Today I want to give you a new way of looking at our Rule Breaker companies... and by extension, at your Rule Breaker companies. A new look, in fact, at any companies operating in business today. It is from the standpoint of Simplicity Marketing.
Those words are capitalized because they come to us directly from the new book, Simplicity Marketing, by Steven Cristol and Peter Sealey. What I want to do is apply their thesis to the world as a Rule Breaker sees it. As we've identified in our book Rule Breakers, Rule Makers and in our many online scribblings for years now, good marketing is behind the success of most Rule Breakers. For this reason, I like marketing CEOs. And I believe that the difference between a good technology company and a bad one is often not the technology, but its marketing. Same for what separates two competing retail companies, and within a host of other industries as well.
Let me first present tonight's thesis, stated in my own words:
George Orwell worried about a dystopia in which humanity unwillingly lost its freedom to a single overlord, Big Brother. But -- surprise, surprise -- communism and State rule are disappearing from our world, replaced by decentralization and the Internet. Government -- let alone dictatorship -- grows less powerful as the days while by.
Instead, there was something else all along that Joe Citizen needed to watch out for, a crippling force that has snuck up on you and me and surprised us. Willingly, not unwillingly. In fact, it's the opposite of Orwell's overlord.
It is overchoice.
The growth of technology and commercialism has led to a world that asks us to make far too many decisions. Take just toothpaste: There are now 37 varieties of Crest toothpaste!
Tube? Pump? Mint? Gel? Tartar control? Baking soda? Original? You want fries with that?
Toothpaste is one of 30-60 decisions we make in a typical grocery store visit... to say nothing of deciding about long-distance phone providers, 401(k) plans, schools for our children, insurance policies, what to watch on TV tonight, which cell phone to use, why one discount broker is better than another, how to program this VCR....
The authors of Simplicity Marketing suggest that the businesses that will succeed will be those that provide us simplicity in our lives. The successful companies will be those that help us as customers answer the question, "This, instead of what?"
"This, instead of what?" means a product or service effectively replaces one or more choices we had to make before we found that product or service. It's either a superior alternative (the substitution of ATMs for bank tellers) or a consolidator (turning numerous choices into one -- in Foolish terms, an index fund instead of a portfolio of 12 "diversified" funds). "Replace" is one of the four R's in a simplicity marketer's toolbox, which also includes Repackage, Reposition, and Replenish. Tonight, I'm concentrating on Replace.
Let's look at a few of our companies. (Do try this at home, by the way.) Here's a quick review:
Amgen (Nasdaq: AMGN): Amgen's blockbuster products, Epogen and Neupogen, replaced less-efficient and less-comfortable treatments. The stimulation of blood-cell growth brought about by these products enabled patients to receive a more powerful injection fewer times a month. "This instead of what?" clearly exists with Amgen's core products in its market. Grade: A+.
Amazon.com (Nasdaq: AMZN): Amazon has "This, instead of what?" written all over its website. The company delivers the products to you, instead of you having to drive out and find the products. That's the nature of e-commerce, which has a huge "This, instead of what?" replacement savings of time and hassle. Amazon further provides you with personalized recommendations that I at least find very helpful when I'm trying to make my next purchase across a number of product categories. (I'm pretty sure I'm not the only one out there.) On the other hand, Amazon's main page has become a commercial swamp for new customers; what was once a bookstore is now a congeries of products and categories all screaming "Buy me!" with needless "percentage growth" of hot products on the page, etc. Simplicity is there, I think, for old customers, but not so much for new ones. Grade: A-.
Excite@Home (Nasdaq: ATHM): When it works, this company has a great substitution: broadband for narrowband. For those comparatively scanty few who've so far adopted the service (versus those presently using dial-up), Excite@Home provides a much more pleasing Internet experience. Assuming the company can deliver it to them. (I'm still waiting, guys. I'm crying out to you via Cox Cable that I want your service and you don't return my emails.) Grade: A for replacement technology, C- for marketing it effectively, D+ for meeting customer demand through deployment, F for merging that excellent, simple business with a second-tier search engine whose name inexplicably appears in the corporate title and continues to divert management (what's left of it) focus.
You probably know enough now to play the game at home. It's a great game to play! It speaks to two Rule Breaker attributes: a company's ability to market through branding, and a company's sustainable advantage.
I believe we will see a growing movement, a longer-term trend, away from commercialism and toward simplicity. I want my Rule Breakers to be serving that, contributing to it, benefiting directly from it. You may wish to take a look at simplicity in your own life. Get in the habit of asking, and living, "This, instead of what?" Master the very real limitation of your finite time and finite capacity for choice.
Fool on!
David Gardner
