Cooperate With Strangers And Volunteers And Help Unemployed People Start Complementary Businesses
This article explores three sources of cost-reducing help that most businesses ignore: strangers, volunteers, and unemployed people. Think of the unifying themes for this lesson as helping to overcome the unattractiveness and tradition stalls. Let’s begin by considering what strangers can do to help your enterprise reduce costs for all stakeholders through applying zero-based analysis to providing the minimum core offering.
How can strangers be most helpful in identifying and making cost reductions? If you are asking yourself that question, this section of the lesson will be quite an eye-opener.
Although there are many possible ways that strangers can help you, I want to focus on just one useful quality of strangers: some of them already know how to reduce your costs and those of your stakeholders by 96 percent. All the answers you need are already present in the minds of some people whom you have never met (and who may have never heard of you or your enterprise).
Why do some strangers know the answers? They have backgrounds and experiences that are different from yours, but that are very relevant to your circumstances.
For example, extremely difficult chemistry problems are often solved by amateur physicists. Such solutions come from this unexpected source because chemists too often limit themselves to chemistry-based solutions, which are just one part of the spectrum of potential solutions. Rather than seek another type of expertise to find possible solutions, many chemists go over the same ground… again and again.
Considerable research has been undertaken concerning how strangers help find solutions to difficult problems. If you would like to read more about what has been learned, I recommend a book that provides an overview of some highly effective practices, Crowdsourcing (Crown Business, 2008) by Jeff Howe.
Let me focus on just two of the newer applications from that book for working with strangers to create exponential cost savings. The first application is to hold a contest to look for a solution to a significant problem in which all contestants are allowed to see details of the best proposed solutions to date and to suggest their own added improvements to those solutions. When this approach was used during a contest to find the fastest way for a salesman to make all of his sales calls, the ultimate solution was 1,000 times better than the best initial solution. Why? Many people can see ways to slightly adjust an overall solution to make it much better. As the posted solutions improve, more strangers become intrigued by the challenge of making useful improvements to the excellent solutions that have already been proposed.
Such experience is consistent with what I have learned about 2,000 percent solutions. Each time you repeat the 2,000 percent solution process, you can create a twenty-times-better solution to the last twenty-times-better solution. Such a repetition creates a four-hundred-times better solution. If you are looking at costs, that means reducing costs by more than 99 percent. How’s that for saving money?
You probably don’t feel as if you have the time to develop 2,000 percent solutions for reducing every aspect of your organization’s costs… and then to repeat the process. If that’s the case, you can instead “hire” strangers to do the work for you.
Typically, such stranger-directed solutions are developed through widely publicized contests that recognize and reward those who create the best solutions during a short amount of time (usually two weeks or less). Most people who enter do so in part to learn something and in part just for the fun of it… so tangible rewards don’t have to be very large. Most small businesses can afford to sponsor such a contest. It’s a good idea to spread the news of your contest as widely as you can through social networking sites relevant to the people you want to reach.
The second newer approach for working with strangers to make huge cost reductions is by encouraging amateurs to suggest solutions. Although many organizations and people are succeeding with online contests that involve professionals, it turns out that there are hundreds of times more amateurs with helpful capabilities for making cost reductions than there are relevant professionals. The most capable amateurs will usually come up with better results than the professionals do. Such an advantageous result seems to occur for two reasons:
1. Solving most difficult problems requires the fresh perspective of highly intelligent people more than a narrowly expert or experienced background.
2. Diverse sources of perspective are very valuable (as I noted in describing the other new method, letting people see and improve on each others’ solutions during a contest).
From the early 1970s, many organizations have found the best innovations by involving large numbers of people who were from seemingly unrelated backgrounds and who were also strangers to the organization and its offerings. I also suspect that another reason such amateur strangers do well is that they aren’t limited by professional blinders that eliminate considering most alternatives.
One of the benefits of working with amateurs who are strangers is that the recognition and rewards they want to receive can be quite modest. Amusing t-shirts are often considered by amateurs to be enough reward.
To find out how well this method can work for you, take your highest cost area, write a description of how you do things now and how your process affects other stakeholders, and underwrite a contest to find a more effective, more desirable, lower-cost method. Once you’ve had your first success with this kind of contest, you’ll be ready for more!
What’s the key cost-reducing point about working with strangers? You can use zero-based analysis to create 2,000 percent cost-reduction solutions by cooperating with strangers to provide the minimum core offering in ways that will almost instantly expand your profits after implementation by reducing your and your stakeholders’ costs by more than 96 percent or increasing social benefits by more than twenty times what you will be spending.
Mention the word “volunteer” and many people think of those seeking donations for nonprofit organizations. In the online world, some people think instead of those who contribute content to and spend time editing entries for Wikipedia.
What do volunteers and for-profit businesses have to do with one another? “Too little” is the cost-reducing answer. The tradition stall causes us to accept what has always been as arbitrary limits to what can and should be done. “If it ain’t broke, don’t fix it” is the well-known mantra of many stuck-in-the-mud adherents to the “wisdom” of blindly following tradition.
The potential use of volunteers to assist for-profit businesses has often been blocked by the tradition stall. To understand how big this stall is, you should realize that even many renowned management authorities such as Peter Drucker (who often talked and wrote about how much for-profit companies could learn from their nonprofit kin) never mention the idea of staffing or relying on volunteers to operate or to improve for-profit businesses.
But we should all know better now. Why? Some successful for-profit businesses are based on volunteers donating their efforts. Consider teetonic dot com as an example. (Visit their site now to get a better grasp of what I’m describing.)
Designing tee-shirt images has been a favorite activity for young people since shortly after the first tee shirt was made. When teaching small-business classes, I often encounter students who want to design tee shirts for a living. They are daunted, however, by the prospect of selling what they design. Many imagine themselves traveling from one flea market to another peddling their offerings from their automobile trunks. Implementing that marketing strategy doesn’t excite the would-be designers very much.
The managers of the site, teetonic dot com, had a better idea. The organization started out by offering free contests for people who wanted to submit designs.
Many companies would have stopped there and simply sold the designs that its owners and managers liked best. The management of teetonic.com was, however, committed to involving as many volunteers as possible. They also chose to have volunteers vote to determine the best designs.
With volunteers designing the products and picking out which designs to make, what’s left to do? You just have to apply the designs to tee shirts and to sell them. In the case of teetonic dot com, these activities are more profitably accomplished by only offering limited editions of the winning designs. And who buys such tees? Why, the volunteers, of course!
The organizers of teetonic dot com aren’t abusing these volunteers as it might seem at first glance. The contest winners receive a free tee shirt in their design, a cash prize of one hundred pounds sterling, and a royalty payment of 50 pence for each tee shirt sold carrying their design (5 percent of the retail price). Runners-up each also receive a free tee shirt.
According to Crowdsourcing, the pretax profit contribution on sales for teetonic dot com is about 80 percent (or 8 pounds out of every 10 pounds paid). The “volunteers” in total are paid only about 6 percent of the company’s profit contribution from a tee-shirt sale. That’s pretty nice for the company, isn’t it?
Without using volunteers, other tee-shirt makers typically earn a profit margin on sales of about 6 percent before income taxes. Using volunteers handsomely pays off in slashing costs for the tee-shirt makers by adding more customers, taking the risk out of how many tee shirts to produce, and eliminating almost all marketing and distribution costs.
The company’s founder decided it was time to cash out his ownership a few years ago and sold the business for about $150 million. That’s not a bad profit for simply organizing a few volunteers.
As good as this approach seems, the company’s business model can still be improved on. If you instead work with an information product that can be downloaded for almost no cost from the Internet, you are able to enjoy such favorable economics and slash both prices and costs by over 99 percent. That’s just what istockphoto dot com did with stock photographs.
On this photographic Web site, photographers post their images and receive credits based on payments made by others who download their work. Such credits can be used to pay for downloading other peoples’ stock images. In this way, designers who are also photographers custom make your own dress online can use many photographs for no out-of-pocket cost. In addition, such photographers enjoy the pleasure of having others make more use their work.
If you don’t have such credits, you can simply buy them. Before istockphoto dot com became popular, downloading most photographs cost only $7.00 to $14.00 compared to several hundred dollars at other stock-photo sites. Many professional photographers were surprised to see their incomes rise by using the site, despite the low prices, due to their stock photos being selected so much more often for presentations and simple brochures.
1. Determine which offerings to provide.
3. Create your offerings.
5. Market your offerings.
7. Provide services for your offerings.
What do you need to do in return for the volunteers who help you? Here are a few suggestions:
2. Improve the quality of the offerings they can access.
4. Make it easier to use the offerings.
6. Give prestige to volunteers.
8. Give volunteers ways to earn income for high-quality efforts.
By using inexpensive automated software on the Internet, it should be possible to develop a billion-dollar enterprise that’s totally operated by volunteers. Why not? Are you ready?
What’s the key cost-reducing point about working with volunteers? You can use zero-based analysis to create 2,000 percent cost-reduction solutions by cooperating with volunteers to provide the minimum core offering to almost instantly expand profits after implementation by reducing your and your stakeholders’ costs more than 96 percent or increasing social benefits by more than twenty times.
How Can Helping Unemployed People Start Complementary New Businesses Contribute to Reducing Costs for all Stakeholders by 96 Percent?
When one of my small-business classes was filled with workers aged fifty-five and older who had lost their jobs and hadn’t been able to find new ones, I became aware of the opportunity to engage unemployed people with an organization that helps them to start complementary businesses. Despite being unemployed, each person impressed me as above-average in intelligence, detail-orientation, and desire to succeed. Although all of these people wanted to find jobs, they realized that their best bet was to start a new business.
All of them immediately perceived that they should find a way to make their businesses complementary to better-established entities. For instance, one couple wanted to start an online retail business to sell quality briefcases and luggage. They did not intend to manufacture the items, but simply to market goods that others would supply on a drop-ship basis. (Orders would be sent electronically from their Web site to the manufacturers who would pack and ship the items from their own facilities.)
One woman wanted to provide custom party favors (little gifts for guests to take home). She intended to have others design and manufacture the favors; her company would help party givers select items and pick the right suppliers to serve those needs.
These business models would require limited capital for the new organizations because they would have no fixed location, no inventory, and no staff. Customers would pay for the items before they are ordered from suppliers. All the day-to-day work would be provided by the business owner, as supplemented by a few suppliers and some simple software.
I later read about a variation on such an approach. A different online tee-shirt company decided to refocus itself to become a custom manufacturer for anyone who wanted to sell tee shirts. Rather than just produce and market the top choices after an online design contest, this company would produce and market tee shirts for everyone who wanted help. This business model is a lot like what online print-on-demand publishers do for book authors. In the process, an unemployed (or underemployed) tee-shirt designer can arrange to have a few tee shirts made and offered online without having to spend much money.
As I thought about such examples, I realized that my unemployed students didn’t lack energy and enthusiasm… they simply lacked some of the necessary knowledge to be successful. Since most organizations could use more people selling or developing the market for their products, one obvious opportunity for such organizations is to help unemployed people earn some money by offering or educating people about the organization’s offerings and enterprises. To succeed, organizations should focus on filling in knowledge and experience deficiencies that might keep unemployed people from being effective on their behalf.
For instance, a luggage manufacturer could provide Web hosting and a Web-site template that would allow people who wanted to sell its merchandise to get into business at less cost with a nicer-looking and easier-to-use Web site. The manufacturer could also make it easy for the new business to attach its own brand to the offerings. A party favor provider could offer to make customizations for each of these new online vendors who purchased a minimum number of any custom item.
I also found that the unemployed people didn’t know much about finance, taxes, accounting, or business processes. Manufacturers could also set up service organizations to provide such functions for the new businesses either on an inexpensive fee-for-service basis or at no cost for those who buy enough offerings.
One of my university students discovered another opportunity. Unemployed people are often eligible for government programs that can be used to establish new businesses. By lending his technical support to villagers in India, the unemployed people there were able to establish a cooperative that could borrow money inexpensively from the government as well as purchase farming and manufacturing supplies at lower prices. A supplier could have performed the role that my student did. In fact, the supplier could probably have found volunteers to do such work at no cost to the supplier.
This cooperative is interesting because the student added a lot of basic educational activities to its purposes so that all the members would be creating and applying 2,000 percent solutions to virtually all of the cooperative’s business activities. Such a cooperative could probably afford to hire one person with expertise part-time to provide whatever technical knowledge the local people were lacking whenever volunteers could not fill the gap.
There are a lot of programs to help reduce unemployment. I believe there will be even more such programs. Now is a good time to investigate how you could unleash an army of highly motivated, properly trained people to advance your company’s interests as owners of complementary small businesses.
While I’ve focused on marketing or purchasing opportunities in this section of the lesson, it may also be that you need people who will customize your offerings, provide service, train people to use the offerings, or perform a variety of other related activities. Consider how you could profitably facilitate and assist unemployed people to start businesses that will also serve such needs.
What’s the key point about helping unemployed people to create complementary new businesses? You can use zero-based analysis to create 2,000 percent cost-reduction solutions that allow you to benefit from helping unemployed people start complementary businesses that assist in providing the minimum core offering in ways that will almost instantly expand your profits by helping reduce your and your stakeholders’ costs by more than 96 percent or increasing social benefits by more than twenty times of what you will be spending.
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