Friday, October 28, 2016

7 Accepted Startup Principles Violated By Steve Jobs

Steve_Jobs_HeadshotSteve Jobs was a one-in-a-million entrepreneur who seemed to violate many conventional rules of starting a business and dealing with people, yet undeniably achieved great success. According to various reasonably credible reports, including his authorized self-titled biography “Steve Jobs,” by Walter Isaacson, he often ignored customer input, berated team members, and misused key business relationships.

As a result, I don’t recommend to aspiring entrepreneurs that they try to emulate his style as a model for their first startup. I don’t proclaim to understand the genius of Steve Jobs, or how his unconventional approach led to success, but I do know some accepted startup principles that he seemed to go out of his way to violate:

  1. Validate your vision with real customers. Steve Jobs once proclaimed, “It's really hard to design products by focus groups. A lot of times, people don't know what they want until you show it to them.” While this approach makes some sense for “paradigm shifts,” most new entrepreneurs can’t survive the high marketing costs, high risk, and long acceptance cycles of big changes. Even Steve Jobs struck out several times with this approach.

  2. Nurture business relationships with key industry players. It is a good thing to have strong convictions, but not so smart to actually feud with potential partners. Steve Jobs battles with Bill Gates are legendary, as well as his breakup with John Scully and others. Most successful entrepreneurs learn from relationships without jeopardizing them.

  3. Establish trust and communication with your team. Jobs was exceptionally hard on key member of his team, starting with Steve Wozniak. He was prone to emotional outbursts which caused team members to “walk on eggshells” around him, and often not share realities. Management by fear is not a recommended style for business success.

  4. Define a solution within the realm of the possible. Bringing innovation and real change to the market does not mean demanding the impossible from your team. Jobs had the reputation of pushing people to “bend reality” through sheer mental force, and it sometimes worked. In my experience, most good teams break and fail under this assault.

  5. Look for startup opportunities within your area of expertise. According to Steve Wozniak and others, Jobs did not understand technology and was not an engineer. Yet somehow he was able to drive great engineers to implement his vision of “insanely great products.” For better odds of success and funding, I recommend you chose a domain where your expertise can help you avoid the impossibilities.

  6. Don’t hold out for perfection on the first iteration. Jobs’ passion for the perfect solution and the perfect product launch seemed to be the key to his long-term success, but caused him to miss release dates, cost targets, and even markets (with NeXT). For the rest of us, I recommend the minimum viable product (MVP) lean startup approach.

  7. Don’t count on multiple failures catapulting you to success. Most entrepreneurs have learned to wear an initial failure like a badge of courage, highlighting what they have learned and destined not to make the same mistake twice. Yet they realize multiple high-visibility failures make it hard to find quality teams, partners, and investors. According to many counts, Steve Jobs suffered at least seven failures, but never lost his credibility, and is still remembered as one of the most successful entrepreneurs of this era.

At the same time, Steve Jobs was a strong advocate of other key startup principles for success, including creating insanely great experiences (not just products), following your heart to do what you love, and thinking differently to produce real innovation. He was also a master marketer who believed in selling dreams, not products.

The bottom line is that every entrepreneur is unique, and there is no magic formula for success in business. Thus the more you know about yourself, the market, and technology, the more likely you will be able to achieve success. Steve Jobs didn’t want to follow conventional principles, but he also didn’t believe in going into business with blinders on. That’s a model for all of us to follow.

Marty Zwilling

*** First published on Inc.com on 10/13/2016 ***

Friday, October 14, 2016

Join The Unicorn Club Of Billion-Dollar Companies

the_lion_and_the_unicorn_v_by_loupombreI’m sure all of you know one or more of the 200 or more young companies that are currently valued at one billion or more by investors and stockholders. These are popularly called “unicorns.” Some of the most well-known include Uber, Airbnb, Snapchat, Xiaomi, and Pinterest. What every entrepreneur is asking me these days, is “How do I get to be a unicorn?”

The first thing I have to remind everyone is that the odds are stacked against you, just like in a lottery. Based on some good estimates of how many new ventures have been started in the last five years, the statistical odds of any individual startup making it to this level are less than one in a million. But, of course, that doesn’t mean you shouldn’t try.

The fact is that valuations are largely set by top venture capital investors and financial firms, and they all have their own proprietary formulas for assigning value. But let me assure you that in the final analysis, the numbers and key elements are highly subjective. Yet there are a common set of driving factors that every entrepreneur should know, including the following:

  1. Extraordinary marketplace traction. If your new venture is still in the idea or development stages, don’t even think about a high valuation. Premium ventures need real traction, such as 100 million users, 10 million in revenue, or brand recognition around the world. It helps to have a following of loyal advocates in the mainstream press.

  2. Active interest by a multitude of investors. When top tier investors compete for a piece of the action, the price can go up exponentially. If you don’t yet have a hundred investors knocking on your door, it’s time to put more focus on viral marketing, closing customers, and exponential growth. Keep working on increasing the momentum.

  3. Experienced team of superstars. Every investor bets on the jockey, more than the horse. It may be time to bring in a new executive team with visible integrity and a sterling track record, or round up some new advisors who have connections with the venture community. Don’t be afraid to give up equity to get a small share of a very large pot.

  4. Opportunity and scalability are unlimited. The target market better be a big one, certainly over a billion dollars, with a double-digit growth rate, and large enough to absorb multiple entrants. Scalability in the worldwide arena must already be demonstrated, with plenty of growth potential ahead. Most unicorns pop up first in new solution categories.

  5. Strong intellectual property and defensibility. Patents and other intellectual property are a necessary initial “barrier to entry,” but these are just the beginning. Additional defensibility elements that unicorn investors look for include speed of implementation, rate of revenue and user growth, and exceptional team strength and leadership.

  6. Credible yet flexible exit strategy. The number of new ventures that successfully navigate the path to a public offering (IPO) with big numbers is still small. The smartest ventures are always courting a multi-billion dollar sale or merger with giants in the industry, including Google (YouTube), Microsoft (Skype), and Facebook (WhatsApp).

But remember, things that go up fast can also come down just as fast. More and more pundits are predicting that the unicorn bubble has grown through hype beyond sustainable value, and will soon collapse. They point to the valuation implosion of former superstars Groupon, Dropbox, and Zynga, which have dropped to valuations that are a fraction of their once lofty numbers.

In addition, achieving unicorn status brings a new set of challenges to a young growth company. The pressure is always on to take more money, to drive the valuation higher and stay in the spotlight, just at the point where a company begins to make money rather than burn through it. Too much money often leads to bad decisions, and has led to the demise of more than one promising growth venture.

But, I’m not suggesting that you take the focus off of valuation. The numbers may be relative, but the principles behind them won’t change, and work for smaller startups as well as unicorns. My advice is to aim high, but be realistic in negotiating with investors.

Unrealistic valuation expectations are one the key reasons that investors walk away from a promising startup, leaving you with no valuation, and perhaps no future. You have to earn a billion-dollar valuation, not declare it. How well does your new company stack-up today?

Marty Zwilling

*** First published on Inc.com on 09/29/2016 ***

Monday, October 10, 2016

Some Business People Talk While Smarter Ones Listen

Shimer_College_Susan_Henking_listeningAs a business advisor, I certainly recognize the need for talking to make an investment case, close a sale, or communicate with your team. I also recognize the need for active listening. The challenge is to know when it’s time to switch from one to the other. You can’t learn anything new while you’re talking, yet many business professionals and entrepreneurs seem to never stop.

It’s a sad spiral, since the longer you talk to someone without stopping to listen, the less both of you really hear, meaning they don’t learn anything and you weren’t listening, so you have to spend even more time talking to get the message across. Here are some guidelines for the most productive interchanges with business associates, investors, and customers:

  1. Limit your statements and answers to sixty seconds or less. Long business responses are usually read as attempts to dominate the conversation, or cover basic weaknesses in your argument. Shorter verbal exchanges help the conversation to flow smoothly, and lead to win-win relationships, rather than debates with a winner and loser.

  2. Listen attentively to responses, and do not interrupt. Practice active listening to the speaker, instead of looking the other way, or formulating a defensive rebuttal. People who maintain eye contact while listening are more like to gain the speaker’s trust, and may actually learn something from the response, leading to effective results.

  3. Lead your response with a thoughtful pause. This pause will convince the speaker that you have heard and processed their input, and gives them an additional incentive to actively listen in turn to your response. The result is greater awareness and impact on both sides, resulting in real learning and the most productive business exchange.

  4. Don’t hesitate to ask questions for clarification. Asking a follow-on question demonstrates that you are really listening and care about the speaker’s view. Questions also are effective in narrowing the focus of the discussion, and more quickly resolving the issue or completing the communication. Asking good questions improves productivity.

  5. Use part of your talking time to summarize what you have heard. This always improves your credibility as a speaker, since it convinces people you are also a listener, and confirms your progress in understanding the message. The result will be a better use of your time and theirs, and a more effective learning process on both sides.

  6. When speaking to an individual, address them by name if possible. This gets their attention and focus, and builds trust and respect for you as an authoritative speaker. The next step is to use personal analogies and familiar terminology to get even higher attention, comprehension, and impact. This will help you get more done in less time.

  7. Choose the right environment and mode of communication. The concept of talking too much is equally applicable to non-verbal discussions, including texting and email. No business person likes long and rambling electronic messages, and in many cases these are ineffective, as they lack body language and the ability to adapt to mood.

  8. Practice the connect, convey, and convince strategy. Every speaker’s challenge is to get people’s attention quickly, succinctly convey the desired message, and move the listener to action. Talking more only confuses the issues, causes people to disconnect, and invites a defensive reaction. Listen for key points, and think before responding.

In business, if you find yourself talking more than listening, it may be time to tune your skills in both. Responsible, effective communication will give you a sustainable competitive advantage over both your peers and your competitors, by allowing you to get more done in less time. Time is a critical resource in these rapidly changing times. Don’t waste it repeating your message ad nauseam.

Marty Zwilling

*** First published on Inc.com on 09/27/2016 ***

Friday, October 7, 2016

A Paperboy Explains The Keys To Success In Business

tulsa-paperboyCreating a new business is not rocket science. Whether you are starting a paper route, or commercializing a complex technology, the same basic principles of success apply. I found this illustrated well in a new book I just finished, “A Paperboy’s Fable,” by a young entrepreneur and writer Deep Patel. It doesn’t take a superior intellect or big credentials to succeed in business.

Although just seventeen years old, Patel has some great insights that I can extrapolate for every aspiring entrepreneur to answer the most common question I get as an advisor and mentor – “Where do I start?” I’m convinced that anyone who really practices the principles outlined in his book not only will have no trouble starting, but also will have a higher probability of success:

  1. Search for big opportunities. Most founders know exactly what they want to sell, and they are personally convinced that everyone will buy one. Yet you should realize that your view is likely biased, so outside industry expert data is needed for validation. Selling something that only a few people need, even newspapers, is not conducive to success.

  2. Invest in your own future success. It takes time, effort, and other resources to start a business. Be prepared to learn some new skills, assemble the right team, and make some sacrifices to get things going. Aspiring entrepreneurs who expect outside funding, reduced work hours, and friends to volunteer, will likely find a hard road ahead.

  3. Harness ingenuity and innovation. Nothing worth doing hasn’t been tried before, so winning requires bringing something new to the table. Newspapers can be delivered sooner or more accurately, or technology can be innovatively packaged or personalized.

  4. Don’t forget the marketing. “If we build it, they will come” is not a winning business strategy. You need to find the customers, rather than waiting for them to find you. With social media and conventional selling, the people with the best message get the order.

  5. Add value and reduce cost for universal appeal. Addressing a worthy cause, such as helping the environment, has a good secondary appeal, but near-term value delivery is usually necessary for business sustainability. Goodness alone doesn’t make a business.

  6. Create customer advocates. Every business needs multipliers to succeed, and one of the best is customers who are so excited and satisfied that they drag in friends. Paper routes succeed best when customers recommend you to neighbors and associates.

  7. Choose a business that you can scale. Services businesses are hard to grow, as you need to clone people to expand. Product businesses are easier to scale, through manufacturing and automation. Don’t be too slow to expand your territory and partners.

  8. Utilize the power of diversification. The author didn’t forget that newspaper customers make good candidates for lawn services and cleaning products. Even huge businesses, like Facebook, have expanded into dating, through Tinder, and games, with Angry Birds.

  9. Hire more expertise and delegate authority. No matter how dedicated, one person can only do so much, while making every decision. Smart entrepreneurs learn quickly to hire people who can operate independently, utilizing the existing brand, and make 1+1=3.

  10. Don’t box yourself in with your brand. Brand for the future. It’s hard to expand “Ty’s Newspaper Business” into landscaping and home products. It’s always expensive to change and rebuild a brand image. Give yourself the maximum flexibility in brand building and naming.

Following these principles, and practicing incremental and continuous learning, are the best ways to prepare for the life you want as an entrepreneur or business professional. Also, before you can decide where to start, you need to define what success means to you.

Success to you probably includes financial gain, but don’t forget that money doesn’t buy lasting satisfaction and happiness. The happiest business people don’t work for money, and don’t even think of what they do as work.

Marty Zwilling

*** First published on Inc.com on 09/22/2016 ***

Monday, October 3, 2016

7 Key Entrepreneur Habits Highlight Execution Ability

Elon-Musk-robot-assemblyAs a small business and startup advisor, I find that entrepreneurs often love to talk about their latest idea, but not their execution. Like most investors, I’m convinced that success in business is more about the plan and the person than the idea. It’s great to be a visionary and a thinker, but a business that generates real world change and wealth requires people who get things done.

For example, Elon Musk is recognized as a visionary entrepreneur, but his fortune and his impact has come from the great companies he has built, including SpaceX, Tesla Motors, and PayPal. He seems to have a knack for surrounding himself with people who can complement his skills, follow his model of an intense work ethic, and together provide consistently outstanding results.

The challenge is to recognize the people with the right traits to get results, and to train yourself to work on the right things. We all know people in business who are constantly busy, but never seem to get anything done. I believe the right attributes and habits can be recognized and learned, and here are seven key ones that I find in successful entrepreneurs:

  1. Actively recruits others and solicits win-win relationships. The best entrepreneurs know what they don’t know, aren’t afraid to ask for business help, and always offer something in return. Some people pretend to have answers for everything, and are only looking for followers, rather than partners. Positive relationship building is always a plus.

  2. Asks hard questions, and actively listens to critical feedback. Dodging the tough issues, and surrounding yourself with “yes” people is not conducive to a successful new business venture. Investors look for entrepreneurs who surround themselves with a smart and experienced team, and use the power of the team to convert the idea to a business.

  3. Sets goals and milestones, with metrics to track progress. Good implementers document and communicate long-term goals, and translate them into daily action items. They define metrics for each goal, and diligently track themselves against these metrics. Ideas can’t be tracked, and tend to only morph into other ideas as time passes.

  4. Publicly reward team members for business results. Affirming and rewarding team members for key actions creates more momentum, commitment, and satisfaction. This gets more done by others, and keeps the focus on results. Reward yourself for results with time away from work, or special events with your family. Investors like happy teams.

  5. Focus all initiatives around value to your customers. A business must be all about listening to customers, delivering value, and customer satisfaction. I still hear too much focus on disruptive technologies, making more money, and working less. Execute processes and metrics around customer requirements, loyalty, satisfaction, and service.

  6. Tie executive titles and organizations to business roles. You will not impress investors in a startup with titles like “Chief Inspiration Officer” or “Chief Thinker.” Results-oriented entrepreneurs limit status titles to traditional business results roles, including finance, operations, customer satisfaction, and business development.

  7. Founder and key partners are role models for results. Team members follow the model of the people they look up to. If key leaders don’t keep personal commitments, promote top performers, and reward results, the rest of the team will change their focus accordingly. Investors recognize volatile personalities and large egos as high risk.

I find that we all have biases that can trick us into picking the wrong people, or discrediting feedback on our ideas and business plans. The best entrepreneurs work hard to overcome these biases, and actively seek insights which may refute their basic assumptions. They are willing to learn and change based on results and new input. Idea people are often more fixed in their view.

Thus if you hear yourself or someone else expounding too often at the idea level on something that will change the world, it may be time change the focus to business traction achieved so far. Even if you are not looking for an outside investor, it helps to think like one in validating that you are investing your own time and effort for maximum impact. Don’t be too busy to get the right things done.

Marty Zwilling

*** First published on Inc.com on 09/20/2016 ***

Saturday, October 1, 2016

How Leadership Styles Evolve To Match Business Stages

leadership-style-businessBy Ernst Gemassmer, Chairman, Startup Professionals

As a retired executive I now reflect on my own leadership styles in different situations during my extensive career. My leadership style has evolved over time and I am wondering whether this is related to increasing experience or different situations. I have concluded that leadership styles must be in line with the ‘life cycle’ of companies, as discussed below.

Early start-up stage:

The vision of the founder or founders prevails during the initial stage. The founder clearly sees the future of the company and overlooks near term obstacles or road- blocks. Leadership at this point is very personal and carries a lot of empathy, needed to convince early employees and VCs. The leader is readily accessible to all employees and ‘leads from the front’.

I was the founder of a hardware company in the communication space. The technology was licensed from a European company, which also provided the start-up funding. The team succeeded in all functional areas, but we found it difficult to generate sales for our new and innovative technology. After a number of challenging years we determined that the market did not develop as expected and I closed the operation down. Even though this decision was hard for my team members, it turned out to be the correct move. The market did not evolve.

Mature start-up stage:

Having convinced VCs or Angels to invest, the company enters the next stage. Functional areas are staffed and headed by experienced managers. The initial vision becomes reality and is being tested by customers and partners. Leadership at this point is shared between the founder and key functional managers. The founder is clearly in charge of each final decision, but seeks advice and council from experienced functional managers and the Board.

Successful Operating Company:

At this stage the company has assured its near term survival, is profitable and growing. An exit strategy is being discussed by senior management and funding partners. In numerous instances the founder has stepped up to the Chairman role, the company is run by professional managers, in a cooperative style. Consensus management tends to prevail at this stage.

This hardware company had achieved a significant market share, had gone public but the rate of growth became nominal. The management team was in total agreement to merge with a global software company. All key managers remained with the merged company.

Distressed Company:

Competition may have eroded a company’s market position, technology may have made its products or service obsolete, staffing and expenses may be out of control. Specialized groups tend to acquire companies, which have encountered this stage. A turn-around interim CEO is brought in with the mandate to ‘fix’ the company within a specified time period. An experienced turn around CEO quickly develops a vision for the company and its survival. The leadership style for this role is tightly focused, hard driving and results oriented. If consensus can be readily obtained it is helpful. Lacking consensus the interim CEO must and will make autocratic decisions to ensure financial viability of the company.

I was interim CEO of a Europe based systems software company. Over 70 percent of the development team was working on a new product. There was no consensus as to when the product would be completed, what the definitive specs were and what revenues could be generated. Since the management team was unable to reach consensus, the project was terminated. Decisions of this type must as fast as possible to avoid internal confusion, lack of direction and ongoing losses.