Chip Koziara

Exploring how to build, scale, and operate businesses from the perspective of individuals and organizations

  • Selection is king (for marketplace businesses)

    Back in late 2018, Netflix made headlines when it paid a reported $100 million to secure the streaming rights for Friends for one year. The fight for Friends didn’t end there—HBO Max later paid $425 million to lock up the rights to stream Friends in a five-year deal.

    Clearly, streaming services value Friends highly. To better understand why, I will introduce a concept called selection.

    I define selection as:

    The availability of distinct goods, services, or service providers that a business offers to its customers

    Examples of selection in companies include:

    • TV shows, movies, and documentaries for Netflix and HBO
    • Books, household items, electronics, and clothing for Amazon and Walmart.com
    • Albums, singles, and music videos for Spotify and Apple Music
    • Restaurants for food delivery platforms like Uber Eats, DoorDash, Postmates, and GrubHub
    • In-network physicians for health insurance policies from companies like Kaiser Permanente or UnitedHealthcare

    Selection is so important because it dictates the experience of a customer within a marketplace business, including driving acquisition of new customers and building a competitive moat to retain existing customers.

    HBO Max spent $425 million for the exclusive rights to Friends, because they believe it will be a key reason that customers will sign up for the new streaming service when it launches in May 2020. Disney spent $4.05B on acquiring Star Wars parent LucasFilms, because Star Wars enhanced the selection of their portfolio1. This bet paid off quickly, as Disney had already generated $4.8B in sales from its four Star Wars movies by late 2018.

    How to think about selection strategically

    Getting selection right is the difference between success and failure for marketplace businesses that connect their customers to goods, services, or service providers. Now how should these companies think about selection strategically?

    I believe there are three distinct aspects of selection that need to be executed flawlessly, typically by different teams within a company:

    1. Identifying the right selection
    2. Adding selection
    3. Discoverability

    1. Identifying the right selection

    When identifying the right selection, companies need to start with their customer in mind. Each customer has different tastes and preferences, which influence which merchants or goods they desire. Some factors can be geographic or demographic, but others may not fall into easy-to-measure categories. To find the right selection for your business, talk to customers, identify how that plays out with your customers and partners, and iterate constantly2.

    Additional guiding principles for identifying the right selection for a business include availability, substitutability, and exclusivity.

    Availability

    Availability describes whether selection is an existing option in the market — like Friends, which is available to the highest bidder — or proprietary — like The Mandalorian, developed exclusively for Disney+. Proprietary options tend to be more uncertain in terms of consumer demand and require a large up-front investment before their value can be realized, though if successful, their benefits to a business will compound over time as they cannot be copied 1:1.

    Substitutability

    How easily selection can be copied or replaced describes its substitutability.

    Popular intellectual property and powerful consumer brands have low substitutability, while more commoditized offerings are highly substitutable. The fewer substitutes an offering has, the higher its value to customers — and the higher its cost to businesses.

    Customers who prefer Friends, McDonald’s, or Taylor Swift cannot be easily convinced to consume The Wire, Burger King, or the Grateful Dead instead. The reverse is true, too! In comparison, consumers do not have strong brand affinity for commodities like phone chargers, so a phone charger produced by AmazonBasics or Apple would be substitutable.

    Exclusivity

    Selection can also be exclusive or non-exclusive, with the value exclusivity varying wildly based on the bargaining power of suppliers and competitive dynamics of an industry. While exclusive selection can be incredibly valuable, overvaluing exclusivity is an expensive mistake.

    2. Adding selection

    After identifying the right selection, a business must acquire it.

    For existing goods, services, or service providers, a business needs to balance a provider’s willingness-to-pay with their business model. A provider’s willingness-to-pay increases as the perceived unique value a company can provide increases.

    I think of perceived unique value as:

    The ability of Company A to create value that Company B desires and cannot attain from other sources3

    Adding existing selection is typically a sales or business development concern.

    For propriety selection, a business needs to understand the investment required to develop the selection and reconcile that with their business model.

    For this type of selection, resourcing needs are determined by the nature of the selection itself. Examples include developing an in-house film studio like Netflix, or white-labeling generic products like AmazonBasics.

    Finally, the acquired selection should drive desired behavior at a cost the business is willing to bear. A feedback loop needs to be established to measure the performance of added selection, so a business can optimize the acquisition of high performing selection and de-prioritize the acquisition of lower performing selection.

    3. Discoverability

    Once a business has the right selection available, it needs to empower customers to easily find what they want.

    This is a product question without a one-size-fits-all playbook for every business. That said, all businesses need to both understand the motivations of their customers and design how selection is surfaced for each type of customer.

    When designing how selection is surfaced for each type of customer, these four methods of segmentation may be helpful: lifecycle, demographic, revealed preference, and stated preference.

    Netflix could use lifecycle segmentation to determine discoverability by showing new users a wide net of generally popular shows — perhaps adjusted by their geographic region, as a potentially relevant demographic component — that allowed these new customers to quickly identify something they would enjoy viewing.

    Disney+ could tackle the same problem by creating a large search bar at the top of the screen so users could manually search for specific content, tracking what the users actually viewed, then surfacing similar titles in future sessions — an example of using revealed preferences to make selection more discoverable.

    As another alternative, HBO Max could survey users during an onboarding flow to see which types of content the most enjoy, using these stated preferences to display recommendations.

    A business can learn how to measure and optimize discoverability, but it will never be a fully solved problem as customer motivations are constantly evolving.

    Concluding thoughts

    Selection helps explain why Netflix and HBO Max emptied their pocketbooks for Friends and why Disney purchased LucasFilm, Pixar, and Marvel.

    Any marketplace business can tap into this powerful concept by developing a selection strategy that reconciles the interaction effects between selection, customers, and their business model. This selection strategy will inform key decisions that will shape a business — and its profitability — over time.

    1. Disney monetizes its brands through streaming, merchandise, and theme parks, among others, extending the concept of selection to all of these areas. ↩︎
    2. This is not an exhaustive list of why a company would or would not transact — factors like trust, operational overhead, and timing of cash flows could all impact whether or not a deal is finalized. ↩︎
    3. Perceived unique value is not absolute. Company B may be able to get better value in limited quantities from Company C than Company A, but still choose to transact solely with Company A due to the aggregate value they can provide. ↩︎

  • How to write an effective work email

    Writing effective emails is a superpower in the workplace. An effective email can make the difference in getting your proposal accepted, key question answered, or idea to stick.

    After writing thousands of emails, I have learned how to distill a work email to the essentials.

    Over the years, I developed a five step checklist for improving the efficacy of emails that I write at work. By sharing this checklist, I hope to make the process of writing emails at work less daunting and more effective.

    To write an effective work email:

    1. Write for your primary and secondary audiences
    2. Be concise
    3. Assume that the email will be forwarded
    4. For longer emails, add a one-line summary at the beginning
    5. Write the subject line last

    1. Write for your primary and secondary audiences

    The first question you need to think through is who you are writing to — the main recipient is the primary audience. The primary audience needs to understand what you are writing about including what, if any, action they need to take as a result of the email.

    If the primary recipient is a senior leader, it is reasonable to assume that they may be reading emails as they ferry between meetings all day, so brevity and clear next steps are even more important. If the recipient is a colleague that you are collaborating on a project with, going into more detail may be appropriate.

    I typically send email to one recipient in the To field, using the Cc field to add in additional individuals or teams. These additional recipients are the secondary audience. The secondary audience needs to have visibility on what is going on, so add any context they will need to understand the nature of the ask or update.

    When writing emails that require decisions or input, make clear asks that are directed at one specific person. This is the primary recipient and they should be addressed by name with the question.

    I like to bold the name and add an @ sign to make this ask even more clear:

    @First Name, can I move forward with the proposal as outlined?

    Or:

    @First Name, could you please reach out to Team X to see if they can support this request?

    2. Be concise

    Include only the level of detail that is needed — no more, no less. After writing your first draft of the email, rewrite it with fewer sentences.

    Considering using bulleted lists, including nesting content in sub-bullets:

    • Bulleted lists are easier to skim than sentences, when used in moderation
      • The writer should focus on the ideas and can use sentence fragments
      • Avoid filler words and prose-like sentence structure

    As an example, here’s a paragraph from a sample email first draft making a recommendation to use customer testimonials in the sales process:

    The attached report contains supporting evidence for the recommendation. There was a 32% increase in sales productivity during the pilot period when we used customer testimonials during calls, so I think including the testimonials for all calls will be an effective way to increase sales by as much as $100 in incremental sales per rep per day. If you look at the annual impact, it could be as much as $425,000.”

    This paragraph could be distilled into this sentence:

    The team could increase weekly incremental sales by $100 per rep — a $425k annualized impact — by implementing customer testimonials during outbound calls (pilot results here1).

    The recommendation’s predicted impact and supporting evidence are clear, with more detail available to reference, if needed, through the included link or attachment.

    3. Assume that the email will be forwarded

    It is important to make sure your spelling and grammar are correct, because your email could get forwarded to a senior leader at your company or even a customer.

    More crucially, make sure that your email is professional. You should be comfortable defending anything you write to anyone inside or outside of your company if they were to somehow read the email.

    4. For longer emails, add a one-line summary at the beginning

    While being concise is important, there are cases where detail cannot be omitted in order to provide the necessary context for the primary recipient to make a decision or understand a decision someone else made.

    In these cases, make sure the first line is a summary of the email with the key question or takeaway for your primary recipient.

    As an example:

    We can unlock $120M in new business by building Feature X by the end of Q1. Can we meet to discuss the tradeoffs of building Feature X instead of continuing with our current development roadmap?

    If this is just an update email, consider providing the high-level takeaways and migrating the more nuanced details into a separate document that you can include a link or attachment to.

    5. Write the subject line last

    Subject lines should make the contents of the email obvious to the primary recipient and provide a hint at the requested next steps. I find it is easier to write the subject line after writing the email, because I can review the content of the email when summarizing the main point.

    Any required action can be called out using brackets at the beginning of the subject line separate from the summarized contents of the email. Adding in the due date (end of week, end of day, a specific date) helps the primary recipient better understand the timeliness of the request and prioritize accordingly.

    As an example, let’s say that you are writing an email to a leader of a team that you work with infrequently with an ask for them to participate in a company-wide leadership panel you’re organizing.

    A possible subject line could be: [Participation Requested EOW] Company-Wide Leadership Panel Opportunity

    This level of detailed formatting in the subject line could be overkill for an email to a teammate or colleague you work with often, so make sure to filter the subject through the lens of the first step — write for your primary and secondary audiences.

    Concluding thoughts

    These rules of thumb will provide a foundation for effective email writing at work. That said, do not be afraid to break these rules! Over time, you’ll find what works best for you and your writing style, as well as what your company’s norms are.

    If you have any specific email questions I didn’t address, let me know via Twitter or email.

    1. Include a link to supporting materials, or include those materials as attachments and reference them in the body of the email. ↩︎

  • How to inspire teams with TAM

    Total Addressable Market, or TAM, is a term used to describe the market opportunity for a product or service. There are a few definitions, but I like to think of TAM as the global market for x in a given year, where x is whatever category a product or service is in.

    For example, Coca-Cola might be interested in the TAM for global annual soft drink spend, whereas Uber might be concerned with the TAM for global annual transportation spend.

    TAM is often used as a measuring stick to answer the question, “how big could this business be?” If the TAM for a market is $100 million, any individual firm in that market is going to have a valuation constrained by the size of their TAM1. In this example, the collective annual revenue of all the firms in that market would be no greater than $100 million, all else equal2.

    Unsurprisingly, TAM is a popular way for startups and more mature companies to describe their market size to investors. But plenty of companies miss an opportunity to translate the excitement they’re generating with investors and senior leadership to the folks that are operating the business day-to-day.

    I believe everyone should know the TAM of their company3. Understanding how big a company is relative to its TAM can inspire and align teams around the opportunity at hand. Ambitious companies are likely only just scratching the surface of their Total Addressable Market, and this context can motivate teams to pursue initiatives that could result in step-change growth4 rather than incremental improvements that would result in flat or modest growth — or even negative growth!

    Absent leadership providing this information readily, going through the thought exercises of which market (or markets) your company operates in, how big its Total Addressable Market is, and measuring how much of its TAM your company has captured are great ways to better understand your business and where opportunities for massive growth may be.

    1. This example assumes these firms only operate in the single $100 million market. In reality, a nascent startup will likely be operating in a primary market, but that’s not likely to be true for Fortune 500 firms. ↩︎
    2. “All else equal” rarely holds up in practice, so thinking about how the TAM can change is critical for understanding a market. Some reasons TAM can change include shifting consumer behavior, potentially due to the diffusion of a new technology across a market or new government regulations. ↩︎
    3. I also believe that everyone in a company should be able to articulate their company’s strategy. Strategy should be something everyone in the company can understand, so it can be a clear north star for decision-making. Tactics matter, too, but should be dictated team-by-team rather than top-down. ↩︎
    4. Eugene Wei wrote the excellent essay Invisible Asymptotes on how Amazon unlocked new step-change growth opportunities by removing the hidden pain points of their business that prevented customers from using Amazon more frequently. His piece calls out TAM specifically, too, including how he viewed Amazon’s long-term TAM as a “layer cake of different retail markets.” ↩︎

Hi, I’m Chip

I work at Uber, where I currently lead strategy and planning for sales operations within our Delivery business. Prior to Uber, I helped launch a new product as a Venture for America Fellow and later co-founded a workplace productivity startup.

I enjoy reading, programming, thinking through business models, and being an arm-chair football coach (Go Blue!). I am always chasing the perfect cup of coffee.

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