The Weekly: Edition #17 - November 1, 2019
Joel Spoelsky on Strategy: Letters I, II, III, IV, V, and VI
+ While these letters were written in the early 2000's, they provide an insightful look and an insider's opinion into the history of the computing industry in the early years. In addition, there are several timeless strategic principles within the letter series that are applicable to all businesses, regardless of industry.
1. Is your business a Ben and Jerry's or an Amazon? All businesses' strategy for growth will include a firm understanding of whether your industry will allow for slow, steady, profitable growth to succeed over the long run OR will require significant amounts of capital up front to reach a sustainable scale. Spoelsky's first letter articulates how to know whether your business will be a 'Ben and Jerry's' or an 'Amazon'.
2. Understand the microeconomics of your industry. In letter V Spoelsky details the strategic reasoning behind giving a product away to generate long-term service opportunities. While this may apply more to the software industry where the marginal cost to produce the next product is zero, there are certainly business model implications for physical product companies selling goods at cost to generate huge potential service revenue opportunities down the road.
3. Identify barriers to entry for new products and services in your industry, then solve them. Ensure your products and services are backwards-compatible with existing products and services in the industry to ensure ease-of-transition for new customers. Think of this as the solution to your competitors' switching costs - make it easy for your potential customers! "The only strategy in getting people to switch to your product is to eliminate barriers."
How Pizza Hut stopped innovating on its pizzas and fell behind Domino's (The Hustle)
+ Two weeks ago, we shared a Bloomberg piece detailing the strategy behind Domino's rise in the pizza market. The story wouldn't be complete without highlighting its competitor's missteps.
The leading indicator of remodeling activity (LIRA) is pointing to a slow down in 2020 (Joint Center for Housing Studies at Harvard)
+ “Continued weakness in existing home sales and new construction will lead to sluggish remodeling activity next year,” says Chris Herbert, Managing Director of the Joint Center for Housing Studies. “Slowdowns in other key indicators of improvement spending—project permitting, sales of building materials, and home prices—also suggest the remodeling market may be reaching a turning point.”
How much longer can the debt-burdened consumer prop up the American economy? (13D Research)
+ "If the American consumer is Atlas — holding up “the greatest economy ever” — his legs are weakening under the strain."
Negative interest rates are destructive but profitable (Integrating Investor)
+ An interesting view and exploration of what negative interest rates mean for society and workers in general as global interest rates fall.
Amazon is expanding free grocery delivery to 2,000+ cities for prime members (Amazon DayOne)
+ We've written extensively about Amazon and their operational strategies, and this expansion of their capabilities continues to illustrate the degree to which they will push the envelope to serve their customers. Small businesses will continue to have to adapt around Amazon's retail strategy to remain relevant in today's instantaneously connected world.
Nothing this week…
Why is a secretive billionaire buying up the Cayman Islands? (New York Times)
+ "Mr. Dart lives on Seven Mile Beach, in an old hotel — the entire hotel — once known as the West Indian Club. He acquired the property in 1994 after renouncing his United States citizenship, a tax dodge so audacious it inspired federal legislation. Though Cayman was initially a refuge for the financier, Mr. Dart, who is thought to be 64, has taken to his adopted home with zeal. With his fortune and his company, Dart Enterprises, he has increasingly come to define the islands’ future."
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