Be Your Own Boss

I was talking to a long time friend and entrepreneur last night for hours over the change in the markets we chase. We’ve known each other for half my life, about 16 years, and we’ve both seen incredible profits and incredible losses over those times. His company is on the verge of falling apart, even though it has a strong calling in its market — business promotions.

His market has been cut up and spit out by deep discount web providers who can handle much more work in a much more efficient way — his personal attention and long term follow through don’t seem to be as valuable as they were a decade ago. Our conversation for many of those hours was mostly him telling me about what he thinks he needs to do to fix the downturn and save his business. My end of the conversation came in the last half hour, and I told him that he was wrong about his direction for saving his business.

He believed that he needed to keep innovating in order to reach new customers and grow his market, especially in the regions that his businesses exist (on the west and east coasts as well as in the midwest where be both live). He said that the reason why he wasn’t able to compete with the online service providers is because they were doing a better job of innovating, and he was focusing on the full service market rather than the up-and-coming market. He relied on a book he purchased in the last year, titled Dealing With Darwin: How Great Companies Innovate at Every Phase of Their Evolution, by Geoffrey A. Moore.

I’ve read Moore’s book, and I actually like a lot of what he has to say. The problem with Moore’s book and my friend’s business is that they’re covering two different subjects, in my opinion. Moore’s book is very successful at looking at the market of commodity goods: items that can be considered “daily use” items — computers, clothes, fast food, and the rest. My friend’s business is definitely not a commodity product, even if competition tries to offer it at commodity profit margins (slim to none).

I’m the founder of an innovation company, Deep Labs, which is a company that has to be an innovator since its market caters to other companies that require innovation. The likelihood of this market becoming a commodity-margin company is slim-to-nil: when your customers always innovate, you have to do the same. The risk taking at Deep Labs is incredibly high, but the rewards can be high as well. In the business promotion market, innovation is not as important as meeting expectation, and this is where my friend should focus his future.

When I explained to him that focusing only on innovation is too risky for the rewards he’d get, he asked me how I’d describe my solution for his market in just a few words. I told him that the most basic description is also the most in-depth one, too: downsell your solutions as time-savers and efficiency-increasers for his marketplace. Show them that what he does is not complicated or innovative in 90% of the work his firm will perform, but what differentiates his business from the online service providers is that he’s there to save his customer time while taking care of their promotional needs.

When I said those bold-faced words to him, I saw the light bulb go off in his head. Before I even had time to ask the question I was intending to ask, he answered it without a single word or prompting from me: “Is it possible that my customers are wasting time doing work they don’t have to when they deal with online service providers?” Are they cutting off their nose to spite their face? Are they wasting a few hours a week in order to save a few dollars, and how many hours a year would they save if they re-hired his firm over the online service providers?

I asked him if he ever went hours out of his way to save a few dollars on a high-end retail sale or for a coupon for a seemingly expensive item. He said he definitely did for a while, but he learned his lesson and stopped. This is a great example of a business trying to innovate (through savings promotions), but failing to focus on what their customers wanted: savings. Saving a few dollars but giving up hours to get that savings may end up costing the customers in the market more, and once they make that realization, they’ll likely not fall for the innovative promotion again. In his market, many of his customers, ex-customers and future customers are wasting hundreds of hours of year doing a job that he used to do — and they’re wasting those hours in order to save themselves a few hundred dollars.

This is one of those areas that many businesses fail to realize — and also fail to use as a selling point. My better half used to own a web design company for years that she let close up because she failed to compete properly with others in the market. Her service was top notch and her customers were always happy, but she had lost a few customers to incredibly cheap companies. Within a year of her closing up shop she started to get phone calls from her ex-clients who wanted to work with her again. I told her to take the contracts but raise her prices: the demand was back and the penalty was paid by those who tried to save a dime without realizing the long term costs to themselves. She didn’t want to get back into the market, already hurt by the few who didn’t see that businesses charge what they have to charge in order to provide the service that is expected by the customers.

My main job in all of my businesses is to be the innovator and the risk taker — but I would never do that unless I knew that I had the responsible follow-through employees or partners who could handle the other important side of any business. If you can save your customers time and money by providing your service cheaper and faster than they can do it themselves, you should never have to worry about the competition that only provides it cheaper. If you lose some customers to the cheapest competitors, always offer them that exit from your services but remind them that you’ll be available should their new service provider require that they invest more of their time in finishing the project. I’ve lost customers over the years, but very few of them have disappeared for good. I’m always surprised at the ones that come knocking on my door when they realize that cost-savings is not effective if they lose time over the deal.

Don’t innovate if you market is about saving people time and money. If someone else can save your customers as much time and money as you can, only then do you have to focus on innovating as the key element of your research and development in your market.

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