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 The Competition Irrelevant
The Know-It-All: One Man’s Humble Quest to Become the Smartest Person in the World
I have the best gig in the world. I get to help people move their dreams forward. I have the opportunity to help college kids who are just starting out. I can advise business owners who have hit a plateau, reach out and find the next big thing that will propel them to higher levels. It is all a big rush. I have talked previously about things that Young Entrepreneurs should know (some seasoned business owners could use these lessons as well). I have written about why someone would use a mentor and Real Social Networking.
But until now, I haven’t written much about what makes me want to get involved with a business. It just so happens that last week I interviewed a number of business owners who were looking for mentors. They each were smart, focused and clear about their mission. But I asked each what they hoped to get out of a mentoring relationship and I literally got blank stares.
For me, there are 8 things that I am looking for when looking to take on a new mentoring opportunity:
- Is the business owner able to clearly articulate his or her business? Does she understand her proposed business model? How does it make money? What does winning look like? Who is the competition? What makes you unique and thus memorable in the marketplace?
- How well does the entrepreneur take to proffered alternative ideas? In almost every first encounter (and many subsequent ones as well), I will offer up some differing opinions. I look for reaction and thought process when the entrepreneur replies. I am absolutely not looking for the entrepreneur to just accept my thesis. Rather, it is how they respond. Are they argumentative? Are they passive? Are they confident? Can they riff off of my idea to get to a better place? Some of my biggest failures as an advisor are when the entrepreneur has all of the answers and feels the need to continue to do what they want to do without seriously considering alternative opinions. Why invest time and effort in the mentoring relationship?
- Does the entrepreneur have a reasonable level of vision? By this I mean, is the entrepreneur focused only on global strategic issues with no real plan to get anything done? Conversely, it is almost as bad to have one who is buried in the minutiae of running the business with no thought beyond the next payroll cycle. While each entrepreneur has a preference for one or the other, it is critical that the entrepreneur develops to have both levels of vision in play at all times.
- Is the entrepreneur a professional? Even the youngest should have the basics down. Business cards, website, firm handshake, thank yous, elevator pitch of the business — all are critical. But most important, is your word your bond? If you promise something, can I count on it? This is where a lot of folks fall down. In most cases, I am volunteering to help you. The least you can do is to make promises you can keep and engage me wisely. Part of my value to you is access to my network. I cannot squander that resource on folks who cannot follow through.
- Is there a plan? Can you build a plan for what you want to do and then live to the plan? Can you stay away from the ADOS — Attention Deficit… Ooh Shiny — method of project planning? There are going to be lots of shiny objects out there. You need to stick to your plans and get stuff done.
- Have you got a reasonable financial plan? You need to keep your monetary requirements as low as possible. Looking for investment is the biggest shiny object project out there. I have seen more business falter through the fund raising period than at any other time. The entrepreneur is focused on making investor pitches and not running the business. Can you wait to get financing until you have a solid revenue stream? Your multiples and percentage of the company that you will retain will certainly be enhanced by waiting.
Yes, I know, some companies need a significant amount of financial assistance to get a prototype up and running. Do the best job that you can of bootstrapping the company and using Friends and Family to get you to the revenue stage if at all possible.
- Are you enthusiastic about your venture? You need to have energy to sell me on the concept and sell others as well. It will come through as you describe your company. You don’t have to be a marketing whiz to be enthusiastic. One of the company owners I met last week was a PhD candidate in materials science. She was as enthusiastic about the potential of her company and product as any of the other CEOs I have met recently.
- Lastly, do you understand my specific skills and capabilities? Is there a fit with the company’s business plan and the CEO’s capabilities? I am a mentor and not a miracle worker. There are areas in which I can help a business that come very easily to me, either because of specific experience or my particular aptitudes. If the business really needs something else, I would try to help them find the right type of mentor to solve that problem. In many cases, the company will require several mentors, who will each work on areas of specialization. It often helps if the mentors know each other and can collaborate, but it is not necessary.
It is a thrilling thing for me to be able to be a part of the growth of young companies. I take the charge of mentorship seriously and hope that the CEOs and founders find value in the journey.
Has anybody got any spare change? This economy has made it difficult for everyone, except possibly, the guys (and gals) at Goldman Sachs.
But that is not exactly the type of change that I was thinking about. The change that I want to talk about today is related to change in your business. As an advisor to small businesses, sometimes I work with folks who have run their companies for 4, 6 or even 8 years. Over that time they have developed a business concept that has built a client base and some revenue stream. But there they are. Their goal is to grow their business, but they are having a rough go of it. None of the concepts or ideas are working.
So, one way to get things moving, they think, is to bring in an advisor. Ah ha, someone who has been there and seen a lot of other companies. Somehow they find out about me (Thank you to all of you who refer business my way). So we talk. I ask questions and they are caught up in the moment of thinking about a big payday. “I know that my concept is worth 4 or 5 times what I am making now. Look at my customers. All I need is someone to show me the path. I’m willing to do anything.” And in a few cases, this is probably right. The company may only be a couple of small tweaks away from greatness.
But way more often, there is disappointment on both sides. Why is this? I believe that a big portion of this is resistance to change. The business owner cannot give up what got her to the current point. Sometimes it is that the owner is doing the work that his employee should be doing (what got him there). Other times, the entrepreneur is feeling that doing the hard work of selling, implementing new programs or developing relationships with partners is below her.
Change is the starting point for the next level of business. Most businesses run in a predictable pattern. Up to about $1 million in revenue, the owner (and entrepreneur) can manage the business by himself. He can figure out the right hires and engender enough loyalty to build a stable business. At about $1 million, in order to grow, the entrepreneur needs to change. Things need to get more formalized. You need sales forecasts, HR forms, partnership negotiations, perhaps even a new business model. The owner needs to get out from servicing the customer directly on a daily basis and start to lead the business in these new directions. In the cases where the owner is capable of growing and changing, this is the start of the entrepreneurial-managerial journey. You are not just running a business, but at this level you are also leading a team that will help to propel the business.
As hard as I try to help an entrepreneur evaluate their readiness for the types of changes that I have described, very few are ready for the reality. It reminds me of the saying “What got you here, won’t take you there.” You have to be willing and capable of change. You have to look at change as an opportunity to learn new things or to try out talents in different areas. Will you be successful? Maybe not, but by not trying you certainly will not be able to get to the next level. Perhaps you will find out that you are capable of performing some of the skills, but woefully inadequate to do others. Fine. Now would be the time to grow your strengths and find others to join your team that can do the painful stuff. Over time, if you look seriously at increasing your talent base, you will become a much stronger businessperson.
But at the heart of the matter, you have to be willing to change – go out on a limb and try something new.
Seth wrote an article this past week about companies that have lost their ability to deliver functional customer service. It reminded me that I needed to talk about a few companies that I have read about or been exposed to that have gone the extra mile.
A few weeks ago, I was privileged to have the opportunity to meet Bo Burlingham, an author and former editor at Inc. Magazine. He wrote a book a few years back called Small Giants: Companies That Choose to Be Great Instead of Big. As a result of his talk, I reread the book and found a few nuggets. The premise of the book is that there are some companies that have remained entrepreneurial and have decided to be great companies without reaching out for the siren song of growth forever. Bo looks at a total of 14 companies in depth and examines the decisions that the management of each company makes to be the best they can be without uncontrolled growth.
One of the companies that he profiles is CitiStorage, a records management and retention company based in Brooklyn, NY. You can’t get much more pedestrian than this business. They take boxes of records from companies, store them in a huge warehouse and deliver them back to the customer when requested. Yet, even here, a savvy business owner can make a difference. Norm Brodsky, the CEO of CitiStorage, is a crusty, exerienced and by the books manager. Yet he understands the power of customer service. The book recounts a sales interaction with a potential customer:
The prospect was to meet with Brodsky at the end of the tour. As they were sitting in his office, Brodsky asked the man if he was considering other vendors. “Yes, two,” he said, and mentioned the names of CitiStorage’s major competitors.
“Did you see any differences between them and us?” Brodsky asked.
“Yes, I did,” the prospect said. “Everyone of your employees was smiling, and they all said hello. I’ve never seen anything quite like it. They really must be happy.”
“I hope so,” Brodsky said. “Thank you for noticing.”
“Because of that, in fact, I’ve decided to give you the business.” the prospect said.
This was an important exchange. First because the prospect noticed that the people who worked at CitiStorage were happier and showed it. Second, due to this, the prospect make a business decision based on his interactions in an hour that usually took several weeks.
In the past several weeks, I have noticed a couple of other companies that have gotten the message. First, I have been to two Chicago Cubs games and every employee from the ticket takers to the ushers have had a great attitude, smiling and conversing with the patrons. It is a big change from previous years under the Tribune ownership. I think that this is an intentional customer service posture that is required by the Ricketts family, new owners of the team.
Second, I had the opportunity to participate in a company tour at S&S Activewear, a company that sells apparel to companies that will further customize them for end users. They had the requisite big, sprawling warehouse with forklifts and conveyors, but they also had a difference in how things were done. Again, it was evident in the way their employees interacted with us. Everyone from the president (who gave the tour) to the order picker was helpful and displayed a genuine excitement about the work that they were doing. Yet you think that this is an outlier due to the company tour, my contacts who deal with this company report that every interaction with the company is treated this way. Due to this fact alone, they have consolidated all of their apparel purchasing to S&S.
Going back to the Seth article, I flew four flights on American Airlines in the past week. They have gotten to the point where the only time that I really have an interaction with them in person, is when I leave the jet and the pilot is standing there waiting for us to get off the plane. Otherwise, it is use the website and the automated check-in, swipe your credit card to pay for checked baggage and yet again for an overpriced package of chips or a pillow. They have squandered any potential opportunity for delivering a positive customer service experience and thus made the choice of airlines for this consumer to be a random choice, rather than an informed choice.
Don’t let yourself fall into this trap. Sure it is cheaper to let a web site do your customer service, but in the end you do your business a disservice if it is the only (or even primary) method of interacting with your customer.
It doesn’t matter if you are big or small. Be like CitiStorage, the Cubs and S&S. Ensure that your team provides customer service with a smile. It will pay off in the long run.
I have been away from my blog posts for way too long and I am missing the act of writing things down. I have been busier with a lot of projects lately, but that is really no excuse. I have a few small articles that I will be publishing over the next week or so and then hopefully will get back on track with a more normal publishing schedule.
My son, Eric, is a musician. He has played in bands for 7 years now and is a sousaphone player for the Illinois State Redbird Big Red Marching Machine
. At the end of Eric’s emails, he includes the quote:
Music expresses that which cannot be said and on which it is impossible to be silent. ~Victor Hugo
As a non-musician, it always seemed to me to be a little strange. How can music express that which cannot be said? I enjoy music and my kids have introduced me to new stuff that I never would have heard without their help. But, really, expressing things?
Then I saw this video showcasing Bobby McFerrin (of Don’t Worry, Be Happy fame) and how music is innate within all of us, everywhere. To me this showed how we all have the basic music sense within us. It is astonishing how quickly the audience “gets it”. Most of the audience members would not consider themselves musicians at any level, could not tell you what note they were singing, yet they were able to use these unknown skills to generate lovely music, under the direction of a “real” musician.
So now, of course, the question is what other types of knowledge are innate at least at the basic level? What else can we do that we don’t know that we can do? I don’t have the answers, but I am interested in the discussion.
I just finished reading Atul Gawande’s newest book, The Checklist Manifesto: How to Get Things Right. Dr. Gawande is a great thinker and I had enjoyed reading his prior two books about the medical community: Better: A Surgeon’s Notes on Performance
and Complications: A Surgeon’s Notes on an Imperfect Science. In this book, he talks about a simple way to reduce errors in the operating room, a checklist. He talks about how checklists can be developed and how they are used in aviation to reduce errors in the cockpit.
There were a couple of key takeaways for me from this book. Gawande reports on the research of the science of complexity. Professors Brenda Zimmerman of York University and Sholom Glouberman of the University of Toronto have developed a distinction between three types of problems in the world. The first type is simple – like following a recipe to bake a cake. You may have to learn some parts of it, but it should be repeatable if you follow the instructions. The second type is complicated – think of sending a rocket to the moon. In a complicated problem, you can usually break it down into many simple problems, but you will have multiple people or teams, multiple specialties and timing and communication become serious obstacles to be overcome. The third type is complex – the example given here is raising a child. Unlike sending a rocket to the moon, if you successfully raise a child, there is no guarantee that your second child will turn out the same. Experience is helpful, but by no means sufficient. It is possible to successfully raise a child (no matter how you define that), you just can’t predict how it will happen.
In each of these types of problems, a checklist can be helpful. In the simple case, a recipe is a simple checklist that ensures that all of the steps are completed in the correct order. In the complex case, a checklist can be used to schedule the work that needs to get done, coordinate the interactions between the different teams and even regulate the communication between teams that is required to iron out issues that arise during the project. Gawande spends some time in the book detailing a large building project and their use of checklists to ensure that all of the myriad details that must be accounted for during a skyscraper construction project are managed.
It is in the complicated cases that the uses of the checklist have really not been utilized. For many years, the complicated cases have seemed to be too random to be managed through checklists. In the surgery, complications are all too often a regular part of the job. This antibiotic doesn’t work for this patient. The patient suddenly develops an infection. The laboratory does not deliver the right type of sample collection device. But Gawande and a team at the World Health Organization worked on a trial project with 8 hospitals around the world to try checklists in the operating room. Their goal was not to address all of the potential complications. They created a list of 19 specific things to check before, during and after a surgery. Things like, did you check the patient’s name bracelet, did you give pre-surgery antibiotics, if there is a chance for blood loss, did you request blood supplies be available. In addition, the checklist required that the team all introduce themselves before surgery. This bit was introduced to help the surgical team function like a team, when the complications arose.
The results from the trial were unbelievable. Hospitals from the US, Canada, UK, Australia, India, the Phillipines, Jordan and Tanzania participated. Overall, the rate of major complications for surgical patients in all eight hospitals fell by 36% after the introduction of the checklist, while deaths fell 47%. Such a simple concept. But it forced everyone to concentrate on the issues that they had control over, while preparing them to work as a team on the unforeseen complications that inevitably arise.
Now, usually I write about entrepreneurship, so why is this so important?
Well, Dr. Gawande took his message of the value of checklists to experts in other industries to see if there was a correlation. One of the folks he talked to was Geoff Smart, who wrote a top selling book on hiring called Who: The A Method for Hiring. Smart did a project with Venture Capitalists where he evaluated the style that the VC used to make investment decisions. The VC’s that used a checklist approach had a 10% likelihood of replacing the senior management versus 50% for VC’s that didn’t use the checklist. They were also more financially successful. The checklist users had an 80% ROI versus 35% or less for the rest.
As you look to develop your businesses, it seems like a good idea to implement checklists throughout your businesses. Even though your outcomes may not result in life and death, like Dr. Gawande, the benefits of using checklists to cull out the simple and mundane errors and focus on the complicating factors will strengthen your business.
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.
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).
There is an interesting article in BusinessWeek this week talking about the differences between entrepreneurs. The question is whether every small business owner is an entrepreneur. Some say yes, other definitions require significant innovation. I think that the conclusion of two classes of entrepreneurs, replicative entrepreneurs and innovative entrepreneurs provides the most clarity and understanding.
Lately, I have been thinking along another path related to the practice of entrepreneurship. There are a lot of entrepreneurs who are totally invested (monetarily and in all other ways) in their great idea. They nurture it and grow it and get others to get excited by the idea. It is all about the idea. Now, over time, the idea might grow and become something more, but the key is the idea. We think of Henry Ford, Jeff Bezos, Steve Jobs and Sam Walton. All successes, but focused on the grand innovative idea. These entrepreneurs typically are thought of as evangelists for the idea.
Another group of entrepreneurs are excited by the chase. Sure the idea has to be reasonable, but the fun is to grow a business, in whatever field currently is interesting. More times than not, the big thing here is the team. The team is why the entrepreneur gets up in the morning and makes that extra effort to sell the customer on the deal. People who are excited by this typically have a strong skill set in a particular area and need to rely on others to work on areas that they are not particularly well suited to. It surely matters less to these entrepreneurs what the specific “idea” is, as long as it is interesting and they have a strong, committed team to work with.
Either way, we have entrepreneurs who are building businesses. The key thing for the entrepreneur to figure out is whether they are the “idea guy” or the team builder. Both can be successful given the right environment. However, if you try to work in an environment that is not suited for you, you are asking for trouble; trouble for the business and trouble for your professional growth.
Find out where your strengths lie and focus on finding the right opportunities on which to concentrate.
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.
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.