“The Time Has Come,” The Walrus Said

‘To talk of many things:
Of shoes — and ships — and sealing wax —
Of cabbages — and kings —
And why the sea is boiling hot —
And whether pigs have wings.’

I love that poem. There’s something whimsical in it, even though it is about an ending. I guess that’s what all of us are reflecting about this week: an ending.

When it comes to finishing up this course, there are many things that I can say I have learned:

  • Not all ideas are great business opportunities
  • Timing is everything
  • If you aren’t sure about financial details, get someone to help you (don’t just ignore them)

Those may just be some of the broad things that I picked up, but I am glad I did. I think I also learned that I need to be seeing the entrepreneurial spirit in every day business. There are plenty of times that the news reports something amazing a company does, and it can come from someone who has the same entrepreneurial spirit as the CEO of a startup. That spirit can take many forms, and like most things, there is not cookie cutter entrepreneur out there.

One of the other conversations I think I most appreciated was about Willingness to Give. We spent a lot of time in economics discussing Willingness to Pay, something as a marketer I am keen to remember. The same concept is true, however, that you have to determine the threshold for Willingness to Give. You are essentially looking at the exchange in value and determining what it is that can increase someone’s giving potential. Is it a logo placement? Special feature? Special treatment? Perhaps that is why we have celebrities who want to be so public about demonstrating their donating power; recognition is what helps raise their Willingness to Give.

If there is an opportunity for me to see some more of this in action, I might pursue it. I know I have been fortunate to know a number of people from RBTC already in the community, and as I have connected with the new people I have met, I know I will stay in touch.

Relationships are key, and while I already knew that, I think that is an excellent point for me to end on.

Thank you.

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Be Significant!

Daniel Pink’s video today was pretty impressive: you have to be significant. But you have to be significant in addition to being useful. There are so many people out there (and as a blogger, I run into them a lot) who want to throw a lot of the traditional forms of business, invention, production, etc. out the window in favor of right-brain thinking. You can’t do that, however.

Necessary, but not sufficient.

In that phrase (repeated a number of times for us), Daniel gets at the idea that moving to the right brain is an extension, not a substitution. We see this in product development all the time. There are new design features added or elements of the product are streamlined, you can even add a celebrity’s name to it. At the end of the day, however, we just want the product to work.  

I may have talked about this before, but Daniel’s video just underlines a theory I’ve been noodling for a while: business isn’t going to change into being 100% virtual, social, or technological. While those elements may make business better, you still have to be great at production, manufacturing, etc. We still will buy groceries and cell phones are still physical objects. This is more like completing the circle instead of starting a new one.

Personally, I was also inspired by the fact he used quotes from Fortune 100 CEOs. The impression I get from a lot of bloggers out there is that “Big Business” can’t get this design stuff. But look at Apple! They’re huge, and design is their business.

When it comes to changing the way that a company needs to think, there should be inspiration for right-brain thinking, but you need the basics. The video I posted above has a similar theme. You need a little extra in order to play music beautifully, but you also need to be able to play the piano. Enjoy!

Posted in Thought Leadership

Going Down with the Ship

In my career, I have had the not-so-fun experience of a company turnaround effort. We were a private firm, had been around 40 years, about 600 employees, and we were essentially in a luxury services business.

When they say there are signs of trouble way before the trouble really starts, it’s true. I think one of the biggest red flags I saw a year before was that the company didn’t think there was too much money to be made in the government.

It was as if they wanted to cut out a whole market just because of procurement difficulties. On the other hand, that market was releasing Requests for Proposals constantly. Filling out proposals took a lot less time than the six-month selling cycle for our commercial clients.

We fought tooth and nail to bring in amazing government clients, growing 20% in the year I was selling and providing extremely profitable projects to the office. Two of the top 10 company clients were federal agencies. And yet we couldn’t get corporate support.

This seems like management and strategy warning flags.

We know all companies have problems, that’s a given. However, if the financial proof is there that they’re misdirected, do you keep fighting it?

I look at our TTI case and Dave, seeing how he felt things were so right and that there were some financial indicators that he was right. But then those indicators also said he was wrong.

Maybe hindsight is 20-20. Maybe you need to have a lot of people who have analyzed failure to see that you might be heading for an iceberg. Or you could be in a position where every hiccup looks like an iceberg.

Turnaround is not fun. However, there are things that can make it less painful, and it is tough to think of those solutions. I guess the biggest lesson from my own experience and reading through this chapter is that you need to ask for help sooner rather than later.

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Willing to Take a Loss

After spending time speaking about banking and financing for start ups, I got to thinking about a conversation many of us in marketing have to have about products: do we take a loss just to get started? I think you can consider early product development very similar to a start up.

Most recently in the news, Amazon admitted to willingness to take a loss on its Prime loyalty program. Essentially, they are gambling that people who already are addicted to Amazon will be willing to pay an annual fee for additional benefits. It seems crazy when there are all kinds of ways that Amazon has found to cut costs, how is it this program will be unprofitable?

If Jeff Bezos walked into a bank today saying, “We have this loyalty program, and while we’re just taking it out of testing, we’ve actually added services to it while keeping the same price. Wanna help us out?” I don’t know if the bank would be so willing to take the risk.

Even with Amazon’s track record, I get the impression analysts are thinking that the incredibly cost-sensitive and lean Amazon might just be off its rocker this time. According to estimates in the Wall Street Journal, at $79 a year, Amazon is potentially losing $11 annually with an estimated average cost of $90 per Prime member. New services make the loss larger.

So what should a bank do in this situation?

If a start up or product launch was willing to start at a loss, there has to be demonstration of the potential profitability somewhere. For the Xbox360 it was in video game licensing and accessories, and for Amazon it’s in the other fees-based businesses it has. Perhaps that’s the key to really gaining financial traction: seeing the big picture and how other components contribute to the final result.

Prime is supposed to create brand loyalty, which in turn can increase customer lifetime value. A bank can understand that if you have financial information to support it (like that Prime members spend about $1,500 on Amazon a year, triple previous spending).

It makes sense that banks see companies when they’re a bit further along. In many cases, they have matured beyond that first amazing idea into a line of offerings. Sometimes those lines are supporting each other, and that can be where the business changes from being just an executed idea into a game-changing firm.

The Wall Street Journal article about Amazon Prime can be found here.

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Finding those Great Resources

Last week, wally Newton came to class. I’ve met Wally a couple of times, but I haven’t had the opportunity to really see how he teaches. In fact, I actually didn’t know too much more about him other than that he taught in the PMBA program.

Then he started speaking, and I was excited to hear about everything he did. Why?

Because he was excited!

You can tell that even though starting a business can be really stressful, he gets joy out of it, and he has a passion for helping others getting started.

This weekend, I saw him at the MBA and PMBA mixer. We got to talking, and I mentioned how great it was that he shared with us the story of Portagua. Perhaps he could come back and share the whole story, maybe with some more people from the Portagua team, at an afternoon event?

He said yes.

Chris Gallagher and I now will see what we can arrange next semester. Both he and I agree that getting to see a case that is happening right in our own neighborhood will be truly valuable. Ideally, this event will spark more interest with companies at the CRC, and we could even have some interns helping over there. I think it also is very important, no matter if you want to be in a start up or be in a big business, that you see how things work out for a firm end-to-end. In some cases those start ups do become big business (Apple, Google, and so on…Smilie: ;).

Wally also offered to introduce me to some folks at the Technology and Toast in a couple of weeks. I guess the saying is, “Better late than never.”

But I know finding Wally as a resource really changes things.

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Emotions Running High at Midwest Lighting

One of the things that struck me about the case we’re reading this week is the role of emotions in the decision-making process for what to do with Midwest Lighting.

I have seen it before: The father starts a business and expects the son to take over. Throw in some squishy partnerships and a few dramatic events, and you have a soap opera.

Nepotism can be incredibly helpful in some cases when you want to ensure that leaders have more than just a financial stake in the company. If you spent years building up a business, you’d hope that your offspring won’t mess it up as much as another individual. However, as another generation takes control, do they really have control? Are there other pressures that impact a decision?

Even if it isn’t conscious, there is a little nagging feeling of wanting to make a right decision based on what a founder would have wanted.

In the case of Midwest Lighting, there is some room for Peterson and Scott to make a decision without too much emotion involved. They can have a neutral third party come in, do a valuation, and then they can decide what’s next based on the numbers.

But great business can’t be run strictly by numbers. There is an emotional component whether we like it or not. It’s the balance of these two that is so critical to our case. Can these gentlemen acknowledge there is history, expectations, and a host of other personal feelings involved, in addition to the basics of getting the business taken care of?

I believe it is possible, but it isn’t going to be easy.

In some cases, things can be a bit better when the emotional part of the decision is diffused, either because roles are changed or more partners are brought on board. As noted, just acknowledging the emotions in the situation can help alleviate some of the issues.

The question to ask is: Is there more value in keeping this a family-run business than if someone else were running it? You can assign a monetary value to the passion, experience, and personal ties one manager might have over another. However, it is neccessary to take a look at the calculation, be honest, and determine if there is added value.

We know just as much as emotion might help drive results, it can also have major costs. Does your calculation support the emotional costs? Something to consider.

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Too Much Money

Perhaps someone somewhere determined that entrepreneurs and teenage girls have something in common: the desire to spend money. Think about it: Getting a little allowance upfront immediately turns into movies with friends, dinners out, and yes, I did need that trendy handbag. For entrepreneurs it can be trips to trade shows, upgrades to first class, and yes, I needed that ergonomic desk chair that costs $2,000.

Perhaps it isn’t exactly the same, but we all know that we’re not the best savers out there, so getting more money early can get an entrepreneur in trouble. When you have money, there’s this temptation to grow. And sometimes you grow too soon.

With growth comes fixed costs, and it is incredibly important to determine how to spend any additional money coming in. What is the opportunity cost when spending money on something fixed (fancy chair) as opposed to something variable? Do you get a return on the fancy chair? Does it really make you so much more productive? Or do you actually work from Starbucks most of the time?

There are some things out there that can help entrepreneurs get going without the temptation to spend money. Coworking is a great example. There are often neutral places (and yes, we even have them in Blacksburg), where like-minded entrepreneurial individuals can pull up a chair, connect to the wireless, and work. If they have questions or just want an outside opinion, they can glance up and see what the entrepreneur across the table is doing. Often these coworking arrangements also have strong social media followings, further connecting you into a network you may not have had.

No, there may be no fancy chair. But you could just happen to tap into a potential brain trust or new idea. Even if you aren’t starting a company right now, it is often exciting to hear what other people are working on.

Getting money too soon may keep you from experiencing these kinds of opportunities because you get focused on your resources. If you put a limit on your startup allowance, you could find that other people have tons of resources to offer you. But you have to put the money away to do it.

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The Entrepreneurial Leader as Manager

We all know there is a lot of discussion about the difference between being a manager and being a leader. What worries me, however, is that some people think that entrepreneurs get a free pass in the management department. In my opinion, vision and innovation just aren’t enough.

As quoted from New Venture Creation, “Much of business education traditionally has emphasized and prepared students for life in administration. There is nothing wrong with that, but education preparing students to start and lead vibrant, growing new ventures cannot afford to emphasize administrative efficiency, maintenance tasks, resource ownership, and institutional formalization. Rather, such a program needs to emphasize skills necessary for life in entrepreneurship…managing conflict, resolving differences, balancing multiple viewpoints and demands, and building teamwork an consensus.”

So in all the conflict management, at what point are you going to actually get things done?

There is a little backpedaling later that states, “Entrepreneurial leaders need a sound foundation in what are considered traditional management skills.” However, if the end result is a harvest of some kind, either being bought directly or going public, how everyone gets along just doesn’t seem like it should be the first priority.

I am not saying work culture is not something that one should ignore, especially if starting a new firm. You have a chance to set the stage for the kind of culture you want in a company, so it makes sense that you have some emotional intelligence with which to do that. However, I have seen a number of start-ups fail or send people packing because essentially they feel like “chaos” is a completely acceptable work culture. For the early stages of a company, sure, maybe you need a little chaos. You cannot scale out of chaos, however, and you will present little value to a buyer or investor if you are unpredictable (and not in a good way).

The founder of the firm may not need to have all the business expertise in the world, but the founder should recognize when he doesn’t have the skills necessary to execute. Hire a team and be willing to defer to them instead of micromanage. At some point, the founder has to let go to see the firm grow.

In an article I have written before, I explored the crossroads between the start up culture and the corporate world. From my interviews and experience, it comes down to execution. For the most part, the best of both worlds is being able to product a great product or service and get it out the door, to see customers enjoying it. You don’t want to have to constantly break your back to get there. I follow the David Allen philosophy: GTD. Getting things done is so important, no matter your role.

But it is even more important if you are going to be a leader.

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NYC and Getting Started

Being in New York City has gotten me thinking about what a company needs to do to get going. There are a lot of people who could sit back, give you feedback, and make you feel cruddy. They don’t have to get their hands dirty, so you suddenly feel like your work didn’t amount to much.

On the other hand, you have so many amazing resources at your fingertips to give you insight. You should be able to bounce your ideas off of professionals who have been there before you.

We are here in New York gathering feedback on a pitch we are making to the Dean in December. We have one presentation, and we have been going through it with various advertising agencies. These people are seeing our project without much introduction, and it is refreshing that we have the opportunity to show people who haven’t been as close to it as we have. Additionally, they are somewhat familiar with our general approach (Social Media), but even our identity is new.

Think of all the great reactions we’re getting.

The most striking feedback, however, is that we are not presenting a pretty package all tied up in a bow. We have a project that will never be finished, but will continue to evolve. That’s something that is hard for people to understand. They want an end result, a way to measure everything with a number. But as someone said to us today, it isn’t just about a number, but it’s about the change. You want to capture the change and see it continuing to move forward.

A business is the same: we hope it will keep evolving. The stakeholders want that to happen, too.

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When The Big Guys Act Small

The hubbub over the last couple of weeks regarding Netflix and the decision to spin off the DVD arm of the business got me thinking about agility. Sometimes, in order to move with the nature of a product life, a business needs to make a decision everyone won’t love. Most of us can be understanding, but the “how” of it is usually what can make or break a company. We shall see where Netflix stands in a few months…

A friend on Facebook recently put on his wall: “Amazon says, ‘There are two types of companies: those that work hard to charge customers more, and those that work hard to charge customers less. Both approaches can work. We are firmly in the second camp.’ This is the missile being thrown at Apple. Love it.”

Maybe it’s because I just came out of a class talking about Netflix, but I thought this comment could also be considered a mini-missile at Netflix, also. Afterall, if Netflix stands to lose Starz and additional content providers, they’ll be charging more but providing less. Sounds like Amazon wants to say, “Game on!” for any company looking to shortchange customers.

Amazon is doing this right now as they announce the Kindle Fire, essentially a move anticipated to really bring the tablet market from the fancy iPad and pretend competitor world, and into the mainstream.  If you think that the first Kindle was all about the “spark,” the Fire is probably going to blow things up.

Timing is everything in this situation. If we remember, Amazon is a little behind with a device that can really compete with the iPad, but they were first in really establishing the ereader market. And then when iPad came along, Amazon jumped in with the Kindle App for iPhone, iPad, Mac, Android, and pretty much anything with a screen. Amazon, essentially a giant supply-chain company that excels at mass-customized marketing, is being the nimble start-up we expect it to be. It’s thinking big and acting small, identifying what it is I want as a consumer, not what my market segment signals it wants.

Just because a start-up grows into a corporation, it doesn’t then mean the corporation is an evil machine that never gets anything right. Amazon may not be the key, but they’re definitely heating things up.

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