Wednesday, July 17, 2019

Use Key Strategic Elements To Avoid Business Plateaus

Business-growth-plateauOne of the biggest challenges I find for new business owners is for them to move from working in the business to working on the business. You are so engaged in building and selling your product or service, that you “don’t have time” to focus on strategy and the next round of changes for the business to survive and grow. The result is a business plateau that hits you like a ton of bricks.

As a business advisor, when I bring this up, at best I will hear the defense that you are focused on the strategy of the moment, such as such as how to increase sales, or reach a new market. I have to admit that I have struggled with this myself many times, trying to understand all the dimensions of strategy, which has always seemed like an amorphous and overwhelming subject.

I was happy to see some good guidance on this subject in a new book, “Outsizing: Strategies to Grow Your Business, Profits, and Potential,” by Steve Coughran, who is a thought leader and consultant in this area. He outlines six dimensions of a winning business strategy, with some practical, research-based steps that I like, to focus on in achieving extraordinary results:

  1. Above all, deliver an exceptional total customer experience. The most successful companies today build a strategy to proactively anticipate the needs of their customers, as a group and individually, and totally delight them with all aspects of the shopping experience, value, delivery, and help with any follow-on questions or problems.

    For example, Apple has been a master at this, developing products like the iPod and iPhone before customers even knew they needed them, creating Apple stores with a whole new shopping and support experience, and intuitive usage needing no manuals.

  2. Highlight your competitive value, not your technology. This may sound obvious, but I still see too many companies with a strategy of highlighting technology improvements and features, rather than their value compared to competitors. This requires constant study of what your customers value, what competitors offer, and your target market.

    Converting customer-centric advantages into business value requires a deep understanding of all the financial elements of your business, as well as customer drivers. It starts with continually optimizing your business model, using analytics on all the data, and creating and using metrics to measure your performance and progress to date.

  3. Seek out and capitalize on emerging opportunities. We all wish we could “see around corners,” and are envious of people like Steve Jobs and Elon Musk, who seem to have this ability. With a little hard work at projecting market and technology turns, as well as the courage to make bold decisions, any of us can move further in this direction.

    For example, it doesn’t take a genius to see opportunities today due to the massive changes in healthcare, environmental concerns, social changes around the world, and the new generations of consumers. But it does take effort to weave these into a strategy.

  4. Unleash the potential of your team and talent. Strong leaders continually work on a strategy of hiring, developing, and retaining the best and the brightest. Too many business owners I know push these efforts to the bottom of their priority list, in favor of the operational crisis of the moment, or until they feel gaping holes in their team.

    Most successful CEOs now recognize motivated teams and a strong culture as one of the greatest sources of competitive advantage and long-term growth. A strategy of empowering people will produce near-term as well as lasting results for your business.

  5. Turn value creation (revenue) into value capture (profit). Strategy is more than hashing out mission, vision, and value statements. It’s making sure that these statements are financially grounded with specifics to assure an adequate return on investment for all constituents. Focus on user counts, or revenue alone, won’t make a long-term business.

    Smart growth and value capture strategies usually include selling more to existing customers and your current market, and selling current products in a new market. before developing new products or carving out a new and untested space for your business.

  6. Internalize the strategy process keyed to the bottom line. Strategy can’t be a one-time effort. Customers and the market don’t stand still, so your strategy can’t either. Efficiency is achieved through consistency and innovation, based on the bottom line results of your business. Establish a strategic cycle of initiatives, actions, and results.

With each of these dimensions, you can see that strategy is actually about working on the business, as well as in it. It’s hard work, and requires that you learn from your mistakes. Yet I’m convinced that we are operating at an exciting time, standing on the edge of new and exciting opportunities. Success won’t come from a random walk – build a strategy now for your future.

Marty Zwilling

*** First published on Inc.com on 07/03/2019 ***

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Monday, July 15, 2019

10 Ways Your Startup Co-Founder Is Like A Good Spouse

Sergey-Brin-Larry-Page-Eric-SchmidtAs 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 long-time 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.
  1. 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.
  1. 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.
  1. 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.
  1. 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.
  1. 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.
  1. 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.
  1. 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.
  1. 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.
  1. 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

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Sunday, July 14, 2019

10 Innovation Myths For New Venture Founders To Avoid

innovation-mythsMost 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 their innovation into reality, but I can’t find much deep 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 the execution side.

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.
  1. 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.
  1. 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.
  1. 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.
  1. 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.
  1. 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.
  1. 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.
  1. 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.
  1. 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.
  1. 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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Saturday, July 13, 2019

9 Elements Of Every New Venture That Investors Expect

Business-model-canvas-prepNew 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 an excellent 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.
  1. 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.
  1. 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.
  1. 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.
  1. 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.
  1. 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.
  1. 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.
  1. 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.
  1. 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

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Friday, July 12, 2019

7 Wise Leadership Strategies When Smart is Not Enough

Bill-Gates-wise-lookMost 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.
  1. 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.
  1. 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.
  1. 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.
  1. 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.
  1. 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.
  1. 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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Wednesday, July 10, 2019

8 Ways To Learn From Your Team And Succeed Together

succeed-with-your-teamStarting 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.
  1. 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.
  1. 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.
  1. 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.
  1. 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.
  1. 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.
  1. 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..
  1. 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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Monday, July 8, 2019

10 Challenging Insights From New Venture Innovators

Insights-from-entrepreneursMost 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.
  1. 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?
  1. 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.
  1. 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.

  1. 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.
  1. 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.
  1. 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.
  1. 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.
  1. 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.
  1. 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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