||Like it? PLEASE +1 it! Thanks!|
Start-up Strategy: To Change the Game, Change the Economics of How Itís Played
The "us" included Alan M. Webber, whom I'd never met. He sat behind me, and - as getting lost tends to promote - we ended up talking about nothing in particular and everything in general: publishing, the game of business, Mr. T, you name it. I didn't know Alan, but it soon became clear that I should listen as much as possible.
Alan was co-founder of Fast Company magazine and former editorial director of the Harvard Business Review.
More specifically related to this post, Alan developed a very interesting habit more than 20 years ago, when he began to carry a supply of 3 x 5 index cards wherever life took him. He wrote down and collected the lessons and insights he gleaned from his experiences travelling the world and in his interactions with people ranging from CEOs and spiritual leaders to basketball coaches, novelists, and stars from dozens of other worlds...
His new book, Rules of Thumb, is a collection of 52 truths he's culled from these notes specifically related to winning in business. I asked him if I could have an exclusive excerpt, and he graciously agreed.
Here is Rule #24, one of my favorites.
RULE #24 - If you want to change the game, change the economics of how the game is played.
Say what you will about the Grateful Dead, in my book Jerry Garcia was one smart businessperson. Here's a guitarist who was missing a piece of a finger, played in several other bands besides his own, found time to sell paintings, had a line of neckties with his name on them, and even got an ice cream flavor named after him. He also articulated a competitive strategy for the Grateful Dead that put him at the top of my list of management gurus: "You do not merely want to be considered just the best of the best. You want to be considered the only ones who do what you do."
The Grateful Dead principle of "being the only ones who do what you do" is what I decided to borrow when it came to devising Fast Company's Web strategy. If you've ever been to a standard rock concert, you've heard the announcement they all make before the show: "No photography, no recording, enjoy the show."
Except for the Grateful Dead. They had a different theory of the economics, which led to a different business model, which led to a different announcement before the show: "Tape all you want! Make all the bootlegs you want, trade them, swap them, sell them to each other."
Their fans enthusiastically complied, creating one of the earliest versions of a social network focused on live bootlegs of their favorite band. Did the band object? Not at all. Because they knew the more traffic their fans created-even if they didn't get a penny from it directly-the more tickets, T-shirts, stickers, CDs, and other Grateful Dead paraphernalia they would eventually sell. Give away the bootlegs, charge for everything else. By the way, it worked: the year Jerry Garcia died, the Grateful Dead was the highest-grossing rock-and-roll band in the United States.
Of course, Jerry Garcia wasn't the first to change the economics of his industry this way. Cyrus McCormick did it with the reaper business in the 1840s.
McCormick is remembered for patenting a reaper in 1843-but that wasn't his real innovation. McCormick had quite a few competitors, but at the beginning nobody was selling any reapers, including McCormick. The problem was farmers couldn't afford the machines. So McCormick changed the economics: he invented an installment plan that let farmers buy his reaper and use the savings the machine produced to pay him back over a three-year period.
Once you start to look you'll find companies in every industry that have changed the economics to change the game: from razors to cameras, computers to airlines, magazines to nonprofits. Companies that start by redesigning the economics of an industry often finish by redesigning the whole industry-and owning it.
The game today is all about changing the game. Competing head-to-head on products and services is table stakes. Innovators are looking for a new business model that will destabilize their rivals and produce a breakthrough opportunity. In fact, in a recent survey of top-level executives in established companies IBM found that the biggest shared concern is that somewhere in the world-in a garage or a dorm room- someone is coming up with a new business model that will overthrow their established way of doing business.
How do you do it?
Start by analyzing the status quo. What's the standard economic model the industry uses today? When you pull it apart, how does it work? What are the assumptions that it's based on? How and why has it become the industry standard? Take a look at it from the point of view of the customer. Exactly what is the customer paying for? And where does the business make its real money? Go back to Business School 101 and ask the fundamental question: what business are you really in?
After you've analyzed the standard business model, take a look outside your own industry. You may be able to learn some new tricks-or at least borrow some inspiration. What would Craigslist founder Craig Newmark do to your industry? What would happen if the whole business moved to the Web? If things that customers paid for now became free? Free, as the saying goes, is a pretty good price. What if you did a King Gillette and gave away the razor? What could you charge for? Take it one more step: are you hurting your business by charging for something you should give away free? (As daily newspapers watch their circulation numbers decline, some critics argue it would make more sense to give the papers away for free.)
After you've looked at the economics from inside the industry and from other industries, try looking at new platforms. Can you imagine new revenue streams that reflect changes going on in customer habits, customer experiences, or customer loyalty? Is emerging technology opening up new ways of connecting-or making customers pine for the good old days when things weren't so high-tech? Don't forget, everyone agreed that retail outlets were dead and all commerce was shifting to the Web. Then Steve Jobs opened up Apple stores with their Genius Bars. Counterintuitive can be a great economic model.
There are a lot of ways to reinvent an economic model. But most established companies are unwilling to do it because it would mean destabilizing their own operation.
Which is exactly what those innovators and entrepreneurs in the garages and dorm rooms are counting on.
Related ArticlesChanging the Game
Why Welcome Change?
The Problem With Plans
In search of better
One Economist to Rule Them All? Really? Do We Have To?
Passive-Aggressive Behavior Is Useless In A Startup
Playing to Win and Not to Not Lose
Totem's segmentation game
Upgrading Performance Closes More Sales: Lessons learned from 14 year old hockey players
The Game Called Public Relations
The Art of Winning
Playing the Game of Life
Are You In The Game
Every Startup Needs an Advisory Board
The Best Network Marketing Leads - And You're Going to Pay For Them?
Three Steps To Change Anything
The Body Rejects the Organ
Poker, Unpredictability, and Going on Tilt
Home > Entrepreneur-Advice > Timothy Ferriss > Startup Strategy To Change the Game Change the Economics of How Its Played > Google +
Free PDF Download
Five Minutes on Friday, Six Minutes on Saturday: Listen to Music, Save Japan; Email a Company, Save 200,000 Sharks
By Timothy Ferriss
About the Author: Timothy Ferriss
RSS for Timothy's articles - Visit Timothy's website
Serial entrepreneur and ultravagabond Timothy Ferriss has been featured by dozens of media, including The New York Times, National Geographic Traveler, NBC, CNN, and MAXIM. He speaks six languages, runs a multinational firm from wireless locations worldwide, and has been a popular guest lecturer at Princeton University since 2003, where he presents entrepreneurship as a tool for ideal lifestyle design and world change. The 4-Hour Workweek is his first book on lifestyle design and details how to outsource and automate your life.
Click here to visit Timothy's website.
Tim Ferriss and Kevin Rose Discuss Their Top 5 MustRead Books
How Does a Bestseller Happen A Case Study in Hitting 1 on the New York Times
The Top 5 Uncommon Timesavers for BloggersWriters
Do You Really Know Bill Gates The Myth of Entrepreneur as RiskTaker
The Creativity Elixir Is Genius OnDemand Possible
Related Forum PostsBook: Secrets of Six Figure Women
Re: e-Commerce and e-Payment providers
Re: Obama Wants Social Security for Illegals
Are you an Opportunity Addict?
Share this article. Fund someone's dream.
Share this post and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.
Top Performing Companies Are Cashing in on Performance Marketing
By James Daniels, Data Driven Marketing
By James Daniels, Data Driven Marketing
By: Evan Carmichael
By: Evan Carmichael
||Like this page? PLEASE +1 it!|