Reaching toward the horizon: How business acquisition is a lot like Mars exploration

It’s funny when you read different things but they all seem to be connected in some way. That’s happening to me right now and this blog post is my attempt to put some of those ideas in order.

I’m reading a book called Strategic Risk Taking (by Aswath Damodaran), which is a book about risk taking in business and the markets; I’m reading a book called Sex on the Moon (by Ben Mezrich) which is a mostly-non-fiction account of a guy who stole lunar moon rocks; the latest issue of National Geographic arrived at our house the other day and it includes an article about Mars exploration; and then a friend posted on Facebook the other day about the Golden Record, a message from earth to aliens that was sent out on the Voyager spacecraft; I’ve also been reading a bit about the applications for a one-way pioneering trip to Mars.

All of those readings ended up being connected (at least in my mind) and related to humanity’s desire to push beyond the boundaries we’ve set for ourselves — to accept the costs and the risks associated with the unknown and to pursue expansion.

I was particularly struck by the Mars exploration missions themselves. Starting back in 1960, humans have been reaching for Mars. In those early years, and in spite of staggeringly high costs, most of the missions failed. Here’s a helpful list on Wikipedia of Mars missions that have succeeded, partially succeeded, and failed. (You’ll note that this list combines all international attempts so when I say “we” in this blog post, I’m referring to humanity in general).

You’ll see when you look at the chart that we started making attempts in 1960 but the first 6 attempts in the first 4 years failed. On the 7th try, we had something called success but the multi-million-dollar mission was considered a success even though it only sent back 21 photos of Mars.

PIA16239_High-Resolution_Self-Portrait_by_Curiosity_Rover_Arm_CameraIt wasn’t until 1969 that we started to achieve success beyond a couple of photos and even those missions weren’t anything other than flybys; it wasn’t until 1971 that we had our first orbital mission success; it wasn’t until 1976 that we actually got a lander to touch down on Mars and start sending information back. (There were a couple of sketchy lander attempts earlier that didn’t send back data).

Even after this first successful attempt, there have been many other attempts with mixed results — success, partial success, and failure — pretty consistently over the years; beginning in 2000, we started achieving more regular success; today the thought of sending a team to Mars (at least one-way) seems more and more likely, with initiatives like Mars One hoping to achieve it within a decade.

When you read my timeline synopsis above, you notice some interesting things: We started exploring Mars in 1960 and spent (collectively) billions of dollars to do it, facing failure after failure until the first hint of success coming in 1964 and the first real success coming in 1969 — a full nine years after those first failed attempts. And results continued to be mixed right up through the 1990’s. Now, our successes are more frequent but they are still short-lived, costly, and the track record isn’t perfect.

But we’re doing it anyway. We’re pushing forward anyway. In spite of the costs and the risk, we explore with an eye on knowledge and an eye on expansion. This isn’t any different from when Columbus (and his peers) pushed forward and sailed into the unknown seas in spite of dire warnings like “There Be Dragons”.

Okay, you’ve patiently read through 550+ words about exploration. So what does this have to do with business?

At the risk of getting a little philosophical, businesses have a similar need to push forward. They explore and expand in an attempt to grow. Although most business’ purposes are profit-driven (as opposed to humanity’s quest for knowledge and bragging rights), the outcome is the same: Businesses have an inherent need to grow beyond themselves. So we shouldn’t be surprised when we read in The Economist that mergers and acquisitions are picking up.

And then I read this article that ponders Why we keep coming back for mergers even though they don’t work. The article was interesting because it really did highlight the constant, costly failures that businesses have experienced in their merger attempts. But businesses keep doing it anyway. Why?

I think the answer lies in our discussion above about Mars exploration. We do it anyways because we need to. The costs and risks are high and the rewards are often mixed even when there is success, but businesses need to grow beyond themselves.

Unfortunately, the options businesses have to grow are limited: They could start something (i.e. on a small scale, like an innovative product, or on a larger scale, like starting a new brand or business) or they could buy something that is already running. The possibility of crash landing is always there but businesses do it anyway because they hope to get to the point when they learn how to do it right. It’s easy to point to mergers as being frequent failures because they are more public and we don’t always see the many failures in a company’s skunkworks.

We often praise Edison for his perseverance while building an (anecdotal) 10,000 failed attempts at a light bulb but we readily criticize a business that tries to merge and fails.

Businesses need to grow, and mergers and acquisitions are an option (even though they are rife with failure). But we need to do it anyway for the very same reasons that humans are exploring Mars. The costs and risks are high and success is elusive… but we get better each time. And maybe — just maybe — a business will find the formula it needs to make it work.

(Image courtesy of NASA/JPL-Caltech)

Aaron Hoos’ weekly reading list: ‘Start-up ideas and names’ edition

Aaron Hoos: Weekly reading list

Mixed bag of topics this week! I hope you enjoy it.

  • 5 start-up naming rules. Recently I was pitching a project to a couple of potential collaborators. My naming conventions are usually: “Call it what it is and maybe mix in a benefit” (that’s why my brands tend to have names like Real Estate Investing Copywriter and Sin Stocks Report — there’s no mistaking what they are). But my collaborative partner didn’t like the name because it wasn’t “clever” enough. She’s a great partner so I mean no disrespect to here but it did highlight how naming conventions really differ between people. So this article does a good job of listing several parameters to help a business owner create a name for their brand or business.
  • 10 unique mobile businesses. Business ideas are my Kryptonite. I could sit here all day long and dream them up. These people are doing some really cool and creative things in the mobile business space. (No, I don’t mean mobile apps. I mean literally mobile businesses — businesses on wheels). Check it out!
  • Over $1 million in sales for 15 year old entrepreneur. I love to hear these stories; I’m always encouraged by kids who get out there and do something really exciting in business. (I had a couple of small businesses when I was a kid, too, but nothing like this, of course).

    If you match your competitors’ prices… STOP

    Price match guarantee“.

    I see that advertised frequently by stores proudly proclaiming that they will “gladly match all regular competitor prices”.

    The thinking is: Mr. or Ms. Consumer will see the flyer for one store but bring that flyer to your store to get the same deal.

    Or on larger ticket items, Mr. or Ms. Consumer will shop around and get a great price at one store but then go to your store to have you match it.

    But why would they?

    It doesn’t make sense to offer a price match guarantee. What’s to stop them from going to the original store that offered the flyer? What’s to stop them from hanging up from the company offering them one price to call you up and get the same price.

    More effort for no extra benefit. People won’t do it.

    Price matching only works when you are already the last store they’ll visit or the last salesperson they’ll call on. You can say “well, you’re here now so I’ll make it easy on you and just match the lowest price so you don’t have to go back to that other store.”

    But you can’t use price-matching as a way to entice people to come to your store in the first place. There is no reason for someone to come back to you to get the same thing they can get somewhere else… unless you have some other competitive advantage.

    I frequently say that you shouldn’t compete on price, although I realize that sometimes you may have to. So, if you are going to compete on price, don’t just match prices because people don’t have a reason to go to your store.

    You have to beat the price. “We’ll beat the competition’s lowest advertised price by 10%” is what one price-beating advertisement says for a store near my house. 10% isn’t huge but it’s something. I’d love to see more than that but that’s just a pipe dream.

    Yeah, I know margins are razor thing. I get it. So maybe you have to beat the price more creatively. Or maybe you have to find some other innovative competitive advantage. This is especially true if your competitors are already advertising a price-beating offer.

    So stop price matching. It’s costing you.

    11 ways to build credibility for your business

    Prospects are more likely going to turn into customers when they feel that they will be buying from a company that is credible. The more credible you are — the more trust and authority that prospects ascribe to you — the more likely you are going to win their hard-earned dollars when they are ready to buy.

    So how do you build credibility for your business? Some entrepreneurs are fooled into believing that any marketing builds credibility but this isn’t the case. Many businesses market but only a few build credibility.

    Here are 11 ways you can build credibility for your business. Mix and match them to build your own unique credibility (even if your competition is already doing some of these).

    #1. CRITIQUE OR EVALUATE SOME ASPECT OF THE INDUSTRY

    Every industry has its popular aspects and its shadowy underbelly. Your competition is trying to shine the light on the best parts but you can build credibility by being honest and up-front and showing quantitative comparisons or frank critique about the industry.

    One example is a grocery store near my house: They usually have a couple of shopping carts by the front door, loaded with products, showing how much you’d pay at their store compared to a couple of the other major chains. It’s an effective way to position themselves as the low cost option.

    #2. SHATTER MYTHS AND MISCONCEPTIONS

    Consumers are outsiders. They only encounter your industry and your business when they need your product or service. Therefore, they develop myths and misconceptions. You can build credibility by educating them about these myths and misconceptions.

    A good example here, in my opinion, is Chris Brogan. Brogan does a great job of shattering the misconceptions of social media by coming back to the ideas of listening, building trust, and connecting to your network rather than focusing on the number of followers or how to explicitly sell on social media.

    #3. REVEAL SECRETS OF THE INDUSTRY AND YOUR BUSINESS

    This is similar to the above idea, I guess, but it’s different enough that I wanted to include it separately. Every business and industry has secrets. They aren’t always bad, they just haven’t been explained to customers. Pricing is one secret. Ingredients is another common secret. And while you may want to keep some parts of your business a secret for competitive reasons, you might gain credibility with your prospects by revealing some secrets.

    One example is from McDonalds. In this video posted on Mcdonald’s Canada’s YouTube site, the McDonald’s Executive Chef explains how to make a Big Mac, and he reveals the ingredients that go into the “secret” sauce (which, he points out, isn’t really a secret at all).

    #4. CREATE INNOVATIVE SOLUTIONS

    Many industries suffer from “same-as” syndrome, where all the competitors offer exactly the same product or service as every other competitor. I have been very critical of the real estate industry for this very reason but I could list a number of industries that suffer from this problem: Financial advisors, dentists, chiropractors, optometrists, locksmiths, roofers, mechanics, and I could go on and on. You’ll build credibility if you break out of the mold and offer something different. It doesn’t have to be massively different — even just slightly different is good. (The Business Model Canvas and Blue Ocean Strategy are both good ways to innovate your business model). And click here to read my best advice on innovation.

    I’m going to piss some people off by mentioning this example: Property Guys is providing a very innovative solution in the real estate industry. (Note to my real estate friends and clients: Don’t let their growing success annoy you. Rather, let it spur you on to further differentiation in your business).

    #5. SHARE CANDIDLY

    Many businesses maintain a barrier between themselves and their customers. I think there are a number of reasons that this happens (depending on the business, I’d guess that profitability, receivable-collection, competitiveness, privacy, and safety are all potential reasons). But customers want to connect with the businesses they buy from, and they are more likely going to buy from people they know, like, and trust. And when things go wrong, customers feel like they can reach out to a person instead of a faceless corporation. You can build credibility by being yourself. Or, if you have a large company, you can build credibility by having a representative be the face of your company. But as you’ll see in a moment, it doesn’t have to a specific person. The point is to share.

    One example of a business that shared candidly and built credibility with their sharing is Domino’s Pizza. They have had an amazing transformation since their pizza turnaround commercial. That’s just an example of how one company used sharing in a one-off way. I think Twitter and Facebook give businesses the opportunity the share on an ongoing basis.

    #6. SURPRISE WITH MORE INSIGHT THAN YOUR COMPETITION

    Businesses put a barrier around what they know. There is a very distinct scope of information in a business’ marketing and a very distinct scope of information in their deliverable. The internet has really challenged many businesses to rethink how much they share before they deliver their deliverable. Some businesses share, for free, as much as 90% of the value they provide customers for free, leaving the 10% as their monetized value. This is smart but it’s not widespread, which means that many businesses can build credibility by educating their market and providing further insight.

    One example was given by Perry Marshall a couple of years ago. (I’d link to it directly but I can’t find it). Perry described a local home repair company that produced a book — a beautifully bound, full-color book with pictures and how-to instructions. Perry rightly suggested that any home maintenance/renovation company could produce a similar book for their type of work — a plumber could produce a book about basic household plumbing; an electrician could produce a book about basic household electricity; and so on. They wouldn’t even have to give away the “secret sauce” of their business but rather just establish credibility by showing people how to care for that part of their home. You may be able to do the same thing in your business.

    #7. DEMONSTRATE YOUR SOLUTION

    I have a secret fascination with product demonstrators. They’re like carnies. They entice people to their booths and show them how sharp their knives are or how absorbent their shammy is. They need to do this because these products sell well when they are demonstrated. We have gotten away from demonstrations in our infoproduct world but products are still being demonstrated. Can you demonstrate some aspect of your product? You’ll build more credibility if you do.

    I recently heard a consultant who demonstrated his methodology on a recorded call with a client. He got their permission first (of course), and then performed his consulting process on them while recording the call. Then he used the call to help sell the consulting service he was selling. This is a brilliant way for a service-based business to demonstrate a solution to build credibility.

    #8. CREATE BEST PRACTICES

    As industries grow, old businesses exit and new businesses enter. The growth is organic and messy. Years later, industries become complicated and fuzzy and even sometimes difficult to understand. You can build credibility by creating industry best practices. Even if other businesses don’t follow them, you’ll still position yourself as a pioneer. Your best practices don’t have to be all-encompassing or industry-wide. You just need to pick one thing and establish best practices. Codify them and establish yourself as an industry leader.

    Many of today’s “gurus” in the world of B2B services have done just that. Seth Godin created what is ultimately a set of best practices around permission marketing. Dan Kennedy created what is ultimately a set of best practices around direct mail. Chris Brogan created what is ultimately a set of best practices around social media. I just wrote a report for a client who is building a certification process in an industry that has none.

    (Note: It’s easy to overlap this idea with the “create an innovative solution” idea, above. But in this example, you’re not actually doing something new, necessarily; you’re just codifying it for others).

    #9. PROVIDE DEEP ANALYSIS OF YOUR PROSPECT’S SITUATION

    Successful sales people understand their prospect’s problems and use that knowledge to sell more effectively. The more you know about your prospect, the better. But often, that knowledge of the prospect’s situation is gained and then used to sell. But you can build credibility by gaining that knowledge and then feeding it back to your prospect. You’re not telling them that they feel a certain way. Rather, you’re telling them why they feel a certain way, and you’re listing and quantifying the many, many, many factors that contribute to their problem.

    One example of a company that does this well is SAP. They’re a huge software company and they write a lot of whitepapers and reports. Those reports focus on the problem their customers have; not just the problem but the deeper, underlying reasons for that problem, along with the “cost” of the problem. They gain credibility by exploring the problem in-depth and, of course, positioning their software solutions as the answer to their customers’ problems.

    #10. EMPATHIZE WITH YOUR PROSPECTS

    Your target market doesn’t want to buy from you. And, in fact, they don’t even care about what you’re selling. They’re thinking of themselves and their problems or needs and how those problems can be solved or those needs fulfilled… not only that, they’re focused on themselves and they have much bigger lives than the problem that your product solves. They’re also thinking about how they’ll pay for their kid’s braces and they’re trying to remember to pick up milk on the way home from work. They don’t want to buy from you. They want to solve a problem with the help of someone who understands. You can build credibility by understanding — activity listening and seeking to see through their eyes.

    I hate to say this but I’m having trouble thinking of an example here. I see it happening a bit… but not nearly to the degree that it could happen.

    #11. BORROW YOUR CREDIBILITY FROM OTHERS

    All of the examples I’ve given so far are credibility-builders that come from you. But your credibility doesn’t have to come from you. There are many ways that you can build credibility by “borrowing” it from others. For example, you should collect testimonials, write case studies, take before and after pictures, encourage customers to provide reviews and to tweet about you and provide a backlink to you on their site. If you’re an author, get a foreword written by someone famous. If you own a restaurant, get a food critic to visit. If you have awards, credentials, and degrees, these can all help with your credibility.

    We see this in the film industry all the time: When a movie is about to be released, the trailer is full of accolades by critiques and film festivals, and it will list actors and actresses who have won (or even been nominated) or major awards.

    Customers buy from businesses that are credible. Mix and match from these credibility-builders to help you establish authority and trust with your target market!

    Small business strategy question: Where are your business blindspots?

    Small business owners can sometimes get too close to their business — so close, in fact, that they struggle to do anything other than focus on the day-to-day operations and fail to work on the big picture strategy. (And many small business owners don’t know how to work on strategy because they are moonlighting or building their business organically from a hobby they have monetized, for example).

    So I published a resource called 100 Small Business Strategy Questions. It’s a list of questions that any entrepreneur or small business owner can go through to help them take a deeper look at their business and figure out how to run it more strategically.

    After I published that list of questions, I’ve been periodically taking each question and writing a blog post about specific steps or ideas that they the small business owner can use to work through that question.

    SMALL BUSINESS STRATEGY QUESTION: WHERE ARE YOUR BUSINESS’ BLINDSPOTS?

    I love the imagery of a business as a car and the business owner as the driver of that car. It perfectly captures the idea of what a business is all about: Heading toward a destination as safely and efficiently as possible, and making constant small and large adjustments along the way.

    Continuing with the car imagery for a moment, is the idea of blindspots — those nasty sections around our car where we simply cannot see. (On most cars, they are typically an invisible triangle that extends out of the back left and right quarterpanels). There are also smaller blindspots elsewhere on some cars, depending on their design: Larger posts between the door and front window are blindspots in some cars. And a lot of cars (until recent design changes) had blindspots around the front and front right quarterpanel. These blindspots can hide hidden dangers that might suddenly leap out to damage your car and keep you from completing your journey.

    If your business is like a car and you are like a driver, the idea of blindspots is just as relevant and just as dangerous. Business blindspots are those unexpected things that you simply didn’t see coming.

    When driving, smart drivers check their blindspots and anticipate potential dangers based on the driving environment. In business, smart entrepreneurs likewise try to figure out what blindspots there might be and they do something about them. I think it’s impossible to completely and comprehensively handle every possible blindspot but the more you work on identifying your blindspots, the better.

    One example of a blindspot is the newspaper industry. Frankly, they didn’t see the web coming and, when it was there, they didn’t realize soon enough the ability it gave people to share quickly and informally. Not surprisingly, the newspaper industry is struggling.

    Another example of a blindspot took place in the automotive industry in the 1970’s and 1980’s. The American automotive industry boldly designed gigantic cars with enough sheet metal that you could run a hobby farm in the trunk of your car. In their blindspot was the social changes that took place as a result of the economy and the oil crisis and changing ideas about vehicles and that was enough of a foothold for Asian car manufacturers to enter the market.

    Another example of a blindspot is in the finance industry. In the early and mid 2000’s, banks were flush with cash and happy to give out low interest, adjustable rate mortgages with (sometimes) aggressive or unclear marketing. They simply didn’t see what could (and did) end up happening when the rates adjusted and people could suddenly no longer afford their homes. (This wasn’t just a blindspot to the individual players in the finance industry but also to the whole industry and the organizations tha provide oversight).

    Another example of a blindspot is with Blackberry. They led the market for years in portable email technology and then smartphone technology. But they became so confident in what they could see that they didn’t see the rise in consumer demand for smartphones, as well as the various functions people were buying phones for. Soon, Blackberrys became “corporate-only” devices… and then uncool altogether.

    We see blindspots happening all the time in many industries and companies; and businesses of every size are impacted by blindspots.

    But if you can identify as many blindspots as possible and prepare for them, you’ll be prepared.

    Permit me one more example, this time from my own business: I was hired on a big contract for a company and it was drawing to a close. I knew there was talk about renewing my contract but that was still up in the air due to several factors. So at first glance, it looked like I would have two options: Either to renew my contract and continue with my client or to not renew my contract and stop working for the client.

    But I wanted to be prepared for blindspots. So I sat down one day and tried to think of all of the other possibilities that could happen — including an offer to continue contracting, but at a lower rate, and an offer to become a full-time employee of the company. (There were others as well but those are the two I remember right now). I listed them and gave some thought to my choices and decisions based on all of those possibilities as well. Guess what happened: When it came time to talk about the contract, the first discussion centered around one of the blindspots I had identified! I countered it effectively, but I could only do that because I had prepared. Then the second conversation centered around another blindspot I had identified. Again, I countered it, only because I had prepared.

    Blindspots can happen to any business, in any aspect of business, and at any time. The more you can anticipate them, the better.

    So how do you anticipate them? Here are some ideas for you:

    1. Create a structure first, just to give yourself something to work with. Two good structures to use (I would use both) is the Business Model Canvas or the sales funnel. My Business Diamond Framework or McKinsey’s 7S model are also good tools to use. You can also mindmap all the different parts of your business (perhaps by activity — sales, marketing, etc.).
    2. Your structure might not be entirely comprehensive but if you pick a couple of these, you’ll have a good starting point. Once you have a structure to work with, think about what you currently do in that section. For example, maybe your marketing consists of activities like “online content”, “blogging”, “social media”, “face-to-face networking”, etc. It might not be easy to list them all but the more you list, the better. Yeah, it’s a big job but if it saves your business then all the better.
    3. Think about what would happen if any of these pieces was suddenly no longer available to you. You can get more specific than that (“what if technology changed so that I couldn’t use this anymore?”; “what if there was a better replacement?”; “what if clients didn’t interact with this anymore?”; etc.) but now you’re starting to think of nearly unlimited possibilities and who has the time for that!?! So start somewhat more generically by just thinking about what would happen if that one particular aspect of your business was something you could no longer do or use.
    4. Another really useful tool is Porter’s Five Forces, a strategic tool created by Harvard Business School professor Michael Porter. The Five Forces are the things that threaten the survival of your business and they include changes in industry competitors, changes in buyers, changes in suppliers, new entrants to the marketplace, and potential substitutes that your buyers might choose. In each case, think about how changes in these factors can impact your business.
    5. Don’t forget to think in the same way at the industry level, as well as the local level. How might your business be affected if your industry was suddenly irrelevant? Or, what would happen if your local marketplace suddenly stopped needing your services?
    6. Confession: I feel like I’m being a bit vague here, but that’s only because there are so many things you could do and sometimes it depends on the business. (And they’re called “blindspots” for a reason. How do you talk about something you don’t know?). But ultimately what you are trying to do is break your mind of the habit of thinking “the current way is the only way” and train yourself to start seeing the possibility of watershed changes that can shatter current systems. You’re trying to see what can’t be seen. It’s hard to imagine specifics but you can think about the possibilities in general and prepare.
    7. Once you have thought about potential blindspots, you can start to prepare. In my experience, preparing for blindspots often means spending more time innovating, diversifying various efforts, seeking more clients and clients in new areas (who might use your product or service in different ways) and trying to stabilize your finances. Obviously this won’t solve every problem but it’s a good start.