RULE #24 - If you want to change the game, change the economics of how the game is played.
"Say what you will about the Grateful Dead, in my book Jerry Garcia was one smart businessperson. Here’s a guitarist who was missing a piece of a finger, played in several other bands besides his own, found time to sell paintings, had a line of neckties with his name on them, and even got an ice cream flavor named after him.
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He also articulated a competitive strategy for the Grateful Dead that put him at the top of my list of management gurus: “You do not merely want to be considered just the best of the best. You want to be considered the only ones who do what you do.”
The Grateful Dead principle of “being the only ones who do what you do” is what I decided to borrow when it came to devising Fast Company’s Web strategy. If you’ve ever been to a standard rock concert, you’ve heard the announcement they all make before the show: “No photography, no recording, enjoy the show.”
Except for the Grateful Dead. They had a different theory of the economics, which led to a different business model, which led to a different announcement before the show: “Tape all you want! Make all the bootlegs you want, trade them, swap them, sell them to each other.”
Their fans enthusiastically complied, creating one of the earliest versions of a social network focused on live bootlegs of their favorite band. Did the band object? Not at all. Because they knew the more traffic their fans created—even if they didn’t get a penny from it directly—the more tickets, T-shirts, stickers, CDs, and other Grateful Dead paraphernalia they would eventually sell. Give away the bootlegs, charge for everything else. By the way, it worked: the year Jerry Garcia died, the Grateful Dead was the highest-grossing rock-and-roll band in the United States.
Of course, Jerry Garcia wasn’t the first to change the economics of his industry this way. Cyrus McCormick did it with the reaper business in the 1840s.
McCormick is remembered for patenting a reaper in 1843—but that wasn’t his real innovation. McCormick had quite a few competitors, but at the beginning nobody was selling any reapers, including McCormick. The problem was farmers couldn’t afford the machines. So McCormick changed the economics: he invented an installment plan that let farmers buy his reaper and use the savings the machine produced to pay him back over a three-year period.
Once you start to look you’ll find companies in every industry that have changed the economics to change the game: from razors to cameras, computers to airlines, magazines to nonprofits. Companies that start by redesigning the economics of an industry often finish by redesigning the whole industry—and owning it..."
Rules of Thumb, is a collection of 52 truths culled from personal notes of author, Alan M Webber, co-founder of Fast Company magazine and former editorial director of the Harvard Business Review.
And I stumbled upon this through Tim Ferris' FourHourWorkWeek website blog: http://www.fourhourworkweek.com/blog/2009/05/13/start-up-strategy-to-change-the-game-change-the-economics-of-how-its-played/
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