The E-commerce Leader

7 Moats of Defensibility Part 2 of 2
[00:00:00]Michael Veazey: talking then of having lists of people in general, which I suppose includes followers on YouTube, what have you, how does that fit into your business and your client’s businesses.
Jason Miles: Yeah, I mean, it’s a great question. A lot of people ask, when I talk about this in the seven modes list, I talk about data being a method of defensibility.
And, um, you know, when you think about what you’re doing as a business owner, then you have, let’s say just an email list. You start with a hundred people. Let’s say, and you know, that seems like an achievable goal for anyone is to say, okay, I’m going to get to a hundred people on a [00:01:00] newsletter list. Um, you, what you’re doing is you’re aggregating data that you then have the right to use legally.
And when you get a customer’s contact information, you have opportunity to do subsequent marketing. And that’s obviously what many Amazon sellers get frustrated with over time, is, I can’t con, you know, contact customers. I can, can’t communicate. There’s a firewall there. Um, and so when you don’t have that firewall there, it.
You know, when you add that level of, uh, defensibility into your own business system where you have the data, you have a really, really powerful, uh, you know. Opportunity, and it’s a sword and a shield. It’s, you know, when I talk a lot about the nine mountains of traffic, I talk about it being the proactive outreach step, the sword, you know?
But the shield concept is just as powerful. If, let’s say you have a new upstart competitor who comes after you, but they’ve got a list of a hundred people and you’ve got a list of a hundred thousand people. Then you [00:02:00] talk to a lot more people about whatever they’re doing, and you know, you just, you have a layer of defensibility because you’ve got more information.
Obviously in the last few years, collecting phone numbers has been all the rage so that you can do text-based marketing. And that’s just another layer of data that, but in my mind, it all goes into this idea that data is a, it’s a sword and shield, but it gives you the opportunity for defensive, uh, you know, approaches to come.
Pete with, uh, you know, people who are coming after your business and trying to win the day and then convert all your customers into their own. And a data can be really, really powerful tool in that regard.
Michael Veazey: And it sounds like what you’re saying with data is data plus permission to use it. Is that right?
That’s the distinction.
Jason Miles: Of course. Legally, legally, you know, and so that means every time, just one little example, you have a Shopify site. If you have it set up in properly, you’ll have people checking out, uh, anonymous and [00:03:00] no methodology for them joining your newsletter list and opting into your marketing.
Well, there’s, you, you’ve just missed the opportunity. So, you know, literally yesterday I was helping a client set up his loyalty program. And so now people can accept, um, that can, can create an account and. Join his loyalty program. Well, he’s just added another layer of data that he has the right to then do creative marketing with.
Um, yeah, those are the examples. Yeah.
Michael Veazey: Excellent. So that does make sense. I just want to, one tiny point to that is that it is possible. You’re quite like the Amazon sellers are frustrated with this all the time and there is a kind of firewall and you just have to come up with imaginative ways to work around that.
I mean, one thing for example, is. But you can drive Facebook traffic and then capture that and then send them on to Amazon. And then of course you have starting to create your own, your own. Yes, exactly. Data and community potentially as well, if you go further with it. So it is starting to happen. Most people are a bit slow adopters with this and I would really encourage people to do it, but [00:04:00] yeah, it can be done.
Jason Miles: Yeah. Let me ask you about this next one then. The, and that’s the culture of innovation and the idea that, um, you know, there’s a lot of famous quotes about this. Um, the idea that, uh, you know, Ray Wayne Gretzky I think was famous for saying, I, you know, you don’t skate to where the puck is. You skate to where the puck is going to be.
And the idea that, you know, if you do have competitors who are coming after you by copying your existing product, in a lot of ways, the only way around that is. Innovate new products that they don’t know you’re doing. And then you’ve got the secret stealth lab of awesomeness that you reveal to the world, and your competition says Ark crud.
Now they’ve won up dust again. And if you can do that over and over, I think there’s power there. What are your thoughts on how that plays out in the Amazon space and in your 10 K collective group? Have you seen people who have done good job at innovating constantly,
Michael Veazey: constantly. Maybe not. I mean, it’s interesting.
I mean, first of all, just to clarify for buddy’s listeners, Wayne [00:05:00] Gretzky, who is presumably an ice hockey player, right? Yeah. So that’s where the puck is. We don’t. We don’t do a lot of skating in this country when we do, we don’t. The parks belong in the hockey field, which is a very British tradition, so, okay.
Yeah. So, so hockey metaphor, um, which makes a lot of sense. So Amazon sellers have a bad habit of innovating in the sense of hacking out the algorithm in a sort of very tactical way and thinking they’re innovating. But that has a very short life expectancy. So I think that is now dying a death. And I’m glad of that cause it gets very exhausting to discuss it all and figure it all out.
But one or two of the things I’ve mentioned already. I mean, I think licensing is relatively innovative for Amazon sellers, even though it’s been around for a long time. As a business model, as I say, one of the members is doing that and doing, really looking, really set to be very good because it’s in a certain type of product category that’s been hit by
We’ll have to see the proof down the line. I’ve mentioned the Facebook group and somebody else is driving Facebook traffic. So advertising traffic to, um, sign up for many chats. And [00:06:00] then following up with them. And one of the innovative things he’s doing is giving them a cheaper product in order to, you know, basically in recompense for review.
So it’s against terms of service, but it’s outside the Amazon ecosystem so they can’t see it. So those are a couple of examples that spring to mind. So people are doing it. It’s not yet very widespread. But as you say, is really important. Um,
Jason Miles: I liked that the innovation in the marketing techniques of course, is something that we, I guess we all do that.
Yeah. I hadn’t thought of it that way. I was thinking more product innovation. But you’re right in pointing out that many times, uh, if you, if you don’t innovate in product or you have a commoditized product, and the culture of innovation applied to the marketing techniques is what makes the, you know, the leader become the leader over time.
I mean, the best marketer wins frequently. Um, and I, that’s interesting. Yeah,
Michael Veazey: you’re right. But actually you put your finger on the thing, which I think generally I see less work going into because it is a fantastic amount of work, I guess. At least that’s my perception. I mean, let’s see your thoughts on this, but my [00:07:00] perception is that developing a product, even if you’ve got an existing product and you’re developing from that is a massive amount of money, time and effort.
So tacking on a bit of Facebook marketing or something is, is relative to that, a pretty small amount of effort. I mean, does that sound true to you?
Jason Miles: Yeah, I think so. You know the, but the thing about it is there’s a real dance that we all have to do, which is the investment of time and energy into a future project.
And the frequently the, there are examples where a long, long process of innovation and work. product and it becomes the sensation, the, the biggest thing ever. The, the, you know, the award winning products that no one else can, you can top, okay. Um, that’s the best case outcome of the long, you know, the, the slow growth or slow, methodical.
Work on a product. The opposite obviously happens as well, where [00:08:00] somebody toiled away for three, four, five years on an idea, and it never comes to fruition. There is no, no good outcome and those are painful, uh, you know, days. But I, that’s the dance. How do we as entrepreneurs know how, how long and how hard to invest into a new.
Innovative concept or idea before we test it. And, you know, there’s been, in the last five years, 10 years, this culture in internet world of, uh, go fast and break things. You know, I’m Reid Hoffman’s famous and if, you know, he is, he’s really genius guy. LinkedIn, uh, founder and co founder of PayPal. He’s, uh, is famous quote is, if your first version of your product isn’t embarrassing.
You’ve waited too long to launch it. Now there’s an artist would never. Believe that’s true. An artist would argue the other side of the point, and so there’s, yeah, there’s, there’s hard work to do there. And I, you know, I don’t know. Sure. There’s a short, easy answer either way. [00:09:00] If the ultimate thing is, does your product hit the market and can you figure out a way to make.
It works at volume. And if, if true, if that’s true, if you can get velocity of sales, then you rewrite history and whatever you did to get there was the right thing. You know? If you asked it, what’s the right thing? If you went slow, it was the right fast. So.
Michael Veazey: Yeah, you’re right. There is a survivorship bias in a lot of these tales, whether it be about some big famous corporate examples, or even just the people that you know, who’ve killed it, killed it on Amazon or Shopify.
But I would just reference a couple of obvious, um, reference points, which is number one, the lean startup by Eric Reese, which I think you and I both read and found a bit hard work, but I think it’s worth revisiting. The concepts behind these things. Um, Ash has done a slightly more cut down version, I think, called running lean, which is by no means intellectually easy to read, but interesting.
And the other one is, of course, Jim Collins in there. I think it’s great by choice where he did massive studies of these huge corporate [00:10:00] giants. Um. And so therefore, they’re not directly applicable to six, seven, eight figure sellers, but all businesses. But what he did pull out of that is that a strategy of fire bullets, then fire cannonballs.
So exactly that question of innovation, you know, not putting five years into something that sends out to fail. Um, but not innovating at all being another issue. So those I think are very worth reading for anyone who’s read them or rereading. That would be the main thing that strikes me.
Jason Miles: I know our conversations.
I know you’ve mentioned that there, you know, we’ve brainstormed this list a little bit and you’ve talked about other economic modes that, you know, like economic, financial pricing type ideas that immediately come to your mind in terms of other opportunities to be, uh, you know, defensive with your work.
What are your thoughts on that, uh, beyond the list of seven here? Things that come to your mind.
Michael Veazey: Yeah. Well, I mean, some obvious, uh, things are economic moats, like having more money. Is it a sad thing to just have to talk about, because obviously a lot of us don’t [00:11:00] have, you know, millions and millions to invest in things, and some people do, not many, but I’ve stumbled across the odd person who has literally hundreds of thousands of pounds to invest in no expertise, but.
Yeah. How do we deal with that? I mean, cause obviously you’re going up against a Walmart or a Tesco’s in the UK and they’re selling an item. They have so much money, we can’t compete. So yeah. What’s, what’s that all about, the economic mate
Jason Miles: that, I mean, I think the interesting piece there is, um, I think that’s why probably the concept of guerrilla marketing was born.
Who’s the guy? Jay? What’s his name? Jay. Not Abraham, not Jay Levinson, for goodness sakes, guerrilla marketing. Um, I can’t remember the author’s name, but it’s a famous set of books. Um, and I think that’s the reason he invented the idea was guerrilla marketing is what you do when you don’t have any money.
Like you’re competing against a, you know, a giant, giant enemy. And I, you know, their strategies there is that you can play out one example that comes to my mind, cause I’m. Um, uh, locally here with [00:12:00] Microsoft close by, I remember it years ago now. Uh, Microsoft launched its Encarta. A CD rom based encyclopedia.
And this is an interesting little story. I heard the math on this and I think it was in either the book by William Poundstone, priceless. The myth of fair value, or it was a, maybe in free, the future of a radical price by, um. Bye. Goodness gracious. Um, it’s cool. We’ll, we’ll look it up. And Chris Anderson.
Chris Anderson.
Michael Veazey: Yeah. Yeah.
Jason Miles: So, so the hit this Mark, this example, uh, of namesake and in England, encyclopedia Britannica was the original. Uh, you know, item or that was being sold, I believe at $600 million a year door to door sales in the United States, something like that. Back in the olden days, the door to door salesman would knock on your door and they’d have a suitcase full of encyclopedia Britannica books and asked to come in.
And it was very awkward. And they would basically sell you on the idea of having a set of encyclopedias in your [00:13:00] house. And for middle class and upper class families, they all had encyclopedia Britannica sets. $600 million a year business and then Microsoft, when it launched in Carta, they vaporize that business, destroyed it, and they made it about a hundred million dollar a year line of business from Microsoft, a CD rom driven.
Uh, you know, product now a hundred million dollars a year. It’s still interesting, but they had destroyed encyclopedia Britannica, door to door sales, and then what? We all know what happened next? We’re familiar. Wikipedia came along. Jimmy Wales created Wikipedia. He vaporized it even more and made it basically public good.
He made Wikipedia sort of just out there, and it’s now funded by donors and he has good backers. And I think Jimmy Wales, I heard somewhere has worth like $22 million. So he’s not poor. No. You know, I mean, but, but he created this, this economic moat around the idea of, uh, encyclopedia content. [00:14:00] It’s unbeatable.
And you know, nobody’s gonna, nobody’s going to top that cause it’s free. And so I think there’s a lot of interesting concepts there in terms of what you can do it with economics, price points and that kind of thing of your business. Yeah.
Michael Veazey: Yeah. I’m going to, in a way, we have to be scrappy and use that guerrilla marketing book.
What we’ll look up folks, by the way, who wrote it, and we’ll put it in the show notes, which will as [email protected] Duke had down there where we have various things including, uh, books. That Jason’s just launched as well. So do check that out at the block. Um, so I’ve just realized, of course we missed out on one of the, um, the, the final piece, which is the high switching costs, which is quite an interesting topic.
I’m not sure that anyone really thinks about that at all. So to, can you give an example of any of your clients or in your own businesses where you, you’ve managed to innovate. Um, sort of high switching costs. And can you just elaborate on what you mean by that as well?
Jason Miles: Sure. Yeah. I mean, I think the interesting stories there are, uh, related to creating a product concept that’s so [00:15:00] holistic.
No, the name Steve jobs is famous for calling their idea of a walled garden. It’s so holistic that you get people into your way of working or with your product or your system, that that’s just not. It’s not relatively easy for them to back out of the deal or, and they don’t want to, I mean, a best case, they’re, they’re happy inside your walled garden.
Um, you know, I’m curious. Coffee company is a good example. Green mountain coffee. If you’re familiar with Michael Green mountain household, brand name in England at this point. And
Michael Veazey: I don’t think it is. I’m not, I’m not very good at shopping cause my wife is like the queen of shopping. So she buys all the household goods like that.
So
Jason Miles: you have. You have a traditional coffee pot, like eight cups, or do you have like a K-cup system?
Michael Veazey: I don’t even know what that is. I think that’s more of an American thing. And we have a cafeteria, a French press, as you would call it, or cafeteria hours, I would call it. Yeah.
Jason Miles: Oh, so let me describe the story.
Sorry. It’s a, an maybe American centric story more, but, um, there was a tiny little coffee company in Colorado, I believe in it, called green mountain coffee. And you know, [00:16:00] coffee is a commoditized system. Absolutely brutal. I launched the three esters farm coffee brand to help support my charity at one point and realized how hard it was to rank on Amazon with coffee and, uh, it’s brutal.
Yeah. So this little company is like, what do they do? Well, they had this technology that they had seen or kind of created, if I get the story right, at least that was a K-cups, which has little plastic cups, single serve cups that you insert into a machine and the machine is sold and to support the K-cups.
Well, they licensed that and had, I believe, a 17 year patent on the deal. And, um, it became so popular. They’ve literally become a massive, massive company. They, um, now it’s dr pepper and Keurig that are together, the two brands. And, uh, they went from zero to just absolutely dominant position by having this, you know, high switching costs concept baked into their coffee [00:17:00] delivery.
And, um, and it’s a, it’s an interesting tale. I mean, uh, you know, it’s, it. There’s a lot to unpack there, I guess is what I could say. Yeah.
Michael Veazey: Yeah. Well, that’s very interesting. I mean, what, what’s so interesting about that, that, um, in a very, what’s the word? Uh, it’s an a brutal commoditized product like coffee, which is literally a commodity in the stock market.
You can buy and sell it. So that’s a sign that it’s really truly a commodity, right? That you do not want to be in it. They, they basically. Innovative on the delivery system for it, if you like. And that’s an extremely American thing, that that’s driven by a sort of convenience. And that’s, that’s been a trend in American consumer products for well over a hundred years, right?
The creation of fridges and you know, anything you like, it’s, it’s an American invention when you guys are famous for that. So that’s a really interesting, and what’s, what’s so interesting as well, we were talking earlier about the license, sort of bringing it back ground almost to what we were talking about at the beginning that licensing.
We talked about licensing as a form of moat for people to have a quasar monopoly if you are the licensee, but if you’re a [00:18:00] licensed or I like these guys are, then you’ve not only, not only if they created high switching costs, but they’ve created a sellable asset, which is in the intellectual property arena, which is just genius because I guess they don’t have to manufacture K cups anymore to make money from it.
Yeah. They just collect royalty checks, I’m guessing. So genius example, I really like it. And. And my, my home example, which I lo a lot less about is just simply Gillette, which I think, um, Seth Godin mentioned in akimbo. That’s a really nice podcast. Just a fantastic, I really liked Seth Godin, like everyone, but I think it, his podcast, by the way, is somebody who best content.
Um, I love podcasts. That’s why we’re doing when I guess, but he talks about Gillette and let’s, you know, you’ve got these raises that they, they started, he would a certain price, but then you will start with the Gillette system. And I’m personally use them and you know, we spend a fortune on those. But I liked the feel of the system.
I don’t want to have to change over. So that’s another classic example, which if we can innovate it in a way B, be part of that. We’ve got [00:19:00] it made really. So I think we’ve covered all of those things. In in some detail. Would you mind just summarizing those seven moats again, cause we’ve gotten over a lot of water has gone under the bridge since we started this conversation, I
Jason Miles: think.
Yeah. And let’s bring it home here in terms of how to actionably, you know, kind of go forward if you’re listening to this, what, let’s say the question is what do you do with this content and here’s some suggestions. So let me, let me summarize the seven modes again and then give just a final kind of suggestion for how to use this content.
The first one is a profitable in-demand product. Second, a high functioning brand. The third is a tribe of true believers, um, loyal followers. The fourth is channel mastery or channel dominance. The fifth is data and, uh, you know, customer information. Uh, the sixth is a high switching costs or a sticky. A product concept.
The seventh is an innovation of culture. Sorry, a culture of innovation. And uh, you know, uh, a system inside your business that makes [00:20:00] products and the idea that you’re, you’re not just a one hit wonder a one product company. You’ve got a culture of creating the next thing your customers are gonna want. So those are the seven.
Let me just suggest one, a simple idea, which is, use this as a checklist. Uh, ask yourself the question, do my business, uh, products or systems support any of these concepts? Or can I apply any of these concepts to my existing business? Or do I need to pivot and, uh, and redefine, uh, how I’m working to create a more defensible longterm, you know, um, business model idea that’s safe, that protects me from competition and from becoming irrelevant too.
My ideal customers. Yeah.
Michael Veazey: Yeah, great idea. And I liked the fact that although this is a strategy podcast, it’s still actionable. You just need to, it might take you longer to action it, but I think having it as a checklist is an excellent idea. May I just add in another thought though, which is once you’ve gone through the checklist, I mean, I would just pick the lowest [00:21:00] hanging fruit.
I mean, if you realize that you actually got something of a tribe built, that you’ve been a bit slapdash about how you built it and he bought. Maybe an L, a lot of people have an email list of several thousand people of, even if they’re on Amazon, you can do email append services pretty cheaply, about nine 10 cents per email address.
Quite a lot of us have got quite big email lists that we’ve neglected and not really nurtured. So that could be, for example, low hanging fruit. So I would suggest once you’ve done your audit, go take action on it as well, and then you’ll really be getting value.
Jason Miles: Absolutely. And of course you’re listening to this podcast and we would love for you to help us create a defensible.
System here, which means we need subscribers, man. We need subscribers and we need reviews. And, uh, we’d love to have you download a few more episodes for your next drive to work or drive home or trip or whatever. Uh, we’re really, really excited about the opportunity to serve our little but growing community through the e-commerce leader.
And, uh, so that would be my call to action as well, is that, do us a favor, subscribe to the show. And leave us a [00:22:00] review.
Michael Veazey: Absolutely. Amen to that. And listen. Great, great topic. We’ve got some other things to deep dive into, but for the moment, I think we got plenty for people to chew on, so thanks very much for your seven moats.
Jason Miles: Absolutely. Thanks man.