Friday, November 28, 2014

Business Roulette

Sometimes in business we like to think that certain tactics we developed in one industry can translate over into another, but as is often the case they do not.  Yes, you always have to look out for strategies that might move from one industry to another, but sometimes these "conversions" can end up with unintended consequences as this short story illustrates.
An African ambassador visited Russia and was entertained by his opposite number, the Russian ambassador. For three days, the African ambassador was wined, dined, and generally treated to the best hospitality that Russia had to offer.

On the last day of his visit, the Russian ambassador said, "As your stay is coming to an end, it's time for you to play our traditional game, Russian roulette. One of the six chambers of this gun is loaded - you spin the cylinder, point the gun at your head, and pull the trigger."

This phased the African slightly, but he was a proud man of a warrior people, and to show fear would be unthinkable. Both men took their guns, spun, and pulled the triggers.

Both chambers were empty, and both ambassadors breathed a sigh of relief.

The African ambassador was impressed with the courageous game, and thought hard about the subject before the Russian Ambassador was due to visit his country the next year.

When the visit came, the African ambassador treated the Russian with all hospitality, until the final day of his stay. Leading him to a private room in the palace, the African ambassador spoke, "Now, time for you to sample our game, African roulette". He then led the Russian into the room, the only occupants of which were six stunning and naked women.

The African ambassador said, "These women are the most beautiful members of one of our tribes. Any one of them will give you a oral sex - take your pick."

The Russian was not entirely averse to this idea, but he couldn't see the connection with Russian Roulette. He said, "Well, ok, great, but where's the roulette part? Where's the danger?"

With a big grin on his face, the African ambassador answered:"One of them is a cannibal."

Wednesday, November 26, 2014

Startup Sins

During my 15 years of helping start and working for start-up companies, I have learned a few things from all the mistakes I have made and from the mentors and advisors I have met and worked with. Though there are dozens of things you may have to worry about when starting a company, I will highlight the 3 Deadly Startup Sins that will pretty much guarantee your eventual failure.

Leadership

Actually, Leadership is the number one element in the eventual success of any new endeavor. And the number one mistake made with most start-ups is assuming that the founder or inventor should be the person running the company. History has proven this is often not the best course of action for the success of a company. Henry Ford stated that even though Thomas Edison was the smartest person he had ever met, he was a horrible businessman.

I have seen far too many people, who happen to be brilliant inventors or scientist, be absolutely horrible leaders. Ever endeavor, large or small, rises and falls on leadership. A great leader can take a mediocre idea and make it successful, while a poor leader will ruin a superior idea with poor execution, lack of buy-in, sloppy team building, and total disregard for the “laws of physics” when running a startup company.

I am not saying a founder cannot learn to be a leader. I am saying that if you have a chance to secure a great, proven leader, do so as soon as possible. If not, make sure that you put as much effort into getting good leadership as you do in perfecting your product. Without this leadership, you will have great difficulty in building out your team, keeping them together, and attracting investments.

Strategy / Marketing / Positioning

These three concepts really go hand and hand. Know your Market and your Customer. I cannot stress enough about this. You better know how you will differentiate yourself in the market place as well as who your target customer is. I mean, know intimately what are they buying now, who is the biggest player, why are they good, where are the opportunities, and how are you going to exploit them. Also, what are you doing differently for everyone else? Does your product, systems, or services have a sustainable competitive advantage? How are you “cheating” or "gaming" the system? Knowing and understanding the answers to these questions will help you position your product or service better in the eyes of your potential customers and help reduce the friction involved in growing sales.

Another big mistake most startups make is assuming what they are dong is so unique and different that there are no competitors in their space. If you think you do not have any competition then you are just delusional, and you should stop what you are doing right now.

Even when the first integrated circuit came onto the market, it had competition, and it was from the vacuum tube. Everything has competition. Actually, the MORE competition and the larger the market, the better your chances are for success. Why? Because in a large market, your competition cannot do everything, and your company can feed off the crumbs that other companies are not focused on to stay alive. And if you are lucky, you can hold on long enough so that your cheaper, faster, better product or service can truly revolutionize the industry.

Be prepared to change. Rarely will your product or service hit the target on the first, second, or third time. Hopefully, you will get within 70% to 80% of your target. All that you are trying to do is “be where the puck is going to be” because your markets and targets in the future are constantly moving. As such, if you stick with your initial “idea” you may find that your market has moved away, new competition has surfaced, or what you thought was a good idea is not anymore; and that revenues will not keep up with expectations.

Greed

The hardest thing to do for an entrepreneur is to divvy up your company. You put in the sweat, hours, capital, and ideas for getting this baby going, and now you feel you are entitled to own the lion’s share. Just remember this, it is better to have a small piece of a hugely successful endeavor, than 100% of nothing. Greed may be good in the movies, but it is a sure way to failure for a startup.

As such, be generous with the core team of individuals you entice to come onto your team. If you do decide to take the lion’s share of the stock, you will have to give up a huge amount of salary in exchange. If you do not give enough stock to your core team, be prepared to have one or all of them leave just when you need them most. Also, be prepared to pay more hard cash for talent if you do not give up some extra “free” stock.  Of course, being generous does NOT mean being foolish.  Make sure your get "effort" and "output" from those you are giving stock to.  That means make ownership contingent on some tangible milestone in the future and if it not met, explain to them you will need that stock to find someone else to do it. 

Once you hand out the “founder’s” shares, the next step is getting investors to pony up real money and invest in your company. For most founders, this becomes an increasingly difficult task, primarily because you are too close and too invested in the company to make a truly rational decision. You either think your idea is worth more that an investor is willing to pay, or your feel the investor just wants to take over your company. You might be right on both counts, but there are ways to protect both your and your investor to achieve a win-win solution. One sure way to scare off investors is to put a sky-high valuation on your “idea,” or ask for tons of money up front without any sales history. It can happen (i.e. Amazon.com) but it is rare.

Any investor in your company should want the same thing you want, a successful endeavor that eventually gets to significant cash-out position. In actuality, you really should not focus too greatly on what valuation you get in your first round, as there are numerous ways for you to minimize the hit you take, in terms of giving away your company, in the long run. One way is to offer the purchase back ½ of the stock the initial investor paid for 2 times the amount within a specific period of time. Or you can forgo giving stock until the 2nd round of investment, and instead take a loan with a high interest rate. That “premium” interest rate can be applied to the 2nd round valuation. In addition, you can also offer a sweetener to the first investor. The important thing here is not to get too hung up on valuation and to think long term.

Secondly, make sure your investor is right for your business. Not all money is the same. A colleague and successful entrepreneur, Tom Dye, once told me to watch out for wedgies. A wedgie is someone who is trying to get leverage in your company without really doing anything to help you. They usually think that because they have invested, they know you business better than you, should have more control than you, and are not so much interested in creating a successful company, as just being in control. If you are unfortunate to have one of these investors, I feel sorry for you. You will be spending 80% of your time trying to please or answer to a wedgie, and not enough managing your company, customers, or product development.

Noticed I said little or nothing about what your product should do or what markets you should be in, or how much margins you should try to make, or how to bring your product or service into the market. You can make money anywhere if there is a need, a fairly sizable market, and a differentiated product. It will be much harder to do if you commit any of the startup sins mentioned above.

Thursday, November 13, 2014

Cell Phone Etiquette

Sometimes, with all the electronic conveniences we have to communicate with we forget that not everyone wants to be privy to a conversation you are having, and during a trip of any length, many of us would just like to "turn off."  Of course, sometimes people as so involved with what they are doing they do not realize what incredible bores they can be.  Here is a little story on how a gentleman handled this situation with aplomb.
After a tiring day, a commuter settled down in his seat and closed his eyes.

As the train rolled out of the station, the young woman sitting next to him pulled out her mobile phone and started talking in a loud voice:

"Hi sweetheart. It's Sue. I'm on the train".
"Yes, I know it's the six thirty and not four thirty, but I had a long meeting".
"No, honey, not with that Kevin from the accounting office. It was with the boss".
"No sweetheart, you're the only one in my life".
"Yes, I'm sure, cross my heart!"

Fifteen minutes later, she was still talking loudly.

When the man sitting next to her had enough, he leaned over and said into the phone, "Sue, hang up the phone and come back to bed."

Sue doesn't use her mobile phone in public any more.

Wednesday, November 12, 2014

Obstacles as Opportunites

In my entrepreneurial journey, I have been fortunate enough to have met both good and bad mentors and entrepreneurs.  The one thing that make a good entrepreneur it the fact that KNOW the the journey is going to be hard and arduous, but they decide to do it anyway.  What makes a poor entrepreneur is a person who thinks there is a shortcut, or an magic wand that will make the "successful."  Yes, some successful entrepreneurs "look" like they just magically made their fortune, but that is such an illusion.  Everyone of them had to fight, and scratch, and claw and yes, a few got a little bit luckier than most, but it was NEVER easy.  And if you think creating something new is easy, stop right now.  You will never make it.

Actually, most of the successful entrepreneurs had to pivot when they ran into an unforeseen obstacle in their path. Yes, even the mighty Google did not know how it was going to make money until someone came up with the idea for AdWords. YouTube was one week away from closing its doors before Google bought them.  The bottom line is that we all have to face obstacles, what we do with them makes all the difference in the world as this story highlights.

The Obstacle in Our Path
Long ago, a king had a boulder placed on a roadway. Then he hid himself and watched to see if anyone would remove the huge rock.

Some of the king's wealthiest merchants and courtiers came by and simply walked around it. Many loudly blamed the king for not keeping the roads clear, but none did anything about getting the stone out of the way.

Then a peasant came along carrying a load of vegetables. On approaching the boulder, the peasant laid down his burden and tried to move the stone to the side of the road. After much pushing and straining, he finally succeeded.

As the peasant picked up his load of vegetables, he noticed a purse lying in the road where the boulder had been. The purse contained many gold coins and a note from the king indicating that the gold was for the person who removed the boulder from the roadway. The peasant learned what many others never understand: Every obstacle presents an opportunity to improve one's condition.
Although this may be a old fable,it highlights how a seemingly difficult problem can be a huge and profitable opportunity for you and your company. So, ask yourself what difficult problems or situations, that if you apply yourself and perhaps great effort, can be changed into in new break through or product?  As I often say, "Necessity maybe the mother of invention, but dissatisfaction is its father."

Customer complaints, new competition, changes in the market, a loss of a big customer, these are all great catalysts to look at a situation a different way, and "discover" a new solution. Yes, it takes effort, but anything worthwhile in achieving, always does.

Wednesday, November 5, 2014

Why Politicians Lie (and Marketers too)

I thought, now that the elections are behind us, and we have been inundated with thousands of hours of hyperbolic advertising, debating, and otherwise misleading statements about such and such doing this and that, I thought I would ponder why politicians (and to a large degree marketers) can seemingly be saying two different things about the same subject. Are they just liars, or is there something completely different going on? As it is often said, there are two sides to every coin, and in debating anything you should be able to equally argue for the pro or con of an idea. I think this little testimony from a Texas legislator sums it up best.
In 1952, Armon M. Sweat, Jr., a member of the Texas House of Representatives, was asked about his position on whiskey. What follows is his exact answer (taken from the Political Archives of Texas):
"If you mean whiskey, the devil's brew, the poison scourge, the bloody monster that defiles innocence, dethrones reason, destroys the home, creates misery and poverty, yea, literally takes the bread from the mouths of little children; if you mean that evil drink that topples Christian men and women from the pinnacles of righteous and gracious living into the bottomless pit of degradation, shame, despair, helplessness, and hopelessness, then, my friend, I am opposed to it with every fiber of my being.

However, if by whiskey you mean the oil of conversation, the philosophic wine, the elixir of life, the ale that is consumed when good fellows get together, that puts a song in their hearts and the warm glow of contentment in their eyes; if you mean Christmas cheer, the stimulating sip that puts a little spring in the step of an elderly gentleman on a frosty morning; if you mean that drink that enables man to magnify his joy, and to forget life's great tragedies and heartbreaks and sorrow; if you mean that drink the sale of which pours into Texas treasuries untold millions of dollars each year, that provides tender care for our little crippled children, our blind, our deaf, our dumb, our pitifully aged and infirm, to build the finest highways, hospitals, universities, and community colleges in this nation, then my friend, I am absolutely, unequivocally in favor of it.

This is my position, and as always, I refuse to compromise on matters of principle."
So while we may think someone is contradicting themselves or even lying to us, at times, they might just be telling the story or offering their opinion from a different point of view.  Just be careful as marketers that you do not deliberately deceive your clients into thinking you can do both. For politicians, it really does not seem to matter.

Monday, October 20, 2014

Focus, Focus, Focus

As many who start up a company begin with a great idea, with a laser focus; it seems as soon as you get started, you start to get distracted by other priorities, or begin adding additional features or strategies for no apparent reason other than to please as many people as possible. As Bill Cosby once said, "I don't know the key to success, but the key to failure is to try to please everyone."


With that in mind, there is a great Hindu epic from the 3,500-year-old Mahabharata, one of the three sacred texts of Hindu, that tells of a story about the five Pandava brothers: Yudhisthira, Bhima, Arjuna, Nakula and Sahadeva.

These brother where the great warriors of ancient India, and one in particular, Arjuna, has a fantastic story of purpose and calling in the Bhagavad Gita. But that is another story.  In any case, this story begins with the brothers' archery teacher's instruction on aim and targeting. The master ties a wooden fish to a tree branch over a basin of water. The master tells the Pandava brothers that they must shoot the fish's eye with their bow and arrow but only by looking at the fish from the reflection in the basin of water.

The eldest brother, Yudhisthira, goes first. Before aiming his bow and arrow, the master stops and asks him "Yudhisthira what do you see?" Yudhisthira says, "I see the sky, I see the birds and the fish."

The master asks Yudhisthira to not draw his bow and go and sit down.

Then the master calls upon Bhima, the second eldest son. Again he asks the question, "Bhima, what do you see?" Bhima says, "I see the tree, the branches, the leaves and the fish."

Once again the master asks Bhima to sit down.

Finally, it is Arjuna's turn.

Arjuna steps forward, positions himself with his bow and arrow above the basin, and the master asks him, "Arjuna what do you see?" Arjuna responds by saying, "I see only the fish's eye." The master tells Arjuna, "Then draw you bow my son, and shoot."

The point of this story is that when you are distracted like the first two brothers by other things, you cannot possibly hit your target. Arjuna knew that, and when he looked into the water all he saw was the fish's eye and that is all he aimed for.

In all things, we often get distracted by people, events, family dramas, and situations that do not really matter and take us away from the work and goal at hand. If you are doing a startup, this is critically important! If you do not focus on the 'fish eye' of you goals, you will waste valuable time, effort, and resources. You will oscillate between one task to another, essentially accomplishing little or nothing. Focus only on your fish eye, do not admire the fish even if that is the goal you want. This wisdom has been around for ages, and is as appropriate today as it was 3,500 years ago. I hope you heed it.

Sunday, October 19, 2014

The Anatomy of a Startup

While starting a company has never been easier, the same facts still remain.  Most close in six months, and only about 10% will ever get to a break even state.  Still, here are some interesting facts about tech startups (hardware, software or internet based). First, most are started by 1 or 2 people; second they spend less than $1,000 per month on development, and if they make it past 9 months, have a good chance of making it a year.  I hope the infographic below adds some additional light on the subject.


Saturday, October 18, 2014

Life is a Train Ride (Perspective)

We often ponder why we are here and what is our purpose.  What is it for and why certain people come and leave or lives while others become what I consider hold dear and I call “friend.” I think this story might help with how to see life as a train ride. 

Life is like a journey on a train...with its stations...changes of routes...and accidents!

At birth we boarded the train and met our parents, and we believe they will always travel by our side.

However, at some station our parents will step down from the train, leaving us on this journey alone….but not quite.

As time goes by, other people will board the train; and they will be significant i.e. our siblings, friends, children, and even the love of our life.

Many will step down and leave a permanent vacuum. Some will move to a another car for awhile and come back. Others will go so unnoticed we don't realize they left their seats!

This train ride will be full of joy, sorrow, fantasy, expectations, hurts, hellos, goodbyes, and farewells.

Success consists of having a good relationship with all passengers...requiring that we give the best of ourselves because we are all on this ride together.

The mystery to everyone is: We do not know at which station we ourselves will step down. So, we must live in the best way - love, forgive, and offer the best of who we are, including giving up our seat if necessary.

It’s important because when the time comes for us to step down and leave our seat empty -- we should leave behind beautiful memories for those who will continue to travel on the train of life without us.

I wish you a joyful journey for the coming years on your train of life. Reap success, give lots of love and be happy.

More importantly, be thankful for the journey and enjoy the view!

Lastly, if you happen be on this train with me, I thank you for being one of the passengers on my train!

Wednesday, October 1, 2014

Capitalism with Cows

Although we in the US believer our brand of capitalism is the best in the world, other countries actually practice a form a capitalism that is right for them.  I thought to show how, an explanation of how the rest of the world sees capitalism using cows as a metaphor would be in order. I hope this makes you more internationally aware of how Adam Smith's invisible hand is a work.

TRADITIONAL CAPITALISM:
- You have two cows.
- You sell one and buy a bull.
- Your herd multiplies, and the economy grows.
- You sell them and retire on the income.

AMERICAN CAPITALISM:
- You have two cows.
- You sell three of them to your publicly listed company, using letters of credit opened by your brother-in-law at the bank, then execute a debt/equity swap with an associated general offer so that you get all four cows back, with a tax exemption for five cows. The milk rights of the six cows are transferred via an intermediary to a Cayman Island company secretly owned by the majority shareholder who sells the rights to all seven cows back to your listed company. The annual report says the company owns eight cows, with an option on one more. Sell one cow to buy influence with a new president of the United States, leaving you with nine cows. No balance sheet provided with the release. The public buys your bull.

AN AUSTRALIAN CORPORATION:
- You have two cows.
- You sell one, accept an LAW tax promised credit payable in 4 year’s time, and force the other to produce the milk of four cows.
- You are surprised when the cow drops dead.

A FRENCH CORPORATION:
- You have two cows.
- You go on strike because you want three cows.

A JAPANESE CORPORATION:
- You have two cows.
- You redesign them so they are one-tenth the size of an ordinary cow and produce 20 times the milk
- You then create clever cow cartoon images called Cowkimon and market them worldwide.

A GERMAN CORPORATION:
- You have two cows.
- You re-engineer them so they live for 100 years, eat once a month, and milk themselves.

A BRITISH CORPORATION:
- You have two cows.
- Both are mad.

AN ITALIAN CORPORATION:
- You have two cows, but you don’t know where they are.
- You break for lunch.

A RUSSIAN CORPORATION:
- You have two cows.
- You count them and learn you have five cows.
- You count them again and learn you have 42 cows.
- You count them again and learn you have 12 cows.
- You stop counting cows and open another bottle of vodka.

A SWISS CORPORATION:
- You have 5000 cows, none of which belong to you.
- You charge others for storing them.

A CHINESE CORPORATION:
- You have two cows.
- You have 300 people milking them.
- You claim full employment, high bovine productivity, and arrest the newsman who reported the numbers.

A NEW ZEALAND CORPORATION:
- You have two cows.
- That one on the left is kinda cute…

Saturday, September 20, 2014

The Saleman's Litmus Test

If your goal is to become a great company or even improve your existing one, every employee in you company should be able to “sell” the product or service that you are merchandising. Since that is usually not the case, you are forced to hire sales people to help implement the objectives laid out by upper management.

A national study indicated that less than 3% of the population has an inherent penchant for sales, and as much as 50% of all salespeople really do not know how to sell. During my 20 odd years in sales, I have hired, worked with, and observed great sales people (yes, both men and women). Being the observant type and believing in best practices, I have complied a listing of questions you should ask any salesperson before you hire them, and should use this Litmus Test to review of your existing sales force to determine whether to keep them or cut them loose.  I hope you find it useful.

Psyching Out the Test: People always try to answer questions the way they think you want them to. You need to 'listen for' answers that someone trying to trick you wouldn't usually predict. You also want to hear specifics, examples, and details. If there are specifics, then it lets you know right off the bat if there's anything worth pursuing. You can give 2 points if they ace this part in general.

Icebreaker: The first four questions loosen up the candidate and set the tone for the entire interview: the interviewer asks questions, and the candidate talks -- a lot. There needs to be a question that focuses on values, attitudes, and ability to communicate. Questions include: Tell me where you would like to be in 5 years? Tell a little about yourself? Tell me you biggest success (the one you are most proud of)? Tell me your biggest failure (one you would do over)? 2 Points for top respondents

Target Behaviors: These 5 questions (2 points each) are designed to reveal the behavioral trait or attitude and tend to be particularly good gauges of success in our organization. They are worth 2 points each if they have them. Here are those personality traits or types and the questions used to gauge them: (1) Assertor: Is the person a doer? (2) Persuader: Can the person persuade a customer? (3) Values: Is the person honest and trustworthy? (4) Relater: Does the person get along with others, and can he or she build long-term relationships? (5) Ego: Does the person have self-regard and a high confidence level but NOT at the expense of being arrogant?

Measuring Integrity: You want candidates who have already had their ethics put to the test. Only two questions address values directly, but all questions are designed to reveal whether a candidate is trustworthy. Question: “What was the hardest ethical dilemma you faced, and what would you have done differently?” This is an important question and it should be weighted at 5 points.

Winning Isn't the Only Thing - But Wanting to Win Is: Look for people who want to win every situation they approach. Remember, in a sales environment there can be six other sales representatives in the lobby, selling products identical to yours. Sales is a gladiator business, and you must win more battles than you lose. Questions: “Tell me your biggest sales success? Name me the person you see yourself as in a movie? Whom would you most consider your role model?” What do you that would be considered unique to your style to close a deal? This one is on a scale of 0 to 4.

Measuring Motivation: You don't need a degree in sales to get this answer right. Look for the word 'money' in this answer. Steer clear of big talkers in favor of careful listeners. Score either a 3 or zero if money is NOT mentioned.

Powers of Persuasion: Ask the question, “Tell me how you can convince someone who does not want your product to buy your product?” This is a classic sales-interview question, but the answers will tell you a lot about how developed a person's persuasive powers are. To a seasoned businessperson, the desired answer, 'By asking questions and finding a need,' may be obvious, but to a green kid out of college, it's not. Many times a person will say, 'I'll cut the prospect a deal.' That answer is wrong! Great answers get 4 points, less if they are not persuasive.

Looking for a Relationship-based Salesperson: You want to see if a candidate can develop long-term customer relationships and work with others easily. A good question is: Tell me how you can get repeat business? 2 Points if this is a swish.

Doers' Profiles: According to traditional sales-psychology books, there are four types of people: Doers, Talkers, Pacers, and Controllers. Not surprisingly, Doers make the best salespeople. Doers will respond to this question aggressively. They have no doubt that if their integrity was questioned, they would be upset, and they would be emphatic about it. A strong value system forces a strong response to the question. It indicates that the candidate is the take-charge type of individual you are looking for. Persistence ia the #1 characteristic of a doer. A good question is: “Do you like working in a group or on your own? How do you handle stress (give an example)?” 4 points it they are a doer, 2 for controllers, 0 for everything else.

The Essence of Selling: It is very hard to change someone's mind, that's what a salesperson must do on almost every call. Selling comes down to providing people not with something they don't need, but with something they didn't know they needed. (read my “You Don’t Know what You Don’t Know post) Question: “Tell me when you were able to convince someone to see your point of view that at first did not?” 3 points for a good answer, but you can rate from 0 to 3.

Measuring Maturity: You would be surprised how many candidates draw an absolute blank on this question. This is a goals oriented question. Look for some honest, clear thinking here -- some sign of maturity and goal orientation. Questions: “How do you prioritize your day? What are your long-term goals? Have you been successful so far?” Maturity is not everything, but it will get you 1 point.

Profits Come First:  Ok this is a big one.  This is to find out if a salesperson knows how important profits are.  The question is this: If you could sell $100 million worth of goods and make $10 million in profits, or sell $2 million and make $1 million, which would you choose?  If they choose $100 million, the get 2 points, $2 million 8 points. Now, to get two more points,they have to tell you why selling $2 million is better... It has to do with selling $100 is really, really hard, and you are making ONLY 10%, and if you sell $85 million you not make anything.  Profit MARGIN is what is important, not revenues... and a great salesman will know this. 

Sum up what you got, if the total is under 40, let the candidate walk, and if you took the test and got under 40, you better start brushing up on your selling skills. Sales is a full contact sport, and if you are not cut out for it, find another job that can better use your skill set whatever it may be.