The Meaning of Surge

This content is part two of a four-part series called Leveraging Market Trends to Reach New Clients from a conversation between Joe Woodard and Mike Michalowicz on the Scaling New Heights Podcast.To read the other parts in this series, see the links below the article.

Joe: I want to get to your book. I understand that the book Surge is more than just a word, it's also an acronym. What does it stand for?

Mike:    There are five steps to a “SURGE”. The first phase which stands for “Separate”, identifying your niche. 

Separate out your community that you're going to target. This is the necessary first step. If we do a surfing analogy, we first must pick the area we're going to surf in. Then we need to start spotting what's called imminent waves, these are trends that are upon us. Once we pick our community, we need to start researching. There are very specific tactics for picking a wave that's in front of us.

Here is what I mean. If you are a surfer in the ocean and you pick your cove, you don't look for a wave that's a mile out and see how it's coming in; you can't even see it. You look for the waves that are immediately in front of you, the next two or three, and you determine if they're a good fit. If they are, meaning it's really surfable and you want to ride it, you unify with it. U is for “Unify”. You paddle in front of it, you match the speed of it, and you start pushing forward.

The next phase is R. R stands for “Rally Cry”. This is a fascinating component that many of us don't think of when we're introducing a new service for our community. There is a resistance that the majority of the community will give to the early adopters.

Here is an example. The first person that bought a Tesla, I can promise you was mocked for buying it, because before the Tesla the only electric car was a golf cart. The first person that bought the Tesla was taking on a massive risk. You may remember the news releases. Is the Tesla going to explode? Will there be battery acid over the road? What's going to happen with this car? No one really knew until it was out there. We create the rally cry as we serve a market that is surging. We attract early adopters and offer them a way to defend themselves. What is the mission of the company beyond the service you are providing? What is the mission you're delivering beyond your service? This gives your customers something they can easily enunciate when they get attacked.

In my business, we are here to eradicate entrepreneurial poverty. When a new accounting or bookkeeping firm joins our partnership, they understand that they're eradicating entrepreneurial poverty. When they are attacked for challenging the traditional gap formula of sales minus expenses equals profit (we challenge that) and they get attacked by the established incumbent in their community, they say, "Hey listen, the method I use eradicates entrepreneurial poverty." They have a greater purpose.

Two more steps, G stands for “Gather”. Surfing analogy - when you're up on the wave and you're starting to ride it, you have to look for what's called the pocket. You do this by physically looking for it, and by adjusting your balance and moving toward it. The pocket by the way, is the energy source of the wave, that's where you explode out and where you do the cool tricks. In business, we need to see where the true demand is.

This is a concept that Eric Ries talked about in The Lean Startup - this minimum viable product. When we enter the market and provide our first service, it may not be perfect. Actually, it is rarely perfect, because if you're early to market, meaning you've identified a wave coming in, and you offer a service, any service that quenches that need is considered a good service. If you and I were walking, dying of thirst, through the desert, and someone was serving up muddy water, we would drink it! It isn’t that we like muddy water, it is that the muddy water was the only option.

As you start growing on your wave, competition sets in. Customers become more educated and more specific in their demands. That is when we actually need to improve our product. Gather the knowledge of what customers are wanting and not wanting and adjust your offering dynamically at the G phase.

The final phase is expansion. E stands for "Expansion". This is where you need to be cautious. This is where the surfers do the tricks, the jumps, and the carves. If you try to do all these different tricks and you aren’t even up on the wave yet, you'll look like an idiot and you'll probably hurt yourself. We must wait until we have momentum in a very specific niche, we have strong traction, and then we replicate the niche.

Here is another example. In the book, I wrote about Brian Smith, the founder of UGG boots. Did you know that he initially made those boots for the surfing community? He identified surfers’ needs and the trigger that was facilitating their consumption. One was that surfers like to emulate the pros in the market. In other words, if pro surfers wore UGGs, the amateurs would wear them, too. Of course, surfers wanted warm feet; once surfing became a year-round sport, surfers were coming in from the ocean with warm feet. So he went after the amateur surfers who wanted warm feet and wanted to copy the pros.

Once he figured out the formula for surfers, he then cloned it out. He went after hockey players, cold feet, copy the pros. Skiers, cold feet, copy the pros. Hunters, cold feet, copy the pros. Then he went after the biggest market that we're all aware of now which is teenage girls. They copied the pros and the pros back then were Britney Spears, Brooke Shields. In the winter, it became not just about “warms up your feet”, it also became a fashion statement. UGG expanded and they exploded to a billion-dollar business, simply by duplicating the niche that worked in other niches over and over again.

Joe: It wasn't like UGG invented the boot. I want to make sure everybody is clear here.

We have room for invention and innovation. I tell people that the different between a small business owner and an entrepreneur is pro-action and innovation, and accountants can play in that pro-action and innovation space. We can create innovative packages, services, innovative ways of engaging with our clients and of creating wealth for our clients and, in some cases, simply value pricing instead of fixed fee pricing. With this value pricing, it must be truly increasing wealth and charging as a percentage under the wealth that you generate, that's the distinction. Value pricing can be innovative. It is there, but very few US accountants have adopted it.

You can innovate within a category. UGG didn't invent the boot, but UGG invented a better boot. They didn’t start huge. They went to market, learned from the market, adapted from the market. They were flexible. For the smaller accounting firms, that is a big competitive advantage because we can be nimble, we can flexible, and we can address trends that are in our markets.

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