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Startup Culture: Think Less, Do More

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time for action signI’ve seen many lists over the years about what makes a great company culture.  This one, from one of the founders of HubSpot on company culture, is worth reading. I like the author’s very first point on action orientation – all his other points too. Wish I made the action orientation point in my previous post regarding “Experimentation and Early Competitive Advantage”.

I’ve only written one business plan in my life. It was while I was in business school, and it was required. Generally, I think business plans are pretty useless (but the planning process can be quite useful).

The problem with business plans is that things change so quickly in the startup world. Before the ink is even dry on that 100+ page business plan as it shoots out the printer, things have already changed and “the plan” is already outdated. Stuff happens: Good stuff, bad stuff — and every now and then, amazing stuff.

Very few startups I know – or companies I’ve invested in – resemble their original business plan. (And that’s a good thing, because it means they’re shaping their businesses to meet the needs of their customers.)

Great startup employees are the same way. They think a little and then do a lot. And then they adapt and modify.

The best companies often don’t start with a brilliant idea, they iterate into one.

It’s hard to learn from thinking. It’s much easier to learn from doing.

Read the rest of the post here.

Kickstarter – Not Just For Entrepreneurs

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Some savvy folks at Sony know product planning can be guesswork. They used a Japanese crowdfunding site to test a new product concept.

“We hid Sony’s name because we wanted to test the real value of the product, whether there will be demand for our concept,” said a member of the Sony team. The quote shows the company’s team understands that traditional market research has drawbacks, especially when it comes to innovation.  Moreover by crowdfunding, the Sony team is avoiding a big pitfall of testing product ideas without also testing the true economic value or price a customer will pay.  Using non-traditional approaches can be less costly and faster to implement. The following are two additional non-traditional ways to test product ideas.

Test Ad: Use Adwords to advertise a new product. You do not need to build the product to test in this way. Make your landing page a way to collect interested users. If you get a zero click-thru rate, that really tells you something about your ad description and the product idea.

Test Purchase: Use a purchase button on your landing page. If you get users to click thru that again tells you something.  This will test your pricing as well. Inform these customers you will let them know when the product is ready.

Alternative approaches to discover what products may gain market traction are worth considering, regardless of your company size. Just be careful not to mislead your potential customers. You must be honest about where you are in your product development.

Before You Write a Business Plan For Your Product, Read This

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If you desire is to create a thriving new business never start by writing a business plan.

In this post I’ll give you five critical questions every new entrepreneur should answer before he or she starts to build a business around a new product.

My motivation is to shift you from an internal focus (writing a business plan) and get you to understand unmet needs and who will buy your product, an external focus to building your business.  Think and act first. Find out if your thinking is guesswork or factual[1].  I bet you’ve created a lot a mythology about your business idea and you’re making many assumptions about the market you intend to serve.

Here are a few questions to help you test yourself:

  • Is any of your thinking fiction?
  • Have you spoken to too few customers?
  • Have you confused users with customers?
  • Can you succinctly answer the following questions so anyone can understand?

Now let’s get specific on questions about your product and customer base.

  1. What is your product?  What will you provide to a potential customer so he or she will exchange money for your product or service?  Can you define it clearly and simply?

Too often new entrepreneurs can’t clearly define their offering.  As amazing as that sounds – potential customers must understand the offering. It is almost impossible to sell a product or service customers don’t clearly understand.

  1. Why does someone need it?  What problems do your product solve?  To get your creativity going, think about: How does your product increase the buyer’s quality of life? How does it “right” a wrong? How does it prevent the end of something good?[2]

If the former questions don’t work think of a product you have purchased and define the “value” that motivated you to purchase it.  Does your product or service have a similar value?

  1. Who are your customers?  Who are the potential customers that have the problem you solve?  Who will buy your product?

Customers will drive your business. It pays to give a great deal of thought to who they are.

Where do they live? Does that affect their likelihood of seeking out your product? What are they like? How old are they? What financial category do they fall into? Oh, and make sure you are really speaking to the customer (he or she is the one that pays you).

  1. How are you going to find these customers?  Or how are they going to find you?

The cost and difficulty of finding your customers is a major factor that impacts your product pricing and, moreover, the success of your enterprise.

Must you travel to each customer’s location to make a sale? Do you already know them? Will you advertise? Find them online, through a website? Hope for word of mouth?

  1. Once you find your customers, how will you keep them?  Will they come back for the quality? The convenience? The excellent service you provide? Will you constantly strive to improve your product? Or work hard to maintain its already superior level of quality?

The first strategic mistake is starting with a business plan and getting stuck guessing with an internal focus.  Move to an external focus. Get to work talking to prospects, sell a product or service to someone.  Find out what will motivate him or her to part with hard earned dollars.  Is there one customer or a million?  Nail down these five questions first, and please do not start with a business plan. Once you really know the answers and you’re sure of what you learned, then you can write a short business plan to cement your ideas.

4 Components to a Memorable Elevator Pitch

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When I started coaching entrepreneurs I found that while all spent time obsessing about the design of their business cards, very few gave thought to their elevator pitch. In my experience, to explain the context and value of your business in an elevator ride’s time, is far and away more useful in winning customers and investors.

You will need your elevator pitch for investors, bankers, customers, prospects, cocktail parties and elevators. It needs to be short and engaging.  The objective to this short engaging story is to pique interest and stimulate curiosity about your business.  It is not to tell every single detail. To drive the point home: “assume a short building,” says Bill Joos of Garage.com, “ruthlessly cut away the unnecessary details.”

Today I’ll break down for you the four components of an effective and memorable elevator pitch. I’ll use an example of how I would sell the need for an elevator pitch, with an elevator pitch:

You have a business card; you must have an elevator pitch too!

Many elevator pitches are too long, generic, and unmemorable.  A great elevator pitch will make your audience: 1) understand 2) be interested and 3) want more.  Your audience will see you as organized and articulate. Our approach creates a pitch half the length of the 56 second average by 1) providing context 2) giving meaning 3) making it matter and 4) showing your difference.

Let’s break down this pitch for a pitch into the four parts.

  1. Provide Context: Context will help your audience hone in on what you are about to describe.

For example, “You have a business card; you must have an elevator pitch too!”

Here I show how an elevator pitch fits into the context of how you represent your business.

Watch out for too much detail.  You can provide the detail later or after the pitch if more time is available.

  1. Give Meaning: It’s all about what needs you address or what problem you solve. Define the problem in one of three ways.
  • How it increases quality of life.
  • How it makes a wrong right.
  • How it prevents the end of something good.

For example: “Many elevator pitches are, too long, generic, and unmemorable.  A great elevator pitch will make your audience 1) understand 2) be interested and 3) want more”.

  1. Make it Matter: This is the so what question. What benefits does your audience or target customer receive?

For example: “Your audience will see you as organized and articulate”.

Another way to think about this point is to ask the following question. What will have changed for the better? In our oversimplified example, you will be regarded as organized. However, without a good pitch you may appear scattered.

  1. Show You’re Different: Can only you and not the other guy tell your story?  How unique is your story?

For example: “Our approach creates a pitch half the length of the 56 second average by 1) providing context 2) giving meaning 3) making it matter and 4) showing your difference”.

In this example, I am “selling” my elevator pitch methodology and seeking to make it unique and better than your other options.

How long should your elevator pitch be?

Your target word budget is 80 words in total. Plan on being able to speak 2 to 3 words a second. Ideally tell the story in 30 seconds. Time yourself.

Try reading mine aloud and time it.

You have a business card; you must have an elevator pitch too!

Many elevator pitches are too long, generic, and unmemorable.  A great elevator pitch will make your audience: 1) understand 2) be interested and 3) want more.  Your audience will see you as organized and articulate. Our approach creates a pitch half the length of the 56-second average by 1) providing context 2) giving meaning 3) making it matter and 4) showing your difference.

About 30 seconds, right?  That was 79 words. Okay, now you give it a try for your business.

[1] http://www.alumni.hbs.edu/careers/pitch/

[2] This concept comes from Guy Kawasaki, see it for yourself by searching youtube “the art of the start”.

[3] http://www.alumni.hbs.edu/careers/pitch/

 

How Your Unconscious Bias is Making Your a Bad Decision Maker

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We create mental models to put the external world in a framework we can understand.  While useful in handling information, these models have real shortcomings, especially in business. Humans have an inherent tendency to favor a particular outcome.  Like believing their product will sell because similar products have been a success in the past. Or believing a male engineer will be a better fit for the organization because all the engineers at your previous companies were men. Or listening to customer feedback in an unbalanced way giving more weight to praise and heavily discounting feedback that is negative.

It is critical to be aware of this tendency; otherwise it will lead to poor decision-making such as hiring or firing someone without cause or investing in an untested idea.

There are many types of mental models we rely on, usually unknowingly. This author can name 12, but today we’re going to focus on our tendency to select data to accept what supports our beliefs and then discount or totally ignore data that is counter to our belief system.  This is called a confirmation bias.

Early Thinking

To protect yourself from confirmation bias in your start-up, try this exercise.

The ladder of inference is a helpful way to troubleshoot your thinking. Please accept the irony of using a mental model after condemning them.  The ladder of inference helps spot your biases and examine your belief systems.

Following is a practical example of how it works with the potential for completely different outcomes.

Steps of the Ladder Outcome 1 Outcome 2
1. Data Collection or        Observation Joe is late to my staff meeting. Joe is late to my staff meeting.
2. Select Data Joe knows I want my meetings to start on time. Joe knows I want my meetings to start on time.
3. Add Meaning Employees who are late to meetings are not serious about their jobs. Joe would normally not be late without a good reason.
4. Make Assumptions Employees who are not serious about their jobs should not be in my organization. He must have been working on the important project I asked him to finish before the meeting.
5. Draw Conclusion Joe is not a valuable member of the organization. Joe is an awesome performer.
6. Beliefs Not addressing poor performance makes me a weak leader. Getting assignment completed move the organization forward.
7. Action He needs to be fired. He deserves a raise.

Blink Analysis

If you remain critical of your own thinking you’ll likely catch yourself before you act out of bias and save yourself from unwise choices.

Here’s a handful of resources to help you avoid sloppy thinking:

Five Tips To Avoid Confirmation Bias

The Ladder of Inference

The Fifth Discipline Field Book

Top 10 Thinking Traps Exposed

5 Critical Tests for Your Product’s Value Proposition

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Recently I’ve had the opportunity to mentor aspiring entrepreneurs as part of an economic development initiative in a neighboring community.  These entrepreneurs are starting fundamental businesses: not the technology related enterprises where I have spent my time, but the principles for success remain the same.

Early Thinking

Doing this, I ended up falling back on an old friend, the “value proposition.”  To explain it to my entrepreneurs who had no business experience I needed to come up with a clear and exact definition.  I used three questions for this purpose, and you can apply them to your start-up:

  1. What is the reason your customer will buy from you?
  2. Why will your ideal customer buy from you and not your competitor?
  3. Why will your ideal customer not take an alternative action, such as not making a purchase?

Answer these questions and you have a good start. The value proposition is not what you do or a description of your business. Answer the question, “why buy” not “what you do.” What value does your business provide to the ideal customer?

Louisville Slugger’s #owntheplate marketing speaks to value:

“Turning Players into Legends since 1884” “Before Little League. Before the World Series. Even before the rule that says three strikes mean you’re out, Louisville Slugger was already perfecting the bats that would write the history of the game. Over the past 125 years, no other brand has logged more wins, captured more titles and set more records than the legendary bats of Louisville Slugger.”

Here is a more edgy example from PinchZoom:

“We create kick-ass mobile experiences – the best companies in the world use our amazing team to create apps that people love”.

Notice how both add their credentials.  Ideally, proving the value they offer will be delivered.

Blink Analysis

There is a lot more to creating a cogent business strategy than crafting a value proposition.  However, without defining the target customer and communicating the unique advantage of your business, do you have a substrate on which to build a great business strategy?

Test your value proposition with my list of common pitfalls:

  1. Buy Low Sell High Pitfall: Have you avoided weak general statement that anyone can make?
  2. Product Description Pitfall: Have you described value your buyer will receive and not provided a description of features and capabilities of your product or service?
  3. So What Pitfall: Do you communicate value that elevates you above the competition?
  4. Follow the Crowd Pitfall: Is your value proposition really different than your competition and unique when compared to them?
  5. Prove It Pitfall:  Are you providing evidence that supports your claims?

Experimentation an Early Competitive Advantage for Startups

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I have a stack of articles that I plan to read, for a while I carry them around in my backpack. Then the article finds a resting place in my office.  Fortunately, the articles get re-discovered and read: eventually.

I found an article on Enlightened Experimentation that had been sitting unread for a while – published in HBR in 2001. But the advice is still fresh more than a decade later.

Large industrial companies such as BMW use “Enlightened Experimentation” for product innovation and experimentation is fundamental to innovation.  The essentials to Enlightened Experimentation are: 1) Organize for rapid experimentation 2) Fail early and often, but avoid mistakes 3) Anticipate and exploit early information 4) Combine new and traditional technologies. 1

Though the concept works both for large corporations and small start-ups can apply the principles of Enlightened Experimentation even more effectively.

Early Thinking:

Experiment your way to competitive advantage: Especially for smaller or start-up firms, quick experimentation can be your earliest, maybe only competitive advantage.  You would think experimentation is natural to young firms, and it is with the best, but certainly not all.  As a new firm or start-up, you cannot outspend a larger well-financed rival.  And non-domestic rivals have other advantages.

Experimenters win: In a globalized market place, your competition may have lower labor cost, less regulation and advanced technology.  Experimentation generates new property knowledge.  Experimentation must expand beyond the R&D teams.  Experiment with product and business model innovation simultaneously.  You have to discover new opportunities before your competition know they exist.

Blink Analysis:

The article entitled “Why Steve Jobs Couldn’t Find A Job”  sums it up.  “Today, value goes to those who know how to create, store, manipulate and use information.  And success in this economy has a lot more to do with innovation, and the creation of entirely new products, industries and very different kinds of jobs.” 2

  1. S. Thomke, “Enlightened Experimentation: A new Imperative for Innovation” Harvard Business Review, February 2001: 66-75.
  2. A. Hartung, “Why Steve Jobs Couldn’t Find A Job” blogs.forbes.com/adamhartung, Web. February 18, 2011.

Related Links:

Treating Innovation as an Experiment

A New Lesson in Innovation for Entrepreneurs

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This entry was posted in Innovation, Social Entrepreneurs and tagged Innovation on February 28, 2011.

Food.  What is the first thing that comes to mind?  I bet it’s not innovation.  I recently had the opportunity to tour Rutgers University’s Food Innovation Center.  Rutgers has built an impressive facility with a food processing plant attached.  This facility is a past winner of NBIA’s  “Incubator of the Year”.  Local farmers can rent a food plant by the day to create new products from produce that would be normally discarded.  The design and flexibility of the facility has enabled a European firm to test launch a new food product. This visit got me thinking how uninventive we can be about innovation.

Early Thinking:

Avoid just a better product: Product innovation by itself is not sufficient for competitive advantage.  Thinking just about the product is a missed opportunity for more innovation.  The farmer that cannot sell bruised or imperfect fruit as fresh produce could focus instead on growing better peaches.

Or make a new drink product with unused product with greater profit margins. One peach grower did just that.

The simultaneous change in product delivery, value proposition, and profit model need to be farmed for innovation opportunities. That is, do not confuse product innovation with the broader concept of business model innovation.  This point is well made in a whitepaper entitled Business Model Innovation; When The Game Gets Tough, Change The Game. Take the example of Apple; its success is due to multiple simultaneous innovations in product, technology and service. The whitepaper outlines other company examples too1.

Simultaneous multiple innovations:  Think beyond your original innovation.  What other areas of your offering have not been looked at for change?  Look at innovative business models outside your industry for ideas.

Blink Analysis:

More than a better mousetrap: Thinking beyond product innovation is a seriously difficult task.  However, it appears organizations that do have been rewarded with market leadership.

  1. Z. Lindgardt, M. Reeves, G. Stalk, M. Deimler “Business Model Innovation, When The Game Get’s Tough, Change The Game”, Boston Consulting Group, (12/2009): 1-8. Bottom of Form