Category: Entrepreneurship

Cutting the Ends off the Ham

Losing $300 Million By Cutting the Ends off the Ham

A daughter is preparing a big family dinner with her mother. Mom cuts both ends off the ham before putting the ham in their big, spacious oven. The daughter asks, “Mom, why do we cut the ends off the ham?”

Mom says, “It’s the way grandma taught me to do it”. Daughter goes to grandma’s house to ask grandma why we cut the ends off the ham.

Grandma’s reply is, “Oh honey, I only cut the ends off the ham because my oven was so small back then that the ham wouldn’t fit inside it without cutting it”.

We Often Carry Forward Out of Date Ideas and Assumptions

This anecdote is an example of something we all do. We form routines and mental models based on a current reality, or, as in the story, we get them handed down to us. But, sometimes the underlying reality changed and our routines and mental models did not.

Sometimes, these no-longer-correct routines and models can have harmless consequences, like cutting the ends off a literal ham. But, sometimes, these outdated approaches can get us into real trouble.

Failing to See the Possibilities in the New Oven

In 1998 and 1999, investors poured money into new online stores like, the “internet pet store”, and, the “internet toy store”.

Investors saw the internet going mainstream and believed that online retail would closely mirror traditional retail. Traditional retail was flush with successful niche retailers like Best Buy, PetSmart, and Toys R Us. But, investors were blind to the fact that the world of traditional retail was a world that had been largely shaped by its constraints.

  • Traditional retail requires lots of high quality floor space in expensive “prime locations” plus warehousing and delivery to stores. Online retail only requires bare necessity warehouses with delivery direct to the customer.
  • Due to space constraints, traditional retailers must be selective about what product they carry and specialize in. Online retailers can stock and sell millions of products for not much more effort, relatively speaking, than is required for hundreds.
  • If traditional retail stores get too large and hard to find product in or if retail employees don’t know the products or the store layout, customers can become lost or frustrated. In online retail, customers don’t expect to deal with an employee and any product is one search or click away.

In short, traditional retail has a small oven, online retail has a very large oven.

Having a product niche like toys or electronics makes perfect sense in traditional retail due to the constraints imposed. But, investors still wanted to cut the ham to put the “old world” constraints on the “new world” of online.

A $300 Million Mistake was founded in 1998, promptly raised $300 million from investors, and was completely out of business by the end of 2000. To be fair, suffered from a variety of other underlying issues as well that made their fall so sudden and dramatic, but, it’s also now clear that the entire premise was flawed from the beginning.

Very small & inexpensively run niche online retailers are certainly thriving in the Long Tail of the current online economy. But, the rest of online retail is largely owned one internet superstore – Amazon. Amazon finally capitalized on all the “big oven” possibilities and, it turned out, that was what the market craved.

It was a mistake to build a “large scale niche” online store like And, perhaps, there was no way that anyone could have known this. Predicting the consequences of great shifts is complicated and fraught with risk.

But, if we are at least aware of and thinking about this phenomenon, maybe we can give ourselves a chance the next time around.

The next time you see major shifts in any area, ask some of these questions:

  • What old restrictions have been removed?
  • What new possibilities are now open that were not there before?
  • Imagine throwing out the old model completely. You are starting fresh in this new environment. What would the ideal model/routine/way of doing business look like?
  • How could I make something better and not simply mirror the old environment in this new one?
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Toy Packages and Disruption

What Toy Packages Can Teach Us About Disrupting Industries

If you are a parent, you were almost certainly frustrated while opening toy packages for your child over the Christmas holidays.

The Toy Package Problem

Some toys are tied into packages with complex ties that require cutting or unwinding. Some toys are literally screwed into their packaging and require a screwdriver to remove them. Some toys require a hammer and drill to assemble. Some toys even require a level. Some toys require batteries (not included), others ask you to turn an Allen wrench several hundred times to complete assembly.

Aside from the hassle, the time required to open and/or assemble is the real rub.

You’re sacrificing time at the most hectic time of the year to jump through hoops to open a toy. You’re taking a timeout from gift opening time with the family to break into inconvenient packages for eager children. You’re looking for your tools to assemble and/or open the toys. You’re up until the wee hours assembling toys on Christmas Eve. You’re shoehorning assembly of toys into the days leading up to Christmas amid all the wrapping and shopping.

Why The Problem Exists

The toy package exterior is designed to be as attractive as possible. This is to catch your child’s eye, to make them want the toy, and to make the sale.

This is apparently the only part of the toy package where the customer is really a consideration at all. Once you have made the decision to buy the toy and presented the toy to your child, it’s too late to turn around. Your child’s heart is now set on the toy.

The toymaker knows this. Once you reach the package interior, you are faced with an obstacle course to take the toy from package to play-ready.

The toy is broken into many parts to fit the toy into a smaller package, thus allowing more toys to fit on a truck or on a shelf. Often, the decals are not even applied to the toy (seriously?) to save labor at the factory. Sometimes the same decisions that make the toy look nice in the package lead to the very ties and screws that make the toy difficult to remove from the package. Sometimes, you might be away from home and realize you don’t even have the necessary tools to assemble the toy once you open the box.

There is zero consideration given to making for a fun or easy “unboxing” experience like you might find for customers of an Apple product. The process is time-consuming, at best, and disappointing for parents and children, at worst.

This is an industry that has never even considered disruption as a possibility for a long time. But, bad news for toymakers and good news for the rest of us…

The Disruption Opportunity

This is an industry ripe for disruption. The disruption could be purely at the retail level or could be a vertically integrated entity from the manufacturer level to the retail level.

Imagine a toy store that sells only toys that are “play-ready” from the time that the boxes are opened. All the toys that don’t need assembly would be in “easy to open” boxes where – crazy idea – any school age child could open their own toys. The toys that need assembly would be designed to be as quick and painless as possible. The pain and frustration of toy packaging would be a dinosaur of the past. When you buy toys, you get that well-thought out “Apple-like” opening experience.

Yes, the toys will be a little more expensive due to designing the experience around the customer rather than the manufacturer and retailer. Less toys will fit on a shelf. Less will fit on a truck. A little more labor may be required at the factory.

But, would you be more likely to take your child toy shopping at this hypothetical store or at a Toys ‘R Us? Would you gladly pay a little more per toy for a guaranteed better experience? How much more are you already paying for a Mac or iPhone versus similar products in the name of a better experience?

Other Companies That Disrupted Under Similar Situations

When will the disruption happen? I don’t know “when”, but, the disruption seems inevitable. There is one constant in good economic times and bad – people love to spend money on their children. People also love to be “enchanted” by new, innovative companies that fix age-old problems in interesting ways.

In the Western world, most of the “big problems” of modern day life are more or less solved – food, shelter, water, electricity.

At this point, the companies that disrupt industries and become larger than life are companies that fix the remaining annoyances like toy package problems. We sometimes forget how relatively minor the annoyances were that spawned the multi-billion dollar mega-corporations that we take for granted today.

We didn’t like hailing cabs or calling cab companies, so, Uber was born. Often, Uber is cheaper, but, convenience is the real selling point.

We didn’t like paying for shipping or entering purchase information over and over on different websites, so, we now buy everything from Amazon. They made it easy to do business with them and they carry almost everything. Do you even price check them any more?

We didn’t like going to the movie rental store. We didn’t like setting our DVR to record. Heck, we didn’t even like our cable company’s clunky (but free!) on-demand streaming service. None of it was a good experience, so, Netflix grew and grew and grew and, now, has nearly unstoppable momentum.

None of these things changed the human race. But, they made the lives of millions just a little easier and a little better. That created all the massive value reflected in the stock price of these companies.

The toy package disruption is inevitable and I, as a customer, can’t wait.

What’s the Lesson?

You are probably asking – What does all this mean for me? What’s the broader lesson here?

It means that, now, more than ever, you should think about your customer experience.

  • Are you presenting an offer, a “package exterior“, that is just good enough to make a sale?
  • Are you following up the sale with a “package interior” that is frustrating or that falls below customer expectations?
  • Are you continually making decisions that reduce the customer experience to add a little profit to your bottom line?
  • Most importantly – would your customers say they “can’t wait” for you to be disrupted?

If the answers to these questions are “yes”, then you, and possibly your whole industry, will only be relevant as long as your customers have no other option.

Companies and industries that say “yes” to the above questions are the places where the “bean counters” have long since taken control of the executive suite. These are the places where it has ceased being about the customer. These are the places, where a “vision” is non-existent, unless you count “increase revenue by 12% YOY” as a vision.

In these companies & industries, the customer is only a concern when it comes to providing an attractive enough “package exterior” to close a sale. Then, the “package interior” is delivered as cheaply as possible. These are the places where it’s not a question of “if” disruption will occur, only “when”.

If You Want to Be An Innovator

If you want to innovate and are looking for an opportunity, then these are the situations you should have your eyes peeled for. Outside of toys, dozens such opportunities are still out there, look for one that speaks to you and your interest and experience.

Look for the types of industries where you see the below types of behaviors:

  • The “package exterior” makes the sale, but, the “package interior” greatly under-delivers.
  • There is an unspoken code among the current competitors of remaining “just good enough”.
  • The current competitors are blind to the problem or believe their customers have “no other choice”.
  • The current competitors see the problem, but, are unwilling or unable to give up the profits of the “old way” to create a more customer-friendly “new way”.

These are the industries that are just waiting for a visionary to ride in and say, “Enough of this, I see a better way, the customer deserves better”.

Once this happens, nothing in that industry will ever be the same again.

Gary Vaynerchuk

Gary Vaynerchuk’s best tips summed up in this #AskGaryVee Hit List

In one section of the #AskGaryVee book, Gary Vaynerchuk provides a quick hit list of his top tips for success. I love the list because it is to-the-point and actionable. Also, I think, this list perfectly sums up most of Gary’s philosophy into a compact, tactical package.

Gary’s original advice is in bold, my comments are in plain text next to the original points.

Gary Vaynerchuk’s Hit List

  1. Have shorter meetings. Go down from 1 hour meetings to 30 minute meetings. Then continue to push to shorten meetings more and more. Gary is down to 4 minute meetings. We all know meetings are a colossal waste of time and time is our most valuable resource. Start doing something about it. Maximize your productive time in the day, reduce your unproductive time.
  2. Don’t focus on things you can’t control. You can’t control who will be president or what the economy will do next month or who will win the Broncos game tomorrow. Focus on the things that your energy, your ideas, and your effort can have an effect on – your career, your family, your company, your friends.
  3. Don’t be afraid to break things. We can waste a tremendous amount of time with endless discussions about whether a new idea is worth trying or not. Quit talking about it & make a decision. If the idea has merit, just try it. You can usually fix it later if it goes badly, sometimes you find something great. Making no decision is the same as making a decision.
  4. Don’t be romantic about your business. This is one of Gary’s staples and I love it. I run into so many business owners that won’t face the current reality because they want their business to be like it was 5 years ago. And, some of them are actively angry that the market has changed. None of this is healthy. It distracts from execution in the present and from what you need to do to be competitive in the future. The “good ole days” are gone, you might have more good days, but, they will look different.
  5. Don’t get slower because you think you “made it”. Once you make it, all eyes are on you, your competitors want what you have. If anything, it gets more demanding, not less. I’ve personally witnessed several individuals who have been ruined by taking the attitude that they “made it” or that their company or the market owes them something for their past success. The race is never over until you retire.
  6. Keep moving, don’t take a breather. Many people take a break because they feel that they “deserve it” because they did something good yesterday. Instead of doing that, how much more momentum could you have, how much more could you get done if you just kept going and kept pushing? Is there a more perfect example of this philosophy than Gary Vaynerchuk himself?
  7. Don’t go for perfection, it’s in the eye of the beholder. Another thought in the same vein as some others – speed and momentum matter a lot in business. You can’t afford to fritter time and capital away by making something “perfect”. In many cases, even if you think you have achieved perfection, you will have to change it later anyway because the market will disagree. “Done and pretty good” beats “unfinished, unreleased, and perfect” any day of the week.
  8. Speed kills in sports and business. The perfect summary of all the thoughts above. How many colossal companies have been killed simply because a small company could move faster than them? The colossal company was busy having 3 hour meetings, getting romantic about yesterday, being afraid to break things today, trying to build the “perfect” new product, and taking a breather from past successes… meanwhile, the new company, the fast company, takes the colossal company out before the big guy knew what hit him.

I highly recommend checking out Gary’s book #AskGaryVee if you want to read more of Gary’s philosophy on business. I also love Gary’s earlier book, Crush It!, if you have any interest in entrepreneurship.

Bullets Before Cannonballs - Testing Your Ideas

Bullets Before Cannonballs – Testing Your Ideas

In Great By Choice, author Jim Collins asks his readers to imagine their business as a ship at sea. The ship has a cannon and a limited amount of gunpowder. The gunpowder represents your resources, usually time and cash.

You spot an enemy ship. Sinking the enemy ship is your goal. Do you just load up your biggest cannonball, all of your gunpowder, fire, and hope for the best? Do you bet all your resources on the first “big bet” that looks good? If you do, a miss and the sound of a cannonball splashing into the ocean is your most likely scenario. You have now burned all your resources and are out of options.

Collins says that the best approach, and the approach used by the world’s most successful companies, is to first fire tiny bullets that require very little resources to fire. Fire one, miss, then adjust your aim and fire again. The cost in resources of missing is so low that you can afford to take a lot of shots.

Repeat over and over until – Ping! – you score a hit on the enemy vessel. Now, you know your cannon is lined up properly. Load up the rest of your gunpowder and take your big shot. The chances of a hit are high, much higher than if you had just taken that ill-advised first shot without first firing the bullets.

The Power of Testing

What Collins is really talking about here is the importance of testing and validating your assumptions and ideas before making any “big bet”. You want your misses to be on your small bets. Once you have found a small bet that works, then consider the big bet. If your small bets worked, you know your odds of success are pretty good with the bigger bet.

A Real World Example

In the 1970’s, my dad started building two-way radios as a hobby. He wanted to start a business selling and servicing radios. But, instead of going out and buying a storefront and going “all-in” immediately, he began by selling his radios part-time in my grandfather’s tire store. After selling a lot of radios that way over the course of several months, my dad saw that there was a market for his radios.

So then, and only then, did my dad take the plunge to take out a loan, buy a store, hire employees, and begin selling two-way radios as a standalone business. After making “the big bet”, my dad’s new business generated $1.5M in sales in its first full year.

The Take Away

If you want to start a business, validate your idea any way that you can.  The simple place to start? Talk to people whom you respect to see what they think of your product or service idea. Many startups use services like Google Polls or Kickstarter to gauge market interest in a given product before creating it. The best way to test is begin small-scale selling of your product, like my dad did, though this is not possible for all businesses. The method will be different for every product, but, the principle is always the same.

One important note: If cash is not involved in your test, take your results with a grain of salt. My dad’s test was perfect, his future customers were literally buying his product already. Because of this, he knew he had great data. If he had only asked the tire store customers if they would hypothetically buy radios if he started selling them, the data could have easily been very off. People say a lot of things, but, what they actually spend cold, hard cash on is often very different.

Don’t Fall Into the Trap

It’s easy to fixate on the romantic notion of the “person who always knew that they knew best and defied all the odds” by making a big bet that “shouldn’t have worked” and who built a great business or career. These people make magazine covers. But, the hundreds who think just like them that fail and end up broke don’t end up on magazine covers.

The reality is that most successful people use tactics like “Bullets Before Cannonballs” and “Succeeding through Failure” to quietly stack the odds in their favor before making their big bets. You can never guarantee success in any venture, but, you can slant the odds of success in your favor by testing and building momentum first. The next time you have an idea that would have major time or cash investment involved, find ways to test and validate before making the big bet.

Have you ever knowingly or unknowingly used the “bullets then cannonballs” approach in your life? If so, how? Let me know in the comments or by emailing me at

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