The Reality of Perception
If you purchased any Burlington Northern (BNI) stock before today, then congratulations! You just nailed a huge return for today’s efforts thanks to an aggressive decision by Warren Buffett. Berkshire Hathaway will be buying out BNI in a cash and stock deal that Buffett is calling his “all-in on the American economy”. Many investors know that many things in which Buffett is involved in turn to gold which is part genius, part luck and part the reality of perception.
So what does the sale of the second largest Railroad in the United States have to do with startups and Internet entrepreneurs? It is related due to the perception that this deal generates in the minds of consumers and investors alike. This perception has almost no bearing on the numbers of the actual deal taking place because it relies heavily on the belief/faith of the American public to start spending and investing again to continue overall market gains. The tricky thing with a down economy is that it is associated with uncertainty, which leads to less spending. Less spending results in less business, more job loss and a repeating cycle that constantly drills lower. In this bold move Buffett is not only scooping up an undervalued asset moving forward, but is simultaneously jump starting the faith of the American investor, entrepreneur and as a side effect the American consumer to reverse the direction of the previously mentioned spiral and start building up the American economic ecosystem.
Great, so Buffett can spend billions to jump start a market sector, a few investors and more spending. How can I apply this to my startup, especially on the Internet where the entire process is so much less tangible? In the minds of your users, whatever they perceive is taken as the true reality of the situation. For instance when the media continues to announce losses in the market, but not report the days of large gains the perception of the average consumer goes down disproportionately to the realistic situation of the market. This same principle can applied in building up your business/service so that users will want to fulfill their own prophecy. That is if you can come across as an established operation that is achieving your goal, especially if it can seem like there is an existing community that is already engaging with your product then other users will want to join onto the bandwagon and propel your business to the next level and provide a much more stable growth future.
This does not mean that you should lie about your business process and/or results; however, you need to be reporting the growth and positive feedback while investing in the perception of an established business. This method has been nicknamed “fake it till you make it” but it does hold some truth to it. — As a consumer, would you buy from a company that is brand new? What about use a new service that JUST came out with little to no users? Obviously some users would still be inclined to use these businesses thanks to “lead users”, but statistically speaking those users are simply not enough to build your company off of for long-term success.
So what do you need to do with your startup to create a positive reality of perception?
Reliability
First and foremost your web service must be reliable! If you build a product that is constantly going down or breaking, or your close know group connections might be willing to come back and give your website a second shot. However, in a lot of cases you get one 10 second chance to get a consumer interested in your website and any faults in the reliability will be hard to overcome downstream with the bulk of users. The big websites don’t fail and get away with it (excluding Twitter), so you need to make sure you site won’t either. If you have constant changes to make to your website, then you will need to invest in a staging server to do extensive testing before rolling out updates for your customers.
Consistency
Do your style sheets match across the different pages? What about your social media presence? Would a new customer hitting your social media outlets be able to immediately associate them to your brand and service? If they can’t, then you absolutely have to fix it, and under a month of launch. These types of attention to detail will greatly enhance the level of trust that a user will invest in your site, time spent on their site and likelihood of referring a friend to your service.
Community
Is anybody actually using your service? How would a new customer know if your site is being used? This is conveyed through “social proof” which is the base number of users you have on your social media outlets. Only have 20 fans on Facebook? How do you expect anyone else to join? It’s not ‘established’ or ‘trustworthy’ in the eyes of the consumer unless you have built up a user base that they feel could only be put together by a solid product/service. Many brands have tried to overcome this social proof by gaming Twitter for hundreds and thousands of bot followers in order to make their brand seem more popular than it would otherwise appear.
After you start to build a following for your service, you need to get user engagement with your service. That is you need to make the users feel like they have a voice in the direction of the service and you allow new and returning users to see the voice of their peers centered on your brand. This snowball of social media will ideally start a conversation around your brand which huge companies are buying out of the ears for, however a clever internet marketer should be able to initiate this effect for under $2,000 for their new brand. The more users engage, the more connected they feel to your service. The more connected they feel the more people they will refer and the more frequently they will use your service.
Conclusion
If you can accomplish those three major hurdles that startup web services consistently run into without a solution to overcome, even the best ideas will fall flat on their faces. Many analyst argue over it is more important to have a better product or better execution; but I feel that Twitter if no other service is the best example of how better execution leads to much more value than a better product because they were able to build a community, be consistent and turned their reliability flaw into a community builder itself. Many other services came out before and after Twitter that were better built, however could not afford to keep up with the execution strategy that Twitter had.
Consumer perception is the self-fulfilling reality. Create the right perception of your service and the reality of success will follow suit for you to completely nail the execution.
Did you want more? Follow @travisketchum here!
DISCLAIMER: Before acting on this post, be sure to read my disclaimer.
Did you enjoy this post? Why not leave a comment below and continue the conversation, or subscribe to my feed and get articles like this delivered automatically to your feed reader.
Comments
You are obviously more well versed in regards to the positioning of Burlington Northern than I would every claim to be. And I also agree that the Internet has allowed for firms who have little to no value garnish a small amount of attention, or as Seth Godin would call it “the initial bubble before the dip”.
However, I think that if you leading an operation that has values of integrity, reliability but most of all provide value to your customer base; then you may be able to break through the clutter of the Internet and start to build a thriving business.
Successful businesses these days prey on end-users to drive development. Perhaps “prey” isn’t the correct word, but the utilization of end users without any other reciprocation than a “Thank you, I think we’ll do that” is extremely prevalent within innovative new businesses.
Companies have to “fake it until they make it” to survive the mass of other alternatives. It is all about voice. First yell, then say something. New net businesses to show immediate value and prove 1) Other people trust the product or service, 2) What ever they boast is true, 3) That the user can trust the service. Initially it is all about trust.
Fifteen minutes of fame can amount to millions of dollars for a new net business. But it seems like the good ideas are coming from just a few companies who really understand how the marketplace is working. These people are able to put an ear to the ground, use their end-users, and create remarkable services and business ideas. They’re also able to utilize current marketing techniques to bolster their views, and thus their penetration.
This buy by Warren Buffet isn’t a new move, acquisitions of undervalued companies happen every day. It is, however, him paying attention. Sometimes the best business moves come from simply listening and watching. Pay attention to the marketplace and to your users and there is money to be made.
Once everyone really looks at BNSF and the economy as a whole, the purchase of BNSF was a no-brainer. Only W.B. has enough money to put his money where is mouth is though.
The internet word has created a whole world of “Fake it until you make it” companies. Integrity and service is what will keep a company going past its “15 minutes of fame”. Companies must be committed to only offering what they can truly and reliably provide. If not, they are doomed to fail.