Monday, May 30, 2022

10 Steps To Second Stage Success For Your New Venture

second-stage-successEarly-stage entrepreneurs rightly keep their focus on creating an innovative product or service. After celebrating success at that level, they often find themselves ill-prepared to move to the next stage, for scaling their business into a high-performing enterprise. That’s where I see too much entrepreneur burnout, growth plateaus, and founders being replaced, to their chagrin.

By definition, second-stage ventures generally have 10 to 99 employees and/or $750,000 to $50 million in revenue, and see that as just the beginning. Of course, not every entrepreneur wants to tackle this challenge. According to one study a decade ago, only 45% of founders plan to exit after stage one, and my guess is that less than half the remainder survive the next stage in their own company.

If you are one of the many entrepreneurs who aspire to get beyond the “art of the start,” there are some proven principles to follow. In his classic book, “Second Stage Entrepreneurship,” Daniel J. Weinfurter, talks about making the leap a couple of times himself, and the perspective he gained from many years of consulting with other companies who have done the same.

I like the ten steps he outlines, which I characterize here as follows:

  1. Seek major capital infusion. Very few startups are cash-rich enough to self-finance aggressive second-stage growth. They need a large infusion from venture capitalists, private equity, bank loans, or mezzanine financing. Of course, that means a new level of risk, giving up some control, and a new business plan. There is no free lunch.
  1. Install a real board of directors. Most entrepreneurs are mavericks, and their passion drove their new business. But to scale the business, they need the complementary expertise, experience, connections, oversight, and new capital connections of a formal board of directors. Recruiting, compensating, and engaging the board is a critical priority.
  1. Focus on creativity more than smashing competitors. To achieve second-stage growth you need to stay at the top of your creative game, more than a focus on beating competitors. Growth is more than simply repackaging existing products, and adding bells and whistles or slick incentives. Keep delivering something new and fresh.
  1. Hire more help than helpers. Smart staffing is a key step to ensure your success at the second stage. In addition to fresh products, you need people smarter than you for real help, with the right combination of skills, experience, and passion to foster and manage new growth. You don’t have the bandwidth to keep filling positions with more helpers.
  1. Switch your attention from product development to sales. Second-stage growth usually requires a formal sales model, an experienced and disciplined sales team, and a well-defined process to meet your new goals and demands. These only come with the proper training, investment in tools, and focus on customer relationships.
  1. Managing business growth is more than metrics. You can hire the best salespeople, have great products and define good metrics, but without decisive and innovative managers, the sales organization will not reach its full potential. Leaders are needed to coach each salesperson, keep the team on message, and spur new growth and goals.
  1. Separate marketing from sales for further leverage. In the second stage, marketing and sales are highly specialized functions. Marketing shapes the concept, branding, packaging, pricing, and positioning. Sales builds relationships, translates needs, makes proposals, and closes the deal. The skills required are complementary, but not the same.
  1. Optimize the total customer experience. Successful second-stage companies often create an entire organization devoted to one-on-one relationships with their customers, not just customer service for exceptions. Delivering a superlative experience is the only way to get truly loyal clients, repeat business, and expansion through social networks.
  1. Build a winning culture and make it pervasive. In these rapidly changing times, in your own rapidly evolving company, culture will be the rudder that guides your path in a fashion that is consistent with your vision and values. Reinforce the values and operating principles with clear behaviors and guidelines to keep the culture healthy and thriving.
  1. Separate management from leadership, and provide both. Leadership is the quality that inspires people to do their best every day. Management guides people in what needs to be done, by creating sustainable and repeatable systems, with education and guidance to make sure all efforts are productive. Neither is effective without the other.

Many startups are family businesses, and these don’t need to be grown into large enterprises. Yet the steps outlined here still have value in building a business that lets you enjoy the entrepreneur lifestyle, and lets you work “on the business” once in a while, rather than “in the business” 24 hours a day, 7 days a week.

On the other hand, if you aspire to be the next Bill Gates or Steve Jobs, these principles for aggressive growth to the enterprise level are absolutely required for survival. It really is a decision to grow and have fun, or die. Are you enjoying your entrepreneur lifestyle today?

Marty Zwilling

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Sunday, May 29, 2022

10 Real World Hazards With Taking Your Startup Public

Wall-Street-bull-IPOIn the old days, every entrepreneur planned on taking their startup public, and making it big. Today the rate of startups going public (IPO – Initial Public Offering) is finally up from the dead zone of the last two decades, and is now double the rate back in 1999. Smart entrepreneurs are now starting to look at this option again, as well as the challenges of running a public company.

Last year was quite a year for IPOs, largely influenced by the significant rise in the number of special purpose acquisition companies (SPACs) who went public, despite almost uniformly negative returns. Thus, today around 90 percent of successful startups are still acquired by bigger companies versus an IPO, as the safer and preferred method of growth and funding.

The reasons are a lot more complex than the meltdown of key investment banks in the US a few years ago, so don’t expect any real change in the numbers soon, especially with recent stock market downturns. In my view, the key reasons that IPOs have lost their luster from an entrepreneur and investor perspective include the following:

  1. The US IPO process has stumbled badly. Too many startups have experienced early financial losses and technical glitches, like Uber and the Zynga IPO a while back, which antagonized individual investors and startup executives as well. In addition, most ordinary investors are convinced that IPO rewards only go to insiders.
  1. Going public is an expensive process. Typical costs for startups today range from $250,000 to $1 million, even if the offering does not go through. In addition, huge amounts of executive time are required, as well as hits to key operational, accounting, and communication processes. The M&A alternative looks simple by comparison.
  1. Constant pressure to increase earnings. Because public shareholders usually take the short-term view, they want to see constant rises in the stock's price so they can sell their shares for a profit. Thus, there is tremendous pressure to increase current earnings, and little appetite for strategic investments.
  1. Startups going public are laid open to competitors and critics. Startups are typically run by a couple of executives who are reluctant to disclose via the prospectus and SEC reports all the decision-making criteria, operational financial details, and compensation formulas. With thousands of shareholders, dealing with critics is an onerous challenge.
  1. Complying with Sarbanes-Oxley requirements is a heavy burden. Public companies of any size must comply immediately with the full reporting requirements of the SEC. There is no accommodation for smaller public companies, who can’t be competitive in their space with the new accounting, documenting, and reporting processes required.
  1. Public companies are always at risk for takeovers. Friendly or hostile takeover attempts are just a couple of the many ways that company founders sense a loss of control of their own destiny. The board of directors, as well as public stockholders, are no longer part of the inside team focused on the founder’s vision to change the world.
  1. Increased liability risk exposure. Public company executives and directors are at civil and even criminal risk for false or misleading statements in the registration statement. In addition, officers may face liability for misrepresentations in public communications and SEC reports. Executives are also at risk for insider trading and employment practices.
  1. Violent market swings usually hit public companies first. Private companies in less-relevant market segments can often fly under the radar in turbulent times like the recent recession. Public stockholders are more easily swayed by emotion and the activities of the crowd, than real market conditions.
  1. Startup founders don’t fit in a public company. Most just don’t enjoy all the challenges of communicating to analysts, placating demanding stockholders, and keeping up with legal reporting requirement. They know they can be quickly tossed aside for not maintaining the right image and the right relationships with people they don’t like.
  1. The image of large public companies is negative. In the last few decades, the paternal image of large multi-national company leaders like Thomas Watson at IBM and Henry Ford is gone. Now the mistakes of large companies like Enron and BP have set a new image of public companies as being led by greedy and uncaring executives.

These negatives have largely overshadowed the potential IPO positives of increased capital for the startup, possible huge increase in personal net worth, broader access to investors, market for their stock, the ability to attract top-notch professionals, and the peer prestige of running a public company.

Thus most startups I know don’t even mention the IPO exit option, when applying for angel funding, and most angel investors will react negatively if you do mention it. As best, you should reserve this option for later stage VC discussions, once you have a well-proven business model, large market following, and substantial revenue.

More importantly, make sure first that you really want to give up the entrepreneur lifestyle for the challenges of a public company executive. I’m betting that Mark Zuckerberg of Facebook fame still has second thoughts from time to time, with all the political scrutiny, despite being worth over $70 billion as a result.

Marty Zwilling

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Saturday, May 28, 2022

7 Key Ingredients to Address the Challenge of Growth

business-growth-challengeOnce your business is running and sustainable, everyone these days expects it to grow, as an indication of long-term health and competitiveness. Thus continued growth becomes the biggest challenge for many of you business owners I meet in my consulting practice. Everyone is looking for that magic strategy that will keep them growing, even during market and company changes.

In fact, I have long believed continual growth gets more and more difficult as your company gets bigger and more mature, as your organization develops repeatable processes and adds overhead to reduce risk. I found this perspective confirmed recently in a new book, “The Crux,” by Richard Rumelt. He focuses on how business leaders have to become strategists to address this issue.

I support the key strategies and priorities, summarized here, that Rumelt offers for all companies to address the continuing challenge of growth, no matter what their size and position today:

  1. Deliver exceptional value to an expanding market. This may seem obvious, yet many companies ignore the keyword “exceptional” or they count on an existing market that is not “expanding.” In addition, you need to focus on the unique value you bring, and maintaining the gap between what customers are willing to pay versus your best cost.

    Obviously, the attributes of the solution you offer have much to do with whether your market is expandable and the value is exceptional. Therefore, one key aspect of every strategy should be regular updates to every solution, no matter how strong it is initially.

  2. Trim your overhead and reduce spent resources. Activities, or whole chunks of your business, may have built up over time, but are not contributing to the bottom line. The resources may be money, public controversy, or management attention. To grow your company, get it trimmed and focused on the business areas that have growth potential.

    Many advisors have likened this strategy to regularly weeding your garden. Keep your company focused on the business areas and functions that fit your strategic direction, by periodically eliminating non-contributing activities, organizations, and business units.

  3. Improve reaction time to competitive situations. With growth opportunities, the first capable response often wins; not necessarily the first mover, but the first one to provide a competent reaction. Large complex organizations usually cannot move quickly, unless there is strategy, unity, and trust among the major actors. Optimize your ability to react.

    Business agility can also be improved by proactively looking ahead – for new trends and technologies that will likely attract competitors and customers. Don’t wait a growth crisis to begin your efforts. Smart companies always have a few “experiments” in process.

  4. Use acquisitions to complement organic growth. Look for economies of scale, complementary skills and technologies, or access to a broader and stronger market. This strategy should not replace organic growth efforts, but should expedite them. Smart companies use acquisitions to enhance momentum and accelerate revenue growth.

    When contemplating a merger or acquisition, you should never overlook the human factors of post-acquisition integration, such as stress among existing employees, IT incompatibilities, and employee turnover. In many cases, the return is not worth the cost.

  5. Avoid overpaying by buying nonpublic companies. Public companies usually only come at a premium over value, or even premium on a premium in a bidding war, big brand names, or overconfidence. Do your homework privately to assess realistic value, intellectual property, and build relationships. Avoid stock deals, and pay with cash.

  6. Plant seedlings outside the core for safe growth. These need to be cultivated and shielded from your core management process, which is usually hampered by power games and conflicts of interest. Successful companies often maintain six or eight seedlings, and always highlight the learning, rather than punish the failures.

  7. Don’t use accounting tricks to fake expansion. Financial assets can be quickly bought and sold to generate gains that look like growth, but you will only fool yourself in the long run. Spend your IQ on how to be transparent to constituents, simplifying your core processes, better understanding competitors, and reacting quickly to market changes.

Finally, remember that your growth strategy can never be static – it needs to evolve and adapt as the market and competitors change. Your challenge is to build a team and an organization which operates close to your customers and the market, and is nimble enough to change as required by competition and the environment. Only then can the business survive and thrive for the long-term.

Marty Zwilling

*** First published on Inc.com on 5/12/2022 ***

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Friday, May 27, 2022

7 Keys To Business Transformation To Meet Competition

digital-transformationIn my experience as a business advisor, most organizations, large and small, struggle to keep up with the pace of change and competitive forces today. You may have a brilliant product strategy, but your operational teams seem to fight change, as well as each other, resulting in turf battles and confusion, leading to the internal drama and problems that occupy too much of your time.

A question I often get is how to transform that overall team into a smooth-running machine that will keep up with the pace of market change, and competition in today’s world. I long ago realized that teams are not machines, but people driven by social forces, so they must be treated as humans, not products that can be manufactured and repaired. People need to feel motivation.

Recently, I found a new book, “Navigate the Swirl,” by Richard Hawkes, which details seven people strategies that, I have learned the hard way, are key to the continuous business changes required to meet today’s market. Hawkes, as the Founder of Growth River consulting, speaks from his experience helping to create high performance organizations around the world.

Here is a summary of key strategies and conversations that both of us agree will help your organization evolve into the adaptive social system your business needs to survive and thrive today:

  1. Energize the team around a shared purpose. Every team needs a sense of purpose to facilitate their engagement, commitment, and emotional connectivity. It’s important that the purpose is explicit and understood by everyone on the team. It can be simple, straightforward, and even functional, rather than world-changing or high-minded.

    These days, I see an increasing value in adopting and promoting for your team a higher-level purpose, such as saving the environment or assisting the disadvantaged. The payback in team engagement, as well as customer revenue and loyalty, can be large.

  2. Keep focus on the journey to a common goal. It’s up to you to provide clarity around priorities, visualizing the required results, and developing a shared sense of being “in it together.” Priorities must include both those for today and tomorrow, and the changes you are targeting to maintain business leadership from tomorrow through the future.

    I would caution you that there will always be events, such as disruptive new technologies, that cannot be predicted. Trying to control what you can’t influence just creates worry and unproductive stress. I encourage you to keep your team focus on targets credible today.

  3. Build a mindset of continuous transformation. This requires embracing a team’s diversity of perspectives, and developing new agreements to support each other, be accountable, and coachable. You do this by being the role model for trust, transparency, and accountability. Team members need comfort with giving and receiving feedback.

    Another approach to establishing this mindset is to create a learning culture in your organization. In a learning culture, your teams have to see rewards rather than penalties for learning from mistakes, and be supported to regularly schedule change experiments.

  4. Clarify individual roles and required capabilities. Specifying roles is seen by the team as distributing power. It’s important to start at the level of capabilities to translate strategies into on-the-ground execution. This may require hiring new people, expanding skillsets, and providing coaching to get the high degree of creativity often required.

    Especially with the right people, and the right skillsets, there will be a good bit of creative tension, and that’s good. Constructive conflict brings out the best alternatives for any transformation, and is inherently productive and positive. Foster it rather than fight it.

  5. Solidify processes and team interdependencies. High performance teams are not freestanding – they must exist in a matrix, a larger social system, and you must optimize the business processes that are cross-functional. Selected leaders must be members of more than one team, as connectors, to advocate-up and align-down the hierarchy.

  6. Align strategies and local decision making. You must build foundations to surface and resolve strategic trade-offs between teams. Each team has a unique role and impact from strategy changes, and being closely connected, a change in one impacts the others. Resolution comes from reconciling trade-offs and aligning toward competitive advantage.

  7. Provide resources to implement initiatives. Here you need not only project management resources, but also skills in forecasting, budgeting, and resource tracking. Of course, implementation also requires the resources to test, iterate, and prototype solutions, in a lean and agile fashion, dictated by the needs of the marketplace.

In my experience, timely business transformations can only be accomplished by high-performance teams. Only these have the built-in intelligence and motivation to know what needs to be done, what learning is needed, and where they need to focus to keep up with the pace of change in business today. You can’t do it alone. If you need transformation, start with the team.

Marty Zwilling

*** First published on Inc.com on 5/11/2022 ***

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Wednesday, May 25, 2022

6 Due Diligence Goals When Vetting Business Partners

due-diligence-resultsBusiness partners can be co-founders in a startup, multiple owners of an existing business, or a joint venture. In every case, a partner can be an asset, bringing new skills and perspectives to the business; or a burden, making every decision more difficult, and taxing your lifestyle satisfaction. You need to do the due diligence to make that decision before you sign away your equity.

As a former startup investor, I was often involved with due diligence on founders, and I felt that founders should do the same on co-founders, as well as investors. Differences you find after the deal is consummated can be painful and expensive, just as in any marriage. I was pleased to see this approach highlighted as well in a new book for startups, “Zero to IPO,” by Frederick Kerrest.

Kerrest also brings years of experience starting and growing his own businesses from a startup through taking them public, so he has much real live experience with choosing and working with partners. I support his summary of recommendations for what to look for in every candidate:

  1. Being around this person is a positive experience. If you don’t like this person now, the feelings will only get stronger when facing tough joint business issues. Beware of signs of a negative attitude or depression, as these can affect your business results, as well as your personal satisfaction. Always make sure you can enjoy some fun together.

    I have found that happy people are the most positive, and also make the best business partners. A recent study shows that happy people in business are also the most successful. Be aware that happiness brings success, and not the other way around.

  2. Their skills and interests complement yours. A business partner or co-founder needs to be supportive in style and form, and fill the gaps in your strengths with their experience and expertise. Also you need to understand how roles will be divided to maximum advantage, so that both of you are not sparring over every task and every solution.

    In my experience, most technical entrepreneurs have little interest or expertise in the financials, or marketing. Thus they benefit hugely from finding a partner who has skills and interest in the these domains. The same benefits also apply to a joint venture.

  3. They are excited about your business objectives. A co-founder who has different motivations, for example maximum profit versus great customer service, will likely undermine you, take a minimal role, or leave the business quickly. You need someone who can easily step into your shoes when a crisis arises, or you need time off work.

    These days, many entrepreneurs are motivated to help the disadvantaged, such as TOMS shoes founder Blake Mycoskie, who differentiated his brand by donating a pair to the needy for every pair sold. Obviously a partner maximizing profits would not be happy.

  4. Trust is evident from his/her constituents. Here you need to seek the perspective of three or more people, not recommended by your prospective partner, who have worked closely with this partner in the past. Don’t worry about coming across as sneaky, as the candidate should be doing the same thing on you too. Don’t ignore any big red flags.

    In today’s economy, with more and more employees working remotely, assessing trust may seem especially difficult. In fact, many say trust is easier to assess now, with the clear reliance on regular and effective communication, and results from relevant leaders.

  5. Negotiation proceeds maturely, including emotions. Having healthy disagreements on strategy or any specific problem is good for bringing new options to the table, as long as differences can be quickly resolved without emotional outbursts or lasting grudges. If you see emotional immaturity in early discussions, count on a rocky relationship at best.

    In fact, many business advisors, including myself, now agree that emotional intelligence is more critical in business than IQ, or logical intelligence. We all understand that partners, employees, and customers are people with emotions, rather than machines.

  6. Your gut-check finds this to be a good fit. Don’t get caught trying to talk yourself into this partnership, based on some external forces, such as access to money or future business connections. Remember business partnerships are a lot like marriages, which need to survive and thrive for the long term, at the gut level as well as the logical level.

In my experience, poor collaboration between business partners, including co-founders, is one of the top reasons for business and startup failures. It’s definitely worth your time to complete real due diligence before it is too late to back out. With the right effort, you can make one-plus-one equal three or more, rather than a zero. Start now, and you won’t have to look back later.

Marty Zwilling

*** First published on Inc.com on 5/11/2022 ***

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Monday, May 23, 2022

7 Ethical Fictions Lead Many New Entrepreneurs Astray

ethical-issuesNew entrepreneurs tend to focus only on getting the product right, and assume that the right culture and ethics will come later simply by hiring good people. In fact, they need an early focus on developing their moral compass, as well as setting the right ethical tone. Building an ethical business is more than just compliance and meeting legal requirements, and it has big paybacks.

One 11-year study of over 200 companies over a decade ago, detailed in the book “Corporate Culture and Performance,” found that those working on their culture improved revenue by 516%, and increased net income by 755%. Conscious Capitalism, a popular business movement with a focus on culture and ethics, claimed a few years ago returns 10 times higher than the S&P 500.

One of the keys to setting the right ethical tone is understanding and avoiding the myths and pitfalls of others. I saw a good summary of these in the classic book, “Ethical Leadership,” by Andrew Leigh, an expert in this area. I like his specifics for business leaders on improving and sustaining the best company cultures, and his summary of the cultural myths facing new business leaders:

  1. It’s easy to be ethical. This myth ignores the complexity surrounding ethical decision making, particularly within business organizations. Ethical decisions are seldom simple. For example, people often do not automatically know that they are facing an ethical choice. Any given individual may not recognize the moral scope of the issues involved.
  1. Business ethics are more about religion than management or leadership. Behind this myth lies the confused belief that ethics are a means of altering people’s values. The reality is different. An ethical culture deals with managing values between the individual and the company, to best handle the inevitable conflicts that crop up in every business.
  1. Hire only ethical people, so further time on business ethics is not needed. This is usually an excuse for not developing ethical policies and practices. These can be as simple as how to handle customer over-payments, or more complex in how to handle the choices every employee may face between conflicting customer and company interests.
  1. Business ethics are best left to philosophers and academics. Deal with this myth by sharing with colleagues some of the highly practical tools for making sense of the issue – such as ethics audits, behavior codes, risk strategies, targeted training and leadership guidance. Business ethics is a discipline that must be practiced every day by everyone.
  1. Ethics can’t be managed. While codes of behavior do not guarantee an ethical culture, they do clarify desired behavior and articulate for employees what is expected of them. Every business has complex and diverse dilemmas which are not specifically covered in documented procedures, so employees need clear values leadership for guidance.
  1. We’ve never broken the law so we must be ethical. Many perfectly legal actions can still be deeply unethical. As an example, companies often realize that faulty products are slipping out, but they delay a recall, sighting that strictly legal requirements are being met. Unethical behavior can even with something low key which initially goes unnoticed.
  1. Unethical behavior in business is just due to a few ‘bad apples.’ In reality, most unethical behavior in business happens because the environment tolerates it, usually through benign neglect. When it comes to ethics, even good people tend to be followers, and if told to do something, they will do it, without considering the ethical implications.

Company ethics are a prime example of where you and your company only get one chance for a great first impression, and if you lose it, it’s almost impossible to regain. Don’t follow the examples of institutions in the recent financial meltdown, or certain oil companies working offshore, or the many smaller company examples we have seen in our own neighborhoods.

Every business, new or old, needs to remember that an ethical culture, or lack of it, shows in the actual behavior and attitudes of all team members, rather than just in policy documents and videos from the top. A successful business is far more than a good product and a good business model – it’s equally about projecting and executing with a great culture. Can you vouch for the culture and ethics of your company, from top to bottom?

Marty Zwilling

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Sunday, May 22, 2022

7 New Venture Leader Attributes That Excite Investors

Jane Marie Chen, Co-Founder and Chief Executive Officer, Embrace, USA; Young Global Leader at the World Economic Forum on India 2012In the beginning all businesses are just people playing out an idea. It’s never the other way around – there is no idea so big that it doesn’t need people to make it succeed. Investors know this, hence the saying “Bet on the jockey (founder), not the horse (idea).” A great jockey is a great role model.

Like it or not, everyone looks to the entrepreneur as the jockey role model in a new business. Typically this energizes new startup founders, but some struggle trying to live up to their own, as well as everyone else’s expectations. In reality, nobody really expects anyone to be superhuman, but it can feel like that.

We certainly wouldn't expect superhuman behavior from the people looking to us for guidance, nor would we want them to expect flawless behavior from themselves. If not flawless behavior, what characteristics and actions do they look for? Here are some frequently mentioned ones:

  1. Demonstrate confidence and leadership. A good role model is someone who is always positive, calm, and confident in themselves. You don't want someone who is down or tries to bring you down. Everyone likes a person who is happy with how far they have come, but continues to strive for bigger and better objectives.
  1. Don’t be afraid to be unique. Whatever you choose to do with your life, be proud of the person you've become, even if that means accepting some ridicule. You want role models who won't pretend to be someone they are not, and won't be fake just to suit other people.
  1. Communicate and interact with everyone. Good communication means listening as well as talking. People are energized by leaders who explain why and where they are going. Great role models know they have to have a consistent message, and repeat it over and over again until everyone understands.
  1. Show respect and concern for others. You may be driven, successful, and smart but whether you choose to show respect or not speaks volumes about how other people see you. Everyone notices if you are taking people for granted, not showing gratitude, or stepping on others to get ahead.
  1. Be knowledgeable and well rounded. Great role models aren't just "teachers." They are constant learners, challenge themselves to get out of their comfort zones, and surround themselves with smarter people. When team members see that their role model can be many things, they will learn to stretch themselves in order to be successful.
  1. Have humility and willingness to admit mistakes. Nobody's perfect. When you make a bad choice, let those who are watching and learning from you know that you made a mistake and how you plan to correct it. By apologizing, admitting your mistake, and accepting accountability, you will be demonstrating an often overlooked part of being a role model.
  1. Do good things outside the job. People who do the work, yet find time for good causes outside of work, such as raising money for charity, saving lives, and helping people in need get extra credit. Commitment to a good cause implies a strong commitment to the business.

True role models, like Richard Branson of Virgin Group and Elon Musk with Tesla, are those who possess the qualities that we would like to have, and those who have changed the way we live. They help us to advocate for ourselves and take a leadership position on the issues that we believe in.

We often don't recognize true role models until we have noticed our own personal growth and progress. That really implies that it takes one to know one. Thus, if you are asking the question, that may mean you are well along the road to being that role model already. Don’t stop now.

Marty Zwilling

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Saturday, May 21, 2022

Balance Your Marketing Spending Between Free and Fee

marketing-budget-balanceThe power and influence of paid media advertising, including print ads, TV commercials, radio, and even online digital campaigns is waning, in favor of unpaid earned and owned messaging from your website, social media, key market influencers, and existing customer word-of-mouth. But startups need to remember that even zero paid media doesn’t mean that marketing is free.

The case for zero paid media as the new marketing model was highlighted a few years ago in the classic book, “Z.E.R.O.” by Joseph Jaffe and Maarten Albarda, both experienced marketers working with new companies, as well as larger firms. They advocate investing in their new framework, where the Z.E.R.O. initials take on meaning as follows:

  1. Zealots, disciples, and influencers. New products and startups often require a culture shift to drive acceptance, which can best be accelerated by zealots or a visible chief disciple, like Steve Jobs. Other sources stronger than paid media today include key social media influencers, such as “mommy bloggers” and popular YouTube events.
  1. Earned media. This is media exposure from a neutral third-party, such as an unpaid news story on your product or service to highlight innovations or social value. This exposure is highly credible, since you don’t control the message, and extremely valuable since it is not viewed as part of any advertising context.
  1. Real customers. Marketing media content from real customers in real time is now commonplace via sites like Yelp, Foursquare, and online reviews. This word-of-mouth media source is also highly credible and valuable, since it comes from “peer” customers, rather than you as the source, or any paid source.
  1. Owned media. This includes your website, blog, and presence on social media platforms, including Facebook, Twitter, Pinterest, Tumblr, Instagram, and many more. These usually provide a customer’s first impression of your offering, and should not be blatantly self-promotional, but instead informative, educational, and even entertaining.

As I mentioned, this framework is powerful, but none of these elements are free. A while back in a blog article, I pointed out that none of these justify a startup business plan with little or no budget for marketing. All require planning, deliberate actions, and quality content and event creation which will likely absorb all the savings from reduced paid media campaigns.

In any case, reframing the conversation from paid media marketing to the new framework requires a balance, and measurements along the way to better manage return on investment. In the book, Jaffe introduces three new sets of metrics for gauging progress:

  • Medium-term metrics. This is essentially a series of interim forecasts not dissimilar from mile-markers in a marathon race that advise whether it’s time to pick up the pace or slow down to smell the roses. Examples include counting members of an advocacy program, app downloads, tenured customers, or subscribers to an e-mail list.
  • Long-term sales. We often talk about short-term sales and long-term relationships in mutually exclusive terms. They are polar opposites in terms of their time frames, but how about building a bridge of compromise between them? Whereas every short-term initiative is akin to a traditional campaign, the long-term sales effort is the commitment.
  • Short-term wins. Accountability is not optional, as it’s still important to have something to show for your efforts quickly. Only this time, consider the large “W” (big win), the small “w” (small win) or in some cases even the small “l” (small loss), which represents failing fast or failing smart, insights, lessons, learnings, or pleasing initial results.

I’m not suggesting that paid media channels should be seen as dead to young companies, since even the revolutionaries, like Google, Facebook, and Apple, still rely on paid media to optimize their own efforts. And paid media are hardly standing still, continually figuring out ways to be more effective, using big data and other innovations to get more customer attention.

Thus while I see startups quick to jump on the zero paid media bandwagon (for budget reasons), I recommend a balance. First, go for that earned and owned media channel, using the same budget parameters you might have previously allocated for paid media. Later, you can lower the budget as the metrics show results, or apply the remainder to paid media as a follow-on step.

In all cases the tone and resources must be focused on capturing today’s customers, who are looking for engagement and connection, rather than the traditional loudest noise. Z.E.R.O. marketing is not zero marketing.

Marty Zwilling

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Friday, May 20, 2022

5 Keys To Enhancing Your Business Negotiation Ability

negotiation-abilityIn my experience, the most successful business leaders and entrepreneurs are the best persuaders, not necessarily the ones with the best solutions. They know how to communicate what they have to the best advantage, and generate more results and satisfaction for all parties. This is a different skill from problem solving, but one that can be learned and honed over time.

Obviously, having both a great solution, as well as great persuasive powers, is a winning combination. As a technologist, I’ve always focused on the solution, but only learned the hard way about persuasion drivers, which I found summarized well in a new book, “Amplify Your Influence,” by Rene Rodriguez. He brings nearly 30 years of behavioral neuroscience to the table.

Here is his and my summary of the top five ways you can amplify your influence as a leader, business professional, entrepreneur, or executive, to improve your impact on others to better share your vision, gain buy-in from constituents, and present difficult information in a way that keeps everyone engaged and drives action:

  1. Credibility: Highlight your real-world experience. In business, your personal brand is key. You need to build it every day by networking to add connections, using social media to build followers, industry event participation, and gathering customer anecdotes to show your presence and understanding of the relevant domain. Confidence adds leverage.

    Another key to credibility is to let your actions speak louder than your words. These actions should include a record of delivering results, and holding yourself accountable as you would anyone else. Don’t use your position to insult, manipulate, or humiliate others.

  2. Emotion: Create empathy with a personal story. Perceived vulnerability is the key to getting emotional buy-in from others. Your ability to convincingly share a struggle, or even humor, is what matters, not your success. Emotions drive business behaviors, as well as personal ones. Effective storytelling requires practice and time, so start today.

    In business persuasion, emotional intelligence is more important than IQ. That ability to sense and respond to other people’s emotion is key to getting the trust and buy-in of your team and other constituents as well. Focus more on being heard than being right.

  3. Logic: Have more convincing facts and figures. In business, logic is critical and is what remains after emotion wears off. Without logic, you may leave behind buyer’s remorse and no plan or details to achieve the goal. Unfortunately, logic alone often will not close the negotiation, but in business it is always a key element. Do your homework.

    In my experience as an angel investor for startups, I often heard entrepreneurs try to cover their lack of real data with passion for the idea and the potential. I certainly like to hear passion and commitment, but financial commitments require facts to be credible.

  4. Timeliness: Take advantage of the perfect moment. Always tailor your message to your audience based on their current needs, and who they are. It helps to draw on current events to show that you are not out of touch, and your argument is not dated. Be aware that demographics or location always changes the impact of your argument.

    Timeliness in business also means never being late for an important meeting with the team or constituents. Perennial tardiness will be perceived as impolite, a waste of other people’s time, and you won’t win at negotiation. Make it a habit to be on-time or early.

  5. Purpose: Relate arguments to a shared end-game. Every negotiation or message must have a purpose for all parties involved. Never let yourself be distracted by side issues, or other topics of interest. Keep the focus on the primary objective, including the end-game value to you as well as them. Win-win discussions are particularly valuable.

    Espousing and living a higher-level purpose, such as saving the environment or helping the disadvantaged, can also amplify your influence with others, inside the company and outside. People who share and respect that purpose will be more supportive and flexible.

I am convinced that if you focus on these five ways to enhance your influence and negotiating success, you will also improve your overall communication, critical thinking, and culture awareness skills. The end-result will be more business success and personal satisfaction from your lifestyle choice. Start today.

Marty Zwilling

*** First published on Inc.com on 5/6/2022 ***

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Wednesday, May 18, 2022

6 Success Mistakes Often Made By Serial Entrepreneurs

Degree-Vs-Dropout-Dilemma-Of-A-Young-EntrepreneurAs you know, growing a business is hard, especially the first time. Unfortunately, every new initiative is different, so don’t get too smug if you have had some success, and can’t wait to repeat it again. In my years as a business advisor, I have seen many of you crash and burn the second time around, despite the confidence. I advise working the next one as thoroughly as the first one.

Here are some key insights that I and others have collected for mature company leaders, as well as serial entrepreneurs. They often justify strategies in their own minds that lead to problems or even catastrophic failures that they never saw coming:

  1. Concluding recent positives are the new norm. Unfortunately, in this new age of rapid market change and harder-to-satisfy customers, you can’t assume that what worked yesterday will work tomorrow. New technologies and the power of the Internet can change things almost overnight, so do your homework from scratch on every initiative.

    For example, the e-commerce trend, driven by the Internet, has boosted many companies to success, but Covid and more recent customer demands for customization, easy returns, and instant delivery have made to model very difficult for many businesses.

  2. Believing you have a magic approach to growth. In my experience, there is no long-term magic in business. Innovative product and process solutions are only temporary, as they quickly become a commodity in the minds of customers and competitors. Yet, if you did it once, you can do it again, but don’t assume it will be easy, or just copying the past.

    In my experience, the secret is mostly hard work and passion. The successful business people I know typically work longer hours, cultivate more relationships, and create new initiatives more often than the rest of us. Take a lesson from Elon Musk and Steve Jobs.

  3. If you like it, so will all your potential customers. Maybe this worked for you the first time, but it is certainly a high-risk approach. As an angel investor, I expected startups to have a passion for their solution, but also to have done the market research and customer validation to size the real opportunity. You and your friends are not the market.

    In addition, these days you have to help your customers find you, through traditional marketing, more social media, and influencers. With today’s information overload, you can’t assume that people will know that you and your new innovative solution even exist.

  4. Capitalize on a continuing market demand trend. You all remember the seemingly limitless growth of social media and dating sites, so for many adding another one seemed like a sure-fire success. Yet I find that investors and customers are no longer interested in just another one. There is no substitute for new business model work and marketing.

    People are seeing the value and have a growing interest in renewable energy, artificial intelligence, and the use of blockchain technology for business. I’m seeing new business models for remote services, the sharing economy, and creating your own ecosystem.

  5. Overlooking the impact of global market forces. The current geopolitical tensions and the pandemic have and will continue to upset markets that were thought to be golden by many entrepreneurs and business owners. As you look ahead to your next business or growth initiative, I recommend that you take a hard look at your current winning strategy.

    In this age, because of world-wide communication, e-commerce, and quick delivery, every local business is really a part of the global market. Don’t assume that you can isolate your business and marketing to the local area, and continue to survive and thrive.

  6. Let your ego do the thinking based on prior success. Don’t let past success take your foot off the pedal of working hard, building relationships, and truly listening to your customers and other experts. Steve Jobs found that his early success at Apple didn’t guarantee him a job, but he came to back with some new thinking in the end.

The message here is that even the most successful business leaders seeking growth, as well as serial entrepreneurs, should never rest on their laurels. There is no substitute for doing your homework on current opportunities in the market, customer trends, and new technologies driving competitors. Stay on your current winning streak and continue to enjoy the entrepreneur lifestyle.

Marty Zwilling

*** First published on Inc.com on 5/4/2022 ***

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Monday, May 16, 2022

5 Ways To Expand Your Thinking For Your Next Startup

expand-your-thinkingWith all the upheaval and uncertainty these days, I find many entrepreneurs and business owners are reluctant to pursue new dreams, waiting for the world to stabilize and risks to go away. As a long-time business advisor, I see things just the opposite. Now is a time of great opportunity, with people knowing they have to adapt, and proven successes such as Elon Musk and Jeff Bezos.

Sometimes the hesitation I see is not just the qualms of starting and growing a business, but an actual inability to think big, chase dreams, or build a support community around you. To counter this hesitancy, I was inspired by a new book, “Make No Small Plans,” by entrepreneurs Elliott Bisnow, Jeff Rosenthal, Brett Leve, and Jeremy Schwartz.

They make a strong case, by virtue of their own experiences, that anyone can think big, and with the proper humility, thirst for knowledge, and a talented team, we all can accomplish the impossible. I will highlight here just a few of the many lessons that they mention, and I also recommend, to get you started down the path to the satisfaction and success you dream about:

  1. Make sure some crazy ideas are added to your list. No idea should go unspoken. You need to give yourself permission to think outside the box, and seriously consider a dream idea or two that your rational mind would rule out quickly. In addition to something you want, just make sure it’s something you can build, and many others may pay for it too.

    A popular and effective way to generate a range of ideas is brainstorming. Good brainstorming requires you to assemble a half-dozen of the right people who are not afraid to speak up and participate. Your challenge is to listen and keep it positive.

  2. Expect to have and acknowledge some failures. Don’t let the fear of failure keep you from taking risk and learning from your mistakes. That doesn’t mean trying the same thing over and over again, and expecting different outcomes. It does mean owning up to mistakes, pivoting, and really listening to customers, advisors, and industry experts.

    Take inspiration from Thomas Edison, who called every failure an “experiment” (now it would be a pivot). He made no excuses for 10,000 light filament failures and soberly responded: “I have just found 10,000 ways that won’t work.” He then succeeded.

  3. Capitalize on authenticity versus perfection. Trust in the real you, including imperfections, and move forward. Perfection in business is undefined and unattainable. Keep your focus on customers, who are never perfect, and build productive relationships. In these days of full communication through the Internet and social media, you can’t hide.

    Authentic leaders are forthcoming about both their strengths and weaknesses. Don’t be like the startup CEO I once worked for who always pretended to have all the answers, even when it was clear to everyone that his depth did not match his marketing passions.

  4. Find a partner to complement your weaknesses. We all have strengths and weaknesses, and too many of you spend your energy trying to fix a weakness, rather than leveraging a strength. Spend that energy instead finding and building relationships to balance that weakness with the strengths of others. One plus one can equal three.

    For example, I worked with Bill Gates and Steve Ballmer, who founded Microsoft and achieved success together. Bill was certainly the idea person and technologist, while Steve brought the business experience from Proctor & Gamble to close the equation.

  5. It’s not all about the idea – focus on the execution. The idea alone is not what’s valuable in business. The real value to you and the customer comes later, through hard work and execution. I learned long ago as an investor that the bridge from thinking and talking, to doing, is a long and difficult one for many to get over. Too many never make it.

    In my experience as an angel investor, I was never impressed when a startup founder claimed to be an “idea person.” Entrepreneurs often tout that “million dollar idea,” but I haven’t seen anyone pay that much for one yet. Focus on delivery results to show value.

I see many business owners who are linear thinkers, and they usually survive, but rarely boast of having achieved their dream, and often they don’t seem all that satisfied with their lifestyle choice. Maybe it’s time for you to take a hard look at your own progress and satisfaction in the business you are in. It’s never too late to starting thinking big, chasing your dreams, and having more fun.

Marty Zwilling

*** First published on Inc.com on 5/2/2022 ***

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Sunday, May 15, 2022

5 Phases Of Every Startup That Regulate Your Success

startup-stages-lead-to-successSuccessful startups seem to follow similar paths to greatness, and unfortunately all too often that path leads them back down the hill much faster than they went up. Big company powerhouses, like IBM and Xerox, took fifty years to make the cycle, but new companies today, in the age of the Internet, often make the cycle in five to ten years, or even less. Consider MySpace and Webvan.

Thus it behooves every entrepreneur to start watching these things more carefully from the very start. By definition, most startups begin as a result of some innovation in product, process, or service. The problem is that innovations in most business areas are coming so fast these days that yours can be overrun while still being scaled up across geographies and other products.

In other words, the challenge today is to build a culture of continuous innovation, as well as continuous scaling, and continuous consolidation, all concurrently. That’s a tall order, especially when your business culture has to fit into the myriad of international and local cultures that are part of every market these days.

In the classic book, “Fish Can’t See Water,” Kai Hammerich and Richard D. Lewis explore these cultural issues, both national and international, that can make or break your company strategy. Incidentally, I love that book title, which seems to me applicable to most aspects of business (and even people), as well as business culture.

To set the stage for all the cultural issues and timing, the authors start with a summary that I agree with of the five lifecycle phases every company is likely to experience over the long-term or short-term, regardless of culture:

  1. Innovation. This business phase is where every entrepreneur starts. It’s a volatile period for every company, where most struggle with getting commercial and technological traction, usually based on a single product or service. A particularly critical moment is when the founders hand over the leadership to a more managerial regime.
  1. Geographic expansion. This phase is characterized by rapid expansion either regionally or globally for growth (scaling up). This is where the culture of the startup has to adapt to the cultures of the markets served. A common practice is to hire local employees who know the geographic culture, even though this may well dilute the company culture.
  1. Product-line expansion. For additional growth, most companies expand the product portfolio to cater to more customers, and sell more to existing customers. The challenge during this phase is to stay innovative and agile. This usually marks the end of organic growth, as partnerships and alliances aid growth, but again dilute the focus on culture.
  1. Efficiency and scale. As the business matures, there is a natural drive towards more efficiency often through sheer scale and a desire for a stronger market share. Companies with an innovative and creative bias, which thrived during the innovation phase, usually struggle in this period. The emphasis is on global processes and tight execution.
  1. Consolidation. This is the end game for an industry, and many companies, characterized by mergers and acquisitions to a few dominant players. Value creation for major shareholders is frequently hampered by integration issues and culture clashes. The crises definitely hits here, if not earlier, and even the survivors can be dragged down.

In fact, crises can and do hit in any phase, due to poor execution, complacency from success, less competitive strategy, change of leadership, and many other reasons. It’s important to note that a company under crisis often will revert to its core national culture, which only further exacerbates the problem.

Thus it’s important to set your company culture early to be a global company, without a specific national bias, since the speed of change is so great. You need the global outlook, even though digitalization and Web 2.0 means you don’t have to have a physical presence in other countries to participate in the global market.

As companies grow in today’s high-speed Internet environment, with constant pivots and new products, they won’t even see the lifecycle phases flashing by, and in fact may be experiencing all of them concurrently. There is no time to be changing your culture to match the lifecycle. How hard are you working to avoid the “fish can’t see water” syndrome?

Marty Zwilling

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Saturday, May 14, 2022

8 Keys To Effective Delegation For All Perfectionists

women-business-laptop-officeFor a few, delegating comes easily, maybe too easy. For others who are perfectionists, letting go of even the most trivial task is almost impossible. If you are in this second category, you probably don’t like the references behind your back that you are a “control freak” or a “micro-manager.”

London business school professor John Hunt notes that only 30 percent of managers think they can delegate well, and of those, only one in three is considered a good delegator by his or her subordinates. This means only about one manager in ten really knows how to empower others.

The challenge is delegating the right things, and not delegating the wrong things. If you don’t get it right, you are busy, but working on the wrong things. Almost every entrepreneur needs to improve their skills in this area, so I did some research on the basics. Jan Yager, in her classic book “Work Less, Do More,” has outlined eight key steps to effective delegation which I endorse:

  1. Choose what tasks you are willing to delegate. You should be using your time on the most critical tasks for the business, and the tasks that only you can do. Delegate what you can’t do, and what doesn’t interest you. For example, non-computer types should consider delegating their social media, website, and SEO activities.

  1. Pick the best person to delegate to. Listen and observe. Learn the traits, values, and characteristics of those who will perform well when you delegate to them. That means give the work to people who deliver, not the people who are the least busy. This requires hiring people with the right skills, not the least expensive or friends and family.
  1. Trust those to whom you delegate. It always starts with trust. Along with trust, you also have to give the people to whom you delegate the chance to do a job their way. Of course the work must be done well, but your way or the highway is not the right way.
  1. Give clear assignments and instructions. The key is striking the right balance between explaining so much detail that the listener is insulted, and not explaining enough for someone to grasp what is expected. Think back to when you were learning, when you were a neophyte.
  1. Set a definite task completion date and a follow-up system. Establish a specific deadline at the beginning, with milestones. In this way you can check up on progress before the final deadline, without fuzzy questions like “How are you doing?”
  1. Give public and written credit. This is the simplest step, but one of the hardest for many people to learn. It will inspire loyalty, provide real satisfaction for work done, and become the basis for mentoring and performance reviews.
  1. Delegate responsibility and authority, not just the task. Managers who fail to delegate responsibility in addition to specific tasks eventually find themselves reporting to their subordinates and doing some of the work, rather than vice versa.
  1. Avoid reverse delegation. Some team members try to give a task back to the manager, if they don’t feel comfortable, or are attempting to dodge responsibility. Don't accept it except in extreme cases. In the long run, every team member needs to learn or leave.

Almost everyone who has grown their startup from a one-person entity to a going concern with many employees has struggled with letting go of any task. On the other hand, executives who come from a large company to a startup tend to delegate too much, resulting in high costs and lack of control.

Finally, every entrepreneur needs to set aside their fear of delegating. If you do it right, as outlined above, every task will likely be done better than you could do it. The only thing you can't delegate is “the buck stops here” role. That can only be done by the person in charge, and it better always be you.

Marty Zwilling

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Friday, May 13, 2022

10 Ways To Be An Entrepreneur Who Endures And Thrives

Entrepreneur-thrivesAs the economy rebuilds after some tough economic times, more and more people seem to be turning to entrepreneurship and their dream lifestyle as an alternative to traditional employment. I applaud this trend, but caution all of you thinking this direction to approach entrepreneurship with your eyes wide open. It is not for everyone, as the entrepreneur’s path is fraught with challenges.

Many experts have tried to clearly lay out the criteria for survival in a way that allows you to judge your own situation and your own temperament, and make a rational decision before starting down this path. I recommend the ten points in a classic book by Bill Murphy, Jr., titled “The Intelligent Entrepreneur,” outlining the keys to successful entrepreneurship, as follows:

  1. Make the commitment. Entrepreneurship can be learned. But you have to be committed to the process of building your own thing and the act of creating something, rather than just coming up with an idea. It will likely take several ideas, with the learning process of failing on a couple, before you can call yourself a successful entrepreneur.
  1. Find a problem, then solve it. Rather than finding a new idea first, try finding a problem first. Problem solvers make successful entrepreneurs. Idea people are dreamers, who often don’t enjoy the hard work of a solution in a specific timeframe to make money.
  1. Think big. Thing new. Think again. In other words, make sure your solution will scale up. Professional investors will tell you they look for business plans that can credibly project revenues of at least $20M within five years, or they won’t justify an investment.
  1. You can't do it alone. Have a support team of people you know and trust. An idea person and a problem solver make a great team. Successful entrepreneurs have to work well with people, whether they be partners, investors, employees, suppliers, or customers.
  1. You must do it alone. But the dichotomy is that there are things that you have to do alone. “The buck stops here.” You have to be decisive, accept responsibility, and provide the vision. Vision is not a group-think activity. Sometimes decisions have to be made quickly, and with very little hard data, so you need the confidence in your gut.
  1. Manage risk. Without risk, there can be no innovation. Not every idea can, or will, be a winner. Fear of failure will kill innovation, but reckless disregard for risk will kill a business. The successful entrepreneur is able to find the balance between these two extremes.
  1. Learn to lead. In a startup, the entrepreneur leader has to do two things. First, drive the business creation process, and secondly, inspire all the others. The others include the rest of the team, investors, and customers. That means hands-on leadership and effective communication.
  1. Learn to sell. Don’t believe the old myth that “if we build it, they will come.” Selling is a learned skill, and takes effort, just like building a product. Everyone in your startup, especially the entrepreneur, needs to understand sales, and needs to be a salesman.
  1. Persist, persevere, prevail. Experts say the prime cause of failure in business is quitting too soon. The successful entrepreneur never gives up, and uses creativity to overcome all obstacles, including personal, financial, and technical ones.
  1. Time, not money, is the key resource. Entrepreneurship is a lifestyle, not a job. Be prepared to play the game for life. There are no quick fixes, or quick get-rich solutions. Learn to manage and balance your time; it’s the one thing that belongs to you alone. Great entrepreneurs have a life outside of work, and find time to give back.

Reporter Bill Murphy compiled his book based on three real-life success stories of Harvard graduates, all of whom proved the points by their failures as well as successes. There is no magic here, but I believe these rules can shorten the learning curve and increase the success rate for every budding entrepreneur. They can also help you be happy and have some fun.

Marty Zwilling

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Wednesday, May 11, 2022

7 Metaphors That Every Aspiring Leader Should Emulate

men-suite-man-businessIn building successful businesses, I find that creating a new and innovative product or service is usually the easy part. The hard part is providing the leadership required to align and motivate all the constituents and players – from engineers, to investors, vendors, and ultimately customers. Great entrepreneurs are not just idea people and then managers, they are extraordinary leaders.

Most investors admit that they invest primarily in people, not ideas, and they inherently believe that they can sense this leadership ability needed to get the rapid growth and 10x return we all strive for. Yet beyond a list of noble attributes, like vision, courage, and integrity, it’s hard for them to define what separates an ordinary entrepreneur or manager from an extraordinary leader.

I saw a new approach in the classic book “Leadership Transformed: How Ordinary Managers Become Extraordinary Leaders,” by Dr. Peter Fuda, which identifies seven leadership themes, presented as metaphors. I believe these will really help anyone recognize great leaders, and even more importantly, accelerate their own entrepreneur leadership transformation:

  1. Demonstrates a burning ambition and a burning platform (fire metaphor). These are the forces that initiate and sustain transformation efforts. The top two on the personal side are “urgency” and “desire,” but these have to be matched on the business side with the willingness to burn the platform (change any aspect of the business) without a crisis.
  1. Sense of accountability and momentum (snowball metaphor). This means no excuses and no rationalization, sweeping team members into mutual accountability. The leader then builds momentum from small successes into a snowball that will grow into a large, powerful, and eventually unstoppable business. Have you addressed all sources of drag or friction on your snowball?
  1. Artfully applies tools, and strategies for change (master chef metaphor). New entrepreneurs are really amateur chefs learning to cook a new business. Existing business frameworks are the recipes, and great entrepreneurs creatively use new tools and strategies to hone these frameworks, just like a master chef.
  1. Works with other team members on mutual aspirations (coach metaphor). It is not about leaders becoming coaches; it’s about leaders letting themselves be coached by others – advisors, team members, and even customers. A team’s captain is dependent on the support of their teammates, requiring trust and respect from both parties, and humility on the part of the leader.
  1. Does not mask authentic self, values, and aspirations (mask metaphor). Too many entrepreneurs put on a mask to conceal personal imperfections, or they adopt an identity not aligned with their authentic self, values, and aspirations. This fa├žade is a burden soon recognized, so dropping the mask is more effective, as well as more comfortable and more fun.
  1. Enhance their self-awareness and edit their own performance (movie metaphor). Great entrepreneurs recognize that leadership is like a movie, and it can be honed and improved by disciplined reflection (see yourself as others see you), edited for impact, and directed by experts on your team. Reflect on how often you operate from judgment as opposed to perception. Think about who could help you reflect-on-action.
  1. Embed their personal journey within the business journey (Russian dolls metaphor). Business is really a set of journeys that interact with an entrepreneur’s personal journey. Up-line this may be your interaction with your Board, investors, and family. Down-line it’s the leadership model you use with your internal teams and external partners. Focus on improving your up-line and down-line dolls with your personal journey.

In addition, here are five strategies that Dr. Fuda and I both agree will lead to a more empowering approach to entrepreneur leadership, and help you optimize all the themes described above:

  • Shift your focus from your business content to market context.

  • Spend more time showing others what is required, rather than telling them.

  • Focus more on collaborating with others, rather than competing.

  • Evolve from guru to guide, and coaching others to find answers for themselves.

  • Move from critic to cheerleader, from what is going wrong to what is going right.

If you are an investor, you need to recognize and mentor entrepreneurs to extraordinary leadership. If you are a startup founder or executive, you need to strive continually to change yourself and your business to build and maintain the leadership you need to out-perform your competition, and generate the results to meet personal and financial objectives. How many of these themes and strategies are you practicing today?

Marty Zwilling

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Monday, May 9, 2022

8 Ways To Increase Worker Buy-In And Customer Service

engaged-business-team-customer-serviceMost businesses spend big money testing their brand logo, catchy marketing phrases, and demographics, but spend little time training and validating that their employees can and do deliver exceptional experiences to their customers. The result, according to an often-quoted Gallup survey, is 70 percent of workers not fully engaged, and poor customer experiences.

The customer experience is really your brand, since that is what customers remember and communicate to others, rather than your marketing. Thus the real challenge in building your brand is building the level of engagement and delivery of your team. Gregg Lederman, in his classic book, “ENGAGED!: Outbehave Your Competition to Create Customers for Life,” offers eight key principles for defining and managing the experience to keep it consistent and profitable:

  1. Keep every employee on stage, delivering an experience. At work, all team members (everyone who gets paid for doing a job at the company) are on stage responsible for delivering a branded experience to coworkers and customers. They have to out-behave and outperform your competition. Is your team performing like they are on Broadway?
  1. Keep your team happy to create engaged customers. An unhappy team member can’t create an engaged customer. Yet less than half of the people working today claim to be satisfied and happy at work. How many of your employees would say that what they think, what they say and what they do are in harmony? Money does not buy engagement.

  1. Don’t just announce your culture, make it visible. Your mission, values, brand positioning, and guiding principles are invisible, unless your employees know specifically how to act them out through their day-to-day behavior. You have to define these behaviors, measure them, and reward them. Walking the talk is the place to start.
  1. Focus on culture change rather than culture talk. Culture is changed by how we act (perform) and interact (employees and customers). Define and document a common mindset and make related behaviors non-negotiable. Everyone must know and do these things consistently. The secret to success is 1% training and 99% reminding.
  1. Turn common sense into common practice. The only true employee-driven measure of whether the workforce is “living the brand” is the perspective of others in each work area. Use a company-wide assessment at least twice a year to understand and remind the team to out-behave the competition. No more gamed employee satisfaction surveys.
  1. Build relationships and stop surveying customers. Every senior leader needs to have regular quality conversations with customers. These enable leaders to learn firsthand about how the company is living the brand and when it is not. Relationships will get referrals, drive more sales, and build loyalty. Use the feedback to improve and grow.
  1. Incent engagement with training and recognition, rather than rewards. Employees get much greater value from the power of recognition and much less from the actual rewards. Reward programs don’t drive sustainable culture change or business results. Provide recognition for the right behaviors consistently, and the results will accrue.
  1. Build trust in you as the leader by managing the experience. Without solid leadership people simply won’t follow. Earn trust by making the right experience a part of the day-to-day conversation, and reminding people by your actions what you expect. Demonstrate a culture of responsibility and accountability.

Lack of engagement is very expensive. According to Lederman, engaged organizations grew profits as much as three times faster than their competitors. Highly engaged organizations have been shown to reduce staff turnover by 87 percent, improve performance by 20 percent, and increase customer satisfaction by at least 12 percent.

Overall, successful startups and world-class companies are known to have fiercely loyal customers driven by fully-engaged team members, resulting in proactive referrals and more purchases. That’s the brand you want, and it needs minimal focus on the logo and advertising to survive and out-perform your competition. How would you rate your customer experience today?

Marty Zwilling

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Sunday, May 8, 2022

10 Startup Founder Decisions That Have No Good Answer

adult-businesman-thinkingMost entrepreneurs struggle with many startup founders quandaries in building their business, and these key dilemmas are probably the biggest source of pain and failure for the entrepreneur lifestyle. People may jump into the lifestyle to be their own boss, achieve great wealth, start a new trend, or all the above. The dilemma is that these goals are usually mutually exclusive.

For example, is the person who starts a new trend likely to be the one who controls it through the growth phase? In a famous Harvard study of 212 new ventures a few years ago, USC professor Noam Wasserman found that half the founders were no longer at the helm after three years, and over time 80% were forced out. That’s not an attractive statistic if you crave control and power.

Don’t wait for the harsh reality of the demanding business world to start thinking about these tradeoffs. The research from Wasserman and others outlines the following top ten dilemmas that every founder needs to deal with sooner or later in their career as an entrepreneur:

  1. The make money or serve humanity dilemma. Your great idea for the next Facebook may make you wealthy, but it probably won’t help the hungry. The answer is to look hard inside yourself, to see what makes you happy and satisfied. If living on Raman noodles while you make the world a better place is fine, skip the investors and growth race.
  1. The right time to start dilemma. The right time to jump is a function of favorable career, personal, and market circumstances. While it’s unlikely that all three of these will ever be true at the same time, most experts don’t recommend jumping at the first opportunity, but first gaining some skill, financial, and business experience first.
  1. The founding team size dilemma. Should you start a company solo or find co-founders to help you? With one or more co-founders, you gain complementary skills, spread the workload and responsibilities, and reduce the risk. The downside is loss of control and financial dilution. In my view, two heads are always better than one.
  1. The co-founder relationship dilemma. While long-time social friends and family may seem like the natural choice for co-founders and team members, these relationships often get in the way of hard business decisions or necessary business adjustments. Old co-workers or new friends with complementary skills usually make the best partners.
  1. The founder’s title and role dilemma. Usually co-founders expect to get a C-level title associated with their area of interest, like CFO for the financial expert. Make sure these titles are handed out only to people who are willing and able to accept the responsibility and workload of the associated role. It’s tough to downgrade titles and roles later.
  1. The compensation model dilemma. Every founding member wants to be compensated richly for the risk and the unknown. You have very little money, and you don’t want to give away your equity. Recognize that the best people don’t work for free. Giving equity is realistic, but base it on contribution and role, with vesting after time and milestones.
  1. The right investors and right time dilemma. You don’t want to take money from friends and family, but it’s too early for angel investors and VCs. No one wants to put in money until you have a product, and you need money to build the product. Bootstrap if you can, otherwise climb the pyramid of family, friends, angels, and VCs.

  1. The right motivated employees dilemma. Very early, you need generalists who can cover multiple areas, but you can’t pay for experience. Later you need specialists and managers. Offer low cash early, with bonuses or stock options for milestones, to people in your personal network. Later use LinkedIn and other job sources for professionals.

  1. The founder succession dilemma. Startups are usually founded by product or service experts who don’t enjoy the various growth phases. Should the founder keep the company small, try to adapt, or step aside in favor of a seasoned business executive? Transition to a specialist role, plan to exit, be prepared to be pushed out, or plan to fail.

  1. The control and growth dilemma. If you take investor money, expect a push for hockey-stick growth and a liquidity event, like going public (IPO) or sale (M&A), to get the payback. If you prefer a private company with organic growth, keep control within friends and family, and prepare for the long haul. Otherwise exit and startup with another idea.

Not facing these dilemmas squarely and honestly is one of the biggest pitfalls facing every entrepreneur. You can’t have it all, just like your startup can’t be all things to all customers. You have to focus on the things you can do and love to do, and do them better than anyone else. Turn these top ten dilemmas into your strengths, and you will have a competitive advantage, as well as the fun and satisfaction you sought to find in the entrepreneur lifestyle.

Marty Zwilling

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Saturday, May 7, 2022

Insights For Business Leaders Who Manage By Autocracy

 Alexander Lukashenko is the President of Belarus.Trying to be a business leader by instilling fear in your employees and partners is never a good approach, but it is particularly devastating in a startup. Yet I see this autocratic approach used all too often by new entrepreneurs, most of whom are not natural tyrants, but who are fighting to mask their own internal fears and insecurities about starting a business.

The classic book on this subject, “Leading Without Fear,” by Laurie K. Cure, PhD, convinced me that fear is a natural reaction to the risks associated with a new venture, and people handle this fear in different ways. Some are able to read the danger signals, and catapult themselves and everyone around them into action without fear, resulting in progress and success.

Others intentionally or unintentionally project their own fear into a weapon that gets used on their team and constituents to get things done and assure accountability, at least in the short term. According to Cure, there are three main reasons that entrepreneurs resort to propagating fear:

  1. Need to establish a sense of urgency. Sometimes it seems like instilling fear is the quickest and most effective way to instill a sense of urgency in other team members. In fact, it does work in the short term, but in the longer term it breeds mistrust and cynicism, which quickly erodes morale and leads to reprisals worse than the challenge.
  1. Don’t know any other way. Often new entrepreneur leaders reach a point of desperation in dealing with people, and hope that they can somehow shame, anger, or scare people into behavior change and desired results. This approach usually stems from primal reactions during early childhood, or a specific cultural background.
  1. Engulfed in the flames of their own fear. Others use fear because they are simply afraid, and unable to hide it. It requires extreme discipline not to project your fear onto others. When leaders are in fear, be it for their own security, sense of affiliation, or self-esteem fears, they become blind to how they might be using fear in their own leadership.

Smart entrepreneurial leaders avoid these reasons, and don't use fear because of its devastating consequences on their long-term business success. Here are a few of the consequences:

  • Fear drives the team into fixed and safe positions, allowing competitors an easy advantage.

  • Fear short-circuits change, creativity, and innovation, which are the life-blood of startups.

  • Fear limits rational discussion of alternatives, leading to poor decisions and inaction.

  • Fear fosters suspicion, mistrust, and cynicism of the leader and the startup.

  • Fear tends to turn the focus inward to survival, rather than outward to customers.

Based on the insights I see from Cure’s book and others, I recommend the following strategies for reducing fear in your own mind and in the minds of your constituents:

  1. Increase your own self-awareness. This is essentially your ability to know yourself, your motives, desires, and personality. Who are you, and why do you do what you do? It is only with self-awareness that you can grow and learn. Self-awareness simply requires an ongoing practice that you can engage in and make a part of your lifestyle.
  1. Be clear on all your goals, and communicate these regularly to your team. If either you or they don’t know the goals, neither of you will know when a threat is imminent, or if everyone is in alignment. When you are out of alignment with the team in terms of goals, everyone feels torn, dissatisfied, and fearful.
  1. Focus more on the positive side of risk. Everyone’s brain has a reward pathway that creates a sense of euphoria and pleasure when you overcome high odds, or do something innovative. Stop focusing so much on the things that can go wrong, and anticipate the joys of progress and success.

All entrepreneurs have to take risks and provide leadership to succeed, but driving yourself and your team with fear is not the answer. The best leadership is providing real motivation from the work itself, and the drive to build something lasting. Fear has no role in either of these.

Marty Zwilling

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