Sep
3
The Tipping Point: How Little Things Can Make a Big Difference - Captured - Malcolm Gladwell
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The Tipping Point: How Little Things Can Make a Big Difference
Epidemics can rise and fall in one dramatic moment. That dramatic moment is the Tipping Point. There are social and viral epidemics. This book is concerned with the epidemics spread by people.
There are three rules to the Tipping Point.
1. The law of the few (Connectors, Mavens and Sellers)
2. The stickiness factor.
3. The power of context.
1. The law of the few
Paul Revere, on his famous ride informing “The British are coming!,” had a partner and fellow revolutionary, William Dawes, who rode with him on a separate route. Dawes headed for Lexington through the towns west of Boston, but he didn’t successfully gather the support that Revere did. Everywhere Revere went, his initial word to the towns spread like wildfire. Paul Revere, says Gladwell, was a Connector and a Maven. His message, the same message as Dawe’s, had far more impact because of it.
Connectors:
- Know everyone.
- Have unusual gift for rapidly making new friendships and acquaintances.
- Gladwell took 200 random names from the phonebook and asked people how many surnames were shared by people they knew. Connectors said 80-100+. Average was 21. My response was 26 :). I’m obviously not a connector yet.
- Roger Horchow airplane ride convinced Gladwell that some just have a gift.
- Important because of the sheer quantity of people they know.
Mavens:
- These folks know everything about a particular area.
- Airwalk hired a fashion Maven, on the edge with everything hip, to “Tip” their shoes into a larger market moving the company from $15 million to $175 million in two years.
- Mavens are valued for what they know. They are trusted by everyone because everyone knows that they know.
- Most likely to pass around deals and coupons.
- They are not persuaders.
Sellers:
- These people have an innate ability to persuade.
- ABC’s polls always favored Reagan more than other candidates because Peter Jennings unknowingly lighted up when he spoke of Reagan. He had the ability to persuade even though people didn’t know they were being persuaded.
2. The Stickiness Factor
An epidemic will grow or stop growing because of how much it sticks. The most popular children shows on TV: Seasame Street and Blues Clues demonstrate the importance of the stickiness factor.
- Seasame Street The folks at Seasame Street found the show on the premise that keeping a child’s attention was equivalent to them learning. They saw the success of commercials and patterned Seasame Street in short, 3-4 minute segments. They almost failed because the childhood experts told them not to combine realty with the muppets. But adding Big Bird to the street kept children’s attention far better. They determined the attention level of each program after they developed the distractor system to which was a slide show of interesting images that would compete with the program for attention. Whenever the children looked at the distractor, they assumed that part of the show wasn’t holding attention. They shot for 90% attention. Seasame Street was a huge success because it was sticky. They later learned from eye movement studies how to increase the amount of learning that took place on the show. If the muppets were too distracting, the children only paid attention to them.
- Blues Clues This show out did Seasame Street because they took 30 more years of child research and improved the show. Short segments aren’t as successful as story lines for children. Children love interactivity. They also love repetition. Blues Clues repeats the same show 5 times, but has enough depth that children love to watch it over and over. It may be the stickiest children’s show of all time. It beat Seasame Street because it focused on children and not on adults like Seasame Street.
3. The Power of Context
- New York Crime Example of the New York drop in crime rate because they repainted the subway cars faster than the gangs could grifiti them. They also put people in jail for trying to get onto the subway free or peeing in the streets. They stopped the little things and the murder rates and horrible crime dropped 60 percent in the area. Bernie Goetz drove these changes. Soon after New York put him in charge of the police department for the entire city and he turned the city crime rate around by 40 percent.
- The magic number of 150 In the army, in hunter gatherer societies, in the gore corporation and in Methodist churches (Divine Secrets of Ya-Ya Sisterhood moves to the Bestseller list overnight in San Francisco and the book clubs), 150 people tend to be the largest size you can get a group and have it actually act together as one voice, in unity without more complex structures of organization
Tipping Points can be caused or prevented. AirWalk shoes orchestrated a Tipping Point for their shoes. They can be deadly. Micronesian suicide rates show a Tipping Point among the teenage boys. Teenage smoking, in spite of the efforts to fight it, is still on the rise even though teens know that it’s not good for them. Teens choose to smoke to rebel and be cool like people they see smoking. They don’t want to hear adults tell them it’s bad for them. Some think people some smoke because it provides a drug to deal with depression. Treating depression may reduce smoking problems. There is a point when an occasional smoker “Tips” and becomes a chain smoker when they have sufficient levels of nicotene. Gladwell thinks it would be possible to stop the Tipping Point from moving to chain smokers by reducing the nicotene content so that they can never get enough nicotene.
Interestingly, in the afterword, Gladwell says the difficult challenge to cause a Tipping Point is to find the Mavens. They are more difficult to find. When Ivory soap places an 800 number for questions on their soap, it’s a Maven trap. No one but Mavens call those numbers. Connectors make it their business to find you. You don’t need to find them. Another example, Lexus, when they had to call back a large group of cars, was worried because they had marketed their perfection and reliability. They recalled the cars and while the owners waited, Lexus washed them and filled them with gas. Owners who lived 100 miles away from a shop received a visit from the mechanic at their home. Lexus even flew to one place to fix the car. This pleased the newest owners of Lexus so much. Plus these new enthusiasts were Mavens. They turned around and marketed Lexus for the company. It was the most impactful callback ever- impactful for the benefit of the company. There are ways to find the Mavens or get them to come to you.
Aug
12
Net Gain: expanding markets through virtual communities - Captured
Filed Under Business Ideas, Resources, Principles, etc., Favorite Books, Free Book Summary - Online, Search Engine Marketing | 1 Comment
Net Gain: Expanding Markets Through Virtual Communities
Purpose:
How will virtual communities change the business world?
How can companies faciliate the organization of communities and extract value?
Central Message:
The Internet changes the power from the vendor to the customer because the customer has access to more perfect information.
Owners of the customer will be champions of the customer.
Companies that avoid the virtual community market may find their business is seriously threatened by small upstarts willing to learn and change.
Companies help a community grow by focusing on membership acquisition and the stickiness of the site (which is largely fueled by member-generated content).
Companies extract value through subscription services and member fees, advertising and transactions within the network.
Validations:
Amazon was using book reviews to build member generated content.
Motley Fool was beginning to gather a large membership able to attract the interests of investment and brokerage companies. Attracts any investment oriented individual, group or business.
Applications:
Value:
The author feels very strongly that membership fees and subscriptions should be very carefully weighed against the need to grow membership and gain marketshare. They encourage extracting value from transactions and advertising.
Key Lists and Summary of the chapters:
Part I: the real value of virtual communities
Chapter 1 - The Race Belongs to the Swift
Power to the customer
1. Distinctive Focus
2. Capacity to integrate content and communication
3. Appreciation of member-generated content
4. Access to competing publishers and vendors
5. Commercial orientation
Profit to vendor
1. Reduced search costs (find customers)
2. Increased propensity for customers to buy (less risk in the virtual environment)
3. Enhanced ability to target (profiles)
4. Greater ability to tailor and add value to existing products and services
5. Lower capital investment
The Challenge of Change
1. Members must be given tools necessary to wield their new power.
2. Members must be given ample opportunity to wield their new power (competing vendors info).
3. Members must be given the chance to maximize the value they receive from information about themselves.
Chapter 2 - Reversing Markets
Virtual communities arise from need for interests, relationships, transactions and fantasies. The power of the virtual community is that they can all build into one powerful brew. There is a fundemental shift in power in the community as consumers…
1. aggregate their purchasing power
2. receive the information advantage (no longer are vendors the wielders of information)
3. vendor choice
4. a reward for the intermediary who puts together the first three (speeds the process)
The vendor’s dilemma is why help make the shift in power?
Well, first of all it’s going to happen even if one fights it. The time will come when vendors can’t afford not to participate. Those who participate early will have lower costs in building the community and will have number of members on their side.
The positive outcome is that lowering of prices to the consumers advantage in the shift in power could push the supply and demand up, increasing the size of the entire market. Traditional vendors and business men would see the community more as the value that comes to the competing vendors and their profits. The community organizer sees the opportunity in the transaction and advertising opportunities. The community itself is more valuable than the products and services of the competing vendors.
Chapter 3 - The new economics of virtual communities
The community organizer who understands virtual communities and their potential see them in the economics of increasing returns. Like Microsoft and Federal Express, the community struggles to grow quickly in the revenues early on, but when the ball gets rolling the growth can be more exponential than flat. Static spreadsheets don’t work. Communities will not make the real profits until they reach a critical mass of members, member profiles, advertisers and vendors, transaction profiles and transactions. When these critical masses are met, then the new business opportunities emerge.
Sources of Revenue for Virtual Communities:
1. Subscription Fees - Fixed price for participation
2. Usage Fees - Charge based on number of hours or pages
3. Member Fees - Content delivery fees for downloads and Service fees for automatic reminders, etc.
Four Dynamics of Increasing Returns
1. Content Attractiveness (marketing and churn) -> hours online -> member relationships -> more content -> more attractive
2. Member Loyalty (customized interaction and relationships) -> hours online -> lower churn -> more content -> more members
3. Member Profiles (data gathering capabilities) -> targeted transaction opportunities -> more transactions -> more profiles
4. Transaction Offerings (bring vendors to community) -> member willingness to spend -> more attractive to vendors -> more vendors
Each of these has a dynamic loop that builds value into the community and increases the returns. Organizers should focus on facilitating these loops.
Organizing Stages
1. Attract Members (marketing, free, great content)
2. Promote Participation (engaging member-generated content, editorial or published content, guest speakers)
3. Build Loyalty (member-to-member relationships, member-to-host relationships, customized interaction)
4. Capture Value (transaction opportunities, targeted advertising, fees for premium services)
“In a nutshell, the dilemma for the virtual community organizer is that the most accessible revenue sources in the near term will be the least attractive from the viewpoint of driving growth. On the other hand, the revenue sources that are most attractive are likely to be beyond the reach of the community organizer in the early years of community formation. The result will be limited revenue generation from the virutal community in the near term.”
However, the costs are just going to get higher for those who wait to enter the market and build the community in the beginning.
Chapter 4 - The Shape of Things to Come
| Stages of Evolution | Description | Key Assumptions |
|---|---|---|
| Virtual Villages | Communities are highly fragmented but profitable businesses, each containing multiple small subcommunities. |
|
| Consentrated constellations | Concentration of core communities, and development of affiliate relationships with niche communities. |
|
| Cosmic Coalitions | Core communities aggregate across complementary core topic areas. |
|
| Integrated infomediaries | Communities and coalitions evolve into agents for members, managing their integrated profiles to maximize value to members. |
|
Part II: building a virtual community
Chapter 5 - Choosing the way in
First thing to do is examine the type of community that will generate the most value as well as your organization’s ability to execute on building the community.
Indicators of economic potential
1. Size potential: means taking the demographics, the size of related associations and estimating how big a community will become.
2. Relative value of being on-line: How many people how begun exploring online in the previous group? Why?
3. Value of being in a community: The need among the demographic to build relationships, explore their interest, transact and experience fantasies will determine the value of being in a community. New parents are intensely interested in community to learn about how to raise children.
4. Likely intensity of commerce: what is the transaction volume of the existing demographic in your interest area?
5. Fractual depth: How much can you segment the community as it expands?
Community Types
Consumer-focused communities
1. Geographic: Total New York: where new york hits the net.
2. Demographic: parents
3. Topical: interests
B2B communities
1. Vertical Industry: Physicians online, Agriculture online, etc.
2. Functional: Built around a specific business function. For example, marketing or purchasing. (MarketingSherpa.com)
3. Geographic
4. Business Category: small businesses community
Indicators of Long-Term Expansion
The fractal breadth is the most important indicator of long-term expansion as the community needs to be able to subdivide into powerful subcommunities as it grows. Topical communities may provide less fertile ground for long-term growth.
Assessing your ability to execute
Brand, existing customers and content are a good start but assets aren’t enough. Skills are as important.
Chapter 6 - Laying the foundation.
Community must be in place before commerce can begin. Speed and preemption are the key as getting ahead in growth will give the leaders an advantage. The stages to successful entry are:
1. Generating traffic: Enter quickly, get people to pass through, use the power of network to get started, generate awareness and partner for preemption (consider distribution partnerships, commercial partnerships, a content partnership and potential competitors before they become competitors). Start with a great directory or resources. Traffic is more important here than return visits.
2. Concentrating traffic: Engage the members. Ask them what they want. Track their usage. Enhance the offerings to the community. Make it easy and attractive for vendors to approach and participate in the community. Extract value.
3. Locking in traffic: Foster personal relationships between members. Accumulate and organize member-generated content. Improve the community functionality. Tailor resources to individual members’ needs.
Chapter 7 - The Gardener’s Touch
It is important to make the community scalable as it grows. This means
1. that people will not loose the sense of community even though there are millions of members. However, the organizer must maintain the benefits of scale because the economies of scale give the membership added value.
2. that you let go and create franchises and empower the members to shape the future of the community. Take an organic management model.
There are various positions to be filled in a community:
Hosts, archivists, community editors, customer service managers, information systems managers, community developers and community architects. However the two most important are the Information analyst and the community merchandiser. Their work extracts the value.
Even though organic management is better, it’s crucial to set and capture key metrics.
Chapter 8 - Equipping the community
Don’t worry about technology. Just focus on the needs of members of the community in choosing technology. This chapter focuses a lot on the challenge to choose between proprietary and standard technologies. This is not as much of an issue today.
Part III - positioning to win the broader game
Chapter 9 - Rethinking functional management
Management is turned on its head because customers have more power. It’s crucial to think about their increased power in marketing. Marketing becomes individually tailored in a virtual community. Focus on product not brand.
Implications for marketers
-
1. Reduce emphasis on value of vendor’s branding
2. Facilitate price comparisons
3. Allow comments to be made on product/service in public, not in confidence.
4. Increase volume of information to be analyzed.
5. Change the rules of advertising and promotion to leverage the customer’s ideas in promoting them.
+
1. Expand demand for product or service.
2. Increase word of mouth promotion of product or service.
3. Stimulate customer feedback.
4. Generate richer information on customers, markets.
5. Eliminate separation of advertising and transactions.
6. Allow advertising to be seen as helpful, not intrusive.
Chapter 10 - Reshaping markets and organizations
“Virtual communities redefine markets by expanding demand. They also redefine markets by focusing on customers rather than on traditional producer-driven notions of ‘industry.’” (page 204)
Jul
27
Love Is The Killer App - Tim Sanders - Captured
Filed Under Business Ideas, Resources, Principles, etc., Favorite Books, Free Book Summary - Online | Leave a Comment
Purpose:
How can one add value to a career or industry in an economy where things and values change so quickly?
Central Message:
1. Showing love, or sharing your intangibles for the benefit of others, makes you valuable in our rapidly changing world!
2. Intangibles are your knowledge, network and compassion.
Validations:
Knowledge and understanding of the world around us through good books makes us walking libraries. We become valuable in many settings and accross multiple companies.
People matter more than corporations. Corporations used to be a stronghold but folks change jobs so many times in life today that corporations are no longer a stronghold. Relationships transcend organizations. They become a stronghold.
Applications:
Value:
Nice guys don’t finish last. They rule!
Jul
14
Emyth Revisited - by Michael Gerber - Captured
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The E-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It
Purposes:
1. Why Don’t Most Small Businesses Work?
2. How do you make them work?
Central Messages:
1a. People work IN their business rather than ON their business mostly as Technicians and as a result their businesses cannot grow.
1b. Most small businesses do not make it past Infancy and even fewer past adolescence and those that make it to maturity do so because they do things differently.
2a. People who work ON their business make their business work for them rather than work for the business.
2b. A business succeeds by balancing the Technician, Manager and Entreprenuer in each of us and balance comes naturally when we envision and work towards a Turnkey business - otherwise known as the Business Development process.
Validations:
- The E-Myth is that Americans think that small business are started by Entreprenuers even though most Small Business are started by technicians, people thinking that they can run a business because they have a skill, they can do something.
- The businesses don’t work because when the owner finds him/herself balancing the Managerial (order based on the past), Entreprenuerial (forsight and planning for the future) and Technical (Doing what needs to be done in the present) aspects of the business, the technician in them usually wins out. They get caught up in doing, doing until they become a slave to their business and can never move the business into maturity, usually dying in infancy or maybe adolescence.
Applications:
This book was written to be an example of application as it follows the “All About Pies” experience of a friend. “All About Pies” is a business that grew, tried to move from infancy to adolescence and then fell back. The owner learns from Gerber principles that get her excited about working on her business rather than working in it.
Value:
Entreprenuers who succeed do so because they have an insatiable desire to know and get it right. This nation needs a new group of entreprenuers who don’t allow a curtain to fall between themselves and the world. We need to see ourselves as who we really are. We are usually the problem. But if we find the courage to lift the curtain and really engage the world, we will grow and adapt to the world as well as make our business work for our primary aim in life.