Tag Archives: market growth

Follow the Big Trends or the Small Ones?

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I have talked to a lot of people about the big trend of mobile, the growth in this area, Imagehow it is changing the way we do business, and how if we don’t want to be left behind, we need to adapt. Some of this has a longer time horizon and some of it needs to be thought about in the short-term. The point is that this is a Macro trend that is happening and one that may be less of a concern than building your small tribe of followers that make a difference to the revenue and profits of your company.

Seth Godin’s blog on Macro Trends Don’t’ Matter so Much, makes a point that I agree with for the more focused, short-term aspects that drive your business.  He says that the Macro trends, like internet subscribers some year in the future, or the number of Spanish speakers as a percent of world population, are not the key drivers to your growth and the group you are after.  We could add things like, Who will have more in Apple’s IOS or Android’s platforms by 2020? What percent of the world total output will China make up in the next 20 years?

These trends are nice to watch, and some of you may want to think about it more than others. However, the key is that most companies and organizations need dozens, hundreds, or thousands to make a difference in their world. They don’t need access to all Spanish speakers, to all internet subscribers, or all those on Apple’s platform. What they need is the ability to spread the word among a tribe of followers that are like-minded and passionate about your unique “purple cow” offering.

This is where you what to really drill down into who your client is and what it is he wants. Robert Bloom, in his amazing book “The Inside Advantage,” gives us a step-by-step process for drilling down to the true look and feel of who your client is and what is unique about what you are offering him.  Knowing your customers in this way will allow the laser-like focus to zero in on your tribe.

Finishing up in Seth’s blog, he says that the big trends are a numbers game, and that by realizing that, you are “treating the market as an amorphous mass of interchangeable parts.”   You realize the micro is more important than the macro and that it is about the people – that we are individual human beings and we have names, desires, wants and interest.

What is your micro group that you are focused on?

Where Is The Internet Going?

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An analyst I used to follow in my investment days, Henry Blodget, is now an editor for Business Insider, and his own company has been on top of the internet space since the beginning.  I like hearing what he has to say because he has had so many years watching the ups and downs of the firms in this space, and he offers good insight into where these companies are going.

Business Insider recently held its annual IGNITION conference with great speakers from LinkedIn, Google, Groupon, and Time Warner.  With so many people in companies that are on the forefront, you have the opportunity to enjoy a great perspective at what is happening now and where things are going.

Here are some of the key observations that Blodget made from the conference:

With 1/3 of the world population now online, it leaves 2/3 of the market left to grow.  However, since this 1/3 earns 85% of the world’s income, the growth and commercial opportunity may not be so strong.  As I have discussed before, the smartphones and tablets are now outselling PCs.  Mobile should be the focal point because that is where growth and activity are coming from.

Mobile devices have hit the half-way point in developed countries, which usually means growth slows down somewhat.  Surprisingly, consumers are willing to pay for content.  Blodget says digital content revenues are exploding!  He points out that digital advertising is growing just behind TV advertising, with most of this growth is going to Google and Facebook.

Another observation is that Google is a better source of adverting than Facebook because Google is like advertising at a store and Facebook is like advertising at a party.  He also notes that the internet has already taken out the newspaper business, so the question is:  Will television be Internet Picnext?

Mary Meeker recently released her presentation on the state of the web, and she had similar observations.  Internet growth is robust, and mobile adoption as many upsides.  Global internet users are growing at 8% year over year, and the USA has 78% penetration, while China has 40%, and India holds 11%.  Smartphones are interesting.  She shows smartphones as a percentage of total subscribers, and China was at 24%, the USA at 48%, Japan at 65%, and India at 4%.  Where do you think you’ll find the most opportunity?

All this data continues to support what we have been discussing for a while, that mobile and all the connectivity it will bring is the major wave we need to be riding right now. What are you doing to get on that wave?

 

Our Economy’s Transition to Oversupply

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Last week, I said we would discuss how to zero in and better handle the demand economy, and we will also look at how to make your offering target the demand that you want to create. We will actually do that next week, so we can first understand how we have transitioned into an economy of oversupply. Let’s review why economic demand has changed. In the book “How Companies Win,” Kash and Calhoun describe four phases of transitions moving from a supply based economy to a demand based one.

The first phase involved market equilibrium, which lasted from 1947 to 1990. After World War II, places that had avoided destruction kicked into a level of prosperity that last for decades. Other areas took longer to adjust but entered the industrial and information economy over time, continuing to create demand as we became more global. With the advent of many different supply chain management approaches and thinkers like Edwards Deming, we continued to lower cost and improve the supply as more demand was created. These good times stayed in balance for a long time . . . until they didn’t.

The period of oversupply started in 1991 and continued through 2007. An aging population in the developed world, the end of the Cold War, and globalization created this phase. This generated a significantly large number of companies adding their offerings to those of the multitude of businesses already out there. The internet popped up during this period, which also created a medium to communicate and share knowledge. This brought many more companies to the table. Productivity increased. Then, the first bubble hit during the early 2000s and was followed by more, which led to the true slowdown in demand.

The demand contraction of the Great Recession hit during 2008. This created a global slowdown not seen since the Depression. The housing market was decimated, and unemployment shot up, continuing a reduction in demand that has lasted to present day. This was followed by stimulus, increasing the debt. To solve this problem, the government will need to spend less and possibly raise taxes, which will likely lead to even less demand.

We now have a Demand Driven Economy. A hypercompetitive business environment characterizes this fourth area, and it will continue into the future. This flat demand will put a crunch on profits and drive a lot of businesses to disappear.

The companies that have a better understanding of the demand situation will be able to position themselves for a demand offering that will drive more business. More on that next week.

The Power of the Crowd

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I wrote a blog in July 2011 called “What Disruptive Technology is Sneaking Up on You?”  I also wrote another one more recently called “Crowdfunding, the Savior for the Entrepreneur.”  Interestingly, they have both been pulled together by the disruptive technology guru Clayton Christensen.  Clayton spoke with CNNMoney for an article they featured on his involvement in crowdfunding.

As I explained in my previous blog, crowdfunding will allow companies to raise money with their social contacts for partial ownership in a company.  You can raise a lot of money by asking for small investments from a large number of people.  Think of this like a mutual fund that has lots of money to invest, but one individual investor may only put in $500 while another puts in $10,000.  Crowdfunding gives the investor the opportunity to invest in people they know even if they don’t have large sums of money.  The previous laws placed tight limitations on this.

Clayton pulls disruptive technology and crowdfunding together when he points out that crowdfunding has the potential to disrupt traditional financiers.  He has invested in a platform that is being created to help bring together both the investor and the company trying to raise more capital.

As I’ve said before, I think this opportunity is going to be big!  It will change the game for many people, most importantly the entrepreneur.  Ideas and opportunities that would have never gotten off the ground before will now have a better chance at a good start and could become job creating machines.

Now, the important ingredient for anyone with aspirations to grow and get funding is a strong social network.  The theme we had back in my investment days was connectivity.  We invested in companies that were creating the infrastructure which would bring us together.  We have all heard “it’s who you know, not what you know.”  This rings even truer today with a major focus on people.

What are you doing to grow your social network?

Make the Trend Your Friend

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Mary Meeker recently released her annual overview of internet trends, and I found it to be very insightful.  You may remember that I have discussed Mary’s research and opinions on this topic in some of my previous blogs.  She pushed forward as a leader in this space with different investment banking firms and is now a partner at one of the most prestigious venture capital firms, Kleiner Perkins.

Meeker’s overview includes more than one-hundred slides, so I have summarized some of what jumped out at me.  The general theme is that internet growth is still significant and mobile adoption is still in the early stages.  Many of the slides show examples of how this connected world is creating the Re-Imagination of everything.

The Smartphone has penetrated only 953 million users when compared to the 6.1 billion mobile phone subscriptions as shown on slide 11.  This is a huge upside.  Think about all the new businesses and people considering apps moving forward.  Is your business prepared to benefit from this growth?

Next, on slide 10, compare the global penetration between the Android and iPhone shipments.  Android has over 250 million compared to over 60 million with the iPhone.  This is a four times difference, and it makes you think about for which one you would build an app.  Looking at your demographic, area, and global reach will help to determine if you choose to create an app for one or both.

Slide 18 shows India’s usage of the internet on a desktop has decreased over time, and their usage of internet on mobile devices has increased over the period 12/08 to 5/12.  Mobile usage has currently surpassed that of desktops, which should be considered for the monetization of sites.  Most sites make more money from ads on the desktop than on mobile.  This will changes things.

Mary also makes several points about how things are changing in the world with the internet.  In 2010, after 305 years, newspaper ad revenue was surpassed by internet (slide 32).  The trend lines for the newspaper ad revenue were declining much faster than the internet was sloping up.

From a technology investment perspective, be careful.  Look at slide 108.  Out of the 1,720 IPOs over the periods 1980 and 2002, only 2% of these companies accounted for 100% of net wealth creation.

Mary states that the “Magnitude of upcoming change will be stunning.  We are still in spring training.”  She gives a long list of reasons in slide 85.  A few key elements include nearly ubiquitous high speed wireless access in developed countries, fearless and connected entrepreneurs, and inexpensive devices and services, including apps.

How are you benefiting from these major trends taking place right before our eyes?

Is Your Sandbox Big Enough?

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In business we refer to a sandbox as the area in which you play or conduct business.  It consists of three things: your geographical boundaries, your products or services, and either your client description if you sell direct or your distribution channel if you sell there.

When determining your sandbox, one area of thought is to make sure that the sandbox you are playing in is capable of getting you to the goals you have created for yourself.  Problems could include not having enough customers or not having the right customers in your geographical boundaries.  The product or service may have saturated the market you’re in, and the client description could have changed or expanded.

In our situation, we found that to reach our goals we need to add a geographical boundary that is larger and more diverse than our existing one in Knoxville, TN.  We have the opportunity to open another office in a market that provides this, and we feel this will open the sandbox for us to get where we want to go.

April Cox, my partner and co-founder of Efficience, will be going to Dubai in the beginning of June to start our new office in that fast growing and dynamic city. April has contacts there from her husband and EO members that we have met over the years, so she will be off and running to network and increase our reach in our new expanded sandbox.

Not only will she be in fast growing market, it is also a modern city adapting to the latest technologies.  This will be a plus for us at Efficience because we believe there is a better way to leverage technology and growing in a new environment with other companies that believe this also will be mutually beneficial.  It takes four hours by plane to get to our office in India from Dubai, so working with our team there will be more  “local” for the companies we connect with as we work together.

We are excited for this expansion and the chance to open the door to new relationships, customers, and product opportunities.

Is your sand box big enough to get you where you want to go?

Riding the Wave or Being Knocked Over?

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Have you thought about how fast things change and how really different things have become with how you work and live?  Think about the companies that you use every day that didn’t even exist ten years ago.  Think about how you use your smartphone today and access Facebook.  How different, both good and bad, was your life back then?

Consider all this from a business perspective.  What new companies have appeared or disappeared because of a new innovative idea?  Things move so rapidly!  A company can go from zero to hero in a flash, but one can also go from kingpin to trash bin in the blink of an eye.  What happened to MySpace, and what is occupying that building near you that was once Blockbuster?

The point is that technology and connectivity are changing the world so fast that items and companies we consider staples, such as Google and Facebook, may not even be around in 5 or so years.  I recently read a Forbes article that shared a perspective on this topic.

According to the article, companies in the early years of the web 1.0 like Yahoo, Amazon, or Google didn’t see the social aspects of web 2.0.  Now in web 3.0, the social companies have not adapted to the current world of the Smartphone.

Will Google face a challenge as better ways to search on smartphones appear?  Will Amazon and Facebook keep up as more people use their phones to shop and connect instead of the desktop?  Which one of these companies will be hit by a new idea brewing up in the  garage right now?

Is there an opportunity for you in this space?  If mobile can disrupt Google and Facebook what can it do to your business?

Discovering Your X-Factor

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I have been working on putting together some content for a breakout session I’ll be doing at the EO Nerve Conference in Atlanta next week. This content was created for Insignia and Quantum leap EO programs to help Forums engage in more stimulating discussions around your businesses with the other business owners. I really enjoy these events, catching up, and sharing with my existing EO friends and meeting new ones.

The topic has to do with discovering your X-Factor, which is not an easy task. Your X-Factor is a decision or strategy that solves an industry bottleneck and gives you 10 to 30 times the competitive advantage. This is something that is not visible to your customers. In fact, you don’t want to share it with anyone outside your organization. Treat your X-Factor like your company’s top secret magic ingredient, which will greatly increase your profitability compared to your competitors.

What are some of the industry bottlenecks? Bottlenecks can come from delivery, largest cost, innovation, process flow, customer retention, employee retention, selection, or people reduction. There are so many options, the ones listed and some that may not be thought of right now. That’s the beauty of it! Seize the opportunity to seek out and develop your X-Factor.

Now, what are a few examples of X-Factors? Outback Steakhouse created a compensation plan to retain restaurant managers (an industry bottleneck), keeping them for 5 years or longer when the average was around 6 months. AutoNation offered all the brands of the various cars to break the bottleneck of customers not returning four out of five times. Starbucks focused on higher prices, giving them unbelievable margins.

So, what process can you follow to help discover your X-Factor? This takes some analysis and digging. Sometimes, you discover it at the industry trade shows. Looking at all the breakouts, you will see the problems they are trying to solve, and that may be just the clue you need. You can brainstorm around these questions: What is the biggest cost in my industry? What are the people problems? Where is innovation not happening? And how do I keep my customers and employees happy? Once you think you have a handle on it, then ask yourself, “Why?” five times and watch the onion open up and reveal itself.

When you latch onto your X-Factor, you will be ready to jump on and ride the rocket, so be prepared to hang on. What are you doing to discover your X-Factor?

Anti Herpes

3 Keys to Business Greatness!

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If you asked me the business authors out there who I think provide the most value, I would have to say Jim Collins and Peter Drucker. Both of these guys have provided huge insight to the business community on how to run a successful company. Like most businesses, we at Efficience are starting the year formulating strategies and goals to make forward progress toward our destination, and reading Collins’ and Drucker’s material has always been good preparation.

Peter Drucker is legendary and has since passed on. I credit him for giving me the insight in the early ‘90s to see how the information revolution would provide the future with value and to develop a mutual fund called IPS Millennium Fund in ‘95 to participate in this information revolution.

Jim Collins opened my mind to creating a company that had a big vision with a BHAG (Big Hairy Audacious Goal), a heart with a core purpose, and personality with core values. So, when Collins came out with his new book, I was anxious to see the new awareness that would come from his decade long research.

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In Great by Choice, Collins and Hansen set up an awareness of how three key areas acted as the common themes in the companies that have dealt with uncertainty, chaos, and luck as well as why some companies thrive despite all this. What they found was very interesting and contradicts common thinking about great companies. They discovered what they call 10Xers (companies that have been beating the marketing and comparison firms by at least 10 times in stock market performance) were not more visionary, more bold, more risk taking, more innovative, or more creative than the comparison companies.

They were more of 3 things:

1) More Disciplined

2) More Empirical

3) More Paranoid

This book is very eye opening! When we think of a company that has had great success, we usually assume it has done so with a new break through idea, a new patent, or by taking a big risk that is paying off. However, this was not the case. Of course, to a point, these companies were innovative and creative, but they became really great by finding what works through empirical evidence, testing that out, and then being super disciplined to get it done. They also worried excessively about what was out there that could change the game for them.

I will discuss each in more detail in next week’s blog. Happy New Year, and I wish you much success this year being worried about what is coming, gathering evidence that your ideas work, and implementing them with vigorous discipline.

 

What’s the Pattern Here?

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Have you ever noticed how things work in cycles with observable patterns? As someone whose strength is observing and seeing patterns, I find it helpful to know that these patterns exist and to see if this awareness generates some form of opportunity. This may be because I have that entrepreneurial instinct that draws out this intrigue, but whatever the case, they seem to pop up everywhere.

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You can find these patterns in the stock market, football teams, the weather, time to market saturation for products, and a multitude of other things. For example, look at the stock market over a long period of time. You will see that over time the price to earnings ratio (PE) tends to expand and contract over a longer time horizon than the normal business cycle.

From 1903 to around 1920, you should notice a contraction of PE from around 24 to 5. From 1920 to 1930, the PE surged from 5 to 28. From 1930 to 1950, it contracted back to 9. From 1950 to 1969, it expanded from that 9 to about 23. Then from 1969 to around 1980, it dropped back down to 7. From 1980 to 2000, you should see it surge up to 42 (can you say bubble?). We have been on a PE contraction since then. The sad news, as you can see from the pattern, is that a long uptrend does not typically start until the price to earnings ratio falls into the single digits.

Being a University of Tennessee football fan, I observe the patterns there also. As fans, we have high expectations every season, which makes it difficult to see the patterns. However, you can go back to the 1960s and see a good decade for the UT program. The 1970s were tough. The 1980s bounced around with big ups and downs. The 1990s were great, and the decade of the 2000s has been sad. You would think from this, the current decade will improve.

If you listen to the news, you would think we have been on a warming trend from the past 100 years. Actually, we have been on a warming trend since the late 1970s. In the mid-70s, all the major news stories reported how the average temperatures had been dropping since the 1950s, so we would all starve to death because of crop failures. Last winter, we had snow on the ground in Knoxville, TN for over three weeks. Typically, snow only stays on the ground here for a couple of days, and this was the first time since I started living here in 1981 that this has happened. Could this be the start of something new?

Finally, notice the trend of how breakthrough technological inventions saturate the market. In a general sense, the automobile, television, and radio each took about 30 to 40 years to fully saturate the market. The VCR took at least 15 years. The internet reached saturation after around 8 to 10 years, and it only took Facebook around 3 years once it opened up to everyone.

This pattern is obvious, and we will see new products, services, and software tools reach full penetration within a year in the near future. This results from how connected everyone has become, and this connectivity continues to increase. I would say that at some point in the near future, products and especially software will reach full market saturation within weeks and even days.

What patterns do you see around you? Will these patterns affect your business? Are there opportunities in those patterns or just the satisfaction of knowing this is just one of those cycles and will eventually change?