Insight for Independent Consultants
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Some of you are number 1 in this diagram, some are number 2, and some are the other farmers depicted there.
This is becoming an important idea for some folks in TEI because I theorize that there is something we think of as market power or distribution in the world of services, and this idea of distribution is important when it comes to getting the market to buy into innovation. Or simply to even buy an innovative service or product.
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The image above is from the 5th edition of Diffusion of Innovations, by Everett Rogers.
Here’s the basic idea: innovations are first adopted by people who are not deeply connected with and liked by the mainstream market. These Innovators (#1 in the diagram above) are part of the market, but somewhat apart from it due to their more cosmopolite nature. When Opinion Leaders find out about an innovation from the Innovators and adopt it, the Innovation starts to spread more rapidly to the mainstream market because Opinion Leaders are more deeply connected with and liked by the mainstream market.
There’s a symbiotic relationship between Innovators and Opinion Leaders. The Innovators have the social and physical freedom to discover innovations, but the innovations can’t gain wide adoption without the Opinion Leaders, who have forgone this same social and physical freedom in exchange for the deeper connections with their market/community that give them the ability to distribute innovation more deeply into the market.
Opinion Leaders have more market power than Innovators. They are “distributors” for innovations.
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If I wanted to introduce a new kind of soft drink to the market, there are three ways I could go about that project:
- Drive around to all the places in my area that sell soft drinks, and have individual conversations with each store owner, and try to convince them to allocate some of their limited shelf space to this new product the market has never heard of and then deal with getting it off their shelves if it doesn’t sell, etc, etc.
- Figure out who already distributes soft drinks to the places in my area that sell soft drinks, and convince them to carry my product on a trial basis.
- Set up my own stores and sell just my soft drink there.
This work is on top of all the other work of inventing, refining, and marketing an innovation, which is itself a substantial amount of work. In #1 above, I’m functioning as my own distributor, and in #2 I’m trying to build a symbiotic relationship with a distributor. The distributor already has invested in relationships — physical and social — with the market. Yes, they’re a “middleman”, but in many cases they’re a vital middleman who adds a lot of value. (In #3 I’m acting as my own distributor and retailer. To keep things simple, I won’t discuss this model further here.)
The Internet lets us cut out middlemen. It’s known for that. Tower Records can tell you all about this facet of the Internet.
But what the Internet actually does is make it possible to cut out middlemen. What it does not do is:
- Make it super duper easy to cut out middlemen.
- Impart to every Internet user the social ability to connect deeply with and be liked by the market they hope to reach.
- Cause every Internet user to enjoy the work of building “distribution” relationships with the market they hope to reach.
The value that distributors offer is something they have built. It’s something they’ve worked for. It’s something they have optimized their business for.
In the physical world of soft drinks, distributors obtain cheap warehouse space, manage a fleet of trucks, manage drivers, track inventory, nurture and maintain relationships with operators of low-margin stores, and on and on and on.
In the world of digital products or services that can be delivered remotely, some of the value of distribution is nullified. Warehouse space cost goes to zero. Trucks aren’t needed, and neither are drivers. Setting up a store becomes something amateurs can do.
But there still is that interface with the customer! That never goes away, and a lot of what makes distribution and retailing difficult and valuable in the world of physical products remains a source of value in the digital world.
A simple yet useful way to think about this is: distribution = access; access to buyers in the market.
This brings us back to the diagram at the top of this email, repeated here for your convenience:
Innovations (whether they be a digital product that you’ve created or a service you offer) are not a Genesis Device that you drop on a planet surface to do its transformative work without further help from you.
Innovations have to be distributed to the mainstream market via a social system. This takes time. Notice the dates on each member of the farming community depicted in the diagram. It’s a 2-year delta between the Innovator adopting the new weed spray and the Opinion Leader adopting. And then it takes another 6 years for that innovation to diffuse through the rest of the social system.
I’m starting to theorize that in the world of independent consulting, some folks are better at generating innovations than distributing them, and some folks are better at distributing innovations than generating them. Some folks are natural Innovators (#1 in the diagram above) and some folks are natural Opinion Leaders (#2 in the diagram above).
It’s not that Innovators can’t become Opinion Leaders. Rather, it’s that it takes real work to become an Opinion Leader, just like it takes real work to build up a distribution business.
To intentionally use a slightly more charged term, it requires real emotional labor deployed over time to build up the access that Opinion Leaders have.
Opinion Leaders have more market power — access — than Innovators, but I’m not convinced that this means they are automatically able to run more profitable businesses. They can address a larger market because they’re liked and trusted by more people. And they might be able to run bigger businesses. But I’m not sure those businesses are automatically more profitable. After all, nurturing and maintaining relationships takes time and energy, the expenditure of which reduce profit.
Further, I’m starting to wonder if the standard indie consulting business model — to the extent that there exists a standard model for this kind of business — assumes that the consultant is an Opinion Leader rather than an Innovator.
If I’m right about this (and I’m not 100% sure I am) then there are some implications:
- Innovators need to seek profitable relationships with Opinion Leaders, not with the mainstream market directly.
- Or, Innovators need to balance out their natural weakness and learn how to build up the market power that Opinion Leaders would more naturally have.
There are going to be indie consulting businesses where this whole Innovator/Opinion Leader thing isn’t a problem, because the consultant is a natural Opinion Leader. They read books or go to conferences where they pick up innovative ideas, and then introduce them to their clients. The relationship asset they’ve built up allows them to introduce the innovation to the mainstream market.
Where I’m trying to figure things out is with my clients who are more like Innovators. TEI attracts amazing folks like these.
The traditional indie consulting model is built around monetizing service delivery. But for that to work as designed, the mainstream market needs to be buying your services. This is a sort of “retail” model. What if you don’t have the distribution needed to get your expertise into “retail stores”?
How, as an Innovator, do you form symbiotic relationships with distributors/Opinion Leaders?
Or alternately, how as an Innovator, do you get better at distribution/retailing?
TEI is a community of practice, and we’re all learning through experience how to do this. The current experiment several members are engaged in looks like partnering with less innovative but more connected businesses that have done the work of building up “distribution” in the market. Very early results are promising, but time will tell.
When did technology start flowing into businesses from the bottom instead of the top? From Best Buy rather than Bain & Company? From OWC rather than IBM?
Seems like it was around 2008 that the flow visibly shifted and the iPhone seemed to really heighten the bring-your-own-device issue.
I think this is a fascinating sea change.
This article talks about how television shows are getting by with consumer gear. Not even really prosumer gear in some cases, but plain ole buy-it-at-a-mall consumer gear: https://www.theverge.com/21288117/late-night-seth-meyers-tech-gadgets-show-home-ipad-microphone
I see this with some of my clients (and myself too). Our home offices do double duty as something like a basic television studio. With event organizers wisely cancelling IRL events through at least Fall 2020, those who speak in order to earn visibility and trust are looking at things like
cheap LED lights + DSLR + cheap teleprompter -> HDMI capture card as as way to make their video look great but without it being ostentatiously great.
Reminds me of this lazy but yet interesting interview with Scott Galloway, on how he uses a garden shed as a TV studio: https://www.wsj.com/articles/prof-scott-galloway-wants-to-be-the-most-influential-thought-leader-in-the-history-of-business-11591619699
That’s another example of this bottom-to-top flow of technology.
That’s it. No larger point about business philosophy, and just a few interesting article links for you today.
I thought I’d take a crack at answering a question that came from my post opt-in survey. I’m doing this without the benefit of a conversation with my questioner, so I won’t have all the context and nuance of such a conversation, but as my wife’s grandmother used to say, it’s better than a poke in the eye, isn’t it?
The question: “My biggest challenge is connecting the dots between what I want to do and then finding companies who are interested in those services.“
This is such an important question. To turn it around on you, dear reader, are you happy following the market (building the specs that your client hands you) or do you want to lead the market in some way (design the specs that your clients follow)?
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What might be the most popular bit of marketing advice out there boils down to this: find out what the market wants, and then build, sell, and deliver what it wants. This might also be a reasonably good 1-sentence summary for a very popular marketing book called Ask. The actual title is the hilariously long Ask. The Counterintuitive Online Method to Discover Exactly What Your Customers Want to Buy…Create a Mass of Raving Fans…and Take Any Business to the Next Level
We’ll call this the Market-First approach. This is a good approach, and there’s a phase of our business journey where this approach makes sense. In fact, there’s a phase where this approach is medicine that cures a sickness.
That sickness is the Idea-First approach. We see this a lot in SaaS software. It’s the ready-fire-aim approach to taking an idea to market. Get excited about the idea, build it, and then try — often with little success — to find the market segment that wants to buy it.
The Market-First approach informs direct response marketing methods, which use data (opt-in rate, for example) to chase market demand. For example, let’s say that I have a sense that people who are new to working from home have problems I could help solve using a SaaS app. One piece of advice I would come across would tell me to set up some landing pages, pay to run ads that send clicks to these landing pages, measure the opt-in rate of these landing pages against each other, and then move forward with the winning idea, perhaps further iterating it along the way. This is a crude rendition of this advice, but you get the idea. We’re collecting data that we hope informs what we build for the market and how we sell it.
In a way, the Market-First approach de-emphasizes innovation. Or it can, if you take it too literally. In the n00b context, however, de-emphasizing innovation is a very good thing.
Most business n00bs suck at innovation in impressively destructive ways, and so de-emphasizing innovation is a good thing for them!!
De-emphasizing innovation is the active ingredient that makes the Market-First approach a good form of medicine for the n00b.
We’re all familiar with two stories: Henry Ford supposedly saying that if he’d asked his customers what they wanted they’d have said faster horses, and the iPhone no-hardware-keyboard innovation in the mobile computing world. These are examples of market-leading innovations.
Alan Klement offers a good perspective to consider when it comes to innovation, and here’s a recent take from him on this subject:
“Supply and Demand” is a misnomer
Supply creates demand. The latter is a derivative of the former. E.g. everyone thought the Blackberry was great, until the iPhone
This means it’s a mistake to believe you are studying demand only (needs). Needs are always linked to a product
— Alan Klement (@alanklement) June 15, 2020
If we buy into this perspective (I do), then it opens up the possibility of leading a market through innovation.
Everything thus far in this email has been contextualized in the world of products. We’re all about services here. There are some fundamental similarities, but there are some stark differences as well.
One difference is that conversations are built into services much more than they are to products, especially if you provide services as a solo consultant. You’re not hermetically sealed away in a corner office with no contact with your clients. You’re talking to them all the time as a matter of course! There is, of course, a time and a place for formal customer research and interviews with your current/past clients and that sort of thing, but in our world, we’re picking up a lot of information about our clients via osmosis.
Another difference is that personal brands have this outsized importance in our world. We can’t have brand equity accrete around a product, or impersonal company identity, so that brand equity has to accrete around our public identity as a person and our point of view.
This leads to a third possibility. We’ve got the Market-First and Idea-First approaches. Let me propose a third way: Transformation-First.
Pausing here to give some credit… I’ve been steeping in the thinking of one of my clients, Kyle Bowen, who applies the ideas we’re discussing here to museums and cultural institutions, and I’m so steeped in his thinking that I worry I’m unconsciously ripping off his ideas. I probably am. I don’t want to dilute his email list’s focus by sending him out-of-vertical subscribers, but the thinking he’s doing there is so muscular that I can’t help but recommend it if you’re interested in these kind of ideas, albeit discussed in a different context than ours: https://superhelpful.substack.com/subscribe
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For the next few paragraphs of this email, think of me like a guitarist improvising a solo that may or may not resolve. It might end up like this:
With the Transformation-First approach, you know the market so well that you know where they want to go and despite the lack of strong evidence that they want a particular kind of service to get them there, you invent it anyway and the presence of that service creates demand for the service. This the kind of alchemy that Rory Sutherland describes in his book titled… Alchemy.
This is what I’m attempting, with some success, to do with The Expertise Incubator. TEI is an unconventional service that I invented to serve a market desire for transformational progress.
With a Transformation-First approach, you’ve been steeped — via your ongoing conversations with the market — in their terminology, their worldview, their office politics, and so on. You just know them really deeply because you’ve been present with them in this intimate way for long enough that you TOTALLY. GET. THEM.
You’ve collected data on them, but via the experience of being present with them. You’ve researched them, but via the experience of serving them over what probably amounts to years. (You can accelerate this timeline with formal research, but you can also just relax into letting it happen over a longer time by always being curious.)
What makes the Transformation-First approach different is that instead of just asking your clients what they want you to build for them (and them possibly saying “a faster horse”), you take a risk; you take what you know about their desire for change and improvement and you design a service or an entire business that facilitates that transformation and then you do the hard work of helping them connect the dots between their current condition, their aspiration(s), and the way your service(s) can move them from status quo to Status Woah! Boy, did that feel cheesy to type! But this new keyboard I’m typing on (low-profile Cherry speed switches) feels so good I’ll allow it.
You are present with them and yet apart from them. You lead them.
That brings us to the final point: bootstrapping vs. brand marketing.
I often cast direct response marketing as a way of chasing markets and brand marketing as a way of shaping markets. There’s also the dimension of time. We need to do different things — different forms of marketing — while we are bootstrapping a business. After we’re out of that bootstrapping phase and we’re the custodian of an audience and running a more stable, profitable business, we can invest in brand marketing, which has the fringe benefit of letting us shape our market.
So dear questioner, the answer to your question is: it depends. Thanks for your question!
I’m kidding. I’m not going to leave you with the non-answer of “it depends” and then peel out.
It does depend, but it depends on your business maturity and depth of connection in the market. Also, let me reiterate the question in case my enjoyment of my new keyboard has become so expansively baroque that you’ve forgotten the question: “My biggest challenge is connecting the dots between what I want to do and then finding companies who are interested in those services.“
If you’re bootstrapping and only superficially connected in the market, you’ll probably want to take that Market-First approach. I’m not saying to read the Ask book, because half of it is offensively terrible, and also because it recommends an approach that presumes having an audience, and you may not have that.
Here’s what the Market-First approach looks like without the so-called Ask Method: Just imitate an existing business (a specialized one, I hope). If their capabilities are similar to yours, there’s a chance that their very existence is evidence that the market wants businesses like that one, and as a new entrant to the market this demand gives you a fighting chance, though please discount this recommendation heavily for verticals that are not open to outsiders.
If you have a higher risk profile, you can do some research to understand the progress your market is trying to make and invent a service that helps them optimize their progress towards an important goal. Alan Klement and the aforelinked email list from Kyle Bowen are again good resources here. If you’re bootstrapping and only superficially connected in the market, then make sure to invent a service that is easy to sell. You may not (yet) have the trust asset needed to sell a more ambitious or transformational or risky service.
And if you are past the bootstrapping phase and more deeply connected in the market, you can consider a service that aims to lead or shape the market. If we take your question’s language at face value, dear questioner, it seems like this is your ambition.
I support this ambition with my every fiber. Even when you’ve built up a significant personal brand, trust asset, and network of access to the market, it’s still a formidable task. It has occupational hazards.
For some of us, this makes getting out of bed in the morning worth it.
Maybe that’s you. 🙂
I’ll follow up with an email that suggests a market-leadership recipe. Might take me a few days.
PS: I don’t think it will undermine my point to add this: you can make a shitload of money chasing a market. I don’t mean to dismiss the idea of building what the market provides evidence that it wants, nor do I mean to diss it by framing it as “chasing” rather than “shaping/leading”. An acquaintance recently posted in a Slack channel that she now makes more money in her sleep from a digital course than she ever did from services. I’m certain she’s not exaggerating. Again, chasing a market can be a fan-freaking-tastic way to make money. But just like the word relationship means different things to different people, for some of us, business means earning the opportunity to lead a market, and that implies a different approach to the business.
Useful Lead Generation Resources
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- A weekly email that teaches readers about a niche topic. Here's a good example: https://resilienceroundup.com
- Writing a short ebook that teaches what you know about a niche topic. A good example: https://leanpub.com/kotlindsls
- Post videos on YouTube that teach what you know about a niche topic. A good example (Marie Poulin teaching about using Notion): https://www.youtube.com/playlist?list=PLpzKoBl909Y1s8hS5QpSlamyGqzmMqzDZ
- Keep it niche. If you worry that you'll run out of stuff to say in a month or two, you've got the focus narrow enough. You won't actually run out of stuff to say or share. Once you get through the entrance to the seemingly small "cave", you'll find that your tiny niche topic expands in scope dramatically.
- Give freely. If your giving creates value, it will open doors of opportunity for you. The world is starving for value, and has a way of turning freely-given value into business opportunity without you needing to squeeze that opportunity out via brute force.
- Be consistent. Commit to some kind of event-based deadline, like "I'll publish my weekly email before I go to sleep on Sunday night" or "I'm a night-owl, so I don't go to sleep without publishing" or "I'm a morning person, so I'll set a timer for an hour and do something for my business before I start doing client work." Keep it simple and don't do a monthly schedule unless you have a lot of discipline. If you've kept up regular workouts over the last 4 months of the coronavirus pandemic, you probably have enough discipline to publish something monthly rather than daily or weekly.
- Keep the production minimal. The content is what matters. The production values probably matter a lot less.
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- If you can regularly reach an audience, you have a platform. (Software like Microsoft Windows and Amazon AWS are platforms too, but not the kind of platform I'm talking about here.)
- Platforms are similar to wealth, but not subject to the taxation or laws that actual wealth is.
- Platforms are similar to power, but not subject to the laws and norms that actual power is.
- Platforms are therefore most similar to soft power.
- For the last 20 years, building a platform has been easier than at any other time in human history. It's not equally easy for everyone, but it's relatively easier for all of us because of the Internet and digital tools.
- As a result, there are lots of people — me included — who have a platform, which is similar to having wealth and power.
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- Our main skill with soft power is using it for our own benefit.
- As unlicensed professionals we're not guided by strong norms about using soft power.
- As self-made experts we're rightly concerned about diluting our platform's focus because that focus is the primary source of our current and future ability to do good in the world.
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