Allan Isfan is a co-founder of FaveQuest, a young start-up. This blog covers start-up topics.

Sunday, December 10, 2006

Google

strategy and the circus

First of all, apologies for slipping on the blog last week. I had some critical meetings which took my entire focus. The meetings went really well but it also highlighted that there is much work to do before takeoff. It was a good reminder to slow down a bit and focus on the basics 'figure out who you customer is, what is his problem and how you are going to solve it better tha anyone else'. Oh ... And you need to figure out how you're going to make money'. Oh and you need to figure out how your competition will react and how you're going to create a defensible position. The results need to be based on some sound research although some gut feel is required as well, especially when you're creating something revolutionary. Like I said earlier, lots to do. Fortunately I now have lots of capable people that can help me. Time to delegate.

A meeting with a very experienced and capable individual a couple of weeks ago reminded me of some basic, but often forgotten critical methods for pulling together real, defensible and sustainable strategies. I would like to share some of these, together with some associated examples. There are lots of concepts that pass for strategy that really are not and his recommendations were an excellent reminder to review my own strategy to ensure it actually is a strategy and that the position I'm creating is indeed defensible.

The basic premise of building a differentiated and defensible strategy is to choose a different set of goals and associated activities. Cirque du Soleil is good example I pulled from one the papers I just read. They chose to dispense with costly items such as animals and other things that did not fit in with their value proposition such as food concessions. Instead, they added high quality dance, music, venues and seating. Each of their shows has a theme and is quite different from others which allows you to see several totally different Cirque du Soleil shows if you wish. In constrast, the traditionals circus is pretty well the same every year .... you probably aren't compelled to go more that once a year (if ever:). Cirque du Soleil also targets a different customer. They are shooting primarily for adults even though some kids certainly go. It would be very unlikely that I would go to a traditional circus without my kids but I would and have gone to Cirque du Soleil without them. My wife and I recently paid $125/ticket for front row seats at the recent Delirium show, and I can tell you that I had no regrets ... a fantastic show! No way anyone would pay that for a traditional three ring circus.

Cirque du Soleil has built an extremely defensible position. Ideally, the competition doesn't even care untill it is too late. If the three ring circus tried to copy Cirque du Soleil, the result would likely be laughable. A critical part of a defensible strategy is tying together a number of key components, doing those really well and linking these to each other in a powerful way. This makes you very difficulut to imitate. Going back to Cirque du Soleil, they provide totally different experience by using out of this world high quality music tied to visual ambience, wild costumes, extreme acrobatics, fantastic dance and held in a decent venue. Very difficult to copy the formula and get it right. Even if you got close, their brand is strong enough that if you are looking for that kind of show, you go to Cirque du Soleil rather than an imitator. They have created a very defensible position.

So lets say we manage to create a defensible position by doing a number of activities differently and pulling these together tightly so that they build on each other making the whole thing difficult to imitate. How do we now sustain this strategic position? Assuming we are successful do create something different, compelling and defensible, presumably many will try to attack us. This is one of the most difficult things to figure out quite honestly. Some of the things that come to mind are obvious ... patent as much as you can, keep moving forward like crazy making each critical item better and better (remember "continuous improvement"?) and maybe add some new features and twist to the mix and perhaps create some strong relationships with key partners. Although you likely do continue to improve and add new capabilities, it probably isn't enough.

For a strategy to be defensible, it needs to be based on trade-offs. We need to chose what not to do and so do our competitors. If there are no trade-offs, there is not need for strategy ... just do everything. I've done this throughout my career and understand very well the trade-offs that need to be made in new products ... there are lots of things that just can't make it in and it is frustrating. However, the interesting stuff starts when you look at your competition and try to understand their business and motivations for doing certain things. If you understand the trade-offs they are going to make, then you can build a strong business because you'll have a good idea how they will react. Ideally what makes you special is exactly what your competitors will chose not to do.

Watcha talking about Willy?

Let me give you an example that will hit home if you are from a great little start-up in Ottawa called Catena. Catena created a plug in card for the SLC Series 5, an old product deployed by Lucent over the years with an installed base of nearly 20 Million lines. This product, named CNX-5, has been and continues to sell extremely well even though we were just a little start-up. How did we beat Alcatel, Lucent and all the other big players? The truth is that we didn't beat them ... we were just an annoying pimple and their big behind. Alcatel has better things to do than to build a custom solution for a small handful of customers ... their revenues from DSLAMs all over the world dwarfed our revenues and they must defend that fiercely against the other big guys. I'm pretty sure they weren't worried about us ... annoyed maybe. They would have had to drop their price dramatically to match our overall deployment costs in order to crush us and that would have cost them more than it was worth. For a small company, the revenues were amazing and we had a defensible position. We created some advanced technology that was very hard to duplicate, even by the top companies, and applied it to a significant market for our size. The technology and tenacity required was a barrier for other small companies and the market we attacked was large for us but not for our large competitors. A really good lesson to have lived through !!!

Ok ... enough with this dry stuff. Let's have a bit of fun. Check out this ad that was created through personiva (see link below). You can create your own through their website www.personiva.com . You upload your picture and it identifies your face then replaces the face of an actor in a comercial or anything else like such as a video game with your face. This company is shooting for a very different adverising model by being really neat, wacky and viral (i.e. the fact that I'm sending you this link is proof). The tech isn't so good that it fools you into thinking it was actually me in the commercial but that is what makes it extra funny in my opinion. Be sure to check out some of the different endings ... the disco one is really funny.

http://www.us.levi.com/lsco/levi/features/yourad/l_yourad.jsp?DetId=18499-7F6V6P0W6D2B7Y8

Cheers,

Allan

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1 Comments:

Blogger Ed Trach said...

Hi Al,

I received the URL of your blog from Jim W. (and assume he got it through Rolly). I was curious to see what you been up to ex-Catena / Ciena.

Earcandy.fm sounds like an intriguing concept to add value to audio streams (AOD = audio on demand+ ?).

Good luck with the new venture!

Ed

10:30 AM

 

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