Wednesday, January 16, 2019

Creating the Next Big Startup Takes More Than Passion

next-big-thingEvery aspiring entrepreneur I know is convinced that his or her idea could be the next big startup, blossoming into a billion dollar unicorn. Yet I find that only a few are able to put their passion aside for a moment, and compare their solution to the attributes that really attract a large market of new customers. Investors, on the other hand, make it their business to look for these attributes.

For example, it’s always smart to start by making your entrance into a hot sector. According to Inc data analysis from industry experts and investors, this coming year offers large opportunities in digital therapeutics and personalized nutrition. Most trend watchers agree that it is time for a revolutionary new category of medicine treatment devices and customized healthcare solutions.

Thus if you need funding to support your efforts, it’s well worth your time to take a hard look at how your offering might fit one of these sectors to appeal today to this new era of customers, as well as investors. In my experience the key attributes in any sector would include the following:

  1. A product or service with depth and a robust set of features. As an investor, I always look for a singular focus to start, but a depth of follow-on that precludes you from being a “one-trick pony.” Customers will remember you and your brand for starting with a point of excellence, but they expect that to broaden as their needs and confidence in you grows.

    Amazon exemplified this approach by first becoming the premier source of books online, and then expanding their scope to having the greatest depth of all e-commerce offerings and features, while still maintaining their lead in online purchasing and delivery services.

  2. Solves a real problem for customers in intelligent new ways. Smart solutions provide benefits that can be quantified, not simply cool or easier to use. Customers don’t want to read instruction manuals these days, or attend a class to learn about features. The best solutions look obvious in retrospect, and you wonder how you ever lived without them.

    For example, the IPhone from Apple, although an integration of complex computer services with telephony and photography, is so easy to use that preschoolers catch on immediately, and most of us can’t imagine surviving without a mobile link to friends.

  3. Provides a complete and memorable customer experience. Customers today are looking for an engaging total customer experience, including shopping, reviews from peers, speed of delivery, and follow-on options, as well as support and service. They expect to be wowed by the product as well as the relationship with you and your team.

    In fact, customer experience can be a greater competitive advantage than your product. Zappos, the popular online shoe store, creates such strong emotional connections with customers through personalized service that people rarely compare their shoe features.

  4. Increase customer confidence and ability to control their life. Both business and consumer customers expect products to empower them to make better decisions, and have more control over their life. If your solution simply reduces the cost of a necessity, or makes things happen faster, it may not be enough to attract a dedicated following.

    In the healthcare arena, as mentioned earlier, people now are looking for new offerings that can be customized per their own unique needs and desires, to extend their lives and maintain healthy lifestyles. More diagnostic tools to fix problems may not be competitive.

  5. Satisfy a “higher purpose” as well as a current need. Customers these days seek out companies that are socially and environmentally conscious, as well as responsive to customer needs. This should be something that matches your values, and can benefit from your strengths, to increase engagement and energy for all stakeholders.

    Chipotle is an example of a company that has capitalized on the benefits of supporting a higher purpose, enhancing their fast food brand reputation at the same time. Their focus on healthy foods and sustainable agriculture motivates employees and customers alike.

In summary, the best product or service is a deep-featured one that innovatively meets customer needs, comes with a great total customer experience, puts customers in the driver’s seat, and has a positive societal impact. Then just build a solid plan, find a great team to implement, and execute well to build the next big startup, have fun, and leave a great legacy.

Marty Zwilling

*** First published on Inc.com on 01-02-2019 ***

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Monday, January 14, 2019

6 Leadership Insights To Inspire New Venture Founders

business-inspired-leadershipStarting and building a company is all about leadership – formulating an idea, building a unique plan based on vision and experience, and forging a path over and through all obstacles. Yet the image of leadership in business is at an all-time low, according to national leadership experts, considering the political debacles, record business bankruptcies, and executive fraud cases.

If the country is to recover financially and politically, new leaders will have to emerge to fill the leadership deficit – new leaders who understand that leadership is a privilege, not an entitlement, according to executive coach Michael Schutzler in his classic book “Inspiring Excellence – A Path to Exceptional Leadership.

Entrepreneurs are well positioned to become the new leaders, because they perceive problems as opportunities, and have the mental mindset to innovate and execute. They have the required passion, perseverance, and work ethic. What they don’t have by default are the skills required, or the relationships. These don’t come automatically with the CEO title.

Schutzler’s view of leadership is different than many academics and executive coaches, who feel that leadership is an innate character trait. He urges people to focus on developing a few key relationship skills, and I agree. Here are some key conclusions:

  1. See leadership is a learned behavior, not a character trait. Good judgment, for example, is certainly a hallmark of exceptional leadership, but it isn’t something you are born with. “More than anything, good judgment comes from listening,” he says. It also comes from paying very close attention to every situation, and learning from it.

  2. Listening is the most important skill for a leader. We need to pay attention to the words and actions of others while suspending judgment long enough to allow your intellect to catch up with your instincts. Why? Because as leaders, if we speak too soon, we shut off creation. We shut off contribution. We force the adoption of our ideas.

  3. Communicating and storytelling. This is not a skill everyone is born with, but it’s a skill we can all develop. People on your team want to believe! They want to believe you know where we are going, or you will get us there even if you aren’t sure of the exact path at this moment. They want stories that compare what they are doing with others.

  4. Acknowledging contribution. This is necessary to sustain motivation during the hard times. It’s not hard to do and doesn’t require a lot of effort or expensive gifts. A thank-you note or peer recognition is enough most of the time.

  5. Negotiation is a practical skill for every leader. Negotiation is often misunderstood to be the domain of clever deal makers. It’s actually really simple. Make very clear requests for a promise. Understand exactly what the promise is - what is being done, when, and what the standard of excellence is, and then check up on the status to make it happen.

  6. Inspire others rather than focus on personal ambition. He believes that we need leaders who use power as a tool for inspiring others to create a better future, not as a tool for retaining their position or perks.

The middle four points are the essential skills for great leadership, inspiring excellence, and building a successful business. They are easily practiced, and serve as the foundation for successfully attracting talent, reaching consensus, making tough choices, and harnessing ambition.

In this fashion the general leadership deficit is really an “opportunity” for new aspiring entrepreneurs in business. So practice the leadership skills needed, and step in when you are ready. Now is your golden opportunity – let’s see how many of you are up to the challenge. We need you all.

Marty Zwilling

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Sunday, January 13, 2019

Your Passion Can Breed Biases That Kill New Ventures

icarus-qualities-businessI’m sure we have all seen entrepreneurs with high levels of passion and confidence touting an idea that seems to make very little sense to us. Of course, we never see ourselves in this mode, yet we need to recognize that all humans see reality differently through a built-in set of “cognitive biases,” based on their own unique background of experiences, training, and mental state.

These biases are good, in that they allow us to quickly filter and make decisions in the constant barrage of information we face each day, but bad because they often lead to errors in reasoning and emotional choices. The worst case is called the “passion trap,” where a pattern of beliefs, choices, and behaviors feels good and becomes self-reinforcing, but leads to disaster.

John Bradberry, in his classic book “6 Secrets to Startup Success,” identifies five key biases that sabotage many passionate entrepreneurs in their startup decision making. I challenge any entrepreneur to honestly tell me they have never fallen victim to any of these in making startup decisions:

  1. Confirmation bias. This refers to the human tendency to select and interpret available information in a way that confirms pre-existing hopes and beliefs. The antidote is to look for dissenting views that seem to form a pattern of concern. Then what you perceive as isolated exceptions, might indeed appear as a clear majority.

  2. Representativeness (belief in the law of small numbers). Many entrepreneurs tend to settle on conclusions they like, based on only a small number of observations or a few pieces of data. The new founder who hears positive reviews from three out of four friends may assume that 75 percent of the general population will react similarly.

  3. Overconfidence or illusion of control. Overconfidence leads founders to treat their assumptions as facts and see less uncertainty and risk than actually exists. The illusion of control causes startup founders to overrate their abilities and skills in controlling future events and outcomes. Both result is “rose-colored” plans, rather than realistic ones.

  4. Anchoring. This refers to our mind’s tendency to give excessive weight to the first information we receive about a topic or the first idea we think of. It encourages founders to cling to an original idea or, if pressed, to consider only slight deviations from the idea instead of more radical alternatives. The ability to pivot sharply and timely is at risk here.

  5. Escalation of commitment (“sunk cost” fallacy). Startup founders often refuse to abandon a losing strategy in an attempt to preserve whatever value has been created up to that point. They feel that they have put so much money, time, and energy into an idea or plan, that it must be the idea. Investing more into a bad idea doesn’t make it good.

Optimism, for example, is a typical entrepreneurial trait that improves performance, but only up to a point. In fact, according to a recent article, too much optimism (optimism bias) is responsible for many failures in business. There are a number of similar entrepreneurial characteristics that are recognized as good, but can be amplified to unhealthy levels, resulting in passion traps, or so-called “Icarus qualities.”

Every entrepreneur needs to be on the lookout for early warning signs of biases and passion traps that signal that you are in danger of undercutting your odds of startup success. Obvious ones are founders who are thinking or saying, “This is a sure thing,” or executives losing patience with advisors who point out risks or shortcomings in your plan.

In my experience, a great startup is more about great execution, rather than a great idea. It’s about converting your passion into economic value. To counter-balance the biases in your passion, the best approach is to look beyond your own mind and actively listen to your customers, your advisors and your team. When was the last time you really listened?

Marty Zwilling

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Saturday, January 12, 2019

The Average Startup Overnight Success Takes Six Years

overnight-successEvery startup founder knows implicitly that startup success is a long hard road. Yet we always dream that we are the exception to the rule. So once in a while it’s good to look at some facts to temper our imagination.

I was reading an old article written by marketing guru Seth Godin a while back where he mentions that “it takes about six years of hard work to become an overnight success”. Based on a small sample of household names from Bill Gates to Mark Zuckerberg, he is an optimist. Here is some data from Wikipedia:

  • Microsoft – Bill Gates founded Microsoft in 1975, to develop and sell BASIC interpreters for the Altair 8800. Six years later, he managed to land a contract with IBM to provide their IBM PC base operating system. Even still, it was another five years before Microsoft went public in 1986, making him an overnight success worth $350 million.
  • Apple - It took Steve Jobs two decades to become an overnight dot-com billionaire. Established in Cupertino, California in 1976, Apple really didn’t get on the map until the advent of the Macintosh in 1984, eight years later. Even then, it struggled through the 80’s and 90’s, until the advent of the iMac and consumer products.
  • Yahoo! - This company was founded by Jerry Yang and David Filo in January 1994. In April, 1996, Yahoo! had its initial public offering, raising $33.8 million, by selling 2.6 million shares at $13 each. Amazon.com and Yahoo! are the benchmarks in the industry for overnight success, but still required two to three years to really get going.
  • Google - Larry Page and Sergey Brin started working on Google in 1996 – but three years later in 1999, few people had even heard of it yet. But add another five years, and Google had made it, going public in 2004 with a market capitalization of $23B.
  • Facebook - Mark Zuckerberg, while attending Harvard as a sophomore, concocted “Facemash” in 2003 to get a lost girlfriend off his mind. He later changed the name to Facebook. In 2005, Facebook still showed a yearly net loss of $3.63 million. But within five years it became an overnight success, and now has nearly 2 billion users worldwide.
  • Amazon.com - Jeff Bezos founded Amazon.com in 1994 and took it public three years later, making him a multibillionaire. Amazon's initial business plan was unusual: the company did not expect a profit for four to five years; the strategy was actually more effective than his business plan predicted. Very rare case.

Take heed. These examples are generally recognized as the fastest growing companies in recent times, so your odds of matching their speed are not good. Investors will always look askance these days at a business plan which projects Amazon.com results.

With most businesses you rarely hear about the months and years of hard work behind the scenes. You rarely hear about the major catastrophes followed by major miracles that brought the businesses back from the brink. You rarely hear about the owners who took out second mortgages to make payroll or to hire a salesperson.

If you don’t have realistic expectations, you can quickly get into the wrong state of mind. You’ll be thinking that to be a success your business has to make you a billionaire in three years. Then you’ll give up way too soon.

This notion of overnight success is an urban legend, and very misleading. If you're starting something new, expect a long and challenging journey. But that's no excuse to move slowly. Many entrepreneurs think they are running, but find themselves falling farther and farther behind a rapidly moving target. Time passes quickly in this mode.

Marty Zwilling

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Friday, January 11, 2019

Your New Venture IP Portfolio Sets Investment Value

intellectual-property-portfolioA large portion of your competitive advantage and your potential value to investors is the size of your intellectual property portfolio. When someone says Intellectual Property (IP), most entrepreneurs think only of patents. In reality, patents are only one of at least eight items that should be in your IP portfolio. You need all these before you start looking for funding.

Some of the other items may cost a lot less, and may be worth far more in the long run. Here are the key elements:

  1. Company name. The company name becomes your intellectual property at the moment you incorporate your startup as an LLC or a Corporation. Sole proprietorships need to trademark the name to protect it. Select it well – marketers will tell you that you will be selling your name, more than your products. Actual incorporation fees in many states are below $100, if you do it yourself. Don’t pick a company name until you are certain that you can get the comparable domain name, so Internet brokers won’t hold you hostage.

  2. Internet domain name. This name (www.domainname.com) is just as critical as the company name, and the two should match as nearly as possible. Significant differences will confuse your customers, and open the door to imitators and scam artists. Internet domain names can be acquired from most hosting providers or Network Solutions, for as little as $10/year each.

  3. Social media accounts. Immediately go to relevant social media sites and grab the same name, even if you never plan to use the accounts. Many companies like Sears, Coca-Cola, and Twitter have already been hurt by people using company names they don’t own on social sites. These days, every business needs a blog, so sign up your domain names accounts on TypePad, Wordpress, and Blogger, or all of the above, before someone starts blogging in your name.

  4. Patents. Remember that ideas cannot be patented, only novel implementations. But the application or provisional application has to be registered before you disclose the details to investors or consumers, or the implementation will be deemed un-patentable. Attorney fees start at around $5K, but provisional patents can be filed yourself for about $300.

  5. Trademarks. A trademark is a name, phrase or logo that tells the consumer the origin of the goods and distinguishes your goods from those of your competitor. Trademarks require a federal trademark registration from the United States Patent and Trademark Office. The cost for a single trademark is less than $300.

  6. Copyrights. No registration and no cost is required to secure a copyright on written, audio, or video material that you create to be attributed to your company. Still, it is recommended that you add the familiar ©Copyright 2017 symbol at the beginning or end of each media and document segment.

  7. Trade secrets with employment agreement. Companies often use non-patentable but important trade secrets to run their business. These trade secrets need to be documented and coupled with an employment agreement, to keep them from migrating to your competitors when employees move on.

  8. Business Plan. Your business plan holds the keys to your kingdom, so you don’t want it in the hands of competitors. If you need early reviews or assistance by people you don’t know well, get them to sign a Non-Disclosure Agreement first. A sample agreement is available for free download from my website.

In cost, all of these elements of intellectual property may be acquired for a few hundred dollars (or a few thousand with an attorney), if you act early and quickly. Later, good intellectual property can be worth millions when your company valuation is set for investment purposes, or when the company is acquired or sold. In between, you need it to survive.

Marty Zwilling

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Wednesday, January 9, 2019

10 Ways To Build Trust And Loyalty In Your Business

TrustBusiness trust seems to be in short supply these days. Perhaps it’s because we are reminded daily of scams on the Internet that result from unscrupulous businesses and people. Yet if you run a business, you know things won’t get done, and most customers won’t buy, unless they trust you. Thus, it’s critical to your success that you build a culture of trust in you and your business.

It can be done, as proven by the market leaders, including Google and Amazon. According to current reports, both your employees and your customers have to feel they know you, and you know them, before levels of trust can accrue. In other words, it’s all about perceived relationships and actions. In my role as a business advisor and investor, I see this proven over and over again.

Most business leaders intuitively understand this, but many are not so clear on the specific actions and programs they need to initiate to build a trust culture in their business, and have it projected outward to potential customers. Thus I offer the following prioritized initiatives from my own experience to get you started:

  1. Make sure everyone knows the business, good and bad. As I said in the beginning, people don’t trust what they don’t know, so make sure you communicate personally to the whole team, and to customers, your companies’ vision, goals, and challenges. Hiding in the corner office, or sharing only good news, does not build a culture of trust and support.

  2. Be the role model for trust and consistency in your actions. The most effective business leaders today build trusting cultures by being visible, competent, and approachable, in the office and in the community. They are clearly in charge, but they don’t hide challenges, and are honest and vulnerable when dealing with all constituents.

  3. Commit to a “higher purpose” that everyone can relate too. Find a social or environmental issue where you, your team, and your customers can make an impact as part of your business. Keys to this would be something that matches your values, and could benefit from your strengths. Make sure your team and your customers have a role.

  4. Set high but rational team expectations, and follow through. People respond best when they know what needs to be done, and feel challenged, but not broken, by delivery expectations. Follow-through means paying attention to who is contributing, and fixing problems in a timely fashion when expectations are not being met.

  5. Build real relationships with employees and customers. For employees, showing empathy and respect for their ideas and challenges is key. For customers that you encounter, it means listening to their needs, and being supportive of special needs and situations, exceeding their expectations, and showing appreciation for their business.

  6. Empower teams to build their own work processes. Key to any trust culture is a feeling of control of your own destiny. That means providing the tools and resources to do the job, without defining and micro-managing the exact process. Your role is to provide mentoring and support as required. It also means listening and following-up on feedback.

  7. Recognize and reward individual key contributions. The most effective individual recognition is timely positive feedback from you to them, in front of their peers, for going beyond the call and excellence. Annual bonuses tied to production metrics are nice, but these will not generate the long-term trust and loyalty you need to set the culture.

  8. Provide training and mentoring directed at career growth. Employees need to see career growth and investment in the people around them, and feel all have access to the training and guidance to get the same opportunities. Everyone prefers informal feedback on their own performance daily, rather than be dependent only on a formal annual review.

  9. Focus on the whole employee and customer experience. With employees, the whole experience might include providing access to food and relaxation at work, or the opportunity to work from home. For customers, the buying experience goes well beyond support after the sale, to include product selection, web site layout, and feedback.

  10. Enable employee or customer shared ownership. Several reliable reports indicate that, on average, employee-owned firms perform substantially better, and have a stronger trust culture. The same is true of consumer co-operatives, owned by customers and managed democratically with trust, aimed at fulfilling the needs of their members.

With these initiatives, you too can build a culture of trust with your employees, and with your customers. But be aware - trust is like the stock market. It’s hard work to get it to go up, and it can come down overnight if you make one wrong step. Thus, I recommend that you seek to get it right the first time and keep it there. Very few businesses get a second chance to be trusted.

Marty Zwilling

*** First published on CayenneConsulting on 12/27/2018 ***

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Monday, January 7, 2019

Baby Boomers May Be Your Biggest Startup Competitors

baby-boomers-havenContrary to what you might guess, the highest rate of entrepreneurial growth over the last few years is not Gen-Y upstarts, but Boomers over the age of 50, now called encore entrepreneurs. In fact, according to the latest Index of Startup Activity by the Kauffman Foundation and recent press reports, these Baby Boomers are actually driving a new entrepreneurship boom.

Some people are calling entrepreneurship the ‘new mid-life crisis’ for the 77 million-strong demographic once thought to be over the hill. Partially due to the economy, but also due to longer, healthier lives and changes in job tenure, Boomers are now expected to stay in the labor force longer, and according to a USNews article, will likely dominate the labor market by 2024.

Here are some indicative entrepreneurial facts from recent Kauffman studies and others. These could convince you that the correct icon for an entrepreneur may now have gray hair, rather than the warm glow of youth:

  • The percent of entrepreneurs who are Baby Boomer starting a business since 1996 has grown from 14.3 percent to 24.3 percent last year.
  • In every one of the last 15 years, Boomers between the ages of 55 and 64 have had a higher rate of entrepreneurial growth than Gen-Y, aged 20–34.
  • These trends seem likely to persist. In the Kauffman Foundation Survey of nearly 5,000 companies that began in 2004, nearly two-thirds of the founders are now between the ages of 35 and 54.
  • Additionally, Kauffman research has revealed that the average age of the founders of technology companies in the United States is a surprisingly high 39 - with twice as many over age 50 as under age 25.
  • While people under 30 have historically jumped from job to job, another striking development has been a deep drop in the incidence of ‘lifetime’ jobs among men over age 50.
  • With longer life expectancies and greater health in later life, older generations are moving to start new firms -- and mentor young entrepreneurs. One new incentive is the falling transaction costs and barriers to entry for entrepreneurs of every age.
  • 65 percent of online users aged 50-64 use social media now, and the growth rate continues to increase. Social networking penetration by Boomers has now caught up with the other age groups, reaching about 80% across the board.
  • The immigrant rate of entrepreneurial activity seems to be declining each year (now about .5%), but still remains higher than the native-born rate. Business-startup rates in America increased the most in the Midwest and South.

In addition, the Boomer demographic is also creating a slew of new market opportunities, including improved healthcare facilities, construction of senior-friendly facilities, and technical support for seniors, by seniors. What all of this means is that boomers will have more impact and power in the marketplace for a lot longer than most people expected.

Since entrepreneurship is a key driver of economic growth, this should bode well for America, and for world economic growth as well. In terms of job creation, innovation, and productivity, entrepreneurs drive growth. Many Boomers have the purchasing power and become enthusiastic early adopters who help lead the way. They are becoming the new early adopters.

Of course no one has any idea what the next big thing will be, but more often than not innovation comes from entrepreneurs. If you are one of the Baby Boomers who wants to redefine retirement, now is your chance for real impact. Find an opportunity you understand, follow your passion, and join the entrepreneurial majority.

Marty Zwilling

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