"Other people's money"

other people's money.jpgSo I watched this movie yesterday, I think it illustrates the concept of shareholders and investors, and what businesses really stand for, quite well. In part, you have a responsibility towards your employees today. In part, and that's where investors come in, you have a responsibility towards the future. In a sense, if both stakeholders were to communicate, the world would be a better world…

For me, it's a pretty safe bet that if I want to start a business, I'll need investors. And people starting a business in the world of food/retail venues, will definitely need a team also. Both will be depending on getting paid; the employees depending on today's cash flow, and the investors betting on a future value. That is life and the way this resource-intensive industry works.

The fact is that venture-backed firms—firms that have external and usually active investors, which hold a share in the business—are usually more successful that firms that are not. The reason for this is that active investors, while sometimes appearing cruel, actually make a business more efficient through various mechanisms such "fat-"trimming and performance-based investing, and also through their know-how and contacts in the industry.

This of course depends on the type of investors you have. On Tech IT Easy, I wrote about the four types of business angels, namely:

  • Operational Expertise Business Angels: These have been or are major executives in the industry they are again investing in and are instrumental in growing the company through providing both financing, expertise, and contacts to suppliers, partners, and customers. Venture capitalists highly value these types of early-stage investors.
  • Financial Returns Business Angels: These are high-worth individuals, but characterised by a passive involvement in the companies they invest in, except for maybe some business-advice. Too many of these types has a negative effect on attracting venture capitalists, as it does not grow the financial pie.
  • Guardian Business Angels: These are probably the most active types, provide a lot of support, take seats on the board of directors, help find venture capitalists, and are highly valued by them. Since entrepreneurship is a highly people-chemical business, this makes sense.
  • Professional Entrepreneur Business Angels: These are investors with the personal experience of having set up their own firms. Also the most well-know type, I think. They may sometimes invest outside of their expertise, which can be a problem, but have a lot of experience in and provide support with market-research, building up the company, meeting milestones, and other business-building activities. They are also highly valued by venture capitalists.
That's all nice and hypothetical, but what it really comes down to is…

Garbage-in-garbage-out
When dealing with investors, it's important to find out what their expectations are. On what basis are they valuing your business. If it's garbage, there is no point in continuing with an investor. I'm not going to define garbage extensively, but if an investor is only after personal profit, then that's a sign of garbage. If he or she is after maximising profit for the business, that is better.. to the degree that the core-values of the business don't get minimised.

That's why it's better to deal with investors that have at least two qualities*, preferably three. One: he or she has to know the industry, or else how can they accurately calculate the value—taking into account stuff that can't be entered in formulas; Two: depending on the stage of the business, he or she will have to be in it for several years, at least 7 when it concerns a start-ups, I would think. And three, he or she has to be what is called a Mensch.
(*: feel free to correct me on any of those).

In terms of employees, you also need a certain profile of people. They need to be dedicated to the business, not necessarily their pay-check; They need to understand business-concerns, and for that to happen, be involved with the business beyond their job-function. They need to understand and share similar values, which again requires two-way communication.

The implication for management is fairly clear, I think. When trying to reconcile both parties, you need to understand you're dealing with someone beyond their job-description. Employees, active investors, shareholders, customers, all have something in common. They are human, they can have vision, they can learn, grow, adapt, change, do. This is important during the selection stage—which employees will I hire, who will I ask to invest in me?—and the co-operative stage—how will I find the middle-ground between these people's concerns?

Other people's money? Get rid of the "other," get rid of the dissonance, and you're on the right track.

pancake.jpgFirst of all, "forgot the name?" Indeed I did and that's already a bad sign for any place. I was brainstorming with my dad on business-ideas in a pancake-shop that had just opened. It still smelled of paint and the coffee stunk as well. The owners were stuck at the back, busy with making pancakes. But ok, I can blame plenty of this on lack of experience, growing pains, whatever you want to call it.

But here's a list of some good things, I think a pancake-place should possess.

Pictures of pancakes: these are wonderful creations, can be filled with sweet and savoury things. Why not advertise that. Instead they had this:


Pancakes (list of ingredients).............Small.....Large

1 ingredient.................................price X...price Y

2 ingredients................................price X...price Y

3 ingredients................................price X...price Y

Very organised, but so lifeless. How does this make me want to try one of their oh-so-delicious pancakes. It doesn't.

A take-out menu: I was a vegetarian for two years. One of the things I missed was that there are very few places catering to non-meat eaters. A savoury pancake can not only offer a great alternative to meat-dishes, it's also a great alternative to pizza. Why not grow your business a little?

Feedback-cards: as a new food-venue, i would consider this vital. How do you know that your formula works? Customers (e.g. me) can sometimes be much more creative than you can imagine.

Free internet and plugs: I already made this point before, and I know pigs will fly before it happens, but free internet = viral marketing!

Something to make me remember the name: a take-out menu, feedback-card, business-card, anything; don't be a commodity!

Finally, a better coffee would be nice. I understand that it's a pancake-place but they don't expect everyone to eat pancakes, do they?

And something I was brainstorming about with my dad: the importance and fallacy of personality in running a food-related venue. I'm sure I'll go into that another time.

The picture is courtesy of thisnylife.com

The answer is that T-Mobile tries its best. Since I've been a customer, here in the Netherlands, I've received birthday-balloons every year, free movie-tickets, friendly (!) reminders to pay my bills, and most recently, because I changed my billing-adress:

tmobile human.JPG
(Dutch subtitle reads: "visit me for a coffee?" and coffee in the cup can be scratched to release a coffee-smell)

Look, I was cynical too, the first time I received my birthday-balloon. But considering how hard it is for a faceless corporation to have a face, I can really appreciate that they are trying.

I nearly shed a tear when I got this—about 5 of these postcards in an envelope—in my mail, and if I wasn't speaking about a corporation, I would've given them a call and thanked them. The thing is that their rates are nice also and I've since recommended their service to anyone that was looking for a new contract. So, I'm not sure where it's the economics or the service, but their way seems to work.

Alternatively, I'm also a customer of Orange, which gives me a pretty affordable ADSL internet-connection but I hate them. They are unreliable, unfriendly on the phone, overcharged me, and generally I feel unappreciated. I would not recommend the company Orange to anyone.

But get this, just as I was writing this post, I heard that T-Mobile just bought Orange in the Netherlands! Yay!

So face, no face? You decide, but I choose the human corporation.



I'm intrigued with finding out more about the creative process of creating real-life things, as it will be helpful in designing venues that work. Last night, I caught an interesting documentary on Discovery, on the creation of the SYN-US, a Ford concept car for the Detroit Auto Show in 2005.

ford synus.jpgWhat is the SYN-US?
Well, as you can see from the picture, it's a tough-looking car. Part of its name comes from the word Synthesis, meaning a mix of the hard, edgy exterior, and the soft, flowing interior.

Some of the influences were, as far as I can tell:

  • the hard landscape of the US (mainly L.A.)
  • possibly post-911 sentiments (speculation)
  • the "Pimp my ride" madness, which affected interior design (speculation)
  • the pressure of concept-car competition - trying to be different
  • the particular profile of cars showcased at the Detroit show - typically manly
  • the SUV (exterior) versus the metro-sexual trend (interior) (speculation)
  • the engineering platform used (more on this later)


The evolution of the car-image
During the documentary, the Ford's brand-image person, responsible for this project, gave a nice overview of the way the car has been perceived and designed over time.

60s - rebellion = tough cars
70s - confusion = she didn't know if there was a clear trend
80s - status = luxury cars
90s - lifestyle = differentiated cars
00s - choice = more and more fragmentation in design


Project SYN-US
For some reason, Ford decided on a B-model car, meaning a smaller model, even though those traditionally didn't do well in the US. From what I could see, the process was done in several stages: research; design; building phase; and interior design. All of which had different considerations, and was, of course, supervised by Ford's management (e.g. the brand-image person). And then of course, the presentation phase.

Research-phase
Essentially, the team needed to form an image of the current situation in the US, as well as how it would develop, to design a product that would fit in, or possibly lead the way. A couple of (cocky) trend-researchers were hired, who tried to look at all things currently playing on the market (I speculate: post-911, pimp-my-ride, beginning of the green trend, metro-sexuality), from the internet and other media, as well as just driving around. The project was code-named "Gorilla" of that gives you a clue. They came up with a film, which was supposed to inspire the designers while creating the concept.

Design-phase
This was conducted by two main designers, one British and one Italian, I think, who came up with a tank-like model with a soft interior. This model was moulded in clay by an advanced machine, and little tweaks were made on the outside. One of these was to create door-handles which appeared like those used on a safe.

Important is to realise that there was a big constraint to the project: the engineering platform. For economic reasons, it can be useful to use existing technology, because that would make the whole product-process much cheaper (factories don't have to be adapted, etc.). In this case, they choose the existing B-model, the Ford Sierra, which had consequences on the dimensions of the SYN-US and type of engine used. Usually, I think this is done when a previous model in the same category is doing very well, and it would not be sensible to create a whole new parallel production process.

The building-process
I can't say much about that. Much machine work and quite integrated with the previous phase. I can say that the design was exaggerated for effect—auto-shows can be very competitive.

Interior-design
Again, quite integrated with the previous phase. Essentially, a trendy-looking interior designer (female, Swedish-looking) was brought to the project to bring this soft, flowing vision of the interior to reality. She decided on soft, skin-like materials in an equally skin-like colour theme. Noteworthy was that she had the words "do not touch" painted on the door-handle, expecting people to want to touch it anyway. Those quirky designers...

The presentation phase
Not much to say here either. A movie was shown, an executive gave a speech, and people could touch it. Typical auto-show stuff. Apparently feedback was not too negative.

knowledge spiral.JPGFinal toughts: The knowledge spiral
All of this reminds me of the knowledge spiral, a concept known in innovation. Basically it's the movement from tacit knowledge—highly personal, hard to formalise and communicate—to explicit knowledge—formal and systematic, easily communicated and shared—back to tacit knowledge, and again explicit knowledge, moving in a continuous spiral. Essentially this works in a fairly rhythmic pattern, staring with an individual that comes up with an idea.

This idea comes from some kind of tacit place—a feeling, experience, know-how. In the case of the SYN-US, it was the trend-research being done. This can be communicated to others, but slowly, maybe in a participative style (the documentary-film that they produced). This must then be made explicit for the organisation (Ford) to use this knowledge. A design is made as well as a model—explicit knowledge is shared among the project people. If this model is successful, it can be shared throughout the model-B division (like happened between the Ford Sierra and this project) and the explicit knowledge spreads. After a while, it can become internalised in the principles and values of the firm, in which case it again becomes tacit. The company can then use this tacit know-how to develop further innovations, ingraining some of what they know already into future designs.

So essentially the movement, like on the picture is:
tacit - tacit
tacit - explicit
explicit - explicit
explicit - tacit
etc.

More on the knowledge spiral can be found here.

Final thoughts 2: relating this to Food and Retail
In the sense of architecture, you have two types of design. The original, where you construct a building, which can develop in a similar process as above, and in the sense of an engineering platform—you end up working with the constraints imposed by the internal space, as well as the environment you are working in. In both cases, some interesting lessons come forth from the way the SYN-US was developed.

FnR-businesses are also people-businesses, which can benefit from understanding the way the knowledge-spiral works. Essentially someone (the founder) can have an idea, it is still tacit at this stage. His or her initial partners will also likely share the same values or be able to understand them quickly. But the bigger the organisation becomes, the more important it is to work on the explicit. Developing operational manuals, films, processes, etc. all of which can be shared through training and other communication, are essential to growing large and well-working organisations. Again, the way the the SYN-US was developed—by people and through processes—sheds some light on that issue.

Nothing illustrates people's preference for convenience more than the evolution of money. Go from bartering goods (think rotting tomatoes), to (heavy) gold, to (less heavy) gold-pieces, to certificates of value, to paper-money, to credit-cards, to ... mobile phones(?) and I hope the point is clear. When it comes to money, people would rather not deal with it at all; they just want to be able to buy stuff.

The same applies to music-media and the need for quality vs. convenience. Take a live concert: the best possible quality of music, not only can you hear it in the best surround-sound possible, you can also see the band, and feel the emotions going through the crowd. It's exhilarating, at least I think so. Anything reproduced really only gives you half the quality. 

The tape became a success, even though they were accompanied by a lot of hissing, because it was so easy to integrate it into social life, like music should be. You could exchange it with friends, carry them in your pocket, even listen to it in your car. The CD really had the same qualities, with the added benefit of no hiss. And along came MP3s, worse quality than CDs again, with their compression and small sizes. Yet it became an instant success because we could exchange it globally, and it had no DRM for liberal home-use. You could burn it on cheap cds and play in your car.. yay!

convenient music.JPG

iPods are infinitely more expensive, and even though I got my 20 gigs worth for only €50 (student-deal), I don't think I would hesitate to buy a €300 model when mine breaks. The simple answer is convenience again. It is expensive, yes, but it's so nice to carry a device around that allows you to play songs in any order, create flexible playlists, as well as play podcasts and, for some (not me), play video and browse websites, even call / photograph people. How cool / convenient is that?

John Gruber wrote another good post about Amazon's new MP3 store and the fact that it works so well with iTunes and hence iPods:

People buy iPods because they love them. If your music doesn’t play on iPods, it isn’t going to sell. And so if (a) you refuse to sell music downloads without DRM; and (b) no other DRM system other than Apple’s is compatible with iPods; then we’re left with a situation where the only successful store is going to be iTunes. What Universal and EMI now seem to have learned, at long last, is that (b) is completely under Apple’s control; only (a) — the labels’ own willingness to allow their music to be sold without DRM — is under their control.

The point being is that people don't care about DRM, it will not affect the way they decide things. They did not buy at the iTunes store because they were locked into the iPod. They bought at the iTunes store because it worked so well with the iPod.

That said, the way Apple treats the rest of the world is disgraceful and I have yet to buy more than 1 song in iTunes. It pissed me of because I couldn't use it anywhere else, because US-customers get a more complete offering, including video, because I already feel like a criminal before I even stole anything... But hey, I agree with the core-idea of iTunes, not necessarily the legalese surrounding international business.

Allow me to digress for the rest of the post.

The dilemma of hardware-companies
w580i.pngRecently, I bought my brother a Sony Ericsson W580i phone. It has a lot of media-capabilities and is actually kind of cool. I like the way that Sony is trying to turn this little device into the new walkman. But there's two things I hate about it. One is that I need to use a special plug* with any headphones I want to use (they don't show you that in the picture). OK, it sucks, but I can deal with it. And two, the software that comes with the phone stinks!

It might be the computer (note that iTunes works well on that one), but as soon as the software started I was both confused and frustrated. Moving music is a three-step process; I had to dig to understand how to import my music; and the whole process is kind of slow... even lags down my brother's PC (might be his crappy PC :). But you could summarise the whole thing down to being pretty unsatisfactory. Alternatively you can use the phone as a hard drive and drag files to it using explorer, but it then doesn't import metadata, like eh what the artist is called and the album.

In both cases, Apple and Sony, you are restricted to using the software. But the iTunes experience is actually kind of nice (except if you want to export things — if it wants to become DRM-free it should also allow me to move music out of my iPod). You can create brilliant playlists, etc. iTunes is in fact the interface that no media-player manufacturer has as yet managed to create, both on the player or on the computer. And what you see with Creative, Sony, etc. is that they are clearly not software-companies, focussing all their energy on the player instead of the software on the computer. But I digress.

The point is that, even though the W580i is infinitely cheaper, it is not Walkman 2 or 3, because there is actually no improvement in the experience. In the technology, yes, in the experience it's a couple of steps backwards. The reason is very much Sony-specific; it has the weirdest business-structure where it splits all its divisions into a competitive matrix, where each has to fight for its yearly budget (if that sounds familiar, it's because public institutions like schools operate in the same idiotic way.) And because of this divided structure, there is no co-operation, no synergy. The hardware-people create brilliant hardware, like they've always done. The software-people, because they suck, create inferior software, and continue to under-perform under Sony's "interesting" mechanism of only rewarding the strong.

Businesses who want to compete for the next medium in music need to understand that customers make decisions based on a very simple principle: "How is my life better because of using your product?" You need to look beyond the lab, into people's homes to see if your hardware-solution might benefit from better software, or vice versa. Or else, you can't even hope to succeed against Apple.

The good thing about the rise of online media-stores, is that if you can create software that works well with them (e.g. Amazon imports music in to iTunes), as well as well with your player, you are already half way there.

2 things I hate: PR & Maths

This is more of a personal* rant than anything purely retail related (*: isn't anything blogged personal?), but I've been in a terrible mood these last few days, and what better way to get out of a mood than a good spiteful rant, lashing out at innocent tools like the ones below.

I hate two things about business: 1. Post-floatation PR = total snore-fest. 2. Anything related to math = like sinking a nail into my brain... slowly. Both problems are fairly related, I think, and I will explain why.

1. Post-floatation public relations
My life is an exercise in duality. I've been rich, I've been poor' I've been hated, I've been popular; I studied strategic management and I studied entrepreneurship. There's something I really loved about strategy and there are things that I really hated, such as: there's no starting position as a strategist. If you want to work in this field, you either start as an analyst (snore-fest x 1000), become a consultant (shoot me now), or you start your own business (yay). That's were entrepreneurship comes in: multi-flavoured coke (yes strategy is in there somewhere).

This summer I read 3 books on companies: eBay's Perfect Store, McDonalds' Grinding it out , and Starbucks' Pour your heart into it. The only one which I could read all the way through was McDonalds.

I was eating up the words of both the Starbucks-book and the eBay-one, for about 60% of the time. Then snore-fest happened. The companies went public. For McDonalds, it actually worked out. Ray Kroc has a knack for staying in touch with his core-values and managed to remove himself from much of the mess. Or perhaps it was because he wrote the book decades after and his trauma was over. For Starbucks/eBay, as soon as the companies went public (in the book), I had to stop reading, and when I eventually resumed, it was at 1/10ths the pace of the pre-floatation material. I haven't even finished the Starbucks book yet (only 50 pages to go), because he's writing about his charity and about protesters.

You get the best insight into what it feels like to go public in the eBay book, because it was written by an excellent and somewhat objective journalist: Adam Cohen. He interviews people throughout the book, gets their emotions, the way they worked, what was exciting about the company that was profitable from day 1. Before the IPO, it seemed like it was a wolf amongst other wolves and some lions. People were happy, excited, and stressed about the ride. The best chapters I've ever read in a business-book.

Then, the company turned into an elephant and everything seemed more abstract, more distant, like pesky little flies. Any wolves on the horizon and the company tried to gobble them up. And more and more people came onboard, diluting a lot of the core-values of the founding staff. I still thinks it's a great book, but what a snore-fest at the end.

Same with Starbucks, though I reserve my final judgement for when I finish it. I loved the way the company was started, and I also to a degree love the stuff that happened after the IPO. But it suddenly got a lot more boring, more about PR, about how to handle investors and stake-holders. How to deal with people who attacked Starbucks just because it was a prime-target, because attacking it would solve all the problems in the developed world.

The difference between entrepreneurship and corporations. If you hate a start-up, start your own. If you hate a corporation, write an angry letter, or better, get a job there... Enough said.

bloody formulas.JPG

2. Mathematical business
This really is a much deeper hate, one which I've had for an insanely long time. First, I must say that I'm more of a right-brained person than a left-brained one. No, forget that, I am human. I like psychology, I like predicting trends, I like innovation, I like creativity, I like risk. All of which I don't think are very well contained in formulas.

Now that of course means that I love statistics, because it predicts trends and confirms my own feelings about stuff. I love the book, Freakonomics. But I abhor it when formulas lead to the abstraction of values, much like the above rant on PR. To some degree, I can imagine Hitler sitting in his bunker with his partners in crime, calculating the ROI of Germans vs. Jews and deciding the former was a safer bet. And when I look at business today, I imagine bankers, even Jewish ones, make similar decisions about a businesses' assets and employees, making financial (read: life or death) decisions on paper everyday, never considering that there is life where a formula cannot penetrate.

More entertainingly, remember the Ben Stiller movie: "Along came Polly?" Ben Stiller is a risk-analyst, afraid of any discrepancy. And along comes Jennifer Aniston (Polly) who throws his whole life upside down, so much so, that he decides to make a risk-analysis of whether or not he should have a relationship with her!? That is what I'm talking about! For another good risk-analysis vs. Lo-o-ove movie, check out "Knocked Up."

Ok, my rant is done. It was largely stimulated by an article about "balanced scorecard," I think. I feel better now. Hope you do too.

The formula in the picture is for Net Present Value.

In this regular segment I focus on news of note (to me at least), about brands that I'm familiar with. I may someday write about Nordstrom, Costco, and Walmart, whom I hear great things about in terms of service, supply-chain management, and frugality, but until I come in contact with what they sell, I'm not sure I can say much. That said, I'm aware that Walmart made moves into Germany (and failed, which intrigues me), and has taken over at least one chains (Asda) in the UK as well, which I have visited. So never say never.

Coca-Cola and Nestlé
coke_blak.JPG.jpgCoca-Cola has, for a third time, partnered up with Nestlé, this time to develop coffee and tea-products. The previous times, the company worked Nestlé to develop Enviga, a calory-burning drink; and with L'Oréal, a daughter-company of Nestlé, to develop the beauty-drink Lumae. So reports Dutch Marketing Tribune.

A few months ago on Tech IT Easy, I expressed my wonderment at the Coke Zero brand and what their aim was there, as well as held a rant on how un-innovative "junk"-drink (or -food) brands are in general. I think this is an interesting move. It won't make the world a better place, perhaps, but it'll be more colourful.

Similarly, I know that Starbucks formed a partnership with PepsiCo a few years back, to develop canned coffee-drinks, also to be sold in supermarkets. So this could very well be a competitive move, by either Nestlé and/or Coca-Cola to compete with a perceived threat of Pepsico's or Starbucks reach into customers' taste-buds. Update: Looks like MSNBC reported on a similar story last year.

Leonidas expands to the cafe-arena
leonidas.jpgIn other, coffee-related news, Belgian chocolate-manufacturer and retailer Leonidas is opening a coffee-outlet in the Netherlands, a first step of what it calls a worldwide expansion of its products and outlets. This according to Dutch publisher, Elsevier.

Again similarities can be drawn with Starbucks (sorry, SB-haters), which started as a producer and retailer of coffee-beans, before it expanded into the business of coffee-bars as well. I think what both Leonidas and Starbucks have in common is a reputation of offering fine products as well as offering a third place which customers feel comfortable in. It's a relatively easy step-up for Leonidas, if its experiment were to succeed, because it can simply adapt its existing retail-outlets.

Isn't the world of coffee exciting?

The psychology of leadership

This week, I wish to focus more on the interpersonal field of business. How to manage, how to motivate, how to be...

I've just finished an excellent article on sciam, regarding the equally titled subject of psychology and leadership. This is an area, I think about a lot and I cannot say that I have mastered it as yet. But that won't prevent me from trying.

brain.jpg

From the article, I learned that our understanding of leadership has evolved over time. We started with viewing it as the action of single men, which stemmed from the way our reality worked at that time (think: the kings and queens in their ivory towers); we then slowly moved towards leaders that were ingrained in the social structure that they were leading (think: how people's revolutions lead to changes in the way governments ruled).

What is important is to form an identity which is shared among the organisation, and this very much depends on the way the "society" is organised; the reality it is operating in. Democratic organisations depend on a co-operative type of leadership; autocratic organisations do not share that methodology.

There are several methods to instil a social identity:

  • Using ways to become one of the group, through speech, dress, salaries: The article mentions Bush's vocal "intricacies" as a method for becoming more sympathetic with the group. It's true that Bush got a lot of bad press because of his interesting way to express himself, but it's also true that it's usually the vocal minority that is heard the loudest.
  • Favouring fairness in solving disputes: This should be clear. The people do not like it if leaders play favourites. They also don't like it if they discriminate against outsiders (see the Jena 6 debacle for an excellent case-study).
  • Molding social identities through words; defining a social identity that - matches the policies they are trying to implement: The article mentions president Lincoln, who emphasized values of liberty, while implementing policy to abolish slavery. Similar tactics can be witnessed today.
  • Not only making identities real, but making followers experience them as real: Talk is just talk. You have to Match vision with a strategy to make that vision a reality.
But, using the analogy of politics, even today, we have not reached a perfect understanding of leadership yet. Just last week, the Dutch government announced that it would not hold another referendum on the introduction of the European constitution, after the majority voted a resounding NO on the last one. Power to the people, no more?

I tend to agree that the involvement of people is a condition for today's leadership. Tyrannies are no longer accepted. However, I also don't think that everyone is equal in their understanding of decision-making. This is a sad truth, but with the acceptance of leadership comes a certain understanding that this is accompanied by a level of expertise (more on this in another post).

To bring these two together, the leader and the followers, there must be a shared understanding, which comes from proper communication. The reason the European constitution failed was the same reason why no-one reads End User Licence Agreements (EULAs). Because product-makers and politicians phrase their words in ways that often only lawyers can understand.

I can guarantee you that the majority of the Dutch population did not read the document of the constitution. But I'm a pretty sure that a large proportion of the US populace read theirs. The simple explanation is proper presentation. Even I, a European, can remember certain amendments of the US-constitution, because I've seen it in a bullet-point format. The implication should be clear.

So the 1-sentence conclusion is: If you want to lead, make your direction understood.

The picture is courtesy of Extensor.co.uk

P.S. I just had to add this Scott Adams cartoon. Very fitting!

Bringing it all together, Month 1

one month award.JPGSo it's been nearly 30 days since I started this weblog, and not much longer since I decided to endeavour on the journey of learning about the world of sound + food and retail, and eventually opening a business there. The posting-rhythm on this blog has been going relatively well, I pretty much always have ideas on what to write about and, right now, already have material for the next 20 days (1 month of blogging), which is crazy!

I want to make it a monthly tradition to recap, both for my own benefit, because my topics tend to be very diverse; and for the benefit of the few readers that are passing by, because I think that blogs navigate terribly.

I will start with a recap of this blog, and then go through what I'm currently thinking about, and what the future will bring, both on- and off-line.

Previously, on Sounds + Food 'N' Retail...
So far, I've tried to approach the fields from different angles and relating pretty much any material I could find to it. User-response has not been great and the cause is probably that I need more focus, but let me attempt to bring together what I've thought about so far.

There are several issues, I felt I needed to focus on. One were my own vision and ideas about the business I would like to start, and initial thoughts were phrased in my posts on:

I also thought about market-research issues, in:And design, in:Along with that, I thought about values:
  • regarding transparency part 1, 2, 3, and 4;
  • regarding people organisations, part 1, 2.
About the value-chain, aka working with partners, suppliers, etc.:I spoke of trends and how to forecast them, in:I approached success inAnd discussed a number of companies, such as:
Tschibo and LaPlace; NBC; McDonalds; Starbucks, as well as the country of China and its explosive growth.

Coming up, in Sound + Food 'N' Retail...
my personal mountain.JPGSo, so, so much! If this enterprise were climbing Mount Everest, I would say that I'm still planting my tent. So far, I have looked at a number of topics and formed some understanding of the principles of people-organisations, as well as some understanding of my own values towards running a business. That will continue for some time.

Generally, for this blog, I've decided on some regular features that I want to hold in the future, including:
  • News from the hive - where I discuss stories of note about retail and/or food;
  • Media-interludes - which really is just an excercise in taste;
  • Strategic discussions - like the HBR-discussions, where I discuss issues of how to structure business-activities;
  • Personal development - where I discuss methods of improving both yourself and your staff;
  • Personal vision - where I discuss my own plans in the industry (much of this is also engrained in the material that I write about);
  • Inspirations - where I highlight people and businesses that I admire and discuss their sites / books / work etc.
As well as all expanding on the past topics: values, people, partners, design, growth, market research, etc. etc.

I have to admit that, at this stage, anything can change. I am looking for a relevant job, and have a number of considerations regarding this, which I will write about in the near future. I think that being in the right place at the right time can accelerate a lot of things, alternatively, I may love my job so much that I could decide to stay for a while longer. I'm also composing a list about what people I want to talk to and what places I need to visit. One event is still on my agenda, visiting a workshop for entrepreneurs in this field, next month in Amsterdam. I hope to meet a lot of interesting people there.

My passion for this field has been with me since I shopped for food with my parents as a teenager; or went on holiday, or ate at restaurants and danced at clubs. It is part of me, so this blog, in whatever shape it may develop, will continue for a long time to come. 

That, right now, is the only sure thing I can say.

The art of forecasting

Is the world of food and retail an innovative one? I'd like to think so. But even if it wasn't, I'd like to be there because I think I could make a difference, and if it was, I'd like to be there to swim in the stream of progressiveness.

An article in HBR advises CEOs, and pretty much everyone else, to not rely too strongly on other people's forecasts, and instead undertake them yourself. Because "the best way to make sense of what lies ahead is to forecast yourself." And I think this is actually a vital skill to possess for entrepreneurs in any field.

Six methods are presented in the article, that should make this task a little easier:

1. Define a Cone of Uncertainty


Unfortunately all the Google-image results had their cones reversed, but this picture gives an indication of what a cone should look like. The wider the cone, the better. Too narrow a cone can mean unpleasant surprises. Too wide, a lack of cohesive strategy.

2. Look for an S-Curve
Basically, change does not come in a straight line. Usually, it starts of slowly, until it suddenly explodes. Eventually it calms down, even subsides, waiting for the next S. The best way to judge when the inflection point is going to happen is to a. read some Andy Grove and b. look at past moments in history, preferably the dramatic ones, and see when and why change happened at that time.

I think that this is very dependant on how close you stand to the curve. Both Ray Crock and Howard Schultz, founders and CEOs of McDonalds and Starbucks respectively, identified a slowly growing trend in their areas. To everyone else this would look as a micro-trend, but to them, because they were close to where the S-Curve started, they could only see it going up. Interestingly, both started in businesses supplying their later industry of choice.

3. Embrace things that don't fit
"By definition anything that is truly new won't fit into a category that already exists."
You essentially have to look for indicators of upcoming change, as unlikely as they may be. HBR mentions a good example: Everquest characters, which were first being sold on eBay until 2001, then banned, but years later Second Life decided to use a very similar business-model.

I personally think it's always easier to see these things in retrospect. That said, using the Everquest-example, this is a case where consumers clearly voiced what they wanted out of a virtual world. It was up to Sony to listen.

4. Hold strong opinions weakly
Essentially, lots of weak information that overlaps is more reliable than a bit of strong information that confirms what you believe in yourself. This should be very clear: keep an open and objective mind.

5. Look back twice as far as you look forward
Before the internet-bubble and -bust in 2000, there was the software-bubble and bust in 1990. Are we now approaching a web applications bubble? Fred Wilson and Dave Winer seem to think so. And look back even further, the media-movement. From theatre, to cinemas, to televisions, to video-recorders, to... the internet? All of this should give plenty of lessons of how volatile the future is, and how rich with opportunity.

In the case of technology, there are, in my humble opinion, two things to watch out for. One, is radical change, which is hard to predict. Two, is the drastic fall in cost, which means that there will be a torrent of competitors flooding and devaluing the market. This is certainly the case now, meaning that some businesses are certain to go bust. The right thing to do now is to invest in radical innovation, propelling a business forward into the next era, as well as ensuring a diversification of efforts. It's never good to keep your hands in a shrinking bucket.

6. Know when Not to make a forecast
As HBR notes, "the cone of uncertainty is not static, it expands and contracts." There are certain situations where forecasting is more difficult than usually. During rapid change, it is nearly impossible to predict what will happen. Similarly when trying to predict change in very complex and diverse environments, say one a global scale, it is very difficult to predict where and how change will happen. The only advice here is to make multiple predictions, both in parallel and subsequently.

Final thoughts
In terms of food and retail I don't yet consider myself a visionary as to how the future will manifest itself. I am a keen observer of current and past events. I see that people have both less time and more time; men are more focussed on metro-sexuality, and at the same time tired of it; health is more important as we have more passive jobs; People become more anti-social, but are leaning towards finding other ways of connecting with people; social gaming is not dead; India and China will and are bringing lots of change to most industries; technology will continue to take over the mobile space with all the sociological and behavioural consequences that may have; children are the major deciders of how household money gets spent, and as they grow smarter, they may even become major earners in households; the nostalgia movement; etc. etc.

And, particularly in this area, I look at the past in trying to draw up a vision of how I want the future to look like. The way I see it, the Past is that which inspires people to create the future. The Now represents the tools (like the ones above) we can use to create it. And the Tomorrow represents the, often surprising, results.

You can buy the full article, written by Paul Saffo, here. HBR also has a very related article on generations and how customers and the workforce will evolve in the next 20 years. Worth checking out!

Last Sunday, I finally got around to watching the F8 Facebook developers-keynote, which was released in May this year (Thanks Jeremy). Similarly, this morning I got to read the transcript of Mark Zuckerberg's, the CEO of Facebook, keynote and Q&A on the Techcrunch40 event. Both made quite an impression to me, enough, I'm sure, to warrant a discussion (not started by me) on Tech IT Easy, I hope.

During F8, Mark presented Facebook as combination of three consideration for developers:
facebook platform.jpg

  • Deep Integration
  • Mass Distribution
  • New Opportunity

Ignoring the marketing-speak and the fact that Facebook is a software, there are many parallels to be found in successful retailing.

Deep Integration: Mark speaks of code, I speak of the source-code that a retail-outlet is made of, it's internal design, stock, packaging, marketing, etc. If you want to optimise the situation for both you and non-store brands, you should find a way to deeply integrate their products into your assortment, and adapt your marketing and design accordingly. There are subtle strategic considerations why this may not always be happening, mainly related to maintaining a power-balance between retailers and suppliers, but that is a conversation for another day.

Mass Distribution: This is based on both the number of visitors your store has and the number of outlets spread regionally, nationally, or worldwide. The more eyeballs you can offer third parties, the more attractive your store becomes to their presence.

New Opportunity: Mark speaks about revenue, offering application-developers the ability to integrate their own advertising and transaction-possibilities and to collect 100% of those returns. This would be very un-characteristic for "real-world" retailers, I would imagine. For one, their cost-structure is very different from Facebook. Renting out space to applications on Facebook is fairly cost-free, ignoring bandwidth, and would cost some real dollars in the real world.

In the software-world, there is the interesting concept of an API, an application programming interface. Facebook released one for its developers, and while they have the full freedom (within norms) to develop applications, there is still an underlying framework of how to build it and in what fashion to present it to users.

I'm just hypothesising, but this would be one way of integrating similar philosophies into food and retail places. Think about the way values are passed down to subsidiaries or franchises. By bringing a business to a level that much can be rationalised into training- and franchisee-manuals, you can apply similar thinking to 3rd-party's in-store activities.

One such example, at least it seemed that way, is a Naked Chef stand, which I came across in a Dutch department-store the other day.

naked chef quality label.jpg

As you can see on the picture above (I hope), the stand is located in the middle of the kitchen-section of the store. It features a combination of books by the naked chef, wines and other ingredients, and on the back, high quality cooking-utensils.

This is the kind of partnership that does well, I think, selling products from both parties in a symbiotic fashion.

The other big online retail-platform is of course eBay, and since I read The Perfect Store, perhaps I'll write more on that in the future.

The Michelin star

michelin stars.jpgCorporate strategy fascinates me, as do the twists and turns a brand can make. Michelin is known for at least two very different, yet strangely related things: it is a manufacturer of tires and it publishes the Michelin Guide, the latter of which is very relevant to the industry of my choosing and what I briefly want to write about.

Travel at its heart
From the company's history, you can see a clear passion for exploring new places, greatly facilitated by the most-used vehicle for exploration in the world: the automobile. As innovation lead to more and more cars, busses, and trucks being used worldwide, and thus more tired being sold, it was only a logical step to enrich people's lives with guides and maps, to share the quality places that were out there. The company could have chosen to remain a simple commodity, a manufacturer of the seemingly simple tire. Instead, it chose to glorify it, and I think many people's lives are better for it.

The Michelin star
This rating, given to restaurants, is probably the most well-known worldwide. Having or losing a star can make or break a restaurant, sometimes leading to 100,000s to millions of Euros more in a restaurant's annual revenue, or vice versa. Michelin, which publishes these ratings in their Michelin Guide, classifies restaurants as follows:

  • Bib gourmand: This is not a star, but an award for "serving a good meal at an affordable price."
  • Espoir: This is a new rating (since 2006), and indicates promising restaurants, which might be awarded a first or second star next year.
  • Restaurant *: One star means that it's a very good restaurant in its category.
  • Restaurant **: Two stars mean that it's a refined cuisine, worth a detour.
  • Restaurant ***: Three stars mean that it's an exemplary cuisine, worth a special journey.
Stars are awarded quite sparingly, which is one of the criticisms of the guide (more to be discussed in a second). For instance, in the UK, out of ca. 5500 restaurants, only 98 possess one star; 11 have two stars; and 3 have three stars. In the Netherlands, although I don't know how many restaurants there are in total, there are 70 one-star restaurants; 8 two-star ones; and 2 three-stars; as well as 70 bib gourmands.

In 2005, France had the most restaurants that were awarded stars (620); followed by the UK (230); and Italy (255). And, while I'm not sure it's very significant, Luxembourg has the most stars per million people (32.6); followed by Switzerland (15.7), Belgium (11.0), and France (10.5).

From Michelin's FAQ, I found out that their guide is based on the same principles as when it was founded in 1900, "because they are approved and supported by readers and travellers and are considered a benchmark of quality within the profession." These include:
  • Visits by anonymous inspectors, who are professionals with a background in the industry and are on the full-time Michelin payroll.
  • Offering a selection of the best hotels and restaurants in all categories of price and comfort, with no preconception or agenda other than to meet the expectations of readers.
  • Independence, meaning that inspectors always pay their own bills and the MICHELIN Guide is entirely independent of the hotel and restaurant industry.
  • And, that the guide is updated every year to guarantee the accuracy of the information in it.
Last, but not least, the guide has been criticised on several fronts over the years. One is that it is very slow to react to changes; that it is conservative in regards to awarding or taking away stars; that it is secretive in the way the testing is done; and that it is unreliable in regards to how it awards restaurants outside of France. It sells around a million guides around the world, and has most recently launched a New York guide.

For further reading, check:
Update: Final thoughts
So how does this three star system relate to FnR?

The restaurant-business clearly is very different from regular retail-businesses. More competitive perhaps, and certainly perfectionistic. But also very secretive, in the sense of a closed kitchen and sometimes the attitude that some of these restaurants portray.

The Michelin star completely falls within the vision of transparency that I have of a good business. While not perfect, it provides a service to both customers, by showing them where quality is, and to restaurant-owners, by forcing them to improve. In other words, I am a fan of such awards and competitions, as it ultimately brings an industry forward.

On a different note, I co-wrote a 55-page paper a few years ago on the internationalisation strategy of Michelin's Tire-business, compared to Bridgestone and Goodyear. I seem to remember we got an ok grade for it too. If you care for a copy, mail me and I'll see what I can do.

Delays and detours

Dear reader(s),

delays and detours.JPGNo apologies as those don't really mean much in this digital world of information-over- and underload. Just an explanation.

I've been sick with the flu for the last few days, which affected my creative drive and ability to update this weblog, as well as do a number of other things. I was planning to go on a catering-related workshop today, something I'm sure was going to inspire me plenty but had to postpone that to next month. It sucks, but c'est la vie!

That, and the other work I have to catch up on, means that updates to this weblog will be delayed by a few days, though I will post good ideas as soon as they appear.

Feel better? Good, so do I!

Vincent

The Eco-trend

dolphin.JPGMy apologies for the break of several days, I'm a little under the weather from a flue of some sort. Nevertheless, I can't help looking at things and coming up with a ton of ideas, which must simply be written down, for your and my pleasure.

This time, I'm thinking about eco-issues, which is clearly a rising trend. I surely don't need to remind people of the effect that the disasters over the last years have had on the media (think: Al Gore's "An Inconvenient Truth"), and the effect it has had on blue- and white-collar enterprises all over the world. But you (or at least I) don't really hear that much from the Food & Retail sector in this regard.

Nevertheless, yesterday I read a good article (in Dutch) on a night-club in Rotterdam, MyTown, which is rebuilding itself in an eco-style way, and another blurb on Marks & Spencer, which is opening their first Eco-store in Scotland. I'm sure there are plenty of other examples, only a Google-search away, but I want to keep it light for today.

For both venues, the eco-part comes from architectural design, making it harder for existing stores to do the same, without incurring cash-flow problems. I'm fairly impressed with some of the innovative measures that MyTown is taking, including building a dance-floor that creates energy through movement (kinetic), and a "relax roof," with solar panels and (how typically Dutch) windmills. Retail Analysis, as usual, is sparse with its details on what Marks & Spencer is doing, except implement energy-efficient measures on its electrical components (lighting, refrigeration, etc.) and using renewable wood-materials.

The business of Eco
This is a world, I've only superficially studied, so excuse mistakes in legislation. From my understanding, ever since the Kyoto agreement, the carbon-emissions per country and per company have become big business, even being traded globally. This manifests itself in such a way that even companies that pollute can acquire carbon-points from companies that are far in the clear in that regard. 

In the Netherlands, and I can't speak for other countries, except perhaps the European Union, subsidies centred around this issue are big business too. MyTown received up to €300,000 for it's reconstruction, and many architects will purposefully choose certain materials because of their eco-quality and the savings in costs it brings through subsidies. From my understanding, the same is happening across the EU, though I cannot confirm this.

As mentioned, this is the first time, I've delved into the FnR-aspect of eco-business, so I'm not sure how prevalent it is. Perhaps, with enough savings, a similar carbon-trading situation can or is occuring, certainly amongst larger chains like M&S.

Is Eco good marketing?
This is an issue I still have to study and perhaps write a future post about. Certainly eco-awareness amongst the public is at an all-time high and business "doing the right thing" can only appear more positive in their eyes. Whether it makes a difference per location or only on a Goodwill-level remains to be seen. For Clubs like MyTown, the entertainment-aspects will of course outweigh what kind of electricity they use for their fridges, however if they can package their eco-friendliness in an entertaining way, I can only see positive things coming out of that.

Oh, and in case you're wondering about the "Dolphin" picture. I was in an abstract kind of mode.

The use case

office.jpgIt's funny how there are actually a lot of similarities between software design and architecture, and venue design and architecture. When building code, you decide on a path which may be difficult to break in the future. And the same when building or inhabiting a building.

And when designing software, you have to do so with the user in mind, or at least you should do so. It is the same with designing your venue for optimal interaction.

A site, I've recently been reading for general design-thoughts is GUUUI.com. It is mainly focussed on websites and designing for interaction, but I find a lot of similarities to the stuff I'm thinking about. Useful are for instance:

and the amusing:
  • how to cure banner blindness: which has consequences on ad-design in the real world as well. Apparently plain text, faces, and cleavage / other "private" body-parts work well.
The use case
The costs of errors are great in both software and real-world venue design, though much greater, at least financially, for the latter. Still, it can very damaging to any business—soft or hard—to start of ill-designed, leading to bad reviews, and worse, scare of customers after the first impression. So it greatly helps to be prepared, even have planned out scenarios on paper or software. That's where use cases come in.

Wikipedia defines a use case as:
"describing the interaction between a primary actor—the initiator of the interaction—and the system itself, represented as a sequence of simple steps. Actors are something or someone which exist outside the system under study, and who (or which) take part in a sequence of activities in a dialogue with the system, to achieve some goal: they may be end users, other systems, or hardware devices. Each use case is a complete series of events, from the point of view of the actor."

Makes a lot of sense in in-store environments as well, doesn't it. You are designing your store as a system of parts—the room, the colours, the products, the placement, the people, the transaction, the exit, etc. And the customer / visitor is the actor.

In software, you would probably use something like Visio on Windows and OmniGraffle on the Mac to paint out scenarios. And I checked, OmniGraffle does in fact provide stencils for office-layouts, which could easily be adapted to store-enviroments. And Graffletopia.com, a site dedicated to user-created stencils, has a section on architecture as well!

Nice to know that tech and real life are not so different after all.

The picture is courtesy of simonyi

I'm following these trends as a. it's geographically relevant and I care about the topic, and b. I'm familiar with both venues.

Tchibo
You could characterise Tchibo as the German Starbucks, which decided not to expand into the catering-space, but instead focusses on the sale of coffee-beans (also in supermarkets), as well as offers a wide assortment of useful and trendy home-products—think coffee-machines & casual wear.

I grew up with the company and always identified it with the good smell of coffee as well as a place to always find quircky and cool stuff. After other supermarkets started doing the same thing however, particularly in Germany, this concept of offering a wide range of anythings, has to some extent become less unique.

From a Dutch magazine, Marketing Tribune, I found out that the company, which has 1,000+ venues, has been opening up 6 stand-alone and 45 in-store locations in the Netherlands over the last 3 years, only to close them in a few months again. The speculated reasons are cultural differences—Tchibo is seen as "too German" (whatever that means)—and high rental-prices, which I find credible.

As far as their preference towards in-store location goes, I think it is noteworthy and shows a lack of self-confidence, one emotion the Dutch certainly value. It did chose to partner up with some leaders though, such as Kruidvat—a pharmacy-like store—and Kijkshop—a (crappy) store which acts as a front for its internet site and has been doing badly as well—as well as some supermarkets.

In any case, too bad.

La Place
A completely different store and business model, a restaurant in fact, La Place has become famous by offering quality food at fairly low prices, in a self-help / buffet fashion, and until recently in an in-store fashion at another leader in the Netherlands, Vroom & Dreesman—a compartment store for pretty much anything—and owned by the company as well.

Again through Marketing Tribune, I found out that the company is expanding to Belgium, a culturally similar place to the Netherlands, in accordance with business-literature on where to expand best.

Where Belgium is perhaps not as similar is in the area of food-standards. The Dutch have, as far as I know, no national dish, while Belgium is sort of a mini-France as far as food (and beer) is concerned, with all the culinary arrogance that comes with it. This is reflected in the design of the new store, which will be more "chique" and offer more culinary delights, such as mussels, crêpes, etc.

Both businesses mentioned will be implementing their respective changes in October this year.

Btw. I'm still working out whether I will make this blog a "news-flash" site or rather spend more time with analysis, so don't expect this kind of news every day.

Who's Apple? Let's talk Starbucks!

I feel like I've written enough about Apple over the last months on Tech IT Easy, and similarly the blog-space is a-buzz with the news of iPods, new colours, new ways to get media, blablabla, how boring huh?

Well, while I still want an iPhone, especially now that it's dropped to a price where the synergy between media-player, mobile PC, and phone is actually quite compelling, I was much more interested to hear the news about yet another partnership, this time with Starbucks. If you aren't a faithful reader of Tech IT Easy, you may not have noticed that lately I spent a lot of time discussing food-related things (completely unrelated to tech of course) and in particular, several posts about Starbucks. The first was on how Starbucks uses vertical integration to maintain a high level of quality throughout their value chain (it is not a franchise!), and the second, more tech after-all, on the concept of a third place and how the web fit into this.

The third place
I hopefully do not need to go into this again too much, as much of the definition can be found on my post and on Wikipedia. But essentially a third place is the space between home-life and work-life, where we try to find some time for ourselves.

Starbucks has really been pushing this concept, both in their amazing book, and of course in their stores. I should mention that, as a European, I'm quite spoiled as far as third places / food-related leisure venues go, and Starbucks, in my opinion, could use some... personality, for lack of a better word. But that is mainly the legacy of scale economies, which is king in the US, and lead to the global and uniform-looking  chains, like McDonalds (see my other post on that here), that we are used to seeing, of which Europe, in turn, has very little to offer.

How has Starbucks tried to make their venues third-place worthy? Well it starts with creating a place where people like to be. Initially, Starbucks was a coffee-bean retailer, not selling coffee-drinks, and a big credo at that time, and ever since then, was to educate people about coffee. This is based on two vital ingredients: excellent coffee and a staff both qualified and approachable. And education and customer-service are pretty much the core of Starbucks, as I see it.

Second is creating an atmosphere that makes people feel at home. Here, music plays an important part as well as providing places where people can work and browse the internet. This has manifested itself in several partnership, with music-producers and artists, incl. Apple, as well as T-mobile to provide fairly global internet-coverage in their chains.

The latest is of course Apple's announcement that people will be able to buy songs currently playing in a Starbucks at a finger-click through itunes, and at no internet-charge.

Starbucks the retailer
After reading the book "Pour your heart into it," I've always seen Starbucks as much more than a simple coffee-chain. The company is aggressively forming partnerships to offer customers a richer experience in their stores, and expanding their reach into supermarkets as well, in order to gain mind-share. And, as Schultz announced in the Apple Keynote, the company is still in its embryonic stages, which I can easily believe.

Focussing purely on their retail-outlets for now (and not their innovative shifts into people's homes), that is what their coffee-houses are in fact becoming. Building on the reputation of their coffee, Starbucks has been extending that to other products in their stores as well, always using the credo of "quality first." While, similar to Apple, this quality comes at a premium, Starbucks is playing into current market -trends that quality leads to less price-sensitive customers, and as long as the company keeps doing well, it can keep charging these prices.

What I see is a shift from the supermarket, book- or music-stores, to places where people come first of all to relax and second to surround themselves in a type of glamour, listen to good music and buy it, read a good book and buy it, have a great coffee and buy some beans to take home.

This is only made possible because Starbucks has a strong control over their value chain and a lot of marketing power at its disposal. A regular coffee-chain, which does not own its own coffee-factories, nor have the financial capacity to own multiple stores, instead franchising them, does not have the same negotiating strength with partners to guarantee this level of quality.

While Starbucks did not entirely start from the ground up—Howard Schultz actually acquired the bean-maker after a while and took their name, it clearly pays off to start as high as possible on the value-chain, as a manufacturer, while having a keen eye for what customers want. 


I'm sure there are other lessons to be drawn from this, such as for instance lock-ins and Apple's perspective. More on this as I think about it or as you suggest it in the comments.

The Escheresque picture is courtesy of MIT.

You can't always be informative, you got to have fun too. That, and I need to take time for Tech IT Easy too, for which I have written a post on innovation management and hope to publish it tomorrow. So, as I expect this to happen more often, I have decided to have regular music and media-interludes to bring a little "colour" to this weblog.

"Bagdad Café," aka "Out of Rosenheim" (imdb / wikipedia) is one of my favourite movies. It's very different from what you'd expect. The story plays in the desert, somewhere in the US. A German woman gets stranded there and starts renting a room at the Bagdad Café, which is a little hotel-bar-restaurant in the middle of nowhere. The female owner of the place, in the mean time, is very stressed and unhappy with her current situation. But as soon as her German visitor arrives, weird stuff starts happening. The place mysteriously gets cleaned up and people start having fun. The cafe really transforms from a dusty emptiness, to a vibrant hangout where people want to be. I really like that.

So without further ado, the video below shows some pictures from the film, and is accompanied by the theme-song "Calling You," by Jevetta Steele, which is on the soundtrack. I had no idea it had been covered about a million times since then, for other renditions by people like Elton John to a house-version, do a Google-video-search. I like the Dominique-one also.

Enjoy! And check out the movie if you get a chance!

This is an opinion-piece and even more open to debate than others. Imagine 2 scenarios: 
One,
a business that bets on the network effect, that tries to lock in their customers, staying up every night worrying about competitors.
Two,
a business that starts a two-way communication process from the start. Grows with customers and they grow with the business too. The business-owner goes to bed happily because friends don't leave friends.
Call me a net-hippy, but the latter seems so much better to me. Some advantages I can list are:
  • by opening up a two-way conversation, you create what customers actually want;
  • by creating freedom of expression, you also stimulate a word-of-mouth campaign;
  • your employees are happier and more motivated;
  • you create a deeper loyalty, based on trust and friendship;
  • you create a long-term and sustainable competitive advantage based on intangible assets.
Of course there is no right-all in this direction either. But it seems to me if you're in a market to compete, you've already lost. 

Fuzzy market research is what I call the pre-quantitative research you would do for writing a business-plan. It's when you're still trying to form a picture of the industry, your business, and your role in the whole thing. And finding that out costs both time and money. How much can certainly differ per business and per industry.


In the case of FnR, you'll be looking at several costs at the initial stage. For one, it is a physical business, meaning that you'll likely be looking at geographical locations, inside and out. That brings with it travel-costs and costs of using the services in the area you are checking out. The latter is important, as you want to form an image of what a customer would feel like both in your venue and that of your competitors. 

It is also a people-intensive business, which brings with it particular dynamics of interaction that must be understood, in the sense of how you want to run your business, and how you want your employees to represent you in front of your visitors. Costs here include the time and money spent studying materials, as well as costs involved in meeting insiders, possibly at trade-shows, workshops, or just informally. You can offset some of those by being creative and combining it with travelling to physical locations, which you also want to study. 

It's also worth studying the industry that you're operating in, which has it's particular quirks and characteristics. You'll have to find financing, and there are different investors in the FnR-world than in other businesses. When running, you'll have to interact with a variety of suppliers, and it helps to be prepared for that. Again, these involve costs and time spent on relevant materials, as well as talking to insiders, some of which can be combined with the above. 

Finally, you'll have to prepare a business-plan, which will take time. Included in that is the time spent writing it, but the most money and time will be spent on market-research. That includes some way of understanding what demographics will be visiting your venue, the costs of running at a certain location, and other variables important to running your business.

Fuzzy research methods
Luckily, the most effective research method also happens to be the most profitable one: gaining experience. By getting a job or jobs in the industry, you'll not only get to speak to insiders, but you'll learn to focus on the stuff that really matters, will produce a better business-plan, and gain more trust from investors, who value experience as much, or more than a good business-idea. And you get paid for doing it, how crazy is that? ;)

The second most effective research method is also quite cheap, the online-search and running this weblog. Not only is there a huge variety of free literature and media, like podcasts and videos, but, hopefully, as I record this here, smart people give me feedback on it too! For free (knock on wood). 

Of course, there is no substitute for visiting places, talking to smart people in person, and reading quality literature. In my case, I'm signed on for a workshop in "restauranting" next month, which goes at around € 90 + travel; I have to buy a book on the subject, which is also around € 90 (I also own several good books already, worth about the same per book); and my monthly Harvard Business Review of € 15 is invaluable to me. There will also be plenty of travel in the next years, trying to come up with a good location, and ideas for the type of business I want to set up, each with its own costs. For the latter, it really helps having friends all over the world :).

I don't like the principle of re-blogs, but sometimes, no many times, people say smarter stuff than I do (in this case, John Gruber), so here goes.

NBC, in a public statement, said following noteworthy things:

In addition, we asked Apple to take concrete steps to protect content from piracy, since it is estimated that the typical iPod contains a significant amount of illegally downloaded material.
and
NBC Universal also wants iTunes to stiffen anti-piracy provisions so computer users would not have easy access to illegal downloads.
Gruber's response:
This is straight out of the music industry’s playbook: assume your customers are criminals and treat them with contempt.
and
It Is Estimated That NBC Could Not Have Screwed This iTunes Thing Up Any Worse.
No, I don't highlight this because I hang on everyone of Gruber's words, far from it, but this does point out a core-problem in the supplier-retail relationship, in my opinion. That of disassociation.

Yes, their estimation of pirated content on the iPod is probably an accurate one, but what business is it of theirs? It would be similar to me entering a record-store and having to submit to a strip-search for "estimated" pirated content. It is disrespectful and any customer-focussed company would know that.

However, NBC is not a customer-focussed company. It is a supplier of content, which means it is a business-2-business company. It acts merely as a legal entity connecting the creators, e.g. the lovely Tina Fey from 30 Rock (who is clearly a human-being), to the owners of iTunes, Apple. They, in turn, sell their products to people, which makes them more customer-focussed (though online selling isn't exactly the same as being in the same room with your customers).

It is my personal opinion that people, and businesses, are the way they are, because of experience... at least as far as people-interaction is concerned (case in point: "the rise of tech is killing the art of chat?"). The more a business interacts with its customers, the human kind, the more it will start to see their point of view. Right now, NBC only understands contracts, and perhaps the creators point of view. But it does not seem to understand that people would be perfectly happy to buy their products, as long as the relationship is based on good value for them, which includes both respect and a fair price.

The way to get around this is not simple market-research. It requires a constant stream of information back to NBC, a barometer of moods, trends, and plain-and-simple information, which gives NBC an idea of where it stands. And of course that won't prevent mistakes. But it will lead to more mistake-fixing instead of making public statements where they call all of us iPod-owners pirates. For one method on how to accomplish this, read my blogpost about Proctor & Gamble's take on shopper marketing.

To a degree, it is understandable why this does not happen. It is not efficient, unless NBC has control over the sales-channel. And it is not efficient for NBC to enter sales, from their perspective, I think. But that is no excuse! If they don't understand a business, they must either gain the necessary knowledge to operate well in it, or stay out of the kitchen! [/end rant]

Btw, how does not having their content in a legal outlet, lessen the risk of piracy? Wouldn't that result in more piracy?


 

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