Daniel Priestley - Oversubscribed

Relationships can eventually be formalised through contracts. When shopping around for phone plans, people waste hours of their life trying to understand the difference between “Go Time,” “Stop the Clock” and “Mega Minutes.” When a person finally signs a contract with a carrier, something strange happens the very next day – they don't see any more ads because the carrier owns the relationship through a contractual agreement. The more contracts a carrier can sign, the more valuable and profitable it will be.

Owning the relationship is a powerful way to become oversubscribed – and there are three ways to do this:

Become more influential – Improve your ability to enroll others in your ideas and projects or align to those who can.

Become better known – Widen your appeal through media, events, publicity and other brand‐building activities.

Get deals in place – Create lasting agreements with clients and formalise them into a contract.

Market “friction” refers to the time, energy, effort and know‐how required to buy something. If it's difficult to buy something because it's far away, poorly understood or time‐consuming, the market is slowing down due to friction.

If you can reduce that friction, you'll attract a lot of customers who will call it a convenience.

When you find ways to simplify and speed up the process of buying from you, it creates a market imbalance. People buy from you because it's much easier than going elsewhere. Since the dot.comera really kicked off in 1999, we've seen many successful businesses build up because they took a traditional business into the digital world. They reduced friction or, put another way, increased convenience.

Amazon almost dealt a death blow to traditional bookstores because it made it a lot easier to buy a book. Each book is exactly the same if you buy it in a store or online but the ease and simplicity of Amazon makes it the default option. Netflix obliterated video rental stores with their approach to getting movies into your home with less hassle.

Convenience or less friction occurs in three ways:

Better distribution – When a business makes something available to its buyers with less energy, effort or time required.

Better market information – As more information is made available, market leaders give way to market followers. This also occurs when a buyer doesn't need to research options as much.

Automation – When things happen faster or on autopilot. This could be new machinery or systems online or offline.

The final way to create more buyers than sellers is to bring down the cost of production so that you can offer something cheaper than everyone else but still make a profit.

Many small services businesses compete on price because they don't have the high overheads that large companies do. They can run their business from the spare room, piggyback on market trends, use cheap software, keep costs low – and still earn a better income than if they were sat at an expensive desk in the city with an expensive brand behind them.

Big businesses used to be able to dominate low prices because they could afford to invest in plant and equipment that would create a barrier to entry. But thanks to today's “collaborative economy,” most of the plant and other equipment is available to smaller businesses when they need it and it's not their problem when they don't.

There are many smart strategies or investments businesses can make to allow prices to stay low. A small business can buy a projector rather than hiring one from a venue each month. A bigger business might find an innovative way to run its warehouse from outside the expensive real estate of the city. A service provider might find ways to strip out a time‐consuming component of their process that doesn't impact on the value a client receives.

When Andrew Lloyd Webber came up with several hit stage shows he made a lot of money, which he then used to buy up the major theatres in London. Because he owns the property, he doesn't have to write shows nowadays; if you want to get your play to run in London you will have to use his property. He can also afford to run his own plays at a lower cost because he owns the venues.

There are three ways you can reduce costs and still keep your margins:

Invest – Cleverly investing into assets that create a natural barrier to entry will enable you to reduce your costs and keep your margins. Owning your premises or buying equipment that is expensive to hire can be ways to keep prices lower.

Refine – Looking for inefficiencies where there are costs that do not increase the value to a paying customer will keep margins wide while prices fall.

Systemize – Using systems and technology rather than people is a powerful way to keep overheads low and margins high.

When establishing your business long term with a group of people, make sure they understand which of these four market positions you are strongest in. Ultimately people want to keep coming back to you because you offer them something fresh and new, you're their most trusted ally, you're super easy to deal with or you're relatively cheaper than everyone else.

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