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.