Yearly Archives: 2009

Essay

Entrepreneurs as superheroes

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Entrepreneurs in our world are venerated for their risk-taking and innovation skills.  It is always a great story to tell when an entrepreneur is successful.  But we must be careful to ensure that we recognize and applaud the skills that got the entrepreneur to the success and understand that most entrepreneurs cannot do it on their own.

Let’s take a few examples.  Steve Jobs is rightly considered an entrepreneur.  When he and Steve Wozniak developed the Apple I computer, they came up with a radical new approach to delivering personal computers.  Steve Wozniak developed the hardware and software and Steve Jobs sold the vision.  Over time, Steve Jobs became the design guru and leads Apple in the development of unique products.  But this grand picture wouldn’t have happened without a man named Mike Markkula. Mike was the initial angel investor in Apple and served as the first president.  It was his leadership that gave both Steves the ability to do their best and allowed Apple to grow.

Another famous entrepreneur is Oprah Winfrey.  She is famous for her TV show, movies, magazine, XM Radio channel, Oprah.com and her tremendous philanthropy work.  She is the master of her domain, keeping on top of all of the vehicles that bear her name.  But if it wasn’t for Jeff Jacobs, an entertainment lawyer, CEO and 10% owner of  Harpo, Inc. (Oprah’s master organization) who runs the businesses, she would not be able to “be Oprah”.

Bill Gates is another entrepreneur who was fantastic at some details, but didn’t have a particularly strong business background.  Bill was able to understand the state of technology and envision a world where every desk would have a computer running Microsoft products on them.  True innovation, absolutely.  But it required Steve Ballmer, Microsoft’s  first business manager to bring the company to the heights to which it ultimately reached.

Too many entrepreneurs have watched Oprah Winfrey (or Steve Jobs or Bill Gates) and thought that they needed to do everything themselves.  Some people chicken out because they know they don’t have all the skills and discount the ones they do have.  Others continue through this phase expecting somehow to become Superman (or Superwoman) and manage all aspects of running a business by themselves.  Neither of these solutions is optimum.

Entrepreneurs need to be open to get a helping hand in developing their business.  Sometimes they can get free advice to help them along.  But more often, they need to understand that they will need to pay to get the highest level of support.  Sometimes it is cash and other times equity. In all cases, it is better to have 50% of a million dollar idea than 100% of a failure.

The real test of the entrepreneur is how much they are willing to sacrifice to see their idea become a success.  Find those folks who have skills where you are lacking.  Sell them on your vision and get them to help you deliver.  You will be the richer for it.

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Economics, Big Picture and Fun

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Economics: Wonder how the local governments are going to handle the reduction in tax income?  Some places have it figured out…  If you haven’t gotten the ticket yet, it seems you will.

Big Picture: I am reading a very interesting book, The Numbers Game: The Commonsense Guide to Understanding Numbers in the News, in Politics, and in Life, by Michael Blastland and Andrew Dilnot.  The idea is that we need to have some sense of numbers before we can make rational decisions.  The book is broken up into chapters like Count, Size and Average. In each, the authors try to show how a little thinking can help us understand what we read and how people can use numbers to confuse.  On a related point, the Freakonomics blog today talks about why it may be better for us to move to an SUV rather than a Prius.  How could this be?  Well, it has to do with our understanding (or lack thereof) of the most common statistic related to fuel economy, miles per gallon.

Fun: There is this group called Improv Everywhere.  They stage fun, surprising scenes.  For the past 8 years, they have staged the No Pants Subway Ride, where their teams (in 22 cities this year, with over 1200 participants in New York alone) get on the subway wearing only their undies.  No harm, no fuss, just bringing fun to the world.  Their latest escapade was to provide a wedding reception to a couple who had just been married by a judge in New York City. What a great gift. The world needs more Improv.

Essay

Baseball and Business

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As you know, I love baseball.  Baseball is a sport that is managed by the numbers.  The cool thing is that the numbers are available to everyone.  For example, if you tried, you could find out that in a game on April 30, 1977, Carlton Fisk of the Boston Red Sox batted 3 for 4 with a double and a stolen base (he stole home!), scored 3 runs and the Red Sox (Luis Tiant) beat the Oakland A’s (Mike Norris) 8-4 in an afternoon game on a 72 degree day.

Some baseball players, like Alfonso Soriano go for the fences every time they go to the plate.  Sometimes they are successful, other times, not so much, but overall they are recognized for the ability to go long ball. Not the first guy you would pick to move a guy from first to second in a close game. Good to have on the team for power, an expert in a certain discipline.

Other players, like Barry Bonds or Manny Ramirez go outside the rules of the game to get the extra oomph to make their careers. Their numbers are great, but they will always have that thorny asterisk besides their name signifying that their accomplishments might not be on a level playing field. Think of the bankers who changed the rules of the game to make more money.

Then there are the less remembered players, like the shortstop for the Red Sox in that game, Rick Burleson.  Rick played 13 years in the majors, hit .273, fielded .972, got into a couple of All Star games, was honored with a Gold Glove and a Silver Slugger award.  The unusual fact about Rick was that he once hit an inside the park home run. He was methodical and steady. Not a Hall of Fame candidate, but a good solid player that you would want on your team.

We know these facts because they are measured.  The great advantage is that everyone has access to the numbers.  When the managers of the teams build a plan for a game, they use these statistics to choose strategies to win. Does it always work?  No, of course not.  That is the fun of the game.   But it can tip the balance in your favor.

What if your whole business life, every decision, every program, every customer interaction was available to everyone for viewing?  How would that change the way that you operate?

Essay

Technological Innovation (or not)

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The entrepreneurial world is always talking about innovation.  If you just offer the same thing or a minor tweak on the same thing as others are providing, you are taking the biggest risk of all.  It is very hard to break into a field with a me-too product in an area that others have already staked out.

What is most interesting is to see this play out with the big boys.

In the technological world, we have had three major announcements in the last week or so.  The first was Wolfram Alpha.  Wolfram took the idea of search and really turned it on its head.  It is not a Google killer, as was first surmised, but an entirely new paradigm.  While Google’s mission is to organize the world’s information and make it universally accessible and useful, Wolfram wants to take formatted, vetted data and make it available in useful formats.  Wolfram Alpha takes on hard questions like “What was the top wind speed for Hurricane Dolores in 1966? “, “What is the life expectancy for a female living in Ghana compared with the US?” and even “Where do babies come from?“.  It provides answers in easy to understand tables, maps and graphs.  It even tells you where it got the answers to your questions, so that you can make a determination if the source is solid.

The second announcement was Google Wave.  (Disclaimer:  Google Wave has not been delivered yet.  What we have seen has been demoware.  But it presented to a group of 4000 developers, so chances of it getting to live status is pretty good.) Here Google asked the question “If we were designing communications like e-mail today, what would it look like?”  Total innovation.  Here they did not use the same metaphors that people have been using like inboxes, subject lines and chain letters.  Remember that email was developed over 40 years ago.  Instant messaging is no better.  It was designed to automate telephone conversations – one to one, wait for one person to stop talking before responding.  Don’t get me wrong.  Email and IM are both great tools, but they are based on old thinking.  Google took a new look at how we communicate and developed a program that leverages the technology of today to provide a totally new experience that has the potential to dramatically change how we work (and play). The entrepreneurial play here is that Wave was developed in the Sydney office with a team that maxed out at 50 engineers. In addition, the product will be offered as open source, which means that anyone can take it, enhance it, install it on their systems, interoperate with others and benefit from the open source community.

The third announcement was from Microsoft, announcing Bing.  Bing is the latest incarnation of Live Search.  They are trying to solve a problem that Google has already solved.  But, they have a cute new name (Bing!, your search is done) and will use a reported $100 Million advertising campaign to try to woo users to use it instead of Google.  Hello!  Microsoft has 8% of the search market, even with the dominant browser and Google has 62%.  How much market share can Microsoft really steal with a me-too product?

Kudos to Wolfram and Google for developing innovative products that change the way that we can use the internet.  Brickbats to Microsoft for spending $100M (on advertising alone, not to mention development costs) on a problem that has mostly been solved.  My guess is that $100M would pay for the engineering teams of both Wolfram Alpha and Google Wave for a couple of years, which would likely create new, useful products.

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Economics, Technology and Behavior

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Economics: The Freakonomics blog points us to Al Roth of the Harvard Business School.  He talks about the opposite of repugnance.  These are things that we as a society promote, even though there are no good financial or political reasons.  They include: monogamous marriage between a man and a woman, home ownership and donating to charity.

Technology: Lots of talk about this new product that Google introduced (not released) at their IO Conference, called Google Wave.  A good overview article can be found at Techcrunch, but if you have an hour and a half to spare, I heartily recommend you watch the keynote speech where the development team demonstrated the tool.  Wave solves some of the problems that we have today with out communications products, by providing a single repository for waves that can contain multi-media and can be edited by a specified group.  The good news is that Google is planning to release Wave as an open source product, so developers can use common interfaces to build new features, much like the Firefox browser.  This also means that Google will probably not be using this as an advertising vehicle. Lots of whiz bang stuff has been included like real time search, context sensitive spell check, easy two way integration with blogs and real time translation.

Behavior: My most popular column to date is the one I entitled “The Young Entrepreneur“.  Tomatonation wrote a version that was more life centered and less business life centered.  But it belongs on the reading list for any 25 year old.

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Big Picture, Behavior and Behind the Scenes

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Big Picture: There is no more pressing issue in our financial lives than Health Care.  If we continue on the current path, we will be spending more than 40% of our GDP on health care issues with no better outcomes than the average country. An indepth article in the New Yorker by Atul Gawande talks about the medical services provided in a high cost county and a low cost county.  The differences may surprise you.

Behavior: Micah muses about the greatest time of your life.  It is interesting to think that you might live your life one way if you think that you have already had your greatest time of your life and another entirely if you are waiting for it.

Behind the Scenes: Here is a story of the New York Times Economics reporter who is on track for foreclosure on his house and the story of how he got there.  An eye-opening view of the loan practices (and unwise spending habits) of our times.

Essay

Sales Differentiation

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Normally, this blog wouldn’t be the first place to go for sales advice.  But, Jeff Leitner wrote this a while back and I have been thinking about it recently as I work with one of my consulting companies.  It is a classic.

Step 1 in sales, determine the prospect’s stomach for change.
No matter what he says, there’s a significant cost to changing.
Even if what he’s changing is no product/service.
Figure out what the financial cost, the psychic cost, the emotional cost of change.
And only then do you turn your attention to step 2.

Step 2 is to change the game.
If you’re competing against an existing product/service, there’s little chance he’s changing vendors.
Instead, you have to craft and then sell something very different than the incumbent sells.
You can’t sell better or more or enhanced or even cheaper (commodities aside).
You have to sell something substantively different, that solves a qualitatively different problem than the incumbent is solving.

Men don’t leave their wives for prettier girls.
Men leave their wives for substantively different, qualitatively different things that they can’t get from their wives.
Prospects are the same.

If you can’t put together a substantively different offer, you can’t win.
Even if you’re competing against no product/service.
Or an ugly wife.

Essay

Who is your Customer?

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Jeff Leitner writes about the questions that you should be asking when you start your business. They include: What is the pain that you are trying to relieve? and What one thing are you trying to sell?.  Both of these are great questions, but I would like to add another to your list.  It is, at once more basic and for some of us, it is a no brainer.  But be careful, the answers might surprise you.

The question is Who is your customer?  Yes, who are you trying to make your products or services for. The reason it is important is that if you truly know who your customer is, you can design the company’s products and processes to support that customer to the best extent. Let’s take a look at some examples to see where this could go.

Pharmaceutical companies – The customer is the patient who needs the medication, right?  Well, if that is the case then why do they sell to the doctors, who do not buy the product, but authorize (through prescriptions) others to purchase the drugs.  I’d have to say that the doctors are the customers.  They pharmaceutical companies do everything they can to influence the doctors and dabble in consumer education, hoping that the patient will be able to demand a certain drug from the doctor.  But the doctor is still the customer, because the buying power remains with them.

Physicians – While we are on the topic of medicine, who are your typical physician’s customers?  It seems you have two choices, either the patient or the insurance companies.  Based upon the way that most doctor’s offices are run, it is obvious that the insurance companies are their main customer.  Everything that the physicians do is designed to make sure that the insurance company gets what it needs.  The patient is the one who allows the doctor to get paid, but the gatekeeper is the insurance company. Concierge care (I love that description) has started to catch on in wealthy areas.  Basically, the doctor does not take insurance and charges an annual membership fee to his or her patient base.  Does this exclude people who must use insurance to cover their health needs?  Yes, of course.  But it allows the doctor to change the customer relationship from the insurance carriers to the patient.

Google – Who is Google’s customer?  Good question.  Google sold over $22 Billion worth of services in the last 12 months.  Most of that came from advertising.  So, of course, Google’s customer would be the advertisers who pay for the services.  Not so fast. I would venture that the users, not the advertisers are Google’s customers.  Most of the new things that Google rolls out are enhancements to the user experience and they are focused on making the world’s information available to everyone.  If they added an additional advertising service, they might increase revenues a little, but if they stopped providing excellent search (and other) services, the advertising would dry up very quickly.

This is all critical as you are building your business.  If you design your business around the wrong customer, you will never see the full benefits that you could be getting.  Think through this question (and Jeff’s above) as you start to build your business plan.  There are significant benefits for not taking the easy road and just picking the customer that everyone expects.  You may be able to garner a much more substantial or lucrative (see physicians above) customer base from a group of folks who are not supported by other organizations.

I would love to hear about more cases where you believe that the customer is not exactly the end user.  Contribute in the comments.

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Data Edition: Behind the Scenes, Strategy, Behavior

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Lots of talk lately about data.

Behind the Scenes: The credit card industry has changed a lot in the past 25 years. The amount of data that the credit card companies know about you and use to predict the future is astonishing. The psychology of getting late payers to get current based on that data bank is also amazing.

Strategy: How do we keep track of the right metrics when determining future plans?  Eric Reis says scientific methods can help determine the best ways to dig deeper into the metrics that we collect.  Simple things like using a split A/B test will provide you with more data to make better decisions.  Eric goes into a lot more detail about tests in his article on the FourHourWorkWeek blog.

Behavior: Google probably collects more data about us than we can imagine.  They are now using this data on their own employees to try to determine who will be the next to leave the company.

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Entrepreneurship, Strategy, Behavior and Turkey Fun

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Entrepreneurship: Think the inner city can’t be a place to start a new business?  Think again.  Given that there is a whole lot more real estate out there available, albeit some with bank branches and auto dealerships.  Smart entrepreneurs are going to be looking for ways to make a business around these sites.

Strategy: Another Seth Godin gem. Knowing how to ask is more important than the ask itself.

Behavior: Dan Ariely, author of the terrific book Predictably Irrational: The Hidden Forces That Shape Our Decisions, spoke at a recent EG conference. EG is an offshoot of the TED conference. Dan’s topic was about how we make decisions. Besides the usual visual games, he discusses some of the reasons that we make decisions and how options that have absolutely no value often distract us in our decision-making process.  Marketers are using this information today to get you to move on their buying process.  In fact, as Dan describes, it could be a matter of life and death in a medical setting.

Fun: I was one of the unnamed friends at Kristin’s turkey (and other assorted goodies) fry-off last weekend.  Pictures and recipes are included in her blog. I admit that I was unsure about the whole deep frying bit, but man, these treats were wonderful.