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Archives for March 2007

How Search Engines Implode; The Portal Trap

Search Engine Portal TrapBlame it on Wall Street. Blame it on evolution. Popularity. Blame it on whatever you want. Sooner or later every search engine stops being a search engine and becomes a portal. And then it dies.

Remember when Yahoo was THE search engine on the internet? No longer. Remember Infoseek? Gone. Could the same thing happen to Google? Sure.

Search Engine Supernova

Here’s how search engines implode:

Step 1: Be a great search engine. Get popular. Make lots of money.

Step 2: Give more to the world. Develop all sorts of great new features. Cut deals with the biggest players out there to provide news, weather, sports, politics, finance, on and on and on.

Step 3: Take step 2 and put it all on your homepage.

Search Engines Vs Portals

Check this Alexa snapshot:

Search Engine Stats

Question: Now we all know that Alexa data is not perfect but how could all three of these major search engines have similar traffic levels, and yet Google can drive 10 times the amount of traffic to your website as the other two?

Answer: Yahoo and MSN are portals first and search engines second. Their homepages are full of links that help drive traffic to themselves and to the people they have deals with. Not to the rest of the web.

Go to Google. What do you see? A search engine. With one purpose; to help you find me or whatever it is you need to find on the whole entire web. But Google is growing and when Matt Cutts talks about the next generation of search, part of me thinks “cool”. And part of me thinks “Supernova”.

It doesn’t matter whether it’s for love or money. The need and the want to continue to develop cool new stuff for your users is so overwhelmingly powerful that every great SE eventually becomes a portal. And then people move on to go find a search engine.

In the Alexa graph, you can see the rise of Live. When you do a search on MSN, Microsoft takes you to Live. Hey, it’s a search engine! Sort of. Live gives you the ability to customize your own home page. They offer you a bunch of THEIR stuff, and they let you put on feeds and stuff from elsewhere on the net. Yahoo and Google both do this too. But Yahoo starts as a portal as soon as you get there. The search bar has become increasingly obscured and their stuff is more in the forefront.

The Portal Trap

When a search engine starts becoming a portal they make a lot of money and they retain traffic. When people just want an SE, they leave. The portal starts making less money and they scramble to put more and more crap on the homepage and highlight it over the search bar. Which is why people are leaving in the first place. It becomes a downward spiral.

This happens because all the little guys who want traffic will talk about whoever sends them traffic and get the buzz going grass roots style.

Search engines have to make it easier for people to find the rest of the web, not just a few select players. Will the “build your own portal” model be better than the “ready-made portal” one?

Probably. But other temptations lie in the road.

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Your Competition Is … Everyone

Fusion Comic CharacterThe power of the human fight-or-flight instinct is a good way to understand how immediate challenges dominate our actions. As a business, your immediate challengers are the competition in your industry. The people that do what you do.

But there’s a bigger picture as well.

Ultimately, you’re competing with every other business on the face of the planet for the consumer dollar. You’re competing with changing technology. You’re competing with time as the world changes constantly. This is why every product or service has a limited product life cycle.

What Happened In The Comic Books Industry

This is a great industry to talk about here because there was a huge wave in the early ’90s. It looked like nothing could stop the comics industry. And then something did.

In the early ’90s, the top selling comics were selling over a million copies each month. Every month. The industry was so vibrant, a group of Marvel’s top talent left and started their own company called Image comics. They were hugely successful. This was an industry where talented creators were becoming millionaires within the space of several months.

The industry kept growing. This created a lot of fierce competition. The traditional kind. From other comic companies and creators. And then things changed.

Enter Windows 95. Enter the internet. Enter cell phones. Playstation. Computer gaming. The list goes on. Technology changed. The world changed. There were now many new things competing for the consumer dollar that had nothing to do with comics.

Today, the industry is working to grow again. In no small part, this is thanks to companies crossing over into other mediums like film and video games. The total dollar value of the comic book industry is still what it was 10 years ago though. The biggest selling comics are only moving around 100,000 copies a month with some titles peaking occasionally into the 250k realm.

How To Look At Your Big Picture

Crashing waves happen in every industry. History says so. To protect yourself over the long term, you have to think about how technology is changing. How the world is changing. And how your products or services have to evolve and change.

Take the internet for example; are websites competing just for dollars or for face-time? YouTube surfers spend an average of 28 minutes on the site. That’s a lot more face-time than the internet’s overall average. Google paid $1.6 billion dollars for YouTube to get that face-time in front of users.

Some questions to turn into action items for looking at the bigger picture:

  • Where are you in the product life cycle you’re in right now?
  • What emerging technologies are creating waves in a big way?
  • What could make you obsolete tomorrow if it occurred?
  • How must your business evolve? In one year? In five?
  • Who are the people you need? What do you need to learn? What strategic partnerships will get you into the future?

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Working With The Market During Costing

Lemonade StandThe absolute measure of what something is worth is whatever someone is willing to pay for it. The lower the price of anything, the more people you’ll find willing to buy it. It makes sense then that pro forma costing needs to start with the market price. The price that customers are willing to pay.

There’s a hunter gatherer mentality that prevents people from putting sales first.

For any business to be successful, it has to make a certain profit margin per item sold, and it also has to sell a certain volume of those items. Every unit sold has to pay for it’s own cost of goods and contribute to the overhead costs of running the business.

Here are a couple of tables showing the right way and the wrong way to approach costing:

Market Targeting

The Right Way To Cost

When you read the market, the sale price can’t really change much. If the numbers don’t work to produce a profit then you have to find a way to squeeze the fixed and the variable costs.

You might have to find a cheaper supplier to buy from. You might have to lease a smaller building than you were planning on. The key thing to remember is that there are very, very, (one more time) very few products that have the ability to defy what the market says they’re worth. The ones that do utilize a large portion of what seems like profit to market the product and build branding.

Why The Wrong Way Is Wrong

Inexperienced business people often start with their variable costs. They add in the fixed costs. Determine the amount of profit they’d like to make. And then they come up with a sales price.

And then nobody buys because the price is too high.

At this point, since they’re on a roll, they decide to make the next mistake. Having already gone forward and built an infrastructure with high overhead, AND committed to variable costs from suppliers that are badly negotiated and too high, they lower the sale price.

The profit erodes and the first thing to get cut is the marketing budget. Which doesn’t help sales. Sometimes when a company gets into this position, every unit they sell is more money lost. It’s a downward spiral.

How And When To Cost The Right Way

When you’re constructing a business plan, that’s the time to look at all this. After you jump in, you have a lot less control over lowering your fixed overhead costs. Costing to work with the market is one reason why it’s essential to stay true to the numbers when you’re constructing a business plan. Numbers don’t lie, unless you put rose colored glasses on.

This is also the reason that smart businesses put sales before purchasing in the grand scheme of doing business. Failing to read the market and missing the target results in lack of sales and bad purchasing; the number one and number two reasons why businesses fail.

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5 Things Every CEO Can Learn From Frank Miller’s 300

300Business is a competitive sport. Sometimes it can get bloody. Sometimes it should.

So it’s no wonder that quotes from great works such as Sun Tzu’s the Art of War are often worked into insightful business ideologies. The movie 300 carries many great lessons that can be applied to business. Especially in the area of leadership.

About Frank Miller

Frank Miller is an amazing writer. He has written some of the most influential graphic novels in the medium. I’ve always been a big fan. If it’s true that a picture is worth a thousand words, it’s also true that one of Frank Miller’s words is worth a thousand pictures. It’s great to see his work (Sin City, 300) on film.

300 is based on historical events. A small force of Spartans held off the massive Persian army at the battle of Thermopylae until help could arrive.

The Lessons Of 300

The original graphic novel is broken into 5 chapters. Here they are with the wisdoms they bear:

  1. Honor. There’s a big difference between ethics and integrity. Know the difference. Be open. Take the high road.
  2. Duty. Not everyone practices honor. Know when it’s time to cut integrity loose and get ethical.
  3. Glory. Celebrate your successes to build momentum. Capitalize on your successes to create more of them.
  4. Combat. Stand in front of your army and you’ll always have an army behind you.
  5. Victory. Sweet isn’t it. Now go back to number 1 and do it all over again.

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Finding Opportunity In Adversity

Smart Car MoversSmart people make money when times are good. Rich people make money when times are bad.

The housing market has been doing great for the last few years. When it starts going down (as all things that go up eventually do), two kinds of people will emerge; those that have sold and moved on to the next wave, and those that get slammed into the rocks as the housing wave reaches the beach.

The great thing about a crashed market is; it will go back up again.

Opportunity Is Not Price Alone

You have to be able to turn a great deal into great profitability.

Let’s say you’ve found an incredible opportunity to buy a fleet of Smart Cars for 30% off their value. Great bargain. For an around-town documents courier service. But not for a furniture moving company.

How many people do you know with garages full of great bargains? An opportunity has two parts; the buy and the sell. If you can’t use it or move it, it’s not much of an opportunity.

The Opportunity Network

Everyone comes across a great buying opportunity occasionally. To get a lot of those opportunies requires having a large network of contacts. Even more important, a large network gives you a much better chance of taking a great buy and selling it – turning it into a real and profitable business opportunity.

Turning Bad Times Into Good Times

A Property Example:

When the housing market is going down and people are trying to get out, it’s not a great time to buy. The time to buy is when a wave is forming and the price starts rising … BUT, if you have a use for the property or you can find a buyer in your network who really needs a certain kind of property, there’s an opportunity.

A Smart Car Example:

Maybe your furniture moving company can’t use a fleet of Smart Cars. But maybe someone in your network can. Maybe the company you lease all your trucks from knows a documents courier company. If you can use your network to create an opportunity, then rather than being a diversion from your normal business operations, you’re increasing your own value in your network.

A Business Example:

Smart business people are always looking at failing companies. Failing companies can be a great bargain. If you see a way to reduce expenses or increase sales through your own network to make the company profitable, you’ve just found a great opportunity. And most of the elements you need to run the company are already in place. It can be a lot easier than starting from scratch.

Opportunity Broker 

Finding a lot of business opportunities in bad situations is like being a broker. You can specialize in a specific industry or you can dabble in all sorts of things. Mostly what you’re doing is brokering deals by using your amazing network to find sellers with great bargains and match them up with buyers willing to pay favorable prices.

Many great bargains come from sellers in a less than favorable financial position. That adversity always brings opportunity for those who can pick up the pieces and put them together.

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Buy Low, Sell High. That’s Business

Buy Low And Sell HighBusiness is simply buying and selling. That’s all it is. Whether it’s retail, manufacturing or servicing, everything to do with conducting business can be categorized as either buying or selling. Expenses or revenue.

From this perspective, there are three things that you can focus on to build a successful business:

  1. Create value
  2. Adjust the ratio of buyers and sellers in your company
  3. Creat a buy / sell strategy

Creating Value Between The Buy And The Sell

This is the passion you bring that’s unique to your business. It’s where you leverage your strengths over the competition.

The key to selling a good or service at a higher price than it cost you is to add value. Manufacturers create products from raw materials. Retailers purchase in large discounted quantities and resell the items individually. Services provide uncommon knowledge.

The more value you can add between the buy and the sell, the more in demand you’re going to be. Some of the most successful businesses do all of the above things. They create (or source) great products and sell them with an emphasis on exceptional service.

More Sellers, Less Buyers

There are numerous expenses in starting and running a business that all conspire to eat away at the revenue. A modest amount of revenue can be gained by keeping significant quantities of reserve cash invested, but other than that, all the revenue comes from making sales.

Your salespeople have the task of paying for everything that every other person in the company does. They pay for the roof over everyone’s head. They pay for the cost of goods that they sell. The insurance. The lights. The bucket, the mop, the floor cleaner, and the guy who who cleans the floors. Everything.

Most companies have a high ratio of people generating expenses compared to the number of people generating revenue. Successful companies have a higher ratio of sellers focusing on bringing in revenue than failing companies do.

Having more sellers and less buyers inherently lowers expenses and increases revenue.

Create A Buy / Sell Strategy

Most companies operate on autopilot when it comes to buying and selling. Successful companies have a strategy for buying and selling embedded in their business plan.

An example of widgets:

A good buy / sell strategy takes into account how many widgets you can sell and what price the market will pay for widgets. With this information in hand, you know how many widgets you need to build, how much equipment you need to make them, and the price you need to get when you buy widget-making materials.

If you build widgets and then try and sell them, the chances are excellent that you may build more than the market will buy, or that they’ll cost more than the market will pay.

This is why successful companies sell before they buy.

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The Complete Open Source Office

OfficeThe expense of business software can add up. And up. And up. Today, you can get pretty much everything you need to run a business from open sources.

Sometimes the success of a new business is dependant on it’s ability to bootstrap (keep costs way down). Not all the software listed here is open source. Most of it is. But everything listed here is free so it fits nicely into a bootstrapping plan.

Office Productivity Suites

OpenOffice.org. OOo is a complete open source office productivity suite. It includes a word processor, spreadsheet, multimedia presentation software, a simple drawing program, a database, and mathematical equation creation tool.

One of the great things about OOo is that it has the capability to open MS Office documents. You can also save your openoffice.org documents as MS Office documents. This is important because MS Office is the standard in business today and you have to be able to send and receive documents to and from other companies using MS Office. Another great feature is the ability of OOo to create .pdf files from your documents.

Google Apps. Google Apps is fast becoming a new way to be productive. It’s an online office suite that also supports MS Office documents. It includes Gmail, Instant messaging, a calendar, Google docs & spreadsheets, a page creator for web publishing and your own online start page for organizing it all.

The beauty of an online suite like this is that all your documents are stored on Google’s servers so you can login and access them from anywhere and with any computer. You can also export your docs to your own computer or allow someone else to access a specific document by sending them an invitation.

Office Communications

Gmail. Email is critical for business communications. Gmail has been the most recognized free email service for a few years now. One of the great features of Gmail is the ability to search through your emails using keywords to find that one email you received months ago that’s buried in there somewhere.

Gmail is part of Google Apps but you can use it separately as well.

Skype. How did the world communicate before Skype? Skype allows you to chat one on one, chat as a group, setup an online conference call, transfer files, and make video calls. It’s all completely free over the internet for Skype users.

Skype is a great way to communicate long distances for free. If you have to make or receive long distance phone calls with landline or cellphone users or add a voicemail feature you can do that too for a small monthly fee and just pennies per minute.

Website CMS

Web hosting is relatively inexpensive. The beauty of having your own web domain is that you can setup official company email addresses like you@yourcompany.com. But you need to populate that website with something. Website building is easier than ever with CMS or content management software.

WordPress. Want to see agreat example of what WordPress can do? Go to www.zoomstart.com. Wait a minute … you’re already here! WordPress is the best blogging software around.

There are thousands of themes created by users for you to download. The latest version of WordPress allows you to create a static front page for your site. This makes it more like a traditional CMS and perfectly suitable to use it to create a web presence for your corporate site.

Joomla. Now you’re playing with power. Joomla is a full blown CMS. It allows you to build complex and interactive sites. There are a ton of applications built by users that allow you to extend the capabilities of Joomla.

*Update Drupal. Another open source CMS. Drupal features a number of add-on modules that enable collaborative authoring, peer-to-peer networking, podcasting and a lot more.

*Update phpBB. There’s nothing new about social networking. The internet was built on the back of bulletin boards and forums. Today they’re as strong as ever and are some of the most authoritive websites on the net. You can build your own with phpBB.

Accounting Software

Every business needs an accounting package. This is an area that hasn’t been developed in the open source world as much as it could be. There is no single household name that stands above everyone else which means there’s a huge opportunity in this arena for development.

There are a number of open source and free accounting packages that a small business might find suitable though. Here they are:

Compiere. This software goes beyond simple accounting. It features enterprise resource planning (ERP) and customer relationship managment (CRM) capability.

Opentaps. Opentaps also features full ERP and CRM capability.

Microsoft Office Accounting Express 2007. This is fairly new for Microsoft. Currently it’s only available for US users but it looks like a great little accounting suite. The software integrates with Microsoft Office to import and export data between MSO Accounting and Outlook, Excel, and Word.

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Larabar: A Case Study In How To Build An Amazing Company

LarabarI had the good fortune to meet the COO of Larabar last week. The more I learned about Larabar, the more I realized what a truly amazing company it is.

Larabar has all the ingredients necessary for rapid success. The first Larabar’s hit store shelves in April 2003. All 500 bars were made in Lara’s kitchen. A year later and they celebrated selling 1 million bars. Three more years have gone by and they now sell 40 million bars a year.

The Ingredients For Building A Successful Business

  1. A great story. Lara Merriken (the founder) got the idea for Larabar while hiking in the Colorado mountains. She wanted a great tasting and healthy whole food nutrition bar. She started experimenting with different ingredients and making them in her kitchen. Her friends and family were her first taste testers.
  2. Great people. You have to have great people who are passionate about what they’re doing to build a strong and successful company. The people at Larabar are passionate. They know they’re creating a great product with a great story. The rest is easy.
  3. A great product. Larabars contain 6 or less ingredients each. They’re made from fruit, nuts and spices. And that’s it. There is truly nothing like them on the market. Most nutrition bars are full of sugar, preservatives, they’re fortified because they contain little natural nutrition, and they’re full of things whose names you can hardly pronounce. Lara set herself apart from the crowd by making a nutrition bar that really was nutritious.
  4. Great packaging. Simple, clean, bold. Great packaging builds a brand. Packaging is the suit and tie your product wears when it meets customers.
  5. A great job getting out and selling. The inside edge that Lara brought to her business was her experience working for Whole Foods Market. She became a buyer for their nutrition department and learned how the pros pitch their products to buyers. When she was ready to take Larabar to store buyers, she knew how to sell it. She went a step further and worked to build a grass roots following by handing out samples and talking to customers in the stores.
  6. Keep it simple. A Larabar has 6 or less ingredients. So does a successful business.

Creating Zoom

Larabar is a great example of a company with a phenomenal amount of zoom. You create zoom by capitalizing on one success to create another success. It’s a snowballing effect. Once you get the momentum going, nothing can stop you.

Look at how Larabar created zoom. See how you can apply the same ingredients of their success to your own company. If you run a blog, your WordPress theme is your packaging. Your writing is the product. Getting out and selling it is the networking you do with other bloggers. The point is, these principles can be applied to any business.

Right now Larabar sells 40 million bars a year. They’re building capacity to produce double that. They’re gonna need it. They got zoom.

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The Real Crooks And Liars Website

Shell GameIf you follow today’s world of slash-and-burn politics, you probably know the site Crooks and Liars. Well, the real crooks and liars website is White Collar Fraud and it’s a great read.

White Collar Fraud is the blog of Sam E. Antar. Sammy was the CFO for Crazy Eddie, a consumer electronics chain from the ’80s. He and others at Crazy Eddie were cooking the books right under their auditors noses. They eventually pulled out every cent they could and sold the company. The new owners quickly realized they had purchased a sinking ship.

The SEC investigated. There were criminal and civil prosecutions. A few jail terms were handed out.

Sammy now writes and lectures about white collar fraud. His site is a great resource for understanding how fraud occurs within a company. I’ve seen a couple of the things he talks about that make the atmosphere ripe for fraud:

  • New and inexperienced accountants being sent out to do the field audit
  • Firms providing both auditing and consulting services for a company (which is a conflict of interests)

The really interesting thing you take away from Sammy’s experienced view is that fraud is not complicated. It’s just an alley-way shell game. Just fast fingers and smooth talkin’.

He’s the first person to tell people two things; Don’t trust him. Don’t trust that his apologies for what he did are sincere. What you can trust is that he knows what he’s talking about when it comes to fraud.

There are some good lessons to be learned from him. You need to protect your company from the dark forces on the outside …

and the inside.

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Packaging Sells Product

Zoom PackagingThe rule is this: Great packaging will not necessarily help your sales but bad packaging will hurt you. So you need great packaging just to have a fighting chance.

Everyone is fighting to get noticed on the shelf. A lot of times people don’t see the product. They can’t touch it, taste it, or use it. All they have to go on to make their decision is the packaging.

What Packaging Needs To Tell The Customer

Your packaging has a job to do that’s more than just being a package. It has to help generate sales. Here’s a checklist of things to think about when designing packaging:

  • Grab Attention. You’re surrounded by the competition. Your packaging has to jump out and grab attention.
  • Promote The Brand. You might notice that large, brand-savvy companies don’t create label graphics that look like a Picasso painting. They use bold, easy-to-read lettering, block colors, and good contrast between the brand name and the background. How easy is your package to read? From how far away? How easily recognizable is it?
  • Generate Trust. People do not buy things they have low confidence in. Your packaging needs to convey professionalism. It has to show people that this product came from a company that knows what it’s doing.
  • Promote Value. If there is something about your product, or the package itself that makes you better than everyone else beside you on the shelf, tell people with the package. Great innovation, technology, and features can go unnoticed if they’re all packaged up or they don’t jump out at you. Promote your value prominently on the front of your packaging.

Sustainable Packaging

Trends like environmental packaging, recyclable, and made from recycled materials have been around for a while. The new kid on the block is sustainable packaging. This is what everyone is talking about and moving towards now. Here’s what sustainable packaging is:

  • Earth Friendly. Sustainable packaging throws lower green house gas emissions into the atmosphere during its manufacture. This has to do with the types of materials used, the amount of material used to create each package, and the processes used to create the package.
  • Energy and Resource Efficient. Less material requiring less energy to shape that material into a package.
  • 100% Recyclable in an Efficient Manner. A good example of this would be a plastic bottle with a label made from the same type of plastic. A plastic bottle with a paper label is still completely recyclable, but not as easily or as efficiently.
  • Uses Bio-materials. Bio-materials decompose naturally in the environment. These are things like cardboard or biodegradeable plastic. If it can not be, or for some reason is not recycled, then it shouldn’t be a burden on landfills and the environment in general after it’s discarded.

You can see that sustainable packaging takes the green revolution a step further. It’s not just about recycling and reusing. It’s about lowering the amount of natural resources, energy, cost, pollution and environmental impact as much as possible.

Packaging Resources

If your company is developing products, you need to stay up to date on what’s happening in the packaging world. The easiest way to do this is to subscribe to Packaging World Magazine. In Canada, you can subscribe to Canadian Packaging Magazine. Some companies may even be eligible for free subsriptions to these magazines. You can apply to find out.

Another great rescource if you really want to jump in to the thick of it is to go to a trade show. Packexpo is sponsored by PMMI and it is one of the biggest and best packaging conventions around.

Both Pack World Magazine and Pack Expo have great websites with tons of articles you can search through on packaging, materials, equipment, and packaging trends.

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