Roasted VC's, toasted Harleys and the darker side of hype cycles - LuLd #005
Looking up, looking down is a regular collection of clues and hunches for innovation and strategy practitioners
Looking up, looking down is our regular drop of recommendations for reading, watching, listening and doing. Think of them as clues and hunches that we’ve bumped into - they’re not yet joined up into a fully-formed narrative but they hint at a bigger story and feel useful and interesting enough to share. Subscribers get them delivered to their inbox every two weeks
Thanks for reading Ten thousand and two! Subscribe for free to receive new posts.
They range from 10,000ft views of emergent change and how it affects our world, to down-at-two-inches hacks and smart reframes to learn from, to reference and to use as a way to keep your thinking fresh, refilling your wells of insight and creativity.
Like any good innovation practitioner, we’ll aim for to make it mostly relevant - though never too relevant. All opinions welcome in the comments.
Hate scrolling? Here’s the list…
Here’s why we think they’re interesting…
TOBY: A provocative look at the whole web3 space. What I really like is how when pushed to define exactly what the value is, the arguments descend into nonsense. Personally I am neutral on this. I think there is a pure speculative rush on pushing it, and it has an unnerving framing around literally the desire to be able to monetise everything. At a very human level the reduction of everything to money feels like some horrific dystopian future where nothing counts unless it is money. More generally I buy that there is an interesting enabling technology under this, just not what they are pitching.
This is the more adult version, where the point being made is “make something people actually want”: Web3 Is the Big Idea Customers Didn’t Ask For - Bloomberg. Both worth a read, one for the laughs, one for the strong innovation point.
TOM: If you believe in the hype cycle model for emerging technologies, then it certainly feels like we are deep in the trough of disillusionment with Web3 right now - and it’s fun to see the masters of the universe take a beating every now and then. But I think it’s important to acknowledge that the roastings and disillusionment with Web3 are primarily being directed not at the innovators and inventors, but at the finance - the VCs, hustlers and hucksters who are playing the pump-and-dump, get-rich-quick game in the short term. As Toby says, there is an interesting enabling technology at the heart of Web3, which may or may not become the basis for a new way of organising our digital world, perhaps even a new philosophy for human interaction. But to misquote Zhou Enlai on the French Revolution, it is too early to say whether it will come to anything and what it will look like if it does. It will take time, and patient investors. It would be a shame if schadenfreude were to kill the curiosity to find out.
TOM: There’s a perennial favourite tabloid news story about the size of chocolate bars - how manufacturers are shrinking sizes without shrinking prices in an effort to maintain margin as input costs go up. This story starts to show what it looks like in the service industry, where propositions and brands built on high availability and high touch become undeliverable.
The challenge for these service businesses is that unlike chocolate bars, you can’t offer just a little less at the same price because that breaks the proposition. Low cost service business like like Ryanair that are built on a proposition of no frills might find it easier to reduce the quality of the service in order to absorb cost, but for service businesses that have invested in brand as a way to drive price premium, the business model starts to look brittle - the moment that you respond to cost increases by reducing the quality of the service, you create conflict between the proposition and the product. In my experience of British Airways, this looks like rolling cancellations of flights, but no attempt to reduce ticket prices or even change availability. For angry travellers, just a little less flight is the difference between going on holiday and not going on holiday.
This is the challenge of business/market fit that Toby talked about in in his piece about the evolution of business models - it’s not enough to have a product at a price that the market will pay (product/market fit), you need a business model that can deliver it consistently at that price.
It makes me wonder whether the recession may bring a raft of innovations from companies who decide against the ‘death by a thousand cuts’ approach to an original proposition and instead start afresh, developing new propositions that not only have product market fit, but business market fit too.
TOBY: What I find interesting is that when the market has competitive convergence it ends up only differentiating on price. The follow up in the examples shown are attempts to maintain the margins against rising prices. The service I used to get implicitly built in is now an add on or has disappeared.
For businesses it may be about smarter tiering (the forever dream of price differentiating the market), or different offers for different folks, a bit like IHG do with Hotel Indigo, Crowne Plaza, Holiday Inn, etc. Or about competing along different vectors so you aren’t price comparable. Trader Joes has the highest grocery sales per square foot as a chain by having an excellent service and a very different proposition.
To pick up on Tom’s point about business models, I think there is a lot in working out the Venn diagram that adds value to consumer and to the business. My favourite example was Tesco doing cashback. Tescos had a significant cost of cash collection from each supermarket at the end of the day. By introducing cashback consumers were able to avoid an extra trip to a cash machine, and Tescos saved a ton on cash collection. My hunch would be leaning into the customer dissatisfaction and upping the service in smart ways is a really strong brand builder vs going with the general impoverishment of service.
TOBY: This article picks up some of the points from the previous, but makes the stronger view on whether this is actually any good for society. It looks at the plight of the poorer members of society vs another hyped up financial bubble.The author asks some important questions of what we should be asking of technology, and whether this tech wet dream distraction is anything more than a pointless bubble and uses the financial analysis to highlight the strong differences between the value of the internet 10 years in vs these technologies
A parallel argument in the vein of Carlota Perez (“Technology Revolutions and Financial Capital “ published in 2002) would be that this is the necessary hype (financial capital) that lays the infrastructure for the next thing, like the internet bubble which led to the laying down of broadband that drove web 2.0 (production capital).
TOM: This is an important, but fairly depressing read! It certainly lays bare the difference between economies of last century where growth and progress came from businesses that made and sold ‘things’ and the world we find ourselves in today, where much of the airtime is given to businesses that sell ‘ideas’ and we reward them with gigantic valuations based on hope and promises (and some might say greed), not profit.
But this is also the story of us. We are storytelling creatures. Our ability to tell stories is what sets us apart from other species, it is how we developed culture, built cities and societies, created the inventions that have transformed human life and this planet (The brilliant Sapiens by Yuval Noah Harari is a must read on this).
More presciently: capitalism is built on stories - IPOs are simply stories about the future that seek to persuade people to take a risk in pursuit of a fair reward. So we must believe that this is a crisis of narrative, and it will take a reset of narrative to fix it, focused on where real, life-changing, sustainable value lies; how we should measure it and what the fair rewards should be.
TOM: The right to repair movement is cool and building momentum - from iPhones to cars. You could read this story through the lens of the toxic consequences of focusing on customer lifetime value in all the wrong ways… finding inventive ways to tie-in consumers to product updates and service bundles that are inescapable.
But it’s also interesting as a reflection on the evolution of business models and the challenges of adapting from one to the other, or even to trying to run them concurrently. I see in this example the tangled threads of traditional manufacturing and product-focused businesses (where the initial purchase prices are higher and profits come from single purchases) and newer, ‘as a service’ business model where the offer is still a physical product, but the initial purchase is lower and profits come from downstream purchases of add-ons and maintenance.
It’s amazing that GM and John Deere have both argued in court that a customer doesn’t technically even own their car or tractor, because the software inside it is licensed, not sold!
I wonder (and hope) whether this demand from consumers for choice and competitive pricing for repairs is just one signal in a broader reset in consumer perceptions of value, where freemium no longer has the allure that it once did, and where disposable is an increasingly dirty word.
TOBY: Right to repair is just a good thing, and great to see businesses like Dixons in the UK embracing this - little known fact is they have the largest repair centre in Europe. This sits on top of a lot of other signals about waste and recycling. The examples given point to a failure to read the customer. They are just predatory lock ins that benefit the business and are transparently venal, offering no value or negative value to the customer. Great businesses would construct offers and models that solve for this before government steps in to legislate (the solution offered in the article) - and there are some interesting examples out there, the ever present Patagonia, Nudie Jeans, Ikea and its second hand furniture approach and so on. Help the customer, help the business, help the planet, it just requires a bit more thinking and a longer term view.
TOBY: I enjoyed this article a lot. Listening and curiosity are both in such short supply (the crypto talk is one of extreme sides not seeking any kind of shared understanding) and are such a necessary part of innovation (don't just listen to the customer get behind to what they mean - What If had some beautiful tools for this) and strategy (spot the causes behind the symptoms). It is also very 10000 and 2, find meaning in the detail. I love his point about reality having a lot of detail. For a business it is so easy to accumulate clumps of data points as seemingly similar and miss out on the rich divergence of the detail. Finally it just reinforces Tom’s point about the importance of curiosity.
TOM: I really like this article, it reminded me that great listening and great curiosity isn’t about putting yourself out there like a sponge and soaking up any old thing, then squeezing it out into your mental bucket. Curiosity is about Finding Stuff Out. That’s probably the root of what I was getting at in good curiosity, bad curiosity. Good curiosity finds stuff out, and in finding something out, it opens up another door, of more stuff to find out - it’s a scavenger hunt, except one where you often don’t quite know what the final prize will be.
TOM: I *think* this is an interesting example of a journey from problem/market fit to product/market fit. The first stage, the problem/market fit, is probably a mix of climate change and cost - most rational people accept that we will need to change our consumption habits if we are to avoid the worst scenarios of a heating world. Eating less meat is a part of that, and meat becoming more costly is a related part. So what’s the product/market fit? Edible insects have been novelty items for ages - niche at best, at least in the western world. A quick browse of Aspire Food Group's website suggests that they spent several years looking for product/market fit in the human consumption market. They probably discovered that outside of a dedicated group of early adopters, most people will try a cricket burger once, then move on. This then looks like a really smart pivot into the pet food market for a number of reasons:
It recognises that the mass market is for bulk protein, not gastronomy
It targets a purchaser who’s not the final consumer and so less squeamish (as a dog owner, I really care about what my pet eats, but it’s certainly a mix of bulk, unrecognisable kibble and more human-friendly treats (aka leftovers)
It passes the requirement for any marketing spend to overcome any remaining ‘ickyness’ factor down the chain to the consumer-facing end product.
On a fundamental impact level, selling a few niche cricket tapas snacks in the speciality aisle isn’t going to make a dent in the fight against climate change, but going after the $34bn pet food market is real ambition.
TOBY: It is an interesting case, as this is definitely a technology in search of a market. The sense I get is they saw a technology, and then looked at the first version of the problem (cricket food to people) and realised just how hard that was. It is a nice to imagine reframe where they went “well its really about people buying less meat not eating” , which took them to pet food. The reflections on raw inputs (cost, efficiency) plus the massively reduced cycle to pet food (how long it takes to get to a fully grown cricket vs a cow) suggest a much cheaper production, which will help with the cut through. Cheaper and better for the planet, fingers crossed on this one.
That’s it for this edition, thanks for reading, if you know someone who you think would enjoy it, please do us a favour and forward it.
Toby and Tom
Thanks for reading Ten thousand and two! Subscribe for free to receive new posts.