How to Apply Cumulative Advantage and Social Agents to Scale Your Business

As business owners, we often focus on meeting the desires of a specific prospect so we can make the sale, but that is like being an employee in the cash flow quadrant where you only get paid when you make a sale.

This approach to sales is very labor intensive and therefore not very scalable. To succeed in most businesses, you have to be scalable and that means creating a word of mouth epidemic. Therefore, you must locate, attract, and nurture what are called “social agents” to help spread the word about your product or service.

Social agents, sometimes called social influences, are people that share your message with others. While a social agent may actually never do business with you, they love recommending you to others.

While working with a prospect one-on-one has the opportunity to make a single sale, attracting a social agent creates the opportunity for a business to make many sales. As related in the story “My Greatest Source of Business Was Right Under My Nose” by Andrew Griffiths the author shares how simply befriending his delivery man yielded a social agent that translated into significantly higher sales.

By engaging one or many social agents, you will not only keep your sales pipeline full, but through a principle known as cumulative advantage, also known as the “Matthew Effect,” it will enable your business to scale over time.

The principle of cumulative advantage states that once a business gains a small advantage over others in its industry, that advantage will compound over time into an increasingly larger advantage. The effect is well known and is embodied in the catchphrase, “The rich get richer while the poor get poorer.”

To demonstrate this principle, think back to the last time you played Monopoly. Each player starts out with an equal sum of money and on a level playing field. As the game progresses, one player (through a combination of luck or through skill) begins to amass a few more income generating properties than the other players. The additional income allows the player to invest in even more income generating properties in comparison to the other players. While there may be some ups and downs during the game, there is a snowballing or amplifying effect that acts as a tailwind for this player. Most often, this advantage continues to multiply and grow as the game progresses. What started out as only a slight advantage ultimately results in this one player owning  the entire game board. The advantage is small at first, but by the end, one player dominates all the rest.

As an entrepreneur, your business may be seemingly just moving along sideways for an extended period of time. Then one day, you attract the right social agent who begins to promote your business message and you get that seemingly invisible boost in sales.

Over time, this advantage continues to grow through the principle of cumulative advantage. It occurs slowly at first, perhaps even inconspicuously, but gains momentum over time. This momentum creates a kind of gravity, making more and more people aware of you and your business. Once your customers perceive you have an advantage, the gains begin to accumulate at a much faster rate as you begin to dominate your competition.

Do you focus on finding, attracting, and nurturing social agents in an effort to employ the principle of cumulative advantage to scale your business?

This post originally appeared March 31, 2017 at www.SteveBizBlog.com.

There Is No Prize for Originality

Earlier today, I was reading a reddit.com post about a young man ready to graduate college this summer who was desperately looking to start his own business. He didn’t have a business idea and was looking to the readership to help him come up with one. I often suggest to clients with a desire to start a business, but who lack an credible idea, to simply find something that works in one place and considering bringing it to another.

For instance, Elliot and Ruth Handler went to Switzerland with their kids, Ken and Barbie. While there, they saw an adult doll dressed in work cloths. The doll was not a kid’s toy, but was marketed to adults. Up to that time, all dolls in the U.S. were marketed to young girls and were babies so that the girls could pretend that they were the doll’s mommy. As their daughter Barbie handled the doll, the Handlers got an idea. They replicated the doll in the U.S. and named them after their kids, Ken and Barbie. This new toy helped launch their company Mattel.

Learn more about how the Barbie doll helped launch Mattel.

In another example, I was watching a current affairs show on T.V. the other day. The story featured a bar in Tokyo that featured a show made up of robots. That bar is crazy popular in Tokyo. I asked myself why wouldn’t the same idea make sense here in the U.S.?

A number of years ago, I was opening an office to support a contract we had with HP in Stuttgart, German. As I sat in a lawyer’s office, discussing Germany’s employment laws, an automated window shade called a “Rollladen” began to come down. Fascinated by the idea of an automated shade, I asked the lawyer what that was all about. He explained that when it gets hot outside, the shades automatically close to reduce the load on the air conditioner and save energy. I asked myself why wouldn’t the same idea make sense here?

Finally, as a child in the 1960’s, I traveled to Germany for the summer to stay with my Aunt and Uncle who spoke very little English in what I call “my total German immersion vacation.” I made some friends over the summer, as all kids do, and was offered a milk box by one of my new friend’s parents one day. I had never see a drink in a box before, but it made incredible sense. Juice boxes were not introduced into the U.S. market until the 1980’s, some 20 years later, and they became an instant success. Again, why did it take so long for ideas like the juice box that was successful in one part of the world to make its debut here in the U.S.?

There is no prize for originality. Like my old boss, Debbie Sagen, once told me, “R&D stands for Ripoff and Duplicate.” So, if you are still looking for that one thing to start your next great business venture, look at what is popular somewhere else and consider bringing it to a new market.

Where will you find the next great product marketing idea?

This post was originally published March 3, 2017 at SteveBizblog.com. Follow Steve on Twitter @SteveImke

Clone Business

Are You a Clone Business?

Every day, entrepreneurs invest huge amounts of time and money to build what they think is a better mousetrap. However, all too often entrepreneurs struggle to articulate how their value proposition is fundamentally different. While many businesses make minor tweaks, they are fundamentally what I call clone businesses.

While there is room in the market for these businesses, clone businesses are just another participant in a red ocean where margins are frequently squeezed to the breaking point for all but the best managed businesses. Clone businesses with little differentiation from their competitors (such as janitorial companies, drywall contractors, etc.) essentially hang their success on the belief that other business owners are incompetent. They are banking on everyone around them being “worse than them” rather than being “better” in some new way. When you are a clone business, you are a commodity, and when you are a commodity, the only real point of differentiation is your price. Price is a poor value proposition as there is always someone out there willing to undercut your price and drive themselves out of business faster than you.

Even a business that entirely transforms an industry and is truly disruptive often is not radically different. For instance, look at the business and economic model of a mini mill that uses recycled steel vs. iron ore. Another example is a cell phone company that uses wireless transmission vs. a landline phone company. In both of these examples, there is only a few degrees of difference from their mainstream competitors.

Other examples include Uber and Airbnb. Uber built a disruptive taxi business with the simple idea that the driver didn’t have to be a taxi driver. Airbnb built a powerful accommodation business on the premise that the room you stayed in didn’t have to be a hotel room. They took what had gone unquestioned and questioned it.

Sakichi ToyodaToyota Motor Corporation’s Sakichi Toyoda developed a technique he called “The 5 Why’s” during the evolution of the automakers manufacturing methodologies. Successful entrepreneurs dare to apply the 5 Why’s to various aspects of their business model to uncover the substantive few degrees of difference that will take them from the red ocean to their blue ocean.

Daniel Burris, the author of “Techno Trends,” says, “The future is already invented.” What he meant by this statement is that most successful businesses simply take a practice from one industry and apply it to their own.

A good example of this principle is Airbnb. Airbnb took the existing hotel and B&B reservation system and applied it to the private home rental market. Most of the core business is the same but just has a slight tweak.

What questions can you ask that will convert your clone business to the next Uber?

Startup Growth

8 Growth Hacking Rules for Startups

Media loves covering stories of startups that utilized unique hacks to grow their users and business rapidly. It’s become part of the “Facebook” dream (as opposed to the “American” dream) that many millennials have chosen to aspire. Traditional business development rules are broken every day when sites like Uber and Airbnb take off with seemingly unexplainable success, while many online businesses flail around with misleading statistics and unrealistic growth projections in hopes of finding that magic pill that will take them to the top.

According to this article, you are ready to growth hack your business, because at least 40% of your users says that life would not be the same without your product. If you’ve yet to reach that milestone, this article is for you. The rules of growth hacking your startup start long before the startup hockey stick success curve.

Rule #1: Don’t Look For Hacks

Prepare for the long haul in building a successful business.  Many people search for growth hacks like looking for a magic diet pill – a quick fix for success without any hard work. As you’ll notice, there still aren’t any magic diet pills, and there aren’t any 100% guaranteed growth hacks. Looking for shortcuts to massive growth can take you down a path that may bring you some short-term wins, but in the end: value, service, and authentic buzz are the keys to creating a successful company.

Rule #2: Build A Great Product

If your product is really industry shaking, it will grow organically.  Many business owners and marketers try to generate press when the product’s still not quite ready for market. A common belief is early buzz or speed to market is the key to viral success, but if your product/software/service stands out as the best of it’s kind, or completely changes an industry and improves efficiency, that will be your best growth hacking strategy.

Rule #3: Don’t Purchase Social Shares

Arash AsliBlog Image 2There’re ways to pump up your stats by buying traffic, likes, video views, or application installs. This is a big no-no. These users don’t stick around, and Google and Facebook’s algorithms for finding false interactions are getting better and better. It has to be natural in the way someone finds your application and use it because they want to, not because they were paid to be there or tricked into it.

Rule #4: Nurture Your First Customers

Preferably paying customers. Not only can they become your raving reviewers and greatest ambassadors, but they also are your most valuable product testers. Listen to them carefully, watch their interactions with your product to know exactly how their experience is going and be available right away to help them out.

Rule #5: Find Partnerships With Bigger Players

Use strategic partnerships to overcome your business challenges by teaming with larger companies that share the same vision and target market. Or, expand your own target audience by tapping the audiences of your suppliers.

Rule #6: Create An Easy-To-Use Rewarding Referral Program

You need to be dialled into understanding your audience, and where referrals are coming in from. We want to try to make the conversion as easy and seamless as can be. Choose a great incentive structure.

Rule #7: Keep Overhead Low And Value High

When it comes right down to it, cash flow is king.  The more you can keep unnecessary expenses down and invest deeply in product development, customer care, and sales hustle, the better off.

Rule #8: Find A Successful Mentor

Don’t try to reinvent the wheel. Hack your startup by using the expertise and experience of a successful startup founder or investor. Their knowledge can be crucial in helping you bypass pitfalls and distractions.

Startup incubator programs have a great mentoring process in place if you already have a start-up with some traction and show you’re ready to hustle for success.  Alternatively, there is mentoring available at Clarity.fm and SoHelpful.me. Successful mentors are busy and have been successful for a reason. Don’t expect them to jump at the chance to give you their “spare” time to motivate and teach you. Read their blog posts, listen to any advice they have already shared before even initially asking for some mentoring. An excellent approach is to offer to intern or provide some value to them first.

The process of growth hacking is actually very simple and straightforward. Start by asking the traditional question “How do I get more customers for my product?”

Author Bio: Arash Asli is at the forefront of business growth. As Co-founder and CEO of Yocale, he has a unique blend of technology, business development, corporate, and finance experience. Arash is honored to have been named the Business in Vancouver’s Top Forty under 40 business executive. http://www.yocale.com

 

Entrepreneur

Entrepreneur or Not – You Need to Read This

If you are a corporate wage earner — as I was for much of my working life — you may decline to read this post because of the term “entrepreneur” in the title. However, I assure you that, regardless of how you make your living, it does have relevance and can provide food for thought.

I had the pleasure of attending a 90-minute talk by Gary Schoeniger on the topic of Redefining Entrepreneurship. Gary knows his stuff as the founder of the Entrepreneurial Leadership Institute (ELI) and co-author of one of the best-ever business books: Who Owns the Ice House: Eight Life Lessons from an Unlikely Entrepreneur. ELI is doing some amazing things in teaching the lessons of the Ice House to students and would-be entrepreneurs. Here are a few of the actionable and fascinating notes from Schoeniger’s presentation:

  1. According to Gallup, only 13% of employees are actively engaged, 24% are actively disengaged and 63% are disengaged. Scary stuff, but it gets worse – on the education front, while 76% of elementary students are engaged, the numbers drop to 61% for middle school and 41% for high school students.
  2. Employers are demanding an entrepreneurial workforce, but there is a large disconnect between what schools are teaching and what entrepreneurs are actually doing.  For an interesting take on this, view the Ken Robinson TED talk titled Do schools kill creativity? Robinson’s talk is profound, funny and worth a listen.
  3. While much of the college-level teaching about startups is focused on the “outliers” like Jobs, Gates and Zuckerberg, such entrepreneurs are a tiny fraction of new businesses. This has the effect of creating unrealistic expectation and discouraging students who would otherwise be successful business owners.
  4. Universities primarily teach management and “delivery” skills but entrepreneurship is more about “discovery” skills. A key entrepreneurial attribute is the ability to identify a problem and craft a solution by utilizing inquiry, creativity, curiosity, observation, networking and collaboration. In other words, an entrepreneur is a detective that is searching for the right signals amongst all the noise.
  5. Google’s head of people operations, Laszlo Bock, announced that the company no longer looks at an applicant’s GPA or where they went to school as hiring criteria. According to Bock, “College can be an “artificial environment” that conditions for one type of thinking. IQ is less valuable than learning on the fly.” This is the essence of the entrepreneurial spirt.
  6. Despite the common myths, most Inc. 500 companies had these characteristics:
  • Start as “ugly babies” where success is by no means apparent
  • No breakthrough technologies
  • Not venture funded (only .018 of all companies are VC backed)
  • Little formal planning, backed up with ad-hoc research
  • Start with average of $10K from friends and family
  • No identifiable educational or personality type of founder(s)

In addition to the search and discovery skills mentioned above, here is what makes for a great entrepreneur:

  • Put themselves out there, creating “tactical serendipity”
  • Self-directed – don’t wait for others to tell them what to do
  • Ability to delay gratification
  • Know how to transform adversity into advantage
  • Persistent and resilient

I will leave you with two final thoughts. First, the world is full of opportunities if you are willing to be a startup detective and find solutions to existing problems. Second, if your career choice finds you working for a company, non-profit or government entity, that’s great, but you and your organization can still benefit greatly from the lessons taught by Gary Schoeniger and other inspirational business leaders.

Note: this post originally appeared at www.GreatB2BMarketing.com 12-10-2015.