MBA via the Library

8 Ways to Fail at Getting Your Product to Market

2011-10-03T12:56:00.005-04:00

This list is taken from the Successful Software Blog, "13 ways to fail at commercial software". While it is focused on a software company, I think a lot of the lessions could be applied to most businesses. Therefore, I reduced the list from 13 to 8, and change the points to be more generic.

Don’t bother with market research, because you just know lots of people are itching to buy your new product.

Only release the product once it is perfect. However long that takes.

Go into a market with very strong competition and compete with them head-on, because you only need a measly 1% of this market to get rich.

Go into a market with no competition. How hard can creating a new market and educating all the potential customers be?

Only think about marketing once the product is nearly complete.

Create a product for people who can’t or won’t buy it (e.g. 10 year olds, prisoners, people in developing countries).

Don’t worry about marketing, because a good product sells itself.

Don’t listen to what your customers say, because you know best.

Is Open Source the Perfect Nash Equilibrium?

2011-08-26T08:09:00.003-04:00

If your company develops software, you are probably using open source software somewhere in your company. (I define open source software as any piece of software which is written by multiple companies/organizations.) My hypothesis is that if you want your company to be as profitable as possible, it must reach a Nash Equilibrium with respect to open source software. To reach this equilibrium, your company must be both using and contributing to open source software.

There are a number of companies which feel that their employees should not be contributing to the open source community because the company is paying the employee and therefore should own the work. On the surface this seems like a very profit oriented line of thinking, but it is flawed. The problem with this line of thought is that if every company did this, most of the companies would be viable. For all companies to succeed, a Nash Equilibrium must be reached. This equilibrium is reached when all companies both use and contribute to the open source community.

To better explain what I mean, I use the example from the movie A Beautiful Mind. In the scene where John Nash "discovers" his equilibrium, a group of women walk into the bar; an attractive one in the middle surrounded by a number of other less attractive women. Nash realizes that if all of the guys were to approach the attractive one in the middle, they would all go home alone. However, if they are to all ignore the one in the middle, and each approach one of the other women, they all stand a good chance to leave with someone. But, if even one of the men stray from the equilibrium and attempt to attract the most attractive women, the other men will become jealous and attempt to attract her as well.

The same is true with the use of open source software. If all companies attempt to only use open source software without contributing, other companies will not see the advantage to contributing and everyone will suffer. Whereas, if all companies who use open source software also contribute, all companies will benefit and profit.

Don't get me wrong, I am not advocating that all companies release all of their software as open source. However, most companies do not actually have as much intellectual property in their software as they think they do. What makes most software companies successful is the support they provide and the ease-of-use of their software. Numerous companies have figured this out and built successful companies around open source software: RedHat with Linux (and many other projects), Sun (now Oracle) with MySQL (and other projects), Cloudera with Hadoop, and many others...

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Seeing How the Sausage is Made

2011-05-17T08:32:00.002-04:00

I take the train to work each day. The conductors on the train communicate with each other over the PA system. This is helpful for them because they don't have to be at an intercom station to hear a message. However it also means that evryone on the train can hear all the messages.

Today there was confusion as to if the doors on the front of the train (which were beyond the platform) were opening or not. Then the guy in the back was confused as to if he should open the doors or not. If he did and the front ones opened, someone could fall out of the train. The details aren't important beyond 2 points:

1) communication is key regardless of your occupation. From conducting trains to running a country, if there are communication issues people could get hurt or worse.

2) be happy that everyone at your job isn't constently watching or hearing your every move. Everyone has bad days, but most people aren't on stage for them... consider yourself lucky.

Recognizing the Mundane Work

2011-03-09T18:46:00.003-05:00

Someone pointed me to a set of slides by Piaw Na on lessons from Google and Facebook on "Startup Engineering Management."

While there is a decent amount of content in the slides, what I found most interesting was some of the comments on rewards. From his slides:

Bend over backwards to reward grungy painful work
Human nature over-emphasizes sexy high-visibility stuff
The low level grungy painful work enables the high-visibility stuff
Create a culture where sharing credit is respected and encouraged
Engineers:
Grungy work means scaling build systems, cleaning up nasty code, refactoring, dealing with painful bugs, chasing bugs across project boundaries
Managers:
Grungy work means firing poor performers, providing feedback people don't want to hear

To me, the biggest take-way from this slide is his top statement, "Bend over backwards to reward grungy painful work." This could (and should) include things like taking the team (if most members of the team do grungy work) out for lunch, dinner, drinks, or some other group activity (dinning is easy as everyone has to do it at some point). I wouldn't however recommend giving someone time off, as that can just reinforce that work is bad and a reward is "not work."

Expense Reports

2011-02-04T08:17:00.001-05:00

Expense reports are a pain for everyone in a corporation. Employees have to remember to keep receipts and the finance department has to record everything and track down offenders who abuse the rules of the system. A better approach that some companies are using is to give all employees credit cards and tell them to simply "use the card as if you are spending your own money." To help enforce that everyone is properly using their card, the monthly amounts are distributed via e-mail to everyone in the company.

An interesting way to trust your employees through community policing.

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Providing Employees Independence

2010-11-06T21:42:00.002-04:00

Again from Sam Wyly's book 1,000 Dollars and an Idea a note on how to keep people motivate and given them enough space to be creative:

Because human capital is what's vital to any business, you need to give your key players a lot of independence. I've noticed over the years that people who are really good at what they do want to be left alone to do it, and that if you start mucking with their ability to do their thing, you're going to kill their enthusiasm.

We build a structure and a culture that allow key players plenty of autonomy to make their own decisions and do their jobs. When they accomplished that, they felt appreciated and had solid economic rewards. Good pay for good work.

How To Delegate

2010-11-06T21:33:00.002-04:00

Delegating is one of the hardest things for someone to do. We each have a unique way in which we think a task should be completed. Very often people feel uncomfortable in delegating tasks because the other person won't complete the task correctly. The problem is, that you must delegate not only the responsibility to complete the task, but also the authority to get it done. I was reminded of this recently while reading Sam Wyly's book 1,000 Dollars and an Idea:

Early on, I had tried to figure it all out myself. Now I was happy to accept that none of us is that smart -- there is just too much to know, there are only so many hours in a day, and there are many ways to do everything. You have to agree on the objectives and delegate both responsibility and authority. You cannot hold people responsible if you don't give them authority. Responsibility without authority is managerial hell.

When a Business Gets Into Trouble

2010-10-12T09:31:00.002-04:00

It is well known now that a company must innovate to remain relevant. In 1946 this idea, published by Peter Drucker in his book Concept of the Corporation, was somewhat groundbreaking. Quoting from Sam Wyly's book 1,000 Dollars and an Idea, it is presented very succinctly:

He observed that huge corporations were based on "manufacturing efficiencies" and had "managerial hierarchies." But inside those hierarchies, he found executives who too often spent time "keeping" their jobs rather than "doing" their jobs, and the excitement that had originally created their business went stale. When a company got into trouble, it came down to managers sticking to outdated ideas or basing decisions on internal misunderstandings.

This is a common problem, especially in upper management. They don't want to suggest ideas that are too outlandish for fear that they will loose their jobs. Instead, they continue to recommend the same ideas that the company has been using and in turn actually hurting the company even more.

Managing Employees After a Mistake

2010-10-07T10:54:00.001-04:00

Good article on the Both Sides of the Table Blog. The steps to managing an employee after a mistake:

1. Highlight the error – Best to do this after the situation has happened, not when emotions are flared on both sides or you won’t have a rational discussion or reflection. Tell the person that you’d like them to reflect on what happend so you can debrief on the topic in 48 hours. Obviously if the situation is urgent you need to put the situation right before reflecting on what happened.

2. Discuss what you would have expected – I never understood why when managers did reviews they’d say what you did wrong without a clear explanation of what they think you should have done. If you don’t have an answer for what the right process or right behavior would be then you’re not going to be very effective in helping the person to be better next time.

3. Help them plan the new rules / process to ensure the mistake isn’t repeated – Be a problem solver. Work on the new process with them. Talk about exactly what needs to happen next time. They need a map for success – not just a “this better never happen again” arse kicking.

4. Don’t immediately go back to “buddy buddy” nice guy. To be an effective disappointed dad they need to feel a little distance and a sense that “all is not OK.” This is really hard as a parent because you want to just go up and hug your kids. I feel the lesson isn’t absorbed as much this way. Think of it as “the penalty box” or a time-out or whatever. But they need a cooling off period from being in your good graces. They need to know it is not OK what happened and shouldn’t be taken lightly. But not a sense that they’re now not to be trusted. In fact, I think the best approach is if they feel they need to re-earn your trust.

5. Don’t yell. Yelling yields resentment in the receiver and often makes the message unpalatable (I have a temper like anybody. I cannot say I’ve never yelled. I got really angry with my assistant, for example, but only one time since we’ve worked together. I yelled. I had regret for weeks and we had to spend way more time working through the issue because I inflamed the situation than would have been the case if I would have kept my cool. I lost twice. I had to rebuild trust. It worked against me, not for me.)

6. Praise people publicly, but discipline people privately – If you do need to discipline people don’t try to make a public spectacle of them to set an example. People won’t learn – they’ll just think you’re an arsehole. People absorb their mistakes when they aren’t embarrassed by them.

A Winning Team

2010-10-06T20:47:00.002-04:00

I'm currently reading 1,000 Dollars & An Idea by Sam Wyly, and I found this description of a winning team very accurate.

"Great teams do not always win, but without a great team -- without synergy and oneness -- winning becomes that much tougher. Being a lone gunslinger in team sports or in business will only get you so far. In both fields of endeavor, you need a team playing together and, at the same time, a structure that allows for each player on that team to flourish in his own unique way. Each member of the team has to be empowered with the responsibility and authority to do the job that needs to be done."

There are two very important points in this description which I've emphasized above. The last part is usually the hardest part for leaders of teams. One needs to let go of responsibility and empower his/her teammates with this responsibility and authority to do their job properly.

Top 3 Aspects to a Well-run Company

2010-06-10T19:40:00.002-04:00

I have come to the conclusion that the following aspects are the three most important aspects to running a company well. I don't consider the order too important as you really need all three to be a successful company.

Culture - This is very tough to develop and different for each company
Organization - Getting the right people into the right positions, and the wrong people out of the company
Complete Business Knowledge

I will focus on the last bullet point for the rest of this post as it has often been overlooked in other people's assessments of what makes a good company.

At my last job we were selling technology. The CEO had previously successfully run and sold a marketing company. He was good at sales and marketing. He was able to sell the idea to investors and to customers. However, we constantly fell apart on the technology side... our only product. We debated things like when to release software, the versioning system, which language to use, which platforms to integrate with, and how to perform installations. To this day they are still having trouble with these issues. The company is on their fourth group of technical folks, and I doubt they will be successful in the long-run. The leader of the company simply doesn't understand technology, or how to pick someone that truly understands technology.

This can be seen time and again in small to medium size companies. If your company manufactures surgical devices, the CEO must understand manufacturing and surgery. The CEO must know what doctors do in an operating room, and what tools they need. The CEO must also understand how manufacturing works. If there is a lack of knowledge on either of these fronts, the business will suffer.

Granted there are short-cuts that companies can take. For example, a CEO who is an expert in manufacturing can hire doctors to come up with product ideas. However, I doubt such a company would ever make it off the ground. The opposite would probably be more realistic; the CEO -- who is a doctor -- would outsource the manufacturing of the devices.

It is extremely important to note the key business areas before starting a business. Simply because you've been successful in one area before, doesn't mean you can translate that success into another area. The people that can are true entrepreneurs.

Running & Working, An Observation

2010-05-04T08:57:00.003-04:00

This thought hit me the other night. I'm not sure from where it came or why, but the more I think about it, the more I realize it to be eerily true. Running a race is much like working at a 9 to 5 job.

Every now and again, against my body's better judgment, I run a 5K race. In these races I lace up my comfortable running shoes, attach the number given to me to the front of my shirt, setup the stopwatch on my wristwatch, and start to run when someone screams "go". Along the way there are people handing out water and screaming words of encouragement. As one step fades into another I'm often passed by other racers. At the end our times are posted on a sheet, people are ranked in the order they completed, and awards are given to the top 3 people. I go home tired and worn-out to possibly race again.

Work, seems to be about the same. Against my body's better judgment, I wake up at 6 in the morning to head out to work. I put on a dress shirt, dress socks and a nice pair of pants, I attach the badge given to me by the company to the front of my belt, and start working after pouring my first cup of coffee. Throughout the day I am given free coffee, free lunch, and criticism by my boss as one day fades into another. At the end of each fiscal year I'm give a grade on a performance review, and awarded increased compensation if I've done well enough. By the end of the day I'm tired and worn-out. I go home to come back the next day to repeat the ritual.

When racing every aspect is designed to help me stay focused on running and forget the fact that my body is hurting. The water, the comfortable shoes, and the words of encouragement are all there to keep me running. Work is much the same. Almost every aspect is designed to keep me focused on my work and forget the fact that my time is not my own.

In both racing and work you are allowed to quit at any time. Simply stop running or stop showing up to work. In both, your ranking will begin to slip and eventually you'll regret the decision. Walking through a crowd of people running, you'll think to yourself that you could have kept going. Sitting at home watching your bills pile up, you'll think that one more day would not have been so bad.

The difference between racing and working is that there is an alternative to work; doing something you love that provides the same benefits as your job. The same cannot easily be said about running. There are few things as beneficial as running that you will love... maybe swimming?

Book Review: Listen First Sell Later

2010-04-21T21:21:00.003-04:00

My mother always told me that if I didn't have anything nice to say, don't say anything at all. Actually, now that I think about it, I don't think she ever said those exact words... so here it comes.

I read "Listen First Sell Later" by Bob Poole and was thoroughly unimpressed. I should correct myself, I never actually made it through the whole book, only about 2/3s of it. This book was nothing more than what would amount to a bunch of blog postings put together in a book. Some people can pull that off if they do a good job of organizing their thoughts and have fluid chapters. This book lacked both. There were no chapters, table of contents or index. Most of the "sections" were small shallow thoughts. While each stood on its own, there was no common theme to be found to let one section flow into the other.

Putting the format of the book aside, the contents of the book was also lacking. Opening the book to a random page/section (86/I Hate Rejection) and re-reading I find that he talks about how he doesn't like rejections during sales calls. He takes them personally. He suggests purchasing books or audio tapes of good sales people so he can learn from his rejections. This is a valid point... learn from your mistakes/rejections. However, he does not tell me how to learn from my mistakes beyond suggesting I buy books/tapes from top sales people. Which sales people Bob? What books? What did you learn from your rejections that you could share with me. Which books did you read?

I would recommend any of the other books I've reviewed here over this book.

This book sells for $14.95... Bob, I want about $10 back, or just buy me a beer and we'll call it even.

Predicting the Future

2010-04-09T20:13:00.003-04:00

I read this post the other day about why you should NEVER listen to your customers. It is a good story and does shine some light on how a company goes about picking new products to create and features those products should have. However, I disagree with it on some levels.

Good companies strike a balance between listening to their customers and deciding on their own what is truly needed. If all you do is invent the future, you will probably fail. There are only a handful of companies that actually invent the future and do a good job of it. The shining star example is Apple. They are in the business of making innovative products that people aren't necessarily asking for. Apple isn't out there constantly asking their customers what they need, instead they are determining on their own what their customers would want and then building it. It is a huge risk to take, but thus far it has paid off well for them.

On the other hand, most companies aren't Apple. They need to listen to their customers and build what they want. You can go a long, long way on providing great customer support, which includes building the features customers ask for. The hardest part -- the part that I believe this post is addressing -- is that listening to your customers and doing exactly what they're asking for is probably never the right way to go. Your customers only have one perspective... theirs. You need to consider new markets, the problem they're really trying to solve, and how it fits into your current business model. Just because a customer is asking for something doesn't mean that is really what they want.

If a company is able to strike this balance, then their success comes down to simply a question of execution and implementation.

Quotes from Gerstner's Book

2010-03-11T09:45:00.003-05:00

I am almost finished reading "Who Says Elephants Can't Dance?" by Louis Gerstner, Jr. However, I found two interesting quotes in the last two days of reading that I should I would post now before I forget.

"people don't do what you expect but what you inspect." - So true and something I've talked about before. This the opposite of incentives.

"no credit can be given for predicting rain -- only for building arks." - Meritocracy is the new way to go. Good guessing shouldn't be rewarded. Instead, well defined metrics and painstaking analysis is required to succeed.

Under-sell Over-deliver Vs. Over-selling

2010-02-08T20:40:00.002-05:00

When you're proposing to do a job, there are two ways to go: under-sell and over-deliver or over-selling. Notice I didn't say over-sell and under-deliver... that's a quick way to loose customers, although I do see it often. There is of course a third which is do exactly as you promised, but that usually doesn't happen, especially when you're starting out.

Under-sell Over-deliver

This works great if you believe you can close the sale on your under-sell. It's very risky, but will win you great praises and a stellar reference. You are usually rolling the dice here, but if you can pull it off it's a big win. The customer will be hopefully blown away, so much so that they are willing to be a reference for other customers and will come back to you time and again.

Besides the risk of not being able to close the sale, there are other disadvantages to this method. First, you have to keep doing exceptional work. If you're an exceptional company, then this shouldn't be a problem. However, as you grow quality might slip and your customers will notice.

The second risk is that you don't actually over-deliver. You end up doing an mediocre job in the eyes of the client. This is usually bad on the sales side of things because they probably won't be a strong reference for you and might not come back to you again. However, this is a big win for the company as whole... you've not just learned what your customers think is mediocre. Anytime you can get information from your customer -- good or bad -- it's a win.

Over-sell

This is a common technique for start-ups. Promise the world, then drink Red Bull until you deliver. It is often your only method for getting initial customers and sales. The key is to ensure you deliver. Multiple over-sells without an appropriate delivery and you're done. You'll be left with no reference accounts and no returning customers.

Getting Customers

2010-01-22T13:50:00.003-05:00

At the end of the day... it really is all about the customers. It doesn't matter if you're starting your own company or managing a multi-million dollar company, if you don't have customers you don't have squat. This is why customer support is so important and why companies like Zappos are so successful.

Focusing on the start-up, I was always under the impression that getting your first paying customer was the most important. As it turns out, it is not. The most important customer is probably your third customer. By the time you have your third customer you know you have something you can sell. The first one could be a fluke. The second might just have money to throw away (yea right). But by the third customer you've been able to convince at least three people to buy your service or product.

Also, by the time you have three customers you now have enough customers to go back and feedback on your product or service. This feedback is invaluable. You have probably been getting feedback as you tried to reach the third customer; however, the feedback from paying customers is often more helpful. You can ask them why they purchased your product or service, and what they don't like about it.

Plus, Ramit Sethi has my back on this.

10 Sales Tips

2010-01-07T19:55:00.002-05:00

I found this blog by Matt Bell entry on TechCrunch: $0 to $20 Million: Ten Hand-to-Hand Sales Tactics. I will just list the 10 tactics here with my commentary as I agree with most of them.

Be mutantly flexible - I've seen this in-person at the start-ups I've worked for in the past. We promise them the work and/or whatever they want instead of trying to sell them on what we already have. There is a danger here though... if you can't meet your promises.
Juice the comp plan - Sales people are motivated by one thing and one thing alone... money. Give them 50% of the sale the first time around, if you have to. Just watch-out they don't over sell... see #1.
Value speed in everything you do - Customer service is "easy" when you're small and only have a few customers.
Plant landmines - Most of the time you're not pitching directly to someone; however, the same applies to websites, etc... put a side-by-side comparison and go after the competition.
Move in after the first date - Giving incentives to your customers if they get customers is a great way to increase sales.
Stand tall - Confidence is good, arrogance will ruin you all the time. Remember the customer is always right, but you can help them be "more right."
Partner up - Don't build what someone else already has. Want to do A/B testing on your site, let Google take care of it for you.
Involve everyone - The engineer sitting in the dark office and only comes out for more Mt. Dew should ALWAYS be brought in on sales calls, but should never speak ;-)
Hire slow, fire fast - This has been repeated over and over. Use a 6 month contract to weed out potential employees. This way you don't have to spend as much time recruiting and hiring and can simply not renew the contract if it isn't working out.
Focus the sales pitch - Practice makes perfect here... give your pitch to everyone; mother, father, significant other, etc. You'll know when you have something everyone can understand.

Silly Demonstration of Teamwork

2009-12-30T14:13:00.004-05:00

I am in the process of reading "Too Big to Fail" by Andrew Sorkin. In it there is the description of a meeting Lewis Glucksman held to drive-home the point of teamwork. It is kinda cheese, but I thought I would post it all the same.

To encourage their solidarity, Glucksman summoned Fuld and his other top traders to a meeting in the firm's conference room. For reasons no one quite understood, Glucksman was holding a few dozen number 2 pencils in his hand. He handed each trader one and asked him to snap it in half, which everyone did, easily and without laughing or even smirking. He then handed a bunch of them to Fuld and asked him to try to break them all in half. Fuld, "The Gorilla," could not do it.

"Stay together, and you will continue to do great things," Glucksman told the group after this Zenlike demonstration.

How to Win Friends and Influence People

2009-12-29T21:49:00.003-05:00

"How to Win Friends and Influence People" should be required reading for everyone that over the age of 18. In a nutshell it tells you to be really nice to people. This is reiterated throughout the book with stories of people being nice and getting what they want. It doesn't always work out this way, but often a good place to start and something to keep in mind.

The book is very textbook-like (probably because Carnegie intended to use it in his course). He has three fundamental techniques for handling people:

Don't criticize, condemn or complain.
Give honest and sincere appreciation.
Arouse in the other person an eager want.

These are probably the best tips in the book with respect to business. Carnegie also provides lists of techniques for the following topics:

Six ways to make people like you
Twelve ways to win people to your way of thinking
How to change people without giving offensive or arousing resentment

You can see all of these techniques (without details) in the Wikipedia article.

All-in-all a very good book that everyone should read. I don't buy everything 100%, but it is a good place to start with negotiations, dealing with people, and just getting through every day life.

What makes me wonder about these techniques are that I read about a number of people who do the exact opposite and succeed. For example, I was just reading today about an anecdote involving Richard Fuld, previous CEO of Lehman Brothers. Quoting from "Too Big to Fail" by Andrew Sorkin:

Kaplan, cupping the receiver with his hand, turned to the young trader, exasperated. "You always think you're the most important," he exploded. "That nothing else matters but your trades. I'm not going to sign your fucking trades until every paper is off my desk!"
"You promise?" Fuld said, tauntingly.
"Yes," Kaplan said. "Then I'll get to it."
Leaning over, Fuld swept his arm across Kaplan's desk with a violent twist, sending dozens of papers flying across the office. Before some of them even landed, Fuld said, firmly but not loudly: "Will you sign it now?"

While it makes for a good story, and goes completely against what Carnegie advocates, we never really know if Kaplan signed the trade or not. My guess... he did.

Secret Meetings

2009-12-10T20:04:00.002-05:00

I have worked at a number of companies and I have seen this happen at almost all of them... secret meetings. It usually involved managers. Sometimes it is one-on-one. They are always behind closed doors. Sometimes after hours. Rarely on the weekends. At the last place I worked there were so many of these meetings that we used to say to each other, "Something is up... the boss's door is closed."

That is the problem with secret meetings... they are almost never secret. Someone -- outside of the people having the meeting -- always knows about the meeting and usually the parties involved.

Most organizations are large enough that people are specialized enough so knowing only the parties involved in a meeting one can closely speculate as to the purpose of the meeting. It begins to beg the question, "Why even try to keep the meeting secret?" People are going to always gossip about the meeting and speculate as to what is being discussed. Is this helpful, hurtful, or have no real affect on conducting business?

I do not have the answers to the above questions, but I would prefer to see a more open environment, excluding personal issues of course.

Churn

2009-11-03T21:43:00.004-05:00

I take the train and a shuttle from the train station to work everyday. I've been doing this now for almost a year. Through the course of a year riding the train and bus you meet people who do the same. Some of these people keep to themselves and others you become friends with. I'm not talking about a deep friendship per-say, but someone you talk with and look forward to seeing at the end or start of your day. Inevitably some of these people stop taking the train. The reasons vary, loss of their job, job moves, etc; but the outcome is the same... they're gone. Now this isn't a post on how I'm sad because one of my train friends is gone, but rather the churn of employees.

Two of my "train friends" will be leaving me before the end of the calendar year because they are being laid-off. They are not sure of the exact day, but they won't have jobs much into 2010 if at all. Certainly, at times, a company cannot avoid this. Times are tough, you might have to let people. While these two friends are upset about loosing their jobs I try to look on the bright side... at least they know it's coming.

The other side of the coin is of course people quitting on you. How do you get people to stick around through the hard times? You've had to cut back on free lunch, taken away at home Intern subsidies, etc... what can you do to get people to stick around? I don't have the answer, but I believe that about the only thing you can do is be as transparent about what is happening as possible. Make people understand that times are tough, and exactly how tough. Cut the CEO (and other executive's salaries) in a proportion to the amount they make. Cuts should be made the deepest at the top as they were the ones to lead the company into its current state.

Other than that, churn in good times is not necessarily a bad thing... new blood = new ideas. Just some thoughts...

Update: If you're going to fire someone, at least do them the favor of getting it over with in the morning. It's just poor practice, in my opinion, to make someone work through the day, then tell them their life as they know it has change and they are without a job.

Asking the Customer

2009-10-20T21:52:00.002-04:00

I have read time and again that you don't need to wonder what features to put into your product, simply ask the customer. I cannot reiterate this point. Some people advocated not even looking at what your competitors are up to. The problem is that no one really addresses how you should get feedback from your customers, or how NOT to get feedback.

I ran in a 5K a few months ago... silly, I know; paying money to run. I just received an e-mail asking me to take a survey about the race. I figured that considering the race was 3 miles, how many questions could they ask? Turns out they can ask 31 questions... well to be fair it was really only 30 questions, they asked one of them twice.

Are these people insane? You're going to attempt to ask me 31 questions without any incentive than helping you make a better race for next time? I ended up completing the whole survey simply to see how much worse it got... I was never so surprised. It is 2009 people (almost 2010, don't tell anyone). You can use the Internet, which just so happens to be an interactive technology. So please don't ask me these series of questions:

How did you travel to the race?

I chose the "walk, run, bike" choice

How much did you spend on lodging during your travel to the race?

I, of course, chose the $0 choice

Seriously though... why ask the second question and waste my time? I live less than a mile away. I got up, walked to the race, and limped home. I didn't buy anything while I was there. I didn't spend any time in a hotel. Heck, I didn't even eat any of the free food (OK, I took a banana). My survey could have been about 10 questions. They could have cut out a lot of cruft and focused on the questions like: "How was the start line?", "How was the finish line?", "Did you like having all these people in your city clogging up traffic?"

Making Decisions

2009-09-14T20:53:00.003-04:00

Throughout business (and life) you will have to make a lot of tough decisions. You will almost never have enough information or the right information. A lot of the time you must make a decision about something you know nothing about. That is the focus of tonight's post... making a decision outside your area of knowledge.

I have been watching Pawn Starts a lot lately. If you haven't seen it, it is a show about a guy who owns a pawn shop with his father and son. What is fascinating to me, besides the crazy crap that shows up at his door, is how this might be one of the last places where you can find true business being conducted. Someone brings in an item they would like to sell and Rick, the owner, negotiates with the seller on a price. Clearly Rick must know the item and the market for the item or else he will pay too much and loose money when he tries to sell it. More than 1/2 of the time Rick tells the seller that he simply doesn't know enough about the item and must call in an expert. When he does this the expert then tells both Rick and the seller what the item is worth. Rick is then able to buy the item at a significantly reduced cost about 1/2 the time. The fact that he can do this at all is a testament to Rick's negotiating skills.

What does any of this have to do with making decisions? When Rick must make a decision to purchase an item he knows little or nothing about, he calls in an expert. He doesn't shoot from the hip or go with this gut. If he did he would probably be out of business quite quickly. While it is time consuming to call in an expert and often a blow to one's ego, Rick never purchases an item without first consulting the expert.

The same must be done is business. It is crucial to have a mentor and to surround yourself with expert consultants both inside and outside the business. As you gain experience you will need their consultation less and less. Rick almost always says something to the effect of, "Well I've learned something here today" after listening to the expert. That is the key. You must learn something from these consultations even if you decide not to follow their advice. It is also unwise to simply follow an expert's advice simply because they are an expert.

Quality, Service, and Price

2009-09-10T18:56:00.003-04:00

Old skool business/marketing tells us that there are usually three factors when deciding which product to buy: quality, service, and price. While this is not wrong, it is incomplete. There are other factors that often play a roll in deciding which products to buy: impulse, trends, and availability (just to name a few). If you are in the market to sell products to individual consumers, then paying attention to these other factors can be extremely important. However, if you products are B2B (or services), the tried and true are often the best metrics.

To dig deeper into these factors and what they mean, we must look at the sales cycle. With respect to these factors, there are two stages to the sale: pre-decision and post-decision. Pre-decision is when the customer is weighing the options between your product and another product (if you're lucky your product is the only one). Quality and price usually drive this decision. Customers can examine the product (or get references about the service) and make a decision about its quality. Customers also have access to the price and the price of your competition. Service is usually not an important factor as it is hard to demonstrate the level of service you will or will not provide. Providing good service is a reputation that is earned over time and lost quickly.

On the contrary, after the decision has been made the customer must continually make the decision to use your product (if you're smart, generating more revenue for you). This is where service can play a major roll. The customer has already shelled out the money, so price is not as important post-decision. The quality of the product must remain high or else you will loose your customers regardless of the service.

The conclusion that one can draw from this is that the pre-decision "sale" is usually easier than the post-decision "sale". Lowering the price is easy, as it does not require any real work (outside of changing signs, brochures, etc). Faking quality is usually easy... just look at all the infomercials. However truly producing a quality product and backing it up with spectacular service, that is what makes customers return. With those two factors strong, customers will not mind paying a premium price.

Tips for Bootstrapping a Company

2009-07-04T14:26:00.004-04:00

In reading the not-so-recent issue of Entrepreneur I came across Guy Kawasaki's 10 tips for bootstrapping a company. I agreed with most of them, so here they are, with my commens in italics:

Focus on cash flow, not profitability - The theory is that profits are the key to suvival. If you could pay the bills with theories, this would be find. The reality is that you pay bills with cash, so focus on cash flow: a small upfront capital requirement, short sales cycles, short payment terms and recurring revenue. I would add that one should also watch/focus on operating margin. If you're flowing cash through your business, but your margins are too slim, then you might look like you're doing well when in reality you're not making enough money to survive even the smallest of down-turns.
Forecast from the bottom up - Most entrepreneurs forecast top-down: "If 1 percent of US car owners install our satellite radio system, that's 1.5 million systems." The bottom-up forecast: "We can open 10 facilities that each install 10 systems a day." Guess which forecast is more likely to happen? Another way to think about it is that forcasting from the top-down is like thinking about how you're going to spend your lotto winnings before you've even bought your ticket. Instead, figure out how you're going to get the money to buy the ticket (then keep "getting the money" and don't buy the ticket).
Ship, then test - How can I recommend shipping stuff that isn't perfect? "Perfect" is the enemy of "good enough." When your product sis "good enough," get it out, because cash flows when you start shipping. By shipping, you also learn what customers truly want you to fix. Google is a perfect example of a company (although certainly not small) that does this the best. Almost all the products that they have were or still are beta. They put something out there, change it on the fly and wait until it's improved enough or doesn't make business sense.
Forget the "proven" team - They're overrated. Hire young, inexpensive, hungry people with fast chips, but necessarily a fully functional instruction set. This is a tough line to walk. If you get too many inexperiences people on your staff you'll spend all of your time teaching. However, if you go after the best team, you could blow through all your cash (or equity positions) on salaries. Instead, try to find right-out-of-college kids that are going to be the next "proven" team, and get them while they are still inexpensive.
Start as a service business - Say you want to build a software company: Provide consulting and services based on your work-in-progress software. This has tow advantages: Immediate revenue and true customer testing. Once the software is field-tested, flip the switch and become a product company. This goes back to operating maring. Service companies usually have lower operating margins than product companys. They can be a good way to get cash flowing through your business.
Focus on function, not form - Mea culpa. I love good form: MacBooks, Audis and Breitling watches. But bootstrappers focus on function: computing, getting from point A to point B and nkowing the time of day. All the chair has to do is hold your butt. It doesn't have to look like it belongs in the Museum of Modern Art. This is only solid advice if your company isn't based on making a better looking product than what exists today. Again, this is all about # 3.
Understaff - Many entrapreneurs staff up for what could hapen, best case. Boostrappres understaff, knowing that all hell might break loose. Another tough line to walk. If you understaff you migth not be able to deliver and miss an opportunity. However, coffee and all-nighters can usually make this problem disappear. Notice I didn't say "it's easy to ramp-up," that's because it is NOT!
Go direct - The optimal number of mouths between a boostrapper and her customer is zero. Sure, stores provide great customer reach and wholesalers provide distribution. But e-commerce was invented so you could sell directly and reap greater margins.
Position against the leader - Toyota introduced Lexus, claiming it's as good as a Mercedes-Benz, but half the price -- Toyota didn't have to explain what "good as Mercedes-Benz" meant. How much do you think they saved? "Cheap iPod" and "poor man's Bose speakers" work, too. This is taking the low-priced road against the high-priced leader. The opposite works too: take the high-priced road against the low-priced leader. Hey, Mercedes-Benz still makes plenty of money.
Find out how deep the rabbit hole really is - The equation is simple: amount of cash divided by cash burned per month. As my friend says, "The leading cause of failure of startups is deal, and death happens when you run out of money." The burn-rate he talks about is key. Money is like the air you breath for a startup. If you can't breath, you cannot live... it's really that simple.

Customer Service

2009-05-12T23:02:00.003-04:00

I had a recent encounter with a lawyer that has left me wondering what people are thinking with respect to customer service. Without getting into details the events went as follows:

I hire lawyer to complete task X
Lawyer agrees but only if I put him on retainer for Y
I prefer to have him contract his services for Y than leave it open-ended
Lawyer states that X will NOT cost more than Y
I agree to the retainer and pay it
Lawyer completes X and goes beyond to compete X+
Lawyer charges me for part of the additional work to compete X+
I argue that he assured me that X would only cost Y and ask him to zero my balance
Lawyer agrees to zero my balance but goes into a long sob story about how he went above and beyond and how "no good deed goes unpunished"

What did he think he would accomplish by putting the sob story in there? He agreed to zero my balance. Did he think I would see it his way, revoke my request, and pay the money?

He made the decision to give-up the money to save the relationship (the correct decision in my option... it wasn't a lot of money). With that decision made, what would it have hurt if he simply said, "Oh, you are correct, I'm sorry... your balance is now zero." Does he think he would set some precedence for next time if he conceded? He is lawyer. He has a contract I signed to hire him for his time at his rate... he could easily force me to pay and I would.

I believe I can answer my own questions in a single word: ego. He felt I was screwing him out of his money, but instead of simply letting it go his ego got in the way. Now I'm left with a zero balance but a bad taste in my mouth. I will certainly think twice before using this lawyer again.

Ego gets in the way too often in business. The purpose of conducting a business is not to be right/correct, but to make money. Technically he was correct, I owe him money. However, by trying to show me he was right he lost money in future work.

Never loosing sight of this; it is the key point to this post and the reason I'm posting it at all. If for no other reason I hope to be able to look back at it during a moment when the shoe is on the other foot and reflect.

Starting a Company, An Essay

2009-04-15T21:36:00.003-04:00

I found this essay on how to start a company and what it takes. It is written by Paul Graham, one of the founders of Viaweb (good company name I think) which was bought by Yahoo.

He lists the three main things you need to do to start a company is to

hire good people
make something customers actually want
spend as little money as possible

Hire Good People

Number 1 has been echoed in many places before. I am a 100% believer in it. Paul recommends getting a few founders together, but no more than 3. I think this is wrong and an important distinction should be made. If you're like me, you probably have a strong view of how things should be done, but you also realize there are a ton of things you don't know. You should surround yourself with smart people; however, it should be clear that it is your company. This way there will never be arguments over what to do... you have the final say.

This is dangerous though, because it is easy to go too far in either direction: being too bossy or acting too much like it is everyone's company. If you have to lean one way or the other, go towards acting like it is everyone's company. You want people to take ownership of the company, and not feel like they are showing up to do a job. However, don't blow smoke up their ass either... they can always sense it, I always could.

Make Something the Customer Actually Wants

This sounds stupid obvious, but it's not. As Paul noted (yeah, we're on a first name basis after just me reading his essay) even big "successful" companies fail at this. The key is to listen to your customer, the hard part is getting them to tell you what to do without wasting a lot of their time, your time and/or most importantly your money.

One way to do this, as Paul suggested, was to demo your product at trade shows. At a trade show they were never trying to sell anything. Instead they were watching how their potential customers used the software. They would spend time asking questions about how to make the software better than trying to sell the product that the customer doesn't really want. If the product is good, it will sell itself.

Spend as Little Money as Possible

This is a new one. People don't usually talk about it. They talk about how to get money (Paul does too), but they don't talk about how to spend it once you have it. This is probably because each company is different, which it is. However, there are some good general tips. Mark Cuban has a few rules for startups; some of them focusing on how to spend money. Joel compares the different ways to grow. Paul says it should always be the Ben & Jerry's way...

I do like the idea of establishing a culture of cheapness... however, I don't like that word. Instead I like thriftiness. Everyone in this recession is being thrifty where they once were not (well not everyone, thanks AIG for being the exception, way to go!). If that could only live on beyond the bad times, thing about how much money would be saved.

Creating a Company Culture

2009-02-19T21:14:00.006-05:00

This is 2009. Gone are the days of the good old boys club. You no longer have to play golf to succeed. You no longer are expected to have a wife and 2.5 kids (or husband, but lets face it, women were never expected to work back in the day). While career advancement has obviously changed, so too has the work environment. Things such as ROWE and telecommuting are now commonplace. With all of these new directions and changes, what works and more importantly, what does?

Unfortunately the answer is, it depends. A company's culture usually stems from the people who started the company. At my last company, for example, the man who started founded it, and the first person he hired, were notorious for leaving early or showing up late. What happened? The employees on the "other side of the building" (literally in this case) started to say things like, "Well no one else is here so I am going to leave." While the founder could have easily been at home working like a dog, he portrayed the image that he was being casual about the whole thing.

The start-up I worked at before that one, I worked from home. Progress wasn't measured by when you were in the office, because I was never there. Instead it was measured purely by results. This would have worked except the metric that I was being measured by was never clearly explained to me. Being new to working from home, I did not think to inquire and simply figured that if there was a problem someone would say something. Unfortunately for me, someone did say something, but it was basically "you're done here."

So how does one establish a company culture that works? First you have to realize that company culture is extremely important. Let me restate this, EXTREMELY IMPORTANT. For the longest time I thought it was MBA garbage, I could not have been more wrong. Knowing that the culture of the company can literally make or break the company, you need to decide the overall attitude of the company. This is best done before starting the company. Before spending a single dime, think about how the day-to-day operations of your company will work. Most people neglect this because they are so wrapped up in a cool product or an innovative service. Nothing kills good ideas faster than a lack of planning.

Some questions to ask yourself before you start building your product or marketing your service:

Most people have a specialty -- technical abilities, marketing, finance, etc -- how will people with the same specialty operate? How will people with opposite specialties operate?
How will progress be measured? Annual reviews, quarterly peer evaluations? How will these metrics be communicated to employees? The handbook, a memo, first day training?
What is the hierarchy of the company on the first day? On the last day? How many "levels" will be between the owner/president/CEO and the bottom person? How many areas (breadth of tree) will there be?
How will people be promoted? How will advancement be communicated to all employees? How does this relate to #2?
What incentives will people have? After about the 3rd person, you will be hiring people who are strictly at the job for a paycheck. Try to get rid of those people as fast as possible; however, sometimes you still need employees to get the work done. Zappos offers employees $2,000 on the first day to quit.

All-in-all most employees and most CEOs don't think about these things. They just let the culture of the company happen. This often works, but with a little thought and planning things can go much smoother.

Year-end Bonus & Gifts

2009-01-01T11:53:00.003-05:00

It's that time of year when you might be getting or giving a year-end bonus or gift. Actually, it's probably too late for this post, but my friend got a year-end gift that was too good not to mention. First some helpful tips, then a bad example.

Tips for giving a year-end bonus/gift:

If you're giving money, tie the amount of money equally to how the company performed and how the employee performed. This way employees are invested in the company yet still must work hard individually to be rewarded.
Money is usually the best gift, unless you can get a discount on merchandise. My father always received a catalog where he could pick 1 item from section A, and 2 from B; or 3 from C. That type of a gift is a joke... it's impersonal and not really in the spirit of the season (especially when you have to decode a chart to figure out what you can get).
Money & gifts are not the only compensation you can give. Times are tight right now, consider giving extra vacation time instead of money or gifts.
Shy away from alcoholic beverages. Not everyone drinks, so giving alcoholic beverages (wine, beer, etc) as a gift can often be insulting.
Remember these are your employees, not necessarily your friends. At the end of the day, this is a business and you must do what is right for the business. However, don't be a scrooge, happy employees are good employees.

And now for the bad... We've all heard of (and have probably done) re-gifting. However, there are certain items you shouldn't re-gift... checks are one such item. A friend of mine works for a small start-up. He came into work the other day and his boss had a stocking with some chocolates, a bottle of champagne and a check in it for him. A very nice gesture my friend thought, until he looked at the check. The check was made out to his boss from the conference his boss had just attended. Apparently his boss had own some contest at the conference and the reward was this check. His boss simply re-gifted the check by writing on the back of it, "Pay to the order of XXX"... my friend can't even cash the check now. He has to go back to his boss to get his boss to sign it. Now that is probably the greatest re-gift story I've ever heard.

5 Search Engine Optimization Tips

2008-12-30T21:40:00.003-05:00

The latest (probably not the latest anymore) issue of Entrepreneur magazine has 5 tips on SEO... here they are, blantely stolen:

Get a good domain - Get a domain that relates to what you're selling. Also remember that you can get mulitple domains.
Take care with titles - This is a common mistake with HTML editors that do-it-for-you. Make sure your titles reflect what is on the page and include your business's name.
Use keywords wisely - Pick a set of keywords you want people to find your site with, then use them throughout the site. Put them in the title, in meta tags in the header, and throughout the page. Also, if applicable, link to sites that come up when you type these keywords into Google or your favorite search engine.
Make your contact information obvious - Some sites hide their contact information to prevent getting SPAM. It's 2008 (almost 2009), get a good SPAM filter and post your contact info all over your site.
Link up - The more relevant the links you have on your site to other sites, the higher you will be ranked. This includes linking to competitors... but do it carefully.

The Breakeven Point

2008-12-08T20:58:00.002-05:00

So my father picked up about 8 books on business all published by the Harvard Business School Press. He thinks Harvard is the greatest thing since sliced bread, I'm starting to think that the HBSP is just an easy way for Harvard Business professors to get published. The first of the 8 that I'm reading is The First 90 Days: Critical Success Strategies for New Leaders at All Levels by Michael Watkins. As promised in a previous post, I'm going to try and pull out lessons as I read instead of doing a single really long book review that no one will read (not that anyone reads the short posts... if you are, leave me a comment).

The first thing I learned from the book was the concept of the "Breakeven Point". This is one of those, "Oh yeah, that makes sense" type of concepts. You aren't blown away when you head/read about it, but you've probably never heard/read someone specifically define it before. The breakeven point is the point at which you stop being a drain on the company and start providing value.

The author defines this nicely with a graph that shows how you are a drain on resources (negative values) when you first start for a company. Then when you've been there for a while you start adding value to the company (positive values). However, it is not until the integral of the curve is zero that you arrive at the break even point. For those of you non-math people out there, that simply means the point at which the positive impact on the company equals the negative drain on the company.

This whole book is about accelerating the time it takes to reach that breakeven point. Well, I'm sure it's about more than that, but for now that is all I know.

More to the point, why is this important? Well, it isn't really... it's just a definition. What is more important is that you keep this in the back of your mind as you start a new job (which I just did a few weeks ago). For me, this definition pops up in my mind every time I go and ask my manager how to do something and/or one of my fellow co-workers. It pops into my mind every time I think about starting a project or adding in some other way.

While I never plan to stop asking questions, I do plan on making a substantial positive effect on the company to offset the negative effect I've had just by starting work there.

Tax Time

2008-12-01T21:45:00.002-05:00

It is rapidly approaching tax time (that is if your fiscal year ends Dec 2008). I'm not a tax accountant so don't do anything I say here without checking with a certified financial adviser. With the disclaimer out of the way, here is what you should do! Actually, some of these tips come from Entrepreneur magazine's Dec issue:

Equipment Deductions - Purchase major equipment as the first-year-write-off ceiling for equipment expenses have doubled for 2008 to $250K. The only hitch, the equipment purchase can't put your business into a loss.
Bonus Depreciation - If you have additional equipment purchases beyond $250K you can get 50% off this year only.
Estate Tax: The estate-tax is $2 million this year, $3.5 million next year, and $0 (yes, zero) in 2010. So if you have substantial assets, gift them to your heirs up to $12K apiece.
Alternative Minimum Tax - This steep tax is starting to affect the middle class (think Joe the plumber). Congress might pass a last minute fix for this... so contact a certified accountant.
Establish a company - If you don't already have your own LLC, create one. It is usually very easy. Also, you can put business expenses through your company and have them count as deductions against your personal income. Check with your local state tax law, but it is often the case that you need only show a profit for 2 out of any 5 year period to not attract an audit... of course you might get audited for other things.

Terminating Employees

2008-11-02T13:56:00.003-05:00

Unfortunately, because of the down economy some people are going to get the present of loosing their job this holiday season. Believe me, this can mean really, really tough times ahead. Here are a few tips on what to do if you are fired, and a few things to do if you have to fire someone.

If you were just fired...

Calm down, don't panic, and control your emotions - You cannot take back the things you say while you are being fired. If you flip-out and start yelling at the person firing you (often an HR person who didn't make the decision) it won't help you. Sure, you will feel better for 30 seconds or a minute, but in the long-run it will only hurt you.
Use level-headed thinking when considering legal options - In most cases the company is not dumb enough to fire you without just cause. To pursue a legal battle will only cost you money and time, both of you which you don't have. Talk to multiple lawyers before even considering going after the company. If the lawyer won't talk to you for free initially, then they are probably just in it for the money... after all, it's down economy for them too.
File for unemployment - This should probably be #2, but considering how litigious we are as a nation, I thought it was more important to talk about the avenue most people will pursue first. As for unemployment, don't let pride cloud your vision... pride can't pay the bills. Also, realize that unemployment is not a sure-thing. Depending upon why you were terminated, you might not get it. Check with you state's department of labor.
Update your resume - You cannot get a job without a resume. There are numerous websites and companies that can help you format and create your resume. In most cases you can find all the resources you need online.
Talk to everyone you know, and everyone you don't - Getting a job is more about who you know than where you apply. If you send your resume in via an online application process, most of the time you don't have as good of a chance as if you send it in via someone you know. The key is to network. Hopefully you've done this before getting fired, but most people haven't. Talk to everyone at your kid's ball game, everyone at the bar, everyone everywhere... you never know when your next boss could be standing in front of you at the checkout line.
Get on LinkedIn - For those that don't know, LinkedIn is the professionals equivalent to Facebook. You can post the places you've worked, what you did there, where you went to school, and other things about you. They also have the ability to cross reference jobs you're searching for with people in your contacts. This way you have an "in" at the company you are applying to.
Submit your resume to a recruiter - Recruiters are often used by companies to find qualified personnel. A recruiter can also provide you tips on how to fix-up your resume, handle an interview, and other job related tips. The only downside to using a recruiter is that the company has to pay as much as 30% of your salary. This will often lead companies to only rely on a recruiter in times of desperation.
Search the classifieds - No, not the newspaper (although you can do this too). It's 2008, look on Craigslist for jobs. I know of a CEO of a start-up that recruits almost exclusively on Craigslist.
Be persistent without being annoying - To you finding a job is the most important thing going on in your life. To the person looking to hire, it probably is not. Regardless of how well staffed the HR department is, someone from the specific division you are looking to work in will probably need to interview you. They probably also have numerous other things going on besides hiring you. Therefore, use your inside contact to find out the best time to talk to this person. Keep your conversations thorough but short... don't waste their time.
Ask other companies where you should work - It sounds desperate, but by item #10 you probably are. When you're talking to HR people, or anyone at a company for that matter, apply item #5. Ask them if they know of any other jobs at competitors or in unrelated fields. Maybe that have a brother or mother that works at some company that is looking to hire. Again, it is all about networking.

If you have to fire someone...

Don't tell anyone that does not need to know - Rumors will occur no matter what you do. However, try and limit them by telling only those people that absolutely need to know, and only as much as they need to know. In one situation someone in HR, along with numerous other people, were being let go. Upper management did not tell that HR person, but the word got around. The HR person assured everyone that she had not heard of anyone being fired. When it actually happened, it was more of a surprise than it needed to be. If upper management had simply told the HR person that some people were going to be let go and to not answer any of those questions, the blow probably would have been softened.
Don't fire someone while they're on vacation - There is never a reason to fire someone while they are on vacation. Lock them out of their accounts, e-mail, etc; then tell them in person when they come back to work. Granted, if they try and check their e-mail and it isn't working, that will probably raise suspicions. However, nothing will ruin an already paid for vacation faster than finding out you've been fired. If you know they are going to be fired, don't let them go on vacation in the first place.
Always fire someone in person - E-mail, written letters, or God forbid a text message is not the proper way to fire someone. Have some respect for that person, regardless of what they've done, and fire them in person. This is going to be a tough time for that person and the least you can do is be professional and fire them in person.
If possible, give them a severance package - You don't have to provide them will full pay, or even any pay, but you should give them something. This all depends upon the job and the position; however, benefits are always a nice parting gift, even if just for a month.
If the termination is amicable try and help them find another job - Let them keep their office to make phone calls, use the Internet, or send resumes. Give them the chance to resign (although this might affect their ability to collect unemployment.) Try and give them some of your contacts to give them a head-start. In the best situation this person might actually become a proponent of the company. People's views of something are usually colored with the last major event that occurred... make their last day as nice as possible.

Tough Times

2008-10-17T12:29:00.002-04:00

We (the world) are going through some tough economic times. A lot of small business are feeling the affects of the slowed economy and the pending recession. In the latest Entrepreneur magazine C.J. Prince provides 4 tips on how to make it through these tough times. Her tips are below with my comments:

Cut costs strategically - She advices not cutting costs across the board. I couldn't agree more. In fact, I would advocate (as many others have) to actually increase spending in advertising. During slower economies spending for research and the production of new products should probably be reduced, while investing in branding and advertising should increase. The slower economy is a great way to get brand recognition over larger competitors. The larger brands will probably cut advertising costs so ad space will probably be cheaper. Plus, working on new products does not generate revenue in the short-term, which is hopefully what this slow down is. Advertising and sales will produce revenue now.
Lose customers to boost profits - This is the old advice, "fire your worst customers." If a certain customer (or set of customers) is taking all most of your support time, then consider not doing business with them anymore. The customer will either shape-up or walk. Either way, you will be saving money.
Forfeit pay - Regardless of your company's size, forgoing pay is always an option. Recommend it to the top tier of your company. Again, this only works if you believe your company needs a short-term boost to get through some rough times.
Review your plan - Because the market is changing, you company needs to change. Will your company survive in the new market place? This is a good time to review your business plan to ensure it can survive after the recession.

Public Speaking

2008-10-17T12:10:00.002-04:00

Guy Kawasaki has an article in the latest issue of Entrepreneur magazine on 11 public speaking tips. Here are his tips with my commentary and other suggestions:

Have something interesting to say - This goes along with #4 (which I would put as #2), know your audience. If you understand what your audience cares about, and you have something inline with what they care about, then you're half way to a good speech.
Cut the sales pitch - This is only somewhat true. I listened to a guy give a presentation about his recent research. However, before he started talking about his recent research, he talked about a previous research project and encouraged everyone to go download and use the code (computer science research) from his previous work. This was somewhat odd for a research presentation; however, like everything in life you need to constantly sell yourself, your company, and your work... regardless of the genre.
Focus on entertaining - This is extremely important. If you can get the audience relaxed and engaged, you will give a better talk. If you need to start out with a joke, do so... but make sure it's appropriate and funny. I usually try and sprinkle jokes through the presentation instead of leading with an obvious one. Also, watch out for self-deprecating jokes. They are sometimes affective, but depending upon the audience can be a train wreck.
Understand the audience - This is a classic and prob the most important.
Overdress - I would re-word this to "dress appropriately." If you're giving a keynote at a seaside resort where everyone is in shorts and sandals, then showing up in a 3-piece suit is probably a bad idea. This can make the audience feel uncomfortable and/or not take you seriously. You have to be able to show you can related to your audience.
Don't denigrate the competition - No one likes a bully or someone who is cocky. If your presentation has the tone of "here is why we're better than them," it won't be well received.
Tell stories - The more relaxed you are, the better you'll speak. So if you know a story well, and can relate it to your topic, use it. This goes along with #11.
Precirculate with the audience - You don't want the first time they've heard of you to be when you go to present.
Speak at the start of an event - If you can present second on the second day, you have the best time slot. People who showed up late will be there, everyone will be caught up on jet-lag, and you will have hand a chance to mingle with everyone.
Ask for a small room - Most people feel more comfortable in smaller venues. Plus it gives the perception that a lot of people have come to see your presentation if it's standing room only.
Practice, and speak all the time - This is probably the best advice... practice does make perfect. Kawasaki claims that it takes 20 times to get a speech correct, so start talking to the mirror.

Incentives

2008-10-13T22:46:00.003-04:00

In the latest issue of Inc. Magazine (OK, I read the whole thing in a day and now I'm blogging about it) is an article on employee incentives. The author provides two descriptive stories about how employees found a way around the intended purpose of an incentive to ensure personal gains. His first example is of a shoe store employee selling a can of silicon shoe spray to customers for a dollar (real cost $13). The employee was able to use a coupon (or some other discount method) to basically give away the spray, but record it as a sale to make the commission.

For a deeper discussion on incentives he points to a book by Robert Austin -- "Measuring an Managing Performance in Organizations." The Cliff Notes version is that incentive plans always fail... not sometimes, but always. While this sounds exaggerated, I believe it's true. When I was in grad school the head of graduate affairs for our department told me that they like to change the rules for getting a PhD (or masters) every 4 years. His reasoning was that after about 4 years graduates students have figured out the most efficient way to overcome the obstacles set in front of them by the department (why the department is setting up obstacles and not helping students is for another blog altogether).

How does one get around the fact that incentives always fail? Two approaches that I've seen: 1) follow the grad school's lead and change the incentives often; 2) establish rules that "gaming" the incentives is wrong. I would recommend trying the second approach as the first usually leaves people confused and frustrated, as I was.

10 Tips to help get the knack

2008-10-13T22:14:00.002-04:00

Norm Brodsky is one of the authors of "The Knack: How street-smart entrepreneurs learn to handle whatever comes up." He has also written an article in the latest Inc. Magazine about 10 rules to help handle whatever comes up. Here are those tips with my comments:

Numbers run a business. If you don't know how to read them, you are flying blind. (100% true. It is also not as difficult as your accountant would like you to believe. Get yourself a book -- from the library of course -- on accounting and a standard accounting program like QuickBooks. This will cover about 90% of what you need, hire someone to do the last 10% so you don't go to jail. This is true both for a start-up and for a manager. If you don't know what your budget is and where that money is going, you're flying blind.)
A sale isn't a sale until you collect. (At my current company we are dealing with 9 month sales cycles -- for various reasons I won't go into.)
When your short-term liabilities exceed your short-term assets, you are bankrupt. (If you don't understand what that means, go back to step #1.)
Forget about shortcuts. Run a business as if it's forever. (I had a roommate in grad school who would continually do something tedious on a research project because he didn't believe that he would have to do it for too long... how long could the research take, right? In the long run he spent more time continually completing the tedious task instead of taking the time initially to build a framework to efficiently complete the tedious task. The same applies here. While still in stealth mode, build a framework your company can grow into later instead of scrambling to put something in place when it's become unmanageable.)
Cash is hard to get and easy to spend. Make it before you spend it. (This often doesn't seem to be true with all you read about companies being funded, but it is. Think of spending an invested or leveraged dollar as costing you twice as much as an earned one. By earning the money you spend, you've already saved 50%!)
You have no friends in business, only associates. (This is the old "don't do business with your friends." This is especially hard when you are starting because your friends are the only people you know. Yet another reason to network.)
Don't focus on the top line. Gross margin is the most important number on the income statement. (Again, if you don't understand, go back to step #1. If your sales are doing well, but your gross margin is down, you will go out of business. It is really that simple.)
Identify your true competitors, and treat them with respect.
Culture drives a company. In the long run, the boss's most important job is to define and enforce it. (I couldn't agree more. Company culture and/or moral are more important than most aspects. If employees truly believe in you and the company, they will go to great lengths. If they are frustrated or unhappy, it will be hard to get them to satisfactorily complete what is required of them.)
The life plan has to come before the business plan. (From the article, and stated better than I could: Building a successful business is not an end in itself. It is a means to an end.)

Advertising is the tax you pay for being unremarkable

2008-10-13T22:09:00.002-04:00

What a great line: "Advertising is the tax you pay for being unremarkable." I'm not sure Robert Stephens knew how remarkable and on-point that statement was when he wrote it in the current issue of Inc. Magazine.

It came from a response to a question about boosting word-of-mouth marketing. He has some good advice -- like paid word-of-mouth is an oxymoron -- however, that one statement alone is more important than any of the other advice he gives in the column.

5 Ways to Save Money

2008-10-13T21:49:00.002-04:00

From the current issue of Inc. Magazine -- Five Ways to Save Money (Layoffs not Included).

My comments after each:

1. Send your employees home.

This is a good idea if you're organized to pull it off. Also, there are some hidden costs: laptops/desktops, Internet connections, phone bills (cell or otherwise). However, if you've hired the right kind of people that don't need to be micromanaged, then having them work from home shouldn't be an issue. As someone who has worked from home, communication is key. Ensure that you communicate with each of your employees (over IM or via the phone... something real-time) at least once-a-day. This will make sure they aren't sitting in an empty home feeling sheltered and depressed.

2. Share your staff.

The key is to make sure that people are happy. If someone is going to be skipping out of work early to work a part-time job (hobby), wouldn't you rather know about it? Create an atmosphere that is open enough so that your employees feel comfortable about asking you to work another job. If done properly, there is no down-side. If the employee truly enjoys working at your company giving them the freedom to pursue other hobbies/jobs will keep them happy. However, if by giving them this freedom they start dropping the ball at work, then you know they are not committed and you can let them go. Either way, you've gained something important: a happy employee or the knowledge that someone is not committed.

3. Get customers to put away their credit cards.

If you can get out of having to pay the additional 1% to 4%, then do it. Along these lines, tighten up how long a customer has to pay you. If you allow your bills to be outstanding for 60 days, that is 60 days worth of bills you have to cover. Technically speaking, when your short-term liabilities exceed your short-term assets you're bankrupt.

4. Cut back on travel.

Also along these lines, try different dates. Sometimes if you arrive a day earlier or later you can save hundreds of dollars on a flight and/or hotel. If your employee has the ability to work from home anyway, it might make sense to have them stay an extra day and work from the hotel. Booking travel at this point is an art.

5. Try do-it-yourself marketing.

Marketing and marketing firms are often over-rated. You know your product the best. You know your customers the best. Gather your whole company (if practical), take them out for drinks (or bring them in), and get ideas from everyone... from the guy who washes the floors up to the CEO. Pizza and beer, that is how the big marketing firms do it.

Everyone has a list of what to do...

2008-10-13T21:27:00.003-04:00

It seems like the more I read about business and start-ups, everyone has a list for me describing what I should be doing. Some of this advice is good, but one should always take advice (of any kind) with a grain of salt.

Here are two great blog entries that I thought were kind of funny. The first references the second, but then contradicts it :-)

Jason Calacanis's blog entry on "How to save money running a startup"
Mark Cuban's blog entry (which references Jason's) on "A couple of my rules for startups"

The most blatant contradiction... the espresso machine; to buy or not to buy. I can see both sides of this, but I think it's less important than some other issues. For example, myself and a fellow co-worker took it upon ourselves to purchase beans and make our own coffee in the morning. Aren't those really the kind of people you want, those who will economically solve the problem at-hand?

A few items from both blogs that I thought were good ones:

Don’t start a company unless its an obsession and something you love. If you have an exit strategy, its not an obsession. Hire people who you think will love working there. (OK, that was 3 in 1)
Know your core competencies and focus on being great at them. Pay up for people in your core competencies. Get the best. Outside the core competencies, hire people that fit your culture but are cheap.
No offices. Open offices keeps everyone in tune with what is going on and keeps the energy up. If an employee is about privacy, show them how to use the lock on the john. There is nothing private in a start up. (I agree about the open offices, but disagree that "nothing is private". What about salaries, special needs, etc? So one conference room, and everyone else in an open office.)
Keep the organization flat. If you have managers reporting to managers in a startup, you will fail. Once you get beyond startup, if you have managers reporting to managers, you will create politics.
Make the job fun for employees. Keep a pulse on the stress levels and accomplishments of your people and reward them. We would take people to a bar every now and then and buy one or 10 for everyone. At MicroSolutions, more often than not we had vendors cover the tab. Vendors always love a good party. (I agree, moral is more important than CEOs usually realize. If people are happy they will work harder, if they are frustrated or burnt-out, they won't work hard. But you have to know how your employees are feeling.)
Use Google hosted email. $50 or free per user…. how can you beat that?!?! Why screw with an exchange server!?!? (I'd add to this, buy computer parts and build your computer -- assuming you know how -- and use open source software.)
Don’t waste money on recruiters. Get inside of Linkedin and Facebook and start looking for people–it works better anyway. (A friend of mine has a startup in Alabama and does technical work. She found almost all of her employees by posting on Craig's list.)
Buy everyone lunch four days a week and establish a no-meetings policy. Going out for food or ording in takes at least 20-60 minutes more than walking up to the buffet and eating. If you do meetings over lunch you also save that time. So, 30 minutes a day across say four days a week is two hours a week… which is 100 hours a year. You get the idea. (The first internship I worked at my boss instituted "Free Lunch Friday". He just wanted to get out of the office and felt bad for us poor students; however, he unknowingly got us thinking about work during our lunch -- at least on Fridays.)

Personality Tests During Job Interviews

2008-09-22T21:12:00.003-04:00

Another article I found interesting in the latest issue of Inc. Magazine. This article focused on what you can do to better weed through applicants that might sound good during the interview process, but turn out to be poor candidates. The article suggested giving personality tests. The suggest the DISC and PIAV tests. I think this is an interesting idea considering that most interviews focus solely on the skills the person has. However, almost more important is how motivated the person is and how well they will integrate with the company's culture. You can train someone to do almost anything; however, if they feel awkward in the company (for whatever reason, everyone is outgoing and they are not, etc) it might not matter what kinds of skills they have.

Focusing back on the technical skills (be it management, engineering, etc), I think often companies are afraid or feel awkward asking a candidate to complete a technical test. I think this is wrong... give them a test. Why would you waste the time hiring this person if they cannot complete a test? If a paper and pencil type of test would be hard to administer for the position (management or sales maybe), then have them sit in on a meeting. It will take a bit of everyone's time; however, these are the people the candidate will be working with. You don't buy a car without test driving it, why would you hire someone without seeing how they perform in a real-world situation. If the balk at the idea of a test or coming back to sit in on a meeting, then they probably aren't all that interested in the job. (Note: You might want them to sign an NDA before they sit in on meetings or take on technical tasks.)

Also, don't be afraid to bring the candidate in for multiple interviews. As mentioned in "Good to Great," take your time while hiring and make sure you get the right person. I've worked at a company where a someone was brought in approximately 9 times (I lost count after about 5) before getting the job.

In the same issue of Inc., they asked a few CEOs what questions they like to ask during a job interview. Here are their responses:

"What would be your theme song?" - Nicole Loftus, Zorch
"Can you pull the wight of three people?" - George Tunis, Hardwire
"Are you a Green Bay Packers fan?" - Michael Hubbard, Media Two Interactive
"What is on your bookshelf?" - Vikram Chalana, Winshuttle
"Do you have a problem filling in as janitor for a day?" - Andrew B. Dwyer, DVS Group
"Define integrity." - Joesf Schmidt, Canvas on Demand
"Do you have a driver's license?" - Bradley Grubaugh, Bradley Excavating
"Who needs you?" - Brian Cork, Brian Cork Human Capital
"What do you want to be when you grow up?" - Gene McCubbin, Pop Labs

And, my personal favorite which I actually learned while going through my Eagle Scout board of review process: "If you were sitting in my seat, what question would you ask?" Then ask them that question.

Online Retail Tools

2008-09-22T20:58:00.003-04:00

I was reading the latest issue of Inc. Magazine and there was an article on tools for helping to setup an online shop.This is explicitly the type of thing a multi-thousand dollar MBA education won't teach you about. Granted, most people going for an MBA aren't technical people and would rely on a technical person to setup their web store. However, having a bit of knowledge about this type of thing can never hurt. And who knows, maybe your technical guy (why is it always a guy... I don't know, but it usually is) can learn something.

Magento - magentocommerce.com
Open-source e-commerce software. Free software, but support costs $500 to $4,000 a year.

Volusion - volusion.com
Hosted e-commerce software. From $29.95 per month for 20 products to $197 per month for unlimited products.

Shopify - shopify.com
Hosted e-commerce software. For $24 a month plus 2% of transactions for 100 products, $299 per month for 10K products and 0.5% of transactions.

Fulfillment by Amazon - amazonservices.com/fulfillment
A shipping service from Amazon.com. Monthly storage fees are $0.45 per cubic foot, plus an extra $0.15 per cubic foot during the 4th quarter.

Loomia Retail - loomia.com
Product recommendation software. 2.5% of all sales generated by Loomia recommendations.

Power Reviews - powerreviews.com
A customer review system for your online store. Free, with a revenue-sharing agreement on Buzzillions.com. Otherwise a $5K setup fee and a monthly charge of $2,500 plus $0.25 for every review.

Not Killing the Entrepreneurial Spirit

2008-09-21T11:32:00.003-04:00

This little blurb came from the book Good to Great. I thought it was so dead-on that I'm just copying it here...

Few successful start-ups become great companies, in large part because they respond to growth and success in the wrong way. Entrepreneurial success is fueled by creativity, imagination, bold moves into uncharted waters, and visionary zeal. As a company grows and becomes more complex, it begins to trip over its own success -- to many new people, too many new customers, too many new orders, too many new products. What was once great fun becomes an unwieldy ball of disorganized stuff. Lack of planning, lack of accounting, lack of systems and lack of hiring constraints create friction. problems surface -- with customers, with cash flow, with schedules.

In response, someone (often a board member) says, "It's time to grow up. This place needs some professional management." The company begins to hire MBAs and seasoned executives from blue-chip companies. Processes, procedures, checklists, and all the rest begin to sprout up like weeds. What was once an egalitarian environment gets replaced with a hierarchy. Chains of command appear for the first time. Reporting relationships become clear, and an executive class with special perks begins to appear. "We" and "they" segmentations appear -- just like in a real company.

The professional managers finally rein in the mess. They create order out of chaos, but they also kill the entrepreneurial spirit. Members of the founding team begin to grumble. "This isn't fun anymore. I used to be able to just get things done. Now I have to fill out these stupid forms and follow these stupid rules. Worst of all, I have to spend a horrendous amount of time in useless meetings." The creative magic begins to wane as some of the most innovative people leave, disgusted by the burgeoning bureaucracy and hierarchy. The exciting start-up transforms into just another company, with nothing special to recommend it. The cancer of mediocrity begins to grow in earnest.

George Rathmann (co-founder of Amgen) avoided this entrepreneurial death spiral. He understood that the purpose of bureaucracy is to compensate for incompetence and lack of discipline -- a problem that largely goes away if you have the right people in the first place. Most companies build their bureaucratic rules to manage the small percentage of wrong people on the bus, which in turn drives away the right people on the bus, which then increases the percentage of wrong people on the bugs, which increases the need for more bureaucracy to compensate for incompetence and lack of discipline, which then further drives the right people away, and so forth. Rathmann also understood an alternative exists: Avoid bureaucracy and hierarchy and instead create a culture of discipline. When you put these two complementary forces together -- a culture of discipline with an ethic of entrepreneurship -- you get a magical alchemy of superior performance and sustained results.

Book Review: Good to Great

2008-09-21T10:23:00.005-04:00

The latest book I read, which took me too long, was Good to Great by Jim Collins. I started out thinking I would not like this book, and was pleasantly surprised. It started immediately focusing in on stock prices with a graph of prices over time on the second page. This immediately turned me off. Not because I don't like numbers, but because the price of a company's stock is not the only way to evaluate how "good" or "great" a company is.

The book was written by spending 6 years (impressive) studying all kinds of data on companies that were performing in-line with the market for at least 15 years. Then at some point had performance that was remarkable compared to its peers and the market for at least 15 years.

The book contains the following chapters, of which I will review the ones I felt were important:

Good is the Enemy of Great
Level 5 Leadership
First Who... Then What
Confront the Brutal Facts (Yet Never Loose Faith)
The Hedgehog Concept (Simplicity within the Three Circles)
A Culture of Discipline
Technology Accelerators
The Flywheel and the Doom Loop
From Good to Great to Built to Last

Level 5 Leadership

While they (I say "they" because there was a team of researchers working on this project even though it's authored by one person) kept trying to introduce reasons as to why these companies went from good to great, it seemed to always tie back to the leader. They outline 5 levels of leadership, level 5 being the best. A level 4 leader is someone who is extremely effective and is probably someone you've heard of before. A level 5 leader is someone who is a bit more obscure because of their lack of self promotion. In numerous interviews with level 5 leaders they contributed their success to the people around them, not themselves. Whereas a level 4 leader contributes the company's success to their ability to steer the ship in the right direction and make the right calls. "Level 5 leaders channel their ego needs away from themselves and into the larger goal of building a great company... their ambition is first and foremost for the institution not themselves."

An interesting find about these great leaders is where they come from. "Ten out of eleven good-to-great CEOs came from inside the company. The comparison companies turned to outsiders with six times greater frequency -- yet they failed to produce sustained great results." I think this is somewhat of a no-brainer when you step back to think about it. Who knows a company better than someone who has risen through the ranks? The ironic part (brought up in the book) is that the people who strive to rise through the ranks and gain power, are usually not Level 5 leaders. They are usually driven by ego.

The final point on Level 5 leaders is their ability to train/establish a successor. In the comparison companies the CEOs were too caught up in celebrating their success to realize that they need to establish a successor, or they picked a successor that was another larger-than-life personality. This is often a bad idea because that new CEO will have a desire to change everything so that they can prove to everyone that their ideas were what made the company great... not simply following what works. Then when things go poorly for the company, the new CEO finds any excuse, other than himself or herself, to explain why their ideas didn't work.

First Who... Then What

They stressed, to which I agree, the importance of getting the right people on the bus and in the right seats and getting the wrong people off the bus. Instead of having a "Genus with a Thousand Helpers," a Level 5 leaders establishes the right team before deciding which direction to point the team towards. This again flows back to ego. Someone with a big ego will usually have the attitude that they can do everything, they just cannot get it all done. So they hire helpers to accomplish what they do not have time to do. Usually this genus is not impressed by the way the task is accomplished and you'll hear sayings like, "If you want something done right, do it yourself." Instead a Level 5 leader looks for people who can do a better job at accomplishing a task than himself or herself. This is a key mentality required for a great company.

Another point made about people was that when a change is needed act fast. "The best people don't need to be managed." When the wrong person is on the bus people usually give that person multiple chances to improve. Time and energy is spent on dealing with that person and their issues instead of working on the business. "Strong performers are intrinsically motivated by performance, and when they see their efforts impeded by carrying extra weight, they eventually become frustrated."

There were three practical disciplines described in the book for dealing with people:

When in doubt, don't hire -- keep looking.
When you know you need to make a people change, act.
Put your best people on your biggest opportunities, not your biggest problems.

The final important discipline/secret is: When you decide to sell off your problems, don't sell off your best people.

Confront the Brutal Facts (Yet Never Loose Faith)

While the entire chapter was good, there were a few points on how to help facilitate and open and honest culture in the work place that I found were dead on:

Lead with questions, not answers - Don't come to a meeting "knowing" why something went wrong. It only leads to blame.
Engage in dialog and debate, not coercion - It should never be one person trying to push their agenda through the company, debate the facts and look at things honestly.
Conduct autopsies, without blame - When something goes wrong people usually don't want to talk about it because they don't want to be blamed. Usually it is never one person's fault... the simple fact that if it is, then the company failed by providing that much power to one person so everyone is to blame.
Build "red flag" mechanisms - There should be checkpoints that are routinely analyzed to see how things are doing. Often as the marketplace changes, so do the indicators of success.

The Hedgehog Concept (Simplicity within the Three Circles)

I am usually not a fan of diagrams that claim they provide the panacea to your problem. I just don't buy it. Things are usually more complicated than any diagram can explain. However, I do think there is some importance in the three questions brought up in this chapter:

What are you deeply passionate about?
What can you be the best in the world at?
What drives your economic engine?

The claim is that answering these three questions, honestly, will move your business from a good business to a great business. I'm not 100% convinced, but answering these questions certainly can't hurt.

A Culture of Discipline

I actually cover this chapter in a different form in this post. I actually like this style of trying to pull out little lessons and posting about the lesson then writing some huge post about a book. I'm going to do this more in the future.

A final thought about this book...

After reading (and while reading) this book there was something that struck me... a lot of time was spent talking about some higher desire than simply building the bottom line of a company. The Rich Dad book on becoming an entrepreneur also mentioned this. The idea is that if you believe so passionately in something and build the company around that passion, that it will be successful. When I first read about this in the Rich Dad book, I did not buy into it at all. However, this is the second time I've seen a reference to it so I'm beginning to believe. If you can get everyone in your company behind some idea, the company will be more successful. That is sometimes hard if your company sells toilet paper or salt. However, if you can get everyone aligned behind your desire to make the best toilet paper or salt, then the company will be more successful. This somewhat ties into the old saying, "Do what you love and the money will follow."

Management: The Military Vs. A Football Team

2008-09-14T14:53:00.003-04:00

I was reading Good to Great the other day (soon to be reviewed, once I finish it), and a section on the management of Nucor struck me. "Central to the Nucor concept was the idea of aligning worker interests with management and shareholder interests through an egalitarian meritocracy largely devoid of class distinctions." And from Ken Iverson's (Nucor CEO) book, "The people at the top of the corporate hierarchy grant themselves privilege after privilege, flaunt those privileges before the men and women who do the real work, then wonder why employees are unmoved by management's invocations to cut costs and boost profitability... When I think of the millions of dollars spent by people at the top of the management hierarchy on efforts to motivate people who are continually put down by that hierarchy, I can only shake my head in wonder." This led me to the analogy of the two basic management hierarchies: the military and a football team.

The Military

In the military there is a very distinct and well established hierarchy. A general is above a colonel. A colonel above a major. A major above a captain, and so on down the line (I was never in the military... even if this isn't right, the names aren't the point). This hierarchy is very effective at completing a specific task. The military usually doesn't fail when it comes to the chain of command and completing a given task because of a confusion over who is responsible. The task might be flawed from the start, but everyone knows their role and where they stand. The problem is that no one expect for the commanders at the top have an opportunity to make decisions and present ideas. Things are not voted upon in the military. This is much like the typical corporate hierarchy that Iverson describes. The men at the top have all the power and privilege, while the men on the bottom do all the work (sorry for the non-gender neutral tone).

As stated above, this is effective when there is a clear task that needs completing. However, in business markets are always changing and it is never clear what task should be undertaken. Instead, workers at all levels, especially those closes to the product or customer, must have input as to the direction of the company. Everyone must feel as though they are working together. This brings me to a football team.

A Football Team

On a football team, there is a quarterback who is calling the play (think of the coaches as the board of directors, but ultimately the quarterback calls the play), much like the CEO in a company. However, everyone else on the field has a job to do and no one managing how that job is completed. If an offensive lineman wants to use one tactic or another to complete a block that is his prerogative, so long as the job is completed. However, if any one member fails to complete his task on a given play, chances are good the play will fail and the whole team suffers.

This is the kind of attitude the Iverson imparted in his employees. "When Nucor had a highly profitable year, everyone in the company would have a very profitable year. But when Nucor faced difficult times, everyone from top to bottom suffered. But people at the top suffered more. In the 1829 recession, for example, workers pay went down 25%, officer pay went down 60%, and the CEO's pay went down 75%."

Something to consider when establishing a management hierarchy. The more you can setup a team mentality and trust that everyone will get the job done or no one will benefit, the better the company will run. This can be difficult to establish. However, establishing it is usually done by getting the right people in the company and the wrong people out of the company. "...your status and authority in Nucor comes from your leadership capabilities, not your position. If you don't like it -- if you really feel you need that class distinction -- well, then, Nucor is not the right place for you."

Book Summary Review: Purple Cow

2008-09-14T14:01:00.003-04:00

This is the last in the marketing book summary reviews. There were more in the book, but they all started to say the same thing so I go bored. This book summary review is of the book Purple Cow by Seth Godin. The summary starts with a line I've seen in almost all of these marketing summaries: "Following the traditional rules of marketing just isn't enough anymore." OK, I get it. Traditional marketing (and it's rules) are obsolete. However, I feel like no one really knows what to do now so everyone has a theory. Here is Seth's...

Not Enough Ps

In traditional marketing there were 5 (or more) Ps that acted as guidelines for marketing. If you had you Ps lined up, then your marketing campaign would be more successful than if you didn't. Of course, because the traditional rules are not good anymore, we need another P (saw that coming a mile away). Seth's new P, the Purple Cow. Essentially a "product or service that is different from the rest and somehow remarkable."

Why You Need the Purple Cow

Most people can't buy your product -- they don't have the money, don't have the time, or simply don't want it.
If consumers don't have enough money to buy what you are selling at the price your are selling it for, you don't have a market for your product or service.
If consumers don't have time to listen to and understand your marketing pitch, your product or service is invisible to them.
If consumers take the time to hear your pitch but decide they don't want what you're selling, you are not going to be successful.

Consider the Beetle

The original VW Beetle was not an immediate success when first introduced. It took strong marketing to sell the Beetle. However, the new Beetle was successful because of it's look and handling on the road. Strong reviews from the auto industry and word of mouth endorsements all helped to make the new Beetle a success. This highlights the change in marketing strategy. Instead of using marketing to sell the product, the product is used to perform the marketing.

Ideas That Spread, Win

"Sneezers" are the people that launch and spread ideavirus. These are the experts who tell friends and collegues about new products or services. Finding an seducing the sneezers in a particular market is essential to creating an ideavirus.

To create an idea that spreads, don't try to make a product for everybody. an "everybody" product probably won't capture the sneezer's interest. Instead you must target a niche instead of a huge market. The hope is to create an ideavirus so focused that i overwhelms that small section of the market and those people will respond.

Krispy Kreme Example

When a Krispy Kreme store opens in a new location, employees start by giving away thousands of donuts. The people most likely show up for a free hot donut are those who have heard the legend of Krispy Kreme and are delighted that the company is finally in town. These people spread the word. They tell their friends and even bring them to a Krispy Kreme store. That's when Krispy Kreme works its marketing magic by dominating the donut "conversation" -- they rush to create partnerships with gas stations, coffee shops, and delis to make it easy for someone to encounter their product.

Four Steps to Creating a Purple Cow

Get premission from people you impressed the first time to alert them the next tim eyou might have another Purple Cow.
Work with the sneezers to make it easier for them to help your idea reach your target audience. Give them the tolls and the story they will need to sell your idea.
Once you've progressed from remarkable product to profitable business, let a different team take over. Try to create many variations of your Purple Cow product. But don't believe your own press releases -- this will cause the inevitable downward slide to mediocrity. Mike your Purple Cow for all it's worth, and fast!
Reinvest and launch another Purple Cow -- to the same audience. Fail and fail and fail again. Assume that what was remarkable the first time won't be remarkable this time.

Salt is not Boring -- Ways to Bring the Cow to Work

For fifty years, Morton has made salt a boring product. However, the people in France who created handmade salt from seawater didn't know salt was supposed to be boring. They get $20 a pound for their salt. So if your product is less boring than salt, come up with a list of 10 ways to change the product (not the hype) to make it appeal to a segment of your audience.

Think Small. One remnant of the TV-industrial complex is the need to think "mass." That's no longer a good idea. Think of the smallest conceivable market and describe a product that overwhelms it with its "remarkability."
Outsource. If the factory is giving you a hard time about jazzing up the product, go elsewhere. There are plenty of job shops that would be delighted to take on your product. After it works, the factory will probably be happy to take the product back.
Build and Use a Permission Asset. Once you have the ability to talk directly to your most loyal customers, it becomes much easier to develop and sell amazing things.
Copy, not From Your Industry, but From any Other Industry. Find an industry more dull than yours, discover who's remarkable in it, and do what it did.
Identify a Competitor Who's Generally Regarded as "at the edges," and Outdo It. Whatever it is known for, do that thing even better.
Ask, "Why not?" Almost everything you don't do is the result of fear or inertia or a historical lack of someone asking, "Why not?"

Again, I am surprised that a book on marketing is talking about (what I would consider) product development. However, I guess that is how the world has changed. You used to be able to make any piece of junk, market it well on TV, radio and print; then sell a ton of them. Of course like most things in America, this has been done to death. Now people don't trust the ads. Therefore, you cannot make junk or even make something that someone thinks is junk. It has to be new and different. The product has to stand out. To that end, the gap between marketing and product development has narrowed. Instead of engineers developing a product, then turning it over to the marketers to market, there is now direct feedback from the marketers to the engineers.

Financial Engineering

2008-09-10T20:21:00.004-04:00

I had never heard the term "financial engineering" until today. I was speaking with some investors that invest in companies when they are a single employee and an idea. The financial engineering tactic he recommended was to create a company that owned the intellectual property (company X). Then form a second company (company Y) that license the IP from the first company.

This can be beneficial because if a company is interested in purchasing company Y, the one with all the exposure in the market, they still have not acquired the IP. Therefore, the acquiring company would have to purchase both X & Y. Or the acquiring company could simply purchase Y and then license the IP from X. Or the acquiring company could purchase X and in the agreement Y would continue to license the IP. This tactic provides options that having everything (IP and market branding) together in one company does not provide.

However, nothing in life is free. Splitting the IP and branding into two companies has a few disadvantages. First, lawyers. There is twice as much work to be done in setting up two companies: establishing the company, payroll, employee insurance, etc. Second, lawyers! When/if you get acquired it will be that much more of a headache to put together a package because the IP and branding are split. As a possible third, if the acquiring company purchases only company X (you still with me on the algebra?) for the IP and decides to continue licensing to company Y, then there is a good chance company Y and the acquiring company will be competing in the near future. This is a problem for a number of reasons and any good lawyer would never let this happen.

Something to consider if you're going to start a business that is based upon well protected IP.

Book Summary Review: Relationship Marketing

2008-09-06T16:06:00.003-04:00

This book summary review is of the book Relationship Marketing: Strategies for the Age of the Customer by Regis McKenna. The idea behind the book is that from the '70s to the '90s a transformation occurred with respect to marketing. No longer were companies driving what customers wanted. Instead, customers were demanding companies to provide more products that fit their needs. The quintessential example that they use is the American car industry. American car companies spent too much time designing new body styles and interiors to focus on what the customer really wanted. The Japaneses on the other hand did listen and began providing the customer what they wanted. In doing so the Japanese car companies were able to steal market share from the American companies.

Start with the Customer

This chapter simply preaches what we've all heard before: "You need to listen to your customer." The book takes this a step further to state that you must always be listening to your customer. Listening to your customer must constantly be in your product development feedback loop. It is a fine line though between listening to what your customers say they want, and what they actually want. Sometimes it's hard to tell the difference or at least easy to convince yourself (as a company) to hear what you want.

Product Positioning

Central concepts:

Understand trends and dynamics: A company can't position a product itself, the market positions the product.
Focus on intangible factors: Companies that sell products based on quality, reliability, technological leadership, and financial health do well.
Target the product to a specific audience: Find a niche and server it better than anyone else.
Understand success and failure: Most companies never analyze why their products fail.
Understand the difference between being marketing-driven and market-drive.
Be willing to experiment: It is all too easy to stay within your company's comfort zone. However, a company can never grow into new areas without experimenting first.

Corporate & Market Positioning

The key to positioning in the market is by establishing credibility. This cannot be done as easily by advertising as it used to be. Word of mouth is the best way to establish credibility. This can be done by simply getting a spokes person for the company in front of the customer in a way that is not a direct advertisement. For example, appearing on television as a market expert helps to establish credibility for the company.

Having knowledgeable sales people and providing services that is unmatched by other companies in your market also provides a good way to advertise by word of mouth. Providing financial incentives to customers for recommending you can also be effective depending upon the market and product.

Over this book summary was good, but didn't tell me anything I didn't already know: you must listen to your customer, a crappy product and a great marketing campaign won't get you customers, and advertising through word of mouth recommendations is the key to a successful company today.

Entrepreneur Mag: Make It Known (Sept '08)

2008-09-04T15:53:00.005-04:00

In the Sept 2008 issue of Entrepreneur magazine there was an article titled "Make It Known". The article discussed 8 steps to successfully branding your product:

Seize the High Ground - Establish your brand on positive attributes, not on doing in your competition. (I agree that only in a few instances does a negative campaign work. The only good way is to compare your product to the competition and highlight what you have that they don't. See this post.)
Create One Message - Pick one message, see if it works and then try another if it doesn't. But you can't try several at once. (This goes back to the old notion of needing a way to measure whatever it is you try: new HR system, marketing campaign, etc. Decisions should be data driven.)
Speak English/Nonjargonese - If your positioning statement uses any acronyms, the odds are that most people won't understand your branding and it won't last very long. (This is especially true when trying to brand a technical product. Often companies fall into the trap that they are going to be branding to technical people so jargon is OK. However, most of the time it is a non-technical person that is going to actually be making the decision to purchase. Unfortunately, all too often the technical people that will use the product and the one purchasing it don't communicate.)
Apply the "Opposite Test" - See if your competition uses antonyms to adjectives like "scalable", "fast" or "easy to use" that you might use to describe your product. If they don't, you probably shouldn't use these adjectives. (Essentially don't make claims that aren't true or that are the same as your competition. Again, differentiate.)
Cascade the Message - Make sure that every employee, especially those on the front lines, understands the branding and its message. (Communication is the key to a successful company. You need to make sure all your employees are on the same page, and that your customer understands your product and message.)
Focus on PR, not Advertising - Brands are based on what people are saying about you, not what you're saying about yourself. (Word-of-mouth is always the best advertising, if you can get it. Create your brand around establishing word-of-mouth.)
Strive for Humanness - Great brands speak to you as an individual, not as part of a market. It's "My iPod," "My Harley," and "My bottle of Coke." (It is always important to try and establish a personal connection between your customers and your product.)
Flow with the Go - It's your customers who ultimately determine what your brand means. Take your best shot and see what sticks with your customers. (This is true in both the positive and negative. Customers will quickly identify what they like and do not like about your product. Play up those things they like, and try to down play or fix those things they do not like. Again, you need to communicate effectively with your customer and measure your changes.)

One final note is that branding should be easy: easy to remember, easy to understand (no weird symbols, jargon, etc) and easy to identify with. Some notes on picking a company name.

Book Summary Review: The Popcorn Report

2008-08-26T21:24:00.002-04:00

This book summary review is of the book The Popcorn Report: How We'll Live, What We'll Buy, Where We'll Work by Faith Popcorn. Let me say right from the start, I did not take this book summary seriously. How could you take someone seriously who dubs herself the "Nostradamus of American Marketing"? Also, I could not find this book in either WorldCat or Amazon!!! If you can find a copy of it and take the time to read it, drop me a comment and let me know what you thought.

With that said I will only enumerate the 10 trends that Popcorn believes will shape the '90s:

Cocooning in a New Decade - Turning inward and only concerning yourself with yourself and your immediate family.
Fantasy Adventure - A vicarious emotional escape through consumerism.
Small Indulgences - The "I deserve it" mentality behind the motivation to buy something of quality that is slightly expensive.
Egonomics - Personalized product concepts or designs, "customability", and personal service.
Cashing Out - Trading in the rewards of traditional success for a slower pace and a greater quality of life.
Down-Aging - Old is becoming better; forty is the new thirty.
Staying Alive - A belief that the way we choose our lives can make us sick, and that we're the only ones we can count on to take care of ourselves.
The Vigilante Consumer - A consumer less concerned with mistakes made by a company than with whether the company responds to them quickly, responsibly, and honestly.
Ninety-nine Lives - A busier fast paced life where we try fulfill all our roles, chase all our dreams, and process all our data bytes.
Save Our Society - Any effort that contributes to making a socially responsible Decency Decade.

All-in-all some of these trends have come through (looking back with almost a decades worth of hindsight). However, I feel as though some of these trends were self-evident in the '80s. The real question is not what did happen in the '90s and was Ms. Popcorn able predict the trends properly, but how did she do it (if she really did it) and what will they be from 2010 to 2020?

Book Summary Review: Lateral Marketing

2008-08-26T15:47:00.003-04:00

This book summary review again comes from The Marketing Gurus. The book Lateral Marketing: New Techniques for Finding Breakthrough Ideas by Kotler and Trias de Bes can be found at your local library here. Below are my comments/summary of the summary of this book. As promised it is much shorter than the last post. I have also tried to put more of my opinion of the book summary into this post than simply a summary... after all you could just read the book summary yourself.

The book starts by making the case that new products are failing more often now than in the past. The reason behind these failing products is the segmentation of a market until it is so small that it is not profitable. Essentially supply & demand. The demand for breakfast cereal (one of the examples they use throughout the book) is about the same now as it was in the '60s and '70s. However, the supply (number of different products) has increased remarkably. Therefore, each product has a smaller segment of the market simply because the consumer has more choices.

The book further argues that new products are not emerging. Instead the products are changing in simple ways. For example, the box of cereal can become larger or the packaging can change from a box to a bag. You can even argue that adding sugar or removing it to become healthy still hasn't changed the product... it's still just cereal.

Lateral marketing, as apposed to vertical or traditional marketing described above, involves taking a product and sufficiently transforming it in order to make it appropriate for satisfying new needs or new persons and situations not considered before. The book cites the example of the cereal bar. The cereal bar is a combination of cereal and the candy bar. With the cereal bar you have a nourishing and healthy food combined with a snack that can be carried and eaten at any time. Now of course you can see the cereal bar market has been segmented and there are numerous cereal bars on the market to choose from. However, it was the lateral marketing or radically combing/changing of the product(s) that created a new market.

This brings me to the first thing that struck me as odd. Here is a book that is talking about marketing and yet to me it seems to be talking more about R&D than marketing. Maybe this is the changing definition of the word because of the changing of the times. Maybe marketing now plays such a strong role in R&D that pure R&D is almost useless (I hope not, I enjoy pure R&D). My theory would be backed up by the fall of AT&T's Bell Labs, Xerox Park, and other institutions of pure research. About the only true bastions of pure research left are academic institutions. Even there the only topics that get any research attention are those that can be published. In the corporation world currency is the ability to grow the bottom line. In academia the currency is the ability to grow your list of publications. OK, back to lateral marketing.

The process of lateral marketing contains three steps:

Select a focus. This will be a product or service.
Make a lateral displacement for generating a stimulus. A lateral displacement is an interruption in the middle of a logical thought process.
Make a connection

To complete the second step, the hardest one, the following techniques can be used: substitute it, invert it, combine it, exaggerate it, eliminate it, or reorder it. In the case of the cereal bars the "combine it" technique was used. For artificial flowers (another example in the book) the "invert it" technique is used. We start with flowers and realize that flowers die. We make a lateral displacement by inverting the last statement to say "flowers that never die". Connecting this back to the original idea of a flower, the artificial flower is born made out of a material that cannot die. I guess you could argue that "substitute it" could also have been applied here; however, we didn't substitute our focus, the flower, only the material used. The book does state, and rightfully so, that this process won't always work and won't always create winners. However, all you need are a few good ideas and you'll be set for life.

Instead of applying lateral marketing to a product, as was described above, it can also be applied to the market. Markets are made up of the following dimensions: need, target, place, time, situation, and experience. By substituting one dimension for another a new market can emerge. For example, Bayer aspirin substituted the normal dimension of situation -- when you have a headache -- for a new situation -- every day to prevent heart attacks. While the product never changed a new market emerged: over the counter heart attack prevention medications.

Overall this book (or at least the summary of it) gets you to think in new ways about products and how you could create a new market for the product. As stated in the summary, the first two products in a new category normally capture 75% of the new market leaving only 25% for the rest. If nothing else, this is a good data point to remember when thinking about entering a new market. If you're trying to bring a product to market that is already saturated, you won't have a large share of the market. Instead try and use the techniques described above to modify the product in some radical way so that a new market is created.

Book Summary Review: Differentiate or Die

2008-08-24T22:14:00.010-04:00

This book summary review comes from The Marketing Gurus which I had mentioned in my previous post. The book Differentiate or Die: Survival in Our Era of Killer Competition by Trout and Rivkin can be found at your local library here. Below are my comments/summary of the summary of the book's chapters. Because this is two removed (my summary of another summary) I'd suggest actually reading the book if this looks at all interesting to you.

The Tyranny of Choice

This chapter explains the obvious: there are millions of products for a consumer to choose from. Any product category usually started with a single entity and then breaks up into sever segments. The book refers to this as the law of division providing the example of the computer breaking up into mainframes, microcomputers, PCs, laptops, notebooks, etc. This "explosion of choice" has resulted in companies that help the consumer find what they are looking for. The largest example of this (although not a company per-say) is the Internet.

The key of course is to have your company/product standout in the crowd or differentiate. The book suggest three ways to address differentiation:

If you ignore your uniqueness and try to be everything for everybody, you quickly undermine what makes you different.
If you ignore changes in the market, your difference can become less important.
If you stay in the shadow of your larger competitors and never establish you "differentness," you will always be weak.

Losing and Reinventing the USP

USP = unique selling proposition and was defined in the 1960 book Reality in Advertising by Rosser Reeves. Reeves explains that to differentiate your products you must offer an option the competition cannot or does not. To do this you must appeal to the four ways people make decisions based on differentiation: intuition, thinking, feeling, and sensing. The book argues that the market has changed so much that companies cannot hang on to the USP model suggested by Reeves.

While this is probably true, I believe it's still important to understand the way people make decisions. Another book that I've previously read, Sway: The Irresistible Pull of Irrational Behavior. It focuses primarily on irrational behavior (I know, what a surprise given the title) such as people passing a world class musician simply because he is playing in the subway of Washington DC. However, understanding how people make the decision to buy (or more importantly not buy) a product is extremely important. Maybe Reeves model need some updating; however, it is still as relevant today as in the '60s.

What Differentiation is Not

The book discusses four ways to poorly differentiate products: Quality & Customer Orientation, Creativity, Price, and Breadth of Line. Quality & Customer Orientation refers to the quality incentives of the '80s and '90s. However, the book argues that most companies treated quality assurance as a one step program. The book cites the airline industry and their frequent flyer programs. "What airlines failed to do was to differentiate themselves for frequent travelers to the degree that justified the costs and drawbacks of the program; such programs were, and are, too easily imitated."

Creativity refers to the vagueness of advertising these days. Slogans like "the best taste ever" and "incredibly smooth" have been replaced with "start something" and "expanding possibilities." The book argues that these vague slogans blur the message trying to be conveyed. "One factor remains true: if people think you have an important message to convey, they will generally open their eyes and ears long enough to absorb what you have to say."

The book argue that price (especially lowering it) should never be the focus of differentiation. Instead you can use the following: do something special, cause some confusion, shift the argument, differentiate with high prices. To counter the argument is Southwest. By using the same kind of airplane, offering no advanced seating, offering no food, and by avoiding hub airports Southwest was able to cut enough costs and pass the savings along to the customer.

The book argues that too many products can be bad for business and cites CompUSA, Sports Authority, and Party City. However, they also cite Toys "R" Us as an example of where a large select has helped. Of course, the obvious example wasn't mentioned: Wal-Mart. I think this point is 100% WORTHLESS. Having a large selection can be good and bad. As with most things the devil is in the details of managing the selection and getting your customers to the products they need. Wal-Mart (partially) does this by having each store's floor plan be exactly the same.

The Four Steps to Differentiation

Lets just jump into them: 1) Make Sense in Context -- Your marketing message must take a "snapshot" of the current market and the arguments in it made by your competitors. Your message must make sense in the context of that market.

2) Finding the Differentiating Idea -- The book states that your differentness does not have to be product-related. However, it cites an example that seems to me to be product-related: Hillsdale College. Their product is the knowledge they impart into it's students. They are different because they do not accept government influence. Well it is that influence (government or otherwise) that would affect their product, knowledge. It seems like differentiating should always be product related.

3) Have Credentials -- Basically if you make claims they should be backed up by the product. Seems obvious to me...

4) Communicate Your Difference -- Better products on their own don't succeed. I think the best example of this (which wasn't mentioned) is Apple computer. They had a graphical user interface while the rest of the world was still playing around with a text interface. However, because they didn't communicate their difference they were not as successful as their competitor, Microsoft.

Eight Successful Differentiation Strategies

Most of the 8 strategies listed here are harder to achieve. For example, number one is "be first." Well yeah, if you're first then you have an obvious difference. However, if you already have a product or are looking to improve something you're probably not going to be first. There are very few firsts. A better strategy would be to figure out how you're "first" and exploit that in your advertising. "Our product X is the first ever to do Y." (OK, I should write ad text, but you get the point.)

Two of the strategies that I do think are helpful are: Be the Preferred Provider & Make Your Product in a Special Way. Be the Preferred Provider is simply another way to say customer service is key. If you deliver a better product or even the same product in a better way by going the extra mile for the customer it will pay dividends. For example, Amazon.com has become the preferred provider of books for most people. At the end of the day, you're going to be reading the same book. However, more people go to Amazon because they've created an easy way to find books and get them to you. As such they've been rewarded by dominating the book market.

Make Your Product in a Special Way can work very well to differentiate yourself. For example, burritos are almost all the same. However, Chipolet has lately dominated the burrito market because of the way the burritos are created. They use only free-range animals and make the burrito to your specs as you wait. (They also did a great job of franchising the system.)

Growth and Sacrifice in Differentiation

In the words of Milton Friedman, "We don't have a desperate need to grow; we have a desperate desire to grow." Essentially as companies grow they tend to loose sight of what got them to where they are in the position to grow. Differentiation is negatively effected by this growth in two ways: the company becomes distracted and the company overextends its product lines.

This is a common problem (and one I plan on writing about). There are three stages (at least that's what I'm told) of any company: infancy, adolescence, and maturity. At each transition the company grows. During that growth the company often forgets to properly service its customer or looses sight of what it is really good at.

Being Different in Different Places: Five Rules for the Road

I will simply list them as they are somewhat self-explanatory.

The current idea may be the wrong idea
Attributes can change when you cross borders
Your market leadership may not translate
Your heritage may not be respected
Your specialty may get blurred

Who's in Charge Here?

This chapter was worthless except for the nice quote from Drucker defining leadership as, "thinking through the organization's mission, defining it, and establishing it, clearly and visibly." The author modified the quote changing "mission" to "difference".

(Note: This review was waaaay too long. Never again will I go chapter by chapter.)

Book Review: The Marketing Gurus

2008-08-17T17:48:00.007-04:00

I didn't realize it before I check it out, but this book is an actually an executive summary of a number of marketing books. You can find this book at your local library here. Each chapter summarizes a different book:

"Differentiate or Die" - Trout & Rivkin
"Lateral Marketing" - Kotler & Trias de Bes
"The Popcorn Report" - Popcorn
"Relationship Marketing" - McKenna
"Networking with the Affluent" - Stanley
"Relentless" - Johansson & Nonaka
"The One to One Future" - Peppers & Rogers
"Up the Loyalty Ladder" - M. Raphel & N. Raphel
"Scoring Points" - Humby, Hunt & Phillips
"How to Drive Your Competition Crazy" - Kawasaki
"Crossing the Chasm" - Moore
"Unleashing the Killer App" - Downes & Mui
"The Anatomy of Buzz" - Rosen
"Purple Cow" - Godin
"Don't Think Pink" - Johnson & Learned
"The Discipline of Market Leaders" - Treacy & Wiersema
"Renovate Before You Innovate" - Zyman

I will be posting reports as I read each chapter.

3 Envelopes

2008-08-15T10:20:00.003-04:00

Someone told me this story/joke the other day... I'm not 100% sure what I should take away from it, but it sadly seems true. A quick Google search found this same story/joke. The story/joke...

A fellow had just been hired as the new CEO of a large high tech corporation. The CEO who was stepping down met with him privately and presented him with three numbered envelopes. "Open these if you run up against a problem you don't think you can solve," he said.

Well, things went along pretty smoothly, but six months later, sales took a downturn and he was really catching a lot of heat. About at his wits's end, he remembered the envelopes. He went to his drawer and took out the first envelope. The message read, "Blame your predecessor."

The new CEO called a press conference and tactfully laid the blame at the feet of the previous CEO. Satisfied with his comments, the press -- and Wall Street -- responded positively, sales began to pick up and the problem was soon behind him.

About a year later, the company was again experiencing a slight dip in sales, combined with serious product problems. Having learned from his previous experience, the CEO quickly opened the second envelope. The message read, "Reorganize." This he did, and the company quickly rebounded.

After several consecutive profitable quarters, the company once again fell on difficult times. The CEO went to his office, closed the door and opened the third envelope.

The message said, "Prepare three envelopes."

Book Review: Rich dad's before you quit your job

2008-08-13T20:32:00.005-04:00

Rich dad's before you quit your job : 10 real-life lessons every entrepreneur should know about building a multimillion-dollar business is the latest book that I've read about starting a business. You can find this book at your local library here.

As the title implies there are 10 lessons that Robert & Sharon (I'm not really on a first name basis with them, but hey) try to teach me... I only learned/re-learned 3.

The difference between a business owner/self-employed & an entrepreneur.
The two types of money: competitive money & cooperative money.
The 3 different levels of pricing.

The 10 lessons he wanted me to learn:

A successful business is created before there is a business.
Learn how to turn bad luck into good luck.
Know the difference between your job and your work.
Success reveals your failures.
The process is more important than the goal.
The best answers are found in your hear... not your head.
The scope of the mission determines your product.
Design a business that can do something that no other business can do.
Don't fight the bargain basement.
Know when to quit.

Lessons 2, 6, and 8 are complete fluff and suspiciously spaced through the book. Lesson 1 is important, but can be summarized by simply saying, "Think about what you're doing and plan it out before you quit your job, sell your house and jump into something without a backup plan."

Lesson 3: job = you're paid, work = what you do to prepare. For example, you get a summer job (you get paid) and you do your homework (you're not paid, or at least I wasn't). To this lesson I would say that if you're not learning something at your job you should find a new job. I don't understand why you cannot get paid to learning.

Lesson 4 is a fancy way of saying, "If you become successful too quickly and you're not prepared for it, you will fail." We can see numerous examples of that... just look at most child stars.

Lesson 5 is a solid one. Essentially you should take note of what worked and what didn't while you're going through the process. Even if you end up failing you'll know what not to do the next time around. This is true for most things you do in your life, but is often overlooked. Part of the reason I'm doing this blog... I don't want to forget as I go through my educational process.

Lesson 7 sounds wishy-washy, but I've heard it enough times from successful people to believe. It is the "Think Big" mentality. If you set the scope of your business to a barber shop on the corner, the best you can do is to own a barber shop on the corner. However, if you set the scope of your business to creating a barber shop so you can later franchise to other people, you could achieve something as big as SuperCuts.

Lesson 9 is the same as my lesson 3. Basically there are 3 levels of pricing: luxury, every-day, and bargain basement. He makes the claim that you don't want to compete in the bargain basement category because someone will always be able to make it for less. This is solid advice. Pricing yourself as the cheapest usually isn't the way to go. Also, pricing yourself with everyone else (every-day) might get you lost in the shuffle. This is why he priced his board game at $200! He also makes the point that you can do both. He uses the example of Toyota & Lexus. They build basically the same cars but don't compete in the same markets: Toyota = everyday, Lexus = luxury.

Lesson 10 has been around forever... "know when to hold 'em and when to fold 'em". This isn't something you can learn from a book, you just need to practice.

Overall the book was helpful, once you get past the constant sales pitch to continue buying his other materials (books & board games). He talks about the businesses he started and why they failed. These case studies do provide some insight and help to drive home some of his points... I just wasn't buying everything he had to sell.

Request for books: Marketing

2008-08-12T23:11:00.003-04:00

I have read a few books (3) now that focus on starting a business and what you should do. I've learned quite quickly that I don't know anything about marketing. If people don't know about your product/service they won't buy it... sorta like this blog. If no one knows about it, then no one will read it and make comments. So I guess my first task is to market this blog.

While I'm working on that, please post marketing book suggestions. Thanks!

Welcome

2008-08-12T22:55:00.003-04:00

The idea of this blog/project is simple: obtain the equivalent information that one would get from an MBA program by reading books from the library and Internet sites. Why would someone undertake such a project? A few reasons:

I have already been in school (read college) for 8 years... I don't want to go back, you can't make me.
I want to start my own business. I learned quite quickly after graduating that the "real world" (read 9 to 5) isn't much fun.
I've already read a few books (more on them later) and I've already forget some of what I've read. I hope this blog will provide, if nothing more, a set of notes that I can reference later in life.
I'm not sure what I should read/learn. I'm hoping that the Internet community can provide guidance on what I should be reading/learning... basically ripping off the idea behind Wikipedia.

I hope you enjoy the posts... actually I hope you disagree with them and tell me as much.