Confession: 8 Mile is one of my favorite movies. That’s not only because I’m a huge hip-hop fan. The gritty Detroit scenes, the classic hero’s journey, the great acting, and yes, the rap battles all play their part in making 8 Mile one of the movies I turn to when it feels like life is beating me down.
In addition to being such an inspiring and entertaining film, the final scene features a major lesson to be learned for anyone trying to sell. For those who haven’t seen the movie (or if you just want to see some great rap battles), start by watching the video below:
Prior to the above final scene, Jimmy Smith Jr. (played by Eminem) constantly has his physical and personal characteristics thrown in his face as insults, the most immutable being the fact that he’s white in a neighborhood that’s mostly black. On top of that, he and his friends aren’t known for being gang members or drug dealers and are simply people who have regular, low wage jobs at an automotive plant. For the majority of the movie, Smith feels defeated by the constant attacks on something he can’t change. The turning point comes when he realizes that his perceived weaknesses can be turned into his strengths, especially if framed the right way. Nowhere is this seen more strongly than in the final battle:
This guy ain’t no motherf***ing MC, I know everything he’s got to say against me, I am white, I am a f***ing bum, I do live in a trailer with my mom, My boy Future is an Uncle Tom. I do got a dumb friend named Cheddar Bob Who shoots himself in his leg with his own gun, I did get jumped by all 6 of you chumps
One of the things that shows skill when freestyling is being able to come up with creative insults. When someone calls out everything you’re about to say, how in the world can you respond? Their self-deprecation takes all the responses right out of your mouth and leaves you gasping for air.
Sales Pitch Objections
The preempting insult strategy from 8 Mile always reminds me of something I love to hear in sales pitches. Startup founders and salespeople have heard every objection in the book. Things like:
Your company is too small
You’re too young
The product isn’t “polished”
You don’t have enough customers
Most salespeople will do their best to brush over the perceived weaknesses of their product. They certainly won’t be bringing up their product’s weaknesses as part of their pitch.
However, none of the above common objections is insurmountable and can actually be turned into advantages. For example, a way to pre-empt the “you don’t have enough customers” objection is to say that you’re currently working with a select group of invite-only early adopter clients. And we all know everyone wants to be part of an invite-only club. The “your company is too small” objection can be reframed by saying you have a small, agile team that can respond to customer requests more quickly than any large company ever could. You get the picture.
I’ve even seen some companies include some of these common objections in their pitch decks or as part of an FAQ section of their website. This is the ultimate show of confidence and highly recommended if you know your responses are going to be powerful.
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Ultimately, whether you make a sale or not is highly dependent on how you respond to objections and questions. Every product and company has strengths and weaknesses. Those that try to gloss over the weaknesses and only highlight their strengths run the risk of being perceived as shady or dishonest. But a company that shows you what it’s weaknesses are AND is able to re-frame those weaknesses as strengths? That’s who you want to work with.
If this is your first time visiting my site, there’s something you should know: I love reading. As subscribers of my monthly reading recommendation newsletter know (if you’re not a subscriber, what are you waiting for?), I have an eclectic taste in books. My recommendations run the gamut from psychology and war history to novels and science or math books.
From the title of this post, you might be thinking that I have a utilitarian view of reading. For the record, that is not true. By no means should you be looking at reading purely from a return on investment (ROI) standpoint. Reading is first and foremost a pleasure. That being said, a useful book is one of the best investments you can make. In fact, reading is one of the very, very few areas of life which offer the potential for 100x or higher returns.
There is so much knowledge just sitting there in books, waiting for someone who can communicate the ideas effectively and take them into the real world. In fact, a large percentage of the people we consider highly intelligent may just be more well read than us. Many of the problems that companies, governments, and individuals face on a regular basis have been in existence for hundreds, if not thousands of years, and have been solved over and over.
The clever innovator or highly accomplished consultant who can solve all your problems may just be pulling their solutions from a better set of sources (books) than you are. And those better sources are the reason they’ve been able to differentiate themselves and get out of the commodity workforce. It’s clear – books can give you a competitive advantage that few other things can. But it requires an investment of both time and money.
“When I get a little money, I buy books; and if any is left, I buy food and clothes”
I’m not recommending you starve yourself to read – we do have libraries after all. But if you want to buy your books (and I recommend you do), it isn’t too difficult to justify the investment. Because that’s what a book is – an investment.
Let’s assume that a book will cost you $15 (you can buy books for much, much less than that but I’ll save those tips for another post). If you buy three books per month, you’re spending $540 per year. If you choose your books wisely (which isn’t easy), you’ll get through 36 books over the course of the year – far more than the average person. Compound this advantage over a few years and you’ve pretty strongly differentiated yourself.
In fact, it wouldn’t be surprising if just one of the books you read leads to an insight which results in your next company, a consulting contract, or a promotion at work. I’ve experienced this firsthand – a $12 book plus a few cold emails once led directly to a $10,000 consulting gig. There aren’t too many investments that can beat that ROI.
And therein lies the similarity to venture capital. Since books have the potential to lead to such high returns, you can afford to be wrong about books many, many times in your search to get it right. In fact, if I never again see a dollar of return from reading, the one consulting gig I earned covers the cost of over 830 books.
This is similar to (but even better than) venture capital economics. VCs fully expect a large percentage of their investments to go to zero. Their entire job is to find the one or two companies which will drive the returns of the entire fund. This means finding the company that can deliver the 100x return. The same applies to buying books. In my case, the ROI of that one book was 833X. While I won’t be competing with Andreessen Horowitz in the venture game any time soon, knowing that reading books can lead to huge payoffs helps me justify the amount of time and money I spend on reading.
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Of course, not every book you read needs to get you a consulting contract or a new job. Some books, fiction or nonfiction, are just an absolute pleasure to read and have no (direct) impact on your earnings potential. If you’re fortunate enough to find one of these books, lucky you. They’re more difficult to find than the 100x return books.
I’ve been going through the Jocko Podcast archives over the past few months. While listening to Episode 47, one of the listener questions really got my attention. The listener asked Jocko if he did anything ritualistic to get himself mentally prepared before his Navy Seal operations. Pretty innocent question and one that I’d imagine many listeners have thought about.
Jocko’s answer was both powerful and counter-intuitive. I highly recommend listening to the full answer here. Here’s the most relevant section:
“I hate to spoil the romantic vision of the mindful warrior poet but that actually, that idea is just not what happens. Here’s the reality: first and foremost, when you’re in combat and preparing for an operation – you are freakin’ busy…there’s so much planning and preparation that needs to be done…you’re not just sitting around trying to figure out your mindset.
That being said, mindset IS a part of combat. So how did I get in the right mission mindset? Well the mindset is not achieved in the minutes or even hours before an operation, from chanting a mantra, or breathing, or meditation, or some song that will get you in touch with your warrior spirit. The mindset is achieved in the weeks, and the months, and the years BEFORE that specific operation commences.
We lived in the mindset and that mindset came from the training we went through, the repetition of the fundamental skill sets. The mindset comes from the discipline – waking up early, studying the tactics, understanding the enemy – from all those unmitigated daily disciplines”.
That is such a powerful answer, and one that any large company hoping to innovate should pay extra attention to. Before I dive into this further, a quick disclaimer: Yes, I fully understand that corporate innovation is orders of magnitude more trivial than war.
The Wrong Type of Innovation Culture
That being said (to borrow a classic Jocko phrase), there are SO many companies that think “innovation” can be learned in a single workshop or can be siloed into a department which will invigorate the rest of the company. You see this all over the place. Everyone seems to be looking for a shortcut and there’s no shortage of charlatans trying to sell it to them.
And when companies try to shortcut their way to innovation and fail, they wonder what went wrong. Let me say this unequivocally: things didn’t go wrong because you picked Outlook over Gmail, or because you chose to go to Tel Aviv for your innovation trip instead of San Francisco. It wasn’t because you picked the wrong innovation workshop vendor, or because you don’t have an open office plan.
Companies who try to make their innovation teams look like the cast of HBO’s ‘Silicon Valley’ are falling for the innovation myth equivalent of the “mindful warrior poet”
This focus on appearances and shortcuts is just another symptom of the “innovation theater” mindset. Innovation theater refers to companies (and people) who optimize for the appearance of being innovative instead of actually being innovative.
Without a doubt, innovation in large companies fails because of company culture. So what can leaders do to make their culture more innovative?
Incentives
Instead of trying to workshop innovation, companies need to build a questioning and experimentation mentality into their company culture. This starts with incentives – both positive and negative. Employees need to have some air cover from their superiors to question the status quo and try new things. In most organizations, a failed project can scar your career for life. This type of massive negative risk disincentive is a great way to ensure that employees never try new things. Getting rid of disincentives (or at least reducing the magnitude of the downside) is a good way for companies to get out of their own way.
But it can’t stop there. Employees also need some positive incentives for developing new businesses. Creating new things with proper incentives is hard enough – imagine having to do it in an environment where your best case scenario is earning a year-end plaque? Creating upside – both financial and prestige-based (early promotions, recognition, and more) – is crucial.
How Do You Spend Your Time?
Too often in large companies, employees spend the entire day running from meeting to meeting, with little time to breathe and collect their thoughts or do any “actual” work. This is no way to innovate. Creating new concepts, even non-disruptive ones, is grounded in thought and experimentation. Twenty person meetings typically have very little to do with it.
Google’s famous “20% Time” policy allows (or arguably, used to allow) employees to spend up to 20% of their time on side projects. This policy was responsible for the creation of Gmail, Adsense, and Google News, products which created or disrupted their categories. The biggest advantage to encouraging employees to start these side projects is that companies enjoy a risk-reward ratio that is massively in their favor. If a concept fails, barely any money or time was spent on it. If it succeeds, well, the results of Gmail speak for themselves. This is exactly that kind of low risk, high reward investment that professional investors hunt for all their lives.
While 20% time may or may not be directly applicable to your company’s situation, managers should be more comfortable giving employees leeway to experiment with new concepts. You never know what your company’s Gmail will be.
Added bonus: employees will feel more empowered and engaged, which usually leads to less turnover!
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There’s no workshop, partnership, or class that will magically turn a stale company into an agile machine. Creating an effective innovation culture requires months and years of foresight, proper incentives, and vigilance against the innovation theater mindset. And to paraphrase Jocko, an innovation culture is built through unmitigated daily disciplines, not shortcuts.
Last week, I had the opportunity to give a talk on product innovation at the Fashion Institute of Design & Merchandising (FIDM). While I think they called me in to share some of the things I’ve learned during my time consulting to The Estee Lauder Companies, it’s hard to say who got more value out of the talk: the students or me.
I’ve switched industries a lot in my (admittedly) short career. Over the past few years, I’ve worked in higher education, early education, ad tech SaaS, cosmetics, and alcohol. Because of that frequent switching, I’ve often been a beginner and forced to get up to speed in new industries quickly. However, during the Q&A portion of the talk at FIDM, I realized I had stopped looking at the cosmetics industry through a beginner’s eyes. The students (all of whom were about 20 years old) were asking questions about the industry, sales channels, and technology from angles I had never thought of but seemed obvious as soon as they brought them up.
For example: among millennials, beauty influencers have huge power to drive sales, simply by recommending a product or featuring it in a makeup tutorial video. Several students brought up the (valid) point of diminishing consumer trust in influencers because of all the undisclosed sponsored posts. In hindsight, this concern seems obvious but in all my time working with beauty brands, this point has either been completely avoided or jokingly brushed off. Yet these students were able to very easily see the long-term consequences of the current influencer trend: diminished consumer trust. Instead of working with influencers or celebrities, these students were interested in figuring out how to build better peer-to-peer recommendation systems that start and end with product effectiveness in a personalized way and can’t be gamed by larger brands. Amazing concept!
What surprised me the most about the FIDM Q&A session is how unaware I was of losing my “beginner’s mind“. I’ve only been in the beauty industry for two and a half years – which is nothing if you compare it to colleagues who’ve been doing this for twenty or thirty years. But those two years were more than enough to make me miss obvious concerns with the current trendy marketing strategy. This brings up an important question: at what point do people lose their “beginner’s mind” and is it possible to keep this creative state of mind for longer periods of time?
At this point, I don’t quite know what the best solution is but I suspect it has something to do with continually exposing yourself to others without much experience and limiting your interactions with so-called “experts”. While I’m sure there’s some value in having deep knowledge within a specific field, it certainly does seem like the more time you spend working on a given problem, the more difficult it is to see the tangential opportunities that might be obvious to a beginner.
I’ll be exploring this beginner/expert dichotomy further in future posts but in the meantime, let me know your thoughts or experiences with the beginner’s mind on Twitter or in the comments!
For the typical early stage startup, closing a deal with a Fortune 500 company can provide a huge boost in morale and momentum (and hopefully cash). Enterprise deals are a signal for investors to indicate traction, a common source of free media attention, and a key factor when potential employees will weigh your offer against other opportunities.
Over the past several years, I’ve sat on the corporate side in my role building the External Innovation group at The Estee Lauder Companies, where I’ve worked on 200+ deals with startups of all sizes. Before that, I sat on the startup side of the table and led growth at several venture-backed companies; closing enterprise deals with companies like Proctor & Gamble, LinkedIn, Spotify, and Honda.
With this dual background, I’ve seen (and made) my fair share of mistakes in building startup-corporate interactions. Avoiding the mistakes below just might be the difference between celebrating a deal with a new enterprise customer and sitting on the sidelines wondering what happened. To paraphrase the classic sales quote from Glengarry Glen Ross: champagne is for closers.
Mistake #1: Assuming Large Companies Have Limitless Cash
Yes, you may be pitching to a billion-dollar company but the person you’re pitching to doesn’t have a billion-dollar budget. While corporate budgets may (keyword: may) have more wiggle room than startup budgets, your corporate counterparts are still dealing with many demands on a limited budget. On top of day-to-day budget concerns, large companies, even successful ones, may implement spending freezes for specific departments. It’s entirely possible that your potential customer will be comparing your product with something in a completely different industry, simply because you’re competing for the same budget dollars. Have some empathy for the budget concerns of your corporate counterparts and it’ll pay off by differentiating you from other salespeople they encounter.
Mistake #2: Trivializing Deep Corporate Knowledge
While it is possible that your startup is “changing the world”, the Fortune 500 companies you’re pitching to have already changed the world and know a thing or two about how things work. There’s nothing more annoying to your corporate counterpart than trivializing the deep knowledge they have of their industry. You can also run the risk of shooting yourself in the foot by extrapolating current trends in your presentation. Do you really think you’re the first person to tell a corporate innovation director with twenty years of experience that artificial intelligence is going to take over every industry by 2030? Whether you’re right or not, the point is they’ve heard that story before and may view it as a sign of arrogance. Showing some humility and using phrases like ‘our hypothesis’ go a long way towards establishing your honesty and credibility.
Mistake #3: Using Too Much Startup Jargon
True story: the first time I mentioned the word “accelerator” in a corporate R&D lab I was consulting for, a senior scientist gave me a confused look and said he “didn’t realize particle accelerators were funding startups now”. While this may initially make you facepalm, it was a great reminder that those of us in “startup world” truly live in a bubble that most of America, and the world, are not part of. Taking the startup jargon down a notch will help you get your point across.
It sounds cliché but knowing your audience is the key to effective communication. When pitching to individuals who’ve spent their entire careers in large companies, avoid using startup words that they won’t understand and connect with. It’s not the job of the audience to figure out the presenter – but it is the job of the salesperson to make sure their pitch isn’t going over the audience’s head.
Mistake #4: Ignoring Implementation Costs
In the omnichannel world we live in, any large company with a physical retail presence is constantly pitched new in-store technology concepts. While the startups offering these technologies are charging reasonable prices (often as low as $30/location/month), what is often ignored is the cost a company must incur to implement a new technology. For example, a technology that provides customer intelligence via iPad to in-store sales staff so they can sell better requires an extensive training program, troubleshooting, and potentially even in-store hardware upgrades. So even though a technology like this may only cost a total of $6,000 per month (200 locations x $30/location/month), the implementation costs (for things like hardware and training) across 200 locations could easily exceed $100,000.
Implementation costs are difficult to avoid entirely but there are steps startups can take to help their clients reduce costs and get themselves closer to signing a deal. These steps include negotiating reduced hardware pricing with manufacturers, assisting with or even providing free training, and offering to troubleshoot software issues for sales staff. Whatever you do, the important thing is to make it feasible and simple for the large company to say yes to working with you – and that doesn’t always involve the price of your actual product.
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Once you’re able to snag a meeting with a decision-maker at a large company, it means you’ve got their attention. They are interested (albeit at a very high level) in what your product can do. That said, these decision-makers are looking at dozens of other companies who are competing for the same budget. The easiest thing for a decision-maker to do is say no and any of the mistakes above give them an easy out. By always keeping your audience in mind, being empathetic to their concerns, and avoiding critical mistakes, your probability of closing a deal goes way up. And that’s ultimately the outcome that both large companies and startup salespeople are after.
We’ve all heard the cliché that we become the average of the five people we spend the most time with. Without a doubt, humans are massively influenced by those we surround ourselves with. Hang out with people who drink every day? Chances are, you’ll start drinking every day too. If your friends are workaholics, you’re more likely to be a workaholic. Accordingly, if we improve the quality of our peers, we can improve our own lives.
Of course, it’s not quite that simple. After all, we can’t just get rid of our friends and pick up “better” ones (nor should we want to). We can, however, surround ourselves with greatness by other means. Living in the Internet-era means it has literally never been easier to influence yourself through the positive examples of others. You just need to have the discipline to curate your environment with the right inputs.
Read Books – Especially Biographies
“Once you learn to read, you will be forever free”
-Frederick Douglass
If anyone knows the value of reading, it’s Frederick Douglass. In an era when teaching a slave to read was considered a major crime, Douglass became a voracious reader, partially through his own initiative and partially through the kindness of his master’s wife. Throughout his life, Douglass maintained that reading and knowledge have the power to free one from their present circumstances and improve their life.
Biographies and autobiographies are incredible resources for exposing yourself to real-world examples of how great individuals dealt with difficult circumstances. Even if you pay full price for your books, where else can you spend $20 and get a deep dive into the life of Abraham Lincoln, Steve Jobs, Andre Agassi, or countless others?
Another big advantage of biographies is they allow you to be mentored by the greatness of people who have been dead for hundreds, if not thousands of years. It’s not quite as good as witnessing events in real-time but it’s not a bad substitute.
Fiction is an underrated resource for surrounding yourself with greatness. After all, what we think of as “history” is usually fictionalized anyway, so why not learn from true fiction? There are tons of fictional characters who can provide positive examples for how we can act in our daily lives and there’s no reason not to learn from them. Books that come to mind are The Martian, the Harry Potter series, and the Hunger Games series.
Listen to Podcasts
If we’ve hung out recently, there’s a good chance I talked your ear off about podcasts. Although they’ve been around for awhile, I’m convinced that the podcast ecosystem is primed for hockey-stick growth. The content available now is just incredible. As more podcasts experiment with non-advertising driven business models, I expect the content quality will only increase.
Some of the best podcasts for exposing yourself to greatness take the form of interviews. Others are of the “lead by example” variety. Here are a few of my personal favorites:
Jocko Podcast – hosted by Jocko Willink (co-author of Extreme Ownership)
All of these podcasts have deep libraries for you to dig into. Some episodes will really strike a chord – others won’t. Sample a few and discover what gets you going.
The best thing about podcasts is they make the person being interviewed seem more human and normal than articles, books, or video. When you hear incredibly accomplished individuals like Jamie Foxx, Jody Mitic, Lisa Randall, or Naval Ravikant in audio, there’s no embellishment by an author, no makeup turning them into flawless beings, and there’s simply a level of rawness that I haven’t seen elsewhere.
Finally, podcasts are a great way to make your commute useful. It doesn’t matter if you drive, take the bus, or ride the subway to work – podcasts are the ultimate way to turn that dead time into productive time.
Pay Attention to Pop Culture and Sports
Image Credit: CBS Sports
I’ll be the first to admit it – the attention we pay to pop culture (and yes, I’m including sports in this category) gets on my nerves sometimes. But that doesn’t mean it can’t be inspiring. I’m far more into sports than music, film, or other types of celebrities but there are powerful examples from every field. To name a few just from football:
Aaron Rodgers going from community college QB to an NFL MVP and Super Bowl winner (I’m biased on this one – Go Pack Go)
Lesson: It’s not about where you start, it’s where you end up.
The New England Patriots ridiculous Super Bowl LI comeback win yesterday over the Atlanta Falcons
I could go on for days with these examples. They are everywhere: basketball, music, books, movies, TV shows, tennis – you name it. It’s easier to surround ourselves with greatness today than at any other time in history. We just need to know where to look.
I strongly recommend reading the blog post linked to in the tweet. It’s Uber CEO Travis Kalanick’s guide to attending CES as a bootstrapping (also known as ‘broke’) founder. The guide itself is interesting but more important is the idea that Kalanick, with an estimated net worth of over $6 billion, ever needed to think about how to go to a conference for under $100/day. The fact that this post was written only eight years ago seems incredible, not to mention that Kalanick hadn’t even founded Uber yet. That didn’t happen until March 2009.
But I’m thinking about that eight year number for other reasons too because exactly eight years ago, I turned 18. And thinking about that birthday and all that’s happened since makes Kalanick’s change in circumstances more understandable. Now to be clear, my net worth isn’t even a rounding error for Travis Kalanick so that’s not what I’m talking about here. Here’s what I am talking about: it’s insane to think how much – good, bad, and ugly – has happened in the past eight years. Some things off the top of my head:
Self-Awareness: (sort of) figured out what makes me tick and what motivates me
Started my first company the summer between high school and college. Got bit by the startup bug – it hasn’t left me since.
Got the opportunity to go to CMU and meet amazing people
I wouldn’t trade any of the experiences or relationships gained from the past eight years for anything. Not even the shitty experiences (or people). Despite what people tell you about life being short, eight years is actually a really long time. A lot of things happen and those things don’t have to be as massive as founding Uber for it to all be worthwhile.
The last eight years have been transformative in every way and I absolutely can’t wait to see what the next eight years brings – no matter if it’s ups, downs, or something in between. And with that, I’m off to drink some birthday beers with people I love. Cheers!
The other day, I was looking to buy a jump rope I could travel with. After spending (wasting?) about 30 minutes going through jump ropes on Amazon caused by searching for “best MMA jump rope”, I paused to ask a highly relevant question: what in the world was wrong with me? Why did I need “the best” jump rope? The previous jump rope I owned came from who knows where and served me fine for a long, long time. The experience felt like living my own version of Aziz Ansari’s piece about trying to find the best toothbrush.
Last week, I had a great lunch conversation with my friend Lexi Lewtan (currently building AngelList’s A-List job platform) about something similar she was noticing in the recruiting industry. Companies all wanted to recruit “the best” iOS engineer or designer for their company even though that bar is subjective based on what that company is building. No one, not even early stage startups, wanted to settle for hiring an average engineer, even if that meant huge cost savings and would get the job done perfectly well.
We’re taught in economics, entrepreneurship, and statistics classes to assume that most things lie on a normally distributed curve. This is especially true about demand – at some prices, I’d like to buy a “widget” while at higher prices, I wouldn’t.
Essentially, the post boils down to the world moving from one of scarcity to one of abundance and that leading to a breakdown of the normal distribution curve:
Image Credit: Alex Danco
To build on Alex’s great post, I think we’re moving to an even greater dichotomy. We’re going to live in a world where companies AND people are either luxuries OR commodities. This trend is showing up in industries as varied as cosmetics, labor, food, and much more. Let’s start with some definitions; what’s the difference between a commodity or a luxury in this context?
Commodity: A product or service for which I’m brand agnostic and highly price sensitive, usually because I believe there is no major difference in quality between brands OR it’s just something I don’t really care about. Examples (for me): gas stations, drug stores, bottled water, socks, paper towels…the list goes on.
Luxury/Premium/Prestige: These are products or services for which I’m highly brand/review sensitive and minimally price sensitive. Things in this category for me include coffee, beer, shoes, cell phone, computer, chocolate, and many, many more. The luxury/premium/prestige category is the one where you would search for “the best” on Google or Amazon.
One key thing to remember is that the determination of a commodity or a luxury is an individual thing – for example, some people think all beer tastes the same and treat it as a commodity. I think differently and am willing to pay a huge premium for beer that I think tastes better, uses more valuable/rare ingredients, and has a better story behind its creation.
The easiest way to test whether something is a luxury or commodity for you is to imagine the price of product X increased by 10%. Would you still buy it or would you switch brands? For example, for most people, if a cup of Starbucks coffee increased from $2.50 to $2.75, they wouldn’t think twice about continuing to buy Starbucks. Similarly, if the price of a 15 inch Macbook Pro went up from $1,999 to $2,299, most Macbook Pro customers would still buy it (although probably with some complaining).
Let’s look at how the luxury vs commodity trend is affecting three very different industries:
Cosmetics
I’ve been spending much of my time studying the cosmetics industry because of my work at The Estee Lauder Companies. Since my role is to look externally, I’ve been watching how companies position themselves and how they’re adapting to this new luxury-commodity dichotomy.
One of the biggest moves last year in cosmetics was P&G divesting a huge chunk of their beauty business in a $12.5 billion sale to Coty. One of the striking things about that transaction is that P&G chose to hang on to its most prestige skincare brand – SKII. In another example, Unilever, a huge personal care company that traditionally stays in the mass-market world with brands like Axe, Dove, and Degree, bought 4 prestige beauty companies in 2015 and they’re on track to acquire more in the future.
For beauty brands, there isn’t much room left in the middle – either you’re making commodities that are competing on price (in which case, your gameplan should be to cut costs as much as humanly possible and sell at grocery stores and drug stores) or you’re competing on uniqueness and luxury, in which case you need some product, marketing, or service elements that stands out.
Labor
If you think about labor in a “prestige” vs “mass-market” manner, you see a similar thing happening. Companies look to hire world class full-time employees for a select few key positions and for everyone else, they’re OK working with outside firms or freelancers. This makes sense from their perspective: why invest additional overhead for average talent when you can replace it easily with the next person who walks in the door?
This trend is part of the reason we’ve seen marketplaces for unskilled labor pop up everywhere over the past few years – not just Uber, but also Fancy Hands, Handy, Wonder, and much more. The people working for these companies are all contractors, which is a much cheaper arrangement for companies than hiring full-time, allows flexibility for workers, and allows companies to adapt dynamically to demand in the marketplace (Uber’s surge pricing is the best known example of this).
On the other side of the unskilled labor marketplaces, highly skilled individuals in certain industries have seen their salaries climb higher and higher as firms bid for their talent. This can be seen on a wide scale by looking at software developer salaries or the long-term rise in CEO pay at Fortune 500 companies. As much as it would be fun to complain that these pay issues are all about corporate greed (which is certainly a factor for the CEO pay issue), at the end of the day, it’s really about companies bidding against each other for talent that they want to acquire or keep at all costs – aka the luxury talent.
Food & Beverage
Believe it or not, there was a time when coffee was a commodity item. For those of us who’ve grown up in the era of the $5+ latte, the commodity coffee era is a difficult world to imagine. I assure you, however, a world in which coffee consisted of hardly drinkable sludge that cost $0.50 was a very real place.
The late 80s and early 90s featured the rise of a company called Starbucks. You may have heard of them. The key distinctive trait of Starbucks was taking a commodity item that no one thought much about and elevating it to a level no other coffee retailer had imagined or done on such a large scale.
What does the word elevating mean? In this context, elevating coffee meant Starbucks started with higher quality beans than any of their existing competitors (luxury), roasted them with a more precise science than their competitors (luxury), integrated the story of Italy, espresso bars, and the Third Place (luxury), and included an ethical component (luxury). Compare that to a gas station that would pour some black sludge in a styrofoam cup and sell it to you for $0.50 (commodity). All of these elements factor into giving Starbucks the cache to sell a commodity product as an affordable luxury for almost 10x what their competitors were selling at. Howard Shultz (the man behind Starbucks) tells the full story behind the commodity to luxury rise in detail in his book Pour Your Heart Into It: How Starbucks Built a Company One Cup at a Time.
Today, the rest of the food & beverage industry is doing its best to try to break out of the world of commodity items. Whether they do or not remains to be seen but the tide has turned in luxury’s favor as more and more people are paying attention to the ingredients in their food. This creates an opportunity for brands to elevate (there’s that word again) healthy ingredients, the lack of preservatives, ethical sourcing, freshness, or dozens of other desirable food characteristics.
Commodity vs Luxury: The Way Forward
The main, short-term outcome of this commodity vs luxury transition is that companies are going to be forced to make decisions about how to invest in their futures. My guess is that more companies are going to invest in building brands that are luxuries. Why? Because a luxury’s key differentiator is uniqueness – which could come from a unique ingredient, a novel process, or a fascinating background story – any and all of which can be sustainable competitive advantages.
Building a commodity business seems to me as an outsider to be a lot more difficult. Commodity businesses would be competing mainly on price which makes it easy to imagine commodity businesses becoming a race to the bottom with margins getting slimmer and slimmer until there are no profits to be made. Commodity businesses survive on high volumes and while of course there will always be a (huge) market for them, I think we’re moving to a world where people will buy a higher percentage of products at a premium that last longer, work better, and are more unique – which by necessity means purchase volume will go down. This trend could also be tied to growing income inequality – fewer people in the middle class – but that requires more research to figure out.
Something I haven’t mentioned anywhere else in this post but runs in the background of all these trends is technology. Technology, especially data but also includes manufacturing tech like 3D printing, is giving companies the ability to create customized and personalized products in almost any industry – which is certainly one way to create a premium product. When a company has created a customized product for you and owns the data to continue improving that product, it becomes a premium experience with a competitive advantage. That’s a tough combination to beat.
Thanks to Lexi Lewtan, Brett Martin, and Josh Dodds for their feedback on early versions of this blog post.
Staying in shape, mentally and physically, is obviously important to overall well-being. Personally, I find my mind is sharper and more importantly, I’m a much happier person when I take care of myself physically.
Since last April, I’ve been traveling a ton for my consulting work, typically somewhere between 2-3 weeks every month. Traveling is something I love so I can’t complain too much about that buuuut it certainly makes staying in shape difficult. Before this travel madness started, I had a regular gym routine (3-4 days of lifting weights, 2-3 days of cardio) but that’s difficult to keep up when you’re in a different place almost every week.
Over the past few months, I’ve learned a lot about staying in shape while traveling. As is usually the case with me, most of these lessons were learned the hard way:
Skip the hotel breakfast
Free hotel breakfasts are almost always god-awful, especially if you’re staying at a road warrior hotel, like Homewood Suites or Residence Inn. Tell me if this sounds familiar: Soggy, somewhat rubbery scrambled eggs, breakfast potatoes that taste like they’ve been out for weeks, and some strange processed meat as a side.
Oh, I forgot about the waffle maker.
Do yourself a favor and skip most of that. Maybe grab some eggs and toast if you’re really hungry. But probably the safest items to consume in a hotel breakfast are the coffee, tea, and juice. With all the other stuff, you’re going to be consuming amounts of sodium and sugar that’ll leave you feeling exhausted for the rest of the day.
So if you’re not going to eat breakfast at the hotel, what can you eat?
Find a grocery store
Grocery stores are amazing places. Even in the middle of nowhere, you can find a grocery store that sells healthy food. My advice is to go to a grocery store the day you arrive and pick up a few things. Obviously food choices are somewhat dependent on whether your hotel room has a fridge/microwave. Here’s what I typically buy, assuming there’s a fridge:
A few apples
Some nutrition bars (I like Nature Valley Oat & Honey bars)
Greek yogurt
That sounds like a solid breakfast to me.
Take advantage of free exercise
This is a concept I try to use all the time, not just when I’m traveling but it’s even more important on the road. The idea is this: if you have to do something, for example, go from the ground floor of the hotel to the 4th floor, there are two options available to you:
Option 1: Take the elevator
Option 2: Walk up the stairs
Even though option 2 is more energy intensive, it’ll take you to the same place as the elevator, you’ll burn a few calories, and you’ll probably save yourself the stress of waiting for an elevator that takes forever and the awkwardness of being in an elevator. Related question: aren’t elevators just the most awkward places ever?
Another great form of free exercise if you’re in a city is just walking to meetings instead of taking an Uber or cab.
Get good at hotel room workouts
Typical hotel gym
Let’s face it: hotel gyms leave a lot to be desired. That said, there are some great workouts which don’t require any equipment and can be done in your hotel room (like this and this). Start doing them regularly when you’re on the road and add your own variations to keep it interesting. The easiest exercises to do in a hotel room, no matter what size, are:
Pushups (all kinds)
Bodyweight squats
Lunges
All sorts of ab exercises
Stretching
Take advantage of real gyms when you’re home
On a related note, if you’re on the road regularly, it’s easy to get into a routine of laying on your couch and watching Netflix when you’re home. I love Netflix as much as the next person but make sure you squeeze in some “real gym” time when you’re home. A real gym is a place that has barbells, plates, machines, and space.
If I get home before 8pm from a trip, I try to squeeze in a short, gym session the same evening.
Free meals aren’t really free
One great thing about work travel is being able to expense your meals. That’s amazing right?! Well, yes and no.
The good news is that you can take advantage of being in a new place and try types of cuisine and restaurants you typically wouldn’t go to. In some industries (like the one I’m working in now), work travel can also entail fancy dinners which gives you an opportunity to try more upscale restaurants you probably wouldn’t choose on your own.
The downside? Well, all those meals might be covered by your company/client but that doesn’t mean the calories don’t count. Just because dessert is covered doesn’t mean you should get dessert.
Remember the “freshman 15” from college? (I do…) You see a similar effect among new consultants for a very similar reason. I remember when I first started college, the “coolest” thing was being able to drink soda with every meal. A few months later, despite being a college athlete, I had gained 15 pounds and it was pretty obvious that the soda needed to go. Don’t make the same mistake as 18-year-old Neil.: try to eat the same way on the road as you’d eat at home.
But that doesn’t mean you shouldn’t enjoy the perks of going to fancy restaurants! Just be smart about it.
Get sleep
For someone who travels a lot, I still haven’t learned how to properly sleep in hotel rooms. Almost without fail, I find it difficult to fall asleep the first night I’m in a new hotel room. Knowing that allows me to plan for it. Most nights I sleep for about 7 hours so on my first night in a new room, I’ll try to budget 8-9 hours for sleep, which gives me some time to toss and turn and still get a normal amount of sleep. It doesn’t always work but it helps.
Skimping on sleep is a great way to get sick while traveling – probably the worst possible combination.
Avoid alcohol, especially late at night
Related to the above, drinking alcohol affects your quality of sleep and can also contribute to getting sick. If your travel requires you to fly, keep in mind that planes dehydrate you so drinking alcohol before, during, or immediately after a flight can be rough on your system (and on your skin). If you do choose to drink, just try to balance each drink with a glass of water and you should be able to avoid dehydration.
And yes, I learned this lesson in the worst possible way by going out in SF the night before a 6:30am flight (what the hell was I thinking?). Next time we’re in the same city, ask me for the story.
If you haven’t heard of StandStand before, you need to check it out. Basically it’s a portable standing desk made of a three interlocking pieces of wood. Great product that travels nicely in a laptop bag.
Especially after sitting for a while in a plane/train, working on a standing desk instead of sitting down feels amazing. Trust me.
Traveling for work can sometimes (or usually) be rough but being smart about how you travel, eat, and move while on the road makes all the difference between a miserable trip and a productive one. I’ve been on both sides of the productive/miserable spectrum and believe me when I say the productive side is a lot more fun. Let me know if you have any other suggestions for staying in shape while traveling – I’d love to try it out.
Getting started in a new industry can be super challenging but in today’s world of shorter stints with companies, quickly building working knowledge of a new industry is an extremely valuable and essential skill. Becoming fluent in your industry quickly means you start providing value sooner to your team, customers, employers, investors – everyone.
Back in the day (2012), I showed up to a lunch meeting in Pittsburgh with Adam Paulisick unprepared to answer his questions about the economics of college admissions, the industry I was running a company in at the time. He gave me some advice that stuck with me ever since: To win, you HAVE to know more about your industry than anyone else – there are no excuses.
Since that embarrassing episode, I’ve tried to apply Adam’s advice to everything I’ve done and developed a step by step process that makes the challenging process of getting up to speed in a new industry a bit more methodical:
Step 1: Read as much as you can about the market
There’s nothing to replace this step. Read EVERYTHING – articles, journals, books, forums, industry history, even tweets. Don’t judge anything you read yet – at this point in the process, you don’t know anything. If there’s some kind of overview book, start with that – if not, start with articles because they’re usually written in layman’s terms. You should absolutely be taking notes – the key here is to start building a knowledge base. Allow yourself to go down the rabbit hole.
One last thing on this topic: give yourself the time you need to read about the industry. Study for this like you studied for the SAT and make sure you block the time off on your calendar. This is just as important as any meeting.
Step 2: Find people who know a lot about the market and spend time with them
Talking to knowledgeable people and asking questions is something that should be done mostly in parallel with reading but make sure you’ve at least read a little bit first so you can ask relevant questions. Don’t worry about forming opinions yet – just keep building knowledge. Asking someone for their time initially feels scary (why would they want to talk to me?) but you’ll find that smart people: a) generally want to be helpful and b) are generous with their time when they sense you’re genuinely curious about their life’s work.
A simple hack here that’s been magical for me: Ask each person you talk to in the industry for one other person they recommend you talk to. Even better, ask if they can introduce you. Very quickly, you’ll have a network of really smart people who genuinely want to help you learn. #winning
Step 3: Form opinions and test them
The first two steps in this process are fairly straightforward – they require work but your ego isn’t at stake. The third step is what will require some courage. To figure out if your mental “picture” of your new industry is correct, you’ll have to form some opinions AND get a reaction on those opinions from knowledgeable people. Without getting a reaction on your opinions, you’ll simply be forming a (likely) incomplete/incorrect mental map of the industry. Feedback is what allows you to correct, iterate, and improve on your mental map to create something resembling reality.
One of the most amazing things about the discovery process is that this is the stage where tons of ingenuity comes from, likely because at this stage, you’re reasoning from first principles (as opposed to ingrained dogma). Cherish this point of the process even though it’s scary sometimes. The worst-case scenario is that you say something stupid – no big deal.
Step 4: Repeat, repeat, repeat!
This process isn’t something that should only be done when you first start working in a new industry. It should be done constantly so that you continually grow your knowledge base and keep your mental map up to date. The ultimate goal is to have what athletes refer to as “fingertip feel” of your industry.
Bonus Tip: Your ego is your worst enemy
All of the suggestions above require leaving your ego at home. If you can’t do that, all the feedback in the world won’t improve your mental map of any industry. Remember, feedback isn’t an insult – it’s a gift and a huge competitive advantage. Allow yourself to accept feedback and you’ll find that you’ve learned more about your industry in 6 months than most people learn in 10 years.
