Solution Analysis

A Corollary for Amazon

I learned from corollaries in 2006. At the time, I was charged with building Amazon’s early digital video product. Amazon lacked the technology to ingest, transform, and transmit digital video files. Digital files were a new but critical concept and the only place on earth that routinely worked with digital video files were post-production facilities in Los Angeles. I knew that I had to tap the knowledge and capabilities of GDMX, Technicolor, Deluxe, and Ascent—all the big players in town. These were to be my corollaries.

I met with every single company and had them walk me through how they worked  with digital files and solved problems. I brought all of my findings back to Amazon in Seattle, and I built what Amazon needed based upon what I learned from these experts.  

This knowledge transfer was possible because of Amazon’s incredible influence on the studios and the studios’ influence on the post-production facilities in Los Angeles. As Amazon was a key distributor of studio content back in the days of DVDs, GDMX, Technicolor, Deluxe, and Ascent were more than willing to grant me access to their facilities. I had the opportunity to learn from the best in the business. 

What I’d like to emphasize here is that I didn’t solve the problem, I discovered the solution. I had no idea what I was looking for when I went to Los Angeles, but I knew that the companies I was visiting had surmounted the challenges that Amazon faced. As I toured the facilities and met with the staff, I learned how the companies moved these big files. The staff were the 10X experts, and they made it sound easy. For them, digital files had been foundational for years. For me, I found solutions that would have taken me months to discover otherwise.

People are often excited to share their expertise. I’ve found that if you show interest in what people do, they’re more than happy to answer your questions. Not only does this help you to solve your own problems, it builds invaluable relationships and even partnerships.

For a company to evolve and reach the next level, it must overcome its hindrances, and it behooves the company to do so in the most efficient way possible. Evolution then, in its most practical sense, means either learning from experts, hiring an expert who can find the solution; licensing or renting a solution; or acquiring the technology that is the solution. 

First Mover Vs. Fast Follower

Being a fast follower rather than a first mover gives companies the benefit of hindsight. Ron Stein, the founder of FastPath Marketing and More Customers Academy, offers words of caution to companies who seek first-mover advantage. According to Stein, the strategy might work if you have a potential disruptive concept, but that is rarely the case. Instead, it is less risky to wait, watch the first movers, and fill in the holes evident in their products. 

Sony’s video cassette playback device, Betamax, launched in 1974, is an example of a first-mover product that worked. However, it worked because no one could match the technology for a long time, says Stein. 

Video Home System (VHS) watched the success of Betamax while also learning from the consumer response to home entertainment. VHS discovered two important facts, that consumers wanted home entertainment and feature length Hollywood movies, which Sony could not deliver with Betamax. By 1980, VHS had 60 percent of the North American market, and Betamax was toast.

First movers often find themselves stuck in quicksand, unable to respond quickly to market demand, which allows competitors to catch them up. Today, although technology is advancing, there is rarely a company that is so far ahead in an area that the first-mover advantage is enough to outweigh the risk. 

First movers have to educate the market. When there is no market validation, there is greater risk. First movers typically have high capital expenses because they are blazing the trail. Agile processes, developing minimum viable products, and trial-and-error learning can be costly. 

For a company that enters the market later, there is less groundwork to cover, and there is an opportunity to improve on the first-mover’s product. What does the product lack? How was it received by the consumer? Can the product be improved? How quickly can a better version be brought to market?

Google was a fast follower of Yahoo, which was the main player in the search engine domain when Google launched. Facebook was a follower in the wake of Myspace, Hi5, and Orkut. McDonalds was a follower after White Castle, which was founded in 1921. McDonalds learned from White Castle and was the first restaurant to introduce the assembly-line system when they opened a redesigned restaurant in 1948, Burger King, Taco Bell, Wendy’s, Carl’s Jr., KFC, and Jack in the Box were all fast-food fast followers after McDonalds, although none have managed to topple McDonalds from the top spot.

Misplaced Biases

There is a well-known problem called not invented here syndrome (NIHS), a costly form of innovation snobbery. With NIHS, a company might reject a perfectly acceptable existing solution purely because it is not their own. The trouble here is that there is no reason to believe that a solution developed in-house would be any better than the solution that already exists on the market.

The mindset of NIHS reminds me of a “fixie” bike, a single-speed bicycle with no brakes favored by the hipster. Where is the logic? Bikes have brakes and clutches for a reason, for safety and as aids when going up and down hill. Gears and brakes are valuable engineering concepts. In the case of a bike, they allow the rider to gracefully stop at the bottom of a hill without the pedals flinging their legs around a million miles per hour crescendoed by a launch over the handlebars.

Please, embrace existing solutions. You can and should peer up and over your own box, whatever your innovation prowess. It’s not normal or advisable to dismiss brakes that keep you from flipping over a bike or sliding out of control. It’s not necessary to huff and puff as you go up a hill or hold on for dear life as you go down. 

Part of the problem with NIHS is observation bias. We think and act in certain ways, some of which are terribly unproductive. We look for familiar patterns and keep to things we know because it’s simpler. But the future of work, the future of strategy, the future of being a manager, and the future of creating a product is the opposite of that. The future requires seeking the best solution no matter where it originates or how paradoxical it may seem.

Finding a Corollary

How do you find a corollary? First, you need to define your problem. Once you have defined your problem, the right corollary will become clear. Do you need to appeal to a different demographic? Then, find an expert in that demographic and bring them on board. Do you need to move down market and reduce the cost of goods sold? Then, find someone who either works down market and understands the supply chain and the parameters of your product or partner with a manufacturer already established downstream.

Additionally, when defining the problem, pick the one with the most leverage, meaning, get to the root of the problem. 

For example, consider the Gillette razor. Let’s assume that consumers are choosing a competitor razor causing Gillette to lose market share. The competitor product is slightly more expensive, and the competitor is spending more on branding to educate the consumer on its product. Could the Gillette razor’s price point be lowered to undercut competitors? Maybe. So let’s look at the cost of goods sold (COGS) for the Gillette razor. 

The parts include the battery, the five blades, a smoothing strip, a moistening strip, and every bell and whistle you could imagine attached to a razor. If Gillette simplifies the razor, the supply chain will change because a newer simpler model no longer needs the advanced technology of the more complicated model. So, it might be possible to find a simpler product at a lower price point with a different manufacturer, but is that the real problem?

You also need to consider consequential and intangible factors such as the reliability of the current supply chain, distribution, storage, shipping, and marketing. COGS broadly is an analysis in and of itself, and it is imprecise. In addition to COGS, has the analysis really dug into the root of the problem. Is the price point the real problem in this case? It might be that the competitor is developing a better relationship with customers and their education branding is paying off. The problem might have nothing at all to do with price and COGS.

Without defining the core problem, Gillette risks falling down a rabbit hole. Gillette might unnecessarily develop a simpler product that would not help their sales and might disrupt an otherwise functioning supply chain. But looking at corollaries in terms of their competitor might reveal that rebranding would be a better strategy. 

The Five Whys

The Lean/Six Sigma space uses a process called “The Five Whys” to whittle a problem down to its root cause. The process is simple: start with a problem statement and continue to ask “Why?” until you get to the root of the problem. Taiichi Ohno, father of the Toyota Production System, explains:

“The basis of Toyota’s scientific approach is to ask why five times whenever we find a problem … By repeating why five times, the nature of the problem as well as its solution becomes clear.“ 

Problem Statement: Customers are unhappy because they are being shipped products that don’t meet their specifications.

1. Why are customers being shipped bad products?

– Because manufacturing built the products to a specification that is different from what the customer and the sales person agreed to.

2. Why did manufacturing build the products to a different specification than that of sales?

– Because the sales person expedites work on the shop floor by calling the head of manufacturing directly to begin work. An error happened when the specifications were being communicated or written down.

3. Why does the sales person call the head of manufacturing directly to start work instead of following the procedure established in the company?

– Because the “start work” form requires the sales director’s approval before work can begin and slows the manufacturing process (or stops it when the director is out of the office).

4. Why does the form contain an approval for the sales director?

– Because the sales director needs to be continually updated on sales for discussions with the CEO.”

Once you have found the root cause, you can identify the options to explore. Depending on the problem and the situation, it may be a software solution, a process solution, or a solution that requires bringing in external experts have faced similar problems in the past.

Where Corollaries Meet Confrontation

Even if you find a corollary, it’s still an uphill battle to implement the solution. In my career, a common problem is what I describe as “the body rejecting the organ.” You bring in a new truth to an organization and there’s so much orthodoxy, so much rigidity around the current truth, that the new truth is disruptive. The new truth challenges people so much that it starts to detract value in the near term because people feel threatened by the disruption and the new perspective. Instead of trying to understand or learn the truth, they try to rid the company of the idea.  

So, why do people feel threatened by change? Because people are afraid to fail. When confronted with a solution to a problem, some will feel that it is something that they cannot understand well enough to demonstrate proficiency. The dynamic is directly tied to personal worth. A lack of understanding is linked to obsolescence, or that they may be considered too old to understand a new idea, or their skill set is out of date. Call it insecurity, if you will. 

It’s okay to not understand everything in business—anyone who acts like they do is pretending. What is important is that leaders constantly try to learn rather than remain in the small corner of the world where they built their career. 

The Steps in Applying Corollaries

In the HowDo guide to corollaries, I lay out a step-by-step approach to identifying problems and the corollaries with the fastest and most risk-free solutions. Broadly speaking, the steps are the following:

Finding the 10x Employee

If you want to solve a problem quickly, you’re going to have to find and acquire those who have solved it before. Sometimes it will be an expert, sometimes it will be an entire team, or even an entire company. It might be a hard pill to swallow given internal bias, but the future will be filled with more of these conversations, so proudly accept corollaries as an addition to your toolbox. 

In my career, the correct expert has an outsized ROI. What I mean by that is that they increase the probability of success, decrease the amount of time required for success, and increase your confidence that you will achieve success. The correct expert comes with all of the learning amassed from the mistakes they’ve made solving the same problem in the past. This is a shortcut around all of the blunders that a less experienced person might encounter, and it is why the right expert does not come cheap.

In Silicon Valley, you have “10X engineer,” so-called because this is a person who is 10 times more productive than everyone else, super human in fact. Some of them are actual geniuses in their field and probably started building neural networks when they were five. But the majority of them are simply just deeply familiar with the problem and have the battle scars to prove it. 

Familiarity is accumulated by being thrown head first into a problem. How do you build a tracking algorithm at Facebook? No clue—let’s find out! Facebook has made a ton of mistakes learning how to target people with algorithms. Thus, hire someone who has worked at Facebook and your consumer algorithms will knock it out of the park.

Finding these experts can be tricky but, for most sectors, LinkedIn provides some transparency to who is doing what. Many people advertise exactly what they want to do and what exactly they are doing. Start with your competitors, and call the people who have solved the problem. If you cannot afford them, look down or across from that competitor. If you can’t afford the person from Facebook, look to Pinterest, Tinder, or any of the other private networks. Look to employees who used to work for Facebook or Instagram and went to startups, failed, or otherwise.

Traditional companies underestimate their appeal to many potential employees. Many high-fliers think that they want to build the future in an open floor plan with unlimited Blue Bottle coffee, but the appeal of startups can soon wane. Many decide they want health insurance not an espresso every two hours. A stable income, stock options, weekends, and evenings are conducive to sanity, 80 hour weeks are not. Find these people, and make a pitch. You might be pleasantly surprised.

At Rosetta Stone, my team was building a better language learning product. My corollaries in this case were the academics that taught language learning. I researched the most cited and most awarded and most acknowledged academics, and I hired them. I also found who was producing the best product, the fastest growing product, the product with the most customer satisfaction and hired them. I identified the best technology platform for our purposes and bought it. I found out who was the leader in app development and market penetration for kids and hired them. I dissected the problems that we needed to solve, and the company created room in the P&L to get the right people. 

The result? Rosetta Stone won iKids awards for our kids apps. The B2B platform we built is now the primary P&L for the company. We went from a B2C company to a B2B company with one or two acquisitions and some new teams. We completely changed the company with precision solutions to problems that we could see were making money. We combined assets that allowed us to squeeze out efficiencies.

I solved no problems myself, I found people who could. I used corollaries to drive growth.