Learn small, profit big

I majored in Chemical Engineering. My dad is a well-known hop chemist in the beer industry (yes, he gets free beer). To most people, chemists and chemical engineers are pretty much the same (it's only one word different!). But there's one thing that separates a Chemical Engineer from a chemist... and that's scale-up.

My dad works in a lab, working with beakers and flasks. A chemical engineer works in a pilot plant and in a plant. We take what the chemist learned in the lab and figure out what fundamentally needs to happen (transformations) to make the product we need. We do this on the lab scale, then pilot plant scale, and finally at the plant.

These transformations are the same no matter what scale you're on... for instance, "remove water" is a fundamental transformation. Notice that "drying" is NOT a fundamental transformation... Why? Because removing water is what needs to happen. Drying is only one way to do it. Can you think of other ways to remove water? Freeze drying? Sucking it out? Zapping it with microwaves?

Once we've figured out what the transformations we need are, we try to quantify it and determine what measures are the same on every scale. For our "remove water" example, the quantity may be "remove water until product has 5% water." This is true in the lab, pilot plant, or manufacturing plant the size of the moon.  In the plant, this could be a 10 million watt Yankee direct contact dryer. In the lab, it could be a stack of Bounty towels.

What's the advantage of doing all this work? Why not just run it at the plant? The reason is a run in the lab probably costs $<100. A run in the plant could cost $10K, $20K, maybe even $100K or more. There's a saying: "Make mistakes in the lab, profits in the plant."

Entrepreneurs should take that to heart. Too many "entrepreneurs" make their mistakes in the plant... Think of all the dot bombs who got $50 million in funding and failed. That's why entrepreneurship is so "risky." On the other hand there are people who start small and when they scale up just multiply everything by 2 or 3 or whatever. They don't figure out what the fundamental measures are.

For NOTtheBookStore venture, I'm trying to apply these principles. I could try to get $1 million in funding, spread it to 100 schools, and go straight to the plant. But instead I'm testing it with 2 schools, one that's 6,000 students and one that's 30,000 students. The fundamental measure I'm testing is conversion rate... i.e. how much I make per visitor to my site. I want to see if that's constant with a bigger school. This is very important so I know how much I can spend on advertising. I also learned that the marketing is the most important part right now; Facebook ads by themselves don't cut it. So I'm also testing ROI for various marketing avenues.

If I show that the bigger school has the same or better conversion, and it makes a profit, I know I have a scalable venture and can start expanding. I also know how to expand it and what marketing avenues to use. If it doesn't make a profit, I can find out by blowing only $1000 or so. I'm making my mistakes in the lab, and hopefully someday my profits in the plant.

Learn small, profit big

Re-entry after the sabbatical

I've now been back to work for 2 months now after my 3 month sabbatical. As you can probably see, one of the things that's happened is I've been able to post less. I still have tons of ideas for blog posts, but making the connection between idea and execution has been a lot harder with 10 hours a day, 5 days a week spoken for.

I enjoy the camaraderie with my co-workers back at work. I also like having all of the resources available to me that a large company has. As I'm working my project, 10-20 other people are working other aspects of it that I don't need to worry about. And the fat paycheck does wonders to replenish the hole in the savings account (before you think I'm really high in this company, I want to tell you that "fat" means fat for a single guy in a city with a very low cost of living).

But the frustration of being in the corporate world still gnaws at me. We still have functional silos that I hate dealing with. The organization chart for the function that represents the consumer and the function that represents production doesn't cross until the general manager (4 levels above me). Which means any decision that requires a trade-off between the functions must be made by someone who thinks about my project for maybe 1 hour a week. Which means we need to have endless meetings and create endless documents and presentations to frame the issue for the general manager, who then makes a call based off a high level view of the project and the company's strategies.

Enough of the complaining. One of the things I'm grappling with is how to find time to work on the outside of work stuff. Another development that has affected my free time is I'm in a relationship that has really progressed in the past few months. (She doesn't quite get the allure of blogging. When I come across people like that, I blog about them. That either causes them to read the blog, or if they don't, I can talk about them without fear of repercussion). The only goal that ranks above being financially independent is being in a great relationship and family. However, she completely buys into the vision of being financially independent, so the prospects are good for finding a win-win at some point! Meanwhile, I'm still working the balance.

Being back at work has given me the challenge of trying to find time for my own projects. The techniques I've learned about have really helped me keep things rolling, but I'd love for things to progress faster. Being on sabbatical had different challenges... it was more getting myself motivated and developing self-discipline.

Re-entry after the sabbatical

What we can learn from spaghetti sauce

This is a great speech by Malcom Gladwell about what makes us most happy may not be the "best" or ideal product - rather a more segmented approach to meeting people's needs. If I were to run this to it's obvious conclusion - I believe the web has empowered people to develop products or content to meet very specific niches unlike anytime before. No longer is the entire country watching Johnny Carson simultaneously on TV - we are instead choosing our most passionate interests from a sea of options. I think this takes power away from the "one large widget corporation" and gives numerous entrepreneurs the opportunity to be masters of entire segments of widgets.

Tipping Point author Malcolm Gladwell gets inside the food industry's pursuit of the perfect spaghetti sauce -- and makes a larger argument about the nature of choice and happiness.

What we can learn from spaghetti sauce

Tiny steps make major leaps

Pamela Slim from the Escape From Cubicle Nation recently posted a blog entry entitled Tiny steps make major leaps. The idea is very similar to a blog I posted a while back called One small step for man. Pamela compares trying to lose weight with trying to leave the cubicle world. Interesting read on Pam's take on a similar subject!

Tiny steps make major leaps

ALPHABETICAL ORDER SUCKS!

This is probably one of those things that scarred me as a kid and I've not gotten over it. My last name is in the back end of the alphabet, and how many freakin' times did I hafta go last because of the first letter of my last name? Alphabetical order is not random order! It gives people earlier in the alphabet an unfair advantage. If I contributed to a project with a team of 5, anytime our names are listed I'm last. Do people even read that far down?

Seth Godin on his blog talks about times to NOT use alphabetical order. Namely, when you're not searching for something specific. Why not order it in a way that it makes sense to? By popularity? I have an example of a different way of ordering something that makes more sense to the end user. I was recently at a new Holiday Inn hotel, and the little cheat sheet of TV channels were listed like this:

Genius! No one goes into a hotel room, picks up the remote, and goes "I wonder what's on channel 2. Or on channel 8. Or channel 45." You go "What channel is ESPN on?"

ALPHABETICAL ORDER SUCKS!

No one gets fired for punting

Last weekend, Bill Belichick, the coach of the New England Patriots, decided to go for it on 4th down and 2 from their own 28 yard line near the end of the game, up 6 points. The Patriots didn't make it, and Belichick was vilified by the press.

Was it Belichick being bold? Was it his lack of confidence in his defense? Was he thinking he was smarter than everyone else in the world?

Well it turns out, he was right. According to Advanced NFL Stats blog, going for it gave him a 79% win probability. Punting gave him a 70% win probability. So if the goal of the game was to win, he made the right decision.

Punting would have been the safe decision. If the Colts drive for a TD, the defense would've been blamed. But punting would have been the wrong decision. But no one gets fired for punting.

The corporate world is like all 29 other coaches in the NFL. People in the corporate world are there because it's safe and secure. People get rewarded for making the safe decision instead of the right decision. There are numerous times where I've pushed and pushed for the risky decision when I saw that the safe route was too risky. I remember trying to convince my boss one day to change the method of production for a new product because the current method wouldn't get us to the point of the project making money. I literally said it's like being down by 8, scoring a touchdown, then kicking the extra point because going for 2 was too risky. (Incidentally, the product has now launched, using the method of production I pushed for... you can probably get it at Wal-Mart. Email me if you want to know what it is).

In a corporation, no one gets fired for punting, even if it means a higher probability of losing the game. No one gets fired for making their employees do hundreds of man-hours of paperwork before approving funding, even if it means wasted money due to all the extra salary paid out for work that doesn't increase the chance of the project succeeding. No one gets fired for requiring a hospital like clean room when manufacturing a product, even when the product is used to clean dirt.

I blogged earlier about how small companies can take down a large corporation. Here's another way. Think like Bill Belichick. Go for it on 4th and 2 to win the game while the corporations are punting.

No one gets fired for punting

Secrets of success in 8 words, 3 minutes

Short and to the point - here's a good video about what it takes to succeed. I think while it may seem simple - I feel that each step could use a lot of focus to bring it to life.

Why do people succeed? Is it because they’re smart? Or are they just lucky? Neither. Analyst Richard St. John condenses years of interviews into an unmissable 3-minute slideshow on the real secrets of success.

Secrets of success in 8 words, 3 minutes