Relationships Matter

IN THE English-speaking world, we have issues when it comes to relationships. There is only one word for friend, which begs the question: “are you a friend, or aren’t you?” Facebook has helped us go some way towards solving this problem by providing a new class of friend, you can now have “real life friends” and “Facebook friends”.  In addition to Facebook friends we now also have “LinkedIn contacts”, which are apparently more valuable than Facebook friends (and that’s why we don’t show them our stupid drunken photos).

In a fast-moving world it would be helpful to understand more clearly the relationship dynamic that we have with people and the quality of those relationships.

Here is a first attempt to segment those relationships in a meaningful way (slightly tongue in cheek).

7 Relationship Segments

  1. Stranger – I don’t know you and you don’t know me. Don’t contact me unless you have something valuable to offer.
  2. Stalker – You know me, but I don’t know you. Whatever I do and where ever I go, you follow me. Stop sending me roses.
  3. Follower – You know me because I am engaged in an activity that provides value to others, and you have taken a genuine interest in that activity.
  4. Facebook friend (social acquaintances) – We’ve met (or at least I think we met at that party a few years ago, I forget). If our paths cross we’ll most likely exchange pleasantries.
  5. LinkedIn contact (professional acquaintances) – We share a common interest or have mutual contacts that have introduced us. We may be able to help each other in the future, so let’s stay connected.
  6. Friend – We know each other. Feel free to contact me for any reason, and I’ll do likewise.
  7. Ally – I will take a bullet for you and you will do the same for me, right?

Barnes & Noble and the Publishing Free for All

THE advent of blogging during the late 1990s significantly lowered the barriers to entry in the publishing industry. Any person with a computer, a blogger account and a half baked idea could get into the industry, and they did. To shake things up further, the advent of blogging reduced the cost of distribution and the price of consuming content to zero. In 2010, eBook sales almost doubled and now make up more than 9% of total consumer book sales.

Despite these significant changes to the industry and a decade of warnings from visionaries like Seth Godin, the publishing industry has been far too slow to respond. The cost structure for physical book publishing is under big pressure, and the following cost breakdown shows where the cracks have appeared:

Cost of Physical Book Publishing:
Author gets 15%
Publisher gets 35%
Distributor gets 10%
Retailers get 40%

Earlier this year a number of major brick and mortar book stores closed their doors. In the US, Borders Group filed for Chapter 11 bankruptcy protection in New York. In Australia, REDGroup Retail, the owner of the Australian book chains Borders and Angus & Robertson, was forced into voluntary administration.

And this is not the end of the story. US based Barnes & Noble and Australian based Dymocks have their heads on the chopping block and are likely to suffer a similar fate, unless significant changes can be made to their respective business models (hint: get out of the bricks and mortar book business while you still can).

If you have any thoughts on how this train wreck waiting to happen will play out, please comment below.


BACK in 1997, Tom Peters talked about “Brand You“. Tom told us that big companies understand the importance of brands and that today, in the Age of the Individual, you have to be your own brand. This is absolutely true, but it is only part of the story.

You are not a walking brand, you are an individual who can create, develop and (if necessary) modify your image to help you provide significant value to others.

You are the big gun, the top cat, the ringleader, the head honcho, the Chief. And as the Chief Executive Officer of You Corporation you are responsible for figuring out who you are and, based on your discoveries, to then confidently create, package and sell what you have to offer the world. There are 5 matters that you will need to attend to:

  1. Resources: You are responsible for sourcing the best materials available to help you do what you do best every day. Butchers need the best meat, bakers the best flour, consultants the sharpest insights, and lawyers the deepest and most accurate legal knowledge. Do you have the materials and equipment you need to do your work right?
  2. Talents: You need to capitalise on your strengths in order to distinguish yourself. If you have a remarkable flare for fashion and find yourself working as an accountant, ask the CEO to find you a different role.
  3. Passion: Your passion is the internal energy and powerful emotion that you need to steam roll the obstacles that stand in your way. Some people say that motivation doesn’t last, this is true, but neither does bathing. Do it daily. Get motivated and then get moving.
  4. Branding: Your brand is the word of mouth; it is what people are saying about you when you’re not in the room. A positive brand works in your favour because other people will be happy to open doors to help you on your way. The more work your brand does for you, the less you will have to do for yourself.
  5. Relationships: You are in the business of value creation, and you will inevitably work with other people to obtain value, create new value, or to offer this value to the world. Build strong trust based relationships so that you can focus on the value creation process and not on who gets what, and who so what to whom.

Understanding the Competition

“Know your [competition], know yourself and you can fight a hundred battles without disaster.”
~ Sun Tzu

YOU are running a company, advising companies or would one day like to be.  A company needs to understand its competition, and here are 11 points to help you do that.

1. Identify the competition

Who are the company’s major competitors? Taking Cadbury as an example, some of its major competitors are Lindt, Ferrero, Nestlé, Hershey and Mars.

2. Segment

Are you able to segment the competition in a meaningful way? You may be able to segment by distribution channel, region, product line, or customer segment. For example, the FOX Broadcasting Company may want to segment its competition by region. In America, some of its major competitors include PBS, NBC, CBS and ABC. In Australia, its competitors include Channel 7, 9 and 10 as well as ABC and SBS.

3. Concentration

What is the concentration of competitors in the market? That is, are there lots of small competitors (a low concentration industry) or a few dominant players (high concentration industry)? Examples of high concentration industries include oil, tobacco and soft drinks. Examples of low concentration industries include wheat and corn.

4. Size

What is the sales volume and market share of the major competitors?

5. Growth

What are the historical growth rates of the competition?

6. Performance

What is the historical performance of the competition? Relevant indicators of performance include profit margins, net income, and return on investment.

7. Competitive Advantage

What is the competition good at? What are the competition’s capabilities? How sustainable are these advantages?

What are their weaknesses? How easily can these weaknesses be exploited?

8. Competitive strategy

What are the competition’s strategic priorities? What motivates them? What are their plans? How can these plans be upset?

9. Competitive response

How will the competition respond to the company’s actions?

10. Substitutes

Are there any other products that people can use that are as good or almost as good as the company’s products? These substitute goods represent a form of indirect competition, think Coke and Doctor Pepper, Vegemite and Nutella, coffee and tea, pizzas and hamburgers, tennis and basketball. Not the same, but it may be a decent substitute.

11. Barriers to entry

Are there barriers to entry that would stop competitors from entering the market? If the market has low barriers to entry then we can expect that the market, if not already heavily contested, will soon be filled with a large number of competitors.

Finding Yourself

THIS post was initially going to be called “finding your competitive advantage”, but I think it goes further than that.

Here are 8 factors to get you thinking, and to help find what you’re looking for:

  1. Why do you do what you do every day? What makes you tick? What do you believe in? These are things that you are not willing to compromise on for any reason.
  2. How do you provide value for others? Why do people ask you to help them solve their problems?
  3. Are you remarkable? That is, are you doing something that is worth people making a remark about.
  4. Where do you source your raw materials? Your ideas, your circuit boards, your fabrics, your fresh fruit, or whatever it is that you use to do what you do every day. Where do you get that from? Are they the best materials you could be using?
  5. Do other people talk about you in a positive way? Do you talk about yourself in a positive way?
  6. What are your key strengths that allow you to do what you do best? Are you using them?
  7. Are you in a stable financial position? (hint: lots of debt may stop from experimenting, from exploring, from discovering, and from becoming remarkable).
  8. If a customer or work colleague had to name three things about you, what would they say? What would you like them to have said?

Set SMART Goals

Whether your goals are personal or professional, setting SMART goals is the first step to actually achieving them

Set SMART Goals

“A goal properly set is halfway reached.”
~ Zig Ziglar

1. Background

ALTHOUGH its origins are unclear, SMART goal setting appears to have been first used by Peter Drucker in his 1954 book “The Practice of Management”.

2. Relevance

Where ever you are right now, you most likely have bright dreams for the future. You may want to publish a book, get your dream job in consulting, boost company profits by 50%, or take a much deserved luxury holiday to the Maldives. The future is a bright beacon of hope where your imagination is the limit and anything is possible; but how do you get there?

3. Importance

The only way to make your dreams for the future become a reality is to set clear goals and to achieve them: each day, each month and each year. Whether your goals are personal or professional, setting SMART goals is the first step to actually achieving them.

4. SMART Goals

Your goals should be SMART:

Relevant, and

4.1 Specific

Your goal should be specific. Goals must be clearly defined and describe what will happen in as much detail as possible. Clearly defined goals are helpful because they allow you to focus on taking action rather than trying to define and understand the goal. For example, a goal to “increase company profits” could be replaced by a more specific goal to “increase profits in each division of the company by at least 5% with 12 months.” Vague goals are no good because it is not be possible to measure progress or to know whether the goal has been achieved.

If your goal is specific, you should be able to answer the following questions:

  • What is the goal? Write the goal down so that you have a record and use action words like “build, organise, complete, create, coordinate, make, develop, plan”. What actions will need to be taken to achieve the goal?
  • Who is involved? Who is responsible for each action that will need to be taken? It may help to write in the active voice, for example “John will organise the web-design…” and not “the web-design will be organised…”
  • Where will this all happen?
  • When will the goal be achieved?
  • How high are you aiming? Be specific. For example, are you aiming for 7% profit growth, or is 4% okay?

4.2 Measurable

Your goal should be measurable so that you can track your progress, hold people accountable for their performance, and so that you know when the goal has been achieved. Make sure that you have established criteria for measuring progress toward the goal. Measuring your progress is important because it will help you stay motivated and on track. If you are behind schedule this would be good to know because it gives you the opportunity to re-double your efforts and make up for lost time.

To determine if your goal is measurable, ask questions such as:

  • How much?
  • How many?
  • How will we know when the goal has been achieved?

4.3 Achievable

Your goal should be achievable with the resources available. Your resources include assets such as cash, real property, equipment, intellectual property, the skills of the people involved, and the time available. If your goal is not achievable with the resources available then you will need to create a sub-goal “get more resources!” and achieve that sub-goal before returning to the primary goal.

Your goal can be ambitious but should also be realistic. If you set the goal too high or too low then the goal will not be meaningful and people will lose motivation.
To determine whether the goal is achievable, ask questions such as:

  • Can we get it done in the proposed timeframe?
  • Do we understand our limitations and constraints?
  • Can we do this with the resources available?
  • Has anyone else done this successfully?
  • Is this possible?

4.4 Relevant

Your goal should be relevant in the sense that it should be consistent with your core values and broader mission. Achieving your goal should move you forwards, not bump you sideways or push you backwards. If your goal is relevant and you are willing to make it a priority then this will help you take ownership of the goal and increase your chances of success.

To determine whether the goal is relevant, ask questions such as:

  • Why is the goal important?
  • Have we achieved similar goals in the past?
  • If the goal is achieved, how will we benefit?
  • Is this a priority?

4.5 Time-Bound

You should set a date by which the goal will be achieved. Setting an end point for the goal will allow you to determine whether you are making good progress. In order to meet a fixed deadline you will need to focus your efforts and work efficiently, there is no time to waste. Go. Hurry.

To determine whether the goal is time-bound, ask questions such as:

  • When will the goal be achieved?
  • Is there a deadline?

[For more information on consulting concepts and frameworks, please download “The Little Blue Consulting Handbook“.]

Seth Godin

Seth who?

SETH Godin is an American marketing guru born in 1960 in Mount Vernon, New York. Seth is an entrepreneur, author, public speaker and agent of change. Seth is widely regarded as America’s greatest marketer.

Seth is always starting new initiatives, some of his more remarkable contributions are highlighted below.


Yoyodyne, his first internet company, pioneered the use of permission marketing to reach customers online, and was sold to Yahoo! in 1998 for US$30 million.

Seth’s latest company, founded in 2005, is called Squidoo. Squidoo is a community website which allows anyone to build a page (known as a ‘lens’) about any topic they are passion about. The site raises money for charity (pays royalties to its members) and is currently ranked 120th in the US (by traffic) by


Seth writes the world’s most popular marketing blog. You can read it here.


Seth has written thirteen books, all of which have been best sellers. He writes about the post-industrial revolution, the way ideas spread, marketing, quitting, leadership and most of all, changing everything. His most recent book is called Poke the Box, a call to action about the initiative you’re taking in your life. You can learn more about Seth’s books by browsing his books here and reading some of the Amazon book reviews.

Free Downloads

Here are some manifestos, ebooks and other PDFs that Seth has gifted to us for free.

  1. Poke the Box: The Workbook – This work book asks one basic question, “What would our world look like if more people started projects, made a ruckus, and took more risks?”
  2. Unleashing the Ideavirus: Read and Share – This manifesto answers the question “how do we get attention to ask for permission from the consumer”?
  3. Money for Nothing (and your clicks for free) – Three Secrets to Web Traffic
  4. The Bootstrapper’s Bible – There’s never been a better time to start a business with no money
  5. Brainwashed – Seven ways to reinvent yourself
  6. Knock Knock – Seth Godin’s Incomplete Guide to building a website that works
  7. Who’s There – Seth Godin’s Incomplete Guide to Blogs and the New Web
  8. What Matters Now – Big ideas from Seth and others
  9. Flipping the Funnel – Giving your fans to power to speak up
  10. Seven Type Rules for Amateur Designers
  11. On the future of the music business


You can view lots of Seth’s talks but clicking the “Seth Godin” hot tag in the Consulting Forum.

Understanding the Customer

“One of the deep secrets of life is that all that is really worth doing is what we do for others.”
~ Lewis Carol

IF THE GOAL in life (and business) is to help others, then a good first step would be to try to understand the people we are aiming to help so that we can figure out who they are and what they want.

Here are 8 things to think about when trying to understand the customer.

1. Identify the customer

In general terms, who is your customer?

2. Segment

What are the important customer segments?

Dividing customers into groups can help you better understand their specific needs and preferences. For example, you may want to segment by:

  1. age group
  2. gender
  3. income level
  4. employment status
  5. distribution channel
  6. region
  7. product preference
  8. new versus existing customers
  9. large versus small customers

3. Concentration

What is the concentration of customers in the market?

This question is important because of the Wal Mart Effect. Is there one customer in the market who is so big that you cannot afford to ignore them? If so, you may need to play by their rules, or look for a different market where you have a competitive edge.

4. Size

How big is the market? How big is each customer segment? How many customers are there and what is the dollar value of those customers?

5. Growth

How fast is the market growing? What is the growth rate of each customer segment?

6. State of the Economy

What state is the economy in?  What stage of the business cycle are we at?

7. State of Technology

What role does technology play in the industry? How quickly is the state of technology changing?

8. Recent and impending changes

Have there been any recent changes in the industry? Are there any impending changes?  For example, new players, mergers & acquisitions, substitutes, technology or government regulations.

9. Industry Drivers

What drives the industry: brand, product quality, scale of operations, or technology?

10. Customer Preference

What do customers want? Do different customer segments want different things?

Have you asked them?

11. Willingness to Pay

What price is each customer segment willing to pay? How price sensitive is each customer segment?

For example, students are extremely price sensitive (i.e. students have a high elasticity of demand). This means that by offering students lower prices for your products you should be able to increase quantity sold enough to boost total revenues.

12. Distribution

What is the best way to reach customers? Does each customer segment have a different distribution preference? For example, younger customers may prefer purchasing online while more mature customers may prefer buying products through traditional retail outlets. Here are 6 ways to reach customers:

  1. mail order
  2. online store
  3. factory outlet
  4. retail store
  5. department store
  6. network marketing

Understanding the Product

WHETHER you are entering a new market, launching a new product, growing market share, developing a pricing strategy or managing costs, you will want to understand the products that you are dealing with.

Here are 9 things to think about when trying to understand a product.

1. Identify the product

What is the product? What does it do?

For example, News Corporation produces newspapers, magazines, film, television and cable.

2. Advantages

What’s special about the product? Why do people buy it? Why is it useful?

For example, News Corporation provides people with media brands that they know and trust, and media content which keeps them entertained and informed.

3. Disadvantages

What are the disadvantages of the product? Are there any side-effects?

For example, MySpace is a social networking platform that caters for musicians but does not offer a community building platform which encourages trusted connections and privacy protection. Facebook and LinkedIn have done a better job of protecting user privacy and encouraging meaningful connections.

4. Differentiation

Is the product a commodity or is it a differentiated from other offerings?

For example, Fox has produced an animated sitcom known as “The Simpsons”; one of a kind.

5. Malleability

Can we change the product?

Our ability to change a product will depend, in part, on how narrowly we define the product. If your product is “blue ball-point pens” then you will have limited ability to change the product. However, if your product is “small plastic products” then you can change the colour of the pen (red, green, purple), the type of pen (ballpoint, rollerball, fountain, felt tip) or even the type of plastic product (stapler, cigarette lighter, highlighter).

6. Legal protection

Is the product protected by copyright, trade mark, or patent?

For example, Fox has protected any information, text, files, images, video, sounds, musical works, works of authorship, applications, and any other materials or content relating to “The Simpsons” by using copyright, trademark, patent and other laws.

7. Complimentary goods

What is happening to the complimentary goods? If the market for complimentary goods is suffering, this will affect the product.

For example, if our product is the SUV Hummer and the price of petrol (gas) has doubled then that will negatively affect the value of our product in the mind of consumers.

8. Product lifecycle

Where is the product in its product lifecycle?

9. Packaging

What does the product include?

For example, if the product is an annual hard copy newspaper subscription, does that include online access?

Are you doing something remarkable?

Loyal customers provide repeat business.  Do something remarkable, and they will spread the word

CUSTOMER loyalty is an important asset for any business for two reasons. Firstly, loyal customers will give you repeat business, to quote Tom Peters “all business success rests on something labelled a sale”. Secondly, and more importantly, loyal customers are the people who spread the good news about your business. Loyal customers are the passionate and unpaid marketers who provide authentic testimony to the quality of your goods and services. Walt Disney captured this idea of customer loyalty when he said, “Do what you do so well that they will want to see it again and bring their friends.

If a business can create something remarkable (e.g. beautifully designed products, superior service, or an uplifting experience) then its loyal customers will spread the word. In today’s competitive marketplace, a business that “does everything right” is a business that is merely “meeting expectations”, and Seth Godin identifies a number of reasons why word of mouth sometimes just doesn’t happen. If you can exceed expectations, dazzle and delight your customers with how much you really care then this will be worth talking about.

Speaking of the need to be remarkable, the McKinsey Quarterly recently sent me an email which is worth mentioning. Apparently, there has been a security breach at the The Quarterly and some customer details have been compromised.  While this could be a source of major embarrassment, McKinsey have turned the security breach into an opportunity to build customer loyalty.  The Quarterly’s email (set out below in full) demonstrates 3 things:

  1. McKinsey places the interests of its readers ahead of their own reputation;
  2. McKinsey takes confidentiality very seriously (much-needed marketing after the Rajat Gupta scandal); and
  3. McKinsey will apologise if it has made a mistake.

Here are the contents of the email I received from Rik Kirkland, Senior Managing Editor of McKinsey & Company:

Important information from McKinsey Quarterly

We have been informed by our e-mail service provider, Epsilon, that your e-mail address was exposed by unauthorized entry into their system. Epsilon sends e-mails on our behalf to McKinsey Quarterly users who have opted to receive e-mail communications from us.

We have been assured by Epsilon that the only information that was obtained was your first name, last name and e-mail address and that the files that were accessed did not include any other information. We are actively working to confirm this. We do not store any credit card numbers, social security numbers, or other personally identifiable information of our users, so we can assure you that no such information was accessed.

Please note, it is possible you may receive spam e-mail messages as a result. We want to urge you to be cautious when opening links or attachments from unknown third parties. Also know that McKinsey Quarterly will not send you e-mails asking for your credit card number, social security number or other personally identifiable information. So if you are ever asked for this information, you can be confident it is not from McKinsey.

We regret this has taken place and apologize for any inconvenience this may have caused you. We take your privacy very seriously, and we will continue to work diligently to protect your personal information.

If you have any questions or concerns, please contact McKinsey Quarterly at [email protected] For any media inquiries, please contact Humphrey Rolleston at +1-212-415-5321.

Rik Kirkland
Senior Managing Editor
McKinsey & Company