The Problem(s) with Groupon

Daily deals are the current darlings of the Web. Groupon, the leading daily dealer, is looking at a valuation of $3-4 Billion in a possible acquisition by Yahoo. I think that would be a bad investment. Groupon is certainly doing well now but I see some problems on the horizon, or already here, that could make the company vulnerable.

1. It's too easy to do. The software isn't hard to do and there are already many competitors popping up locally and nationally. Remember MySpace? All a competitor needs to do is be Facebook to Groupon's MySpace. Also remember that TiVo saw its market share destroyed by DVRs provided by cable/satellite companies. There is no reason Facebook, Foursquare and many others can't play in this space.

2. It's a bad deal for businesses. Although I expect Groupon to start bowing to competitive pressure in this area, they usually take a 50% share of the Groupon offering. So if I'm offering you a $100 gift certificate for $50 and the Groupon takes half I'm left with $25. Is a $75 loss worth acquiring a new customer?

3. Cannibalism. Once Groupon does the rounds on all the local businesses what happens then? Well they start back around. So now companies have an increased risk of cannibalizing their own customers. Essentially giving their existing buyers a huge discount on services or goods they would have paid for anyway.

4. User Fatigue. I'm not saying people are going to get tired of saving money but they will get tired of receiving emails they don't want. Why won't they want the emails? Since Groupon will be forced by businesses to be more competitive with other daily dealers that will mean the coupons will not be as good (smaller discounts) which will lead to users tuning out. I realize that as their list grows they only need a small percentage opting in for each Groupon but I would argue that they will see declining returns as their lists top out (there are only so many people in each city).

5. Customer Service. This is perhaps the biggest complaint with Groupon. Since there are often hundred to thousands of people getting a Groupon it creates a real customer service issue. What's a business to do? Staff up for the tsunami and then have an HR problem downsizing when it passes? Not staff up and then have disgruntled customers who have a bad experience, tell everyone about it and never come back?

In Groupon's defense they have the opportunity to head off many of these current and potential problems. They also have the cash to do it. It will be interesting to see if they can turn into a sustainable, real company or be remembered as an interesting Web trend that couldn't make the turn.

Change Surfing- Technology and Politics

It would be easy to see the recent election as a rebuke of Obama, Democrats, Health Care, Big Government, etc. There is no doubt a good argument to be made for all of those points. But I see it differently. I see a trend that has less to do with policy and more to do with our use of technology.

During the last 15 years we have seen a stunning advance in technology. But our bodies are not as easily upgradable as software or hardware. Moore's Law doesn't apply to human beings.

We now have an impatient, ADD electorate. A nation needing Ritalin in its water.

I believe what happened in 2006, 2008 and now in 2010 has more to do with our need to change the channel than to change the country. We get bored. We want a new shiny object. Right now that shiny object is the Tea Party. In 2008 it was Obama. In 2006 it was Anyone But Bush. But our collective need for political change surfing undermines any real change.

Some would argue that gridlock is a good thing. I believe gridlock will create a second rate country unable to compete with the agile one party governments we see in China and Russia.

America is no longer willing to have hard, meaningful conversations. We don't have the attention span. Our use of technology has ruined our ability to focus. That concerns me more than wars, deficits or any hot topic of the day.

We are losing the ability to think clearly and objectively. We no longer have those quiet spaces in our lives to think.

What's the solution? I don't know. There probably isn't one since we lack the discipline to impose any real change on our behavior. "I've seen the enemy and it's us."

Most likely our ADD fueled by the mis-use of technology will only result in more change surfing in 2012 and beyond. In the end we will surf our way into the history books. Another great empire that couldn't handle its own success.

Resisting Jargon

Jargon: the language, esp. the vocabulary, peculiar to a particular trade, profession, or group.
source: dictionary.com

When used with a client jargon often creates walls and confusion. I think many in my industry use it to create a sense of value- if you understood what all these words meant then you wouldn't need me.

There is a place for it to be sure. It exists to be used as short hard for larger concepts or systems by a specific profession. But it has almost no place with clients.

We need to strip our client communications down to real language as much as possible. When we do use it we should always stop and make sure the client is following. Many times it's difficult to tell since they, understandably, don't want to look stupid.

Maybe the best way to bridge this gap is to give our clients a Jargon Primer. A glossary of terms that they can reference in case we get sloppy.

I think we can only blame ourselves when clients are confused about a process or solution. We probably speaking in a foreign language.

Hard Conversations

Consider this- whenever you feel uncomfortable about something see that as a sign of progress. If you are uncomfortable confronting something then put that to the top of the list. Ask the hard questions first. The real key to success in business, and I think somewhat in life, is being willing to have hard conversations. Almost as important is having them happen quickly. Like punishing a dog right after it pisses on the rug- the "conversation" with that dog loses all meaning within 60 seconds. If you let too much time go by you lose the clarity of the conversation- memories get fuzzy and facts evaporate. That applies to conversations with yourself and others.

The companies I see fail, or fall into decline, are often taken down by leadership that shied away from hard conversations. At the heart of those conversations are usually real truths they don't want to address out of fear. They put them off since it makes them uncomfortable and it only creates bigger harder problems to push off again later. Eventually they melt down and have the hard conversations, which have only multiplied, but it's too late. They are in a weakened position and can only confess to screwing up, they have lost all leverage. I am speaking from experience here, more than I would like to admit to.

Business rewards the brave who don't let fear sabotage potential.

Idea: Making Indy "Cool" with Cultural Micro-Loans

At a recent Meridian Institute event at the IMA there was a panel discussion that nicely devolved into asking the age old question- "How to be cool?"
The question was framed by one of the panelists- Kristian Andersen, a friend and business associate of mine.

Kristian essentially answered his own question with the equally age old wisdom of "anyone trying to be cool is well on the way to being uncool".

What an elusive thing "cool" is! The minute you grab it it slips away. But ask any kid graduating from college where they want to live and chances are you are going to hear the word "cool" used. Also, there's a good chance "Indianapolis" will not be one of the words they use. We need to change that.

Since cool can't really be manufactured I want to put forward that it can be incubated. You can make sure the soil has the right PH levels.

I think we can accomplish this by having cultural micro-loans, available to anyone with a half decent idea.

Cool is bottom up not top down. Find people, groups, organizations, that are just getting going and gently feed them. Just a little at a time as they find their legs. Think outside of the usual arts orgs or non-profits. These organizations are great but they are slllooooow. Let's fund and realize ideas quickly.

I would urge the city or an individual or some organization to set up this micro-loan system online, I know a company that can help :). Perhaps it could allowing voting on some of the higher dollar ideas. This would be like a very local Kickstarter in a way. Perhaps it could be set up where the full funding is triggered once 25-50% is crowd sourced.

Think about the huge impact this could have on the city! It would create buzz and attract artists, musicians, entrepreneurs and nerds from all around. Think of what the impact could be on our economy- the businesses that would come out of this, the tourists and talent that would flock to our city. Even if 90% of the investments fail to bring a return just a few success would more than justify the investment.