113. Jacqui Boland’s Entrepreneurial Journey on a Red Tricycle

This week on the Economics For Business Podcast we were gifted the opportunity of reviewing and assessing a completed entrepreneurial journey, courtesy of Jacqui Boland, founder, CEO and now alumna of Red Tricycle, following the acquisition of the company by the corporate owner of tinybeans, a family photo sharing and journaling app.

Red Tricycle is a brand — “a lifestyle brand that fuels the parenting universe with daily inspiration for family fun.” In the “Economics For Business Value Proposition Template,” the Red Tricycle proposition would be:

FOR: Fun Moms

WHO: Search for and utilize ideas for family activities for parents and children to enjoy together.

VALUE PROMISE: A unique daily source of ideas and inspiration for family fun

VALUE RATIONALE: Every day, Red Tricycle finds and presents all the best local and in-home family fun opportunities and makes them easy for Moms to research, evaluate and act.

BENEFIT > COST: In one daily web visit, Moms have easy access to a unique curation of new ideas and inspirations, simply formatted, and requiring a minimum of their precious time.

Jacqui was generous in helping us map her entrepreneurial journey to the stages of the Economics For Business GPS.

Key Takeaways And Actionable Insights.

Imagination

The pre-design phase in which entrepreneurs develop the imaginary construct of their business idea.

Jacqui was a new mom in a new and unfamiliar city. She wanted to identify all the opportunities for fun with her family. She became an avid online searcher. A few conversations with some other moms revealed that many moms are searchers — with intensity and determination and a commitment to find and evaluate all the relevant information in their field of search. The idea of an online one-stop location for information about local family-friendly fun activities was born.

A useful tool for the Imagination phase of entrepreneurship is “Entrepreneurial Empathy”: Download Here.

Design

The phase where a validated imagination is transformed into a more formal business model.

Jacqui capitalized on her existing knowledge field. She knew magazine publishing and the power of content, and how to source it. She knew the advertising revenue model for magazines. She was able to design a crisp business model of content creation, content presentation, consumer engagement, and attractiveness for local and eventually national advertisers.

One of the tools in the Design tool set is the “Means-Ends Chain,” helping entrepreneurs to align their business design with customer values: Download Here.

Assembly

The phase in which design is operationalized by selecting and combining assets: people, technology, content, operating processes.

Assembly for Red Tricycle began with people: content producers, editors, salespeople. Jacqui found investors, initially angel investors, then angel groups, and, later in the business’s evolution, institutional venture capital. In turn investors and investor groups like 500 Startups were very useful in providing connections and recommendations for technology and software resources. Comparisons between different operating models that the investor groups were able to provide were useful guidance in making resource selections.

Consult our “Austrian Capital Theory” tool for capital assembly of resources: Download Here.

Marketing

The phase in which the designed and assembled entrepreneurial offering is presented to the market for consumer consideration.

Red Tricycle adopted a city market-by-market rollout strategy, starting in Seattle, proceeding to San Francisco, then systematically adding more cities. The killer app for market introduction was “Mom Word Of Mouth”. Moms have friends in other cities, and travel between cities, and are excited to share family fun ideas with others. The best sharers were subscribers to the Red Tricycle newsletter, so the brand worked hard to build up a subscriber list.

Red Tricycle KPIs were traffic, subscribers, and revenue. As a result of a system of creating and testing content, Red Tricycle could seed new markets with say 20 or 30 stories that drove good SEO traffic. And then the job was to convert that traffic to subscribers to the newsletter.

Building brand uniqueness is fundamental for the Marketing Phase. Use our “Brand Uniqueness Blueprint”: Download Here.

Customer Experience

The phase of the value learning process in which customers try the offering, experience its benefits, and assess the subjective value.

Red Tricycle designed a very specific customer experience, which Jacqui described as: “Quick, get an idea and inspiration to spend time with your kids, and then go offline and do it, and then come back two days later and do it over and over again.” The model was distinctive in not asking for too much time (“the infinite scroll”). Red Tricycle helped Moms focus on the lighter side of parenting and having fun with their kids.

Social media came into play as an aggregator of subjective value anecdotes. Moms would share a picture of themselves at the zoo and use Red Tricycle’s recommended hashtag, “Best weekend ever.” And not just everyday moms, but even celebrity moms, like Randi Zuckerberg, Pink, Ivanka Trump, sharing that they found a great idea for a campsite or a restaurant. These were subjective value data points.

Facilitate great customer experiences with our VUCA tool: Download Here.

Management and Growth

The phase where the business model is scaled and the marketing and customer experience reach is expanded, with continuous innovation accelerating growth.

The major growth pivots for Red Tricycle were the transition from local to national advertisers, and hiring and assembling and empowering the new team members best suited to lead the way in the new business environment that this entailed.

The goal for the management and growth phase was to roll out multiple local markets, and build a strong foundation of local advertising revenue until Red Tricycle had enough scale to interest national advertisers. The transition was a 5 year process. As Jacqui described it: “We put a plan in place and then we adjusted and adjusted and adjusted.”

A core element of the transition management is hiring. Skilled national advertiser salespeople are expensive, and sometimes it might take a year of that salary before a new salesperson can close a big national deal. There’s a lot of foundational work that needs to be done. Scaling the business was a delicate process. A fully staffed company would have a sales team across the U.S. in every market, but if you can’t afford that, you have to stretch and think, “Can this person sell local and national? Could this person cover Chicago, and L.A.?” And then once you start to get a little bit bigger, and you can hire an L.A. staff, what happens to that Chicago rep?” It’s a constant adjustment.

How does growth feel? “You’re always looking for the next milestone. And you have about a minute after you hit a goal or a milestone to celebrate, and then you run into the next quarter and you have another goal that’s even higher. So it’s a constant stretch.”

“Upsizing a Customer Need” is a useful tool for the Management and Growth Phase: Download Here.

Disposition

When the entrepreneur decides to sell the business, merge it into a larger business and relinquish the founder / owner role, or to turn it over to the next generation.

Selling a business is just as much a marketing task as establishing it and growing it. And that means seeing the business through the eyes of an acquirer — empathic diagnosis of their needs, their preferences, their goals and desires, their constraints.

Jacqui had made the economic calculation that the best path forward was not to raise additional venture capital for continued high growth, but to demonstrate solid and sustainable profitability and look for either a strategic partner or an acquisition partner. She didn’t use a banker (whose process she compared to a dating app) but conducted her own search for a firm that would recognize a complementary asset that could be a marketing engine for them. She found a partner in an adjacent field (family photo sharing) that was strong in technology and would benefit from Red Tricycle’s content creation and sales expertise. The deal was made quite quickly.

Additional Resources

Map of Jacqui Boland’s Entrepreneurial Journey (PDF): Download PDF

eGPS Handbook (PDF): Download PDF

The Division Of Economics Into Macro And Micro Is Incoherent. Individual Action And Interaction Are The Two Levels On Which To Focus.

If you read about or think about economics, whether you find your content in textbooks, business books, or business magazines or on news sites and programs or blog sites or via popular writers, you’ve probably come across the terms micro-economics and macro-economics. 

If you explore, you can find multiple definitions for each of these terms:

  • The International Monetary Fund defines macroeconomics as “how the overall economy works”, typically at the national level, and via the study and analysis of “aggregate variables” such as overall employment and money supply. Microeconomics, according to the IMF is concerned with a single market such as the automobile market or the oil market and how these are “driven by supply or demand changes”.
  • Investopedia, to take just one alternative source, describes macroeconomics as “the decisions of countries and governments” and microeconomics as “the study of individuals and business decisions”.

These are just two samples of the definitions available to searchers on the internet. They are clearly very different in import and meaning. 

The confusion would not be a surprise to Economics Professor Richard E. Wagner. In fact he says, in a book entitled Politics As A Peculiar Business, that the distinction between micro- and macroeconomics is “incoherent” and “non-informative”: it can’t tell us anything.

The established and institutionalized distinction between microeconomics and macroeconomics is incoherent in Wagner’s explanation, because 

it treats some types of interaction as macro while treating other types as macro, based on nothing more than the size or the extent of the interaction. Hence, the division of firms into distinct industries is to create micro entities, while their aggregation is to create a macro entity. This is nothing but incoherence, for all firms beyond proprietorships involve collective phenomena and are products of interaction.

Rather than the micro/macro classification, Wagner proposes the distinction between individual action and social interaction. He presents two very fancy terms for these two classifications: praxeology and catallaxy. Praxeology pertains to individual action, catallaxy pertains to interaction between individuals in society. Economic reasoning begins with praxeology, but most of the phenomena that are analyzed by economists are catallactical.

Prices, firms and markets are treated in the traditional economics as micro objects, to distinguish them from aggregate variables. But if micro pertains to individual action, then prices, firms and markets are macro objects because they pertain to interaction. Hence the accusation of incoherence. 

What’s so important about individual action in economics?  Wagner stipulates that societies change only through individual action inside those societies, with those actions spreading within the society according to the receptivity of other members of society to those changes. All change originates at the action, i.e. individual, level. Individual action matters; there is no such thing as social action.

Individuals interact through their connections to other individuals. If we think of society or the economy, it must be as a network of such connections. If we talk of social structures, we must talk of a network of connections between individuals who are constantly seeking better states of affairs within their own spheres of interest.

These choices of better states are subjective. As Wagner puts it, “Sentiment proposes objects for reason to think about”. In other words, economists can’t know why people do what they do. 

But modern economics can shed light on the implications of individual action and interaction. Systems theory establishes the basis for understanding interactions based on subjective value, and modern techniques of computational modeling of systems can show how theories play out. A frequent result of the action and interaction of individuals s “emergent” outcomes: patterns of system behavior that are not predictable from the behavior of individuals, yet are the result of it. Adam Smith recognized these outcomes as the results of human behavior but not of human design, brought about by the invisible hand of the market.

These emergent outcomes can mean economic flourishing for all because, in commercial societies, individuals choose actions that provide services to others that those others are willing to pay for. This is market-based action, continuously refined by the feedback loop of profit and loss, and the reciprocal relationship of choice and cost. All these actions, choices and costs occur at the micro level, the level of the individual.

Macroeconomics, on the other hand, is a mirage, a fallacy. It’s a made-up concept designed to justify government policy to “manage” a macro-level idea of the economy. If economists can aggregate data at the level of the economy, they can propose policies that claim to have the potential to induce changes in the aggregates. But since there is no such phenomenon as action at the aggregate level, or even interaction – people don’t interact with aggregates, but with other people – this entire scenario is invalid. Or, as Wagner would say, incoherent.

Why do the claims for the efficacy of policy persist? As Wagner also explains, the realm of economics and the realm of politics are now entangled. Actions in one realm can not be disentangled from action in the other. When individual action in the economic realm brings about flourishing, there will always be a politician or a federal agency to intervene to attempt to change the outcome. It is unlikely that we can disentangle ourselves from politicians and their macroeconomics any time soon, despite the incoherence.

Re-thinking The Role Of The Consumer In The Business System: Making Six Strong Connections.

A breakthrough paper published by Dr. Per Bylund and Dr. Mark Packard in January 2021, titled Subjective Value In Entrepreneurship, points to ten radical shifts in business thinking. We consider each one in turn. This article is number two in our series. (Previous articles here and here.)

Producers produce, consumers consume. Producers innovate, consumers enjoy the benefits of innovation. Producers pursue new ideas and new economic value, consumers evaluate and choose.

These are typical mental models of the business system. What if they are painting the wrong picture? What if, in representing the flow of production, innovation, ideas and value from the producer to the consumer (or the B2B customer), they are missing the fundamental mechanism of economics?

That is one of the questions asked by Dr. Per Bylund and Dr. Mark Packard in their paper Subjective Value In Entrepreneurship. In it, they propose a different image. Rather than a one-way flow of value from producer to consumer, they suggest that the producer and the consumer are equally engaged in a joint quest for value. The flow is two-way, not one-way. 

One of the implications of this new perspective is to attach greater importance to the connection between the entrepreneur and the consumer, and to study this connection with greater intensity, rather than to focus on the behavior of the entrepreneur or the behavior of the consumer in isolation. 

To immerse ourselves in this new way of thinking about the consumer’s role, a new mental model helps. In the new model, the consumer can be viewed as a dynamic bundle of connections to various resources. The consumer is assembing a system – to run a household, or to run an office, or to implement some specific task in as efficient and effective way as possible, i.e. best result at lowest cost. To supply the system with the required resources for its operation, the consumer connects to supply sources: for the household system the connections might be to a supermarket, a dry cleaner, an array of other retailers, a few gas stations, the local water and energy suppliers, audio and video entertainment services, internet and PC, some expert services (an electrician and a plumber, for example), one or more schools, doctors and healthcare services. There are many more of course. Think of a cloud of service connections surrounding each individual consumer and family. We can imagine a similar cloud for a B2B customer.

Whether consumer or customer, the value generation system is big and complex.

A producer who seeks to provide services to the consumer should first develop the mental model of all the existing connections the consumer has already assembled in their cloud, and is currently monitoring, managing and evaluating. For each one, the consumer continuously applies a set of value questions: was my most recent experience as valuable as I wanted it to be; do I continue to rank the value of that experience value higher than alternative satisfactions; do I feel the cost of exchange is less than the value experienced? This ongoing valuation is a dynamic swirl of continuous change, with different satisfactions and services simultaneously rising and falling in their relative ranking in the consumer’s mind.

With each act of valuation, the consumer emits a signal for the alert entrepreneur to pick up: dissatisfaction or satisfaction. The signal can be understood in terms of the consumer’s interaction with the world of goods and services providers, in the context of a never-ending quest for a higher value state. The entrepreneurs and businesses that have developed the strongest connections to the consumer will be best placed to intercept and translate the value-seeking signals.

The Six Strong Connections.

Mark Packard Episode Cover Photo

Alert businesses develop their connections along multiple dimensions;

The Information Connection: consumers are imparting information in their desire for greater value, and the smart business develops excellent information-receiving capabilities. The well-tuned connection is not so much information-gathering (i.e. intentional queries such as surveys) as a cultural disposition to hear and listen, especially at the front lines of direct contact with customers.

The information connection is two-way. Successful businesses fine tune their information provision to the customer, aiming to ensure that it is personalized, specifically relevant to a declared value desire, and additive to the knowledge they need to support their decision-making. Happily, “spray and pray” advertising tactics have been abandoned. Personalization of digital communications is a big advance for businesses, so long as they avoid the feelings of “interruption and annoyance” that can be the unintended consequence.

The Value Proposition Connection: from the listening connection, businesses can craft a customized value proposition, a proposal to address the customer’s search for greater value. This connection must also be two-way. How does the customer react? What is the level of belief? Is the customer prompted to learn more about the firm making the proposition? How does the customer feel about this value proposition compared to alternatives? If there is no feedback loop, the business is unable to answer these questions and unable to advance further through the value process. 

The Evaluation Connection: consumers are engaged in continuous evaluation of their alternatives within the value system they have created for themselves. Businesses aim to be part of the evaluation process, providing knowledge where it is requested, and responses where they are called for.

The Exchange Connection: too often, it is the exchange connection between customer and provider that is emphasized at the expense of all others: it becomes the sole end of interaction for the business, whereas it is better (and more profitably) seen as one component in the cloud of connections surrounding the consumer. Certainly, a completed exchange connection – i.e. an economic transaction – indicates a successful response by a business to a consumer’s signal; however, it does not say anything about the probability of future connections.

The Experience Connection: subjective value is experienced uniquely by the consumer, so this connection is the most distant for the producer. The only role is as observer, monitoring the experience. The monitoring can be funneled through feedback loops to the designers tasked with making the experience as valuable as possible.

The Assessment Connection: the consumer’s assessment of the experience is more accessible to the producer, because the consumer is much more liable to articulate the details of the assessment, whether as complaints or praise. A strong connection would deliver far more nuance, of course, especially in the consumer’s conditional language of “It would be better if….” or “I wish…..”.

When business truly grants the consumer / end-user the role of equal partner in co-navigating towards a higher value, these six two-way connections are established, always open, and serve as freeways of co-creation.

112 Peter Klein: When Policy-Makers Discover The Benefits of Entrepreneurship, They Can’t Resist Intervening

Innovative entrepreneurship is the segment of the entrepreneurial economy that is especially highly focused on innovation via new products and services. Within innovative entrepreneurship there is an even brighter spotlight on NTBF — new technology-based firms that are cutting edge, scalable, and fast-growing. They represent only one form of entrepreneurship, but one that is very interesting. Indeed, they attract the interest of government and government policy-makers. A recent special issue of the Strategic Entrepreneurship Journal, a top journal for which our friend Peter Klein sits on the editorial board, examined the impact of policy on entrepreneurship itself and on the institutional and social challenges of these policy interventions.

Key Takeaways & Actionable Insights

Government policy-makers take an interest in innovative entrepreneurship when they are trying to grab some credit for economic growth and improved goods and services.

Both micro policies and macro policies aim at stimulating successful entrepreneurial and innovative outcomes. Policies to encourage the growth of green energy supplies, for example, are a micro policy; they apply only to firms engaged in particular activities. Changing bankruptcy laws (so that the reallocation of assets can proceed faster and more smoothly) or an educational initiative to support entrepreneurship teaching in school would be classified as macro policies: trying to create a new set of conditions that apply to all firms, all entrepreneurs, all technologies.

Government doing nothing to intervene is another — highly desirable — kind of macro policy: maintaining a social order in which entrepreneurs can operate with the least uncertainty about the future regulatory environment.

At minimum, government interventions in favor of entrepreneurship fail to properly consider trade-offs.

Analysis of policy starts from trade-offs. Every policy has trade-offs. Economists are the ones to point this out. Politicians just want one button to push to achieve one specific goal. All that is needed, they presume, is a piece of legislation that provides a tax break or a subsidy to the firms they want to succeed. But there are always trade offs. Directing funds or capital to one group of firms diverts it from another group. The consequences are unknown and can’t be known. What if the current crop of battery technologies, for example, do not include the one that will emerge as a more efficient alternative in the future? By subsidizing today’s technology do we constrain the emergence of a better one in the future?

Evidence suggests that neither macro policies nor micro policies are successful or effective.

One example of ineffective micro policy is intellectual property protection for selected technologies or firms. One of the papers in the Strategic Entrepreneurship Journal special edition looks at fast tracking patents for particular technology areas. One of the outcomes identified is the diversion of resources to overinvestment in legal protections and excess litigation with all its attendant economic costs.

Regulatory systems are another form of macro policy. An example is the number of days it takes to get the permits to open a new business. Reducing this would be a macro policy that could be effective. Peter Klein made the comparison between Singapore vs India on this variable, pointing out the correlation with greater speed of innovation in the former, encouraging new and unintended applications of technology.

But often, regulatory permissions favor well-funded and well-connected firms over the young and agile, and certification signals may not be completely accurate about underlying quality.

Micro interventions are targeted to boost outcomes by helping a particular firm or technology. Bureaucrats claim they can make better decisions than the market about resource allocation. They identify so-called “market failures” to be corrected (like fossil fuels causing pollution), and market decisions that they believe should be over-ridden. They don’t want to let consumers buy the gas-powered SUVs they prefer.

There’s no reason to believe these policy makers will get their decisions right. They certainly don’t have the incentives to do so, since they are not governed by profit and loss. They can easily pick the wrong projects.

Some interventions may be dismissed as irrelevant, but they may still produce distortions.

The papers in the Strategic Entrepreneurship Journal special edition point out that many of the cash payments / subsidies / tax breaks are given to firms that would have launched any way and been successful anyway. One paper (not in this collection, but cited by Professor Klein) found that the major effect of research grants in STEM is to increase the salaries of scientists rather than encourage scientific experiments that wouldn’t otherwise take place. The result is not better science, but a better life for scientists (that is, those who know how to win grants).

The private sector can stimulate basic science and government subsidies are not needed. For example, pharma companies encourage basic research at private companies via the incentives they provide via M&A strategy — an exit plan from the lab for basic science. In general, firms trying to develop new products and services for the market do a lot of the scientific discovery in the early stages of production. The government is not needed.

When government does provide venture capital (more frequently in Europe and Southeast Asia than in the US), the researchers reporting in this journal edition identified the receipt of such funds as mostly a marketing signal, enabling firms to enroll bigger partners, or get a prestigious underwriter for their IPO as a consequence of the positive imagery derived from being a subsidy winner.

Non-policy is a more promising and potentially more effective approach to encouraging entrepreneurship.

Culture is an example of non-policy. A culture that encourages experimentation and creativity, and assigns a low level of stigma to boldness whatever the result, is likely to attract more investment and accumulate more capital than a culture of more traditional norms favoring continuity. Cultural evolution like this is less likely to occur in a system where the state directs investment and chooses industries and sectors for support. One outcome is a negative view of business when business success is determined by getting close to government: in those cases, individuals tend to think badly of all business, including entrepreneurial businesses.

The verdict: maintain a healthy skepticism about the case for interventions to support entrepreneurship.

Overall, the evidence is not in favor of either macro-interventions or micro-interventions to stimulate innovative entrepreneurship. How should the individual entrepreneur think? It may be an ethical issue: whether or not to accept government subsidies or support. Nevertheless, the entrepreneur must make the best use of available knowledge, which includes knowledge of the regulatory regime. One of the papers in the collection finds that entrepreneurial businesses can make better connections with the right kinds of capital and partners as a result of government involvement. At some level, this kind of knowledge is a defensive mechanism for the real world.

And at least the regulators and policy makers are recognizing entrepreneurship as a positive force for growth and for good.

Additional Resources

“Effects of Institutions and Policies on Entrepreneurship” (PDF): Download PDF

Read the management summary of the Strategic Entrepreneurship Journal special edition (PDF): Download Paper

The Austrian Business Model (video): https://e4epod.com/model

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