AirBnB’s Chesky Loses Focus

Good article with lots of information. I just don’t agree with the basic premise of AirBnB standardizing a service that is rendered by thousands of people around the globe.

AirBnB’s success comes from making an inefficient market, that of the occasional room rental between individuals, fun and efficient. Any incursion into the more traditional market with entrenched players means adding the complexities and costs of laws and regulations. No individual can deal with them in a cost effective manner. And AirBnB cannot do it in their place across thousands of jurisdictions in a cost effective way either.

AirBnB should not lose focus and do what it does very well.

ROKC’n an Educational Non-Profit

Recently, we had the chance to see the inner workings of a NYC-based educational non-profit which, according to some, after 40 years, has plateaued. That is, membership, has stagnated for a number of years. This was a big challenge for us since the organization is very small and does not have all the usual roles one normally finds in larger for-profit businesses. Many roles are filled by volunteers with little or no experience. And, the leadership style is very open and communal. In a certain sense, this organization is probably as close to a leaderless company as one can imagine; a “holacracy” if you will.

Now don’t get us wrong. We are all for flat, networked, community-driven, halocratic,…organizations if it improves company performance. But, it must improve company performance. Otherwise, you are just herding cats! A tiresome activity at best.

That is where the rub was. An education-based business is by definition hierarchical with teachers instructing students and teachers maintaining their skills by learning from other teachers, the institution maintaining accreditation from a “higher” authority, and so on so forth. This need conflicts with a flat leadership structure made up of many volunteers each improvising in one area or another. Interestingly, this particular organization also suffered from a widely acknowledged condition of poor communication which in and of itself is renders a flat, communal, approach very inefficient.

Based on discussions with a number of members, we were able to discern a number of different levels of communication: 1) executive director with head office, 2) a leadership committee, 3) an inner group close to leadership, 4) membership, 5) non-members, and 6) the head office with all members. Even for us, there were challenges. We started working with level 3 and were supposed to work with levels 4 and 5 but were never informed of the dates and times, which means probably a number of those people never had the chance to be heard. Interestingly, communication and community are derived from the same word “communicare”, “to share”. Creating community becomes difficult when communication breaks down.

As a result of our time together, we came to the conclusion that the company no longer understood if its core business was an education or community. So we applied the key component method by asking: What is the asset the company owns and/or controls that gives it a competitive advantage in the markets in which it operates?

The answer was simple. The educational content provided by the company is controlled by them in the market in which it is operating. And, its 40 years of existence demonstrates a certain competitive advantage with respect to other organizations that provide a similar or substitute product. The head office that provides the educational content is known around the world, further bolstering their competitive advantage by providing a well recognized brand which is used under license. Consequently, community is a result of the education the business provides its membership and, as such, should be returned to its leadership position at the core of the organization’s development strategy.

Community, on the other hand, is not owned or controlled by the company. Nor does it provide a competitive advantage in the market in which the company operates. As wonderful as it may be to be a member of the community, from a business point of view it is not defendable. The barriers are just too low.

By placing education first the company can focus all its efforts on what is truly of value to its members. Of course, this means being able to effectively and efficiently communicate their educational offer to existing members who can then derive its value for themselves. And, communicate this value to attract new members. All the processes surrounding communication need to be reviewed and corrected wherever needed. With the membership, with potential members, in classrooms, in the hallways, by the elevator, as well as outside the organization’s walls to their neighborhood, the city, the New York tri-state area, to affiliates in other cities around the world, to the head office, … always expanding their sphere of influence as a center of educational excellence and community.

Disruptive Company Mythology

Disruptive companies are a journalistic myth attributed to those businesses that devise a business model that extends an established market to a encompass a segment that could not be satisfied through the traditional model. I call it a myth because once the business scales up to compete with status quo economic actors the legislative and regulatory rules by which the latter operate are imposed drastically increasing the cost of doing doing business, thus making them uncompetitive.

AirBnB, Uber, Aereo,… Are all challenged by entrenched players who have built and who defend their companies based on legislative and regulatory norms. If these disruptive upstarts want to play in their market then they must play by the rules.

To date, there is no disruptive business that has truly influenced the cost of doing business at scale. Nor will they.

Google European Anti-Trust Settlement

It seems to me this settlement seeks to level the player field between Google and its competitors in the search results business instead of protecting consumers from any real wrong-doing.

Europe already has stronger privacy laws than the US which is a good way of protecting the consumer so it makes more sense to increase those laws making the use of the information harvested by Google or any other search engine more difficult to use thus less valuable.

It may be worthwhile recalling search engines only use advertising as a way of monetizing the business but with the rise of “Big Data” it is the data itself that will provide most of the enterprise value. It may be time to reorient this discussion to where it is today’s way of creating value, not yesterday’s.

Misgivings on a Tesla-Chrysler Merger

Interesting assessment but off the mark. A Tesla-Chrysler, Musk/Marchionne, team up makes no sense whatsoever.

Tesla is not really an automotive company. It is a tech company specialized in developing an energy management system that is presently used in cars. The company’s value lays in being able to use this technology – once it is main stream – in other applications. In other words, the company has a huge unexploited market potential.

Fiat and Chrysler are dinosaurs. As you state, their technology is not very competitive consequently their fundamental value is in the brands.

A combination of the two would result in limiting – if not amputating – Tesla’s market potential and consequently its ROI for investors by using the tech only in Fiat/Chrysler cars. Tesla shareholders will never go for it unless they got a huge premium. Fiat/Chrysler shareholders wouldn’t go for it because of the speculative nature of the tech; and, because it would mean declaring Fiat’s branding strategy is a bust, which would mean Marchionne’s fall from grace.

Sorry, this is the wrong strategy.

Applying the ROKC to Boing Boing Maternity

A close friend and business partner sent me an article that appeared in the Huffington Post asking me how ROKC would apply to this business case. After much consideration the ROKC approach would make the following analysis and recommendations.

Mrs. Paperno, founder and owner of Boing Boing in Brooklyn, has a key component: knowledge. As she writes in her article:

“I got certified as a lactation consultant, bra fitter, baby wearing expert, etc.,…”

When she started her business, these certifications gave her a strong competitive advantage. Enough to allow her to open a business.

Seventeen years ago, she launched “Boing Boing, the first breastfeeding boutique in the nation. I rent breast pumps, sell nursing bras, and know the answer to 99 percent of your pumping/breastfeeding issues. …and for years, was happy to share my knowledge and honored to be a part of that special time when things require the touch and support of another human.” Her business was doing wonderfully… “I was the one picking up bills, and joyfully buying presents for my employees as well as donating money to my favorite charities.” So far so good, she was doing everything right.

There was a key component with a competitive advantage and she had created a product, the store, that customers valued and consumed. As a result of this perceived success, Mrs. Paperno tried to reproduce it by opening another store and launching an e-commerce site.

It is this expansion that was her downfall. Mrs. Paperno’s advantage was knowledge not running a store or a website. Even in her article she states as much:

“I fielded questions, helped moms nurse,…Now parents come in after buying their carriers online and expect me to show them how to use it.” – Knowledge is what clients wanted and still seek today.

“For over 10 years I had been running these [moms] groups for free, …. But I never got on top of running calendars or a store website/online sign-up process….Week after week, women would wheel their $1,000 strollers into my shop, hang out in the back, literally leaving their shit for me to clean up after they rolled out; buying nothing and asking for more weeks… I didn’t want to run an online business…” – Not good at running multiple stores or an e-commerce site.

And, as with all good things, competition develops offering customers an alternatives and reducing the competitive advantage.

“Now this neighborhood is filthy with baby haircutting/toy shops, clubs, babyccino cafes, baby DJ lessons, $600 baby proofing companies and cooking lessons for nannies…corporations had figured out how to capitalize on these wealthy women when I could not, …”

The result: Doing too many things at once means doing some things badly and some things even worse.

There is a silver lining here in the fact that Mrs. Paperno’s know-how is sought by clients who have shopped elsewhere. So the ROKC approach would suggest that not all is lost and recommend the following course of action: use your key component to develop a knowledge based product.

Her initial consideration that “you cannot run even a small brick and mortar shop without an online presence” was correct. In today’s business world, in order for a business to succeed it must operate at the crossroads of the digital and the physical. Likewise, as her experience demonstrates her online presence cannot be e-commerce because it requires more resources than are available. Consequently, her online life needs to limit itself to sharing her knowledge with her clients through content creation. Lucky for Mrs. Paperno she can write. This article and the couple of others I found are well written from my point of view.

Holder herself out there as an expert in her field should allow her not only to generate an income stream from end-users but also to associate herself with her previous competitors by supporting them in their actions. She can curate e-commerce sites, syndicate content, provide editorial works, recommend products, sponsor products and events, and develop new products and services (like the moms groups). All activities that can generate additional revenue streams through licensing fees and services.

By focusing on getting a Return On her Key Component – knowledge – in a very narrow manner, Mrs. Paperno can do more with less. Let those who know how to run multiple retail locations do it. Allow those who know how to run e-commerce sites do that too. Let the corporations run moms groups if they are better at it than you. You do what you are good at.

As a closing thought, Mrs. Paperno should not sell her store without getting a contract to provide her expertise to customers: in-store and online.

All quotes are taken from “Hiding in Plain Sight: Life Under the Wheel of a $1,000 Stroller”, by Karen Paperno, Huffington Post, 12/22/2013.

How do you put technology in the hands of people so that it’s useful?

Krista Donaldson, CEO of D-Rev, a not-for-profit product development company, asks:

How do you ensure that needed technology gets to the customers who need it so that it improves their lives?

Three principles ensure that the technology gets to the right people :

  • The product needs to be world class. On the par, or better than, the best product on the market.
  • The product needs to be user-centric, even user obsessed. Not just for the end-user but everyone who interacts with the product.
  • The product needs to be market-driven. That is affordable and valued by a customer who uses it.

This approach nicely reflects the ROKC phase Transformation Process you can learn more about by buying a copy of our publication. Buy it now by clicking on the link in the sidebar.

Listen to this very exciting TED talk to learn how D-Rev designed an $80 prosthesis for people earning $4 a month.

Immigration & The American Dream

Nice article by Kevin Maggiacomo describing the American immigrant story: Has The U.S. Lost The American Dream? Well, the immigrant story for those who came en mass. In many locations around the US, and elsewhere in the world, people – even towns – immigrated and resettled into close knit communities where they maintained their cultural identity. In some cases this was out of necessity since they were discriminated against by the people already there. In other cases it was just more comfortable. Then again, there were other immigrants who didn’t migrate in sufficient numbers to create these communities and had other challenges to face in their relative isolation.

As the article implies, it is in these reconstituted towns and villages that skills from the “old country” could be put to work because they found willing buyers. To use a more contemporary expression, these were ready-made ecosystems that provided for their members.

Contrary to the articles implications, this type of economic development did not end with the 19 century waves of immigration to the United States. The model has been reproduced by each successive group of immigrants: Korean, Japanese, Chinese, Mexicans, Pakistani, and so on. As with the Italians, and the Irish before them, and the Germans before them, … these immigrants supported one another in their process of social and economic integration. Each group had to fight for their place. Yes, sometimes even through the use of violence: gangs, mafias and such.

What is important to note here is the access to capital. Mr. Maggiacomo’s grandmother was able to engage in micro-lending because the family had an excess of capital to lend. In today’s America, other immigrants engage in the same practices. The most notable are the Koreans, from what I recall.

From this perspective, the loss of the American Dream is actually the success of the American Dream that the Maggiacomo family has experienced as they are now a large regional bank and fully integrated into the national fabric. What has been lost is that ready-made ecosystem of like-minded immigrants. By seeking those who are different Mr Maggiacomo is trying to tap into other ecosystems that are more distant from his immigrant Italian roots.

ROKC Outperforms McKinsey

Had the pleasure of listening to this interview about McKinsey strategy development and find that it is over complicated. Chris Bradley and Angus Dawson do a good job of promoting McKinsey services but focus too much on the operational aspects of strategy and not enough on what drives a business’s competitive advantage. For example, in defining a strategy data and analytics should not be used as they are both operationally issues.

Where ROKC does agree with them is with determining strategy at a market level. It is only at this level that it is possible to evaluate the competitive advantage of a key component.

By focusing on generating returns on the asset that provides the business with its competitive advantage in the market in which it operates leaders can maintain the flexibility of action that today’s competitive markets impose thus changing strategies without diminishing the value of the company.

To learn all about the ROKC methodology Click here

Facebook efficiency

“According to recent data, said Kartik Hosanagar, associate professor of Internet commerce in Wharton’s Operations and Information Management Department, [on] Facebook, … just 0.2 percent of total status updates actually reach users for whom that content is relevant, and 1 percent of that teeny minority actually engages.

So what’s a company to do if it wishes to get those much-coveted likes and comments? Hosanagar’s research findings showed the following:

  1. Of all content, photos and videos generate the most number of likes and impressions and are important in generating comments.
  2. If a brand posts a question, that post will elicit more comments, but fewer likes; conversely, if the brand asks the user to like a post, the post will receive more likes and fewer comments.
  3. Timing matters. Users are most active between 9 a.m. and 10 a.m., and then at 2 p.m., and on Friday, Saturday, Sunday and Monday.
  4. Social media is an ideal venue through which to highlight the organization’s social initiatives, as philanthropic posts generate high levels of engagement with fans.”

See more

In other words, you gotta work hard to connect.

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