Lessons Learned – Casting the Net for Brilliant Idea “Show Stoppers”

The last four posts in this business startup series dealt with ways to get started brainstorming, for the purpose of coming up with a great idea for a new business. Some of the authorities quoted in those posts seem to play down the value of the initial decision, since, in their respective situations, major adjustments had to be made later to survive or grow. Some of the articles suggested you could probably just lie on your couch and have an idea run into you, rather than having to get up off the couch and work for the idea.

In her article, Getting into a Breakthrough Frame of Mind, Lisa Gundry, Professor of Management and Director of The Center for Creativity & Innovation at DePaul University, suggests “[D]uring this time of economic recovery it can be an opportune period to rediscover and even reinvent your business. The following ideas can help create the conditions for breakthrough thinking:”

1. Unlock yourself from your expectations and be open to possibilities.
2. Review the opportunity or problem as you understand it.
3. Engage in experimentation.
4. Focus your attention on what you want to see happen, rather than what you do not want to occur.

Here’s one more set of steps on how to brainstorm your initial business idea, and to move the ball a little further down the field. I always believe in looking a little further down the road when I’m trying to read a map, and Kathy Korman Frey’s article, How to Turn an Idea into a Business, takes us just beyond the business concept stage. In fact, she even gets into mind mapping with an article you definitely should read if you’re interested in ways to come up with an idea.

Frey suggests a seven-part strategy for coming up with ideas. She suggests starting by taking a piece of paper, drawing a circle in the middle, and then writing the name of an interest or passion in the middle of the circle. She then suggests, in the area just outside that circle, writing every word that comes into your head when you think about your area of interest. From there, you try to find those words that are connected in some fashion, .linking them with lines, then drawing circles around clusters of words, and, finally, picking your favorite cluster. Having found a nexus, you develop an “elevator speech,” briefly describing what the cluster-based business is about. At the end of the exercise, you develop and deliver your “pitch” to sell your product or service for this business.

A few years ago, there was a marked increase in the number of firms, and “inventors,” who spent a substantial amount of time studying patents which had been issued but never commercialized. Many patents boasted great and novel ideas, but could not be commercialized after the patent was issued, because there was either very little interest in the ultimate product (i.e. fruit) of the patent holder’s labor, or because it could not be produced efficiently.

Some of these patented creations needed lighter and stronger materials to be viable. Some needed an energy source, and some needed another part or component to reach marketable potential. Then along came lighter and stronger alloys, more efficient batteries, etc. Guess what? Great ideas were not really reborn, but they were resurrected and updated and lots of folks are making lots of money because they could “connect the dots.”

Some of these new business concepts may revolve around disruptive innovation. This “term of art coined by Clayton Christensen, describes a process by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves ‘up market,’ eventually displacing established competitors.” Harvard Business School professor, Lynda M. Applegate, describes this in her article, Jumpstarting Innovation: Using Disruption to Your Advantage, as follows.

“These disruptive innovations are not just novel inventions. Successful innovators take ideas and turn them into opportunities by adding a business model that creates sustainable economic value for all stakeholders. They then go one step further and exploit the opportunity by creating a sustainable business.”

This is exciting stuff. Part of this process, however, is Balancing interest and excitement, as mentioned by Jeffrey Kalmikoff, former chief creative officer at skinnyCorp/Threadless:

There’s nothing wrong with being excited. However, excitement is energy, and what you do with that energy is often times more important than the fact that it exists. Just because a car can go fast doesn’t mean it always should, right?

Kalmikoff makes the point that “excitement is what brings on the onslaught of brainstorming – new idea after new idea after new idea” but “I can now see how unbridled excitement can actually derail focus.”

Likewise, Richard Mammone points out in his article, Humility and the Successful Startup, that:

“You must take a full accounting of your strengths and weaknesses before you get started. This takes a great deal of honesty and humility, but it is the only path to success.”

“Every skill set required to form a startup should be subjected to a make-or-buy decision process. In other words, if you don’t have it, outsource it. Let me just stop here for a moment and mention that outsourcing is the strategic entrepreneur’s solution to most problems. There are too many moving parts in a business to have deep expertise in every area; it’s not practical for you to hold on to tasks like marketing if you are an engineer—or product testing if you are a marketing guru.”

I’m in the camp with those who value extensive work to come up with the best possible business concept right off the bat. We all know things change, but that is something to be factored into any plan for a business startup. We will get into synchronizing business goals and personal goals in a later post. For now, however, we must consider whether our new business will be a short-term venture, or is to be of much longer duration.

A huge segment of businesses, both in the United States and internationally, is family controlled. Some were started for that purpose, but many were not. We will look at the unique overlay of issues related to family businesses down the road, but if your goal is to start a business, which will survive your own life and be a foundation for improving the financial health of the family tree, then a substantially different set of options comes into play. Clearly, this might not be just starting a little Internet-based operation in your spare time, in order to get a little extra cash. Of course, if you start a really good Internet-based business, it can have the same impact on your family.

We have already looked at elements some feel are essential for a productive brainstorming session. Certainly, if there are things, which would seem to improve your odds of success in a venture, they should be considered carefully. Likewise, if there are elements which would tend to distract your efforts, delay them, or lead you in less than the most promising direction, efforts should be taken to minimize these. Low hanging fruit is one thing, ignoring the odds is another.

We have also looked at a few baseline considerations, such as whether it is better to try to go it alone, find friends to work with, exclude friends and find others whose only focus is on the prospective venture, or some combination thereof. All of these factors may or may not impact any given startup situation. As you work through the process, it just seems to make sense to try to cast the broadest net of concern, in true brainstorming fashion, to fish for as many of these potential “show stopper” factors as possible. Then, again using the brainstorming techniques we’ve looked at, we can start to rank them, discounting ideas with factors which seem least likely to impact us, and setting the others aside for further study and action.

There are many great articles, books, and seminars on developing innovative ideas. We’ve covered a few, and I suggest you look at as many as possible to come up with the perfect method for you. After all, what you’ve come up with in this exercise may not be the only one you will need or want to brainstorm in future. At some point, however, you’ve got to get beyond the concept stage and on to the next part of the process. In his article, How Good Is Your Big Idea, Tim Knox sums this up.

Every business idea, no matter how good it sounds while bouncing around inside your head, should be put to the test before you invest time and money into its execution. Success lies not in what you think of your idea, but what the buying public will think. Many entrepreneurs find out too late that the public’s opinion of their idea differs greatly from their own. Wasted time and money aside, the last thing you want to do is hear “I told you so!” from your husband, so take a deep breath, slow down, and let’s look at the ways you can test the feasibility of your idea.

We can presume there is probably competition of some sort for almost everything we might come up with, in terms of a concept for a new business. Are we not defying the odds again, if we pick the low hanging fruit, knowing there is likely to be much more sustainable business models within our reach with more effort? My vote is yes, and since I don’t see a show of hands in opposition, we’re going to take a brief look at some “macro” issues before we get to our final, short list of business concepts.

Perhaps one of the simplest “show stopper” tests is described by Alan Hall, founder and Chairman of Grow Utah Ventures, in his blog post, Two Questions Every Entrepreneur Should Answer. The two simple questions are:

1. Who are your customers?
2. How are you going to make revenue?

One of the popular “brilliant ideas” these days is to build a business based upon creating something free, building a gigantic social network around this concept, and then slowly finding ways to “monetize” the user base, either with ads on the Web site or blog, or by other means. We’ll look at this phenomenon in a later post, but suffice it to say, this can often land in the “low hanging fruit” bin. An article by John Tozzi, Building a Facebook for Wine, points out some of the hazards, even for lawyers. Michael Stajer’s original idea was to start an Ebay site for buying and selling wine, but the path took an unforeseen twist.

The Bay Area attorney sold his personal wine collection for $25,000 to finance the site, called WineCommune. At the time, he hoped to get venture or angel funding early on. “My original plan was, ‘Hey, I’ll get this product up and then I’ll shop it around and see if I can get some money, hire some people, and then take it to the next level,’” Stajer says.

That didn’t happen. The dot-com collapse came a year after he started WineCommune, and investors were wary of the regulated market of alcohol sales. Stajer kept his day job and gradually developed the site. He amassed more than $40,000 in credit-card debt to finance the business. But despite the time he spent wondering how he would ever pay the bills, Stajer says he’s glad he never got funded.

As it turned out, Stajer was able to change directions and stay with the wine concept, but his initial “brilliant idea” needed a major overhaul. This points out the need to have a backup plan, as you explore and finalize your own brilliant idea for a new business.

The prospect that your venture may never make money makes it important to have a backup plan, says Stajer. His father, a hotelier and restaurateur, advised him that “if you want to be an entrepreneur, that’s fine, but have something to fall back on.” Stajer knew that if his business failed, he could always work at a law firm for a few years to pay off his debt.

Stajer was able to rework his love for wine and desire to make it big by taking wine online. Ultimately, he scrapped the Ebay of wine concept and went with a little less inventory startup expense.

The company expanded by launching online retailer J.J. Buckley and WineZap, a price comparison site with a social network. He expects WineCommune to have $17 million in revenues this year from a mix of advertising, paid referrals, and retail wine sales across the three sites. “Now, of course, [the credit-card debt is] paid off, and I got my wine collection back,” he says.

If your big idea is trying to create viable wine businesses through social networks, flip through this slide show.

At this point in our journey, having spent the last four posts on coming up with the initial business concept or idea, it is probably time to take a short break. We started with a desire to create a new business from scratch. We have looked at a number of ways to brainstorm our first concept, trying to use the funnel approach. We first threw all our possible ideas up on the wall. Then we gradually started to look at ways we could reduce “all” to “fewer,” and more logical choices during the initial selection process.

This idea creation process is as much art as science. There are definitely many “scientific” approaches to it, many of which we’ve looked at, and many of which we have not. Every entrepreneur must pick his or her own combination of these methods for each venture. The method and the elements will change, in many cases, depending up the goals of the entrepreneur and other environmental factors.

At this point we still don’t know what we don’t know. That is a very dangerous place to be. Our excitement and growing passion for our initial selection make cause us to take off, rashly, in the wrong direction. A good general would never march troops over the hill without sending out scouts and having the best possible reconnaissance on what lies ahead. No one wants to be ambushed. We already have an investment of time in the process. As we continue our journey, that investment of time and other resources will increase substantially.

Every step we take in one direction may very well be two steps away from another direction. If we spend $100 or 100 hours pursuing choice “A,” then we have $100 less or 100 hours less to pursue choice “B.” We have a “gut” feeling at this point about which direction we should start out on, but being mindful of the “vector” factor mentioned in a previous post, we certainly want to conserve our resources, including our time, and reach our ultimate goal as quickly as reasonably possible. Some say it is all about the journey, but we don’t want to waste time on the trail either.

Having come up with some initial selections for our new business concept, in the next posts we’ll review what we have come up with and start down the funnel to refine and conduct further screening of our new business ideas to see if there are any show stoppers, which eliminate the reasonable prospect of going forward. We may hit the wall on one or more, but our initial research may also lead us to simple work-arounds, such as outsourcing. They might even help us discover some combination of factors leading to a disruptive innovation.

The path we are seeking is one which leads us to success. There are many, trails which will lead to failure and many, which will lead to disaster. We have to be as sure as we can that when we make further investment of our time and other resources, we are well prepared for the next steps in the journey, and have the greatest chance of success for the future.

This is the fifth post in the business startup series. For others in the series, check the series index.

Join the Applied Entrepreneurship group on LinkedIn. Membership is free and I try to post about ten articles a day there. We have some great discussions going and if you are an entrepreneur, we hope you will join us.

Lessons Learned – Finalizing the Short List of Initial Business Ideas

The title of Melanie Lindner’s article, Is Your Great Idea A Real Business?, asks what some might consider a fair question as we continue our journey to starting a new business.

“We were trying to find businesses that would want to buy our software, but it was hard to get new leads,” says Moodley, 36. He figured other sales organizations would be willing to pay $30 a month to drum up new business through his site, which would offer more targeted information than, say, mainly free sites hosted by Bloomberg and Schwab.

Good idea, terrible timing. About four months later, after plowing $2,500 and putting hundreds of hours into a prototype, Moodley watched in horror as Google launched its own finance site, called Google Finance. “It literally looked exactly like my site,” says Moodley. “I had a sinking feeling in my stomach as I clicked around and realized that their site was completely free, and I was planning to charge for the same information.”

Moodley’s mistake is all too common, says Toby Stuart, professor of entrepreneurial management at the Harvard Business School, who warns would-be small-business owners not to “overestimate their originality.” In other words: If you’ve thought of it, chances are someone else has too.

Fortunately for us, Lindner also gives us some help on how to answer this question, by asking two more:

The first question you should always ask yourself: Do I have a compelling value proposition? It might seem obvious, but it bears repeating: A great idea is only a great business idea if it has an obvious and compelling value proposition–meaning that enough people are willing to pay for your product or service at a price above your cost to deliver it.

Next question: Is there a viable market for your product or service? Even if your business is likely to turn a profit, professional investors won’t line up to fund an operation with limited growth potential. Also, don’t expect to create a new market–if one doesn’t already exist, there’s probably a reason

Have You Created an Impossible Business? by C.J. Hayden works through the efforts of a consultant to help entrepreneurs in two different scenarios. While these deal with existing businesses, rather than the determination of the basic concept or business idea in a pre-start up situation, there are relevant lessons for our journey. It sometimes helps to look a little further down the road when you’re studying a map (or GPS display). Here’s some wisdom from Hayden’s article.

It’s easy to think that any business can be successful if you work hard enough, but there are many situations where this just isn’t so. Consultants, coaches, and other service professionals often start a business believing that all they need to do is charge a “reasonable” fee and sell “enough” of their time. But unless you do the math to prove or disprove your assumptions, you may be creating a business that can never succeed.

New consultants, coaches, and other professionals almost always overestimate how much they can earn and underestimate the amount of time and money required to successfully market themselves. They also forget that they will have to cover not only their living costs and business expenses, but pay self-employment tax, buy their own health insurance, provide for their own retirement, and allow for unpaid vacation and sick time.

Another way to look at the process can be found in the article, A process to test a startup idea, by Brian S. Courtney.  In Courtney’s case, he had an existing business, but was interested in pursuing something different. Courtney said “[S]o what does this have to do with a startup? Well, I’m using this same process to help define my next move.”

We use five steps to align business users and software developers:

• Define the idea
• Determine the business case for doing it
• Create alignment around it
• Define an implementation plan to execute it
• Get executive buy-in to fund it

I love (perhaps too much) the phrase “low hanging fruit.” Common definitions include a simple problem or target; a target that is easy to achieve; or a problem that is easy to solve. Most of us love to find low hanging fruit, and in our search for the best business idea for us, we’re sure to find some. An article by Andrew Goldsmith, which I posted today on the Applied Entrepreneurship group site, Here’s an Idea That’s Not Quite Ripe, gives another view of this.

Goldsmith’s article seems to focus, literally, on orchards and consultants. He says:

How is a company like an orchard? In the minds of some consultants, we’re all field hands and they’re the Johnny Appleseeds of change. And the right way to work those trees? It’s advice we’ve all heard: pick the low-hanging fruit.

Plowing (no pun intended) through the article, discounting the general feeling of some that consultants may not be worth the fee, the article ends with the news that the consultants have figured out a better solution than the clients thought.

“In the past,” Faubion says, “we had larger trees that required ladders. The new trees are ‘pedestrian’ trees that don’t require ladders. So instead of picking the low-hanging fruit, the industry has lowered the tree.” Now that’s thinking outside the, uh, orchard.

The real lesson for us at this stage of our journey to start a new business is not how brilliant some consultants might be. Returning to the orchard, Goldsmith’s article mentions that “low hanging fruit” may not always be the best. It is the easiest to pick, but often the better fruit is higher on the tree and requires more work to reach. The lesson for us may be that we may come across many, easy to find “answers” on our quest. Just as there are often several equally plausible answers to a question, a common tendency is to harvest what seems acceptable, rather than working a little or a lot harder, going for the better answer and the real prize.

Paul Dowling, CEO at DreamStake Social Media, had an interesting post yesterday on the LinkedIn, Start-Up Phase Forum:

All too often I hear people say that they have had a brilliant idea and can’t understand why people will not buy into it. What they don’t realize is that the idea is only a small part of the equation. In some cases a good entrepreneur can even have success with an average idea so long as it is well implemented. An entrepreneur needs to tick a number of boxes. Firstly, potential investors and clients will need to buy into the person and their management team. A good management team will succeed with an average business idea, whereas a poor management team with a good idea will fail. Secondly, the team will need to be excellent at implementation. This involves writing a good business plan and executing on it. Thirdly, focus is essential. Very few entrepreneurs succeed without extreme focus at least in the early days. Finally, adaptability is a key point. The business idea will evolve on a monthly basis until the right model is discovered. A good entrepreneur can deal with ambiguity.

Wannabe entrepreneurs can spend their lives brainstorming the way to build a better mousetrap. If they do, they may never become a “real” entrepreneur. On the other hand, they can also dive in too quickly, perhaps having plucked some of the low hanging fruit we discussed earlier in this series, only to find it spoiled and worthless. That could leave the wannabe entrepreneur broke and exhausted from pursuing the “impossible dream.” Not a good scenario.

There must clearly be a balance in our efforts to discover the best business idea for our new venture. Just like the saddlebags on a mule, there must be balance between working hard and “working smart” on this stage of the process. At some point, however, we must also make one of our first business judgments and determine that we have exhausted our reasonable prospects of coming up with a “brilliant idea.” If we have not, we might want to start at the beginning and go through the basics again, recruit others in the process to give us different perspectives and skill sets, or simply find a mentor who can help us get back on the right path.

Once we find the first “brilliant idea,” our journey has just turned the first corner. In the next post, we’ll finish our quest for the perfect business idea and start the stage. We will embark on the process of initial research and testing of the idea we’ve come up with to give ourselves our first internal performance audit.

This is the fourth post in the business startup series. For others in the series, check the series index.

Join the Applied Entrepreneurship group on LinkedIn. Membership is free and I try to post about ten articles a day there. We have some great discussions going and if you are an entrepreneur, we hope you will join us.

Lessons Learned – Moving to Your “Short List” of Business Startup Ideas

We identified two criteria for our new business idea in the last post. Those are that:

1. we must have passion for whatever business idea we come up with; and
2. running this business must give us personal satisfaction

We also got started with the process of generating ideas or opportunities we are interested in exploring and adding to our short list of potential businesses to start. Since your starting vector (on the journey to find the best concept or opportunity for your new venture), will often be a factor in how quickly you reach your goal, if at all, we’re going to spend a little more time on that issue in this post.

In an attempt to be “fair and balanced,” I must admit that Paul Graham’s article, Ideas for startups, seems to place less value on the initial business idea.

The fact is, most startups end up nothing like the initial idea. It would be closer to the truth to say the main value of your initial idea is that, in the process of discovering it’s broken, you’ll come up with your real idea.

The initial idea is just a starting point– not a blueprint, but a question. It might help if they were expressed that way. Instead of saying that your idea is to make a collaborative, web-based spreadsheet, say: could one make a collaborative, web-based spreadsheet? A few grammatical tweaks, and a woefully incomplete idea becomes a promising question to explore.

Actually, startup ideas are not million dollar ideas, and here’s an experiment you can try to prove it: just try to sell one. Nothing evolves faster than markets. The fact that there’s no market for startup ideas suggests there’s no demand. Which means, in the narrow sense of the word, that startup ideas are worthless.

Despite Graham’s apparently pessimistic view of the value of initial business ideas and concepts, his article presents several strategies to generate good business concepts, and is worth reading as we move along on our journey to a startup.

I posted an article today on the Applied Entrepreneurship group site on LinkedIn, Saras Sarasvathy Explains the Entrepreneurial Method, by, of course, Saras Sarasvathy. She says:

So it’s not really a question of this is better than that, it is just that the way entrepreneurs do it, they work with what they have and they look around and say, “What can I do with this?” And then, “What else can I do with it?” So it goes back to the idea of doing the doable and then pushing it.  So they just look around at the resources that are available to them and by resources I don’t even mean money.  A lot of the entrepreneurs I study started with things like who I am, what I know and whom I know.  So they are looking at what kind of a person am I, what kinds of things turn me on, what kind of things that I just will not do because it goes against my values. So, they have a sense of self. They know what they know and very often they are very good at knowing what they don’t know.

I posted another article today on the Applied Entrepreneurship group site, from the Idea Sandbox blog, which also seems on point for our present stage in the process: How To Create The Perfect (Brain) Storm. This particular post sets out three elements necessary or at least helpful for brainstorming. Here’s a snippet from the post:

Have you ever been in a brainstorming or strategy meeting where all the elements seemed just right and ideas just kept flowing and flowing? You and your team were able to hit ideas “out of the park?”

Chances are you had…

1. a. the right people assembled,
2. b. the right process and tools, and were,
3. c. in the right place… where people felt safe to think big ideas and were free from distraction.

I call these conditions the Perfect (Brain) Storm… When all the elements come together just so, and ideas just seem to flow.

Despite what the last article says, some feel the quest for ideas shouldn’t be all that hard.  Finding the Real Opportunities starts out as follows:

Business ideas are all around you.

They are lurking in your garage, in your basement, in your kitchen, and in your children’s room. You’ll find them in magazine ads, at your neighbor’s house, and at work. They are right there in the vegetables you brought in from the yard . . . in the stack of papers next to your laser printer . . . in the back of your truck . . . and at the back of your mind.

You don’t need to be a genius or an MBA to spot those ideas and turn them into profits, either. Identifying business opportunities is often as easy as identifying problems many people share and finding a way to solve them

The article goes on to suggest that one reason it is so easy to find ideas for your new business is because you can simply:

• Do what you live to do
• Turn old standbys into new products
• Look for marketing avalanches
• Look for mundane moneymakers
• Spin off a more lucrative business (not relevant to us since we’re presumably starting from scratch)

There are certainly many more ways to consider when trying to come up with the initial core idea or concept for a new business. I will be posting an article tomorrow on the LinkedIn site, which at least raises one worth mentioning here. The article by Paula Pollock, is Ego Keeping You From Your Dreams?

The bulk of the verbiage in the article is not necessarily germane to our process at this point. It does raise the significant specter of ego,  which is germane. When working through the process of finding an appropriate business idea for further study, ego can certainly get in the way. This may be particularly true if working in a group, since we all want to impress our peers with our value in such situations. It could, however, be an even more dangerous factor when working alone, since there are no others to question our energy, experience, or available resources.

I often suggest a little exercise to clients embarking on a new venture. I recommend that, after they create their initial draft of a business plan or business case, they lock themselves in a room alone with a mirror. I suggest they then say out loud to themselves, while looking in the mirror at themselves, each of the essential things to which they plan to commit themselves in the prospective endeavor, and that they next repeat, in the same fashion, each of their qualifications enabling them to have a reasonable chance of accomplishing these goals.

Granted, I expect very few of these clients actually go through this exercise. Some have done it, have thanked me, and have then moved back into the real world. The exercise works just as well when each member of a startup group does this, individually, of course. If you get through it with a straight face, you are either a really good liar, or better able to do the same thing when you look for your first employees, investors, etc.

In the next post, we’ll try to get to our short list of potential business ideas, and then move on to the start of the research and testing phase.

This is the third post in the business startup series. For others in the series, check the series index.

Join the Applied Entrepreneurship group on LinkedIn. Membership is free and I try to post about ten articles a day there. We have some great discussions going and if you are an entrepreneur, we hope you will join us.

Lessons Learned – Brainstorming Business Concept Options

Have you ever had the feeling you wanted to start your own business, but just couldn’t put your finger on exactly what type of business that would be? Do you periodically think you’ve come up with a great idea for a business, but never seem to be able to put two plus two together to make five or more? Well, we’re at that point in the business life cycle.

Maybe there will be a real business and maybe there won’t. It is up to us to figure out if we can pull off starting a successful one. We can definitely pull off starting a new business, but with a troubled economy, banks which seem to have a death grip on funds for even their best clients, and skittish customers who may be delaying or avoiding all sorts of traditional spending, we’ve got to be even more careful than in boom times. Cash flow hides a lot of mistakes in your business plan. A recession can certainly point them out.

The good news is that historically, in times of economic downturn, the United States and other countries have often produced healthier and ultimately more successful businesses than in more prosperous times. The common wisdom is that this phenomenon is due to the fact that entrepreneurs are, by necessity, much more cautious in an economic downturn, take better care of their resources. This includes more judicious use of those resources, careful calculation, and sampling of potential ROI for their time, money, and other resources.

Given this premise, we want to do at least as well, but there is something else we want. We want to be happy in our work. I’m not necessarily talking Snow White’s seven happy fellows who whistled while they worked, but we want to be happy when we spend our time on this potential enterprise. Then again, being happy enough to want to whistle while we work wouldn’t be a bad choice either.

We will come back to this when we get to the good old entrepreneurial self-analysis, but personal satisfaction must be a major part of this new prospective enterprise. We have to remember that often, one option is not leaving your “day job.” Sometimes inaction is the best choice.

The other factor, consistently preached by the most successful entrepreneurs in the numerous articles I’ve posted on the LinkedIn Applied Entrepreneurship group site, is that entrepreneurs must have passion for their business.

There are all sorts of articles on how to generate ideas, innovation strategies, and the like. Some of these are great for large corporations and other big organizations with lots of resources, including facilitators with plenty of professionally researched data. How does one person or a small group of folks go through a similar process?

There are way too many articles dedicated to this topic to post here. Many others deal with it peripherally. I have selected just a few from the Applied Entrepreneurship reading list to start with in this post.

Based just on the title, I picked one by Derek Cheshire to start with, How to generate 20 new business ideas over coffee. Cheshire suggests the following method.

To start with, select an issue or topic about which you need to generate ideas. The fact that some of you will be more familiar with the topic than others in a group situation doesn’t matter for this exercise. Everybody will get benefit from trying out the technique and swapping notes afterwards.

The topic should have a positive and possibility-focused phrasing, such as “How can we gain/improve/create/diversify/build…” Make sure that everyone in the group understands the question or statement.

Cheshire also suggests each member of the group take notes on their own notepad (a/k/a laptop or handheld) and pick one member of the group to serve as recorder, putting all the ideas generated up on a flip chart, being sure to write them verbatim so as not to interject opinion or other filters.

He also suggests using a reverse statement to start with. In the case of my group, this might be listing all the types of businesses we would not want to start together, or factors of such a business, which we would not want to engage in. For example, if none of us wants to be a welder or be involved in a fabrication business, we might eliminate a few of the possibilities right off the bat. If we don’t want to be involved with kids in business, a tutoring (at least for kids) or day care business might take a dive early.

Cheshire suggests the next move is to reverse the process, using the same ideas generated in the first round. Although this part of the procedure would seem to have merit for determining what is not going well in an existing business situation, I’m not so sure it works for a group of friends and colleagues trying to figure out if they can come up with a business they could start together. Perhaps you can help me on that one. If so, I’d like to hear from you.

If working for an idea is too much for you, perhaps it will just come to you. Ryan P. Allis, author of Zero to One Million, wrote an article I posted for the Applied Entrepreneurship group, 105 Business Ideas. I know it is a catchy title, but the point is that there are tons of such articles out there for you to peruse.

If reading is too hard for you, then try the article I posted by Jeff Elgin: Looking for a Great Business Idea? Stay Home. The subtitle reads “A tour of the typical home reveals numerous opportunities to start a home services franchise.” Keep in mind, this article comes from the “Franchise Zone” of Entrepreneur.com, but Elgin’s premise is that ” as just one example of how ubiquitous franchises have become, let’s take a look around a typical home to see what types of opportunities await people interested in starting a home services franchise.” He then walks you through everything from lawn services, garage remodeling companies (something we could all probably use), to interior decorating, and maid services.

If you have more rooms, perhaps you can get more ideas while lying on your couch. If you have the energy to get up, read another of a very large number of articles on generating business ideas, which was written by Steve Strauss, Find the Right Recipe for Business Success.

According to Strauss, creating your own successful recipe is a three-step process:

1. Brainstorming. Sit down and write down every kooky idea that comes into your head about possible successful formulas that might work for your business. It could be an ad that you run in your local newspaper. Maybe it would be a direct mail campaign. It could be a sale, or an outlet at a local flea market. Who knows? There are countless ways that you can distinguish your business and create a successful recipe.

Once you have some ideas, eliminate the bad ones, and then get some feedback. Speak with people whose judgment you trust, and talk to other entrepreneurs you know who are successful. Come up with your top two or three ideas.

2. Testing. Once you have a list of potential goldmines (which is what a good business recipe is — something you can mine again and again), try them out. Yes, it would be great if they all worked, but the idea here is to discover your very best option, the one plan that can be repeated over and over again to bring in customers and money. Figuring that out is a great moment in the life of any business because it means that you will be able to be a long-term success.

3. Repeat. You must make sure that you will be able to duplicate this success time and again, with measurable, predictable results. And once you have done that, you will have created a reliable, steady source of income that you can always count on. Doesn’t that sound nice?

There are many other ways to generate initial ideas for a new business. We will continue our search in the next post. Got any great ways to generate such ideas? Let me know.

This is the second post in the business startup series. For others in the series, check the series index.

Join the Applied Entrepreneurship group on LinkedIn. Membership is free and I try to post about ten articles a day there. We have some great discussions going and if you are an entrepreneur, we hope you will join us.

Lessons Learned – Refining (or finding) the Initial New Business Concept

In my last post, I mentioned I had been working on a change of direction for this blog. Instead of digesting the fifty or so articles I post weekly on the LinkedIn, Applied Entrepreneurship group site, and then giving my thoughts and impressions of common threads, I’m trying something new.

The current plan is to continue to use the rapidly growing Applied Entrepreneurship archive of some 1,400 articles on entrepreneurship (also available from the Boxnet application on my LinkedIn profile page), as well as new articles I post from this point forward, The difference is that instead of just blogging about the articles, based upon whatever gets posted on a daily basis, I’m going to try to “connect the dots” in a different way.

The premise of the blog’s new direction will be to use those articles, as well as your comments, in a step-by-step journey to starting a new business venture. Beginning with this post, I plan to walk through the process of starting what could be either a hypothetical business, or perhaps an actual business. I plan to have some fun with this, and I hope you will too.

There are at least a few things, which could make this a little more interesting.

• First, quite some time ago, one of the posts referenced an article I’d run across describing a “virtual incubator” project. Without going into too much detail, entrepreneurs posted their interests online in an ongoing user generated blog format, in hopes of matching talents, opportunities, and other things necessary for a start-up. The goal was to actually create one or more real business ventures out of the “sparks” generated through the virtual community.

I followed much of the string from the beginning, which ended up consisting of hundreds of posts. I won’t spoil the secret of the extent to which this generated real business ventures, but I would like to think this series has at least the same potential.

• Second, a group of professionals with whom I have served on a board of directors, has been exploring the possibility of continuing to work together in some new endeavor. We all spend some of our time on charitable boards but have an interest in the potential of working together to make some money together. We like each other and respect the talents we have seen each other display for many months, while we served on the board of the same enterprise. We plan to get together socially in the near future, and I’m sure this topic will come up.

There is the potential that we can use the output (from me) and input (from you) of this blog series to help us gel our thoughts, pick a plan to go forward, and actually get a business off the ground.

• Third, simply posting “the best of” articles and gathering feedback from readers should allow me to periodically post “best practices” lists and discussions. The Applied Entrepreneurship reading list, referenced above, contains literally scores of articles on many different aspects of entrepreneurship, as well as the process of starting and running a successful business. Some of the articles contain conflicting points of view. Some are better than others. Some are the best for one situation, but may not work for another. This is where experience, a good dose of luck, and the art of applied entrepreneurship come into play.

There is no one book, which will walk you through starting up every type of business under every set of circumstances. I’ve bought and studied enough of them to feel comfortable in making that statement. I’m still buying them and reading them, but I doubt I’ll ever find that silver bullet. On the other hand, there are lots of millionaires, and quite a few billionaires, who got where they are through imperfect means and methods. You don’t necessarily have to do it perfectly, but you do have to do it well enough to beat the competition and sustain that long enough to get it to the bank. (Read the article I posted by Anthony Robbins, Don’t Try To Be Perfect.)

I plan to use this blog series to generate a series of “best of the best” business startup and business operations articles, which I hope will provide you with both an opportunity to participate in the selection process, and benefit from the results. The success of this part of the plan is as much dependent upon you as it is on me, so let’s get started.

On The Threshold of Starting a New Business Venture

One of the threshold issues in such an endeavor deals not with issues, but people themselves. An article by Noam Wasserman, which I posted on the Applied Entrepreneurship site earlier this month, Founding with Friends, Founding with Strangers?, deals, as the title suggests, with the issue of whether one is better off founding a business with strangers or friends. The article gives pros and cons, and was certainly worth reading as a preface for this venture.

Another of the threshold issues is whether the concepts entrepreneur “wannabes” are working with are real ideas or “just” opportunities. Often, I find my new clients come in with great excitement, having found what they think is the “better mousetrap.” Just as often, someone has apparently just found the “perfect” business opportunity, but they have to act fast to make it work. In both cases, there is a great danger that they will rush past the basics on their way to the “gold rush.” Sometimes that can work, but the odds are slim.

Yesterday, I posted an article by Tim Berry (founder of Palo Alto software and great business blogger), titled Ideas vs. Opportunities. Here are a couple of points from his article:

The business planning process is about filtering the opportunities — a precious few, requiring focus, and planning — from the idea.

An opportunity has some of the following elements:

• Industry and market potential: look at market structure, industry structure, growth rate, margins, costs, etc.
• Economics: capital requirements, fixed costs, cash flow, return on investment, risk.
• Competitive advantage: degree of control, barriers to entry, availability of sufficient resources.
• Management team: people who know the industry, the market, the operations, the logistics, the road to market.

So now we’re starting on the journey with at least two things in mind. The two issues are:

1. Is it better (or reasonable) to start a business with friends than with strangers?
2. Are we better off looking for an idea for starting a new business, or just looking for the right opportunity?

There are clearly many more issues one should consider at this stage, including the old entrepreneurial quotient self-evaluation. We’ll get into that and dozens of other startup questions and answers as we travel down this road together. If you have suggestions on answers to either question, above, or would like to suggest other threshold questions, please contribute to the process.

This is the first post in the business startup series. For others in the series, check the series index.

Join the Applied Entrepreneurship group on LinkedIn. Membership is free and I try to post about ten articles a day there. We have some great discussions going and if you are an entrepreneur, we hope you will join us.

Lessons Learned-Tweaking the Plan

What I Think

I think some of the faithful readers may have missed the daily digests of articles posted on the LinkedIn Applied Entrepreneurship. I’ve taken a little leave of absence from this blog for a couple of weeks.

On the one hand, with the economy turning around, I’ve been busier than usual (a good thing) in the for-profit arena. On the other hand, I’ve gotten a couple of not-for-profit projects closer to their “happy place,” so some of my time is starting to free up again. I mentioned in an earlier post that I feel compelled to give back as much as I can, and allocate a substantial amount of my time to various not-for-profit activities, such as volunteering as a SCORE counselor, serving on some community organizations, and various not-for-profit boards. I try to keep a balance, but with all these balls in the air, the ebb and flow of projects takes some careful project management.

For that reason, among others, I periodically try to evaluate the ROI for those I try to serve. This, of course, includes clients of my law firm and consulting business, but also includes readers of this blog. I have been happy to see a relatively rapid increase in the number of readers, but, frankly, am not getting the feedback I had hoped for. Granted, much of the content of each post, since I changed directions initially many months ago, was a digest of the articles written by others. These articles were carefully selected by me for posting with the Applied Entrepreneurship group I started in late February of this year.

The LinkedIn group is thriving and growing. We’re working on our first live event in Louisville, probably between the end of this year and Derby 2010 (i.e. early Spring). We have members in quite a few states and in over a dozen countries.

Tonight, I just posted the tenth article of the day on the LinkedIn group site. That brings me to just short of 1,400 articles I have posted on various aspects of entrepreneurship since February. Rather than being satisfied with the plateau this blog has perhaps reached, I have now decided to try to tweak it again, to see if I can increase the value to those who read it.

I have spent the last couple of weeks considering alternatives. Originally, I wrote periodic posts on topics, which seemed appropriate for the original stated purpose of the blog. After starting the Applied Entrepreneurship group, it seemed appropriate to synchronize these posts with the articles I was reading and posting on a daily basis with the Applied Entrepreneurship group. My hope was that this would help reinforce the lessons learned, or to be learned, from reading the articles themselves. I tried to post the digest a few weeks after the original articles were posted on the LinkedIn site, so the digests would not serve as a crutch or replacement for reading the actual articles. I added my take-aways, and tried find common threads in the articles.

The benefit of this, as far as I was concerned, personally, was that I had to read and reread these articles in order to be able to digest them and comment upon them. As with seminars I teach for other lawyers, consultants and other entrepreneurs, when you have to teach someone else about something you’ve been doing for years, you have a tendency to relearn and sometimes conduct a self-audit of sorts on yourself and your own practices.

My personal ROI for creating these blog posts has been tremendous. It has definitely helped me gel my thoughts in a number of areas and to explore many new and emerging areas, such as where Web 3.0 is likely to take us. Frankly, I miss not having the personal benefit of carefully rereading and analyzing the articles I have been posting. I feel like I have been missing something important in these few weeks I’ve been missing from this blog.

In my effort to tweak the plan for this blog, I am again trying to find balance between what I strive to do for readers here, and what I try to do for others. As with all negotiations, there has to be a win-win. Part of that equation for me must be getting back to having an opportunity to again do the closer analysis of these hand-picked articles. What must give way is doing this on a daily basis.

This is where I could use your help and input if you have an interest in this blog. My present thinking is that this could tie in with another project I started several years ago, and have let malinger. That project was writing a book, to be published online, about starting a business in the bubble-burst period following the initial online business boom. That roller coaster has now been around the circuit a few times since I started the book, and I did publish quite a few chapters in the form of articles, which remain on my law firm Web site.

What I am considering now, is combining the book project with the blog project and the Applied Entrepreneurship project. I plan to keep posting the ten or so articles a day on the LinkedIn, Applied Entrepreneurship site. I enjoy looking for, reading, and posting the ten best articles I can find every day. I also continue to learn quite a bit by doing this, and hopefully, the Applied Entrepreneurship members do also.

Having reached the 1,400 article mark, I find that I now have quite a variety of articles on applied entrepreneurship, but some are obviously better than others. I have scores of “the ten best” or “the fifteen most important” type articles, many of which are on the same subject but come to different conclusions. My thought is that I will try to “mine” these articles and post my thoughts about what is really most important or helpful, one topic at a time.

If I post about once a week, what I might be able to do is give links to the articles I’m considering on a particular topic. I will then do my own analysis and thoughts in the topic and post that. If there is feedback, as I hope there will be, then this blog can really gain value from readers lending their own opinions on a topical and searchable basis.

Another part of the present plan is to try to put myself back in the role of a start-up entrepreneur, considering those things that typically come up first in the process. I then plan to work my way through those issues entrepreneurs face, in more or less, typically life cycle order.

There are several challenges to this plan. One is that many of the articles I have posted already deal with more than one subject. Unless I reread all 1,400, and keep up with the new ones as I post them, I will undoubtedly miss some articles on a particular topic. Another is that there are many entrepreneurial startup variations. Some entrepreneurs are offered a business by a departing boss who would like to retire. Some want to convert a hobby to a business. Some family members are expected to join the family business and seem to have little choice but to take over when the family requires it. Some entrepreneurs come across a franchise opportunity and go that route, which is clearly much different than starting a business from scratch or buying a going business. These days, there is a surge of big companies offering employees an “opportunity” to take limited operations of the business and split them off to a new company for the new entrepreneur/former employee.

There are many other scenarios, but the main path I plan to take is that of someone who has a general idea of the sort of business they would like to start from scratch, but who is uncertain how to proceed. That being the case, I plan to work with the process and see where it takes me.

The extra “fun” of this new project for me is that a group of very bright individuals I worked with on a board of directors, is now thinking of taking up the challenge of continuing to try to work together in our respective lives after rotating off of this board. We have a variety of skills, would like to make some money, have some fun, we like each other (so far), and would certainly want to remain friends. We are planning a social get together very soon, and coming up with an idea for how we could work together with the above goals in mind, is a challenge.

For these reasons, the first topic I plan to tackle is how to come up with the best idea for a business. Clearly, many topics intersect and overlap at this and essentially every other stage of the entrepreneur’s business life cycle. We all have to start someplace, and trying to figure out how to get started and what to get started on, is a common issue with many of my clients.

I would appreciate your thoughts on this plan and your support with my intended tweak. Please let me know what you think.

This is the preface to the startup series. Here’s the first article:

Lessons Learned – Refining (or finding) the Initial New Business Concept

Join the Applied Entrepreneurship group on LinkedIn. Membership is free and I try to post about ten articles a day there. We have some great discussions going and if you are an entrepreneur, we hope you will join us.

Mediation as an alternative to expensive, public litigation of sensitive business issues

More than one hundred years ago, Abraham Lincoln was quoted as saying: “Discourage Litigation. Persuade your neighbors to compromise whenever you can. Point out to them how the nominal winner often is the real loser, in fees, expenses and waste of time.”

Lincoln was mainly trying to persuade lawyers to act as peacemakers and good members of the community by advising them to help resolve disputes without litigation. This he felt was simply a better practice than to be just another hired gun litigating your opponent into the dust. In truth, in the business community, this is often simply better legal and business advice than encouraging a business to initiate or continue a lawsuit.

Not all controversies or problems are appropriate for mediation. The decision to seek an alternative to litigation may, however, be most important in two situations. When the continuation of a business relationship (such as vendor-purchaser or employer-employee) is more important or could provide greater long term benefit than victory by litigation; or When the business has proprietary information or trade secrets at risk which might be subject to disclosure to the public (and particularly where such information may not be protectable in a court proceeding).

Mediation to Preserve Relationships

 

Most businesses employ alternative dispute resolution tactics nearly every day in their relationships with employees, customers and vendors. Litigation is and should be the exception to the rule when handling problems in these relationships. Were this not the case, certainly these businesses would not last long nor be successful.

Preservation of all of these relationships is essential for development and growth of any business. Our society seems, however, to be transcending into one that is ever more litigious and this may cause a strain on an already tenuous bond.

Early referral of a dispute may prevent the initiation of litigation. If litigation has already commenced, one of the goals of mediation can certainly be the rebuilding of a damaged relationship. Professional mediators are trained in the use of special techniques designed to allow the parties to address their own problems creatively and to reach their own binding solution.

Often, simple miscommunication or the desire to tell one’s story, is the missing element which first results in a bruised ego or growing mistrust, and then ends in a broken relationship. The process of professionally facilitated mediation can be handled in such a way that the parties have both the opportunity to give their version of the problem and to really listen to the other side’s version of what happened and what is important. This can all take place in an environment set up for a relatively relaxed, informal and positive conversation.

If saving the relationship with a valued key employee, an important customer or supplier is more important than trying to achieve a costly “victory” in court, then mediation can be the answer.

Mediation to Protect Proprietary Information

 

Any lawyer who has spent any time in the records section of any courthouse has undoubtedly come across a litigation file which contains some type of “sealed” envelope of evidence or records. Often, parties in business disputes deal with trade secrets and other information which their competitors would love to get their hands on. Attorneys for such litigants will then seek “protective” orders or use other procedural devices to protect such sensitive and valuable information from dissemination to the wrong hands.

Unfortunately, the judicial clerks, posting or docket clerks, copy room clerks, records retention clerks, secretaries and judges, adverse counsel and others who populate the courthouse and repeatedly interact with court files, are not usually particularly adept at nor informed on the issue of protecting such files from unauthorized eyes. Typically such files are public, pursuant to the Freedom of Information Act or some local state open records law. Often there is no way to tell who has opened a file, let alone who has copied part of its contents or even removed parts. Frankly, it happens in every jurisdiction.

If it were your customer or price list that might be subject to such unregulated disclosure, would you not take reasonable steps to protect this information? Once you sue or get sued, you lose much of your control over your records, let alone control of the outcome.

In litigation, you face a hostile opponent who may very well be able to use the power of the court to pry open your vault of confidential business secrets. You may also find that your fate is in the hands of a judge or jury that has less regard for your business than you do, and a different attitude about your trade secrets. Once the judicial forum is invoked by either party, however, it may become impossible to remove your business from it.

Alternatives in Dispute Resolution

 

There are a number of different ways to resolve disputes. The following is a brief list of some of the more common varieties and some differences between them.

Mediation

 

This is a process that typically is voluntary. It is more and more often, however, being ordered by courts, so it is worthy of investigation. It is best conducted by a specially trained neutral facilitator who will use special techniques to bring the parties to a voluntary final resolution of their dispute. The parties will develop their own solution, which can be binding, or nonbinding, partial or complete.

The process of mediation is typically not subject to disclosure and all communications with the mediator can be confidential. The mediator will often caucus or discuss issues privately with one party at a time at some point during the mediation. The mediation can last a few hours or a few days, according to the agreement of the parties.

The process is fairly informal and usually held at a location designed for the comfort of the parties in order to facilitate dialogue and trust. At the end of the mediation, the parties can settle, or they can decide to go to court or another forum if they have not reached a binding agreement.

Arbitration

 

This is also a private and confidential procedure which, unlike mediation, is adjudicatory in nature. The parties typically will select one arbitrator or a panel to hear the case. The parties will present their case in a fairly formal fashion. Rules of evidence and procedure guide the process, just as with a judicial case, although the rules are generally somewhat more relaxed. Pre and post trial motions, subpoenas, evidence and witnesses are all a part of this process.

Typically, the decision of the arbitrator is binding on the parties, just as with a judicial decision. The parties usually can go to court to enforce the arbitration decision. Because the process is much more drawn out and complex than mediation, it is usually much more costly.

Mini-trial and “Rent-a-Judges

Parties to a dispute may decide to hire their own private judge to decide their case. This is usually a retired judge who will use existing court rules, although the parties can decide by agreement to modify the rules for reasons of time, cost or confidentiality.

Often a mini-trial will severely limit such aspects of the process as discovery, cross-examination and extensive presentation of evidence. In some situations, executives from the opposing businesses will “present” their case to a neutral. This is not a negotiation or a mediation. It is an abbreviated statement of positions, justification and basis for position. The parties will typically decide if the process is binding or not.

A private judicial decision of this type can result in the parties retaining control of the situation and the information, and should greatly reduce the time needed to reach a conclusion. There is no judicial precedent to such decisions, so a private ruling can be made.

When not to Mediate Mediation is designed to bring the parties to a dispute together so they may gain insight into the other party’s apparent justification for their position, and well as being required by the process to more closely break down and examine the elements of their own position. It is also designed to facilitate the parties in looking at their mutual problem in a more innovative and flexible way than, perhaps, they had previously. Mediation, however, will meet resistance when the parties do not have sufficient information to make an informed decision. It will tend to be less successful if the parties cannot gain the same frame of reference on critical aspects of the controversy.

Additionally, it will certainly fail if one of the sides is merely using it as a fishing expedition, rather than as a good faith device to resolve a dispute. Having all reasonably ascertainable facts before the mediation begins will assure a better result.

Mediation is becoming more common in business disputes as the court system becomes more expensive and bogged down with other cases. The time consumed by executive, staff and counsel, let alone the cost, can be devastating to any business. Add to this the judicially imposed loss of control of the result and the potential for wholesale disclosure or your trade secrets, and the prospect of litigation can be daunting.

Mediation, rather than the “win-lose” situation sought in litigation, uses a public “win-win” strategy to allow the parties to formulate their own solution in privacy. Mediation can result in protection of your confidential business information while you rebuild an important relationship, or at least quickly resolve what would otherwise be a continuing distraction from running your business.

 

If you enjoyed this article, why don’t you join the Applied Entrepreneurship group on LinkedIn. Membership is free and I try to post about ten articles a day there. We have some great discussions going and if you are an entrepreneur, we hope you will join us.

Lessons I Learned Today 7/2/09 – Did Entrepreneurship Kill Michael Jackson and Elvis?

This is a digest and recap of highlights, quotes, and comments from articles and discussions posted on this date on the Applied Entrepreneurship, LinkedIn group site.

 

*A process to test a startup idea by Brian Courtney 

I’ve redone this post to pull out the workshop methodology from how I hope to use that methodology in figuring out what to do in my next startup. To summarize the workshop process, we use five steps to align business users and software developers:” 

• Define the idea
• Determine the business case for doing it
• Create alignment around it
• Define an implementation plan to execute it
• Get executive buy-in to fund it

 

*Attrition – Early warning signs for a startup by Brian Courtney

The article highlights some of the challenges of trying to run a startup with 95% of the resources on one continent and the majority of the senior executive team on another. The author was responsible for US operations for an IT services startup out in India and noticed that quality was becoming a problem. The root cause seemed to point to excessive attrition rates, which had spiraled out of control.

The problems appeared to be directly related to the stress that rapid growth can bring. The team’s reaction to the stress created so much tension that it escalated to verbal abuse.

Western ideals warped judgment on ways to resolve the problems, because “in India things are different.”

“Authority and power create privilege and this sense of privilege led to the inconsistent application of policies (favoritism) which created a lot of resentment. With proper oversight and coaching most of the problems could have been avoided.”

 

*Service Quality Strategy via better IT by Brian Courtney

“To understand customer expectations you have to talk to your past, present and future customers. If your company can afford it, this means doing a market survey or hiring a market research team, but if you’re a startup or a small business, this may be cost prohibitive. So what can you do on your own to try to get a realistic picture of what your customers want? There are a number of online tools and sites that can help get an accurate picture so you can build a service quality strategy. Here’s what you should try to determine:”

• How do your customers want to communicate?
• Where do they want to communicate?
• How do you capture what they are saying?
• What do you do with the results?

“Depending on the kind of service you provide you’ll need to understand how your customers use technology in order to determine how to reach them. Customers range from Inactives, which do not participate in most online technologies to Creators, which are highly active, creating web content, publishing blogs and multimedia content for general consumption.”

“Once you have defined the technology profile of your customer base, you can then create a targeted communication plan.” The article offers ideas for the different profiles, as well as a multitude of links for these profiles, including:

• Spectators
• Joiners
• Collectors
• Critics
• Creators

Armed with a technology profile for your customer base, create a communication plan that focuses on where and how to communicate and where and how to monitor your customer’s online behaviors and discussions. Define your service quality strategy so that your organization can create the service standards needed to exceed customer expectations.

The service quality strategy is really a balancing act between what you can afford to do, what you can do, what you competition is doing, and what your customers wants you to do. Determine what are the most important service attributes your customers are looking for. Gather what information you can about your competition’s service successes and failures to see if they have vulnerabilities in service delivery. Address your customer expectations and align them with your strengths and weaknesses. Look for and attack competitor vulnerabilities for service differentiation and it should fit within your organizational capabilities.

Understanding customer expectations is the first step in delivering true quality service. The next step is converting your service quality strategy to quality standards that the organization can execute.

 

*Multi-Millioniare Entrepreneur Strategies by Ade Shokoya

“The big difference between successful entrepreneurs and entrepreneurs who fail is that successful entrepreneurs persevere in the face of challenges and adversity. All you need is an idea, belief and commitment.”

“Attraction + Action = Success. When you have an idea, you must instantly act on it. If you don’t, someone else will get rich and famous from it. The key to your success is action!”

“You don’t always need an original idea to succeed. Sometimes all you need is to improve or repackage and reposition an existing product.”

“To become a multi-millionaire entrepreneur, you have to continuously invest in yourself and your own development.”

“One of the key success characteristics of the multi-millionaire entrepreneurs is that they always take instant action.”

“Remember – the quality of your tomorrow depends on what actions you take today…”

 

*Michael Jackson’s Entrepreneur Characteristics by Ade Shokoya

“Whether you’re a fan of his music or not, there’s no denying that Michael Jackson had a big influence on popular culture. And for a time, he was the best in his field. So today, let’s take a quick look at Michael Jackson’s entrepreneurial characteristics:”

• Continuous Improvement
• Vision
• Innovation
• Uniqueness
• Value Focus

“The entrepreneur characteristic of focusing on customer needs and giving them value is essential to your business success. Because value and service are the foundation of any successful business. In fact, It is a prerequisite for any business.”

“Customers have so many options to choose from, if your service or product does not meet their expectations, they’ll go elsewhere. Most customers want to be loyal. Too many options lead to information overload and confusion.”

 

*5 Entrepreneurial Lessons From Michael Jackson’s Mistakes by Ade Shokoya

This article outlines “5 important lessons every entrepreneur and small business owners can learn” from some of Michael Jackson’s mistakes:

• Watch What You Say and Do
• Stay True To Who You Are
• Choose Your Team Wisely
• Manage Your Finances
• Never Over Commit Yourself

“Many industry experts questioned if Michael Jackson was fit enough to deliver such a physically, mentally and emotionally demanding schedule. Now being suggested that the stress he was experiencing may have been a major contributor to Michael Jackson’s untimely death. The lesson to be learnt from this is not to over commit. In fact, you’ll often find that you’re much better off under committing and over delivering. Because if you over commit, that might be the death of you and your business.”

 

*Practice the 10/20/30 Rule for Presentations by Joey Asher

“Guy Kawasaki is a technology guru and venture capitalist who listens to a lot of presentations from entrepreneurs seeking money for startup ventures. The overwhelming majority of the presentations he hears are, as he says on his blog, ‘crap.”"

He demands that all presentations at his business, Garage Technology Ventures, follow what he calls the “10/20/30 rule.” It’s a rule that should be embraced by anyone who wants to connect with audiences.

The rule states that all presentations should be limited to 10 slides, 20 minutes and have no words on the slides smaller than 30-point type. The rule “keeps you out of the weeds by forcing you to keep your message focused on key issues.”

“Limiting your message to 10 slides forces you to answer the question, “What do I really want to say?”"

“When Kawasaki listens to a pitch for startup capital, he allocates an hour. Limiting the pitch to 20 minutes allows for 40 minutes of Q&A. As Kawasaki knows, all presentations improve with lots of Q&A.”

“If you follow the 10/20/30 rule, your presentations will be a breath of a fresh air.”

 

What I Think

I think I see a dangerous syndrome for entrepreneurs in the articles posted on this date. Brian Courtney’s article, Attrition – Early warning signs for a startup, describes efforts to fix what appeared to be a quality control problem with the division of an IT company in India. As Courtney’s articles says:

“The problems appeared to be directly related to the stress that rapid growth can bring. The team’s reaction to the stress created so much tension that it escalated to verbal abuse.”

An argument could be made that Michael Jackson’s case, at least on the surface, represents the mirror image of Courtney’s article. It appears that Jackson’s rise to fame, obviously possible only because of his huge inventory of skills, was also propelled in the early years by the well-publicized stress inflicted on him by his family situation. In Courtney’s article, the business was nearly destroyed by the effects of stress. In Jackson’s case, his rise to fame could in large part be dependent upon that same stress, only to later take a fatal toll on him.

Ade Shokoya’s article, 5 Entrepreneurial Lessons From Michael Jackson’s Mistakes, gives one view of mistakes Jackson’s career teaches entrepreneurs. One of those was over commitment. In an eerie parallel, Jackson and Elvis might have had longer careers if they had paid more attention to another of the lessons Shokoya points to, which is choosing your team wisely. This appears extremely important for entertainers, who must repeatedly perform on queue at their peak, regardless of injuries and other day-to-day stress. Seems like that could be the same syndrome many other non-entertainment industry entrepreneurs may face when they come to work every day, then cannot let go of when their employees depart at the end of an employee’s normal business day.

Joey Asher’s article, Practice the 10/20/30 Rule for Presentations, mentions that if “you follow the 10/20/30 rule, your presentations will be a breath of a fresh air.” Perhaps that is what these entertainers and other stressed out entrepreneurs are lacking. The ability to put your business a/k/a next performance in perspective, giving balance to the “fresh air” of a real personal life, may obviously escape many highly focused, intensely driven entrepreneurs.

Staying “true to who you are,” as Shokoya’s article also points out, may certainly seem nearly impossible when everyone around you wants you to be ever more than you are. The ability to morph into that “superior being” is one talent many true entrepreneurs possess, and we mere mortals may not. While some who master that one characteristic may rise to the top of their arena, if they are not the “complete entrepreneurial package,” they may just not be able to maintain their flight to what should be their ultimate reward.

Could it be that some super successful entrepreneurs possess a fatal combination of the characteristics of both father Daedalus and Icarus his son? Greek legend say Daedalus was such a skilled artisan that he was able to fashion wings so he and his son could escape captivity at the hands of the king of Crete. Daedalus warned his son not to fly too high, because the wax which held the wings together would melt. The great skill and craftsmanship of Daedalus allowed his son to “rise to the top,” as it were, but the hubris of Icarus led him to believe he could ignore the warnings of his father. He flew so high the sun melted his wings and he fell to his death, just as his father had warned.

Is it possible that there is a mythological parallel to the stories of Michael and Elvis? Did their skills allow them to rise so high that they began to believe themselves too powerful to need to listen to their advisors? Perhaps it is the advisors who both pushed them just beyond their limits, and neglected their duties to keep them from flying so high that they risked, and eventually lost their lives.

We may never know the truth, but it is clear that any entrepreneur must be the “complete package.” Extraordinary talent and a seemingly super human work ethic alone may not be enough. If you cannot control your hubris, you must at pick the members of your team wisely enough that they can prevent you from melting in the heat of your own success.

 

If you enjoyed my impression of these articles, why don’t you read them for yourself and see what you and I missed or hit? Join the Applied Entrepreneurship group on LinkedIn. Membership is free and I try to post about ten articles a day there. We have some great discussions going and if you are an entrepreneur, we hope you will join us.

Lessons I Learned Today 7/1/09 –Seeing the Forest Beyond the Trees

This is a digest and recap of highlights, quotes, and comments from articles and discussions posted on this date on the Applied Entrepreneurship, LinkedIn group site.

  

*CEOs Who Saved Their Companies 

 “It’s a position many entrepreneurs will be familiar with, though Sonim’s journey from stardom to near-bankruptcy will be faster than most. Jamie Constable, CEO of turnaround investment firm RCapital (which now owns Little Chef) says there’s ‘a very steady flow of companies getting themselves into serious financial trouble’. Survival in this environment depends ‘not on how well run you are, but on how you’re structured financially.’”

“For investors, it’s essential to distinguish between good businesses that are simply running out of cash, and those with more fundamental issues.”

“Sometimes turnarounds are more about a fresh approach than a complete change of direction. Richard Brighton, MD of electronics manufacturer Exception EMS, was hired to turn round a company that was ‘going through a degree of stagnation, always making around £17 million, always chasing sales to make up for the customers it had lost, always at a break-even level.’”

“Viewed with hindsight, the solutions to a company’s problems may look obvious. But when you’re at your lowest ebb, those troubles can seem insurmountable.”

“Cutting costs, accepting low profitability and focusing on retention of customers may work in the short term, but often you’ll need to look further ahead and consider more radical changes to your business.”

“Economies of scale can be achieved as businesses pool resources such as buildings, equipment, specialist staff and back office functions. New products can be developed on the back of the companies’ combined expertise.”

“A business may not constitute a viable independent entity in the long term. If other companies are in the same position, a merger may be the most feasible option, minimizing competition and increasing market share.”

 

*Take advantage of being a startup company — while you still can by Elizabeth Cogswell Baskin

“As a brand new company, you can probably use all the help you can get. You won’t be a startup forever, so take advantage of it while you can. Don’t be shy about asking for help.

In the beginning, other business owners in your industry see you as a kindred spirit, or maybe like a younger, greener version of themselves. But sooner or later, as your company begins to pick up steam, that willingness to help will decline. Think of it as a compliment. This means people now consider you a strong competitor. Ask other business owners for advice. Ask everyone you know for referrals. Ask a potential customer for the sale.”

 

*Distress is painful: delay, deadly

“Ask any seasoned Interim or Turnaround Manager why distress is painful:  simply put, there’s a huge amount to do, inadequate and/or insufficient resources and time available, and frequently people are focused on doing things that are not top priority.  Early challenges include:  getting a clear understanding of the situation;  managing customer and supplier expectations;  understanding how long things have been deteriorating;  discovering what has prompted action now;  and gently challenging assumptions in the brief!”

“Probe deeper and ask why things don’t always go smoothly once the agenda is set.  Even then, denial, prevarication or obstruction by or between the stakeholders can easily constrain the speed with which the turnaround can be started, let alone executed … … and that assumes that taking modest risks is not restricted by an urgent need to operate within tight banking covenants and closely-monitored headroom. “

“Given a situation with many of these factors, the number of issues compounds; and, unless they have had prior experience of a distressed situation, few stakeholders understand how rapidly deterioration can accelerate with the passage of time.”

“If you think you’re doing everything right, but the numbers don’t reflect that, go back to basics.  Double-check all operational and financial statistics and their interdependence.”

“If the numbers are still not right, or if things are starting to go badly wrong, why not bring in a Turnaround Manager or an Interim to help stabilise the situation?  As with any walk of life, there are times when it pays to seek out specialist help from someone whose training and experience equips them to work well in a specific field: they will almost always outperform those for whom this is uncharted territory.”

“Interims and Turnaround Managers have the added advantage of not being wed to any of the historical mental frames that inhabit most businesses.  Their focus is on a successful outcome for the company or the stakeholders, so they are not necessarily bound to existing strategies or emotional ties.  They are often able to ask pertinent questions based on their experience which may help to identify disconnects between the activity and the reported data.”

“t takes courage for an executive board to call for help from an external source – - sometimes they need to be prompted to do so by other stakeholders – - but the earlier that operational and financial difficulties are recognised and an Interim or Turnaround Manager is engaged, the better are the chances of survival.”

 

*Small Business Strategies: The rules you can break when starting a business by Elizabeth Cogswell Baskin

There are plenty of people, books and seminars out there to tell you all the things you should do when launching and running a business. A great deal of it is sound advice. But as the owner of the company, you make the rules. I don’t advise blindly accepting some of the business rules others consider common wisdom. Here’s a handful of rules I think are worth breaking:

• The rule: It’s all about the bottom line.  The reality: It’s about doing the right thing.
• The rule: Entrepreneurs all work 24/7.  The reality: You control when you do the work.
• The rule: You can’t start a business without a business plan.  The reality: Many successful companies skipped that part.
• The rule: You ought to have a thorough understanding of business.  The reality: You don’t have to know everything.
• The rule: It’s important than everyone like you.  The reality: Being the boss and being liked are sometimes mutually exclusive.

 

*Gen Y is taking the entrepreneurial plunge like no generation before by Elizabeth Cogswell Baskin

“The Millennial generation is now opening businesses at a faster rate than Gen X and Boomers. The Boston Globe reports that 30-40 percent of new graduates from top colleges are forgoing the interview process in favor of the startup process. Other research shows at least 50 percent of all Millennials count working for themselves as one of their goals.”

“I predict the majority of these new businesses will succeed. The odd quirks their generation brings to the workplace that are driving their corporate bosses crazy are the same traits that will help them be successful as entrepreneurs. Most important among those traits is their expectation that they are qualified to lead, starting now. Millennials also tend to chafe at being judged by their experience instead of their ability to do the job. That’s also a valuable trait for a business owner, because starting a company from thin air requires you to demonstrate that ability.”

Gen Y defines leadership differently than previous generations. This is what I would recommend for any Millennial contemplating a startup:

• Create an informal group of trusted advisors.
• Associate the risk of business with some physical risk you enjoy.
• Develop perseverance.

 

*Anatomy of a $1.67 Billion IP Verdict by Zusha Elinson

“News of the record-setting $1.67 billion patent verdict against Abbott Labs had patent lawyers slack-jawed across the country.”

“Abbott lawyers pressed the argument that Humira was entirely different from J&J’s competing arthritis drug Remicade, made by a division called Centocor Ortho Biotech. They said that Humira didn’t infringe and tried to invalidate the patent at issue, which Centocor had exclusively licensed from New York University. They also tried to convince the jury that Abbott’s drug came first, and Lee alluded throughout the trial to the Chinese proverb, “Give a man a fish; you have fed him for a day. Teach a man to fish; and you have fed him for a lifetime,” to illustrate the idea that Abbott had taught the world about how to make the arthritis treatment.”

“J&J’s lawyers weren’t afraid to turn to aphorisms. In what observer Carter called a “fire and brimstone” closing, Dallas trial lawyer Sayles quoted the biblical prophet Isaiah, asking the jury, “Come now, let us reason together,” as they discussed the huge damages in the case.”

“Sayles and Elderkin had the task of convincing the panel that the multibillion-dollar damages weren’t absurd, since they were tied to Abbott’s sales of Humira, which totaled $4.5 billion last year. They originally asked for $2.2 billion in damages. On the other side, an expert for Abbott put the damages at a much lower $200 million if in fact there was infringement.”

“After five hours of deliberations, the jury went with the Johnson & Johnson lawyers, finding willful infringement and awarding $1.17 billion in lost profits and $504 million in royalties. The award broke the previous record, a San Diego jury’s $1.52 billion verdict against Microsoft, in favor of Alcatel-Lucent.”

 

*Michael Jackson, Entrepreneur; The culture and politics that made his success possible. by Brian S. Wesbury & Robert Stein

“Regardless of what one thinks of Michael Jackson’s music or his life choices, it is easy to recognize how enormously productive Jackson was. He broke all the records for album sales, put MTV on the map and propelled music videos into the mainstream.”

“He created something out of nothing. He used his talent, hard work, and creativity to please the ears and eyes of consumers around the globe. If Jackson–or any entrepreneur for that matter–had asked a certain kind of economist whether he should pursue this line of work, this innovation, he would have been told it was foolhardy. “‘f there really was a market for that kind of stuff, someone would have done it already,’ they would say. But this is a static view of the world.”

“In reality, the economy is dynamic. And what allows that dynamism, what creates the environment for entrepreneurship, is the institutional framework–property rights, the rule of law and even the level of common trust among citizens.”

“Economic laws can either enhance or undermine the vibrancy of an economy, helping or hurting individual incentives and the flow of creative ideas.”

“Raising tax rates, regulating business and redistributing income can all interfere with these incentives. Americans know this, but politicians often listen to economists who don’t. With so many big items–like health care, cap-and-trade and large tax hikes–on the table, the decisions of the next few years will help determine whether the U.S. produces more Michael Jacksons, or not.”

 

What I Think

I think there are any number of lessons to be learned from the articles posted on this date, but, as usual, I’m going to try to find a primary lesson to focus on. In looking at these articles, although each of them has value, three sentences stick out from the article, CEOs Who Saved Their Companies:

“Sometimes turnarounds are more about a fresh approach than a complete change of direction.”

“Viewed with hindsight, the solutions to a company’s problems may look obvious. But when you’re at your lowest ebb, those troubles can seem insurmountable.”

In many respects, this is the reason for starting the Applied Entrepreneurship group on LinkedIn and for converting this blog to digest and comment on such insights. Put another way, as the old adage goes, sometimes it is hard to see the forest for the trees.

James Dicks puts an interesting spin on this in his article, Can’t See the Forest for the Trees. Dicks’ article, posted on Evan Charmichael’s blog, includes the following advice:

“Every day is a new challenge and, if it’s done right, the ball moves forward, inch by inch, and that’s all that can be expected in these troubling times. There is a catch though. You have to do something and sometimes that something is just getting off the couch to try and make something happen. Most times it is the small things that turn into the big things and sometimes the things you try your hardest at turn out to be nothing. But whatever you do will always give you new light into what you have already done and that’s when inspiration springs to life.”

It is really only hard to see the forest for the trees if you are too close and don’t have the experience to get an accurate perspective on your situation, or a guide who can educate you. Elizabeth Cogswell Baskin’s article, Take advantage of being a startup company — while you still can, teaches us that in particular, owners of start-ups may be able to get good free advice more easily than owners mature companies, because other business owners will see start-up entrepreneurs as a sort of kindred spirit on the one hand, while not necessarily seeing them as a threat on the other. Her advice is to take advantage of this as much as possible, since this will change fairly rapidly.

The other article by Baskin posted on this date, Small Business Strategies, warns us, that although there is a great deal of information and advice available for small businesses, be careful what you adopt as “gospel.” Her article goes through a number of small business “rules,” which may be better ignored than followed. Determining what is a good rule for your situation and what is not, is an art, but to some extent it is a coachable art. Having a good mentor will go a long way to helping you sort this all out. Working hard brings rewards more often than not, but working smarter should almost always net you a better bottom line and happier path to it. 

 

If you enjoyed my impression of these articles, why don’t you read them for yourself and see what you and I missed or hit? Join the Applied Entrepreneurship group on LinkedIn. Membership is free and I try to post about ten articles a day there. We have some great discussions going and if you are an entrepreneur, we hope you will join us.

Lessons I Learned Today 6/30/09 – Getting to Know You; Science Lab 101

This is a digest and recap of highlights, quotes, and comments from articles and discussions posted on this date on the Applied Entrepreneurship, LinkedIn group site.

 

*A Practical Guide to CEO Succession Planning by Clarke Murphy

“Clarke Murphy and the CEO/Board Services Practice discuss the specific elements and timeline of a successful CEO succession plan, as well as the steps necessary to ensure a smooth transition.”

1. Begin intensive knowledge sharing.

2. Communicate with stakeholders.

3. Develop a written transition plan.

4. Share the transition plan.

5. Strengthen relationships with the board.

The article contains an example of a grid showing the personal average of each candidate based upon the following criteria:

• Vision and Strategy;
• Ensuring Tactical Success;
• Relationships and Communication;
• Motivation; Business;
• Fit to Situation

Competitive Benchmarking with four tiers:

tier 1 – Best candidate available in the market for this position

tier 2 – Would present as candidate without reservations

tier 3 – Would be presented as a candidate with reservations

tier 4 – Would definitely not be presented as a candidate for the position

“Managing the CEO succession process is a board’s ultimate responsibility. A regularly reviewed and closely followed succession plan is essential to successfully exercise that responsibility. The costs of shortchanging this process are easy to see when companies are caught off guard by events; the payoff is reflected in the company’s momentum as it moves from one leader to the next. In addition, ongoing succession planning helps the board to be better informed and aligns the development of the senior management team with the strategic needs of the company. Beyond its usefulness in risk mitigation, CEO succession planning contributes to the successful governance and management of the firm long before a successor is needed.”

 

*The ABCs of Buying a Business by Tim Berry

“Buying an existing business is an excellent option that is often overlooked by entrepreneurs, but it does have advantages. You will have an established name, existing customers and an immediate revenue stream. However, searching for a business to buy can be difficult, and finding the right one to buy is tougher yet.”

“To provide some ’structure’ to this very complex decision, the following process-oriented steps may serve as a checklist to help you go through the process.”

“Based on what you know about yourself and why you are interested in this business, you must constantly assess if the concept and the business is right for you. Does it fit with your interests and your resources? Cash, credibility, skills and contacts: do yours match what this business will demand?”

“Access to the “real numbers” behind the business is crucial.”

“You will want to retain a Certified Public Accountant and an attorney who is knowledgeable in business acquisitions. A CPA will to help guide you through the financial analysis process, and you may benefit from legal counsel as agreements are drafted and signed. Their expertise and the emotional separation from the process can make the costs for their services your wisest investments in the entire process.”

“Ultimately, negotiations will lead to a business valuation to determine what the business is actually worth. There are several ways to estimate the value of a company, such as the value of the company’s assets, how much debt does it hold, and from what sources are the company’s current revenues and profits? All of these are going to have a different impact on the value of the business. Other factors to consider in the valuation process include:

• Level of risk
• Competition
• Growth
• Organizational stability
• Management team
• Overall desirability

“Based on a valuation that you find acceptable, the specific arrangements of the financial transaction may determine if this is a “go” or something to walk away from and feel good about.”

“Determine if you are going to be able to add value to the business or if your goal is simply to keep “the machine” running. Once you have purchased the business, what are your objectives? Are you planning on owning the business for the next twenty years, or growing it over the next five years and then looking for the opportunity to sell? This will impact the intangible assessment of what the business may be worth to you and help assess the potential challenges ahead. Beginning your business plan will help to clarify your objectives and the business potential ahead.”

The bottom line:

• Take your time.
• Be methodical about gathering all the information you can.
• Pay attention to the details.
• Get help when needed and leverage available resources.
• Continue to “test” to see if the business and its demands fit who you are and what you want your business to be.
• If the deal doesn’t feel right, keep looking

 

*Questions to Ask When Buying a Business by Stephen Windhaus

“There are so many questions to ask when considering the purchase of an existing business. Let me give you a few examples that relate to financial, marketing, ownership and operations:”

• Why is the seller selling?
• Have you asked to review the certified financial statements of income, cash flow and balance sheets for the last three years?
• Have you asked to see the company’s IRS returns for the last three years?
• Have you asked for a copy of all documents of all outstanding indebtedness?
• Has there been any significant turnover of employees?
• Is there a close relationship between company and customers?
• Do vendors display preferred, regular or irregular relations with the company?
• Are there any members to a management team for this company?
• What are the actual conditions of existing fixed assets like office equipment, machinery, vehicles and the like?

“This is a brief list designed to give you a starting point from which to begin the investigation of the venture in which you are about to invest.”

 

*Buying a Business? Know What You Are Getting! by Tim Berry

“When buying or investing in a business you need to evaluate that business carefully. One tool is the Investment Analysis.”

There are many valuation formulas:

• The Book Value formula calculates valuation as Assets less Liabilities, just the same as Net Worth.
• The Liquidation Value formula says the business is worth the liquidation value of its Assets, less Liabilities.
• The Replacement Value formula says the business is worth what it costs to replace it.
• The Times Sales formula is one where the business is worth the Sales Multiple shown as the Calculated Sales-based Valuation.
• The Times Earnings formula is another of the two most common.
• Market comparisons look at actual transactions of similar businesses of similar size.

“The valuation of a business depends not just on simple formulas and multiples, but also general market conditions, specific economics of the business, its location, its branding, its management team, its balance sheet, its customer base, the negotiating skills of the parties, and other factors.”

“For privately held companies, valuation of a business is theoretical until there is a transaction. When the transaction happens, the business is worth whatever the buyers pay for it. As a buyer and or seller of a business you don’t necessarily get what you deserve; you get what you negotiate; or what you settle for.”

 

*How Does Innovation Fit into a Business Plan? by Tim Berry

“Innovation changes a business plan pretty much as a reflection of how it changes a business. It adds risk, uncertainty, and interest too.”

“Risk has two sides to it: up and down. The upside risk in innovation is of course the benefits to a business when innovation leads to a more desirable offering: better product, suitable for a larger market, differentiated from competition, easier to build, and so forth. The downside risk the business that depends on innovation usually positions itself on innovation and loses big time when somebody else comes up with the next new bigger, faster, and better. “

“Interest comes with innovation too. Market makers are interested. Opinion leaders are interested. Competitors are interested. And investors are interested. To the investor, innovation means defensibility and market advantage.”

“Innovation is part of your company’s identity, we would hope one of its strengths, and certainly a key element in business offering. It directly affects the market, both in the higher degree of guessing required (educated guessing, we hope) and in how it affects target market and message. And it affects strategy focus, too, because it turns a company towards it like plants growing towards the sun.”

 

*To Franchise or Not to Franchise by Tim Berry

“When you are trying to decide whether to buy into a franchise there are several factors to consider. Make sure you are looking at a solid and effective franchise that offers real value. There are hundreds of good ones, but lots of bad ones too.

You are paying an up-front franchise fee and a percentage of sales to get two main benefits:

• A formula you can follow, a proven formula that guides you through the process, avoiding expensive mistakes.
• National marketing to enhance your business with a brand name, television advertising, etc.

“I would want to know about training costs, needs, quality and availability. I would also want to know from other owners how well the parent company meets franchisees’ needs regarding product and system-wide marketing. I’d want to know also whether their marketing actually works and how much supplemental marketing you need to do. Do they supply signage? Do you have any choice about signage, etc.?”

“I’d talk to at least 10 other franchisees before I spent my money on somebody’s franchise formula business. I’d also find an attorney with experience in this area, and go through with him or her some of the questions you should be asking. For example, is the franchisor going to protect your territory or sell another franchise across the street? How can you tell for sure? What guarantees does the franchisor make about national advertising, etc.?”

 

* Social Media Will Change Your Business by Stephen Baker and Heather Green

“There are some 9 million blogs out there, with 40,000 new ones popping up each day. Any dolt with a working computer and an Internet connection can become a blog publisher in the 10 minutes it takes to sign up.”

“The divide between the publishers and the public is collapsing. This turns mass media upside down. It creates media of the masses.”

“Companies have to learn to track what blogs are talking about, pinpoint influential bloggers, and figure out how to buttonhole them, privately and publicly.”

“The dot-com era was powered by companies—complete with programmers, marketing budgets, Aeron chairs, and burn rates. The masses of bloggers, by contrast, are normal folks with computers: no budget, no business plan, no burn rate, and—that’s right—no bubble.”

“The role of the blog startups is to build tools for this grassroots uprising.”

“The Web we’ve come to know is mostly a collection of documents. A library. These documents don’t change much. Blogs are different. They evolve with every posting, each one tied to a moment. So if a company can track millions of blogs simultaneously, it gets a heat map of what a growing part of the world is thinking about, minute by minute. E-mail has carried on billions of conversations over the past decade. But those exchanges were private. Most blogs are open to the world. As the bloggers read each other, comment, and link from one page to the next, they create a global conversation.”

“In time, aggregators could turn the Web on its head. Why? They discourage surfing as users increasingly just wait for interesting items to drop onto their page or e-mailbox. Internet advertising, which traditionally counts on page views and clicks, could be thrown for a loop. Already Yahoo is packaging ads on the feeds. Google is testing the waters.”

“Mainstream media companies will master blogs as an advertising tool and take over vast commercial stretches of the blogosphere. Over the next five years, this could well divide winners and losers in media. And in the process, mainstream media will start to look more and more like—you guessed it—blogs. Clay Shirky, a Web expert at New York University, calls it ‘an absorption process where the thing doing the absorbing changes.’”

“Blogs can land sponsorship deals for as much as $25,000 per month, say consultants. O.K. money for an entrepreneur, but a rounding error in the ad industry. Blog power simply doesn’t translate yet into big bucks. For now, it’s running mostly on people’s passion to communicate—especially in developing markets.”

 

* Social Media SWOT Analysis by Peter Hollier

“It only makes sense to use SWOT analysis within the Social Media realm to determine the strengths, weaknesses, opportunities and threats that business has or will encounter upon initiation of a Social Media program. Without a SWOT analysis it will be impossible to develop an effective Social Media Marketing Strategic Plan, develop company guidelines and effectively initiate the Social Media Program.”

“The following questions are a starting point to what should be asked about your company’s SWOT”

• Does your company have the creative people required to develop meaningful high quality content and communication on a regular basis?
• Does your business understand the keywords customers and prospects use to find your Social Media content?
• Does your business have strong change management skills?
• Does the company feel comfortable with empowering company employees to interact with customers using Social Media?
• Are you customers using Social Media for personal or business reasons?
• Have you identified and evaluated the efforts if any of your competitor’s Social Media presence?

“This by no means a comprehensive list of questions which need to be answered to complete a SWOT for your business’s Social Media program however, it is an indication of the types of questions you should be considering about your business’s capability to thrive in a Social Media environment.”

 

What I Think

I think all of the articles posted on this date center on change and change management of one sort or another. I also think the common thread is “getting to know you.”

Clarke Murphy’s article, A Practical Guide to CEO Succession Planning, deals with the specific elements and timeline of a successful CEO succession plan. Boiled down to the basics, this is simply a system in which criteria are developed to compare and contrast various factors to reach a decision on which of several options is the best fit for a particular situation. It is a way to “get to know” and understand several options and pick the best one.

The articles by Tim Berry and Stephen Windhaus on buying a business, when boiled down to the basics, are also stories of how one can create a series of criteria to use to compare various options. One option is to buy a business. One option is to not buy a business. You can take this up a notch, and compare various, somewhat dissimilar opportunities and bring them down to your own personal set of “final criteria.”

The screening used to compare various franchise opportunities presents one set of criteria. The screening to compare opportunities to buy several non-franchise opportunities presents other criteria to compare and contrast. Once the best candidate from each “column” is selected, the winners can be compared and contrasted using a narrower set of criteria, and that in turn can be compared to the advantages or disadvantages of taking no action. What a concept!

As they say, the devil is in the details. Knowing what formulas or criteria to use can be as much of an art as a science. Giving appropriate weight to the various criteria or factors is also critical to ending up with a selection, which will make you happy. These are things, fortunately, which can be accomplished by the proverbial “trained professional.” Selecting which “trained professional” to use and when to use them is, likewise, a process in which you can develop criteria relevant to your situation, such as education, experience, price, availability, etc.

Even the social media SWOT analysis article by Peter Hollier presents a similar analysis. Distilled down to the basic concept, this is a process of a company getting to know itself and how it will be able to manage a change when dealing with various options. In this case, it is a matter of developing relevant criteria to determine if it can achieve reasonable ROI from engaging in a social media campaign.

Isn’t this the same sort of thing our high school teachers tried to us in science lab? This is the scientific method applied to business opportunities. According to Science Buddy. Com, a popular Web site for kids learning the scientific method in school:

 The scientific method is a way to ask and answer scientific questions by making observations and doing experiments. The steps of the scientific method are to:

• Ask a Question
• Do Background Research
• Construct a Hypothesis
• Test Your Hypothesis by Doing an Experiment
• Analyze Your Data and Draw a Conclusion
• Communicate Your Results

Notwithstanding the Art of the Deal, is business really this simple? Does it just come to putting things on a grid and selecting the option with the best numbers. Not really, but it seems like that could certainly help.

Look at a relatively simple personal transaction, such as buying a house. There are lots of factors to consider, but for some people who move frequently, the process is just not that hard. Through multiple experiences, they have learned to identify the important things they want in any house, such as price, condition, location (ex. proximity to where they work, or to good schools), number of bedrooms, etc. Others, involved in exactly the same process for the first time, are probably much more likely to see the decision as extremely complex, to make a significant mistake, and be unsatisfied with the results, because they didn’t factor in something important to them.

In residential real estate, “curb appeal” is very important. In business, not so much. Given the wealth of material available online and from “trained professionals,” why would a business owner rely on curb appeal in an significant situation? “Getting to know you” can be an art, but not all of us are artists. If you want to play the odds, my money is on the science. 

 

 

If you enjoyed my impression of these articles, why don’t you read them for yourself and see what you and I missed or hit? Join the Applied Entrepreneurship group on LinkedIn. Membership is free and I try to post about ten articles a day there. We have some great discussions going and if you are an entrepreneur, we hope you will join us.