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Thursday, November 30, 2006

Some Honesty for the Entrepreneur

Honesty and the Entrepreneur:

The last few weeks have been hard at work, cash flow, Investor and possible sale and I have drawn some lessons learned from it all.

  • Don't work with a managment team that you are uncomfortable with, you dont need to be best friends but makes sure they are competent, trust worthy and loyal.
  • Don't work with a team that has different end game than yourself, even when things get tough, a leader is not about self preservation, if you are a good leader you will get a new job
  • Money is not the total focus of why you do what you do, neither should it be your fellow leaders
  • When you engage with investors, make sure they are ethical and that your internal sponser is a strong member of there partners team.
  • Be flexible, don't work on things for the sake of it, work on it because it will make a difference, and don't waste your best executives on the same pointless tasks as well.
  • A start up will be like a family after a while, remember what it is like to be a family member
  • Don't waste your life on something that is not going to bring you satisfaction and meaning
  • Treat others as you want to be treated yourself

Well thats enough of a rant, and if you know off anyone looking for senior operations guy then point them in my direction, it's time to get meaning back in my life..



Wednesday, November 29, 2006

Coaching tips for the entrepreneurial leader

Develop Others By Asking the Right Questions

Build a culture where individuals are expected to take responsibility, seek solutions and take action by asking the right questions of them.

If you're an entrepreneurial leader, you know that your most important task is to move your company into the future through high-level thinking and strategic development. But with the daily chores of problem-solving and hands-on management, you just don't have the time. It's not happening the way it should, and you don't know how to fix it.

What makes it even more frustrating is that you've seen leaders who do seem to have the time for that high-level focus. They don't stagger under the weight of daily operations and of problems that should have been solved lower on the organizational chart. How do they do it? Do they struggle too, but hide it better? Are their employees more competent?

You can develop your ability to lead and grow a team that can work efficiently and effectively without constant supervision. You can do this with the staff you already have. And the path to get there may be simpler than you imagined.

In my work-life with companies ranging from start-ups to multinationals, and even in my own experience as the owner of an entrepreneurial business, I've found that the most underused, undervalued and most effective technique for encouraging initiative and independent decision-making is the skill of asking effective questions.

My present company is typical of many entrepreneurial organizations in that everyone on the staff must be confident and capable of acting with minimal supervision. We use questions to encourage our employees to stretch themselves and take ownership of their responsibilities--whether they're high-level managers or entry-level assistants. We find that, if an employee doesn't respond with an expanded sense of confidence and responsibility, then the way he or she does respond exposes bigger issues that need to be addressed and gives us the information we need to make smart decisions.

You're thinking it's got to be more complicated than just saying, "Good question--what do you think?" Well, yes, you do need to ask the right questions at the right time with the right intent, but let's start with the simple fact that asking questions of people inspires them to think and act independently.

Let's look at a couple of factors that are important for success. The first step is to make sure that you're in the right frame of mind to make it work. You'll want to remember that this technique will not only help you become a better leader of people, it'll also help you discover things you didn't know about your business and your employees. It may change the way you view situations and give you a new vantage-point from which to make the high-level decisions.

You also need to be sure that you're really ready to delegate downward. If you aren't quite ready to take that step, your questions will probably take the form of leading questions that have an assumed right answer. Your employees may see your questioning as a waste of their time and perhaps a threatening exercise, and they'll continue chasing you down the halls for your opinion about everything from new business development to which brand of printer paper to order.

Next, diagnose where you stand when it comes to your own questioning style. The next time an employee comes to you with a question or problem, count the number of questions you ask them and the number of opinions you voice.

Note the style of questions you tend to ask. Are they challenging questions ("Have you even thought about this particular solution?"), your opinion disguised as questions ("Don't you think that this approach is best?") or true clarifying questions ("What have you considered so far?")? Your goal is to ask just the clarifying questions and forget about the rest. The rest are unproductive and will only create stress for your employees.

With this baseline, you can start applying this skill. But wait! One more thing.

Because any change in your behavior can be confusing or frightening to your staff, it's important to sit down with them and explain what you're doing and why. If they simply see a change in you that they don't understand, they may view it as a negative experience or something to resist.

After all that set-up, the next step will sound anticlimactic. It's incredibly simple, but does require focus and commitment.

Each time an employee asks you a question that is a request to solve a problem or take on unwelcome responsibility, ask at least three questions before venturing an opinion. That's it. Just ask three productive questions to find out what information the employee has already gathered and if he knows enough to make a recommendation. If he can, reinforce the behavior with a positive response and encourage him to go ahead and make the decision on his own.

If he hasn't, suggest that he collect the information he'll need, then come back to you when he feels he can make a recommendation.

In the back of your mind, you'll want to remember that change is going to take a little time--it won't happen overnight--but the pay-off will be there in the end. After just a few rounds of this, your employees should begin to work through problems on their own, only bringing you problems that really do need your attention, along with recommendations for a solution.

A culture will begin to develop where individuals are expected to actively take responsibility, seek solutions and take action. You'll gain the freedom to lead and to focus on strategy and development. This is especially important in an entrepreneurial environment where you may be a genius in your field, but not have an extensive management background.

What if you don't see results right away? If your employees don't quickly start to rise to the occasion, one of three things is happening:

  1. It's just the initial stumbling block you'll encounter if your employees are cemented into their behaviors. They'll push back, trying to get you to act in the way they've come to expect. Assume that it will be awkward at first as everyone gets used to it. Explain again the purpose of the questions, then give it a little more time.
  2. You have some gaps in training and skills that are stopping your employees from reaching their potential. You should be able to identify those areas through your questioning and address them with hard skills and subject matter training, or perhaps a program of organizational development and coaching.
  3. After addressing 1 and 2, if a single employee isn't responding while the rest of the team is improving, that particular employee may not be a good fit for your organization. The questioning technique sometimes reveals an inability to take on the responsibility necessary to get the job done. In that case, you have to face a decision that's made easier by the clarifying questioning you've been asking.

If you think this technique of asking the right questions at the right time with the right intent sounds simple then you probably haven't tried it. It may sound simple, but it's certainly not easy. I've worked with entrepreneurial leaders who literally cannot ask questions before offering solutions and advice. They--like you--have reached a level of success because they are so good at problem-solving and giving hands-on direction. But as your organization grows and you're looking to the future, the time has come to switch gears from "managing" to "leading." To get to the next level, you'll need to step outside of your comfortable position as head problem-solver and start developing your people to pick up where you left off.

Excellent leadership isn't about having all the answers. That's just ego and habit. It's about building an organization where people--you included--are able to confidently take ownership of their responsibilities. And there's no better way than asking questions to help them gain the confidence they'll need to ensure their success



Tuesday, November 28, 2006

Some lessons from the past to help the entrepreneur

The six mistakes of man:

1. The delusion that personal gain is made by crushing others.

"Always be able to look in the mirror at the end of the day and be comfortable in the image you see"

2. The tendency to worry about things that cannot be changed or

"Every system in your body is affected by worry. In addition to raising blood pressure and increasing blood clotting, worry can prompt your liver to produce more cholesterol, all of which can raise your risk of heart attack and stroke. Muscle tension can give rise to headaches, back pain, and other body aches. Worry can also trigger an increase in stomach acid and either slow or speed up muscle contractions in your intestines, which can lead to stomach aches, constipation, diarrhea, gas or heartburn.
Worry can affect your skin (rash or itch). It can impact your respiratory system and aggravating asthma. Growing evidence even suggests that chronic worry can compromise your immune system, making you more vulnerable to bacteria, viruses, perhaps even cancer

3. Insisting that a thing is impossible because we cannot accomplish

" There was a time that putting a man on the moon was impossible" "it is now common place for us to use our mobile phones to call someone on the other side of the world", if we think it is impossible, we have already set the condition to fail in our mind, do not predict your own failure, I have on many occasions had what looks like impossible goals, but through determination and extreme effort from world class teams we have achieved them. Give your self a chance, start doing the impossible it is fun!!!!

4. Refusal to set aside trivial preferences.

" We allow our personal preferences to cloud our judgment, to rob us from opportunities that otherwise would bring great profit." Let yourself expand in mind and preferences, accommodate other peoples preferences, develop a world view not a personal view"

5. Neglecting development and refinement of the mind, and not
acquiring the habit of reading or studying.

"You never stop learning if you do you are dead"

6. Attempting to compel others to believe and live as we do.

"as long as a man does not hurt others with his beliefs, then he has the freedom to follow them. When you are head to head in a debate with a fellow employee, take a step back and try and think in his shoes"

~ Cicero, Roman philosopher and statesman, (c. 106-43 B.C.)

~ Gordon, Celtic native and resident of earth, (c. 1963- B.C)



Monday, November 27, 2006

What MBA programs do not teach about leadership

7 Ways Leaders Handicap Themselves

This post came aout from an interesting meeting a few months ago, I met with a young business leader who had asked for assistance, she was personable and had a good business running but was not sure about where she was going, I spent a couple of hours with her and talked through some senarios regarding growth strategies for her company at that time, she could have a brillant future if she only looked up from the day to day business of selling, and look strategically at the future, tactical planning has it's place , but strategic thinking wins the battle. I have since been deluged with "sales"e-mails from her hawking her companies courses, which has turned my right off helping her and I believe an abuse of our first meeting, I feel used so what is my motivation help the company or even use her services ?.

In a new book that captures the essence of leadership—Great Leadership—author Anthony Bell writes, "For all the importance of great leadership, it doesn’t happen by itself. Without a framework, leaders often handicap themselves in a number of significant ways." He outlines these issues:

1 Leaders tend to operate from intuition and experience. While both can serve a leader well, neither is infallible: intuition cannot compensate for the blind spots every person has, and experience is a tutor with a limited perspective.
2 Leaders tend to become leaders because they are technically competent. Being good at something singles them out for promotion. But what makes people effective at one level can make them ineffective at another.
3 Leaders tend to operate with the skills that were most useful two levels below their current level. In part because of the way they were chosen for the leadership track, they tend to maintain the mind-set of the level where they last felt real mastery.
4 Few leaders are taught to lead. Because most leaders learn intuitively from experience, that experience is seldom analyzed with any depth, consistency, or systematic feedback. A few leaders have the good fortune of being taught informally by a particularly effective boss or mentor, but such teachers are rare. Even fewer leaders are taught formally; academic institutions focus on the organization of work more than on the application of leadership. MBA programs don’t teach leadership, or, at best, they teach only a narrow portion of it. Many corporations offer inhouse programs, but few combine strong teaching with the kind of in-depth coaching that guarantees its application.
5 Leaders tend to stop learning in midlife. By the time people hit their forties, many rely on their previous knowledge and have only a shallow commitment to ongoing self-education and self development.
6 Few leaders lead from a clear sense of purpose. Even fewer lead from a clear sense of noble purpose.
7 Few leaders know how to pass on what they know. Not having been taught, they have little idea how to help others develop their leadership skills.

Bell writes, "To overcome these obstacles, leaders need some guidelines; they need a framework for understanding and exercising great leadership. Leaders stand or fall not so much by their talent or lack of it as by their understanding or misunderstanding of what great leadership is." In his book he discusses a well presented framework that consists of three dimensions of leadership—organizational, operational, and people leadership. He demonstrates how these three dimensions, when properly integrated and applied, will greatly enhance the quality of your leadership.


Sunday, November 26, 2006

The Venture capital guys who seeded Skype

"Morning in November over the Bay"

Below is a good article about Mangrove Capital, the folks who seeded
Skype. I also attached the link to Mangrove's hot trends page on
their web site.



Also why not join me on: www.linkedIn.com




Friday, November 24, 2006

Skill vs. Luck in Entrepreneurship and Venture Capital

This weekend, I read a recent paper titled “Skill vs. Luck in Entrepreneurship and Venture Capital: Evidence From Serial Entrepreneurs” by Paul Gompers, Anna Kovner, Josh Lerner and David Scharfstein from Harvard.

I read through the paper and captured a few data points that I found really interesting and thought worthy of sharing with you. My hope is that it sparks some interesting dialog and conversation.

You can access it here for free: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=933932

I’ve done my best to capture the essence of some of these points,

Six Interesting Stats About Startup Success

1. Failure Increases Chances Of Success: Entrepreneurs who succeeded in a prior venture have a 30% chance of succeeding in their next venture. First-time entrepreneurs only have an 18% chance of succeeding. Interestingly, those have previously failed have a 20% chance of succeeding.

So, it seems that you're better off having started a company and having failed -- then not having started one at all. If you’re considering kicking off a startup, it seems that you should just go ahead and do it (even if you’re going to fail). Getting the first failure out of the way (assuming you learn what you should from it) will increase your chances the second time around.

2. VCs Really Do Invest In The People: Failed serial entrepreneurs are more likely than successful serial entrepreneurs to get funding from the same venture capital firm that financed their first ventures.

This doesn’t make complete sense to me, but I believe it. VCs are “relationship” investors and I can see how they might lean more towards the entrepreneur they know (even if their original startup was a failure) rather than take a chance on a successful serial entrepreneur they don’t know. On the other hand, if I were a limited partner and had a choice of VCs, I think I’d pick those that have a demonstrated history of backing successful serial entrepreneurs. But, I have a bias.

3. Serial Entrepreneurs More Likely To Raise Funding: Entrepreneurs are much more likely to receive first-round funding at an early stage (60% of the time) if this is their second or subsequent venture than first time entrepreneurs (which receive such funding 45% of the time).

Though the numbers seem a little high (this is probably because they’re talking about all funding, and not just VC funding), this makes sense. Nothing to talk about here.

4. First-Timers and Non-Successes Benefit More From VC Expertise: First-time entrepreneurs have a 17.6% chance of succeeding when funded by more experienced VC firms and an 11.7% chance of succeeding when funded by less experience VC firms. Failed entrepreneurs who are funded by experienced VC firms have a 22.1% chance of succeeding compared to a 14.7% chance of succeeding when they are funded by less experienced VC firms. So, first time entrepreneurs and failed entrepreneurs are more likely to benefit from VC firm expertise..

5. Better VCs Provide Better Deals: Venture capital firm experience is positively related to pre-money valuation. More experienced firms pay more for new ventures -- likely because they have higher success rates.

This seems like one more reason to pick the top-tier, experienced VC (if you have the choice). Overall, you’ll likely get a better deal. Not only is this “smart money”, it’s more money too.

6. Serial Entrepreneurs Get Better Terms: Repeat entrepreneurs receive more favorable terms for vesting, board structure and liquidation rights, but do not receive greater equity ownership percentages. So, though serial entrepreneurs may extract greater value from VCs, this value is in the non-price terms of the investment.

I don’t like this particular data point as I’d hope to get better pricing terms from a VC as a “repeat” entrepreneur. But, then again, things outside of pure valuation are often just as important so I’m not going to complain.

So, what do you think? Do any of the above points agree with your own experience or instincts? Anything leap out at you as being counter-intuitive?

See you all tonight,

Wish me luck we may have new owners here on site today..



Thursday, November 23, 2006

The Five Roles of a Great Leader

The Five Roles of a Great Leader

Taking on the role of leader means wearing many hats. Here are the five that you should learn to wear most comfortably.

It’s no secret that leaders today must balance many roles and serve multiple audiences, all while communicating one primary vision. In any given business day, you might serve the role of creative business thinker trying to inspire employees to embrace your vision then morph into an industry sage role helping to advance not only your company but your entire industry. Juggling it all might make you feel like a chameleon.

At a recent conference, I heard Cara Good, owner and president of WunderMarx, a public relations agency in Tustin, California, speak about the confluence of communications styles and leadership. She outlined how a successful leader is, in essence, a business storyteller playing five key roles: futurist, historian, ambassador, analyst and contrarian. Good explains how mastering these communication roles could aid entrepreneurs today in perfecting their leadership skills through a Q&A session with Patty Vogan

Some answers to questions that she was asked are below, they show a good understanding of what it takes to lead and lead well, I would add that knowing and doing are too different worlds. There are smart people who know a lot about mechanics and can't change a wheel on a car, and there is the lady who cut's hair for her day job can change a wheel in the pitch black of a wet winters night. She may have basic knowledge but it is the application of the knowledge that has the Impact. Leadership is about taking people from one place in there life to another, hopfully a better place, this can be done in an enviroment of work or in social arena. Now to the Q&A session with Cara.

How do you explain how the day-to-day activities of your company help you and your employees achieve your vision?

Cara Good: This is a classic leadership role in which the leader plays the role of futurist defining the expected direction of the company. All your stakeholders--from customers to employees to vendor partners to the media--look to you to impart knowledge on where your organization is headed and how it will get there. It's your CEO perspective that helps people connect the dots between their day-to-day activities and the future direction of the company. And from a media perspective, your vision makes headlines.

Why is it important for a leader to reflect on where the company’s been?

Good: Just as people want to know where your company’s headed, they also want to know where the company’s been. In this, leaders are playing the role of historian. You can humanize your business, especially one that’s product-driven, by creating strong messages around your company's origins.

What communication style do you think is most important to the role of leader?

Good: I believe that serving the role of ambassador is the most important communication style you can adopt as a leader. You’re the "face" of your company. It's vital to portray an image during meetings, employee one-on-ones, media interviews and other public events that’s congruent with your company's overall vision, mission and values. Think about watching the evening broadcast news: Headline-grabbing CEOs are personable, conversational and charismatic, no matter what the news may be. This is the ultimate leadership role.

How can entrepreneurs follow industry trends and stay ahead of the curve?

Good: Leaders are also analysts, that is, they’re industry forecasters who are well versed on the trends, opportunities and problems that their industries might face. In any public exchange, they must be ready to answer the question, "Where do you see your industry going over the next year, and what challenges do you anticipate?"

As a leader, how can you distinguish yourself from the competition?

Good: One of the most important leadership opportunities is to know what you stand for and be able to communicate it. This helps you distinguish yourself from the competition and provide true leadership--not “me too” copycat management. This sometimes means you’ll play the role of contrarian, disagreeing with others because you see the big picture and want to map your day-to-day decisions based on your long-term leadership vision. Take a look at industry issues, economic climates and general business forecasts. Now analyze your opinions on each. Do you agree or disagree? Let people know how you stand, especially if it counters conventional thought



Wednesday, November 22, 2006

"because" vs "with"

"because" vs "with"

This is a very interesting article worth a read, it talks about the two choices we have to make around product/services to our customers ?we either make it easy or hard...

JP Rangaswami writing in The Daily Telegraph blog:
As technologists, we have two choices:One is to provide the customer a better experience, the freedom to select what he wants, a differentiation based on service quality against a backdrop of abundance.
The second is to create artificial scarcities around the things that are abundant, create new inconveniences for the customer, new lock-ins, new irritants. Irritants like Region Coding on DVDs. Lock-ins like we see in digital music.
For the last thirty years, too many of us in IT have focussed on creating these artificial scarcities, often without even knowing it. First we paid to bury the data in vendor stacks, then we paid to try and dig it out. We've been doing this for years. And we're in danger of doing it again.
Time for a change.
Time to focus on ways of delivering service where the customer wants, when the customer wants, how the customer wants. Time to focus on open platforms, open protocols, open software, open ways of doing business.
That's what the economics of abundance is really about. Making money because of what you do, and not with what you do. Having customers who stay with you because they want to, not because they have to.Great stuff from JP, as usual.

The Secrets of Due Diligence - Be warned

It is always good to know whats ahead of you and if you are going run your own company that is VC funded / or otherwise funded, then due diligence will become a well know activity, this short article is on how to perform good due diligence it will help you prepare for your own. I have been through this activity more times than I can count from both sides of a deal and it is important that both sides get it correct and walk away with the right picture for the organization. Due diligence is not the sexy part of the game, but it is one of the most important things you will go through, next to selecting a good coffee machine being for the buisness (dont underestimate a good cup of coffee when everything turns to a rats nest).

Sealing the deal is the easy part. But first comes due diligence.

Here's how to calculate your target's stand-alone value. A Harvard Business Review excerpt.

What can companies do to improve their due diligence? To answer that question, we've taken a close look at twenty companies—both public and private—whose transactions have demonstrated high-quality due diligence. We calibrated our findings against our experiences in 2,000-odd deals we've screened over the past ten years. We've found that successful acquirers view due diligence as much more than an exercise in verifying data. While they go through the numbers deeply and thoroughly, they also put the broader, strategic rationale for their acquisitions under the microscope. They look at the business case in its entirety, probing for strengths and weaknesses and searching for unreliable assumptions and other flaws in the logic. They take a highly disciplined and objective approach to the process, and their senior executives pay close heed to the results of the investigations and analyses—to the extent that they are prepared to walk away from a deal, even in the very late stages of negotiations. For these companies, due diligence acts as a counterweight to the excitement that builds when managers begin to pursue a target.

The successful acquirers we studied were all consistent in their approach to due diligence. Although there were idiosyncrasies and differences in emphasis placed on their inquiries, all of them built their due diligence process as an investigation into four basic questions:

  • What are we really buying?
  • What is the target's stand-alone value?
  • Where are the synergies—and the skeletons?
  • What's our walk-away price?

[Here] we'll examine each of these questions in depth, demonstrating how they can provide any company with a solid framework for effective due diligence. [...]

Once the wheels of an acquisition are turning, it becomes difficult for senior managers to step on the brakes.

What is the target's stand-alone value?
Once the wheels of an acquisition are turning, it becomes difficult for senior managers to step on the brakes; they become too invested in the deal's success. Here, again, due diligence should play a critical role by imposing objective discipline on the financial side of the process. What you find in your bottom-up assessment of the target and its industry must translate into concrete benefits in revenue, cost and earnings, and, ultimately, cash flow. At the same time, the target's books should be rigorously analyzed not just to verify reported numbers and assumptions but also to determine the business's true value as a stand-alone concern. The vast majority of the price you pay reflects the business as is, not as it might be once you've won it. Too often the reverse is true: The fundamentals of the business for sale are unattractive relative to its price, so the search begins for synergies to justify the deal.

Of course, determining a company's true value is easier said than done. Ever since the old days of the barter economy, when farmers would exaggerate the health and understate the age of the livestock they were trading, sellers have always tried to dress up their assets to make them look more appealing than they really are. That's certainly true in business today, when companies can use a wide range of accounting tricks to buff their numbers. Here are just a few of the most common examples of financial trickery used:

  • Stuffing distribution channels to inflate sales projections. For instance, a company may treat as market sales many of the products it sells to distributors—which may not represent recurring sales.
  • Using overoptimistic projections to inflate the expected returns from investments in new technologies and other capital expenditures. A company might, for example, assume that a major uptick in its cross selling will enable it to recoup its large investment in customer relationship management software.
  • Disguising the head count of cost centers by decentralizing functions so you never see the full picture. For instance, some companies scatter the marketing function among field offices and maintain just a coordinating crew at headquarters, which hides the true overhead.
  • Treating recurring items as extraordinary costs to get them off the P&L. A company might, for example, use the restructuring of a sales network as a way to declare bad receivables as a onetime expense.
  • Exaggerating a Web site's potential for being an effective, cheap sales channel.
  • Underfunding capital expenditures or sales, general, and administrative costs in the periods leading up to a sale to make cash flow look healthier. For example, a manufacturer may decide to postpone its machine renewals a year or two so those figures won't be immediately visible in the books. But the manufacturer will overstate free cash flow—and possibly mislead the investor about how much regular capital a plant needs.
  • Encouraging the sales force to boost sales while hiding costs. A company looking for a buyer might, for example, offer advantageous terms and conditions on postsale service to boost current sales. The product revenues will show up immediately in the P&L, but the lower profit margin on service revenues will not be apparent until much later.

To arrive at a business's true stand-alone value, all these accounting tricks must be stripped away to reveal the historical and prospective cash flows. Often, the only way to do this is to look beyond the reported numbers—to send a due diligence team into the field to see what's really happening with costs and sales.

That's what Cinven, a leading European private equity company, did before acquiring Odeon Cinemas, a UK theater chain, in 2000. Instead of looking at the aggregate revenues and costs, as Odeon reported them, Cinven's analysts combed through the numbers of every individual cinema in order to understand the P&L dynamics at each location. They were able to paint a rich picture of local demand patterns and competitor activities, including data on attendance, revenues, operating costs, and capital expenditures that would be required over the next five years. This microexamination of the company revealed that the initial market valuation was flawed; estimates of sales growth at the national level were not justified by local trends. Armed with the findings, Cinven negotiated to pay £45 million less than the original asking price.

Getting ground-level numbers usually requires the close cooperation of the acquisition target's top brass. An adversarial posture almost always backfires. Cinven, for example, took pains to explain to Odeon's executives that a deep understanding of Odeon's business would help ensure the ultimate success of the merger. Cinven and Odeon executives worked as a team to examine the results of each cinema and to test the assumptions of Odeon's business model. They held four daylong meetings in which they went through each of the sites and agreed on the most important levers for revenue and profit growth in the local markets. Although the process may strike the target company as excessively intrusive, target managers will find there are a number of benefits to going along with it beyond pleasing a potential acquirer. Even if the deal with Cinven had fallen apart, Odeon would have emerged from the deal's due diligence process with a much better understanding of its own economics.

Of course, no matter how friendly the approach, many targets will be prickly. The company may have something to hide. Or the target's managers may just want to retain their independence; people who believe that knowledge is power naturally like to hold on to that knowledge. But innocent or not, a target's hesitancy or outright hostility during due diligence is a sign that a deal's value will be more difficult to realize than originally expected. As Joe Trustey, managing partner of private equity firm Summit Partners, says: "We walk away from a target whose management is uncooperative in due diligence. For us, that's a deal



Tuesday, November 21, 2006

leadership development you need it and your staff needs it

Dan Tobin succinctly made the case why so much well-intending leadership development falls short of the mark.

So what works?

Every couple of years, the HR consulting firm Hewitt Associates identifies twenty top "financially successful companies" that "consistently produce great leaders."

In identifying the 20 firms best at leadership development, researchers drew from 373 public and private companies in the United States in early 2005. The median revenue of participating companies was approximately $2 billion, with a median employee size of 7,300. Obviously, that's the big leagues. But the instructive lessons they provide can be applied universally to all types of organizations.

In summarizing Hewitt's Top Companies for Leaders research, the Wharton Leadership Digest notes:

Hewitt found that the top 20 companies differed from the other firms in several key practices.

1. The chief executive and board directors are more actively involved in leadership development initiatives.

Of the top 20 companies, 100% of the CEO are engaged, but of the other firms, 65%.

2. High-potential managers are more often identified, paid more, given greater development, and brought into more frequent contact with top executives.

Of the top 20, 95% identify high potential managers, but of the others, 77%.

3. Leadership development programs are more closely tied to compensation.

Of the top 20, 65% link explicitly leadership capacities to long-term incentive pay, but of others, 23%.

4. Company executives are held more accountable for leadership development programs.

Of the top 20, 80% hold management responsible for developing high-potential managers, but of others, 35%.

You can download a 20-page summary of Hewitt's findings (in a PDF file) here.

In a related "secrets of successful leadership development" item, David Parks of Bluepoint Leadership Development reveals the process Microsoft is using to develop its future leaders:

The Leadership Bench Initiative at Microsoft Corporation is a landmark example of a systemic approach to leadership development. In the course of a year, hand picked participants who are being groomed for director and executive roles are exposed to a series of workshops, action learning projects, and coaching.

Each experience builds upon the last and hangs together as a holistic leadership development process clearly linked to the business goals. It even ventures beyond the traditional boundaries of soft skill leadership development and incorporates financial and business modeling elements.

The entire experience is capped with a final session delivered by Microsoft executives who are involved in the process throughout.

Microsoft wasn't in Hewitt's Top 20 leadership development companies for 2005, but it looks like it's making good strides toward effective Leadership Development. (David Parks made his observations writing in his firm's The Point Newsletter this month.)

Now, if you've read this far, you're into Leadership Development—either as a provider, like me, who works with companies to grow their leaders, or you are in an organization striving to improve its leadership bench strength. One suggestion for anyone on the brink of launching—or assessing—a Leadership Development effort: Ask for the research basis of the programs and its models, assessments, exercises and all the (expensive and time-consuming) trappings that go into a leadership development undertaking.

Leadership Development is too often the province of guesswork and pet theories with little evidentiary foundation. Some good looking, well-presented and intuitively comfortable tactics not only are not proven to work, they are actually—when researched—negatively correlated with producing desired results. Ouch!

Question: Do you really want to subject the time, attention and energy of your most important human assets on what may be the psychological equivalent of snake oil?

Caveat emptor. Buenas fortuna.



Monday, November 20, 2006

Lessons Not Learned About Innovation

Every managerial generation rediscovers the need for innovation to drive growth but, decade after decade, "grand declarations about innovation are followed by mediocre execution that produces anemic results, and innovation groups are quietly disbanded in quiet cost-cutting drives." So observes Rosabeth Moss Kanter in a new Harvard Business Review article, "Innovation: The Classic Traps."
Kanter, who holds the Ernest L. Arbuckle Professorship at Harvard Business School, specializing in strategy, innovation, and leadership for change, discusses her ideas on managing innovation and what companies can do to avoid the innovation traps that snare so many.
Sean Silverthorne: Companies and executives seem doomed to repeat the past when it comes to innovation. What are some of these mistakes and why are they repeated each generation?
Rosabeth Moss Kanter: Innovation seems to be rediscovered in each managerial generation (about every six years) as a fundamental way to enable new growth. But each generation seems to have forgotten or never learned the mistakes of the past, so we see classic traps repeated over and over again. Some of these repeat offenders include burying innovation teams under too much bureaucracy, treating the innovators as more valued corporate citizens than those who work in the current business, and hiring leaders who don't have the relationship and communications skills necessary to foster innovation.
Why the refusal to learn from the past? Institutional memories are short. But internal business pressures also play a part as executives balance the need to protect current revenue streams with the imperative to get behind new concepts crucial to future success. And too often executives lack courage—they call for innovation but then pull the plug on every idea brought their way.
Q: You categorize these mistakes under the headings of strategy, process, structure, and skills. Could you summarize your remedies?
A: Here are a few of the dozen lessons I offer in the article:
Look for small innovations, not just blockbusters. Big hits are rare, but too many executives swing for the fences with each new innovation. This not only marginalizes people who work on smaller projects, but also tends to result in projects modeled on existing market successes—that is, not that innovative. Truly new concepts often spring from smaller beginnings.
Create processes and controls. The innovation process is inherently uncertain, so companies must develop new ways of tracking progress in these units. Rewarding a manager who "sticks to plan" doesn't encourage something new.
Select the right leadership. Innovation teams can't be isolated—their ideas will never catch on. So pick leaders who not only can communicate inside and outside the organization but who also know how to foster a collaborative culture.
In short, there are a lot of specific things companies can do to encourage rather than stifle innovation. But overall, companies need a culture and way of working that emphasizes flexibility and attention to relationships across areas.
Q: One of your warnings for corporate leaders is to be careful not to create two classes of corporate citizens: "those who have all the fun" and "those who make all the money." What's the central message here?
A: In 2002, Arrow Electronics attempted a new Internet venture, Arrow.com. The group was granted perks not given to others, and this did not go unnoticed by the sales group, which was already feeling threatened by Internet-enabled sales. The result: a literal brick wall was erected to separate the two sides of the building. Time was wasted battling each other and even stealing each others' customers.
So the message is you can't afford to build two cultures. Strong interpersonal connections must be created between the new and the established. In fact, each must contribute to the other.
Q: What is the innovation pyramid and how does it work?
A: The innovation pyramid is an innovation strategy that works at three levels. The lion's share of the investment underwrites a few big bets at the top: clear directions for the future. The second level is a portfolio of promising mid-range ideas driven by designated teams. At the bottom of the pyramid are early-stage ideas or incremental innovations that permit continuous improvement.
Influence flows from top to bottom—the big bets encourage smaller wins heading in the same direction. But success can also flow from the bottom to the top—3M's Post-it Notes is one such example.
Senior managers can use the innovation pyramid to gauge current efforts, recalibrate as ideas prove their value, and ensure there is activity at all levels.
Q: What companies do you think are the best at fostering innovation and avoiding these traps that snare others?
A: In the article I point to success stories from a number of companies including IBM, Seagate, Williams-Sonoma, P&G, and Gillette. Using the Innovation Pyramid model to accelerate innovation, Gillette created a stream of innovations—a battery-powered toothbrush, the marketing campaign for the Mach3Turbo, and the new-concept 2006 five-blade battery-powered Fusion shaving system—that raised revenues and profits.
Managers at these companies have learned the innovation lessons of the past. They strike the right balance between getting the highest returns from current activities and investing in new growth, they create organizational flexibility, and they foster communication and relationships.
Q: What are you working on currently?
A: I'm working with a small number of exemplary global companies that set high standards for themselves to see how they develop those standards, apply them to every business function, use them to raise the standards of the countries in which they operate, and generate productive innovation and new business opportunities in the process.
This continues my interest in innovation on a much bigger scale, and I'm already learning about cutting-edge new business practices. Stay tuned; I will start reporting on this in the spring.
About the author
Sean Silverthorne



Woz and Guy Kawasaki did a one-on one-chat

This was an entertaining evening, and informative, hope you enjoy it

The Top Ten Things I Love Most About Woz


Woz and I did a one-on one-chat for the Commonwealth Club on November 16, 2006 as part of his iWoz book tour. If you’d like to watch a video of the interview, click here (an Andrew Bourland production with tagging by Veotag). It was one of the most enjoyable gigs that I’ve ever done. After the event, I compiled this list of the “Top Ten Things I Love Most About Woz.”

  1. He knows what he is; he knows what he’s not; and he’s comfortable with both. (These are very rare qualities in Silicon Valley.)

  2. His design theory is, “Create what you want to use.”

  3. He is unwaveringly loyal to Apple.

  4. He is unwaveringly complimentary about HP.

  5. He’s proof that it can be advantageous to grow up in a less-than-rich family.

  6. He went back to school long after getting a degree was necessary for him to get ahead in the world.

  7. He taught fifth graders instead of becoming a venture capitalist. (Although these jobs are remarkably similar—it’s just that venture capitalists get paid millions of dollars, fly around in private jets, and expense greens fees.)

  8. He believes that your work/writing/code/design—whatever kind of output—is a personal reflection of your being and a window into your soul.

  9. His idea of a cool product is much more than “I’m creating a niche version of MySpace using APIs and will make money with AdSense.”

  10. He’s generous to a fault.

  11. He thinks that Macintosh’s small market share is proof that it’s an elite computer.

Here are a few pictures from the event. The story of the white laptop is here.



Sunday, November 19, 2006

Protecting Intellectual Capital

Establish an on-going dialog with legal counsel.
By John Teresko

Aug. 1, 2005 -- Strategic initiatives such as nanotechnology heighten the need for intellectual property safeguards, advises attorney Alan J. Ross, a partner in the Cleveland office of Bricker & Eckler LLP.
He recommends periodic reviews of operating procedures and policies as well as establishing an on-going dialog with appropriate legal counsel.
To facilitate initiating that dialog, Ross offers the following list as preparation:
Designate an oversight team to handle electronic records management that includes business, legal, and IT staff. Electronic records have become a major problem for business from both compliance and litigation discovery standpoints. The law is clear that record retention policies must be enforced and routine destruction of relevant records must cease once a company learns of a claim. Failure to follow proper procedures may completely undermine a company' s litigation position. New federal civil procedure rules governing electronic records will heighten the problem.
Apply sensible metrics to intellectual property decisions. Increasingly, businesses are required to value their intangible assets and justify their acquisition and maintenance costs. Sarbanes Oxley effectively mandates this for public companies. A team from R&D, marketing and legal should develop business-based metrics for your company's IP program. You need to know to what extent a market is protected by patent or trademark. Require blanket IP assignments from employees and develop post-employment strategies. You must be able to claim exclusive ownership of IP assets developed by your employees. Get assignments in writing before employment begins. In an exit interview get an acknowledgement that the employee is not leaving with company assets and will not be disclosing company trade secrets. Then confirm everything in writing to the employee with a copy to his new employer.
Update electronic use policies periodically and enforce compliance. Technology evolves rapidly. Stale electronic use policies will eventually present ambiguities or vulnerabilities. Company policies should be updated periodically and require that PDAs and electronic files taken off site be password-protected or encrypted. Leverage technology to bolster IP protection and increase productivity. Most employees are unaware that the identity and nature of the sites they visit, how long they remain online, and sensitive information in search terms are routinely captured. You may realize productivity gains by periodically reminding employees of this practice. You also should consider programs or services that quarantine communications referencing words associated with proprietary information and communications to a competitor's Internet domain.
Monitor employee blogs. Current estimates suggest that there are 2.5 million blog sites in the United States, and 10,000 are coming online every day. While company-sponsored blogs may be an asset, employee blogs represent a potential source of competitive intelligence and a place where “dirty laundry” may be publicly aired. You clearly have a right to protect yourself from disclosure of proprietary information and should monitor blogs for references to your organization and react to inappropriate postings.
Monitor competitors' patent developments. Under current law, knowledge of a competitor's patents can be problematic. But Congress is moving quickly to change that with a package of patent reforms that likely will include universal publishing of patent applications after 18 months and post-grant opposition procedures. You should begin monitoring your competitors' patent activities. Advance knowledge can forewarn of a competitor's R&D direction, potential patent coverage that might intersect with your own developments, and potentially weak patents that should be challenged before they are issued.
Make privacy a top priority. Although several federal privacy acts like HIPAA, GLB and COPPA protect specific, limited categories of information, privacy issues are currently governed by a patchwork of state regulations that are rapidly evolving as identity-theft crimes explode. Compliance with one state's laws does not guarantee compliance will all. You should periodically reevaluate the privacy requirements of each state in which you do business or every state if you sell via the Internet and should comply with the most stringent regulations.
Employ confidentiality agreements when outsourcing. The risk of exposing trade secret information to non-employees increases exponentially with outsourcing. Every outside organization performing work for your business should execute a non-disclosure agreement. They demonstrate your company's dedication to preserving its proprietary information, which is essential in trade secret misappropriation litigation, and they make the outsider more cognizant of confidential information.
Monitor trademark usage on the Internet. Today's technologically-savvy users often copy companies' marks and paste them onto their own Internet sites. While such use is often inoffensive, courts routinely hold that to maintain trademarks, the owner must police them and ferret out inappropriate uses of its marks.
Prohibit mobile phones with cameras in sensitive areas. Mobile phones with built-in cameras have become the bane of trade secret protection. A picture continues to be worth a thousand words, and perhaps more, if it shows your newest development before it' s been released to the public.
Require employees to encrypt their home wireless networks. In the computer age, e-employees often take their work home. With the proliferation of wireless home networks, it is essential that you require your employees to activate their router's encryption to exclude outsiders from the network.
I think this is all to much protection, but would happy to hear from anyone with a view, John is a good guy and has worked for some top organizations, and some of his ideas maybe extreme but as early stage companies we must take seriously the protection of your I.P. as it is your value

Friday, November 17, 2006

Finding the Right Fit for your company

Finding the Right Fit ( 20/20 hindsight)

The key to hiring the right executives may lie in hiring the right recruiter. That's not easy.
Brian Hecht knows the trials of an executive search. As CEO of Enews.com, a leading online vendor of magazine subscriptions, he took far more time than he should have in finding a new CFO. "I had been interviewing personally referred candidates for months and nobody was quite perfect for us," says Hecht. "At some point, we decided we needed a good CFO yesterday."
So the company called in executive search firm Redwood Partners. "We did not have a bake-off," he says, but rather looked for a firm that "looked like us" and understood the pressures of Internet time. "Waiting three to four months is simply unacceptable."
With the firm's help, Enews found and hired Phil Callaghan in just under six weeks. As CFO of Multex (MLTX) , Callaghan helped take the investment research and financial-services company public last year. Enews came up with a better candidate "than we ever imagined by using a good firm," he notes. "When it's a tough search, you want the professionals on your side."
Find Right Recruiter
Choosing the right professional is critical. The wrong recruiter can be a startup's nightmare. A bad fit could mean a search that languishes in the murk between the hiring company's expectations and the recruiter's responsiveness and connection to the market's best talent. Worse, the wrong recruiter could lead a company to make the wrong hire, creating a mess that sucks up time, effort and resources.
So how does a company find the right recruiter? Consider streaming-media company Electrifier's search for a chief executive. Current CEO and cofounder Mihail Lari conducted a thorough search of his own. "I've been in the technology business now for several years, and I've been following the most high-profile recruiters," says Lari, who plans to step down as chairman of his venture-funded company once the ongoing search for its next CEO – its first recruitment effort at the management-team level – is completed.
Lari also sought advice from people with firsthand experience: "We have several directors on our board who had done searches before, so we turned to our directors" to help select and engage the best search firms.
"The management team at Electrifier met with several people who are in the recruiting business," Lari says. The company eventually consulted with three firms that demonstrated solid leadership in placing executives at Internet companies and appeared ready to commit to Electrifier's search. Then Lari checked out one of the firms, Christian & Timbers, with a former client of the recruiter. He consulted his friend John Herr, senior VP of sales and marketing at Buy.com, which had engaged the search firm for its CEO slot. "I shot off an e-mail to John to see what [Buy.com's] experience was like and got very positive validation that [the firm] would do a solid job. We felt that we had found the right fit."
But how does that fit really feel? And what does it mean to the hiring company, and to its investors? Amy Bromberg, VP of human resources with Jupiter Online, says today's leading Internet companies are looking for lasting relationships with recruiters who can prove their strategic value and justify their high fees. "The best firms become an adviser to you on issues that go beyond making the hire," she adds.
The right headhunter will respect the client company's sense of urgency. Gone are the days when a recruiter could spend nine months searching for an executive job candidate, and one need look no further than the executive-search industry for proof. It is cashing in on company demand for executive talent, but it's also reinventing itself to meet the requirements of an increasingly wired world. "I think the significant difference today is the speed at which you want things done. When we've identified a need, it's immediate," says Thomas Pace, president and COO of the Internet Financial Network. "I think if they're good and effective at what they're doing, they're literally beginning to bring in people a week after you talked to them and [have] signed a deal to do it and to close the search inside of 60 days."
Furthermore, both the hiring company and its recruiter have to commit to keeping the search nimble. "There's just absolutely no time to waste in deciding whether you want this candidate or not," says David Lord, CEO of Executive Search Services, since it's likely the candidate, if he or she is destined for dot-com stardom, has already received other offers.
Dot-coms also need to decide whether a single recruitment provider can handle multiple search assignments across job functions, Pace says – in his case, from marketing to business development and editorial talent – without compromising quality on candidates. He also suggests that hiring companies attend industry-specific conferences and talk with others about search firms they've engaged and who they would recommend.
A recruiter, says Pace, will be more willing to channel the best candidates to a hiring firm if it has a vested interest, such as a fee agreement based in part, or totally, on equity – a potential pot of gold that has already started to line the pockets of many firms. "The idea of the search firm having or taking some of the compensation in equity gives it an incentive to deliver the best candidates and an ongoing interest in the welfare of the company. It's to its economic benefit to make the search work," says Pace.
Once one finds the right recruiter, however, there's another problem. "I think the challenge for a dot-com is not just finding a search consultant who can do the work but one that has the capacity," adds Executive Search Service's Lord. "There's so much work [for recruiters] in this sector right now. The best search consultants are helplessly busy."

The conventional wisdom in the recruitment industry pegs headhunters' "completion rate" at 75 percent. But what about the one in four searches that never end in delivering a top-flight candidate to the hiring company? It's just as likely that the hiring company pulled the plug on these "failed" searches as it is that the external recruiter waived the white flag. The hiring company may cite a new merger, acquisition or restructuring as reason for giving up on a search, or perhaps it simply changed its mind about creating or filling the position. It might also blame the recruiter for promising more than it could deliver or for presenting underqualified candidates who wouldn't fit into its corporate culture.
The recruiter might give up on a search because of a dearth of high-caliber candidates, because the hiring company has unrealistic expectations or because the company won't pay what it takes to find the best talent. A headhunter might also grow impatient if a client tries to change the job specifications halfway into the search, if the company is indecisive or if it insists on having too many honchos involved in the interviewing process.



Thursday, November 16, 2006

Funding Your Dream Video / How to get the funds for your start up

Funding Your Dream Video


This is the video recording of the “Funding Your Dream” panel at Garage’s recent “Art of the Start Conference.”

The moderator is Mohanjit Jolly, Managing Director - Garage Technology Ventures. The speakers are:

  • Daniel Ahn, Managing Director - Woodside Fund
  • Susan Mason, General Partner - Onset Ventures
  • Chris Moran, General Manager - Applied Ventures
  • Warren Packard, Managing Director - Draper Fisher Jurvetson
  • Ian Sobieski, Founder and Managing Director - Band of Angels Fund

This video has been tagged by Veotag. (The Veotag process continues to impress me as a way to make watching video much more efficient.) The topics include:

  • Getting to venture capitalists
  • How to make a presentation
  • The optimal length of a business plan
  • How to handle the valuation process
  • Role changes in the founding team

Meaning and elements of company philosophy

A few thoughts

I have few pictures and a painting in my office that I have bought over the years the painting was bought in London off the Piccadilly fence. In that open-air market, which operates on weekends, the artists sell their own works. Judged by the £24 price, my painting is not great art. But it has delightful swirls, angles, and other abstract forms, all in bright colours. And when the artist, told me the title -- Forces at Work -- I bought it immediately.

With a little metal plate bearing the title and the artist's name, the painting is a constant reminder to me that any successful organization must give continuing attention to keeping adjusted to the forces affecting it -- that is, to the forces-at-work element of its philosophy. But before discussing that element, let us examine the whole concept of company philosophy as a system component and identify other important elements of a successful philosophy.

Meaning and elements of company philosophy

Over the years, I have noticed that some managers-- particularly top-management executives in the most successful companies -- often refer to "our philosophy." They may speak of something that "our philosophy calls for" or of some action taken in the business that is "not in accordance with our philosophy." In mentioning "our philosophy," they assume that everyone knows what "our philosophy" is.

As the term is most commonly used, it seems to stand for the basic beliefs that people in the business are expected to hold and be guided by -- informal, unwritten guidelines on how people should perform and conduct themselves. Once such a philosophy crystallizes, it becomes a powerful force indeed. When one person tells another "That's not the way we do things around here," the advice had better be heeded.

The literature on company philosophy is neither very extensive nor very satisfactory. But one dictionary definition of philosophy does apply: "general laws that furnish the rational explanation of anything." In this sense, a company philosophy evolves as a set of laws or guidelines that gradually become established, through trial and error or through leadership, as expected patterns of behaviour.

Some typical examples of basic beliefs that serve as guidelines to action will clarify the concept. Although such basic beliefs inevitably vary from company to company, here are five that I find recurring frequently in the most successful corporations:

Maintenance of high ethical standards in external and internal relationships is essential to maximum success.

Decisions should be based on facts, objectively considered -- what I call the fact-founded, thought-through approach to decision making.

The business should be kept in adjustment with the forces at work in its environment.

People should be judged on the basis of their performance, not on personality, education, or personal traits and skills.

The business should be administered with a sense of competitive urgency.

High ethical standards

The business with high ethical standards has three primary advantages over competitors whose standards are lower:

A business of high principle generates greater drive and effectiveness because people know that they can do the right thing decisively and with confidence. When there is any doubt about what action to take, they can rely on the guidance of ethical principles. Inner administrative drive emanates largely from the fact that everyone feels confident that he can safely do the right thing immediately. And they also know that any action that is even slightly unprincipled will be generally condemned.

A business of high principle attracts high-calibre people more easily, thereby gaining a basic competitive and profit edge. A high-calibre person favours the business of principle and avoids the employer whose practices are questionable. For this reason, companies that do not adhere to high ethical standards must actually maintain a higher level of compensation to attract and hold people of ability.

A business of high principle develops better and more profitable relations with customers, competitors, and the general public because it can be counted on to do the right thing at all times. By the consistently ethical character of its actions, it builds a favourable image. In choosing among suppliers, customers resolve their doubts in favour of such a company. Competitors are less likely to comment unfavourably on it. And the general public is more likely to be open-minded toward its actions.

Too often, these values tend to be taken for granted. My point in mentioning them is to urge executives to actively seek ways of making high principle a more explicit element in their company philosophy. No one likes to declaim about his honesty and trustworthiness, but the leaders of a company can profitably articulate, within the organization, their determination that everyone shall adhere to high standards of ethics. That is the best foundation for a profit-making company philosophy and a profitable system of management.