Building an ecosystem and "Theory of your business"

Businesses must stop thinking about their business as a single block buster movie that creates a large short term profit. Instead think of a successful business as a franchise like ‘Star Wars’. You must think about maximizing the client experience with different avenues; movies, TV shows, comics, novels, merchandise etc.

Your product is not your business.

Shows like “Shark Tank” and” Dragons Den” have been growing ever popular in today’s culture which sparks daring individuals to start their very own business.

While I am all for the rise of entrepreneurship, these shows often perpetrate the wrong idea of what being a successful entrepreneur and business owner is. It perpetuates the notion of having “the single silver bullet idea” and values single products as the cornerstone for success.

Anyone experienced in the business world will know this is not the case. Overestimating the value of your product breeds a severe lack of adaptability and egocentricity which we know will kill a company in the long term.

Very few companies ever became successful from their first product; instead, it can be seen throughout history that the first product is simply just your way into the market and is just a catalyst for you to learn more about the consumer base.

If you are not constantly trying to make your current product service, or business model obsolete rest assured your competitors will – Peter Drucker

All products eventually become superseded; even Facebook when it first started is not even close to what is now. Instagram used to be a location-tracking app - when the founders introduced it to the market they quickly found out they had to make drastic changes.

Flicker came about from a game that introduced a simple photo-sharing button.

Do not become attached to your product because it could spell grave disaster. 

• Sony is not in the video game business; they are in the entertainment business.
• Amazon is not in the bookstore business; they are in the convenience business. 
• Disney is not in the cartoon business; they are in the happiness business.

Imagine the limited growth in those companies if they believed they were in a myopic business; I guess there would be no Disney land, there be no Sony TV’s and you wouldn’t have same day shipping for your groceries on Amazon.

•Don’t sell me clothes. Sell me a sharp appearance, style, and attractiveness. 

•Don’t sell me insurance, sell me peace of mind and a great future for my family and me. 

•Don’t sell me a house. Sell me comfort, contentment, a good investment, and pride of ownership. 

•Don’t sell me books. Sell me pleasant hours and the profits of knowledge 

•Don’t sell me things. Sell me ideals, feelings, self-respect, home, life and happiness

Understand the true value your business brings

It is imperative that a company know the value it provides on the customer value level and not the obvious product answer. The biggest issue companies have is they actually don’t know why consumers buy; they assume it is features and new technology but this is rarely the case.

No one cares about your product, service or company. They only care about what you can do to make their lives better.

Over a billion toothpastes are sold every year in the United States. I don't believe anyone in history has ever had a strong desire to brush their teeth and use toothpaste for the fun of it. Most people don’t wake up thinking "I would love to go out and shop for toothpaste, I can call my friends to join me and pick out the perfect toothpaste, we can make a day out of it; it can be a dental day". Not many people have this desire or train of thought; certainly not enough to warrant a billion toothpaste bottles sold every year. What they do have is a realisation having bad breath is extremely detrimental to their health and social status. They have fear that their teeth will go brown; that they will scare off potential partners; that they will be ridiculed for bad breath; scared they won’t fit in.

Tivo example...

At the turn of the 21st century TiVo was presented at a broadcasters’ convention in Las Vegas. Many thought it would change the TV industry forever, and they were right. People even used to use it as a verb "I'll Tivo it..."

The company never understood the consumer or the market as a whole. There was no doubt TiVo had the best product; it was even hailed as a staple product for Oprah who publicized it on her show. Even after one of the most influential personalities in the world endorsed it, the company was a commercial failure. 

It fell into the trap that many entrepreneurs and businesses fall into; they fell for the “we have the best product and people should come to us”. Even after initial traction in the market TiVo could not grow. With the client base they had, it should have been enough to grow into an impressive company. However, they did little work on understanding their clients or even a hint of genuinely caring about them. 

The product was advertised against people’s core desires. When people asked why they should buy Tivo the company responded with pure technological features: 

• you can record any program. The market then responded with “a VCR can do that”
• you can watch your favourite shows whenever you want. The market then responded with “a VCR can do that”
• it changes your entire television viewing experience. The market said they don't want to change their viewing experience. No one wakes up desiring to change their TV viewing experience. The market didn't even know it needed their viewing experience changed. Remember humans do not like change; thus without a compelling reason you will be going against a mountain.

Now let's look at a far better way Tivo should have approached the market; a benefit driven approach.

• Never channel surf again. 
• Turn on the TV and have the confidence that you will always have something you love to watch
• Don’t wait on TV; let your TV wait on you

These dot-points speak to a direct problem for much of the market. It articulates how their life will actually benefit.

Theory of your business

You MUST have a theory of your business that creates an ecosystem. You should be able to exaplin it yourself and others. It is the theory of how you will create, revenue, profit, value and sustainability in a repeatable way.

Most owners are not capable of going on a whiteboard and drawing their theory of business on a board. 

Lee Iacocca when he took over Chrysler when it went bankrupt the first time and he had to cut the payroll. He couldn’t fire any of the union guys so he could only fire the salary white collar guys. He spent three days in a room with a white board handing each person a marker and asked them “draw me a diagram of how in the hell do you help this company sell a car with what you do”. Anyone who couldn’t draw the diagram he fired them. 

Disney works with a “theory of sustainable value”. Everytime in their history they have not been optimal they have deviated from this core theory and they get back to it. One of the biggest falls they had was when they staretd doing one a done movies which was in complete violation of their theory of sustaible value. For instance the movie Wild Hogs starring John Travalta, Tim Allen etc was about old guys in a moter cycle gang and it connected to nothing else. There was no stuffed toys, Disney land riddes or merchandise, comics etc. They did a fair amount of these things and realised it was an opportunity cost to what they could be doing and they cnacleed everything later and went back to their core strategy. 

Amazon have a great theory of business for themselves. 

A 1957 infographic of Walt Disney's corporate theory reveals a complex web of strategic channels. The illustration might be nearly 60 years old, but it's still the basis of the brand's success.

When Disney makes a movie today, the company thinks beyond the motion picture to how the story can be leveraged into merchandise, experiences, and spin-offs. It's not just a film: it's a theme park ride, a chapter in a larger saga, an action figure, a musical on ice—you get the picture.

Walt himself laid out a similar strategy in the '50s. Examine the flow of information in the graphic. The film studio is at Disney's core with different platforms in orbit. Films provide material for comic strips that, in turn, promote films. The comics become reprintable material for books. The film studio feeds article content for Walt Disney Magazine, which advertises Disneyland—a sales outlet for merchandise based off films.

Today, the network is larger, there are more platforms, and the path to success can get awfully messy, but the basic strategy is the same. Instead of following the model of other studios—releasing many films and hoping for a blockbuster—Disney is select. It releases about 10 films annually and builds out the franchising and revenue-generating opportunities that come with the territory.

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