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Book Review: The Advantage by Patrick Lencioni

I just finished The Advantage by Patrick Lencioni on why organization health is the number one reason companies succeed. Lencioni argues it’s the true competitive advantage companies have.

I’ve read a lot of business books and have gone through an MBA program to learn about competitive advantages and the “it” factors that makes some companies better than others. Most of the readings have been about culture with a sprinkling of motivations. Culture makes the most noise for success, and it’s not a surprise. Culture is more uniquely applied for a company. How it operates with values and its mission. If values and the mission provide the map of a company, then organization health is the step-by-step directions to navigate.
The key take-aways:
  • Organizational health starts from the top. Much like culture, leaders can determine the health of company. Eliminating office politics (big points here from Lencioni) while ensuring the leaders row all in the same direction fosters strong health. Removing politics and acting in as a single cohesive executive team cultivates greater success than operating well but in silos.
  • Lencioni hits hard on trust across the executive team. This is the key to removing politics. Encouraging individual leaders to be vulnerable enables folks to work better together understanding individual purposes and reasons for actions – he encourages leaders to share vulnerable stories from early years (oftentimes, childhood). Trust enables leaders to have healthy debate, and agreement to move forward together as a team despite opposing feelings individually.
  • Healthy organizations exhibit cohesive teams where the whole is greater than the parts. Organizationally healthy companies exhibit functional groups who may operate outside their functional silos and even, at times, reducing effectiveness of a functional role to support another function as long as the greater company is positively impacted. In one case, this could mean sharing engineering resources to help on the marketing or sales side.
  • Meetings are big, big deal. Typically, meetings are also a waste today due to not only a lack of action, but poor structure and categorization. Lencioni argues for four types of meetings: the daily check-in, weekly tactical, monthly strategic, and quarterly off-site. In some ways, these meetings can actually increase the number of meetings in the short-term. However, long-term, meetings can reduce, but also be highly actionable making meetings productive. Being structured on the topics and the goals for each meeting type drive results. Lencioni argues that this is the biggest and lowest hanging fruit for companies.

This book was recommended to me by a friend who works at one of the top companies to work for in Atlanta. It’s not surprise why he recommended this as he’s seeing the book’s influence at his company. It’s clear to him how Lencioni was onto something on building organizational health.

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Learning from the Hedgehog and the Fox

There’s a Greek parable I heard recently from a VP of Sales about the Hedgehog Concept. The parable goes, “The fox knows many things, but the hedgehog knows one big thing.”

In essence, the fox uses his cunning to pounce, sneak upon, play, etc. to attack the hedgehog. However, the hedgehog needs only do one thing and do it well – defend itself. Against the cunning fox, the hedgehog simply rolls into a ball with its spines pointed outward in all directions.
Jim Collins, author of From Good to Great, took the parable and related it to organizations. He suggests companies should find the one thing they’re good at to beat competitors. There are three factors to consider what a company is good — illustrated below.
Copyright © 2001 Jim Collins. Originally published in the book “Good to Great: Why Some Companies Make the Leap… And Others Don’t.” Image source: https://www.mindtools.com/media/Diagrams/Hedgehog-Concept.jpg 
The VP of Sales I spoke with goes on to share how his sales organization must also be the fox. I couldn’t agree more in today’s age where companies are rising from every corner of the internet. In fact, Chief Martec posted last year its annual Marketing Technology Landscape. They mapped almost 4,900 companies. This is a significantgrowth from the 2012 landscape of roughly 150 companies.
Chief Marketing Technologist Blog, May 2017. Image source: https://cdn.chiefmartec.com/wp-content/uploads/2017/05/marketing_technology_landscape_2017_thumb.jpg
The environment for startups is both exciting as well as daunting. Great startups must do one thing well to survive. Really, they must do one thing well to earn customers. But as they compete against the budgets of their much larger counterparts, startups must also be cunning and use their agility to outmaneuver larger companies.
To that point, people must also think about their own abilities as a hedgehog and as a fox. How are folks surviving and growing beyond themselves and their counterparts?
Consider your now… like a hedgehog, what is the one thing you are truly great at? How are you (or can you be) cunning like a fox?

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Which came first – CAC or ASP?

Got a little chicken or the egg situation here. Except in this case, we’re talking about CAC or ASP (cost of acquisition vs. average selling price). More context…
My company’s recent little pivot is called Burner Rocket. We help B2B companies break through the noise to reach key decision makers. Our secret sauce? We send burner phones. Yes, a little like that scene from The Matrix when Neo gets a phone and gets an immediate call from Morpheus.
It’s crazy effective(~65.5% turn-ons and 75.3% conversation rate)
… and fun (you can’t help but feed off the fun energy from “folks recording personalized videos” to “recipients turning on the phones”).
This isn’t the cheap direct mail piece like coffee mugs or keychains. Sometimes, you gotta go big to break through the noise these days.
When I pitched a local entrepreneur recently, he immediately said, “wow, your customers must have a high ASP”. I thought he would, for sure, go with “wow, your customers must have a high CAC”. It’s a chicken or egg situation where you could ask which came first?
In the world of ASP vs. CAC, they both influence each other. My focus on CAC is to isolate the costand difficulty of acquiring a customer. I want to focus on the customer, and her buying cycle. The burner phones really cut out a ton of time, especially, when it comes to breaking through to net-new leads. They also get conversations because of the novelty (prospects may now associate the brand and product to be novel).
ASP should take into account CAC, too. However, ASP does not cover the longer-term revenue that could come from a customer – lifetime value (LTV). ASP may not actually cover cost of servicing a customer. Instead, the lifetime of the customer should take service into account.
Our new business may not influence ASP, or LTV for that matter. Instead, our new business can accelerate the pipeline via the top-of-funnel conversions (cold to conversations, to demos) and likely the mid-funnel with stalled opportunities. Thus, our phones can materially impact CAC.
Then again, I focus on all three metrics with a priority on both CAC and LTV before ASP. Prime B2B companies who have high CAC and LTV are good candidates + our other ideal customer profile (ICP) facets.
What are your thoughts? How are you considering your go-to-market strategy?
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What are you good at?

What are you good at?
If you listed 5 or more “talents” or “skills”, try again. What are you really good at? If you listed 3, try again. If someone was to remember you for this, what would that be? Did you say one thing, yet?
Think about someone you know. What’s s/he good at? Who else could you say is also good at that?
Now, what are you really good at? What distinguishes you from someone else who is good in something similar? What differentiates you from the 100’s, 1000’s of others who could be similar?
Can you tell anyone in the world what you’re good at simply and curtly? If you spend more than 15 seconds, try again.
This isn’t just practice. This is your brand. This is your strategy. Think about this for your business. Why should anyone care about you? Why should anyone buy from you? What will you do for the buyer?
Let’s try again: what are you good at?
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Doubling Price to Sell the Unsellable

There’s a story in Robert Cialdini’s book Influenceabout pricing strategy and psychology. The story goes that a Native American jewelry store had an abundance of turquoise jewelry. 
The owner wanted to move the inventory, and tried several sales best practices including product placement and advising her staff to push the jewelry. However, the inventory didn’t move.
As the owner was leaving for a business trip, she scribbled a note for the manager to move the inventory by cutting the price in half.
When the owner returned, all of the inventory had sold. The remarkable part of this story, however, is that the manager misread the note – doubling the price instead of halving!
The previously unsellable jewelry became sellable. Customers associated the high cost of the pieces as high quality.
Consider the factors at play when considering pricing products and services. The market does not always dictate price as you might expect.
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Negative Churn: Opportunities to Continue Selling

Last week, I shared a post about negative churn – when revenue from existing customers is greater than revenue lost from customers churning (see article). The relevant question, then, is how do companies achieve negative churn? Here are a few options:
  • Additional licenses – This one is common in today’s SaaS companies – selling based on licenses or “seats”. As a team grows, more seats may be required to gain access to a product/ service. 
  • Cross-sell – This type of sale captures cross-functionally opportunities within an organization. For example, a CRM may first be sold to a sales team to manage pipeline. Then, marketing may buy access to the CRM to understand lead and prospect-flow. And so on…
  • Up-sell –Many products and services have tiered business models (packages). Tiered packages allow for companies to address a market’s consumer surplus – sell packages that capitalize on differing price considerations, typically. Think: silver, gold, platinum packages with options that are locked for specific packages.
  • Additional products/ services – Up-selling largely occurs with tiered packages. However, packages are typically within the same product. This sell-on type is about selling a different product/ service. These tend to be complementary offers. For example, a product seller may sell professional services. This can also include things like accessories or service plans (think: cellphone cases or insurance plans).

There are many ways for businesses to continue to sell to existing customers – plenty of latitude to supplement the company’s business model. These are the opportunities that give investors excitement to grow a market beyond its existing.

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Think Delight First, Not Revenue

I overheard a discussion between two execs recently about the idea of working closer together. One exec was pitching another way to earn incremental revenue from existing customers. Except, the conversation stopped there – regarding more revenue anyways. Instead, the execs shifted focus to discussing how working closer together could add “delight” to customers.
It’s hugely telling when an entrepreneur pauses a discussion to shift the focus away from “more money” to “more delight”. Here, the entrepreneur understands the importance of thinking about the customer-first. Here, the entrepreneur understands the importance of creating emotional value.
Thinking revenue-first means thinking about the company first. However, the company does not exist without its customers. Thinking customer-first puts the company on a path to bringing customers in and retaining them [especially against competition].
When thinking about the services and products you can’t live without today, think about the ones that you wouldn’t leave the brand. Think about how delight surrounds your decision to use that service or product. Think about the people you surround yourself with, and how your interactions together are delightful. Think about how driving customer deliver shifts how employees engage with the company mission.
Think about delight. Think about customers first.
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When We Ignore Our Previous Experience for Our Great Startup Idea

I met up with a friend recently who is noodling over an idea. What was interesting was how she was so deep into her idea, and didn’t use her life’s skills and work to help validate the idea.
Like me, she started her professional career in consulting. Like me, we both ignored our acquired consulting skills when building a startup (my example was Body Boss, as described in Postmortem of a Failed Startup).
It’s a funny and sad mistake I’ve seen a lot – starting with yours truly. There’s excitement in the initial idea that people put on the blinders. They (we) ignore experience in the previous “corporate” world. I attribute much of this to emotions running high. Emotions have ways of clouding our judgements and processes.
This happens especially in endeavors we get excited about but do not have explicit professional experience in. For myself and my Body Boss cofounders, that area was fitness. We loved fitness, but we came from outside the industry.
For example, what makes consulting so effective is the initial phase of any project – discovery. In startups, you throw in “customer” in front of the word, and you have a critical foundation of building a company – “customer discovery”. In this phase, consultants interview stakeholders, assess processes, gather surveys and analytics, etc. to formulate a plan. The same should happen in building a startup.
If you have an idea, be careful of being emotionally attached. Balance excitement with grounded thinking. This doesn’t mean shooting down ideas so early on. Instead, take a moment, and recognize how you can apply previous lessons to the opportunity in front of you. Sometimes, that means playing the role of pre-idea. Be the third-party.
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Vertical SaaS? Horizontal SaaS? It’s All News to Me

Not sure why, but I have only recently heard of a term called “Vertical SaaS”. Okay, there’s also “Horizontal SaaS”, too. Based on some light research, looks like vertical SaaS is also a growing trend and the number of companies fewer than horizontal SaaS providers.
Vertical SaaS borrows its moniker from the concept of vertical integrationwhereby there is more control over a supply chain from raw materials to point-of-sale. Here, vertical SaaS companies focus on a niche market (industry) offering a solution that enables more process control.
Horizontal SaaS providers get really good at a particular offering, and widen their market to reach scale. Their focus is on breadth of market, and thus, its sales and marketing strategies can require more resources.
Many vertical SaaS companies (such as Veeva Systems, Guidewire, Fleetmatics) are doing well usurping legacy systems of traditionally slow-tech-adoption industries. Here, vertical companies develop a best-of-breed product, and focus on selling only into that industry. This tends to create “winner-take-all” situations, especially given the smaller number of vertical SaaS providers.
Horizontal companies continue to expand and can create extreme competition due to its vast go-to-market strategy. Horizontal SaaS companies tend to create category winners like Dropbox, Zendesk, and Salesforce.
There isn’t necessarily a “better” strategy, but it’s clear that go-to-market strategies, product strategies, and organizational structures are highly affected by going horizontal or vertical.
Resources:

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Consider Monetizing Third-Party Beneficiaries Along a User’s Journey

An entrepreneur recently asked me how to monetize her app. She’s made great progress building and marketing her app. In fact, she’s been asked to do several interviews and has been invited to conferences all over. Next, she’s seeking investment to support growth, but has few ideas on monetization. Given specific challenges, she could consider monetizing based on third-parties.
Some background: the entrepreneur’s app empowers users to reach long-term safety and security. Since app launch, she’s ridden an impressive wave of press and publicity. Her app is cause-related, and given the most common user demographic, users are not financially stable. Meanwhile, as a for-profit company, asking for donations to support app development and her cause has been troublesome.
The app helps users navigate the long process getting from “low-point” to “high-point”. Because her target users have little disposable income, charging users will be a major deterrent and possibly dilute the power of her cause.
The entrepreneur could consider monetizing the steps along the user journey by considering what third-parties could benefit from reaching the user and by supporting the cause. Perhaps like…

A gamification-like strategy, where company-sponsored rewards (i.e. discounts towards food, clothing, etc.) are earned when users complete specific educational tasks. This can motivate users to stay on track and supported throughout their journeys towards the high-point. 

The entrepreneur can monetize based on reward redemption or sponsorship careful not to dilute sponsorship dollars for the sake of revenue. Meanwhile, sponsoring companies will be able to market their products and services, while also supporting a positive cause.

There are many ways to monetize popular apps despite hurdles – low income users, fears of cause/ value dilution, user privacy, etc. In this entrepreneur’s case, consider not only the target users, but also what third-parties can benefit along a user’s journey.
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