President Reagan has been quoted as saying “I’m from the government and I’m here to help” are the most terrifying words in the English language. One phrase I used to hear a lot that was just as terrifying to me was “we want to be your (fill in the blank) partner.” That could be a tech partner or a marketing partner or whatever. The thing was that most people have a tremendous amount of difficulty distinguishing between a partner and a vendor. The sad truth is that very few people or organizations that you’re in business with want to be the former and that’s a shame. Vendors are a dime a dozen while good partners are rare.
How do I distinguish between the two? Vendors send you bills while you usually end up sending a partner their share of your joint profits. Vendors come into your office and tell you how great their product or service is, even if you’re using it or them. They tell you their story and ignore yours. Instead of telling you what they are doing for you specifically, they tell you about the latest success story they’ve had, usually with some other “partner” of theirs.
It’s always easy to spot the vendors and the potential partners almost from the second they walk in the door. Partners will talk about you and your situation and tell you specifically how they can help. They’ll ask for reasonable compensation but also volunteer to share in the upside because they believe in their product and its ability to help you. Vendors come in with a canned, generic pitch. Their rates are fixed in stone and they don’t share the risk and so don’t have any interest in sharing the rewards.
I’ve always felt that my goals and those of my business partners were very much aligned. I can’t say the same of many of the vendors I’ve worked with over the years. I’ve also always tried to do business with my consulting clients and franchise candidates in that way – as a good partner and resource rather than as a vendor. Is that a difference without a distinction? Not in my book. How about in yours?
Did you happen to hear about (or read!) the NY Times article on how a young man got “sucked into the vortex” of radical videos on YouTube? It’s an interesting and scary read. It’s about how a person goes to YouTube to watch a video on one thing and ends up multiple videos later watching something completely different and often dangerous.
As the article says:
YouTube has been a godsend for hyper-partisans on all sides. It has allowed them to bypass traditional gatekeepers and broadcast their views to mainstream audiences and has helped once-obscure commentators build lucrative media businesses.
As usual, we’re not here to rant about the politics of these videos. It’s just as easy for the videos to be dangerous and non-political and even though YouTube specifically bans harmful or dangerous content, they can’t catch everything.
The real issue here is YouTube’s – and many other platforms’ – business model. They make money by keeping you engaged and the way that they do that is often via a recommendation engine. That engine uses an algorithm that rewards videos that have lengthy watch times by promoting them more often. Of course, the more engaged you are, the more ads you’ll see and that’s really the problem. Most of the popular platforms follow that business model and their interests don’t necessarily align with yours. They all have some sort of algorithm which on YouTube, as the article says, is
the software that determines which videos appear on users’ home pages and inside the “Up Next” sidebar next to a video that is playing. The algorithm is responsible for more than 70 percent of all time spent on the site.
Of course, you can turn off the recommendations. You can also delete your search history, pausing it going forward, and your watch history which will prevent the algorithm from determining what you usually watch. If you haven’t hidden the video suggestions (it’s in your settings) at least you’ll see lots of pretty neutral offerings. More importantly, you’ll take back control and realign their interests with yours.
It would be easy for YouTube and others to prevent a host of problems by killing off the recommendation engine but they never will because it’s the thing that drives their business model. In a perfect world, every business’ interests would align perfectly with those of their customers. Maybe it’s because the big platforms are out of alignment with us that there is so much anger directed toward them?
Foodie Friday! I installed a couple of the food-delivery apps on my smartphone this week. Some of my favorite local places use the delivery services to expand their business and I thought having the ability to order in might be a nice option. Of course, that got me thinking about what exactly the restaurants got besides the additional order (at a lower price when you factor in the service’s cut but no service cost). The answer, as it is with almost everything today, should have been data but as it turns out, not so much.
The reality is that the delivery apps hang on to the data. They “own” the customer, not the restaurant, and that’s a problem, or it should be. Restaurants are giving up the direct connection to their customer by not getting that data and they have no way to combine it with their offline, real-world data gathered when I actually show up to eat as well as with the data they might get from a reservation service such as Open Table.
Ownership of the customer is an enormous issue no matter what business you’re in. For example, your car spits out reams of data about your location, your driving habits, and many other things. How many? A report by Consumer Reports said that “There are more than 200 data points in cars today, with at least 140 viable business uses.” Who owns the data and, therefore, the customer? The dealer who sold you the car? The manufacturer? I, of course, think the right answer is that YOU own the data until you give it to someone for a specific purpose.
Think about how many things around you gather data these days. Your TV, refrigerator, heck, even your toothbrush might be collecting information about you and your habits. Who owns you as a customer? I bought my TCL TV through Best Buy. It has Roku built in. Who “owns” me? What’s being shared?
It’s a question you need to ask as a business person when you partner or work with a third party. I think customer ownership is a fundamental issue and it’s only going to become more important. Of course, as a consumer, you ought to be every bit as concerned but we’ve talked about privacy a lot here so not today (84 posts and counting in the last 11 years!).
I really don’t care much about DoorDash or GrubHub. Without the restaurants they serve, I wouldn’t ever install or use them. I’m not their customer in any real sense – they provide a nice service but it’s the food I’m after, right? So why do they think they have a right to own me? Are you asking that question at all? Maybe you should!
You can call shared interests believing your own BS or you can call them eating your own dog food. I like to think of it as having skin in the game, a phrase coined by Warren Buffet referring to a situation in which high-ranking insiders use their own money to buy stock in the company they are running. I use it in a much broader context and it’s something you should be looking for at every turn.
Photo by rawpixel.com
I can’t tell you how many companies paraded into my office when I was in corporate life promising to solve issues we might be having with revenue generation, audience measurement, or dozens of other common problems. Many of the offerings were actually quite interesting although not yet deployed in the real world to any extent. If I was interested but skeptical, I’d usually make an offer somewhat akin to this:
I like your product but it’s awfully difficult for me to stroke out a check on something that is promising but unproven. So let’s do this. You provide the product and service as you say and I will pay you a much lower fee (or nothing!). However, if you deliver the results you say you will deliver, we’ll set up a success fee that will pay you more than you’re currently asking. In fact, if your numbers are right, you’ll earn double what you are charging.
In other words, I wanted them to have skin in the game. I wanted our interests to be perfectly aligned and I wanted there to be consequences for us both if we didn’t achieve what we set out to do. The reality is that you should always ask yourself who has what skin where because most businesses do their damnedest to avoid any sort of risk by putting in some skin. Sure, they pay lip-service to the notion of entrepreneurship but there are few who have put their money where their mouth is and invested into the tech ecosystem or directly into startups. Pay attention – much of the time the investment comes only after the product has proven itself or is a direct ripoff of something that’s already successful. I call this the second penguin strategy (you don’t want to be the first penguin that jumps in the water since there may be predators lurking).
If you’ve ever played cards, inevitably there is a kibitzer around. You know – the person who looks on and often offers unwanted advice or comment. They have no skin in the game. There are kibitzers in business too – you can find them writing for many trade publications – and you might even have some in your company as partners or clients or even employees. Not many companies took me up on my offer to make them more money. The few that did were fantastic partners and I still speak with some of the executives from those firms almost 20 years later. Having skin in the game made all the difference. What do you think?
One thing I’ve done over my decade in consulting is to go to tech events. Many of these attract dozens of budding entrepreneurs as well as we consultant types who are always on the lookout for a new client. Inevitably, as you’re making small talk and new connections, someone will tell you about their earth-shattering, world-changing brilliant idea. All they need is some seed money. Most of the time, their ideas…well…suck. Let me explain why.
First of all, they can’t explain the problem that they’re solving. They have a vague idea of who might have the problem but they can’t really explain what the problem is since they’re not the customer. Then they can’t exactly explain how they’ll scale – how they will attract a large enough customer base to get them to positive cash-flow and profitability. Lastly, they can’t explain the revenue model – how they will monetize the enterprise.
Major suckitude, in other words.
If you can’t explain how your idea takes in someone’s money – an investor’s or a customer’s – and spits profit out the other end, you’re in big trouble. An idea isn’t a business, you see.
One thing I’ve learned in consulting on franchises is that a lot of food franchises want you to have some food experience. While specific industry experience is less of a requirement in other categories, having relevant experience is a huge help everywhere, even if it’s just demonstrating skills that can help in your new business. If you don’t have the basic skills you need to germinate your idea – leadership skills, sales skills among them – or relevant industry experience, you are going to fail. Was that mean? OK, it was mean, but your idea still sucks because you are hanging it out there all on its own with nothing to support it. No money. No experience. No skills.
By the way. Most people who have been around for a while (your potential investors and others) can figure out very quickly if your buzzword-laden pitch is BS. Dressing up your sucky idea with a fancy presentation laden with jargon is lipstick on a pig.
What ideas don’t suck? The best businesses come from someone trying to solve their own problem and having the business acumen to grow that solution into something that can benefit others if the problem is a big enough one. There is a plan to make money, acquire customers, and generate a profit. Got an idea with those things? THAT doesn’t suck!
Happy Foodie Friday and a Happy Easter and a Zissen Pesach to those of you who celebrate one or the other (or both!). I spent much of this week in Las Vegas, one of this country’s great food cities. I know – how can I say that about a town that’s built pretty much just to separate you from your money? Well, you gotta eat in between all of that spending and it seems as if every big name chef has a place in Vegas. There is also an awful lot of great local places too.
While the food is very good at most places in town, it’s pretty expensive. Obviously, the high-end, big-name chef places are pricey but even some of the small local joints I patronized ended up costing quite a bit of change. While I realize that the prices I pay in my little North Carolina town aren’t “big city”, I’m quite used to NYC pricing since that’s what I paid my entire life. The prices in Vegas are beyond that when you total up all of the ala carte items you order.
One thing that’s a real tradition is the Vegas buffet. Every hotel has one and there are many stand-alone buffets in town as well. They’re not inexpensive either. The one at my hotel was $31 including the tip. Yes, even bottomless mimosas! As I was running through the massive food service area (for the third time), I realized that I’m very much a buffet guy and I think most consumers are too.
What I mean by that is that we seem to be living in an age where everything is ala carte. Your airline ticket may be your protein, but you might want some veggies (an assigned seat), a salad (a checked bag), and a starch (fuel surcharges, booking fees, etc.) which will make up the real cost of your meal. Sure, your hotel room is $139/night, but the “resort fees” and fees for things like having a safe in your room or built-in tips for the housekeeper can inflate your bill quite a bit.
Everyone complains about what most ticket services tack on to the base price of a concert ticket. Look at your cable or telephone bill and I’m sure you can find quite a bit of dough you’re being charged that takes your monthly tab beyond the advertised price that drew you in as a customer in the first place. I’m a buffet-pricing guy. Tell me the entire price upfront and let me decide. Sure, the lower price might get me in the door once, but the anger I feel when I see the final bill will assure that I won’t be back.
You might be fine with ala carte pricing. In theory, I am too because why pay for something you won’t use? The problem is that you really don’t have the option. When an airline charges you for carry-on bags or for checked bags, there is no “option” unless it’s a day trip without luggage. You’re paying the fee. why not include it in the price?
Enjoy your buffet this weekend!