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December 7, 2018

What Is Blitzscaling And Why It Matters

Blitzscaling: The Lightning-Fast Path to Building Massively Valuable Companies is a book written by Reid Hoffman (LinkedIn Co-founder) and Chris Yeh.

At its core, the concept of Blitzscaling is about growing at a rate that is so much faster than your competitors that makes you feel uncomfortable. In short, Blitzscaling is prioritizing speed over efficiency in the face of uncertainty.

The name Blitzscaling comes from a World War II association with the term “blitzkrieg” or lightning war, where the attacker risks it all to either win or lose the battle.

Understanding Blitzscaling might means having a framework that can help your small organization to scale up or your large company to also benefit from a new and reinvigorated acceleration, which is critical to survival in a market that changes at a faster pace.

Let’s start from what’s Blitzscaling is not.

Blitzscaling is not growth hacking

Confusing Blitzscaling with growth hacking might be easy. There is a critical difference. Blitzscaling looks at massive growth which is also accompanied by high uncertainty. As pointed out by Reid Hoffman in an HBR interview:

Blitzscaling is what you do when you need to grow really, really quickly. It’s the science and art of rapidly building out a company to serve a large and usually global market, with the goal of becoming the first mover at scale.

Therefore three features of Blitzscaling are:

grow really quickly
usually at a global scale
gain the first mover of scale advantage

Thus, rather than a process of experimentation with the aim of testing what works and what doesn’t efficiently, Blitzscaling is about being all in!

Blitzscaling is not a magic formula

Rather than a magic formula that works in each scenario, Blitzscaling follows a framework that revolves around three key ingredients:

business model innovation
management innovation
growth strategy

Those three key ingredients of Blitzscaling.

What’s Blitzscaling then? There are a few key elements I think are worth highlighting.

Speed in the face of efficiency

This is a critical difference between scale up and Blitzscale. The former happens in a scenario of certainty and efficiency.

You allocated the resources necessary to test what works and what doesn’t with fewer assumptions as possible.

You have wider margins to test those things up to focus on what works. In a way instead, Blitzscaling is about survival.

Thus, max speed is everything, because if you don’t reach the scale, you might be dead any time soon. That is why efficiency takes a back seat.

Blitzscaling is an uncertain process

As Blitzscaling is an uncertain process, it might also require massive resources as it is a sort of calculated gamble where many mistakes will be made.

Capital will be a crucial element to recover from those mistakes. Making a mistake, also big ones are part of Blitzscaling. In short, those who take the risks of Blitzscaling are able to also amass the rewards by building multi-billion companies at global scale.

The reward is the first-scaler advantage

One key reward of Blitzscaling is the first-scaler advantage. The first who succeed at Blitzscaling take all or most of the market which gives them a lasting advantage hard to overcome.

What are the stages of Blitzscaling?

The main stages of Blitzscaling usually are:

Family-scale, up to 9 employees
Tribe, defined in 10s employees
Village in 100s of employees
City in 1000s of employees
Nation in 10,000s employees

While this is a simplification, it is crucial to understand that a company which is Blitzscaling will go through several stages, each of which has differentiating features. For instance, in some stages financing might be the most important aspect, while in others building the winning team is.

Blitzscaling: A must-read

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Blitzscaling is a must-read for anyone in the entrepreneurial world – I believe.

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Published on December 07, 2018 15:29

December 6, 2018

Top 16 Business Books To Read For 2019

Our world changes at a faster and faster pace.

What was true yesterday, not necessarily is going to be so tomorrow.

Yet, in this scenario, it is essential to be grounded in the real world and rather than rely on too many things to know, one way to survive and thrive is to be aware of a set of heuristics.

In short, knowing the heuristics is a way to avoid to get lost in the plethora of information, theories, and news that every day keep us distracted from real issues in our life, family and business.

To thrive in this scenario, you need an internal compass that can guide you through the business world so that you will never lose your path again.

You can build that internal compass by implementing physical and mental habits that will make you mentally stable. One way to shape this internal compass is by reading good stuff.

Although it might always seem right to read, selecting what your read is critical. Just like on a diet you want to ingest qualify food when it comes to reading you want to feed your mind with ideas and insights that will empower you and create a better version of yourself as person and businessman.

For such reason, I am going to suggest fifteen business books that will deepen your understanding of the business world. Although this is a list for 2019, do not expect to see the newest books on the market. Often I believe the best books are the ones that survived to the test of time.

Also, this is a list, but it is not meant to be read as a ranking. Each of those books will shape your understanding of the entrepreneurial and business world in a way that is not possible to rank.

Blitzscaling

The lessons of blitzscaling can be adapted to help build great companies in nearly any ecosystem by Reid Hoffman, Blitzscaling: The Lightning-Fast Path to Building Massively Valuable Companies

In a business world that has become very competitive, thanks also to the digital age, it becomes critical to develop a new mindset and framework that goes beyond the conventional business thinking, Blitzscaling: The Lightning-Fast Path to Building Massively Valuable Companies is a book written by Reid Hoffman (LinkedIn Co-founder) and Chris Yeh, is the perfect book for that.

At its core, Blitzscaling is a process of massive growth in an uncertain environment. It shows you the path toward building multi-billion dollar companies but also how to think in a more unconventional way. At the same time, Blitzscaling suggests an interesting perspective on how to look at business model innovation as a key ingredient for any organization success!

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Measure What Matters

We must realize—and act on the realization—that if we try to focus on everything, we focus on nothing by John Doerr, Measure What Matters

John Doerr is a venture capitalist and among the early investors of Google. He developed over the years a framework for goal setting which is aimed at helping any organization find the proper way to set goals and achieve strategic results for the sustainable growth of the business.

Indeed, early Googlers are among the companies that used his system, called OKRs (Objectives and Key Results) for setting, communicating and monitoring their goals during a process of hypergrowth! If you need a leadership process for your organization, this is the book for you!

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The 10X Rule

Never reduce a target. Instead, increase actions. When you start rethinking your targets, making up excuses, and letting yourself off the hook, you are giving up on your dreams! by Grant Cardone,The 10X Rule: The Only Difference Between Success and Failure

One thing that I like about this book is its unconventional way to look at goal setting where most people will tell you to set reasonable, achievable goals. Grant Cardone suggests you to think in terms of 10X. In short, you want to set such ambitious goals that you’ll need massive action to get there.

That massive action will also make you think in an unconventional way. Indeed, when you switch your mindset from classic business goal setting to 10X, it changes everything! You look for a way to consistently grow your business at 10-100X levels, which requires you to escape competition – or to crash it.

At the same time even when you get halfway through your 10X goal, you’ve already achieved massive success. That’s the book for you if you want to get there!

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Tools of Titans

The world is changed by your example, not by your opinion ― by Timothy Ferriss, Tools of Titans

Many believe that reading is for wimps. Why would you be spending your time reading, when you can act?

Action without reflection is like steering a boat that is about to go adrift.

In other words, it is essential to act, but also to take the time to reflect and study. That is going to make your actions way more efficient.

If you are looking for a tool that can boost your effectiveness in the real world, there is no better book than Tim Ferris’ “Tools of Titans.”

This is a book about health, wealth, and wisdom (the book comprises three sections).

Tools of Titans is the distilled knowledge of over 200+ guests interviewed in more than two decades at “The Tim Ferris Show,” one of the best podcasts currently available for business and lifestyle.

What makes Tools of Titans unique?

Most of the content of the book is actionable. Ready for use. In other words, if you are looking to transform your life, that is a fantastic way to start.

Furthermore, Tim Ferris does a great job in locating the best experts in each field. Therefore, whatever interest you have, you can now find a mentor thanks to Ferris’ work.

I suggest you go through this book with a notepad and mark the pages you find more interesting (you will see most parts of the book fascinating).

As soon as you have done reading it; start implementing and testing.

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Homo Deus

Censorship no longer works by hiding information from you; censorship works by flooding you with immense amounts of misinformation, of irrelevant information, of funny cat videos, until you’re just unable to focus by Yuval Noah Harari

Homo Deus isn’t designed as a business book. Yet I believe it will benefit you in many ways.

Harari, the author, is a historian but most of all an avid practitioner of Vipassana Meditation. This is a practice taught in India for over 2,500 years, which main aim is to allow to see things as they are.

There is nothing esoteric, mystic or religious about this practice. Instead, this is a way of detaching your mind from your thoughts and stop identifying yourself with your mind.

By practicing Vipassana, Harari also developed a way to see the reality, that will blow your mind.

What makes Homo Deus unique?

In the complex world in which we live it is impossible to predict what is going to happen tomorrow. Even though Harari’s account in Homo Deus explores the likely scenarios that will shape our world in the next century, this fantastic book does one more incredible thing,

It will give you new eyes that you can use to look at the business world like never before.

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Antifragile

They think that intelligence is about noticing things are relevant (detecting patterns); in a complex world, intelligence consists in ignoring things that are irrelevant (avoiding false patterns) – by Nicholas Nassim Taleb

Our minds have not been wired to live in a complex world like that we created in the last century. In short, we evolved in a world where scarcity was paramount.

On the other hand, nowadays the opposite is true. In most western developed countries abundance is the rule. From food to information we have it all.

In short, the world we created clashes with the world in which we evolved. These mismatches make us vulnerable in many ways.

One of the most significant vulnerabilities is about how we interpret reality. Prehistoric humans had to understand each pattern around them to avoid extinction. For instance, when Mr. Hunter-Gatherer saw a moving bush, he knew it was time for him to run as fast as he could.

In fact, behind that bush, a dangerous predator could have been hiding. Even if the wind only moved that bush, it didn’t matter to Mr. Hunter-Gatherer. Indeed, the cost of being wrong was so high (death) that he could not afford it.

While this ability to find patterns allowed us to survive, it also makes us extremely biased toward the modern world.

The former trader, Nicholas Nassim Taleb, in his book, Antifragile, will show you how and why reality is not as we perceive it. Although his focus is about the business and economic world, Taleb immense culture makes him able to space across several disciplines.

What makes Antifragile unique?

While reading Antifragile, you will suddenly change your perspectives on many things. You will probably stop watching TV, and read newspapers; while you will start reading classics. Yet the most significant change of all will be about a new fresh mindset,

You will become a modern skeptic

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Pre-suasion

In large measure, who we are with respect to any choice is where we are, attentionally, in the moment before the choice ― Robert B. Cialdini, Pre-Suasion

What makes Pre-suasion unique?

This book will show you how “invisible clues” can shape your decision-making ability way more than you think.

For anyone that operates in the business world, the book will also do a crucial thing,

Pre-suasion will give you a toolbox to use right away to boost the reach and success of your business.

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Will it Fly

The Riches are in the Niches ― Pat Flynn, Will It Fly

The San Diegan Pat Flynn is among the most successful social media marketers, bloggers, podcasters in the business world. With his community The Smart Passive Income, he has helped dozens of thousands of people to build and grow a successful business.

Furthermore, Pat Flynn will not only show you how to create a business but also how to validate it, which will make the risk of failure dismal.

What makes Will it Fly special?

Pat Flyn’s book, Will It Fly, is a tool that allows you to go from Mission Design to Validation, with a simplicity that only Pat Flynn is capable of.

At the end of the day,

You will find yourself in front of your desired audience without even realizing it!

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Traction

Poor distribution – not product – is the number one cause of failure.

― Gabriel Weinberg, Traction: A Startup Guide to Getting Customers

In the startup world, often having a good product seems enough to scale a business (I believed that too). Yet as Gabriel Weinberg, CEO and founder of DuckDuckGo explains, often what a startup is lacking to take off and scale is the distribution side. Weinberg previously cofounded Opobox, which got acquired for $10 million.

The co-author of Traction, Justin Mares is the founder of two startups and the former director of revenue at Exceptional, a software company that was acquired by Rackspace.

The formula for a successful customer acquisition goes through what the authors call Bullseye Framework.

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My life in advertising

We must submit all things in advertising, as in everything else, to the court of public opinion by Claude C. Hopkins in My Life in Advertising

We like to give new and fancy names to old things. Whether you want to call it marketing, growth hacking, and business development that is all about sales and scale up a business. Yet, Claude C. Hopkins was one of the great advertising pioneers taught me that independently of the name you give it marketing is about selling.

At the age of 41, he was hired by Albert Lasker owner of Lord & Thomas advertising in 1907 at a salary of $185,000 a year. If you think that is a lot today imagine what it was back then.

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Ogilvy on Advertising

“Advertising people who ignore research are as dangerous as generals who ignore decodes of enemy signals.” ― David Ogilvy, Ogilvy on Advertising

David Ogilvy was a business executive who founded the advertising, marketing, and PR agency Ogilvy & Mather in 1948. Once again, you can read new books about new marketing disciplines to which we gave then fancy names. However, the foundation of those subjects came from people like Ogilvy.

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The Start-Up of You

All humans are entrepreneurs not because they should start companies but because the will to create is encoded in human DNA, and creation is the essence of entrepreneurship. ― Reid Hoffman, The Start-Up of You: Adapt to the Future, Invest in Yourself, and Transform Your Career

Reid Hoffman is one of the most exceptional internet entrepreneurs of our time. Beside co-founding PayPal and LinkedIn (if that is not enough) he also invested in Airbnb, Coupons.com, Edmodo, and many others.
He teaches us how in today’s world having the mindset of the entrepreneur isn’t for a few but instead encapsulated in our DNA.
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Hooked

Companies who form strong user habits enjoy several benefits to their bottom line. ― Nir Eyal, Hooked: How to Build Habit-Forming Products

Nir Eyal’s book is one of those business readings that you can’t miss out. In fact, this is a book I advise anyone either if working for a startup or only a user of many technological products.

The author of Hooked, Nir Eyal, has been able to put together a framework, the so-called Hooked Model which helps to explain why and how companies can manufacture products and services which are so addictive but also how to build those habit-forming products.

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Lost and Founder

The problem with MVPs, and with the “something > nothing” model, is that if you launch to a large customer base or a broad community, you build brand association with that first version. by Rand Fishkin in Lost and Founder

If you’re familiar with digital marketing, then you must know Rand Fishkin. He’s the founder of Moz.com the most important and authoritative blog on search engine optimization. He is a rockstar not only for SEO practitioners but for many that are trying to build a business from scratch. In fact, with his Whiteboard Friday Rand Fishkin has been teaching to millions of people SEO.

Also, Rand Fishkin has also grown Moz, a subscription-based business model software for SEO in a multimillion-dollar company, that in 2017 netted over $47 million. His book, “Lost and Founder” is a transparent story of how it all started and the painful process of growing a startup from a web agency.

This is a must-read for any aspiring founder but also for anyone that is running a startup. Rand Fishkin bursts many myths about the so-called “Silicon Valley” way of thinking about entrepreneurship!

You will learn many lessons from Rand Fishkin that you can apply to your business. One example is the concept of an exceptional viable product.

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How I Lost 170 Million Dollars

You have to decide your own self-worth versus letting others determine it by Noah Kagan in How I lost 170 Million Dollars

Anyone in the digital entrepreneurship world knowingly or not has met Noah Kagan. How? Through either AppSumo.com or Sumo.com.

Those websites are among the most popular because they offer to digital entrepreneurs the tools to grow their businesses, quickly.

Also, AppSumo hosts lifetime deals on digital tools. Noah Kagan and his team have built their business on email marketing and SEO copywriting.

What is most interesting about this book is the experience described by Noah Kagan as employee number 30 on Facebook, before the company would scale up to become the tech giant it is today. The story is transparent, honest and with no BS.

Noah Kagan spent most of the time in the book in describing is greatest failures but also how those turned out to teach him many valuable business lessons that he used to build his current startups successfully.

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Bullshit Jobs: A Theory

Bullshit jobs are jobs which even the person doing the job can’t really justify the existence of, but they have to pretend that there’s some reason for it to exist. That’s the bullshit element. A lot of people confuse bullshit jobs and shit jobs, but they’re not the same thing

by David Graeber

In a world that is becoming increasingly technological, already a few decades back we believed that work would have become shorter and shorter.

However, this didn’t happen. If all we only focused more on productivity and efficiency with the results of creating a bunch of jobs, that seems useful from the outside but that in reality are useless for the same people performing them.

In short, modernity has created a whole new category of jobs, that Davide Graeber defines “bullshit” because they are meaningless and degrading for who performs them.

This account is incredible because it will burst many myths we have today about our workplaces and how we perceive time and money.

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Tools and resources for your business:

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Published on December 06, 2018 16:00

December 5, 2018

What Is Business Model Innovation And Why It Matters

Business model innovation is about increasing the success of an organization with existing products and technologies by creating a compelling value proposition able to allow an organization to scale up customers, with a better operating model.

At its core business model innovation is a subtle change, that as it becomes hard to dissect from the outside world (in many cases business model innovation is detected when an organization has achieved massive success), it is also hard to copy.

Thus, in a world where technology has become, in part a commodity business model innovation can make a huge difference.

Before we move forward toward deciphering and dissecting business model innovation, let’s bust three myths, existing in the entrepreneurship world, especially in the era of digital business models.

Myth one: the best product wins

When you get online, and want to look for something, but you’re not sure what is that chances are you’ll land on a white page with a small search box on it, that is Google search results page.

Why in the first place do you get there?

Well, you get there because Google is an incredible product, able to find you anything on the web at a super fast speed. Yet, is Google the best product out there? And how do we define best?

Well, Google is a great search engine able to give you relevant results to any question, but it also benefits from network effects. In short, one of the reasons why Google is good enough in intercepting search intents is the fact that billion people around the world use each day.

At the same time, Google is a decent product for what it gives us back (and it is free), but it also has drawbacks. For instance, in an experiment, an SEO expert tried to rank a Latin Language site (a language used by ancient Romans, no longer in use) and guess what? It did that successfully.

This is not to say that Google is not a good search engine. Yet Google today is the most widely used search engine on earth, and part of the reason why is thanks to its distribution strategy.

Since its scale-up phase, Google aggressively acquired deals that made it the tech giant we know today. However, a few people realize it, and it is easy to think – especially in tech – that the best product wins.

A great product with a lack of distribution strategy won’t go far.

Myth two: technology is what gives a competitive advantage

Peter Thiel, former CEO of PayPal has shifted an important business paradigm. As the common business thinking goes “be the first and you’ll probably win over time.”

This is called in business jargon, first-mover advantage. Peter Thiel, instead pointed out an important paradigm, especially in the tech industry, which is the last-mover advantage.

In other words, companies that come later, especially in the tech industry, can win over existing organizations, even when those were the first movers. For instance, Google and Facebook were not the first movers to move in the search and social media space. They dominated it.

What happened there? The answer is business model innovation!

Myth three: business modeling innovation is just about how you make money

When Google came out of the Stanford dormitory where the two P.h.D. had invented it, it was a great search engine. Many argue it was 10x better than competitors.

Yet it wasn’t financially successful until it managed via a couple of years of trial and errors to design an innovative business model. In short, Google introduced an auction system for advertising, which aim was to remove the inefficiencies of how advertising had worked for decades.

That was not the primary innovation. Indeed, another search engine called Overture was already doing it successfully. Therefore, where Google innovated was the introduction of a few critical parameters to allow advertisers to show on top of Google text-based ads results.

In other words, it wasn’t enough to be offering a higher bidding rate on a keyword. Google crossed that with a few other parameters which allowed to show on top of the ads space on Google results, those that were most relevant and had a higher click-through rate.

Even though it might sound trivial now, as the whole web, after Google has been built on the premise of click-through-rate, it was not back then. That business model innovation was critical to Google economic hypergrowth, scale, and domination.

Business modeling isn’t a simple concept, and in the mind of most people, that is about how you make money. However, business modeling is way more than that. It is how you make a great product or service so that your customers keep coming back.

It is about how you make that product or service scalable. And how you keep making financial sense of your business over time. But also the value proposition you’re able to deliver to key partners, which are a crucial ingredient of your business success!

Thus, even though business model innovation can be about changing the way you charge your customers and how you make money, it can also be about other critical aspects of the business that will allow you the scale up.

There isn’t a single path to business model innovation, but there are a few critical questions to ask.

What kind of questions do you need to ask with business model innovation?

To understand how to innovate a business model you might want to think along the line of how to tweak and redesign your value chain, cost structure, key partners and in general what can help you scale:

How can I design a better value chain?
Can I improve the existing cost structure?
What is the distribution channel that can accelerate growth?
Why is my company experiencing bottlenecks in certain areas?
Is the organizational structure helping the company to grow as it should?

Paths toward business model innovation

There isn’t a single path toward business model innovation. At times you can design a business model drawing from your previous experiences in that industry.

Other times you’ll have to figure it out along the way. Among the many paths to business model innovation, we’ll see three paths that might be quite interesting for your business.

Engineer an innovative business model from scratch

As Reid Hoffman points out in his book Blitzscaling business model innovation is a key ingredient to success, especially in the digital space, where a countless number of companies offer innovative tools and solutions on the market.

That’s why in some cases business model innovation can be engineered before

This is what happened when I cofounded LinkedIn. The key business model innovations for LinkedIn, including the two-way nature of the relationships and filling professionals’ need for a business-oriented online identity, didn’t just happen organically.

As explained by Reid Hoffman he used his understanding of the social networking world (he had founded a social network called SocialNet) to design an innovative business model for LinkedIn, which got acquired in 2016 by Microsoft for an astounding $26.2 billion.

In short, what gives a competitive advantage isn’t any more technology alone but a combination of technology paired with an innovative business model.

Yet designing a business model isn’t always possible beforehand. In some cases, you need to experiment, reiterate and find it

Find an innovative business model along the way

When Google was scaling up, it didn’t figure it all out right away. Although the tech giant has incredible technology and product, it still lacked behind in business model innovation.

Yet when it finally, after a few trial and errors figure it out (Google was running out of investment money) it was a massive success. When Google had to show its numbers, when it got listed back in 2004 the company made already over three billion in revenues, a 155x growth in about four years!

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In this scenario, you need to try and test many things before you can say to have a business model that makes you scale up sustainably and that it does make sense financially.

In the end, if you do find it, you’ve created a long-lasting competitive advantage!

Use business model innovation as a survival mechanism

Imagine if the next time you reserve an Uber ride, you’ll see coming to a self-driven car. Now stop imagining. Indeed Uber has been investing in self-driving cars since 2015.

Why would a company that is dominating an entire space make such a move? Well, a couple of reasons. First, if self-driving cars become mass adopted Uber would be out of business.

This implies that if Uber wants to thrive in the next era needs to be on top of this game. The second aspect is about business model innovation. Among its key partners, Uber has drivers across the world.

Yet those drivers also pose a significant threat to Uber success. Even though Uber might be pulling the plug or spinning off its self-driving cars business, this example is to show how the company never stop experimenting with business model innovation.

Business units like Uber Eats, Express Pool, Freight are all an attempt to tweak an existing business model until it allows the company to become financially sustainable, also at a massive scale.

Is business model innovation for anyone?

In theory business model innovation is for anyone. Think of the case of a small consulting business that operates in a traditional industry, where most of the competitors charge by the hour.

Yet instead of keeping to do that the small consulting business starts only to charge a small retainer and a success fee. This kind of model might be not financially viable at the beginning, but it might wipe out competitors over time.

Indeed, with a larger customer base, the retainer becomes an essential base for the company’s revenues. And the success fees the scalable part of the business.

In other cases though, business model innovation might require massive financial resources. Think of a business that decides to dominate an existing industry, and it does that by introducing an innovative business model that grows at a reckless pace.

That pace might be attractive for investors looking for high returns on their investments, while it might also burn a lot of cash!

Do you have business model innovation examples you want to share with us? Comment below or send us an email at fourweekmba@gmail.com

Tools and resources for your business:

Learn how tech companies business models work and the lessons you can learn to scale up your own company:

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Published on December 05, 2018 11:36

December 4, 2018

Digital Marketing Trends For 2019 [With Neal Schaffer]

I had the pleasure to know Neal Schaffer, in 2017, when I was launching a book crowdfunding campaign on Publishizer, and he was launching his book The Business of Influence.

Neal is one of the most knowledgeable persons I know that has a deep understanding of social media, content marketing, and influencer marketing. I’m glad the Four-Week MBA community can benefit from his expertise, and I took the chance to ask him a few questions.

Gennaro: Neal, great to have you on my blog. Can you tell us a little bit more about yourself and your experience with social selling?

Neal: I have been involved in the industry that we call social media, social media marketing, and/or social selling. There’s a lot of different words people use to describe it. I began professionally, actually, before social media.

My background before the advent of social media was B2B technology sales, business development, and marketing. I actually just organically began to blog about LinkedIn back in 2008, which led to my first book in 2009 called Windmill Networking: Understanding, Leveraging and Maximizing LinkedIn.

This led to my first speaking opportunity in 2009, which then led to my first paid speaking opportunity. It was really in January 2010 when four different companies over the course of two weeks reached out to me saying they wanted my help with social media consulting.

And that’s where I launched Windmills Marketing, my social media strategy consultancy, which since then has really spawned a career in speaking, in training, in teaching, and of course in consulting and implementation.

I teach social media marketing and social selling to executives at three different universities. Rutgers University in New Jersey in the United States. I fly every year to Europe, in Dublin, to teach at the Irish Management Institute. And every two or three years I teach at the University of Jyvaskyla. They have an executive MBA program called Avance in Helsinki, Finland.

I also, obviously, consult with companies. Recently, I’ve been focusing a lot on influencer marketing, and I have a book coming out on this topic, The Business of Influence, which will publish in probably late 2019, early 2020, depending on the timing of my publisher. So, that is a little bit about me.

Gennaro: What are some of the trends you see forming ahead that will impact social media in 2019?

Neal: Looking ahead for digital and social marketing in 2019 and just focusing on a few trends I see:

First, chatbot technologies on websites. I believe they started with customer support functionality. They’re turning into more sophisticated bots. Obviously, dependent on how you program them, that can really help to facilitate a conversation on your website 24/7.

Businesses invest a lot in content and in social media to try to generate a lot of website traffic, but once they’re there, they’re waiting for someone to click on a shopping cart button, or click on a “contact us” button, or maybe download an asset. There’s a lot more we can be doing in between that. That’s really where the chatbot comes in. I’ve heard, anecdotally, reports of companies saying that they’ve had double-digit numbers in terms of percentages of people that visit their website who will actually engage with these chatbots. I see that as sort of a mainstream technology that is going to be catching on worldwide in the not so distant future. Probably, a lot of large businesses already have this technology. It doesn’t have to cost a lot, but I think it’s something that every, even small, business should look at implementing in 2019 and beyond.

Speaking of chatbots, Facebook Messenger bots is something that is talked about a lot in social media. I would say if you’re already leveraging chatbots and you can replicate that with a Facebook Messenger bot, go for it. If you haven’t done a chatbot before, I would first start with that before moving over to Facebook Messenger. I’ve heard, anecdotally, great results of companies that are doing Facebook Messenger bots. It’s something that obviously if you have a large and engaging community on Facebook, this is something you should be looking at as well. We’ve already seen data that suggests that Facebook Messenger open rates and click rates are way beyond what emails get, for a lot of different reasons. That’s another technology that you should be looking into in 2019 and beyond, as well.

Gennaro: What are some of the other areas?

Neal: I think content is as important as ever, and if you’ve been invested in content marketing, which is no longer a revolution. It’s more like an evolution. It may be time, instead of creating new content on a regular basis, to look back at your old content: Revise it. Make it more authoritative.

If it was short-form content, because that was the buzzworthy trend of the day, make it long form content. I think that when you look at top articles in Google search results, they tend to be more of the longer form. So, that’s something that I think companies should really strive for, and really focus on the quality rather than the quantity. If you don’t have the ideas for new content, go back and work on your old content. Revise it.

In some cases, prune it because your old content is going to compete with your new content for search engine rankings. It might be time to actually delete out old content. This is something that I’ve been doing a lot of. So, that’s sort of my take on content.

Gennaro: What else you think is critical to be successful?

Neal: Paid social … This is really where the conversation began. I think that paid social is still going to be effective for a lot of companies, but over time it gets more expensive. And, consumers at the end of the day, even though it might be on social media, are still going to look at advertisements as, guess what, advertisements. I think that businesses need to understand that and understand that they really need to be savvy, ideally leveraging user-generated content for their advertisements. If not leveraging, influencer content for their advertisements.

This leads me to influencer marketing where I see the future going. I see it going there because I almost think that this organic social media experimentation is coming to an end. It’s just harder and harder for organic social content from businesses to be seen in the news feed. It really is pay to play, and when you pay for it, it’s becoming more expensive, and it is an advertisement.

Gennaro: What’s the way out then? How do you make it work in this upcoming scenario?

Neal: How do you ignite word of mouth? That’s what social media was supposed to be about was word of mouth. It’s really about harnessing the power of influencers, and I’m not talking about those million follower Instagrammers. Everybody has influence, and I believe you should be starting with your fans, your employees, those that are already talking about you, and try to build a community that can tap into that greater community that is out there in social media that should become your customer.

This is something I’m going to be writing and blogging and talking a lot about over the next few months, but if you could take all that energy you spend into your own organic social media presence, and you can focus that energy on relationships with people. People like I said that are already your fans, your employees, people talking about you, or people that are more of nano influence or micro influence, or people that don’t have more than 10,000 followers but have a lot of great engagement in the niche communities that they have. I think that is time much better spent, and I think that if you take the data, you’ll see that you can probably replicate your organic social KPIs very easily by doing that over a short period, working with the right people.

So, that’s why I’m writing a book on influencer marketing the business of influence, and that’s why I’m really excited as more and more companies realize that influencer marketing is about community and not campaign. I think that they begin to see the light and a lot more money will be invested in people in 2019 and beyond.

You can follow Neal on Twitter. You can also follow him on his blog.

Do you want us to cover other stories, interviews, and topics that can help your business grow? Leave a comment below or ping us at fourweekmba@gmail.com

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Published on December 04, 2018 04:24

December 3, 2018

How Does Groupon Make Money? Groupon Business Model In A Nutshell

Groupon business model is a two-sided marketplace where local consumers meet deals from local merchants. The company makes money by selling local and travel services and goods.

Its value proposition based on attracting local customers to local merchants is quite compelling. Local consumers instead get savings and discounts that they would not get elsewhere.

The company measures its financial success in gross billings and revenues growth. Groupon generated over $2.8 billion in 2017, by selling its goods and services directly via its websites and mobile app, and indirectly via third-party affiliate sites, who get a commission for each sale.

Groupon business snapshot

Groupon business model is based on a local e-commerce marketplace that connects merchants to consumers by offering goods and services at a discount. Groupon in part replaces the traditional media that local businesses have used over the years to generate sales at a local level. This includes:

yellow pages
direct mail
newspaper
radio
television
and online advertisements

The value proposition is quite simple: Groupon attracts customers to merchants, which otherwise would have missed. Consumers get savings and discounts that they would usually not get elsewhere.

Those offers are primarily run on groupon.com sites in many countries, and mobile applications.

The offerings are organized into three primary categories:

Local (service): revenues are primarily generated through Groupon relationships with local and national merchants
Goods (product): direct revenues from transactions in which Groupon sell merchandise inventory directly to customers, and third-party revenues
and Travel (service): Groupon features travel offers at both discounted and market rates

Distribution strategy and marketing mix: a two-sided marketplace needs both marketing and sales capabilities

When deciding whether allocate marketing vs. sales resources, it is critical to understand the value of a lead and potential customer on the one hand.

Thus, if a company sells expensive products made for a specific and limited target business development and sales are the key ingredient for its success.

Yet if the company sells a low-priced product which is well-suited for a mass market or consumers, then marketing will be the best option available.

On the other hand, when it comes to the acquisition and distribution process of a two-sided marketplace, it is essential to consider the acquisition process from two perspectives. For instance, the two principal partners Groupon has to create value for are:

local merchants willing to offer discounts in exchange for qualified local customers
and local consumers ready to buy from local merchants

This also implies a two-sided distribution strategy, where each of those key players will be drawn to the platform with either sales or marketing.

The value of a merchant brought to Groupon is intrinsically higher than the value of a local consumer. Therefore, Groupon will use sales processes and support to nurture the relationships with those local merchants.

Instead, to acquire local consumers, Groupon uses a marketing mix made of several marketing activities to keep the platform appealing for its local consumers which can find the offer they need.

The two ways of access to the platform are:

the website groupon.com
and the mobile app

Let’s now look in detail at Groupon marketing and sales activities to draw local consumers and local merchants to the platform.

Marketing as the primary driver of acquisition of local consumers

Groupon uses a variety of marketing channels with a direct to customers business model by making its deal offerings available through its marketplaces.

The primary driver for consumers access is the Groupon mobile application. Indeed, in the fourth quarter of 2017, over 69% of Groupon global transactions happened on mobile devices.

This makes marketing a critical ingredient of Groupon growth strategy and an essential component of its distribution strategy. To have some context in 2017 Groupon spent 31% of its revenues in marketing (over $400 million).

What marketing mix does Groupon use?
Search engine optimization

For a platform like Groupon that highly depends on visibility from local consumers across the globe, there is no better way to reach them than through search engines. Indeed, search engines present two key advantage:

consumers can be targeted based on specific keywords (like, “best SPA deals”)
consumers can also be targeted based on local keywords (like, “best SPA deals in LA”)

Therefore, an SEO (search engine optimization) can have a massive ROI for a company and platform like Groupon. Via third-party search engines, consumers across the globe can access to Groupon deals. SEO has the advantage of being organic. In short, consumers get to Groupon based on organic rankings the platform has gained over the years.

Search engine marketing

Customers can access the Groupon platform also via paid listings on search engines based on bidding keywords. For instance, Google allows through its advertising network to bid on specific keywords that have specific commercial intent.

Thus, companies that look for those keywords will probably end up purchasing Groupon deals. This is called search engine marketing or SEM.

Email and push notifications.

Another key ingredient of Groupon marketing mix is comprised of direct access to consumers via an email list made of subscribers that voluntarily sign up and of push notifications (notification service to send updates on mobile devices).

That system allows Groupon a higher control over what offerings to show directly to its consumers and subscribers.

Affiliate channels.

Another important marketing distribution strategy is based on affiliate marketing. In short, affiliates that send consumers to Groupon offerings via links on their websites get rewarded with a commission.

Social and display.

The virality of social media is also essential to allow the sharing of dealings from Groupon. Groupon also promotes its offerings using display advertising on websites.

Television and other offline.

Groupon also started to invest more in offline marketing, such as television advertising, print, and radio.

Sales operations as the primary driver of acquisition of local merchants

The relationship with the millions of local merchants on Groupon is critical for the long-term success of the business. Those relationships indeed are an essential part of long-term business success.

That’s also why Groupon, in 2017, had 2,400 merchant sales representatives and sales support staff. They had the role of nurturing merchant relationships and provide local expertise.

Beyond merchant sales, Groupon also leverages on deal managers to provide support in areas such as:

deal managers
editorial
merchant services
customer service
technology
merchandising and logistics

Deal managers and sales teams work together to optimize deal structure, pricing, discount and geographic mix of deals in respective markets.

The editorial department creates written and visual content on the deals offered on the platform.

Merchant services representatives help merchants optimize their strategy when deals are offered. And customer service answers customer inquiries in several areas.

The technology focuses on the design and development of new features and products, maintenance of the site and mobile platform and improvement of the internal system.

While merchandising and logistics are responsible for managing inventory and the flow of products from suppliers to customers.

In 2017 Groupon spent over $994 million to support this infrastructure.

How does Groupon make money?

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Source: Groupon 2017 Annual Report

Groupon makes money primarily by selling its deals offerings to local consumers based on two primary channels:

direct
third-party and other

Cost of Direct revenues

The Company generates direct revenue from merchandise of sale inventory through its Goods category. That is also the reason why the cost of revenues for immediate is way higher than third-party revenues which are recorded on a net basis.

Direct revenues also include a cost of inventory, shipping, fulfillment costs, and inventory markdowns.

Third-party and other revenue

For the third-party merchant, revenue is recorded on a net basis and is presented within third-party revenue.

For third-party revenue transactions, cost of revenue includes estimated refunds. The mechanism allows those third-party to earn commissions when customers make purchases using digital coupons via their websites and applications.

Key financial metrics

Each business financial success is measured according to a set of internal metrics the company uses to assess its growth.

At the same time, those metrics are communicated to outside investors to assess the state of advancement of the company.

Groupon looks at five key metrics:

gross billings
revenue
gross profit
adjusted EBITDA
free cash flow

A glance at Groupon digital marketing strategy

Groupon has a massive reach, with its website alone has over fifty million visits according to Similar Web estimates (this is an estimate and not to be taken as an actual number):

[image error]

Also according to Similar Web Groupon is the first site in the US for Coupons, within the Shopping category.

[image error]

Still, according to Similar Web estimates, the marketing mix is skewed toward two primary channels:

direct
and organic traffic (via SEO)

Those two sources of traffic are critical as on the one hand it points Groupon strong brand and at the same time authoritativeness. Other channels like social, mail and display also play a crucial role.

Related business models:

A Snapshot Of Booking Business Model
How Does Airbnb Make Money? Airbnb Peer To Peer Business Model In A Nutshell

Tools and resources for your business:

Selected business models from the site:

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Published on December 03, 2018 15:17

December 1, 2018

Apple Distribution: The Apple Store Is Not About Selling iPhones

When you walk through the urban streets of cities around the world, in crowded and selected locations you’ll find an Apple Store. From Piazza Liberty in Milan, Cotai Central in Macau or Grand Central Terminal in New York, the Apple brand leaves a strong impression in the mind of its consumers.

Those impressions might also create a cognitive gap. In short, people might assume that those Apple Stores are also the primary driver of Apple’s revenues.

While Apple Stores are a crucial driver of its revenues, they are not a primary driver. Thus, let’s give a glance at Apple distribution strategy and why its stores aren’t necessarily what you think and what business function they have instead.

Apple distribution strategy in a nutshell

When it comes to distribution channels companies, usually use a direct or indirect approach. In many other cases through a mixture of direct and indirect channels make more sense.

For instance, the Apple business model leverages both on direct and indirect channels. Apple sells its products directly via its Apple Stores.

This is critical to Apple success as it enables it to deliver a high-quality buying experience for its products in which service and education are emphasized.

That is also why Apple keeps expanding its stores worldwide. While this is a critical part of Amazon distribution strategy, it is also quite expensive. Yet Apple has full control over the customer experience and control over a distribution strategy requires massive resources.

With this approach, Apple can employ experienced and knowledgeable personnel able to offer a wide selection of third-party hardware, software and other accessories that complement Apple’s products.

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Indeed, you can see how a good chunk of Apple‘s revenues also comprise services (13%) and other products (5.6%). This means that the Apple stores are an essential driver of sales.

And it makes sense given how much the company spends in running them. To have a bit of context, in the next ten years Apple will spend over nine billion dollars in operating leases as reported on its financial statements.

Yet if Apple were relying solely on its retail operations, this would be too risky. Indeed, those retail stores are subject to financial risks and if sales were to rely exclusively on them would, when slowing down, it would easily create trouble for Apple long-term business success.

At the same time, Apple Stores have a high impact on the company’s brand. Indeed they create visibility for the brand and the company’s products. How? Let’s do this simple exercise.

if I were to ask you “where do you think Apple sells most of its products?” I’d bet you would probably answer, via its Apple Stores. However, if I were to ask you “where did you buy your iPhone?” (which is the primary driver of Apple sales) chances are you’ll answer “not at the Apple Store!”

In short, I like to define Apple distribution strategy a creating a “positive cognitive gap in perception” for its consumers. Consumers might associate Apple with the image they get primarily via its Apple Stores. Those stores are just one smaller part of the overall Apple distribution strategy.

Not by chance, Apple‘s retail stores are typically located at high-traffic locations in quality shopping malls and urban shopping districts. The aim is to create as much visibility independently from sales.

I’m not saying sales are not significant. The main point is that Apple can leverage its stores to have control of its branding strategy, thus the way consumers perceive the overall company.

Yet that is not where most of the sales happen! In short, the Apple Store isn’t just a retail store. As highlighted an Apple Store is a branding and marketing effort to create a controlled experience and imaginary in the mind of its consumers.

If it is easy to assume that most of Apple‘s revenues are coming from its direct channels, Apple employs a variety of indirect distribution channels that comprise:

third-party cellular network carriers
wholesalers, retailers
and resellers

Besides the Apple Store, you will find an Apple product also at Best Buy, Walmart, Target, Radio Shack and Sam’s. And chances are you bought an Apple product there.

Why? In 2018, according to Apple Annual Report, the company’s net sales through its direct channels accounted for 29% of its revenues. Compared to 71% of net sales coming from its indirect distribution channels!

Stores as Marketing and cognitive gaps

The main takeaway is that often companies engage in direct distribution strategies which are quite expensive and not necessarily tied to just revenue generation. A store where Apple can sell its products directly to the consumers has a massive branding advantage.

Apple can open up those stores in high traffic location in urban areas, and those stores often are architectural masterpieces, which want to capture the collective imaginary of people around the world, even though most of its sales happen via indirect distribution channels.

Tools and resources for your business:

Selected business model

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Published on December 01, 2018 15:07

Distribution Channels: Types, Functions, And Examples

A distribution channel is the set of steps a good or service has to go through to reach the final consumer. At a higher level, distribution channels can be either direct or indirect.

At the same time, direct and indirect distribution channels can have multiple variations, according to how the good or service gets to the final consumer.

Why a distribution channel strategy matters

Often companies undervalue distribution channels as they think that a good product or service will automatically create its distribution.

While this might happen, it is more of a utopia than reality. Distribution needs to be created, at times with sheer force combined with strategic planning and deep understanding of customers needs, or desire generation.

A traditional distribution strategy looks at the classic 4 Ps (product, promotion, price, and placement).

Those are the key ingredients to grow the revenues of a business, quickly and sustainably. Thus, a distribution strategy starts from:

understanding the wants of their customers
leverage on insights to create a better purchasing experience
develop new products and services that customers will want to buy
create go-to-market strategies that reach the proper customer target
generate demand for a set of products and services offered

Without an appropriate strategy of distribution, it is hard to have a successful and sustainable business model.

Types of distribution channels

At a higher level, distribution channels can be broken down in direct and indirect. This primarily depends on how long is a chain between who makes the product and the final consumer.

The number of steps it takes will make the distribution channel direct or indirect. Let’s visualize a distribution chain to understand the difference between direct and indirect strategy:

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Where in a direct distribution strategy a producer can access the consumer, in an indirect distribution strategy, the producer will meet its consumer demands via third-parties wholesalers or retailers.

Thus, a direct approach makes the value chain shorter and at the same time allows more control by the producer on how the final customer experiences the product or service offered.

At the same time, a direct to consumer strategy is quite expensive and not always effective enough to allow proper distribution. Therefore, companies often use a mixture of direct and indirect distribution strategies, which determine their marketing mix.

Between the direct-to-consumer and entirely indirect distribution strategy (where the producer sells to a wholesaler), there are several indirect variations, based on how many steps it takes to reach the final consumer and how long is the value chain.

For instance, in the scenarios in which a producer sells to a wholesaler, the wholesaler sells to retailers, who reach the final consumers. However, in some other cases, the distribution channels might be shorter.

Think of the Costco business model, where the company purchases a selected variety of goods in bulk from producers. Yet instead of reselling that to retailers, Costco itself acts as a retailer, by leveraging on its membership-based business model and selling those items in bulk quantity directly to consumers, who appreciate the convenience of its prices together with the selection of high-quality products.

In other cases yet, the distribution channels strategy might be even shorter. Take the example of the Apple business model where the company sells part of its products via its retail stores, which create a unique experience for Apple‘s consumers and make the value chain shorter.

Distribution channel vs. supply chain

It is easy to confuse and mix up the definition of distribution channels with the supply chain even though the distribution channels and strategies might sometimes cross with the supply chain.

The distribution strategy concerns primarily on bringing the product in front of customers, and especially customers that are willing and ready to buy it.

Therefore, in some cases, bringing a product in front of the right people might be a matter for the supply chain. For instance, in the Luxottica business model, vertical integration means the ability to control the full customer experience and to choose also the location of the retail stores.

Thus, this is a case in which supply chain management also becomes a distribution strategy.

It is critical to maintaining a clear difference between supply chain and distribution channel strategy. While the supply chain comprises all the planning, manufacturing and logistics activities that make the product go from the purchase of raw materials, transformation in a final product that might get delivered to the final customer (Zara business model leverages on supply chain management as a distribution strategy).

In short, where supply chain management concerns itself with integrating supply and demand, a distribution strategy involves itself primarily about the demand chain.

To have a deep understanding of the difference between the supply chain and distribution strategy it is important to consider three main aspects.

Supply chain vs. demand chain

Where a supply chain seeks at efficiencies that can, for instance, reduce the cost of purchasing raw materials, at integrating several parts of the supply chain or at creating better logistic.

Distribution channels and strategy looks more at creating demand for a product or service by leveraging on several strategies. For instance, having insight about potential customers can allow a company to generate demand via distribution and marketing just like in the Nike, business model.

Internal vs. external

A supply chain concerns with all the aspects that begin with sourcing raw materials, to production processes, inventory management and all the other processes that bring a product or service in front of the final customer.

On the other hand, a distribution strategy concerns primarily with the demand chain. Therefore, the difference is primarily internal vs. external. Supply chain affects costs and how to reduce them via efficiencies.

Distribution channels and strategy looks at how to grow the demand. Thus, increasing revenues for the business. This distinction is not absolute. As in some cases when a core competence of a company is its supply chain management, then that also becomes a distribution strategy, just like in the Amazon business model case study.

Via efficient inventory management, Amazon can keep large facilities where most tasks are automated. This allows Amazon to host third-party inventories, of sellers that are part of the Amazon network.

That in turn, makes Amazon stores more interesting for final customers as they can find more products they need, they can get then faster and purchase them in a bundle. In this case, Amazon supply chain strategy in part crosses with its distribution strategy.

Process-centric vs. customer-centric

Where supply chain is often process-centric. In short, it wants to improve efficiency, reduce steps among several parts of the chain, and make the process as smooth as possible. Distribution channels and strategies focus on the customer.

Where is the customer? How do we get more of them? Is that a matter of price? Value or product? A distribution strategy is obsessed with customers. Once again, this is a rough distinction as in some cases, companies’ have a customer-centric approach at any company’s level.

That’s what Jeff Bezos means when says that successful companies need to stay in “Day One.”

Why you need to understand the demand chain

Demand chain management is a complex endeavor that involves the relations among suppliers and customers and how those interest to grow the demand of the product or service.

At the core, it is about designing a business model which makes possible for the organization to meet customer needs, create desire and demand with an existing supply chain.

Thus, the demand chain is the value chain from your customers’ perspective. This implies synergies between the supply chain and distribution and marketing to design a business model that delivers the most suited value proposition and generated higher revenues for the business.

It is almost like demand chain management allows supply chain management to look outside the company’s boundaries and understand the market.

Therefore, demand management will primarily understand, generate and stimulate customer demand and align the supply chain processes with that.

A proper distribution strategy focuses on understanding the supply and value chain to design a sustainable business model, where for instance:

the company has to guarantee enough margins and the proper condition to third-parties distributors to allow them to run sustainable operations
align the incentives between the company, the distributors and consumers
train and educate distributors so that they can offer the best customer experience
create alignment between distributors to avoid fragmented pricing, placement and promotion strategy
understand what products or services might allow the organization to grow its reach

B2B, B2C and distribution channels

A distribution strategy and therefore the distribution channels involved will change based on the target customer. Indeed, selling to a business clientele is not the same thing as selling to consumers.

This implies different capabilities and distribution strategy. For instance, a B2B (business to business) distribution strategy might be shorter, as you might be able to reach directly the businesses that will act as intermediaries between you and the final consumer.

Think of the case of a company selling software as a service (so-called SaaS). If that software is complex and requires a certain degree of expertise, it will be better suited to be sold via other agencies and third-parties, which in turn will have access to the consumer business.

This will imply a distribution strategy focused on acquiring the proper sales force to manage more complex client.

On the other hand, if a company sells an App for iPhone, which doesn’t require any particular expertise from the final user.

The company will have direct access to its consumers and will use marketing channels, which don’t necessarily require a complex sales force. This is a critical difference between marketing and sales.

Traditional distribution channels vs. digital distribution channels

As consumer behaviors had swiftly changed in the last decades, more and more people purchase via the internet, and they feel more and more comfortable buying expensive items on the web.

[image error]

For instance, Tesla allows you to order a $65K car directly on its site.

Therefore, digital distribution strategies are critical for any business, also one that has always operated off-line.

As explained by Gabriel Weinberg, CEO, and founder of DuckDuckGo, there are at least 19 distribution channels between online and off-line:

Targeting Blogs
Publicity
Unconventional PR
Search Engine Marketing
Social and Display Ads
Offline Ads
Search Engine Optimization
Content Marketing
Email Marketing
Viral Marketing
Engineering as Marketing
Business Development
Sales
Affiliate Programs
Existing Platforms
Trade Shows
Offline Events
Speaking Engagements
Community Building

Each of those channels can be a critical ingredient to enhance the revenues of a business.

Distribution management: marketing or sales?

Understanding whether distribution management is a matter of sales or marketing is superfluous as it might make us switch the focus from what’s important.

However, it makes sense to draw some lines as this allows proper attribution of responsibility and accountability across the departments of an organization.

Thus, distribution management is typically seen as a marketing function. Yet, once again it depends on the kind of organization you’re running.

Imagine the case of a company that sells to wholesaler or retailers; this means most of the contracts might be managed by salespeople, as they require an understanding of deals terms, relationships and partnerships in place.

In that case, your salesforce will be able to give you insights that can help yo improve the distribution strategy. In the opposite scenario, where the company sells a product directly to consumers, most of the processes might be automated. Thus, most of the insights will be in the hands of the marketing department.

Tools and resources for your business:

Selected business model

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Published on December 01, 2018 13:36

November 29, 2018

The Business of Ghostwriting by Zara Altair

“You will never plough a field if you only turn it over in your mind.”

—Irish Proverb

A Lucrative Option for Writers

Becoming a ghostwriter can be a lucrative business choice for freelance writers. People have ideas but don’t know how to go about writing them down or do not have the time. The ghostwriter’s work is getting those ideas into a written format.

There are four main types of ghostwriting projects:

Web copywriting
Non-fiction articles, short ebooks, and books
Fiction
Memoir

Each of these ghostwriting subgenres provides opportunities for writers to get paid to translate ideas into written words. Each stresses different writing and communication talents. Eventually, you’ll find the niche that suits your personality and work ethos.

The Benefits

As a ghostwriter, you use your writing talents and get paid well. If you enjoy writing as a way to earn money, ghostwriting pays you well for your skills. The benefits for writers are multiple.

Startup costs are minimal. You need a computer, internet access, and a way to communicate with clients.
Ghostwriting pays well. Without a byline, you can increase your fee by 15% – 20% above regular freelancing fees.
Book projects give you one big project focus, so you aren’t juggling project time.
Flexibility. Within the constraints of a deadline for a project completion date, you can work any hours from early morning to late at night. You can arrange a time to spend with family and friends but still get work done.
Develop relationships. Your relationship with influencers in your industry can develop into repeat business and referrals. You will also gain insights into how big names work and think.
Solo work. If joining teams and communicating with coworkers isn’t your fit, ghostwriting gives you the opportunity to work alone in the environment you choose.

Ghostwriting allows you to work with ideas and people that can be exciting and financially rewarding.

The Drawbacks

Before you decide that ghostwriting is the perfect low-cost startup business for you, make sure you are comfortable with the drawbacks.

Give up your ego. Your name is not attached to the finished work. Your writer bragging rights are forfeited. When your work is successful, it can be painful seeing them get the credit for your work.
Your portfolio is limited. Most ghostwriting agreements come with a nondisclosure agreement, so you are limited in how you show off your work. You can list a project as a book and the subject matter, but can’t include actual writing samples. Depending on the client, you can ask to include samples in a portfolio in your Nondisclosure Agreement.
It takes time to build a business. Your clients may not want to share that someone else wrote their text – you. They are often hesitant to make public recommendations about your work.
You need to be facile with writing styles. One client may want “just the facts” presented logically. Another may want an emotionally packed language. Know your writing style comfort level to accept work that you can perform well.
Social skills. Many ghostwriting projects require back and forth with the “author.” You will need to accept editorial suggestions gracefully or educate them on why a certain method makes a book stronger or more engaging for readers. If you like hiding away in your writing cave, working with people can be challenging.
You work alone. No socializing or impromptu lunches with coworkers. You may feel isolated.

Carefully consider your personality and writing style(s) before you choose to ghostwrite as a solopreneur venture.

A Writer’s Option

If you enjoy writing and are comfortable communicating with others, ghostwriting can be a solid way to bring in a steady income. As a ghostwriter, you enjoy a flexible schedule, rewarding fees, and a personal sense of accomplishment. When you are comfortable with the parameters, ghostwriting is a viable, low-cost entry, business.

Listen to the full interview to Zara Altair

The Four-Week MBA had the opportunity and honor of interviewing Zara Altair to know all the inside out of ghostwriting:

https://fourweekmba.com/wp-content/uploads/2018/11/ghostwriting.m4a

If you have questions, need ghostwriting services, or you aspire to become a ghostwriter you can connect with Zara on LinkedIn. You can also follow Zara on Zara Altair Writes.

Also, if you think we should cover other topics or have ideas for a podcast session feel free to pitch it at fourweekmba@gmail.com or leave a comment below!

Tools and resources for your business:

Learn how tech companies business models work and the lessons you can learn to start your own company:

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Published on November 29, 2018 05:14

November 28, 2018

FAANG Companies: Why Are They So Hot?

FAANG is an acronym that comprises the hottest tech companies’ stocks. Those are Facebook, Amazon, Apple, Netflix and Alphabet’s Google. The term was coined by Jim Cramer, former hedge fund manager and host of CNBC’s Mad Money and founder of the publication TheStreet:

What’s interesting about the FAANG is how those companies together form more of an ecosystem of how people consume content, purchase things and find information on the web. Thus, it is worth giving a look under the hood of the companies that comprise the FAANG ecosystem.

The FAANG ecosystem

When we speak about tech, in the last decades we often refer to the IT space. With the rise of the web, a new wave of tech companies have taken over the business world. Those tech companies have the ability to influence the way people behave, consume content and purchase things.

Those tech companies are considered “hot” often make the news. There are a few aspects why those companies manage to capture so much attention:

in some ways some of the FAANG companies (think of Facebook, Google and Netflix) do make money by capturing the attention of as many people as possible (so-called attention merchant)
they’ve been able to become multi-billion businesses in a relatively short span of time
they’ve changed the way we thought about ourselves (think of Facebook convinving us that personal branding is a end in itself)
they’ve changed the way we think about our societies (think of the Netflix series have the ability to form cults)
they’ve changed the way we think about entrepreneurship (Steve Jobs’ “Stay Hungry, Stay Foolish” has become a mantra among millions of entrenrepeurs and aspiring businessmen)

FAANG businesses dissected

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FAANG companies have been able to become multi-billion dollar businesses relatively quickly. For instance, in 2017 Facebook passed the $40 billion revenue mark. While Google passed the $110 billion revenue mark. Apple by far was the tech company with the highest revenue at almost $230 billion.

[image error]It is critical to notice that the FAANG companies run different business models. And that is also why they carry a different level of profitability. In some cases, a lower profitability might be driven by the industry in which one of the FAANG operations but also from strategic choices. For instance, even though Amazon is the one with the highest revenues, right after Apple, it is the company with the lowest net income, after Netflix.

I’ve explained many times how Amazon runs a cash machine business where with extremely low profits it is able to generate massive cash flows.

Instead, if we look at Apple, the company has high revenues and high margins. This is in part due to its razor and blade strategy and also thanks to Apple’s to keep high margins on its iPhone and related products.

FAANG business models in a nutshell
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The FAANG companies are run primarily via five four main business models:

Facebook and Google primary business model is advertising
Amazon makes money primarily by selling products on its online stores
Apple sells primarily its hardware products (iPhone, iPad, Tablets and Mac Computers)
Netflix sells primarily streaming memberships

It is important to notice how most of the FAANG companies have been investing in other areas to diversify their revenue generation.

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Beyond Facebook, and Netflix which primarily make money via advertising (the former) and membership fees (the latter), Amazon, Apple, and Google have a more diversified revenue generation.

Google, now Alphabet made 86% of its revenues via advertising, yet Google isn’t just about advertising anymore. Even though online stores, is still Amazon primary revenue generation stream, there are other segments of the business that are quite interesting and might become massive in the coming decade.

Indeed, Amazon AWS, born as an experimental business unit it has become a competitive and large business in its own sake. Amazon also started to generate a good chunk of its revenues via membership with its Amazon Prime Subscription Program. Another interesting aspect of Amazon is its ability to generate revenues via advertising and third-party seller services. In short, the Amazon business model is like an octopus that is able to get in and be successful in many industries with several revenue streams. As Jeff Bezos would put it, it’s all about being in day one.

Apple revenues still primarily depend on the sales of its iPhone, yet considering Apple just a product company might be limiting. Apple srenght is definitely in its brand and the unique experiences it has been able to design via its devices that integrated work extremely well together.

What’s so special about that FAANG?

In this historic period, FAANG companies managed to get most of our attention. There isn’t a single day when one of those companies make the news. Yet what is hot today might not be so tomorrow. So the question is, would those companies still be so hot in ten, twenty years time?

FAANG business models:

Tools and resources for your business:

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Published on November 28, 2018 15:21

November 26, 2018

How Does Grubhub Make Money? Grubhub Business Model In A Nutshell

Grubhub is an online and mobile platform for restaurant pick-up and delivery orders. In 2018 the company connected 95,000 takeout restaurants in over 1,700 U.S. cities and London. The Grubhub business model comprises a portfolio of brands like Seamless, LevelUp, Eat24, AllMenus, MenuPages, and Tapingo. The company makes money primarily by charging restaurants a pre-order commission, and it generates revenues when diners place an order on its platform. Also, it charges restaurants that use Grubhub delivery services and when diners pay for those services.

Grubhub portfolio of brands

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Source: Grubhub official website

At the time of this writing, Grubhub comprises a portfolio of brands that includes Grubhub, Seamless, LevelUp, Eat24, AllMenus, MenuPages and Tapingo. The company was founded in 2004, and it merged with Seamless – founded in 1999 – in 2013.

Grubhub has been able to grow substantially following the merger with Seamless and aggressive acquisitions of other brands.

Who are Grubhub key partners? Grubhub two-sided marketplace explained

As a two-sided platform, Grubhub offers value for two key partners:

restaurants
and diners

The value and ability to grow its business highly depend on Grubhub ability to keep offering a compelling value proposition for those two key partners.

What is Grubhub value proposition?

The value proposition changes according to the key partner Grubhub is able to reach with its services. Indeed, the Company has a powerful two-sided network that creates value for both restaurants and diners. Therefore, it is critical to distinguish between the value proposition offered to those two partners.

The value proposition for restaurants

Grubhub has been able to deliver a unique value proposition for restaurants, as it generates higher margin takeout orders at full menu prices.

Indeed, for restaurants, the takeout is a way to grow their business without adding seating capacity or staff.

Also, being able to promote takeout is expensive, inefficient and its success can’t be tracked. Thus, Grubhub is offering a risk-free service to restaurants to grow their business.

In contrast, restaurants can track orders on the platform quite efficiently, by connecting restaurants with local diners with the least effort and best match.

This is a compelling value proposition for restaurants. But there is even more to it.

Why is the value proposition so compelling for restaurants?

There are also three key incentives for restaurants to be part of the Grubhub network:

Grubhub does not charge the restaurants any upfront or subscription fees
the platform does not require restaurants to apply any discount on their menu (in contrast to other platforms)
restaurants only pay Grubhun when the orders from the diner are generated

Therefore, Grubhub has packaged a low-risk, high-return solution which is highly efficient, trackable and it carries no upfront cost, neither a subscription fee.

The value proposition for diners

Diners get what Grubhub defines a “direct line” into the kitchen, avoiding inefficiencies, or frustrations associated with paper menus and phone orders.

When Grubhub designed the value proposition for diners, it did so by keeping in mind that the traditional takeout ordering process is often frustrating, while Grubhub has designed its platform to make the user experience as frictionless and rewarding as possible.

Therefore, Grubhub value proposition for diners can be summarized in a few key bullet points:

an easy-to-use, intuitive and personalized platform that connects diners with local restaurants
it makes the – usually bad takeout experience – accurate, efficient and frictionless
Grubhub also provides diners with information and transparency about their orders
its algorithms make re-ordering convenient by storing previous orders, preferences and payment information,

This, in turn, help diners shop more frequently, and restaurants monetize more from continued and repeated business.

How does Grubhub make money?

Grubhub business model is based on charging restaurants a per-order commission that is primarily percentage-based. In some markets, Grubhub provides delivery services to restaurants on its platform. The Company also generates revenues when diners place an order on its platform.

Restaurants can choose their level of commission rate, at or above the base rate. A higher commission rate allows the restaurants to have a higher exposure to diners on the platform.

Also, restaurants use Grubhub delivery services pay an additional commission. Fees are also charged to the diners for delivery services it provides. Grubhub usually remits net proceeds to the restaurants on at least a monthly basis.

Grubhub key business metrics

Any business measures its financial success via a set of metrics that define it. For Grubhub those financial metrics are:

Active diners
Daily average grubs
Gross food sales

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Source: Grubhub annual report for 2017

active diners are the number of unique diner accounts from which an order has been placed in the past twelve months through the platform
daily average grubs are the number of revenue generating orders placed on Grubhub platform divided by the number of days for a given period
gross food sales are the total value of food, beverages, taxes, prepaid gratuities, and any diner-paid delivery fees processed through Grubhub platform

Grubhub has experienced consistent growth of its key metrics primarily due to increased product and brand awareness by diners:

driven by marketing efforts and word-of-mouth referrals
better restaurant choices for diners in our markets
technology and product improvements
acquisitions of other brands

A glance at Grubhub growth drivers

The company has been able to grow consistently over the years thanks to marketing activities, acquisition, improved platform via its technologies. We’ll look more in detail to its marketing and acquisition activities.

Marketing campaigns

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Source: Grubhub annual report for 2017

Grubhub spent over 20% of its revenues in sales and marketing expenses in 2017. Those comprised primarily:

advertising expenses including search engine marketing, television, online display, media and other programs
salaries, commissions, benefits, stock-based compensation expense, and bonuses
payments to contractors and facilities costs

The company has been investing in massive resources in digital marketing campaigns. Indeed, if we look at its primary web metrics:

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According to SimilarWeb Grubhub is the fourth most popular site in the US for restaurants and delivery, in the food and drink category with over sixteen million visitors each month.

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Also, according to Alexa, the platform has quite good engagement metrics which show a good user experience.

If we look at the marketing mix according to Similar Web:

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Direct and search represent the most important channels. Direct traffic shows us a few critical elements:

Grubhub strong brand
its ability to reach diners with other channels then search engines

Similar Sites according to Alexa comprise other platforms:

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Of those platforms, seamless.com and eat24.com are part of the Grubhub brand portfolio.

Expansion via acquisitions

The company invested massively in acquisition campaigns that gave it a strong portfolio of various brands:

In 2015, Grubhub acquired assets of DiningIn.com, the membership units of Restaurants on the Run (“Restaurants on the Run”) and membership units of Mealport USA, LLC (“Delivered Dish”)
On May 2016, the Company acquired KMLEE Investments Inc. and LABite.com, Inc. (collectively, “LABite”)
On October 2017, Grubhub acquired eat24, llC (“eat24”), a wholly owned subsidiary of yelp inc.
On August 2017, Grubhub acquired a&D Network Solutions, inc. and Dashed, inc. (collectively, “Foodler”)
On September 2018, Grubhub acquired SCVNGR, inc. d/b/a levelUp (“levelUp”)
November 2018, Grubhub acquired Tapingo, a leading platform for campus food ordering

Understand Grubhub valuation via four main variables

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Source: Grubhub annual report for 2017

When we look at the valuation of Grubhub it is interesting to notice how the company valuation method takes into account four main variables:

restaurant relationships
diner acquisition
developed technology
trademark

Grubhub future challenges

Some of the challenges that Grubhub has to take into account which might impact its business comprise its ability to:

attract and retain restaurants in a cost effective manner
maintain, protect and enhance its brand
strengthen the takeout marketplace
generate positive cash flow and to achieve and sustain profitability
keep pace with technology changes in the takeout industry;

Who owns Grubhub? [image error]

Source: Grubhub proxy statement for 2018

The main institutional investors that have an equity stake higher than 5% as of 2018 are Caledonia, Baillie Gifford & Co., The Vanguard Group, T. Rowe Price Associates, BlackRock, Carmignac Gestion, and PAR Investment Partners.

Tools and resources for your business:

What Is a Business Model? 30 Successful Types of Business Models You Need to Know
What Is a Business Model Canvas? Business Model Canvas Explained

Marketing vs. Sales: How to Use Sales Processes to Grow Your Business

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Published on November 26, 2018 16:23