The business world is changing very fast right now.
Transparency and global marketplaces are the catalysts.
There's no room left in 2012 for average, or even good, products.
Just three or four years ago, making a good product was good enough. In fact, a lot of the business thinking at the time focused on knowing when to stop investing in a product and get it out the door.
"Perfection is the enemy of progress," I would tell folks. The MVP (minimum viable product) and lean startup movements are great for learning -- but there is nothing MVP about an iPad or Ridley Scott film.
However, with radical transparency built into marketplaces like Apple's App Store*, Yelp**, Metacritic*** and GDGT****, consumers instantly decide if something is
a) an insta-buy
b) an insta-pass (i.e., non-purchase)
c) an insta-delay (i.e., wait for more info)
* I'm a shareholder & device holder
** I'm a power user: http://calacanis.yelp.com/ (but not yet elite, so follow me)
*** I select my movies by Metacritic score and won't see anything under 80 unless it's sci-fi.
**** Bought seven devices in 30 days for $1,500+ based on GDGT Score -- and I'm an investor and board member. ]
We're moving to a world where founders either win it all or win nothing.
A world where restaurants like 800 Degrees and Milo Olive have a line out the door while nearby empty restaurants enter death spirals that only Gordon Ramsay can reverse.
Here's what’s happening:
1. Preternatural consumers (PCs) will never engage without deeply consulting a rating system.
2. PCs feel it's their giri to support the superlative while protecting mortals from that which is common.
3. The early majority of consumers trust the ratings systems, and although their tastes are not as refined as PCs and they are disinclined to write a review, a portion of them will take the time to parrot what the PCs are saying.
4. The late majority and laggards used to consume what was in front of them, but even with their lack of innate refinement, they understand how to consume a "gun" versus an "upside-down gun" histogram (more on the gun to come).
No amount of marketing or gamesmanship is going to flip the upside-down gun over. If your product sucks, it's over. Transparency is a bitch.
Now, how do we account for consumers still going to TGI Fridays and Olive Garden--the purveyors of mediocrity? Well, in some cases it's that the other choices haven't made their way to the 'burbs, or folks want the cheap, but over time, better choices at similar prices will make their way to the back of the adoption curve.
Twenty or 30 years ago, the idea of uncivilized folks ordering a latte or cappuccino every single morning was unthinkable. Frack! The idea that the uncouth would know the difference between the two beverages was absurd. Truck drivers and high-school drop-outs regularly order macchiatos these days -- in the 90s in New York City I had to explain it to waiters!
You see, in the old days, it was about distribution, location, marketing spend, celebrity endorsement, traffic buying or the black art of search engine optimization.
Today it's about getting a positive net-promoter score and making your five-star histogram look like a gun: a lot of five-star reviews coupled with some four-star reviews make the barrel. A dramatic drop-off to three stars, followed by slightly fewer two- and one-star reviews, makes the handle of your gun.
The quantity of reviews, of course, reinforces this pattern.
How many times have you seen the gun in the App Store and just clicked "buy" without thinking about it?
Now, how many times have you seen a histogram that looks like an upside-down gun and run for the hills? Exactly.
If the handle is up and the barrel is down, or if the product has only a handful of reviews, folks are running from your product.
Impact on Talent
The end result is that a hit product becomes a megahit. The distribution curve of people's attention is getting more extreme. "Words with Friends" and "DrawSomething" are so much more appealing that they get 98% of their marketspace. Just like the 800 Degrees pizza joint in Westwood has a line around the corner while seven other three-star places have 2% of the turnover.
The world demands excellence and has the ability to exile the average with a one-star review.
If you're good at what you do (a three- or four-star contributor) you're actually the same as average (two or three star), and you're much closer to bad (one star) than great (five star).
It's five stars or nothing today.
Steve Jobs knew this, and that's why he fought to have great people in his company and not the good. He knew that a phone rated a 10 was 100% harder to make than one rated a 9 -- and 200% harder to make than a phone rated an 8.
Not only that, Jobs understood the importance of aesthetic appeal--the importance of NON-FUNCTION. His biography tells the story of the craftsmanship on the "side of the fence or computer that nobody ever sees" being as good as the forward-facing parts.
What this means for startups is that the world has no place for good, let alone average, contributors.
For founders, this means means the uncomfortable and the sometimes emotionally scarring process of pushing good team members to greatness -- or firing them. Getting from good to great is very, very hard.
If you are an average contributor, super likeable, have balance in your life and you do your job well, then you're startup kryptonite.
If you have someone who is average, I suggest you do what I've started doing: offer to give them a reference to work at your competitors. I seriously did that recently. I liked someone a lot, they were really cool and really smart, but they set their target in life at doing "good work" and having balance in their life.
If your target is good, you'll hit average and sometimes good. That means no one will care about your work. The person left and is happier in their life, and I am happy to open the seat for someone excellent.
Now, the difference between being good and great isn't the amount of hours you work (although that can correlate), and it's not based on life versus work balance primarily. The key difference between good and great is effort and intent. If your intent and effort is targeted at excellence, you've got a much better chance of hitting it than if you're trying to do a good job.
The upside of aligning your organization around excellent effort and intent is that you either inspire or scare the average and good people to move up or out. It becomes really clear what's expected, and the bonus is that if things do go really well, you can align rewards with this success. Things like stock options, free lunches, salary or benefits come from profits eventually -- even if today they come from investors in many of our startups.
As much as folks want to believe that the startup world is getting more balanced, it's actually getting more extreme. Revenue, valuations and attention are becoming more polarized. Winners will be anointed instantly in many cases -- sometimes growing from the pivoted carcasses of the dead.
The age of good has ended and the age of excellence has begun.
Heck, you're seeing this in the investors themselves. It's becoming clear which angel investors and VCs are awesome thanks to AngelList, Quora and TheFunded.
What does all this mean in the big picture? Well, I'm not sure but my sense is the following:
1. Unemployment will get worse. Good, average and okay contributors will land in one bucket: zero impact. Zero-impact work will be sent to the lowest wage locations -- and the places with the fewest worker rights.
2. Excellent people will become a magnitude more appreciated and compensated.
3. Teams will get smaller but be able to reach extraordinary outcomes.
4. Angel investing will become absurdly more binary. It's already hit driven, but we'll see single hits make uber-angels (Peter Thiel's Facebook investment comes to mind).
5. Polarization of wealth will result in increased civil unrest as "good people" wonder why their "good work" results in little to no recognition in the form of jobs and compensation. We're seeing this already with the okay and "below okay" workers. There simply isn't work for them, and faced with no job prospects a (hu)man can become bitter. That bitterness can then push your job performance lower.
I don't make a judgement call on any of this. In many aspects of my own life, I consider myself good, not excellent.
These trends are making me recommit myself to excellence in everything I do -- and in trying to do a little less but better!
I've started looking at every project with my name on it and saying, "How can it be better?" and "How can I get another half-point on the five-point rating system?"
At the LAUNCH Festival -- which is the largest and best of its kind by people I respect -- I fought like a maniac to get $1.7M commited in investments so that founders and investors would consider the event excellent, not "good" like in previous years. Folks came out of it saying it was the best event they had ever been too. We're sitting in our office discussing how we can be more responsive to startups we accept to LAUNCH Education & Kids in June -- as well as how awesome we can be to the ones we reject from pitching (aka the back-of-the-fence companies).
At Mahalo, I'm obsessing over the apps we're making and trying to get them to a 10 / 10 in design, content and knowledge transfer. I'm having uncomfortable battles with producers over individual shots in seven-minute videos and the mnemonics we're making. But together we're putting out things like our "Learn Guitar" iBook, which Apple suddenly featured twice in two weeks (whoa!).
In these emails to you, I'm only publishing one out of every seven I write.
I used to publish one out of every three. There's a chance this email may never actually get to you. I'm going to send this to a half-dozen folks I respect, and if they don't love it, I'm going to let it sit in Google Docs -- never to be opened again!
Okay, I think we're going to send this email. A couple of smart folks think it's excellent.
Everything has to be excellent to matter.
If you can do something well or good -- don't.
Shut it down! Start over! Iterate to excellence.
And if you're good at what you do, then I suggest making a plan to be excellent -- or quitting and joining the 99% at Occupy Wall Street.
I think the polarization of wealth is as much about the "age of excellence and the end of good" as it is about the criminal Wall Street gambling d-bags who rape and pillage our economy with every trade they can. Certainly the financial crimes of Wall Street did damage, but what damage does putting out average products do to our economy?
The OWS protesters have only one choice: be excellent.
And by the looks of their efforts they are only "good" at protesting. If OWS wants to make an impact, it will have to let go of the "good protest" high-fives and figure out how to do a protest that CNN will cover 20 days in row.
Seriously, if I'm running OWS, we're going to get 100 folks to climb on board a billionaire's yacht and handcuff ourselves to the railing. That would be EXCELLENT protesting.
How about occupying the Hamptons on Main Street and hitting the rich where it hurts: traffic on Friday afternoons and Sunday nights! Take your protesting seriously, OWS -- take it to the excellent level. Don't let them put you in a box!
Or maybe we would go to a major golf course and storm the 18th hole in the middle of a Tiger Woods comeback. That would get attention! That would seriously piss off rich people and get the message out.
Excellence: it's all that's left.