You don’t need an investor

Venture Capitalist

Yesterday I got an email from Sam Birmingham from Pollenizer, and it’s message was so compelling, I had to share it here:

It is something we hear all too often… “I was wondering if you could help me find an investor?”

You don’t need an investor. You need customers.

You don’t need an investor. You need to prove that you are developing a sustainable business model.

You don’t need an investor. You need to focus on learning as much as you can with the finite resources at your disposal.

Sometimes having limited time / money / people can be an advantage. Do the best you can with what you’ve got. Stop making and start answering the most important question in entrepreneurship – what comes next? 

For more startup goodness be sure to check out the Pollenizer blog. 

New Book – The Great Fragmentation – out now.

How toilet paper weirdly tells a story of industrial disruption

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If you’ve been wondering recently why you use so much toilet paper. Why it seems every year you’re buying more rolls than ever before. Wonder no more. As a bonus you’ll also find out with a weird example how so many industrial companies sow the seeds of their own disruption.

The first every job I held with a big company after graduating was with Kimberly Clark. An American multinational paper goods manufacturer. A big brand of theirs is Kleenex. The market leading toilet paper which we now buy giant packs of up to 24 rolls. But it wasn’t always this way. When I started working there more than 20 years ago the best selling package size of toilet paper was a 4 pack. Did we all of a sudden start going to the toilet more frequently to require more toilet paper? If not, then how is it that most families could survive on a 4 or 6 roll pack from the weekly shop and now we need to purchase to a 24 roll pack?

Here’s how:

When I started working at Kimberly Clark most toilet rolls had between 300 and 500 sheets (paper squares) per roll. Some brands had up to 1000 sheets per roll. But what I discovered as a few years went by is that instead of raising the price, the company would simply remove 10 or 20 sheets per year. They did this as they believed that consumers are more sensitive about price than quantity. It’s a popular fast moving consumer goods ‘pricing‘ tactic to maintain profitability without changing the selling price. Kleenex Cottonelle is now down to 180 sheets per roll. In addition to this Kleenex Cottonelle is 1 ply, and the Kleenex brand it replaced was 2 ply. Some toilet papers are down to 100 sheets per roll. They even increase the size of the core of the roll to keep the same perceived roll width. So there is your answer. Each roll we buy these days has far less paper on it. Often by a factors of 4, 6 and even 10. This is why we need to buy packs which are 4x times the size. But the paper companies got what they wanted, they kept their prices per roll roughly the same.

But this goes deeper than a story of bathroom anthropology. It tells the story of how many large legacy companies are coming undone. It’s a story of their industrial mindset. And that mindset is as follows: They’d rather give their customers less for the same price than be transparent. In fact, it’s exactly what industrialists do, they want to get more for less, every single year. But in a strange kind of reversal, they end up costing themselves more and giving themselves less. Their cost per roll in distribution, and packaging goes up. And their cost per tonne of what they sell in retail margins increases. And it is of course a race to the bottom. A brand can only cut product delivery so far until the product is no longer. It also creates a worse product experience for the end consumer. I know I don’t want to carry home toilet paper packs four times the size in my trolly or buy it 4 times as frequently.

Above all of that, it shows where the focus is for these companies: On selling stuff they already sell, as cheaply as possible, using the machines they’ve already got, with a short term focus. At no point is the end user considered, or part of a strategy which doesn’t involve trickery. They have a mindset of scarcity, not abundance. On the flip side we have many startups and technology companies focused on giving more for less, and creating platforms for consumer creation and collaboration. It’s no wonder half of the the Fortune 500 lost their invitations to the party in the past 10 years.

New Book – The Great Fragmentation – out now.

The best single lesson Bill Gates gave every startup & product manager

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The worlds richest man, Bill Gates, did something important all those years ago when he lead the personal computing revolution. He didn’t let perfection get in the way of success. In fact, he became the worlds richest man by selling a product which in many ways was well, suboptimal. His software crashed so often it was just a normal part of the product usage experience. And we accepted the situation for one simple reason: it was better than the alternatives. It was better than doing the work manually. It enabled us to create malleable work. It enabled us share information electronically. At the time this was such a shift forward in communication, the imperfections, the problems, the crashes and other stuff Microsoft became famous for still made it better than the substitutes.

This story makes clear two points when it comes to product strategy:

  1. Users will tolerate imperfect products that provide significant utility jumps over what they are currently using. Think game changers – Tesla short mileage range comes to mind.
  2. If the product is a ‘me too’ offer, then the only thing that will create success is the exact opposite: Seamless user experience, beauty, stability and reliability. The hassle of switching must be worth the effort. Instagram comes to mind.

If our startup is introducing people to a much better option, we need to move quick and fill the void, even if it has known imperfections. We shouldn’t be afraid of making it better later, once it’s already in market. But if, we are entering an established game, we better be sure it’s not full of bugs. But sometimes the hardest thing to do is not fool ourselves as to which category we are actually playing in.

New Book – The Great Fragmentation – out now.

The first question early stage startups should ask themselves

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When we being our journey into a new startup we get excited by the possibilities of what we are about to build. Especially when it comes to raising capital to support the project. But in the moment there’s one question we should not forget to ask ourselves:

Is this a technology push or a problem pull?

The answer to this question changes the direction of the entire project. It changes who will care about what we are building. If making money is the objective, it makes more sense to be in the problem pull space. If you want to change the world, Peter Thiel or Peter Diamandis style, then it pays to be in the technology push arena. Both can become commercial success stories, and one isn’t superior to other, it just depends on what we are chasing – it’s really about the ‘Why?’ The thing that really matters is not confusing which of the two our startup plays in and ensuring our expectations match the funding, timeline and outcome realities.

New Book – The Great Fragmentation – out now.

Learn why data matters with one simple photo

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If I was to ask you what the kids in the above picture were doing – beyond burying their faces in their smart phones, there is an almost infinite number of possible answers:

Messaging a friend, Face-timing their mum, Commenting on a blog, Snapchatting, Booking a flight, Submitting their homework, Buying a pair of sneakers, Updating their FB status, Getting directions, Sending a friend some money, Finding a cafe for lunch…. they might even be talking to directly to each other. The point is we don’t know. We can’t know by observing behaviour from the outside. Instead we need to get inside the data to find out what is actually going on.

This is a big shift in marketing and business in general. We can’t simply observe, we can’t just ask, we’ve got to mine. And while this movement might have started with the smart phone, we’re now entering an era of general purpose machinery and computing. End products which change their purpose based on who is using the technology. Malleable products like 3D printers and self drive cars will mean the only way to know what’s really going on is to match usage and observation with data. Increasingly this will need to involve collaboration, and the effective way to do that won’t be just taking the data without asking, or tricking people with hidden terms and conditions, but collaborating with it. In order to do this we need to develop a trusted relationship where we share the marketing process with our users just as if they are part of our internal team. If we do this, we can bake a bigger revenue pie where we all get a piece.

New Book – The Great Fragmentation – out now. 

The global content playbook & how the internet actually works

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I’m a big fan of the John Oliver show Last Week Tonight. Which, in an unconnected web world I wouldn’t even know about as it has never been shown in Australia. But through the wonder of sharing great content online I became a big fan. The show airs in the USA on Sunday nights, and in their wisdom, HBO would publish much of the shows content on Youtube a day later. I’d eagerly await to watch it here on Monday night in Australia through the Last Week Tonight Youtube channel. At last, a media company that gets it. A media company that understands the value of building connection and fan bases globally in real time. They even made it available to non subscribers – wow.

That was until this week. For some reason, most likely the HBO launch in Australia or some other licensing arrangement in Australia with Stan, Presto or Netflix, I now get the classic picture above: Sorry, This content is not available in your region.

Wrong.

This content is available in my region, they simply made a decision to give up their direct relationship with me, and forced me to get it elsewhere. Now they won’t share any of the potential advertising revenue or other prizes which come from direct customer relationships. Weirdly, much of it is ‘still’ available on youtube channels where others have uploaded it. The back door has been opened. And it’s licensing deal structures born of the late 1970’s cable TV era that create this back door leakage.

More than 20 years into this thing, here’s a simple lesson every media company should already know: Once it is released anywhere digitally, it is released everywhere digitally. The desires of the content owners to limit distribution are irrelevant. Given this is the new truth, a better strategy might be to just embrace it.

New Book – The Great Fragmentation – out now. 

Something I told every staff member I ever had & you should too

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I spent a large part of my career working for large corporations in the Fast Moving Consumer Goods world – think Fortune 500. When I finally arrived at the level of managing people directly, one of the first things I would tell them is this:

“The company we work for does not care about us. They don’t care about me, and they don’t care about you. I’ll try and help you, as a person in your career. If that means that you need to work elsewhere, I’ll help you get there, to a better place. If that means that I need to be more loyal to you, than the company we work for, I’ll do that too. In the end companies will come and go, we’ll be inside one for a period, and then we won’t. And the company won’t care once we’re gone, it’ll be as if we never existed. The thing that really matters, while we are here working for this company, is each other. Our relationships will last through and beyond the companies we go through, so let’s look after each other first. And if we do this, the companies we work for will be the ultimate beneficiaries anyway.”

This sounds counterintuitive, maybe even disloyal, but in my experience it’s the starting point of true loyalty and better outcomes in any size business or project. Sometimes it’s worth knowing what really matters as we play this ‘unreal’ game of economics.

New Book – The Great Fragmentation – out now.