Episode 3: Do you have the right product? (Transcript)
[00:00:00] Rem Oculee: Welcome to the Exit Mindset podcast. I’m Rem Oculee. I spent years researching and studying exit strategies to improve businesses, and I’m here to help you increase profits, increase your company valuation and get you more work-life balance.
[00:00:26] Do you ever wonder if you have the right product in your company? Do you have any doubts about it? Do you think maybe it could be better? Product is one of the biggest challenges a company has, and sometimes the most unnoticed and ignored part of the business. Lots of times companies think, “Well, we have a good product, and it’s working just fine,” and they lose the drive to take that product to the next level, or do something about it.
[00:01:00] And when it comes to the Exit Mindset, a buyer typically looks at your product, but he doesn’t just look at your product from the perspective of, “Is it a good product or a bad product? Is it selling or not selling?” Lots of times a product is selling, as it happened with one of my companies where the product was selling just fine. But from the buyer’s perspective, “Where is the future of the product?” And that’s the thing you ought to look at.
[00:01:21] That’s the thing you ought to consider, and it’s a very difficult thing to do without an exit mindset. Because from your vantage point, the product is something that is just working fine, or you might have some reservations sometimes. Yeah, can I do better? Can I do this? Can I do that? But there’s just no incentive for you to do it. By placing yourself in the Exit Mindset, you have a completely different outlook on the whole thing.
[00:01:46] So let’s start by talking about that. Let’s talk about the product itself. What is the product? The biggest misconception people have is that they think the product is something physical, and I can’t tell you how many times I’ve talked to people that have service products, or intangible products, and they don’t think it’s a product. It’s bizarre.
[00:02:07] Sometimes they think the product is completely something else than what they have. I’m telling you that if you do not define what your product is clearly, and know what it is, and have it in your head as a picture, you will not be able to get the maximum leverage in your company. As you know, the three pillars of an Exit Mindset are product, infrastructure, and conversation.
[00:02:35] Remember, without the product you’ve got nothing. The most important thing, or step one, is the product. You can have all the infrastructure you want. Good luck. But you have no product. You can have all the conversation with the consumer about the infrastructure you have, but there’s no product. Or if your product is weak, or unpalatable to the consumer, again, you’ve got very little. Now, lots of times people confuse the differentiation between a weak and a strong product.
[00:03:06] They confuse the fact that the product sells, with its future potential. Or the future to create even a better model or a better innovation. Because what happens lots of times is you’re going to find that a buyer is looking at the future. Where is this going? Also, sometimes the product is very mediocre. So when the product is mediocre, your company’s going to be mediocre.
[00:03:33] That happens a lot. All the great models, all the innovations occur, because someone takes a product and turns it into something unique, different, and more palatable to the consumer. And you don’t have to invent your product. It’s not about creating a brand new product. It’s not about discovering the 127th element in the periodic table in chemistry.
[00:03:57] It’s not about that. Lots of the products, by the way, when they’re innovated, they’re combinations. They’re combinations and modifications, and variations of various things. Various types of products. For example, what is Uber? Uber is a combination of a taxi and its computer software, combined together in a way that allows a consumer to call on a ride anytime they want through their phone.
[00:04:26] That’s it. Software to order something that exists. You can get anything on demand nowadays and combine it with private use of a car by individuals. That’s where the innovation is. Now, let’s take another example. Let’s take Uber Eats. Again, what is it? It’s a combination of delivery service with their on demand software.
[00:04:51] So they’re really – there’s no new invention here that is massive. All that is combined. So in your product, the question is, “What do you have in there? How can you take your product and turn it into something better?” By thinking that way – by using certain principles that we will outline, and some of these things will be outlined in my book, The Exit Mindset, you will see a list of things you can do that will help you figure out how to improve your product.
[00:05:21] So you ask yourself, “How do I do this? I mean, my product is my product. It looks good, I think.” What you need to do, the first thing, is to define it. Step two, use the Exit Mindset. Step three, make changes. Simple three-step process. So let’s talk about the first thing: define it. Define what your product is. There are three types of products.
[00:05:46] One is a service. Two is a physical product. Third is a hybrid, Kappa product. And the tricky part about this is when we get to the hybrid. When it comes to the hybrid, the question is, is it the physical product that you’re selling? Or is it some other product that you’re selling? And that’s where you really have to do a deep dive into what is going on in your business.
[00:06:11] So lots of times you think, because you’re selling a physical product or a product that has a deliverable, that this is the actual product. But sometimes it’s not. Sometimes it’s a hybrid service and physical product, or an end product that you give at the end of that service, and the true business you’re in is maybe the service business.
[00:06:34] Most people would think that Amazon is in the product business. But think carefully. Are they really? First of all, let’s look at their product, the product you receive at home or in your office. It’s not their product in the first place. Second, let’s look at their service that delivers it to you. It’s not even theirs anyway. Whether it’s UPS, or FedEx, or the United States Postal Service – it doesn’t matter.
[00:07:00] Ultimately, if you look at their product, it’s technology. It’s that piece of technology that allows you to order what you want, send them feedback on it, and get information and data on everything that you’re buying. So what is Amazon the business of? Are they really in the business of selling products?
[00:07:21] Sort of. I guess you can argue it that way. You can argue that they’re a data company, which, by the way, if you knew anything about Amazon, you would know that they consider themselves to be a data company. The second thing is, if you look at it, their model is mostly pretty much – I would – you can look at it as a service model.
[00:07:39] The service they provide you is the ability to go through millions and millions of products in the marketplace, display them to you through search, and give you feedback from their customers in a manner that will allow you to make a decision. That’s it. That’s what Amazon is. Otherwise, if you think of it as Amazon is the company that sells your product, or gets your product – well, the supermarket has a product for you.
[00:08:07] The supplies store has a product for you. All the products you’re buying from Amazon are being sold somewhere, most of the time. Are they in the delivery business? They might have some leg that does that, but that’s not the core business. The core business is again, the service. So it’s the hybrid service delivery model. They figured out a way to show you what you need through their software platform, then get what you want delivered to your door.
[00:08:40] So it’s really a hybrid. So what is the point of this conversation? Let me be clear. You need to look at your service or product in that way too, and try to figure out, do you sell a product, or a service, or a hybrid? And what is the intent, and what is it ultimately that you’re selling to the consumer? Because that would be your main product.
[00:09:00] In my years of talking to CEOs and talking to people with companies that asked for my help, we have this conversation. We discover that they’re in the right business, but in their head, they’re in the wrong business as far as their product. What they’re selling is not what they thought they were selling. What they’re selling is something else.
[00:09:20] That is the biggest point you can take from this podcast. Let’s talk about the second thing. Once you understand what your product is, and that requires soul searching, thinking, discussions, having discussions with your team, and really looking at your product from a completely different perspective.
[00:09:38] Once you define it, use the Exit Mindset to decide how you could make it better. Because now you can focus on the real product, not the side product or a part of your product that is not necessarily what the consumer is looking for. That is the biggest breakthrough you can ever undertake in your company.
[00:09:59] Because once you figure that out, the rest is easy. And nothing is really, really, really easy, but I would say it gets a lot easier, because you focus in the right direction. The last one is to make changes. Take action. If there’s anything that’s important in creating an Exit Mindset, it’s taking action. Once you figure out what your product is, and once you work on it and come up with the plans as to how to change it, take action.
[00:10:29] And that should be the beginning. The genesis of the transformation of your company into the next level. One of the most important things you have to look at is, “Where’s your product going?” And here is where the concept of research and development is going to come into play. For a lot of people, they think, “Well, my company is too small to have research and development,” and that is furthest from the truth.
[00:10:51] Research and development does not mean you have to have a department or a unit with seventeen people, or a hundred people just doing research every day. Research and development could be done through curiosity. Research and development could come by being curious. by inquiring, by thinking about what it could be.
[00:11:10] So if we start the process by looking at how the product is perceived by the general public, “What are they thinking about it? Where is it going to go?” If it’s an average product that’s not going to go anywhere, and you’re subject to the vendor that you’re dealing with, then if the vendor you’re dealing with, that sells your product, just sells it to somebody else, it has no innovation capability.
[00:11:32] You’re just as stuck as they are, probably. Because a chain is as strong as its weakest link. Not having a product that they can innovate is where companies down spiral at some point in time. The best companies in the world are the companies that are two steps ahead of their competition with the product. You’re always coming up with something new.
[00:11:52] I mean, simple case and point, you look at Facebook. They continuously innovate, and innovate, and innovate, and come up with new things. Many other companies do the same thing. Some of the specialists, some of the larger Fortune 500 companies have the infrastructure for research and development, but there’ve been many companies out there that are smaller and managed to innovate.
[00:12:12] In fact, I will tell you big companies have been taken down by small companies consisting of a few people, just because those few people came up with an innovation that the bigger company did not think about. Let’s just take a simple case in point – Blockbuster and Netflix. Really, the person that created Netflix is Reed Hastings, who did this by simply taking a CD, and putting it an envelope with his friend, and sending it out using the US Postal Service.
[00:12:44] That was it. It was as simple as that. This was not born out of a big research and development department. It was just he was fed up with going to Blockbuster. He did not want to keep going in there and finding that he has to pay late fees. Actually, his wife was getting upset at him for paying late fees, and he decided – let me see if I could create a new model.
[00:13:08] And that one act of buying a few CDs and shipping them through the US Postal Service to find out if the CD would even hold, created an entire new company that took down a behemoth, one of the largest companies in the industry, Blockbuster. They went out of business, and Netflix kept moving forward. But notice how they look at their product. They just didn’t stop there.
[00:13:33] They went from CDs and they figured, “Well, maybe we ought to deliver the content through digital media?” From there on, they said, “Okay, well maybe instead of just delivering other people’s content maybe we ought to produce our content?” And the sky’s the limit. They keep going. Now, can Netflix be taken down someday by somebody else that comes up with a new innovation?
[00:13:52] Sure! It could happen. Maybe a couple of people in their home will come up with an idea that will take them completely down. We don’t know yet. If Netflix keeps doing what they’re doing, perhaps they’re going to be there for a very long time. Now, you compare that to other companies that attempted to do the same.
[00:14:11] There are companies that sell videos in multiple ways. So let’s look at your product. What is there in your product that you can change? Innovate? Create a different variation of? If your product is very average, like a CD that has a movie on it, like Blockbuster had, what can you do with your product to make a variation of it that’s a little bit different?
[00:14:36] That is what it’s all about. This is where it goes. This is how you come up with real breakthroughs. By thinking. And let’s not forget, thinking is the most important thing, and the hardest thing, in the world. People would rather move a building before they start thinking too hard.
[00:14:53] Sometimes it’s difficult to think about changes, and what you can do. The first answer you get from your question is, “Well, I don’t know.” For example, if you ask yourself, “What can I do with my product? How can I change it?” And that first answer is “No…I don’t know,” it doesn’t mean “I can’t do anything.” If you keep asking the question over and over and over again, “How can I improve the product?” You’re going to find at some point you come up with an answer.
[00:15:20] If you keep examining your product, you keep looking from different angles, you talk to people, talk to your employees, talk to your vendors, you look at the environment – be plugged in – you’re going to find that there are ways that others haven’t thought about. I keep reminding you, innovations occur because people see simple things that others do not look at, and then everyone wants to do it.
[00:15:43] We know that. I bring glad examples through this podcast. Simplest one, the concept of an office suite. The Microsoft doc. But somehow, somewhere, Microsoft managed to create something around it that others couldn’t do. That’s why you have only one Microsoft suite. You don’t have that many people out there.
[00:16:02] I mean, Google surely is trying to change that, but look at the difference between Microsoft and Google. Google came out and said, “We’ll do this digitally.” So the Google suite, the G suite at the time when it was created, was not delivered through a purchasable item like Microsoft. It was simply you had to subscribe.
[00:16:21] It was subscription-based on Google servers. Today, probably the closest competitor to Office suite is G suite. It’s an innovative model. The entire infrastructure of G suite is different, even though it delivers the same product. It delivers a word processor. Presentation, like a PowerPoint, like presentation software.
[00:16:45] It delivers a spreadsheet like Excel, but all these things are the product that is just very basic. However, the delivery method of that product – the way it was configured – is completely different, allowing them to generate revenues and create something that the market would accept and like. So then you go back to Microsoft. Well, Microsoft is now trying to copy some of those elements, but again, the model is different.
[00:17:12] Everybody’s got to cut their path. Everybody’s got to find their own way. I bring you these examples, not for informational purposes, but for you to model, because modeling is the most important thing. If you look at the model itself, how are these things happening? How are they getting to those distinctions? What are the differentiations in the products, and how is that happening? And why is it that nobody else has come in and been able to compete with some of those companies?
[00:17:37] It’s not just the fact that they have the power, in terms of money and resources. It’s more than that. It’s the innovation itself. During the internet time, there were a number of companies that had search models, and some of them were well-funded. Yet Google, a company with two people, did what they did. So when we were talking about Google, let’s go back to the history on this one. Who remembers Alta Vista?
[00:18:07] Maybe few of you would. Maybe all of you don’t remember or know what it is. Alta Vista was the first text-based search company that became very, very popular. They were getting approximately eighty million hits a day, and that was huge by the standards back then, the early internet days. Yet Google comes in from behind. Google trounces Alta Vista to the point where nobody knows the name, Alta Vista.
[00:18:32] Can you imagine? Do you want to be one of those? Which one would you rather be? Would you rather be the one that’s been decimated by competition? Or would you rather be the one that comes in and takes over? I know which one you want to be. This is the entire point of this podcast. This is the entire point of the Exit Mindset.
[00:18:54] This is why I wrote the book. Because I do want you to think that way. I don’t want you to think average. Again, the point of this is not so much what a great story it is. The question is, “How can two people, that end up being ten people, that end up being twenty people who can revolutionize the world?” Simply because they created a product that others don’t have. It’s innovative. It’s got distinction. It’s got the ability to scale. It’s definitely got the ability to improve in a massive way.
[00:19:25] So when you look at your company, try to think, What can I do with my product? How can I change it? If a buyer comes in right now and takes a look at my company, would they look at my product and say, “You know, this is something really unique!” Or is it something that’s just average that anybody has, and all I’m doing is buying something that I can get anywhere?
[00:19:48] So I’m going to make up a model right now. If you’re in the wine business, you’re selling wine bottles. I mean, unless you are selling a highly unique type of wine, and you’re the only vendor that sells that wine, most likely you’re just selling multiple types of wines out there. So what differentiates you from, say, the person that’s selling it next door?
[00:20:12] The supermarkets? There are various outlets out there that sell a variety of wine products. So you’re looking at my product. Is my product unique from an exit perspective? Is somebody coming in to buy it for a wine store going to think it’s worth it, from a valuation standpoint? From what I’m making with it right now? Probably the answer is no, because they don’t see the future in it.
[00:20:33] But what if you change the dynamics? What if you add, for example, delivery? I’m making it up completely. Please don’t take that as an exact model. Or what if you add to it the ability for him to come in and say, for example, taste, get a historic perspective on the winery, and buy it? What if you offer them options to subscribe, continue to receive the same wine or creations in the future?
[00:21:02] Anyway you think about it. And there are models like that out there, by the way. They do that. But if you want a company to sell for more than an average company like yours would, you have to be able to offer the buyer of the company something more. However, just keep in mind, it goes hand in hand.
[00:21:17] A buyer’s going to come in and see your innovative model, and at the same time, your innovative model itself is creating more revenues for you, and creating more distinction for you in the marketplace. So it really is a catch-22. You have to have an Exit Mindset to be able to create a better model, but the metamodel will create a better business for you. That by itself will create more time, create more freedom, create more profits for you and give you the higher valuation you’re looking for.
[00:21:45] Action is everything. If you don’t use it, you’ll lose it. I’m Rem Oculee, and I’ll see you on the next episode.
[00:21:54] Mae Talle: You’ve just listened to the Exit Mindset podcast with Rem Oculee. If you haven’t yet subscribed or followed, please do so in your podcast listening app. Or better yet, visit ExitMindset.com to join the conversation, access the show notes, and discover our bonus content.
[00:22:14] Lastly, we want to help as many business owners as possible. If you know anyone that could benefit from the information given in this podcast, please feel free to share it with them. Until next time!