Transcript

Aproximate read time: 51 minutes

Orren: Hi Dave, thanks for making time to talk today.

David: My pleasure.

Orren: The Griffin Alliance story is one that hasn’t been explored very publicly before. It’s one of those businesses that goes about what it does with very little publicity. For an outsider of the launch of the Dog and Duck seemed pretty organic, but I know that there was a lot of strategy and moving pieces behind the scene as that, I guess guaranteed the venue would be a success and probably a starting point for Griffin Alliance to accelerate its company growth. So I wanted to start off with a bit of context of what Griffin Alliance is, who you are and what you are currently doing.

David: We noticed that there was a really big imbalance of market power in the entertainment and hospitality industry where those too meet. Between individual DJs and the venues and it was really interesting to watch it because I was managing Synagogue nightclub this was may be 20 years ago and just seeing how dysfunctional that was for all parties involved, what it meant for me as the venue manager, because I was managing a venue at that time was that I was able to get the labour for quite a lot cheaper. But what it also meant was that there was no coherence or cooperation between the DJs and what that meant was that I couldn’t create a seamless experience for the customers on the night because all the DJs were completing. And arguing and wanting to play these songs or those songs, they wouldn’t work together to create what was best for the customer and also the other side of that was because they were all fighting all the time, I was unable to create any community around the DJs, because that would be all working against each other and all having different factions and different people that were loyal to this DJ and wouldn’t attend that venue because that DJ was there and all sorts of things that might for a very, very fragmented community. So, what I did was I created this alliance of DJs. And we said look, if we all worked together, then we should be better off and the venue should be better off. So let’s cooperate and let’s see what we can do.

Orren: So it really came from the understanding, 20 years ago when you were a venue manager of looking at how the community of entertainers were working and the hierarchy and the power that they had and the dysfunction and then working a method around controlling or containing that natural dynamic and how you could use that then for other venues.

David: That is what the whole thing was to me it seemed like, because, there were three things which were quite interesting which made a controlling option completely impossible. Firstly, people aren’t DJs for a long time generally. So there was a huge amount of temporal fragmentation in the market. So, a DJ who would be effective and useful this year wasn’t necessarily effective and useful next year or the year before. And also, because the DJs were all put in a situation by the venues where they were constantly fighting with each other, there weren’t any cooperation with DJs to do any sort of community around the service that they were offering. And so the idea wasn’t to create any control mechanism. I’ve seen venues, the bigger super clubs, had already created good control mechanisms which was “these DJs at club and only our club and we get their people” but it wasn’t optimal because of the fragmentation. So you’d go to all this effort of getting a DJ and contract like that, they’d be really useful creating a community for 12 to 24 months but then you are stuck with this DJ who was in your community, wasn’t supper effective, wanted to get out, but you didn’t want him to leave because that would fragment the user community’s internally within the super club. And so it meant the super club tended to stagnate over the period of two to four years. Because of the situation where I needed to keep the DJs they contracted to keep the community together but in that process of keeping the community together by not fragmenting then the new DJs that would enter the market would fragment the community anyway from the outside.

Orren: So what you are saying is that there was this control dynamic from a lot of the other service providers out there and you saw that market need.

David: I see the opportunity to move from the control dynamic through to creating a structure that would evolve naturally to create a better result. To create the right environment around these DJs. Then you can create an environment where you can create some communities that doesn’t fragment overtime. And they don’t fragment between venues either.

Orren: And I guess it was probably a 10 year period between Synagogue and doing the outsourced marketing for Dog and Duck. What sorts of things did you put in place or learn during that 10 year period that moved away from that control dynamic?

David: I think the first thing and a lot people think that the Dog and Dog was first big success of Griffin Alliance but there were five large successes before that, but Griffin Alliance wasn’t well known, so people would go “Oh wow that venue is quite big, that’s really very interesting” they become quite busy and seems to be quite coherent. And, so I was able to learn from working other venues and also I was very fortunate that I found venues that weren’t seen to be competing with the key venues, the big super clubs or the very cool clubs in the city. So I started working mainly in suburban venues where I was able to tryout so many different ways of operating, without attracting too much attention from the incumbents in the system that could have knocked me out of the industry practically at the start.

Orren: Sure, it is doing a lot of risk to tests and keeping yourself under the radar while you are doing that learning.

David: That second thing is, it was keeping myself under the radar, I remember one of agents spoke to me when the company was about four or five times the size of their company, but mine was still contracting work to us thinking that we were this tiny little company. And he said to me, “are you really super big? “ And I went, “yeah.” And he was like, “you didn’t tell me.” And I said “no you didn’t ask.” And that company was then sold in probably a moth of that conversation because the owner realized that the market control that we had generated by cooperating was not something that he was going to be able to compete against so he took the opportunity to hand the business to someone else before it went downhill really fast. And it was so interesting how much control we were able to create in the market. Without having a control structure for our DJs.

Orren: Sure, do you think that was because you were reversing what the existing structure was in the marketplace, and providing value to those entertainers that wasn’t currently being on offer?

David: I don’t think the statement of “providing something that wasn’t on offer” would be accurate because I don’t think we were providing something of higher value to DJs and a lot of the DJs that we trained didn’t end up working for us and a lot of the were advised not to work for us because we were designed to work with a specific type of DJs and specific type of host and a specific type of community creator. Not everyone. It was designed to be not better but in the incumbent system, it was designed just to be different.

Orren: And you were the only one that was doing that in South Australia at the time?

David: Yeah.

Orren: Can you talk a bit about who you are where you have come from? Do you do quite a lot of work in the Scout? Do you think that background or your university education had much to do with trying things differently or trying things that were taken from different industries and applying it to the one that you are operating in?

David: I had ever really thought about that but now that you mentioned it, particularly the Cadet core of growing up in a command and control structure and seeing that evolve over the period of sort of 20 years, seeing this massive shift in military tactics toward creating an organic structure where information flowed up, not down. And I really took that to heart and then I was fortunate enough to be involved in studying evolutionary biology in university and I was able to create significant insights for myself at least between the things I was learning in evolutionary biology and have that model apply into economics.

Orren: Ok, so it has been a about a 10 year period between working at the Synagogue, trying out a lot of different things, with many different venues until coming in contact with the Dog and Duck. It was probably around 2006 that you and your team when in there and then an impressive renovation was done. From that point on the centre, took about 12 months to then build to venue capacity on both Friday and Saturday nights, can you give me a synopsis of how you came across the venue owners at Dog and Duck and how you had the conversations with them to go in and start working with them?

David: Yeah, so the way Wally Hodgkin the owner there is a highly experienced hospitality person who had pooled his assets to take the venue that essentially looked like a condemned building when he started with it and he completely rebuilt it to create something that he hoped to become first of all a highly frequented at hotel during the day and secondly, he hoped that he would be able to make a lot of extra money by creating a night club of experience on the Friday and Saturday night. I was introduced to him by a security guard and someone who had worked with him at some of his venues. So, I met with Wally and be made it immediately very clear to me that he would really need my help on the nightclub side of things because he that wasn’t his forte. Much older guy, in his day, he was an excellent, I guess a promoter, I’m not sure what you would call them back in his day but he was quite well known for arranging excellent parties but he was now at an age that he was not in touch with the youth so, he asked our team to come in based on the performance that we had created at the venue right next door called Red Square so we had taken over with Red Square from the outset and built that venue to the busiest venue in Hindley Street over the period of about 2years. And he asked if he could do the same thing there and I said to him “I thought there was about a 30 percent chance and that was the highest probability that anyone was going to be able to honestly offer him” by comparing success of other teams with the events they would do. We had been running at about a 30 to 40 percent success rate creating user communities that was going to sustain.

Orren: Ok. So once you had come across Wally, what was the conversation like with him convincing him that you could perform and also once that conversation had happened, what did it look like during that prelaunch period and then at launch period?

David: I’ll explain the cause of it that led to us being invited to be there because it is not as simple as walking in, in a suite and making a good pitch. In this case, I’m not saying that is always the case. But we had a track record that we had previously done had been significant and successful. He was inviting us to be involved based on a previous success. So he seen what had been done based on Red Square and at The Office Bar and quite a few suburban venues and based on that previous success he was asking if he could have an attempt to replicate that style of success in his venue. So it wasn’t really a pitching and convincing situation. It was much more a reputation based situation. That reputation that had been built up over ten years of just creating reliable and sensible results for people and the other side of it I think might had influenced was that he had also seen us fail and seen how those relationships had been preserved after a failure and I think that was important to him knowing that these things aren’t a certainty and that he wanted to work with someone who if things weren’t going well would be cooperative in a hand over process and would be willing to accept if things weren’t going well and that it would be opportune to someone else a crack at the titles.

Orren: Sure, so you are coming from a place that have been known, a place of credibility and also place of trust if everything went sour that could be maintained and turned around.

David: Yeah. And I suspect that weighed Wally’s mind more heavily than anyone because he had been in the industry for so long.

Orren: So, once you had that conversation, it sounds like there was a quite a bit of a foundation of trust there. Once that had to be created what was the very first thing that you did within that venue and I guess some calling that the pre-launch period.

David: Yes, I still remember walking through the venue. Wally spoke to use before he made any kind of decision about how he was going to design and build the venue. So, we walk into the front door and it was kind of a half of off its hinges and I remember stepping straight into probably a foot deep of pigeon poo and all floor boards are broken up and you could see what squatters had been living there from time to time. The venue with essentially a wreck and there was not aware of level of funding that Wally was creating to renovate the venue but then when he explained the funding level that had to renovate and that he had like my input into to how to create a venue so that could work both at the hospitality venue servicing a busy street during the day and also at the night club at night. Then I was able to work with him and we were able to create a venue that was able to perform that due function.

Orren: so at that point before they had done a renovation, what were the types of things that you were doing within that venue?

David: Well, within the venue we were looking into how to utilize the space. And it was luxury that we hadn’t been afforded before. Was to say, what is the optimal room sizing that we want? Because we actually had a unique opportunity to create psychologically optimal room sizes and people would say, “why would the Dog hold better and Reds?” As we were able create optimal room sizing and also optimal room facing from the street. And because we were able to get those two things right, it massive difference for the people inside because we were able to create room sizes that made people feel comfortable with quite varying numbers of people within them. And, secondly we were able to create a flow of traffic so that we were able to always have people in that front window so when people looked into the venue, even if there were 20 or 30 people inside, it looked full and people would come in. And that was a huge opportunity that Wally afforded us. And a big part of the strategic success was to be able to create the foundation for a venue that first of all lets itself feel really good inside regardless of what was going on in it and secondly a venue that looked really full from the street with even if there were 20 or 30 people inside.

Orren: Sure, so it is a stage roll up of the different rooms opening up at various points throughout the night. Because that venue is quite large – two story, multiple rooms.

David: Being able to design a venue from scratch that was designed to fill up from the front to the back to the top, and had the room sizing optimized around that and also being having direct, the visual from the street. I couldn’t ask for a better opportunity than that. There is no better opportunity than that when you can get to design that from scratch.

Orren: So what kind of key metrics were you monitoring during that period?

David: Well, one of the things is that Dog and Duck wasn’t from the outset designed to be packed to the boards, pay a lot of money to get into venue. The initial strategy was to provide Wally to be ability to generate cash flow on the weekend and it wasn’t my immediate vision to say “ok let’s open this venue up and pack it full of Hindley Street eighteen to twenty five year olds”, that certainly wasn’t the strategy. In the first instance, we said “let’s open the door and see who comes in and likes the place first.” That that for me is the fundamental of creating a community, is that it is like if I’m going to grow a certain type of crop in a certain area, if I don’t have 100 years of rainfall and soil data then probably one sensible things for me to do is just throw 100 different seeds out on the ground and then see which ones crop naturally with the natural rainfall. This is a very organic approach in terms of going, who will naturally come into this venue and what demographic of people would naturally flow into this venue without us having to do any marketing at all.

Orren: So you are basically doing a product for the people that are there rather that forcing on a product to a demographic that you want to be there?

David: Yeah absolutely. That’s the organic community growth model and that came from something that I learned during my time at Flinders Uni studying evolutionary biology was that the things called Seral Progression were things that naturally grow and certain things grow out at the start aren’t there when the community is fully established. But if you watch a community as it forms you can predict what sort of end community might be forming one step at a time by saying the things that first colonize.

Orren: Ok, so what sort of resources do you have at this time and how you were you to focus them on the areas that were wining and the areas that were not and I guess the community creation that you are talking about was organic but how did you steer that or not steer that in the direction that was naturally going.

David: Well, when we first started, I was very fortunate – Daniel Toop who manages Griffin Alliance in Melbourne offered to supervise the venue which meant he was doing the DJing from the very first night. And what that meant was we had somebody in there that had intelligent and trained eyes and ears to create some sensible metric tracking for us and to actually see what was going on and report in weekly. And help us deploy some basic metric tracking systems in there. The most important metric that we were tracking when we first started wasn’t a number that a lot of people would think of, it is a post code. People think of metrics like how many people come in or how long did they stay or how much money did they spend per head and those sorts of things. Often, what was really important to me in the first instance was “where do the people who come here live?” Something that we found out very quickly was that a lot of the people lived at Flinders University. Which was fascinating to me. They didn’t go to Flinders University, they lived there.
And so, that gave us a really big early clue about the demographic that was going to be naturally coming in there.

Orren: Ok, was there anything that you did with that data?

David: The main thing that we did with that data was to get curious and to do a drill down. And say, “Who are these people with this post codes?” Let’s find them in the venue. And then Dan’s task was to get to know some people and find some people that were residents at Flinders University and then find the circles that they were associating with the outside the university.

Orren: Right, and would that be within the night club scene or would that be just in general

David: Absolutely not within the night club scene. We wanted to know who these people were, and what they did. We weren’t interested in going who do they go out with on Saturday night, we wanted to know what do you study, what sports do you play. These sorts of things were very important to us and we wanted to know particularly what do you do on Saturday night when you don’t go out clubbing. That was very important to us as well.

Orren: Ok, so it was really getting to know that person as a person rather that just number that was walking through the door.

David: So when I’m talking to my staff, it was important to me to explain to them first of all what phase of the development the community is in and if it is in phase one which is the phase we are discussing now, we are really interested in what is the archetype, what is the person who is absolutely typical of the native user. The user who you really don’t have to market to, who will just walk into a venue like that as say “wow, I have found my place.” If I can have every member of my team know what exactly what that person may look like and how they might speak, the things they might say during a conversation, it really helps my staff to find out who the key community people might be to move into the second phase of developing a club.

Orren: So, Dan was really on a reconnaissance mission to find those people. Find out what really made them tick and then communicate all that information to the rest of the people that we were working there and say “find more of these people and less of people aren’t that are fit that same demographic.”

David: Yeah, absolutely. To paint that picture to the rest of the team as we started to deploy more and more staff into the venue. They knew when they spotted that sort of the person like that and greet them as they came through the front door, to really make the time to get to know that person and it was never really for us about pushing away the wrong sort of person. A Climax Community which is a community which is fully developed, naturally, has a space for the weeds to grow. So it’s not worth worrying about spraying out the other ones. And that is one of the big differences between the model that I had in my mind of what a stable and dynamic night club community looks like compared to what most of the I guess what we call the “Boom and Bust” night clubs that most people are used to, “this venues cool for six month on a Thursday and now this one is cool, this is the place to be on Saturday night and oh no we are going here now, because this is the new thing.” I was really interested in creating a stable state community that would endure over period of five to 10 years because that was dynamic and not a mono-culture.

Orren: So, just to discuss the few different things, the natural market, Dan as being the host of the night for lack of the better term, and also things that room set and a staged roll out of the physical venue. Was there anything else that you were doing during that first initial phase that really helped seed everything for the later stages?

David: One other thing that you mentioned which I haven’t really discussed, room set, absolutely fundamentals, so this is a things that we see in the middle of, in a mono-culture situation were the real is to get people so similar to each other but that I feel immediately comfortable in a volume that just makes the venue completely full so that there is a line-up. That is what we see in most night clubs – what we do is find out how to lay out a venue so that with the lowest possible number of people in there, people wouldn’t leave. So were able to create a situation where you might only have 10 to 20 people inside a night club that can hold 400 people, but most people wouldn’t leave. And that was really, really important to us to know how to do that. Because a night club is going to remain full for a long period of time in terms of on the night, and secondly a long period of time overtime, is still going to have ups and downs, so if it is a quite weekend around town even the busy club might not be full. And so it was very important to us to experiment wildly with how to layout the chairs, tables, where to put the DJ booth? All these sorts of things like how much lighting and how little lighting to use and also what are the genres of music to play at different times in order to make it a situation where the lowest number of people would leave even with the smaller number of people in the room.

Orren: So, you were given quite a big license to go out and experiment with room set lighting without investing a lot of money in infrastructure straight up and once you got it right, then you can go out and spend that money in investing in best room set?

David: The thing that was really, really interesting about that was, we discovered that usually the optimal room layout and optimum lighting wasn’t the biggest or the best. At the peak of Dog and Duck, the lighting system of that venue was worth $875, the entire lighting for the main room was $875 worth of lights. We had tried more lights. We had tried more expensive lights. But the optimal lighting solution there was less than a $1,000. So, it was really interesting that once we stopped being in a situation where we were required to impress and started focusing on what actually causes people to stay in the venue most and we focused on the result rather than trying to be desperately impressive. We actually found some really good economic solutions for our business as well.

Orren: Ok, do you have time to discuss a handful of those?

David: Yeah, I mean absolutely. So, one of the things that we discovered was that module sound systems made a lot of sense for us than standard front of house P.A.s. So, some of the common wisdom in night clubs is that the sound in the venue needs to be absolutely the crystal clearest and the most powerful you can have. Because that would give people a real pop and a real wow when they walk in the venue and it will also impact on them emotionally. And what we found was that we were actually getting a better room hold using a low fidelity modular system. So that was really interesting. I’m still not absolutely sure why but what I suspect was that it was just different. So, people came into our venue and it just felt different from the other seven venues that they had been to that night. And that is one of the things that really stood out for me is that most of the venues that were created weren’t the best venue, they were busier there because they were just different.

Orren: Sure, that seems like a very common thing throughout everything you have been saying until now. There is a common denominator that everything else has happened in the marketplace and then you are doing the opposite.

David: Yeah. And not necessarily the opposite because to me the opposite is also the same. So we saw a lot of people saw us being successful and either try to copy or do the exact opposite. And on of the things that I used to impress upon my team time and again is that just copying what someone else does is not differentiating us. But also seeing what someone doing and then presenting the opposite to the market is really only intensifying the sameness of the market by creating a polarization. So, once again in nature what we see isn’t the opposite. We see things thriving just because they have a slightly different strategy or something that is slightly different about them which means there are just not competing, it is not the opposite, it is just not competing.

Orren: Sure, ok. So then moving on to the next phase, what were you doing next within that lifecycle of Dog and Duck?

David: Dan came to me and said Dave, “We have a club here.” And he said “you’ve got a great street view. We’ve got a very, very low thresholding venue because of the street view and the room layout that we got and we got a core community here that is really precise and highly loyal. But also their user base that they communicate with and interface with, first of all is very large and secondly it is not catered to on this street or really anywhere else on a Saturday night.” As it turns out he was absolutely correct. And we started generating some phase two numbers. So in phase two we became much more interested in first of all how many people come in one week, were coming back the following week and also of the people that are coming in how many of those people we can have a communication with that causes them to bring new guests the first time. And what we noticed in this particular venue was we saw number we had seen before and we know this was a community that could build very, very quickly as long as we were willing to move with them and nourish them as they grew. So in phase two what we want to establish is, is the product we have something that people want to use a second time because if they don’t then we are probably going to struggle and as we start to move into phase three what we want to start asking is, is this product is created or is the community around this product in a way has them want to tell people about it. Because if they don’t we are going to wack a fair amount of advertising into this to get it moving.

Orren: And that is something you haven’t done. And that is something you haven’t done a lot of with most of your venues, just to throw in a ton of advertising behind it.

David: Yeah. And that for me has been the fundamental difference for us and has been very, very important in the success of a lot of our venues is that that, sure a Climax Community doesn’t made to weeded but also a Climax Community doesn’t want to be fertilizing either. Because when we start fertilize a community like that just helps grow the weeds because a Climax Community doesn’t need that. It is just artificial and it doesn’t help nourish it.

Orren: So, can you give me an idea of how you were tracking people coming in for the first, second, third, fourth times and what were some of the tools that allowed you to do that and also allowed you to communicate with them if you weren’t using advertising?

David: Absolutely. So, we were building some very, very specific and tailored internal infrastructure. We bought an application called Microsoft Excel and we also upgraded into this amazing CRM called Google Documents. And using those amazing custom built, customized fully functional CRM and CMS systems we were able to give someone a plastic card with a number on it. So then we were able to, when people bought the plastic card, we were able to write that number down on a piece of paper, compare all the numbers that we got for one night to the week before and see how many of them matched. And we continued using that system in one form or another pretty much the whole time. There was never a time when we found any of the digital systems to be particularly superior to that because we weren’t dealing with a more that say 1,500 people in a night, of whom, maybe three or four hundred might be a member. So we did try to use some digital systems in some other venues but they really didn’t for the amount of time and money mucking around we spent building them and customizing them and getting angry when they broke on the night. It wasn’t any better for us that Excel and plastic printed cards from a standard printing company with numbers printed on them.

Orren: Ok. And what was some of the tools that you used to stop people from leaving the venue?

David: This was where we come back for circle and rely on the Alliance. When DJs and hosting staff are all feeling threatened, they don’t share in the community spirit and they don’t connect each other to each other’s loyal people. And they don’t work together to create a community experience. The DJ who is finishing wants to play some really, really bad song in the venue so the next DJ would have a harder time looking good because if the next DJ looks good then maybe then the previous DJ is going to look bad and lose their set. What we did was we made very, very clear to both the venues and the DJs that once a DJ was incumbent in a set, there was a set of metrics that we would review that related specifically to their ability to hold people at the venue during the set and no other metric would be used. And no venue manager could say “Oh I don’t like that set”, we don’t care about that and I can remember some managers that became quite mad when they became hired because it became a choice between me and them. Because they would say “this DJ is not right” and my attitude was, “well their metrics are right so they stay.” And that wasn’t just because the DJ might be performing well, it was because if we were constantly using a consistent system that would required a style of performance that held people in the venue and we refused to fire someone, he was abiding by that system and using it, it created an environment where all of the DJs were pulling together to try to hold the maximum people inside the venue all night. So when all the DJs are pulling all together to hold as many people inside the venue from the moment you open the doors to the moment you finish, it creates some very, very interesting results that we don’t see in other venues. For instance, the standard wisdom is that you’ve got to have a two hour rotation; you’ve got to play all the big hits every two hour. Now what we found that at most of our venue we could have a five or even a six hour rotation, so you wouldn’t see the same song within six hour period. Even a big winners that you hear on the radio all the time. So the idea was that all of the DJs would get the play all of the big hits and that was the only way to make it fair for them and make them all happy. But we were able to create a situation where a huge amount of more musical diversity over the night. What that meant was that we were able to then create a huge amount of less musical diversity from week to week. And create a situation where we had quite a predictable offering of music week on week on week so people could always go for the sort of sound they wanted week on week on week but they weren’t forced to listen to the same songs every two hours. And that meant that we could create a longer term consistency in product but creating less repetition.

Orren: So you talked about how you keep people in that venue, what about in reverse, once people are actually in there, how do are you then pulling people in? You are not using advertising. What are the tools and metrics that you were using to get more people who are attending that venue and then grow it?

David: There was no point in trying to fill up a leaky boat. So in phase one, what we are seeing is where are the holes? What is the lowest number of people that we can have inside this venue and still hold people? So in phase one, we stuff all the holes and we found the way to create this boat as something that people don’t just naturally like that. And in the second phase we ask the question, “who comes here and what do we need to offer to cause those people to have those people to come back the second time.” And that whole focus of having people to come back the second time, is the absolute core of the second phase. Some what we are monitoring there is simply if they came in this week and inviting them to come back in the second week. So when someone would come in one way and would get the details and then actually seeing from those people that had come in for the very first time, we would have a special system for inviting them back in for the second time, and actually monitor how many of them who then come in for the first time in one way, would then come back the next week. And we were constantly building that percentage so say if 20 people came in for the first time this week and 30 came back next week then that’s a 50 percent return rate. So what we would try to do every week was to have more people return for the second as of the percentage of the people that came in. If that number was lifting we knew that our product knowledge in terms of the customers that we had native in the venue was building. Because people who were come in for the first time, and then come back again. This was a very simple rough and ready system. Because we weren’t tracking if someone who was coming in for the third, fourth and the fifth time. All that we were interested in tracking in that second phase was that if someone comes in once and we deliver them the experience on the night and have them come again, and is that number going up? If that number is going up at phase two, then we know that we are building that product. So when we come in to phase three and we now know that we have a boat that doesn’t leak and we know that we have a product that people are going to use for the second time so when we finally do call someone to come in for the first time they are actually going to come back. Then in the third phase we do what most venues do in the first phase. And we go out and say, “Let’s attract new people into this venue.” But the difference though is that when we attract these people in for the first time, we are confident that they are going to return. And secondly, we don’t need to do the broad scale marketing. And this works as a bit of a virtuous cycle at this stage because what it means is that someone from within our user community is going out and inviting someone new in who is similar but not exactly the same but within the same demographic. And that then provides the person who we know is very likely to return and that person then becomes potentially another promoter for us. So this creates this virtuous cycle that as you can see that is something that can then naturally and organically snow ball without any advertising and the beauty of that is that it allowed us to move into that third phase were we have this self perpetuating cycle without other venues noticing that we were doing it because what be normal when any other venue wanted to busy was to advertise publicly which would then therefore attract the attention of the competitors who would then also advertise and that would both end up in the mediocre result. While with this system we were able to grow quite explosively without attracting the attention of our competitors.

Orren: I see, so how did you move people up that loyalty chain?

David: So, once again Occam’s Razor is just my life. Can this be done in a Google Document? If it can be done in any simple way that has even one less step let’s do it even if it is not quite accurate, we are not quite sexy, not quite as good. So the system was very, very simple. Someone comes in for the first time and we’ll just put a little tag on them of which we’ll have their phone number and we can send them a text message. If someone shows that text message, then they can become a member with a card. Then it was very simple for my staff because once we have a card if they see that card coming back into the venue to begin a communication with that person of would you like to become an ambassador to what we are doing here? Would you be willing to share the experience you have here with few friends and bring them back, because if you would, we would really like to celebrate that with you and make you feel special. So it is a very simple, single flag system, very much nominal. You see a text message, is it this text message, if it is this is a person who is returning for the second time. This person needs to be given a card. Then if the person has a card it is just this conversation that do you want to be a part of our community in a more active way? And that was it. Not very complicated at all.

Orren: Ok. So beyond the night how were you using things like social media to keep that conversation going?

David: Particularly, at Dog and Duck social media was a real boon for us. It was the time that Facebook chat was just becoming the way to spent time. So you just lie on your bed, hung over and tired or procrastinating from your study or avoiding your spouse or I don’t know what people do in their homes but just jump on Facebook and just get some head space. What we did was we paid someone in our team who loved to sit at home doing that a bit of cash to sit on there as the Dog and Duck instead of them self. What was really, really important as these were the staff of Dog and Duck. People who were there every Saturday night. So, picture would pop of a person who they would be having a conversation with, and they would know this person and so for hours and hours we would sit on that chat and would just chat to people and would just talk to them and the objective of Facebook chat for us was never, ever, ever to try to convince someone to come into our venue. In fact there was nothing in there scripting or all around that. All we ever did on Facebook chat was just talk to people and ask them questions and become interested in them and learn things about them and what that allowed me to do was to pay my staff a small amount of money to enjoy what they were doing anyway on Facebook chat. But to get to know all the people that were actually coming to the club and also one thing that was really important was that a lot of people who really wanted to be part of that club experience were being introverted and on the night they wouldn’t necessarily come out of the comfort zone and have chat to this big DJ guy or this girl on the front door who everyone seems to think is supper popular or whatever. But you get them one on one on a Facebook chat and then chat to you for two or three hours then you and you find out all this stuff about them that you already supported in the community and that sort of stuff, so it gave us access to a whole demographic of people that were once again different to the people that were targeted by everyone else.

Orren: Ok. So it is really a different communication channel for a different personality type that wasn’t being catered for on the night or in the market.

David: This is a good example of not, this is not a better. If you are in night club, these are introverted, quite people, they are not better in terms of building a community. They are actually worst because they are a bit shy and they won’t necessarily go out of their comfort zone as much and it takes them a long time to pluck up the courage to invite people to their birthday and you know all that sorts of stuff. Not only to pluck up the courage, are they less bothered by rocking up with just only two people instead of 10. They don’t take validation, so this demographic that we are tapping into on Facebook chat was different. It was definitely not better. And it was just different and no one else was really tapping into them.

Orren: Did you find on the nights that those people were of valuable contributors to that community?

David: Most people’s view of a night club is accurate. It is a whole a lot of narcissistic extraverts feeling great about being out in this amazing crazy atmosphere and being big and loud and wearing amazing things and that sort of stuff and these people are not bad people, don’t get me wrong, those people are just normal great cool people like anyone else. But what it creates is a mono-culture. And introverted people are really intimidated by an environment like that. And the community at large is made up of all different types of personalities. But a night club quite often isn’t welcoming to people who are a bit shy or quite or who really enjoy music and enjoy dancing but don’t enjoy people dancing all over them and that sort of stuff. Or, people who really like to go out and socialize, but prefer having a little bit of a chat with friends not running over them on a dance floor with their tongue hanging out. So what we were able to do was we were able to empowered by those sort of people and create a club environment where yeah, there was a dance floor but there was also there was a huge amount of bar area where people who were just sitting around and having the conversation that they wanted to have all week but they hadn’t been together with their friends and created an environment where some of these introverted people were the social leaders within the group and therefore people that were a bit more shy or people who were a bit more introverted who would just liked to sit around and have a conversation in a group of two or three people were able to access that experience within the club environment which they weren’t getting at a super club or super cool little niche club.

Orren: And that is because the staff of that venue were willing to take the time to go out and have conversation with them whether it is on the night or through other communication channels.

David: Well, the thing is that these people wouldn’t necessarily even speak to us on the night. They come in and go “Hey how are you going?” and then they just want to come in with their two or three friends. But they took their validation from a deep and meaningful conversation with two or three of their friends. Now that for most venues would be suicide to have these shy people sitting around the bar and chatting. What it allowed us to create was a diverse and interesting experience for a board set selection of the community where people didn’t feel board but allowed then to be a little bit of extraverted than they wanted to be, but if they wanted to chill back and not be out there and running around crazy, they could actually retreat back to the bar or to the sitting areas and have a meaningful conversation and a chat through six in the morning. And that was one of my greatest pleasures. Particularly at Dog and Duck, was to see the groups of people that would come in and they would not set foot on the dance floor all night but they would be in the Pokie room which was a huge benefit for us at the Dog and Duck where there was this Pokie room and we would do $20 worth of trade in there. People were just sitting around there and having conversations for two or three hours on a Saturday night. But inside the venue, nice and warm, you are drinking and having a great time but connecting really deeply with people, not just kind of running around on the dance floor and doing that surface connection. But really deeply connecting with one another.

Orren: Ok. That really makes sense. You built a venue that has a very broad community that are bringing new people within that social structure back into the venue. Once you are at that stage what do you do from there? Do you how do you capitalize on that venue success?

David: Yeah. So, one of the things that is not obvious, is that once a venue has a self perpetuating community inside it that is not there because of the venue, but is already an independently coherent community is that that community is transferable. So, most venues when they get full, the promoter is in a bind because they can’t go startup another venue without dragging that mono-culture across to this other venue. Which means they kill the initial venue. So the biggest problem promoters have is that they can only have one busy venue one at a time. And this creates an argument between the venue owner who wants to maximize bar trade and the club promoter who wants to get people just moving through the venues as quickly as possible, getting as many people to pay that door charge. Whereas what we were able to do was we were able to fill a venue up and just leave it full of people drinking hard inside the venue so that the people inside the venue were providing good cash flow for the venue and also having a good time but then with the overflow we were able to seed that community, that same community out into the other venue. A good example of that was having the Ramsgate full and over flowing on a Friday night but back in the graphic wasn’t really going anywhere on a Saturday night and that’s how we seeded the Duke of York. We were saying to these people, we know you are not going to go to the Ramy on a Saturday night, because that is a band night for thirty plus. So the Ramy doesn’t lose anything, your coherent community that would be at home at the Ramsgate or at the Sandbar or anywhere, would you be interested into pop into town on a Saturday night? We asked them that question and they said “we are in town anyway on a Saturday night”, so we said well, come into the Duke and that is where we take a phase three community that’s fully thresholding and fully comfortable on a Friday night and then we seed that into phase one into another venue on a Saturday night and just see how it takes. And in the case of the Duke of York, it took root and flourished into a venue that was a couple of thousand people were coming through there at its peak on a Saturday night. Very, very large suburban community. All frequently in the venue in the city on a Saturday night.

Orren: What do you think some of the most important take always or lessons learnt that you have got from this process of learning and what would you do different next time you would go into a venue?

David: Probably the biggest learnt thing for me across the board is different is better than better. So for instance we have a business that brides source good quality DJs for weddings and we created an accountability structure where the DJ’s future work depends on doing good performance which is just different to what everyone else offers in that market. And it is not better. It is not a better system. It is a different system. And in all of the business opportunities that I look at, I take a little bit of a different approach that most other people look at and go is this sufficiently similar but tweaked differently. Whereas I think most people when they are looking for the new, new thing, I get so frustrated when people talk about, what is the word, it gets me so angry that I blocked it out of my memory completely, they talk about disruption yeah disruption. To me that just seems like the antithesis of creating something lasting and organic. And I’m not saying that disruption isn’t a phenomenon that is spectacular. But for me as a business person, the idea of disruption when I’m creating to create something substantial for another human being to take advantage of and to make their life better, that doesn’t seem to me like a natural way to be going about it. Yes spectacular. Yes really cool and yes may be instructive for people in a startup situations. But for me I don’t ever look at disruptive businesses and ever want to get involved with them and I’m really interested in businesses that are just slightly different but in a way that is going to differentiate them enough that they can take root in a completely different way to the incumbent in the situation. The other good thing about that, that I like is that the incumbents aren’t intimidated by a business that just has something that is slightly different about it, and that doesn’t hold itself out to be disruptive. And I think that is really, really important because I see so many businesses get crushed by the competitor.

Orren: This is a good segue. Under what circumstances should someone try to create one of these community driven type products? And on the flip side when is this just not a good model for them? And how could they get some really good mileage out of using this community driven approach?

David: What I’m look for in a business that I know that can work in this model, first of all it is a short generation times. So for instance this model would not work for selling washing machines. Because the cycle for customer conversion for a washing machine is about 20 years. So something like a night club is really, really good because in a night club situation every single year, has a new user community, that is fresh out of high school, turning eighteen keen to check out the night clubs. So a short user generation cycle where you are constantly seeing new cohorts is really, really important. So for instance something that is age based is really, really good. So if you have got a product that people use only when they say, acne products would be a good example. That is something that people use for certain numbers of years and then stop using them. So this model would work for an acne product. And it would work online or offline. Because that has a short generation cycle. It is something to you all of the sudden need and all of the sudden don’t need. And you trying to create a community around that that endures overtime because as people leave on the back-end those people in the middle are recruiting people on the front-end. Does that make sense? So, that is the number one thing for this model is short generation times. Unless you want to be an entrepreneur for 230 years, you are not going to be able to do this with a washing machine.

Orren: What would be the immediate first steps or next actions someone would need to take if their product fits into a category that is very close to that?

David: So the first action to take I think is just flipping the script on what you are doing and going “who is doing this really, really well, and how can we be a little bit different? Not the opposite, but how can we be a little bit different?” So, I’m thinking in acne space, it could be something as simple as a different type of applicator. That to me, if someone came to me and said “I have this new acne solution that is better,” I’d be well like “that is interesting go away from me.” But if they say, “hey Dave, I’ve got this new bottle, for the same acne cream” that would probably actually interest me more because a revolutionary new acne formulation is first of all something a bit controversial to bring into the market, it is going to be something that has investment on the front end as a pharmaceutical. But a new applicator or just a new container, to me that is something that we can very quickly deliver to market and go “hey we are in phase one.” Let’s just see who naturally pulls this off the shelf? Let’s just put up a landing page and go “hey check it out.” This is the same stuff that you have been using for the last 20 years, now come in a brush instead of a tube. Let’s just pop a landing page up and see if people tap on that and give us their details. That is something we can do for $600. We don’t need to get a new patient.

Orren: That is very clear. This interview has been very useful. Where can people find out more about you? And how would you prefer people to contact you if they want to find out more about user generated communities whether it is within the hospitality or any other product niche?

David: Well, first of all I’ve experimented with these communities in all different spaces from politics through to bush walking so I’m happy to chat to people about any different communities. And not just for profit. Also in the not-for-profit space. I really enjoy working with people, in that space even currently. The best way to contact me is to drop me an email. It is just my full name david bartholomeusz at gmail dot com. I’m on my email everyday and I’d love to chat with people on email and I welcome anyone that wasn’t to chat about this stuff. I can talk about this stuff all day as you heard.

Orren: Awesome. Look Dave, thank you very much for your time and hopefully I’ll chat to you soon.

David: Yeah. Look forward to it.