Episode Transcript
[00:00:00] Speaker A: Value based pricing is bullshit.
[00:00:02] Speaker B: What is the magic, the secret sauce that these companies have that mean that we don't have to like do our little song and dance number which you'd normally have to do as an agency?
[00:00:11] Speaker A: The strategy has no substance is what I got from that. And I think there's the claim of the claims. We care more, we want it more, we're passionate about it, but ultimately it's not factual, substantiated. Like what is something I can poke at with a stick.
[00:00:24] Speaker B: First of all, you have got like big, big chunk of founders who are not doing strategy at all, period. And if you say that you're the best, but your business is not earning outsized profits or it's not growing at the rate you want it to grow or whatever else, then I can just say to you, well, so how's that being the best serving you? Apparently it's not serving you. Great.
[00:00:45] Speaker A: Tell me the name of the book because I can't seem to remember.
[00:00:48] Speaker B: Oh, it is no bullshit strategy.
[00:00:51] Speaker C: Yo, Mike check what's up everybody? You're listening to the Street Pricing Podcast, the only show where proven SaaS leaders share their mindse and mistakes in pricing so we can all stop guessing and start growing. Enjoy, subscribe and tell a friend. Now let's break it down with your host and sought after slayer of bad pricing, Marcos Rivera.
[00:01:13] Speaker A: What's up and welcome to the Street Pricing podcast. I'm Marcos Rivera, author, founder and CEO of Pricing IO and today's guest is Alex Smith. He's the founder of Basic Arts and a black belt in detecting bullshit. I want to introduce you, Alex, welcome to the show there.
[00:01:28] Speaker B: I've been thinking my LinkedIn handle isn't very good, so I'll just use that one instead.
[00:01:34] Speaker A: This is gonna be a lot of fun, man. I read your book, I'm gonna, we're gonna get all into that stuff. But for the audience here today, can you just tell em real quickly who you are and what you do?
[00:01:42] Speaker B: Yeah, sure. So I am, Slash was a strategy consultant, you know, classic sort of business strategy porter kind of stuff and wasn't a particularly distinguished or successful one.
But I, through various means that we can get into if you want, I managed to stumble across a way of talking about strategy which made it much more sort of graspable and appealing and understandable to the sort of people, let's say, who are not going to read a textbook or do a Harvard mba and who, which is to say the vast majority of founders and who therefore were kind of locked out of good Strategic techniques and wisdom, which ultimately is a crime. You know, 99% of people running businesses don't know the first thing about strategy, given that this is actually kind of their fundamental responsibility. So now I sort of see my role primarily to, you know, democratize strategy, bring it to the masses and actually get people to start doing it in a half decent way.
[00:02:45] Speaker A: Love it. Love it. I think there are some fundamental skills that entrepreneurs and folks starting businesses just are missing when they're getting out there. I love the being locked out of. Locked out of wisdom. Right. Is kind of the thing that we're fighting for. When I wrote my book, that's exactly why I did it was just to get people to think about pricing, just even in the fundamentals so they don't make any silly mistakes. So in doing this, you wrote a book. And tell me the name of the book, because I can't seem to remember.
[00:03:10] Speaker B: Oh, it is no bullshit strategy.
[00:03:14] Speaker A: Sarcasm detected. Right.
[00:03:16] Speaker B: Which, which might I add, like all of like 2 seconds thought went into that. It was literally, what is a book that I can write in under a week? Because I thought, well, no one's going to read this. Whatever the easiest thing to write is, that's what I'll write. And then I can tell everyone I'm an author and. Yeah, but isn't that always the way? It's the decisions that you put no energy into somehow turn out to sometimes be the best.
[00:03:37] Speaker A: Yeah, absolutely. And I have a copy right here and you can see the bullshit in red italics on the font. So my kids are walking by, I have this book on my coffee table and my kids, my 6 year old daughter looks at it and she starts giggling. Okay. And she's like giggling. I'm like, what are you guys laughing about? And I go, daddy, what's the name of the book you're reading? Trying to get me to, you know, very good. Say bullshit out loud. And they're just having a good old time with it. But no, I had a great time reading it. Short, sweet. I think I punched it out in a quick flight from San Diego to San Francisco. Super short and quite actionable. So I want to unpack some of that stuff here in a minute. But before we get into this, I want to lay out a quick structure for the audience. So this podcast is based on the book street pricing. And normally I go through a rewind portion of a story play what's going on today? And then a fast forward. What are we seeing in the future? I want to derail that today a bit because I want to see what happens when you get a pricing expert and a strategy expert in a room and start jamming on stuff. Right. I also believe strategy and pricing are just, they're just inescapably linked. Like they have to work together and they have to jive if you really want to succeed in business. So I wanted to open things up a little bit different here today and talk a little bit about some coffee and where you're from. Judging by the accent, you hail from what, New Jersey, right? That's kind of what your accent's telling me.
[00:04:56] Speaker B: I wish, I wish. Got to get over there soon.
London.
[00:05:01] Speaker A: And so you're probably sitting in a, in a, in a, not a cafe, maybe a pub in London. I need to know the moment that it clicked for you. Like man, strategy is just pure bullshit. Where did it click for you?
[00:05:10] Speaker B: Yeah, so I, the shortest, most efficient version of this is that I went and became a quote unquote strategy consultant without ever having worked under, in an organization that does strategy, without ever having worked under someone who does strategy, without ever having done any form of course or qualification on strategy and without ever having even read a book on strategy. So it was completely made up system that in my old job which was in a sort of ad agency, I kind of started to intuit that, look, sometimes we get clients that come along where you don't really have to do much creative thinking in order to like make this thing look good and persuade people to buy it. So I became very fascinated with, you know, what is the magic, the secret sauce that these companies have that mean that we don't have to like do our little song and dance number which you'd normally have to do as an agency. And I started to develop all of these, what I thought were very original theories around the characteristics of these businesses. Now little did I know at the time that all I was doing piecing together in a sort of reverse engineered way, the sort of orthodox best practice strategic thinking which you would find on an MBA course, which you would find if you read Porter or Blue Ocean strategy. Any of this stuff, I'd never heard of any of that. I didn't know that was a thing. So I was very, very pleased with myself because I thought that, I really thought that I was inventing this whole new body of thought. And I did this TEDx talk which did pretty well because it got picked up by TED as the video of the day. And I got all this lovely comments on it and it and some. But there was one comment that was not lovely and some bastard, he comes in there and he says, oh, this is basically the Blue Ocean concept versus the Red Ocean concept. And I was like, what are you even talking about? What is Blue Ocean like? I mean, this is how clueless I was because I was already like, pitching myself as a sort of expert, as a solo consultant by this point. And then about a year, a year later, I got around to reading the book Blue Ocean Strategy. God, everyone's just going to think I've ripped this off. And obviously these are just universal concepts, right? Nobody invents strategy. You just put labels on the same quite easily observable patterns that are going on in business. Blue Ocean is a great label, and all I'd done was just put different labels onto the same underlying dynamics. So I was very, I was very sort of annoyed about this because I thought, oh, okay, fine, so I'm not actually this, like, once in a lifetime genius.
But then what I realized is, well, hold up a second. If I quote, unquote, strategy expert have never even heard of the number one selling strategy book of all time or any of the other stuff around it. No wonder none of my clients have either, because, all right, fine, it's news to me, but it's also news to all of these clients. And I was like, isn't that insane that, like, this stuff, like, you know, Michael Porter and things like that, which I think, you know, how can you run a business without having read that stuff? The fact of the matter is, is that nobody reads that. It's not a very entertaining book. It's not very good book, is a fantastic piece of strategy, right? But it's not like no one wants to read it. And I realized, well, well, damn it, like, although it wasn't my intention, I've generated a new set of sort of techniques and language which people do actually sort of enjoy and chime with. And then obviously the opportunity opened up to me to think, think, oh, well, okay, so this is, this is my role in the market. Not that I haven't really put it this way, but I'm strategy for dummies, so.
And then when I, when I sort of figured that out, then everything kind of started to fall into. Into place. And so then everything that I'm doing in my business now is directed at getting that accessible, fast, enjoyable, etc. Form of strategy into people's hands.
[00:08:49] Speaker A: Excellent, Excellent. So initially thinking you stumbled upon something, you really stumbled upon something where you just really needed to unpack it a little bit further. And so my. I'm curious though, because there's, you know, you wrote the book, you have clients, you're growing, you're doing good stuff, you're probably using it on yourself is my guess. Is there an element of your strategy that you feel like is kind of the hard part or the tricky part that you think most entrepreneurs are people trying to implement the no bullshit strategy framework you think they're going to trip up on? Maybe you could step us through a little bit of like the big tenets of the framework. Like what is, how do you really do this stuff? And then where do people trip up?
[00:09:24] Speaker B: Sure.
So we can think about it in terms of just like chunks of the market. So first of all, you have got like big, big chunk of founders who are not doing strategy at all, period. Like, I mean it just doesn't even come into their head even necessarily the word.
And they are the ones who are, and we're talking 50% here. And these are the ones who are like 100% reactive in what they do and very much just jumping onto the new, fighting today's fire. And frankly, and you can run a reasonably successful business doing that. I'm not saying that that's going to kill you. It's not ideal. But this is the day to day reality of a lot of businesses. So we move past them, then we move into the next chunk of founders who are thinking in terms of some degree of strategy. In other words, they're thinking in terms of how is this business going to win. So they recognize the basic idea, which weirdly the other first 50% haven't even thought of this, this next chunk. They realize, okay, well look, this business has got no God given right to succeed. We actually need, there needs to be some sort of reason or hypothesis or game that we're playing which is going to make us grow and succeed and to some extent beat our competitors.
So that's already big progress if you're at least thinking that basic, asking that basic question. But most of those founders then fall at the next hurdle because they develop what I call better strategies. Which means their strategy, when all is said and done is just some variant of doing what they're competitive to do, but doing it better. And it's a very natural trap to fall into because it's very logical. We think, well, you know, the market will reward the best one, will it not? And if I am the best, then I will win. But this is this, although it seems on the face of it logical, it's just crap from top to bottom. So the first place, the first reason it's crap is because, well, everybody is obviously, well, for the most part, everybody's trying to be the best. And you don't really have any, you don't really have, generally speaking, any reasonable claim to being the best in any truly objective sense. And a lot of companies, they sort of overrate their own abilities and they underrate their competitors. So firstly, they're probably not actually even the best in the first place. But even if they were, it still doesn't work because if you say that you are the best X, whatever that, whatever that thing is, or what you're really saying is that you're the same as everybody else, just a little bit more. And the market, it can't differentiate between a group of options that are fundamentally providing the same value, that are fundamentally providing the same service. And when you get into that kind of dog fight, the one that wins is going to be, generally speaking, the most famous one, the one with the, with the best contacts, the one who's prepared to spend most on marketing, or the one who's prepared to cut its prices most aggressively. Now, unless you happen to be like the Coca Cola of your category, like that's not a game that you want to play. That's obviously a margin sapping profit sapping. So this is where you then basically just start to gradually commodify and you enter a race to the bottom trying to be better than your competitors. Long story short is a race to the bottom. So that is what. So that most common variant of strategy that screws the next 40% or even the next 49%, the remaining tiny group of people are the ones who are starting to, to some extent figure it out, which are the people who realize that the market never rewards the best, the best X. The market only rewards the only X. Obviously if you put yourself into a position where you are the, you are the only such and such that does such and such, if people want that thing, then you're the only game in town and then you can be very profitable, et cetera, et cetera, et cetera. Now, I say that like that, super easy. There's a whole stack of difficulties of arriving at that position.
But in terms of just like why the most people fail, it's because of those first two reasons, either not doing it at all or having some variant of better strategy, which is in essence a false strategy.
[00:13:20] Speaker A: I think a lot of entrepreneurs are probably their ears perked up a little bit because they probably either on their website or in their pitch deck or somewhere says saying we are better than XYZ or whatever it is, or we're the best at that. And you're sort of now taking, you know what. Yeah, but that's. That strategy is crap. And the main, the main thing is being better is what I'm sounding. What it sounds like is the incremental of being better. There's a lot of subjectivity behind it. It gets kind of blurry and fuzzy and it's really hard to like really, you know, plant your stake into that and win. And ultimately what ends up happening is the ones that win are the ones that either just spend more on marketing, cut prices, different things like that, and use other tactics to get the attention, which in most cases are not sustainable in, in your point of view. When you're talking to someone who is, or listen, who thinks that their product or business is better than the next guy. How do you get them off that track? Because that's probably. They've been chanting that every day. It's probably somewhere also in their office wall posted. How do you get them off of that? Because I think that's essentially calling their baby ugly. But it's, but you know, but it's not going to take them far. So I'm curious to know that there's probably some founders you've worked with or some entrepreneurs that are like, no, I'm better. That's why I'm good and that's why I'm, I'm winning. How do you get them off of that track and maybe reframe it a little bit? Because I think it's powerful. I think it's really powerful to go from better to only. But I just think that some people might, might go down, you know, kicking and screaming.
[00:14:49] Speaker B: Well, the first point to say is that if they are winning, then no big deal then, then it's working. But I mean, obviously, like by pure force of statistics, most businesses aren't winning. Most businesses have some sort of problem and some sort of like hill they're trying to get over. And I think you can normally trace it back to this issue. So let's again remove the people who are winning because then I'm like, fair play. Okay, yeah, so it does work.
So then after that, I mean, it's not even to say that they aren't the best. Maybe they are. You don't actually even really need to enter that argument because the real argument is that even if you are the best, it's not going to pay you any strategic dividends. And if you say that you're the best but your business is not earning outsized profits or it's not growing at the rate you want it to grow or whatever else, then I can just say to you, well, so how is that being the best serving you? Apparently, apparently it's not serving you. Great. Another thing that I think is important to do to sort of pop that bubble is if someone says that they're the best at whatever kind of generic value offering in their category is. So I mean, let's just say that you are a restaurant or something and you say that we have like the best service, something like this. The next question I would ask is, well, okay, how do you quantify that? How do you, how do you prove that? Because often these claims are really more sort of wish fulfillment claims than they are built on any hard innovation. So any form of differentiated value that any business offers, again, this is, this is, so much of this stuff is just common sense, right? But like, it's common sense that people never really think about until you sort of shove it in their face to say, all right, you're offering some form of differentiated value. You say that you are better at whatever.
Explain to me the specific innovation that you have that none of your competitors have, which therefore delivers that. And so again, if you have a customer service claim, for sake of argument, it's reasonable to expect that if you're saying that it's better, there must be something that the business does which is unique, that generates that, that result.
And then people, they don't have anything because they'll say something like, oh, well, it's because we care more or something. And then you're actually just like you're substantiating a claim with another claim. You're not substantially engaging a claim with a fact. Now there's this energy company in the UK called Octopus Energy, you know, electricity and gas. And they actually do have a massive strategic advantage built on customer service, which is very unusual. But luckily for them, customer service is so bad in that category that you can actually do that, you can actually play this game. And when you say to them, well, hang on, like, what is the hard factual innovation driving that? I mean, they've got loads of stuff. But to give one example, you go to Octopus Energy's website, there is a phone number there. You, right there, not hidden. You call that phone number and there's not a single push button menu. It rings and a person picks up the phone and that is it. They're not even one push button menu. You compare that to all their competitors who you have to be on the phone for like two hours to get through to a human being. This is a seismic, revolutionary innovation in that category. And this is why there is actual substance to their claim. And there is genuine hardcore differentiation at play. You compare that to a company who says, says, well, our advantage is customer service because we care more.
There's no comparison. So generally speaking, yes, when you throw that challenge at people, the claim starts to sort of collapse under its own weight.
[00:18:04] Speaker A: Yeah, I think that's really fascinating, A. That there's a utility company out there that actually picks up the phone. I think that's fascinating, number one. But number two.
And that's also in the uk. But number three, that there's a.
It's interesting that the strategy has no substance is what I got from that. And I think there's the claim of the claims. We care more, we want it more, we're passionate about it. Right. You hear a lot about that, but ultimately it's not factual, substantiated. Like, what is something I can poke at with a stick?
[00:18:32] Speaker B: Exactly.
[00:18:33] Speaker A: And. And I think that that's massive because when I think through folks that are trying to do pricing and pricing their product and trying to be differentiated from the others, and I would ask them questions about their market position. Are you the premium product? And they go, yes, yes, we're the premium product in the market. I was like, okay. And so they go, well, we want to charge higher prices because we're the premium product. So great. Tell me why you think you're the premium product. Because we care more, because we're passionate, because we love what we do, because this. But nothing really that sticks out as the, you know, like. Like the one core thing that you can poke at with the stick. So if you had to help someone go from, we love it, we care more, you know, we're passionate about this, to something they can poke at with the stick. My sense is that's the point where they start to maybe struggle a little bit to really point that out. Right. What is that? So is there a framework or exercise you go through? And I'm setting you up because there was something I read in your book about this, this Dolly Parton method, which I'm like, what the hell is that? What is that? What does Dolly Parton have to do with. With freaking anything around strategy? Right. And so, you know, enlighten us a little bit. Like, how do you start to really break this down and. And hone in on that? No bullshit, like, differentiator that makes you only instead of better.
[00:19:48] Speaker B: So we're starting from the position of like knowing that we need to be the only. And you know, so you need to offer the market something that it wants clearly, but number two, that it can't get anywhere else. So very, very difficult needle to thread. You need to think, well, where are we going to get that idea from? And so the best sort of practice kind of advice that you'll always get online and everyone thinks this is, this is probably the one thing that I talk about that I get the most pushback on because people do not like hearing this. People will basically say, well you got to talk to your customer, you got to list, listen to your customer, you're going to learn from your customer, blah, blah, blah. Now talking to and understanding your customer, etc is very important, I'm not going to deny that. But it's not a good source of strategic innovation because most markets, and there are exceptions in tech and stuff like that, I'll just, I'll just put that as an aside. Sort of emerging markets, but most markets are basically very, very well served and all of the customers needs are sort of or stated needs are well catered for.
Because if the customer was sitting there saying, my God, I really wish that we had X and none of the people were offering it, well someone would come along and offer it and then it would be gone, wouldn't it? So you're not just going to speak to the customer and like have them just give you like this gift wrapped, give us this and we will give you money and you will ride off into the sunset. But that's what people sort of think is going to happen. But unfortunately that, that's like in the sort of late capitalism that's kind of in the past. The markets are much bigger, too mature and they're much too, and they're much too well serviced and you're very unlikely to find something which your competitors aren't also finding. So this sort of like linear, obvious approach to finding this offer is pretty ineffective. You need to then have a more, a more sort of like lateral way of arriving at something original. And the way that you do that, broadly speaking, is that instead of asking the customer what their problems are and then solving that problem, in which case you're probably not going to find a fresh problem. And you're also. And even if you do find a fresh problem, you're not going to be clever enough to come up with a solution to it because no one else could come up with a solution to it, you do the reverse, which is you establish some form of novel solution or sort of new value Offering new way of doing things. And then you ask what problem, what hypothetical problem could this solve for somebody? So it is actually very much a sort of solution in search of a problem approach. And of course you're not always going to find a problem, but you will much more than you think. So you're essentially generating arbitrary difference or you're looking for arbitrary difference that already exists within your business. And then you're sort of saying under what circumstances could this generate value for the customer? And this is how then you suddenly come up with a new form of value, a new thing to offer the customer, which the customer was not asking for because it just never entered their brain that it was like a thing. But when they see it, it doesn't mean that it's not a real problem. It's just like the, the solution creates its own need. And we actually see the vast majority of sort of big strategic success stories, companies generating need where no need existed before. So you don't need to, there doesn't need to be an, there doesn't need to be a need that's not being answered. You can actually create the need. So I'll be just very basic example just to illustrate the principle. One of my favorite case studies is the Nintendo Switch. The Nintendo Switch and the world's number one console. How did they get there? I mean, I'm not too sure what conversations they had internally, but dynamically what the Nintendo Switch does, which is different from the PlayStation and the Xbox, first of all, is that they recognize that they are very, very underpowered. Like Nintendo is much less good at creating a powerful high performance console than Sony and Microsoft are. And that is the main battleground that Sony and Microsoft are fighting on. Who can have the most awesome like online gaming experience, et cetera, et cetera. That is the core of that category. Nintendo were miles off that. So we could say for sake of argument that Nintendo had this innate inbuilt difference. We could even say weakness compared to the status quo of the category. So going to the Dolly Parton quote, find out who you are and do it on purpose. Nintendo could observe themselves and say, look, well, at the end of the day we are not as good as our competitors at producing something with very high performance. Right? This is where we're starting from. First glance you're like, well that's not good, is it? Because like high performance is good. Why would people want to buy a low performance console? And on the face of it you're like, well they wouldn't. But this is where you then are Trying to pull that thread and say, right, under what circumstances could this, could this actually be good? What sort of customer, what sort of situation could this create value in? So obviously everyone knows that the low performance actually enabled them to make a smaller machine, which meant they can make it portable, which meant they could unlock a whole new form of gaming, party gaming, in person gaming, which PlayStation and Xbox have sort of moved away from. And then Nintendo suddenly have this white space in the market and they become the world's number one console. And I want to also stress nobody was really asking for what Nintendo gave them. We can't say that like they did. Some focus groups and people said I wish someone would make a console like this and then they made it. But it's also just commonsensical to see that, well, hang on, if we make that thing, I can see why people would want that. So this is just like, I'm just using this to illustrate a universal pattern of how you generate new value in a category where you, you draw it out of pre existing differences, disagreements, weaknesses, quirks that you didn't even necessarily intend and then you connect them to a customer team.
[00:25:14] Speaker A: I want to take a quick pause here to ask you for a huge favor that'll mean a lot to me. Please review and share the show. Share it with your team, your friends, your peers. Not only will it help them stop the guesswork in pricing, but it'll also help you and increase the chances that you'll take action and change for yourself. All right, much love. Now back to the show. That's fascinating because there's a lot of reframing in that, right? Which is a weakness, a quirk, something you're already kind of doing, maybe just as a natural consequence of your, I don't know, skills, competencies, like whatever that is or what the business is doing and or limitations like you said, which I think is really powerful, that maybe something that you're looking at as a weakness or limitation could actually be reframed as an. Only that really matters to a specific group for a specific reason. And I think that might be the ninja move that maybe a lot of folks are thinking about. Right. And so I guess one way is, is really, I'm taking it just by that example. You have to really self reflect on, okay, what do we actually naturally do really well or not, right? And sort of kind of break those things down, which I think a lot of folks don't realize. And maybe they're busy chasing another competitor and saying, oh, we're not as fast as them, we need to be faster or we're not as robust as them, so we need to add more features. And they're probably chasing without actually taking a moment to sit back and realize, what do we already naturally do really well on our own, based on our own circumstances and that whole mix. Right. Which can be very different company to company. And then how do we sort of pull out and accentuate and, you know, maybe our own little category out of it? Clearly there's probably a few steps in between. Clearly. But it's a very powerful framing because you're probably wondering like, well, you know, I am a CRM, you know, solution out there in the market, or project management software, and I want to be as good as this next guy or the bigger guy. But that may be the wrong approach in thinking about how you really pull yourself apart and pull yourself and stand out, I should say.
[00:27:08] Speaker B: Yeah, yeah, exactly. And I'll add one little thing, just because conscious of sort of like a tech audience, that there's one other consideration here where something I see that tech audiences do wrong. A lot of what I've talked about is sort of going from the frame of you have a generic product in a sort of generic category where people understand the category and you're undifferentiated. So, you know, like, I sell socks and everyone knows what a sock is, and I'm just another sock and blah, blah, blah, commodification. Now, there are some companies and you get more of them in tech than in other places where the first thing they'll say is, they'll say, well, we are, we're completely unique. No one does what we do. So there's a lot. Tech companies are a lot more sort of loosely defined. And so there's a lot more uniqueness going on in there because there's a lot more innovation going on there. And so they think, well, Alex, we've got this all figured out because, like, we are quite literally the only, you know, widget that does this thing, this thing and this thing. So they think, oh, well, I'm on the road, I'm on the easy street. But then suddenly it doesn't work. And the reason it doesn't work is it's for the same reason, but like a mirror image, like also like a photo negative. Every single business to be bought, it needs to end up in this sweet spot which we can call familiar but different. Every single, like, successful business people can say, oh, this is like thing that I know, but it's a little bit different in such and such a way. So you Know, it's sort of, it's 80% generic, 20% something fresh. And even in, like, tech, you know, let's take Airbnb, like, very, very novel concept. But as far as the customer is concerned, they're sort of thinking of it like, oh, it's like a hotel, but not a hotel, you know, so they're sort of starting from that frame. And then Airbnb just has to take them on this little, this little jump to its new concept. What you get with most, what you get with most tech companies is because they have not rooted what they're doing in something that is well understood by their customer. They are sort of floating around in the ether and they're very, they're too weird and they're unbiased. So actually being too innovative is just as bad as being too generic. Because you, because people just don't know how to frame you, box you, categorize you, and it's just like, oh, it's just too much effort. I just can't be asked. I mean, there's a reason that, you know, AI has been presented to us as a chatbot, right? I mean, like, it's, there are, I think there are other conceptual ways that could have been packaged for us, but as it happens, it's been packaged as a chatbot, so we get it. So it's, oh, it's like WhatsApp, but not. So the tech companies, a lot of the time, they have this reverse problem. And what they need to do is not find a way to make themselves more weird and more differentiated. They need to find a way to make themselves seem more normal, safe and more normal and safe. So they need to essentially find a category, a well understood boring category to latch onto. And not only latch onto, but also push against. Because when you're pushing against those norms, you need to have norms to push against. But if you don't exist in any pre. Existing category, there's nothing for you to push against. You're sort of pushing against thin air, so you're not getting any traction. So I just wanted to just point this out with a consciousness of the, of the tech audience that, who might be sitting there thinking, oh, well, we're so unique that, like, this isn't. This is, this is not, not an issue for us.
[00:30:07] Speaker A: I think that makes perfect sense, though. I mean, it doesn't. When you, when you first you wonder, like, what is he talking about? Like, of course I'm unique. I, I'm the only one that has this code base. What do you mean? I can Only do this, right? But. But I think if you take it a step further, right, People like familiar. And there's always a saying I do in pricing, which is a confused mind never buys. And you're bringing something to light for me, which is a bored mind never buys. And so you kind of want this. This in between, right? Of just enough intrigue, but not enough to confuse the hell out of them. Right. And just to get them there. And I think that's the balance. And when I do pricing, it's all about striking a balance, a blend of how simple you make it, how flexible you make it, and not go too far in the extremes. And it sounds like in strategy, you don't want to go too far one way or the other. Overly generic, overly innovative, but something that is maybe meaningful in terms of what you can do super well and what they really want and trying to match those two things up. So if you had a. I bet you get this all the time, right? Because I get people, you know, throwing their pricey models at me and say, hey, can you break this down? Tell me how to make it better?
Have you. Do you get people that show you their strategy and say, hey, Alex, can you break this down to make it better? And if it does happen, then what are some of the BS detectors? And you know, like, oh, this is bullshit. I can see right away because they're using these words or don't, or missing this thing or anything you can give us on trips to assess. Because I bet you folks are listening, probably wondering, like, huh, is my strategy bullshit? So what kind of tools and tips can you give them to break it down?
[00:31:36] Speaker B: Yeah, sure. So we already talked about the better issue, so you have to, like, get over that. And even when people are conscious of that, I've noticed they're actually very hard. They're very bad at discerning when they're making that error. So that's the first thing. The next thing, which I sort of touched upon just a second ago, but I want to sort of really emphasize is that, like, I really strongly believe that every strategy needs to be rooted in what's normal. So in a established category. And so if you haven't done that routing, then the rest of the house of cards kind of falls apart. So if people aren't telling me, look, we are basically a blur thing that you understand.
And then building from that, it's very hard then to evaluate the strategy and whether it's going to work. So that's the next issue. And then structurally, you need to. My big Breakout came from a post I did about how to write a strategy document. And this was a big viral post. And that's sort of like when everything kind of like changed for me. And so people, people obviously really vibed with the idea. And a big part of that is that a strategy is not like, if you actually think about what it looks like, it's. It's not a phrase or a sentence or whatever. What it is is, it's an argument. It's a narrativized argument. A bit like the closing statement that a lawyer might give in a trial or something like that.
So you need to actually write your strategy as a little essay or a little story. And the shape of that story is always going to be something like, here's the status quo, here's why it sucks, here's what we've noticed that no one else has noticed, here's what we're therefore going to do, and here's the value that that generates for the customer. Boom, boom, boom, boom, boom. That is a strategy. If you want to see, like, so I've created this, I've got a template as like a lead magnet, which if you, if you subscribe to my newsletter, you, you can, you can get the template. So you can literally just put your thinking into this template because it needs to fit in this template like that. But if you want to see like the, the single best real world piece of strategy ever written, so you just get a flavor for what good looks like, then you need to look at the. You need to Google Tesla's secret master plan, because it is good. Because most companies do not share their strategy publicly, but in 2006, Elon Musk did. So this is a blog post, it's a bit longer, but you only need to pay attention to like the first four paragraphs. So we're talking like, you know, 400 words or something. And you read that and he literally just lays out what I said, just what I just said. But for Tesla, it's uncanny how everything, the way he lays it out is exactly what happened. So it all came true. This is before the first Tesla was even launched. It all came true. And you see two things. Firstly, you see that strategy needs to be laid out as an argument, not a statement or even a story. You might also say, not a statement. And then what you also see is just how insanely simple it is. And I'm like, if this was good enough to build not only a multibillion dollar brand, but a multibillion dollar category, because obviously they actually basically created The EV category, it sure as hell is good enough for your own mind to bit business. Just a couple of paragraphs of text. Just saying what I just said before. Here's what's stupid about what's happening now. Here's another idea. Here's what we're going to do. Off we go. It is that simple.
[00:34:53] Speaker A: Simple and powerful. I'm thinking about that, that reframing the. And I'm going to Google that. The Tesla secret master plan. Check it out.
[00:35:01] Speaker B: It's amazing.
[00:35:02] Speaker A: Read that. But, but ultimately the argument thing is really powerful because now you're sort of taking a position, right? There's a point of view, something out there is either broken, it's not working, or this is what you know, it's not good enough. Whatever that is, you can solve that in this unique way and therefore move on like that. Those that structure, I think in those different dots, I think make a lot of sense and I think is an exercise that most folks don't do, right?
[00:35:27] Speaker B: I think they just think about it this way. Like I say that like a business that is not generating new value, that didn't exist before that business existed, that business has got no right to exist. That business shouldn't exist, in my opinion. I know it's a harsh thing to say, a harsh way of putting it, but like all you're doing if, if you're not generating new value is you're just like, you're polluting the pool, you're diluting the pie, mixing my metaphors, you know what I mean?
And you're just trying to like hoover up a bit of stuff for yourself. And it's not very effective and it's not very generous. And all of our businesses start that way. I'm no different. We start our businesses for selfish reasons because we want to be our own boss, because we want to have all the money, whatever. But you need to then start to think, well, damn it, like, this business needs to earn its right to exist. And it's only going to do that if it generates new value. And it's only going to generate new value if it identifies and attacks a flaw in the status quo. And if you don't, if you're not doing that, then what are you doing? What are you doing? I question.
[00:36:26] Speaker A: I think that's a very valid question. I think most folks listening today should probably ask themselves, what are you doing? And are you able to add new, meaningful, familiar value to a category, again, in a unique way and be able to capitalize on that? Or are you? I love The I love the comment. Are you hoovering up a little bit for yourself and moving on? Which, and by the way, if that's, that's what you want to do, then fine, then just, let's just agree that you know, don't, don't expect your business to be a multi billion dollar brand or category.
[00:36:56] Speaker B: Exactly. We, it is what is a very good point to just like really point out that number one strategy is optional. It's not essential. There are plenty of unstrategic businesses who are performing perfectly well doing the kind of the vampire game on their categories. And like it's. That is fine, that does work. But exactly, exactly what you said just there. You won't be what we might call a sort of meaningful or high impact or massive brand doing that, but you could still have a very nice, profitable, functional business.
We should, we should definitely be clear on that.
[00:37:30] Speaker A: Absolutely. No, I think that's really strong takeaways for someone to think through, you know, initially, you know, am I just better or best stepping away from that being very clear and then connecting those dots on where that, that space is for them that they can fill again naturally. They obviously don't want to try to do something they're not very good at and differentiate on that. That wouldn't be a good strategy. And then going through that, I think that template and taking them, you know, some time to sit down and think it through and write it is a great exercise for anybody listening today. So I think all those very punchy, think, you know, Dolly Parton, you know, find out who you are, do it on purpose. Like all that is I think super essential for anybody listening today who wants to get ahead because the software space, let's face it, a little crowded and can a lot of folks popping in overnight, you know, somebody over a weekend can code something and compete against you. Right. So you have to be really crisp on who you are and what you do. I do want to take us into one different direction before we wrap up here. Is notion of value based pricing and something that you said that, that caught, that perked my ears. I want to dig into this for everybody listening. He said value based pricing is bullshit. I gotta, I wanna give a little bit of airtime to this because this is, this is something that is core to a lot of pricing communities. Value based pricing, the holy grail. And you're saying, you know what? Yeah, yeah, yeah. But I think it's bullshit. I want you to air out your argument on why value based pricing is bullshit.
[00:38:57] Speaker B: Well, so first I'll Start by saying that like, I really don't know anything about pricing and I really want to hear hear your well thought through views on this because obviously like, you know, pricing then does come clearly as a consequence of strategy. But I'll be honest, it's something that I always just kind of leave to someone else and I think, oh, someone will figure out, figure out that side of things. So I don't have a lot of sophistication around it. One thing I have found is that so obviously I'm in the consultancy space where value based pricing is a big deal and I will concede that some forms of service or product, their effect can be quantified in such a scientific way is that I get it. So like, if you can say that like, you know, our new call answering system will save you X amount of hours, which adds up to Y amount of money and then we charge 10% of that money, isn't that reasonable? Blah, blah. I sort of get that if something is like incredibly quantifiable in a very sort of binary way like that, but I think very, very few things adhere to that beautiful principle. So then after that, like, I mean, for my own stuff, and I'm not talking for like all of my other projects, I'm just giving you my own experience because it's just quite funny, I ultimately just discovered that I suppose people would say that this is a form of value based pricing if you really want to argue the toss. But, but basically like the rationalistic argument over like okay, if, if you do X, then it's going to give you Y dollar value. So it's reasonable for me to charge whatever is completely impotent to compared to the much more intuitive like sniff test of like, does this feel like the amount of money that I would like to spend on this thing? So what I was telling you before we got on the call is that when I launched this sort of little, this little video course about my sort of like strategy methodology, and I launched it at $700 and I sold one in the first two days, I was like, well this is just like a complete and utter disaster. So I had no shame. I was like, all right everyone, price drop $369 and I sold 250. So like now I would argue that in terms of the value of the product, there's no meaningful difference between those two prices. But I think that in terms of just the way it hits people's pockets and their sort of emotional reaction to it, I think it's obviously, is obviously extremely different and what? You'll, what you'll, you'll laugh. I think because, like, my only experience to, like, pricing is the, what is it called? The Van Westendorp model. You know what I'm talking about, right?
So I actually ran that for my product beforehand and it actually spat out something like 300, 320 as the optimal price. And that model is all based on just asking people, what would you feel comfortable spending? So it's a very emotional model. And so what do you know? Turns out that it was actually because I then overruled it because everyone was saying to me, that's too low a price. This is much better than that. This is worth so much more. Imagine what this could mean to someone's business, blah, blah, blah, blah. As far as, like, yeah, yeah, I'll charge 700. Why not, like, and got greedy and then. Nope, actually it's just like, basically that. That much more lizard brain reaction to the pricing. And it's the same thing with my consultancy now. I used to be all like, you know, charging a different price for every company. And obviously, like a billion dollar company has got more upside than a $10 million company and getting all clever with that. And in the end I was just like, screw it, I'm just going to pick a number, which I think I'm happy with. And I know that basically people will think, yeah, that sounds about right. And I'm just going to say, that's the price and I'll do whatever. And off we go. And is this right? Am I leaving money on the table? Maybe, but this is just my personal, like, shoddy experience with, with pricing.
[00:42:34] Speaker A: There's something there, though. Let me, let me give you my quick one on this one, because I do think that value based pricing is from a framework perspective all makes sense, right? You charge value, you exchange it. Even Warren Buffett said, you know, price is what you pay, value is what you get, right? All this kind of fun stuff, but in reality, is it, is it real? And I'll give you a very simple example. If someone were to say, hey, Marcos, how much would you be willing to pay for a slice of pizza? All right, I would say, I don't know, a couple bucks, four bucks, five bucks, whatever it is. And what's my brain doing is I'm not looking for the value based price. I'm not quantifying the value that the slice of pizza gives me. And the cheese and the gooeyness and the heat and the crust and all that. I'm just thinking generally, right? With my brain Other pizzas I've had, I've eaten, paid for, you know, general. My general framework, the context around the pizza as well. I might also want to pay more if I'm starving versus if I'm full. Right.
So I actually love the idea more of context based pricing than value based pricing. Love it, love it. Right?
[00:43:32] Speaker B: That's great.
[00:43:33] Speaker A: And so there's this notion of value informed. Sure, you got to understand your value, all that good stuff. But I think when it comes to people paying money, money for things, I think they just really kind of. They use a lot of their. There's a lot of psychology in this. The short of it is, I don't want to go off on a tangent, is that I think it has to feel right for them to pull out their, their dollars or wallet or credit card and pay for.
[00:43:54] Speaker B: For it.
[00:43:54] Speaker A: And I think that is overlooked by a lot of, you know, spreadsheet optimizations and sciences and all this other stuff. That's not how people buy stuff. And I think if you want a price just for the intellectual, you know, curiosity of it, great. If you want a price to sell things, you got to factor in the psychology. So that's where for me it's more about context and about value.
[00:44:13] Speaker B: Beautifully put. Yeah, no, I think that, I think that's exactly spot on. So taking it back to my, to my course product before, I think that just like, yeah, a big part of it was just like people know how much this sort of thing costs. And even if I'd created the most ultimate high value generating course in the world, you can't really get over the fact that people think something like this should cost something like that.
[00:44:40] Speaker A: Awesome. Awesome. Well, we're going to drop the mic on that one. I want to give you an opportunity though. There's something I love to ask everyone on the show that comes out.
It just helps humanize them a little bit more, get to know him a little bit as a person.
So I want to know, what is your favorite jam? Your favorite could be a song, could be an artist. That's okay too. What's your favorite jam growing up that you could just listen to over and over and over? What is that song and why? Growing up or now, I'd say growing up, if you can't figure it out now is okay too.
[00:45:13] Speaker B: Bonus point one was Hendrix in particular.
In particular probably Voodoo Child. So that I think that's quite respectable for a teenage boy to be into that. But you want the truth. I think the one song that I probably listened to more than any other back in those days was always by Bon Jovi. Absolutely.
[00:45:32] Speaker A: Oh nice.
Very very cool.
[00:45:37] Speaker B: I mean obviously you then over listen to these things and now you hear it and it's like an and it's lost the magic. But.
But yeah that's that's the true answer.
[00:45:48] Speaker A: I love Hendrix and Joey and little known secret about me actually is a lot to to Bonjour when I was growing up too. A lot of people don't know that they think I was pure hip hop. But no.
Listen Alex, I want to thank you for coming out here dropping some knowledge bombs around strategy. I think this is core to the success of a lot of businesses. I'm glad you you broke it down in a no bullshit way. Here's kind of how you think about things and here's why. Your beautifully laid out elegant Strategy on your PowerPoint slide may not be the best strategy for you. So giving everybody something to think about. So one thing I want to do also is remind everyone like look, Alex is someone that can really break through just the fluff and so I would recommend following him on LinkedIn. Visit Basic Arts. Download that template. Check it out. I think it's time well invested. All right. Willing to come back, Alex, on a future show anytime.
[00:46:41] Speaker B: Love it.
[00:46:42] Speaker A: Awesome. All right, Alex Smith from New Jersey. Just kidding.
Listen, a founder of Basic Arts, thanks for coming in today. And audience, please, I want you to take this information, take everything you learned and just take a step forward. Get 1% better, try it out, move away from that guesswork and start doing your pricing on purpose. And remember, you want to stop guessing and start growing. Until next time, thank you and much.
[00:47:07] Speaker C: Love for listening to the Street Pricing podcast with Marcos Rivera. We hope you enjoyed this episode. And don't forget to like and subscribe. If you want to learn more about capturing value, pick up a copy of Street Pricing on Amazon. Until next time.
