Saturday, October 25, 2014

Answer These Ten Key Questions To Beat Competitors

change-the-model Change is hard. I see entrepreneurs every day who are trying to change the world with a new idea, and startups that are trying to survive their hyper-growth phase by changing processes to meet demand. In both cases, it’s easy for them to become frustrated and give up, since most have never been trained in change management, and don’t even know what questions to ask.

A while back, I spotted a new book for change management leaders in large organization, and I realized that many of the issues they face are the same as ones faced in every growing startup. Phil Buckley, in “Change With Confidence,” provides practical answer to fifty of the biggest questions that keep change leaders up at night.

Here are ten of the key questions that apply equally well to the world of startups and entrepreneurs, as they do to large organizations. If entrepreneurs answer these questions for their startup, they will definitely stay ahead of most of their competitors in the startup world:

  1. What is the “secret sauce” that my startup brings to the problem? Your passion is necessary but not sufficient to motivate real change. You need to quantify change results that constituents can see, feel, smell, or taste. Words alone, like “improved efficiency”, “paradigm shift,” and “breakthrough technology” won’t convince people to follow you.

  2. Who are the stakeholders who can most influence success? Stakeholders are key people impacted, or leaders who influence key people. For example, early adopters may be easily sold, but new technology product success really hinges on adoption by certain demographics, perhaps more influenced by celebrities or mommy bloggers.

  3. What do I need to know before I commit to deliverables? The last thing you need in a startup is a false start, where you can’t deliver on a product change deadline, or a new marketing channel. Deliverables and the resources you have to achieve them are two sides of the same equation. Make sure they match before you commit.

  4. How do I measure success? Define hard (data) and soft (anecdotal) metrics on the change, as well as on the quality of your leadership. That means you have to start with assessing the current state against the same metrics, before you can assess progress or change. Make sure metric results are available to the team, to keep them motivated.

  5. Will my proposed change actually achieve the desired outcome? It’s important to separate optimism and dreams from market realities. Ask yourself, “If I were an investor, would I support this effort, given the costs and promised returns?” Just because Google sales hit $1.5 billion in 4 years doesn’t mean any other startup can do it.

  6. How do I avoid scope creep? Expanding a project without additional time or resources is called scope creep. It takes a strong team and strong leadership to manage it. What works is a documented change request and review process, as well as quantification of resources required as well as anticipated incremental results.

  7. What does a good plan look like? A good plan is a written one, approved by all key players, which maps out all activities and provides a framework for leaders and team members to follow. Calibrate the plan with resources available to deliver it. Keep the plan simple, focused, and flexible.

  8. How do I know what resources I need? Without adequate resources to support your efforts, you will be faced with trade-offs that often lead to a poor transition to new ways and a burned-out team. What works is documenting early a fact-based resourcing plan, using credible sources, with a reserve allowance of 10% for contingencies.

  9. How do I prepare people to work in the new ways? Most important changes require new ways of working: a combination of new knowledge, skills, mind-sets, behaviors, relationships, and processes. Provide step-by-step job aids, training, and hiring for critical aspects of the new plan. Allow adequate time for this preparation before implementation.

  10. How do I reduce risk? A key aspect of mitigating risk is to first identify the risk elements before you start, and build in contingency plans, in case the risks materialize. Then establish trigger points to clarify when contingency plans need to be activated. This will speed up remedial actions and minimize damage.

Everyone learns and celebrates changes done well during startup hyper-growth from zero to a profitable business, and everyone loses when a promising but challenging startup fails. I hope these points illustrate that the best strategy for every startup evolution is to answer the key questions early, and don’t wait for the first crisis to think about risks and contingencies.

The ultimate objective of every entrepreneur and every team is to make change an opportunity for success, rather than an excuse for failure. When was the last time you approached change with confidence, rather than fighting it all the way?

Marty Zwilling


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Friday, October 24, 2014

Make Every Member Of Your Startup Act Like An Owner

people-entrepreneurs Every startup lucky enough to get some traction gets to the point where they decide to hire some “regular employees” for sales, marketing, and administrative tasks. Then they are surprised to see productivity and creativity take a big dip. What they should be doing is hiring only “entrepreneurs,” meaning people who think and act as if this is their own business.

This commitment to hire people who think like entrepreneurs, or instill an “owner’s mindset” in every employee, should be a high priority in every business. It’s what every customer looks for in every transaction. Most people will tell you this is impossible, but I found a book, “Army of Entrepreneurs,” by Jennifer Prosek, where she seems to have actually accomplished this.

I like how she was able to motivate, train, and reward employees, including the implementation of an incentive program to get every member of the team actively involved in generating new business. She also identifies the typical myths against using this approach, and describes how to overcome each one:

  • “Entrepreneurs are born, not made.” The reality is that all entrepreneurial skills are learnable skills. The entrepreneurial mindset is a function of motivation, priorities, and risk versus reward, all of which you set or enable by your leadership and example. Hire employees who have strong skills, with the motivation to learn new ones.
  • “Employees will care only about work they create.” This is really an issue of the quality of the people you hire rather than the management or compensation system. The key is to hire people with the right mindset, and communicate it daily to your whole team, by your actions as well as your words.
  • “Junior people shouldn’t be involved in new business.” This is the platitude of an obsolete corporate culture where you had to “pay your dues” in menial jobs before adding creativity or making decisions. In today’s marketplace, junior staffers are often the most intimately connected to the market, technology, and the customer network.
  • “Employees will lose focus on their work.” Old management models encourage employees to optimize their own task, often at the expense of the overall company objectives. There is new evidence that people want to understand the bigger picture, and business growth financial incentives will increase productivity, rather than lower it.
  • “Sales will be the organization’s sole focus.” Again, you get what you demand and reward. If sales are the only way to get rewarded in your organization, then sales will take precedence over other activities. Motivate for a spectrum of entrepreneurial behaviors, and you will see results.
  • “We don’t need to reward lead generation.” For a startup, you don’t have a recognized brand to bring in the leads. All businesses need to proactively seek leads, rather than simply attract them, with the creativity and initiatives of every employee rewarded for every contribution.
  • “There is too much risk associated with decentralized decision making.” When you have to move and change quickly to survive, centralized decision making is too slow. You become the bottleneck. If you train people properly, empower them, trust them, and they understand the business, your evolving business can become a revolution.

Every large company wishes they could harness the power of a thousand entrepreneurs within their employee ranks to re-create the exceptional business growth they once knew. Instead, for growth, most have resigned themselves to buying startups that exhibit these characteristics.

Thus, the last thing you need as a growing startup is a “regular employee.” Hire entrepreneurs like you, grow like an entrepreneurial company, and stand above competitors in the acquisition process to carry that fire forward. That’s a win-win for everyone in this new culture and new economy.

Marty Zwilling


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Wednesday, October 22, 2014

Ideas Are Only The Beginning Of Startup Innovation

google_innovation_ideas Most people think innovation is all about ideas, when in fact it is more about delivery, people, and process. Entrepreneurs looking to innovate need to understand the execution challenge if they expect their startup to carve out a profitable niche in the marketplace, and keep innovating to build and maintain a sustainable competitive advantage.

Everyone thinks they know how to make innovation happen, but I can’t find much real research on the subject. At the same time, myths about innovation are commonplace in business. Vijay Govindarajan and Chris Trimble, in their book “The Other Side of Innovation: Solving the Execution Challenge” have done some good work on this subject.

They take you step-by-step through the innovation execution process, in the context the ten most common myths about innovation, which I think makes their approach particularly instructive:

  1. Innovation is all about ideas. While it is true that you can’t get started without an idea, the importance of the Big Hunt is vastly overrated. Ideas are only beginnings. Without the necessary focus, discipline, and resources on execution, nothing happens.

  2. A great leader never fails at innovation. When it comes to innovation, there is nothing simple about execution. The inherent conflicts between innovation and ongoing operations are simply too fundamental and too powerful for one person to tackle alone.

  3. Effective innovation leaders are subversives fighting the system. Effective innovation leaders are not necessarily the biggest risk takers, mavericks, and rebels. The primary virtue of an effective innovation leader is humility. What you want is integration with real world operations, not an undisciplined and chaotic mess.

  4. Everyone can be an innovator. Ideation is everyone’s job, as are small improvements in each employee’s direct sphere of responsibility. Yet most team members don’t have the bandwidth or interest to do their existing job, and well as address major innovations.

  5. Real innovation happens bottoms-up. Innovation initiatives of any appreciable scale require a formal, intentional resource commitment. That requires the focus and resources from top executives to sustain, even initiate, relevant efforts.

  6. Innovation can be embedded inside an established organization. Some forms of innovation can be imbedded, like continuous product improvement, but discontinuous innovation is basically incompatible with ongoing operations.

  7. Initiating innovation requires wholesale organizational change. Innovation requires only targeted change. The first principle is to do no harm to existing operations. A common approach that works is to use dedicated teams to structure innovative efforts.

  8. Innovation can only happen in skunk works. Innovation should not be isolated from ongoing operations. There must be engagement between the two. Nearly every worthwhile innovation initiative needs to leverage existing assets and capabilities.

  9. Innovation is unmanageable chaos. Unfortunately, best practices for generating ideas have almost nothing to do with best practices for moving them forward. Innovation must be closely and carefully managed, during the 99% of the journey that is execution.

  10. Only startups can innovate. Luckily for entrepreneurs, many large companies are convinced that they must leave innovation to startups. Yet research suggests that many of the world’s biggest problems can only be solved by large, established corporations.

Everyone agrees that the goal of innovation is positive change, to make someone or something better. Entrepreneurs need it to start, and established companies need it to survive. The front end of innovation, or “ideating” is the energizing and glamorous part. Execution seems like behind-the-scenes dirty work. But without the reality of execution, big ideas may not turn out so well, even in startups.

Marty Zwilling


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Monday, October 20, 2014

Right Entrepreneurs In The Right Place Get Funded

startup-fundingI’m a strong believer that investors invest in people, before they invest in a business plan, or an idea. But I continue to learn that there are a host of other factors, maybe not even related to you or your business, that could keep you from getting the funding that you need. You may not have control over many of these, but it helps to know, for planning purposes, what is really happening.

Obviously, a key factor is always the state of the economy and the mood of the venture capital community. The good news is that both of these are looking up these days. According to the Silicon Valley Venture Capitalist Confidence Index® for the First Quarter 2014, the Q1 increase marks seven consecutive quarters of positive sentiment among Silicon Valley venture capitalists.

On the other hand, venture capital doesn’t get smoothly spread across the geographic and demographic landscape, and the number of active firms has dropped sharply. An older but still relevant study, published by CB Insights, Venture Capital Human Capital Report, summarizes a variety of characteristics for private early-stage Internet ventures funded in the US. The significant findings include the following:

  • Founders need to live in the right place. No surprises here. California (Silicon Valley), New York (NYC), and Massachusetts (Boston) are the places to be in the US for venture capital attention. Almost 80% of the funding handed out in the US consistently comes from these three locations.
  • Whites and Asians lead the race. 87% of funded founders are white, which is not too far above the US population of 77% white. More notably, the second largest group receiving funding was Asians, at 12%, despite comprising only 4% of the population.
  • All-Asian founding teams raise the largest rounds. Asian teams in California raised median funding rounds of $4.4M, significantly higher than the $3M raised by mixed or all-white founding teams. In other locations, the trend was more equal, even somewhat reversed in New York and Boston.

  • Wunderkinds don’t have the magic touch. The average age of founding teams getting funded is in the Gen-X 35-44 year age range. However, the highest median funding did go to those in age range 26-34 years old. Amazingly, no founding teams in the Gen-Y 18-25 year range received any funding in California.
  • Experience does count. Fully 39% of founders funded were formerly CEOs or had founded prior companies. Other common previous roles were executives in Sales, Marketing, and Product Management, all suggesting that VCs back experience.
  • More founders generally means more money. Overall the majority of companies have two or more founders, but over a third are led by one founder. More founders does not necessarily result in larger funding rounds, but the highest median funding generally goes to companies which have two or more founders.
  • Going solo works better on the East Coast. Co-founder companies are the norm in California, but 40-50% of the startups in New York and Massachusetts have only one founder. In New York, these solo efforts even raised more money, with a median of $4M.

If you don’t live in these corridors, don’t assume that you can simply incorporate in the state, or email your proposals there and be considered a local. At minimum, you need to get an introduction from a local player, or better yet, set up a local office and network there. Investing is all about people-to-people relationships.

If you are from outside the US, especially Asia, experts tell me that the focus is even more on relationships. George Wang, founder and chairman of the Beijing-based Chinese Professional Network (CPN), recommends that anyone from the West wanting to get involved in Chinese start-ups slow the pace down and “Spend six months and get to know the place and the people.”

If you need funding, focus first on the human side of venture capital, before you rush to pitch your plan. The evidence confirms that from a funding perspective, a successful startup is more about the right people being in the right place at the right time, versus the technology or solution.

Marty Zwilling


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Sunday, October 19, 2014

How To Recognize The Greatest Boss You Never Had

the-greatest-boss Everyone can recognize a great boss a mile away, so why is it so hard to find one? We all remember a few that are “legends in their own mind”, but that doesn’t do it. In fact, the clue here is that the view in your mind is the only one that matters, rather than the other way around.

Almost every one of us in business can remember that one special manager or executive in their career who exemplifies the norm, who commanded our respect, and treated us like a friend, even in the toughest of personal or business crises. In commemoration of Boss’s Day this past week on October 16th, let’s all tip our hat to that unique and rare business person we wish everyone would emulate.

I’ve asked many peers for the traits or attributes they saw in that person, and most will list the following positive functional traits of a good boss:

  1. Leadership. Shows outstanding skills in guiding team members towards attainment of the organization’s goals and the right decisions at the right point of time. As Drucker said, "management is doing things right; leadership is doing the right things."

  2. Plan and delegate. Possesses foresight and skills to understand the relevant capabilities of team members, and then scheduling tasks and delegating to the right people to get tasks done within deadlines. You are a guide, not a commander.

  3. Domain expert. Demonstrates complete knowledge of his field and confident about that knowledge, with the common sense to make quick productive decisions, and ability to think outside the box.

  4. Set clear expectations. Employees should always know what is expected of them. One of the easiest ways to do this is to set deliverable milestones for each employee over a set period of time. Then review the performance vs. the roadmap or deliverable at least six months prior to a performance review and discuss ways to improve.

  5. Positive recognition. Immediately recognize team members, publicly or privately, when they complete something successfully or show initiative. Congratulate them on a job well done. Most employees are not motivated by money alone. Good managers know that employees want regular recognition that their job is being done well.

In my view, these are all necessary attributes, but are not sufficient to put you in that great category. Most people recognize that it takes more to be great, but the attributes are a bit more esoteric, and harder to quantify. Here are a few of the great ones:

  1. Active listener. Shows traits such as listening with feedback, optimistic attitude, motivating ability, and a concern for people. Listening to what is said as well as what is not said is of the utmost importance. It is demoralizing to an employee to be speaking to a supervisor and be interrupted for a phone call. All interruptions should be avoided.

  2. Shows empathy. This refers to the ability to "walk in another person's shoes", and to have insight into the thoughts, and the emotional reactions of individuals faced with change. Empathy requires that you suspend judgment of another's actions or reactions, while you try to understand them, and treat them with sensitivity, respect, and kindness.

  3. Always honest. Simply put, today’s managers live in glass houses. Everything that a manager does is seen by his employees. If a manager says one thing and does another, employees see it. Managers must be straightforward in all words and actions. A manager must “walk the talk.” That also means recognizing weaknesses, and admitting mistakes.

  4. Sense of humor. People of all ages and cultures respond to humor. The majority of people are able to be amused at something funny, and see an irony. One of the most frequently cited attractions in great personal relationships is a sense of humor.

  5. Keep their cool. A great manager is an effective communicator and a composed individual, with a proven tolerance for ambiguity. He/she never loses their cool, and is able to correct the team members without emotional body language or statements.

Whole books are written on this subject, but hopefully you get the picture. Great managers and bosses must do the technical job well – and they also must do the people job very well. Now that you understand these things, I’m not sure why it is so hard to find a great boss. I guess an even harder question I should ask is why is it so hard to be one?

Marty Zwilling


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Saturday, October 18, 2014

How To Maximize Your Odds With A Part-time Startup

020614-N-0552D-001 Many experts will tell you that you can’t succeed as a part-time entrepreneur, as any good startup will require a 100 percent commitment of your time and energy. But not many of us have enough savings to live for a year or more without a salary, fund the startup, and still feed the family. Thus I often recommend that entrepreneurs keep their day job until the startup is producing revenue.

Of course, if you have investors anxious to give you money, or a rich uncle to keep you afloat, there is nothing wrong with a dedicated and full commitment to the startup, with commensurate more aggressive milestones and growth expectations. We all understand the risk of competitors quickly closing in, and market factors changing before we can roll out our solution.

For those of you who do decide to keep your day job, here are some pragmatic recommendations I espouse on how to make the most progress in your startup, while simultaneously juggling your other critical family and employer roles. In fact, these suggestions have tremendous value, even if you are dedicated and committed full-time to your new startup:

  1. Find a co-founder who can keep you balanced. Two co-founders, both working part-time are actually better than one founder full-time. You both need the complementary skills, ability to debate alternatives, and the tendency to keep each other motivated, that neither could match working alone. One still needs to be the agreed final decision maker.

  2. Schedule fixed times and days for the startup, working with the team. Building a startup is hard work, and requires discipline to get it done. Working part-time doesn’t mean all working randomly alone. Commit to a regular weekend time and a couple of specific nights per week where you meet with the team and focus only on the startup.

  3. Get better at saying ‘no’ to your friends. Learning to manage your own time is critical. Everyone around you enjoys adding things to your schedule, and reducing their to-do list. The key is learning to say no without offering a long list of excuses, or whining about how busy you are. It’s never possible to satisfy everyone, so be true first to your own priorities.

  4. Set realistic milestones and take them seriously. It’s easy for part-timers to make excuses that other priorities caused you to miss milestones, but predictable results and metrics in this mode are even more critical than for full-time members. Use the 80/20 rule to maximize productivity – get 80 percent outcome from 20 percent of focused efforts.

  5. Select a business idea that has a longer runway. Some startup ideas are dependent on a rapidly emerging fad, or have many competitors fighting for a limited market. You can’t move fast enough on a part-time basis to win in these areas. On the other hand, if you have a new technology, with patent applied for, maybe you more time to get it right.

  6. Prepare yourself for a longer journey to success. Seth Godin is famous for saying that the average time for overnight success in a startup is six years, even working full-time. Like any startup solution, the first version will likely be wrong, and require one or more pivots. Learn to look for small indications of success to keep you motivated.

  7. Make learning your full-time vocation. No matter how many full-time, part-time, and family commitments you have, you always need to carve out time for learning new things. Learning is not stealing from any employer, and it prepares you for all your futures. Don’t wait for anyone to pay your way to class, or give you time off for training. It won’t happen.

The advantage of quitting your day job early is that it removes all excuses, and all qualms from you and others, that the new startup is only a hobby. There is nothing that drives an entrepreneur like being hungry, dependent on the outcome, and seeing mounting debt. Without self-discipline, many aspiring entrepreneurs find that a single focus is the only way anything ever gets done.

There is certainly additional risk associated with working a paying job during the day, and working on your startup nights and weekends. First is the risk to your health and family life, which if you lose these, all the business opportunity in the world doesn’t matter.

Then there is the risk of antagonizing your current employer by missing deadlines, reduced productivity, or even getting embroiled in a legal conflict of interest or intellectual property ownership rights. I suggest it’s best to be up-front with your employer, with an honest commitment that your startup work will not impact company commitments or results.

Potential conflict of interest issues with a current employer should be explored openly, and resulting agreement documented, to preclude the possibility that you might lose everything later as your startup succeeds. On the positive side, your employer may like what you have in mind, and become your first investor and biggest supporter.

If your conclusion after all these pros and cons is that the risk is too high for you, you probably need to keep your day-job long-term, and give your startup idea to someone else. There certainly isn’t anything wrong with a regular well-paid job and career, with health-care benefits, and a competitive retirement plan. But the entrepreneur lifestyle is still more fun, even part-time.

Marty Zwilling

*** First published on Entrepreneur.com on 10/10/2014 ***


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Friday, October 17, 2014

Ten Rules For Business Success Survive A Century

Napoleon_HillIn this world of constant change, new technologies, and a thousand cultures, it’s evident and somehow comforting to me that the basic rules for business prosperity really haven’t changed in the last hundred years. Business success is still more about the people than the technology or idea involved. As an Angel investor and a mentor to entrepreneurs I still see this every day.

I was just perusing a new book, “The Science of Success,” a collection of essays by and about Napoleon Hill, who is most recognized as the author of the best seller “Think and Grow Rich” from way back in 1937. Hill attributes his ten rules of success to Andrew Carnegie, who was in his prime well before that, over a hundred years ago.

Since language and implication have changed a bit since then, I’ll restate Carnegie and Hill’s original rules here, with my own current-day commentary and recommendations added:

  1. Definiteness of purpose. Every entrepreneur needs to start by setting a major purpose for embarking down a specific business path. This objective needs to go beyond making a parent or spouse happy, getting rich quick, or advancing a technology. For success these days, the purpose better focus on people, and solve a real problem for customers.

  2. Master-mind alliance. Building successful businesses still requires the ability to find and inspire the best people who “have what you haven't,” whether that be skills, knowledge, connections, or funding. Then you must extend these alliances to vendors, partners, customers, and even competitors (coopetition).

  3. Going the extra mile. Hill's eagerness to serve others gave him greater opportunities, and this Law of Reciprocity works the same today. Doing more than you have to do is the only thing that justifies raises or promotions, and puts people under an obligation to you.  This is still one of the most important competitive differentiators that you can offer.

  4. Applied faith. This is a level of belief that has action behind it. Anyone can have ideas, passion, and faith about an important business opportunity. Yet for most people it’s only a daydream, since they are not willing or able to commit the actions required to deliver. Results are still the only true measure of success in business.

  5. Personal initiative. Successful entrepreneurs do what they need to do without being told how to do it. Asking for insight is not the same as asking for the next step, or asking an advisor to make the decision. Great entrepreneurs are proactive, not only in selecting the right idea, but in implementing a product, setting a price, and choosing customers.

  6. Imagination. This is the number one skill required for creativity and innovation. Without imagination, entrepreneurs cannot look at a problem from a new perspective. Without imagination, entrepreneurs cannot visualize how various solutions to a problem would work. Without imagination, entrepreneurs can never dream up new ideas.

  7. Enthusiasm. This is the contagious quality that great entrepreneurs have to attract correlative passion, commitment, the best people, and customers to their idea and solution. Enthusiasm is one of the most powerful motivational tools in an entrepreneur’s arsenal, and no success will accrue without it.

  8. Accurate thinking. Accurate thinking is the ability to separate facts from fiction via deductive reasoning, and to isolate and use facts effectively that are pertinent to your own challenges and problems. When the necessary facts are not available, accurate inductive reasoning or hypothetical thinking is required to fill the gap.

  9. Concentration of effort. In current terms this is called focus and determination, to never give up and never be diverted from your purpose. With focus and determination, you and your team will understand what's most important for success, and drive your motivation through the execution steps required.

  10. Profiting by adversity. This simply means remembering that there can be an equivalent benefit for every setback. Successful entrepreneurs learn from funding failures, economic adversity, ruthless competitors, and lethargic customers. They insist on greater efficiency, try new business models, organizational improvements, and better cash management.

Carnegie and Hill understood how business success rules were tied to the entrepreneur way back in the early 1900’s, and the evidence is that those rules are still as applicable now as they were then. Business models and technology have improved dramatically, but the power of people with foresight, passion, and determination continues to supersede all these elements.

So the next time you are tempted to broadcast an abstract email to me and other investors on your new “million dollar idea,” make sure you include your track record on how well you stack up against these rules for business success. Investors still tend to bet on the jockey, not the horse.

Marty Zwilling


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