Welcome back to another episode of Monetization Nation with Dave Knox. In the previous episode, we discussed Dave’s entrepreneurial journey and how he turned his passions into a career.
In today’s episode, we’ll discuss three ways to evaluate new business ideas and share a few stories from Dave’s book, Predicting the Turn: The High Stakes Game of Business Between Startups and Blue Chips.
The Story Behind Predicting the Turn
Dave used to spend his workdays with big companies while he spent his nights and weekends working with startups. While corporations often looked at lean startups admiring their agility and startups looked at big companies admiring their influence and resources, at the end of the day, they were two sides of the same coin.
In Predicting the Turn, Dave talks about the high-stakes game of both disruptive startups and innovative big companies with the goal to teach his readers how to foresee the changing shifts in their industry.
Dave wants us to realize that no one’s going to know with certainty what’s going to happen next. But we can start preparing ourselves by mapping out different scenarios of how things can go and comparing the probability of one thing over another. This can help us be prepared and put ourselves in the driver’s seat.
1. Avoid Having a Kodak Lost Moment
During most of the 20th century, Kodak reigned in the photographic film industry. It was so dominant that its “Kodak moment” tagline entered the common lexicon to describe a personal event that deserved to be recorded for future generations (Source: Wikipedia). However, In 2012 and as a result of bankruptcy filing and restructuring, Kodak was forced to sell off a half-billion-dollar portfolio of patents covering digital photography and online photo applications to technology titans like Apple and Google (Source: WSJ).
Dave interprets a “Kodak moment” as being in control of where the industry and our business could go but losing this control because we’re not willing to give up what we have right now. This is what Kodak did with the rise of digital photography. In 1975, Steve Sasson invented the self-contained digital camera while working at Kodak. But when he presented it to the leadership team there, they dismissed it. One of the biggest reasons for that was because Kodak made a lot of money off the paper and printing of photographs. They forgot that they were in the business of sharing moments and not just physical photos. That was the essence of a Kodak moment. It was about capturing moments and sharing them. This is what we’ve all experienced with digital cameras. There are more photos taken today than there ever were when we were using physical photos. If Kodak had realized that, they would have been in a vastly different position than where they are today. They had that moment, but they just missed it in terms of where they could go and what would come out of it.
2. Look at New Opportunities Separately
The shift toward e-commerce is fueled in part by people’s need to save time. The overall convenience of e-commerce is probably why the number of global digital buyers is estimated to reach 2.14 billion in 2021 (Source: Oberlo.com). However, Dave believes that e-commerce is the best buying tool that has ever been created only if you know exactly what you’re looking for. Then it’s just a matter of finding where it’s sold, whether it’s on Amazon, eBay, or some other place.
Dave believes that where e-commerce has fallen flat is in being a shopping tool. Shopping is an inherent human behavior. We love to explore, see and learn. That’s why some people can get lost in a mall or grocery store for multiple hours. It’s to fill this need for discovery, by walking the aisles in the store and finding that thing we didn’t expect to find.
What NatureBox and other subscription-based e-commerce brands did was that they made it easy for people to buy while fulfilling their need to explore. Buyers would receive their box at home and it would be filled with things they didn’t even know they wanted but were curated and brought home to them. This is the same thing BarkBox did for pets and Birchbox did with beauty products.
Dave believes that this is what the big companies got wrong. When they looked at a new business opportunity, they would ask whether or not it was a good business idea. They were thinking of it purely as a retail play. They would look at BarkBox and ask if BarkBox can beat PetSmart or look at Birchbox and wonder if it can beat Sephora. Dave thinks this was shortsighted because they didn’t realize it was actually part of their brand-building. It would create much more opportunity for them if they had embraced it instead of analyzing whether it was good or bad business. It was the model of subscription boxes that created room for companies like DoorDash.
So often when big businesses look at a new emerging opportunity, it’s too small that it can’t compete with their existing revenue streams. What they should do instead is step back and not compare. They should look at it as a separate business unit that doesn’t even have to compete with existing units. It’s “how do we seize this new opportunity?” Because if they don’t, the emerging business is going to seize them and leapfrog them in many ways.
4. Understand That People Come First
Dave has lost a lot of money in many of the businesses he invested in. When he thinks about it, he finds one thing in common with all of these ventures. Almost every time it was that he was betting on the idea instead of betting on the person. It was looking at that idea and seeing the potential. And in those cases, Dave overlooked the question of, “Was this the right entrepreneur to be able to do that?”
On the flip side, the businesses where Dave has been most successful were because of the tenacity of the entrepreneur. He could see that this person had something special. And oftentimes the thing they ended up building wasn’t necessarily the thing he invested in. But the person didn’t change and they were the ones driving and making it work. At the end of the day, business, even when it’s about dollars and cents, it’s ultimately a people’s game. We’re betting on the people, whether they’re the people we hire, the vendors we work with, the partners we have, or the entrepreneurs we invest in.
Leveraging Existing Technologies
Dave believes the biggest business tectonic shift today is the rise of entrepreneurship. Historically, entrepreneurship has always had barriers such as the cost of starting a business. What’s amazing today is the tools that have emerged that allow us to start a business in a space that we never could have done before.
Today, we can create a Shopify, Etsy, or eBay store in a matter of hours. Only 10 years ago, to create an e-commerce site that could allow a third party to buy from us, get something shipped, and accept payment, it would take tens, if not hundreds of thousands of dollars and much more time.
Now we have all these tools attainable for many people that make it easier to start as entrepreneurs. That’s why, over the last decade, a lot of new consumer brands have emerged because the barrier to entry is getting lower. Things like the ability to work with a contract manager, manufacturer to make a product, and the way to do fulfillment using third-party logistics have gotten much easier and less expensive than what they used to be.
The advice I would give for a new entrepreneur who can’t leverage the existing technologies and has some developer telling them they have to build from scratch, is they need to get a second opinion. If we have to build our business from scratch, we might reconsider our business model and find something where we can leverage existing technologies.
Thank you so much Dave for sharing your stories and knowledge with us today. Here are some of my key takeaways from this episode:
1. In business, we’ll never know with certainty what’s going to happen next. But we can start preparing ourselves and map out different ways and scenarios of how things can go.
2. Big companies should look at emerging business opportunities as separate business units that don’t have to compete with existing businesses.
3. Instead of building from scratch, always try to leverage existing technologies to build our business. It generally saves time and money.
4. When we’re looking to invest in a new business, it’s important to not just focus on the idea, but also on the people who are going to execute that idea.
Connect with Dave
If you enjoyed this interview and want to learn more about Dave or connect with him, you can find him on LinkedIn or visit his website at PredictingTheTurn.com or his company’s website at NaturesWillowBalm.com. You can also find his book on Amazon.
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