The Slow-Motion Startup

Trying to keep TDTYTIS running while doing the IB at school has been a bit tricky. At the beginning of the year, when school started getting really busy, I spent a lot of time stressing that TDTYTIS would never get off the ground because it wouldn’t get the momentum behind it if I couldn’t devote my whole day to it. But over the past few months I’ve actually seen a lot of benefits to the fact that I can’t devote every moment I have to TDTYTIS. And the thing I’ve realized is that even if I didn’t have school, starting a project with limited time can actually be a really good thing. In fact, it could even be a strategy.

I’ll call it the Slow-Mo Startup. If you have limited time with which to work on a new project or business you’re starting, then it may make sense for you to follow a similar strategy. Essentially it means slowing everything down so that you can juggle different things in your life, while using the fact that you’re busy to your (and the project’s) advantage.

Here are a few of the advantages that have arisen for TDTYTIS because I haven’t been able to devote all of my time to it:

• I’ve been able to spend more time actually thinking instead of doing, which has allowed me to do more planning around the best way forward.

• I’ve been able to listen to feedback and actually act on it. I’ve noticed that a lot of startups whose founders are devoting their whole lives to it actually don’t listen as much to feedback, because they are too busy simply carrying out their plan.

• More people now have a meaningful connection with TDTYTIS as I’ve been able to connect what I’m doing in other parts of my life (school, conferences) to the project. If I was spending all my time on TDTYTIS, then my life would be very one-sided and I wouldn’t have been able to make these connections.

The core of this strategy is really about having the ability to think. I see too many people starting projects and startups having a great idea, and then spending all of their time trying to carry out their strategy. Because I’ve had limited time, I’ve under-planned because I know I won’t have time to do everything I plan for. And the beauty of this is that I’ve been able to spend a lot more time listening to people, and then thinking about what they’ve said, and acting on their advice to find the best way forward for TDTYTIS. I feel that TDTYTIS has greatly benefitted from this.

What I’m getting at is that not having enough time is no excuse to not start a project. I strongly feel that you can balance different things in life, and especially if school is something you feel you have to do, it shouldn’t stop you from starting a project or business on the side. I think if people can be aware that their limited time is actually helping them create a more defined value proposition, then many more young people can start projects while doing school. And that’s something great for the individual, and society as a whole – most projects started by young people aim to help other areas of society.

Realize that being busy can help you start a project in a more effective way. Then get out and start the project you’ve been thinking about for ages. I guarantee you won’t regret it.

Icebreaker’s International Growth & New Zealand’s Brand

About a month and a half ago, as winter was just setting in here in Wellington, I bought an Icebreaker merino undershirt. I’d heard a lot about Icebreaker stuff being incredibly warm, so thought I’d give it a go. A few weeks later, and I own everything from an Icebreaker coat to Icebreaker briefs. Their stuff is so warm, so comfortable, and so breathable that it doesn’t smell at all. It’s really even better than their advertising describes. Anyway, this post isn’t actually a pitch for Icebreaker – although I completely and utterly recommend you buy their stuff. I wanted to just talk about a fantastic Kiwi business success story, and touch on how they’ve successfully used New Zealand’s brand to help them sell their products internationally.

Icebreaker is now sold in pretty much every continent, and they’re incredibly well known for a Kiwi company still owned by its founders and original backers. 1999 was when they decided to do a test in Europe, and since then their growth has been simply astounding.

It’s funny how a couple of the most talked about New Zealand success stories in recent years have both been companies that have heavily used New Zealand’s brand to help sell their products. 42 Below, a New Zealand vodka company that was sold to Bacardi a few years back, also used “Pure New Zealand” as part of their marketing.

And that phrase – “Pure New Zealand” – should not be underestimated. A country’s brand is something very valuable (provided the country has a good brand) because it’s something people can relate to. More than a company’s brand, a country’s brand is in some ways tangible. People can actually walk around a country and therefore they gain a deeper understanding of what values and images are associated with that country. A company on the other hand isn’t a tangible object that people can walk around to better understand. In most cases their images are simply marketing strategies.

So Icebreaker, and other companies utilizing New Zealand’s good brand, are very smart about it. In some ways it’s a free marketing strategy that can’t easily be replicated any other way.

I’ve travelled quite a bit, and one thing that I notice no matter where I go is how responsive and positive people are to hearing “New Zealand” in response to asking where I’m from. I’ve never heard anything negative in response to me saying New Zealand, and usually the next comment is one involving a word such as “beautiful”, “stunning”, “clean”, or “safe”. When you have those kind of connotations to a brand, something is going right.

While some companies like Icebreaker are doing a fantastic job riding New Zealand’s image to achieve international growth, I think more could be doing it. And don’t get me wrong – by no means do I think every New Zealand company should use NZ’s brand. But I do think that a few more could at least use “New Zealand” in their tagline to conjure up images. We just have to be careful not to overuse it, and only let companies who truly can achieve huge international growth use it.

And on top of all the other benefits of using NZ’s brand internationally – it keeps us back home happy. We just get even more passionate about Icebreaker and our country!

Reliability Of Books Over Digital Information

There’s something to be said for paper. And that’s coming from someone who actually hates paper – I’ve done as much as I possibly can to eliminate it from my life. (At school, I don’t use any textbooks or exercise books – everything is digital). So I’m not really talking about the fact that some people think it’s nice to read from paper instead of from a screen.

I’m talking about how paper, because it is a tangible object, has some form of inherent value. It doesn’t matter that it costs mere cents for each sheet of paper in a book. The simple fact that is is physical means it has value over the same book in digital format. And from thinking about this, I believe it means information that is physically printed may in fact be more accurate on average.

Think about the editing process of a book before it goes to print. Many people will read the text, check it for accuracy, and edit for grammar and spelling. It’s an intensive process, because no one wants to spend all of the money and time printing a book when there could be inaccurate information or a spelling mistake. And that’s also to do with how you can’t edit a book once it’s printed. It’s there forever. Because of this, people will spend much longer checking over their work. Instead, think about an e-book that someone publishes. It’s partly a mental thing – people think “Oh, I can always edit it if it’s in digital form”. And that’s true – it’s not necessarily permanent.

Because of this, information we find in digital format may on average be much less accurate. I began thinking about this the other day when comparing information in a textbook on the Spanish Civil War to information I found online regarding the same topic. There were discrepancies between the information in each source, and after researching the topic more I found that the information in the book was actually correct. A teacher at school was also talking to me about how he finds books are usually are more accurate than digital information.

I think it’s interesting to see that the whole world is moving digital, and yet there are some negatives to this. I don’t like that fact – I’m someone who strongly believes everything can be digital and the world will be a better place than it was previously. But I’ve written a lot on some of the problems that are occurring with the rise of digital information, and I keep coming back to the fact that digital information has a much lower perceived value.

It’s dangerous if in ten years all information is digital, but it’s much less accurate than it was when it was printed. We need to avoid that. And the same thing is happening with physical newspapers versus online newspapers – the physical ones are more accurate, and if a mistake is found online they’ll simply edit it. Why does this happen? Online information is free.

Because almost everything online is free, I believe it will always be less accurate because it doesn’t have the same value. Therefore, the only fix I see is if information on the Internet starts being charged for.

As an aside, I’ve actually found that magazines I’ve bought on my iPad are very accurate. And that’s because they’ve cost me money.

People will bitch and complain about organisations starting to charge for content online. But I think it’s inevitable to happen when people realize advertising revenues aren’t as profitable, and aren’t as sustainable. So at least hopefully you reading this post will recognise there are more benefits than it may appear to being charged for digital information.

Economics Lesson: Perfectly Competitive Industries

A couple of weeks ago I did my first post on economic theory, regarding price elasticities. I had a lot of emails from people saying that they learned something new, and they hoped I’d continue to do economic posts. So here’s the second.

This one is part of a general topic I’m studying called Theory of the Firm. It discusses various market structures, and how producers within them function based on the type of market structure they are in. Here I’m going to be talking about just one of the four main types of market structure: perfect competition.

Perfect competition is generally the market structure that economists would like to exist in a perfect world, because it allows firms to achieve greater economic efficiency. Let me explain this concept. Economic efficiency is achieved when both productive efficiency and allocative efficiency are met. Productive efficiency occurs when a firm produces their product at the minimum average total cost. In other words, they produce the product as cheaply as it can possibly made. Allocative efficiency occurs when the market is in equilibrium – ie. supply equals demand and therefore both consumers and producers are “happy”. Economic efficiency, then, is when a firm or industry produces the best possible combination of products at lowest cost with their limited resources so that they are best meeting the demands of consumers.

There are five assumptions to the perfect competition model:

• There is a very large number of firms.
• Each firm is a price-taker (accepts price set by supply and demand, and has no influence over it).
• All firms produce homogenous products.
• There is free entry and exit of firms in the market.
• There is completely transparent information.

Of these assumptions, the most important is probably the fact that all firms are price-takers. What this means is that because each firm sells such a small quantity of goods compared to the overall market, they have no way to influence the price. An example of this in real life is New Zealand’s dairy industry. Because NZ supplies a small quantity of the overall world market, we have no way to influence the price in our favor. This has implications on the market, as it means the firm will have a perfectly elastic demand curve facing it. In other words – each firm can supply as much or as little as they want to the market, but at the market equilibrium price. This means that on the firm’s revenue curves, price is also equal to demand. This is a feature solely of a perfectly competitive market.

I’ve included a graph of the firm’s revenues and profits below, as I am studying in the Theory of the Firm topic. You may not understand it as this post would be very very long if I went into detail about marginal costs and product, but I may do that in a later post. I recommend googling Marginal Cost so that you can better understand the “MC” curve, which is an important feature of all individual firm charts. (Hint: marginal cost is another way of describing supply, as the supply curve shows the quantity of the good or service a firm is willing and able to supply at different prices). The graph also shows how the price is found, because included is the market graph. Price (and demand under perfect competition) is simply set by the point of market equilibrium in the market graph. Note also that in this example, the firm is making an economic profit, shown by the shaded blue area, or the difference between average cost (AC) and price (price is equal to AR and MR). This is basic theory now – profit = price – costs!

Currently what I’m studying is exactly how a perfectly competitive market achieves economic efficiency in a way that a monopolistic industry simply cannot. If you’re really interested, have a Google search on the topic to find some more information, or flick me an email and I’ll send you an in-depth essay I’ve done on it.

It’s worth noting that perfectly competitive industries rarely occur in real life. Like a lot of economics, it’s simply an ideal with which to base economic decisions upon. In fact, there aren’t even any examples of truly perfectly competitive markets. The closest one that people can think of is a Saturday market where there are many fruit and vegetable sellers. They are all selling a homogenous good, there are lots of firms, they don’t have control over the price because each firm sells a small quantity compared to the total, and it is relatively easy for a new seller to set up at the market. However, it could be argued that there isn’t completely open information or there may be barriers to entry because people need to own land to farm the fruit and vegetables. Monopolistic competition and oligopolies are two of the other market structures that I’m studying which occur more often in real life.

I hope I’ve explained this simply enough to understand! Please do leave a comment or flick me an email with any questions or comments you have. These posts are a great way for me to ensure I understand the concepts well enough to be able to explain, and I’m glad after my last post on elasticities that a lot of people found it useful. Thanks all for reading!

An Argument For Apps Over HTML5

Tell me: what do the http:// and www written in my browser address bar actually do? For years I’ve learned to type them in without understanding why or what they do. Now browsers are getting smart and I don’t actually need to type them in any more – but even when I don’t type them, my browser will automatically insert them.

Doesn’t it seem a little bit weird to you that we still need to use that syntax? Websites are becoming so advanced – they’re becoming experiences. And yet we are still shown some of that information which I believe should really be hidden from the user. In fact, it’s not just the http:// and www which I think needs to be removed. It’s the entire address bar.

This relates to the whole app vs. website debate. Some people think that in the future we will browse websites through app-style mechanisms, while others feel that the browser will live and we will continue to browse websites in the same way, albeit with better technology like HTML5. My bets are definitely on the prior of those two. And the address bar is one fundamental reason.

I believe that everything that goes on behind a website (ie. whatever isn’t displayed or isn’t useful to the user) should simply not be shown. Now, a massive address bar that runs the whole length of your browser window is just silly. It doesn’t help you, and in fact it just detracts from what I feel should be the experience of a website.

That is part of why I believe the future of websites is apps. It’s because apps don’t do or show anything that the user doesn’t need to see. They’re entirely user-oriented, and I believe the same can’t be said for websites in their form today.

The whole “apps vs HTML5″ argument needs to take this into account. If HTML5 is just shoved into existing browsers that do things that the user doesn’t need to see, then I don’t think HTML5 will win because it doesn’t offer the same experience to the user.

I think the future is looking bright for apps, and this is just one reason why.

How Brands Can Make Successful Mobile Apps

The other day I was up in Auckland for the day working with Frucor’s Digital Innovation team. Frucor, in case you don’t know or live in another country, is the company behind a lot of drinks such as V, Fresh Up, Just Juice, and Pepsi. They’ve tasked a few of their staff to come up with the ways in which Frucor can use the mobile revolution to drive “transformational” growth. I was asked to talk to them for a few hours on what mobile is to teenagers, and what the most important aspects of mobile are to teens. From an outsider’s perspective, it looks like Frucor is going to do mobile right. And as someone who loves V, their flagship drink, that’s very exciting.

Many companies fail to create groups like this so that they can truly connect with customers and find out what’s important. And as a result, many companies are screwing up mobile. They’re being un-innovative and just simply boring. What companies need to realize is that doing something big, and investing heavily in mobile, is what drives growth. If you can build an app that keeps your customers using it multiple times a day, that’s the kind of thing that drives “transformational” growth.

I’ve defined the elements that I believe would make a successful mobile app as three things. And obviously this only works with companies with a product targeted towards teenagers. But they are:

• Fun
• Incentive
• Social

Fun comes from including a sense of humor – like Air New Zealand’s Rico campaign, which uses sexual connotations to get laughs. It also comes from offering random prizes so that there is an element of the unknown to using the app. People don’t know when they’ll win something, so they’ll keep using the app and it’s exciting every time they use it.

Incentive comes from offering users a real reward for using the app and consuming larger quantities of your product (or simply purchasing more). You should build in a system that allows users to keep getting rewarded, not only rewarded once. Otherwise they’ll just stop using the app.

Social comes from having full Facebook and Twitter integration, yes. But it’s more than that. It involves giving people incentive to consume or purchase your product with friends. It goes without saying, then, that the app will probably utilize location based services, and possibly in a year or so near-field communication.

I’ll be interested to see if any other companies get this right. But at least in New Zealand, my bets are on Frucor doing the next big thing in the mobile space.

Economics Lesson: Price Elasticity of Demand

I wrote a few weeks ago about the fact that I may occasionally do posts about things I’m learning in school that are relevant to this blog – namely, economics and history. This is the first of those posts.

I’m going to assume you have some basic knowledge of supply and demand. If not, please Google it and read up before reading this post. While both of those theories refer to what happens when there is a change in price, ie. does supply or demand increase or decrease, elasticities refer to how much does either supply or demand change when there is a change in price.

There are a few different types of elasticities that refer to what happens to supply/demand when there is a change in different factors. The most basic type of elasticities are price elasticities, and this blog post will discuss solely the price elasticity of demand (arguably the most useful elasticity). These simply tell us that if there is a change in the price of a good, how much does either supply or demand change in response to that change in price. Goods are usually either referred to as price elastic or price inelastic. It’s pretty obvious – if demand/supply for a good changes by a large amount when there is a change in price, the good is price elastic. If there is a small change in supply/demand? The good will be price inelastic.

The graph below shows the demand curves for price elastic and price inelastic goods.

As you can see, a relatively inelastic good has a steeper curve. Take a look at the axes for the inelastic good – when there is a change in price, the response of quantity demanded is smaller because the curve is steeper. On the other hand, with an elastic good, a change in price will lead to a much larger change in quantity demanded.

Now, what types of goods are elastic or inelastic? Think about things such as cigarettes. If someone is addicted to cigarettes, if there is an increase in their price, the addict will likely continue to demand the same amount of cigarettes and simply pay for the higher price. This means that for the increase in price, there was a relatively low decrease in demand – meaning the good is inelastic.

An example of an elastic good is anything that has close substitute products. For example, if Ford puts up the price of their family car, there will be a large decrease in quantity demanded because consumers will simply buy a family car made by another company that has not put up the price of their car.

Producers can use this knowledge of price elasticities to make pricing decisions about their products. If they know that their good has elastic demand, then they will likely not raise the price of their good because they know the quantity demanded for their product will decrease drastically. On the other hand, if they know that their good is inelastic then they will likely raise the price as the quantity demanded will not decrease by much and they therefore make a larger total revenue.

That’s a brief and general outline of the most simple type of elasticity. For me, writing blog posts on things like this really helps me to ensure I understand the concept and can write about it in a concise manner. So I hope you got something out of it too! Let me know if you think I should do more of this type of post, or not bother.