Posts Tagged Entrepreneurship
Insightful talk between two great thinkers – Brad Feld and Jim Collins.
The reason that capitalism has lifted more people out of poverty and created more wealth over the last 100 years than ever before is because when practiced correctly entrepreneurs are free to create products and services that solve problems. Then in the marketplace of ideas customers vote with their wallets. This creates jobs and wealth for the founder, investors and employees. It’s the old line “if you build a better mousetrap, people will come.”
This concept is captured in the idea of Permissionless Innovation. Permissionless Innovation can be summarized with the statement “Innovation should be allowed by default”. Freedom to Innovate should always be given the benefit of the doubt, it should be assumed that something is legal rather than the other way around.
This sounds like a no brainer but we see examples everyday where government at all levels doesn’t allow for the freedom to innovate. Two of the most successful examples would be Uber and AirBnb which have succeeded in spite of the myriad of road blocks that varying governments have put in their way. Which begs the question “what is governments role regarding business innovation?” In what areas should they have to give permission? When should the government step in?
I believe that the government should step in only when someone’s rights are violated or if there is a proven danger to life or liberty. It is important to point out that rights does not mean livelihood. Too often governments are stepping in because the new entrant is threatening the livelihood of a company or group that has managed to use to government to protect themselves.
Local and state governments around the country interfere with regulations governing things like nail salons, hair stylists, interior decorators and even food trucks. In San Antonio, if you operate a food truck within 300 ft of any establishment serving food (including convenience and grocery stores) you are subject to a $2000 a day fine. Even if you are on private property. Another example is the fact that in many states Tesla can not sell a car directly to the customer, they need to work through a dealer network. How is the customer harmed in this transaction? Who is the government really protecting?
The Heritage Foundation (www.heritage.org) does an annual ranking of economic freedom. They rank every country on 10 categories including things like property rights, corruption, trade and investment. One of these categories is Business Freedom. Business freedom covers what it takes to start a business, obtain a license and close a business. It is appalling that the United States which is supposed to be the most free country in the world ranks 12th on the overall rankings and 15th for business freedom.
This is how we turbocharge our economy and deal with income inequality. I am waiting to hear candidates talk it but I am not holding my breath.
Maybe you are staring at the blank screen and don’t know where to start. Or it could be when you are looking at your phone and don’t know who to call next. How about when your beta customer tells you something isn’t working and you don’t have the skills to fix it. Or maybe you see an article and you learn that someone is “in your space”.
All of these and thousands of other scenarios are examples of when an entrepreneur must look in the mirror and recommit themselves to the mission that they have committed themselves to. Just like anything the entrepreneurial journey is one with peaks and valleys. But because the entrepreneur tends to personalize everything associated with their business these peaks tend to be higher and the valleys lower and they come at you fast and furious. It can be quite a roller coaster ride.
Sometimes it hits you 3 days before your closing, when you have already committed the money to new projects and the Venture Capitalist calls you to tell you that they are pulling out of the deal. Or it could be when your distribution partner decides to end your key distribution deal. These are the times that the entrepreneur has to dig deep and decide how committed they are to their mission.
Each of the 5 C’s (Conscious, Curious, Creative, Customer Focused, and Committed) are important. However, there are examples of entrepreneurs who have been successful who lacked one or two of the first four. Maybe they created a new technology and hired someone who was customer focused. Maybe they had a vision and was able to find someone creative to figure out how to make the business model work. But to reach their goal everyone has had to be committed to their cause. They have had to overcome obstacles to achieve their vision. These obstacles may have been small ones like having a key recruit back out of a job or they may have been big ones like having a major competitor enter your arena.
It’s ironic that this has been the hardest blog post to write in 3 years. Some work stuff came up, it’s summer which means I am taking time away from the lake and I haven’t seen any other “Update” posts in a while so I wonder if anyone is out there. These things cause you to ask yourself, why should I keep going? That’s what happens to the entrepreneur. They begin to question all of their basic assumptions. Are we really building something my customers want? Do my employees believe in our mission? Is my family really supportive? These doubts are normal and exactly when the committed entrepreneur breaks through.
However, there is a fine line between committed and stupid. We all hear romantic stories about Fred Smith and how he spent his family’s money without their permission to prop up FedEx in the early days. But we don’t hear about the guy who squandered his wife’s trust fund on bad investments and a Porsche dealership. The woman who was supposed to be set for life is now 76 and working as a nurses aide.
No matter how committed you are you have to know when to throw in the towel. There are three constituencies to look at when evaluating this decision. First, are my customers (not just one group, but all of your different customer bases) supportive and willing to pay for what I am delivering? Are my investors fully informed and willing to keep supporting me? Do my employees continue to support the mission and what we are trying to accomplish? If all three of these are true then you aren’t crazy. If you lose one group for an extended period of time, maybe it’s time to throw in the towel.
Did you see the Warriors/Cav’s game? Can you believe this weather? What did you get on problem number 4? Any plans for the weekend? What’s your major? Or the Granddaddy of them all, What’s your sign?
Long ago when we were trying to date, we learned that you had to try to engage your date in conversation. Get him or her to talk about themselves. Some people suggest that you apply the same advice to business. That if you can get your customer to talk about themselves you will learn everything that you need to know. It’s good advice for dating, but terrible advice for running a business.
For the last 4 months I have written about the 5 C’s of entrepreneurship. The first 3 were: Conscious, Curious and Creative. Today, we will talk about being customer focused.
Many people think of being customer focused as giving the customer lots of ways of interacting with you. Returning emails, holding focus groups, talking to them in your stores or call centers, doing surveys…. In essence listening to your customer.
It’s not that those things aren’t important, it’s that those things are a small part of the answer. They are only one input into the decision making process.
Being customer focused as an entrepreneur means “being the customer”. Literally understanding exactly what the customer is going through. It’s listening, empathy, caring and passion all rolled into one. The passion to solve the customer problems because you have the same problems.
The best way to describe this is with an example. The first company that I was part of the founding team was Streamline. Steamline was a consumer direct company that delivered a whole range of goods and services directly into the home; Groceries, dry cleaning, video rentals, prepared meals, pet food and lots of other stuff on a weekly scheduled basis. We focused our business on what we called “Busy Suburban Families.” We had one key a rule. If you were a director or above, you had to be a customer. Every other employee was also encouraged to be a customer but at the director level it was required. But unlike most companies, you didn’t get any special pricing or discounts. You paid exactly what our customers paid.
The reason for all of this was that we wanted you to understand exactly what it was like to be a customer. What it was like at 10:00 at night to place your order. What happened when you came home from work and opened your bins and god forbid your dinner wasn’t there. What happened when you looked at your bills at the end of the month. You had to understand at the personal level if we were delivering on the value promise that we made and how critical every thing we did was to satisfying that customer. We went so far that when we hired a new web development firm that was outside of our trade area we set up a new delivery route just for them so that they could experience the service that they were building the website for. We were customer focused because we were all customers.
Above my desk in Needham sits a 4” section of a carpenter’s ruler. It is mounted on a black piece of cardboard. It was given to me to remind me of the 4” rule. You see a friend went to the grand opening of a bike superstore that he had invested in. The place was amazing. Indoor riding track, shelves stocked with all of the best merchandise and not a thing out of place. Nirvana for the bike enthusiast. Everyone was anticipating the grand opening the next day. After the tour they were told that they could shop so he decided to buy a basket for his granddaughters bike. He tried and tried but couldn’t figure out what he needed. Pricing was confusing, and trying to figure out if it would fit the bike was impossible. At 4 feet away the store looked great. When he became a customer and got to within 4” the store was a disaster. It closed within 6 months. They weren’t customer focused. You have to view everything that you do from the viewpoint of the customer – from 4”.
Bottom line is being customer focused is about truly understanding what the customer is going through. Getting into their shoes to understand how they want to interact with your business and what the challenges are. Although this is not the most important characteristic that an entrepreneur has, it is the single biggest reason that the entrepreneur can compete with the established big guy. The entrepreneur doesn’t have the policies, procedures, and systems that the big company does which keep them from behaving as the customer wants. The startup can build their company to exactly match what the customer wants.
It’s that focus that builds fortunes.
This is the third in a series of five articles on the attributes that all entrepreneurs must possess. I refer to these as the 5 C’s. They are: Conscious, Curious, Creative, Customer Focused and Creative.
Your consciousness has made you aware of a potential opportunity. Your curiosity has then further defined the parameters of the customer needs, the current offerings and the area of opportunity. This is where your creativity takes over.
The creativity of an entrepreneur allows them to look at an opportunity totally differently than anyone has looked at it before. Hundreds or even thousands of people may have looked at the same problem, but the entrepreneur sees it in a new light.
Most revolutionary business ideas are the sum of many, many creative breakthroughs. Take Uber for an example, sure there was the big idea that said “Why can’t I just summon a taxi with my smartphone?” Although in NYC, you just go to the street and hail a cab, in many other large cities (or even in certain neighborhoods) it’s not that easy. Uber is a creative solution to the problem of on demand transportation.
But even after the big creative idea other hurdles pop up that require the entrepreneur to be creative. Questions like, how do I know that the person picking me up is reputable? What about payment and tipping? How do we get around the medallion laws? How do I make sure that someone is available? Although these things seem totally obvious now, when they were first starting up they were just a couple of the dozens if not hundreds of hurdles that the founders needed to craft creative solutions to.
They didn’t have any new information. They just took the same set of facts and put them together in a new and unique way.
From asking the question why during their curiosity phase the entrepreneur may see things that everyone else assumed was required and realize that it can be done a different way or totally done away with.
But what does all that mean in the real world?
Take the example of Streamline. Streamline was a consumer direct home delivery company. They delivered groceries, dry cleaning, video rentals, prepared meals and a bunch of other products and services directly into the consumers home.
Many folks took this to mean that you take the grocery store and put it online exactly as it is. Streamline looked at it and said that they could change the paradigm to better match what the customer wants.
The big idea was, “Why am I pushing a cart up and down the grocery aisle when I know exactly what I want?” I have a list. When the list says “Chicken Breasts” I know exactly what that means. When it says dish detergent I know the brand, size and scent that I want. The company could take that list and get those products for me. But the really big idea was if you are doing this to save time, you don’t want to be stuck in the house waiting for delivery. So they created a way to deliver so that you didn’t have to be home. This went against what every other company was doing at the time.
One of the myriad of smaller creative solutions that they had to come up with revolved around selling things like bananas. When a customer wants to buy a bunch of bananas, do they want 2 lbs or do they want 6 bananas. Grocery stores sell by the pound because they buy by the pound, but the customer is telling themselves to buy 6. Streamline fixed this by selling them by the each. They bought bananas to a specification that said they must be between a range (.3 – .35 lbs each). And then they told the customer the weight range and the price each. The customer than bought the number of bananas they wanted. Most companies won’t sell this way because they buy the by the pound. Streamline figured out what the customer wanted and sold them that way.
The second example is nomo. nomo is a social app aimed at college students to let them know what is going on around campus. Currently events on campus are publicized 3 ways. There is the old fashioned flyer that is never available when you need it. There are emails, which are ignored by students. And there is the school website which has tons of data but is very hard to navigate. The big stumbling block in all of this is that the college administration is the gatekeeper, this means that it is a hurdle to get things approved and there is a leadtime required. You also can’t publicize things like parties.
The big idea here was to put all of the control into the hands of the students – to build a platform where each organization controlled their own page and their own calendar. To make it free of administration control it had to be ad supported. And to keep costs low, groups and their leadership had to be verifiable via publically available information. The app launched this week and it will be up and fully running on at least 3 campuses this fall.
Entrepreneurial Creativity is fundamentally about taking in all the same facts available to anyone else and putting them together in a way that no one else has thought of to allow for a unique solution for the customer.
Or put another way…
“Creativity is just connecting things. When you ask creative people how they did something, they feel a little guilty because they didn’t really do it, they just saw something. It seemed obvious to them after a while.” – Steve Jobs,
Your consciousness has put this little nagging idea in the back of your head. It’s your curiosity that gets you to the point of deciding if it’s a good idea and even more importantly if it is one worth pursuing.
This curiosity comes to life thru an endless stream of questions. Each question gets you a little more information and helps you add color to your idea and to define if and how you move forward.
Basic questions like:
- How did it get this way?
- Has it always been like this?
- Why do they do it that way?
Help you gather deep background information on the industry and possible competitors.
As you begin to develop an understanding more complex questions are asked. These might include:
- How much does that cost to do?
- What are the cost drivers?
- What are people paid?
- What are the margins?
- Where does that come from?
- What skills are required?
- How do they acquire customers?
- Who are their suppliers/partners?
- Who else does this?
- Who are competitors?
These questions give your target detail and help you decide if you should continue to invest your time. Many of the answers might be guesses which will be revised later sometimes many times. Answers might also not be readily available but they help raise the entrepreneurs consciousness for things to be on the lookout for in the future.
An example of this is a company that I am working on with some of my students. The company is called “nomo” and it is an app that gives college students a place to find out everything that is happening on and around campus. This includes sporting events, club meetings and even parties. All of the content is entirely user generated and kept away from administrative control.
The idea came from one student making the comment that the “administration needs to fix the website because you can’t find out when anything is happening.” This lead to question “how do you find out what is going on?” being asked informally of many students on many campuses. As the onion was peeled back and the question why was asked it became apparent that there was a wide spread problem that cut across every campus in the US. As a follow up some quick financial questions about how much this might cost to develop and run. And who would be interested in gaining access to these students gave answers that demanded that further work be done.
There are similarities between how this curiosity guides you and the six sigma process. Many doing the six sigma process advocate using the five why’s. This informal process involves asking the question Why do you do that? Or Why is it that way? and when you get an answer you ask Why? again. Each successive time you get deeper and deeper into the problem until you are theoretically at the root cause.
As an entrepreneur it is by peeling back these layers that you develop an understanding of the strengths and vulnerabilities of a company or industry and gives you the tools and knowledge to capitalize on your idea.
Next Month: Creative
To be conscious is more than just continuing to have air flowing in and out of your lungs and to have brain waves on your EEG. It means to have an awareness of the world around you.
Every person in the developed world has tens of thousands of stimuli hitting him every day. Every person we walk by, every sign we see, tv, radio and the internet all contribute to this torrent of information. We can’t possibly be aware of all of it. We all have filters that determine what we notice and what we ignore.
How often have you driven somewhere and when you get there you realize you have no memory of the trip. It has become part of the background noise of your life. You were not even conscious of your trip.
Being an entrepreneur requires opening up your consciousness and loosening those filters. You still can’t take in all that is going on around you. You need to be selective. You pick and chose which areas that you pay attention to and ignore the rest. If you are a teacher you may be acutely aware of everything educational going on around you. Not just in your classroom but when you see a mother teaching her child something in a park, or when you see the manager in the coffee shop training a new employee, these things may enter your consciousness and may spark an idea that translates to your classroom.
These observation skills are natural but over time what you observe is filtered out. A successful entrepreneur purposely disables those filters by being mindful of their conscious thought. To turn off those filters require time and effort but can be done with practice. If you find yourself asking the question “did I just see that?” or making the comment “ you wouldn’t believe what I saw when I was at…” you are developing these skills.
By opening up these filters you become acutely aware of how things operate and opportunities present themselves to you. Not fully formed business plans, but little nuggets that engage your imagination.
Erik Larson, the author of “Devil in the White City” describes it this way “I try to put myself in the way of luck. I try to read widely, promiscuously. I try to fill my brain with things in hope that something will eventually click.”
For me, my consciousness is all about the consumer and how the consumer interacts with companies and their products. It might be standing in a line at the bank or watching people interact in an airport or even at Gillette Stadium home of the SuperBowl champion New England Patriots. I am constantly taking things in and trying to observe how these interactions work and don’t work.
One of the companies that I am currently working on is an app called nomo which is designed for college students. (nomo is the social directory for everything that is happening around campus, outside of the classroom. ) The seed of the idea for nomo came from a conversation that I was having with a student at Union College about entrepreneurship. At one point he said to me “and tell the administration that they need to fix their website.” I asked what he meant and he said “you can’t find out when anything is on it”. We finished the conversation but those comments stuck with me.
Because I spend quite a bit of time on multiple college campuses I kept wondering was there something behind those comments. They penetrated my consciousness and I couldn’t shake the feeling that there might be an opportunity there.
Next month is Curious.