October 25, 2010

64) The 4-Hour Workweek: Escape 9-5, Live Anywhere, and Join the New Rich

危 wēi  danger

Timothy Ferriss, an American writer, educational activist, and entrepreneur wrote a semi-autobiographical self-help book in 2007 that was well received by friends and family.  Ferriss’ working title, ‘Drug Dealing for Fun and Profit’, wasn’t as well received.  He decided to proceed with the name anyway, liking it because it polarized opinion.  However, once he had secured distribution, Wal-Mart vetoed the title’s use so Ferriss was back to the drawing board.  He found it relatively easy to whittle the list down to 12 but found it tough to select a final name: everyone had an opinion on the best, including his agent and distributor but none agreed.  Surely he would be best going with his gut feel and upsetting either his distributor or agent?

机 jī opportunity

Instead, Ferriss decided to look for some data. He took 6 prospective titles that everyone could live with:  including ‘Broadband and White Sand’, ‘Millionaire Chameleon’ and ‘The 4-Hour Workweek’ and developed an Google Adwords campaign for each.  He bid on keywords related to the book’s content including ‘401k’ and ‘language learning’: when those keywords formed part of someone’s search on Google the prospective title popped up as a headline and the advertisement text would be the subtitle.  Ferriss was interested to see which of the sponsored links would be clicked on most, knowing that he needed his title to compete with over 200,000 books published in the US each year.  At the end of the week, for less than $200 he knew that “The 4-Hour Workweek” had the best click-through rate by far and he went with that title.

His experimentation didn’t stop there, he decided to test various covers by printing them on high quality paper and placing them on existing similar sized books in the new non-fiction rack at Borders, Palo Alto.  He sat with a coffee and observed, learning which cover really was most appealing.

My colleague in New York, Joe Gerber has been using this approach recently with real success, it’s a reminder to me that every part of a business (including the virtual) can be prototyped.

How About…

  • Prototyping every part of your business before launch?
  • Placing advertisements into existing online networks before launch for feedback?  e.g. as Joe says how about using Foursquare to figure out “if this is worth stopping for?”

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source video: http://vimeo.com/3934635

July 20, 2010

59) Levi’s

危 wēi  danger

I have always been slightly skeptical of established US & European fashion brands’ ability to succeed in emerging markets, after all the average income per person in China is around $3,500 and in India it’s $1,000.  Counterfeiting is rife and unlike super-premium brands they seem particularly vulnerable to low end disruption.  The Indian jeans market is no exception – home-grown companies such as Arvind Mills have addressed the low end market with huge success.  The company, founded in 1931, grew to be the fourth largest producer of denim for wholesale over the course of the following 60 years. It realized that India’s poorest couldn’t afford jeans and launched its own label – Ruf n Tuf – in 1995 to address the opportunity.  Its approach was to focus on the Indian consumers at ‘the bottom of the pyramid’, completely redesigning its business model with an emphasis on value.  Arvind Mills succeeded by selling a jeans kit to local tailors for $6/pair – minimal kit variants kept manufacturing costs low and the local tailors quickly became an effective marketing channel.   Subsequently the company has continued to innovate, adopting a full franchisee system for the manufacture and distribution of Ruf and Tuf jeans in 1995.

Surely the established jeans companies of the developed world, including Levi’s (the inventor of jeans) will be unable to service the ‘bottom of the pyramid’ and will be unable to compete, perpetually being disrupted by companies like Arvind Mills and being undermined by counterfeiting?

机 jī opportunity

Although the 1994 entry of Levi’s in India received a tepid response its fortunes have improved recently – it banks heavily on celebrity endorsement, product innovation and a superior retail experience to drive growth.  Most recently it has adopted an innovative “pay as you wear” model in India – the company offers cash-strapped Indians the opportunity to buy their jeans in three interest-free installments.  “A monthly installment scheme makes it easier for people to build their wardrobe with a premium brand like ours” says Shumone Chatterjee, MD of Levi’s in India.  The approach is smart – it enables more of India’s fashion conscious consumers to wear the Levi’s brand without eroding its brand equity or dropping its price points – although Levi’s will never completely straddle the pyramid it might manage to straddle a few more levels…

How About…

  • Defending your market position from disruptors using creative pricing?
  • Examining straddling the pyramid in emerging markets?
  • Empowering another part of the value chain to finish your products and services?

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July 13, 2010

58) Dropbox

危 wēi  danger

MIT-grad Drew Houston was frustrated with how often he forgot his USB drive.  He was sure that there was a better solution, probably a Web-based file hosting service but he couldn’t find one available so he founded Dropbox with a fellow MIT-Grad to build it.  Shortly after receiving seed financing from Y-Combinator in 2007 they released a short video explaining their plans on Hacker News – the video received 1200 Diggs and Houston realised that they must be onto something.  They built the product (which is worth checking out for its wonderfully simple UI here) and officially launched at 2008′s TechCrunch50, an annual technology conference.  Initial users loved the product so the next logical step seemed to be to advertise and they launched an Adwords affiliate programme.  The results were shockingly poor – customer acquisition cost proved to be $233-388 (for a $99 product).  Perhaps the company’s VC backed competitors were overspending and the company would never be able to compete?

机 jī opportunity

The team interpreted the situation differently – they didn’t see the cost of Adwords advertising as the problem, they concluded that their challenge was that consumers don’t search for problems that they don’t know they have.  In other words the team needed to find a way to create demand, not harvest it.  The team knew that users that were referred to the product invariably loved it so they developed a system to incentivise the referral process (gifting both the referrer and the new users free memory – a 2-sided incentive).  The approach worked: user numbers from Sept 2008 to Jan 2010 have increased from 100k to 4m, and 35% of these new users joined directly from the referral programme.

How About…

  • Questioning whether your aim is to create or harvest demand?
  • Using 2-sided incentives to drive sales?

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I like the low-fi introductory video (the only information on their homepage), it reflects the team’s humility and dives straight into the benefit using an analogous situation:

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