Innovation in Action: 2 Cellos

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Re-invention.  Innovation.  Those words that businesses dream about for both survival and long term growth.  

It comes from a mindset that is open to:

  • New ideas, especially ideas that are “Not invented here.”

  • Outside thinking, completely different areas of life

  • A relentless pursuit of action:  “How do WE apply that to OUR business?”

  • A willingness to accept failure, scrape your knees and get at it again.

Take what could be one of the most boring instruments you can imagine from high school band:  The Cello.  Do you remember people dying to sign up for that instrument?  Could you imagine the masses ever paying money to see people perform it, outside of an orchestra?

With that said, I present 2 Cellos.  Their videos tell the story, as well as the millions of people following them.  

Gamechangers indeed. 

 

2 cellos - innovation in action

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The $ Shave Club: Disruption in Action

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Sometimes disruption happens right under your nose.  Take a look at the men’s razor blade category:

  • Needs to be continuously replenished.
  • Massive market.  Let’s call it 50% of the world’s population.  Maybe a bit less if you don’t mind facial hair.
  • Huge barriers to entry.  How can you get into this category?
    • You’re not just going to “up and build” a factory, it takes massive capital and expertise
    • Your also not going to unseat one of the established brands (Gillette) and their massive branding investment.  
    • If you could conquer these 3 barriers, you need to get the consumer to vote, which means you need access to distribution.  In CPG, that’s the health & beauty buyer at the retail chains.

So how do you gain a slice of an industry dominated by the 800lb Gorilla? 

  • Find a source of supply.  Nearly every category has Private Label & Contract Manufacturing supply.

  • Forget the middleman in the distribution chain, go directly to the consumer.

  • Build your own brand, unconventionally.  Use social media, be edgy, create stories.

  • Keep expenses LOW.  To the bone….

In other words, do everything DIFFERENTLY than the industry leaders do.

How do you know when the big guys are sleeping at the switch?  They begrudgingly acknowledge the up-start.  Then they immediately cling to their existing business model, defend it and ignore the very threat in the first place.

  • “We have products at those price points too!”
    • Maybe, but can I find them when 80% of the shelf space is covered with your more expensive stuff?
    • But you won’t deliver it to my doorstep will you?  Of course not, that would annoy the retail buyers wouldn’t it?

You see these types of up-starts more and more.  SODA stream comes to mind.

Sodastream

If Coke or Pepsi do not have a team figuring out how to buy and integrate this company into their model they would need their heads examined.  When I say “team”, I’m talking about a team of less than 10 people.  In an urban office, FAR away from headquarters, made up of strategic thinkers with minimal internal experience within Coke or Pepsi.

Sometimes experience is what prevents the 800lb gorillas from seeing a disruptive model.

Blinders off.  

Disruption lenses on.

http://online.wsj.com/news/articles/SB10001424052702303624004577338103789934144

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Case Study: Local Liquor Store’s Fighting A Sea Change

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There is a fascinating case study playing out for business geeks (and wine lovers) across the state of TN.

Should grocery stores be legally allowed to sell wine?

Thirty-three states currently allow wine sales in grocery stores.  In Tn., the sale of wine is prohibited in grocery stores, so if you’re a wine drinker, you’re forced to go to one of the 600 some odd packaged liquor stores across the state. Where there is money at stake, there is lobbying on both sides (grocers and packaged stores) to get laws passed that will either protect or enhance one’s bottom line.  The debates are fierce.

Interesting things happen in business when law changes present game-changing business scenarios.  When these scenarios play out there are often clear winners and losers.  Choices are made early on that determine the businesses survival, or profitable exit.  More often than not, time becomes the enemy as inertia (lack of decision or wrong decision) eats them alive.

Grocery stores have more to gain, packaged stores are on defense, thinking about their protected distribution channel now being put up for grabs and the thought of Deborah buying her Chardonnay next to the fish counter.

Sometimes businesses can’t control when external forces (government) put them on defense.  But when they are put there, they need to make 1 of 2 clear choices as soon as possible for playing defense effectively:

  1. Get consumed with the game changing issue (law change) and fight to PREVENT it from occurring.  In other words, prevent the future from changing.
  2. Accept that future change is not IF, but WHEN.  Then do 1 of 2 things.
    1. Exit the business if you can’t envision a profitable scenario, and do it fast.
    2. Get off your heels and figure out how to compete, Re-tool your business, get ready to compete since the big boys are coming.

Choosing 1 or 2 comes down to placing a bet if the future is likely to change or not, weighing the scales of both arguments.

Predicting the future sounds daunting, but is really just an educated guess and “weighing the scales.”  To do that, try the following:

  • List out all the stake-holders.  What different groups are involved?  
  • Ask yourself the following:  Will the proposed future change benefit or hurt the respective stakeholder?
  • Is there more $’s TODAY chasing the future proposed state or maintaining the current?  Will that be the case tomorrow, or will it shift?

You need to weigh the scales, for each stakeholder and judge which one wants the future to happen and which one does not.

Depending on which way the scale leans should usually HEAVILY influence you decision.  As it relates to this case, here’s how I see it.[Continue Reading…]

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The Cocktail Napkin: A Game-Changer From The Old School

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My love of the Old School stems from it’s simplicity.  Things moved at a slower pace back in the day, but that didn’t mean it was LESS focused on generating big outcomes.  I-phones and all their apps did not exist in the ’80s.  But guess what did?

Cocktail napkins.

They worked.  Some of the world’s greatest businesses were launched on cocktail napkins.

Usually, 2 people are having coffee, or of course….a “cocktail” and the conversation moves to something game-changing.

  • An idea…..

  • A Problem

  • A Solution

  • A radical concept

The people both agree that it’s worthy of pen and paper and needs to be captured.  Only none are within arm’s reach…..so the cocktail napkin enters the scene.

So what’s the big deal about something so old school and simple?

  • Something magical happens when ideas go from brain to paper.

  • They become tangible.  They become refined.  They start to evolve.

  • Pen and paper, or napkins are powerful, if you use them.

It is simply amazing how many people have plenty of great ideas, or problems that stay stuck in their head, never to enter a piece of paper.  Sometimes the difference between SOME results and none are simple the difference between getting it out the head, and onto something tangible.  Think of it as step #1.

Next time your at Starbucks and something hits your brain, reach for the napkin.

Write it down.  You will be one step closer to something better than letting it linger in the ‘noggin.

Brains are like filing cabinets, at some point they over-flow.

over-flowing cabinet

image credit: Lifehacker.com

Five Businesses Born at a Bar

http://www.entrepreneur.com/article/219834

 

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4 Reasons the College President Sleeps Well at Night….While Their Industry Awaits Disruption

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I can’t think of another industry that is more “ripe for disruption” than the higher education market.  

I’m not sure if being the President of a University would excite me or leave me up at night in cold sweats.  Probably both, but I suspect that most Presidents are sleeping well at night.  It reminds me of  the music, book, and traditional retailing industries overall.  These are industries that have long histories of stability that were turned on their head when a better, sometimes more efficient (ie cheaper) alternative came along.  I’m sure those companies did not see the disruption coming either.

While positive changes in higher education are certainly happening, it does not  seem to recognize the magnitude of what could lie ahead related to “disruption.”  So I will write this post as if I were the President of your beloved Alma Mater, commenting on his or her ability to sleep at night.

What Excites Me Leading The University:

1)  I sell a product that falls into the “no brainer” camp called a college education.  Employment opportunities, lifetime earnings and the overall “intangibles” of a college education (vs not having one) are numerous and in black and white numbers reported by the US census.

It’s worth PERSONALLY envisioning where YOU would be, had you NOT spent your time in college, and compare that to where you are now.  Chances are, you feel great about your college investment.  While your college experience may not be credited with 100% for all your life’s blessings, I do suspect it would be high on most people’s list.  As a result, these good feelings tend to be generational and self-sustaining, creating long term inertia and little need for fundamental change in the industry.  If it worked for me, than by golly that’s what I’ll do form my kids!  It is a self perpetuating cycle that leads to more of the same.

Unemployment and Earning comparison of education levels

 Back to the President….

It’s fun to market a “no-brainer, gotta have!” product that is universally recognized as being the link to “game changing” life outcomes as an advanced education is often linked too.  So my faith in PRODUCT, scores a perfect 10 on my ability to sleep at night.

2)  Don’t take my word for it, the population recognizes these facts, and their actions prove it over the past 50 years.  In 1950, about 5% of the population had a bachelor’s degree.  Today, that number approaches 1/3.

More importantly, that means there are tons of growth opportunities that lie ahead.  While there has been massive growthnearly 2/3’s of the population have NOT obtained that bachelors degree.  Plenty of HUNTING ground for new customers.  It’s great to be in the 3rd inning of a game that looks like we are winning by a wide margin.

Education Attainment of Population 1947 to 2003

 3)  When you have a GREAT product proposition, and more and more customers flocking to your door, the laws of supply and demand tend to be in your favor.  What does this mean?  PRICING POWER.  When you have the ability to price your product north, that creates more opportunities for re-investment (faculty, buildings, technology, marketing), and is simply less stressful than industries engaged in the race to the bottom.

And how has college tuition/fees been priced relative to overall inflation?  This chart sums it up.

College inflation vs overall inflation

 What’s important to Note:  While my factors #1 & 2 could RELATE to the pricing reality, it may not necessarily have DRIVEN the price of college increases.  In statistics, there is a saying:  “Correlation does not imply causation.”  Nevertheless, if I’m the President, I would rather see this chart than the reverse.

4)  There is a “big brother” in our corner, called the federal government.  They recognize the USA’s competitive position in the global economy is linked to a highly skilled and educated work force, and they put their money where their mouth is with grants, cheap loans, etc.  “Making college affordable” is a theme that does not seem to be going away anytime soon.

Abundant money supply with a growing consumer base also provides a “sleep well at night factor” that approaches a 10.

Incidentally, this may be a contributing factor to cost escalation as well.

Those are 4 big factors as President of this esteemed University I feel great about.  I have a great product.  More and more customers show up every year.  I can grow rapidly, as more people haven’t experienced this product than have.  And  I can price it strong, and while I wouldn’t abuse it, there seems to be no limit to pricing well above the overall inflation rate, the past 15 years prove it.  It’s also nice to have a pretty big check-book in my industries corner called the federal government.

Are there things that concern me?  [Continue Reading…]

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