The Art of Profitability

2006-07-18T13:47:00.000-07:00

Don't forget to check out TicTap Contextual Ads, a free technology that shows Amazon product ads. You can style it with CSS, and there's even a WordPress plugin.

2006-07-18T13:44:00.000-07:00

My Faith * Love * Hope is a new Christian blog. It deals with apologetics, devotion, sermons, and lessons from the Bible.

2005-10-07T12:09:00.000-07:00

Clustered Amazon.com search!

http://www.tictap.com/clust

2005-08-23T02:01:00.000-07:00

TicTap now does long tail searches of Amazon.com!

Now you can find the hidden gems that aren't best sellers. Hopefully, this will give the little-known authors more visibility (and money).

2005-08-13T07:41:00.000-07:00

The TicTap widget has been upgraded to version 0.6.

Besides bug fixes, it now shows newest-released products, and does Yahoo! song and podcast searches.

You can download them here.

2005-07-27T14:42:00.000-07:00

Hot off the press!

I spent about a day creating TicTap's (and my) first ever Konfabulator widget.

This is still very beta-stage software but it is usable. The TicTap widget allows you to find top selling, most gifted and most wished products from Amazon.com

http://www.tictap.com/downloads/TicTap.widget

2005-05-09T06:40:00.000-07:00

We've made so many improvements to TicTap in the last month. The TicTap blog will explain all the features.

One of the features that I find is a real time saver is the ability to search directly from the browser's url bar! For example, try searching for norah jones here. You'll see that the search term "norah jones" is actually embedded in the url.

Contact me at alexchoowk at tictap dot com if you have anything good (and bad) to say.

2005-03-27T09:13:00.000-08:00

I have not been writing about 'The Art of Profitability' for almost a year now. It's because I have been building a service based on some of the models I learnt in that book.

TicTap, http://www.tictap.com/ is a price hunting SMS service. It works for US mobile phones only.

It's really useful if you are at the mall and want to see if Amazon.com sells a particular product cheaper. Best of all, you will be given a free access code to view all ur previous search histories online.

If you prefer to search on the web instead, TicTap also provides a browser-based search interface. In addition to providing the search results in a concise and uncluttered format, it also provides a spelling tool, a tool to send the price information for a product by SMS to a US mobile phone, and gift recommendations.

The mobile and web search services are free and requires no registration. Visit http://www.tictap.com/ for more info.

Our intention is to make it really easy for you to find products, remember them and catalog them.

As one of its creators, I would love to hear from you if you use it. Send email to alexchoowk at tictap dot com please.

2004-05-30T09:12:00.000-07:00

A new site on spam fighting has been created. It's called Bye Bye Spam.

Bye Bye Spam is a easy to read and understand guide for the layman who wants to know the potential liabilities of spam, besides the nuisance we are all aware of. There's also a recommendation for an excellent anti-spam software.

I created it in response to the horribly contructed Singapore Antispam Resource Centre. You can read my initial reaction to this site here.

"So where is the next chapter review of 'The Art of Profitability'?", you ask. Coming up... ;)

2004-05-14T12:52:00.000-07:00

I was busy this past week with a partnership that fizzled out as quickly as it started. You can read about my unhappy ordeal at Mother Blogger.

I apologise to those of you who have been waiting for the next profit model. It will come up over the weekend.

2004-05-04T01:55:00.000-07:00

Blockbuster Profits - that's the topic of Chapter 6 of Adrian Slywotzky's book The Art of Profitability.

The Blockbuster Model is ideally suited for companies that depends on always having new products to maintain or grow revenue, like bitotech, pharmaceuticals and chip companies.

It's a mindset.

David Zhao talks about a friend of his, Marc, who went to work for the herbicide and pesticide division of a Swiss company. Marc realized that the pipeline of new products was running dry and there was no system in place that thought about R&D, managed R&D or differentiate between profitably and non-profitable R&D.

So he started to talk to his staff and customers and allocated the greatest amount of resources to the products that were the most promising. He also made employees accountable for their work with a incentive-based pay system. They even had mock trials of teh FDA approval process carried out in-house.

Knowing also that R&D is hit-and-miss in nature, he also ensured that each project had at least one backup, so that in case the current porject fails, they can fall back on the backups without having to write off the entire investment.

What Marc did essentially was institute a front to back system that would not just bring hugely profitable products to market, he could also manage the risks and ensure that there will be follow-up blockbusters to it. It's a complete cycle that feeds on itself.

David said that it takes a lot of confidence to be able to aim high, and deliberately set out to build the next great blockbuster.

For homework, David asked Steve to read A Technique for Producing Ideas and Einstein's Dreams.

2004-05-03T23:46:00.000-07:00

It's nice to know that Blog Search Engine has included this site in their listings.

I was reading some notes on Berkshire Hathaway's 2004 Annual Meeting. Thought readers may be interested to know some books that Buffett and Munger recommended.

Buffett enjoyed reading A Short History of Nearly Everything by Bill Bryson.

Munger liked Les Schwab Pride in Performance: Keep It Going and Deep Simplicity: Chaos, Complexity and the Emergence of Life by John Gribbin.

2004-04-30T23:20:00.000-07:00

I know it's been a while since I wrote a review. Sorry about that, I've just been quite busy lately.

I made a new friend on the web lately. He's the author of the excellent site Redemption in a Blog.

I will be back on Sunday or Monday at the latest with a new review.

2004-04-22T00:57:00.000-07:00

AutoSmiley was not as ready for prime time as I hoped when it was launched. Fortunately, that problem has been solved. Which means I am now ready to write the next chapter review of The Art of Profitability.

Chapter 5: Time Profit

The Time Profit model is for companys whose profits will gradually dwindle as competitors start to imitate its products. Essentially, any product that is not protected by patents or copyrights is at risk. Think about Intel. It comes up with a new processor, and AMD follows suit in a matter of months. This is followed by ruthless price cutting to maintain market share. This means that Intel only has those few months before AMD comes up with their own product to make huge profits off these new models.

David tells Steve about this investment banker, Terry, who mastered the Time Profit model extremely well. Terry was upset that every new product her company launches will see little profit within 3 months of its introduction. She laments to her boss, and is told that there is nothing they can do to stop their competitors from imitating.

She agrees, and has a brain wave. Since she cannot fight the inevitable, what the company can do is to actually make more profits than it ever did in those months when they had the first-mover advantage. This means changing their internal processes and client management systems so that no time is lost to profit making from the get go.

I think the Time Profit model, unlike the previous models already explained, is not really a way to make more moeny. Rather, it warns companies who are engaged in time profits business how they stand to lose a lot of money if they are not aware of the dangers.

The Time Profit model is very well illustrated in the book, Only The Paranoid Survive, by Andy Grove, the former CEO of Intel. Professor Grove explains why his company can never sit still and is always looking behind its back in the race to stay in front.

I reread Innumeracy over the weekend. It's amazing how much I missed during the first 2 reads :-p. This is one book that will sharpen the way you look at the world.

2004-04-20T06:14:00.000-07:00

Google Apps now has 4 applications. Those of you who use text smileys in your blogs will like AutoSmiley. It automatically turns your text smileys into emoticons!

Another application is a handy tool to find the definition of any word you encounter.

And if you like up-to-the-minute news, try out Glocal News.

Iw ill be back in a day or two with the next chapter review of "The Art of Profitability".

2004-04-15T23:51:00.000-07:00

I have a new site called Google Apps. It's really a laboratory for me to try out cool things I can build on top of Google. Please visit that site and give me your feedback.

2004-04-15T04:18:00.000-07:00

It's taken me quite a while but I've finally gotten down to writing the next profit model.

Chapter 4: Switchboard Profit

David starts to talk about the Hollywood superagent Michael Ovitz. He compared someone of Ovitz's status with an ordinary agent and got Steve to think about it.

This is what happens with an ordinary agent. He may just represent a few actors. Period. A better agent may have good contacts with some directors and even script writers. But Michael Ovitz has the network of actors, directors, producers, writers etc. In other words, Ovitz knows everyone who is required to make a film. And he knows the best.

More than that, Ovitz also knows A LOT of these people. What this means is that Ovitz is able to leverage his connections to negotiate the best deals in the shortest time with the highest probability of success, because he has immense bargaining power given his golden network and mass of talent he represents.

The Switchboard Profit Model is about gaining access to all parts of a system, building up critical mass and leveraging that bargaining power for maximum profits.

For example, an ordinary agent whose cut is 10% and who represents only 1 actor who earns $1m per movie, would earn $100,000 himself. Ovitz, by representing the same actor AND the producer AND the writer, can approach the movie studio and say it will cost the studio $3m to hire all three, and his earnings will be $300,000. And it does not take him 3 times as much time to make this amount as the ordinary agent who earns $100,000.

Now we can see why Ovitz makes millions a year, because he represents marquee-name actors, actresses, directors, producers and writers, and can package the whole system to be presented to movie studios. How many studios will turn him down without first considering where else they can find such a talented cast?

After explaining to Steve what the Switchboard Profit Model is, David asks Steve to read two books for home work. They are Innumeracy, by John Allen Paulos, and Power To Burn, by Stephen Singular.

Innumeracy is an attempt by Paulos, who is a mathematician, to examine many aspects of popular culture, from stock scams and newspaper psychics to diet and medical claims to demonstrate the popular misperceptions resulting from the inability to deal with large numbers, probability, ratios. It is a wonderful book. He wrote another book which I have also read, called A Mathematician Reads The Newspaper. Again, a gem of a book.

Power to Burn is a book about Michael Ovitz.

I hope by now, you understand why I decided to do a chapter by chapter of Adrian Slywotzky's book. I don't think I am doing enough justice by simply summarizing the models, you need to read it yourself. So please order you copy today.

2004-04-09T22:55:00.000-07:00

Alright, I'm back with a new chapter from Adrian Slywotzky's "The Art of Profitability".

Chapter 3 : Multi-Component Profit

Steve's lesson starts off with a recap of the Pyramid Profit that he learnt last week. He hands David a list of 3 companies that employ this profit model. They are Nokia, General Motors and American Express. David is impressed.

David starts off with this week's lesson. He gets Steve to think about Coca-Cola. It is a company that sells syrup, but it sells it in various ways - from vending machines to supermarkets to restaurants. Coke's cost of goods is essentially the same for all 3 sales channels, yet the selling price per unit volume is entirely different! Think about how much you spend on Coke at McDonalds versus the 1.5 litre bottle at Walmart. It's not surprising that Coke's profit margins are highest from restaurants and vendng machines.

What Coke has is one product, and different businesses. And their clients consume the same product at every price point. This contrasts with Mattel where their aim is to get specific types of customers to buy at specific price points.

The Multi-Component profit model is about using a base product to generate various business segments with different profit margins.

David then goes on to other types of businesses that use the Multi-Component profit model. Hotels is one of them . They offer guest rooms, seminar rooms and even convention halls, all at different prices. But they are still selling space.

David continues to talk about a good friend of his who brilliantly saw that bookstores could employ this model very successfully too. Besides just selling books to walk-in customers, bookstores could sell their services to corporate clients, bookclubs and special interest groups. They will still be selling books, and each group of client is a separate business with a its own profit potential.

I think the Multi-Component profit model should be employed more often. The problem, as David mentioned is that many people cannot see that it suits them.

For example, I think many food businesses in Singapore can increase their profitability by taking pick-up orders, and even catering. I can imagine them charging people an additional 50 cents for a pick-up order. That's really free money to them since it requires little additional work.

Microsoft is also a master of the Multi-Component profit model. Their Windows Server family of products is made up of numerous pieces of software. But the difference between the Standard and Advanced version is really that some features are disabled in the Standard version. In other words, Microsoft creates the Advance version, and then disables some features and sell it as the Standard version at a cheaper price. But the cost of these two versions are nearly identical, while the Advance version fetches much more in profit.

I will be back on Tuesday for Chapter 4. Have a great weekend!

2004-04-09T15:19:00.000-07:00

I have replaced Google with FreeFind as the default site search engine. Google only indexes this site about once a month, where as I can set FreeFind to index as often as I want. Currently, it is set to once a week.

2004-04-07T16:21:00.000-07:00

I have added quite a few features to this blog lately. You can sign up for my newsletter, do a Google search on this site, and also use the commenting and trackback system.

As this site was created only recently, you might not get results if you use the Google search as the Google spiders might not have crawled yet. I will post a link when it has.

2004-04-05T09:39:00.000-07:00

Back from the weekend. Here's the next profit model, the Pyramid Profit.

Chapter 2: Pyramid Profit Model

So Steve goes back to David's office the next week, and David tells him about a talk he gave at a software company's marketing meeting. David was the keynote speaker, but he said the guest speaker was even better.

This guest speaker was from Mattel, the toy company. David was incredibly impressed by the content of the speech, although the software executives didn't get the gist of it. This was what he learnt.

Mattel sells Barbie dolls. They sell one for about $20 to $30. And when an imitation appears, Mattel has to take defensive action by selling cheaper versions of Barbie dolls at $10 to seal off that space, to fight with the imitator.

But to achieve real breakthrough, Mattel also sells $200 Barbie dolls. And the real genius is that these $200 dolls are not sold to the young daughters, but to their mothers who used to play with Barbie dolls many years ago! That is to say, these dolls are not sold as toys but as collector's items.

David goes on to explain that the beauty of Mattel's strategy is that they had turned Barbie from a product into a fully integrated system, with the cheap Barbies at the bottom of the price point as a defensive fort, and the expensive ones as their most profitable revenue generators.

Diagrammatically, it would look like a pyramid. And the best thing is, even girls who buy the cheapest Barbie dolls eventually go on to buy accessories and upgrades to the more expensive ones.

David goes on to explain that not every company can implement this model. For example, most people do not buy the most expensive petrol at the petrol station. A true pyramid is more than just a set of price points. A true pyramid is a system where the lowest cost products are manufactured and sold with so much efficiency that it is virtually impossible for competitors to underprice it. David calls the lowest price point the firewall.

The problem with petrol is that the manufacturing cost is quite similar, regardless of the type, and really hard to differentiate to the consumer.

That is the Pyramid Profit model, and I will be back in a few days with the next model.

2004-04-03T09:40:00.000-08:00

A short introduction on the way this book was written.

It is styled as a conversation between this man called Steve Gardner, and a profit guru by the name of David Zhao. Once a week, Steve would meet David at his office and learn a profit model. The author, Adrian Slywotsky is the narrator of these conversations.

Chapter 1: Customer Solution Profit model

David starts off by saying that he had studied hundreds of companies in the past thirty years. He discovered there are many ways to achieve profits and he will teach Steve the 23 most important ones he has discovered.

The first one is called Customer Solution Profits.

David uses Factset Research as an example of a company that has mastered Customer Solution Profits.

David compared Factset to a client of his who was in the same business of selling financial information to money managers. Apparently, Factset could manage $24m worth of annual slaes with only 36 people, while his client had $40m in sales with 400 people! Obviously, Factset was doing something very right.

The key to Factset's strategy was to focus intensely on acquiring a limited number of customers a year. And when they had targetted potential clients, they would send 2-3 people down to that client's office and learn everything they can about their business process and their business concerns. Based on this in-depth knowledge of their client's business, they would develop a customised solution that would work wonderfully well for this client, and this client only.

During this learning and integrating period, Facset's costs were huge and revenues tiny. But after a few months, when the system was fully operational, they wouldn't need 2-3 people at the office anymore. Since the software became a seamless part of their client's operations, the support guy would drop by only when required. As a result, their revenues would increase with usage, and costs would drop dramatically.

And this being a software business, their margins were huge.

David says that is essentially the Customer Solutions Profits.

I personally think that many companies try to practise this profit model. For example, many companies selling CRM or ERP software behave like Factset, except that they do not sell financial information.

However, we witnessed many failures during the last few years of these types of implementation. I think the cause wasn't the software. It was in the business systems and processes. It's one think to give software to people to use (so that it feels like a burden), and it's another thing to give them software that blends in seamlessly with their current business systems. I think this was where Factset succeeded here others did not.

I will post the next profit model 'Pyramid Profit' another day!

2004-04-03T07:35:00.000-08:00

I created this blog because I want to share the knowledge I gained from Adrian Slywotzky's excellent book The Art of Profitability.

The books lists down 23 profit models, and I think anyone who read this book will learn a lot! I know my 'profit horizon' widened when I read it.

For those of you who don't have the time to read it, never fear, for I am here to give my best shot at explaining each profit model. I intend to post a new profit model every 2 to 3 days, so check back often.

If you are interested to know more about this book, click on the amazon.com link on the right.

Here's to all of us :)