Tag Archives: Business model

Keeping It Real

Back in 2015, an engineer at Twitter asked his security team to look into fake accounts. He said he was stunned to find that a significant percentage of the total accounts created on Twitter had Russian and Ukrainian IP addresses and he also found that they were, for the most part, fake. They were “bots”.

Photo by Alex Knight on Unsplash

No, today isn’t a political rant about how our Democracy might just have been hijacked by a foreign power. Rather, what happened next, as told in this piece by Bloomberg, is instructive to any of us in business because it raises a few issues that are common to us all.

The engineer was part of the security team. That team was tasked with keeping the platform secure. He took his findings to another team – the growth team – which had the responsibility for increasing the user base. That user base number is critical for every business since how the business is valued is based in part on how many users (we can’t really say people in this case, can we?) are active. Discovering that a significant percentage of the user base was fake could have a negative effect on the business’ balance sheet, and in this, we begin to see the problem.

There is a misalignment of goals. If part of security is keeping the platform free from spambots, the people responsible for deleting the spambots can’t have any goals which make deleting those bots counterproductive. In this case, the engineer was told to “stay in his lane”. In other words, pay no attention to the man behind the curtain – the reality of our user numbers – it’s not your job.

No organization should have these kinds of silos. No organization can base its public statements about growth and user engagement on numbers it knows are fake. It’s one thing for users to inflate their follower numbers by buying fake followers but it’s quite another for Twitter itself to be aware of these non-human accounts and to do nothing about them because they want to keep their user numbers up.

I don’t mean to single out Twitter. The same issue persists on Facebook and other social platforms and it’s way more insidious than research can find. There is a term – dark social – that refers to sharing activity among the network’s members that isn’t easily measured. Let’s say a fake account spreads a lie and maybe even buys an ad to do so. We can see how many impressions the ad had or how many followers the fake account has. What we can’t easily see is the network effect. I see the post and am outraged about it. I tell five friends, who tell five of their friends, etc., particularly when it’s shared off the network itself via email or text.

I am fairly certain that each of these networks could identify and stop this activity despite what you might have seen in Congress last week. Those were the lawyers testifying, not the engineers. The point for your business is to keep everyone’s goals in alignment, don’t build silos, and to be honest with yourself and with your investors. These are public companies who might just be committing fraud, but every company has the same responsibility for honesty and transparency.  You with me?

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Filed under digital media, Huh?, Thinking Aloud

They Don’t Make It Like That Anymore

This Foodie Friday I am going to run the risk of sounding like the grumpy old man I’m slowly becoming. Rather than admonishing you all to get off my lawn, I want to share the sentiment I had a week or so ago as I fired up my smoker. My smoker, or as it’s lovingly known, “The Beast”, was made by the New Braunfels Smoker Company at least 20 years ago, How do I know that? Well, that’s today’s food and business thought.

The Beast is made of heavy steel that’s quite thick and it weighs well over 100 pounds even without my usual load of meats inside. As I was cleaning up the old Rancho Deluxe to get ready for its sale, the smoker was one of the very few things that I was adamant about saving for the move. Why was that, especially when I also gave away or junked a Caja China and two other grills? In a sentence:

Because they don’t make them like that anymore.

The New Braunfels Smoker Company was sold to Char-Broil 20 years ago. Almost immediately, the quality of the products went downhill, and this was especially noticeable on the gauge of the steel. The steel was thinner and didn’t hold heat as well. When a rust spot developed, it was difficult to sand and paint it without almost going through the area that has rusted. The products were similar in design and name, but that was about all that was the same. The bbq forums, home to serious meat smoking aficionados like me, were deluged with negative comments and, more importantly to the business, better alternatives to what had been a superior line of smokers.

This is something from which any business can learn. We’re always under pressure to improve our margins. Some folks look to cheaper materials, other to cheaper, less-skilled labor, and still others to cutting customer service. Sometimes we just skimp on quality control. While margins might improve, there is a strong chance that revenues will decline as the customer base figures out that “you’re not making it like that anymore.” As an Apple user, I recently switched to a Chromebook because my Mac OS isn’t as smooth and there are glitches that were never an issue before. For you cooks out there, Pyrex changed their formula and “new” Pyrex is not as good. Recent Craftsman tools, once the industry standard, are now made in China and aren’t nearly as good. I can go on and I’m sure you can as well.

If you’re successful, resist the temptation to cut corners. People notice (so does your staff). Don’t be part of a conversation that claims you don’t make it like that anymore.

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Filed under Consulting, food, Huh?

Do We Really Want Mullets?

Anyone remember the mullet? You know what I’m talking about: the haircut that’s “business in the front, a party in the back.” I think the last time the mullet was popular was when it was sported by members of the Pittsburgh Penguins when they won The Stanley Cup in the early 1990’s. Since then, it’s become more of an object of ridicule than a hairstyle to be admired. I think we’ve come to recognize that we can’t be both businesslike and a party at the same time.

I thought of the mullet the other day when I read that Facebook was testing resume-building features so that users can share their work history with their Facebook friends. They’re obviously trying to hone in on a space dominated by LinkedIn. The curious thing is that your “resume” doesn’t really display. It seems as if Facebook is simply gathering the information which one can assume they’ll use to fuel a service for headhunters and active job seekers. There’s actually a couple of points we can think about here.

The first is that most of the people I know (myself included) use different social sites for different purposes. Many of my Facebook friends are not work-related. We’re not generally connected on LinkedIn. I don’t cross-post (other than the screed) content on the two sites since I don’t especially think my business contacts care about what food I’ve eaten or what concerts I’ve attended or my political views. Conversely, I don’t bore my non-work friends with the three or four business-related articles I might come across that I find interesting.

From what I can tell, most users can distinguish between the appropriate content for the two sites. Frankly, I think Facebook knows way too much about each of us anyway, and I’m not sure that I want them to know much more about my work life, my contacts, or anything else I keep in the workplace. I certainly don’t want potential clients considering anything other than the professional qualifications available to them on LinkedIn – not my musical tastes, not my politics and not my sad attempts at humor with friends.

More importantly, every business needs a focus. Facebook, in particular, seems to have decided that anything is fair game. They’re trying to out video YouTube, to out marketplace Amazon, and to compete in areas such as food delivery. In the meantime, they can’t even decide if they’re a media business (hint: they are).  Each of us needs to figure out what business we’re in so we can channel our resources, focus on our competition, and understand what problems our solutions can solve to serve our customer base. Chasing the next shiny object or growing beyond our core competence generally is more trouble than it’s worth. That’s how we end up with a mullet and is that what we really want?

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Embracing Change

“The only constant is change” is an old saw, but it got to be so because it’s true. I mean, it was uttered by an ancient Greek philosopher (Heraclitus) and has been repeated for 1,500 years. Change is inevitable yet a lot of us are incredibly resistant to it. We carry that resistance into our business lives as well.

Most businesses are pretty good at living in today. They have a grasp on their current situation and have allocated resources to deal with their daily operations based on that situation. A lot of businesses also have a grasp on what will happen tomorrow. They plan lines of succession within departments and train their staff to move up. They allocate capital to grow strategically based on how they see tomorrow playing out. Generally, the short-term doesn’t portend radical change.

The problem occurs when you ask businesses (and people) to think about the day AFTER tomorrow – the longer term in which change occurs. In some cases, people don’t even recognize that there will be a day after tomorrow. Try to have a chat with a 23-year-old employee about retirement and the need to start saving today for something 50 years down the road if you want proof of that. A lot of managers guide their businesses based on a series of short-term plans and goals without contemplating the sustainability of their plans over long-term. They don’t embrace change because they don’t want to accept that it’s going to happen.

The music business fought change and where are they now? My beloved TV business is going through this now as they continue to deny cord-cutting is a problem and refusing to adjust to this massive change. On the non-business side, I believe that many of the challenges our country faces are due to the refusal to accept how our demographic and economic base has changed. That refusal, both in business and outside of it, sparks fear as the signs of change become more prevalent. It’s really only traumatic, however, if we try to resist rather than accepting change and planning for it.

I believe in controlling your business. That means you need to contemplate change, accept it, and revise your plans before change happens to you and not because of you. Things happening due to circumstances beyond your control should be rare if you look to the day after tomorrow, embrace the inevitable change, and having a clear picture of where you’re going, not clinging to an unreasonable and unsustainable changed past. Make sense?

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The Pivot

Way back when in 1995, I was working at ABC Sports as their VP of Marketing. My job entailed meeting with advertisers and constructing packages of media and on-site benefits. We’d collaboratively design in-program elements, popularly known then as “enhancements”, to capitalize on the marketers’ involvement with a sport or an event. These things all took place on-air or on-site. The other big “on” – online – didn’t exist.

One day the president of ABC Sports walked into my office and asked me if I knew anything about computers. As a user of AOL, Prodigy, Compuserve and other early services, I replied that I did. He informed me that I was in charge and was to attend a meeting. ABC corporate had made a deal with this little start-up of under a million users called America OnLine and I was now to provide sports programming on behalf of ABC.

That was my pivot into digital. I didn’t realize it at the time, but saying “yes” to my boss’ question and being willing to take on some new, different responsibility had changed my life forever. None of us knew at the time that digital was going to disrupt the television business. We certainly didn’t think of it as anything other than an interesting sideline. But we began to see a little money coming in based on what we were doing, and once in a while, I could add some online stuff to the broad package of rights and benefits I was offering in my “real” job. Less than 5 years later, my job had become fully centered on digital, as I was now running a division of the NHL that didn’t even exist when I entered the digital world.

Being willing to pivot is a critical thing. Many businesses would be long gone if they were unwilling to do so. Foursquare, for example, pivoted their business from a consumer product to a B2B product, providing “location intelligence” to marketers. 90% of their revenue comes from that change. YouTube started as a video dating site. Nokia was a paper company. Twitter was a podcasting network. None of those businesses would be as successful, or maybe even exist, if they hadn’t been willing to shift their business paradigm and pivot.

I’d love to tell you that I saw the digital tsunami coming and got out in front of it on purpose but that would be a lie. I was lucky enough to ride the wave once it did show up because in my mind we were just doing what we’d always done – making great content and deriving value from the attention users gave it – albeit through a very different channel. The pivot was allowing my mind to be open enough to make that connection and to take the risk that it would be a rewarding road. Is your mind open to things like that?

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Filed under digital media, Growing up, Reality checks, sports business

Our Daily Bread

I was struck, this Foodie Friday, by an article written for the Civil Eats site about how much bread is wasted. I don’t mean financial resources. This is actual bread: loaves, bagels, even donuts. As the piece states:

There’s also the fact that, except in the most exclusive bakeries, a bare shelf is a no-no. Customers expect fresh bread and lots of it. Sugar and fat are also relatively inexpensive, so it is safer to make too much and donate the leftovers than it is to risk running out.

Apparently, it’s a worldwide epidemic, caused, in part, by the growth of factory bread. You know: mass-produced loaves that taste like nothing and are full of fat, carbs, and not much else. Putting aside the quality of the products, I hate waste in all of its forms but particularly when it comes to food. Yes, there are people in this country and around the world who are starving, but I don’t think for a minute that the food either you or I throw out is taken from their mouths. I also get that the statement is more a reminder to be thankful for what we have. What’s lost in idly tossing out food or giving away a bakery’s excess is something I learned from both my friend’s grandmother who taught me to cook and from watching Jacques Pepin on TV.

Nothing is to be wasted. Old bread becomes breadcrumbs or a panade to round out meatballs or a meatloaf. Maybe it’s even the star of a Panzanella. Top mac and cheese with fresh breadcrumbs. Veggie trimmings can be collected and used to make broth, as can shrimp shells or meat trimmings. Ground beef generally is, in fact, meat trimmings.Find some Jacques Pepin videos on YouTube and you’ll be struck by how everything he has is used somehow, even as a garnish.

Bakeries might need to do a better job of managing their dough, but so do we. The kitchen mantra of wasting nothing needs to apply to every business. I once saw the events group at the NHL dragging full garbage bins. They were tossing the contents of their closet which contained event signs and other stuff. We turned their garbage into a million dollar auction business. Nothing is wasted.

What if the bakeries and supermarkets changed the paradigm? What if empty shelves were a sign of an in-demand, high-quality product? What if they made less? Great BBQ places run out of food in hours. It sure makes projecting your P&L a lot easier when you know that you’ll sell everything you make. Sure, you’re losing a bit of upside by running out, but how does that compare with what you’re wasting? Food for thought!

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Is The End Near For Sports?

I know you might be thinking that my headline is just some outrageous form of click bait and that I can’t seriously think that big time professional sports are heading down the same path as traditional big media. Let me throw a few recent articles at you and maybe you’ll come to a different conclusion (which I do hope you’ll post in the comments).

The sports business is based on a few large revenue streams. One is income from the games themselves: ticket sales, concessions, merchandise, etc. What makes many of those things possible is a nice facility – an arena or stadium. We’ve seen franchises move (and piss off their fans) over the stadium issue, sometimes even before the bonds on the last stadium built for the team are paid off. I urge you to watch the John Oliver piece on the relationship between teams and towns but here is why I suddenly think there is an issue. As reported by Mondaq:

bill has been introduced that would eliminate the availability of federal tax-exempt bonds for stadium financing… The bill would amend the Internal Revenue Code to treat bonds used to finance a “professional sports stadium” as automatically meeting the “private security or payment” test, thus rendering any such bonds taxable irrespective of the source of payment.

In other words, it will make public spending on a private facility way more difficult. That will lead to fewer new facilities and a much harder path to growing that revenue stream. Strike 1.

Then there is the largest revenue stream for most big leagues: TV. Kagen recently reported that the U.S.pay-TV industry will lose 10.8 million subscribers through 2021, according to their latest forecast. You might already know that ESPN has been losing subscribers – May 2017 estimates were 3.3% lower than the year before. For every million subs lost, ESPN takes in roughly $7.75 million less PER MONTH – or $93 million a year, and they have already lost multiple millions of subscribers. Yes, some are being replaced via the sale of OTT services, but that requires spending to sign customers, something ESPN hasn’t had to do before. The same subscriber loss issue is true of every other sports network albeit to a lesser degree since their monthly fees are less than ESPN’s. Smaller subscriber fees mean a diminished ability to pay those large rights fees. Sure, other channels (some would say suckers) will step up – Facebook, Twitter, YouTube, and others. But my guess is that the outrageous increases many entities have secured over the last few rights cycles are gone for good. Strike 2.

Finally, costs are not going to go down, at least not without major disruptions such as the two recent NHL lockouts. Players aren’t going to make less (the downside of the salary cap), team personnel probably won’t, at least not without a lot of turnover, and many of the other costs are either already low (minimum wages) or difficult to cut (food costs in the concessions, etc.).  In an effort to mitigate some of the lower revenue and growing costs, some of the entities involved in sports are beginning to do what the airlines have done and make what was once part of the deal (in-flight meals, free bag check) part of an a la carte menu to grow revenue. Specifically, look, for example, at what NBC has done with their Premier League package. They are doing away in part with their NBC Sports Live streaming coverage in favor of a new premium streaming service called “Premier League Pass” that will be in addition to the matches that are already broadcast on live TV. The stand-alone streaming service will cost $50 in addition to whatever you’re paying for your cable subscription. That will bring in more dough but it will also anger fans. Strike 3?

Don’t misunderstand me. I think interest in sports generally has never been higher, and I think any sports entity that doesn’t rely on a big TV contract and employs athletes as independent contractors (I’m looking at you, LPGA) will be in good shape. I just think there is a major disruption coming in the next few years as we’ve seen in the TV and music businesses. Watch out as the next cycle of TV deals begins and if this bill is passed. It’s going to be a bumpy ride, don’t you think?

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