Netcore’s Profipoly Strategy (Part 4)

Netcore – 2

For any shift to take place, people need to change their minds. Therefore, the first step Netcore needs to do is to bring profitability front and centre for consumer-facing digital businesses. They need to be weaned away from the addictive drug of adtech to the business-saving elixir of martech. Good storytelling can make this happen.

  • Start with a new and memorable phrase to describe the problem. In Netcore’s case, the word I have been using is “profipoly” (profits monopoly). I tell a story about how companies like Google, Apple and Microsoft have created a profits monopoly which delivers exponential forever profitable growth for them – and keeps competitors at bay. Every business needs to aspire to become a profipoly. And I plan to show them how to do it.
  • Show how marketing has made a wrong turn by not focusing on profitable A focus on branding, acquisition, and retention has meant that growth comes at the cost of profits. I show the state of brand P&Ls (profit and loss statement), and how marketing is one of the biggest contributors to profitless (profitless or less profits) outcomes.
  • Bring in the agents of change – the breakthrough ideas and innovations. This is the exciting part of the story – where the troubled past can give way to a happy future.
  • Show the outcomes – happier customers with memorable experiences, and better P&Ls. All this can lead to sustainable profitable growth.
  • End with a roadmap and a hero – the 90-day plan (call-to-action) which needs a “Chief Profipoly Officer” to implement it.

This is where the second step comes in. Businesses need to be persuaded about creating a new role at the leadership level, the Chief Profipoly Officer, who combines marketing skills with financial finesse. The pitch to the three key decision-makers can be as follows:

  • CFO: profits now
  • CEO: profits forever
  • CMO: pathway to CEO

The CMO pitch needs some explanation. Today, most CMOs are lifers. Few make it to the corner office. This is because of two reasons. First, their tenure tends to be just a few years at a business – among the shortest across CxOs. Second, they are not seen to have the necessary understanding of finance and ‘real business’ because of their detachment and disconnect from profits. CMOs need to be persuaded that the path to becoming CEO is by becoming the Chief Profipoly Officer. This is the education and evangelism that Netcore needs to do.

The third step is to pioneer innovations to fix the funnel frictions with industry-leading innovations which “Only Netcore Can” deliver. I have discussed twelve such innovations as part of the Profipoly Stack:

  1. Catalog and Customer Data
  2. AI-enriched Catalog
  3. Large Customer Model
  4. Unistack
  5. Digital Twin
  6. Velvet Rope Marketing
  7. Unichannel
  8. Email 2.0
  9. Atomic Rewards
  10. Actions Ads
  11. Progency
  12. Earned Growth

In the martech industry, Netcore is uniquely positioned to build and deliver on all these innovations.

The fourth step is to create landing products which can get a foothold in digital businesses and generate organic inbound leads at scale. Ideas like the Profipoly Score and unique solutions like Multi-channel Inbox Commerce (across Email, RCS, and WhatsApp) can be good entry points.

The fifth step to drive the expansion to the full Profipoly Stack is to combine SaaS and Service. Just selling a cloud solution is not helping businesses make the most of its capabilities. What they need is a thin layer of services – a Progency, which combines product and agency. Businesses need to be persuaded that Netcore-as-Progency has skin in the game, which is where a new pricing model needs to come in, as I explained in Martech 2.0: Adtech-Style Performance Pricing Transformation. This alignment between outcomes and rewards is crucial for martech to garner a larger share of marketing budgets.

The sixth and final step is to address the “Who”. In its aspirations to build a global business, Netcore needs “Geo CEOs” – leaders in every country. Macquarie Bank’s innovative approach to global expansion was underscored by its introduction of its “loose-tight” approach, as explained in “The Millionaire’s Factory.” Recognising that each geographical market had its unique challenges, opportunities, and cultural nuances, Macquarie empowered regional CEOs to take the helm and tailor strategies best suited for their respective territories. This decentralisation of authority was a break from the traditional top-down, one-size-fits-all approach that many multinational corporations employed. By entrusting “Geo CEOs” with significant autonomy and decision-making power, Macquarie ensured that its strategies were agile, locally relevant, and finely attuned to the dynamics of each market. This approach not only fostered a sense of ownership and entrepreneurial spirit among the regional leaders but also enabled Macquarie to tap into local insights and expertise, driving robust growth and solidifying its footprint across various geographies. Netcore needs to imbue a similar entrepreneurial spirit across its leaders to conquer global markets, one country at a time.

This is the transition Netcore needs to make – for itself and its customers. The prize is the $200 billion AdWaste – which is many times the size of today’s martech industry. This is a unique moment in time: just as Generative AI promises to upend fortunes of companies and industries, Netcore can do the same in the world of Martech with its own profipoly strategy.

Thinks 1075

Rita McGrath and M. Muneer: “More than 80% of Indian startups don’t make it past the first 5 years and even fewer the next five. As part of a few startups that survived these two milestones, we can tell you how important it is to constantly look at your business models and make corrections while staying lean all the time. Some business models are inherently more attractive than others. Yet, oddly, stakeholders often don’t ask the obvious questions. This may be because it is perceived as either complicated or too much work. For those looking for a quick overview of what makes one model superior to another, here are some key questions…Are we able to create switching costs once we have customers?…Are we transactional or relational?…How interchangeable is our user interface?…Painkillers or vitamins?…Do we have a chance to take advantage of network effects?…Do we solve a problem once and for all, or is it recurring?”

Ron Shaich: “The most powerful responsibility of leadership in business or in any organization is to actually transform—once you discover what’s going to matter in the future. The key to most everything is, first, tell yourself the truth, where you really stand, what the competitive marketplace is. Second, based on that, know what matters. Third, get done what matters…It is important to recognize the nature of innovation in any enterprise. If you don’t innovate, you die. You must continue to stay ahead or at least keep pace with a changing marketplace. As your company gets larger, it takes more time to develop that and to get it done. Most organizations are set up with functional leaders. Functional leaders are very good at saying “no” in defending their function. The problem is, very few people say “yes.” Saying “yes” is about a fundamental commitment to where the enterprise itself is heading, not to the functions.”

Manoj Pant: “At the base of the problem is the reality that no economy can outpace the growth of its consumer base, as production and demand must match. While digital economy aggregators have been multiplying the production of services rapidly, all of them together can only sell a particular product (be it education, food, cars, etc) to the same set of individuals. As many fight for the eyeballs of the same consumer, only one will succeed (so ‘winner takes all’ is still plausible), and the rest will fail. Another symptom of the problem is the downsizing of many companies in the IT sector. The bottom-line is clear. While the size of the manufacturing sector is actually limited by the fixed costs of setting up industrial units, which keeps the number of contenders low, in the case of technology-driven aggregators, the very source of growth (low delivery costs) can also be the cause of their downfall. Maybe Freddie Bulsara, the star performer of the rock-band Queen, was prophetic. As we go along, many more digital companies are likely to bite the dust.”

Economist: “In some ways the covid-19 pandemic was a blip. After soaring in 2020, unemployment across the rich world quickly dropped to pre-pandemic lows. Rich countries reattained their pre-covid gdp levels in short order. And yet, more than two years after lockdowns were lifted, at least one change appears to be enduring: consumer habits across the rich world have shifted decisively, and perhaps permanently. Welcome to the age of the hermit…Three years on the share of spending devoted to services remains below its pre-covid level. Relative to its pre-covid trend, the decline is even sharper. Rich-world consumers are spending on the order of $600bn a year less on services than you might have expected in 2019. In particular, people are less interested in spending on leisure activities that generally take place outside the home, including hospitality and recreation. The money saved is being redirected to goods, ranging from durables such as chairs and fridges, to things like clothes, food and wine.”

The Generalist: “Zavain Dar believes we’re entering a fecund era for life sciences investing. The software and AI revolution fundamentally alters the composition of businesses founded in the sector, allowing for more capital-efficient approaches and leading to higher multiples…Zavain expects the ascent and proliferation of large language models (LLMs) to open new frontiers in biology and chemistry. In particular, advanced LLMs and other foundation models should lead to greater accuracy, finer fidelity, and emergent abilities in these fields. The result could be an explosion of new, promising treatments and therapeutics.”

Netcore’s Profipoly Strategy (Part 3)

Netcore – 1

Netcore has a unique opportunity to enable B2C/D2C businesses in their profipoly journey. In doing so, can Netcore become a profipoly?

In my essay 4M and Netcore 2.0: A Framework for Exponential Growth, I had identified Netcore’s strengths:

  • World-class ESP (email service provider) platform
  • Support for all push channels (email, SMS, push notifications, WhatsApp, RCS)
  • Full-stack customer engagement platform
  • Unbxd’s strengths in onsite search and recommendations, and AI-based catalog enrichment
  • Our India base delivers both a large, cost-effective talent pool and first customers
  • A global presence via Netcore International
  • Our profitability which has helped us survive and thrive through the years

I had also listed out Netcore’s innovations which can give it continuing power in the martech marketplace:

  • AMP in Email, to enable mini-websites and apps inside email (as part of Inbox Commerce)
  • Atomic Rewards, to provide micro-incentives for actions delinked from transactions
  • Velvet Rope Marketing, which correctly identifies the Best customers based on CLV (customer lifetime value)
  • Generative AI, to underpin all that we do
  • A synergistic and complementary “Netcore Constellation” via our investments

I had ended my essay thus: “For far too long, companies have focused on the small pool of martech spending even as the bigger ocean of adtech spending (with 50% AdWaste) has gone unnoticed and untapped. This is the opportunity for Netcore 2.0 along with its partners.”

Netcore 2.0 needs to lead the martech industry in its profipoly transition. The commoditised martech stack…

…needs to be replaced by the Profipoly Stack.

Therein lies the key to Netcore’s transformation to becoming a Profipoly.

How can this be done? How can we at Netcore reinvent ourselves with our 2.0 avatar?

Thinks 1074

WSJ: “It helps to understand how these AIs work. Two terms it’s imperative to know: “generative AI” and “foundation models.” The current generation of AIs that have people so excited—the ones doing things that until a couple of years ago it seemed only humans could—are what are known as generative AIs. They are based on foundation models, which are gigantic systems trained on enormous corpuses of data—in many cases, terabytes of information representing everything readily available on the internet. Generative AIs are the AIs that generate eerily humanlike responses to written prompts, or surprisingly convincing images, or artificial voices that sound just like the humans they copy…Between the invention of the steam engine and the debut of the locomotive, more than a century elapsed. Meanwhile, a new science was born, which in turn became the midwife of countless other advancements essential to the Industrial Revolution. If the development of generative AIs conforms to this pattern at all, its near future will include transformative inventions—AIs expert in different subjects, truly personal assistants—followed by years of refinement, mad scrambles to harness and benefit from these new technologies, and possibly another sort of Industrial Revolution. But rather than a revolution predicated on energy and matter, this one will be based on the manipulation of data and insight.”

Rainer Zitelmann: “Massive public borrowing and economic interventions by governments and central banks are exacerbating current problems by pushing them into the future. This will continue until the system either recovers through radical capitalist reforms – or collapses, giving rise to demagogues whose promises of salvation mobilize the masses and lead them into bondage.” [via CafeHayek]

Satya Nadella: “look at this new example of the inverted classroom, where people are saying, “Look, we know you’re going to use one of the LLMs, like Bing Chat or ChatGPT, for your assignments. What we want to know are the prompts. We’ll give you the answer, now tell us the prompts.” That’s critical thinking. Because you learn so much more. I think that critical thinking, good judgment, how to think in a broad way, and not being afraid to learn, could be the new benefits. I sometimes say to myself, “My God, I wish I understood more biology.” And now I can ask dumb questions and have things explained at my pace. Our ability to consume more knowledge and to grow our own knowledge base can improve. I think there’ll be lots of interesting implications from having this powerful tool.”

Rama Bijapurkar: “The truth is that consumer demand in India is not fragile anymore. It is substantial and robust, and has demonstrated the powerful arithmetic of consistent compounding growth. Yes, it is vulnerable because of Consumer India’s occupation profile, but it is now large enough to not collapse. Even when there is a slowdown in growth rate, it has enough momentum to move forward because of its large mass (momentum in physics is mass times velocity). All of Consumer India is desperate to consume everything from quality-of-life improvers to productivity tools to affordable indulgences. Poor consumer sentiment has never significantly impaired consumption. Even borrowing to consume has been morally purified. The only impediment is limited income, which is improving by the year. It is now the supply side that ails and lags. It needs to find/rediscover its animal spirits to serve existing demand and stoke demand growth.”

Mint: “Urban reforms must begin by letting Indian cities look after themselves better through far more meaningful public representation, backed by access to financial resources. Municipal bodies need greater leeway on levies for them to raise money at reasonable rates from bond markets. The private use of public zones by the well-off—think of cars parked on streets and gated enclosures of public roads—should be neither free nor lightly charged. With tech trackers available, road pricing could also be experimented with as a revenue source. So long as civic charges are progressive, with the rich paying much more, cities could find new ways to fund themselves. As our economy emerges and we hope to attract the world’s gaze as a beacon of success in this ‘Asian century,’ we need cities and towns that are worthy of being identified as among the world’s best. Things like leaky sewage pipes and bad air quality must not let us down—especially not if we aim to host mega events like the Olympics. Our urban spaces need to spiff up.”

Netcore’s Profipoly Strategy (Part 2)

Profipoly – 2

There are two tracks for digital/eCommerce businesses: products which must be compelling for end customers and bring in the revenues, and the marketing spends which generate demand (the attention-interest-desire-action journey). I will focus on marketing because this is where most digital businesses are losing the plot – and therefore the opportunity to create a profipoly.

What marketers are doing is overspending on new acquisitions and underinvesting on existing customers. Half the adtech spending is turning into “AdWaste”. The side effect of this is that there isn’t enough money left for the martech side to build deeper and more rewarding relationships with existing customers. The twin benefits of shifting spends from adtech to martech are a sustainable increase in revenues, and a reduction in wasteful spending which flows to the bottom line. The synergy of an exceptional product offering coupled with a meticulously crafted marketing approach can set the stage for exponential forever profitable growth – the cornerstone of a true profipoly.

So, how can we apply our strategy learnings into crafting a roadmap for building a profipoly?

Strategy is about choices and deciding where to play to win. The first decision CEOs and their CMOs must make is to focus on existing customers rather than new customer acquisition.

This must be followed by deploying new innovations in the martech stack: going from the conventional data, experiences, and communications thinking to focusing on increasing LTV (lifetime value), predicting next best actions, and enabling inbox commerce. [I discuss the 12 innovations that can enable this in Profipoly: Marketing’s Fourth Wave and Final Frontier. Think of this as “invention” – reinventing marketing and converting it from a cost centre into a profits driver.

Because of the over-reliance on new customers for growth, building deep relationships with existing customers is the blue ocean. Customers of a brand do not expect any differentiated experiences and thus have limited loyalty and are easily switched by competitors. What if this could be challenged and changed? What if the frictions in customer journeys could be removed? What if martech could predict the next best actions of every customer? What if martech could deliver hyper-personalisation at scale – marketing to a segment of one?

In the evolving landscape of digital commerce, the realignment of strategy is not just an option but a necessity for businesses aspiring to become profipolies. Success hinges upon deliberate choices and the execution of those choices. A pivot towards valuing existing customers and fostering deeper relationships with them unlocks a vast, often untapped potential. It’s a strategic shift from the saturated battlegrounds of new customer acquisition to the blue oceans of customer loyalty and maximised lifetime value. By integrating cutting-edge martech innovations, businesses can transcend conventional marketing paradigms, creating profit engines with deep moats. It’s a transformative journey where every touchpoint becomes an opportunity, every interaction a step towards hyper-personalisation, and every strategic decision a leap towards building a profipoly. In this realm, strategy doesn’t just shape business choices; it actively moulds the trajectory towards exponential forever profitable growth.

Thinks 1073

Skimming, scanning, scrolling — the age of deep reading is over (FT). “Digital reading appears to be destroying habits of “deep reading”. Stunning numbers of people with years of schooling are effectively illiterate. Admittedly, nostalgics have been whining about new media since 1492, but today’s whines have an evidential basis. To quote this month’s Ljubljana Reading Manifesto, signed by publishers’ and library associations, scholars, PEN International and others: “The digital realm may foster more reading than ever in history, but it also offers many temptations to read in a superficial and scattered manner — or even not to read at all. This increasingly endangers higher-level reading.” That’s ominous, because “higher-level reading” has been essential to civilisation. It enabled the Enlightenment, democracy and an international rise in empathy for people who aren’t like us. How will we cope without it?”

WSJ: ““The Cult of Creativity” comes at a technological turning point. The emergence of generative-AI tools has given us the option of outsourcing our brainstorming, becoming prompt engineers to idea-spitting machines. Will this new development erode our sense of agency in the workplace once again? If large-language models are capable of creative acts, what will be our uniquely human contributions? In Mr. Franklin’s idealistic scenario of the future, we will redirect our energy away from producing more disruptive innovations and toward a thoughtful consideration of “what should be produced in the first place.” World-saving ideas and technologies are still needed—whether they result from creative thinking or not—but “the space to question the goodness of the new,” Mr. Franklin suggests, might be “the big idea we need right now.””

Economist: “Research by Oriana Bandiera of the London School of Economics and her co-authors looked at the diaries of 1,114 CEOs in six countries, and categorised their behaviours into two types. On their definitions, “leaders” have more meetings with other C-suite executives, and more interactions with multiple people inside and outside the company. “Managers” spend more time with employees involved in operational activities and have more one-to-one meetings. Leaders communicate and co-ordinate; managers drill downwards and focus on individuals. The research suggested that firms that are run by leaders perform better than those run by managers.” More: “As firms in knowledge industries automate routine tasks and rely on the same digital tools—Amazon Web Services, Gmail, Microsoft office software—it is better management, not investments in technology, that can give them a competitive edge. Poor management can blunt it, by killing productivity and raising staff turnover. According to a Gallup survey from 2015, half of Americans who left a previous job did so because of a bad manager. Last year McKinsey, a consultancy, found that a similar share of job-leavers said they did not feel valued by their managers. The value of good management, then, is rising. At the same time, the environment in which managers do their job is being transformed. This new landscape rewards some skills more and some less than in the past. As a result, your manager tomorrow will not look the same as your parents’ did.”

WaPo: “Before they became products in their own right, Marvel movies were unusually expensive and elaborate advertisements for action figures. Ike Perlmutter, erstwhile CEO of Marvel Entertainment, developed the company into a film studio not with the aim of making good or even endurable movies, but with the goal of enticing fans to buy merchandise. More than 30 films and 20 spinoff series later, his gambit has paid off and then some. Marvel has sold a lot of toys, but it has also sold more tickets than any other franchise in history, as journalists Joanna Robinson, Dave Gonzales and Gavin Edwards document in their scrupulous new book, “MCU: The Reign of Marvel Studios.” When the trio completed the manuscript last April, “Marvel had made thirty-one feature films with a worldwide gross of over $28 billion.” (An additional movie has since been released; the company is nothing if not diligent about pumping out content.) The Marvel movies are now “the most successful film series of all time,” a fount of cinematic sugar expertly optimized for bingeing.”

Vinod Khosla: “I think the biggest problem is that AI will cause great abundance, great GDP growth, great productivity growth, everything economists love—and increase income disparity. The good news is, if [AI allows us to] change GDP growth, say, for the next 50 years, from 2% to 4%, there’s more than enough abundance to share. There’s room for universal basic income, assuring minimum standards, and people will be able to work on the things they want to work on. The need to work in society will disappear within 25 years for those countries that adapt these technologies.”

Netcore’s Profipoly Strategy (Part 1)

Profipoly – 1

A business must aim to become a profipoly – building a “profits monopoly” which sucks the oxygen of profits from the competition limiting their capacity to grow or even survive. It is the most powerful competitive advantage a business can create for itself. A “profipoly strategy” can be thought of as a set of choices to winning and continuing Power in significant markets.

I wrote in ProfitXL to Profipoly: Solving the Four Funnel Frictions: “Historically, we’ve seen several non-government profipolies. More than a century ago, Standard Oil reigned in the US, until it was dismantled by government intervention. In the 1960s and 70s, IBM ruled computing. AT&T in the US was the profipolist in telecom until it was broken up by US regulators. Many others persisted until technological advancements or strategic blunders diminished their dominance. Microsoft and Intel, colloquially known as Wintel, held a commanding position in the computing industry throughout the 1980s and 1990s, and reportedly garnered 110% of industry profits, implying a 10% loss for all others! Nokia, with its 40% market share in mobile phones, was another profipoly, which was eventually surpassed by Apple. In the adtech space, Google and Facebook have forged a profitable duopoly, leaving scant room for others. Visa and Mastercard reign payments processing, Amazon rules ecommerce and reinvests its cash flows for increasing market share. LVMH has created a house of luxury brands, allowing it to seize a large portion of the market’s profits, mirroring the concept of a “profipoly.” De Beers maintains its stranglehold on diamond trade. In India, Indigo Airlines, with a striking 60% market share, has continued to grow by continuously investing in expanding routes, causing several competitors to capitulate.”

What will it take for a digital/eCommerce business to build a profipoly? In fact, the challenge most digital businesses (especially in eCommerce) face is that they are not very profitable – a far cry from being profipolies. So, what is the strategy that can take a business from being profitless (no profits or less profits) to becoming a profipoly?

I wrote in Profipoly: Marketing’s Fourth Wave and Final Frontier: “Profipoly marketing isn’t a departure from the previous waves but rather a synthesis and evolution. The foundational branding efforts ensure that businesses establish trust and identity, while performance marketing builds on this by identifying and acquiring the most suitable audience. Once acquired, martech ensures they stay loyal. Profipoly takes this a step further by emphasising not just loyalty, but profitability. Instead of casting wide nets or even targeted nets, profipoly marketing aims to maximise revenue from the most valuable customer segments and their networks… A profipoly-driven brand will not expend resources equally on all customers but will invest disproportionately in keeping its highest value customers engaged and satisfied. This doesn’t mean alienating other customers, but rather optimising resources for maximum profit generation. Moreover, the line between loyalty programs and customer experience will blur. Brands will offer unique, hyper-personalised experiences to their top-tier customers, making them not just loyal followers but ardent brand advocates.”

Thinks 1072

Emily Badger: “There is a thing that happens in cities — that we think happens in cities — when people with lots of different ideas bump into each other on the sidewalk, or at the bar or the grocery store or the gym. Together, they think up things that would never come out of a conference room or the kind of coffee meeting that has a calendar invite. Weird new ideas take root. Innovation follows. The urbanist icon Jane Jacobs identified these collisions as central to what makes cities dynamic. Her followers think of them as the product of serendipity. Economists have their own name for the almost-magical benefit these connections create: knowledge spillovers. “The chance encounters facilitated by cities,” the economist Edward Glaeser has written, “are the stuff of human progress.” Remote work has, well, blurred this picture. Can you have serendipity two days a week? Where do people bump into one another when the downtown coffee shops are closed? How do workers spill their knowledge when they’ve moved to Montana, or the exurbs? Does that even matter anymore?”

David Brooks: “I am a grower. I do have the ability to look at my shortcomings, and then try to prod myself into becoming a more fully developed person. I have learned something profound along the way. Being openhearted is a prerequisite for being a full, kind and wise human being. But it is not enough. People need social skills. The real process of, say, building a friendship or creating a community involves performing a series of small, concrete actions well: being curious about other people; disagreeing without poisoning relationships; revealing vulnerability at an appropriate pace; being a good listener; knowing how to ask for and offer forgiveness; knowing how to host a gathering where everyone feels embraced; knowing how to see things from another’s point of view. People want to connect. Above almost any other need, human beings long to have another person look into their faces with love and acceptance. The issue is that we lack practical knowledge about how to give one another the attention we crave. Some days it seems like we have intentionally built a society that gives people little guidance on how to perform the most important activities of life.”

Donald Boudreaux: “If we exclude misanthropes, most people today can – without excessive simplification – be divided into two distinct camps: the Awestruck and the Awws. The Awestruck are unceasingly amazed at the modern world. They are enormously grateful for the countless amenities and benefits of life in the modern global economy. They are aware that nearly all of our ancestors not only did without the comfort and convenience of the likes of air-conditioning, automobiles, air travel, aspirin, automatic dishwashers, telephony, recorded music, and laptop computers and smartphones connected 24/7/365 by wi-fi to the Web, the Awestruck also realize that most of our ancestors did without access to antibiotics, artificial lighting, indoor plumbing, the ability to bathe daily, and even regular supplies of food. The Awws, in contrast, are either ignorant of how most of our ancestors lived, or they believe that our ancestors’ experiences are irrelevant for assessing the state of the world today. Unlike the Awestruck, the Awws do not compare the state of the world today to that of the actual past. Instead, the Awws compare the state of the world today to fictions conjured by their imaginations. They compare today’s reality to what they imagine to be a Perfect World. The Awws then notice an undeniable reality: As marvelous as today’s world is, it’s not perfect. It could be marvelouser. Imperfections abound. Upon noticing these imperfections the Awws, in their dismay, moan “Awww.””

FT: “[Venture Capital] is returning to its origins as an artisanal cottage industry after failing to become an institutional asset class. That suits some VC firms just fine. “Our job is to find entrepreneurs who were placed on the planet to build industries,” says Danny Rimer, partner at Index Ventures, describing VC as a “passion industry”. He adds: “We think it is a great time to invest. We love to be contrarian.”…The VC industry has been stuck on one very specific formula of funding enterprise software companies and will have to find more innovative ways of backing climate tech and industrial hardware companies, suggests Judith Dada, a partner at La Famiglia. “The venture ecosystem will evolve. Tomorrow’s successes are not going to look like yesterday’s,” she says. Just as at the top of any bull market it is dangerous to believe “this time is different”, so at the bottom of any bear market, too. But, above all, VC investors are praying for interest rates to come down, the market cycle to turn and animal spirits to revive.”

Profipoly Score: The North Star Metric

1

Measure

We exist in a world dictated by measurements and comparisons. From the moment of our birth, metrics like height and weight define us. As we progress into school, we are evaluated through marks and grades. To gain college admission, we undergo competitive exams like JEE (in India) and SAT (for US), earning ranks or percentiles that determine our next educational step. In the professional realm, our salary serves as a tangible measure of our contribution and significance within an organisation. Within our social spheres, we often find ourselves subconsciously gauging our net worth against others.

In the corporate landscape, a plethora of metrics such as profits, earnings per share, and Return on Investment (RoI) serve as barometers of success. There’s been a growing inclination among businesses to employ tools like the Myers–Briggs Type Indicator to identify the diverse personality types within their teams, fostering a deeper understanding of employee dynamics.

As we navigate through different life stages, our health metrics become pivotal, necessitating regular monitoring of cholesterol levels, blood sugar, Vitamin D, and other essential indicators. The importance of measurement extends beyond individual and organisational levels to encompass nations. Countries are evaluated and ranked based on various parameters including population, GDP, inequality, and economic freedom, among numerous other indices and figures.

Essentially, the narrative of an individual, a business, and a country is intrinsically woven around measurement. It is through these quantifiable entities that we perceive, understand, and navigate our existence, ensuring continuous growth, development, and well-being in a world that thrives on comparison and competition.

As James Vincent writes in “Beyond Measure – The Hidden History of Measurement”:

As it stands today, the world around us is the product of countless acts of measurement, their presence rendered invisible by their ubiquity. Whether you are reading these words on the page or on a screen, their finished form is the product of careful weighing and counting. The pulp that forms the paper was made using a chemical mix finely calibrated to tease apart the wood’s fibrous cells without destroying their structure. The resulting sheets were forced through gigantic metal rollers of staggering precision, squeezed to the consistent thickness you now feel between your fingers. They were cut and bound to a familiar size, before being packed, weighed, and shipped around the world. Even the font used to render these words is the product of careful measurement; every serif pruned, the gaps between each pairing of letters nudged into equilibrium. And if you are reading this in a digital format, then this chain of measure is even more complex, starting with the atomic-scale engineering of silicon chips and the carefully balanced alchemy of your device’s battery. Regardless of whether we think about it or not, measurement is suffused throughout the world; an ordering principle that affects not only what we see and touch, but also the often intangible guidelines 6of society, from clocks and calendars to the rewards and punishments of work.

… we regularly turn to measurement to fix the greatest problems in society, whether in healthcare, education, or policing, so why should we be surprised if it is capable of threatening our happiness too? This, I think, is the true beauty of the subject: its depth is hidden on the surface. Peel back that thin layer of familiarity and measurement is anything but banal. It is a complex and turbulent force that has shaped history; it has been a tutor to humanity and an overlord also. Over time, it has been the concern of gods and kings, and an inspiration to both philosophers and scientists. It is a child’s art, practised with a pencil and ruler, but also the means by which some of humanity’s greatest achievements have been orchestrated. In the final reckoning, measurement has left its mark on us all.

If businesses need to embark on their journey to becoming a profipoly (profits monopoly), they will need to measure progress. In this series, we will discuss the “Profipoly Score.”

2

Key Numbers

In a previous essay on “Profipoly: Marketing’s Final Frontier” [LINK], I had written about the need for a business audit. In this series, I will discuss the questions that Chief Profipoly Officers need to answer as they implement the innovations. The score from these questions can be the North Star Metric to help them measure progress along the transformation journey. The Profipoly Score is calculated on a scale of 100.

We will begin with 5 key numbers, each worth 10 points.

1. Profits Alpha

What is the alpha for the profits (or EBIDTA)? Alpha, a term from the world of finance, is the excess return relative to a benchmark. Scoring:

  • Same as industry benchmark: 5 points
  • Then add or subtract 1 point depending on whether the alpha is above or below the benchmark.

For example, if the industry benchmark for EBIDTA is 10% and your EBIDTA is 13%, give yourself 8 points on a scale of 10. Floor and ceiling are 0 and 10.

In case data is not easily available, estimate the numbers to the best of your ability. The reason for looking for alpha is that every industry has a different structure, so what matters is how well you are doing as compared to competitors.

2. Growth Alpha

Do similarly for growth. Same scoring as above.

3. Market Share

What is your market share of the profits pool? (If you are not able to estimate, you could do it on revenues.) Remember the goal is for a “profits monopoly.” Give yourself 1 point for every 10% market share that you.

4. Earned Growth

Earned Growth measures growth from existing customers and referrals. It is measured thus:

Earned Growth = Net Revenue Retention + Earned New Customers (ENC) – 100.

Scoring:

  • 50 or more: 10 points
  • Reduce 1 point for every 10 reduction in Earned Growth (and round-off the result).

Thus, Earned Growth of 65 will fetch 2 points, while 118 will fetch 7 points.

5. NPS (Net Promoter Score)

Baseline is 5 points for a score of 10. Add or subtract 1 point for every 10 points above or below, with 0 and 10 points as the floor and ceiling.

Thus, if your NPS score is 32, give yourself 8 points. If it is -20, you get 3 points.

Add up the 5 scores to get your mini-Profipoly Score (on a scale of 50).

Example

  • Profits Alpha: if the alpha is 3%, then you get 8 points
  • Growth Alpha: if the alpha is 1%, then you get 6 points
  • Market Share: if the market share is 20%, then you get 2 points
  • Earned Growth: if your earned Growth is 12, then you get 6 points
  • NPS: if your NPS score is 20, then you get 7 points

Thus, your mini-Profipoly Score is 29 on a scale of 50.

3

Frictions

I have previous discussed the five Funnel Frictions [LINK]. It is time to score the ‘frictionlessness’ in the customer journey.

We will begin with the 3 frictions related to existing customers, and then look at the 2 frictions associated with new customers. Each is worth 5 points.

1. Attention Recession

The ‘good fraction’ is 1%, meaning that 1 out of every 100 messages sent gets a response. Response can be defined as clicks or in-message actions. Apply this across all the channels used: email, SMS, WhatsApp, and RCS. [You could also do it for nudges.]

Score 1 point for every 1% of responses. Thus a 5% response rate will get you the maximum score of 5.

2. Red Journeys 

The ‘good fraction’ is 3%, meaning that 3% of the visits to a website or app result in a transaction (conversion).

Score 1 point for every 2% conversion. So, if you are getting an 8% conversion rate from visits to your properties, then give yourself 4 points. A 10% or higher conversion rate will get you the maximum possible of 5 points.

3. Dormancy and Churn

The ‘good fraction’ is 33%, meaning that typically a third of the database is being actively communicated to.

Score 1 point for every 10% of active customers, peaking at 5 points for 50%.

4. AdWaste

Typically, half the marketing spend on acquisition is being wasted. Most businesses tend to spend 80-90% of their budgets on new customer acquisition. The goal here must be to balance the spending between new and existing customers.

Score 1 point for every 10% of the budget that is spent on existing customers. Thus, a 30% spend will get you 3 points, with the maximum of 5 points for a perfectly balanced spend of 50:50.

5. Identity Gap

Typically, 10% of the visitors to a brand’s digital properties are known. The goal here is to reduce the anonymous traffic as much as possible.

Score 1 point for every 10% of identified visitors for a maximum of 5 points. Thus, if you have 30% known traffic, you get 3 points.

Example

  • If the messages response rate is 4%, you get 4 of 5 points
  • If the conversion rate is 6%, you get 3 of 5 points
  • If the active database is 40%, you get 4 of 5 points
  • If your martech spend is 30%, you get 3 of 5 points
  • If your identified base is 20%, you get 2 of 5 points

Thus, your Frictionless Score is 16 on a scale of 25.

4

12 innovations and 13 Questions

The final element in calculating the Profipoly Score is to track the adoption of the innovations and get a sense of the qualitative steps taken. Each Yes is worth 1 point, for a total of 25 points.

Score 1 for every innovation adopted.

  1. Unistack
  2. Large Customer Model
  3. Digital Twins
  4. Velvet Rope Marketing
  5. Catalog and Customer Data
  6. AI-enabled Catalog Enrichment
  7. Unichannel
  8. Email 2.0 powering Inbox Commerce
  9. Atomic Rewards
  10. Action Ads
  11. Progency
  12. Earned Growth

Score 1 for every Yes answer.

  1. Do you have a Chief Profipoly Officer?
  2. Do you have a system for doing the Profipoly Score every 3-6 months?
  3. Do you collect data from every customer touchpoint?
  4. Do you have a program to capture identity info for every anonymous visitor on the website?
  5. Are you collecting two identities for every customer? (An identity is like an email ID or mobile number, with right of way in the form of an opt-in.)
  6. Are you collecting name, gender, and location for your customers?
  7. Are you calculating CLV for every customer? (CLV needs to be calculated right; there are many ways to do it wrong.)
  8. Do you know the Best Customer Genome of your customers?
  9. Are you using the BCG for new customer acquisition?
  10. Is every email that you send an AMP email?
  11. Does every email have a footer with various AMPlets (eg. NPS, progressive profiling)?
  12. Do you have omnichannel recommendations?
  13. Do you have a referrals program focused on Best Customers?

This will total to a maximum 25 points.

**

It is now time to calculate the Profipoly Score by adding up the sub-scores on a scale of 100.

  • 5 key numbers (on a scale of 50 points): mini-Profipoly Score
  • Actions on the 5 frictions (on a scale of 25 points): Frictionless Score
  • Innovations adoption and actions taken (on a scale of 25 points)

The Profipoly Score is a tracker for measuring the progress in the transformational journey towards exponential forever profitable growth. It is a leading indicator for the health of the business, a metric which will indicate the capacity of a business to maximise the profits pool in an industry. The Profipoly Score needs to become as important as earnings per share and NPS in the management lexicon.

Thinks 1071

WSJ: “United will bring back a boarding method for economy passengers that it says is more efficient, hoping to shave up to two minutes off what is often a cumbersome, often contentious process.  It sounds simple: window, middle, aisle, or “Wilma.” When economy passengers board, those sitting in the window seat will go first, followed by middle seats, then aisles. Groups traveling on the same reservation will still board together…[The] airline says it can shave off up to two minutes from boarding times.”

Economist: “If luck does play a more important role in outcomes than is often acknowledged, what does that mean? For individuals, it suggests you should increase the chances that chance will work in your favour. Partners at Y Combinator, a startup accelerator, encourage founders to apply to their programmes by talking about increasing the “surface area of luck”: putting yourself in situations where you may be rejected is a way of giving luck more opportunity to strike. An awareness of the role that luck plays ought to affect the behaviour of managers, too. Portfolio thinking reduces the role of luck: Messrs Milkov and Navidi make the point that the probability of striking it lucky in oil exploration goes up if firms complete numerous independent wells. If luck can mean a bad decision has a good result, or vice versa, managers should learn to assess the success of an initiative on the basis of process as well as outcome. And if the difference between skill and luck becomes discernible over time, then reward people on consistency of performance, not one-off highs.”

Ros Atkins, author, “The Art of Explanation”: “When I feel myself not communicating as clearly as I would like to, not using precise language, with a single person, a group of people, or an audience on TV, generally, it means that I haven’t understood two things completely. “What specifically am I trying to communicate?” and “Have I properly understood the details of that subject and how I’m going to express myself on them?””

Anthony Strong: “Our restaurant is walk-in only, so we don’t pay an online reservation platform or lose money on no-shows. Our tiny menu is efficient and minimizes waste. Our product, pasta, is affordable enough to keep profit margins sufficient even during inflationary periods. Most important, guests order at the front door with the host before being pointed to their (fully set) table, which eliminates 15 minutes of profit-killing dead time at the beginning of each meal. It’s becoming common for us to do more than four turns on a table at night. The faster we turn tables, the stronger our sales are. The more we do with less, the better our margins are. Better margins enable us to price more competitively and pass on our savings at a time when everyone is feeling the squeeze; almost all of our pastas are under $20.”