A Tale of Three Economy Heroes
Economy Heroes come in all shapes and sizes. They come from different families, different cultures and different resources. They’re men and women who voraciously take the risks required to maintain surface tension on our country’s innovation, generate jobs and keep us in the hunt with our world’s economy.
Are there categories of heroes? Patternicity is a term that is gaining ground in social and business vernacular.
The Big Boys Buy Their Ideas
Ok, they got me. After watching Google Wave and Voice fizzle I believed that the online behemoth could actually be crazy enough to buy and brand something like Google Motion:
I’m all about jumping on the next technology bandwagon, but I just couldn’t imagine licking two fingers and slapping my knee in the middle of a presentation. And because I assumed Google probably paid $150 million for this toy, I finally decided to approach them with my concept for a word processor that only responds to yodels.
Big Boys like Google are smart enough to realize that almost all innovation in this country comes from entrepreneurs of lower middle market companies. Innovation is MIA in most of the Fortune 5000; their decision process on new ideas is often like a barge trying to do a 180 in a retention pond. Not so with Entrepreneurs. An Economy Hero risks it all to design, develop and prove a product so that the Googles of the world will buy and invest the required resources to scale it.
Innovation is one of the reasons why we love our Entrepreneurs; that along with the fact they generate over 85% of jobs. And even though I swallowed Google’s April Fools ruse, I’m relieved to know thousands of offices won’t (temporarily) be full of employees miming in front of their laptops.
Is Your Decision Tempo Fast Enough?
A few weeks ago I met the real Jack Bauer. No kidding. Until recently, Tim Burke directed CTU (Counter Terrorist Unit) in Los Angeles. And after listening to him share stories with twelve of my friends for over an hour, I realized to what degree this guy is indeed the “real deal.” He talked about his training as a Green Beret and Special Forces commander for over 20 years, he talked about assassination attempts on his life, he identified his perfect record of 143 missions that he led without a casualty, he described himself as one of the most proficient snipers in the world, and he estimated he had fired over 500,000 rounds in his career. Read Malcolm Gladwell’s book, Outliers, and you’ll realize this guy fits the template.
Tim talked most, however, about combat and mission; specifically related to the art and science of battlefield decision making. He described that his trusted decision process for combat was based on 4, continuously circulating factors – Observe, Orient, Decide and Act. This process, used by all Special Forces on the battlefield around the world, is known as The OODA Loop:
The OODA Loop responds to what Tim described as “Combat Tempo”, the degree to which battle conditions accelerate and decelerate. He stated that decisions must occur in tandem with combat tempo – which often peaks at a moment’s notice. Tim said that when a team is aligned on strategy and mission and has the ability to accurately assess their condition, respond quickly to Combat Tempo, and utilize pertinent, updated information so that informed decisions can be made quick and continually, then the team will defeat the adversary and survive.
My adrenal gland pumped a quart of electricity into my veins as I listened. Tim’s trusted decision process fulfilled the need of every Entrepreneur across the country. The process for battlefield decisions applies directly to business. Most businesses need a simple, trusted and effective decision process that equips the leadership team to respond quickly to changes in the market, on the management team, with the economic model, and the ROI of the business. By “paraphrasing” the OODA Loop in a business context, the process might look like this:
Decide: make a decision
Align: make sure the team is in sync on the mission and the right priorities
Track: assess performance on individual contribution to priorities and the status of the 5-10 most important company metrics
Adapt: Make the next aligned and timely strategic decision based on updated, real time information.
Decide again!
DECIDE – ALIGN – TRACK- ADAPT (DATA)
The ‘DATA Loop” increases corporate decision tempo so that the company can respond quickly and remain maneuverable. My question is, is your tempo fast enough? I know it’s hard to fathom, but strategy can be simple. It’s not easy, but it can be simple. And hey, if it’s good enough for Jack Bauer, I’m talking the real Jack Bauer, it’s good enough for us.
A Vaccine for the Alignment Epidemic
Over the past few months I’ve had the privilege to interact with many CEOs of innovative emerging growth companies. I call these individuals Economy Heroes:
I asked these creative warriors to tell me their company story – how they got started, their uniqueness, vision for the future and mission in the present. Even though I agree with Tom Brokaw that my father, a soldier and entrepreneur, was part of our country’s Greatest Generation, my eyes start to swell when I hear stories about this generation’s “starters” who step out and take such risk to change our lives. I puff with national pride when I hear accounts of of boot strapping, maxing credit cards (24 in one case), personal sacrifice to keep employees, and passionate pursuit of ideas. Entrepreneurs are indeed our country’s competitive advantage in the world economy.
For many of the companies I requested that the CEO, and at least two of his/her leadership team, take a short assessment to determine their alignment on critical issues. I wasn’t surprised that almost all teams were significantly out of sync in categories such as priorities, value proposition, economic model, management team and capital structure.
I’ve learned from hundreds of second stage companies over the past 18 months that team misalignment is not a trend, it’s a universal epidemic that continues to produce significant consequences to our economy.
Despite the herculean effort of our Economy Heroes, history indicates that over 90% of their ventures will fail; and misalignment will be one of the greatest factors in their demise. The process to get a team in sync is simple, but it can also be difficult. We can surface the right information and provide radical objectivity for the team to examine the brutal facts; the tough part is the tough decisions that follow.
The less than 10% of second stage ventures that succeed generate over 85% of new jobs in this country. What would happen in our economy if the success needle moved to 20%?
It’s time for Entrepreneurs to roll up their sleeves and receive the vaccine that will sync their team and dramatically increase their company’s chance of survival.
www.incnav.com
Sync with Your Team or Swim with the Fishes
In The Godfather, Sonny Corleone received an unmarked package while in a meeting with other “family” members. The paper bound parcel looked weird and obviously contained overripe contents:
Sonny asks, “What’s this?” Right hand hit-man Clemenza responds, “It means Luca Brasi (their rock star assassin) swims with the fishes.” Paraphrase: Luca ain’t around no more.
It reminds me of the young rock star CEO from Atlanta I met a few months ago. A few minutes into our discussion I threw out the stat that over 90% of emerging businesses fail. He shot back that, “I can’t get my arms around that figure, and besides… I don’t scare that easy.”
You’ve got to admire the guy’s chutzpa; which, by the way, is the reason those few entrepreneurs that make it generate over 85% of jobs. But even though this talented young man is fortunate enough to boast about his company’s growth, the odds are (overwhelmingly) high that his dream child will share the sandy bottom with Luca Brasi in just a few years.
What are we missing? How can a growing company with a unique product and a brilliant founder fail? Why do these companies sink? For many, they sink because they don’t SYNC.
So let’s brainstorm…
What happens when a CEO and the team are out of sync on one or more of the following items:
- The company’s top 3 priorities
- The company’s value proposition (unique competitive advantage)
- The company’s leadership team (are the right people in the right positions?)
- The company’s economic model (will the company make money at higher volumes? Can we scale our value proposition?)
- The company’s capital (do we have enough money to fund future growth?)
Here’s what happens:
“It’s a crisis” translates into … it’s a crisis. We spoke this week at the B.I.G. Summit in Orlando to over 400 Entrepreneurs:
In our breakout session my partner asked the audience, “How many of you think your team is in sync on your company’s top priorities?” Not one hand. We’ve seen the same response over the past few years with hundreds of CEOs around the country. A team out of sync is a team that lacks focus and accountability on the right priorities. Without alignment on critical issues like those I detailed above the company cannot prepare for the inevitable growth transitions that will occur when it’s too big to be small and too small to be big – which we call No Man’s Land.
But here’s the good news: syncing a team is easier than you think. You just need a quick and efficient way to find out where the team is out of sync so that you can get on the same page and track performance. Next time I’ll describe how you can accomplish that feat in less than 10 minutes. If you want a sneak preview, visit www.IncNav.com.
Until then, don’t open any unmarked packages that smell funny. Let someone else do the swimming.
Will Your Company be Good 2 Late?
- Image via Wikipedia
Some people say we should sell to the Fortune 500. Screw that, we want to sell to the Fortune 5,000,000. Jason Fried, Founder 37 Signals, from his book Rework
I read the Jim Collins classic Good to Great three times and discussed it with a group of talented business people once per week for over a year. I was baptized in the gospel of the Hedgehog, the Level 5 Leader and the 3 Circles. I know the statistics of what the heralded 15oo did right in order to sustain growth and market leadership for so many years.
Since then I’ve learned another stat. Each of those card carrying G2G behemoths employ over 5000 people; which sounds immensely impressive until you consider that companies that employ over 5k employ over 2.9% of our workforce. It’s fascinating to consider how Walgreen improved themselves with a new competitive advantage via their online experience, but Walgreen didn’t invent their innovation. It’s compelling to learn how Wells Fargo forged its way through economic swings, but Fargo didn’t GoFar when it came to creating enough jobs to move the needle on our country’s unemployment rate.
Collins focused on the successful Fortune 500 size institutions to surface the diamonds of insight of what they did right. But what of the real innovators in our economy? What of the companies that generate millions upon millions of our jobs, even though over 9 out of 10 of them fail? What can we do to prevent these courageous Founders and their fledgling ventures from being Good 2 Late?
For example, a large percentage of emerging business fail because they literally die on the vine of their own growth. Economy Heroes of these essential ventures need a plausible path to answer an essential question: Will my company make money at higher volumes? This company found out it couldn’t:
The Inc. Investment Indicator enables a company to measure the return it generates on capital – both physical and personnel. Most emerging companies don’t consider the financial impact of an executive hire on their risk level. Employees impact ROI on capital as much as a lease or hardware purchase. This company is already moving dangerously close to capital collapse; and even though they have the opportunity to scale their business, capital constraints will prevent them from doing so.
I love this scene from The Natural where Robert Redford describes a huge mistake he could have avoided:
Entrepreneurs rarely see IT coming; and that IT is No Man’s Land. It’s the chasm of the inevitable transitions that a company must hurdle in order to scale the business. If CEOs and their leadership teams can sync on the right priorities and prepare for No Man’s Land, they are less likely to step on the same landmines of those who were Good 2 Late.
Is Your Company Straplegic?
“This downturn has changed the way we will think about our business for many years to come,” says Steve Odland, Office Depot’s chairman and chief executive.Walt Shill, head of the North American management consulting practice for Accenture Ltd., is even more blunt: “Strategy, as we knew it, is dead,” he contends. “Corporate clients decided that increased flexibility and accelerated decision making are much more important than simply predicting the future.” Strategic Plans Lose Favor, the Wall Street Journal January 25, 2010
Is your company crippled by its own strategy? If so you’re in good company and, if so, there’s hope for recovery and the freedom to enable your company to maneuver in this economy. Over 90% of emerging companies fold, often due to the fact that they allow themselves to become straplegic.
You might think our Special Forces are the ninjas of strategic planning. Most of us would surmise that these superbly trained warriors agonize over charts and maps to devise the next 25 steps of their next initiative. Not so, especially in the battlefield.
Special forces use a simple but powerful decision process called the OODA Loop. The “Loop” by definition is circular not linear, in other words it’s a fluid and flexible methodology that requires a continuous flow of essential information combined with the ability to analyze and synthesize that information into quick decisions. OODA stands for Observe, Orient, Decide, and Act. According to my close friend and former Special Forces member, Mickey Pittman, the OODA Loop is designed to accomplish two objectives – defeat the enemy and survive. Without the Loop, field warriors fall prey to attack and often are crippled in the line of fire.
Entrepreneurs can also become crippled by cumbersome, multi-teir strategic plans generated either by a Fortune 100 consultant or at 3 day workshops taught by a self proclaimed “thought leader”. These plans weigh as much as the Obamacare document and rely on a linear series of events that are more difficult to follow than a map to the Lost Ark. They traumatize Entrepreneurs and their leadership teams into a state of confusion and low moral; in other words the company becomes Straplegic.
Here’s a thought. Instead of spending the next 12 months Six Sigma-ing your company into efficiency Nirvana, why not embrace the brutal facts of our New Normal economy and focus on remaining flexible in the battle to beat your competition and survive. I suggest a 3 step process for business in lieu of the magnificent 4 step OODA Loop:
- Decide – Choose your company’s top 3-5 priorities
- Align – sync (continuously) your team on those priorities (look at previous “Sync’Em” posts)
- Track – hold team members accountable to actions that support priorities and update performance on company metrics
The DAT Loop requires continually updated information on team alignment, company investments, customer acquisition, management positions, and economic modeling. If that information is available then the company can remain maneuverable to make the right decisions, maintain team alignment and a use a concise scoreboard to track performance.
Do DAT! You’ll be on your feet in no time.Does Your Company Have Adequate Capital to Throttle Up?
CEOs often feel like their company is too big to be small and too small to be big as they enter the second stage of corporate growth. At that point, capital restructuring lurks around the corner to fund the wave of growth in the next revenue zone. The “pang” from capital “hunger” starts to feel something like this:
We recently compared a client’s financial performance to over 400 competitors in their industry. Here is what we found:
Our client’s company was at the bottom of the trough, poised to throttle up the wall of growth pains. EBITDA dropped dramatically in the next revenue zone industry wide due to infrastructure and management requirements. Once they peaked over the crest at $20 million the ride would be easier, but they had to pump in capital to fuel them through the transition.
Ironically, growth can be one of the greatest illusions of corporate health. The sooner CEOs identify the wave before it crests and acquire the capital horsepower required to carry them through that dangerous transition – that my partner Doug Tatum identifies as No Man’s Land – the higher the probability that the company will survive and scale.
Sync’Em (Part III): The Amazing Power of Tandem Action
People make business plans for all sorts of reasons — to attract funding, evaluate future growth, build partnerships, or guide development. Unfortunately, the vast majority of these plans are usually out of date by the time the printer ink dries. Business moves fast: the product’s features morph, new competitors emerge, or the economic climate shifts. When these changes occur, many people just throw their business plans out the window. For a plan to be truly valuable it needs to evolve with your company and stay relevant in the face of uncertainty. Amy Gallow, Keeping Your Business Plan Flexible, Harvard Business Review
“When you think about a business plan, think about the distinction between a snapshot and a moving picture,” says William Sahlman, the Dimitri V. D’Arbeloff – Class of 1955 Professor of Business Administration at Harvard Business School and author of How to Write a Great Business Plan.
Writing a plan makes you feel in control of things you can’t actually control. Why don’t we just call plans what they really are: guesses… When you turn guesses into plans, you enter a danger zone. Plans let the past drive the future. They put blinders on you. “This is where we’re going because, well, that’s where we said we were going.” And that’s the problem: Plans are inconsistent with improvisation… You have the most information when you’re doing something, not before you’ve done it. Sometimes you need to say, “We’re going in a new direction because that’s what makes sense – today. Give up on the guesswork. Decide what you’re going to do this week, not this year. Jason Fried, author of Rework, Founder of 37signals
“This downturn has changed the way we will think about our business for many years to come,” says Steve Odland, Office Depot’s chairman and chief executive.Walt Shill, head of the North American management consulting practice for Accenture Ltd., is even more blunt: “Strategy, as we knew it, is dead,” he contends. “Corporate clients decided that increased flexibility and accelerated decision making are much more important than simply predicting the future.” Strategic Plans Lose Favor, the Wall Street Journal January 25, 2010
I spent several hours this week with the founders of a $12 million company who literally papered the circumference of their board room with a linear 5 year business plan – believing they’ve anticipated every decision and investment required to scale 10x current revenues by 2016. I’ve encountered similar CEOs over the past year who have driven their strategic stake into the ground without considering the necessity of maintaining tandem action with their inner circle so that they can remain maneuverable by focusing on the right priorities that are relevant – today!
Entrepreneurs fight a daily battle for survival. They’re immersed in a war that bombards them with a poor economy, increasing regulations and crippling taxation. Without alignment between CEO and inner circle on the right priorities they are swimming upstream against the Class 6 Niagara rapids to meet objectives. Instead of suffering through the perils of misalignment the team can DAT (Decide, Align and Track) in tandem, working with seamless synchronization on critical issues in the battle. I love this final scene from The Last of the Mohicans when Hawkeye and Chingachgook pursue their enemy Magua not as individuals, but as a single fighting unit in tandem with each others movement and strategy.
Our company has observed that tandem action requires continual assessment of internal alignment as well as a trusted decision process that forms the backbone of an effective corporate culture. When CEO and inner circle are aligned and in sync on the 3-5 top priorities for corporate growth, they can engage in the business equivalent of the “Mohican” tandem action that Hawkeye and his father achieved to defeat Magua and survive.
When tandem action occurs on a leadership team it’s an amazing and beautiful thing to behold.
Sync’Em (part II): This is what Happens When…
I’m sure you’ve heard, or stated, the following anecdote: This is what happens when cousins marry…
Let me rephrase that statement in several different contexts with similar, but no less severe, outcomes.
This is what happens when an inebriated college student beta tests his idea for a new sport which requires the nuanced skills of a figure skater, a rancher, and a matador:
This is what happens when a cool family has far too much money to spend at Walt Disney World:
And this is what happens when the leadership team of a regional insurance company is out of Sync (alignment) on allocating resources to develop a new product:
The CEO and Inner Circle disagreed on investing in a new product. Often when a company enters the fringes of No Man’s Land the team is confused and the CEO becomes bored; he/she “escapes” to a new idea that siphons energy and resources from the company’s core value proposition. At this point the company can become distracted enough to fail in it’s inability to fund future growth.
… when alignment is lacking, new programs run a high risk of external failure and typically fall into disuse overtime. Also, without management’s support and consistency, employees’ commitment to quality will usually deteriorate, their individual objectives will take precedence, and their morale and productivity will diminish overtime.
Bob Frost, Director of Measurement International
Misalignment is a superb example of the age-old physics rule: error increases with distance. I will miss the target completely if I’m shooting at 100 yards and my site is off less than a millimeter. CEOs and inner circles can easily migrate out of sync on critical issues, imperceptibly at first – ultimately off the “same page” altogether. Companies fail when leadership is out of sync and lack a trusted decision making process.
This (failure) is what happens when companies are misaligned; but it’s not difficult, or time consuming, for a CEO and Inner Circle to get on the same page when they decide to do so. Sync’Em – it’s the most important action to align and execute on the right priorities.
Just think what might have happened if the Skaterranchador would have Synched with his inner circle and stayed focused on his successful iPhone app?
Innovation Happens on a Cliff’s Edge – Or the Edge of a Very Deep Hole
Innovation often happens when it must happen. You’ve got the emotional capacity of a scrub oak if your adrenal gland hasn’t reached red line in the past few days watching the Chilean miners break into daylight one by one riding in Clinton Cragg’s amazing invention, the Pheonix Capsule:
Cragg arrived in Chile in late August, less than a week after the miner entrapment. In less than two months, assisted by engineers in the Chilean Navy, Cragg’s Star Trek worthy, torpedo shaped vehicle was ready for miner retrieval.
How does this kind of innovation happen in less than two months?! Ask your friendly neighborhood entrepreneur. Our Economy Heroes provide almost all innovation in our economy because they have the creativity to invest and the maneuverability to respond to problems that demand attention and solution. Listen to my partner, Doug Tatum, describe this phenomenon:
Hail our Economy Heroes who step up and step in with the same fervor and outer envelope “ideation” as Clinton Cragg invested for the Chilean miners. The big boys can’t respond like this; initiating immediate innovation in a Fortune 500 company is like trying to turn a barge around in a retention pond. Those behemoths don’t innovate – they BUY innovation – and then invest the millions required to scale the idea.
Thank you, Dr. Cragg for stepping over the cliff’s edge and diving down into the 2400 ft. solid stone rabbit hole with your invention. Our entrepreneurs are ready to do the same, every day every where. That’s why they are our Economy Heroes and America’s competitive advantage in the world economy.
Sync’Em: How to Drive Alignment on Critical Priorities, Part I
Is your leadership team on the same page when it comes to critical issues your company will face in the next 90 days? Or do you feel like you’re stuck in the above conversation with your inner circle – trying to convince them that “Caesar Romero was tall”?
My firm has worked with over 200 CEOs and their inner circles over the past 14 months. We often start our interaction with clients with a short online assessment that allows them to respond to statements regarding
- Their Market (Value Proposition)
- Their Management (Are the right people in the right positions?)
- Their Economic Model (Will the company make money at higher volumes?)
- Their Money (available capital for future growth)
Without exception the results are similar to this sample summary:
I’ve stated before that over 95% 0f our clients are severely misaligned on their company’s value proposition. Why is alignment so important to an emerging company? How can misalignment effect growth, strategy, execution and momentum as we finish the tumultuous 2010 and as we enter the potential maelstrom of 2011?
I’ll delve more into the severity of misalignment in the next post; but allow me to start the process by offering the best definition of culture Ive ever heard – provided by my partner, Doug Tatum:
In case you’re wondering – here’s the secret sauce to sync your team if you’re in the hunt for the “same page” on critical priorities: create a trusted decision making process.
Romero was tall. Just sayin’.
The Promise: I Can do That – How do I do That?
How often do we make promises to customers we’re not quite able to meet:
My partner, Doug Tatum, describes this phenomenon:
And while we’re finding that core issue to scale – how do we handle those promises when we’re pseudo, sort-of, quasi able to meet them:
We are constantly amazed that over 95% of the corporate leadership teams we help are not aligned on their value proposition. How does that effect the team’s ability to create the right priorities to execute? How does that misalignment create havoc when different promises are made to different customers outside of the company’s unique competitive advantage?
If you as CEO have told clients “I can do that!” and then asked yourself, “How do I do that?”: if you have made promises that, as Doug states, you’re only 70% able to keep you might want to make sure your team is aligned on the company value proposition. Once aligned you can either reconfigure your services to meet those promises, or fire specific customers so that you can refocus on that “thing” you business does best – which is also that thing you do best.
Can you do that? Yes you can do that!
Hail Our Inc. 5000 Economy Heroes
I started twenty-two years ago out of the trunk of my car. Dave Dreiling, CEO/Founder GTM Sportswear
Last weekend I attended the Inc. 5000 national event at the Gaylord Hotel in Washington D.C. For three days I swam in the ocean of adrenalin, creativity and chutzpa created by leaders of the fastest growing companies in America. I personally interacted with over 100 of these Economy Heroes and marveled at their ability to persevere and succeed in the worst economic downturn of this generation.
I listened to stories from heroes like Dave Dreiling, founder and visionary of a $65 million sporting goods company that he started out of the trunk of his car twenty-two years ago; he now employs over 800 people. Or Joanne Cobb-Rossi who successfully straddles the fine line of career and family while leading her thriving company, Zooom Printing.
The enthusiasm were palpable; a pleasant contrast to the 2009 conference that fell in the center of the stock crash. It was like finding an oasis in the endless parched commentary of doom and gloom we’ve trudged through over the past two years.
My partners, Doug Tatum and Steve Kimball shared fascinating Inc. 5000 data with the CEOs in our workshop on Saturday morning. The biggest surprise stemmed from the collective projected 40% growth in 2011. That’s a clear indication of the ice running through their veins.
A fascinating response occurred when Steve initiated a quick exercise where the CEOs could share their most critical priority for 2011. It was like NBA draft day. Participants reached for the nearest 2-3 shirt sleeves and immediately engaged, providing me with a vivid visual of the entrepreneur’s need for peer to peer interaction. More on that later.
Joanne Cobb-Rossi of Zooom Printing accepts an Inc. award from President Bob Lapointe
Our company recently entered the Inc. family to provide tools for entrepreneurs that equip them to:
- Surface company alignment immediately
- Identify the 3-5 critical key performance indicators for 2010 and 2011
- Track performance with a concise but comprehensive company scoreboard.
We are now Inc. Navigator (www.IncNav.com) and proud to be surrounded by so many fearless Economy Heroes, both in the Inc. 5000 and beyond.
Dave Dreiling provides an excellent example of the impact entrepreneurs have on our economy and job market. Although less than 10% of new ventures survive, those that make it generate over 80% of the jobs in this country.
As I mingled amongst these innovative elite, those who love capitalism and embrace the risk it requires I was reminded that we must do what we must do to clear the regulatory and taxation path so that they, like Dave and the 800 members of his family, can do what they do best – create jobs!
There’s Pain Against the Grain
- Image by k-ideas via Flickr
The largest opportunities are found in ideas that go against the grain. Omar Hamoui founder, AdMob
Going against the grain via product innovation is about as much fun as getting clawed by an angry cat after stroking it in the wrong direction. A “disruptive” product by definition disrupts the behavior of the potential buyer such that he/she is required to change in order to experience the product’s unique and/or game changing benefits. Almost every person on the planet despises change – except of course those coveted, delightful and almost always obscure Early Adopters. These risk taking, usually tech craving “Sneezers” (as Seth Godin identifies them) were the first in line on the day iPhone 4 plunged into the market. In fact they were the first 25,000 of the 2,000,000 that purchased the fantastic, but faulty device.
And therein lies the reason all entrepreneurs love Early Adopters – they don’t care that the product they’ve just purchased has warts. I’ve spoken with a number of iPhone 4 owners. Do they experience daily dropped calls? Of course. Do they still love their iPhone 4? You bet. I know because I’m a proud owner of this next-gen device that must be encased in add-on rubber housing in order to function properly. That’s the “pain” against the grain I’m willing to endure.
Let’s face it, disruption requires that the customers get dirty. Our product, for example requires that CEOs review an x-ray of their business that reveals both existing tumors and those in the pre-cancerous stage. These growths can surface in their marketing, their management team, their economic model, and their working capital. This sometimes wrenching process is not an enticing experience for many business owners, but for those who engage early – they are both enlightened and excited that they now know where the Code Red exists and how they can address it.
Our company is on the verge of identifying its Early Adopters. They will dive in, get dirty and provide feedback worth far more than gold. They’re businesses will succeed at a rate far above the norm, and they will tell others about their experience at a fast and reckless rate of speed. They will experience their own pain against their company’s grain when they make the difficult decisions revealed through our solution. But they will prevail and we will love them for their willingness and courage to adopt our process this early in the game.
What’s Your Sole Purpose in this Market?
My company has worked with over 200 CEOs and their inner circles in the past 14 months. Over 98% have a common problem. Michael Arrington from TechCrunch describes it:
It’s a problem that pervades Silicon Valley. Sometimes people think that a simple description of a product means there isn’t much there. But really it’s the opposite. You have to be able to distill down what you do in a way that your customers can easily understand the value proposition. It’s hard, but it’s also a business necessity. (from What is it You Do: The Need for Simplicity, September 13)
So, in one sentence, what is your company’s value proposition? What is your sole purpose in this Market?
My company’s one hour deep-dive includes what most would consider a simple question. We ask CEOs and their inner circles, “What is your unique competitive advantage?” It’s one of the best questions to reveal misalignment on the leadership team. Answers often vary dramatically and descriptions ramble, sometimes for an entire paragraph.
A business can’t scale without an effective economic model; a model that scales a crystal clear value proposition so that the company makes more money at higher volumes. Ask Steve Jobs how he would describe the first iPod – “A thousand tunes in your pocket”, remember? Or how about this one from your college days, “Hot pizza delivered to your door in 30 minutes, or it’s free” – Dominos sold enough pepperoni to fill the Rose Bowl with that one.
“The Ultimate Driving Machine” (BMW), “The Best Free Way to Manage Your Money” (mint.com – over 1,000,000 users), “The Chicken Sandwich” (Chick-Fil-a), and so on. If a company’s leadership team can’t articulate (in unison) the reason a customer would choose them over any other provider - do they know why they’re in business? Can they make it through the No Man’s Land minefield without that clarity?
Don’t wait for the drill sergeant. Ask the members of your team to articulate the company’s “sole purpose.” You’re a genius if you do.
How do We Fuel the Law of Accelerating Returns?
- Image via Wikipedia
Will the new Health Care Plan hurt Entrepreneurs? Listen to Stacey Blackman’s from BNET offer her observations:
Because the plan calls for businesses with over 25 employees to provide mandatory health coverage or be fined 8 percent of its payroll, McGrath believes this will not only have an ill effect on small business, but our economy as a whole. She writes:
With small business growth having led us out of most recessions in the past, get ready for this sector to add jobs far more slowly and with far greater caution than it had previously — a big blow to an economy that desperately needs a vibrant and growing small business sector.
McGrath also notes that under the plan households that make above $350,000 will face a surtax to pay for medical care. She believes that many of those taxed will be small business owners and entrepreneurs who would otherwise use that money not for luxuries, but for “working capital, inventory, marketing and other unglamorous business necessities.”
Ray Kurzweil is one of the most recognized inventors of the last 4 decades. Inc. Magazine calls him “the rightful heir to Thomas Edison”, the Wall Street Journal refers to him as “the restless genius” and Forbes, “the ultimate thinking machine.” Kurzweil made this fascinating “entrepreneurial’ statement in his futuristic work, The Singularity is Near:
It’s the economic imperative of a competitive marketplace that is the primary force driving technology forward and fueling the law of accelerating returns.
I remember reading an article in the Wall Street Journal almost twenty years ago when National Health Care first appeared on our radar. When asked about the impact on his practice, a Canadian surgeon identified that he was surviving despite having to use equipment over twenty years old.
Twenty years old? That means if you need your gallbladder removed today you would face over three weeks of recovery due to the necessity of receiving a subcostal incision across muscle in a 60 minute procedure rather than playing golf two days later after a 15 minute laparoscopic cholecystectomy.
Listen to Kurzweil: Drive Technology + Competitive Marketplace = Accelerating Returns, which produces what? Entrepreneurial incentive to act on their ideas, risk their resources on future rewards and… CREATE JOBS!
Or have your gallbladder removed the old way. I’ll set our tee time for mid-October.
Entrepreneurs Ask: What’s a Comfort Zone?
The Onion just posted this update today on the perils of escaping the “Comfort Zone”:
WASHINGTON—A new report published this week by the Department of Health and Human Services revealed that more than 10 million Americans are violently killed each year while attempting to break away from their regular everyday routines and try something new. “We found that getting out of your comfort zone and facing your fears resulted in premature death nearly 78 percent of the time,” HHS researcher Madeline Hersh said. “People always ask themselves, ‘What’s the worst that can happen?’ Well, according to our research, anything from being bitten by a poisonous snake to dying in a hot-air balloon crash can happen.” The report found that the safest individuals were those who surrendered to the soul-crushing monotony of habit and then convinced themselves that they had things pretty good.
Have you ever heard Entrepreneurs hesitate to make a decision because it will take them out of their comfort zone? They don’t know what a comfort zone is much less explored the possibility of stepping outside of it. They live outside whatever we might consider comfortable; they live a life of perpetual risk, living on the edge of defeat and fighting every temptation to play “not to lose.”
Testicular steel (that’s a gender neutral term) is one of the reasons I love entrepreneurs. It’s also why their growing companies eventually fail over 90% of the time. The “violent death” that transpires with the 10 million annual unfortunate risk takers applies 10x to entrepreneurs who take the risk of a new venture. That 9:1 ratio doesn’t scare them as I’ve stated before (thus the name of this blog), but it should give them pause to consider the chasms they must jump and what rockets are required to propel them as they orbit and battle the odds outside the comfort zone.
At the risk of sounding misguided I respect those who perished stepping out of their zone, except those of course who “starred” in the show Jackass. I’m even enamored with with the ADHD adrenalin addicts who took one too many flights in the squirrel suit. But the reality is that a large percentage of the 10 million died due to a lack of preparation couched in a naive paradigm of over confidence.
Sounds a lot like entrepreneurs of growing companies, doesn’t it? Just as there are unavoidable laws relating to gravity so there are universal and inevitable growth transitions a company must hurdle to scale. Stockdale’s Paradox combined with a clear view of the mines in the minefield produces a comprehensive, but focused, execution strategy. This type of plan goes a long way to move the needle of corporate success beyond 10%.
I know you didn’t hear what I just said, Mr. and Ms. Entrepreneur. And that’s okay, I’ll keep saying it because you are my hero and the hope of this nation to turn the tide in our economy. Besides, I so enjoy it when you land safely in the squirrel suit.
The Growth Illusion or… How Does a Ferrari Leap a Canyon?
- Image via Wikipedia
People think there’s some kind of continuum between the smallest and biggest business – an unbroken line between me and the mouse on my desk and Microsoft – and that there’s some magical moment where you transform from being a small to a midsize to a large business. In fact, research shows that to be very far from the truth. Each form of business is a totally separate beast, and there are vastly different skill sets in running each one.
The real difference between a small business and an enterprise is the owner’s attitude toward growth. A Silicon Valley start-up is completely focused on getting big, and naturally risks failure to get there. A true small business, on the other hand, is focused on becoming profitable, feeding a family, and staying in business. That’s a fundamental psychographic and cultural difference.
Ridgely Evers, Co-founder of Intuit and Quickbooks, From American Express OPEN BOOK
She’s driving her new Ferrari with the top down. It’s a beautiful day in SoCal and the needle is creeping over 115 mph. Speed increases and life is good. What she doesn’t see is a 1000 ft. chasm she has to jump a mile down the road. Entrepreneurs riding a growth curve often can’t see the curve for the chasm. Ridgely calls is a “magical moment”, my company calls it No Man’s Land. ALL companies go through it. No Man’s Land is an inevitable, unavoidable growth transition every Entrepreneur must face.
The illusion of growth is as subtle and sublime as any Copperfield act. If the Ferrari driver does not recognize the chasm is coming, she’ll re-enact this classic, and far-too common company scenario:
Whatever “beast” (as Ridgely identifies) your company becomes, it must ask the “Small Giant vs. Gazelle” question I mentioned in previous posts, and then review the business in the context of No Man’s Land. Is my company nearing the chasm? Am I already in the chasm and need thrusters to clear it?
Don’t wait, it may be a glorious SoCal day, but the chasm is coming.
An Entrepreneur Must Protect Her Fastball
- Image by cliff1066™ via Flickr
Delegating authority is a notoriously difficult undertaking for many business owners to accept, especially when it comes time to bringing in an outside CEO. In a Q & A in The New York Times, Lisa Price, founder of the beauty products company Carol’s Daughter, explains how she learned to calmly accept that an outside CEO might not be such a bad thing. Price explains that while juggling a lot of issues, it helps to put an actual dollar amount to the value of your time and then determine whether or not it is cost-effective for one person to handle every single task. “I did something as long as it made sense to me to do it,” she said. “And then, once it made sense to turn it over to someone else–either because it could get done better, or because I could spend my time making more money elsewhere–I did it.”
Inc. Magazine, A Model for Smarter Growth, August 23, 2010, Jason Del Ray
Delegation is essential to growth, no question. But when does an Entrepreneur refrain from delegating? The founder must not release the company’s most valuable asset in order to maintain momentum and growth – he or she must protect the “Fastball”. My partner Doug Tatum describes this phenomenon:
What do I mean by “Fastball”? Consider my favorite baseball ever – Nolan Ryan. Ryan is considered by many to be the greatest pitcher of all time. Batters braced themselves for almost twenty years when Ryan took the mound because they had no question what was coming – a blazing, 100 mph fastball right down the center of the strike zone. Hall of Famer, Reggie Jackson, said of Ryan’s heater – “It disappeared half way to the plate.”
Nolan Ryan built an incredible career around one thing – something he was passionate about; something he did better than anything else. All Entrepreneurs have their “fastballs” and although the company at some point must get good at what the founder does best in order to scale, it makes little sense in the first few stages of corporate growth for her to give up trips to the mound to throw her heater. It’s what she, and the company does best.
Which is More Valuable: Capital or a Crystal Ball?
What does the average Entrepreneur want most? Before you scream “More capital!” as the typical visceral response, consider the deeper implications that our Economy Heroes face concerning crucial decisions for an uncertain future. Over the past two years I’ve heard them ask the same questions time and again; seldom about money, or the lack thereof.
Most arm chair economists believe that capital is the hammer that should slam every strategic “nail”. But research with thousands of companies over the course of two decades reveals that, although adequate funding is an inevitable necessity to growth, Entrepreneurs would be better served with revelations from their company’s Corporate Crystal Ball (if they had one) than immediate Capital.
If Entrepreneurs could cup their hands around their company’s Crystal Ball, what would they want it reveal? How about the answers to these questions:
“What is the REAL condition of my company?”
“How misaligned is my leadership team on critical issues?”
“Am I building company wealth by my decisions?”
“What future landmines am I missing?”
“What is my company’s Value Proposition?”
“Do I have the right people in the right positions in order to grow to the next level?”
“Will the company make more money at higher volumes?”
“Do we have enough capital to grow?” (ok they do ask this question too)
Entrepreneurs need a Crystal Ball that is both indicative (present condition) and predictive (future results) in order to make crucial decisions now that impact future performance. They need a powerful solution that will equip them to control their company’s destiny.
Can I tell you a secret? I may not look like a Freakonomic Gypsy, but I know where to find your company’s Crystal Ball. Are buckets full of duckets close to your financial fore-token? Maybe not, but I’ll bet you’re more interested in what the Ball reveals than where the coins are buried.
A Tale of Three Economy Heroes
Economy Heroes come in all shapes and sizes. They come from different families, different cultures and different resources. They’re men and women who voraciously take the risks required to maintain surface tension on our country’s innovation, generate jobs and keep us in the hunt with our world’s economy.
Are there categories of heroes? Patternicity is a term that is gaining ground in social and business vernacular. At its core, Patternicity describes the search for patterns, such that some patterns are real and some are not. I believe their are patterns in how Entrepreneurs are both “born” and “made” in this great capitalistic society of ours. I’d like to tell you a short tale, in fact three short tales of individuals that represent the primary categories of Economy Heroes. The stories represent real heroes; only the names have been changed.
The Natural (Julie) - She started with a paper route in the 4th grade (the age when most entrepreneurs surface by the way – future post). She created several concert events in high school with live bands that paid for her first year of college tuition. She didn’t pursue a degree in college – she only took classes that contributed to her academic portfolio for a future 
business. During her first break at school she sold for Southwestern, hawking books door to door in the blazing heat of an unfamiliar metro area. She won top honors for summer sales. After taking all pertinent classes Julie placed a down payment on a duplex and worked nights to repair it to perfection.
Fast-forward fifteen years. Julie’s business and her employees have survived and thrived through all swings in the commercial real estate industry. She doesn’t need to work; her most recent purchase was a 140 foot Hatteras parked in the Caribbean. And as she looks out over the water from her 8500 square foot condo thirty stories up, she spins the mental plates of her next seven commercial deals.
The Fighter (Todd). His step-father grabbed his shoulders shook him at age fourteen, shouting that he was white trash and would never amount to anything. From that moment Todd determined he would get the hell out of that house as fast as he could. He would become financially independent ASAP and eventually prove to that S.O.B. that he was dead wrong about his step-son. Todd paid his way through school and with bulldog tenacity graduated magna cum laude with an MBA and his Physician Assistant license. His anger and energy ran deep. He worked several years for an orthopedic surgeon before proving his business acumen by helping the CEO with a few critical decisions on expanding the practice. When the CEO decided to move on, Todd stepped in and grew the practice from 17 million to 70 million in 7 years; he currently employs over 200 people. During his reign as CEO he also invested in numerous companies and land deals on the side, acting as corporate leader by day and rogue entrepreneur by night. He was a millionaire many times over before he turned 40, but he ended every day with the same phrase, “Well I’m still employed.” He proved the S.O.B. wrong and he never let his Physician Assistant license expire.
The Bounced (Ken). After working with International Harvester as top sales person worldwide for 25 years, Ken was bounced into unemployment via company reorganization. He knew what he knew best – selling a gigantic, all wheel drive strip mining truck. This hunk of powerhouse machinery was so large you could almost stand inside one of its tires. So Ken, the truck engineer and the truck business manager mortgaged their homes and secured a $10 million loan to purchase both truck and parts business from IH. For the next ten years Ken and his cohorts worked 24/7, traveling around the world looking for deals and dealers. They negotiated and re-negotiated loans with “the man”, and enjoyed every minute of it. A much larger competitor eventually bought both truck and parts business just to get them out of the market. Ken now travels the world with his wife, but he misses the life he experienced after the “bounce.”
I’m sure there are more categories of Entrepreneurs than the Natural, the Fighter and the Bounced; but thankful are we that these heroes used their innate ability as well as their resiliency and tenacity to build enterprise in this great nation of ours. They, and our other Economy Heroes, deserve our support to clear the path and get our of their way so that they continue to do what they do best – CREATE JOBS!
When CEOs Become Blind and Bored
Psychologists refer to this as the paradox of power. The very traits that helped leaders accumulate control in the first place all but disappear once they rise to power. Instead of being polite, honest and outgoing, they become impulsive, reckless and rude. In some cases, these new habits can help a leader be more decisive and single-minded, or more likely to make choices that will be profitable regardless of their popularity. One recent study found that overconfident CEOs were more likely to pursue innovation and take their companies in new technological directions. Unchecked, however, these instincts can lead to a big fall.
The Power Trip, Wall Street Journal – August 14, 2010
And that’s the problem. “New technological directions” are often a landmine waiting for the CEO’s foot. Here’s the crazy part - CEOs get crazy in No Man’s Land. It’s a time of confusion and distraction, when the company is too big to be small and too small to be big. After months, perhaps years of solid growth the company realizes they’re not quite sure why they’re in business. The value proposition becomes ambiguous at best and the economic model, or lack there-of, does not enable the company to make money at higher volumes. So what does the CEO do? He or she gets bored with the details and starts innovating in a different direction.
This is red line danger zone for corporate direction and strategy. The idea that launched the business, that “thing” that the company did best to this point, starts to lose it’s appeal to the CEO. In typical ADD (or ADHD) fashion the boss believes the best course of action is to get creative and do something different. Landmine, three o’clock!
One of the reasons No Man’s Land claims so many ventures is the loss of the CEO’s tenacious focus. Instead of a new idea, the leadership team should re-align on the value proposition and then refresh the economic model to scale the value proposition. This “re-focus” increases the probability that the company will survive No Man’s Land and thrive in more profitable revenue zones.
If you are a CEO and you’re becoming bored with your company’s direction, step back and re-focus. Don’t let the illusion of past or present growth blind you to the reality of No Man’s Land. Align the team on your value proposition and make the appropriate investments to maintain momentum and survive your growing pains.
If you need a hobby, try P90X – you’ll be too tired to be bored.
The Corporate Totem – An Elegant Benchmark to Reality
- Image via Wikipedia
Please pardon if I indulge myself in an of elucidation on my new favorite movie, Inception. One trip through Christopher Nolan‘s dream epic is not enough to start connecting the dots on its symbolism. I was just trying to keep up my first time around; Nolan is writing and directing ninja. The second time, however, I felt the freedom to participate in Nolan’s multiple metaphors, starting with reality and ending in the “Basement” of the hero’s prison of memories.
My favorite imagery ties into the Totem, a personal item that each dream warrior identified in the real world in order to ground themselves to reality in the dream world. In Cobb’s (Leonardo DiCaprio) case, it was a spinning top. If ever he became confused as to whether he was in reality or fantasy, he would spin the top and wait for it to stop spinning. If it didn’t stop, he knew he was in a dream.
Each warrior’s Totem was personal and confidential. As stated by several characters:
Arthur: So, a totem. It’s a small object, potentially heavy, something you can have on you all the time…
Ariadne: What, like a coin?
Arthur: No, it has to be more unique than that, like – this is a loaded die.
[Ariadne reaches out to take the die]
Arthur: . Nah, I can’t let you touch it, that would defeat the purpose. See only I know the balance and weight of this particular loaded die. That way when you look at your totem, you know beyond a doubt you’re not in someone else’s dream.
Ariadne state’s later, after she’s created her item that the Totem is an elegant means to ground oneself in reality.
I remember hearing a story about famed basketball coach John Wooden concerning his religious beliefs. When asked why he didn’t discuss the topic more in public he responded that he wanted to live it more than speak it – which he did. Then he added that he carried an item in his pocket to remind him at all times of the example he wanted to provide others regarding his faith. The item was a small metal cross with sharp edges. When, as coach, he was tempted to erupt in response to a bad call in a game he would reach into his pocket and grasp the cross as hard as possible. As the sharp edges of his “Totem” pressed against his fingers the great coach would remember the example he wanted to display on the court; then he would take a deep breath. He rarely if ever lost his temper on or off the court.
Companies today need their own personalized Totems. I’ve described the insidious nature of No Man’s Land in previous posts; the inevitable transition companies experience during the second stage of corporate growth. It’s a time of confusion and critical decisions. Even after a company is successful in accessing the right information, both from a corporate alignment perspective as well as competitive benchmarking, and even after they identify the 3-5 must do key performance indicators, it’s easy to slip into the dream world of “delusional growth” and forget that the No Man’s Land chasm is either coming fast or upon them.
That’s why I recommend that my clients review a one-page company snapshot either monthly or quarterly that benchmarks key metric and KPI performance. Something like this:
With a “Totem” like this, CEOs can control company delusion and embrace the facts of their performance. I’d show you my company’s totem, but then I don’t want to lose my sense of reality in my own dream 
Brent Sapp
