I was recently speaking with a former colleague who is a leader of one of the most successful businesses I have been part of, a mini-corn (a near unicorn, $500 million – $1 billion valuation), and I realized that there is one overriding driver of large scale success, and it is determination. Anyone who reads my blog (and by definition that means you) realizes I am a huge advocate of analytics based decision making, blue ocean strategy, open management, customer driven products, etc. These are all great and will help you grow and optimize your business but the truly huge companies get there because of the sheer determination and take no prisoner attitude of their leaders.
I was fortunate enough to be part of a team like this and people often ask what was the secret to its success. They often assume it is great technology, design genius or some black box, even internally most of us did not see it (myself included), but the key driver of greatness was the sheer determination of the top leadership. The leadership’s entire focus was on growth, always grow, never stop, never slow down, never let anything or anyone get in the way.
Not a popularity contest
This attitude would often make people uncomfortable but they would never stop pushing. This often meant taking risks that other companies would not take or risks that others in the company did not want to take. It often meant hurting feelings, not just of competitors but those internally who lost resources or prestige to the steamroller.
What stands out is that this leadership team that ended up generating huge success never cared if they were liked internally or externally. All they cared about was getting the most resources and making the decisions that drove their business higher, and only drove their business higher.
It also meant never being satisfied, and this last principle is what helped me see the overall determination. Even when this leadership team had seen more success than anyone else I have ever met, they still have as much hunger as the first day I met them. It is still all about growth, not just winning but owning the space and then it will be about further distancing themselves from number two. It’s probably very much the same as why Bill Belichick does not stop when the Patriots are up by 10 in the fourth quarter, but will still continue passing and competing until they win by 31. Continue reading “It all comes down to the eye of the tiger”
I hate writing about the next big thing because it is usually trite, clichéd or just hype, but I read a great piece in the Harvard Business Review about the collaborative economy (“Sharing’s Not Just for Start-Ups” by Rachel Botsman) that I wanted to share. Most of us have come across and probably used start-ups leveraging collaboration or sharing, companies such as Airbnb (where people share excess rooms with travelers) or Uber and Lyft (where people who need a ride can find a driver who is looking to earn extra funds. In and of itself, this is an exciting space with many promising early stage companies, from peer-to-peer lending (money club) to online lessons (Udemy). What I found interesting in Botsman’s article is how this opportunity can be extended to many other businesses.
There are great opportunities in the collaborative economy to create additional revenue streams (which may supplant their core business at some point) or provide channels for user growth. Botsman starts by discussing Marriott, the hotel chain, which rolled out an offering in conjunction with LiquidSpace so people and businesses could book excess conference rooms at market clearing prices. Not only did this initiative create a new revenue stream for Marriott by generating income from rooms that were sitting unused, it also helped grow the customer base. Continue reading “The collaborative economy is an opportunity for all companies”
I recently wrote about the winner-takes-all economy, based on what I read in The Second Machine Age by Erik Brynjolfsson and Andrew McAfee. The authors also provided some fascinating insights into how recombinations are driving economic growth. The insights about recombinations is very helpful in understanding the type of start-ups that are most likely to succeed.
Effectively, recombinations are taking different technological improvements and combining them to create disruptive products. An example they use is Waze, the smartphone app that provides optimal driving directions. Waze is a recombination of a location sensor, data transmission device (that is, a phone), GPS system, and social network. The team at Waze invented none of these technologies; they just put them together in a new way. None of these elements was particularly novel. Their combination was revolutionary.
While recombinations initially feel like something that would drive incremental innovation, because you are combining multiple rapidly increasing technologies it leads toexponential growth that creates staggeringly big numbers, ones that leave our intuition and experience behind.
The authors cite economist Martin Weitzman, who developed a mathematical model of new growth theory, in which the fixed factors in an economy—machine tools, trucks, laboratories, etc— are augmented over time by pieces of knowledge that he calls ‘seed ideas,’ and knowledge itself increases over time as previous seed ideas are recombined into new ones. This is an innovation-as-building-block view of the world, where both the knowledge pieces and the seed ideas can be combined and recombined over time. This model has a fascinating result: Because combinatorial possibilities explode so quickly, there is an infinite number of recombinations of the existing knowledge pieces. Continue reading “Creating billion-dollar businesses through recombination”
Last month, I wrote how Uber’s partnership with Open Table shows the value of strategic partnerships to all businesses. The Motley Fool just published an analysis that shows how Uber has teamed up with Starbucks, TripAdvisor, Hyatt Hotels and United Airlines in addition to Open Table. This means that a user making a reservation with OpenTable could also book a ride with Uber to get to the restaurant. Passengers on United Airlines could book Uber vehicles, along with their tickets, to pick them up from the airport. A Hyatt guest could book a room and get an Uber ride from the airport to the hotel.
The impact of these partnerships is huge. In the Motley Fool piece, they calculate that if only 6 percent of Open Table reservations then use an Uber, it will double Uber’s monthly active users. Furthermore, the partnerships can help increase Uber’s revenue 5X, to over $1 billion annually.
This analysis further strengthens the point that partnerships are an incredibly powerful way of growing your business. Rather than just focusing on building everything internally, partnerships can speed your growth often at a lower cost.
When I recently updated my OpenTable app, I noticed they incorporated a partnership with Uber in which you can request a car when looking at an upcoming reservation and the car would already know your destination. This partnership between Uber and OpenTable is a great example of strategic thinking by both companies. I wanted to comment on it as I think all companies can learn some key lessons from the initiative.
Continue reading “Partnerships, focus and competition”
While many entrepreneurs, especially those in Northern California, focus on starting the next sexy business, it is often the mundane ventures that generate the highest return. Companies like Waste Management generate billions in revenue yet investors fawn over and entrepreneurs try to replicate the Twitters and King.coms. Not that those are bad companies, but many would-be founders are overlooking opportunities in “boring” businesses that could yield billion-dollar returns.
The Amazon example
Probably the best example of this gap between the perceived opportunity and the real opportunity is Amazon. Most of the people reading this blog are probably excited about Amazon’s strategy to use drones for delivery or the newest content and original program that it has added to Amazon Prime. However, as Forbes Magazine wrote about in the article “Amazon’s Wholesale Slaughter”, its initiative in the $8 trillion wholesale distribution business is their most disruptive move yet.
AmazonSupply is an e-commerce site that targets the unsexy but huge wholesale and distribution market. While people are fascinated by the $4 trillion retail business (Amazon’s share is $74 billion) where Amazon has gained a huge share, wholesalers in the US alone generated $7.2 trillion. Continue reading “The beauty of starting a business with a nice personality”
As many know, I believe end-of-year predictions have zero value and I prefer to look at important trends that are already unfolding and will impact readers next year. The most important trend right now for people in the social media and gaming spaces, as well as almost anyone in the tech space, is the evolution of analytics. Thomas Davenport, author of the seminal work Competing on Analytics, recently wrote an article in the Harvard Business Review about Analytics 3.0. Just as Analytics 2.0 transformed the gaming space, allowing companies like Zynga, Playfish and Disney to leap over established competitors, Analytics 3.0 can reshape as dramatically the gaming ecosystem. Analytics 3.0 is a new resolve to apply powerful data gathering and analysis methods not just to a company’s operations but also to its offerings—to embed data smartness into the products, services and games that customers buy.
A brief history of analytics
To understand best the impact of Analytics 3.0, it is helpful to understand 1.0 and 2.0 and their impact. Analytics 1.0 ushered in an objective, deep understanding of important business phenomena and gave managers and leaders the fact-based comprehension to go beyond intuition when making decisions. Data about sales, customer interactions, production processes, etc., were recorded, aggregated and analyzed. For the first time, analytics were used to compete by creating greater efficiency: making better decisions on key issues to improve performance. Continue reading “Analytics 3.0”
Most, if not all, social game companies are missing their greatest source of value. While companies struggle to add $0.01 to ARPDAU, there is an opportunity to exponentially increase the revenue from your player base. And it is an opportunity not unique to social game companies but one many technology companies should explore.
The real value many social game companies have is their player graph and relationships. A player graph is the understanding, on an individual level, of your players’ preferences, decisions and behaviors. Once you figure out how to leverage this information, your revenue from in-app purchases or advertising is a footnote. I remember years ago (2009 to be exact) speaking with a partner at the VC firm Andreessen Horowitz, then an investor in Zynga, who told me that even if Zynga’s players stopped spending entirely the company would be worth over a billion dollars (this was pre-IPO) due to its network of players.
The ability to monetize these players with in-app purchases has since turned into a mixed blessing, as it has blinded many companies to their greatest potential source of value. As many companies generated millions or even billions of dollars in revenue through in-app purchases and thus focused on optimizing revenue from each player, they lost the urgency to harness the true value of their players to optimize their company’s value. Continue reading “Unlocking the value from your social game’s player graph data”