MikeMichalowiczPicDo you wait for luck to come to you or do you make your own luck?  This is one of the questions that Mike Michalowicz answers in his new book Surge.  In today’s podcast Mike is going to talk about pushing wine down my throat a well as giving us the low down on his new book.

I met Mike at a Michael Port event last year and had just read his book Profit First.  In that book he talks about paying yourself first and why it’s crucial the first money you put away is your profit and then work around everything else.

Surge is similar in that there are things you need to do first like managing your own luck.  Besides talking about margaritas and wine here are some of the other things we talked about in this podcast episode:

    • Why making your own luck is better than waiting for someone else to bring it to you.
    • How following specific routines will help you get better results than anyone could have predicted.
    • How to carve out a niche and then exploit it.  (I love this as I’m a card carrying nicheaholic.)
    • How to be aware of patterns that help you take advantage of things right in front of your eyes.
    • How teeny experiments are so much better than a big plan that takes a long time and then never works out the way we expected it to.


Narrator:         Welcome to The Sustainable Business Radio Show podcast where you’ll learn not only how to create a sustainable business but you’ll also learn the secrets of creating extraordinary value within your business and your life. In The Sustainable Business, we focus on what it’s going to take for you to take your successful business and make it economically and personally successful.

Your host, Josh Patrick, is going to help us through finding great thought leaders as well as providing insights he’s learned through his 40 years of owning, running, planning and thinking about what it takes to make a successful business sustainable.

Josh:                Hey, how are you today? This is Josh Patrick. You’re at The Sustainable Business.

Today, we have a repeat guest. I’m really excited to have Mike back with us. It’s Mike Michalowicz. Mike has written a bunch of books. I’m actually looking at some of them right now. He’s written a great book called Profit First which I highly recommend you read. He has written a book called the The Pumpkin Plan. And his newest book which is what we’re going to talk about today is Surge.

So, instead of me yammering out about Mike, why don’t we bring him in and let him talk for himself.

Mike:               Yeah, let me yammer about myself, right?

Josh:                Yeah. That’s a good thing to do, Mike.

Mike:               Josh, thanks for having me back. It’s good to reconnect after trying to force margaritas down your throat.

Josh:                Yeah. Well, that wasn’t especially successful but you did force some wine down my throat.

Mike:               I did. I did. I think I’m like an alcohol pusher. I don’t drink myself that much but I like other people to imbibe so.

Josh:                I used to do that when I tended a bar but I’m not a bar tender anymore so.

Mike:               Yeah.

                        Good, good. So, as if it we’re more of a cut from the same cloth.

Josh:                Yeah. I mean, basically. Basically—

Mike:               Yeah.

Josh:                So, let’s talk about Surge.

Mike:               Yes.

Josh:                And let’s start with talking about creating your own luck because I think that it’s just such an interesting thing to do.

Mike:               Yeah. It’s fascinating.

So, I had a reader challenge me on my other books. In a way, I didn’t expect. They said, “I love your books. I love the content but there’s one thing missing. If I’m in the wrong place at the wrong time, I don’t care what strategy I use. It’s going to be of no benefit.” And they said, “Your timing really matters.”

The idea is, I guess, if we decided to start a typewriting business today, it’s really going to be tough to build a substantial business or even a successful one because it’s the wrong timing. But 50 years ago or 75 years ago, typewriters – that’s a good business. So, I looked into it and one of the first things I found is what we attribute to luck, often just pure happenstance, it can be manufactured or facilitated or planned or prepared for. There is no magic bullet. You know, we can’t make things happen all the time but I found that we can improve the odds dramatically. And that’s what this book is about.

And the opening story in there is about a homeless woman who is no longer homeless, but for a period of her life was homeless. And she developed a strategy, very quickly, to find money. What’s funny is if you or I find 50 bucks or 20 bucks on the street, Josh, like for me, that’s like a huge windfall. I’m pumped through the day. I come home and tell my wife, “I found 20 bucks today. It’s a miracle.” Well, she made it such a habit that she was generating that every day. She follows specific routine to look for money that was lost, looked in the common spots and she deliberately made it happen. And I think we can—actually, more than think, I know we can do same with our businesses.

Josh:                So, how do you apply that to a business?

Mike:               Well, the first thing is you’ve got to find where to look for the money, so to speak. She did it by looking at what’s called “catch and hold points.” At least, that’s the term she gave it. Like, milk crates, ironically, on a street, often are the perfect kind of butterfly nets for cash. So, if someone drops some money and it flutters down the street, these milk crates catch it.

Well, in business, the first thing we’ve got to do is we’ve to carve out the niche that we’re going to be looking at. When people ask me, “What’s the next big opportunity?” My response is, “Well, there’s billions of opportunities out there” but just like the oceans, saying, “Hey, which wave should I ride?” There’s billions of waves. You have to pick the cove or the area you’re going to surf in. So you must carve out a niche and then you evaluate it. The more narrow the niche, the more you can find the movements that are happening. And I found, in every niche, there’s movements. I mean, it could be bakeries, to yarn distribution, to electric cars. I mean, any category, there’s movements happening but you have to pick a category to start observing it.

Josh:                This sounds like patterns we’re talking about.

Mike:               Yes.

Josh:                So, how do you become aware of a pattern?

Mike:               I use surfing analogies throughout the book but we’re looking for what I call an imminent wave. And if you just consider surfers real quick, a surfer goes out in the water, they’re looking at some the waves that are right in front of them – the ones that are approaching now. They evaluate, “Is that an opportunity?” If not, they let it play through, so to speak. If it is, they paddle in front of it.

In the niche, once you identify a niche, you have to look for the changes that are going on. And here’s a couple of ways to find changes. First, observe people’s behavior. One of the examples I share in the book is in the surfing community itself, when UGG came about. Brian Smith is the founder of UGG. He watched surfers’ behaviors and what he would do is he would sit out at the beach and watch surfers. And he noticed that with the advancements of neoprene, this was in the 70’s, that surfers were now surfing year round. They could stay warm with neoprene but when they were coming in from doing a set of surfing, they would try to warm their feet up because their feet were still exposed. They were trying to warm their feet up and they would put it in front of a fireplace or wrap it in blankets or towels to warm their feet up. That was the movement. There was a shift – neoprene. It resulted in a subsequent wave which was the need for warm feet. Now, that’s how UGGs got invented.

So, once you pick your category, see where they’re moving now. What are they doing? And what are the ripples coming out of it? Another hint, too, is search the history for that industry. I mean, you can literally Google “history for the yarn industry,” “trends in the yarn industry”. Often, that shows you what’s happening in the past. And the past is always fading out, something new is approaching. And often, the superpast – meaning beyond the immediate past re-appears, so we go kind of in a cycle. So, look at what’s currently popular – it’s the thing on the way out. And the thing from before that may be coming back.

Josh:                You know, that’s a great tip – to search the industry. I really never thought of that before but it sure makes sense.

Mike:               And it’s simple, by the way.

Josh:                Yeah.

Mike:               It’s literally a Google search away.

Josh:                Well, that’s one of the things I really like with your work, because all your work is really simple – not easy, but simple.

Mike:               Thank you.

Josh:                That’s, you know, something for folks to think about is that you want simplicity in your life and don’t expect simplicity to be easy because the two aren’t the same.

Mike:               And that’s the next thing I’ve got to figure out is, I’m trying to figure out how to get people to do simple things when they’re not easy. But one day, I will write a book about it when I figure it out. But it’s a shame, so many people I share a tip or they learn from someone else a great tip that could have so much of a big impact on their business but they revert back to what they’ve always been doing and don’t try the new thing because it’s perceived to be too hard. That’s the inevitable challenge.

Josh:                I put that in the “fail fast, fail cheap” thing—

Mike:               Yes.

Josh:                Is that, often we try to do things and we make this gigantic plan and we never do it. If we do little, teeny experiments, we are more likely to try the new thing.

Mike:               Right.

Josh:                So, that’s the way I get people to do it – and myself, actually so.

One of the things you had in your book which I really found just an important thing – especially for the size businesses that we’re working with, between 25 and a couple hundred employees, is to focus on individual waves and not the title shift. Can you explain what you mean by that?

Mike:               Yeah. So, a title shift would be something like mobile technology. I can’t tell you how many businesses say they’ve ridden the wave of mobile technology. But really, no one rides that because there’s all these different sub-categories to it. There are phones. There are apps for the phones. There’s operating systems for the phones. There’s cases for the phones. There’s wearable technology which is considered mobile. You know, there’s watches and there’s lapel pins and all these different things. Cell towers are part of mobile technology, right? The infrastructure behind it.

So, when we look at where the trends or what’s the opportunity in mobile technology, it actually is not ride-able. There’s too many components and we’ll get distracted. We need to carve down to a subset and see what’s going on. “What’s the trend in the app development?” And I would argue, “You can go more narrow.” If maybe, you’re into fitness and that’s your target, “what’s the developments and trends in mobile fitness apps?” If you’re into infrastructure, maybe you’re into the physical cables. Maybe you’re into the radiofrequency kind of transmissions coming out of those towers. Maybe you’re into the metal structures that support this. But you’ve got to go into that subset and then you evaluate again, “What’s the history? What’s the current behavior of the consumers? What do we believe is coming next?”

The other thing, too, is always – always look for the early adopters. I suggest “Don’t ride a wave until you see early adopters.” Early adopter means some people have stepped into this space and are consuming it and they’ve had the ability to stick with it.

The example, Josh, I tend to use is electric car. Ten years ago, if I told you, “I’m considering getting an electric car.” You would perhaps said, “Mike, that’s called a golf cart. Good luck.” Like, now, fast forward, and chances are, Josh, in your neighborhood, in my neighborhood, someone’s got a Tesla – maybe, two or three now. Well, when they first bought the Tesla, five years ago, they were early adopters. Early adopters – the inaugural adopters really get attacked by the community around them. The jokes of the golf cart are circling around. If those inaugural adopters can stick with it and actually convince others to buy it, that’s called the Early Adopter Phase. Then we have proof concept. And Tesla now has 400,000 pre-orders for the next car – the biggest in world history. There’s a big trend in electric cars.

Now, what I’m saying is, look for the early adopters and see if they can stick with it. You’ve now identified a megatrend. But what are all the little breakouts from that? Controlling the cabin temperature is very important in electric cars because that’s a big energy consumer. Can you do something in cabin temperature control? Fueling stations. All these different things are going to sparking out from this wave that’s coming through.

Josh:                It makes perfectly good sense to me. Another thing you had in your book, again, which I absolutely love is “customers speak the truth with their wallets”. And I used to say, “customers vote with their feet,” probably about the same. So, what do you mean by “speaking the truth with your wallet”?

Mike:               Yeah. So, a lot of us believe customers speak the truth with their words and we try to extract knowledge from them by asking questions, by surveying them. But the real truth is spoken through their actions or their spend, hence the wallet. And then, so the phrase is “people speak the truth through their wallets, not their words.” We can, very quickly be misguided by listening to people’s words. And we’ve got to be aware too is that the most vocal customers will speak up and form a bias because the other customers who aren’t as vocal or likely to participate in Q&A-type stuff won’t speak up and will believe that the vocal ones are the representation of the entirety of the group and it could be totally askew.

But wallets is what you measure. So, what you do is you go through your client base and see who spends the most and who spends the most frequently. Those clients are representative typically of your best clients. Now, it’s important that you like doing business with them. Sometimes you end up with a big client that spends a lot of money with you and you can’t stand them, that’s not an opportunity. But if you have clients that spend with you regularly, are very profitable and you enjoy working with them, that could be an opportunity to find your wave. Find out what’s going on with them. Find the history of their industry and perhaps you’re finding a wave going on there and it’s a shortcut into the industry. Now that you have one client already in there, it’s much easier to find the next client.

Josh:                Perfectly good sense. When we used to do customer advisory boards and I was presenting a product or a new product, possibly, I’d always ask people and said, “Will you spend your money on it and not somebody else’s money?”

Mike:               That’s right.

Josh:                And if the answer was “no”, I knew it was a lousy idea.

Mike:               The irony is I’ve asked the same question when I’m prototyping or testing something. I’ll say, “Hey, would you buy this?” If he will say, “Yeah, I would.” That still is just a word. The real response is say, “Oh, you would? That’s fantastic. I’m taking deposits today. Would you put down X hundred or thousands of dollars or whatever it is?” And then everything changes like, “Oh, well, I would but I’m not ready.” “Okay, so you wouldn’t put money down yet.” I know I haven’t convinced him.

Josh:                So, one thing that you talked about here which, again, I basically agree with, about every point you have in the book which is really cool is you talk about putting stuff on one page with bullet points.

Mike:               I call it buyer’s defense.

Josh:                Yeah. Why is that important?

Mike:               So, when you’re trying to catch a wave, that means you’re early to the market. There’s massive opportunity because if you’re early to the market, there is a delta in your favor that there’s more demand than there is supply. It’s you and more people looking for you, than there’s available supply which means your marketing doesn’t need to be that powerful. It doesn’t need to be that effective because people need you.

It’s like if you and I were thirsting for water because we walked through the desert, the first person with water – even if it’s muddy, we’ll take it. And there’s a misperception from that vendor saying, “Wow, clearly, people like my water.” No, there is more need than supply. So, what happens is when people start consuming from you, the people around them will say “You’re an idiot for buying muddy water. You know, you could’ve just bought this clean stuff if you walked a little further.”

I call it the buyer’s defense, meaning the buyer purchases our service or our product – early adopter, we may have an inferior product. We don’t even know we do because people are buying it. But the people around them, regardless if our product’s inferior or fantastic, will say, “Oh, you should’ve bought an alternative. You should have had something different.” You know, I went on the web and I found this and that.” So, we need to defend that customer. What you do, is when they buy from you, literally provide them with a one sheet bullet points of why their purchase was a smart, prudent purchase. And when they get attacked, you’ve now armed them to say, “Hey, this water has these wonderful vitamins and nutrients, and the location was ideal that I didn’t die. So, this is why it was a good purchase.”

And if that document is prepared well enough, it’ll actually convert other consumers. And it doesn’t have to be a physical document [inaudible 00:14:34] but you do have to keep educating consumers after they make a purchase. Consumers of the Tesla – the early adopters have been constantly [inaudible 00:14:42] and educated by Elon Musk, all the material that’s out there, of why their decision is so smart. And now, they’re using that to sell the next guy who’s attacking the decision.

Josh:                Which is they need to do because the press has decided Tesla’s now evil which is interesting.

Mike:               Isn’t that so funny? I actually talk about that in the book. It’s called the Sellout Phase. There’s a certain phase where any business will be considered evil because it’s achieved a certain size. The irony is, there was a time that Google was the champion. They were finally defeating Yahoo! Something better was there. Now, Google sucks. Apple was great because they were taking down Microsoft. Now, Apple’s this arrogant juggernaut. Tesla was fantastic because it was so innovative and the environmental impact was so extraordinary and they were doing something so radical but now they’re kind of jerks because they’re big.

As our business grows, the irony is we’ll achieve this Sellout Phase where the inaugural adopters, the people that took on our products, start tearing us apart because they feel abandoned when we didn’t stay small and we went bigger. And then the press jumps on stuff like that too.

Josh:                Oh, the press loves to talk about negative stuff. That’s for sure.

Mike:               Oh, my gosh. Yeah.

Josh:                So, I call myself often a niche-a-holic and in the book you have the five common elements of your niche marketplace. What are the five common elements and why are they important?

Mike:               In a niche marketplace – let me just kind of outline what that means again. A niche – I define it by an industry- meaning, an industry vertical. Now, you can also do a niche based upon demographic or psychographic but it’s much more hard to define. The elements that make it up, just roughly, are–

So, a niche is an industry where there’s what’s called congregation points. Meaning, that it’s established enough that they are sharing information through common congregation points. They have a magazine that caters to this industry. There’s a conference that goes on. The importance of a congregation point is this is where we’re going to want to insert ourselves. That’s where they’re all kind of being bottlenecks through and that’s where the opportunity is.

The next thing is, there’s industry authorities. So, meaning, there’s other people that speak to this industry and are successfully doing it by the way which means as you move into it that you now have influencers that you want to connect with. Maybe there are other people that read the magazines. Maybe the speakers at the conferences where there’s these influencers. There’s also media channels dedicated to it. So, similar to the congregation points, there’s media channels like podcast dedicated to the category and so forth. That’s an element.

The other part, too, of a niche is that you’ll find there is disproportionally less competition than the broad category. So if I went out and said, “I’m providing accounting services to anybody, I’ve a million competitors.” If I say, “I provide accounting services only to electric car manufacturers.” I may have zero or one competitor. So it narrows the category.

There are some other elements. But that’s some of the core stuff that you’ll see distinguishes a niche and represents opportunities for you to step into the niche.

Josh:                So one of the things about niches, which I think you just mentioned which is really interesting, is that if you’re really good at identifying a niche, you’re not limiting your marketplace, you’re limiting your competitors.

Mike:               That’s right. Isn’t that funny? I mean, the irony is actually you’re increasing your opportunity. The analogy I use and I think when you and I were hanging out a few months back, and me forcing margaritas on you, I think I was sharing the story of a general practitioner versus a surgeon. And if you think about it, you know, all of us have a general practitioner but the general practitioner will look at a skin rash, or a cough, or anything.

Well, when that general practitioner says, “That cough is actually indicative of heart disease.” Now, we go to the heart surgeon – a specialist and we’ll pay a massive premium for them because our life is on the line. And we’re going to see this in business, too. The general practitioner businesses who serve anybody, attract a general audience who will just find someone that’s generally convenient and won’t pay generally much money. You know, if your general practitioner says “You know, we’re going to up our co-pay from $50 to $5,000. I’ll see you next month.” No way would you go to that general practitioner. But if the heart surgeon says, “It’s $5,000 to see what’s going on with you. And by the way, I’m the world’s best heart surgeon to address your concerns.” When your life is on the line, $5000 isn’t so big anymore.

And so, in business, when we identify a niche we’re becoming this elite heart surgeon. You understand the nuances and elements of the niche. You understand more than just what you provide. You understand all of the surrounding providers and you know how to care for this industry. You will actually attract customers who have life-threatening problems in their business who want a specialist and will pay a significant premium. So, you actually increase the quality of your clients, often the number of clients, and you decrease the competition. I mean, there’s no reason not to be a niche specialist. I’ve yet to find a reason not to be.

Josh:                There is no reason.

Mike:               Yeah.

Josh:                There’s another benefit and then we have to end here. Your cost of delivering service will dramatically plummet because you’re not doing one-off’s anymore.

Mike:               Yeah. Yeah, totally.

Now, as I was saying that I don’t find a reason not to be a niche specialist, once your company hits $100 million in revenue, you’ve got to start broadening out. Like, Microsoft and Amazon, I get what they’re doing. If you’re small business, you’ve got to stay focused. And one of the biggest advantages, Josh, is what you said, your costs literally plummet, so your profitability jumps. It’s a win-win-win.

Josh:                Well, it’s a good thing we’re not talking about Microsoft because that’s not our audience. Our audience here are blue-collared businesses that do between 25 and 200 employees and want to become sustainable.

Mike:               Yup.

Josh:                So Mike, unfortunately, we are out of time. And I know that people are going to want to find out how to contact you and buy your book, so how would they go about doing that?

Mike:               So, the place to go is my website. It’s mikemichalowicz.com. I’ll give you a shortcut to get there because I know that it’s the longest most like Polish name on the planet. I was called mike motor bike in high school, so just go to mikemotorbike.com it’ll bring you right to my website.

And on my website, free [inaudible 00:20:37] books and all that stuff. I used to write for Wall Street Journal. You’ll get those articles that are only available for Wall Street Journal subscribers.

And I do [inaudible 00:20:45] additional thing, it is the most different website you’ll ever visit. I think you’ll have a unique experience if you go there.

Josh:                Well, Cool. I’ll take a look at it myself.

Mike:               Thank you.

Josh:                So, Mike, thanks so much for your time today.

And for those of you who are interested in getting some strategic ideas on how to make your business more sustainable, all you have to do is take out your smartphone, text to 44222, PERIODIC. Text PERIODIC, P-E-R-I-O-D-I-C to 44222 and we’ll get our little, cool, 56-periodic tables of business elements to you and what you can do strategically in your business.

So thanks so much for hanging around with us at the Sustainable Business. I hope to see you back here soon.

Narrator:         You’ve been listening to The Sustainable Business podcast where we ask the question, “What would it take for your business to still be around 100 years from now?” If you like what you’ve heard and want more information, please contact Josh Patrick at 802‑846‑1264 ext 2, or visit us on our website at www.askjoshpatrick.com, or you can send Josh an e-mail at jpatrick@askjoshpatrick.com.

Thanks for listening. We hope to see you at The Sustainable Business in the near future.

Topics: sustainable business podcast, Marketing, niche, Innovation, Uncategorized, small experiments

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