Category Archives: Business / Leadership

Business / Leadership

The Long Tail

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Browsing kottke.org this morning, I came across the term “Long Tail business”. Curious, I started searching around to find out what the term meant.

The term first appeared (I think) in Wired Magazine in an article by Chris Anderson called, well, The Long Tail. The idea is that while traditional media has been based on “hits”, that sites like Amazon, iTunes and NetFlix are finding high profitiability and lower margins by offering “niche” products along side the typical “hit” products.

Essentially the idea, in my mind, boils down to this. There some demand for everything. Businesses like the ones mentioned above are seeing a lot of demand for niche products that aren’t necessarily mainstream hits, but because they have been made available, people are buying them.

Chris presents the following graph as a picture of the Long Tail:

The large red spike to the left is the mainstream demand. The yellow signifies the niche markets. The theory is that the yellow line goes infinitely to the right, and while the demand for these products may not be as high as the ones on the left, there will always be demand for them somewhere, because they are there. Services like iTunes can service these niche markets because the cost of “stocking” the product is a matter of disk space and bandwidth, while Amazon services the niche products differently with a used bookstore network (and therefore doesn’t necessarily have to stock the product). The ability to address these niche markets without dramatically increasing stocking costs means more sales, because no matter what it is, someone will want to buy it. Linking niche products to mainstream products via “Those who bought this also bought …” type of recommendations increases the visibility of these products.

The theory is very interesting but I’m sure I’m not doing it justice. For an explanation that actually makes sense, I would recommend reading the original article and then hitting Chris Andersons blog.

Pour Your Heart Into It: How Starbucks Built a Company One Cup At A Time

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Pour Your Heart into It : How Starbucks Built a Company One Cup at a Time The last post talked about my opinion of the three things I find extremely important for a company to do in order to succeed. It was initiated by the treatment that I had received the previous day at Starbucks and a posting by Jason Kottke. The timing could not have been better for Tom The Architect to recommend I read the book Pour Your Heart into It : How Starbucks Built a Company One Cup at a Time, the inspring story by Starbucks CEO Howard Schultz on how he built the Starbucks brand and business on – you guessed it – the three things mentioned in my previous posting.

The book begins talking about Howards childhood and the origins of his drive to succeed being based on his fathers unhappiness and hardships supporting his family. We go through college with Howard and his first job, as a salesman, on to his first exposure to Starbucks corporation, a coffee roasting company dedicated to bringing fine coffees to its customers. Howard is completely caught up in the passion that the company owners have, and persue them to hire him as an employee. Finally, after a lot of convincing on Howards part, they hired him.

We then go to Milan, where Howard is first exposed to the espresso bar. He is captivated by the environment which these bars create and takes an idea back to the Starbucks owners to begin opening espresso bars in the Seattle area to recreate the environment he encountered in Milan. The owners of the company are resistant to the idea, fearing it will comprimise the standards they have set for themselves in being the finest coffee roasters in the Seattle area.

Finally, Howard decides to leave Starbucks and start his own company running his own authentic espresso bars in the Seattle area. His Il Giornale stores are highly successful. By the time Howard has 3 stores (to Starbucks 6), the owners of Starbucks decide to put the company up for sale and Il Giornale buys the company, changing it’s name to Starbucks.

The remainder of the book chronicles the building of the Starbucks we know today and the journey from small entrepreneurial company to a large, multi-national, professionally managed one. The most amazing thing about the story was the adherance to the core values that the company was founded on and the unwavering belief that customers and the employees drive business success. The company is living proof that success (financial and otherwise) is a by-product of doing the right things for your customers. It is also is a very good example of how valueable a mission statement that articulates the values of the company can be as a “measuring stick” to help you make decisions.

Reading this book was a breath of fresh air for me. I highly recommend it as not only a fascinating story in general, but for the lessons in leadership that it offers. Howard Schultz is very honest about both the things he feels he did right and mistakes he thinks he’s made. He shares the heartbreak of being turned down for venture capitol, and the elation of succeeding in the business of his dreams. He explains some of the real challenging times he has had as CEO of Starbucks, the issues encountered when a company grows really quickly and the ways in which these issues were handled. He outlines his creation of a “leadership pipeline” and his long journey towards being able to let go of the details and finding people he trusted to take care of them as the company grew. Finally, he talks about the delicate balance between values and Wall Street, and the stress that the shareholders can bring to a business.

This is probably the best “business” book I’ve read in quite a while. It has everything you could possibly want in a book about leadership, vision, and values. I highly recommend it if you are looking for a truly inspiring story.

Reaching “Norm” Status – The Ultimate in Customer Service

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An interesting thing happened to me in the local Starbucks the other day. I reached “Norm” status.

“Norm” status is what I call the point when dealing with a vendor (like a Starbucks, a local restaurant, a local bar, or even a web site) when you walk into the establishment and your order is started before you are asked what you are there for. They know you well enough to give you what you need with no effort on your part.

I coined the name from the TV show Cheers, where Norm would walk into the bar, everyone would yell “Norm!”, and by the time he sat down he had his beer in front of him – and his stool was always open and ready for him.

“Norm” status is the ultimate in customer service. It’s the point in the vendor/customer relationship where the customer feels they are important enough to pay attention to and they don’t have to work to get exactly what they want.

In a conversation with Tom the Architect yesterday talking about good web sites, I realized that one of the reasons I like Amazon.com so much is that I have reached “Norm” status with them. As soon as I log in, they tell me what they recommend. If I need to find something, I can find it in a matter of minutes. I never spend more then ten minutes on Amazon without finding exactly what I need and the status of where my order is with them. I never walk away disappointed or with unmet expectations – and I rarely log out without having placed an order for exactly what I want, and knowing approximately when I’ll get it.

“Norm” status is the ultimate in customer service. It is personalization at its finest and it makes the customer feel important. The more the customer feels important and gets what he wants (or at least knows he can’t get it), the more he or she will return because you’ve treated them well.

After reading Jason Kottke’s My Business Influences I started thinking about the things that I think make businesses great. I came up with three things:

  • Values – Running business according to your values rather than making revenue the primary value. This is a lot of what Jason was talking about
  • “Norm” status – Making the customer feel wanted and important. Personalization of experience and the customer walking out of your business thinking you “know” them is very important to repeat business
  • Integrating into the customers life, rather than making them work to integrate you. – Amazon does this really well. Not only do they become part of my buying life because they treat me well, but because of their service enabled system, I have the ability to reuse their store at the application level. I can integrate them into things like WordPress that I use in every day life. Because they integrate into my every day life so invisibly, I automatically default to using them because they are there – not because I have to think “Gee, maybe I’ll check Amazon”. This integration into my every day life and tools creates opportunity for them to receive referral business from me when I find a book or product I like and want to recommend it to others. This effects their overall revenue numbers.

I believe these three principles are a few of the keys to a businesses success. The core values must be centered around the customer. The customer has to feel important. Finally, you have to be present in their lives without them having to think about it, by integrating into the things they do every day.

These three things should be what goals are built around. Revenue should never be the primary goal of a business, because in my opinion it is a natural side effect, or by-product, of satisfying these three core principles.

Now … if you’ll excuse me, I can use a Venti-triple-shot-skim-no-whip-mocha now.

My Business Influences (kottke.org)

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Jason Kottke has a great article called My business influences on his web site kottke.org.

Jason has currently made the move to work for himself full time running his web site. This posting is a good one, talking about a base principle in running business – letting your values drive the business instead of the other way around.

It’s a really great and thought provoking article on the subject.

A Lesson in Sales and the Importance of Value Exchange

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Tom the Architect and I attended the 2005 Information Security Summit put together by the UW eBusiness Institute on February 23. I have to say it was extremely interesting.

There was an interesting line up of speakers, the last of which was Richard Stiennon, the Vice President of Threat Research from WebRoot Software, Inc. and former VP of Research with Gartner.

First, he is an extremely engaging speaker. I guess thats what happens when you spend a lot of time at Gartner. One of the things I hate about conferences that have speakers that are selling something, is that the speaker is selling something. Richard doesn’t come off that way at all. His lecture is entertaining, and he talks enough about his company for you to know its there to help you with the problem he is talking about, without beating you over the head to buy his product.

Secondly, the subject matter was extremely interesting. His company has done a lot of research into spyware and adware and he had some really interesting statistics and some great stories peppered through his lecture. Richard has a good grasp of the subject matter that his company is addressing with their product.

Having just wrestled with having one of our Windows machines here at the labs being taken over by something that decides randomly to pop up porn sites, the subject matter of his talk was very real to me. As I was wrestling with cleaning up the system to get out of completely reinstalling Windows again (which I had just spent practically a whole day installing just a short month ago), one of the questions that I ask myself quietly among the swearing is “why someone would actually write software that does the things that this software does”? Richards explanation of the revenue model for the adware business helped a lot in answering this question for me. In a market that has a possible 2.4 billion dollar ceiling, I was, as he pointed out during his talk, one of the people that briefly sat in my chair going “well, for that kind of money, this isn’t that bad”. Then I had to shake the thought out of my head after remembering the pain of trying to clean a machine that had been infected.

During the initial fight with this malware on our machine, I had downloaded Ad-Aware SE Personal from Lavasoft and ran it to clean the machine. While it found over 500 instances of spyware and adware on the machine and cleaned them, the one that I wanted to get rid of still remained on the machine – you know, the one that popped up pretty explicit pictures every so often when you initially opened the browser. No matter how many times I ran the software (or others) this one piece of software remained on this machine.

At the end of Richards lecture, I decided that first thing this morning I would download his product and sweep the machine yet again in order to try and remove this thing. Why did I make this decision? The primary reason was that I didn’t feel sold to. What normally happens in these situations is that I’m so pissed off about the hard sell that I write-off the product straightaway and decide not to even look at it. Richards style is such that I felt like I was getting information (value) and, oh, by the way, this webroot software might solve your problem.

So I downloaded the free trial Spy Sweeper this morning (by the way, another great practice. If you want me to buy your software, let me try it beforehand so I know it meets my needs). I ran it on the machine this morning and found 55 “items” and over 4000 “traces” of “things” on the machine. Once quarantined, the machine looked brand new.

So, what did I learn from this little experience? Well, first I learned a lot about selling. Since I received a ton of value from a speaker and not a salesman, I tried his product. Because his company is confident in their product, they let you try it first in order to make sure it meets your needs before you actually commit funds to it. Because it actually fixed my problem, I’ll be picking up this software for the Windows machines sitting on my home network.

The exchange of value was extremely high. I received the information necessary to solve my problem without feeling violated, and he received a sale. This lecture was a great lesson for me on salesmanship.

Am I getting the most out of my people?

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Andy Kaufman of the Institute for Leadership Excellence and Development has a great blog entry on his blog on getting the most out of your people.

Some excellent points. I’m currently wrestling with metrics and how they effect productivity in groups. There’s a fine line between measuring the “convenient” rather than the “important”. The former can have really damaging effects on the morale of a team, if nothing else just because it doesn’t make sense.

I read Andy’s site religiously. He obviously spends a lot of time thinking about leadership and takes many things from his own life to illustrate the points he is trying to make.

I spend a lot of time reading business and leadership books. Some of them have a huge effect on me. Some sound nice, but you don’t know whether they will work or not. The nice thing about reading Andy’s stuff is that I have worked for him twice in the past and know he practices what he preaches. He is one of those managers that stick out in my career that I really admire for the productivity he was able to squeeze out of me during the times we worked together. Working with him was definitely the highlight of my career so far.

Give his site a read. You won’t walk away disappointed. You may also want to pick up his book, Navigating the Winds of Change if you get a chance.