Saturday, February 29, 2020

7 Startup Risks That Come With Other People’s Money

businessman-investor-moneyOne of the myths I often hear as an advisor to many entrepreneurs is that their lifestyle would somehow be better if they could more easily find other people’s money to build their startup. They don’t realize that according to many experts, more than 90 percent of satisfied entrepreneurs use bootstrapping, since other people’s money always comes with strings, most of them negative.

For example, Bill Gates founded and grew Microsoft, and Michael Dell built a great technology company, both with no outside funding until they went successful enough to go public years later and sell shares to common stockholders. In fact, Michael Dell privatized his company again in 2013 for a few years, in his words to “unleash again the passion of our team members.”

Maintaining your team’s passion and freedom to focus first on innovating for customers are only a couple of the reasons for thinking hard before you seek money from crowdfunding, angel investors, venture capital organizations, or attempt to qualify for a public stock offering. Some of the specific challenges that always come with other people’s money include the following:

  1. You will stay awake nights worrying about how to pay it back. Most entrepreneurs never forget for a moment that having investors means owing money, even if they can legally argue that equity is not debt. Many times friends and family have been broken by failed investments. Usually it pays to move a startup slower rather than risk relationships.
  1. Investors want board seats and a vote on key decisions. Of course, this can be positive if you really need the help and experience in making key decisions. But I suggest that a small advisory board with the right people might give you better guidance (no near-term financial bias), and you can always choose to ignore it if your insights are strong.
  1. Pre-defined milestones and deadlines in an uncertain world. No entrepreneur enjoys the stress of committing to dates and results on an innovative and unpredictable journey to change the world. Yet every investor, including a rich uncle, will likely ask for specific progress evidence. Bootstrapping gives you the flexibility to explore creative alternatives.
  1. You left your corporate job to get away from budgets. When you are spending other people’s money, they want to know how much and when. Startups don’t come with the discipline on payables and receivables that you left at corporate. Investors quickly learn the only control they really have is financial, so they will use it to apply any constraints.
  1. Pivots become a source of pain rather than positive learning. Every startup I know has had to pivot at least once, no matter how certain they were of their solution and market. Pivoting early brings satisfaction and saves money and time, except when you don’t pivot due to investor evidence required, and the pain of explaining your mistakes.
  1. Explaining actions to investors takes time you don’t have. Very few entrepreneurs I know have the patience and time to communicate to the satisfaction of all investors. It’s usually the small investors who want the most frequent updates, or phone calls before every direction change, and investor relations costs only go up as your business grows.
  1. Investors will become the toughest boss you ever had. It’s very common for founders who find venture capital funding, to soon find out that they are being replaced by a CEO who has “more experience.” Other founders, even with experience, are forced out by disagreements over strategy or progress. You won’t be fired if you use your own money.

Of course, bootstrapping does imply living within your means, and it may require you to postpone your startup efforts while you build up an investment fund of your own. It also may mean finding alternatives to cash for attracting team members, or bartering services to expand your access to infrastructure or expertise. It also may just mean taking less money later.

On the other hand, avoiding outside funding means you can apply your passion and innovative solution without investor challenges, and remain in full control of your destiny. Isn’t this why you were attracted to the entrepreneur lifestyle in the first place?

Marty Zwilling

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Friday, February 28, 2020

7 Ways For Businesses To Work Less And Enjoy It More

work-less-and-enjoy-it-moreSuccessful businesses are all about getting results, not just working hard. As a new business advisor, I hear facts all the time about how hard an entrepreneur is working, but often have a hard time getting them to quantify results. You must never stop looking for ways to get more traction with fewer personal hours, and more productivity, efficiency, and momentum from the team.

In my view, it’s really unfortunate that most employees in business are still paid by the hour, regardless of their productivity. Thus you get what you pay for -- hours worked without any factoring of results and efficiency. Even you as the entrepreneur, who may not be getting paid at all, are tricked into thinking that if you had more hours, you could get better results.

Instead of counting and working more hours, I believe there are better ways to improve your productivity, as well as employee satisfaction, in growing your business:

  1. Create relevant result targets for all key employees. The first benefit of this approach is that it forces you to quantify your business objectives at every level, and employees know exactly what is expected of them, rather than just plodding through another day. Progress, or lack of it, will give you the feedback you need to focus on the right items.

    In business vernacular, targets are usually called metrics. A good metric has to be easily measurable, and directly correlated to results, rather than hours worked. For example, for a sales person, this metric number would likely measure new revenue or new customers.

  2. Provide incentives to focus everyone on real results. These incentives don’t have to be big cash bonuses. In fact, mounting evidence indicates that people respond just as well to non-cash recognition in front of peers, or special rewards. For you as the owner, the incentives are business growth, more customers, higher profits, all for less work.

    Incentives are a way to improve motivation and commitment, which are hard to measure directly. A more comprehensive study by Gallup showed that 70 percent of employees today lack these attributes. That’s a huge payback potential for the cost of any incentives.

  3. Prioritize all your time spent using the 80/20 rule. This rule, also known as the Pareto principle, proven in most businesses, suggests that 80 percent of real results come from 20 percent of the demands on your time. You will never be able to satisfy all the requests for your help, so it critical that you prioritize your efforts based on impact, not noise.

  4. Evaluate where technology and training can help. I still find entrepreneurs and employees who refuse to use computers and new techniques, because they don’t want to take the time to learn what’s available today. Make sure you are the model to follow, rather than the problem. It’s your responsibility to keep up with change in your industry.

    If your trusted accountant still keeps customer and financial records in a growing array of file folders, he is likely not doing himself or your business any favors, even if he puts in 100 hours a week. Your highest priority may be to help him make some changes.

  5. Balance your time between family and the business. You can’t be fully productive if you aren’t healthy, or you are under serious stress from the family. Practice that model at work to optimize employee productivity, by encouraging time off for vacations, family events, and entertainment. People unhappy at work are not helping your business thrive.

  6. Foster open communication between all team members. This has to start from the top, through you setting an open-door policy, frequent updates to the team, and making it clear that feedback and suggestions are appreciated, rather than penalized. Stress the importance of working as a team, and provide opportunities for team events and results.

  7. Highlight milestone successes often, rather than annually. Even small incremental successes, when publicly recognized, send the message that results are expected and appreciated, rather than work hours endured each week. Always strive to set achievable, yet challenging, milestones to make success more than an impossible dream.

The best and most successful entrepreneurs I know are the ones who talk first about the great results they are achieving, as well as the challenges they are overcoming. They are not hesitant to introduce me to their key employees and partners, and have them echo the same perspective.

Working hard should be something people can deduce from your results, not the other way around.

Marty Zwilling

*** First published on Inc.com on 02/13/2020 ***

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Wednesday, February 26, 2020

7 Leadership Strategies To Rev-Up Your Team Vitality

Richard-Branson-team-vitalityMost startup ideas begin in the mind of an individual, but an idea is not a business. It takes a team, with effective leadership, to build a business. Many aspiring entrepreneurs default to team leadership by domination and control. Yet in my experience, the best entrepreneurs quickly learn the art of people connection. They connect and inspire the right people to achieve more with less.

Connected leaders often become transformational for people and the company, as they use their people insights to incent a new level of performance, leaving team members feeling proud and deeply satisfied. Richard Branson, for example, often makes a point of rewarding outstanding people by taking them aside and telling them that they are now in charge of the new company.

The principles of connected leadership are outlined well in a classic book, “The Vitality Imperative,” by Mickey Connolly, Jim Motroni, and Richard McDonald. As principals of the Conversant consultancy, they speak from experience in improving people connectivity and leadership through working with over 400 organizations in 100 countries.

While their focus has been primarily larger organizations, I believe the principles they espouse are equally applicable to startups and small businesses. Here is my extrapolation of their key elements of connected leadership into the entrepreneurial world:

  1. Be visibly present and aware of individual sensitivities. In the chaos of a startup, it’s easy to have “not enough time” to listen and relate to individual members of the team. As a result, impatience increases and effectiveness declines, leaving even more to be done. Presence without prejudice increases leader trust, and enjoyment of work by all parties.
  1. Seek to appreciate team goals, worries, and circumstances. People in a new venture are not mechanical elements. Align your leadership practices with human nature, which requires empathy. In any organization, large or small, empathy improves accountability, accelerates learning, increases influence, and facilitates future planning.
  1. Define and highlight a business purpose, beyond profit. A common purpose creates a community. Process without purpose leads to frustration and bureaucracy. The tangible benefits of a purpose, such as reducing environmental pollution, include making work more meaningful, promoting teamwork, and improving personal role commitment.
  1. Speak the truth, even if painful, over avoidance and deception. Authenticity creates trust, accelerates the solution process, improves agility and resilience, and inspires innovation. Some leaders avoid candor to reduce employee fear, and others to induce fear. But the most destructive fear is the fear of deceit, only eliminated by authenticity.
  1. Outline future potential for the business and the person. Connected leaders don’t let probability and ordinary work destroy possibility. Seeing wonder in the future breaks the grip of the past, redeems mistakes, creates options, and ignites vitality. This leads to new connections and creates new possibilities for the venture and the person.
  1. Build a culture of innovative evolution after initial revolution. Startups often begin with a revolution, but continuous revolution is risky and stressful. A better sense of timing is a commitment to an agile, ever-evolving venture, where the return on investment can be predicted. This improves team leverage, getting more out of time, money, and talent.
  1. Leverage small surprising results into repeated cycle momentum. Momentum is a powerful multiplier that supercharges community, contribution and choice. Surprising positive results are energizing, cause people to update their beliefs, and cause positive chain reactions. Connected leaders share the lessons and show due appreciation.

The vitality of a startup team, and the founder leadership provided, are more key to startup success than the potential of the initial idea. This is why professional investors will tell you that they invest in people, rather than ideas. How much value can the principles of connected leadership bring to your new venture?

Marty Zwilling

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Monday, February 24, 2020

6 Benefits of Outsourcing and Freelancing In Startups

PrintOne of the most stressful and unanticipated challenges that comes with starting a new business is hiring and managing employees. Many entrepreneurs I have mentored make big mistakes in this area, by hiring low-cost friends and family, with minimal skills or training, and expecting them to have the same work ethic, passion, and business knowledge as the founder.

A solution I often recommend, as least in early growth, is the use of outsourcing for critical tasks. While this approach appears to cost more on the surface, it often actually costs you less, when you consider the hidden costs of rework, poor customer satisfaction, employee management, and training required. As your business matures and stabilizes, regular employees make more sense.

I just finished a new book for entrepreneurs, “Secrets to a Successful Startup,” by Trevor Blake, which makes the same points, based on his own real-life experience with three successful startups. He outlines well the following benefits of outsourcing and freelancing, and I agree:

  1. Serving your business well is a competitive priority. With worldwide instant access to skills and alternatives via the Internet, I see a much more competitive and skilled remote workforce than ever before. Contract employees know they have to perform well or they will be quickly replaced. The terms are clear, and there is no entitlement to deal with.

    Of course, it still pays to consider the impact of cultural norms and languages, as well as time zones, particularly in areas that present your image to customers, such as customer service. Direct customer-facing non-technical roles should be the last ones outsourced.

  2. Outsourcing can give your startup a more mature image. Customers won’t know that vendors are not employees of your company. Outsource providers will adopt your company name when they interact with others, and their expertise can help you overcome the hesitation of some clients to do business with small and new businesses.

    For example, if I need help with product installation or customization, I don’t want to see someone who is clearly new to this role or inexperienced. Most freelancers are already experts and confident from previous assignments, and that image will help your business.

  3. You contract expertise rather than train employees. If you do your due diligence hiring job right, the contractors you outsource will already be trained in their jobs. with experience. Their career depends on keeping up their skills, and they must have the confidence to work unsupervised. Training takes time and energy you may not have yet.

    One of the first places that many entrepreneurs effectively use outsourcing, is in the initial hiring of key employees, and the execution of key Human Resources functions. HR is easily done on a contract basis, and may not be a full-time function for early businesses.

  4. Avoid employee-related expenses and management. By using contractors and vendors, you avoid all the expenses and regulations that come with employees, including career management, worker’s compensation, health insurance, and tax withholding. In addition, you can reduce to soft costs of mentoring, relationship building, and socializing.

    According to a recent MIT study, the true costs of employees are typically in the 1.25 to 1.4 times base salary range, not including space and equipment requirements. This goes a long way in covering any premium that you might pay for comparable freelancers.

  5. Freelancers are ready to go to work immediately. Outsourcing vendors hire, train, and manage their own employees, using their own human resources, performance, and appraisal systems. They need no office setup, since they have their own. By outsourcing to experienced staff, you can focus your time and energy on your business growth.

  6. You can easily adjust services to control cash-flow. Services vendors typically offer a menu of services, so you can select what you want when you need it. Outsourcing gives you the flexibility to add on or cut back services and volume according to demand, and meet your cash-flow management requirements. Startups all need that flexibility.

    Every new business finds it impossible to project growth and service needs, since they have no experience or history to guide them. In addition, they often find the need to pivot as they learn more out their customer needs and solution match to the market.

I recognize that there are potential negatives associated with outsourcing and freelancing, including threats to security and confidentiality, continuity issues, communication challenges, and impact on existing employee morale. Yet, in my experience, the pros far outweigh the cons in modern startups, so don’t let managing employees be the nemesis of your great new business.

Marty Zwilling

*** First published on Inc.com on 02/07/2020 ***

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Sunday, February 23, 2020

7 New Dimensions Of Market Value In This Digital Age

scale-money-value-balanceAs a startup advisor, I see too many entrepreneurs get distracted by technology or their favorite cause, and then wonder why they can’t find an investor, attract customers, or build a long-term business. Every startup needs to start with an honest assessment of how they provide customer value, and how that translates into a sustainable business return for stakeholders and growth.

Customer value used to be a simple concept of how much they pay for a solution, compared to their incremental cost reduction driven by your business. Now these principles are complicated by the worldwide instant access to many competitive alternatives, indirect social and environment impacts, and the velocity of change enabled by the pervasive market move to digital.

The market is now a chaotic swirling storm of change, which is characterized in the classic book, “Digital Vortex,” by Jeff Loucks et al, as causing digital disruption on a massive scale. In this new world, finding customer value is elusive, where out of nowhere startups and other tech savvy disruptors attack, and your most loyal customers bolt for the door at the slightest opportunity.

The authors focus on the many new principles of customer value in the digital disruptor age, which I believe every business executive and entrepreneur needs to understand, in order to make their business more competitive and investable. These principles include the following:

  1. Free and ultra-low cost may no longer be competitive. The old saying that it’s pretty hard to compete with free no longer holds, when cost is not the primary customer value element and free is the norm. Customers now put big value on experience, social impact, empowerment, and feedback. Value to second-order customer advertisers is key.
  1. Internet disruptors make prices and margins transparent. A wide range of digital comparison-shopping tools enable customers to see differences, and instantly source at the lowest cost worldwide. Competitive customer value that can be monetized for stakeholders has to go beyond the short-term value of special deals and coupons.
  1. Customer empowerment and digital tools removes middlemen. Circumventing middlemen (going direct) do-it-yourself (DIY) and placing the customer “in charge” are core element of digital disruption to traditional customer value levers. For example, Netflix uses a digital model to unbundle television programming, creating new customer value.
  1. Digital customization creates unique experiences for each customer. Value is now derived by tailoring the product per customer, or interpreting a user’s location and specific needs to create an experience that maximizes value. Even advertising and search results are personalized per user for maximum impact and improved business return.
  1. Instant gratification requires automated digital fulfillment processes. This business model gives customers the value they want without have to wait, either by delivering physical products quickly, or by providing digital versions instantaneously. In today’s world, time is often more valuable then margin to the business as well as the customer.
  1. Digitizing processes reduces friction and increases convenience. Automation provides customer value by using technology to complete tasks and arrange for the completion of tasks by others. Customers and businesses alike benefit from not having to enter the same data multiple times, and making better decisions from accumulated data.
  1. Digital platforms create network effects that multiply customer value. Network effects are huge value generators. They span the gamut from peer-to-peer interactions to crowdsourcing, gamification, and communities. They are a powerful competitive force, once successfully established, that is difficult to dislodge with winner-take-all potential.

Digital disruptors have also introduced the concept of value vampires, who shrink the overall revenue and profit pool in a market to gain competitive advantage. On the other side of the equation, every business needs to find value vacancies, which are market opportunities that can be profitably exploited via digital disruption.

Thus customers and investors still need to see customer value at the key deliverable from your business, rather than technology or a “save the world” mission. But in this Digital Age, customer value has many new dimensions. Make sure you are focusing on the right ones for your customer segment, and the return for your business will let you live long and prosper.

Marty Zwilling

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Saturday, February 22, 2020

8 Guiding Principles To An Enviable Employee Culture

Culture_is_something_that_unitesWith today’s interactive social media and the real-time Internet, both customers and employees see inside your company easily, so you can’t hide your real company culture. At the same time relationship perceptions have become the biggest drivers to customer loyalty and employee engagement. Thus in every business, big or small, culture can make or break your success.

Examples of companies well known for their winning cultures inside and out include Apple and Google. In both cases, their products are not generally cheaper or unique, but the mindset behind how they do what they do, and think what they think, makes them stand out. Others, by most accounts including Blockbuster and JCPenney, lost their focus on culture, and paid a heavy price.

In fact, most entrepreneurs and executives today recognize the importance of building and maintaining the right culture, but many are not so clear on how to do it, or assessing where they stand in the process. To that end, I was impressed with the specifics provided in a classic book, “Nimble, Focused, Feisty,” by Sara Roberts, a “go-to” expert on organizational transformation.

What I have seen in startups correlates well with Roberts’ evidence that there are three basic elements of a winning culture mindset today – fast is better than big, possibility over profitability, and being passionately outward-directed to customers and employees. I support her outline of several guiding principles for any company on how to achieve and maintain this mindset:

  1. Remain nimble and ready to pivot. Winning organizations have a culture of no expectation of always doing what they are currently doing. They know how rapidly things change, and that today’s positive reality may not carry them to where they ultimately want to go. They are always on the lookout for new opportunities and innovations.
  1. Structure for speed in making changes. Speed in any organization is largely a function of hierarchy, trust, and the ability to make decisions quickly across the organization. The primary key is establishing a culture that relies on values, rather than rules, to guide every action. Teams and individuals at all levels must be motivated to make decisions.
  1. Solve problems by co-creating and collaborating. Effective collaboration requires bringing together a variety of contributors who trust each other to get to the best solution. These days, that includes the initiative to bring up issues and tap the wisdom of “crowds” through social media, employee forums, and listening to industry influencers.
  1. Lead with purpose as a balance to profit. Increasingly, the landscape is shifting from an emphasis on “how” to an appreciation of “why,” both inside and outside the company. If executives don’t see social good or higher purpose as important to success, customers and employees will remind them – overtly by feedback, or passively by deserting them.
  1. Maintain a customer-centric focus. Businesses oriented primarily toward near-term shareholder value make themselves vulnerable in the long term. If you focus on what’s best for the customer, both near-term and long-term, you will see where customers are headed, and can plan change versus crisis reaction. Talk with real customers constantly.
  1. Find leaders who are courageous connectors. Courageous leaders acknowledge doubt and gaps, but still make decisions with confidence. Connector leaders enable their teams to navigate other organizations effectively, connect them with required resources, and expand their sense of possibilities and purpose. Set the culture by example.
  1. Build teams with people who get things done. A nimble organization needs doers and makers. Makers are not scared of taking action; in fact they’re biased toward action. They ask forgiveness rather than ask for permission, are motivated by results, and naturally collaborative. Leaders help most by not putting barriers in the way of their people.
  1. Winning cultures need consistent people practices. The best team cultures are built and maintained by systematic and deliberate hiring. Don’t hire only under duress, or settle for less than the best fit. Involve the team in selecting the best fit, culture matching, and getting “buy-in” from all the right players. Motivate with meaning, not just money.

For companies to remain successful in this new era, they need a culture that is proactive rather than defensive. It’s purposely designed, leveraged, and honed to be nimble in addressing change, customers, and integration of purpose with business value. How long has it been since you have reviewed your culture at the employee and customer level? Surprises are expensive.

Marty Zwilling

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Friday, February 21, 2020

6 Ways To Make You An Entrepreneur Before The Product

personal-brandMany of the entrepreneurs I advise or invest with spend considerable time on the Internet, keeping up with technology, customers, and competitors, but very few feel the need for an early personal presence. In fact, some totally avoid it, assuming their product or solution will speak for itself later. They don’t realize that you need to build positives early, to offset any negatives later.

The reality online these days is that even the best solutions attract doubters and unhappy competitors, so don’t wait for that first negative message to make you surface online. Be proactive in defining your personal and business identity early with positive content, well before your product debuts, highlighting your current vision, accomplishments, and personal image:

  1. Establish a personal brand online as an influencer and leader. Contributing to industry blogs, or starting your own, is an ideal way to express your positive values, and build a reputation that can save you later if your product stumbles, or you receive some negative challenges. A positive personal brand will give your product instant credibility.

    You should also use these forums to test and hone your solution idea for general acceptance, before your risk your own money and investor funds to build a shippable version. It’s easier, cheaper, and quicker to pivot at this stage rather than later.

  2. Anticipate and establish supporting social media accounts. It’s amazing how quickly competitors and “me too” products can encroach on your space, after your product debuts, with account names you should have reserved. You may not see the need for a YouTube, Instagram, or Twitter account now, until someone takes the name you want.

    Identify misdirection can be as devastating to a business as identify theft. Customers expect consistency of your brand name across all channels, so don’t pick a web site name if the comparable name is available or already taken on relevant social media.

  3. Consistently review and respond to relevant online feedback. There are dozens of tools available to help you monitor relevant activity, including Social Mention and Google Alerts. All significant feedback, both positive and negative, should be acknowledged or answered in a timely and non-defensive fashion to show that you are listening and care.

    Don’t make the mistake of ignoring negative comments or reviews, hoping they will go away, or someone else will come to your defense. Remember the classic “United Breaks Guitars” experience, which reportedly United cost over a billion dollars in lost business.

  4. Invest your time in networking online, as well as offline. Your reputation and impact these days are highly influenced by who you know and interact with online, as well as your recognized expertise. You need to be an active member of LinkedIn, Meetup, or equivalent sites where influencers exchange ideas and discuss current business issues.

    These online interactions must be complemented by comparable offline activities, such as participation in industry conferences, mentoring, and publishing print articles to solidify and expand your reputation. Every future entrepreneur should start by networking.

  5. Make your lifestyle a model of the online reputation you want. In today’s world, it is impossible to live one image, and project a different one online. The Internet, through pictures, sound, and text, sees everything, including the good, bad, and the ugly. In fact, sharing a positive portion of your personal story is a memorable way to get presence.

    If you listen carefully, I think you will find that most of the people you know who have a high respect for a famous entrepreneur, for example Elon Musk or Jeff Bezos, will remember one or more their personal anecdotes, better than a technical contribution.

  6. Reach out to friends and supporters for positive mentions. If they credit you in their blog or industry articles, those backlinks will boost your SEO ranking, as well as your perceived reputation online. Most people now believe that we learn more from our mistakes than from successes, so even indications that you are not perfect can help you.

    I find that even friends and supporters online have short attention spans. If they don’t hear from you, or you don’t offer to do something for them occasionally, they will forget about you in assigning credit or soliciting mutual future support.

I recognize that preparation for and execution a product launch can be all consuming, causing you to back away from your normal networking and online communication activities. Yet I assure you that your personal impact, and future product success, can be severely impacted by this lack of focus. A positive online solution image and reputation requires constant personal nurturing.

Marty Zwilling

*** First published on Inc.com on 02/06/2020 ***

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Wednesday, February 19, 2020

5 Priorities For New Business Leader Self-Development

business-leader-developmentIn my business of mentoring new entrepreneurs and advising small company owners, I recognize that most don’t start as experienced leaders, and most don’t realize that people leadership is a primary key to their future success. Building a business is not a one-person job, and leading by edict rarely works today. You need to pick the right people, and learn as you go to lead the team.

I just completed a new book, “The Self-Evolved Leader,” by Dave McKeown. While directed at larger enterprise leaders, it really hits all the key elements of learning and evolving as a leader that I recommend to entrepreneurs. It should convince you that no matter how much you know about technology, leading a team, as well as vendors and customers, is a whole new challenge.

I find that the hardest part of becoming the business leader you need to be, is learning and changing yourself, rather that trying to change the people around you. Here are the key internal characteristics that McKeown and I both see as critical to your growth from a technical expert who can develop a great solution, to the recognized business leader you need to be to prosper:

  1. Measure yourself on how much you have learned lately. True leaders are never satisfied with what they know about their leadership, as well as their products, and are always in pursuit of new learning. That means constantly seeking feedback, taking time for relevant seminars and guidance, and looking for positive changes in the organization.

    Another approach is to tackle one specific problem at a time. For example, if feedback tells you that you don’t communicate well, start measuring yourself on how many times you send out unsolicited notes on status, strategy, guidance, and praise for results.

  2. Don’t be afraid to demonstrate your vulnerability. Without vulnerability you can’t have an objective understanding of your leadership effectiveness. Until you admit your weaknesses, such as marketing or communication, you team won’t have the courage to take the initiative to show what can be done, and help you learn how to improve.

    In my own business career, this was a tough one for me. I felt that vulnerability itself was a sign of weakness, and the team needed strength. Over time, I learned that I could get more personal results, as well as satisfaction, by enlisting the natural strengths of others.

  3. Practice deep empathy for everyone on your team. With empathy comes compassion and an understanding of the impact your decisions as a leader have on your team. It’s the necessary foundation for helping everyone on the team develop into their best selves, and optimizing the output to be greater than the sum of the individual capabilities.

    If you’re naturally low on the empathy scale, make an extra effort to not just recognize team member feelings, and your impact on others. In private team member discussions and counseling, don’t be afraid to ask about feelings, and be willing to share your own.

  4. Foster a sense of connectedness between team members. Self-improving leaders recognize that what positively impacts one member impacts others, to improve actions, careers, and lives. All are interconnected, so optimal team performance is dependent on optimizing each individual role to their particular set of strengths, including yours.

    One of the best things you can do to establish that connection with your team members is to focus on building strong personal relationships with each, and foster relationships between them. As the leader, you must reach out to them, not the other way around.

  5. Understand what you can control and accept what you can’t. No leader can control all external circumstances around them, whether it’s politics, people, economics, or even the luck of the draw. Good leaders never complain about what they can’t control, and never demand results from team members which are outside their control.

    A key part of the acceptance process is learning to be the team model for coping with a crisis. If it involves elements outside your control, you must keep your emotions in check and make a more conscious decision about how to deal with the difficult situation.

The successful entrepreneurs I know all tell me that as they learned to be better leaders, they were able to spend less time on daily crises, and more time for the important things, like long-term direction and people development. Equally important, they were able to reduce their own stress level, improve business-family balance, and enjoy more satisfaction from their efforts.

Marty Zwilling

*** First published on Inc.com on 02/04/2020 ***

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Monday, February 17, 2020

6 Challenges In Penetrating The New World Of Services

BusinessServicesSelling services has always been about relationships, but the challenges of building relationships with services clients have exploded. Customers today extrapolate their relationships not only from personal contact, but from every aspect of their interface with your company, including web site and social media interactions, access to peer reviews, as well as the actual services experience.

In addition, as every business becomes instantly global via the Internet, it’s virtually impossible for you to touch every customer personally. Thus services experiences and relationships tend to be based more and more on new media and technology. Customers today may actually feel a personal relationship, or an unsatisfying one, without ever interacting with you or your team.

I saw these modern challenges and some positive guidance summarized in the classic book, “Service Excellence,” by Ruth N. Bolton, a distinguished Marketing Educator Award winner at the W.P. Carey School of Business. I agree with her focus on six challenging characteristics, both old and new, of every services business:

  1. Intangibility of a customer experience with services. Customer services experiences can’t be seen, felt, tasted, or touched in the same way that people interact with tangible goods. Services experiences are different for each client, so it’s important to customize experiences and timing per customer. If your business doesn’t offer personalized services, don’t expect good relationships.
  1. Relationships are a function of customer culture. For consistency and efficiency, services companies have traditionally minimized personalization. Yet today, people of every culture worldwide expect every relationship to relate to their unique perspective. Companies need service strategies that increase spontaneity to enhance experiences.
  1. Experiences are more visible to other customers. In some cases, such as in a hair salon, services are delivered in view of other customers who may be impacted by your experience. In all cases, experience details are quickly and easily communicated to others via Facebook or Yelp, meaning a relationship will impact many others very quickly.
  1. Services experiences cannot be inventoried. Service organizations must find effective ways to manage capacity and thereby match the supply and timeliness of services with customers’ usage of them. It is very important for service companies to use and market peak load pricing, seasonal, and customer scheduling without impacting relationships.
  1. Infusing technology within the customer experience. Customers now expect services to be more technology-enabled, such as online banking, parcel tracking, transportation on demand, and smart home security. The overall experience and relationship derived are more and more set by the technology interaction, rather than personal interaction.
  1. New media shapes and reflects the customer experience. Unlike traditional media, which is not interactive, social media provides for and customers expect targeted, personalized, and socially responsible communications. These become a key part of your engagement and relationship, and also define community and demographic associations.

The rise of the “sharing economy” has sparked intense interest in services that allow people to co-produce the service in new ways, such as Airbnb for accommodation and Uber for transportation services. Thus your relationship needs to consider ways that customers can participate through spontaneous and discretionary contributions to your services, with variations for each market segment.

It’s time for all services organizations to take a future-oriented view of customer experience and relationships, rather than the traditional retrospective view. Services are no longer a simple people-to-people business. Relationships and experiences are now driven more and more by interactive media and smart technology. If your services business isn’t innovating with the market, it’s falling behind.

Marty Zwilling

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Sunday, February 16, 2020

7 Ways Growing Companies Drift From Startup Thinking

brainstorming-businessmen-computerEvery new venture that survives the first five years starts to drift away from their entrepreneurial thinking, and assumes they have achieved the path to longevity. In fact, even within Fortune 100 companies, almost 90 percent have encountered growth stalls or flirted with failure, or worse, in the last 50 years. No company can afford to lose the agility, flexibility, and innovation of a startup.

Examples of great companies that have achieved longevity, by initiating major changes, include American Express (originally express mail), IBM (tabulating and computer hardware), and J.P. Morgan (chemical manufacturing). Others, including Eastman Kodak (film and cameras), Pullman Company (railroads), and RCA Victor (radio) never kept up with change and are gone forever.

The many ways that great firms can slip away from entrepreneurial thinking were highlighted in the classic book, “Achieving Longevity,” by Jim Dewald, based on his own experiences as a corporate executive, entrepreneur, and Dean of the Haskayne School of Business. Here are a few of the key challenges he outlines that I have seen as well:

  1. Competitors are easier to quantify than new opportunities. Competitor statistics are the domain of analysts, financiers, and shareholders, so naturally it is attractive for companies to focus on them primarily. Undefined opportunities which may be built from innovation are the stuff of dreams and passion, relegated only to entrepreneurial thinking.
  1. Companies follow each other rather than the market. Change is hard. Businesses firmly ensconced down an existing path find it hard to leave their comfort zone or jeopardize current revenue streams, and tend to prioritize the value of incremental change, even in the face of new markets, technology, or economic conditions.
  1. The future is extrapolated from internal data analysis. Metrics and observations while running the existing business become the primary basis for future projections. This data reinforces what they already know and believe, so a divergent path rarely looks attractive. The result is a self-fulfilling prophecy that often leads to disaster.
  1. Efficiency focus strips away resources from innovation. Through cost-cutting and highly-specialized hiring, firms unintentionally weed out the capacity to innovate and adapt to change. The drive for resource-based advantage can be profitable for big companies, but it is always temporary, never permanent.
  1. Penalties for management learning experiences. In an entrepreneurial venture, errors are expected, and even celebrated when positioned as learning opportunities. In stable corporate ventures, mistakes are seen as a signs of incompetence, and penalized by loss of bonuses or position. As a result, undefined new opportunities are deemed too risky.
  1. Focus on data-driven leadership versus passion. Strong creative views or even arrogance in new realms by entrepreneurs is expected and often revered, as was the case with Steve Jobs at Apple. In corporate boardrooms, a show of hubris or emotion is deeply troubling, and can end careers. Logic and data-driven leadership is the norm.
  1. Intolerance for pivots and failed experiments. Every startup I know has pivoted at least once, and expects failed experiments to lead them to the true market. In corporate environments the cost in time and dollars of a pivot or failed experiment can be huge, like turning a large battleship. Stakeholders and board members alike react very negatively.

What is most ironic is that the inverse of many of these challenges is critical to success in the first five years of a new venture – focus on competitors, generating internal data and analysis, emphasizing data-driven leadership, and creating standardized repeatable processes. Many see these activities as the elimination of entrepreneurial thinking, for stability and endurance.

My message is that the pendulum has to swing in concert with the market and the economy, as well as the maturity of the company. Today’s market is extremely volatile, where unprecedented change is the norm, and entrepreneurial thinking is the only way to assure longevity. Maybe it’s time to take a hard look at the balance in your own mindset and your business.

Marty Zwilling

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Saturday, February 15, 2020

10 Timeless First Principles Of A Prosperous Business

business-success-principlesIn this world of constant change, new technologies, and a thousand cultures, it’s evident and somehow comforting to me that the basic rules for business prosperity really haven’t changed in the last hundred years. Business success is still more about the people than the technology or idea involved. As an angel investor and a mentor to entrepreneurs I still see this every day.

I was just reviewing a collection of essays by and about Napoleon Hill, “The Science of Success,” who is most recognized as the author of the best seller “Think and Grow Rich” from way back in 1937. Hill attributes his ten rules of success to Andrew Carnegie, who was in his prime well before that, over a hundred years ago, but I believe the principles are still critically relevant.

Since language and implication have changed a bit since then, I’ll restate Carnegie and Hill’s original principles here, with my own current-day commentary and recommendations added:

  1. Definiteness of purpose. Every entrepreneur needs to start by setting a major purpose for embarking down a specific business path. This objective needs to go beyond making a parent or spouse happy, getting rich quick, or advancing a technology. For success these days, the purpose better focus on people, and solve a real problem for customers.
  1. Master-mind alliance. Building successful businesses still requires the ability to find and inspire the best people who “have what you haven't,” whether that be skills, knowledge, connections, or funding. Then you must extend these alliances to vendors, partners, customers, and even competitors (coopetition).
  1. Going the extra mile. Hill's eagerness to serve others gave him greater opportunities, and this Law of Reciprocity works the same today. Doing more than you have to do is the only thing that justifies raises or promotions, and puts people under an obligation to you.  This is still one of the most important competitive differentiators that you can offer.
  1. Applied faith. This is a level of belief that has action behind it. Anyone can have ideas, passion, and faith about an important business opportunity. Yet for most people it’s only a daydream, since they are not willing or able to commit the actions required to deliver. Results are still the only true measure of success in business.
  1. Personal initiative. Successful entrepreneurs do what they need to do without being told how to do it. Asking for insight is not the same as asking for the next step, or asking an advisor to make the decision. Great entrepreneurs are proactive, not only in selecting the right idea, but in implementing a product, setting a price, and choosing customers.
  1. Imagination. This is the number one skill required for creativity and innovation. Without imagination, entrepreneurs cannot look at a problem from a new perspective. Without imagination, entrepreneurs cannot visualize how various solutions to a problem would work. Without imagination, entrepreneurs can never dream up new ideas.
  1. Enthusiasm. This is the contagious quality that great entrepreneurs have to attract correlative passion, commitment, the best people, and customers to their idea and solution. Enthusiasm is one of the most powerful motivational tools in an entrepreneur’s arsenal, and no success will accrue without it.
  1. Accurate thinking. Accurate thinking is the ability to separate facts from fiction via deductive reasoning, and to isolate and use facts effectively that are pertinent to your own challenges and problems. When the necessary facts are not available, accurate inductive reasoning or hypothetical thinking is required to fill the gap.
  1. Concentration of effort. In current terms this is called focus and determination, to never give up and never be diverted from your purpose. With focus and determination, you and your team will understand what's most important for success, and drive your motivation through the execution steps required.
  1. Profiting by adversity. This simply means remembering that there can be an equivalent benefit for every setback. Successful entrepreneurs learn from funding failures, economic adversity, ruthless competitors, and lethargic customers. They insist on greater efficiency, try new business models, organizational improvements, and better cash management.

Carnegie and Hill understood how business success rules were tied to the entrepreneur way back in the early 1900’s, and the evidence is that those rules are still as applicable now as they were then. Business models and technology have improved dramatically, but the power of people with foresight, passion, and determination continues to supersede all these elements.

So the next time you are tempted to broadcast an abstract email to me and other investors on your new “million dollar idea,” make sure you include your track record on how well you stack up against these rules for business success. Investors still tend to bet on the jockey, not the horse.

Marty Zwilling

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Friday, February 14, 2020

5 Strategies For Startup Partnering To Win Long Term

elon-musk-jb-straubel-drew-baglinoBusiness partnerships have traditionally been agreements to drive more transactions than either company could do alone. The new paradigm, driven by disruptive technologies, cloud-served supercomputing, and the new generation of young adults with global empathy, is partnering and giving something now for a competitive advantage in the future.

An excellent example is the initiative by Elon Musk and Tesla Motors a few years ago to give away their battery patents, to infrastructure and competitive car providers, without transactional agreements. This will facilitate the expansion of battery charging and support facilities, and ultimately create more customers and growth for the whole industry, including Tesla.

Another partnering model example is the IBM Watson Group $1 billion investment to share cloud-based development and super-computing tools. A partnership was announced with the City of New York, to connect and grow NYC's startup ecosystem. This facilitates technology growth and innovation for startups in Silicon Alley, as well as positioning IBM for growth down the road.

These initiatives are what Bob Johansen and Karl Ronn call “The Reciprocity Advantage” in their classic book on how partnerships must work in the future for innovation and growth. Johansen knows this space, as a distinguished fellow at the Institute for the Future in Silicon Valley, and Ronn is a serial entrepreneur and managing director of Innovation Portfolio Partners in Palo Alto.

Their recommendations are consistent with mine in working with startups, as well as more mature organizations, to start future-proofing their growth in today’s world of relationships and conscious capitalism. The basic steps to adopting this reciprocity advantage paradigm can be summarized as follows:

  1. Identify your assets that have complementary value to others. Johansen calls this uncovering your right-of-way. Ideally, this is an existing platform where you already have established the ability to innovate with authenticity, and can afford to give access to others, with the potential to yield greater value later, like the Tesla and IBM examples.
  1. Find partners who can do what you cannot do alone. Here you are looking for formal and informal relationships that can increase your innovation potential in the long run, and not be inclined to undermine your own efforts. Some of the more interesting partnerships may be asymmetrical: very big companies partnering with startups, or even individuals.
  1. Learn by experimenting in low-cost and iterative ways. This is the new world of do-it-yourself (DIY) prototyping. FabLabs is an example of a new class of facilities for entrepreneurs to start experimenting early. Success is when both you and your new partners learn how to make money while experiencing new growth from the initiative.
  1. Scale it once you figure out what works. When you are convinced that your new business offering is desirable, viable, and ownable, then you are ready to scale. Cloud-served services will be an amplifier for almost any opportunity, not only in the developed world, but in the developing world as well. Social media relationships fuel the scaling fire.
  1. Maintain the agility to quickly pivot or quit. Not everything will work. Too many companies and entrepreneurs find it hard to stop a bad project. Key success indicators to monitor are passion level, and the ability to meet regular short-term milestones. If a plan doesn’t work, the key is to fail fast, create a new plan, but don’t give up.

The authors and I predict that the new forces of social structuring and the so-called digital natives (Gen Y and younger) will soon disrupt the traditional transaction model for doing business, as well as the current partnering model. Partnering will begin to happen across great distances, include reciprocity thinking, and even intellectual property will shift from a closed to a more open system.

It’s time for every individual, startup, and mature company, to uncover their shareable value, find complementary partners, and capitalize on their scalable advantages. I’m certain you will find it to be more fun and more productive than plotting every day to kill your competitors for growth.

Marty Zwilling

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Wednesday, February 12, 2020

6 Personal Assessment Tools To Optimize Career Growth

career-businessman-arrowsToo many people, young and older, let their career and their lifestyle happen to them, rather than proactively making things happen based on their personal passions, skills, and interests. Others make decisions based on someone else’s interests, such as the father who wants his son to take over the family business, or dreams openly of having a doctor in the family. Neither of these approaches is likely to lead to a satisfying career or personal happiness for you.

These days, with the instant access to information and experts in every field around the world, and the wealth of personal assessment tools available on the Internet, there is no excuse for not exploring and evaluating the alternatives before you make a step forward. A very credible starting point is the classic book “Promote Yourself: The New Rules For Career Success” by Dan Schawbel, managing partner of Millennial Branding, a Gen Y research and consulting firm.

Among other things, he outlines some of the popular assessment tools that I also often recommend as a mentor to entrepreneurs, including the following:

  1. MBTI (Myers-Briggs Type Indicator). Myers Briggs is one of the most widely used and recognized career assessments in existence, and does an excellent job of identifying your personality type so you can connect it to the right career and lifestyle. It can also help you better relate to others and become more self-aware.
  1. Gallup's Clifton Strength Finder. The focus of this tool is to help you discover your top five strengths and learn how you can use them to excel and perform at a higher level. The creator, Dr. Donald O. Clifton, is widely recognized as the Father of Strengths-Based Psychology, and has helped millions of people around the world discover their strengths.
  1. Marcus Buckingham StandOut Assessment. This one builds on the positive premise that the most effective method for improving people is to build on their strengths, rather than correcting their weaknesses. It’s the one to use if you have tried other assessments that claim to tell you who you are, but don't tell you what you can do with that information.
  1. Career Key. This one helps you identify careers and even college majors that match your set of interests, traits, skills, and abilities. It was developed by Lawrence K. Jones, a professor Emeritus in the College of Education at North Carolina State University, who specializes in the areas of school counseling and career counseling and development.
  1. MAPP™ Career Assessment. The MAPP career assessment is perfect for students, graduates and working adults. You'll get a wealth of information to help find the right career that matches your unique assessment profile. The MAPP career test was one of the first comprehensive career tests online for consumers, with over 8 million customers.
  1. Leadership Motivation Assessment. This one tells you how motivated you are to be a leader. After all, it takes hard work to become an effective business leader; and if you are not prepared to put this work in, or if, deep down, you're not sure whether you want to lead or not, you'll struggle to lead people effectively, and not be happy doing it as well.

If after taking one or more of these, or another one I just found, “Fingerprint For Success,” you are still stuck on what domain you fit best into, whether you should be an entrepreneur, and how to get started, the following questions should help get those introspective juices flowing into action:

  • When have you been the most committed and passionate toward something in your life?
  • What talents do you use the most and what are your strengths?
  • Which roles and activities did you like and dislike in the past?
  • What aspect of those roles did you like the most and least?

After you get your own thoughts and assessment results together, it helps to get some feedback from people you respect, including parents, industry experts, and mentors. An outside perspective can be incredibly valuable as well, and help you narrow down what may seem like a long list, and relate that to the real world. Something you feel passionate about that doesn’t put food on the table, for example, may not be sustainable.

But the time to start is now. The most important point is to plot your own path, rather than be a victim of unpredictable circumstances and someone else’s whims. Don’t let other people be winners at your expense.

Marty Zwilling

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Monday, February 10, 2020

7 Business Leadership Keys To A Thriving New Venture

startup-leadershipOne of the realities of being an entrepreneur is that you have to keep learning and changing to survive. Everyone on the startup team knows there is no buffer, and no personal isolation from impact based on your job description that can save you. Thus everyone has to make sure they are focusing on what is important, and making leadership decisions to save the business.

That is what business leadership is all about. Unfortunately, in mature companies, a larger and larger percentage of employees forget company survival and customers as the objectives, and focus only on their own personal gain. Risks to the business drift off their radar screen, resulting in poor business decisions, as well as less job satisfaction and declining professional success.

In a classic book exploring these issues, “Lead to Succeed: The Only Leadership Book You Need,” Chris Roebuck, an expert on transformational leadership, highlighted the positive impact of entrepreneurial leadership. I have worked in both large companies as well as startups, and I have observed first-hand the principles that he highlights:

  1. Total focus on delivering to the customer. Every startup team member is close to the customer front lines, so they see how every function does or does not add value to the service they give to the customer. People in larger organizations move away from day-to-day contact with the end customer, and focus becomes company internal and isolated.
  1. Optimizing risk, not minimizing it. Calculated risks must be taken to enable change, to improve, and meet new customer needs. Minimizing risk will eventually cause any company to fail. Mistakes will happen, so the objective should not be to eliminate all mistakes, but to catch them before they create disasters, and become repeatable.
  1. Constantly being creative and innovative to get better. Mature organizations forget that change is an opportunity, not a threat. Yet nothing stands still. Change allows everyone to be push the limits in response, to improve their opportunity for personal growth, improve the company competitive position and odds for long-term success.
  1. Taking personal responsibility for organizational results. The attitude that creeps into big companies is that individual employees have no results responsibility outside their own objectives. This causes company-wide inefficiency, poor communication, and poor alignment, and also tends to reduce the effectiveness of every individual leader.
  1. Understanding the wider picture. To get individual and team performance to the highest level, everyone has to be committed to the organization’s vision, values, and strategy, just as much as their personal objectives. An attitude of no responsibility outside of individual objectives is almost always detrimental to the company.
  1. Keeping things simple. Over time, people in large organizations tend to make things more complicated than they need to be. This may be to impress others with their expertise, or their desire to minimize risk. Entrepreneurial leaders know that complexity actually increases risk, as well as mistakes, and ultimately reduces customer satisfaction.
  1. Inspiring people around you with a clear vision and target. People need a customer-driven vision and some form of end destination to give meaning to why they do things, and engages them beyond their internal view. They also need step-by-step targets to help them visualize the journey to that destination, and see that it’s possible to achieve it.

In fact, large organizations need entrepreneurial leadership and thinking just as much as startups. The challenge to build and maintain this perspective is the same everywhere. It has to start with leadership from the top, hiring people with the right skills, giving them the right training and tools, and motivating them with the right leadership objectives, compensation, and growth opportunities.

I’m convinced that we are entering a new era of the entrepreneur. The cost of starting your own company is at an all-time low, and all the information and tools you need to lead are readily available on the Internet. More and more people are doing their own thing, freelancing, working from home, and starting their own companies.

But this doesn’t mean that everyone should start their own company to be an entrepreneur. Entrepreneurial leadership and thinking like an entrepreneur have just as much value, both to you and to your company, in big organizations as well as small. You can lead to succeed wherever you are. Do it now.

Marty Zwilling

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Sunday, February 9, 2020

6 Team Members Who Will Make Your New Venture Robust

entrepreneur-dream-teamIn my years of advising startups and occasional investing, I’ve seen many great ideas start and fail, but the right team always seems to make good things happen, even without the ultimate idea. That’s why investors say they invest in people (bet on the jockey, not the horse), rather than the idea. Yet every entrepreneur I meet wants to talk about the idea, and rarely mentions the team.

Thus I was happily surprised when I found the classic book, “The Tech Entrepreneur’s Survival Guide,” by Bernd Schoner, PhD, and cofounder of ThingMagic, which leans heavily on the people side of the equation. He gives a wealth of practical advice on building a successful technical startup, including some specifics that I like on what constitutes a dream team of partners:

  1. The technical guru. You need to have a technical genius on the team to get your startup product off the ground. Outsourcing your core competency does not work. The technical skill can be highly specific, and the person may be a prima donna, but the role is required. If you’re lucky, your guru also brings some commercial contacts to the table.
  1. The trusted leader. Running a new company cannot always be a consensus-driven process, especially when hard decisions need to be made that affect everybody’s lives. Being the leader doesn’t mean more equity, nor does it mean the leader will necessarily be CEO. It just means that the cofounders trust one of their own and are willing to follow.
  1. The industry veteran. It takes a long immersion in the marketplace for someone to be a true insider, understand the subtleties of the competitive landscape, recognize the people who are true assets (independent of titles), and look through the propaganda of technical collateral and PR campaigns. These people also have the credibility to attract investors.
  1. The sales professional. Young high-tech startups are at constant risk of forgetting that they actually need to sell the wonderful technology they invented. A sales fanatic on the founder team helps to contain that risk. The combination of technical insight, founder authority, and sales experience is a hard-to-beat advantage in a competitive market.
  1. The financial suit.  You need a trained CFO to fill the financial gaps on your team. Outside professionals are always available, but they may have their own agenda, such as building a career, making money quickly, or managing up the stock price for a quick exit. If one of your cofounders has the necessary skills, your team will make the tradeoffs.

  1. The operations superstar. In the midst of high-tech development, funding, and selling, someone has to keep the office network running, get processes documented, and manage to keep everyone happy and busy. Fortunately, no combination of eccentricity, nerdiness, and charisma is required. Hard work and attention to detail are the key.

I’m not suggesting that you need all six of these as cofounders initially, but I always recommend a minimum of two founders with different perspectives. The rest can come from early hires (with stock options to assure commitment), equity investors, or even strategic partners. Outsourcing any of these critical roles is very expensive, and usually not very effective.

If you can’t recruit all of these onto your direct team, the next best alternative is to build a first-class Advisory Board of outside people, with the requisite skills and a wealth of experience. These should be hand-picked, come with a proven track record, be willing and able to help, and be completely trustworthy. The best startups have both strong cofounders and strong advisors.

What if you are convinced that your idea is great, but you just can’t seem to pull together the team and advisors you need? It’s time to think about licensing what you have to an existing company already in business, and give up developing and marketing it yourself. Remember the old adage that a small percentage of something is better than a large percentage of nothing.

Their success with your idea will at least give you the connections and the credibility to get the right team together on your next idea. Another alternative is to rely on that famous first tier of support, called friends, family and fools. Or you can always bootstrap the idea yourself, get some traction, and build your first startup organically. It’s a longer road, but may be more satisfying.

We all love the dark horse who comes from the rear to lead the pack and win the race, but very few of these really happen. Schoner and ThingMagic are now part of JADAK within Novanta, a multibillion-dollar public technology company, so success is possible without that initial dream team. My message is that it can be a lot more fun if you engage the right team at the beginning.

Marty Zwilling

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Saturday, February 8, 2020

10 Manageable Risks That An Entrepreneur Should Take

risk-managementThere is an old saying that good lawyers run away from risk, while good businessmen run towards risk. Entrepreneurs see “no risk” as meaning “no reward.” In reality, all risks are not the same. Many risks can be managed or calculated to improve growth or provide a competitive edge, while others, like skipping quality checks to save money, are recipes for failure.

The challenge is to avoid the bad risks, while actively seeking and managing the smart risks. There are no guarantees in business, but it pays to learn from the experiences of entrepreneurs and business experts who have gone before you. As a long-time mentor to entrepreneurs, here is my collection of smart risks that investors and I look for in new startups:

  1. Focus on a tough customer problem rather than a fun technology. Investors hate technology solutions looking for a problem, due to the high risk of no customers. If the customer need is obvious and large, the calculated risk is in the quality of your solution, your team, and marketing. These are risks that can be mitigated with the right resources.
  1. Schedule frequent updates to your solution to maintain growth. Assuming that you can quickly recover after competitors kill your cash cow is not a smart risk. You need a plan to regularly obsolete your own offerings, with continuous innovation, before customers send you negative messages. It’s hard to recover from a tarnished image.
  1. Plan to deliver a family of products, rather than a one-trick pony. Even a great initial product, with no follow-on, won’t keep you ahead of competitors very long. A smarter risk is to build a plan, with associated greater resources, that will put you in position to expand your product line and keep one step ahead of competitors.
  1. Implement a modern real business model. Providing everything free, and growing users to the max for years, like Twitter and Facebook, is a high risk approach requiring deep pockets. Risk is more manageable with subscriptions and even freemium pricing. Even non-profits need revenue to cover their costs, and continue to provide services.
  1. Find a strategic partner to accelerate growth. Everyone wants to forge ahead all alone, and kill every competitor in sight. Almost always, risks are more predictable when you use coopetition for access to new customers, economies of scale, and shared resources. Finding win-win deals is a manageable risk, versus a battle with one winner.
  1. Use metrics to measure results of marketing initiatives. Too many entrepreneurs put all their resources in one big make-or-break effort they can’t measure, or they count on word-of-mouth and viral marketing, which are totally unpredictable. I like marketing plans that come from both inside and outside the box, but have milestones and measurements.
  1. Recruit the best team members and provide incentives. Trying to save money by recruiting family members, or hiring only interns, is a bad risk. Great team members may take more time to find, and cost you stock options, but a qualified and highly motivated team that stretches your budget is a good calculated risk.
  1. Build your business with minimum outside funding. More money is not more likely to solve your problems or reduce your risk. Investors know that startups with too much money fail just as often as those with not enough. Strategically, you need a plan to survive through organic growth, with outside funding to effectively accelerate scaling.
  1. Don’t rely on conservative forecasts to reduce risk. Investors don’t fund conservative forecasts, nor wildly optimistic ones, since both imply a lack of commitment or homework. Opportunity and revenue projections based on deep market and customer analysis are a smarter risk. Measurements and business intelligence along the way also mitigate risk.
  1. Be a leader rather than following in the footsteps of another. Many entrepreneurs think they can reduce and predict risk by emulating previous winners like Google and Twitter. But stepping into a crowded space to steal customers is more risky than attracting new customers looking for a solution. Customers like leaders, not followers.

The risks you want to take are the ones that you planned for in your resources, set up metrics to measure, and manage on an ongoing basis. All the rest are bad risks, including problems you didn’t anticipate, competitors you didn’t know about, and customer expectations that you can’t meet.

An age-old measure of startup health is how much time top executives spend on containing bad risks, versus proactively exploring new risk opportunities. If the majority of your time is in recovery mode, your whole startup is likely a bad risk.

Marty Zwilling

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Friday, February 7, 2020

5 Ways To Sample The Joy Of An Entrepreneur Lifestyle

Namira_Salim_Richard_BransonEven though I’m a big proponent of becoming an entrepreneur, it is definitely not for everyone. Unfortunately the success and lavish lifestyle of some current well-known entrepreneurs, including Richard Branson and Elon Musk, lead many who are not so well prepared to jump in with both feet, only to be shocked and severely tested by the unexpected rigors and high risk.

Thus, as an initial step in my mentoring efforts to young or older aspiring entrepreneurs alike, I always recommend ways of dipping your toes in the water, before risking all your life savings, some important personal relationships, and your own well-being for a long time to come. Here are a few of my favorites sampling techniques that I have seen work out well over the years:

  1. Take a job for a while with an early-stage startup. There is no better way to feel the pressures and unknowns, as well as the excitement, of a startup than to work in one as an employee, and realize that the highs and lows are even greater for the founder. You will realize quickly that this environment either invigorates you or stresses you to the max.

    The alternative and more predictable corporate role may suddenly seem more satisfying and financially stable to you and your family. In my view, entrepreneur roles need to be planned carefully rather than made on the spur of the moment. In all cases, it pays to play to your strengths, and stick to business domains and skills you already know.

  2. Adopt the Silicon Valley entrepreneur family model. When I lived in Silicon Valley where “everyone” was an entrepreneur, I noticed that smart couples followed the strategy that both partners would never be in startups at the same time. One would keep a regular job, with medical benefits and normal work hours, while the other was deep in a startup.

    If both were bitten by the entrepreneurial bug, they might actually switch roles every few years. They rationalize the chaos, long hours, and small paychecks from a startup in the short-term. Founders stock and stock options are worth nothing for the first few years. The upside is the long-term potential of changing the world and becoming a billionaire.

  3. Test your entrepreneur instincts through crowdfunding. You can invest small amounts in someone else’s “can’t-fail” crowdfunding campaign, or support a friend, without jeopardizing your financial future. Perhaps you will decide that the world still isn’t ready for your vision of the future. You may also calibrate your own level of commitment.

    By following the crowdfunding campaigns of others, you can learn much about what types of ideas and solutions are attractive to customers, and also understand some new ways to raise money in todays competitive world.

  4. Attend industry and investor meetings and conferences. You will be surprised by how much you can learn about new trends and new opportunities in your industry from expert talks and investment groups. Contrary to popular opinion, most new ideas don’t come from flashes of genius, but from industry research and existing customer feedback.

    Networking with investors will tell you what they are looking for in ideas and pitches, and get you introduced to the right people before you are desperately looking for money. Ask them what ideas and entrepreneurs are on their radar today, and why. Then be one later.

  5. Make yourself an active part of the entrepreneur community. If you want to be an entrepreneur, it’s helpful to get to know as many as you can, and ask them for pointers on how to start and best practices. There are many entrepreneur support groups, such as EO, so look for one in your area, and make this is your world before you step off the cliff.

    In fact, this approach addresses one of the other common myths I hear from aspiring entrepreneurs – that most entrepreneurs are “self driven” introverts who don’t need to deal with what other people think. I find that building a business is more about the right people skills than solution development.

Above all else, make sure you understand the risk and the challenges ahead, as well as the positive lifestyle implications. It’s definitely fun to create something from nothing, and to have more control over your own destiny, but only if it works. As with any other career choice, it pays to educate and test yourself before committing totally. I want all my entrepreneurs to be winners.

Marty Zwilling

*** First published on Inc.com on 01/24/2020 ***

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Wednesday, February 5, 2020

5 Startup Challenges That Derail Many Entrepreneurs

problem-aspirations-avoidingAs a mentor to entrepreneurs, I tend to see many of the same obstacles appearing in every new startup, and since I don’t want to appear to be a downer, I’m not sure how to properly warn people ahead of time to be on the alert for these challenges. In fact, since most entrepreneurs are eternal optimists anyway, they would never believe any negative scenarios could happen to them.

Yet, in the interest of full disclosure, and an honest intent to save future entrepreneurs some grief and money, I would remind you that starting any business has key dependencies on at least five major elements, including product design and delivery, the right people on the team, adequate funding, a sizable market opportunity, and marketing. Each of these can go astray as follows:

  1. Your product or service hits unexpected snags. Despite your best planning efforts, innovative solutions always take longer than expected to deliver, and functional or quality problems will appear at the worst possible moment to jeopardize success. See the story of Elizabeth Holmes and Theranos for an example of product snags leading to a disaster.

    My message is to anticipate the unknown, buffer your plan schedules, and above all communicate frequently to key players using integrity. Too many entrepreneurs think that expert external advisors are suspect, or will slow them down. Don’t hide in your office.

  2. A principal player bows out or does not deliver. Even the strongest relationships are often tested and broken by the stresses of a new startup. That’s why investors will usually decline to fund startups made up of family members or fighting co-founders. Personally, I’ve seen many promising startups come apart prematurely due to relationship breaks.

    Of course, there are no guarantees, but I still see otherwise smart entrepreneurs taking shortcuts in their hiring, or jumping into business relationships based on emotion or low cost. When people problems arise, it’s critical that you make changes as required quickly.

  3. Funding is depleted before customer sales ramp up. One of the pitfalls of optimism is the expectation for early customer growth, and understating the real costs of design, development, and inventory. Some startups I see actually “fail by success,” with too many orders coming in from major retailers before vendor long payment cycles can catch up.

    The solution here is to never stop the fundraising cycle, moving quickly from friends and family, to angels, to venture capitalists. Don’t underestimate your own value as customers arrive, establishing a line of credit, and borrowing against inventory. Keep control by writing every check personally, and manage receivable and payables tightly.

  4. Your customers and competition make unexpected moves. The world today never stands still. Competitors see the value of your idea, and the good ones move fast. Key markets come and go as social and political winds drift. Amazingly enough, I often find that entrepreneurs, once started, are slow to adjust due to ego or inexperience.

    Every startup should assume the need to pivot at least once, if for no other reason, you probably missed the target audience to some degree on the first try.

    Examples abound of startups who had to pivot for success, including Twitter moving from podcasts to social commentating, and Yelp moving from email to online. Smarter entrepreneurs don’t wait for a crisis to drive change, by defining key milestones and metrics for tracking progress. Keep your plan updated, and don’t be caught off guard.

  5. Marketing and sales take more time and effort than anticipated. Every entrepreneur seems to start with the assumption that “if we build it, they will come.” It doesn’t work that way anymore, so don’t count on word-of-mouth to keep you ahead of the crowd. You need your best people and real resources dedicated to early marketing and branding.

    It pays big dividends to keep up with the latest strategies in your marketplace that have failed, as well as succeeded. Don’t wait for that worst case scenario where the customers aren’t buying, and hope to fix it by cutting prices. First impressions last a long time.

Again, I’m not trying to be a downer by suggesting that every entrepreneur will face all these problems, but I’m a strong believer that being fore-warned allows you to be fore-armed. It’s a lot more satisfying, and a lot more fun, to be able to flash the smile of success and understanding, than to spend most of your time is crisis mode, tackling problems you never anticipated.

Marty Zwilling

*** First published on Inc.com on 01/22/2020 ***

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Monday, February 3, 2020

4 Customer Decisive Moments That Your Startup Can Win

shake-hand-buy-car-dealToday’s customers are much more in control of their buying decision, as they have more choices and more information than ever before. Almost instantly, via the Internet or on their smartphone in the store, they can find the lowest price alternative or their favorite features, without waiting for push marketing or listening to your best sales person.

This can be an advantage to startups who don’t have the resources and brand awareness of mature businesses, if they understand and position themselves to win in the decisive moments of the new customer buying process. These decisive moments, and how to respond, are outlined in Robert H. Bloom’s classic book, “The New Experts: Win Today's Newly Empowered Customers.”

Bloom is a widely known expert on managing business growth, and he starts by summarizing the three key weapons of current customers, which include an instant summary of choices, prices, and features. His research indicates that they don’t have any old-fashioned customer loyalty, and they want precisely what appeals to them at the moment, preferably customized just for them.

New startups actually have a flexibility advantage over more mature businesses in anticipating and reacting to the four key decisive moments that Bloom outlines and I have observed in the new customer buying process:

  1. Survive the now-or-never moment. You only get one chance to make a great first impression. If you can’t get a positive customer perception at this first moment, you will likely never get another chance – with so many other alternatives. The key to winning in that moment is to think like a buyer, not the seller. Build a relationship and trust quickly.
  1. Win the make-or-break moment. You win here by getting the customer immediately engaged, and keeping him there, by knowing their interests and expectations better than any competitor or alternative. Avoid the extended period of evaluation and negotiation during which the customer will likely move to other transaction alternatives.
  1. Sustain the keep-or-lose moment. The buying process is just the beginning of the customer experience, and it has to remain a good one throughout the time that your customer actually uses your product or service. Great startups manage to continually improve the relationship through outstanding follow-on support and service.
  1. Capitalize on the multiplier moment. Of course you want your customer to come back, but the best ones also become your evangelists in bringing their friends to you, and broadcasting their positive experiences to the world through social media. This is a key moment where your customer acquisition costs go way down, and your profits go way up.

This new world is all about empowered customers. As an entrepreneur and startup, you should love this environment and cater to it. Many existing businesses see it as a big problem, and can’t adapt easily. That’s your chance to step in and compete at every moment of the customer buying process, usage experience, and follow-on events.

As you bring on employees to facilitate your growth, they have to embrace the new reality. Empowered customers required empowered employees, and your internal business processes have to be aligned with the same principles and the same smartphone and Internet technologies. Make sure you adopt the right hiring practices and training to keep your team responsive.

Then you have to trust the team to think and act proactively on behalf of your vision and mission. Of course, both you and they will make mistakes, which are the best learning experiences. Continuous innovation and change are the keys to staying current, reducing complexity, and delivering the winning customer experience to keep you ahead of the competition.

What most companies don’t realize is that businesses don’t drive customer trends anymore, customers drive business trends. Consumers are well aware of the latest technologies, and their expectations are usually ahead of even the most forward-thinking startups. It’s up to you to understand and capitalize on the decisive moments of empowered customers, or you will become a “has-been” before you even start.

Marty Zwilling

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