Mark Sigal's Blog - The Network Garden

On Free Markets, Bailouts and Safety Nets: Rules of the Road Needed

Okay, so now that we have answered the Big Question, we need to collectively start focusing on a bunch of little questions…

On Creative Destruction 

Not so long ago, corporate giants with names like PanAm, ITT and Montgomery Ward roamed the earth.

They faded and were replaced by new companies with names like Microsoft, Southwest Airlines and Target.

The US became famous for this pattern of decay and new growth.

Over time, American government built a bigger safety net so workers could survive the vicissitudes of this creative destruction — with unemployment insurance and soon, one hopes, health care security.

But the government has generally not interfered in the dynamic process itself, which is the source of the country’s prosperity. (Excerpted from Bailout to Nowhere, David Brooks, NYT Op Ed.)

Bail Me Out, Please! 

In ‘How to Fix a Flat,’ Thomas Friedman listens quizzically to pleas for a bailout of the auto industry (and why it makes no sense):

They were interviewing Bob Nardelli, the CEO of Chrysler, and he was explaining why the auto industry, at that time, needed $25 billion in loan guarantees.

It wasn’t a bailout, he said. It was a way to enable the car companies to retool for innovation.  I could not help but shout back at the TV screen: “We have to subsidize Detroit so that it will innovate? What business were you people in other than innovation?”

A Question of Principles

David Brooks of The New York Times frames the road ahead  in 'Bailout to Nowhere': Going forward, the larger principle is over the nature of America’s political system.

Is this country going to slide into progressive corporatism, a merger of corporate and federal power that will inevitably stifle competition, empower corporate and federal bureaucrats and protect entrenched interests?

Or is the US going to stick with its historic model: Helping workers weather the storms of a dynamic economy, but preserving the dynamism that is the core of the country’s success.

A Failure of Enforcement, Not Free Markets 

Put it all together, and you have to ask yourself, "What's the Moral of the Story?"

Steve Forbes in Forbes Magazine offers a pretty crystallized view of the WHAT and the WHY behind our systemic conundrum:

"Free markets need to have sensible rules of the road. For example, we're free to drive where we want, but we're supposed to adhere to speed limits and signal when turning.

When the housing market became truly chaotic in 2004-06, and bankers were doing things they had never done before, the Fed--as road cop--had the power to turn on its siren and pull those bankers over. Greenspan chose not to. That was a failure of enforcement, not free markets."

SIDEBAR: Forbes also argues for formally announcing that a strong dollar is now US policy (agreed), suspending mark-to-market rules (totally disagree – see Capitalism 2.0), having the SEC reinstate the uptick rule regarding short-selling and enforce the rule against "naked" short-selling.

I guess this is one of those moments when you have to embrace the credo that when you get to the fork in the road, take it.

Marketing Patterns: It's Easier to Motivate than to Persuade

Seth Godin makes a great point in his post, ‘Marketing lessons from the US election.’ 

In it, he asserts that motivating the committed outperforms persuading the uncommitted.

In the case of the Obama campaign, the “committed” were blacks and college age voters that too often in past elections did not show up in numbers on Election Day. 

The genius of the Obama campaign is that by motivating these groups and tactically ensuring that they made it to the voting booth on Election Day, Obama managed to expand the electorate pie, a Herculean accomplishment that literally changed the equation.

Godin’s conclusion sums it up best: “Every marketer can learn from this. It's easier (far easier) to motivate the slightly motivated than it is to argue with those that either ignore you or are predisposed to not like you.”

Related Posts:

1. Social Media: It’s About Breadcrumbs and Conversations
2. Online Community Building: Three Critical Ingredients
3. The Serial Killer, Gustave and Creative Marketing
4. Are You Working with Chickens or Pigs?

Thought Streams – Privilege, Poverty and Overcoming Adversity

While I think that Malcolm Gladwell (of ‘Blink’ and ‘The Tipping Point’ fame) has a penchant for writing the end of his story and THEN finding the facts to support it, he is nonetheless an immensely enjoyable storyteller, specifically because he so fancies the frame and measure of good narrative. 

Hence, in the weekend reading bucket, read Gladwell’s “The Uses of Adversity” (online @ The New Yorker) with the same ‘willing suspension of disbelief’ that you mentally sign up for when you enter a movie theater; i.e., come to be entertained, just don’t over-think.

In the article, Gladwell prophesizes that sometimes being an underprivileged outsider trumps being the insider born with the silver spoon.  Similarly, he argues that there are times when being an outsider is precisely what makes you a good insider.

To support his argument, he tells the story of Sidney Weinberg, for 40 years the face of investor banking giant, Goldman Sachs.  As Gladwell details, the man who created what we know as Goldman Sachs was a poor, uneducated member of a despised minority, yet he rose to the top, becoming the trusted source of presidents, corporate heads and the generals of industry.

An underlying theme of the story is whether in these troubled times, we need more people who have been “cradled, nursed and reared in the stimulating school of poverty,” as Andrew Carnegie, the consummate self-made man, once put it. 

Put another way, does a life born into adversity better prepare one for handling turbulent times than pedigree, socio-economic status and connections? 

There is clearly not a binary answer to this one, but it’s a fun read nonetheless.

Read the full article HERE.

When Does it Get Easy? In the Box!

You must be thinking that these are tough times, unseasonably tough times, no less.  So when does it get easy?

I hearken back to my first mentor, a gentleman by the name of Sam Bachner, who I worked with at my first startup, CBM.

Sam had built a personal fortune well into the 'eight figures' range.  Yet, despite his good fortune, there was Sam working like a dog well into his sixties.

This prompted someone to ask him, "Sam when does it get easy?  You've worked hard, you've achieved great success, you could count your money and call it a day.  When does it get easy?"

Sam just smiled, and said, "In the box. When I am in the box it gets easy.  Until then, I work, live and fight for my daily bread."

Crazy Wisdom as Rome Burns

There is a Buddhist axiom about Crazy Wisdom.  When you are standing on the edge and staring into the abyss, the pain, confusion and fear that surrounds you can actually be the catalyst for clarity and understanding to emerge.

Discipline and directness take the place of devil-may-care, willy-nilly-ness, and a new set of muscles manifest; Suddenly, you are able to ‘carve’ new paths and reach heights that heretofore were unattainable.

I believe that now is a time for Crazy Wisdom – when Rome is seemingly burning, when the stakes that we hold most dear seem most tenuous, and when the road ahead is cloudy and as confusing as it has ever been.

Time to develop a clear personal narrative of who you are, what your unfair advantages are, what you have to offer and what you require/are looking for in return.

Time to commit to practicing consistency, clarity and grace under pressure.

Time to concentrate, breath deep, relax and then faithfully walk through the fire to get to the other side.

(Side note: watching Obama and McCain the other night in the third debate was akin to viewing the yin-yang picture of consistency, clarity and grace under pressure, as contrasted by the NOT example. There is much worth emulating in Obama's deeply reasoned approach.)

Related Links:

1. Read Crazy Wisdom (the book): I have been a practitioner of Tibetan Buddhism for ~15 years, and consider my virtual guru to be the late, great teacher, Chogyam Trungpa. This book is part of a series of books taken from seminars, and the structure is very powerful.  Each chapter starts with an explanation of the concept by Trungpa himself so you get the "official" explanation of the construct being covered. Then, in the next section you have questions (from the seminar audience) and answers (from Trungpa) on the concepts presented so you get another dimension of understanding. And of course, as the reader, you make your own analysis. I have found such an approach to be a great way to triangulate on informationally rich concepts. Be forewarned, though. These are serious, conceptually dense readings that take dedication, concentration and a 'one chapter at a time' mental investment to meaningfully get through.
2. Hold a Picture in your Pocket:  Cognitive dissonance and manifesting change.
3. On Intellectual Honesty:  See things as they really are; act on that knowledge.
4. On Life as Art Poetic Truths & Getting Rich: Read the poem at the bottom of the post - it's a classic from the book referenced in the post.

When Your World is Collapsing...Take a Vacation!

The world is a scary place right now.  The stock market is crashing.  The housing market is in the crapper.  And lots of people are waiting for the other shoe to drop in the job market.  What to do when it’s crisis time everywhere you look?  Sell your 401(k)?  Update your resume?  Find god?  No, no, no. 

Take a vacation.  Huh?  You heard me.  Take a vacation.

To frame this one, let me share a quick sermon from when I was a bit younger.  My first startup was a real estate asset management company that was an offshoot of a larger development company. I was driven to eat, sleep and breathe work 24/7/365 days a year.  I had fire in my belly, and was every bit as passionate then as I am now.

My business partner and I hit a major crisis point in the business that involved key customers, key employees and personal sustenance issues, and we shared it in frantic tones with “Sam,” the chairman of the parent company.  We were looking for answers, and we were looking for them fast.

“Sam, we need to move mountains to keep that customer happy.  Sam, is there any way we can sweeten the pot so we don’t lose Brian.  He’s our number one producer.  Sam, we are running perilously low on cash.  What should we do?”

Sam, who was worth well north of $100M, just listened to our rants, our angst, and our serious confusion. Then he smiled, and said, “Guys, take a vacation.”

Flummoxed, we got more agitated.  “Sam, did you hear what we said? It’s serious!?”

Again, Sam repeated, “Guys, the crisis will wait, but you can’t, and besides, it’s never good to make so many big decisions in a stress-filled, darkly confused place.  Take a week off.  The world will still be there.  Your head will be clearer for having taken the break, and your decision making process will be better for it.”

Best advice ever for times of crisis.  The world can wait, and quick decisions made in dark places are usually the worst decisions you can make.  So take a vacation, clear your head, and decide what you need to decide standing at a place of higher ground.

You will be better for it.

Related Posts:

1. Hold a Picture in your Pocket:  Cognitive dissonance and manifesting change.
2. On Intellectual Honesty:  See things as they really are; act on that knowledge.
3. The Five Keys to Business Success: The most important drivers to entrepreneurial success.
4. Ambition is a Kind of Vampirism: The human challenges of aiming high.

Ambition is a Kind of Vampirism

Once bitten by it, there is no return to your former life.  It’s a form of blood lust, an insatiable hunger that can only be temporarily sated, its host never again fully satisfied. 

It consumes the spirit and envelops the flesh.  With a single-mindedness; of thoughts of prey, and conquests far and wide. 

It carries elements of the supernatural.  Its powers can carry you to unfathomable, sometimes terrifying, yet exhilarating, heights. 

But it is also the lonely road in that few understand the pain, the hunger and the never-ending pursuit that comes with being infected by it.

It is scary and threatening to others, and they keep their distance lest they succumb to it, too.

Pity those who pursue it but fail to realize it; for they are destined to walk the earth for a seeming eternity.  They are the fallen ones, wandering in an undead state, not truly dead. But no longer among the living.

Pursue the Highest Common Denominator

Here’s a riddle.  Is the strategic ideal to pursue ubiquity by serving the lowest common denominator (LCD)? 

Or, should you aspire to push the envelope on what is possible, and elevate the definition of the situation to a whole new level?

This latter realm is the Highest Common Denominator (HCD).  And, whereas LCD is all about simplicity, openness and an assumption of fairly loose couplings, HCD is about deep integration and more formal orchestration of use cases and workflows to serve a specific form-factor.

The iPhone/iPod, for example, delivers an HCD experience (bugs, notwithstanding) for communications, media, gaming and information services.

Paradoxically, being HCD also means being proprietary in that the hardware, software and service layers must be delivered as a unified, tightly integrated and co-dependent package to accomplish all of this goodness.

In the yin-yang scheme of things, if Apple is all about delivering HCD, then Google is all about LCD.  Its search and advertising cornerstones are simple, spartan and just work.  But they don’t get the heart pounding in the same way iPhones and Macs inspire the Cult of Apple.

Yet, both companies are pretty much are without peers in terms of their ability to play the disruptor role across the entirety of the media, mobile, PC and Internet segments; industry segments which once were impenetrably different, but no more.

So it’s not an EITHER/OR, but I would argue that Google-style LCD sensibility has taken hold more so than Apple-style HCD mindset, and that's a shame.

Why is this so? HCD is hard; it is complex; it is fraught with execution risk; and it takes real vision.  But we need more vision and we need more aspiration to be a game-changer if we are not only to disrupt and race industries to the bottom but rather, to re-invent them, and reach new plateaus.

Which brings me to local media and local advertisers.  Talk about delivering an LCD experience.  I am talking the local newspaper, local TV stations and yellow page-style listing guides.

They need to get on an HCD track if they are going to regain relevance, and thus have high value real estate to sell.

Currently, the newspaper is selling something that less and less people are buying – and to a predominantly  aging populace, no less. The local TV station is similarly squeezed.  And don’t get me started on yellow pages.

Revenue and/or margin contraction has driven these operators to shrink reporting, creative and editorial staffs.  This has ossified their product, creating a vicious cycle.  (Or maybe just not having a monopoly anymore has irrevocably changed the game, and they haven’t shown the resolve or vision to adjust in a value added fashion).

But things need not play out linearly.  Think about it this way.  Thanks to Google AdSense sensibility, brands now see the logic of paying different amounts for different access and engagement/performance levels.

In an HCD approach, a local media operator might give brands access to richer tools to express their uniqueness or to craft highly specific call-to-action campaigns that are nonetheless tightly integrated with the media property.

This would yield ad units that could be customized and interactive enough to facilitate finely honed brand engagement or lead generation activities.  Media units could be set up to systematically maximize audience reach and engagement levels.  And be priced accordingly.

This implies a quicker read format, more akin to the newsletter, that blurs the line for subscribers between the print and online portion of their accounts, can be chopped up into specialized, media-rich topics, easily customized, updated throughout the day, and which is organize-able and share-able to meet the whims of the subscriber.  It's about engagement, shelf-life and context, something that today's local paper is missing.

Learning to excel at delivering such high value integrated media and advertising units will not be easy, and it implies not only shedding a lot of legacy skin, but a more formal coordination of the media and advertising creation process than currently exists.

But it’s the HCD experience that AdSense can't deliver, and sometimes, necessity is the mother of invention.

Related Links

1. The Chess Masters: Apple versus Google: an assessment of why Google and Apple are without peer.
2. The Programmable Fan Site: a new media/ad unit model.
3. Comcast Buys DailyCandy For $125 Million*: snapshot of a newsletter success.

If you want to see how it ends, then look at how it begins

Once upon a time, I had a business "partner" who regularly over-promised and under-delivered.  Completely intolerant of the concerns and aspirations of others, he was never one to roll up his sleeves and sweat the details with my partners & I. 

Frequently late to our meetings, and often leaving early (if not missing meetings outright), he generally showed a disrespect and disregard for our time and what we were trying to accomplish.  The consummate fair weather friend, he was quick to turn the discussion to “YOU GUYS” the minute the going got tough.

I know, you are thinking, "What a complete bastard and lousy partner," but you know what.  We knew from the very first negotiation that this tiger’s stripes were tilted a specific direction, and we all know that a tiger doesn’t change its stripes so the moral of the story should be obvious:

If you want to see how it ends, then look at how it begins.

Generally speaking, during the set up stage of, for example, a client engagement (think: pitching, demoing, defining requirements, negotiating contract, etc.) a clear pattern emerges.

The client consistently makes, misses or regularly re-schedules meetings. They haggle over minutiae or better yet, don’t sweat peripheral details. They treat you like a trusted partner or they treat you like a contractor. They treat each other with respect and practice honest, clear and constructive communication. Or they don’t. They have a clear sense of requirements, use cases, etc. or not.

My only point is that repeatedly, I have found myself many months down the road looking at a given client’s/partner’s/employee’s footprint with us, only to conclude that everything (good or bad) we know about the client now, we pretty much knew then.

It's the proverbial case of what you sew is what you reap.  So pay attention to how it begins, as that is your likely destiny.

Related Links:

1. Hold a Picture in your Pocket:  Cognitive dissonance and manifesting change.
2. On Intellectual Honesty:  See things as they really are; act on that knowledge.
3. The Five Keys to Business Success: The most important drivers to entrepreneurial success.

Two Minute Warning: A True Sermon

Some years back, I was chatting with my good friend and business partner, Greg Malin, and he asked me if my near-term goal was to sell the startup I was doing at the time.

I proceeded to give Greg a non-answer about it all depending on circumstances. 

There were scenarios where going it alone would be great. 

But, there were also others where the right buyer opportunity comes along and this was your exit.

Greg then said something that has stuck with me ever since.  He said, “It seems that until you decide what your preferred outcome is, you probably won’t get there.”

And you know what.  He was right.  Clarity came about 18 months later, when I knew that the time was right to sell.

Metaphorically speaking, that changed the definition of the (business) game being played from ‘coming out of half time’ to ‘two minute warning.’

Two minute warning was all about scripted plays, clock management and clear decision paths like ‘kick field goal’ or ‘go for touchdown.’

So how did the two minute warning play out in this particular instance?  We focused on execution, which gave us ample ticks on the clock, and worked our way into having some favorable options. 

Yeah, we had to call some audibles, but we got to the goal line, and punched it in when our moment came. 

With the distance of time, I can honestly say that we practiced skillful means.

There is an axiom that John Wooden, the UCLA Bruins ‘Wizard of Westwood,’ once put forth. 

He said that if you fail to prepare, you prepare to fail, adding that failure to act is often the biggest failure of all.

So in what areas professionally or personally are you ‘coming out of halftime’ and which ones is it ‘two minute warning’ time? 

What is your strategy in these respective areas, what are the tactical plays that you want to execute, and how many ticks of the clock do you need to get it done?

Focus on where you want to be, document the specifics, commit to execution-orientation and faithfully punch it in.  Don't be denied.

Related Links:

1. Mandala - There's Order and There's Chaos: A post I wrote about training the mind.
2. On Life as Art, Poetic Truths & Getting Rich: because you've got to be in it to win it.
3. Wooden - A Lifetime of Observations On and Off the Court: A great book on John Wooden's Pyramid of Success.

Mission Accomplished. But is it the RIGHT mission?

The photo-op that will live in infamy.  Bush’s proclamation of ‘Mission Accomplished’ proved to be anything but, providing a searing snapshot of hubris, ineptitude, arrogance and confusing platitudes with action.  Coupled with the selfless, heroic nature of our soldiers (and their willingness to run through whatever wall their mission points them to), this became a recipe for the pointless loss of life focused on the wrong enemy.

Flash forward to some great comments last night on The Tonight Show with Jay Leno by Chris Matthews of ‘Hardball with Chris Matthews.’

In talking about the imperative of the electorate in choosing the next president, he stated that we have to hold our candidate of choice to a higher standard (than Bush) by asking in an honest, challenging fashion, “Are you giving these guys (i.e., our military) the right mission?” 

Lest no one die in vain, or worse, for the vanity of others.

When you think about it, in the larger scheme of things the concept of accomplishing the ‘right mission’ is as much a product of clear DEFINITION as it is one of execution.

Moral of the story: be it in your personal life, your career pursuits or the measuring stick by which you judge the performance/leadership of others, having clarity of what’s the mission, and whether it is the RIGHT one is a picture worth keeping in your pocket at all times.

Related Links:

1. Hold a Picture in your Pocket:  Cognitive dissonance and manifesting change.
2. On Intellectual Honesty:  See things as they really are; act on that knowledge.

Own It. Own the Outcome.

Something to chew on...

Life is hard. 

Paradoxes aplenty. 

But you own total responsibility

For your own happiness. 

That is not to deny the truth

Of your inter-dependence on others.

But you alone have to own it.

Own the outcome.

It's the path to favorable gravity.

On Life as Art, Poetic Truths & Getting Rich

For me, the process of getting and being rich is simultaneously an aspiration, an outcome and a clear measuring stick of 'success.'

Ah, but isn't success a state of mind, defined by the quality of one's living, the values that one holds and the bedrock of family and friends?

Absolutely, but life is defined by paradoxes and how we reconcile them.  After all, many a brilliant artist starves to death or goes bonkers, overcome by the sheer weight of market failure combined with the psychological isolation and loneliness that comes from failing to realize one's goals.

More to the point, we are not brains in a jar.  We are flesh and blood, and for the limited time that we all have on the planet, few of us aspire to live monk-like existences devoid of material wants. 

Moreover, the field of play that we compete within keeps score in a monetary and asset oriented fashion.

It reminds me of a riddle that we put forth to interviewees in my companies:

You can choose between working with two companies.  At one company, you will get to build the product of your dreams, free of time, market and dollar constraints.  The only catch is that the product will only be used by very few people, and under no definition will it be a market success.  At the other company, you will face all sorts of trade-offs and compromises based on time, dollars, customer requirements, competitive, etc., BUT the product will be used by countless millions of people and be a huge market and financial success.  Which company do you choose?

Of course, few choices are so binary, but the way interviewees answer the question speaks volumes about how they define success, how cognizant they are of team goals, their embrace of the goodness of caring about paying customers and the like, and implicitly speaks to a recognition/maturity that the art versus commerce paradox is not an all or none assessment.

With this as the backdrop, I want to STRONGLY encourage readers that aspire to get rich to read the book 'How to Get Rich.' 

Written by Felix Dennis, chairman of Maxim Magazine (so a bonafide $400M net worth type of rich guy), the book offers sage, simple, clear and actionable truths about the earnest pursuit of getting rich.

It's a quick read with straight-up delivery, including decisions made, outcomes realized and lessons learned.  It's also a joy to read.  And as a wordsmither and lover of good prose, I also appreciate the fact that Dennis approaches his tome with the eyes (and ears) of a poet.

What follows is the opening poem from the book (by the author), a poem that also frames chapter by chapter the topics that the book covers.  Any entrepreneur would be hard pressed to more crisply articulate the path to success:

How to Get Rich (by Felix Dennis)

Good Fortune? The fact is
The more you practice,
The harder you sweat,
The luckier you get.

Ideas? We've had 'em
Since Eve deceived Adam,
But take it from me
Execution's the key.

The money? Just pester
A likely investor.
To get what you need
You toady to greed.

The talent? Go sign it.
But first wine and dine it.
It's tedious work
With a talented jerk.

Good timing? To win it
You gotta be in it.
Just never be late
To quit or cut bait.

Expansion? It's vanity!
Profit is sanity.
Overhead begs
To walk on two legs.

The first step? Just do it
And bluff your way through it.
Remember to duck!
God speed ….

And Good Luck!

Related Links:

1. The Tyranny of the ALL or NONE: embracing the paradox of the AND in life.
2. All In: on getting rich.
3. Brain in the Jar: on maximizing your time on the planet in terms of productivity.

All In: On Getting Rich

I am reading an immensely enjoyable book called, “How to Get Rich,” by Felix Dennis, Chairman of Maxim. 

Sharing sage but simple truths and applying them to archetypes like ‘Young, Penniless & Inexperienced,’ ‘Slightly Better Off and On the Way Up’ and ‘Senior Manager or Professional,’ Dennis speaks clearly to the pursuit of tangible rewards, staring risk in the face, having chutzpah, the goodness of experience, the importance of team-building, having a plan, executing on it and gaining the confidence to overcome fears of failure.

As an entrepreneur, this is a timely topic for me.  I have won (Tribe Communications – sold to Zoom; Whistle Communications – sold to IBM; Rapid Logic – sold to Wind River; Me.com – sold to Apple), lost (UXComm, Kenamea), had noble pursuits that did not achieve market success (CafeNet, Verdada) and still have two stories in progress (Snapp Networks, vSocial).

In the past, I have written about wanting to work with Pigs over Chickens, Keys to Success, Paradoxes on the Path to Winning in the Market and How to Change Your Life.

Today, I want to talk about the importance of embracing mental toughness in learning to cope with people (customers, co-workers, partners, investors, etc.) whose paths you invariably cross in the pursuit of success.

Trust in this.  The minute you commit to being a member of the “A” Team, a Winner and a Do-er, the bullshit of others ceases to be a valid excuse for failure.

To be clear, failure happens when it happens but there ceases to be a moral basis for failure.  Winners fight until they cease to believe or when the last bit of oxygen has been stamped out.

To steal a gambling analogy, think of this as being ‘All In.’

But there is one critical caveat, a moment when all bets are off.  I am not talking about blind faith or stupid risk taking, to be sure.  In fact, if I could not answer a strong yes to ANY of the four questions below, I wouldn’t be doing what I am doing:

1. Do I believe in what we are doing in terms of our value proposition for customers?
2. Do I think that we are going to deliver what we have promised?
3. Do I feel that this is a worthwhile, compelling use of my time?
4. Do I feel that I am continuing to get better and gain skills that I will be able to carry forward?

Would you?  Seems obvious.  Less obvious is why people make themselves unhappy when the answers to the above questions are all YES.

Related Links:

1. Are you working with Chickens or Pigs? Hint your want to work with Pigs. 
2. The Five Keys to Business Success: Some pattern recognition on lessons learned.
3. "Strategic" vs. "Win-able": Early customers and The 1.0 /3.0 Paradox.
4. Metamorphosis - Change your Life: Real life change in 12 months.

Threading the Needle: Essential Truths for Early-Stage Entrepreneurs

I talk to a lot of entrepreneurs in my daily travels.  This can take the form of informal guidance, formal advisory/board roles, writing a check as an angel investor or plugging-in operationally in a ‘permanent’ interim capacity.

Those who know me will tell you that beyond the pattern recognition that comes from doing seven start-ups, part of the goodness that I bring to the table is a clear, intellectually honest perspective that is actionable.  While I may not always be right, at least I am not confused. ;-)

So, with that as a precursor, let me share some 'Essential Truths for Early-Stage Entrepreneurs.'

Execution, Not Ideas, Are What Matter
First and foremost is the truism that ideas are cheap.  Trust that no matter how inspired and brilliant your idea is that another entrepreneur is within striking distance of essentially the same idea or addressing the same customer need via a different approach.

This should keep you focused on defining and documenting milestones and metrics that formally prove out the core assertions of your business or customer proposition.  Always strive to know what has to go right for you to succeed and in what order, and track your progress methodically and diligently.

Second, many entrepreneurs confuse the big picture with the little picture.  Specifically, they confuse macro industry trends and abstract customer pain points with there being an indelible need for your specific offering. 

This is a by-product of confusing vision and strategy with tactical execution.  This confusion can lead you to think that you are farther down the road than you really are, inasmuch as it sidesteps difficult questions of whether you have the technical know how to deliver your product or service, whether you have documented a clear product plan, built a working prototype, codified a financial plan, tested the water with prospective customers and the like.

90% of the entrepreneurs that I speak to fall prey to this one, and the body blow is palpable when I have to calibrate for them where they are actually at in terms of progress (i.e., pretty close to the starting line).

Third, an explicit part of your early stage planning should be to minimize the number of milestones you need to answer the above questions, as this has the effect of compacting the timeline and dollars needed to mitigate some piece of the risk equation, and success is all about risk mitigation.

The 1.0/3.0 Paradox
An essential truth here is that you cannot be all things to all people, especially when you roll out the first version of your product. 

I call this truism ‘The 1.0/3.0 Paradox’ and it goes like this.  Every start-up is born of their 3.0 vision of what their business looks like when their products are mature, their business is generating positive cash flow and they have fully penetrated the marketplace. 

Unfortunately, start-ups can only initially deliver 1.0 functionality, and customers have repeatedly proven that they buy exclusively based on their 1.0 needs (relative to your actual 1.0 deliverables). 

Thus, many a company dies because they fail to thread this particular needle.  No less paradoxical, he who wins the customer at the 1.0 stage of the market is usually ‘good enough’ to not get dislodged in 2.0 and by then, it is game over for the competition so the paradox is solving a 1.0 problem that gets you into the game to become legacy in 2.0 while you execute on your 3.0 ambitions.

Fund Raising Realities
Similar to the above truths, you need to understand how investors think and their motivations.  Save for your friends and family, investors invest to make money and preserve capital.  Period.

It seems obvious, but many an entrepreneur forgets this essential truth, and the related truth that investors gravitate between fear and greed. 

The more they have to speculate about the technical or market risk associated with your venture, the more they are going to default to fear mode, and pass on investing in your business. 

By contrast, the more you can show how you have addressed and checked off the individual risk items relative to your stated business objectives, the more likely greed will prevail, and you will get a check.

I should caveat the above with the following.  Many would-be entrepreneurs see comparable stage financings occurring based on less tangible goodness (from the just-funded start-up), and wonder, “What’s the Magic Key?” 

The truth of the matter is that often the magic key is pedigree.  Investors are much more likely to write a check in the early stage to back someone who has played a key role at another successful start-up or at a gorilla company, like Google. 

‘Been there, done that’ is a form of risk mitigation, and a reasonable form at that.

If you don’t have pedigree, don’t bemoan it but do counter that essential truth by focusing on proprietary advantages, or more fundamentally, ‘proof’ in the form of having something built, and securing customer or partner traction. 

When to Start Selling
Finally, when is the right time to start testing the water with users, customers, partners, etc? 

Many entrepreneurs struggle with this one, fearing a wasted first impression and/or a fear of having their idea stolen. 

Two comments here.  One, in general you can not get out of the fishbowl quickly enough so long as you are not confusing having a PowerPoint with having a product. 

The reason is simple.  Often, what you think is the ‘dog’ (of your product) turns out to be the ‘tail,’ and vice versa, and the only way to discover this is by vetting your solution with customers. 

(The efficacy of this point is even more so in the consumer realm since consumers are a notoriously fickle bunch, making watching what they DO infinitely more important than listening to what they SAY.)

Also, not all customers are created equal so you always have the option of targeting ‘B’ and ‘C’ caliber prospects while you are perfecting your product and your pitch, and saving your outreach to the ‘A’ list once you have worked out the bugs with the B/C list.

Take heart.  Many a successful start-up turned tail early in the life of their venture to great success simply by virtue of being out their with a real product or prototype and actually listening and adjusting to the needs of the market.

Early stage is a scary, but exhilarating, place.  There are plenty of different ways to thread the needle but some essential truths that you need to keep front and center.

Are there other truths that come to mind?

Related Links:

1. "Strategic" vs. "Win-able": Early customers and The 1.0 /3.0 Paradox.
2. Metrics of Success: You can't improve what you don't measure.
3. Start in the Middle: Methodology for solving complex use cases.