Sunday, July 23, 2017

4 Startup Survival Lessons Lead To Business Success

Panthera_onca_predatorThe good news is that the rate of new entrepreneurship leveled off a bit last year, although it is still rising, according to the latest Kauffman Index of startup activity. The bad news is that it’s back to pre-recession highs, the opportunity for change is huge, and the cost of entry is at an all-time low. It’s a jungle fight for survival for aspiring entrepreneurs of all ages and demographics.

In this context, it’s time for every business, not only startups, to take a fresh look at the basics of business success. Jamie Gerdsen, in his classic book of lessons on business change, creatively titled “Squirrels, Boats, and Thoroughbreds,” aims first at existing businesses, but I believe that most of his points, like his laws of the jungle, can be rewritten for startups, as follows:

  1. If you want to eat... I don’t believe in greed, but we all need to make enough money to eat. This means building a revenue stream, and tuning your business model to produce margins in the 50 percent range or above. I support being socially and environmentally conscious, but you can’t help anyone else if you don’t eat.

  2. If you want to survive... Survival means growth and scaling. Once you have a proven business model, you need to scale the business up quickly to stay ahead of competitors. These days, doubling your business volumes every year is the “norm” that investors and potential acquirers are looking for.

  3. If you want to be feared... Every startup needs a sustainable competitive advantage. In the jungle, it might be the strongest jaws, but in startups it’s more likely the strongest intellectual property. With no competitive advantage, startups with new ideas gaining traction are never feared, and are usually eaten for lunch as sleeping giants wake up.

  4. If you want to mate... In the business world, we call this finding the right strategic alliances. That means you have to stand out above the crowd, and aggressively pursue those candidates that can help you breed even more presence and power in the marketplace. Sitting quietly on the sidelines, waiting to be found, is a lonely world.

Every startup in the business jungle begins with a limited amount of three precious commodities – time, talent, and treasures. The smart ones have a plan for how they intend to spend these resources, and measure themselves against the plan. Otherwise they will likely look back later, and find that one or more of the laws of the jungle have been compromised:

  • Time – Start with a timeline of how much runway you have, with objectives and milestones mapped against the timeline. Time management is an art. Don’t waste precious time on the “crisis of the day,” in favor of strategically critical tasks. The best entrepreneurs work on making better time management a top objective.

  • Talent – Every startup needs talents to give the company value. In the beginning, the entrepreneur has to cover all talents, which is made more possible these days by the wealth of information available on the Internet, as well as books and online courses. Talent can also be outsourced, but surviving in the business jungle without talent is unlikely.

  • Treasure – Most entrepreneurs assume that treasure means funding. In reality, more important treasures often include intellectual property, the ability to innovate, and well-defined processes that can deliver great products and reach new customers more efficiently and effectively than competitors. Money is no substitute for these other treasures.

In summary, whether you are running a startup, a family business, or a famous brand like IBM, you are all part of the jungle. You can be a small tiger with big teeth, or an aging dinosaur. The laws of the jungle apply to all. It really is a world of survival for the fittest.

The jungle framework is a great one to set the right perspective. Startups which prosper and succeed learn the rules of the jungle early, don’t make excuses, and don’t look for any entitlements. Does your startup have an understanding of reality, a real sense of urgency, and the overwhelming drive to innovation to make you the king of the jungle any time soon?

Marty Zwilling

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Saturday, July 22, 2017

8 Leadership Lapses Every Business Owner Must Avoid

leadership-lapsesEven entrepreneurs who have built many startups, or sold their last one for millions of dollars, know they make occasional people leadership mistakes. They know leadership is all about managing their own complicated, illogical, and fallible human foibles, as well as the people they depend on. These can trip up even the best, often at the cost of more than a good night’s sleep.

Thankfully, most mistakes won’t be as spectacular as the America Online merger with Time Warner for $350 billion, back in 2000, engineered by then superstar entrepreneurs Stephen M. Case and Gerald M. Levin. They apparently ignored all conventional wisdom and advisors, and struck a deal which crashed both companies, now a case study in many business schools.

By most accounts, this case exhibits almost all the lapses identified in a classic book by Dr. Nicole Lipkin, “What Keeps Leaders Up At Night.” She provides some great guidance, based on coaching experience and a doctorate in clinical psychology, on recognizing and resolving the most troubling management issues for leaders in all stages of an organization:

  1. I’m a good leader. So why do I sometimes act like a bad one? According to the evidence, good bosses go bad (temporarily versus the chronically horrible), for three overarching reasons – too busy to win, to proud to see, or too afraid to lose. Every leader needs to check and enhance his self-awareness to recognize and avoid these.

  2. Why don’t people heed my sage advice? Many people use the terms influence, persuasion, and manipulation interchangeably. But each carries its own specific meaning. Influence requires winning minds and hearts to inspire action. Persuasion intellectually stimulates a person to action. Manipulation is seen as insincerity, and it gets non-action.

  3. Why do I lose my cool in hot situations? Stress comes in two distinct forms: good stress and bad stress (distress). Managed effectively, stress is a good thing, leading to survival. But chronic stress and distress results in overreaction to non-life-threatening events. Schedule an on-going reality check with trusted advisors to know the difference.

  4. Why does a good fight sometimes go bad? A good fight in business is called healthy competition. Unfortunately, feelings of envy and inferiority can quickly turn healthy competition into a knock-down, drag-out fight between people and companies, turning a win-win situation into a lose-lose one. Check all your emotions at the gate.

  5. Why can ambition sabotage success? Every leader needs to balance ambition with humility, restrain one’s ego, treat others with respect, create positive impressions, and adopt a long-term perspective of success. Don’t let a “nearsighted” view cloud the “big-picture” view; success in the best interests of all. Contemplate your legacy to others.

  6. Why do people resist change? The brain’s hard wiring pre-disposes us to habitual behavior and decision making. We let biases influence our reaction to change and our ability to make decisions that cause change. To thrive you need to become more aware of biases and psychology behind your own and your people’s responses to change.

  7. Why do good teams go bad? Humans have always affiliated with groups and teams in order to survive and thrive. Group dynamics are not always good, including “us” versus “them” mentality, group conformity, social loafing, and emotional contagion. Leaders need to manage these dynamics to keep from falling prey to negative group behaviors.

  8. What causes a star to fade? When start performers fade, it’s almost always a failure to remain engaged with the people and the job. Smart leaders must constantly monitor the four essential elements of engagement: social connection, leadership excellence, aligned culture, and meaningful work and life. Engagement drives performance and satisfaction.

These questions should all be contemplated and understood by every entrepreneur and startup founder, starting on day one of their quest. Remember, we are all human, and we will make mistakes. The challenge is to learn from these, and just as importantly, learn from others who have been there before you.

So when you find yourself losing sleep at night, don’t get mired in the quicksand of self-pity and self-destruction. Every personal admonition of “What was I thinking?” should be followed with some objective analysis, maybe some help from a trusted ally, and a determination to get back on track and have fun. Being an entrepreneur is a lifestyle you must enjoy to be successful.

Marty Zwilling

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Friday, July 21, 2017

6 Steps To Saying No At Work To Your Boss And Peers

just-say-noEvery dedicated business professional I know can’t find enough hours in a day to do their best work, and yet they often find themselves saying yes to new requests from the people around them. In some cases it may be fear of retribution by the boss, but more often they just hate to disappoint others, and end up instead with high stress and low credibility in the crisis to deliver.

In addition to saying yes too often, professionals under pressure often say no poorly, by attacking the requestor or by avoiding any definitive response. Either of these approaches usually makes a stressful situation worse, often leading to guilt, burnout, and continuing accommodation.

The solution to this problem is part of a bigger challenge – taking back control of your work life, and regaining a sense of freedom and influence, as described in a new book, “Work-Life Brilliance: Tools to Break Stress and Create the Life and Health You Crave,” by Denise R. Green, a noted executive coach, speaker, and CEO of Brilliance, Inc.

A key part of her message that resonated with me, as a mentor to entrepreneurs, is her guidance on how to deal with the constant demands and requests that every business founder faces. She provides pragmatic advice for dealing with the three pains of the brain (social, status, and priorities) that erode your control and your satisfaction with work that you really love to do.

Specifically, here are six steps to declining requests without actually saying no, that she and I both recommend, when your plate is full or your priorities need to be elsewhere:

  1. Create a pause before responding. Did you ever notice how a yes can slip out of your mouth or get sent in an email before you even think about it? It’s tough to undo that yes without hard feelings or guilt. Before you respond, at least take a deep breath, or better yet, buy some time with language like “Let me give this some thought, and I’ll get back to you by the end of the day.” Be sure to follow-up as promised, to maintain your credibility.

  1. Clearly decline without using the word no. Skip the “maybes” or “I’ll try.” Make sure your response is clear and concise, with wording such as “I wish I could but I’m already over-committed,” “I’m just not able right now to do the job you need,” or “Anything new this week with my schedule is out of the question.” Be sure to keep a smile on your face.
  1. Share a credible reason for declining. Resist the urge to complain about being over-worked and under-appreciated, and share an honest explanation that you think is most credible with the requestor. For example, “I have another commitment at the same time that I can’t move,” or “This isn’t my area of expertise, so I’m just not the best person.”
  1. Offer sincere gratitude (as relevant). Ending with gratitude can soften the decline. It may sound like, “Thank you for considering me,” or “I’m pleased that you would trust me with such an important request.” Research shows that people pay more attention to endings, rather than beginnings, but you may choose to start with the thank-you.
  1. Make an offer that serves both your needs. Do not make an offer simply to make yourself feel better. A good offer might be, “Here is the contact info for the perfect person for this task,” or “I can recommend a new tool which will solve that problem with minimal effort by anyone.” The objective is to get the job done, and stave off future requests.
  1. Drop the guilt. Most times, guilt is just a bad habit – the result of trying to live up to unrealistic, unattainable standards. If you feel guilt, ask yourself, “Have I harmed someone or acted in conflict with my values?” If yes, apologize, then do better. Otherwise don’t let guilt trick you into thinking you are actually doing something productive for you.

Remember, you don’t have to be viewed as a yes person to be viewed as a leader. In fact, if you look at the leaders and most respected people around you, they are clear but selective in what they support and agree to do. They have learned the art of controlling their priorities, and they feel less stressed and more productive as a result. That’s the best way to enjoy work and life.

Marty Zwilling

*** First published on Huffington Post on 07/20/2017 ***

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Wednesday, July 19, 2017

5 Stages of Technology Adoption Compared To Grieving

mobile-phone-sad-faceHow many times have investors heard startups start their pitch by touting that their technology is “disruptive?” What entrepreneurs forget or don’t realize is that most customers are wary of all technology, educating the market on new technology is expensive, takes a long time, and people buy problem solutions rather than technology. Investors will likely wait for more traction.

The concept of disruptive technology was first introduced by Clayton M. Christensen in “The Innovator’s Dilemma” way back in 1995. Such technologies, like the digital camera and mobile phones, introduce such novel concepts that they displace existing technology quickly by societal standards. Unfortunately this “quickly” may be too slowly to save initial startups in the space.

In this time of rapid change, it’s easy to conclude that everyone is an early adopter, and we all tend to forget quickly the time and stages we go through while adapting to new technologies, and then loving them. It’s time to review the classic article on HBR “The Five Stages of Disruption Denial,” by Grant McCracken, comparing technology adoption to Kubler-Ross’ five stages of grief:

  1. Confusion. We don't quite get it. We sign up for the new app, or buy one of the new devices after we see our cool friends using it. We give it a whirl, and quickly complain that things were easier the old way. By this time, gurus are reassuring us that it is the greatest thing ever. But that doesn't help. We decide to wait another year for the next version.

  2. Repudiation. There are many people who don't get the new technology, and now social life is a little like a competition to show that we're not "falling for it." At this point, there can more social capital in saying that we don't like the technology than that we do. We all hear snappy one-liners like, "Twitter. What could I possibly say in 140 characters?"

  3. Shaming. This is when we are so persuaded that we're right and the new innovation is wrong that we are prepared to make fun of the credulous among us. "This Twitter thing. It's just a fad. Give it a couple of months and it will go away." We heard a lot of this sort of thing about Pinterest in the early days. Now it's valued at $12 billion.

  4. Acceptance. By this time, the innovation is taking off. The middle adopters are signing on. It is clear now even to late adopters (the great majority) that there is at least one useful aspect of the new technology, and it’s here to stay. Confronted by accomplished, irrefutable fact, the rest of us cave in, sign up, and brag about how modern we are.

  5. Forgetting. This is where we destroy the evidence, even in our own mind. Now we are inclined to act as if we always understood and approved of a world instilled with new innovation. One minute, we are too smart to be fooled by Twitter. The next we are fully on board. It's a like high school. We are captives of what Mark Earls calls "the herd."

In the old days, it typically took 20 years for this process to happen. Now it happens much faster, but it still takes longer that the survival lifetime of a struggling startup. Smartphone acceptance is now approaching 80 percent, only ten years after the first Apple iPhone was introduced. There is other evidence that may be the new norm, and will be soon beaten.

Marketing guru Seth Godin mentioned in an article a while back that “it takes about six years of hard work to become an overnight success.” Mark Zuckerberg spent about 7 years and $150 million before Facebook became cash-flow positive. MySpace and several others, who arguably pioneered the disruptive social media technology, never really survived to enjoy it.

Too many of the entrepreneurs I know who highlighted their disruptive technology early ultimately ran out of money and had to shut down for being “ahead of their time.” They did everything right, but the market just wasn't ready. Sometimes this is just an excuse for other problems, but don’t forget the old investor saying: "being early is the same as being wrong."

Overall, I think more startups do fail by being too early to market than fail by being too late. This is probably a hard message to swallow, but it’s usually the second mouse that gets the cheese. What are you doing to avoid this trap with your disruptive technology?

Marty Zwilling

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Monday, July 17, 2017

Startups Need Employees Who React Like Entrepreneurs

think-like-an-entrepreneurEvery 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 classic 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:

  1. “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.

  2. “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.

  3. “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.

  4. “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.

  5. “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.

  6. “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.

  7. “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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Sunday, July 16, 2017

How to Pick a Partner Who Will Amplify Your Efforts

google-cofoundersAs a long-time business advisor and angel investor, I’m a believer that “two heads are better than one” in building a new business. Very few entrepreneurs have the range of skills and experience to be the solution creator as well as business creator, or operational as well as sales leader. The challenge is to recognize and recruit that ideal partner match early with minimal cost and risk.

In fact, I would broaden the definition of partner from co-founder to “business partner.” The reason is that good attributes apply equally well to “external” partners, as they do to internal partners, like a co-founder or CTO. A good overall example is the synergy between Google co-Founders Sergey Brin and Larry Page, as well as Executive Chairman Eric Schmidt.

In all cases, the challenge is the same, of finding people that you can work with and enjoy in the business relationship. The relationship has to have trust, communication, and respect in order to work. Otherwise, like a marriage, it will be doomed to constant conflict, second guessing, and unhappiness. So the following traits have to apply to both sides of the partnership to work:

  1. Capable of working collaboratively. Some people are too independent to be partner material. If they or you find it hard to trust others, love to work alone, always have to be in control, or insist on micro-managing, it may be time for change or looking elsewhere.

  2. Neither partner needs to be managed. Good partners are people who are confident in their own abilities, and willing and able to make decisions, take responsibility for their actions, and able to provide leadership, rather than require leadership.

  3. All partners have compatible work styles. Most entrepreneurs work long hours and weekends to get the job done. If you team with a partner who likes to sleep late, and reserves the weekend for other activities, the partnership will likely not work.

  4. Agree on a common vision and commitment. It doesn’t take long to sense someone’s real commitment, or vision and desired outcome of a joint project. Is your project seen by both as an end in itself, or a means to another end? Conflicting visions won’t work.

  5. Believe in similar values and goals. If one of your core values is exceeding your customer expectations for quality and service, and your potential partner ascribes to the low cost, high profit mantra, a successful partnership is highly unlikely over the long-term.

  6. Operate with a comparable level of integrity. High levels of integrity are important in business, but more important is your level of comfort with your partner’s integrity. This is a critical element of a good relationship, but a tough one. This is probably the best place to apply your “gut” feeling.

  7. Brings complementary skills and experience. If both of you are experts at software development, even though one loves design and the other loves coding, that still won’t get the marketing done. Look at the big picture first of development, finance, and marketing/sales.

  8. Feels a real passion and love for their role. The passion has to be in the business context – meaning results oriented, customer oriented, and sensitive to competition. In many cases, experts with academic or research credentials are not good partners for a business venture.

  9. Believe in the same ethical and diversity boundaries. How the leaders of your company handle adherence to the spirit as well as the letter of the law will be seen by all employees, customers, and investors. Ethics and the view of personal boundaries should be explored fully.

  10. Carry minimal historical baggage. Partner decisions are more important than team member hiring decisions. Thus you should do the same or more due diligence on educational background, previous work, and references. Look impartially from all angles and do the follow-up on all relevant previous roles.

Beyond the core team of two or three startup partners, every startup should seek to “outsource” the rest of their strategic requirements to external business partners. It’s faster and cheaper than building a large team in-house, and usually more effective.

By using this checklist, you should be able to objectively match potential partners with your own needs and expectations. Then, as I always recommend, it’s time to establish a formal agreement or contract to cement the partnership. With that, you will have a strong foundation for success, as well as a great working relationship for the next thirty years.

Marty Zwilling

*** First published on Huffington Post on 07/15/2017 ***

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Saturday, July 15, 2017

10 Business Idea Assertions Mask The Real Challenge

idea-plan-actionMost 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 classic 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, innovative ideas really have no value. Customers are interested in solutions, and investors want to see the money. Your real challenge as an entrepreneur is to create an innovative business, not an innovative idea.

Marty Zwilling

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Friday, July 14, 2017

6 Ways To Learn From Failure, And Beat Success Odds

business-experiment-failureAspiring entrepreneurs and new business owners often ask me for a secret formula for success, and they seem surprised when I tell them there isn’t one. In my experience, every new business is best handled as a series of experiments, from which smart founders learn a winning strategy, after some mistakes. In fact, that culture of learning as you go is my secret to business success.

For example, you probably never knew that both Facebook and YouTube started out as dating-site experiments, but pivoted to something more unique when that experiment failed due to an apparently over-crowded market.

In today’s rapidly changing world, there are no sure-fire winning ideas, and experiments within clearly defined parameters are the only way to gauge the potential of emerging opportunities. Investors often argue that founders learn more from failed experiments, so don’t be afraid to wear your failures with pride, in support of what you have learned.

In fact, I just finished a new book, “Winning from Failing,” by business development and sales productivity expert Josh Seibert, which extends this principle as well to large corporate organizations seeking to improve their productivity and success. He and I both believe that the key to high growth in any company is a learning culture, led from the highest executive levels.

Everyone agrees that establishing and maintaining a company-wide learning culture is not so easy. It requires an ongoing commitment and effort from top executives and leaders at every level, with a focus on the following key principles:

  1. Incenting everyone to step outside their comfort zone. Innovation in building the business is just as important as in building the solution. Yet, by default, most team members stay within the realm of “what has always worked,” rather than stretch the limits. Leaders need to reward experiments, rather than demand fixed processes.

  2. Eliminate any drama and penalties from failed experiments. Many managers and entrepreneurs love to play the game of persecutor, rescuer, and victim, on every initiative that doesn’t go exactly as planned. In any of these roles, or by penalty, the manager discourages team members from taking anything positive from the learning opportunity.

  3. Encourage a strong learning culture to improve accountability. Organizations with a strong learning culture inevitably have a strong parallel culture of accountability. These are two sides of the same coin, and both lead to improved productivity and innovation. Accountability must be demonstrated from the top, and rewarded rather than penalized.

  4. Hire based on learning experiences rather than skills only. One question most interviewers never ask is for evidence of what you have learned from previous failures, as well as successes. This identifies “potential,” or the ability to adapt to and grow into more complex roles and changing environments. Potential is enhanced in a learning culture.

  5. Establish mentoring and coaching relationships. Both are an important part of every learning culture. Mentoring is a less formal arrangement for long-term career guidance, while coaching is a more formal association focused on improvements in behavior and performance in the current job. These roles can be equally beneficial for both parties.

  6. Clearly assign development responsibility and measure results. For every learning initiative, including training, mentoring, and coaching, someone has to be responsible for the actual work to get it scheduled and track results. Many executives give lip service to people development, but don’t allocate the necessary time or resources to be effective.

Once a learning culture is established, the fear of failure and retribution is removed, and people will move forward with confidence on a regular basis into uncharted territory. In today’s rapidly changing environment, that is the only formula any company can adopt to achieve long-term viability and success. It’s up to you to make it happen.

Marty Zwilling

*** First published on Inc.com on 07/01/2017 ***

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Wednesday, July 12, 2017

Great Businesses Focus On Solutions, Not Technologies

solution-not-technologyEven though I love technology, I always cringe when an entrepreneur starts an angel investor pitch to me by touting his new technology. They have forgotten that new technologies are perceived by most customers as causing more pain than the problems they eliminate. I chastise these startups to highlight the solution created by the technology, rather than the technology.

I usually get pushback about the success of all the great technology companies, like Intel and Apple. Let me be clear – technology and market-driven need not be mutually exclusive! The best companies find a way to drive the market with a solution based on their technology, rather than push their new technology as the solution for the marketplace.

Yet we all know that many customers delay their adoption of the latest software platform, and avoid new hardware, for a year or two until all the “kinks” are worked out of them. In reality, new technology alone is often assigned a negative value, as startups push out alpha and beta products earlier and earlier in the competitive rush.

Of course, there are always a few early adopters who love change and need to have the latest technology, but early adopters don’t make the market. Here are a few thoughts on a process that will keep you on the right track for the majority of your real customers:

  • Continually get real customer input. Is your product tempered with actual market and customer feedback? Everyone's personal perspectives and interests are different, so the key is starting from market problems, and going from there to technology - not vice versa. One good way to get this input is by providing a customer support forum, which asks for input, and also lets customers help each other.
  • Focus on user pain points. What are the major points of pain experienced by the users of your product or service? Users with no pain who say “nice to have” will not likely endure change for your product. For example, Xerox emphasizes the user multitasking capability for busy offices of their new printer family, rather than the new technologies.
  • Keep it simple and easy to use. Are the user problems being solved in the simplest possible way, with the fewest possible features, or have many features been thrown in, just because the technology can deliver them? Users want to know how your new digital printing workflow software helps you automate everyday operations, not how many features it has.

The easiest way to start this process is by starting from the market drivers and working forwards, not backwards. Don’t make the mistake of looking at market needs or requests as an afterthought to verify what's already been planned or built.

Companies that are market-driven are externally focused: they identify opportunities and then capitalize on them. Technology-driven companies are internally focused: they identify what is possible with the technology and then look for customers who might like the results.

Market-driven also means knowing the overall dynamics and forces in the marketplace and understanding how those forces might impact the business – marketing and sales driven. A technology-driven business is driven by engineers. A great company finds a balance between these two forces, but makes the business side the driver.

In fact, technology is neither intrinsically good nor intrinsically bad. We all know that very few customers will buy technology, simply for the sake of technology. Technology tools and platforms are hard to sell, because the people who love and understand them are not usually the decision makers, or the budget owners.

But how do you manage “disruptive” technologies, where people don't even know they have a need? Many entrepreneurs are convinced that they have the greatest invention ever, and others will believe when they see it. Investors know better, since dramatic changes in technology historically take a long time and lots of money go gain a foothold – with a few rare exceptions.

If you are looking for external investors, my advice is to take a hard look at your business plan and investor presentation. If they highlight your technology first, you will likely be tagged as a solution looking for a problem. Start by quantifying a customer problem, and show how you are using technology innovatively to solve this problem. That’s market-driven technology providing solutions, and every investor and customer will want a piece of that action.

Marty Zwilling

*** Published by Xerox Small Business Solutions on 07/06/2017 ***

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Monday, July 10, 2017

10 Unconventional Management Techniques That Work

sir-richard-branson-executiveI’ve been a manager in business for many years, and like most of you, I’ve also had my share of bad managers, as well as a few good ones. As a result, I’m certainly convinced that engaging, retaining, and developing people for maximum performance is one of the toughest jobs you will ever have. I’m also convinced that the conventional wisdom for best practices isn’t always right.

I was pleased to find a new book on this topic, “Managing to Make a Difference,” by Larry Sternberg and Kim Turnage, which manages to highlight some of the more pragmatic but unconventional insights on how to get better results, and still grow the respect of your team. Here are ten tips which may surprise many of you, but I have found to be real difference makers:

  1. Go ahead, get close to the people you manage. New managers are generally taught not to build personal relationships with direct reports – in case you have to discipline them later. I believe that a relationship makes it more likely they will trust your guidance, including corrective behavior, before anyone needs to resort to disciplinary action.

  2. Don’t get involved in mediating relationship conflicts. In my experience, this is definitely an area where “no good deed goes unpunished.” Managers often get sucked into relationship conflicts by trying to “manage” employees, instead of encouraging direct communication. Focusing on problems only magnifies negativity in your organization.

  3. Tolerate undesirable behaviors if results are solid. If a person is a top performer, but always late to meetings, or takes extra time off, it’s not smart to come down hard on annoying behaviors. This may be seen as favoritism, but I believe earned favoritism based on superior performance will be seen by others as a good thing and emulated.

  4. Kick butt to motivate a sense of urgency. In these days of feel-good incentives and only positive feedback, there are still times to let people know strongly that their work approach is unacceptable. Kicking butt cannot and will not increase people’s ability to perform better, but it can be very effective when they are not giving their best effort.

  5. Solicit volunteers for unpopular tasks. Most managers assume that unpopular tasks have to be dictated or rotated. In reality, the volunteer approach can be more effective, since you might be surprised by an unknown interest, or the appeal of a benefit, such as doing the task from home. Volunteers will always be more engaged and more committed.

  6. Invest more of your time with top performers. Personnel people talk primarily about spending time with and coaching poor performers. Yet top performers are the most responsive to coaching, and can leverage your help much more effectively. It’s also the only way to key your best performers challenged, or from being recruited away.

  7. Consider firing someone as the most caring thing to do. In the vast majority of cases, when an employee is not succeeding, he or she knows it long before you do. Extending their time in that situation is not compassionate, diminishes self-esteem, and the stress often causes health problems. Let them go to find a better fit, with real job satisfaction.

  8. Don’t chase hearsay, rumors, or gossip. When someone gives you third-party information, it is almost always incomplete, out of context, or biased. Any attempts by you to “verify” this information, takes valuable time, with results equally unreliable. Even worse, people follow your example, causing greater damage to productivity and morale.

  9. Take action on legacy employees. Contrary to popular belief, doing nothing is not the easy way out. Be thoughtful and compassionate, but deal with the challenge head-on. Carrying them, or allowing them to continue with no change until retirement, kills your credibility, as well as the productivity of the entire team. Taking no action hurts everyone.

  10. Focus on hiring people who can replace you. I have always sought to hire people I can learn from, rather than time training. It is easier to move up in your career when you have members on your team who can smoothly transition into your role. In addition, that kind of reputation tends to attract additional high-performing people to your organization.

I find that too many managers get so focused on business goals, and their own personal agenda, that they lose sight of the individual needs of their employees. Managers you remember and respect, even if their approach is unconventional, are the few who focus on making a difference in the lives of the people they manage. That’s a win-win opportunity that we should all strive for.

Marty Zwilling

*** First published on Inc.com on 06/19/2017 ***

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Sunday, July 9, 2017

The Business Model Canvas Can Get Your Startup Funded

business-model-canvasNew entrepreneurs are always looking for a shortcut in getting their venture story and plan across to investors, and closing on the funding they need. An effective tool I see used more and more, as a prelude to a more detailed business plan, is the Business Model Canvas, first introduced by Alexander Osterwalder back in 2008. It forces you to bridge the gap between idea and execution.

The canvas is a visual chart with elements describing your value proposition, structure, finances, and customers, to help companies identify and align business activities. Now I see in a new book, “Business Models for Teams,” by Tim Clark and Bruce Hazen, an extension of this process to down inside the venture, for teams and individuals. It shows you how everyone works in synergy.

In my experience as a new business advisor, a business is nothing until people are aligned and work in sync. As an active angel investor, I look for this level of alignment and understanding in every funding presentation I hear. I look for evidence of the nine major elements of the model canvas, as paraphrased here from the author’s key points and how they apply to teams:

  1. Customer segments. A business without well-defined customers is never fundable. Valid customer segments must be quantified for every opportunity. Many businesses these days serve both paying and non-paying customers, such as Google and Facebook, who count on millions of non-paying users to attract advertisers, who really pay the bill.

  2. Value propositions. Think of value propositions as bundles of services or products that create benefits (value) for customers. The ability to deliver better value is the main reason why customers select one competitor over another. Value should always include not only functions, but also social, environmental, and emotional benefits as well.

  3. Revenue. Every business needs revenue to provide investor returns and offset costs. “Free” is not an attractive revenue model to investors. Popular revenue models today include recurring subscription charges, licensing, as well the traditional sale or lease model. Every team needs to understand how their activities relate to customer revenue.

  4. Costs. Every entrepreneur needs to know and communicate the total costs associated with their solution or product, including cost of goods sold, customer acquisition costs, capital costs, operational expenses, and partner costs. Every team and every individual should know their own cost contributions required to complete their activities.

  5. Key resources. Investors are looking for the sum of all assets that are truly essential for creating, communicating, selling, and delivering your value proposition. These normally include people, tangible property, intellectual property, and cash flow requirements. Secondary assets, such as desks and computers, can be ignored at the funding stage.

  6. Channels. Channels have to be identified through which a startup creates awareness, induces evaluation, enables purchase, and executes the delivery of the value proposition. Every team and every individual needs to know how they relate to, or are responsible for, specific customer relationships. Investors will demand clear channel definitions.

  7. Customer relationships. Today, businesses are all about customer relationships, not just transactions. Thus investors expect to hear about strategies and technologies that your company plans to use to manage all customer interactions, with the goals of attracting new customers, improving customer retention, and driving sales growth.

  8. Key activities. These are the important things the business must do to make a specific business model work, specifically creating, communicating, selling, and delivering value propositions. Then there is the follow-up to provide customer support and satisfaction. Entrepreneurs who can’t communicate specific activities are not ready for funding.

  9. Key partners. No startup or entrepreneur is an island. It takes partners to make a business work, normally including suppliers, marketing, channel, and distribution partners, as well as funding partners. Every partner has their own set of activities and required resources. Every startup looking for investment needs a solid partner story.

Beyond the investment, a major challenge that every entrepreneur faces is getting teams and every individual on the team aligned and committed to the overall strategy and plan. That step, commonly called the we-to-me translation, is another value of the business model canvas and its extensions. There are no shortcuts to funding, but it pays to use the tools that work. Try this one.

Marty Zwilling

*** First published on Huffington Post on 07/08/2017 ***

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Saturday, July 8, 2017

7 Leadership Principles To Get You From Smart To Wise

from-smart-to-wiseMost of the entrepreneurs I have met are smart, but many are not always wise. That means they may show great insights into a new technology that has marginal business value, their passion may motivate team members more than customers, or they may allow themselves to be pulled over the ethical line in their success drive. Wise leaders are authentic, timeless, and enduring.

Of course, experience is the ultimate teacher of the differences between smart and wise. But none of us can afford to make that many mistakes, so it helps to understand the basic principles that are key to making wise, as well as smart, decisions. In their classic book on the subject, “From Smart to Wise,” Prasad Kaipa and Navi Radjou offer some great observations, based on their years of research and consulting experience with hundreds of leaders.

I’ve summarized their basic principles here, in the context of early-stage entrepreneurs and startups, in the hope of providing a head start, and fewer mistakes to recover from, for every entrepreneur:

  1. Broaden your perspective for your passion, to the greater good. Perspective is what defines us, and shapes our thoughts and actions. For technologists it drives the passion to take new ideas to new realities. Wise leaders tend to connect their worldview and ideas, to help everyone find a larger meaning in life. Steve Jobs espoused this principle.

  2. Act authentically and appropriately as your perspective changes. Wise entrepreneurs are sensitive to the context they operate in and fine-tune their actions accordingly, while continuing to serve their higher purpose. They never forget their moral compass, and maintain credibility by always bridging the saying-versus-doing gap.

  3. Learn to perform any role well, without forgetting who you really are. We all know a smart entrepreneur who wouldn’t give up the CEO role, and lost the company. Wise leaders give up an existing role when it is time. They willingly act as trustees or servant leaders in whatever actions and roles they accept. Bill Gates seems to fit this model.

  4. Expand horizons to make every decision win-win versus win-lose. Smart leaders tend to make decisions instinctively, based on their own experience, with little attention to the larger context. Wise decisions win in the long run for the broader purpose, as well as problem at hand. Don’t let practical execution or emotions sway strategic deliberations.

  5. Know when to hold and when to fold, with flexible fortitude. Many smart leaders tend to stick with a decision, without any re-alignment to a rapidly changing external context. Wise leaders show courage in following the context, and grace in letting go when appropriate. This flexible fortitude keeps them aligned with the long-term benefit.

  6. Act and lead with enlightened self-interest, to serve others. This world is now too complex for one entrepreneur to have all the resources and products needed to satisfy their customers. That means nurturing partnerships and cooperation with competition, for the greater good. It’s a move from pure self-interest to enlightened self-interest.

  7. Strive to create your own authentic path to wise leadership. First adopt the six leadership elements including perspective, action orientation, role clarity, decision logic, fortitude, and motivation. Then integrate these in your own path to wise leadership, building wise cross-functional teams, wise organizations, and wise communities.

Smart people impress us all with their intellectual power and uncanny ability to achieve their goals. But smartness alone is not always sufficient to keep entrepreneurs out of trouble and sustain their success. Wise entrepreneurs ultimately are the ones that create lasting value for both stakeholders and society.

Evolving from smart to wise requires nothing more than reflecting on the best practices of other wise entrepreneurs and emulating them appropriately in your own personal journey and roles. Now is the time to measure where you are along the path, and build the roadmap for your journey. Have you assessed your leadership style lately against these principles?

Marty Zwilling

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Friday, July 7, 2017

8 Keys To Effective Team Leadership In Startups Today

team-leadership-todayStarting and running a company is a team effort. Yes, it takes a leader (entrepreneur), but you can’t do it alone, without a team. Maybe only you and a co-founder comprise the team at first, to provide key skills, back you up, and test your ideas. As the startup grows, the team has to be able to really push you in making growth decisions, rather than you pulling them along.

The responsibility for leadership rests on you as the founder or CEO, and your leadership style. Many entrepreneurs still fall back to the traditional “control” leadership paradigm, but I don’t see it working so well any more. I agree more with Dr. Roger Schwarz and his classic book, “Smart Leaders, Smarter Teams.” He outlines eight keys to an effective mutual learning approach as follows:

  1. State views and ask genuine questions. When you state your views and ask genuine questions, you are convincingly open and curious. Understand that curiosity doesn’t mean agreement, and all questions are not genuine. Recognize that rhetorical questions seek to make a point or make people do something, not come up with a real answer.

  2. Share all relevant information. All team members need all the right information, before they can make, understand, and implement forward-looking decisions. That means sharing timely information that doesn’t always support your view, or might upset others. You should disclose your feelings, and any limiting factors like privacy or legality.

  3. Use specific examples and agree on what important words mean. If you hear someone on the team using a word or term that you think is unclear to others, ask for a specific example. This usually requires naming real names, rather than “someone,” and asking what you really want to know, without generalizing the question.

  4. Explain reasoning and intent. Teams are hardwired to make meaning out of problems. When you share your reasoning and intent, you reduce the need for others to figure out reasons, or assume something is being withheld. Start every meeting with one or two sentences that explain what you want to talk about and why.

  5. Focus on interests, not positions. Positions represent specific solutions from a given team member, whereas interests are the underlying needs that drive people to their position. You need a decision that meets all key interests, in order to get total commitment to the best solution from the team.

  6. Test assumptions and inferences. Assumptions are conclusions with no information. Inferences are conclusions about things you don’t know based on things you do know. Avoid assumptions, and test every inference by checking it against behavior confirmed by someone else. Untested inferences are among the main reasons a team gets stuck.

  7. Jointly design next steps. When you jointly design next steps, you design them with others instead of for others. It increases the chance that you will get a genuinely workable solution and that the team will be committed to implementing it. Keep in mind that joint design doesn’t mean that you give up your prerogative of making the final decision..

  8. Discuss un-discussable issues. These are topics relevant to a solution that team members won’t address in the team, due to fear or compassion. Examples include disruptive actions of a team member or a boss. Leaders may start the discussion outside, but must address it, with respect, inside the team for mutual learning and resolution.

Where you as the leader may be part of the problem in the mutual learning process, it may be necessary to ask a third party inside the organization, or a consultant from outside the organization to facilitate the transformation, or the resolution of a tough change issue. True leaders know how to move out of the way to let others do what they do best.

The results are improved performance, stronger working relationships, and greater well-being for you, your team, and your company. In the long run, every entrepreneur needs to remember that it’s the team, with their broader range of skills and experience, that builds the leader’s success – and not the other way around. This rarely happens with total control leadership.

Marty Zwilling

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Wednesday, July 5, 2017

10 Controversial Lessons From Serious Entrepreneurs

serious-elon-muskMost people agree that entrepreneurs have to think differently and take risks to have much chance of building a successful business. Yet I have found that serious entrepreneurs usually go way beyond these platitudes in their actions and thinking, and often won’t volunteer their real views, for fear of alienating “regular” people, and being branded a fanatic.

In the classic book “The Entrepreneur Mind,” from serial entrepreneur Kevin D. Johnson, he outlines 100 essential beliefs, insights, and habits of serious entrepreneurs. Most of these are predictable, like think big and create new markets, but I found a few, like the ten below, that will likely raise the hackles of many people outside this lifestyle, and many “wannabe” entrepreneurs.

Yet, based on my own years of experience “in the business”, mentoring many entrepreneurs, and following stalwarts like Elon Musk and Jeff Bezos, even these potentially controversial mindsets ring true to me:

  1. All risk isn’t risky. Entrepreneurs surely understand the high probability of failure, but they don’t necessarily like to gamble. Instead, they take calculated risks, stacking the deck in their favor. They must have enough confidence in themselves, supplemented by expert knowledge, solid relationships, or personal wealth, to see the risk as near zero.

  2. Business comes first, family second. This view isn’t a selfish one, but a recognition by serious entrepreneurs that family well-being is dependent on the success of the business, not the other way around. This is why airlines ask you to put on your oxygen mask first. Should you forego closing a million dollar deal to attend a ball game with your son?

  3. Following your passion is bogus. Look for a good business model first. Your passion may be for a good cause, like curing world hunger, but it may not be a good business. In any young business, you inevitably find things that are not enjoyable, but need to be done, like cold calls or firing unproductive employees. Just doing fun things is a myth.

  4. It’s not about being your own boss. Great entrepreneurs aren’t interested in being bosses at all. People who crave the freedom to do what they want when they want generally make terrible entrepreneurs. In order to be a successful entrepreneur, discipline is a must, and accept your new bosses as investors, partners, and customers.

  5. Fire your worst customers. We have all had customers who take advantage of us, to the detriment of other good customers. The best entrepreneurs are quick to make the tough decisions to bypass bad customers, with proper respect, to minimize frustration, resource drain, and reputation loss. You can’t please everyone all the time.

  6. Ignorance can be bliss. It’s great to be highly familiar with the industry in which you plan to compete, but many times people see too many challenges, and never start. In other cases, entrepreneurs are opening up new business areas, so no one yet knows the challenges. Serious entrepreneurs trust their ability to beat a new path to the opportunity.

  7. You’re in no rush to get an MBA. If you are already an entrepreneur, more education, including an MBA, will only slow you down. Consider it a waste of time. If you plan to become an entrepreneur, and already have business experience or an undergraduate business degree, skip the two-year delay and cost of the MBA.

  8. You are odd, and it’s OK. Entrepreneurs, especially those in technology, usually don’t start out as well-rounded, well-adjusted leaders. In fact, being odd is quite the norm. According to other studies, attention-deficit disorder (ADD) is common, as well as host of other personality disorders. It’s actually cool to be a geek in this lifestyle.

  9. A check in hand means nothing. Every entrepreneur remembers their na├»ve days when that first customer check bounced. When you receive a new purchase order, a check, a verbal agreement, or even a written agreement, don’t get too happy and excited. Save the celebration until you have cold cash in hand, or the funds are verified.

  10. There’s no such thing as a cold call. If you are an elite entrepreneur, you don’t go into anything cold. With the Internet and a plethora of other resources, you can warm up any call quickly, and not waste your time or theirs. Doing your homework first is one of the best ways to get an advantage over your competition.

If you think Johnson is on the right track, see his book for 90 more challenging insights. Even if you disagree with some of these, try to open your mind to the value of the seemingly backward way of thinking required to be a great entrepreneur – others seek refuge, they take risks; others want a job, they want to create jobs; others follow the market, while they define the market.

Have you caught the entrepreneur bug yet? If so, prepare for a lifetime commitment, and learn from the elite. There is no turning back.

Marty Zwilling

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Monday, July 3, 2017

12 Types Of Conversations Needed To Grow A Business

conversation-businessWhether you are trying to motivate your team, close a deal with a customer, or get funding from an investor, a casual conversation is usually a waste of your valuable time. These result is a founder who is always “too busy,” but never seems to get the business done and the team moving. All real business is conversations focused on creating results.

Shawn Kent Hayashi, in her classic book “Conversations That Get Results and Inspire Collaboration” makes my point very well as she outlines the top twelve types of conversations that relate to working together in business, and provides tips on how to make each of them more effective for all concerned:

  1. Conversation for connection. Connecting with others happens when we slow down our talking enough to be in the present and really listen to one another. Rapport building requires listening, more than talking. Powerful listening causes trust to grow.

  2. Conversation for creating new possibilities. The questions a manager or colleague asks help us to understand a situation better, if we ask good questions and really listen to the answers. Conversations can also be the triggers to professional development.

  3. Conversation for structure. When we know what we want to create, the next step is to devise a plan. We build our plans with the steps as we become aware of them through conversations, with ourselves as well as with others.

  4. Conversation for commitment. For each identified action step, we identify potential candidates and then seek their commitment to produce the result that corresponds to the task. The commitments we make to ourselves are the most fundamental.

  5. Conversation for action. What actions will make your tasks and goals come alive? We’ve all seen people get stuck in a project because they do not know what to do next. They’re not asking themselves or anyone else the right questions, and not listening.

  6. Conversation for accountability. After a conversation for commitment has occurred and the expectations are clear, being accountable for engaging others in what you want to do is a sign of respect. Sometimes people need to be guided into better outcomes.

  7. Conversation for conflict resolution. Many people will avoid conflict in work relationships at all costs, which is nonproductive. Others feel fear when the smell of conflict arises. A few overuse this conversation type. Conflict is normal, so deal with it.

  8. Conversation for breakdown. Anger indicates that something or someone has crossed one of our boundaries, and is a signal to address the issue. Breakdown recognition is vital to moving forward. Asking for what we want might actually clear up the breakdown.

  9. Conversation for withdrawal and disengagement. It is unrealistic to think that all work relationships will be enjoyable or friendly forever. Often it is best to end a tenuous connection, so that we can invest our time in ones that are meaningful and productive.

  10. Conversation for change. Your ability to change the direction of an individual, team, or an investor occurs through conversations. By design, you can change the conversation in the office, at board meetings, and with peers who seem to have gone off track.

  11. Conversation for appreciation. Think of the last time you felt really appreciated at work. Undoubtedly someone showed appreciation of your efforts using language that works for you. Affirming others through conversation builds relationships and momentum.

  12. Conversation for moving on. You have conversations for moving on when leaving a community or transferring or retiring from a company. One day you might reconnect, but for now you have closure, with no expectations of future conversations.

Being successful as an entrepreneur begins in a conversation with ourselves first, and then extends to others, focused on what we are passionate about, and the solutions we are bringing to market. None of these are casual conversations, where you don’t really listen to the response. How committed are you when someone is obviously not listening to your responses?

Marty Zwilling

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Sunday, July 2, 2017

New Buying Habits Are More Important Than Technology

Consumer-buying-habitsMany entrepreneurs think that adapting to the new technologies, like smart phones and Internet commerce, are the key to attracting new customers. In fact, businesses need to adapt even more completely to the changes in the buying and social behavior of consumers. High-technology product startups, without customers, don’t make a business.

Today’s customer buying dynamics are all about “user experience,” according to Brian Solis, in his classic book “What’s the Future of Business?”. This thought leader in new media asserts that every business needs to understand social psychology and rethink their business models, approach, and relationships in order to create unique and memorable experiences for both customers and employees.

Solis outlines the heuristics of social psychology that are key to building positive customer experiences today. These begin with the following Cialdini’s Six Principles of Influence, which consumers use to make decisions, buttressed by results from various social media surveys he references in the book:

  1. Social proof – follow the crowd. During today’s dynamic customer journey, consumers often find themselves at a point of indecision. When uncertain of what to do next, social proof kicks in to see what others are doing, or have done. Survey results show that more than 80% of consumers now receive advice through social networking sites prior to a product purchase.

  2. Authority – the guiding light. Perceived authorities guide decision making, by investing time, resources, and activity in earning a position of influence, leading to a community of loyalists who follow their recommendations. Most consumers now research online product reviews, blogs, YouTube, Twitter, and Facebook, for authoritative guidance.

  3. Scarcity – less is more. Greater value is assigned to the resources that are, or are perceived to be, less available. Driven by the fear of loss or the stature of self-expression, consumers are driven by the ability to participate as members in exclusive deals. 3 out of 4 people like getting exclusive offers that they can redeem via Facebook or other sites.

  4. Liking – builds bonds and trust. There is one old saying in business that is still very true in this age of social media: People do business with people they like. We all have a natural inclination to emulate those we like and admire. Almost 50% of shoppers surveyed admitted to making at least one purchase based on a social media friend recommendation.

  5. Consistency. When faced with uncertainty, consumers tend not to take risks. Rather, they prefer to stay consistent with beliefs or past behavior. When these do not line up in the decision-making cycle, consumers feel true psychological discomfort. The result is that over 60% of online shoppers are brand loyal due to other online satisfaction data.

  6. Reciprocity – pay it forward. Perhaps the greatest asset in social capital is that of benevolence. We have an innate desire to repay favors in order to maintain social fairness, whether those favors were invited or not. Every month, over 25 billion pieces of content are shared on Facebook alone, with a major portion oriented toward reciprocity.

Social psychology in general deals with how individuals relate to one another. In today’s social networks, the social economy is defined by how people earn and spend social capital. Based on the commerce of actions, words, and intentions (or actions, reactions, and transaction), people build their own standing. Startups earn relationships and resulting stature the same way.

Another aspect of the social psychology of consumer buying today is the four stages where customers take actions that move them toward you or away from your startup. These are sometimes called the four moments of truth:

  • Zero Moment of Truth. The few moments before people buy, where impressions are formed and the path to purchase begins. It is that moment when consumers grab their laptop or mobile phone, and start learning about a product or service.
  • First Moment of Truth. This is what people think when they see your product and it’s the impressions they form when they read the words describing your product.
  • Second Moment of Truth. It’s what people feel, think, see, hear, touch, smell, and (sometimes) taste as they experience your product over time. It’s also how your company supports them in their efforts throughout the relationship.
  • Ultimate Moment of Truth. It’s that shared moment at every step of the experience that becomes the next person’s Zero Moment of Truth. This one is required to generating word of mouth, advocacy, and influence.

So for all you technologists, who routinely focus their resources on a great product (“if we build it, they will come”), it’s time to balance the business success equation. Learning how to craft and nurture great customer experiences around your product is critical. The future of your business these days depends on it.

Marty Zwilling

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Saturday, July 1, 2017

10 Strategies To Cover New Product Development Costs

woman-lab-assistantThe “valley of death” is a common term in the startup world, referring to the difficulty of covering the negative cash flow in the early stages of a startup, before their new product or service is bringing in revenue from real customers. I often get asked about the real alternatives to bridge this valley, and there are some good ones I will outline here.

According to my experience and a classic Gompers and Lerner study, the challenge is very real, with a majority of new ventures that don't attract investors failing within the first three years. The problem is that professional investors (angels and venture capitalists) want a proven business model before they invest, ready to scale, rather than the more risky research and development efforts.

My first advice for new entrepreneurs is to pick a domain that doesn’t have the sky-high up-front development costs, like online web sites and smart phone apps. Leave the world of new computer chips and new drugs to the big companies, and people with deep pockets. For the rest of us, the following suggestions will help you survive the valley of death:

  1. Accumulate some resources before you start. It always reduces risk to plan your business first. That includes estimating the money required to get to the revenue stage, and saving money to cover costs before you jump off the cliff. Self-funding or bootstrapping is still the most common and safest approach for startups

  2. Keep your day job until revenue starts to flow. A common alternative is to work on your startup on nights and weekends, surviving the valley of death via another job, or the support of a working spouse. Of course, we all realize that this approach will take longer, and could jeopardize both roles if not managed effectively. Set expectations accordingly.

  3. Solicit funds from friends and family. After bootstrapping, friends and family are the most common funding sources for early-stage startups. As a rule of thumb, it is a required step anyway, since outside investors will not normally consider providing any funding until they see “skin in the game” from inside.

  4. Use crowd funding. The hottest new way of funding startups is to use online sites, like Kickstarter, to request donations, pre-order, get a reward, or even give equity. If your offering is exciting enough, you may get millions in small amounts from other people on the Internet to help you fly high over the valley of death.

  5. Apply for contests and business grants. This source is a major focus these days, due to government initiatives to incent research and development on alternative energy and other technologies. The positives are that you give up no equity, and these apply to the early startup stages, but they do take time and much effort to win.

  6. Get a loan or line-of-credit. This is only a viable alternative if you have personal assets or a home you are willing to commit as collateral to back the loan or credit card. In general, banks won’t give you a loan until the business is cash-flow positive, no matter what the future potential. Nevertheless, it’s an option that doesn’t cost you equity.

  7. Join a startup incubator. A startup incubator is a company, university, or other organization which provides resources for equity to nurture young companies, helping them to survive and grow during the startup period when they are most vulnerable. These resources often include a cash investment, as well as office space, and consulting.

  8. Barter your services for their services. Bartering technically means exchanging goods or services as a substitute for money. An example would be getting free office space by agreeing to be the property manager for the owner. Exchanging your services for services is possible with legal counsel, accountants, engineers, and even sales people.

  9. Joint venture with distributor or beneficiary. A related or strategically interested company may see the value of your product as complementary to theirs, and be willing to advance funding very early, which can be repaid when you develop your revenue stream later. Consider licensing your product or intellectual property, and “white labeling.”

  10. Commit to a major customer. Find a customer who would benefit greatly from getting your product first, and be willing to advance you the cost of development, based on their experience with you in the past. The advantage to the customer is that he will have enough control to make sure it meets his requirements, and will get dedicated support.

The good news is that the cost for new startups is at an all-time low. In the early days (20 years ago), most new e-commerce sites cost a million dollars to set up. Now the price is closer to $100, if you are willing to do the work yourself. Software apps that once required a 10-person team can now be done with the Lean Development methodology by two people in a couple of months.

The bad news is that the valley’s depth before real revenue, considering the high costs of marketing, manufacturing, and sales, can still add up to $500K, on up to $1 million or more, before you will be attractive to angel investors or venture capital.

In reality, the financing valley of death tests the commitment, determination, and problem solving ability of every entrepreneur. It’s the time when you create tremendous value out of nothing. It’s what separates the true entrepreneurs from the wannabes. Yet, in many ways, this starting period is the most satisfying time you will ever have as an entrepreneur. Are you ready to start?

Marty Zwilling

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