Product or Service?

The one thing I like about writing, and blogging in particular, is that it gives one a chance to air out their thoughts, in public, with the potential for feedback. However, one of the most important aspects that is easily overlooked, and this obviously applies to all journaling and not just blogging, is that it gives one the chance to take partially formed ideas and simply by the act of writing them down, flesh them out into fully formed thoughts. This is what I am going to attempt today. Buckle your seatbelts.

In case you’ve fallen behind in following my life (wouldn’t be hard, I don’t think I’ve talked about it much here in the last few months), I’m currently working for Kirkham Systems and Fireball Media. Kirkham Systems is an established IT services company servicing the Fort Smith, Arkansas metro area offering IT services to small businesses. It’s been very successful, although obviously no business is as successful as it’s proprietors would hope. Fireball Media is an advertising agency, brand spanking new, less than a couple months old, so we really have no expectations or data to suggest whether that one is performing well or not. Time will tell.

Thus far, Kirkham Systems is excelling in its sweet spot of providing services to companies with about 5 to 25 PCs. More than that, most people have decided to hire full time IT help, less than that people generally don’t have the budget to afford our services or prefer to let their kids best friend come in and help them out with those ‘puters. Kirkham Systems also does a significant amount of web design and custom software. It’s a very well rounded company, distinguishing itself not only with its customer service but also in its ability to offer a full suite of services from networking, to custom software, to web design.

However, we haven’t as yet been able to crack the nut that I’d really like to crack. Unfortunately with a company like Kirkham Systems, companies who hire a full time IT staff have usually done so because they feel they’re going to get the best service from having those services in house. If I owned my own business, I can’t see wanting to outsource a full time staff member to waiting in queue at some other company. I know from experience you’d probably get better service than the average person staffing a one person IT shop, but it’s a hard sell. We don’t sell hardware or software solutions, so we really don’t have a lot to offer companies with an IT staff. Like I said, it’s a tough nut to crack.

It’s very difficult to make a service company grow exponentially like a product company can. Take any recent product phenomena like the iPod and you can see what I mean. Rarely can you come up with a service based idea that will catch on like a product can. You can’t hold a service in your hand, you can’t start up its motor, you can’t look at after the salesman has come and gone. You grow a service company one customer at a time, and while you can, and we are, building other existing channels outside of direct sales and standard advertising based marketing, it’s very difficult to find a niche that is wide, has limited competition, and has the potential for growth that a product based company could have.

I’m still looking for the magic solution, but I’m afraid there isn’t one. I think this is largely why service based businesses tend to not be chains, or at least not large ones. Chains require profit margins and scalability that isn’t present in service based businesses. Larger prodcut companies, chains (restraunts, retail, etc) included, require being able to gain effeciencies with the size of the company such that the potential revenue for a given employee grows with the success of the product (or in the case of retail, the mix of products I suppose). Service based businesses, since their revenues are largely based on labor, are limited to revenue per employee based on some multiple of billable hours. Administrative overhead merely cuts into the profit generated by a revenue generating employee, thusly, to grow to the size required to maintain a large administrative staff and bureaucracy as is typical of larger companies becomes nearly inpossible. I believe Brad Feld has written about this. I don’t know what the exact size would be, I think it would depend on the company, but I think every service based business would hit a point where it becomes unprofitable to add more billable employees because the overhead required to manage those employees becomes too expensive.

I think perhaps I’m pondering a problem that I would have learned about in Business School. Perhaps I should go back to college :). I may be writing about a problem that’s been written about so extensively as to make my thoughts seem like a rehash of some famous business writer’s thesis. Maybe someone reading this can point me to it. Am I right or wrong? Am I missing the examples of people who have found the magic bullet and turned service based businesses into large enterprise?

Definition of Design

I live this, every day:

“Design consists of creating things for clients who may not know what they want, until they see what you’ve done, then they know exactly what they want, but it’s not what you did.” – Brian Sooy

Finding the Right Partner for Your Business

Mark Cuban has a great post about finding the right partner for your business and accepting your faults. While I don’t think you should ever stop trying to improve yourself, which in my case is attempting to be more organized, I do think he’s got a very valid point in knowing when to accept your faults and make sure you’re backing yourself up with a good partner. Thankfully, I think I’ve found a good one with Tom, so we’re covered there. The sky is the limit!

Dumbest quote of the year

This came across an email list I’m on recently:

Ning co-founder Marc Andreessen recently said…

Ideally we’ll never meet any of our customers. We actually had to take the sign down from our front door because one of our customers actually stopped in, uninvited, and said, “Hi, I love your service.? And we’re like, “why are you here?? And so down came the sign.

Drop-bys like that should only happen in sitcoms as far as I’m concerned… The consumer internet businesses in a sense are ideal businesses from the standpoint of never meeting your customers.

Only in the technology business would anyone be caught dead uttering such an utterly stupid statement, and even then it doesn’t make it any less of a moronic comment. Your customers are your bread and butter. You should jump up and down if someone takes the time to stop by your office just to tell you how much they like you, and you should be just as excited if someone takes the time to tell you what you’re doing poorly, because it’s a chance to save a customer and make an advocate. This is something I’d expect to see on Rick Segal’s blog, in one of his infamous (at least to me) overheard dumb business conversations. I can’t honestly see anyone with this kind of attitude being successful in any business in the long run, technology or not.

The Local Web Experiment: Fort Smith, Arkansas

A while back, I wrote about what I’m calling the Local Web. The Local Web, in my mind, is a group (an infinite number of groups are possible) which arrange their interconnectedness by sharing a geographical point of reference, traditionally Metropolitican Statistical Areas, or MSAs. The Local Web is already built in many of the larger cities, with directories and vertical search engines to allow you to search for stuff in major metropolitan areas, but a good percentage if not the majority of Americans live outside of a major metropolitan area. The connected netizens from those areas are being largely overlooked by current major initiatives to create localized web experiences.

I’m starting an experiment in a town that should be the perfect size. My hometown is Fort Smith, Arkansas, a town of about 80,000 with about a quarter million in the MSA. There are billions of dollars of business done every year here, and many companies here ship worldwide. However, for doing business in town, most people still reach for the phone book. The reason for this, of course, is because you can spend days Googling around for information about Fort Smith businesses without finding much but spam sites. No one in this town has made a concerted effort to make sure things are easily found on the web about businesses they’d like to do business with.

So, I’m starting an experiment. I’m going to organize a blogger meetup to start. I’ve already found several local bloggers and I’m going to find or create more. I’m going to organize them and attempt to get them to write about business and other activities (softball, church, whatever) they that they do locally and where they do them at. I’m going to try to incent people to create links from site to site across town and try to make information more easily indexable by the search engines so that when you search for something in the area you don’t end up at a spam site. We will be holding the meetings at Kirkham Systems of Fort Smith.

Once this is going strongly, I, along with the staff of Kirkham Systems are going to start showing the results to local businesses and convince them they should have a website with a blog and incent them to link to the people they’re doing business with and write about their experiences with it. The goal is to create an interconnected web of links focused on this geographical area, so that if you end up at Kirkham Systems website you’ll find annotated links about the people we do business with, and when you end up there you can find the people they do business with.

If I’m right, by the time I’m done, Google will be a far more interesting resource to find information about businesses, things and places in Fort Smith, Arkansas than any other resource, anywhere. This may seem boring to people who live on the coasts and can find a well designed and well organized website for even local businesses, but for the large portions of the country that have been ignored by businesses attempting to organize information for them on the web, I think this will be a large step forward. No one understands or cares about this because they haven’t been educated as to what it can mean for both their businesses, themselves and their community. My goal is to educate everyone here.

The Local Web is long overdue.

Head Injuries R’Us

I’m totally going Rick Segal on your asses tonight.  If you’re not reading his blog and you’re in any way, shape, or form involved in business, you should be.

So, we have a name for name for FedEx Kinkos, Head Injuries R’Us.   Honestly, I’m not a big Kinkos customer, since I don’t really deal much in paper, but this week while we were down in the Bay Area, we had need for paper versions of several documents, so naturally we ended up at Kinkos.

I don’t know that I’ve ever felt like I needed to invest so much effort to pay someone.  We had need for some quick and dirty business cards for me which required printing color on cardstock.  This seems like a simple request.  I could do it on my inkjet printer at home with little to no effort, so thusly Kinkos should be able to accomplish it in a fraction of the time.  Well, long story short, not this Kinkos.  They had one color printer down, and the other one was completely backed up.  They told us "Come back tomorrow."  Who knows how many sales they lost.

To me it seems like a simple queueing issue.  I needed 1 sheet of cardstock printed.  Whatever else was in the queue then probably consisted of much larger batches with customers who were not in the store at the time.  The revenue from my purchase would have been insignificant, but what they’ve done by not training their employees with how to deal with outage situations is to guarantee they will not receive my business when it comes time to do a larger printing.  They could have simply printed my page and delayed the other jobs by a minute and I would have been none the wiser and neither, most likely, would the other customers they were printing for that day.

Later in the day, we are at yet another Kinkos, to print up color copies of a document and purchase two binders to place those documents in.  We waited for over 10 minutes to pay $6 for the binders.  We contemplated laying the cash on the counter and walking out, but we didn’t have the change.

The thing to learn from this experience if you’re running a business, is that every interaction with a customer is valuable.  Kinkos is a business which markets to people whose time is valuable.  I understand outages and downtime, but your employees must be trained to deal with them.  I could have walked out of the store a happy customer had a manager or employee been thinking on their feet about what to do with a 50% capacity loss.  Telling a customer to come back tomorrow isn’t good business and it’s likely that I won’t come back again, period.  Secondly, if you run a retail/service business, make sure the retail side always has at least one register dedicated to it, rather than tieing up 100% of your capacity to answer service related questions.  A customer shouldn’t have to wait 10 minutes to pay for something, otherwise she’s likely to not pay at all.

CNO: Chief ‘No’ Officer

Finally catching up on weeks of RSS news I haven’t read, and I came across this on Seth Godin’s blog:

Appoint a CNO—chief no officer. No longer can someone say no to an idea and leave it at that. If you want to turn something down, you’ve got to pass it on to your boss. Then either he says yes or gives it to his boss. For a “no” to be official, it’s got to be approved by the chief no officer and countersigned by every manager along the way.

As he says, it’s not that simple, but it could be! This kind of an idea, this kind of attitude, could fix most problems I have with large companies. The culture of no, that I’ve spoken about to collegues multiple times, is a good part of what I have a problem with working for large companies. It’s far easier to do nothing than to do something, that after a while attempting to do the right thing becomes far more work than it’s worth, fighting against all the no answers between you and the top rungs. Businesses that maintain the status quo die, and the entire bureaucracy of the business is setup for people to protect their fiefdom’s and maintain the status quo. This is why you will find me working for small companies for the foreseeable future after this job is over.