Groupon’s Biggest Deal ever by Frank Sennett

Groupon’s Biggest Deal ever by Frank Sennett

The inside story of how one insane gamble, tons of unbelievable hype, and millions of wild deals made billions for one ballsy joker.

Andrew Mason tried so hard to make his friends laugh in high school that he drove his exasperated freshman math teacher to tears on more than one occasion. Absolute commitment to a bit regardless of audience response remains a hallmark of Mason’s humor. But long before he became the Andy Kaufman of CEOs, his friends saw him as the go-to-guy for outrageous stunts.

One of the standard shorthand references reporters employ to illustrate Andrew Mason’s improbable rise to CEO of one of the planet’s hottest online companies is to note that he graduated from Northwestern University in 2003 as a music major and went to work with indie-rock producing icon Steve Albini at his Electrical Audio recording studios in Chicago. But don’t pigeonhole Mason as a musician who got lucky. He coded web sites as a teenager, and enrolled at Northwestern in engineering before changing his major. Prior to creating Groupon precursor The Point, he attended grad school in public policy at the University of Chicago because he wanted to get funding for a Website called Policy Tree.

He knew nothing about the world of venture capital, but he had studied factCheck.org, a site funded by the Wharton School at UPenn. Why couldn't Policy Tree be the FactCheck of the university of Chicago? he wondered. Mason was so determined to pursue his vision that he enrolled in graduate school because it was the only way he could think of to secure backing for his brainchild. The idea behind Policy Tree was to give people on opposite sides of a given public-policy issue an online tool they could use to find common ground and ultimately act together for the good of society. Before mason got into the grad program in U of Chicago, he got a job in 2006 Jan. as a FileMaker developer for one of Lefkofsky’s companies, Echo Global Logistics, which uses online tracking and analytics technology to help business move cargo more efficiently.

Within a few months of starting with Echo Global, Mason had shifted to InnerWorking which is another firm run by Lefkofsky, which is also housed in the same building. Having distinguished himself with both hard work and creative thinking, Mason was now the lead developer tasked with redesigning the print technology interface for InnerWorkings. That Fall he decided to enroll at the U of C, but Lefkofsky had other plans and was determined to keep this new star around. If it was money Mason wanted, no problem. InnerWorkings was prepared to rise his salary from the low five figures to $200,000. Amazingly, Mason was unmoved by the offer. However, he agreed to come back to InnerWorkings one day a week to help hand off his projects.

Policy Tree wasn’t the only idea for a site vying for mason’s attention. he also wanted to launch one that would improve the world by harnessing the power of collective action. The core idea was for users to post campaigns for collective action on the site - whether it was to start a boycott to force a cell-phone company to change onerous contract provisions or even to finance a climate-controlling glass dome that would turn the city of Chicago into temperate paradise, as Mason famously lobbied for soon after The Point launched. Lefkofsky liked the Web site idea, but he was perhaps even more interested in the fact that Mason was spending ten hours a day online. The notion that a young guy who thought a lot like Lefkofksy could serve as his guide to this new world was an intoxicating one, and it could be worth serious money.

Mason’s five-page outline for his site was better than the verbal pitch, so much so that Lefkofsky was ready to invest $1 million dollar, if Mason can skip his graduate study and dedicating for this Web Site. Mason left U of C and joined the new company, The Point.

After working for one year and spending all of the $1 million and other VC’s investment, there was no sustainable path for The Point. The board of directors started pressuring Lefkofsky to the pull the plug. These were the same directors who sat on the boards of his companies InnerWorkings and MediaBank, an online media-buying company that he and Keywell (co-founder for The Point as well) has founded. Those firms look like even more of a dog by comparison.

Since there was no revenue coming in from the new company, The Point, Lefkofsky pushed harder to sell advertising on the site, mason finally blew up at him. “What is wrong with you? We are getting thousand visitors a month and we’ll make nine dollars a month in advertising. Why would I do that?” Mason asked. “You just need to see what it feels like to do something that results in making money”, Lefkofsky insisted. Mason finally agreed to create some ad positions on The Point’s blog but neither party left the argument a winner, and by August it was clear that hosting ads wasn’t going to generate meaningful revenue.

While those options were dead ends, Lefkofsky’s capitalist reeducation camp did ultimately lead mason and the other young idealists on his team to seek a non-adversarial business model, one in which every party would leave with something of value. To get to that epiphany, the team closely examined how members were using the site. Interestingly, a few of them had attempted before to persuade merchants to offer a discount if a certain number of users agreed to say, eat dinner at their restaurant. Group buying had been tried on the Internet many times before, So what was ThePoint.com going to do that was different?

Mason approached the issue from the perspective of the consumer: If he could get a daily email that highlighted one great business at an even better price, he’d often be moved to buy. But the key insight which gave rise to Groupon, is actually amazingly simple and like most great business models, makes you end asking yourself,” Why didn’t I think of that ?”

What Mason and his team eventually figured out is this: Every day local merchants have unused inventory. They have food that goes to waste, appointments that don’t get filled. They need like more business, more customers. And to get more customers, merchants have to entice them to come in, which often means offering them a discount. But for most merchants, discounts and sales are catch-22. You only want to lower price, if you know you are going to get new customers. Until Groupon arrived, this was an unsolved equation. Groupon applied the logic of tipping points and said to merchants: “If we can get you one hundred customers, will you give them all 50% off?” That created an immediate connection between the incentive offered and the merchant’s desired result. Overnight a new marketplace was formed.

Going forward, a Groupon would be a deal offering typically 50% or more off the price of a merchant’s goods or services. Shop owners would usually get half the proceeds from each Groupon purchase and they would cover the coupon value as well. So if a Groupon offered twenty dollar’s worth of a service for ten dollars, Groupon would take five dollars - half of the base purchase price - from every deal sold. The merchant would get the other five dollars, but would have to provide twenty dollars’ worth of value to each customer.  Factoring in Groupon’s cur and the coupon value, then, merchants would be taking 75% hit off the full retail price on every deal sold. It was a margin killer in the short term, but business hoped the promotions would pay off by converting deal buyers into long-term customers more effectively than direct mail or old-fashioned newspaper coupons could do.Groupon wouldn’t be the best marketing vehicle for every merchant type, but in general the trick was to structure offers so that the expense was justified.That’s how once-in-a-decade, market-transforming businesses are born.

[it went well with local merchants in Chicago and when they introduced it in Boston, there was already a con firm selling the same idea that Groupon started with. Since the first movers has many advantages, Groupon went into other cities in a faster mode. When they attempt to go to Europe, there is a con company who doing same business model and already in the market. That company has been doing same approach with eBay as well. When eBay became famous the same firm started in Europe with the same idea. eBay ended up buying the company. Same thing happened here where Groupon bought the European firm to expand in Europe.

The con company’s operating principle is quite simple - follow the growing web companies in US and copy them in Europe. When the original company wants to expand to Europe, sell the con company and make profit.

In the fast growing business, yahoo approached to buy the company for $3 billion, but Groupon rejected that idea. Google raised the bar to $6 billion which put Groupon folks in catch-22 dilemma. As per their growth chart, Groupon company will be $10bn to $20bn company in few years; if so, why to sell to Google for $6bn? Finally company decided to reject that offer as well and decided to initiate IPO to become a standalone company.

Initial price was $20, but went up to $24 after a month, but thereafter, it was sliding down fast and current stock price is $4.73.

Groupon business model can be copied by anyone. Social media companies like Facebook, Google could sell such discount coupons as well. Amazon is also targeting similar idea. Was the idea of rejecting $6bn Google offer was insane one?]

Site referred: http://factcheck.org/

The power of Full Engagement by Jim Loehr and Tony Schwartz.

The power of Full Engagement by Jim Loehr and Tony Schwartz.

Managing energy, not time, is the key to high performance and personal renewal.

The power of full engagement

Old Paradigm                    New Paradigm
Manage time                     Manage energy
Avoid Stress                    Seek Stress
Life is a marathon              Life is a series of sprints
Downtime is wasted time         Downtime is productive time
Rewards fuel performance        Purpose fuels performance
Self-discipline rules           Rituals rule
The power of positive thinking  The power of full engagement.

Principle 1: Full engagement requires drawing on four separate but related sources of energy: physical, emotional, mental and spiritual.

Principle 2: Because energy capacity diminishes both with overuse and with underuse, we must balance energy expenditure with intermittent energy renewal.

Principle 3: To build capacity, we must push beyond our normal limits, training in the same systematic way that elite athletes do.

Principle 4; Positive energy rituals - highly specific routines for managing energy - are the key to full engagement and sustained high performance.

The mind and body are one. The primary markers of physical capacity are strength, endurance, flexibility and resilience. These are precisely the same makers of capacity emotionally, mentally, and spiritually. Emotional flexibility reflects the capacity to move freely and appropriately along a wide spectrum of emotions. Emotional resilience is the ability to bounce back from experiences of disappointment, frustration and even loss. Mental endurance is a measure of the ability to sustain focus and concentration over time, while mental flexibility is marked by the capacity of move between the rational and intuitive and to embrace multiple points of view. Spiritual strength is reflected in the commitment to one's deepest values, regardless of circumstance and even when adhering to them involves personal sacrifice. It reflects the tolerance for values and beliefs that are different than one’s own, so long as those values and beliefs don’t bring harm to others.

• To maintain a powerful pulse in our lives, we must learn how to rhythmically spend and renew energy.
• We build emotional, mental and spiritual capacity in precisely the same way that we build physical capacity.
• A positive ritual is a behavior that becomes automatic over time - fueled by some deeply held value.
• Energy is simply the capacity to do work. Our most  fundamental need as human beings is to spend and recover energy.
• We call this rhythmic wave oscillation, and it represents the fundamental pulse of life.
• We are oscillatory beings in an oscillatory universe.
• Rhythmicity is our inheritance.
• Expanding capacity requires a willingness to endure short-term discomfort in the service of long-term reward.
• The longer, more continuously and later at night you work, the less efficient and more mistake-prone you become.
• Interval training is means by which to build more energy capacity and to tolerate more stress, but also to teach the body to recover more efficiently.

The range of what we think and do
Is limited by what we fail to notice
And because we fail to notice
That we fail to notice
There is little we can do
To Change
Until we notice
How failing to notice
Shapes our thoughts and deeds
   - poem written by R.D. Laing

Summary of the Full Engagement Training System

1. Objective: Perform in the storm

Build the necessary capacity to sustain high performance in the face of increasing demand

2. Central Conclusion:Energy is the fundamental currency of high performance
Capacity is a function of one’s ability to expand and recover energy
Even thought, feeling and action has an energy consequence
Energy is the most important individual and organizational resource


3. Full Engagement: Optimal energy in the context of high performance
Physically, energized
Emotionally connected,
Mentally focused &
Spiritually aligned

4. Full Engagement is a consequence of the skillful management of energy in all dimensions.

5. Full engagement principles:
Managing energy, not time is the key to high performance
Full engagement requires drawing on four separate but related dimensions of energy: physical, emotional, mental and spiritual.
Because energy capacity diminishes with both overuse and underuse, we must learn to balance energy expenditure with intermittent energy renewal.
To build capacity, we must push beyond our normal limits, training in the same systematic way that elite athletes do.
Positive energy rituals - highly specific routines for managing energy - are the key to full engagement and sustained high performance.

6. Full engagement requires drawing on four separate but related sources of energy:
Physical , Emotional Mental & Spiritual capacity is reflected in one’s ability to expend and recover energy at the physical, Emotional Mental & Spiritual  level, respectively.
The most fundamental source of energy is physical and the most significant is spiritual.

7. Four source of energy
Physical energy is defined by quantity of energy
Emotional capacity is defined by quality of energy
Mental capacity is defined by focus of energy
Spiritual capacity is defined by force of energy.

8. Measuring energy:
The quantity f available energy is measured in terms of volume (low to high)
The quality of available energy is measured in terms of unpleasant to pleasant
The focus of available energy is measured in terms of broad to narrow and external to internal.
The force of available energy is measured in terms of self to others, external to internal and negative to positive.

9. Optimal performance requires:
Greatest quantity of energy
Highest quality of energy
Clearest focus of energy
Maximum force of energy

10. Barriers of full engagement: Negative habits that block, distort, waste, diminish, deplete and contaminate stored energy.

11. The full engagement training system: Removes barriers by establishing strategic positive energy rituals that insure sufficient capacity in all dimensions

12. Positive energy rituals support effective energy management

13. Lifelong energy objectives: To burn as brightly as possible for as long as possible in the service of what really matters.
Strongest possible physical pulse
Strongest possible emotional pulse
Strongest possible mental pulse
Strongest possible spiritual pulse

14. Chronological age is fixed. Biological age can be modified with training.
Biological age (reflected in performance capacity) is determined by one’s ability to effectively expend and recover energy.

15. Full engagement requires periodic strategic recovery.
The energy that serves full engagement is renewed and stored during periods of strategic recover(disengagement)

16. The rhythmic movement between energy expenditure and energy recovery is called oscillation.
Oscillation refers to the optimal cycle of work/rest intervals
Chronic stress without recovery and chronic recovery without stress both serve to reduce capacity.
In sport, these conditions are referred to as overtraining and undertraining

17. The opposite of oscillation is linearity
Linearity is excessive stress without recovery or excessive recovery with insufficient stress
High-pressure situations generate powerful forces of linearity

18. Sustained high performance is best served by assuming the mentality of a sprinter not a marathoner.
Over the span of a thirty-to-forty-year career, performance is optimized by scheduling work into 90-to-120 minutes periods of intensive effort followed by shorter periods of recovery and renewal.

19. Most of us are under trained physically and spiritually (not even stress) and overtrained mentally and emotionally (not enough recovery).

20. Interval exercise is far superior to steady-state exercise in terms of enhancing energy-management skills

21. Energy is the human system is multidimensional
A dynamic relationship exists between physical , emotional, mental and spiritual energy.
Changes in any one of the dimension of energy affect all dimensions

22. Energy capacities follow developmental lines.
First level of development is physical
Second level of development is emotional/social
Third level of development is cognitive/mental
Fourth level of development is moral/spiritual

23. Each of the four dimensions follows its own developmental stages

24. The full engagement training system begins spiritually with a connection to purpose.

25. High positive energy is the fuel for high performance.
High positive energy flows from the perception of opportunity, adventure and challenge (approach). Negative energy is precipitated by the perception of threat, danger and fears about survival (avoidance).

Primary capacities /skills
Physical:hearts and lungs,Abdominals,Shoulders & back, legs and Arms
Emotional: Self-Confidence, Self-regulation, Interpersonal effectiveness & Empathy / caring
Mental: Focus, Realistic optimism, Time management, & Creativity
Spiritual: Character, Passion/commitment, Integrity, & Service to others

Supportive Habits/skills
Physical:sleep, exercise, diet and hydration
Emotional: patience, openness, trust & enjoyment
Mental: visualization, positive self-talk, positive attitude, mental preparation
Spiritual: Honesty, integrity, courage and persistence.

Shine by Edward M. Hallowell, MD

Shine by Edward M. Hallowell, MD
Using Brain Science to get the best from your people.

In order to have circle of excellence in your team, there are five steps. More importantly the need for Vitamin C(connect).

The first modern paradox: while we have grown electronically superconnected, we have simultaneously grown emotionally disconnected.from each other.

The second modern paradox: People’s best efforts often fail not because they aren't working hard enough, but because they are working too hard.

over the past 200 million years, the genetic evolution of the human hypothalamus, with its capacity for the four Fs - fight, flight, feeding and fornication - has rendered our selfish ‘drives’ only modestly more sophisticated than an alligator’s.

1. Select
The goal of this step is to work at the intersection of three elements - helping your people to find:

• What they are good at
• What they like
• What adds value to the organization or world

If there is a problem with selection or fit, managers can refer to the three frameworks suggested:

• The Hallowell Self-Report Job-Fit Scale
• The framework for flow
• The Kolbe conative assessment (kolbe.com)

Key ideas:

• You can’t sprint to peak performance.
• The brain is competitively plastic: you get better at what you practice and worse at what you neglect.
• Physical exercise builds up your brain as much as it does your muscles and heart.
• Positive emotion sets the stage for peak performance.

2. Connect
Create an atmosphere at work that is high on trust, optimism, cohesion, openness, permission to be real, and positive energy.  Creating connection requires daily commitment, because modern life conspires to disconnect people. A few simple tools:

• Look for spark.
• Model and teach what Carol Dweck calls a growth mind-set, as opposed to a fixed mind-set.
• Model and teach optimism, a belief there is no problem as a team we can’t overcome.
• Use the human moment judiciously instead of always relying on electronic communication
• Get to know a little bit about the outside life of each person you work with.
• Treat everyone with respect, esp. the people you dislike.
• Understand, as a manager, the meaning and impact of transference.
• Meet people where they are. Don’t expect a person to be someone he is not.
• Encourage people to be real.
• Encourage humor
• Seek out the marginalized people and try to bring them in.

3. Play
Create a culture that encourages free play of the mind.

• Ask open-ended questions’
• Encourage everyone to produce at least three new ideas each month and require management to evaluate and respond to each.
• Allow for irreverence or goofiness and model these yourself.
• Brainstorm
• Reward new ideas and innovation
• Encourage people to question anything and everything.

4. Grapple and Grow
As long as people are making progress all should go well. If they get stick:

• Don't pound the table and demand they work harder
• Look instead at step 1, 2 & 3 and see what might have gone wrong upstream. Then make adjustments there.
• Play what I refer to as Ping-Pong, borrowing a phrase from a man who specializes in helping
• people get unstuck. Simply keep offering ideas and suggestions and even as they get rejected, keep offering more. You are trying to provide a catalyst, not an answer.

5. Shine.
The goal here is for everyone to feel recognized and valued for what they do, not just the stars of the show.

• Always be on the lookout for moments when you can offer a word of recognition. Don’t make the mistake of withholding compliments.
• Create a culture that is generous with praise. It becomes far easier to examine and learn from failures when success are recognized regularly.
• Recognize not only achievement ,but also attitudes, like optimism and a growth mind-set.

Play stimulates the secretion of brain-derived neurotrophic factor or BDNF, a recently discovered molecule that triggers the growth of nerves in the brain. Play also stimulates the amygdala, which is a clump of neurons deep within the brain that helps regulate emotions and exerts a beneficial effect on the prefrontal cortex in the brain.

Read a book on creative-thinking techniques. ‘Thinkertoys’ by Michael Michalko offers many simple, practical exercise to stimulate imaginative engagement. Michalko divides the book into sections such as ‘Intuitive thinkertoys and Group Thinkertoys. The book is both fun and rich in instruction for anyone who feels stuck.



Books referred in this book:
Robert Putnam’s Bowling Alone
Daniel Gilbert’s Stumbling on Happiness
john Ratey’s Spark: The revolutionary New Science of Exercise and the Brain
Michael Michalko’s Thinkertoys http://www.ted.com/talks/martin_seligman_on_the_state_of_psychology.html