The E-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It
Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant
The Know-It-All: One Man’s Humble Quest to Become the Smartest Person in the World
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 Al Herbach  Friday, February 5th, 2010 I haven’t done a recommended links post is a while and so here we go:
Seth: This week Seth Godin directed me to two very cool web resources that I urge you to take time to read and view.
The first is the video Lemonade. It deals directly with folks in the advertising agency business who have been laid off and how they found their next steps. Some people feel that it is talking about the need to start a new business, but my take is that it shows that you really can make Lemonade out of lemons if you pursue your dreams. The video is well made and totally engaging.
The second is a free e-book on pricing. How exciting can that be, you ask? Well, the author, Todd Sattersten who has developed the business book review site inbubblewrap, clearly explains the components of pricing, costing and especially margin. He also delves into the concept of free. All in all a very quick and information packed presentation. And the price is right!
The Brain: Harvard Business Review had a nice article on how the middle aged brain (of which I am the proud owner) has some inherent benefits as it relates to businesses. It is good to hear that while we sometimes can’t remember names, we have built other skills that can help us in the business world.
Microsoft: Microsoft’s perception in the marketplace has changed over the past 25 years. The New York Times has a nice article on what the company has done to put itself in their current market space. This is a good warning to Google as well as any other company that goes through significant growth.
Al Herbach Monday, February 1st, 2010 Apple. It seems like they are the darling of the technology world. Just this week, they announced the iPad — the next thing that will revolutionize our world. Apple is a very divisive company. People either love them or hate them. The lovers are passionate and evangelical. The haters are passionate and focused.
Until recently, I was a hater. I have been on the PC platform since my first PC in 1984, with one 5.25 floppy drive, since I couldn’t afford the 5 MB (yes MB) hard drive. My resolve broke down when I saw the iPhone. Here finally was a phone that I could use as a single device for all my needs. The fact that it could sync with Outlook and keep all my music and run apps was (pardon the pun) beautiful music to me. So last June, when the iPhone 3GS was announced, I overcame my trepidation and bought the phone. I really love the phone. It is easy to use, rock solid, has the huge App Store and just works well. Yes, of course, there are things that I wish it could do, like multi-tasking and more detailed profile settings, but in general I am pleased with my iPhone purchase. I am still not on the Mac bandwagon. That is going to take a whole lot more magic.
The Apple store is another great story. I love the Apple store. Everyone in the store is enabled to make a your customer experience the best. Want to buy something? Any Apple employee can make a sale — no waiting on line; heck they will even email a receipt to you. The Genius bar is terrific for solving problems. You get the feeling that everything that they do is focused on you. I can’t think of another retail environment that makes me feel like that, with the possible exception of Disney (topic for another blog post).
But, while Apple can make you feel like the smartest consumer ever for choosing to work with their products and their people, it seems to me that in their own way, they also treat you like the stupidest consumer. How can that be? Well, they severely limit the types of applications that developers can offer. Somebody reasonably smart can write a solid profile manager for the App Store, but Apple won’t allow it because it violates what they think should be available. How about a way to automatically expand text typed into an input field — something like tyvm should be able to be automatically expanded to Thank you very much? Both of these features are standard on the competing Blackberry platform, but even if someone wanted to write these applications, Apple would not allow them.
It gets worse. Say you lost your iPhone charger. How much would you expect Apple to charge you to replace it? Remember that the 8 GB iPhone can be bought for $99. According to Apple website, they want $29.00 for the replacement. 30% of the purchase price for a power charger? That is crazy. Yes, I know that you can find a third party charger almost anywhere for $10 or $15, but what does Apple take us for? Here is an even worse case. The iPhone allows you to store movies for remote watching. No problem, unless you want to plug your iPhone into your home television so that you can watch on the big screen. Then you can buy the video cables from Apple for $49. Too rich for your blood? OK, find some third party cables and buy them for $10. I did. When I hooked them up, the picture showed up on my tv for about 2 seconds then went blank. I got a message that said that since I wasn’t using the approved Apple cables, they had disabled the video output. Remember that I did get a picture for a short bit, so it isn’t a technical issue. Ouch. Starting to make me feel like less of that smartest consumer ever.
They have continued these policies with the iPad. What a wonderful media player. But no HDMI output. Too bad that you will need a (you guessed it) proprietary plug to get video output. Well, I am sure that it must have a USB output. All real devices have a USB output. Um, not so much with the iPad. The answer is that it will be available with an accessory kit. I have heard that Apple believes that they want to serve the non-technical crowd and don’t want to make things too complicated for that marketplace. Well, it seems to me that the PC marketplace hasn’t done too badly by giving people options. If only someone could develop a “gorgeous” device that was open to be customized to our needs.
I guess that my experience has shown that it is possible to be in the middle on the topic of Apple. I love the customer service and I love the device. I just wish that the company had the foresight to help me make this my device, at a reasonable cost. Then I could confidently move into the ranks of the lovers.
Al Herbach Wednesday, January 27th, 2010 Lately I have become fascinated with the sales process. Those of you who know me well, are not surprised, since sales has always been a Black Hole area for me. But my fascination is really directed at a certain type of sales process. Let me explain.
When you think of sales, you normally think of a company who has a product or service and has to find customers for that deliverable. There are a lot of folks writing articles about and perfecting their sales processes to get that prospect to sign on the dotted line. Everybody from Boeing to the local deli has their own process down and understands what they need to do to ensure that the income keeps rolling in.
In the past several weeks, I have had conversations with several businesses that have a dual sales process. That is, they have to sell someone on the idea to sell a product to the end user.
At DePaul University’s Coleman Entrepreneurship Center, I attended a Blueprint Connections networking event recently. These events give student entrepreneurs an opportunity to talk with and present their ideas to experienced business folks. I am always excited by the future of business after attending these sessions; there is just so much energy there.
At this event, I met a student named John. John had started a business of providing real estate services to college students. His goal was to match students to the perfect apartment. John had a good sense of his market, he understood the value of high quality service and he made a compelling case. His challenge, though, was that in order to make a sale, he actually had to make two sales. He had to develop relationships (and contracts) with landlords, so that he could show their properties and get paid for the successful lease process. Then he had to sell the students on the need for his services and the “inventory” of properties that he could show. It is a devilishly hard process to manage.
Another company that I have been working with sells a licensed commodity to a large retail chain. The owner needs to get legal authorization from each licensee (think over 15,000) to sell their licensed material. Then he has to work with the store manager (there are over 5,000 of those) at the retail chain to offer his products. Even though corporate has given the green light to selling the products, they want the store managers at the local level to make the final decision. It is a balancing problem. You want to go out to the licensee and get the authorization so that you have something to provide to the retail chain, but it certainly is helpful if you have the local retail store already on board to sell the products and can go to the licensee with a pre-order.
These opportunities are golden opportunities, because they have the benefit of a contractual relationship between the parties and that makes it more difficult for others to enter. When we talk about investors funding ventures, one area we normally talk about is barriers to entry. These dual-focused sales efforts do provide some level of barrier. The challenge is how to balance the sales efforts in a knowledgeable and responsible way to grow your business.
Al Herbach Monday, January 18th, 2010 Recently I had the opportunity to see Tim Sanders speak. His book, Love Is the Killer App: How to Win Business and Influence Friends talks about how nice, smart people can do good by sharing. One of the things that he proposes is that people read more and share what they are reading. In that spirit, I wanted to share some of the great books that I have read recently.
Non-Fiction
Malcolm Gladwell’s newest book, What the Dog Saw: And Other Adventures, looks at topics as diverse as Cesar Milan, the dog whisperer to copyright law to the history of hair color ads and their effects on feminism. The book is an anthology of some of his favorite articles that he has written for The New Yorker. This medium gives him the ability to write long form articles that delve deeply into the subject matter. I highly recommend this book. Malcolm is a smart guy that follows his curiosity and writes well. It is a winning combination.
My favorite book last year was What Would Google Do? , by Jeff Jarvis. This book is not about how Google runs their business per se. In this book, Jeff looks at other industries and applies Google business practices to radically change the business model of that particular business. Jarvis is a journalist and he applies the Google model to newspapers, but also to restaurants, music and retailers among others. For anyone truly interested in business, this book will make you think about your business in new ways.
As an advisor to companies, I find that many of the issues that I encounter are rooted in organizational problems. One of the best books that I have read and recommend often is called The Five Dysfunctions of a Team: A Leadership Fable (J-B Lencioni Series) , by Patrick Lencioni. Patrick writes a business fable about a Silicon Valley start-up and the travails of a new CEO with an executive team that just doesn’t get it. The book is a quick read and Patrick deftly gets the symptoms and cures woven into the storyline.
And for those of you who are looking for financing, a great book on what venture capitalists look for when evaluating companies is also told in fable form by Randy Komisar in The Monk and the Riddle: The Art of Creating a Life While Making a Living .
A. J. Jacobs is a writer with OCD. In prior books, he lived by the rules of the Old Testament for a year and read the entire Encyclopedia Brittannica and wrote about his favorite articles. In his latest book, The Guinea Pig Diaries: My Life as an Experiment , he becomes a human guinea pig and tells the story of each encounter. Included in this book are his experiences in Outsourcing his Life to an offshore firm in India and the Nakedness Experiments, where he and Mary Louise Parker pose naked for a photo in Esquire Magazine. A. J. has been compared to the George Plimpton of our age. In this he succeeds, with a bit more droll humor.
Fiction
John Irving is a true American superstar storyteller, easily in the same class as Stephen King or Mark Twain. He develops quirky characters and builds complex storylines that keep the reader engaged. His latest – Last Night in Twisted River: A Novel – takes his readers on a ride through a life time of love, betrayal, vendettas, loss, Italian cooking and naked skydiving. Somehow it all works marvelously.
Audrey Niffenegger doesn’t write often, but her writing takes on a luminous quality that fully sucks you in to the very end. Her latest book, Her Fearful Symmetry: A Novel , explores the life of a set of twins.
Let me know in the comments if you have specific books that you have read recently and would like to recommend.
Al Herbach Tuesday, December 22nd, 2009 In time for the holiday season (well, actually too late for Hanukkah) I give to each of you the following links:
- Seth Godin provides a free e-version of his latest book, What Matters Now, a compilation of short essays on single topics by a raft of 70 big thinkers. People like Chris Anderson, Jason Fried, Arianna Huffington, Kevin Kelly, Dan Ariely, Gina Trapani and Tim Sanders. Absolutely worth every penny
- Amazing story about how the IRS terrorizes audits a young mother who makes $10 per hour because they can’t believe that she can support herself on that income.
- Mark Cuban has an interesting idea on how to fund some of our most pressing problems. I think he is on to something. This type of tax has the benefit of being a very small amount on a huge number of transactions and will be almost invisible.
- Customer service and large companies. Go hand and hand like a horse and carriage? Not so much at American Airlines. See what happens when an employee reaches out to a customer who has some issues with their web site.
- If you ever have to give a big presentation and you want to add video clips of famous sayings from movies, you have to catch this site. There are over 12,000 clips and they are approved for use by the studios.
Al Herbach Friday, December 18th, 2009 A few weeks back, Jeff and I had this discussion about entrepreneurs. Jeff posits that there are two kinds of entrepreneurs out there. Now there are lots of ways to slice and dice entrepreneurs, but the way that he talked about it was interesting, so I wanted to pass it along.
The theory is that entrepreneurs are either scientists or engineers. Scientists are people who are always searching for something new. Think Alexander Fleming or Watson and Crick. Their batting average is very low, but when they get a hit, it is almost always a major deal. Think today of all of those scientists working to solve the mysteries of cancer or AIDS or the Higgs Boson. Most of them will work their entire lives on these difficult problems and achieve little success. But those that do succeed, will do so in a big way.
In business, probably the most famous scientist is Steve Jobs. He has created new technologies almost single handedly. But there are others; think of Phil Knight of Nike or Howard Schultz of Starbucks, who have fundamentally changed the way that we look at their market spaces. It takes someone who is willing to put all of their chips (and those of their investors) on the line on that single effort. Today, we look at the success that Steve Jobs is and declare that there is no way that he could lose, but in fact, if the iPod had failed, the future of Apple as a going concern would not be guaranteed,
On the other side of the coin are the engineers. These are folks who look to optimize the existing market space through tweaks. Most entrepreneurs fall into this category. They look at the current offerings and say I could do a better job, if only I changed something. They build upon the work of the scientists. Perhaps it is going after a different geographic segment, using a different distribution model or maybe changing the design of the product to better fit a perceived hole in the market. Here think of Avis vs. Hertz or Vizio vs. Sony. In any case, the engineer probably has a different success curve. This one would look more like the typical bell curve, where a majority see some success and some fail and a few hit a home run. This is not the place where you typically see a grand slam, but there are a lot of .250 hitting shortstops in the history of the Major Leagues who have earned a decent living.
The good news is that either option can work. But as with most things in life, risk tolerance will play into your strategy. If you are the kind of person to put it all on the line, you must still have a great new idea and execute well. If so, you can reap the huge rewards. On the other hand, slow and steady can also win the race. Sergey Brin and Larry Page are engineers (in both senses of the word) who through Google, developed a better way to search the web. They certainly did well for themselves.
Understand who you are and your preferred mode of operation. Once you can understand this, it will help guide your growth as an entrepreneur.
Al Herbach Monday, November 30th, 2009 I was reminded recently that I haven’t done a links column is a while, so here goes for a few good reads:
- Seth Godin writes about funding for a business. The typical methods are debt (loan) or equity (stock). He proposes a third way that might make some funding sources happy. I am intrigued.
- Dustin Curtis writes about the science of entrepreneurship. This article was fun to read, but take a look at the rest of the articles on his blogazine. He is a talented User Experience designer and each article is beautiful and thoughtful. Also to be read are the two articles about American Airlines and their user experience. By the way, American Airlines fired the AA designer who wrote to Dustin.
- Fun logic test here: Are you a cognitive miser?
- For entrepreneurs out there who are having problems with marketing, here are over 100 marketing questions that will help you get started thinking about how to market your company (or yourself).
Al Herbach Tuesday, November 24th, 2009 A number of the technology companies that I have been advising have been working towards building whatever they have to build to get a product into the marketplace. They have lists of features and are using some sort of project management system to track their progress. The feature lists are long and sometimes include esoteric features that the founders believe will immediately make them more newsworthy and consequently, more able to be funded.
My advice to my entrepreneur friends is simple. The biggest thing that makes a difference in getting funding is having paying customers. The faster that you can get a paying customer, the faster you can show to the world that you have a product or service that people want. The difference between pre-revenue and post-revenue is huge. Of course, post-revenue has a volume to it. One paying customer means something; 200 paying customers means something much more. But as the old Chinese proverb says, a journey of a thousand miles began with a single step. Take that step early.
Take the time up front to identify the minimum that you need to do to give your potential customers value and give them a glimpse of the future. Once you have decided what the initial feature set is, develop with all your heart and soul. Work fast and resist the temptation to add features. Keep a list, off to the side, of the neat features that you might want to consider in release 1.1 or 1.2. Go through the entire development cycle. Do not forget to quality check and validate your user interface. But release that code and sell that product. Most likely, your initial customers will not be shy about asking for additional features. Add them to your list and keep track of how many times each item is requested and by whom.
Only when you have gotten some paying customers to utilize your system can you determine which features are most critical to your success. That gives you the understanding to wisely choose the small set of features that will be in the next release. The unanticipated advantage of this is that you get another chance to tell your customers and prospects about a new release with new features that were suggested by them. You can’t get better PR than telling your customers that you are listening to them.
The best software firms out there do this… Look at Google with Google Reader or Google Docs. They push out new features almost every other week. Look at 37 Signals. Backpack today is much different from when it started out and the founders had no idea of the direction it should take, but their customers did.
You can’t get customers until you have a product out there. Release early and often.
Al Herbach Wednesday, November 4th, 2009 Short post today.
Ryan Avent today talks about a topic that I have wondered about for a while. In his piece, he talks about the funding for infrastructure, but it could just as easily be talking about improving our health care system. He rightly points out that the media (both left and right sides) don’t talk about this issue at all. Now, I don’t recommend that we scrap our entire defense network, but it certainly seems like this budgetary area is ripe for the picking.
On the Avent article, one commenter left the following, which made my day:
Maybe if we described that bridge collapsing in Minnesota as our infrastructure “suicide bombing” us, than we’d get that much money
Al Herbach Tuesday, October 27th, 2009 Last week, I was so bold as to call out the entire airline industry. Not enough innovation, too much nickle and diming, poor customer service. You have heard it all before, but my mistake was to assume (you know how that ends) that the airline industry was acting as a unified block. In most cases, they are. If American raises prices, Continental and United follow along the next day. If United adds a new “cost option”, the rest act like sheep or more likely, lemmings to offer the new selection.
But then I read this story about three guys who came up with a new way to skip a lot of the nonsense that is associated with flying. This is an entrepreneurial story that makes my heart sing, because these three non-aviation experts were able to think outside the box and come up with an entirely new aviation model in SeaPort Airlines.
The idea of getting around the FAA’s rules about security screenings by using planes that are under the legally mandated size is genius. They have started small, flying between two heavily trafficked cities, Portland and Seattle in business turboprops outfitted for commuter use. They fly into in-city airports, saving commute times on both ends. There are 10 scheduled round trip flights each weekday, so customers have plenty of options. Recently they have added some additional destinations both in the Northwest and in MidSouth as part of the FAA’s Essential Air Service Program.
From this we can learn a couple of key lessons. The first is that the entrepreneurial spirit does not limit itself to technology companies. Second, even the most moribund industry with the tightest controls can be attacked by a nimble competitor who is focused on serving a niche. Don’t lo0k at the Facebooks and YouTubes of the world as the only example of exemplary entrepreneurship — that is the lottery, a one in several million chance. Rather, find a place where people are unhappy with their options and give them something better. Be the best in your niche and you will reap the rewards.
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