Chart du jour

Itanium Sales Forecast History, courtesy Wikipedia.

Anyone think sales people are not optimists?

How not to advertise your product

Today's advertisement brought to you courtesy of Facebook.



How many things are wrong with this ad?

Customer retention 101

I've never written a blog post extolling a service provider. So far. Today that changes, and with good reason.

I've always been a big fan of Starwood. They maintain great properties, have a fantastic loyalty program and I've always had a great experience with their staff. So I was surprised recently when a charge showed up on my credit card for a stay I had cancelled. I called them. They have real people picking up the phone when you call. No waiting, no clicking through annoying menus, or sitting at my desk going "agent, agent, agent" until the voice recognition software finally cuts through my accent to figure out what I'm saying.

The person on the phone was polite, and promised to contact the property right away. Sure enough, late the same night (11.30PM or so), I received an email from the property giving me details on why I was charged. It appears they never received notice of my online cancellation. I wrote a return email saying that yes, I had made the reservation and cancelled it online and no, I didn't have a confirmation number to share with him. A reply quickly came back that said "You don't need to give us any more information. We'll reverse the charge, and credit your card immediately." Two days later, the refund showed up on my card. That was it.

Two emails, no need for "supporting evidence" to back up my claim, no fuss, and a refund that showed up promptly. Is anyone surprised that I'm more loyal to Starwood than ever?

On international aid

In which we choose not to rant.

So today I had this conversation about "getting involved" with non-profits that do work in India. Most of them, even today, focus on aid. This is the Bono+Jeffrey Sachs model, where the coffers of wealthy nations are opened up to end poverty in poor countries. There's a debate raging about whether this model works or not.

I believe that applying the "rising tide raises all boats" philosophy makes a much bigger difference to a country's economic development than handouts. Here are a few experts on the topic:

First, Kenyan economist James Shikwanti to the G8.

Next, a Nigerian finance minister:



Lastly, George Ayittey, Ghanaian economist:



What's true for Africa is true for everywhere else. Stop sending aid, unless it's for disaster relief. Instead, invest.

Commercializing technology

In which we ponder the gulf between technology and product

I was having a conversation this morning with a friend who mentioned a startup he knew of. The company has developed a new technology that converts biomass into fuel (don't ask me how, I don't know the details yet). A similar company in Eastern Europe has been successful, so the investors believe that given the right GTM (go to market) strategy, this company could be a commercial success. The problem? The technology they have today needs economy of scale i.e., it needs to process a LOT of biomass to make fuel, and this means you get a BIG machine that costs a lot of money. The investors are interested in affordability i.e., make me a small machine that one family can buy and use. Result: a startup team that is focused on the cool new widget they invented, and potential investors who are (rightly) worried about commercial viability.

As a thought exercise, let's see how this might play out.

This is not an unusual situation. In fact, you see it in Silicon Valley about a dozen times a day. Startups are almost always about cool technology. They're not thinking about commercialization i.e., making money. At some point, the startup team realizes (or the investors help them realize) that money needs to be made. How? You can go both ways: you can take a product and build a business around it, or you can identify a market need and adapt your product to it. Which approach is better? That depends on your particular situation. A machine that converts biomass into fuel can be either (1) a small gizmo that you sell to every farmer in India for very little money or (2) a fairly large installation that is sold to large farms, co-operative societies or even joint families and villages. (I'm over-simplifying here. Obviously, there is a spectrum between these options and the final product can be anywhere on that spectrum).

In (1), you want a truly retail product that can be manufactured, shipped, marketed, sold and supported at pretty thin margins. In this case, your "big money" is going to have to come from scale. Assuming, of course, that you make that commitment to go out and sell the thing by the tens of millions. If you're trying to cover a country like India with a small retail product that will be sold to farmers, what should you worry about? You should worry about being able to find and reach that customer base. You should worry about the logistics of getting your product from manufacturing to customer. You should worry about how this product is going to be maintained and serviced. And how you're going to do all this at very low cost per device. Is the retail product going to be robust enough that you expect a very low failure rate? Is it simple enough to repair that every village cycle shop guy can repair it and you don't need to worry about building a service organization?

In (2), you have a little more wiggle room. Each installed product has to be profitable on its own: so you need fairly hefty margins (remember that you're factoring in the cost of getting it there, setting it up and probably servicing it too). Now you're less worried about finding new customers and more about scaling carefully and maintaining your customer base. What is the lifetime of this product? How long before you have to replace it? How often do you have to service it? Do you price lifetime service into the installation or do you take the product + service fee pricing route?

Neither case gives you easy problems to solve. These are fairly standard business principles. The trick is to remember these and apply them rigorously when you're looking at that shiny new gadget that's _just_ short of where you need it to be for the business model to work.

Dealing with competition

What should a company do when beseiged by competition?

First, is the competition really offering the same thing? Are online news sites and blogs providing the same service as the NY Times? No. If the NY Times prints (or puts it on the digital paper) it, it must be true. And it must be important. No one, with the possible exception of the BBC, can claim that kind of authority.

So the question becomes, Are you focusing on your strengths? If you're the NY Times, why are you trying to be the fastest to publish news about an upcoming book? In that field, you have a million competitors, including the publisher who probably has a blog anyway. Shouldn't you be focusing on publishing an authoritative review of the book? I would definitely spend more time reading that review than I would reading an "article" about the book launch.

Lastly, what else can you do that's unique to you? If the NYTimes offered a list of 20 books to read this month, or plays to watch this week, or countries to visit this year, I'd probably listen. I'd definitely listen if they were able to tell me which charities are actually operating on the ground in Myanmar and would benefit most from my donation. Because they are the only ones who can.