Disney: the business of acquisition and Beyond Meat's marketing playbook
💡JC's Newsletter #111
Dear friends,
In JC’s Newsletter, I share the articles, documentaries, and books that I enjoyed the most in the last week, with some comments on how we relate to them at Alan. I do not endorse all the articles I share, they are up for debate.
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💡Must-read
👉 Mike Maples Jr. (Floodgate) - A Playbook for Startups (Join Colossus)
Thinking about the future:
An inflection is a sea change that creates the opportunity to create a breakthrough that changes the subject of the future and changes the way we, the people, think and act. What are some examples of inflections?
GPS locators got bundled in with smartphones. And so another inflection was that smartphone adoption, we believed was going to go from 10% to greater than 50%.
And this is the step that a lot of people skip. I call it insight development. In insight development, you use a technique We call backcasting to identify a secret that will lead to a different future. That will be a breakthrough different future.
➡️ What are our inflection points?
That's the don't-let-this-happen-to-you scenario is not having the courage to be disliked, not having the courage to say, "I don't need everybody to like this idea. In fact, it's a feature, not a bug." What happens in a lot of those cases is, the entrepreneur talks to too many conventional thinkers, and they spent too much time engineering features to handle the objections of the conventional thinker.
➡️ How to be contrarian?
There are going to be times where you get negative PR that is completely unfair and not true. There are going to be times when you get rejected nine times out of 10 and that's actually a sign of progress. Just helping them get in the head space of the mission of the breakthrough requires you to have the courage to be disliked, by definition.
"Hey, look, you're not a failure here. It's just the experiment we ran was proven invalid. It's not you that failed. It's the experiment that turned out untrue. Let's get on with life. Don't beat yourself up about it. Don't let it affect your confidence in your ability to change the future”.
➡️ The importance of courage and accepting failure.
Picking your customers:
The thought process is counterintuitive, but I love it, which is, we're not going to try to convince customers to find us and buy from us. We're going to pick our customers based on their fitness to the different future we're designing. We're going to select them and convince them to move with us.
➡️ Very important to pick your first customers.
I'd have a slide, and it would have the 30 customers we chose for this year, of which we want to get 10. We wouldn't even talk to any other customers. We spent all of our time talking to those 30, and we ended up getting 12.
➡️ Good strategy.
It's very counterintuitive, but if you get it right, if you're correct about who the innovative customers should be, and you get them, they're going to take you to the promised land, because they are living in that different future. You're building what's missing for them in that different future.
🏯Building a company
👉 “Disney's Bob Iger: Building a Magical Ecosystem, part 1” (Master of Scale)
After Pixar, Kevin Mayer and Tom Staggs – Tom was our CFO and Kevin was our head of strategy – and I put together an acquisition targets list.
We said, “Okay, we've done this, and it's worked. What could be next?” We declared ourselves good at this. For all we knew at the time, it could have been our last good one.
And the two top names on the list were Marvel and Lucasfilm. They both kind of fit the mold, which is high quality, branded content.
➡️ Should we build a list of acquisition targets when we are ready?
👉 Ethan Brown (Beyond Meat): how to reach your customer? (Master Of Scale)
For those of you who didn’t grow up in the U.S. in a specific period of the nineties, the Got Milk campaign featured athletes, actors, and all manner of celebrities posing with a glass of cow juice and sporting a thickly applied milk mustache. The message? Milk makes you stronger, healthier, and more agile. You know, like athletes are.
With Jeff Manning’s help (who did the Got Help campaign), and the help of a bunch of smart players on Beyond’s marketing team, they crafted campaigns around celebrity endorsements – everyone from Snoop Dogg and Shaquille O'Neal to Shaun White and Lindsey Vonn. They especially leaned into athletes as the ideal spokespeople for their product. Like Chris Paul.
Edwin Land, who I really admire, the inventor of the Polaroid, had a funny line, which is not really true, but he says, "Marketing is what you do when your product's no good." You do have to market because there's so many differentiated products in the market, or you have to differentiate rather. But if there's truth to what you're doing, it's a hell of a lot easier to market. And so having these athletes out there doing that is incredible.
➡️ What would be our strategy of celebrity endorsements for Alan? And Alan Mind?
BROWN: We pivoted extremely quickly to retail. We started to take all of our food service products that could be packaged into retail and packed them in retail. We launched a very low cost offering called the cookout classic, which was 10 burgers for $1.60 a burger or something, which is much cheaper than where we were. We did that almost overnight. At the time the beef industry was undergoing a lot of supply shock, so their prices were spiking. And so we did this as an opportunity to get closer to the price of beef at a time when people needed value. And so we just tried to capitalize to the extent we could on changing market conditions and get as much of our inventory out of the food service space and into retail, and it worked.
➡️ Importance of low cost and competitive pricing.
👉 Operating leverage (FireHose)
Operating leverage measures the degree to which a company can increase its profits by growing revenue.
The nature of operating leverage in a business like TDUP is that it comes from a lower cost structure. Investing in automation, for example, should enable inbound processing labor to be more efficient and therefore amortize more volume over the fixed cost of distribution center employees. TDUP can then choose whether to allow those gains in profitability to flow to the bottom line, or to reinvest them, for example, in better payouts for sellers, or lower unit prices for buyers. Regardless, the source of the leverage comes from lowering the unit cost at the contribution level.
The main way in which FVRR achieves operating leverage is not by lowering costs, but by increasing the spend per customer meaningfully over time.
➡️ Interesting article about operating leverage, and how pushing for radical automation everywhere in our stack will be super important for insurance and better life.
🗞In the news
📱Technology
👉 Unity, Weta, and Faceless Platforms (Stratechery)
Weta, as you would expect given how nascent computer graphics were, was integrated from top-to-bottom: Jackson’s team didn’t make software to make graphics for Jackson’s films; Jackson actually made a scene in a film that needed graphics to give his team a reason to get started on making software. That bet paid off a few years later when Weta played a pivotal role in the Lord of the Rings trilogy. The feedback loop between movie-making and software- development was tight in a way that is only possible with a fully integrated approach, resulting in dramatic improvements from film to film.
Over the intervening years, though, Weta gradually branched out, working on films beyond Jackson’s personal projects, including Avatar and Avengers. This too makes sense: developing software is both incredibly capital intensive and benefits from high rates of iteration; that means there is both an economic motive to serve more customers, increasing the return on the initial investment, and a product motive, since every time the software is used there is the potential for improvement. Still, software development and software application were still integrated, because there was so much more improvement to be had.
➡️ Our strategy with AaaS.
Epic, which built the Unreal engine for Unreal Tournament. These were integrated efforts: the engine was built for the game, and the game was built for the engine; once development was completed then the engine was made available to other developers to build their own games, without having to recreate all of the work that id or Epic had already done.
Today it is actually Unity’s Operate Solutions, including its advertising network and in-app purchase support, plus other services like hosting and multiplayer support, that makes up 65% of Unity’s revenue.
➡️ Ads & Mini-Apps.
👉 Opendoor Earnings, Opendoor's Pricing, Opendoor's Scalability (Stratechery)
We expect to be back to operating within our 4% to 6% target margin range in Q4. Over the long term, we believe this moves to 7% to 9%, as we continue to grow our services revenue and margin streams.
➡️ Interesting benchmark in terms of gross margin.
🏥 Healthcare
👉 The wonder of antibodies (Iconiq)
Vaccines elicit two types of immunity: T cell and B cell. The B cells produce antibodies and those go away. If all antibodies stayed in your bloodstream after every cold you’ve had, your blood would be too thick. But they do stay in your memory banks. When you see the virus again, the antibodies go back up.
There was a crazy study on children who were infected in the 1918 influenza pandemic and the researchers tracked them down 90 years later. These people were 90 to 105 years old and they still had strong memory B cells from the original 1918 influenza strain. They put their blood in a test tube with influenza from 1918 and the blood quickly made neutralizing antibodies. They put those antibodies into mice and the animals were protected from that influenza.
T cells and B cells can last a very long time.
👉 As the telehealth market shakes out, Teladoc, Amwell feeling pressure from new entrants, more specialization (FierceHealthcare)
Telehealth use overall has leveled off at levels 38 times higher than before the COVID-19 pandemic, ranging from 13% to 17% of visits across all specialties, according to an analysis from McKinsey released in July.
Fair Health, which tracks telehealth visits as a percentage of all medical claim lines, also reported telehealth visits represented 4.2% of medical claims in July, down from 4.5% in June and down significantly from 13% at the peak of the pandemic in April 2020, according to Fair Health's Monthly Telehealth Regional Tracker.
"I expect to see Amazon move to down the path of LetsGetChecked with a telehealth platform to assess symptoms and mail-away diagnostic tests combined with same-day delivery of drugs to treat conditions. More of that primary care value channel will be moving into digital channels," he said.
👉 A letter to our shareholders from Ali Parsa (Babylon Health)
Make quality healthcare, accessible and affordable for every person on earth.
➡️ Interesting how they frame their mission statement.
Serve over 24 million people.
Approximately 6 million interactions.
➡️ Not a lot of interactions compared to the number of members, but still 6m!
Michael Porter defined “value” in healthcare as the quality of care (patient experience plus clinical outcome), divided by cost of delivery.
Unit Cost of Care: Our unit costs of care are falling in every one of our markets too. For example: in Rwanda there has been a 55% reduction in the unit cost of our consultation, while in the UK, our unit cost of delivery of primary care per person dropped by 33% in 2 years.
Meanwhile circa 48% of all our member interactions are done through our technology platform with no human involvement. In our longest standing market in the UK, 84% of all our primary consultations are now entirely virtual.
➡️ What would it mean for us to get there?
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