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Passing Risk….. Good for Wall Street, but is it Good for the economy?

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For better or worse, we’re in the era of the “sharing economy”. Hilariously chronicled in this Portlandia sketch, it seems like one can rent anything these days from dresses (renttherunway), to homes (Airbnb) to one’s car (Uber).
 
I often wonder why Airbnb and Uber are lumped together. From the outside, they both appear to have similar business models, but Uber’s takes a vastly different approach by seeking to control the entire process, from onboarding of drivers to point of sale.
If we look at different business models over the years, we’ve witnessed the rise of the corporation in the first half of the twentieth century (Standard Oil, General Electric, IBM). These businesses sought to control all aspects of the business from production, distribution and sales. The second half of the 20th century introduced the franchise model. The best example is McDonalds, where both the corporation and the individual proprietor shared risk. This allowed fast food restaurants, hotel chains and insurance carriers to scale quickly. By the end of the 20th century, we started seeing businesses like eBay and Craigslist match buyers and sellers together to create a new distribution of commerce, disrupting an industry, such as the classified section of newspapers. In the second decade of the 21st century, we’re seeing this model scale with a wide variety of disruptive technologies from Airbnb (Lodging), Yelp/Tripadvisor (Travel Reviews); but by far the biggest disruptive technology today is Uber.
Not only is Uber disrupting the Taxi/Livery market, it seeks to control both ends of spectrum by setting the rates for drivers, as well as what buyers are willing to pay for rides.  This leads me to ask, are businesses who pass risk to others “good for the economy”
This is not just limited to Uber, as there are other noteworthy examples:
Motion Picture Industry:
– Most of the Academy Award nominations were produced by independent production companies, not major Hollywood Studios
–  The vast majority of tabasco plants are grown outside the Tabasco plantation in Louisiana.
– 97% of chickens are produced via contract farms
– FedEx is moving away from the contractor model, which might foreshadow a necessary direction for Uber
Cosmetics
– MaryKay and Avon have employed independent contractors for years
Remove from consideration the driverless cars which may or may not be coming by 2040 (Silicon Valley thinks this will be widely adapted, but so did the US Government with the Metric System in the 1970’s and I don’t see anyone buying a liter of gas in this country.)
There’s an extensive amount of risk with UBER’s business model to sustain profitability. It is estimated most drivers who start are not there by years end. This dramatic turnover looks more like Amway or Avon. This is a HUGE issue for UBER. If passengers cannot find a ride quickly, theywill go to other services. The arbitrary approach UBER is taking to keep their drivers, which according to a reporter at City Paper, you’re fired if you don’t maintain a 4.6 Rating, plus there’s no way for a driver to dispute their ratings with Uber or a third party will only hurt their ability to scale. Also, with recent cash infusions from Carl Icahn at Lyft as well as other car sharing services starting to secure funding; this is going to get very competitive.
So what’s in UBER’s immediate Future? Fantastic Investment or Folly?
Clearly, UBER is engaging in unrivaled scalability; no other player can match this at the moment. However, unlike other tech companies, like Facebook, the cost to switch services is very cheap.
Here’s a snapshot of Uber’s competition and the unexpected winners:
Lyft
Sidecar
Livery and Taxi Services (Yes traditional livery services and taxis will adapt)
The dominant winner in the battle may oddly not be UBER, or for that matter, any company. The winners will probably be the drivers themselves. Remember, people buy from whom they trust and the best drivers will be rewarded for good work. I equate this to the human equivalent of a strong YELP/Tripadvisor review. The community will decide who’s good and those drivers who benefit from that will decide where they want to work.
That makes UBER more like Century 21 or Coldwell Banker than a tech company. All they’re doing is connecting buyers and sellers. If they don’t have good drivers, their business will fail.
Furthermore, I think there are a good number of folks who see the need for a ride as a commodity. They’re not going to care if it’s UBER, Lyft or a Taxi – they simply need to get to their destination as quickly and cheaply as possible. That’s why I think you’ll see an app that will layer all these services on top of each other (think a taxi version of Kayak). Drivers are all using Lyft, Uber and Sidecar at the same time to find the best deal? Why can’t consumers select their service similarly?
In the short term, passing risk might sound like a very attractive business plan. However, given that UBER doesn’t own cars and relies on drivers to get customers from point A to point B, there’s a serious flaw here. They’re not so much creating a new means of transportation, but rather they are changing the way we interact with it. Furthermore, their arrogance and negative publicity may have crossed a line both with their customers and the general perception of the company.
In the long-term, it seems like the UBER risk model may be a nasty headache for Wall Street, one paved with lawsuits and lost shareholder value.

Written by Derek Reese

August 3, 2015 at 12:16 am

Posted in Uncategorized

How Technology Disruption Could Devalue Sports Franchises

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Twenty years ago, I wondered why sports teams were being sold for hundreds of millions of dollars, a seemingly exorbitant amount. Today, almost every NFL team is worth at least one billion dollars, according to Forbes. Most large market Baseball and Basketball teams are now worth over $500 million.  Why the high value? Is it only wacky owners like Mark Cuban and Daniel Snyder who are willing to pay those high prices? The reality is they’re savvy and have made a wise investment. A few years ago, the NFL negotiated with the major networks and sealed a $27 billion deal in television contracts, according to the New York Times. These rights, as well as the local sports programming fee (commonly known as the sports tax), have helped provide lucrative revenue streams whether the viewer is watching or not. By some estimates, this is costing subscriber households $100 per year.
The Cord cutting band wagon has been accelerating for the last few months, with MoffettNathanson Research estimating 31K customers have cut their cable television subscriptions. That may not sound like much, considering Time Warner Cable generates $20 billion a year, but it’s concerns Verizon Fios, who launched slimmed down offerings for customers last month, increasing options for subcribers.  While it’s not quite “pay for what you want”, it’s a step in the right direction for consumers.
While cable and phone companies are starting to address consumer demand for increased choice, sports teams are at the highest risk since consumers pay the most for sports channel access. According to SNL Kagan, Yankees Entertainment Sports charges the cable companies $2.99 per month for access. That’s almost $36 per year per household. When you factor in the 7.3 million households in the New York Metro area, that’s  half a billion dollars per year for YES, whether someone is watching or not. For a network that averages 68K viewers during primetime, this clearly shows the vast majority of viewers who pay for the service aren’t tuning in. While the Yankees currently own 20% (Fox Owns 80%)  20% these days (Fox owns 80%), there’s a vested interest for the Yankees in making sure the entire New York Metro area pays this fee.
However, with consumers gravitating to services like NetFlix, Hulu and the recently launched HBO Now, we’re seeing sports leagues react. The NFL, for example,  is responding with their games being offered on Verizon Mobile. The reality is, however, these new services are not new revenue streams for sports teams, but a replacement. For example, if  $3MM million households decided to drop the YES network, this would result in $108 million in lost fees. To make up that gap the sports networks will have to offer their core fan base new experiences they’re willing to pay for, as well as creatively sell the franchise abroad, much like the Manchester United has done in the states.
Either way, I don’t see how these fees can continue to last. This is one issue Libertarians and Liberals can agree on.

Written by Derek Reese

June 8, 2015 at 3:04 am

Posted in Uncategorized

Offline Meets Online, How to Use Your Social Networking Skills in Real Life Situations

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As much as business connections have moved online with the advent of LinkedIn, Twitter and Facebook, “Face to Face” is still King when making new connections. But how do you leverage both in this Web 2.0 world? In this post I will examine best practices.

Recently over drinks I was chatting with a seasoned salesperson who eloquently informed me that “It’s never been so easy, yet so hard to do business”. The environment we’re in has created a double-edged sword. Through digital technology (blogs, social networks and websites) it’s never been easier to understand who our customers are and what they need. However, this has resulted in the bar being raised with customers who are more demanding, impolite and curt than ever before.

But as much as things are changing at a rapid pace, networking events are still very relevant. They may have evolved, but have not completely changed in that they continue to be noisy, crowded and full of libations.  So how do you make the most of them?

1-    Before the event

With many events powered by MeetUp, Eventbrite and Facebook it has become easier to see who will be attending. Not only does this give you validation as to whether it’s worthwhile, but also provides you with great insights as to whom you need to be in contact with. Use social networks to secure information on who they are.

 

2-    During the event

For most, meeting new people is one of life’s daunting challenges. If there’s someone who I find important that I might not know, I like to use my smartphone apps to locate their LinkedIn Profile. To dive deeper as to what they’re thinking I use Google Search to discover what they’re saying on Twitter (Google provides better results on finding the person than Twitter itself). Think this is intrusive? Within a few years facial recognition technology will allow you take a picture of a person and bring up their entire social graph.

The good news is that age-old rules still apply when making a new acquaintance.  A couple of points I find that work for me are:

A-    When the moment presents itself (do not interrupt an ongoing conversation), introduce yourself with what’s known as an  “Open Face”. This can be described as the warm feeling you get when you see a baby or puppy for the 1st time; pass that happiness on to the other person.  Smile, but be natural.

B-    If possible, shake that person’s hand and introduce yourself. Say something nice about them or their company, but be genuine.

C-    Be generally interested in what that person has to say and add value.

D-   When speaking about your own business, convey a one or two sentence value proposition that will instantly make that person understand what you do.

E-    Don’t talk at length about your business. Talk about their business or topic of importance to them.  Remember, that everyone wants to feel important and special.

F-    Don’t overstay your welcome. If that prospect is the decision maker, ask for a business card and leave with value; offer to do something for that person (send a case study or client example)

 

3-    After the event

For prospects you find want to build a business relationship with, your follow-up is key.  If you want to really stand out, a personal handwritten note will wow any executive, but a brief e-mail that is followed by a LinkedIn invite or Twitter follow is customary these days. Think of the e-mail like an actual handwritten note; but keep it short, sweet and to the point. Mention how you met, what you discussed, attach follow-up items (articles or case studies) and outline next steps. If you feel your impression was strong enough, by all means and ask for a follow-up meeting.  These executives are inundated with e-mails all day long, so make sure you have a strong subject line. I like to cite my own name as well as the value I’m offering in the e-mail “Derek Reese from XYZ, Case Study on Small Business”. Avoid terms like “Hi, Opportunity and Savings” because these are triggers for your e-mail to wind up in their spam folder.

If you think this company is a strong target, you might want to set up an RSS feed from their news page or Google alert, these will give you key insights into changes in the company.

Most importantly! Add value when you communicate in the future.

If you have any direct questions, please feel free to contact me on LinkedIn or follow me on Twitter.

Written by Derek Reese

July 28, 2011 at 1:22 pm

“How to use Social Media to close more business” Part 2: Twitter

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If Rip van Winkle woke up today to discover Twitter, I’d be pressed to say he’d be amazed at how boring people are. Do you really care that someone is “grabbing a cup of coffee” or “stuck in traffic”? Besides all the noise (Forrester Research in September 2010 estimated 72% of posts are not even viewed), what’s the relevancy? Beyond the pointless posts, Twitter is game-changer and something a business development professional should pay attention to. At no time in human history has there been a platform that conveys human thoughts and shared knowledge in real time. You’re probably thinking while it’s great that millions of people are expressing their thoughts, how does this increase sales? In this post I will examine further.

I find the more information you have about a client, the more fruitful the conversation. I suggest using Twitter to listen to what your prospect is saying as well as how others perceive the prospect’s company. Think of it as your ability to listen to what’s important to them both personally and professionally. While a company’s website might give you insights into their objectives, tweets from executives can give you valuable information into what’s important to them. Company tweets bring major projects directly to your attention, giving you a reason to engage in a conversation.

Follow

So how do you begin?

I find the best way to start is by following the company as well as key executives employed there. Almost all major corporations and even a great number of small and medium size businesses have official Twitter feeds. This is a great resource to gain understanding of what products they’re developing, offers in market or major news items. A simple way to keep up with what’s happening is the “follow” tab directly on their Twitter page.

Besides the official company voice there are numerous people talking about your prospects in real time (crowdsourcing effect). Try using a hashtag (#) in the search bar to find out what discussions are happening. This should give you trends that you can share with the customer as well as understand some of the challenges they face.

While there’s tons of noise on Twitter, if it’s the right chatter you’d be interested, correct?    If you have a robust LinkedIn Network (100+ connections) and are connected to your customers on this platform, I suggest following your already established network on Twitter. Alex Blom, a social media strategist has some great tips on exporting your LinkedIn contacts to Twitter.

Finally you should consider following relevant thought leaders and major industry publications. For example, I follow thought leaders such as Chris Anderson, Kara Swisher, and Bill Gates as well as publications  Ad Age, Brandweek, Harvard Business Review.This helps me keep up to date on what’s happening so I can have intelligent conversations with my customers.

Listen

Now that you have a robust database of hundreds of people you’re following, what are the best ways to listen to what they’re saying? While Twitter might be adequate if there isn’t a great deal of conversation in your network, it can be laborious if you have a large one.

A few months back the New York Enterprise Report had an excellent post “New Ways to Surf the Social Media Wave”. This should give you some great ideas on ways to manage your social graph. Here are some additional suggestions:

Tweetdeck – The industry standard for managing one’s social graph

Hootsuite – Web based application

If you’re an executive on the go, options really depend on the device you carry. I have a Blackberry, so I find the Twitter Blackberry application works effectively for me. If you have Android or iPhone devices, TweetDeck has created applications that work with these systems.

Engage

You’re following the connections most important to you and listening to what they have to say, so what’s next? Once you’ve established your presence, it’s time to engage with your network through tweets. A few years ago I was at a social media summit and the speaker was asked how best to approach Twitter, what he said stuck with me. He mentioned you need to tailor your content to the audience you’re looking to reach. Think it about it from their perspective. Will they be interested in reading your post? What irks you about other posts probably is ditto for your network, so it’s best to keep those traffic jams and cups of coffee at Starbucks to yourself. Focus on information that’s relevant. So what’s relevant? Keeping in mind that Twitter is public forum, I find it’s topical issues, news/information, or any information from your company that can be released externally.

For best practices, check out these guidelines from Kodak, Coca-Cola and IBM.

While it’s great to post relevant information to your community, I don’t find the “if you build it they will come strategy” to be most effective. You need to interact directly with your customers.

Re-tweet their posts, mention them directly in your tweets (ie @billgates stated Technology is important in schools, here’s a study). MOST IMPORTANTLY you now have reasons to connect with your customers directly. If your prospect is talking about Topic X and you have a solution for that problem, then you have a reason to fire off an e-mail or make a call since the issue is relevant to them. Make sure you reference their Twitter post. You’ll be surprised at how many people aren’t doing this. Think about it. Twitter can be your golden goose by giving you real time information on what your prospects are thinking. They’re telling you directly what’s important to them. Take advantage of this information.

Stayed tuned for my next post on Facebook best practices.

If you have any direct questions, please feel free to contact me on LinkedIn or follow me on Twitter.

Derek Reese

Written by Derek Reese

January 1, 2011 at 12:36 am

Iceland the Cashless Society

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I’ve been seeing lots of chatter regarding virtual currencies, location based social media incentives and monetizing your network, but what if we really went cashless as society? What would this mean and how would we do it? In spending time in Iceland, I see their model as one to emulate.

In one week in Iceland, I’ve found it unnecessary to complete a currency exchange credit cards (visa/mastercard, not American Express) is accepted everywhere. Here’s some of the more unique places

  • A fellow traveler I met in the hostel paid his speeding ticket (it’s 245 Euro should you be interested) on the spot
  • Chewing gun at a gas station
  • Daytrip hike

Here’s why it works in Iceland

  • NO transaction charges paid by consumer
  • Portable credit card machine for quick transactions
  • Most transactions as debit in nature
  • Iceland has the technology advances to support this (most digital country in Europe)

This has me thinking about why United States would emulate such a program

Benefits

  • Eliminate the need for the Treasury to print costly bills/coins
  • Allow for the government to collect tax revenue in real time
  • Give people the power to truly see their spending habits

Iceland is a highly educated (30% of the population have college degrees), forward thinking nation with a small population (b/w 280K to 320K). What works there won’t work in the US, but I do feel we can implement this

Challenge #1

Retailers will balk at paying transaction fees for low profit items such as a stick of gum

Solution: Set a min price where visa/mastercard/amex can start charging transaction fees such as $25. Credit card companies are incentived to get their customers to use their cards more, the logic being if they’re using a Capital One Visa card for a stick of gum they might for a new bedroom set

Challenge #2

Americans have far too much credit card debt.

Solution: Encourage consumers to use debit cards and offer realtime balance information before and after they make a transaction. Put limits on how much they can charge. Do not allow overdrafts.

Opportunity

With Smart Phone penetration approaching 50%, why night eliminate bulky credit cards and offer the use of cell phones to make transactions. Why not have visa/mastercard/bank apps that allow consumers to make purchases directly. This if environmentally friendly since instead of print paper, transaction information is processed directly in the phone. Social media companies/retailers benefit because consumers can instantly choose to share their purchases with their network.

These are just a few of my thoughts


Written by Derek Reese

June 5, 2010 at 3:41 pm

Posted in Uncategorized

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Welcome to the Launch of What, How, Where!

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Welcome to the launch of the “The Who, How & Where” column. Over the next few weeks I’ll be examining social media from a European perspective.

  1. What’s their view on social media
  2. How are they approaching the medium
  3. Where do they think this is going?

I hope you enjoy this column!

Written by Derek Reese

June 1, 2010 at 12:44 pm

Posted in Uncategorized