I have just uploaded a new ebook on Scribd. I have combined previous blog posts and content form other ebooks to put together a comprehensive one stop resource for people who are starting a business after losing their job. Hope you enjoy.
Recently Jupiter lost one of it’s stripes. Scientists cannot explain why this has happened. Start-ups need to learn from this. Look, sometimes things just happen. Sometimes you just lose your stripe. This can not be rationalized or explained. It just happens.
You might have devised the most bulletproof, foolproof, guaranteed to succeed, watertight, plan. You may think that there is absolutely no chance that it will not succeed. However, this is the start-up game and anything can happen. There is no such thing as guaranteed to succeed. There are way too many variables.
That’s why standing off and doing reams of market research is dangerous. Instead find out the fundamentals and jump into the game. Be like a jazz musician and start improvising. Eventually you will play something astonishing. When you are an active participant in the market you can roll with the punches. However, when you spend months researching before you do anything, you are open to get knocked out.
By gearing yourself to expect the unexpected you will be able to deal with any unexpected shocks in a level headed manner. Remember, the unexpected is to be expected when you start a business. It’s up to you to be prepared for it.
I have been looking at previous posts and articles that I have written over the last year and a half. There is quite a lot of stuff. As a result, I am currently working on an ebook based on that content. I hope it will be a valuable resource for first time entrepreneurs who have recently lost their job.
I will be condensing and re-writing the material over the next few weeks. I hope to get the ebook out there before the end of June.
You can’t bluff a start-up. It’s a no bluff zone. That’s the reality. You can’t achieve anything without substance.
This is actually a good thing because you don’t have to worry about anything else. You can be the worst presenter ever. You can look like a mess. You can smell bad. If you are competent at what you do and there is substance behind your start-up then people will be prepared to invest.
Conversely, you can be Mr/Ms slick and it will get you nowhere. Remember, the people you will be dealing with will see through the crap. This applies to both investors and early adopters.
Substance over sales pitch all the way.
As you know, being an entrepreneur is very different from being an employee. Probably the biggest difference is how failure is looked at. See, I’m going to let you in on a secret. Something that your former boss never told you. In fact, they probably are not aware about it.
As an entrepreneur, you have to ditch the right first time mentality for an test and measure – incremental improvement philosophy. When I explain this to my “employee” friends they think that I am making an excuse for failure. This is a typical reaction for someone who works in a cocooned environment. So, lets look at why many large organizations promote a right first time mentality.
It’s actually a microcosm of what VCs do. You see, in a large organization if it takes ten tries to get one success then ten employees can try ten different things with only one being a success. Nine out of the ten are deemed failures with one deemed a success. The objective has been achieved, but there has been nine failures.
In a start-up scenario, the same occurs except in a linear fashion. Instead of ten employees failing nine times to succeed once, one entrepreneur must try ten things to find one that works. I know there are other factors such as learning from past mistakes and the effect of incremental improvement. However, the above example highlights my point.
As an entrepreneur, you need your helicopter license at the ready, because the view from up there really helps.
I’m sure that you have heard about the huge success of the iPad. In fact, it could be argued that the iPad is the most successful launch of all time. Current economic climate considered, this is a jaw dropping achievement. But behind the headlines lie a valuable lesson for start-up entrepreneurs. You see, Apple have perfected marketing. They are to marketing what Chopin is to the piano concerto. The great thing for you is that you can apply the same model to your start-up. There is nothing better than getting off on the right foot.
Be warned, it’s not a quick fix – results overnight model. It surprisingly doesn’t focus on the launch. Instead it’s rooted in what has resurfaced as the fundamentals of marketing in the digital age. In a recent blog post on why Apple has been so successful with the iPad Seth Godin, lays out the core reasons. Here’s a quick summary. It’s worth reading the full post.
He reckons that Apple’s strategy can work better for smaller gigs and more focused markets. I totally agree.
1. Earn a permission asset.
2. Don’t try to please everyone.
3. Make a product worth talking about.
4. Make it easy for people to talk about you.
5. Build a platform for others to play in.
6. Create a culture of wonder.
7. Be willing to fail.
8. Give the tribe a badge.
9. Don’t give up so easy.
10. Don’t worry so much about conventional wisdom.
Surprisingly, not enough start-up entrepreneurs follow this model. Well if you want to join that club, you are free to do so. Go ahead and read that Marketing textbook that was published in the early 90s. The rest of us will be busy applying what is proven to work today.
As always comments welcome and appreciated. Especially those who disagree.
We have all seen it. The behemoth 80+ page business plan. It’s a sight to behold. Very impressive indeed. A lot of work went into it. In fact, it took four and a half weeks to write and proof read. It contains every conceivable detail and the writers believe that it leaves no stone unturned.
Okay, it sounds good doesn’t it? Well, in fact when you think about it, it’s not. Here are seven reasons why.
- If you are looking for investment, the people who you want to invest in your business don’t have the time to read it.
- If you can’t condense what your business is about into a five minute read, either you are an extreme scatter-brain or your business has way too many moving parts for a start-up.
- If you are going to use the plan in the day to day management of your business it’s not practical to have a plan that resembles a telephone directory.
- It’s good to take care of the environment. Mammoth business plans = less rain forest = not good at all.
- The more technical jargon there is, the more you are diluting the two core elements of the plan. How is this business going to make money? and how much can it make?
- Law of averages are against you when you have an eighty plus page plan. Less people will read it. So if you are looking for investment, there is a smaller pool of people that you can draw from.
- You have wasted time writing it when you should have been working on getting traction and making sales for your business. Sales matter much more than a business plan.
What do you think? Feel free to add more reasons in the comments. If you disagree please feel free to comment as well.
Back when I was at grad school I remember thinking that if all you needed to do to achieve success was to follow the (insert random business acronym here) model why are all businesses not successful?
It got me thinking. Can you package success? Is there one pathway to success that will work every time that you follow it? However, I put these thoughts to the back of my head and continued working on mastering a plethora of three letter acronyms and pseudo mathematical statements (management gurus like to use technical mathematical terms instead of plain English. I think it makes then feel more important.)
It was when I donned my entrepreneurial robes for the first time that I realized that applying a systematic approach blindly doesn’t cut it in the world of start-ups. Instead of learning traditional management theory I would have been better honing my observational skills. I would have been better to stay off the sheet music and become great at Jazz improvisation.
In an article by Yanky Fachler, which I have kindly been given permission to republish for you here, this issue is looked at in greater detail. It looks into Phil Rozenweig’s claim that there are no formulas for successful business people. Good reading for people who have worked within a system driven by a three letter acronym.
Here it is:
The Halo Effect
Yanky Fachler examines Phil Rozenzweig’s claim that there are no formulas for successful business performance
Most smart managers, business consultants, and business journalists, says veteran business manager turned professor Phil Rosenzweig, cannot tell the difference between good and bad research. His book, The Halo Effect, is designed to be a counter-weight to the unsupported claims made by famous gurus and self-described “thought leaders,” and to counter the phenomenon of books that tell simplistic stories under the guise of rigorous research. In the author’s own words, The Halo Effect is an antidote to conventional leadership books, an attempt to raise the level of discussion in the business world, and to sharpen critical thinking skills about management.
That’s a pretty bold claim. Equally bold is the endorsement of the book by Nassim Nicholas Taleb, author of Black Swan and Fooled by Randomness. Taleb has achieved new guru status of his own, since he was almost alone in predicting the economic meltdown that we are now experiencing. He describes The Halo Effect as an antidote to those bestselling books by gurus presenting false patter and naive arguments, and as one of the most important management books of all time.
Does the book live up to the claims of its author? I think that Rosenzweig does a convincing job of showing that much of our thinking about company performance is shaped by the Halo Effect – the tendency to make specific evaluations based on a general impression. Using the example of Lego, he shows that when a company performs well, we infer that it has a brilliant strategy, a visionary CEO, motivated people, and a vibrant culture. When performance falters, we infer that the strategy was misguided, the CEO became arrogant, the people were complacent, and the culture stodgy.
If this tendency was only limited to journalistic hyperbole, says Rosenzweig, it would be harmless. But when researchers gather data contaminated by the Halo Effect, the findings become suspect. This becomes critical when so many best-selling authors claim to have identified the drivers of company performance. This is a fallacy, says Rosenzweig. The only thing these authors show is how highly we regard these high performers. And since so much research is fundamentally flawed, any conclusions about what drives company performance are necessarily suspect.
The most dangerous consequence of reliance on contaminated data is the widespread notion, explicit in such books as Jim Collins’s Good to Great, that companies can achieve success by following a formula. The Halo Effect seeks to show that performance is not about formulas for success, but about seeing the world in terms of probabilities. Strategic leadership is about making choices in an uncertain environment. The fact that even good decisions can lead to unfavourable outcomes, does not mean that the original decision was inherently wrong. Likewise, a bad decision can lead to a favourable outcome. Luck, rather than a magic formula, can often dictate the outcome.
The problem with so many management books, says Rosenzweig, is that they operate mainly at the level of storytelling. They provide comfort and inspiration, but ultimately they deceive managers about the true nature of business success. This is echoed by Tom Groenfeldt at Technology and Finance. “Pop business books probably won’t do you any harm, unless you take them too seriously. However, before you settle down with the next one, read through The Halo Effect to sharpen your critical faculties.
If Rosenzweig is correct, and I believe he is, then the question is Why? Why are so many management gurus contaminated with the Halo Effect? Why do so many authors make such extravagant claims about their 3 principles, 4 habits, 5 secrets, 6 keys and seven principles? Why, in other words, are so many business experts deluded?
I found one answer in a book called Mistakes were made (but not by me): Why we justify foolish beliefs, bad decisions, and hurtful acts, by Carol Tavris and Elliot Aronson (who is quoted in The Halo Effect.) The authors examine the issue of cognitive dissonance: why people dodge responsibility when things fall apart, why public figures are unable to own up when they screw up, and why we can see hypocrisy in others but not in ourselves. The book offers a fascinating explanation of the harm and damage caused by self-deception and delusion.
When most new entrepreneurs think about market research, they imagine questionnaires and focus groups. There is nothing wrong with that, is there? I mean, it appears on the curriculum for Marketing 101. However, focus groups and questionnaires are time consuming, relatively expensive to conduct, and not very accurate. We all know that people don’t really say what they are truly thinking in focus groups and questionnaires.
For start-up entrepreneurs, these old school methods are out dated. There is a better, and for the cash conscious, a cheaper way. Remember the old saying “actions speak louder than words?” The same applies to doing market research for a new business. Observation is where it’s at. Proper desk research using the Internet will reveal a huge amount about your target market. More and more methodologies and tools are available for you to find out what your target audience is really thinking and doing.
It’s like a hunter following animal tracks in the forest. You are following digital footprints left by your target demographic online.
Using a combination of keyword research, ad planning systems, alexa, backlink research, forum research, business analysis, website analysis, news searches and simply asking questions, you can reveal a staggering amount of information that will really assist you in setting up and positioning your new venture in the marketplace.
Observation can help you understand a lot of things. It sounds easy, but are you prepared to open your eyes?
So what can governments throughout the world do in order to encourage new start-ups? Well there are many tools at policy makers’ disposal. However, I think one method in particular would not only encourage more start-ups but skew the culture of society towards a more pro entrepreneurship stance.
People involved in start-ups should be given a lower tax rate than other segments of society. This reflects the risks involved in starting, investing in, or working for a start-up company. This lower tax rate needs to be available to start-up entrepreneurs and their employees along with start-up investors.
Lets look at it from an employee’s standpoint. Working for a start-up is risky. The statistics show this. As a result, they are taking these risks on a personal level and if the business fails they are out of a job. In order for start-ups to get high caliber employees, this personal risk needs to be addressed by policy makers. By offering a lower tax rate to employees of new start ups, governments are giving these employees who have accepted higher risk employment, which has the potential to benefit the broader economy, a fair deal.
In some cases, it would allow cash conscious start-ups to pay less while the employee would get the same take home pay.
Obviously, lower Capital Gains Tax rates for entrepreneurs and investors will be helpful. Investing in a start-up should be rewarded more than investing in an s&P 500 company.
Any tax jurisdiction that implements such policies will reap great economic rewards. This change in taxation policy would create activity in the most important area of the economy for recovery. Globalization means that the country with the best climate for start-ups will eventually win.
Wouldn’t it be nice for politicians to take a big picture view once in a while, and cut everyone involved in the start-up community a break?