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Thursday, February 8, 2018

Sales For February 2018 Exceed $1,100 After 7 Days and the Similarities Between Business and "Risk"

Today's post comes on the heels of a fantastic start to February, which has, at least historically been a very slow month. Sales after just a week are $1,176 and whopping 89% of that total is from repeat customers, some of whom are returning after relatively long absences. So there is an opportunity to strengthen the relationship with them by giving them the new marketing materials and enhanced levels of service that they did not receive 2 years ago.

I have had a thought churning around in my head for months now about the similarities between the board game "Risk" and how to survive in business. For those of you unfamiliar with this classic world domination game, it looks like this:

Image result for risk board game

As you can see, the object of the game is to take over the entire world by attacking other countries. Each turn, a player receives additional armies that they can use to attack other countries or defend the ones they have. The number of armies each player gets depends on how many countries they hold, with players who hold entire continents receiving additional armies. Asia, Europe and North America are worth the highest number of armies in this regard, while Australia and South America are worth the least number. Each time a player is successful in taking a country, they get one of the cards shown per turn. Those cards have a different soldier type shown on them, and whenever a player gets three of a kind or one of each, they have the option of "cashing" them in for additional armies. At the beginning of the game, these sets are worth relatively few armies, but as more and more players trade them in, the number of armies increases, until by about 10 sets, it is 100 armies or so per set.

What is significant about all this is that the rules of the game are designed to punish the seeking of instant gratification, while rewarding those who play the long, strategic game. I used to always lose at this game and for the longest time, I could never understand why. Then one day my dad, who had a very mathematical mind told me: "Son, you have to have at least 3:1 to attack and win. If you don't have at least 3:1, you don't have enough armies." I thought he was mistaken, since I had often been able to attack and take over countries with 1.5:1 or 2:1, but then I would lose them within 2 or three turns as the same player attacked me back, or another player did. I now understand what he really meant, which was that you need 3:1 in order to successfully attack, but also to successfully defend against follow up attacks.

Most rookie players of this game immediately try to go for Europe and Asia, and to a lesser extent, North America because they are worth 5, 7 and 5 armies each respectively. But the problem is, all three of those continent contain a lot of territories. Asia for instance has 12, while Europe has 9 and North America also has 9. In addition, each of these continents have many borders and thus many territories that must be defended continuously in order to keep the entire continent intact: Asia has 5, while Europe and North America both have 3. So the upshot is that these continents require far too many armies to be able to capture all the territories and adequately defend them. What most players thus do is spread themselves too thin in trying to take these continents and then they cash in their cards early in a vain attempt to get armies to defend them.

Meanwhile the smart players focus on getting Australia and South America, for while they are only worth 2 armies each, they have far fewer territories and far fewer borders. South America is 5 territories and 2 borders. Australia on the other hand has 4 territories and 1 border. So it is by far the easiest to get and defend. Smart players focus on these first, and this gives someone who holds both a minimum of 7 armies per turn, which they can concentrate on the few border territories that they have. They can then attack just one country at the periphery of their border, re-distribute their armies back to their border country, at the end of the turn and take their card. They can do this every turn, while all the other players weaken each other and bid up the value of the card sets. Generally, most players won't attack them because they are too strong, and what they hold doesn't seem to the other players to be worth the risk. Then, when the sets are worth 70 or 80 armies each, these players can cash in their multiple sets, one turn after another, and sweep across the entire board, winning the game in about 3 or 4 turns.

And so it is in the business world: you can think of your market as the board and resources as your "armies". Your cards are the milestones that you reach with your market: new innovations released, positive social media responses, positive reviews received, customer relationships established and so on.

In my business, the world of dealing in stamps for collectors, the "Asia" or "Europe"are the expensive, blue-chip rarities that trade for hundreds or thousands of dollars. Most dealers try to deal exclusively in these stamps because of the perceived ease of selling and prestige, and they ignore the "Australia" of the stamp world, which are the modern issues, that can be acquired in quantity with limited resources, but at the same time are very complex and require a lot of work to identify properly and sell. Competing successfully in selling the classic stamps requires a massive amount of money - more than most dealers have at their disposal, so what happens is that no one dealer ever becomes the largest in these markets. On the other hand, by focusing on becoming an expert in the modern material, specializing in just one country (Canada) and offering a second-to-none selection, I am able to afford my stock with the resources at my disposal.  I can also easily defend myself against competition because it would take my competitors years to catch up to me in terms of my level of knowledge and the depth of my stock, and by the time they do, I will have already expanded my offering and knowledge level to another area. As I gain more customers, more followers on my blog (my cards), my resources will increase, as my sales grow. Having more resources will enable me to expand at a controlled rate and increase the chances of my survival, to the point where survival is practically assured.

You can easily adapt this analogy to almost any business you have or want to start. The first thing you need to do is identify the "Australia": that product or idea that you can develop with the resources you have, or can obtain, that you can defend, and which will allow you to grow your resource base. Then you go about developing your product or service and collecting your "cards" and learning as much as you can as you go. Sometimes you have to re-distribute your armies (re-evaluate your business strategy), but if you start with enough resources and are patient, you will ultimately take the continent successfully. It is important to be able to recognize the "cards" for what they are and take them where you can. Any opportunity to engage with a potential customer is a card. There is no such thing as an annoying "tire kicker". Tire kickers are often over time, the source of your best customers. You just have to be patient. Sure there are many that will never buy, just as it is possible in Risk to keep acquiring cards and never getting a cashable set, though it is very unlikely over the longer term.

Once you have that continent and a growing resource base, all you have to do is slowly expand your reach, either by adding additional products or services, or going after different markets. Your resources will then grow. It doesn't matter if the rate of growth is not quick. As long as your competition cannot significantly erode your resource base, your resources will continue growing, and time will be on your side.