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Category: Business Strategy

  • The Surprising Truth About AI: Why It’s a Game-Changer for Businesses

    The Surprising Truth About AI: Why It’s a Game-Changer for Businesses

    Have you ever wondered, “What are the real applications of AI?” or thought, “Well, I tried it, and it doesn’t really work”? Fortunately, I know how to pack everything important about AI into one post.

    TL;DR — AI today is a tool for engineers that allows for the very cheap creation of highly efficient, narrow microservices to solve business problems. The larger the company, the greater the output. The money is here.

    Below, I’ll briefly cover what’s happening today, what will happen tomorrow, and address some popular misconceptions.

    Here’s How the Situation Looks Today

    1. AI Models Are Getting Smarter Very Quickly

    If you tried something a year ago and it didn’t work, chances are it works today. And if it doesn’t work today, it might work tomorrow.

    2. “Models” Are Not the Same as “Products”

    Most AI models are incredibly powerful tools that can improve any business process. However, using them requires engineering skills.

    3. Why So Few Successful Off-the-Shelf B2B AI Products?

    Because engineering custom solutions using AI is much cheaper and more effective than buying any boxed solutions. For example, Klarna ditched Salesforce in favor of services generated using AI.

    4. Corporations Are the Biggest Winners

    Corporations spending hundreds of millions of dollars on operations with huge legacy processes, documents, code, and data stand to gain the most.

    5. S&P 500 Companies Are Hiring AI Engineers in Droves

    Right now, about 30% of all S&P 500 companies are hiring AI engineers en masse to eliminate boxed SaaS solutions and replace them with custom AI solutions.

    6. “Custom AI Solutions” Include AI-Assisted Development

    For instance, if your company needs to input invoices from PDFs into a database, instead of buying a ready-made service, you can ask AI to develop the appropriate microservice for you. Within two hours, you have ColQwen2 deployed in your AWS with the necessary prompts.

    7. Using Large Models to Build Specialized Services

    The main application for AI now is using large and smart models to quickly develop small, highly specialized services for solving operational tasks using weaker models or even without AI.

    8. Large Models for Analysis, Automation, and Research

    Big models are also used for analyzing large amounts of information, automating complex processes, and conducting research.

    What Will Happen Tomorrow

    1. Rule of Thumb — Chat-Based Consumer AI Products Will Be Overtaken

    If a consumer AI product works through chat, sooner or later it will be overtaken by a new feature from ChatGPT.

    2. Survival of Consumer AI Products

    Consumer AI can survive if the product has social mechanics, access to truly unique data (e.g., medical records), or if the service is inaccessible to public companies (e.g., adult content).

    3. A New Breed of Off-the-Shelf B2B Products

    Agents with a high level of autonomy are the new type of boxed B2B products. Small companies with lean teams will benefit the most. I believe this is comparable to the rise of small boutique businesses in the mid-2010s, thanks to platforms like Tilda, Instagram, and targeted advertising.

    Popular Misconceptions

    1. “If AI Can’t Count the Number of ‘R’s in ‘Strawberry,’ It Can’t Be Trusted with Complex Tasks”

    AI is trained and tested on tasks for which a company like J.P. Morgan might pay $1 billion a year. This list doesn’t include counting letters in words, solving riddles from summer camps, discussing the philosophical ideas of Hungarian socialists, or fact-checking obscure individuals.

    2. “AI Generates Words Sequentially; It Doesn’t Understand Meaning and Can’t Be Part of a Reliable System”

    A nuclear power plant is just water vapor turning a turbine. A Falcon rocket is just a jet pushing a tank. A MacBook is just zeros and ones that turn tiny lights on and off. Sometimes very simple things can form the foundation of incredibly complex solutions.

    3. “I Read in a Report from an Expert…”

    You didn’t read reports; you read posts by people who read the reports for you. When Goldman Sachs released a report this summer presenting both skeptics’ and optimists’ forecasts, only the skeptics were quoted in posts. No one, of course, cited the positive report from McKinsey. No one mentioned the highly optimistic report from Deloitte. No one quoted Fortune 100 executives who announced nine-figure investments in internal AI developments during earnings calls.

    Most skeptics are simply upset that they have to watch the AI party from the sidelines. So they grumble.

    Read the article: “Sonos’ Shocking App Relaunch Failure: A Cautionary Tale”

  • Surprising Power: How Winning Early Shapes Future Entrepreneurs

    Surprising Power: How Winning Early Shapes Future Entrepreneurs

    Introduction to a Winning Mindset

    As a young athlete, I learned early that success isn’t just about how hard you train; it’s about developing a habit of winning. This realization isn’t just applicable to sports but extends deeply into entrepreneurship.

    The Real Reason Behind the Success of Athlete-Turned-Entrepreneurs

    Many argue that former athletes make great entrepreneurs because they are used to pushing their limits and training rigorously. While that’s true, I believe the real secret lies elsewhere.

    Competition Fuels Growth

    The key ingredient is competition. Athletes compete not just to participate but to win. This competitive spirit is cultivated from a young age, driving athletes to continually improve their skills and achieve more.

    Choosing Your Battles Wisely

    In sports, you compete with those in your league—people whose skills match or challenge your own. This ensures that you’re not overwhelmed but are pushed enough to grow. This principle is vital in business as well.

    The Cycle of Continuous Improvement

    Winning breeds the motivation for further training, which in turn leads to more winning. This cycle of success builds a mindset geared towards achieving and surpassing goals, a mindset that’s invaluable in entrepreneurship.

    Cultivating a Winning Habit in the Workplace

    Just like athletes, employees and entrepreneurs must cultivate a habit of winning daily. It’s about setting and conquering progressively challenging goals.

    Who’s Next on Your List to Outdo?

    Identify your nearest competitor and aim to surpass them. Then, set your sights on the next. The path from one victory to the next can lead you to the top of your industry.

    Read the article: “Amazing Life and Legacy of Aaron Beck”

  • Revolutionary Compensation: The Proven Power of OTE in Sales

    Revolutionary Compensation: The Proven Power of OTE in Sales

    Every once in a while, I see how businesses with traditional roots keep reinventing the wheel when it comes to sales compensation schemes. It’s a perennial debate—should we pay a percentage of sales, offer a fixed salary, cap commissions, or structure pay so that people work for results, not just a paycheck? These questions are a constant source of tension and innovation in business strategies.

    What is OTE and How Does it Work?

    In every corporation and successful grown-up startup, there’s a common formula that simplifies this complex issue. Salespeople, especially those in aggressive roles, have something called On Target Earnings (OTE). For instance, a decent enterprise salesperson in the States might have an OTE of $300,000. This figure is essentially the expected annual income if they meet their sales quota.

    This OTE is typically split between a base salary and commission. Often it’s a 50/50 split, sometimes 60/40. So, for our example, the “salary” would be $150,000, with the remaining $150,000 being potential commission.

    Achieving and Exceeding Quotas

    When a sales quota is exactly met, the salesperson earns an additional $150,000 in commissions. What happens if they exceed their quota? That’s where accelerators kick in, offering a more aggressive commission rate on any sales beyond the target. This is a brilliant scheme because it’s predictable yet highly motivating. Salespeople are driven not only to meet but exceed their quotas, knowing that their compensation will increase significantly with every extra effort.

    Why This System Works

    The beauty of this system lies in its ability to be meticulously planned while also adapting to individual experience through OTE. There’s no need to reinvent compensation strategies when you have a method as straightforward and motivating as this. It avoids the pitfalls of constant restructuring, which often feels like walking through a minefield of rakes.

    Commissions are typically paid out monthly or quarterly, rarely annually. A good rule of thumb for the quota mathematics to work is that they should be at least 4-5 times the OTE of the salesperson. In hardware companies, it might be double that due to higher costs, while software companies tend to stick to the 4-5 times guideline.

    Read the article: “SF Bay Area AI Fundraising Revival: The Power of Resilience and Innovation”

  • For non-Americans: Unveiling the Mighty American Market – 7 steps. Why It’s Unmatched in Global Consumption

    For non-Americans: Unveiling the Mighty American Market – 7 steps. Why It’s Unmatched in Global Consumption

    Many non-Americans underestimate the significance of the American market, often comparing it to the rapidly growing Chinese economy in terms of GDP. However, the real value of the American market lies not just in its share of global GDP but in its unparalleled proportion of worldwide consumption.

    Dominance in Various Sectors

    Brokerage Services

    The United States accounts for approximately 50-60% of the clients of the world’s largest brokerage firms. Companies like Charles Schwab, Fidelity, Vanguard, and JP Morgan, each boasting around 50 million clients, illustrate the substantial role the U.S. plays in the global brokerage landscape.

    Advertising

    In 2024, the U.S. is projected to hold about 45% of the global advertising market by expenditure. This positions it as the largest advertising market globally, leading significantly in digital ads, television, and other media.

    Transportation

    The American market also plays a pivotal role in the logistics and transportation sector, holding about 25-30% of global revenue in freight and passenger transport. This is due to its extensive use of vehicles for freight, a well-developed network of roads, and a significant volume of passenger transport by cars and buses.

    Gaming Industry

    Regarding the gaming market, the U.S. claims approximately 30-35% of the global consumption in monetary terms. High income levels, advanced technological infrastructure, and the cultural significance of gaming in the country contribute to this dominance.

    Financial Services

    The U.S. market’s consumption of financial services is also noteworthy, making up about 35-40% of the global market. The high level of public engagement with banking services, investments, and insurance products underscores the dominance of the U.S. financial market.

    Telecommunications

    In telecommunications, the U.S. accounts for about 20-25% of global consumption, including mobile services, broadband, and other communication services, highlighting its significance in the sector.

    Defense and Pharmaceuticals

    Furthermore, the U.S. comprises roughly 35-40% of global expenditure on military hardware, including significant domestic purchases and international military contracts, making it the largest market in the defense industry. Lastly, about 45-50% of global pharmaceutical consumption by value happens in the U.S., with high spending on drugs, large sales volumes, and the extensive use of innovative medications.

    Conclusion

    Despite ongoing predictions of the dollar’s demise, the U.S. economy continues to thrive, supported by its status as the reserve currency, substantial government debt and budget deficits, and successful Treasury sales. The dollar remains the strongest global currency, demonstrating the enduring strength and influence of the American market.

    PDF The Grand Chessboard – CIA

  • The Surprising Rise of UnionPay in Global Payments

    The Surprising Rise of UnionPay in Global Payments

    UnionPay’s Growing Presence

    For many years, the global payment market has been dominated by two major players—Visa and Mastercard. They have established a duopoly, comfortably reigning over international transactions. However, things are changing rapidly with the aggressive rise of a third contender: UnionPay, the Chinese payment system. Last year alone, UnionPay processed an impressive 228 billion transactions worldwide, which has pushed it to second place in global payment systems. Interestingly, it even surpassed Visa and Mastercard in terms of total payment volume.

    UnionPay’s Stronghold in China

    This growth isn’t surprising, considering UnionPay’s monopoly over the enormous Chinese market. China’s population and economic influence provide a solid foundation for UnionPay to thrive. The fact that it dominates China’s domestic market explains its massive transaction volume. When Visa and Mastercard pulled out of Russia, UnionPay stepped in, further extending its reach in markets that needed an alternative payment solution. But here’s where things get interesting: how dominant is UnionPay outside China?

    The Global Reality: Not as Strong as It Appears

    Despite the significant numbers, UnionPay’s global reach outside of China is surprisingly limited. According to the latest research by Datos Insights, if we exclude China from the picture, UnionPay accounts for less than 1% of the global transaction volume. This revelation highlights an important reality—UnionPay’s dominance is heavily reliant on its Chinese customer base. Its growth, while impressive on paper, doesn’t have the same impact when compared globally without China in the equation.

    So, while UnionPay has made a huge splash in specific markets, its influence outside China remains minimal. In many parts of the world, Visa and Mastercard continue to dominate, leaving UnionPay in the shadows.

    What Does This Mean for the Future of UnionPay?

    The future of UnionPay’s global expansion is still unclear. While the company has undoubtedly made strides in markets like Russia, its reliance on China makes its global growth fragile. Essentially, UnionPay is a giant, but one that’s standing on a single clay foot—a metaphor used to describe how it’s strong in one area but fragile elsewhere.

    UnionPay has potential, but whether it can truly challenge the likes of Visa and Mastercard on the global stage remains to be seen. Its current growth strategy will need to focus on gaining more traction outside of China to compete effectively in a global market where consumers still prefer the established giants.

    Key Takeaway: Always Look at the Bigger Picture

    At first glance, UnionPay’s dominance seems undeniable. The sheer volume of transactions can be impressive, but looking closely at the details changes the perspective. In this case, while UnionPay leads in China, it’s clear that its global influence is still limited. The key lesson here? Always dig deeper into the numbers and avoid being swayed by large figures without context.

  • Embracing the Unscalable: A Necessity for Groundbreaking Startups

    Embracing the Unscalable: A Necessity for Groundbreaking Startups

    It’s often said that necessity is the mother of invention. This saying holds incredibly true in the world of startups, especially when considering the paths taken by giants like Uber and Airbnb in their early days. Both companies embarked on highly unscalable practices that were crucial to their initial growth and success. Here’s a personal look at why doing things that don’t scale is not only unavoidable but essential for groundbreaking startups.

    Uber’s iPhone Endeavor

    In mid-2014, Uber was the largest buyer of iPhones globally, spending over $100 million to equip new drivers with the devices. Most drivers didn’t own iPhones, which were necessary for running Uber’s driver app—specially configured for the iPhone at the time. This massive investment in hardware was a bold, unscalable move that helped Uber rapidly expand its driver network.

    Airbnb’s Photography Strategy

    Similarly, Airbnb in its nascent stages sent photographers to snap appealing photos of listings. While not scalable, this strategy significantly boosted the platform’s appeal and listings quality, helping to trigger a shift in market behavior. Owners eventually started taking their high-quality photos, understanding that aesthetics could greatly enhance rental attractiveness.

    The Wisdom of Paul Graham

    Paul Graham, a revered figure in the startup ecosystem, has long advocated for founders to ‘do things that don’t scale.’ He famously advised Airbnb’s founders with this wisdom, which has since become a guiding principle for many in the tech industry. The rationale is that such efforts, although not scalable, are vital for overcoming initial inertia and sparking significant traction.

    The Inevitable Need for Unscalable Actions

    Unscalable actions seem to be a rite of passage for startups venturing into uncharted territories. These actions allow startups to deeply understand their markets, tailor their offerings, and create a strong foundation for future scalable solutions. Whether it’s manually tweaking systems, engaging directly with users, or hand-holding early adopters, these efforts are often what differentiate successful startups from the rest.

    Conclusion

    In conclusion, the journey of a startup is filled with paradoxes, the most profound being the necessity to engage in unscalable actions to achieve scalability. Uber’s and Airbnb’s stories are testaments to this, highlighting how such actions are critical stepping stones in the path to widespread success. So, if you’re at the helm of a startup, consider what unscalable but impactful action you need to take today to pave the way for your venture’s future.

    Read more about “Why Founder-Run Companies Outshine in the Tech World”

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  • Unleashing Potential: Why Founder-Run Companies Outshine in the Tech World

    Unleashing Potential: Why Founder-Run Companies Outshine in the Tech World

    As a tech enthusiast and an investor, I’ve always been fascinated by the dynamics of founder-run companies versus those managed by hired CEOs. This distinction is particularly stark in the tech sector, where the original vision and risk appetite of founders often drive long-term success. Let’s dive into why companies steered by their founders often outperform those operated by external management.

    The Unique Founder Impact

    Founders bring an irreplaceable blend of passion and intimate knowledge to their ventures. This combination is crucial in the tech industry, where understanding the nuances of the product and market can make or break a company. Studies from prestigious institutions like Harvard and Stanford have shown that companies with founders at the helm report better revenue figures and market capitalization than those led by hired CEOs. Founders are not necessarily smarter, but they are deeply aligned with the company’s long-term goals and are more willing to take significant risks.

    Research Insights on Founder Leadership

    Several research studies underscore the effectiveness of founder leadership:

    1. Harvard and Stanford Study (2012): Companies with founding CEOs show higher revenue and market cap compared to their counterparts.

    2. MIT Sloan Analysis (2013): Tech companies led by founders exhibit faster growth due to more radical innovations and strategies.

    3. Noam Wasserman’s Research (2016), Harvard Business School: Founders achieve higher early-stage success due to their vision and passion.

    4. University of Virginia Study (2017): S&P 500 companies under founding leaders report higher profitability and shareholder returns.

    The Need for Transition

    Despite the clear advantages, the growth trajectory of a booming business can sometimes necessitate a more structured approach to management. As companies evolve, the very innovation that spurred their initial growth can become a sideline to the day-to-day operational demands, leading to a potential shift from founder to professional CEO. This transition, though often necessary, can dilute the company’s original mission unless the new management preserves the founder’s vision.

    Real-World Examples of Founder Success

    Many of the largest tech companies continue to be led by their founders, proving the enduring value of founder leadership:

    – Meta (formerly Facebook): Mark Zuckerberg founded in 2004 and remains CEO.

    – Amazon: Founded by Jeff Bezos in 1994, who still influences as executive chairman.

    – Tesla and SpaceX: Elon Musk, a key figure since the early stages, directs both.

    – Palantir Technologies: Co-founder Alex Karp has been CEO since 2003.

    – Coinbase: Brian Armstrong, founder, has been CEO since 2012.

    – CrowdStrike: Founded by George Kurtz, Dimitri Alperovitch, and Gregg Marcinak in 2011, with Kurtz as the current CEO.

    – NVIDIA: Founded by Jensen Huang, Chris Malachowsky, and Curtis Priem in 1993, with Huang as CEO.

    Founder-run companies, especially in the technology sector, tend to maintain a strategic advantage by staying true to their original vision and adapting boldly to new challenges. While the role of a founder can transition over time, their enduring impact on the company’s direction and culture is undeniable. When I invest in tech stocks, one of my criteria is leadership; having a founder at the helm is a significant plus.

    Read more about 7 Master Essential Soft Skills for Non-American Tech Professionals

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  • Embrace the Era of Microtribes: How to Adapt in a Fragmented Market

    Embrace the Era of Microtribes: How to Adapt in a Fragmented Market

    For decades, businesses have relied on reaching the widest possible audience with their products. This model, however, is starting to falter.
    The reason? An increasing fragmentation of customer needs across the globe. Instead of a mass army of consumers eager to purchase a one-size-fits-all product, businesses are now facing numerous smaller groups of people united by narrow interests and niche preferences. These groups have even earned their own name—“microtribes.”
    In my view, this is a continuation of a global trend toward decentralization that is making its way through many areas of human life.

    As Dev Patnaik, CEO of Jump Associates, pointed out in Forbes, this emerging trend is significantly complicating life for companies like Disney, Nestlé, and Nike, which have traditionally catered to the mass consumer.
    It’s not just consumer-focused giants feeling the squeeze. B2B players like SAP and Salesforce, whose universal CRMs were once the go-to for diverse industries—from oil companies to advertising agencies—are now losing ground. New competitors are carving out pieces of the market by focusing on niche audiences and optimizing their products for specific needs. There are now CRMs designed specifically for landscape designers, and even separate CRMs for companies that specialize in lawn care.

    This niching down in the economy isn’t going away. In fact, it’s only going to expand to new markets and products. Patnaik believes that the era of microtribes might require companies to fundamentally rethink how they approach their work.
    Instead of chasing that one billion-dollar idea, it might be wiser to look for ten ideas worth a hundred million each. Decentralizing and diversifying your grand plans—if you have any—might be the smarter strategy.


    In this decentralized world, flexibility is key. Companies that embrace microtribes and tailor their products to these niche audiences will be the ones that thrive. The trend is pushing businesses to move away from the one-size-fits-all approach, leading them to develop solutions that resonate more deeply with smaller, but highly engaged, audiences.
    It’s an exciting time for innovators who are willing to think smaller, more personalized, and more dynamic. Whether you’re a startup or an established player, the shift to serving microtribes can open up opportunities that may have been overlooked in the past.

    Read about read about the importance of storytelling

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  • 5 strategies for Navigating Business Conflicts

    5 strategies for Navigating Business Conflicts

    Navigating through business conflicts effectively is an essential skill every entrepreneur and business professional must master. My experience in the field has taught me various methods to handle disputes, whether with competitors, clients, or partners. These strategies are not just theoretical; they are tried and tested methods that have helped me steer my business relationships in the right direction.

    Read more about negotiation skills


    1. Avoidance Strategy: The Art of Ignoring

    The first strategy I often employ is avoidance. Simply pretending the conflict does not exist can sometimes work wonders. It’s like playing an invisible game where you ignore the issue hoping it will resolve itself or that the other party will tire out.

    Pros: This method can be incredibly frustrating for your opponent, which might give you a psychological edge.

    Cons: More often than not, the problem doesn’t disappear. Ignoring issues can lead to missed opportunities to resolve underlying problems, potentially damaging the business.

    2. Adaptation Strategy: Peace at Any Cost

    Adaptation involves sacrificing your interests for the sake of future peace and harmony. This strategy is about being the bigger person and putting the relationship above the conflict.

    Pros: Peace is always better than ongoing conflict. It maintains the relationship and opens doors for future cooperation.

    Cons: This approach can make you appear weak, inviting further challenges from others who might see this willingness to yield as a vulnerability.

    3. Competitive Strategy: Standing Firm

    Competition means standing your ground and letting the best argument win. This is about assertiveness and sometimes, sheer willpower.

    Pros: It can lead to quick victories, securing your position and demonstrating strength.

    Cons: This method risks significant losses if things don’t go your way and can lead to burned bridges or heightened tensions.

    4. Compromise Strategy: The Middle Ground

    Compromising involves giving something to get something. It’s about negotiation, where both parties make concessions until a mutual agreement is reached.

    Pros: It ensures that an agreement is reached, and both parties leave with something of value.

    Cons: Compromises can lead to situations where neither party is fully satisfied, affecting the long-term effectiveness of the solution.

    5. Collaboration Strategy: Constructive Resolution

    Finally, the most challenging yet rewarding strategy is collaboration. This involves finding a solution that satisfies all parties involved.

    Pros: It results in everyone being happy and often strengthens relationships, turning competitors into collaborators.

    Cons: It’s time-consuming, complicated, and requires significant effort and preparation. Successful outcomes are rare because they demand high levels of diplomacy and skill.

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  • The Surprising Fall of Thrasio: A Tale of Business Pitfalls

    The Surprising Fall of Thrasio: A Tale of Business Pitfalls

    In the ever-evolving landscape of business, the rise and fall of companies serve as pivotal learning points. The story of Thrasio, once celebrated as a trailblazer in the e-commerce sector, provides a compelling case study on the critical nature of strategic management and the volatile nature of business growth.

    The Meteoric Rise

    Thrasio quickly became a household name by capitalizing on the Amazon FBA (Fulfillment by Amazon) opportunity. They streamlined the process of acquiring and optimizing small, successful Amazon businesses, boosting their operational efficiencies and scaling them to new heights. Their strategy was clear: buy, improve, and earn. This approach led to rapid growth, attracting significant investments and valuations soaring to billions.


    Challenges and Missteps

    However, the very strategies that propelled Thrasio to success also sowed the seeds of its challenges. The rapid pace of acquisitions led to integration issues. Each business, with its unique brand and operational nuances, presented complexities that Thrasio struggled to manage at scale. Furthermore, the competitive landscape evolved; as more players entered the space, the cost of acquisitions increased, thinning margins.


    The Downfall

    The downfall of Thrasio can be attributed to a combination of over-expansion and underestimation of operational challenges. As the market became saturated and profitability per acquisition diminished, the financial sustainability of Thrasio’s model came into question. This led to a downward spiral, affecting investor confidence and financial stability.


    Lessons Learned

    The Thrasio saga highlights several key lessons for business leaders:
    – Scalability vs. Sustainability: Rapid scale should not compromise the long-term sustainability of the business model.
    – Integration is Key: Effective integration of acquisitions is crucial to realizing their value.
    – Market Dynamics: Continuous reassessment of market conditions and business strategies is essential as external conditions evolve.

    Conclusion

    The rise and fall of Thrasio serve as a stark reminder of the delicate balance required in strategic business management. For entrepreneurs and business leaders, Thrasio’s story offers valuable insights into the potential pitfalls of rapid expansion and the importance of robust operational strategies in the pursuit of growth.