03 Jan On Distribution
Peter Theil’s essay on distribution is one of the most important business essays I’ve ever come across. After reading it I see distribution everywhere I look.
While Peter’s essay is fairly thorough here are some other forms of distribution it doesn’t mention.
My gym is gross. It has only two stars on Yelp. The treadmills are frequently broken and the AC works in fits.
But it’s adjacent to the 31 story office building where I work. So it’s extremely convenient. My coworkers and I use the gym despite it’s flaws.
Many years ago, I imagine there must have been a discussion between the gym owners about whether the lease amount was worth the price. I’d argue their decision to do it has guaranteed the gym’s success more than any decision made since.
Sometimes just being near people is all your business needs.
We live in an attention economy. Twitter, broadcast news, apps – they all compete for our eyeballs. But with so much noise its difficult for people to remember your product.
Websites and apps are particularly vulnerable because they’re islands unto themselves with no distribution. If I visit work.com everyday, I don’t pass by gym.com along the way.
But if you can consistently capture people’s attention, thats a distribution strategy that might keep you relevant.
Jason Calicanis also knows the importance of attention. His podcast, This Week in Startups has not been a financial success but it’s done wonders for his career as an angel investor. It’s actually boosted his net worth more than his other (successful) business ventures:
— jason (@Jason)
November 13, 2014
His podcast gets him early access to talented entrepreneurs. And when those entrepreneurs are ready to raise money, Jason is one of the first people they think of to ask. He stays on people’s minds.
Many start ups in Silicon Valley want to disrupt higher education. If Wikipedia can replace Britannica, the thinking goes, online learning will replace physical schools.
But schools have the hidden advantage of distribution. Their process of teaching, (while not more efficient), is more effective than online learning.
Online: Fact (A) goes from the screen, into the students brain.
University: Fact (A) goes from the textbook, through the teacher, into the students brain.
The difference is that middle step and it’s important. The teacher is a proxy for self discipline.
Students are human. And for most of them, it’s much easier to outsource the learning process to a teacher so they can focus on the course work at hand.
Looking back at my own design eduction, I probably could have bought the same books that were assigned in school and taught myself. But I wouldn’t have known what to focus on. Nor did I have the discipline.
I had no idea what typography was. But I had a teacher who did. She knew how important it was and she pushed me to learn it. Plus I was in a class with 30 other kids learning typography, so what the hell else was I going to do during that time?
Contrast that with online learning. It requires you to have the discipline of the teacher while also playing the student. You’re the drill instructor and the cadet.
Learning is difficult. It hurts a little. The classroom environment transfers knowledge to your brain in a way that requires less discipline than if you were to teach yourself. Thats why they have a better distribution strategy than web based platforms.
What happens when two companies with distribution in different verticals partner up? TMZ and Starline Tours did just that.
TMZ is a brand that people associate with celebrity. And Starline has a fleet of vehicles and guides that give tours of famous people’s homes. They combined the consumer facing brand of TMZ with the logistical network of Starline Tours and got something bigger than either could have built on their own.
It’s a particularly savy move by TMZ because it appears they just lent out their name.
When distribution is taken away
Not long ago Oprah was the queen of daytime television. She had a remarkable 25 year run at ABC and picked up 14 Emmy’s along the way.
She definitely had product market fit.
But in 2010 she quit her show. She wanted control of the product and distribution. She wanted to BE ABC.
Fast forward to present day and we’ve witnessed a rocky transition. OWN was finally profitable last year but her personal influence has waned considerably.
Is Oprah less likable than she was a few years ago? No. She just lacks distribution. She underestimated the platform that ABC provided and now Ellen has replaced her.
If someone, a product, as compelling as Oprah can fade that quickly without distribution, what hope does your company have?