The Best Businesses Create Demand

The entrepreneur creates a model i.e. a solution to the frustrations of customers.

Adrian Slywatsky in Demand discusses necessities for successful products.

Demand creators:

1.     Make it magnetic - A product needs to appeal to our cat brain.  It needs generate emotion, or even addiction (caffeine, nicotine).  The Mac is shiny and clean. Our cat brain (limbic) makes decisions and our human brain (cerebral cortex) uses selective distortion, selective retention, and motivated reasoning to justify that decision. Our rational brain is like a lawyer making a case.  

2.     Solve hassles - The hassle map illustrates this.   On Healthcare Slywatsky discusses a successful Medicare HMO called Caremore.

3.     The backstory  - what you don’t see that makes the product work.  ITunes for the iPod is an example.

4.     Find the triggers.  What gets people to actually buy a product?  For Nespresso it is seeing a demonstration and then tasting the product. I tried this and the demonstration is impressive.

5.     Build a steep trajectory  - Keep improving the product to stay ahead of competition.   Generic capsules for Nespresso were just OK’d by a European judge

6.     De- average - segment your market.  Make tea for tea drinkers and coffee for coffee drinkers.  Know your demographics and psychographics. 

Back to Gerber’s E-myth. 

Businesses have 3 employee types.

1.  The entrepreneur focuses on how must the business work as a system for generating demand and producing results for the customer thus generating profits.  The business is viewed as a whole, modeled after a future vision.  It is less important what is done than the process of how it is done.  It’s not the commodity, but the delivery.  How does my business look to the customer?  All work must be documented in operations manuals.

 

2.  The manager organizes the technicians and maintains the status quo often engendering conflict with the changing vision of the entrepreneur.   A people strategy is developed to communicate purpose, standards, and demand accountability to and of the employees.  Gerber’s manager creates a role for the technicians  in a game. The game requires victories to keep people involved and the game can never end.

 

3.  The technician  - does what work needs to be done to produce results to generate income.  He looks at the business as a sum of parts modeled in the present.  Gerber says that people with the lowest level of skill to fulfill their function should operate your business.    The critical step is determining what you really need.  Using low cost employees often goes against conventional wisdom as described by Michael Lewis in his book Moneyball. 

 Gerber notes that Business depends on

Innovation -which is trying new things.

Quantification - Does wearing a different color increase sales

Everything should be quantified.  Michael Lewis describes in Moneyball how critical it is to see which factors make a difference

Orchestration- after something is found to be an improvement all discretion is eliminated. 

It is only recently that corporations have adopted this as the Lean management process.

 Last Saturday I was supposed to meet with a group at Gas Works Park.   Looking for familiar faces, I took a walk around the park.  It was a beautiful hot (for Seattle) summer day.   There were several weddings going on.  As I hiked around the hill there were two women in their twenties sunning themselves.   I overheard one say to the other earnestly, “ Things just won’t get better until these old people die off”.    They must mean me, I thought.

 Our Irrational Mind

Michael Gerber’sE Myth - When a customer first hears about a product until the time he is triggered to buy it several thing happen.  First the brain takes in all the information needed to make a decision. It works like this.  A + B = C.  A is the stimuli.  B is what your brain does with it. C is the action that occurs.   The most important part is B.   The stimuli may go to the conscious mind but it is the unconscious mind that makes the decision.  The cat brain (see below) decides.   The unconscious mind contains the customer’s expectations.   These make up his personality.   If the food meets expectations the mind says yes.   The unconscious mind sends its decision to the conscious mind, which then goes out to the world to assemble the rational armament to support its already determined emotional commitment.   Therefore, buying decisions are made irrationally.

The  demographics (who your customer is ) establish the psychographics ( why he buys).   Reality exists only in someone’s perceptions.   Thus to create demand you need to find a perceived need and fill it. 

You have 3 brains.

 The most primitive is the reptile brain.  This does most of the housekeeping such as breathing, heart rate, sleeping, waking.   It also takes in visual signals and keeps track of your position in a room.  That, this is done in a separate part of the brain from the rest of visualization  is how you can drive home, have no memory of driving, and yet arrive alive.   The reptile brain got you home.

On top of that is a cat brain.  This manages animal survival.   Most of its functions involve the 4 Fs – fighting, feeding, fleeing  and ... reproduction.   Its  amygdala signals the emotions of the Fs  rage, pleasure, fear and their memories.  The amygdala  attaches to the hippocampus which converts short term memories to long term.  This is why you remember things that are emotionally charged.   These structures surround an egg shaped thalamus which is a control tower for the senses. 

When you first walk into a room your reptile brain notes your position. Then your cat brain scans the room.   You notice if there is anything you can eat.  ?  Is there anything that will eat you?   Is there anything you can mate with.  Is there anything that will mate with you .  Is there anything you have seen before. 

Finally covering this like a baby blanket is the neocortex.  Although it appears uniform , each region of this is specialized with regions for speech, vision,  memory etc.  The part behind the forhead, prefrontal cortex, handles the uniquely human “executive functions” problem solving, maintaining attention, and inhibiting emotions (leashing the cat).  Since the birth canal can only be so big, babies are born with an undeveloped brain.  Thus babies are learning machines making adults teachers.   

Which leads to Brain Plasticity 

Dr. Michael Merzenich at Google on Plasticity 

Medina Baby Brain Rules Lecture at Google

The brain is a plastic machine.  The brain  establishes control of its development. 

 The first stage consist of  anything goes plasticity.  For example if exposed to specific sounds the brain develops an auditory cortex or a language specific processor.  If exposed to random noise this does not happen.   Through natural competitive plasticity processes the brain organizes itself to learn language.   A the baby gets exposed to 4 million words before it puts meaning to any words at about 9 months.   This is important to developing working memory and selective attention.  In the next stage plasticity only occurs when the brain interprets an outcome as good for it.   As we age learning  gets more gates and the brain selects what it wants to learn.   It evolves to where it can control its self -development. 

Merzenich  then covers the example of a child learning to use a spoon.  The brain specializes by evaluating the success of an attempt.  If the attempt is good the brain says save it and it strengthens the connections that made that attempt.   Over thousands of attempts, it evaluates, judging by success in getting the food.  It creates a model of a good attempt in memory and  evolves a model by practicing its use.  It  then evaluates its success against that model.   The area of the cortex devoted to controlling the hand gets larger and millions of neurons interconnect differently.   That’s how you master abilities and finally develop what is YOU.   All input is associated with all previous plasticity, which is your model of the world; your prediction of what comes next - You.  You compare every input with your prediction.  This happens billions times a year and becomes you.

In a second stage  it acquires it primary skills.  This is done at school and life

 Medina Brain Rules Lecture

Lastly in the third stage  it becomes a user of skills it has mastered which gets us through most of our life.  

 You can screw up a brain with bad genetics, a bad childhood.  However, since the brain  is plastic it can be fixed.