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Is your craft becoming a commodity?

We’ve talked about this before, but it merits another mention whether you are a programmer, web designer or woodworker.

Written by Christian Heilmann in *2009* and borrowed from a slide in Nathan Smith‘s presentation: “Sass and Compass, The Future of Stylesheets Now” (cool info, BTW), the graphic’s comment is about programming, but could be about any number of skills.

Is your craft changing? Is it already commoditized or moving that direction?

In the past, we’ve talked about your work being outsourced to other countries (some that are perhaps thought of as third world countries) and how the work you do cannot be as valuable as it once was if this is even possible.

It isn’t that the work is no longer valuable. It’s that the ability to produce that kind of work has become more common and the skill to do so is no longer a true rarity/specialty.

Is that the kind of work you’re doing/selling?

Is that the positioning you want in the future, much less now?

It’s no longer about the code. Hasn’t been for some time.

 

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Business model Competition Creativity Improvement Leadership planning Positioning Small Business Software business strategic planning

What would happen if yours was perfect?

bzzzzzzz
Creative Commons License photo credit: ruurmo

If your software business was â??perfectâ?, what would it look like?

What do I mean? Here are a few ideas to get you startedâ?¦

  • Whatâ??s your product line look like?
  • What services do you offer?
  • How big (or little) is your staff?
  • What benefits do you offer?
  • How much vacation do you enjoy per year?
  • What would your customers say about your company?
  • How many customers would you have?
  • What trade shows do you exhibit at?
  • Whatâ??s your position in the market?
  • What would happen when a support call came in?
  • What would happen when a bug was found?

Not in the software business? So what. Replace “software business” with whatever you do. Alter the question list to fit your business.

You might be thinking none of this could ever happen.

Or you could start with your answers and work backwards to figure out what it will take to get there. Take one step, then another.

If you don’t ask yourself the hard questions…who will?

PS: Are you really in the <whatever> business? A drill bit manufacturer doesn’t sell drill bits. Ultimately, they sell holes. A coffee shop sells comfort, even to take out customers. What do you really sell?

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Community Competition Corporate America Creativity Economic Development Entrepreneurs Leadership Positioning Small Business Software business strategic planning Technology

Not a nerd? Not a problem.


Creative Commons License photo credit: f_mafra

If you’ve been reading what’s going on in the economy, it seems like a fair percentage of the new jobs that are still out there are going to technical people.

Even today in Silicon Valley, the number of applicants in the job pool for a specific skill are roughly equal to the number of open jobs in that niche.

Meanwhile, local employers here in Montana are telling me they get 100-300 resumes/applications for every open job they post – which isn’t too many right now.

Every day, more and more jobs involve technical knowledge. Even tattoos are technical these days, as evidenced by the ink on this girl’s neck.

It’s html, the language used to create web pages.

Technical people

When I say “technical people”, I mean programmers, engineers and similar folks.

While some of the work these folks do can be outsourced, the work that isn’t tends to require local cultural context that isn’t often available to the technical person in another country.

Cultural context means a knowledge of the culture of the target market for the product you’re designing. Some products require it, some do not.

For example, an electrical engineer in almost any country or region of the world can design a cell phone component because “everyone” knows what a cell phone is and how it’s used.

The same isn’t always true when the design target is something in the cultural context of a particular area.

If you are in the U.S. or Canada, would you know the important aspects of designing a motorized trike designed for the streets of Delhi or Shanghai? Probably not, unless you have traveled extensively and spent time in those places.

That doesn’t mean you can’t learn those critical design points or someone from that region can’t learn those specific to work in the U.S. and Canada, but there is a learning curve.

Not all jobs require that context. Quite often, when you look at the jobs that have been outsourced, you’ll find that those jobs were lost because those jobs *can* be outsourced.

That doesn’t mean they aren’t technical. It simply means that they are technical but anyone with the skills can perform them – no matter what culture they grew up in.

Lots of people get really angry about that, just like they got angry at steam engines, the cotton gin and other advances that changed how our economy works. Meanwhile, that outsourced job went to some guy in somewhere who’s trying to feed his kids like everyone else. He might be making $1.10 a day doing that work, but it could be twice his previous pay.

Regardless of what the pay is, that’s a job that COULD be outsourced. Technical or not, it’s too general.

I received this (redacted) email from a friend today who has forgotten more enterprise network stuff than I’ll ever know.

So now I have another big contract.

These guys build big infrastructure for municipalities and large facilities. Perfect shovel ready stuff for millions of dollars and several years putting America back to work.

My job …. getting a working solution that allows them to move the technical work to a big city outside the US. Seems those folk need the work a LOT more than their counterparts who happen to be in, of all places, a city here in the US).

This is not the first time I have had a project where the purpose was to move American jobs overseas but it sucks more and more each time.

Add the that the fact that the Sr. Management team for this company is amazingly draconian with amazing bad morale and it proves that some people truly have just about sold out to the highest bidder.

The technical work being outsourced here is highly technical, but it is also generalized. It has no local context that matters, has nothing substantial to differentiate it, nothing to keep the work from being done elsewhere, whether elsewhere is Kansas or Kazakhstan.

Not a nerd

What if you aren’t “technical” in the context I’ve described here? Let’s say you’re a cabinet maker (which to me seems very technical).

Have you made the effort to determine what needs these specialized businesses have? Their success and their specialized needs might fuel yours.

Just an example, but worth some thought and perhaps, some effort.

Not being outsourced is as much your responsibility as anyone’s. Make the effort.

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Blogging Business culture Competition Customer relationships customer retention Feedback Ideas Improvement Influence Internet marketing Marketing Positioning Small Business Software business The Slight Edge

Did You Know…That You Should Follow Up?

misty
Creative Commons License photo credit: antaean

If you look at the path a prospect follows on the way to becoming a customer and then, at their path as a new customer; youâ??ll see plenty of places where it would be valuable for them to receive an occasional tap on the shoulder.

With that tap comes just a little bit of info, but it won’t/shouldn’t always be a sales message, at least not explicitly.

Consider these 3 little words: â??Did you know?â?

They start sentences like these:

  • Did you knowâ?¦ that if you get stuck, we have 24 x 7 customer support lines?
  • Did you knowâ?¦ that 90% of businesses fail after a fire destroys their business – and much of that is because they are underinsured. Those who might have made it often donâ??t because they donâ??t have their current customer/order data backed up, which means that on fire day + 1, they have no idea who needs a follow up, who placed an order yesterday, etc. Using the automated backup feature in our software can save your business. Weâ??ll be happy to show you how it works.
  • Did you knowâ?¦ that many of our customers find our software’s dashboard feature motivational to them and their staff? Here’s a link to a video showing you how to turn it on.
  • Did you knowâ?¦ that we offer a 180 day money back guarantee? Thereâ??s simply no risk to putting our product/service to work for you.
  • Did you knowâ?¦ that we offer free online training videos that are broken down by function and only last 2-3 minutes? You can take a brief break, learn what you need to know right now and get back to work.

You get the idea.

Look at the typical timeline for a prospect.

Where do YOUR prospects need a little bit of assistance, a hand on the shoulder or a Did You Know?

After theyâ??ve bought, when do they need a little help? For customers youâ??ve had for months or years, are there new features or new things you do for your customers? Put each of these items in your follow up system and let them know when it is appropriate for each customer.

They can be emailed and blogged, but they should also go out in your printed newsletter.

You *do* have a printed monthly customers-only newsletter, right? 4 pages is enough. Seems like a little thing but itâ??ll never get ignored if itâ??s good.

All of these things put together will start to build a follow up system that no competitor will duplicate. And thatâ??s exactly what we want.

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Advertising Business model Competition Customer relationships customer retention Improvement Leadership Recurring Revenue Small Business Software business strategic planning Strategy

Make an offer that makes sense

zipper
Creative Commons License photo credit: gagilas

Yesterday, an email from WinZip arrived in my inbox.

I’ve used and liked WinZip for at least a decade. Not many pieces of software can make that claim.

Lately, they’ve been emailing me pretty frequently. This particular email offered a free copy of the latest WinZip if I used their affiliate link to sign up for a free trial with Netflix’s online movie service.

Whaaaa?

Ok, maybe that’s not such a bad deal if I’m not already a Netflix user, but the offer may not make sense depending on what kind of WinZip customer I am.

When I got the email, I wondered “Why Netflix?”

It might make perfect sense if WinZip knows their customer base well. Perhaps they’re sure that a majority of their users are home users, student/teacher users or small business/corporate users. If that were so, it would’ve been best to segment their email list and mail this offer only to their home users. And perhaps I’m somehow on that home list, rather than on their “business customer” list.

Even if all that is true, is this a service that most WinZip users can take advantage of? Does it help their users get more out of their WinZip? Or did they send it because Netflix is a really good affiliate deal for the makers of WinZip?

The offer just doesn’t make sense from a “How can we help you get more out of our software?” perspective – something you should *always* be thinking about, whether you sell software or transmission oil coolers.

In fact, some will see that message – especially at multi-per-week frequencies – as spam.

I’m not convinced that WinZip segmented their email list before sending this out. If they had, it might make sense.

Leverage

In your case, it’s essential to avoid being “one of those people” and eventually ending up on a spam blacklist.

If you’re going to send 3rd party offers to your customers, make absolutely sure they make sense by giving your customer an opportunity to leverage the investment they’ve already made in your products and services.

Whaaaa? Part 2

When you build a commodity (mostly) utility, even one as good as WinZip as been, at some point your business model is going to flatten out. With no recurring revenue, you start doing things like emailing your customers offers to purchase a movie service. Even your business customers.

Think deep and long about that business model. What happens after 100 customers? What happens after 500 or 50,000? What happens 10 years from now?

The more thought you invest in that stuff now, even while building the next-big-thing, the less likely you’ll need to make choices that would never cross your mind otherwise.

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customer retention Direct Marketing Entrepreneurs Internet marketing Marketing planning Retail Sales Small Business Software business strategic planning Strategy The Slight Edge

Learning from Angry Birds

What have you learned from the Angry Birds – other than how to burn up a ton of time?

Having a (if not the) best selling game glued to the top of the iPhone AppStore charts has made Rovio a household name among smartphone users. But what have they done that you can learn from?

Free works as a marketing strategy, as always (@chr1sa would agree): The Angry Birds free edition is at the top of the AppStore charts for free games. That it’s also at the top of the paid charts is indicative that they chose the right price point and gave the free version just enough to get players hooked.

Use the news and the calendar: They created a Halloween version, a holiday version with Christmas hams and so on.

Would you like fries with that? Get stuck? You can pay a small amount to get past that annoying place in the game that’s frustrating you.

Perfect, then project: Once making the game a success on the iPhone was complete, they moved it to other mobile platforms (iPad, Android) and then to the Mac – leveraging a substantial investment in development, as well as expanding their market to new customers on other hardware.

Get value from the gatekeeper: Apple’s AppStore is the gatekeeper to Rovio’s biggest market to date. There’s nothing wrong with using a gatekeeper’s services as long as they deliver value…and customers. Often they’re exactly what you need to reach cruising altitude.

How are you using these strategies? Which ones did I leave out?

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Business model Business Resources Competition Entrepreneurs Management Pricing Small Business Software business strategic planning Strategy

How’s your soup?

A few weeks ago, the NY Times’ “You’re the Boss” blog (which discusses small business topics) had a piece from Chicago entrepreneur Jay Goltz about the 10 reasons small businesses fail.

It’s a laundry list of pretty fundamental stuff, much of which we regularly talk about here:

  • a business model whose math doesn’t work,
  • owners who can’t get out of their own way
  • out-of-control growth
  • poor accounting
  • insufficient cash cushion
  • operational mediocrity
  • operational inefficiencies
  • dysfunctional management
  • lack of a succession plan
  • a declining market

Several of the items on this list are things that I encounter not only as a customer, but as someone who helps businesses improve their performance and profitability. Some of them are more frustrating than others. I’ll bet you see them as well.

Jay summed up his comments with this:

In life, you may have forgiving friends and relatives, but entrepreneurship is rarely forgiving. Eventually, everything shows up in the soup. If people donâ??t like the soup, employees stop working for you, and customers stop doing business with you. And that is why businesses fail.

Unforgiving

We recently talked about the market’s lack of forgiveness. If you missed that piece, I noted that I can be as nice as you like when discussing examples I’ve seen that you can learn from, but the market…well, it just won’t be nice or fair about it. It doesn’t benefit you (or the folks I write about) to whitewash things.

So how can you, the head chef of your business, keep these 10 things out of your soup?

Relentless focus and accountability.

I warned my clients at the first of the year that I would be holding them more accountable for their efforts. Not one has rebelled. Those who have been pressed the hardest have responded with the most results. Accountability works.

First things first

If you have a business model whose math doesn’t work, NONE of the other stuff really matters.

The “If there’s plenty of gross there has to be some net around here somewhere” thing is more prevalent than you’d think. People start businesses for all kinds of reasons, but it’s pretty shocking how few pay attention to the math of the business model.

They start out with a price that they THINK makes sense (it might, it might not) and that initial pricing often drives the rest of the business, their marketing (ie: how many sales they need to make) and their operations (how costs are defrayed).

The other nine items on this list are pretty important, but it doesn’t matter AT ALL how well you’re doing at these things if the basic math of your business doesn’t work.

Cash flow is king

Back in my photo software days, many of our competitors (we had eight at one time) offered “free lifetime support”.

I refused to offer that because I knew it would either kill our business or prevent us from providing the kind of support we felt we had to offer.

Prospective customers would ask me why they should buy our stuff instead of a competitor’s when that competitor didn’t charge annually for software upgrades and support.

All I had to do was ask them: “Whose lifetime are we talking about? How free, unlimited and lifetime is that support when they go out of business because their business model doesn’t work?” Two years later, only two competitors remained.

If the math for your business model doesn’t work, nothing else matters. Once it does, the other nine things are pretty important.

Next time, we’ll get into detail about the math of your business.

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affluence Business culture Customer relationships customer retention Direct Marketing Improvement Management Marketing Retail Sales service Small Business Software business strategic planning The Slight Edge

Predictably Creating Value

Driftwood
Creative Commons License photo credit: nagillum

As I read the story about the success of logger James Stupack’s new business, it struck a chord with me.

I was quite pleased to hear of his creativity and stick-to-it attitude. It’s easy to give up. He didn’t.

He added value.

I’ve spent a lot of time talking to folks locally about doing the sort of things Stupack did to add value to a commodity product.

Sometimes it comes in the form of a question, like “So..if I’m in Atlanta and I want fancy columns for my timber-frame home – why would I buy a log from you way up there in Montana when there are perfectly good trees here in Georgia, South Carolina and so on? Either way when I get it here, I’ll have to pay someone to add character to it.”

Stupack answers that question by specializing in making his commodity into something far more valuable than “just a log”. It’s especially cool that these just happen to be the same logs that might have been left to rot (or burned as firewood/slash) in the past.

Not always a commodity

Sometimes what you sell isn’t a commodity, such as tech (software development, web design, graphic design, etc) or services like oil changes, small engine repair, or even musical instrument cleaning and refurb.

So how do you create value for something like that, especially keeping in mind that you’ll probably want to sell your business someday.

One threat to your eventual sales price is that you’ve created a job rather than a business. If that fits your lifestyle, that’s fine – but most business owners have the idea that they will someday be able to sell their business.

In order to make that happen – and not have the buyer’s bank laugh at the sales price – you have to demonstrate some value that even a banker would love.

In the case of a retail store that sells snowmobiles, jewelry or water heaters, historical sales trends will give the prospective buyer (and their banker) some numbers to make sense of.

That customer list thing again

But for that service business, many owners find themselves looking for a buyer and having nothing valuable to sell except their customer list, if that.

Quite a few don’t have a customer list. We’ve talked about that many a time. To repeat: you should have a list of customers and contact information so you can reach them in an emergency. Or a non emergency…

Even with a huge list of customers, you aren’t going to get much interest from the banker unless you can prove recurring sales.

If you have data (and you should) that shows average frequency of purchase for your customers, average sales for that purchase interval, then they’ll be a little happier.

What you want to aim for is a way to show them dependable revenue even if you (but not your staff, if any) disappear for a month.

How so?

In the case of a graphic artist, you might sell your icons and artwork online, as handmade prints on Etsy.com, or in a litany of other places. You might still do custom work for clients, but you have a cadre of products that sell even if you don’t have ANY custom work going on.

The same goes for other tech services businesses. The software consultant who works on an hourly or project basis but has no software on the market is worth almost nothing when they can’t work. The same goes for the amazing web developer and similarly skilled folks. Both of them have done little more than create a job for themselves but are not building equity in their business. If contract work dries up, so does their wallet.

The oil change place is usually smart enough to solicit fleet work, such as changing the oil and providing other regular maintenance to city, county or corporate fleet vehicles. Even if they don’t see a retail customer this week, that fleet work will help them meet their nut for the month.  Those fleet customers are valuable because their business is PREDICTABLE.

The same strategy is just as effective for the musical instrument sales and repair shop.

Buyers and their bankers love predictable, especially when we’re talking about income.

These days, a lot of buyers are replacing a job they’ve lost. Having a business that can replace their income in a predictable manner is going to make your business more attractive to buyers – and in the meantime, it’ll do a lot better job of taking care of you.

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Tweaks that touch the bottom line

Yesterday, we talked about a little tiny, totally-free thing that you could do to ensure that someone comes back to your business on a day that you can’t serve them.

As you might guess, there are a bunch of these little things.

They range from how you answer the phone to that little something extra you do when packing something for shipment to a customer.

It definitely impacts how you respond to calls, emails, tweets and other inquiries – such as “Do you have any iPads in stock?” (a frequent question to Apple dealers these days).

How do you answer questions that you *know* aren’t going to immediately close a sale?

Let’s use a software developer as an easy example. Upon detection of an error, they have a ton of choices:

  • You can display a technical message about what happened (“Stack push failure in c70mss.dll at C53DAE.”)
  • You can display a friendly message explaining what happened in non-technical terms. (“I’m not sure what’s wrong, but you’ve gotta reboot.”)
  • You can display a message that provides instructions to fix the problem. (“Don’t do that again. Do this instead.”)
  • You can make the program blow up and force the user to start all over again, and just skip that whole “display a message” thing.
  • You can fix the problem (and if necessary, inform the user) and move on.

That last one might make you scratch your head a bit. Remember, you went to the trouble to *detect it* and create a message, so why not just fix it when you can?

Sure, there are cases where you can’t assume what to do and you have to ask… but those are normally the exception.

Not just the geeks

The same goes for handling customer issues in your business.

You could force your staff to say “Sorry, my manager has to be here to fix that.” or you could simply put a process in place that allows them to deal with it – and do so without risking financial loss.

That’s a win in several ways:

  • It’s a win for your customer because they get helped immediately rather than having to wait for you and even worse, make a return trip to the store for something that should’ve been right in the first place.
  • It’s a win for your staff because it empowers them, giving them the emotional “reward” for helping a customer – which will motivate them to want to continue that little buzz-fest.
  • It’s a win for you because it keeps you off the phone. Rather than dealing with minimum wage questions you shouldn’t be interrupted with anyway, you can keep playing golf, fishing, planning your next strategic move and/or creating the next big thing that’ll push your business into its next big growth cycle.

If Wal-Mart can issue a refund (or execute an exchange) without requiring a phone call to the CEO in Bentonville, I think you can find a way too.

Look around. What can you tweak? Most of these things cost nothing. We might simply be talking about a once a month (or quarter) email.

You simply have to be a little more enthusiastic about thinking about the needs of your customer and how to make the next interaction with your business *even better*.

All of these things contribute to the kind of customer service, the kind of quality feel, the kind of thought process that makes a customer want to do business with no one else but you – even if they can’t put a finger on why that is.

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A yummy bowlful of dongles

Sometimes, competitors hand you a gift.

Years ago, one of our competitors in the photo software business used an antiquated hardware ‘dongle’ to prove to the software that you had the right to use it.

We knew their users *hated* the dongle. It plugged into the printer port, which caused printer problems. It kept the business owner from using the software from home, or it required a return trip to the office to get the dongle if you went home without it. Worse, you had to return home to get it if you forgot to take it to the office in the morning after doing a little work at home. In some way, it was a subtle reminder that they didn’t trust their paying customers and/or weren’t willing or able to find a better way to manage licenses.

We decided it was time to make an issue of it at the next trade show, so we came up with an irresistible, advance notice competitive upgrade offer to users of the dongle-controlled software who would be attending that show.

There was only one catch: You had to give us the dongle.

We wanted the dongle for several reasons:

  • We didn’t want them using both programs.
  • We didn’t want them giving the dongle away. We wanted it off the market. Forever.
  • We wanted to get people talking (we did something almost every year to stir the pot).

We decided to use the dongles in our booth, but not to run their software.

Sitting on top of an eye-level pedestal at the front of our booth…was a fishbowl half-full of dongles.