Niche Down

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Niche Down Page 9

by Christopher Lochhead


  Stepping outside the weird, wonderful world of high tech, it’s not difficult to see how newsletter systems, artificial intelligence, video platforms and the like could help other niche-minded youpreneurs share their expertise with a much larger audience than they could ever imagine touching even just five years ago. This is setting the stage for a boom in niched-down services.

  “What this system is going to allow to happen is that you’re now able to find enough people for your individual quirky thing to make it a worthwhile endeavor for you because the data and the system is finding the individuals that are out there that want what you have and essentially connecting you to them,” Maney observes.

  Want to learn about more entrepreneurs who are already taking that idea to heart? Turn the page for the final chapter of Niche Down!

  * * *

  40The New Yorker, “How BlackBerry Fell,” Aug. 12, 2013.

  41“Apple celebrates 1 billion iPhones,” July 27, 2016.

  42The Huffington Post, “Justin Esch And Dave Lefkow, J&D’s Foods: “You Put Bacon Where?” March 16, 2012.

  43San Francisco Chronicle, “Jack O’Neill, 89, a surfing legend who endures,” May 27, 2012.

  44YouTube, “Jack O’Neill World Memorial Paddle Out,” July 12, 2017.

  45Legends & Losers, “Branding Icon: From Surf Bum To Business Pirate With Santa Cruz Legend Rich Novak,” March 1, 2018.

  46The Santa Cruz Sentinel, “NHS celebrates 40 years of skateboarding innovation and the creation of an industry,” Oct. 20, 2013.

  47“23 New Stem and Outdoor Badges Enrich Girl Scout Programming, Which Data Shows Helps Girls Excel In Life,” July 25, 2017.

  48Forbes,“How the Founder of GoldieBlox Is Creating The Next Generation Of Women In STEM,” Oct. 11, 2017.

  49Pew Research Center Internet & Technology research, “Social Media Fact Sheet,” Feb. 5, 2018.

  50New York Times, “Putting a Designer’s Polish on Ikea Products,” Oct. 2, 2017.

  51Legends & Losers, “Kevin Maney And The Power Of Being Unscaled,” March 28, 2018.

  52GigaOM, “Ben Thompson: The one-man blog isn’t dead, it’s better than ever,” Feb. 2, 2015.

  53Recode, “How Ben Thompson built Stratechery into a one-man publishing empire,” Feb. 14, 2017.

  5.

  IT TAKES COURAGE TO BE LEGENDARY

  “You have to illuminate that path forward, show people where we are going. [And] show us how to get there.”

  — Bill Walton, legendary NBA Hall of Famer and Emmy Award-winning sportscaster

  “To be yourself in a world that is constantly trying to make you something else is the greatest accomplishment.”

  — Ralph Waldo Emerson, legendary poet and champion of individualism

  Good News! A Niche-nado Is Coming!

  We’re not exactly in the business of making predictions, but as we write this final chapter, we’re eagerly comparing notes on where some of tomorrow’s legendary niches will swirl up or storm through the calm complacence of a mature, mild-mannered market segment. We see mega categories and whole industries ready for nichetastic fragmentation! And we’re excited to report that we see oodles of opportunity for those courageous enough to step forward.

  “I think that with a lot of things where scale isn’t as important and expertise really, really matters, that’s where [you’ll] see the niche-down opportunities becoming really prominent,” growth-strategy consultant Eddie Yoon (who contributed massively to this book!) observed during our discussion for this book.

  We couldn’t agree more.

  The sphere of management consulting, which is today a $250 billion industry, is one landscape we’ll be watching closely for legends-in-the-making. Heck, the industry is already ripe with examples of niche-down-success stories.

  Here’s just one of them: AlixPartners, founded in 1981 when the United States was floundering through the tail end of a recession. Jay Alix54 foresaw the niche need for a specialized sort of financial and executive consultant experienced in guiding companies through restructurings or bankruptcies. So, he set out to cultivate that skillset and establish a venture dedicated to that service.

  His namesake firm quickly became a highly sought-after ally for tough turnarounds — it was involved in the high-profile reorganizations of General Motors55, Enron and Kmart (among others). One of the company’s innovations was a fee structure tied to the success of the engagement — something that has now become a common practice across the industry. Another was AlixPartners’ strategy of embedding a senior manager with decision-making authority into the organization being turned around or sold off. The firm became adept at finding value in “failure.” AlixPartners has become so successful over its almost four decades of existence that every big consulting firm now offers similar services.

  That’s because every successful niche-down attracts imitators.

  We’d argue that the consulting field is ripe for even more category violence56 in the months and years ahead, thanks to lower-cost data-visualization technologies, the rise of cloud-computing services that allow individuals to share their ideas more freely, and artificial-intelligence software that helps with gathering an audience.

  All of these tools abet individual experts in “unscaling” themselves, as our friend Kevin Maney calls it. You can “go big” without having to crank up some massive-support organization or administrative network.

  And they are exactly the tools that were instrumental in the rise of the Stratechery newsletter, which we discussed in Chapter 4. “Modern technology makes it possible to become a personal enterprise again,” observes Yoon.

  You want to know another industry wide open for niching down? Banking. Many of the largest players are woefully out of touch with their customer base — even as they scramble to figure out how to use mobile applications and digital services to streamline their own expenses. Yes, it’s all about them, not you.

  When was the last time you added up all the fees associated with the banks’ privilege of managing your money? People of all ages are sick of being nickled and dimed for fees by financial institutions, but millennials are especially fed up with this practice.

  Gallup data57 suggests that only 30% of them are “engaged” with a retail bank. And they are 2.5 times more likely as their elders to switch allegiances to an organization that offers more compelling options.

  You can also see the niche-down philosophy playing out in real time in the media business. Yes, the stodgy media business is a perfect place for niches.

  Ever heard of The Hallmark Channel?

  It is hands-down the queen of “feel-good” programming. Hey, why not run holiday specials in the middle of July! It was also the only “non-news” network among the Top-15 networks to realize substantial growth58 during 2016 and 2017 — and not just among the older women who were its original demographic. Yes, it turns out that even middle-aged guys need a Hallmark fix.

  A very similar sort of nostalgia has powered the rise of “Korean dramas”59 (or K-dramas, for short), a genre of shows that has basically exploded on streaming-video sites such as Netflix and DramaFever (which specializes in programming from other cultures). You can think of a K-drama as a hybrid of a soap opera (because there are plenty of cliffhangers) and a “chick flick” (because there’s always romance involved). If you don’t speak Korean, you have to watch the programs with subtitles. But they have become “strangely addictive”60 in the United States.

  It turns out people of every culture like finding their happy place.

  Embark On A Journey Of Self-Discovery

  The most legendary people make a choice to be legendary. They are not fooling around. Legendary is not an accident.

  NBA basketball legend Bill Walton61 makes this mindset clear, “I wanted t
o be great.” When he chatted with Christopher for the first of two Legends & Losers appearances (so far!), Bill goes on to say, “…don’t be just sitting there waiting for the ball to fall in your lap. Don’t be sitting there waiting for the phone to ring, man. You’ve got to have a plan. You’ve got to have structure. You’ve got to have organization. When you come up against problems, you’ve got to be able to get through them quickly, and make decisions, and get going, and play in this great game of life.”

  So how do you discover, declare, define and defend your unique niche?

  It starts with viewing the landscape of your chosen industry through a different set of binoculars than everyone else is using.

  Legendary designer and educator John Bielenberg suggests “thinking wrong.62”

  You may consult the same maps along your journey, but your route will travel through untraversed terrain and your destination will be hidden from others’ views — until you outline the routes for them to follow you there.

  In short, you must examine the accepted norms and practices of a given industry, and then blaze a trail that verges away from the road well traveled.

  Here is an overarching question we suggest as the first guidepost for this journey:

  Is the industry you’re seeking to address dominated by companies that have become complacent?

  Most bloated bureaucracies can’t help but move slowly.

  They’re designed to optimize process, not creativity.

  And they usually don’t concern themselves with nimble, niche competitors until those rivals have claimed enough scale to be worth noticing. And when they do notice, they’re just as likely to buy into the niche than try to play by some upstart’s rules. That’s why Unilever scooped up super-premium ice-cream maker Ben & Jerry’s, and Clorox offered a sweet deal to honey-inspired personal-care products maker Burt’s Bees.

  The executives at those mammoth, consumer-products companies niched in, when the original founders of those unique, disruptive ventures niched out.

  Another question to serve as a compass is this one:

  Is the category you’d like to occupy growing or shrinking?

  No judgments here. As the K-dramas example we mentioned earlier in this chapter illustrates, your potential demographic may be way more diverse than you realize. And, if a market is contracting, that’s creating a problem for someone, somewhere, and it could be a signal that new growth lies beyond the horizon of today’s industry norms.

  And don’t overlook the role of innovation. Ask yourself:

  How might new technologies, including cloud computing services, artificial-intelligence software, genetics and genomics advances, cryptocurrencies and blockchain-transaction technology, self-driving everything, digital-payment apps, three-dimensional printing and so on, affect your category?

  Every single item on that menu, for example, is behind at least one niche startup seeking to rewrite the rules in the field of big agriculture.

  Take the seemingly ubiquitous hamburger, a staple of the American diet and the lifeblood of many fast-food restaurants. For all sorts of cultural reasons, the all-beef burger is under attack. Here’s just one of the problems: health-conscious consumers are consciously weaning off red meat, and it’s a whole lot more palatable to ditch the ground stuff than a perfectly grilled steak. Some pretty tasty, plant-based alternatives from ventures like Beyond Meat, Memphis Meats and Impossible Burgers think they have the right ingredients to tempt burger-lovers who are looking for an alternative.

  The appetite for their products is growing: giant protein company Tyson Foods has backed both Beyond Meat and Memphis Meats. As for Impossible Burgers, it has impossibly broad reach for what amounts to a better veggie burger (way better, actually). Heather can order one any time she wants at a 30-year-old family grill less than two miles from her house in New Jersey. That’s pretty good name recognition for a seven-year-old company. Here’s a tech-enabled niche business that should appeal to any reader who has ever ordered a pizza for delivery to her home or business, only to have it show up lukewarm or cold. It’s called Zume Pizza63, which delivers thin-crust pies in the San Francisco Bay Area. Zume’s niche is quite specific: Cofounders Julia Collins (a restaurant entrepreneur) and Alex Garden (a former executive at both Microsoft and Zynga) have cooked up robots that automate, assemble and cook orders right in the back of the delivery truck as it’s headed out for a delivery. And, you guessed it, the orders come in via a mobile app.

  The only thing the driver really does is create the slices and walk the piping-hot pizza to the door. “She doesn’t have to think about when to turn the ovens on [and/or] whether to turn the ovens off,” Collins told NPR. “She doesn’t have to think about what route to take or [whom] to go to first. All of that is driven off of our algorithm.”

  Without algorithms and robotics, there would be no Zume. Don’t worry. If you’re not a tech geek, we’re not asking you to become one. But that might be exactly what you look for in your cofounder.

  On your journey of self-discovery, don’t forget to keep both your ears and eyes open. Use these questions as guideposts.

  What do people think about the problem you’d like to address? Is the problem really a problem? And, what’s more, how do you think people will view the problem 10 years into the future?

  This doesn’t mean you have to invest in formal focus groups, but you should listen, listen, listen. Remember today’s solutions are tomorrow’s problems. Think back to when developing the next new mobile app was the “thing” to do. Now, people are looking for an antidote to their smartphones.

  Write down all of your assumptions related to these questions and the opposite of all those assumptions. Think wrong.

  Chances are, your path forward may be guided by the contrarian point of view, like many of the entrepreneurs we’ve mentioned in earlier chapters. But we’re not done with the introductions yet. Here’s another maverick for you to meet before we say goodbye: Annie Morhauser, the founder of Annieglass, who joined Christopher on Episode 16264 of Legends & Losers.

  Her glassware company has prevailed in the Monterey Bay Area of Northern California since 1983 — overcoming a major financial setback after the October 1989 Loma Prieta earthquake, which destroyed more than 100,000 pounds of raw materials. One-of-a-kind fine art works by Annie Morhauser are part of collections at respected institutions like the Smithsonian Art Museum in Washington, D.C., and the Corning Museum of Glass in Corning, New York.

  Did we mention that she has been the category queen of her niche for 35 years now? Annieglass was actually one of the very first entrepreneurs whom Heather interviewed eons ago for a now-defunct gift-trade publication!

  Annie has accomplished something rare: crossing over into the commercial world while tenaciously retaining her fine-art approach and choosing not to compromise on production. The 30 full-time employees that staff her 15,000-square-foot glassmaking studio in Watsonville, California, handcraft more than 100,000 plates, bowls, serving dishes, stemware, flatware and other items annually. Exquisite objects that also happen to be dishwasher-safe.

  Annieglass is a mass producer — by hand — of sculptural glassware.

  How’s that for a powerful niche down?!

  And that has been a crucial differentiator for the venture for several decades now.

  The main Annieglass facility is located just south of the beach city of Santa Cruz, California, where the company got its start. It also includes an “experiential retail” space called the Craftbar where Annieglass holds classes such as how to make your own glass plate or how to assemble your own indoor succulent garden.

  Sure, the operation could probably produce a lot more items if it hired glassmaking facilities in a foreign locale to replicate its designs — and plenty of knock-off competitors do just that every time Annie comes out with a new collection. But Annie deliberately decided not to travel that path. “I
made the choice not to go overseas,” she told Christopher. “There is tremendous pressure to do that, and I think that is why I am still here. People feel the need to over-diversify.”

  Let that ring in your head. “People feel the need to over-diversify.”

  Part of this was a lifestyle decision: when Annie was originally contemplating an opportunity to scale production, she was a young mother and didn’t want to be forced to spend days or weeks away from her children. The approach also allowed Annie to continue refining her own unique interpretation of an “ancient” style of glassmaking: Her company’s signature method of creating pieces is slumping, with glass sheets heated, and then forced into molds to be reshaped as they cool. Annieglass also blasts glass with garnets and sand to etch textures and designs onto the surface, and team also uses water jets to cut pieces. “I have deadlines for myself every six months,” Annie says.

  She welcomes visiting artists who specialize in other mediums — and who aren’t glass “nerds” — to help her dream up new ideas. An example of one of the company’s contemporary innovations is Elements, a line of thick trivets and appetizer trays made entirely out of recycled, glass scraps. “For every piece that we make, there is [are] a dozen more that we can’t figure out,” she admits.

  Annie’s advice for niching down: “Know your truth north. Know your limitations.”

  The Struggle Is Real

  People often have a hard time starting something new. They get stuck on the “how” as soon as their idea for the “what” becomes clear.

 

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