Monthly Archives: March 2012

Plural v Singular

There is many of my friends and business associates that go “plural” at some point in their career. Many become non executive directors of a number of companies and also invest in many of these companies.

I personally slightly struggle with this idea and perhaps it is my life stage but also really like the idea of staying singular. Focus is one of the key ways to succeed, and many companies or executives I have seen fail is partly apportioned to lack of focus.

In terms of governance non executives can provide a good level of support to shareholders and executives in businesses and provide help, advice and contacts, but most real business success I have seen is through single minded focus on an area and obsession about improving the product or service in that area.

For me I thing “going singular” has more risk, but spreading the risk by splitting your focus over lots of businesses seems more risky to me!

So if you plan to work on an area either personally or through an investment – get a singularly focused team and back them.

As Andrew Carnegie said – “Put all your eggs in one basket and watch the basket!”

Subscription based businesses

Firstly a confession – I love subscription businesses, they remove a great deal of latency or indecision and massively improve the predictability of your business, and I am constantly interested in businesses or new innovations that use subscription based models to grow.

There are some great examples of these in both the US and UK. I thought I might name a few I really liked:

Lovefilm

Such a simple service, turning a massively complex product range into a simple and convenient service. Pay a subscription every month and through your door pops a film every few days or weeks which you can watch at your convenience. I personally prefer the actual physical DVD model as some of the complexity of streaming and choosing is taken away and there is MUCH more choice by DVD than streaming.

Part of the success is the proposition, not only is the service convenient but it gives you lots of choice at the same price of buying a single DVD every month. My only issue is that recruitment costs I am sure will be high (and higher now that Netflix have launched in the UK) and average revenue per customer will be relatively low, meaning that the payback on customer recruitment will take a while.

The key things you are looking for in my mind is:

  • Mass market product
    Choice being a barrier or switching issue
    Something you use multiple times (think of products or services you use every day/week)
    Reasonable contribution in terms of margin (ideally greater than 50%)
  • Diet Chef has all the above characteristics, and investors love this.

    I have recently noticed that there is a number of subscription sample services popping up – especially in the cosmetics industry. These offer a subscription of samples of new or emerging beauty brands that you gain samples every month. I assume that these samples are given to the subscription company free or at a very low cost, the issue is that you are not really “using” the product your are sampling it, and there is friction between getting the sample and then building loyalty to the product. I would also argue that the value is slightly being transferred to the brand owner rather than you building a brand yourself. The customer is going to build loyalty for the delivery service but I don’t think these will be big businesses and there will be a LOT of competition if they start to take off (think Groupon) so consolidation will happen in the future.

    Looking around the BA flight that I am currently on the obvious good examples are:

    Newspapers (lots of reading these as services on iPads)
    Books (Kindle readers)
    Contact lenses – especially daily disposables