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Writer's pictureJohn Saunders

EPIC FAILURE

“Fall in love with the problem, not the solution.” -Uri Levine, Waze Co-founder


In this article series, I share excerpts and stories from my recently published book, The Optimizer, Building and Leading a Team of Serial Innovators.


This week we’ll explore the power of optimization and one harrowing example of how it can destroy your business without a constant focus on delivering customer value and profits.

Join me on a journey back before the dot-com bubble. Yes, life before the year 2000, or Y2K as it was called, was a simpler time when your mobile phone couldn’t provide access to every bit of information in the world, and its greatest feature was just making phone calls. I was enjoying life in New York City, finally earning enough money to cover the cost of living in my 250-square-foot studio apartment on the Upper East Side. It was early 1999, and I was in the midst of taking my Wall Street mentor’s advice to expand my skill set outside of my company while fundraising for the New York Underground Film Festival (NYUFF). My target audience was companies marketing their brand to the Gen X crowd — my crowd. One day, a friend told me about a company delivering goods right to your door from a website order and I said, “There’s no way.” My friend replied, “It’s real; it’s called Kozmo.com and they promise one-hour delivery from website orders for no fee.” They were growing like mad and had raised $280 million in venture capital funding. A cash sponsorship from Kozmo seemed like a perfect fit to complement the money and twenty-two cases of Jameson Irish Whiskey I had already secured. I tracked down their marketing personnel to discuss sponsoring the NYUFF and we met. After a few chats about sponsorship, my contact told me they didn’t see the festival as a good fit. “But,” he added, “we are looking for a head of sales. What do you think about joining Kozmo?” This was intriguing, as it was late in 1999 and dot-com companies were all the rage. California had Silicon Valley and NYC had “Silicon Alley.” Silicon Alley firms were disrupting the landscape of work and life in NYC, long dominated by the patterns of financial services. My employer begrudgingly allowed a casual work environment after years of suit and tie. I was truly torn about leaving the comfort of Wall Street to join a hip new venture, especially since I was finally making decent money for a twenty-six-year-old. A week later, I agreed to meet with my Kozmo contact to explore employment terms. We met around 9:30 p.m., got a soft drink at a bodega near their NYC office, and talked while we walked. He spent thirty minutes endlessly discussing how well things were going at Kozmo. I’d be crazy not to jump on board, I thought. On a dimly lit corner in the East Village, I finally stopped, turned to him, and asked: “What is the deal you’re thinking about?” He paused, looked me right in the eye and said, “Thirty thousand dollars, plus discretionary stock options.” “That will barely cover my rent after taxes,” I replied. “You’d be a great fit and we need help growing!” “Thanks, but I can’t do it.” I began my deflated walk toward the number four subway station to head home. It would have been such a big risk, as I had no safety net, but I still couldn’t help keeping tabs on Kozmo’s progress. “Within the next year, they had over three thousand employees and entered several major cities. I was devastated for months that I passed this opportunity by. However, while Kozmo added over four hundred thousand customers, they still had not found a way to make money while burning through the entire $280 million from investors. In April of 2001, they permanently shut their doors after four years. As the successful wine merchant Tim Varan once told me, “You can only sell a dollar for ninety-five cents for so long before it’s a problem.” I dodged a bullet and learned early in my career that enthusiasm doesn’t always equal success, and I learned there was a limit to my risk tolerance.

Innovation means little if the focus isn’t understanding what customer’s value and delivering on that need, while creating profits.

This problem needs to be addressed not just by startup companies but also established organizations that are looking to develop a new product, process or service.


Embrace the journey of finding the value that your customers demand, don’t bring them the solution you think they want!


How do you create an environment where your team constantly thinks in this capacity?


I hope you enjoyed this post. Next week I’ll discuss the first of four principles of the optimizer mindset and share examples of what they look like and how they can impact your business.


If you enjoyed this article, you can find further information my book here: www.johncsaunders.com along with information about my coaching and consulting business, Forward Advisory Solutions. You can buy my book at www.johncsaunders.com/order-my-book or sign up for my newsletter to be a part of my community at www.johncsaunders.com/blog


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