SME's - Portfolio entrepreneurship Rob Smorfitt, Start up Guru from South Africa What is portfolio entrepreneurship? Portfolio entre...
I have been looking at technology transfer methedology of late, I have transfered technology in the past, for a selection of companies and u...
One thing you will have noticed when you talk to an investor is there passion for your sales projection, order book and customer sales funn...
Friday, March 30, 2007
How many 18-year-olds do you know that have managed to bag a deal with a major supermarket to sell their product? Not many? Well that’s Fraser Doherty’s point exactly.
At the age of 14, Edinburgh-born Doherty went out to the supermarket with a couple of pounds in his pocket. He bought some fruit and sugar and made a few jars of jam. Four years later his SuperJams brand is on the shelves of 130 Waitrose stores.
Doherty owes a lot to his Gran, who first taught him how to make it. Once he had the idea he started spending all his evenings and weekends cooking it up. His neighbours were his first customers but he soon moved on to selling it at farmers’ markets and local delicatessens.
“By the time I started selling at the farmers’ markets I’d been in the press quite a lot,” says Doherty, who is currently in his first year of university in Glasgow, studying business and accountancy. “People knew the story and were familiar with it, but I don’t think that was the only reason it sold well. Publicity isn’t a reason for people to keep coming back for it again and again. I had a genuinely good product.”
Doherty’s operation grew rapidly. His parents were driving him to the trade fairs and markets to sell the jam which he was making at a rate of a thousand jars a week. “It was getting a bit ridiculous to be spending 16 hours a day, seven days a week making the jam,” he recalls. “So I decided I had to come up with a big idea to get production up to the next level.”
Doherty did some research, and armed with the knowledge that jam sales were in decline, he decided to create a healthy range, using so-called super fruits such as blueberries and cranberries. He also came up with the idea of using grape juice instead of sugar to sweeten it.
The big break came with the opening of some new Waitrose stores in Edinburgh. Doherty went along to a buyer’s fair and got talking to the supermarket’s jam buyer. Impressed with the jam, the Waitrose buyer told Doherty to get his labels designed and find somewhere to produce it on a large scale – so, having left school, that’s what he spent his gap year doing.
He found a factory where he could oversee production, and got a local ad agency to design the jars for free. The whole process was filmed for a Channel 4 documentary, which of course helped get the brand out there.
Doherty now works out of an office at university where he does what he describes as ‘enterprise evangelism’, promoting entrepreneurship to young people through speeches and radio and tv appearances.
The future? Well, Doherty says he might have to give uni a few years off if the Waitrose sales do well. “Once my time gets ‘jam-packed’ I’d probably end up making a bad job of uni and the business if I tried to do them both.”
Friday, March 23, 2007
SlideShare.net, is a site for sharing PowerPoint presentations, it announced The World’s Best Presentation Contest. The judges are a “who’s who” of presentation gurus: Bert Decker, Garr Reynolds, Jerry Weissman,
Contestants will upload their presentations to Slideshare.net, and then people from anywhere can rate the entries. Their votes will determine the “People’s Choice” winner. The judges will select the winners of the contest. Prizes include an Alienware laptop with Windows Vista, XBox 360s, and iPods.
Have a go, it's a good way to prepare for a pitch, check out the perspective of the judges, Bert, Garr, and Jerry, to help improve your luck
Interview with Eric Schmidt, CEO of Google:
"You don't learn very much when you yourself are talking"
The guys at iInnovate posted a lovely interview with Eric Schmidt, CEO of Google. Among the topics they covered were:
Motivation of entrepreneurs
Maintaining the entrepreneurial spirit
Traditional and non-traditional organization design
What Microsoft and Yahoo does that impresses him
Invention of disruptive technologies
My favorite line was: “You don’t learn very much when you yourself are talking.”
Lifted from Guy Kawasaki's blog....
Thursday, March 22, 2007
What can be done with the open source approach to life? and the betterment of mankind, communication is the one thing that can help break barriers down, and help the growth of trade between countries, which in turn helps bring peace...you don't go to war with your best buddy in trade do you ?, have a read at the article below, and see what it does to your old grey matter...
All the World’s a Story
By DAVID CARR
Published: March 19, 2007 in the NYTIMES.
Journalism has always been a product of networks. A reporter receives an assignment, begins calling “sources” — people he or she knows or can find. More calls follow and, with luck and a deadline looming, the reporter will gain enough mastery of the topic to sit down at a keyboard and tell the world a story.
A new experiment wants to broaden the network to include readers and their sources. Assignment Zero (zero.newassignment.net/), a collaboration between Wired magazine and NewAssignment.Net, the experimental journalism site established by Jay Rosen, a professor of journalism at New York University, intends to use not only the wisdom of the crowd, but their combined reporting efforts — an approach that has come to be called “crowdsourcing.”
The idea is to apply to journalism the same open-source model of Web-enabled collaboration that produced the operating system Linux, the Web browser Mozilla and the online encyclopedia Wikipedia.
“Can large groups of widely scattered people, working together voluntarily on the net, report on something happening in their world right now, and by dividing the work wisely tell the story more completely, while hitting high standards in truth, accuracy and free expression?” Professor Rosen asked last week on Wired.com.
That may not seem like much of a revolution at a time when millions are staring at user-generated video on YouTube, but journalism is generally left in the hands of professionals.
Assignment Zero will use custom software to create a virtual newsroom that allows collaboration on a discrete, but open-ended, topic from the very start.
In this instance, the topic will be be crowdsourcing, so the phenomenon will be used to cover the phenomenon itself. Citizens with a variety of expertise — the “people formerly known as the audience,” as Professor Rosen describes them — will produce work to be iterated and edited by experienced journalists.
“This is designed as a pro-am approach to journalism. I think I saw possibilities here that others did not, and you can only do so much writing about it,” Professor Rosen said. “There is so much up for grabs right now, and the barriers to entry, the costs of doing something have become low enough to where it seemed it was best to just give it a try.”
If all that sounds like a gossamer bit of Web 2.0 preciousness, consider that Gannett is in the process of remaking the newsrooms at its 90 newspapers into “information centers,” a place where readers are given access to all the tools of journalism including, yes, the journalists themselves.
At newspapers like The Asbury Park Press in New Jersey, Florida Today in Brevard County and The News-Press in Fort Meyers, Fla., citizens can dial into databases and public records, or contribute their own experiences to provide grist for reported efforts.
A project at The News-Press on the high cost of sewer and water lines (available in the newspaper’s paid archives at www.news-press.com/apps/pbcs.dll/frontpage) included volunteer engineers going over blueprints in their spare time and an insider who disclosed critical documents.
“This is a new approach to watchdog journalism. Crowdsourcing is engaging the wisdom and expertise in our communities early on in the reporting process,” Jennifer Carroll, vice president of new media content for Gannett, said.
Making the choice in favor of transparency, dialogue and in some instances collaboration, the country’s largest newspaper company is willing to surrender traditions of competition, expertise and control.
Of course, there’s an economic rationale, as well. Many hands make light work and cheap ones if they belong to volunteers. But Gannett is also betting that people will be more compelled to stay with a product they helped make. (Ms. Carroll said that jobs will not be cut, but redefined. We’ll see about that.)
Jeff Howe, a reporter who helped coin the term “crowdsourcing” and is writing a book about the subject, will draw on the reporting from AssignmentZero to write a feature article in Wired about the phenomenon.
Wired has also financed an editor, Lauren Sandler, a veteran journalist, producer and author, who will oversee assignments, edit copy and write a blog to keep the community that grows up around the story informed about its progress. The site has a director of participation, Amanda Michel, who used the Web to enroll citizens in the campaigns of Howard Dean and later, John Kerry and John Edwards, and a nicely named “directory of verification.”
But the largest share of the reporting is the responsibility to folks who simply raised their hands. In the next few months, deadlines will loom for the citizen journalists, copy will be edited and articles will appear at NewAssignment.net site. A few of those might even make it into Wired magazine, according to Chris Anderson, the editor.
“This is an experiment in doing things differently, and maybe better,” said Mr. Anderson. “It doesn’t invalidate the way things have been done, but it allows us to bring in some nontraditional sources and approaches.”
The Web has transformed a lot of things, including journalism, turning it into a self-cleaning and occasionally overheated oven. Those of us who perpetrate journalism know in our hearts that it is a craft, not a profession, one that requires a finite set of skills to do competently and a lot of passion to do well.
This past season, I wrote a blog about the movie business that would flick at topics that I was either too uninformed about or too hard-pressed to nail down. Inevitably, readers would begin buzzing around in comments, a hive that sent out a swarm that eventually, through conversation, argument and annotation, yielded valuable insights and hard facts.
“We are not creating a robot that is some kind of journalism machine,” said Ms. Sandler, the editor of the project. “This is not a death knell or a new utopia.”
“It’s like throwing a party,” she added. You program the iPod, mix the punch and dim the lights and then at 8 o’clock people show up. And then who knows what is going to happen?”
Wednesday, March 21, 2007
Neil Gershenfeld offers a glimpse at life after the digital revolution by sharing some of the projects created in Fab Labs - low-cost fabrication labs that encourage invention and production on a local level. Director of MIT's celebrated Center for Bits and Atoms, Gershenfeld explains how his Fab Labs, set up around the world, harness the creative energy of local people, allowing them to build eyeglass frames, toys, computer parts, anything they need
Tuesday, March 20, 2007
So how do you measure your commitment well here's the litmus test for how I try to distinguish between the two: If your startup dies next week, what will be the actual impact on a given individual?
The point here is that just because someone quits their day job, just because they write a relatively large check, just because they take the founder title none of these necessarily means that they are committed. Its possible that in all of these cases, the actual impact on the individual is relatively minor. They find another day job or they mourn the loss of their investment for a week or a month. What I consider to be real co-founders are those that are financially and emotionally committed to the startup. For the founders to be committed, if the startup dies tomorrow, it will forever change their life. They can't just wake up the next day and have it be life as usual (yes, they'll recover but the failure will have a lasting impact).
Well that's the chicken and pig story...have a think about it....
I saw this 3 min clip by Richard St John he was talking about Why do people succeed? it is very interesting and honest...have a look if you have the time....
Monday, March 19, 2007
The company’s operating plan, technology road map, and executive team should not focus on unnatural acts, in the hopes of attracting a buyer, but rather on building a company with the potential for independence. Companies built to "flip" often flop. They often flop due to the fact the team is not truly committed but, instead, looking for a quick buck. Bad motives drive bad behavior.
A fundamental concept that helps focus management on building to independence is optionality, or BATNA – which is MBA-speak for "best alternative to a negotiated agreement." BATNA is a fundamental tool for understanding negotiating leverage and strategy. If you work to ensure you have a BATNA – for example continued independence or a higher offer – the company is able to negotiate from a position of strength. If no BATNA exists (i.e. the choice is between a fire sale or running out of cash), the company is at the mercy of the buyer and the negotiation becomes an exercise in Russian roulette. Always have a BATNA.
Be Prepared for Acquisition: Sourcefire ("FIRE") went public this week. Since the last security company went public – NetScreen – there have been over 250 security M&A transactions.
While the security software market is an extreme example, it is far more probable that a successful tech company will be bought rather than go public. Accordingly, while no special plan for sale should be developed, it is highly logical to expect M&A to emerge as the path to liquidity.
While VCs believe "companies are bought and not sold," acquirers tend to believe that "successful partners make the best acquisition targets." Successful partnerships are characterized by:
: a history of successful joint customer engagements,
: successful technical integrations and co-deployments,
a joint roadmap,
: co-marketing and sales traction, and
management teams and team members with a track record of collaborating to reach shared objectives.
A great example of the partner-to-buy model is SAP and Virsa, although there are many such examples.
Keep Good Records:
Finally, M&A is a diligence driven exercise. The final clichs that "good record keeping makes for good diligence and good diligence makes for expedited outcomes." Good records include:
: Articles of Incorporation/company charter
: All Board minutes, contracts, signed employee assignment of IP forms
: Capitalization table
: Option plan records
: Prior financing documents
: Audited financials
: Patent filings
: Documentation relating to litigation, assessments, or claims
Any material gap in records will either 1) delay the sale process and/or 2) will lead to a higher escrow to offset potential liabilities that may "appear" post-close.
In summary, all clich's are common sense and the M&A related clich's noted in this post are no different:
build companies for independence (always have multiple BATNAs),
keep good records
Friday, March 16, 2007
Webb’s advice is particularly relevant because he’s been there – and come through it. After suffering several painful failures, in 1995 Webb opened a pub in his hometown Brighton and eventually grew £25m turnover retail group, C-Side, comprising of 30 bars, nightclubs, gyms and a radio station. In 2001 he sold it for £15m. He’s now doing the same with Medicine Group and has a number of investments in start-up businesses.Risking It All, insists Webb, is about pointing out the mistakes and lessons he learnt along the way and prompting the growing numbers that see running their own business as a glamorous alternative lifestyle to think what it really involves.
“Being an entrepreneur is the new rock’n’roll. It’s a bit of a vogue at the moment. In a way that’s misleading as it’s still as risky as it’s ever been,” says Webb.
“Having said that, we live in a society where people value being in control of their lives and starting a business is the single one thing anyone can do to achieve that. It can also be a very good way of making money and immensely satisfying.”
For Webb, it’s about understanding the downsides. “There’s no salary and no safety net. If things don’t work out or you get ill there’s a whole lot of negatives.” He finds the notion of ‘escaping the rat race’ equally misleading:
”People always say ‘I’m sick of all these long hours’, well they should never see starting a business as a route to working less.”
First hand experience
So how do you prepare yourself for the reality? Webb's answer is resounding: get some experience.
“Most people fail because they don’t know how to run that type of business well enough,” explains Webb. “As a typical example, someone thinks they can run a restaurant having not worked in one because they’ve eaten in a lot.
“Even if you have to wait on tables in Starbucks, go and do it. Get hands-on experience with a successful operator, learn how their systems work, how they manage stock, how they handle staff and money.”
Basic business knowledge
Webb insists a degree of basic business knowledge is also essential. He studied business at Brighton University and while he doesn’t advocate such a qualification as a prerequisite, the ability to monitor your finances is.
“You have to have an understanding of profit and loss, margins, break even, how to add and subtract VAT; the basic arithmetic of business.”
Risking It All also provides a valuable insight into the point where flaws in a business plan are exposed. Webb says there’s one continually reoccurring issue: a lack of cash.
“Businesses are often under-funded,” he says. “A month in and it suddenly dawns on people this is an awfully lot bigger than they actually thought and they’re already massively over budget. Building in a contingency isn’t just an accounts thing; it’s a real buffer you’ll almost certainly need.”
Webb accepts, however, that raising finance isn’t easy. “You can have the best idea in the world but unless you’ve got security the banks won’t give you more than a couple of thousand.”
While admitting saving up or convincing friends and family to invest is the most sensible way to fund a business, Webb says you shouldn’t be afraid of debt – even if it's not the sort of advice they teach you at business school.
“When I started I got loads of money on credit cards. It’s never recommended but as a pragmatic practical step then why not? If you think you’ll be able to pay it back quickly, then do it.”
Three step guide to success
The key for Webb is ensuring it’s a sound idea in the first place. The first of three pieces of advice he offers, is to stay in your job while you test the concept. “Start on a small scale without losing your income as you’ll need that money during the first few months,” he says.
Secondly, Webb says you’ll need to surround yourself with support. “It’ll be one of the most challenging periods of your life. Make sure your partner, family and friends are onside.”
Finally, be critical of your own idea. “If there’s no one doing the idea there’s normally a reason,” he warns. “Rip it apart. If people say it’s not a good idea, listen. Don’t necessarily believe what they say, but often there are ounces of truth.”
Don’t be afraid
Despite all Webb’s proffering of caution, he’s passionate that providing you really believe in an idea and you’ve thoroughly explored its viability, then you should give it your all – and that includes being undeterred by the threat, or even reality, of failure.
“I’ve experienced failure, but hopefully out of disaster comes experience,” says Webb. “When people do go bust they shouldn’t see it as the end of their entrepreneurial career. Failure is emotionally draining; people feel humiliated and often it stops them ever doing it again, but I’d always encourage them to.
Thursday, March 15, 2007
When you change, all your relationships change
By Pam Slim
One of the unexpected parts of heading towards your right life is discovering that sometimes those around you are not ready, willing or able to see you change. This can result in disagreements, fracturing or even ending long-term friendships and relationships.
If you are in the process of moving from a corporate employee to an entrepreneur, you will experience an amazing identity shift. You will change your attitude, challenge long-term beliefs, stretch and grow in new areas, take more of a "center stage" role in public life and possibly totally redesign your life. This may make those around you very uncomfortable. Why is this?
We usually form relationships around common bonds such as school, work or community functions. You might have a tight group of friends that helped you through the hell of medical or graduate school. Or you all spent many hours in solidarity against an evil boss, griped about the lack of decent, eligible mates in the dating world, or watched your children grow up together. As you leave these shared environments, you may find that you don't have as much in common as you thought you did. And relationships may fade.
Each person in a relationship quickly takes on a specific role. Maybe you have always been the kind and understanding friend that jumps into action when your friend is in need, providing a shoulder to cry on, a truck to move furniture, or money to get out of a crisis. If you decide that this role is draining you of energy you need to invest in yourself, and you change it, be prepared for some resentment. A true clue that this is the case is when someone says "What happened to the (Sue) (Jose) that I used to know? You don't act like the same person anymore!" They are right ... and this is good!
You might be headed in a direction that freaks out your current circle of friends. You may be a card-carrying member of the suburbs, clocking in and out of your garage at the same time as your neighbors each day. When you share your plans to take your family on a year-long tour of the world to complete community service projects, you may see some stunned reactions. Some friends may think that you have simply lost your mind. Others may be projecting their own insecurity on you, by thinking "If Ashok isn't satisfied with mundane suburban life, maybe my life doesn't have any meaning!"
As much as we all talk about wanting to be happy and fulfilled, when you actually are, it can annoy the crap out of those around you. We bond with each other by our daily gripes. We start by quipping about the depressing news in the paper, then let the receptionist at work know how bad traffic was, mumble quietly to a co-worker about the lame meeting you have to attend to start your day. And this is all before 9am. Can you imagine waking up and smiling at the day ahead of you? When someone asks you how you are, answering "I am great! My work is exciting, I have a great relationship with my kids and husband, I love my home, my health is great, and I generally feel like skipping most of the time." While wondering which mind-bending cult you joined, your friends will be quietly checking your purse for illicit drugs. Once they find you are on a natural high, they may quickly tire of your positive demeanor and look for someone else to complain with.
I have had very personal experience with this, seeing a very dear and close circle of friends slip away as my life changed when I moved out of state, got married, had a child and started a new phase of my business. I can honestly say that losing these friends has been a more painful experience to deal with than any past relationship breakup. The bond of friendship is very strong, and a big part of our identity is tied up with those that we have spent years talking to, laughing and crying with. I never intended to let these friendships go, and there is a big part of the process that I will never understand. But I have come to a place where I accept it, and realize that for whatever reason, it happened.
How can you get through these tough relationship transitions?
Communicate clearly and frequently with those around you about the changes that are going on in your life. Talk about implications to the relationship in terms of time you will be able to be available to the person, things you want to improve or change, and what you need from each other in order to feel good about the relationship. I think one of the mistakes I made is not being clear that I would not be as available to my friends as when I was single and close by geographically, and that caused real hurt to them when they needed me to be there.
Validate that you are moving in the right direction. If you have done your tough and deep introspective work, you will know the reasons why you are making changes in your life. You are the only one that knows that this is the right direction. Your friends may perceive that you are making a bad move that will make you unhappy or unsafe. Listen to what they have to say, then while you are alone, check deep within your gut and see what is true. If you feel good about the direction you are heading, that all that matters.
Realize that some relationships will not survive the change, and that is OK. There is something tremendously comforting with knowing people your whole life and sharing a deep history. But as you think of all the transitions you have gone through, you will see that friends from one phase didn't always transfer to another. I am lucky enough to have a great friend that I have known since infancy, one since 4th grade and one since college. I see these friendships enduring the test of time. But others will ebb and flow as my life changes.
Honor the history you have together. It can be perplexing and hurtful to lose connection with people you love deeply. But it will solve nothing to get angry and say many things you regret, which will sour your great memories of time spent together. If you are able, tell your friends how much you appreciate all the years you had together. If you aren't talking, write the words down in a journal, or say them in a silent reflection. I will always, always wish good health and happiness to friends who are no longer in my life.
Trust that "your people" will show up for this new phase of life. There is an awkward stage of transition where some of your old friends may not be available anymore, and you don't have any new friends that you can relate to. This is a very lonely place. Trust in yourself, and keep moving on your path towards your right life. When you least expect it, new, wonderful people will appear to support and encourage you.
Personal growth comes with pain, no matter how you slice it. But it is good, healing pain that will serve you in more ways than you can imagine. Once you move from the flexible body of a caterpillar to the muck you become in a cocoon, there is no going back. Trust yourself and keep moving.
Wednesday, March 14, 2007
This is something that should come as second nature to a senior manager /executive leader, whether it is your own company, a suppliers or customers, it is a skill that helps you understand how the company works and if it is healthy, Patty Vogan wrote this article on determining company culture, and I thought it may help you if your are struggling with this....and if you don't think it is important or you have never noticed, give me a call and for a small fee I will come and show you how important a healthy company culture is.
Company culture how to determine
By Patty Vogan.
Walk into any company and you can tell the culture of that company in about 10 minutes--sometimes even in 10 seconds. For instance, if you walked into the headquarters of surf ware manufacturer Quiksilver in Huntington Beach, California, in a suit and tie, you'd be very out of place. Likewise, if you walked into electronics manufacturer Toshiba in Irvine, California, with spiked hair and a skateboard under your arm, you'd feel like you didn't belong.
Whether you realize it or not, your company has a culture based on its core values. So did you design the culture with passion and purpose--or did it occur by default? Can you even describe what your company culture is? Or are you too close to the trees to see the forest? If you can't describe it immediately, let's take a look at few areas that'll help you identify your company's culture--and make positive changes for the better.
Good News and Bad News:
As the leader of your business, what type of corporate culture have you set up when it comes to receiving news that's less than positive? Many business owners have a fit and blow their lids when they hear any bad news. But what kind of signal does that send to your employee? Knowing that the boss is unlikely to be kind means employees most likely won't say anything for fear of getting their heads chopped off. So that leaves just one thing to do: Tell the boss what he or she wants to hear. If this is you, you're never going to hear the truth from your employees--only what they think you want to hear. So you're most likely never going to hear anything negative until you've got a full-blown crisis on your hands.
What about the good news? As the company leader, do you take credit for the good ideas--even if they weren't your ideas? Do you have the attitude that "It's their job, and I expect it to be done well" without giving them credit for working hard and excelling? What type of recognition programs do you have set up to reward or acknowledge a job well done? The answers are in the questions.
Helpful Hints: As the leader of your company, it's important to avoid outbursts and blow-ups. Your goal is to provide a place of centeredness, be clear about your expectations, have trust and faith, and create a future vision for the company. A humble leader who gives credit where credit is due will have very loyal employees.
MeetingsCompany meetings have a culture of their own, too. How effective are yours? Have you ever heard anyone at your company say, "That was a horrible meeting. What a waste of my time!"? Unfortunately ineffective, wasteful meetings have become a norm in many companies. If you'd like to turn things around, you can.
Be sure you have an agenda and stick to it.
Limit the number of items on the agenda to just two or three.
Start on time and end on time.
Make sure the decision makers are in attendance, or reschedule the meeting.
Each item covered in the meeting should either be resolved during the meeting or have an action step and follow-up person assigned to it.
Each action step should include the standard "Who, What, When, Where, and By What Date" information.
The Pulse of Company Culture
If departments are working against each other with a "we vs. them" attitude, the heartbeat of the company will be rapid and dysfunctional because employees are operating from a basis of fear. That creates a very unhealthy corporate culture.
Helpful Hints:It's usually pretty easy to spot the untitled leaders in your company--those are the people that your other employees are listening to. If you can get these unofficial leaders on board with your plans and goals, you'll start to defuse the "we vs. them" culture.
Remember, corporate culture begins at the top and ends at the top. When you want changes to be made, you'll have to be the one to get the ball rolling. A healthy company culture is one in which the following process exists: The business owner makes a decision, then delegates responsibility for that decision and watches to see how well it's carried out. If it's not working well, the business owner will revise their plan and try something new. A dysfunctional leader, on the other hand, will defend the decision to the death just because he or she made that decision and "That's the rule!"
A corporate culture often happens by default instead of design. But companies that purposefully set up their culture are far more successful than companies that have a culture that exists by default. If your company's culture is not quite what you'd dreamed it would be, you have the ability to change it. It's never too late to create your own success.
Tuesday, March 13, 2007
This was an article I picked up, it discusses how to tell if a board is doing well, a question that I have asked myself a few times, from both sides of the table ...in my first start up company, there were debates amoung the senior managment on what we should expect from the board of directors, as it was our first time in a start up we had big expectations of what a board should bring to the table, off course we were dissapointed, but we were not being realistic about it....the board is there to give some corporate guidance and mentoring to the managment team, they should help set the strategy, and leave the tactics to the management team....
“Do I Have an Effective Board of Directors? (How Can I Tell??)”
By Noam Wasserman http://founderresearch.blogspot.com/
In April 2006, almost two dozen VCs, CEOs, and industry experts came together to form the Working Group on Director Accountability and Board Effectiveness (whew -- quite a name! I’ll take the liberty of using “WGDABE” instead :->), chaired by Pascal Levensohn. The impetus for the formation of WGDABE was a sense that VC-backed companies lack metrics for judging board effectiveness, and that having such metrics might help executives and boards assess where board performance could be improved. (That's probably also true of many non-VC-backed companies, though WGDABE seems to want to focus on the VC subset of companies.)This can be particularly critical for new ventures, where:
many directors (e.g., founders, new VCs, first-time CEOs, or industry executives who are serving on a board for the first time) are not experienced in the role of director – for instance, my post here provides some data on how board composition is particularly skewed towards many of these people during the early stages of venture growth;
dysfunctional board behavior often emerges at the worst times – e.g., when crisis hits or when critical exit decisions have to be made; or
there may be strong conflicts between the interests of the various parties involved (as I’ve examined in some of my case studies).
Note: In addition to the link above, my other board-related posts have covered the board's role as a mentor of venture executives rather than solely being a monitor of them, and have presented data on how the board's composition and functioning is affected by the stage of company development.
Last week, the WGDABE released a white paper entitled, “A Simple Guide to the Basic Responsibilities of VC-Backed Company Directors.” (Pascal's download form for the white paper is here.) Since my first look at a draft of the paper, the WGDABE has made some nice additions and clarifications, and the official white paper will hopefully be of use to many of the readers of this blog. (As I indicated above, the "VC-Backed" part of the title is a bit too limiting; most of the paper also applies to the broader set of non-VC companies.) In particular, the paper:
can help educate many founders, non-director senior managers, and other first-time directors about the board’s roles and responsibilities, regarding both business and legal issues;
highlights some practices that seem to separate effective vs. ineffective boards; and
provides a user-friendly checklist with which you can evaluate your own board and identify where it can improve.
I also like the fact that this paper is only part of an overall effort to improve board effectiveness. The members of the WGDABE are supposed to be pushing for their own companies to implement the checklist and other parts of the white paper, and the WGDABE is planning to do follow-up analyses of whether those companies gained any of the expected benefits from doing so. (They'll hopefully get a large enough sample and do a rigorous enough set of analyses that they'll be able to draw statistically- and practically-significant conclusions!) At the least, it's an interesting experiment in improving governance, and if it reaches its full potential, it could be quite a productive effort.
Monday, March 12, 2007
Use the well know technique of S.W.O.T....strenght, weaknesses, opportunities and threats, this will give you a snap shot of the business and now you can see where you need to research your competition to improve your W.T. rating.
You need to too, you should use your executive team to look at these things for you, and when you have the funds you need to hire a good Biz dep manager to take these things forward.Do not play the ostrich game, know what you are up against, before it is to late to do something about it.
Patents...from Ask the VC
Question: Should entrepreneurs avoid patents, especially examining them, to avoid willful infringement and 3x damages down the road?
To answer your question, the answer is “yes” in my opinion. If you are simply hunting around to see what’s out there and you don’t currently have a company or idea, then there is probably no harm and no foul.
However, if you are engaged in a business, you should not be monitoring patents in your ecosystem for the very reasons that you bring up: knowingly infringing someone’s patent can lead to treble damages and attorney fees. Sometimes ignorance is bliss. If you happen to stumble upon something that you might infringe, you are in the unenviable position of what to do (answer: call your lawyer).
some follow up on this post,
Tuesday 13th of March
The best thing about having a blog is writing about a topic and then watching the email comments and questions flow in. I especially love the comments that disagree with what I write, as I usually learn more than I expound.
My post yesterday regarding whether or not entrepreneurs should review patents in broadening their knowledge of their ecosystem definitely struck a chord. If you want to see the full comments, check out the original post. In summary, though, I got a lot comments similar to these:
Investors are not going to put money into your company if you face potential litigation, and you are unable to tell them if you infringe or not. This will definitely be covered in due diligence. Likewise, you would be doing your shareholders a disservice by not understanding and evaluating your risk.
The problem with this approach is that you look uninformed when VC's ask you to explain the IP landscape when they are performing due diligence.
Further, you need to get comfortable that you have freedom to operate, and the only way to do this is to review other's patents.
If you know and understand the patents in your field, you can frequently design around the narrow patents, making sure you don't infringe.
As a biotech entrepreneur, intellectual property is a major part of my day-to-day work. You need to monitor patents (and journal articles) in your ecosystem. Many strategic decisions are based on if you believe you can get protection for a certain idea. The only way to know that is if you have done your research and know what else has been patented.
These are all good points. Let me make something clear: just because I advised not to become a patent searcher, does not mean that you don’t have to know what’s out there. You can know a ton about your IP situation by monitoring other companies in your ecosystem, trying out their products, talking to their customers, reading reports, etc. This is all very different than personally searching through the patent filings.
I wholeheartedly agree that one should be knowledgeable, but if you are going to do this, do it before you start the business, make sure it’s clean than go full speed ahead. If you are worried, then get patent counsel involved, have them (not you) review the patents and write you a non-infringement letter to give you comfort. By having counsel monitor, this work is privileged and can’t be used against you later. Again, what we are trying to protect against here is willful infringement, not trying to keep you completely blind.
As for bio-tech, I’ll admit it’s a different animal and one, frankly, that I’m not an expert on. If this is what is standard in your industry, this is news to me. In the software / tech world, most patent attorneys that I know don’t want their clients out there searching around.
Thanks to everyone who has participated in the conversation. I also got support to blog again (call it a rant) on what is wrong with the patent system in our country. Stay tuned…
Saturday, March 10, 2007
here is the link...
have a great weekend
Friday, March 09, 2007
How to recover when your work stability slips out from beneath you
By Pam Slim of Escape from Cubicle Nation weblog
I just got a message last night from a friend who has been employed in a job that he really dislikes for at least the last 10 years. He has been busily working on an entrepreneurial project on the side, and has been trying to figure out how to make the transition to full-time entrepreneurship in a way that won't cause financial hardship to his family.
Yesterday, he unexpectedly lost his job.
I can feel sensation that must have gone through his body upon receiving the news. As much as he had been dreaming about starting a new venture, he was not "there yet" in terms of feeling totally prepared.
So how do you recover from something like this without dissolving into a bundle of nerves?
Allow yourself to freak out. You don't have to do it in front of friends, family or co-workers (in fact, I would not advise that!), but you DO need to let out the huge amount of fear and sadness that you feel. You may want to drive to a remote spot and sob and scream in your car. Or take a hike in a secluded area and cry your guts out to a sympathetic tree or rock. Or, if you live alone or can send the family away for a day or two, stock up on comfort food and sit curled in a fetal position on your couch watching sad movies or bad television. Whatever it takes to let the heat of the emotions out of your body.
Think short term. One of the most common things that happens when you lose your financial stability is to fill your mind with all the horrible things that will happen in the future as the result of your lack of funds. Like your kids will not be able to go to college. And you will have to move out of your comfortable neighborhood and into a shack down by the railroad tracks. These thoughts will do nothing but torment you. Focus on what you need to get done in the very short term - as in the next four days.
Cut back all non-essentials immediately. Except for a treat or two. Now is the time to squeeze out all of the excess from your budget, since you will need funds to float to the next stage of secure cash flow. But don't get so extreme that you go from 2 lattes a day to water only. You may rebel against such austerity and feel deprived. Treat yourself to something special every once in awhile to keep your spirits up and momentum going.
Surround yourself with supportive, pragmatic and accessible friends. You need people around you who will help you face your fears and keep moving in a positive direction. Be very discriminating about who you share your anxiety with, as you are in a fragile state and don't need anyone around who will add fuel to your fears. We all have a "Negative Nelly" friend or two in our circle who will remind you of how dour the job market is, of the friend they had who didn't find work for 3 years, or of her shock that you didn't have 6 years of income saved up in case something like this happened. Steer clear of these folks and call the ones who will hold your hand and walk you through your transition step by step.
Write down what you want to happen in the affirmative. Say things like "I will find good work to pay my bills." "I will meet people that will open new doors for my emerging business." "I will stay positive and healthy and not let my fears control me." "I will end up in a better place than I am in now as a result of all the good work I do to get through this challenge." Regardless of how you feel about the hoopla surrounding The Secret and The Law of Attraction these days, it never hurts to think positively. In my own experience with a recent scare in my husband's construction business when he lost a contract, I am convinced that our positive thinking got us back on track much more quickly than if we would have stewed in panic. (As a matter of fact, since it happened last year, our # of employees and business has doubled - go figure!)
Define your short-term financial needs very concretely. Get very clear how much you need to bring in per week or month. Then ask yourself "How can I generate this income?" You may find that you can do a short-term contract, sell valuable knick-knacks on eBay, tap into a non-essential savings account or collect on a long-owed debt by a family member or friend.
When you are done mourning your loss, look on the bright side! In my friend's case, he has known for a long time that he hated his job and wanted to do something different. Life has a funny way of giving you what you ask for, even if it doesn't come at the time you think you want it. He might have stayed at a life-sucking job for 5 more years, holding back on moving full-force into his business idea. Your success will depend 100% on the way in which you interpret your twist of fate. Look at it is a good thing, and it most likely will be. That's how I now see the pain I suffered when a boyfriend dumped me. If he hadn't, I wouldn't have met my fabulous husband! So all coins have two sides.
As scary as it can be, losing financial footing can help you take a great leap in the direction you have been meaning to go, but were too busy to begin.
Thursday, March 08, 2007
- Wanna be entrepreneurs
- Tired road warrior entrepreneurs
- and Me
This is a short intro to a book that has found a place by my beside, Guy has just finished a post on it as well....this will give you times of refreshing...and a bundle of ideas, some folks think that companies just take one idea and they become a business, as an old CEO of mines used to say and he was correct on this occasion, your business is built brick by brick, (it is not a prefab mines). I hope you enjoy, and please drop by some of my guest bloggers listed on my page...all good...
Founders at Work: Stories of Startups’ Early Days:
This book is a gold mine for great stories about entrepreneurship. Here is a list of some of my favorites. The major lesson: Entrepreneurship is all about tactics, guts, not knowing that things are not done “this way,” and making do with not enough money.
Some of the Gems inside:
Sabeer Bhatia (Hotmail) on how he decided whether to tell venture capitalists the real idea he wanted to get funded. “If they passed the litmus test of not rejecting us for the wrong reasons and said, ‘OK, we don’t mind that you’re young, we don’t mind that you don’t have management experience, only when they would start poking holes in the actual idea would we share the Hotmail idea with them.”
Woz (Apple). “All the best things I did at Apple came from (a) not having money, and (b) not having done it before, ever.”
Mitch Kapor (Lotus Development) on how much money he asked for from Sevin-Rosen. “I think I said probably $2 to $3 million. We had nothing. We hand an early-stage under-development spreadsheet, and me and Jon Sachs. So that was the biggest number I felt I could ask for without being totally absurd.”
Evan Williams (Blogger.com) on how he raised money to buy more servers. “We posted it on our website, and it said, ‘Hey, we know Blogger is really slow. It’s because we need more hardware. We don’t have the money to buy it, so give us money, and we will buy more hardware and we’ll make Blogger faster.’”
Tim Brady (Yahoo!). “The funniest thing I can remember was when there was a huge storm in May of ‘95, and the power grid went down for a few days. We had to go rent a power generator and take turns filling it with diesel fuel for 4 days. 24/7. We were laughing, ‘How many pages to the gallon today?.”
Mike Lazaridis (Research in Motion) on the importance of recruiting students. “’…What’s important to me are the signs on the back of the building.’ Of course, everyone recoiled from that. I explained to them, ‘I don’t really care if anyone else knows where the building is. All I want is the students to know where the building is.’”
Mike Ramsay (Tivo): “I remember one weekend, we took the entire company, what was about 60 people at the time, and we divvied them up and went to all the Fry’s stores in the Bay Area, because they were selling at Fry’s. We set up demo stations and the employees were giving demos. It was great because almost everybody had no experience of what it’s really like to sell in a retail store.”
Paul Graham (Viaweb): “Neither of us knew how to write Windows software, and we didn’t want to learn. It seemed like this huge steaming turd that was best avoided. So the main thing we thought when we first had the idea of doing web-based applications was, ‘Thank God we don’t have to write software on Windows.’” On raising money: “The advice I would give is to avoid it. I would say spend as little as you can because every dollar of the investors’ money you get will be taken out of your ass…”
Catarina Fake (Flickr): “So Flickr started off as a feature. It wasn’t really a product. It was kind of IM in which you could drag and drop photos onto people’s desktops and show them what you were looking at.”
Brewster Kahle (Thinking Machines): “The blessing of Thinking Machines and the curse of Thinking Machines was that it had a lot of money. If you have a lot of money, then you can be detached from people that are going to pay you in the future.”
Chuck Geshke (Adobe) on the reaction of the spouses of Xerox execs to a demonstration of PARC technology in 1977: “They loved this stuff. They sat down and played with the mouse, they changed a few things on the screen, they hit the print button and it looked the same on paper as it did on the screen. They said, ‘Wow, this is really cool. This would really change an office if it had this technology.’”
[This is why you should always listen to your wife. And if you’re a woman, you should never listen to your husband.]
Ann Winblad (Open Systems). “So I get in front of these 60 or 70 guys and these guys are probably all in their 50s and I’m in my 20s, and we had a ‘blue light special,’ where we said, ‘If you give me a check today for $10,000, you can have unlimited rights to one of our modules.’ …I went home with, I think, like 12 or 15 of these $10,000 checks in my purse.”
James Hong (Hot or Not) on his first beta site. “My dad was the first person that ever saw Hot or Not besides Jim and me, and he got addicted to it! Here’s my dad, a 60-year-old retired Chinese guy who, as my father, is supposed to be asexual, and he’s saying, ‘She’s hot. This one’s not hot at all.’”
On using his parents to moderate the pictures: “I originally had my parents moderating since they were retired, and after a few days I asked my dad how it was going. He said, ‘Oh, it’s really interesting. Mom saw a picture of a guy and a girl and another girl and they were doing…’ So I told Jim, ‘Dude, my parents can’t do this any more. They’re looking at porn all day.’”
On his newfound dating success with hot women: “All of a sudden Hot or Not happened, and I was starting to date all these attractive women. I got a taste of it, and I realized that looks don’t make up for a good personality. Many of these girls were annoying. They were fun to hang out with, but I couldn’t have a conversation with them.”
[IMHO, James is the funniest person in the book.]
James Currier (Tickle). “When we started the company, we wanted to change the world, and we had all these tests on the site to help people with their lives. We had the anxiety test, the parenting, relationship, and communications tests. And no one came. …’Let’s do a test for what kind of breed of dog you are.’ …We put it online and 8 days later we had a million people trying to enter our site.”
Mena Trott (Six Apart) on early meetings with the current CEO of the company, Barak Berkowitz. “Barak said, ‘That’s great for a niche or personal lifestyle business, but we’re not interested in investing in that.’ At first we thought, ‘Who is this asshole? Why is he saying that to us?’”
Wednesday, March 07, 2007
There is a way to get things done, and get them done right, if you're willing to put in a little work.
By Michael E. Gerber
What in the world is everyone talking about when they talk about management?Primarily, they're talking about control.Managers control things. People. Results. The stuff we do every day to make sure nothing goes wrong, to make sure that we're sailing smoothly.And yet, no matter how many managers we hire, and how many things they do, and how many results they're accountable for, and how hard they work, and how much they care, something always-and I mean always-goes wrong.Why is that? Why is it that no matter how hard we try to control everything, most things seem to have a mind of their own?I suggest-and rather strongly-that it's the belief held by most business owners that successful managers are people with some sort of "management skills" that are to blame. It's our belief that people can be depended on to do what they say they're going to do that gets in our way. Not only because we hire managers with false and impossible-to-realize expectations, but no matter how often our expectations are proven to be unrealistic, we hold on to them with everything we've got. Because to change our perception of what's true would mean we would have to accept the fact that people can't be depended on to do what they say they're going to do. If that's true, then we all need to set about discovering what we can depend on, and that's the management system each and every single one of our managers needs to become expert at, and use.It's not the person, it's the system.It's not how much our managers care, or how hard they try; it's how well they've been trained in "the way we do it here." The Action Plan. The Controlling Calendar. The standards by which we measure our performance. The Benchmarks. The due dates. The accountability. The way in which we monitor the system. Knowing that something is always going to go wrong, but because we're watching it, seeing it, understanding what we've committed to do, and by when, and by whom, and for how much, we can then begin to understand, with true oversight, what it is we've jointly committed to, and what our expectations actually are. Not of the manager, but of the process through which a result is expected to be produced.But who's got time to do all that, and do the job, too?Just about everyone asks me that when I haul out my Management 101 primer, which says: "If you don't have a system for doing it, you aren't going to get it done."Unless you're lucky, that is.To be successful, you need to discover the way to produce a specific result in your business. And through that discovery, you need to then determine how you can consistently replicate that specific result. That becomes the intellectual property of your rarified organization, and the specific quality you deliver to each and every manager who takes on the task of first, being committed, and second, committed to knowing the truth. And third, committed to doing what's true, or of finding a way to improve it.
Tuesday, March 06, 2007
The last few days I have been plenty ill with the dreaded flu, so plenty of thinking time....one thing I did have was a visit from DYNO-ROD, I had a partially blocked drain that was getting worse and they came to fix it....well they came....but there were a few things that stopped them from progressing....and that has given me a picture of there organization that was not the best. So what were the issues, the first engineers tools were inadequate and faulty, he did not have any water in his tanks for the high pressure flushing system, when he did manage to get his tanks filled (could not use the garden tap, it has different sized fittings) the pressure flushing system was faulty. The next step was for him to go and get his van repaired and another engineer would be sent to complete the call, but he could not tell me when he would come, first engineer showing I hate my company attitude. The second engineer arrived and, well he did not have any better luck, he needed lifting gear to lift the drain covers, and supprise... supprise , the company only had two sets of the gear in Scotland, so it would have to be tomorrow that they come back and fix the blockage, meanwhile I have a load of raw sewage on the front lawn, well update they have arrived 30 mins ago to complete the job. I have a couple of suggestions for Dyna Rod:
- Get the operations team to work on procedures to ensure the vans and equipment are fully functioning when they arrive at a job
- Have a hand out prepared for any customer who may have questions regarding the repair and any other contact numbers required
- Make sure the engineers know how important it is for them to be motivated and present a good image of there company.
I will let you know how it goes with the drains....so to the article below...many start ups have a CEO who has had not experience ofthe role previous to his new company, I hope this article will help you out a little.
Within a company the CEO is generally regarded as being all powerful, yet the fact remains that the average tenure of a CEO is less than 2 years. Against this background, Robert Heller of http://www.thinkingmanagers.com/ considers the nature of the power a CEO.
Power and the Manager
Once in a while journalists and writers get hung up on identifying the most powerful woman or women managers. But what is meant by ‘power’? It might refer to force of personality, which is expected of chief executives of both sexes. But forceful personalities might not necessarily have significant power in the usual sense. The real meaning of corporate power is in the importance of the company, not the individual managers.
Fortune magazine called Carly Fiorina as “the most powerful woman in business” as she was the first female to be appointed CEO of one of the 20 largest companies in the US. But when you examine Fiorina’s actual performance at Hewlett-Packard, the most significant aspect of her power is its limitations. Her major initiative was to secure the acquisition of a rival PC maker Compaq (which had just been taken over Digital Equipment).
The founding families were vehemently opposed to the takeover, and a ferocious battle ensued in and out of the boardroom. Fiorina secured the support of a narrow majority of the shareholders, but it turned out to be a victory gained at too great a cost. Walter Hewlett, who led the family opposition, might well be proved absolutely right – Compaq was a dubious purchase, and perhaps should not have been contemplated. But the epic struggle shows that ultimate power is that of ownership – employees, even those with the title of chief executive, do not possess it.
Actually, the power of the CEO has always been conditional, the largest element by far in the complex network of influence and authority in which all managers participate and which instils each of them a measure of individual power. One of these conditions is that all holders of power must justify their position by their performance, both in results and relationships in the eyes of their superiors and subordinates. The CEO is not an exception to this rule, and quite right too.One of the dissenters among the HP directors, Tom Perkins, said: “I probably am too easily bored with board process, and too preoccupied with customers, growth, market share and the bottom line.” This came as part of a response to a fierce attack on him by Fiorina. But Perkins, a veteran and very successful Silicon Valley venture capitalist, is spot on. Power rises towards the top, and becomes greater as it does. So the way power is exercised must be changed to match. The ultimate power of the CEO is making others take responsibility for all aspects of the organisation, while establishing a modus operandi that instils the boss with complete confidence that those responsibilities are being handled in the best way possible.
Monday, March 05, 2007
Rob Smorfitt, Start up Guru from South Africa
What is portfolio entrepreneurship? Portfolio entrepreneurship normally follows on from serial entrepreneurship. Ideally this should be something all entrepreneurs do, but seldom is.A serial entrepreneur is someone who buys and / or starts a business, and then moves on and sells it, and then repeats the process. However, a portfolio entrepreneur, as the next stage, ownsmultiple businesses at the same time.A portfolio entrepreneur requires a fair amount of skill to juggle these different requirements on his or her time. It is not a simple process and ideally, to start with, the entrepreneur should ensure that the two businesses are in the same industry, as this will allow the entrepreneur to then gain the necessary skills to manage two businesses simultaneously.Key success factors here are partners and delegation. Failure to do take partners, and more importantly the delagation of duties, will surely lead to business failure, and quite likely a nervous breakdown. There are always exceptions ot the rule, but ideally you need someone to do the work. At this level you should be focused on strategy and possibly top level sales. I personally love the sales part, and therefore focus on strategy and sales. Work to your strengths.Give it a try. It is fun and challenging. It is exciting and as you begin to diversify it is incredibly stimulating. Just remember the cash flow consequences or you can lose it all.
Friday, March 02, 2007
Why Smart Companies Do Dumb Things
By Guy Kawasaki
Not a day goes by when I don’t ask myself, “Why do smart companies do such dumb things?” We all know companies that cook the books and throw outrageous parties at one end of the spectrum to sell lousy products at the other. A sweeping answer is that companies are run by smart people, and smart people do dumb things as we’ve learned.
However, when smart people assemble in companies, they are still capable of doing dumb, if not even dumber, things. Wouldn’t you think that groups would provide checks and balances? Let’s tap into Why Smart People Do Dumb Things again because it’s a cornucopia of ideas, recommendations, and provocations that can explain why smart companies do dumb things.
Consensus. When it comes to doing dumb things, the sum of the parts is less than the whole. Throwing more minds at the problem means more data, more perspectives, more possible solutions, more critiques of these solutions, and more minds (and hands) implementing the solution, right?
Possibly, but there’s also the downside of more people: once consensus starts to build, it’s harder to alter a decision. It’s one thing to argue against a few people; it’s much more difficult to argue against the wisdom of a crowd. Individuals who hold out, question, or disagree are labeled as clueless, uncooperative, and not team players.
Conviction. Consensus rears its ugly head during the decision-making process. The situation can get worse once implementation occurs because the organization marches along with a firm belief in what it’s doing. At that point, a decision takes on a sacred life of its own, and a company cannot see flaws.
Conviction is not inherently bad, and truthfully, it’s an important component of success. The trick is to combine conviction with open eyes and open minds to reduce the likelihood of having a conviction in the wrong thing.
CEOs. There is one kind of consensus that is particularly powerful and dangerous: a CEO (or any top executive) who provides cues about what she likes. (CEO=Consensus Executive Officer?) Then, disagreeing takes on the gravity of career risk; however, smart people don’t necessarily turn into thumb-sucking dweebs just because the CEO likes something, so what gives?
It could be that people, no matter how smart, rearrange reality. They do not simply follow the dumb cues of the CEO. Instead, there’s an intermediate step: they see the cues, rearrange the facts in their mind, and then conclude that the CEO is right. The result is the same, though.
Experts. If there’s anything smart people worship it’s other smart people. For example, you don’t know much about geography, so you hire an consultant who’s an expert in geography, and he tells you that the earth is flat. It’s touch to be strong enough to not defer to an expert.
Most experts have a tough time accepting surprises that are outside of their comfort zone. For example, if you come to me with a marketing problem, I will usually tell you that evangelism is the answer. :-)
Good news. A company, any company, is constantly assaulted by its competition, customers, governments, and schmexperts (schmucks + experts). Faced with this onslaught, good news is an addictive, illegal, and dangerous drug. It makes you crave more good news, and you refuse to communicate bad news up the chain of command. Ultimately, it may even make you refuse to hear bad news at all. How many commanders-in-chief of armies has this phenomenon probably brought down over the course of history?
Lofty ends. Lofty ends can justify all sorts of weird and inappropriate means. Look no further than the quests for peace that produce mayhem and violence. Or, the desire to make a profit (something that is genuinely good for shareholders and customers) that warps a company’s code of ethics even though the company is made up of smart, honest people. Companies trying to achieve a lofty goal can start believing that any means to achieve it is okay.
In addition to what the book discusses, I’ve noticed three additional factors that make smart companies do dumb things.
Budgets. Ideas take on a life of their own in the form of convictions. That’s bad enough, but then the implementation of ideas can also take on a life of its own. This is called a budget. It is a holy document that takes the place of management, observation, decision-making, and analysis for an entire year. Then the flawed thinking of the budget serves as the basis for the next year’s implementations. You’ve heard of stem cells. You can think of many budgets as stupid cells.
Greed. You’ve heard of concept of “good to great” by Jim Collins. There’s also “good to greedy,” and greed usually trumps intelligence. When a company wants it all, it usually doesn’t let rules, regulations, and common sense get in the way.
Arrogance. This is greed’s twin brother. Arrogance sets in when a company claims success as if it’s a God-given right. Arrogance also means that a company believes it’s above the law—that no one and nothing has claims against it.
Here are my thoughts on ways to prevent or minimize doing dumb things:
Say, believe, and act in a way that convinces employees that differences of opinion and diversity of thoughts are good things. Frankly, a couple of curmudgeons is a good thing for a company.
Don’t be in a rush to meet consensus. In particular CEOs should not rush into a decision even though the image of decisiveness is so seductive.
Spell things out. It’s not enough to say, "Plug this leak in our company" and assume that it will be done legally. You should say, "Plug this leak in our company by using only legal, ethical, and reasonable methods." That’s when you’re done.
Move the crowns. When employees go around saying, "We need to do it this way because Bill/Steve/Carly/Larry wants it this way,” you’re in trouble. It means that employees are making decisions based on what they think will make kings and queens happy—as opposed to what’s right for the customer, employees, or shareholders. Good CEOs put the crown on the heads of customers, not themselves.
Restrict the use of experts to narrow areas. Never use experts to create your product roadmap or marketing plans unless you want MBAs who have never run anything larger than a school snack bar to decide your fate.
Ask for bad news. Don’t assume it will find you—you have to find it. You should allocate a time that’s specifically for communicating bad news.
Don’t shoot the messenger who brings the bad news unless he caused it.
Don’t reward the messenger who brings good news unless he caused it.
Approach budgets as working guidelines, not policies set in stone. If your budget doesn’t change for the whole year, you’re either clairvoyant (there are probably easier ways to make money if you are) or clueless.
Squash arrogance and greed. I’ll be honest: I don’t know how to do this. If I figure it out, it will be the topic of an upcoming blog.
Thursday, March 01, 2007
Here then is my top-ten list of geek business myths By Ron Garret , A Silicon Valley VC
Myth #1: A brilliant idea will make you rich.Reality: A brilliant idea is neither necessary nor sufficient for a successful business, although all else being equal it can't hurt. Microsoft is probably the canonical example of a successful business, and it has never had a single brilliant idea in its entire history. (To the contrary, Microsoft has achieved success largely by seeking out and destroying other people's brilliant ideas.) Google was based on a couple of brilliant ideas (Page rank, text-only ads, massive parallel implementation on cheap hardware) but none of those ideas were original with Larry or Sergey. This is not to say that Larry, Sergey and Bill are not bright guys -- all three of them are sharper than I can ever hope to be. But the idea that any of them woke up one day with an inspiration and coasted the rest of the way to riches is a myth.
Myth #2: If you build it they will come.There is a grain of truth to this myth. There have been examples of businesses that just built a product, cast it upon the ether(net), and achieved success. (Google is the canonical example.) But for every Google there are ten examples of companies that had killer products that didn't sell for one reason or another. My favorite example of this is the first company I tried to start back in 1993. It was called FlowNet, and it was a new design for a high speed local area network. It ran at 500Mb/s in a time when 10 Mb/s ethernet was the norm. For more than five years, FlowNet had the best price/performance ratio of any available network. On top of that, FlowNet had built-in quality-of-service guarantees for streaming video. If FlowNet had taken over the world your streaming video would be working a lot better today than it does.But despite the fact that on a technical level FlowNet blew everything else out of the water it was an abysmal failure as a business. We never sold a single unit. The full story of why FlowNet failed would take me far afield, but if I had to sum it up in a nutshell the reason it didn't sell was very simple: it wasn't Ethernet. And if we'd done our homework and market research we could have known that this would be, if not a show-stopper at least a significant obstacle. And we would have known it before we spent tens of thousands of dollars of our own money on patent attorneys and prototypes.
Myth #3: Someone will steal your idea if you don't protect it.Reality: No one gives a damn about your idea until you actually succeed and by then it's too late. Even on the off chance that you do manage to stumble across someone who is as excited about your idea as you are, if they have any brains they will join you rather than try to beat you. (And if they don't have any brains then it doesn't matter what they do.)Patent protection does serve one useful purpose: it can make investors feel warm and fuzzy, especially naive investors. But I strongly recommend that you do your own patent filings. It's not hard to do once you learn how (get the Nolo Press book "Patent it Yourself"). You'll do a better job than most patent attorneys and save yourself a lot of money.
Myth #4: What you think matters.Reality: It matters not one whit that you and all your buddies think that your idea is the greatest thing since sliced pizza (unless, of course, your buddies are rich enough to be the customer base for your business). What matters is what your customers think. It is natural to assume that if you and your buddies think your idea is cool that millions of other people out there will think it's cool too, and sometimes it works out that way, but usually not. The reason is that if you are smart enough to have a brilliant idea then you (and most likely your buddies) are different from everyone else. I don't mean to sound condescending here, but the sad fact of the matter is that compared to you, most people are pretty dumb (look at how many people vote Republican ;-) and they care about dumb things. (I just heard about a new clothing store in Pasadena that has lines around the block. A clothing store!) If you cater only to people who care about the things that you care about then your customer base will be pretty small.
Myth #5: Financial models are bogus.As with myth #2 there is a grain of truth here. As Carl Sagan was fond of saying, prophecy is a lost art. There is no way to know for sure how much money your business is going to make, or how much it will cost to get to market. The reason for doing financial models is to do a reality check and convince yourself that making a return on investment is even a plausible possibility. If you run the numbers and find out that in order to reach break-even you need a customer base that is ten times larger than the currently known market for your product then you should probably rethink things. As Dwight Eisenhower said: plans are useless, but planning is indispensible.This myth is the basis for one of the most classic mistakes that geeks make when pitching their ideas. They will say things like "Even if we only capture 1% of the market we'll make big bucks." Statements like that are a dead giveaway that you haven't done your homework to find out what your customers actually want. You may as well say: there's a good chance that only 1 customer in 100 will buy our product (and frankly, we're not even sure about that). Doesn't exactly inspire confidence.
Myth #6: What you know matters more than who you know.Reality: You've been in denial about this your whole life. You were either brought up to believe that being smart mattered, or you just didn't believe your mother when she told you that getting along with the other kids was more important than getting straight A's.The truth is, who you know matters more than what you know. This is not to say that being smart and knowledgable is useless. Knowing "what" is often an effective means of getting introduced to the right "whos". But ultimately, the people you know and trust (and more importantly who trust you) matter more than the factual knowledge you may have at your immediate disposal. And there is a sound reason for this: business decisions are horrifically complicated. No one person can possibly amass all the knowledge and experience required to make a broad range of such decisions on their own, so effective business people delegate much of their decision-making to other people. And when they choose who to delegate to, their first pick is always people they know and trust.Ironically, C programmers understand this much better than Lisp programmers. One of the ironies of the programming world is that using Lisp is vastly more productive than using pretty much any other programming language, but successful businesses based on Lisp are quite rare. The reason for this, I think, is that Lisp allows you to be so productive that a single person can get things done without having to work together with anyone else, and so Lisp programmers never develop the social skills needed to work effectively as a member of a team. A C programmer, by contrast, can't do anything useful except as a member of a team. So although programming in C hobbles you in some ways, it forces you to form groups whose net effectiveness is greater than the sum of their parts, and who collectively can stomp on all the individual Lisp programmers out there, even though one-on-one a Lisper can run rings around a C programmer.
Myth #7: A Ph.D. means something.Reality: The only thing a Ph.D. means is that you're not a moron, and you're willing to put up with the bullshit it takes to slog your way through a Ph.D. program somewhere. Empirically, having a Ph.D. is negatively correlated with business success. This is because the reward structure in academia is almost the exact opposite of what it is in business. In academia, what your peers think matters. In business, it's what your customers think that matters, and your customers are (almost certainly) not your peers.[UPDATE: this is not to say that getting a Ph.D. is useless. You can learn a lot of useful stuff by getting a Ph.D. But it's the knowledge and experience that you gain by going through the process that is potentially valuable (for business endeavors), not the degree itself.]
Myth #8: I need $5 million to start my businessReality: Unless you're building hardware (in which case you should definitely rethink what you're doing) you most likely don't need any startup capital at all. Paul Graham has written extensively about this so I won't belabor it too much, except to say this: you don't need much startup capital, but what you do need is a willingness to work your buns off. You have to bring your brilliant idea to fruition yourself; no one else will do it for you, and no one will give you the money to hire someone to do it for you. The reason is very simple: if you don't believe in the commercial potential of your idea enough to give up your evenings and weekends to own a bigger chunk of it, why should anyone else believe in it enough to put their hard-earned money at risk?
Myth #9: The idea is the most important part of my business plan.Reality: The idea is very nearly irrelevant. What matters is 1) who are your customers? 2) Why will they buy what you're selling? (Note that the reason for this could very well be something like, "Because I'm famous and I have a huge fan base and they will buy sacks of stale dog shit if it has my name on it." But in your case it will more likely be, "Because we have a great product that blows the competition out of the water.") 3) Who is on your team? and 4) What are the risks?
Myth #10: Having no competition is a good thing.Reality: If you have no competition the most likely reason for that is that there's no money to be made. There are six billion people on this planet, and it's very unlikely that every last of them will have left a lucrative market niche completely unexploited.The good news is that it is very likely that your competition sucks. The vast majority of businesses are not run very well. They make shoddy products. They treat their customers and their employees like shit. It's not hard to find market opportunities where you can go in and kick the competition's ass. You don't want no competition, what you want is bad competition. And there's plenty of that out there.Special bonus myth (free with your paid subscription): After the IPO I'll be happy.If you don't enjoy the process of starting a business then you will probably not succeed. It's just too much work, and it will suck you dry if you're not having fun doing it. Even if you get filthy stinking rich you will just have more time to look back across the years you wasted being miserable and nursing your acid reflux. The charm of expensive cars and whatnot wears off quickly. There's only one kind of happiness that money can buy, and that is the opportunity to be on the other side of the table when some bright kid comes along with a brilliant idea for a business.All these myths can be neatly summarized in a pithy slogan: it's the customer, stupid. Success in business is not about having a brilliant idea. Bright ideas are a dime a dozen. Business is about taking a bright idea and assembling a team that can turn that idea into a product and bring that product to customers who want to buy it. It's that simple. And that complicated.Good luck.