Don’t race to squander your competitive advantage
No matter what you aspire to do in life, you have at least one characteristic that gives you a competitive advantage over others. But at one time or another, that very characteristic may seem like something that’s holding you back, something to fix. Why? Because for something to be a competitive advantage, it has to be - by definition - unusual. As in weird, out of place. And as you learn about other people that have been successful doing what you aspire to do, you’ll notice that something about you just doesn’t fit. It’s natural to feel an urge to mold yourself into the perceived archetype for success. But here’s the rub: By the time you read about an archetype for success it is - again, by definition - patterned, emulated. It is no longer a competitive advantage. So by attempting to mold yourself to it, you are setting yourself up to shed characteristics that could set you apart and accelerate progress toward your ambitions.
What’s your competitive advantage?
It may not seem immediately apparent. But in my experience, a good place to start is to think of something you were embarrassed by the last time you read an article about how things are *supposed* to be done.
At various points, I’ve been embarrassed by…
My age when I started in consulting (22). My education (two state schools). My name (blad? glad?). My company’s business model (enterprise) and market (HR).
They all turned into competitive advantages.
In consulting, I was able to start the social media practice for one of the largest HR consultancies in the world precisely because I was young - it actually made me credible on the subject. My company’s market, HR departments, doesn’t sound sexy. But it’s that very fact that makes the market such an advantage - there’s less competition and a high barrier to entry.
The things we’re embarrassed by can actually make us great.
What are you embarrassed by?
Instead of fixing, eliminate
h.engage had a bug. In the activity feed, there were buttons to sort the feed by actions that everyone, your friends, or you had taken. This feature has been on h.engage since launch. But it turned out that if someone stayed inactive on the site and then clicked one of those buttons, they would get a really weird error.
So, we got ready to fix it. Phil (our CTO) estimated it would take 3 days or so (that’s kind of a big project for Phil - he’s really fast). Him fixing this would come at the expense of working on new features, which is always a bit of a bummer, but we certainly didn’t want our users to see a weird error.
Right before Phil went into the development cave, it occurred to me: Do we actually have to fix this bug? We track the number of times our users click those buttons. Does anyone actually use them? So we jumped into mixpanel (our metrics tool) and took a look at the # of users that clicked those buttons as a % of visitors to the page. This is the actual graph:
On average? 2%
In other words, the vast majority of people don’t really care about filtering their feed according to those categories. So, why waste 3 days fixing something people don’t use?
We decided to change the to-do: Instead of fixing the bug, we would remove the buttons. The development time went from 3 days to 2 hours.
By pausing to assess how many of our users actually valued something instead of going on a reaction to fixing something that’s “broken”, we simplified our product and saved 21 hours of development time. It seems like such a simple lesson, but in the mayhem of day-to-day work, it’s easy to forget and be reactive.
1. When you do something new, figure out if there is a way to measure it even if you’re not sure what you’ll do with the data. Problems are inherently unpredictable. Data collection storage is cheap. It can make the difference between chasing your tail and making tangible progress.
2. Before making a decision, ask the question: “Is there data that I can base this decision on?” Write it on a note card and keep it in front of you. Get into the habit of asking the question. 8 times out of 10 it won’t be worth it. The 2 times it does will make it worthwhile.
A quick scientific explanation for why social media works
About 40% of everyday speech is devoted to telling others about what we feel or think. Now…Harvard University neuroscientists have uncovered the reason: It feels so rewarding, at the level of brain cells and synapses, that we can’t help sharing our thoughts.
….People were even willing to forgo money in order to talk about themselves
Building a real (lean startup) business: How Zinga recognizes revenue matters
One of the major points the Lean Startup movement makes (and that I buy into) is that to build a successful business quickly, management needs to identify clear metrics to measure the link between what’s being built by R&D and how it’s making the company revenue. This helps everyone in an organization align their activities with what matters to the company.
However, for this methodology to be really effective, a company needs to understand how it is making (or going to make) revenue. I think there are three basic components to this:
- Who is going to pay (customer)
- What they’re going to pay for (value / product)
- How they’re willing to pay (100% up front? Monthly? A little bit throughout? )
I’m not going to bait myself into a prolonged discussion regarding how these three variables are related (hint: I don’t believe it’s sequential!), but I would like to make the point that the “How” variable is really understudied. How a company gets paid can have a drastic impact on product development decisions. For example, if a company gets paid 100% up front, there will be a disproportionate incentive to cram as many features as possible to sell the product and then walk away (ah yes, hello enterprise software..). If a company gets paid monthly, there is more of an incentive to keep providing value throughout the duration of the service and to extend the amount of time a customer finds value in it (think dropbox or any good SaaS).
The “how a company gets paid” is a nuanced and important part of building a business, but it can be a little hard to understand how important it is without a real world example. I recently came across a great article in Forbes about Zinga that helps provide a real example of how another company is dealing with the implications of its business model.
The title is somewhat sensational, “Social Media’s Phony Accounting”, but it’s well worth the read. I’ll post some of the parts I like here.
Here’s how the virtual-goods accounting game is played. If you buy and hold Facebook credits (used to buy virtual goods in games on Facebook) Facebook treats the purchase as deferred revenue—the same way a retailer would book the sale of a gift card—until you spend your credits.
When you buy FarmVille’s hot rod tractor, you use your Facebook credits or charge $10 (which, unseen to you, buys 100 Facebook credits that are converted to 55 in Farm Cash). Facebook sends $7 to Zynga and keeps 30%—$3—as a processing fee, moving that $3 from deferred revenue into current revenue.
When does Zynga get to recognize its $7 in revenues?
E&Y has … propos[ed] three different models for social gaming companies to pick from: game-based, in which revenue is recognized very slowly, over the life of the game; user-based, a faster scheme that lasts over the time a typical user sticks with the game; and speedy item-based, rooted on the properties of specific virtual goods. Using the last method, Zynga recognizes revenues from “consumable” virtual items like energy immediately and revenues from “durable” ones like tractors over the time a player is projected to stick with a game.
Tweaking estimates can make a big difference to the bottom line.
For example, in its fourth amended registration statement, filed with the SEC in October of 2011, Zynga noted that during the first half of last year it estimated the blended average paying player life for a game as 15 months, down from 19 months a year earlier. The shorter player life increased GAAP revenue for the six months by $27.3 million, turning a loss for the six months ended June 30, 2011 into a net profit of $18.1 million. Well-timed: This change came just before Zynga went public in mid-December at $10 a share.