Tag Archives: entrepreneurship

Essay

Scientists and Engineers

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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.

Recommended Links

Funding, User Experience, Logic and Marketing

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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).
Essay

Release early and often

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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.

Essay

Value and Choice – Eating my words (a little)

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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.

Essay

The Whole Vision Thing

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Before you go any further in reading this, watch this video.

Have you watched it?  OK, then let’s proceed.

I have been reading Every Patient Tells a Story by Lisa Sanders, a technical advisor to the television show House. Lisa is an internist at Yale and an expert in the diagnosis process. The book provides an excellent description of how our medical system is predisposed to have difficulties in finding the causes to the unusual diseases. She talks about doctors focusing on the common solutions to a complicated combination of symptoms, not understanding the problem in depth before providing a diagnosis and relying too much on technology to make decisions that should have a human component.

This led me to thinking about how in business we also make these same kinds of errors.  Normally, these errors don’t have a human life or death hanging in the balance, but the viability of the business sure might.  The video that I pointed to at the beginning of this post shows that sometimes we don’t have the right attention to detail.

Extrapolate that finding into your business life and you will find all kinds of ways to increase your vigilance and gather more information to make informed decisions.  Now, I am not advocating analysis paralysis here.  Just as in the medical field, if you wait until you have every piece of evidence, the patient could likely be dead.  But you should be thinking about how to gather the right information and how to be aware of changes from your expectations.  In general, if everything is at status quo, you are missing something.  Perhaps it is the marketplace asking for something new.  Perhaps it is your competition who is planning a different strategy.  Perhaps it is the legal or regulatory environment. Perhaps it is just your own employees who are tired of the same old thing and are letting up on quality.  Any of these can have a huge impact on your business.  Your job is to watch out for the color changes, while the cards are being dealt.

Essay

Go for the close

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Recently, as part of some non-profit work I have been doing, I have been to two banks.  The purpose was to redeem CD’s that have matured.  These are not small accounts.  One was for low 5 digits and the other low 6 digits. Small community bank and mega-bank.  From the outside, not a whole lot of similarity here.

What was amazing to me was that no one at either bank asked if they could do anything to keep our account? Can I tell you about our new CD rates?  I would be happy to match the rate for any local bank. Nothing.  Just typed up the cashier’s check and handed it to us. I know that the banking business is in such a difficult place these days that I was floored that no one tried to keep an existing customer from leaving.

But hey, what do I know, I am not making the huge bucks running a bank.  I am sure that they know way better than me.

So, if you don’t run a bank, take my advice.  Ask people who are leaving “Is there anything that I can do to keep you as a customer?”.  Fix the problem or make a better offer.  It has to be cheaper than signing up a new customer and you have the possibility of someone like me writing a very different blog post about you.

Essay

Facets of Entrepreneurship

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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.

Essay

Banking Etiquette

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Banks have gotten a bad rap over the past year or so.  But in truth, they are the linchpin of our financial livelihood as entrepreneurs.  If you accept credit cards, you need a bank.  If you pay payroll taxes, you need a bank.  If you want to pay your employees using direct deposit (or even the quaint paycheck), you need a bank.  Most vendors still require that you pay them using a check.

Banks also can provide loans for businesses.  These can be asset based loans, lines of credit, mortgages, long and short term.  And this is where businesses can get into trouble.

While most business owners think of their checking accounts and loan accounts as separate entities, the banks do not.  So if you have missed a couple of payments or have just exceeded your loan covenants, the bank can, without warning, clear out your accounts to fulfill the terms of your loan agreements.  And if you have a personal guarantee, they can tap into any personal accounts you might have at the same institution.  Talk about a kick to the head…

I have a few suggestions to try to make this less of a potential issue for you:

  1. Build a good relationship with your banker.  Meet quarterly with him or her.  Take them into your business and explain what goes on.  For sure, tell them the good news when you sign a big deal, but just as critically, let them know when things aren’t going so well.  The more you communicate with them the better you will be.
  2. Don’t put all your eggs in one basket.  Keep your personal accounts at a separate bank.  Keep transactional money at the primary bank, but keep other long term cash somewhere else.
  3. Understand your loan covenants.
  4. If you don’t hear from your banker, or they don’t return your calls, don’t consider this a good thing.  The last time I heard about the money transferring process was 2 weeks after hearing “Oh yeah, I haven’t heard from my banker at BigBank in 6 months.  I’m guessing that they have forgotten about us.  They must have bigger fish to fry.”

When this happens, everyone gets upset at the bank.  How could they do this?  In reality, the bank is just trying to forestall the worst outcome for the bank, a complete loss of the capital that they have provided to the customer. They figure something is better than nothing.  And the entrepreneur needs to understand that that is a potential outcome of the deal that they made when they accepted the cash.

Essay

Idea Risk

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Sorry for the time between posts, but summer intruded and must take precedence.  I will try to get back on a better schedule, but can make no promises since I still have another month or so of summer.  But on to more meaty topics…

So many entrepreneurs (me included sometimes) have said that they would love to start up a new venture if only they had a great idea.  But is that really the case?

While I was researching a new venture idea, I came upon the thought that there were really two kinds of risk in the entrepreneurial world.  The first is Idea Risk.  That is, is the idea good enough to base a viable business upon?  The second is Management Risk, or can the team that the entrepreneur has assembled pull it off?  Of these, Management Risk seemed to be the most likely to be able to be ameliorated through judicious use of mentors, incubators and trusted service providers.  The Idea Risk seemed to be a binary decision – either it was a good idea or not.  But the more that I have thought about it, the more that I find that Idea Risk has more facets.

I have a friend who, over the past year, has met with various people and has generated at least 7 or 8 actionable ideas.  Not just “Oh you should start up a new-age car dealership” kind of wacky ideas.  But full blown creative ideas, ideally suited to the person that he was talking with, with some sense of market potential, revenue sources… the real deal. In only one of those cases, has the person taken the idea and run with it.  And she didn’t do it until she was goaded into it and provided some incentives that reduced her risk.

And therein lies the real rub.  It is not the lack of ideas.  There are tons of ideas out there. If you are looking for a great idea, check out this list of 999. It may not even be the quality of the idea, although the new age car dealership doesn’t rock my boat. The real reason that people don’t start ventures is the risk factor.  They are worried that they will not make enough money.  They are worried that their mother-in-law will not like them.  They are worried that they will lose the house.  They are worried that their friends will think them crazy for leaving a perfectly good job as a manager at IBM.

My advice to you is that if you want to be an entrepreneur, you have to get over the fear of what everyone else has to say.  If you find an idea that you are passionate about, think Bill Gates “A computer on every desktop running Windows” or Anita Roddick‘s “To dedicate our business to the pursuit of social and environmental change.” at the Body Shop, go for it with all your heart and all your soul.

I truly believe that the key word in Idea Risk is Risk, not Idea.

Essay, food

Perfection

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No matter what you purchase or sell, no matter how hard you work, you can almost never reach perfection.  Perfection is the holy grail of your business. Until recently I don’t believe that I had ever experienced perfection in a product or service.

I am proud to say that I witnessed and dare I say, participated in perfection in a small business.  The venue was Charlie Trotter’s restaurant in Chicago.  As part of a silent auction benefiting SuperSibs, I was the big winner of a Chef for a Day experience.  What that meant was that for 6 hours, I would be working (alas at no salary) as a sous chef for the restaurant.  After my Chef for a Day experience was completed, I had the opportunity to enjoy a meal with my wife and several friends at the kitchen table, a table for four elegantly set right in the working kitchen.

After arriving at 2pm and getting fitted for a chef’s jacket, apron and chef’s hat, I was set to work cleaning and dehulling fava beans.  Some of these fava beans were to be used for a decorative puree for a plate and others were to be used whole as part of the garnish for several plates for dinner.  Other jobs awaiting me were breaking down cilantro, lemons, chives and other herbs. The other chefs working all were friendly and helpful, directing me to the rudiments of the tasks at hand.

The kitchen was small and very busy, yet totally under control.  No screaming; everybody had a job to do and managed it well.  The kitchen had several master chefs, but also a large number of young chefs working their own stations. Charlie believes in supporting up and coming students, so there were several interns from Kendall College and Culinary Institute of America working their hearts out.  The experienced chefs were always around to lend a helping hand, whether it was shucking oysters or teaching an intern how to use a cherry pitter for the first time.

At about 4:30, they had a family dinner.  Food was plated and the front of house staff (waiters, hosts and maitre de) met in the studio kitchen for a meal.  While the food was good, it wasn’t that different from what we might have in my house on a typical evening.  Salad, a beef stew over rice, vegetables sauteed in a tomato sauce and (different from my house), homemade ice cream sundaes.  The front of house was very friendly, asking about what I did for a living and why I was interested in this opportunity.  They were also open to my many questions about their work background, how this restaurant is different from others and what they liked best about working there.  These kids, most of them were in their early 20’s, worked at least 12 hour shifts 5 and 6 days a week.  What impressed me most was the level of confidence they had in their abilities to deliver first class service to all their guests.  I deal with young people in their 20’s all the time and these were a special crew.

After family dinner, back to the kitchen for more prep work.  The kitchen was buzzing as the first service was about to start.  Charlie does work with the Chicago Public Schools and on that night was hosting a group of high school kids from CPS to a 10 course dinner. They were able to take a tour of the kitchen and, I’m sure, wonder what the balding guy was doing in the kitchen. The purpose of Charlie’s work is to show the kids what can be accomplished in the hospitality industry.  Many of the staff talked with the students and explained how things worked and took questions.

All of the ingredients were of the highest quality. There were special ingredients that were used just in Charlie Trotter’s kitchen. A special olive oil from a certain farm in Australia or the chocolate that comes from one estate in Africa and is used in 6 different ways.  But more than that was the confidence of the chefs in working with those ingredients.  There weren’t many recipes floating around, but there were a lot of tasting spoons.  This is how expert artists cook.  They have an idea and build it with the use of ingredients rather than paints or mosaic tiles.  But the creativity did not just extend to the building of the dishes.  It went to the unusual pairings of flavors, the plating of the dishes and even the physical dishes themselves (more about that later).

After my work was complete, I was able to change into dress clothes and join our group back in the kitchen for our dinner.  Alex, our waiter for the evening, was that perfect combination of total knowledge of the food and kitchen and openness to work with the guests to make them feel totally comfortable asking questions and learning.  Alex told us at the start that we would not get a menu, but would be served whatever the chefs felt was best on that night. Would we like to choose a wine?  Not so simple; Charlie’s wine cellars hold 20,000 bottles of wine. Alex was right there to give guidance on how the menu might proceed, to make the wine selection easier.

But, Al, you have written 900 words and haven’t even talked about the food that you were served.  How could that be?  Well, over the 4 hours (yes, 4 hours) that we enjoyed our dinner, we were served 20 separate courses. Each was served in the French style with small portions (thank god for small favors), yet each dish was a work of art. Each dish was a complicated and creative mix of flavors that engaged your palate without a single note that became overwhelming.  There were 3 amuse (appetizers), 5 fish dishes, 2 vegetable focused dishes, 2 poultry, 2 meat, 1 cheese, 5 desserts.  Each dish was cooked without butter; so much for the French style.  But there were always surprises.  Freshwater eel with banana.  Duck breast with licorice jelly. Onion sorbet. Matsuzaka beef (Kobe style) with a plum vinegar broth that cut the richness of the beef. Frozen key lime meringue with cilantro and green peppercorn.  Unbelievable flavors and gorgeous presentation.  Each dish was presented in a unique serving plate.  We only had a duplicate plate once during the dinner.  Even the plates were chosen for the applicability to the specific course we were being served.  Some were small, some were large, some had wells for broths, some were shaped like boats, some were Asian in design.  Each was perfect for the course that presented.

And yet, what comes back is that we were able to have an elegant dinner sitting in the middle of a kitchen that was serving the second round of diners in the rest of the restaurant. Periodically, some guests from the restaurant were able to take a quick tour of the kitchen led by the same front of house staff that I had met at the family dinner. The activity around us did not abate, but there was no interruption to our dinner.

After dinner, Alex took us on a grand tour of the restaurant.  We were able to see the types of equipment used in the kitchen and how the ingredients were stored. We saw the Studio Kitchen, where Charlie Trotter films his TV show.  We saw the herb garden at the rear of the property.  We were able to tour some of the wine cellars.

All in all it was an unbelievable day (and night).  I had anticipated having fun seeing how a world class restaurant operates behind the scenes. I had anticipated a great dinner.  What I got was so much more.  It was the complete mix of people, processes, product, environment and training that made for a perfect experience.

My question to you is what would you have to do to get people to write about your business this way?  How can you make your business perfect?