Tag: business model

Uncommon Service (book review)

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Uncommon Service is a “what to do and how” kind of book. If Atomic Habits is a what/how book for the person then Uncommon Service is one for service businesses. 

It’s organized into four parts: 

One: The tradeoffs. To have uncommonly great service, a business must make tradeoffs. Importance requires attention – and there’s an opportunity cost to that attention. In Unreasonable Hospitality, Will Guidara writes about the front-of-house staff that aims to create “legendary” moments for the guests. They Google the guests. They run out at the last minute for just the right gift. They go above and beyond above and beyond. 

But they don’t shine glasses, clean tables, or sweep the sidewalk. They don’t help with any of the hundreds of tasks that need doing every single night. That’s a tradeoff. 

The LinkdInfluencer scoffs, be the best. But businesses that dig deeply into customers’ jobs find there are things the customers want more than others. Your customers want tradeoffs. 

Two: Things cost money. Uncommon service isn’t free.

Customers could pay more and get more. Premium services like Disney’s Backstage Magic tour and The Four Seasons work this way but these opportunities are limited. Most businesses cannot simply charge more. 

Instead, most businesses must find holistic solutions. Exceptional service leads to more word of mouth and less marketing spend. Specialized service leads to better processes and less loss or more gain. When Publix employees walk customers to requested items – rather than tell them the aisle – does that increase sales and decrease theft? Certainly. 

Few businesses can claim it cost more and it’s worth it, but all businesses can think creatively about how to offer more and how to pay for it. 

Three: A business’s team reflects a business’s tradeoffs. 

Florida has a lot of mom-and-pop pool cleaning businesses. Our neighbor likes reports that detail the pH, chlorine, and salt levels. For him, the JTBD is visual and numerical.

But most cleaners want to show up, clean, and move on – while listening to whatever on Bluetooth headphones. 

So the business owner makes it easy for their employees. Rather than have the cleaner communicate with the customer, they communicate with the office that prepares the report. Cleaners take a few photos, report some numbers, and move on. The office makes it look as nice and tidy as the pool. 

(Alternatively, a business can try to hire people rather than design the system. We write a lot about that at Daily Entrepreneur.)

Four: Prepare the customer. The authors suggest service businesses imagine they are manufacturers. In ‘goods’ businesses customers don’t wander around the plant, inspecting machinery, and tinkering. No – and they shouldn’t do that in a service business. 

But customers are part of the experience: they have varied expectations, arrive at different times, and spend different amounts. They are “locally logical”: what makes sense to one will not make sense to another. 

Like employees, a business has two options. They can change the system for the people or change the people for the system. 

We’ve written about financial stakeholders. An investor is only as good as their capital base. This is part of Warren Buffett’s persona: he draws people aligned with his approach. He picks the people for the system.

But not every business can filter their customers. In those cases, they must focus on the customer’s experience. How can a business operator systematize the times they bend over backward? 

Historically Harvard Business books run dry with too much theory or too specialized examples. This book did not. It was uncommonly good, fast, and helpful. 

Notes. Never Split the Difference addresses tradeoffs well. Both Never Split… and Uncommon Service are recommended by Bob Moesta. 

Calendly’s CAC

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Approximately seventy percent of Calendly’s new users come from using a Calendly link. That’s a crazy CAC.

But that’s not all.

Customer acquisition cost requires converting customers which requires building something that offers progress (the JTBD).

At first, Calendly’s users were broad. “What that means,” said Annie Pearl “is that product managers had a really hard time prioritizing.”

What the heck to build?

“We’ve made a clear distinction that while a lot of the feature work – that we’ll do to support our target personas of sales teams, customer success teams, and recruiting teams – will impact folks who are not in those personas. Those are the core ICPs that we’re going after. And so, historically, that would’ve always been a sort of trade-off decision and a question. And now I think we have a lot of rigor around our target market and the persona we’re going after. And so, teams can use that to prioritize and deliver better value for those users.”

A lot of people join, but the product may not be built for them.

Calendly’s actions represent Todd Rose’s three features from The End of Average.

We are jagged creatures. ‘Good’ executives are a collection of leadership, insight, and strategy skills. The average ‘good’ is a collection of jagged parts.

We are contextual creatures. We aren’t ‘jerks’, it’s just when we are driving. We aren’t ‘generous’, it’s just while tipping a server.

We are path dependent. The places we’ve been, affect the places we will go.

If a business serves “the average” they won’t find the jagged, contextual, or path-dependent parts that really matter. Calendly’s decision to build for sales teams, customer success teams, and recruiting teams show how their process embraces Rose’s observations.

Real Advice

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Mary-Ellis Bunim and Jonathan Murray wanted to create a television show for MTV that capitalized on the 90s teen culture.

But they had a problem. 

Scripted shows like Beverly Hills, 90210, and Melrose Place were expensive. So the staffers looked to MTV’s roots for inspiration. 

Successful businesses deliver value to customers in a sustainable way. Apple doesn’t sell iPhones for less than the cost to make them. The local lawn care company won’t mow for less than the cost of labor. 

MTV’s original secret was just that. The musicians paid for their own videos. MTV got them for free. MTV sold advertising on the broadcast and the artists got attention. 

Bingo, thought Bunim and Murray. Find “free” content.

MTV’s Real World premiered on this day in 1992. 

Around the same time, Mike Reiss was writing for the Simpsons. In his book, Springfield Confidential, he writes that he’s not a religious man but he’s spiritual in the sense that there’s always a perfect joke. Every gag, prompt, and setup has a perfect punchline. They didn’t always find it, Reiss writes, but they always tried. 

That’s was Bunum’s and Murry’s mindset – find a way. 

When money is tight, when skills are scarce, when growth has stalled – find a way. 

This is part of the Daily Entrepreneur series, sign up here.

NBA’s broadcast innovation dilemma

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Disruption theory (2:00 minute YouTube HBR explainer) describes how leading companies serve their customers through product improvements rather than invention.

Keurig’s innovation was capsule coffee and sustains their company with ideas like Brew ID which “recommends recipes with easy step-by-step instructions.”

It’s an innovation dilemma because sustaining innovations makes the money printers go brrr, like at ESPN.

These sustaining innovations fail when the customer Jobs-to-be-done changes.

“We started doing it for free,” Nate Duncan said on Wharton Moneyball in December 2022 about his NBA Strategy Stream show, “with the idea of eventually doing something like this back in the 2016/2017 season. We did it pretty much unpaid – our Patreon subscribers would throw us a few bucks but they weren’t obligated to – and we just built up a lot of reps doing it in the bad old days.”

Think about that. Duncan and his partner Danny Leroux worked “pretty much unpaid” to broadcast NBA games.

But they found an audience. They found an adapting JTBD.

Disruption theory also describes how leading companies can create both sustaining and disruptive innovations. One aspect is a separate P/L. But that takes financial, temporal, and status capital. Within any organization, what executive is going to suggest an unprofitable bet to create something people might want? No way.

But that’s disruption theory.

Build or Buy and a Better Approach

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‘Build or buy’ choices are everywhere; from ordering take-out to business acquisitions. Bob Iger started to ‘buy’ when he noticed that the most popular parade characters weren’t from Disney but from Pixar. 

The first-level question may be ‘build or buy?’ but each has an important second-level angle. 

Build – what do we hope to learn from this experience? In Acquisitions Anonymous #148, Jesse Pujji talks about a supplement brand. 

Successful DTC brands have a successful product, distribution, and marketing system. 

Most of the product innovation, Pujji explains, is gone. Supplements are an established part of many production facilities. You could start one in thirty days. That part of the learning advantage is gone. 

So too is the distribution thanks to Amazon, Shopify, and 3PL

Common products delivered in the same way make it a game of good messages to profitable niches. That’s something a person learns by doing. The only built solution is social ads – which have become expensive. So rather than buy a supplement brand, Pujji suggests, to build one because you can’t buy the knowledge. 

Buy – what are the opportunity costs? Humans are generally bad at considering what else? Ask people about not buying a Ford and they say they’ll buy a Honda. It’s part of our mental accounting. 

Hack this system by making the choices explicit. Think like The Price is Right. It’s a choice of this or that. Did Disney debate their options? To be a fly on those walls….

Bob Iger had to buy Pixar, Marvel, and Star Wars because Disney could not build those things. Though many brilliant people could work on that project, Disney faced the innovator’s dilemma. Creation is rowdy, rambunctious, and most important to Disney – unprofitable. 

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We’ve the tendency to think this or that and if this is good then that is bad. Life’s far more complicated. The opposite of a good idea may be another good idea. So ask why, ask about the second level aspects, and what else might happen here. 

Why is this so cheap?

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Our simple business model is a product, distribution, and marketing. 

  • Sex toys (product) sell better thanks to Amazon’s anonymity (distribution). 
  • RX BARS (product) sold better with a packaging redesign (marketing).
  • Catalogs, department stores, big box, and online (distribution) seeded DTC (products). 

Why is this so cheap?

One thing low-cost airlines got right, says Rory Sutherland, is they “magnify the things you didn’t get like a meal, pre-allocated seating, free checked luggage, and so on. And they had to do that to explain where the savings were taking place. Otherwise, you assumed it was worse trained pilots.” 

Yes! “People don’t just believe, here’s the price but you can get it for this,” agrees Marcia Kilgore, “you have to tell them how and you have to tell them why.”

According to Kilgore, beauty product is no longer differentiated. Everyone sells the same thing – and anyone can sell it. This is a problem for people like Kilgore. 

Hers is the ‘explain where‘ approach – we cut out the middleman. But with so many new entrants (thanks to easy products) it’s hard to communicate that message. 

“Instagram and Facebook have become the new landlords. We’re trying to get away from having to ‘pay retail’ and now you have to pay that same cut to Instagram.”

If the product is constant among beauty brands and the distribution channels are limited to retail and DTC what kind of levers exist in marketing? 

1/ Change the CAC/LTV. If Instagram is the new rent, then only acquire customers once. Kilgore’s company Beauty Pie uses a membership model like Amazon Prime. Founder Jeff Bezos said, “Our goal with Amazon Prime, make no mistake, is to make sure that if you are not a Prime member, you are being irresponsible.”

2/ More organic & less paid marketing. Instagram ads may be bid up but Instagram posts are still free. Beauty products have inherent characteristics that make how-to and before-and-after content successful. 

3/ Offer extras. The Beauty Pie boxes are nicely designed but not expensive. The message is “just as good but nothing extra”. The brand has good communication. They’re using alchemy.  

Kinko’s JTBD

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When asked if he worried about Xerox vertically integrating, Kinko’s founder Pual Orfalea said ‘HAAHAHAHAH. No.’

It’s obvious with distance, hindsight, and present best practices that’s exactly what Xerox should have done. Move down the market, get closer to the customers, and let their purchase decisions drive product innovation. But Paul Orfalea just laughed.

And he’s right.

Xerox couldn’t have acquired Kinko’s because Xerox and Kinkos are two different businesses.

“We aren’t in the copy business. We are in the emotions business. We help people get jobs, make sales brochures, and celebrate the major moments of their lives.” – Paul Orfalea, founder of Kinko’s

People don’t want quarter-inch holes, the expression goes, they want to hang their damn vacation photos.

Orfalea figured that out and designed his organization around the idea. He empowered counterworkers to solve problems immediately. When customers came in worked up and stressed out about an errored order, the last they thing want to hear is ‘let me talk to my manager and see what we can do.’ No! An immediate refund and rushed redo was the solution, and it’s what Kinko’s did.

“Our customers didn’t particularly care how the work got done either,” Paul writes in Copy This,” But they cared passionately about obtaining relief, symbolized by the finished product.

Job to be done is a great theory for product development but it only works holistically. The Panera job is food and place. If either is ‘a mess’ then neither works. The things have to fit together as homeotelic systems. Actions A and B work toward the same goal.

Kudos to Kinko’s and Xerox for using the Rich Barton “Scrabble Letter” naming system. Orfalea credits the name of Kinko’s to his kinky hair and his mom noting that people don’t forget hard consonants, as our first is GooGoo Gaga.

Alice and Bob own soccer teams…

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Alice runs her team conservatively and finishes with 17 wins, 17 draws, and 4 losses. 

Bob runs his team with more variance and finishes with 19 wins, 11, draws, and 8 losses. 

Which is better? 

Let’s reframe, like the ball bet. Is it better to exchange 2 wins for 6 draws and 4 fewer losses? 

Haralabos ‘Bob’ Voulgaris bought a soccer team because he knows these answers because he’s seen these questions. 

After Moneyball but before Morey-ball, Haralabos discovered and gambled on basketball inefficiencies. The best known now is the three-point shot. Voulgaris thinks that soccer is similar. Teams earn three points for a win, one for a draw, and zero for a loss. Rather than three or two points in basketball, it’s three or one points in soccer standings.

Soccer’s business model is like the music business model. Artists lose money recording an album, break even touring, and profit from the merchandise. This had to be Pixar’s business too. Division three soccer teams lose money, division two teams break even, and La Liga or Premier League teams “print money”. 

Soccer teams can move up (promotion) or move down (relegation). Bob’s team, CD Castellón is in the third division and they need about sixty-eight points for a chance at promotion. 

Both Alice (17/17/4) and Bob (19/11/8) earned sixty-eight points – but they don’t seem equal. This is Bob’s point – it’s worth risking more for wins than less for draws.

The big question is: What are the right metrics for this system? 

  • Hurricane wind speeds are probably the wrong metric. Though easy to measure they don’t convey the potential storm damage which comes from the rain, surge, and flooding. Moneyball and Morey-ball are both descriptions of systems where the important metrics shifted.
  • ‘Draws’ is a wolf in sheep’s clothing. It seems fine – splitting the difference between a win and a loss – but the unique point system shifts the weight. 
  • Risking more – Bob’s approach – focuses on what matters. It’s the points stupid.

Humans are loss averse but the soccer standing scoring rewards bucking this trend. Alice and Bob own soccer teams, let’s see what happens.

Open 24 Hours

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What do you want? is the wrong question.

Customers speak in the language of problems.
Businesses speak in the language of solutions.

When Netflix asked customers what they wanted, the customers said more new releases. So Netflix bought more. Then they looked at the data.

Engineers compared churn rates for customers who got new movies quickly with those who didn’t and the results were indistinguishable.

What customers wanted were faster movies. If customers got a movie within a few days of returning the previous they were less likely to churn out than customers who had to wait longer. Bingo. Netflix’s solution wasn’t more new releases, it was shorter shipping times.

Good for Netflix – but what about us? What about businesses that don’t have data engineers?

“From 1984 to about 1987, I proselytized about the wisdom of staying open for 24 hours,” Paul Orfalea writes in Copy This. Orfalea was a unique manager.

Rather than spending time at the office, Orfalea was on the road talking to Kinko’s partners, customers, and anyone who found something that worked.

“I’d met a convenience store owner who found his overall sales jumped 50 percent when he decided to stay open for 24 hours. At first, the increase seemed like a mystery. His foot traffic wasn’t great during the overnight hours. But his customers liked knowing they could patronize his stores any time day or night. They never had to worry when he was open or closed.”

Bingo.

Kinko’s business wasn’t selling copies – it was managing emotions. Customers needed help. Kinko’s helped them get jobs, celebrate moments, or create the brochure that needed done yesterday. Being open 24 hours helped.

Survivor Games

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December 13 is the Survivor finale and a chance to highlight the different ideas of the blog.

Sampling. These people are not “representative samples“. Survivor hosts a casting call for people with good stories. Like Bob Iger’s big lesson, entertainment isn’t about reporting so much as stories.

Incentives. Like the many games of Jeopardy, Survivor has layers of games. When there are layers of games it’s difficult to judge actions. Is someone trying to win the game or claim later fame?

Business models. Thanks to MTV in 1981 and then Real World in 1992, one entertainment business model is to create value by editing rather than crafting (unlike Seinfeld). Put regular people with backstories (hence sampling) in interesting situations and things will happen. Edit a month of island living to a few dozen hours and viola.

Customer acquisition costs. Sequels – it’s season 43 for Survivor! – have lower CACs. Consumers don’t need to be educated.