Ecomm Challenge Day 2 — Strategy

This is a big one to tackle on Day two! I’m not sure I will be able to articulate all of my thinking in this article, but I will attempt to outline the main things that I think are important, in what is probably more of a philosophy that a strategy.
I recently read Peter Thiel’s ‘Zero to One’ and although I can’t wholeheartedly agree with all of his thinking and ethos, I think most of us can agree he is one of the shrewdest investors operating right now. He also knows what it takes to make a successful company, and has created 7 questions to product innovation (the following excerpts are from Hypinnovation.com):
1 — The Engineering Question
If we are truly talking about an innovation, then the product will not be an incremental improvement. For it to be an innovation it must be 10 times better than what is currently available. Apple’s iPad was 10X better than previous tablets. Google’s search performance, accuracy, and simplicity, was 10X better than the plethora of previous search engines and portals.
“A Great technology company should have proprietary technology an order of magnitude better than its nearest substitute.” — Peter Thiel
I am not creating any new technology at all, but what I hope I am doing is building on my strengths and focusing on innovative ways of marketing products that manufacturers and wholesalers may not have the time or resource to do.
My aim is to attract a niche of customer who value new and innovative products which take an ethical approach to their manufacturing and distribution techniques.
To do this, I have applied my own “personal values filter” on the products which I hope to promote and sell, acting as an ethical curator of exceptional products which will save the consumer the arduous task of hunting them out themselves.
2 — The Timing Question
Are you entering an existing market with the product? Is it a slow moving market, or a fast moving one? Cleantech compared itself to the silicon chip industry of the 70’s, but failed to appreciate the speed at which that market was moving — it was expanding exponentially with Moore’s law — whereas the cleantech industry had no such advancement.
There are some key trends that support undertaking this challenge at this particular point in time:
Product discovery is moving rapidly from search to social:
A key element of my marketing mix will be social & influencers, which most retailers have struggled to generate a positive ROI from.
Digital Media has now Inverted against Analogue media:
The Influencer market is estimated to be worth £3.8–7.6bn in the over the next 5 years.
YouTube stars are seen as 90% more authentic compared to mainstream celebrities. 74% of use social media consumers use posts to make purchase decisions. Social validation is now seen as a major driver of e-commerce revenue.
Influencer need — It’s hard to be an influencer. No, really. I know it may not look like it on the surface what with all the free stuff they seem to get given, but the level of output you need to sustain to grow an audience is really terrifying. And it is just about to get even harder.
Facebook are about to roll out the same branded content tool to influencers that publishers have had for over a year. It is designed to allay consumer fears that they are not always aware that an influencer is working with a brand to recommend a product. This is fair enough, but the new system puts all the control back in Facebook’s hands. As soon as the influencer creates the post and tags in the brand, the brand will now have to pay to distribute the post through Facebook, rather than making the most of the influencers earned organic audience.
Why is this bad? Influencers lose their organic audiences, which they have tried so hard to build up. Facebook earns more money through paid media spend for the same campaign and advertisers end up spending more money to deliver the same campaign. You could argue that Facebook needs to recoup the costs of hosting all this content, but in reality we know Facebook is doing very well:
Another stroke of evil genius?
Ecommerce was worth £133bn and growing at the rate of 15% — E-xanthos
Although the expression of the final idea has yet to be defined, it would appear that I am fishing in the right pond. To be effective I will need something to make the proposition unique to cut through the noise of other competitors.
3 — The Monopoly Question
Peter Thiel believes monopolies are a good thing, and competition is bad. Monopolies allow you to innovate, because you have cash flow, and room to try radical things. Competition, on the other hand, prevents you from innovating. Google has had a monopoly on search for over a decade — nobody even comes close to its market share — and it can therefore invest in innovation. Think of Google Glass, Driverless Cars, Project Loon, and Internet Barges.
“Exaggerating your own uniqueness is an easy way to botch the monopoly question.” — Peter Thiel
This is one of Peter Thiel’s questions that I really struggle with. I understand that Google and Facebook have been very profitable due to their respective monopolies and have earned their shareholders billions of dollars. However, when you consider the impact of these monopolies on commerce in general, and the influence they hold over our lives specifically, I cannot agree that they are always a good thing. I agree uniqueness is a positive thing as it makes you stand out, and that you should have a point of difference that is not easily replicable. During the challenge I will be working towards a USP without it being monopolistic.
4 — The People Question
So much of innovation is about the quality of people and culture you have. And finding a technical advancement which is 10X better, means having engineers and technical people to do it.
“This was a huge red flag, because real technologists wear T-shirts and jeans. So we instituted a blanket rule: pass on any company whose founders dressed up for pitch meetings.” — Peter Thiel
I have to back myself on this one. I also have some very talented and helpful friends which have already offered to help me on this quest. Culture is something that I think is really important and I hope I can instil my values with the people I collaborate with.
5 — The Distribution Question
You might think your technology speaks for itself, but it most probably doesn’t. You still need an effective distribution channel. Primarily a way to get close to the customer, so they can experience the superior advantage you can bring.
“Cleantech companies effectively courted government and investors, but they often forgot about customers. They learned the hard way that the world is not a laboratory.” — Peter Thiel
I think the distribution question is the key question to the success of this venture. I am going to aim to set up and automate as much of the site function and supply chain as possible. This primarily is so that I can focus my efforts on distribution.
I am hopefully going to recruit influencers to help develop the proposition and bring their audiences to help build a community. Then I am going to use as many creative and content assets that I can generate to market to niche communities on their terms. I will use have to use mostly free methods of engaging with consumers, but may have to reserve a small promotional budget to get started.
6 — The Durability Question
You should plan to be the last mover in your market. What does the market look like in 10 and 20 years time? And how will your solution dominate the space? What possible competition could you face — can China make it cheaper, is the customer still ready to pay for your solution when circumstances change? You need to be asking these questions to see how durable your future is.
I only have 15 days to make a profit, so I am going to park this until after the challenge. If it is a question of last mover advantage, I think I have it. E-commerce is a mature field, affiliate marketing has been around for decades, as has social media and digital content. People have established very robust businesses in each of these fields.
7 — The Secret Question
All great companies are built upon finding answers to secrets, this is the heart of innovation. Secrets are problems which have an answer, but nobody has figured it out yet. Pythagoras discovered the secrets of the triangle, Newton discovered the secrets to gravity, and NASA figured out how to land humans on the moon. These are big secrets, but every great company and product solves a problem for the customer in a new way, previously unknown. Think Airbnb and Uber.
“Great companies have secrets: specific reasons for success that other people don’t see.” — Peter Thiel
This one also needs some work, but at the moment the expression of the secret is this:
“Most people would assume they buy a product on logic and price alone. I’m intending to prove that this is not the case.
People would rather buy an ethical, well-designed product over one that merely provides a function. To buy into this concept they need to feel that they are not alone and that there are many people that think the same way.
That in turn has the power to change things.
Pay a fair price, for well designed products that are made to last.”
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