Wealth Systems: Digital Commerce, Part I
The other Wealth Engines we’ve profiled have been around a long time.
But the world is changing fast.
As technology accelerates the share of the world’s commercial activity occurring online will continue to rise.
This makes creating products, services and experiences catered to the digital market a lucrative opportunity with growing tailwinds from the expansion of the market. Don’t forget about the gold rushes and shovels lesson: you can strike gold just by servicing other people’s dreams of a sparking sifting pan.
I am focusing very heavily on this wealth engine, we discuss the specifics at the end of this article. The plan for the series is to showcase the performance capabilities of this Wealth Engine and share tactical tools as well.
Why Digital Is The Future
There are many reasons why Digital Commerce is currently producing more wealth than the other engines.
Let’s review the most significant growth factors for digital businesses:
Lower Startup and Operating Costs
No need for rent, utilities for a physical space, or as many employees. This significantly reduces expenses.You'll save on costs like in-store displays, security, and maintenance that a physical store requires.
If you reduce the cost to start, to experiment, to iterate… growth happens much faster.
Global Reach
You can sell to customers worldwide, expanding your market potential far beyond a local area.
24/7 Availability
Your online store is open all the time, allowing customers to shop at their convenience, even when you're asleep.
Easier Scalability
Expanding your online business is often less complex than opening new physical locations. You can increase inventory or change offerings easily. You can port your company to another county, country or eventually planet with relative ease v.s. picking up and moving a brick and mortar business.
Targeted Marketing
Online marketing tools allow you to reach very specific customer segments, maximizing the impact of your advertising.
Customer Data Insights
You can easily gather information about customer preferences and behavior to tailor your offerings.
Building a business online means you have the potential to work hard on developing a digital product or service, host that “work” on the cloud, and then sell access to it in some form.
Make money 24/7, 365, while you are sleeping or (my favorite) while you are building up another wealth engine.
Your cost to deliver 1 instance of your product or service is largely the same as delivering 100, or even 1,000.
This elasticity is ideal in a rapidly changing world.
These are just the tips of the waves. It’s a big ocean that’s getting bigger by the minute.
Let’s dive in.
Capture the Power of AI
While it is absolutely true that robotics will eventually form a portal that allows AI to influence our material world in every way possible (far beyond our own ability to influence the physical environment too, a subject for another day…) the digital space is already accessible to the rising power of AI.
This is critical because AI is useful in all phases of the game.
Ideation
Idea screening
Concept development
Marketing strategy
Product development
Product launching
AI is revolutionizing each phase of the product development process, making it more efficient, data-driven, and customer-centric:
Idea Generation
This is the brainstorming phase where you gather ideas for new products or ways to improve existing ones. Ideas can come from various sources like customer feedback, market research, competitor analysis, or internal brainstorming sessions.
Trend analysis: AI algorithms can analyze vast amounts of data from social media, customer reviews, and industry reports to identify emerging trends and unmet customer needs, providing inspiration for new product ideas.
Competitive analysis: AI can track competitor activities, product launches, and customer feedback, highlighting areas where new products can differentiate themselves.
Generative AI: Tools like ChatGPT can help brainstorm ideas, generate names, and even create initial marketing copy.
I’d start by “talking” with your favorite AI about ideas you have. Problems you’d like to solve, methods you are playing with, “wouldn’t it be great if” and all related commentary.
Your objective here isn’t editing the perfect business idea into existence… separate writing from editing.
Idea Screening
Now you can use your editing muscle.
In this phase, you evaluate the generated ideas based on their feasibility, potential profitability, and alignment with your company's goals and resources. The aim is to narrow down the ideas to the most promising ones.
Predictive modeling: AI can assess the potential success of product ideas by analyzing historical data, market trends, and customer preferences, helping prioritize the most promising concepts.
Risk assessment: AI can identify potential risks and challenges associated with each idea, helping teams make informed decisions and mitigate potential problems early on.
This is where you take your 2 or 3 best ideas and start coming “Red Teaming” against them. Using AI (and your own brain) to come up with ways these online businesses can fail, friction you may face, etc…
Where is the energy in the economy going?
Does your idea position you near that moving energy, or are you hoping to create a market that may never form?
Concept Development and Testing
The selected ideas are developed into detailed concepts, including features, benefits, target audience, and potential pricing. These concepts are then tested with potential customers through surveys, focus groups, or prototypes to gather feedback and refine the concept.
Virtual prototyping: AI-powered tools can create realistic virtual prototypes, allowing teams to test and refine product concepts in a cost-effective and time-efficient manner.
Customer feedback analysis: AI can analyze customer feedback from surveys, social media, and other channels, providing valuable insights into product preferences and potential improvements.
Personalized recommendations: AI can personalize product concepts for specific customer segments, tailoring features and benefits to individual needs and preferences.
This is my favorite phase.
We take pretty good ideas and we engineer them typically in an evolutionary fashion (responding to pressures, growing as a result) into what will ultimately become the product / service.
Marketing Strategy and Business Analysis
This phase involves developing a comprehensive marketing strategy for the product, including target market segmentation, positioning, pricing, distribution, and promotion. A thorough business analysis is also conducted to assess the product's financial viability, including sales projections, cost estimates, and profit margins.
Target audience identification: AI can analyze customer data to identify specific target audiences, their needs, and their preferred communication channels.
Pricing optimization: AI algorithms can analyze market data, competitor pricing, and customer behavior to determine optimal pricing strategies that maximize profitability.
Demand forecasting: AI can forecast product demand based on historical data, market trends, and other factors, helping optimize inventory management and reduce waste.
At the start you are simultaneously too close to your idea AND too far from the market. Not a great vantage point to set pricing, finalize positioning or plan your promotion.
Hire consultants for this.
Seriously.
The dream is to hire people who already serve your ICP (ideal customer profile) and earnestly earn the right to get an introduction after you demonstrate the value of what you’ve built.
If you can’t afford consultants… use your clients or prospects.
“I’m working on a brand new solution to the X problem… you know what a pain it is, well this idea Y might solve it… I’ve got a few solutions and I am shaping them into a new offering and bringing them to market, can I talk you through what I’ve built…”
That will generate interest, you’ll get valuable feedback on both X and Y. The problem and what you built to solve it.
Not to scare you, but I’ve “solved” problems that I couldn’t find customers to pay for. This is where product/market fit is everything. You need to talk to people (multiple people) who SEE the problem you see. Then you need to go further and get some agreement that the other solutions are missing one or more elements — they don’t have a feature, they can’t solve the full problem, it won’t work in Z industry, etc…
This is why I advocate for working with professionals at this stage.. they will accelerate you AND stop you from accelerating into an empty space with no market potential.
Product Development and Testing
This is where the actual product is designed, engineered, and manufactured. Prototypes are created, tested, and refined until the final product meets the desired specifications and quality standards. Before a full-scale launch, the product is often tested in a limited market to assess its performance, gather real-world feedback, and identify any potential issues or improvements.
Generative design: AI can generate multiple design options based on specific criteria, helping engineers and designers explore innovative solutions and optimize product performance.
Quality control: AI-powered inspection systems can identify defects and anomalies in products with high accuracy and speed, improving quality control and reducing waste.
A/B testing: AI can optimize A/B testing by analyzing real-time data and dynamically adjusting test parameters to identify the most effective marketing messages and product features.
Sentiment analysis: AI can analyze customer feedback and social media sentiment to gauge product reception and identify areas for improvement before a full-scale launch.
Another great area to outsource.
Some folks advocate bringing in a technical partner and having them “take the wheel” here, but I have seen that approach add complexity and operational risk, say nothing of economic dilution or business friction.
I’d rather build the crudest possible MVP and get a paying customer providing feedback ASAP. I chose to become the technical partner by upskilling in software engineering, that path is always available.
Side Note: Choosing not to learn to code in 2024 is akin to being illiterate in the 1900s or 2000s. AI can help you learn the basic tenets of programing, quickly you’ll start grasping the core concepts and begin working with the design patterns you will learn to love.
Give yourself every edge - the problem solving mindset and technical capabilities that you earn by becoming a programmer is worth it.
AI gives you the ability to accelerate. You can iterate through designs, frame ideas, sharpen them into fine weapons and wield them with strategies refined by AI.
Product Launch
This is the final phase where the product is officially introduced to the market. A comprehensive launch plan is executed, including marketing campaigns, sales efforts, and customer support to ensure a successful market entry.
Personalized marketing: AI can personalize marketing campaigns for individual customers based on their preferences and behavior, increasing engagement and conversion rates.
Customer service automation: AI-powered chatbots can provide instant customer support, answer questions, and resolve issues, improving customer satisfaction and reducing support costs.
By leveraging AI in each phase of the product development process, companies can bring innovative and customer-centric products to market faster, with higher quality, and greater profitability.
AI is providing businesses with powerful tools to understand and engage customers, optimize operations, and drive growth. It's not just a technological advancement; it's a fundamental shift in how businesses operate and compete in the digital age.
As you can see clearly now, AI is the onboard computer in your Digital Commerce Wealth Engine that is adding power and efficiency to commerce.
Let’s take this engine apart and look at it more closely.
What Are The Engine Components?
The Fuel: Value Proposition
This is the heart of your engine, the unique offering that solves a problem or fulfills a need for your target audience. It could be a digital product (software, online course, ebook), a service (consulting, coaching, design), or a combination of both.
Differentiation: What makes your offering stand out from the competition? Is it superior quality, innovative features, exceptional customer service, or a unique pricing model? Clearly define your competitive advantage.
Target Audience: Who are your ideal customers? What are their pain points, desires, and demographics? Understanding your target audience is crucial for tailoring your messaging and marketing efforts.
The Ignition: Marketing and Sales
How will you attract potential customers to your engine? Strategies could include content marketing, SEO, social media advertising, email marketing, partnerships, or paid advertising.
Sales Funnel: Once you have leads, how will you nurture them towards a purchase? This involves creating a clear customer journey, offering valuable content and resources, building trust, and ultimately converting leads into paying customers.
Conversion Optimization: Continuously test and optimize your sales funnel to improve conversion rates. Experiment with different landing pages, calls to action, pricing models, and sales strategies.
The Engine Block: Technology and Infrastructure
Your website or platform is the foundation of your digital business. It should be user-friendly, visually appealing, and optimized for conversions. Consider using a content management system or e-commerce platform to streamline your operations.
Choose a reliable hosting provider to ensure your website is always up and running smoothly. Consider factors like uptime guarantees, security features, and scalability options.
Integrate a secure payment gateway to accept online payments from customers. Popular options include Stripe, PayPal, and Square.
I use Stripe for payment gateway and most of my companies bank with Mercury bank, they integrate beautifully into the new economy.
Implement analytics tools like Google Analytics to track website traffic, user behavior, and conversion data. This will help you understand your audience and optimize your marketing efforts.
The Transmission: Delivery and Fulfillment
Focus on providing excellent customer support to address inquiries, resolve issues, and build long-term relationships with your customers.
If you're selling digital products, set up a system for automated delivery after purchase. This could involve sending download links via email or providing access to a membership area.
If you're offering services, establish clear processes for onboarding clients, delivering your services, and managing client communication.
Our budding media empire here uses Substack to facilitate most of this - on both the digital product and services side of things.
The Exhaust: Metrics and Optimization
Identify the most important metrics for your business, such as website traffic, conversion rates, customer acquisition cost (CAC), and customer lifetime value (CLV).
Essentially business is “won” in the tension between your CAC and CLV — if you spend $2,000 developing a customer worth $25,000 to your business… you should focus on marketing ASAP and activating as many channels as possible to your content.
On the other hand, if you are spending $200 per client to earn someone who contributes $50 to your business… well you better HOPE people don’t find your storefront :)
Make sure you can see what’s happening in your business - financially and operationally. Regularly analyze your data to identify trends, patterns, and areas for improvement.
Use your data insights to make informed decisions and continuously optimize your marketing, sales, and operations to maximize your wealth engine's performance.
By strategically building and optimizing these components, you'll create a Wealth Engine that can generate consistent revenue, at lower operating costs than other businesses while driving sustainable systems-based growth.
Look Ahead to Part II
In Part II we are going to look at two examples of building this wealth engine from my personal life.
I started building the first in 2022, a SaaS revenue intelligence company. Our entry level product is $12,500 and the AI-based system is $35,000 — annual subscriptions required, and we charge for implementation as well hourly rate for system reconfiguration.
The second began in 2023 → it is this family of substack publications, including the one you are currently reading:
Each of these substacks has paying customers with monthly recurring and annual recurring subscriptions to access paywalled content.
These forums also offer the opportunity to develop ideas in 3 different domains I care a lot about:
Improving humanity’s condition with technology
Optimizing efficiency to make us more effective in business
Systematizing wealth building so we can do more with our wealth
The micro media empire will grow in both free and paid subscribers.
The marketing roadmap includes:
guest posting on other great publications
joining podcasts as a guest to talk tech, business and wealth
launching in video format (not sure yet if podcast or going full show)
Smart people are telling me to build a community behind the pay gates not just thoughts, documentation and system designs. We are exploring this and will be using all available means to gain signal by giving value.
In Part III we will start discussing in more detail the role AI plays in Digital Commerce with specific examples. Part VI and V will explore the future of Digital Commerce and methods to optimize the performance of this wealth engine.
Soon we will have five different wealth engines up and running!
👋 Thank you for reading Wealth Systems. I started this in November 2023 to share the systems, technology, and mindsets that I encountered on Wall Street.
💡The BIG IDEA is share practical knowledge that can be applied toward the development and refinement of wealth building systems.
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