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Welcome to the Renaissance

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My Most Important Grade

Love the Light – Endure the Darkness (Infographic)

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Trajectory Chapter 10. SUPER Motivation – The Desire to Feed Our Families

(This is Chapter 3 of Trajectory, the forthcoming book by Michael R.H. Stewart)

CHAPTER 10: SUPER MOTIVATION

There is an overarching objective in today’s unpredictable world economy — as the owner, manager or employee in a small business – and that is the desire to feed our families.

There can be no shame in that.

Of course, under ideal circumstances this should not be at the very top of the entrepreneurial list.

As Guy Kawasaki is famous for insisting, if your primary goal is to make meaning – rather than to make money — all else will fall naturally into place.

Steve Jobs is famous for similar beliefs.  His desire was to change the world, not to own it.

I agree with both men entirely.

Current research suggests that we are making headway.  We entrepreneurs can take pride in the fact that in recent research being conducted by the Startup Genome Project it was found that:  ”Most successful founders are driven by impact rather than money.”

However, this book is intended for the overburdened entrepreneur, not the successful founder.  This book is intended for individuals deeply involved in the search for accomplishment, not for those who have already achieved it.

So how do we accomplish the necessary, while aspiring toward the exceptional?

 

Make an Impact While Facing Reality

To completely ignore the present realities – to insist that we should be eleemosynary to the elimination of our basic obligations to those who depend upon us – is at best naivete and at worst the height of irresponsibility.  We must absolutely make an impact, but we must face reality too.

Let’s call this dual approach SUPER Motivation.

Having proclaimed a strong desire to get back to the salad days of Guy Kawasaki’s thinking before the world economy started to slide, let me say that for now at least, feeding our families should be a major concern of everyone involved in business.

Bear with me on this, because what I have to say in this chapter – however it is framed – may be the most important advice in this book.

In order to feed our families, it is first necessary to learn the mechanics of motivating people – encouraging them to do what needs to be done – to buy our products and services.

But equally important is the notion that in Social Media we should soft-pedal the sales message.  It should be decidedly in the back seat as we drive toward our objectives.

It is the great conundrum of business – how to motivate people, and in today’s world we must do so unobtrusively.

In this chapter, I will share the simple secret for getting this done.

 

Take the Money and Run

Take the Money and RunRemember Virgil Starkwell?   Probably not, I suppose.

Let me refresh your memory.

In the 1969 movie comedy, Take the Money and Run, Woody Allen played a hapless hero bent upon a life of crime.

He was not very good at it.

He tried to rob a bank by handing a too-hastily handwritten note to the bank teller at window #9.

The note was supposed to say:

“Please put $50 thousand into this bag.  Act natural.  I am pointing a gun at you.”

Sadly, the teller could not read his illegible note.

The teller asked, “I can’t read this. What is this?  Abt natural“?

Virgil responded, somewhat annoyed, “No it just reads, ‘Please put $50 thousand into this bag. Act natural. I am pointing a gun at you.’”

“Does it say, ‘Act natural’?” the teller asked.

Virgil responded, getting more than a little frustrated, “I, uh, am pointing a gun at you.”

“That looks like ‘gub’”, the teller responded.  “It doesn’t look like ‘gun’.”

Virgil was nonplussed.

The teller asked her manager to come review the note, saying “George, would you step over here a moment please.  What does this say?”

Now the manager was reading the note.  “”Please put $50 thousand into this bag and… abt?  What’s ‘abt’?”

(You can see where this was going, even if you don’t remember the movie).

“It says “Act,” Virgil insisted again.

Then the teller asked her manager “Does this look like “gub” or “gun“?

Virgil made one final attempt, repeating, “Please put $50 thousand into this bag. Act natural. I am pointing a gun at you.

Finally, both the teller and the manager saw the light.

“Oh, I see, this is a hold up,” the manager exclaimed.

“Yes!” Virgil said with victory in his voice.

“Well, you’ll have to have this note initialized by one of our vice-presidents before I can give you any money.”

Virgil got arrested and served his time, regretting that he had not stood his ground with the teller and manager.  He became very highly motivated not to repeat that blunder.

 

What’s the Point?

The point of retelling this story is not Virgil’s embarrassing plight.

Rather, it is to lay the groundwork for a later scene in which Virgil, now a convict on a prison chain gang for another crime, has become very highly motivated to prove his courage and resolve and not to cave in to the prison warden.

The movie narrator describes Virgil’s chain gang experience this way:

“The time drags by an endless grind of backbreaking labor.  Brutal discipline is common under the hot sun.  The men aren’t even permitted to faint without written permission.”

“Virgil complains and he is severely tortured.”

This is where the key to motivating people is described.

The narrator continues:

In the Pit“For several days Virgil is locked inside a sweatbox … (a deep pit in the exercise yard, topped by a steel lid) … with an insurance salesman.”

“Hi, I’m Joe Green, I represent Ajax and Widget Insurance Company,” the insurance salesman begins.  “I’d like to talk to you about a little insurance… You’re about 30, right?”

Virgil screams under his breath, barely maintaining his resolve.

“I think the best thing to do is get straight life then a little term… and… how about dental and medical?”

Virgil’s resolve begins to dissolve.

“We got a great deal on dental,” the persistent salesman concludes.

Virgil finally loses it.

He has lost his motivation completely, and the warden has won.

Fade to black.

 

A Pleasant Surprise

Having spent many years as a senior executive for one of the largest insurance companies on earth, this scene has always made me cringe a little.  But there was no denying that this torture seemed to work.

Is this the answer to motivating people?  To make the alternative too unbearable to contemplate?  Well, no, but it puts the subject in stark relief.

Motivating the prospective buyer has always been a necessary evil, whatever the means.

The debate has always been how to motivate the buyer, without permanently destroying the rapport between buyer and seller.

Of course, there are answers to this marketing conundrum.  Marketing texts are full of them.  Business schools delight in explaining theories and possible approaches.

The Motivated BuyerBut here’s the pleasant surprise, provided by the miracle of Social Media.

Here is the punch line – the advice I promised you before telling the story of Virgil Starkwell.

Because in Social Media you have the gift of very large potential numbers, it is no longer necessary to motivate people.

The secret is simple and powerful.

Instead of motivating people … find people who are already motivated.

Do this, and you will no longer have to drag your potential buyers up the steep cliff to where your products reside — they will scramble to the top themselves.  Give them what they want and need and they will do the difficult climbing mostly without you.

 

The New Motivation Model

What can we learn from Virgil Starkwell and his unfortunate hold-up note?

MotivationWhat can we learn from the pit in Virgil’s exercise yard?

What can we learn from typical marketing approaches that attempt to motivate our potential buyers, even when that approach seems not to work?

The simple answer is this – motivating buyers is a thankless, ineffective and inefficient process – so don’t do it.

Don’t do it?  How else are we to progress in our businesses?  No one enjoys the process, but isn’t it essential?

Ask yourself this important question:  Is traditional marketing still relevant in today’s world?

Let’s take a step backwards in time to see where this motivational process came from – and let’s check it for reasonableness in today’s world.

In 1890, American transportation was in a state of flux.  There were over 13,000 businesses that sold various accessories for the “carriage industry.”  A famous example was the buggy whip manufacturer.

One of the stalwarts in the buggy whip trade was William Durant — who ultimately founded both General Motors and Chevrolet. He worked for a carriage maker, and was one who spoke out against cars as being “smelly, noisy and dangerous.” But when he realized that the world was moving towards them, and that his current company wouldn’t be able to adapt due to preconceived notions about product, he jumped ship to Buick.

Before this important choice, he could have taken two approaches.  He could have ignored the fact that the American transportation industry was changing fundamentally, as he continued to beat a dead horse with his buggy whips.  He could have continually upgraded his buggy whip, his marketing material, his sales force and his motivational techniques.  He didn’t.  He chose to adapt instead.

There have been many examples in our history of choices similar to this one.

The steamship and railroad companies — successful for decades when they had a virtual monopoly on moving the public from one place to another — when faced with the advent of the commercial airplane could have easily clung to the status quo as they sailed and steamed away from reality and into obscurity.  Some did, but many did not.  They chose to adapt instead.

The software and computer industry — having not existed at all a few decades before — when faced with the advent of the DOS operating system, Windows and Microsoft, could have easily clung to the status quo as they clicked and whirred away from reality and into obscurity.   Some did, but many did not.  They chose to adapt instead.

These were monumental paradigm shifts in buyer preferences, but did we learn from them?  In some ways we did, but in important ways we did not.

We still believed, and we continued to teach in our colleges and universities, that motivating the unwilling buyer was still the key to successful marketing.

We believed that marketing was a push technique.  If you continued to bombard your buyer with the reasons to buy your product, irrespective of his wishes, you would eventually prevail.

It was just a matter of modifying the sales pitch, we stubbornly believed – we just needed to be sure our brochure said “gun” instead of “gub”.

It was a continual unwelcome message, but like placing the buyer in a pit with an insurance salesman, we believed that he would eventually give in.  The alternative – staying in the pit listening to an unwanted sales pitch – would eventually wear the buyer down.

The dominant sales thinking was simply, never accept “no” for an answer.

Today we have seen a paradigm shift that makes the aforementioned market changes seem trivial by comparison.

That shift is Social Media.

Importantly, we suddenly have the luxury of a virtually unlimited source of motivated buyers from around the world.  We need not motivate a small group of potential buyers, because we can accumulate motivated buyers in large quantities simply by casting a much larger net.  They are out there waiting, eager to buy our products and services; we just need to find them.

Marketing in today’s Social Media world, is or should be a pull technique.  If we simply learn to listen to our potential buyers – if we learn to give them what they want instead of what we want to sell them – motivating the buyer will no longer be necessary.

 

Social Media Has Changed Everything

Products and services change, economic environments improve or get worse, but it is a rare event indeed when everything changes at once.

Social Media is one of those events.

Social Media is neither a tool nor a vocation, as it is often mischaracterized.  It is a complete paradigm shift — if ever that term was appropriate.

Old solutions have become obsolete.  Old approaches have become irrelevant.   Old methods — even those memorialized by the passage of time — have lost their effectiveness and efficiency.

Social Media requires a new mindset — new principles — new ways of doing things.

Most important among these changes is the fact that motivation of the buyer  has become less of a nightmare and more of a blessing.  It is no longer necessary to cajole and convince.  It is only necessary to locate and inspire.

 

 

 

For Whom the Bell Tolls – Tragedy in Tucson

As citizens of Arizona, as Americans and as a members of the larger human family, we must all take this opportunity to pause and reflect on the unspeakable tragedy that struck our friends and fellow citizens in Tucson on Saturday.

All across America, bells are tolling for the victims and their families, but the larger realization, as penned by the 17th century poet John Dunne, is that those bells are tolling for all of us.

In the words of the poet:

“No man is an island, entire of itself; every man is a piece of the continent, a part of the main…  Any man’s death diminishes me because I am involved in mankind; and therefore never send to know for whom the bell tolls; it tolls for thee. . . .”

We have all been stunned and reduced to tears by this tragic event.  We have all been outraged by the senseless violence.  We have all been diminished by the loss of so many innocent lives, because we are all members of the same human family.

As we reflect on this great sadness, however, there is also cause for solace.  As Americans, we have had more than our share of loss at the hands of ruthless, indiscriminate killers.  But somehow, by the grace of our Creator, we have always managed to rise above the carnage and the tears to realize that despite the grief we share a common heritage of good.  In the midst of the bloodshed, we witnessed the uncommon valor and unselfishness of the victims who gave their lives protecting others.  We listened to the parents of a sweet 9 year old girl as they somehow found the grace to meet their sadness with dignity and celebration of the child they lost.  Once again, our grief was tempered by the professionalism and devotion of the doctors who gave so much to save lives.  Through it all, we are reminded that we live in a nation where public service, despite its inherent dangers, is still a beacon to the rest of the world.

As we mourn our loss, it is also comforting to know that while loved ones have been taken from us, they remain a indestructible part of our lives.

Gone in a Flash ? – A Tribute and Eulogy

This brief posting is my honest tribute to, and possible eulogy for, the pioneering world of Adobe Flash.

For many years, especially when Jericho Technology’s early reputation was built on Flash development, I was not just a Flash devotee and evangelist, I was an apostle.   My love for the product and the professional results it could achieve were unequaled.  “Criticize Flash at your peril” was my war cry.  The occasional critics of Flash websites, then mostly in the minority, were quickly dispatched.

Sadly, all things change.

Every David has a Goliath at some point in his life.  And with Steve Jobs, Adobe Flash may have its hands full.  Among other things he said, “Flash was created during the PC era – for PCs and mice. Flash is a successful business for Adobe, and we can understand why they want to push it beyond PCs.  But the mobile era is about low power devices, touch interfaces and open web standards – all areas where Flash falls short.”

I have read Mr. Jobs’ complete explanation for why Flash is not allowed on the iPod, iPhone and iPad, and I understand the case he is making.  Unlike the old days when such arguments could be ignored, or at least not taken seriously, this time the casket may be closing.  Whether the reasons are strictly technical, as Mr. Jobs insists, or due in large measure to the fact that the child-like Internet is finally outgrowing its knickers, the result may still be the same.

There are many fine web design companies continuing to use Flash religiously, and Adobe is a fine software company.  However, Mr. Jobs is a thought leader with a strong and well-deserved following.  He is the Wagon-master that led all of us across the new frontier, keeping us safe from the Indians in his unapologetic way.

I hope that the Internet is big enough for all of them.

Ford Is The Leader in Social Media

I have remarked in this space before that the Ford Motor Company is doing a masterful job in Social Media.  A brief visit to their Ford Story website stakes their claim to the Social Media title, unequivocally in my view.   They are listening to their customers, and they are paying attention to what they are hearing.

The graph on this post, taken from The Nielsen Company and Netview statistics, tells an even more important story.  Of the Top Ten Automotive websites, ranked by audience size, Ford is the only auto manufacturer listed.  The audience is saying by their presence, “We might scout around for deals and Blue Book values, but when it comes to brand loyalty, our vote goes to Ford.”

I can hear you saying, “OK, but Ford is an American icon, and their CEO is remarkable.  Their prominence is not because of Social Media.”  I won’t dispute either claim.  Ford is an icon, and Alan Mulally, the Ford CEO is remarkable.  And their prominence is not because of Social Media alone.

This is just one man’s opinion, of course, but in my view Ford’s Social Media presence is second to none.  Scott Monty, the head of Social Media for Ford, has a lot to be proud of, and my prediction is that as Social Media becomes more determinant of the public’s buying behavior, Ford will completely out distance the competition.

Incubating Entrepreneurial Ideas

The time has come to resurrect a business model that has been missing from the growing edge of the Internet for several years:  the Incubator for Entrepreneurial Ideas.

Social Media has given new life to the entrepreneurial spirit.  Not since the Halcyon days of the late 1990′s has a new idea so invigorated the thinking of marketing professionals.  With the advent of Twitter, Facebook, Flickr, LinkedIn, YouTube, Digg, StumbleUpon and many others, a whole new area of growth and profit has emerged for American businesses.

Replacing the old formulas of static websites, search engine optimization strategies, link-building and pay-per-click advertising, a revolutionary new model for gaining customers and exposure has taken center stage, (without the inherent expense and interminable delays).

Add to the Social Media explosion, the opening of the world stage, the Small is the New Big transformation and you have excitement being generated to a degree unseen since the Land Rush of 1889.

The last time that the power of the entrepreneurial idea was given precedence over corporate power and resources, Jericho Technology was at the leading edge; providing support, advice and marketing implementation to start-up businesses of all sizes and persuasions.  It is time to provide that leadership again.

CMOs Map of the Social Media Landscape

Occasionally throughout the history of the Internet, the web has created new and exciting career paths inside of major corporations.  When this type of corporate genesis occurs, the hearts of lifelong marketing aficionados skip a beat or two, (mine included).

Perhaps the most interesting new position in recent memory is the Chief Marketing Officer for Social Media.  Like all new positions of this importance and novelty, the brevity of the new market results in a lack of specific knowledge.  Even the most accomplished marketing executives, with decades of experience, can find themselves lost in the uncharted reaches of Social Media Land.  Undaunted, these marketing professionals throw themselves into the fray and learn as they go along.

Thanks to the good graces of CMO.com, a map of the Social Media Landscape has been created.  There is a veritable feast of valuable information here.  (You are welcome to click on this map to enlarge it, and click to enlarge it again).

In Pursuit of the Small Idea

For two decades, I have spent a few moments every day indulging myself by being purely creative.

On those occasions, I would shut out the rest of the world, disconnect my phone and my email, and simply allow my mind to wander around in its closet, hoping to stumble upon the next “Big Idea.”

Lately I have changed that view.  I still make every effort to be creative, but the elusive “Big Idea” has been replaced by an even more interesting and exciting stand-in … the “small Idea.”

Everyone fantasizes about being the next Bill Gates, I imagine, and my theory was that I was just as deserving of that honor as anyone else.   But a growing list of experts are now suggesting that the days of the “Big Idea” may have come to their inevitable end, and that surgically precise small ideas may be the wave of innovation from here on.

Decades ago Japanese factories fine-tuned an idea called the “lean manufacturing process,” which focused on eliminating any work or investment that didn’t produce value for customers.  Within the last week, the New York Times was reporting on a new idea coined by two entrepreneurs, Eric Ries and Steven Blank, called the “lean start-up,” and it is already resonating throughout the venture capital community.  “If it works, it will reduce failure rates for entrepreneurial ventures and boost innovation,” says Thomas R. Eisenmann, a professor at the Harvard Business School. “That’s a big deal for the economy.”

“Technology animates the lean start-up process,” the New York Times continues.   “Free open-source programming tools and easily distributed Web-based software drive down the cost of developing new products and services. The early companies embracing the principles live largely on the Web, which makes it possible to measure and track customer behavior constantly and to invite suggestions and criticism.

Internet companies have steadily taken advantage of the falling costs of getting up and running — often spending just hundreds of thousands of dollars instead of the millions that were required several years ago. But the lean start-up formula adds management practices tailored to exploit the Web environment.”

“So the lean playbook advises quick development of a “minimum viable product,” designed with the smallest set of features that will please some group of customers. Then, the start-up should continually experiment by tweaking its offering, seeing how the market responds and changing the product accordingly.”

Not quite a “big idea,” Social Media was certainly a sea-change in the way entrepreneurs view the Internet.  Twitter, Facebook, YouTube, Foursquare and other variations on the Social Media idea, are truly inexpensive, small ideas, that when combined with lean operations may be the best path toward profits in today’s climate.

Seth Godin has said, “Small is the new big.  Focus on relevant, specialized, and unique.  It’s the difference that makes the difference”.   According to Seth, small helps you be remarkable – “Small means that you will outsource the boring, low-impact stuff like manufacturing and shipping and billing and packing to others, while you keep the power because you invent the remarkable and tell stories to people who want to hear them.”

IPM – Innovate, Populate, Monetize

IPM

Many years ago, Danny DeVito popularized the term OPM (“Other People’s Money”) in a movie by the same name.  It was a comedy, albeit a little dark, having as its theme the greed that came to be synonymous with some facets of American business.

For purposes of this article I have invented a new catch phrase, IPM (Innovate, Populate, Monetize) to help answer the question … “How do we make any money with our website (or if you’re very optimistic, a livelihood) in an entirely professional manner?”

This would seem to be an obvious question, but it really isn’t, having mystified start-up companies for the entire history of the World Wide Web.

First, at the risk of disappointing  some of my readers, let’s dispel a few myths:

THE “FIELD OF DREAMS” MYTH

This myth is a basic untruth that promises… “If you build it … (any website, even if mediocre and non-Social-Media enabled)…they will come.”  This has never been true.  If anything, it is much LESS true today than it was years ago when the Internet carried an implicit cache.  There are literally millions of websites now, and even the best ideas or products are indistinguishable under an avalanche of mediocrity.

As a minimum, your site must be more compelling, more interactive, more “sticky” and more user-friendly than ANY of your perceived competition.  After that it still has the challenge of being found, and the pressure of converting visitors into customers.

Do it yourself websites are fine, if you happen to be an Internet aficionado, a marketing and strategic planning expert, and a seasoned businessman with a long track record of real-world successes.  Otherwise, what you have is a hobby, not a business.

THE “WIZARD OF OZ” MYTH

In the iconic film “The Wizard of OZ,” a key character was a short, old, slightly plump man, hiding behind a screen.  He had no real powers except those his visitors imparted to him.  In the world of Social Media, there are more self-proclaimed experts than there are needy customers.  Of the 35.4 million hits on a Google search for “Social Media experts” do we really believe each of them is an authority on a medium that has only existed for a few years?  And what about the countless people trying to sell you their “secret formula” on how to make Twitter work, for example?  If it is working so well for them, why do they find it necessary to sell their solution to you?  They should be rolling in money, should they not?  It’s really just silly, don’t you think?

For roughly the last two decades I have been deeply immersed in all facets of the Internet, after a career as a senior officer for a huge company, and I would be the first to admit that I don’t have all the answers.

Here’s a brief suggestion:  If you assume that your start-up business will generate $6 million per year of revenue when it reaches maturity, ask your new “adviser” if he has ever been responsible for a business with a $6 million per year budget.  If he says “No” find someone who has.  It’s really that simple.

——————————

Now for the monetization formulas:

This article, (Part 1 of 3), will concentrate on the most obvious and generally accepted method that has proven successful, particularly in the recent Social Media realm: Display Ads.

Display Adds:

Let’s skip immediately to the bad news.  If you wish to use this form of cash generation, you must be able to innovate sufficiently to populate your website with a million (yes, million) visitors per day, in order to monetize your site for (on average) a revenue stream of $200 per day or $6,000 per month.

As explained on Venturedig.com, (a bona fide expert), “This is your bread and butter business model. It centers on showing showing Display/Context Ads. The two major forms of this are CPC (cost per click) and CPA (cost per action or acquisition).

Example:

facebook_quiz_ad

With the ad above, the user clicks the ad, they take a quiz, and usually they fill out their email address or phone number. The advertiser (IQ Quiz), will pay the Facebook developer (you) each time a user fills out their email address or phone number. Usually, there’s a middle man involved. The middle man is called an ad network.

Banner Model

These types of ads can pay out a CPM of $0.05 – $0.80 (*Depending on Country*)

Say you serve 1 million impressions of these per day, at a $0.20 CPM, you can expect to make $200 per day, or $6,000 a month.”

Watch this blog for Parts 2 and 3 to come.

The Puzzle of Doing Business Overseas

For many years in the 1980′s & 1990′s, I was a Senior Vice President at AIGM, the marketing arm of the American International Group.  Among other things, I was responsible for transplanting various successful product lines in the United States, to 135 foreign countries.

Insurance companies have tended to be myopic in such matters.  In the past, they have assumed that if Product A sold in the U.S., it would also sell equally well in England, France, Russia, Egypt and anywhere else they chose to cast their net.  That was a mostly invalid assumption.

As reported this month in the Harvard Business Review, companies still assume …”that a good track record at home is a predictor of success in the global arena, and that exposing high performers to new cultures will set them on the path to becoming effective multinational leaders.”

“To a point”, HBR continued, “those things are true. We agree that moving people around the world is vital to developing global leadership capabilities. But it is seldom enough. Plenty of smart, talented executives … fail spectacularly in expatriate assignments, even when they try their best to understand local cultures and fit in. Assigning an important overseas post to the wrong executive—one who doesn’t have the propensity to learn and succeed in a new and different environment—can be a painful, expensive proposition.”

Chalk it up to ethnocentrism, arrogance, hubris or plain naivete, doing business overseas can be very challenging for U.S. companies.  In today’s global community, differences in cultures have slightly less impact, but still business leaders ignore the remaining differences at their peril.

Specifically, the Harvard Business Review suggests that, “success abroad hinges on something called a global mind-set. This mind-set has three main components: intellectual capital, or knowledge of international business and the capacity to learn; psychological capital, or openness to different cultures and the capacity to change; and social capital, the ability to form connections, to bring people together, and to influence stakeholders—including colleagues, clients, suppliers, and regulatory agencies—who are unlike you in cultural heritage, professional background, or political outlook. The most effective international leaders are strong in all three dimensions.”

I have traveled extensively over the years, and the more I learn, the more I realize that the Worldwide Web is replete with opportunities, as well as challenges.  For companies with the inclination and the expertise, in an ever smaller world, the puzzle of doing business overseas will be solved.

Jericho Technology has contacts in the following countries.  If we can be of service in your international business, feel free to contact us:

  • United Kingdom
  • Belgium
  • Netherlands
  • Luxembourg
  • Germany
  • Italy
  • United Arab Emirates
  • Russia (Russian Federation and Volga Region)
  • Turkey
  • Belarus
  • Portugal
  • Egypt
  • Switzerland
  • Thailand
  • Estonia
  • Latvia
  • Lithuania
  • Israel
  • Hong Kong
  • Morocco
  • Philippines
  • Panama
  • Bulgaria
  • Argentina
  • China
  • Portugal

Customers Are Where You TWEET Them

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According to Inc. Magazine, Twitter Works!

It pays off in actual business, not just buzz, according to Inc. and marketing expert Michael Stelzner, founder of SocialMediaExaminer.com.   And the more time you use it for (and the more experienced you become), the better the results.

Inc Magazine continues … “One in three business owners say that social media helps them to close business. That percentage may yet improve – 74 percent of small business owners who were early adopters, and have been using social media for years, say it’s helped them close business, according to the 2010 Social Media Marketing Industry Report, which surveyed 1,898 small business owners.

What’s more, a resounding 85 percent of those surveyed say that the platform has created buzz for their businesses. (For the record, 91 percent of all respondents use social media.)

Other benefits (in the order in which they ranked): The medium increases web traffic and opens opportunities to build new partnerships. More than half of respondents said social media generates good sales leads. And a couple of fringe benefit: Some three-quarters (73 percent) reported a significant rise in search engine rankings, which feeds exposure. Nearly half (48 percent) said social media reduced their overall marketing expenses (up from 35 percent in the 2009 survey). Marketing expert Michael Stelzner, founder of SocialMediaExaminer.com, put together the report.”

Remember the Productivity Ratio

Here is a tremendously useful experiment:  The next time you attend a business conference, or have the opportunity to brainstorm with extremely successful start-up company executives, ask them for the most noteworthy success formulas they monitor in their businesses.

If you ask this question repeatedly, you are likely to get many different answers.  Some of the most common ones will be ratios: Return on Equity, Return on Investment, Net Profit Rate, Gross Margin Rate, Current Rate, and other less obvious formulas.

One answer you are less likely to hear is the Productivity Ratio — sales divided by number of employees.  The objective is to have a large sales number and a small number of employees. Admittedly, this is not a terribly sexy calculation.  After all, if you are growing, should not your employee base be growing proportionately?  Is not the number of individuals you employ a barometer of success?  Is it not risky to leave your company vulnerable by under staffing it?

The answer to all of these questions is … “not necessarily.”

Inc.com, the online magazine with an enormous following of start-up entrepreneurs, recently published the following examples that argued this case eloquently:

COMPANY: Nature’s Cure, in Oakland, Calif.
DESCRIPTION: Produces a line of acne medicine
REVENUES: $6 million
EMPLOYEES: 13
RATIO: $462,000 per employee
PRODUCTIVITY STRATEGY: Outsource like crazy

The reason for the company’s low head count is simple: CEO Amy Baker deliberately built the company to function with few rank-and-file workers. The staff is incredibly top-heavy: 7 of the company’s 13 employees are executives.

Baker gets away with her unorthodox management structure by outsourcing nearly everything. For instance, whereas many consumer-products companies would employ rank-and-file workers in sales and marketing, Baker has farmed out most of those functions to brokers and outside strategists. The executives in sales and marketing operate more like relationship managers.

To be fair, Baker’s penchant for outsourcing artificially inflates her company’s productivity ratio. But Baker argues that the outsourcing makes it easier for her employees to maneuver or make changes without fixed overhead. Take, for example, her four sales executives. Three of them manage a regional group of sales brokers, and one serves as an inside sales coordinator. If the VP who’s in charge of the Atlanta region finds that sales are slow, then that VP can simply fire the broker and find another.

Strictly speaking, Nature’s Cure is a manufacturer of acne medicine. Yet the company even outsources the making and packaging of its product. The company also relegates its distribution to a warehouse-cum-shipping center in Chicago. One of Baker’s execs, based in Chicago, oversees the entire distribution process. Another VP, in the Oakland office, coordinates every aspect of manufacturing: quality standards, packaging, and inventory management.

Baker acknowledges the risks of building a manufacturing company this way: Nature’s Cure has few hard assets, such as equipment or real estate. A valuation of the company would involve only an appraisal of the soft stuff: the company’s medicine patents and the Nature’s Cure brand.

And because Baker’s exit strategy is to sell Nature’s Cure to another consumer-products company, she believes that she ought to spend her time and capital on building assets that her acquirers would covet — namely, a big-time brand.

COMPANY: Legacy South, in Atlanta
DESCRIPTION: Provides wealth-management services
REVENUES: $3 million
EMPLOYEES: 5
RATIO: $600,000 per employee
PRODUCTIVITY STRATEGY: Automate key functions with technology

Legacy South grosses an impressive $3 million a year with only five employees, but that feat is even more impressive given that two of those staffers are administrative. The other three, including CEO John Viani, do the actual wealth management, each handling about 35 clients. Some clients speak to Viani quarterly, while others talk to him a few times a week. And Viani’s two partners communicate with clients just as frequently.

The perpetual challenge for Legacy South is striking a communicative balance: maintaining high-quality personal interactions while preventing a daily deluge of calls from needy clients.

For Viani, the answer is technology. In addition to sending clients their quarterly statements from discount broker Charles Schwab, Legacy South sends its own statements, which are “in a more friendly format,” according to Viani. The company generates the statements through a software program called Advent, which automatically downloads information from the Schwab Web site, then rejiggers it to Legacy South’s easy-to-understand style. For daily access to the information, clients can log on to the password-protected Legacy South Web site (www.legacysouth.com).

For the most part, Viani and his partners communicate with their clients through phone calls and face-to-face meetings. But there are occasions when Legacy South feels the need to communicate with its clientele as a group. Say the Fed hikes interest rates, or the stock market plummets. Clients often want to know how such events will affect them. In such cases Legacy South relies on the relatively low-tech combination of a client database and E-mail to efficiently communicate en mass.

Although technology eases some of the communicative burden from Legacy South, customer selectivity and management decisions play a part as well. Viani says there have been “two or three instances” when the company has had to “fire” excessively high-maintenance clients. Viani and his partners have agreed that they will take on no more than 40 clients each. When the principal-to-client ratio surpasses 40, Legacy South will look to bring in its sixth portfolio manager.

COMPANY: U.S. Energy Services, in Wayzata, Minn.
DESCRIPTION: Provides energy-management services
REVENUES: $22 million
EMPLOYEES: 22
RATIO: $1 million per employee
PRODUCTIVITY STRATEGY: Use open-book management and profit sharing to instill efficiency

U.S. Energy Services makes $22 million a year from a client base of 150. The company examines every aspect of its clients’ utility bills, scouring them for cost savings. After diagnosing problems, U.S. Energy acts to solve them for its clients — for instance, by renegotiating rates with the utilities. U.S. Energy charges clients a percentage of the total bill, usually around 2%, and a fee ranging from $400 to $10,000, depending on how labor-intensive the solutions turn out to be.

But how does a paltry staff of 22 master the post-regulation-era billing intricacies of thousands of energy suppliers in 48 states? Over the years, employees gain an intimate knowledge about clients’ billing particulars. Generally speaking, the longer U.S. Energy has had a client, the less labor-intensive it becomes for the company to assess that client’s utility bill. That is why the company has been able to beef up revenues in recent years without adding legions of employees.

CEO Bill Bathe also credits the interplay of two management factors — open-book management and profit-sharing bonuses — for the high revenues-to-worker ratio at U.S. Energy Services. He and his partners share all the company’s financial information (except individual salaries) with their workers. The employees, in turn, have a clear understanding of how their productivity can affect the bottom line. In other words, the employees know they’ll receive larger bonuses if their individual revenue-generating efforts are fruitful. Conversely, the employees also understand the cost burden of any non-revenue-generating employees, which is why, as Bathe says, “there are no secretaries here.” Employees type their own letters and spreadsheets, but they also know better than to spend hours on such non lucrative tasks.

Bathe believes that the open-book system, which cultivates a culture of knowledge sharing, motivates greater group productivity. For example, say that an experienced U.S. Energy employee, while analyzing a corporate client’s utility bill, finds an error on the statement that he’s never seen before. The employee then shares his discovery to help his coworkers discover similar errors in the future. That information sharing saves money for U.S. Energy’s clients, increases the company’s total revenues (some of which come as a percentage of any savings the company secures for the client), and, by extension, boosts the size of the profit-sharing bonus.

There is, however, a downside to running such a tight ship. The company can’t easily take on new work since it lacks what Bathe, using a sports term, calls “bench strength” — high-quality backup performers whom it can enlist at times of increased demand. Also, he says, the company culture’s emphasis on efficiency at all costs often prevents workers from even casual socializing. “We’re so efficient, we spend almost no time together,” he laments.

“Big Money, Small Payroll, Growing Your Business Article – Inc …” Inc.com. 25 Nov. 2009. Read the article here.

Jericho Technology wholeheartedly embraces the Productivity Ratio as a key factor in success.  In it’s fifteen year history, the company has never employed more than four individuals full time.  It is a success formula that we consistently recommend to our clients.