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Except 2: How Portable are On-Demand Taxi Services Such as Uber and Lyft?
The two largest U.S.-based on-demand transportation companies, Lyft and Uber, are based in
San Francisco, the perfect launching pad for that business model. To the extent that other cities
characteristics deviate from those of San Francisco, the portability of progressive taxi services
becomes less certain.
San Francisco resembles a custom built stage for casting unregulated livery services in the most
favorable light. San Francisco has a very young and tech savvy population which generally ranks
environmental stewardship above auto ownership. In other words, San Francisco boasts the ideal
demographic for embracing taxi apps. The prohibitive expenses associated with parking and auto
insurance renders on-demand taxi services a valuable proposition while San Franciscos hilly
terrain discourages walking and bicycle riding.
Many large cities have centralized all of their public transportation offerings under one
management authority, such as New York Citys Metropolitan Transportation Authority. In
contrast, San Francisco probably has the worlds most balkanized transportation system with six
or seven distinct bodies. The result of these transportation agencies having largely failedin
terms of syncing the schedules of various modes and lines of transportation as well as granting
riders discounts on integrated journeysis that end-to-end travel in San Francisco is
uncoordinated. On top of that, at 8.1 miles per hour, San Franciscos light rail system, which
feeds in the metro service, has the infamous distinction of being the slowest in the U.S. The
problems associated with the halting tempo of parts of San Franciscos disjointed transportation
network are compounded by the fact that hundreds of thousands of San Franciscos commuters
are required to work on East Coast time. Those required to arrive at their offices extremely early
in the morningmany of those whose jobs are tied to the opening of the New York Stock
Exchange have to arrive at their desks no later than 5:30 am local timeare very receptive to
alternative transportation solutions
Excerpt 3: Antilog Analysis and Connecting the Cement and Bridal Industries
Lets say that you are considering backing an entrepreneur who wants to rapidly expand his
fledgling chain of hot chocolate cafes. This entrepreneur is using Starbucks as his analog. His
analysis is thorough as it runs the gamut from real estate strategy, customer profiles, price points,
supply chain issues, employee training, marketing and more. After reading this entrepreneurs
report, you may be prepared to invest in his chain of hot chocolate cafes. While the analog
analysis is necessary, it is not sufficient. The analog analysis should be accompanied by antilog
analysis, which in this example, would compare the hot chocolate shops with chains of cafs that
failed. Taking a second look at the hot chocolate chain could cause you to come to the
conclusion that the entrepreneurs shops and expansion strategy more closely resemble the hot
beverage chains that failed.
Decision makers should consider the frequency at which companies with a winning concept elect
not to promote that concept. Lets say that you are a business development executive employed
by Dangote Cement, the leading cement producer in Nigeria. You want to expand your
companys revenues. You conduct some research into best marketing practices that some of the
worlds most successful cement companies have undertaken to grow their revenues. During the
course of this research, you learn that one of the initiatives that Monterey, Mexico-based Cemex
took earlier in its history was to market cement to newlyweds. Cemex realized that most newlymarried Mexican couples could not afford to move out of their parents homes, but still craved
privacy. Millions of Mexicans solved this dilemma by building additional rooms onto their
parents houses.
So, if you were a manager at Dangote, and you were looking for marketing angles and revenue
expansion opportunities, you might try to emulate Cemexs success by redirecting part of
Dangotes marketing budget to wedding planners and bridal stores. So far, this seems reasonable
given the resemblance of the financial position and living preferences of recently betrothed
Mexican couples to Nigerian newlyweds.
However, before you redirect your marketing budget to wedding planners and bridal magazines,
consider just one more thing. Why havent cement companies in other developing countries
pursued cement sales to newly-married couples? Surely, many executives at cement companies
are aware of Cemexs success in this regard. When I wrote a patent valuation report for a large
Thai cement company, I brought the Cemex-bridal issue to that firms attention but those
executives did not show any interest in pursuing a similar strategy.1 Cemex itself has been a
serial acquiror of cement operators in developing countries. In many of its related press releases,
During the lunches and dinners that my hosts treated me to, several of the twenty-something
executives at the Thai cement company mentioned in passing that they lived with their parents.
My thinking was that if these successful people reside with their parents, such living
arrangements must be common in Thailand.
1
Cemex stated that it will boost the acquirees operations by sharing its managerial acumen.
However, as far as I can tell, Cemex has not marketed its cement to newlyweds in other
countries.
The point is that it is an error to use as an analog a strategy that was once successful but never
replicated elsewhere. There is a stronger argument for the Dangote cement executive to refrain
from marketing cement to newly-married couples than to pursue such a strategy.
Gedankenexperiment Lets say that you would like to determine the extent to which people
are reading books from electronic readers. Maybe you are at a caf or airport lounge. As you are
getting your coffee, you notice that some ten people are reading from Kindles or Nooks. All of a
sudden, there is an Internet outage. How many of those ten people are still reading from their
dedicated e-readers? If only two are, then eighty percent of people using e-readers are doing so
to access the Internet, not to read books.