Friday, May 25, 2018

6 Relationship Strategies That Propel Your Business

Kathy_Ireland,_Warren_Buffett_and_Bill_GatesUnfortunately, people who are great at inventing things, and have high creativity, often don’t have strong interpersonal skills or interests. As a mentor to aspiring entrepreneurs, I see a high level of frustration from people in this category who have personally developed great solutions, but can’t make them into a business. They don’t realize that running a business requires relationships.

I strongly believe the talent to effectively build relationships can be learned, just like any other skill, even if you are an introvert like me. It does take effort and focus, just like learning other skills that you need to achieve objectives you have set. In business, you need to build relationships with a wide range of people, including investors, peers, employees, and of course customers.

As part of my own efforts to maximize my relationship efforts, I found some concise business-oriented guidance in a new book, “Born to Build,” by Jim Clifton and Sangeeta Badal, Ph.D. These executives from Gallup bring together their best data from business professionals around the world, to offer the following strategies for stepping our relationship results up a notch:

  1. Build new relationships by diversifying your networks. Force yourself to go beyond people in your immediate circle, and those you know well, to contact and nurture a real relationship with at least one supplier, a customer, and a competitor. The next step is to seek out relevant people from unrelated organizations, such as media and government.

  2. Give as much as you expect to get from every relationship. Effective relationships in business require reciprocity – not a one-way half-hearted effort. Offer and deliver help, connect people with each other, or share industry or nonprofit-sector information. Only then will you feel satisfaction and find others willing to respond when you need help.

  3. Selectively spend quality time on key relationships. Spend time with your most important customers, your most productive employees, and leaders who can make the most difference to your organization. These relationships will generate returns in the immediate future and in the long run. Avoid the trap of idle discussions and ego building.

  4. Keep your focus on the local social and business landscape. Pay attention to bonds, loyalties, and networks that characterize your community. Recognize the norms, values and preferences that shape the behavior of the people you need. This will help you form a durable and effective network that you can maximize for your business interests.

  5. Apply your time, brand, and resources to key social issues. Build a constituency of relationships with people who have shared beliefs, interests, and ambitions. Collaborating with them on solving shared social problems will turn them into engaged advocates of your business and make them your most powerful allies in building other relationships.

  6. Prune, renew, and reshape your networks frequently. Nurture people relationships critical to your organization carefully and often. Push contacts whose usefulness has diminished over time into your inactive network. Regularly identify new relationships that are vital to the future of your business, and define strategies to build these connections.

I do offer some points of caution in all relationship building efforts:

  • More relationships are not always better. Highly successful business leaders don’t necessarily have larger networks. Be selective about the associations you form, listen carefully for situations where you can add value and derive value, and prune the rest.

  • Overinvestment in relationships can take precious time away from focusing on the technical elements of your business. Invest your time wisely in balancing the demands of market awareness, new technologies, and future organizational strategy.

  • Sometimes strong relationship networks can shut out new people and new thinking, insulating you from fresh input from the “outside.” Introducing new elements into your network will generate new perspectives, new experiences, and positive change.

Overall, the breadth and depth of your relationship networks is more critical to your business success than your ability to define and build the perfect solution. These relationships empower you to confidently and aggressively take risks, continually innovate, and recover from losses and setbacks along the way. Your business is a community, not an island. You can’t run it alone.

Marty Zwilling

*** First published on Inc.com on 05/10/2018 ***

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Wednesday, May 23, 2018

8 CEO Traits That People See As Strength Of Character

Warren_Buffett_KUAs an angel investor in early-stage startups, I’ve long noticed my peers apparent bias toward the strength and character of the founding entrepreneurs, often overriding a strong solution to a painful problem with a big opportunity. In other words, the entrepreneur quality is more important than the idea -- in investor jargon, people invest in the jockey, and not the horse.

I’ve often wondered if anyone has quantified the implied assumption that leadership character is indeed a critical element of the success equation for startups, so I was pleased to see the classic book “Return On Character,” by Fred Kiel, a renowned leadership consultant. He has completed a study of more than 100 CEOs, with feedback from over 8,000 of their employees on this topic.

His research concluded that CEOs who received high scores for character also achieved much higher business results – nearly five times the average return on assets (ROA) during the two-year period covered. On the other hand, those CEOs with the lowest character scores (self-focused) were distrusted and suspected of telling the truth only slightly more than half the time.

Through interviews, Kiel identified eight common traits and habits exhibited by all the CEOs with a top character ranking (deemed virtuoso CEOs – masters of the skills and art of leadership):

  1. Displayed and demanded high moral principles. These are summarized as the four keystone character habits of integrity, responsibility, forgiveness and compassion. The authors found these to be achievable through self-training and practice, rather than requiring a genetic endowment. That means all of us have a chance.

  2. Embraced a worldview of positive beliefs. The scope of the positive leadership views included human nature, organization life, and personal purpose. The lower character leaders were consistently more negative and pessimistic in their worldview. In both cases, the beliefs tended to become realities.

  3. Developed a higher level of mental complexity. A leader judged high on cognitive complexity tends to perceive nuances and subtle differences that a person with a lower measure does not. High leaders continually challenged their own ideas and were quicker to adapt them to encompass new information, experiences, and meaning.

  4. Sought out and listened to critical feedback from others. High scoring leaders seek and positively respond to feedback from three critical groups: peers, customers, and direct reporting team members. Self-focused leaders, on the other hand, are more likely to resort to denial when faced with unpleasant feedback.

  5. Find and enjoy the company of one or more mentors. The leadership benefits of mentoring start in childhood, but are just as important at the mature CEO level. Virtuoso leaders recognize and seek three types of mentoring – career mentoring for the longer term, peer mentoring for tactical guidance, and life mentoring for quality of life balancing.

  6. Demonstrate the ideas and behaviors of self-determination. Leaders with a high level of self-determination continually seek more competence in their chosen domain, relatedness and connectivity to other stakeholders, and the autonomy to act in harmony with an integrated view of themselves.

  7. Virtuoso leaders know their life story. By crafting a coherent narrative of their life, they are better able to understand the major events and influences that have shaped their personal development and use that understanding to assess and improve their response to new situations as they arise.

  8. Sought and accepted help from many supportive people since childhood. Leaders who have sought help from natural helpers since childhood, including parents, teachers, and business influencers, usually feel more accepted, respected, and affirmed, and pass that feeling on to followers.

While Kiel’s focus was not specifically on startups, I believe the insights and conclusions apply equally well, if not more so, to startup environments. Every entrepreneur needs to understand the importance of character and leadership is to their growth and success, as well as their ability to attract investors. The return on character in business is well worth the investment.

Marty Zwilling

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Monday, May 21, 2018

7 Accelerants For Team Learning And Business Growth

growth-team-learningWe all want opportunities to learn, experiment, and grow in our jobs, but most bosses and businesses tend to seek out and reward team members who already know how to do the job, and can repeat the task without fail as the business scales. I believe this is the conundrum that leads sadly to less than 30 percent of people being fully engaged at work, and low morale all around.

As a former manager in big businesses, as well as the founder of my own small startup, I found that leading team members on their own learning curve, and designing their job to maximize learning and engagement, is a win-win situation for the business as well as the employee. The best part is that everyone is poised for today’s rapid market changes, rather than fighting them.

I was pleased to see this approach highlighted in a new book, “Build an A-Team,” by Whitney Johnson, an award-winning Wall Street analyst, writer, and keynote speaker on business and career innovation and growth. I fully support her outline of seven accelerants of learning and growth in business, which I believe every manager and entrepreneur should practice:

  1. Become a talent developer, by taking some risks with people. This starts by finding new hires that have to stretch to fit the role, and mentoring them as they learn. Every team member should be rewarded for taking market risks to grow themselves and the business. Actively create and share a plan to move them to new roles as they mature.

  2. Pinpoint individual distinctive strengths and utilize them. To perform at the highest level, and get the greatest satisfaction, each member of the team must operate from a position of personal strength in job assignments. Because we all have a tough time spotting our own strengths, your job is to help people find and deliver in their best roles.

  3. Impose thoughtful constraints on time and budget for focus. We all want unbounded freedom to do a job, but we also realize that tasks tend to expand to fit the time and budget allotted. Reasonable constraints force team members to be resourceful, creative, and learn from taking risks. The result is personal and business growth and innovation.

  4. Battle against entitlement, yet celebrate even small successes. Fearing an increased sense of entitlement, manager sometimes dial back on praise. Smart managers learn to reward progress without entitling team members. Disruptive innovation thrives in an environment of gratitude and continuous learning, rather than one of entitlement.

  5. Position stepping backward as a way to move forward. Many of the best companies support taking a leave of absence for additional education or training. This step back from current responsibilities can be a slingshot to greater long-term growth. The same can be said for side assignments of other countries, or broadening roles in other organizations.

  6. Give failure its due, and push employees to new challenges. Learning from failure is not always instinctive, but you can help it be constructive rather than destructive. In the same way, a good manager is a bit like a parent, pushing charges into uncomfortable situations and helping them grow and learn. Good employees love stretch assignments.

  7. Encourage individualized discovery-driven growth. This is called planning to learn, rather than learning to plan. You need to have a destination in mind, but let your team members tell you the best way to get there. Pit them against the real challenges, and innovation will follow. Be quick to shift team members as their skills and talents evolve.

If you follow these initiatives, I assure you that you will drive higher performance and higher morale in the organization, as well as become the boss people love. People need continuous learning and fresh challenges to stay engaged, and your business needs it to thrive, no matter what the economy and your industry throws at you.

In my advisory role, I often see the alternatives, and they are not so positive. You will lose your high potentials, and even if they do stay, they won’t innovate and your business will become less competitive. You will be beaten by faster-adapting competitors because you won’t be prepared for the future. Remember that the single biggest impediment to innovation could be you.

Marty Zwilling

*** First published on Inc.com on 05/07/2018 ***

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Sunday, May 20, 2018

Entrepreneurs Can Capitalize On The New Gig Economy

gig-economy-entrepreneurThe era of stable lifetime jobs for business professionals within a single company are gone. Companies are rightsized quickly now as markets change rapidly, and business professionals are quick to jump to new opportunities for growth and survival, with no ties to special benefits or pension plans. Thus smart business professionals are rapidly becoming the new entrepreneurs.

As a mentor to startups, I see more startups that are really an individual professional, marketing themselves as a consultant or freelancer in this new gig economy. This is a positive in uncoupling them from a dependency on a single company or boss, but the downside is that they have to suddenly manage all facets of a business, including finances, strategy, and savings for the future.

Of course, entrepreneurs delivering services have existed for some time, including business consultant, independent contractor, and freelancer titles. But these titles are not descriptive of specific roles or skills, and have always had marginal credibility in the business community. I suggest that new entrepreneurs lead with their “professional” title, which suggests their focus and specialized skill, and can be applied to almost any role. Here are some examples:

  • Marketing Professional. Every company and startups needs marketing experts, who are skilled and knowledgeable in the development of marketing programs, content creation, lead generation, and the utilization of social media. This world changes rapidly, and needs a professional with experience in digital and conventional media to keep up.
  • Software Development Professional. Even big companies I know find it hard to keep their in-house programmers up to speed on the latest technologies, including mobile devices, the latest Web technologies, and multi-tenant applications in the Cloud. More and more are scouring LinkedIn for specialists willing to do short-term relationships.
  • Staffing Professional. Staffing requirements come and go in every company, big or small. One of the harsh realities for most product entrepreneurs is that they have deal with hiring and firing as their company grows, and they have no experience or idea where to start. For existing trained professionals, it’s an opportunity to become an entrepreneur.
  • Administrative Professional. Long ago, these were called secretaries, often starting in the typing pool, with the best aligning themselves with an advancing executive, leading to a long career. Now the new breed of these is a self-managed entrepreneur, working remotely, with real expertise on the administrative tools and ways of business today.
  • Sales Professional. The best sales people in any company are highly focused, and self-motivated by the commissions they can earn by closing a few big deals. They know how to capitalize on social media, viral marketing, events, and the new tools of the trade. They are always ready to move on to the next big opportunity as markets change.

I’m sure you can think of a dozen more examples today. Tomorrow you may be looking for a Personal Finance Professional, Health-Care Professional, or even a Startup Professional. We are becoming a society of entrepreneurs. Even the education system is starting to recognize this, with entrepreneurial courses and majors springing up in every university across the world.

Thus you don’t need to invent an innovative product or technology to be a real entrepreneur. The cost of entry as a services professional is at an all-time low, with powerful free tools to create your own website, cheap incorporation of yourself as a Limited Liability Corporation (LLC) via the Internet, and community colleges offering courses for anyone in the new technologies.

The challenge is that not everyone is ready and willing to take on the responsibility for their own skills, lifestyle management, and financial stability. Many of these new entrepreneurs come to me looking for an angel investor or crowdfunding, which will never happen. Investors don’t fund entrepreneurs offering services, since these don’t scale, don’t have large margins, and need just a customer contract to start.

So if you have some resources, some skills, and some confidence in yourself, maybe it’s time for you to jump on the entrepreneurial bandwagon. There is no longer any excuse for a professional businessperson to be stuck in a position they don’t enjoy and can’t control. The entrepreneur lifestyle is much more satisfying, and has unlimited potential.

Marty Zwilling

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Saturday, May 19, 2018

7 Benefits of Promoting Your Dream Before Building It

TopSecretIt’s still popular these days for startup founders to operate in stealth mode, meaning no details about the idea or progress are shared with anyone until the big reveal and rollout. The common reason given is that this prevents any competitor from stealing their idea and beating them to market. In my view, this paranoid approach costs them much more than the risk of being open.

I’m not suggesting that a startup should ever disclose patent details to others before filing, but I can’t imagine why a startup would not seek visibility and feedback for their idea and solution while they could still make changes with minimal cost. Pivots and corrections are inevitable for startups in this age of rapid change, and the earlier you make them, the quicker you get to success.

Being open is the new business culture around the world. Entrepreneurs talk to customers and competitors talk to each other about the new trends and technologies they see. Coopetition is the new mantra for growing your business faster. Here are seven key reasons that being open is better for your startup than trying to fly under the radar:

  1. Visibility generates interest. You can’t get any word-of-mouth or media activity by hiding. Before you finalize the product is the best time to talk about it and see if you can get some buzz started. This will do more for your first mover advantage than more time in the lab. Most people agree that even negative media attention is better than none.

  2. Evaluate customer response prior to development. It’s never too early to get real feedback from the people who count. No matter how passionate and certain you are that your idea is perfect, the reality is that you will likely need to pivot at least once. Why not make the change before you have wasted significant time and money?

  3. Get competitors to surface early. You may be convinced that no competitors exist, which is very unlikely. If there really are no competitors, then there is likely no market opportunity, or you haven’t looked yet. If your position is so tentative that knowledge of your idea puts you in jeopardy, you need to know it sooner, rather than later.

  4. Demonstrate a minimum viable product (MVP). Surface your prototype, get customer feedback, make corrections, and iterate until you get it right. Startups in stealth mode often have a false sense of security that they can take extra time to do the job right the first time. Customer feedback is required to get it right, and hidden time is wasted time.

  5. Meet investors before asking for money. The time to build investor relationships is before you need the investment. It gives you credibility to mention your idea in general terms, without immediately asking for money. This can help you get in the door when you are ready, and asking questions early will give you insights on investor priorities.

  6. Pivots can be done gracefully at this point. Customer credibility actually improves when they see you making changes based on their input, and the cost of correcting mistakes early is lower. Operating in stealth mode for an extended period tends to convince entrepreneurs to believe their own biases, and visibly fight the need to change.

  7. Optimize your web history and presence. Stealth mode normally means no time for search engine optimization prior to product launch, not to mention relevant blogging activity, and link building. This means your whole startup effort will appear as very early stage for investors, and will likely not be adequately tuned for customers.

On the other hand, stealth mode does make sense for large companies, like Apple and IBM, who will likely be sued for pre-announcing a future product, since other companies have used this ploy in the past to freeze the market and lock out new competitors. Of course, even startups can get into serious trouble by talking about products and direction with no intent or ability to deliver.

I also realize that there are a limited set of startups, facing particularly entrenched and unscrupulous competitors, where early stealth mode is necessary. With most other classes of startups today, including smartphone apps, web services, and social media applications, early customer feedback is critical, and time to market is of the essence, so secrecy is more of an excuse than an advantage. Who are you fooling by not allowing your startup to be found?

Marty Zwilling

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Friday, May 18, 2018

8 Early Indications Of Trouble Ahead For Your Venture

graph-business-in-troubleAs a company executive, or a business advisor, we have to always be on the alert for indications that your business, while looking calm on the surface, has strong undercurrents starting that can lead to disaster. You don’t want to be in one of those high-flying companies, like Webvan, Pets.com, and eToys, that almost made it to the big time, before fading or crashing into oblivion.

You can’t always believe what you hear after the fact from company executives, or even industry analysts. Popular rationales include attempting to grow too fast, product quality problems, and missing the market, but the realities often go much deeper. Here are some early signals I see too often, which are recoverable if recognized and acted on sooner rather than later:

  1. Competing or toxic cultures start to build momentum. Everyone on the team must share the same purpose, values, and goals. Unhappy employees usually indicates that multiple agendas exist, such as some people driven by customers, and others by technology. The founder or top executives must set one culture by words and actions.

  2. Company leaders don’t maintain trust and transparency. When I do due diligence for investors, and I find team members hesitant or openly negative when talking about the leadership team, there is likely a trust issue, or at least a failure to communicate. Leaders need to “say what they mean and mean what they say” all the time and every time.

  3. More passion is being applied to a product that is not ready. If your solution doesn’t work, or can’t be delivered in the marketplace, no amount of determination or passion will save you. For high technology solutions, almost working is failing. Business leaders need to be realists, to understand when to pivot and when to fall back in recovery mode.

  4. Poor cash flow management is leading to bad decisions. Vendors and most people on your team need to be getting paid on a predictable basis, or their loyalty quickly turns to retribution. Soliciting timely and adequate funding is more critical than development. Too much money can have the same negative effect on focus and decision making.

  5. Uncontrolled team conflict is killing productivity and motivation. The best business teams don’t shy away from some healthy friction and heated debates between team members and leaders, to recognize innovative insights and make change happen. Yet we all know that there is a fine line here, beyond which heated debates generate so much emotion and drama that the entire team becomes dysfunctional, stalling progress.

  6. Great technology is touted as the long-term business savior. No matter how amazing your technology, a successful business requires marketing, solution delivery, and customers with a problem and the right amount of money to spend. Even if early-adopters are quick to jump, make sure the mass market appreciates your solution.

  7. Plans and priorities are changing at an accelerating rate. In these times of rapid market evolution, it’s good to see plan change agility. Yet, this change ability must be managed, and not allowed to degenerate into chaos, with less and less communication from the top. If you don’t know where you are going, you probably won’t get there.

  8. Putting more focus on blame than resolution and prevention. Every business makes mistakes when taking risks for growth and innovation. Companies in trouble tend to assume a victim mentality and blame factors outside their control, rather than learn from experience. Team members need to be rewarded for taking risks, rather than punished.

These signals are usually accompanied by a variety of others, including key leaders jumping ship, overall reduction in morale, rapid organizational changes, and micromanagement. If you see these symptoms in your own company, there still may be time for recovery, or it may be time to join the exit before disaster strikes.

The best antidote I know for heading off all these problems is building an advisory team early, consisting of no more than five external advisors, who have individual expertise and experience in similar business domains, and then actively listening to their perspective and recommendations. Don’t let the waves of change become a tsunami that you don’t see coming until it is too late.

Marty Zwilling

*** First published on Inc.com on 05/02/2018 ***

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Wednesday, May 16, 2018

8 Ways To Test The Depth Of A Startup Before Joining

Pierre_Omidyar_Richard_BransonEvery startup founder loves to prompt for questions from investors and potential key team members about their vision, and the huge opportunity that can be had with their disruptive technology. Yet if you are on the other side of the table, there are some other key questions that you need to ask, which will tell you more about the real success prospects for this business.

Enthusiastic startup founders may try to deflect or minimize these questions in true media-training style, so you need to be patient, calm, and persistent to get the whole story. From my perspective as an investor, I recommend that every founder needs to know the answers to these questions, be open and honest in answering them thoughtfully, and without making excuses:

  1. What is the current runway and burn rate? These terms quantify how fast money is being spent, and how long the business can survive before another round of investments is required. Early stage burn rates over $50K per month, or a runway of less than six months may indicate an inefficient or desperate startup. Think twice before you jump in.

  2. How complex is the capitalization table? The allocation of shares among the founders, and the number and size of outside investments, will tells volumes about the health, stability, and management of the business. Most founders like to talk about their many months or years of sweat-equity, but cash invested is a stronger commitment.

  3. When did this effort really start, including pivots? If the company has been around for more than a couple of years, and still has no product or revenue flow, there better be a good explanation. One more key employee or one more investor will probably not turn the situation around. History gaps and founder turnover may indicate a long road ahead.

  4. Does everyone on the team have a clear role and mutual respect? You won’t get this answer directly from the founder, so ask to talk to other key team members to make sure everyone is carrying their weight, and communicates effectively. Some conflict and differing perspective is healthy, but too many titles or close relatives should be suspect.

  5. Any outside advisors or board members available for discussion? Every startup should have at least a couple of outside advisors who are not major investors or family members, anxious to talk to new investors and key new hires. These should be people with complementary skills to the founders as well as industry expertise or connections.

  6. Is there a real customer willing to give a testimonial? Don’t be sidetracked by potential customers in the middle of a free trial, or friends of the founder. If it’s too early for customers, make sure you understand exactly when the product ships, how detailed is the rollout and promotion plan, and how many times these plans have changed.

  7. Are any lawsuits and challenges to intellectual property pending? Before you invest your life savings, or bet your career on this startup, you need to know how much of a barrier to entry the brand and patents are projected to be. If you have questions or concerns, now is the time to seek legal advice, not after the fact.

  8. How much and when can I reasonably expect a payback? Since nine out of ten startups fail completely, serious investors look for a 10X return on their investment within five years. Look for examples of similar companies and revenue multiples achieved from acquirers. Calculate employee stock option values and vesting times, as well as salary.

These questions are the key ones in every due diligence effort, always done by accredited investors, but almost never done by key employees and new partners. Ironically, startup investors are normally in less personal jeopardy than early startup employees. Smart investors know that many startup investments will fail, while employees always plan on million dollar payouts.

In any case, in addition to the grand vision and the chance to change the world, I recommend that it’s worth your while to calmly and assertively get some good answers to some hard questions from a passionate startup founder before you sign your life away.

Marty Zwilling

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Monday, May 14, 2018

8 Keys To Successfully Bootstrapping Your New Venture

money-bootstrap-startIf you really want to start a business your way without a boss or professional investor hovering over you, then just fund it yourself or through friends and family, and grow it organically. It’s more possible to bootstrap today than a few years ago, as the cost of entry continues to go down. According to Investopedia, over 90 percent of successful businesses currently start this way.

With one of the new free tools and a dose of sweat equity, you can create a website for almost nothing -- and you are on your way to success with ecommerce, your latest invention or personal services. It’s equally easy to go online and incorporate your new entity, register some intellectual property and have some fun with social media for marketing and interacting with customers.

The key to successful bootstrapping is to master the do-it-yourself approach, defer compensation or barter services whenever possible and become a frugal minimalist in all things requiring a cash outlay. Here are the key principles I recommend as an advisor to many entrepreneurs:

  1. Start your business in your own home. With the advent of the Internet, the size and address of your office is irrelevant. Most new teams are geographically dispersed these days anyway, so paying rent for an office should be differed to later stages when revenue is plentiful. You will be in good company with the many legends who used this approach.

  2. Barter services for access to required resources. Don’t rationalize a big investment in basic equipment with long-term requirements thinking. Look for a part-time job in a local or family business to provide access to things you will need only occasionally, such as a high-speed printer, video equipment or product assembly tools and storage.

  3. Learn to be a generalist rather than a specialist. With the unlimited access to “how-to” videos and detailed instructions on the Internet, you shouldn’t need to hire experts for most things. Likewise, too many volunteers and interns will only increase your workload and rework costs. Use your networking to get advice, but all jobs can be do-it-yourself.

  4. Operate small, but show a big-company image. You don’t need a large building and staff to be visible and heard worldwide. Use multiple social-media channels, blogging, email and voicemail to build the same image and responsiveness as larger competitors. Keep expenses down, but keep customer visibility and sensitivity as a top priority.

  5. Practice living on a shoestring budget. Most successful entrepreneurs take only a very minimum salary during the formative business years and reinvest all profits back into the business for organic growth. Defer your desire for expensive perks and vacations until later when you have time for them. You can have fun without spending big money.

  6. Favor profitability over revenue and user growth. Adding free users or customers to increase valuation makes sense for a venture-backed startup looking to go public, but will kill bootstrapping. Self-sustainability, independence, and real fun requires paying customers, profitability and an early cash-flow-positive business plan.

  7. Use your equity for key executives and business partners. Bootstrapping doesn’t mean that you don’t share equity. You can use it best to entice new team members and partners, giving you more horsepower and commitment for the long run. Investors seeking equity for cash typically want more control and cash-return quickly.

  8. Don’t assume you must plan for exponential growth. Investors have spread the word that you can’t get “hockey-stick” growth without a large cash infusion. In fact, you don’t need exponential growth to give you a good return and be declared successful. You may not be acquired for 10-times revenue, but quick exits and public offerings are no fun.

In summary, bootstrapping means living within your means, watching costs carefully, finding alternatives to cash for building the team and expanding the business infrastructure. Bootstrapping does require a full confidence in your own passion to make decisions and change the world with no investors to lean on or blame. But isn’t that why you signed up to be an entrepreneur in the first place?

Marty Zwilling

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Sunday, May 13, 2018

10 New Venture Strategies That Often Lead To Disaster

business-shortcuts-failureEvery entrepreneur I know has their favorite excuse for a previous failure – an investor backed out, the economy took a downturn, or a supplier delivered bad quality. These things outside your control do happen, but based on my years of experience as a startup advisor and angel investor, I still see too many strategies leading to failure that are inside the entrepreneur decision realm.

I certainly agree that starting a business is fraught with risk, and none of us get it all right the first time. It’s important to learn from your own mistakes, but it’s even smarter to learn from someone else’s mistakes, without paying their high price in time lost, cost, and pain. In that spirit, I offer my perspective on ten common startup failure sources that rarely get admitted by entrepreneurs:

  1. Choose to skip the written business plan. I believe the old adage that you don’t know what you don’t know until you try to write it down. A business plan is for you first, not investors. The discipline of writing down your plan is the best way to make sure you understand how to transform your idea into a business, and how to communicate it.

  2. Offer free solutions to bring in more customers. Don’t get caught in the myth that you shouldn’t worry about monetization until after you have a large customer base. Viral marketing costs real money, and your support staff and hosting systems cost even more. Even non-profits need a profitable business model to offset staff and operating costs.

  3. Assume passion level defines business opportunity. There is no substitute for market research to confirm that your passion matches a real need in the market. Not every great idea is a viable business. Social causes are great, but your ability to sustain your value contribution is directly linked to your ability to find paying customers.

  4. Practice dreaming more than doing. Dreamers come up with ideas, and do-ers come up with businesses. Building a successful business is all about execution. Don’t try to build a business unless you are comfortable with risk, uncertainty, responsibility, and hard decisions. Dreams may motivate your team, but customers expect real solutions.

  5. Convinced that many existing players means room for ‘me-too.’ Jumping into a crowded space is a great way to get lost quickly. Your chances of success are much greater if you target an under-served niche, or bring a new quantum leap in value over existing competitors. ‘Easier-to-use’ and other fuzzy terms won’t get any attention.

  6. Bypasses intellectual property as not worth the cost. ‘First-to-market’ is not a sustainable competitive advantage for startups, since sleeping giants do wake up when they see traction, and they can smash newcomers quickly. Patents and trademarks are very valuable in attracting investors for scaling, as well as future premium buyouts.

  7. Thinks boundless energy is equal to experience. The real secrets of any business domain are not intuitively obvious, nor available in books. Many entrepreneurs tackle a completely unknown business domain, because the solution looks obvious, and they plan to work very hard. Usually it pays to work in an industry for a while, before you try to fix it.

  8. Willing to start today and find resources later. Cash is always hard to find, but in many cases it’s even harder to find access to needed distribution channels, government contract expertise, or the special skills required to deliver your solution. Entrepreneurs need to spend time working on the business, as well as in the business.

  9. Finish the product before marketing begins. It’s never too early to start marketing, since it usually takes as long to build marketing momentum as it does to build a product. No startup can afford to do these serially. In today’s information age, it takes time and money to make your solution visible. Marketing should start before product development.

  10. Just give up and start over when tired and frustrated. In my experience, most startup success back-stories include an entrepreneur that simply would not give up, despite seemingly impossible odds. Most great entrepreneurs, including Steve Jobs and Thomas Edison, overcame multiple setbacks before they built their legacy of success.

None of these issues involve rocket science or MBAs. The best entrepreneurs just temper their passion with reality checks and street smarts, derived from their advisors and learning from their peers. It’s good to avoid making the same mistake twice, but it’s even more important to avoid making the same mistake as others before you, and expecting a better outcome. Even the best excuses don’t lead to success.

Marty Zwilling

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Saturday, May 12, 2018

5 Key Successes Will Sustain Entrepreneur Inspiration

inspiration-perspirationMany experts are certain that successful entrepreneurs are the ones with the most inspiration (passion and dream), while others will assert that it’s about more perspiration (working harder). In my experience, both are always required in heavy doses. There are no “can’t fail” shortcuts or “get rich quick” scenarios.

That’s why all those so-called million dollar ideas I hear about as an investor don’t get me excited, and entrepreneurs find that working twenty hours a day often generates nothing more than sweat, instead of the desired sweat equity. Moving a dream into reality requires balancing on a tight-rope of passion supported by unending efforts to move heaven and earth to make it happen.

For success under in this challenging and stressful environment, it’s important to recognize every small element of success to keep your inspiration alive. Here are five key ones to celebrate:

  1. Enjoy the feedback from every satisfied customer. This is the confirmation that your product or service fills a real need in the marketplace. Talking to real customers is the best way to keep your inspiration alive, as well as the best way keep on track with changing trends and future innovation ideas.

  2. Note the growth of your team and your own leadership. Overcoming obstacles and learning is one of the biggest inspiration for most entrepreneurs. Similarly, it will be very satisfying to see the productivity increases from your leadership and mentoring. Enjoy watching key members of your team grow from followers to leaders.

  3. Celebrate the ability to pay yourself a salary. Having enough revenue to finally give yourself a salary is an inspiring event, and one that you should savor. New business models that provide an ongoing revenue stream, or a secondary stream from advertising, raise your margins and can give you some additional satisfaction.

  4. Watch that patent provide a real barrier to competitive entry. Re-live that moment of inspiration that resulted in an innovative design and implementation for your product, and is now providing you with a sustainable competitive advantage. This may also be the moment when you get your first big acquisition offer, rather than a clone appearing.

  5. Appreciate the media accolades and peer success feedback. Enjoy that first video interview at an industry conference, or the newspaper story which enhances your startup visibility and credibility. Feel the inspiration from peers asking for your secret, or peers trying to model their efforts after yours.

At the same time, you can never let up on the work and the sweat required for continuous innovation, exemplary customer satisfaction, and staying ahead of competitors:

  • Marketing is a never-ending challenge. Even with the perfect product, your customers won’t even know you exist without marketing. Surprisingly, word-of-mouth and viral efforts require more work and a larger budget than you would expect. You have to react quickly to changes in the marketplace, and adapt to new customer requirements.
  • Managing cash-flow personally and continually. Cash-flow challenges must be part of your daily workload, especially if the business is growing fast. This is a task that you should never delegate. Keeping expenses down must always be top priority. One approach, which is even more work, is to keep tasks in-house rather than outsourcing.
  • Increasing customer focus and loyalty. Using the new social media channels for customer interactions and feedback is a great boon, but it requires daily attention and work to respond to customer requirements, fix satisfaction issues before they escalate, and build the level of loyalty required to make every customer an advocate to friends.

In my experience, I have found that if entrepreneurs can sustain the inspiration, even the hard work becomes part of the fun and satisfaction, leading to success. All of one, without the other, is not sustainable. How well are you doing in that balance between inspiration and perspiration?

Marty Zwilling

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Friday, May 11, 2018

5 Leadership Practices That Violate Natural Instincts

counter-intuitive-leadershipEven though we all know that success in business means taking risks on new and unproven innovations, we are still creatures of habit, programmed by evolution to favor the safe and familiar. Thus following your natural instincts and intuition in growing your business is often the worst thing you can do. Yet training yourself and your team to practice unsafe thinking is scary.

For example, every entrepreneur selling online and struggling with growth, seems to come asking for money to expand into retail (safe and known territory). As an investor, I see retailers failing and downsizing all around me, so I’m looking for founders with new and innovative business models that I’ve never seen before, like the shared-economy models of Airbnb and Uber.

Since none of us can see the next business breakthrough, we can only emulate the people who have brought real innovation to market, and challenge the team around us to think counter-intuitively, in hopes of changing habits. I found some real insights along these lines in a new book, “Unsafe Thinking,” by Jonah Sachs, who is one of the influential social innovators I know.

He outlines a set of straightforward practices that both he and I believe we can all use to create counter-intuitive breakthroughs ourselves. We don’t need to wait for lightning to strike, if we proactively improve our ability to accept more seemingly outlandish solutions and ideas:

  1. Focus on the inconvenient truths of your industry or company. Perhaps your known world doesn’t always work in the ways you intuitively expect. What’s the grain of truth hidden in the feedback from persistent critics or unhappy customers? Look for these as starting points for productive cognitive dissonance rather than anomalies to ignore.

  2. Reformulate existing problems to ones that open new doors. Some problems seem to have no solution that offers you growth. For example, if your customers don’t like your home security solution price, perhaps you should be selling it to insurance companies. They have more money, and can offer it free to customers due to reduced claim risks.

  3. Bring in an outsider’s mindset, or simply an outsider. Sometimes we are all too close to see the real problem, or the solution. What seems counter-intuitive to you may be more evident to an outsider. In business, it pays to ask for insights from smart but less connected advisors, or challenge the creative thinking of new members on your team.

  4. Listen to your intuition, but test it critically before rollout. Jumping to conclusions based on intuition still leaves room for creative thinking to validate the result. I still see too many business owners who are quick to lower their prices, only to find themselves in a deeper commodity hole. Counter-intuitively, you may need to raise prices for exclusivity.

  5. Present ideas as minimally unsafe, to maintain credibility. Counter-intuitive concepts, when they break too many expectations and arouse too much dissonance, are often arbitrarily dismissed. People tend to listen and talk about ideas that don’t shock all norms. Once people engage, the team more readily pushes the limits, and experiences buy-in.

Often you will find the best opportunity for a breakthrough is a problem that seems intractable and that you wish to quickly resolve with a simple solution, like giving your customer his money back. If you stick with these problems longer than is comfortable, and find an innovative solution, you could end up with a delighted customer who brings in many new customers via social media.

For your team, you also must remember that they respond to what you reward. Incenting the most creative and non-intuitive ideas has been shown to fuel many breakthroughs. On the other hand, paying people for how fast they close problems will have the opposite effect. Instill a sense in your team that it is safe to suggest crazy ideas, ask big questions, and step into the unknown.

Experience in business is a great teacher, but it can also leave your performance and your company in a rut. Now is the time to rethink how safely you work, look for those blind spots, and build a healthier and more thriving company by embracing intelligent risk and some counter-intuitive ideas.

Marty Zwilling

*** First published on Inc.com on 04/28/2018 ***

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Wednesday, May 9, 2018

5 Steps To Due Diligence On Your Potential Investors

due-diligenceEven though the color of their money is always green, all startup investors are not the same. Struggling entrepreneurs are often so happy to get a funding offer that they neglect the recommended reverse due diligence on the investors. Taking on equity investors to fund your company is much like getting married – it is a long-term relationship that has to work at all levels.

Investor due diligence on a startup is not a mysterious black art, but is nothing more than a final integrity check on all aspects of your business model, team, product, customers, and plan. Reverse due diligence on the investor is a comparable process whereby the entrepreneur seeks to validate the track record, operating style, and motivation of every potential partner.

If all this checking sounds a bit paranoid and unnecessary, it may be time to take another look at some questionable investor practices and onerous term sheet requests. Beyond the technical issues, if the chemistry isn’t right, the impact on your startup and future business is likely to be similar to that of a bad marriage. It’s no fun for either side.

Thus, here are the minimum steps that I recommend to every entrepreneur in completing an effective reverse due diligence effort:

  1. Get a perspective from peer investors. Of course you need to discount any investor competitive positioning, but local investment group leaders will quickly tell you the strengths and terms of active investors in your area. If your investor is unknown, or peers offer no positive attributes, take it as a red flag. A sample of three views is adequate.

  2. Personally visit another startup funded by this investor. Through networking with other entrepreneurs, you should find one or more to visit that have relationships with this investor. Another approach is to ask the investor for references, where their involvement has made a real difference, leading to success.

  3. Do research on investor visibility via Google and social media. Start by checking the profile and credentials of investor principals on LinkedIn and industry associations. Check for positive or negative news articles, press releases, relationships, and support of community organizations.

  4. Invite the investor to dinner or fun-related activity. Outside of work is where you can best evaluate the chemistry match, and decide whether you can enjoy and learn from the relationship. Enjoy a sports event together, or find common non-profit causes to participate in. As with any relationship, it doesn’t pay to close in a heated rush.

  5. Conduct a routine credit and background check. Look for investor experience in your business domain, as well as evidence of integrity and trustworthiness. Check the content of the investor’s website, and pay particular attention to the source of funds. Personal funds imply the most commitment, and offshore funding is most suspect.

Investor agreements should always be reviewed by an attorney who is familiar with startup equity investment deals. To get the terms you want, it’s better to start with your own term sheet. It’s even better to let the attorney do the negotiating, since many innocent-sounding protective and governance provisions can have long-term negative consequences to you.

While I recognize that there continues to be a shortage of venture capital for new entrepreneurs, compared to the demand, don’t succumb to the temptation to take funds from investors that you are not totally comfortable with. The result will likely be business demands that you can’t meet, loss of key personnel, potential lawsuits, and certainly not the fun lifestyle you expected.

The only successful entrepreneur-investor relationships are win-win ones. That means you and your business must benefit from both the money and mentoring from the investor, and the investor will win from getting a larger return sooner. Win-win relationships get better over time, whereas win-lose go downhill fast and rarely survive the honeymoon period. Know your partner well before you get married.

Marty Zwilling

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Monday, May 7, 2018

8 Tips To Improve Your Work Results and Satisfaction

man-multi-taskingIn my role as business advisor, I rarely find owners and founders who aren’t working hard, but I often find dedicated people who can’t seem to stay focused. That means they may be killing themselves by working twenty hours a day, multi-tasking between email, their smartphone, and the crisis of the moment, but find themselves unable to focus on strategic issues and hiring.

For example, I tried desperately to channel the boundless energy and enthusiasm of a new business owner a few years ago, but she insisted on being a part of every activity, until she aggravated some previous health limitations, became bedridden, and the business floundered. We are all human, so it pays to recognize our limitations, and spend our energies wisely.

Over the years, I have developed some basic rules that work for me, and I believe can really help any business professional manage their focus and awareness in all work activities. Practicing these will ensure greater productivity, less stress, as well as an improved overall sense of well-being. For business owners, these rules can mean the difference between success and failure.

Many fast-growing companies, including Google and Starbucks, have active coaching programs to highlight these mental strategies and habits that lead to focus, and increase overall productivity:

  1. Give full attention to individuals, objects, and ideas around you. Start by making a conscious decision to intentionally be totally present and focus on each team member, client, meeting, and family member. Don’t let your mind wander or give in to distractions around you, such as phones ringing, social media notifications, or report deliveries.

  2. Focus on previously-seen problems from a fresh perspective. In this fast-moving word, today’s reality is different from the past, but it’s easy and often not productive to apply old perceptions, rather than utilize your more satisfying curiosity. Mindlessly applying the “way things have always been done” will not enhance your career.

  3. Balance your efforts between satisfying tasks versus difficult. Practicing awareness of balance will lead to a change in your ability to focus and complete all tasks. Many business professionals give priority to easy tasks, such as email and texting, and practice long-term avoidance of more challenging work, thus lowering overall productivity.

  4. Accept that you need not solve every problem personally. Extended fighting with a specific problem leads to anger and frustration, but rarely solves it. Focus until you have exhausted your own reasonable efforts, and then seek help. In business, the most productive people are ones who can work effectively with all the resources around them.

  5. Regularly purge frustrations and negative thoughts from your mind. Clearing your mind is a simple powerful mental strategy to reset your perspective and refocus your thoughts to the task at hand. Eliminate negative distractions and toxic relationships. Spend some time on positive outside activities, including sporting events and music.

  6. Find an occasion to smile and laugh every day. The key to cultivating happiness and joy is to focus on at least one activity that you enjoy daily. The best leaders look for positives to celebrate, rather than always being critical. Sometimes joy is just reserving a specific time for quiet contemplation and appreciation of all the good you see around you.

  7. Incorporate kindness in every interaction with people. When you treat people with respect, understanding, and focus, they will do the same for you, making both of you more productive and happier as well. Handling constant interruptions is frustrating at best, leading to emotional and insensitive reactions, rather than constructive feedback.

  8. Practice patience and listening before impulsively responding. Get in the habit of taking a few breaths to calm down before focusing on the next crisis request. Sometimes I find this means counting to ten or a bit of discomfort before tackling the next challenging situation. Other times it means softly saying “not now” or “get on my calendar.”

Without these initiatives, most people will find their productivity at work declining. We all face the same information overload, increased pressure to move fast, and often distracted work reality. Our attention is continuously under siege, leading to fewer results. Have you noticed an impact on your perspective, health, and happiness? Now may be the time to increase your focus.

Marty Zwilling

*** First published on Inc.com on 04/21/2018 ***

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Sunday, May 6, 2018

6 Tips On Honing A Culture Of Winning Through Focus

business-focus-more-with-lessIntuitively, many entrepreneurs and businesses believe that the key to faster growth and success is more products, features, and markets. Since we all have limited resources, and can’t add more hours to the day, the result is usually more things done poorly, rather than a few key things done better than anyone else. The message here is focus, reiterated by every advisor and investor.

Good examples of startup focus before success include Google with their search engine, Facebook with friends networking, and Apple with personal computers. Later, after that initial success builds resources, and your penetration of the target market approaches 30 percent, it’s time to expand your horizons and make anticipatory changes to your focus. Don’t wait for a crisis.

For larger and mature companies, the hard part seems to be giving up the familiar space that isn’t working so well anymore, so that you can focus on a new segment or opportunity. This was highlighted in the classic book “Do Less Better,” by John R. Bell, an experienced business expert, who highlights the power of strategic sacrifice in today’s complex business world.

Bell calls this change hesitation the failure to kill your darlings, or the fall from a specialist to a generalist. All entrepreneurs must succeed first as specialists, using pivots as required to zero in on the real and current market. It’s a tough world even for big-company generalists, who take on the complexities of product diversification. Just ask J.C. Penny, Radio Shack, and many others.

I particularly like Bell’s discussion of business culture characteristics that create the necessary focus and being the best in any business environment. This culture must be maintained by every company at every stage of maturity. I’ll paraphrase several of the key elements here in the context of entrepreneurs and startups:

  1. An overriding sense of urgency and passion. Nimbleness and urgency to get the job done will set you apart from your competitors in so many ways, particularly with customers. It comes naturally with a small highly motivated team, but it’s increasingly difficult to maintain in the face of size and success. Build it at the start and don’t ever lose it.

  2. Well-articulated goals and metrics. Your success or failure must be quantified by such key business indicators as market share, financial ratios, brand awareness, new product launches, and execution within the deadlines. Like the refrain of an old country song, if you don’t know where you’re going, you will probably end up somewhere else.

  3. Innovation-driven mindset and actions. Startups can’t hope to outspend a giant with a fat balance sheet. Rather you must outsmart the giant with innovative thinking, pivoting on a dime, and impeccable execution. Innovation initiatives of any appreciable scale require a formal, intentional resource commitment, and work best bottoms-up.

  4. Zero tolerance for complacency and status quo. Always strive to increase your lead, and while competitors scramble to catch you, unleash your next breakthrough product, service, or promotion. It’s easy for complacency to creep in unnoticed in the face of initial success. Continually move up the bar to re-test your personal limits and your team.

  5. Maintain an intimate knowledge of the competition. You must know what your competitors are planning, and how they think, corporately and individually. Study their moves and engage your team for an analysis of updates. Avoid egotistical price wars and emotional outbursts, but make competitors think you are prepared to win at all costs.

  6. Focus on the few things that really matter. No organization, large or small, can manage more than five goals and priorities without becoming unfocused and ineffective. Keep these balanced and aligned between people and process, and keep the scope realistic. Concentrate your actions on preemptive projects that are within your control.

In the long run, to have a long run, your company needs a narrow and memorable focus that is constantly being updated in innovative ways. It’s easy to think that doing less as a company means you’re slacking, but results and longevity are all that count. Every entrepreneur and executive must learn how to build and maintain a culture of doing fewer things better.

Marty Zwilling

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Saturday, May 5, 2018

4 Critical Stages Transform An Idea Into A Business

entrepreneur-startup-stagesAccording to most definitions, an entrepreneur is one who envisions a new and different business, meaning one that is not a copy of an existing business model. Many entrepreneurs have a passion and an idea, or even invent a new product, but are never able to execute to the point of creating a startup. Even fewer are able to grow the startup into a viable business.

As a mentor and advisor to entrepreneurs and startups, and an angel investor, my passion is to find and nurture those entrepreneurs with innovative business ideas and acumen, to make them into successful business owners. I fully realize that for some of the best entrepreneurs, success is surviving the journey, and they can’t wait to hand off the new business and start another one.

Thus, in my view, entrepreneurship is an evolution of an idea through a series of developmental stages, culminating in a self-sustaining business. A business is an entity which exchanges goods and services with people outside the business (customers) for money, social good, or something of equal value. Here is a summary of the key stages along the way:

  1. Idea and seed stage. In this first stage, a specific idea or passion is solidified into an executable plan. Typically this is done by one or more entrepreneurs with personal or family resources, with no business entity yet formed, so they would not yet be considered business owners. Market research and a business plan should be the focus at this stage.

  2. Startup and development stage. The development stage normally begins with designing and prototyping a product or service, and creating the company legal entity. While legally the entrepreneur has created a business entity, there is nothing of value yet to own since the company has no solution to offer, no customers, and no revenue.

  3. Funding and rollout stage. At this point investors should be interested in buying a chunk of the business. It is arguably sustainable with a proven value proposition and business model for customers, and operations processes that work. The entrepreneur now becomes a business owner, and must start thinking like one to get to the next stage.

  4. Growth and scaling stage. This is the stage where most entrepreneurs exit, get pushed out, or learn to operate as full-time business owners. Business owners know that growth as a business versus a startup requires replicable and documented processes, a focus on marketing and sales, personnel management skills, and detailed planning.

Another way of determining when an entrepreneur becomes a business owner is to look for the mindset change required to build and maintain a successful business. Every entrepreneur needs to compare his strengths and aspirations to this business mindset:

  • Satisfaction from business success versus the big idea. Business owners get their satisfaction from happy customers and happy stakeholders. Entrepreneurs are more focused on thinking big, stepping into the unknown, and changing the world. They embrace risk, while a business owner seeks to reduce and manage risk.
  • Seeking a stable environment now versus a better future one. Good business owners like a predictable market where they can make calculated decisions to improve and grow. Entrepreneurs love to envision breakthroughs and disruptive technologies, with tough problems to overcome, which will allow them to create lasting change.
  • Relish repeatable activities and processes versus new challenges. Most small business owners enjoy the completion of daily and weekly tasks, and cyclical processes, like inventory and receivables. True entrepreneurs are always thinking many months out, anticipating the next opportunity and the next recognition for innovation.
  • Long-term attachment to the business versus the idea. If you see the business as the core of your worth, you will make a great business owner. Entrepreneurs see their value in the change they accomplish, and their impact on the future. True business owners dream of keeping the business in the family, and making it a long-term success.

Yes, there are notable entrepreneurs who make the transition from the big idea to a big business owner, including Bill Gates and Mark Zuckerberg. But there are thousands more whose interests revolve around being a better entrepreneur. Others start and end their careers as business owners, by buying an existing business, inheriting a family business, or buying a franchise.

So I believe the bottom line is that most entrepreneurs never really become business owners. They may step into that space for a few years to maximize the impact of their idea and personal return, but their heart is in their next venture, and that’s the way it should be. Neither money nor business success will buy you happiness if you aren’t doing what you love. You decide.

Marty Zwilling

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Friday, May 4, 2018

5 Big Data Challenges For The Holy Grail Of Business

big-big-data-book-humanWe are now solidly in the era of big data, where computers are capturing and processing the details of everything we do with all our interconnected devices in real time. Businesses see this as the Holy Grail for finally being able to predict who, where, and when customers will buy their existing solutions, and what their future solutions must look like to be attractive.

According to recent estimates, ninety percent of the data in the world today was captured in the last two years, at roughly 2.5 quintillion bytes a day. That’s a lot of data, but the jury is still out on whether technology can make any sense of the data, or derive new meaning from it in our rapidly changing world. So far, we haven’t been very good at predicting the future in life or in business.

For me, the first step in understanding the potential is to better understand what human data really looks like as it comes in from all these sources. I found some help in this regard from a classic book, “Humanizing Big Data,” by leading consumer researcher Colin Strong. I will paraphrase here the keys ways he outlines that our lives are becoming increasingly datafied:

  1. Datafication of emotions and sentiment. The explosion of self-reporting on social media has led us to provide very intimate details of ourselves. Many market research companies now use this data by ‘scraping’ the web to obtain detailed examples of the sentiment relating to particular issues, brands, products, and services.

  2. Datafication of relationships and interactions. We are now not only able to see and track the ways in which people relate, but with whom they relate, how they do it, and when. Social media has the potential to transform our understanding of relationships by datafying professional and personal connections on a global scale.

  3. Datafication of speech. Speech analytics is becoming more common, particularly as conversations are increasingly recorded and stored as part of interactions with call centers, as well as with each other. As speech recognition improves, the range of voice-based data and meaning that can be captured in an intelligible format grows.

  4. Datafication of offline and back-office activities. Within many data-intensive domains such as finance, healthcare, and e-commerce, there is a huge amount of data stored on individual behaviors and outcomes. Add to that the emergence of image analysis and facial recognition systems processing in-store footage, traffic systems, and surveillance.

  5. Datafication of culture. There is a whole new discipline of ‘cultural analytics,’ which uses digital image processing and visualization for the analysis of image and video collections to explore cultural trends. For example, Google’s Ngram service has already datafied over 5.2 million books from 1800 to 2000 to let anyone analyze cultural trends.

Of course, there is a big jump needed from data to real insights, intelligent decisions, and future predictions. This book author also explores some of the major challenges associated with humans making sense of big data, and using it effectively, including the following:

  • The human psychology of cognitive inertia. Humans seem to be wired to resist change, with a set of cognitive ‘rules of thumb’ which focus us on short-term loss-averse behaviors. Human are inclined to rely on familiar assumptions and exhibit a reluctance to revise those assumptions, even when new evidence challenges their accuracy.
  • Cognitive ability to make sense of data. Even though computers can process and store large volumes of data, assessing the implications still falls primarily in the realm of humans. Sense-making is the process of deriving meaning from experience and situational awareness, which seems to be a struggle for both people and computers.
  • Information overload and data quality. In reality, more data does not necessarily lead to better decisions. More information usually means more time is required to make a decision, perhaps leading to inertia, or volumes of one type of data bias the decision in the wrong direction, since more data is not always better data.

As we continue to become more data connected online and offline, there is no question that our digital exhaust will tell more and more about us, allowing better short-term projections of our buying habits and interests. Yet, the challenge of really predicting future needs and behavior is much tougher. Thus, I predict that humans will be driving big data in business, rather than the other way around, for a long time to come.

Marty Zwilling

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Wednesday, May 2, 2018

6 Ways To Pitch Your Innovation To Today’s Customers

Disruptive_LogoEvery entrepreneur with a new technology tells me that his innovation will be industry-disrupting, meaning that it will render the existing technology obsolete, and create a new market. Yet truly disruptive innovations, like the smartphone from Apple and the rise of the Internet, are very rare, and are generally unpredicted. So why would any investor ever believe any of these claims?

In fact, as a mentor to entrepreneurs and an investor, I recommend that entrepreneurs avoid using the term disruptive with investors, since many see it as implying extra high risk, a long time for payback, and extensive marketing to build the new market. Yet a win in this department clearly has huge implications for success, and a very real potential to change the world.

Thus, it’s worth some extra effort to understand attributes of the market, in concert with your new technology, which might really indicate that industry disruption is possible with your innovation. In a classic book, “Disruption by Design,” by the renowned innovation consultant Paul Paetz, I found a list of common patterns and recognizable attributes that I like, called disruption fingerprints.

I suspect that several of these will surprise most entrepreneurs as being counter-intuitive to their thinking. Entrepreneurs tend to look for big changes and big markets when seeking disruptive opportunities, when the opposite may be more effective. I agree with Paetz that the following approaches are often more likely to find a disruptive opportunity around the corner:

  1. Initially address a small market niche. Disrupting a huge market intuitively has greater potential, but it’s also like turning an aircraft carrier. It takes a long time and lots of effort to overcome existing momentum, and both investors and customers want to see results on a small scale in their lifetime, before they line up to join the movement.

  2. Pick a technology that somehow seems inferior to the major incumbents. Existing players normally think in terms of bigger, better, and faster, whereas more customers may really be satisfied by smaller, cheaper, and simpler. Think personal computers compared to mainframes, or smartphone cameras compared to professional cameras.

  3. Target large but moderate-to-low-growth segments. Usually these are low-growth for a reason – a new technology or price point could easily be the trigger to a large opportunity. On the other hand, high-growth segments may look more attractive, but are likely being attacked by the big players and many other competitors.

  4. Look for sizable customer populations unattractive to incumbents. These may be people who can’t afford existing products due to income levels or location, but need the solution. Remember the explosion of cell phones throughout the world when cheap versions and new pricing models were introduced a few years ago.

  5. Explore industries where you are an outsider. Most business advisors recommend that you stick with the business area you know, where you have inside knowledge. Often entrepreneurs are more able to think outside the box and bring disruptive change to less-known business domains. Consider Apple’s move into music, telephones, and watches.

  6. Compete against non-consumption and non-existing markets. The most disruptive products are ones that never existed before, and no forecasts are even available to size the opportunity. Facebook built the social media market before customers even knew they needed it. Naturally, these are very high risk efforts, but have unlimited potential.

Of course, entrepreneurs looking for disruptive opportunities should never forget the more likely disruptive alternatives, such as bypassing existing channels to go direct to the customer, finding an order-of-magnitude cost breakthrough, addressing underserved needs, or offering dramatic improvements in ease-of-use and convenience to new and existing users.

Yet, even with these alternatives, market disruption is rarely predictable – it’s obvious only in hindsight. Every entrepreneur should aim for it, but restrain themselves from highlighting that focus to early investors, or even early customers. It’s one of the quickest ways to lose your credibility, and maybe even your opportunity. Pitch your innovation against today’s market.

Marty Zwilling

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Monday, April 30, 2018

6 Strategies for Showing Authenticity in Leadership

authentic-bill-gatesEvery business owner and startup founder knows they are expected to lead the charge in starting and growing their business. In my experience as a business advisor and mentor, I find that most believe they are doing a convincing job, but in many cases, their key team members are not so sure. In reality, leadership is a function of what your team believes, not what you believe.

This is an area where perception is more important than reality. I find that leadership is a hard thing to fake. Authentic leaders start with a strong sense of values, and some deep beliefs in their mission and purpose, but just as importantly, they are able to personally inspire and build trusting relationships with the people around them who can make things happen in the business.

I found this concept of authentic leadership outlined well in a recent book, “Impromptu,” by Judith Humphrey. She has coached thousands of leaders over the years on how to inspire and influence people when they speak, both formally and informally. She offers a half dozen sharing strategies for demonstrating authenticity that I believe everyone in a leadership position should practice:

  1. Share your presence. The starting point of projecting authenticity is to be mentally and emotionally present and focused on people when you are physically present. We have all had bosses who seem to always be in another world, or take constant interruptions, when you are looking for attention. Make sure your authentic self is always perceptibly present.

  2. Share your ideas. Authenticity also means having the courage to share your thinking. Some business leaders feel more comfortable or obliged to echo what others think, or give you the company line, but never seem to have a view of their own. With classic leaders, like Steve Jobs, the team always knew his bold ideas for design and direction.

  3. Share your beliefs and values. Recognized leaders inspire others with their beliefs and values. Many years ago, I had occasion to work directly with Bill Gates at Microsoft on DOS. People on his team clearly waited for his technical insights, and couldn’t wait to make them a reality. His approach was not always polite, but it was definitely authentic.

  4. Share your feelings. If you announce a reorganization or business pivot in a purely factual manner, you will come across as unfeeling and insensitive. It’s important to use your own words, with real passion, to be viewed as authentic. Just don’t let that passion turn negative, by venting or making excuses about poor customers or the economy.

  5. Share your vulnerabilities. Authentic leaders are forthcoming about both their strengths and weaknesses. I once worked for a startup CEO who always pretended to have all the product answers, even when it was clear to everyone that his technical depth did not match his marketing passions. Humbly asking for expert help makes leaders stronger.

  6. Share your stories. Personal stories are always more effective in delivering a message, and in establishing the authenticity of the speaker. Team members find it easy to relate to stories about learning experiences and family challenges. Everyone wants to grow and develop their own abilities, and tend to follow people who are models of that ability.

With these initiatives, I believe every one of us can become a better leader, and be perceived that way by our peers and team members. While we are talking about perceptions and authenticity, another key element to watch is your body language. The wrong body language can easily undo all your efforts to create openness, warmth, and interest in the other person.

For example, if you intend to project openness, never cross your arms, or stand and hover above a peer or team member who is sitting down for a discussion. Don’t forget the power of good eye contact in making you appear approachable, likeable, trustworthy, and believable. There are many other body language elements that will reinforce or dilute your efforts to improve leadership.

Unfortunately, I still find too many entrepreneurs who are convinced that building a business is primarily about getting the technology right, and finding the money. In my experience, it’s more about finding the right people, and being able to be the leader that they need. That’s why the investors I know say they invest in the jockey, not the horse. Be the best jockey that you can be.

Marty Zwilling

*** First published on Inc.com on 04/17/2018 ***

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Sunday, April 29, 2018

5 Skills To Hone For Seeing Future Trends In Business

virtual-reality-business-trendsEvery entrepreneur realizes that change is now the norm, and they have to adapt their business quickly to survive and prosper. In fact, the best entrepreneurs seem to see breakthrough changes coming even before they really happen, and are able to turn them into huge new opportunities. In the trade, this rare capability is called the ability to see around corners.

While only a few people seem to be born with the right genes, I’m convinced that it is also a skill that can be learned and even institutionalized. In the classic book, “The Attacker’s Advantage,” by world-renowned business advisor Ram Charan, I found some real guidance on what skills are required, what to look for, and how to react in time. Here is a summary of his five basic strategies:

  1. Always on the alert, sensing for signals and meaning of change. Technically, this is known as perceptual acuity. Smart entrepreneurs compare perceptions with a diverse group of leaders and experts on a regular basis. They search for impending changes across multiple environments, and reflect on these to spark new ideas for growth.

  2. A mind-set to see opportunity in uncertainty. Uncertainty is an invitation to go on the attack and entrepreneurs need to be always ready to take their business to a new place in the changing landscape. They should never be defensive, and accept reality when core competencies are actually a hindrance to moving in a more promising direction.

  3. The ability to see a new path forward and commit to it. Leading entrepreneurs don’t wait for everyone to agree with their view of where to take the business, and have the courage of their convictions. They pursue new opportunities with tenacity, identify the obstacles they need to overcome, the blockages that stand in the way, and attack them.

  4. Adeptness in managing the transition to the new path. These entrepreneurs stay connected to both external and internal realities to know when to accelerate and when to shift the short-term/long-term balance, with a sharp eye on cash flow and debt. They create and meet short-term milestones to win credibility with investors and stakeholders.

  5. Skill in making the organization steerable and agile. No business leader can succeed in driving change without being able to bring key people on the team along. They learn to be agile, or steerable, by linking the external realities in real time to assignments, priorities, decision-making power, funding, and key performance indicators.

Examples of recent entrepreneurs who exemplify these attributes include Steve Jobs, who moved Apple from a computer company to smart phones and music, Elon Musk, who seems to be capitalizing on structural changes in the auto industry and space travel, and Jeff Bezos, who parlayed selling books on the Internet to a whole new paradigm for shopping from home.

Too many entrepreneurs allow the pressures of daily crises and total immersion in tactical details to narrow their thinking and to lower the altitude of their view. Everyone needs to find and hone the techniques that work for them in maintaining that perceptual acuity. Here are a few that both Charan and I recommend to get started:

  • Set aside ten minutes of each weekly staff meeting for that purpose.
  • Seek contrary viewpoints from people you respect, rather than compiling support.
  • Regularly dissect the past, to look for change signals you and others missed.
  • Continually increase your mental map of key changes in multiple industries.
  • Evaluate who might use an invention, patent, or new law to create a bend in the road.
  • Use outsiders to multiply your capacity to scan for disrupting patterns.
  • Watch the social scene, looking for new consumer behaviors and trends.
  • Be a voracious reader in all forms of media, both online and offline.

Even if you can’t see around the corners, it helps to have the perceptual acuity to see bends in the road before others. With that, and the courage to accelerate towards them as opportunities, rather than slowing down to mount a defense, you too can be a winner, rather than a victim in today’s uncertain but unlimited market.

Marty Zwilling

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