Before You Can Multiply, You Must First Learn to Divide

While in Asia, I heard a great expression, “Before You Can Multiply, You Must First Learn to Divide.”  I now find myself using this saying nearly every day.

The idea is that if you want to grow your business, you must learn to partner with others – and give them a slice.  This means you take a smaller slice of a bigger pie.

I have been doing this for a while now with my agent.  He takes a percentage of my business in exchange for handling everything from negotiating, contracting, logistics, travel, invoicing, etc.  I am convinced I make more money through this arrangement…and work less.

I recently had a conversation with a guy who runs a seminar business.  When big name American speakers come to his country, he hosts a public seminar.  His biggest challenge is getting butts in seats.  When I looked at his business model, it was flawed.  He has a lot of fixed costs, like advertising, printing (brochures) and postage.  His customer acquisition cost is ridiculously high, and was often hit or miss.  He could spend $5,000 on a newspaper advertisement and get only three customers paying $300 each.  Even with 50 paying customers, he is still paying a 33% customer acquisition cost – assuming no discounts.  My suggestion was to create a model where others make money only when he makes money.  One example is to set up an affiliate program where he gives a large commission to people who get him paying customers.  This moves his costs from fixed to variable.  This removes his risk while encouraging others to take a vested interest in his success.

Yesterday I was at a board meeting for my local National Speakers Association chapter (I was the President last year and am still on the board).  Over the last two years we spent a lot of time and money on something we call the “Visibility Initiative.”  The idea was to get visibility for our members in order to help them get more gigs.  We spent thousands on website development and marketing.  If we use the “divide before multiply” concept, it would make more sense to get someone to do all of these activities for us.  Speakers bureaus sell speakers to event planners.  They already have the connections and already have websites.  This is their business.  Therefore, if we partner with a bureau (or two), they get their commission for every gig booked and we get greater results with less effort.

When I was on the Donny Deutsch show, a caller asked, “I am the owner of a business.  How do I retain my top talent?”  Donny asked what percentage of the business he owned.  The caller said 100%.  Donny’s response was (paraphrasing), “Wrong.  As of today you own 80%.  Go into the office of your top 10 people and tell them that they are now partners in the business.  Give them 2% each.  They will have a greater sense of ownership.  Besides, this is probably the amount you would have given them as a bonus anyway.” 

Where can you multiply by first dividing?  Where can you give a slice of your business to someone else?  How can you grow your business while creating more income for others?

What Can You Give Away for Free?

Today I leave for Asia and will be gone for 3 weeks. Before I go, I want to throw out an idea I have been playing with. It’s rough, and I will write more about it soon. The concept is probably most relevant to those in the “intellectual property” business – speakers, trainers, advisers, coaches, and consultants.

I was speaking with a friend who owns a training business. She described a frustration of hers. After doing a day-long training session for a company, she discovered that they were using her materials to train other employees – without paying her any extra money. From her perspective, this was not permitted unless they licensed her content. She also discovered that outside trainers (i.e., competitors) were getting access to her training materials.

This got me thinking about my recent blog entries on companies that are giving away their intellectual property as part of their innovation strategy. GlaxoSmithKline is giving away their cancer cell research, and Nokia is giving away free software.

So, I asked her, “What if you gave away your intellectual property? How would you need to re-invent your business?”

I then drew the following chart to stimulate some conversation. I used getting publicity (PR) as an example during our discussion (written from the viewpoint of the buyer – not the service provider).

The framework depicts three levels of services/products: tell me, enable me, do it for me.

Tell me: These products/services tell you how to do something. If you want PR, you could read a book, take a class, or listen to CDs on the topic. Coaching and traditional advisory-type consulting also fall into this group.

Enable me: These products/services go beyond advice and give you the tools to make things happen. Pricing may be a one-time fee, a subscription, or a pay-as-you-use. [my Innovation Personality Poker is a simple “enable me” tool]. As an example, if you want PR, you could…

• buy a press release writer, software that asks simple questions and spits out a professional press release with hypnotic marketing words embedded.  Maybe it could even automatically submit it to PRWeb.com or PRNewsWire.com.
• buy/license an article submitter that sends your articles out to a pre-determined list of article websites.
• subscribe to PRLEADS.com, a subscription service that sends you daily requests from journalists who are looking for experts.

Do it for me: Here the work is actually done for you. You could hire a PR firm to get publicity and you could pay them on retainer (a monthly fee) or better yet, you could pay them on results (they get paid when you get placed).

What is interesting about this model is that as you go to higher levels, the value delivered increases, while the offerings become more difficult to replicate.

I believe that the sweet spot is the “enable me” level. Not only do you increase the value delivered and reduce the replicability, but you also gain leverage because you can build it once and sell it many times.

What if you gave away your intellectual property? What if you gave away your “tell me” content and used it as marketing material? What if your greatest assets were converted into “enable me” products? How would you need to re-invent YOUR business?

Well, I’m off to Asia. In the meantime, I welcome any thoughts or comments on this idea.  And if you are in Kuala Lumpur, Bangkok, or Singapore, I hope you will attend one of my presentations.

Nokia Giving Away Software for Free

Yesterday I mentioned that GlaxoSmithKline is giving away a small fortune’s worth of cancer research.  The idea is to speed up the process.

Yesterday, Nokia announced that it will spend nearly a half billion dollars to buy a software consortium – so that it can give away the software for free.  Symbian, one of the leading software developers for high-end mobile phones, is the platform for Nokia phones.  By offering the software at no cost, Nokia hopes to increase Symbian’s market share, to increase the pace of software development by third parties, and to decrease its own software licensing fees.

According to the article, “While more than 90 percent of PCs run Windows, the market for cell-phone software is much more fragmented, with a dozen competing platforms. That means software developers have a much harder time creating applications, and raises costs for handset manufacturers and carriers that have to deal with many different systems.”

Symbian will continue to be run as a multi-company foundation, addressing the concerns that it might eventually become a monopoly like Microsoft.

What can you give away to others – suppliers, researchers, competitors – that will enable you to increase innovation at a lower cost?

Open Source Innovation vs Open Innovation

I discussed Open Innovation many times in this blog.  The other day, GlaxoSmithKline announced that they are collaborating with the National Cancer Institute to make a “large body of cancer cell genomic data available to all cancer researchers.” This feels more like “Open Source” Innovation.

Much like Open Source Software, GSK has turned over a small fortune’s worth of information to the research community – for free.

Assuming that that the findings of the community are made public (the open source philosophy), this would almost certainly accelerate cancer research exponentially.  Each researcher could build on the ideas of others.

Most research groups are small organizations who do not have the capacity (or desire) to develop drugs.  Therefore, when breakthroughs are discovered, GSK can step back in and capitalize on the finding of the research community.  This will surely decrease their drug development times and costs.

I do wonder how they are handling intellectual property ownership issues that might emerge.  Stay tuned!

7 Ways Innovation Can Help Recession-Proof Your Business

As the economy continues to tumble, it is tempting to cut back on your investments in innovation. But now is the perfect time to increase your innovation efforts. Here are seven creative ways that innovation can help you recession-proof your business.

1. Make Your Products/Services More Accessible

Successful companies are now shifting their emphasis away from increased performance and sophistication to increased accessibility and affordability. This helps you tap into an under-served market. Low cost and ultra-portable netbook computers are outselling more expensive models. The Nintendo Wii has sold more boxes than PlayStation and Xbox combined. To learn more about specific innovation strategies, read our articles on The Innovation Bell Curve.

2. Use Open Innovation to Reduce R&D Costs

Sometimes it can be less expensive to have others do your innovating for you. Organizations like InnoCentive enable you to define the “value” of a new idea and then post your request to a large community of expert solvers. This moves innovation from an unpredictable cost (infrastructure, the cost of researchers, and other hidden costs) to a predictable cost (the posting fee and reward).  Other Open Innovation option include asking your customers what they want.  Check out MyStarbucksIdea.com.  Open Innovation is a perfect way to reduce costs while growing the business.  Learn about my own Open Innovation experiences…and dilemmas.

3. Use Process Innovation to Reduce Operating Costs

Innovation is not just about new products or new business models. It can also be focused on ways of reducing operating costs. Use my 7Rs of process innovation to help make your processes more efficient and more effective. I have seen companies reduce costs by 60% while improving responsiveness to customers by as much as 90%. If you can increase service while increasing margins, you are sure to recession-proof your business.  Download my 7Rs worksheet and improve your processes

4. Use Innovation to Match Supply and Demand

Sometimes you only want temporary measures to help you ride out tough times. I worked at Accenture, the large international management consulting firm, for 15 years. During my time there we went through three recessions. Each time the pattern was the same: the economy tanks, customers reduce spending on consulting, Accenture lays off employees, the economy picks up, Accenture scrambles to hire talent. During the 2001 dot-com bubble burst, they used a different approach. Instead of handing out pink slips, they offered a leave of absence for a period of time. The employee on sabbatical would get 20% of their salary (plus benefits) and would be assured a job upon their return. This helped match supply with demand, while keeping morale relatively high. Sometimes a creative solution can help you smooth the ups and downs of the economy.

5. Solve Your Customers’ Pain

Although customers have reduced spending on discretionary items, they may be willing to invest in products or services that eliminate their pains.  Problem solvers are always in big demand.  If their pain is the need for cost containment, how can you do it for them – and take a slice of the action?  In my business, I get more requests for speeches on ”recession proofing” than I do for those on general innovation.   What pain do you solve?  Or how can you make your customer aware of a pain that they may not have noticed?  Learn more about why solving a pain is more powerful…during any economic condition. You may also be interested to learn why the ATM machine was headed for failure…until it was seen as solving a specific pain.

6. Fail Cheaply

If you are truly innovative, you will fail.  If you don’t fail, you are playing it safe.  Therefore, if you are going to fail, FAIL CHEAPLY.  And no, this is not the same as failing fast.  I am not talking about speed, I am addressing the cost to implement.  To fail cheaply, you must embrace the “build it, try it, fix it” mentality.  Build out your idea as a small experiment.  Implement it.  Learn from the experience. My Innovation Personality Poker was developed using this approach.  I first created a simple spreadsheet to test for personalities.  Then I created home-made cards printed at FedEx Kinkos on card stock.  Finally, when we knew it was perfect, we invested in designers and 500 decks of casino-quality poker cards.   Learn more about the “build it, try it, fix it” approach.

7. Before You Can Multiply, You Must First Learn to Divide

While in Asia, I heard a great expression, “Before You Can Multiply, You Must First Learn to Divide.”  I now find myself using this saying nearly every day.  The idea is that if you want to grow your business, you must learn to partner with others – and give them a slice (and a vested interest in YOUR success).  This means you take a smaller slice of a bigger pie.  With the economic downturn, this philosophy is even more appropriate.  People are now hungry for new money making opportunities.  When you help others make money, you make money.  Read more about this powerful, yet simple concept.

BONUS: Use Innovation to Improve Your Suppliers’ Business

We often underestimate the value of our various business partners, and in particular the value of our suppliers. I once worked with a potato chip manufacturer. They were dependent on the quality of the potatoes grown by small, financial unstable growers. Instead of squeezing their suppliers, they helped the suppliers grow their business. They helped the growers buy equipment and fertilizer at reduced costs by leveraging the buying power of the large chip manufacturer. They gave them business loans at reduced rates. When the market gets tight, your suppliers may struggle more than you. But if you help them be successful, you might find you are more successful.

The Bottom Line: Use Innovation to Leapfrog the Competition

While others are tightening their belts, truly successful companies use the recession as a chance to leapfrog their competition. My favorite company, Koch Industries, increases their investments during difficult times. They know that if they focus on innovation while others are cutting costs, they will quickly catapult past everyone else. They must be doing something right. They have grown seven times faster than the S&P 500 for the past 40 years. This is a company that has proven it is recession proof.  Innovation is a powerful tool that can help you ride out the tough times and position you for future growth. With the recession here, you need innovation now more than ever.

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