Summer Edition #5 - Learning from the basics

Summer Edition #5

Micro-niched

My wife Kate belongs to a Facebook group called Fitzroy Neighbourhood Network. Its 13,000+ members are a ripe — and large enough — market for a plethora of micro-niched businesses.

Kate loves peonies, and they’re expensive in Melbourne, so we were happy to have hand-delivered a generous bunch from a young woman — at half the price of the main street florist. We’ve also had a guy come by and cleanse our (admittedly feral) wheelie bin - that’s his thing.

Now what can we learn, strategically, from the businesses of Ms Peony, and Mr Wheelie-Bin? Three things strike me:

• Relevance: Each has a very clear problem they’re solving (e.g., expensive and variable-quality flowers)

• Smallness: Their economic model permits profitability at minimal scale (e.g., because they’re hyper-local, both businesses can avoid charging for travel)

• Intimacy: Their on-line presence conveys a relatable story about the vendor that’s appealing to customers (“Of course we want to encourage a nice young woman who’s making her way in the world — and, who’s practically a neighbour!”)

Now, you might think that all of these features only apply to these micro-niched businesses. But, think again — they relate equally well to businesses at all scales (from those with dozens of hundreds of staff, to multi-nationals).

Question: How would you apply relevance, smallness and intimacy at your scale of operations?

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Cost of doing business

In my early 20s, I was delighted to get a graduate job with Andersen Consulting, which was, back then, one of the ‘Big Eight’ management consulting firms (they collapsed spectacularly under ethical transgressions a few years later).

One perk was that they sent me to their US global headquarters for a month of ‘green bean’ training, where I met others like me from all corners of the globe. These included some junior consultants from Brazil, who told me something shocking.

They got paid once a month — and had to spend as much of their salary as soon as possible. Why? 1980s hyperinflation meant that their pay packet would be worth 30% less at month’s end. So, they all paid for rent, bills, car payments, groceries and gifts, within the first few days.

We’re not running 300% inflation like 80s Brazil but, twice during 2024, I’ve paused to consider whether I renew a service.

Apple increased my news subscription price by 25% in one hit. And, my CRM (KEAP PRO), increased theirs by 12%. I know from my local government clients that construction / build costs are also up compared to a year ago. And, in our supermarkets, you’ve possibly noticed that meat, bread and dairy products are leading an inflationary upsurge.

Now, there are plenty of businesses where variable input costs are part of the calculus of making money (think jet fuel for airlines, or interest rates for property developers). But, what about most businesses which assume far more static pricing, and now feel disrupted by price spikes?

The obvious solution is to increase pricing in line with input cost increases. But what about:

• Renegotiating (or re-procuring) long-standing supplier arrangements?

• Retaining existing pricing by removing features, or downsizing products?

• Evaluating labour costs, including reducing casualised or labour hire staff?

• Invest in technology to remove costs, especially labour?

• Reduce or consolidate borrowing costs (if you’re leveraged)?

If you’ve audited these five factors, where you could potentially reduce costs by 2 - 5% each, you’ve already countered likely inflationary effects. In fact, you’ve done more than 80% of organisations do. If you do so each year, you’ve done more than 95% of companies do.

Question: What conscious measures are you taking to counteract inflationary input costs?

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Backyard scientist

When my son, Jasper, was in primary school he told me: “I learn more from this guy in 10 minutes than in an entire term of science at school”. That got my attention — and ‘this guy’ was YouTuber Mark Rober. 

Rober is a former NASA and Apple engineer and inventor whose viral videos Jasper and I have watched now for years.

They’re on subjects as diverse as how to trick parcel thieves with an engineered contraption that sprays glitter on the miscreants, a Halloween costume which embeds iPads or iPhones into costumes making it appear as if you’re seeing a body’s internals, and beating escape rooms. Rober’s schtick is to wrap science up in what amounts to a prank.

Jasper’s (and my) favourite is where Rober, during COVID lockdown, wanted to bird watch in his backyard, but squirrels kept stealing his birdseed. So, he created an elaborate “squirrel obstacle course” which combined animal behaviourism, physics and electronics to provide persistent squirrels with a snack as a reward. I found it compelling (and have watched it multiple times). He’s now made subsequent versions, and I can see why these squirrel videos have, between them, been viewed over 250 million times (!).

But HOW does this work? What exactly does Rober do?

I’ll share just one of his techniques, which he calls, “Concentrated Nuggets of Coolness”. He agonises over his scripts, shortening assiduously from 5 sentences to 4. Then 3. Then 3 with fewer words. He’s always finding the most economical way to grab attention. Because he knows that, like you reading this newsletter, there are always at least a dozen other things dragging you away, so he has to keep your attention.

Question: What can you communicate, unconventionally, in a rapid, enjoyable way?

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Before you do get dragged away, please commit 0.32 seconds by clicking the ‘heart’ below. I don’t want (or need) 250 million people reading this, but I do like to know that a few thousand people are enjoying what’s here.

During this coming week, do pay attention to the insights that basic processes reveal all around you, and how you can apply them to success in your organisation.

See you next Friday,

Andrew