A corporate Shark Tank that might work

In the previous post, I covered what folks miss when they want to implement a corporate shark tank.

This post covers some ideas on how to bring shark tank into a company that might work.

First, folks with ideas should do groundwork to prove an idea, just like the contestants on Shark Tank

In one place I worked, field leaders presented lots of promotion ideas because they were rewarded for presenting ideas. They got kudos for being forward-thinking, engaged and thinking about the success of business, even though many of their ideas had been tried and failed. So, they tossed plenty of ideas over the wall, not caring whether the business actually tried them or not.

Because so many of those ideas never went anywhere once thrown over the wall, we started asking the field leaders if they would fund the trial on their own P&L to prove it out for the business.

We were surprised with how that changed things.

It cut the number of ideas down by 80%. Talking about an idea is one thing. But, it turns out, putting some stakes on the table to prove your idea is another.

When people were forced to think through how an idea might impact their own wallet, much like founders on Shark Tank, they filtered their ideas more carefully and were more interested in learning about why some ideas had failed.

It also resulted in a few brave souls some ideas that were different and they signed up to try it at their own risk, achieving the original results we were after, bypassing red tape to test more ideas.

One of those ideas ended up being a grand slam home run and a few were pretty good.

Second, everyone is a shark

Most folks envision a corporate Shark Tank as an innovation committee made up of mid to high level managers who will act as gatekeepers.

But, I think this will result in the same red tape as the typical innovation methods they have now, but it will just be more showcased.

I would open the Shark Tank to anybody in the organization, to create an idea marketplace that can connect up the idea generators and champions with folks that want to try them in the real world and on larger scales, on their own P&L, or contribute their own time, effort and expertise.

I do see a need for a committee, just not as a gatekeeper.

The committee would collect the ideas, help idea generators conduct early testing and connect the idea folks with people who want to try them in the business or contribute more.

The committee could maintain an online, searchable list of ideas, like Kickstarter, so folks in the organization can search them when they are looking for ideas, along with organizing regular meetings where ideas that have shown good signs in early testing are pitched to gain champion for larger scale trials.

I think the committee can also enforce some key principles of innovation

Ideas don’t die until they’ve been tried. The primary criteria for product and marketing ideas is how customers respond to it. I’ve seen lots of ideas killed for lots of other reasons, like management didn’t like the idea, it was thought the idea didn’t fit with the vision of the company and so on.

Remind everyone that the the odds success are very low, somewhere between 1-in-10 and 1-in-10,000. That’s why we don’t kill ideas until tried, why we try as much as possible on very small scales and encourage as much trial as we can. Good innovation is much more about playing the odds than beating them. It’s a lot like fishing. Even the best fisherman don’t catch a fish on every line.

Corporate Shark Tank?

I’m a big fan of Shark Tank and so are folks I work with. Though, I’m surprised when we discuss it what they don’t see.

Some co-workers want to bring a shark tank-like process into the company to generate and vet new ideas.

In their corporate version of Shark Tank, they see employees pitching their ideas to a committee of leaders, who ask pointed questions, like the Sharks, to ferret out the best ideas and then cast votes for the best ideas to proceed, ‘just like Shark Tank.’

I think they miss key incentives from Shark Tank that make it work.

I suspect their version of Shark Tank would end up looking a lot like the political and bureaucratic processes that already govern capital and resource allocation in large companies.

For those who like the Shark Tank committee idea, consider the following questions.

What do folks pitching the ideas have at stake? What groundwork have they done? Who is on the committee? What do the folks pitching ideas have at stake? How do ideas advance?

What do the folks pitching the ideas have at stake?

These Shark Tank fans haven’t seemed to notice that the folks pitching ideas on Shark Tank have a good deal of their own money, creativity and effort at stake. It’s well beyond idea stage.

Their idea passed an important first filter: the founders thought enough about it to sacrifice their time and money for it, over all the ideas they may have had.

Ideas without proof are just talk and talk is cheap.

What groundwork have they done?

They also miss that startup founders have done a good amount of groundwork of proving their ideas — often into prototype or full product mode with real sales, which means the ideas have been put through a second important filter — do customers actually want it?

One of the classic speeches on Shark Tank was given by Barb Corcoran, directed at a founder from the corporate world who spent all of his time making sure the operations of his business would be ready to fulfill when the orders started rolling in.

Corcoran said something like, you are like many we see from the corporate world. You’re very smart, but you spend all your time solving getting the back office set up that you skipped checking the most important step: is it something customers actually want?

The Sharks hone in on many signs of early sales, customer demand and the cost of acquiring paying customers. Products that people want have a very low or zero cost of acquiring paying customers because customers instantly see the value prop, then they tell their friends and family (word of mouth) and they also repeat purchases.

These are products that sell themselves. Most successful products are products that sell themselves. Chipotle, for example, didn’t spend much on advertising until after it had already saturated the market with restaurants. Prior to that, simply opening new Chipotles was enough to get new customers.

Sales signals are 1,000 times more telling than whether or not the idea just sounds good and the sharks know this.

All the Sharks have changed their mind on a product where the idea didn’t sound good to them but the sales said otherwise. They know enough to know that their personal assessment of the merits of the product isn’t as good as the market’s assessment.

So, by the time the ideas see the Shark Tank, most have passed two important filters — the founder’s sniff test and markets/customer tests, in some form or fashion.

On occasion, Sharks do invest in products that are still in the idea phase. It might be a product that complements another product in their portfolio well, so they have a read on potential sales from that.

More often, Sharks dismiss the idea saying it’s “too early” for them. That means, they don’t have enough of a read on the second filter and it’s just too big of a guess for them.

Who is on the committee?

The corporate shark tankers envision executives on this internal Shark Tank committee.

These Shark Tank fans haven’t noticed that the sharks earned their way onto the panel with their own startup and business performance.

Most corporate executives do not have this experience. They may be good at delivering projects on time and under budget and playing office politics, but that doesn’t mean they can sniff out a good idea as good as a Shark, especially when they don’t have much at stake.

This is an easy mistake to make. Business leaders are often confused as good business people, but that’s not true.

It’s also important to notice that the Sharks are betting their own money on the businesses. They aren’t just giving a simple yay or nay vote with no consequence on whether the idea succeeds. That changes the decision-making considerably.

Without these incentives, the corporate shark tank would turn into more or less a venue for mental tennis.

How do ideas advance?

In the corporate shark tank, ideas advance through committee by majority vote.

Again, these folks miss that it only takes one shark in Shark Tank to buy-in. In this sense, the bar on this filter is lower on the real Shark Tank.

But, it’s balanced out that the Shark is putting their own money, time and expertise into the deal, which causes them to be a lot more careful in their decision.

Compare to the executive committee majority vote. Nothing is on the line for anyone. If a project they voted for fails, it costs them nothing.

When a Shark is wrong, it hits their pocketbook.

But, I do like the idea of bringing Shark Tanks in corporate worlds as one avenue of ideas. But, here’s what I would recommend to execute it to keep the incentives and filters that make Shark Tank (and venture capital) work.

More on that in the next post.

Why don’t we see the rising costs of college as price gouging?

College has become expensive because prices have consistently risen at rates above inflation for quite some time.

A chart from this Wikipedia article shows cost of college since the 1980s shows tuition has increased about 3x cost of living and 2x medical costs.

If private industry raised prices so consistently, price gouging would be a common criticism.

The closest we seem to get to criticizing college costs is simply lamenting it, as if it’s just some force of nature that can’t be reckoned with.

If you are sensitive to price gouging in the private sector, can I ask why you aren’t as sensitive to it in college education?

Subscription Fatigue

What gives? Everybody seems to want $4.99/month from me. “It’s just a cup coffee,” they prod.

I get it. A few businesses did well with the ‘subscription model.’ A classic example is Netflix vs. Blockbuster. Stitch Fix subscription-fied clothing.

The case sounds good to managers. Subscriptions get more of their company’s revenue onto a recurring basis where customers, once signed up. face behavioral barriers to canceling. It feels like this reduces the exposure company revenue has to the whims of customers on a transactional nature.

But, as a customer, I’m at that point where each new subscription, even though it’s ‘just a cup of coffee,’ is too big of a hurdle for me to agree to. Subscription fatigue.

I’m guessing I’m not the only one.

Just as they are a barrier to cancelling, I wonder if subscriptions are becoming a barrier to adoption?

Also, I think subscriptions act as a veil that keeps managers from thinking about what really matters: what customers want.

They see Stitch Fix and think customers want to buy their clothes on subscription.

They miss that maybe Stitch Fix customers really want to get new clothes without having to to go through the trial-and-error process to become an expert shopper.

Update: It seems like businesses should explore mixed models, so customers can transact how they choose. Some may prefer subscription, some may prefer transactional.

Stitch Fix makes it easy to do both.

Discovery+ does not. Subscription is the only option.

MLS is no transcendent soccer

It occurred to me today while reading some back and forth on pro/rel, soccer in the US and and in Europe that opponents of pro/rel miss something.

A key knock against pro/rel, from critics, is super clubs that win or contend for their league titles over and over again. These critics like the American system, that handicaps teams through a myriad of salary, draft and roster rules to achieve more competitive parity and less super clubs.

One comment I read today, pointed out that comparing the number of teams/clubs that have won the championship in MLS to Premier League is not the right comparison. A better comparison is to the two leagues under the Premier League in the U.K.’s soccer pyramid.

Those leagues have far more champions and a large number of clubs that have been promoted into the league and relegated down to the next league.

But, why compare to those leagues? After all, MLS is the top league in the U.S.

First, the level of competition in those leagues are more on par with MLS, because the payrolls are more on par.

But, that comment made me think there’s a more important reason.

The top leagues around the world have created what the critics the would call super clubs. These critics don’t understand why its fun to watch the same clubs in contention year after year.

But, for fans, those leagues have created clubs and soccer that transcends geography.

What does that mean?

Lots of folks around the world, not just in their home cities, follow Manchester United, Arsenal, Liverpool, Barcelona, Real Madrid, Juventus, PSG and Bayern Munich, among others. Even more have heard of them.

The attention garnered by teams in MLS and the 2nd and 3rd tiers in Europe is limited to the populations in the towns around them or people with affinities to those towns.

The big clubs transcend this geography because they have the world’s best players and best coaches. Their coaches are less constrained by budget to get the players that can execute their systems.

Soccer fans around the world want to watch the best players and best clubs for lots of reasons. They enjoy watching the top players and teams.

They want to see how the top play. They want to see what’s possible. They want to see results of all the hard work those players put in and the talent that goes with. They want to see how the coach has pieced together a masterpiece to execute their vision and how they handle adversity and adjust game plans, rather than watching a coaches make due because they that had to make tough trade-offs to make a budget.

While I think it’s tough to peel the apart the affinity folks have for a club vs the club’s players and performance is tough, Man United is a good example of what happens when you don’t have the performance. They have good players, but that’s not enough and and the club has lost a little bit of the transcendent footing over the past few years as they have struggled with performance.

I’d argue that its owners might think the game is just about getting the best players and misses the part where you have to get managers that can build the teams that can execute their winning vision. In Man United, I see a team of good players, where the coach, like coaches in the U.S., have to make due with what they have, rather than get the right pieces for their game plan.

And, while soccer fans love to follow their transcendent favorites, they also love to follow their local teams and cheer them on, too. Those are the 2nd and 3rd tier leagues in England and MLS, maybe, if they have a local team.

These soccer fans don’t get bored watching their transcendent teams continue to pile on results because they are watching the best do what they do.

Opponents of pro/rel in US soccer demonstrate that they do not understand how bottom-up works

Their critical mistake is believing that strong support for soccer must precede pro/rel, as if, somehow, pro/rel would weaken support.

They don’t understand that pro/rel helps cause strong support for soccer. So, they block the very thing that can create the condition they require.

They will say, “oh, but relegation battles don’t make things that much more interesting.”

I agree. In this post, I wrote more about what really does drive the benefit, from the bottom-up, of pro/rel.

Pro/rel would connect a lot of disconnected pieces in soccer

One thing that bugs me about soccer is how often I miss the local MLS game because I’m either busy playing soccer or had a game to coach.

It’s hard to imagine a solution. Why would adult and youth soccer teams organize their schedules around the pro team? They are all independent of each other and have no incentive to organize their schedules around each other.

What most folks miss in pro/rel is that the club becomes the organizer of the the local pro team, adult leagues and youth soccer. It connects all these up. And they have more incentive to organize their amateur youth and adult schedules around the pro team, so more people can watch the pro team, as that becomes the main event each week.

They become what is more authentically known as ‘club supporters,’ which is a marketing term in the U.S. to refer to season ticket holders.

But, it’s easy to see it has more meaning in countries where ‘supporters’ are folks that belong to a club where they play, maybe volunteer coach, and where their kids play or grew up playing.

How US Soccer impacts your pickup

A couple yokels on Twitter were poking fun at a pro/rel supporter who said US soccer is repressing soccer at all levels in the US.

“He thinks US soccer is repressing my weekly soccer pickup. Haha”

Jokes on them.

As the famous French economist pointed out in his Parable of the Broken Window, there are things that can and things that cannot be seen.

Rather than being persuasive, these yokels demonstrated that they lack knowledge for the things that cannot be seen.

What they can’t see here is how US Soccer’s policies have limited their pickup.

If US Soccer organized soccer by world standards set in the the guidelines of its charter organization, FIFA, chances are good that there would be land-based soccer clubs dotting cities and towns across the country where pickup soccer was just one of the many activities it hosted, making it easier to get games going more often with better facilities.

Some questions for critics of pro/rel

One thing I noticed about critics of pro/rel is how confident that it would never work in the U.S. These are questions I have for them:

How do you know? Has it been tried here before? When and where?

For that matter, are there places in the world where pro/rel has been tried and it ended in system failure? I often hear these critics say that someday there will be collapse in these pyramids, but that someday never seems to get closer.

Do you think that there’s anything to the phrase, “you never know until you try?” Have you ever said it yourself?

Then what makes you so sure about pro/rel in the U.S.?

Are you 100% in your predictions of what will work and what won’t? If so, why aren’t you the richest person in the world?

Why not try it? I really don’t understand the vehement distaste folks have for it in a sport.

“Nobody will invest in the MLS if there’s a risk of relegation”

This is a common objection to pro/rel in US soccer.

To use this objection reveals ignorance on a few fairly obvious points.

That most of the rest of soccer world that uses pro/rel and has no trouble finding investors for clubs.

That even Americans have invested in clubs in these pro/rel leagues. Some folks who have invested even commentate for American soccer, like Stu Holden, who invested in FC Mallorca then in Spain’s second division and won promotion to its first division. Stu was very, very excited that day.

Might SOME investors be reluctant to invest with a threat of relegation? Sure. But that’s not ALL investors.

Likewise, some investors may be reluctant to invest in a closed league for lots of reasons One reason could be that you like to win, you think winning depends on having the best players possible, and yet central office restrains your roster choices to keep the league competitive (i.e. prevent a talent bidding war among owners), because it thinks that works.

Often, when these points are made, the critic moves the goalposts on the discussion to other points like “but, clubs fail when they are demoted.”

Which reveals more ignorance. Have clubs failed when demoted? Sure. Does it happen every time? Far from it.

Does it matter? It shouldn’t. Failure is common and accepted in all walks of life. Why should sports be immune to it? It matters even less if the incentives are in place to encourage more competition to quickly replace those failures.

In places with pro/rel, there is plenty of competition to fill the voids of the occasional failure, just like in other markets. When one restaurant fails, plenty others are there to fill the void.

I also understand that failure isn’t fun for the folks involved. But, I think a landscape that allows for the occasional failure when a team isn’t working, and that has a vibrant landscape of competitors, is better than a landscape with a few players that is prone to total system failure.

But MLS is far from total system failure!

That’s the topic for the next post.