My recent reading/listening list has been almost entirely:
*Biographies of successful businessmen
*Biographies of military leaders and statesmen
*Practical business reading with case studies mixed in
...and that's about it.
Following those three topics exclusively, I've come to a conclusion.
You're almost required to have the distribution and marketing to make money.
Or rather, the distribution/marketing mix will usually capture most of the economic value in the transaction, if there's any substitutes at all for your product.
Distribution+Marketing without the product is okay and you can do well. Product without distribution/marketing is in a really vulnerable position.
The most thriving companies frequently have all three: Coca-Cola, Toyota, Nike, Starbucks... solid marketing base, control their product, and control enough of their distribution to get it their own way.
Take a hypothetical industry with five major product suppliers, and 3 major distribution channels. I'd rather own one of the distribution channels than one of the product suppliers.
But that's not sexy! Nobody lionizes distributors. There's a mythical quality to people who innovate and make great products. Really edgy and interesting marketing gets a nod too. But plain ol' fashioned "get it seen everywhere" marketing plus owning or controlling the distribution channel? No lionizing. No celebration.
It's the same in military campaigns and statesmanship. They don't build statues of consolidators... even though intelligently consolidating is crucial to having a lasting impact on the world.
Anyways. By all means, build great products. Totally unique products with no substitution, if you can. But some industries, that's not quite possible. In those industries, make damn sure you've got a good grasp on marketing and distribution channels. Great product + you don't have the marketing and distribution = vulnerable to getting your clock cleaned at any given time.
Owning the marketing and distribution?
Not sexy. But very profitable. Study, understand, and own or otherwise influence/control the marketing and distribution. That's where the economic value is at.
I think you're spot on with your choice in owning distribution rather than production. That's exactly why Wal-Mart became the behemoth it did. It's why Amazon and Zappos were able to corner such huge marketplaces so quickly. They were the first/best at creating the most efficient distribution possible.
Very good point, and a very common example is the millions of companies with websites out there that rely on Google as their sole source of traffic and customers (even worse if they are relying on organic rankings only). The product is theirs, and they have a superficial control of the marketing through 'on-site' seo, but if Google decides to pull the plug and do something crazy like change their algorithm kicking said companies results out of the listings - that business is in trouble, their distribution channel will bite them in the ass.
I've been thinking a lot about SEO strategy recently for a site I work on, hence the strange point.
Anyways, care to share some "Biographies of successful businessmen" and "Biographies of military leaders and statesmen"?
I'm always interested in reading about tactical geniuses like Napoleon Bonaparte and applying their thoughts to business and personal development.
Maybe that explains why there has been so much growth in the software industry, particular on the Internet. Distribution costs basically went down to hundredths of pennies. There are open source projects that lets you set up a basic distribution hub for free. All you need is a server, those costs are always coming down. People could effectively control product and distribution at the same time. Marketing is the weak pillar though (i.e. how do you convince somebody of value without them being able to *see* or *hold* the product beforehand), which might be why you hear stories about good Internet marketers poppin' bottles.
Question from a reader:
how important is having a business license and a business plan to running a successful website that makes money? Is it more important then having a business idea and a product.
Business plan: 1/10, maybe 2/10
"History repeats itself, and that's one of the things wrong with history." Clarence Darrow
This is a familiar quote to us all, but how often do you actually stop and wonder what we, as a culture or as a nation, are repeating? As a self proclaimed history nerd, I like to look back over history and wonder what has happened before and what are the correlations to what we are seeing, living, experiencing today.
The United States is often seen as the greatest nation since what nation? Rome. Before Rome, there were several kingdoms that had practiced domination of the region. There was only one that was as long lasting as Rome. As a nation, Rome was founded on the republic ideology and with this as its backbone, it brought in a new era of innovation, economic progress, and expansion. This was a country that lasted longer than any other kingdom did at that point in history. So why did it fall?
Like Rome, the United States has held a similar torch of achievement until recently. Unfortunately, there are a lot of similarities between where the nation of Rome found itself prior to its great demise and where we, as a nation, find ourselves. Here are just a couple of similarities: economic mismanagement, societal entitlement, decay in the military strength, influx of varying cancers. For this post, let's look at the economic mismanagement and societal entitlement.