How I Beat My Competition

1. How I Beat My Competition • Prepared for: Engineering/Telfer Lecture • Date: February/March 2012 Professor Bruce M. Firestone, B. Eng. (Civil), M. Eng-Sci., PhD.; Entrepreneurship Ambassador, Telfer School of Management, University of Ottawa; Founder, Ottawa Senators; Executive Director, Exploriem.org; Real Estate and Mortgage Broker, Century 21 Explorer Realty Inc. • http://twitter.com/ProfBruce • http://www.eqjournal.org

2. How I Beat My Competition How many enemies do you have? • > 10 • < or = 10 but > 5 • < or = 5 but > 2 • < or = 2 but > 0 • 0

3. How I Beat My Competition How many enemies do you have? • I have > 30,000 • They are called Maple Leaf fans • Banned Maple Leafs mid-week games when we received Sens Franchise • Made a deal with Canadiens to show their mid-week broadcasts and vice versa • If you don’t think you have any enemies, you’re just not looking hard enough

4. How I Beat My Competition How many enemies do you have? • Existing businesses don’t want you to be successful • They plan to eliminate you either by: • Buying you • Taking your customers from you 1 at a time • P = M = B, an identity at the topmost level • Most nations are controlled by 100 or fewer families

5. How I Beat My Competition “We live in a cynical world, and we work in a business of tough competitors,” Jerry Maguire. • When I graduated from McGill’s Civil Engineering program in the 1970s, there were 3.5 billion souls on this planet • And probably no more than 450 million participated in a recognizably modern economy • Today, there are 7 billion people and around 4.5 billion participate • MUCH more competition today: 10 X • But also it has never been easier (Web 2.0 and 3.0 tools, many of them free) and there has never been more opportunities to start a new enterprise today • Afterall, there are 7 billion potential, end-user customers

6. How I Beat My Competition 10-Step Program to Beat the Competition • 1. Get a great Business Model– add some DV and Pixie Dust [At C21 Commercial, we belong to OREB] • 2. Know your competition– also look for opportunities to be co-opetitors [Window valve installer/curtain wall manufacturers; Yahoo uses Bing and Google Ad Servers to power some of their offerings– adding $350 million/yr to their bottom line] • 3. Set goals– then democratize them [N=?, Digg.com launch– don’t push on a string] • 4. Out execute—ideas are abundant* & hence relatively cheap, execution counts/hire ‘up’ [GradeATechs.com v NerdsOnSite.com] * What is the largest prime number?

7. How I Beat My Competition 10-Step Program (Cont’d) • 5. Adopt a great pricing strategy– price says a lot about you [Hotel occupancy rate goes up when price goes up] • 6. Learn how to sell– if you can’t sell (ideas, products services, new hires, banks, suppliers) , you can’t be an entrepreneur [Sold the BOG of the NHL on Ottawa] • 7. Provide an authentic experience with great customer service– under promise and over deliver [Tony Hsieh says: “Provide WOW (customer) service.” Eg., Finding a pair of boots seen once in a Hollywood film]

8. How I Beat My Competition 10-Step Program (Cont’d) • 8. Reduce your costs or keep your costs down– no matter what your income, costs always rise to exceed it [Canderel and Pen Funds/Collecting Grand Masters] • 9. Integrate the Internet into everything you do– don’t let your competitors start at the 85-metre mark in a 100-metre race [Virtual Homebuilder 30:1 advantage– GE’s Jack Welch says most important invention in last 40 yrs of the 20th Century is the Internet] • 10. Know your business ecosystem– both your supply chain and your value chain (at least 2-D) [Spa clients– mostly women. Clients’ clients– mostly men]

9. How I Beat My Competition Case Study– Mont Cascade and Proslide • Rick Hunter, former Canadian Ski Team Member • Retires after injury • Buys a ski hill • Mostly on credit and a bit of savings • Loses an atrocious amount year 1 • Sitting on the hill in Spring of that year– what to do?

10. How I Beat My Competition Case Study– Mont Cascade and Proslide (Cont’d) • Family to support • Debt to repay • Bankruptcy facing him • Looks at hill/looks at lake/looks at hill again • Facing extinction event concentrates the mind • Eureka!

11. How I Beat My Competition Case Study– Mont Cascade and Proslide (Cont’d) • Buy two straight plastic tubes from manufacturer in Rigaud, Québec on (yet more) credit • Buys a couple of pumps on (still more) credit • One shack for women’s change room/another for men’s • Reuse parking and food services and toilets from ski hill • 30,000 people show up that summer and give Rick $13 to use his waterslides

12. How I Beat My Competition Case Study– Mont Cascade and Proslide (Cont’d) • Saved! • Asks Rigaud manufacturer: “How about a tube with a bend in it?” • “No we don’t do that.” • “Why not?” • “We do it that way because that’s the way it’s always been done.”

13. How I Beat My Competition Case Study– Mont Cascade and Proslide (Cont’d) • Rick hires first engineer to design a waterslide with a curve in it • Non trivial problem of g-force calculations

14. How I Beat My Competition Case Study– Mont Cascade and Proslide (Cont’d) • One day a Disney executive hears about this • Rick gets the contract for Splash Mountain • ProSlide is born • World leader in custom design, engineering and manufacturing of fiberglass water rides

15. How I Beat My Competition Case Study– Mont Cascade and Proslide LESSONS LEARNED • Just because you’re a good skier doesn’t mean you know anything about running a ski hill– you need to be an expert/no dilettantes please • Opportunity is where you find it/disaster focuses the mind/opportunity to discover your DV • Never give up but be prepared to change what you are doing if it isn’t working– every biz model changes when it comes into contact with RL

16. How I Beat My Competition Case Study– Mont Cascade and Proslide (Cont’d) LESSONS LEARNED • Stick to your guns– when Rigaud manufacturer said there was no way to safely design curvilinear slides, Rick would not take ‘no’ for an answer • Zuckerberg at Facebook had a vision for it that was unshakeable despite many setbacks, betrayals and competitors • Read ‘The Facebook Effect’ to understand the level of passion, talent and commitment needed to be successful • What business is Rick really in? The design business • Which can not easily be knocked off or outsourced to CHINDIA

17. How I Beat My Competition Case Study– Tony Hsieh and Zappos.com • Tony knows nothing about selling shoes • But he wanted to run an Internet business • Wanted to develop a business where customer service was a core competency • No time limits on or scripts for his CSRs • Fell in love with a Biz Model that was ‘practically no money down’: based on drop shipping

18. How I Beat My Competition Case Study– Tony Hsieh and Zappos.com (Cont’d) • Drop shipping meant that he had no control over transportation to the client • And he could not offer a great selection because shoe manufacturers would not give him access to top of the line models– only retailers with RL locations got that • Shoe manufactures gave preferential treatment to brick and mortar stores • Had to open a RL location • Had to build mega warehouse and delivery infrastructure • Had to go ‘all-in’: even sell his beloved condo in SF to keep the biz afloat

19. How I Beat My Competition Case Study– Tony Hsieh and Zappos.com (Cont’d) • Tony developed ten core values as part of his corporate culture and part of his DV: 1. providing WOW service 2. embracing change 3. being a fun place to work and a little bit weird 4. being creative, open minded and having a sense of adventure

20. How I Beat My Competition Case Study– Tony Hsieh and Zappos.com (Cont’d) 5. promoting growth and learning amongst employees and as an organization 6. having honest relationships not only between staff members but with customers and suppliers too 7. creating a positive team environment and a family spirit 8. doing more with less 9. being passionate 10. being a bit humble

21. How I Beat My Competition Case Study– Tony Hsieh and Zappos.com (Cont’d) • Similar to Ottawa’s fastest growing tech co, Shopify.com’s corporate culture • Passionate, committed, high end CS, terrific biz model, funky corporate culture, superb execution, bootstrapped, adaptive, authentic, innovative and lots of DV • http://www.eqjournalblog.com/?p=2171

22. How I Beat My Competition Case Study– Tony Hsieh and Zappos.com (Cont’d) • According to Daniel Goleman, Emotional Intelligence accounts for 75% of the performance of an employee or manager with 25% explained by IQ and everything else • For CEOs, ratio is even higher

23. How I Beat My Competition Case Study– Tony Hsieh and Zappos.com (Cont’d) • A Zappos.com client is not looked at as a customer who is buying one pair of shoes for $200 • She represents a lifetime client who might buy shoes, handbags, work-out clothing and more—thousands of dollars  • Brian M. and the stalled Cadillac

24. How I Beat My Competition Case Study– Tony Hsieh and Zappos.com (Cont’d) • Tony wrote “Delivering Happiness” about his experiences • Asked influential bloggers to write a review • Promised them a free, advance copy • When they received it, there were two copies • Delivering “WOW service” again • For the ~$300,000 they spent on this, they got the book to the NYT Best Seller List (http://www.eqjournalblog.com/?p=973)

25. How I Beat My Competition Case Study– Tony Hsieh and Zappos.com LESSONS LEARNED • Customer service is a profit centre not a cost centre • Customer service can be a key differentiator • You have to be in it boots and all– not one foot on the shore and the other in the boat • Tony can execute expertly • Tony understood that if he didn’t fix biz model, Zappos.com would die– you must adapt • Zappos pays (almost) as much attention to the supply chain as the value chain [Walmart also does this]

26. How I Beat My Competition Case Study– LooseButton.com • Loose Button Founders Ray Cao and Aditya Shah • Both Waterloo Engineers • Demonstrate a lot of the principles of GTBMR, Get the Biz Model Right • About 98% client base is female and growing fast • Suppliers:L’Oreal, Moroccan Oil, Dermalogica and dozens of others

27. How I Beat My Competition Case Study– LooseButton.com (Cont’d) • Reshaping the way consumer products industry delivers samples to consumers • Employed agencies to go to malls to hand out samplers to consumers quasi randomly • Ray and Aditya highly analytical/believe in value of tracking metrics to make enterprise smarter • Startups grow faster too–7x if u set goals/track metrics

28. How I Beat My Competition Case Study– LooseButton.com (Cont’d) • Value proposition : “We’re the Netflix of the beauty products industry but with e-Harmony for brains.”  • Every consumer completes profile letting LooseButton.com know what type of products interested in • Once /month, Luxe Box delivered by CPC (Canada Post Corporation) with travel-size samplers from suppliers 

29. How I Beat My Competition Case Study– LooseButton.com (Cont’d) • Form of mass customization—every Luxe Box contains different products matching individual consumer interests with a few surprises on upside thrown in • Clients independently started to record YouTube videos of themselves receiving, using and experimenting  • Over 10,000 views • Tribes of makeup evangelists forming around strongest influencers 

30. How I Beat My Competition Case Study– LooseButton.com (Cont’d) • Clients paying $12 per month ($10 if they sign up for a year) to receive monthly try-before-you-buy Luxe Box filled with samples • LB’s suppliers provide samples for free • In addition suppliers like L’Oreal and Moroccan Oil pay for right to be included in Luxe Box 

31. How I Beat My Competition Case Study– LooseButton.com (Cont’d) • Negative cost marketing too—organizations paying to market Luxe Box for them… Globe and Mail, Chatelaine and other publications, desperately trying to hold onto readers, buy Luxe Box subscriptions (at around 80% of retail price) to give to their most loyal customers • Vastly extends LB’s reach  & growth rate • LB getting paid on 3-sides of their biz model– a first!

32. How I Beat My Competition Case Study– LooseButton.com (Cont’d) • Tough business to knock off until Internet can “download” makeup and beauty potions! • As long as Canada Post Corporation keeps going, they’re in great shape • How to make it even tougher to knock off? • Build an even stronger community around it– add follow/follower model; e.g., integrate Twitter API or other SM

33. How I Beat My Competition Case Study– LooseButton.com (Cont’d) • Named company ‘Loose Button’ cuz: “Buttons are fasteners that connect two pieces of cloth. We intelligently connect consumers and brands.” • Also LB name is different from product (Luxe Box) cuz it’s the 1st of many • “Manpacks”, Foodie, Health, Wellness, Fitness, Tools & Equipment, 100s more variations!

34. How I Beat My Competition Case Study– LooseButton.com (Cont’d) • Started LB right out of University • Advisory Board with luminaries like Harry Rosen and Jagoda Pike (former publisher of the Toronto Star) • Mentoring helped a lot • Decided not to go into apparel space since it was saturated • Went into market research and product discovery side instead • Biz coach comes in once per week • Set goals, track metrics and live up to their word

35. How I Beat My Competition Case Study– LooseButton.com (Cont’d) • Other changes? • Add Qricket Code to each Luxe Box (QR code where u can change website resolves to after printing them so that, like ET, each Box can call home • Add LooseButton.org to give back to their community too • Business models today not just about making money • If it’s all about money you’ll have none • If it’s all about building insanely great products and services plus making contribution to society, you’ll seem to have it all • Gen Y and Steve Jobs phenomenon • Bolt on to existing model standalone not-for-profit dedicated to say wellness with own sources of funding and marketing would help wider community

36. How I Beat My Competition

37. How I Beat My Competition Case Study– LooseButton.com Lessons Learned • GTBMR, Get the Business Model Right • Add DV, Differentiated Value • Mass Customize—integrate the Internet • Set goals/track metrics for yourself and your clients/suppliers/marketing partners • Build a community/give back

38. How I Beat My Competition Case Study– Ottawa Senators and the Palladium • Canderel and others enter the Ottawa marketplace and out compete the locals • Office rents go from $18 in 1982 to $6 in 1987 • We were constantly trading up in terms of business size and complexity • Move to a market with fewer competitors and some more DV– get out of the way of the elephants • “What does TO have that we don’t have?”

39. How I Beat My Competition Case Study– Ottawa Senators and the Palladium (Cont’d) • A Zoo, the Princess of Wales Theatre, a NHL Team • NHL is getting ready for expansion again • Randy, MBA from Clarkson: “Let’s do it.” • Cyril Leeder, CA: “How much is it going to cost?” • Estimate: $35 million (then going rate for NBA expansion team)

40. How I Beat My Competition Case Study– Ottawa Senators and the Palladium (Cont’d) • Franchise cost: $50,000,000 USD in 1990 • Pre-sold 15,000 PRNs for $25 each for a team that does not yet exist • Pre-sold 500 Corporate sponsors for $500 each • Pre-sold 32 Original Corporate Sponsors for $15,000 each • Pre-sold media rights for radio and TV for $250,000 and $4,000,000, respectively

41. How I Beat My Competition Case Study– Ottawa Senators and the Palladium (Cont’d) • Pre-sold 30-year arena management contract for $15 million + a corporate guarantee • Pre-sold pouring rights for $3 million • Pre-sold product rights for $1 million • Pre-sold 10,000 season tickets 22 months before the first game for $22 million in cash • Pre-leased 100 suites at $100,000 per suite per year or $10 million per year for 5 years = $50,000,000

42. How I Beat My Competition Case Study– Ottawa Senators and the Palladium (Cont’d) • Bought 600 acres for $12k per acre, won a NHL franchise, built a MCF (Major Community Facility– aka, Scotiabank Place) in the middle and sold extra 500 acres for $112k per acre to make $50,000,000 • You get the picture… PRE-SELL, PRE-SELL, PRE-SELL… find ‘launch clients’ before you launch

43. How I Beat My Competition Case Study– Ottawa Senators and the Palladium (Cont’d) • Howard Darwin: “If anyone should be bidding for a NHL team for Ottawa it should be me. But you have the only site for a MCF, you have 500 corporate sponsors tied up, you have 15,000 reservations for season tickets, you have the relationships with the NHL BOG.” • Me: “That’s right, Howard.”

44. How I Beat My Competition Case Study– Ottawa Senators and the Palladium (Cont’d) • Having launch clients (pre-sales) changes everything– it gives everyone involved confidence that you are on the right track, it increases your credibility and is an important source of (cheap) capital • The minimum number of launch clients you need is three: you can convince one fool to buy any product or service, maybe two but probably not three

45. How I Beat My Competition Case Study– Ottawa Senators and the Palladium (Cont’d) • Meet with each member of the BOG at least twice • Meet with the President of the NHL • Go to Palm Beach with 120 followers including the Ottawa Fire Department Marching Band • Slogan: “Bring Back the Senators” • Name things like: “The Palladium”– give it the breath of life (like the Elves did in Middle Earth)

46. How I Beat My Competition Case Study– Ottawa Senators and the Palladium (Cont’d) • Prioritize • Lobby • Know what you are doing (learn from Bill Torrey/Glen Sather/Sam Pollack) • Media proclaims: ‘Milwaukee/Seattle’ • Stand your ground– “You will NEVER, EVER get a NHL Team in… Ottawa.”

47. How I Beat My Competition Case Study– Ottawa Senators and the Palladium (Cont’d) • Plaster Palm Beach Airport with Bumper Stickers • Make your presentation a conversation • Never stop • Last thing they see is your happy, smiling face • Be someone others can have trust in; trust is the foundation of a successful life in business and in your personal situation • “Go where hockey is known and loved and we’ll take care of your franchise.” • Beat Milwaukee, Portland, Seattle, Houston, Hamilton and St Petersburg

48. How I Beat My Competition Case Study– Ottawa Senators and the Palladium (Cont’d) • Dec. 6, 1990, the NHL awarded franchises to the cities of Ottawa and Tampa • But really they awarded them to Phil Esposito (for Tampa) and Bruce Firestone (for Ottawa) • They trusted us • Our theme song– Tom Petty’s DON’T BACK DOWN • We get a unanimous vote from the NHL! • In entrepreneurship, results count and results come from a fundamental source: trust— remember this— “People like to buy from people they like and trust.”

49. How I Beat My Competition Case Study– Ottawa Senators and the Palladium LESSONS LEARNED • Set your goals, internalize them, democratize them and publicize them • Outwit, outplay and out execute the competition • Know who your real audience is • There’s the published hierarchy then there is the one that really makes things happen– not all owners are created equal– know the business ecosystem

50. How I Beat My Competition How Do I Beat the Competition: Pop Quiz 1. Can you name five things you need to do to beat your competition? __________________________________ __________________________________ ___________________________________ ___________________________________ ___________________________________ 5 Marks