Brigadoon Weekend
Emerging issues shaping commerce and culture.
October 10, 2020
Business Models Only.
BUSINESS MODELS DEEP DIVE SEVEN
How the death of fast fashion is transforming Asia's garment industry: The changing economics of the industry could profoundly impact those countries in South and Southeast Asia that have positioned themselves as hubs for the most basic elements of the garment supply chains. And it potentially ends a seven-decade-long global race to the bottom on wages, as full automation drastically changes how the industry turns a profit and threatens to displace millions of low-skilled workers around the world.
+ Nikkei Asia
Arii has over 2 million followers. So why did her clothing line fail? The social media star fell short of selling 252 items in 13 days. 252 out of 2.6 million is just over .009%. If you look at that number as a conversion rate, it’s low—too low for anyone who calls themselves an influencer to aspire to. It’s basically less effective than a display ad, which is saying something.
+ Adweek
What’s next for Silicon Valley? Over the last 20 years, Silicon Valley has benefited from a once-in-a-lifetime alignment of advantages. American primacy, the ubiquity of cheap capital, the arrival of the smartphone (among other widely adopted tech innovations), and, perhaps most significantly, a benign regulatory environment have all conspired to create a historic concentration of wealth and power. The titans of the Valley and their heirs have been free to roam far ahead of lawmakers, watchdogs, and tax codes. That might not be true for much longer, however.
+ Maëlle Gavet
11 lessons from venture capitalist Fred Wilson: Fred Wilson has been investing in tech companies since the late 1980s. CB Insights takes a look at some of his most important lessons on product, management, and investing.
+ CB Insights
Have we reached “peak fintech”? Business and banking are being presented with opportunities to benefit from digital insights like never before.
+ Jane Turner
Death of a car salesman: Subscriptions disrupt the forecourt: Carmakers seek out different models to appeal to streaming generation.
+ FT
How China’s economy is poised to win the future: The Chinese authoritarian-capitalist model wasn’t supposed to survive in a global free market, let alone thrive. Today China’s political and economic system is better equipped and perhaps even more sustainable than the American model, which has dominated the international system since the end of World War II.
+ Ian Bremmer
ROSS RANTS
Audiences + business models
Like most entrepreneurial endeavors, we rarely know what the market wants or needs - and we often launch a product or service based on guesswork and hope. This leads to revenue mismatch, creating too many offers, and going after too many customers / too many markets.
Bill Aulet has written and lectured extensively on the concept of Disciplined Entrepreneurship.
Aulet is a multi-time entrepreneur and the Managing Director of the Martin Trust Center for MIT Entrepreneurship and Professor of the Practice at the MIT Sloan School of Management.
You can find his materials here and a lecture here.
Amazing resources.
From my entrepreneurial endeavors (and numerous failures), being disciplined, and saying no, staying focused is essential.
You can’t be all things to all people.
No doubt, this is a challenge, but it is critical at the end of the day.
Many times entrepreneurs are going after two audiences, two customers, and two types of revenue.
One B2C and one B2B.
Both demand different types of strategy, tactics, and business organization - not impossible - but a significant challenge to be successful in both.
Consider there is a reason there are so few KFC-Taco Bell joint restaurants - it is a massive challenge even for a well-funded, long-established, giant corporation to produce food for two different audiences.
Why business models matter = narration + numbers
“Who is the customer? What does the customer value?” -- Peter Drucker
A good business model begins with an instinct into human motivations, fears, emotions, challenges, and desires flowing into a rich stream of profits.
Business models at their heart are stories that explain how the enterprise works and makes a profit.
When business models fail, they fail the narrative test (story) and the numbers test (profits + loss don’t add up).
Management consultant and writer Joan Magretta explains business models ask fundamental questions: How do we make money in this business? What is the underlying economic logic that explains how we can deliver value to a customer at a reasonable cost?
Think of a business model like the scientific method - you start with an idea for a consumer need, you then test this need, and iterate as necessary.
Plus, business models serve as an exceptional planning tool - a business model focuses on how the enterprise elements will work together to secure profits.
Business models often fail because they make feeble assumptions about human motivations, fears, emotions, challenges, and desires. Often business models are solutions in search of a problem.
Business models are not the same as a strategy.
Business models describe how the pieces work together, whereas strategy tells how you will do better than your rivals to capture and secure customers.
Sooner or later, if you are right and discovered a human need where you can deliver a solution profitably, you will foster competition. Dealing with this competition is how you deploy your strategy.
Executing the same business model with no strategy to differentiate yourself in terms of what customers and markets you serve will lead to failure.
Failure not because of a business model, failure because you are trying to be all things to all people - there is no difference in experience, engagement, or effect between your company and the other company.
Being all things to all people has no story, no patina, no folklore.
A proper business model tells a good story and can get customers aligned around the same values and culture your company brings into existence.
A good story is easy to remember, and is easy to repeat.
A good business model is easy to remember and easy to repeat.
A good business model is a narration that captures the numbers necessary to serve customers and remain in existence for the long-term.
BUSINESS MODELS DATA POINTS
Chew this: Gum marketers are trying to turn around a 23% drop in US sales between 2010 and 2018, WSJ reports. They attribute the plunge to mints (you don't need to find somewhere to throw them out), smartphones (an alternative outlet for your nervous energy), and peer pressure. “Chewing gum is becoming less socially acceptable,” said Dirk Van de Put, CEO of Trident and Dentyne maker Mondelez International.
Louis Vuitton is now designing outfits for League of Legends characters: The luxury brand is partnering with Riot Games to offer specially designed champion skins and a capsule collection designed by famed French designer and LV creative director Nicolas Ghesquière.
The surprising business model behind Guinness World Records: Planet Money reports, the people behind the Guinness World Records used to make money by, well, selling books. But with the rise of the Internet came a decline in book sales, and so they had to create a new business model — selling publicity.
AI-powered advances by themselves, according to a 2019 McKinsey study, could boost annual global GDP by $13 trillion, or an additional percentage point.
In a normal year, an estimated 30% of fashion and clothing goods go unsold; this year, those losses are expected to be dramatically higher. The Wall Street Journal reports that Ralph Lauren has $160 million worth of inventory that is likely to be sold off for less than the company paid for it; Urban Outfitters has $43 million, and Columbia Sportwear has $9.3 million.
Indra Nooyi is optimistic about business’ role in solving climate change: "Businesses have a crucial role to play in changing consumer behavior: the push factor. If companies like PepsiCo change their model to use less water and more recyclable packaging, then by purchasing these products, consumers are helping to protect the environment. But businesses also need the pull factor to help incentivize that change. They need consumers to purposefully not buy things that damage the environment. Our goals at PepsiCo would have been far easier to achieve if our consumers had voted with their wallets and forced us to change."
BRIGADOON READS
Subscribed: Why the Subscription Model Will Be Your Company's Future - and What to Do About It
+ Tien Tzuo
The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail (Management of Innovation and Change)
+ Clayton M. Christensen
The Future of Capitalism: Facing the New Anxieties
+ Paul Collier
BRIGADOON WATCHES
The end of advertising: In this talk from Summit 2018, Connie Chan, a general partner at Andreessen Horowitz, reveals how Chinese internet companies have adopted innovative business models that diversify revenue streams and create customer flexibility. Watch the full video of Connie’s talk or skip to particular sections in the index - click here.
TWEET
Studies by Harvard and Catalyst show that the increased female representation on boards is linked to greater return on sales, higher return on equity, and improved corporate reputations. The list could go on, but the bottom line is this: A women’s place is in the boardroom 🙌
@mishanonoo
Misha Nonoo is a US-based British-Bahraini fashion designer, best known for her eponymous line of women's ready-to-wear.
Have a great weekend. See you next week.
-Marc
Curation and commentary by Marc A. Ross
Brigadoon is conversations and insights for a better world.
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