The Oft-Repeated Pattern of Stakeholder Demotion and Entrepreneurial Opportunity

[MJ DeMarco]

From the other thread on SONOS...

MARKETING - FTE - Sonos: How to ruin your brand and piss off your early adopters (of course, do it after you go public)

SONOS (which recently went public, at which point I knew the company would start to suck) apparently didn't have their "Great News!" email go off very well, which was news of planned obsolescence which in so many words, told customers to shit or get off the pot... (OF course, they just went...

www.thefastlaneforum.com

https://twitter.com/i/web/status/1220486233345810432

View: https://twitter.com/MJDeMarco/status/1220486233345810432

Adobe is a classic example of a company that got huge because of the value they delivered and their focus on the customer need. And as soon as their priorities shifted to profit, they lost their integrity. They are truly, completely awful now. I have so many examples of how disappointing their software is, and I've made my life on using it for 20 years.

Someone is going to come and eat their lunch. And I will enjoy watching it.

@SamRussell I downloaded trials of Affinity after seeing people trolling Adobe on their own Instagram account about how they liked Affinity better.

Think about that. This is how I learned about Affinity. From Adobe's own social media account.

Poignant story, but all too common.

Here is the often repeated pattern of stakeholder demotion that occurs when a company goes public. It is one of the "defects" of capitalism which is the source of ire for many. As a capitalist myself, I understand that it is an opportunity-- which by nature, defines capitalism.

1. Build a great company with great products
2. Adopt a customer/product centered approach.
3. Grow like a weed... billions and billions!
4. Go public
5. Shift organizational priority to profit, beating Wall Street consensus earnings estimates every quarter
6. Lower organizational priority for customers behind shareholders and employees (abandoning the customer-centric approach that allowed them to grow in the first place)
7. Diminish customer service, lower value of the product, increase prices (outsource service, cheapen ingredients, "squeeze the towel!")
8. Toss in a continuity billing model to foster #5 (e.i. Thanks Adobe!)
9. Enjoy the slow decline of worse products, worse service, worse everything.
10. Company reaches peak growth: enter maturation and decline ... the point old customers seek a new company to do business with.

#10 is where we entrepreneurs come in, anyone who wants to exploit the skewing opportunity.

This reoccurring truism will always exist. And it's why there is always opportunity... Adobe, Etsy, SONOS, Facebook, Upwork, Fiverr; the list is long and lengthy...

 

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[Andy Black]

Reminds me of a nice little book I read years ago called “The Innovator’s Dilemma”.

My paraphrased takeaway was that the small and agile innovator often grows to the point it can no longer compete with the small and agile innovator.

The larger companies have to find *big* opportunities, leaving openings for the smaller companies - that they can then turn into big opportunities.

 

[PapaGang]

From the other thread on SONOS...

MARKETING - FTE - Sonos: How to ruin your brand and piss off your early adopters (of course, do it after you go public)

SONOS (which recently went public, at which point I knew the company would start to suck) apparently didn't have their "Great News!" email go off very well, which was news of planned obsolescence which in so many words, told customers to shit or get off the pot... (OF course, they just went...

www.thefastlaneforum.com

https://twitter.com/i/web/status/1220486233345810432

View: https://twitter.com/MJDeMarco/status/1220486233345810432




Poignant story, but all too common.

Here is the often repeated pattern of stakeholder demotion that occurs when a company goes public. It is one of the "defects" of capitalism which is the source of ire for many. As a capitalist myself, I understand that it is an opportunity-- which by nature, defines capitalism.

1. Build a great company with great products
2. Adopt a customer/product centered approach.
3. Grow like a weed... billions and billions!
4. Go public
5. Shift organizational priority to profit, beating Wall Street consensus earnings estimates every quarter
6. Lower organizational priority for customers behind shareholders and employees (abandoning the customer-centric approach that allowed them to grow in the first place)
7. Diminish customer service, lower value of the product, increase prices (outsource service, cheapen ingredients, "squeeze the towel!")
8. Toss in a continuity billing model to foster #5 (e.i. Thanks Adobe!)
9. Enjoy the slow decline of worse products, worse service, worse everything.
10. Company reaches peak growth: enter maturation and decline ... the point old customers seek a new company to do business with.

#10 is where we entrepreneurs come in, anyone who wants to exploit the skewing opportunity.

This reoccurring truism will always exist. And it's why there is always opportunity... Adobe, Etsy, SONOS, Facebook, Upwork, Fiverr; the list is long and lengthy...

Totally agree.

Quick story about old Adobe (customer focused)
I have a copy of Adobe CS3 on an old G5 mac that has no wireless card, so it exists in a time vacuum. I can't tell you how joyful that software is to use, and it's over 10 years old. Everything boots up in less than 7 seconds. No intrusive pop ups, no push notification that it needs updated, no arcane options hidden away in a sub menu of a preferences dialog box. It was perfectly imperfect.
Bugs?
We made workarounds.

Every once in awhile I will boot it up because I need to retrieve an old file, or scan a document (my old scanner is not compatible with CC of course) and I marvel at just how fast and responsive it was. As someone who spent years keeping track of my time in fifteen minute increments, I am acutely aware of how much time I am wasting, and how productive I am. And this old software just works.

There are some components of Creative Cloud that are great (dark mode, Camera Raw, vector image placement in Photoshop) but if I could I'd probably run an older install of their software made before they turned into the graphic software equivalent of AT&T.

Ok I am done beating this horse. They have already stolen too much of my life.


But the real meat of your post is completely true and the very basis of capitalism. See an opportunity, work hard to deliver the need & value, make it bigger than yourself, fill the gap, be responsive and kind to the partners and customers that help get you there. The dollars are flowing to Affinity right now. I saw them on the landing page of Apple's App store a while back, and I think it won their app of the year. It's about to get real.

 

[NMdad]

On a smaller scale, I saw the same pattern when I worked for an ERP software startup:

1. Startup made something their clients loved. Sold like crazy. I was a support tech, and our job was to make the clients happy--no matter how long that took. A robust internal training program created a deep well of internal expertise.
2. Clients freaking loved us. Attending our annual conference was a party & a way to meet in-person the people they'd been talking to (and getting help from) via phone for months.
3. Startup gets acquired by Fortune 1000 company.
4. Internal training dramatically limited because it wasn't billable time. Emphasis on reducing time to solve client issues--which meant lots of band-aid fixes. Funky startup culture watered down by corporate policies.
5. Employees with deep expertise leave, and some of us start consulting--doing what we'd been doing as employees (but getting paid 4-5x what our salaries had been). ERP support continues to erode, and clients are often frustrated--despite the high price they're paying for annual support.
6. Subpar support by the former startup means plenty of business for consultants like me.
7. Over time, more clients start looking for alternatives to the ERP application they loved so much years ago.

 

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[Kak]

Right on the line you point out... The leadership usually changes too. The board will pick a CEO who follows orders. Someone who isn't really a leader, but someone that is OK carrying out the will of democratized decision making that comes along with public ownership.

The heat is always up on those guys so they don't make waves.

I 100% totally agree. Once the decision making process becomes democratized, it is a 180 yard drive down the fairway. It works for a while until someone better comes along and disrupts.

The problem is that an IPO is a GREAT exit strategy in certain, more exciting, industries. It will generate unparalleled levels of personal wealth for the original proprietor(s).

When a company has an IPO, the consumers are not the only customers anymore. The shareholders are too. So what does that mean for you personally as the guy that just took your company public? Way more customers and way more money. The competing interests show themselves later because to do this, for all intents and purposes, they sold control of their company to a mini congress. What happens next is... mediocracy at best.

Companies are built on bold moves that depart from the status quo. That rarely happens at this stage unless the board gets desperate or lucky.

I'm torn on that. Do I want to build some perfect shining company or do I want to get rich and let a board impart their flavor of mediocre? That is a tough choice. I still hold we start companies to ultimately provide personal wealth. It is not that much different than just selling the company to a person that burns it to the ground. At least with a board it is a controlled burn. Is that the original entreprenuer's problem? Not really.

Meh. A bunch of pride and $2.50 will buy you a cup of coffee. It is often the right wealth building move to turn it over even if the customer experience wanes. I would rather have a bunch of money representing MY work than a company that lives on and on to see steeper and steeper competition. I will exit at prime.

 

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[Andy Black]

I guess this is why we should pay attention to any news about IPOs and M&As.

I worked for a "startup" and all they wanted to do was IPO and be acquired. Eugh...

 

[ApparentHorizon]

I needed Illustrator CC for a quick project. So i bought 2 month subscription.

Went to cancel and all seemed well, until the billing came in next month.

Turns out they disguised their cancel confirmation page, to trick you if you weren't paying careful attention.

I take full responsibility for it, but it's just like the recent Google update to trick you into clicking ads.

You have to scroll down below the fold, and click a non-discrete link that blends in with the rest of the page.

Gimp is free and open source, by the way: GIMP It does more than enough to help you create graphics for a couple of websites.

 

[PapaGang]

I needed Illustrator CC for a quick project. So i bought 2 month subscription.

Went to cancel and all seemed well, until the billing came in next month.

Turns out they disguised their cancel confirmation page, to trick you if you weren't paying careful attention.

I take full responsibility for it, but it's just like the recent Google update to trick you into clicking ads.

You have to scroll down below the fold, and click a non-discrete link that blends in with the rest of the page.

Gimp is free and open source, by the way: GIMP It does more than enough to help you create graphics for a couple of websites.

This is what I'm talking about. They have a damn UI department designing things to be deliberately confusing and difficult, which results in financial mistakes made in their favor.

...for the short term.

 

[Tourmaline]

But the real meat of your post is completely true and the very basis of capitalism. See an opportunity, work hard to deliver the need & value, make it bigger than yourself, fill the gap, be responsive and kind to the partners and customers that help get you there. The dollars are flowing to Affinity right now. I saw them on the landing page of Apple's App store a while back, and I think it won their app of the year. It's about to get real.

I contend that this is the basis for capitalism. If it was, it would not lead to a company's demise.

The basis of capitalism is to help people through business. Once that is violated, a company dies. If that was not true then SONOS would actually be growing even faster and not slowly dying by focusing on profits over service/customers.

Do you disagree?

 

[amp0193]

When a company has an IPO, the consumers are not the only customers anymore. The shareholders are too.

This doesn't just happen at an IPO, it's anytime you take outside money. Every dollar you take a little bit less control that you have for yourself.

When I took my first dollar of outside money, my company goals effectively changed to "provide a return for the investors"... which for now looks like: operate the business as I see fit, as long as I meet expected timelines on objectives and an exit. I do not plan on taking institutional money, however, and want to maintain majority voting rights for myself on major decisions.

But long-term, I'm going to be selling the company, and I will be optimizing for profit (or growth) for the 12 months leading into that sale, and I will not be able to control 100% what happens to the company after that.

I'm open to staying on as CEO for a while post-acquisition, depending on how the deal is structured. But if it came down to a choice between maintaining ownership for myself, or taking my chips off the table and selling to XYZ Megacorp, who's values may not be 100% aligned with mine... I'm picking door #2.

 

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[MitchC]

Reminds me of a nice little book I read years ago called “The Innovator’s Dilemma”.

My paraphrased takeaway was that the small and agile innovator often grows to the point it can no longer compete with the small and agile innovator.

The larger companies have to find *big* opportunities, leaving openings for the smaller companies - that they can then turn into big opportunities.

I mentioned this in another thread about adobe, that book also talks about how smaller startups can take the low end of the market with a cheap and basic option not worth pursuing by the bigger business but eventually the offering from the smaller start up becomes good enough that it satisfies the needs of the majority. Affinity is getting there.

 

[MJ DeMarco]

I have a copy of Adobe CS3

Yes, I still use Fireworks, and old graphics program from circa 2002.

 

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[awestbro]

The dollars are flowing to Affinity right now.

So glad there's a good competitor to Adobe now. I downloaded Affinity a couple months ago to do some quick wireframes and its 99% of what I wanted from similar Adobe tools and really fast to boot. I have the iPad and desktop apps and both are fantastic.

 

[socaldude]

Ever notice how now when you upload a picture on your own f@cebook profile it hardly ever gets seen by your friends.

Nope no wonder, my own facebook feed is jusyt flooded with "sponsored" posts. Hardly any of it is of my friends pictures or status updates.

Instead of having an organic news feed you now have this giant shitstorm of random stupid videos and very little of your own social circle.

Im getting real tired of it.

 

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[ZF Lee]

I'm torn on that. Do I want to build some perfect shining company or do I want to get rich and let a board impart their flavor of mediocre? That is a tough choice. I still hold we start companies to ultimately provide personal wealth. It is not that much different than just selling the company to a person that burns it to the ground. At least with a board it is a controlled burn. Is that the original entreprenuer's problem? Not really.

Meh. A bunch of pride and 2.50 will buy you a cup of coffee. It is often the right wealth building move to turn it over even if the customer experience wanes. I would rather have a bunch of money representing MY work than a company that lives on and on to see steeper and steeper competition. I will exit at prime.

I'm worrying about this issue too, although I'm personally nowhere near that point haha.

I think this is a deadly wave that is being even more encouraged in the finance world...where companies are bought and sold not to provide more consolidated value to the end-customers, but to just flush the cash around.

Michael Masterson in his book 'Ready, Fire, Aim' merely suggests breaking up the biz into 'profit centers', and then getting folks to head them, and report on their performance quarterly to you.

So you still have the reins, but you leave some heavy-lifting to the folks.
Judging from the book, it feels a lot more down-to-earth than a regular board.
Thoughts?

 

[Dignium]

Meh. A bunch of pride and 2.50 will buy you a cup of coffee. It is often the right wealth building move to turn it over even if the customer experience wanes. I would rather have a bunch of money representing MY work than a company that lives on and on to see steeper and steeper competition. I will exit at prime.

Same here. And I will then have the runway to build greater that that if I so choose. If pride is holding you back from a grand exit, think of the liquidation event as a oppurtunity to quickly eclipse in your next venture what you’re proud of in your current one.

Now, which large public companies didn’t demote their customers, and to this day shows that customers and shareholders are close together - years, even decades later?

What do they do, what do they put in their contracts, and how did they structure their company and shares to disincentivize customer demotion?

 

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[Kak]

I'm worrying about this issue too, although I'm personally nowhere near that point haha.

I think this is a deadly wave that is being even more encouraged in the finance world...where companies are bought and sold not to provide more consolidated value to the end-customers, but to just flush the cash around.

Michael Masterson in his book 'Ready, Fire, Aim' merely suggests breaking up the biz into 'profit centers', and then getting folks to head them, and report on their performance quarterly to you.

So you still have the reins, but you leave some heavy-lifting to the folks.
Judging from the book, it feels a lot more down-to-earth than a regular board.
Thoughts?

You could, but it would be worth a lot less money to you. Offering a product and service to a market of energized customers is linear growth for the sake of argument.

Offering a financial opportunity to a market of energized investors AND offering MORE products and services to a market of energized consumers is the exponential route.

Which horse would you rather saddle up and ride as the OWNER?

The answer to that question is another question, is your business the work of art? Or is your value the work of art?

There are headwinds and tailwinds to whatever decision.

MJ is 100% right about the consumer experience.

 

[Kak]

This doesn't just happen at an IPO, it's anytime you take outside money. Every dollar you take a little bit less control that you have for yourself.

Agreed.

There is a difference in mentality of the investors for the sake of this argument though.

Generally, early, private investors are inspired by the vision and the disruption. They want to align themselves with the CEO and his/her vision for taking care of customers. It is when companies start electing board member delegates to represent totally passive investors that own mutual funds when this starts really getting sanded down to mediocre.

Being a good steward of investor money is a very very good thing.

 

[Roli]

To go back to Sweden, Sweden is a capitalist country 100%. They just have extensive social programs. Which they mostly can only keep up as long as they have because of prior oil profits if I'm not mistaken.

You are mistaken, you're thinking of Norway, which has huge oil reserves and started a sovereign wealth fund, which every Norwegian is entitled to.

Watch the video on Sweden at the bottom of this post, you'll be amazed.

The fundamental problem with heavy social programs is that it slows down economic growth. Money is redistributed from the most productive to the least productive.

Nope. That's just the lie we're told. In truth, Sweden's social programs help the least productive to become more so.

I feel humbled! I've added it to my signature per your request

Good stuff! You have a great site, with a cool product, shout it loud and proud!!

Watch this, and you'll realise that socialism and capitalism can live together quite happily. I hear what you're saying regarding economic growth, however this obsession with growth is more corporate than capitalist, because growth often comes at the cost of stability. Be that economic stability, or social stability.

It's just 15 minutes, enjoy!

View: https://www.youtube.com/watch?v=2E0dWHCnic8&t=1s

 

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[Roli]

Socialism does not allow for private property or privately owned businesses. Socialism is fundamentally state/group owned means of production.

Nope, that's Communism. Essentially part of the lie we're told by the corporate-owned govermedia; previously exclusively in America, but now also in the UK and Europe, is that socialism is the same as Communism. Which is akin to saying capitalism is the same as Nazism.

What happened in Soviet Russia was not socialism, it was an imperialist dictatorship masked as a socialist initiative, fuelled by the lies of Maoist China.

In a true socialist country, people are allowed to come and go as they please, express political dissidence, and pursue capitalistic goals. Taxation is high, however it's the same for everyone, wages are evened out, a doctor will still take home more than a cleaner, however the tax that they both pay is used for social betterment, rather than to give people and companies that can already afford it, an even better run.

This isn't just philosophical masturbation, there are quite a few countries around the world that manage to strike this balance, with Norway and Sweden being the ones that most look to.

I wish they had given some hard stats on how much money Sweden gives for welfare, I'm having trouble finding this.

I'm not sure about that, however living in London as I do, I know and have met quite a few Swedish people, and I ask them about taxation and their system. In fact, I watched that video the other day and spoke to a couple of my friends about it.

They both agreed that the video portrayed an accurate depiction of Sweden, they told me that even though there is high taxation, people there accept that is what makes their country work. As opined in the video, there is less resentment from high earners about the tax, because they all benefited from free education and healthcare, and cheap housing.


You mentioned the roughly $800 per month. Recently a Swedish person made a post on TMFF, and they stated that the (major) city (not Stockholm) where they lived, they got an apartment in the smart part of town for about $350 per month. In London it would cost four times that.

The point is, that if you have your entire system set up with a strong social ethic, then things like property cease to become assets to profit from, and simply places to live. Of course people still own their own homes in Sweden, and some probably profit from those homes, however this isn't the status quo.

From budget to budget, their tax system remains fairly static, people do not expect to get bonuses from tax cuts, because they get societal kickbacks that far outweigh having a few thousand extra Kronas a year.

Plus of course, there is no resentment caused by the fact that a normal person has to pay tax, yet a huge corporation finds ways around it. So the poor, do not resent the rich, nor vice versa, they live side by side.

As the guy said in the video, you don't start a business because of a 5% cut in corporation tax, you start a business because you can afford the risk. In America and the UK, if you start a business and lose everything, the consequences are a lot higher than if you live in Sweden. I myself have come close to being kicked out of my home in the past, because of failed business ventures.

I think the fact that they have a low GDP coeeficient, yet high economic imbalance, shows that it works. If you want to sit around on your arse all day, then the government will allow you to do that, however you won't become rich from that.

At the same time, if you want to go all in on a business idea, they'll help you out with that as well. Does that stifle wealth? No. Does it stifle growth? Probably. However do they suffer from a boom & bust economy? Nope?

Here's a brief account of how Sweden solved their 1992 banking crisis Swedish banking rescue - Wikipedia

The TLR version, is that they bailed out the banks, however they nationalised them, or sold them to private equity firms. Then when they returned to profit, the state took those profits and put it back in the taxpayers' pockets who'd bailed them out in the first place.

Contrast with what happened in the US and UK, whereby banks were bailed out and literally nothing happened to them, they just carried on as usual, screwing us all over whilst getting bailed out to hundreds of billions of dollars.

In the UK Lloyds was nationalised, and now they are going to sell it back to the city at a loss....

Anyway, I'm ranting now!

In conclusion, I asked both of my Swedish friends, why the hell they would ever want to leave the place? They both said the same thing, boredom. They found the people pleasant but boring, they came to the UK for excitement. I found it very interesting that they both independently said the same thing.

World Happiness Report - Wikipedia

en.wikipedia.org

 

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[Tourmaline]

Funny how so often things get entangled with semantics. And of course what socialism is does depend a lot on who you ask because of the forms in which it appears.

If we take the opening paragraph from wiki:

Socialism is a political, social and economic philosophy encompassing a range of economic and social systems characterised by social ownership[1][2][3] of the means of production[4][5][6][7] and workers' self-management of enterprise[8][9] as well as the political theories and movements associated with such systems.[10] Social ownership can be public, collective or cooperative ownership, or citizen ownership of equity.[11] There are many varieties of socialism and there is no single definition encapsulating all of them,[12] with social ownership being the common element shared by its various forms.[1][13][14]

And yes communism is a form of socialism, by definition. Both derive from Marx.

Communism is a form of socialism. Nazism is actually also a form of socialism, Nazi is short for National Socialism after all, even though their form of it is mixed with fascism and rather different compared to Communism.

For reference it will help to see how wiki defines capitalism:

Capitalism is an economic system based on the private ownership of the means of production and their operation for profit.[1][2][3][4] Characteristics central to capitalism include private property, capital accumulation, wage labor, voluntary exchange, a price system and competitive markets.[5][6] In a capitalist market economy, decision-making and investments are determined by every owner of wealth, property or production ability in financial and capital markets, whereas prices and the distribution of goods and services are mainly determined by competition in goods and services markets.[7][8]

The two are inherently opposing - You have group/public ownership of means of production compared to private ownership of means of production.

Capitalism is also greatly fueled by the profit motive which most socialists find evil. And I do not exaggerate by socialists see profit as evil.

Especially in today's postmodernist neo-marxist socialists that are running around the USA and much of europe, profit is tied to power structures that necessarily oppress the people at the bottom of the hierarchies. And thus it is evil. Anywhere there is profit there will be exploitation and evil being perpetrated.

In the USA the DSA is pretty powerful, Bernie Sanders who at this point may very well be the democratic candidate in the upcoming election, is a member of this group.

What is Democratic Socialism? - Democratic Socialists of America (DSA)

Democratic socialists believe that both the economy and society should be run democratically—to meet public needs, not to make profits for a few.

www.dsausa.org

Democratic socialists do not want to create an all-powerful government bureaucracy. But we do not want big corporate bureaucracies to control our society either. Rather, we believe that social and economic decisions should be made by those whom they most affect.
...
Social ownership could take many forms, such as worker-owned cooperatives or publicly owned enterprises managed by workers and consumer representatives. Democratic socialists favor as much decentralization as possible. While the large concentrations of capital in industries such as energy and steel may necessitate some form of state ownership, many consumer-goods industries might be best run as cooperatives.

So what's my point here really?

Conflating Sweden's capitalist economic system with some strong social programs with general socialism creates a rather dangerous precedent. It then makes one think that the Democratic Socialists of America is also just another variant of this, which is extremely far from the case.

At the heart Sweden's capitalist system, it has strong economic freedom. It social programs and taxation scheme promotes economic freedom.

At the heart of any socialist system, there is no economic freedom. It seeks to control industries as it sees fit to provide people with goods and services that they deem important.

that if you have your entire system set up with a strong social ethic

This is extremely important. We, and well most analysis, seem to look at economic systems and social system in a sort of vacuum.

In the USA our culture does not have a strong social ethic. I find it unfortunately rather uncommon to come across people that actually want to work and help their community. Our focus, especially in high school and college and onwards too, is on having fun, partying, and making ourselves feel good. It is not on bettering the country, advancing humanity, serving life and others.

I do think however it's getting better over the last decade, but there is an extremely strong influence, especially from Hollywood, to promote self-centered selfishness.

A large part of the lack of strong social ethic is the difference in population. Sweden has 10 million people, Texas alone has nearly 30 million people. We also have much greater ethnic diversity.

Both these things I think contribute to people having 'group think' and not wanting to give their money to people that they feel too different or disconnected from.

I realize this is already getting really long, lol, but I appreciate this discussion we're having!

In America and the UK, if you start a business and lose everything, the consequences are a lot higher than if you live in Sweden. I myself have come close to being kicked out of my home in the past, because of failed business ventures.

Yes absolutely this is the case. That must have been pretty scary to have come close to being kicked out of your home!

I think it's probably one degree tougher in the USA because our health insurance is greatly tied to our employer. Typically the employer pays 90% of the costs, whereas your healthcare is baked into your taxes already. It is not uncommon for Americans that are self employed or have a business to keep a corporate job just for healthcare for their family.

In conclusion, I asked both of my Swedish friends, why the hell they would ever want to leave the place? They both said the same thing, boredom. They found the people pleasant but boring, they came to the UK for excitement. I found it very interesting that they both independently said the same thing.

haha! Well, perhaps the danger of losing everything and living on the streets adds to the excitement and passion!

 

[PapaGang]

From the other thread on SONOS...

MARKETING - FTE - Sonos: How to ruin your brand and piss off your early adopters (of course, do it after you go public)

SONOS (which recently went public, at which point I knew the company would start to suck) apparently didn't have their "Great News!" email go off very well, which was news of planned obsolescence which in so many words, told customers to shit or get off the pot... (OF course, they just went...

www.thefastlaneforum.com

https://twitter.com/i/web/status/1220486233345810432

View: https://twitter.com/MJDeMarco/status/1220486233345810432




Poignant story, but all too common.

Here is the often repeated pattern of stakeholder demotion that occurs when a company goes public. It is one of the "defects" of capitalism which is the source of ire for many. As a capitalist myself, I understand that it is an opportunity-- which by nature, defines capitalism.

1. Build a great company with great products
2. Adopt a customer/product centered approach.
3. Grow like a weed... billions and billions!
4. Go public
5. Shift organizational priority to profit, beating Wall Street consensus earnings estimates every quarter
6. Lower organizational priority for customers behind shareholders and employees (abandoning the customer-centric approach that allowed them to grow in the first place)
7. Diminish customer service, lower value of the product, increase prices (outsource service, cheapen ingredients, "squeeze the towel!")
8. Toss in a continuity billing model to foster #5 (e.i. Thanks Adobe!)
9. Enjoy the slow decline of worse products, worse service, worse everything.
10. Company reaches peak growth: enter maturation and decline ... the point old customers seek a new company to do business with.

#10 is where we entrepreneurs come in, anyone who wants to exploit the skewing opportunity.

This reoccurring truism will always exist. And it's why there is always opportunity... Adobe, Etsy, SONOS, Facebook, Upwork, Fiverr; the list is long and lengthy...

Chobani is a great example of what you are talking about. For years Dannon and Yoplait had the yogurt category locked up.

Who thought you could reinvent yogurt? That's inspiration!

 

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[SEBASTlAN]

This reoccurring truism will always exist. And it's why there is always opportunity... Adobe, Etsy, SONOS, Facebook, Upwork, Fiverr; the list is long and lengthy...

The major takeaway.

I guess this is why we should pay attention to any news about IPOs and M&As.

 

[PapaGang]

...the small and agile innovator often grows to the point it can no longer compete with the small and agile innovator.

That's the most brilliant thing I've read for awhile. Thanks for sharing.

 

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[Roli]

Poignant story, but all too common.

Here is the often repeated pattern of stakeholder demotion that occurs when a company goes public. It is one of the "defects" of capitalism which is the source of ire for many. As a capitalist myself, I understand that it is an opportunity-- which by nature, defines capitalism.

For me this is the difference between capitalism and corporatism. The first allows for the growth and betterment of the common man or woman. The second panders to the behemoth of the corporate entity, destroying and stifling competition, swaying government legislation in order to skew the marketplace.

Once stages 6-10 have happened, then comes the only way profits can increase is by paying less tax and eroding the rights of your workers. Think Apple Ireland and zero hour contracts.

This is the sad march to corporatism, and unfortunately - especially in, though not exclusive to the United States - the corporate-industrial-media complex have convinced a lot of people that they are one and the same, that anybody who decries Amazon paying 0.1% tax is anti-capitalist.

For me Sweden have got this right, they are a virulently capitalist country, with the highest percentage of billionaires in the world, yet they have one of the most advanced social systems in place.

They have pitted corporatism (in the guise of capitalism), against socialism, as if the two are diametrically opposed, when in fact the two can coexist quite happily. Sweden is living proof of that.

I wrote an article about this some time ago, postulating the question; is it inevitable that a company will become evil? In which I take a look at the story arc of a small company, right through to big corporation, and I came to the conclusion that; yes, it is indeed inevitable.

However since watching the brilliant breakdown of Sweden's economics by the amazing Economics Explained Youtube channel, I have changed my mind.

Corporatism denounces taxation because it cuts profits, as the corporation tries to cut corners. Whereas capitalism welcomes taxation, as it uses it to further the capitalistic cause, which inevitably leads to a fairer social structure.

I know this isn't directly what you spoke of, however I believe they are linked.

I have a copy of Adobe CS3 on an old G5 mac that has no wireless card, so it exists in a time vacuum.

We are kindred spirits, I have an old power Mac (Intel) with Final Cut Pro 7 the last great FCP

I contend that this is [not] the basis for capitalism. If it was, it would not lead to a company's demise.

The basis of capitalism is to help people through business. Once that is violated, a company dies. If that was not true then SONOS would actually be growing even faster and not slowly dying by focusing on profits over service/customers.

Completely agree, and in fact laid out why above, in my answer to MJ.

I took the liberty of correcting your quote by the way; I figured the word not was missing.

Also, on another note, could you please add your website into your signature. I was trying to show some friends your site the other day, and couldn't find it. Is it the same as your name?

Anyway, remember this thread when you become a huge behemoth of a company, stay gold man! :-D

 

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[JordanK]

One of my 2019 New Year Goals was to delete Facebook. Been off it for 13 months now and I haven't missed it at all. It was tough the first month as I primarily talked to people through Messenger but now everyone knows to contact me on Instagram which is the only public social media I use (Funny enough its owned by Facebook).

I really like how with Instagram I can control 95% of the feed by only following people I am interested in receiving content from. Facebook became a problem for me when news and arguments kept popping up unsolicited. Instagram is a lot more positive and I learn a lot each day from some really good people who share pieces of their life and tips on how to improve (In the Real Estate, Fitness and Travel genres mainly for me).

The biggest thing that will affect Facebook is that for every person who leaves it forces others to interact with them on other platforms. All of my friends either have to call/text, WhatsApp (Also owned by Facebook) or Instagram DM me to get in contact. This is time not spent on Facebook or Messenger. Ultimately, it probably doesn't matter to them as they are all under the one banner but I see Instagram going the same way shortly. I used to post my party pictures and weird stuff that happened during my day but I'm more hesitant now as it's become more professional/older family members are beginning to use the platform more as its where the "young people are nowadays". This was the first sign that lead to me want to leave Facebook a few years back.

 

[Dignium]

The biggest thing that will affect Facebook is that for every person who leaves it forces others to interact with them on other platforms. All of my friends either have to call/text, WhatsApp (Also owned by Facebook) or Instagram DM me to get in contact. This is time not spent on Facebook or Messenger. Ultimately, it probably doesn't matter to them as they are all under the one banner but I see Instagram going the same way shortly.

Could be a playbook for Facebook the company:
-Buy up and coming social media platforms (Instagram, WhatsApp)
-nudge users over to IG & WA by systemically squeezing the towels on FB (original platform).
-Sweeten the UX on IG & WA until critical mass is reached. (We are here)
My guess as to what happens next:
-Once critical mass is reached, begin the same systemic towel squeezing & user demotion to IG & WA.
-If you can’t buy the up and comer, repeat the cycle by revamping Facebook the platform to nudge users back over to Facebook.
-in the face of the mass market moving on to favor a different kind of social media, Flail like MySpace did in the early years of Facebook as the mass market moved on to a different kind of social media.

I think the next great social media platform is going to be decentralized and offer more page customization.

Enough people could be tired of the same blue washed aesthetic on every page, so it could provide the option to do intricate page customization or have an AI do it so people don’t feel left out.

I like to think that those that that demote their customers in low-regulation markets have a short time horizon.

On the other hand, customer demotion in low-regulation industries often leads to alternatives better than the original. Imagine if the admin of that entrepreneur forum in MJs early ventures life stayed a fertile garden. Our lives would be poorer today.

 

[Kak]

Now, which large public companies didn’t demote their customers after going public, and to this day shows that customers are close to stakeholders years, even decades after going public?

Apple is an example that did demote customers, struggled, and in desperation went back to Jobs. Jobs' leadership turned them around with the iPod. The rest is history. They became the first trillion dollar company. He set a trajectory for the company that isn't democratized. Eventually it will be again, but for now, the customer experience is considered among the best.

Disney is another that danced with the devil a little and got burned. In desperation they hired Iger. Iger is a good leader and entrusted with a lot of power by the board.

 

[Tourmaline]

For me this is the difference between capitalism and corporatism. The first allows for the growth and betterment of the common man or woman. The second panders to the behemoth of the corporate entity, destroying and stifling competition, swaying government legislation in order to skew the marketplace.

Once stages 6-10 have happened, then comes the only way profits can increase is by paying less tax and eroding the rights of your workers. Think Apple Ireland and zero hour contracts.

This is the sad march to corporatism, and unfortunately - especially in, though not exclusive to the United States - the corporate-industrial-media complex have convinced a lot of people that they are one and the same, that anybody who decries Amazon paying 0.1% tax is anti-capitalist.

For me Sweden have got this right, they are a virulently capitalist country, with the highest percentage of billionaires in the world, yet they have one of the most advanced social systems in place.

They have pitted corporatism (in the guise of capitalism), against socialism, as if the two are diametrically opposed, when in fact the two can coexist quite happily. Sweden is living proof of that.

I wrote an article about this some time ago, postulating the question; is it inevitable that a company will become evil? In which I take a look at the story arc of a small company, right through to big corporation, and I came to the conclusion that; yes, it is indeed inevitable.

However since watching the brilliant breakdown of Sweden's economics by the amazing Economics Explained Youtube channel, I have changed my mind.

Corporatism denounces taxation because it cuts profits, as the corporation tries to cut corners. Whereas capitalism welcomes taxation, as it uses it to further the capitalistic cause, which inevitably leads to a fairer social structure.

I know this isn't directly what you spoke of, however I believe they are linked.

Have you looked at Sweden's corporate tax rate? 21.4%

We're now at 21%, thanks to Trump. Probably the single best thing Trump has done this entire time.

I don't actually understand the need for a corporate tax at all. All profits divested to shareholders will be taxed. It seems like double dipping to tax it before it's paid out then? And if it's not paid out, the corporation will likely reinvest in itself or other areas and grow right?

So then corporate tax simply slows down growth?

I want to say I'm missing something but it seems that straightforward.

I suppose perhaps we need some corporate tax so that corporations will then do things in order to get tax breaks.

To me corporatism is about corporations hijacking government. When this is established corporations are allowed to do things against the market and against the populace that it serves/employs that it should not be able to. I do not think we are there by any means. China is far more of a corporatocracy than America is, the government and business work very closely at the expense of their workers. Probably a byproduct of the individual not being valued. Unlike in the USA where the individual reigns supreme.

To go back to Sweden, Sweden is a capitalist country 100%. They just have extensive social programs. Which they mostly can only keep up as long as they have because of prior oil profits if I'm not mistaken.

The fundamental problem with heavy social programs is that it slows down economic growth. Money is redistributed from the most productive to the least productive. To be clear I am not saying we should not have any social programs in the USA. But that it should be minimal, because the more we have, the more our growth slows, which ultimately hurts everyone.

According to this you see the USA grew by 2.35%, UK by 1.235%, France by 1.249%, Germany by 0.544%, Sweden by 0.936%, Switzerland by 0.761%, Norway by 1.932%, Denmark by 1.698% in 2019.

The numbers ultimately don't lie. And in the USA we still have welfare, food stamps, medicare, housing vouchers while more than double the growth rate of Sweden and most european countries that have far more extensive social programs.

Completely agree, and in fact laid out why above, in my answer to MJ.

I took the liberty of correcting your quote by the way; I figured the word not was missing.

Also, on another note, could you please add your website into your signature. I was trying to show some friends your site the other day, and couldn't find it. Is it the same as your name?

Anyway, remember this thread when you become a huge behemoth of a company, stay gold man! :-D

I feel humbled! I've added it to my signature per your request

 

[Tourmaline]

You are mistaken, you're thinking of Norway, which has huge oil reserves and started a sovereign wealth fund, which every Norwegian is entitled to.

Watch the video on Sweden at the bottom of this post, you'll be amazed.



Nope. That's just the lie we're told. In truth, Sweden's social programs help the least productive to become more so.



Good stuff! You have a great site, with a cool product, shout it loud and proud!!

Watch this, and you'll realise that socialism and capitalism can live together quite happily. I hear what you're saying regarding economic growth, however this obsession with growth is more corporate than capitalist, because growth often comes at the cost of stability. Be that economic stability, or social stability.

It's just 15 minutes, enjoy!

View: https://www.youtube.com/watch?v=2E0dWHCnic8&t=1s

ah okay, yes I was confusing them with Norway!

The video was interesting, thank you.

Though fundamentally this isn't socialism. It's capitalism with social programs. Socialism does not allow for private property or privately owned businesses. Socialism is fundamentally state/group owned means of production.

At best one can call this capitalism with socialistic programs. Which the USA already has.

So what is interesting is that they have very high income tax, but low capital gains and corporate tax. Although actually their capital gains tax is 30%, which is higher than the USA's at 15%-20%.

Hence low income inequality, but high wealth inequality.

But the fact that their welfare seemingly keeps someone from being in poverty entirely, means that people can quit their job rather readily and start a business.

I wish they had given some hard stats on how much money Sweden gives for welfare, I'm having trouble finding this.

I found this: Sweden: average monthly social welfare payment 2007-2017 | Statista

Says average payment is 7703 kronor a month which is only $800 USD. But average may not be a good measure here.

USA is hard to judge as it varies by state: States Where Welfare Recipients Are Paid More Than Minimum Wage

But in general it doesn't seem like much at all, especially if you don't have kids.