When to roll in the Trojan Horse
I've been speaking about Trojan Horses a lot this week. And, I mean this in the Greek mythological sense and not the computer virus sense.
I mean it to represent a beachhead strategy when it comes to launching a new product. It would have been hard for Facebook to have taken on mySpace directly, but by building a site for University students first, establishing a strong position, and then branching out, they were able to do just that.
The same with regional services like Thrillist and Daily Candy. It's easier to launch a service one city at a time, building up critical mass in each, before hopping to a new town and starting over.
This is a time-honored style of business development; get your systems down on either a small scale or with a specific focus and then expand. It’s been used in all sort of industries, and has propelled some merchants into areas one would have never suspected. At one point Sears, yes that Sears, was the largest seller of homes in the United States. How? Systems.
By developing the finest system of procurement, delivery, and financing of any merchant, Sears was able to build, sell, and deliver more houses to more people than ever before. Step back from your business and find out what your good at, really good at, and then apply those lessons and systems to a comparable product.
We've used this tactic at Snooth in the past and intend on using it more in the future. We used our position in wine (Snooth) to leverage our hop into Spirits (TheSpir.it) and are about to do it again with a hop into another new vertical. It's a powerful way to get a leveraged start, and one that you should consider.
Take the time to assess your systems. Find out what you’re good at, and at the same time what you could be better at. Leverage your assets and work on your weakness to make expanding your business an extension of your existing business. This sort of natural growth not only creates incredible economies of scale but imbues your new venture with unstoppable momentum.
Fighting the Attrition
"Come writers and critics
Who prophesize with your pen
And keep your eyes wide
The chance won't come again
And don't speak too soon
For the wheel's still in spin
And there's no tellin' who
That it's namin'.
For the loser now
Will be later to win
For the times they are a-changin'."
- Bob Dylan
Do the maths. If the average American holds a job between 3 and 5 years at a time, with those between 18 and 38 (most of the people I work with fall in this range) having the shortest duration, then how do you build a culture when 1/3 of your workforce is leaving each year?
There are 24 people in the office as I write this, up from 5 in May 2009. Following the logic above, that means every 45 days someone will leave, and we'd have to hire at that rate just to hold steady. However, we are growing, and expect to have 40 people here by the end of 2011, so in addition to the 8, we'd need to hire 16 more people. 24 people - that's one every 2 weeks.
It takes us 40 hours on average to find a candidate we want to hire, and then 3-6 months for them to reach maximum efficiency here. HR quickly becomes a major role and although Operations does most of the work, it clearly touches on each and every employee here.
Although it may not seem like it when you are sifting through 1,000 resumes, HR (I mean it in its broadest sense, to include training, morale, hiring etc) is one of the most scalable things I can focus on here. While the CEO may get the glory, the success a company achieves is built on the hard work of the folks who come in daily and move the ball forward inch by inch. As Steve Jobs was known to say: “A players hire A players; B players hire C players”. Investing the time to hire the best, and then work with them so they stick around pays dividends.
I wrote this today as one of Snooth's editors, Carly Wray, is leaving us to work on a script optioned by a tv network. We'll miss her, and are sad to see her go. And, although I work hard to keep people here, when someone's dream takes them in a different direction, there's nothing to do, but to wish them luck. Good luck Carly, we're rooting for you.
Copying your competition is pointless
I used to sail Laser IIs while at University and one thing the Captain of the squad told me was that if you are being shadowed by someone from the other team, the easiest way to leave them behind was to throw in as many tacks as possible.
Its totally counter-intuitive, tacking slows the boat down and unnecessary tacking is the last thing you'd think you'd want to do to stay in front. But, and this part stuck with me, if you are being followed by a shadow, someone that will mirror your every move, the more moves you throw out the harder you become to replicate, and slowly your opponent will lose ground.
Its the same with chess. You can't win a game by copying your opponent, you are always a move behind.
In business these rules apply even more directly.
If I were to create a site that mirrored Facebook's functionality no one would join (there are switching costs to leaving Facebook, and a mere replica cannot not overcome those). If we copied everything we could see about a competitor, we'd not succeed - there are too many hidden points of differentiation to replicate any company or service accurately. While it may be possible to copy the design ethic, or the start time, or the customer service policy of any specific company, its impossible to replicate the culture, the team, the goodwill or any of the other less tangible attributes.
For better or worse, the CEO of a company needs to carve out their own niche, follow their passion, and trust that their original instincts and business plan made sense. Its why the Blue Ocean Strategy is so popular.
Who is your competition?
Just who is your competition anyway? Is it the wine store down the block with really cheap prices, or that winery across the way with perfectly draining soil?
The execs at Coke did a good job when they began defining their market in terms of "Share of the Stomach." No longer was Pepsi their only nemesis, suddenly Campbell's Soup, Burger King, and bell peppers all became public enemy #1.
Chris Dixon, Co-Founder at Hunch, recently wrote about a quote that summarizes this perfectly for internet companies: "Your #1 competitor starting out will always be the BACK button, nothing else."
In my role at Snooth, I have been asked the competition question at least 50 times, and each time I say that same thing: We compete for users' attention (and if we sold anything, we'd be competing for their money, as well). People hate my response, and they expect me to list companies like Wine Spectator or Wine Advocate or Thrillist or Wall Street Journal or someone else, when that simply wouldn't be true.
It wasn't true when Snooth had 1,000 users, and it's not true now that we reach 10 million users per month. Our biggest issue has always been lack of recognition, or worse, ambivalence from users that we've managed to get to our homepage. Wine Spectator, great as it is, has obviously never captured 100% of the universe of wine lovers on the planet. For Snooth to get its first 1,000 users, let alone its 10 million users per month, we didn't have to win them from another wine resource. In fact when we survey our users the most common answer to "what other wine websites do you visit?" is "none."
It's the same for a winery, or a retailer. Your biggest problem is not the obvious competitor you've been eyeing warily, but the other distractions, causes and temptations that tug at the minds and wallets of your prospective customers.
That may make marketing sound like an impossibility, but remember this, the customers that chose to spend their money with you, did so above every other option in the world. You just need to figure out what it was that caused them to do that, and position yourselves for a repeat.
Monitoring Your Reputation
Last time I wrote about how I stay on top of industry and other relevant news, and I promised to talk about how I keep tabs on what’s being said about the brands I work for.
The gold standard used to be Google Alerts. In true Google style, there’s a simple interface where you type in the keywords you care about (your brand, your name maybe, a region or varietal you are interested in, your competitor's brand, etc.) and then choose whether to have the results emailed to you daily or weekly. Sadly, since the explosion of user-generated content, Google Alerts has struggled to keep up and is now significantly less useful. I still use it, however, as it helps deliver a baseline.
Each of the social networks offers a way to search their own data. For example, there's Twitter Search. This used to be a separate product called Summize, but was acquired by Twitter a year ago. The service is still not well-integrated into Twitter.
Recently, the tracking and monitoring space has exploded and there are lots of choices that each offer a single way to track what is being said about your brand across multiple channels (web, Twitter, Facebook, blogs, etc). These range in price from free to several thousand dollars per year. I think that the free services are sufficient for those starting out, and fine for the majority of wineries and wine brands.
Social Mention, which is built on Yahoo’s Search Engine, is my favorite both for its simplicity and for its depth. The web interface is simple, there are some basic analytics, it allows you to receive email alerts, and importantly, it’s free.
Embracing Fear
Entrepreneurs frequently have to make big decisions based on limited information, and when a wrong decision can bankrupt the company many people would over analyze and not commit, which in itself can be equally detrimental. Fred Wilson of AVC blogged that "Fear is a No-No" a few weeks ago, and I wanted to share two stories I've experienced that back that up:
Snooth moved into a new office a month ago. It's the fourth space we've had since we incorporated in November 2006, if you include working off of the kitchen table in Mark's old apartment. Here's the list of spaces we've had:
- Marks Kitchen Table - 2 people - dollar risk: $0 (Mark could always go back to eating breakfast there)
- Shared office space (Sunshine Suites) - 5 people - dollar risk was 1 month's rent: $3,000
- Shared office space with a fellow startup (HopStop) - 10 people - dollar risk was my commitment for 6 month's rent: $21,000
- 49W 24th St, Snooth's own 5,000 square foot office - 20+ people - dollar risk is a 5 year lease, plus improvements to the space, with a total value of over $600,000
When you're a small startup watching the pennies it can be hard to go from $3,000 to $21,000, but the sticker shock on moving to a commitment of over half a million dollars can keep you up at night. However, as the CEO of a hyper-growth startup (we've tripled our headcount in the last 12 months) I've become inured to the pressure of making these big decisions, and when you factor in that the process from finding a new office space to moving can take 6 months, and the growth rate of our company over that time, if we'd moved to anything smaller we'd have been wanting to move again by Christmas. Now we're settled, the new space is the perfect size for the team, and what seemed like a huge monthly commitment now seems tiny.
The second example of this is that when Snooth was first conceived and launched we had intended on monetizing via lead generation. We put a lot of effort into the platform to manage the accounting, billing and management for our partners, and then, when we began signing stores up, we found the going slow. After a year of fits and starts we realized we still didn't have a viable business model, and so (here's the fear inducing part), abandoned our original plan, and thus far our only hope of revenue, to build an ad supported business. Oh, we also decided to do that in the winter of 2008, which was probably the worst time to launch an ad supported anything.
Fast forward 18 months, and Snooth is now a profitable ad supported media company. We have multiple brands: Snooth, Thespir.it, and we're launching several other verticals over the coming months, and our sales and operations team, which has grown from 0 to more than 10, now makes up around half the company.
As CEO I've gambled on these issues and others, and have been lucky enough to have bet correctly each (well, at least most of the) time. If I'd have bet wrong with the latter example the company would not exist today, and yet, its clear to me that not taking these big swings would also have resulted in a company unlikely to have existed at this point either.
Keeping Current
People often ask me what newspapers I read. I haven't read or held a physical newspaper in a decade, and I get very little of my news from traditional news sources. However, I skim a lot of sources daily for information, be it general news, wine and spirits news, or technology-related information.
I follow 39 feeds, ranging from the NYTimes to Techcrunch to Tom Wark's Fermentation blog, and in total these sites generate around 200 articles per day. The only way I can keep up with this is to skim the headlines and just read the few that really catch my attention. I can do this in around 20 minutes using Google Reader which allows me to skim headlines chronologically.
Google also makes it easy to whittle down your list once it gets too large. They have a trends tab, which shows you which feeds you typically read. It's then easy to delete feeds that you may have added but no longer focus on. For example, from my account, Google tells me that “From your 39 subscriptions, over the last 30 days you read 4,517 items, starred 2 items, shared 0 items, and emailed 0 items.” However, some feeds are read frequently (NYTimes 83%) while others are ignored entirely.
In addition, I subscribe to several newsletters, including the following Wine Industry ones that I recommend:
> Wine Business Daily - Essential daily industry news
> Benson Marketing Groups daily newsletter - As above, essential daily reading
> Bottlenose newsletter - Bottlenose builds ecommerce websites for wineries, and they have a monthly newsletter which discusses aggregate metrics and data for their customers (eg. June's average order value for their stores was $255.09 a drop of 0.2% from the previous month).
> Mark Brown's Buffalo Trace Industry News Update - Mainly focused on Spirits, but a nice counterpoint to the California-centric wine news I often get.
I’ll talk about how I stay on top of whats’s being said and written about the companies I work with in a later post.
Getting the most out of Google Product Search
Wineries typically show up first in Google searches for their brand (having the winery name in the URL is key for this), but for more specific searches, often lose out to retailers or other sites. Owning that top spot is key, as shown in this heat-map of user click behavior: The top result receives over 50% of the clicks.
It is even possible to own two sequential spots on Google, but it's rare and typically limited to similar products or parent/child classes of products in larger database-driven sites:
Retailers and wineries do have another ace at their disposal, though, and it’s Google Products (formerly known as Google Base). As can be seen in the screenshot below, Google now shows shopping results in the main listings. Coupled with an image, this is a very attention-grabbing part of the page, and I would expect the heat-map distribution to change based on this new page design.
As a winery or retailer, you should make sure your products are listed in Google Product Search -- instructions can be found here -- whether it’s something you do yourself, or a service your website management company can provide, this should be a priority. It’s free, it's Google, the searches are targeted, the users are highly qualified, and some other wine sites (including WineLog) even populate their database using Google’s data, so the reach is further extended.
The move
Snooth moved offices today. It's been a long week of furniture assembly (we've estimated around 140 hours so far), schlepping boxes of wine (around 150 back breaking cases), and hauling trash out of both the new and old space (around 2,000 cubic feet of trash). I had meant to write more, but I'm beat, so will leave you with a tour of the new space (we're about 60% settled, we need to decorate and position the furniture properly).
Wall of unopened wine boxes:
Watch the video here:
New Snooth Office tour
Snooth’s New Offices
Snooth is moving to new digs this Friday, and this is a preamble to me writing a post on the need to ignore fear. In the interim, here's a few shots of the work in progress. The space is being rebuilt. It was a raw space, so we've put up some 6-foot high walls to create some separation. The first shot shows two of the 5-man pods, built in this way. Then there are some shots of the conference rooms, and because we're moving in just a few days and don't have time to wait for the paint to dry, we're having the furniture shipped in at the same time.
It's a huge step up for Snooth, which began in Mark's kitchen in Brooklyn, before we moved to a shared space (3 desks) and then onto our current space (12 desks now, but meant for just 8). This new space, is 4,500 square feet and will be built out for 30+.
