The Amazon annual shareholder letter by Jeff Bezos is always full of fascinating information and perspective, especially the views on risk/reward experiments.  What Amazon has accomplished (and continues to accomplish) is mind-blowing.  The letter is inspiring and a must read! A few snippets are below:

Fulfillment by Amazon and Amazon Prime Membership:

With the success of these two programs now so well established, it’s difficult for most people to fully appreciate today just how radical those two offerings were at the time we launched them. We invested in both of these programs at significant financial risk and after much internal debate. We had to continue investing significantly over time as we experimented with different ideas and iterations. We could not foresee with certainty what those programs would eventually look like, let alone whether they would succeed, but they were pushed forward with intuition and heart, and nourished with optimism.

Non-linear success:

A builder’s mentality helps us approach big, hard-to-solve opportunities with a humble conviction that success can come through iteration: invent, launch, reinvent, relaunch, start over, rinse, repeat, again and again. They know the path to success is anything but straight. 

Sometimes (often actually) in business, you do know where you’re going, and when you do, you can be efficient. Put in place a plan and execute. In contrast, wandering in business is not efficient … but it’s also not random. It’s guided – by hunch, gut, intuition, curiosity, and powered by a deep conviction that the prize for customers is big enough that it’s worth being a little messy and tangential to find our way there. Wandering is an essential counter-balance to efficiency. You need to employ both. The outsized discoveries – the “non-linear” ones – are highly likely to require wandering.

Failure:

As a company grows, everything needs to scale, including the size of your failed experiments. If the size of your failures isn’t growing, you’re not going to be inventing at a size that can actually move the needle. Amazon will be experimenting at the right scale for a company of our size if we occasionally have multibillion-dollar failures. 

Amazon Echo:

No customer was asking for Echo. This was definitely us wandering. Market research doesn’t help. If you had gone to a customer in 2013 and said “Would you like a black, always-on cylinder in your kitchen about the size of a Pringles can that you can talk to and ask questions, that also turns on your lights and plays music?” I guarantee you they’d have looked at you strangely and said “No, thank you.”  Since that first-generation Echo, customers have purchased more than 100 million Alexa-enabled devices. 

In 2018, Third-party sales were $160 billion; First party sales were $117 billion.  Although Mr. Bezos states that “Third-party sellers are kicking our first party butt. Badly” as compound growth rates are 52% vs 25%.  This is simply an attempt to underplay Amazon’s dominance since the growth rate differential is directly attributable to the small third-party denominator in 1999 of .1 billion.  Today, as 50% of all online sales occur through the Amazon platform, Amazon’s success is clear.

#Amazon #Risk/Reward #Non-linearSuccess

March was a busy month as I decided to take the entire Digital Marketing Program by The Wharton School in collaboration with edX.  The program consists of four courses, each with four or five units, each unit is three to five hours, and the program recommends one unit per week.  I rearranged various client-scheduled engagements to the afternoons, to free up my mornings to pursue the program.  I started early each morning and took one unit (course recommendation of one week) per day and achieved completion of the program over several weeks.  While some of the material was reiteration of previous knowledge, overall it was time well spent as often marketing aspects were presented from a different perspective.  New ways of thinking and new viewpoints are priceless.  I am a strong believer in the analytics of digital marketing, and the courses were a solid mix of ‘new digital’, its growth from variations of “old-world” direct response, and an overall online-offline mixture.

The course I enjoyed most was Customer Centricity, Managing the Value of Customer Relationships which discusses marketing philosophies that I have believed since my very first entrepreneurial venture: not all customers are created equal.  The majority of profits come from a company’s top ten or twenty percent of its customers, as well as the lesser customers which can be moved-up into this high value group.  The remaining customers are still important, as they help amortize substantial fixed costs, but enhanced service efforts should be focused on top tier customers.  Professor Fader, in Customer Centricity, also interwove marketing and finance in Customer Based Corporate Valuations.  I am a big proponent of the similarity in analytical aspects of data-driven marketing to finance, as has been demonstrated in the crisscrossing of the two throughout my career.

The courses also featured numerous acronyms including GRAVITY (geography, resistance, adjacency, vicinity, isolation, topography, you), SUCCES (simple, unexpected, concrete, credible, emotional, stories; they did not include the last S in success, but it would stand for stickiness), and STEPPS (social currency, triggers, emotion, public, practical value, stories).

Two of this month’s readings are books by Professors who taught the Wharton – edX courses:  The Customer Centricity Playbook: Implement a Winning Strategy Driven by Customer Lifetime Value, by Peter Fader, and Invisible Influence: The Hidden Forces That Shape Behavior, by Jonah Berger.  The third book for March, Scrum: A Breathtakingly Brief and Agile Introduction, by Chris Sims & Hillary Louise Johnson is a short, but worthwhile description of Scrum, an agile framework of efficient, iterative development.

Books:

  1. Scrum: A Breathtakingly Brief and Agile Introduction, by Chris Sims & Hillary Louise Johnson
  2. The Customer Centricity Playbook: Implement a Winning Strategy Driven by Customer Lifetime Value, by Peter Fader and Sarah Toms
  3. Invisible Influence: The Hidden Forces That Shape Behavior, by Jonah Berger

Courses

  1. Google Analytics Academy: Advanced Google Analytics
  2. The Wharton School in collaboration with edX: Digital Marketing, Social Media, & E-Commerce
  3. The Wharton School in collaboration with edX: Marketing Analytics: Tools & Techniques
  4. The Wharton School in collaboration with edX: Customer Centricity: Managing the Value of Customer Relationships
  5. The Wharton School in collaboration with edX: Selling Ideas: How to Influence Others and Get Your Message to Catch On

Unlike the Google Analytics Academy, Advanced Analytics course which was free, The Wharton School courses cost $580 per course, but they reminded me of my days at Wharton undergrad, as the quality of each course was top-notch.  March was the busiest and most challenging month of online course work, and the book total of eleven is slightly above pace to reach the 40 book goal for 2019.

 

Screen Shot 2019-04-01 at 4.41.08 PM

 

#ContinuousLearning  #ContinuousImprovement

Aggregated Credibility is a valuable, dynamic asset most businesses underutilize.  The products and services your business sells everyday have positive impacts on your customers lives and each sale (or service you provide) inspires trust in your company and brand.  This trustworthiness adds up over time to impressive, confidence-inspiring information that should be shared with your current and future customers.

Small, as well as large businesses, can create powerful, compelling headlines and press releases proudly proclaiming their Aggregated Credibility.  If Joe’s Plumbing, a local plumbing company, services 10 customers a day, five days a week, over the course of a year it earns the Aggregated Credibility of Happily Servicing Over 2,000 Local Neighbors in the Past Year or Joe’s Plumbing, Your Local Plumber, Proudly Servicing 2,000 Fairfield County Neighbors in the Past Year.

Many people choose their supermarket based on coupons.  If a supermarket sees 400 customers a day, and the average customer saves $10, then in six months the supermarket has saved customers $700,000.  We saved customers over $700,000 in the last six months, how much can we save for you?  Or We saved customers over $123,000 last month, how much will you save today?  Both are potentially enticing headlines.

Bombas.com utilizes Aggregated Credibility to inspire confidence in the company and the company’s mission of donating socks to those in need for every pair purchased.  The constantly growing ticker displayed on their website of the 16.6 Million Pairs Donated shouts instant credibility for Bombas and encourages customers to engage in their socially responsible mission.

Aggregated Credibility needs to be relatable to resonate with customers.  In 1955 McDonald’s, under its famous Golden Arches displayed Over 1 Million Served.  In 1960, the sign was increased to 400 Million, and to 1 Billion in 1963.  McDonald’s periodically increased it at various milestones (5 Billion in 1969, 20 Billion in 1976 and 50 Billion in 1984), until 1994, when McDonald’s served its 100 Billionth customer and changed the iconic Golden Arches signage to Billions and Billions Served.  Even though they have served over 300 billion customers to date, McDonald’s continues displaying Billions and Billions Served.

Your company has worked hard to develop trust and authenticity one customer at a time, and deserves to effectively utilize the impressive, persuasive headlines it has earned. What is your Aggregated Credibility?

#AggregatedCredibility  #UnderutilizedAssets

 

Aggregated Credibility Cloud

February continued 2019’s strong continuous learning agenda.  The three books read were excellent for varied reasons.  Building a Story Brand by Donald Miller and Marketing Rebellion: The Most Human Company Wins by Mark Schaefer, both pushed the human aspect of marketing which was a distant approach from the programmatic, digital side discussed in most of the online courses.  In reality, marketing is not an either/or scenario, as optimally both sides are symbiotic.  The information obtainable from digital, which makes any data-junkie salivate, can inform and enhance personal story-telling strategies.

The Bitcoin Standard: The Decentralized Alternative to Central Banking, by Saifedean Ammous, did not discuss Bitcoin significantly for the first 2/3rd of the book, instead focusing history gold as well as other monetary commodities and discussed hard versus soft money.  A fascinating read (although a biased anti-Keynesian view) on hard versus soft money.

Books:

  1. Building a Story Brand, by Donald Miller discusses the ebb and flow of a story and positions the company as the guide to the hero (the customer)
  2. The Bitcoin Standard: The Decentralized Alternative to Central Banking, by Saifedean Ammous
  3. Marketing Rebellion: The Most Human Company Wins, by Mark Schaefer

Courses/Lectures

  1. LinkedIn Learning Course: Building Your Marketing Stack (2hrs 19 min)
  2. LinkedIn Learning Course: Business Intelligence for Consultants (29 min)
  3. LinkedIn Learning Course: Strategic Partnerships (49 min)
  4. LinkedIn Learning Course: Agile Marketing Foundations (1hr 13 min)
  5. Udemy Digital Marketing 301 (2hrs)
  6. Udemy Scrum Prep + Scrum Master + Scrum Training (3hrs)
  7. Google Analytics Academy

The LinkedIn Courses as well as the Google Analytics Academy were free.  Udemy was $15-$20 per course.  The total cost for February was again under $100; that’s a lot of information to digest for less than a single dinner for two, but, then again, it is a lot easier for your stomach to feel full, than your head.

#ContinuousLearning  #ContinuousImprovement

I am an avid believer in continuous improvement and continuous learning.  Personal education is the ultimate asymmetric bet with virtually the only downside being the potential opportunity cost of time, while upside is limitless knowledge that can benefit your current business/clients and/or your future self.  My goal of reading 40 books for 2019, which would have been easier before I fell down the online lecture rabbit hole (again), but the internet offers a never-ending ability to search for new knowledge and fall-down more rabbit holes. Most of the lectures were refreshments of current knowledge, but if I can gain one new idea (or a re-remembrance of prior knowledge) per hour, it is an hour well-spent.

January was a solid start for 2019 with the following:

Books:

  1. Blitzscaling, The Lightning-Fast Path To Building Massively Valuable Companies, by Reid Hoffman and Chris Yeh. My thoughts on Blitzscaling.
  2. Creative Selection, Inside Apple’s Design Process During the Golden Age of Steve Jobs, by Ken Kocienda. My thoughts on Creative Selection.
  3. Ninja Future: Secrets to Success in the World of Innovation, by Gary Shapiro
  4. This is Marketing: You Cannot Be Seen Until You See, by Seth Godin
  5. Industry e-book for a sustainability project I am working on.

Courses/Lectures:

  1. LinkedIn LearningPath: Become a Digital Advertising Specialist. This consisted of 11 courses; Most are overly basic, but I did enjoy a couple, including Programmatic Advertising
  2. LinkedIn Learning Course: Introduction to Attribution and Mix Modeling (1hr 41 min)
  3. LinkedIn Learning Course: Digital Marketing (1hr 27 min)
  4. LinkedIn Learning Course: Creative Thinking (47 min)
  5. Udemy Digital Marketing 201. This course is relatively basic, but still worthwhile, as there were a few snippets of information.

The LinkedIn courses are free.  Udemy was $10.  The total cost of the above was less than $100, and all are definitely more worthwhile than spending time in front of the television.  Looking forward to what February brings!

#ContinuousLearning  #ContinuousImprovement

Blitzscaling, The Lightning-Fast Path To Building Massively Valuable Companies, by Reid Hoffman and Chris Yeh, is a compelling read whose thesis states if a company has access to ample capital and the potential opportunity to capture most or all of a market, it should prioritize growth speed over efficiency, and accept, even ignore the inefficiencies and non-life-threatening fires that come along with it.

Blitzscaling is a counterintuitive strategy that goes against many classic old-school business techniques as you need to accept operating inefficiencies and uncertainties in exchange for speed.  “When a market is up for grabs, the risk isn’t inefficiency – the risk is playing it too safe. If you win, efficiency isn’t that important; if you lose, efficiency is completely irrelevant.”

The book discusses many of the most well-known, fastest growing and currently most valuable companies, including: Airbnb, Alibaba, Amazon, Apple, Dropbox, Facebook, Google, LinkedIn/Microsoft, Netflix, PayPal, Uber and others.  A couple years ago when Uber was raising money at a $60 billion private valuation, it may have been difficult to understand the astronomical valuation, but Blitzscaling presents a solid argument for it.  If Uber uses inexpensive capital to subsidize both sides of the market when it enters a new city, it has a substantially stronger likelihood of quickly capturing significant share. Uber has a chicken and egg scenario as both sides of the market need to be built simultaneously for Uber to be successful.  Uber needs to recruiter drivers to ‘supply’ rides, needs to acquire customers (‘demand’ for rides).  By utilizing economical capital to subsidize drivers (paying drivers a higher percentage or bonuses as additional incentives to join the platform) and subsidizing passengers (with cheaper rides to incentivize them to try the new platform), Uber achieves massive momentum from dual-sided network effects.

The story of Airbnb is fascinating, and an area that can easily be overlooked is how customer-obsessed they were from the very beginning. “Paul Graham, the cofounder of Y Combinator, wrote a famous essay in which he advised entrepreneurs to do things that don’t scale.”  This advice may seem counterintuitive (especially in a book about Blitzscaling), but it is vital to developing an optimal product.  When your business is small you want to can into a customer’s complete experience to understand everything the customer thinks and desires.  Airbnb realized that listings are more successful if they are accompanied by professional photographs, so founders Brian Chesky and Joe Gebbia, in the beginning knocked on customer’s doors to photograph their homes.  Obviously, the founders could not personally scale to photograph all Airbnb listings, but it allowed them to truly get to know and understand their customers (listen to Brian Chesky’s fantastic talk on Reid Hoffman’s Master of Scale podcast titled Handcrafted.  Their Obama O’s and Captain McCain’s were brilliant gorilla fundraises and the 11-star experience demonstrates their obsession with customer experience).

Possibly the company to most successfully implement Blitzscaling (although the term did not exist at the time) is Amazon.  Amazon’s substantial access to capital through inexpensive public funds as well as generated revenue allowed it to build out its massive infrastructure and best-in-class fulfillment systems.  Throughout the years, Amazon was constantly criticized for not consistently showing ‘Wall Street profits’ while it utilized these inexpensive funds to subsidize its distribution and logistics expenses, as well as the fees it charged third-party sellers, to capture an astonishing portion of US online market sales. Currently about fifty cents of every new dollar online is spent on the Amazon platform.  In addition, due to this market dominance, Amazon continually recaptures these earlier subsidized dollars by squeezing the margins of third party resellers (who, in aggregate, account for more sales on the Amazon platform than goods sold directly by Amazon).  Ten years ago, third-party sellers paid less than 20% of aggregate sales in fees to Amazon.  Whether third-party sellers knew it or not, Amazon was subsidizing their expenses to capture dominant market share of the massive overall online retail category. Every year Amazon raises fees to third-party sellers, squeezing their margins and redistributing it back to Amazon.  Currently third party sellers pay 40% of aggregate sales in fees to Amazon, but this would not have been possible without the successful Blitzscaling done by Amazon years ago.

If you like Blitzscaling, The Lightning-Fast Path To Building Massively Valuable Companies, I highly recommend checking out Reid Hoffman’s Master of Scale podcast which I personally look forward to listening to every week.  Blitzscaling is difficult to implement, and the likelihood of failure far exceeds success, however this risk is compensated for by the massive rewards that can be achieved from its success.

#Blitzscaling #ReidHoffman #CounterIntuitive #ContinuousLearning #GrowthStrategy

blitzscaling

I have always been a tremendous believer of continuous improvement.  There is so much to learn, and the internet makes it exceptionally easy to fall-down new rabbit holes.  Between LinkedIn Learning, Cousera, the Kindle, podcasts, and the internet in general, the amount of acquirable knowledge is limitless.  For 2019, I have set the goal to read 40 books.  Creative Selection, by Ken Kocienda was my first pick for 2019, and I highly recommend it.

Creative Selection, Inside Apple’s Design Process During the Golden Age of Steve Jobs, by Ken Kocienda is well written and a thoroughly enjoyable read regarding Apple’s constant reiterative demo process, where Apple creates concrete and specific demos so peers can make judgements/comments/criticisms/improvements based off actual ‘physical’ samples.  Substantial work is put into each demo, similar to the way ideas are pitched at Amazon in detailed memo form, rather than simple power point presentations.  Unlike Amazon memos that are polished, complete plans, Apple demos are down and dirty focusing on the specific area/item being demoed, with the background staged (potentially a Hollywood-type façade) to engross to the viewer into experiencing the demo portion as if the viewer is using the complete product.  The comprehensive due diligence/research involved in creating the demo (or memo for Amazon), helps to continually refine the idea.  As a side note, this reminds me of writing detailed marketing and disposal plans years ago at MBI.  As a young associate, I was amazed by the hours necessary to perfect these plans and to summarize them into short one or two page memos.  The substantial efforts required to ‘meticulously craft’ these short memos forced me to truly understand the plan, as well as, the what if scenarios associated with it.  Proposals would have been far easier (and far less efficient) to put forward as rambling multi-page plans than the concise, productive versions which educated me and allowed my managers to efficiently critique (and improve) them.

Concrete, specific demos allow peers to discuss the item being created in explicit detail, and offer distinct criticisms and suggestions.  Ken Kocienda presents an interesting illustration of the importance of having a specific ‘physical’ item to discuss and critique.  He uses puppies as an example.  Think of a cute puppy in your mind and imagine as many details about your puppy as you can.  I’ll think of one as well, I bet my puppy is cuter than yours.  Under this scenario, we both have imagined cute puppies, but there is no way to distinguish which one is cuter.  We can argue as we each describe our puppy, but we cannot resolve which is cuter without concrete and specific examples.  However, if we have physical pictures of each puppy, we can easily discuss their actual merits.  This example is relatively silly, but it demonstrates the importance of concrete examples. Without them the theoretical argument is virtually impossible, with them the discussion is efficient and relatively simple.

The production of the demos at Apple forces the creator to get a true understanding of the underlying issues with his creation.  The comments/criticisms received from peers utilizing the physical demo (rather than discussing theoretical images) are integrated into the following demo version.  Each demo, building on all prior work.  The best ideas survive, while the weaker ideas go extinct.  From these constant, reiterative improvements, magical, one-of a kind generational products have been created.

#CreativeSelection #AppleMagic #AppleDemos #KenKocienda

%d bloggers like this: