With the long holiday weekend ahead, I thought that I would share some nuggets of interest that have shaped my thinking about building, investing in and marketing businesses.
· On Advertising (David Ogilvy):
o It has been found that the less an advertisement looks like an advertisement, and the more it looks like an editorial, the more readers stop, look and read. Therefore, study the graphics used by editors and imitate them. Study the graphics used in advertisements, and avoid them.
o Two minute television ads are the most effective (relative to 30 second and one minute ads), and late at night is the best time for ads in terms of actual selling. Further, longer copywriting is much more effective than short, sound bite form copy.
· On Investing:
o (legendary VC, Arthur Rock): He espoused investing in companies that were close to his office to reduce travel, keeping a tight rein on spending, and conveying a "harsh sense of urgency" to the entrepreneurs in his portfolio companies.
o (Sequoia Capital founder, Donald Valentine): He bets on the racetrack, not the jockey. "My position has always been that you build great companies by finding monster markets that are in transition, and you find the people later," says Valentine.
o (Google, Yahoo VC, Mike Moritz): Avoid capital-intensive businesses, take measured steps, never underestimate the difficulty of changing consumer behavior, and don't begin a rollout until you're sure the recipe is working. The biggest lesson? "Any business that Wall Street is prepared to throw hundreds of millions of dollars at is not one we should be in."
o (Valentine on Moritz and Steve Jobs): "They're both incredibly aggressive questioners. And our business is all about figuring out which questions are relevant in making a decision, because the people who are starting a company don't have a clue what the answers are. Steve always has been an incredible questioner. Draining, exhausting. Same characteristic that I recognized in Moritz."
o (Warren Buffett mantras):
§ In a commodity type of business, it is impossible to be a lot smarter than your dumbest competitor.
§ Buying a good business at a fair price is a lot smarter than buying a fair business at a good price.
§ What makes a good business from Buffett's perspective: It is large enough in terms of demonstrated earnings, has demonstrated consistent earning power (future projections are of little interest nor are turnaround situations), is earning good returns on equity while employing little or no debt, has its management team in place, is a "simple business" in that it is easy to understand, and is available at a known offering price (Buffett won't waste his time or that of the seller by talking, even preliminarily, about a transaction when price is unknown).
· On Effective Management:
o (Peter Drucker): Effective executives focus on getting the right things done (i.e., your contribution to the business, not your effort or smarts). There are five key habits that they diligently maintain. They:
§ Know where their time goes. Their approaches to time management consist of first recording how is spent, then figuring how to better manage it, then consolidating tasks into focused chunks and pruning the time wasters.
§ Focus on outward contribution, or results. Managers understand that they are responsible for service results and held accountable for the outcomes the results manifest.
§ Build on the strengths of themselves and their staffs, and don't expand the focus into areas of weakness. From a staffing perspective, this translates to figuring out what the core contribution the person is being hired for and not hiring a composite set of strengths and weaknesses, as this is a recipe for mediocrity. This forces a focus on what a person really needs to be able to do to deliver their contributions so that all parties are clear on requirements from the get go.
§ Focus on few major areas where outstanding performance will translate to superior results. Towards this end, focus yourself and the organization on doing one thing at a time and doing first things first. Be religious about tossing what was not effective yesterday, and picking the future over the past in decision-making. Focus on the opportunity rather than the problem. Finally, aim high and to make a difference rather than pursuing what is safe. Choose your own direction (don’t jump on the bandwagon).
§ Focus on making effective decisions. They understand that decision making is the specific executive task of effective executives. Towards that end, they first ask themselves whether a strategic path has clearly defined elements and whether a distinct sequence of steps exist, as well as whether both are understood by the executive and his/her team. Moreover, they focus more on key decisions in terms of what is strategic and generic and less on solving problems. This translates into assuming that everything is a symptom and looking for the root problem (as opposed to assuming everything is a new problem).
Have a nice LONG weekend!
