How does one create an organization that doesn’t waste its talent?Read More
Filtering by Category: Strategy
The only way to find time for Type 3 work is to make it, and then fight like hell to protect it.Read More
The priority is special because it’s the first one.Read More
A management parable, from my breakfast table to yours.
There are four general strategies to make a company more profitable.Read More
I'm proud to present an independent study project I completed at Ross which translates Allan Afuah's business model framework so that it can be used by public-sector executives.Read More
In business and innovation, Teece's model helps you determine who will profit from an innovation. After learning about it, I got to thinking if that model - or a similar concept - could be translated to cities and regions. So I came back with a question - how do cities know if they will reap the benefits of an economic growth initiative? Here's a model to help answer that question. It's unsubstantiated by data, but it's an intuition that I'd love your feedback on.
To determine if a city or region will benefit from an economic growth initiative, I propose mapping the initiatives along two axes: the type of growth the initiative intends to create and the source of new revenues created.
As it happens, the quadrant look curiously similar to the Michigan Model of Leadership.
- Type of Growth - is the growth created because of a creating a new product or services that meets an unmet market need? Or, is it a product or service that tries to steal market share from a competitor?
- Source of New Revenues - are the incremental revenues created generated from customers in the city? Or, are those revenues collected from people from another locality? In other words, are the revenues exports or not?
USING THE MODEL
Using the model is simple. Note that the "city" is a placeholder term for the economic subdivision being analyzed. You could replace "city" with state or region.
Each quadrant has a distinct flavor. I've included notes in each quadrant to help economic growth teams determine the conditions under which they can reap the benefits from initiatives in each quadrant.
- Generate a list of all economic growth initiative for the city
- Map them on to the model. Initiatives that are 100% new products/services with cash 100% generated from non-local customers would go in the top right hand corner. And so on.
- Each quadrant has a distinct flavor. Look at where the distribution of all initiatives across the framework lie. Is it balanced? Should it be balanced?
- Look at the quadrant each initiative is in. Are the conditions in that quadrant met? If so, the city may reap the benefits of growth. If not, their ability to reap the benefits of growth will be handicapped.
Does this model made sense? As an economic development professional, do you find it useful?
I read two articles about ambition, risk, and innovation this morning. I'd like to share these articles and the thoughts they inspired about business's role in society and my own moonshot goal. THE ARTICLES
"The golden quarter: Some of our greatest cultural and technological achievements took place between 1945 and 1971. Why has progress stalled?" - Why was the post WWII period to technologically groundbreaking and why hasn't the trend continued? This article explores why.
"Google's Larry Page: the most ambitious CEO in the universe" - This is a profile of Google CEO Larry Page (who's a Michigan Alum, by the way) his approach to management, and his aspirations for Google & humanity.
Both pieces are more than worth reading. And as I said before, they helped me get one step closer to crystallizing the "moonshot" everything I do works towards.
But it also helped me better articulate my point of view about business's role in society. I'd like to share that with you first.
BUSINESS SHOULD BE TRULY AMBITIOUS
I'm an MBA at the Ross School of Business, and the new Dean has articulated how Ross is the school that creates leaders that make a positive difference in the world. The implicit assumption there, from my perspective, is that business should make a positive difference in the world.
I don't disagree with this (very much) as an outcome. What I disagree with strongly is the framing, because it doesn't emphasize what's really important. This framing misses the deeper point of ambition.
What I see now is that business should be truly ambitious. What I mean by that is business should create products and services for customers that solve their most challenge and most valuable problems. It just so happens that the most ambitious things are the ones that make a positive difference in the world. So I think it's a subtle mistake to advocate for business's purpose to be making a positive difference in the world, what really matters is for business to be ambitious.
If you do that, making a positive difference in the world is sure to occur. Notice however, that the corollary (if you advocate for making a positive difference, ambition is sure to follow) is unappealing and untrue. Put another way, what's the point in making a positive difference if it's incremental and not ambitious?
Business shouldn't be about incrementally improving software or developing a slightly more differentiated laundry detergent. Business should do be doing things that are hard and profitable, not easy and profitable. Business should be doing ambitious things that are worthy of the sector's resources and its brightest minds.
Something that truly kills my heart a little bit is to see tremendously bright people join companies that put their talents toward banal purposes. If a mind is a terrible thing to waste, wasting a great mind on uninspired ends is a tragedy.
And that's what I learned, It doesn't matter if we mint business leaders who make a positive difference in the world if they aren't truly ambitious when selecting the problems they choose to solve.
As many of you know, I've had a number of qualms with business school. I think the root of my frustration is that at its core, it doesn't breed true ambition.
MY MOONSHOT: "MANAGEMENT AS FREEDOM"
I think a moonshot - a transformative goal that far exceeds the possibilities of the present day - is something everyone should have. These moonshots are the goals that matter so much to you, you don't care if you fail when trying to achieve them. It's something that you want to take risks to achieve and want to connect with others around.
Moonshots are goals that evolve and become more clear as time passes. Here's my latest understanding of my moonshot.
In the past 100 years or so, organizations and management have been about control. Management has tried to centralize, streamline, and bring consistency to the organizational world. The way organizations treated people was like interchangeable parts in a machine.
I don't believe that management should focus on maintaining control anymore. Management should be about freedom.
I want to rewrite the playbook on management - from its purpose to its strategies to its tactics - so that it focuses on freedom, not control. This means rethinking a host of things, like leader-follower relationships, collaboration, cross-sector partnership, metrics, technology, strategy, and others.
My moonshot is to fundamentally change the practice of management so that every organization in the world is rooted in freedom and not control.
WHAT DO YOU THINK?
- What's your moonshot?
- Am I full of it? Is business truly ambitious?
When deciding on a business strategy, it's important to choose the right target and frame challenges correctly. In fantasy football, for example, you can frame the objective when drafting in one of two ways (note that I'm thinking of a standard draft, not an auction draft): 1. Draft the players who will score the most points 2. Draft the team that will score the most points, against my opponent, week after week
Here's how the drafting strategy changes based on how you frame the objective -
If your objective is draft the players who score the most points, you:
- Draft stars because they score a lot of points
- Draft players who are anchors of their respective teams because they are perceived to score more points
- Draft sleepers because you want to get more value for your pick (and appear to be smarter than your friends)
- Draft kickers and defenses in late rounds because they usually score low amounts of points
My objective is to draft a team which scores the most points, against my opponent, week after week. So, this is how I draft my team:
- Draft stars because they score a lot of points (duh)
- Draft players on teams that are expected to win games (this reduces variability because if the team is better, they will likely score more points, even if they aren't at the top of the depth chart of their individual team). If you've ever drafted an offensive starter on the Oakland Raiders you know where I'm coming from
- Avoid players who have had major injuries or off-the-field issues (Ray Rice, AP, anyone?)
- Draft players in contract years (because they are more motivated to do well)
- Spread out bye weeks (so you can prevent having two stars out of your lineup in the same week)
- Draft defenses and kickers early (their expected value is higher) You play defenses and kickers 16 out of 17 weeks so they end up being higher contributors than a bench player you only play during bye-weeks. Also, there's less depth at those positions so drafting late gets you lemons
- When trying to draft sleepers, determine how the team has improved in the offseason to determine whether the player is now surrounded by better teammates
I've had fairly good results once adopting this strategy, but my fantasy football strategy is beside the point. The point is, how you frame your objective dramatically affects your business strategy. So choose the right one.
I have been, and likely always will be interested and motivated to improve how institutions work. The three biggest institutions of our time that need to be reimagined are healthcare, education, and government. I don't think this is because healthcare, education, or government are inherently flawed or because the good folks working in those realms are foolish or stupid. Rather, I think those three areas are the last institutions to be reformed since the beginning of the information age because they're the biggest, gnarliest, and most difficult to change.
If you claim to be interested in "systemic change" and you're not working in healthcare, education, or government I'd seriously question your understanding of modern-day problems or your courage. These domains are where all the action is*.
* - It's worth noting that all these domains are inextricably linked to cities.
If you're working for a company, chances are that your company falls into one of two categories: Business-to-Business (B2B) or Business-to-Consumer (B2C). In the past, the way this normally has worked is similar to the auto industry. The Original Equipment Manufacturers (OEMs) - think GM, Ford, and Toyota - are the B2C companies selling their product to end consumers. These companies do the final assembly of the car and build consumer brands. The OEMs are supplied by several tiers of B2B companies - businesses that serve other businesses.
Generally speaking, Tier 1 suppliers are big and the companies who supply the Tier 1 suppliers (these are called "Tier 2" suppliers) are smaller than Tier 1 suppliers. Tier 2 companies are supplied by Tier 3 suppliers who are even smaller then them. You can think of it this way: the OEMs are the biggest fish and they use stuff supplied by smaller fish, who are supplied by smaller fish, and so on. That's just the way it was back then.
In today's sort of world, it's hard to go out on your own (and say, be an independent car maker) because when you're a big fish you have the benefits of scale. When you're a little guy you have to do all your own hiring, all your own sourcing, all your own marketing, and so on. In a nutshell, when you're a little fish, it's hard to compete because you can't spread fixed costs out across a big, big business.
This is all changing, now, though. It's becoming easier and easier to make it as a "little fish", if you're in an industry with a long tail.
Serving the Long Tail
There are lots of industries that have a handful of big companies and thousands of small players. In this sort of industry, the thousands of little players are called the "long tail." As I've mentioned above, the companies in the long tail don't have the benefit of scale to spread out fixed costs. In theory, someone could make a ton of money by providing a service to all the little fish in a long tail industry. This opportunity has existed for centuries.
This is hard however, because it's not trivial and is often expensive to serve thousands of customers simultaneously if you're a small company. Coordination costs make it difficult to serve the long tail.
But all that is changing. Digital technology is making it possible to dramatically cut coordination costs. Thus, it is now more possible than ever to serve the long tail. Lots of companies are now serving the long tail, here are a few examples:
Kickstarter - The market for creative goods (e.g., video games, movies, gadgets, etc.) are often dominated by big players. One obstacle to being an independent player in the creative goods market is the difficulty of finding funds and the difficulty of attracting a customer base. Kickstarter helps independent people making creative products do both.
Amazon Web Services - If you're a software developer, you need server space and computing power to run an app. This stuff, historically, was only accessible to big companies with deep pockets. Now, Amazon Web Services and other cloud storage and cloud computing providers make it affordable for independent developers and small software companies to get their prototypes off the ground.
Elance - Large companies gobble up talent and do many things in-house. It was hard to be a freelancer (whether it be in writing, publishing, marketing, consulting, etc.) because you couldn't find clients. Now, Elance is one of the many services that allows talented professionals to find clients, and avoid selling out to big firms (or even small ones). At the same time, small companies now have unprecedented access to skilled professionals, often for short-term jobs.
Castle - There are a few big property management companies. But most landlords aren't big, and there are LOTS of small property managers who own and manage real estate. The cool dudes at Castle are working on a product to serve these folks. Oh, and, even more awesome...they're Detroiters!
The Opportunity Of Serving The Long Tail
For a long time independent companies / freelancers have been woefully underserved, because the costs of serving can't sustain profitability. But now, because of digital technology, it's suddenly becoming possible. If you're a clever entrepreneur, one way to be very successful (and feel great because you get to serve an underserved market) is to do the following. I'm focusing on B2B companies in this post. But, the same logic could be applied to B2C companies. Also, if you're interested in serving underserved companies through business, check out the Base of the Pyramid Strategies work being done at the Ross School of Business. (I'm taking a class on this next term, I'm stoked).
Anyway, follow these steps:
- Find a market that has a few large players (because this indicates that there's money to be made there) but that is also highly fragmented by loads of small or independent players.
- Understand the needs of the independent players. How are they being underserved?
- Of the needs you've identified, pick one that can be addressed with a solution that mitigates coordination or other transaction costs. This is likely a cost that larger players can afford to do in-house and is solvable using digital technology*
- Build the product / service
- Take it to market
If you start thinking about it, you'll likely think of many, many, industries which have a long tail AND which have a long tail that can be served via digital technology. Let me know if you make it big.
* - If you're looking at a solution (like Kickstarter or Elance) you have to consider the needs of anyone interacting with the independent players. In the case of Kickstarter, for example, you can't just make sure the people making the creative projects are having their needs met, you also have to incorporate the needs of the crowd funders when building the solution.
One way to simplify business school, is to know that to succeed in business you have to do this. Seriously, this is all you've gotta do:
- Define who your customer is.
- Find out what they need.
- Imagine something that will fill your customer's need.
- Make it.
- Give it to them.
That's it, that's all you've gotta do. Of course, there's a lot of sophistication with how to make this happen.
The beauty of this 5 step process is that it's broadly applicable. You could apply it to lots of different organizations across sectors, whether it is a foundation, a family, a government, a neighborhood, a non-profit...anything. What I can't fathom is what Detroit needs. I have my own opinion on what Detroit needs, but I can't find anyone articulating it clearly across the city. In my observation, everyone is prescribing solutions and not understanding real needs. Here's what I mean:
Breaking it down for Detroit to succeed
- Define who your customer is. - This is easy, sort of, let's assume citizens of the City of Detroit.
- Find out what they need. - This is what I don't see being articulated. Do people need agency? Do they need to feel safe? Do they need distraction and entertainment? Do they need opportunity? What does Detroit need, really?
- Imagine something that will fill your customer's need. - Street Lights, No Blight, Public Transportation, Good Schools (notice that these are solutions, not descriptions of need.)
- Make it. - Self explanatory.
- Give it to them. - Self explanatory.
Here's why it matters. For every need that exists, there's hundreds of ways to solve that need. Take "bring light to darkness in your home" as an example of a need. You could solve that need with a fire, a lantern, a fluorescent light, an incandescent light, a flashlight, etc. People don't need lamps, they need light in dark places. There's a difference.
The problem is, when you don't define what someone needs really well, it's hard to give them a solution that really works for them. Providing solutions to problems is aided greatly by defining the right need. Solutions without real needs don't last and aren't useful.
So for real, if anyone has found good articulations of what Detroit needs (or what subgroups of Detroiters need) please point me to it. If nobody has found anything, we're in a bad spot because it means people are prescribing solutions without understanding needs. That leads to bad solutions or solutions that work only because of luck.
In the previous post of this series, I proposed that we don’t have a sound theoretical framework for understanding forms of non-economic value creation. Because we don’t have a theoretical framework for understanding non-economic value (e.g., social value) we don’t have tools to measure and assess our efforts to create it. In turn, we aren’t very good at addressing social problems. As I mentioned in the post, Business Must Do Good, social value is all about happiness. So any framework for understanding social value must aim to explain happiness, which I’ll call “welfare” in this post. For those of you who are economists, you can think of welfare as an analog for consumer and producer surplus.
For now, I’ll go straight into a work-in-progress framework for understanding social value (i.e., welfare), leaving out much of the theoretical underpinnings. I’ll save those for a subsequent post. Needless to say, it’s a little complicated. There are several types of social value (e.g., physical health, intellectual engagement, social engagement, emotional health, etc.). For the sake of introducing the framework, I’ll focus on physical health.
A Framework for Social Value Creation
What’s different about social value, is that it’s not always best to maximizing or minimizing a certain quantity – like some abstract measure of physical health, like resting heart rate or weight. For social value, it’s instead important to be in balance between extremes. Moreover, it’s not always about absolutely quantities either, sometimes welfare is derived from comparisons between an individual’s level of welfare versus another person, versus their aspiration, or versus their perception of their level of welfare.
These observations are the basis of this framework, which is how I propose we conceptualize social value. I will explain each part of it in turn:
Overview: This is a horizontal bar and not a wedge, for a reason. I don’t thin social value should be measured implying more is better than less, it’s all about meeting expectation, being in balance, and having equity between people…because that’s what makes us happy. This bar is a simple way of plotting out certain types of information in a cohesive way, and what is important to interpret is how these quantities of welfare relate to each other.
The bar as a whole is a range of possible levels of welfare for some value driver, in the realm of physical health maybe it’s something like resting heart rate, blood pressure, weight, or some quotient between the three.
Points of indifference: I have plotted upper limits and lower limits of indifference. By this I imply there are values where it doesn’t matter so much if one has more or less welfare. Take resting heart rate or weight for example, if you’re in a certain range you’re considered healthy and it doesn’t really matter if you’re within that range. When you fall outside that range, it’s not a great thing.
For individuals, the interpretation tactic here would be to see whether people fall inside our outside this range of indifference. For societies, you could evaluate – in aggregate – what the distribution of people across the value driver is…say in a histogram. You could also look at whether the range between the indifference points is increasing or decreasing.
Desired Point, Actual Point, and Perceived Point: Think of this using the example of weight. On this horizontal bar, different people would have different desires of where they would want to be, where they actually are, and where they perceive they are. Plotting these points would provide insights on whether people are actually happy because you could evaluate the gaps between these points.
For individuals the interpretation tactic would be to look at the gaps between desired points, actual points, and perceived points because they would give some indication on how happy that person is (because a lot of what makes us happy is whether we are getting what we desire. For societies, you could aggregate and look at centrality and variances measures for these values and the distances between them.
Ability and Perceived Ability to Change Actual Point (Changeability Coefficients): A final component that affects our happiness is whether or not we have the agency to change our actual life outcomes. Again, think of weight as an example – if we think we can’t change our weight or actually can’t change our weight and we want to, it make us unhappy.
You’d have to measure this as some sort of coefficient or rate and represent it in some way (explicitly or maybe changing the color of the graph to represent different coefficients). You could measure this at the individual or aggregate level.
After explaining this framework, I know there are at least two open questions. I will attempt to slowly build on this model by addressing them in future posts. They are:
- “Weight and blood pressure – the examples you gave – are only two of many, many, things that affect happiness and social value…what types of things would you measure?”
- “Let’s say you could determine different types of things to measure. How would you actually collect and analyze the data?”
I also invite you to challenge my ideas a lot. This is a huge idea and I want to work collaboratively to get it right. If we, together, do get this idea right…it sincerely and wholeheartedly believe it could provide the foundation for groundbreaking work.
Once I’m able to articulate the complexities of social value, I’ll move on to Civic Value and Spiritual Value.
You Can’t Manage What You Can’t Assess (And Measure) A few months ago I introduced the notion that Business Must Do Good. Urban Innovation Exchange even picked up the post. In that post I proposed that there are four kinds of value that can be created: economic, social, civic, and spiritual.
These types of value creation are inevitable in the organizational world. As businesses, governments, NGOs, religious organizations, and others consume resources to operate, they will inevitable create and destroy value. Some of that value will be in each of the four realms I have described: economic, social, civic, and spiritual.
We can’t manage value creation in each of these realms unless we assess them. Without some form of assessment, categorization, and measurement we will not be able to proactively take steps to create or destroy value in each of these realms. As a result, even though me may want to create social, civic, or spiritual value, we won’t be able to intentionally.
In short – you can’t manage what you can’t assess (and measure). And by that I don’t mean that we have to measure social, civic, or spiritual value and convert it into a dollar value. In fact, I think that’s a foolish exercise that can’t be done. This idea is so important (and so misunderstood), I’ll focus on the relationship between economic and social value in a subsequent post.
Since we want to manage (and foster) the creation of social, civic, and spiritual value, it’s absolutely essential for us to assess and understand it. This is to say that we need to measure value.
Many have failed in attempting to assess non-economic value. Now, I’d like to present a new approach.
Better Approaching the Assessment of Non-Economic Value
We have some really good tools for understanding economic value. If you take an introductory strategy class in business school, you’ll quickly learn about the wedge as a framework for understanding value.
In short, economic value is the difference between how much a consumer is willing to pay for something minus its cost. Here’s a visual explanation, it’s called the “wedge”:
Everything in business tries to affect these parts of the wedge to create more value. Because creating (and capturing) value is the goal, there are all sorts of things to measuring each aspect of this diagram, people study this stuff like crazy – whether it’s how to optimizing pricing to figuring out how to accurately define how much a customer is willing to pay, and more, not to mention oodles of ways to measure costs.
The point is this: because managers measure willingness to pay, price, and cost – and study it like crazy – they are able to analyze what’s preventing them from creating value and change something to create more value. The tools of business require measurement to improve performance. Business tools, it turns out, are derived from this “wedge” because it’s a simple framework for defining economic value.
The Wedge Doesn’t Work For Non-Economic Value
The wedge, unfortunately, doesn’t translate well to non-economic value. Happiness (the aim of social value) doesn’t have traditional "costs" and it’s really hard to measure happiness in terms of dollars, nor does it have “prices” in the same way as economic value.
I propose that this is why we're swimming around aimlessly when it comes to measuring non-economic value: we don’t have a simple way of understanding what social value is. We need a novel representation of social value – like the wedge – except for social, civic, and spiritual value. Once we have those, we can build more sophisticated tools to understand and measure non-economic forms of value.
For the past few months, I’ve been questioning, tinkering, and exploring how to develop a framework for non-economic forms of value. I started with social value. Read the next post in this series to discover and provide feedback on what I’m coming up with.
In Detroit, we celebrate entrepreneurs - whether they be social, civic, or for-profit entrepreneurs - and rightly so. Entrepreneurs create new technologies and possibilities in the markets they attempt to serve and disrupt. What is also true, however, is that entrepreneurs are scrappy. Their resources are often limited, so it makes sense that successful entrepreneurs seem to have vision, ingenuity, creativity, drive, and a willingness to take risk - without these things, entrepreneurs would have no edge over incumbents because they certainly have less resources. Entrepreneurs make do and ultimately succeed with less resources than their corporate counterparts. In my mind, this is an oxymoron. Why are entrepreneurs the ones who change industries and social problems, even though they usually have less talent, money, or other resources?
The most obvious explanation is that entrepreneurs can work without the confining attributes of large, political, risk-averse organizations. Entrepreneurs don't have to cut through red tape like those in corporations do. Because they're freed from the confines of traditional organizations they have high "ROR" - or "return on resources." By this I mean, they have a lot of results, given the limited about of resources to which they have access.
But, imagine the value that would be created if the ROR of organizations with large amounts of resources were higher? A 10% ROR for a $1B company is much higher than that of a $1M company.
What's needed to accomplish an increasing ROR in large organizations is not entrepreneurs, but intrapreneurs. Intrapreneurship is not a well definied concept within society...yet. Here's a working definition:
A person within a large corporation who takes direct responsibility for turning an idea into a profitable finished product through assertive risk-taking and innovation.
These intrapreneurs might create new products or services to generate increased profits within a business. Or maybe an intrapreneur builds a new idea which increases the social impact of the organization. Maybe the intrapreneur changes the way a company works so that it's a happier, healthier, or more effective organization.
Much like the way countries can't always export their way out of recession, I don't think Detroit will become a more vibrant city if we only create entrepreneurs. Entrepreneurship can't wholly replace the city's existing employment opportunities and industries except in decades, maybe. Entrepreneurship takes too long and is very risky, to name a few reasons. More than that, we have a tremendous amount of talent and resources in our local companies. To let those resources atrophy and become obsolete would be a waste and lost opportunity.
Imagine: Detroit could be a hub of private sector and local government intraprenurship and lead the nation in such efforts. We have institutions, companies, and industries ripe for a fresh approach. We have a dire need to adapt to changing economic, social, and civic realities. We also have a history of tenacious work ethic and ingenuity.
Detroit could be home to the world's best intrapreneurs and we would be better for it.
I want to intern in Detroit this summer and I’m extremely interested in things like Consumer Insights, New Product Development, Future Trends Analysis, and Strategic Planning. Basically, I like building and launching new things. Seeing as how working in Auto is the likeliest of these routes (though not exclusively), I figured I’d see if I could actually come up with visionary ideas about the automotive industry. This post is the third installment in a series I hope to keep with over the next few months. In it I will try to empathize with different customer segments and think of new products or services that would serve them in fresh ways. If you think my ideas are legit, I’d appreciate your help in finding a sweet gig for the summer. If you think my ideas are far from legit, I’d appreciate your feedback.
One of the reasons I find the automotive industry very unique is because of how cars are sold. Think about it, how many products in the world have a named career path? In auto, you can be a car salesman, for almost any other product you're known just as a "salesman", except maybe for insurance. I think that's a testament to how special automobiles are in our culture and the uniqueness of automobiles as a product.
Because sales are so important to the industry, and because dealers don't seem to have changed radically in the past few decades, I figured I'd try to reimagine what dealerships might be in the future. Because dealers are a common link between many different types of customers, I'll provide a short description of every kind of dealer experience I can think of (at least in a first round of thinking). It would take much more market research to decide between this set of ideas.
Also, some motivation for this post: Apple has a unique retail experience for computers. If that's the case, it seems silly NOT to reimagine dealerships because the product (a car) is much more intricate than a computer and something people are as passionate about as Apple products.
Dealers as Auto Fan Clubs - for gearheads
There are some people who LOVE cars. These are the Top Gear-watching, horsepower-hoarding, car enthusiasts that see these products not as appliances but as works of art and human ingenuity. Why not interface with these people directly? I can see a dealership as being a community space for car lovers. Maybe you get a sneak peek at new models or features. Maybe you get to learn advanced auto-modding. Maybe you have a beer with other gearheads in your area. The dealership itself could be a place where people come together to share their love for automobiles. An added benefit to the OEM is that they can get valuable feedback from these super passionate, "extreme" users of their product.
Dealers as car support groups - for auto novices
Owning a car isn't easy. You have to maintain it, you have to understand how it works, and all this takes a lot of time. Why not have the dealership be an automobile concierge of sorts? Maybe if you have a dealer "membership", you pay the dealer a fixed fee (like a service package) and they take care of any repairs you need. You get an oil change and its free. They do basic maintenance on your car for you. They do all the taking care of the car, so the customer doesn't have to. Maybe they even teach you about how to take care of your car and give you opportunities to learn about car ownership. Think of it like getting an extended service contract or warranty for your vehicle and a car education to boot. The dealer would be a center of activity which helps people have a painless car ownership experience.
Dealers as urban convenience centers - for urban professionals
I used to work in the city and now I live in a smaller place. Something that was very annoying to me was always parking and doing minor repairs to my car - I could never find the time for something non-urgent. So, why not combine both these needs for urban consumers? The OEM would have a small parking lot, perhaps in a structure, and the driver would go to work...maybe by bus, subway, or bike share. While the driver is at work, maybe they can arrange to have basic car repair completed, maybe an oil change, new lights, a wash, tune up, tires, windshield wipers, etc. This would help with having a place to park, having repairs done, and having a hub to get people the "last mile" on their commute.
As far as this "last mile" stuff goes, I think that's a new business model in itself which I'll try to discuss in a future post as it is only peripherally relevant to dealerships.
Dealers as retail pop ups - for the spontaneous consumerist
You don't need much to sell a car. All you really need is, well, the car. So why not have a pop up on a busy street that has a small booth, but mostly just has models to test drive or inspect by passersby. That way it would keep "dealer" costs down and would still give potential buyers a chance check out cars as they walked by. This could be a fun and low-cost way for carmakers to give consumers exposure to their best products in an environment the consumer already is in...cities.
Dealers as classrooms - for the next generation of car owners, car dreamers, and car makers
Maybe car dealerships can be agents of social good, too. There are lots of kids that probably like learning physics, engineering, design, and similar things. With a curriculum built up for wide use, maybe car dealership could be an experiential learning environment for students across the country. After school students could go to the dealership and maybe a mechanic does a lesson with you. Maybe they bring in speakers who work in automotive engineering or design for sessions with parents and kids together. The dealership is a space that's not always 100% utilized that oozes engineering and design. Why not get other, younger people, interested as well?
Overall, I think dealers could go in many directions. But to do that, we'd have to think of dealers as more than "a place where cars are sold." I think we can, and should. As a bit of motivation / business case discussion - having an ongoing, positive, touchpoint with consumers is probably good for business. Once I leave the lot, I hate going to dealerships and mechanics. As a comparison, I love going to the Apple Store (or REI, for that matter) and kind of enjoy spending money there.
- Increased Market Share = More Programs
- More Profits = More Impact
More programs doesn't mean more impact, just as more market share doesn't mean more profits. Not-so-good Managers in both sectors don't understand this fully. Increasing market share or programs makes you look like a better manager / executive, but it doesn't mean you are a better manager / executive.
The anecdotal difference, I think, is that founders in the private sector are crazy about profits whereas founders in the social sector seem more likely to be interested in their "market share" than their private sector peers.
Basically (and I'm being really basic) the CSD industry operates on a franchised bottling model. What we consider to be the company, let's just go with Coke, makes syrup which it then sells to bottlers. This "mothership" company also puts in a lot of marketing effort and deals with big national contracts. The bottlers add in carbonated water to the syrup sold by the mothership to make a finished product. The bottlers then sell and distribute the bottles within the territory they have exclusive rights for.
There's a lot of nuance, but this is basically it. There are a few other interesting facts about the CSD companies:
- Recently (in the past few years / decades) Coke and Pepsi have been buying up bottlers, but operating them as separate companies
- The companies have been expanding into emerging markets
- US beverage consumption per person (all beverages) has been flat for the past forty years...it's about 185 gallons per person, per year
- Bottlers have high operating costs and relatively low margins
- Retail consolidation has given larger retailers a lot of leverage when negotiating prices with bottlers / mothership companies
- CSDs have been trying to expand into non-CSD beverage (e.g., bottled water, juices, sports drinks
- Cut costs by eliminating a few steps in the value chain and punting those costs to consumers themselves
- Providing a value-add to consumers (coke whenever you want it!)
- Provide consumers the opportunity to customize their product experience (maybe you have a cartridge for three types of soda and two types of sweetener)
- Provide a direct-to-customer product, which probably has a better way of linking marketing and promotion to consumers, so you can probably develop a better relationship with those customers for upsell opportunities for product bundling (which becomes really useful as you diversity product mix beyond beverages or even just beyond CSDs)
- Maybe you could even create retail locations and turn the product into a lifestyle brand with accessories and add-on opportunities for enterprising soda enthusiasts
The draft is located here: http://www.scribd.com/doc/132613580/On-Community
I'd love to hear your ideas and criticisms. In case you want something to orient you, these paragraphs explain the document:
What is this document?
These notes are an attempt to create an integrated point of view about community and community engagement, specifically in Detroit. The views are my own (i.e., not representative of my company), but these ideas have certainly been informed and shaped by many other people, books, articles, in addition to my own experiences and experiments.
I’ve tried to leave out forays into tangential topics as much as possible, for brevity’s sake (though I suppose this memo is by no means “brief”).
That being said, please let me know if additional detail in any of the areas would be interesting or helpful.