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Your Field Guide to the Rat Bastards of Office Politics

I started my business career with the naïve assumption that if I worked hard, kept my head down and contributed well as a team player, I would get noticed and promoted by upper management.   You can imagine my shock when I realized that some of my peers chose means other than hard work and valid contribution to pursue recognition and promotion.   These folks, ( let’s call them rat bastards),  sought advancement via self-promotion, empire building, bandwagon jumping and good old fashioned back-stabbing.   What I didn’t originally anticipate was how many rat bastards ( which is ultimately a term of affection) I would encounter along the way. I also underestimated their effectiveness.  Nor did I have any tactics to handle them.

By the time I became a CEO, I was able to identify and remove rat bastards or at least shut down their activities.  If you’re lucky enough to work in a company where political behavior is frowned upon, the culture will probably declaw these folks.  If you’re not, you need to learn to cope with these folks and their maneuvers.

Now, a little self promotion or well-timed politicking may sometimes be a powerful additive to your work efforts.  But if self promotion doesn’t come naturally to you, you need to counterbalance the rat bastards without sacrificing your integrity or becoming one of them.   

So here is a quick view of some of the rat bastards (“R.B.’s”) and how to handle them. These are some practical yet relatively innocent counter-measures for some typical rat bastard behavior.

The Self Promoting R.B.

Who they are:

Barnum the Rat Bastard is adept at using all media and messaging available to amplify his or her successes, contributions and achievements.  The level of achievement or degree of difficulty associated with any success isn’t a primary concern.  The primary objective is the communication to a targeted audience for the purpose of inflating perceived value of the self promoting R.B.  While you may be toiling away and hoping for mere recognition of meeting significant milestones, this isn’t part of the paradigm of the self promoter. The self promoting R.B. promotes often, loudly and without discernment.

How to deal with them:

As a practical matter, you can’t say or do anything contrary to R.B.’s self promoting messaging regardless of how overblown it is.  Instead, you need to re-amplify the message as much as possible.  If the self promoter sends out an email trumpeting a personal/organizational achievement,  embellish the claims and expand the distribution by forwarding the email to a broader list.   Don’t re-amplify every message mind you, but only those messages that are the most transparently self promotional.   Yes, there is some downside risk in re-amplification but the upside is that the self promoting R.B.’s credibility typically suffers because anyone broadly understood to be a self promoter ends up with a credibility issue.

The Empire Building R.B.

Who they are:

Julius Rat Bastard, the grabber of headcount, budget and all manner of territory for means and to ends unclear even to himself.     For this R.B., the only point that matters is building the kingdom.  This R.B. operates with the presumption that more resources equates with more value and importance.    There isn’t an evaluation on Julius’ part about making the sum greater than the total of the parts;  Julius is just focused on making the sum as big as possible by acquiring more parts.

How to deal with them:

To slow Julius R.B. down in the long term, you need to be “helpful” in the short term.   First, take all your marginal performers, known troublemakers and general pains-in-the-neck and get them into a single functional group.   Then, task that group with something that either appears to or does overlap responsibilities with a group working within Julius’ organizational functions.  This will prompt an irresistible temptation for Julius to petition upper management for the transfer of your troublemaker group into his domain.  When the discussion inevitably arises, you agree to the transfer of this function and it’s associated group to Julius R.B. In one move you have reduced your management headaches while transferring them to a place where they can do you some good; and you appear to be a great team player.   That can be the end of it. (On the other hand, you may choose to comment on how poorly the group is faring after the move and state that you never had any issues with the team.  But that would be perilously close to rat bastard behavior.)

 

The Bandwagon Jumping R.B.

Who they are:

Like a newly converted 2010 Miami Heat fan, this R.B. will align himself with any obvious winner.  Using revisionist history and creative story line gerrymandering, this R.B. can trace his role and contribution into every organization success.   In order for him to do this, the Bandwagon jumping R.B. has to constantly monitor people’s perspectives on the status of many initiatives. In order to jump on the right bandwagon at the right time, he must always seek association with potential successful bandwagons.

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How to deal with them:

Your mission is to simply tout the likelihood of successful outcomes for every initiative you’re aware of.  Occupy the bandwagon jumping R.B.’s time by recommending initiatives and projects. Help this R.B. claim involvement or create tenuous relationships with many looming victories.  The farther afield geographically, organizationally, or functionally the better, as the gravitational pull of any bandwagon is powerful to this rat bastard.  And since there won’t be much intellectual honesty about the association or involvement, you can leverage the pull of many bandwagons across a broad array of activities.

The Back Stabbing R.B.

 Who they are:

Richard Hatch of the original “Survivor” TV show comes to mind.  Sure, you may not know who they are as you won’t hear their musings, statements and mistruths until after they’ve back-stabbed. In my experience most back stabbers are the toughest R.B.s to spot.  Some will be your “friend”, most won’t bother with the charade. These are R.B.s who operate in the shadows, making private derogatory comments and accusations that can torpedo your credibility and success.

How to deal with them:

The only proactive method for dealing with these R.B.s is to spot them before they have the (next) chance to backstab. Spotting them is critical to diffusing their effect.  Unfortunately, you will probably identify one only when a manager or someone trusted approaches you to validate one of the R.B.’s statements.   However, if the R.B. has simply declared that you are an idiot, you won’t likely be provided with the opportunity to address the statement – and spot the back stabber R.B.  As a manager, if  someone (the prospective back stabber R.B.) tells you a colleague is an idiot, you can respond in one of two ways IF the accused “idiot” is on your team or under your management level  First, ask “Does he know he is an idiot?”, and second, declare “If not, let’s get him in here and let him know – or at least let him know you think that.  Let’s get this on the table.”  Sure, there are real idiots out there. But it is better to deal with these things head on as a manager. This technique keeps you in the management role and “outs” the back stabbing R.B.

If the accused “idiot” is a superior. DO NOT ENGAGE. The Back stabber R.B. will take any conversation (even one-sided) about a superior and put your name on the statements that occur in the conversation.

Once the back stabber R.B. is identified you can call him out in a number of ways.  If you hear anything suspect, you can make statements like “I can’t believe anyone would say that….” or “WHO did you hear that from?” or “Gosh, it sounds like you’ve been listening to “Back stabber R.B.”  Make sure you circle back to Back stabber R.B. to make him aware of your comment.   Back stabbers are a form of bully, just much less direct.  And bullies and back stabbers don’t like folks who strike back or have their number.

Roundup

The presence of political behavior demonstrates the absence of management.  If you are now or ever will be in a position to extinquish it within a group, there are few things as beneficial that you can do for your team’s well being.  Until the day when you are in a position to vanquish this behavior, there’s no rationale, valor or redemption in accepting these behaviors or failing to handle these rat bastards. 

Originally published on Business Insider's Strategy Section on 10/14/10.

 

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5 Skills CEO's have, that you may lack........

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Hard work, smarts and a little bit of luck will take you (or anyone) a long way. In most organizations, less than 1% of employees will attain an executive level position. You may desire to be one of the few, and if do you want to reach the top, you will have to demonstrate four relatively rare skills to distinguish yourself.

These skills are rare because few people have them. And these rare skills will drive your career progression upward because they are very valuable. You may already have some of these skills, and what you don’t have, you can develop.

The skills described here aren’t a function of age, education or experience. They all reflect a need for judgment, self control and insight. But with those attributes and these skills, you have all the makings of a top executive.

1.    Superior Issue Discernment and Listening Skills

In law school, students spend a lot of time on “issue spotting”. The skill set they are learning is to determine what comprises the critical issue of a conflict. In business, your ability to listen carefully will drive your ability to spot the real issue in any given situation. Identification of the right “issues” and leadership of their resolution will consistently put you ahead of the pack.

For senior management, identifying critical underlying issues and framing them well for others is a requisite skill. You need to cut through the spin, personal agendas and noise. To do this, you need to hear people out and listen carefully. Ask the right questions, because you need to understand what is important to them, what motivates them and what  is driving them .

People will try and spin you or convince you of a specific point of view. Beyond recognizing that truth, you need to understand why they want to spin you and what is in it for them if they succeed in getting  you to view the issue from their perspective.  Senior management determines the underlying issue as well as the motivation of the person discussing  the issue. You should always ask yourself where they are “really” coming from. Try to see through what they’re saying from a personal point of view to the broader organizational issues. 

Colleagues will complain about co-workers and customers when they are really talking about the roles the people are playing. Flaws in process and communication are usually surfaced as complaints about individuals fulfilling their described duties. Don’t fall for “Sam is a knucklehead” as the complete issue (which while likely true, it isn’t the issue at hand). The issue at hand may actually be Sam’s position is in procedural  or organizational conflict with the complainer’s position.

2.    Ability to lead change without creating enemies

You will get noticed quickly if you are a source of change and progress. But it may not be the notice you necessarily want if the buzz is negative. Causing others to comfortably leave the status quo isn’t an easy aspect of leadership but is a very powerful one. Organizations lionize their positive change leaders.  In fact, organizations tend to promote their positive change leaders  ahead of all others. The change leaders who create enemies along the way will usually reap what they sow and will be done in by their adversaries.
 
In order to affect change, yet not create rumpled feathers along the way requires careful management. To accomplish this, you must consistently communicate to others how they can be part of making things function better. You must show them how to make things function better for the whole organization as well as function better for themselves. Yes, this involves some convincing and may even require compromise. And remember people will not be courageous.

If you’re leading the change, don’t expect people to jump on the bandwagon until it is clear that the bandwagon is rolling. They will jump on when it looks like you may have a winner. That’s ok. Just get them ready to join you once some momentum is clearly evident. Don’t expect colleagues to think of the changes required, or even help you lead it,  but they can help you refine it.  And they can help swing  public support for the change you’re leading at a critical  moment. 
 
When it bubbles up to top management, the first questions will be  “What is the change and who is bought in?” followed quickly by “Who is leading this?”

3.    The judgement to choose your battles wisely and the courage to fight them

The ideal battle is one without opposition. If you dedicate time and effort to fight breast cancer or child pornography, you can do so knowing that there will  be no named, organized or coherent opposition. No one will come out in favor of cancer or deviant behavior.  That lack of opposition is a key component of a wisely chosen battle. For example, choose to lead a “quality improvement” initiative, over a cost cutting witch hunt. Avoid direct confrontation with organized opposition at all costs. 
 
One might argue that the lack of opposition makes it less of a “battle”. Well, the effort against inertia will usually make it feel enough like a battle in most organizations. And in many organizations  the opposition will often not identify itself explicitly. Either way, it pays to declare victory early and often to discourage opposition.
 
The best battles are ones against items that broadly cause headaches to multiple departments. Think  of the customer renewal process that involves five  groups that could be done entirely on line. Or the outsized customer inquiries into shipment date that could be fixed with more communication. Seek issues that annoy multiple departments. Recruit the affected departments  to join the fight.

4.    The ability to produce extraordinary results from ordinary people

So you’re assigned to manage a group of relatively ordinary performers and tasked with formidable challenges? Welcome to the world. There are a lot of ordinary performers. Getting them to produce extraordinary results will get you noticed while it propels you up the corporate ladder. So, do you crack the proverbial whip?  You could…but that will likely only produce marginal improvement. It will probably produce simply more from ordinary people rather than extraordinary results. 

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It is fairly possible to get ordinary people to exceed their historical performance and perform impressively, while not easy to do on the face of it. The key isn’t getting folks to work harder, though this is helpful, the key is getting them to work smarter. For example, if you can get a group to go from making average decisions to superior ones you get a step change in overall performance. If you combine better decisions with incremental effort, you will see extraordinary results. To get colleagues to work smarter, you must create a culture within your group that instructs and enlightens individuals to consistently make better decisions. The essence of superior results is cumulative effort of better decisions and improved execution.   
Peter Schultz, the CEO of Porsche, who turned around the company in the early 80’s wrote a book about this very subject. He felt that extraordinary people are by definition rare. And to get ordinary folks to produce extraordinary results one had to establish a leadership culture caused buy in to the bigger mission and better decisions. He also famous for saying that one should “plan democratically and implement like a dictator”.

5.    Lead by doing and demonstrate maturity

Respond quickly to matters that arise, act decisively and communicate your rationale, do their jobs with them, and capture/disseminate  best practices. If a group begins responding to customers in two hours instead of eight because you’ve declared that to be the standard, you’ve moved the ball forward materially. To get that done, you need your team to prioritize response ahead of whatever they used to fill their time with in the interim. Those tasks will now have to  come after not before responding to the customer. There are no more hours in a day and your team may not be working harder, but they are working smarter by making better prioritization decisions.

Demonstrate maturity and accept that you won’t ever receive the full credit.

There is a saying that “ success has many fathers while failure is an orphan.” And if you’re the originator of many successes, you will know the truth of this maxim better than anyone. The majority of people within an organization will never understand the role you’ve played or the contributions you’ve made. If you do a good job of communicating your priorities to upper management, however, they’ll consistently attribute the successes that follow correctly to you.
 
In the short run, it can be a little disconcerting to hear people re-purposing your insights and leadership. In the long run, no one really believes them because they don’t do anything consistently other than re-purpose other peoples’ contributions.

If you want to be entrusted with tremendous responsibility, your maturity is synonymous with your readiness for it.  And as a former chief executive, I can tell you it is very impressive to see someone respond with grace and professionalism when others appropriate their accomplishments.

This article was Originally published in BusinessInsider .

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Growing up, I always wanted to start a business, 8 things I wish I knew....

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Things take longer than you ever imagine

Everything that involves people, resource, tasks and coordination takes longer than you ever think it should take to get done.  It isn't about developing patience, as patience doesn't really help you keep driving things forward.  It is about being realistic in your planning and and management.  

Items that do succeed tend to do so quickly

I have seen more successes - products, projects, employees, start strongly than slowly.  The great salesperson or employee is great from the first day.  The strong employees contribute immediately.  The product that is going to be a hit gets strong, initial reactions from customers. 

People will let you down

In ways you can't even imagine when you start out.   Everything from inattentiveness, laziness to fraud and theft can be expected from the people you meet along the way.  Your faith in people or belief in them can be a dangerous thing.  As Pres. Reagan put it,
"Trust by verify".  Blind faith will get your butt kicked again and again.  Love and reward your employees but don't have too much confidence in them.

Good employees are really hard to find

Not difficult to find, really difficult to find.  And they're the first ones to leave.  The truth is that 10% of the world is competent and you're looking for that 10% in every hire.  It is hard to do consistently.  And it is why organizations that do it with frequency have such strong reputations.  If you want to build a business predicated largely on finding, getting and keeping quality employees to succeed -- you should understand that premise will be your greatest risk.  Finding a market and profitably selling to it, the usually greatest risks, will take a back seat.   Better yet, pursue a business that needs some reasonable percentage of employees to be really good.

Your bad employees rarely quit

For thing they're not really all that motivated to look as that might involve actual performance.   For another, no one else is likely to recruit them.  Your marginal and weak employees are with you for life unless you move proactively.   In many years of running businesses, the only time this wasn't true was during the dot com bubble.  At that time, every idiot could get a 15% to 20% raise here in Northern Virginia by changing jobs.  And they did.  Aside from that blessed time, weak employees are your most "loyal".

You will be lucky and unlucky

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In the fullness of time, you will be assuredly lucky and unlucky.   And, good luck for that matter, knowing which events will turn out to be good or bad luck once time has past.  This is to say, sometimes what appears to bad luck will turn out to be good -- the weak salesperson who turned down your job offer -- or vice versa.  Look you will have ups and downs and you will win or lose things that you don't deserve to win or lose.   You will be unlucky and lucky, you just may never know when.

Avoid the myth and misery of sunk cost

See the item about succeeding quickly above.  Don't chain yourself to the anchors you lovingly create in pursuit of success.  If it isn't working for you or the business, let it go.  Understand that it isn't good money after bad money, it is all bad money.  Fire that salesperson, let that manager go, stop selling that product, get used to moving on.   One makes a lot of decisions in running a business, accept that not all of them will be right.

Fill the pipe, always fill the pipe

The difference between good times and bad times is often reflected in how many of the opportunities, customers, etc. end up closing successfully.  In good times, more deals close from a normal opportunity pipeline.  In bad times, less deals close from the pipeline.  So, fill the pipeline of opportunities, always look to add to the pipeline.   Deals don't close for a million reasons.  Your only defense is to fill the pipe.

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Tech Journal South Interview

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Completed an interview with the other morning with Allen Maurer of TechJournal South.  He is a real interesting guy and we had a lot of fun discussing opportunities within the greater South for venture investment.

Opportunities in a "Recession-driven" America

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Pattern Recognition for Entrepreneurs, not just VC's

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VC's use "pattern recognition" to assess the viability of deals.  Pattern recognition is a method of seeing commonalities between a current , novel concept and previous ideas.  And while it is a great tool commonly used by Venture Capitalists, the pattern recognition tool is mostly ignored by entrepreneurs.  Which is a shame, because every investor pitch would benefit from substantive comparisons to previous successes and differentiation from previous failures.

I use the adjective "substantive" precisely here.   For an entrepreneur to say we are a cross between "Facebook and Twitter" is not substantive. 

Substantive comparisons need to be as precise as possible to be worthwhile.

To say, "We anticipate a go-to-market approach quite comparable to Companies X and Y, both of which relied on $5 per lead CPA and conversion rates of 3% to generate first year revenues in excess of $2M" is very substantive.  And it is convincing.  Substantive comparisons can leverage almost every aspect of an investment pitch.

Picture the proverbial hockey stick revenue slide.   One line going out and up, dramatically so, in year 2, 3 or 4.  We see a lot of these, at least in investor pitches -- we see a lot of these -- and the entrepreneur that can make it seem highly likely is quite rare.   Rarer still is the one that can actually do it.  Now picture adding two or three companies historical data, who have grown comparably to the hockey stick slide, and make an argument that your company can do the same.  Because, for example, your value proposition is similar or the target audience is the same.  Or, specifically, talk about the distribution partners or other critical events in the company's history that led to this hyper growth and what the comparable event will be for the company you're pitching.  Do the legwork, people who do their homework tend to succeed.  This isn't news.

Simply, turn the power of pattern recognition in your favor by consistently finding factual examples to support your probability of success. 

Most of what you need to do this is online.  The rest is generally available from current or former employees of the companies that will serve as your com-parables.  No, you generally don't want or need secret information.  But, even to say something like in a pitch meeting like, " I consider three successful Companies, X, Y, and Z, to be the most comparable.  And I've talked to marketing and sales folks from each about the key things that drove their phenomenal growth.  It boils down to the following four things that we need to do......". 

Holy cow, talking about having me at hello.

Specifically, here are four areas that one can benefit from pattern recognition in an investor pitch.

1.    Value Proposition

Finding successful companies with analogous value propositions is compelling and enlightening for anyone considering investment.  It validates both the potential market and the likelihood that the market will respond to your offering.  You can have the greatest solution to a large, existing problem but people have to want it.   The old adage from biotech is that is not just how many people have a condition, it is how many people will seek treatment for the condition.   If people want the solution, how will you clearly communicate your product's ability to meet that desire/need.  The success of previous value propositions within your target market is just a plain, old good thing to know....

2.    Go-To-Market

Can what you're selling be profitably sold?  You would be surprised how often potential new deals fail to make this argument convincingly.  It isn't just about price, though price is a factor.  It is about the combination of marketing, sales and price yielding a profitable company.  One cannot succeed selling $25k Saas subscriptions with $150k salespeople, the numbers won't facilitate or support a growing company.   You can model it any way you want but no one has done it.  Here again, showing the pattern by offering an example proves the point.  Bringing just a "made up spreadsheet" that you authored doesn't make the point.

3.    Management

Does this team know the processes and approaches critical to success in this company?   This is probably the area where most companies do link back to the previous experience of management as a basis for success in the new venture.  But precision is frequently lacking in these descriptions, be precise -- "Jack's experience at Acme -- where they used the same telesales model we're intended to use -- is going to be instrumental".  Tell with depth and clarity what people learned from the personal/professional experience and company observations related to the company at hand.

4.    Financials

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Do you know the critical metrics for the business you're pitching?  Customer acquisition costs, lifetime value, profitability, churn, etc. are all fundamental to success.  Don't make them up, don't estimate them.  Research them and find suitable examples.  Present those examples in your pitch.  Perhaps, even present some you regard as not good examples for comparison and describe why they are not good examples. 

A demonstration of real command of expected key metrics and solid examples of those metrics in practice will go a long way to building belief in a model. 

Clearly, there are many, many more areas in any pitch that would benefit from pattern recognition.  It is my suspicion that there is a material amount of this information at the fingertips of any CEO building an investment pitch.  My point would be bring this information forward as it builds credibility while it steers an audience to a point of view.

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The Many Mythical Creatures of Venture Capital

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(I was in Urban Outfitters on Saturday afternoon in Georgetown and happened upon a product in the check out line called "Freakin' Magical Unicorn" gum.  Of course, I bought 3 packs and that began the wheels turning on mythical creatures and the Magical Unicorns in my world.......)

First from Napoleon Dynamite ---

Deb What are you drawing?

Napoleon Dynamite A liger.

Deb What's a liger?

Napoleon Dynamite It's pretty much my favorite animal. It's like a lion and a tiger mixed... bred for its skills in magic.

The reported odds of a venture backed company reaching an Initial Public Offering are 1 in 50,000.  Which makes the identification of these companies with any consistency a clear challenge.   It takes diligence and a keen eye to differentiate that real potential.  Yet, it would be delusional to assume you wouldn't miss one along the way.  So the essence of what makes the venture capitalist's job so enjoyable is the difficulty inherent in succeeding regularly.  The venture capitalist must find something that is inherently rare.  It takes hard work, an open mind and considerable patience.  But, it is rewarding to be part (in any way - large or small) of entrepreneur's realized dreams and successes. 

Clearly, though, the start ups who will go the distance are rare creatures and the results necessary to propel the company to an IPO are near mythical -- ideally from no revenue to over $100M annually in some short period of years.  The proverbial hockey stick that is present in so many investor pitches and missing from so many Board reports.  So the venture capital industry and its participants, since it is largely predicated on these IPO companies, must be adept at finding these rare companies.

Simply put, the industry exists to find these rare, almost mythical creatures.  As one could well imagine, finding them includes no small amount of diligence in addition to judgment.  And being sure of one's decision when the moment arrives (given the odds against it) isn't easy.   So the venture capitalist's job entails the endless pursuit of a relatively unique company.  The equivalent of finding a lyger or a unicorn?!?  Can one find mythical creatures in this day and age? 

Yes, they can be found and are found. 

Yet there are other mythical creatures in venture capital.  But they aren't just limited to moonshot IPO companies.

In practice, there are plenty of mythical creatures in venture capital in my experience. 

(Many of which are unlike "Lygers" in that they have not been bred for skills in magic)

In ten years of working within the industry, I've encountered many of these mythical creatures. Here are some my favorite mythical creatures from venture capital. 

The Polished Turdy Golden Bird

Wait a minute, what is this an incredibly great deal in my email box from an unknown investment banker?  Could that be?  Forget that it doesn't match any of my pre-existing criteria for investment stage, technology or geography, or that this is a great deal that just needs four times my normal investment bite size to get to the next level. And ignore that great deals don't ever find you, you have to find them.  Behold, the great email gift from the unknown investment banker, the polished turdy golden bird.  And brought to you by the mythical, generous-with-his-great-deals-even-though-he-doesn't-know-you investment banker.  And this special bird exists only in email.   If one follows up to find out more, the facts are much less golden and the deal much less polished.  This bird only exists in email and if you carry a mobile device, you can hold it in your hand.

The "Deal Doing" Follower Capitalist

This venture capitalist is like the satyr of old  -- half man and half goat.   The man half meets with you to indicate enthusiasm for your deal  while the goat half dominates the rest of his existence.  He doesn't lead funding rounds and can't help find you a lead.  

Which can serve to reduce the possibility of a deal getting done.  All of which is to say, that like the satyr he is "described as roguish but faint-hearted — subversive and dangerous, yet shy and cowardly". 

He is around deals, near deals, about deals but doesn't do them. 

Ahhh, who said all mythical creatures are well thought of?  

The Knife Floating Hummingbird

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This is a deal creature is predicated on the concept that the  knife is no longer falling and now is the right time to invest in something that has never materially progressed as previous funding(s). 

This mythical creature isn't really falling, it is floating, you see, you just need to ignore gravity.  Yes, it is a knife.  But, you must ignore what you see and imagine its wings flapping so fast you can't see them. 

You must assume, as the potential investor, that you know how to pick the perfect time to invest.

The Stalled Rocket Phoenix

Many VC's firms support incubators or have carved out a portion of their fund to support early, early start ups.  This support is typically capped in amount or requires specific progress milestones to garner further investment support. This creates a possibility of a firm which has not met the milestones but needs investment.

These graduates of incubators or VC firm's start up set aside funds that are described as both "ready to take off" and ineligible from further financial support from the sponsor organization.  They are ready to rise even if they people telling you won't put their money where their mouth is.

So yes, while it is a potential phoenix -- it is just stalled where it is for the time being and perhaps forever. 

A Freaking Magical Unicorn

The deal everyone has seen and passed on that is now the perfect deal for me.   Yes, it is truly magical that I would be soooo lucky.  The Freaking Magical Unicorn is often from out of town, frequently from Boston, for some reason.   Probably because the Boston VC's have enough respect and affection for their peers in the DC area?  Or that they're ok with sending us a "great deal" from time to time?

One has to look upon this Unicorn and question the good fortune that is associated all the Boston VC's passing on this great deal. Why one is so lucky as to it arriving upon one's doorstep? 

Well, it is a Freaking Magical Unicorn  --- a great deal from out-of-town and that is carried upon the wings of improbability to one's doorstep.

The We're-Maid

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The deal that is about to sell and create a fabulous return but just needs a little money to get to the finish line.   The We're-Maid management team sings a song of low risks and certain returns. 

But like the mermaids of legend, the temptation calls to jump from the safe boat to swim to the beckoning call of easy returns. 

But, alas, the currents are stronger and the swim longer than meets the eye.

All is inevitably lost faster on a We're-Maid than anything else.  The risk-less deal doesn't exist after all.  It is the mythical creature of lore not reality.

The We're-Maid team is probably the most frequently spotted of this list.

Looking at this list, I realize that there are other mythical creatures in the venture capital world including those within the industry as vc's, lawyers, bankers, entrepreneurs, etc. 

Perhaps best to describe them in another post or two?

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Surviving your Start Up's Perfect Storm

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You can do everything right in a start up and still struggle and even fail.  Maybe you encounter a "perfect storm" of negative events that is impossible to predict and difficult to overcome.   As they say on bumper stickers, "Sh#t happens".   

A perfect storm occurs when external events or series of events (completely beyond your control and not of your making) combine dramatically and negatively impacts your business.  

A very capable entrepreneur I know describes this effect as being OBE:  Overcome By Events.  Sometimes, in spite of flawless execution, great planning, and outstanding management, you can still be Overcome By Events, or at least, initially overcome.

So, is this a fatalistic post?  No, quite the contrary.   Yes, one can do everything right and get hammered by things beyond one's control.  But, in the final analysis, overcoming seemingly impossible challenges and leading your company back from the brink after suffering a potentially fatal blow is one of the most satisfying aspects of running a business. The satisfaction may be personal and private; typically only you know the extent of the challenge your business faced and can truly appreciate the creativity, determination, and perseverance you brought to overcoming that challenge.   So while you might not want another one to occur, you have some sense of confidence that perfect storms can be overcome.

So can one get better at handling a perfect storm?  Yes, absolutely, one can improve their skills at this even if every perfect storm is unique.  Which is the point of the post, you can't predict perfect storms but you can prepare for them.  Let's discuss how.

First, though, let's delineate the perfect storm idea.  Perfect storms are comprised of minor and major things that go wrong like a customer in a simultaneous fashion.  Like a your top 3 customers failing to pay for an extended period when all had been historically reliable.  Or a major order getting canceled after a salesperson had failed to document a deal correctly combined with a critical shipment going out late enough to prompt a return.  

Perfect storms can also be created by three or four events that are not mutually exclusive.  For example, say you run a business with reasonably stable monthly cash flow, except for in January, when your cash balance is typically at its lowest point.  Then say your largest customer, who pays with like clockwork, unexpectedly calls in early January and apologizes for not being able to send a check for several weeks.   You now deal with the most severe cash crisis you can imagine. 

A perfect storm forms when two or three or ten of those major things go wrong, all at the same time. I experienced a perfect storm when I ran a business servicing dot-coms in the late 90s; suddenly the industry and our customers disappeared.    I realized while I had worried about everything that could go wrong, what did go wrong was wholly and completely different from what I had worried about.   I wondered if it was all a failure of my imagination -- was I not very good at predicting what would go wrong?  Was anyone good at it?  Who knew there was a volcano in Iceland that could shut down European air travel?

All of which changed my point of view from not spending intellectual cycles on assessing the probabilities to spending my energy on potential responses to all manner of setbacks.  I no longer model in mind what will go wrong as much as I consider what my response will be to a broader list of potential setbacks.  I don't necessarily spend time on the probability of any scenario, because simply, it is too hard to really know.  What you can know is that things will go wrong and sometimes go wrong in combination that create unique challenges.

My perspective became that the key to surmounting the perfect storms that will inevitably appear is to shift from anticipating what will go wrong to what you will do when things do go wrong.  That is that the priority is upon responding to what does go wrong -- better.  Another way to say this is that one should re-direct energy from worry to planning. 

Stop trying to  guess what will go wrong per se', and instead, develop response plans to a broad spectrum of issues.   The likelihood of anything, including a natural disaster, Icelandic volcano or an uncontrolled Gulf of Mexico oil spill, is nearly impossible to assess.   But you can have a response to the loss of air traffic to Europe for two weeks.  Or, the absence of Florida orders for a month.  Or, the dramatic decline of Gulf Coast orders to your business.  Being right about why  isn't going to financially rewarding whereas be ready for what goes wrong will be financially worthwhile.

Here’s a challenge I consistently give CEOs.  I’ll say, “Take some time and think about this.  What headline could you read in tomorrow’s paper that would be the best possible news for your company, and what headline would be the worst possible news?” 

The next day they come back and tell me the best and worst news they could imagine.  My goal isn’t to create a sense of optimism or pessimism; my goal is to get their wheels turning.  If you ask yourself, “What is the worst news I could see in tomorrow’s paper?” you’ll naturally start to think about what you would do if that actually occurred.  Thinking about what you would do in a moment of crisis is terribly important because your response and response time are critical.  Your company is like an organic entity; if it sustains injury, applying first aid as soon as possible could be the difference between company life and death.  

Responding quickly – and with a good or great response – is paramount.   The sooner the better.  Which is why planning responses will always benefit in a way that worrying about causes will not.

In a crisis, good is not the enemy of perfect; react quickly with the best possible solutions at hand.

I suggest you model “impossibly” negative situations and develop a Plan A, a Plan B, and a Plan C in the event the impossible does in fact occur.  Someday, somehow, the impossible will happen as it frequently does actually happen. 

You can’t control a perfect storm… but you can control how you respond.

Over the last twenty-five years I’ve found perfect storms occur more often than I once would have thought.  The frequency of perfect storms is the bad news; the good news is you can do a good job overcoming a perfect storm with anticipation and planning. 

You may not be able to turn bad into good, but you can certainly turn bad into not as bad.

And sometimes that’s enough. 

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What if you wake up tomorrow and your computers have crashed?  What if your largest customer is bankrupt?  What if your industry – or the industry you serve – disappears?  Focus on short-term planning, not long-term planning. 

Perfect storms occur.  Response time is critical.  As the CEO or owner, only you – by having thought about possibilities and potential responses ahead of time – can respond as quickly and effectively as your business deserves.

 

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As an entrepreneur, be a truth seeker, it will find you investors

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One of the many gifts of entrepreneurs is to see truths about opportunities ahead of others.  Vision, foresight, an ability to see an emerging market prior to its emergence.  For VC's, the difficulty is determining which entrepreneurs' projected truths are, in fact, correct.   While all claim to be correct, few are with any consistently achieved and reasonably documented track record.   But while the entrepreneur propounds a set of truths as the basis for an investment decision, the investor looks at the truths and truth finder.  As an entrepreneur, being a truth seeker and finder will get you funded.  This, however, isn't widely understood.

All which leads to one of the fundamental disconnects between VC's and entrepreneurs.  Which is the VC has to believe the entrepreneurs' truths, but more importantly, the entrepreneur's ability to discover the truth.  

In the simplest terms, fundings are measured by the amount of truths they discover.  If a team runs through money and time to discover the business model, go to market, pricing, positioning and sales strategy, well, they are likely to receive financing which is both adequate and well priced.  On the other hand, if the initial funding doesn't deliver insights into what is true, well follow on funding is rather difficult.  The teams' skills at truth finding are far more central to a follow on investment decision than is generally understood by start up management teams.

For me, entrepreneurs who test, try out ideas, experiment, succeed and fail and test again, always get the nod at the start up and follow on.  The entrepreneur will often arrive to pitch a new set of truths for a follow on funding and not understand that the real issue and decision isn't about the new, potential truths.  It is about the entrepreneur's skill at being a truth finding.   The entrepreneur will often be surprised at a partnership's lack of faith in the follow on opportunity.  For the entrepreneur, the previous money had led to discoveries and understandings.  The follow on proposal builds on those.  "Why isn't this an easier decision?", the entrepreneur might ask.  The investor is looking at the amount of discovery related to the time elapsed and the resources invested and assessing whether the ultimate, "finance-able" truth can be reached with a follow on investment.

Within the VC community, there are a lot of terms of art for time/effort/journey and discoveries associated with getting to knowledge of what and will won't work with a start ups' business model.   One of my favorite expressions is to "turn over some cards", which is to use time and invested money to better understand the strength or weakness of a given path.   The term illustrates the differing focal points of the investor focusing on the truths serially discovered for time and money versus the entrepreneur's idea of the hand with all the cards visible.  It also recognizes that truth seeking is an invest-able proposition.

Which is to say, that including in one's investment pitch a full overview of suspected truths and the methods to uncover them is far more powerful and compelling than people realize generally.  If you want to motivate investors, convince them that you have good ideas of which are the emerging truths and great skills at proving your ideas.  

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Exceed Revenue or Meet Expenses? Neither, both, either?

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Start up CEO's tend to focus in their reports on beating revenue targets (if that's the available positive spin) or highlight beating the expense line (clear second place in the positive spin department). It is understandable enough, after all, you put the available good news forward.  Sure, it is usually better to be the "beat revenue" story rather than the "beat expenses" story.  And, of course, one would always like to tell the both "beat revenue and expense" target story.  But that isn't always possible.   Then again, how one achieves higher revenues or lower expenses determines whether either the results are good news or bad news.   Because either can be good or bad news. 

That said, I find that both reports in practice tend to under report the "how" they beat revenues or expenses.   As the listener, the how one exceeds revenue or beats expense targets is key.  For the qualitative appraisal of a board director of these reports, the how is the focal point.  In fact, the "how" may be the most important aspect to the report.  The how of current achievements is the window to and foundation of future performance.

First, let's level set our understanding.

It is an American maxim and tired joke about one spouse remarking to the other over an armful full of purchases --- "I saved you money as these items were 'on sale' today".   Of course, the non-shopping spouse sees the half empty side of the class that money wasn't "saved" but rather "spent" on the sale items.   Either way, across varying time lines, both sides of the argument can be viewed as fundamentally correct.  This commonsensical view of getting necessary things cheaper via promotional sales is difficult to oppose for most people.

It does have limits as an argument, however, within a business context.  Because in business, now is qualitatively better than later.  Now is better than later in business because the early an investment is made the sooner it pays off.    In smaller or start ups, this early is better can be especially true as small companies are always in a race against time.

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If one, for example, beats expense targets by delays of  hiring (which is commonly the case) this has all kinds of downstream effects.   Or by same token, keeps marketing spend lower to create a better present and an undermined future.   And there is no delay in hiring that will be felt as directly as a failure to hire sales people.  If, for example, a salesperson takes 4 months to become a positive contribution to operations, then delays in hiring salespeople create a hole in time and money that can't be filled.   That time and money is lost.  Like an airplane flight with empty seats, the revenue opportunity is lost.  And there is no chance to get it back.    It is quite a repeated, though frustrating, moment to hear a CEO imitating success via lower expenses built on the foundation of reduced marketing or understaffed sales.  "Great", I think, "we missed revenue and we will keep missing it".  But, I get to hear about how we staying under our expense targets.  It is not small consolation, it isn't consolation at all.

By the same token, hitting the current revenue target by emptying the next quarter or heavy discounts isn't a  victory.  Weakening the future or customer price expectations will cost the company and quickly.  To hit a revenue target while greatly exceeding expenses has its clear drawbacks as well. 

The net of all of this is today's results don't stand alone.  They must represent current achievement but also a clear path to future results.  In a start up, where the future holds greater prospects of the company's potential --- today's results are more about the future than the present.   Everything done today is building a better tomorrow.  If exceeding revenue builds a better tomorrow or exceeding expenses contributes more to a better eventual outcome, pursue the latter. 

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Skype, TV and a World of 500 Channels: Incubators

I did a short interview recently of which this clip is a short portion.  The program is produced out of Atlanta by Jean Creech called Bold Ventures TV.  This was a question on the value of incubators.

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7 Questions to Avoid in your New Job Interview

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Through 28 years of management and what feels like thousands of interviews of people for all levels of positions.  Here are five things I would suggest avoiding.

1.    Don't ask how hard people work in this company.

2.    Avoid intense drill downs into severance policies.

3.    Delay any questions about smoke breaks or smoking locations

4.    Don't drill down into company insurance policy questions related mental health benefits or pregnancy policies (if female).

5.    Wait to get the company's full holiday schedules.

6.    Avoid questions about whether management is a stickler about being on time, leaving early or unexpected absences. 

7.    Keep quiet on any "odd benefits" questions based upon the benefits of previous employers, including massages, organic snacks, clothing allowance, etc.

If you're like me, you would be amazed at the questions potential employees will ask in the interview process.  And while there is clearly an appropriate time and place for these thoughts (for the most part), they aren't usually in the first and/or second interview.   That said, I have heard them all -- early on into job interviews -- as well as later in the process.

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Great Blog Post on What its like to be a VC

For those interested in what are the pluses and minuses of working as a Venture Capitalist, Mark Suster, of  GRP Partners has written a spot on blog post about it.  Mark's blog, "Both Sides of the Table", is a great regular read.  What it is like to be a VC

Look for 3 Things to find "Fire in the Belly"

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It is a strange term, "Fire in the Belly", that refers to someone's drive or motivation to achieve success.   When you're interviewing prospective employees, especially ones for a start up, finding this quality can be difficult.  But, the reward for finding these people is immeasurable.

No one who wishes to be hired in an interview setting is going to say "Hey, when the going gets tough and you need someone to stay with the task until its done, it won't be me".  Or, "Regardless of the importance to the company, I won't stay late to perfect tomorrow's presentation under any circumstances".   People are socialized well enough to understand that commitment and diligence are valued traits.

Sure as an entrepreneur, you know that employees by definition won't care about the enterprise like you do.  Potential employees will often describe a "passion" for the product, technology or tasks at hand.  Which is nice,  but fire in belly burns on and passion burns out.   Fire in the belly is a continued drive that doesn't ebb or flow while passion rises and falls.

So how do you find it?

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Look for three things, which may appear individually or in combination. 

First, look for a history of drive.  People with drive have had it their whole life. It's in their DNA.  People with real drive have demonstrated it from very, very early on. Ask questions about their very first job.  Not the one after college, the very first thing they did for pay.   Guess what, they usually started working early in life.  And they took the jobs they could get for the pay available. And they were rewarded with more responsibility.   You'll often find that they worked very hard in these jobs for low pay.  And, if they are who you're looking for, they didn't then and don't now have any problem with working hard. BINGO!!! It's what they do, it is who they are as people.  They will work hard for you because that's what they do and have done for every employer they have ever had.  They are driven and always will be. 

Second, find people with something to prove to the world or a member of it.   You do this by asking questions about their role models, relationships, family and long term ambitions.   People with drive usually have someone or some groups that have importance to them.  Find out who they are, why they are important to them, and what they want to prove at the end of the day.   To cut to the quick, it is frequently a parent.  Sometimes it is positive, they worship a parent and want to make them proud.  Or they have a notably successful parent they want to out do.  Sometimes it is negative, the parent has expressed doubts or flat out pessimism about the interviewee prospects for success.  Or the folks in their hometown think they are dumb to pursue this field.  When you're determined that the candidate will be unrelenting to make a parent proud or prove some one or group wrong, you should be thinking about where he or she will sit in your office.

Third, find people that have overcome obstacles.   Real obstacles like the loss of a parent, abusive or alcoholic caregivers, tragedy, or material set backs.   Ask about their life growing up and the material conditions or events within it.   What were their life changing events?  People who have succeeded while balancing drunken parents and abandoned siblings at 15 aren't easily discouraged by the normal setbacks associated with growing a business.   Their internal dialogue isn't about giving up or giving way. They don't tell themselves that things are "too tough".    They will think to themselves, "hey, if the hell I grew up with wasn't enough to stop me, today's challenges aren't going to stop me either."  If you want people who will go through walls to succeed, hire people who already have gone through walls in their life.  I don't say this lightly or disrespectfully as these people have experienced real pain. 

Find someone with any of these qualities and you will benefit every day they are in your employ.  Drive or Fire in the Belly comes to work every day and brings energy to every task. 

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Somethings have natural lift, others are a complete slog

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If you read about the decision making process by investors,  including angel investors and venture capitalists, you’ll  likely  encounter the term "pattern recognition".  Pattern recognition describes an investor's tendency to attempt to match the existing   business proposition to previous experiences. This match ideally  will be to previous successful investments and companies.  But it might also be a match to unsuccessful ones.   Investors employ pattern recognition  because it enables faster processing of the multiple opportunities that need evaluation every week. 

There are various specific aspects to employing pattern recognition.   Sales model, business model, distribution method, customer set and other similarities to previous successes warrant consideration in pattern recognition.   And while I will blog again on pattern recognition and its components, today I would like to focus on a trusted technique within pattern recognition. 

One of my favorite techniques in applying pattern recognition is to determine if there evidence of natural lift.  That is to say, is this an investment   that will benefit from environmental or systemic factors?  Further, is this a company where growth and success will come more easily than not?  Will this company will be a slog?  Is there natural lift to the idea/product.  For example;  If you launched a   Facebook application as the Facebook platform was beginning its  meteoric rise, that would be an example of systemic benefit.  Your life and the focus of your investor would be about managing growth   rather than creating it.  You can start companies whose success will be difficult and risky.  You can also start ones where success will   be easier and more likely.    

The difference between new entrepreneurs and experienced  ones can be the  latter's desire to start companies with natural lift.  That natural   lift makes them easy to raise money for by the way. Natural lift  enables customers to be acquired more cheaply and employees recruited more easily.  Momentum is created in conjunction with and   facilitated by, the external environment.  I find that people often   confuse natural lift with "buzz".   I consider buzz as a potential side product of natural lift but different in a fundamental way.     Natural lift cannot be created by the company per se' as it is an external factor.  Buzz can be created by the efforts of the   company's staff and is internally generated ultimately.   (Sometimes   faux mentum rather than momentum.....) 

The alternative to a company with natural lift is when the success of the investment  is a complete,  endless slog.  Where growth and success be fought for and won on an   inch by inch basis.  No wind at your back ever.  And while   investors won't necessarily gravitate to a slog, there are many that   will sign on to the right one.  There are just less investors that will back an endless slog than will back a company with natural lift.  And, no one   can handle many companies on the slog path as they are time  consuming by nature.    So choose carefully, you can do it the easy way or the hard way.

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Time for some Asymmetric Marketing

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I was speaking with someone over this past weekend and shared that I blog on a regular basis.   I described that I try to give "practical advice" related to start ups, financing and growing a business.  The response was a question, "Don't people need impractical advice more?" like alternative ways to market, sell, raise money, etc....

My interpretation of "alternative" advice was what to do when you lack the money and manpower to accomplish what you need to for your small enterprise to grow.    And if there is a single good area for alternative advice, it is the use of asymmetric (guerrilla) marketing by a start up at a trade show.

Here's the scenario, you want to make a big splash at an upcoming industry trade show.  You have little to no money to do so.   You cannot afford trade show space and you don't own a booth even if you could get the space.  It is nonetheless critical for the company to join the fray and get in front of potential customers.   

I have done this with everything from stickers on escalator hand belts ($50) , to posters in trade show elevators ($250) , to hotel key cards with my logo in the trade show's main hotel ($250), to rogue banners hanging from the hotel across the street ($500), to college acting groups staging fake demonstrations dressed as hippies outside main venues of trade show evening events demanding access to my product ($500).  More on these in a minute.  If you're ready to make a splash, ok with people getting a little angry with you, and capable of a stunt or two.  Well here's the plan, and you may just have a lot of fun.   I always did........

1.    Understand the physical geography

Weeks or months prior to the targeted show, go to the trade show venue, surrounding hotels and any known venues for evening events.  Get a grasp on where people will walk, pick up buses, catch cabs, have lunch and meet for drinks.  Know the lay of the land literally.  I know this costs money but it is the fundamental first step.  Meet the bell captain in your target hotels.  Say hello to the head of housekeeping.  Talk with the convention center and hotel staff responsible for handling the trade show organizer.

2.    Determine which real estate and assets the trade show controls

This means everything from key cards in convention hotels to trade show venue itself.   By key cards, I mean the hotel keys one receives when checking in to the hotel.  They are cheap to have printed and generally a hotel will accept your logo'd key cards for usage at a convention for a small fee (as low as $250 or you may get it for free).   Hotels across the street or around the corner, where many trade show attendees will stay,  but are outside the trade show's control are key targets.  Will the trade show provide T-Shirts, Hats or Buttons to any housekeeping, front desk or bell staff?   Does the hotel have an internal video channel running on the hotel's TV's?   Find out what assets exist.  

3.    Get a sense of the rules

Some trade shows, usually mature, larger ones, have a great deal of staff and do a good job of controlling the assets you seek to leverage over a couple of days.  To the degree you can, without tipping your hand, get a handle on these rules. 

4.     Understand that you will need 4 to 7 gambits

Sadly, some of your gambits will be spotted immediately and removed quickly.   Some will not as people can often mostly assume someone else authorized you to replace the hotel's regular coasters in the main bar with the ones with your logo.   All it really took was a tip to the bartender ($50) and your coasters ($125).  Also, your gambits need to be executed in close timing proximity to one another immediately prior to the trade show opening.   Think 4 or 5am on the day of opening.  As you soon be explaining that you didn't know it was wrong to place bumper stickers on the convention center's trash cans ($75), or put decals surrounding hotel elevator call button plates ($50), or decorate the hotel's fake plants with small hanging monkeys/birds/ornaments ($125) or place logo'd doormats outside the convention center's doors ($500) or tape posters in key locations in the rest rooms ($150) or put logo'd toiletry baskets in those same convention center restrooms ($250).   Some of your soldiers won't make it off the beach and you should expect some losses.

That you did all of that as well put large buttons on the hotel maids ($100 tip/$100 buttons), desk staff and T-Shirts on the bell staff ($200 tips/$150 T-Shirts) when you weren't really allowed to do so, well, you should anticipate a stern conversation in which you demonstrate profound ignorance.  Won't do it again, you should say, not this year - not here.

5.    Hijack a little spotlight in a main event

Most trade shows will have a large evening event for entertainment and networking purposes.   Buses from main hotels to the event have bus drivers who might like to wear a new hat ($100 offered prize to bus driver spotted with it on - done very publicly - early on - as well as the price of the hats.).  Or my personal favorite, the college drama group staging an attention gathering event (as little as $300) outside the large, evening event venue.    They need the "freedom and power" your product provides and they are protesting its limited distribution (by trade show attendees).   To be clear, I would usually have to explain to the head of the college drama group that I wouldn't have a protest permit or anything like that.  If the police came to move along, be polite and get the hell out of there.   They were always cool with this.  And the police never came though the trade show people were usually plenty mad.  Then again, they would pick a public sidewalk which was visible from bus drop off but didn't impede traffic flow.

Another favorite spotlight stealing tactic is bring celebrity impersonators and a photographer with you to the event.  Elvis, Cher and Marilyn Monroe will work really well with a lot of folks.  If your show is in Las Vegas, they are plentiful and affordable (as low as $500 for evening per star).   Capture their emails so you can send the picture or put a button/lapel item on them associated with the picture process.  Or make sure Elvis has your hat on.

Later when you're successful and the company is progressing well, you will spend the $30k or $75k to do the trade show properly,  And, you'll likely look back on these shenanigans with a private smile.  I do. 

And when you get to spend all that money, you'll know which method generates the best results.

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• Tips and Strategies for a Small Business Entrepreneur to Beat the Competition (entrepreneurideasclub.com)
• How does an entrepreneur chooses his/her industry? (startups.com)
• Who to listen to when starting a business (startups.com)
• Small Businesses A Sure Shot Success (entrepreneurideasclub.com)

5 Pieces of good news you should ignore

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When you're running a company, one quickly becomes acquainted with the thought that everything matters.  That everything, every little detail, as it relates to the enterprise and its progression is important.  And in that, one is mostly but not completely right.

Some stuff doesn't matter or matter enough.  Perhaps, un-intuitively, the surprise is that most of the stuff that turns out not to matter is good news.  That is to say, positive events that don't translate into anything additive to the company's growth.

Here are 5 that come to mind:

1.    Positive local press

Here it is the Washington Post which is a prominent national publication.   And a great write up in it will certainly bring kudos from your Facebook friends.   Enjoy for a couple minutes and then get back to things that will grow the company.

2.    National TV appearance

Check the numbers on your favorite cable programs.  Unless those include Fox's Bill O'Reilly, large numbers of people aren't watching these shows.  And, even when they are watching, they are likely not interested in your product.  It is exciting and fun.  Just consider it a break from the daily routine.  You still have to concentrate on communicating your value proposition to probable suspects. 

3.    Product of Year from a Trade Pub

It is great fun to win and beat your competitors in a "head to head" appraisal.    Then again, if you take the same effort that goes into influencing one of these and apply to everyone who doesn't read the trade publication (>99% of the universe) -- it would have been a much better use of time.   Plus, there's always a competitive trade publication coming to a different answer and all the trade publication awards have a very short useful life.  So, as they say, fame and magazine awards are fleeting. 

4.    Trade Show Award

Do we really trust these folks?  Really?   If you have a big enough booth, you're entitled to the award for most innovative product or product of the year.  If you aren't profoundly suspect of these, take an afternoon off. 

5.    Calls from Large Company Bureaucrats

They are interested and enthusiastic but utterly powerless.  They are also meaningless in their own organizations but get to be giants within yours.  They call expressing powerful interest and you would be forgiven thinking about the potential positive impact.   Then again, you might have better things to do than give meaning to someone who has chosen to live a powerless life.  Many a small company will find itself turned on its head chasing a huge opportunity that is only the product of a bureaucrat's search for meaning.

I raise these 5 pieces of good news because they are often touted by the CEO's that pitch us as evidence that the company is really gaining traction.  Unfortunately, they frequently tend to indicate that the company won't gain traction because its management is chasing good news that would be better ignored.....

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Always, always, always talk to your angry customers

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When I ran companies my policy was the phone would always be answered by a person.  If a caller was angry or upset – in any way – all employees were instructed to say, “The CEO of our company wishes to speak with anyone who calls and is upset about our products, our services, or with anything about our company.  Could I transfer you to him now?”   

As you can guess, most callers said, “You’re darned right you can transfer me to the CEO.  He needs to deal with this problem now!” 

I took those calls.  Every single one – even if the call interrupted meetings.  (We never interrupted client meetings, though; if I was already with a customer I returned the call as soon as possible.)  I took those calls for years, and even some many were decidedly uncomfortable, what often surprised me was how much I could learn by listening to angry customers.  Over time I identified more employee problems as a result of those calls than I did by any other means. 

In short, our customers not only kept us in business – they also identified issues for me.

Here’s an example.  An angry customer is on the phone with a support person.  (Or, really, with any company employee; every employee who works for you is ultimately paid to help customers and make them happy.)   The customer said, “I spent a lot of money on this product… and it was delivered with a part missing.  I need that resolved immediately!” 

The employee said, “I understand the problem… but it will take a fair amount of time to resolve.  It’s now 4:45 and I get off at 5:00.  It will take more than fifteen minutes to resolve this issue; I think it’s best if you called us back tomorrow.” 

(I’m not making this up.)

The customer became angrier.  (Big surprise.)  Another employee overheard the call, stepped in, and had the call transferred to me.  I apologized on behalf of the company, determined the problem, brought in a more conscientious employee to help… together we made sure the missing part shipped overnight. 

Fortunately for me, but perhaps unfortunately for the original employee, they didn’t have to worry about getting off at 5:00, much less taking the call the next day.  I fired him.  Treat a customer that way once and you’ll surely do it again.  I considered myself lucky to learn about this problem employee when I did. 

At least 75% of the time simply by taking angry calls I would learn about employees who were inconsiderate to customers or vendors.  I couldn’t be everywhere.  I couldn’t see everything.  But dealing with angry customers increased my reach and vision dramatically.

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6 Easy Steps to a Great Idea (Or one that turns out great)

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I am lecturing a James Madison University New Venture class this evening on selecting an idea for the basis of a business plan.   The student teams are tasked with coming up a business idea and building a plan over the semester.  And as anyone who has done it knows, it isn't an easy thing to do. 

This is what I'm going to tell them. These are the 6 Easy Steps to a Great Idea (Or one that turns out great).

I should clarify that there are both great ideas and ideas that turn out to be great, this is the pursuit of the latter.  Great ideas are well and fine but for a business plan, there is no alternative to pursuing an idea that turns out to be great.  Great ideas can stand alone in art and science but not in business. 

In business, the only thing that matters are ideas that facilitate great results.   Ideas that when well executed -- meet a market need and generate growth and profit -- and ultimately, turn out well in the end for all. 

To start a business one doesn't need a great idea, they need an idea that with time, effort and inspiration can generate great results.

The steps then are not actually, specifically about finding a great idea.   They are the steps to finding an idea that could, should or just might turn out to be great. 

1.    Find something people currently or will want

This is distinctly different than something people currently or will need.   People need healthy food but any hour long drive down any Interstate highway in the United States should convince you they "want" crappy fast food.  Maybe they "should" want something but that doesn't mean they ever will want it.  They want $3 oily, bitter coffee from Starbucks because it is conveniently offered whenever and wherever they want it.   What people want or will want is generally viewed with some need mystery.  And it will be so long as one tries to "think it up" on their own.  If your goal is think up a great idea, you can lock yourself in a room and commence to do so.  If you want an idea that will turn out well you need to talk with people and you need to look for it.  To find, one must seek.

2.    Look for Wishes

What do people wish they had that they currently lack?  One might wish there was a gym closer to my house, or an all night chili dog restaurant or mobile dog groomer in my town.  They wish for things they will probably want if they become available.  How do you find them?  Go to any business establishment and ask the staff what people complain about.   They'll tell you.  They are sick and tired of hearing about the very opportunity that you're desperate to find and can't discover on your own   They'll say "People wish we were open later, or had a mobile offering, or were located closer to their home".  They might say "We get a lot of requests for higher end product, or custom product or less snarky salespeople".  Ok, the last item might be implicit in your conversation.

3.    Study the environment to find Wishes

So you know what people wish for, how do they fulfill the wish today.  Do they choose some worthy substitute or drive an extra distance or pay more for an over-sized alternative?  This isn't about understanding the customer as much as it is determining the competitive environment.  People who wish for or want something are usually meeting the wish or want with something today.   Yes, there are completely new solutions to wishes everyday, but most of the wishes and wants have been around for thousands of years.  New ones are relatively rare. 

People have unmet wants and cope with their unmet wants in a conscious way.  Typically, in ways that are less than ideal.   If you have any doubts about this, go a to a night club on a Saturday night.

It is that functioning alternative that one usually will compete with.  That people want a better something won't guarantee business or success.  It is a starting point but only a starting point.  It is not high bar to clear to assume that one's offering, which is perfectly suited to a task, is only competing with other things also perfectly suited to the task.  It has to motivate change from whatever comprises the existing coping behavior.

The issue is give them what they want in all ways that is far, far better than current substitute.  The challenge is deliver something that makes them happier than what they're doing today.

4.    Define Happiness

If makes people happy to have their wishes realized or wants met.  If you really want an idea that turns our great, make people happy by doing business with you.  Make them happy to embrace the change you offer them for their unmet needs or wants.

How will you deliver them what they wish for and/or want?  What will bring them the greatest satisfaction?  Define every aspect of their happiness with your offering and its delivery.  Determine how you will deliver the kind of happiness with products and services that people feel compelled to tell others about.   Examine how much it will cost you to consistently deliver happiness.  If one can do it reliably well and at a reasonable cost, this might be an idea that could turn out well.

5.    Understand who wants the Happiness you offer

In the simplest terms, are they rich or poor, are they smart or dumb?  I say this with all due respect and affection to dumb people everywhere.   Perhaps, my distinction would be better as well educated versus poorly educated.  Either way, dumb people buy a lot faster than smart people.  The rich ones are able to buy more than the poor ones.  Yes, this isn't rocket science.  If you going to sell to dumb people, target the rich ones.  (Don't think they're out there!?!, HAH!!, I say, they're out there.)  They buy fast and are in a position to buy a lot.

The fastest path to ideas that don't turn out great is attempting to make smart, poor people happy.  

They have the intellect to discuss a purchase at some length, if not the budget to complete one.

At the end of your analysis, the question is "Given your target audience characteristics and desires, can you profitably sell the Happiness you offer them?". 

6.    Determine how many people want your offer of Happiness

Now and only now, look at how many people are in your target market and decide if you can build a business around and within that target market.  The wish, the want and the need precede the target market selection.   Don't just choose a large, ill defined market and attempt to divine an unmet need.  Find unmet needs and  solution to meet them.  The first way of starting with the target market will lock one into the search for great ideas.  The second way, unmet needs matched with real solutions and genuine happiness, will uncover larger target markets than one readily imagines and ideas that turn out in the fullness of time to be great.

That said and done, they should go write their business plans as they are now ready.

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Finding Cheap Capital for your Business

The cheapest and the best capital to grow a business comes from customers.  Some businesses, like consulting businesses and other services businesses, shouldn't often start with any other type of capital.

Here is a short clip from a recent Fox Business Network appearance about starting a consulting business.

Advice to a Start Up CEO, Me - 20 Years ago

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In many years of start ups, I've noticed some truisms of potential value for the start up CEO. I just wish I could tell them to myself 20 years ago.

1.    Customers with the biggest issue with price tend to be the customers with the biggest issues. ( including pretty much everything -- payment,  product support, upgrades, etc.)  

2.    Software Developers, Salespeople and Lawyers tend to overstate their accomplishments, potential and value.  No real need to ask, they'll tell you.

3.    Accountants, HR people, and administrative staff tend to undervalue their accomplishments, potential and value.  Here you have a real need to ask, they won't tell you.

4.    People are who are going to be very difficult to deal with will make a point of explaining to you upfront how reasonable they are deal with.  Very reasonable, in fact, in their opinion and their opinion only.

5.    The world has some incredibly talented liars and thieves.   They will make a point of not self identifying and are most indignant when their character is questioned.  You will meet at least 2 or more per year.  Keep count.

6.    Stress displays character, it doesn't build it.  And serious stress will often tell you more than you want to know about someone.

7.    Everybody-- during every day -- acts in economic self interest in almost every way.  Good employees try to align their economic interests with yours.  Bad employees don't.  Don't assume though that your economic self interests and those of your good employees are always aligned.  Or that your economic self interests aren't ever aligned with your bad employees. 

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Dear Entrepreneur, You can ignore my VC advice

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I work with a lot of entrepreneurs in the frequently challenging endeavor of growing small companies.    When one is continually entering uncharted territory, it is difficult if not impossible to be right all the time.  The CEO won’t be always be right and nor will I.

To that end, I explain to the CEO’s I work with that for me there is only one way to get in trouble with me.

And that is to ignore my advice and fail.

                              

As a starting point, one can take my advice or ignore it, succeed or fail, and from my point of view the relationship will only be undermined by a combination of failure and a consistent failure to listen to good advice. 

On the other hand, the entrepreneur that doesn’t listen and succeeds is ok in my book.  Listen and fail, that’s ok too. Listen and succeed, that’ll work. I have only had one entrepreneur in 10 years that failed to listen and, coincidentally (?!?) didn't progress his company very well.   Now, I am assessing listening skills and disposition to take advice from the very first meeting.

In any case, I make a living by helping entrepreneurs succeed and if I’m not more right than wrong with my advice – I won’t be doing it much longer.  I just assume that I’m not always right and I search for CEO’s who assume the same about themselves.

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Inside a Venture Capital Pitch meeting

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We recently collaborated with Washington Post reporter, Tom Heath, on an article that offered an insider's view to a VC pitch by an entrepreneur and the ensuing discussion following the entrepreneur's departure.   Nathan Wieler of Original Projects was the entrepreneur and did a great job.  It was a pleasure to work with Tom Heath.  Tom shouldered the burden of a lot of content in a very limited amount of words.

Here is a link to the article.

Peek inside a VC Pitch

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Getting help for your business is one thing, trusting it is another

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Start Up Trouble Makers: Board Members

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In a another edition of the Trouble Maker series, let's focus on members of the Board of Directors. 

Mr. Ants in His Pants 

He joined at the last investment round three months and is now ready to exit the investment.   Yes, yes, he came into the round professing his patience and commitment to the long term but that was 3 board meetings ago.  Now, he wonders why we aren't leveraging the current moment. Why can't we test the market for the company now?

His condition is terminal so don't invest your time trying to get him to bide his time.

Ms. Young VC

She replaced the senior partner you did the deal with originally. Ms. Young VC works from the proverbial VC playbook and there will be no deviation from it regardless of circumstances.  It is her first board directorship and everything is viewed through the prism of how this will make her look to her partners. Any setback or plot twist must be explained as an independent action on your part. 

Her Ivy League education means she is solidly grounded in business metrics and accounting forensics.  Her emotional intelligence well, not so much.  Whatever you do, don't get her frightened as a scared Venture Capitalist is never a pretty sight. 

Mr. Strategic Investor's Appointed Representative 

He has no idea how to properly direct a company of any size, he's a financial controller at the Strategic Investor.  He is accustomed to driving via the rear view mirror.  Nor he is at all confident that decisions should be left to management.  "Whoa, wait a minute" he'll say, "shouldn't the board look over that Xerox Copier lease prior to you signing it".   You may argue that the good people (and lawyers) of the Xerox Corporation aren't actually looking for feedback or any input on their copier lease from a money-losing, under-capitalized start up.  But you would be wasting your time.  

Image via Wikipedia

Mr. Older VC

He is a great guy but all the optimism has been crushed out of his being over the last 25 years.  And while he is encouraged by recent progress, he foresees no need to become optimistic.  In fact, he believes we should plan for the worst. 

He assumes this will be a long slog with good news and bad news tending to even each other out.  Yet, if and when it works out, he will be as happy as anyone if only a little more surprised.

Mr. Recent CEO Independent

Yes, he is "in the bag" for management and can be depended upon to decry low salaries and inadequate stock option grants at any opportunity in any meeting.   Aside from the previous dispensation, he is usually one of the most valuable directors in the room.  He will frequently offer practical, valuable insights into all company operations.  What a concept.

Mr. Independent Director - Man about Town

Where does the money come from?  How does he get in these deals?  He's like the Dos Equis guy, "the most interesting man in the world" but he's younger.  (I may have met the guy who the Dos Equis guy is modeled on in Venezuela 15 years ago, but that's for another blog).  In the TV ads they say, “Women want him, men want to be him.”  So, yes, he may not make it to every board meeting nor even say a single thing until the end of the meeting when he does -- but what else would you want from this guy? Insights on GAAP?

Other Troublemaker Posts:

CEO Troublemakers 

The Original 7 Troublemakers

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