I have three muscles, without which I couldn’t do my work. The first is curiosity. (You can call it inquisitiveness, you can call it questioning.) The second muscle [is] the muscle of appreciation. It’s not questioning so much as it is noticing… how joyful things can be, how colorful things can be, what already exists as an inspiration. The muscle of curiosity and the muscle of appreciation enable the muscle of imagination. via www.brainpickings.org
Facebook has layered its executive, legal, policy and communications ranks with high-powered politicos from both parties, beefing up its firepower for future battles in Washington and beyond.
Like all mature businesses and industries (See oil industry, Microsoft, Big Three car makers), when you run out of ideas and the means to generate them, much less execute them, when you seek to merely defend your territory, you:
What's odd, though, is Facebook's continuing to pose as an open and transparent ....whatever, business, business model, community.
There are 500 million members in this community who invest their personal lives in building the brand known as Facebook, 100 million of which would love to participate more openly in building this resource, I'm guessing.
And, yet, Facebook chose to ignore all of them, all of us.
“Most of them will be overpriced,” Buffett, chairman and chief executive officer of Berkshire Hathaway Inc. (BRK/A), said today in New Delhi. ”It’s extremely difficult to value social- networking-site companies,” he said, without specifying companies. “Some will be huge winners, which will make up for the rest.”Bloomberg News
Oh, well.
I was dreaming when I wrote this, so sue me if I go to fast.
Prince has the best advice for those already trading shares in the huge losers (those that will make up for the huge winners):
Treat Them As You Do Your Best Customers; They Are.
Who is more important? Customers or employees.
In terms of building a brand, building buy-in for its message and for its purpose, who hears its message first?
Chicken or egg theology issues aside, the first person to hear your message is your employee. That makes them your first customer. They need to buy your message first before they can deliver it to the public. And without their buy-in, without their passionate engagement in creating and communicating that promise to in-turn their customers....your brand remains just that: yours, and yours alone. And no one ever finds their life made better, sweeter, more rewarding.
Your first customer is your employee.
Your most important customer is your employee.
They have to buy that message, every hour of every day, in order to create it, tweak, refine it, redefine it and deliver it to the market.
They not only buy it, they invest the majority of their waking hours and those of their families in making it believable, meaningful, and delivering financial results.
Recognize that. Recognize them. Recognize they bring the others. They bring the customers and the success and growth for ...their business.
You can take one of those weeks and turn it into a month or commit to an accelerated pace and complete 6 of the weeks in one month.
You can create your own week of employee recognition. Share that journey here. Share it in your blog or Twitter or Facebook.
But, do something to recognize your employees! They set your brand apart as your ultimate competitive edge.
And the more you recognize their achievements, the more achievements you'll see and they'll enjoy, along with your customers and and shareholders, partners and vendors.
Recently, I announced a weekly series of posts with 5 tips, tools and resources to help us entrepreneurs*...Keep.Moving.Forward.
Here's Week 9 and its theme:
* Feed The Mind.
Feed it with content that's inspiring, helping, uplifting, motivating, teaching, connecting...you with your goal and those who share it, can help you reach it, can help you help them reach theirs.
* Start each day with a good breakfast.
Remember? Breakfast is the most important meal of the day? Right? Ok, I'm a big fan of breakfasts. And now I start my day with diet of positive news. Doing that sets the tone for the day. By starting my day reading them I noticed my patience for gloom and doom stories has diminished. And m interest, my antennae for good stories has increased. And I find them in more and more places.
I created a Twitter list for Inspiration. I have a feeling my RTs from this list may appear pompous, a tone of lecturing (or hectoring). But I know when I see these quotes they serve as an inspirational roadsign....this way, this way. So, I know there are others who might find them easy.
My cousin, John, sends a daily email with inspirational quotes.
There are more. I may create a separate post to show who feeds my mind the most. (That may explain some things...)
And I start my day reading them.
* Join a mastermind group.
I never joined one.
But, I did join a CEO Peer-to-Peer coaching group from Peersight created by my friend Steve MacGill. This was a wonderful efficient means to create a collaborative teaching environment in private among my peers.
* Read...books.
This habit is easy for me. I have always been an avid reader of books. One of my first disclaimers with my wife, before we married, was never leave me alone in a bookstore. I will drop $100.00 in a heartbeat. She laughed...but only once.
Now, this habit is satisfied with my weekly radio show. People send me books, for free! And I am honored with the chance to speak with many of these authors.
I use a quote from Jim Rohn to ask questions of my guests. That question is:
Leaders are readers. You're a leader. What are you reading?
Remember that leaders are readers. They are constantly learning, constantly feed their minds, new knowledge from new sources. Today, that demand to constantly learn, unlearn in order to relearn is at a premium. And it will only grow.
Read...to lead.
This week's guest on my radio, his book and message, falls right in-line. Today We Are Rich, by Tim Sanders, is a wonderful book that goes into far more detail and offers far more resources on the topic here. Our conversation starts at 9:30 AM, Central. You can listen here.
* Walk Away; Walk THAT Way.
You already know the following, right?
We have a limited number of hours during the day.
During this time, we will be challenged or teased or tempted by moments, experiences and yes, even our friends and family and co-workers to wallow in the mud.
Walk away when that temptation arises. Walk THAT way towards our goals and solutions and those who want to walk that way, too.
I am late to this. Well, maybe I am late to understanding how necessary it is.
At times, I have been the one that needed to be avoided. I am glad that happened. (Yes, at times it was painful.) Otherwise, those bad habits would have been reinforced. And, hopefully, I won't return to that role.
I have found now, as I start my day, set the tone and direction, repeat this practice daily, that this becomes easier. I walk THAT way. And in doing so, I think I help those around me walk with me, THAT way.
**********
Reminder: We're all entrepreneurs.
Our whole life is a series "of hurdles, challenges, setbacks, disappointments, screaming euphoria, comparable levels of despair, a thrilling ride....” And like business entrepreneurs we’re pushed and pulled to invent and re-invent ourselves each and every day...or suffer the same fate as businesses who close their eyes to the world, refuse to change, and slowly disappear.
And like entrepreneurs in the business world, sometimes we get stuck. Sometimes, we need a tip, a reminder, a flashlight, a life buoy...And in this economy, we all need all the help we can get.
I hope this helps.
Feel free to share your tips, resources or means you have found help you keep.moving.forward.
Disclaimer: I'm a work in process with each of these steps, especially that last one. I'm getting better at the 2nd one. I overlook them all at different times, I handle them or have handled them poorly at others....But I Keep.Moving.Forward. I think you can too, if you take one of them today.
True confession:
Where is the balance between real-world and pragmatic vs discouraged and demoralized? When do we cross from being positive into being pollyannish? And vice versa, when do we cross from being realistic into being cynical and discouraging?
By nature, I have always been drawn to the aberrant behavior. Just fascinating, I thought. But, somewhere things shifted. And like that album, What once were vices are now habits, suggests, aberrant behavior from 'back in the day' has now become...commonplace, routine. What's interesting for me are tales of hope and inspiratin and accomplishment, tools and resources to bring us to our goals, data and research that shows how we can feed our minds in order to replicate that pattern, that result, that world. It seems, we, me, could benefit with more of us feeding our minds...positive food. Imagine a media channel who broadcasts a daily list of World's BEST People or Today's 5 Inspiring stories? It is doable. The tools and resources from digital andsocial media make curating that news a snap...if you want. That is the key. The motivation for these media outlets might be there is a much bigger audience for this news and it would be an easy, inspiring way to differentiate yourselves and generate positive word-of-mouth for your work. Just a thought.
Some days a simple comment of support and appreciation can transform that day of lead into a day of gold.
A friend of mine and her comments helped transform my day of lead into a day of gold. It probably took 5 minutes of her time. It made the rest of my day, well, golden.
Try it. Just tell someone you appreciate them, what they're accomplishing, what they're trying to do....a tweet, an email, a phone call, a facebook wallpost, a face-to-face gathering, a letter....whatever works.
Let's turn some lead into gold. Make the world a little brighter.
For 2 million wildebeest of Africa, their Serengeti is a 1,000 mile-long migration filled with hunger, thirst, predators and exhaustion. The journey is so impressive, so dangerous and incomparably massive that is rated the #1 Natural Wonder of the World.
Stefan Swanepoel’s life has been a “Serengeti journey”—from his birth in Kenya to schooling in Hong Kong and South Africa eventually, running a New York-based global franchise network with 25,000 sales associates in 30 countries. In all he has served as president of seven companies and two non-profit organizations.
Stefan is a leader. ( After once again going over the notes from our conversation (here), I am convinced he has been a leader since his early school days first in Hong Kong and then in Africa.)
I asked him:
You're a leader. Leaders are readers, says Jim Rohn. I just quote him. What books are you reading?
And he answered:
It’s wonderful to get on a plane and go somewhere. Books are good for planes.
A book I have on my table is Getting Naked by Pat Lencioni. there’s a whole bunch of books by Lencioni. Getting Naked is the best business book on my table from him.
You posted a list of your top business fables from the last 20-some years. Which one was yours?
If I had to pick one I’d say Who Moved My Cheese? by Dr. Spencer Johnson. He's written the most successful business fable of all time.
The author I look up to the most is probably Ken Blanchard. I remember him going back to almost my university years, the One-Minute Manager, 1983 if I remember correctly. I have a testimonial from him for my book. And it was so great to get that from someone I look up to so much.
A personal friend of mine, I’m meeting with this afternoon is Bob Burg. He wrote The Go-Giver and Go-Givers Sell More. And his book has been translated into a number of languages.
I liked his answer very much. I saw a leader who walked his walk and talked as he talk as he described. And I saw a leader who understood the power of stories to unite across cultures, across businesses, and create a driving force for success not only for the company but for the individuals who are traveling through their serengeti. And with those stories these individuals can unite into a caravan to help, encourage, support each other.
Chris Zane is founder and CEO of Zane's Cycles which has achieved an average annual growth rate of 23% annual since 1980 when it opened.
How?
"Zane credits his success to giving 'extraordinary customer service with the help of an empowered team of employees...The whole thing is about having a good time. Being positive. People have to be happy at work.' "
His book, Reinventing the Wheel: The Science of Creating Lifetime Customers, shares his story, his journey, to reinventing the wheel for his business and along the way creating lifetime customers over 3 or 4 recessions, three wars, 7 presidential elections....and achieved that stunning growth rate selling bicycles.
He shared an hour of his time recently to talk about his journey, his principles in leading his business, some stories from giving 'extraordinary customer service with the help of an empowered team of employees...having a good time.
Chris, thanks for taking the time to be on the show!
My pleasure. And thanks for having me.
Thanks for writing a great book! You shared so many examples of what worked, a few that didn’t, what you’re thinking was in that process and how it connected with you, your customers, your competitors, suppliers. Excellent.
It’s all front-line practitioner kind of stuff that everyone can understand.
As I was reading this, I kept thinking that an entrepreneur with 5-10 employees who is looking for some immediately doable solutions backed with good logic and data ...would be able to open your book and find 5 or 6 things in the first pages of your book. You wrote it in the voice of someone who’s been there, accomplished that.
Tell us about this book. What inspired you to write this book?
For the last 15 years or so, I’ve had tremendous opportunities to go out and speak in front of groups about what it’s like to create a lifetime customers.
You know, we have a very different focus on what we do. We look at the lifetime value of a customer and we base our relationship on multiple transactions rather than a single transaction. So, we have a different way of looking at the relationship with our customers than most businesses have. And, even businesses that say “We’re all about creating lifetime relationship”...there are holes in what they say and what they do and the thought processes behind it.
I wrote the book, basically, it’s share tons of stories...what we did...the thought processes behind it...and then what the outcome is and how it was successful or it wasn’t successful.
You can look at each situation to ok, this is a great opportunity to do something, to try it, see if it works. Let’s see if we can show value to our customers and ultimately have them continue to come to our business.
My inspiration is people who want to become customer-service focused, customer-centric organizations, give them the tools to get there.
Excellent. Excellent.
My friend Erika Andersen coined a great phrase in her book, Being Strategic. The phrase is reasonable aspiration or hoped-for future. What was your reasonable aspiration or hoped-for future for writing this book?
Well, it’s completely unreasonable. But, again, you know when you’re an entrepreneur you’ll never look at limitations; you’ll look at opportunities at what potentially could come from stepping outside your comfort zone and creating some unique offering.
A friend of mine, Jim Issler, wrote an endorsement of the book and how this book is an archetype. That’s a pretty arrogant statement. But, at the end of the day, if the book has the ability to sit on people’s shelves, they learn from it and they move from transactionally-focused business to a customer-service focused business...that’s the goal I would love to see happen.
I’m involved in lots of organizations. I’m involved in Arizona State University’s Center for Services Leadership; I’m on the board there. We’re constantly looking at ways to improve the quality of service here in the United States.
And it’s really something that’s important to have available the tools for people to do the right thing to become a service-oriented business. That’s what I believe the book has the ability to do.
What metrics are you using to track your progress?
The metrics are the success that we’ve had.
You talk about the growth we’ve had, the 23% annual growth. It’s actually we’ve grown 23% a year since 1981. I started the business in 1981, when I was 16 years old and I bought the business from the previous owner.
Right from the start, that was the point of focus. I couldn’t compete on price because the other bike shops were larger. I couldn’t sell things for less than they could. I realized service-offerings were the most important things we had to provide to our customers.
We’ve grown at annual rate of 23% a year since 1981 right up until this year. It’s been consistent growth. It’s not a flash in the pan. Those metrics are recognizing that we can have strong double-digit growth forever is reason enough to stay on the path we’re on.
That’s fantastic!
Who was your audience? Describe the person you wrote this book for when maybe at some point you really wanted to be test-riding one of those new elliptical bikes?
They’re pretty cool bikes. They’re going to be game changers. As popular as the road bike and mountain bike are, I think the new form of elliptical bike which looks like an elliptical bike from the gym which you can use to propel the bike. And we’ve had some interesting success moving. People are really liking.
But, back to the book. The book really had two audiences. We’ve looked to expand our business to multiple locations around the country, understanding that there’s an opportunity out there and we’d love to see our business grow from the location we’re in now to having multiple locations around the country. Things tightened up with the economy and we’ve put that on hold.
But, during the process of writing the book, I wanted it to be a training manual for future employees show what the culture of the business is.
But it’s the entrepreneur, that guy that is struggling with how to be different and understanding what it takes to be different. You know, Zane’s did this but I can do this. I can’t cookie-cutter his ideas but that’s a great idea and how can I find a similar idea in my business to allow me to gain lifetime customers rather than transactional relationship.
Let’s talk a bit about science and lifetime customers. I'm an art major but even I know science is about creating a hypothesis and then testing and experimenting and judging the results to either confirm or deny that hypothesis. Where does that process play out in creating lifetime customers?
The simplest part of this understanding, and really when an ‘aha’ moment came for me and for the rest of my team came when we figured out what a lifetime customer means. Lots of of people are in the business of saying "we’re in the business of capturing 100% share of the wallet, supporting our customers for life and all this stuff. "
And what we did was we started by sitting down and thinking through ok, this bike is at 8 and this bike is at 12 and this bike is when you go to college, and this one is when you get married and then you’re mid-life crisis bike and your retirement bike.
What do all those transactions add up to be? And we looked at all those numbers without referrals, just the individual customer. We said if they’re going to buy all of their bikes from us we’re going to capture $12,500 in business from them. Subsequently, we work on 45% gross margin...so, that works out to $5600 in gross profit.
As soon as we realized what that number was, it changed the game. It became the reason we were in business. Our existence reason was to satisfy our customers so that every time they thought about what they needed associated with what we offer, then they would come to us rather than someone else.
And, if that meant taking it on the chin because there was a service thing that was questionable and he was riding down the road and hit a pothole and bent his rim and had to have it replaced...I could certainly push back on him to pay for that because I wasn’t riding with you that day.
But, at the end of the day I probably have that rim in the back. It costs me about $15.00. We replace the wheel and we send him on his way. He leaves feeling special and the investment in doing business with us was worth it and continues to support our business by fulfilling his needs with us.
So, that $5600 in gross profit is easy to relinquish if you know you’re going to capture that back.
Let's talk about your lifetime guarantee. You offer a lifetime guarantee for parts and labor. You touched on that just now. Walk us through the ROI on that because I think it’s important to understand those numbers.
Awright, so, let’s talk about the nuances of the bike business. And then we’ll talk about the service offering.
When I started in business, my competitors offered a 30-day tuneup. You buy a bike; you bring it back in 30 days; they tweak it to make sure everything is working correctly. And they send you on your way.
And from that point forward, anything the bike needs you have to pay for it at some labor rate which at today’s rates is $100-$150 an hour for labor.
What we did is we looked at it and said ok, we’ll throw in a year’s worth of free service. Because if we build our bikes correctly, they’re not going to need a lot of service for the first year. We can expand our warranties beyond what our competitors are offering from 90-days to a year.
And, then what I found is if you build it correctly, to do things to head off creative obsolescence or the need for paid service, then the bikes can go much longer than a year without needing any real service or any kind of adjustment.
I say that specifically if you tighten some loose spokes on a wheel that comes out of the box the wheel will never go out of true. If you lubricate the housings with a little bit of grease the cables will never rust and you’ll never need to replace them.
There are things you can do to offset the potential liability of service if your business is built on satisfying your customers with an extended service policy. Rather than not doing those things so that at some they’re going to have to come back and pay you to fix those things you could have offset prior to letting that bike go out the door.
So, then we went to 2 years free service when my competitors went to one-year free service. They followed suit because they saw their market-share diminishing. And then at some point we looked at it and said:
“You know what these guys are going to go to 2-years because we’re at 2-years. And we know that there’s not that many bikes coming bike at 2 years unless there’s a legitimate problem...so let’s go to lifetime.”
And we made it retroactive to everything we sold. Everyone knew they could come in and we wouldn’t nickle and dime they about the service.
And, again, it all came about at about the same time we realized our customers were worth so many dollars to us. Why would we ever want them to go somewhere else?
I remember I was at a conference in Sweden. Everybody there was talking about switching costs and how you hate to change your bank accounts and it takes so much time and energy and those are the switching costs that were built-in so you’ll stay with them. And I looked at them and said:
“Well, our switching costs are lifetime service. We don’t charge you to fix your bike. Why would you go somewhere where they charge you? And it allows you stay in front of your customers and continue to offer them the new things that continuously come out. Hopefully move them up the ranks in business. ”
So, that was all the process of lifetime free service.
At the same time we looked at the parts. And we said:
“Well, things break because they’re not manufactured correctly. If I go back to my supplier and say “Hey, here’s a derailleur or here’s a wheel or something that’s damaged that didn’t live up to its life expectancy. I need a credit for it because I’m going to give one to me customer for free.”
They follow suit because they see we’re doing enough volume with the and they say:
“You’re valuable to us. And if you offer this free lifetime parts we’ll back you on it."
So, now I’m not even out of pocket on this for parts that need to be replaced because the manufacturers realize we’re doing all this volume with them and they’re willing to support us.
Chicken and egg question. Which came first your lifetime guarantee for parts and service or your growth rate? Was your growth faster or slower after the lifetime guarantee?
It was definitely the service.
It’s funny. We’ve been doing this for 30 years and I can look over a cliff-of-service decision and jump and never worry about how to figure out how to fly before I hit the bottom.
But, early on, you don’t have that confidence. It takes a tremendous amount of time to be able to grow your understanding of the fact that not every customer takes advantage of every policy. So, that at the end of the day it’s not 100% or 0%. It’s some percentage in the middle that will allow you, some percent of customers will take advantage of the service offerings.
We started with the service and then we saw the growth. We continue to add service offerings and continue to see the growth. It’s become part of our organization, the core, to continue to find things to wow the customer, create customer excitement.
Because, it’s paying huge dividends over the long-term. At the end of the day, that 23% growth, that’s a hard number to keep going at the end of your 29th year.
At some point, it’s real money.
Yeah, it’s real money.
At the end of 1981, my first year sales were $56,000. We just closed our books on over $15 million in sales. It’s just continued to tick up every year, that 23% annual rate. And hopefully, we’ll hit $18 million.
Now, early on, when you began to realize the lifetime value of customers, as they moved through their phases of purchase and you went to your suppliers and said:
Hey, your part was broke, I’m going to replace it for free with the customer. You need to give it to me for free.
What was that initial conversation like? Now, they’d say “Well, of course. We’d be honored.” But in those early days what was the response?
Well, one of my greatest stories is my helmet supplier. You know we had a customer come in who had lost the buckle. There was nothing wrong with the helmet. They just lost the buckle, you know the buckle underneath your chin.
And we took the helmet and threw it in our warranty bin and gave the guy a new helmet. You know, he looked at us kinda strange and said:
“Really?”
And we said
“Yeah, yeah, we’re good. Be safe. Wear your helmet.”
Well, when my supplier came in he looked in the warranty bin and pulled the helmet out and he said:
‘You know there’s nothing wrong with this helmet.”
And I said:
“Yeah, I know it. But I need you to warranty because the guy lost the buckle.”
And he said:
“I can’t warranty a helmet because the guy lost a buckle. There’s nothing wrong with it.”
I said:
“Well, you really should. Because if you don’t, I’m not going to buy any more helmets from you. And, oh by the way, I’m not going to buy any helmets from you and I need $5000 worth of helmets. I can call one of your competitors and say if you’ll give me a $20.00 credit I’ll write you a $5000 order.”
And the supplier looked at me and said:
“I can write you a $20.00 credit for a $5000 order.”
And I said:
“Well, I knew you could.”
I know my customer is worth $5600 in profit. So, I can take a hit if I have to because long-term I’m going collect a lot of profit.
Same thing for my supplier. Right then we realized all we had to do was show and explain what our value was to them so that they could justify satisfying our situation and help us be more successful.
And ever since then, it’s not even a conversation. We just say:
“Here’s the deal. Write the credit. And oh, by the way, thanks for being generous with your credits. But, we’ll be loyal to you because you’re loyal to us.”
And that’s our relationship.
Who was more skeptical of your lifetime guarantee? Customers, suppliers or employees?
The people who were most skeptical were my competitors. It was actually awesome!
When I started with my bike shop there were 17 bike shops in New Haven county, Connecticut. You know, we need to start pushing back. And here’s a 16-year old kid trying to grow a business. And they all laughed and didn’t think we could get any traction.
And as we progressed and figured out the relationship with the customer and started adding these offerings, they just didn’t have any way of competing. They didn’t know what to do in order to compete with us.
One of the things I love is when my competitors offer the same free service policy we offer. But they don’t do it for the lifetime relationship of the customer. They do it to sell the customer standing in the store.
And when the guy walks in and buys a bike and then goes back in for free service ...there’s always a little loophole.
“This is covered but this isn’t covered. This is taken care of, but this isn’t. You’re going to be out of pocket for this, but not this.”
With us, there is no push-back. Lifetime free service is lifetime free service. Lifetime parts warranty is what it is.
We’re not trying to create all these barriers to get the customer frustrated.
Even when we’re on the selling floor I tell people:
“A lifetime free service policy isn’t to sell you this bike. A lifetime free service policy is to sell you your next bike. You’re going to buy this one. I’m going to take care of you; I’m not going to take advantage of you. And when you need something you’re going to come back to me because you trust me and you’re not going to go somewhere else.”
And even in the industry, there’s guys all over the country, when this article was published in INC by Donna Fenn, it explained this whole process of what we do. We had all kinds of dealers writing in to trade journals saying:
“You never give away something you can charge for. This guy’s a knucklehead. He’s going to be out of business.”
Subsequently, we’ve continued to grow. And there’s quite a few of these guys in the bike business who recognized the value of this lifetime free service and are following suit.
But it’s not the norm in the industry. Our profit margins are very high. Our growth is very high. It’s certainly working for us.
Now back in the day, the Big Three carmakers back-in-the-day financed their global multi-billion empires on a business model where a majority of their profits came from car owners buying replacement parts. But, you sell bikes and offer a lifetime guarantee for parts and labor.
What’s in your DNA that helped you see this when all these smart guys, these MBA-types, failed to see it?
Part of it is being front-line, having a one-on-one relationship with them and listening to their needs, fulfilling their needs. There’s a lot to be understood by understanding your customer, feeling the pulse of your customer.
I love the example of the car industry. It’s a great example of what they didn’t do that we did. And had they done it, they’d probably be in much better shape.
GM reorganized. Chrysler was bought by Fiat. Ford kinda gets it.
But, there’s lots of companies like Hundai, Kia and these little ancillary companies that came in with these extended warranties and not out of pocket warranties that the customer could make a single investment and trust that they made a good decision.
And look at the market-share that they’ve gained. And, just the fact that these guys were in the business of selling parts and not lifetime relationship with their customers and these guys have actually gone away and they’re not even being run by the same people who ran the company 25 years ago.
When you shift your thinking from transactions.
“We made a profit on this deal. We made a profit on this deal.”
That diminishes because a customer will switch if they find a better opportunity.
Where if you’re consistently focused on satisfying the needs of your customer and doing what’s best for your customer and trusting that they will be loyal to you...then you can grow your business on good products, good service and good profits for your company.
That’s such a simple value. People will pay for value. People will pay for trust. And when you don’t that’s when they turn the conversation.
My wife and I bought a new car this summer. And everything’s covered. Well, maybe not the tires. But everything in the vehicle is covered.
And, it was an easy decision. What you’re paying you’re paying for 4 years. I know I’m not going to have to pay to change the oil or do anything else. I can go back to the dealer because I don’t feel like I’m being take advantage of with whatever the dealer pricing might be.
And hopefully, over time, after 3 or 4 years I’ll have a trusting relationship with them so I’ll want to continue a relationship with them so when I need to buy something or I’m out of pocket for some of the relationship that needs to be done. At least they’re giving me an opportunity to try to figure out if I should trust them rather than immediately go someplace else.
That’s the attitude of everybody else because they don’t trust their provider. It’s been a bad model for so long that we’re seeing the tide turn a little. That’s the passion that we have. We want to change the tide across lots of businesses because it’s really the right thing.
“Good service not only improves business but it also improves the quality of life.”
You know people who work with me are happier. They’re empowered to do what they have to do. Customers are happier because they know they’re not going to be taken advantage of; they’re going to be taken care of.
What’s the push-back? There no anxiety. You’re going to do what’s right for the customer and that’s that.
Beautiful. Beautiful. It’s a delight hearing that from you.
There’s an exception to every rule. And you touched on it just now. And you have one with your Lifetime Guarantee. What is your one exception to your lifetime guarantee?
Tubes. Flat-tires are an exception. You know, we’re not riding with you. If you get a flat-tire, you basically are going to be out of pocket for it.
But, we started a policy where for a single investment of $20.00 if you get a flat-tire you can bring it back to us and we’ll fix it for free forever. The tube costs a couple of bucks and labor’s pretty quick and easy to do.
So, if somebody wants to make an investment....it costs about $12.00 to change a tube if it’s not one of our bikes and covered by this insurance policy. So, basically, if you buy two flat repairs forever we’ll replace and change your tubes. And then you’re covered.
It’s a profit-center for us. I’m not going to hide behind that. The $20 is based on future liabilities. We know that some people get lots of flats and some people don’t. But at the end of the day, ultimately it’s a quality offering, it’s an investment and they’ve covered for 100%.
Let’s say even if it wasn’t a profit center they have to walk through your store. And you’ve set it up where they have to walk through your store, have a free cup of coffee at your espresso bar. Re-establish the relationship, remind themselves of what a great store you have.
That’s exactly it. We know what we do well and what we don’t do well.
One of our failed service-offerings was telling people who bought bikes that we would pick it up at their home and return it to their home. No charge. We did this for a couple of years and we sold a few thousand bikes that had this pick-up and delivery service.
And what we found was that it was detrimental to our business. Customers weren’t coming in the door. They weren’t smelling the rubber and the coffee. They weren’t getting an emotional connection to the business. They literally had the bike in their garage. They’d call us and we’d pick it up and they never had a chance to buy a power-bar or a new GPS speedometer for their bike.
So, we actually abandoned that service.
But, the thing I like to promote and the the thing I like to talk about with folks is.... we didn’t abandon it to the people we promised it to. We just stopped offering it to the people who came in. So, when someone calls us up and says “Hey can you pick up my bike.” we go into our database and realize they bought it in the window of time where we offered free pickup we go and pick up their bike and delivery it to them. It’s not a big deal.
People after and prior to that offering, they don’t have that luxury because it doesn’t work for us to stay profitable and continue to grow. So, they have to physically come in and visit our business. We will continue to service them for free.
Fantastic. Fantastic.
Let's talk for a minute about partners and customers, vendors and suppliers. There's a lot of talk with some good basis that customers should be brought into the fold, treated more like a partner. I've said it; I’ve championed it.
You write something different. You write, as you speak, directly and candidly, that with your vendors and suppliers you're their customer, not their partner. Why did you choose to draw this line?
Yeah, I’m pretty passionate about it. I promote it to them in our conversations.
You know, when my customer calls me with a need and I recognize that I have the opportunity to profit from the relationship I treat them well and I work to try to entice them to continue to do business with me.
Unfortunately, when the partnership thing comes up that becomes a different situation. Your partner is your wife or your husband. And sometimes you mistreat them. Because they’re your partner and you’re in this commitment, then you forgive them and you move on. But, at the end of the day in a business environment they’re not really partners unless they’re paying your rent or paying a part of your electric bill or paying for your people who work there. That’s what a partner is involved in.
A vendor supplies me goods and I buy them from them because they offer me a reason. They service me; they give me quick delivery; the price is competitive; they stand behind the warranty.
Whatever it might be, they earn my business as a customer or supplier relationship and not a partner relationship. Because, at the end of the day, yes, I value the idea that they bring product to me that people want to buy. But they don’t have, they’re not on the financial hook for the expenses of the business. So, they’re not a partner.
And I want them to treat me like a customer so I can treat them like a customer and not try to convince them that they are my partner and sometimes ask them for forgiveness.
Great answer. It keeps everything simple and clear, out in the open.
One of the many reasons I liked your book was Chapter 4. There you talk about giving back to the community both from a philanthropic point of view as well as from a pragmatic, customer-loyalty view. Can you share with us some of those programs and your plans for Zane's Foundation?
Yeah, we have a Zane Foundation. Zane Foundation is an organization I started 20 years ago. I looked at the opportunity in the marketplace and said:
“There’s not a lot of people, there’s not a lot of businesses, supporting education and the arts.”
You know, we’re in the bike business; we’re not in the arts and education business.
But I felt that in order to drive value to the community, if we consistently supported arts and education offering scholarships to high school students as they graduate and supporting all of the arts programs that go on in the community unrelated to our specific business. We sponsor bike rides and we’re the title sponsor of a couple of different triathlons and we do a kid’s triathlon and we’re engaged at the non-profit level supporting a lot of different things.
But, the Zane Foundation was specifically to make a mark in the community to show that the business cares about the broad scope of the community and not just supporting our own endeavors and not just being connected to the bike side of our business.
Now, it’s well over $100,000 in scholarships for students in the community we’re in, as well as, lots of other stuff that presents itself as requests for contributions.
And in the community, too, we look pretty seriously at over the last 29 or 30 years we paid out over $29 million in payroll to people who live in the community who then shop in the local hardware store and buy groceries and dry-cleaner and coffee shop.
We look at that as part of our community support as well. The money isn’t disappearing. It’s staying in the market as well. The money flows in the community and it’s an important part of what businesses, specifically small businesses do in the community. They drive great revenue in the community.
Employee engagement is a hot topic these days. That's because most companies lack it. And those companies with it are growing and hiring. Coincidentally we're in a jobless recovery. I'm thinking to do what you do must require a lot of employee engagement. New ideas, new roles, new tasks...disruption, some things work, some don't, lots of growth....
I'm thinking in some respects you're hiring entrepreneurs, those who are comfortable with risk and change and failure. What do you look for when you hire?
The thing that I look for specifically is nice people. One of the things that I’ve found over they years in hiring and firing and making good decisions and bad decisions with staffing is when you meet somebody and they look you in the eye and they’re outgoing and they’re confident. You enjoy the interaction right from the start. Those are the people you want to have in your organization.
And if you build an organization with those kinds of people it brings itself to be an even better environment. People are nice; they get along; they enjoy working together.
And then, when you empower your employees to do whatever it takes to satisfy your customer. And that’s a single mantra within our organization is to take care of the customer so that they’ll want to come back.
And, that the customer service starts when the customer experience fails. That’s another thing we talk about pretty openly in our organization: If the customer doesn’t complain it’s because they’re having such a good time and you’re empowered to say yes and do whatever they need to do....then we don’t have to go through the recovery process or the apology process. They just had a good time when they were here and they want to continue to come here.
Those are the types of relationships that we like to create with our employees and giving them the ability to do the right thing for the customers. Once you find people that fit together it’s easy to continue to add people that fit together. Because during the interview process and the interaction with multiple people as they interview....you don’t interview with just one person. You have to get the nod from a couple or three people who appreciate what the person’s bringing to the table as a new employee.
“They’ll fit in. They seem like they’re nice.”
Or they’re a friend of a friend. We tease our summer interns, our summer staff, that when they leave to go back to college they need to give us the names of one of their friends we can hire or they can’t leave. They’re stuck in the store until they find their own replacement.
Typically, they bring in someone who fits, rather than undermining the organization. Because they know they’re going to come back over Christmas or over spring break.
A lot of engagement at that level where you’re part of the family, you’re part of the club, you’re part of the group, let’s make it better.
What percent of your ideas come from your employees?
At this point most of them.
My responsibilities in the way that the business has grown is I’m not required or accountable to the organization on a daily basis. I have a Retail Manager, a National Sales Manager, an Operations Director. These guys are all responsible for running the different divisions of our organization so I can go out and find new opportunities and focus on growth and brand-building.
The ideas that have come about in the last few years have been promoted by the staff saying:
“I saw this. And it looked interesting. Is there a way for us to adapt it to us so that it works.”
When we talk about our 90-day price protection policy...and the lifetime service warranty and the lifetime parts warranty the customer assumes they’re paying a premium. So, in order to get our customer comfortable with the fact that they should make an investment with us we offer 90-day Price Policy. So, if you buy it from us and you see it anywhere in Connecticut for less within 90 days, let us know and we’ll refund the difference plus 10%.
That was a BestBuy policy 15 years ago. We looked at it read it, and realized we could do that. And we, basically, cookie-cuttered that policy and turned it into our policy. They had a 30-day and we turned it into a 90-day because we realized the liability was low.
Now that’s how we move forward now. People just bring stuff in and say:
“This might work. Can we challenge this to see if it’s good idea or not a good idea?”
It’s a collective group of like-minded individuals that want to succeed at this model. And everybody’s open to new ideas and trying to figure out if there’s a value or not.
And another thing. It’s like the bike-delivery thing. You can start things and if they don’t work you can abandon them. Just as long as you live up to the promises of the people you made them to. It’s not that it’s engraved in stone. You can manipulate the offering until it works for your organization. But, you need to try something.
I’ve had people who’ve worked for me. And the ship’s on the dock. They’re trying to manage the course they’re going to take and account for the weather. And they never leave the dock.
My attitude is get the ship out on the seas and let’s figure it out as we go. And, as long as we don’t capsize, we’ll get where we need to go a heck of a lot faster than those who are afraid to let the boat leave the dock.
I have the confidence that I can manipulate or manage the situation while I’m in it in order to be successful.
What happens, if it happens, when they hear your idea and think it stinks? Likewise, with you and their idea?
Well, it happens.
Fortunately, we’re like-minded and we’re also comfortable with one another. We’ve been around one another that none of us have thin skin. And if I come into a meeting to present a concept and I can’t defend wholeheartedly then it does stink. I haven’t done the homework.
I talk about the interview I saw with Marc Zuckerberg where he said if someone comes in with a new idea they have to build it and then they can show it him in real-time.
That’s kind of how we are with the policies and service-offerings. If you haven’t figured out how to make it work and you’re looking for someone else to carry the burden of this great idea, then it’s not a great idea. If you can’t sell it and convince folks that it’s really good, then it should go by the wayside.
One of the policies we just implemented from one of the guys in the organization was at Christmastime was when we get returns. Tom said
“What if we offered a premium to customers if they would take gift card?”
Now, of course we’ll give cash back. Our unconditional return policy says you can return anything to us for forever and we’ll always give you your money back. But how about we give them 10% kicker on their return? So, if they want to buy a bike in the spring or a different piece of spring clothing and the spring clothes haven’t come in, so there’s a benefit to them from just getting cash back.
And there’s a benefit to us. We can keep the cash in the company during the winter when the sales are slow. And the customer gets a premium on their value when they’re ready to make a buying decision. And they remain loyal to us.
We saw a pretty nice offering at the holiday there where we had about $15,000 in returns that came back with customers taking the 10% to continue the relationship with us and to get a better value when they want to make their buying decision.
That’s the kind of thing where Tom presented it. We challenged it. It made a lot of sense. And we started to move on it and everybody’s loved it since. So, it seems like a permanent policy moving forward.
That leads us to our next question. You have a theme or principle in your business called Point North. Now, not every employee, even your brother, has the same zeal for happy customers you do. How do you, not keep them in line but maybe align and re-align their actions and interactions towards your commitment to customers?
The “Point North” model is a pretty interesting one. If you think about...you’re in a room full of people and everybody closes their eyes and points in the direction they believe is north. And if you open your eyes and look around you can assume not everybody in the room is pointing in the same direction.
And, subsequently, our business needs to continue in the same direction with the same attitude.So we use this “Point North” model as basically a simple, slogan, or expression we have in our business to remind us that the only difference we have in our business between us and our competition is the service that we offer.
I’ll say that again:
“The only difference between us and our competition is the service that we offer.”
And what happens is everybody knows that. And actually there’s a little plaque in the building and we call that North. And so, if we see an interaction with an employee that’s becoming heated or we see a customer who for whatever reason is challenging our existence and potentially being unreasonable and the employee starts to get a little uncomfortable with the direction they need to make, the decisions to satisfy the customer...we can walk up to them and without interrupting the conversation, I can say to them “Point North”. And immediately they know it’s the only difference between us and our competition is the service that we offer and that’s what I need to do. And then they’re redirected to do the right thing.
As long as we’re all moving in the single direction, there’s no inconsistency in the relationship with the customer. They can interact with me. They can interact with Tom or Greg. And it doesn’t matter because they’re going to get the same attitude.
And I think that uncertainty in business is why people choose to go somewhere else. You go into the dry cleaner and one guys really nice and one guy has a chip on his shoulder. Or one guy cares you want your collar tabs back and the other guy doesn’t. Eventually, you’ll go:
“Ah, let me find another place that’s better.”
And we’re tying to have this consistent relationship with the customer where again the customer service starts when the customer experience fails. Keep the customer service experience positive and we don’t have to do the hard work.
That’s such a great, simple, mechanism to remind people without making a big production about it: “Point North”.
Yep.
Zane's Cycles is an international company in that you celebrate Bastille Day...
Well, of course! Doesn’t everybody!
Tell us about that decision to celebrate the French Revolution annually.
Well, it happened that THE Bastille Day happened a few years ago and Tom my Operations Manager came up to me and said I’m going to close the store a little early. And Bastille Day is July 14th and it’s probably one of the busiest weeks of our year.
He says:
“I’m going to close the story at 3 instead of at 6:30. We’re going to get a bus and we’re going to take everybody up to an Amusement park. We’re burnt. We’ve all been working hard. ”
Our season kicks off the middle of march. And it had been 3 solid months of 10-12 hour days. There was a need for us to refresh our batteries and recharge.
So, he said:
"We’re going to close a little early. And, we’ll put a little sign on the door for the customers and explain we closed a little early. We’ll give them a 10% kicker tomorrow as an inconvenience. Come back tomorrow; tell us you came here today and we’ll give you 10% off your purchase as an apology for us inconveniencing you and not being here."
And I kinda shook my head. You know, I guess, you know it’s probably not in all the business books that you should close your business. But, again, the quality of my people is way more important than anything else that we have. If they’re burnt and we need to refresh then let’s do it.
We did it.
And again, Bastille Day just happened to be on a Wednesday. So, we said on the sign
“In Observance of Bastille Day we closed early”.
It was just kind of a fun thing.
Now, we just typically close early on Bastille Day and go up and do something, whether it’s an outing like paintball or something or we go to the amusement park or whatever. But it’s a refresher day in the middle of our highest season that gives everybody a chance to kickback and remember the fact we’re not just all about the profit we’re making or the business that we’re promoting.
In simplest terms, and it’s a hard thing, we’ve had interactions with customers where they’ve been billigerent or taken advantage of a situation to the point that’s been unreasonable and we’ve canned a customer for being unreasonable. But, at the end of the day, my employees are by far are the most important asset I have. And, at the end of the day if my employees are unhappy and they’re not going to come to work then I have to stand there and do the work. We’re obviously at the point where we’re too busy to do it: one man can’t run the operation.
My focus at this point is to engage the people in the business and see value in them being there. And if we have to close early to do that then that’s the right thing to do. It’s not a hard decision.
You've created very high expectations with your customers. You've beautifully fulfilled them as you continue to grow. But life's not perfect and neither is everyone at Zane's. Though, it seems might close. But your expectations leave little room for error. One little one and the tide turns into a tsunami of...customers going around say Yeah, we knew it couldn't be true...How do you deal with the inevitable screwup? People forget something, forget a promise to an important customer. How do you deal with that?
Let me tell you, it happens. It’s unfortunate that it happens; but it happens. Nothing is perfect all the time.
How you handle that is what challenges all the other things that you do. You can recover a customer after a mistake. You can apologize and do what it takes to make them feel valuable and understand that you truly made a mistake. And have them want to continue to do business with you. That’s the relationship that drives all the other things that happen.
We have this great story about a customer who’s Valentine Day, we call it The Valentine Day Massacre. We had a customer who came into the store who put a bike on layaway because she couldn’t afford to buy the whole thing for her husband for Valentine’s Day.
So, she put down some money and said:
“I want to bring my husband by after you’re closed and show him the bike I’m buying for him. And next week, when I get my paycheck I’ll come by and pay the balance of it.
If I put balloons and a message and a card on the bike, will you put in the window of the store. So, when I come by tonight with him, I can show him the bike.”
Great idea.
At the end of the day the goal was to take the bike put in the window of the store, lock up and go. So, when she comes by it’s in the window.
Well, of course we forgot.
The next morning I get a voicemail from her and, you know, she’s upset. Actually, she’s really upset. She’s really ticked. She’s like:
"You wasted my time. You wasted my valentine’s day night. I went to the store, I wanted to show him the bike. I sent him out of the car to look into the window thinking the bike was going to be there with my note and there was nothing there. And oh by the way some of my co-workers actually showed up in the parking lot to see his response him seeing the bike he was going to get. I was embarrassed because they were standing there looking and wondering what’s happening."
We were embarrased. We killed two cupids. It was a long voice mail. And I called Tom and I said:
"What’s the deal with the bike?”
And he says:
“I know. I got into work this morning and it wasn’t in the window. Greg was supposed to put it in the window cause he was the one that worked with her. And it just didn’t happen. And I got a voicemail from her, too.”
And I said:
What are we going to do? We gotta make this right. Let’s sit down and think through this and figure it out.
She owes half the price of the bike. We can certainly forgive the balance and get the bike to the husband tonight to make up for it and so he can have the bike.
I’m like:
Yeah, that’s easy to do. But, what else can we do to make her feel special? We screwed up and we want her to know that we’re really apologetic for the situation.
Well, why don’t we re-create the Valentine’s Day Dinner? We’ll call up Quattro’s and let ‘em know we have a customer coming in and let ‘em get a bottle of wine, nice dinner. We’ll cover the cost of the dinner. By the way, we should probably cater lunch for all the people who came to see this. They don’t like this either because we wasted their time, too.
And he said:
Yeah, that’s a good idea, too.
Ultimately we went through the whole process and got the gift certificates and told her we were going to come over and drop the bike off and he apologized over the phone. And she seemed to calm down a bit.
And we went to the house and gave the bike to the husband and gave her the certificates for the dinner and for the lunch. I should have saved the voice mail. But he called me and left a voice mail after he left their house and said:
“Dude. She kissed me.”
So, we went from the morning where she hated us, despised our existence and hated our time because she went through this thoughtful process to something nice for her husband and we were the reason it didn’t come about. So, the fact is she’s kissing my manager because we stepped up and did what was the right thing to do.
It could have been easier to say:
“Hey man. We made a mistake. Mistakes happen.”
But that’s not what we do; that’s not what we’re about. When we make a mistake, we apologize and we’re willing to do whatever it takes to satisfy the relationship so that it becomes a great story for us. And the customer knows it’s a great story for them because we really do care about them.
The best part of the story was 3 days later I get an envelope with a letter from my employee, Greg. He was the employee who worked with this woman and in there was this really nice letter saying:
“ I apologize for making a mistake and I potentially cost us a lifetime customer. And oh, by the way, here’s a check for $400 to cover the costs of all the stuff we did for this woman to satisfy her as a customer.”
Now, of course I didn’t cash the check because we all make mistakes. And Zanes can afford to pay to fix the mistakes our employees make. I want my employees to feel that they can do whatever it is they need to do. But, to have an employee take a week’s pay out of his existence, to write a check, to cover the cost of his mistake...that’s an employee I want working for me.
Actually, he’s still here. Greg’s going to be a lifer. He gets what we’re about and he wants to make this a greater organization.
I just looked up and we’ve come to the end of our hour. The time has just raced by. I thoroughly enjoyed talking with you. I know you’re crazy busy and a million things waiting for you.
You're a leader. Leaders are readers. Jim Rohn says that; I just quote him. On your website, you have a page where you have a recommended reading list. One of them caught my eye. The Offshore Nation. How do you offshore or outsource your customer experiences? Where do you draw the line in that dynamic?
I certainly believe that readers are leaders. One of the reasons I promote this book on my website is because we all need to know what is out there and what’s changing.
There are a lot of books out there that are talking about looking at the global economy. When you look at the US economy as whole, we’re not in the manufacturing business, we’re in the service business. IBM is spending time promoting that you’re going to get an academic degree in service management or service science like you can get a degree in service science.
People need to read books on potentially what’s happening out in the marketplace, or the world, that will challenge our existence to be successful.
And The Offshore Nation is a great book to know what is potentially coming down the line.
Where can we find you on the web?
We’re at Zanes and I’m at Chris Zane. Those are the two main places we have to visit and give us feedback. Good or bad. I’m a customer service guy, so it doesn’t matter.
Brian is a Practice Consultant for Gallup. For more than 21 years, Brim has worked as a consultant and advisor to some of the world's leading organizations.
He's recently co-authored with Tony Rutigliano, an excellent book on selling: Strengths Based Selling. Whether you are a fan of the strengths-based movement or looking for sales training manual backed with research, profiles and examples, that support tips and actionable plans to grow your sales...you'll want to buy this book.
And while you're at it, listen to tomorrow's show at 9:30 AM while we talk with Brian about Strengths Based Selling. Listening options are listed below.
Gallup combines its research with the sales expertise of Tony Rutigliano (Senior Practice Expert at Gallup and former publisher and editor-in-chief of Sales & Marketing Management) and Brian Brim (Senior Practice Expert at Gallup who has worked as a consultant, speaker, and advisor for more than 21 years), resulting in a step-by-step guide for using individual strengths to increase sales performance.His insights have supported many organizations to increase performance by maximizing their talent and human capital systems. Based on a landmark 30-year research project, Gallup's revolutionary conclusion maintains that we perform best when we focus on building our strengths, bucking the conventional wisdom that encourages us to focus on fixing our weaknesses.
The book hinges on one simple yet powerful belief: there is no one right way to sell.
We'll talk with Brian about this great book, how you can use it and the strengths-based model to bring faster sales with greater engagement between all the stakeholders of your organization: employees, customers, vendors and partners.
FTC Disclaimer: My friends at Cave - Henricks sent me a copy of this book.
No strings. Just, here's a copy of a new book.
I read it. I was inspired. I asked if they could coordinate an interview with one of the authors.
Brian agreed.
I wrote this review and ran it by Michele to make sure both the timing and content was aligned with her goals. Fortunately, they were. Fortunately, for me, really.I would have been embarassed otherwise.
Other than that, and the pleasure of spending an hour in conversation with Brian....and the pleasure of transcribing the show at a later date and sharing it and talking about...there was no compensation.
Know the answer to this question: What Changes If They Leave?
What would change?
What would change about your/their company and its relationships with all the key stakeholders?
What different results would you see?
The answer to these questions is the first step towards recognizing your employees, what they bring, what they contribute, what your/their company is with them and their contribution.
The next step is to recognize them in a way that’s meaningful to them. Personally, personalized, with purpose.
But don’t skip that first step, don’t go immediately to Go. You won’t pick up 200% of their discretionary effort (love that term...sorta), intellectually and emotionally. In fact, you’ll lose some.
Why?
Your recognition is meaningless. It’s empty, a platitude at best, a patronizing attitude at worst. As consumers we can sniff out fake brand messages in a nano-second. We do that with strangers whose message arrives unrequested in our mail, our websites, our phones. Imagine how much faster a fake note of recognition can be sniffed out by those with whom we spend the majority of our waking hours.
Back to the point. What would change? How would your company, their company, change in their absence. Know that. Then recognize them for that.
You can take one of those weeks and turn it into a month or commit to an accelerated pace and complete 6 of the weeks in one month.
You can create your own week of employee recognition. Share that journey here. Share it in your blog or Twitter or Facebook.
But, do something to recognize your employees! They set your brand apart as your ultimate competitive edge.
And the more you recognize their achievements, the more achievements you'll see and they'll enjoy, along with your customers and and shareholders, partners and vendors.
Recently, I announced a weekly series of posts with 5 tips, tools and resources to help us entrepreneurs*...Keep.Moving.Forward.
Here's Week 8 and its theme:
Volunteer
Volunteering offers hope and help to others. Not preaching, just sharing an observation.
And sometimes, ok most times, the hope and help we each need is found only in the hope and help we give.
Granted, that’s tough. And I have stumbled on this one. But...when I remember it, it always works.
Being a fan of baby-steps* more than herculean tasks (especially since I can choose to create either) I prefer a regular routine of baby-steps. Here are some baby-steps, steps I can take with a high degree of confidence that it will yield something positive for someone else, generate a little forward momentum each and every day.
Volunteer with Local Organizations.
Each town has nearly unlimited opportunities for volunteers, especially in this economy. Our little town has a volunteer coordinator with offices in our local library. I’m sure other towns have similar ones, too.
I walk by the offices of our local food bank, The Lord’s Cupboard, at least weekly, if not daily. My challenge was walking in the door and letting them know I wanted to help. Finally...one day I walked in and said I wanted to help. I’m glad I did. They welcomed me with open arms. We talked for a few minutes and came up with a plan.
Each Friday afternoon I load up our car with food and deliver it to several places in town**.
Help Your Neighbor
My neighbor came over with his snow plow several times this year. Made my day.
I’ve shoveled the walks of my neighbors when they’re gone. It only took a few minutes. Made my day.
Now, with social media, neighbors on another continent.... live next door to us.
So...shovel their digital sidewalks. Clear their path. With all the tools and resources online, the challenge is two-fold:
1. a willingness;
2. which opportunity with which resource.
Just take a baby-step.
For that matter, we all have families. Does any family not have volunteer opportunities within it?
Be A Curator of Inspiration.
Ultimately, we're all curators. It's just a choice of what we curate.
My cousin John shares an inspirational quote every day by email. He started this during the 2008 great Recession when he saw the need for a little light and hope. A few years ago he had a few hundred people on his list. They all came through word-of-mouth. I'm sure that number has continued to grow. (Me? I found out through a google alert.)
Most blogging platforms offer a clipping widget. That lets you clip some portion of an article to your blog. I use Posterous to share a daily story of inspiration here.
Share what you know. Jonathan Fields shares wonderful tips for entrepreneurs and well, anybody, at his site. There are many others, as well.
LISTEN
This might be the most powerful, most highly-leveraged, act you can volunteer to offer.
Just listen.
Family, friends, co-workers, a neighbor. Just listen. Let them share their stories. We all have great stories and great challenges. We need to share them; we all need to hear them.
And it takes so little. Just listen.
Be a Mentor
Some companies create mentoring programs. They match senior and junior members together. Traditionally, those programs have been designed for the senior members to share knowledge and wisdom with the junior members. These days I think it is an opportunity for a two-way street given the rapid changes in technologies and attitudes between generations.
Don’t wait for a formal program. Be alert. Find one person and make yourself a resource for them to learn.
Take One Baby-Step.
The challenge is not to change the world. The opportunity is to help one person, one time. So, take that one baby step. Help one person, one time. See how it feels.
Then take another. Make it a habit.
**********
* Just a reminder: we're all entrepreneurs.
Our whole life is a series "of hurdles, challenges, setbacks, disappointments, screaming euphoria, comparable levels of despair, a thrilling ride....” And like business entrepreneurs we’re pushed and pulled to invent and re-invent ourselves each and every day...or suffer the same fate as businesses who refuse to change: close our eyes to the world.
And like entrepreneurs in the business world, sometimes we get stuck. Sometimes, we need a tip, a reminder, a flashlight, a life buoy...And in this economy, we all need all the help we can get.
I hope this helps.
Feel free to share your tips, resources or means you have found help you keep.moving.forward.
Disclaimer: I'm a work in process with each of these steps, especially that last one. I'm getting better at the 2nd one. I overlook them all at different times, I handle them or have handled them poorly at others....But I Keep.Moving.Forward. I think you can too, if you take one of them today.
* When you add up all those baby-steps I’m thinking that herculean task, that stall inside my head that needs cleaning, could perhaps be accomplished. That my plan. I’m sticking to it.
** It is a time - management issue; I avoid commitments unless they are ones I can keep. I will find more. Check back in a few months.
This is the fork in the road that just about all of us face, whether as individuals or organizations. We have to make an assumption about whether people are going to steal our ideas, break their promises, void their contracts and steal from us, or perhaps, that people are basically honest, trustworthy and generous. via sethgodin.typepad.com
Seth's right.
But I'm not sure which is the path less traveled. Sometimes I think it's that first path: people are going to steal our ideas, break their promises, void their contracts and steal from us. But that's only when I read the news too much.
And sometimes...maybe we wake up, look around and think...man, have I not been listening. And, if we sleep-walked too far, too conveniently, if we've traveled too long in the first path, it's a bit muddy and sluggish crossing the fields to get to that path where people are basically honest, trustworthy and generous. Brambles and thorns, a few snakes, sometimes a clearing on a rise so we can see where we're headed.
But it's worth it. It's really the only fork in the road. That fork in the road.
Bill Davidow has served the high-technology industry as executive and venture investor for over 30 years. He remains active as an advisor to Mohr Davidow Ventures, a venture capital firm.
He's an electrical engineer by training with degrees from Dartmouth, Cal Tech and Stanford.
High-tech and electrical engineering for the past 20 years has been all about, nearly all, connections. He's seen the impact from the inside out and now has written about his observations of the impact from these past 20+ years of increasing abilities we have to connect and share.
That's what we talked about. You can listen to our conversation here.
Bill, thank you for being on the show.
Thank you for having me. I can see I have a very big challenge.
Thank you for writing a book that's bothered me. No, seriously. It's a great book. It's well-written, your conviction is compelling. You have great data. You integrate that data into excellent stories and examples you share.
You have been an investor in the tech industry for 20- 30 years. From my little part of the cornfield, tech these days is very focused on connections, collaborations and communications. Would that be correct?
It’s absolutely correct.
What the book is doing is telling people how to use those connections correctly.
I don’t have any problem with connections. I, unfortunately, don’t have a fiber-optic cable running to my home; and, I wish I did. I could never have written the book without all the information I gather on the internet. I could not work today without the connections.
But, I think it’s important that people understand that any great technology, uh, you can abuse the level of connectivity and you may be abusing it without even realizing you’re abusing it.
When in the past 20-30 years and maybe the last 10 did you see the signs that people were over using it, abusing these connections, and they were presenting serious threats to the established order, that’s not the right term, ...to how many of our institutions function and our economies and cultures work.
"How do all these phenomena effect what is going on around us."
And in the past, I’d say the last 6 months, it has become so evident what is going on. And when I give a talk to day, I start out by saying “Egypt, Tunisia, Wikileaks, the flash crash, Iceland, the meltdown of 2008 and our economy. What do all of those things have in common?
I point out to people what they all have in common. They were all made larger and they were made more virulent and they happened faster because the internet accelerated all this.
I want people to understand how the internet acts as an accelerant in all these things. Because things happen so quickly and they come upon us so quickly we have less time to react and less time to adjust. And also things race out of control more quickly because the internet facilitates it.
As I’m prone to do, even after a couple hundred shows, when my guests start sharing great points I start scribbling. You’ve made some great points. What I’d like to do is hold that thought for just a second and instead talk about that seminal moment when you said ...I gotta write this book.
I’ve been writing this book, working on the book, for over 10 years.
And, the light really went on when I began to think about the compounding of money. If you think about the compounding of money, if you were a kid and you put money in your savings account you were paid 2% interest. That interest got fed back into your account and your money doubled in 36 years. If you could find a place that would pay you 5% interest, your money would double in 14 years because you had more money fed back into your account.
And, so when you increase the amount of positive feedback in a system things happen much more quickly. And what I realized the internet was doing was that by strengthening the connections and creating more interconnections it was creating more positive feedback in the system so things could grow more quickly.
If you were to look at over-the-counter derivatives and the notional value of those derivatives....in 2000 the notional value of those derivatives was equal to 2 trillion dollars. That’s a pretty big number and it’s equal to the output of all the countries of the world for a single year.
But, by 2007 the notional value of those derivatives had grown to 600 trillion dollars. So, that’s a compounded rate of growth of 40%.
And, none of that could have happened without the information tools of the internet that facilitated that growth. And you had to exchange a lot of paper; you had to make a lot of computations; you had to create replicating portfolios. You had to do all of this work.
As a matter of fact when Lehman Brothers went bankrupt they had 933,000 derivative contracts that they were dealing with. And they could never have kept track of that paper or created that labyrinth without the information tools of the internet.
The internet didn’t create the financial crisis of 2008. But, it facilitated a lot of the components. Before the internet that problem would have been much smaller.
Now, Erika Andersen wrote Being Strategic. One of her concepts in that book is the reasonable aspiration or hoped-for future. What was your reasonable aspiration or hoped-for future with writing this book?
Originally, I started out thinking if I could help 2000 policy makers understand that they are living in a different world, then maybe we’ll be able to avoid some of these problems.
Whenever you see interconnections increasing you ought to scratch your head and say:
“What is that doing?”
And also, there is a whole set of studies that academia has done with accidents. And they know that when you increase interconnections in a tightly-coupled environment the environment becomes more accident prone. And that doesn’t matter if it’s the Three-mile reactor in Pennsylvania or the chemical plant in Bhopal or the Challenger 13.
The increase in activity in an environment in which you have more accidents. I wanted to alert people to look for problems earlier. And ask questions about ‘are they going out of control?”
For example, had the regulators looked at the over-the-counter derivatives in 2002 and seen they had grown by 60-80% they would have said:
“Gee maybe we should act earlier and make this less of a problem.”
Being an engineer by education and a venture capitalist by profession, I know this next question will be easy. What metrics will you use to measure your progress towards that hoped-for future?
I guess the metric I would use is if people read the book and ultimately get back to me and say:
“I found the book useful and here’s what I did because of it.”
A number of years ago I wrote a marketing book. After 25 years it’s still in hard cover and people keep coming back to me and saying:
“Gee, I changed the way I ran my business because of that.”
I started to have conversations with policy-makers in Washington and to a degree that they come back to me and say “Gee, I found this useful and helped shape some of my thinking. ” then I’ll consider this a success.
I’m having a lot of fun and as long as people find the answers that it provides are valuable then that will be great.
Let me back up and talk about a couple of the points you mentioned and describe how they come in contact with my world.
You mentioned the discussion, among academics, that increased connections within a tightly closed system increases the probability of accidents; increased connections equal increased risk of accidents.
Now, in my little world, one paradigm I live by is that increased connections within a business means fewer accidents. Closer conversations with the customers, those making and delivering a product, and it’s the lack of connections that create accidents: bad product launches, marketing messages.
So, where am I not connecting with what you just said?
You’re talking about something I didn’t talk about in the book. It got edited out.
But I had something that people thought was too wonky. I talked about intra-hierarchical connections, those things that go on in a business, and extra-hierarchical connections, those things that go on outside the business.
And, extra-hierarchical connections are extremely important. They let you find out what’s going on with customers and things like that. Or the military uses them all the time to gather intelligence on what the opponents are doing.
But, they do something that is very, very, key. They do not let those extra-hierarchical connections penetrate the organization.
I’ll give you an example of an extra-hierarchical connection that penetrated our control structure: WikiLeaks. Or somebody puts a foreign agent inside the government.
I will give you an example of another extra-hierarchical connection which is very relevant. You have a tremendous amount of debt with China. We are a debtor nation to China. That debt is an extra-hierarchical connection that gets involved in our control structure. It’s quite possible that China will demand a higher interest rate. And then that may drive up the interest rates in our country.
You have to be very careful about the external connections that you have.
This is the key point about them.
You might ask Greece what they think about extra-hierarchical connections of that nature. Because, the austerity that is being imposed on their country is because of their dependence on foreign debt.
Now, once again, that’s not an internet-related connection. But, the internet can do quite the same things.
I’ll give you one example. The stuxnet virus that people think brought down a lot of the uranium processing in Iran. That is an extra-hierarchical connection that got into their system.
Your book talked about some of our recent financial and global crises and disasters: our financial and real estate markets, Iceland's banking collapse, the dotcom bubble...and the loss of privacy. And I read you to say that the internet and its rampant connections accelerated and/or magnified their impact.
Would that be fair to say?
I kept thinking....national and global financial disasters, rampant speculation, ponzi schemes and natural disasters. We've seen them before. The Great Depression of the 30's, The Savings and Loan Debacle of the 80's which I think the bill is coming due very soon for that bailout.
They all share the same drivers: Greed, a willful suspension of disbelief, a sense of entitlement or that somehow this business model is different.
All those things have happened in the past. And, I’m not going to argue that the 2008 financial crisis wouldn’t have happened; it might have happened in 2010. The argument is it would have been smaller and less virulent.
My favorite example is the Tulip Mania in Holland in the 17th century. They tried to export that bubble. They drove up the prices of tulip bulbs until a tulip bulb cost an equivalent of $20,000 at that time. And they tried to move that to the UK. But, they couldn’t export it.
Or the South Sea bubble which was once again a British financial crisis and it didn’t get exported.
All the internet is doing is increasing the probability that these things will get exported and will be larger.
I had a banker from Lehman tell me that none of this could have happened without the internet. And what they meant was not that the financial crisis could have happened, but gee it wouldn’t have been that big.
And what the internet does is it has the ability to magnify these things and make them much faster. All the argument in the book is just be careful. Things are going to race out of control more quickly because you have all of these wonderful tools.
As an example is I have a Facebook page and you have a Facebook page. But the idea that over 600 million people could have a page...over night is just amazing.
I was reading a book, an excellent book, titled Virtually You. It was talking about the psychological consequences and impacts this is having on people. If the book is right, it has a number of negative consequences. Well, in the old days, when you might have had 1 million users you would have time to think about that and modify your behavior. Suddenly that gets to 500 million users and it’s a totally different situation.
I can remember when we first started using email. I used to argue with people that you should charge for email. I used to get people very irritated with me. My point was we charge for junkmail, we charge for regular mail, we charge for telephone conversations, we charge for federal express. Why should this form of communication be free? Why, if it is free, isn’t it going to be abused? I think 3rd-class mail is abused. My mail box is full of stuff still today that I don’t want to get. My argument still today is if you were going to make email free you were just going to get spam and things like this.
Well, everyone said you don’t have to worry about that. You can construct filters and do this and do that. But, it’s very difficult to deal with a problem once it gets entrenched. And I don’t think the filters work very well.
It’s easy for me to blast my image in front of people. Their time is very expensive. But, my time to do this is very easy. It’s very cheap for me to do this.
One of the things that all of this over-connectivity does is it enables people to externalize costs. When you increase connections you increase the chances that costs will be externalized.
An example of this is if you build a coal-fired plant in the midwest, you get acid-rain on the east coast. What you’ve done is externalized the costs of that pollution. It’s the people on the east coast who pay for the pollution that is generated in the midwest.
In California, our air quality is effected by what’s going on in Beijing. In the central valley we are paying a price for the lack of pollution controls in China.
As things get more and more connected and connections span much greater and greater distances it is much easier to externalize costs and pass the costs on to somebody else. In the financial crisis, a lot of the costs were externalized and passed on to the tax payer. The internet made the financial crisis larger and so it increased the externalized costs to a group of people.
In much the same way, the internet makes it much easier to move production to companies that don’t have good environmental laws. You can hear about that from unions, from politicians. We are in effect, in many cases, independent of how irresponsible corporations are going to act. The people in these foreign countries are paying the costs of environmental pollution and we’re getting the products with cheaper costs.
These things tend to happen and connections make it possible.
One thing I had in mind, you talked about the example of the coal-fired plant. I grew up in North Carolina and the Great Smoky Mountain National Park suffers from acid rain from the coal-fred plant in a neighboring state.
I’m thinking the increased connections would help people understand doing x in that state and generating y in that state. And possibly there would be a more comprehensive conversation that would include accountability for actions across state borders.
I absolutely think that is one of the very positive things. The transparency that the internet provides is wonderful in helping to control that type of problem and creating awareness. There are so many positive things about the internet. And all I’m trying warn people about is that there can be negative consequences that we should be alert to.
Overall, in the final chapters of the book, I have a section titled “everything is a connection”. I want people to understand that there are other types of connections that can have the same effect that you have to be careful about. One of the most important inter-connections that we are making today, and is not internet-related, is that we frequently connect high-risk systems with low-risk systems.
I’ll give you an example. GM retirement plan that they had to scrap as a result of bankruptcy connected a high-risk system, your retirement, with GM, a low-risk system. You look at it, GM has been around for 100 years and it will never fail. But the obligations to that pension system played a big role in causing the crisis of GM.
So, when you inter-connect things you have to be very careful. All the time, we’re connecting high-risk systems with low-risk systems. We think that the low-risk situation will save us with the high-risk situation. That is getting us in trouble with systems like Medicare and Social Security, today. We tend to think that the other guy can pick up the bill.
Alvin Toffler in his book Revolutionary Wealth, I think, described, or foretold, the collapse of some of social and governing institutions. He described their collapse arising from their inability to embrace change. You reference some of this in your book when you discuss the lack of controls and the connection of high-risk and low-risk change models.
What is the relationship with overconnectedness and our current institutions’ inability to manage change?
Awright. I got a good example. May 6th we had the flash crash. The Dow Jones dropped almost 1000 points in a single day. And it was followed by what I call the rocket recovery. It gained back almost 650 points of the 1000 point decline.
And if you look at what happened there, and here is an example of over-connectivity at work. In 2005, we began to see the emergence of those alternative trading systems. Think of them as electronic trading systems. The NYSE in 2005 was trading, doing about 80% of the volume in stocks. And they had circuit breakers; they had market-makers. And they tended to make the market orderly. By 2010, the electronic exchanges and all these alternative trading systems were doing about 75% of the volume in the listed NYSE stocks. That’s one very rapid change.
And then along comes high-frequency trading. People can use computers and put them on the exchange floor and track very small trades, very very quickly, and make a few pennies on the trade. And if they make millions of trades that adds up to lots of money.
So, these two things happened. By the year 2010, almost 2/3’s of the trading of stocks was done by electronic trading systems.
And that happens to be a tightly connected system in which regulators...nobody, the regulation just didn’t come up.
Then along comes May 6th. People are worried about the Greek debt. And Waddell Reid goes in and sells $4 billion of S&P futures short. That shouldn’t have created a problem. But, what it did was, in that emotional environment was it triggered a selling panic. All the buyers left the market. And suddenly you had the price of the stock cratering.
Now, some really crazy things happened. A Proctor and Gamble stock which was trading at $62 a share falls to $56 a share. The NYSE says “Hey, that’s hit a circuit-breaker. Let’s take a timeout and think about this”.
But, the electronic systems find alternative exchanges that are happy to trade the stock at $40 a share. And by the end of the day, the stock has popped back up to $60 a share.
Or you have Accenture, which was trading at $40 a share that day and there were no buyers in the market. All of these electronic systems were forced to have something called the “stub-quote”. And the “stub-quote” happened to be a penny a share. And here’s Accenture that drops from $40 a share to $.01 a share and pops back up to $39.00 a share.
So, all of these things are happening in this new environment where the regulators haven’t been able to track or keep up with things.
I define “overconnectivity” as change that happens at such high rates because of these overconnections or dense arrays of interconnections that the rest of the environment can’t keep up.
The flash crash was a perfect example of what went on in that environment.
Great examples, great details. Is there any pulling back? Can we pull slow this pace of change down with series of brakes, or walls, if you will? Let the institutions catch up?
I think you can do that.
I am not a big fan of regulation. But, I don’t know what you do about if people are going to abuse it.
For an example, there was a time I was talking to a banker, just this weekend, and she said:
“I use to work for the B of A and we would never make a real estate loan for anybody where the payments on the house, plus the insurance plus the taxes turned out to be greater than 30% of the person’s monthly income”
Now. You’re not going to have a real estate bubble under those circumstances.
But, those were the banks’ rules. The banks were doing a great job of regulating themselves and that environment.
Suddenly you have all these tools and people say:
“Well, you can throw the rules out the window.”
If businesses and institutions aren’t going to act responsibly then...I don’t think you have another choice.
And it’s great to talk about self-regulation, but if it’s not going to happen.
My favorite whipping boy is Over-the-Counter derivatives. They played a part in the 2008 financial crisis. With $30 trillion of Over the Counter derivatives, if there had been a problem it would have been no big deal. But with $600 trillion, it was.
So, why did the financial institutions become involved in $600 trillion worth of notational transactions? Well, because they could make lot of money doing it. They were out to make money. They got away with externalizing the costs.
Now, you sit here and say what can you do about it? It turns out there is no way you can build a phenomenally large, tightly-connected system, that isn’t accident prone. You can have all the regulations you want. But that system is going to be accident prone.
And the argument is always the same from people:
“Regulation is going to be destructive.”
And, I absolutely agree that there’s a lot of downside. But the only way you can make that system safe is to make it a lot smaller. You can do that in a number of ways. But it would require world financial regulation in order for it to work.
For example, if there were a tax on all derivative transactions. Or, there were margin requirements for derivatives similar to the ones you have for commodities you would not have $600 trillion in derivatives floating around.
Even a BA in Art can understand this, even the margin requirements.
My estimate is that if you would put the margin requirements in and you would put exchanges in place where the exchanges can act if the counter-party failed. ...This is my guess. It would have required $5 trillion in capital to be set aside to support the $600 trillion in OTC derivatives. That’s a guess.
But if people had to set aside $5 trillion to support $600 trillion OTC derivative market, there wouldn’t be $600 trillion in OTC derivatives.
It just seems so obvious and straight-forward. But, the word that keeps coming up, flashing on my little screen here is “GREED”.
You know, I think Gordon Gecko said “Greed is good.”
Yeah, but that was a movie.
I think you know greed does play a role in economic development. It has the ability to go to excess. As long as your greed isn’t hurting anyone else that can be a very private issue. But, when your greed hurts 200 million middle-class people then that’s a problem.
I remember my father’s favorite stories of Jay Gould. Someone came up to him, and he certainly was greed man...he was one of the robber barons, and someone said to him:
“I’m going to kill you”.
And Jay Gould said:
“Why.”
And the man said:
“You have $100 million and I have nothing.”
And Jay Gould said:
“Well, my $100 million is equivalent to $5 for every man, woman and child in the United States. Here’s $5 and go out and collect $5 from everybody else.”
Let’s talk about net neutrality. I think there’s been proposed a two-tier system by the FCC. Would it, a two-tier system, slow down or serve as a breaking system?
I’ve become very confused about what network neutrality really means. But, some of the thoughts about charging different rates for different services might slow down the rate at which somebody like NetFlix can move to stream digital information or movies to people’s homes. It has the potential to slow down some of these things.
But, I don’t think that’s going to have much effect on the phenomena I’m talking about. The phenomena I’m talking about has to do with the social dislocations that occur from major changes in connectivity and our ability to cope with them.
And, some of them are absolutely great. I love getting my news on my iPad. But I worry that investigative reporting is going to go away. I love shopping on Amazon. But, I also know that the local bookstore had a culture role to fill in our society.
Those types of disruptions are going to go on. I don’t hink network neutrality is going to effect whether they happen or not.
As I read your book, I kept thinking about one of my favorite topics which we touched on briefly at the beginning and that topic is employee engagement. I’m going to ask it again because I think it’s important. Employees are way out in front of corporate management and policies with technology to connect. What are some examples of companies who have become overconnected or connected too fast for their leadership to lead it?
I’ve never really thought about that problem. I think in general corporations have figured out pretty good ways to use those tools inside a corporation. On the other hand, I could give you a very big corporation and call it Egypt or Tunisia. It certainly, the internet played a very important role in its collapse.
If the corporation had numerous disaffected employees then having all this internal communication could create problems.
I am unaware of the internet causing big problems in corporations. It’s caused some embarrassments. Whistle-blowers have come on the scene. Bosses have been pilloried by unhappy employees and things like that. I don’t think there have been big tragedies caused by that.
You touched on this with your point that the citizens of Egypt were not able to make meaningful employment for themselves. The objective was as key as the ability to share divergent political views. There’s a big movement on social media to be a curator of content. We’d serve as publishers or routers for news.
Shervin Pishevar is the founder of the OpenMesh Project, Social Gaming Network and an active angel investor. He authored a great post in Tech Crunch called Humans are the Routers. And the openmesh project is a project to create a new line of communications technologies that governments would find hard to block: Ad hoc wireless mesh networks.
Now what? Now we're each a router....The connections aren't becoming fewer.
In that post, he described a dinner party he had recently with Secretary of State Clinton. He told her Secretary Clinton, the last bastion of dictatorship is the router.
On the other hand the last bastion of institutional control would be the router.
I think it’s great that we have all of these information sources. But, in writing this book, I worked with a great writer: Katy Hacker. Every time I wrote a sentence she would challenge me and ask for the facts and ask for the references. And, she was a former NY Times reporter. And what I worry about is where everyone becomes the router...that there’s a tremendous amount of fact-checking that people do. And I was talking with her about foreign exchange transactions, there were $3 trillion in foreign exchange transactions...And then today people say $4 trillion.
Well, when you try and verify that number you will be surprised at how hard it is to get a solid number. And everybody believes it. It’s at best what I would call a squishy fact.
And there’s another squishy fact or opinion out there that 90% of the trades are speculative. Once again, when you try to get a handle on that number it becomes extremely difficult.
And, what I wonder is if everyone is the router then these posts that take on tremendous credibility because they are in print. It becomes very easy to make people believe all these things.
I’m becoming a bigger and bigger fan of responsible investigative reporting. And, I think it’s great that there are knowledgeable people out there that you can tap into. But, I worry about all the unreliable routers we’re going to find in the system.
That’s a very clear answer. Thank you. It really drove home the point.
We’ve reached the imagination moment in the show. Being a venture capitalist you have been exposed to imaginative enterprises, so this may be the best part of the show.
Let's imagine President Obama calls you right after we finish. He says
David, I'm sorry I missed you at the dinner out in Silicon Valley a few weeks ago. Mark and Steve are so pushy, I had to give them those seats next to me. But look, I got elected from the power of connections. But now in power, I'm a little ambivalent. Still, we're a fractured country. How do we realize the promise of the internet in being connected and avoid the dangers of being overconnected. What are three things our country can do and come on up to DC and I'll take you to dinner next time your in DC.
I’m afraid President Obama wouldn’t like my answers. One of the thing I would point out to him is that the internet enables you to arbitrage everything. And of course that’s an exaggeration.
But a slight difference in wages and you can arbitrage it. A slight difference in policy and you can arbitrage it or taxes and you can arbitrage it. I don’t like the financial regulation in the US and I’ll go operate where they don’t have those regulations. I don’t like the labor laws in Iowa, I’ll go elsewhere.
I would say to President Obama that:
Suddenly we’ve gotten into a world where we have to be competitive in everything we do. We cannot tolerate any inefficiencies whether it’s in government or business or education. We can’t afford to run a grade-school system and then have the high-school act as a backup. And connectivity is forcing us into an extremely competitive world where we’re all having to do our best every single day. And I don’t think the US has faced up to that today.
Leaders are readers. Jim Rohn says that; I just quote him. You're a leader, have been a leader for decades. You’ve mentioned a few books here already. What are you reading, for fun or work?
Well, I just got through all the Dragon Tattoo books. I enjoyed reading those.
I enjoy plowing through all these things and do my best to stay informed. I guess I’m going to just keep reading.
Where are you speaking?
I mostly talk in Silicon Valley. The best way to encourage people to read my book is to talk with people like you. I write op-eds. The Christian Science Monitor posted one that said the growth industry in the coming age will be the construction industry. I explained how wherever you’ve changed interconnections dramatically we end up rebuilding the infrastructure of society. That led to construction booms.
I love doing things like that and hopefully some of the ideas will be accepted.
We gotta go. I hate doing this. I so loved this conversation. But I know you’re busy and it’s early in the morning where you are. your book woke me up and I hope it’s waking a lot of people up. I hope our readers buy your book and become aware of some of the risks from all of these connections.
America, the champion of democracy and freedom, actually has more Internet censorship than some countries in Africa and South America according to an infographic based on Internet censorship research conducted by the OpenNet Initiative. via mashable.com
So. We're lagging in education, innovation, job creation, bandwidth, but growing in censored content.
I know there is a ratio hidden amongst the changes in these areas. Maybe someone with deeper research skills and data, better math skills, and time...can find them or share the link to where they are already discussed.
The theme of this ratio centers around...conversations, collaborations and communications.
Those who can...converse, collaborate, communicate will create the new products, services, and business models that create new companies that require new jobs and result in thriving communities of opportunities for now and the coming generations. Those that can't, won't.
Check out the article atmashable.com. It's excellent in its discussion and further data.
Scott Gerber is a syndicated columnist (WSJ, Entrepreneur, Inc.), a serial entrepreneur, author of Never Get a "Real" Job: How to Dump Your Boss, Build a Business and Not Go Broke, and founder of the Young Entrepreneur Council, an advocacy group made up of many of the world’s top young entrepreneurs that works to help young people overcome the devastating effects of youth unemployment and underemployment by teaching them how to build businesses.
He is the founder and CEO of Gerber Enterprises, an entrepreneurial incubator and venture management company that invests capital, management expertise, and marketing services into innovative early and mid-stage companies.
He joins the show at 9:30 AM, Central, tomorrow. Listening options are listed below.
We're going to talk about entrepreneurs and jobs and innovation and how you can bring them both into your life, your business, your community. And we'll talk ways Scott shares in his book to live that calling and how Young Entrepreneur Council can help and others join the community of entrepreneurs and build businesses and create jobs and grow this economy.
LISTENING OPTIONS
Live
1. Call 646-915-9212 during the show's live hour, 9:30 AM - 10:30 AM, Central.
Know the answer to this question: What’s their future with the company and why does it matter to them?
So, let's say you have a plan for each employee's evolution. You have mapped out a plan where you provide the necessary training, challenges and assignments that grow the depth and breadth of their skillsets in order for them to continually provide additional value for the company.
Great.
Have you discussed this plan with each employee? Do you understand why and how it matters to them? Any of it? The training, the assignments, the eventual destination?
They may have an entirely different future mapped out for themselves.
One of you might have a grander future envisioned than the other. Would it be great if you married up those two visions?
One of you may have a future the other has no desire to see. Would it save money if you aligned your budgets and plans?
Budget planning practicalities aside, taking the time to recognize their plans for the future shows you care about this employee. Recognition by one's manager is a key element in creating employee engagement.
So, have a sit-down with your organization members. Talk with them about their future, where they see it, where you see it.
Why is that future so important for them?
How do their strengths and talents help them reach this goal?
What obstacles can you remove that might interfere with reaching that goal?
How can you, together, create a plan to reach that goal?
That’s how you recognize your employee. You sit down and listen.
Listening is recognizing. Listening is finding answers. Answers deliver solutions.
And, those solutions create an engaged employee who delivers higher profits, faster revenue growth, higher equity valuations, lower employee turnover and hiring costs and higher customer loyalty and repeat purchases. Those are metrics any company can recognize.
And when their employees gain the recognition they deserve then these are the results their companies report annually and quarterly.
You can take one of those weeks and turn it into a month or commit to an accelerated pace and complete 6 of the weeks in one month.
You can create your own week of employee recognition. Share that journey here. Share it in your blog or Twitter or Facebook.
But, do something to recognize your employees! They set your brand apart as your ultimate competitive edge.
And the more you recognize their achievements, the more achievements you'll see and they'll enjoy, along with your customers and and shareholders, partners and vendors.
For god’s sake, for your sake, organize your desk.
Few things bring greater peace and clarity, with a little breath of fresh air, to a cluttered and throttled mind than…organizing my desk. As daunting as the task appears...its reality is far simpler. The key is just to start and to set a time limit. Sometimes, cleaning one thing can implore us to clean another and another...The choice with obsessive/compulsive tendencies is where to ...focus them. Me? I prefer obsessing over A. keep.moving.forward; b. quickly removing distractions.
Be impatient.
If you’re not impatient about reaching your goal maybe you should ask if it really matters.
Close browsers and applications
Limit your time on social media.
I love social media. Who doesn’t, right? ( Ok, my oldest sister...but I still love ya. ) On the other hand who hasn’t sunk oodles of time in link and links and tweets and tweets.
Set time limits. I block out time in the AM, a little at lunch and some in the evenings. At most.
Don’t follow everyone. At that point, it’s not personal. That’s the point. It’s not personal. I follow those who add meaning, add value to my day. I want the same in return. Follow me if I add value and meaning. Don’t if I don’t. That’s the only way to learn and be efficient and Keep.Moving.Forward.
Sever ties.
This may not be required.
But, moving forward means leaving the past and the present behind. Some we know may...how to say this gently...be unable to accept us in a different light, a different role, and may be unable to celebrate or support us as we pursue our goals.
It is painful, sometimes.
Sometimes this can serve as a wakeup call for others, too.
But pursuing our goals is disruptive. It involves change not just in our physical and financial settings, but in our relationship settings, too.
Change is good. But, sometimes, we change when others aren't ready and, if we're honest, that's happened with us, too.
**********
* Just a reminder: we're all entrepreneurs.
Our whole life is a series "of hurdles, challenges, setbacks, disappointments, screaming euphoria, comparable levels of despair, a thrilling ride....” And like business entrepreneurs we’re pushed and pulled to invent and re-invent ourselves each and every day...or suffer the same fate as businesses who refuse to change: close our eyes to the world.
And like entrepreneurs in the business world, sometimes we get stuck. Sometimes, we need a tip, a reminder, a flashlight, a life buoy...And in this economy, we all need all the help we can get.
I hope this helps.
Feel free to share your tips, resources or means you have found help you keep.moving.forward.
Disclaimer: I'm a work in process with each of these steps, especially that last one. I'm getting better at the 2nd one. I overlook them all at different times, I handle them or have handled them poorly at others....But I Keep.Moving.Forward. I think you can too, if you take one of them today.
Sensory Logic is a scientific market research firm that specializes in quantifying emotional response through the facial coding tool known as the facial coding action system.
About Face shows how 21st century advertising can realize success by being 'on-emotion' first and foremost. Using data from eye tracking and facial coding to analyse consumer responses, About Face demonstrates exactly which advertising strategies are successful and why. Moving beyond the old Ps of product, price, place and promotion, Dan Hill outlines ten rules for emotionally effective advertising including simplicity, familiarity, relevancy and believability. Emotions rule decision making. About Face shows you that by focusing on the three new Ps of passion, purpose and personality, your campaigns can become more effective and emotionally engaging, taking you closer to the consumer."
That's from his website. I think it's pretty accurate.
Dan answered some of these questions:
Why do we hate ads so much? What can be done to change that?
Why are ads so unproductive? (See above) What can be done to change that?
Why aren’t advertisers doing what Dan, his book and oodles of research show they should?
Dan, thank you for being on our show.
I’m delighted. I’m looking forward to a great conversation.
Thank you for writing a great book! When did you decide to write this book?
Well, we’ve been running the company for 13 years. You’re right. We’re trying to be innovative because the breakthroughs in brain science that have been documented increasingly over the last 25 years prove that we are largely emotional decision-makers.
A couple of key statistics right off the bat:
the conservative estimate is that 90 - 95% of thought activity isn’t fully conscious.
the emotional part of the brain sends 10 times as much data to the rational part of the brain as vice versa.
Those are well documented out there in the advertising world. And yet they’re not being incorporated in advertising, marketing, marketing research.
For 13 years, we’ve been dedicated to changing this paradigm, to making emotions front and center. And the book was inspired by looking at the database and saying “Look I can give you both those examples and statistics and patterns. Let’s see if we can wake people up and make a difference.”
Erika Andersen coined a great phrase and question in her book Being Strategic. the phrase is reasonable aspiration or hoped-for future. The question is what is your reasonable aspiration or hoped-for future? What was yours with writing this book?
Well, there’s really probably 2 or 3 key markets I’m trying to get to. For the Creative Director I’m hoping to liberate them a bit. In a lot of cases they have a client who believes that the solution and the path to great advertising is to be uber-rational, to come with message upon message. It’s what I call message-itis. Take a TV spot for instance. The truth is it’s a 30-second film. You have time for one idea, maximum. You may not be able to get that out and talk to people about something they already know and put a slight twist on it. You have a really limited canvas.
On behalf of the Creative Director, I’m certain they have many cases where they get a brief from the client who says “These are the 7 points we have to make in the next advertisement.”
It’s not going to work because of people’s attention spans. It’s not going to work because we are mostly emotional decision-makers. And if you are feeding us like we are drinking out of a firehose....sorry, that’s not the emotional experience most of us are looking for. And it’s not going to engage people. And they’re going to turn away.
So, one of the reasonable aspirations is to say “Let’s dial down the message.” People are mostly emotional decision-makers anyway. Hitting them with rational point after rational point is not going to work.
I think in the case of the Creative Director, they also need to wake up a bit. I think the clients often get frustrated. They don’t think they’re breaking through and the Creative Director gets caught up in being an artist. I have a Masters in Creative Writing from Brown...I have a PhD in English ...I was a poet for many years in my background; I like the creative process.
But what we see in our testing is that it’s too clever by half. There are too many special effects, the spacing is too fast by half. It loses people.
I call "frustration the hidden emotional cancer" in advertising. Half the households in America didn’t buy a book last year. 20% of the adults in the Western world are functionally illiterate. So, it’s easy to lose people and you can do too much messaging. You can do it by being too clever in your message. Both the advertisers and for the creative person I’m hoping to have the ammo to help them make the decision to clean up their messaging.
The ultimate beneficiary is the consumer, quite honestly. They will get advertising that isn’t demeaning, that doesn’t make them feel stupid or lost, that has significance and relevance and everyone can benefit in the end.
Being an advertiser this next question should be easy. What are some of the metrics you'll use to measure your progress towards that hoped-for future?
The first thing is engagement. We use this tool called facial coding. Any of your listeners have read Blink by Malcolm Gladwell. This is the only research tool described, 30 pages i fact. And it’s the basis of the Lie to Me show on Fox on Monday nights.
Facial coding is a killer ap. You’re reading the face to judge emotional reaction. It’s so universal that even a person born blind has the same facial expressions as you or I.
When we look at participant, the first key metric is the level of engagement. How much activity on the face is resonating that this is engaging for them. If you don’t engage people you can win them over.
The other engagement is what I call “on emotion”. 20th century advertising was much more rational than it should be. It was, especially from the advertiser’s point of view, on message, about talking points.
I think the future of advertising is not just about being ‘on message’, not just about talking points. It’s about being ‘on emotion’ and creating feeling points. Is it the right emotion at the right time?
I’ll give you a little brief instance. We were testing recently for a large package goods company. They were getting a lot of happiness and a lot of halo around the offer. People were enjoying the commercial. Then they flashed to a little scene that was on a beach. It was really close to the end of the commercial. And, it was filmed on an October day; no one’s on the beach. And it looked a little forlorn. We took the people from feeling happy to feeling sad. And that broke the emotional momentum of the commercial. So, getting the right emotion that pertains to your offer and fit into people’s lives and build on a story...that’s where you want to go. Those are the metrics we are interested in.
Excellent. So how are those metrics measured with your book that shows your reaching your audience?
It’s book sales.
But, it’s also invitations to give speeches. I was invited this morning to speak to the industry leaders in market research. Keynote speech. Their paradigm is still a supremely rational one.
I know the book has just appeared in Germany and in the Washington Post as one of the Top 5 Emerging books business should be paying attention to. You want to be influential and you want to have readers.
Describe the reader you had in mind as you prepared this book, late at night, laboring...? You have answered that, talking about the Creative Director and hopefully the consumer.
There’s a lot of Saturday mornings where I rolled out of bed to start to write for a 12-hour day. You have to have some passion and belief in what you’re doing to keep yourself going.
Some of it is the Creative Director, yes. I think they realize 2 things matter the most. You gotta have a visual. After all, if a picture is worth 10,000 words. You don’t have time in advertising and no one wants to take the time to consume 10,000 words. You’ve got to have a visual or draw a picture quickly that really resonates with people. You have to have a defining visual. Over 20% of the brain is exclusively devoted to processing visuals.
On behalf of the Creative Directors, I don’t believe their clients are oriented towards thinking of the visuals very often. Especially if you move up to the CFO or CEO, they are left-brain, analytical people. They have got to be aware that people are operating on a sensory emotional level and that’s how advertising can be effective.
So, part of the book was trying to give ammo to the Creative Director to say
Yep, here’s the evidence to prove that you are right.
You’ve got to have the dominant visual. And then you have to make the emotional connection. You’ve got to be ‘on emotion’.
The other audience is the client. I’m hoping they can see ways they can push back on the Creative Director and say
You’re making this thing too complicated. You’re being too clever by half.
One of the statistics we looked at was how many scenes do you have in your 30-second radio or tv spots. In other words, as you move from one element of your script to another, if you put a lot of scene changes...that might be fun for you, kinda like MTV editing. But, as you move beyond 3 or 4, the more people start having it all blurred for them. And you are less effective.
I want to give the client the ability to say to the Creative Director:
I love that you want to be a movie director. But I have a 30 seconds to communicate. Please don’t lose my audience. Make it a bit more compact so people can take it home with them and stay with it.
Drilling on this point just a bit, ‘cause I think it’s important...W-I-I-F-M is the streaming media channel we play all day. That's the channel of what's in it for me. What's in it for these two groups of readers? Why should they care?
There’s a tremendous problem. In the desperation to get our attention there’s a heavy use of humor and sex. There’s some justification because after all if it creates some happiness.That’s an emotion that cases us to get more oxygen in the brain and causes us to be more willing to consider more things, to put them into perspective. So, if you’re introducing new things to people then creating happiness is great.
But, how often do we see humor overshadow the product so we forget its offer. How often is the humor considered sexist?
There’s a real important initiative to bring more diversity to the Creative Director’s ranks. Ad Age had a report that looked at last year’s Super Bowl and I believe out of all the ads that were shown that if you go beyond white male creative directors I think there were 2 of the spots that were created by someone else.
The humor might be amusing to the Creative Director. But, I know a lot of people, certainly women in the target audience that say:
That doesn’t make me feel good. That doesn’t reinforce my self-worth. It’s irrelevant; it’s offensive.
That’s humor in its own right. Sometimes it’s sex in the humor. But, the WIFFM is the key thing. What we’re looking for is this is communication. We’re not interested in a joke. A joke is not as valuable as a sale, certainly not to the sponsor of this stuff.
You have to get to the value proposition and the values proposition. Your values proposition, how you see the world, what matters to you is a reflection of your upbringing, your outlook, your heroes and value systems. It’s intrinsically who you are. And it’s hugely emotional. You have to have some way to connect on their values level. You certainly don’t want to insult their values otherwise you’re losing out big time.
In your book you promise to reveal to us the secrets of effective advertising that big global brands have a paid big global amounts to learn and master. You and your book delivered on that promise.
But judging from the ads of big global brands they haven’t learned yet. Ads remain unbearable for us and ineffective for them. Where's the disconnect between your teaching and their learning?
It’s a very provocative and wonderful question. I’m going to give you a really honest answer and more honest than I should give you.
One thing is billables. The ad agencies do not want to disrupt their billables. They need to create the aura that they are the magicians and they can do it well. So, to admit that they have some shortcomings or they could improve their game.
I had a BBC interview and there was guy from a major ad agency and he was saying:
“We have perfected our market research.”
And I said:
“Wow. Perfection is a pretty high standard. How do you do it?”
And he wouldn’t divulge it.
And I said:
“Well, this is how we do it with facial coding.”
And he came back with:
“Well, that’s fine if you want to create consumers like rats in a maze.”
I came back that:
“I'm a poet by training. I’m trying to create emotional content that connects.”
I think some of this is that nervous pushback.
I think the other one is ego. I have a lot of sympathy. They get their stuff worked over and challenged by clients who may not have a feel for what makes for a wonderful ad.
But, I’m not sure a Creative Director always does either. How often do they indulge their ego? Insulting both genders, not just women? In surveys male and female alike can’t relate to the depictions of them in advertising.
So, the Creative Director...it’s their love-child, their advertising. So, it’s hard to back off and take criticism. Yet, some of the criticism could make a difference and make a better ad.
It’s ego and money. I call it the Casablanca Effect. It’s that point in the movie where Claude Rains says:
Round up the usual suspects.
It’s really easy for human nature, for all of us, to follow rote patterns. Yet, there’s a tremendous upside opportunity to have better creative in their own right and to have better sales results.
I look to the most rigorous studies out there. They estimate that only 15% of advertising pays for itself.
I think it’s up to the clients to ask their Creative Directors how do we get into that 15% range.
Early in your book you talk about Al and Laura Ries and their critique that advertising's too often one-sided, biased and selfish...rather than consumer-oriented or consumer-facing. Ads tell us about a product. And then ask us what do we think about their product. But a Yale University study came up with a list of 12 most persuasive words. What was the number one word?
The number one word was YOU. That’s very much similar to WIIFM, what’s in it for me. Show me that you actually care about my situation in life, not just selling me something.
We have gone through and looked at the engagement rates, really key metric across a 30-second tv spot. And it dies in the last 5 seconds. It falls off badly in the last 5 seconds because what typically happens in the last 5 seconds is you’re not presented with an opportunity to say as I consumer “would I but this?”
You get the distinct impression you are being sold to. Suddenly the corporate logo is there, the music, the tagline, the last hard push of why you should buy X-Y-Z. And it sure doesn’t feel like a WIIFM. It feels like what’s in it for the company.
And yet, what do people remember? Openings, closings and peak moments. So, the advertiser is throwing away one of the three most important places by not going to the YOU.
If you look at the other words on the list a lot of them really are about me, defending myself. You’ve got words like ‘proven’, ‘guarantee’, ‘results’, ‘money’ which is about the fact that most basic human emotions are to defend myself.
That could be defending my self-esteem, my family, also defending my pocketbook. But, beyond that, do I want to look at ‘new’, ‘love’, ‘discovery’, ‘my health’...ways in which you can expand your world in a profitable way without depleting your resources.
And that all comes back to the individual. How do you feed the ‘me’. And it should be interpersonal connection and I think a lot of advertising doesn’t leave us feeling that way and it’s a shame.
Aren't ads and their self-absorption just a reflection of us and our self-absorption? Why don't we recognize our own faces in those self-absorbed ads? Or maybe we do.
Well, I think another point we should go to here is casting. They almost always are in the commercial. And this is a moment where we could see ourselves in the company, where our self-interests could be the same.
We have found that more dramatic versions of story-telling ads and testimonial ads, is among the least effective.
It could be more effective. If you connect to a human being could be a very powerful way to be brought along in the situation, to see what’s in it for you. But, we have discovered over our 13 years that the casting is really crucial. We have seen swings of as much as 30% for a piece of advertising where the format could be the same, the offer, the color-scheme, the music are all the same except for the actor. Certain people have stage presence, certain people we intuitively like and trust. And you never like someone you don’t intuitively trust.
A lot of the acting isn’t that good. You probably get sent over a lot of grip and grin photos from the casting people. They are showing what is know as a social smile. That’s a smile you can try and manipulate just around the mouth. A true smile involves muscles around the eye. That’s how you get the twinkle in the eye. And it’s very hard to fake.
The very nature of the casting process is to receive a whole bunch of photographs with people flashing social smiles. And although we’re all experts in facial coding, flashing a smile that we don’t really believe or trust or buy into...that’s another reason why being on emotion is important.
And when that is off, and I’ll give you a prime example. You have a lot of CEOs who like to be in their own ads. Few of them are effective. A lot of them are not. And I remember one who was trying to pick up on the angst and frustration with the bank bailouts and downturn and he was talking about how angry he was on behalf of his fellow lovers of the product. I’m looking at his face and thinking
Huh. There’s no anger on your face. I believe you’re still making a lot of money on your product. And you’re well-removed from your target market in terms of their lifestyle. And your face is not showing the emotion your words are talking about.
That disconnect is something that is going to resonate for people. And it’s going to be a way in which we are blocked from relating to that commercial.
I think about because last night I was watching a documentary on PBS about Egypt. And there’s a point in the speech where Mubarak says:
I never wanted power.
And everybody who was watching that speech in the square snickered when they heard that.
You have to be very aware of that as a speaker. Authenticity and trust is indeed the emotion of business.
You write that fear and self-defense are the two themes underlying that list of 12 most persuasive words.
Fear and self-defense are ruled by our reptilian brain, the amygdala. So....should ads target the reptile in all of us? That’s a cheeky question. But is it possible that ads can target perhaps our higher reasoning powers, our altruistic and social nature?
Well, I think that the social nature is a key point we haven’t touched on yet. You want to belong to a group. It feels good. You want to belong. Defending is our most core emotion. But the other three are to acquire status and products. One of them is to learn and discover which is a word that shows up on that list.
The 4th key motivation is to bond with people. Romantically, with your family, with your peer group. That makes you feel better and feel comfortable, a sense of power. And it’s a really key dimension that you could rationalize
Your book explains how to communicate with us, a three-brained monster called the consumer. We just touched on one brain, the reptilian brain, What are the other two brains and their functions? Which one do most ads fail to reach?
I think it’s essentially emotional. The reptilian brain is 500 million years old. The emotional brain is 200 million years old. The rational brain, the executive function brain, is 100,000 years old.
That’s longer than I’m going to live. It seems like a long time.
But, in the course of evolution the rational brain is the odd man out. It does not have the first-mover advantage in business terms. We are overwhelmingly sensory, emotional, decision-makers. One of my favorite quotes is from a famous attorney. And he said “I don’t like spinach. I’m glad I don’t like spinach because if I did I’d eat it and I’d just hate it.”
I think that’s how we make decisions. Everyone has a comfort zone. Everyone feels for it before they think. The key thing is to make that connection. Make that connection to ourselves, to how we fit into a group. It allows s to defend ourselves, to bond. It does everything for us.
That’s the part that’s missing. And in an ad that’s effective, yeah, you can draw the distinction between our users and your users. Apple’s done this very effectively with Microsoft and PCs saying:
We’re the wonderful, cool, crowd. And you’re the flat-footed geeks.
So, there is some advantage in drawing those distinctions but only if you have made people feel good about being part of that crowd.
We’ve known this about the 3-headed brain since 1948. So many GI’s suffered head wounds that the US Government threw research dollars after to figure out how to help GIs. And they discovered that we have this 3-part brain.
So, this is something now that even after the MRI brain scans added some additional insights in the ’80’s, you’re going all the way back to WW2. And this is documented and well-known, but not it’s not well-known enough.
You should ask yourself how do I make the sensory connection whether it’s the visual or tactile impression.
What’s the one way I have that’s the signature clue that’s going to hook people in and make the reptilian brain and make it work.
Then you need to ask:
What one emotion am I trying to get at? Is it pride, is it alleviation of fear? What one emotion am I trying to tap into and leverage with this commercial and get to the mammalian brain.
And then the "rational brain". I would frankly put quotation marks around it. We’re not like Mr. Spock, we’re like Homer Simpson. We make decisions based on greed and laziness and stupidity and jealousy. What I would call the rational brain is the intellectual alibi. Give people a reason, a statistic, some way to justify the decision that they have made in their gut.
You need the signature visual, the one emotion you’re going to leverage, and the intellectual alibi. You do those three things in your print ad, your tv spot or your website then you’re a lot farther ahead than you were 20 minutes ago.
You describe the first key to an effective ad as Stopping Power? Where does stopping power end and interruption begin?
That’s a fabulous question. I love the way it’s even worded. It is not an interruption if it’s a welcome interruption.
Stopping power is so much more an important term for those who want to make sales than mere awareness. Because you can do surveys that find out how many people know your brand name. All the ad agencies love awareness because that’s the top of mind response. “I’m aware of Saddam Hussein. I’m aware of Adolph Hitler.” I’m not going to buy their brand. Awareness means nothing in the marketplace by itself.
Stopping power means you change the behavior. You made them pay attention. One of the ways you do this is surprise. Surprise is an emotion where you’re seeing things. You’re eyes go wide and your mouth drops open. Almost as if it’s Mother Nature’s way of saying:
Why don’t you shut up and listen.
And if you can make people surprised then they’re on alert and you can take it from there.
So, that’s really where Stopping Power starts in. And yes, if it proves to be lame or offensive or boring then you have lost your opportunity and then it’s an interruption.
What I talk about in the first rule is “Get physical.” That’s so important in the reptilian brain. In addition to facial coding, for half a decade or more we’ve used eye-tracking. It’s commonly available and I think I was one of the first purchasers of this software from a Swedish company with eye-tracking technology. Eye-tracking software lets you get down to the split-second. You’re getting data every 1/25 of a second so we know what people are looking at.
And what we’ve discovered is yes it’s nice to have a dominant visual. People really gravitate to faces so don’t blow that. That’s where casting comes in. If, the visuals have some significance for people’s lives; that’s a key one.
And there’s one more that the client would often miss. There’s gotta be change; there’s gotta be motion. People notice contrast. You’re taking me from problem to solution. You’re taking me from ideal product maybe. But how do I get there? Me vs A Rival. People need the contrast because that’s friction. Story-telling plot has gotta include a tension that gets resolved.
And, I think a Creative Director gets that. But the client can be such a motor-mouth "let’s get out message after message", that there’s no chance for that contrast to build. Even visually you gotta have the contrast.
We notice motion. Let’s go back all the way to being on the plains of Africa. If you could catch the moving animal you could have dinner. If you didn’t, you starved. We notice motion, changes in our environment.
Advertising introduces elements of change, conflict, tension, that it can build on. The resolution of course is the branded offer that makes you a hero.
Given all the data that’s now available about us consumers and our habits and where we go..why is it so difficult then for advertisers to interrupt us with an ad of some relevance to our interests?
I think the key word is data. Anybody can drown in tons of data. I think the issue is do you hear any of it? Do you have the story-line? Do you know who the people are?
Take demographics for instance. So often they’re just looking for their target market. To them it’s just a series of numbers. They’re 42 years old, they make this much money and they live here.
Well, we did for a little bit of fun we went through and we checked out Martin Luther King vs Malcolm X. They would have fit the very same demographic profile. But, that didn’t tell you about the heart of the individual. Both of them were fighting for the same cause. They certainly had very different routes and philosophies about how to get there.
And if you just stick with the data, if you just stick with the demographics, you don’t have an intimate sense of who someone is.
One of the initiatives we’ve launched, I’m going to introduce a new term it’s called The Big 5 Factor. It’s the leading academic model on personality. And it’s often called OCEAN because it refers to Openness, Conscientiousness, Extroverted, Agreeable and Neuroticism. And if you can figure out what someone’s personality type is, which is reflected by in what emotions are most common for them. Obviously if someone is more neurotic and not emotionally stable well, then, fear is a more relevant emotion for them. If someone is agreeable then...they’re going to be more happy, for instance.
So, knowing what that personality type is will get you a lot closer to who Malcolm X and Martin Luther King are and give you a chance to have commercials that resonate to the individual’s psyche and not just a flat depiction of a sea of numbers.
Honestly, if you look at most market research and a lot of ways most companies would see their target market, I don’t think they see people. They see pocketbooks and demographic numbers. They don’t have a feel for the people they’re trying to reach. That’s the terrible shame of it. And that’s why there’s the need to make a difference.
The key has to be connecting on the sensory emotional levels. Those are the two oldest parts of the brain and if your message sits in the rational part of the brain you’re getting almost none of the action.
My friend Michele Miller at Wonderbranding blog writes about advertising and particularly to that gender that makes the majority of household purchases: women. She shared recently part of a TED presentations where the speaker discussed the shift in advertising from demographics to shared interests. And I’m thinking as you’re talking that this movement from demographics to shared interests might bridge the gap between seeing numbers and seeing people. What’s your thoughts on that?
I think it’s hugely important. We were just testing a TV spot for a financial services company and at one point they have Ellen DeGeneres in there, just briefly. They had a whole bunch of other celebrities in there. But, I think, because of the nature of her talk show, being open, even crying on the air...she’s shared who she is and a level of vulnerability and people like her show and her approach. There’s a real connection. And she was the only celebrity that got a response on the emotional thermometer, so to speak, in that piece of advertising.
You’re seeing a huge lift in cause marketing. I don’t think that’s going to go away. That brings the values proposition not just the value proposition. It makes the offer more than an offer. Maybe, donations are going to be made to a cause. You see how lives of people, or initiatives you support, it gives you a sense of community.
There are so many products out there so many more than anyone has the pocketbook to buy. Companies are struggling mightily with differentiation. Anything they create gets copied almost immediately by someone else if it’s selling well.
The thing you can’t take away is inside your own person. Your own feelings are unique to you. They are customized in the extreme by definition.
And making that emotional connection, which is often referred to as brand equity. But brand equity is so often tested it’s back to the awareness game. Brand equity is really entirely about emotions. It is about “I care”, “I believe”, “This brand is meaningful to me”.
Brands are really a central repository of value. The ad campaigns come and go. But how you feel about a company is going to be the key. If you can relate to them, if you can feel like it is sharing, I think is a model that works for women.
They do make most of the purchases. And yet, the Creative Directors are mostly male. The CEOs are overwhelmingly male. I’m amazed there aren’t more females in CMO positions. There really should be or there has to be guys in that position who get it, authorize, support it.
Social media. I don’t know if I drink the kool-aid all the time, but I have sipped it and it is good. I’m thinking that social media could help in connecting those with shared interests. How would advertising change to address this shift from demographics to shared interests?
It’s a complicated question. It’s not just a fad; it’s not going away. It’s a question of learning and doing it well.
But I like the kool-aid analogy. It is potentially treacherous. Think about it. Who is on social media? You’re connecting with your friends. You’re talking about your life, your self.
You better make sure you’re not interruptive here, that you’re not just airlifting in here something that’s entirely about the company, there’s no WIIFM. That’s a risk. You could have initiatives that the target market just doesn’t care about. So you’re just annoying them.
It’s also possible that you’re going to be liable to being flamed. Greenpeace put out a piece about Unilever and how the rainforest was creating problems. It was a very powerful, emotional piece. They have to be very careful there.
You have to make sure your value proposition is very emotional. So, how do you manage to not get flamed.
We have 7 core emotions and 5 of them are negative. Anger and contempt and sadness and disgust and fear. I think it’s very possible that social media can be a very energizing, propelling thing and we’re seeing that in the middle east right now, can be something that your company finds is a two-edged sword and your company finds the sword is getting rammed into it.
So, you play it carefully. There are some companies doing it well. I mention one in the book. Ford had offered one of its cars to a whole bunch of people. I think 20 or 50 people. They did not have to blog or tweet about it, talk about it on Facebook. It was their choice based on how the car performed for them.
So, it didn’t put as much pressure on them. It wasn’t a hard sell. It was a wow because “Suddenly I have this car that shows up in my life.” And you can communicate about the car.You can boast about it to your friends; you’ve got the social dimensions. You could post videos. And Ford had a lot of positive press out of this far more than they could have paid for out of a campaign and with a lot more authenticity.
The key to the social media stuff is you don’t offend their value system, you give them the WIIFM - the reason why they should care for themselves and communicate this their friends and does it feel authentic and are you offering the chance for an experience.
I think social media also ties into the fact that you are going to blow past the traditional TV, radio, print, even website. You’re going to get out into the public arena. One of my favorite pieces of advertising that I’ve been talking about a lot is a company that donated a skate-board ramp. And suddenly, teenagers get to ride up and down that ramp. They’ll get to see the logo over and over and over. Hundreds of times, a lot more than any TV ad campaign. And, you can, if you’re a teenager, you can ride over the logo and express your rebellious side by saying “I got the logo, I got this company under my feet, literally.” And I think that’s very attractive to a 16-year old boy.
I think that’s a brilliant piece of advertising that’s kind of an adjunct to the social media thing. But it gives people a chance to feel like they can own it, that it’s a part of their lives, that it’s not an imposition, that it’s not an interruption. That’s got to be the key thing. Otherwise, it’s just another way of imposing.
I think we’ve all gone to websites where we’ve seen, almost every company has a site that says "so and so sucks". I’ve seen cases where I’ve gone on those and I can tell where certain ones of those postings feel manufactured. They feel like pre-fab housing. Someone from the PR wing said:
We better post some positive things.
It just feels stilted.
I think people have a really good BS detector. And you can blow yourself up quickly by being those kinds of liars.
I loved your whole book. But one section stood out for me. It’s where you analyzed a 60-second ad and showed what looks like an ad agency who can't help itself. They have 38 seconds of engagement. They’re clever; they’re creative; they’re personal...the test subjects are completely engaged. And then they just HAVE to use the professional voice over and the interest is lost. Why do they do that?
I think their hand is probably forced by the corporation becase now they have to put in all the talking points. And it is one of my favorite examples. It’s in the telecommunications field. They start telling the story. They open with characters. It’s engaging; the emotions are flowing. And then the corporate voice over comes in and it reminds me of my favorite New Yorker cartoon where 2 women are talking and one of them says:
But enough about me. What do YOU think about me?
It’s the company talking to itself. It’s talking in a really boring way. It’s very generic. It’s faceless, almost literally, pun intended.
That’s important because if you go back to emotions and how they’re generated, there’s really 3 key elements. There is the visuals and the sound effects and how it’s working on the sensory level. There’s the value proposition. And a 3rd one is a personality type.
I’ll give you an amusing instance. I was in a grocery store. I’m going down the aisle. I suddenly see that General Mills has taken Betty Crocker off the packaging; they’ve replaced her with a spoon.
I get really curious and I go home and look up all the old Betty Crockers on the website. She’s supposed to be the epitome of the ‘happy housewife’. And yet over 7 versions and 100 years, she’s never had a true smile on her face. Never once.
How do you get this wrong for 100 years in a row? Someone’s at fault whether it’s the ad agency or whoever at the company that signs off on these things. But it’s just amazing.
You want to respond to a person, a sense of who they are, trustworthy, warm, provocative; something that gets our juices going. And we have these corporate voice overs. And they’re really common. And I have to add that I show they are 1/3 as effective as a more casual, intimate, dialogue between people.
And yet, over and over, they are used. I believe they are used to deliver the messaging. And because it saves money. You’re cutting off your nose to spite your face by just going to a single actor rather than using a couple.
It’s hard to hug a giant. That’s what I would urge the corporate clients to realize. If they are a big company with a lot of resources then that’s potentially really great. They can put a really good product in the marketplace and they can support it.
On the other hand, it’s easy to draw into your tower and not connect with people. Lose a sense of who they are. Put up a stone wall and not be personal.
We all experience this through customer service unfortunately where very often we get the kind of service we don’t really like. It’s important to make those personal connections. I guess in essence that’s the purpose of the book is to re-human-asize the advertising process. Get away from data and get back to people.
Let's talk about the Rise of the Creative Class. And, that's not Richard Florida's book, but the opportunity for brand evangelists or vigilantes to create more powerful ads, cheaper, than the brands themselves. What's the role of consumer-participation in collaborating w/ brands to create messages the consumer care about.
I think this is a fascinating adjunct to the social media conversation we had just a few minutes ago. Doritos has been very much out there, on the super bowl, running ads that were consumer created. There are a lot of creative types using the internet to do mashups and parodies. Parodies, quite honestly, draw a lot more traffic than original advertising.
Do creatives get burnt out? Do they get frustrated with the signoff process? Are there other possibilities, take teenagers who have a better feel for what the product is about.
My best friend lives in LA and I said to him one time:
“What should be your number one criteria for choosing an ad agency?”
Because seemingly they all have resources and won awards.
And he said:
“Oh. It’s easy. You choose the agency, if you’re smart, that can get you closer to your target market than you can get on your own.”
Within the agency, do they have people who really know and feel this brand.
I think this is going to scare the agencies to death. This is a great chance to tap into the WIIFM, people’s lives and what it really means for them. This is something I would hope the agencies could collaborate with without killing off the spirit. And it would offer tremendous cost savings for the client. Ideally, it could lift the amount of advertising that’s effective.
Thomas Friedman’s written about this in The Lexus and the Olive Tree. The companies and individuals and countries that do best are the ones that are most connected. So, the more you have that flow and the reachouts and the brainstorming I think the better off you are. The more ossified you, the more isolated you are, you’re going to pay for that in the end and probably sooner than it.
How do you use social media for your work? Where can we find you?
I am not your best example because I am not nearly as good as I should be at doing those things. I’m going to have to make apologies there. Certainly, I do respond to individual emails. So, dhill at sensorylogic dot com works. I expect within a couple of months I’ll be tweeting.
If you go to our website, the obligatory 3 w’s and sensorylogic.com then you can more of what we do. I did write a book on the presidential race in 2008. That’s another way to learn about what we’ve done. It was called Facetime. I was very prescient on picking out who was going to do well in the race.
Another way people can find out more is go to YouTube.
You're a leader. Leaders are readers. Jim Rohn says that. I just quote him. What are you reading these days?
I am reading a book on evolutionary psychology, mating and romance.
I’m reading constantly a book on the brain.
I’m reading native american novelists.
I jump around a lot.
A book just arrived about sports and statistics. That’s a project we’re working on. Matheletics just showed up for me.
Leave us with one parting thought for our listeners to remind us what we should expect to see in an effective ad.
The most important thing in the end is probably to keep it simple. If you took a print ad, you should be able to look at it and flip it upside down almost immediately and something should stay in your mind. There should be a dominant visual, a keyword choice that stands out. Some way that it’s been memorable to you and that made a connection. The joke that has to be explained to you is never as funny as the joke you just get.
If you really look at the psychology of the emotional connection, you’ve really got the 3-second rule. Hut, hut, hike and the play is on. If something can’t be understood readily....you are making it mostly into an intellectual exercise. It’s not going to have the stopping power, the memorability, the persuasion that you actually need in the gut. Keep it simple. Find that one thing that’s going to matter in that ad. And anything that detracts from the power of that or augments it, drop it.
At first glance, I see Nevada and Florida, ranked 4th and 5th, respectively for best business environments.
Let's see Nevada's unemployment is...the worst in the country. Google "Nevada's Unemployment". And, it just keeps getting worse.
Florida's unemployment rate was 12% in December, 2010, according to the Bureau of Labor Statistics. That's compared to 9.8% nationwide. Unemployment figures by the BLS omit those whose unemployment benefits have expired.
But wait for it....now look at the a recent chart that shows those mortgages underwater, meaning the amount the homeowner owes on their mortgage loan is greater than the value of the home.
Whose at the top, er, bottom of this list? Nevada at #1 and Florida at #2. They have the highest percentages of homeowners* with mortgage negative equity.
There's that cognitive dissonance.
How does a state with a great business environment turn around and create the worst environment for employment and home ownership?
Who gets the return on that investment for creating such a favorable environment for business?
So how long can businesses sustain year-over-year profit growth if generating unemployment is their means to success?
Now let's consider Iowa*. Ok. Iowa's unemployment rate is 6.1% in December 2010. That's half of Florida's.
Oh. And land prices in Iowa are at or near record highs. How's those real estate prices going for you in Florida?
And, underwater mortgages? We're near the bottom.
And, this chart is about profit growth and low corporate taxes. Ok.
How long can businesses sustain year-over-year profit growth if there results are reported as record levels of unemployment and record levels of negative equity mortgages?
That is not a path that takes us to a future. That's a path that takes us to an end.
* And yes, Iowa has its own challenges in creating a sustainable business environment with attractive jobs to keep the children who benefit from the state's great public education system from leaving. But, we're getting better at it.
I didn't expect to find Iowa showing so high on the results that indicate a strong, sustainable, economy. I have been one to poo-poo some of our policies.
At some point...there's no one to buy because either they are out of work, under-water with their mortgage (or both) and the kids have all gone to where there is a future...Know what I mean, Verne?
Jackie Huba: Monster Loyalty: How Lady Gaga Turns Followers into Fanatics a bigger challenge than I predicted. It’s not what to say that challenged me. It’s what NOT to say. I start reading and within 3-4 paragraphs, I’m nodding my head and saying Yes, yes, exactly. Bam. Bam, baby. Yeah, come on. Can I get a witness. Then I want to share verbatim Jackie’s translation of Gaga’s strategy. Here’s why. It’s a strategy with 7 steps that any, ANY, business can execute under its own terms and under its own budget no matter how small or large. Granted, I enjoy reading this strategy as it’s applied to Gaga. And Jackie's a good writer. But, what's really inspiring is understanding how even a car wash could apply this strategy with these 7 steps and find success. You could build a global empire selling gardening mulch if you followed these 7 steps. And you could lower your advertising and marketing budgets, to boot.
Kevin Allen: The Case of the Missing Cutlery: A Leadership Course for the Rising Star Yes! Finally a leadership book and author who bring empathy, caring and listening to the front of the leadership room instead of insisting it sit in the back, laughed at or ignored with no champion and certainly no budget to help spotlight its role in creating engaged leaders.
He had me as a reader and fan on the first page of his introduction. Here’s what he wrote:
Years later, when I was made Executive Vice President at McCann Erickson Worldwide ... I came to realize that the gift of human empathy, which had guided me through those early days at Marriott, would allow me to steer literally thousands of people to row in the direction of McCann Erickson’s future.
I’ve learned things the hard way, through trial and error, mostly error. Through it all, I came to realize people follow you because of who you are; because you have come to understand the deep desires and hopes of your people; and because, by connecting with them, you have created a culture and a common cause they believe in.
Chuck Blakeman: Why Employees Are Always a Bad Idea I love this book. It's true that I say this about every book I review here. And why shouldn't I? Why waste time reviewing a book I don't love.
That being said...Why Employees Are Always a Bad Idea: (and other business diseases of the industrial age) is one of my favorite business books for a long time.
It starts with the title. It's eye-catching, provocative, right? Mentally, it's a head-slap, positing a theorem inside your head then pounding it home with AlwayandBad to let you know you're not getting away; you're going to have your mind changed. Right now.
As I kept looking at the title, tilting my head like a dog - one side to the other - I began to smile. I read a kindred spirit. Here's a rebel, a true disruptor, someone who's willing speak up, take a stand; I like that. I might not agree with what I'm about to read, but his title made me smile without being cloying or clever so I knew I was in for a good ride.
Stephen Lynch: Business Execution for RESULTS: A practical guide for leaders of small to mid-sized firms I'm an avid reader, always have been. I've read a lot of business books and I’ve led a small business. I recommend you read Business Execution for Results: A Practical Guide for Leaders of Small to Mid-Sized Firms. It is a very, very good book, among the best, most usable business books I’ve read.
As a writer, he does things that make the reading very pleasant, very inspiring, very engaging. Very good.
He offers personal stories, anecdotes, little clips. They’re genuine, sincere, well-organized to capture your attention, engage you in the story that illustrates the next lesson. I found myself thinking...I can relate...I am relating....I see, feel, remember this personally. And Stephen’s writing is very crisp, very concise in taking you from these stories to the principle with each chapter...and as important to the steps you’re going to take to generate the results you want to see. No hitch in the reading flow. VERY nice.
Kerry Patterson: Crucial Conversations: Tools for Talking When Stakes are High I came with low expectations. I was severely disappointed. It's a great book. This is a well-written, timely, book with tips and reminders and steps to take with each page you read. Real-world examples, real-world steps, to create real, meaningful conversations when the stakes are high. (*****)
Gregg Fraley: Jack's Notebook: A business novel about creative problem solving I read this book completel, too. That should say enough. Even more, I plan to read it again this month. It's a great story whose purpose is to share useful, practical, tips and steps you can take to more effectively and more creatively solve challenges. (*****)
