Risky Business – Lean Startup
In the class prep, I was at first kind of surprised the by the concept of the lean startup. I mean, it made sense to me to try to minimize costs by using customer feedback to guide product development, and I liked the approach of continuous learning. But I found it kind of counter-intuitive to try to minimize risk by taking risks (trying completely new products, models, and approaches). You’ve already invested money in your original plan – isn’t it riskier to change your plan completely?
It wasn’t until we had to make our group business plans that I understood. It was difficult to forecast exactly what our consumers’ response would be, if we could achieve our goals of an excellent customer experience, and if we would be able to make a profit. It showed me that in every business, there will be major unknowns that the company will have to learn about and then adapt to. I could definitely see how using customer feedback for management decisions would actually guide the business to suit their needs better, making the business less risky overall. It may not have to be as drastic as overhauling the business structure – it may be broad strategic goals such as marketing more to a certain market segment.
For example, one classmate blogged about how she would hypothetically start a business with the “UBC events app” that one group pitched in our entrepreneurship class. I agree that a lean start-up approach could be very effective. I would try to get as much consumer feedback as possible, which would be fairly easy because my target market is my peers. I would also have to experiment with different kinds of marketing – social media, a booth at clubs events, coordinating with UBC REC events.
Picture: http://lean.st/
We Are All Canucks
https://www.youtube.com/watch?v=s4BNZdGovkk
I’ve been noticing many ads for the Vancouver Canucks, and their powerfully emotive tagline “We Are All Canucks”. Personally, I’m not a huge hockey fan, but I found it impressive how effective their marketing strategy is – to the point where they are such a big part of local identity and culture that it doesn’t matter if they win or lose. One of my classmates even blogged that “It’s not always about the win“. She cites the positive fan experiences provided and the charity work by the team as reasons that they appeal to consumers. Another blog by a Sauder student mentions how they have strategically signed players that are fan favourites and used social validation by “boasting consecutive attendance-sellouts”.
Other businesses use the Canucks’ powerful brand to stregthen their own marketing too. For example, the law firm Fasken Martineau used Canucks sponsorship to increase brand awareness, increase media exposure, and give their clients and lawyers a unique place to network and increase revenue. They wanted to associate their brand with the Canucks’ “teamwork, excellence, community involvement and community service”.
If you look at hockey team as a firm in the entertainment industry, their main revenue streams are from tickets sales, merchandise sales, sponsorship and broadcasting rights. These heavily rely on the support of fans, so it makes sense that the Canucks would invest extensively in their marketing. They’ve managed to capture a huge range of demographics as their consumers because their marketing is very broad and inclusive. Even though I don’t really like hockey, I still identify with the Canucks as “MY team” and I can definitely appreciate the skillful strategy behind their marketing.
Get a Slice of the Pie!
I’ve been looking at Porter’s Five Forces while thinking of recommendations for my group project, and I found myself wondering how it was possible to penetrate an existing, mature market. How could new start-ups possibly gain market share by competing with giant multinational corporations with a huge amounts of capital, economies of scale, and established brands? I thought the biggest advantage these new firms could have is innovation, taking advantage of advances in technology. I was curious, so I decided to research a little more in depth on my own.
I was wrong. Innovation is important, but in mature market it’s often not the biggest factor. In this London Business School article, the author states that it’s not enough to only innovate and come out with new products. The firms need to create disruptive products that are able to gain market share because they have a price advantage over existing firms and reached a similar level of product performance as existing brands. One of the most famous examples is how Japanese car manufacturers penetrated the western car market over time by offering high quality products at lower prices. However, firms have to take into consideration that improving quality often causes costs to increase. In addition, incumbent firms may cut costs or invest in creating a subsidiary brand that is lower priced in order to compete. For example, Swiss company SMH created the brand Swatch to compete witih Timex and Seiko. Learning this made me really respect the Sauder alumni who are successful entrepreneurs!
How to Make a Difference
This is more personal blog – I loved learning about more about corporate social responsibility because working with non-profit organizations during high school was a major part of my choice to come to Sauder.
I went on a humanitarian trip to the Dominican Republic where we worked with two non-profit organizations (it should be mentioned that these were religious organizations, but I want to focus on the effectiveness of their operations strategy). One was a couple doing grassroots, hands on work with people in government housing. The second organization had a core team of 8-10 people and were able to to connect a nation-wide network of churches in order to help empower church leaders.
Both organizations were doing important, meaningful work, but I saw what a bigger impact people could have if they used organizational and management skills in a similar way that people run businesses. For example, the bigger organization had to consider a complicated variety of costs (food, transportation, construction materials), human resources (translators, construction labourers, pastors) and making sure the value proposition of their “product” would meet the needs of individual churches, or their “consumers”.
My experiences are a little different from social entrepreneurship, which is for profit, but I have to agree that using entrepreneurial approach to solve social problems can be much more effective in creating positive change in the world.
Personal Branding – Get Online!
I was so interested when alumni Tina Lu shared how her Linkedin profile was a huge part of how she found connections and job opportunities. I had just attended a workshop where Julio Viskovich shared about the effective use of social media as part of your personal brand. He referenced a blog post by Gerry Moran on building the perfect Linkedin profile, and it led me to another post about how to measure your personal branding success on Linkedin.
I am usually more of a passive user on sites like Facebook, usually only connecting with people if I’ve met them in real life for security reasons. I found it fascinating how these social selling experts used social media to actively promote themselves and strategically reach out to connect with other people in the business community. Instead of trying to make sure people don’t stalk them using the Internet, they want to be known for their work. They made me look at these social media outlets as tools, and showed me that you can be just as strategic about your digital footprint as you are about your resume. In modern times, your online presence is now considered a vital part of your personal brand. I will definitely be creating a Linkedin profile as soon as possible!
Marketing to Millenniums
One of the most desirable targets in marketing today are the millenniums, also known as Generation Y (born from around 1980’s to early 2000s). This group is a huge population segment, and if a company succeeds in hooking this group they could be very profitable.
One article on Adweek details how difficult reaching this generation can be. Generation Y has relatively low disposable income, so they cannot be considered “volume drivers” but need to be seen as a long-term growth proposition. They don’t mind being marketed to, or being loyal to a brand, but they are highly aware of how they want to use their money – for example, they don’t want to pay for intermediaries or ads when they pay for music, they want to pay the artist. With this group’s rampant individualism, unique talent and passion matters (reaching out through social media) instead of consumers just interacting with distant giant corporations. Comedy is considered an excellent way to draw in millenniums, I think because it makes the corporation seem more authentic and relatable.
I found this article so interesting because these are the people trying to figure out how to market to me. And it’s true – I am a bit wary about giant corporations trying to get me to do surveys, but when I meet a passionate entrepreneur I’m much more willing to support them. I admire individual Youtube artists who pursue their passion outside of a label. I want corporations to believe in the product they are offering, not just trying to rip me off and take my money. And I don’t disagree that some of the most successful marketers to my generation will be from my generation.
Fashion – Can Supply Chains Keep Up?
ModCloth is a online vintage fashion retailer that uses feedback from customers to improve their supply chain.
In class, we looked at how Dell’s virtually integrated supply chain was a key component to their success. Their close relationships with manufacturers made just-in-time production possible, and the constant feedback from customers made it able to adapt to customer needs quickly.
How can other industries learn from this? In this fashion industry, demand can often be difficult to predict because with so many substitutes, sales depend heavily on consumer tastes (which are often swayed by marketing). Instead of a product oriented approach where brands will make products and spend most of their time trying to sell them, the industry seems to be moving towards a market oriented approach where customer feedback shapes production decisions to enhance customer value. This allows companies to cut down costs on unwanted inventory and efficiently capitalize on consumer wants by customizing. This is especially important with the development of online shopping, where there are many more substitutes and customer value is vital to consumer decision making.
This is a suitable direction for the fashion industry especially because fashion is by nature interactive, with clothes being part of how we express ourselves and relate to one another. This aspect of the industry makes it even easier to gather feedback with the use of social media and networking.
Valve – No Leadership?
I was looking at a classmates blog, and found his post about the organizational structure of the company Valve very interesting. Basically, Valve is a successful video-game company with no managers. Everyone chooses their work and workers are paid according to peer rankings. It is a very unique flat organizational structure. Workers even have desks and chairs on wheels so that they have the freedom to move floors.
Though my classmate believes this model is very risky and inefficient, I think this model works well for the video game industry. Projects at Valve have to reach a “critical mass” of support before it is possible to truly carry out an idea and manufacture the game. While this allows a huge range of creativity, it also encourages teamwork in a field where people might be inclined to hoard ideas so that they can claim intellectual rights. The peer ranking payment system also encourages people to work together – the entire company a true team.
However, I agree that there are risks. Valve needs to be very careful in choosing employees that will positively contribute to the corporate culture or the structure could fall apart. Individuals should not need to be told to work because they are self-motivated and innovative.
Picture: http://www.bbc.co.uk/news/technology-24205497
Facebook Ads
Facebook recently has been facing Federal Trade Commission Inquiry because of their new privacy policy. Some points of concern are that users are required to “grant the company wide permission to use their personal information in advertising”, and that “Facebook automatically assumes that the parents of teenagers using the service have given permission for their names and images to be used in Facebook advertising.”
How much of what we post on social media is being used in advertising? Facebook actually provides businesses with the locations, genders, ages, interests, and connections of its users so that businesses can target their customers better. For businesses, this helps them use their advertising more effectively and is a great tool for marketing.
One blogger however, suggests that ads on Facebook are usually ignored because the users are focused on socializing. She goes on to say that ads have no place on Facebook, and only help to isolate people.
So should Facebook remove ads? I don’t think so. It’s a major source of revenue for Facebook and an excellent tool for businesses to reach out to consumers and communities. By using Facebook, you are declaring to the world who you are – I see targeted advertising as just a consequence of that.
The Value of Music
The music industry is in a flux as music becomes more an more accessible through the internet. While some artists values the internet as a marketing tool, pirating and free music has made people question the true value of music and what kind of compensation the musicians are getting for their work. One such musician in a blog post shares how he makes much less money from online streaming than radio.
Another side to this issue is that online music subscription services such as Pandora and Spotify have not been profitable because they cannot make enough revenue from subscriptions and advertising to pay royalty fees. Most recently, Pandora won a lawsuit against the American Society of Composers, Authors and Publishers (ASCAP), who where trying to prevent Pandora from licensing songs so that they could renegotiate higher royalty fees. So far, Pandora has focused on increasing the revenue by allowing for more advertising. However, I think this is a short term solution, and they will have to alter their business model in order to counter the higher royalty fees once their contract with ASCAP expires and they renegotiate.
“Court Gives a Victory to Pandora Over Licensing Streaming Music,” New York Times, accessed Sept. 20, 2013, http://www.nytimes.com/2013/09/19/business/media/court-gives-a-victory-to-pandora-over-licensing-streaming-music.html
“Pandora and Spotify Rake In the Money and Then Send It Off in Royalties,” New York Times, accessed Sept. 20, 2013, http://mediadecoder.blogs.nytimes.com/2012/08/24/pandora-and-spotify-rake-in-the-money-and-then-send-it-off-in-royalties/?_r=0
Picture: “Internet Music – How Are You Listening?” Compete.com, accessed Sept. 20, 2013, https://blog.compete.com/2012/04/12/internet-music-how-are-you-listening/