see how people react to it, then improve from there.

For drill bits and other tools, this makes perfect sense. Put it out there, get it used, improve it. The definition of "minimal" is obvious.

Often, for software we use in public, this definition leads to failure. Why? Two reasons:

1. Marketing plays by different rules than engineering. Many products depend on community, on adoption within a tribe, on buzz–these products aren't viable when they first launch, precisely because they haven't been adopted. "Being used by my peers," is a key element of what makes something like a fax machine a viable product, and of course, your new tool isn't.

With enough patience and push and consistent enthusiasm, these products have a shot at crossing the threshhold. But if the mindset is "see what works and do it more," you'll often discover yourself giving up long before that happens.

2. There's a burst of energy and attention and effort that accompanies a launch, even a minimally viable one. If there's a delay in pick up from the community, though (see #1) it's easy to move on to the next thing, the next launch, the next hoopla, as opposed to doing the insanely hard work of sticking with that thing you already launched.

Inherent in the process of minimal viable product, then, is a trusting, large permission base that will eagerly listen to you, try your new work and let you know what they think. And you don't have the option of building that audience once the product is ready–that's too late.