Beautiful Strategy; Deadly Execution

photo © 2009 Matt Hendrick | more info (via: Wylio)

One of my clients recently contacted me about yet another e-mail he had received, which he considered to be SPAM. We are all getting more and more annoyed with SPAM, regardless of the effectiveness of our filters. SPAM forces us into a huge waste of otherwise productive time, to deal with the nuances of those who would inflict their unsolicited marketing efforts and avarice upon us.

My client had received an unwanted e-mail “offer” for something from a company which produces software he uses in his business. He complained to the company. They responded, apologizing (something I find exceedingly rare these days), and said they would remove him from their e-mail list. End of story, right? Of course not!

He got more e-mail and even a phone call. As it turns out, the company, somewhat amazingly, felt it had to continue to apologize because they had turned their e-mail marketing efforts over to a “respectable third party” which, as they said, had created what they considered a “fail-safe mechanism.” This mechanism was designed so that when the “respectable third party” company received an “unsubscribe” message, the primary company was “blocked” and could no longer communicate with the “customer” by e-mail.

Bottom line seemed to be that my client continued to get hassled, possibly because multiple e-mail lists had been generated at some time after his initial subscription to an online professional publication he used in his business. Neither the primary nor the “respectable third party” e-mail marketing guru company seemed to be able to find where the continuing stream of e-mail was coming from, and so the SPAM continued.

My client finally got a total refund for his subscription, but during the process, felt, as many of us do, that, like the thermostat in a hotel room, the unsubscribe button seemed to be for show. I’ve actually read a few articles which caution against clicking on the unsubscribe button because some marketing companies use it to verify that they have actually hit a “live” e-mail address, and thus ramp up their marketing efforts on this newly verified e-mail account.

What we have here is a failure to communicate, effectively. (With apologies to Cool Hand Luke and Paul Newman)

It looked to me like this company did make a much better than average attempt to do what they could to “make things right” for my client, including the personal phone call, apparently thoughtful letter and e-mail, and presumably full refund. Key words, however, are “average” and “what they could.”

This point coincides with a growing frustration I have with big and small companies. That includes a recent attempt to redirect a birthday present I had tried to get shipped to a relative. I was presented with a logistics system from one of our major package “facilitators,” that apparently does not include humans, and a previously well rated vendor who, no doubt, intentionally conceals any ability to investigate the status of shipments or contact a human, once your credit card payment is accepted.

I likewise recently tried to get my hands on a software shipment that was mistakenly delivered to the wrong address. Being at least a semi-nerd, I went to the package “facilitator’s” Web site to redirect or attempt to pick the package up, since it seemed to be floating around town faster than I was. The shipping agent’s notice on my office door indicated the package was accompanied by a “don’t turn it over unless you get his signature” caveat. From the facilitator’s Web site, I happily changed the pick-up location to indicate I would drive 20 minutes away and pick it up from the local distribution hub, rather than chasing the drivers around town.

When I got to the hub the next day, however, I was actually told by the facilitator’s employee that the package had been delivered to my office’s next door neighbor, who had apparently been kind enough to sign for it, and that the Web site deal pretty much never seemed to work. It took several days, e-mails and phone calls with my office neighbor to coordinate with her part-time schedule to finally get the software, at no small inconvenience to her or me. 

Back to key words: “average” and “what they could.” I’m pretty well fed up with companies who cannot control their technology, and particularly those who tout the strength and efficiency of their logistical technology assets. Your experiences and mine, although different in many respects, may be similar in that more and more of these companies seem to have made a deal with the “devil” in order to leverage their business.

We all face this issue from time-to-time, but I’m afraid some aspects of the technology some companies use seem to be taking on a life of their own, not unlike the “Terminators” and “Cylons” of science fiction fame. I’m actually now starting to worry about whether I should unplug my iRobot vac in the basement when go to sleep at night or am away from home.

The efforts of my client’s vendor did appear sincere and beyond what most companies seem to be willing or capable of doing in such situations. I understand economies of scale and that a vendor can probably ship something more cost effectively through a company which focuses only on logistics. I also realize there may be a further economy of scale for the vendor if it turns over other functions, such as e-mail marketing, to other companies that concentrate only on that.

The problem seems to be developing and monitoring an effective way for the primary company to retain control of the whole process. In the 1984 science fiction film The Terminator, by James Cameron (more recently of Avatar fame) the premise was that mankind had developed an artificial intelligence system, including a network called Skynet. That AI network was so sophisticated that it became self-aware and then set about to eradicate the pesky and less efficient humans who built it. The humans fought back and were on the verge of winning back their planet. Skynet, according to the story, then used emotionless cyborgs they had created called Terminators, to try to kill off the survivors.

These Terminators were very effective because they had no emotion. They were totally focused upon the goals they were programmed to achieve. Does this start to sound, even remotely, like a company with good intentions, turning various core functions over to “respectable third parties” who, in turn, create a fail-safe system to prevent errors? When the next step is turning your customers into the “resistance,” is it possible it might be time to rethink your strategy?

I believe it was Winston Churchill who said: “However beautiful the strategy, you should occasionally look at the results.” Some companies may be creating their own Terminators, as part of their effort to improve efficiency and their own bottom line. The bottom line, however, could be terminating their customer base, and in turn, themselves.

 

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.

Could Social Media Plug the BP Oil Leak? Can Social Media Clean It Up?

Following is a post from my SociaLies blog. This is the first one I have posted on both sites and may be the first of many.

Thus far, I have posted “unique” entries on the two blogs, but it seems to me this one enjoys a convergence of thought, which might be of interest to those only interested in entrepreneurship as well as to those primarily interested in social media forensics.

In this case, it seems to me that there is an opportunity for entrepreneurs and companies facing a crisis to use social media tools as part of their strategy to avert, resolve, or remediate disasters. In the case below, BP had contingency plans, but they have not worked. It seems they must now innovate. What better way to tap a much larger pool of gray matter, than posing the question, “how do we fix this problem?”

Here is the SociaLies post.
*******************************************************************

Could Social Media Plug the BP Oil Leak?

Can Social Media Clean It Up?

The title of this post notwithstanding, I’m not asking if:

1. dropping all the Facebook  ”friends,” LinkedIn “contacts,” and Twitter “followers” into the ocean directly above the horrific BP oil leak would plug it; nor
2. if there might be a possibility that turning a year’s worth of online digital chatter into pieces of paper containing those messages would bury the leak so much as to stop it.

Granted, there are statistics indicating:

• Facebook is said to currently have more than 400 million active users; 50% of whom, as active users, log on to Facebook in any given day; the average user has 130 friends; people spend over 500 billion minutes per month on Facebook; there are over 160 million objects that people interact with (pages, groups and events); the average user is connected to 60 pages, groups and events; the average user creates 70 pieces of content each month; and more than 25 billion pieces of content (web links, news stories, blog posts, notes, photo albums, etc.) shared each month.

These statistics come from Facebook.

• LinkedIn may have over 65 million members in over 200 countries; have a new member join approximately every second, and and be able to boast that executives from all Fortune 500 companies are members.

These statistics come from LinkedIn

• Twitter is said to have 105,779,710 registered users; new users signing up at the rate of 300,000 per day; and 180 million unique visitors coming to the site every month.

These statistics come from the Huffington Post

Some might say these statistics are inflated. That would certainly be a surprise wouldn’t it? The Tweet Twins, yes, you read that right, put these statistics, as of December, 2009 at:

• LinkedIn users at 24 million unique U.S. visitors;
• Facebook users at 23 million unique U.S. visitors; and
• Twitter users 116 million unique U.S. visitors

Any way you slice it, these are some hefty numbers. What I’m wondering is, with all those folks using social media to connect, learn, and more, why does social media seem to have so little a role in solving the BP oil catastrophe?

I searched the BP Web site and failed to come up with an easy way to offer a suggestion to BP on how to fix the problem. I’ve heard on the news that everyone from actor Kevin Costner to some of our most brilliant scientists have tried to make suggestions, but have had a difficult time getting anyone at BP to listen to them. How could that be in a world with such robust social media platforms designed specifically to facilitate communication?

“”They’re clearly out of ideas, and there’s a whole world of people willing to do this free of charge,” said Dwayne Spradlin, CEO of InnoCentive Inc., which has created an online network of experts to solve problems.”

When I searched the BP Web site for information on the oil spill, I found very little, if anything, to allow one to post a suggestion. BP America has a Facebook pageand a presence on Twitter. The official Deepwater Horizon Response has a Web site. It states:

“A Unified Command has been established to manage response operations to the April 20, 2010 “Deepwater Horizon” incident. A Unified Command links the organizations responding to an incident and provides a forum for those organizations to make consensus decisions. This site is maintained by the Unified Command’s Joint Information Center (JIC), which provides the public with reliable, timely information about the response.”

Below that statement are the names of fifteen .gov sites one might initially think were intended to facilitate the process of transmitting one’s brilliant, problem solving ideas to the “proper authorities.” Not so fast. All you get here is links to the home page of these fifteen government agencies.

The Unified Command Web site contains a link to an Alternative Technology Response Form, posted online. It also has a suggestions page where it says:

“BP has established a process to receive and review submitted suggestions, on how to stop the flow of oil or contain the spill emanating from the Mississippi Canyon 252 well. Proposals are reviewed for their technical feasibility and proof of application.”

“More than 7,800 ideas have been proposed to date. Given this quantity of technical proposals suggested by industry professionals and the public, it may take some time to technically review each one.”

Maybe they don’t need our input, with all those suggestions. As a student of how social media can be used by businesses, I find it hard to believe that putting up an essentially static Web page with a limited information form is the best way to get meaningful input. It took a while to find out how to offer a suggestion and the Web site says they are apparently overloaded with suggestions. Traditional media channels are full of stories about people who have suggestions but can’t seem to get anyone to listen.

BP seems to tout its expertise. BP America’s Web site maintains that:

“BP strives to minimize the environmental impact of its activities by applying management systems and standards and using innovative technology in its operations.”

If BP is innovative, they have not yet proven it in the Gulf of Mexico oil spill response. As of this writing, they were still struggling to find an effective way to “plug the damn hole.”

Perhaps they have not seen the wisdom or potential application of James Surowiecki’s The Wisdom of  Crowds. Surowiecki says:

“If you put together a big enough group of people and ask them to ‘make decisions affecting matters of general interest,’ that group’s decisions will, over time, be ‘intellectually [superior] to the isolated individual,’ no matter how smart or well-informed he is.”

If BP is actually getting too many suggestions to handle well in a finite amount of time, what would they have to lose by giving the wisdom of the crowd a shot? One of my favorite examples of how a business can use the wisdom of the crowd to be successful comes from Threadless. As Max Chafkin says in his article about the company in Inc. magazine, The Customer is the Company:

“…[t]he lesson of Threadless … demonstrates what happens when you allow your company to become what your customers want it to be, when you make something as basic and quaint as ‘trust’ a core competency. Threadless succeeds by asking more than any modern retail company has ever asked of its customers — to design the products, to serve as the sales force, to become the employees. Nickell has pioneered a new kind of innovation. It doesn’t require huge research budgets or creative brilliance — just a willingness to keep looking outward.”

If you are not familiar with the Threadless business model, it would be fair to say it is one in which the customers create the product. Threadless makes T-shirts. They don’t think up the designs, however. They let the customers do that. Anyone who wants to can design a shirt. Once the designs are in, customers have an opportunity to engage in a “popularity contest” and pick their favorite design. Threadless then produces the winning T-shirts for a group of potentially interested customers who are already prequalified buyers.

Could BP do worse than they are now? What would they have to lose by opening up the potential solutions and letting the world vote on the best solutions? If the “best” solutions didn’t work, it would seem they and we would be no worse off. Maybe Kevin Costner has the solution. Maybe Joe Shmoe does. I don’t know. What we do know is that BP has apparently not come up with one yet.

Maybe it is time for the wisdom of the crowds to take a shot at resolving the continuing oil spill in the Gulf of Mexico. Could social media be used to “plug the damn hole?” Could the use of social media be helpful in finding ways to more effectively remediate the damage the oil spill has and will cause?

I don’t know, but could BP do worse than asking?

If you are a company that wants to innovate, or just avoid disasters, shouldn’t you incorporate all available tools, including social media tools into your company tool box?

Lessons I Learned Today 6/23/09 – Entrepreneur Crowdsourcing

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.

  

*Traits of a Successful Entrepreneur

“Success and failure always depend on the entrepreneur.”

Here are the traits of a successful entrepreneur:

• Whether short term or long term, a successful entrepreneur never misses setting his goal.
• Successful entrepreneurs know how to revise or rewrite goals whenever there is something that needs to be changed.
• An entrepreneur knows how to search for opportunities that may not be visible for most people.
• An entrepreneur knows how to take advantage of these opportunities.
• An entrepreneur knows his strengths and weakness.
• An entrepreneur always wants to be the best.
• An entrepreneur enjoys what he does and knows how to enjoy as well.
• A successful entrepreneur loves his work and enjoys what he is doing but does not make his business his life.
• An entrepreneur knows when to get help.
• A successful entrepreneur recognizes that he could not do some things alone and needs a hand in order to get things right.

 

*Have a Purpose in Life? You Might Live Longer by Kathleen Doheny

“If you have a purpose in life — lofty or not — you’ll live longer, a new study shows.”

“It doesn’t seem to matter much what the purpose is, or whether the purpose involves a goal that’s ambitious or modest.”

“When comparing scores, Boyle found that those with a higher sense of purpose had about half the risk of dying during the follow-up period as did those with a lower sense of purpose. And that was true, she said, even after controlling for such factors as depressive symptoms, chronic medical conditions and disability.”

“What this is saying is, if you find purpose in life, if you find your life is meaningful and if you have goal-directed behavior, you are likely to live longer,” she said.

 

*Crowdsourcing: What It Means for Innovation by John Winsor

“Some have predicted that crowdsourcing is the future of the marketing, advertising, and industrial design industries. The phenomenon, they argue, will accelerate creativity across a larger network.”

“The current global economic conditions have forced all of us to do more with less. Participants sharpen their creative skills, stay involved with the things they love to do and—most important—get noticed at crowdsourcing marketplaces such as InnoCentive, TopCoder, uTest, and CrowdSpring.”

“The increasing complexity of problems has caused a rise in mass collaboration.”

“New forms of social editing will emerge that allow customers, experts, and brand advocates to curate crowd-created ideas to sort through the ideas and stay on strategy. For now, the most important thing is to jump in and try.”

“As crowdsourcing continues to accelerate, the biggest question is how it will affect business writ large. But it will certainly usher in radical changes to business models and business systems.”

 

*Turning Nonprofits into For-Profits by John Tozzi

“Social enterprises like Bikestation often don’t fit neatly into existing ownership structures. Those that register as nonprofits have trouble tapping private capital to expand, while for-profit companies risk compromising their missions because they must put shareholders’ returns first. But growing interest in hybrid business models has spurred recent efforts at the state level to create new corporate structures that allow entrepreneurs to integrate nonfinancial goals into for-profit businesses. “The intentions of entrepreneurs and investors have evolved over time to include a desire to create social value as well as shareholder value.”

“One new form, known as the Low-profit Limited Liability Company (or L3C), is intended for companies that put their missions before profits. The structure lets them qualify for “program-related investments” from foundations—loans or investments that further a foundation’s goals and also may yield financial returns.”

“The nonprofit remains essentially a holding company for the intellectual property, though Bikestation plans to use the licensing revenue to make grants. As part of the agreement, the nonprofit got a small ownership stake in the new Bikestation and controls a seat on the board.”

 

*A Brief Guide to Personal Branding Using Social Media by Hasan Shirazi

“Developing a brand over social media is a step-by-step non-linier process, and it will take some time before you start seeing the results. Remember, creating a personal brand is directly proportional to creating value for other people.”

“Besides blogging, to further extend you personal brand, creating accounts on other social networks and media platforms help a lot.”

“The concept of personal branding is closely associated to that of leadership and at the heart of its passion. There is much more you can do to standout and become a brand. Remember, Online personal branding using social media is depended on creating quality relationships. Try to look for ways to help those who are best placed to help you, they’ll be more inclined to help you, and if you need to call on them they’ll remember who you are.”

 

*Employees: The Direct Route to Customers’ Hearts

“The link between employee engagement and business outcomes has been well established: employees that are more engaged in their work and with their companies are more likely to stay, more likely to recommend the company and its products, and more likely to go the extra mile to get the job done. But employees can also be a window to customers, and more importantly, a barometer for their satisfaction with your company’s products and services.”

“Research involving more than 30,000 customer service employees conducted earlier this year by the Corporate Executive Board indicates that there is a close connection between employees’ work experience and customer opinions. Departments where employees reported they had the authority to take actions to meet customer needs, make decisions on their own to improve quality, and respond to problems without waiting for approval had the highest levels of customer satisfaction.”

“The study also discovered that even a small change in employees’ ability to get the job done for customers can yield big dividends. Improving the percentage of employees who reported they had the ability to easily correct customers’ problems by just 5 percentage points yielded a 10% increase in customer satisfaction. Satisfied customers buy more of your products and services and recommend your organization to others. In fact, the relationships between employee and customer viewpoints were so strong that employee opinions about their ability to serve customers could be used as a bellwether for client concerns.”

 

*Learning from Pirate Communities – Entrepreneurship by John Horn

“According to an up-and-coming business publication, the Harvard Business Review, “entrepreneurs look at financial challenges or a recession and, instead of wringing their hands, find ways to innovate and spin them into gold for social transformation.” The biggest immobilizer today is fear. Fear to take risks. Fear to innovate. Fear to change.”

“Yes, many – or most – of the pirates are gangsters. No, this doesn’t make hostage-taking okay. But this article has outlined some of the ways that these seagoing thugs are dealing with a recessive global economy. “Pirates were the first people to rebel against this world,” says Hari. They didn’t like the rigour, restrictions and “oppressiveness” of the seafaring alternatives of, say, the Merchant Marine or Royal Navy, so they chose a more independent, democratic and risky life at sea.”

 

*Dusting Off a Big Idea in Hard Times by Reena Jana

“As recession-racked companies search for ways to cut costs, some are rediscovering automated innovation. In the early 2000s, auto-innovation was trumpeted as the Next Big Thing. Instead of relying on engineers and designers, HAL-like computers would create goods on their own by exhaustively combining bits and pieces of previously successful products.”

“Now that companies are under intense pressure to get more out of every dollar, automated innovation is making a comeback. Rather than being used to create products, however, it’s turning into an efficiency tool to improve business processes.”

“Successful innovations are often built on the backs of failed ones.”

 

*Seniors as Entrepreneurs: Their Time Has Come by Stacy Perman

“Economic volatility plus more boomer retirees have moved the starting age for startups and led to a surge of senior-run businesses.”

“In recent years, the number of individuals starting their own businesses during what is usually considered the “retirement years” has been rising, according to economists and small-business observers. And so has the age at which they are starting their own ventures: According to the nonprofit AARP Public Policy Institute, in 2008, 21% of the self-employed were between 55 and 64, while 10% were 65 and older. Experts believe the stock market’s recent brutalization of retirement accounts will prod additional older Americans to start their own businesses.

“While many have elected to become first-time entrepreneurs after 60, a number of economic factors and a job market perceived to be biased against older workers have pushed a number of people into starting their own businesses. With many retirees finding their pensions and 401(k) plans dented—and a rising U.S. unemployment rate, now at 9.4%—the trend toward aged entrepreneurs is poised to grow.”

 

*Governing in a Recession by Beverly Behan

“As board members wade through today’s grim business headlines of massive layoffs, tumbling stock prices, and chief executive officer terminations, many are asking themselves what they should do differently. Here are four critical things boards must consider in responding to today’s tough business environment.”

• If your corporate strategy was set six months ago or earlier, you should look at whether it’s best to stay the course or make some critical changes to respond to the tough new economic environment. Take the time at your next board meeting (three or four hours for a really good discussion) to go back to the underpinnings of the strategy—the classic SWOT analysis (strengths, weaknesses, opportunities, and threats), with emphasis on the opportunities and threats presented in today’s economy.
• Spend another two to three hours at an upcoming board meeting talking specifically about risks. Focus on five major risks facing the company. How might they have changed in view of the current economic environment?
• As board members, you must ask yourselves: Do we have confidence in the CEO and the management team to lead the company through this tough economic situation? If the answer is no, then it’s time to pull an AIG. If the answer is yes, then it’s important to let the CEO manage and keep the board members governing.
• When losses mount and big investors rattle their sabers, boards always feel pressured to fire the CEO. Whether you should take the plunge goes back to the earlier question: Does the board still have confidence in him? If the answer is no, the board must consider the timing and ramifications of pulling the plug.

“Tough times call for some tough boardroom discussions. Make sure your board steps up to them in the right way.”

 

What I Think

I think a couple of common threads come together when I look at the random articles posted on this date. The Entrepreneurship Process blog article, Traits of a Successful Entrepreneur, makes the point that success and failure always depend on the entrepreneur. John Horn’s article, Learning from Pirate Communities – Entrepreneurship, makes the point that one of the biggest immobilizers today is fear to innovate or to take other risks. Pirates, glorified or seen as humorous to some extent in recent movies, are, as Horn states, gangsters who should be seen as neither glorious nor humorous.

What some pirates do have is a life so harsh at “home,” that taking almost any risk seems less dangerous than doing nothing. We all have a comfort zone where we like to stay because it is more comfortable than any alternative of which we are aware. Some simply fear any change, yet a fire or tornado can cause all but the most reluctant to leave in the face of clearly impending disaster. We have seen, of course, before and after Katrina and other disasters, that some will never leave, regardless of the certainty of the impending destruction of their homes. Most, however, have a great enough sense of self-preservation, that they can be forced to accept the uncertainty of the future after escape, as opposed to the certainty of destruction of everything they know, should they choose inaction.

If you look at crowdsourcing from the macro level, at one level entrepreneurs themselves are forming a global crowdsourcing case study. Some are staying where they have been most comfortable and successful in the past, hoping things will turn around. Few are unblemished by the sagging global economy, but undoubtedly many are well enough off to experience little or no change in daily life, despite lower profit margins or even losses in their various enterprises.

Stay with me on this. If you analogize our current global financial crisis with a Katrina type storm approaching our home, some entrepreneurs will have anticipated this, and made sufficient disaster preparation and recovery preparations so that they will be “OK” and survive the storm. Some will not have made those plans, but will detect the early warning signs, and move away from the “storm,” by cutting costs, reducing obligations, trying to speed up cash flow, looking for “disaster-resistant” goods and services, etc. This is kind of like buying plywood before the storm and checking your insurance coverage again.

Some, of course, will ignore the storm warnings, thinking the storm will turn away at the last minute, as it usually does. Those who live or have a vacation home in the Carolinas or Florida are probably accustomed to watching the early warning radar and tracking tropical storms during the hurricane season. Based upon that experience, I’ve often watched those storms form, grow, and start on their destructive path in a direction pointed at my property. Many of those storms have turned into hurricanes and actually gotten close enough to knock down some trees, but in every case, so far, they have turned away. If you do this enough, you can become complacent, thinking “it will never happen to me.”

It seems too many of us have fallen into this storm “watching and ignoring” pattern with the economy. I didn’t live during “The Great Depression,” but those I know who did, have a different view of saving and living frugally than many of us “younger” folks. Their paradigm is simply different from ours, based in large part upon the hardships they faced and became accustomed to as they tried to survive that storm.

It seems to me, entrepreneurs, as a macro group, are showing signs of a changing paradigm. Some have not made sufficient plans or have chosen to ignore the storm, and will undoubtedly perish, in terms of having sufficient resources to remain in the entrepreneurial community. Some of my own clients have been so economically damaged by trying to hold onto a sinking business, that they will likely never be able to must the financial energy to re-emerge as a business owner.

Most of the survivors, however, are those currently scurrying away from the storm in one way or another. They are changing the way their business thinks and works. They are using strategies, such as the employee empowerment tactics described in the Business Week article, Employees: The Direct Route to Customers’ Hearts. They are finding ways to determine what their customers really want, finding more efficient ways to provide this to them, and to doing what they must to survive.

How are you handling the storm? If it has already destroyed your business, do you have the strength to make it rise from the ashes? If it has not hit you yet, at least to the point of making you alter your thinking about the potential to cause you serious damage, have you made realistic disaster preparation and recovery plans? Many of the old rules seem to be going out the window with this storm. It could, in fact, become the perfect storm. Some will survive it. Some will not. Which are you and how will you make that a certainty, as opposed to a possibility? One way might be to continue to watch the macro entrepreneurial crowdsourcing patterns forming now, and to say with those who are getting to “higher ground.”

  

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 6/15/09 – Lessons for Young Wannabees

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.

 

*Top 5 Mistakes in Forming Your Corporation by Brad Sugars

“While some owners think incorporation is only for “big” companies, there are a number of reasons even “small” entrepreneurs should think about incorporating, mainly from the standpoint of personal liability protection.”

“While the number of sole proprietorships outnumbers corporations, most of those entities exist by default–meaning the owners have taken the easiest and least expensive road to getting their businesses off the ground.”

“What those owners fail to see, however, is the downside of having all of your “business eggs in one basket,” and many are just a lawsuit away from losing every asset in their name–including their home, cars and any personal or investment savings.”

“While forming a corporation or LLC is less expensive and easier than ever before, here are some things to avoid to get your corporation off the ground.”

• Incorporating without getting the advice of a good CPA
• Thinking the corporate veil gives you unlimited liability protection
• Incorporating, then operating without getting the proper local business licenses
• Incorporating and then not filing periodic paperwork or taxes as required by your state
• Incorporating without sufficient capital 

“Getting sound financial and legal advice may up your cost of incorporation… but in the long-run, the costs of doing things right pale in comparison to the hard costs of being in the wrong type of corporate structure. Or worse yet, finding yourself subject to fines and penalties you never knew existed.”

 

*Entrepreneurs’ predicaments illustrate role of lawyer by Stuart Adams

Entrepreneurs can sometimes see only a golden opportunity or irreversible disaster on their horizon because of a lack of perspective. In many such circumstances they might benefit from an attorney’s impartial counsel.

Entrepreneurs, like all of us, sometimes get too close to a situation and can’t see the forest for the trees. An impartial professional can be an invaluable ally in achieving success or avoiding disaster.

Good and bad deals come along every day. When one crosses your path, it’s easy to lose perspective and jump on impulse. Taking the time to thoroughly analyze the opportunity with trusted advisers can spell the difference between fortune and disaster.

 

*Change Aversion – Coming to Terms by Dr. Earl R. Smith II

“Many people see it as stepping from the known to the unknown. However, the only way that you can see it this way is to ignore that change is an unavoidable part of your every day. You are changing all the time. Therefore, the question is not whether or not you will change but how big are the steps you are ready to allow yourself to take. Your personal growth depends on this very decision.”

“Stress over change comes from two sources. The first is the process of change itself – you have to pay attention to what is becoming the new ‘reality’. The second is the apprehension that you bring to the process when you contemplate changes at your upper level of tolerance. Your ability to come to terms with change and grow will depend on how comfortable you can become with the first apprehension and how much you can reduce the second.”

“It is a truism that there will be no growth without effort. Change and the challenges that it brings is the common denominator. Your approach to change and ability to achieve the correct balance will define your life as much as any other factor – and much more than most.”

 

*Building a Strategy Pyramid by Tim Berry

“I came up with the strategy pyramid, which made it possible to track implementation and work on strategic alignment. We used it to build a database of business activities that we called “programs” and track them back up through tactics and strategy.”

“You can use the strategy pyramid in your own planning. Focus on three or four main strategic priorities and build a conceptual pyramid for each one. Don’t sweat the details like definitions of strategies and tactics; just make it work for you, in your business, with your pyramid. Do sweat the details like making programs with specific responsibilities, budgets and projected outputs when possible.”

“Remember, good business planning is nine parts implementation for every one part strategy.”

 

*Assumption is the Mother of All … – Lessons for Young Wannabees by Dr. Earl R. Smith II

In any logical structure, there are key assumptions that, if overturned, will result in the total disintegration of that logical structure. In philosophical terminology, these are ‘synthetic judgments a priori.’

These assumptions are taken as given without question. Examples might be ‘god exists’. ‘I am alive’ or ‘today is the day after yesterday’. However, if these assumptions are proven false, the entire structure that has been built upon them crumbles and falls.

1. Question everything

2. Particularly the most important assumptions

3. Accept nothing as true

4. Unless you have drilled down to bedrock

5. Blind faith is religion

6. Business is validating and debunking

7. Debunking is as important as validating

8. Fools accept – professionals validate

“Remember: in business, it is much more important to be successful that to be right. Business is not about demonstrating the inherent correctness of your belief about reality. It is not about validating your assumptions about reality. It does not give you an opportunity to ‘change the world as we know it’. Business is about connecting a value proposition that can be delivered on with a set of customers who recognize the value of that proposition and are willing to pay an adequate price for receiving its benefits.”

 

*Beware the ‘Shiny Stuff’ Seduction by Luke McKinney

“Equipping a new office is a fine line between being on Wall Street and a kid in a candy store: you don’t want your brand new business to fail because of penny-pinching, but every cent spent is taken out of the pile keeping your company alive until it’s profitable.”

What questions should you be asking every time you’re about to be invoiced?

• What You Need, Not What You Want
• Don’t Be Ready For Everything
• Time Is Money, But How Much?
• Counting the Concealed Costs

You can’t plan on things working. You have to know what to do when things go wrong, and if you didn’t already know that you should reexamine your business plan.

 

*Drafting Trouble-Free Social Media Policies by James Wong

“In just two years, social networks have grown from little-known, niche Web sites to popular super-sites on Web. For many company workers, signing on to Facebook is now as much of their morning ritual as the Starbucks latte or checking out the sports pages. Rumor has it that Bill Gates spends 30 minutes per day on Facebook; and President Barack Obama twitters.”

“Meanwhile, in legal departments across corporate America, social networks are under the radar, either because general counsels believe that existing policies are sufficient to manage risk, or worse, they believe what employees post onto social media poses only minimal risk to the corporation.”

The risks presented by unfettered communications on social networks are serious, pervasive and increasing. Existing policies are unlikely to cover evolving situations, but even assuming existing policies are in place, enforcement can be problematic.

“In the area of intellectual property: too much sharing by engineers could jeopardize claims for patents or trade secret status; uploads may infringe copyrights; and the company’s trademark may be misused, for example, on worker blogs that complain about the company’s workplace practices.”

“In securities: misleading statements made by persons with knowledge of the company may be construed as securities fraud; bloggers may make statements during a company’s “blackout” period; bloggers airing a corporation’s dirty laundry on a blog or forum may run against the company’s view of disclosable events.”

“HR departments may go to social networking sites to research job applicants. However, there is a danger that they may gather protected information such as race, age, religious backgrounds, etc., that may expose the company to anti-discrimination claims.”

“Counsel need to create, adopt and enforce policies that reduce risk without causing bigger problems, like resistance from colleagues. Companies may find their policies posted on the Web, dissected and criticized by the general public. So the creation of policy itself becomes risky.”

“One of the most difficult aspects of formulating policy will be enforcement. Significantly, there are numerous federal and state statutes protecting employee speech rights in the workplace, including those that shield whistleblowers. Garden variety review and termination provisions may not be enforceable.”

 

*Harness the Power of a Trademark by Tamara Monosoff

“In the inventing world, a lot of attention is paid to patenting. Often overlooked is the power of a trademark–a wonderful tool that can provide an incredible value when it comes to protecting your product or brand name.”

“A trademark can become one of your company’s most important and valuable assets. For example, consider all the brands you know, trust and prefer. These trademarked names have immeasurable value, and they’re protected. You couldn’t open up an ice cream shop in your town and call it Ben & Jerry’s without a quick visit from a powerful lawyer.”

“One important thing to know about a trademark is that you should begin using it immediately, prior to the formal application process. And keep detailed records regarding the date the mark is first used in commerce; this is of critical importance when filing the trademark application paperwork. Additionally, by placing the trademark symbol beside your product or service name, you acquire some common law rights. This varies from state to state.”

 

*How to Value Your Startup by Asheesh Advani

“Entrepreneurs need to put a value on their startups in order to raise money, and investors need to put a value on their investments to generate liquidity. Since neither entrepreneurs nor investors are known for right-brain artistic thinking, this article aims to provide some tips for left-brain thinkers to make sense of startup valuation.”

“If investors are telling you that your startup is worth $1 million, then that’s what it’s worth.”

“If you’re not profitable, your business probably isn’t worth very much.”

“Be careful about overvaluing your startup with faulty assumptions; it will only make your life more difficult-particularly if your investors have governance rights, such as positions on the company’s board.”

“Much like artists, entrepreneurs need to use creativity in valuing their startup businesses. Traditional approaches to valuation based on book values and P/E ratios are akin to painting by numbers.”

 

What I Think

I think the relatively broad range of articles posted on this date provides a nice primer for first time entrepreneurs and validation for experienced entrepreneurs as well. Brad Sugars’ article, Top 5 Mistakes in Forming Your Corporation, makes the point that sometimes doing things right from the beginning may cost more, but it can save many times that amount in the long run. Many first time entrepreneurs will try to save money by cutting corners on hiring the proverbial “trained professional” to help with critical steps in the process of taking the start-up to the next level.

Although Sugars’ article mentions only fines, penalties, and tax consequences, Tamara Monosoff’s article, Harness the Power of a Trademark, should also give clues about the danger of losing a valuable trademark or service mark. James Wong’s article, Drafting Trouble-Free Social Media Policies, should likewise give some insight into the dangers entrepreneurs face by ignoring the opportunity to obtain professional counsel on issues such as creating employee policies. A slip on either side of the proper path can be extremely costly in many ways, including legal fees greatly in excess of what the entrepreneur would have paid to obtain correct advice to start with, let alone judgment damages imposed by a court.

Luke McKinney’s article, Beware the ‘Shiny Stuff’ Seduction, teaches us to watch the fine line between spending valuable start-up resources on those things which seem important or desirable, and those things which actually are essential. Too many first time entrepreneurs think they know what they’re doing when they attempt to start their first business. Unfortunately, I’ve seen many an MBA and highly compensated executive fall flat on their face when starting their own company.

If starting a business were easy, everybody would be doing it successfully. Many try, but figures from the SBA and other sources indicate the success rate is relatively low. Much of this failure is based upon the entrepreneur not doing adequate research or being underfunded. Sadly, many first time entrepreneurs simply don’t know what they don’t know. Since the devil is often in the details, it makes sense to find a mentor or professional who can guide you through these difficult day-to-day challenges. Until you’ve been down the often circuitous road of entrepreneurship, it is way too easy to miss a step or take a fork in the road, only to end up in the unhappy land of the “wannabees.”

  

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 5/20/09 – Which way do I go?

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.

 

*Growing Too Fast? Watch the Danger Signs by Shel Horowitz

A closely held business should prepare for the day when it might be for sale, and the business will fetch its best price only if everything is in order.

For bankers, the biggest caution flag is a cash flow problem and the most important criterion: a business should be able to repay debts out of income generated through normal operations.

There is a long list of red flags focused on lack of proper corporate documentation, which covers a number of areas:

• Documentation that is inconsistent with current practice
• Poorly negotiated vendor and franchise agreements
• Failure to document loans from shareholders or problem employees
• Improper protection of trade secrets and intellectual property
• Noncompliance with ERISA disclosure rules
• Lack of buy/sell and succession agreements
• Inability to move forward because 50/50 ownership creates a voting deadlock
• Inadequate cash reserves to pay taxes (especially for S corporations
• A history of contract disputes
• Unwillingness to grant sufficient independence to advisors or lack of follow-through on their recommendations

 

*Competitive Intelligence on a Shoestring by Shel Horowitz

“There are a lot of things you can do on the cheap that help you understand your market better.” It can help you:

• Be prepared when your competitor launches a new product or enters a new territory
• Understand the opportunities and threats posed by your competitor’s strengths and weaknesses
• Know when organizational shifts create power vacuums or new directions and centers of influence
• Watch technology trends that could create an upheaval in your industry
• Know how to protect your company’s uniqueness: the “special sauce” or “crown jewels:” that differentiate you from everyone else in the market

Among many other techniques you can use with essentially no cost to you:

• Examine the company’s own website
• Collect information from trade shows, industry journals, etc.
• Ask questions of former employees – that don’t violate their NDAs (for instance, “Who are the rising stars, what makes them tick? You’re not asking them to show you the blueprints, but the contextual info can help you understand what they’re going to do next”.)
• Visit job websites such as Monster.com and see what kinds of positions they’re listing
• Put their company names into news alert services and receive a notice when they get press
• Ask journalists who’ve interviewed your competitors about the back story that didn’t make it into print
• Look on business portal and information websites such as hoovers.com and ceoexpress.com
• Ask their customers, suppliers, and other stakeholders

This article was worth reading simply because of the amazing list of hyperlinks to CI resources, divided into ten categories. You have to bookmark this article.

 

*Grow Your Business with Strategic Questions by Shel Horowitz

By focusing on the positive, on the encompassing, broad-based “how” rather than on the narrower, more defensive “why,” strategic questions uncover new opportunities that might otherwise have stayed hidden.

Typical strategic questions might be:

• How might we..?
• What would it take..?
• What might shift our situation for the better?
• What in the past leads you to think as you do?
• How has change happened here in the past?
• How did the issue of… first get on your radar screen

Strategic questions can help your business last through the ages. Lipke cited a Royal Dutch Shell study of 40 companies that were hundreds of years old (the oldest was a 700 year old Scottish firm). The researchers identified four common characteristics:

• fiscal conservatism, including large cash reserves;
• a strong sense of organization, community, and each individual’s role;
• seeking outside influences ” for example- ongoing conversations with the most radical thinkers they could find”; and
• active encouragement of unconventional experimentation

 

*Branding: Three Experts, Three Approaches by Shel Horowitz

Branding is about creating loyalty: generating repeat customers and positive word-of-mouth that leads to referral business. The final result comes out of an exhaustive six-stage process:

• research
• strategy
• creation
• tools
• launch
• maintenance.

Each of these has many subelements. For instance, within the category of brand creation, selecting a name is one of the steps. Selecting the right name involves seeking something short…easy to spell…easy to say…distinctive…memorable…long-lasting…and without any really brainless cultural baggage in the words, the shapes, the colors (like trying to market the Chevy Nova in Spanish-speaking countries where the name translates as “doesn’t go”). Oh yes, and it should be available as an Internet URL.

 

*What Kind of Business will You have in 30 Years -And Who will Be Running It? by Shel Horowitz

“A successful succession strategy recognizes the need to combine younger visionary dreamers—sometimes called the “lunatic fringe”—and Boomer-generation practical managers who can turn those sweeping visions into systematized, replicable products and processes.”

Getting the radically different perspectives—the visionary and the manager—to harmonize requires an adjustment.

Collaborative leadership is key to fusing those two very different personalities.

You need a task team” to integrate marketing, sales, and manufacturing. “You will need collaborative leadership for boundary-less management.”

“In a traditional organization, knowledge transfer does not take place; people are protecting their turf. In collaborative leadership, we all work together. Everyone may not benefit equally, but together we’ll change the size of the pie.”

 

*Where to Locate Your Business by John Tozzi

Each year, entrepreneurs start or expand some 650,000 small companies, according to data from the Small Business Administration. Choosing the right place can mean the difference between profitability and failure.

Large corporations typically pay professionals high fees to find the best location for new plants, offices, or stores. But the cost can be prohibitive for small companies, ranging from $50,000 to $125,000 or more.

Many factors affect whether a place is a good location for a particular business, including the labor force, tax rates, distance from suppliers and distributors, access to transportation, and the local market for the company’s products or services.

GIS Planning launched a site three months ago called ZoomProspector.com, designed to help entrepreneurs find and evaluate potential sites based on what attributes of a place matter most to their business. Other Web sites like City-data.com provide local information, but Ubalde says ZoomProspector’s proprietary data, much of it collected from the company’s economic development clients, offers small business owners access to the same information large companies use when they decide where to site new locations. ZoomProspector is free for users and makes money by selling geographically targeted advertising,

Aside from the labor pool, tax rates differ significantly from state to state, and they may be more important for small businesses with few employees.

Those small businesses in a position to create jobs can appeal to local economic development groups for help, and use other tools such as the Site Selection Network.

 

*Think Twice About Being First to Market by John Tozzi

New research offers fresh insight on when to launch a product or service, and shows that being first to market isn’t always a competitive advantage.

“Conventional wisdom says being first to market creates a competitive advantage. Reality is more complicated. Market opportunities are constantly opening and closing, and a hit idea at one point could be a dud a year earlier or a yawning “me too” business a year later.”

“New entrepreneurs can improve their odds if they weigh how much they stand to gain or lose by waiting.”

“In a hostile learning environment, entrepreneurs gain relatively little benefit by watching others. For example, if the relevant knowledge is protected intellectual property, studying the market before entering wouldn’t yield much advantage. In these situations, the trade-off favors entering early. But in less hostile learning environments, where entrepreneurs gain valuable information likely to increase their success just by watching other companies, companies benefit from waiting and learning lessons from earlier players.”

 

*Desperate for Entrepreneurs by Amy S. Choi

With a 22% unemployment rate and the second-highest foreclosure rate in the country, Merced County is pinning its hopes on small business.

Entrepreneurs and small business owners in Merced County are facing dire times, and seeking financial assistance to help them stay afloat or, in Lucy’s case, get up off the ground. The cities want to help them. Local authorities, in fact, are pinning their hopes on entrepreneurs to help create jobs and restore economic health in the region.

Small businesses are the backbone of our economy. Entrepreneurs will pull the economy out of the recession. But without some assistance, whether that comes in the form of financing, refinancing, or debt relief, it seems all but impossible that entrepreneurs such as Lucy Whittle will be able to thrive, much less carry the rest of the economy on their shoulders.

 

What I Think

I think many of my business clients can use a road map. Fortunately, there are lots of such guides out there. This series of articles, once again, was chosen randomly. Look at the common thread, however. Every one of these articles can help an entrepreneur at some stage of the process of starting, running, or getting out of a business.

The Desperate for Entrepreneurs article by Amy Choi and the Where to Locate Your Business article by John Tozzi point out the significance of site location. There are tremendous differences in the availability of resources and the cost of locating in different parts of the county, and even within different cities in a single state. The “Big Guys” certainly put a lot of research into the decision on where to locate a new operation, as well as whether they can squeeze a little more out of a location by staying, or ultimately do better by relocating to another place. Why shouldn’t small to mid-sized businesses do the same?

Obviously, the “Big Guys” have resources with which to conduct such analysis, which it would seem smaller companies don’t have. On the other hand, these articles point out that even smaller companies can do extensive site location research at nearly no cost with resources pointed out in these articles. It would seem extravagantly foolish not to take advantage of such tools, which can provide a long term advantage or disadvantage to your business.

Another roadmap to success can be found in the Competitive Intelligence on a Shoestring article by Shel Horowitz. This article is packed with links to find out almost anything you want to know about your competition, your market, funding, the future of your industry, and all for free. Once again, before charging in or continuing on, shouldn’t you check the map to make sure you’re on course to your chosen destination?

Once you are up and running, the Think Twice About Being First to Market article by John Tozzi is a good one, which can help you save your limited resources to apply them most effectively. “Common wisdom” is to be first to market because once you become the leader, you have beaten the competition. As with the article I posted recently by Wil Schroter, Draft Your Competition, there are actually two ways of looking at this. In some cases, just as in the Indy 500, you are more likely to win the race if you sometimes draft behind your closest competition, watching for their mistakes and missed opportunities, as they expend more of their resources than you, all to stay ahead.

The road from start-up to a successful final destination is typically long and difficult. Sometimes it simply makes sense to be conservative at the beginning, to keep checking your map to make sure you are on course, and to conserve as much of your finite resources as possible for the final push. The articles by Shel Horowitz, which I posted on this date, should all be helpful in making the best use of those resources. All of them should help you keep your focus on your goal and help you reach it a little faster and in a little better shape than if you didn’t check those directions.

They have lots of road maps in service stations along the interstates for a reason. Are you one of those guys they talk about because you refused to stop to ask for directions?

 

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.