Re:Focus

How To Have A Revolution

 We don't live in times of violent revolutions anymore. In this day and age, they do more harm than good. But that does not mean we don't need a good revolution now and then. The way to make an impact today is not to threaten people, but to look after them.  To show them an alternative. To inspire.

All revolutionaries are independent thinkers.  All revolutionaries envision a world different than the one we live in today.  But today's most effective revolutionaries don't throw molotov cocktails five miles away from a G-8 summit, today's revolutionaries are invited to speak at the G-8 summit.  Today's revolutionaries don't wear Che Guavara t-shirts, they wear Prada shoes.

Today's revolutionaries are young thought leaders who are invited to counsel politicians and generals.  Today's revolutionaries are entrepreneurs who start businesses to build a brighter future not just a bigger bank account.  Today's revolutionaries are not pressured to make quarterly results, they are driven to build strong companies that care for those invested in their cause over those who invested in their business.

Today's revolutionaries look like you and me. They are in our companies. They are in our government. They start businesses. They run schools. They look ahead and say "I believe in a world way better than this one..."

In today's society, there is no need to throw stones to affect change. But we do need change...the only question is who are you inspiring?

VIVA LA REVOLUCION!

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Don't Protect Your Property

It all started in 1885.  Grover Cleveland was president of the United States when George Eastman introduced roll film, the invention that paved the way for the development of the motion picture. The film business was such a good business, in fact, that Eastman's company, Kodak, went on to form an entirely new company whose sole purpose was to manufacture the chemicals needed to develop their film. In 1936, Kodak went on to introduce 35mm film and life was good...

But then in 1975, the Kodak did something horrible: they invented the digital camera.  You heard me right, Kodak invented the digital camera in the 1970s.  This was not good.  Fearing their new invention would eat away at film and chemical sales, Kodak worked to suppress the new technology.

Kodak made the biggest mistake possible.

As Zig Ziegler said, "people don't buy drills, they buy holes" and Kodak ignored the hole to protect the drill. Instead of building a business around why people use film, they set out to protect the film itself. No company can suppress an advancement in technology, and certainly not for such a selfish reason as to preserve the status quo to maintain sales of one piece of intellectual property.

And in 1999 it all started to unravel. Just as digital photography was starting to gain momentum, Kodak's stock traded at about $80. It has been a steady decline since and now their stock rarely goes beyond between $4 - $5 a share.

The massive loss of money notwithstanding, Kodak has been forced to lay off thousands of workers to stay in business.  All because they focused on what they were selling at the expense of why people were buying it.  Imagine if Kodak embraced the reason the film existed and let go of the film.  They would be THE pioneer in digital photography.

To paraphrase Seth Godin, the goal is not to find customers for your products, it's to make products for your customers.

Sadly, other industries were too busy protecting their drills while ignoring the holes to notice what happened to Kodak. The music industry was too busy trying to protect dvds and an album culture as the world around them moved to an mp3, song culture. They tried to suppress the spread of mp3s by running around suing 13 year olds. Even my own publisher, Penguin Books, which is now living in a digital book world, refused to let me give away my book on Kindle for free for a week for fear that it would, and I quote, "eat away at hard cover sales." People don't all want a paper-bound book, they want the ideas contained within that book.

Companies obsessed with protecting their intellectual property forget that people are actually buying the application of their intellectual property, why the product exists.  The ones that understand this are the ones that find new and different ways to help people get that application they want regardless the form the intellectual property takes.  Call it open source, if you want, the companies who embrace the philosophy are the leaders and the innovators.  Kodak, publishing and the music industry...they are the dinosaurs.   

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The Law of Two-Thirds

When we go to college we’re told we can have good grades, a good social life or sleep – pick two.  Business is no different.  Almost everything we buy can be boiled down to quality, speed or price – pick two. A Rolls Royce, for example, is made from the finest materials and costs a lot of money.  But they take a long time to make.  A Toyota Camry, in contrast, is fast and cheap and though the quality is good, it’s not the best.

Energy consumption is governed by the same principle.  Choosing oil as our primary source for energy – we decided we wanted our energy cheap and readily available – but the damage it does to the environment is the compromise.  In contrast, clean energy is less damaging to the environment but, depending on the source you choose, it can be slow to collect or expensive to deliver.  We can have two out of three, but not all three.  

Our economy is the same.  The way we judge and manage our public companies is often based on quarterly results (speed) and large returns (money) but to achieve that, the long term stability of our public companies and our economy (quality) constantly seems at risk as a result. The rich and fast choice we made during the dot-com era weakened the foundation of the economy that resulted in a stock-market crash. The rich and fast mentality of the housing bubble and the sales of mortgage backed securities produced the same result.  As did the boom before every bust in history.  In contrast, companies that choose the combination of money and quality, like Warren Buffet’s Berkshire-Hathaway, offer good results and long-term success, but few get-rich-quick opportunities. Two out of three.

The two-thirds compromise is so remarkably consistent in so many areas that we can even use it to test if a salesman or a company is being honest when they are trying to sell us something.  I never trust anyone who tells me they offer the best price, fast delivery times and the best quality.  No such thing…something’s gotta give.

A business that understands the two-thirds compromise when marketing its products or services will be viewed as vastly more credible and honest when they offer two out of three.  Offer someone amazing quality, offer it at speed…but don’t be shy to charge a premium for that combination.  If you want to keep the cost down but don’t want to sacrifice quality, then make sure your customers know they will have to wait a little longer to get what you sell.

 

The remarkable thing about the rule of two-thirds is that people are happy to sacrifice one third to get the two-thirds they value more.  In fact, they expect and prefer it.  If I’m going to pay a lot of money for something of extreme quality, I actually prefer that they take a little more time putting it together for me.  And if I’m going to eat at a fast-food joint where I want my food fast and cheap, I’ll get impatient if it takes too long – even if they tell me it’s because they are trying to ensure the best quality. I don't want quality - I want it fast and cheap. If I wanted quality, I would have gone somewhere else that would make me wait longer or pay more. That's just the way things work.

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