When there’s more of something in one place than there is in another, that discrepancy can be a resource. The water at the top of a creek has more potential energy than the water at the bottom of a creek, and that’s why a water wheel can do something useful like mill grain. Or if you have fine silk fabric and the people around you only have coarse or low quality fabric, you may be able to exchange some of your high quality fabric for food or something else you would like. We’re used to thinking of benefits and value together.

But inefficiency and waste can also be resources in some cases. Lawyers benefit when two parties cannot come to an agreement on their own. Matchmaking websites make money in addition to matches because the process of finding a good partner for a relationship is rarely straightforward. The stock markets have built-in inefficiencies: they’re known as commissions, and stockbrokers don’t seem to mind them.

In thinking about how you’re trying to earn money with your business, have you considered how to leverage inefficiency and waste? Some of the strongest solutions to tough problems don’t just ameliorate failures; they use failure as a resource.

It used to be the “mailing list.” Now, it’s generally just called “The List.” Building and maintaining your List takes time, especially if you’re aiming for 10,000+ list members.

I find it helpful to have reminders at hand as to what I’m doing and why I’m doing it when I’m working on a long-term project, so here are four properties of a list that I hope will help you keep on track when building or maintaining your own List:

1. The List is a form of capital

Your list is a resource, but don’t think of it as a consumable. It generally takes other resources (time, at the very least) to build the list, and some ways of building a list are more expensive than others. If I offered to paint a wall-sized fresco of the Albuquerque downtown skyline (actual size) for anyone who will sign up on my list, I’d run out of time, money, and the willingness to look at the Albuquerque downtown skyline long before I had a list built.

Alternatively, if I gave away a PDF file with blueprints of my own design for a 1/20th scale model of the Duomo in Florence in exchange for a signup on my list, I’d have much less work on my hands. After I’ve put together the PDF, there’s no more effort involved in providing 20,000 digital copies than there is in providing 20.

Once you’ve built your list, it has an intrinsic value, regardless of how much effort went into building it. At that point, knowing how much time and effort was required to build the list, you will gladly put in the time needed to maintain your list capital.

2. The List is principal – don’t fritter it away

This goes along with the non-consumable nature of the list. Don’t sell out your list, and don’t squeeze the list for money. If you do, some members might still buy something from you, but they won’t like you for it, and they’ll leave. Instead, by providing value to the members of your list on an ongoing basis, you can expect to receive dividends in return. It’s a longer-term outlook. Think in terms of mutual benefit, and you’ll do well.

3. A business is made up of relationships, and that’s exactly what The List is

Selling a single product can bring some income, but getting orders for a product isn’t nearly as important as getting re-orders. If you’re getting re-orders, you have a business. And the only way to get re-orders is by building relationships. That’s the heart of the List idea.

4. The List isn’t a community in itself

Through your list, you have a relationship with each member. In general, however, the list members don’t have direct relationships with each other. Now if you work at it, you can bring some of the trappings of community to your list, by sharing selected members’ comments and questions with the rest of the list, for example.

There are different community/list mixtures available if you want to experiment. A blog with comments enabled will still have you at the center of the discussion, but participants can relate to one another directly through the comments. A discussion forum that you moderate would be still more community-focused. Besides the limits on your time, there’s nothing to keep you from building a list, running a blog, and moderating a discussion forum if you want to.

What questions or concerns do you have about building a list? Are they “why” questions, “how” questions, “when” questions? Or maybe “whether” questions? Please post your comments by clicking on the “Comment” button or in the comment window below this post. If you’re reading this post through an RSS or email feed, please stop by the studionontroppo.com site and share your thoughts. I look forward to your comments and questions!

As promised in the last post, today I’m going to present a high-altitude view of one type of internet information business. I’ll pick one of the possible business models (the What), I’ll describe what’s appealing about working this way (the Why), and I’ll lay out the three components that are necessary for the business to succeed (the How).

It’s a high-altitude view today because there are many, many details in even a straightforward business model like this one, and a holistic overview will help you decide which aspects you’d like to explore and in what order.

The WHAT

I’ll begin by presenting the components of one particular internet business model: creating and selling digital-delivery products, such as downloadable pdf files or videos (think YouTube). There are many other business models available, ranging from blogging to affiliate marketing, and many of the technologies and approaches relevant to this model can be directly applied to other models. This ability to recycle and repurpose your knowledge and know-how is one of the benefits of developing your information entrepreneur skillset.

The WHY

First, here are some of the guiding principles that might lead you to consider this kind of business. This model might be good for you, if:

1. You want to devote only a few hours per week to the tasks of running a business. You’d rather spend the majority of your time doing other things, such as starting new projects, creating content, or doing something completely non-work-related.
2. You like the idea of your product being out there on its own, marketing itself, sending you some income whether you’re paying attention to it or not.
3. You’re not interested in leaving your day job (right now, at least), but you wouldn’t mind some extra income each month.

Downloadable products can be sold to internet customers (almost) anywhere, and there is very low overhead and little maintenance in selling this way.  It’s exciting to imagine being able to connect people who really need particular, specfic information, know-how, and experience with the people who have that information, know-how, and experience.  The goal is mutual benefit: value for the customer, compensation for the provider, and good will generated between them.

OK, time for a little thought experiment.

Imagine a downloadable, pdf-format text-and-images resource, such as a how-to manual for Vespa owners who want to repaint their scooter.

Photo: antmoose

Now consider some of the ramifications:

• The manual might sell online for $20. If 10 people (worldwide!) purchase the manual each month… [math left as an exercise for the reader].
• It can be delivered (i.e. downloaded) without paying for postage.
• You don’t need a warehouse or even a garage for inventory of your product. The manual is a file on a computer server.
• Customers don’t have to wait to get it delivered in the mail.  They can download it and read it right away or print it out to read wherever they’d like.
• If you want to change something in the manual, you don’t have to reprint it; you just change the file, and the new version is ready immediately.  There’s no necessary, intrinsic cost to change the product.

The HOW

Here are the components you would need to make this work (high-altitude overview only, today):

1. The product itself
2. A website set up to deliver the product and perform financial transactions (accepting credit card payments, handling refund requests, crediting your bank account)
3. A marketing system that helps potential customers find your site

Depending on your personality and your skills and inclinations, you may feel that at least one of these three components seems extraordinarily difficult. I’m here to tell you that all three components are really, truly manageable, and you don’t have to be a Rhodes-scholar-who-spends-all-her-free-time-between-high-powered-sales-meetings-in-the-computer-lab to get them all to work together.

Does this sound doable? Do you run a business like this? If this sounds reasonable and intriguing, but you’re not doing it, why not? Where are you stuck? I welcome your feedback and questions.