Groupon Appears on 60 Minutes
Note: Groupon sponsors WindyCityGo and other events created by WisdomGroup.
In 2009 people wondered What does Groupon do? Today pundits are asking “Is Groupon’s business model sustainable?” The future is unknown. However, Groupon is certainly positioned to pounce on opportunities as they unfold.
60 Minutes at Groupon
Journalist Leslie Stahl interviews titans. Sergey Brin of Google. Mark Zukerberg of Facebook. Paul Allen of Microsoft. This week 60 Minutes aired Stahl’s interview of Groupon’s CEO, Andrew Mason. Here’s a 4-minute clip:
Is Groupon’s Business Model Sustainable?
So far the model works. Local businesses get a sudden surge of new customers. If the customers are happy, they return.
Over time, entrepreneurs who noticed Groupon’s success launched competing companies. Will the competitors eat Groupon’s lunch?
They might. But that only becomes a problem if Groupon stands still.
Competition is Good
Successful pioneers attract competitors. Personally I believe that competition yields several benefits, among them:
- Excellence. Competition drives all of us to achieve more. When I was a competitive swimmer, my teammates and I always achieved faster times against our tougher rivals. Maybe it was the adrenaline.
- Market legitimacy. Some customers prefer to follow the crowd. When they see multiple companies offering similar services, they begin to view the service as “legitimate”. And then they buy.
- The shopping cluster effect. Why do restaurants cluster together in city neighborhoods? Zoning might play a role. In fact, restaurants have learned that when people want to eat, they don’t necessarily know what they want until they get close to their destination. It makes more sense to drive toward a cluster of restaurants because you’ll have more choices once you arrive. When restaurants locate near other restaurants, they all win, even though they may be competitors.
In summary, competition creates more opportunities for all players in the game.
What If Groupon’s Model Fails?
A failed business model means that the company needs to find a new way to make money. Steve Blank’s book, The Four Steps to the Epiphany, shows how a company can pivot through several business models before achieving success. To pivot successfully, a company must:
- Listen to customers, so that they know which parts of their model to modify.
- Build a team of smart & capable people so that they can implement the new model quickly and effectively.
Groupon’s rapid growth in three short years shows that they know how to listen to customers. As far as the team is concerned, Groupon attracts some of the sharpest software developers around. Their acquisition of Obtiva was a big move in the team-building department.
Groupon has a strong team. If a pivot becomes necessary, they’re well equipped to handle it.
Positioned to Win
Overall it appears that Groupon (and their hometown, Chicago) will do well over time:
- If the Groupon model proves successful over time, they will make money and grow.
- If their model fails, they have the right team on board for a successful pivot.
I look forward to watching Groupon as they continue to grow.