Central Perk: Seth's Blog : Beyond geography

miercuri, 25 septembrie 2013

Seth's Blog : Beyond geography

Beyond geography

The original business was a lemonade stand. At least metaphorically.

Geographically based, this sort of business offers the following proposition: We are physically convenient to you, and you won't pass another business on the way here that offers you a transaction you will like more than ours.

Originally, of course, this meant on your block. Now, it means within a drive, with good parking. Or any choice that's based on scarce options due to proximity.

The geography-based business is real-estate driven. The right neighborhood with the right rent is a good thing, a natural disaster or the decay of your neighborhood, a bad omen indeed.

The local farm is all about geography, as is a pharmacy and a pizza joint. McDonald's was focused on geography as they grew, Ray Kroc knew that few people would drive past ten other hamburger places to get to a McDonald's.

A business to business organization can also be focused on geography, either because it's a provider to local businesses, or, to get just a little metaphorical, because it's built around just a few closely-tended customers. Those businesses stick with this supplier because it's easier than switching.

As information began to spread, a second kind of business came along. The commodity-based business says, "we sell what they sell, but cheaper." The commodity business requires that information be available and that you're able to actually produce a standard item cheap enough to win at this.

A commodity business always lives on the knife edge of cheaper. More information, bigger areas served and the combination of automation and cheap labor means that at any moment, you can be made obsolete. If a business is depending on winning the Google search sweepstakes and to win the price-shopping shopper, it's a commodity business.

And the third type, the modern type, the type that's the most difficult to build and the most stable once built is the community-based business.

This entity thrives because it's worth the drive, it's worth the cost and it delivers something hard to find just about anywhere--community, not convenience. The community-based business might very well serve a local (geographic) community, but it doesn't try to serve every person in the town, just those that have decided to eagerly join that community.

McKinsey is a community-based consulting firm. Their community is the boardroom of the Fortune 1000, and they can charge a huge premium over 'geographic' providers because the product is not merely the advice they dispense. Choose McKinsey because it says something about who you are and which group you are part of.

Community-based businesses tell stories. They create remarkable products. They sync up their tribe. They happily surrender market share to the commodity seller--if it's a lower price you want, good luck to you! The community business says, "people like us shop at a place like this." This is where brands live, and where work that matters gets done.

The geography-based surf shop sells surfboards and supplies to the grommets who come to this beach this weekend. The commodity surf shop sells the cheapest boards and wetsuits, online. And the community-based surf shop runs swap meets, has a newsletter, organizes competitions, commissions original artwork on boards, and yes, along the way, sells some surf wax.

All three structures can work, for schools, for non-profits, for companies big and small. But each is its own style, with its own structures and measurements and strategies. Choose!