Monthly Archives: January 2009


I love collaboration – it’s a way of providing both personal gain and mutual benefit, which is another way of saying that it works and is sustainable. Here’s a great TED talk by Howard Rhengold on the topic – enjoy.

Information assymetry

In his excellent book The Undercover Economist, author Tim Harford discusses (among many other topics) the problem of information asymmetry, first identified by Nobel prize winner George Akerlof in 1970.

Information asymmetry
Information asymmetry is a market condition where the sellers of a certain good know more about the product than the buyers. Akerlof’s example was the second hand car market where sellers know the foibles of their cars but buyers cannot tell the good cars from the bad. Buyers therefore compensate for this uncertainty by offering a price lower than the sellers of good cars are prepared to accept, preventing the sellers of good cars from entering their car in the market at all. Ultimately the effect of information asymmetry is that the second hand car market becomes a market for lemons.

Solution #1 – Experts
Given the value to both sellers and buyers in reducing uncertainty, a variety of businesses have been created to solve the state of asymmetric information in a number of markets. Two examples might be pre-purchase vehicle inspections in the second hand car market and building & pest inspections in real estate. Of course, experts sometimes have different incentives to that of their clients – real estate agents, for instance, have little incentive to get the best price for their clients, instead looking for turn houses over as fast as possible. Freakonomics discusses one study which found that real estate agents kept their own houses on sale ten days longer (waiting for a better offer) than the average, getting 3% more than the price they obtain for you and I.

Solution # 2 – The internet
Of course, the most powerful antidote for information asymmetry has been the internet. Information is no longer controlled by the powers that be – it’s now democratised and readily searchable through Google. It’s also changed the speed at which information is available so that everyone gets it at the same time. Finally, a large number of comparison services have been created to deal specifically with this issue, be it a restaurant guide or customer reviews on Amazon & eBay.

Solution #3 – Other signals of quality
Where information asymmetry persists in spite of experts and the internet, Tim Harford explains that consumers look to other signals for quality that have nothing to do with the product itself. A car dealer with a marble-floored showroom would therefore be viewed more favourably than someone who operates from their garage. This is because their larger investment suggests they are more interested in protecting that investment than doing a dodgy deal and leaving town. I see two problems with this, however, where significant financial investment is involved:

a) Apparent risk only
Investing in non-product quality signals speaks to apparent risk rather than real risk – the marble flooring makes no actual difference to the quality of the BMW parked on it. Being an inefficient solution it may worsen the problem – sellers may seek to recover their investment by massively inflating prices, selling lower cost goods or hitting you with hidden costs.

b) The past, not the future
The second problem with this high-investment solution (such as a showroom) is that it’s an indication of a previous commitment, rather than a future commitment. That prior commitment might also involve high levels of debt, requiring solid-looking businesses to close without warning.

What does all this mean? It’s hard to get people to trust vendors in faulty markets. For you and I who want to sell things, this is a serious problem. In a future post I’ll discuss an inexpensive solution that any business can employ.

Steve Jobs speaks out

The online excerpts from Fortune’s interview with Apple CEO Steve Jobs are well worth reading.

Apple is a mature company who has retained its innovative outlook, passion and hunger. They know what they do best and stick to that. If they don’t love a potential product, it doesn’t get made. If they’re making a product but it’s not quite right yet, they don’t ship it anyway – they stop the project and get it right. They’re experienced enough to anticipate what customers don’t yet know they want to create something that they can’t live without. They’re totally committed to extraordinary design, stunning aesthetics, simplicity and usability. They didn’t plan to redefine the music industry with iTunes, but they did it so well that they did.

How could you not love Apple?

Do you want to build a universally-admired large company like Apple? Don’t make compromises at the start – how you begin & build your company is how you will end it.

What’s in it for me?

In the battle for Australian ice cream cone supremacy, Nestle and Streets are currently going head to head with expensive TVC campaigns, promoting their Drumstick and Cornetto respectively. Here are their commercials:

Watching the ads, it seems that Streets have a better handle on the ‘what’s in it for me?’ factor – their tagline of ‘no boring bits’ is a compelling difference between their cone and the competition. The axe-weilding maniac clearly demonstrates the difference – we don’t need to believe Streets, we can see the difference.

Nestle, by comparison, appear to be taking a social proof / nostalgia line, that Drumsticks have been part of the Australian summer experience since 1963. This might encourage us to get to the corner store to buy an ice cream, but standing at the fridge which ice cream will we choose? Maybe the one with ‘no boring bits’ rather than the one that was first made in ’63.

Ensure your products have a compelling advantage over the competition (one that consumers will find compelling, not you) and in every instance of your customer-facing material, ensure that it passes the ‘what’s in it for me?’ test – clearly communicate that compelling advantage. If you don’t, you’re wasting your precious cash, your time and another opportunity to turn consumers into customers.

The Brand Gap

The Brand Gap by Marty Neumeier is one of my favourite business books for three reasons:

  • it explains clearly what a brand is (trust),
  • it provides a high level view of how to build a brand, and
  • you can read it and understand all of the concepts in 90 minutes.

This slide presentation tells you all you need to know about the book – the book uses the same illustrations but with additional text that’s worth the investment.

{slideshare}[slideshare id=28886&doc=the-brand-gap-14630&w=425]{/slideshare}

The Long Tail, 1,000 True Fans & Idea Generation

Wired magazine editor Chris Anderson wrote about The Long Tail in 2004. The idea is that publishing and distribution used to be controlled by the powerful elite who could invest in expensive content creation, owned the distribution channels and were always looking for the next big hit. Now, however, content creation and distribution have been democratised by technology and the internet respectively, allowing for new content producers to make niche content. Content in increasingly narrow niches makes increasingly smaller (but not zero) sales, hence the shape of the long tail. Corporately, however, the long tail accounts for a significant proportion of sales and it’s the aggregators – Amazon, iTunes, etc – who are cleaning up.

Kevin Kelly (the founding editor of Wired magazine) wrote a recent article (found by Seth) on the long tail and how it’s great for the aggregators, fabulous for consumers but not so good for niche artists who are selling a few albums a week, say, out on the long tail. Kevin has a brilliant solution – to create 1,000 True Fans. True Fans are people who wait with baited breath for the next album / exhibition / book and attend every show or book signing. 1,000 is the number that an artist probably needs to survive, and it’s an achievable number to create. With this new framework an artist can take heart – they don’t need to convert the world nor do they need to be lost in the long tail. They can focus on creating 1,000 fans.

This works in business too, of course. You don’t need to change the world, you just need to create those 10, 100, 1,000 or 10,000 customers (depending on the value of your sales) who love absolutely everything about who you are, what you do and keep coming back for more. This is a great encouragement to small business owners who are rightly concerned about their message being lost in the noise of mainstream media and advertising. You don’t have to go to the millions, you just have to build your fan base and have ongoing, direct conversations with them. Do read & digest Kevin’s article for inspiration.

Kevin’s solution reminded me of a useful book by innovation consultant Ken Hudson, called The Idea Generator. This book lives in my laptop bag, ready for when I need inspiration solving a problem. It contains 60 tools to:

  • solve problems in a more powerful way,
  • create new growth opportunities,
  • immediately improve your performance,
  • enhance your teams performance,
  • help you sell with more impact, and
  • deliver breakthrough leadership results.

The premise of the book is that we often come up with the same solutions because we look at the same problem through the same lens. By changing our lens (how we view a problem) and/or looking at a different problem (eg. instead of ‘how can we increase customer satisfaction?’ ask ‘how can we make people more passionate about our brand?’, say), we can come up with new solutions. And by looking at multiple problems through multiple lenses we can come up with multiple solutions. The 60 tools are methods of changing lens or changing the problem to suit different situations.

Kevin’s solution is consistent with the third tool in The Idea Generator – Find new measurements. This tool advises that we create new, different measurements and solve the problem in the light of these. For an artist, the conventional method of measuring success might be ranking in the music charts or radio airplay. Kevin points out that this is unnecessary – the new measurements artists (and business owners) should focus on the number of fans they have who consistently buying their products. With this new measurement, artists (and you) can now find solutions to do just that – build your fan base. Good luck.


Storytelling is a method of creating an emotional connection between you and consumers, one that bypasses the filters that protect them from the noise and clutter of modern life. It works because it replicates how friends communicate – through stories rather than the transfer of facts and figures.

Consider Honda, who wanted to convey their commitment to and success in achieving their impossible dreams. They could have tried listing their achievements or spouting figures but they created this masterpiece instead:

You ‘ve just willingly participated in a Honda history lesson, spanning 50 years and highlighting 12 of their most significant vehicles and motor sport achievements. Honda paid you to educate yourself about their passion & products by offering Andy Williams ‘ compelling narrative (the song), the filmic visuals of stunning Kiwi scenery and allowing you to vicariously enjoy the character’s Honda-derived pleasure.

Here’s the current Australian campaign for Nestle Diet yogurt:

Nestle have reinforced their ‘No unexpected calories’ tagline for Diet yogurt by using the familiar metaphors of a courier & female friends conversing, playfully but directly attacking other ‘light ‘ snacks, reminding women of their thighs and showing Kate ‘s confidence & blissful ignorance in eating Diet yogurt. You were paid to educate yourself on Diet yogurt with humour that ‘s still funny after multiple viewings.

Renault have a different take on vehicle safety:

You ‘ve just been shown multiple full frontal, offset frontal and side impact collisions for eight models in their range and seen each of the passenger safety cells remain intact. Normal crash testing images are of manikins hitting concrete barriers in strangely painted cars and are as interesting as watching paint dry. By using the metaphor of a ballet, simple but beautiful visuals, playful music and a large dose of the unexpected (how many car ads have you seen where the cars are crashed?) you were pleased to educate yourself that Renault have the safest car range ever, with 8 models achieving a 5 star NCAP rating.

Then there ‘s Jim Beam (small town nostalgia), Apple (versus PC), Mainland cheese (farmers who take life at a gentle pace), Bud Light (male rituals) – the list goes on and on.

Of course, you don ‘t need to invest in an expensive television commercial to tell stories. Where possible you should tell your story – one that is truthful to you & your products and is meaningful to your target audience – consistently in every customer-facing interaction.


I love Hugh McLeod ‘s musings on how to be creative – I come back to it every few months to check my sanity. Rather than point out my favourite sections, I recommend you find fifteen minutes and read it all in one sitting.

On creativity and education, this TED talk by Sir Ken Robinson struck a deep chord with me. Again I recommend that you find twenty minutes to view it in full, but if pressed for time watch at least these sections:

5:30 – 6:30? Creativity is the willingness to make mistakes
11:15 ->? How our education system discourages creativity
15:00 ->? Epiphanies – how Gillian Lynne discovered her talent.

I can very much relate to Gillian’s story. Not in the sense of claiming to have a world-class talent hidden within me (here ‘s hoping), but in the sense of being a non-standard pupil & employee who has from time to time provided unwelcome challenges to lecturers, former employers and family members.

Over the last few years I’ve worked most of it out, aided significantly by the Myers-Briggs framework (I’m an ENTP). One of my key abilities is to connect disparate ideas to form new ideas or solutions, and the requisite input to this is new ideas. Give me new information, ideas, concepts, situations & challenges and I will enthusiastically absorb this information for instant reuse in new situations. I do this more rapidly and comprehensively than anyone I know.

Put me, however, in a mundane environment and my ability to connect ideas will transport my mind elsewhere, leading to intense frustration, failure to complete mundane tasks and subsequent complications for myself and others relying upon me. I cope less well with mundane environments than anyone I know.

Armed with this knowledge I now know:

  • what types of projects light my fire,
  • which situations to avoid or work around, and
  • to ignore well-intentioned but misinformed advice to persist in mundane environments.

Perhaps Gillian’s story resonates with you as well – I encourage you to overcome the weight of others’ expectations to learn what truly drives your passion. You won’t regret it.

Complexity, friend and foe

In business startup, complexity is your friend. The harder it is to start your business, the less likely a competitor can follow in your footsteps. Embrace and welcome it, provided that you have the competency, resources and support to push through it. It’s the dip that makes your venture valuable.

Once your business is up and running, complexity is your foe. A complex business model, website or sales process will confuse, dissuade or frustrate potential customers and limit your plans to change the world. Destroy it. To this end I recommend a great speech by Bill Gates on never surrendering to complexity, courtesy of Presentation Zen.


A few years ago, Dove started their campaign for real beauty. For Dove it was a point of differentiation but it was more than that – a core belief that a) the cosmetics industry negatively impacts women’s (and particularly young women’s) self-esteem and b) real beauty exists in all women. It’s been enormously successful for Dove, so successful that Nivea has recently started a poor imitation of the campaign.

Here are three examples of Dove’s campaign and the latest ad from Nivea. Firstly, Dove’s 70 second ‘Evolution’ film released virally a couple of years ago, showing how fake images of models really are: (email readers click through to view)

Secondly, Dove’s ‘True Colours’ ad – a clear statement of belief without selling any product at all:

Thirdly, an advertisement from Dove on their pro-age range of products, a brilliant counterpoint to the proliferation of anti-aging products on the market:

Finally, here’s Nivea’s lacklustre me-too campaign which is currently running on Australian commercial TV:

In his book BE Brands, author Simon Hammond explains how brands with core BElief foster a desire for BElonging from consumers. If the brand exhibits BEhaviour consistent with their BElief then they can expect amazing BEhaviour in response from their consumers. Dove has achieved this to a remarkable degree by sharing a clear and original BElief. Nivea will, however, need to come up with the own BELief and share it with much greater clarity than the advertisement above.

As for your business, your BElief can be simple and does not require the investment that Dove has devoted to theirs – it just has to be yours and not faked. Simon Hammond’s advice is to be who you are, to “start with your passion … follow your real spirit, align that with the real lives of consumers and see where you end up”.