Friday, December 14, 2007

The Secret – as Applied to Business

Stand back Oprah, I've got something to say......

Since I have spent the season speaking with investors and prospective entrepreneurs who ask about what we really do, I have had to boil it down to a few principles. We’re in the business of helping companies understand what makes their business plans works, what trends are going to drive the industry and occasionally, the true nature of being.

Savvy early stage investors know what I am talking about because they even have terms for this – “the secret sauce” or the “thumb on the scale” but like the concept of a tipping point, few of them have a way to really articulate this quality.

That’s really where the iBreakfast Entrepreneur Club and the bimonthly Innovator Evenings kick in.

One of the things we do is help people understand the critical element of their business. And that gets into another area that you don’t learn in business school. As a journalist I once covered Artificial Intelligence, and I know from the art of Knowledge Engineering, the interrogative process programmers use to create the rules driving the system, how you gather and order the intelligence. Generally it requires interviewing a domain expert and getting them to explain it in the form of rules of thumb. Often, these turn out to contain strangely mundane little secrets. There are famous storiees like the old Italian immigrant who ran Campbell’s soup tomato vats who had all kids of ways to figure out when the boiling was just so.

So I learned to become a great believer of “The Secret”, but not really in the Oprah way. She may have something though I don’t it believe it works in the way it is hyped. i.e. “learn this secret and everything happens.” But in a particular context where everything else has been prepared, a secret can make all the difference in the world.

It definitely happens in business and I believe it underlies many great businesses even though the secret is usually something quite mundane. It is really the context it makes all the difference. Agein, if you’ve read The Tipping Point you’ll know that big differences can take place from very small issues. Consider them the keystone in an otherwise unformed edifice. The question is how to find them, better yet, which is what we try to do, how do you predict what they will be?

Some of my Favorite Examples of Business “Secrets”

Starbucks – What Exactly are we Buying Here?
How do you get people to pay $4 for a $1 cup of coffee? Do you just make it better? But 4 times better? And how can you support one on just about every corner of the country? Maybe you need to look at the history of the Opium Wars where the British brought cheap opium from India for sale in China. Or just check with the local pot dealer…….of the local convenience store with cigarette ads at counter level. What Howard Schwartz learned in his incubation years as a coffee grinder was how to get more caffeine out of a bean. Starbucks sells the highest caffeine content coffee in the country and his customers, all lined up first thing in the morning, are caffeine addicts. Forget the arguments about taste, the real issue is when it comes to addictive products is whether or not it hits the spot. Starbucks does and it makes them the true successors to the tobacco cartel, the Cali Cartel, the rumrunners. They treat their staff well, they support the arts and if they weren’t so legal and downright acceptable they would probably support organizaed religion too.

For all I know, Schwartz got his ideas from Phillip Morris (remember, mundane secrets are fungible) who learned how to up the nicotine content in Marlboros through a combination of specially cultivated strains of tobacco and the addition of nice, fresh ammonia. He might have read David Ogilvy’s classic “Confessions of an Adman” where we learn the secret of how the young Ogilvy, as a cook, charmed an old dowager on a strict diet of one stewed apple a day by mashing up the content of two apples and shoving into the shell of one…… Or, maybe he just have stumbled upon it. But you can see how it worked - it took Americans a few years to get hooked……and then wham! My guess is that if anyone ever buys Starbucks it will be tobacco company……..or a drug company.


MacDonalds: Getting You Out in 20 Minutes.

The story goes that the founder came up with the combination of fast food and free diner seating in the army. The camaraderie of the cafeteria in wartime was deeply compelling and that became the basis of the MacDonald’s brothers fast food concept. Don’t just sell hamburgers, give people a nice place to sit down and eat ‘em. The problem was, how do you get these happy customers out of there in 20 minutes or less so that you could maintain the turnover necessary to reach profitability. How do you get rid of seat-hoggers? The obvious answer is - uncomfortable seats. But that wouldn’t look good besides, you still want the initial experience to be comforting, you just don’t want it to last that long. So they came up with molded seats that forced you to sit in such away that your spine would tell you to leave in less than 20 minutes. Even my chiropractor laughs at that one as he forces me out of his office in 20 minutes…….

The funny part is that when the fast food co.’s first started taking over midtown Manhattan with 24 hour free seating in a nice warm place - the winter tramp community paid attention. Turns out they understood the principles of ergonomic engineering too and to get around the forced spinal subluxation, they simply piled up freely available old newspapers in a way that voided the back-aggravation, enabling them to stay all night and long enough into the morning to enjoy a nice Egg MacMuffin. Is it any wonder then, that one of the biggest franchise holders in midtown is a former cop. What are the odds he came up with a secret of his own for getting rid of the bums? Just wondering……

The Secret in Sports

No question, sports has its secrets too. Not the chemical ones, although there clearly is a huge market for that. (And of course, no ever guessed those bulked up hitters were doing anything other than Exercise Made Simple or 5 Minute Abs.) I am talking about all kinds of subtle ones that again, only really work in the context of a particular talent. Everyone knows Wayne Gretzky’s mantra, “don’t be where the ball, be where it’s going to be.” But that’s easier said than done. Did Gretzky major in calculus or did he just have a sixth sense? I’m guessing he would do well in options trading too.

We know that Muhammed Ali won through talent and mind games. But did you know that Michael Jordan’s genius also had something to do with a special skill he mastered. According to a recent TV interview, he showed how we able to imperceptibly tug or push the limbs of his opponents so that he could manipulate them and amazingly, always seem to get the ball away form them. Why did it have to be imperceptible? Because its illegal. But what the camera couldn’t see, the refs couldn’t either. Now that Michael is retired, he is happy to talk about it….Turns out, talent has tricks too……

I would argue that in each case, these geniuses, especially the ones giving the $1500 motivation courses, are leaving out this critical element. For example, Tony Robbins wants to unleash the giant in you. But it helps to be giant in the first place and you don’t get that from seminars. Donald Trump wants to make you rich, but no book of his can help you grow up with a father who taught you everything about the building industry, hand you off to all his contacts and then leave you a few hundred million to get you on your way. By the way, I consider the fatherly training and credibility-building more valuable than the cash which he would have lost anyway, if it hadn’t been for the former.

In another context, lots of people want to be the next Bill Gates but aside from his privileged background (his parents got him a gig debugging minicomputers while still in high school), it helps that he has something akin to a photographic memory.

The secrets are really something specific to a certain person a certain management or even a certain time and space. Our passion at the iBreakfast Entrepreneur is really to help people find their own. Usually, it encounters great resistance and denial of the sort…..”I already know….blah….blah…blah….” Sometimes they do. Usually not. Wish it were easier but when you come down to it, that is why we’ve been dong the iBreakfast for 10 long years……..
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