How to scale billion dollar businesses: Don’t build popcorn stands

At a prior job, I worked with a sharp guy named Scott Schedler who had been the CFO of a large division at General Electric. I learned a lot from him, but one lesson stuck with me more than the others:

“Don’t build popcorn stands.”

It’s something he learned at GE, where they used the label “popcorn stands” to describe business units that were too small to meaningfully impact GE’s earnings.

(Apparently popcorn stand proliferation was a problem at GE due to ambitious rising leaders spawning new business units as a way to prove themselves.)

The problems with popcorn stands are twofold:

  1. Building popcorn stands consumes your time and attention, two of your most valuable resources.
  2. Maintaining popcorn stands adds persistent overhead to your daily work (I’ll give an example later to illustrate).

This lesson is useful even if you don’t work at a massive multinational company.

The company we worked at, The Motley Fool, was small compared to GE, so Scott applied the metaphor to new projects rather than new business units.

He encouraged us to ask ourselves “is this a popcorn stand?” anytime we started a new project.

Which was shorthand for “does this project have the potential to drive at least $X of incremental cash per year?”

If you set the value of $X high enough, asking yourself that question pushes you towards boldness. Towards impact.

I won’t suggest a number for $X, but it should be big.

I’ll give an example. I was the Director of Marketing at The Motley Fool, so let’s talk about marketing.

Popcorn Stands in Marketing

A common example of popcorn stands in the marketing world is overly granular segmentation.

Popcorn stand customer segments often reveal themselves with eye-popping conversion rates. Look a little closer and you’ll also see tiny user counts paired with even smaller net cash results.

These kinds of micro-segments become nightmares as they proliferate, because:

  • Reporting and analysis take more and more time with each new segment.
  • The need for bespoke creative skyrockets as you launch campaigns for the new segments.
  • Customers inevitably land in multiple buckets. Which means you need to build rules to define who gets what content and when they should receive it (and the number of rules grows geometrically as you add more segments).

Worst of all, marketers become obsessed with finding incremental conversion rate wins on campaigns that have no hope of moving the needle.

In my experience, the most common outputs of micro-segments are micro-tests.

You know what I’m talking about. Any marketer worth their salt loves running tests, and micro-segments provide an endless supply of possible tests.

The popcorn stand takes root when you see one of your micro-segments underperforming by, say, 10%.

Actually, the popcorn stand was born when you built the micro-segment in the first place. You see, popcorn stands, like Gremlins, are incredible self-replicating machines.

Eventually, one of them will jump into a pool, multiply with reckless abandon, and fill your resume with an army of unimportant tests.

gremlins-1984

Anyways, let’s return to your underperforming micro-segment…

You’ve identified a segment to test, and you’re excited to have new talking points for your next stand up meeting. You develop creative and go through your process for launching tests.

The process to launch the test inevitably takes longer than you expect.

Your test finally launches (yay!). And then what happens? You find yourself checking the results five times a day, even though it’s a meaningless test.

Congratulations, your quick-and-easy test has become a major distraction and is actively preventing you from working on something more impactful.

To be clear, I’m not arguing that segmentation is bad. You should segment your customers into meaningful buckets and send them messages tailored to their interests.

That’s the foundation of good marketing.

But your segments should be large and impactful enough to justify the cost of maintaining (and testing) them.

That’s just a single “popcorn stand” example. I’m sure you can think of more.

At The Motley Fool, our work became far more rewarding creatively and professionally when we started avoiding popcorn stands.

Instead of running small, iterative tests, we spent our time building new, high-value products.

Instead of thinking about button colors, we focused our creative energy on designing compelling and engaging campaigns for our product launches.

Customers were excited to see innovative and new offerings. And the launches drove massive sales growth for the company.

How to build breakthroughs instead of a popcorn stands

Most marketers begin their careers as Popcorn Stand Builders. I know I did.

Heck, in retrospect I think it took me 10 years to learn what the word “marketing” really meant.

Real marketing…

… I’m talking about the kind of breakthrough marketing that drives game-changing results…

… happens at the intersection of persuasion, human nature, advertising, sales, business models, analytics, and copywriting.

I’ve dedicated my career to exploring that intersection, and this site is dedicated to sharing what I’ve learned.

My goal is to be a source of good ideas. Ideas that you can take and turn into game changing breakthroughs inside your company.

If you’d like to follow along, you should sign up for my email newsletter and I’ll notify you when I post new content.

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Talk soon,
Don

 

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