Lighting Out

Including assumptions in your business plan

2012-04-20T15:52:00.001-07:00

I just published a new post over at the Bplans.com Up & Running blog about including assumptions in business plans. Every business plan should document the core assumptions that drive the business and include a test plan for validating those assumptions. Not only will this make your business plan actionable but it will help guide you towards a successful business.

Read the full post here.

Do you deliver what you promise?

2011-01-13T14:14:00.000-08:00

Seth Godin had a great post today about setting expectations in your marketing. He discusses the all-to-common fact that big companies advertise great customer experiences but rarely deliver. Under-delivering on a promise leads to customer disappointment. So, the choice is to either not promise anything and hope that you meet expectations OR promise something that you can deliver.

As serendipity would have it, I happened to have an interaction with Zappos.com customer service today. I’ve heard for years about Zappos’ legendary customer service, but, awash in advertising that promises great customer service and companies that rarely deliver, I certainly had my doubts. Could a company that processes billions of dollars of sales a year really provide great customer service? It turns out that they can. I was not only surprised, but totally blown away by the quality of service.

The fact is, most customers these days expect to be disappointed. They look at advertising that promises a great experience and instead of being inspired to try a new brand, question how it could possibly be true. Many customers, like me, doubt that any company will actually live up to (let alone exceed) their marketing.

Therefor, it does not take much to wow your customers. Even doing things as simple as showing up on time, returning calls promptly, keeping your job site clean, delivering more than was expected for your consulting contract, etc. - these are all enough to WOW your customer and generate loyalty. It’s these little things that keep customers coming back time and time again.

I see this every day here at Palo Alto Software. We’ve done away with our phone tree. Most customers can talk to a customer service agent with less than 1 minute of hold time. We let people download their software years after they purchased it - for free. It’s the little things that count and because customer service is so often bad, it’s easy to please.

Back to Seth’s post. His final word of advice is to invest the money you would have spent on advertising into actual customer satisfaction. Since great customer experiences are few and far between, a happy customer is bound to be a loyal one. And not just a loyal customer, but one that tells 10 of their friends to also use your services.

Is your brand a luxury brand?

2011-01-04T17:03:00.000-08:00

As little as a 5-6 years ago, computers and cell phones were purely utilitarian devices. That is, they were used to get tasks done. They weren't always very pretty to look at and certainly not things that you necessarily craved - unless your inner geek needed whatever was the latest and greatest technology. "Sexy" was certainly not a word ever used to describe the latest Dell, Motorola phone, or the newest desktop from HP.

Then Apple managed to change the world. Most people think that Apple's great innovation was the invention of the portable mp3 player. Far from it. Plenty of others existed when the iPod came along. What Apple focused on was design - the design of the software that ran on the iPod, the industrial design of the actual device, and the simplicity of a single ecosystem for managing your music and getting it onto your device.

Even at the time the iPod first launched, it did less than it's competitors. It had fewer features yet it was more expensive than almost anything else out there. Even today, the current crop of iPods still does much less in raw functionality than alternative players. And yet, they still cost more.

What Apple knew was that customers craved simplicity and would be willing to pay for a device that looked cool. People could show off the fact that they owned an iPod with the (now ubiquitous) white headphones even when the device was in their pocket. If it cost a little bit more, that would make it slightly exclusive as it would scare away the bargain hunters and the pure feature geeks.

Apple created an accessible luxury. Something that cost a little more, something that customers craved. This started mostly in the form of iPods, but now comes in the form of subsidized iPhones and is extending to the iPad (although the iPad is priced to be a little more exclusive and not as affordable to the general populace).

Apple's computers are truly heading into "luxury" territory. The least expensive MacBook is $1,000, yet I can go down to my local "big-box" store and get a reasonable laptop for $300. I know - these two computers can't be compared in terms of quality, bundled software, processor speed, etc. I'm simply pointing out that the price of admission into the cult-of-mac is quite a bit higher than the cost of entry into the general world of laptop computing. When you open up your MacBook in the local Starbucks, everyone knows that your computer is a "premium" computer and not just some run-of-the-mill Dell.

Which brings me to my real point: What's so great about being a luxury brand?

First of all, you're protected from feature or performance competition. To compete, you need better style, perhaps better quality, and certainly better customer service. The experience of purchasing a luxury brand needs to be top quality from your initial shopping experience to customer support, but you don't necessarily need to compete on core features. Often times, less is actually more.

Second, you don't have to compete on price so your margins can be big. In fact, you better have a premium price to substantiate your premium brand. Not only do you have a premium price, but you need to make sure that your products aren't offered in discount locations that can't support your entire brand experience. What this generally means is that you get to command higher margins than your competition and hopefully reap the profits at the end of the day. Luxury products tend to be highly profitable.

Third, your market is slightly more affluent than the target markets of other brands. Your customer is able to spend a little more to get a product that they can show off. This segment of the market is a little more resilient to economic ups and downs and will be able to spend money with you even when the economy tightens up.

Here's where Apple has had a brilliant strategy: not everyone can afford their higher-end computers, but they have plenty of "affordable luxury" products so that you can get a piece of the brand without having to pay thousands of dollars. This is equivalent to Coach selling slightly less expensive handbags or Dolce & Gabbana selling sunglasses for around $100. Customers get to get a taste of a luxury brand at a reasonable price. Everyone likes to spoil themselves now and again with a little luxury and affordable luxuries can have great appeal. Witness the explosion of cupcake shops that sell the tiny cakes for $3 and up at huge profits!

The one potential issue with being a luxury brand is that you might have to give up the low end of the market in order to succeed. Back again to Apple, it appears that they might do this with both the iPad and the iPhone as Android phones and tablets take over in terms of sheer volume. My guess is that Apple will stick with their high-end, luxury strategy and let the rest of the market be owned by someone else. They'll stick to their high-margin products for the top end of the market and let others fight it out to claim the rest of the market with low margins and tough price competition.

So, how can you make your own brand a luxury brand? Can you update the experience of shopping in your store or on your website? How do you make your product or service worth paying a little extra for?

Here are a few tips:

1. Extraordinary customer service. Make doing business with you a better experience than anywhere else.

2. Extraordinary product quality. Your product doesn't need to do more than the next guy's. It just needs to do the basics better.

3. Exclusivity. An endless supply of your product usually means that anyone can get it. You need to figure out a way to make your product or your service slightly scarce. Make it worth lining up for.

Is your brand a luxury brand? Can it be one?

How to compete with Wal-Mart

2009-03-20T11:23:00.000-07:00

WSJ's Independant Street blog has an interesting post today about what small businesses can do to survive when Wal-Mart comes to town. The data shows that if businesses try to compete on price, they loose. Small biz just can't beat Wal-Mart at the game that they own and have perfected over the decades.

What small business CAN do is differentiate:

Better service. Who gets great service at Wal-Mart, Home Depot, Best Buy or any other big box store? Small businesses can differentiate by providing exceptional customer service. By doing this, prices can be kept high and possibly even be raised. Better service will also drive customer loyalty and referred business.
Unique products. Wal-Mart and other big box stores only cary mainstream products. Local stores can differentiate by providing products that will never be available at the big box stores.
Focus. Wal-Mart excels at providing something for everyone. What they don't excel at is deep focus in single product categories. Small businesses should look to find a specific niche and become experts at servicing that niche. In this case, less is more - a very different strategy than Wal-Mart's "more is more" strategy.

I'm sure there are plenty of other ways to compete against Wal-Mart. What are yours?

Where are Borders and B&N in the ebook game?

2009-02-12T11:32:00.000-08:00

I have to admit, I'm drooling over the new Kindle from Amazon. I wasn't that interested in the first version, but this second edition looks like it has fixed a lot of the issues. I still wish it had backlighting, though. Having to clip on a normal book light to read at night seems a little kludgy.

That's why I'm very excited about the forthcoming ebook reader for the iPhone from Shortcovers. I know there are other ebook readers for the iphone out there, but this will be one of the first ones connected to a large library of ebooks for purchase. In fact, you can even buy one chapter at a time in a "pay as you read" model.

But, my real question in all of this is why are Borders and Barnes & Noble not in this market? They ceeded the online book sales market to Amazon in the 90s. Now they're going to miss the boat on digital distribution as well. Amazon knows full well (and I believe this too) that physical books are going to be sold less and less over the next decade. E-ink and flexible displays are going to make book and newspaper reading an entirely digital experience. It's really just a matter of time.

So, if Borders and Barnes & Noble want to survive, they should be working with their publishing contacts (the same ones Amazon has) to build a digital book marketplace. They should hire some iPhone developers and put together a great ebook reader application. If they don't, they will become dinasours and miss this market completely. They don't need to go the hardware route as Amazon has done. Afterall, that is expensive and time consuming. Instead, they should work with the hardware platforms that are in millions of pockets already - iphones, blackberries, etc.

As I write this, I think about Tim's post today about Netflix and how much guts (and smarts) it takes to work on a new busienss model that destroys your old one. This is what Borders and B&N need to do to survive.

Design Patterns

2009-02-04T09:37:00.000-08:00

User interface design has always been one of my passions and I enjoy checking out new design resources as I stumble accross them.

Today, Cale pointed me towards Quince, a "UX Patterns Explorer." This very cool Silverlight application allows you to search through design solutions to data sorting and navigation. While not every solution is perfect, it's a great resource to explore options as you are developing your own web sites and applications.

92% of Americans Employed

2009-01-30T14:15:00.001-08:00

I'm usually a glass-half-empty kind of person. I can't help it, but I'm generally a pessimist.

But, right now I'm a firm believer that one of the only ways we as Americans can help lead ourselves out of our financial crisis is to be optimists. As Aaron Patzer points out in his guest post on TechCrunch today, Americans (who use Mint.com) are spending an average of $400/month less. Of course, layoffs aren't helping. But, the fact remains that 92% of Americans have their jobs still. Many of these people haven't even taken any pay cuts. They are just spending less - maybe out of fear of what's to come, acknowledgment that they should have been saving more in the past, or just from a lack of optimism.

I'm not an economist (far from it) but it seems pretty clear that the country could start turning itself around if the 92% of employed Americans simply started spending again - maybe not all of the $400/month they aren't spending now, but how about half of that. Of course, in the long term Americans need to have better savings habits, but now is not the time to go that route. We need money flowing through our economy and getting average Americans to spend is one of the best ways to do that.

In fact, Finland is on the cutting edge of this scenario. They are running a national ad campaign that encourages people to start spending. Read more about that story at NPR.org.

Free webinar on simple marketing tactics

2009-01-30T11:47:00.001-08:00

John Jantsch of Duct Tape Marketing fame will be giving a free webinar on Simple Marketing Tactics on February 11, 2009 at 12:00pm CST.

"Let's get back to basics and start utilizing simple, effective and affordable marketing tactics to create momentum that carries your business through the tough times and allows it soar in the good times."

Reserve your spot today!

Fail Gracefully

2009-01-29T11:22:00.001-08:00

Tim Berry's blog post today on "failing forward" reminded me of one of my favorite engineering/application design phrases: fail gracefully.

What does this mean? It means that you should design your applications and web sites to provide the end user with useful and informative information when it runs into a problem. Failing gracefully means:

Providing useful 404 pages on your web site
Not displaying only error codes when your application crashes. Provide information that will help the user fix the problem.
Not letting engineers write your error messages. (see point 2)
Making sure errors behind the scenes don't bring everything else to a screeching halt

Beyond writing code and developing applications, the "fail gracefully"concept is useful in business. This means:

Having good backup plans if things don't go as you originally planned.
Knowing what your alternatives are.
Planning ahead for optimistic and pessimistic scenarios
Learning from your mistakes

Not that any of us ever want to fail, but it's inevitable in business, entrepreneurship and life. So, failing gracefully is a much better option than just failing.

Good business reading coming soon

2008-10-10T13:00:00.000-07:00

I'm looking forward to two (most likely good) books from my favorite business authors that are coming out later this month:

Seth Godin's Tribes and Guy Kawasaki's Reality Check both come out in a few weeks and I'm sure they will quickly become required reading for entrepreneurs and marketers everywhere.

For a long time, I've admired both of these authors for their ability to cut through the BS and provide business advice that you can apply to your business immediately. There's no academic, theoretical garbage to muck up the messages. You come away from reading anything by these authors thinking, "I already knew what they told me, but they presented it in a much better way than I ever thought of."

Anyway, pre-order these books on Amazon. I'm sure you won't be disappointed.

Organize your Business for Growth

2008-10-08T10:12:00.000-07:00

I really enjoyed John Jantsch's post yesterday about organizing your marketing. The real insight for me was the idea that even very small organizations should have an org chart for how they would like their organization to look in the future. To quote from John:

See, here’s the deal, even if it’s just you and Louie, he does this, you do that, you need an org chart for your business. Here’s why. No matter how many actual people you have in your organization, your business has many functions, it’s just that they are being done - or not being done - by just you and Louie.
By creating an organization chart, and acknowledging all the functions, you stand a far greater chance of developing individual systems and strategies to make sure the work in each area is organized and done. Not to mention the fact that you are laying the foundation for growth if and when you have bodies to put in more of the boxes on your chart.

This concept about laying the foundation for growth is critical for small businesses, especially as we all look at the global economic crisis and wonder how we are going to grow our businesses. They key is planning for growth and changing your outlook from "glass half empty" to "glass half full." This attitude alone will help you and your employees look forward and work with you to figure out how to grow rather than focusing all your time on working through worse-case scenarios.

So, go out and create your org chart and plan for growth. This discipline alone will help you organize your business so that you get things done. And getting things done will lead to growth.

MACs for Business

2008-08-31T20:19:00.000-07:00

The excellent post over at Ars Technica about how Apple can gain significant OS marketshare speaks directly to an issue we have here at Palo Alto Software. As we've grown, our Mac culture has grown as well. More and more of our new hires come to the company as Mac users, despite the fact that the software that we market and sell is Windows only (for the time being). I have to admit, I even caved and got a Macbook Pro last fall and now I'm thinking of replacing the Vista machine I have at home with an iMac.

The problem is that Macs are simply expensive. I'm not trying to fan the flames on the decade-old war of Mac vs. PC in terms of cost/performance. The simple fact is that I can buy pretty good PCs for usually half of what a Mac costs. I know, these PCs probably don't benchmark what the Macs do, but for most of our employees, running a web browser and a few basic applications is all they do. And for half the money, it ends up being a pretty simple decision.

What I would like to see Apple do is provide me with the guts of a Mac Mini in a tower form factor that I can easily upgrade as I need to. Heck, Apple can even charge me around $1k for these machines, a nice $300+ premium over a mini. I'm not suggesting that they license their OS to Dell - they can keep the hardware market that they love so much. I just want them offer an upgradeable business machine that is flexible so that I can customize it for specific employees needs.

For example, most of our employees run dual monitors. The Mac Mini does not support this and adding a better video card is out of the question. External video cards are expensive. If the Mac was in an upgradable tower format, I could just upgrade using off-the-shelf components. Is that too much to ask?

So, my opinion is that Apple could begin to dominate the office market by simply creating an office-friendly computer: an upgradable tower for around $1k. This would fill the gap between the Mini and the Pro and give someone like me the flexibility to buy computers that fit our business at a reasonable price point. No need to bet the farm on a risky OS licensing deal - just build a simple computer that fills a basic need.

Green and Profitable

2008-08-14T13:07:00.001-07:00

Check out CO2Stats.com when you get a chance. Looks like a cool idea and is apparently already profitable.

I like the fact that more and more companies are showing that you can work in the green movement AND make money at the same time. Not embracing that idea, that environmentally friendly businesses and capitalism can mix, is what is killing the US auto companies (among many other things).

What down economy?

2008-07-18T19:21:00.000-07:00

Jim's Blogging!

2008-06-24T15:57:00.000-07:00

Jim Blasingame, The Small Business Advocate, is finally blogging. Jim has a great weekly newsletter and I hope the content from the newsletter makes its way to the blog.

Welcome Jim!

Macs aren't perfect

2008-06-09T09:21:00.000-07:00

Good to be home

2008-06-07T18:43:00.000-07:00

No time to blog? Go Micro

2008-05-23T10:36:00.000-07:00

My friend and colleague Cale Bruckner has modified his blogging strategy over at his blog PalmIT and I think it is a great way to keep blogging without feeling the pressure to post long, in-depth articles. A major hurdle to blogging for most people is the intimidation factor and the time commitment. It feels like a major commitment to churn out a few hundred or thousand words a day/week/month. And it is.

So, instead of setting out to write a book with every blog post, why not try micro blogging? This is the practice of posting very short blog posts, often just one or two sentences and a link. A photo and a comment would also be good enough. If you find a site or an article that you think is interesting, post the link, add a short comment, and post it. Not only will this approach keep you blogging and keep your blog fresh, but most likely your audience will appreciate it as well. Everyone is already overloaded with information. Keeping things short and to the point is probably a good strategy.

Seth is Smarter than Me

2008-05-19T13:34:00.000-07:00

Shocking, I know. It turns out that my snipe at Seth Godin in my previous post for not having comments is not really valid. There might be an actually strategy, not laziness, behind the choice to not have comments. Darren Rowse explains it best in an interview with Guy Kawasaki:

However another stroke of genius (I'm not sure if it's intended) with this approach is that Seth has made his blog a little more viral by not having comments. What happens when he writes something that people want to respond to? In many cases they blog about it - 'sneezing' his post further than his current readership.

Check out the number of blogs that link to his posts in Technorati. Most of them are just writing things that you'd normally expect to see being left as comments on a blog. It's no wonder that he's currently the 13th most linked to blog in the blogosphere (according to the Top 100 list)!

Darren goes on to say that this "strategy" wouldn't work for everyone, especially new bloggers, unless you have an alternative method for getting traffic to your site such as a successful book or a well known online profile of some kind.

So, I'm eating crow today. Sorry Seth. It still would be interesting to know for sure if this was an intended strategy or if Seth just didn't want to moderate comments.

Retail Packaging

2008-05-15T08:31:00.000-07:00

Seth Godin's post today on retail packaging is right on the money. Having lived in this world for several years, he is speaking the exact truth:

[Bad] packaging is the result of a paranoid retail buyer (the person who orders in bulk for the store, not the buyer at retail) demanding pilfer-proof packaging combined with a lazy brand manager choosing a lousy solution to the challenge presented by getting it into a retailer. "Make it pilfer-proof or we won't carry it," he says. The brand manager doesn't want to take a risk, so she packages it the way they packaged it when the device cost $1,000. Impregnable.

The online thing I would change here is that it's not always a "lazy brand manager" but sometimes a business that can't afford to loose a major channel and has to bend to the retail buyer's whims. I've lived this and that's how it works sometimes. If you want to stay on the shelf you have to do what the buyer says.

And as long as I'm writing about Seth's post, here's my plea to Seth: Open up comments on your blog! Please! You preach about social conversations and about customer/company interactions but don't open up your own blog for public discussion. I just don't get it.

Social Pressure

2008-04-17T14:21:00.000-07:00

In the world of web 2.0, the expectations to be social are overwhelming. We're all supposed to be sharing photos on flickr, blogging, reading blogs, managing our facebook and myspace profiles, updating linkedin, tweeting, posting video, and more. There are new services every day that are supposed to make our social interactions "easier."

In reality, what we have is a new flood of inbound information. Honestly, it's hard to keep up! Or maybe I'm just getting too old ;)

For me, the hardest thing is the pressure of all of this new inbound information. It feels like if you turn your back for a few minutes, go out to lunch, play with your kids, etc, you will miss the next speedy evolution of the web. People that are participating in social media for a living generate such a high volume of content that it feels that that level of participation is the expectation for all involved in social media. Not only that, matching my consumption to the production level of this content is virtually impossible to do while making sure I honor my obligations to work & family. Forget a full inbox. How about a Google Reader with thousands of unread blog posts?

I think it's time to re-set expectations about what is possible in social media (production and consumption). Thankfully, Sarah Perez has a new post about how real people don't have time for social media. It's a relief to see a post like this and also nice to re-set expectations about the real commitment that it takes to be fully involved in social media.

This topic of balance seems to be a growing theme among bloggers of late, although maybe not addressing the content parsing problem that "social media" creates directly:

(update: Erick Schonfeld gets it - Web 3.0 will be about reducing the Noise)

37Signals: Urgency is Poisonous
Tim Berry: Are you Making this Startup Mistake?
37 Signals (again): Workplace Experiments

The crux of all of this is to have a work-life balance and enjoy life beyond the computer screen. I love computers and technology, but I strongly believe that sometimes taking a break (even 30 minutes) is a good thing.

Why Competition is a Good Thing

2008-04-16T16:05:00.001-07:00

New post over at Palo Alto Software's BIG blog. Check it out.

Fire your customers

2008-03-25T21:12:00.001-07:00

Check out my latest post on the BIG blog about growing your business by focusing on customers you can satisfy and firing the rest.

A short tail is better in the physical world

2008-03-12T19:23:00.000-07:00

Seth Godin has an interesting post about Borders (the book store):

It turns out that cutting inventory by 10% and facing books out (instead of just showing spines) increased their sales by 9%. This is counter to Long Tail thinking, which says that more choices and more inventory tend to increase sales.

This highlights a real point that online and off-line thinking and merchandising are inherently very different. While the online world is currently focused on search as the primary navigation method, the off-line world is still all about browsing and discovery. It makes perfect sense that when there is less information to consume in a book store, where browsing is the primary mode of discovery, sales will go up. Make it easier to discover new books by facing covers out to the consumer and obviously sales will go up.

On the web, however, the long tail is still king. I doubt that Borders has decreased its online inventory in any way. In fact, I'm sure they try and increase it so that any possible search gives them a sales opportunity.

What the internet does need is a hybrid approach. Sometimes you just want to browse and discover. Search provides a poor interface to this type of discovery. Companies like SearchMe are working on this. I'd like to see more sites embrace this type of interface. I want it for NetFlix's "new releases" (something akin to browsing BlockBuster's new release wall) and it would be also great for clothing sites. Searching is great, but sometimes an experience similar to flipping through a catalog is the right approach.

There's still room for human-built search tools

2008-03-10T22:49:00.000-07:00

Way back in internet history, the primary way to discover new sites on the web was through human-built directory sites. In the current Google, keyword search-dominated world, it's easy to forget this. While geeks like us know that a few people out there are trying to give human-powered search a second chance, it has been essentially forgotten in favor of machine-driven bots that crawl the web and produce results based on complex and ever-changing algorithms.

Honestly, I love machine-driven search. Way back in my Yahoo! days (I was there when the above logo existed) it was clear that hand built web directories could never scale - and this was when the internet was "small." But those directories DO have a place and I hope that some of these newer incarnations of the old Yahoo! idea succeed where Google fails.

How is Google failing, you ask? With billions in revenue, massive search share, and endless innovation, how could Google fail? Well, it starts with simple searches. I'm currently evaluating shopping cart technology and also looking for NetSuite consultants. Searching in Google for these vendors works to a degree, but never turns up an exhaustive and thorough list of vendors. I've found that after searching for shopping cart vendors for over a week, I'm still finding strong candidates who failed to make it into Google's top 30 results (and who looks at more than the top 10 anyway?)

What the world needs is a good set of lists. Lists that Google can find and present when users are doing these kinds of searches. The world can not be limited to the top 10 results for any particular query, but unfortunately that's how it works right now. For most businesses, if you don't crack the top 10 for your key terms, you might as well not exist.

I hope that Mahalo and Squidoo succeed for this reason. Google's style of search has a place, but it can't be the be-all end-all for finding information. Google needs to find a way to direct users to lists of things that are compiled by humans because, at the end of the day, it is human intelligence and filtering that provides the most value to the end-user.