Berkonomics

Go ahead. Revert to “old school” marketing. If you dare…

Posted on March 31, 2022 by Dave Berkus

“Broadcast the message and they will come!” “Segment my broadcast and I will have better response.” Both of these time–honored methods of reaching our customers have worked for as long as there was print and radio–TV to get the message out.

The obsolete marketing message

And both have become increasingly obsolete as new channels of reach have evolved, allowing direct and personal contact with our potential customers, and better yet, free and near–free forms of marketing just for the asking.

Today’s marketing tools and methods

Today, if you are not targeting your marketing effort with predictive analysis and segment–focused communications, you are way behind others who do. Big data analytics enable us to find and target just the right audience at the right time, something we could not do even a few years ago. If you feel overwhelmed by this, there are experts waiting to serve you with new tools, ideas and channels you have never used, and which will open your eyes to powers that may shock you.

But the leaders of this new school practice customer–driven communication, personalized to the point of basing communication upon individual customer behavior.

A personal story

[Email readers, continue here…] My spouse visited a website for women’s clothing, then followed it with a search for a service using a browser. Immediately, seconds after her shopping effort, ads for that same online retailer surrounded her on the other site. Those ads could have been for a competing online retailer looking to take business from the first. But either way, targeted marketing worked with her that day. She bought again.

Interactive conversations with your customers

But the pinnacle of direct new–age marketing comes in the form of interactive conversations between company and customer, progressing from the contact through purchase through follow–up offer. Surely you’ve experienced this in your own online shopping efforts and perhaps have used that time–limited 15% discount to purchase something you may or may not have needed.

Old school or new school. Spend lots and not be sure of the return on investment; or spend much less and offer some of the savings to the customer. Hmm. Which is the win–win here?

Now, if you had a choice and the inclination to do something about it, which would you want to be? Old school? New school?

Posted in Positioning | 5 Comments

Steve Jobs’ “aha moment!”

Posted on March 24, 2022 by Dave Berkus

There is a process to innovation that can be summed up with four words: “Whoa. Wow! Hmmm. Yes!” Credit Dr. Mark Goulston with this. He states, that’s exactly how Steve Jobs described his “aha moment.” So, let’s paraphrase the late Mr. Jobs as we describe this process.

A bit of history that “made” Apple rich

Jobs was invited to Xerox Parc research facility and – against the better judgment of the research coordinator – shown three projects the engineers were working on. The first of the three was a rough cobbling together of a graphic user interface, complete with a crude “mouse.” Jobs hardly remembered the other two.

Whoa! Here’s how to change an industry…

“Whoa,” he must have thought when seeing that GUI for the first time. “Wow!” he states in later recounts was his intense impression. “Hmmm” – that could be the future of computing everywhere, he says he thought immediately. “Yes!” he must have said to his colleagues as soon as he was away from the facility.

And that’s how the Macintosh was conceived.

His vision for the Macintosh and later for all that followed came from that “Yes!” moment, defining what would become one of the most valuable companies on earth with a single “aha” moment.

Let’s define the process.

[Email readers, continue here…] This is a process that you and I can use. Think for a moment. Have you ever had such a game–changing “aha” moment in your business life? And if not, could you recognize it as a defining experience as Jobs did?

…and your ability to realize the “aha” moment.

There are many examples of great advances in technology or industry from such aha moments. But it is as much a skill to be developed as an accident of fate. Discipline yourself to notice things that not only interest you but draw deeply into your emotional self as you see them for the first time. And when you do spot such an anomaly, “whoa.” Slow down to absorb what you’ve seen and how you are reacting to it.

How to get to “Wow!”

Your “wow!” moment follows if you can identify why you stopped to look and connect that with your reason for excitement. “Hmmm.” This could be important and lead to something big for us. “Yes!” I know what we can do to change the world with this.

It’s a process that is repeatable, even if the time this happens is rare, perhaps as in Jobs’ case, once in a lifetime. But isn’t it worth making this a skill in your inventory of skills? Perhaps the result is not a game–changer, just a great lift for the business. Or perhaps it is the beginning of everything grand to follow.

Posted in Finding your ideal niche, Surrounding yourself with talent | 1 Comment

Branding yourself: A critical decision

Posted on March 17, 2022 by Dave Berkus

We’re talking about brand strategy here. Not advertising, and certainly not an easy grasp for amateur marketers. So how developed is your company’s brand? Is your message clear, concise, and consistent?

Here’s the professional’s process:

There is a process used by professionals to get to clear messaging. It starts with “discovery,” the process of finding the strengths of the company in the minds of all stakeholders. That requires careful questioning, accumulation of results, and then the creation of a strategy for making a message reflect these advantages.

Branding a cow seems so much easier.

We start with our intended audience, asking ourselves who we are talking to, what we need to say, and how we are going to say it. We want our audience to know what we stand for in the fewest, most memorable words.

Think of this as our core message.

We define (clearly) what we give (our core attributes) and then why it matters, or what our audience gets (the benefits).

[Email readers, continue here…] A good brand strategy then lists supporting arguments for both the give and the get. Once we have done this, we should be ready to create our audience–facing message, which we know as advertising.

What we usually do wrong

Very few of us have conducted a brand strategy effort, and much of our advertising reflects this, with wasted ad dollars spent as we nibble around the core message and miss targeting the primary “get” message in our ads.

You can follow the steps outlined above and attempt to define your core message or seek help from a professional. It seems that most often, this extra effort to define brand message would be cheaper and much more effective than our present attempts at “spray and pray” advertising today.

Or you can hope your present advertising is effective – and concentrate on learning a new skill at the ranch.

Posted in Finding your ideal niche, Positioning | 1 Comment

Customer empowerment? Blame the Internet.

Posted on March 10, 2022 by Dave Berkus

Customer empowerment is moving so fast nowadays that many of us are running to just catch up. Yet if we don’t or can’t, it is a sure thing that someone else will.

Yes, we can blame the Internet for this. But don’t close your eyes to the fact that your customers have grown to expect your products or services in the form of…

‘WHAT I want, WHEN I want, and WHERE I want.’

Especially for those of us producing forms of media for consumption, from books to movies to music to games to blogs to podcasts and more, our customers expect delivery in the form of bits over the Internet upon demand, usable on a multitude of devices, and sometimes stored and available in the cloud at no additional cost.

Expectations rise with technology.

For those producing physical products (atoms, not bits), Amazon and a few others have set the bar of expectation that already includes one–hour delivery at a cost and for certain items in many urban areas. At the very least, two–day delivery has become the minimum expectation to virtually anywhere.

Embrace remote outreach to save everyone time.

[Email readers, continue here…] If you provide services rather than products (neither bits nor atoms), consider offering discounted rates for remote phone or video appointments if applicable, for un–booked appointment times if not possible, and for early booking of time if neither works.

Entering the age of mass customization

As to selection (WHAT I want), do not be surprised to see your customers moving you to find ways to use 3D printing and other mass customization tools to create unique products without inventory cost to you – and certainly moving you to consider “additive manufacturing” (3–D printing) as a new norm for some or many of your products. Be ready: remote 3–D printers may soon make “WHERE I want” common for some products produced locally on demand.

If you are not considering these demands and your responses already, surely someone else is. Be an adaptive business leader. Create strategies to lead in areas where new technologies can give you a competitive edge.

Posted in Finding your ideal niche, Positioning | Leave a comment

Good, cheap, fast. Pick any two.

Posted on March 3, 2022 by Dave Berkus

This one is attributed to Red Adair, the famous oil and gas fire suppressing expert. And boy, does it apply to most of us and our offerings.

“Quality” products and services…

…should not be positioned as “cheap,” or your potential customers will question your message from the start and will be more critical of the delivered product than if offered as one or the other, but not both.

Let’s define “fast.”

“Fast” applies to either service speed (including delivery) or product manufacturing time. If you as a supplier have plenty of spare resources available, you might temporarily get away with adding “fast” to both other two attributes of good and cheap.

But beware.

Being fast usually requires having inefficient links or spare resources in the supply chain that can be stretched at comparatively low cost in terms of your overhead cash and offering quality. If it becomes a part of your long-term sales message, there is risk that you will set expectations you cannot achieve. And a disappointment based on missed delivery or completion is as great as one based upon trounced quality or price expectations. This is particularly true if you have been caught up in supply chain issues lately that are well beyond your control, or if you failed to anticipate the extent of these and under-ordered materials.

What if you’re competing as an Internet seller using “fast?”

And if you are an Internet seller, “fast” becomes difficult to offer if you know that Amazon (and perhaps others) offer one or two–day delivery at no charge – and at least Amazon now provides same day delivery of many items in some metro areas.

One answer to this puzzle

[Email readers, continue here…] So, consider this: Make “fast” a tool for use as an inducement for particularly important customers or orders, or at times when resources are underutilized. Offer “fast” when it works for you to close a sale that would not have been likely otherwise.

Back to Red Adair…

Red Adair said, “…pick any two.” I think it more appropriate for most of us to concentrate upon “good” (quality) or “cheap” (price) and add “fast” as needed to close the sale or fill the resource cup.

There are other ways to describe this.

Our good friend Adam Miller, founder of Cornerstone on Demand, uses words appropriate for software development when describing his version of this “pick any two” quandary. He describes his choice as “cost, quality or scope. Pick two.”

It is an excellent variation on the theme – selecting from a limited menu of the use of resources. Note that the only difference in Adam’s shortlist is that he substitutes “scope” for “fast” – but we could just add “scope” to the three we dealt with above to demonstrate yet again that we all have limited resources from which to select our best path.

About “scope” with development-related issues

For software–related tech businesses, scope always creeps, increasing the complexity, disturbing the planned progress, and increasing costs – sometimes dramatically, as projects fall further behind.

The lesson then is that resources are always going to be limited, and that management always must select the most important of the competing outcomes. It would be worth spending time with your team with someone volunteering to take the unpopular position just to explore the edges of this with speakers for each of the alternatives actively bringing the alternative views to the discussion.

Posted in Finding your ideal niche, Positioning | 2 Comments

The lion and the ant: A managerial lesson

Posted on February 24, 2022 by Dave Berkus

This story has turned out to be one of the most enduring posts ever for me, well worth repeating. And what a lesson for us all. I confess that our research cannot find its source. So, with thanks to whomever originally created this great little parable, here it is:

“Every day, a small Ant arrived at work early and started work immediately, she produced a lot and she was happy. The boss, a lion, was surprised to see that the ant was working without supervision. He thought if the ant can produce so much without supervision, wouldn’t she produce more if she had a supervisor!

So the lion recruited a cockroach who had extensive experience as a supervisor and who was famous for writing excellent reports. The cockroach’s first decision was to set up a clocking in attendance system. He also needed a secretary to help him write and type his reports. He recruited a spider who managed the archives and monitored all phone calls.

[Email readers, continue here…] The Lion was delighted with the cockroach’s report and asked him to produce graphs to describe production rates and analyze trends so that he could use them for presentations at board meetings, so the cockroach had to buy a new computer and a laser printer and recruit a fly to manage the IT department. The Ant, who had been once so productive and relaxed, hated this new plethora of paperwork and meetings which used up most of her time.

The lion came to the conclusion that it was high time to nominate a person in charge of the department where the ant worked. The position was given to the Cicada whose first decision was to buy a carpet and an ergonomic chair for his office. The new person in charge, the cicada, also needed a computer and a personal assistant, who he had brought from his previous department, to help him prepare a work and budget control strategic optimization plan.

The department where the ant works is now a sad place, where nobody laughs anymore and everybody has become upset. It was at that time the cicada convinced the boss, The Lion to start a climatic study of the environment. Having reviewed the charges of running the ant’s department, the lion found out that the production was much less than before – so he recruited the Owl, a prestigious and renowned consultant, to carry out an audit and suggest solutions. The owl spent 3 months in the department and came out with an enormous report, in several volumes, that concluded that “The Department is overstaffed.”

Guess who the lion fired first?

The Ant of course “Because she showed lack of motivation and had a negative attitude.”

So the lesson is obvious. And we see examples every day. We build our companies with layers of management in the natural course of growth, often quoting that a manager should have no more than six direct reports, or that managers should be freed to do the important, high value work.

We often ignore the ants in our work lives, thinking – perhaps subconsciously – that value equates to salary level, or lowest level workers can be replaced. Or best of all, management generates creative output and pushes that creativity down to the worker ants in the organization whose job is to work, not think.

So in this story, was the lion guilty of just that form of managerial thinking? Why not see the obvious? Just add more ants, hopefully as resourceful as the first? Or is it more complex? We learn from our experience and education that growth comes from “top–grading” at all levels of the organization. And that the bottom ten percent of the workforce must be replaced, as we hire “A” players.

The story is meant to illustrate one folly of common management. I’d take it as a beautiful warning to all of us that some things are obvious in business, and that we should focus on what works and reinforce that whenever we see it working.

Be a better lion. Watch for what’s great in each and every ant.

————————————————————————

Responses to The lion and the ant: A managerial lesson

David J McNeil says:

Is there anyone who HASN’T seen exactly this scenario play out?…. Thanks to Dave Berkus for the reminder.
sbobet says:

My work with taxon cycles began when I realized the evolutionary history of the Pheidole

Dave Berkus says:

“Slobet’s” comment above led me to Wikipedia.”Taxon cycles are sequential phases of expansion and contraction of the ranges of species, associated generally with shifts in ecological distribution.” and Pheidoles are scavenger ants. Not quite sure of the meaning of the comment, but I learned something new with this…

Les Spielman says:

Excellent reminder Dave. Thank you, again!
Yaniv says:

To answer your question, Dave, about the source of the parable, it is the Ant, of course. The same Ant with whom the Lion should have consulted, prior to embarking on a misguided effort to replicate her success. Poor thing had to write this parable and broadcast it through social media, just to get her point across. All the Lion had to do was talk to her first, to understand her motivation.
Rick Munson says:

Dave and all, thank for the valuable lessons in the life of business. What a wonderful world it would be if we were always open to be teachable and in remembrance of our important life experiences. Awareness, acceptance, action and allowance with a good attitude.
Gary Skraba says:

Outstanding way to put this tendency into perspective!

Plus, Yaniv is right on the mark: lions really need to get to know their star ant(s) and consider the ramifications of such changes, even if they are consistent with “accepted practices”, which is a lazier approach to process improvement than actually thinking through individual situations.
Cricket Lee says:

Always great!
sbobet says:

lions really need to get to know their star ant(s) and consider the ramifications of such changes, even if they are consistent with “accepted practices”, which is a lazier approach to process
Alex says:

It is unfortunate that the producer gets kick out and the swivel chair managers remained, end result :zero production
Mervin says:

Thank you for this excellent article. The information has actually
currently assisted me with my task where I was
stuck as well as didn’t recognize exactly what to
do as following action. Eagerly anticipating
your next messages!
duppydom says:

This story is much like what usually happens in the corporate sector. The office heads do not realize that it is actually the “ants” who actually run their business. The employees who are considered ants in offices are the ones who work the hardest. And the officials above them in hierarchy mostly don’t realize that. And when it comes to downsizing, these “ants” are ones who suffer the most.
Kala Sridhar says:

Very impactful story.
Absolutely right.
Lions need to recognize the efforts of the ants performers and encourage them.
Superb corporate lesson
Anu Prabhakar says:

This one is the best context ever read about the truth going on these days in corporate offices. Yes of course most hard working honest employees are always the sufferers and those who work less and boast more get benefited. And the mobile shop keepers selling such ideas as were followed in lion’s office earn much much more than any one. Maintaining urgent records is different. But making least required reports for the sake of cunning ideas only mars the efficiency of intelligent hard working employees.
Jose says:

The Ant doesn’t need the Lion, or the cockroach or anyone else for that matter. Just some feedback from fellow ants on what’s working

Images created using MS Designer (DALL-e-3) in 2024. – DWB

Posted in Depending upon others, Protecting the business, Surrounding yourself with talent | Leave a comment

How credible are you to others?

Posted on February 17, 2022 by Dave Berkus

How do you define credibility in business?

A friend of mine recently told me his story of how his very career rests on his credibility with his major supplier–partners. He stated that everything rides upon his credibility when he declares that he can produce a quality product on time, especially when his competition has faltered attempting to do so.

There’s little news in that statement…

…until you hear of the stories of those who destroyed a good thing with one badly executed promise, or one lie, or one slip in quality or delivery.

We often hear that our best asset is our reputation.

With the number and range of competitors easily available to our potential and actual customers today through a simple Internet search, we cannot afford to waste a single customer because of a missed promise or failure to rise to an expected level of service. Combine that with the ease of posting reviews, both good and bad, and we find ourselves in a microscopic ecosystem where small individual failures are often rewarded with massive negative blowback.

[Email readers, continue here…] And we all know that once posted, a bad comment or review cannot be erased and remains forever.

And your promises?

You represent your company (and yourself) with every promise you make, whether as small as a date–certain for delivery or as large as a significant contract based upon expected quality and service.

Think of your competitors.

If yours is a B–to–B relationship, you will have salespeople from the other side of the fence watching your every move, anxious to exploit every misstep. And if yours is B-to-C, then customers will make their opinions known with their reviews for all to see.

It isn’t human nature to think of your personal and corporate credibility whenever you offer any sort of terms for price, delivery, quality or service. But in this world of rapid communication and persistent information, you should do just that.

Posted in Depending upon others, Positioning | 1 Comment

Finding “stinky clauses” in legal investment documents

Posted on February 10, 2022 by Dave Berkus

Here’s the problem:

Investors sometimes join into investment rounds that have been pre–negotiated by others, receiving the paperwork already created by attorneys from that negotiation. It is not uncommon for a sharp investor to discover a “stinky” clause or two in such agreements when reading them in preparation for signing. Bill Payne came across just such a stinky clause in a deal we both were joining as investors late in the process.

Can you change a deal if not the lead investor?

Changing the deal that late in the game is nearly impossible, after other investors have already completed their documents and the deal is supposedly put to bed. So, what does the latest tag–along investor do?

Passively sign and hope for the best?

You can tell from the title of this insight that the usual result is to passively sign while holding the nose, a trick perfected by experienced investors suffering this malady not for the first time.

But what if the principals find this at the last minute?

What if it is the company attorney or entrepreneur that finds the stinky clause so very late in the game? How do you confront the investors who have already agreed to terms and even perhaps signed their documents? Is it worth risking the deal to negotiate a late change during the equivalent of the ninth inning?

Here’s the test to use if you are impacted.

[Email readers, continue here…] The answer is obviously in the importance of the issue to the person discovering it. In most cases, the probability of whatever the clause being triggered sometime in the future is slight, and therefore the risk remote. So, it is a bet against the event made with chance on your side.

Watch out for what might be a future challenge.

Then again, it is those improbable future events that end up causing lawsuits years later, often just because a party to an agreement did not understand the implication of a clause or even a document. We hire attorneys precisely to help us prevent future conflict by resolving issues before they happen.

So, how do most of us respond to a stinky clause?

Most of us will let the matter slip and sign while holding our nose, a feat in itself (holding the nose, paper and pen at the same time). Some of us will pass on the deal rather than confront the issue, especially if it is an important one to the late signer. And that often happens when just such an issue has bitten the candidate investor in some past deal, making the likelihood of such negative reaction higher with sophisticated, long- time investors.

Maybe there are skunks in the woods that don’t even know they smell. Or maybe there are targets in the woods without the capacity to even catch the odor of a bad negotiation or deal documentation. Either way, there are risks in deals we sometimes never catch – that later catch up to us in the most surprising places and times.

Posted in Raising money | Leave a comment

What if you and your investors don’t agree on an exit?

Posted on February 3, 2022 by Dave Berkus

First, the implied promise:

Taking money from professional investors such as angels or VCs usually requires that you agree to seek an exit for those investors in your plan, often targeting five to seven years as the ideal period for growth before a liquidity event.

Of course, even though that is your contract with the investors, way over half of those implied contracts never work out that way.

What if you later decide to just keep control?

It is perfectly OK for you to want to grow your company and plan to keep control for you and your offspring, with no intention to sell. There’s a name for this. We say that you are growing an evergreen enterprise, one in which outside money is to be taken in the form of loans or royalty agreements, not shares of stock or ownership.

Investors will not be happy and will usually react.

Of course, you will find yourself in opposition to your investors and some of most of your board members if you do this after taking outside investment. There are clauses in preferred stock investment agreements allowing the investor in many cases to “put” the shares back to you at the purchase price plus dividends or more after a period, usually five years, if no effort is made to find a buyer or begin the IPO process. Although rarely used, these clauses do give the investors power over your decision to turn your business into a lifestyle project.

If you have no intention of giving up ownership or even control over time, state that early and plan accordingly. Assume that your sources of funding will be greatly limited to loans, sometimes at high interest rates and requiring personal guarantees and even security in assets.

The advantage of creating an evergreen company.

[Email readers, continue here…] One thing that becomes obvious when there are no investors looking over your shoulder is that you can plan for a pacing of your growth, focusing upon long term strategies that might be very comfortable for you but not so much for outside investors. (You may recall my story of the company that was forced to grow to death by a famous venture capital investor expecting massive profit or nothing, with no expectations in between.)

A personal experience that relates

I also recall vividly one of my first investments where the entrepreneur backed out of a sale to a well-known investment company at the last second, declaring his intention not to sell “his” company. I was able to negotiate a “put” of my shares back to the company at 5x my investment. Both of us were happy, but that outcome is rare.

More advantages to not taking the money at all

Evergreen companies can focus upon profit as more important than rapid growth, upon customer service above immediate profit, and upon people first before all of these. For some, that comfort is worth forgoing building high equity value.

In fact, sometimes entrepreneurs will do better financially just taking profits over the long run then they might have by building equity for an ultimate sale. And a smaller sale of the company later when the founder retains 100% of the equity may well compensate that founder with more than if outside money had been taken early on.

Posted in Ignition! Starting up, Raising money | Leave a comment

Don’t just raise money. Do it on good news!

Posted on January 27, 2022 by Dave Berkus

Why is this important advice?

Because the first rule for raising money is to do it on good news – right when sales are increasing at an accelerating rate. Or when a major customer signs a significant deal. Or when something happens that makes an investor think this company is about to break out.

What if you have no good news to offer?

Unfortunately, the longer you wait without significant upward news, the harder it is to get attention. It’s human nature for investors to want to buy into a fast growing future, proven by some event in the immediate past.

So, here’s the rub.

Raising too much too early dilutes the founder interest to unacceptable levels. In recent years, I have counseled founders to raise enough to accelerate to a significant milestone that is over a year away, and to scale the business to find breakeven with two early rounds if possible. Once at breakeven, the rush to raise more is over, and there are far more options available. Tech businesses today can do this much more easily than a decade ago, with cheaper development costs, SaaS hosting environments avoiding heavy equipment costs, and development platforms with pre-formed routines available. While working toward good news events, some entrepreneurs plan to take in consulting work to pay some of the costs during the early stage of a company.

Where to look if you just don’t have any good news?

If you have been in business for a while and don’t have significant good news to tell, I would make a list of possible strategic investors, people or companies that would benefit from your product or service. They will be immune to the disinterest shown by financial investors.