8 All Too Painful Entrepreneur Negotiation Mistakes

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One of the things I have learned the hard way over my years in business, and in advising others, is that it takes more than passion, creativity, and hard work to start and grow a business. A key skill that many of you don’t appreciate is the ability to effectively manage the negotiations that come with every business. The results are lost opportunity, poor contracts, or a failed business.

For example, one of the first decisions that most of you entrepreneurs face is how much equity to give to early investors, co-founders, and key new hires. These are tough and sensitive decisions, especially for technologists and introverts, who may prefer to let their innovations speak for them.

With that context, I was pleased to see a new book, “Entrepreneurial Negotiation,” by Samuel Dinnar and Lawrence Susskind, consultants and negotiation experts from Harvard and MIT. They reinforce my own view that negotiation is a critical skill for every business professional, and it can be learned and honed throughout your career.

The most successful business people, in my experience, are the ones who start early, and never stop learning better negotiating skills. In particular, we all need to recognize and prevent negotiation mistakes before they occur. The most common mistakes their research has identified include the following:

1. Focusing totally on your own interests (self-centered). If you don’t work to recognize and understand the needs and priorities of those with whom you have to negotiate, you will be blind to clues that could lead to better outcomes for both sides. Remember that every business, and every relationship, must be a win-win one, rather than a win-lose.
   
   
2. Passion making you overly optimistic and overconfident. Your conviction that your innovation cannot fail will lead to contingencies not discussed or documented, or failing to consider the possibilities that agreements could break down or people might act unreliably. Negotiation is more about mitigating risk and uncertainty, rather than selling.
   
   
3. Winning defined as reaching an agreement - now. Sometimes no agreement or a future agreement is the best alternative. You must always consider the lasting impact of an immediate action on reputation, trust, future negotiations, and long-term relationships. Don’t allow yourself to become desperate, and always be willing to walk away for cause.
   
   
4. Accepting a quick compromise to get things done. Most of you are “doers,” who are multitasking under a heavy workload, and measure success by how many things get done. You may have an aversion to conflict, or be willing to declare victory by signing on to a compromise that you later regret. Don’t ever sacrifice base principles or integrity.
   
   
5. Approaching negotiation as an individual sport. As a business owner, you survive by lean operations, and value your independent spirit. Don’t confuse being responsible, in a heroic sense, with being an effective team leader. Perhaps coming up with the original idea required individual effort, but negotiation often requires utilizing the right expert.
   
   
6. Negotiating as merely haggling over the price. Most business owners I know feel comfortable handling transactions with buyers, with the owner as the seller negotiating the price. More important for success are the complex transactions between partners, investors, and suppliers, where risk, long-term gain, and relationships are negotiated.
   
   
7. Relying heavily on intuition versus prepared evidence. All negotiation involves some improvisation, but there is no substitute for advance preparation to support best case, acceptable compromises, and walk-away triggers. It doesn’t help to blame the other side when negotiations don’t go as expected, and you only have gut instinct to fall back on.
   
   
8. Allowing biases, emotion, and ego to overrule logic. This mistake causes you to hear and see only what you want, and to react inappropriately when things don’t go your way. By keeping your emotions in check, understanding the other person’s position, and using logical arguments, you will find negotiation to be much more satisfying and successful.
   

The first step in avoiding these mistakes is accepting the fact that negotiating is a way of life in business, not an occasional special event. By recognizing that you do it every day, you can get better and improve your confidence simply from the practice and learning from your mistakes.

When negotiating, always be pleasant and persistent but not demanding. Be professional at all times - do not get frustrated and angry if a negotiation does not proceed in your favor, and don’t be hesitant to enlist the help of internal and external subject experts as required. Negotiate your way to success, rather than wait for random luck to favor you.

Marty Zwilling

*** First published on Inc.com on 03/11/2019 ***

7 Guidelines For Picking Business Battles You Can Win

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Many entrepreneurs are not prepared for conflict, or actively avoid it. Their vision, passion, and focus are so strong that they can’t imagine someone disagreeing, much less fighting them to the death. But the reality is that startups are composed of smart people, with emotions as well as intellects, working in close proximity under much pressure, so conflicts will occur.

In fact, most business conflict is constructive and should be embraced in steering through the maze of innovation and change that is part of every successful business. Surround yourself with “yes” people, and you may feel good initially, but the brick walls no one mentions will hurt later.

On the other extreme, constant and unmanaged conflict will quickly drive your startup to be dysfunctional. Here are a few simple principles leading to constructive conflict resolution that I espouse, as summarized from the classic book by Peter T. Coleman, “The Five Percent: Finding Solutions to Seemingly Impossible Conflicts:”

1. Know what type of conflict you are in. The first step is to assess whether the conflict is win-lose, win-win, or mixed (some competing and some shared goals). Each of the three types requires different strategies and tactics. Learning how to identify and respond to each type is central to success. Try a good business mentor to get you on the right track.
   
   
2. Not all conflicts are bad. Most often, conflicts present us with opportunities to solve problems and bring about necessary changes, to learn more about ourselves and the business, and to innovate – to go beyond what we already know and do. Avoid the ones that are irrelevant to your startup, but don’t hesitate to engage in the others.
   
   
3. Whenever possible, cooperate. Research has consistently shown that more collaborative approaches to resolving win-win or mixed-motive disputes (the majority of conflicts) work best. Therefore you should always approach conflicts with others as mutually shared problems to be solved together.
   
   
4. Be flexible. Try to distinguish your position in a conflict (“I need a raise”) from your underlying needs and interests in the relationship (“I want more respect for my contribution”). Your initial position may severely limit your options. Creativity and openness to exploration are essential to constructive solutions.
   
   
5. Do not personalize. Try to keep the problem separate from the person when in conflict (do not make them the problem). When conflicts become personal, the rules change, the stakes get higher, emotions spike, and the conflict can quickly become unmanageable.
   
   
6. Meet face-to-face and listen carefully. Meet in a neutral location, and work hard to listen to the other side in a conflict. Accurate information is critical, and careful listening communicates respect. This alone will move the conflict in a more friendly and constructive direction. Don’t mistake sending text messages and emails as listening.
   
   
7. Be fair, firm, and friendly. Research shows that the process of how conflicts are handled in usually more important than the outcomes of conflicts. Always attempt to be reasonable, respectful and persistent, but do not cave in. Find a way to make sure your needs are met.
   

Applied correctly, these methods can move most business conflicts in a positive and satisfying direction. But Coleman asserts that there are five percent that will always be “intractable.” These usually involve issues that won’t ever be resolved in the workplace, and should be avoided, like politics, religion, personal enmity, and cultural biases. Your best bet on these is not to engage.

For the rest, you must engage (avoidance just hardens positions and delays the consequences), and you must bring closure to the argument or conflict. Closure in business should include formalizing the result in a written document, with clearly outlined terms and activities, and follow-on milestones as required.

The most successful entrepreneurs are creative and skillful in handling conflicts, and actively seek constructive conflict with key stakeholders. The result is better decisions, more consensus, and better communication. In business, as in life, real change rarely happens without some pain. Learn to deal with it.

Marty Zwilling

Artificial Intelligence Can Help Or Hurt Any Business

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Everyone has heard about the big potential for using artificial intelligence (AI) to expand your business, but many of the small businesses I mentor are still wary of embracing it, because they don’t understand how it works, and fear losing control and unintended consequences. My advice is that AI is here, so it behooves all of us to learn how to use it properly and move forward.

For example, it is a no-brainer to first take advantage of the wave of new capabilities for data collection and smarter analysis to improve productivity and marketing. What is not so obvious is how to create and roll out solutions that can directly impact customer trust or financial well-being. There have been too many recent glitches, such as evidence of devices invading our privacy.

To put this all in perspective, I was happy to see the guidance and recommendations on how to deal with artificial intelligence correctly in a new book, “The Big Nine,” by Amy Webb. As a recognized futurist and thought leader in this space, she outlines how the big nine tech titans, including Google, Microsoft, and Alibaba, should be working to solve key long-term issues.

I believe her guidance and insight on these issues is equally important to every business owner and entrepreneur in understanding and marketing the principles of artificial intelligence to their business solutions and their customers, along the following lines:

1. Don’t forget the social implications as well as business. AI assistants in homes are great (Google Assistant, Siri and Alexa) – but to children, they might easily be considered co-parents or teachers. Make sure you are comfortable that your offering which includes AI doesn’t go too far in molding human society into a non-human machine.
   
   For example, Facebook realized just before rollout that their new AI-based chatbots, Alice and Bob, had developed their own secret language and were talking to each other in a new shorthand, potentially misleading users. Alice and Bob were shut down immediately.
   
   
2. Human employees and customers still need roles. While the disturbing visions of robots taking our jobs are almost certainly overblown, almost everyone sees no small amount of disruption ahead. Your role in business is to manage the transition where humans and machines will productively co-exist to keep human customers satisfied.
   
   
3. Honor fundamental rights to personal security and privacy. As AI technology shapes how your customers access information, interact with devices, and share personal information, you will still be held responsible for protecting their data and privacy. This doesn’t require any great technical acumen, just vigilant attention to values and rights.
   
   It is already possible to collect digital breadcrumbs on team members or customers and use them to determine if online behaviors signal an intent to complete a desired action. The wrong use of these actions will put them, as well as your business, in jeopardy.
   
   
4. The value of a human life cannot be compromised. Artificial intelligence systems from IBM Watson and BioMind have already made great strides in diagnosing and treating life-threatening cancers. But early mistakes have made it abundantly clear that they are not perfect, and decisions that are critical to saving lives can never have too much scrutiny.
   
   
5. We live in a non-homogeneous world. We must make sure that our business behavior is always inclusive. AI without oversight can take phenomena for granted, or fail to see that what works in one social domain, culture, or gender may not work in another.
   
   As a current example, Tessa Lau, a computer scientist and cofounder of robotics company Savioke, says she frequently sees designs that neglect to take into account the perspectives of women and other minority groups.
   
   
6. Individual biases must be excluded. We all have unconscious (and conscious) biases that can be inadvertently built into artificial intelligence solutions and their usage, based on our race, gender, appearance, age, wealth and much more. The result will be a lack of trust in your solution, and lost opportunity for both your business and your customers.
   

As a business professional or executive, whether you feel qualified or not, you are in the forefront of the artificial intelligence revolution that will soon change every business and every customer. The decisions you make now, even the seemingly small ones, may be critical in avoiding AI unintentional consequences and even assuring the long-term survival of our human species.

Marty Zwilling

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

5 Keys To Relying On Intuition In Business Decisions

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With all the progress in analytical tools and big data available, many people feel there is no place in business today for intuition and gut instincts. As an advisor to entrepreneurs for many years, I strongly disagree, and still see the value of at least combining intuition with logical analysis, as we face customers and markets driven by relationships, emotions, and unpredictable social trends.

I also see many successful entrepreneurs, including Richard Branson, who openly state, “I rely far more on gut instinct than researching huge amounts of statistics.” The venerable Steve Jobs was reportedly in the same category. In proper business circles, it’s called thinking outside the box, so don’t be misled into concluding that business no longer benefits from individual thinking.

In fact, I just saw a new book supporting this position, “Decisive Intuition,” by Rick Snyder, an international business coach who has launched and grown several businesses of his own, as well as helped big companies, including Intel and Anytime Fitness. He digs deeper into how intuition works, and concludes that correctly honing and using your gut instinct is a powerful tool.

We both agree that a big challenge we face in helping business professionals is getting you to stop being stymied by your own inner critic – that voice in your head that you are not good enough, or are probably doing something wrong. We all have to make friends with our inner critic, and make room for our intuitive voice to show up and lead us to the right decisions.

Here is my interpretation of Snyder’s recommendations to develop your intuition, and get you to that balance of logical analysis and intuitive decision making:

1. Isolate your inner critic from the rest of you. Of course, we all have that inner critic element, as it’s important for our safety and security, but it need not overwhelm what we have learned about our business and our customers. Keep it in its place by avoiding the moods and emotions that can cause you to censor yourself on key decisions.
   
   For example, when you begin to feel overwhelmed by the stress of a heavy workload or crisis, it may be time take a long walk to think, or retire to your favorite gym for a workout to change your focus. Then your intuitive forces will help you reach a balanced decision.
   
   
2. Use humor to loosen the grip of your internal critic. Self-critic messages are already so heavy that often bringing levity is valuable in helping balance it all out. For example, say “Oh, there’s my inner critic again!” or “Apparently, my inner critic thinks that I shouldn’t be the one to do the investment pitch,” as you smile at its attempt to thwart you.
   
   
3. Ask your critic what it’s trying to protect you from. Think carefully about what’s at risk if you follow through with the behavior you are fearful of or are being warned about. Now you can logically isolate the current situation from past experiences, and how this decision can be made, from more recent learning, without repeating past actual risks.
   
   For example, you might find that the critic is trying to prevent the repeat of past pain where you trusted someone and later felt betrayed, or a time when you delegated work to someone else and you felt let down. Now you decide from confidence rather than fear.
   
   
4. Work to be a better advocate for yourself. Once you are able to isolate the internal critic portion of your being, and better understand its cause and boundaries, you will be able to restore trust in yourself, repair your own reputation internally, and restore self-leadership. The better you understand it, the quicker the critic will disarm and relax.

   According to a recent article on ConsciousED, Elon Musk learned a long time ago to trust his intuition. He calls it: “thinking from first principles,” and it lead him to create Tesla, SpaceX and Paypal.

5. Practice new behaviors to wire new neural pathways. New modes of trusting yourself won’t happen by thinking alone. If your inner critic procrastinates, start working on that task right now. If you have been hesitant to delegate work, make a list of all your activities and publish a delegation list for all to see. Repetition increases skill and defeats the critic.
   

With these tips, I’m convinced that you can train yourself and get help from the people around you to integrate your directional, social, and informational intuition with results from all the logical analysis and data tools to make better decisions in business. Even though I’m a technologist, I believe the most competitive and most innovative businesses will always be run by people, not robots.

Marty Zwilling

*** First published on Inc.com on 03/04/2019 ***

7 Lessons From Airbnb and Uber On Customer Values

Contrary to popular myth, to be a disruptive new businesses, you don’t always need an innovative new technology to win. Many notable recent successes, including Airbnb and Uber, have done it by finding disruptive customers, with essentially no new technology. They seek customers willing to decouple from accepted buying models, or are actively looking for a better total experience.

These customers, and they are becoming the norm these days, are ones actively looking for new ways to discover, buy, or use a product they need, and won’t hesitate to break the single-source company link between these activities. They have no problem shopping in retail to see and test items, yet order online for a better price, and jump to another company for add-ons or support.

As a new business, you need to intimately understand today’s customer value chain, to allow you to peel away a piece for your business from the Hiltons, Yellow Cabs, and the General Motors of the world. I found some real guidance on this challenge in a new book, “Unlocking the Customer Value Chain,” by Thales S. Teixeira, based on his recent Harvard Business School research.

From his work with many new companies that have made it big, even without disruptive new technologies, he offers the following seven lessons that I, as a long-time entrepreneur advisor, believe every new business founder should take to heart:

1. Focus on acquiring an initial customer set in bulk. Acquiring users one by one takes too much cost and time. As a startup, you need to build a large customer base quickly, as Airbnb did with social media work around oversubscribed big-city conferences. Uber used promotion of major sports events and concerts, where masses of people sought rides.

2. Hit competitors where they are vulnerable. Don’t put yourself in the crosshairs of established incumbents, or directly target their customers. Instead seek out customers they can’t or won’t serve. Uber and Airbnb managed to remain “under the radar” of the giants by snatching up excess demand until they had their own foothold in the market.

3. Don’t be afraid to start with less-scalable tactics. To launch a disruptive business, focus on more people-intensive tactics that yield insight into customers and their needs, no matter how small the impact might be at first. Scale should only be a concern later in your company’s lifecycle. If you lack customers early on, you have nothing to scale.

   Large tech companies, like General Motors, tend to obsess over building only scalable strategies, like a dealer network. Their view is that if it doesn’t work for millions of customers, it is a poor investment. Tesla quickly built their base by eliminating dealers.

4. Build your supplier base before early customers. Your initial customers are critically important, yet their relationship with you is extremely fragile. Without suppliers, the customers walk away. For two-sided marketplaces, focus on acquiring supply-side offerings, like Airbnb rooms, before going to the demand side (people needing rooms).

5. Capitalize on offline and low-cost strategies. Tech startups tend to dismiss offline customer acquisition strategies, such as organizing events, creating on-the-ground operations, or incentivizing users to promote their services. Birchbox was able to make big money only after turning off television advertising and relying heavily on social media.

6. Favor operations over technology to prove it works. For your disruptive business to succeed, it needs to work, plain and simple. Early on, you cannot expect technology to recognize problems and be flexible enough to quickly adapt as you learn.

   Uber thus went door-to-door to get its first drivers to sign up. Airbnb did the same for its renters, and convinced people to list their homes. Employees went out of their way to find a person to rent each home. Only later was technology used to accelerate the process.

7. View your business only through customer’s eyes. As your new business is seeking customers, you have to maintain the customer’s point of view at all times, making operational adjustments quickly to lower customer effort, time, and monetary costs. This holds doubly true if you have an online marketplace, with disparate customer groups.

I’m convinced that finding disruptive customers and new business models is often more important to creating a new business than new technology. Thus it’s critical to target your customers well, understand how their value chain can be decoupled, and work to deliver unique value compared to competitors. In the end, it is your customer, not your company, who drives disruption.

Marty Zwilling

*** First published on Inc.com on 02/22/2019 ***

Customer-Centric Strategies Win Over Product-Centric

Is your marketing focus product-centric or customer-centric? If you only sell products, it’s time to realize that times have changed. With a wealth of products now available, customers look for the most memorable experience, not just the best product. These days, a fun shopping experience, or no-question returns, often tips the scales over extra product features or a lower price.

As an example, most of the people I know who have switched to shopping online don’t even mention the product, but are ecstatic about quickly finding exactly what they need on Amazon, with one-click ordering and overnight delivery, without ever leaving the comfort of their home. Amazon is very customer-centric, but it can make all the difference in retail as well as online.

One of the keys to a successful customer-centric strategy is understanding and measuring your customers lifetime value (CLV), since customers are definitely not all the same. I saw some great insights on this in a new book, “The Customer Centricity Playbook,” by Peter Fader and Sarah Toms, who have been thought-leaders in this area for several years.

In addition to quantifying the positives of the customer lifetime value metric, they address the mistakes that I see regularly in my business advisory service relative to assessing the value of customers and value, including the following:

1. Failing to account for current customer status and stage. Customer status can be one of three states – future new customer, current customer, or inactive past customer. The costs and lifetime value models are different for each of these types, so they shouldn’t be lumped together. Status factors are more important than demographics.

   The customer lifetime value also must consider the customer stage (search, conversion, retention, advocate) and the profit you expect in total. Remember that it always costs less to get repeat business from existing customers than it does to acquire new ones.

2. Forgetting to distinguish contractual from other customers. It’s relatively simple to predict subscription-based and other contractual customers, but much harder to project retention and repeat purchases from customers with unpredictable transactions. Thus retention rates have to be adjusted down for non-contractual customers.

   All this may sound very complex, but calculating customer values can actually be fairly simple if you have the data and tools. The message here is skip the gut feel estimates, and plan on using one of the many predictive analytic tools, such as Sisence or Azure.

3. Believing customer retention rates remain constant over time. For a cohort of customers all acquired at the same time, the retention rate for those who stay longer actually goes up over time. Thus incremental investments are better spent figuring out ways to extract further value from sticky customers at any given point in time.

   Stepping aside from pure lifetime value concerns, customer retention is also the best way to measure how successfully your company is providing its solution. In addition, your loyal customers are the best source of referrals as a key source of new customers.

4. Assuming that customers fit a bell curve distribution. The reality is that almost every CLV distribution curve is heavily skewed to the left, with lower-value customers making up the largest proportion. These must be pruned out quickly or “fired,” with extra effort put in to retain the long right trailing curve of high lifetime-value customers.

   For example, you will often find some new customers who want to test your limits by demanding extra service or concessions, leaving you with little or no lifetime value. These need to be excluded as early as possible, to prevent CLV values from being skewed low.

5. Omitting lifetime value beyond dollars and cents. In many businesses, customer value goes beyond financial considerations. In community organizations (non-profits), the value of volunteering and other positive types of engagement must to be added. These may be missed by existing tools, and require adjustment to prevent strategic errors.

   In addition, in industries such as healthcare, the idea of predicting the CLV also carries some obvious ethical and legal considerations. What are the implications if the best customers are the least healthy? Lifetime value is not intended to relate to length of life.

I predict that one day soon customer-centric strategies, and metrics like customer lifetime value, will be seen as the standard in business management, rather than an exception in a product-centric world. With the advice in this book, and by avoiding the mistakes discussed here, you can get started today with a big leg up on your competition.

Marty Zwilling

*** First published on Inc.com on 02/19/2019 ***

5 Keys To Career And Business Success For Introverts

In this age where every person feels the need for a relationship with people they do business with, introverts like me might seem to be at a distinct disadvantage. Most of us just don’t have the urge to proactively get out and talk to new people, face-to-face, online, or through an app. This is equally hard at work, especially when many of our peers may be remote, anywhere in the world.

Fortunately, there is more and more evidence that introverts still succeed in business, as several of our most successful companies were founded and led by introverts. For example, you probably never realized that Bill Gates, Mark Zuckerberg, Warren Buffett, and Elon Musk all claim to have at least started as introverts. Take confidence from these that you can persevere and win as well.

In fact, I found some excellent guidance on how to capitalize on your strengths, as well as areas that you may need to focus, in a new book, “The Introvert’s Complete Career Guide,” by Jane Finkle, also one of us, who has been a successful career coach for more than two decades.

She demonstrates how to use your introverted qualities to their best advantage, and then develop a sprinkling of extroverted qualities to round out a forceful combination for ultimate business success. The key strategies she recommends, with my own priorities and insights, include the following:

1. Be consistently very good at what you do. In business and in your career, there is no substitute for focus and hard work, whether you are an introvert or an extrovert. The more your work speaks for itself, the less self-promotion and marketing will be required. At the same time, you can never forget to communicate specifics to managers and customers.

   I personally worked with Bill Gates back in the early PC days, and I was continually impressed with his ability to deliver tough technical solutions on time, and with real innovations. Yet he was also good at subtly communicating his extra effort and value.

2. Be self-directed with your business goals. Don’t wait for someone else to decide what your next role or business objective should be. Being an introvert is no excuse for not communicating your interests and objectives to the people who can help. Take control of your own future through directed communication, targeted actions, training and practice.

   By definition, a leader is not someone who always follows others. Warren Buffett, while working as a stockbroker, set his own investment strategy and took a Dale Carnegie speaking course to more effectively communicate it. The results speak for themselves.

3. Don’t be afraid to take calculated risks. Avoid getting stuck in a rut because the usual approach is seductively familiar and safe. Try new techniques and approaches that take you outside your comfort zone, or raise your fear level at first. Be prepared to do the extra research and practice required to turn risk into leadership and success.

   One approach is to identify an emerging trend that could impact your organization or business, and volunteer to join an initiative to capitalize on it. Think beyond just attending industry conferences, to being on a “futures” panel, or even presenting your own ideas.

4. Keep ahead of others on use of new technology. Technological advances continue to accelerate and are driving change in business, so don’t let your introversion be perceived as indicative of an old dog that can’t learn new tricks. Embrace new technology as an ally, and use it to advance your leadership position over peers and competitors.

   Elon Musk has always been controversial, and has sometimes stumbled, as he stepped boldly into his vision of private space travel to Mars, and the growth of his Tesla electric car business. Yet he is consistently viewed as a leader in multiple technological areas.

5. Stay extra savvy about your business domain. Introverts really have the advantage in being able to listen and watch carefully to fully understand the corporate culture and behavioral norms, such as how the company is thriving, where it’s faltering, and who is on their way up or out. Then find the best way to fit into the picture, without compromise.

   These days, for example, it’s valuable to think globally about market and career shifts and opportunities, while others are focused only on the local domain. Make every effort to get there first, and suddenly you will find that people will follow your lead without talking.

In any business environment, it’s important that you not think of your introversion as a big weakness. Yet it is always valuable to hone a few extrovert skills, forcing you to move beyond your comfort zone in facing a changing world. If you are already an extravert, the strategies here will help you as well, by giving you that well-rounded view that we all need to succeed today.

Marty Zwilling

*** First published on Inc.com on 02/15/2019 ***